UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-21922
RS Variable Products Trust
(Exact name of registrant as specified in charter)
| | |
388 Market Street San Francisco, CA | | 94111 |
| (Address of principal executive offices) | | (Zip code) |
Terry R. Otton
c/o RS Investments
388 Market Street
San Francisco, CA 94111
(Name and address of agent for service)
Registrant’s telephone number, including area code: 800-221-3253
Date of fiscal year end: December 31
Date of reporting period: June 30, 2011
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
| Item 1. | Reports to Stockholders. |
The Report to Shareholders is attached herewith.
2011 Semiannual Report
All data as of June 30, 2011
RS Variable Products Trust
| Ÿ | | RS Large Cap Alpha VIP Series |
| | | | |
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE | | |  | |
TABLE OF CONTENTS
Except as otherwise specifically stated, all information and investment team commentary, including portfolio security positions, is as of June 30, 2011. The views expressed in the investment team letters are those of the Fund’s portfolio manager(s) and are subject to change without notice. They do not necessarily represent the views of RS Investments. The letters contain some forward-looking statements providing current expectations or forecasts of future events; they do not necessarily relate to historical or current facts. There can be no guarantee that any forward-looking statement will be realized. We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events, or otherwise. Any discussions of specific securities should not be considered a recommendation to buy or sell those securities. Fund holdings will vary.
RS LARGE CAP ALPHA VIP SERIES
The Statement of Additional Information provides further information about the investment team, including information regarding their compensation, other accounts they manage, and their ownership interests in the Fund. For information on how to receive a copy of the Statement of Additional Information, please see the back cover of the relevant Prospectus or visit our Web site at www.guardianinvestor.com.
RS Large Cap Alpha VIP Series Commentary
Highlights
| Ÿ | | The broad U.S. equity market, as defined by the S&P 500® Index1, delivered positive performance in the first half of 2011, despite renewed concerns over the strength of the economic recovery. |
| Ÿ | | RS Large Cap Alpha VIP Series returned positive performance for the six-month period, but underperformed the benchmark Russell 1000® Value Index2, as well as the S&P 500® Index. The Fund’s performance relative to the Russell 1000 Value was held back by stock selection in the consumer discretionary, financial services, and energy sectors. Stock selection in the technology sector aided relative performance. |
| Ÿ | | RS Large Cap Alpha VIP Series seeks long-term capital appreciation by identifying large-cap companies with improving returns on invested capital (ROIC). |
Market Overview
The broad U.S. equity market, as defined by the S&P 500® Index, started out the year on a positive note, delivering positive absolute first quarter returns as investors focused on generally healthy corporate profits and better market liquidity in the wake of the Federal Reserve’s most recent round of quantitative easing. The market experienced renewed downward volatility in March, however, as economic fears resurfaced, aggravated by the earthquake in Japan, the debt crisis in Europe, and a spike in oil prices. Investors were also uneasy regarding how the economy might fare if the Federal Reserve were to wind down its quantitative easing efforts. As employment growth continued to stagnate and the housing market remained weak, economic fears took center stage during the second quarter, contributing to downward volatility in equity prices. As many investors lost their appetites for risk, they sought refuge in more economically defensive investments in areas such as consumer staples and health care.
Fund Performance Overview
RS Large Cap Alpha VIP Series returned 1.87% for the six-month period ended June 30, 2011, underperforming the benchmark Russell 1000® Value Index, which
returned 5.92%, and the S&P 500® Index, which returned 6.02%.
Among the Fund’s largest individual detractors for the period were a number of financial services holdings. The Fund’s detractors included Citigroup, Inc., which was pressured after reporting lackluster revenues and earnings performance, and Aflac, Inc., a supplemental insurance provider that generates over 70% of its cash flows from Japan. The company has faced questions over its financial exposure tied to the Tohoku earthquake and ensuing tsunami, as well as over the short-term ramifications of its decision to de-risk its investment portfolio. We believe that the tragic events in Japan will not have a material impact on the Aflac’s long-term return profile; moreover, we believe that reducing risk is in the long-term best interests of company’s shareholders.
While we have seen evidence of improving capital positions, liquidity, and underwriting standards within the financial services sector, we seek to be discriminating in our financial services investments, concentrating on insurance companies that we believe possess structurally superior distribution models, as well as banks that we believe focus on “relationship lending” and possess low cost core deposit franchises.
The Fund’s other large detractors included retailer Gap, Inc., which lost ground amid concerns over cotton prices and how a sluggish U.S. economy might impact consumer spending. Economic uncertainty also weighed on the share price performance of Martin Marietta Materials, Inc., a producer of aggregates for the construction industry.
On a positive note, relative performance was aided by stock selection in the technology sector, and in particular by our investment in Symantec Corp., a security software and services provider capitalizing on increasing enterprise investment in technology to fend off increasingly sophisticated cyber threats. Within business services and technology, we continue to seek to allocate capital to businesses with understandable and predictable revenue streams as well as high customer retention rates and recurring cash flow characteristics.
Other positive contributors included shares of Praxair, Inc., a supplier of industrial gases, which has capitalized
RS LARGE CAP ALPHA VIP SERIES
on strong demand for its compressed ultra-pure oxygen and other gases used in the production of integrated circuits and other high tech and industrial products. The company continues to win new contracts both domestically and in China. The Fund’s relative performance was also aided by our investment in drug maker Pfizer, which benefited from investors’ renewed enthusiasm for more defensive, large-cap health care stocks during the second quarter. Investors have also welcomed the company’s efforts to rein in costs and shed underperforming product lines.
Outlook
We believe that we are in a period of protracted volatility as the markets grapple with a variety of issues, including deleveraging, deflation/inflation risks, government budget deficits, higher taxes, and the potential for rising risk premiums. In this environment, we continue to focus on identifying company-specific structural changes that we believe will lead to improving returns on invested capital.
RS Funds are sold by prospectus only. You should carefully consider the investment objectives, risks, charges and expenses of the RS Funds before making an investment decision. The prospectus contains this and other important information. Please read it carefully before investing or sending money. Please visit our web site at www.guardianinvestor.com or to obtain a printed copy, call 800-221-3253.
Any discussions of specific securities should not be considered a recommendation to buy or sell those securities. Fund holdings will vary.
Except as otherwise specifically stated, all information and investment team commentary, including portfolio security positions, is as of June 30, 2011.
As with all mutual funds, the value of an investment in the Fund could decline, in which case you could lose money. The Fund invests primarily in equity securities and therefore exposes you to the general risks of investing in stock markets.
RS LARGE CAP ALPHA VIP SERIES
Characteristics
| | |
| Total Net Assets: $972,910,447 | | |
| | |
| |
| Sector Allocation vs. Index3 |
 |
| | | | |
| | |
| Top Ten Holdings4 | | | |
| | |
| Holding | | % of Total
Net Assets | |
| Praxair, Inc. | | | 4.73% | |
| Symantec Corp. | | | 4.19% | |
| Citigroup, Inc. | | | 4.18% | |
| eBay, Inc. | | | 3.90% | |
| Occidental Petroleum Corp. | | | 3.88% | |
| Activision Blizzard, Inc. | | | 3.77% | |
| Talisman Energy, Inc. | | | 3.74% | |
| CVS Caremark Corp. | | | 3.51% | |
| Aflac, Inc. | | | 3.50% | |
| Pfizer, Inc. | | | 3.49% | |
| Total | | | 38.89% | |
| 1 | The S&P 500® Index is an unmanaged market-capitalization-weighted index generally considered to be representative of U.S. equity market activity. The index consists of 500 stocks representing leading industries of the U.S. economy. Index results assume the reinvestment of dividends paid on the stocks constituting the index. You may not invest in the index, and, unlike the Fund, the index does not incur fees or expenses. |
| 2 | The Russell 1000® Value Index is an unmanaged market-capitalization-weighted index that measures the performance of those companies in the Russell 1000® Index (which consists of the 1,000 largest U.S. companies based on total market capitalization) with lower price-to-book ratios and lower forecasted growth values. Index results assume the reinvestment of dividends paid on stocks constituting the Index. You may not invest in the index, and, unlike the Fund, the index does not incur fees or expenses. |
| 3 | The Fund’s holdings are allocated to each sector based on their Russell Global Sector classification. If a holding is not classified by Russell, it is assigned a Russell designation by RS Investments. Cash includes short-term investments and net other assets and liabilities. |
| 4 | Portfolio holdings are subject to change and should not be considered a recommendation to buy or sell individual securities. |
RS LARGE CAP ALPHA VIP SERIES
Performance Update
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| |
| Average Annual Returns | |
| | | | | | | | |
| | | Inception Date | | | Year-to-Date | | | 1 Year | | | 3 Year | | | 5 Year | | | 10 Year | | | Since Inception | |
| RS Large Cap Alpha VIP Series | | | 4/13/83 | | | | 1.87% | | | | 25.23% | | | | 3.32% | | | | 6.76% | | | | 3.32% | | | | 10.58% | |
| Russell 1000® Value Index2 | | | | | | | 5.92% | | | | 28.94% | | | | 2.28% | | | | 1.15% | | | | 3.99% | | | | 11.32% | |
| S&P 500® Index1 | | | | | | | 6.02% | | | | 30.69% | | | | 3.34% | | | | 2.94% | | | | 2.72% | | | | 10.69% | |
Since inception performance for the indexes is measured from 3/31/1983, the month end prior to the Fund’s commencement of operations.
| | |
| |
| Results of a Hypothetical $10,000 Investment |
The chart above shows the performance of a hypothetical $10,000 investment made 10 years ago in RS Large Cap Alpha VIP Series, the Russell 1000® Value Index, and in the S&P 500® Index. Index returns do not include the fees and expenses of the Fund, but do include the reinvestment of dividends.
Performance quoted represents past performance and does not guarantee or predict future results. The Fund is the successor to The Guardian Stock Fund; performance shown includes performance of the predecessor fund for periods prior to October 9, 2006. Investment return and principal value will fluctuate, so shares, when redeemed, may be worth more or less than their original cost. Please keep in mind that any high double-digit returns are highly unusual and cannot be sustained. The Fund’s fees and expenses are detailed in the Financial Highlights section of this report. Fees and expenses are factored into the net asset value of your shares and any performance numbers we release. Total return figures reflect an expense limitation in effect for the periods shown; without such limitation, the performance shown would have been lower. Performance results assume the reinvestment of dividends and capital gains. The return figures shown do not reflect the deduction of taxes that a contractowner/policyholder may pay on Fund distributions or redemption units. The actual total returns for owners of variable annuity contracts or variable life insurance policies that provide for investment in the Fund will be lower to reflect separate account and contract/policy charges. Current and month-end performance information, which may be lower or higher than that cited, is available by calling 800-221-3253 and is periodically updated on our Web site: www.guardianinvestor.com.
UNDERSTANDING YOUR FUND’S EXPENSES (UNAUDITED)
By investing in the Fund, you incur two types of costs: (1) transaction costs, including, as applicable, sales charges (loads) on purchase payments; redemption fees; and exchange fees; and (2) ongoing costs, including as applicable, investment advisory fees; and other Fund expenses. The example below is intended to help you understand your ongoing costs (in dollars) of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period indicated. The table below shows the Fund’s expenses in two ways:
Expenses based on actual return
This section of the table provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Expenses based on hypothetical 5% return for comparison purposes
This section of the table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund with the cost of investing in other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore the second section is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If these transactional costs were included, your costs would have been higher.
| | | | | | | | | | | | | | |
| | | Beginning
Account Value
1/1/11 | | Ending
Account Value
6/30/11 | | | Expenses Paid
During Period*
1/1/11-6/30/11 | | | Expense Ratio
During Period 1/1/11-6/30/11 | |
| Based on Actual Return | | $1,000.00 | | | $1,018.70 | | | | $2.75 | | | | 0.55% | |
| Based on Hypothetical Return (5% Return Before Expenses) | | $1,000.00 | | | $1,022.07 | | | | $2.75 | | | | 0.55% | |
| * | Expenses are equal to the Fund’s annualized expense ratio as indicated, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). |
SCHEDULE OF INVESTMENTS — RS LARGE CAP ALPHA VIP SERIES
| | | | | | | | |
| June 30, 2011 (unaudited) | | Shares | | | Value | |
| Common Stocks – 98.1% | |
| Asset Management & Custodian – 2.1% | |
State Street Corp. | | | 461,450 | | | $ | 20,806,781 | |
| | | | | | | | | |
| | | | | | | | 20,806,781 | |
| Back Office Support, HR and Consulting – 2.9% | |
Synopsys, Inc.(1) | | | 1,088,422 | | | | 27,983,330 | |
| | | | | | | | | |
| | | | | | | | 27,983,330 | |
| Banks: Diversified – 6.1% | |
KeyCorp | | | 3,728,900 | | | | 31,061,737 | |
Regions Financial Corp. | | | 4,539,468 | | | | 28,144,702 | |
| | | | | | | | | |
| | | | | | | | 59,206,439 | |
| Building Materials – 3.2% | |
Martin Marietta Materials, Inc. | | | 395,595 | | | | 31,635,732 | |
| | | | | | | | | |
| | | | | | | | 31,635,732 | |
| Chemicals: Specialty – 4.7% | |
Praxair, Inc. | | | 424,177 | | | | 45,976,545 | |
| | | | | | | | | |
| | | | | | | | 45,976,545 | |
| Computer Services, Software & Systems – 7.3% | |
Microsoft Corp. | | | 1,148,277 | | | | 29,855,202 | |
Symantec Corp.(1) | | | 2,067,500 | | | | 40,771,100 | |
| | | | | | | | | |
| | | | | | | | 70,626,302 | |
| Consumer Services: Miscellaneous – 3.9% | |
eBay, Inc.(1) | | | 1,175,470 | | | | 37,932,417 | |
| | | | | | | | | |
| | | | | | | | 37,932,417 | |
| Diversified Financial Services – 4.2% | |
Citigroup, Inc. | | | 977,068 | | | | 40,685,112 | |
| | | | | | | | | |
| | | | | | | | 40,685,112 | |
| Diversified Manufacturing Operations – 3.0% | |
Honeywell International, Inc. | | | 487,455 | | | | 29,047,443 | |
| | | | | | | | | |
| | | | | | | | 29,047,443 | |
| Drug & Grocery Store Chains – 3.5% | |
CVS Caremark Corp. | | | 907,730 | | | | 34,112,493 | |
| | | | | | | | | |
| | | | | | | | 34,112,493 | |
| Electronic Entertainment – 3.8% | |
Activision Blizzard, Inc. | | | 3,142,040 | | | | 36,699,027 | |
| | | | | | | | | |
| | | | | | | | 36,699,027 | |
| Health Care Facilities – 2.9% | |
HCA Holdings, Inc.(1) | | | 866,400 | | | | 28,591,200 | |
| | | | | | | | | |
| | | | | | | | 28,591,200 | |
| Insurance: Life – 6.2% | |
Aflac, Inc. | | | 729,171 | | | | 34,037,702 | |
Prudential Financial, Inc. | | | 413,800 | | | | 26,313,542 | |
| | | | | | | | | |
| | | | | | | | 60,351,244 | |
| Insurance: Multi-Line – 3.1% | |
MetLife, Inc. | | | 677,700 | | | | 29,730,699 | |
| | | | | | | | | |
| | | | | | | | 29,730,699 | |
| Insurance: Property-Casualty – 2.0% | |
The Allstate Corp. | | | 639,900 | | | | 19,536,147 | |
| | | | | | | | | |
| | | | | | | | 19,536,147 | |
| | | | | | | | |
| June 30, 2011 (unaudited) | | Shares | | | Value | |
| Medical & Dental Instruments & Supplies – 1.0% | |
Covidien PLC | | | 184,300 | | | $ | 9,810,289 | |
| | | | | | | | | |
| | | | | | | | 9,810,289 | |
| Metals & Minerals: Diversified – 2.3% | |
BHP Billiton Ltd., ADR | | | 239,637 | | | | 22,676,849 | |
| | | | | | | | | |
| | | | | | | | 22,676,849 | |
| Oil: Crude Producers – 13.2% | |
Canadian Natural Resources Ltd. | | | 504,162 | | | | 21,104,221 | |
Occidental Petroleum Corp. | | | 362,500 | | | | 37,714,500 | |
Southwestern Energy Co.(1) | | | 773,732 | | | | 33,177,628 | |
Talisman Energy, Inc. | | | 1,775,640 | | | | 36,382,864 | |
| | | | | | | | | |
| | | | | | | | 128,379,213 | |
| Pharmaceuticals – 9.5% | |
Merck & Co., Inc. | | | 866,621 | | | | 30,583,055 | |
Pfizer, Inc. | | | 1,646,100 | | | | 33,909,660 | |
Warner Chilcott PLC, Class A | | | 1,159,300 | | | | 27,973,909 | |
| | | | | | | | | |
| | | | | | | | 92,466,624 | |
| Precious Metals & Minerals – 2.5% | |
Goldcorp, Inc. | | | 495,409 | | | | 23,913,392 | |
| | | | | | | | | |
| | | | | | | | 23,913,392 | |
| Specialty Retail – 5.0% | |
The Gap, Inc. | | | 1,680,970 | | | | 30,425,557 | |
Urban Outfitters, Inc.(1) | | | 655,386 | | | | 18,449,116 | |
| | | | | | | | | |
| | | | | | | | 48,874,673 | |
| Toys – 2.6% | |
Hasbro, Inc. | | | 575,592 | | | | 25,285,757 | |
| | | | | | | | | |
| | | | | | | | 25,285,757 | |
| Transportation Miscellaneous – 3.1% | |
United Parcel Service, Inc., Class B | | | 414,300 | | | | 30,214,899 | |
| | | | | | | | | |
| | | | | | | | 30,214,899 | |
Total Common Stocks
(Cost $819,888,880) | | | | | | | 954,542,607 | |
| | | | | | | | |
| | | Principal
Amount | | | Value | |
| Repurchase Agreements – 1.9% | |
State Street Bank and Trust Co. Repurchase Agreement, 0.01%, dated 6/30/2011, maturity value of $17,989,005, due 7/1/2011(2) | | $ | 17,989,000 | | | | 17,989,000 | |
Total Repurchase Agreements
(Cost $17,989,000) | | | | | | | 17,989,000 | |
Total Investments - 100.0%
(Cost $837,877,880) | | | | | | | 972,531,607 | |
| Other Assets, Net - 0.0% | | | | | | | 378,840 | |
| Total Net Assets - 100.0% | | | | | | $ | 972,910,447 | |
| (1) | Non-income producing security. |
| | | | |
| 8 | | | | The accompanying notes are an integral part of these financial statements. |
RS LARGE CAP ALPHA VIP SERIES
| (2) | The table below presents collateral for repurchase agreements. |
| | | | | | | | | | | | |
| Security | | Coupon | | | Maturity
Date | | | Value | |
| U.S. Treasury Note | | | 1.00% | | | | 3/31/2012 | | | $ | 18,349,163 | |
Legend:
ADR — American Depositary Receipt.
The following is a summary of the inputs used as of June 30, 2011 in valuing the Fund’s investments. For more information on valuation inputs, please refer to Note 1a of the accompanying Notes to Financial Statements.
| | | | | | | | | | | | | | | | |
| | | Valuation Inputs | | | | |
| Investments in Securities (unaudited) | | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
| Common Stocks | | $ | 954,542,607 | | | $ | — | | | $ | — | | | $ | 954,542,607 | |
| Repurchase Agreements | | | — | | | | 17,989,000 | | | | — | | | | 17,989,000 | |
| Total | | $ | 954,542,607 | | | $ | 17,989,000 | | | $ | — | | | $ | 972,531,607 | |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 9 |
FINANCIAL INFORMATION — RS LARGE CAP ALPHA VIP SERIES
| | | | |
Statement of Assets and Liabilities As of June 30, 2011 (unaudited) | | | |
Assets | | | | |
Investments, at value | | $ | 972,531,607 | |
Cash and cash equivalents | | | 87 | |
Dividends/interest receivable | | | 974,981 | |
Receivable for fund shares subscribed | | | 217,067 | |
Prepaid expenses | | | 144,404 | |
| | | | | |
Total Assets | | | 973,868,146 | |
| | | | | |
| | |
Liabilities | | | | |
Payable for fund shares redeemed | | | 453,021 | |
Payable to adviser | | | 389,639 | |
Accrued trustees’ fees | | | 12,021 | |
Payable organization costs and offering costs | | | 5,487 | |
Accrued expenses/other liabilities | | | 97,531 | |
| | | | | |
Total Liabilities | | | 957,699 | |
| | | | | |
Total Net Assets | | $ | 972,910,447 | |
| | | | | |
| | |
Net Assets Consist of: | | | | |
Paid-in capital | | $ | 1,027,544,104 | |
Accumulated undistributed net investment income | | | 4,038,684 | |
Accumulated net realized loss from investments and foreign currency transactions | | | (193,326,620 | ) |
Net unrealized appreciation on investments and translation of assets and liabilities in foreign currencies | | | 134,654,279 | |
| | | | | |
Total Net Assets | | $ | 972,910,447 | |
| | | | | |
Investments, at Cost | | $ | 837,877,880 | |
| | | | | |
| | |
Pricing of Shares | | | | |
Shares of Beneficial Interest Outstanding with no Par Value | | | 25,113,381 | |
Net Asset Value Per Share | | | $38.74 | |
| | | | | |
| | | | |
Statement of Operations For the Six-Month Period Ended June 30, 2011 (unaudited) | |
Investment Income | | | | |
Dividends | | $ | 6,774,601 | |
Interest | | | 1,197 | |
Withholding taxes on foreign dividends | | | (60,545 | ) |
| | | | | |
Total Investment Income | | | 6,715,253 | |
| | | | | |
| | |
Expenses | | | | |
Investment advisory fees | | | 2,441,146 | |
Professional fees | | | 61,582 | |
Administrative service fees | | | 59,206 | |
Custodian fees | | | 45,729 | |
Trustees’ fees | | | 21,689 | |
Other expenses | | | 49,535 | |
| | | | | |
Total Expenses | | | 2,678,887 | |
| | |
Less: Custody credits | | | (3 | ) |
| | | | | |
Total Expenses, Net | | | 2,678,884 | |
| | | | | |
Net Investment Income | | | 4,036,369 | |
| | | | | |
| | |
Realized Gain/(Loss) and Change in Unrealized Appreciation/Depreciation on Investments and Foreign Currency Transactions | | | | |
Net realized gain from investments | | | 79,021,676 | |
Net realized gain from foreign currency transactions | | | 3,728 | |
Net change in unrealized appreciation/depreciation on investments | | | (64,842,844 | ) |
Net change in unrealized appreciation/depreciation on translation of assets and liabilities in foreign currencies | | | (2,404 | ) |
| | | | | |
Net Gain on Investments and Foreign Currency Transactions | | | 14,180,156 | |
| | | | | |
Net Increase in Net Assets Resulting from Operations | | $ | 18,216,525 | |
| | | | | |
| | | | | |
| | | | |
| 10 | | | | The accompanying notes are an integral part of these financial statements. |
FINANCIAL INFORMATION — RS LARGE CAP ALPHA VIP SERIES
| | | | | | | | |
Statements of Changes in Net Assets Six-month-ended numbers are unaudited | | | | | | |
| | | |
| | | For the
Six Months Ended
6/30/11 | | | For the
Year Ended
12/31/10 | |
| | | | |
Operations | | | | | | | | |
Net investment income | | $ | 4,036,369 | | | $ | 6,650,177 | |
Net realized gain from investments and foreign currency transactions | | | 79,025,404 | | | | 85,779,530 | |
Net change in unrealized appreciation/depreciation on investments and translation of assets and liabilities in foreign currencies | | | (64,845,248 | ) | | | 51,479,712 | |
| | | | | | | | | |
Net Increase in Net Assets Resulting from Operations | | | 18,216,525 | | | | 143,909,419 | |
| | | | | | | | | |
| | | |
Distributions to Shareholders | | | | | | | | |
Net investment income | | | — | | | | (21,130,486 | ) |
| | | | | | | | | |
Total Distributions | | | — | | | | (21,130,486 | ) |
| | | | | | | | | |
| | | |
Capital Share Transactions | | | | | | | | |
Proceeds from sales of shares | | | 43,204,462 | | | | 72,498,697 | |
Reinvestment of distributions | | | — | | | | 21,130,486 | |
Cost of shares redeemed | | | (63,405,386 | ) | | | (122,911,738 | ) |
| | | | | | | | | |
Net Decrease in Net Assets Resulting from Capital Share
Transactions | | | (20,200,924 | ) | | | (29,282,555 | ) |
| | | | | | | | | |
Net Increase/(Decrease) in Net Assets | | | (1,984,399 | ) | | | 93,496,378 | |
| | | | | | | | | |
| | | |
Net Assets | | | | | | | | |
Beginning of period | | | 974,894,846 | | | | 881,398,468 | |
| | | | | | | | | |
End of period | | $ | 972,910,447 | | | $ | 974,894,846 | |
| | | | | | | | | |
Accumulated Undistributed Net Investment Income Included in Net Assets | | $ | 4,038,684 | | | $ | 2,315 | |
| | | | | | | | | |
| | | |
Other Information: | | | | | | | | |
Shares | | | | | | | | |
Sold | | | 1,113,135 | | | | 2,095,271 | |
Reinvested | | | — | | | | 564,383 | |
Redeemed | | | (1,631,622 | ) | | | (3,562,948 | ) |
| | | | | | | | | |
Net Decrease | | | (518,487 | ) | | | (903,294 | ) |
| | | | | | | | | |
| | | | | | | | | |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 11 |
FINANCIAL INFORMATION — RS LARGE CAP ALPHA VIP SERIES
The financial highlights table is intended to help you understand the Fund’s financial performance for the past six reporting periods. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the Fund (assuming reinvestment of all distributions).
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Financial Highlights Six-month-ended numbers are unaudited | | | | | | | | | | |
| | | Net Asset Value,
Beginning of
Period | | | Net Investment
Income | | | Net Realized
and Unrealized
Gain/(Loss) | | | Total
Operations | | | Distributions
From Net
Investment
Income | | | Distributions
From Net
Realized
Capital Gains | | | Total
Distributions | |
Six Months Ended 6/30/111 | | $ | 38.03 | | | $ | 0.16 | | | $ | 0.55 | | | $ | 0.71 | | | $ | — | | | $ | — | | | $ | — | |
Year Ended 12/31/10 | | | 33.22 | | | | 0.28 | | | | 5.37 | | | | 5.65 | | | | (0.84 | ) | | | — | | | | (0.84 | ) |
Year Ended 12/31/09 | | | 26.60 | | | | 0.35 | | | | 6.32 | | | | 6.67 | | | | (0.05 | ) | | | — | | | | (0.05 | ) |
Year Ended 12/31/08 | | | 38.43 | | | | 0.46 | | | | (11.85 | ) | | | (11.39 | ) | | | (0.44 | ) | | | — | | | | (0.44 | ) |
Year Ended 12/31/07 | | | 33.67 | | | | 0.36 | | | | 4.75 | | | | 5.11 | | | | (0.35 | ) | | | — | | | | (0.35 | ) |
Year Ended 12/31/06 | | | 29.29 | | | | 0.39 | | | | 4.59 | | | | 4.98 | | | | (0.60 | ) | | | — | | | | (0.60 | ) |
| | | | |
| 12 | | | | The accompanying notes are an integral part of these financial statements. |
FINANCIAL INFORMATION — RS LARGE CAP ALPHA VIP SERIES
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Net Asset
Value, End of
Period | | | Total
Return2 | | | Net Assets, End
of Period (000s) | | | Net Ratio of
Expenses to
Average Net
Assets3 | | | Gross Ratio of
Expenses to
Average Net
Assets | | | Net Ratio of Net
Investment Income
to Average Net Assets3 | | | Gross Ratio of Net
Investment Income
to Average Net Assets | | | Portfolio
Turnover Rate | |
| $ | 38.74 | | | | 1.87% | | | $ | 972,910 | | | �� | 0.55% | | | | 0.55% | | | | 0.83% | | | | 0.83% | | | | 25% | |
| | 38.03 | | | | 17.05% | | | | 974,895 | | | | 0.55% | | | | 0.55% | | | | 0.75% | | | | 0.75% | | | | 60% | |
| | 33.22 | | | | 25.09% | | | | 881,398 | | | | 0.57% | | | | 0.58% | | | | 1.30% | | | | 1.31% | | | | 145% | |
| | 26.60 | | | | (29.62)% | | | | 668,245 | | | | 0.56% | | | | 0.56% | | | | 1.25% | | | | 1.25% | | | | 44% | |
| | 38.43 | | | | 15.19% | | | | 1,082,788 | | | | 0.57% | | | | 0.57% | | | | 0.93% | | | | 0.93% | | | | 60% | |
| | 33.67 | | | | 17.26% | | | | 1,048,865 | | | | 0.57% | | | | 0.57% | | | | 1.17% | | | | 1.17% | | | | 85% | |
Distributions reflect actual per-share amounts distributed for the period.
| 1 | Ratios for periods less than one year have been annualized, except for total return and portfolio turnover rate. |
| 2 | Total returns do not reflect the effects of charges deducted pursuant to the terms of The Guardian Insurance & Annuity Company, Inc.’s variable contracts. Inclusion of such charges would reduce the total returns for all periods shown. |
| 3 | Net Ratio of Expenses to Average Net Assets and Net Ratio of Net Investment Income to Average Net Assets include the effect of fee waivers, expense limitations and custody credits, if applicable. |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 13 |
NOTES TO FINANCIAL STATEMENTS — RS LARGE CAP ALPHA VIP SERIES (UNAUDITED)
June 30, 2011 (unaudited)
RS Variable Products Trust (the “Trust”), a Massachusetts business trust organized on May 18, 2006, is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust currently offers twelve series. RS Large Cap Alpha VIP Series (the “Fund”) is a series of the Trust. The Fund is a diversified fund. The financial statements for the other remaining series of the Trust are presented in separate reports.
The Fund has authorized an unlimited number of shares of beneficial interest with no par value. Shares are bought and sold at closing net asset value (“NAV”), which is the price for all outstanding shares of the Fund. Class I shares of the Fund are only sold to certain separate accounts of The Guardian Insurance & Annuity Company, Inc. (“GIAC”). GIAC is a wholly-owned subsidiary of The Guardian Life Insurance Company of America (“Guardian Life”). The Fund is currently offered to insurance company separate accounts that fund certain variable annuity and variable life insurance contracts issued by GIAC.
Note 1. Significant Accounting Policies
The following policies are in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
a. Investment Valuations Marketable securities are valued at the last reported sale price on the principal exchange or market on which they are traded; or, if there were no sales that day, at the mean between the closing bid and asked prices. Securities traded on the NASDAQ Stock Market, LLC (“NASDAQ”) are generally valued at the NASDAQ official closing price, which may not be the last sale price. If the NASDAQ official closing price is not available for a security, that security is generally valued using the last reported sale price, or, if no sales are reported, at the mean between the closing bid and asked prices. Short-term investments that will mature in 60 days or less are valued at amortized cost, which approximates market value. Repurchase agreements are carried at cost, which approximates market value. Foreign securities are valued in the currencies of the markets in which they trade and then converted to U.S. dollars using the prevailing exchange rates at the close of the New York Stock Exchange (“NYSE”).
Securities for which market quotations are not readily available or for which market quotations may be considered unreliable are valued at their fair values as determined in accordance with guidelines and procedures adopted by the Trust’s Board of Trustees.
Securities whose values have been materially affected by events occurring before the Fund’s valuation time but after the close of the securities’ principal exchange or market may be fair valued using methods approved by the Board of Trustees. In addition, if there has been a movement in the U.S. markets that exceeds a specified threshold, the values of the Fund’s investments in foreign securities are generally determined by a pricing service using pricing models designed to estimate likely changes in the values of those securities.
The Fund has adopted the authoritative guidance under GAAP on determining fair value when the volume and level of activity for an asset or liability have significantly decreased and for identifying transactions that are not orderly. Accordingly, if the Fund determines that either the volume and/or level of activity for an asset or liability has significantly decreased (from normal conditions for that asset or liability) or price quotations or observable inputs are not associated with orderly transactions, increased analysis and management judgment will be required to estimate fair value.
In accordance with Financial Accounting Standards Board Codification Topic 820 (“ASC Topic 820”), fair value is defined as the price that the Fund would receive upon selling an investment in an “arm’s length” transaction to a willing buyer in the principal or most advantageous market for the investment. ASC Topic 820 established a hierarchy for classification of fair value measurements for disclosure purposes. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances. The hierarchy of inputs is summarized in the three broad levels listed below.
| Ÿ | | Level 1 — unadjusted quoted prices in active markets for identical investments |
| Ÿ | | Level 2 — inputs other than unadjusted quoted prices that are observable either directly or indirectly (including adjusted quoted prices for similar investments, interest rates, prepayment speeds, credit risks, etc.) |
NOTES TO FINANCIAL STATEMENTS — RS LARGE CAP ALPHA VIP SERIES (UNAUDITED)
| Ÿ | | Level 3 — significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments) |
Inputs may include price information, volatility statistics, specific and broad credit data, liquidity statistics, and other factors. A security’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires significant judgment by the Trust. The Trust considers observable data to be that market data which is readily available, regularly distributed or updated, reliable and verifiable, and provided by independent sources that are actively involved in the relevant market. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. Changes in valuation techniques may result in transfers into or out of an investment’s assigned level within the hierarchy.
Effective beginning with the Fund’s current fiscal year, the Financial Accounting Standards Board requires reporting entities to make disclosures about purchases, sales, issuances and settlements of Level 3 securities on a gross basis. For the six months ended June 30, 2011, the Fund had no securities classified as Level 3.
There were no significant transfers between Level 1 and Level 2 for the six months end June 30, 2011.
In determining a security’s placement within the hierarchy, the Trust separates the Fund’s investment portfolio into two categories: investments and derivatives (e.g., futures).
Investments Investments whose values are based on quoted market prices in active markets, and are therefore classified within Level 1, include active listed equities. The Trust does not adjust the quoted price for such instruments, even in situations where the Fund holds a large position and a sale could reasonably be expected to impact the quoted price.
Investments that trade in markets that are not considered to be active, but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within Level 2. These include certain U.S. government and sovereign obligations, most government agency securities, investment-grade corporate bonds, certain mortgage products, state, municipal and provincial obligations, and certain foreign equity securities.
Investments classified within Level 3 have significant unobservable inputs, as they trade infrequently or not at
all. Level 3 investments include, among others, private placement securities. When observable prices are not available for these securities, the Trust uses one or more valuation techniques for which sufficient and reliable data is available. The inputs used by the Trust in estimating the value of Level 3 investments include the original transaction price, recent transactions in the same or similar instruments, completed or pending third-party transactions in the underlying investment or comparable issuers, subsequent rounds of financing, recapitalizations, and other transactions across the capital structure. Level 3 investments may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the Trust in the absence of market information. Assumptions used by the Trust due to the lack of observable inputs may significantly impact the resulting fair value and therefore the Fund’s results of operations.
Derivatives Exchange-traded derivatives, such as futures contracts and exchange traded option contracts, are typically classified within Level 1 or Level 2 of the fair value hierarchy depending on whether or not they are deemed to be actively traded. Certain derivatives, such as generic forwards, swaps and options, have inputs which can generally be corroborated by market data and are therefore classified within Level 2.
b. Federal Income Taxes The Fund intends to continue complying with the requirements of the Internal Revenue Code to qualify as a regulated investment company and to distribute substantially all net investment income and realized net capital gains, if any, to shareholders. Therefore, the Fund does not expect to be subject to income tax, and no provision for such tax has been made.
From time to time, however, the Fund may choose to pay an excise tax if the cost of making the required distribution exceeds the amount of the excise tax.
As of June 30, 2011, the Trust has reviewed the tax positions for open periods, as applicable to the Fund, and has determined that no provision for income tax is required in the Fund’s financial statements. The Fund recognizes interest and penalties, if any, related to unrecognized tax positions as income tax expense in the Statement of Operations. For the six months ended June 30, 2011, the Fund did not incur any interest or penalties. The Fund is not subject to examination by U.S. federal tax authorities for tax years before 2007 and by state authorities for tax years before 2006.
c. Securities Transactions Securities transactions are accounted for on the date securities are purchased or
NOTES TO FINANCIAL STATEMENTS — RS LARGE CAP ALPHA VIP SERIES (UNAUDITED)
sold (trade date). Realized gains or losses on securities transactions are determined on the basis of specific identification.
d. Foreign Currency Translation The accounting records of the Fund are maintained in U.S. dollars. Investment securities and all other assets and liabilities of the Fund denominated in a foreign currency are generally translated into U.S. dollars at the exchange rates quoted at the close of the NYSE on each business day. Purchases and sales of securities, income receipts, and expense payments are translated into U.S. dollars at the exchange rates in effect on the dates of the respective transactions. The Fund does not isolate the portion of the fluctuations on investments resulting from changes in foreign currency exchange rates from the fluctuations in market prices of investments held. Such fluctuations are included with the net realized and unrealized gain or loss from investments.
e. Investment Income Dividend income is generally recorded on the ex-dividend date. Interest income, which includes amortization/accretion of premium/discount, is accrued and recorded daily.
f. Expenses Many expenses of the Trust can be directly attributed to a specific series of the Trust. Expenses that cannot be directly attributed to a specific series of the Trust are generally apportioned among all the series in the Trust, based on relative net assets.
g. Custody Credits The Fund has entered into an arrangement with its custodian, State Street Bank and Trust Company, whereby credits realized as a result of uninvested cash balances are used to reduce the Fund’s custodian expenses. The Fund’s custody credits, if any, are shown in the accompanying Statement of Operations.
h. Distributions to Shareholders The Fund intends to declare and distribute substantially all net investment income, if any, at least once a year. Unless the Fund is instructed otherwise, all distributions to shareholders are credited in the form of additional shares of the Fund at the net asset value, recorded on the ex-dividend date.
i. Capital Accounts Due to the timing of dividend distributions and the differences in accounting for income and realized gains/(losses) for financial statement purposes versus federal income tax purposes, the fiscal year in which amounts are distributed may differ from the year in which the income and realized gains/(losses) were recorded by the Fund.
Note 2. Transactions with Affiliates
a. Advisory Fee Under the terms of the advisory agreement, which is reviewed and approved annually by the Board of Trustees, the Fund pays an investment advisory fee to RS Investment Management Co. LLC (“RS Investments”). Guardian Investor Services LLC (“GIS”), a subsidiary of Guardian Life, holds a majority interest in RS Investments. RS Investments receives an investment advisory fee based on the average daily net assets of the Fund at an annual rate of 0.50%. The Fund has also entered into an agreement with GIS for distribution services with respect to its shares.
b. Compensation of Trustees and Officers Trustees and officers of the Trust who are interested persons, as defined in the 1940 Act, of RS Investments receive no compensation from the Fund for acting as such. Trustees of the Trust who are not interested persons of RS Investments receive compensation and reimbursement of expenses from the Trust.
Note 3. Federal Income Taxes
a. Distributions to Shareholders The tax character of distributions paid to shareholders during the year ended December 31, 2010, which is the most recently completed tax year, was as follows:
|
Ordinary
Income |
| $21,130,486 |
Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. These differences are primarily due to differing treatments of income and gains on various investment securities held by the Fund, timing differences, and differing characterizations of distributions made by the Fund. Permanent book and tax basis differences will result in reclassifications to paid-in capital, undistributed net investment income and accumulated undistributed net realized gain/(loss) on investments and foreign currency transactions. Undistributed net investment income and accumulated undistributed net realized gain/(loss) on investments and foreign currency transactions may include temporary book and tax differences, which will reverse in a subsequent period.
As of December 31, 2010, the Fund made the following reclassifications of permanent book and tax basis differences:
| | | | | | | | |
| Paid-in-Capital | | Accumulated Net Investment
Income/(Loss) | | | Accumulated
Net Realized
Gain/(Loss) | |
| $(82,016,863) | | $ | 9,978,977 | | | $ | 72,037,886 | |
NOTES TO FINANCIAL STATEMENTS — RS LARGE CAP ALPHA VIP SERIES (UNAUDITED)
The tax basis of distributable earnings as of December 31, 2010 was as follows:
| | | | |
| | | Undistributed Ordinary Income | | |
| | | $2,315 | | |
During any particular year, net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed and, therefore, are normally distributed to shareholders annually.
During the year ended December 31, 2010, the Fund utilized $82,716,312 of capital loss carryovers. Capital loss carryovers available to the Fund at December 31, 2010 were as follows:
| | | | |
| Expiring | | Amount | |
| 2011 | | $ | 95,938,938 | |
| 2015 | | | 63,066 | |
| 2016 | | | 15,285,989 | |
| 2017 | | | 160,708,957 | |
| | | | | |
| Total | | $ | 271,996,950 | |
| | | | | |
| | | | | |
Capital loss carryovers of $82,015,263 expired in the year ended December 31, 2010.
In determining its taxable income, current tax law permits the Fund to elect to treat all or a portion of any net capital or currency loss realized after October 31 as occurring on the first day of the following fiscal year. For the year ended December 31, 2010, the Fund had no such losses.
On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted. The Act modernizes several of the federal income and excise tax rules related to regulated investment companies, and with certain exceptions, is effective for taxable years beginning after December 22, 2010.
Among the changes are revisions to capital loss carryforward rules allowing for capital losses to be carried forward to one or more subsequent taxable years without expiration. Rules previously in effect limited the carryforward period to eight taxable years. Capital loss carryforwards generated in taxable years beginning after the effective date of the Act must be fully used before capital loss carryforwards generated in taxable years prior to the effective date of the Act. Changes to excise tax rules include timing of recognition of certain income and a change in the required distribution rate for capital gains.
b. Tax Basis of Investments The cost of investments for federal income tax purposes at June 30, 2011, was
$838,241,206. The gross unrealized appreciation and depreciation on investments, on a tax basis, at June 30, 2011, aggregated $144,402,930 and $(10,112,529), respectively, resulting in net unrealized appreciation of $134,290,401.
Note 4. Investments
a. Investment Purchases and Sales The cost of investments purchased and the proceeds from investments sold (excluding short-term investments) amounted to $245,109,946 and $269,230,887, respectively, for the six months ended June 30, 2011.
b. Foreign Securities Foreign securities investments involve special risks and considerations not typically associated with those of U.S. origin. These risks include, but are not limited to, currency risk; adverse political, social, and economic developments; and less reliable information about issuers. Moreover, securities of some foreign companies may be less liquid and their prices more volatile than those of comparable U.S. companies.
c. Industry or Sector Concentration In its normal course of business, the Fund may invest a significant portion of its assets in companies within a limited number of industries or sectors. As a result, the Fund may be subject to a greater risk of loss than that of a fund invested in a wider spectrum of industries or sectors because the stocks of many or all of the companies in the industry, group of industries, sector, or sectors may decline in value due to developments adversely affecting the industry, group of industries, sector, or sectors.
d. Repurchase Agreements The collateral for repurchase agreements is either cash or fully negotiable U.S. government securities (including U.S. government agency securities). Repurchase agreements are fully collateralized (including the interest accrued thereon) and such collateral is marked-to-market daily while the agreements remain in force. If the value of the collateral falls below the repurchase price plus accrued interest, the Fund will typically require the seller to deposit additional collateral by the next business day. If the request for additional collateral is not met, or the seller defaults, the Fund maintains the right to sell the collateral (although it may be prevented or delayed from doing so in certain circumstances) and may claim any resulting loss against the seller.
Note 5. Temporary Borrowings
The Fund, with other funds managed by RS Investments, shares in a $75 million committed revolving credit/overdraft protection facility from State Street Bank and Trust Company for temporary purposes, including the meeting of redemption requests that otherwise might
NOTES TO FINANCIAL STATEMENTS — RS LARGE CAP ALPHA VIP SERIES (UNAUDITED)
require the untimely disposition of securities. Interest is calculated based on market rates at the time of borrowing; all the funds that are parties to the facility share in a commitment fee that is allocated among the funds on the basis of their respective net assets. The Fund may borrow up to the lesser of one-third of its total assets (including amounts borrowed) or any lower limit specified in the Fund’s Statement of Additional Information or Prospectus.
For the six months ended June 30, 2011, the Fund did not borrow from the facility.
Note 6. Review for Subsequent Events
The Trust has evaluated subsequent events through the issuance of the Fund’s financial statements and determined that no material events have occurred that require disclosure.
Note 7. Indemnifications
Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, in the normal course of business, the Fund enters into contracts with its vendors and others that provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund. However, based on experience, the Fund expects the risk of loss to be remote.
SUPPLEMENTAL INFORMATION (UNAUDITED)
Meeting of Shareholders
A special meeting of the shareholders of RS Variable Products Trust (“the Trust”) was held on May 20, 2011. At the meeting, the shareholders of the Trust elected Judson Bergman, Kenneth R. Fitzsimmons, Jr., Anne M. Goggin, Christopher C. Melvin, Jr., Deanna M. Mulligan, Gloria S. Nelund, Terry R. Otton, and John P. Rohal as trustees of the Trust.
Proposal To Elect Trustees
| | | | |
Nominee | | Votes For | | Votes Against/Withheld |
| Judson Bergman | | 264,351,869.410 | | 14,579,441.977 |
| Kenneth R. Fitzsimmons, Jr. | | 264,417,319.717 | | 14,513,991.670 |
| Anne M. Goggin | | 265,496,967.524 | | 13,434,343.863 |
| Christopher C. Melvin, Jr. | | 264,182,743.884 | | 14,748,567.503 |
| Deanna M. Mulligan | | 264,603,554.628 | | 14,327,756.759 |
| Gloria S. Nelund | | 265,607,677.552 | | 13,323,633.835 |
| Terry R. Otton | | 265,360,024.512 | | 13,571,286.875 |
| John P. Rohal | | 264,052,063.420 | | 14,879,247.967 |
Portfolio Holdings and Proxy Voting Procedures
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Form N-Q is available on the Securities and Exchange Commission’s Web site at http://www.sec.gov. The Fund’s Form N-Q may be reviewed and copied at the Commission’s Public Reference Room in Washington, DC, and information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330. This information is also available, without charge, upon request, by calling toll-free 800-221-3253.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 will be available (i) without charge, upon request, by calling toll-free 800-221-3253; and (ii) on the Securities and Exchange Commission’s Web site at http://www.sec.gov.
The Statement of Additional Information includes additional information about the Trust’s Trustees and Officers and is available, without charge, upon request by calling toll-free 800-221-3253.
This report is transmitted to shareholders only. It is not authorized for use as an offer of sale or a solicitation of an offer to buy shares of a Fund unless accompanied or preceded by that Fund’s current prospectus. Past performance results shown in this report should not be considered a representation of future performance. Investment returns and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Statements and other information herein are as dated and are subject to change.
2011 Semiannual Report
All data as of June 30, 2011
RS Variable Products Trust
| Ÿ | | RS Small Cap Growth Equity VIP Series |
| | | | |
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE | | |  | |
TABLE OF CONTENTS
Except as otherwise specifically stated, all information and investment team commentary, including portfolio security positions, is as of June 30, 2011. The views expressed in the investment team letters are those of the Fund’s portfolio manager(s) and are subject to change without notice. They do not necessarily represent the views of RS Investments. The letters contain some forward-looking statements providing current expectations or forecasts of future events; they do not necessarily relate to historical or current facts. There can be no guarantee that any forward-looking statement will be realized. We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events, or otherwise. Any discussions of specific securities should not be considered a recommendation to buy or sell those securities. Fund holdings will vary.
RS SMALL CAP GROWTH EQUITY VIP SERIES
The Statement of Additional Information provides further information about the investment team, including information regarding his compensation, other accounts he manages, and his ownership interests in the Fund. For information on how to receive a copy of the Statement of Additional Information, please see the back cover of the relevant Prospectus or visit our Web site at www.guardianinvestor.com.
Highlights
| Ÿ | | Small-cap shares, as defined by the Russell 2000® Index1, delivered solid performance in the first half of 2011, despite renewed economic uncertainty. |
| Ÿ | | RS Small Cap Growth Equity VIP Series outperformed the benchmark Russell 2000® Growth Index2 for the six-month period ended June 30, 2011 as well as the Russell 2000® Index. The Fund’s performance relative to the Russell 2000® Growth Index was supported in particular by stock selection in the consumer discretionary sector. Stock selection in the energy and utilities sectors hindered relative performance. |
| Ÿ | | RS Small Cap Growth Equity VIP Series seeks long-term capital growth by investing in small-cap companies that we believe have greater earnings potential relative to market expectations. |
Market Overview
The broad U.S. equity market, as defined by the S&P 500® Index3, started out the year on a positive note, delivering solid first quarter returns as investors focused on generally healthy corporate profits and better market liquidity in the wake of the Federal Reserve’s most recent round of quantitative easing. The market experienced renewed downward volatility in March, however, as economic fears resurfaced, aggravated by the earthquake in Japan, the debt crisis in Europe, and a spike in oil prices. As the first half of 2011 drew to a close, investors’ appetites for risk became muted, as they sought refuge in more economically defensive investments in the consumer staples, health care, and utility sectors.
Fund Performance Overview
RS Small Cap Growth Equity VIP Series gained 13.70% over the six-month period ended June 30, 2011, outperforming the benchmark Russell 2000® Growth Index, which returned 8.59%, as well as the Russell 2000® Index, which returned 6.21%.
Portfolio Review
The Fund’s relative performance benefited from stock selection in the consumer discretionary sector, and in particular from our investments in several retailers. One standout performer was Ulta Salon, Cosmetics & Fragrance, a retailer of both high end and discount beauty supply brands that continues to report solid revenue performance as it capitalizes on its store expansion plans and high customer touchpoint strategy.
In the health care sector, we benefited from our investment in Pharmasset, a biotechnology company that is focused on developing next generation treatments for hepatitis C (HCV), a condition that affects a large and relatively underserved population. Against this backdrop, we believe that there is a huge potential market for Pharmasset’s orally administered HCV drug that has fewer side effects than competing drugs.
Among our technology holdings, our relative results were supported by strong performance by Fortinet, the manufacturer of an advanced data security hardware system that processes huge amounts of information at a fast rate to identify potential cyber threats. We believe the company is well positioned to benefit from continued enterprise investment in the data security area.
On a negative note, other technology investments in the Fund struggled due to some inventory building by customers, which dampened near-term earnings prospects. Relative detractors included Oclaro, a supplier of optical components. We remain positive on Oclaro’s long-term prospects, given our view that data networking equipment and components will be in great demand over the next few years as companies build out data networks to accommodate the growing volumes of data traffic.
Also within technology, we were less reassured by prospects for networking connectivity software maker Smith Micro Software, another detractor for the period, which has faced uncertainty over inventory issues and the delayed roll-out of Verizon’s 4G technology. We liquidated our investment in the company as it failed to progress towards our initial investment thesis.
Within healthcare, the Fund’s relative performance was dampened by our investment in Salix Pharmaceuticals. The stock declined sharply in February after the FDA failed to approve the company’s liver disease drug for a secondary indication to treat a digestive disorder. Given the uncertainty around a new strategy for FDA approval, we exited the position.
Outlook
We remain optimistic on the outlook for our portfolio of companies as they continue to maneuver through a backdrop of mixed signals in the global economy. We continue to believe that small-cap companies house some of the most compelling innovations, and we continue to focus on companies that we believe will realize sustained earnings growth. As long-term investors, we seek to look
RS SMALL CAP GROWTH EQUITY VIP SERIES
beyond short-term cyclical factors and strive to position the Fund to benefit from innovations and growth opportunities across a variety of industries.
RS Funds are sold by prospectus only. You should carefully consider the investment objectives, risks, charges and expenses of the RS Funds before making an investment decision. The prospectus contains this and other important information. Please read it carefully before investing or sending money. Please visit our web site at www.guardianinvestor.com or to obtain a printed copy, call 800-221-3253.
Any discussions of specific securities should not be considered a recommendation to buy or sell those securities. Fund holdings will vary.
Except as otherwise specifically stated, all information and investment team commentary, including portfolio security positions, is as of June 30, 2011.
As with all mutual funds, the value of an investment in the Fund could decline, in which case you could lose money. Small cap investing entails special risks. Small cap stocks have tended to be more volatile and to drop more in down markets than large cap stocks. This may happen because small companies may be limited in terms of product lines, financial resources, and management.
RS SMALL CAP GROWTH EQUITY VIP SERIES
Characteristics
| | |
| Total Net Assets: $108,379,117 | | |
| | | | |
| |
| Sector Allocation vs. Index4 | |
 | |
| | |
| Top Ten Holdings5 | | | |
| | |
Holding | | % of Total
Net Assets | |
| Ulta Salon, Cosmetics & Fragrance, Inc. | | | 1.82% | |
| HEICO Corp., Class A | | | 1.74% | |
| Vitamin Shoppe, Inc. | | | 1.66% | |
| Steven Madden Ltd. | | | 1.62% | |
| Netlogic Microsystems, Inc. | | | 1.62% | |
| RBC Bearings, Inc. | | | 1.56% | |
| Wright Express Corp. | | | 1.56% | |
| Ancestry.com, Inc. | | | 1.55% | |
| Team Health Holdings, Inc. | | | 1.55% | |
| Gardner Denver, Inc. | | | 1.54% | |
| Total | | | 16.22% | |
| 1 | The Russell 2000® Index is an unmanaged market capitalization-weighted index that measures the performance of the 2,000 smallest companies in the Russell 3000® Index, which consists of the 3,000 largest U.S. companies based on total market capitalization. Index results assume the reinvestment of dividends paid on the stocks constituting the index. You may not invest in the index, and, unlike the Fund, the index does not incur fees or expenses. |
| 2 | The Russell 2000® Growth Index is an unmanaged market capitalization-weighted index that measures the performance of those companies in the Russell 2000 Index with higher price-to-book ratios and higher forecasted growth values. (The Russell 2000 Index is an unmanaged market capitalization-weighted index that measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which consists of the 3,000 largest U.S. companies based on total market capitalization.) Investment results assume the reinvestment of dividends paid on the stocks constituting the index. You may not invest in the index, and, unlike the Fund, the index does not incur fees or expenses. |
| 3 | The S&P 500® Index is an unmanaged market-capitalization-weighted index generally considered to be representative of U.S. equity market activity. The index consists of 500 stocks representing leading industries of the U.S. economy. Index results assume the reinvestment of dividends paid on the stocks constituting the index. You may not invest in the index, and, unlike the Fund, the index does not incur fees or expenses. |
RS SMALL CAP GROWTH EQUITY VIP SERIES
| 4 | The Fund’s holdings are allocated to each sector based on their Russell Global Sector classification. If a holding is not classified by Russell, it is assigned a Russell designation by RS Investments. Cash includes short-term investments and net other assets and liabilities. |
| 5 | Portfolio holdings are subject to change and should not be considered a recommendation to buy or sell individual securities. |
Performance Update
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
| Average Annual Total Returns | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
| | | Inception
Date | | | Year-to-Date | | | 1 Year | | | 3 Year | | | 5 Year | | | 10 Year | | | Since
Inception | |
| RS Small Cap Growth Equity VIP Series | | | 5/1/97 | | | | 13.70% | | | | 48.21% | | | | 13.23% | | | | 8.33% | | | | 8.03% | | | | 9.01% | |
| Russell 2000® Growth Index2 | | | | | | | 8.59% | | | | 43.50% | | | | 8.35% | | | | 5.79% | | | | 4.63% | | | | 5.83% | |
| Russell 2000® Index1 | | | | | | | 6.21% | | | | 37.41% | | | | 7.77% | | | | 4.08% | | | | 6.27% | | | | 7.73% | |
| | | | | | | |
| Results of a Hypothetical $10,000 Investment | | | | | | | | | | | | | | | | | | | |
 | |
The chart above shows the performance of a hypothetical $10,000 investment made 10 years ago in RS Small Cap Growth Equity VIP Series, in the Russell 2000® Growth Index, and in the Russell 2000® Index. Index returns do not include the fees and expenses of the Fund, but do include the reinvestment of dividends.
Performance quoted represents past performance and does not guarantee or predict future results. The Fund is the successor to The Guardian Small Cap Stock Fund; performance shown includes performance of the predecessor fund for periods prior to October 9, 2006. Investment return and principal value will fluctuate, so shares, when redeemed, may be worth more or less than their original cost. Please keep in mind that any high double-digit returns are highly unusual and cannot be sustained. The Fund’s fees and expenses are detailed in the Financial Highlights section of this report. Fees and expenses are factored into the net asset value of your shares and any performance numbers we release. Performance results assume the reinvestment of dividends and capital gains. The return figures shown do not reflect the deduction of taxes that a contract owner/policyholder may pay on Fund distributions or redemption units. The actual total returns for owners of variable annuity contracts or variable life insurance policies that provide for investment in the Fund will be lower to reflect separate account and contract/policy charges. Current and month-end performance information, which may be lower or higher than that cited, is available by calling 800-221-3253 and is periodically updated on our Web site: www.guardianinvestor.com.
UNDERSTANDING YOUR FUND’S EXPENSES (UNAUDITED)
By investing in the Fund, you incur two types of costs: (1) transaction costs, including, as applicable, sales charges (loads) on purchase payments; redemption fees; and exchange fees; and (2) ongoing costs, including as applicable, investment advisory fees; and other Fund expenses. The example below is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period indicated. The table below shows the Fund’s expenses in two ways:
Expenses based on actual return
This section of the table provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Expenses based on hypothetical 5% return for comparison purposes
This section of the table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund with the cost of investing in other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore the second section is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If these transactional costs were included, your costs would have been higher.
| | | | | | | | | | | | | | |
| | | Beginning
Account Value 1/1/11 | | Ending Account Value 6/30/11 | | | Expenses Paid During Period* 1/1/11-6/30/11 | | | Expense Ratio During Period 1/1/11-6/30/11 | |
| Based on Actual Return | | $1,000.00 | | | $1,137.00 | | | | $4.52 | | | | 0.85% | |
| Based on Hypothetical Return (5% Return Before Expenses) | | $1,000.00 | | | $1,020.56 | | | | $4.27 | | | | 0.85% | |
| * | Expenses are equal to the Fund’s annualized expense ratio as indicated, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). |
SCHEDULE OF INVESTMENTS — RS SMALL CAP GROWTH EQUITY VIP SERIES
| | | | | | | | |
| June 30, 2011 (unaudited) | | Shares | | | Value | |
| Common Stocks – 98.8% | | | | | | | | |
| Advertising Agencies – 1.5% | | | | | | | | |
Velti PLC(1) | | | 98,100 | | | $ | 1,658,871 | |
| | | | | | | | | |
| | | | | | | | 1,658,871 | |
| Aerospace – 1.7% | | | | | | | | |
HEICO Corp., Class A | | | 47,538 | | | | 1,890,111 | |
| | | | | | | | | |
| | | | | | | | 1,890,111 | |
| Asset Management & Custodian – 0.3% | |
Financial Engines, Inc.(1) | | | 11,500 | | | | 298,080 | |
| | | | | | | | | |
| | | | | | | | 298,080 | |
| Auto Parts – 1.5% | |
LKQ Corp.(1) | | | 62,600 | | | | 1,633,234 | |
| | | | | | | | | |
| | | | | | | | 1,633,234 | |
| Back Office Support, HR and Consulting – 2.6% | |
Dice Holdings, Inc.(1) | | | 86,332 | | | | 1,167,209 | |
ICF International, Inc.(1) | | | 31,600 | | | | 802,008 | |
Robert Half International, Inc. | | | 30,400 | | | | 821,712 | |
| | | | | | | | | |
| | | | | | | | 2,790,929 | |
| Banks: Diversified – 1.0% | |
IBERIABANK Corp. | | | 18,800 | | | | 1,083,632 | |
| | | | | | | | | |
| | | | | | | | 1,083,632 | |
| Biotechnology – 5.3% | |
Aegerion Pharmaceuticals, Inc.(1) | | | 30,500 | | | | 480,375 | |
Aveo Pharmaceuticals, Inc.(1) | | | 40,270 | | | | 829,965 | |
Medivation, Inc.(1) | | | 37,400 | | | | 801,482 | |
Myriad Genetics, Inc.(1) | | | 32,145 | | | | 730,013 | |
NPS Pharmaceuticals, Inc.(1) | | | 104,600 | | | | 988,470 | |
Pharmasset, Inc.(1) | | | 9,700 | | | | 1,088,340 | |
Seattle Genetics, Inc.(1) | | | 41,900 | | | | 859,788 | |
| | | | | | | | | |
| | | | | | | | 5,778,433 | |
| Chemicals: Diversified – 1.0% | |
LSB Industries, Inc.(1) | | | 26,500 | | | | 1,137,380 | |
| | | | | | | | | |
| | | | | | | | 1,137,380 | |
| Chemicals: Specialty – 1.2% | |
Balchem Corp. | | | 29,800 | | | | 1,304,644 | |
| | | | | | | | | |
| | | | | | | | 1,304,644 | |
| Commercial Vehicles & Parts – 1.3% | |
Commercial Vehicle Group, Inc.(1) | | | 99,200 | | | | 1,407,648 | |
| | | | | | | | | |
| | | | | | | | 1,407,648 | |
| Communications Technology – 3.5% | |
ADTRAN, Inc. | | | 25,700 | | | | 994,847 | |
NETGEAR, Inc.(1) | | | 24,800 | | | | 1,084,256 | |
Oclaro, Inc.(1) | | | 138,487 | | | | 930,633 | |
Polycom, Inc.(1) | | | 12,600 | | | | 810,180 | |
| | | | | | | | | |
| | | | | | | | 3,819,916 | |
| Computer Services, Software & Systems – 10.4% | |
comScore, Inc.(1) | | | 52,287 | | | | 1,354,233 | |
Concur Technologies, Inc.(1) | | | 26,400 | | | | 1,321,848 | |
Digital River, Inc.(1) | | | 31,965 | | | | 1,027,995 | |
Fortinet, Inc.(1) | | | 59,800 | | | | 1,631,942 | |
| | | | | | | | | |
| | | | | | | | |
| June 30, 2011 (unaudited) | | Shares | | | Value | |
| Computer Services, Software & Systems (continued) | |
Gartner, Inc.(1) | | | 26,500 | | | $ | 1,067,685 | |
Informatica Corp.(1) | | | 25,340 | | | | 1,480,616 | |
Sapient Corp.(1) | | | 59,100 | | | | 888,273 | |
The Ultimate Software Group, Inc.(1) | | | 28,700 | | | | 1,562,141 | |
VeriFone Systems, Inc.(1) | | | 20,394 | | | | 904,474 | |
| | | | | | | | | |
| | | | | | | | 11,239,207 | |
| Computer Technology – 0.7% | |
Super Micro Computer, Inc.(1) | | | 45,800 | | | | 736,922 | |
| | | | | | | | | |
| | | | | | | | 736,922 | |
| Consumer Electronics – 1.4% | | | | | | | | |
RealD, Inc.(1) | | | 65,461 | | | | 1,531,133 | |
| | | | | | | | | |
| | | | | | | | 1,531,133 | |
| Consumer Lending – 1.4% | |
Portfolio Recovery Associates, Inc.(1) | | | 17,452 | | | | 1,479,755 | |
| | | | | | | | | |
| | | | | | | | 1,479,755 | |
| Consumer Services: Miscellaneous – 1.5% | |
Ancestry.com, Inc.(1) | | | 40,700 | | | | 1,684,573 | |
| | | | | | | | | |
| | | | | | | | 1,684,573 | |
| Containers & Packaging – 1.2% | |
Rock-Tenn Co., Class A | | | 19,400 | | | | 1,286,996 | |
| | | | | | | | | |
| | | | | | | | 1,286,996 | |
| Education Services – 1.3% | |
American Public Education, Inc.(1) | | | 31,096 | | | | 1,384,083 | |
| | | | | | | | | |
| | | | | | | | 1,384,083 | |
| Financial Data & Systems – 2.7% | |
Higher One Holdings, Inc.(1) | | | 65,334 | | | | 1,236,119 | |
Wright Express Corp.(1) | | | 32,423 | | | | 1,688,266 | |
| | | | | | | | | |
| | | | | | | | 2,924,385 | |
| Foods – 1.2% | |
Diamond Foods, Inc. | | | 16,700 | | | | 1,274,878 | |
| | | | | | | | | |
| | | | | | | | 1,274,878 | |
| Health Care Management Services – 1.2% | |
Catalyst Health Solutions, Inc.(1) | | | 23,000 | | | | 1,283,860 | |
| | | | | | | | | |
| | | | | | | | 1,283,860 | |
| Health Care Services – 3.7% | |
Healthways, Inc.(1) | | | 82,100 | | | | 1,246,278 | |
HMS Holdings Corp.(1) | | | 14,700 | | | | 1,129,989 | |
Team Health Holdings, Inc.(1) | | | 74,473 | | | | 1,676,387 | |
| | | | | | | | | |
| | | | | | | | 4,052,654 | |
| Hotel/Motel – 1.0% | |
Gaylord Entertainment Co.(1) | | | 35,300 | | | | 1,059,000 | |
| | | | | | | | | |
| | | | | | | | 1,059,000 | |
| Leisure Time – 0.1% | |
HomeAway, Inc.(1) | | | 2,300 | | | | 89,010 | |
| | | | | | | | | |
| | | | | | | | 89,010 | |
| Machinery: Industrial – 2.5% | |
Altra Holdings, Inc.(1) | | | 44,300 | | | | 1,062,757 | |
| | | | | | | | | |
| | | | |
| 8 | | | | The accompanying notes are an integral part of these financial statements. |
RS SMALL CAP GROWTH EQUITY VIP SERIES
| | | | | | | | |
| June 30, 2011 (unaudited) | | Shares | | | Value | |
| Machinery: Industrial (continued) | |
Gardner Denver, Inc. | | | 19,900 | | | $ | 1,672,595 | |
| | | | | | | | | |
| | | | | | | | 2,735,352 | |
| Medical & Dental Instruments & Supplies – 3.5% | |
ABIOMED, Inc.(1) | | | 30,700 | | | | 497,340 | |
Align Technology, Inc.(1) | | | 51,800 | | | | 1,181,040 | |
Merit Medical Systems, Inc.(1) | | | 53,600 | | | | 963,192 | |
Neogen Corp.(1) | | | 25,000 | | | | 1,130,250 | |
| | | | | | | | | |
| | | | | | | | 3,771,822 | |
| Medical Equipment – 4.7% | |
Accuray, Inc.(1) | | | 142,736 | | | | 1,143,315 | |
Cyberonics, Inc.(1) | | | 19,997 | | | | 558,916 | |
Dexcom, Inc.(1) | | | 93,607 | | | | 1,356,366 | |
Masimo Corp. | | | 31,900 | | | | 946,792 | |
Zoll Medical Corp.(1) | | | 19,900 | | | | 1,127,534 | |
| | | | | | | | | |
| | | | | | | | 5,132,923 | |
| Metal Fabricating – 1.6% | |
RBC Bearings, Inc.(1) | | | 44,800 | | | | 1,691,648 | |
| | | | | | | | | |
| | | | | | | | 1,691,648 | |
| Metals & Minerals: Diversified – 2.5% | |
Compass Minerals International, Inc. | | | 15,400 | | | | 1,325,478 | |
Globe Specialty Metals, Inc. | | | 62,400 | | | | 1,399,008 | |
| | | | | | | | | |
| | | | | | | | 2,724,486 | |
| Oil Well Equipment & Services – 3.8% | |
Complete Production Services, Inc.(1) | | | 45,800 | | | | 1,527,888 | |
Core Laboratories N.V. | | | 11,402 | | | | 1,271,779 | |
Dril-Quip, Inc.(1) | | | 19,510 | | | | 1,323,363 | |
| | | | | | | | | |
| | | | | | | | 4,123,030 | |
| Oil: Crude Producers – 0.7% | |
Comstock Resources, Inc.(1) | | | 28,529 | | | | 821,350 | |
| | | | | | | | | |
| | | | | | | | 821,350 | |
| Pharmaceuticals – 1.7% | |
Amarin Corp. PLC, ADR(1) | | | 44,255 | | | | 640,370 | |
BioMarin Pharmaceutical, Inc.(1) | | | 46,113 | | | | 1,254,734 | |
| | | | | | | | | |
| | | | | | | | 1,895,104 | |
| Printing and Copying Services – 0.7% | |
VistaPrint N.V.(1) | | | 14,925 | | | | 714,161 | |
| | | | | | | | | |
| | | | | | | | 714,161 | |
| Producer Durables: Miscellaneous – 0.9% | |
BE Aerospace, Inc.(1) | | | 24,900 | | | | 1,016,169 | |
| | | | | | | | | |
| | | | | | | | 1,016,169 | |
| Production Technology Equipment – 0.7% | |
Rudolph Technologies, Inc.(1) | | | 68,800 | | | | 736,848 | |
| | | | | | | | | |
| | | | | | | | 736,848 | |
| Radio & TV Broadcasters – 0.5% | | | | | | | | |
Pandora Media, Inc.(1) | | | 30,200 | | | | 571,082 | |
| | | | | | | | | |
| | | | | | | | 571,082 | |
| Real Estate – 0.9% | |
FirstService Corp.(1) | | | 27,200 | | | | 939,488 | |
| | | | | | | | | |
| | | | | | | | 939,488 | |
| | | | | | | | |
| June 30, 2011 (unaudited) | | Shares | | | Value | |
| Restaurants – 1.1% | |
BJ’s Restaurants, Inc.(1) | | | 22,448 | | | $ | 1,175,377 | |
| | | | | | | | | |
| | | | | | | | 1,175,377 | |
| Scientific Instruments: Electrical – 1.2% | |
GrafTech International Ltd.(1) | | | 62,132 | | | | 1,259,416 | |
| | | | | | | | | |
| | | | | | | | 1,259,416 | |
| Scientific Instruments: Gauges & Meters – 1.0% | |
Elster Group SE, ADR(1) | | | 67,190 | | | | 1,100,572 | |
| | | | | | | | | |
| | | | | | | | 1,100,572 | |
| Securities Brokerage & Services – 1.0% | |
MarketAxess Holdings, Inc. | | | 41,987 | | | | 1,052,194 | |
| | | | | | | | | |
| | | | | | | | 1,052,194 | |
| Semiconductors & Components – 6.0% | |
Hittite Microwave Corp.(1) | | | 18,300 | | | | 1,132,953 | |
Netlogic Microsystems, Inc.(1) | | | 43,438 | | | | 1,755,764 | |
O2Micro International Ltd., ADR(1) | | | 33,708 | | | | 219,102 | |
Power Integrations, Inc. | | | 33,581 | | | | 1,290,518 | |
SemiLEDs Corp.(1) | | | 116,800 | | | | 753,360 | |
Silicon Laboratories, Inc.(1) | | | 31,700 | | | | 1,307,942 | |
| | | | | | | | | |
| | | | | | | | 6,459,639 | |
| Specialty Retail – 4.9% | |
Tractor Supply Co. | | | 22,300 | | | | 1,491,424 | |
Ulta Salon, Cosmetics & Fragrance, Inc.(1) | | | 30,600 | | | | 1,976,148 | |
Vitamin Shoppe, Inc.(1) | | | 39,400 | | | | 1,802,944 | |
| | | | | | | | | |
| | | | | | | | 5,270,516 | |
| Textiles, Apparel & Shoes – 6.6% | |
Crocs, Inc.(1) | | | 48,100 | | | | 1,238,575 | |
Deckers Outdoor Corp.(1) | | | 13,500 | | | | 1,189,890 | |
G-III Apparel Group Ltd.(1) | | | 41,700 | | | | 1,437,816 | |
Steven Madden Ltd.(1) | | | 46,950 | | | | 1,761,094 | |
Under Armour, Inc., Class A(1) | | | 19,625 | | | | 1,517,209 | |
| | | | | | | | | |
| | | | | | | | 7,144,584 | |
| Truckers – 2.4% | |
Old Dominion Freight Line, Inc.(1) | | | 36,500 | | | | 1,361,450 | |
Roadrunner Transportation Systems, Inc.(1) | | | 83,500 | | | | 1,259,180 | |
| | | | | | | | | |
| | | | | | | | 2,620,630 | |
| Utilities: Telecommunications – 1.2% | |
j2 Global Communications, Inc.(1) | | | 45,334 | | | | 1,279,779 | |
| | | | | | | | | |
| | | | | | | | 1,279,779 | |
Total Common Stocks
(Cost $81,496,907) | | | | 107,065,504 | |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 9 |
SCHEDULE OF INVESTMENTS — RS SMALL CAP GROWTH EQUITY VIP SERIES
| | | | | | | | |
| June 30, 2011 (unaudited) | | Principal Amount | | | Value | |
| Repurchase Agreements – 2.0% | |
State Street Bank and Trust Co. Repurchase Agreement, 0.01%, dated 6/30/2011, maturity value of $2,159,001, due 7/1/2011(2) | | $ | 2,159,000 | | | $ | 2,159,000 | |
Total Repurchase Agreements
(Cost $2,159,000) | | | | 2,159,000 | |
Total Investments - 100.8%
(Cost $83,655,907) | | | | 109,224,504 | |
| Other Liabilities, Net - (0.8)% | | | | (845,387 | ) |
| Total Net Assets - 100.0% | | | $ | 108,379,117 | |
| (1) | Non-income producing security. |
| (2) | The table below presents collateral for repurchase agreements. |
| | | | | | | | | | | | |
| Security | | Coupon | | | Maturity Date | | | Value | |
| U.S. Treasury Note | | | 1.00% | | | | 3/31/2012 | | | $ | 2,204,119 | |
Legend:
ADR — American Depositary Receipt.
The following is a summary of the inputs used as of June 30, 2011 in valuing the Fund’s investments. For more information on valuation inputs, please refer to Note 1a of the accompanying Notes to Financial Statements.
| | | | | | | | | | | | | | | | |
| | | Valuation Inputs | | | | |
| Investments in Securities | | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
| Common Stocks | | $ | 107,065,504 | | | $ | — | | | $ | — | | | $ | 107,065,504 | |
| Repurchase Agreements | | | — | | | | 2,159,000 | | | | — | | | | 2,159,000 | |
| Total | | $ | 107,065,504 | | | $ | 2,159,000 | | | $ | — | | | $ | 109,224,504 | |
| | | | |
| 10 | | | | The accompanying notes are an integral part of these financial statements. |
FINANCIAL INFORMATION — RS SMALL CAP GROWTH EQUITY VIP SERIES
| | | | |
Statement of Assets and Liabilities As of June 30, 2011 (unaudited) | |
Assets | | | | |
Investments, at value | | $ | 109,224,504 | |
Cash and cash equivalents | | | 872 | |
Receivable for investments sold | | | 504,570 | |
Receivable for fund shares subscribed | | | 11,510 | |
Dividends/interest receivable | | | 6,393 | |
| | | | | |
Total Assets | | | 109,747,849 | |
| | | | | |
| | |
Liabilities | | | | |
Payable for investments purchased | | | 1,244,517 | |
Payable to adviser | | | 64,783 | |
Payable for fund shares redeemed | | | 43,449 | |
Accrued trustees’ fees | | | 1,424 | |
Accrued expenses/other liabilities | | | 14,559 | |
| | | | | |
Total Liabilities | | | 1,368,732 | |
| | | | | |
Total Net Assets | | $ | 108,379,117 | |
| | | | | |
| | |
Net Assets Consist of: | | | | |
Paid-in capital | | $ | 94,954,312 | |
Accumulated undistributed net investment loss | | | (358,923 | ) |
Accumulated net realized loss from investments | | | (11,784,869 | ) |
Net unrealized appreciation on investments | | | 25,568,597 | |
| | | | | |
Total Net Assets | | $ | 108,379,117 | |
| | | | | |
Investments, at Cost | | $ | 83,655,907 | |
| | | | | |
| | |
Pricing of Shares | | | | |
Shares of Beneficial Interest Outstanding with no Par Value | | | 7,252,147 | |
Net Asset Value Per Share | | | $14.94 | |
| | | | | |
| | | | |
Statement of Operations For the Six-Month Period Ended June 30, 2011 (unaudited) | |
Investment Income | | | | |
Dividends | | $ | 87,289 | |
Interest | | | 135 | |
Withholding taxes on foreign dividends | | | (881 | ) |
| | | | | |
Total Investment Income | | | 86,543 | |
| | | | | |
| | |
Expenses | | | | |
Investment advisory fees | | | 391,537 | |
Custodian fees | | | 16,953 | |
Professional fees | | | 14,139 | |
Shareholder reports | | | 10,068 | |
Administrative service fees | | | 6,834 | |
Trustees’ fees | | | 2,450 | |
Other expenses | | | 3,487 | |
| | | | | |
Total Expenses | | | 445,468 | |
Less: Custody credits | | | (2 | ) |
| | | | | |
Total Expenses, Net | | | 445,466 | |
| | | | | |
Net Investment Loss | | | (358,923 | ) |
| | | | | |
| | |
Realized Gain/(Loss) and Change in Unrealized Appreciation/Depreciation on Investments | | | | |
Net realized gain from investments | | | 11,569,819 | |
Net change in unrealized appreciation/depreciation on investments | | | 2,156,018 | |
| | | | | |
Net Gain on Investments | | | 13,725,837 | |
| | | | | |
Net Increase in Net Assets Resulting from Operations | | $ | 13,366,914 | |
| | | | | |
| | | | | |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 11 |
FINANCIAL INFORMATION — RS SMALL CAP GROWTH EQUITY VIP SERIES
| | | | | | | | |
Statements of Changes in Net Assets Six-month-ended numbers are unaudited | | | | | | |
| | | |
| | | For the
Six Months Ended
6/30/11 | | | For the
Year Ended
12/31/10 | |
| | | | |
Operations | | | | | | | | |
Net investment loss | | $ | (358,923 | ) | | $ | (540,804 | ) |
Net realized gain from investments | | | 11,569,819 | | | | 28,472,346 | |
Net change in unrealized appreciation/depreciation on investments | | | 2,156,018 | | | | (1,318,283 | ) |
| | | | | | | | | |
Net Increase in Net Assets Resulting from Operations | | | 13,366,914 | | | | 26,613,259 | |
| | | | | | | | | |
| | | |
Capital Share Transactions | | | | | | | | |
Proceeds from sales of shares | | | 6,863,773 | | | | 7,600,453 | |
Cost of shares redeemed | | | (12,081,015 | ) | | | (52,154,875 | ) |
| | | | | | | | | |
Net Decrease in Net Assets Resulting from Capital Share
Transactions | | | (5,217,242 | ) | | | (44,554,422 | ) |
| | | | | | | | | |
Net Increase/(Decrease) in Net Assets | | | 8,149,672 | | | | (17,941,163 | ) |
| | | | | | | | | |
| | | |
Net Assets | | | | | | | | |
Beginning of period | | | 100,229,445 | | | | 118,170,608 | |
| | | | | | | | | |
End of period | | $ | 108,379,117 | | | $ | 100,229,445 | |
| | | | | | | | | |
Accumulated Undistributed Net Investment Loss Included in Net Assets | | $ | (358,923 | ) | | $ | — | |
| | | | | | | | | |
| | | |
Other Information: | | | | | | | | |
Shares | | | | | | | | |
Sold | | | 484,926 | | | | 678,262 | |
Redeemed | | | (861,255 | ) | | | (4,519,985 | ) |
| | | | | | | | | |
Net Decrease | | | (376,329 | ) | | | (3,841,723 | ) |
| | | | | | | | | |
| | | | | | | | | |
| | | | |
| 12 | | | | The accompanying notes are an integral part of these financial statements. |
This Page Intentionally Left Blank
FINANCIAL INFORMATION — RS SMALL CAP GROWTH EQUITY VIP SERIES
The financial highlights table is intended to help you understand the Fund’s financial performance for the past six reporting periods. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the Fund (assuming reinvestment of all distributions).
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Financial Highlights Six-month-ended numbers are unaudited | | | | | | | | | | | | | | | | | | | | | | |
| | | Net Asset Value,
Beginning of
Period | | | Net Investment
Income/(Loss) | | | Net Realized and Unrealized
Gain/(Loss) | | | Total
Operations | | | Distributions
From Net
Investment
Income | | | Distributions
From Net
Realized
Capital Gains | | | Return of
Capital | | | Total
Distributions | |
Six Months Ended 6/30/111 | | $ | 13.14 | | | $ | (0.05 | ) | | $ | 1.85 | | | $ | 1.80 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Year Ended 12/31/10 | | | 10.30 | | | | (0.07 | ) | | | 2.91 | | | | 2.84 | | | | — | | | | — | | | | — | | | | — | |
Year Ended 12/31/09 | | | 7.51 | | | | (0.03 | ) | | | 2.82 | | | | 2.79 | | | | — | | | | — | | | | — | | | | — | |
Year Ended 12/31/08 | | | 11.82 | | | | 0.01 | | | | (4.17 | ) | | | (4.16 | ) | | | (0.01 | ) | | | (0.08 | ) | | | (0.06 | ) | | | (0.15 | ) |
Year Ended 12/31/07 | | | 15.03 | | | | 0.13 | | | | 0.60 | | | | 0.73 | | | | (0.14 | ) | | | (3.80 | ) | | | — | | | | (3.94 | ) |
Year Ended 12/31/06 | | | 14.13 | | | | 0.02 | | | | 2.35 | | | | 2.37 | | | | — | | | | (1.47 | ) | | | — | | | | (1.47 | ) |
| | | | |
| 14 | | | | The accompanying notes are an integral part of these financial statements. |
FINANCIAL INFORMATION — RS SMALL CAP GROWTH EQUITY VIP SERIES
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Net Asset
Value, End of
Period | | | Total
Return2 | | | Net Assets, End of Period (000s) | | | Net Ratio of
Expenses to
Average Net
Assets3 | | | Gross Ratio of
Expenses to
Average Net
Assets | | | Net Ratio of Net
Investment Income/ (Loss) to Average
Net Assets3 | | | Gross Ratio of Net
Investment Income/ (Loss) to Average
Net Assets | | | Portfolio
Turnover Rate | |
| $ | 14.94 | | | | 13.70% | | | $ | 108,379 | | | | 0.85% | | | | 0.85% | | | | (0.69)% | | | | (0.69)% | | | | 44% | |
| | 13.14 | | | | 27.57% | | | | 100,229 | | | | 0.86% | | | | 0.86% | | | | (0.52)% | | | | (0.52)% | | | | 121% | |
| | 10.30 | | | | 37.15% | | | | 118,171 | | | | 0.85% | | | | 0.88% | | | | (0.33)% | | | | (0.36)% | | | | 177% | |
| | 7.51 | | | | (35.18)% | | | | 88,939 | | | | 0.85% | | | | 0.86% | | | | 0.06% | | | | 0.05% | | | | 118% | |
| | 11.82 | | | | 5.13% | | | | 203,087 | | | | 0.85% | | | | 0.85% | | | | 0.68% | | | | 0.68% | | | | 149% | |
| | 15.03 | | | | 17.17% | | | | 233,010 | | | | 0.85% | | | | 0.85% | | | | 0.12% | | | | 0.12% | | | | 136% | |
Distributions reflect actual per-share amounts distributed for the period.
| 1 | Ratios for periods less than one year have been annualized, except for total return and portfolio turnover rate. |
| 2 | Total returns do not reflect the effects of charges deducted pursuant to the terms of The Guardian Insurance & Annuity Company, Inc.’s variable contracts. Inclusion of such charges would reduce the total returns for all periods shown. |
| 3 | Net Ratio of Expenses to Average Net Assets and Net Ratio of Net Investment Income/(Loss) to Average Net Assets include the effect of fee waivers, expense limitations and custody credits, if applicable. |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 15 |
NOTES TO FINANCIAL STATEMENTS — RS SMALL CAP GROWTH EQUITY VIP SERIES (UNAUDITED)
June 30, 2011 (unaudited)
RS Variable Products Trust (the “Trust”), a Massachusetts business trust organized on May 18, 2006, is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust currently offers twelve series. RS Small Cap Growth Equity VIP Series (the “Fund”) is a series of the Trust. The Fund is a diversified fund. The financial statements for the other remaining series of the Trust are presented in separate reports.
The Fund has authorized an unlimited number of shares of beneficial interest with no par value. Shares are bought and sold at closing net asset value (“NAV”), which is the price for all outstanding shares of the Fund. Class I shares of the Fund are only sold to certain separate accounts of The Guardian Insurance & Annuity Company, Inc. (“GIAC”). GIAC is a wholly-owned subsidiary of The Guardian Life Insurance Company of America (“Guardian Life”). The Fund is currently offered to insurance company separate accounts that fund certain variable annuity and variable life insurance contracts issued by GIAC.
Note 1. Significant Accounting Policies
The following policies are in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
a. Investment Valuations Marketable securities are valued at the last reported sale price on the principal exchange or market on which they are traded; or, if there were no sales that day, at the mean between the closing bid and asked prices. Securities traded on the NASDAQ Stock Market, LLC (“NASDAQ”) are generally valued at the NASDAQ official closing price, which may not be the last sale price. If the NASDAQ official closing price is not available for a security, that security is generally valued using the last reported sale price, or, if no sales are reported, at the mean between the closing bid and asked prices. Short-term investments that will mature in 60 days or less are valued at amortized cost, which approximates market value. Repurchase agreements are carried at cost, which approximates market value. Foreign securities are valued in the currencies of the markets in which they trade and then converted to U.S. dollars using the prevailing exchange rates at the close of the New York Stock Exchange (“NYSE”).
Securities for which market quotations are not readily available or for which market quotations may be considered unreliable are valued at their fair values as determined in accordance with guidelines and procedures adopted by the Trust’s Board of Trustees.
Securities whose values have been materially affected by events occurring before the Fund’s valuation time but after the close of the securities’ principal exchange or market may be fair valued using methods approved by the Board of Trustees. In addition, if there has been a movement in the U.S. markets that exceeds a specified threshold, the values of the Fund’s investments in foreign securities are generally determined by a pricing service using pricing models designed to estimate likely changes in the values of those securities.
The Fund has adopted the authoritative guidance under GAAP on determining fair value when the volume and level of activity for an asset or liability have significantly decreased and for identifying transactions that are not orderly. Accordingly, if the Fund determines that either the volume and/or level of activity for an asset or liability has significantly decreased (from normal conditions for that asset or liability) or price quotations or observable inputs are not associated with orderly transactions, increased analysis and management judgment will be required to estimate fair value.
In accordance with Financial Accounting Standards Board Codification Topic 820 (“ASC Topic 820”), fair value is defined as the price that the Fund would receive upon selling an investment in an “arm’s length” transaction to a willing buyer in the principal or most advantageous market for the investment. ASC Topic 820 established a hierarchy for classification of fair value measurements for disclosure purposes. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances. The hierarchy of inputs is summarized in the three broad levels listed below.
| Ÿ | | Level 1 — unadjusted quoted prices in active markets for identical investments |
| Ÿ | | Level 2 — inputs other than unadjusted quoted prices that are observable either directly or indirectly (including adjusted quoted prices for similar investments, interest rates, prepayment speeds, credit risks, etc.) |
NOTES TO FINANCIAL STATEMENTS — RS SMALL CAP GROWTH EQUITY VIP SERIES (UNAUDITED)
| Ÿ | | Level 3 — significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments) |
Inputs may include price information, volatility statistics, specific and broad credit data, liquidity statistics, and other factors. A security’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires significant judgment by the Trust. The Trust considers observable data to be that market data which is readily available, regularly distributed or updated, reliable and verifiable, and provided by independent sources that are actively involved in the relevant market. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. Changes in valuation techniques may result in transfers into or out of an investment’s assigned level within the hierarchy.
Effective beginning with the Fund’s current fiscal year, the Financial Accounting Standards Board requires reporting entities to make disclosures about purchases, sales, issuances and settlements of Level 3 securities on a gross basis. For the six months ended June 30, 2011, the Fund had no securities classified as Level 3.
There were no significant transfers between Level 1 and Level 2 for the six months end June 30, 2011.
In determining a security’s placement within the hierarchy, the Trust separates the Fund’s investment portfolio into two categories: investments and derivatives (e.g., futures).
Investments Investments whose values are based on quoted market prices in active markets, and are therefore classified within Level 1, include active listed equities. The Trust does not adjust the quoted price for such instruments, even in situations where the Fund holds a large position and a sale could reasonably be expected to impact the quoted price.
Investments that trade in markets that are not considered to be active, but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within Level 2. These include certain U.S. government and sovereign obligations, most government agency securities, investment-grade corporate bonds, certain mortgage products, state, municipal and provincial obligations, and certain foreign equity securities.
Investments classified within Level 3 have significant unobservable inputs, as they trade infrequently or not at
all. Level 3 investments include, among others, private placement securities. When observable prices are not available for these securities, the Trust uses one or more valuation techniques for which sufficient and reliable data is available. The inputs used by the Trust in estimating the value of Level 3 investments include the original transaction price, recent transactions in the same or similar instruments, completed or pending third-party transactions in the underlying investment or comparable issuers, subsequent rounds of financing, recapitalizations, and other transactions across the capital structure. Level 3 investments may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the Trust in the absence of market information. Assumptions used by the Trust due to the lack of observable inputs may significantly impact the resulting fair value and therefore the Fund’s results of operations.
Derivatives Exchange-traded derivatives, such as futures contracts and exchange traded option contracts, are typically classified within Level 1 or Level 2 of the fair value hierarchy depending on whether or not they are deemed to be actively traded. Certain derivatives, such as generic forwards, swaps and options, have inputs which can generally be corroborated by market data and are therefore classified within Level 2.
b. Federal Income Taxes The Fund intends to continue complying with the requirements of the Internal Revenue Code to qualify as a regulated investment company and to distribute substantially all net investment income and realized net capital gains, if any, to shareholders. Therefore, the Fund does not expect to be subject to income tax, and no provision for such tax has been made.
From time to time, however, the Fund may choose to pay an excise tax if the cost of making the required distribution exceeds the amount of the excise tax.
As of June 30, 2011, the Trust has reviewed the tax positions for open periods, as applicable to the Fund, and has determined that no provision for income tax is required in the Fund’s financial statements. The Fund recognizes interest and penalties, if any, related to unrecognized tax positions as income tax expense in the Statement of Operations. For the six months ended June 30, 2011, the Fund did not incur any interest or penalties. The Fund is not subject to examination by U.S. federal tax authorities for tax years before 2007 and by state authorities for tax years before 2006.
c. Securities Transactions Securities transactions are accounted for on the date securities are purchased or sold (trade date). Realized gains or losses on securities
NOTES TO FINANCIAL STATEMENTS — RS SMALL CAP GROWTH EQUITY VIP SERIES (UNAUDITED)
transactions are determined on the basis of specific identification.
d. Foreign Currency Translation The accounting records of the Fund are maintained in U.S. dollars. Investment securities and all other assets and liabilities of the Fund denominated in a foreign currency are generally translated into U.S. dollars at the exchange rates quoted at the close of the NYSE on each business day. Purchases and sales of securities, income receipts, and expense payments are translated into U.S. dollars at the exchange rates in effect on the dates of the respective transactions. The Fund does not isolate the portion of the fluctuations on investments resulting from changes in foreign currency exchange rates from the fluctuations in market prices of investments held. Such fluctuations are included with the net realized and unrealized gain or loss from investments.
e. Investment Income Dividend income is generally recorded on the ex-dividend date. Interest income, which includes amortization/accretion of premium/discount, is accrued and recorded daily.
f. Expenses Many expenses of the Trust can be directly attributed to a specific series of the Trust. Expenses that cannot be directly attributed to a specific series of the Trust are generally apportioned among all the series in the Trust, based on relative net assets.
g. Custody Credits The Fund has entered into an arrangement with its custodian, State Street Bank and Trust Company, whereby credits realized as a result of uninvested cash balances are used to reduce the Fund’s custodian expenses. The Fund’s custody credits, if any, are shown in the accompanying Statement of Operations.
h. Distributions to Shareholders The Fund intends to declare and distribute substantially all net investment income, if any, at least once a year. Distributions of net realized capital gains, if any, are declared and paid at least once a year. Unless the Fund is instructed otherwise, all distributions to shareholders are credited in the form of additional shares of the Fund at the net asset value, recorded on the ex-dividend date.
i. Capital Accounts Due to the timing of dividend distributions and the differences in accounting for income and realized gains/(losses) for financial statement purposes versus federal income tax purposes, the fiscal year in which amounts are distributed may differ from the year in which the income and realized gains/(losses) were recorded by the Fund.
Note 2. Transactions with Affiliates
a. Advisory Fee Under the terms of the advisory agreement, which is reviewed and approved annually by the Board of Trustees, the Fund pays an investment advisory fee to RS Investment Management Co. LLC (“RS Investments”). Guardian Investor Services LLC (“GIS”), a subsidiary of Guardian Life, holds a majority interest in RS Investments. RS Investments receives an investment advisory fee based on the average daily net assets of the Fund at an annual rate of 0.75%. The Fund has also entered into an agreement with GIS for distribution services with respect to its shares.
b. Compensation of Trustees and Officers Trustees and officers of the Trust who are interested persons, as defined in the 1940 Act, of RS Investments receive no compensation from the Fund for acting as such. Trustees of the Trust who are not interested persons of RS Investments receive compensation and reimbursement of expenses from the Trust.
Note 3. Federal Income Taxes
a. Distributions to Shareholders No distributions were paid to shareholders during the year ended December 31, 2010, which is the most recently completed tax year.
Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. These differences are primarily due to differing treatments of income and gains on various investment securities held by the Fund, timing differences, and differing characterizations of distributions made by the Fund. Permanent book and tax basis differences will result in reclassifications to paid-in capital, undistributed net investment income and accumulated undistributed net realized gain/(loss) on investments and foreign currency transactions. Undistributed net investment income and accumulated undistributed net realized gain/(loss) on investments and foreign currency transactions may include temporary book and tax differences, which will reverse in a subsequent period.
As of December 31, 2010, the Fund made the following reclassifications of permanent book and tax basis differences:
| | | | | | | | |
| Paid-in-Capital | | Accumulated Net Investment Loss | | | Accumulated
Net Realized Loss | |
| $(438,522) | | $ | 540,804 | | | $ | (102,282 | ) |
During any particular year, net realized gains from investment transactions, in excess of available capital
NOTES TO FINANCIAL STATEMENTS — RS SMALL CAP GROWTH EQUITY VIP SERIES (UNAUDITED)
loss carryforwards, would be taxable to the Fund if not distributed and, therefore, are normally distributed to shareholders annually.
During the year ended December 31, 2010, the Fund utilized $28,495,128 of capital loss carryovers. Capital loss carryovers available to the Fund at December 31, 2010 were $22,983,382, expiring in 2017.
In determining its taxable income, current tax law permits the Fund to elect to treat all or a portion of any net capital or currency loss realized after October 31 as occurring on the first day of the following fiscal year. For the year ended December 31, 2010, the Fund had no such losses.
On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted. The Act modernizes several of the federal income and excise tax rules related to regulated investment companies, and with certain exceptions, is effective for taxable years beginning after December 22, 2010.
Among the changes are revisions to capital loss carryforward rules allowing for capital losses to be carried forward to one or more subsequent taxable years without expiration. Rules previously in effect limited the carryforward period to eight taxable years. Capital loss carryforwards generated in taxable years beginning after the effective date of the Act must be fully used before capital loss carryforwards generated in taxable years prior to the effective date of the Act. Changes to excise tax rules include timing of recognition of certain income and a change in the required distribution rate for capital gains.
b. Tax Basis of Investments The cost of investments for federal income tax purposes at June 30, 2011, was $83,964,535. The gross unrealized appreciation and depreciation on investments, on a tax basis, at June 30, 2011, aggregated $27,176,605 and $(1,916,636), respectively, resulting in net unrealized appreciation of $25,259,969.
Note 4. Investments
a. Investment Purchases and Sales The cost of investments purchased and the proceeds from investments sold (excluding short-term investments) amounted to $45,712,506 and $49,634,263, respectively, for the six months ended June 30, 2011.
b. Foreign Securities Foreign securities investments involve special risks and considerations not typically associated with those of U.S. origin. These risks include,
but are not limited to, currency risk; adverse political, social, and economic developments; and less reliable information about issuers. Moreover, securities of some foreign companies may be less liquid and their prices more volatile than those of comparable U.S. companies.
c. Industry or Sector Concentration In its normal course of business, the Fund may invest a significant portion of its assets in companies within a limited number of industries or sectors. As a result, the Fund may be subject to a greater risk of loss than that of a fund invested in a wider spectrum of industries or sectors because the stocks of many or all of the companies in the industry, group of industries, sector, or sectors may decline in value due to developments adversely affecting the industry, group of industries, sector, or sectors.
d. Repurchase Agreements The collateral for repurchase agreements is either cash or fully negotiable U.S. government securities (including U.S. government agency securities). Repurchase agreements are fully collateralized (including the interest accrued thereon) and such collateral is marked-to-market daily while the agreements remain in force. If the value of the collateral falls below the repurchase price plus accrued interest, the Fund will typically require the seller to deposit additional collateral by the next business day. If the request for additional collateral is not met, or the seller defaults, the Fund maintains the right to sell the collateral (although it may be prevented or delayed from doing so in certain circumstances) and may claim any resulting loss against the seller.
Note 5. Temporary Borrowings
The Fund, with other funds managed by RS Investments, shares in a $75 million committed revolving credit/overdraft protection facility from State Street Bank and Trust Company for temporary purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. Interest is calculated based on market rates at the time of borrowing; all the funds that are parties to the facility share in a commitment fee that is allocated among the funds on the basis of their respective net assets. The Fund may borrow up to the lesser of one-third of its total assets (including amounts borrowed) or any lower limit specified in the Fund’s Statement of Additional Information or Prospectus.
NOTES TO FINANCIAL STATEMENTS — RS SMALL CAP GROWTH EQUITY VIP SERIES (UNAUDITED)
For the six months ended June 30, 2011, the Fund borrowed from the facility as follows:
| | | | | | | | | | |
Amount Outstanding
at 6/30/11 | | | Average
Borrowing* | | | Average
Interest Rate* | |
| $ | — | | | $ | 496,982 | | | | 1.48% | |
| * | For the six months ended June 30, 2011, based on the number of days borrowings were outstanding. |
Note 6. Review for Subsequent Events
The Trust has evaluated subsequent events through the issuance of the Fund’s financial statements and determined that no material events have occurred that require disclosure.
Note 7. Indemnifications
Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, in the normal course of business, the Fund enters into contracts with its vendors and others that provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund. However, based on experience, the Fund expects the risk of loss to be remote.
SUPPLEMENTAL INFORMATION (UNAUDITED)
Meeting of Shareholders
A special meeting of the shareholders of RS Variable Products Trust (“the Trust”) was held on May 20, 2011. At the meeting, the shareholders of the Trust elected Judson Bergman, Kenneth R. Fitzsimmons, Jr., Anne M. Goggin, Christopher C. Melvin, Jr., Deanna M. Mulligan, Gloria S. Nelund, Terry R. Otton, and John P. Rohal as trustees of the Trust.
Proposal To Elect Trustees
| | | | |
| Nominee | | Votes For | | Votes Against/Withheld |
| Judson Bergman | | 264,351,869.410 | | 14,579,441.977 |
| Kenneth R. Fitzsimmons, Jr. | | 264,417,319.717 | | 14,513,991.670 |
| Anne M. Goggin | | 265,496,967.524 | | 13,434,343.863 |
| Christopher C. Melvin, Jr. | | 264,182,743.884 | | 14,748,567.503 |
| Deanna M. Mulligan | | 264,603,554.628 | | 14,327,756.759 |
| Gloria S. Nelund | | 265,607,677.552 | | 13,323,633.835 |
| Terry R. Otton | | 265,360,024.512 | | 13,571,286.875 |
| John P. Rohal | | 264,052,063.420 | | 14,879,247.967 |
Portfolio Holdings and Proxy Voting Procedures
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Form N-Q is available on the Securities and Exchange Commission’s Web site at http://www.sec.gov. The Fund’s Form N-Q may be reviewed and copied at the Commission’s Public Reference Room in Washington, DC, and information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330. This information is also available, without charge, upon request, by calling toll-free 800-221-3253.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 will be available (i) without charge, upon request, by calling toll-free 800-221-3253; and (ii) on the Securities and Exchange Commission’s Web site at http://www.sec.gov.
The Statement of Additional Information includes additional information about the Trust’s Trustees and Officers and is available, without charge, upon request by calling toll-free 800-221-3253.
This report is transmitted to shareholders only. It is not authorized for use as an offer of sale or a solicitation of an offer to buy shares of a Fund unless accompanied or preceded by that Fund’s current prospectus. Past performance results shown in this report should not be considered a representation of future performance. Investment returns and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Statements and other information herein are as dated and are subject to change.
2011 Semiannual Report
All data as of June 30, 2011
RS Variable Products Trust
| | | | |
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE | | |  | |
TABLE OF CONTENTS
Except as otherwise specifically stated, all information and investment team commentary, including portfolio security positions, is as of June 30, 2011. The views expressed in the investment team letters are those of the Fund’s portfolio manager(s) and are subject to change without notice. They do not necessarily represent the views of RS Investments. The letters contain some forward-looking statements providing current expectations or forecasts of future events; they do not necessarily relate to historical or current facts. There can be no guarantee that any forward-looking statement will be realized. We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events, or otherwise. Any discussions of specific securities should not be considered a recommendation to buy or sell those securities. Fund holdings will vary.
RS PARTNERS VIP SERIES
The Fund’s adviser since October 9, 2006 is RS Investments, and the Fund is managed by a different investment team than the predecessor fund.
The Statement of Additional Information provides further information about the investment team, including information regarding their compensation, other accounts they manage, and their ownership interests in the Fund. For information on how to receive a copy of the Statement of Additional Information, please see the back cover of the relevant Prospectus or visit our Web site at www.guardianinvestor.com.
RS Partners VIP Series Commentary
Highlights
| Ÿ | | U.S. equity markets, as defined by the S&P 500® Index1, delivered positive performance in the first half of 2011 despite renewed economic uncertainty and the shadow of the European debt crisis. |
| Ÿ | | RS Partners VIP Series had positive performance for the six-month period, and also outperformed the benchmark Russell 2000® Value Index2. The Fund’s relative performance benefitted from stock selection in the technology and consumer discretionary sectors. On a negative note, stock selection in the financial services sector detracted from relative performance. |
| Ÿ | | RS Partners VIP Series seeks long-term capital appreciation by identifying small companies with improving returns on invested capital (ROIC). |
Market Overview
The broad U.S. equity market, as defined by the S&P 500® Index, started out the year on a positive note, delivering positive absolute first quarter returns as investors focused on generally healthy corporate profits and better market liquidity in the wake of the Federal Reserve’s most recent round of quantitative easing. The market experienced renewed downward volatility in March, however, as economic fears resurfaced, aggravated by the earthquake in Japan, the debt crisis in Europe, and a spike in oil prices. Investors were also uneasy regarding how the economy might fare if the Federal Reserve were to wind down its quantitative easing efforts. As employment growth continued to stagnate and the housing market remained weak, economic fears took center stage during the second quarter, contributing to downward volatility in equity prices. As many investors lost their appetites for risk, they sought refuge in more economically defensive investments in areas such as consumer staples and health care.
Fund Performance Overview
RS Partners VIP Series returned 4.27% for the six-month period ended June 30, 2011, outperforming the Russell 2000® Value Index, which returned 3.77%.
The Fund’s relative performance benefited from several technology investments, including Atmel Corp., a developer of microchips in high demand for use in smart phone touchscreen technology. Within the technology sector, we continue to allocate capital to businesses that we believe have understandable and predictable revenue streams with high customer retention rates and recurring cash flow characteristics.
In the consumer discretionary sector, the Fund remains focused on companies that we believe have strong recurring cash flows and that we believe possess minimal economic sensitivity. During the period, we benefited from our investment in GameStop Corp., a specialty retailer of electronic game and PC entertainment software, which is exploring new opportunities tied to streaming media.
The Fund’s top positive contributor for the period was Key Energy Services, a provider of oil well services, which benefited in part from strong earnings performance. Within the energy and raw materials areas, we continue to emphasize what we believe to be cost-advantaged producers of energy and non-energy commodities that we expect to generate attractive returns across the commodity price cycle.
On a negative note, a number of the Fund’s financial services holdings detracted from performance in what was a challenging period for financial services stocks. Detractors included regional bank holding companies Susquehanna Bancshares, Inc. and First Horizon National, as well as MGIC Investment Corp., the nation’s largest provider of private mortgage insurance. The entire financial services sector has been pressured recently by concerns over the repercussions of regulatory changes, the Japanese earthquake disaster, and a deepening sovereign debt crisis in Europe. Despite these headwinds, we remain constructive on what we see as evidence of improving capital, liquidity, and underwriting standards within select names in the financial services sector. We also seek to be discriminating in our financial services investments, concentrating on banks, such as Susquehanna and First Horizon, that we believe possess low-cost core deposit franchises and strengthening customer relationships.
RS PARTNERS VIP SERIES
Outlook
We believe that we are in a period of protracted volatility as the markets grapple with a variety of issues, including ongoing deleveraging, deflation/inflation risks, government budget deficits, higher taxes, and the potential for rising risk premiums. We have never attempted to maximize short-term results, as we do not
believe that our investors would be adequately compensated for the level of risk that we would have to assume. Instead, we attempt to create long-term value for our investors, and we continue to believe that the Fund is well positioned for an environment in which individual company-specific cash flow fundamentals will be properly rewarded.
RS Funds are sold by prospectus only. You should carefully consider the investment objectives, risks, charges and expenses of the RS Funds before making an investment decision. The prospectus contains this and other important information. Please read it carefully before investing or sending money. Please visit our web site at www.guardianinvestor.com or to obtain a printed copy, call 800-221-3253.
Any discussions of specific securities should not be considered a recommendation to buy or sell those securities. Fund holdings will vary.
Except as otherwise specifically stated, all information and investment team commentary, including portfolio security positions, is as of June 30, 2011.
As with all mutual funds, the value of an investment in the Fund could decline, in which case you could lose money. Investing in small- and mid-size companies can involve risks such as having less publicly available information, higher volatility, and less liquidity than in the case of larger companies. Investing in a more limited number of issuers and sectors can be subject to greater market fluctuation. Overweighting investments in certain sectors or industries increases the risk of loss due to general declines in the prices of stocks in those sectors or industries. Foreign securities are subject to political, regulatory, economic, and exchange-rate risks not present in domestic investments. The value of a debt security is affected by changes in interest rates and is subject to any credit risk of the issuer or guarantor of the security. Investments in companies in natural resources industries may involve risks including changes in commodities prices, changes in demand for various natural resources, changes in energy prices, and international political and economic developments.
RS PARTNERS VIP SERIES
Characteristics
| | |
| Total Net Assets: $16,220,157 | | |
|
| |
| Sector Allocation vs. Index3 |
| | | | |
| | |
Top Ten Holdings4 | | | |
| | |
| Holding | | % of Total
Net Assets | |
| GameStop Corp., Class A | | | 4.38% | |
| Atmel Corp. | | | 4.26% | |
| Groupe Aeroplan, Inc. | | | 3.58% | |
| Denbury Resources, Inc. | | | 3.56% | |
| Compass Minerals International, Inc. | | | 3.47% | |
| Key Energy Services, Inc. | | | 3.45% | |
| New Gold, Inc. | | | 3.34% | |
| Calpine Corp. | | | 3.25% | |
| Myriad Genetics, Inc. | | | 3.16% | |
| Associated Banc-Corp. | | | 3.10% | |
| Total | | | 35.55% | |
| 1 | The S&P 500® Index is an unmanaged market-capitalization-weighted index generally considered to be representative of U.S. equity market activity. The index consists of 500 stocks representing leading industries of the U.S. economy. Index results assume the reinvestment of dividends paid on the stocks constituting the index. You may not invest in the index, and, unlike the Fund, the index does not incur fees or expenses. |
| 2 | The Russell 2000® Value Index is an unmanaged market-capitalization-weighted index that measures the performance of those companies in the Russell 2000® Index with lower price-to-book ratios and lower forecasted growth values. (The Russell 2000® Value Index measures the performance of the 2,000 smallest companies in the Russell 3000® Index, which consists of the 3,000 largest U.S. companies based on total market capitalization.) Index results assume the reinvestment of dividends paid on the stocks constituting the index. You may not invest in the index, and, unlike the Fund, the index does not incur fees or expenses. |
| 3 | The Fund’s holdings are allocated to each sector based on their Russell Global Sector classification. If a holding is not classified by Russell, it is assigned a Russell designation by RS Investments. Cash includes short-term investments and net other assets and liabilities. |
| 4 | Portfolio holdings are subject to change and should not be considered a recommendation to buy or sell individual securities. |
RS PARTNERS VIP SERIES
Performance Update
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
| Average Annual Returns | | | | | | | | | | | | | | | | |
| | | | | | | |
| | | Inception Date | | | Year-to-Date | | | 1 Year | | | 3 Year | | | 5 Year | | | Since Inception | |
| RS Partners VIP Series | | | 2/3/03 | | | | 4.27% | | | | 34.41% | | | | 7.48% | | | | 5.07% | | | | 9.73% | |
| Russell 2000® Value Index2 | | | | | | | 3.77% | | | | 31.35% | | | | 7.09% | | | | 2.24% | | | | 10.87% | |
| | | | | | | | | | |
| | | |
| Results of a Hypothetical $10,000 Investment | | | | |
 |
The chart above shows the performance of a hypothetical $10,000 investment made on 2/3/03 in RS Partners VIP Series and the Russell 2000® Value Index. Index returns do not include the fees and expenses of the Fund, but do include the reinvestment of dividends.
Performance quoted represents past performance and does not guarantee or predict future results. The Fund is the successor to The Guardian UBS VC Small Cap Value Fund; performance shown includes performance of the predecessor fund for periods prior to October 9, 2006. The predecessor fund, a diversified mutual fund with generally similar investment objective, strategies, and policies, was advised by Guardian Investor Services LLC. The Fund’s adviser since October 9, 2006 is RS Investments, and the Fund is managed by a different investment team than the predecessor fund. Investment return and principal value will fluctuate, so shares, when redeemed, may be worth more or less than their original cost. Please keep in mind that any high double-digit returns are highly unusual and cannot be sustained. The Fund’s fees and expenses are detailed in the Financial Highlights section of this report. Fees and expenses are factored into the net asset value of your shares and any performance numbers we release. Total return figures reflect an expense limitation in effect during the periods shown; without such limitation, the performance shown would have been lower. Performance results assume the reinvestment of dividends and capital gains. The return figures shown do not reflect the deduction of taxes that a contractowner/policyholder may pay on Fund distributions or redemption units. The actual total returns for owners of variable annuity contracts or variable life insurance policies that provide for investment in the Fund will be lower to reflect separate account and contract/policy charges. Current and month-end performance information, which may be lower or higher than that cited, is available by calling 800-221-3253 and is periodically updated on our Web site: www.guardianinvestor.com.
UNDERSTANDING YOUR FUND’S EXPENSES (UNAUDITED)
By investing in the Fund, you incur two types of costs: (1) transaction costs, including, as applicable, sales charges (loads) on purchase payments; redemption fees and exchange fees; and (2) ongoing costs, including as applicable, investment advisory fees and other Fund expenses. The example below is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period indicated. The table below shows the Fund’s expenses in two ways:
Expenses based on actual return
This section of the table provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Expenses based on hypothetical 5% return for comparison purposes
This section of the table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund with the cost of investing in other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore the second section is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If these transactional costs were included, your costs would have been higher.
| | | | | | | | | | | | | | | | |
| | | Beginning
Account Value
1/1/11 | | | Ending
Account Value
6/30/11 | | | Expenses Paid
During Period*
1/1/11-6/30/11 | | | Expense Ratio
During Period 1/1/11-6/30/11 | |
| Based on Actual Return | | $ | 1,000.00 | | | $ | 1,042.70 | | | $ | 6.89 | | | | 1.36% | |
| Based on Hypothetical Return (5% Return Before Expenses) | | $ | 1,000.00 | | | $ | 1,018.05 | | | $ | 6.81 | | | | 1.36% | |
| * | Expenses are equal to the Fund’s annualized expense ratio as indicated, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). |
SCHEDULE OF INVESTMENTS — RS PARTNERS VIP SERIES
| | | | | | | | | | | | |
| June 30, 2011 (unaudited) | | Foreign
Currency | | | Shares | | | Value | |
| Common Stocks – 90.7% | |
| Advertising Agencies – 3.6% | |
Groupe Aeroplan, Inc. | | | CAD | | | | 41,990 | | | $ | 579,923 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 579,923 | |
| Auto Parts – 2.3% | |
BorgWarner, Inc.(1) | | | | | | | 4,523 | | | | 365,413 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 365,413 | |
| Banks: Diversified – 9.7% | |
Associated Banc-Corp. | | | | | | | 36,134 | | | | 502,262 | |
Commerce Bancshares, Inc. | | | | | | | 8,167 | | | | 351,181 | |
First Horizon National Corp. | | | | | | | 48,294 | | | | 460,725 | |
Susquehanna Bancshares, Inc. | | | | | | | 32,535 | | | | 260,280 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 1,574,448 | |
| Biotechnology – 3.2% | |
Myriad Genetics, Inc.(1) | | | | | | | 22,552 | | | | 512,156 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 512,156 | |
| Computer Services, Software & Systems – 11.6% | |
ACI Worldwide, Inc.(1) | | | | | | | 11,940 | | | | 403,214 | |
Acxiom Corp.(1) | | | | | | | 30,878 | | | | 404,811 | |
AOL, Inc.(1) | | | | | | | 19,597 | | | | 389,196 | |
DST Systems, Inc. | | | | | | | 7,549 | | | | 398,587 | |
Parametric Technology Corp.(1) | | | | | | | 12,693 | | | | 291,050 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 1,886,858 | |
| Consumer Electronics – 1.5% | |
Harman International Industries, Inc. | | | | | | | 5,328 | | | | 242,797 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 242,797 | |
| Consumer Lending – 3.3% | |
MGIC Investment Corp.(1) | | | | | | | 43,299 | | | | 257,629 | |
MoneyGram International, Inc.(1) | | | | | | | 82,783 | | | | 274,840 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 532,469 | |
| Financial Data & Systems – 3.2% | |
Euronet Worldwide, Inc.(1) | | | | | | | 20,052 | | | | 309,001 | |
Jack Henry & Associates, Inc. | | | | | | | 7,013 | | | | 210,460 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 519,461 | |
| Health Care Facilities – 0.9% | |
VCA Antech, Inc.(1) | | | | | | | 6,850 | | | | 145,220 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 145,220 | |
| Health Care Management Services – 1.9% | |
Magellan Health Services, Inc.(1) | | | | | | | 5,748 | | | | 314,646 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 314,646 | |
| Insurance: Life – 4.7% | |
StanCorp Financial Group, Inc. | | | | | | | 8,973 | | | | 378,571 | |
Torchmark Corp. | | | | | | | 5,983 | | | | 383,749 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 762,320 | |
| Insurance: Multi-Line – 1.5% | |
eHealth, Inc.(1) | | | | | | | 12,532 | | | | 167,428 | |
PICO Holdings, Inc.(1) | | | | | | | 2,420 | | | | 70,180 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 237,608 | |
| | | | | | | | | | | | |
| June 30, 2011 (unaudited) | | Foreign
Currency | | | Shares | | | Value | |
| Insurance: Property-Casualty – 2.3% | |
Genworth MI Canada, Inc. | | | CAD | | | | 14,200 | | | $ | 373,828 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 373,828 | |
| Medical Equipment – 2.6% | |
Sirona Dental Systems, Inc.(1) | | | | | | | 7,922 | | | | 420,658 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 420,658 | |
| Metals & Minerals: Diversified – 3.5% | |
Compass Minerals International, Inc. | | | | | | | 6,542 | | | | 563,070 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 563,070 | |
| Oil Well Equipment & Services – 3.4% | |
Key Energy Services, Inc.(1) | | | | | | | 31,095 | | | | 559,710 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 559,710 | |
| Oil: Crude Producers – 7.2% | |
Concho Resources, Inc.(1) | | | | 4,694 | | | | 431,144 | |
Denbury Resources, Inc.(1) | | | | 28,908 | | | | 578,160 | |
Peyto Exploration & Development Corp. | | | CAD | | | | 6,790 | | | | 151,366 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 1,160,670 | |
| Precious Metals & Minerals – 3.3% | |
New Gold, Inc.(1) | | | | | | | 52,688 | | | | 542,160 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 542,160 | |
| Scientific Instruments: Pollution Control – 2.2% | |
Waste Connections, Inc. | | | | | | | 11,506 | | | | 365,085 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 365,085 | |
| Securities Brokerage & Services – 2.9% | |
MF Global Holdings Ltd.(1) | | | | 60,446 | | | | 467,852 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 467,852 | |
| Semiconductors & Components – 6.3% | |
Atmel Corp.(1) | | | | | | | 49,114 | | | | 691,034 | |
Integrated Device Technology, Inc.(1) | | | | | | | 42,646 | | | | 335,198 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 1,026,232 | |
| Specialty Retail – 4.4% | |
GameStop Corp., Class A(1) | | | | 26,626 | | | | 710,115 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 710,115 | |
| Utilities: Gas Distributors – 2.0% | |
Questar Corp. | | | | | | | 18,110 | | | | 320,728 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 320,728 | |
| Utilities: Miscellaneous – 3.2% | |
Calpine Corp.(1) | | | | | | | 32,694 | | | | 527,354 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 527,354 | |
Total Common Stocks
(Cost $11,607,352) | | | | | | | | | | | 14,710,781 | |
| | | | |
| 8 | | | | The accompanying notes are an integral part of these financial statements. |
SCHEDULE OF INVESTMENTS — RS PARTNERS VIP SERIES
| | | | | | | | |
| June 30, 2011 (unaudited) | | Principal
Amount | | | Value | |
| Repurchase Agreements – 8.7% | |
State Street Bank and Trust Co. Repurchase Agreement, 0.01%, dated 6/30/2011, maturity value of $1,412,000, due 7/1/2011(2) | | $ | 1,412,000 | | | $ | 1,412,000 | |
| Total Repurchase Agreements (Cost $1,412,000) | | | | | | | 1,412,000 | |
Total Investments - 99.4%
(Cost $13,019,352) | | | | | | | 16,122,781 | |
| Other Assets, Net - 0.6% | | | | | | | 97,376 | |
| Total Net Assets - 100.0% | | | | | | $ | 16,220,157 | |
| (1) | Non-income producing security. |
| (2) | The table below presents collateral for repurchase agreements. |
| | | | | | | | | | | | |
| Security | | Coupon | | | Maturity
Date | | | Value | |
| U.S. Treasury Note | | | 1.00% | | | | 4/30/2012 | | | $ | 1,441,866 | |
Legend:
Foreign-Denominated Security
CAD — Canadian Dollar
The following is a summary of the inputs used as of June 30, 2011 in valuing the Fund’s investments. For more information on valuation inputs, please refer to Note 1a of the accompanying Notes to Financial Statements.
| | | | | | | | | | | | | | | | |
| | | Valuation Inputs | | | | |
| Investments in Securities | | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
| Common Stocks | | $ | 14,710,781 | | | $ | — | | | $ | — | | | $ | 14,710,781 | |
| Repurchase Agreements | | | — | | | | 1,412,000 | | | | — | | | | 1,412,000 | |
| Total | | $ | 14,710,781 | | | $ | 1,412,000 | | | $ | — | | | $ | 16,122,781 | |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 9 |
FINANCIAL INFORMATION — RS PARTNERS VIP SERIES
| | | | |
Statement of Assets and Liabilities As of June 30, 2011 (unaudited) | | | |
Assets | | | | |
Investments, at value | | $ | 16,122,781 | |
Cash and cash equivalents | | | 632 | |
Foreign currency, at value | | | 5,121 | |
Receivable for fund shares subscribed | | | 156,794 | |
Receivable for investments sold | | | 21,789 | |
Dividends/interest receivable | | | 1,809 | |
| | | | | |
Total Assets | | | 16,308,926 | |
| | | | | |
| | |
Liabilities | | | | |
Payable for investments purchased | | | 44,911 | |
Payable to adviser | | | 12,837 | |
Payable for fund shares redeemed | | | 11,137 | |
Accrued trustees’ fees | | | 177 | |
Accrued expenses/other liabilities | | | 19,707 | |
| | | | | |
Total Liabilities | | | 88,769 | |
| | | | | |
Total Net Assets | | $ | 16,220,157 | |
| | | | | |
| | |
Net Assets Consist of: | | | | |
Paid-in capital | | $ | 15,373,503 | |
Accumulated undistributed net investment loss | | | (70,539 | ) |
Accumulated net realized loss from investments and foreign currency transactions | | | (2,186,275 | ) |
Net unrealized appreciation on investments and translation of assets and liabilities in foreign currencies | | | 3,103,468 | |
| | | | | |
Total Net Assets | | $ | 16,220,157 | |
| | | | | |
Investments, at Cost | | $ | 13,019,352 | |
| | | | | |
Foreign Currency, at Cost | | $ | 5,089 | |
| | | | | |
| | |
Pricing of Shares | | | | |
Shares of Beneficial Interest Outstanding with no Par Value | | | 1,254,467 | |
Net Asset Value Per Share | | | $12.93 | |
| | | | | |
| | | | |
Statement of Operations For the Six-Month Period Ended June 30, 2011 (unaudited) | |
Investment Income | | | | |
Dividends | | $ | 42,322 | |
Interest | | | 161 | |
Withholding taxes on foreign dividends | | | (2,115 | ) |
| | | | | |
Total Investment Income | | | 40,368 | |
| | | | | |
| | |
Expenses | | | | |
Investment advisory fees | | | 81,374 | |
Custodian fees | | | 12,074 | |
Professional fees | | | 9,504 | |
Shareholder reports | | | 5,932 | |
Administrative service fees | | | 953 | |
Trustees’ fees | | | 344 | |
Other expenses | | | 514 | |
| | | | | |
Total Expenses | | | 110,695 | |
| | | | | |
Net Investment Loss | | | (70,327 | ) |
| | | | | |
| | |
Realized Gain/(Loss) and Change in Unrealized Appreciation/Depreciation on Investments and Foreign Currency Transactions | | | | |
Net realized gain from investments | | | 1,346,526 | |
Net realized loss from foreign currency transactions | | | (1,152 | ) |
Net change in unrealized appreciation/depreciation on investments | | | (598,642 | ) |
Net change in unrealized appreciation/depreciation on translation of assets and liabilities in foreign currencies | | | 76 | |
| | | | | |
Net Gain on Investments and Foreign Currency Transactions | | | 746,808 | |
| | | | | |
Net Increase in Net Assets Resulting from Operations | | $ | 676,481 | |
| | | | | |
| | | | | |
| | | | |
| 10 | | | | The accompanying notes are an integral part of these financial statements. |
FINANCIAL INFORMATION — RS PARTNERS VIP SERIES
| | | | | | | | |
Statements of Changes in Net Assets Six-month-ended numbers are unaudited | | | | | | |
| | | |
| | | For the
Six Months Ended
6/30/11 | | | For the
Year Ended
12/31/10 | |
| | | | |
Operations | | | | | | | | |
Net investment loss | | $ | (70,327 | ) | | $ | (149,879 | ) |
Net realized gain from investments and foreign currency transactions | | | 1,345,374 | | | | 2,533,156 | |
Net change in unrealized appreciation/depreciation on investments and translation of assets and liabilities in foreign currencies | | | (598,566 | ) | | | 1,469,618 | |
| | | | | | | | | |
Net Increase in Net Assets Resulting from Operations | | | 676,481 | | | | 3,852,895 | |
| | | | | | | | | |
| | | |
Capital Share Transactions | | | | | | | | |
Proceeds from sales of shares | | | 3,058,944 | | | | 6,181,993 | |
Cost of shares redeemed | | | (4,199,902 | ) | | | (10,088,222 | ) |
| | | | | | | | | |
Net Decrease in Net Assets Resulting from Capital Share
Transactions | | | (1,140,958 | ) | | | (3,906,229 | ) |
| | | | | | | | | |
Net Decrease in Net Assets | | | (464,477 | ) | | | (53,334 | ) |
| | | | | | | | | |
| | | |
Net Assets | | | | | | | | |
Beginning of period | | | 16,684,634 | | | | 16,737,968 | |
| | | | | | | | | |
End of period | | $ | 16,220,157 | | | $ | 16,684,634 | |
| | | | | | | | | |
Accumulated Undistributed Net Investment Loss Included in Net Assets | | $ | (70,539 | ) | | $ | (212 | ) |
| | | | | | | | | |
| | | |
Other Information: | | | | | | | | |
Shares | | | | | | | | |
Sold | | | 238,127 | | | | 570,539 | |
Redeemed | | | (329,143 | ) | | | (934,394 | ) |
| | | | | | | | | |
Net Decrease | | | (91,016 | ) | | | (363,855 | ) |
| | | | | | | | | |
| | | | | | | | | |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 11 |
FINANCIAL INFORMATION – RS PARTNERS VIP SERIES
The financial highlights table is intended to help you understand the Fund’s financial performance for the past six reporting periods. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the Fund (assuming reinvestment of all distributions).
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Financial Highlights Six-month-ended numbers are unaudited | | | | | | | | | | | | | | | | |
| | | Net Asset Value,
Beginning of
Period | | | Net Investment
Income/(Loss) | | | Net Realized and Unrealized
Gain/(Loss) | | | Total
Operations | | | Distributions
From Net
Investment
Income | | | Distributions From Net
Realized Capital Gains | | | Total
Distributions | |
Six Months Ended 6/30/111 | | $ | 12.40 | | | $ | (0.06 | ) | | $ | 0.59 | | | $ | 0.53 | | | $ | — | | | $ | — | | | $ | — | |
Year Ended 12/31/10 | | | 9.79 | | | | (0.11 | ) | | | 2.72 | | | | 2.61 | | | | — | | | | — | | | | — | |
Year Ended 12/31/09 | | | 7.01 | | | | (0.05 | ) | | | 2.83 | | | | 2.78 | | | | — | | | | — | | | | — | |
Year Ended 12/31/08 | | | 10.95 | | | | (0.03 | ) | | | (3.71 | ) | | | (3.74 | ) | | | — | | | | (0.20 | ) | | | (0.20 | ) |
Year Ended 12/31/07 | | | 11.71 | | | | (0.02 | ) | | | (0.22 | ) | | | (0.24 | ) | | | — | | | | (0.52 | ) | | | (0.52 | ) |
Year Ended 12/31/06 | | | 13.01 | | | | 0.04 | | | | 1.15 | | | | 1.19 | | | | (0.03 | ) | | | (2.46 | ) | | | (2.49 | ) |
| | | | |
| 12 | | | | The accompanying notes are an integral part of these financial statements. |
FINANCIAL INFORMATION – RS PARTNERS VIP SERIES
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Net Asset
Value, End of
Period | | | Total
Return2 | | | Net Assets, End
of Period (000s) | | | Net Ratio of
Expenses to
Average Net
Assets3 | | | Gross Ratio of
Expenses to
Average Net
Assets | | | Net Ratio of Net
Investment Income/ (Loss) to Average
Net Assets3 | | | Gross Ratio of Net
Investment Income/ (Loss) to Average Net Assets | | | Portfolio
Turnover Rate | |
| $ | 12.93 | | | | 4.27% | | | $ | 16,220 | | | | 1.36% | | | | 1.36% | | | | (0.86)% | | | | (0.86)% | | | | 22% | |
| | 12.40 | | | | 26.66% | | | | 16,685 | | | | 1.40% | | | | 1.40% | | | | (0.97)% | | | | (0.97)% | | | | 77% | |
| | 9.79 | | | | 39.66% | | | | 16,738 | | | | 1.36% | | | | 1.47% | | | | (0.54)% | | | | (0.65)% | | | | 72% | |
| | 7.01 | | | | (34.00)% | | | | 15,098 | | | | 1.36% | | | | 1.49% | | | | (0.35)% | | | | (0.48)% | | | | 95% | |
| | 10.95 | | | | (2.03)% | | | | 20,816 | | | | 1.36% | | | | 1.50% | | | | (0.13)% | | | | (0.27)% | | | | 73% | |
| | 11.71 | | | | 9.35% | | | | 22,338 | | | | 1.36% | | | | 1.43% | | | | 0.28% | | | | 0.21% | | | | 172% | |
Distributions reflect actual per-share amounts distributed for the period.
| 1 | Ratios for periods less than one year have been annualized, except for total return and portfolio turnover rate. |
| 2 | Total returns do not reflect the effects of charges deducted pursuant to the terms of The Guardian Insurance & Annuity Company, Inc.’s variable contracts. Inclusion of such charges would reduce the total returns for all periods shown. |
| 3 | Net Ratio of Expenses to Average Net Assets and Net Ratio of Net Investment Income/(Loss) to Average Net Assets include the effect of fee waivers, expense limitations and custody credits, if applicable. |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 13 |
NOTES TO FINANCIAL STATEMENTS — RS PARTNERS VIP SERIES (UNAUDITED)
June 30, 2011 (unaudited)
RS Variable Products Trust (the “Trust”), a Massachusetts business trust organized on May 18, 2006, is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust currently offers twelve series. RS Partners VIP Series (the “Fund”) is a series of the Trust. The Fund is a non-diversified fund. The financial statements for the other remaining series of the Trust are presented in separate reports.
The Fund has authorized an unlimited number of shares of beneficial interest with no par value. Shares are bought and sold at closing net asset value (“NAV”), which is the price for all outstanding shares of the Fund. Class I shares of the Fund are only sold to certain separate accounts of The Guardian Insurance & Annuity Company, Inc. (“GIAC”). GIAC is a wholly-owned subsidiary of The Guardian Life Insurance Company of America (“Guardian Life”). The Fund is currently offered to insurance company separate accounts that fund certain variable annuity and variable life insurance contracts issued by GIAC.
Note 1. Significant Accounting Policies
The following policies are in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
a. Investment Valuations Marketable securities are valued at the last reported sale price on the principal exchange or market on which they are traded; or, if there were no sales that day, at the mean between the closing bid and asked prices. Securities traded on the NASDAQ Stock Market, LLC (“NASDAQ”) are generally valued at the NASDAQ official closing price, which may not be the last sale price. If the NASDAQ official closing price is not available for a security, that security is generally valued using the last reported sale price, or, if no sales are reported, at the mean between the closing bid and asked prices. Short-term investments that will mature in 60 days or less are valued at amortized cost, which approximates market value. Repurchase agreements are carried at cost, which approximates market value. Foreign securities are valued in the currencies of the markets in which they trade and then converted to U.S. dollars using the prevailing exchange rates at the close of the New York Stock Exchange (“NYSE”).
Securities for which market quotations are not readily available or for which market quotations may be considered unreliable are valued at their fair values as determined in accordance with guidelines and procedures adopted by the Trust’s Board of Trustees.
Securities whose values have been materially affected by events occurring before the Fund’s valuation time but after the close of the securities’ principal exchange or market may be fair valued using methods approved by the Board of Trustees. In addition, if there has been a movement in the U.S. markets that exceeds a specified threshold, the values of the Fund’s investments in foreign securities are generally determined by a pricing service using pricing models designed to estimate likely changes in the values of those securities.
The Fund has adopted the authoritative guidance under GAAP on determining fair value when the volume and level of activity for an asset or liability have significantly decreased and for identifying transactions that are not orderly. Accordingly, if the Fund determines that either the volume and/or level of activity for an asset or liability has significantly decreased (from normal conditions for that asset or liability) or price quotations or observable inputs are not associated with orderly transactions, increased analysis and management judgment will be required to estimate fair value.
In accordance with Financial Accounting Standards Board Codification Topic 820 (“ASC Topic 820”), fair value is defined as the price that the Fund would receive upon selling an investment in an “arm’s length” transaction to a willing buyer in the principal or most advantageous market for the investment. ASC Topic 820 established a hierarchy for classification of fair value measurements for disclosure purposes. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances. The hierarchy of inputs is summarized in the three broad levels listed below.
| Ÿ | | Level 1 — unadjusted quoted prices in active markets for identical investments |
| Ÿ | | Level 2 — inputs other than unadjusted quoted prices that are observable either directly or indirectly (including adjusted quoted prices for similar investments, interest rates, prepayment speeds, credit risks, etc.) |
NOTES TO FINANCIAL STATEMENTS — RS PARTNERS VIP SERIES (UNAUDITED)
| Ÿ | | Level 3 — significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments) |
Inputs may include price information, volatility statistics, specific and broad credit data, liquidity statistics, and other factors. A security’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires significant judgment by the Trust. The Trust considers observable data to be that market data which is readily available, regularly distributed or updated, reliable and verifiable, and provided by independent sources that are actively involved in the relevant market. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. Changes in valuation techniques may result in transfers into or out of an investment’s assigned level within the hierarchy.
Effective beginning with the Fund’s current fiscal year, the Financial Accounting Standards Board requires reporting entities to make disclosures about purchases, sales, issuances and settlements of Level 3 securities on a gross basis. For the six months ended June 30, 2011, the Fund had no securities classified as Level 3.
There were no significant transfers between Level 1 and Level 2 for the six months end June 30, 2011.
In determining a security’s placement within the hierarchy, the Trust separates the Fund’s investment portfolio into two categories: investments and derivatives (e.g., futures).
Investments Investments whose values are based on quoted market prices in active markets, and are therefore classified within Level 1, include active listed equities. The Trust does not adjust the quoted price for such instruments, even in situations where the Fund holds a large position and a sale could reasonably be expected to impact the quoted price.
Investments that trade in markets that are not considered to be active, but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within Level 2. These include certain U.S. government and sovereign obligations, most government agency securities, investment-grade corporate bonds, certain mortgage products, state, municipal and provincial obligations, and certain foreign equity securities.
Investments classified within Level 3 have significant unobservable inputs, as they trade infrequently or not at
all. Level 3 investments include, among others, private placement securities. When observable prices are not available for these securities, the Trust uses one or more valuation techniques for which sufficient and reliable data is available. The inputs used by the Trust in estimating the value of Level 3 investments include the original transaction price, recent transactions in the same or similar instruments, completed or pending third-party transactions in the underlying investment or comparable issuers, subsequent rounds of financing, recapitalizations, and other transactions across the capital structure. Level 3 investments may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the Trust in the absence of market information. Assumptions used by the Trust due to the lack of observable inputs may significantly impact the resulting fair value and therefore the Fund’s results of operations.
Derivatives Exchange-traded derivatives, such as futures contracts and exchange traded option contracts, are typically classified within Level 1 or Level 2 of the fair value hierarchy depending on whether or not they are deemed to be actively traded. Certain derivatives, such as generic forwards, swaps and options, have inputs which can generally be corroborated by market data and are therefore classified within Level 2.
b. Federal Income Taxes The Fund intends to continue complying with the requirements of the Internal Revenue Code to qualify as a regulated investment company and to distribute substantially all net investment income and realized net capital gains, if any, to shareholders. Therefore, the Fund does not expect to be subject to income tax, and no provision for such tax has been made.
From time to time, however, the Fund may choose to pay an excise tax if the cost of making the required distribution exceeds the amount of the excise tax.
As of June 30, 2011, the Trust has reviewed the tax positions for open periods, as applicable to the Fund, and has determined that no provision for income tax is required in the Fund’s financial statements. The Fund recognizes interest and penalties, if any, related to unrecognized tax positions as income tax expense in the Statement of Operations. For the six months ended June 30, 2011, the Fund did not incur any interest or penalties. The Fund is not subject to examination by U.S. federal tax authorities for tax years before 2007 and by state authorities for tax years before 2006.
c. Securities Transactions Securities transactions are accounted for on the date securities are purchased or sold (trade date). Realized gains or losses on securities transactions are determined on the basis of specific identification.
NOTES TO FINANCIAL STATEMENTS — RS PARTNERS VIP SERIES (UNAUDITED)
d. Foreign Currency Translation The accounting records of the Fund are maintained in U.S. dollars. Investment securities and all other assets and liabilities of the Fund denominated in a foreign currency are generally translated into U.S. dollars at the exchange rates quoted at the close of the NYSE on each business day. Purchases and sales of securities, income receipts, and expense payments are translated into U.S. dollars at the exchange rates in effect on the dates of the respective transactions. The Fund does not isolate the portion of the fluctuations on investments resulting from changes in foreign currency exchange rates from the fluctuations in market prices of investments held. Such fluctuations are included with the net realized and unrealized gain or loss from investments.
e. Investment Income Dividend income is generally recorded on the ex-dividend date. Interest income, which includes amortization/accretion of premium/discount, is accrued and recorded daily.
f. Expenses Many expenses of the Trust can be directly attributed to a specific series of the Trust. Expenses that cannot be directly attributed to a specific series of the Trust are generally apportioned among all the series in the Trust, based on relative net assets.
g. Custody Credits The Fund has entered into an arrangement with its custodian, State Street Bank and Trust Company, whereby credits realized as a result of uninvested cash balances are used to reduce the Fund’s custodian expenses. The Fund’s custody credits, if any, are shown in the accompanying Statement of Operations.
h. Distributions to Shareholders The Fund intends to declare and distribute substantially all net investment income, if any, at least once a year. Distributions of net realized capital gains, if any, are declared and paid at least once a year. Unless the Fund is instructed otherwise, all distributions to shareholders are credited in the form of additional shares of the Fund at the net asset value, recorded on the ex-dividend date.
i. Capital Accounts Due to the timing of dividend distributions and the differences in accounting for income and realized gains/(losses) for financial statement purposes versus federal income tax purposes, the fiscal year in which amounts are distributed may differ from the year in which the income and realized gains/(losses) were recorded by the Fund.
Note 2. Transactions with Affiliates
a. Advisory Fee Under the terms of the advisory agreement, which is reviewed and approved annually by
the Board of Trustees, the Fund pays an investment advisory fee to RS Investment Management Co. LLC (“RS Investments”). Guardian Investor Services LLC (“GIS”), a subsidiary of Guardian Life, holds a majority interest in RS Investments. RS Investments receives an investment advisory fee based on the average daily net assets of the Fund at an annual rate of 1.00%. The Fund has also entered into an agreement with GIS for distribution services with respect to its shares.
b. Compensation of Trustees and Officers Trustees and officers of the Trust who are interested persons, as defined in the 1940 Act, of RS Investments receive no compensation from the Fund for acting as such. Trustees of the Trust who are not interested persons of RS Investments receive compensation and reimbursement of expenses from the Trust.
Note 3. Federal Income Taxes
a. Distributions to Shareholders No distributions were paid to shareholders during the year ended December 31, 2010, which is the most recently completed tax year.
Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. These differences are primarily due to differing treatments of income and gains on various investment securities held by the Fund, timing differences, and differing characterizations of distributions made by the Fund. Permanent book and tax basis differences will result in reclassifications to paid-in capital, undistributed net investment income and accumulated undistributed net realized gain/(loss) on investments and foreign currency transactions. Undistributed net investment income and accumulated undistributed net realized gain/(loss) on investments and foreign currency transactions may include temporary book and tax differences, which will reverse in a subsequent period.
As of December 31, 2010, the Fund made the following reclassifications of permanent book and tax basis differences:
| | | | | | | | |
| Paid-in-Capital | | Accumulated Net Investment Loss | | | Accumulated
Net Realized Loss | |
| $(151,201) | | $ | 149,667 | | | $ | 1,534 | |
During any particular year, net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed and, therefore, are normally distributed to shareholders annually.
NOTES TO FINANCIAL STATEMENTS — RS PARTNERS VIP SERIES (UNAUDITED)
During the year ended December 31, 2010, the Fund utilized $2,308,314 of capital loss carryovers. Capital loss carryovers available to the Fund at December 31, 2010, were $3,345,756, expiring in 2017.
In determining its taxable income, current tax law permits the Fund to elect to treat all or a portion of any net capital or currency loss realized after October 31 as occurring on the first day of the following fiscal year. For the year ended December 31, 2010, the Fund elected to defer net capital and currency losses of $221.
On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted. The Act modernizes several of the federal income and excise tax rules related to regulated investment companies, and with certain exceptions, is effective for taxable years beginning after December 22, 2010.
Among the changes are revisions to capital loss carryforward rules allowing for capital losses to be carried forward to one or more subsequent taxable years without expiration. Rules previously in effect limited the carryforward period to eight taxable years. Capital loss carryforwards generated in taxable years beginning after the effective date of the Act must be fully used before capital loss carryforwards generated in taxable years prior to the effective date of the Act. Changes to excise tax rules include timing of recognition of certain income and a change in the required distribution rate for capital gains.
b. Tax Basis of Investments The cost of investments for federal income tax purposes at June 30, 2011, was $13,187,198. The gross unrealized appreciation and depreciation on investments, on a tax basis, at June 30, 2011, aggregated $3,227,143 and $(291,560), respectively, resulting in net unrealized appreciation of $2,935,583.
Note 4. Investments
a. Investment Purchases and Sales The cost of investments purchased and the proceeds from investments sold (excluding short-term investments) amounted to $3,166,751 and $3,655,114, respectively, for the six months ended June 30, 2011.
b. Foreign Securities Foreign securities investments involve special risks and considerations not typically associated with those of U.S. origin. These risks include, but are not limited to, currency risk; adverse political, social, and economic developments; and less reliable information about issuers. Moreover, securities of some foreign companies may be less liquid and their prices more volatile than those of comparable U.S. companies.
c. Industry or Sector Concentration In its normal course of business, the Fund may invest a significant portion of its assets in companies within a limited number of industries or sectors. As a result, the Fund may be subject to a greater risk of loss than that of a fund invested in a wider spectrum of industries or sectors because the stocks of many or all of the companies in the industry, group of industries, sector, or sectors may decline in value due to developments adversely affecting the industry, group of industries, sector, or sectors.
d. Repurchase Agreements The collateral for repurchase agreements is either cash or fully negotiable U.S. government securities (including U.S. government agency securities). Repurchase agreements are fully collateralized (including the interest accrued thereon) and such collateral is marked-to-market daily while the agreements remain in force. If the value of the collateral falls below the repurchase price plus accrued interest, the Fund will typically require the seller to deposit additional collateral by the next business day. If the request for additional collateral is not met, or the seller defaults, the Fund maintains the right to sell the collateral (although it may be prevented or delayed from doing so in certain circumstances) and may claim any resulting loss against the seller.
Note 5. Temporary Borrowings
The Fund, with other funds managed by RS Investments, shares in a $75 million committed revolving credit/overdraft protection facility from State Street Bank and Trust Company for temporary purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. Interest is calculated based on market rates at the time of borrowing; all the funds that are parties to the facility share in a commitment fee that is allocated among the funds on the basis of their respective net assets. The Fund may borrow up to the lesser of one-third of its total assets (including amounts borrowed) or any lower limit specified in the Fund’s Statement of Additional Information or Prospectus.
For the six months ended June 30, 2011, the Fund did not borrow from the facility.
Note 6. Review for Subsequent Events
The Trust has evaluated subsequent events through the issuance of the Fund’s financial statements and determined that no material events have occurred that require disclosure.
NOTES TO FINANCIAL STATEMENTS — RS PARTNERS VIP SERIES (UNAUDITED)
Note 7. Indemnifications
Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, in the normal course of business, the Fund enters into contracts with its vendors and others that provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund. However, based on experience, the Fund expects the risk of loss to be remote.
SUPPLEMENTAL INFORMATION (UNAUDITED)
Meeting of Shareholders
A special meeting of the shareholders of RS Variable Products Trust (“the Trust”) was held on May 20, 2011. At the meeting, the shareholders of the Trust elected Judson Bergman, Kenneth R. Fitzsimmons, Jr., Anne M. Goggin, Christopher C. Melvin, Jr., Deanna M. Mulligan, Gloria S. Nelund, Terry R. Otton, and John P. Rohal as trustees of the Trust.
Proposal To Elect Trustees
| | | | |
Nominee | | Votes For | | Votes Against/Withheld |
| Judson Bergman | | 264,351,869.410 | | 14,579,441.977 |
| Kenneth R. Fitzsimmons, Jr. | | 264,417,319.717 | | 14,513,991.670 |
| Anne M. Goggin | | 265,496,967.524 | | 13,434,343.863 |
| Christopher C. Melvin, Jr. | | 264,182,743.884 | | 14,748,567.503 |
| Deanna M. Mulligan | | 264,603,554.628 | | 14,327,756.759 |
| Gloria S. Nelund | | 265,607,677.552 | | 13,323,633.835 |
| Terry R. Otton | | 265,360,024.512 | | 13,571,286.875 |
| John P. Rohal | | 264,052,063.420 | | 14,879,247.967 |
Portfolio Holdings and Proxy Voting Procedures
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Form N-Q is available on the Securities and Exchange Commission’s Web site at http://www.sec.gov. The Fund’s Form N-Q may be reviewed and copied at the Commission’s Public Reference Room in Washington, DC, and information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330. This information is also available, without charge, upon request, by calling toll-free 800-221-3253.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 will be available (i) without charge, upon request, by calling toll-free 800-221-3253; and (ii) on the Securities and Exchange Commission’s Web site at http://www.sec.gov.
The Statement of Additional Information includes additional information about the Trust’s Trustees and Officers and is available, without charge, upon request by calling toll-free 800-221-3253.
This report is transmitted to shareholders only. It is not authorized for use as an offer of sale or a solicitation of an offer to buy shares of a Fund unless accompanied or preceded by that Fund’s current prospectus. Past performance results shown in this report should not be considered a representation of future performance. Investment returns and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Statements and other information herein are as dated and are subject to change.
2011 Semiannual Report
All data as of June 30, 2011
RS Variable Products Trust
| Ÿ | | RS S&P 500 Index VIP Series |
| | | | |
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE | | |  | |
TABLE OF CONTENTS
Except as otherwise specifically stated, all information and investment team commentary, including portfolio security positions, is as of June 30, 2011. The views expressed in the investment team letters are those of the Fund’s portfolio manager(s) and are subject to change without notice. They do not necessarily represent the views of RS Investments or Guardian Investor Services LLC. The letters contain some forward-looking statements providing current expectations or forecasts of future events; they do not necessarily relate to historical or current facts. There can be no guarantee that any forward-looking statement will be realized. We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events, or otherwise. Any discussions of specific securities should not be considered a recommendation to buy or sell those securities. Fund holdings will vary.
RS S&P 500 INDEX VIP SERIES
The Statement of Additional Information provides further information about your investment team, including information regarding their compensation, other accounts they manage, and their ownership interests in the Fund. For information on how to receive a copy of the Statement of Additional Information, please see the back cover of the Fund’s Prospectus or visit our Web site at www.guardianinvestor.com.
RS S&P 500 Index VIP Series Commentary
Highlights
| Ÿ | | Volatility in the S&P 500® Index1 was low through the first quarter of 2011, but increased later in the second quarter amid investor concerns over weaker economic performance and the European sovereign debt crisis (e.g. Greece and Ireland). |
| Ÿ | | RS S&P 500 Index VIP Series slightly underperformed its benchmark, the S&P 500® Index, for the six-month period ended June 30, 2011. |
| Ÿ | | In managing RS S&P 500 Index VIP Series, our goal is to attempt to track the investment performance of the S&P 500® Index, while remaining close to fully invested in stocks and keeping trading costs to a minimum. |
Market Overview
The S&P 500® Index proved resilient for the first quarter, as investors focused on generally healthy corporate earnings news and optimism on the economy rather than on tumultuous world events such as unrest in the Middle East, the earthquake and tsunami in Japan, and the ongoing solvency crisis in the European Union. But as oil prices started to climb, investors became increasingly risk averse and the stock market became more volatile, as reflected in the Chicago Board Options Exchange
Market Volatility Index (VIX)2, a measure of the implied volatility of the S&P 500 options market. After ending the first quarter at 17.743, the VIX increased to reach a second quarter high of 22.733 on June 16th. The VIX then turned sharply lower during the remainder of June as volatility eased and investor appetites for risk seemed to return. Against this backdrop, the S&P 500® Index was still able to deliver a solid positive return for the six-month period.
Fund Performance Overview
RS S&P 500 Index VIP Series returned 5.92% for the six-month period ended June 30, 2011. The Fund’s benchmark, the S&P 500® Index, returned 6.02% over the same period. The difference in performance is primarily due to the fact that, unlike the Fund, the Index does not incur fees and expenses. The S&P 500® Index is a theoretical portfolio of 500 blue chip stocks, the return of which is computed as though the stocks were purchased and the index subsequently rebalanced without any trading costs or fund expenses.
Outlook
In this environment, we continued to manage the portfolio with the intention of being substantially fully invested in stocks, while we attempt to track the S&P 500® Index and try to keep trading costs to a minimum.
RS Funds are sold by prospectus only. You should carefully consider the investment objectives, risks, charges and expenses of the RS Funds before making an investment decision. The prospectus contains this and other important information. Please read it carefully before investing or sending money. Please visit our web site at www.guardianinvestor.com or to obtain a printed copy, call 800-221-3253.
Any discussions of specific securities should not be considered a recommendation to buy or sell those securities. Fund holdings will vary.
Except as otherwise specifically stated, all information and investment team commentary, including portfolio security positions, is as of June 30, 2011.
There is no assurance that the Fund will track the performance of the S&P 500® Index perfectly. As with all mutual funds, the value of an investment in the Fund could decline, in which case you could lose money. The Fund invests primarily in equity securities and therefore exposes you to the general risks of investing in stock markets. Derivative transactions can create leverage and may be highly volatile. It is possible that a derivative transaction will result in a loss greater than the principal amount invested and the Fund may not be able to close out a derivative transaction at a favorable time or price.
RS S&P 500 INDEX VIP SERIES
| | |
| Total Net Assets: $108,920,598 | | |
|
| |
| Sector Allocation4 |
 |
| | | | |
| | |
| Top Ten Holdings5 | | | |
| | |
| Holding | | % of Total
Net Assets | |
| Exxon Mobil Corp. | | | 3.26% | |
| Apple, Inc. | | | 2.52% | |
| International Business Machines Corp. | | | 1.69% | |
| Chevron Corp. | | | 1.67% | |
| General Electric Co. | | | 1.62% | |
| Microsoft Corp. | | | 1.57% | |
| AT&T, Inc. | | | 1.51% | |
| Johnson & Johnson | | | 1.48% | |
| The Procter & Gamble Co. | | | 1.45% | |
| JPMorgan Chase & Co. | | | 1.32% | |
| Total | | | 18.09% | |
| 1 | The S&P 500® Index is an unmanaged market-capitalization-weighted index generally considered to be representative of U.S. equity market activity. The index consists of 500 stocks representing leading industries of the U.S. economy. Index results assume the reinvestment of dividends paid on the stocks constituting the index. You may not invest in the index, and, unlike the Fund, the index does not incur fees or expenses. |
| 2 | The Chicago Board Options Exchange Market Volatility Index is generally considered to be representative of S&P 500 options market and shows the market’s expectation of 30-day volatility. It is constructed using the implied volatilities of a wide range of S&P 500 index options. This volatility is meant to be forward looking and is calculated from both calls and puts. The VIX is a widely used measure of market risk and is often referred to as the “investor fear gauge”. Index results assume the reinvestment of dividends paid on the stocks constituting the index. You may not invest in the index, and, unlike any Fund, the index does not incur fees or expenses. |
| 4 | The Fund’s holdings are allocated to each sector based on their Russell Global Sector classification. If a holding is not classified by Russell, it is assigned a Russell designation by RS Investments. Cash includes short-term investments and net other assets and liabilities. Sector weighting differences between the portfolio and index exist due the presence of cash and other short term assets/liabilities (including futures) in the portfolio. |
| 5 | Portfolio holdings are subject to change and should not be considered a recommendation to buy or sell individual securities. |
RS S&P 500 INDEX VIP SERIES
Performance Update
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
| Average Annual Total Returns | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
| | | Inception
Date | | | Year-to-Date | | | 1
Year | | | 3
Year | | | 5
Year | | | 10
Year | | | Since
Inception | |
| RS S&P 500 Index VIP Series | | | 8/25/99 | | | | 5.92% | | | | 30.27% | | | | 3.09% | | | | 2.68% | | | | 2.44% | | | | 1.21% | |
| S&P 500® Index1 | | | | | | | 6.02% | | | | 30.69% | | | | 3.34% | | | | 2.94% | | | | 2.72% | | | | 1.43% | |
| | | | | | | |
| Results of a Hypothetical $10,000 Investment | | | | | | | | | | | | | | | | | | | |
 | |
The chart above shows the performance of a hypothetical $10,000 investment made 10 years ago in RS S&P 500 Index VIP Series and in the S&P 500® Index. Index returns do not include the fees and expenses of the Fund, but do include the reinvestment of dividends.
Performance quoted represents past performance and does not guarantee or predict future results. The Fund is the successor to The Guardian VC 500 Index Fund; performance shown includes performance of the predecessor fund for periods prior to October 9, 2006. Investment return and principal value will fluctuate, so shares, when redeemed, may be worth more or less than their original cost. The Fund’s fees and expenses are detailed in the Financial Highlights section of this report. Fees and expenses are factored into the net asset value of your shares and any performance numbers we release. Total return figures reflect an expense limitation in effect during the periods shown; without such limitation, the performance shown would have been lower. Performance results assume the reinvestment of dividends and capital gains. The return figures shown do not reflect the deduction of taxes that a contractowner/policyholder may pay on Fund distributions or redemption units. The actual total returns for owners of variable annuity contracts or variable life insurance policies that provide for investment in the Fund will be lower to reflect separate account and contract/policy charges. Current and month-end performance information, which may be lower or higher than that cited, is available by calling 800-221-3253 and is periodically updated on our Web site: www.guardianinvestor.com.
UNDERSTANDING YOUR FUND’S EXPENSES (UNAUDITED)
By investing in the Fund, you incur two types of costs: (1) transaction costs, including, as applicable, sales charges (loads) on purchase payments; redemption fees; and exchange fees; and (2) ongoing costs, including as applicable, investment advisory fees; and other Fund expenses. The example below is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period indicated. The table below shows the Fund’s expenses in two ways:
Expenses based on actual return
This section of the table provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Expenses based on hypothetical 5% return for comparison purposes
This section of the table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund with the cost of investing in other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore the second section is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If these transactional costs were included, your costs would have been higher.
| | | | | | | | | | | | | | |
| | | Beginning
Account Value
1/1/11 | | Ending
Account Value
6/30/11 | | | Expenses Paid
During Period*
1/1/11-6/30/11 | | | Expense Ratio
During Period
1/1/11-6/30/11 | |
| Based on Actual Return | | $1,000.00 | | | $1,059.20 | | | | $1.43 | | | | 0.28% | |
| Based on Hypothetical Return (5% Return Before Expenses) | | $1,000.00 | | | $1,023.41 | | | | $1.40 | | | | 0.28% | |
| * | Expenses are equal to the Fund’s annualized expense ratio as indicated, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). |
SCHEDULE OF INVESTMENTS — RS S&P 500 INDEX VIP SERIES
| | | | | | | | |
| June 30, 2011 (unaudited) | | Shares | | | Value | |
| Common Stocks – 97.6% | |
| Advertising Agencies – 0.2% | |
Omnicom Group, Inc. | | | 2,501 | | | $ | 120,448 | |
The Interpublic Group of Companies, Inc. | | | 4,313 | | | | 53,913 | |
| | | | | | | | | |
| | | | | | | | 174,361 | |
| Aerospace – 2.2% | |
FLIR Systems, Inc. | | | 1,405 | | | | 47,363 | |
General Dynamics Corp. | | | 3,296 | | | | 245,618 | |
Goodrich Corp. | | | 1,106 | | | | 105,623 | |
L-3 Communications Holdings, Inc. | | | 930 | | | | 81,328 | |
Lockheed Martin Corp. | | | 2,544 | | | | 205,988 | |
Northrop Grumman Corp. | | | 2,563 | | | | 177,744 | |
Raytheon Co. | | | 3,165 | | | | 157,775 | |
Rockwell Collins, Inc. | | | 1,379 | | | | 85,071 | |
Textron, Inc. | | | 2,442 | | | | 57,656 | |
The Boeing Co. | | | 6,493 | | | | 480,027 | |
United Technologies Corp. | | | 8,126 | | | | 719,232 | |
| | | | | | | | | |
| | | | | | | | 2,363,425 | |
| Air Transport – 0.3% | |
FedEx Corp. | | | 2,782 | | | | 263,873 | |
Southwest Airlines Co. | | | 6,949 | | | | 79,357 | |
| | | | | | | | | |
| | | | | | | | 343,230 | |
| Aluminum – 0.1% | |
Alcoa, Inc. | | | 9,390 | | | | 148,925 | |
| | | | | | | | | |
| | | | | | | | 148,925 | |
| Asset Management & Custodian – 0.9% | |
BlackRock, Inc. | | | 846 | | | | 162,271 | |
Federated Investors, Inc., Class B | | | 816 | | | | 19,453 | |
Franklin Resources, Inc. | | | 1,281 | | | | 168,182 | |
Invesco Ltd. | | | 4,064 | | | | 95,098 | |
Janus Capital Group, Inc. | | | 1,647 | | | | 15,548 | |
Legg Mason, Inc. | | | 1,344 | | | | 44,029 | |
Northern Trust Corp. | | | 2,133 | | | | 98,033 | |
State Street Corp. | | | 4,428 | | | | 199,659 | |
T. Rowe Price Group, Inc. | | | 2,290 | | | | 138,179 | |
| | | | | | | | | |
| | | | | | | | 940,452 | |
| Auto Parts – 0.3% | |
Genuine Parts Co. | | | 1,386 | | | | 75,398 | |
Johnson Controls, Inc. | | | 5,982 | | | | 249,210 | |
| | | | | | | | | |
| | | | | | | | 324,608 | |
| Auto Services – 0.0% | |
The Goodyear Tire & Rubber Co.(1) | | | 2,150 | | | | 36,055 | |
| | | | | | | | | |
| | | | | | | | 36,055 | |
| Automobiles – 0.4% | |
Ford Motor Co.(1) | | | 33,405 | | | | 460,655 | |
| | | | | | | | | |
| | | | | | | | 460,655 | |
| Back Office Support, HR and Consulting – 0.4% | |
Automatic Data Processing, Inc. | | | 4,383 | | | | 230,896 | |
Iron Mountain, Inc. | | | 1,763 | | | | 60,101 | |
Monster Worldwide, Inc.(1) | | | 1,167 | | | | 17,108 | |
| | | | | | | | | |
| | | | | | | | |
| June 30, 2011 (unaudited) | | Shares | | | Value | |
| Back Office Support, HR and Consulting (continued) | |
Paychex, Inc. | | | 2,849 | | | $ | 87,521 | |
Robert Half International, Inc. | | | 1,296 | | | | 35,031 | |
| | | | | | | | | |
| | | | | | | | 430,657 | |
| Banks: Diversified – 3.5% | |
Bank of America Corp.(2) | | | 89,385 | | | | 979,660 | |
BB&T Corp. | | | 6,140 | | | | 164,798 | |
Comerica, Inc. | | | 1,568 | | | | 54,206 | |
Fifth Third Bancorp | | | 8,128 | | | | 103,632 | |
First Horizon National Corp. | | | 2,348 | | | | 22,400 | |
Huntington Bancshares, Inc. | | | 7,618 | | | | 49,974 | |
KeyCorp | | | 8,448 | | | | 70,372 | |
M&T Bank Corp. | | | 1,087 | | | | 95,602 | |
Marshall & Ilsley Corp. | | | 4,680 | | | | 37,300 | |
PNC Financial Services Group, Inc. | | | 4,637 | | | | 276,411 | |
Regions Financial Corp. | | | 11,102 | | | | 68,832 | |
SunTrust Banks, Inc. | | | 4,729 | | | | 122,008 | |
U.S. Bancorp | | | 16,956 | | | | 432,547 | |
Wells Fargo & Co. | | | 46,781 | | | | 1,312,675 | |
Zions Bancorporation | | | 1,600 | | | | 38,416 | |
| | | | | | | | | |
| | | | | | | | 3,828,833 | |
| Banks: Savings, Thrift & Mortgage Lending – 0.1% | |
Hudson City Bancorp, Inc. | | | 4,627 | | | | 37,895 | |
People’s United Financial, Inc. | | | 3,216 | | | | 43,223 | |
| | | | | | | | | |
| | | | | | | | 81,118 | |
| Beverage: Brewers & Distillers – 0.1% | |
Brown-Forman Corp., Class B | | | 898 | | | | 67,072 | |
Constellation Brands, Inc., Class A(1) | | | 1,553 | | | | 32,333 | |
Molson Coors Brewing Co., Class B | | | 1,398 | | | | 62,547 | |
| | | | | | | | | |
| | | | | | | | 161,952 | |
| Beverage: Soft Drinks – 2.3% | |
Coca-Cola Enterprises, Inc. | | | 2,917 | | | | 85,118 | |
Dr. Pepper Snapple Group, Inc. | | | 1,981 | | | | 83,064 | |
PepsiCo, Inc. | | | 14,028 | | | | 987,992 | |
The Coca-Cola Co. | | | 20,263 | | | | 1,363,497 | |
| | | | | | | | | |
| | | | | | | | 2,519,671 | |
| Biotechnology – 1.3% | |
Amgen, Inc.(1) | | | 8,253 | | | | 481,562 | |
Baxter International, Inc. | | | 5,117 | | | | 305,434 | |
Biogen Idec, Inc.(1) | | | 2,139 | | | | 228,702 | |
Celgene Corp.(1) | | | 4,113 | | | | 248,096 | |
Cephalon, Inc.(1) | | | 664 | | | | 53,054 | |
Life Technologies Corp.(1) | | | 1,596 | | | | 83,104 | |
| | | | | | | | | |
| | | | | | | | 1,399,952 | |
| Building Materials – 0.1% | |
Masco Corp. | | | 3,164 | | | | 38,063 | |
Vulcan Materials Co. | | | 1,151 | | | | 44,348 | |
| | | | | | | | | |
| | | | | | | | 82,411 | |
| Cable Television Services – 1.2% | |
Cablevision Systems Corp., Class A | | | 2,061 | | | | 74,629 | |
| | | | | | | | | |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 7 |
RS S&P 500 INDEX VIP SERIES
| | | | | | | | |
| June 30, 2011 (unaudited) | | Shares | | | Value | |
| Cable Television Services (continued) | |
Comcast Corp., Class A | | | 24,511 | | | $ | 621,109 | |
DIRECTV, Class A(1) | | | 6,787 | | | | 344,915 | |
Scripps Networks Interactive, Inc., Class A | | | 806 | | | | 39,397 | |
Time Warner Cable, Inc. | | | 3,035 | | | | 236,852 | |
| | | | | | | | | |
| | | | | | | | 1,316,902 | |
| Casinos & Gambling – 0.0% | |
International Game Technology | | | 2,629 | | | | 46,218 | |
| | | | | | | | | |
| | | | | | | | 46,218 | |
| Chemicals: Diversified – 1.1% | |
Airgas, Inc. | | | 648 | | | | 45,386 | |
E.I. du Pont de Nemours & Co. | | | 8,141 | | | | 440,021 | |
Eastman Chemical Co. | | | 624 | | | | 63,692 | |
Ecolab, Inc. | | | 2,063 | | | | 116,312 | |
FMC Corp. | | | 632 | | | | 54,364 | |
Sigma-Aldrich Corp. | | | 1,076 | | | | 78,957 | |
The Dow Chemical Co. | | | 10,319 | | | | 371,484 | |
| | | | | | | | | |
| | | | | | | | 1,170,216 | |
| Chemicals: Specialty – 0.5% | |
Air Products & Chemicals, Inc. | | | 1,897 | | | | 181,315 | |
International Flavors & Fragrances, Inc. | | | 711 | | | | 45,675 | |
Praxair, Inc. | | | 2,678 | | | | 290,268 | |
| | | | | | | | | |
| | | | | | | | 517,258 | |
| Coal – 0.3% | |
Alpha Natural Resources, Inc.(1) | | | 2,002 | | | | 90,971 | |
CONSOL Energy, Inc. | | | 2,000 | | | | 96,960 | |
Peabody Energy Corp. | | | 2,388 | | | | 140,677 | |
| | | | | | | | | |
| | | | | | | | 328,608 | |
| Commercial Services: Rental & Leasing – 0.0% | |
Ryder System, Inc. | | | 462 | | | | 26,265 | |
| | | | | | | | | |
| | | | | | | | 26,265 | |
| Commercial Vehicles & Parts – 0.1% | |
PACCAR, Inc. | | | 3,222 | | | | 164,612 | |
| | | | | | | | | |
| | | | | | | | 164,612 | |
| Communications Technology – 1.7% | |
Cisco Systems, Inc. | | | 48,823 | | | | 762,127 | |
Harris Corp. | | | 1,123 | | | | 50,602 | |
JDS Uniphase Corp.(1) | | | 1,982 | | | | 33,020 | |
Juniper Networks, Inc.(1) | | | 4,703 | | | | 148,145 | |
QUALCOMM, Inc. | | | 14,768 | | | | 838,675 | |
Tellabs, Inc. | | | 3,228 | | | | 14,881 | |
| | | | | | | | | |
| | | | | | | | 1,847,450 | |
| Computer Services, Software & Systems – 5.3% | |
Adobe Systems, Inc.(1) | | | 4,474 | | | | 140,707 | |
Akamai Technologies, Inc.(1) | | | 1,641 | | | | 51,642 | |
Autodesk, Inc.(1) | | | 2,021 | | | | 78,011 | |
BMC Software, Inc.(1) | | | 1,586 | | | | 86,754 | |
CA, Inc. | | | 3,384 | | | | 77,291 | |
Citrix Systems, Inc.(1) | | | 1,656 | | | | 132,480 | |
| | | | | | | | | |
| | | | | | | | |
| June 30, 2011 (unaudited) | | Shares | | | Value | |
| Computer Services, Software & Systems (continued) | |
Cognizant Technology Solutions Corp., Class A(1) | | | 2,686 | | | $ | 196,991 | |
Computer Sciences Corp. | | | 1,368 | | | | 51,929 | |
Compuware Corp.(1) | | | 1,940 | | | | 18,934 | |
F5 Networks, Inc.(1) | | | 713 | | | | 78,608 | |
Google, Inc., Class A(1) | | | 2,215 | | | | 1,121,632 | |
Intuit, Inc.(1) | | | 2,412 | | | | 125,086 | |
Microsoft Corp.(2) | | | 65,583 | | | | 1,705,158 | |
Oracle Corp. | | | 34,341 | | | | 1,130,162 | |
Red Hat, Inc.(1) | | | 1,715 | | | | 78,719 | |
SAIC, Inc.(1) | | | 2,625 | | | | 44,153 | |
Salesforce.com, Inc.(1) | | | 1,045 | | | | 155,684 | |
Symantec Corp.(1) | | | 6,741 | | | | 132,933 | |
Teradata Corp.(1) | | | 1,484 | | | | 89,337 | |
VeriSign, Inc. | | | 1,528 | | | | 51,127 | |
Yahoo! Inc.(1) | | | 11,534 | | | | 173,471 | |
| | | | | | | | | |
| | | | | | | | 5,720,809 | |
| Computer Technology – 5.9% | |
Apple, Inc.(1)(2) | | | 8,179 | | | | 2,745,445 | |
Dell, Inc.(1) | | | 14,818 | | | | 247,016 | |
EMC Corp.(1) | | | 18,262 | | | | 503,118 | |
Hewlett-Packard Co. | | | 18,345 | | | | 667,758 | |
International Business Machines Corp.(2) | | | 10,711 | | | | 1,837,472 | |
NetApp, Inc.(1) | | | 3,246 | | | | 171,324 | |
NVIDIA Corp.(1) | | | 5,132 | | | | 81,779 | |
SanDisk Corp.(1) | | | 2,092 | | | | 86,818 | |
Western Digital Corp.(1) | | | 2,043 | | | | 74,324 | |
| | | | | | | | | |
| | | | | | | | 6,415,054 | |
| Consumer Electronics – 0.0% | |
Harman International Industries, Inc. | | | 629 | | | | 28,664 | |
| | | | | | | | | |
| | | | | | | | 28,664 | |
| Consumer Lending – 0.1% | |
SLM Corp. | | | 4,659 | | | | 78,318 | |
| | | | | | | | | |
| | | | | | | | 78,318 | |
| Consumer Services: Miscellaneous – 0.3% | |
eBay, Inc.(1) | | | 10,094 | | | | 325,733 | |
H & R Block, Inc. | | | 2,703 | | | | 43,356 | |
| | | | | | | | | |
| | | | | | | | 369,089 | |
| Containers & Packaging – 0.1% | |
Ball Corp. | | | 1,490 | | | | 57,305 | |
Bemis Co., Inc. | | | 948 | | | | 32,024 | |
Owens-Illinois, Inc.(1) | | | 1,473 | | | | 38,018 | |
Sealed Air Corp. | | | 1,410 | | | | 33,544 | |
| | | | | | | | | |
| | | | | | | | 160,891 | |
| Copper – 0.4% | |
Freeport-McMoran Copper & Gold, Inc., Class B | | | 8,362 | | | | 442,350 | |
| | | | | | | | | |
| | | | | | | | 442,350 | |
| Cosmetics – 0.2% | |
Avon Products, Inc. | | | 3,779 | | | | 105,812 | |
| | | | | | | | | |
| | | | |
| 8 | | | | The accompanying notes are an integral part of these financial statements. |
SCHEDULE OF INVESTMENTS — RS S&P 500 INDEX VIP SERIES
| | | | | | | | |
| June 30, 2011 (unaudited) | | Shares | | | Value | |
| Cosmetics (continued) | |
Estee Lauder Companies, Inc., Class A | | | 1,019 | | | $ | 107,189 | |
| | | | | | | | | |
| | | | | | | | 213,001 | |
| Diversified Financial Services – 3.8% | |
Ameriprise Financial, Inc. | | | 2,179 | | | | 125,685 | |
Bank of New York Mellon Corp. | | | 10,961 | | | | 280,821 | |
Capital One Financial Corp. | | | 4,039 | | | | 208,695 | |
Citigroup, Inc. | | | 25,839 | | | | 1,075,936 | |
JPMorgan Chase & Co.(2) | | | 35,188 | | | | 1,440,597 | |
Leucadia National Corp. | | | 1,746 | | | | 59,538 | |
Morgan Stanley | | | 13,629 | | | | 313,603 | |
The Goldman Sachs Group, Inc. | | | 4,590 | | | | 610,883 | |
| | | | | | | | | |
| | | | | | | | 4,115,758 | |
| Diversified Manufacturing Operations – 3.7% | |
3M Co. | | | 6,275 | | | | 595,184 | |
Danaher Corp. | | | 4,777 | | | | 253,133 | |
Dover Corp. | | | 1,648 | | | | 111,734 | |
Eaton Corp. | | | 3,004 | | | | 154,556 | |
General Electric Co.(2) | | | 93,757 | | | | 1,768,257 | |
Honeywell International, Inc. | | | 6,929 | | | | 412,899 | |
Illinois Tool Works, Inc. | | | 4,401 | | | | 248,613 | |
Ingersoll-Rand PLC | | | 2,913 | | | | 132,279 | |
ITT Corp. | | | 1,622 | | | | 95,585 | |
Tyco International Ltd. | | | 4,184 | | | | 206,815 | |
| | | | | | | | | |
| | | | | | | | 3,979,055 | |
| Diversified Media – 0.7% | |
Discovery Communications, Inc., Class A(1) | | | 2,492 | | | | 102,072 | |
News Corp., Class A | | | 20,164 | | | | 356,903 | |
Time Warner, Inc. | | | 9,483 | | | | 344,897 | |
| | | | | | | | | |
| | | | | | | | 803,872 | |
| Diversified Retail – 2.4% | |
Amazon.com, Inc.(1) | | | 3,146 | | | | 643,326 | |
Big Lots, Inc.(1) | | | 661 | | | | 21,912 | |
Costco Wholesale Corp. | | | 3,856 | | | | 313,261 | |
Family Dollar Stores, Inc. | | | 1,115 | | | | 58,604 | |
J.C. Penney Co., Inc. | | | 1,888 | | | | 65,212 | |
Kohl’s Corp. | | | 2,574 | | | | 128,726 | |
Macy’s, Inc. | | | 3,734 | | | | 109,182 | |
Nordstrom, Inc. | | | 1,483 | | | | 69,612 | |
Sears Holdings Corp.(1) | | | 397 | | | | 28,362 | |
Target Corp. | | | 6,095 | | | | 285,916 | |
Wal-Mart Stores, Inc. | | | 16,914 | | | | 898,810 | |
| | | | | | | | | |
| | | | | | | | 2,622,923 | |
| Drug & Grocery Store Chains – 1.0% | |
CVS Caremark Corp. | | | 12,087 | | | | 454,229 | |
Safeway, Inc. | | | 3,245 | | | | 75,836 | |
SUPERVALU, Inc. | | | 1,878 | | | | 17,672 | |
The Kroger Co. | | | 5,375 | | | | 133,300 | |
Walgreen Co. | | | 8,147 | | | | 345,922 | |
| | | | | | | | | |
| | | | | | | | |
| June 30, 2011 (unaudited) | | Shares | | | Value | |
| Drug & Grocery Store Chains (continued) | |
Whole Foods Market, Inc. | | | 1,305 | | | $ | 82,802 | |
| | | | | | | | | |
| | | | | | | | 1,109,761 | |
| Education Services – 0.1% | |
Apollo Group, Inc., Class A(1) | | | 1,087 | | | | 47,480 | |
DeVry, Inc. | | | 543 | | | | 32,108 | |
| | | | | | | | | |
| | | | | | | | 79,588 | |
| Electronic Components – 0.3% | |
Amphenol Corp., Class A | | | 1,550 | | | | 83,685 | |
Corning, Inc. | | | 13,821 | | | | 250,851 | |
Molex, Inc. | | | 1,230 | | | | 31,697 | |
| | | | | | | | | |
| | | | | | | | 366,233 | |
| Electronic Entertainment – 0.1% | |
Electronic Arts, Inc.(1) | | | 2,941 | | | | 69,408 | |
| | | | | | | | | |
| | | | | | | | 69,408 | |
| Energy Equipment – 0.1% | |
First Solar, Inc.(1) | | | 483 | | | | 63,886 | |
| | | | | | | | | |
| | | | | | | | 63,886 | |
| Engineering & Contracting Services – 0.2% | |
Fluor Corp. | | | 1,559 | | | | 100,805 | |
Jacobs Engineering Group, Inc.(1) | | | 1,115 | | | | 48,224 | |
Quanta Services, Inc.(1) | | | 1,908 | | | | 38,541 | |
| | | | | | | | | |
| | | | | | | | 187,570 | |
| Entertainment – 0.8% | |
The Walt Disney Co. | | | 16,763 | | | | 654,427 | |
Viacom, Inc., Class B | | | 5,271 | | | | 268,821 | |
| | | | | | | | | |
| | | | | | | | 923,248 | |
| Environmental, Maintenance, And Security Services – 0.0% | |
Cintas Corp. | | | 1,130 | | | | 37,324 | |
| | | | | | | | | |
| | | | | | | | 37,324 | |
| Fertilizers – 0.4% | |
CF Industries Holdings, Inc. | | | 630 | | | | 89,252 | |
Monsanto Co. | | | 4,738 | | | | 343,695 | |
| | | | | | | | | |
| | | | | | | | 432,947 | |
| Financial Data & Systems – 1.5% | |
American Express Co. | | | 9,257 | | | | 478,587 | |
Discover Financial Services | | | 4,819 | | | | 128,908 | |
Equifax, Inc. | | | 1,080 | | | | 37,498 | |
Fidelity National Information Services, Inc. | | | 2,343 | | | | 72,141 | |
Fiserv, Inc.(1) | | | 1,289 | | | | 80,730 | |
MasterCard, Inc., Class A | | | 832 | | | | 250,715 | |
Moody’s Corp. | | | 1,764 | | | | 67,649 | |
The Dun & Bradstreet Corp. | | | 444 | | | | 33,540 | |
Total System Services, Inc. | | | 1,423 | | | | 26,439 | |
Visa, Inc., Class A | | | 4,277 | | | | 360,380 | |
Western Union Co. | | | 5,719 | | | | 114,552 | |
| | | | | | | | | |
| | | | | | | | 1,651,139 | |
| Foods – 1.7% | |
Campbell Soup Co. | | | 1,627 | | | | 56,213 | |
| | | | | | | | | |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 9 |
RS S&P 500 INDEX VIP SERIES
| | | | | | | | |
| June 30, 2011 (unaudited) | | Shares | | | Value | |
| Foods (continued) | |
ConAgra Foods, Inc. | | | 3,643 | | | $ | 94,026 | |
Dean Foods Co.(1) | | | 1,620 | | | | 19,877 | |
General Mills, Inc. | | | 5,539 | | | | 206,162 | |
H.J. Heinz Co. | | | 2,848 | | | | 151,742 | |
Hormel Foods Corp. | | | 1,219 | | | | 36,338 | |
Kellogg Co. | | | 2,237 | | | | 123,751 | |
Kraft Foods, Inc., Class A | | | 15,445 | | | | 544,127 | |
McCormick & Co., Inc. | | | 1,182 | | | | 58,592 | |
Mead Johnson Nutrition Co. | | | 1,808 | | | | 122,130 | |
Sara Lee Corp. | | | 5,160 | | | | 97,988 | |
Sysco Corp. | | | 5,043 | | | | 157,241 | |
The Hershey Co. | | | 1,366 | | | | 77,657 | |
The J.M. Smucker Co. | | | 1,055 | | | | 80,644 | |
Tyson Foods, Inc., Class A | | | 2,638 | | | | 51,230 | |
| | | | | | | | | |
| | | | | | | | 1,877,718 | |
| Forms And Bulk Printing Services – 0.0% | |
R.R. Donnelley & Sons Co. | | | 1,841 | | | | 36,102 | |
| | | | | | | | | |
| | | | | | | | 36,102 | |
| Fruit & Grain Processing – 0.2% | |
Archer-Daniels-Midland Co. | | | 6,034 | | | | 181,925 | |
| | | | | | | | | |
| | | | | | | | 181,925 | |
| Gas Pipeline – 0.3% | |
El Paso Corp. | | | 6,758 | | | | 136,511 | |
EQT Corp. | | | 1,321 | | | | 69,379 | |
Spectra Energy Corp. | | | 5,724 | | | | 156,895 | |
| | | | | | | | | |
| | | | | | | | 362,785 | |
| Gold – 0.2% | |
Newmont Mining Corp. | | | 4,349 | | | | 234,716 | |
| | | | | | | | | |
| | | | | | | | 234,716 | |
| Health Care Facilities – 0.1% | |
DaVita, Inc.(1) | | | 847 | | | | 73,359 | |
Tenet Healthcare Corp.(1) | | | 4,283 | | | | 26,726 | |
| | | | | | | | | |
| | | | | | | | 100,085 | |
| Health Care Management Services – 1.1% | |
Aetna, Inc. | | | 3,394 | | | | 149,641 | |
CIGNA Corp. | | | 2,397 | | | | 123,278 | |
Coventry Health Care, Inc.(1) | | | 1,321 | | | | 48,177 | |
Humana, Inc. | | | 1,490 | | | | 120,005 | |
UnitedHealth Group, Inc. | | | 9,660 | | | | 498,263 | |
WellPoint, Inc. | | | 3,247 | | | | 255,766 | |
| | | | | | | | | |
| | | | | | | | 1,195,130 | |
| Health Care Services – 0.7% | |
Cerner Corp.(1) | | | 1,276 | | | | 77,976 | |
Express Scripts, Inc.(1) | | | 4,664 | | | | 251,763 | |
McKesson Corp. | | | 2,249 | | | | 188,129 | |
Medco Health Solutions, Inc.(1) | | | 3,568 | | | | 201,663 | |
| | | | | | | | | |
| | | | | | | | 719,531 | |
| Home Building – 0.1% | |
D.R. Horton, Inc. | | | 2,471 | | | | 28,466 | |
| | | | | | | | | |
| | | | | | | | |
| June 30, 2011 (unaudited) | | Shares | | | Value | |
| Home Building (continued) | |
Lennar Corp., Class A | | | 1,431 | | | $ | 25,973 | |
Pulte Group, Inc.(1) | | | 2,970 | | | | 22,750 | |
| | | | | | | | | |
| | | | | | | | 77,189 | |
| Hotel/Motel – 0.3% | |
Marriott International, Inc., Class A | | | 2,559 | | | | 90,819 | |
Starwood Hotels & Resorts Worldwide, Inc. | | | 1,713 | | | | 95,997 | |
Wyndham Worldwide Corp. | | | 1,533 | | | | 51,585 | |
Wynn Resorts Ltd. | | | 679 | | | | 97,464 | |
| | | | | | | | | |
| | | | | | | | 335,865 | |
| Household Appliances – 0.0% | |
Whirlpool Corp. | | | 668 | | | | 54,322 | |
| | | | | | | | | |
| | | | | | | | 54,322 | |
| Household Equipment & Products – 0.2% | |
Fortune Brands, Inc. | | | 1,356 | | | | 86,472 | |
Newell Rubbermaid, Inc. | | | 2,588 | | | | 40,839 | |
Snap-On, Inc. | | | 515 | | | | 32,177 | |
Stanley Black & Decker, Inc. | | | 1,486 | | | | 107,066 | |
| | | | | | | | | |
| | | | | | | | 266,554 | |
| Household Furnishings – 0.0% | |
Leggett & Platt, Inc. | | | 1,313 | | | | 32,011 | |
| | | | | | | | | |
| | | | | | | | 32,011 | |
| Insurance: Life – 0.7% | |
Aflac, Inc. | | | 4,151 | | | | 193,769 | |
Lincoln National Corp. | | | 2,787 | | | | 79,402 | |
Principal Financial Group, Inc. | | | 2,837 | | | | 86,301 | |
Prudential Financial, Inc. | | | 4,304 | | | | 273,691 | |
Torchmark Corp. | | | 684 | | | | 43,872 | |
Unum Group | | | 2,745 | | | | 69,943 | |
| | | | | | | | | |
| | | | | | | | 746,978 | |
| Insurance: Multi-Line – 2.1% | |
American International Group, Inc.(1) | | | 3,856 | | | | 113,058 | |
Aon Corp. | | | 2,940 | | | | 150,822 | |
Assurant, Inc. | | | 887 | | | | 32,171 | |
Berkshire Hathaway, Inc., Class B(1) | | | 15,291 | | | | 1,183,371 | |
Genworth Financial, Inc., Class A(1) | | | 4,308 | | | | 44,286 | |
Loews Corp. | | | 2,776 | | | | 116,842 | |
Marsh & McLennan Companies, Inc. | | | 4,800 | | | | 149,712 | |
MetLife, Inc. | | | 9,299 | | | | 407,947 | |
The Hartford Financial Services Group, Inc. | | | 3,908 | | | | 103,054 | |
| | | | | | | | | |
| | | | | | | | 2,301,263 | |
| Insurance: Property-Casualty – 0.9% | |
ACE Ltd. | | | 2,961 | | | | 194,893 | |
Cincinnati Financial Corp. | | | 1,430 | | | | 41,727 | |
The Allstate Corp. | | | 4,692 | | | | 143,247 | |
The Chubb Corp. | | | 2,607 | | | | 163,224 | |
The Progressive Corp. | | | 5,895 | | | | 126,035 | |
The Travelers Companies, Inc. | | | 3,712 | | | | 216,707 | |
| | | | | | | | | |
| | | | |
| 10 | | | | The accompanying notes are an integral part of these financial statements. |
SCHEDULE OF INVESTMENTS — RS S&P 500 INDEX VIP SERIES
| | | | | | | | |
| June 30, 2011 (unaudited) | | Shares | | | Value | |
| Insurance: Property-Casualty (continued) | |
XL Group PLC | | | 2,731 | | | $ | 60,027 | |
| | | | | | | | | |
| | | | | | | | 945,860 | |
| Leisure Time – 0.4% | |
Carnival Corp. | | | 3,806 | | | | 143,220 | |
Expedia, Inc. | | | 1,769 | | | | 51,283 | |
Priceline.com, Inc.(1) | | | 441 | | | | 225,761 | |
| | | | | | | | | |
| | | | | | | | 420,264 | |
| Luxury Items – 0.1% | |
Tiffany & Co. | | | 1,115 | | | | 87,550 | |
| | | | | | | | | |
| | | | | | | | 87,550 | |
| Machinery: Agricultural – 0.3% | |
Deere & Co. | | | 3,718 | | | | 306,549 | |
| | | | | | | | | |
| | | | | | | | 306,549 | |
| Machinery: Construction & Handling – 0.6% | |
Caterpillar, Inc. | | | 5,645 | | | | 600,967 | |
| | | | | | | | | |
| | | | | | | | 600,967 | |
| Machinery: Engines – 0.2% | |
Cummins, Inc. | | | 1,748 | | | | 180,900 | |
| | | | | | | | | |
| | | | | | | | 180,900 | |
| Machinery: Industrial – 0.1% | |
Joy Global, Inc. | | | 929 | | | | 88,478 | |
| | | | | | | | | |
| | | | | | | | 88,478 | |
| Medical & Dental Instruments & Supplies – 1.1% | |
Becton, Dickinson and Co. | | | 1,958 | | | | 168,721 | |
Boston Scientific Corp.(1) | | | 13,409 | | | | 92,656 | |
C.R. Bard, Inc. | | | 756 | | | | 83,054 | |
Covidien PLC | | | 4,360 | | | | 232,083 | |
DENTSPLY International, Inc. | | | 1,259 | | | | 47,943 | |
Edwards Lifesciences Corp.(1) | | | 1,015 | | | | 88,488 | |
Patterson Companies, Inc. | | | 853 | | | | 28,055 | |
St. Jude Medical, Inc. | | | 2,871 | | | | 136,889 | |
Stryker Corp. | | | 2,969 | | | | 174,250 | |
Zimmer Holdings, Inc.(1) | | | 1,695 | | | | 107,124 | |
| | | | | | | | | |
| | | | | | | | 1,159,263 | |
| Medical Equipment – 0.8% | |
CareFusion Corp.(1) | | | 1,974 | | | | 53,634 | |
Intuitive Surgical, Inc.(1) | | | 354 | | | | 131,727 | |
Medtronic, Inc. | | | 9,450 | | | | 364,109 | |
PerkinElmer, Inc. | | | 1,009 | | | | 27,152 | |
Thermo Fisher Scientific, Inc.(1) | | | 3,455 | | | | 222,467 | |
Varian Medical Systems, Inc.(1) | | | 1,060 | | | | 74,221 | |
| | | | | | | | | |
| | | | | | | | 873,310 | |
| Medical Services – 0.2% | |
Laboratory Corp. of America Holdings(1) | | | 886 | | | | 85,756 | |
Quest Diagnostics, Inc. | | | 1,393 | | | | 82,326 | |
| | | | | | | | | |
| | | | | | | | 168,082 | |
| Metal Fabricating – 0.3% | |
Fastenal Co. | | | 2,609 | | | | 93,898 | |
Precision Castparts Corp. | | | 1,267 | | | | 208,611 | |
| | | | | | | | | |
| | | | | | | | 302,509 | |
| | | | | | | | |
| June 30, 2011 (unaudited) | | Shares | | | Value | |
| Metals & Minerals: Diversified – 0.1% | |
Cliffs Natural Resources, Inc. | | | 1,280 | | | $ | 118,336 | |
Titanium Metals Corp. | | | 782 | | | | 14,326 | |
| | | | | | | | | |
| | | | | | | | 132,662 | |
| Office Supplies & Equipment – 0.2% | |
Avery Dennison Corp. | | | 941 | | | | 36,351 | |
Lexmark International Group, Inc., Class A(1) | | | 691 | | | | 20,219 | |
Pitney Bowes, Inc. | | | 1,783 | | | | 40,991 | |
Xerox Corp. | | | 12,354 | | | | 128,605 | |
| | | | | | | | | |
| | | | | | | | 226,166 | |
| Offshore Drilling & Other Services – 0.0% | |
Diamond Offshore Drilling, Inc. | | | 613 | | | | 43,161 | |
| | | | | | | | | |
| | | | | | | | 43,161 | |
| Oil Well Equipment & Services – 2.3% | |
Baker Hughes, Inc. | | | 3,836 | | | | 278,340 | |
Cameron International Corp.(1) | | | 2,161 | | | | 108,677 | |
FMC Technologies, Inc.(1) | | | 2,125 | | | | 95,179 | |
Halliburton Co. | | | 8,072 | | | | 411,672 | |
Helmerich & Payne, Inc. | | | 939 | | | | 62,087 | |
Nabors Industries Ltd.(1) | | | 2,525 | | | | 62,216 | |
National-Oilwell Varco, Inc. | | | 3,718 | | | | 290,785 | |
Noble Corp. | | | 2,227 | | | | 87,766 | |
Rowan Companies, Inc.(1) | | | 1,119 | | | | 43,428 | |
Schlumberger Ltd. | | | 12,018 | | | | 1,038,355 | |
| | | | | | | | | |
| | | | | | | | 2,478,505 | |
| Oil: Crude Producers – 2.7% | |
Anadarko Petroleum Corp. | | | 4,382 | | | | 336,362 | |
Apache Corp. | | | 3,379 | | | | 416,935 | |
Cabot Oil & Gas Corp. | | | 920 | | | | 61,005 | |
Chesapeake Energy Corp. | | | 5,804 | | | | 172,321 | |
Denbury Resources, Inc.(1) | | | 3,548 | | | | 70,960 | |
Devon Energy Corp. | | | 3,770 | | | | 297,114 | |
EOG Resources, Inc. | | | 2,368 | | | | 247,574 | |
Newfield Exploration Co.(1) | | | 1,200 | | | | 81,624 | |
Noble Energy, Inc. | | | 1,553 | | | | 139,195 | |
Occidental Petroleum Corp. | | | 7,177 | | | | 746,695 | |
Pioneer Natural Resources Co. | | | 1,028 | | | | 92,078 | |
QEP Resources, Inc. | | | 1,567 | | | | 65,548 | |
Range Resources Corp. | | | 1,417 | | | | 78,644 | |
Southwestern Energy Co.(1) | | | 3,064 | | | | 131,384 | |
| | | | | | | | | |
| | | | | | | | 2,937,439 | |
| Oil: Integrated – 6.5% | |
Chevron Corp. | | | 17,727 | | | | 1,823,045 | |
ConocoPhillips | | | 12,502 | | | | 940,025 | |
Exxon Mobil Corp.(2) | | | 43,568 | | | | 3,545,564 | |
Hess Corp. | | | 2,656 | | | | 198,563 | |
Marathon Oil Corp. | | | 6,269 | | | | 330,251 | |
Murphy Oil Corp. | | | 1,699 | | | | 111,556 | |
Williams Companies, Inc. | | | 5,174 | | | | 156,513 | |
| | | | | | | | | |
| | | | | | | | 7,105,517 | |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 11 |
RS S&P 500 INDEX VIP SERIES
| | | | | | | | |
| June 30, 2011 (unaudited) | | Shares | | | Value | |
| Oil: Refining And Marketing – 0.2% | |
Sunoco, Inc. | | | 1,060 | | | $ | 44,212 | |
Tesoro Corp.(1) | | | 1,268 | | | | 29,050 | |
Valero Energy Corp. | | | 5,028 | | | | 128,566 | |
| | | | | | | | | |
| | | | | | | | 201,828 | |
| Paints & Coatings – 0.2% | |
PPG Industries, Inc. | | | 1,419 | | | | 128,831 | |
The Sherwin-Williams Co. | | | 779 | | | | 65,335 | |
| | | | | | | | | |
| | | | | | | | 194,166 | |
| Paper – 0.2% | |
International Paper Co. | | | 3,881 | | | | 115,731 | |
MeadWestvaco Corp. | | | 1,489 | | | | 49,599 | |
| | | | | | | | | |
| | | | | | | | 165,330 | |
| Personal Care – 2.1% | |
Clorox Co. | | | 1,174 | | | | 79,175 | |
Colgate-Palmolive Co. | | | 4,378 | | | | 382,681 | |
Kimberly-Clark Corp. | | | 3,490 | | | | 232,294 | |
The Procter & Gamble Co.(2) | | | 24,761 | | | | 1,574,057 | |
| | | | | | | | | |
| | | | | | | | 2,268,207 | |
| Pharmaceuticals – 6.1% | |
Abbott Laboratories | | | 13,624 | | | | 716,895 | |
Allergan, Inc. | | | 2,694 | | | | 224,276 | |
AmerisourceBergen Corp. | | | 2,421 | | | | 100,229 | |
Bristol-Myers Squibb Co. | | | 15,043 | | | | 435,645 | |
Cardinal Health, Inc. | | | 3,089 | | | | 140,302 | |
Eli Lilly & Co. | | | 9,011 | | | | 338,183 | |
Forest Laboratories, Inc.(1) | | | 2,526 | | | | 99,373 | |
Gilead Sciences, Inc.(1) | | | 7,028 | | | | 291,030 | |
Hospira, Inc.(1) | | | 1,494 | | | | 84,650 | |
Johnson & Johnson(2) | | | 24,213 | | | | 1,610,649 | |
Merck & Co., Inc. | | | 27,250 | | | | 961,653 | |
Mylan, Inc.(1) | | | 3,841 | | | | 94,757 | |
Pfizer, Inc. | | | 69,905 | | | | 1,440,043 | |
Watson Pharmaceuticals, Inc.(1) | | | 1,125 | | | | 77,321 | |
| | | | | | | | | |
| | | | | | | | 6,615,006 | |
| Producer Durables: Miscellaneous – 0.1% | |
W.W. Grainger, Inc. | | | 519 | | | | 79,744 | |
| | | | | | | | | |
| | | | | | | | 79,744 | |
| Production Technology Equipment – 0.2% | |
Applied Materials, Inc. | | | 11,665 | | | | 151,762 | |
KLA-Tencor Corp. | | | 1,476 | | | | 59,748 | |
Novellus Systems, Inc.(1) | | | 798 | | | | 28,840 | |
Teradyne, Inc.(1) | | | 1,624 | | | | 24,035 | |
| | | | | | | | | |
| | | | | | | | 264,385 | |
| Publishing – 0.1% | |
Gannett Co., Inc. | | | 2,076 | | | | 29,728 | |
The McGraw-Hill Companies, Inc. | | | 2,711 | | | | 113,618 | |
The Washington Post Co., Class B | | | 52 | | | | 21,786 | |
| | | | | | | | | |
| | | | | | | | 165,132 | |
| | | | | | | | |
| June 30, 2011 (unaudited) | | Shares | | | Value | |
| Radio & Tv Broadcasters – 0.2% | |
CBS Corp., Class B | | | 5,927 | | | $ | 168,860 | |
| | | | | | | | | |
| | | | | | | | 168,860 | |
| Railroads – 0.9% | |
CSX Corp. | | | 9,789 | | | | 256,668 | |
Norfolk Southern Corp. | | | 3,146 | | | | 235,730 | |
Union Pacific Corp. | | | 4,328 | | | | 451,843 | |
| | | | | | | | | |
| | | | | | | | 944,241 | |
| Real Estate – 0.1% | |
CB Richard Ellis Group, Inc., Class A(1) | | | 2,573 | | | | 64,608 | |
| | | | | | | | | |
| | | | | | | | 64,608 | |
| Real Estate Investment Trusts – 1.6% | |
Apartment Investment & Management Co., Class A | | | 1,046 | | | | 26,704 | |
AvalonBay Communities, Inc. | | | 760 | | | | 97,584 | |
Boston Properties, Inc. | | | 1,258 | | | | 133,549 | |
Equity Residential | | | 2,591 | | | | 155,460 | |
HCP, Inc. | | | 3,552 | | | | 130,323 | |
Health Care REIT, Inc. | | | 1,510 | | | | 79,169 | |
Host Hotels & Resorts, Inc. | | | 5,992 | | | | 101,565 | |
Kimco Realty Corp. | | | 3,601 | | | | 67,123 | |
Plum Creek Timber Co., Inc. | | | 1,415 | | | | 57,364 | |
ProLogis, Inc. | | | 4,019 | | | | 144,041 | |
Public Storage, Inc. | | | 1,234 | | | | 140,688 | |
Simon Property Group, Inc. | | | 2,622 | | | | 304,755 | |
Ventas, Inc. | | | 1,415 | | | | 74,585 | |
Vornado Realty Trust | | | 1,439 | | | | 134,086 | |
Weyerhaeuser Co. | | | 4,743 | | | | 103,682 | |
| | | | | | | | | |
| | | | | | | | 1,750,678 | |
| Recreational Vehicles & Boats – 0.1% | |
Harley-Davidson, Inc. | | | 2,083 | | | | 85,340 | |
| | | | | | | | | |
| | | | | | | | 85,340 | |
| Restaurants – 1.3% | |
Chipotle Mexican Grill, Inc.(1) | | | 279 | | | | 85,985 | |
Darden Restaurants, Inc. | | | 1,239 | | | | 61,653 | |
McDonald’s Corp. | | | 9,223 | | | | 777,683 | |
Starbucks Corp. | | | 6,591 | | | | 260,278 | |
Yum! Brands, Inc. | | | 4,120 | | | | 227,589 | |
| | | | | | | | | |
| | | | | | | | 1,413,188 | |
| Scientific Instruments: Control & Filter – 0.5% | |
Flowserve Corp. | | | 504 | | | | 55,385 | |
Pall Corp. | | | 1,033 | | | | 58,086 | |
Parker Hannifin Corp. | | | 1,429 | | | | 128,238 | |
Rockwell Automation, Inc. | | | 1,257 | | | | 109,057 | |
Roper Industries, Inc. | | | 840 | | | | 69,972 | |
Waters Corp.(1) | | | 806 | | | | 77,166 | |
| | | | | | | | | |
| | | | | | | | 497,904 | |
| Scientific Instruments: Electrical – 0.3% | |
Emerson Electric Co. | | | 6,655 | | | | 374,344 | |
| | | | | | | | | |
| | | | | | | | 374,344 | |
| | | | |
| 12 | | | | The accompanying notes are an integral part of these financial statements. |
SCHEDULE OF INVESTMENTS — RS S&P 500 INDEX VIP SERIES
| | | | | | | | |
| June 30, 2011 (unaudited) | | Shares | | | Value | |
| Scientific Instruments: Gauges & Meters – 0.1% | |
Agilent Technologies, Inc.(1) | | | 3,050 | | | $ | 155,885 | |
| | | | | | | | | |
| | | | | | | | 155,885 | |
| Scientific Instruments: Pollution Control – 0.3% | |
Republic Services, Inc. | | | 2,743 | | | | 84,621 | |
Stericycle, Inc.(1) | | | 767 | | | | 68,355 | |
Waste Management, Inc. | | | 4,196 | | | | 156,385 | |
| | | | | | | | | |
| | | | | | | | 309,361 | |
| Securities Brokerage & Services – 0.5% | |
CME Group, Inc. | | | 590 | | | | 172,038 | |
E*TRADE Financial Corp.(1) | | | 2,230 | | | | 30,774 | |
IntercontinentalExchange, Inc.(1) | | | 657 | | | | 81,935 | |
NYSE Euronext | | | 2,296 | | | | 78,684 | |
The Charles Schwab Corp. | | | 8,832 | | | | 145,286 | |
The NASDAQ OMX Group, Inc.(1) | | | 1,317 | | | | 33,320 | |
| | | | | | | | | |
| | | | | | | | 542,037 | |
| Semiconductors & Components – 2.0% | |
Advanced Micro Devices, Inc.(1) | | | 5,101 | | | | 35,656 | |
Altera Corp. | | | 2,807 | | | | 130,104 | |
Analog Devices, Inc. | | | 2,641 | | | | 103,369 | |
Broadcom Corp., Class A(1) | | | 4,207 | | | | 141,523 | |
Intel Corp. | | | 46,910 | | | | 1,039,526 | |
Linear Technology Corp. | | | 2,004 | | | | 66,172 | |
LSI Corp.(1) | | | 5,462 | | | | 38,889 | |
MEMC Electronic Materials, Inc.(1) | | | 2,052 | | | | 17,504 | |
Microchip Technology, Inc. | | | 1,672 | | | | 63,385 | |
Micron Technology, Inc.(1) | | | 7,568 | | | | 56,609 | |
National Semiconductor Corp. | | | 2,128 | | | | 52,370 | |
Texas Instruments, Inc. | | | 10,355 | | | | 339,955 | |
Xilinx, Inc. | | | 2,323 | | | | 84,720 | |
| | | | | | | | | |
| | | | | | | | 2,169,782 | |
| Specialty Retail – 1.8% | |
Abercrombie & Fitch Co., Class A | | | 770 | | | | 51,528 | |
AutoNation, Inc.(1) | | | 567 | | | | 20,758 | |
AutoZone, Inc.(1) | | | 240 | | | | 70,764 | |
Bed, Bath & Beyond, Inc.(1) | | | 2,251 | | | | 131,391 | |
Best Buy Co., Inc. | | | 2,892 | | | | 90,838 | |
CarMax, Inc.(1) | | | 1,990 | | | | 65,809 | |
GameStop Corp., Class A(1) | | | 1,250 | | | | 33,337 | |
Limited Brands, Inc. | | | 2,334 | | | | 89,742 | |
Lowe’s Companies, Inc. | | | 11,518 | | | | 268,485 | |
Netflix, Inc.(1) | | | 390 | | | | 102,449 | |
O’Reilly Automotive, Inc.(1) | | | 1,252 | | | | 82,019 | |
RadioShack Corp. | | | 940 | | | | 12,511 | |
Ross Stores, Inc. | | | 1,050 | | | | 84,126 | |
Staples, Inc. | | | 6,322 | | | | 99,888 | |
The Gap, Inc. | | | 3,652 | | | | 66,101 | |
The Home Depot, Inc. | | | 14,085 | | | | 510,159 | |
The TJX Companies, Inc. | | | 3,498 | | | | 183,750 | |
Urban Outfitters, Inc.(1) | | | 1,132 | | | | 31,866 | |
| | | | | | | | | |
| | | | | | | | 1,995,521 | |
| | | | | | | | |
| June 30, 2011 (unaudited) | | Shares | | | Value | |
| Steel – 0.2% | |
AK Steel Holding Corp. | | | 964 | | | $ | 15,193 | |
Allegheny Technologies, Inc. | | | 937 | | | | 59,471 | |
Nucor Corp. | | | 2,778 | | | | 114,509 | |
United States Steel Corp. | | | 1,270 | | | | 58,471 | |
| | | | | | | | | |
| | | | | | | | 247,644 | |
| Technology: Miscellaneous – 0.0% | |
Jabil Circuit, Inc. | | | 1,730 | | | | 34,946 | |
| | | | | | | | | |
| | | | | | | | 34,946 | |
| Telecommunications Equipment – 0.3% | |
American Tower Corp., Class A(1) | | | 3,516 | | | | 183,992 | |
Motorola Mobility Holdings, Inc.(1) | | | 2,601 | | | | 57,326 | |
Motorola Solutions, Inc.(1) | | | 2,974 | | | | 136,923 | |
| | | | | | | | | |
| | | | | | | | 378,241 | |
| Textiles, Apparel & Shoes – 0.6% | |
Coach, Inc. | | | 2,611 | | | | 166,921 | |
NIKE, Inc., Class B | | | 3,384 | | | | 304,493 | |
Polo Ralph Lauren Corp. | | | 590 | | | | 78,240 | |
VF Corp. | | | 763 | | | | 82,831 | |
| | | | | | | | | |
| | | | | | | | 632,485 | |
| Tobacco – 1.6% | |
Altria Group, Inc. | | | 18,476 | | | | 487,951 | |
Lorillard, Inc. | | | 1,285 | | | | 139,898 | |
Philip Morris International, Inc. | | | 15,728 | | | | 1,050,159 | |
Reynolds American, Inc. | | | 2,981 | | | | 110,446 | |
| | | | | | | | | |
| | | | | | | | 1,788,454 | |
| Toys – 0.1% | |
Hasbro, Inc. | | | 1,228 | | | | 53,946 | |
Mattel, Inc. | | | 3,063 | | | | 84,202 | |
| | | | | | | | | |
| | | | | | | | 138,148 | |
| Transportation Miscellaneous – 0.7% | |
Expeditors International of Washington, Inc. | | | 1,876 | | | | 96,033 | |
United Parcel Service, Inc., Class B | | | 8,711 | | | | 635,293 | |
| | | | | | | | | |
| | | | | | | | 731,326 | |
| Truckers – 0.1% | |
C.H. Robinson Worldwide, Inc. | | | 1,465 | | | | 115,501 | |
| | | | | | | | | |
| | | | | | | | 115,501 | |
| Utilities: Electrical – 3.0% | |
Ameren Corp. | | | 2,125 | | | | 61,285 | |
American Electric Power, Inc. | | | 4,261 | | | | 160,555 | |
CMS Energy Corp. | | | 2,192 | | | | 43,160 | |
Consolidated Edison, Inc. | | | 2,582 | | | | 137,466 | |
Constellation Energy Group | | | 1,742 | | | | 66,126 | |
Dominion Resources, Inc. | | | 5,145 | | | | 248,349 | |
DTE Energy Co. | | | 1,526 | | | | 76,331 | |
Duke Energy Corp. | | | 11,762 | | | | 221,478 | |
Edison International | | | 2,888 | | | | 111,910 | |
Entergy Corp. | | | 1,597 | | | | 109,043 | |
Exelon Corp. | | | 5,866 | | | | 251,299 | |
| | | | | | | | | |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 13 |
RS S&P 500 INDEX VIP SERIES
| | | | | | | | |
| June 30, 2011 (unaudited) | | Shares | | | Value | |
| Utilities: Electrical (continued) | |
FirstEnergy Corp. | | | 3,706 | | | $ | 163,620 | |
NextEra Energy, Inc. | | | 3,665 | | | | 210,591 | |
Northeast Utilities | | | 1,563 | | | | 54,971 | |
NRG Energy, Inc.(1) | | | 2,171 | | | | 53,363 | |
Pepco Holdings, Inc. | | | 2,014 | | | | 39,535 | |
PG&E Corp. | | | 3,509 | | | | 147,483 | |
Pinnacle West Capital Corp. | | | 942 | | | | 41,994 | |
PPL Corp. | | | 5,020 | | | | 139,707 | |
Progress Energy, Inc. | | | 2,599 | | | | 124,778 | |
Public Service Enterprise Group, Inc. | | | 4,370 | | | | 142,637 | |
SCANA Corp. | | | 1,009 | | | | 39,724 | |
Southern Co. | | | 7,482 | | | | 302,123 | |
TECO Energy, Inc. | | | 1,882 | | | | 35,551 | |
The AES Corp.(1) | | | 5,846 | | | | 74,478 | |
Wisconsin Energy Corp. | | | 2,057 | | | | 64,487 | |
Xcel Energy, Inc. | | | 4,276 | | | | 103,907 | |
| | | | | | | | | |
| | | | | | | | 3,225,951 | |
| Utilities: Gas Distributors – 0.3% | |
CenterPoint Energy, Inc. | | | 3,724 | | | | 72,059 | |
Nicor, Inc. | | | 413 | | | | 22,608 | |
NiSource, Inc. | | | 2,459 | | | | 49,795 | |
ONEOK, Inc. | | | 946 | | | | 70,013 | |
Sempra Energy | | | 2,128 | | | | 112,529 | |
| | | | | | | | | |
| | | | | | | | 327,004 | |
| Utilities: Miscellaneous – 0.0% | |
Integrys Energy Group, Inc. | | | 693 | | | | 35,925 | |
| | | | | | | | | |
| | | | | | | | 35,925 | |
| Utilities: Telecommunications – 2.8% | |
AT&T, Inc.(2) | | | 52,213 | | | | 1,640,010 | |
CenturyLink, Inc. | | | 5,259 | | | | 212,621 | |
Frontier Communications Corp. | | | 8,716 | | | | 70,338 | |
MetroPCS Communications, Inc.(1) | | | 2,329 | | | | 40,082 | |
Sprint Nextel Corp.(1) | | | 26,368 | | | | 142,124 | |
Verizon Communications, Inc. | | | 24,974 | | | | 929,782 | |
Windstream Corp. | | | 4,352 | | | | 56,402 | |
| | | | | | | | | |
| | | | | | | | 3,091,359 | |
Total Common Stocks
(Cost $66,596,114) | | | | | | | 106,336,609 | |
| | | | | | | | |
| June 30, 2011 (unaudited) | | Principal
Amount | | | Value | |
| U.S. Government Securities – 0.2% | |
U.S. Treasury Bills
0.044% due 8/25/2011 | | $ | 50,000 | | | $ | 49,997 | |
U.S. Treasury Notes | | | | | | | | |
1.00% due 8/31/2011(2) | | | 75,000 | | | | 75,117 | |
3.125% due 5/15/2019(2) | | | 145,000 | | | | 149,712 | |
| | | | | | | | | |
| | | | | | | | 274,826 | |
Total U.S. Government Securities
(Cost $266,988) | | | | 274,826 | |
| | | | | | | | |
| | | Principal
Amount | | | Value | |
| Repurchase Agreements – 2.1% | | | | | |
State Street Bank and Trust Co. Repurchase Agreement, 0.01%, dated 6/30/2011, maturity value of $2,242,001, due 7/1/2011(3) | | | 2,242,000 | | | | 2,242,000 | |
Total Repurchase Agreements
(Cost $2,242,000) | | | | 2,242,000 | |
Total Investments - 99.9%
(Cost $69,105,102) | | | | 108,853,435 | |
| Other Assets, Net - 0.1% | | | | 67,163 | |
| Total Net Assets - 100.0% | | | $ | 108,920,598 | |
| (1) | Non-income producing security. |
| (2) | Security is segregated as collateral to cover margin requirements on open futures contracts. |
| (3) | The table below presents collateral for repurchase agreements. |
| | | | | | | | | | | | |
| Security | | Coupon | | | Maturity
Date | | | Value | |
| FHLB | | | 5.25% | | | | 8/8/2033 | | | $ | 2,290,600 | |
The table below presents futures contracts as of June 30, 2011.
| | | | | | | | | | | | | | | | |
| Description | | Counterparty | | Number
of
Contracts | | Expiration | | | Face
Value
(000s) | | | Unrealized
Appreciation | |
| Purchased Futures Contracts | |
E-mini
S&P 500
Futures | | Goldman
Sachs & Co. | | 38 | | | 9/16/2011 | | | $ | 2,499 | | | $ | 68,376 | |
| | | | |
| 14 | | | | The accompanying notes are an integral part of these financial statements. |
SCHEDULE OF INVESTMENTS — RS S&P 500 INDEX VIP SERIES
The following is a summary of the inputs used as of June 30, 2011 in valuing the Fund’s investments. For more information on valuation inputs, please refer to Note 1a of the accompanying Notes to Financial Statements.
| | | | | | | | | | | | | | | | |
| | | Valuation Inputs | | | | |
| Investments in Securities (unaudited) | | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
| Common Stocks | | $ | 106,336,609 | | | $ | — | | | $ | — | | | $ | 106,336,609 | |
| U.S. Government Securities | | | — | | | | 274,826 | | | | — | | | | 274,826 | |
| Repurchase Agreements | | | — | | | | 2,242,000 | | | | — | | | | 2,242,000 | |
| Other Financial Instruments: | | | | | | | | | | | | | | | | |
| Financial Futures Contracts | | | 68,376 | | | | — | | | | — | | | | 68,376 | |
| Total | | $ | 106,404,985 | | | $ | 2,516,826 | | | $ | — | | | $ | 108,921,811 | |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 15 |
FINANCIAL INFORMATION — RS S&P 500 INDEX VIP SERIES
| | | | |
Statement of Assets and Liabilities As of June 30, 2011 (unaudited) | |
Assets | | | | |
Investments, at value | | $ | 108,853,435 | |
Cash and cash equivalents | | | 909 | |
Dividends/interest receivable | | | 136,070 | |
Receivable for variation margin | | | 21,280 | |
Due from distributor | | | 10,196 | |
Receivable for fund shares subscribed | | | 190 | |
| | | | | |
Total Assets | | | 109,022,080 | |
| | | | | |
| | |
Liabilities | | | | |
Payable for fund shares redeemed | | | 51,636 | |
Payable to adviser | | | 21,911 | |
Accrued trustees’ fees | | | 1,452 | |
Accrued expenses/other liabilities | | | 26,483 | |
| | | | | |
Total Liabilities | | | 101,482 | |
| | | | | |
Total Net Assets | | $ | 108,920,598 | |
| | | | | |
| | |
Net Assets Consist of: | | | | |
Paid-in capital | | $ | 114,262,071 | |
Accumulated undistributed net investment income | | | 905,049 | |
Accumulated net realized loss from investments and futures contracts | | | (46,063,231 | ) |
Net unrealized appreciation on investments and futures contracts | | | 39,816,709 | |
| | | | | |
Total Net Assets | | $ | 108,920,598 | |
| | | | | |
Investments, at Cost | | $ | 69,105,102 | |
| | | | | |
| | |
Pricing of Shares | | | | |
Shares of Beneficial Interest Outstanding with no Par Value | | | 11,273,752 | |
Net Asset Value Per Share | | | $9.66 | |
| | | | | |
| | | | |
Statement of Operations For the Six-Month Period Ended June 30, 2011 (unaudited) | |
Investment Income | | | | |
Dividends | | $ | 1,050,229 | |
Interest | | | 2,933 | |
| | | | | |
Total Investment Income | | | 1,053,162 | |
| | | | | |
| | |
Expenses | | | | |
Investment advisory fees | | | 137,645 | |
Custodian fees | | | 29,889 | |
Professional fees | | | 13,237 | |
Shareholder reports | | | 8,901 | |
Administrative service fees | | | 6,834 | |
Trustees’ fees | | | 2,503 | |
Other expenses | | | 8,581 | |
| | | | | |
Total Expenses | | | 207,590 | |
| | |
Less: Expense reimbursement by distributor | | | (53,428 | ) |
| | | | | |
Total Expenses, Net | | | 154,162 | |
| | | | | |
Net Investment Income | | | 899,000 | |
| | | | | |
| | |
Realized Gain/(Loss) and Change in Unrealized Appreciation/Depreciation on Investments and Futures Contracts | | | | |
Net realized gain from investments | | | 2,035,658 | |
Net realized gain from futures contracts | | | 145,320 | |
Net change in unrealized appreciation/depreciation on investments | | | 3,287,501 | |
Net change in unrealized appreciation/depreciation on futures contracts | | | 28,905 | |
| | | | | |
Net Gain on Investments and Futures Contracts | | | 5,497,384 | |
| | | | | |
Net Increase in Net Assets Resulting from Operations | | $ | 6,396,384 | |
| | | | | |
| | | | | |
| | | | |
| 16 | | | | The accompanying notes are an integral part of these financial statements. |
FINANCIAL INFORMATION — RS S&P 500 INDEX VIP SERIES
| | | | | | | | |
Statements of Changes in Net Assets Six-month-ended numbers are unaudited | | | | | | |
| | | |
| | | For the
Six Months Ended
6/30/11 | | | For the
Year Ended
12/31/10 | |
| | | | |
Operations | | | | | | | | |
Net investment income | | $ | 899,000 | | | $ | 1,806,139 | |
Net realized gain from investments and futures contracts | | | 2,180,978 | | | | 1,813,430 | |
Net change in unrealized appreciation/depreciation on investments and futures contracts | | | 3,316,406 | | | | 11,122,427 | |
| | | | | | | | | |
Net Increase in Net Assets Resulting from Operations | | | 6,396,384 | | | | 14,741,996 | |
| | | | | | | | | |
| | | |
Distributions to Shareholders | | | | | | | | |
Net investment income | | | — | | | | (1,800,090 | ) |
| | | | | | | | | |
Total Distributions | | | — | | | | (1,800,090 | ) |
| | | | | | | | | |
| | | |
Capital Share Transactions | | | | | | | | |
Proceeds from sales of shares | | | 3,814,665 | | | | 7,883,279 | |
Reinvestment of distributions | | | — | | | | 1,800,090 | |
Cost of shares redeemed | | | (11,091,110 | ) | | | (17,244,856 | ) |
| | | | | | | | | |
Net Decrease in Net Assets Resulting from Capital Share
Transactions | | | (7,276,445 | ) | | | (7,561,487 | ) |
| | | | | | | | | |
Net Increase/(Decrease) in Net Assets | | | (880,061 | ) | | | 5,380,419 | |
| | | | | | | | | |
| | | |
Net Assets | | | | | | | | |
Beginning of period | | | 109,800,659 | | | | 104,420,240 | |
| | | | | | | | | |
End of period | | $ | 108,920,598 | | | $ | 109,800,659 | |
| | | | | | | | | |
Accumulated Undistributed Net Investment Income Included in Net Assets | | $ | 905,049 | | | $ | 6,049 | |
| | | | | | | | | |
| | | |
Other Information: | | | | | | | | |
Shares | | | | | | | | |
Sold | | | 400,645 | | | | 970,612 | |
Reinvested | | | — | | | | 199,788 | |
Redeemed | | | (1,160,816 | ) | | | (2,064,901 | ) |
| | | | | | | | | |
Net Decrease | | | (760,171 | ) | | | (894,501 | ) |
| | | | | | | | | |
| | | | | | | | | |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 17 |
FINANCIAL INFORMATION — RS S&P 500 INDEX VIP SERIES
The financial highlights table is intended to help you understand the Fund’s financial performance for the past six reporting periods. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the Fund (assuming reinvestment of all distributions).
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Financial Highlights Six-month-ended numbers are unaudited | |
| | | Net Asset Value,
Beginning of
Period | | | Net Investment
Income | | | Net Realized
and Unrealized
Gain/(Loss) | | | Total
Operations | | | Distributions
From Net
Investment
Income | | | Distributions
From Net
Realized
Capital Gains | | | Total
Distributions | |
Six Months Ended 6/30/111 | | $ | 9.12 | | | $ | 0.08 | | | $ | 0.46 | | | $ | 0.54 | | | $ | — | | | $ | — | | | $ | — | |
Year Ended 12/31/10 | | | 8.08 | | | | 0.15 | | | | 1.04 | | | | 1.19 | | | | (0.15 | ) | | | — | | | | (0.15 | ) |
Year Ended 12/31/09 | | | 6.52 | | | | 0.15 | | | | 1.56 | | | | 1.71 | | | | (0.15 | ) | | | — | | | | (0.15 | ) |
Year Ended 12/31/08 | | | 10.71 | | | | 0.21 | | | | (4.19 | ) | | | (3.98 | ) | | | (0.21 | ) | | | — | | | | (0.21 | ) |
Year Ended 12/31/07 | | | 10.36 | | | | 0.19 | | | | 0.35 | | | | 0.54 | | | | (0.19 | ) | | | — | | | | (0.19 | ) |
Year Ended 12/31/06 | | | 9.12 | | | | 0.16 | | | | 1.24 | | | | 1.40 | | | | (0.16 | ) | | | — | | | | (0.16 | ) |
| | | | |
| 18 | | | | The accompanying notes are an integral part of these financial statements. |
FINANCIAL INFORMATION — RS S&P 500 INDEX VIP SERIES
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Net Asset
Value, End of
Period | | | Total
Return2 | | | Net Assets, End
of Period (000s) | | | Net Ratio of
Expenses to
Average Net
Assets3 | | | Gross Ratio of
Expenses to
Average Net
Assets | | | Net Ratio of Net
Investment Income
to Average
Net Assets3 | | | Gross Ratio of Net
Investment Income
to Average
Net Assets | | | Portfolio
Turnover Rate | |
| $ | 9.66 | | | | 5.92% | | | $ | 108,921 | | | | 0.28% | | | | 0.38% | | | | 1.63% | | | | 1.53% | | | | 1% | |
| | 9.12 | | | | 14.77% | | | | 109,801 | | | | 0.28% | | | | 0.37% | | | | 1.74% | | | | 1.65% | | | | 5% | |
| | 8.08 | | | | 26.25% | | | | 104,420 | | | | 0.28% | | | | 0.36% | | | | 2.03% | | | | 1.95% | | | | 5% | |
| | 6.52 | | | | (37.16)% | | | | 158,838 | | | | 0.28% | | | | 0.35% | | | | 2.02% | | | | 1.95% | | | | 8% | |
| | 10.71 | | | | 5.22% | | | | 282,937 | | | | 0.28% | | | | 0.35% | | | | 1.72% | | | | 1.65% | | | | 3% | |
| | 10.36 | | | | 15.46% | | | | 268,391 | | | | 0.28% | | | | 0.36% | | | | 1.72% | | | | 1.64% | | | | 2% | |
Distributions reflect actual per-share amounts distributed for the period.
| 1 | Ratios for periods less than one year have been annualized, except for total return and portfolio turnover rate. |
| 2 | Total returns do not reflect the effects of charges deducted pursuant to the terms of The Guardian Insurance & Annuity Company, Inc.’s variable contracts. Inclusion of such charges would reduce the total returns for all periods shown. |
| 3 | Net Ratio of Expenses to Average Net Assets and Net Ratio of Net Investment Income to Average Net Assets include the effect of fee waivers, expense limitations and custody credits, if applicable. |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 19 |
NOTES TO FINANCIAL STATEMENTS — RS S&P 500 INDEX VIP SERIES (UNAUDITED)
June 30, 2011 (unaudited)
RS Variable Products Trust (the “Trust”), a Massachusetts business trust organized on May 18, 2006, is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust currently offers twelve series. RS S&P 500 Index VIP Series (the “Fund”) is a series of the Trust. The Fund is a diversified fund. The financial statements for the other remaining series of the Trust are presented in separate reports.
The Fund has authorized an unlimited number of shares of beneficial interest with no par value. Shares are bought and sold at closing net asset value (“NAV”), which is the price for all outstanding shares of the Fund. Class I shares of the Fund are only sold to certain separate accounts of The Guardian Insurance & Annuity Company, Inc. (“GIAC”). GIAC is a wholly-owned subsidiary of The Guardian Life Insurance Company of America (“Guardian Life”). The Fund is currently offered to insurance company separate accounts that fund certain variable annuity and variable life insurance contracts issued by GIAC.
Note 1. Significant Accounting Policies
The following policies are in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
a. Investment Valuations Marketable securities are valued at the last reported sale price on the principal exchange or market on which they are traded; or, if there were no sales that day, at the mean between the closing bid and asked prices. Securities traded on the NASDAQ Stock Market, LLC (“NASDAQ”) are generally valued at the NASDAQ official closing price, which may not be the last sale price. If the NASDAQ official closing price is not available for a security, that security is generally valued using the last reported sale price, or, if no sales are reported, at the mean between the closing bid and asked prices. Short-term investments that will mature in 60 days or less are valued at amortized cost, which approximates market value. Repurchase agreements are carried at cost, which approximates market value. Foreign securities are valued in the currencies of the markets in which they trade and then converted to U.S. dollars using the prevailing exchange rates at the close of the New York Stock Exchange (“NYSE”). Future contracts shall
be valued at the settlement prices established each day by the boards of trade or exchange on which they are traded.
Securities for which market quotations are not readily available or for which market quotations may be considered unreliable are valued at their fair values as determined in accordance with guidelines and procedures adopted by the Trust’s Board of Trustees.
The Fund has adopted the authoritative guidance under GAAP on determining fair value when the volume and level of activity for an asset or liability have significantly decreased and for identifying transactions that are not orderly. Accordingly, if the Fund determines that either the volume and/or level of activity for an asset or liability has significantly decreased (from normal conditions for that asset or liability) or price quotations or observable inputs are not associated with orderly transactions, increased analysis and management judgment will be required to estimate fair value.
In accordance with Financial Accounting Standards Board Codification Topic 820 (“ASC Topic 820”), fair value is defined as the price that the Fund would receive upon selling an investment in an “arm’s length” transaction to a willing buyer in the principal or most advantageous market for the investment. ASC Topic 820 established a hierarchy for classification of fair value measurements for disclosure purposes. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances. The hierarchy of inputs is summarized in the three broad levels listed below.
| Ÿ | | Level 1 — unadjusted quoted prices in active markets for identical investments |
| Ÿ | | Level 2 — inputs other than unadjusted quoted prices that are observable either directly or indirectly (including adjusted quoted prices for similar investments, interest rates, prepayment speeds, credit risks, etc.) |
| Ÿ | | Level 3 — significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments) |
Inputs may include price information, volatility statistics, specific and broad credit data, liquidity statistics, and
NOTES TO FINANCIAL STATEMENTS — RS S&P 500 INDEX VIP SERIES (UNAUDITED)
other factors. A security’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires significant judgment by the Trust. The Trust considers observable data to be that market data which is readily available, regularly distributed or updated, reliable and verifiable, and provided by independent sources that are actively involved in the relevant market. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. Changes in valuation techniques may result in transfers into or out of an investment’s assigned level within the hierarchy.
Effective beginning with the Fund’s current fiscal year, the Financial Accounting Standards Board requires reporting entities to make disclosures about purchases, sales, issuances and settlements of Level 3 securities on a gross basis. For the six months ended June 30, 2011, the Fund had no securities classified as Level 3.
There were no significant transfers between Level 1 and Level 2 for the six months end June 30, 2011.
In determining a security’s placement within the hierarchy, the Trust separates the Fund’s investment portfolio into two categories: investments and derivatives (e.g., futures).
Investments Investments whose values are based on quoted market prices in active markets, and are therefore classified within Level 1, include active listed equities. The Trust does not adjust the quoted price for such instruments, even in situations where the Fund holds a large position and a sale could reasonably be expected to impact the quoted price.
Investments that trade in markets that are not considered to be active, but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within Level 2. These include certain U.S. government and sovereign obligations, most government agency securities, investment-grade corporate bonds, certain mortgage products, state, municipal and provincial obligations, and certain foreign equity securities.
Investments classified within Level 3 have significant unobservable inputs, as they trade infrequently or not at all. Level 3 investments include, among others, private placement securities. When observable prices are not available for these securities, the Trust uses one or more valuation techniques for which sufficient and reliable data is available. The inputs used by the Trust in estimating
the value of Level 3 investments include the original transaction price, recent transactions in the same or similar instruments, completed or pending third-party transactions in the underlying investment or comparable issuers, subsequent rounds of financing, recapitalizations, and other transactions across the capital structure. Level 3 investments may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the Trust in the absence of market information. Assumptions used by the Trust due to the lack of observable inputs may significantly impact the resulting fair value and therefore the Fund’s results of operations.
Derivatives Exchange-traded derivatives, such as futures contracts and exchange traded option contracts, are typically classified within Level 1 or Level 2 of the fair value hierarchy depending on whether or not they are deemed to be actively traded. Certain derivatives, such as generic forwards, swaps and options, have inputs which can generally be corroborated by market data and are therefore classified within Level 2.
b. Federal Income Taxes The Fund intends to continue complying with the requirements of the Internal Revenue Code to qualify as a regulated investment company and to distribute substantially all net investment income and realized net capital gains, if any, to shareholders. Therefore, the Fund does not expect to be subject to income tax, and no provision for such tax has been made.
From time to time, however, the Fund may choose to pay an excise tax if the cost of making the required distribution exceeds the amount of the excise tax.
As of June 30, 2011, the Trust has reviewed the tax positions for open periods, as applicable to the Fund, and has determined that no provision for income tax is required in the Fund’s financial statements. The Fund recognizes interest and penalties, if any, related to unrecognized tax positions as income tax expense in the Statement of Operations. For the six months ended June 30, 2011, the Fund did not incur any interest or penalties. The Fund is not subject to examination by U.S. federal tax authorities for tax years before 2007 and by state authorities for tax years before 2006.
c. Securities Transactions Securities transactions are accounted for on the date securities are purchased or sold (trade date). Realized gains or losses on securities transactions are determined on the basis of specific identification.
d. Futures Contracts The Fund may enter into financial futures contracts. In entering into such contracts, the
NOTES TO FINANCIAL STATEMENTS — RS S&P 500 INDEX VIP SERIES (UNAUDITED)
Fund is required to deposit with the broker, either in cash or securities, an amount equal to a certain percentage of the notional value of the contract. Subsequent payments are received or made by the Fund each day, depending on the daily fluctuations in the values of the contracts, and are recorded for financial statement purposes as variation margin received or paid by the Fund. Daily changes in variation margin are recognized as unrealized gains or losses by the Fund. The Fund may not achieve the anticipated benefits of the financial futures contracts and may realize a loss.
e. Investment Income Dividend income is generally recorded on the ex-dividend date. Interest income, which includes amortization/accretion of premium/discount, is accrued and recorded daily.
f. Expenses Many expenses of the Trust can be directly attributed to a specific series of the Trust. Expenses that cannot be directly attributed to a specific series of the Trust are generally apportioned among all the series in the Trust, based on relative net assets.
g. Custody Credits The Fund has entered into an arrangement with its custodian, State Street Bank and Trust Company, whereby credits realized as a result of uninvested cash balances are used to reduce the Fund’s custodian expenses. The Fund’s custody credits, if any, are shown in the accompanying Statement of Operations.
h. Distributions to Shareholders The Fund intends to declare and distribute substantially all net investment income, if any, at least once a year. Distributions of net realized capital gains, if any, are declared and paid at least once a year. Unless the Fund is instructed otherwise, all distributions to shareholders are credited in the form of additional shares of the Fund at the net asset value, recorded on the ex-dividend date.
i. Capital Accounts Due to the timing of dividend distributions and the differences in accounting for income and realized gains/(losses) for financial statement purposes versus federal income tax purposes, the fiscal year in which amounts are distributed may differ from the year in which the income and realized gains/(losses) were recorded by the Fund.
Note 2. Transactions with Affiliates
a. Advisory Fee and Expense Limitation Under the terms of the advisory agreement, which is reviewed and approved annually by the Board of Trustees, the Fund pays an investment advisory fee to RS Investment
Management Co. LLC (“RS Investments”). Guardian Investor Services LLC (“GIS”), a subsidiary of Guardian Life, holds a majority interest in RS Investments. RS Investments receives an investment advisory fee based on the average daily net assets of the Fund at an annual rate of 0.25%. The Fund has also entered into an agreement with GIS for distribution services with respect to its shares.
RS Investments has entered into a Sub-Advisory Services Agreement with GIS. GIS is responsible for providing day-to-day investment advisory services to the Fund, subject to the oversight of the Board of Trustees of the Trust and review by RS Investments. As compensation for GIS’s services, RS Investments pays fees to GIS at an annual rate of 0.2375% of the average daily net assets of the Fund. Payment of the sub-investment advisory fee does not represent a separate or additional expense to the Fund.
Pursuant to a written agreement in effect through April 30, 2012, expense limitations have been imposed whereby RS Investments agreed to limit the Fund’s total annual fund operating expenses to 0.28% of the average daily net assets of the Fund. To satisfy the expense limitations, certain affiliates of RS Investments, including GIS, may waive fees that would otherwise be charged to the Fund or may reimburse expenses incurred by the Fund.
RS Investments and GIS do not intend to recoup any reimbursed expenses or waived advisory fees from a prior year under expense limitations then in effect for the Fund.
RS Investments has an Expense Reimbursement Agreement in place with GIS with respect to certain funds of the Trust to which GIS serves as sub-adviser. The Expense Reimbursement Agreement provides that GIS will reimburse RS Investments for certain operating expenses and may make additional payments to mitigate losses incurred by RS Investments.
b. Compensation of Trustees and Officers Trustees and officers of the Trust who are interested persons, as defined in the 1940 Act, of RS Investments receive no compensation from the Fund for acting as such. Trustees of the Trust who are not interested persons of RS Investments receive compensation and reimbursement of expenses from the Trust.
NOTES TO FINANCIAL STATEMENTS — RS S&P 500 INDEX VIP SERIES (UNAUDITED)
Note 3. Federal Income Taxes
a. Distributions to Shareholders The tax character of distributions paid to shareholders during the year ended December 31, 2010, which is the most recently completed tax year, was as follows:
| | |
Ordinary
Income | |
| | $1,800,090 | |
Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. These differences are primarily due to differing treatments of income and gains on various investment securities held by the Fund, timing differences, and differing characterizations of distributions made by the Fund. Permanent book and tax basis differences will result in reclassifications to paid-in capital, undistributed net investment income and accumulated undistributed net realized gain/(loss) on investments. Undistributed net investment income and accumulated undistributed net realized gain/(loss) on investments may include temporary book and tax differences, which will reverse in a subsequent period.
As of December 31, 2010, the Fund made the following reclassifications of permanent book and tax basis differences:
| | | | | | | | |
| Paid-in-Capital | | Accumulated Net Investment Income | | | Accumulated
Net Realized Loss | |
| $(112,642,799) | | $ | — | | | $ | 112,642,799 | |
During any particular year, net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed and, therefore, are normally distributed to shareholders annually.
The tax basis of distributable earnings as of December 31, 2010 was as follows:
| | |
Undistributed
Ordinary
Income | |
| | $6,049 | |
During the year ended December 31, 2010, the Fund did not utilize capital loss carryovers. Capital loss carryovers available to the Fund at December 31, 2010 were as follows:
| | | | |
| Expiring | |
Amount | |
| 2011 | | $ | 11,938,809 | |
| 2013 | | | 549,960 | |
| 2016 | | | 7,289,622 | |
| 2017 | | | 17,800,138 | |
| 2018 | | | 2,436,419 | |
| | | | | |
| Total | | $ | 40,014,948 | |
| | | | | |
| | | | | |
Capital loss carryovers of $112,662,870 expired in the year ended December 31, 2010.
In determining its taxable income, current tax law permits the Fund to elect to treat all or a portion of any net capital or currency loss realized after October 31 as occurring on the first day of the following fiscal year. For the year ended December 31, 2010, the Fund had no such losses.
On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted. The Act modernizes several of the federal income and excise tax rules related to regulated investment companies, and with certain exceptions, is effective for taxable years beginning after December 22, 2010.
Among the changes are revisions to capital loss carryforward rules allowing for capital losses to be carried forward to one or more subsequent taxable years without expiration. Rules previously in effect limited the carryforward period to eight taxable years. Capital loss carryforwards generated in taxable years beginning after the effective date of the Act must be fully used before capital loss carryforwards generated in taxable years prior to the effective date of the Act. Changes to excise tax rules include timing of recognition of certain income and a change in the required distribution rate for capital gains.
b. Tax Basis of Investments The cost of investments for federal income tax purposes at June 30, 2011, was $76,882,997. The gross unrealized appreciation and depreciation on investments, on a tax basis, at June 30, 2011, aggregated $36,717,102 and $(4,746,664), respectively, resulting in net unrealized appreciation/depreciation of $31,970,438.
Note 4. Investments
a. Investment Purchases and Sales The cost of investments purchased and the proceeds from investments sold (excluding short-term investments) amounted to $1,369,554 and $8,199,435, respectively, for the six months ended June 30, 2011.
NOTES TO FINANCIAL STATEMENTS — RS S&P 500 INDEX VIP SERIES (UNAUDITED)
b. Derivative Instruments and Hedging Activities The following is a summary of the fair valuation of the fund’s derivative instruments categorized by risk exposure at June 30, 2011.
| | | | | | |
| Derivative Instrument Type | | Statement of Assets
and Liabilities Location | | Value | |
| Financial Futures Contracts | | Net unrealized appreciation/depreciation on investments and futures contracts* | | $ | 68,376 | |
| * | The cumulative appreciation/depreciation of financial futures contracts is reported in the notes to the Schedule of Investments. Only the daily change in variation margin as of the reporting date is presented in the Statement of Assets and Liabilities. See Note 1d for additional information on futures contracts. |
The following is a summary of the effect of the Fund’s derivative instruments on the Statement of Operations for the six months ended June 30, 2011.
| | | | | | |
| Derivative Instrument Type | | Location of Gain/(Loss)
on Derivatives
Recognized in Income | | Amount | |
| Financial Futures Contracts | | Net realized gain from futures contracts | | $ | 145,320 | |
| | | Net change in unrealized appreciation/depreciation on futures contracts | | | 28,905 | |
The Fund held an average daily face value of $2,114,000 E-mini S&P 500 futures contracts for the six months ended June 30, 2011.
The Fund may, but will not necessarily, enter into derivative transactions, such as financial futures contracts, as a substitute for the purchase or sale of securities or when there is significant cash received from fund shares sold.
c. Repurchase Agreements The collateral for repurchase agreements is either cash or fully negotiable U.S. government securities (including U.S. government agency securities). Repurchase agreements are fully collateralized (including the interest accrued thereon) and such collateral is marked-to-market daily while the agreements remain in force. If the value of the collateral falls below the repurchase price plus accrued interest, the Fund will typically require the seller to deposit additional collateral by the next business day. If the request for additional collateral is not met, or the seller defaults, the Fund maintains the right to sell the collateral (although it may be prevented or delayed from doing so in certain circumstances) and may claim any resulting loss against the seller.
Note 5. Temporary Borrowings
The Fund, with other funds managed by RS Investments, shares in a $75 million committed revolving credit/overdraft protection facility from State Street Bank and Trust Company for temporary purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. Interest is calculated based on market rates at the time of borrowing; all the funds that are parties to the facility share in a commitment fee that is allocated among the funds on the basis of their respective net assets. The Fund may borrow up to the lesser of one-third of its total assets (including amounts borrowed) or any lower limit specified in the Fund’s Statement of Additional Information or Prospectus.
For the six months ended June 30, 2011, the Fund did not borrow from the facility.
Note 6. Legal Matters
Two lawsuits have been filed relating to the Fund’s investment in Tribune Company in connection with a leveraged buyout transaction by which Tribune Company converted to a privately-held company in 2007. One has been filed in the U.S. Bankruptcy Court for the District of Delaware, naming the Trust as a defendant; the other has been filed in Delaware Superior Court. The plaintiffs in both lawsuits seek to recover amounts paid to Tribune shareholders in the leveraged buyout transaction. The Fund received $218,212 in the transaction. The Trust cannot predict the outcomes of these proceedings. If the proceedings were to be decided or settled in a manner adverse to the Fund, the payment of such judgments or settlements could have a material adverse effect on the Fund’s net asset value.
Note 7. Review for Subsequent Events
The Trust has evaluated subsequent events through the issuance of the Fund’s financial statements and determined that no material events have occurred that require disclosure.
Note 8. Indemnifications
Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, in the normal course of business, the Fund enters into contracts with its vendors and others that provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund. However, based on experience, the Fund expects the risk of loss to be remote.
SUPPLEMENTAL INFORMATION (UNAUDITED)
Meeting of Shareholders
A special meeting of the shareholders of RS Variable Products Trust (“the Trust”) was held on May 20, 2011. At the meeting, the shareholders of the Trust elected Judson Bergman, Kenneth R. Fitzsimmons, Jr., Anne M. Goggin, Christopher C. Melvin, Jr., Deanna M. Mulligan, Gloria S. Nelund, Terry R. Otton, and John P. Rohal as trustees of the Trust.
Proposal To Elect Trustees
| | | | |
| Nominee | |
Votes For | | Votes Against/Withheld |
| Judson Bergman | | 264,351,869.410 | | 14,579,441.977 |
| Kenneth R. Fitzsimmons, Jr. | | 264,417,319.717 | | 14,513,991.670 |
| Anne M. Goggin | | 265,496,967.524 | | 13,434,343.863 |
| Christopher C. Melvin, Jr. | | 264,182,743.884 | | 14,748,567.503 |
| Deanna M. Mulligan | | 264,603,554.628 | | 14,327,756.759 |
| Gloria S. Nelund | | 265,607,677.552 | | 13,323,633.835 |
| Terry R. Otton | | 265,360,024.512 | | 13,571,286.875 |
| John P. Rohal | | 264,052,063.420 | | 14,879,247.967 |
Portfolio Holdings and Proxy Voting Procedures
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Form N-Q is available on the Securities and Exchange Commission’s Web site at http://www.sec.gov. The Fund’s Form N-Q may be reviewed and copied at the Commission’s Public Reference Room in Washington, DC, and information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330. This information is also available, without charge, upon request, by calling toll-free 800-221-3253.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 will be available (i) without charge, upon request, by calling toll-free 800-221-3253; and (ii) on the Securities and Exchange Commission’s Web site at http://www.sec.gov.
The Statement of Additional Information includes additional information about the Trust’s Trustees and Officers and is available, without charge, upon request by calling toll-free 800-221-3253.
This report is transmitted to shareholders only. It is not authorized for use as an offer of sale or a solicitation of an offer to buy shares of a Fund unless accompanied or preceded by that Fund’s current prospectus. Past performance results shown in this report should not be considered a representation of future performance. Investment returns and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Statements and other information herein are as dated and are subject to change.
2011 Semiannual Report
All data as of June 30, 2011
RS Variable Products Trust
| Ÿ | | RS International Growth VIP Series |
| | | | |
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE | | |  | |
TABLE OF CONTENTS
Except as otherwise specifically stated, all information and investment team commentary, including portfolio security positions, is as of June 30, 2011. The views expressed in the investment team letters are those of the Fund’s portfolio manager(s) and are subject to change without notice. They do not necessarily represent the views of RS Investments, Guardian Baillie Gifford Limited or Baillie Gifford Overseas Limited. The letters contain some forward-looking statements providing current expectations or forecasts of future events; they do not necessarily relate to historical or current facts. There can be no guarantee that any forward-looking statement will be realized. We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events, or otherwise. Any discussions of specific securities should not be considered a recommendation to buy or sell those securities. Fund holdings will vary.
RS INTERNATIONAL GROWTH VIP SERIES
The Statement of Additional Information provides further information about your investment team, including information regarding their compensation, other accounts they manage, and their ownership interests in the Fund. For information on how to receive a copy of the Statement of Additional Information, please see the back cover of the Fund’s Prospectus or visit our Web site at www.guardianinvestor.com.
RS International Growth VIP Series Commentary
Highlights
| Ÿ | | International equity markets, as defined by the MSCI EAFE Index1, produced positive returns despite concerns relating to Japanese supply-side disruption, the threat of rising inflation and peripheral Euro zone debt default. |
| Ÿ | | During the first half of 2011, RS International Growth VIP Series returned 5.49%, outperforming the benchmark MSCI EAFE Index, which returned 5.35%. The Fund also outperformed the benchmark MSCI EAFE Growth Index2, which returned 4.66%. The Fund’s consumer discretionary and technology holdings were beneficial to relative returns while financial stocks detracted from relative returns. |
| Ÿ | | RS International Growth VIP Series seeks long-term capital appreciation by investing in companies that we believe can sustain above-average growth rates and that currently trade at prices that do not fully reflect those rates of growth. |
Market Overview
The first half of 2011 was characterized by several newsworthy events. There was a series of supply shocks early in the year, ranging from a Chinese drought to Australian floods. This was followed by widespread political unrest in the Arab world, leading to a surge in the price of oil; then came the Japanese disaster, in which natural destruction was worsened by nuclear uncertainty. China continued to grow despite concerns, and the corporate sector has continued to report good profits. Under this volatile backdrop, international markets, as defined by the MSCI EAFE Index, posted positive absolute returns during the first half of 2011.
Performance Update
During the first half of 2011, RS International Growth VIP Series returned 5.49%, outperforming the MSCI EAFE Index, which returned 5.35%. The Fund also outperformed the MSCI EAFE Growth Index, which returned 4.66%.
Portfolio Review
In China, the Fund benefited from its holding in Baidu, the search engine giant, which excited markets as it displayed almost 100% year-on-year revenue growth.
Recently it acquired a majority stake in the online travel site Qunar.com, which we believe is set to benefit from increased Chinese tourism as disposable incomes rise. At the same time Tencent, the Chinese social networking site, also produced good returns. It is benefiting from a growing subscriber base and strong uptake of their micro blogging and gaming services.
Elsewhere, Rakuten, the Japanese e-commerce company, performed well as it displayed progress in moving into overseas markets. However, Nintendo, the Japanese gaming company, continued to detract from returns. In June it unveiled the Wii U, the Wii’s successor, which will be in the shops next year. Unfortunately many of its features were already anticipated by the market. We are becoming increasingly worried about the sustainability of Nintendo’s culture of innovation and therefore reduced the Fund’s holding over the period.
The Fund’s energy holdings detracted from returns over the first half of 2011. Petrobras, the Brazilian oil company, fell out of favour with the market despite a background of higher oil prices. The Brazilian government is increasingly using the company for national economic aims which we believe are not necessarily in line with the objectives of minority shareholders.
OGX, the Brazilian exploration and production company, fell sharply following an independent report from petroleum consultancy DeGolyer & McNaughton, which analyzed OGX’s assets off the coast of Brazil. Their findings disappointed the market as reserves were lower than expected and suggest that the company has been 6-12 months ahead of itself with its guidance. Given that the report was dated over four months ago, and that the headline prospective reserves number appears fine, as long-term holders we are not overly concerned by the delay in the conversion of reserves.
Outlook
We believe that the Fund continues to be optimistically positioned, stemming from our positive view on the long-term prospects for global growth. We believe that growth will be driven by the continued development of emerging markets and their increasing weight in the global economy. We think loose monetary policy in the West remains a support for the moment, although we believe
RS INTERNATIONAL GROWTH VIP SERIES
we are nearing an “exit strategy” in at least some areas. Overall, we remain positive on the prospects for equities.
RS Funds are sold by prospectus only. You should carefully consider the investment objectives, risks, charges and expenses of the RS Funds before making an investment decision. The prospectus contains this and other important information. Please read it carefully before investing or sending money. Please visit our web site at www.guardianinvestor.com or to obtain a printed copy, call 800-221-3253.
Any discussions of specific securities should not be considered a recommendation to buy or sell those securities. Fund holdings will vary.
Except as otherwise specifically stated, all information and investment team commentary, including portfolio security positions, is as of June 30, 2011.
As with all mutual funds, the value of an investment in the Fund could decline, in which case you could lose money. International investing involves special risks, which include changes in currency rates, foreign taxation and differences in auditing standards and securities regulations, political uncertainty, and greater volatility.
RS INTERNATIONAL GROWTH VIP SERIES
Characteristics
| | |
| Total Net Assets: $252,842,489 | | |
| | | | | | |
| | | |
| Geographical Location3 | | | | | |
 | |
| | | |
| Top Ten Holdings3 | | | | | |
| | | |
| Holding | | Country | | % of Total
Net Assets | |
| Baidu, Inc., ADR | | People’s Republic of China | | | 4.62% | |
| Atlas Copco AB, Class B | | Sweden | | | 3.70% | |
| BHP Billiton PLC | | United Kingdom | | | 3.14% | |
| Tencent Holdings Ltd. | | People’s Republic of China | | | 2.96% | |
| Banco Santander S.A. | | Spain | | | 2.95% | |
| PPR | | France | | | 2.84% | |
| Compagnie Financiere Richemont S.A., Class A | | Switzerland | | | 2.83% | |
| Standard Chartered PLC | | United Kingdom | | | 2.70% | |
| Rakuten, Inc. | | Japan | | | 2.69% | |
| Industria de Diseno Textil S.A. | | Spain | | | 2.48% | |
| Total | | | | | 30.91% | |
| 1 | The MSCI EAFE Index (Europe, Australasia, and Far East) is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the US & Canada. Index results assume the reinvestment of dividends paid on the stocks constituting the index. Unlike the Fund, the index does not incur fees or expenses. |
| 2 | The MSCI EAFE Growth Index (Europe, Australasia, and Far East) generally represents approximately 50% of the free float-adjusted market capitalization of the MSCI EAFE Index and consists of those securities within the MSCI EAFE Index classified by MSCI as most representing the growth style. Index results assume the reinvestment of dividends paid on the stocks constituting the index. Unlike the Fund, the index does not incur fees or expenses. |
| 3 | Portfolio holdings are subject to change and should not be considered a recommendation to buy or sell individual securities. Cash includes short-term investments and net other assets and liabilities. |
RS INTERNATIONAL GROWTH VIP SERIES
Performance Update
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | |
| Average Annual Total Returns | | | | | | | |
| | | | | | | | |
| | | Inception Date | | | Year-to-Date | | | 1 Year | | | 3 Year | | | 5 Year | | | 10 Year | | | Since Inception | |
| RS International Growth VIP Series | | | 2/8/91 | | | | 5.49% | | | | 34.52% | | | | 1.00% | | | | 4.30% | | | | 5.91% | | | | 7.84% | |
| MSCI EAFE Index1 | | | | | | | 5.35% | | | | 30.93% | | | | -1.30% | | | | 1.96% | | | | 6.12% | | | | 6.19% | |
| MSCI EAFE Growth Index2 | | | | | | | 4.66% | | | | 31.65% | | | | -1.49% | | | | 2.88% | | | | 5.63% | | | | 4.66% | |
Since inception performance for the indices is measured from 1/31/91, the month end prior to the Fund’s commencement of operations.
|
| |
| Results of a Hypothetical $10,000 Investment |
 |
The chart above shows the performance of a hypothetical $10,000 investment made 10 years ago in RS International Growth VIP Series, in the MSCI EAFE Index, and in the MSCI EAFE Growth Index. Index returns do not include the fees and expenses of the Fund, but do include the reinvestment of dividends.
Performance quoted represents past performance and does not guarantee or predict future results. The Fund is the successor to The Baillie Gifford International Growth Fund; performance shown includes performance of the predecessor fund for periods prior to October 9, 2006. Investment return and principal value will fluctuate, so shares, when redeemed, may be worth more or less than their original cost. The Fund’s fees and expenses are detailed in the Financial Highlights section of this report. Fees and expenses are factored into the net asset value of your shares and any performance numbers we release. Total return figures reflect an expense limitation in effect during the periods shown; without such limitation, the performance shown would have been lower. Performance results assume the reinvestment of dividends and capital gains. The return figures shown do not reflect the deduction of taxes that a contractowner/policyholder may pay on Fund distributions or redemption units. The actual total returns for owners of variable annuity contracts or variable life insurance policies that provide for investment in the Fund will be lower to reflect separate account and contract/policy charges. Current and month-end performance information, which may be lower or higher than that cited, is available by calling 800-221-3253 and is periodically updated on our Web site: www.guardianinvestor.com.
UNDERSTANDING YOUR FUND’S EXPENSES (UNAUDITED)
By investing in the Fund, you incur two types of costs: (1) transaction costs, including, as applicable, sales charges (loads) on purchase payments; redemption fees; and exchange fees; and (2) ongoing costs, including as applicable, investment advisory fees; and other Fund expenses. The example below is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period indicated. The table below shows the Fund’s expenses in two ways:
Expenses based on actual return
This section of the table provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Expenses based on hypothetical 5% return for comparison purposes
This section of the table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund with the cost of investing in other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore the second section is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If these transactional costs were included, your costs would have been higher.
| | | | | | | | | | | | | | | | |
| | | Beginning
Account Value 1/1/11 | | | Ending
Account Value 6/30/11 | | | Expenses Paid During Period* 1/1/11-6/30/11 | | | Expense Ratio During Period 1/1/11-6/30/11 | |
| Based on Actual Return | | | $1,000.00 | | | | $1,054.90 | | | | $4.55 | | | | 0.89% | |
| Based on Hypothetical Return (5% Return Before Expenses) | | | $1,000.00 | | | | $1,020.36 | | | | $4.48 | | | | 0.89% | |
| * | Expenses are equal to the Fund’s annualized expense ratio as indicated, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). |
SCHEDULE OF INVESTMENTS — RS INTERNATIONAL GROWTH VIP SERIES
| | | | | | | | |
| June 30, 2011 (unaudited) | | Shares | | | Value | |
| Common Stocks – 95.5% | |
| Australia – 6.2% | |
Brambles Ltd. | | | 470,504 | | | $ | 3,658,241 | |
Fortescue Metals Group Ltd. | | | 500,794 | | | | 3,436,186 | |
James Hardie Industries N.V.(1) | | | 142,882 | | | | 905,243 | |
Woodside Petroleum Ltd. | | | 103,268 | | | | 4,555,879 | |
Woolworths Ltd. | | | 103,344 | | | | 3,083,444 | |
| | | | | | | | | |
| | | | | | | | 15,638,993 | |
| Brazil – 1.9% | |
B2W Companhia Global do Varejo | | | 66,300 | | | | 809,288 | |
BM&F BOVESPA S.A. | | | 254,000 | | | | 1,681,235 | |
OGX Petroleo e Gas
Participacoes S.A.(1) | | | 242,100 | | | | 2,263,313 | |
| | | | | | | | | |
| | | | | | | | 4,753,836 | |
| Denmark – 3.0% | |
Novo Nordisk A/S, Class B | | | 31,302 | | | | 3,921,491 | |
Novozymes A/S, Class B | | | 12,992 | | | | 2,116,868 | |
Vestas Wind Systems A/S(1) | | | 66,888 | | | | 1,552,730 | |
| | | | | | | | | |
| | | | | | | | 7,591,089 | |
| France – 6.2% | |
Essilor International S.A. | | | 45,300 | | | | 3,675,585 | |
L’Oreal S.A. | | | 37,525 | | | | 4,869,768 | |
PPR | | | 40,360 | | | | 7,188,322 | |
| | | | | | | | | |
| | | | | | | | 15,733,675 | |
| Germany – 6.2% | |
Adidas AG | | | 58,913 | | | | 4,670,718 | |
Aixtron AG | | | 60,902 | | | | 2,078,673 | |
Axel Springer AG | | | 24,195 | | | | 1,196,389 | |
HeidelbergCement AG | | | 31,191 | | | | 1,994,843 | |
SAP AG | | | 41,099 | | | | 2,491,761 | |
SMA Solar Technology AG | | | 10,948 | | | | 1,218,061 | |
TUI AG(1) | | | 187,816 | | | | 2,041,380 | |
| | | | | | | | | |
| | | | | | | | 15,691,825 | |
| Hong Kong – 1.7% | |
Hong Kong Exchanges & Clearing Ltd. | | | 146,900 | | | | 3,095,148 | |
Li & Fung Ltd. | | | 568,000 | | | | 1,135,255 | |
| | | | | | | | | |
| | | | | | | | 4,230,403 | |
| India – 0.9% | |
Housing Development Finance
Corp. Ltd. | | | 82,500 | | | | 1,300,715 | |
Reliance Capital Ltd. | | | 64,826 | | | | 845,085 | |
| | | | | | | | | |
| | | | | | | | 2,145,800 | |
| Israel – 1.1% | |
Teva Pharmaceutical Industries
Ltd., ADR | | | 54,400 | | | | 2,623,168 | |
| | | | | | | | | |
| | | | | | | | 2,623,168 | |
| Japan – 11.1% | |
Canon, Inc. | | | 91,200 | | | | 4,338,046 | |
Gree, Inc. | | | 77,700 | | | | 1,698,579 | |
Hoya Corp. | | | 91,100 | | | | 2,016,819 | |
Kyocera Corp. | | | 14,200 | | | | 1,445,815 | |
Nintendo Co. Ltd. | | | 10,200 | | | | 1,915,440 | |
| | | | | | | | | |
| | | | | | | | |
| June 30, 2011 (unaudited) | | Shares | | | Value | |
| Japan (continued) | |
Rakuten, Inc. | | | 6,563 | | | $ | 6,792,863 | |
Rohm Co. Ltd. | | | 24,200 | | | | 1,388,389 | |
SMC Corp. | | | 25,400 | | | | 4,578,857 | |
Yamada Denki Co. Ltd. | | | 18,260 | | | | 1,487,816 | |
Yamaha Motor Co. Ltd.(1) | | | 134,600 | | | | 2,472,288 | |
| | | | | | | | | |
| | | | | | | | 28,134,912 | |
| Mexico – 0.5% | |
Wal-Mart de Mexico S.A.B. de C.V., Series V | | | 441,200 | | | | 1,309,450 | |
| | | | | | | | | |
| | | | | | | | 1,309,450 | |
| People’s Republic of China – 9.0% | |
Baidu, Inc., ADR(1) | | | 83,300 | | | | 11,672,829 | |
China Merchants Bank Co. Ltd.,
H shares | | | 607,000 | | | | 1,476,612 | |
CNOOC Ltd. | | | 745,000 | | | | 1,758,624 | |
Ports Design Ltd. | | | 166,500 | | | | 395,295 | |
Tencent Holdings Ltd. | | | 274,000 | | | | 7,485,191 | |
| | | | | | | | | |
| | | | | | | | 22,788,551 | |
| Peru – 0.4% | | | | | | | | |
Credicorp Ltd. | | | 12,774 | | | | 1,099,841 | |
| | | | | | | | | |
| | | | | | | | 1,099,841 | |
| Singapore – 0.7% | | | | | | | | |
Singapore Exchange Ltd. | | | 295,000 | | | | 1,812,743 | |
| | | | | | | | | |
| | | | | | | | 1,812,743 | |
| South Africa – 0.5% | | | | | | | | |
Impala Platinum Holdings Ltd. | | | 42,800 | | | | 1,154,929 | |
| | | | | | | | | |
| | | | | | | | 1,154,929 | |
| South Korea – 1.8% | | | | | | | | |
Celltrion, Inc. | | | 54,813 | | | | 2,274,144 | |
Samsung Electronics Co. Ltd. | | | 2,934 | | | | 2,280,390 | |
| | | | | | | | | |
| | | | | | | | 4,554,534 | |
| Spain – 5.4% | | | | | | | | |
Banco Santander S.A. | | | 647,760 | | | | 7,462,285 | |
Industria de Diseno Textil S.A. | | | 68,736 | | | | 6,262,794 | |
| | | | | | | | | |
| | | | | | | | 13,725,079 | |
| Sweden – 8.8% | | | | | | | | |
Alfa Laval AB | | | 134,371 | | | | 2,897,890 | |
Atlas Copco AB, Class B | | | 396,721 | | | | 9,359,015 | |
Oriflame Cosmetics S.A., SDR | | | 25,515 | | | | 1,258,125 | |
Sandvik AB | | | 224,959 | | | | 3,941,135 | |
Svenska Handelsbanken AB, Class A | | | 154,516 | | | | 4,764,125 | |
| | | | | | | | | |
| | | | | | | | 22,220,290 | |
| Switzerland – 7.7% | | | | | | | | |
ABB Ltd. (Reg S)(1) | | | 121,694 | | | | 3,161,891 | |
Compagnie Financiere Richemont S.A., Class A | | | 109,274 | | | | 7,161,057 | |
Geberit AG(1) | | | 14,434 | | | | 3,424,319 | |
Swatch Group AG | | | 2,787 | | | | 1,406,620 | |
Syngenta AG (Reg S)(1) | | | 12,914 | | | | 4,364,291 | |
| | | | | | | | | |
| | | | | | | | 19,518,178 | |
| | | | |
| 8 | | | | The accompanying notes are an integral part of these financial statements. |
RS INTERNATIONAL GROWTH VIP SERIES
| | | | | | | | |
| June 30, 2011 (unaudited) | | Shares | | | Value | |
| Taiwan – 0.9% | | | | | | | | |
Taiwan Semiconductor Mfg. Co.
Ltd., ADR | | | 184,966 | | | $ | 2,332,421 | |
| | | | | | | | | |
| | | | | | | | 2,332,421 | |
| Turkey – 1.2% | | | | | | | | |
Turkiye Garanti Bankasi A.S. | | | 633,866 | | | | 2,876,360 | |
| | | | | | | | | |
| | | | | | | | 2,876,360 | |
| United Kingdom – 20.3% | | | | | | | | |
ARM Holdings PLC | | | 327,000 | | | | 3,074,980 | |
Autonomy Corp. PLC(1) | | | 122,867 | | | | 3,365,578 | |
BG Group PLC | | | 111,790 | | | | 2,538,295 | |
BHP Billiton PLC | | | 202,000 | | | | 7,937,343 | |
British American Tobacco PLC | | | 115,500 | | | | 5,064,859 | |
Meggitt PLC | | | 560,608 | | | | 3,428,953 | |
Prudential PLC | | | 376,000 | | | | 4,341,599 | |
Rolls-Royce Holdings PLC(1) | | | 421,000 | | | | 4,359,833 | |
SABMiller PLC | | | 125,600 | | | | 4,584,463 | |
Signet Jewelers Ltd.(1) | | | 35,325 | | | | 1,670,614 | |
Standard Chartered PLC | | | 260,000 | | | | 6,829,594 | |
Tesco PLC | | | 652,000 | | | | 4,212,559 | |
| | | | | | | | | |
| | | | | | | | 51,408,670 | |
Total Common Stocks
(Cost $179,667,282) | | | | | | | 241,344,747 | |
| | | | | | | | |
| | | Shares | | | Value | |
| Preferred Stocks – 3.5% | | | | | | | | |
| Brazil – 2.4% | | | | | | | | |
Itau Unibanco Holding S.A., ADR | | | 147,440 | | | | 3,472,212 | |
Petroleo Brasileiro S.A., ADR | | | 87,300 | | | | 2,678,364 | |
| | | | | | | | | |
| | | | | | | | 6,150,576 | |
| | | | | | | | |
| June 30, 2011 (unaudited) | | Shares | | | Value | |
| Germany – 1.1% | | | | | | | | |
Porsche Automobil Holding SE | | | 35,175 | | | $ | 2,790,171 | |
| | | | | | | | | |
| | | | | | | | 2,790,171 | |
Total Preferred Stocks
(Cost $8,254,562) | | | | | | | 8,940,747 | |
| | | | | | | | |
| | | Principal Amount | | | Value | |
| Repurchase Agreements – 0.1% | | | | | |
State Street Bank and Trust Co. Repurchase Agreement, 0.01%, dated 6/30/2011, maturity value of $243,000, due 7/1/2011(2) | | $ | 243,000 | | | | 243,000 | |
Total Repurchase Agreements
(Cost $243,000) | | | | | | | 243,000 | |
Total Investments - 99.1%
(Cost $188,164,844) | | | | | | | 250,528,494 | |
| Other Assets, Net - 0.9% | | | | | | | 2,313,995 | |
| Total Net Assets - 100.0% | | | | | | $ | 252,842,489 | |
| (1) | Non-income producing security. |
| (2) | The table below presents collateral for repurchase agreements. |
| | | | | | | | | | | | |
| Security | | Coupon | | | Maturity
Date | | | Value | |
| U.S. Treasury Note | | | 1.125% | | | | 1/15/2012 | | | $ | 252,500 | |
Legend:
ADR — American Depositary Receipt.
SDR — Swedish Depository Receipt.
The following is a summary of the inputs used as of June 30, 2011 in valuing the Fund’s investments. For more information on valuation inputs, please refer to Note 1a of the accompanying Notes to Financial Statements.
| | | | | | | | | | | | | | | | |
| | | Valuation Inputs | | | | |
| Investments in Securities | | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
Common Stocks | | $ | 23,791,545 | | | $ | 217,553,202 | * | | $ | — | | | $ | 241,344,747 | |
Preferred Stocks | | | 6,150,576 | | | | 2,790,171 | * | | | — | | | | 8,940,747 | |
Repurchase Agreements | | | — | | | | 243,000 | | | | — | | | | 243,000 | |
| Total | | $ | 29,942,121 | | | $ | 220,586,373 | | | $ | — | | | $ | 250,528,494 | |
| * | Consists of certain foreign securities whose values were determined by a pricing service using pricing models. These investments in securities were classified as Level 2 rather than Level 1. |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 9 |
FINANCIAL INFORMATION - RS INTERNATIONAL GROWTH VIP SERIES
| | | | |
Statement of Assets and Liabilities As of June 30, 2011 (unaudited) | | | |
Assets | | | | |
Investments, at value | | $ | 250,528,494 | |
Cash and cash equivalents | | | 90 | |
Foreign currency, at value | | | 307,017 | |
Receivable for investments sold | | | 2,445,795 | |
Dividends receivable | | | 604,467 | |
Receivable for fund shares subscribed | | | 9,461 | |
| | | | | |
Total Assets | | | 253,895,324 | |
| | | | | |
| | |
Liabilities | | | | |
Payable for investments purchased | | | 773,471 | |
Payable to adviser | | | 163,293 | |
Payable for fund shares redeemed | | | 103,842 | |
Accrued trustees’ fees | | | 3,443 | |
Accrued expenses/other liabilities | | | 8,786 | |
| | | | | |
Total Liabilities | | | 1,052,835 | |
| | | | | |
Total Net Assets | | $ | 252,842,489 | |
| | | | | |
| | |
Net Assets Consist of: | | | | |
Paid-in capital | | $ | 189,745,495 | |
Accumulated undistributed net investment income | | | 1,695,320 | |
Accumulated net realized loss from investments and foreign currency transactions | | | (1,000,947 | ) |
Net unrealized appreciation on investments and translation of assets and liabilities in foreign currencies | | | 62,402,621 | |
| | | | | |
Total Net Assets | | $ | 252,842,489 | |
| | | | | |
Investments, at Cost | | $ | 188,164,844 | |
| | | | | |
Foreign Currency, at Cost | | $ | 305,954 | |
| | | | | |
| | |
Pricing of Shares | | | | |
Shares of Beneficial Interest Outstanding with no Par Value | | | 12,181,320 | |
Net Asset Value Per Share | | | $20.76 | |
| | | | | |
| | | | |
Statement of Operations For the Six-Month Period Ended June 30, 2011 (unaudited) | |
Investment Income | | | | |
Dividends | | $ | 4,284,161 | |
Interest | | | 140 | |
Withholding taxes on foreign dividends | | | (367,401 | ) |
| | | | | |
Total Investment Income | | | 3,916,900 | |
| | | | | |
| | |
Expenses | | | | |
Investment advisory fees | | | 1,019,296 | |
Custodian fees | | | 55,053 | |
Professional fees | | | 20,696 | |
Administrative service fees | | | 15,796 | |
Shareholder reports | | | 13,339 | |
Trustees’ fees | | | 5,905 | |
Other expenses | | | 8,804 | |
| | | | | |
Total Expenses | | | 1,138,889 | |
| | | | | |
Net Investment Income | | | 2,778,011 | |
| | | | | |
| | |
Realized Gain/(Loss) and Change in Unrealized Appreciation/Depreciation on Investments and Foreign Currency Transactions | | | | |
Net realized gain from investments | | | 6,055,103 | |
Net realized gain from foreign currency transactions | | | 44,173 | |
Net change in unrealized appreciation/depreciation on investments | | | 4,790,069 | |
Net change in unrealized appreciation/depreciation on translation of assets and liabilities in foreign currencies | | | 22,426 | |
| | | | | |
Net Gain on Investments and Foreign Currency Transactions | | | 10,911,771 | |
| | | | | |
Net Increase in Net Assets Resulting from Operations | | $ | 13,689,782 | |
| | | | | |
| | | | | |
| | | | |
| 10 | | | | The accompanying notes are an integral part of these financial statements. |
FINANCIAL INFORMATION - RS INTERNATIONAL GROWTH VIP SERIES
| | | | | | | | |
Statements of Changes in Net Assets Six-Month-Ended numbers are unaudited | | | | | | |
| | | |
| | | For the Six Months Ended
6/30/11 | | | For the Year Ended 12/31/10 | |
| | | | |
Operations | | | | | | | | |
Net investment income | | $ | 2,778,011 | | | $ | 3,238,545 | |
Net realized gain from investments and foreign currency transactions | | | 6,099,276 | | | | 19,442,037 | |
Net change in unrealized appreciation/depreciation on investments and translation of assets and liabilities in foreign currencies | | | 4,812,495 | | | | 9,748,856 | |
| | | | | | | | | |
Net Increase in Net Assets Resulting from Operations | | | 13,689,782 | | | | 32,429,438 | |
| | | | | | | | | |
| | | |
Distributions to Shareholders | | | | | | | | |
Net investment income | | | — | | | | (3,995,231 | ) |
| | | | | | | | | |
Total Distributions | | | — | | | | (3,995,231 | ) |
| | | | | | | | | |
| | | |
Capital Share Transactions | | | | | | | | |
Proceeds from sales of shares | | | 4,933,895 | | | | 14,101,670 | |
Reinvestment of distributions | | | — | | | | 3,995,231 | |
Cost of shares redeemed | | | (21,714,707 | ) | | | (39,664,438 | ) |
| | | | | | | | | |
Net Decrease in Net Assets Resulting from Capital Share
Transactions | | | (16,780,812 | ) | | | (21,567,537 | ) |
| | | | | | | | | |
Net Increase/(Decrease) in Net Assets | | | (3,091,030 | ) | | | 6,866,670 | |
| | | | | | | | | |
| | | |
Net Assets | | | | | | | | |
Beginning of period | | | 255,933,519 | | | | 249,066,849 | |
| | | | | | | | | |
End of period | | $ | 252,842,489 | | | $ | 255,933,519 | |
| | | | | | | | | |
Distributions in Excess of Net Investment Income Included in Net Assets | | $ | — | | | $ | (1,082,691 | ) |
| | | | | | | | | |
Accumulated Undistributed Net Investment Income Included in Net Assets | | $ | 1,695,320 | | | $ | — | |
| | | | | | | | | |
| | | |
Other Information: | | | | | | | | |
Shares | | | | | | | | |
Sold | | | 244,741 | | | | 822,081 | |
Reinvested | | | — | | | | 205,834 | |
Redeemed | | | (1,067,889 | ) | | | (2,245,206 | ) |
| | | | | | | | | |
Net Decrease | | | (823,148 | ) | | | (1,217,291 | ) |
| | | | | | | | | |
| | | | | | | | | |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 11 |
FINANCIAL INFORMATION — RS INTERNATIONAL GROWTH VIP SERIES
The financial highlights table is intended to help you understand the Fund’s financial performance for the past six reporting periods. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the Fund (assuming reinvestment of all distributions).
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Financial Highlights Six-Month-Ended numbers are unaudited | | | | | | | | | | | | | | | | | | | |
| | | Net Asset Value,
Beginning of
Period | | | Net Investment
Income | | | Net Realized
and Unrealized
Gain/(Loss) | | | Total
Operations | | | Distributions
From Net
Investment
Income | | | Distributions
From Net
Realized
Capital Gains | | | Total
Distributions | |
Six Months Ended 6/30/111 | | $ | 19.68 | | | $ | 0.22 | | | $ | 0.86 | | | $ | 1.08 | | | $ | — | | | $ | — | | | $ | — | |
Year Ended 12/31/10 | | | 17.51 | | | | 0.25 | | | | 2.23 | | | | 2.48 | | | | (0.31 | ) | | | — | | | | (0.31 | ) |
Year Ended 12/31/09 | | | 12.81 | | | | 0.26 | | | | 4.73 | | | | 4.99 | | | | (0.28 | ) | | | (0.01 | ) | | | (0.29 | ) |
Year Ended 12/31/08 | | | 24.09 | | | | 0.42 | | | | (10.88 | ) | | | (10.46 | ) | | | (0.36 | ) | | | (0.46 | ) | | | (0.82 | ) |
Year Ended 12/31/07 | | | 21.69 | | | | 0.29 | | | | 2.94 | | | | 3.23 | | | | (0.83 | ) | | | — | | | | (0.83 | ) |
Year Ended 12/31/06 | | | 17.80 | | | | 0.20 | | | | 3.92 | | | | 4.12 | | | | (0.23 | ) | | | — | | | | (0.23 | ) |
| | | | |
| 12 | | | | The accompanying notes are an integral part of these financial statements. |
FINANCIAL INFORMATION — RS INTERNATIONAL GROWTH VIP SERIES
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Net Asset
Value, End of
Period | | | Total
Return2 | | | Net Assets, End
of Period (000s) | | | Net Ratio of
Expenses to
Average Net
Assets3 | | | Gross Ratio of
Expenses to
Average Net
Assets | | | Net Ratio of Net
Investment Income
to Average Net Assets3 | | | Gross Ratio of Net Investment Income
to Average Net Assets | | | Portfolio
Turnover Rate | |
| $ | 20.76 | | | | 5.49% | | | $ | 252,842 | | | | 0.89% | | | | 0.89% | | | | 2.18% | | | | 2.18% | | | | 7% | |
| | 19.68 | | | | 14.19% | | | | 255,934 | | | | 0.91% | | | | 0.91% | | | | 1.33% | | | | 1.33% | | | | 87% | |
| | 17.51 | | | | 38.98% | | | | 249,067 | | | | 0.92% | | | | 0.92% | | | | 1.74% | | | | 1.74% | | | | 23% | |
| | 12.81 | | | | (43.28)% | | | | 188,697 | | | | 0.91% | | | | 0.91% | | | | 2.03% | | | | 2.03% | | | | 38% | |
| | 24.09 | | | | 15.02% | | | | 318,968 | | | | 0.96% | | | | 0.96% | | | | 1.14% | | | | 1.14% | | | | 27% | |
| | 21.69 | | | | 23.43% | | | | 280,371 | | | | 1.04% | | | | 1.04% | | | | 1.06% | | | | 1.06% | | | | 22% | |
Distributions reflect actual per-share amounts distributed for the period.
| 1 | Ratios for periods less than one year have been annualized, except for total return and portfolio turnover rate. |
| 2 | Total returns do not reflect the effects of charges deducted pursuant to the terms of The Guardian Insurance & Annuity Company, Inc.’s variable contracts. Inclusion of such charges would reduce the total returns for all periods shown. |
| 3 | Net Ratio of Expenses to Average Net Assets and Net Ratio of Net Investment Income to Average Net Assets include the effect of fee waivers, expense limitations and custody credits, if applicable. |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 13 |
NOTES TO FINANCIAL STATEMENTS — RS INTERNATIONAL GROWTH VIP SERIES (UNAUDITED)
June 30, 2011 (unaudited)
RS Variable Products Trust (the “Trust”), a Massachusetts business trust organized on May 18, 2006, is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust currently offers twelve series. RS International Growth VIP Series (the “Fund”) is a series of the Trust. The Fund is a diversified fund. The financial statements for the other remaining series of the Trust are presented in separate reports.
The Fund has authorized an unlimited number of shares of beneficial interest with no par value. Shares are bought and sold at closing net asset value (“NAV”), which is the price for all outstanding shares of the Fund. Class I shares of the Fund are only sold to certain separate accounts of The Guardian Insurance & Annuity Company, Inc. (“GIAC”). GIAC is a wholly-owned subsidiary of The Guardian Life Insurance Company of America (“Guardian Life”). The Fund is currently offered to insurance company separate accounts that fund certain variable annuity and variable life insurance contracts issued by GIAC.
Note 1. Significant Accounting Policies
The following policies are in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
a. Investment Valuations Marketable securities are valued at the last reported sale price on the principal exchange or market on which they are traded; or, if there were no sales that day, at the mean between the closing bid and asked prices. Securities traded on the NASDAQ Stock Market, LLC (“NASDAQ”) are generally valued at the NASDAQ official closing price, which may not be the last sale price. If the NASDAQ official closing price is not available for a security, that security is generally valued using the last reported sale price, or, if no sales are reported, at the mean between the closing bid and asked prices. Short-term investments that will mature in 60 days or less are valued at amortized cost, which approximates market value. Repurchase agreements are carried at cost, which approximates market value. Foreign securities are valued in the currencies of the markets in which they trade and then converted to U.S. dollars using the prevailing exchange rates at the close of the New York Stock Exchange (“NYSE”). Forward foreign
currency contracts are valued at the current cost of covering or offsetting such contracts.
Securities for which market quotations are not readily available or for which market quotations may be considered unreliable are valued at their fair values as determined in accordance with guidelines and procedures adopted by the Trust’s Board of Trustees.
Securities whose values have been materially affected by events occurring before the Fund’s valuation time but after the close of the securities’ principal exchange or market may be fair valued using methods approved by the Board of Trustees. In addition, the values of the Fund’s investments in foreign securities are generally determined by a pricing service using pricing models designed to estimate likely changes in the values of those securities.
The Fund has adopted the authoritative guidance under GAAP on determining fair value when the volume and level of activity for an asset or liability have significantly decreased and for identifying transactions that are not orderly. Accordingly, if the Fund determines that either the volume and/or level of activity for an asset or liability has significantly decreased (from normal conditions for that asset or liability) or price quotations or observable inputs are not associated with orderly transactions, increased analysis and management judgment will be required to estimate fair value.
In accordance with Financial Accounting Standards Board Codification Topic 820 (“ASC Topic 820”), fair value is defined as the price that the Fund would receive upon selling an investment in an “arm’s length” transaction to a willing buyer in the principal or most advantageous market for the investment. ASC Topic 820 established a hierarchy for classification of fair value measurements for disclosure purposes. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances. The hierarchy of inputs is summarized in the three broad levels listed below.
| Ÿ | | Level 1 — unadjusted quoted prices in active markets for identical investments |
| Ÿ | | Level 2 — inputs other than unadjusted quoted prices that are observable either directly or indirectly (including adjusted quoted prices for similar investments, interest rates, prepayment speeds, credit risks, etc.) |
NOTES TO FINANCIAL STATEMENTS — RS INTERNATIONAL GROWTH VIP SERIES (UNAUDITED)
| Ÿ | | Level 3 — significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments) |
Inputs may include price information, volatility statistics, specific and broad credit data, liquidity statistics, and other factors. A security’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires significant judgment by the Trust. The Trust considers observable data to be that market data which is readily available, regularly distributed or updated, reliable and verifiable, and provided by independent sources that are actively involved in the relevant market. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. Changes in valuation techniques may result in transfers into or out of an investment’s assigned level within the hierarchy.
Effective beginning with the Fund’s current fiscal year, the Financial Accounting Standards Board requires reporting entities to make disclosures about purchases, sales, issuances and settlements of Level 3 securities on a gross basis. For the six months ended June 30, 2011, the Fund had no securities classified as Level 3.
There were no significant transfers between Level 1 and Level 2 for the six months ended June 30, 2011.
In determining a security’s placement within the hierarchy, the Trust separates the Fund’s investment portfolio into two categories: investments and derivatives (e.g., futures).
Investments Investments whose values are based on quoted market prices in active markets, and are therefore classified within Level 1, include active listed equities. The Trust does not adjust the quoted price for such instruments, even in situations where the Fund holds a large position and a sale could reasonably be expected to impact the quoted price.
Investments that trade in markets that are not considered to be active, but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within Level 2. These include certain U.S. government and sovereign obligations, most government agency securities, investment-grade corporate bonds, certain mortgage products, state, municipal and provincial obligations, and certain foreign equity securities.
Investments classified within Level 3 have significant
unobservable inputs, as they trade infrequently or not at
all. Level 3 investments include, among others, private placement securities. When observable prices are not available for these securities, the Trust uses one or more valuation techniques for which sufficient and reliable data is available. The inputs used by the Trust in estimating the value of Level 3 investments include the original transaction price, recent transactions in the same or similar instruments, completed or pending third-party transactions in the underlying investment or comparable issuers, subsequent rounds of financing, recapitalizations, and other transactions across the capital structure. Level 3 investments may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the Trust in the absence of market information. Assumptions used by the Trust due to the lack of observable inputs may significantly impact the resulting fair value and therefore the Fund’s results of operations.
Derivatives Exchange-traded derivatives, such as futures contracts and exchange traded option contracts, are typically classified within Level 1 or Level 2 of the fair value hierarchy depending on whether or not they are deemed to be actively traded. Certain derivatives, such as generic forwards, swaps and options, have inputs which can generally be corroborated by market data and are therefore classified within Level 2.
b. Federal Income Taxes The Fund intends to continue complying with the requirements of the Internal Revenue Code to qualify as a regulated investment company and to distribute substantially all net investment income and realized net capital gains, if any, to shareholders. Therefore, the Fund does not expect to be subject to income tax, and no provision for such tax has been made.
From time to time, however, the Fund may choose to pay an excise tax if the cost of making the required distribution exceeds the amount of the excise tax.
As of June 30, 2011, the Trust has reviewed the tax positions for open periods, as applicable to the Fund, and has determined that no provision for income tax is required in the Fund’s financial statements. The Fund recognizes interest and penalties, if any, related to unrecognized tax positions as income tax expense in the Statement of Operations. For the six months ended June 30, 2011, the Fund did not incur any interest or penalties. The Fund is not subject to examination by U.S. federal tax authorities for tax years before 2007 and by state authorities for tax years before 2006.
c. Securities Transactions Securities transactions are accounted for on the date securities are purchased or sold (trade date). Realized gains or losses on securities transactions are determined on the basis of specific identification.
NOTES TO FINANCIAL STATEMENTS — RS INTERNATIONAL GROWTH VIP SERIES (UNAUDITED)
d. Foreign Currency Translation The accounting records of the Fund are maintained in U.S. dollars. Investment securities and all other assets and liabilities of the Fund denominated in a foreign currency are generally translated into U.S. dollars at the exchange rates quoted at the close of the NYSE on each business day. Purchases and sales of securities, income receipts, and expense payments are translated into U.S. dollars at the exchange rates in effect on the dates of the respective transactions. The Fund does not isolate the portion of the fluctuations on investments resulting from changes in foreign currency exchange rates from the fluctuations in market prices of investments held. Such fluctuations are included with the net realized and unrealized gain or loss from investments.
e. Forward Foreign Currency Contracts The Fund may enter into forward foreign currency contracts. A forward foreign currency contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward exchange rate. Risks may arise from the potential inability of the Fund’s counterparty to meet the terms of a contract and from unanticipated movements in the value of a currency relative to another currency. Fluctuations in the values of forward foreign currency contracts are recorded for book purposes as unrealized gains or losses from translation of other assets and liabilities denominated in foreign currencies by the Fund. When a forward contract is closed, the Fund will record a realized gain or loss equal to the increase or decrease in the value of such forward contract between the time it was opened and the time it was closed. Such amounts are recorded as net realized gains or losses on foreign currency related transactions.
f. Investment Income Dividend income is generally recorded on the ex-dividend date. Interest income, which includes amortization/accretion of premium/discount, is accrued and recorded daily.
g. Expenses Many expenses of the Trust can be directly attributed to a specific series of the Trust. Expenses that cannot be directly attributed to a specific series of the Trust are generally apportioned among all the series in the Trust, based on relative net assets.
h. Custody Credits The Fund has entered into an arrangement with its custodian, State Street Bank and Trust Company, whereby credits realized as a result of uninvested cash balances are used to reduce the Fund’s custodian expenses. The Fund’s custody credits, if any, are shown in the accompanying Statement of Operations.
i. Distributions to Shareholders The Fund intends to declare and distribute substantially all net investment income, if any, at least once a year. Distributions of net
realized capital gains, if any, are declared and paid at least once a year. Unless the Fund is instructed otherwise, all distributions to shareholders are credited in the form of additional shares of the Fund at the net asset value, recorded on the ex-dividend date.
j. Capital Accounts Due to the timing of dividend distributions and the differences in accounting for income and realized gains/(losses) for financial statement purposes versus federal income tax purposes, the fiscal year in which amounts are distributed may differ from the year in which the income and realized gains/(losses) were recorded by the Fund.
Note 2. Transactions with Affiliates
a. Advisory Fee Under the terms of the advisory agreement, which is reviewed and approved annually by the Board of Trustees, the Fund pays an investment advisory fee to RS Investment Management Co. LLC (“RS Investments”). Guardian Investor Services LLC (“GIS”), a subsidiary of Guardian Life, holds a majority interest in RS Investments. RS Investments receives an investment advisory fee based on the average daily net assets of the Fund at an annual rate of 0.80%. The Fund has also entered into an agreement with GIS for distribution services with respect to its shares.
RS Investments has entered into a Sub-Advisory Services Agreement with Guardian Baillie Gifford Limited (“GBG”), a Scottish company owned jointly by GIAC and Baillie Gifford Overseas Limited (“BG Overseas”). As compensation for GBG’s services, RS Investments pays fees to GBG at annual rates of 0.76% of the average daily net assets of the Fund. Payment of the sub-investment advisory fee does not represent a separate or additional expense to the Fund. GBG has entered into a Sub-Sub-Investment Advisory Agreement with BG Overseas pursuant to which BG Overseas is responsible for providing day-to-day investment advisory services to the Fund subject to the oversight and direction of the Board of Trustees of the Trust and review by RS Investments. A sub-sub-investment advisory fee payable at the rate of 0.32% of the average daily net assets of the Fund is payable by GBG to BG Overseas for its services. The sub-sub-investment advisory fee rate in effect from January 1, 2011 through April 30, 2011 was 0.40%. Payment of the sub-sub-investment advisory fee does not represent a separate or additional expense to the Fund.
RS Investments has an Expense Reimbursement Agreement in place with GIS with respect to certain funds of the Trust to which GIS or GBG serves as sub-adviser. The Expense Reimbursement Agreement
NOTES TO FINANCIAL STATEMENTS — RS INTERNATIONAL GROWTH VIP SERIES (UNAUDITED)
provides that GIS will reimburse RS Investments for certain operating expenses and may make additional payments to mitigate losses incurred by RS Investments.
b. Compensation of Trustees and Officers Trustees and officers of the Trust who are interested persons, as defined in the 1940 Act, of RS Investments receive no compensation from the Fund for acting as such. Trustees of the Trust who are not interested persons of RS Investments receive compensation and reimbursement of expenses from the Trust.
Note 3. Federal Income Taxes
a. Distributions to Shareholders The tax character of distributions paid to shareholders during the year ended December 31, 2010, which is the most recently completed tax year, was as follows:
| | |
Ordinary
Income | |
| $ | 3,995,231 | |
Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. These differences are primarily due to differing treatments of income and gains on various investment securities held by the Fund, timing differences, and differing characterizations of distributions made by the Fund. Permanent book and tax basis differences will result in reclassifications to paid-in capital, undistributed net investment income and accumulated undistributed net realized gain/(loss) on investments and foreign currency transactions. Undistributed net investment income and accumulated undistributed net realized gain/(loss) on investments and foreign currency transactions may include temporary book and tax differences, which will reverse in a subsequent period.
As of December 31, 2010, the Fund made the following reclassifications of permanent book and tax basis differences:
| | | | | | | | |
| Paid-in-Capital | | Accumulated Net Investment Loss | | | Accumulated
Net Realized Loss | |
| $(93,540) | | $ | (8,654 | ) | | $ | 102,194 | |
During any particular year, net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed and, therefore, are normally distributed to shareholders annually.
During the year ended December 31, 2010, the Fund utilized $19,022,066 of capital loss carryovers. Capital
loss carryovers available to the Fund at December 31, 2010, were $7,100,222, expiring in 2017.
In determining its taxable income, current tax law permits the Fund to elect to treat all or a portion of any net capital or currency loss realized after October 31 as occurring on the first day of the following fiscal year. For the year ended December 31, 2010, the Fund had no such losses.
On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted. The Act modernizes several of the federal income and excise tax rules related to regulated investment companies, and with certain exceptions, is effective for taxable years beginning after December 22, 2010.
Among the changes are revisions to capital loss carryforward rules allowing for capital losses to be carried forward to one or more subsequent taxable years without expiration. Rules previously in effect limited the carryforward period to eight taxable years. Capital loss carryforwards generated in taxable years beginning after the effective date of the Act must be fully used before capital loss carryforwards generated in taxable years prior to the effective date of the Act. Changes to excise tax rules include timing of recognition of certain income and a change in the required distribution rate for capital gains.
b. Tax Basis of Investments The cost of investments for federal income tax purposes at June 30, 2011, was $189,247,381. The gross unrealized appreciation and depreciation on investments, on a tax basis, at June 30, 2011, aggregated $67,041,212 and $(5,760,099), respectively, resulting in net unrealized appreciation of $61,281,113.
Note 4. Investments
a. Investment Purchases and Sales The cost of investments purchased and the proceeds from investments sold (excluding short-term investments) amounted to $17,484,336 and $31,233,669, respectively, for the six months ended June 30, 2011.
b. Foreign Securities Foreign securities investments involve special risks and considerations not typically associated with those of U.S. origin. These risks include, but are not limited to, currency risk; adverse political, social, and economic developments; and less reliable information about issuers. Moreover, securities of some foreign companies may be less liquid and their prices more volatile than those of comparable U.S. companies.
NOTES TO FINANCIAL STATEMENTS — RS INTERNATIONAL GROWTH VIP SERIES (UNAUDITED)
c. Industry or Sector Concentration In its normal course of business, the Fund may invest a significant portion of its assets in companies within a limited number of industries or sectors. As a result, the Fund may be subject to a greater risk of loss than that of a fund invested in a wider spectrum of industries or sectors because the stocks of many or all of the companies in the industry, group of industries, sector, or sectors may decline in value due to developments adversely affecting the industry, group of industries, sector, or sectors.
d. Repurchase Agreements The collateral for repurchase agreements is either cash or fully negotiable U.S. government securities (including U.S. government agency securities). Repurchase agreements are fully collateralized (including the interest accrued thereon) and such collateral is marked-to-market daily while the agreements remain in force. If the value of the collateral falls below the repurchase price plus accrued interest, the Fund will typically require the seller to deposit additional collateral by the next business day. If the request for additional collateral is not met, or the seller defaults, the Fund maintains the right to sell the collateral (although it may be prevented or delayed from doing so in certain circumstances) and may claim any resulting loss against the seller.
Note 5. Temporary Borrowings
The Fund, with other funds managed by RS Investments, shares in a $75 million committed revolving credit/overdraft protection facility from State Street Bank and Trust Company for temporary purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. Interest is calculated based on market rates at the time of borrowing; all the funds that are parties to the facility share in a commitment fee that is allocated among the funds on the basis of their respective net assets. The Fund may borrow up to the lesser of one-third of its total assets (including amounts borrowed) or any lower limit specified in the Fund’s Statement of Additional Information or Prospectus.
For the six months ended June 30, 2011, the Fund did not borrow from the facility.
Note 6. Review for Subsequent Events
The Trust has evaluated subsequent events through the issuance of the Fund’s financial statements and determined that no material events have occurred that require disclosure.
Note 7. Indemnifications
Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, in the normal course of business, the Fund enters into contracts with its vendors and others that provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund. However, based on experience, the Fund expects the risk of loss to be remote.
SUPPLEMENTAL INFORMATION (UNAUDITED)
Meeting of Shareholders
A special meeting of the shareholders of RS Variable Products Trust (“the Trust”) was held on May 20, 2011. At the meeting, the shareholders of the Trust elected Judson Bergman, Kenneth R. Fitzsimmons, Jr., Anne M. Goggin, Christopher C. Melvin, Jr., Deanna M. Mulligan, Gloria S. Nelund, Terry R. Otton, and John P. Rohal as trustees of the Trust.
Proposal To Elect Trustees
| | | | |
| Nominee | |
Votes For | | Votes Against/Withheld |
| Judson Bergman | | 264,351,869.410 | | 14,579,441.977 |
| Kenneth R. Fitzsimmons, Jr. | | 264,417,319.717 | | 14,513,991.670 |
| Anne M. Goggin | | 265,496,967.524 | | 13,434,343.863 |
| Christopher C. Melvin, Jr. | | 264,182,743.884 | | 14,748,567.503 |
| Deanna M. Mulligan | | 264,603,554.628 | | 14,327,756.759 |
| Gloria S. Nelund | | 265,607,677.552 | | 13,323,633.835 |
| Terry R. Otton | | 265,360,024.512 | | 13,571,286.875 |
| John P. Rohal | | 264,052,063.420 | | 14,879,247.967 |
Portfolio Holdings and Proxy Voting Procedures
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Form N-Q is available on the Securities and Exchange Commission’s Web site at http://www.sec.gov. The Fund’s Form N-Q may be reviewed and copied at the Commission’s Public Reference Room in Washington, DC, and information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330. This information is also available, without charge, upon request, by calling toll-free 800-221-3253.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 will be available (i) without charge, upon request, by calling toll-free 800-221-3253; and (ii) on the Securities and Exchange Commission’s Web site at http://www.sec.gov.
The Statement of Additional Information includes additional information about the Trust’s Trustees and Officers and is available, without charge, upon request by calling toll-free 800-221-3253.
This report is transmitted to shareholders only. It is not authorized for use as an offer of sale or a solicitation of an offer to buy shares of a Fund unless accompanied or preceded by that Fund’s current prospectus. Past performance results shown in this report should not be considered a representation of future performance. Investment returns and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Statements and other information herein are as dated and are subject to change.
2011 Semiannual Report
All data as of June 30, 2011
RS Variable Products Trust
| Ÿ | | RS Emerging Markets VIP Series |
| | | | |
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE | | |  | |
TABLE OF CONTENTS
Except as otherwise specifically stated, all information and investment team commentary, including portfolio security positions, is as of June 30, 2011. The views expressed in the investment team letters are those of the Fund’s portfolio manager(s) and are subject to change without notice. They do not necessarily represent the views of RS Investments, Guardian Baillie Gifford Limited or Baillie Gifford Overseas Limited. The letters contain some forward-looking statements providing current expectations or forecasts of future events; they do not necessarily relate to historical or current facts. There can be no guarantee that any forward-looking statement will be realized. We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events, or otherwise. Any discussions of specific securities should not be considered a recommendation to buy or sell those securities. Fund holdings will vary.
RS EMERGING MARKETS VIP SERIES
The Statement of Additional Information provides further information about your investment team, including information regarding their compensation, other accounts they manage, and their ownership interests in the Fund. For information on how to receive a copy of the Statement of Additional Information, please see the back cover of the Fund Prospectus or visit our Web site at www.guardianinvestor.com.
RS Emerging Markets VIP Series Commentary
Highlights
| Ÿ | | Emerging markets, as defined by the MSCI Emerging Markets Index1, produced volatile performance during the first half of 2011, and ultimately delivered a modest return. |
| Ÿ | | RS Emerging Markets VIP Series returned -3.39% during the first half of 2011, underperforming the benchmark MSCI Emerging Markets Index, which returned 1.03%. Stock selection, in particular in the energy sector and Russia, hindered relative performance. |
| Ÿ | | RS Emerging Markets VIP Series seeks long-term capital appreciation by investing in companies that we believe can sustain above-average growth rates and that currently trade at prices that do not fully reflect those rates of growth. |
Market Overview
The flat six months of returns generated by emerging markets, as defined by the MSCI Emerging Markets Index, mask the significant volatility that took place during this time. Some of the weaker emerging markets were predictable in our view — Egypt suffered from its popular uprising and Peru was weak on concerns that the newly elected President’s policies could hamper the country’s growth. Similarly, Russia’s market outperformed largely due to the oil price increase. However, we feel the strong performance of some of the peripheral Eastern European countries such as Hungary and the Czech Republic was perhaps less obvious to investors.
The markets fretted over a myriad of different concerns: inflation, an economic ‘hard-landing’ in China, Eurozone default risk, the Arab uprisings, Japanese production disruption, and oil and food price spikes. Against this backdrop, China performed in line with the MSCI Emerging Markets Index, Brazil lagged the Index, and India underperformed the Index quite significantly.
Performance Update
RS Emerging Markets VIP Series returned -3.39% during the first half of 2011, underperforming the MSCI Emerging Markets Index, which returned 1.03%.
Portfolio Review
With the increase in oil and commodity prices at the start of 2011 followed by a retrenchment in recent months, the Fund’s stock selection in the energy and materials sector detracted from relative returns. Above all, a lack of exposure to the Russian oil and gas companies, for example being underweight Gazprom (gas producer) in the first quarter of 2011, held back relative returns.
The gold miners Gold Fields (South Africa) and Petropavlovsk (Russia) hindered relative performance as the companies suffered from cost pressures. However, we believe these companies will benefit from their improving production profiles and the longer term rise in the gold price that will allow returns to increase.
On the positive side, several individual holdings contributed to relative Fund returns during the first half of the year. One standout performer was the mineral sands miner Kenmare Resources, benefiting from sharp increases in the prices of its products. We believe the sector offers the prospect of strong demand growth and tight supplies. Kenmare is one of few companies in the sector which is in production and offers the prospect of increasing output.
The Fund’s holding in Hyundai Mobis (auto after sales and parts) was also favorable. Hyundai Motor is rapidly growing its car sales globally and we believe that Mobis is well positioned to capitalize on this.
Within the information technology sector, Baidu (Chinese search engine) continued to perform well after posting strong earnings results. Given that the Chinese internet is still at a very early stage, and that existing customers are increasing their advertising spending with Baidu, we believe the stock continues to be very attractive.
Outlook
We believe that our views have differed from those of the market of late. To some extent, we think this reflects our continued faith in emerging markets growth at a time when concerns over inflation and the risk of policy error have been rising. Conscious of these risks, we made some small adjustments to the portfolio where we felt the stresses would be keenly felt.
RS EMERGING MARKETS VIP SERIES
However, we have no intention of abandoning those stocks where our conviction in significant long-term upside remains strong. Many of the companies in the Fund are delivering what we consider to be strong operational results, but the share price performance has been disappointing. We are happy to be patient, not least during a period in which valuations look particularly attractive in our view.
RS Funds are sold by prospectus only. You should carefully consider the investment objectives, risks, charges and expenses of the RS Funds before making an investment decision. The prospectus contains this and other important information. Please read it carefully before investing or sending money. Please visit our Web site at www.guardianinvestor.com or to obtain a printed copy, call 800-221-3253.
Any discussion of specific securities should not be considered a recommendation to buy or sell those securities. Fund holdings will vary.
Except as otherwise specifically stated, all information and investment team commentary, including portfolio security positions, is as of June 30, 2011.
As with all mutual funds, the value of an investment in the Fund could decline, in which case you could lose money. International investing involves special risks, which include changes in currency rates, foreign taxation and differences in auditing standards and securities regulations, political uncertainty and greater volatility. These risks are even greater when investing in emerging markets.
RS EMERGING MARKETS VIP SERIES
Characteristics
| | |
| Total Net Assets: $130,595,011 | | |
| | | | | | |
| | | |
| Geographical Location2 | | | | | |
 | |
| | | |
| Top Ten Holdings2 | | | | | |
| | | |
| Holding | | Country | | % of Total
Net Assets | |
| Petroleo Brasileiro S.A., ADR | | Brazil | | | 3.61% | |
| Samsung Electronics Co. Ltd. | | South Korea | | | 3.21% | |
| Dragon Oil PLC | | Other Emerging Markets Countries | | | 2.97% | |
| Vale S.A., ADR | | Brazil | | | 2.92% | |
| China Shenhua Energy Co. Ltd., H shares | | People’s Republic of China | | | 2.56% | |
| China Life Insurance Co. Ltd. | | Taiwan | | | 2.45% | |
| Hyundai Mobis | | South Korea | | | 2.31% | |
| Taiwan Semiconductor Manufacturing Co. Ltd. | | Taiwan | | | 2.20% | |
| Hon Hai Precision Industry Co. Ltd. | | Taiwan | | | 2.11% | |
| Baidu, Inc., ADR | | People’s Republic of China | | | 2.03% | |
| Total | | | | | 26.37% | |
| 1 | The MSCI Emerging Markets Index (EM) is a free float-adjusted market capitalization index that is designed to measure equity performance of emerging markets. Index results assume the reinvestment of dividends paid on the stocks constituting the index. Unlike the Fund, the index does not incur fees or expenses. |
| 2 | Portfolio holdings are subject to change and should not be considered a recommendation to buy or sell individual securities. Cash includes short-term investments and net other assets and liabilities. |
RS EMERGING MARKETS VIP SERIES
Performance Update
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
| Average Annual Total Returns | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
| | | Inception Date | | | Year-to-Date | | | 1 Year | | | 3 Year | | | 5 Year | | | 10 Year | | | Since Inception | |
| RS Emerging Markets VIP Series | | | 10/17/94 | | | | -3.39% | | | | 22.73% | | | | 3.94% | | | | 11.92% | | | | 16.95% | | | | 10.41% | |
| MSCI Emerging Markets Index1 | | | | | | | 1.03% | | | | 28.17% | | | | 4.53% | | | | 11.75% | | | | 16.54% | | | | 6.74% | |
Since inception performance for the index is measured from 9/30/94, the month end prior to the Fund’s commencement of operations.
|
| |
| Results of a Hypothetical $10,000 Investment |
 |
The chart above shows the performance of a hypothetical $10,000 investment made 10 years ago in RS Emerging Markets VIP Series and the MSCI Emerging Markets Index. Index returns do not include the fees and expenses of the Fund, but do include the reinvestment of dividends.
Performance quoted represents past performance and does not guarantee or predict future results. The Fund is the successor to The Baillie Gifford Emerging Markets Fund; performance shown includes performance of the predecessor fund for periods prior to October 9, 2006. Investment return and principal value will fluctuate, so shares, when redeemed, may be worth more or less than their original cost. The Fund’s fees and expenses are detailed in the Financial Highlights section of this report. Fees and expenses are factored into the net asset value of your shares and any performance numbers we release. Total return figures reflect an expense limitation in effect during the periods shown; without such limitation, the performance shown would have been lower. Performance results assume the reinvestment of dividends and capital gains. The return figures shown do not reflect the deduction of taxes that a contractowner/policyholder may pay on Fund distributions or redemption units. The actual total returns for owners of variable annuity contracts or variable life insurance policies that provide for investment in the Fund will be lower to reflect separate account and contract/policy charges. Current and month-end performance information, which may be lower or higher than that cited, is available by calling 800-221-3253 and is periodically updated on our Web site: www.guardianinvestor.com.
UNDERSTANDING YOUR FUND’S EXPENSES (UNAUDITED)
By investing in the Fund, you incur two types of costs: (1) transaction costs, including, as applicable, sales charges (loads) on purchase payments; redemption fees; and exchange fees; and (2) ongoing costs, including as applicable, investment advisory fees; and other Fund expenses. The example below is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period indicated. The table below shows the Fund’s expenses in two ways:
Expenses based on actual return
This section of the table provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Expenses based on hypothetical 5% return for comparison purposes
This section of the table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund with the cost of investing in other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore the second section is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If these transactional costs were included, your costs would have been higher.
| | | | | | | | | | | | | | |
| | | Beginning
Account Value
1/1/11 | | Ending
Account Value
6/30/11 | | | Expenses Paid
During Period*
1/1/11-6/30/11 | | | Expense Ratio
During Period
1/1/11-6/30/11 | |
| Based on Actual Return | | $1,000.00 | | | $966.10 | | | | $5.78 | | | | 1.19% | |
| Based on Hypothetical Return (5% Return Before Expenses) | | $1,000.00 | | | $1,018.91 | | | | $5.94 | | | | 1.19% | |
| * | Expenses are equal to the Fund’s annualized expense ratio as indicated, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). |
SCHEDULE OF INVESTMENTS — RS EMERGING MARKETS VIP SERIES
| | | | | | | | |
| June 30, 2011 (unaudited) | | Shares | | | Value | |
| Common Stocks – 91.1% | |
| Brazil – 9.5% | |
All America Latina Logistica | | | 139,440 | | | $ | 1,173,131 | |
BM&F BOVESPA S.A. | | | 89,000 | | | | 589,094 | |
MercadoLibre, Inc. | | | 12,900 | | | | 1,023,486 | |
OGX Petroleo e Gas Participacoes S.A.(1) | | | 112,800 | | | | 1,054,530 | |
Petroleo Brasileiro S.A., ADR | | | 139,324 | | | | 4,717,511 | |
Vale S.A., ADR | | | 119,200 | | | | 3,808,440 | |
| | | | | | | | | |
| | | | | | | | 12,366,192 | |
| Egypt – 0.6% | |
Commercial International Bank Egypt SAE | | | 62,516 | | | | 314,020 | |
Egyptian Financial Group-Hermes Holding | | | 135,084 | | | | 455,093 | |
| | | | | | �� | | | |
| | | | | | | | 769,113 | |
| India – 5.9% | |
ACC Ltd. | | | 32,400 | | | | 690,296 | |
GAIL India Ltd. | | | 145,834 | | | | 1,438,341 | |
Hero Honda Motors Ltd. | | | 27,200 | | | | 1,133,129 | |
Housing Development Finance Corp. Ltd. | | | 103,500 | | | | 1,631,806 | |
IFCI Ltd. | | | 476,979 | | | | 490,141 | |
Infrastructure Development Finance Co. Ltd.(1) | | | 241,100 | | | | 708,132 | |
Tata Power Co. Ltd. | | | 54,700 | | | | 1,605,211 | |
| | | | | | | | | |
| | | | | | | | 7,697,056 | |
| Indonesia – 4.7% | |
PT Astra International Tbk | | | 170,500 | | | | 1,267,406 | |
PT Bank Rakyat Indonesia Tbk | | | 1,561,000 | | | | 1,187,367 | |
PT Bumi Resources Tbk | | | 5,022,500 | | | | 1,734,047 | |
PT Semen Gresik (Persero) Tbk | | | 904,500 | | | | 1,014,053 | |
PT Tambang Batubara Bukit Asam Tbk | | | 368,000 | | | | 894,739 | |
| | | | | | | | | |
| | | | | | | | 6,097,612 | |
| Kazakhstan – 1.1% | |
Kazakhmys PLC | | | 65,000 | | | | 1,440,855 | |
| | | | | | | | | |
| | | | | | | | 1,440,855 | |
| Malaysia – 0.8% | |
Public Bank Berhad | | | 246,000 | | | | 1,082,151 | |
| | | | | | | | | |
| | | | | | | | 1,082,151 | |
| Mexico – 3.9% | |
America Movil S.A.B. de C.V., ADR, Series L | | | 37,800 | | | | 2,036,664 | |
Cemex S.A.B. de C.V., ADR(1) | | | 152,464 | | | | 1,311,190 | |
Wal-Mart de Mexico S.A.B. de C.V. | | | 605,284 | | | | 1,796,440 | |
| | | | | | | | | |
| | | | | | | | 5,144,294 | |
| People’s Republic of China – 16.5% | |
Alibaba.com Ltd. | | | 574,500 | | | | 918,994 | |
Aluminum Corp. of China Ltd., H shares | | | 1,880,000 | | | | 1,619,410 | |
Baidu, Inc., ADR(1) | | | 18,900 | | | | 2,648,457 | |
| | |
| | | | | | | | |
| June 30, 2011 (unaudited) | | Shares | | | Value | |
| People’s Republic of China (continued) | |
Bank of China Ltd., H shares | | | 3,254,900 | | | $ | 1,597,340 | |
China Construction Bank Corp., H shares | | | 2,074,830 | | | | 1,729,943 | |
China Railway Construction Corp. Ltd., H shares | | | 1,224,500 | | | | 1,028,450 | |
China Shenhua Energy Co. Ltd., H shares | | | 697,000 | | | | 3,348,974 | |
China Taiping Insurance Holdings Co. Ltd.(1) | | | 384,000 | | | | 867,513 | |
CNOOC Ltd. | | | 538,000 | | | | 1,269,986 | |
CSR Corp. Ltd., H shares | | | 1,188,000 | | | | 1,117,098 | |
Focus Media Holding Ltd., ADR(1) | | | 41,300 | | | | 1,284,430 | |
Parkson Retail Group Ltd. | | | 455,000 | | | | 668,888 | |
Ping An Insurance (Group) Co. of China Ltd., H shares | | | 183,500 | | | | 1,904,386 | |
Want Want China Holdings Ltd. | | | 1,517,000 | | | | 1,472,939 | |
| | | | | | | | | |
| | | | | | | | 21,476,808 | |
| Peru – 0.8% | |
Credicorp Ltd. | | | 12,400 | | | | 1,067,640 | |
| | | | | | | | | |
| | | | | | | | 1,067,640 | |
| Russia – 6.4% | |
Evraz Group S.A., GDR (Reg S)(1) | | | 33,800 | | | | 1,052,301 | |
Gazprom OAO, ADR | | | 64,400 | | | | 940,108 | |
LUKOIL, ADR | | | 29,000 | | | | 1,847,373 | |
NovaTek OAO, GDR, (Reg S) | | | 7,700 | | | | 1,064,853 | |
Petropavlovsk PLC | | | 74,400 | | | | 871,816 | |
United Co. RUSAL PLC(1) | | | 390,000 | | | | 536,841 | |
VTB Bank OJSC, GDR (Reg S) | | | 190,000 | | | | 1,173,268 | |
X5 Retail Group N.V., GDR (Reg S)(1) | | | 22,020 | | | | 862,484 | |
| | | | | | | | | |
| | | | | | | | 8,349,044 | |
| South Africa – 6.0% | |
Gold Fields Ltd. | | | 116,300 | | | | 1,705,798 | |
Gold Fields Ltd., ADR | | | 38,800 | | | | 566,092 | |
Impala Platinum Holdings Ltd. | | | 48,600 | | | | 1,311,438 | |
Lonmin PLC | | | 38,818 | | | | 905,870 | |
Massmart Holdings Ltd. | | | 32,354 | | | | 669,883 | |
Naspers Ltd., N shares | | | 46,890 | | | | 2,648,074 | |
| | | | | | | | | |
| | | | | | | | 7,807,155 | |
| South Korea – 13.9% | |
Cheil Industries, Inc. | | | 10,300 | | | | 1,235,302 | |
E-Mart Co. Ltd.(1) | | | 4,212 | | | | 964,580 | |
GLOVIS Co. Ltd. | | | 11,700 | | | | 1,892,506 | |
Hyundai Engineering & Construction Co. Ltd. | | | 9,600 | | | | 778,060 | |
Hyundai Mobis | | | 8,030 | | | | 3,021,326 | |
LG Corp. | | | 22,100 | | | | 1,669,076 | |
LS Corp. | | | 6,300 | | | | 651,757 | |
NHN Corp.(1) | | | 7,600 | | | | 1,347,380 | |
Samsung Electronics Co. Ltd. | | | 5,386 | | | | 4,186,156 | |
Samsung Fire & Marine Insurance Co. Ltd. | | | 8,500 | | | | 1,977,838 | |
| | | | | | | | | |
| | | | |
| 8 | | | | The accompanying notes are an integral part of these financial statements. |
RS EMERGING MARKETS VIP SERIES
| | | | | | | | |
| June 30, 2011 (unaudited) | | Shares | | | Value | |
| South Korea (continued) | |
Shinsegae Co. Ltd. | | | 1,487 | | | $ | 472,848 | |
| | | | | | | | | |
| | | | | | | | 18,196,829 | |
| Taiwan – 10.0% | |
Advanced Semiconductor Engineering, Inc. | | | 830,205 | | | | 915,409 | |
China Life Insurance Co. Ltd. | | | 2,415,970 | | | | 3,205,520 | |
Far Eastern Department Stores Ltd. | | | 941,400 | | | | 1,891,549 | |
Hon Hai Precision Industry Co. Ltd. | | | 800,990 | | | | 2,757,643 | |
MediaTek, Inc. | | | 129,282 | | | | 1,408,167 | |
Taiwan Semiconductor Manufacturing Co. Ltd. | | | 1,140,385 | | | | 2,874,066 | |
| | | | | | | | | |
| | | | | | | | 13,052,354 | |
| Thailand – 1.6% | |
Bank of Ayudhya Public Co. Ltd. | | | 2,329,800 | | | | 2,092,373 | |
| | | | | | | | | |
| | | | | | | | 2,092,373 | |
| Turkey – 1.1% | |
Turkiye Garanti Bankasi A.S. | | | 326,555 | | | | 1,481,843 | |
| | | | | | | | | |
| | | | | | | | 1,481,843 | |
| Other African Countries – 4.4% | |
African Petroleum Corp. Ltd.(1) | | | 1,462,300 | | | | 1,333,132 | |
Chariot Oil & Gas Ltd.(1) | | | 322,542 | | | | 960,267 | |
Kenmare Resources PLC(1) | | | 2,305,984 | | | | 2,181,734 | |
Tullow Oil PLC | | | 63,500 | | | | 1,264,546 | |
| | | | | | | | | |
| | | | | | | | 5,739,679 | |
| Other Emerging Markets Countries – 3.9% | |
Dragon Oil PLC | | | 461,490 | | | | 3,873,404 | |
Gulf Keystone Petroleum Ltd.(1) | | | 550,499 | | | | 1,216,881 | |
| | | | | | | | | |
| | | | | | | | 5,090,285 | |
Total Common Stocks
(Cost $86,386,788) | | | | 118,951,283 | |
| | | | | | | | |
| June 30, 2011 (unaudited) | | Shares | | | Value | |
| Preferred Stocks – 7.5% | | | | | | | | |
| Brazil – 6.4% | | | | | | | | |
Banco Bradesco S.A. | | | 103,342 | | | $ | 2,099,088 | |
Bradespar S.A. | | | 41,100 | | | | 1,042,873 | |
Cia Brasileira de Distribuicao Grupo Pao de Acucar | | | 32,200 | | | | 1,488,630 | |
Companhia Energetica de Minas Gerais | | | 71,637 | | | | 1,453,717 | |
Itausa-Investimentos Itau S.A. | | | 301,632 | | | | 2,317,347 | |
| | | | | | | | | |
| | | | | | | | 8,401,655 | |
| South Korea – 1.1% | | | | | | | | |
Samsung Electronics Co. Ltd. | | | 2,774 | | | | 1,459,237 | |
| | | | | | | | | |
| | | | | | | | 1,459,237 | |
Total Preferred Stocks
(Cost $4,597,260) | | | | 9,860,892 | |
| | | | | | | | |
| | | Principal
Amount | | | Value | |
| Repurchase Agreements – 1.1% | |
State Street Bank and Trust Co. Repurchase Agreement, 0.01%, dated 6/30/2011, maturity value of $1,383,000, due 7/1/2011(2) | | $ | 1,383,000 | | | | 1,383,000 | |
Total Repurchase Agreements
(Cost $1,383,000) | | | | 1,383,000 | |
Total Investments - 99.7%
(Cost $92,367,048) | | | | 130,195,175 | |
| Other Assets, Net - 0.3% | | | | 399,836 | |
| Total Net Assets - 100.0% | | | $ | 130,595,011 | |
| (1) | Non-income producing security. |
| (2) | The table below presents collateral for repurchase agreements. |
| | | | | | | | | | | | |
| Security | | Coupon | | | Maturity
Date | | | Value | |
| U.S. Treasury Note | | | 1.00% | | | | 4/30/2012 | | | $ | 1,411,617 | |
Legend:
ADR — American Depositary Receipt.
GDR — Global Depositary Receipt.
The following is a summary of the inputs used as of June 30, 2011 in valuing the Fund’s investments. For more information on valuation inputs, please refer to Note 1a of the accompanying Notes to Financial Statements.
| | | | | | | | | | | | | | | | |
| | | Valuation Inputs | | | | |
| Investments in Securities | | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
| Common Stocks | | $ | 27,378,839 | | | $ | 91,572,444 | * | | $ | — | | | $ | 118,951,283 | |
| Preferred Stocks | | | 8,401,655 | | | | 1,459,237 | * | | | — | | | | 9,860,892 | |
| Repurchase Agreements | | | — | | | | 1,383,000 | | | | — | | | | 1,383,000 | |
| Total | | $ | 35,780,494 | | | $ | 94,414,681 | | | $ | — | | | $ | 130,195,175 | |
| * | Consists of certain foreign securities whose values were determined by a pricing service using pricing models. These investments in securities were classified as Level 2 rather than Level 1. |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 9 |
FINANCIAL INFORMATION — RS EMERGING MARKETS VIP SERIES
| | | | |
Statement of Assets and Liabilities As of June 30, 2011 (unaudited) | | | |
Assets | | | | |
Investments, at value | | $ | 130,195,175 | |
Cash and cash equivalents | | | 34 | |
Foreign currency, at value | | | 310,506 | |
Dividends receivable | | | 441,314 | |
Receivable for fund shares subscribed | | | 64,193 | |
| | | | | |
Total Assets | | | 131,011,222 | |
| | | | | |
| | |
Liabilities | | | | |
Payable for fund shares redeemed | | | 142,300 | |
Payable to adviser | | | 105,675 | |
Accrued foreign capital gains tax | | | 100,815 | |
Payable for investments purchased | | | 36,849 | |
Accrued trustees’ fees | | | 2,062 | |
Accrued expenses/other liabilities | | | 28,510 | |
| | | | | |
Total Liabilities | | | 416,211 | |
| | | | | |
Total Net Assets | | $ | 130,595,011 | |
| | | | | |
| | |
Net Assets Consist of: | | | | |
Paid-in capital | | $ | 81,388,096 | |
Accumulated undistributed net investment loss | | | (3,488,161 | ) |
Accumulated net realized gain from investments and foreign currency transactions | | | 14,974,199 | |
Net unrealized appreciation on investments, foreign capital gains tax and translation of assets and liabilities in foreign currencies | | | 37,720,877 | |
| | | | | |
Total Net Assets | | $ | 130,595,011 | |
| | | | | |
Investments, at Cost | | $ | 92,367,048 | |
| | | | | |
Foreign Currency, at Cost | | $ | 308,531 | |
| | | | | |
| | |
Pricing of Shares | | | | |
Shares of Beneficial Interest Outstanding with no Par Value | | | 5,522,006 | |
Net Asset Value Per Share | | | $23.65 | |
| | | | | |
| | | | |
Statement of Operations For the Six-Month Period Ended June 30, 2011 (unaudited) | |
Investment Income | | | | |
Dividends | | $ | 1,295,625 | |
Interest | | | 192 | |
Withholding taxes on foreign dividends | | | (119,164 | ) |
| | | | | |
Total Investment Income | | | 1,176,653 | |
| | | | | |
| | |
Expenses | | | | |
Investment advisory fees | | | 692,266 | |
Custodian fees | | | 82,148 | |
Professional fees | | | 15,416 | |
Shareholder reports | | | 10,707 | |
Administrative service fees | | | 9,229 | |
Trustees’ fees | | | 3,452 | |
Other expenses | | | 7,748 | |
| | | | | |
Total Expenses | | | 820,966 | |
| | | | | |
Net Investment Income | | | 355,687 | |
| | | | | |
| | |
Realized Gain/(Loss) and Change in Unrealized Appreciation/Depreciation on Investments and Foreign Currency Transactions | | | | |
Net realized gain from investments | | | 12,470,560 | |
Net realized loss from foreign currency transactions | | | (46,824 | ) |
Net change in unrealized appreciation/depreciation on investments | | | (17,857,312 | ) |
Net change in unrealized appreciation/depreciation on translation of assets and liabilities in foreign currencies | | | (1,465 | ) |
Net change in accrued foreign capital gains tax | | | 17,696 | |
| | | | | |
Net Loss on Investments and Foreign Currency Transactions | | | (5,417,345 | ) |
| | | | | |
Net Decrease in Net Assets Resulting from Operations | | $ | (5,061,658 | ) |
| | | | | |
| | | | | |
| | | | |
| 10 | | | | The accompanying notes are an integral part of these financial statements. |
FINANCIAL INFORMATION — RS EMERGING MARKETS VIP SERIES
| | | | | | | | |
Statements of Changes in Net Assets Six-month-ended numbers are unaudited | | | | | | |
| | | |
| | | For the
Six Months Ended
6/30/11 | | | For the
Year Ended
12/31/10 | |
| | | | |
Operations | | | | | | | | |
Net investment income | | $ | 355,687 | | | $ | 489,842 | |
Net realized gain from investments and foreign currency transactions | | | 12,423,736 | | | | 18,553,058 | |
Net change in unrealized appreciation/depreciation on investments, foreign capital gains tax and translation of assets and liabilities in foreign currencies | | | (17,841,081 | ) | | | 5,272,580 | |
| | | | | | | | | |
Net Increase/(Decrease) in Net Assets Resulting from Operations | | | (5,061,658 | ) | | | 24,315,480 | |
| | | | | | | | | |
| | | |
Distributions to Shareholders | | | | | | | | |
Net investment income | | | — | | | | (3,946,440 | ) |
Net realized gain on investments | | | — | | | | (709,520 | ) |
| | | | | | | | | |
Total Distributions | | | — | | | | (4,655,960 | ) |
| | | | | | | | | |
| | | |
Capital Share Transactions | | | | | | | | |
Proceeds from sales of shares | | | 4,097,842 | | | | 17,336,433 | |
Reinvestment of distributions | | | — | | | | 4,655,960 | |
Cost of shares redeemed | | | (20,972,214 | ) | | | (37,073,825 | ) |
| | | | | | | | | |
Net Decrease in Net Assets Resulting from Capital Share
Transactions | | | (16,874,372 | ) | | | (15,081,432 | ) |
| | | | | | | | | |
Net Increase/(Decrease) in Net Assets | | | (21,936,030 | ) | | | 4,578,088 | |
| | | | | | | | | |
| | | |
Net Assets | | | | | | | | |
Beginning of period | | | 152,531,041 | | | | 147,952,953 | |
| | | | | | | | | |
End of period | | $ | 130,595,011 | | | $ | 152,531,041 | |
| | | | | | | | | |
Distributions in Excess of Net Investment Income Included in Net Assets | | $ | — | | | $ | (3,843,849 | ) |
| | | | | | | | | |
Accumulated Undistributed Net Investment Income/(Loss) Included in Net Assets | | $ | (3,488,161 | ) | | $ | — | |
| | | | | | | | | |
| | | |
Other Information: | | | | | | | | |
Shares | | | | | | | | |
Sold | | | 171,461 | | | | 795,145 | |
Reinvested | | | — | | | | 198,633 | |
Redeemed | | | (880,632 | ) | | | (1,733,959 | ) |
| | | | | | | | | |
Net Decrease | | | (709,171 | ) | | | (740,181 | ) |
| | | | | | | | | |
| | | | | | | | | |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 11 |
FINANCIAL INFORMATION — RS EMERGING MARKETS VIP SERIES
The financial highlights table is intended to help you understand the Fund’s financial performance for the past six reporting periods. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the Fund (assuming reinvestment of all distributions).
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Financial Highlights Six-month-ended numbers are unaudited | |
| | | Net Asset Value,
Beginning of
Period | | | Net Investment
Income/(Loss) | | | Net Realized
and Unrealized
Gain/(Loss) | | | Total
Operations | | | Distributions
From Net
Investment
Income | | | Distributions
From Net
Realized
Capital Gains | | | Return of
Capital | | | Total
Distributions | |
Six Months Ended 6/30/111 | | $ | 24.48 | | | $ | (0.01 | ) | | $ | (0.82 | ) | | $ | (0.83 | ) | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Year Ended 12/31/10 | | | 21.22 | | | | 0.04 | | | | 3.99 | | | | 4.03 | | | | (0.65 | ) | | | (0.12 | ) | | | — | | | | (0.77 | ) |
Year Ended 12/31/09 | | | 11.11 | | | | 0.06 | | | | 10.62 | | | | 10.68 | | | | (0.57 | ) | | | — | | | | — | | | | (0.57 | ) |
Year Ended 12/31/08 | | | 29.44 | | | | 0.18 | | | | (16.87 | ) | | | (16.69 | ) | | | (0.04 | ) | | | (1.57 | ) | | | (0.03 | ) | | | (1.64 | ) |
Year Ended 12/31/07 | | | 24.55 | | | | 0.38 | | | | 10.49 | | | | 10.87 | | | | (0.62 | ) | | | (5.36 | ) | | | — | | | | (5.98 | ) |
Year Ended 12/31/06 | | | 21.46 | | | | 0.16 | | | | 7.33 | | | | 7.49 | �� | | | (0.17 | ) | | | (4.23 | ) | | | — | | | | (4.40 | ) |
| | | | |
| 12 | | | | The accompanying notes are an integral part of these financial statements. |
FINANCIAL INFORMATION — RS EMERGING MARKETS VIP SERIES
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Net Asset
Value, End of
Period | | | Total
Return2 | | | Net Assets, End
of Period (000s) | | | Net Ratio of
Expenses to
Average Net
Assets3 | | | Gross Ratio of
Expenses to
Average Net
Assets | | | Net Ratio of Net
Investment Income
to Average
Net Assets3 | | | Gross Ratio of Net
Investment Income
to Average
Net Assets | | | Portfolio
Turnover
Rate | |
| $ | 23.65 | | | | (3.39)% | | | $ | 130,595 | | | | 1.19% | | | | 1.19% | | | | 0.51% | | | | 0.51% | | | | 23% | |
| | 24.48 | | | | 19.13% | | | | 152,531 | | | | 1.19% | | | | 1.19% | | | | 0.35% | | | | 0.35% | | | | 36% | |
| | 21.22 | | | | 96.37% | | | | 147,953 | | | | 1.28% | | | | 1.28% | | | | 0.34% | | | | 0.34% | | | | 57% | |
| | 11.11 | | | | (56.65)% | | | | 79,807 | | | | 1.18% | | | | 1.18% | | | | 0.81% | | | | 0.81% | | | | 61% | |
| | 29.44 | | | | 45.40% | | | | 246,687 | | | | 1.26% | | | | 1.26% | | | | 1.16% | | | | 1.16% | | | | 54% | |
| | 24.55 | | | | 36.19% | | | | 176,661 | | | | 1.43% | | | | 1.45% | | | | 0.58% | | | | 0.57% | | | | 62% | |
Distributions reflect actual per-share amounts distributed for the period.
| 1 | Ratios for periods less than one year have been annualized, except for total return and portfolio turnover rate. |
| 2 | Total returns do not reflect the effects of charges deducted pursuant to the terms of The Guardian Insurance & Annuity Company, Inc.’s variable contracts. Inclusion of such charges would reduce the total returns for all periods shown. |
| 3 | Net Ratio of Expenses to Average Net Assets and Net Ratio of Net Investment Income to Average Net Assets include the effect of fee waivers, expense limitations and custody credits, if applicable. |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 13 |
NOTES TO FINANCIAL STATEMENTS — RS EMERGING MARKETS VIP SERIES (UNAUDITED)
June 30, 2011 (unaudited)
RS Variable Products Trust (the “Trust”), a Massachusetts business trust organized on May 18, 2006, is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust currently offers twelve series. RS Emerging Markets VIP Series (the “Fund”) is a series of the Trust. The Fund is a diversified fund. The financial statements for the other remaining series of the Trust are presented in separate reports.
The Fund has authorized an unlimited number of shares of beneficial interest with no par value. Shares are bought and sold at closing net asset value (“NAV”), which is the price for all outstanding shares of the Fund. Class I shares of the Fund are only sold to certain separate accounts of The Guardian Insurance & Annuity Company, Inc. (“GIAC”). GIAC is a wholly-owned subsidiary of The Guardian Life Insurance Company of America (“Guardian Life”). The Fund is currently offered to insurance company separate accounts that fund certain variable annuity and variable life insurance contracts issued by GIAC.
Note 1. Significant Accounting Policies
The following policies are in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
a. Investment Valuations Marketable securities are valued at the last reported sale price on the principal exchange or market on which they are traded; or, if there were no sales that day, at the mean between the closing bid and asked prices. Securities traded on the NASDAQ Stock Market, LLC (“NASDAQ”) are generally valued at the NASDAQ official closing price, which may not be the last sale price. If the NASDAQ official closing price is not available for a security, that security is generally valued using the last reported sale price, or, if no sales are reported, at the mean between the closing bid and asked prices. Short-term investments that will mature in 60 days or less are valued at amortized cost, which approximates market value. Repurchase agreements are carried at cost, which approximates market value. Foreign securities are valued in the currencies of the markets in which they trade and then converted to U.S. dollars using the prevailing exchange rates at the close of the New
York Stock Exchange (“NYSE”). Forward foreign currency contracts are valued at the current cost of covering or offsetting such contracts.
Securities for which market quotations are not readily available or for which market quotations may be considered unreliable are valued at their fair values as determined in accordance with guidelines and procedures adopted by the Trust’s Board of Trustees.
Securities whose values have been materially affected by events occurring before the Fund’s valuation time but after the close of the securities’ principal exchange or market may be fair valued using methods approved by the Board of Trustees. In addition, the values of the Fund’s investments in foreign securities are generally determined by a pricing service using pricing models designed to estimate likely changes in the values of those securities.
The Fund has adopted the authoritative guidance under GAAP on determining fair value when the volume and level of activity for an asset or liability have significantly decreased and for identifying transactions that are not orderly. Accordingly, if the Fund determines that either the volume and/or level of activity for an asset or liability has significantly decreased (from normal conditions for that asset or liability) or price quotations or observable inputs are not associated with orderly transactions, increased analysis and management judgment will be required to estimate fair value.
In accordance with Financial Accounting Standards Board Codification Topic 820 (“ASC Topic 820”), fair value is defined as the price that the Fund would receive upon selling an investment in an “arm’s length” transaction to a willing buyer in the principal or most advantageous market for the investment. ASC Topic 820 established a hierarchy for classification of fair value measurements for disclosure purposes. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances. The hierarchy of inputs is summarized in the three broad levels listed below.
| Ÿ | | Level 1 — unadjusted quoted prices in active markets for identical investments |
| Ÿ | | Level 2 — inputs other than unadjusted quoted prices that are observable either directly or indirectly |
NOTES TO FINANCIAL STATEMENTS — RS EMERGING MARKETS VIP SERIES (UNAUDITED)
| | | (including adjusted quoted prices for similar investments, interest rates, prepayment speeds, credit risks, etc.) |
| Ÿ | | Level 3 — significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments) |
Inputs may include price information, volatility statistics, specific and broad credit data, liquidity statistics, and other factors. A security’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires significant judgment by the Trust. The Trust considers observable data to be that market data which is readily available, regularly distributed or updated, reliable and verifiable, and provided by independent sources that are actively involved in the relevant market. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. Changes in valuation techniques may result in transfers into or out of an investment’s assigned level within the hierarchy.
Effective beginning with the Fund’s current fiscal year, the Financial Accounting Standards Board requires reporting entities to make disclosures about purchases, sales, issuances and settlements of Level 3 securities on a gross basis. For the six months ended June 30, 2011, the Fund had no securities classified as Level 3.
There were no significant transfers between Level 1 and Level 2 for the six months ended June 30, 2011.
In determining a security’s placement within the hierarchy, the Trust separates the Fund’s investment portfolio into two categories: investments and derivatives (e.g., futures).
Investments Investments whose values are based on quoted market prices in active markets, and are therefore classified within Level 1, include active listed equities. The Trust does not adjust the quoted price for such instruments, even in situations where the Fund holds a large position and a sale could reasonably be expected to impact the quoted price.
Investments that trade in markets that are not considered to be active, but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within Level 2. These include certain U.S. government and sovereign obligations, most government agency securities, investment-grade corporate bonds, certain
mortgage products, state, municipal and provincial obligations, and certain foreign equity securities.
Investments classified within Level 3 have significant unobservable inputs, as they trade infrequently or not at all. Level 3 investments include, among others, private placement securities. When observable prices are not available for these securities, the Trust uses one or more valuation techniques for which sufficient and reliable data is available. The inputs used by the Trust in estimating the value of Level 3 investments include the original transaction price, recent transactions in the same or similar instruments, completed or pending third-party transactions in the underlying investment or comparable issuers, subsequent rounds of financing, recapitalizations, and other transactions across the capital structure. Level 3 investments may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the Trust in the absence of market information. Assumptions used by the Trust due to the lack of observable inputs may significantly impact the resulting fair value and therefore the Fund’s results of operations.
Derivatives Exchange-traded derivatives, such as futures contracts and exchange traded option contracts, are typically classified within Level 1 or Level 2 of the fair value hierarchy depending on whether or not they are deemed to be actively traded. Certain derivatives, such as generic forwards, swaps and options, have inputs which can generally be corroborated by market data and are therefore classified within Level 2.
b. Federal Income Taxes The Fund intends to continue complying with the requirements of the Internal Revenue Code to qualify as a regulated investment company and to distribute substantially all net investment income and realized net capital gains, if any, to shareholders. Therefore, the Fund does not expect to be subject to income tax, and no provision for such tax has been made.
From time to time, however, the Fund may choose to pay an excise tax if the cost of making the required distribution exceeds the amount of the excise tax.
As of June 30, 2011, the Trust has reviewed the tax positions for open periods, as applicable to the Fund, and has determined that no provision for income tax is required in the Fund’s financial statements. The Fund recognizes interest and penalties, if any, related to unrecognized tax positions as income tax expense in the Statement of Operations. For the six months ended June 30, 2011, the Fund did not incur any interest or penalties. The Fund is not subject to examination by U.S.
NOTES TO FINANCIAL STATEMENTS — RS EMERGING MARKETS VIP SERIES (UNAUDITED)
federal tax authorities for tax years before 2007 and by state authorities for tax years before 2006.
c. Securities Transactions Securities transactions are accounted for on the date securities are purchased or sold (trade date). Realized gains or losses on securities transactions are determined on the basis of specific identification.
d. Foreign Currency Translation The accounting records of the Fund are maintained in U.S. dollars. Investment securities and all other assets and liabilities of the Fund denominated in a foreign currency are generally translated into U.S. dollars at the exchange rates quoted at the close of the NYSE on each business day. Purchases and sales of securities, income receipts, and expense payments are translated into U.S. dollars at the exchange rates in effect on the dates of the respective transactions. The Fund does not isolate the portion of the fluctuations on investments resulting from changes in foreign currency exchange rates from the fluctuations in market prices of investments held. Such fluctuations are included with the net realized and unrealized gain or loss from investments.
e. Forward Foreign Currency Contracts The Fund may enter into forward foreign currency contracts. A forward foreign currency contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward exchange rate. Risks may arise from the potential inability of the Fund’s counterparty to meet the terms of a contract and from unanticipated movements in the value of a currency relative to another currency. Fluctuations in the values of forward foreign currency contracts are recorded for book purposes as unrealized gains or losses from translation of other assets and liabilities denominated in foreign currencies by the Fund. When a forward contract is closed, the Fund will record a realized gain or loss equal to the increase or decrease in the value of such forward contract between the time it was opened and the time it was closed. Such amounts are recorded as net realized gains or losses on foreign currency related transactions.
f. Foreign Capital Gains Tax Gains realized by the Fund on the sale of securities in certain foreign countries are subject to non-U.S. taxes. The Fund records a liability based on unrealized gains to provide for non-U.S. taxes likely to be payable upon the sale of such securities.
g. Investment Income Dividend income is generally recorded on the ex-dividend date. Interest income, which includes amortization/accretion of premium/discount, is accrued and recorded daily.
h. Expenses Many expenses of the Trust can be directly attributed to a specific series of the Trust. Expenses that cannot be directly attributed to a specific series of the Trust are generally apportioned among all the series in the Trust, based on relative net assets.
i. Custody Credits The Fund has entered into an arrangement with its custodian, State Street Bank and Trust Company, whereby credits realized as a result of uninvested cash balances are used to reduce the Fund’s custodian expenses. The Fund’s custody credits, if any, are shown in the accompanying Statement of Operations.
j. Distributions to Shareholders The Fund intends to declare and distribute substantially all net investment income, if any, at least once a year. Distributions of net realized capital gains, if any, are declared and paid at least once a year. Unless the Fund is instructed otherwise, all distributions to shareholders are credited in the form of additional shares of the Fund at the net asset value, recorded on the ex-dividend date.
k. Capital Accounts Due to the timing of dividend distributions and the differences in accounting for income and realized gains/(losses) for financial statement purposes versus federal income tax purposes, the fiscal year in which amounts are distributed may differ from the year in which the income and realized gains/(losses) were recorded by the Fund.
Note 2. Transactions with Affiliates
a. Advisory Fee Under the terms of the advisory agreement, which is reviewed and approved annually by the Board of Trustees, the Fund pays an investment advisory fee to RS Investment Management Co. LLC (“RS Investments”). Guardian Investor Services LLC (“GIS”), a subsidiary of Guardian Life, holds a majority interest in RS Investments. RS Investments receives an investment advisory fee based on the average daily net assets of the Fund at an annual rate of 1.00%. The Fund has also entered into an agreement with GIS for distribution services with respect to its shares.
RS Investments has entered into a Sub-Advisory Services Agreement with Guardian Baillie Gifford Limited (“GBG”), a Scottish company owned jointly by GIAC and Baillie Gifford Overseas Limited (“BG Overseas”). As compensation for GBG’s services, RS Investments pays fees to GBG at annual rates of 0.95% of the average daily net assets of the Fund. Payment of the sub-investment advisory fee does not represent a separate or additional expense to the Fund. GBG has entered into a Sub-Sub-Investment Advisory Agreement
NOTES TO FINANCIAL STATEMENTS — RS EMERGING MARKETS VIP SERIES (UNAUDITED)
with BG Overseas pursuant to which BG Overseas is responsible for providing day-to-day investment advisory services to the Fund subject to the oversight and direction of the Board of Trustees of the Trust and review by RS Investments. A sub-sub-investment advisory fee payable at the rate of 0.50% of the average daily net assets of the Fund is payable by GBG to BG Overseas for its services. Payment of the sub-sub-investment advisory fee does not represent a separate or additional expense to the Fund.
RS Investments has an Expense Reimbursement Agreement in place with GIS with respect to certain funds of the Trust to which GIS or GBG serves as sub-adviser. The Expense Reimbursement Agreement provides that GIS will reimburse RS Investments for certain operating expenses and may make additional payments to mitigate losses incurred by RS Investments.
b. Compensation of Trustees and Officers Trustees and officers of the Trust who are interested persons, as defined in the 1940 Act, of RS Investments receive no compensation from the Fund for acting as such. Trustees of the Trust who are not interested persons of RS Investments receive compensation and reimbursement of expenses from the Trust.
Note 3. Federal Income Taxes
a. Distributions to Shareholders The tax character of distributions paid to shareholders during the year ended December 31, 2010, which is the most recently completed tax year, was as follows:
| | | | | | |
Ordinary
Income | | | Long-Term
Capital Gains | |
| | $3,896,849 | | | $ | 759,111 | |
Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. These differences are primarily due to differing treatments of income and gains on various investment securities held by the Fund, timing differences, and differing characterizations of distributions made by the Fund. Permanent book and tax basis differences will result in reclassifications to paid-in capital, undistributed net investment income and accumulated undistributed net realized gain/(loss) on investments and foreign currency transactions. Undistributed net investment income and accumulated undistributed net realized gain/(loss) on investments and foreign currency transactions may include temporary book and tax differences, which will reverse in a subsequent period.
As of December 31, 2010, the Fund made the following reclassifications of permanent book and tax basis differences:
| | | | | | | | |
| Paid-in-Capital | | Accumulated Net Investment Loss | | | Accumulated
Net Realized Gain | |
| $— | | $ | 3,034,148 | | | $ | (3,034,148 | ) |
The tax basis of distributable earnings as of December 31, 2010 was as follows:
| | | | |
Undistributed
Ordinary
Income | | Undistributed
Long-Term Capital Gains | |
| $— | | $ | 3,725,015 | |
During any particular year, net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed and, therefore, are normally distributed to shareholders annually.
During the year ended December 31, 2010, the Fund utilized $10,867,414 of capital loss carryovers.
In determining its taxable income, current tax law permits the Fund to elect to treat all or a portion of any net capital or currency loss realized after October 31 as occurring on the first day of the following fiscal year. For the year ended December 31, 2010, the Fund elected to defer net capital and currency losses of $38,067.
On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted. The Act modernizes several of the federal income and excise tax rules related to regulated investment companies, and with certain exceptions, is effective for taxable years beginning after December 22, 2010.
Among the changes are revisions to capital loss carryforward rules allowing for capital losses to be carried forward to one or more subsequent taxable years without expiration. Rules previously in effect limited the carryforward period to eight taxable years. Capital loss carryforwards generated in taxable years beginning after the effective date of the Act must be fully used before capital loss carryforwards generated in taxable years prior to the effective date of the Act. Changes to excise tax rules include timing of recognition of certain income and a change in the required distribution rate for capital gains.
b. Tax Basis of Investments The cost of investments for federal income tax purposes at June 30, 2011, was $97,238,501. The gross unrealized appreciation and
NOTES TO FINANCIAL STATEMENTS — RS EMERGING MARKETS VIP SERIES (UNAUDITED)
depreciation on investments, on a tax basis, at June 30, 2011, aggregated $37,582,678 and $(4,626,004), respectively, resulting in net unrealized appreciation of $32,956,674.
Note 4. Investments
a. Investment Purchases and Sales The cost of investments purchased and the proceeds from investments sold (excluding short-term investments) amounted to $32,518,320 and $49,618,819, respectively, for the six months ended June 30, 2011.
b. Foreign Securities Foreign securities investments involve special risks and considerations not typically associated with those of U.S. origin. These risks include, but are not limited to, currency risk; adverse political, social, and economic developments; and less reliable information about issuers. Moreover, securities of some foreign companies may be less liquid and their prices more volatile than those of comparable U.S. companies.
c. Industry or Sector Concentration In its normal course of business, the Fund may invest a significant portion of its assets in companies within a limited number of industries or sectors. As a result, the Fund may be subject to a greater risk of loss than that of a fund invested in a wider spectrum of industries or sectors because the stocks of many or all of the companies in the industry, group of industries, sector, or sectors may decline in value due to developments adversely affecting the industry, group of industries, sector, or sectors.
Investing in developing countries can add additional risk, such as high rates of inflation or sharply devalued currencies against the U.S. dollar. Transaction costs are often higher and there may be delays in settlement procedures.
d. Repurchase Agreements The collateral for repurchase agreements is either cash or fully negotiable U.S. government securities (including U.S. government agency securities). Repurchase agreements are fully collateralized (including the interest accrued thereon) and such collateral is marked-to-market daily while the agreements remain in force. If the value of the collateral falls below the repurchase price plus accrued interest, the Fund will typically require the seller to deposit additional collateral by the next business day. If the request for additional collateral is not met, or the seller defaults, the Fund maintains the right to sell the collateral (although it may be prevented or delayed from doing so in certain circumstances) and may claim any resulting loss against the seller.
Note 5. Temporary Borrowings
The Fund, with other funds managed by RS Investments, shares in a $75 million committed revolving credit/overdraft protection facility from State Street Bank and Trust Company for temporary purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. Interest is calculated based on market rates at the time of borrowing; all the funds that are parties to the facility share in a commitment fee that is allocated among the funds on the basis of their respective net assets. The Fund may borrow up to the lesser of one-third of its total assets (including amounts borrowed) or any lower limit specified in the Fund’s Statement of Additional Information or Prospectus.
For the six months ended June 30, 2011, the Fund borrowed from the facility as follows:
| | | | | | | | |
Amount Outstanding
at 6/30/11 | | Average
Borrowing* | | | Average
Interest Rate* | |
| $— | | $ | 299,808 | | | | 1.45% | |
| * | For the six months ended June 30, 2011, based on the number of days borrowings were outstanding. |
Note 6. Review for Subsequent Events
The Trust has evaluated subsequent events through the issuance of the Fund’s financial statements and determined that no material events have occurred that require disclosure.
Note 7. Indemnifications
Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, in the normal course of business, the Fund enters into contracts with its vendors and others that provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund. However, based on experience, the Fund expects the risk of loss to be remote.
SUPPLEMENTAL INFORMATION (UNAUDITED)
Meeting of Shareholders
A special meeting of the shareholders of RS Variable Products Trust (“the Trust”) was held on May 20, 2011. At the meeting, the shareholders of the Trust elected Judson Bergman, Kenneth R. Fitzsimmons, Jr., Anne M. Goggin, Christopher C. Melvin, Jr., Deanna M. Mulligan, Gloria S. Nelund, Terry R. Otton, and John P. Rohal as trustees of the Trust.
Proposal To Elect Trustees
| | | | |
| Nominee | |
Votes For | | Votes Against/Withheld |
| Judson Bergman | | 264,351,869.410 | | 14,579,441.977 |
| Kenneth R. Fitzsimmons, Jr. | | 264,417,319.717 | | 14,513,991.670 |
| Anne M. Goggin | | 265,496,967.524 | | 13,434,343.863 |
| Christopher C. Melvin, Jr. | | 264,182,743.884 | | 14,748,567.503 |
| Deanna M. Mulligan | | 264,603,554.628 | | 14,327,756.759 |
| Gloria S. Nelund | | 265,607,677.552 | | 13,323,633.835 |
| Terry R. Otton | | 265,360,024.512 | | 13,571,286.875 |
| John P. Rohal | | 264,052,063.420 | | 14,879,247.967 |
Portfolio Holdings and Proxy Voting Procedures
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Form N-Q is available on the Securities and Exchange Commission’s Web site at http://www.sec.gov. The Fund’s Form N-Q may be reviewed and copied at the Commission’s Public Reference Room in Washington, DC, and information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330. This information is also available, without charge, upon request, by calling toll-free 800-221-3253.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 will be available (i) without charge, upon request, by calling toll-free 800-221-3253; and (ii) on the Securities and Exchange Commission’s Web site at http://www.sec.gov.
The Statement of Additional Information includes additional information about the Trust’s Trustees and Officers and is available, without charge, upon request by calling toll-free 800-221-3253.
This report is transmitted to shareholders only. It is not authorized for use as an offer of sale or a solicitation of an offer to buy shares of a Fund unless accompanied or preceded by that Fund’s current prospectus. Past performance results shown in this report should not be considered a representation of future performance. Investment returns and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Statements and other information herein are as dated and are subject to change.
2011 Semiannual Report
All data as of June 30, 2011
RS Variable Products Trust
| Ÿ | | RS Investment Quality Bond VIP Series |
| | | | |
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE | | |  | |
TABLE OF CONTENTS
Except as otherwise specifically stated, all information and investment team commentary, including portfolio security positions, is as of June 30, 2011. The views expressed in the investment team letters are those of the Fund’s portfolio manager(s) and are subject to change without notice. They do not necessarily represent the views of RS Investments or Guardian Investor Services LLC. The letters contain some forward-looking statements providing current expectations or forecasts of future events; they do not necessarily relate to historical or current facts. There can be no guarantee that any forward-looking statement will be realized. We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events, or otherwise. Any discussions of specific securities should not be considered a recommendation to buy or sell those securities. Fund holdings will vary.
RS INVESTMENT QUALITY BOND VIP SERIES
The Statement of Additional Information provides further information about your investment team, including information regarding their compensation, other accounts they manage, and their ownership interests in the Fund. For information on how to receive a copy of the Statement of Additional Information, please see the back cover of the Fund’s Prospectus or visit our Web site at www.guardianinvestor.com.
RS Investment Quality Bond VIP Series Commentary
Highlights
| Ÿ | | A market preference for corporate bonds and other non-Treasury fixed income investments early in 2011 faded in the second quarter, as concerns over the debt crisis in Greece led investors to seek safety in Treasury bonds and other lower risk securities. |
| Ÿ | | RS Investment Quality Bond VIP Series delivered a positive return for the six-month period that ended June 30, 2011, but underperformed its benchmark, the Barclays Capital U.S. Aggregate Bond Index1. |
| Ÿ | | Overweight exposure to corporate bonds and commercial mortgage backed securities (CMBS) aided the Fund’s relative performance in the first quarter, but proved detrimental in the second quarter and for the six-month period overall. |
Market Overview
The fixed income market started out 2011 on a positive note, supported by relatively healthy corporate earnings performance. Against this backdrop, yield-hungry investors looked beyond the Treasury market for opportunities in non-Treasury segments of the fixed-income market. Investors became more risk-averse later in the first quarter as they confronted a number of external shocks, including unrest in the Middle East, the Japanese earthquake, the European sovereign debt crisis (e.g. Greece and Ireland), and renewed questions over the strength of the U.S. economic recovery. In the second quarter, concerns over the implications of the debt crisis in Greece triggered an investor flight to quality that benefited the Treasury market relative to other areas of the fixed-income market. As a result, Treasury yields declined in the second quarter after rising slightly in the first.
Fund Performance Overview
For the six-month period that ended June 30, 2011, RS Investment Quality Bond VIP Series returned 2.60%, underperforming a 2.72% return by the benchmark Barclays Capital U.S. Aggregate Bond Index. The Fund underperformed the 2.69% average return for the Lipper Intermediate Investment Grade Debt Funds peer group2. (The peer group consisted of 89 variable annuity funds that invest primarily in investment grade debt issues with average maturities of five to ten years.)
The Fund continued its investment strategy of overweighting non-Treasury segments of the fixed income market, notably investment grade corporate bonds and CMBS. This strategy worked in the Fund’s favor in the first quarter, but proved detrimental in the second quarter. We believe that this underperformance seems to have reflected investor unease over the European debt crisis (e.g. Greece and Ireland), rather than any fundamental concerns over the strength of corporate balance sheets in the United States. Overall, we ended the second quarter with approximately 27% of the Fund allocated to investment grade corporate bonds, relative to a 22% weighting for our benchmark index.
Outlook
We are cautiously optimistic on the economy and the strengthening of corporate balance sheets. Given this outlook, we believe many of the non-Treasury segments of the bond market, including the corporate segment, may provide opportunities to add value to the Fund’s portfolio.
RS INVESTMENT QUALITY BOND VIP SERIES
RS Funds are sold by prospectus only. You should carefully consider the investment objectives, risks, charges and expenses of the RS Funds before making an investment decision. The prospectus contains this and other important information. Please read it carefully before investing or sending money. Please visit our web site at www.guardianinvestor.com or to obtain a printed copy, call 800-221-3253.
Any discussions of specific securities should not be considered a recommendation to buy or sell those securities. Fund holdings will vary.
Except as otherwise specifically stated, all information and investment team commentary, including portfolio security positions, is as of June 30, 2011.
As with all mutual funds, the value of an investment in the Fund could decline, in which case you could lose money. Bond funds are subject to interest rate risk, credit risk, and prepayment risk. When interest rates rise, bond prices generally fall, and when interest rates fall, bond prices generally rise. Currently, interest rates are at relatively low levels. Please keep in mind that in this kind of environment the risk that bond prices may fall when interest rates rise is potentially greater. Derivative transactions can create leverage and may be highly volatile. It is possible that a derivative transaction will result in a loss greater than the principal amount invested and the Fund may not be able to close out a derivative transaction at a favorable time or price. The values of mortgage-backed securities depend on the credit quality and adequacy of the underlying assets or collateral and may be highly volatile.
RS INVESTMENT QUALITY BOND VIP SERIES
Characteristics
| | |
| Total Net Assets: $668,870,735 | | |
|
| |
| Sector Allocation |
 |
| |
| Bond Quality Allocation3 |
 |
RS INVESTMENT QUALITY BOND VIP SERIES
| | | | | | | | | | | | |
| | | | |
| Top Ten Holdings4 | | | | | | | | | |
| | | | |
| Holding | | Coupon | | | Maturity Date | | | % of Total
Net Assets | |
| FNMA - Mortgage Pass-Through | | | 4.500% | | | | 12/1/2041 | | | | 2.27% | |
| FNMA - Mortgage Pass-Through | | | 5.500% | | | | 5/1/2038 | | | | 2.19% | |
| U.S. Treasury Bonds | | | 4.250% | | | | 11/15/2040 | | | | 2.01% | |
| FHLMC - Mortgage Pass-Through | | | 4.000% | | | | 1/1/2041 | | | | 1.87% | |
| FNMA - Mortgage Pass-Through | | | 5.000% | | | | 5/1/2038 | | | | 1.56% | |
| FNMA - Mortgage Pass-Through | | | 4.000% | | | | 11/1/2040 | | | | 1.48% | |
| FHLMC - CMO | | | 5.500% | | | | 9/15/2035 | | | | 1.39% | |
| U.S. Treasury Bonds | | | 3.125% | | | | 5/15/2021 | | | | 1.27% | |
| FNMA - Mortgage Pass-Through | | | 5.000% | | | | 11/1/2039 | | | | 1.16% | |
| Citigroup Commercial Mortgage Trust | | | 5.431% | | | | 10/15/2049 | | | | 1.03% | |
| Total | | | | | | | | | | | 16.23% | |
| 1 | The Barclays Capital U.S. Aggregate Bond Index is generally considered to be representative of U.S. bond market activity. The Barclays Capital Aggregate Bond Index is an unmanaged Index that is not available for direct investment. There are no expenses associated with the Index while there are expenses associated with the Fund. |
| 2 | Lipper, Inc. is an independent mutual fund monitoring and rating service. Its database of performance information is based on historical returns, which assume the reinvestment of dividends and distributions and the deduction of all Fund expenses. Lipper return figures do not reflect the deduction of any sales charges that an investor may pay when purchasing or redeeming shares of the Fund. |
| 3 | Source: Moody’s, Standard and Poor’s, Fitch Investor Services. |
| 4 | Portfolio holdings are subject to change and should not be considered a recommendation to buy or sell individual securities. Top ten holdings are determined at the unique security level. For this reason, the securities included above, their order, and the percentages they represent of the Fund’s total net assets may differ from similar data calculated directly from the Schedule of Investments, where certain securities of the same issuer with the same coupon rate may be aggregated. Also, certain securities that the Fund’s management consider “short-term” investments have been excluded from this presentation. |
RS INVESTMENT QUALITY BOND VIP SERIES
Performance Update
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
| Average Annual Total Returns | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
| | | Inception Date | | | Year-to-Date | | | 1 Year | | | 3 Year | | | 5 Year | | | 10 Year | | | Since Inception | |
| RS Investment Quality Bond VIP Series | | | 5/1/83 | | | | 2.60% | | | | 4.52% | | | | 7.02% | | | | 6.61% | | | | 5.78% | | | | 7.65% | |
| Barclays Capital U.S. Aggregate Bond Index1 | | | | | | | 2.72% | | | | 3.90% | | | | 6.46% | | | | 6.52% | | | | 5.74% | | | | 8.08% | |
Since inception performance for the index is measured from 4/30/1983, the month end prior to the Fund’s commencement of operations.
|
| |
| Results of a Hypothetical $10,000 Investment |
 |
The chart above shows the performance of a hypothetical $10,000 investment made 10 years ago in RS Investment Quality Bond VIP Series and the Barclays Capital U.S. Aggregate Bond Index. Index returns do not include the fees and expenses of the Fund, but do include reinvestment of dividends.
Performance quoted represents past performance and does not guarantee or predict future results. The Fund is the successor to The Guardian Bond Fund, Inc.; performance shown includes performance of the predecessor fund for periods prior to October 9, 2006. Investment return and principal value will fluctuate, so shares, when redeemed, may be worth more or less than their original cost. The Fund’s fees and expenses are detailed in the Financial Highlights section of this report. Fees and expenses are factored into the net asset value of your shares and any performance numbers we release. Total return figures reflect an expense limitation in effect during the periods shown; without such limitation, the performance shown would have been lower. Performance results assume the reinvestment of dividends and capital gains. The return figures shown do not reflect the deduction of taxes that a contractowner/policyholder may pay on Fund distributions or redemption units. The actual total returns for owners of variable annuity contracts or variable life insurance policies that provide for investment in the Fund will be lower to reflect separate account and contract/policy charges. Current and month-end performance information, which may be lower or higher than that cited, is available by calling 800-221-3253 and is periodically updated on our Web site: www.guardianinvestor.com.
UNDERSTANDING YOUR FUND’S EXPENSES (UNAUDITED)
By investing in the Fund, you incur two types of costs: (1) transaction costs, including, as applicable, sales charges (loads) on purchase payments; redemption fees; and exchange fees; and (2) ongoing costs, including as applicable, investment advisory fees; and other Fund expenses. The example below is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period indicated. The table below shows the Fund’s expenses in two ways:
Expenses based on actual return
This section of the table provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Expenses based on hypothetical 5% return for comparison purposes
This section of the table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund with the cost of investing in other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore the second section is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If these transactional costs were included, your costs would have been higher.
| | | | | | | | | | | | | | |
| | | Beginning
Account Value
1/1/11 | | Ending
Account Value
6/30/11 | | | Expenses Paid
During Period*
1/1/11-6/30/11 | | | Expense Ratio
During Period
1/1/11-6/30/11 | |
| Based on Actual Return | | $1,000.00 | | | $1,026.00 | | | | $2.80 | | | | 0.56% | |
| Based on Hypothetical Return (5% Return Before Expenses) | | $1,000.00 | | | $1,022.03 | | | | $2.80 | | | | 0.56% | |
| * | Expenses are equal to the Fund’s annualized expense ratio as indicated, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). |
SCHEDULE OF INVESTMENTS — RS INVESTMENT QUALITY BOND VIP SERIES
| | | | | | | | |
| June 30, 2011 (unaudited) | | Principal
Amount | | | Value | |
| Asset Backed Securities – 3.8% | | | | | |
Ally Master Owner Trust
2011-1 A2
2.15% due 1/15/2016 | | $ | 6,250,000 | | | $ | 6,331,736 | |
Ameriquest Mortgage Securities, Inc.
2003-5 A6
4.541% due 4/25/2033(1) | | | 1,409,060 | | | | 1,281,308 | |
Chase Funding Mortgage Loan Trust
2004-1 1A6
4.266% due 6/25/2015 | | | 295,032 | | | | 289,237 | |
CitiFinancial Mortgage Securities, Inc.
2003-3 AF5
4.553% due 8/25/2033(1) | | | 740,764 | | | | 745,895 | |
CNH Equipment Trust
2009-C A4
3.00% due 8/17/2015 | | | 5,600,000 | | | | 5,748,631 | |
GE Capital Credit Card Master Note Trust
2010-3 A
2.21% due 6/15/2016 | | | 650,000 | | | | 665,345 | |
Hertz Vehicle Financing LLC 2009-2A A1
4.26% due 3/25/2014(2) | | | 3,975,000 | | | | 4,153,638 | |
Hyundai Auto Receivables Trust
2009-A A4
3.15% due 3/15/2016 | | | 1,300,000 | | | | 1,349,444 | |
World Omni Auto Receivables Trust
2010-A A4
2.21% due 5/15/2015 | | | 4,800,000 | | | | 4,898,118 | |
| | | | | | | | | |
Total Asset Backed Securities
(Cost $25,038,597) | | | | 25,463,352 | |
| | | | | | | | |
| | | Principal
Amount | | | Value | |
| Collateralized Mortgage Obligations – 16.8% | | | | | |
Banc of America Alternative Loan Trust
2004-1 2A1
6.00% due 2/25/2034 | | | 4,343,676 | | | | 4,398,732 | |
Cendant Mortgage Corp.
2003-4 1A1
4.85% due 5/25/2033 | | | 843,852 | | | | 855,619 | |
Chase Mortgage Finance Corp.
2003-S11 3A1
5.50% due 10/25/2033 | | | 1,425,416 | | | | 1,449,266 | |
Citicorp Mortgage Securities, Inc.
2007-8 1A3
6.00% due 9/25/2037 | | | 1,820,518 | | | | 1,788,400 | |
Countrywide Alternative Loan Trust
2004-35T2 A1
6.00% due 2/25/2035 | | | 1,098,272 | | | | 1,093,481 | |
2006-19CB A15
6.00% due 8/25/2036 | | | 1,584,001 | | | | 1,308,447 | |
| | | | | | | | | |
| | | | | | | | |
| June 30, 2011 (unaudited) | | Principal
Amount | | | Value | |
| Collateralized Mortgage Obligations (continued) | |
Countrywide Home Loans Trust
2003-J7 2A12
5.00% due 8/25/2033 | | $ | 3,662,309 | | | $ | 3,745,586 | |
2003-11 A31
5.50% due 5/25/2033 | | | 4,513,240 | | | | 4,695,345 | |
2002-19 1A1
6.25% due 11/25/2032 | | | 656,796 | | | | 691,484 | |
FHLMC
2663 VQ
5.00% due 6/15/2022 | | | 2,800,000 | | | | 3,054,301 | |
1534 Z
5.00% due 6/15/2023 | | | 608,599 | | | | 608,371 | |
3227 PR
5.50% due 9/15/2035 | | | 8,458,331 | | | | 9,302,040 | |
FNMA
2002-77 QG
5.50% due 12/25/2032 | | | 4,110,000 | | | | 4,669,988 | |
2006-45 AC
5.50% due 6/25/2036 | | | 480,710 | | | | 471,026 | |
2002-52 PB
6.00% due 2/25/2032 | | | 1,191,652 | | | | 1,218,694 | |
GMAC Mortgage Corp. Loan Trust
2004-J6 2A1
5.25% due 2/25/2035 | | | 396,873 | | | | 397,482 | |
GNMA
1997-19 PG
6.50% due 12/20/2027 | | | 2,672,160 | | | | 2,998,041 | |
GSR Mortgage Loan Trust
2004-10F 6A1
5.00% due 9/25/2034 | | | 4,521,249 | | | | 4,685,736 | |
J.P. Morgan Mortgage Trust
2005-A3 11A2
4.463% due 6/25/2035(1) | | | 5,913,000 | | | | 5,941,252 | |
2004-S2 1A3
4.75% due 11/25/2019 | | | 4,220,368 | | | | 4,311,389 | |
Master Asset Securitization Trust
2003-5 2A1
5.00% due 6/25/2018 | | | 1,401,876 | | | | 1,462,312 | |
2003-10 3A7
5.50% due 11/25/2033 | | | 1,507,919 | | | | 1,575,181 | |
Prime Mortgage Trust
2004-2 A3
5.25% due 11/25/2019 | | | 1,111,877 | | | | 1,152,065 | |
2003-3 A9
5.50% due 1/25/2034 | | | 4,605,765 | | | | 4,696,480 | |
Residential Asset Mortgage Products, Inc.
2005-SL1 A4
6.00% due 5/25/2032 | | | 1,016,602 | | | | 1,042,470 | |
Residential Funding Mortgage Securities I, Inc.
2005-S1 2A1
4.75% due 2/25/2020 | | | 2,358,383 | | | | 2,419,564 | |
2005-S3 A1
4.75% due 3/25/2020 | | | 3,979,824 | | | | 3,997,025 | |
2003-S20 1A4
5.50% due 12/25/2033 | | | 723,521 | | | | 724,415 | |
| | | | | | | | | |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 9 |
SCHEDULE OF INVESTMENTS — RS INVESTMENT QUALITY BOND VIP SERIES
| | | | | | | | |
| June 30, 2011 (unaudited) | | Principal
Amount | | | Value | |
| Collateralized Mortgage Obligations (continued) | |
Residential Funding Mortgage Securities Trust
2006-S3 A7
5.50% due 3/25/2036 | | $ | 1,555,114 | | | $ | 1,317,705 | |
Structured Asset Securities Corp.
2004-21XS 2A6A
4.74% due 12/25/2034(1) | | | 3,658,809 | | | | 3,688,790 | |
2005-1 4A1
5.00% due 2/25/2020 | | | 2,451,815 | | | | 2,498,851 | |
Wells Fargo Mortgage Backed Securities Trust
2005-1 1A1
4.75% due 1/25/2020 | | | 2,904,241 | | | | 3,001,127 | |
2005-2 2A1
4.75% due 4/25/2020(3) | | | 2,605,279 | | | | 2,706,249 | |
2004-2 A1
5.00% due 1/25/2019 | | | 1,644,925 | | | | 1,698,979 | |
2006-1 A3
5.00% due 3/25/2021 | | | 4,882,975 | | | | 4,857,730 | |
2003-2 A7
5.25% due 2/25/2018(3) | | | 4,049,626 | | | | 4,165,384 | |
2006-7 1A1
5.25% due 6/25/2021 | | | 1,140,217 | | | | 1,155,882 | |
2003-9 1A3
5.25% due 8/25/2033 | | | 2,464,872 | | | | 2,562,235 | |
2005-6 A1
5.25% due 8/25/2035 | | | 4,441,404 | | | | 4,462,563 | |
2004-6 A4
5.50% due 6/25/2034 | | | 3,181,579 | | | | 3,425,068 | |
2007-13 A7
6.00% due 9/25/2037 | | | 2,220,193 | | | | 2,129,727 | |
| | | | | | | | | |
Total Collateralized Mortgage Obligations
(Cost $110,748,667) | | | | 112,424,482 | |
| | | | | | | | |
| | | Principal
Amount | | | Value | |
| Senior Secured Loans – 0.7% | | | | | |
| Finance Companies – 0.1% | | | | | |
Springleaf Finance Corp.
Term Loan
5.50% due 5/10/2017(1) | | | 750,000 | | | | 734,250 | |
| | | | | | | | | |
| | | | | 734,250 | |
| Healthcare – 0.4% | | | | | |
Grifols, Inc.
Term Loan B
6.00% due 11/23/2016(1) | | | 2,000,000 | | | | 2,006,260 | |
IMS Health, Inc. New
Term Loan B
4.50% due 8/25/2017(1) | | | 740,633 | | | | 740,982 | |
| | | | | | | | | |
| | | | | 2,747,242 | |
| Metals And Mining – 0.2% | | | | | |
Novelis, Inc.
New Term Loan B
3.75% due 3/10/2017(1) | | | 1,592,000 | | | | 1,592,541 | |
| | | | | | | | | |
| | | | | 1,592,541 | |
Total Senior Secured Loans
(Cost $5,085,615) | | | | 5,074,033 | |
| | | | | | | | |
| June 30, 2011 (unaudited) | | Principal
Amount | | | Value | |
| Commercial Mortgage-Backed Securities – 20.9% | |
Adams Outdoor Advertising LP
2010-1 A
5.438% due 12/20/2040(2) | | $ | 4,771,626 | | | $ | 4,963,137 | |
American Tower Trust
2007-1A AFX
5.42% due 4/15/2037(2)(3) | | | 4,420,000 | | | | 4,756,769 | |
Banc of America Commercial Mortgage, Inc.
2005-6 A4
5.367% due 9/10/2047(1) | | | 5,800,000 | | | | 6,328,270 | |
2006-2 A4
5.924% due 5/10/2045(1) | | | 3,400,000 | | | | 3,762,704 | |
Bear Stearns Commercial Mortgage Securities
2003-T10 A2
4.74% due 3/13/2040 | | | 4,500,000 | | | | 4,700,827 | |
2005-PW10 A4
5.405% due 12/11/2040(1) | | | 3,735,000 | | | | 4,071,752 | |
2005-PW10 AM
5.449% due 12/11/2040(1) | | | 3,466,000 | | | | 3,477,919 | |
Chase Commercial Mortgage Securities Corp.
1998-1 F
6.56% due 5/18/2030(1)(2) | | | 3,152,942 | | | | 3,307,954 | |
Citigroup Commercial Mortgage Trust
2006-C5 A4
5.431% due 10/15/2049 | | | 6,320,000 | | | | 6,859,534 | |
Citigroup/Deutsche Bank Commercial Mortgage Trust
2005-CD1 AM
5.394% due 7/15/2044(1) | | | 4,295,000 | | | | 4,351,599 | |
Credit Suisse Mortgage Capital Certificates
2006-C3 A3
6.014% due 6/15/2038(1) | | | 380,000 | | | | 417,587 | |
Crown Castle Towers LLC
Sr. Sec. Nt.
6.113% due 1/15/2020(2)(3) | | | 5,800,000 | | | | 6,328,490 | |
CS First Boston Mortgage Securities Corp.
2004-C5 A2
4.183% due 11/15/2037 | | | 865,066 | | | | 864,592 | |
2005-C1 AJ
5.075% due 2/15/2038(1) | | | 2,765,000 | | | | 2,750,653 | |
2005-C5 AM
5.10% due 8/15/2038(1) | | | 2,100,000 | | | | 2,122,505 | |
Four Times Square Trust
2006-4TS A
5.401% due 12/13/2028(2) | | | 4,100,000 | | | | 4,340,175 | |
GE Capital Commercial Mortgage Corp.
2003-C2 A4
5.145% due 7/10/2037 | | | 4,975,000 | | | | 5,265,437 | |
GMAC Commercial Mortgage Securities, Inc.
2006 C1 AM
5.29% due 11/10/2045(1) | | | 2,100,000 | | | | 2,082,405 | |
| | | | | | | | | |
| | | | |
| 10 | | | | The accompanying notes are an integral part of these financial statements. |
RS INVESTMENT QUALITY BOND VIP SERIES
| | | | | | | | |
| June 30, 2011 (unaudited) | | Principal
Amount | | | Value | |
| Commercial Mortgage-Backed Securities (continued) | |
Greenwich Capital Commercial Funding Corp.
2003-C2 A4
4.915% due 1/5/2036 | | $ | 3,900,000 | | | $ | 4,138,056 | |
2004-GG1 A7
5.317% due 6/10/2036(1) | | | 3,764,000 | | | | 4,044,168 | |
J.P. Morgan Chase Commercial Mortgage Securities Corp.
2011-C4 A3
4.106% due 7/15/2046(2) | | | 6,600,000 | | | | 6,585,760 | |
2005-LDP3 A4
4.936% due 8/15/2042(1)(3) | | | 4,000,000 | | | | 4,306,862 | |
2005-LDP5 A4
5.371% due 12/15/2044(1)(3) | | | 2,880,000 | | | | 3,142,861 | |
2001-C1 A3
5.857% due 10/12/2035(3) | | | 1,269,345 | | | | 1,271,353 | |
LB Commercial Conduit Mortgage Trust
1998-C1 F
6.30% due 2/18/2030(2) | | | 5,000,000 | | | | 5,147,974 | |
LB UBS Commercial Mortgage Trust
2002-C7 A4
4.96% due 12/15/2031 | | | 4,400,000 | | | | 4,595,117 | |
2003-C8 A4
5.124% due 11/15/2032(1) | | | 1,000,000 | | | | 1,067,102 | |
2002-C1 A4
6.462% due 3/15/2031 | | | 769,932 | | | | 786,272 | |
Morgan Stanley Capital I
2004-HQ3 A3
4.49% due 1/13/2041 | | | 157,356 | | | | 159,418 | |
2005-HQ7 AAB
5.351% due 11/14/2042(1) | | | 4,613,435 | | | | 4,775,967 | |
NCUA Guaranteed Notes
2010-C1 A2
2.90% due 10/29/2020 | | | 2,190,000 | | | | 2,185,909 | |
Salomon Brothers Mortgage Securities VII, Inc.
1999-C1 G
7.286% due 5/18/2032(1)(2) | | | 4,237,000 | | | | 4,519,069 | |
SBA Tower Trust
Sec. Nt.
4.254% due 4/15/2015(2) | | | 5,500,000 | | | | 5,786,153 | |
Wachovia Bank Commercial Mortgage Trust
2004-C10 A4
4.748% due 2/15/2041 | | | 1,841,894 | | | | 1,945,539 | |
2005-C18 A4
4.935% due 4/15/2042 | | | 2,495,000 | | | | 2,687,128 | |
2004-C11 A5
5.215% due 1/15/2041(1) | | | 3,477,000 | | | | 3,735,982 | |
2006-C23 AM | | | | | | | | |
5.466% due 1/15/2045(1) | | | 4,050,000 | | | | 4,163,514 | |
WF-RBS Commercial Mortgage Trust
2011-C2 A4
4.869% due 2/15/2044(1)(2) | | | 4,100,000 | | | | 4,202,765 | |
| | | | | | | | | |
Total Commercial Mortgage-Backed Securities
(Cost $136,742,645) | | | | 139,999,278 | |
| | | | | | | | |
| June 30, 2011 (unaudited) | | Principal
Amount | | | Value | |
| Corporate Bonds – 32.3% | | | | | | | | |
| Aerospace & Defense – 0.1% | |
Northrop Grumman Space & Mission Systems Corp.
7.75% due 6/1/2029 | | $ | 500,000 | | | $ | 635,494 | |
| | | | | | | | | |
| | | | | 635,494 | |
| Automotive – 1.2% | |
Banque PSA Finance
Sr. Nt.
5.75% due 4/4/2021(2) | | | 1,600,000 | | | | 1,619,117 | |
BorgWarner, Inc.
Sr. Nt.
4.625% due 9/15/2020 | | | 1,500,000 | | | | 1,528,724 | |
Ford Motor Credit Co. LLC
Sr. Nt.
8.00% due 6/1/2014 | | | 3,000,000 | | | | 3,291,129 | |
RCI Banque SA
Sr. Nt.
4.60% due 4/12/2016(2) | | | 1,500,000 | | | | 1,532,284 | |
| | | | | | | | | |
| | | | | 7,971,254 | |
| Banking – 5.2% | | | | | | | | |
American Express Bank FSB
6.00% due 9/13/2017 | | | 500,000 | | | | 564,009 | |
Bank of America Corp.
Sr. Nt.
7.375% due 5/15/2014 | | | 1,500,000 | | | | 1,686,294 | |
Bank One Corp.
5.25% due 1/30/2013 | | | 600,000 | | | | 635,522 | |
Citigroup, Inc.
Sr. Nt.
6.125% due 11/21/2017-5/15/2018 | | | 3,400,000 | | | | 3,748,696 | |
City National Corp.
5.125% due 2/15/2013 | | | 700,000 | | | | 731,257 | |
Credit Suisse First Boston USA, Inc.
6.50% due 1/15/2012 | | | 800,000 | | | | 825,078 | |
Credit Suisse/New York NY
Sr. Nt.
3.50% due 3/23/2015 | | | 1,000,000 | | | | 1,031,029 | |
5.30% due 8/13/2019 | | | 1,200,000 | | | | 1,277,263 | |
Deutsche Bank AG London
6.00% due 9/1/2017 | | | 800,000 | | | | 892,595 | |
Discover Bank Sub. Nt.
7.00% due 4/15/2020 | | | 1,600,000 | | | | 1,777,106 | |
Fifth Third Capital Trust IV
6.50% due 4/15/2037(1) | | | 1,500,000 | | | | 1,473,750 | |
HSBC USA, Inc.
4.625% due 4/1/2014 | | | 700,000 | | | | 746,161 | |
Huntington BancShares, Inc. Sub. Nt.
7.00% due 12/15/2020 | | | 1,500,000 | | | | 1,691,256 | |
JPMorgan Chase Bank N.A.
6.00% due 10/1/2017 | | | 1,500,000 | | | | 1,666,908 | |
Lloyds TSB Bank PLC
5.80% due 1/13/2020(2) | | | 1,500,000 | | | | 1,502,172 | |
| | | | | | | | | |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 11 |
SCHEDULE OF INVESTMENTS — RS INVESTMENT QUALITY BOND VIP SERIES
| | | | | | | | |
| June 30, 2011 (unaudited) | | Principal
Amount | | | Value | |
| Banking (continued) | | | | | | | | |
Merrill Lynch & Co., Inc.
Sr. Nt. Ser. C
6.05% due 8/15/2012 | | $ | 1,000,000 | | | $ | 1,052,711 | |
Morgan Stanley
5.95% due 12/28/2017 | | | 2,300,000 | | | | 2,472,608 | |
PNC Bank N.A.
6.875% due 4/1/2018 | | | 800,000 | | | | 942,916 | |
Regions Financial Corp.
Sr. Nt.
4.875% due 4/26/2013 | | | 1,500,000 | | | | 1,512,889 | |
Santander U.S. Debt S.A. Unipersonal
3.724% due 1/20/2015(2) | | | 1,300,000 | | | | 1,258,354 | |
The Bear Stearns Cos. LLC
Sub. Nt.
5.55% due 1/22/2017 | | | 800,000 | | | | 874,944 | |
The Goldman Sachs Group, Inc.
5.125% due 1/15/2015 | | | 1,600,000 | | | | 1,716,962 | |
5.625% due 1/15/2017 | | | 370,000 | | | | 391,696 | |
UBS AG Stamford CT
Sr. Nt.
4.875% due 8/4/2020 | | | 1,600,000 | | | | 1,618,315 | |
USB Realty Corp.
6.091% due 1/15/2012(1)(2)(4) | | | 950,000 | | | | 828,875 | |
Wachovia Corp.
5.25% due 8/1/2014 | | | 700,000 | | | | 750,305 | |
Wells Fargo Bank N.A.
5.75% due 5/16/2016 | | | 1,200,000 | | | | 1,334,933 | |
| | | | | | | | | |
| | | | | 35,004,604 | |
| Brokerage – 1.2% | | | | | | | | |
BlackRock, Inc.
Sr. Nt.
3.50% due 12/10/2014 | | | 1,200,000 | | | | 1,264,639 | |
4.25% due 5/24/2021 | | | 1,700,000 | | | | 1,671,911 | |
Jefferies Group, Inc.
Sr. Nt.
3.875% due 11/9/2015 | | | 1,200,000 | | | | 1,219,483 | |
Lehman Brothers Holdings Capital Trust VII
5.857% due 5/31/2012(4)(5) | | | 1,000,000 | | | | 100 | |
Nomura Holdings, Inc.
Sr. Nt.
5.00% due 3/4/2015 | | | 1,600,000 | | | | 1,686,962 | |
Raymond James Financial, Inc.
Sr. Nt.
4.25% due 4/15/2016 | | | 1,200,000 | | | | 1,238,827 | |
The Charles Schwab Corp.
Sr. Nt.
4.95% due 6/1/2014 | | | 1,000,000 | | | | 1,096,427 | |
| | | | | | | | | |
| | | | | | | | 8,178,349 | |
| Building Materials – 0.5% | | | | | | | | |
CRH America, Inc.
6.00% due 9/30/2016 | | | 1,350,000 | | | | 1,481,853 | |
| | | | | | | | | |
| | | | | | | | |
| June 30, 2011 (unaudited) | | Principal
Amount | | | Value | |
| Building Materials (continued) | | | | | | | | |
Masco Corp.
Sr. Nt.
5.875% due 7/15/2012 | | $ | 1,500,000 | | | $ | 1,551,549 | |
| | | | | | | | | |
| | | | | 3,033,402 | |
| Chemicals – 0.8% | | | | | | | | |
Celanese US Holdings LLC
Sr. Nt.
5.875% due 6/15/2021 | | | 1,300,000 | | | | 1,329,250 | |
FMC Corp.
Sr. Nt.
5.20% due 12/15/2019 | | | 500,000 | | | | 534,155 | |
Incitec Pivot Finance LLC
6.00% due 12/10/2019(2) | | | 1,200,000 | | | | 1,285,238 | |
Lubrizol Corp.
Sr. Nt.
8.875% due 2/1/2019 | | | 500,000 | | | | 650,281 | |
The Dow Chemical Co.
Sr. Nt.
5.70% due 5/15/2018 | | | 1,500,000 | | | | 1,662,171 | |
| | | | | | | | | |
| | | | | | | | 5,461,095 | |
| Construction Machinery – 0.2% | | | | | | | | |
Joy Global, Inc.
6.00% due 11/15/2016 | | | 1,200,000 | | | | 1,351,789 | |
| | | | | | | | | |
| | | | | | | | 1,351,789 | |
| Consumer Products – 0.2% | | | | | | | | |
Whirlpool Corp.
Sr. Nt.
8.00% due 5/1/2012 | | | 1,000,000 | | | | 1,056,579 | |
| | | | | | | | | |
| | | | | | | | 1,056,579 | |
| Diversified Manufacturing – 0.1% | | | | | | | | |
Siemens Financieringsmat N.V.
6.125% due 8/17/2026(2) | | | 750,000 | | | | 849,137 | |
| | | | | | | | | |
| | | | | | | | 849,137 | |
| Electric – 1.0% | | | | | | | | |
Alabama Power Co.
5.65% due 3/15/2035 | | | 750,000 | | | | 748,085 | |
Duquesne Light Holdings, Inc.
Sr. Nt.
5.50% due 8/15/2015 | | | 1,515,000 | | | | 1,578,848 | |
Florida Power & Light Co.
4.95% due 6/1/2035 | | | 750,000 | | | | 727,570 | |
Nevada Power Co.
6.65% due 4/1/2036 | | | 600,000 | | | | 692,697 | |
PacifiCorp
5.25% due 6/15/2035 | | | 350,000 | | | | 346,739 | |
PPL Electric Utilities Corp.
6.25% due 5/15/2039 | | | 1,455,000 | | | | 1,639,065 | |
Virginia Electric and Power Co.
Sr. Nt.
8.875% due 11/15/2038 | | | 800,000 | | | | 1,184,275 | |
| | | | | | | | | |
| | | | | | | | 6,917,279 | |
| Energy - Integrated – 0.8% | | | | | | | | |
BP Capital Markets PLC
4.50% due 10/1/2020 | | | 1,600,000 | | | | 1,631,670 | |
| | | | | | | | | |
| | | | |
| 12 | | | | The accompanying notes are an integral part of these financial statements. |
RS INVESTMENT QUALITY BOND VIP SERIES
| | | | | | | | |
| June 30, 2011 (unaudited) | | Principal
Amount | | | Value | |
| Energy - Integrated (continued) | | | | | | | | |
Hess Corp.
Sr. Nt
. 5.60% due 2/15/2041 | | $ | 2,000,000 | | | $ | 1,954,928 | |
Suncor Energy, Inc.
Sr. Nt.
6.50% due 6/15/2038 | | | 1,200,000 | | | | 1,310,434 | |
Tosco Corp.
8.125% due 2/15/2030 | | | 500,000 | | | | 653,314 | |
| | | | | | | | | |
| | | | | | | | 5,550,346 | |
| Entertainment – 0.4% | | | | | | | | |
Time Warner, Inc.
7.57% due 2/1/2024 | | | 1,450,000 | | | | 1,782,626 | |
Viacom, Inc.
6.875% due 4/30/2036 | | | 800,000 | | | | 893,123 | |
| | | | | | | | | |
| | | | | | | | 2,675,749 | |
| Food And Beverage – 0.8% | | | | | | | | |
Anheuser-Busch InBev Worldwide, Inc.
4.125% due 1/15/2015 | | | 1,650,000 | | | | 1,774,514 | |
Kraft Foods, Inc.
Sr. Nt.
6.50% due 2/9/2040 | | | 500,000 | | | | 555,387 | |
Mead Johnson Nutrition Co.
Sr. Nt.
4.90% due 11/1/2019 | | | 1,200,000 | | | | 1,266,244 | |
Pernod-Ricard S.A.
Sr. Nt.
5.75% due 4/7/2021(2) | | | 2,000,000 | | | | 2,088,114 | |
| | | | | | | | | |
| | | | | | | | 5,684,259 | |
| Gaming – 0.2% | | | | | | | | |
Seminole Indian Tribe of Florida
Sr. Sec. Nt.
5.798% due 10/1/2013(2) | | | 1,500,000 | | | | 1,506,060 | |
| | | | | | | | | |
| | | | | | | | 1,506,060 | |
| Government Related – 1.0% | | | | | | | | |
Korea Electric Power Corp.
Sr. Nt.
5.50% due 7/21/2014(2) | | | 1,500,000 | | | | 1,617,508 | |
Pemex Project Funding Master Trust
5.75% due 3/1/2018 | | | 700,000 | | | | 767,554 | |
Petrobras International Finance Co.
5.875% due 3/1/2018 | | | 1,250,000 | | | | 1,344,963 | |
RAS Laffan Liquefied Natural Gas Co. Ltd.
Sr. Sec. Nt.
6.75% due 9/30/2019(2) | | | 2,300,000 | | | | 2,668,000 | |
| | | | | | | | | |
| | | | | | | | 6,398,025 | |
| Health Insurance – 0.3% | | | | | | | | |
UnitedHealth Group, Inc.
6.50% due 6/15/2037 | | | 500,000 | | | | 546,700 | |
WellPoint, Inc.
Sr. Nt.
4.35% due 8/15/2020 | | | 1,200,000 | | | | 1,211,742 | |
| | | | | | | | | |
| | | | | | | | 1,758,442 | |
| Healthcare – 0.7% | | | | | | | | |
Beckman Coulter, Inc.
Sr. Nt.
7.00% due 6/1/2019 | | | 750,000 | | | | 885,103 | |
| | | | | | | | | |
| | | | | | | | |
| June 30, 2011 (unaudited) | | Principal
Amount | | | Value | |
| Healthcare (continued) | | | | | | | | |
Bio-Rad Laboratories, Inc.
Sr. Nt.
4.875% due 12/15/2020 | | $ | 1,300,000 | | | $ | 1,322,012 | |
Fresenius Medical Care US Finance, Inc.
6.875% due 7/15/2017 | | | 1,500,000 | | | | 1,586,250 | |
McKesson Corp.
Sr. Nt.
7.50% due 2/15/2019 | | | 600,000 | | | | 737,035 | |
| | | | | | | | | |
| | | | | | | | 4,530,400 | |
| Independent Energy – 1.0% | | | | | | | | |
Canadian Natural Resources Ltd.
6.25% due 3/15/2038 | | | 600,000 | | | | 652,844 | |
Chesapeake Energy Corp.
6.125% due 2/15/2021 | | | 1,400,000 | | | | 1,417,500 | |
Dolphin Energy Ltd.
Sr. Sec. Nt.
5.888% due 6/15/2019(2) | | | 1,767,200 | | | | 1,904,158 | |
Nexen, Inc.
Sr. Nt.
6.20% due 7/30/2019 | | | 900,000 | | | | 1,011,053 | |
Whiting Petroleum Corp.
6.50% due 10/1/2018 | | | 1,600,000 | | | | 1,664,000 | |
| | | | | | | | | |
| | | | | | | | 6,649,555 | |
| Industrial - Other – 0.3% | | | | | | | | |
Princeton University
Sr. Nt.
5.70% due 3/1/2039 | | | 1,600,000 | | | | 1,790,016 | |
| | | | | | | | | |
| | | | | | | | 1,790,016 | |
| Insurance - Life – 2.4% | | | | | | | | |
American International Group, Inc. Sr. Nt.
5.85% due 1/16/2018 | | | 1,000,000 | | | | 1,046,376 | |
AXA SA
6.463% due 12/14/2018(1)(2)(4) | | | 800,000 | | | | 692,000 | |
Genworth Financial, Inc.
Sr. Nt.
7.20% due 2/15/2021 | | | 2,400,000 | | | | 2,401,714 | |
ING Groep N.V. Jr.
Sub. Nt.
5.775% due 12/8/2015(1)(4) | | | 2,000,000 | | | | 1,840,000 | |
MetLife, Inc.
6.40% due 12/15/2036 | | | 500,000 | | | | 487,500 | |
Sr. Nt. Series A
6.817% due 8/15/2018 | | | 1,400,000 | | | | 1,639,198 | |
New York Life Insurance Co. Sub. Nt.
6.75% due 11/15/2039(2) | | | 1,000,000 | | | | 1,139,123 | |
Prudential Financial, Inc.
Sr. Nt.
7.375% due 6/15/2019 | | | 1,500,000 | | | | 1,778,858 | |
Symetra Financial Corp.
6.125% due 4/1/2016(2) | | | 800,000 | | | | 842,388 | |
Teachers Insurance & Annuity Association of America Nt.
6.85% due 12/16/2039(2) | | | 1,200,000 | | | | 1,365,464 | |
| | | | | | | | | |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 13 |
SCHEDULE OF INVESTMENTS — RS INVESTMENT QUALITY BOND VIP SERIES
| | | | | | | | |
| June 30, 2011 (unaudited) | | Principal
Amount | | | Value | |
| Insurance - Life (continued) | | | | | | | | |
The Hartford Financial Services Group, Inc.
Sr. Nt.
5.50% due 3/30/2020 | | $ | 1,500,000 | | | $ | 1,546,214 | |
UnumProvident Finance Co.
Sr. Nt.
6.85% due 11/15/2015(2) | | | 1,100,000 | | | | 1,231,320 | |
| | | | | | | | | |
| | | | | | | | 16,010,155 | |
| Insurance P&C – 1.6% | | | | | | | | |
Ace INA Holdings, Inc.
5.80% due 3/15/2018 | | | 1,000,000 | | | | 1,112,887 | |
Allied World Assurance Co. Hldgs. Ltd.
7.50% due 8/1/2016 | | | 1,100,000 | | | | 1,260,537 | |
Allstate Life Global Funding Trust Nt.
5.375% due 4/30/2013 | | | 750,000 | | | | 808,277 | |
Berkshire Hathaway Finance Corp.
5.75% due 1/15/2040 | | | 1,500,000 | | | | 1,558,289 | |
Liberty Mutual Group, Inc.
5.00% due 6/1/2021(2) | | | 1,400,000 | | | | 1,325,694 | |
The Northwestern Mutual Life Insurance Co.
Nt.
6.063% due 3/30/2040(2) | | | 1,500,000 | | | | 1,580,974 | |
The Travelers Cos., Inc.
Sr. Nt.
5.75% due 12/15/2017 | | | 1,000,000 | | | | 1,115,123 | |
ZFS Finance USA Trust II
Jr. Sub. Nt.
6.45% due 12/15/2065(1)(2) | | | 1,600,000 | | | | 1,624,000 | |
| | | | | | | | | |
| | | | | | | | 10,385,781 | |
| Lodging – 0.3% | | | | | | | | |
Host Hotels & Resorts LP
6.875% due 11/1/2014 | | | 1,700,000 | | | | 1,742,500 | |
| | | | | | | | | |
| | | | | | | | 1,742,500 | |
| Media Cable – 1.2% | | | | | | | | |
Comcast Corp. | | | | | | | | |
6.45% due 3/15/2037 | | | 1,000,000 | | | | 1,069,555 | |
6.50% due 1/15/2017 | | | 1,100,000 | | | | 1,282,059 | |
Time Warner Cable, Inc. | | | | | | | | |
5.40% due 7/2/2012 | | | 1,000,000 | | | | 1,045,375 | |
5.85% due 5/1/2017 | | | 2,900,000 | | | | 3,261,203 | |
Virgin Media Secured Finance PLC Sr. Sec. Nt.
6.50% due 1/15/2018 | | | 1,500,000 | | | | 1,644,375 | |
| | | | | | | | | |
| | | | | | | | 8,302,567 | |
| Media Noncable – 0.2% | | | | | | | | |
Scholastic Corp.
Sr. Nt.
5.00% due 4/15/2013 | | | 1,500,000 | | | | 1,535,625 | |
| | | | | | | | | |
| | | | | | | | 1,535,625 | |
| | | | | | | | |
| June 30, 2011 (unaudited) | | Principal
Amount | | | Value | |
| Metals And Mining – 1.8% | | | | | | | | |
Allegheny Technologies, Inc.
Sr. Nt.
9.375% due 6/1/2019 | | $ | 1,500,000 | | | $ | 1,900,592 | |
ArcelorMittal
Sr. Nt.
6.125% due 6/1/2018 | | | 750,000 | | | | 803,309 | |
Cliffs Natural Resources, Inc.
Sr. Nt.
5.90% due 3/15/2020 | | | 2,250,000 | | | | 2,435,989 | |
FMG Resources August 2006 Pty. Ltd.
6.375% due 2/1/2016(2) | | | 2,000,000 | | | | 1,995,000 | |
Freeport-McMoRan Copper & Gold, Inc.
Sr. Nt.
8.375% due 4/1/2017 | | | 1,200,000 | | | | 1,311,000 | |
Steel Dynamics, Inc.
6.75% due 4/1/2015 | | | 1,500,000 | | | | 1,530,000 | |
United States Steel Corp.
Sr. Nt.
7.00% due 2/1/2018 | | | 1,500,000 | | | | 1,515,000 | |
Vale Overseas Ltd.
6.25% due 1/23/2017 | | | 400,000 | | | | 452,498 | |
| | | | | | | | | |
| | | | | | | | 11,943,388 | |
| Non Captive Consumer – 0.3% | | | | | | | | |
Household Finance Corp.
6.375% due 11/27/2012 | | | 1,000,000 | | | | 1,069,822 | |
SLM Corp.
Sr. Nt.
6.25% due 1/25/2016 | | | 1,200,000 | | | | 1,245,000 | |
| | | | | | | | | |
| | | | | | | | 2,314,822 | |
| Non Captive Diversified – 1.2% | | | | | | | | |
Ally Financial, Inc.
4.50% due 2/11/2014 | | | 1,500,000 | | | | 1,500,000 | |
CIT Group, Inc.
Sec. Nt.
5.25% due 4/1/2014(2) | | | 1,500,000 | | | | 1,492,500 | |
GATX Corp.
Sr. Nt.
4.75% due 10/1/2012 | | | 650,000 | | | | 676,381 | |
General Electric Capital Corp.
6.75% due 3/15/2032 | | | 1,000,000 | | | | 1,111,052 | |
Sr. Nt.
5.625% due 5/1/2018 | | | 1,200,000 | | | | 1,312,462 | |
KKR Group Finance Co.
6.375% due 9/29/2020(2) | | | 1,600,000 | | | | 1,692,042 | |
| | | | | | | | | |
| | | | | | | | 7,784,437 | |
| Oil Field Services – 0.4% | | | | | | | | |
Transocean, Inc.
Sr. Nt.
6.00% due 3/15/2018 | | | 550,000 | | | | 608,950 | |
Weatherford International Ltd.
5.15% due 3/15/2013 | | | 700,000 | | | | 739,607 | |
6.50% due 8/1/2036 | | | 1,500,000 | | | | 1,547,277 | |
| | | | | | | | | |
| | | | | | | | 2,895,834 | |
| | | | |
| 14 | | | | The accompanying notes are an integral part of these financial statements. |
RS INVESTMENT QUALITY BOND VIP SERIES
| | | | | | | | |
| June 30, 2011 (unaudited) | | Principal
Amount | | | Value | |
| Paper – 0.5% | | | | | | | | |
Georgia-Pacific LLC
5.40% due 11/1/2020(2) | | $ | 2,000,000 | | | $ | 2,038,264 | |
Rock-Tenn Co.
Sr. Sec. Nt.
8.20% due 8/15/2011 | | | 1,300,000 | | | | 1,311,375 | |
| | | | | | | | | |
| | | | | | | | 3,349,639 | |
| Pharmaceuticals – 0.7% | | | | | | | | |
Abbott Laboratories
Sr. Nt.
5.125% due 4/1/2019 | | | 1,400,000 | | | | 1,540,189 | |
Amgen, Inc.
5.85% due 6/1/2017 | | | 400,000 | | | | 463,183 | |
Eli Lilly & Co.
Sr. Nt.
4.20% due 3/6/2014 | | | 1,500,000 | | | | 1,619,447 | |
Pfizer, Inc.
Sr. Nt.
6.20% due 3/15/2019 | | | 800,000 | | | | 935,802 | |
| | | | | | | | | |
| | | | | | | | 4,558,621 | |
| Pipelines – 1.0% | | | | | | | | |
Boardwalk Pipelines LP
5.75% due 9/15/2019 | | | 1,600,000 | | | | 1,730,184 | |
Energy Transfer Partners LP
Sr. Nt.
8.50% due 4/15/2014 | | | 750,000 | | | | 872,592 | |
Enterprise Products Operating LLC | | | | | |
5.20% due 9/1/2020 | | | 1,000,000 | | | | 1,054,438 | |
8.375% due 8/1/2066(1) | | | 400,000 | | | | 433,000 | |
Magellan Midstream Partners LP
6.55% due 7/15/2019 | | | 1,200,000 | | | | 1,394,144 | |
Williams Partners LP
Sr. Nt.
5.25% due 3/15/2020 | | | 1,000,000 | | | | 1,052,804 | |
| | | | | | | | | |
| | | | | | | | 6,537,162 | |
| Railroads – 0.1% | | | | | | | | |
Canadian National Railway Co.
Sr. Nt.
5.85% due 11/15/2017 | | | 800,000 | | | | 932,718 | |
| | | | | | | | | |
| | | | | | | | 932,718 | |
| Refining – 0.4% | | | | | | | | |
Motiva Enterprises LLC
Nt.
5.75% due 1/15/2020(2) | | | 1,500,000 | | | | 1,663,104 | |
Valero Energy Corp.
Sr. Nt.
9.375% due 3/15/2019 | | | 600,000 | | | | 766,369 | |
| | | | | | | | | |
| | | | | | | | 2,429,473 | |
| REITs – 0.9% | | | | | | | | |
CommonWealth REIT
Sr. Nt.
5.875% due 9/15/2020 | | | 1,200,000 | | | | 1,232,281 | |
Equity One, Inc.
6.25% due 12/15/2014 | | | 1,100,000 | | | | 1,201,871 | |
| | | | | | | | | |
| | | | | | | | |
| June 30, 2011 (unaudited) | | Principal
Amount | | | Value | |
| REITs (continued) | | | | | | | | |
ERP Operating LP
5.375% due 8/1/2016 | | $ | 775,000 | | | $ | 850,358 | |
ProLogis LP
Sr. Nt.
6.875% due 3/15/2020 | | | 1,500,000 | | | | 1,656,315 | |
WEA Finance LLC
5.40% due 10/1/2012(2) | | | 900,000 | | | | 945,711 | |
| | | | | | | | | |
| | | | | | | | 5,886,536 | |
| Retailers – 0.5% | | | | | | | | |
Macy’s Retail Holdings, Inc.
5.90% due 12/1/2016 | | | 1,500,000 | | | | 1,683,845 | |
Nordstrom, Inc.
Sr. Nt.
4.75% due 5/1/2020 | | | 1,500,000 | | | | 1,576,116 | |
| | | | | | | | | |
| | | | | | | | 3,259,961 | |
| Technology – 0.6% | | | | | | | | |
Computer Sciences Corp.
Series WI
Sr. Nt.
6.50% due 3/15/2018 | | | 800,000 | | | | 856,762 | |
Corning, Inc.
Sr. Nt.
6.625% due 5/15/2019 | | | 1,000,000 | | | | 1,164,646 | |
Kla-Tencor Corp.
Sr. Nt.
6.90% due 5/1/2018 | | | 1,500,000 | | | | 1,694,427 | |
National Semiconductor Corp.
6.60% due 6/15/2017 | | | 500,000 | | | | 588,472 | |
| | | | | | | | | |
| | | | | | | | 4,304,307 | |
| Wireless – 1.0% | | | | | | | | |
America Movil S.A.B. de C.V.
5.00% due 10/16/2019 | | | 1,500,000 | | | | 1,566,222 | |
American Tower Corp.
Sr. Nt.
4.625% due 4/1/2015 | | | 1,500,000 | | | | 1,579,128 | |
Cellco Partnership
Sr. Nt.
5.55% due 2/1/2014 | | | 800,000 | | | | 881,784 | |
New Cingular Wireless Services, Inc.
8.125% due 5/1/2012 | | | 1,250,000 | | | | 1,325,299 | |
Vodafone Group PLC
Sr. Nt.
5.45% due 6/10/2019 | | | 1,000,000 | | | | 1,111,424 | |
6.15% due 2/27/2037 | | | 350,000 | | | | 375,555 | |
| | | | | | | | | |
| | | | | | | | 6,839,412 | |
| Wirelines – 1.2% | | | | | | | | |
AT&T, Inc.
6.30% due 1/15/2038 | | | 1,200,000 | | | | 1,270,774 | |
Deutsche Telekom International Finance BV
8.75% due 6/15/2030 | | | 850,000 | | | | 1,121,823 | |
France Telecom S.A.
8.50% due 3/1/2031 | | | 335,000 | | | | 450,875 | |
| | | | | | | | | |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 15 |
SCHEDULE OF INVESTMENTS — RS INVESTMENT QUALITY BOND VIP SERIES
| | | | | | | | |
| June 30, 2011 (unaudited) | | Principal
Amount | | | Value | |
| Wirelines (continued) | | | | | | | | |
Qwest Communications International, Inc.
7.125% due 4/1/2018 | | $ | 1,500,000 | | | $ | 1,610,625 | |
Telecom Italia Capital SA | | | | | | | | |
5.25% due 11/15/2013-
10/1/2015 | | | 2,050,000 | | | | 2,146,452 | |
Verizon Communications, Inc.
6.40% due 2/15/2038 | | | 1,250,000 | | | | 1,354,728 | |
| | | | | | | | | |
| | | | | | | | 7,955,277 | |
Total Corporate Bonds
(Cost $202,826,384) | | | | | | | 215,970,049 | |
| | | | | | | | |
| | | Principal
Amount | | | Value | |
| Hybrid ARMS – 0.3% | | | | | | | | |
FNMA
5.765% due 12/1/2036(1) | | | 959,525 | | | | 1,019,426 | |
6.228% due 8/1/2046(1) | | | 740,522 | | | | 764,542 | |
| | | | | | | | | |
Total Hybrid ARMS
(Cost $1,711,596) | | | | | | | 1,783,968 | |
| | | | | | | | |
| | | Principal
Amount | | | Value | |
| Mortgage Pass-Through Securities – 15.1% | |
FHLMC
4.00% due 12/1/2040 - 1/1/2041 | | | 17,928,745 | | | | 17,939,770 | |
5.50% due 2/1/2037 - 6/1/2038 | | | 4,051,091 | | | | 4,387,925 | |
7.00% due 9/1/2038 | | | 816,514 | | | | 939,117 | |
FNMA | | | | | | | | |
4.00% due 11/1/2040 | | | 9,896,538 | | | | 9,910,505 | |
4.50% due 12/1/2041(6) | | | 14,700,000 | | | | 15,207,606 | |
5.00% due 4/1/2023 - 12/1/2039 | | | 21,849,424 | | | | 23,263,970 | |
5.00% due 12/1/2041(6) | | | 4,000,000 | | | | 4,250,000 | |
5.50% due 1/1/2038 - 5/1/2038 | | | 15,312,353 | | | | 16,575,466 | |
5.50% due 12/1/2041(6) | | | 6,000,000 | | | | 6,487,500 | |
6.00% due 8/1/2021 | | | 561,740 | | | | 618,406 | |
6.50% due 2/1/2013 - 12/1/2014 | | | 104,141 | | | | 108,016 | |
7.00% due
9/1/2014 - 6/1/2032 | | | 247,881 | | | | 282,760 | |
7.50% due 12/1/2029 | | | 226,897 | | | | 266,088 | |
8.00% due
1/1/2030 - 9/1/2030 | | | 81,501 | | | | 96,101 | |
| GNMA | | | | | | | | |
6.00% due 10/15/2032 -12/15/2033 | | | 611,407 | | | | 684,521 | |
| | | | | | | | | |
Total Mortgage Pass-Through Securities
(Cost $99,718,876) | | | | 101,017,751 | |
| | | | | | | | |
| June 30, 2011 (unaudited) | | Principal
Amount | | | Value | |
| Municipal Bonds – 1.8% | | | | | |
Arizona Water Infrastructure Finance Authority Revenue Water Quality-Series A
5.00% due 10/1/2027 | | $ | 1,200,000 | | | $ | 1,278,564 | |
California State General Obligation
5.25% due 4/1/2014 | | | 800,000 | | | | 860,000 | |
Chicago Illinois Metropolitan Water Reclamation District Greater Chicago General Obligation Build America Bonds-Taxable Direct Payment
5.72% due 12/1/2038 | | | 1,600,000 | | | | 1,661,632 | |
Illinois State Toll Highway Authority Toll Highway Revenue Build America Bonds-Series A
6.184% due 1/1/2034 | | | 1,000,000 | | | | 1,034,950 | |
Massachusetts Bay Transportation Authority Revenue Series A
5.25% due 7/1/2034 | | | 2,400,000 | | | | 2,518,584 | |
Massachusetts State Health & Educational Facilities Authority Revenue Harvard University-Series A
5.50% due 11/15/2036 | | | 1,190,000 | | | | 1,291,697 | |
New York City Municipal Water Finance Authority Water & Sewer Revenue Build America Bonds-Series EE
6.011% due 6/15/2042 | | | 1,600,000 | | | | 1,753,824 | |
Oregon School Board Association
4.759% due 6/30/2028 | | | 450,000 | | | | 417,348 | |
San Diego County California Water Authority Financing Agency Water Revenue Build America Bonds-Series B
6.138% due 5/1/2049 | | | 1,500,000 | | | | 1,594,050 | |
| | | | | | | | | |
Total Municipal Bonds
(Cost $11,838,185) | | | | | | | 12,410,649 | |
| | | | | | | | |
| | | Principal
Amount | | | Value | |
| U.S. Government Securities – 7.0% | | | | | |
U.S. Treasury Bonds | | | | | | | | |
3.875% due 8/15/2040 | | | 5,750,000 | | | | 5,264,844 | |
4.25% due 11/15/2040 | | | 13,780,000 | | | | 13,469,950 | |
4.375% due 5/15/2040 | | | 1,105,000 | | | | 1,104,315 | |
4.75% due 2/15/2041 | | | 4,970,000 | | | | 5,282,956 | |
6.625% due 2/15/2027 | | | 2,500,000 | | | | 3,307,422 | |
U.S. Treasury Notes
1.75% due 5/31/2016 | | | 2,600,000 | | | | 2,604,056 | |
2.375% due 5/31/2018 | | | 2,000,000 | | | | 1,989,380 | |
3.125% due 5/15/2021 | | | 8,520,000 | | | | 8,496,059 | |
| | | | | | | | | |
| | | | |
| 16 | | | | The accompanying notes are an integral part of these financial statements. |
RS INVESTMENT QUALITY BOND VIP SERIES
| | | | | | | | |
| June 30, 2011 (unaudited) | | Principal
Amount | | | Value | |
| U.S. Government Securities (continued) | | | | | |
3.625% due 2/15/2021 | | $ | 4,825,000 | | | $ | 5,031,191 | |
| | | | | | | | | |
Total U.S. Government Securities
(Cost $46,651,834) | | | | 46,550,173 | |
| | | | | | | | |
| | | Principal
Amount | | | Value | |
| Short-Term Investments – 4.0% | | | | | |
General Electric Capital Corp.
0.08% due 7/14/2011(3) | | | 5,000,000 | | | | 4,999,856 | |
IIllinois Tool Works, Inc.
0.10% due 7/14/2011(3) | | | 5,000,000 | | | | 4,999,819 | |
John Deere Credit Ltd.
0.11% due 7/14/2011(3) | | | 5,000,000 | | | | 4,999,801 | |
Koch Resources LLC
0.09% due 7/14/2011(3) | | | 1,500,000 | | | | 1,499,951 | |
United Parcel Service, Inc.
0.04% due 7/14/2011(3) | | | 5,000,000 | | | | 4,999,928 | |
Wal-Mart Stores, Inc.
0.08% due 7/14/2011(3) | | | 5,000,000 | | | | 4,999,856 | |
| | | | | | | | | |
Total Short-Term Investments
(Cost $26,499,211) | | | | | | | 26,499,211 | |
| | | | | | | | |
| | | Principal
Amount | | | Value | |
| Repurchase Agreements – 1.4% | | | | | |
State Street Bank and Trust Co. Repurchase Agreement,
0.01%, dated 6/30/2011, maturity value of $9,413,003, due 7/1/2011(7) | | | 9,413,000 | | | | 9,413,000 | |
| | | | | | | | | |
Total Repurchase Agreements
(Cost $9,413,000) | | | | | | | 9,413,000 | |
Total Investments - 104.1%
(Cost $676,274,610) | | | | | | | 696,605,946 | |
| Other Liabilities, Net - (4.1)% | | | | | | | (27,735,211 | ) |
| Total Net Assets - 100.0% | | | | | | $ | 668,870,735 | |
| (1) | Variable rate securities, which may include step-up bonds or adjustable rate mortgages. The rate shown is the rate in effect at June 30, 2011. |
| (2) | Securities that may be resold in transactions, exempt from registration under Rule 144A of the Securities Act of 1933, normally to certain qualified buyers. At June 30, 2011, the aggregate market value of these securities amounted to $92,378,485, representing 13.8% of net assets. These securities have been deemed liquid by the investment adviser pursuant to the Fund’s liquidity procedures approved by the Board of Trustees. |
| (3) | Securities are segregated to cover to be announced securities, TBA. |
| (4) | Maturity is perpetual. Maturity date presented represents the next call date. |
| (5) | Non-income producing security. In case of a bond, generally denotes that the issuer has defaulted on the payment of principal or interest or has filed for bankruptcy. The following table presents bonds that are in default. |
| | | | | | | | | | | | | | | | | | | | |
| Security | | Coupon | | | Maturity
Date | | | Principal
Amount | | | Acquisition
Cost | | | Value | |
Lehman Brothers Holdings Capital Trust VII | | | 5.857% | | | | 5/31/2012 | | | $ | 1,000,000 | | | $ | 996,693 | | | $ | 100 | |
| (6) | TBA – To be announced. |
| (7) | The table below presents collateral for repurchase agreements. |
| | | | | | | | | | | | |
| Security | | Coupon | | | Maturity
Date | | | Value | |
| U.S. Treasury Bill | | | 0.00% | | | | 7/21/2011 | | | $ | 9,604,942 | |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 17 |
SCHEDULE OF INVESTMENTS — RS INVESTMENT QUALITY BOND VIP SERIES
The following is a summary of the inputs used as of June 30, 2011 in valuing the Fund’s investments. For more information on valuation inputs, please refer to Note 1a of the accompanying Notes to Financial Statements.
| | | | | | | | | | | | | | | | |
| | | Valuation Inputs | | | | |
| Investments in Securities (unaudited) | | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
| Asset Backed Securities | | $ | — | | | $ | 25,463,352 | | | $ | — | | | $ | 25,463,352 | |
| Collateralized Mortgage Obligations | | | — | | | | 112,424,482 | | | | — | | | | 112,424,482 | |
| Senior Secured Loans | | | — | | | | 5,074,033 | | | | — | | | | 5,074,033 | |
| Commercial Mortgage-Backed Securities | | | — | | | | 139,999,278 | | | | — | | | | 139,999,278 | |
| Corporate Bonds | | | — | | | | 215,970,049 | | | | — | | | | 215,970,049 | |
| Hybrid ARMS | | | — | | | | 1,783,968 | | | | — | | | | 1,783,968 | |
| Mortgage Pass-Through Securities | | | — | | | | 101,017,751 | | | | — | | | | 101,017,751 | |
| Municipal Bonds | | | — | | | | 12,410,649 | | | | — | | | | 12,410,649 | |
| U.S. Government Securities | | | — | | | | 46,550,173 | | | | — | | | | 46,550,173 | |
| Short-Term Investments | | | — | | | | 26,499,211 | | | | — | | | | 26,499,211 | |
| Repurchase Agreements | | | — | | | | 9,413,000 | | | | — | | | | 9,413,000 | |
| Total | | $ | — | | | $ | 696,605,946 | | | $ | — | | | $ | 696,605,946 | |
| | | | |
| 18 | | | | The accompanying notes are an integral part of these financial statements. |
FINANCIAL INFORMATION — RS INVESTMENT QUALITY BOND VIP SERIES
| | | | |
Statement of Assets and Liabilities As of June 30, 2011 (unaudited) | | | |
Assets | | | | |
Investments, at value | | $ | 696,605,946 | |
Cash and cash equivalents | | | 412 | |
Interest receivable | | | 4,941,385 | |
Receivable for fund shares subscribed | | | 331,472 | |
Prepaid expenses | | | 73,554 | |
Receivable for investments sold | | | 1,874 | |
| | | | | |
Total Assets | | | 701,954,643 | |
| | | | | |
| | |
Liabilities | | | | |
Payable for investments purchased | | | 32,372,255 | |
Payable for fund shares redeemed | | | 376,108 | |
Payable to adviser | | | 275,800 | |
Accrued trustees’ fees | | | 8,828 | |
Accrued expenses/other liabilities | | | 50,917 | |
| | | | | |
Total Liabilities | | | 33,083,908 | |
| | | | | |
Total Net Assets | | $ | 668,870,735 | |
| | | | | |
| | |
Net Assets Consist of: | | | | |
Paid-in capital | | $ | 633,706,369 | |
Accumulated undistributed net investment income | | | 12,523,678 | |
Accumulated net realized gain from investments | | | 2,309,352 | |
Net unrealized appreciation on investments | | | 20,331,336 | |
| | | | | |
Total Net Assets | | $ | 668,870,735 | |
| | | | | |
Investments, at Cost | | $ | 676,274,610 | |
| | | | | |
| | |
Pricing of Shares | | | | |
Shares of Beneficial Interest Outstanding with no Par Value | | | 52,903,150 | |
Net Asset Value Per Share | | | $12.64 | |
| | | | | |
| | | | |
Statement of Operations For the Six-Month Period Ended June 30, 2011 (unaudited) | |
Investment Income | | | | |
Interest | | $ | 14,371,546 | |
Withholding taxes on foreign interest | | | (6,375 | ) |
| | | | | |
Total Investment Income | | | 14,365,171 | |
| | | | | |
| | |
Expenses | | | | |
Investment advisory fees | | | 1,617,425 | |
Custodian fees | | | 52,985 | |
Administrative service fees | | | 39,832 | |
Professional fees | | | 38,825 | |
Shareholder reports | | | 21,267 | |
Trustees’ fees | | | 14,506 | |
Other expenses | | | 20,888 | |
| | | | | |
Total Expenses | | | 1,805,728 | |
Less: Custody credits | | | (96 | ) |
| | | | | |
Total Expenses, Net | | | 1,805,632 | |
| | | | | |
Net Investment Income | | | 12,559,539 | |
| | | | | |
| | |
Realized Gain/(Loss) and Change in Unrealized Appreciation/Depreciation on Investments | | | | |
Net realized gain from investments | | | 2,211,742 | |
Net change in unrealized appreciation/depreciation on investments | | | 2,157,892 | |
| | | | | |
Net Gain on Investments | | | 4,369,634 | |
| | | | | |
Net Increase in Net Assets Resulting from Operations | | $ | 16,929,173 | |
| | | | | |
| | | | | |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 19 |
FINANCIAL INFORMATION — RS INVESTMENT QUALITY BOND VIP SERIES
| | | | | | | | |
Statements of Changes in Net Assets Six-month-ended numbers are unaudited | | | | | | |
| | | |
| | | For the
Six Months Ended
6/30/11 | | | For the
Year Ended
12/31/10 | |
| | | | |
Operations | | | | | | | | |
Net investment income | | $ | 12,559,539 | | | $ | 23,391,043 | |
Net realized gain from investments | | | 2,211,742 | | | | 9,432,310 | |
Net change in unrealized appreciation/depreciation on investments | | | 2,157,892 | | | | 10,780,992 | |
| | | | | | | | | |
Net Increase in Net Assets Resulting from Operations | | | 16,929,173 | | | | 43,604,345 | |
| | | | | | | | | |
| | | |
Distributions to Shareholders | | | | | | | | |
Net investment income | | | — | | | | (23,557,061 | ) |
Net realized gain on investments | | | — | | | | (6,729,196 | ) |
| | | | | | | | | |
Total Distributions | | | — | | | | (30,286,257 | ) |
| | | | | | | | | |
| | | |
Capital Share Transactions | | | | | | | | |
Proceeds from sales of shares | | | 62,794,883 | | | | 104,961,765 | |
Reinvestment of distributions | | | — | | | | 30,286,257 | |
Cost of shares redeemed | | | (41,989,908 | ) | | | (76,774,232 | ) |
| | | | | | | | | |
Net Increase in Net Assets Resulting from Capital Share
Transactions | | | 20,804,975 | | | | 58,473,790 | |
| | | | | | | | | |
Net Increase in Net Assets | | | 37,734,148 | | | | 71,791,878 | |
| | | | | | | | | |
| | | |
Net Assets | | | | | | | | |
Beginning of period | | | 631,136,587 | | | | 559,344,709 | |
| | | | | | | | | |
End of period | | $ | 668,870,735 | | | $ | 631,136,587 | |
| | | | | | | | | |
Distributions in Excess of Net Investment Income Included in Net Assets | | $ | — | | | $ | (35,861 | ) |
| | | | | | | | | |
Accumulated Undistributed Net Investment Income Included in Net Assets | | $ | 12,523,678 | | | $ | — | |
| | | | | | | | | |
| | | |
Other Information: | | | | | | | | |
Shares | | | | | | | | |
Sold | | | 5,036,192 | | | | 8,275,610 | |
Reinvested | | | — | | | | 2,484,517 | |
Redeemed | | | (3,362,111 | ) | | | (6,059,343 | ) |
| | | | | | | | | |
Net Increase | | | 1,674,081 | | | | 4,700,784 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | |
| 20 | | | | The accompanying notes are an integral part of these financial statements. |
This Page Intentionally Left Blank
FINANCIAL INFORMATION — RS INVESTMENT QUALITY BOND VIP SERIES
The financial highlights table is intended to help you understand the Fund’s financial performance for the past six reporting periods. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the Fund (assuming reinvestment of all distributions).
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Financial Highlights Six-month-ended numbers are unaudited | |
| | | Net Asset Value,
Beginning of
Period | | | Net Investment
Income | | | Net Realized
and Unrealized
Gain/(Loss) | | | Total
Operations | | | Distributions
From Net
Investment
Income | | | Distributions
From Net
Realized
Capital Gains | | | Total
Distributions | |
Six Months Ended 6/30/111 | | $ | 12.32 | | | $ | 0.24 | | | $ | 0.08 | | | $ | 0.32 | | | $ | — | | | $ | — | | | $ | — | |
Year Ended 12/31/10 | | | 12.02 | | | | 0.48 | | | | 0.44 | | | | 0.92 | | | | (0.48 | ) | | | (0.14 | ) | | | (0.62 | ) |
Year Ended 12/31/09 | | | 11.32 | | | | 0.50 | | | | 0.78 | | | | 1.28 | | | | (0.50 | ) | | | (0.08 | ) | | | (0.58 | ) |
Year Ended 12/31/08 | | | 11.95 | | | | 0.61 | | | | (0.56 | ) | | | 0.05 | | | | (0.61 | ) | | | (0.07 | ) | | | (0.68 | ) |
Year Ended 12/31/07 | | | 11.78 | | | | 0.53 | | | | 0.20 | | | | 0.73 | | | | (0.56 | )4 | | | — | | | | (0.56 | ) |
Year Ended 12/31/06 | | | 11.82 | | | | 0.52 | | | | (0.03 | ) | | | 0.49 | | | | (0.53 | ) | | | (0.00 | )5 | | | (0.53 | ) |
| | | | |
| 22 | | | | The accompanying notes are an integral part of these financial statements. |
FINANCIAL INFORMATION — RS INVESTMENT QUALITY BOND VIP SERIES
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Net Asset
Value, End of
Period | | | Total Return2 | | | Net Assets, End
of Period (000s) | | | Net Ratio of
Expenses to
Average Net
Assets3 | | | Gross Ratio of
Expenses to
Average Net
Assets | | | Net Ratio of Net
Investment Income
to Average
Net Assets3 | | | Gross Ratio of Net
Investment Income
to Average
Net Assets | | | Portfolio
Turnover Rate | |
| $ | 12.64 | | | | 2.60% | | | $ | 668,871 | | | | 0.56% | | | | 0.56% | | | | 3.88% | | | | 3.88% | | | | 43% | |
| | 12.32 | | | | 7.72% | | | | 631,137 | | | | 0.56% | | | | 0.56% | | | | 3.90% | | | | 3.90% | | | | 121% | |
| | 12.02 | | | | 11.20% | | | | 559,345 | | | | 0.58% | | | | 0.58% | | | | 4.54% | | | | 4.54% | | | | 153% | |
| | 11.32 | | | | 0.47% | | | | 419,579 | | | | 0.56% | | | | 0.57% | | | | 4.57% | | | | 4.56% | | | | 186% | |
| | 11.95 | | | | 6.22% | | | | 473,404 | | | | 0.59% | | | | 0.59% | | | | 4.79% | | | | 4.79% | | | | 145% | |
| | 11.78 | | | | 4.19% | | | | 386,035 | | | | 0.60% | 6 | | | 0.60% | | | | 4.61% | | | | 4.61% | | | | 130% | |
Distributions reflect actual per-share amounts distributed for the period.
| 1 | Ratios for periods less than one year have been annualized, except for total return and portfolio turnover rate. |
| 2 | Total returns do not reflect the effects of charges deducted pursuant to the terms of The Guardian Insurance & Annuity Company, Inc.’s variable contracts. Inclusion of such charges would reduce the total returns for all periods shown. |
| 3 | Net Ratio of Expenses to Average Net Assets and Net Ratio of Net Investment Income to Average Net Assets include the effect of fee waivers, expense limitations and custody credits, if applicable. |
| 4 | Includes return of capital distribution rounding $0.00 per share. |
| 5 | Rounds to $0.00 per share. |
| 6 | Expense ratio includes interest expense associated with reverse repurchase agreements. Excluding the interest expense, the expense ratio is 0.59% in 2006. |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 23 |
NOTES TO FINANCIAL STATEMENTS — RS INVESTMENT QUALITY BOND VIP SERIES (UNAUDITED)
June 30, 2011 (unaudited)
RS Variable Products Trust (the “Trust”), a Massachusetts business trust organized on May 18, 2006, is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust currently offers twelve series. RS Investment Quality Bond VIP Series (the “Fund”) is a series of the Trust. The Fund is a diversified fund. The financial statements for the other remaining series of the Trust are presented in separate reports.
The Fund has authorized an unlimited number of shares of beneficial interest with no par value. Shares are bought and sold at closing net asset value (“NAV”), which is the price for all outstanding shares of the Fund. Class I shares of the Fund are only sold to certain separate accounts of The Guardian Insurance & Annuity Company, Inc. (“GIAC”). GIAC is a wholly-owned subsidiary of The Guardian Life Insurance Company of America (“Guardian Life”). The Fund is currently offered to insurance company separate accounts that fund certain variable annuity and variable life insurance contracts issued by GIAC.
Note 1. Significant Accounting Policies
The following policies are in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
a. Investment Valuations The Fund is responsible for the valuation of portfolio securities and uses independent pricing services (each, a “Service”). Debt securities with more than 60 days to maturity for which quoted bid prices are readily available and representative of the bid side of the market are valued by a relevant Service at the bid price. Debt securities with more than 60 days to maturity for which quoted bid prices are not readily available and representative of the market value are valued by the Service at estimated market value based on methods which may include consideration of yields or prices of government securities of comparable coupon, maturity and type; indications as to values from dealers; and general market conditions.
Other marketable securities are valued at the last reported sale price on the principal exchange or market on which they are traded; or, if there were no sales that
day, at the mean between the closing bid and asked prices. Securities traded on the NASDAQ Stock Market, LLC (“NASDAQ”) are generally valued at the NASDAQ official closing price, which may not be the last sale price. If the NASDAQ official closing price is not available for a security, that security is generally valued using the last reported sale price, or, if no sales are reported, at the mean between the closing bid and asked prices. Short-term investments that will mature in 60 days or less are valued at amortized cost, which approximates market value. Repurchase agreements are carried at cost, which approximates market value. Foreign securities are valued in the currencies of the markets in which they trade and then converted to U.S. dollars using the prevailing exchange rates at the close of the New York Stock Exchange (“NYSE”).
Securities for which market quotations are not readily available or for which market quotations may be considered unreliable or for which a service does not provide a valuation are valued at their fair values as determined in accordance with guidelines and procedures adopted by the Trust’s Board of Trustees.
Securities whose values have been materially affected by events occurring before the Fund’s valuation time but after the close of the securities’ principal exchange or market may be fair valued using methods approved by the Board of Trustees.
The Fund has adopted the authoritative guidance under GAAP on determining fair value when the volume and level of activity for an asset or liability have significantly decreased and for identifying transactions that are not orderly. Accordingly, if the Fund determines that either the volume and/or level of activity for an asset or liability has significantly decreased (from normal conditions for that asset or liability) or price quotations or observable inputs are not associated with orderly transactions, increased analysis and management judgment will be required to estimate fair value.
In accordance with Financial Accounting Standards Board Codification Topic 820 (“ASC Topic 820”), fair value is defined as the price that the Fund would receive upon selling an investment in an “arm’s length” transaction to a willing buyer in the principal or most advantageous market for the investment. ASC Topic 820 established a hierarchy for classification of fair value measurements for disclosure purposes. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own
NOTES TO FINANCIAL STATEMENTS — RS INVESTMENT QUALITY BOND VIP SERIES (UNAUDITED)
assumptions about the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances. The hierarchy of inputs is summarized in the three broad levels listed below.
| Ÿ | | Level 1 — unadjusted quoted prices in active markets for identical investments |
| Ÿ | | Level 2 — inputs other than unadjusted quoted prices that are observable either directly or indirectly (including adjusted quoted prices for similar investments, interest rates, prepayment speeds, credit risks, etc.) |
| Ÿ | | Level 3 — significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments) |
Inputs may include price information, volatility statistics, specific and broad credit data, liquidity statistics, and other factors. A security’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires significant judgment by the Trust. The Trust considers observable data to be that market data which is readily available, regularly distributed or updated, reliable and verifiable, and provided by independent sources that are actively involved in the relevant market. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. Changes in valuation techniques may result in transfers into or out of an investment’s assigned level within the hierarchy.
Effective beginning with the Fund’s current fiscal year, the Financial Accounting Standards Board requires reporting entities to make disclosures about purchases, sales, issuances and settlements of Level 3 securities on a gross basis. For the six months ended June 30, 2011, the Fund had no securities classified as Level 3.
There were no significant transfers between Level 1 and Level 2 for the six months end June 30, 2011.
In determining a security’s placement within the hierarchy, the Trust separates the Fund’s investment portfolio into two categories: investments and derivatives (e.g., futures).
Investments Investments whose values are based on quoted market prices in active markets, and are therefore classified within Level 1, include active listed equities. The Trust does not adjust the quoted price for such instruments, even in situations where the Fund holds a large position and a sale could reasonably be expected to impact the quoted price.
Investments that trade in markets that are not considered to be active, but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within Level 2. These include certain U.S. government and sovereign obligations, most government agency securities, investment-grade corporate bonds, certain mortgage products, state, municipal and provincial obligations, and certain foreign equity securities.
Investments classified within Level 3 have significant unobservable inputs, as they trade infrequently or not at all. Level 3 investments include, among others, private placement securities. When observable prices are not available for these securities, the Trust uses one or more valuation techniques for which sufficient and reliable data is available. The inputs used by the Trust in estimating the value of Level 3 investments include the original transaction price, recent transactions in the same or similar instruments, completed or pending third-party transactions in the underlying investment or comparable issuers, subsequent rounds of financing, recapitalizations, and other transactions across the capital structure. Level 3 investments may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the Trust in the absence of market information. Assumptions used by the Trust due to the lack of observable inputs may significantly impact the resulting fair value and therefore the Fund’s results of operations.
Derivatives Exchange-traded derivatives, such as futures contracts and exchange traded option contracts, are typically classified within Level 1 or Level 2 of the fair value hierarchy depending on whether or not they are deemed to be actively traded. Certain derivatives, such as generic forwards, swaps and options, have inputs which can generally be corroborated by market data and are therefore classified within Level 2.
b. Federal Income Taxes The Fund intends to continue complying with the requirements of the Internal Revenue Code to qualify as a regulated investment company and to distribute substantially all net investment income and realized net capital gains, if any, to shareholders. Therefore, the Fund does not expect to be subject to income tax, and no provision for such tax has been made.
From time to time, however, the Fund may choose to pay an excise tax if the cost of making the required distribution exceeds the amount of the excise tax.
As of June 30, 2011, the Trust has reviewed the tax positions for open periods, as applicable to the Fund, and has determined that no provision for income tax is
NOTES TO FINANCIAL STATEMENTS — RS INVESTMENT QUALITY BOND VIP SERIES (UNAUDITED)
required in the Fund’s financial statements. The Fund recognizes interest and penalties, if any, related to unrecognized tax positions as income tax expense in the Statement of Operations. For the six months ended June 30, 2011, the Fund did not incur any interest or penalties. The Fund is not subject to examination by U.S. federal tax authorities for tax years before 2007 and by state authorities for tax years before 2006.
c. Securities Transactions Securities transactions are accounted for on the date securities are purchased or sold (trade date). Realized gains or losses on securities transactions are determined on the basis of specific identification.
d. Investment Income Dividend income is generally recorded on the ex-dividend date. Interest income, which includes amortization/accretion of premium/discount, is accrued and recorded daily.
e. Expenses Many expenses of the Trust can be directly attributed to a specific series of the Trust. Expenses that cannot be directly attributed to a specific series of the Trust are generally apportioned among all the series in the Trust, based on relative net assets.
f. Custody Credits The Fund has entered into an arrangement with its custodian, State Street Bank and Trust Company, whereby credits realized as a result of uninvested cash balances are used to reduce the Fund’s custodian expenses. The Fund’s custody credits, if any, are shown in the accompanying Statement of Operations.
g. Distributions to Shareholders The Fund intends to declare and distribute substantially all net investment income, if any, at least once a year. Distributions of net realized capital gains, if any, are declared and paid at least once a year. Unless the Fund is instructed otherwise, all distributions to shareholders are credited in the form of additional shares of the Fund at the net asset value, recorded on the ex-dividend date.
h. Capital Accounts Due to the timing of dividend distributions and the differences in accounting for income and realized gains/(losses) for financial statement purposes versus federal income tax purposes, the fiscal year in which amounts are distributed may differ from the year in which the income and realized gains/(losses) were recorded by the Fund.
Note 2. Transactions with Affiliates
a. Advisory Fee Under the terms of the advisory agreement, which is reviewed and approved annually by the Board of Trustees, the Fund pays an investment
advisory fee to RS Investment Management Co. LLC (“RS Investments”). Guardian Investor Services LLC (“GIS”), a subsidiary of Guardian Life, holds a majority interest in RS Investments. RS Investments receives an investment advisory fee based on the average daily net assets of the Fund at an annual rate of 0.50%. The Fund has also entered into an agreement with GIS for distribution services with respect to its shares.
RS Investments has entered into a Sub-Advisory Services Agreement with GIS. GIS is responsible for providing day-to-day investment advisory services to the Fund, subject to the oversight of the Board of Trustees of the Trust and review by RS Investments. As compensation for GIS’s services, RS Investments pays fees to GIS at an annual rate of 0.475% of the average daily net assets of the Fund. Payment of the sub-investment advisory fee does not represent a separate or additional expense to the Fund.
RS Investments has an Expense Reimbursement Agreement in place with GIS with respect to certain funds of the Trust to which GIS serves as sub-adviser. The Expense Reimbursement Agreement provides that GIS will reimburse RS Investments for certain operating expenses and may make additional payments to mitigate losses incurred by RS Investments.
b. Compensation of Trustees and Officers Trustees and officers of the Trust who are interested persons, as defined in the 1940 Act, of RS Investments receive no compensation from the Fund for acting as such. Trustees of the Trust who are not interested persons of RS Investments receive compensation and reimbursement of expenses from the Trust.
Note 3. Federal Income Taxes
a. Distributions to Shareholders The tax character of distributions paid during the year ended December 31, 2010, which is the most recently completed tax year, was as follows:
| | | | | | |
Ordinary Income | | | Long-Term Capital Gains | |
| | $25,618,477 | | | $ | 4,667,780 | |
Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. These differences are primarily due to differing treatments of income and gains on various investment securities held by the Fund, timing differences, and differing characterizations of distributions made by the Fund. Permanent book and tax basis differences will result in reclassifications to paid-in capital, undistributed net
NOTES TO FINANCIAL STATEMENTS — RS INVESTMENT QUALITY BOND VIP SERIES (UNAUDITED)
investment income and accumulated undistributed net realized gain/(loss) on investments. Undistributed net investment income and accumulated undistributed net realized gain/(loss) on investments may include temporary book and tax differences, which will reverse in a subsequent period.
As of December 31, 2010, the Fund made the following reclassifications of permanent book and tax basis differences:
| | | | | | | | | | |
| Paid-in-Capital | | | Accumulated Net Investment Income | | | Accumulated Net Realized Gain | |
| | $— | | | $ | 163,146 | | | $ | (163,146 | ) |
The tax basis of distributable earnings as of December 31, 2010 was as follows:
| | | | | | |
Undistributed Ordinary Income | | | Undistributed Long-Term Capital Gains | |
| | $— | | | $ | 258,442 | |
During any particular year, net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed and, therefore, are normally distributed to shareholders annually.
During the year ended December 31, 2010, the Fund utilized $1,591,779 of capital loss carryovers.
In determining its taxable income, current tax law permits the Fund to elect to treat all or a portion of any net capital or currency loss realized after October 31 as occurring on the first day of the following fiscal year. For the year ended December 31, 2010, the Fund had no such losses.
On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted. The Act modernizes several of the federal income and excise tax rules related to regulated investment companies, and with certain exceptions, is effective for taxable years beginning after December 22, 2010.
Among the changes are revisions to capital loss carryforward rules allowing for capital losses to be carried forward to one or more subsequent taxable years without expiration. Rules previously in effect limited the carryforward period to eight taxable years. Capital loss carryforwards generated in taxable years beginning after the effective date of the Act must be fully used before capital loss carryforwards generated in taxable years prior to the effective date of the Act. Changes to excise
tax rules include timing of recognition of certain income and a change in the required distribution rate for capital gains.
b. Tax Basis of Investments The cost of investments for federal income tax purposes at June 30, 2011, was $676,324,749. The gross unrealized appreciation and depreciation on investments, on a tax basis, at June 30, 2011, aggregated $24,455,947 and $(4,174,750), respectively, resulting in net unrealized appreciation/depreciation of $20,281,197.
Note 4. Investments
a. Investment Purchases and Sales The cost of U.S. government agency obligations and other investments purchased and the proceeds from U.S. government agency obligations and other investments sold (excluding short-term investments) for the six months ended June 30, 2011 were as follows:
| | | | | | | | |
| | | Other Investments | | | U.S. Government and Agency Obligations | |
| Purchases | | $ | 136,408,432 | | | $ | 222,568,202 | |
| Sales | | | 68,201,386 | | | | 216,602,177 | |
b. Repurchase Agreements The collateral for repurchase agreements is either cash or fully negotiable U.S. government securities (including U.S. government agency securities). Repurchase agreements are fully collateralized (including the interest accrued thereon) and such collateral is marked-to-market daily while the agreements remain in force. If the value of the collateral falls below the repurchase price plus accrued interest, the Fund will typically require the seller to deposit additional collateral by the next business day. If the request for additional collateral is not met, or the seller defaults, the Fund maintains the right to sell the collateral (although it may be prevented or delayed from doing so in certain circumstances) and may claim any resulting loss against the seller.
c. Loans Floating rate loans in which the Fund invest are primarily “senior” loans. Senior floating rate loans typically hold a senior position in the capital structure of the borrower, are typically secured by specific collateral, and have a claim on the assets and/or stock of the borrower that is senior to that held by subordinated debtholders and stockholders of the borrower. While these protections may reduce risk, these investments still present significant credit risk. A significant portion of the Fund’s floating rate investments may be issued in connection with highly leveraged transactions such as leveraged buyouts, leveraged recapitalization loans, and
NOTES TO FINANCIAL STATEMENTS — RS INVESTMENT QUALITY BOND VIP SERIES (UNAUDITED)
other types of acquisition financing. Obligations in these types of transactions are subject to greater credit risk (including default and bankruptcy) than many other investments and may be, or could become, illiquid. See note (f) regarding below investment grade securities.
The Fund may purchase second lien loans (secured loans with a claim on collateral subordinate to a senior lender’s claim on such collateral), fixed rate loans, unsecured loans, and other debt obligations.
d. Securities Purchased on a When-Issued, Delayed Delivery, and TBA Basis The Fund may purchase securities on a when-issued, delayed delivery, or to be announced (TBA) basis, with payment and delivery scheduled for a future date. These transactions are subject to market fluctuations and are subject to the risk that the value at delivery may be more or less than the trade date purchase price. Although the Fund will generally purchase these securities with the intention of holding the securities, it may sell the securities before the settlement date. Assets have been segregated for these securities.
e. Restricted and Illiquid Securities A restricted security cannot be resold to the general public without prior registration under the Securities Act of 1933 (except pursuant to an applicable exemption). If the security is subsequently registered and resold, the issuer would typically bear the expense of all registrations at no cost to the Fund. Restricted and illiquid securities are valued according to the guidelines and procedures adopted by the Trust’s Board of Trustees and are noted in the schedule of investments.
f. Below Investment Grade Securities The Fund may invest in below investment grade securities (i.e. lower-quality debt), which are subject to certain risks. Lower-quality debt is considered to be speculative because it is less certain that the issuer will be able to pay interest or repay the principal than in the case of investment-grade debt. These securities can involve a substantially greater risk of default than higher-rated securities, and their values can decline significantly over short periods of time. Lower-quality debt securities tend to be more sensitive to adverse news about the issuer, or the market and the economy in general, than higher quality debt securities. The market for these securities can be less liquid, especially during periods of recession or general market decline.
Note 5. Temporary Borrowings
The Fund, with other funds managed by RS Investments, shares in a $75 million committed revolving credit/overdraft protection facility from State Street Bank and
Trust Company for temporary purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. Interest is calculated based on market rates at the time of borrowing; all the funds that are parties to the facility share in a commitment fee that is allocated among the funds on the basis of their respective net assets. The Fund may borrow up to the lesser of one-third of its total assets (including amounts borrowed) or any lower limit specified in the Fund’s Statement of Additional Information or Prospectus.
For the six months ended June 30, 2011, the Fund did not borrow from the facility.
Note 6. Review for Subsequent Events
The Trust has evaluated subsequent events through the issuance of the Fund’s financial statements and determined that no material events have occurred that require disclosure.
Note 7. Indemnifications
Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, in the normal course of business, the Fund enters into contracts with its vendors and others that provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund. However, based on experience, the Fund expects the risk of loss to be remote.
SUPPLEMENTAL INFORMATION (UNAUDITED)
Meeting of Shareholders
A special meeting of the shareholders of RS Variable Products Trust (“the Trust”) was held on May 20, 2011. At the meeting, the shareholders of the Trust elected Judson Bergman, Kenneth R. Fitzsimmons, Jr., Anne M. Goggin, Christopher C. Melvin, Jr., Deanna M. Mulligan, Gloria S. Nelund, Terry R. Otton, and John P. Rohal as trustees of the Trust.
Proposal To Elect Trustees
| | | | |
| Nominee | |
Votes For | | Votes Against/Withheld |
| Judson Bergman | | 264,351,869.410 | | 14,579,441.977 |
| Kenneth R. Fitzsimmons, Jr. | | 264,417,319.717 | | 14,513,991.670 |
| Anne M. Goggin | | 265,496,967.524 | | 13,434,343.863 |
| Christopher C. Melvin, Jr. | | 264,182,743.884 | | 14,748,567.503 |
| Deanna M. Mulligan | | 264,603,554.628 | | 14,327,756.759 |
| Gloria S. Nelund | | 265,607,677.552 | | 13,323,633.835 |
| Terry R. Otton | | 265,360,024.512 | | 13,571,286.875 |
| John P. Rohal | | 264,052,063.420 | | 14,879,247.967 |
Portfolio Holdings and Proxy Voting Procedures
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Form N-Q is available on the Securities and Exchange Commission’s Web site at http://www.sec.gov. The Fund’s Form N-Q may be reviewed and copied at the Commission’s Public Reference Room in Washington, DC, and information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330. This information is also available, without charge, upon request, by calling toll-free 800-221-3253.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 will be available (i) without charge, upon request, by calling toll-free 800-221-3253; and (ii) on the Securities and Exchange Commission’s Web site at http://www.sec.gov.
The Statement of Additional Information includes additional information about the Trust’s Trustees and Officers and is available, without charge, upon request by calling toll-free 800-221-3253.
This report is transmitted to shareholders only. It is not authorized for use as an offer of sale or a solicitation of an offer to buy shares of a Fund unless accompanied or preceded by that Fund’s current prospectus. Past performance results shown in this report should not be considered a representation of future performance. Investment returns and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Statements and other information herein are as dated and are subject to change.
2011 Semiannual Report
All data as of June 30, 2011
RS Variable Products Trust
| Ÿ | | RS Low Duration Bond VIP Series |
| | | | |
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE | | |  | |
TABLE OF CONTENTS
Except as otherwise specifically stated, all information and investment team commentary, including portfolio security positions, is as of June 30, 2011. The views expressed in the investment team letters are those of the Fund’s portfolio manager(s) and are subject to change without notice. They do not necessarily represent the views of RS Investments or Guardian Investor Services LLC. The letters contain some forward-looking statements providing current expectations or forecasts of future events; they do not necessarily relate to historical or current facts. There can be no guarantee that any forward-looking statement will be realized. We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events, or otherwise. Any discussions of specific securities should not be considered a recommendation to buy or sell those securities. Fund holdings will vary.
RS LOW DURATION BOND VIP SERIES
The Statement of Additional Information provides further information about your investment team, including information regarding their compensation, other accounts they manage, and their ownership interests in the Fund. For information on how to receive a copy of the Statement of Additional Information, please see the back cover of the Fund’s Prospectus or visit our Web site at www.guardianinvestor.com.
RS Low Duration Bond VIP Series Commentary
Highlights
| Ÿ | | The fixed income market showed volatile performance in the first half of 2011 as investor preference for corporate bonds and other non-Treasury securities in the first quarter gave way to a second quarter flight to quality that benefited the Treasury market. |
| Ÿ | | RS Low Duration Bond VIP Series delivered a positive return in the first six months of 2011, while also outperforming its benchmark, the Barclays Capital U.S. Government 1-3 Year Bond Index1. |
| Ÿ | | The Fund’s overweight exposure to non-Treasury sectors such as corporate bonds and commercial mortgage-backed securities (CMBS) aided relative performance, especially in the first quarter. |
Market Overview
The fixed income market started out 2011 on a positive note, supported by relatively healthy corporate earnings performance. Against this backdrop, yield-hungry investors looked beyond the Treasury market for opportunities in non-Treasury segments of the fixed-income market. Investors became more risk-averse later in the first quarter as they confronted a number of external shocks, including unrest in the Middle East, the Japanese earthquake, the European sovereign debt crisis (e.g. Greece and Ireland), and renewed questions over the strength of the U.S. economic recovery. In the second quarter, concerns over the debt crisis in Greece triggered an investor flight to quality that benefited the Treasury market relative to other areas of the fixed-income market. As a result, Treasury yields declined in the second quarter after rising slightly in the first.
Fund Performance Overview
RS Low Duration Bond VIP Series returned 1.35% for the six-month period that ended June 30, 2011. The
Fund’s benchmark, the Barclays Capital U.S. Government 1-3 Year Bond Index, returned 0.88% for the period. The Fund’s performance compared favorably with a 1.28% average return for the Lipper Short-Intermediate Investment Grade Debt Funds peer group2. (The peer group consisted of 44 variable annuity funds that invest primarily in short-term investment-grade debt with average maturities of one to three years.)
The Fund continued its investment strategy of overweighting non-Treasury segments of the fixed income market, notably investment grade corporate bonds and CMBS. This strategy aided our results in the first quarter, but subtracted from the Fund’s relative outperformance in the second quarter as risk-averse investors sought a safe haven in the Treasury market.
While many of the Fund’s corporate bonds delivered positive performance in the second quarter, as a group they underperformed Treasury securities of similar duration during that period3. We believe that this underperformance seems to have reflected investor unease over the European debt crisis (e.g. Greece and Ireland), rather than any fundamental concerns over the strength of corporate balance sheets in the United States. Overall, we ended the quarter with approximately 39% of the Fund allocated to corporate bonds.
Outlook
Given the risk/reward profiles we are seeing in the market at this time, we have continued to focus our investments on non-Treasury segments of the fixed income market, including corporate bonds backed by what we believe to be strong balance sheets. We believe that our disciplined investment process will help us seek appropriate investment opportunities for the Fund through different economic cycles.
RS Funds are sold by prospectus only. You should carefully consider the investment objectives, risks, charges and expenses of the RS Funds before making an investment decision. The prospectus contains this and other important information. Please read it carefully before investing or sending money. Please visit our web site at www.guardianinvestor.com or to obtain a printed copy, call 800-221-3253.
Any discussions of specific securities should not be considered a recommendation to buy or sell those securities. Fund holdings will vary.
Except as otherwise specifically stated, all information and investment team commentary, including portfolio security positions, is as of June 30, 2011.
As with all mutual funds, the value of an investment in the Fund could decline, in which case you could lose money. Bond funds are subject to interest rate risk, credit risk, and prepayment risk. When interest rates rise, bond prices generally fall, and when interest rates fall, bond prices generally rise. Currently, interest rates are at relatively low levels. Please keep in mind that in this kind of environment, the risk that bond prices may fall when interest rates rise is potentially greater. Derivative transactions can create leverage and may be highly volatile. It is possible that a derivative transaction will result in a loss greater than the principal amount invested and the Fund may not be able to close out a derivative transaction at a favorable time or price. The values of mortgage-backed securities depend on the credit quality and adequacy of the underlying assets or collateral and may be highly volatile.
RS LOW DURATION BOND VIP SERIES
| | |
Characteristics Total Net Assets: $130,350,442 | | |
|
| |
| Sector Allocation |
 |
| |
| Bond Quality Allocation4 |
 |
RS LOW DURATION BOND VIP SERIES
| | | | | | | | | | | | |
| | | | |
| Top Ten Holdings5 | | | | | | | | | |
| | | | |
| Holding | | Coupon | | | Maturity Date | | | % of Total
Net Assets | |
| U.S. Treasury Notes | | | 0.750% | | | | 6/15/2014 | | | | 2.95% | |
| U.S. Treasury Notes | | | 1.000% | | | | 5/15/2014 | | | | 1.90% | |
| U.S. Treasury Notes | | | 0.625% | | | | 2/28/2013 | | | | 1.72% | |
| U.S. Treasury Notes | | | 1.250% | | | | 4/15/2014 | | | | 1.18% | |
| U.S. Treasury Notes | | | 0.500% | | | | 11/30/2012 | | | | 1.00% | |
| U.S. Treasury Notes | | | 1.500% | | | | 6/30/2016 | | | | 0.98% | |
| J.P. Morgan Chase Commercial Mortgage Securities Corp. | | | 5.371% | | | | 12/15/2044 | | | | 0.96% | |
| U.S. Treasury Notes | | | 0.625% | | | | 1/31/2013 | | | | 0.95% | |
| CNH Equipment Trust | | | 3.000% | | | | 8/17/2015 | | | | 0.95% | |
| CS First Boston Mortgage Securities Corp. | | | 5.416% | | | | 5/15/2036 | | | | 0.92% | |
| Total | | | | | | | | | | | 13.51% | |
| 1 | The Barclays Capital U.S. Government 1-3 Year Bond Index is generally considered to be representative of U.S. Government bonds with maturities between one and three years. The Barclays Capital U.S. Government 1-3 Year Bond Index is an unmanaged index that is not available for direct investment. There are no expenses associated with the index while there are expenses associated with the Fund. |
| 2 | Lipper, Inc. is an independent mutual fund monitoring and rating service. Its database of performance information is based on historical returns, which assume the reinvestment of dividends and distributions and the deduction of all Fund expenses. Lipper return figures do not reflect the deduction of any sales charges that an investor may pay when purchasing or redeeming shares of the Fund. |
| 3 | Source: Barclays Capital Index Summary, Barclays Capital Inc. |
| 4 | Source: Moody’s, Standard and Poors, Fitch Investors Service. |
| 5 | Portfolio holdings are subject to change and should not be considered a recommendation to buy or sell individual securities. Top ten holdings are determined at the unique security level. For this reason, the securities included above, their order, and the percentages they represent of the Fund’s total net assets may differ from similar data calculated directly from the Schedule of Investments, where certain securities of the same issuer with the same coupon rate may be aggregated. |
RS LOW DURATION BOND VIP SERIES
Performance Update
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
| Average Annual Total Returns | | | | | | | | | | | | | | | | | | |
| | | | | | | |
| | | Inception Date | | | Year-to-Date | | | 1 Year | | | 3 Year | | | 5 Year | | | Since Inception | |
| RS Low Duration Bond VIP Series | | | 8/28/03 | | | | 1.35% | | | | 3.18% | | | | 4.68% | | | | 4.88% | | | | 3.63% | |
| Barclays Capital U.S. Government 1-3 Year Bond Index1 | | | | | | | 0.88% | | | | 1.38% | | | | 3.05% | | | | 4.27% | | | | 3.36% | |
| | | | | | | | | | |
| |
| Results of a Hypothetical $10,000 Investment |
 |
The chart above shows the performance of a hypothetical $10,000 investment made on 8/28/03 in RS Low Duration Bond VIP Series and the Barclays Capital U.S. Government 1-3 Year Bond Index. Index returns do not include the fees and expenses of the Fund, but do include the reinvestment of dividends.
Performance quoted represents past performance and does not guarantee or predict future results. The Fund is the successor to The Guardian VC Low Duration Bond Fund; performance shown includes performance of the predecessor fund for periods prior to October 9, 2006. Investment return and principal value will fluctuate, so shares, when redeemed, may be worth more or less than their original cost. The Fund’s fees and expenses are detailed in the Financial Highlights section of this report. Fees and expenses are factored into the net asset value of your shares and any performance numbers we release. Total return figures reflect an expense limitation in effect during the periods shown; without such limitation, the performance shown would have been lower. Performance results assume the reinvestment of dividends and capital gains. The return figures shown do not reflect the deduction of taxes that a contractowner/policyholder may pay on Fund distributions or redemption units. The actual total returns for owners of variable annuity contracts or variable life insurance policies that provide for investment in the Fund will be lower to reflect separate account and contract/policy charges. Current and month-end performance information, which may be lower or higher than that cited, is available by calling 800-221-3253 and is periodically updated on our Web site: www.guardianinvestor.com.
UNDERSTANDING YOUR FUND’S EXPENSES (UNAUDITED)
By investing in the Fund, you incur two types of costs: (1) transaction costs, including, as applicable, sales charges (loads) on purchase payments; redemption fees; and exchange fees; and (2) ongoing costs, including as applicable, investment advisory fees; and other Fund expenses. The example below is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period indicated. The table below shows the Fund’s expenses in two ways:
Expenses based on actual return
This section of the table provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Expenses based on hypothetical 5% return for comparison purposes
This section of the table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund with the cost of investing in other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore the second section is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If these transactional costs were included, your costs would have been higher.
| | | | | | | | | | | | | | |
| | | Beginning
Account Value
1/1/11 | | Ending
Account Value
6/30/11 | | | Expenses Paid
During Period*
1/1/11-6/30/11 | | | Expense Ratio
During Period
1/1/11-6/30/11 | |
| Based on Actual Return | | $1,000.00 | | | $1,013.50 | | | | $2.80 | | | | 0.56% | |
| Based on Hypothetical Return (5% Return Before Expenses) | | $1,000.00 | | | $1,022.01 | | | | $2.82 | | | | 0.56% | |
| * | Expenses are equal to the Fund’s annualized expense ratio as indicated, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). |
SCHEDULE OF INVESTMENTS — RS LOW DURATION BOND VIP SERIES
| | | | | | | | |
| June 30, 2011 (unaudited) | | Principal
Amount | | | Value | |
| Asset Backed Securities – 15.2% | |
Ally Auto Receivables Trust
2010-3 A3
1.11% due 10/15/2014 | | $ | 1,000,000 | | | $ | 1,004,081 | |
Ally Master Owner Trust
2011-1 A2
2.15% due 1/15/2016 | | | 350,000 | | | | 354,578 | |
2010-3 A
2.88% due 4/15/2015(1) | | | 800,000 | | | | 822,955 | |
AmeriCredit Automobile Receivables Trust
2010-3 A3
1.14% due 4/8/2015 | | | 900,000 | | | | 901,066 | |
Ameriquest Mortgage Securities, Inc.
2003-5 A6
4.541% due 4/25/2033(2) | | | 129,205 | | | | 117,490 | |
Bank of America Auto Trust
2010-1A A4
2.18% due 2/15/2017(1) | | | 450,000 | | | | 460,550 | |
2009-2A A4
3.03% due 10/15/2016(1) | | | 740,000 | | | | 760,012 | |
BMW Vehicle Lease Trust
2009-1 A4
3.66% due 8/15/2013 | | | 100,000 | | | | 100,383 | |
Capital One Multi-Asset Execution Trust
2005-A10 A
0.267% due 9/15/2015(2) | | | 260,000 | | | | 259,746 | |
2005-A7 A7
4.70% due 6/15/2015 | | | 850,000 | | | | 889,397 | |
Chase Funding Mortgage Loan Trust
2004-1 1A6
4.266% due 6/25/2015 | | | 228,412 | | | | 223,925 | |
Citibank Credit Card Issuance Trust
2004-A8 A8
4.90% due 12/12/2016 | | | 950,000 | | | | 1,055,906 | |
CitiFinancial Mortgage Securities, Inc.
2003-3 AF5
4.553% due 8/25/2033(2) | | | 147,836 | | | | 148,860 | |
CNH Equipment Trust
2007-C A4B
1.337% due 3/17/2014(2) | | | 470,043 | | | | 470,235 | |
2009-C A4
3.00% due 8/17/2015(3) | | | 1,200,000 | | | | 1,231,849 | |
2007-C A4A
5.42% due 3/17/2014 | | | 97,184 | | | | 97,387 | |
Ford Credit Floorplan Master Owner Trust
2010-3 A2
1.887% due 2/15/2017(1)(2) | | | 985,000 | | | | 1,023,287 | |
GE Capital Credit Card Master Note Trust
2010-3 A
2.21% due 6/15/2016 | | | 750,000 | | | | 767,706 | |
| | | | | | | | | |
| | | | | | | | |
| June 30, 2011 (unaudited) | | Principal
Amount | | | Value | |
| Asset Backed Securities (continued) | |
Harley-Davidson Motorcycle Trust
2009-2 A4
3.32% due 2/15/2017 | | $ | 1,000,000 | | | $ | 1,024,155 | |
Hertz Vehicle Financing LLC
2009-2A A1
4.26% due 3/25/2014(1) | | | 950,000 | | | | 992,693 | |
Honda Auto Receivables Owner Trust
2010-3 A4
0.94% due 12/21/2016 | | | 954,000 | | | | 950,178 | |
Hyundai Auto Receivables Trust
2009-A A4
3.15% due 3/15/2016 | | | 600,000 | | | | 622,821 | |
John Deere Owner Trust
2009-B A4
2.33% due 5/16/2016(3) | | | 850,000 | | | | 864,215 | |
Navistar Financial Corp. Owner Trust
2010-A A3
1.99% due 1/21/2014(1) | | | 950,000 | | | | 959,299 | |
Nissan Auto Lease Trust
2009-B A3
2.07% due 1/15/2015 | | | 173,516 | | | | 173,858 | |
PG&E Energy Recovery Funding LLC
2005-1 A4
4.37% due 6/25/2014 | | | 537,209 | | | | 548,649 | |
2005-1 A5
4.47% due 12/25/2014 | | | 420,000 | | | | 439,032 | |
Residential Asset Mortgage Products, Inc.
2002-RS4 AI5
6.163% due 8/25/2032(2) | | | 20,695 | | | | 11,685 | |
Toyota Auto Receivables Owner Trust
2010-C A4
1.09% due 12/15/2014 | | | 500,000 | | | | 501,225 | |
Volkswagen Auto Lease Trust
2010-A A4
1.18% due 10/20/2015 | | | 900,000 | | | | 903,107 | |
World Omni Auto Receivables Trust
2010-A A4
2.21% due 9/15/2013 | | | 600,000 | | | | 612,265 | |
World Omni Automobile Lease Securitization Trust
2009-A A3
1.65% due 2/15/2013 | | | 476,746 | | | | 477,800 | |
| | | | | | | | | |
Total Asset Backed Securities
(Cost $19,614,494) | | | | 19,770,395 | |
| | | | | | | | |
| | | Principal
Amount | | | Value | |
| Collateralized Mortgage Obligations – 10.8% | |
Cendant Mortgage Corp.
2003-4 1A1
4.85% due 5/25/2033 | | | 206,803 | | | | 209,687 | |
Chase Mortgage Finance Corp.
2003-S10 A1
4.75% due 11/25/2018 | | | 509,327 | | | | 525,057 | |
2003-S14 3A1
5.50% due 1/25/2034 | | | 285,898 | | | | 288,619 | |
| | | | | | | | | |
| | | | |
| 8 | | | | The accompanying notes are an integral part of these financial statements. |
SCHEDULE OF INVESTMENTS — RS LOW DURATION BOND VIP SERIES
| | | | | | | | |
| June 30, 2011 (unaudited) | | Principal
Amount | | | Value | |
| Collateralized Mortgage Obligations (continued) | |
Citicorp Mortgage Securities, Inc.
2005-1 1A9
5.25% due 2/25/2035 | | $ | 282,619 | | | $ | 283,990 | |
Countrywide Alternative Loan Trust
2004-35T2 A1
6.00% due 2/25/2035 | | | 237,961 | | | | 236,922 | |
Countrywide Home Loans Trust
2003-50 A1
5.00% due 11/25/2018 | | | 776,681 | | | | 800,889 | |
2003-11 A31
5.50% due 5/25/2033 | | | 790,902 | | | | 822,815 | |
2002-19 1A1
6.25% due 11/25/2032 | | | 39,212 | | | | 41,283 | |
CS First Boston Mortgage Securities Corp.
2003-23 2A8
4.50% due 10/25/2018 | | | 294,044 | | | | 302,437 | |
2003-8 2A1
5.00% due 4/25/2018 | | | 491,937 | | | | 499,309 | |
2004-5 5A1
5.00% due 8/25/2019 | | | 758,834 | | | | 767,881 | |
FHLMC
1534 Z
5.00% due 6/15/2023 | | | 83,097 | | | | 83,066 | |
20 H
5.50% due 10/25/2023 | | | 41,297 | | | | 43,808 | |
First Horizon Mortgage Pass-Through Trust
2004-4 2A3
4.50% due 7/25/2019 | | | 575,445 | | | | 582,178 | |
FNMA
2003-63 GU
4.00% due 7/25/2033 | | | 3,829 | | | | 3,939 | |
2005-39 CL
5.00% due 12/25/2021 | | | 12,255 | | | | 12,290 | |
2006-45 AC
5.50% due 6/25/2036 | | | 34,456 | | | | 33,762 | |
2002-52 PB
6.00% due 2/25/2032 | | | 88,182 | | | | 90,183 | |
GMAC Mortgage Corp. Loan Trust
2004-J3 A6
5.25% due 7/25/2034 | | | 18,892 | | | | 18,849 | |
2004-J6 2A1
5.25% due 2/25/2035 | | | 102,919 | | | | 103,077 | |
GNMA
2002-93 NV
4.75% due 2/20/2032 | | | 111 | | | | 111 | |
J.P. Morgan Mortgage Trust
2005-A1 5A1
4.479% due 2/25/2035(2) | | | 176,994 | | | | 177,039 | |
2004-S2 1A3
4.75% due 11/25/2019 | | | 277,109 | | | | 283,085 | |
2004-S1 1A7
5.00% due 9/25/2034 | | | 117,338 | | | | 121,215 | |
Master Asset Securitization Trust
2003-5 2A1
5.00% due 6/25/2018 | | | 231,923 | | | | 241,921 | |
| | | | | | | | | |
| | | | | | | | |
| June 30, 2011 (unaudited) | | Principal
Amount | | | Value | |
| Collateralized Mortgage Obligations (continued) | |
Morgan Stanley Mortgage Loan Trust
2004-1 1A9
4.50% due 11/25/2018 | | $ | 285,157 | | | $ | 290,024 | |
Prime Mortgage Trust
2004-2 A2
4.75% due 11/25/2019 | | | 503,794 | | | | 517,596 | |
2003-3 A9
5.50% due 1/25/2034 | | | 412,446 | | | | 420,569 | |
Residential Asset Mortgage Products, Inc.
2005-SL1 A4
6.00% due 5/25/2032 | | | 34,911 | | | | 35,799 | |
Residential Asset Securitization Trust
2003-A2 A1
4.25% due 5/25/2033 | | | 746,965 | | | | 728,621 | |
Residential Funding Mortgage Securities I, Inc.
2004-S9 2A1
4.75% due 12/25/2019 | | | 363,296 | | | | 368,560 | |
2005-S1 2A1
4.75% due 2/25/2020 | | | 357,344 | | | | 366,614 | |
2003-S20 1A4
5.50% due 12/25/2033 | | | 55,927 | | | | 55,996 | |
Structured Asset Securities Corp.
2004-21XS 2A6A
4.74% due 12/25/2034(2) | | | 650,080 | | | | 655,407 | |
2005-1 4A1
5.00% due 2/25/2020 | | | 396,935 | | | | 404,550 | |
Wells Fargo Mortgage Backed Securities Trust
2003-J 2A1
4.419% due 10/25/2033(2) | | | 274,039 | | | | 277,407 | |
2003-8 A1
4.50% due 8/25/2018 | | | 201,292 | | | | 207,192 | |
2003-J 1A9
4.579% due 10/25/2033(2) | | | 1,129,779 | | | | 1,146,953 | |
2003-N 2A1
4.737% due 12/25/2033(2) | | | 623,212 | | | | 630,778 | |
2003-15 1A1
4.75% due 12/25/2018 | | | 69,399 | | | | 71,642 | |
2005-1 1A1
4.75% due 1/25/2020 | | | 388,237 | | | | 401,188 | |
2003-6 1A1
5.00% due 6/25/2018 | | | 271,311 | | | | 281,002 | |
2004-2 A1
5.00% due 1/25/2019 | | | 481,598 | | | | 497,423 | |
2006-7 1A1
5.25% due 6/25/2021 | | | 178,013 | | | | 180,459 | |
| | | | | | | | | |
Total Collateralized Mortgage Obligations
(Cost $14,070,685) | | | | 14,111,192 | |
| | | | | | | | |
| | | Principal
Amount | | | Value | |
| Senior Secured Loans – 1.9% | |
| Energy – 0.2% | |
CITGO Petroleum Corp.
Term Loan C
9.00% due 6/23/2017(2) | | | 297,000 | | | | 308,583 | |
| | | | | | | | | |
| | | | | | | | 308,583 | |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 9 |
RS LOW DURATION BOND VIP SERIES
| | | | | | | | |
| June 30, 2011 (unaudited) | | Principal
Amount | | | Value | |
| Finance Companies – 0.2% | |
Springleaf Finance Corp.
Term Loan
5.50% due 5/10/2017(2) | | $ | 200,000 | | | $ | 195,800 | |
| | | | | | | | | |
| | | | | | | | 195,800 | |
| Healthcare – 0.4% | |
Grifols, Inc.
Term Loan B
6.00% due 11/23/2016(2) | | | 250,000 | | | | 250,782 | |
IMS Health, Inc.
New Term Loan B
4.50% due 8/25/2017(2) | | | 246,878 | | | | 246,994 | |
| | | | | | | | | |
| | | | | | | | 497,776 | |
| Real Estate Investment Trusts – 0.9% | |
Istar Financial, Inc.
Term Loan A1
5.00% due 6/28/2013(2) | | | 711,236 | | | | 699,793 | |
LNR Property Corp.
Term Loan B
4.75% due 4/29/2016(2) | | | 500,000 | | | | 497,085 | |
| | | | | | | | | |
| | | | | | | | 1,196,878 | |
| Textiles, Apparel & Shoes – 0.2% | |
J Crew Operating Corp.
New Term Loan B
4.75% due 3/7/2018(2) | | | 300,000 | | | | 286,917 | |
| | | | | | | | | |
| | | | | | | | 286,917 | |
Total Senior Secured Loans
(Cost $2,492,294) | | | | | | | 2,485,954 | |
| | | | | | | | |
| | | Principal
Amount | | | Value | |
| Commercial Mortgage-Backed Securities – 23.2% | |
American Tower Trust
2007-1A AFX
5.42% due 4/15/2037(1) | | | 580,000 | | | | 624,191 | |
Asset Securitization Corp.
1996-D3 A4
8.109% due 10/13/2026(2) | | | 600,000 | | | | 606,879 | |
Banc of America Commercial Mortgage, Inc.
2004-1 A4
4.76% due 11/10/2039 | | | 750,000 | | | | 795,206 | |
2005-6 A4
5.367% due 9/10/2047(2) | | | 500,000 | | | | 545,540 | |
2006-2 A4
5.924% due 5/10/2045(2) | | | 500,000 | | | | 553,339 | |
Bear Stearns Commercial Mortgage Securities
2004-PWR3 A4
4.715% due 2/11/2041 | | | 540,000 | | | | 572,499 | |
2003-T10 A2
4.74% due 3/13/2040 | | | 550,000 | | | | 574,546 | |
2003-PWR2 A4
5.186% due 5/11/2039(2) | | | 700,000 | | | | 743,800 | |
| | | | | | | | | |
| | | | | | | | |
| June 30, 2011 (unaudited) | | Principal
Amount | | | Value | |
| Commercial Mortgage-Backed Securities (continued) | |
CDC Commercial Mortgage Trust
2002-FX1 B
5.856% due 5/15/2035 | | $ | 650,000 | | | $ | 657,520 | |
Chase Commercial Mortgage Securities Corp.
1998-1 F
6.56% due 5/18/2030(1)(2) | | | 379,254 | | | | 397,900 | |
Citigroup Commercial Mortgage Trust
2006-C5 A4
5.431% due 10/15/2049 | | | 500,000 | | | | 542,685 | |
Commercial Mortgage Asset Trust
1999-C1 A3
6.64% due 1/17/2032 | | | 7,888 | | | | 7,890 | |
1999-C1 B
7.23% due 1/17/2032(2) | | | 1,000,000 | | | | 1,092,445 | |
Commercial Mortgage Pass-Through Certificates
2003-LB1A A1
3.251% due 6/10/2038 | | | 228,576 | | | | 231,179 | |
2005-LP5 A4
4.982% due 5/10/2043(2) | | | 530,000 | | | | 571,099 | |
Crown Castle Towers LLC
Sr. Sec. Nt.
3.214% due 8/15/2015(1) | | | 350,000 | | | | 355,385 | |
4.523% due 1/15/2015(1) | | | 550,000 | | | | 574,841 | |
CS First Boston Mortgage Securities Corp.
2003-C3 A5
3.936% due 5/15/2038 | | | 1,135,000 | | | | 1,175,917 | |
2002-CP5 A1
4.106% due 12/15/2035 | | | 155,200 | | | | 156,281 | |
2004-C5 A2
4.183% due 11/15/2037 | | | 48,736 | | | | 48,709 | |
2004-C2 A2
5.416% due 5/15/2036(2) | | | 1,102,000 | | | | 1,193,853 | |
1997-C2 F
7.46% due 1/17/2035(2) | | | 575,000 | | | | 628,741 | |
First Union-Lehman Brothers-Bank of America
1998-C2 E
6.778% due 11/18/2035 | | | 872,000 | | | | 923,023 | |
GE Capital Commercial Mortgage Corp.
2004-C1 A3
4.596% due 11/10/2038 | | | 115,000 | | | | 120,708 | |
2004-C1 B
4.692% due 11/10/2038(2) | | | 385,000 | | | | 401,917 | |
2005-C1 AJ
4.826% due 6/10/2048(2) | | | 500,000 | | | | 495,221 | |
2003-C2 A4
5.145% due 7/10/2037 | | | 545,000 | | | | 576,817 | |
GMAC Commercial Mortgage Securities, Inc.
2003-C2 A2
5.654% due 5/10/2040(2) | | | 730,000 | | | | 784,499 | |
| | | | | | | | | |
| | | | |
| 10 | | | | The accompanying notes are an integral part of these financial statements. |
SCHEDULE OF INVESTMENTS — RS LOW DURATION BOND VIP SERIES
| | | | | | | | |
| June 30, 2011 (unaudited) | | Principal
Amount | | | Value | |
| Commercial Mortgage-Backed Securities (continued) | |
Greenwich Capital Commercial Funding Corp.
2005-GG3 A3
4.569% due 8/10/2042 | | $ | 890,000 | | | $ | 900,384 | |
2004-GG1 A7
5.317% due 6/10/2036(2) | | | 1,075,000 | | | | 1,155,016 | |
GS Mortgage Securities Corp. II
2004-GG2 A3
4.602% due 8/10/2038 | | | 30,738 | | | | 30,725 | |
J.P. Morgan Chase Commercial Mortgage Securities Corp.
2003-CB6 A2
5.255% due 7/12/2037(2) | | | 800,000 | | | | 848,229 | |
2005-LDP5 A4
5.371% due 12/15/2044(2) | | | 1,150,000 | | | | 1,254,962 | |
2005-LDP5 AM
5.413% due 12/15/2044(2) | | | 640,000 | | | | 678,558 | |
LB UBS Commercial Mortgage Trust
2003-C7 A4
4.931% due 9/15/2035(2) | | | 1,005,000 | | | | 1,064,753 | |
2002-C7 A4
4.96% due 12/15/2031 | | | 600,000 | | | | 626,607 | |
2003-C8 A4
5.124% due 11/15/2032(2) | | | 500,000 | | | | 533,551 | |
Merrill Lynch Mortgage Trust
2003-KEY1 A4
5.236% due 11/12/2035(2) | | | 500,000 | | | | 532,955 | |
Morgan Stanley Capital I
2004-HQ3 A4
4.80% due 1/13/2041 | | | 450,000 | | | | 472,814 | |
2003-T11 A3
4.85% due 6/13/2041 | | | 106,919 | | | | 107,768 | |
2005-HQ7 AAB
5.351% due 11/14/2042(2) | | | 461,344 | | | | 477,597 | |
Morgan Stanley Dean Witter Capital I
2002-IQ2 B
5.93% due 12/15/2035 | | | 347,000 | | | | 358,533 | |
Nomura Asset Securities Corp.
1998-D6 B1
6.00% due 3/15/2030(1) | | | 580,000 | | | | 606,147 | |
Salomon Brothers Mortgage Securities VII, Inc.
2002-KEY2 A2
4.467% due 3/18/2036 | | | 276,160 | | | | 279,840 | |
2002-KEY2 A3
4.865% due 3/18/2036 | | | 270,000 | | | | 277,183 | |
1999-C1 G
7.286% due 5/18/2032(1)(2) | | | 450,500 | | | | 480,491 | |
Wachovia Bank Commercial Mortgage Trust
2003-C8 A3
4.445% due 11/15/2035 | | | 647,225 | | | | 651,150 | |
2004-C10 A4
4.748% due 2/15/2041 | | | 551,920 | | | | 582,977 | |
2004-C11 A5
5.215% due 1/15/2041(2) | | | 575,000 | | | | 617,828 | |
| | | | | | | | | |
| | | | | | | | |
| June 30, 2011 (unaudited) | | Principal
Amount | | | Value | |
| Commercial Mortgage-Backed Securities (continued) | |
2005-C21 A4
5.38% due 10/15/2044(2) | | $ | 900,000 | | | $ | 981,371 | |
2006-C23 AM
5.466% due 1/15/2045(2) | | | 750,000 | | | | 771,021 | |
| | | | | | | | | |
| Total Commercial Mortgage-Backed Securities (Cost $30,026,652) | | | | 30,243,090 | |
| | | | | | | | |
| | | Principal
Amount | | | Value | |
| Corporate Bonds – 36.6% | | | | | | | | |
| Aerospace/Defense – 0.4% | | | | | | | | |
L-3 Communications Corp.
Ser. B
6.375% due 10/15/2015 | | | 500,000 | | | | 513,750 | |
| | | | | | | | | |
| | | | | | | | 513,750 | |
| Automotive – 1.2% | | | | | | | | |
Banque PSA Finance
Sr. Nt.
3.375% due 4/4/2014(1) | | | 500,000 | | | | 510,320 | |
Ford Motor Credit Co. LLC
Sr. Nt.
7.50% due 8/1/2012 | | | 500,000 | | | | 523,202 | |
RCI Banque S.A.
Sr. Nt.
3.40% due 4/11/2014(1) | | | 500,000 | | | | 509,248 | |
| | | | | | | | | |
| | | | | | | | 1,542,770 | |
| Banking – 7.1% | | | | | | | | |
Abbey National Treasury Services PLC
2.875% due 4/25/2014 | | | 500,000 | | | | 501,798 | |
American Express Travel Related Services Co., Inc.
Sr. Nt.
5.25% due 11/21/2011(1) | | | 500,000 | | | | 508,697 | |
ANZ National Int’l Ltd.
2.375% due 12/21/2012(1) | | | 500,000 | | | | 507,674 | |
Barclays Bank PLC
Sr. Nt.
2.50% due 1/23/2013 | | | 300,000 | | | | 305,519 | |
Capital One Financial Corp.
Sr. Nt.
5.70% due 9/15/2011 | | | 350,000 | | | | 353,514 | |
Citigroup, Inc.
Sr. Nt.
5.10% due 9/29/2011 | | | 300,000 | | | | 303,134 | |
5.50% due 4/11/2013 | | | 300,000 | | | | 318,503 | |
Credit Suisse/New York NY
Sr. Nt.
3.45% due 7/2/2012 | | | 200,000 | | | | 205,304 | |
5.00% due 5/15/2013 | | | 250,000 | | | | 266,854 | |
Deutsche Bank AG
Sr. Nt.
2.375% due 1/11/2013 | | | 300,000 | | | | 304,343 | |
Fifth Third Capital Trust IV
6.50% due 4/15/2037(2) | | | 500,000 | | | | 491,250 | |
| | | | | | | | | |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 11 |
RS LOW DURATION BOND VIP SERIES
| | | | | | | | |
| June 30, 2011 (unaudited) | | Principal
Amount | | | Value | |
| Banking (continued) | | | | | | | | |
ING Bank N.V.
Sr. Nt.
2.375% due 6/9/2014(1) | | $ | 600,000 | | | $ | 597,220 | |
Merrill Lynch & Co., Inc.
Sr. Nt. Ser. C
6.05% due 8/15/2012 | | | 350,000 | | | | 368,449 | |
Morgan Stanley
Sr. Nt.
2.875% due 1/24/2014 | | | 250,000 | | | | 252,981 | |
5.30% due 3/1/2013 | | | 250,000 | | | | 264,327 | |
PNC Preferred Funding Trust III
Jr. Sub. Nt.
8.70% due 3/15/2013(1)(2)(4) | | | 400,000 | | | | 421,780 | |
Rabobank Nederland N.V.
Sr. Nt.
2.65% due 8/17/2012(1) | | | 250,000 | | | | 255,723 | |
Regions Financial Corp.
Sr. Nt.
4.875% due 4/26/2013 | | | 500,000 | | | | 504,296 | |
Royal Bank of Scotland PLC
3.25% due 1/11/2014 | | | 500,000 | | | | 506,882 | |
The Goldman Sachs Group, Inc.
Sr. Nt.
3.625% due 8/1/2012 | | | 500,000 | | | | 514,602 | |
U.S. Bancorp
Sr. Nt.
2.875% due 11/20/2014 | | | 500,000 | | | | 523,602 | |
UBS AG Stamford CT
Sr. Nt.
2.25% due 8/12/2013 | | | 300,000 | | | | 305,163 | |
Union Bank N.A.
Sr. Nt.
2.125% due 12/16/2013 | | | 300,000 | | | | 301,639 | |
Westpac Banking Corp.
Sr. Nt.
2.10% due 8/2/2013 | | | 300,000 | | | | 303,750 | |
| | | | | | | | | |
| | | | | | | | 9,187,004 | |
| Building Materials – 0.6% | | | | | | | | |
CRH America, Inc.
5.625% due 9/30/2011 | | | 163,000 | | | | 164,788 | |
Lafarge S.A.
Sr. Nt.
6.15% due 7/15/2011 | | | 300,000 | | | | 300,405 | |
Masco Corp.
Sr. Nt.
5.875% due 7/15/2012 | | | 250,000 | | | | 258,592 | |
| | | | | | | | | |
| | | | | | | | 723,785 | |
| Chemicals – 0.6% | | | | | | | | |
Airgas, Inc.
Sr. Nt.
2.85% due 10/1/2013 | | | 500,000 | | | | 512,612 | |
The Dow Chemical Co.
Sr. Nt.
4.85% due 8/15/2012 | | | 300,000 | | | | 313,336 | |
| | | | | | | | | |
| | | | | | | | 825,948 | |
| | | | | | | | |
| June 30, 2011 (unaudited) | | Principal
Amount | | | Value | |
| Construction Machinery – 0.2% | | | | | | | | |
Case New Holland, Inc.
7.75% due 9/1/2013 | | $ | 250,000 | | | $ | 270,625 | |
| | | | | | | | | |
| | | | | | | | 270,625 | |
| Consumer Products – 0.2% | | | | | | | | |
Whirlpool Corp.
Sr. Nt.
8.00% due 5/1/2012 | | | 250,000 | | | | 264,145 | |
| | | | | | | | | |
| | | | | | | | 264,145 | |
| Diversified Manufacturing – 0.2% | | | | | | | | |
Danaher Corp.
Sr. Nt.
1.30% due 6/23/2014 | | | 200,000 | | | | 199,884 | |
| | | | | | | | | |
| | | | | | | | 199,884 | |
| Electric – 2.6% | | | | | | | | |
AEP Texas North Co.
Sr. Nt. Ser. B
5.50% due 3/1/2013 | | | 150,000 | | | | 159,641 | |
Edison Mission Energy
Sr. Nt.
7.50% due 6/15/2013 | | | 500,000 | | | | 503,125 | |
EDP Finance BV
Sr. Nt.
5.375% due 11/2/2012(1) | | | 500,000 | | | | 500,654 | |
FirstEnergy Corp.
Sr. Nt. Ser. B
6.45% due 11/15/2011 | | | 200,000 | | | | 203,742 | |
Great Plains Energy, Inc.
Sr. Nt.
2.75% due 8/15/2013 | | | 200,000 | | | | 204,559 | |
MidAmerican Energy Holdings Co.
Sr. Nt.
3.15% due 7/15/2012 | | | 200,000 | | | | 204,798 | |
Mirant Mid Atlantic Pass Through Trust
Ser. A
8.625% due 6/30/2012 | | | 322,272 | | | | 327,911 | |
National Rural Utilities Cooperative Finance Corp.
1.125% due 11/1/2013 | | | 500,000 | | | | 500,341 | |
2.625% due 9/16/2012 | | | 200,000 | | | | 204,582 | |
Oncor Electric Delivery Co.
Sr. Sec. Nt.
6.375% due 5/1/2012 | | | 250,000 | | | | 260,734 | |
The AES Corp.
Sr. Nt.
7.75% due 3/1/2014 | | | 250,000 | | | | 270,000 | |
| | | | | | | | | |
| | | | | | | | 3,340,087 | |
| Energy – Integrated – 0.7% | | | | | | | | |
BP Capital Markets PLC
3.125% due 3/10/2012 | | | 500,000 | | | | 508,672 | |
Chevron Corp.
3.45% due 3/3/2012 | | | 350,000 | | | | 357,331 | |
| | | | | | | | | |
| | | | | | | | 866,003 | |
| | | | |
| 12 | | | | The accompanying notes are an integral part of these financial statements. |
SCHEDULE OF INVESTMENTS — RS LOW DURATION BOND VIP SERIES
| | | | | | | | |
| June 30, 2011 (unaudited) | | Principal
Amount | | | Value | |
| Food And Beverage – 2.1% | | | | | | | | |
Anheuser-Busch InBev Worldwide, Inc.
2.50% due 3/26/2013 | | $ | 450,000 | | | $ | 461,137 | |
3.00% due 10/15/2012 | | | 200,000 | | | | 205,357 | |
Coca-Cola Enterprises, Inc.
Sr. Nt.
1.125% due 11/12/2013 | | | 300,000 | | | | 299,716 | |
Dr. Pepper Snapple Group, Inc.
1.70% due 12/21/2011 | | | 300,000 | | | | 301,735 | |
General Mills, Inc.
Sr. Nt.
1.55% due 5/16/2014 | | | 250,000 | | | | 251,719 | |
Kraft Foods, Inc.
Sr. Nt.
2.625% due 5/8/2013 | | | 600,000 | | | | 617,277 | |
SABMiller PLC
6.20% due 7/1/2011 | | | 300,000 | | | | 300,000 | |
Wm. Wrigley Jr. Co.
Sec. Nt.
2.45% due 6/28/2012(1) | | | 150,000 | | | | 150,299 | |
Sr. Sec. Nt.
3.05% due 6/28/2013(1) | | | 150,000 | | | | 153,330 | |
| | | | | | | | | |
| | | | | | | | 2,740,570 | |
| Gaming – 0.2% | | | | | | | | |
Seminole Indian Tribe of Florida
Sr. Sec. Nt.
5.798% due 10/1/2013(1) | | | 300,000 | | | | 301,212 | |
| | | | | | | | | |
| | | | | | | | 301,212 | |
| Government Related – 0.2% | | | | | | | | |
Ras Laffan Liquefied Natural Gas Co. Ltd.
Sr. Sec. Nt.
4.50% due 9/30/2012(1) | | | 250,000 | | | | 260,000 | |
| | | | | | | | | |
| | | | | | | | 260,000 | |
| Health Insurance – 0.4% | | | | | | | | |
UnitedHealth Group, Inc.
Sr. Nt.
4.875% due 4/1/2013 | | | 500,000 | | | | 530,138 | |
| | | | | | | | | |
| | | | | | | | 530,138 | |
| Healthcare – 1.2% | | | | | | | | |
AmerisourceBergen Corp.
5.625% due 9/15/2012 | | | 250,000 | | | | 262,889 | |
CareFusion Corp.
Sr. Nt.
4.125% due 8/1/2012 | | | 250,000 | | | | 257,680 | |
Express Scripts, Inc.
5.25% due 6/15/2012 | | | 300,000 | | | | 312,113 | |
Life Technologies Corp.
Sr. Nt.
3.375% due 3/1/2013 | | | 350,000 | | | | 360,306 | |
Thermo Fisher Scientific, Inc.
Sr. Nt.
2.15% due 12/28/2012 | | | 300,000 | | | | 305,514 | |
| | | | | | | | | |
| | | | | | | | 1,498,502 | |
| | | | | | | | |
| June 30, 2011 (unaudited) | | Principal
Amount | | | Value | |
| Independent Energy – 0.8% | | | | | | | | |
Chesapeake Energy Corp.
7.625% due 7/15/2013 | | $ | 350,000 | | | $ | 381,500 | |
Woodside Finance Ltd.
5.00% due 11/15/2013(1) | | | 600,000 | | | | 642,756 | |
| | | | | | | | | |
| | | | | | | | 1,024,256 | |
| Insurance - Life – 2.7% | | | | | | | | |
American International Group, Inc.
Sr. Nt.
3.65% due 1/15/2014 | | | 400,000 | | | | 407,636 | |
Assurant, Inc.
Sr. Nt.
5.625% due 2/15/2014 | | | 500,000 | | | | 534,234 | |
Genworth Financial, Inc.
Sr. Nt.
5.65% due 6/15/2012 | | | 500,000 | | | | 516,776 | |
Lincoln National Corp.
Sr. Nt.
5.65% due 8/27/2012 | | | 600,000 | | | | 628,734 | |
Metropolitan Life Global Funding I
Sr. Sec. Nt.
2.875% due 9/17/2012(1) | | | 500,000 | | | | 510,978 | |
New York Life Global Funding
2.25% due 12/14/2012(1) | | | 200,000 | | | | 204,125 | |
Prudential Financial, Inc.
Sr. Nt.
3.625% due 9/17/2012 | | | 200,000 | | | | 205,321 | |
5.10% due 12/14/2011 | | | 300,000 | | | | 305,396 | |
The Hartford Financial Services Group, Inc.
Sr. Nt.
5.25% due 10/15/2011 | | | 250,000 | | | | 253,028 | |
| | | | | | | | | |
| | | | | | | | 3,566,228 | |
| Insurance P&C – 1.5% | | | | | | | | |
Aspen Insurance Holdings Ltd.
Sr. Nt.
6.00% due 8/15/2014 | | | 350,000 | | | | 378,388 | |
Axis Capital Holdings Ltd.
Sr. Nt.
5.75% due 12/1/2014 | | | 300,000 | | | | 324,167 | |
Berkshire Hathaway Finance Corp.
1.50% due 1/10/2014 | | | 250,000 | | | | 252,222 | |
Marsh & McLennan Cos., Inc.
Sr. Nt.
4.85% due 2/15/2013 | | | 500,000 | | | | 523,937 | |
XL Capital Finance Europe PLC
Sr. Nt.
6.50% due 1/15/2012 | | | 500,000 | | | | 514,330 | |
| | | | | | | | | |
| | | | | | | | 1,993,044 | |
| Lodging – 0.3% | | | | | | | | |
Royal Caribbean Cruises Ltd.
Sr. Nt.
7.00% due 6/15/2013 | | | 300,000 | | | | 320,250 | |
| | | | | | | | | |
| | | | | | | | 320,250 | |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 13 |
RS LOW DURATION BOND VIP SERIES
| | | | | | | | |
| June 30, 2011 (unaudited) | | Principal
Amount | | | Value | |
| Media Cable – 0.4% | | | | | | | | |
Time Warner Cable, Inc.
5.40% due 7/2/2012 | | $ | 500,000 | | | $ | 522,687 | |
| | | | | | | | | |
| | | | | | | | 522,687 | |
| Media Noncable – 0.6% | | | | | | | | |
NBC Universal, Inc.
Sr. Nt.
2.10% due 4/1/2014(1) | | | 500,000 | | | | 506,632 | |
Scholastic Corp.
Sr. Nt.
5.00% due 4/15/2013 | | | 250,000 | | | | 255,938 | |
| | | | | | | | | |
| | | | | | | | 762,570 | |
| Metals And Mining – 2.1% | | | | | | | | |
Alcoa, Inc.
Sr. Nt.
6.00% due 1/15/2012 | | | 300,000 | | | | 307,501 | |
Anglo American Capital PLC
2.15% due 9/27/2013(1) | | | 300,000 | | | | 303,952 | |
ArcelorMittal
Sr. Nt.
5.375% due 6/1/2013 | | | 250,000 | | | | 266,179 | |
FMG Resources August 2006 Pty. Ltd.
7.00% due 11/1/2015(1) | | | 500,000 | | | | 510,000 | |
Freeport-McMoRan Copper & Gold, Inc.
Sr. Nt.
8.375% due 4/1/2017 | | | 450,000 | | | | 491,625 | |
Steel Dynamics, Inc.
7.375% due 11/1/2012 | | | 300,000 | | | | 316,500 | |
United States Steel Corp.
Sr. Nt.
5.65% due 6/1/2013 | | | 300,000 | | | | 312,750 | |
Xstrata Finance Canada Ltd.
5.50% due 11/16/2011(1) | | | 250,000 | | | | 254,345 | |
| | | | | | | | | |
| | | | | | | | 2,762,852 | |
| Non Captive Consumer – 0.4% | | | | | | | | |
SLM Corp.
Sr. Nt. Ser. A
5.00% due 10/1/2013 | | | 300,000 | | | | 312,000 | |
5.40% due 10/25/2011 | | | 250,000 | | | | 252,493 | |
| | | | | | | | | |
| | | | | | | | 564,493 | |
| Non Captive Diversified – 1.3% | | | | | | | | |
Ally Financial, Inc.
4.50% due 2/11/2014 | | | 450,000 | | | | 450,000 | |
CIT Group, Inc.
Sec. Nt.
5.25% due 4/1/2014(1) | | | 300,000 | | | | 298,500 | |
GATX Corp.
Sr. Nt.
4.75% due 10/1/2012 | | | 300,000 | | | | 312,176 | |
General Electric Capital Corp.
Sr. Nt.
2.80% due 1/8/2013 | | | 650,000 | | | | 666,504 | |
| | | | | | | | | |
| | | | | | | | 1,727,180 | |
| | | | | | | | |
| June 30, 2011 (unaudited) | | Principal
Amount | | | Value | |
| Oil Field Services – 0.8% | | | | | | | | |
Transocean Ltd.
5.25% due 3/15/2013 | | $ | 300,000 | | | $ | 319,552 | |
Weatherford International Ltd.
5.15% due 3/15/2013 | | | 761,000 | | | | 804,058 | |
| | | | | | | | | |
| | | | | | | | 1,123,610 | |
| Packaging – 0.5% | | | | | | | | |
Bemis Co., Inc.
Sr. Nt.
4.875% due 4/1/2012 | | | 210,000 | | | | 215,935 | |
Pactiv Corp.
Sr. Nt.
5.875% due 7/15/2012 | | | 400,000 | | | | 411,500 | |
| | | | | | | | | |
| | | | | | | | 627,435 | |
| Paper – 0.2% | | | | | | | | |
Rock-Tenn Co.
Sr. Sec. Nt.
8.20% due 8/15/2011 | | | 300,000 | | | | 302,625 | |
| | | | | | | | | |
| | | | | | | | 302,625 | |
| Pharmaceuticals – 0.6% | | | | | | | | |
Eli Lilly & Co.
Sr. Nt.
3.55% due 3/6/2012 | | | 350,000 | | | | 357,652 | |
Pfizer, Inc.
Sr. Nt.
4.45% due 3/15/2012 | | | 350,000 | | | | 359,972 | |
| | | | | | | | | |
| | | | | | | | 717,624 | |
| Pipelines – 1.6% | | | | | | | | |
Energy Transfer Partners LP
Sr. Nt.
5.65% due 8/1/2012 | | | 200,000 | | | | 209,548 | |
Enterprise Products Operating LLC
4.60% due 8/1/2012 | | | 300,000 | | | | 311,573 | |
Kinder Morgan Energy Partners LP
Sr. Nt.
7.125% due 3/15/2012 | | | 300,000 | | | | 313,159 | |
Kinder Morgan, Inc.
Sr. Nt.
6.50% due 9/1/2012 | | | 400,000 | | | | 420,000 | |
NGPL PipeCo LLC
Sr. Nt.
6.514% due 12/15/2012(1) | | | 300,000 | | | | 315,478 | |
Plains All American Pipeline LP
4.25% due 9/1/2012 | | | 500,000 | | | | 516,971 | |
| | | | | | | | | |
| | | | | | | | 2,086,729 | |
| REITs – 0.6% | | | | | | | | |
Camden Property Trust
Sr. Nt.
5.875% due 11/30/2012 | | | 250,000 | | | | 263,765 | |
CommonWealth REIT
Sr. Nt.
6.95% due 4/1/2012 | | | 300,000 | | | | 309,835 | |
| | | | | | | | | |
| | | | |
| 14 | | | | The accompanying notes are an integral part of these financial statements. |
SCHEDULE OF INVESTMENTS — RS LOW DURATION BOND VIP SERIES
| | | | | | | | |
| June 30, 2011 (unaudited) | | Principal
Amount | | | Value | |
| REITs (continued) | | | | | | | | |
Liberty Property LP
Sr. Nt.
6.375% due 8/15/2012 | | $ | 200,000 | | | $ | 210,230 | |
| | | | | | | | | |
| | | | | | | | 783,830 | |
| Retailers – 0.8% | | | | | | | | |
Home Depot, Inc.
Sr. Nt.
5.25% due 12/16/2013 | | | 600,000 | | | | 655,641 | |
Macy’s Retail Holdings, Inc.
5.35% due 3/15/2012 | | | 350,000 | | | | 358,868 | |
| | | | | | | | | |
| | | | | | | | 1,014,509 | |
| Technology – 1.9% | | | | | | | | |
Agilent Technologies, Inc.
Sr. Nt.
2.50% due 7/15/2013 | | | 200,000 | | | | 203,636 | |
4.45% due 9/14/2012 | | | 300,000 | | | | 310,732 | |
Broadcom Corp.
Sr. Nt.
1.50% due 11/1/2013(1) | | | 500,000 | | | | 501,165 | |
Hewlett-Packard Co.
Sr. Nt.
4.25% due 2/24/2012 | | | 200,000 | | | | 204,816 | |
Lexmark International, Inc.
Sr. Nt.
5.90% due 6/1/2013 | | | 350,000 | | | | 373,164 | |
Maxim Integrated Products, Inc.
Sr. Nt.
3.45% due 6/14/2013 | | | 250,000 | | | | 259,621 | |
National Semiconductor Corp.
Sr. Nt.
6.15% due 6/15/2012 | | | 250,000 | | | | 260,603 | |
Pitney Bowes, Inc.
Sr. Nt.
3.875% due 6/15/2013 | | | 400,000 | | | | 417,556 | |
| | | | | | | | | |
| | | | | | | | 2,531,293 | |
| Transportation Services – 0.4% | | | | | | | | |
ERAC USA Finance LLC
2.25% due 1/10/2014(1) | | | 500,000 | | | | 504,986 | |
| | | | | | | | | |
| | | | | | | | 504,986 | |
| Wireless – 0.3% | | | | | | | | |
Cellco Partnership
Sr. Nt.
5.25% due 2/1/2012 | | | 400,000 | | | | 410,497 | |
| | | | | | | | | |
| | | | | | | | 410,497 | |
| Wirelines – 0.9% | | | | | | | | |
Telecom Italia Capital SA
5.25% due 11/15/2013 | | | 500,000 | | | | 524,886 | |
Telefonica Emisiones SAU
2.582% due 4/26/2013 | | | 700,000 | | | | 707,241 | |
| | | | | | | | | |
| | | | | | | | 1,232,127 | |
Total Corporate Bonds
(Cost $47,038,380) | | | | 47,643,248 | |
| | | | | | | | |
| June 30, 2011 (unaudited) | | Principal
Amount | | | Value | |
| Government Agencies – 0.3% | | | | | | | | |
PNC Funding Corp.
2.30% due 6/22/2012(5) | | $ | 350,000 | | | $ | 357,050 | |
| | | | | | | | | |
Total Government Agencies
(Cost $350,586) | | | | | | | 357,050 | |
| | | | | | | | |
| | | Principal
Amount | | | Value | |
| Hybrid ARMS – 0.0% | | | | | | | | |
FNMA
6.228% due 8/1/2046(2) | | | 55,584 | | | | 57,388 | |
| | | | | | | | | |
Total Hybrid ARMS
(Cost $56,073) | | | | 57,388 | |
| | | | | | | | |
| | | Principal
Amount | | | Value | |
| Mortgage-Backed Securities – 0.1% | |
FHLMC
7.00% due 9/1/2038 | | | 69,450 | | | | 79,878 | |
| | | | | | | | | |
Total Mortgage-Backed Securities
(Cost $72,159) | | | | 79,878 | |
| | | | | | | | |
| | | Principal
Amount | | | Value | |
| U.S. Government Securities – 10.7% | |
U.S. Treasury Notes
0.50% due 11/30/2012 | | | 1,300,000 | | | | 1,303,199 | |
0.625% due 1/31/2013-2/28/2013 | | | 3,473,000 | | | | 3,486,526 | |
0.75% due 6/15/2014 | | | 3,850,000 | | | | 3,845,488 | |
1.00% due 5/15/2014 | | | 2,460,000 | | | | 2,476,335 | |
1.25% due 4/15/2014 | | | 1,515,000 | | | | 1,536,304 | |
1.50% due 6/30/2016 | | | 1,300,000 | | | | 1,283,347 | |
| | | | | | | | | |
Total U.S. Government Securities
(Cost $13,908,211) | | | | 13,931,199 | |
| | | | | | | | |
| | | Principal
Amount | | | Value | |
| Repurchase Agreements – 2.3% | | | | | |
State Street Bank and Trust Co. Repurchase Agreement, 0.01%,
dated 6/30/2011, maturity
value of $3,061,001, due
7/1/2011(6) | | | 3,061,000 | | | | 3,061,000 | |
Total Repurchase Agreements
(Cost $3,061,000) | | | | 3,061,000 | |
Total Investments - 101.1%
(Cost $130,690,534) | | | | 131,740,394 | |
| Other Liabilities, Net - (1.1)% | | | | (1,389,952 | ) |
| Total Net Assets - 100.0% | | | $ | 130,350,442 | |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 15 |
RS LOW DURATION BOND VIP SERIES
| (1) | Securities that may be resold in transactions, exempt from registration under Rule 144A of the Securities Act of 1933, normally to certain qualified buyers. At June 30, 2011, the aggregate market value of these securities amounted to $17,286,825, representing 13.3% of net assets. These securities have been deemed liquid by the investment adviser pursuant to the Fund’s liquidity procedures approved by the Board of Trustees. |
| (2) | Variable rate securities, which may include step-up bonds or adjustable rate mortgages. The rate shown is the rate in effect at June 30, 2011. |
| (3) | Securities are segregated for anticipated collateral requirements. |
| (4) | Maturity is perpetual. Maturity date presented represents the next call date. |
| (5) | Classified under Government Agencies as a result of participation in the U.S. Government Troubled Asset Relief Program. |
| (6) | The table below presents collateral for repurchase agreements. |
| | | | | | | | | | | | |
| Security | | Coupon | | | Maturity
Date | | | Value | |
| FHLMC | | | 5.00% | | | | 4/8/2030 | | | $ | 3,125,550 | |
| | | | |
| 16 | | | | The accompanying notes are an integral part of these financial statements. |
The following is a summary of the inputs used as of June 30, 2011 in valuing the Fund’s investments. For more information on valuation inputs, please refer to Note 1a of the accompanying Notes to Financial Statements.
| | | | | | | | | | | | | | | | |
| | | Valuation Inputs | | | | |
| Investments in Securities (unaudited) | | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
| Asset Backed Securities | | $ | — | | | $ | 19,770,395 | | | $ | — | | | $ | 19,770,395 | |
| Collateralized Mortgage Obligations | | | — | | | | 14,111,192 | | | | — | | | | 14,111,192 | |
| Senior Secured Loans | | | — | | | | 2,485,954 | | | | — | | | | 2,485,954 | |
| Commercial Mortgage-Backed Securities | | | — | | | | 30,243,090 | | | | — | | | | 30,243,090 | |
| Corporate Bonds | | | — | | | | 47,643,248 | | | | — | | | | 47,643,248 | |
| Government Agencies | | | — | | | | 357,050 | | | | — | | | | 357,050 | |
| Hybrid ARMS | | | — | | | | 57,388 | | | | — | | | | 57,388 | |
| Mortgage-Backed Securities | | | — | | | | 79,878 | | | | — | | | | 79,878 | |
| U.S. Government Securities | | | — | | | | 13,931,199 | | | | — | | | | 13,931,199 | |
| Repurchase Agreements | | | — | | | | 3,061,000 | | | | — | | | | 3,061,000 | |
| Total | | $ | — | | | $ | 131,740,394 | | | $ | — | | | $ | 131,740,394 | |
FINANCIAL INFORMATION — RS LOW DURATION BOND VIP SERIES
| | | | |
Statement of Assets and Liabilities As of June 30, 2011 (unaudited) | | | |
Assets | | | | |
Investments, at value | | $ | 131,740,394 | |
Cash and cash equivalents | | | 412 | |
Receivable for investments sold | | | 849,675 | |
Interest receivable | | | 770,317 | |
Receivable for fund shares subscribed | | | 207,077 | |
| | | | | |
Total Assets | | | 133,567,875 | |
| | | | | |
| | |
Liabilities | | | | |
Payable for investments purchased | | | 3,153,912 | |
Payable to adviser | | | 47,377 | |
Accrued trustees’ fees | | | 1,384 | |
Payable for fund shares redeemed | | | 375 | |
Accrued expenses/other liabilities | | | 14,385 | |
| | | | | |
Total Liabilities | | | 3,217,433 | |
| | | | | |
Total Net Assets | | $ | 130,350,442 | |
| | | | | |
| | |
Net Assets Consist of: | | | | |
Paid-in capital | | $ | 127,636,647 | |
Accumulated undistributed net investment income | | | 1,625,589 | |
Accumulated net realized gain from investments | | | 38,346 | |
Net unrealized appreciation on investments | | | 1,049,860 | |
| | | | | |
Total Net Assets | | $ | 130,350,442 | |
| | | | | |
Investments, at Cost | | $ | 130,690,534 | |
| | | | | |
| | |
Pricing of Shares | | | | |
Shares of Beneficial Interest Outstanding with no Par Value | | | 12,379,619 | |
Net Asset Value Per Share | | | $10.53 | |
| | | | | |
| | | | |
Statement of Operations For the Six-Month Period Ended June 30, 2011 (unaudited) | |
Investment Income | | | | |
Interest | | $ | 1,950,993 | |
| | | | | |
Total Investment Income | | | 1,950,993 | |
| | | | | |
| | |
Expenses | | | | |
Investment advisory fees | | | 260,690 | |
Custodian fees | | | 27,199 | |
Professional fees | | | 13,534 | |
Shareholder reports | | | 11,441 | |
Administrative service fees | | | 6,780 | |
Trustees’ fees | | | 2,443 | |
Other expenses | | | 3,334 | |
| | | | | |
Total Expenses | | | 325,421 | |
| | |
Less: Custody credits | | | (17 | ) |
| | | | | |
Total Expenses, Net | | | 325,404 | |
| | | | | |
Net Investment Income | | | 1,625,589 | |
| | | | | |
| | |
Realized Gain/(Loss) and Change in Unrealized Appreciation/Depreciation on Investments | | | | |
Net realized gain from investments | | | 13,711 | |
Net change in unrealized appreciation/depreciation on investments | | | (128,571 | ) |
| | | | | |
Net Loss on Investments | | | (114,860 | ) |
| | | | | |
Net Increase in Net Assets Resulting from Operations | | $ | 1,510,729 | |
| | | | | |
| | | | | |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 17 |
FINANCIAL INFORMATION — RS LOW DURATION BOND VIP SERIES
| | | | | | | | |
Statement of Changes in Net Assets Six-month-ended numbers are unaudited | | | | | | |
| | | |
| | | For the
Six Months Ended
6/30/11 | | | For the
Year Ended
12/31/10 | |
| | | | |
Operations | | | | | | | | |
Net investment income | | $ | 1,625,589 | | | $ | 2,981,045 | |
Net realized gain from investments | | | 13,711 | | | | 681,771 | |
Net change in unrealized appreciation/depreciation on investments | | | (128,571 | ) | | | 171,656 | |
| | | | | | | | | |
Net Increase in Net Assets Resulting from Operations | | | 1,510,729 | | | | 3,834,472 | |
| | | | | | | | | |
| | | |
Distributions to Shareholders | | | | | | | | |
Net investment income | | | — | | | | (3,010,378 | ) |
Net realized gain on investments | | | — | | | | (711,405 | ) |
| | | | | | | | | |
Total Distributions | | | — | | | | (3,721,783 | ) |
| | | | | | | | | |
| | | |
Capital Share Transactions | | | | | | | | |
Proceeds from sales of shares | | | 30,828,565 | | | | 52,728,718 | |
Reinvestment of distributions | | | — | | | | 3,721,783 | |
Cost of shares redeemed | | | (6,530,005 | ) | | | (22,294,491 | ) |
| | | | | | | | | |
Net Increase in Net Assets Resulting from Capital Share
Transactions | | | 24,298,560 | | | | 34,156,010 | |
| | | | | | | | | |
Net Increase in Net Assets | | | 25,809,289 | | | | 34,268,699 | |
| | | | | | | | | |
| | | |
Net Assets | | | | | | | | |
Beginning of period | | | 104,541,153 | | | | 70,272,454 | |
| | | | | | | | | |
End of period | | $ | 130,350,442 | | | $ | 104,541,153 | |
| | | | | | | | | |
Accumulated Undistributed Net Investment Income Included in Net Assets | | $ | 1,625,589 | | | $ | — | |
| | | | | | | | | |
| | | |
Other Information: | | | | | | | | |
Shares | | | | | | | | |
Sold | | | 2,943,438 | | | | 4,978,794 | |
Reinvested | | | — | | | | 358,899 | |
Redeemed | | | (624,256 | ) | | | (2,094,797 | ) |
| | | | | | | | | |
Net Increase | | | 2,319,182 | | | | 3,242,896 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | |
| 18 | | | | The accompanying notes are an integral part of these financial statements. |
This Page Intentionally Left Blank
FINANCIAL INFORMATION — RS LOW DURATION BOND VIP SERIES
The financial highlights table is intended to help you understand the Fund’s financial performance for the past six reporting periods. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the Fund (assuming reinvestment of all distributions).
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Financial Highlights Six-month-ended numbers are unaudited | | | | | | | | | | | | | | | | |
| | | Net Asset Value,
Beginning of
Period | | | Net Investment
Income | | | Net Realized and Unrealized
Gain | | | Total Operations | | | Distributions
From Net
Investment
Income | | | Distributions
From Net Realized Capital Gains | | | Total
Distributions | |
Six Months Ended 6/30/111 | | $ | 10.39 | | | $ | 0.13 | | | $ | 0.01 | | | $ | 0.14 | | | $ | — | | | $ | — | | | $ | — | |
Year Ended 12/31/10 | | | 10.31 | | | | 0.32 | | | | 0.15 | | | | 0.47 | | | | (0.32 | ) | | | (0.07 | ) | | | (0.39 | ) |
Year Ended 12/31/09 | | | 9.94 | | | | 0.27 | | | | 0.37 | | | | 0.64 | | | | (0.27 | ) | | | — | | | | (0.27 | ) |
Year Ended 12/31/08 | | | 9.91 | | | | 0.32 | | | | 0.03 | | | | 0.35 | | | | (0.32 | ) | | | — | | | | (0.32 | ) |
Year Ended 12/31/07 | | | 9.82 | | | | 0.45 | | | | 0.09 | | | | 0.54 | | | | (0.45 | ) | | | — | | | | (0.45 | ) |
Year Ended 12/31/06 | | | 9.81 | | | | 0.38 | | | | 0.01 | | | | 0.39 | | | | (0.38 | ) | | | — | | | | (0.38 | ) |
| | | | |
| 20 | | | | The accompanying notes are an integral part of these financial statements. |
FINANCIAL INFORMATION — RS LOW DURATION BOND VIP SERIES
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Net Asset Value, End of
Period | | | Total Return2 | | | Net Assets, End of Period (000s) | | | Net Ratio of
Expenses to
Average Net
Assets3 | | | Gross Ratio of Expenses to
Average Net
Assets | | | Net Ratio of Net
Investment Income to Average Net Assets3 | | | Gross Ratio of Net
Investment Income
to Average Net Assets | | | Portfolio
Turnover Rate | |
| $ | 10.53 | | | | 1.35% | | | $ | 130,350 | | | | 0.56% | | | | 0.56% | | | | 2.81% | | | | 2.81% | | | | 26% | |
| | 10.39 | | | | 4.57% | | | | 104,541 | | | | 0.58% | | | | 0.58% | | | | 3.33% | | | | 3.33% | | | | 103% | |
| | 10.31 | | | | 6.38% | | | | 70,272 | | | | 0.62% | | | | 0.62% | | | | 3.38% | | | | 3.38% | | | | 335% | |
| | 9.94 | | | | 3.56% | | | | 33,679 | | | | 0.68% | | | | 0.68% | | | | 3.46% | | | | 3.46% | | | | 136% | |
| | 9.91 | | | | 5.48% | | | | 26,935 | | | | 0.70% | | | | 0.79% | | | | 4.38% | | | | 4.29% | | | | 69% | |
| | 9.82 | | | | 4.07% | | | | 27,969 | | | | 0.71% | 4 | | | 0.72% | | | | 3.88% | | | | 3.87% | | | | 78% | |
Distributions reflect actual per-share amounts distributed for the period.
| 1 | Ratios for periods less than one year have been annualized, except for total return and portfolio turnover rate. |
| 2 | Total returns do not reflect the effects of charges deducted pursuant to the terms of The Guardian Insurance & Annuity Company, Inc.’s variable contracts. Inclusion of such charges would reduce the total returns for all periods shown. |
| 3 | Net Ratio of Expenses to Average Net Assets and Net Ratio of Net Investment Income to Average Net Assets include the effect of fee waivers, expense limitations and custody credits, if applicable. |
| 4 | Before offset of custody credits. Including the custody credits, the expense ratio is 0.70%. |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 21 |
NOTES TO FINANCIAL STATEMENTS — RS LOW DURATION BOND VIP SERIES (UNAUDITED)
June 30, 2011 (unaudited)
RS Variable Products Trust (the “Trust”), a Massachusetts business trust organized on May 18, 2006, is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust currently offers twelve series. RS Low Duration Bond VIP Series (the “Fund”) is a series of the Trust. The Fund is a diversified fund. The financial statements for the other remaining series of the Trust are presented in separate reports.
The Fund has authorized an unlimited number of shares of beneficial interest with no par value. Shares are bought and sold at closing net asset value (“NAV”), which is the price for all outstanding shares of the Fund. Class I shares of the Fund are only sold to certain separate accounts of The Guardian Insurance & Annuity Company, Inc. (“GIAC”). GIAC is a wholly-owned subsidiary of The Guardian Life Insurance Company of America (“Guardian Life”). The Fund is currently offered to insurance company separate accounts that fund certain variable annuity and variable life insurance contracts issued by GIAC.
Note 1. Significant Accounting Policies
The following policies are in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
a. Investment Valuations The Fund is responsible for the valuation of portfolio securities and uses independent pricing services (each, a “Service”). Debt securities with more than 60 days to maturity for which quoted bid prices are readily available and representative of the bid side of the market are valued by a relevant Service at the bid price. Debt securities with more than 60 days to maturity for which quoted bid prices are not readily available and representative of the market value are valued by the Service at estimated market value based on methods which may include consideration of yields or prices of government securities of comparable coupon, maturity and type; indications as to values from dealers; and general market conditions.
Other marketable securities are valued at the last reported sale price on the principal exchange or market on which they are traded; or, if there were no sales that day, at the mean between the closing bid and asked
prices. Securities traded on the NASDAQ Stock Market, LLC (“NASDAQ”) are generally valued at the NASDAQ official closing price, which may not be the last sale price. If the NASDAQ official closing price is not available for a security, that security is generally valued using the last reported sale price, or, if no sales are reported, at the mean between the closing bid and asked prices. Short-term investments that will mature in 60 days or less are valued at amortized cost, which approximates market value. Repurchase agreements are carried at cost, which approximates market value. Foreign securities are valued in the currencies of the markets in which they trade and then converted to U.S. dollars using the prevailing exchange rates at the close of the New York Stock Exchange (“NYSE”).
Securities for which market quotations are not readily available or for which market quotations may be considered unreliable or for which a service does not provide a valuation are valued at their fair values as determined in accordance with guidelines and procedures adopted by the Trust’s Board of Trustees.
Securities whose values have been materially affected by events occurring before the Fund’s valuation time but after the close of the securities’ principal exchange or market may be fair valued using methods approved by the Board of Trustees.
The Fund has adopted the authoritative guidance under GAAP on determining fair value when the volume and level of activity for an asset or liability have significantly decreased and for identifying transactions that are not orderly. Accordingly, if the Fund determines that either the volume and/or level of activity for an asset or liability has significantly decreased (from normal conditions for that asset or liability) or price quotations or observable inputs are not associated with orderly transactions, increased analysis and management judgment will be required to estimate fair value.
In accordance with Financial Accounting Standards Board Codification Topic 820 (“ASC Topic 820”), fair value is defined as the price that the Fund would receive upon selling an investment in an “arm’s length” transaction to a willing buyer in the principal or most advantageous market for the investment. ASC Topic 820 established a hierarchy for classification of fair value measurements for disclosure purposes. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability based on the
NOTES TO FINANCIAL STATEMENTS — RS LOW DURATION BOND VIP SERIES (UNAUDITED)
best information available in the circumstances. The hierarchy of inputs is summarized in the three broad levels listed below.
| Ÿ | | Level 1 — unadjusted quoted prices in active markets for identical investments |
| Ÿ | | Level 2 — inputs other than unadjusted quoted prices that are observable either directly or indirectly (including adjusted quoted prices for similar investments, interest rates, prepayment speeds, credit risks, etc.) |
| Ÿ | | Level 3 — significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments) |
Inputs may include price information, volatility statistics, specific and broad credit data, liquidity statistics, and other factors. A security’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires significant judgment by the Trust. The Trust considers observable data to be that market data which is readily available, regularly distributed or updated, reliable and verifiable, and provided by independent sources that are actively involved in the relevant market. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. Changes in valuation techniques may result in transfers into or out of an investment’s assigned level within the hierarchy.
Effective beginning with the Fund’s current fiscal year, the Financial Accounting Standards Board requires reporting entities to make disclosures about purchases, sales, issuances and settlements of Level 3 securities on a gross basis. For the six months ended June 30, 2011, the Fund had no securities classified as Level 3.
There were no significant transfers between Level 1 and Level 2 for the six months end June 30, 2011.
In determining a security’s placement within the hierarchy, the Trust separates the Fund’s investment portfolio into two categories: investments and derivatives (e.g., futures).
Investments Investments whose values are based on quoted market prices in active markets, and are therefore classified within Level 1, include active listed equities. The Trust does not adjust the quoted price for such instruments, even in situations where the Fund holds a large position and a sale could reasonably be expected to impact the quoted price.
Investments that trade in markets that are not considered to be active, but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within Level 2. These include certain U.S. government and sovereign obligations, most government agency securities, investment-grade corporate bonds, certain mortgage products, state, municipal and provincial obligations, and certain foreign equity securities.
Investments classified within Level 3 have significant unobservable inputs, as they trade infrequently or not at all. Level 3 investments include, among others, private placement securities. When observable prices are not available for these securities, the Trust uses one or more valuation techniques for which sufficient and reliable data is available. The inputs used by the Trust in estimating the value of Level 3 investments include the original transaction price, recent transactions in the same or similar instruments, completed or pending third-party transactions in the underlying investment or comparable issuers, subsequent rounds of financing, recapitalizations, and other transactions across the capital structure. Level 3 investments may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the Trust in the absence of market information. Assumptions used by the Trust due to the lack of observable inputs may significantly impact the resulting fair value and therefore the Fund’s results of operations.
Derivatives Exchange-traded derivatives, such as futures contracts and exchange traded option contracts, are typically classified within Level 1 or Level 2 of the fair value hierarchy depending on whether or not they are deemed to be actively traded. Certain derivatives, such as generic forwards, swaps and options, have inputs which can generally be corroborated by market data and are therefore classified within Level 2.
b. Federal Income Taxes The Fund intends to continue complying with the requirements of the Internal Revenue Code to qualify as a regulated investment company and to distribute substantially all net investment income and realized net capital gains, if any, to shareholders. Therefore, the Fund does not expect to be subject to income tax, and no provision for such tax has been made.
From time to time, however, the Fund may choose to pay an excise tax if the cost of making the required distribution exceeds the amount of the excise tax.
As of June 30, 2011, the Trust has reviewed the tax positions for open periods, as applicable to the Fund, and has determined that no provision for income tax is
NOTES TO FINANCIAL STATEMENTS — RS LOW DURATION BOND VIP SERIES (UNAUDITED)
required in the Fund’s financial statements. The Fund recognizes interest and penalties, if any, related to unrecognized tax positions as income tax expense in the Statement of Operations. For the six months ended June 30, 2011, the Fund did not incur any interest or penalties. The Fund is not subject to examination by U.S. federal tax authorities for tax years before 2007 and by state authorities for tax years before 2006.
c. Securities Transactions Securities transactions are accounted for on the date securities are purchased or sold (trade date). Realized gains or losses on securities transactions are determined on the basis of specific identification.
d. Investment Income Dividend income is generally recorded on the ex-dividend date. Interest income, which includes amortization/accretion of premium/discount, is accrued and recorded daily.
e. Expenses Many expenses of the Trust can be directly attributed to a specific series of the Trust. Expenses that cannot be directly attributed to a specific series of the Trust are generally apportioned among all the series in the Trust, based on relative net assets.
f. Custody Credits The Fund has entered into an arrangement with its custodian, State Street Bank and Trust Company, whereby credits realized as a result of uninvested cash balances are used to reduce the Fund’s custodian expenses. The Fund’s custody credits, if any, are shown in the accompanying Statement of Operations.
g. Distributions to Shareholders The Fund intends to declare and distribute substantially all net investment income, if any, at least once a year. Distributions of net realized capital gains, if any, are declared and paid at least once a year. Unless the Fund is instructed otherwise, all distributions to shareholders are credited in the form of additional shares of the Fund at the net asset value, recorded on the ex-dividend date.
h. Capital Accounts Due to the timing of dividend distributions and the differences in accounting for income and realized gains/(losses) for financial statement purposes versus federal income tax purposes, the fiscal year in which amounts are distributed may differ from the year in which the income and realized gains/(losses) were recorded by the Fund.
Note 2. Transactions with Affiliates
a. Advisory Fee Under the terms of the advisory agreement, which is reviewed and approved annually by the Board of Trustees, the Fund pays an investment
advisory fee to RS Investment Management Co. LLC (“RS Investments”). Guardian Investor Services LLC (“GIS”), a subsidiary of Guardian Life, holds a majority interest in RS Investments. RS Investments receives an investment advisory fee based on the average daily net assets of the Fund at an annual rate of 0.45%. The Fund has also entered into an agreement with GIS for distribution services with respect to its shares.
RS Investments has entered into a Sub-Advisory Services Agreement with GIS. GIS is responsible for providing day-to-day investment advisory services to the Fund, subject to the oversight of the Board of Trustees of the Trust and review by RS Investments. As compensation for GIS’s services, RS Investments pays fees to GIS at an annual rate of 0.4275% of the average daily net assets of the Fund. Payment of the sub-investment advisory fee does not represent a separate or additional expense to the Fund.
RS Investments has an Expense Reimbursement Agreement in place with GIS with respect to certain funds of the Trust to which GIS serves as sub-adviser. The Expense Reimbursement Agreement provides that GIS will reimburse RS Investments for certain operating expenses and may make additional payments to mitigate losses incurred by RS Investments.
b. Compensation of Trustees and Officers Trustees and officers of the Trust who are interested persons, as defined in the 1940 Act, of RS Investments receive no compensation from the Fund for acting as such. Trustees of the Trust who are not interested persons of RS Investments receive compensation and reimbursement of expenses from the Trust.
Note 3. Federal Income Taxes
a. Distributions to Shareholders The tax character of distributions paid during the year ended December 31, 2010, which is the most recently completed tax year, was as follows:
| | | | |
| Ordinary Income | | Long-Term Capital Gains | |
| $3,328,463 | | $ | 393,320 | |
Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. These differences are primarily due to differing treatments of income and gains on various investment securities held by the Fund, timing differences, and differing characterizations of distributions made by the Fund. Permanent book and tax basis differences will result in reclassifications to paid-in capital, undistributed net
NOTES TO FINANCIAL STATEMENTS — RS LOW DURATION BOND VIP SERIES (UNAUDITED)
investment income and accumulated undistributed net realized gain/(loss) on investments. Undistributed net investment income and accumulated undistributed net realized gain/(loss) on investments may include temporary book and tax differences, which will reverse in a subsequent period.
As of December 31, 2010, the Fund made the following reclassifications of permanent book and tax basis differences:
| | | | | | | | | | |
| Paid-in-Capital | | | Accumulated
Net Investment Income | | | Accumulated
Net Realized Gain | |
| | $— | | | $ | 29,333 | | | $ | (29,333 | ) |
The tax basis of distributable earnings as of December 31, 2010 was as follows:
| | | | | | |
Undistributed
Ordinary
Income | | | Undistributed
Long-Term Capital Gains | |
| | $9,829 | | | $ | 14,805 | |
During any particular year, net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed and, therefore, are normally distributed to shareholders annually.
In determining its taxable income, current tax law permits the Fund to elect to treat all or a portion of any net capital or currency loss realized after October 31 as occurring on the first day of the following fiscal year. For the year ended December 31, 2010, the Fund had no such losses.
On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted. The Act modernizes several of the federal income and excise tax rules related to regulated investment companies, and with certain exceptions, is effective for taxable years beginning after December 22, 2010.
Among the changes are revisions to capital loss carryforward rules allowing for capital losses to be carried forward to one or more subsequent taxable years without expiration. Rules previously in effect limited the carryforward period to eight taxable years. Capital loss carryforwards generated in taxable years beginning after the effective date of the Act must be fully used before capital loss carryforwards generated in taxable years prior to the effective date of the Act. Changes to excise tax rules include timing of recognition of certain income and a change in the required distribution rate for capital gains.
b. Tax Basis of Investments The cost of investments for federal income tax purposes at June 30, 2011, was $130,701,768. The gross unrealized appreciation and depreciation on investments, on a tax basis, at June 30, 2011, aggregated $1,439,097 and $(400,471), respectively, resulting in net unrealized appreciation of $1,038,626.
Note 4. Investments
a. Investment Purchases and Sales The cost of U.S. government agency obligations and other investments purchased and the proceeds from U.S. government agency obligations and other investments sold (excluding short-term investments) for the six months ended June 30, 2011, were as follows:
| | | | | | | | |
| | | Other Investments | | | U.S.
Government
and Agency
Obligations | |
| Purchases | | $ | 31,669,642 | | | $ | 32,084,279 | |
| Sales | | | 7,924,859 | | | | 22,078,216 | |
b. Repurchase Agreements The collateral for repurchase agreements is either cash or fully negotiable U.S. government securities (including U.S. government agency securities). Repurchase agreements are fully collateralized (including the interest accrued thereon) and such collateral is marked-to-market daily while the agreements remain in force. If the value of the collateral falls below the repurchase price plus accrued interest, the Fund will typically require the seller to deposit additional collateral by the next business day. If the request for additional collateral is not met, or the seller defaults, the Fund maintains the right to sell the collateral (although it may be prevented or delayed from doing so in certain circumstances) and may claim any resulting loss against the seller.
c. Loans Floating rate loans in which the Fund invest are primarily “senior” loans. Senior floating rate loans typically hold a senior position in the capital structure of the borrower, are typically secured by specific collateral, and have a claim on the assets and/or stock of the borrower that is senior to that held by subordinated debtholders and stockholders of the borrower. While these protections may reduce risk, these investments still present significant credit risk. A significant portion of the Fund’s floating rate investments may be issued in connection with highly leveraged transactions such as leveraged buyouts, leveraged recapitalization loans, and other types of acquisition financing. Obligations in these types of transactions are subject to greater credit risk (including default and bankruptcy) than many other
NOTES TO FINANCIAL STATEMENTS — RS LOW DURATION BOND VIP SERIES (UNAUDITED)
investments and may be, or could become, illiquid. See note (e) regarding below investment grade securities.
The Fund may purchase second lien loans (secured loans with a claim on collateral subordinate to a senior lender’s claim on such collateral), fixed rate loans, unsecured loans, and other debt obligations.
d. Restricted and Illiquid Securities A restricted security cannot be resold to the general public without prior registration under the Securities Act of 1933 (except pursuant to an applicable exemption). If the security is subsequently registered and resold, the issuer would typically bear the expense of all registrations at no cost to the Fund. Restricted and illiquid securities are valued according to the guidelines and procedures adopted by the Trust’s Board of Trustees.
e. Below Investment Grade Securities The Fund may invest in below investment grade securities (i.e. lower-quality debt), which are subject to certain risks. Lower-quality debt is considered to be speculative because it is less certain that the issuer will be able to pay interest or repay the principal than in the case of investment-grade debt. These securities can involve a substantially greater risk of default than higher-rated securities, and their values can decline significantly over short periods of time. Lower-quality debt securities tend to be more sensitive to adverse news about the issuer, or the market and the economy in general, than higher quality debt securities. The market for these securities can be less liquid, especially during periods of recession or general market decline.
Note 5. Temporary Borrowings
The Fund, with other funds managed by RS Investments, shares in a $75 million committed revolving credit/overdraft protection facility from State Street Bank and Trust Company for temporary purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. Interest is calculated based on market rates at the time of borrowing; all the funds that are parties to the facility share in a commitment fee that is allocated among the funds on the basis of their respective net assets. The Fund may borrow up to the lesser of one-third of its total assets (including amounts borrowed) or any lower limit specified in the Fund’s Statement of Additional Information or Prospectus.
For the six months ended June 30, 2011, the Fund did not borrow from the facility.
Note 6. Review for Subsequent Events
The Trust has evaluated subsequent events through the issuance of the Fund’s financial statements and determined that no material events have occurred that require disclosure.
Note 7. Indemnifications
Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, in the normal course of business, the Fund enters into contracts with its vendors and others that provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund. However, based on experience, the Fund expects the risk of loss to be remote.
SUPPLEMENTAL INFORMATION (UNAUDITED)
Meeting of Shareholders
A special meeting of the shareholders of RS Variable Products Trust (“the Trust”) was held on May 20, 2011. At the meeting, the shareholders of the Trust elected Judson Bergman, Kenneth R. Fitzsimmons, Jr., Anne M. Goggin, Christopher C. Melvin, Jr., Deanna M. Mulligan, Gloria S. Nelund, Terry R. Otton, and John P. Rohal as trustees of the Trust.
Proposal To Elect Trustees
| | | | |
Nominee | | Votes For | | Votes Against/Withheld |
| Judson Bergman | | 264,351,869.410 | | 14,579,441.977 |
| Kenneth R. Fitzsimmons, Jr. | | 264,417,319.717 | | 14,513,991.670 |
| Anne M. Goggin | | 265,496,967.524 | | 13,434,343.863 |
| Christopher C. Melvin, Jr. | | 264,182,743.884 | | 14,748,567.503 |
| Deanna M. Mulligan | | 264,603,554.628 | | 14,327,756.759 |
| Gloria S. Nelund | | 265,607,677.552 | | 13,323,633.835 |
| Terry R. Otton | | 265,360,024.512 | | 13,571,286.875 |
| John P. Rohal | | 264,052,063.420 | | 14,879,247.967 |
Portfolio Holdings and Proxy Voting Procedures
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Form N-Q is available on the Securities and Exchange Commission’s Web site at http://www.sec.gov. The Fund’s Form N-Q may be reviewed and copied at the Commission’s Public Reference Room in Washington, DC, and information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330. This information is also available, without charge, upon request, by calling toll-free 800-221-3253.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 will be available (i) without charge, upon request, by calling toll-free 800-221-3253; and (ii) on the Securities and Exchange Commission’s Web site at http://www.sec.gov.
The Statement of Additional Information includes additional information about the Trust’s Trustees and Officers and is available, without charge, upon request by calling toll-free 800-221-3253.
This report is transmitted to shareholders only. It is not authorized for use as an offer of sale or a solicitation of an offer to buy shares of a Fund unless accompanied or preceded by that Fund’s current prospectus. Past performance results shown in this report should not be considered a representation of future performance. Investment returns and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Statements and other information herein are as dated and are subject to change.
2011 Semiannual Report
All data as of June 30, 2011
RS Variable Products Trust
| Ÿ | | RS High Yield VIP Series |
| | | | |
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE | | |  | |
TABLE OF CONTENTS
Except as otherwise specifically stated, all information and investment team commentary, including portfolio security positions, is as of June 30, 2011. The views expressed in the investment team letters are those of the Fund’s portfolio manager(s) and are subject to change without notice. They do not necessarily represent the views of RS Investments or Guardian Investor Services LLC. The letters contain some forward-looking statements providing current expectations or forecasts of future events; they do not necessarily relate to historical or current facts. There can be no guarantee that any forward-looking statement will be realized. We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events, or otherwise. Any discussions of specific securities should not be considered a recommendation to buy or sell those securities. Fund holdings will vary.
RS HIGH YIELD VIP SERIES
The Statement of Additional Information provides further information about your investment team, including information regarding their compensation, other accounts they manage, and their ownership interests in the Fund. For information on how to receive a copy of the Statement of Additional Information, please see the back cover of the Fund’s Prospectus or visit our Web site at www.guardianinvestor.com.
RS High Yield VIP Series Commentary
Highlights
| Ÿ | | Despite recent volatility, the high yield market delivered strong positive performance in the first half of 2011, supported by generally healthy corporate earnings performance and lower default rates. |
| Ÿ | | RS High Yield VIP Series returned positive performance for the six-month period, but underperformed its benchmark, the Barclays Capital U.S. Corporate High-Yield Index1. |
| Ÿ | | We believe that the high yield sector remains attractively valued as compared to other asset classes. |
Market Overview
The high yield market began the year on a positive note, supported by improving corporate fundamentals, modest economic growth, a strong new issue market, and a continuing low default rate. In our view, these favorable developments helped to support investor confidence and appetites for yield in the first quarter, despite a backdrop of tumultuous world events, including unrest in the Middle East, the earthquake and tsunami in Japan, and rising oil prices. Against this backdrop, the Barclays Capital U.S. Corporate High-Yield Index delivered a strong first quarter return that well outpaced performance by the broader fixed income market.
The favorable environment for the high yield market continued into the second quarter, but was soon obscured by worsening economic data and continued headlines detailing the ongoing sovereign debt crisis in Europe (e.g. Greece and Ireland). As investors lost their appetites for risk, they sought safety in the Treasury market2. High yield mutual funds began to experience large fund outflows, which triggered a June correction in the high yield market, with the Barclays Capital U.S. Corporate High-Yield Index declining by 97 basis points for the month of June. Despite this decline, the Index still delivered a solid gain for both the second quarter and six-month period.
New issuance remained strong following record new levels in 2010, with $180 billion in new debt issued in the first half of 20113. Default rates within the high yield market also remained at low levels, which we believe reflects improving corporate fundamentals and a robust new issuance market.
Fund Performance Overview
RS High Yield VIP Series returned 4.39% for the six-month period ended June 30, 2011, but underperformed its benchmark, the Barclays Capital U.S. Corporate High-Yield Index which returned 4.97% for the period. The Fund outperformed the 4.38% average return of its Lipper High Current Yield Funds peer group4. (The peer group consisted of 122 variable annuity funds that invest primarily in high yield corporate securities.)
The Fund’s relative performance compared to the benchmark Index partly reflected our underweight in yield-to-call bonds relative to the Index position. This positioning worked to our benefit in the first quarter, but proved less advantageous during the second quarter market correction when these instruments held their value better than other areas of the high yield market.
From a sector standpoint, Fund performance early in the six-month period benefited from two homebuilding related credits, Hovnanian Enterprises and Beazer Homes, that we believed were undervalued despite the continued weak housing market. After these bonds rallied in the first quarter, we reduced our holdings, as we still believe the new home construction market is likely to be weak moving forward.
On a negative note, the Fund’s relative performance in the second quarter was hindered by two electric power-related investments, NRG and Mirant. While natural gas prices remain stubbornly low, dampening near-term prospects for power producers, we continue to believe these investments to be attractive given their above market yields and strong industry positions.
Outlook
We believe the recent weakness in the high yield market has created attractive entry points for investors. We believe there will be positive corporate earnings momentum and meaningful balance sheet improvement for high yield issuers, which could indicate strong fundamentals moving forward. Furthermore, we believe improving corporate liquidity and robust capital markets activity should continue to support a low default rate over the next two years, providing a positive tone for the market.
RS HIGH YIELD VIP SERIES
RS Funds are sold by prospectus only. You should carefully consider the investment objectives, risks, charges and expenses of the RS Funds before making an investment decision. The prospectus contains this and other important information. Please read it carefully before investing or sending money. Please visit our web site at www.guardianinvestor.com or to obtain a printed copy, call 800-221-3253.
Any discussions of specific securities should not be considered a recommendation to buy or sell those securities. Fund holdings will vary.
Except as otherwise specifically stated, all information and investment team commentary, including portfolio security positions, is as of June 30, 2011.
As with all mutual funds, the value of an investment in the Fund could decline, in which case you could lose money. Bond funds are subject to interest rate risk, credit risk, and prepayment risk. When interest rates rise, bond prices generally fall, and when interest rates fall, bond prices generally rise. Currently, interest rates are at relatively low levels. Please keep in mind that in this kind of environment, the risk that bond prices may fall when interest rates rise is potentially greater. Derivative transactions can create leverage and may be highly volatile. It is possible that a derivative transaction will result in a loss greater than the principal amount invested and the Fund may not be able to close out a derivative transaction at a favorable time or price. High yield bond investing includes special risks. Investments in lower rated and unrated debt securities are subject to a greater loss of principal and interest than investments in higher rated securities. The values of mortgage-backed securities depend on the credit quality and adequacy of the underlying assets or collateral and may be highly volatile.
RS HIGH YIELD VIP SERIES
Characteristics
| | |
| Total Net Assets: $72,656,987 | | |
| | | | | | | | | | | | |
| | | |
| Bond Quality Allocation5 | | | | | | | |
 | |
| | | | |
| Top Ten Holdings6 | | | | | | | | | |
| | | | |
| Holding | | Coupon | | | Maturity Date | | | % of Total
Net Assets | |
| Exopack LLC | | | 6.500% | | | | 5/26/2017 | | | | 1.37% | |
| Chrysler Group LLC | | | 6.000% | | | | 5/24/2017 | | | | 1.34% | |
| Block Communications, Inc. | | | 8.250% | | | | 12/15/2015 | | | | 1.23% | |
| Frac Tech International LLC | | | 6.250% | | | | 5/6/2016 | | | | 1.21% | |
| DISH DBS Corp. | | | 7.875% | | | | 9/1/2019 | | | | 1.14% | |
| Clear Channel Communication, Inc. | | | 3.837% | | | | 1/28/2016 | | | | 1.12% | |
| Michael Foods, Inc. | | | 9.750% | | | | 7/15/2018 | | | | 1.10% | |
| ARAMARK Holdings Corp. | | | 8.625% | | | | 5/1/2016 | | | | 1.09% | |
| Alliance HealthCare Services, Inc. | | | 8.000% | | | | 12/1/2016 | | | | 1.04% | |
| NII Capital Corp. | | | 8.875% | | | | 12/15/2019 | | | | 1.00% | |
| Total | | | | | | | | | | | 11.64% | |
| 1 | The Barclays Capital U.S. Corporate High-Yield Index is generally considered to be representative of the investable universe of the U.S.-dominated high-yield debt market. The Barclays Capital U.S. Corporate High Yield Index is not available for direct investment. There are no expenses associated with the index while there are expenses associated with the Fund. |
| 2 | Strategic Insight, Monthly Fund Industry Review, June 2011. |
| 3 | J.P. Morgan High Yield and Leveraged Loan Research, Credit Strategy Weekly Update, July 8, 2011, Pg 38. |
| 4 | Lipper, Inc. is an independent mutual fund monitoring and rating service. Its database of performance information is based on historical returns, which assume the reinvestment of dividends and distributions and the deduction of all Fund expenses. Lipper return figures do not reflect the deduction of any sales charges that an investor may pay when purchasing or redeeming shares of the Fund. |
| 5 | Source: Moody’s, Standard and Poor’s, Fitch Investors Service. |
| 6 | Portfolio holdings are subject to change and should not be considered a recommendation to buy or sell individual securities. Top ten holdings are determined at the unique security level. For this reason, the securities included above, their order, and the percentages they represent of the Fund’s total net assets may differ from similar data calculated directly from the Schedule of Investments, where certain securities of the same issuer with the same coupon rate may be aggregated. |
RS HIGH YIELD VIP SERIES
Performance Update
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| Average Annual Total Returns | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | Inception Date | | | Year-to-Date | | | 1 Year | | | 3 Year | | | 5 Year | | | 10 Year | | | Since Inception | | | |
| RS High Yield VIP Series | | | 9/13/99 | | | | 4.39% | | | | 14.88% | | | | 9.88% | | | | 7.23% | | | | 7.01% | | | | 5.74% | | | |
| Barclays Capital U.S. Corporate High-Yield Index1 | | | | | | | 4.97% | | | | 15.63% | | | | 12.68% | | | | 9.30% | | | | 8.99% | | | | 7.47% | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | |
| Results of a Hypothetical $10,000 Investment | | | | | | | | | | | | | | | | |
 |
The chart above shows the performance of a hypothetical $10,000 investment made 10 years ago in RS High Yield VIP Series and the Barclays Capital U.S. Corporate High-Yield Index. Index returns do not include the fees and expenses of the Fund, but do include the reinvestment of dividends.
Performance quoted represents past performance and does not guarantee or predict future results. The Fund is the successor to The Guardian VC High Yield Bond Fund; performance shown includes performance of the predecessor fund for periods prior to October 9, 2006. Investment return and principal value will fluctuate, so shares, when redeemed, may be worth more or less than their original cost. The Fund’s fees and expenses are detailed in the Financial Highlights section of this report. Fees and expenses are factored into the net asset value of your shares and any performance numbers we release. Total return figures reflect an expense limitation in effect during the periods shown; without such limitation, the performance shown would have been lower. Performance results assume the reinvestment of dividends and capital gains. The return figures shown do not reflect the deduction of taxes that a contractowner/policyholder may pay on Fund distributions or redemption units. The actual total returns for owners of variable annuity contracts or variable life insurance policies that provide for investment in the Fund will be lower to reflect separate account and contract/policy charges. Current and month-end performance information, which may be lower or higher than that cited, is available by calling 800-221-3253 and is periodically updated on our Web site: www.guardianinvestor.com.
UNDERSTANDING YOUR FUND’S EXPENSES (UNAUDITED)
By investing in the Fund, you incur two types of costs: (1) transaction costs, including, as applicable, sales charges (loads) on purchase payments; redemption fees; and exchange fees; and (2) ongoing costs, including as applicable, investment advisory fees; and other Fund expenses. The example below is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period indicated. The table below shows the Fund’s expenses in two ways:
Expenses based on actual return
This section of the table provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Expenses based on hypothetical 5% return for comparison purposes
This section of the table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund with the cost of investing in other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore the second section is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If these transactional costs were included, your costs would have been higher.
| | | | | | | | | | | | | | |
| | | Beginning
Account Value
1/1/11 | | Ending
Account Value
6/30/11 | | | Expenses Paid
During Period*
1/1/11-6/30/11 | | | Expense Ratio
During Period
1/1/11-6/30/11 | |
| Based on Actual Return | | $1,000.00 | | $ | 1,043.90 | | | $ | 3.78 | | | | 0.75% | |
| Based on Hypothetical Return (5% Return Before Expenses) | | $1,000.00 | | $ | 1,021.10 | | | $ | 3.74 | | | | 0.75% | |
| * | Expenses are equal to the Fund’s annualized expense ratio as indicated, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). |
SCHEDULE OF INVESTMENTS — RS HIGH YIELD VIP SERIES
| | | | | | | | |
| June 30, 2011 (unaudited) | | Principal
Amount | | | Value | |
| Corporate Bonds – 89.6% | | | | | | | | |
| Aerospace/Defense – 0.5% | | | | | | | | |
Moog, Inc.
Sr. Sub. Nt.
7.25% due 6/15/2018 | | $ | 325,000 | | | $ | 344,906 | |
| | | | | | | | | |
| | | | | | | | 344,906 | |
| Airlines – 0.9% | | | | | | | | |
American Airlines, Inc.
Sr. Sec. Nt.
7.50% due 3/15/2016(1) | | | 700,000 | | | | 686,000 | |
| | | | | | | | | |
| | | | | | | | 686,000 | |
| Automotive – 4.3% | | | | | | | | |
American Axle & Manufacturing, Inc.
7.875% due 3/1/2017 | | | 400,000 | | | | 400,000 | |
Commercial Vehicle Group, Inc.
Sr. Sec. Nt.
7.875% due 4/15/2019(1) | | | 230,000 | | | | 230,000 | |
Ford Motor Credit Co. LLC
Sr. Nt.
7.00% due 4/15/2015 | | | 220,000 | | | | 237,635 | |
8.00% due 12/15/2016 | | | 300,000 | | | | 337,346 | |
8.125% due 1/15/2020 | | | 440,000 | | | | 509,701 | |
General Motors Financial Co., Inc.
6.75% due 6/1/2018(1) | | | 360,000 | | | | 360,900 | |
Pittsburgh Glass Works LLC
Sr. Sec. Nt.
8.50% due 4/15/2016(1) | | | 200,000 | | | | 205,500 | |
UCI International, Inc.
8.625% due 2/15/2019 | | | 470,000 | | | | 484,100 | |
Visteon Corp.
Sr. Nt.
6.75% due 4/15/2019(1) | | | 370,000 | | | | 357,050 | |
| | | | | | | | | |
| | | | | | | | 3,122,232 | |
| Banking – 0.8% | | | | | | | | |
AmSouth Bank
Sub. Nt., Ser. AI
5.20% due 4/1/2015 | | | 400,000 | | | | 385,740 | |
Royal Bank of Scotland Group PLC
Jr. Sub. Nt.
7.648% due 9/30/2031(2)(3) | | | 200,000 | | | | 180,000 | |
| | | | | | | | | |
| | | | | | | | 565,740 | |
| Brokerage – 2.0% | | | | | | | | |
E*Trade Financial Corp.
Sr. Nt.
6.75% due 6/1/2016 | | | 300,000 | | | | 294,000 | |
7.875% due 12/1/2015 | | | 480,000 | | | | 482,400 | |
12.50% due 11/30/2017(4) | | | 578,000 | | | | 676,260 | |
| | | | | | | | | |
| | | | | | | | 1,452,660 | |
| Building Materials – 1.0% | | | | | | | | |
American Standard Americas
Sr. Sec. Nt.
10.75% due 1/15/2016(1) | | | 400,000 | | | | 384,500 | |
Norcraft Cos. L.P.
Sec. Nt.
10.50% due 12/15/2015(1) | | | 350,000 | | | | 355,250 | |
| | | | | | | | | |
| | | | | | | | 739,750 | |
| | | | | | | | |
| June 30, 2011 (unaudited) | | Principal
Amount | | | Value | |
| Construction Machinery – 0.4% | | | | | | | | |
RSC Equipment Rental, Inc.
8.25% due 2/1/2021 | | $ | 300,000 | | | $ | 298,500 | |
| | | | | | | | | |
| | | | | | | | 298,500 | |
| Consumer Cyclical Services – 1.4% | | | | | | | | |
The Geo Group, Inc.
6.625% due 2/15/2021(1) | | | 200,000 | | | | 198,500 | |
Travelport LLC
4.879% due 9/1/2014(2) | | | 620,000 | | | | 528,550 | |
West Corp.
7.875% due 1/15/2019(1) | | | 320,000 | | | | 310,400 | |
| | | | | | | | | |
| | | | | | | | 1,037,450 | |
| Consumer Products – 1.3% | | | | | | | | |
Armored Autogroup, Inc.
Sr. Nt.
9.25% due 11/1/2018(1) | | | 300,000 | | | | 297,000 | |
NBTY, Inc.
9.00% due 10/1/2018(1) | | | 600,000 | | | | 633,000 | |
| | | | | | | | | |
| | | | | | | | 930,000 | |
| Electric – 5.4% | | | | | | | | |
Calpine Corp.
Sr. Sec. Nt.
7.50% due 2/15/2021(1) | | | 200,000 | | | | 204,000 | |
7.875% due 7/31/2020(1) | | | 400,000 | | | | 418,000 | |
Energy Future Intermediate Holding Co. LLC
Sr. Sec. Nt.
10.00% due 12/1/2020 | | | 250,000 | | | | 266,615 | |
GenOn Energy, Inc.
Sr. Nt.
7.875% due 6/15/2017 | | | 300,000 | | | | 301,500 | |
Mirant Americas Generation LLC
Sr. Nt.
8.50% due 10/1/2021 | | | 110,000 | | | | 112,750 | |
Mirant Mid Atlantic Pass Through Trust
Ser. A
8.625% due 6/30/2012 | | | 35,038 | | | | 35,651 | |
Ser. B
9.125% due 6/30/2017 | | | 375,616 | | | | 403,788 | |
North American Energy Alliance LLC
Sr. Sec. Nt.
10.875% due 6/1/2016(1) | | | 490,000 | | | | 539,000 | |
NRG Energy, Inc.
8.25% due 9/1/2020 | | | 150,000 | | | | 153,000 | |
8.50% due 6/15/2019 | | | 600,000 | | | | 621,000 | |
Texas Competitive Electric Holdings Co. LLC
Sr. Sec. Nt.
11.50% due 10/1/2020(1) | | | 300,000 | | | | 294,750 | |
The AES Corp.
Sr. Nt.
7.375% due 7/1/2021(1) | | | 270,000 | | | | 274,050 | |
8.00% due 6/1/2020 | | | 260,000 | | | | 276,900 | |
| | | | | | | | | |
| | | | | | | | 3,901,004 | |
| | | | |
| 8 | | | | The accompanying notes are an integral part of these financial statements. |
RS HIGH YIELD VIP SERIES
| | | | | | | | |
| June 30, 2011 (unaudited) | | Principal
Amount | | | Value | |
| Entertainment – 0.4% | | | | | | | | |
NAI Entertainment Holdings LLC
Sr. Sec. Nt.
8.25% due 12/15/2017(1) | | $ | 300,000 | | | $ | 321,750 | |
| | | | | | | | | |
| | | | | | | | 321,750 | |
| Food And Beverage – 3.3% | | | | | | | | |
Aramark Corp.
3.773% due 2/1/2015(2) | | | 108,000 | | | | 105,030 | |
ARAMARK Holdings Corp.
Sr. Nt.
8.625% due 5/1/2016(1)(4) | | | 780,000 | | | | 793,650 | |
Darling International, Inc.
8.50% due 12/15/2018(1) | | | 150,000 | | | | 162,000 | |
Michael Foods, Inc.
Sr. Nt.
9.75% due 7/15/2018(1) | | | 750,000 | | | | 802,500 | |
Reddy Ice Corp.
Sr. Sec. Nt.
11.25% due 3/15/2015 | | | 550,000 | | | | 562,375 | |
| | | | | | | | | |
| | | | | | | | 2,425,555 | |
| Gaming – 2.0% | | | | | | | | |
Caesar’s Entertainment Operating Co., Inc.
5.625% due 6/1/2015 | | | 400,000 | | | | 323,000 | |
Pinnacle Entertainment, Inc.
8.75% due 5/15/2020 | | | 350,000 | | | | 366,625 | |
Scientific Games International, Inc.
9.25% due 6/15/2019 | | | 480,000 | | | | 517,800 | |
Wynn Las Vegas LLC
7.75% due 8/15/2020 | | | 200,000 | | | | 217,250 | |
| | | | | | | | | |
| | | | | | | | 1,424,675 | |
| Healthcare – 8.1% | | | | | | | | |
Alliance HealthCare Services, Inc.
Sr. Nt.
8.00% due 12/1/2016 | | | 780,000 | | | | 752,700 | |
Apria Healthcare Group, Inc.
Sr. Sec. Nt.
12.375% due 11/1/2014 | | | 390,000 | | | | 406,087 | |
Community Health Systems, Inc.
8.875% due 7/15/2015 | | | 150,000 | | | | 154,500 | |
ConvaTec Healthcare E S.A.
Sr. Nt.
10.50% due 12/15/2018(1) | | | 600,000 | | | | 621,000 | |
DaVita, Inc.
6.625% due 11/1/2020 | | | 400,000 | | | | 407,000 | |
HCA Holdings, Inc.
Sr. Nt.
7.75% due 5/15/2021(1) | | | 180,000 | | | | 186,750 | |
HCA, Inc.
Sr. Nt.
6.375% due 1/15/2015 | | | 200,000 | | | | 204,000 | |
Sr. Sec. Nt.
7.875% due 2/15/2020 | | | 200,000 | | | | 217,000 | |
8.50% due 4/15/2019 | | | 260,000 | | | | 287,300 | |
9.875% due 2/15/2017 | | | 143,000 | | | | 159,088 | |
IMS Health, Inc.
Sr. Nt.
12.50% due 3/1/2018(1) | | | 330,000 | | | | 393,525 | |
| | | | | | | | | |
| | | | | | | | |
| June 30, 2011 (unaudited) | | Principal
Amount | | | Value | |
| Healthcare (continued) | | | | | | | | |
Kindred Healthcare, Inc.
8.25% due 6/1/2019(1) | | $ | 310,000 | | | $ | 308,450 | |
Omega Healthcare Investors, Inc.
6.75% due 10/15/2022(1) | | | 500,000 | | | | 493,125 | |
Teleflex, Inc.
6.875% due 6/1/2019 | | | 170,000 | | | | 172,125 | |
Universal Hospital Services, Inc.
Sec. Nt.
8.50% due 6/1/2015(4) | | | 300,000 | | | | 309,000 | |
Vanguard Health Holding Co. II LLC
8.00% due 2/1/2018 | | | 570,000 | | | | 588,525 | |
WP Rocket Merger Sub, Inc.
Sr. Nt.
10.125% due 7/15/2019(1) | | | 240,000 | | | | 242,400 | |
| | | | | | | | | |
| | | | | | | | 5,902,575 | |
| Home Construction – 1.0% | | | | | | | | |
Beazer Homes USA, Inc.
Sr. Nt.
9.125% due 5/15/2019(1) | | | 250,000 | | | | 215,000 | |
Meritage Homes Corp.
7.15% due 4/15/2020 | | | 550,000 | | | | 536,250 | |
| | | | | | | | | |
| | | | | | | | 751,250 | |
| Independent Energy – 7.7% | | | | | | | | |
Alta Mesa Holdings
Sr. Nt.
9.625% due 10/15/2018(1) | | | 500,000 | | | | 500,000 | |
Carrizo Oil & Gas, Inc.
8.625% due 10/15/2018 | | | 400,000 | | | | 412,000 | |
Chesapeake Energy Corp.
6.625% due 8/15/2020 | | | 162,000 | | | | 170,505 | |
9.50% due 2/15/2015 | | | 400,000 | | | | 464,000 | |
Clayton Williams Energy, Inc.
7.75% due 4/1/2019(1) | | | 320,000 | | | | 313,600 | |
Concho Resources, Inc.
Sr. Nt.
7.00% due 1/15/2021 | | | 150,000 | | | | 155,250 | |
Connacher Oil and Gas Ltd.
Sec. Nt.
8.50% due 8/1/2019(1) | | | 360,000 | | | | 342,000 | |
Continental Resources, Inc.
8.25% due 10/1/2019 | | | 230,000 | | | | 251,275 | |
Eagle Rock Energy Partners L.P.
8.375% due 6/1/2019(1) | | | 180,000 | | | | 179,550 | |
Energy XXI Gulf Coast, Inc.
Sr. Nt.
7.75% due 6/15/2019(1) | | | 100,000 | | | | 99,500 | |
9.25% due 12/15/2017(1) | | | 100,000 | | | | 106,500 | |
EV Energy Partners L.P.
8.00% due 4/15/2019(1) | | | 160,000 | | | | 160,600 | |
Harvest Operations Corp.
6.875% due 10/1/2017(1) | | | 200,000 | | | | 206,500 | |
Linn Energy LLC
6.50% due 5/15/2019(1) | | | 140,000 | | | | 138,600 | |
7.75% due 2/1/2021(1) | | | 330,000 | | | | 343,200 | |
OGX Petroleo e Gas
Participacoes S.A.
8.50% due 6/1/2018(1) | | | 220,000 | | | | 226,270 | |
| | | | | | | | | |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 9 |
SCHEDULE OF INVESTMENTS — RS HIGH YIELD VIP SERIES
| | | | | | | | |
| June 30, 2011 (unaudited) | | Principal
Amount | | | Value | |
| Independent Energy (continued) | | | | | | | | |
Plains Exploration & Production Co.
6.625% due 5/1/2021 | | $ | 460,000 | | | $ | 460,000 | |
Rosetta Resources, Inc.
9.50% due 4/15/2018 | | | 220,000 | | | | 243,650 | |
SandRidge Energy, Inc.
7.50% due 3/15/2021(1) | | | 350,000 | | | | 354,375 | |
Venoco, Inc.
11.50% due 10/1/2017 | | | 440,000 | | | | 477,400 | |
| | | | | | | | | |
| | | | | | | | 5,604,775 | |
| Insurance - Life – 2.3% | | | | | | | | |
CNO Financial Group, Inc.
Sr. Sec. Nt.
9.00% due 1/15/2018(1) | | | 300,000 | | | | 318,000 | |
Genworth Financial, Inc.
Sr. Nt. Ser. MTN
6.515% due 5/22/2018 | | | 440,000 | | | | 437,485 | |
ING Groep N.V.
Jr. Sub. Nt.
5.775% due 12/8/2015(2)(3) | | | 500,000 | | | | 460,000 | |
Symetra Financial Corp.
8.30% due 10/15/2037(1)(2) | | | 440,000 | | | | 449,900 | |
| | | | | | | | | |
| | | | | | | | 1,665,385 | |
| Media Cable – 2.4% | | | | | | | | |
AMC Networks, Inc.
7.75% due 7/15/2021(1) | | | 280,000 | | | | 292,600 | |
CCO Holdings LLC
6.50% due 4/30/2021 | | | 350,000 | | | | 345,188 | |
7.875% due 4/30/2018 | | | 250,000 | | | | 263,438 | |
DISH DBS Corp.
7.875% due 9/1/2019 | | | 770,000 | | | | 830,637 | |
| | | | | | | | | |
| | | | | | | | 1,731,863 | |
| Media Noncable – 6.2% | |
Block Communications, Inc.
Sr. Nt.
8.25% due 12/15/2015(1) | | | 880,000 | | | | 896,500 | |
EH Holding Corp.
Sr. Sec. Nt.
6.50% due 6/15/2019(1) | | | 240,000 | | | | 244,200 | |
Sr. Nt.
7.625% due 6/15/2021(1) | | | 230,000 | | | | 234,600 | |
Entravision Communications
Corp.
Sr. Sec. Nt.
8.75% due 8/1/2017 | | | 400,000 | | | | 414,000 | |
Gannett Co., Inc.
7.125% due 9/1/2018(1) | | | 200,000 | | | | 200,750 | |
9.375% due 11/15/2017 | | | 110,000 | | | | 121,000 | |
Inmarsat Finance PLC
7.375% due 12/1/2017(1) | | | 100,000 | | | | 106,000 | |
Intelsat Jackson Holdings S.A.
7.25% due 4/1/2019(1) | | | 200,000 | | | | 198,500 | |
7.50% due 4/1/2021(1) | | | 460,000 | | | | 457,125 | |
11.25% due 6/15/2016 | | | 410,000 | | | | 434,600 | |
Intelsat Luxembourg S.A.
11.50% due 2/4/2017(1)(4) | | | 300,000 | | | | 322,500 | |
| | | | | | | | | |
| | | | | | | | |
| June 30, 2011 (unaudited) | | Principal
Amount | | | Value | |
| Media Noncable (continued) | |
Lamar Media Corp.
6.625% due 8/15/2015 | | $ | 110,000 | | | $ | 111,237 | |
Univision Communications, Inc.
Sr. Sec. Nt.
7.875% due 11/1/2020(1) | | | 320,000 | | | | 328,000 | |
Valassis Communications, Inc.
6.625% due 2/1/2021 | | | 470,000 | | | | 465,300 | |
| | | | | | | | | |
| | | | | | | | 4,534,312 | |
| Metals And Mining – 1.7% | |
American Rock Salt Co. LLC
Sec. Nt.
8.25% due 5/1/2018(1) | | | 380,000 | | | | 381,425 | |
Arch Coal, Inc.
7.00% due 6/15/2019(1) | | | 250,000 | | | | 249,375 | |
Penn Virginia Resource Partners L.P.
8.25% due 4/15/2018 | | | 270,000 | | | | 278,775 | |
Thompson Creek Metals Co., Inc. 7.375% due 6/1/2018(1) | | | 300,000 | | | | 294,000 | |
| | | | | | | | | |
| | | | | | | | 1,203,575 | |
| Natural Gas - Distributors – 0.6% | |
Ferrellgas L.P.
Sr. Nt.
6.50% due 5/1/2021(1) | | | 280,000 | | | | 264,600 | |
Inergy L.P.
7.00% due 10/1/2018 | | | 150,000 | | | | 151,500 | |
| | | | | | | | | |
| | | | | | | | 416,100 | |
| Non Captive Consumer – 0.4% | |
Springleaf Finance Corp.
Sr. Nt. Ser. I
5.40% due 12/1/2015 | | | 150,000 | | | | 137,250 | |
Sr. Nt. Ser. J 6.90% due 12/15/2017 | | | 200,000 | | | | 183,500 | |
| | | | | | | | | |
| | | | | | | | 320,750 | |
| Non Captive Diversified – 2.5% | |
Ally Financial, Inc.
8.00% due 3/15/2020 -11/1/2031 | | | 650,000 | | | | 696,625 | |
CIT Group, Inc.
Sec. Nt.
6.625% due 4/1/2018(1) | | | 200,000 | | | | 208,500 | |
7.00% due 5/1/2017 | | | 600,000 | | | | 598,500 | |
International Lease Finance Corp.
Sr. Nt.
8.75% due 3/15/2017 | | | 320,000 | | | | 350,000 | |
| | | | | | | | | |
| | | | | | | | 1,853,625 | |
| Oil Field Services – 1.8% | |
Basic Energy Services, Inc.
7.75% due 2/15/2019(1) | | | 340,000 | | | | 341,700 | |
Complete Production
Services, Inc.
8.00% due 12/15/2016 | | | 260,000 | | | | 271,700 | |
Oil States International, Inc.
6.50% due 6/1/2019(1) | | | 180,000 | | | | 180,900 | |
Stallion Oilfield Holdings Ltd.
Sr. Sec. Nt.
10.50% due 2/15/2015 | | | 469,000 | | | | 508,865 | |
| | | | | | | | | |
| | | | | | | | 1,303,165 | |
| | | | |
| 10 | | | | The accompanying notes are an integral part of these financial statements. |
RS HIGH YIELD VIP SERIES
| | | | | | | | |
| June 30, 2011 (unaudited) | | Principal
Amount | | | Value | |
| Packaging – 2.8% | |
Berry Plastics Corp.
Sec. Nt.
9.75% due 1/15/2021 | | $ | 670,000 | | | $ | 648,225 | |
Packaging Dynamics Corp.
Sr. Sec. Nt.
8.75% due 2/1/2016(1) | | | 150,000 | | | | 152,250 | |
Reynolds Group Issuer, Inc.
Sr. Sec. Nt.
7.125% due 4/15/2019(1) | | | 400,000 | | | | 397,000 | |
8.75% due 5/15/2018(1) | | | 440,000 | | | | 432,300 | |
9.00% due 4/15/2019(1) | | | 400,000 | | | | 395,000 | |
| | | | | | | | | |
| | | | | | | | 2,024,775 | |
| Paper – 1.3% | |
Cascades, Inc.
7.75% due 12/15/2017 | | | 200,000 | | | | 208,500 | |
Longview Fibre
Paper & Packaging, Inc.
Sr. Sec. Nt.
8.00% due 6/1/2016(1) | | | 380,000 | | | | 381,900 | |
Millar Western Forest Products Ltd.
Sr. Nt.
8.50% due 4/1/2021(1) | | | 400,000 | | | | 360,000 | |
| | | | | | | | | |
| | | | | | | | 950,400 | |
| Pharmaceuticals — 0.7% | |
Endo Pharmaceuticals Holdings, Inc.
7.00% due 7/15/2019(1) | | | 270,000 | | | | 276,750 | |
Giant Funding Corp.
Sr. Sec. Nt.
8.25% due 2/1/2018(1) | | | 200,000 | | | | 208,500 | |
| | | | | | | | | |
| | | | | | | | 485,250 | |
| Pipelines – 3.4% | |
Atlas Pipeline Partners L.P.
8.75% due 6/15/2018 | | | 520,000 | | | | 549,900 | |
Copano Energy LLC
7.125% due 4/1/2021 | | | 400,000 | | | | 395,000 | |
MarkWest Energy Partners L.P.
6.50% due 8/15/2021 | | | 400,000 | | | | 397,000 | |
Martin Midstream Partners L.P.
8.875% due 4/1/2018 | | | 250,000 | | | | 262,500 | |
Niska Gas Storage US LLC
8.875% due 3/15/2018 | | | 440,000 | | | | 462,000 | |
Regency Energy Partners L.P.
6.50% due 7/15/2021 | | | 280,000 | | | | 283,500 | |
Targa Resources Partners L.P.
6.875% due 2/1/2021(1) | | | 150,000 | | | | 148,500 | |
| | | | | | | | | |
| | | | | | | | 2,498,400 | |
| Railroads – 0.4% | | | | | | | | |
RailAmerica, Inc.
Sr. Sec. Nt.
9.25% due 7/1/2017 | | | 250,000 | | | | 274,375 | |
| | | | | | | | | |
| | | | | | | | 274,375 | |
| Refining – 2.1% | | | | | | | | |
Alon Refining Krotz Springs, Inc.
Sr. Sec. Nt.
13.50% due 10/15/2014 | | | 280,000 | | | | 292,600 | |
| | | | | | | | | |
| | | | | | | | |
| June 30, 2011 (unaudited) | | Principal
Amount | | | Value | |
| Refining (continued) | |
Calumet Specialty Products
Partners L.P.
9.375% due 5/1/2019(1) | | $ | 380,000 | | | $ | 391,400 | |
Citgo Petroleum Corp.
Sr. Sec. Nt.
11.50% due 7/1/2017(1) | | | 525,000 | | | | 609,000 | |
Northern Tier Energy LLC
Sr. Sec. Nt.
10.50% due 12/1/2017(1) | | | 200,000 | | | | 220,500 | |
| | | | | | | | | |
| | | | | | | | 1,513,500 | |
| REITs – 1.0% | | | | | | | | |
Sabra Health Care L.P.
8.125% due 11/1/2018 | | | 720,000 | | | | 720,000 | |
| | | | | | | | | |
| | | | | | | | 720,000 | |
| Retailers – 2.3% | |
Burlington Coat Factory Warehouse Corp.
10.00% due 2/15/2019(1) | | | 700,000 | | | | 693,000 | |
Susser Holdings LLC
8.50% due 5/15/2016 | | | 450,000 | | | | 473,625 | |
The Neiman Marcus Group, Inc.
10.375% due 10/15/2015 | | | 150,000 | | | | 157,500 | |
YCC Holdings LLC
Sr. Nt.
10.25% due 2/15/2016(1)(4) | | | 340,000 | | | | 340,850 | |
| | | | | | | | | |
| | | | | | | | 1,664,975 | |
| Supermarkets – 1.4% | |
BI-LO LLC
Sr. Sec. Nt.
9.25% due 2/15/2019(1) | | | 480,000 | | | | 486,000 | |
Tops Holding Corp.
Sr. Sec. Nt.
10.125% due 10/15/2015 | | | 470,000 | | | | 498,788 | |
| | | | | | | | | |
| | | | | | | | 984,788 | |
| Technology – 6.2% | |
Amkor Technology, Inc.
Sr. Nt.
6.625% due 6/1/2021(1) | | | 150,000 | | | | 144,375 | |
7.375% due 5/1/2018 | | | 180,000 | | | | 182,925 | |
CDW Escrow Corp.
8.50% due 4/1/2019(1) | | | 450,000 | | | | 441,000 | |
CDW LLC
11.50% due 10/12/2015(4) | | | 8,722 | | | | 9,202 | |
DuPont Fabros Technology L.P.
8.50% due 12/15/2017 | | | 380,000 | | | | 415,150 | |
First Data Corp.
Sr. Sec. Nt.
8.75% due 1/15/2022(1)(4) | | | 706,000 | | | | 690,115 | |
Freescale Semiconductor, Inc.
8.05% due 2/1/2020(1) | | | 290,000 | | | | 291,450 | |
GXS Worldwide, Inc.
Sr. Sec. Nt.
9.75% due 6/15/2015 | | | 380,000 | | | | 384,750 | |
iGATE Corp.
9.00% due 5/1/2016(1) | | | 300,000 | | | | 303,000 | |
| | | | | | | | | |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 11 |
SCHEDULE OF INVESTMENTS — RS HIGH YIELD VIP SERIES
| | | | | | | | |
| June 30, 2011 (unaudited) | | Principal
Amount | | | Value | |
| Technology (continued) | |
Sanmina-SCI Corp.
7.00% due 5/15/2019(1) | | $ | 280,000 | | | $ | 264,600 | |
Sensata Technologies B.V.
6.50% due 5/15/2019(1) | | | 150,000 | | | | 149,625 | |
Sitel LLC
Sr. Nt.
11.50% due 4/1/2018 | | | 330,000 | | | | 301,950 | |
Softbrands, Inc.
Sr. Nt.
11.50% due 7/15/2018(1) | | | 500,000 | | | | 460,715 | |
TransUnion LLC
11.375% due 6/15/2018 | | | 400,000 | | | | 452,000 | |
| | | | | | | | | |
| | | | | | | | 4,490,857 | |
| Transportation Services – 3.0% | | | | | |
Avis Budget Car Rental LLC
7.75% due 5/15/2016 | | | 255,000 | | | | 259,462 | |
8.25% due 1/15/2019 | | | 200,000 | | | | 202,500 | |
9.625% due 3/15/2018 | | | 350,000 | | | | 373,625 | |
CMA CGM S.A.
Sr. Nt.
8.50% due 4/15/2017(1) | | | 340,000 | | | | 285,600 | |
Hertz Corp.
7.50% due 10/15/2018(1) | | | 300,000 | | | | 309,000 | |
Navios Maritime Acquisition Corp.
Sr. Sec. Nt.
8.625% due 11/1/2017 | | | 400,000 | | | | 394,000 | |
Navios Maritime Holdings, Inc.
Sr. Sec. Nt.
8.875% due 11/1/2017 | | | 280,000 | | | | 288,400 | |
Teekay Corp.
Sr. Nt.
8.50% due 1/15/2020 | | | 100,000 | | | | 103,250 | |
| | | | | | | | | |
| | | | | | | | 2,215,837 | |
| Wireless – 5.2% | | | | | | | | |
Cricket Communications, Inc.
7.75% due 10/15/2020 | | | 190,000 | | | | 186,200 | |
Sr. Nt.
7.75% due 10/15/2020(1) | | | 140,000 | | | | 136,850 | |
Digicel Ltd.
Sr. Nt.
8.25% due 9/1/2017(1) | | | 600,000 | | | | 622,500 | |
MetroPCS Wireless, Inc.
7.875% due 9/1/2018 | | | 500,000 | | | | 529,375 | |
NII Capital Corp.
8.875% due 12/15/2019 | | | 660,000 | | | | 728,475 | |
10.00% due 8/15/2016 | | | 270,000 | | | | 313,200 | |
Sprint Capital Corp.
6.90% due 5/1/2019 | | | 655,000 | | | | 674,650 | |
Trilogy International Partners LLC
Sr. Sec. Nt.
10.25% due 8/15/2016(1) | | | 300,000 | | | | 304,500 | |
Wind Acquisition Finance S.A.
Sr. Sec. Nt.
7.25% due 2/15/2018(1) | | | 250,000 | | | | 260,000 | |
| | | | | | | | | |
| | | | | | | | 3,755,750 | |
| | | | | | | | |
| June 30, 2011 (unaudited) | | Principal
Amount | | | Value | |
| Wirelines – 1.4% | | | | | | | | |
Frontier Communications Corp.
Sr. Nt.
8.125% due 10/1/2018 | | $ | 460,000 | | | $ | 499,675 | |
8.25% due 4/15/2017 | | | 220,000 | | | | 239,250 | |
Windstream Corp.
7.875% due 11/1/2017 | | | 240,000 | | | | 254,700 | |
| | | | | | | | | |
| | | | | | | | 993,625 | |
Total Corporate Bonds
(Cost $63,632,377) | | | | | | | 65,110,129 | |
| | | | | | | | |
| | | Principal
Amount | | | Value | |
| Senior Secured Loans – 5.8% | | | | | |
| Automotive – 1.4% | | | | | | | | |
Chrysler Group LLC
Term Loan
6.00% due 5/24/2017(2) | | | 1,000,000 | | | | 976,560 | |
| | | | | | | | | |
| | | | | | | | 976,560 | |
| Gaming – 0.7% | | | | | | | | |
Harrah’s Prop Co.
Sr. Nt.
3.19% due 2/13/2013(2) | | | 600,000 | | | | 504,324 | |
| | | | | | | | | |
| | | | | | | | 504,324 | |
| Media Noncable – 1.1% | | | | | |
Clear Channel Communication, Inc.
Term Loan B
3.836% due 1/28/2016(2) | | | 964,026 | | | | 816,288 | |
| | | | | | | | | |
| | | | | | | | 816,288 | |
| Oil Field Services – 1.2% | | | | | | | | |
Frac Tech International LLC
Term Loan B
6.25% due 5/6/2016(2) | | | 880,147 | | | | 878,387 | |
| | | | | | | | | |
| | | | | | | | 878,387 | |
| Paper – 1.4% | | | | | | | | |
Exopack LLC
Term Loan
6.50% due 5/26/2017(2) | | | 1,000,000 | | | | 996,630 | |
| | | | | | | | | |
| | | | | | | | 996,630 | |
Total Senior Secured Loans
(Cost $4,246,425) | | | | | | | 4,172,189 | |
| | | | | | | | |
| | | Shares | | | Value | |
| Common Stocks – 0.7% | | | | | | | | |
| Non Captive Diversified – 0.7% | | | | | | | | |
Citigroup, Inc. | | | 12,569 | | | | 523,373 | |
| | | | | | | | | |
| | | | | | | | 523,373 | |
Total Common Stocks
(Cost $378,402) | | | | | | | 523,373 | |
| | | | |
| 12 | | | | The accompanying notes are an integral part of these financial statements. |
RS HIGH YIELD VIP SERIES
| | | | | | | | |
| June 30, 2011 (unaudited) | | Principal
Amount | | | Value | |
| Repurchase Agreements – 1.5% | | | | | |
State Street Bank and Trust Co. Repurchase Agreement, 0.01%, dated 6/30/2011, maturity value of $1,072,000, due 7/1/2011(5) | | $ | 1,072,000 | | | $ | 1,072,000 | |
Total Repurchase Agreements
(Cost $1,072,000) | | | | 1,072,000 | |
Total Investments - 97.6%
(Cost $69,329,204) | | | | 70,877,691 | |
| Other Assets, Net - 2.4% | | | | 1,779,296 | |
| Total Net Assets - 100.0% | | | $ | 72,656,987 | |
| (1) | Securities that may be resold in transactions, exempt from registration under Rule 144A of the Securities Act of 1933, normally to certain qualified buyers. At June 30, 2011, the aggregate market value of these securities amounted to $29,384,200, representing 40.4% of net assets. These securities have been deemed liquid by the investment adviser pursuant to the Fund’s liquidity procedures approved by the Board of Trustees. |
| (2) | Variable rate security. The rate shown is the rate in effect at June 30, 2011. |
| (3) | Maturity is perpetual. Maturity date presented represents the next call date. |
| (4) | Payment-in-kind security for which part of the income earned may be paid as additional principal. |
| (5) | The table below presents collateral for repurchase agreements. |
| | | | | | | | | | | | |
| Security | | Coupon | | | Maturity
Date | | | Value | |
| U.S Treasury Bill | | | 0.00% | | | | 7/21/2011 | | | $ | 1,094,993 | |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 13 |
SCHEDULE OF INVESTMENTS — RS HIGH YIELD VIP SERIES
The following is a summary of the inputs used as of June 30, 2011 in valuing the Fund’s investments. For more information on valuation inputs, please refer to Note 1a of the accompanying Notes to Financial Statements.
| | | | | | | | | | | | | | | | |
| | | Valuation Inputs | | | | |
| Investments in Securities (unaudited) | | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
| Corporate Bonds | | $ | — | | | $ | 65,110,129 | | | $ | — | | | $ | 65,110,129 | |
| Senior Secured Loans | | | — | | | | 4,172,189 | | | | — | | | | 4,172,189 | |
| Common Stocks | | | 523,373 | | | | — | | | | — | | | | 523,373 | |
| Repurchase Agreements | | | — | | | | 1,072,000 | | | | — | | | | 1,072,000 | |
| Total | | $ | 523,373 | | | $ | 70,354,318 | | | $ | — | | | $ | 70,877,691 | |
| | | | |
| 14 | | | | The accompanying notes are an integral part of these financial statements. |
FINANCIAL INFORMATION — RS HIGH YIELD VIP SERIES
| | | | |
Statement of Assets and Liabilities As of June 30, 2011 (unaudited) | | | |
Assets | | | | |
Investments, at value | | $ | 70,877,691 | |
Cash and cash equivalents | | | 619 | |
Interest receivable | | | 1,268,129 | |
Receivable for investments sold | | | 1,049,239 | |
Receivable for fund shares subscribed | | | 46,083 | |
| | | | | |
Total Assets | | | 73,241,761 | |
| | | | | |
| | |
Liabilities | | | | |
Payable for investments purchased | | | 460,875 | |
Payable for fund shares redeemed | | | 63,124 | |
Payable to adviser | | | 38,261 | |
Accrued trustees’ fees | | | 1,204 | |
Accrued expenses/other liabilities | | | 21,310 | |
| | | | | |
Total Liabilities | | | 584,774 | |
| | | | | |
Total Net Assets | | $ | 72,656,987 | |
| | | | | |
| | |
Net Assets Consist of: | | | | |
Paid-in capital | | $ | 71,853,279 | |
Accumulated undistributed net investment income | | | 2,869,757 | |
Accumulated net realized loss from investments | | | (3,614,536 | ) |
Net unrealized appreciation on investments | | | 1,548,487 | |
| | | | | |
Total Net Assets | | $ | 72,656,987 | |
| | | | | |
Investments, at Cost | | $ | 69,329,204 | |
| | | | | |
| | |
Pricing of Shares | | | | |
Shares of Beneficial Interest Outstanding with no Par Value | | | 9,261,657 | |
Net Asset Value Per Share | | | $7.84 | |
| | | | | |
| | | | |
Statement of Operations For the Six-Month Period Ended June 30, 2011 (unaudited) | |
Investment Income | | | | |
Interest | | $ | 3,165,408 | |
Dividends | | | 126 | |
Withholding taxes on foreign interest | | | (218 | ) |
| | | | | |
Total Investment Income | | | 3,165,316 | |
| | | | | |
| | |
Expenses | | | | |
Investment advisory fees | | | 237,918 | |
Custodian fees | | | 26,154 | |
Professional fees | | | 12,578 | |
Shareholder reports | | | 9,043 | |
Administrative service fees | | | 5,176 | |
Trustees’ fees | | | 1,913 | |
Other expenses | | | 2,781 | |
| | | | | |
Total Expenses | | | 295,563 | |
| | |
Less: Custody credits | | | (6 | ) |
| | | | | |
Total Expenses, Net | | | 295,557 | |
| | | | | |
Net Investment Income | | | 2,869,759 | |
| | | | | |
| | |
Realized Gain/(Loss) and Change in Unrealized Appreciation/Depreciation on Investments | | | | |
Net realized gain from investments | | | 3,378,014 | |
Net change in unrealized appreciation/depreciation on investments | | | (2,763,519 | ) |
| | | | | |
Net Gain on Investments | | | 614,495 | |
| | | | | |
Net Increase in Net Assets Resulting from Operations | | $ | 3,484,254 | |
| | | | | |
| | | | | |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 15 |
FINANCIAL INFORMATION — RS HIGH YIELD VIP SERIES
| | | | | | | | |
Statement of Changes in Net Assets Six-Month-Ended numbers are unaudited | | | | | | |
| | | |
| | | For the Six Months Ended 6/30/11 | | | For the Year Ended 12/31/10 | |
| | | | |
Operations | | | | | | | | |
Net investment income | | $ | 2,869,759 | | | $ | 6,478,378 | |
Net realized gain from investments | | | 3,378,014 | | | | 2,534,284 | |
Net change in unrealized appreciation/depreciation on investments | | | (2,763,519 | ) | | | 1,477,084 | |
| | | | | | | | | |
Net Increase in Net Assets Resulting from Operations | | | 3,484,254 | | | | 10,489,746 | |
| | | | | | | | | |
| | | |
Distributions to Shareholders | | | | | | | | |
Net investment income | | | — | | | | (6,507,704 | ) |
| | | | | | | | | |
Total Distributions | | | — | | | | (6,507,704 | ) |
| | | | | | | | | |
| | | |
Capital Share Transactions | | | | | | | | |
Proceeds from sales of shares | | | 5,229,264 | | | | 15,929,776 | |
Reinvestment of distributions | | | — | | | | 6,507,704 | |
Cost of shares redeemed | | | (15,134,346 | ) | | | (30,455,660 | ) |
| | | | | | | | | |
Net Decrease in Net Assets Resulting from Capital Share
Transactions | | | (9,905,082 | ) | | | (8,018,180 | ) |
| | | | | | | | | |
Net Decrease in Net Assets | | | (6,420,828 | ) | | | (4,036,138 | ) |
| | | | | | | | | |
| | | |
Net Assets | | | | | | | | |
Beginning of period | | | 79,077,815 | | | | 83,113,953 | |
| | | | | | | | | |
End of period | | $ | 72,656,987 | | | $ | 79,077,815 | |
| | | | | | | | | |
Distributions in Excess of Net Investment Income Included in Net Assets | | $ | — | | | $ | (2 | ) |
| | | | | | | | | |
Accumulated Undistributed Net Investment Income Included in Net Assets | | $ | 2,869,757 | | | $ | — | |
| | | | | | | | | |
| | | |
Other Information: | | | | | | | | |
Shares | | | | | | | | |
Sold | | | 671,552 | | | | 2,091,583 | |
Reinvested | | | — | | | | 874,692 | |
Redeemed | | | (1,940,833 | ) | | | (3,974,027 | ) |
| | | | | | | | | |
Net Decrease | | | (1,269,281 | ) | | | (1,007,752 | ) |
| | | | | | | | | |
| | | | | | | | | |
| | | | |
| 16 | | | | The accompanying notes are an integral part of these financial statements. |
This Page Intentionally Left Blank
FINANCIAL INFORMATION — RS HIGH YIELD VIP SERIES
The financial highlights table is intended to help you understand the Fund's financial performance for the past six reporting periods. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the Fund (assuming reinvestment of all distributions).
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Financial Highlights Six-Month-Ended numbers are unaudited | |
| | | Net Asset Value,
Beginning of
Period | | | Net Investment
Income | | | Net Realized and Unrealized
Gain/(Loss) | | | Total Operations | | | Distributions
From Net
Investment
Income | | | Distributions
From Net Realized Capital Gains | | | Total
Distributions | |
Six Months Ended 6/30/111 | | $ | 7.51 | | | $ | 0.31 | | | $ | 0.02 | | | $ | 0.33 | | | $ | — | | | $ | — | | | $ | — | |
Year Ended 12/31/10 | | | 7.20 | | | | 0.67 | | | | 0.31 | | | | 0.98 | | | | (0.67 | ) | | | — | | | | (0.67 | ) |
Year Ended 12/31/09 | | | 5.59 | | | | 0.53 | | | | 1.60 | | | | 2.13 | | | | (0.52 | ) | | | — | | | | (0.52 | ) |
Year Ended 12/31/08 | | | 7.90 | | | | 0.63 | | | | (2.31 | ) | | | (1.68 | ) | | | (0.63 | ) | | | — | | | | (0.63 | ) |
Year Ended 12/31/07 | | | 8.47 | | | | 0.67 | | | | (0.57 | ) | | | 0.10 | | | | (0.67 | ) | | | — | | | | (0.67 | ) |
Year Ended 12/31/06 | | | 8.33 | | | | 0.61 | | | | 0.14 | | | | 0.75 | | | | (0.61 | ) | | | — | | | | (0.61 | ) |
| | | | |
| 18 | | | | The accompanying notes are an integral part of these financial statements. |
RS HIGH YIELD VIP SERIES
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Net Asset Value, End of Period | | | Total Return2 | | | Net Assets, End of Period (000s) | | | Net Ratio of Expenses to Average Net Assets3 | | | Gross Ratio of Expenses to Average Net
Assets | | | Net Ratio of Net Investment Income to Average Net Assets3 | | | Gross Ratio of Net Investment Income to Average Net Assets | | | Portfolio Turnover Rate | |
| $ | 7.84 | | | | 4.39% | | | $ | 72,657 | | | | 0.75% | | | | 0.75% | | | | 7.24% | | | | 7.24% | | | | 65% | |
| | 7.51 | | | | 13.72% | | | | 79,078 | | | | 0.74% | | | | 0.74% | | | | 7.85% | | | | 7.85% | | | | 99% | |
| | 7.20 | | | | 38.10% | | | | 83,114 | | | | 0.75% | | | | 0.75% | | | | 8.39% | | | | 8.39% | | | | 59% | |
| | 5.59 | | | | (20.83)% | | | | 47,250 | | | | 0.76% | | | | 0.77% | | | | 8.50% | | | | 8.49% | | | | 69% | |
| | 7.90 | | | | 1.19% | | | | 62,424 | | | | 0.76% | | | | 0.80% | | | | 7.49% | | | | 7.45% | | | | 97% | |
| | 8.47 | | | | 9.17% | | | | 64,358 | | | | 0.76% | | | | 0.77% | | | | 6.94% | | | | 6.93% | | | | 88% | |
Distributions reflect actual per-share amounts distributed for the period.
| 1 | Ratios for periods less than one year have been annualized, except for total return and portfolio turnover rate. |
| 2 | Total returns do not reflect the effects of charges deducted pursuant to the terms of The Guardian Insurance & Annuity Company, Inc.’s variable contracts. Inclusion of such charges would reduce the total returns for all periods shown. |
| 3 | Net Ratio of Expenses to Average Net Assets and Net Ratio of Net Investment Income to Average Net Assets include the effect of fee waivers, expense limitations and custody credits, if applicable. |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 19 |
NOTES TO FINANCIAL STATEMENTS — RS HIGH YIELD VIP SERIES (UNAUDITED)
June 30, 2011 (unaudited)
RS Variable Products Trust (the “Trust”), a Massachusetts business trust organized on May 18, 2006, is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust currently offers twelve series. RS High Yield VIP Series (formerly known as RS High Yield Bond VIP Series) (the “Fund”) is a series of the Trust. The Fund is a diversified fund. The financial statements for the other remaining series of the Trust are presented in separate reports.
The Fund has authorized an unlimited number of shares of beneficial interest with no par value. Shares are bought and sold at closing net asset value (“NAV”), which is the price for all outstanding shares of the Fund. Class I shares of the Fund are only sold to certain separate accounts of The Guardian Insurance & Annuity Company, Inc. (“GIAC”). GIAC is a wholly-owned subsidiary of The Guardian Life Insurance Company of America (“Guardian Life”). The Fund is currently offered to insurance company separate accounts that fund certain variable annuity and variable life insurance contracts issued by GIAC.
Note 1. Significant Accounting Policies
The following policies are in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
a. Investment Valuations The Fund is responsible for the valuation of portfolio securities and uses independent pricing services (each, a “Service”). Debt securities with more than 60 days to maturity for which quoted bid prices are readily available and representative of the bid side of the market are valued by a relevant Service at the bid price. Debt securities with more than 60 days to maturity for which quoted bid prices are not readily available and representative of the market value are valued by the Service at estimated market value based on methods which may include consideration of yields or prices of government securities of comparable coupon, maturity and type; indications as to values from dealers; and general market conditions.
Other marketable securities are valued at the last reported sale price on the principal exchange or market on which they are traded; or, if there were no sales that day, at the mean between the closing bid and asked
prices. Securities traded on the NASDAQ Stock Market, LLC (“NASDAQ”) are generally valued at the NASDAQ official closing price, which may not be the last sale price. If the NASDAQ official closing price is not available for a security, that security is generally valued using the last reported sale price, or, if no sales are reported, at the mean between the closing bid and asked prices. Short-term investments that will mature in 60 days or less are valued at amortized cost, which approximates market value. Repurchase agreements are carried at cost, which approximates market value. Foreign securities are valued in the currencies of the markets in which they trade and then converted to U.S. dollars using the prevailing exchange rates at the close of the New York Stock Exchange (“NYSE”).
Securities for which market quotations are not readily available or for which market quotations may be considered unreliable or for which a service does not provide a valuation are valued at their fair values as determined in accordance with guidelines and procedures adopted by the Trust’s Board of Trustees.
Securities whose values have been materially affected by events occurring before the Fund’s valuation time but after the close of the securities’ principal exchange or market may be fair valued using methods approved by the Board of Trustees.
The Fund has adopted the authoritative guidance under GAAP on determining fair value when the volume and level of activity for an asset or liability have significantly decreased and for identifying transactions that are not orderly. Accordingly, if the Fund determines that either the volume and/or level of activity for an asset or liability has significantly decreased (from normal conditions for that asset or liability) or price quotations or observable inputs are not associated with orderly transactions, increased analysis and management judgment will be required to estimate fair value.
In accordance with Financial Accounting Standards Board Codification Topic 820 (“ASC Topic 820”), fair value is defined as the price that the Fund would receive upon selling an investment in an “arm’s length” transaction to a willing buyer in the principal or most advantageous market for the investment. ASC Topic 820 established a hierarchy for classification of fair value measurements for disclosure purposes. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants
RS HIGH YIELD VIP SERIES (UNAUDITED)
would use in pricing the asset or liability based on the best information available in the circumstances. The hierarchy of inputs is summarized in the three broad levels listed below.
| Ÿ | | Level 1 — unadjusted quoted prices in active markets for identical investments |
| Ÿ | | Level 2 — inputs other than unadjusted quoted prices that are observable either directly or indirectly (including adjusted quoted prices for similar investments, interest rates, prepayment speeds, credit risks, etc.) |
| Ÿ | | Level 3 — significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments) |
Inputs may include price information, volatility statistics, specific and broad credit data, liquidity statistics, and other factors. A security’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires significant judgment by the Trust. The Trust considers observable data to be that market data which is readily available, regularly distributed or updated, reliable and verifiable, and provided by independent sources that are actively involved in the relevant market. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. Changes in valuation techniques may result in transfers into or out of an investment’s assigned level within the hierarchy.
Effective beginning with the Fund’s current fiscal year, the Financial Accounting Standards Board requires reporting entities to make disclosures about purchases, sales, issuances and settlements of Level 3 securities on a gross basis. For the six months ended June 30, 2011, the Fund had no securities classified as Level 3.
There were no significant transfers between Level 1 and Level 2 for the six months end June 30, 2011.
In determining a security’s placement within the hierarchy, the Trust separates the Fund’s investment portfolio into two categories: investments and derivatives (e.g., futures).
Investments Investments whose values are based on quoted market prices in active markets, and are therefore classified within Level 1, include active listed equities. The Trust does not adjust the quoted price for such instruments, even in situations where the Fund holds a large position and a sale could reasonably be expected to impact the quoted price.
Investments that trade in markets that are not considered to be active, but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within Level 2. These include certain U.S. government and sovereign obligations, most government agency securities, investment-grade corporate bonds, certain mortgage products, state, municipal and provincial obligations, and certain foreign equity securities.
Investments classified within Level 3 have significant unobservable inputs, as they trade infrequently or not at all. Level 3 investments include, among others, private placement securities. When observable prices are not available for these securities, the Trust uses one or more valuation techniques for which sufficient and reliable data is available. The inputs used by the Trust in estimating the value of Level 3 investments include the original transaction price, recent transactions in the same or similar instruments, completed or pending third-party transactions in the underlying investment or comparable issuers, subsequent rounds of financing, recapitalizations, and other transactions across the capital structure. Level 3 investments may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the Trust in the absence of market information. Assumptions used by the Trust due to the lack of observable inputs may significantly impact the resulting fair value and therefore the Fund’s results of operations.
Derivatives Exchange-traded derivatives, such as futures contracts and exchange traded option contracts, are typically classified within Level 1 or Level 2 of the fair value hierarchy depending on whether or not they are deemed to be actively traded. Certain derivatives, such as generic forwards, swaps and options, have inputs which can generally be corroborated by market data and are therefore classified within Level 2.
b. Federal Income Taxes The Fund intends to continue complying with the requirements of the Internal Revenue Code to qualify as a regulated investment company and to distribute substantially all net investment income and realized net capital gains, if any, to shareholders. Therefore, the Fund does not expect to be subject to income tax, and no provision for such tax has been made.
From time to time, however, the Fund may choose to pay an excise tax if the cost of making the required distribution exceeds the amount of the excise tax.
As of June 30, 2011, the Trust has reviewed the tax positions for open periods, as applicable to the Fund, and has determined that no provision for income tax is
NOTES TO FINANCIAL STATEMENTS — RS HIGH YIELD VIP SERIES (UNAUDITED)
required in the Fund’s financial statements. The Fund recognizes interest and penalties, if any, related to unrecognized tax positions as income tax expense in the Statement of Operations. For the six months ended June 30, 2011, the Fund did not incur any interest or penalties. The Fund is not subject to examination by U.S. federal tax authorities for tax years before 2007 and by state authorities for tax years before 2006.
c. Securities Transactions Securities transactions are accounted for on the date securities are purchased or sold (trade date). Realized gains or losses on securities transactions are determined on the basis of specific identification.
d. Investment Income Dividend income is generally recorded on the ex-dividend date. Interest income, which includes amortization/accretion of premium/discount, is accrued and recorded daily.
e. Expenses Many expenses of the Trust can be directly attributed to a specific series of the Trust. Expenses that cannot be directly attributed to a specific series of the Trust are generally apportioned among all the series in the Trust, based on relative net assets.
f. Custody Credits The Fund has entered into an arrangement with its custodian, State Street Bank and Trust Company, whereby credits realized as a result of uninvested cash balances are used to reduce the Fund’s custodian expenses. The Fund’s custody credits, if any, are shown in the accompanying Statement of Operations.
g. Distributions to Shareholders The Fund intends to declare and distribute substantially all net investment income, if any, at least once a year. Distributions of net realized capital gains, if any, are declared and paid at least once a year. Unless the Fund is instructed otherwise, all distributions to shareholders are credited in the form of additional shares of the Fund at the net asset value, recorded on the ex-dividend date.
h. Capital Accounts Due to the timing of dividend distributions and the differences in accounting for income and realized gains/(losses) for financial statement purposes versus federal income tax purposes, the fiscal year in which amounts are distributed may differ from the year in which the income and realized gains/(losses) were recorded by the Fund.
Note 2. Transactions with Affiliates
a. Advisory Fee Under the terms of the advisory agreement, which is reviewed and approved annually by
the Board of Trustees, the Fund pays an investment advisory fee to RS Investment Management Co. LLC (“RS Investments”). Guardian Investor Services LLC (“GIS”), a subsidiary of Guardian Life, holds a majority interest in RS Investments. RS Investments receives an investment advisory fee based on the average daily net assets of the Fund at an annual rate of 0.60%. The Fund has also entered into an agreement with GIS for distribution services with respect to its shares.
RS Investments has entered into a Sub-Advisory Services Agreement with GIS. GIS is responsible for providing day-to-day investment advisory services to the Fund, subject to the oversight of the Board of Trustees of the Trust and review by RS Investments. As compensation for GIS’s services, RS Investments pays fees to GIS at an annual rate of 0.57% of the average daily net assets of the Fund. Payment of the sub-investment advisory fee does not represent a separate or additional expense to the Fund.
RS Investments has an Expense Reimbursement Agreement in place with GIS with respect to certain funds of the Trust to which GIS serves as sub-adviser. The Expense Reimbursement Agreement provides that GIS will reimburse RS Investments for certain operating expenses and may make additional payments to mitigate losses incurred by RS Investments.
b. Compensation of Trustees and Officers Trustees and officers of the Trust who are interested persons, as defined in the 1940 Act, of RS Investments receive no compensation from the Fund for acting as such. Trustees of the Trust who are not interested persons of RS Investments receive compensation and reimbursement of expenses from the Trust.
Note 3. Federal Income Taxes
a. Distributions to Shareholders The tax character of distributions paid during the year ended December 31, 2010, which is the most recently completed tax year, was as follows:
Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. These differences are primarily due to differing treatments of income and gains on various investment securities held by the Fund, timing differences, and differing characterizations of distributions made by the Fund.
RS HIGH YIELD VIP SERIES (UNAUDITED)
Permanent book and tax basis differences will result in reclassifications to paid-in capital, undistributed net investment income and accumulated undistributed net realized gain/(loss) on investments. Undistributed net investment income and accumulated undistributed net realized gain/(loss) on investments may include temporary book and tax differences, which will reverse in a subsequent period.
As of December 31, 2010, the Fund made the following reclassifications of permanent book and tax basis differences:
| | | | | | | | |
| Paid-in-Capital | | Accumulated
Net Investment Income | | | Accumulated
Net Realized Loss | |
| $(274,561) | | $ | (77,171 | ) | | $ | 351,732 | |
During any particular year, net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed and, therefore, are normally distributed to shareholders annually.
During the year ended December 31, 2010, the Fund utilized $2,443,275 of capital loss carryovers. Capital loss carryovers available to the Fund at December 31, 2010 were as follows:
| | | | |
| Expiring | |
Amount | |
| 2016 | | $ | 4,762,996 | |
| 2017 | | | 2,229,558 | |
| | | | | |
| Total | | $ | 6,992,554 | |
| | | | | |
| | | | | |
Capital loss carryovers of $442,741 expired in the year ended December 31, 2010.
In determining its taxable income, current tax law permits the Fund to elect to treat all or a portion of any net capital or currency loss realized after October 31 as occurring on the first day of the following fiscal year. For the year ended December 31, 2010, the Fund had no such losses.
On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted. The Act modernizes several of the federal income and excise tax rules related to regulated investment companies, and with certain exceptions, is effective for taxable years beginning after December 22, 2010.
Among the changes are revisions to capital loss carryforward rules allowing for capital losses to be carried forward to one or more subsequent taxable years
without expiration. Rules previously in effect limited the carryforward period to eight taxable years. Capital loss carryforwards generated in taxable years beginning after the effective date of the Act must be fully used before capital loss carryforwards generated in taxable years prior to the effective date of the Act. Changes to excise tax rules include timing of recognition of certain income and a change in the required distribution rate for capital gains.
b. Tax Basis of Investments The cost of investments for federal income tax purposes at June 30, 2011, was $69,329,386. The gross unrealized appreciation and depreciation on investments, on a tax basis, at June 30, 2011, aggregated $2,268,175 and $(719,870), respectively, resulting in net unrealized appreciation of $1,548,305.
Note 4. Investments
a. Investment Purchases and Sales The cost of investments purchased and the proceeds from investments sold (excluding short-term investments) amounted to $49,519,358 and $54,360,511, respectively, for the six months ended June 30, 2011.
b. Repurchase Agreements The collateral for repurchase agreements is either cash or fully negotiable U.S. government securities (including U.S. government agency securities). Repurchase agreements are fully collateralized (including the interest accrued thereon) and such collateral is marked-to-market daily while the agreements remain in force. If the value of the collateral falls below the repurchase price plus accrued interest, the Fund will typically require the seller to deposit additional collateral by the next business day. If the request for additional collateral is not met, or the seller defaults, the Fund maintains the right to sell the collateral (although it may be prevented or delayed from doing so in certain circumstances) and may claim any resulting loss against the seller.
c. Loans Floating rate loans in which the Fund invest are primarily “senior” loans. Senior floating rate loans typically hold a senior position in the capital structure of the borrower, are typically secured by specific collateral, and have a claim on the assets and/or stock of the borrower that is senior to that held by subordinated debtholders and stockholders of the borrower. While these protections may reduce risk, these investments still present significant credit risk. A significant portion of the Fund’s floating rate investments may be issued in connection with highly leveraged transactions such as leveraged buyouts, leveraged recapitalization loans, and other types of acquisition financing. Obligations in these
NOTES TO FINANCIAL STATEMENTS — RS HIGH YIELD VIP SERIES (UNAUDITED)
types of transactions are subject to greater credit risk (including default and bankruptcy) than many other investments and may be, or could become, illiquid. See note (f) regarding below investment grade securities.
The Fund may purchase second lien loans (secured loans with a claim on collateral subordinate to a senior lender’s claim on such collateral), fixed rate loans, unsecured loans, and other debt obligations.
d. Payment In-Kind Securities The Fund may invest in payment in-kind securities. Payment in-kind securities give the issuer the option at each interest payment date of making interest payments in either cash or additional debt securities. Those additional debt securities usually have the same terms, including maturity dates and interest rates, and associated risks as the original bonds.
e. Restricted and Illiquid Securities A restricted security cannot be resold to the general public without prior registration under the Securities Act of 1933 (except pursuant to an applicable exemption). If the security is subsequently registered and resold, the issuer would typically bear the expense of all registrations at no cost to the Fund. Restricted and illiquid securities are valued according to the guidelines and procedures adopted by the Trust’s Board of Trustees.
f. Below Investment Grade Securities The Fund may invest in below investment grade securities (i.e. lower-quality debt), which are subject to certain risks. Lower-quality debt is considered to be speculative because it is less certain that the issuer will be able to pay interest or repay the principal than in the case of investment-grade debt. These securities can involve a substantially greater risk of default than higher-rated securities, and their values can decline significantly over short periods of time. Lower-quality debt securities tend to be more sensitive to adverse news about the issuer, or the market and the economy in general, than higher quality debt securities. The market for these securities can be less liquid, especially during periods of recession or general market decline.
Note 5. Temporary Borrowings
The Fund, with other funds managed by RS Investments, shares in a $75 million committed revolving credit/overdraft protection facility from State Street Bank and Trust Company for temporary purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. Interest is calculated based on market rates at the time of borrowing; all the funds that are parties to the facility share in a commitment fee that is allocated among the
funds on the basis of their respective net assets. The Fund may borrow up to the lesser of one-third of its total assets (including amounts borrowed) or any lower limit specified in the Fund’s Statement of Additional Information or Prospectus.
For the six months ended June 30, 2011, the Fund did not borrow from the facility.
Note 6. Review for Subsequent Events
The Trust has evaluated subsequent events through the issuance of the Fund’s financial statements and determined that no material events have occurred that require disclosure.
Note 7. Indemnifications
Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, in the normal course of business, the Fund enters into contracts with its vendors and others that provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund. However, based on experience, the Fund expects the risk of loss to be remote.
SUPPLEMENTAL INFORMATION (UNAUDITED)
Meeting of Shareholders
A special meeting of the shareholders of RS Variable Products Trust (“the Trust”) was held on May 20, 2011. At the meeting, the shareholders of the Trust elected Judson Bergman, Kenneth R. Fitzsimmons, Jr., Anne M. Goggin, Christopher C. Melvin, Jr., Deanna M. Mulligan, Gloria S. Nelund, Terry R. Otton, and John P. Rohal as trustees of the Trust.
Proposal To Elect Trustees
| | | | |
| Nominee | |
Votes For | | Votes Against/Withheld |
| Judson Bergman | | 264,351,869.410 | | 14,579,441.977 |
| Kenneth R. Fitzsimmons, Jr. | | 264,417,319.717 | | 14,513,991.670 |
| Anne M. Goggin | | 265,496,967.524 | | 13,434,343.863 |
| Christopher C. Melvin, Jr. | | 264,182,743.884 | | 14,748,567.503 |
| Deanna M. Mulligan | | 264,603,554.628 | | 14,327,756.759 |
| Gloria S. Nelund | | 265,607,677.552 | | 13,323,633.835 |
| Terry R. Otton | | 265,360,024.512 | | 13,571,286.875 |
| John P. Rohal | | 264,052,063.420 | | 14,879,247.967 |
Portfolio Holdings and Proxy Voting Procedures
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Form N-Q is available on the Securities and Exchange Commission’s Web site at http://www.sec.gov. The Fund’s Form N-Q may be reviewed and copied at the Commission’s Public Reference Room in Washington, DC, and information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330. This information is also available, without charge, upon request, by calling toll-free 800-221-3253.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 will be available (i) without charge, upon request, by calling toll-free 800-221-3253; and (ii) on the Securities and Exchange Commission’s Web site at http://www.sec.gov.
The Statement of Additional Information includes additional information about the Trust’s Trustees and Officers and is available, without charge, upon request by calling toll-free 800-221-3253.
This report is transmitted to shareholders only. It is not authorized for use as an offer of sale or a solicitation of an offer to buy shares of a Fund unless accompanied or preceded by that Fund’s current prospectus. Past performance results shown in this report should not be considered a representation of future performance. Investment returns and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Statements and other information herein are as dated and are subject to change.
2011 Semiannual Report
All data as of June 30, 2011
RS Variable Products Trust
| Ÿ | | RS Money Market VIP Series |
| | | | |
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE | | |  | |
TABLE OF CONTENTS
Except as otherwise specifically stated, all information and investment team commentary, including portfolio security positions, is as of June 30, 2011. The views expressed in the investment team letters are those of the Fund’s portfolio manager(s) and are subject to change without notice. They do not necessarily represent the views of RS Investments or Guardian Investor Services LLC. The letters contain some forward-looking statements providing current expectations or forecasts of future events; they do not necessarily relate to historical or current facts. There can be no guarantee that any forward-looking statement will be realized. We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events, or otherwise. Any discussions of specific securities should not be considered a recommendation to buy or sell those securities. Fund holdings will vary.
RS MONEY MARKET VIP SERIES
The Statement of Additional Information provides further information about your investment team, including information regarding their compensation, other accounts they manage, and their ownership interests in the Fund. For information on how to receive a copy of the Statement of Additional Information, please see the back cover of the Fund’s Prospectus or visit our Web site at www.guardianinvestor.com.
RS Money Market VIP Series Commentary
Highlights
| Ÿ | | While the economic recovery continued in the first half of 2011, concerns over persistent high unemployment, increasing energy prices, and the repercussions of the European debt crisis (e.g. Greece and Ireland) contributed to uncertainty over the near-term economic outlook. |
| Ÿ | | RS Money Market VIP Series returned 0.00% for the six-month period, and underperformed its benchmark, the Barclays Capital U.S. Treasury Bellwethers (3 Month) Index1. |
Market Overview
At the June 22, 2011 meeting of the Federal Reserve Open Market Committee (FOMC), policymakers stated that the economic recovery was continuing at a moderate pace, despite the short-term drag from higher food and energy prices and supply chain disruptions following the earthquake and tsunami in Japan. The FOMC also confirmed that the Federal Reserve (Fed) would end its $600 billion asset purchase program at the end of the second quarter 2011, as planned.
Several factors affected returns in money market funds in the first half of 2011. The federal funds rate remained anchored in the range of 0.00% to 0.25% throughout the period, reducing available returns. Proceeds from maturing investments across the entire money market space were also being reinvested at offering levels that were among the lowest offered historically. Many commercial paper issuers and programs also reduced or halted issuance as commercial paper outstanding continued to decline in 2010 and 2011 from the peak issuance period in 2007.
Portfolio Review
RS Money Market VIP Series returned 0.00% for the six-month period that ended June 30, 2011, compared to a 0.09% return for its benchmark, the Barclays Capital U.S. Treasury Bellwethers (3 Month) Index.
The Fund holds the majority of its exposure in high grade Tier 1 commercial paper of either financial or industrial issuers. The Fund was overweight in high quality industrial names and recently began to add high quality
insurance/finance names. In the second quarter of 2011, we maintained the Fund’s exposure to floating rate taxable municipal bonds, due to our belief that high quality issuers are offering attractive rates. The Fund also maintained its exposure to stand-alone high grade taxable municipal paper and to U.S. Treasury bills. The Fund does not currently have any exposure to European bank commercial paper or certificates of deposit.
Outlook
Given our outlook for improving but still moderate economic growth, we expect the federal funds rate to remain in the current range of near zero as we move into the second half of 2011. As we look ahead, we expect to focus on issuers that we believe can survive current, often uneven, economic conditions.
RS MONEY MARKET VIP SERIES
RS Funds are sold by prospectus only. You should carefully consider the investment objectives, risks, charges and expenses of the RS Funds before making an investment decision. The prospectus contains this and other important information. Please read it carefully before investing or sending money. Please visit our web site at www.guardianinvestor.com or to obtain a printed copy, call 800-221-3253.
Any discussions of specific securities should not be considered a recommendation to buy or sell those securities. Fund holdings will vary.
Except as otherwise specifically stated, all information and investment team commentary, including portfolio security positions, is as of June 30, 2011.
RS Money Market VIP Series is neither insured nor guaranteed by the FDIC or any other government agency. Although the Fund seeks to preserve the value of an investment at $1.00 per unit, it is possible to lose money by investing in the Fund.
RS MONEY MARKET VIP SERIES
Characteristics
| | |
| Total Net Assets: $157,443,072 | | |
| | | | | | |
| | | |
| Portfolio Statistics | | | | | Sector Allocation |
Average Maturity (days) | | | 31 | | | 
|
Current 7-Day Yield | | | | | |
with fee waiver2 | | | 0.01% | | |
without fee waiver and maintenance | | | -0.42% | | |
Effective 7-Day Yield | | | | | |
with fee waiver2 | | | 0.01% | | |
without fee waiver and maintenance | | | -0.42% | | |
Annualized historical yields for the 7-day period ended June 30, 2011. Effective yield assumes reinvested income. Yields will vary.
| | | | | | | | | | | | |
| | | | |
| Top Ten Holdings3 | | | | | | | | | |
| | | | |
| Holding | | Discount/
Coupon | | | Maturity
Date | | | % of Total
Net Assets | |
| Connecticut St. Housing Fin. Auth. | | | 0.160% | | | | 7/7/2011 | | | | 4.13% | |
| Ecolab, Inc. | | | 0.030% | | | | 7/1/2011 | | | | 3.18% | |
| Caterpillar Financial Services Corp. | | | 0.070% | | | | 7/1/2011 | | | | 3.18% | |
| United Parcel Service, Inc. | | | 0.010% | | | | 7/6/2011 | | | | 3.18% | |
| Air Products & Chemicals, Inc. | | | 0.100% | | | | 7/14/2011 | | | | 3.18% | |
| U.S. Treasury Bills | | | 0.245% | | | | 9/22/2011 | | | | 3.17% | |
| Iowa Fin. Auth. Single Family Mtg. Rev. | | | 0.150% | | | | 7/7/2011 | | | | 2.06% | |
| Danaher Corp. | | | 0.080% | | | | 7/1/2011 | | | | 1.91% | |
| Proctor & Gamble Co. | | | 0.080% | | | | 7/5/2011 | | | | 1.91% | |
| International Business Machines Corp. | | | 0.060% | | | | 7/12/2011 | | | | 1.91% | |
| Total | | | | | | | | | | | 27.81% | |
RS MONEY MARKET VIP SERIES
Performance Update
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
| Average Annual Total Returns | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
| | | Inception Date | | | Year-to-Date | | | 1 Year | | | 3 Year | | | 5 Year | | | 10 Year | | | Since Inception | |
| RS Money Market VIP Series | | | 12/29/81 | | | | 0.00% | | | | 0.01% | | | | 0.28% | | | | 1.83% | | | | 1.79% | | | | 4.86% | |
| Barclays Capital U.S. Treasury Bellwethers (3 Month) Index1 | | | | | | | 0.09% | | | | 0.18% | | | | 0.47% | | | | 2.07% | | | | 2.16% | | | | 5.05% | |
Please refer to page 5 for the 7-day yield quotation which more closely reflects the current earnings of the RS Money Market VIP Series than the total return quotations.
Since inception performance for the index is measured from 11/30/1981, the month end prior to the Fund’s commencement of operations.
| 1 | The Barclays Capital U.S. Treasury Bellwethers (3 Month) Index is generally considered to be representative of the average yield of three-month Treasury Bills. The Barclays Capital U.S. Treasury Bellwethers (3 Month) Index is an unmanaged index that is not available for direct investment. There are no expenses associated with the index while there are expenses associated with the Fund. |
| 2 | Pursuant to a written agreement in effect through April 30, 2012, expense limitations have been imposed by the Adviser. In addition, Guardian Investor Services LLC (GIS), the Fund’s subadviser, voluntarily reimbursed expenses to maintain a minimum yield threshold for RS Money Market VIP Series. There is no guarantee that the reimbursement will be in effect for subsequent periods. See page 18 for further information. |
| 3 | Portfolio holdings are subject to change and should not be considered a recommendation to buy or sell individual securities. Top ten holdings are determined at the unique security level. For this reason, the securities included above, their order, and the percentages they represent of the Fund’s total net assets may differ from similar data calculated directly from the Schedule of Investments, where certain securities of the same issuer with the same coupon rate may be aggregated. |
Performance quoted represents past performance and does not guarantee or predict future results. The Fund is the successor to The Guardian Cash Fund, Inc.; performance shown includes performance of the predecessor fund for periods prior to October 9, 2006. Investment return and principal value will fluctuate, so shares, when redeemed, may be worth more or less than their original cost. The Fund’s fees and expenses are detailed in the Financial Highlights section of this report. Gross fees and expenses are factored into the net asset value of your shares and any performance numbers we release. Total return figures reflect an expense limitation in effect during the periods shown; without such limitation, the performance shown would have been lower. Performance results assume the reinvestment of dividends and capital gains. The return figures shown do not reflect the deduction of taxes that a contractowner/policyholder may pay on Fund distributions or redemption units. The actual total returns for owners of variable annuity contracts or variable life insurance policies that provide for investment in the Fund will be lower to reflect separate account and contract/policy charges. Current and month-end performance information, which may be lower or higher than that cited, is available by calling 800-221-3253 and is periodically updated on our Web site: www.guardianinvestor.com.
UNDERSTANDING YOUR FUND’S EXPENSES (UNAUDITED)
By investing in the Fund, you incur two types of costs: (1) transaction costs, including, as applicable, sales charges (loads) on purchase payments; redemption fees; and exchange fees; and (2) ongoing costs, including as applicable, investment advisory fees; and other Fund expenses. The example below is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period indicated. The table below shows the Fund’s expenses in two ways:
Expenses based on actual return
This section of the table provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Expenses based on hypothetical 5% return for comparison purposes
This section of the table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund with the cost of investing in other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore the second section is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If these transactional costs were included, your costs would have been higher.
| | | | | | | | | | | | | | |
| | | Beginning
Account Value
1/1/11 | | Ending
Account Value
6/30/11 | | | Expenses Paid
During Period*
1/1/11-6/30/11 | | | Expense Ratio
During Period
1/1/11-6/30/11 | |
| Based on Actual Return | | $1,000.00 | | | $1,000.00 | | | | $0.85 | | | | 0.17% | |
| Based on Hypothetical Return (5% Return Before Expenses) | | $1,000.00 | | | $1,023.94 | | | | $0.86 | | | | 0.17% | |
| * | Expenses are equal to the Fund’s annualized expense ratio as indicated, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). |
SCHEDULE OF INVESTMENTS — RS MONEY MARKET VIP SERIES
| | | | | | | | |
| June 30, 2011 (unaudited) | | Principal
Amount | | | Value | |
| Commercial Paper – 77.5% | |
| Aerospace & Defense – 1.9% | |
United Technologies Corp.
0.07% due 7/20/2011(1) | | $ | 3,000,000 | | | $ | 2,999,889 | |
| | | | | | | | | |
| | | | | | | | 2,999,889 | |
| Chemicals – 7.9% | |
Air Products & Chemicals, Inc.
0.10% due 7/14/2011(1) | | | 5,000,000 | | | | 4,999,820 | |
BASF SE
0.10% due 7/7/2011(1) | | | 2,500,000 | | | | 2,499,958 | |
Ecolab, Inc.
0.03% due 7/1/2011(1) | | | 5,000,000 | | | | 5,000,000 | |
| | | | | | | | | |
| | | | | | | | 12,499,778 | |
| Computers – 3.8% | |
Hewlett-Packard Co.
0.08% due 7/15/2011(1) | | | 3,000,000 | | | | 2,999,907 | |
International Business Machines Corp.
0.06% due 7/12/2011(1) | | | 3,000,000 | | | | 2,999,945 | |
| | | | | | | | | |
| | | | | | | | 5,999,852 | |
| Conglomerates – 1.9% | |
General Electric Capital Corp.
0.06% due 8/8/2011 | | | 3,000,000 | | | | 2,999,810 | |
| | | | | | | | | |
| | | | | | | | 2,999,810 | |
| Diversified Manufacturing – 3.8% | |
Danaher Corp.
0.08% due 7/1/2011(1) | | | 3,000,000 | | | | 3,000,000 | |
Illinois Tool Works, Inc.
0.10% due 7/15/2011(1) | | | 3,000,000 | | | | 2,999,883 | |
| | | | | | | | | |
| | | | | | | | 5,999,883 | |
| Education Revenue – 4.8% | |
Duke University
0.18% due 8/31/2011 | | | 2,500,000 | | | | 2,499,237 | |
President and Fellows of Harvard College
0.18% due 10/3/2011 | | | 2,500,000 | | | | 2,498,825 | |
Yale University
0.18% due 9/19/2011 | | | 2,500,000 | | | | 2,499,000 | |
| | | | | | | | | |
| | | | | | | | 7,497,062 | |
| Electric – 7.3% | |
American Transmission Co., LLC
0.01% due 7/8/2011(1) | | | 1,000,000 | | | | 999,975 | |
0.13% due 7/1/2011(1) | | | 2,500,000 | | | | 2,500,000 | |
Electricite de France
0.12% due 7/20/2011(1) | | | 3,000,000 | | | | 2,999,810 | |
Emerson Electric Co.
0.05% due 7/6/2011(1) | | | 2,500,000 | | | | 2,499,982 | |
0.08% due 7/5/2011(1) | | | 2,500,000 | | | | 2,499,978 | |
| | | | | | | | | |
| | | | | | | | 11,499,745 | |
| Entertainment – 1.9% | |
The Walt Disney Co.
0.10% due 9/6/2011(1) | | | 3,000,000 | | | | 2,999,442 | |
| | | | | | | | | |
| | | | | | | | 2,999,442 | |
| | | | | | | | |
| June 30, 2011 (unaudited) | | Principal
Amount | | | Value | |
| Finance Companies – 3.2% | |
Metlife Funding, Inc.
0.11% due 7/6/2011 | | $ | 2,500,000 | | | $ | 2,499,962 | |
Private Export Funding Corp.
0.13% due 8/1/2011(1) | | | 2,500,000 | | | | 2,499,720 | |
| | | | | | | | | |
| | | | | | | | 4,999,682 | |
| Food and Beverage – 6.3% | |
Nestle Capital Corp.
0.01% due 11/28/2011(1) | | | 2,500,000 | | | | 2,497,917 | |
Pepsico, Inc.
0.10% due 7/20/2011(1) | | | 2,500,000 | | | | 2,499,868 | |
The Coca-Cola Co.
0.11% due 8/9/2011(1) | | | 2,500,000 | | | | 2,499,702 | |
Unilever Capital Corp.
0.09% due 7/8/2011(1) | | | 2,500,000 | | | | 2,499,956 | |
| | | | | | | | | |
| | | | | | | | 9,997,443 | |
| Household Products - Wares – 3.8% | | | | | |
Kimberly-Clark Worldwide, Inc.
0.07% due 7/13/2011(1) | | | 3,000,000 | | | | 2,999,930 | |
Proctor & Gamble Co.
0.08% due 7/5/2011(1) | | | 3,000,000 | | | | 2,999,973 | |
| | | | | | | | | |
| | | | | | | | 5,999,903 | |
| Insurance - Life – 3.2% | | | | | | | | |
Massachusetts Mutual Life Insurance Co.
0.14% due 7/21/2011(1) | | | 2,500,000 | | | | 2,499,806 | |
Prudential PLC
0.29% due 7/7/2011(1) | | | 2,500,000 | | | | 2,499,879 | |
| | | | | | | | | |
| | | | | | | | 4,999,685 | |
| Internet – 3.5% | | | | | | | | |
eBay, Inc.
0.16% due 7/13/2011(1) | | | 2,500,000 | | | | 2,499,867 | |
Google, Inc.
0.11% due 9/16/2011(1) | | | 3,000,000 | | | | 2,999,294 | |
| | | | | | | | | |
| | | | | | | | 5,499,161 | |
| Machinery – 4.8% | | | | | | | | |
Caterpillar Financial Services Corp.
0.07% due 7/1/2011 | | | 5,000,000 | | | | 5,000,000 | |
John Deere Bank S.A.
0.11% due 7/26/2011(1) | | | 2,500,000 | | | | 2,499,809 | |
| | | | | | | | | |
| | | | | | | | 7,499,809 | |
| Oil & Gas Services – 1.6% | | | | | | | | |
Schlumberger Ltd.
0.12% due 7/15/2011(1) | | | 2,500,000 | | | | 2,499,883 | |
| | | | | | | | | |
| | | | | | | | 2,499,883 | |
| Personal Products – 2.2% | | | | | | | | |
L’Oreal U.S.A., Inc.
0.06% due 7/14/2011(1) | | | 2,500,000 | | | | 2,499,946 | |
0.09% due 8/16/2011(1) | | | 1,000,000 | | | | 999,885 | |
| | | | | | | | | |
| | | | | | | | 3,499,831 | |
| | | | |
| 8 | | | | The accompanying notes are an integral part of these financial statements. |
RS MONEY MARKET VIP SERIES
| | | | | | | | |
| June 30, 2011 (unaudited) | | Principal
Amount | | | Value | |
| Pharmaceuticals – 8.3% | | | | | | | | |
Abbott Laboratories
0.15% due 7/18/2011(1) | | $ | 2,500,000 | | | $ | 2,499,823 | |
Medtronic, Inc.
0.10% due 9/7/2011(1) | | | 2,500,000 | | | | 2,499,528 | |
Pfizer, Inc.
0.06% due 7/6/2011(1) | | | 2,500,000 | | | | 2,499,979 | |
Roche Holdings, Inc.
0.08% due 7/21/2011(1) | | | 2,500,000 | | | | 2,499,889 | |
Sanofi-Aventis
0.16% due 10/20/2011(1) | | | 3,000,000 | | | | 2,998,520 | |
| | | | | | | | | |
| | | | | | | | 12,997,739 | |
| Retailers – 1.6% | | | | | | | | |
Target Corp.
0.09% due 7/1/2011 | | | 2,500,000 | | | | 2,500,000 | |
| | | | | | | | | |
| | | | | | | | 2,500,000 | |
| Transportation – 4.8% | | | | | | | | |
NetJets, Inc.
0.12% due 8/1/2011(1) | | | 2,500,000 | | | | 2,499,742 | |
United Parcel Service, Inc.
0.01% due 7/6/2011(1) | | | 5,000,000 | | | | 4,999,993 | |
| | | | | | | | | |
| | | | | | | | 7,499,735 | |
| Utilities - Electric & Water – 0.9% | | | | | |
National Rural Utilities Cooperative Finance Corp.
0.15% due 7/7/2011 | | | 1,500,000 | | | | 1,499,962 | |
| | | | | | | | | |
| | | | | | | | 1,499,962 | |
Total Commercial Paper
(Cost $121,988,294) | | | | 121,988,294 | |
| | | | | | | | |
| | | Principal
Amount | | | Value | |
| Municipal Securities – 8.6% | | | | | | | | |
| Connecticut – 4.1% | | | | | | | | |
Connecticut St. Housing Fin. Auth.
Ser. B-4
0.16% due 7/7/2011(2) | | | 6,495,000 | | | | 6,495,000 | |
| | | | | | | | | |
| | | | | | | | 6,495,000 | |
| District of Columbia – 0.6% | | | | | | | | |
District of Columbia Univ. Rev. Ref-Georgetown Univ.
Ser. C
0.06% due 7/7/2011(2) | | | 1,000,000 | | | | 1,000,000 | |
| | | | | | | | | |
| | | | | | | | 1,000,000 | |
| Iowa – 2.1% | | | | | | | | |
Iowa Fin. Auth. Single Family Mtg. Rev. Mtg. Bkd. Secs. Prog. Ser. C
0.15% due 7/7/2011(2) | | | 3,240,000 | | | | 3,240,000 | |
| | | | | | | | | |
| | | | | | | | 3,240,000 | |
| | | | | | | | |
| June 30, 2011 (unaudited) | | Principal
Amount | | | Value | |
| New York – 1.8% | | | | | | | | |
New York St. Pwr. Auth.
0.23% due 7/7/2011 | | $ | 2,839,000 | | | $ | 2,838,891 | |
| | | | | | | | | |
| | | | | | | | 2,838,891 | |
Total Municipal Securities
(Cost $13,573,891) | | | | 13,573,891 | |
| | | | | | | | |
| | | Principal
Amount | | | Value | |
| U.S. Government Securities – 11.1% | | | | | |
U.S. Treasury Bills | | | | | | | | |
0.07% due 12/22/2011 | | | 2,500,000 | | | | 2,499,154 | |
0.085% due 9/15/2011 | | | 2,500,000 | | | | 2,499,552 | |
0.145% due 10/20/2011 | | | 2,500,000 | | | | 2,498,882 | |
0.155% due 8/25/2011 | | | 2,500,000 | | | | 2,499,408 | |
0.175% due 7/28/2011 | | | 2,500,000 | | | | 2,499,672 | |
0.245% due 9/22/2011 | | | 5,000,000 | | | | 4,997,176 | |
| | | | | | | | | |
Total U.S. Government Securities
(Cost $17,493,844) | | | | 17,493,844 | |
| | | | | | | | |
| | | Principal
Amount | | | Value | |
| Repurchase Agreements – 2.8% | | | | | |
State Street Bank and Trust Co. Repurchase Agreement, 0.01%, dated 6/30/2011, maturity value of $4,437,001, due 7/1/2011(3) | | | 4,437,000 | | | | 4,437,000 | |
Total Repurchase Agreements
(Cost $4,437,000) | | | | 4,437,000 | |
Total Investments - 100.0%
(Cost $157,493,029) | | | | 157,493,029 | |
| Other Liabilities, Net - 0.0% | | | | (49,957 | ) |
| Total Net Assets - 100.0% | | | $ | 157,443,072 | |
| (1) | Security issued in an exempt transaction without registration under the Securities Act of 1933. At June 30, 2011, the aggregate market value of these securities amounted to $99,991,498, representing 63.5% of the net assets. These securities have been deemed liquid by the investment adviser pursuant to the Fund’s liquidity procedures approved by the Board of Trustees. |
| (2) | Variable rate demand note. The rate shown is the rate in effect at June 30, 2011. |
| (3) | The table below presents collateral for repurchase agreements. |
| | | | | | | | | | | | |
| Security | | Coupon | | | Maturity
Date | | | Value | |
| U.S. Treasury Bill | | | 0.00% | | | | 8/11/2011 | | | $ | 4,529,896 | |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 9 |
SCHEDULE OF INVESTMENTS — RS MONEY MARKET VIP SERIES
The following is a summary of the inputs used as of June 30, 2011 in valuing the Fund’s investments. For more information on valuation inputs, please refer to Note 1a of the accompanying Notes to Financial Statements.
| | | | | | | | | | | | | | | | |
| | | Valuation Inputs | | | | |
| Investments in Securities (unaudited) | | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
| Commercial Paper | | $ | — | | | $ | 121,988,294 | | | $ | — | | | $ | 121,988,294 | |
| Municipal Securities | | | — | | | | 13,573,891 | | | | — | | | | 13,573,891 | |
| U.S. Government Securities | | | — | | | | 17,493,844 | | | | — | | | | 17,493,844 | |
| Repurchase Agreements | | | — | | | | 4,437,000 | | | | — | | | | 4,437,000 | |
| Total | | $ | — | | | $ | 157,493,029 | | | $ | — | | | $ | 157,493,029 | |
The Fund’s end of the month schedule of investments is available at www.guardianinvestor.com on the fifth business day following the end of each month. Also available on the website is a link to the Securities Exchange Commission’s website to view the Fund’s monthly Form N-MFP filings which are posted by the sixtieth day after the end of each month.
| | | | |
| 10 | | | | The accompanying notes are an integral part of these financial statements. |
FINANCIAL INFORMATION — RS MONEY MARKET VIP SERIES
| | | | |
Statement of Assets and Liabilities As of June 30, 2011 (unaudited) | | | |
Assets | | | | |
Investments, at value | | $ | 157,493,029 | |
Cash and cash equivalents | | | 80 | |
Receivable for fund shares subscribed | | | 106,570 | |
Due from subadviser | | | 53,562 | |
Interest receivable | | | 2,201 | |
| | | | | |
Total Assets | | | 157,655,442 | |
| | | | | |
| | |
Liabilities | | | | |
Payable for fund shares redeemed | | | 143,062 | |
Payable to adviser | | | 58,358 | |
Accrued trustees’ fees | | | 2,612 | |
Accrued expenses/other liabilities | | | 8,338 | |
| | | | | |
Total Liabilities | | | 212,370 | |
| | | | | |
Total Net Assets | | $ | 157,443,072 | |
| | | | | |
| | |
Net Assets Consist of: | | | | |
Paid-in capital | | $ | 157,448,955 | |
Accumulated undistributed net investment income | | | 29,474 | |
Accumulated net realized loss from investments | | | (35,357 | ) |
| | | | | |
Total Net Assets | | $ | 157,443,072 | |
| | | | | |
Investments, at Cost | | $ | 157,493,029 | |
| | | | | |
| | |
Pricing of Shares | | | | |
Shares of Beneficial Interest Outstanding with no Par Value | | | 157,450,539 | |
Net Asset Value Per Share | | | $1.00 | |
| | | | | |
| | | | |
Statement of Operations For the Six-Month Period Ended June 30, 2011 (unaudited) | |
Investment Income | | | | |
Interest | | $ | 143,398 | |
| | | | | |
Total Investment Income | | | 143,398 | |
| | | | | |
| | |
Expenses | | | | |
Investment advisory fees | | | 355,268 | |
Professional fees | | | 16,063 | |
Custodian fees | | | 13,511 | |
Shareholder reports | | | 10,696 | |
Administrative service fees | | | 10,568 | |
Trustees’ fees | | | 3,846 | |
Other expenses | | | 5,239 | |
| | | | | |
Total Expenses | | | 415,191 | |
| | |
Less: Expense reimbursement by subadviser | | | (279,684 | ) |
| | | | | |
Total Expenses, Net | | | 135,507 | |
| | | | | |
Net Investment Income | | | 7,891 | |
| | | | | |
Net Increase in Net Assets Resulting from Operations | | $ | 7,891 | |
| | | | | |
| | | | | |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 11 |
FINANCIAL INFORMATION — RS MONEY MARKET VIP SERIES
| | | | | | | | |
Statements of Changes in Net Assets Six-month-ended numbers are unaudited | | | | | | |
| | | |
| | | For the
Six Months Ended
6/30/11 | | | For the Year Ended
12/31/10 | |
| | | | |
Operations | | | | | | | | |
Net investment income | | $ | 7,891 | | | $ | 42,499 | |
Net realized loss from investments | | | — | | | | (500 | ) |
| | | | | | | | | |
Net Increase in Net Assets Resulting from Operations | | | 7,891 | | | | 41,999 | |
| | | | | | | | | |
| | | |
Distributions to Shareholders | | | | | | | | |
Net investment income | | | (7,891 | ) | | | (41,976 | ) |
| | | | | | | | | |
Total Distributions | | | (7,891 | ) | | | (41,976 | ) |
| | | | | | | | | |
| | | |
Capital Share Transactions | | | | | | | | |
Proceeds from sales of shares | | | 28,341,274 | | | | 51,857,209 | |
Reinvestment of distributions | | | 7,892 | | | | 41,979 | |
Cost of shares redeemed | | | (36,705,421 | ) | | | (100,575,018 | ) |
| | | | | | | | | |
Net Decrease in Net Assets Resulting from Capital Share
Transactions | | | (8,356,255 | ) | | | (48,675,830 | ) |
| | | | | | | | | |
Net Decrease in Net Assets | | | (8,356,255 | ) | | | (48,675,807 | ) |
| | | | | | | | | |
| | | |
Net Assets | | | | | | | | |
Beginning of period | | | 165,799,327 | | | | 214,475,134 | |
| | | | | | | | | |
End of period | | $ | 157,443,072 | | | $ | 165,799,327 | |
| | | | | | | | | |
Accumulated Undistributed Net Investment Income Included in Net Assets | | $ | 29,474 | | | $ | 29,474 | |
| | | | | | | | | |
| | | |
Other Information: | | | | | | | | |
Shares | | | | | | | | |
Sold | | | 28,341,274 | | | | 51,857,209 | |
Reinvested | | | 7,892 | | | | 41,979 | |
Redeemed | | | (36,705,421 | ) | | | (100,575,018 | ) |
| | | | | | | | | |
Net Decrease | | | (8,356,255 | ) | | | (48,675,830 | ) |
| | | | | | | | | |
| | | | | | | | | |
| | | | |
| 12 | | | | The accompanying notes are an integral part of these financial statements. |
This Page Intentionally Left Blank
FINANCIAL INFORMATION — RS MONEY MARKET VIP SERIES
The financial highlights table is intended to help you understand the Fund’s financial performance for the past six reporting periods. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the Fund (assuming reinvestment of all distributions).
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Financial Highlights Six-month-ended numbers are unaudited | |
| | | Net Asset Value,
Beginning of
Period | | | Net Investment
Income | | | Net Realized
and Unrealized
Gain/(Loss) | | | Total
Operations | | | Distributions
From Net
Investment
Income | | | Distributions
From Net
Realized
Capital Gains | | | Total
Distributions | |
Six Months Ended 6/30/111 | | $ | 1.00 | | | $ | — | 5 | | $ | — | 5 | | $ | — | 5 | | $ | — | 5 | | $ | — | | | $ | — | 5 |
Year Ended 12/31/10 | | | 1.00 | | | | — | 5 | | | — | 5 | | | — | 5 | | | — | 5 | | | — | | | | — | 5 |
Year Ended 12/31/09 | | | 1.00 | | | | — | 5 | | | — | | | | — | 5 | | | — | 5 | | | — | | | | — | 5 |
Year Ended 12/31/084 | | | 1.00 | | | | 0.02 | | | | — | | | | 0.02 | | | | (0.02 | ) | | | — | | | | (0.02 | ) |
Year Ended 12/31/074 | | | 1.00 | | | | 0.05 | | | | — | | | | 0.05 | | | | (0.05 | ) | | | — | | | | (0.05 | ) |
Year Ended 12/31/064 | | | 1.00 | | | | 0.04 | | | | — | | | | 0.04 | | | | (0.04 | ) | | | — | | | | (0.04 | ) |
| | | | |
| 14 | | | | The accompanying notes are an integral part of these financial statements. |
FINANCIAL INFORMATION — RS MONEY MARKET VIP SERIES
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Net Asset
Value, End of
Period | | | Total
Return2 | | | Net Assets, End
of Period (000s) | | | Net Ratio of
Expenses to
Average Net
Assets3 | | | Gross Ratio of
Expenses to
Average Net
Assets | | | Net Ratio of Net
Investment Income to Average Net Assets3 | | | Gross Ratio of Net
Investment
Income/(Loss) to
Average Net Assets | |
| $ | 1.00 | | | | 0.00% | | | $ | 157,443 | | | | 0.17% | 7 | | | 0.53% | | | | 0.01% | 7 | | | (0.35)% | |
| | 1.00 | | | | 0.02% | | | | 165,799 | | | | 0.20% | 7 | | | 0.52% | | | | 0.02% | 7 | | | (0.30)% | |
| | 1.00 | | | | 0.06% | | | | 214,475 | | | | 0.38% | 7 | | | 0.54% | | | | 0.06% | 7 | | | (0.10)% | |
| | 1.00 | | | | 2.03% | 6 | | | 289,173 | | | | 0.51% | | | | 0.52% | | | | 2.00% | | | | 1.99% | |
| | 1.00 | | | | 4.71% | | | | 243,759 | | | | 0.58% | | | | 0.58% | | | | 4.61% | | | | 4.61% | |
| | 1.00 | | | | 4.52% | | | | 220,270 | | | | 0.59% | | | | 0.59% | | | | 4.45% | | | | 4.45% | |
Distributions reflect actual per-share amounts distributed for the period.
| 1 | Ratios for periods less than one year have been annualized, except for total return and portfolio turnover rate. |
| 2 | Total returns do not reflect the effects of charges deducted pursuant to the terms of The Guardian Insurance & Annuity Company, Inc.’s variable contracts. Inclusion of such charges would reduce the total returns for all periods shown. |
| 3 | Net Ratio of Expenses to Average Net Assets and Net Ratio of Net Investment Income to Average Net Assets include the effect of fee waivers, expense limitations and custody credits, if applicable. |
| 4 | On December 23, 2008, Class I Shares split on a 10-for-1 basis. The net assets values and other-per share information have been restated to reflect the stock split. |
| 5 | Rounds to $0.00 per share. |
| 6 | Without the effect of the voluntary contribution by the distributor, total return would have been 1.98%. |
| 7 | Includes additional subsidies to maintain a minimum yield threshold (See Note 2a). |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 15 |
NOTES TO FINANCIAL STATEMENTS — RS MONEY MARKET VIP SERIES (UNAUDITED)
June 30, 2011 (unaudited)
RS Variable Products Trust (the “Trust”), a Massachusetts business trust organized on May 18, 2006, is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust currently offers twelve series. RS Money Market VIP Series (the “Fund”) is a series of the Trust. The Fund is a diversified fund. The financial statements for the other remaining series of the Trust are presented in separate reports.
The Fund has authorized an unlimited number of shares of beneficial interest with no par value. Shares are bought and sold at closing net asset value (“NAV”), which is the price for all outstanding shares of the Fund. Class I shares of the Fund are only sold to certain separate accounts of The Guardian Insurance & Annuity Company, Inc. (“GIAC”). GIAC is a wholly-owned subsidiary of The Guardian Life Insurance Company of America (“Guardian Life”). The Fund is currently offered to insurance company separate accounts that fund certain variable annuity and variable life insurance contracts issued by GIAC.
Note 1. Significant Accounting Policies
The following policies are in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
a. Investment Valuations Repurchase agreements are carried at cost, which approximates market value. The Fund values its investments based on amortized cost in accordance with Rule 2a-7 of the 1940 Act.
The Fund has adopted the authoritative guidance under GAAP on determining fair value when the volume and level of activity for an asset or liability have significantly decreased and for identifying transactions that are not orderly. Accordingly, if the Fund determines that either the volume and/or level of activity for an asset or liability has significantly decreased (from normal conditions for that asset or liability) or price quotations or observable inputs are not associated with orderly transactions, increased analysis and management judgment will be required to estimate fair value.
In accordance with Financial Accounting Standards Board Codification Topic 820 (“ASC Topic 820”), fair
value is defined as the price that the Fund would receive upon selling an investment in an “arm’s length” transaction to a willing buyer in the principal or most advantageous market for the investment. ASC Topic 820 established a hierarchy for classification of fair value measurements for disclosure purposes. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances. The hierarchy of inputs is summarized in the three broad levels listed below.
| Ÿ | | Level 1 — unadjusted quoted prices in active markets for identical investments |
| Ÿ | | Level 2 — inputs other than unadjusted quoted prices that are observable either directly or indirectly (including adjusted quoted prices for similar investments, interest rates, prepayment speeds, credit risks, etc.) |
| Ÿ | | Level 3 — significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments) |
Inputs may include price information, volatility statistics, specific and broad credit data, liquidity statistics, and other factors. A security’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires significant judgment by the Trust. The Trust considers observable data to be that market data which is readily available, regularly distributed or updated, reliable and verifiable, and provided by independent sources that are actively involved in the relevant market. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. Changes in valuation techniques may result in transfers into or out of an investment’s assigned level within the hierarchy.
Effective beginning with the Fund’s current fiscal year, the Financial Accounting Standards Board requires reporting entities to make disclosures about purchases, sales, issuances and settlements of Level 3 securities on a gross basis. For the six months ended June 30, 2011, the Fund had no securities classified as Level 3.
There were no significant transfers between Level 1 and Level 2 for the six months end June 30, 2011.
NOTES TO FINANCIAL STATEMENTS — RS MONEY MARKET VIP SERIES (UNAUDITED)
In determining a security’s placement within the hierarchy, the Trust separates the Fund’s investment portfolio into two categories: investments and derivatives (e.g., futures).
Investments Investments whose values are based on quoted market prices in active markets, and are therefore classified within Level 1, include active listed equities. The Trust does not adjust the quoted price for such instruments, even in situations where the Fund holds a large position and a sale could reasonably be expected to impact the quoted price.
Investments that trade in markets that are not considered to be active, but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within Level 2. These include certain U.S. government and sovereign obligations, most government agency securities, investment-grade corporate bonds, certain mortgage products, state, municipal and provincial obligations, and certain foreign equity securities.
Investments classified within Level 3 have significant unobservable inputs, as they trade infrequently or not at all. Level 3 investments include, among others, private placement securities. When observable prices are not available for these securities, the Trust uses one or more valuation techniques for which sufficient and reliable data is available. The inputs used by the Trust in estimating the value of Level 3 investments include the original transaction price, recent transactions in the same or similar instruments, completed or pending third-party transactions in the underlying investment or comparable issuers, subsequent rounds of financing, recapitalizations, and other transactions across the capital structure. Level 3 investments may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the Trust in the absence of market information. Assumptions used by the Trust due to the lack of observable inputs may significantly impact the resulting fair value and therefore the Fund’s results of operations.
Derivatives Exchange-traded derivatives, such as futures contracts and exchange traded option contracts, are typically classified within Level 1 or Level 2 of the fair value hierarchy depending on whether or not they are deemed to be actively traded. Certain derivatives, such as generic forwards, swaps and options, have inputs which can generally be corroborated by market data and are therefore classified within Level 2.
b. Federal Income Taxes The Fund intends to continue complying with the requirements of the Internal Revenue
Code to qualify as a regulated investment company and to distribute substantially all net investment income and realized net capital gains, if any, to shareholders. Therefore, the Fund does not expect to be subject to income tax, and no provision for such tax has been made.
From time to time, however, the Fund may choose to pay an excise tax if the cost of making the required distribution exceeds the amount of the excise tax.
As of June 30, 2011, the Trust has reviewed the tax positions for open periods, as applicable to the Fund, and has determined that no provision for income tax is required in the Fund’s financial statements. The Fund recognizes interest and penalties, if any, related to unrecognized tax positions as income tax expense in the Statement of Operations. For the six months ended June 30, 2011, the Fund did not incur any interest or penalties. The Fund is not subject to examination by U.S. federal tax authorities for tax years before 2007 and by state authorities for tax years before 2006.
c. Securities Transactions Securities transactions are accounted for on the date securities are purchased or sold (trade date). Realized gains or losses on securities transactions are determined on the basis of specific identification.
d. Investment Income Interest income, which includes amortization/accretion of premium/discount, is accrued and recorded daily.
e. Expenses Many expenses of the Trust can be directly attributed to a specific series of the Trust. Expenses that cannot be directly attributed to a specific series of the Trust are generally apportioned among all the series in the Trust, based on relative net assets.
f. Custody Credits The Fund has entered into an arrangement with its custodian, State Street Bank and Trust Company, whereby credits realized as a result of uninvested cash balances are used to reduce the Fund’s custodian expenses. The Fund’s custody credits, if any, are shown in the accompanying Statement of Operations.
g. Distributions to Shareholders Distributions of net investment income, which includes any net realized capital gains or losses, are typically declared and accrued daily and paid monthly. Unless the Fund is instructed otherwise, all distributions to shareholders are credited in the form of additional shares of the Fund, recorded on the ex-dividend date.
h. Capital Accounts Due to the timing of dividend distributions and the differences in accounting for
NOTES TO FINANCIAL STATEMENTS — RS MONEY MARKET VIP SERIES (UNAUDITED)
income and realized gains/(losses) for financial statement purposes versus federal income tax purposes, the fiscal year in which amounts are distributed may differ from the year in which the income and realized gains/(losses) were recorded by the Fund.
Note 2. Transactions with Affiliates
a. Advisory Fee and Expense Limitation Under the terms of the advisory agreement, which is reviewed and approved annually by the Board of Trustees, the Fund pays an investment advisory fee to RS Investment Management Co. LLC (“RS Investments”). Guardian Investor Services LLC (“GIS”), a subsidiary of Guardian Life, holds a majority interest in RS Investments. RS Investments receives an investment advisory fee based on the average daily net assets of the Fund at an annual rate of 0.45%. The Fund has also entered into an agreement with GIS for distribution services with respect to its shares.
RS Investments has entered into a Sub-Advisory Services Agreement with GIS. GIS is responsible for providing day-to-day investment advisory services to the Fund, subject to the oversight of the Board of Trustees of the Trust and review by RS Investments. As compensation for GIS’s services, RS Investments pays fees to GIS at an annual rate of 0.4275% of the average daily net assets of the Fund. Payment of the sub-investment advisory fee does not represent a separate or additional expense to the Fund.
Pursuant to a written agreement between RS Investments and the Trust in effect through April 30, 2012, an expense limitation has been imposed whereby RS Investments agreed to limit the Fund’s total annual fund operating expenses to 0.54% of the average daily net assets of the Fund. To satisfy the expense limitations, certain affiliates of RS Investments, including GIS, may waive expenses that would otherwise be charged to the Fund or may reimburse expenses incurred by the Fund.
In addition, GIS voluntarily reimbursed expenses to maintain a minimum yield threshold for the Fund during the six months ended June 30, 2011. There is no guarantee that the reimbursement will be in effect for subsequent periods.
RS Investments and GIS do not intend to recoup any reimbursed expenses or waived advisory fees from a prior year under expense limitations then in effect for the Fund.
RS Investments has an Expense Reimbursement Agreement in place with GIS with respect to certain
funds of the Trust to which GIS serves as sub-adviser. The Expense Reimbursement Agreement provides that GIS will reimburse RS Investments for certain operating expenses and may make additional payments to mitigate losses incurred by RS Investments.
b. Compensation of Trustees and Officers Trustees and officers of the Trust who are interested persons, as defined in the 1940 Act, of RS Investments receive no compensation from the Fund for acting as such. Trustees of the Trust who are not interested persons of RS Investments receive compensation and reimbursement of expenses from the Trust.
Note 3. Federal Income Taxes
a. Distributions to Shareholders The tax character of distributions paid to shareholders during the year ended December 31, 2010, which is the most recently completed tax year, was as follows:
Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. These differences are primarily due to differing treatments of income and gains on various investment securities held by the Fund, timing differences, and differing characterizations of distributions made by the Fund. Permanent book and tax basis differences will result in reclassifications to paid-in capital, undistributed net investment income and accumulated undistributed net realized gain/(loss) on investments. Undistributed net investment income and accumulated undistributed net realized gain/(loss) on investments may include temporary book and tax differences, which will reverse in a subsequent period.
As of December 31, 2010, the Fund made the following reclassifications of permanent book and tax basis differences:
| | | | | | | | | | |
| Paid-in-Capital | | | Accumulated Net Investment Income | | | Accumulated
Net Realized Loss | |
| | $(997) | | �� | $ | 997 | | | $ | — | |
The tax basis of distributable earnings as of December 31, 2010 was as follows:
| | |
Undistributed
Ordinary
Income | |
| | $29,474 | |
NOTES TO FINANCIAL STATEMENTS — RS MONEY MARKET VIP SERIES (UNAUDITED)
During any particular year, net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed and, therefore, are normally distributed to shareholders annually.
During the year ended December 31, 2010, the Fund did not utilize capital loss carryovers. Capital loss carryovers available to the Fund at December 31, 2010 were as follows:
| | | | |
| Expiring | |
Amount | |
| 2011 | | $ | 7,909 | |
| 2012 | | | 3,238 | |
| 2015 | | | 3,788 | |
| 2016 | | | 18,099 | |
| 2017 | | | 1,823 | |
| 2018 | | | 500 | |
| | | | | |
| Total | | $ | 35,357 | |
| | | | | |
| | | | | |
In determining its taxable income, current tax law permits the Fund to elect to treat all or a portion of any net capital or currency loss realized after October 31 as occurring on the first day of the following fiscal year. For the year ended December 31, 2010, the Fund had no such losses.
On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted. The Act modernizes several of the federal income and excise tax rules related to regulated investment companies, and with certain exceptions, is effective for taxable years beginning after December 22, 2010.
Among the changes are revisions to capital loss carryforward rules allowing for capital losses to be carried forward to one or more subsequent taxable years without expiration. Rules previously in effect limited the carryforward period to eight taxable years. Capital loss carryforwards generated in taxable years beginning after the effective date of the Act must be fully used before capital loss carryforwards generated in taxable years prior to the effective date of the Act. Changes to excise tax rules include timing of recognition of certain income and a change in the required distribution rate for capital gains.
b. Tax Basis of Investments The cost of investments for federal income tax purposes at June 30, 2011, was $157,493,029 and net unrealized appreciation/(depreciation) was $0.
Note 4. Investments
a. Repurchase Agreements The collateral for repurchase agreements is either cash or fully negotiable U.S. government securities (including U.S. government agency securities). Repurchase agreements are fully collateralized (including the interest accrued thereon) and such collateral is marked-to-market daily while the agreements remain in force. If the value of the collateral falls below the repurchase price plus accrued interest, the Fund will typically require the seller to deposit additional collateral by the next business day. If the request for additional collateral is not met, or the seller defaults, the Fund maintains the right to sell the collateral (although it may be prevented or delayed from doing so in certain circumstances) and may claim any resulting loss against the seller.
Note 5. Review for Subsequent Events
The Trust has evaluated subsequent events through the issuance of the Fund’s financial statements and determined that no material events have occurred that require disclosure.
Note 6. Indemnifications
Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, in the normal course of business, the Fund enters into contracts with its vendors and others that provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund. However, based on experience, the Fund expects the risk of loss to be remote.
SUPPLEMENTAL INFORMATION (UNAUDITED)
Meeting of Shareholders
A special meeting of the shareholders of RS Variable Products Trust (“the Trust”) was held on May 20, 2011. At this meeting, the shareholders of the Trust elected Judson Bergman, Kenneth R. Fitzsimmons, Jr., Anne M. Goggin, Christopher C. Melvin, Jr., Deanna M. Mulligan, Gloria S. Nelund, Terry R. Otton, and John P. Rohal as trustees of the Trust.
Proposal to Elect Trustees
| | | | |
| Nominee | |
Votes For | | Votes Against/Withheld |
| Judson Bergman | | 264,351,869.410 | | 14,579,441.977 |
| Kenneth R. Fitzsimmons, Jr. | | 264,417,319.717 | | 14,513,991.670 |
| Anne M. Goggin | | 265,496,967.524 | | 13,434,343.863 |
| Christopher C. Melvin, Jr. | | 264,182,743.884 | | 14,748,567.503 |
| Deanna M. Mulligan | | 264,603,554.628 | | 14,327,756.759 |
| Gloria S. Nelund | | 265,607,677.552 | | 13,323,633.835 |
| Terry R. Otton | | 265,360,024.512 | | 13,571,286.875 |
| John P. Rohal | | 264,052,063.420 | | 14,879,247.967 |
Portfolio Holdings and Proxy Voting Procedures
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Form N-Q is available on the Securities and Exchange Commission’s Web site at http://www.sec.gov. The Fund’s Form N-Q may be reviewed and copied at the Commission’s Public Reference Room in Washington, DC, and information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330. This information is also available, without charge, upon request, by calling toll-free 800-221-3253.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 will be available (i) without charge, upon request, by calling toll-free 800-221-3253; and (ii) on the Securities and Exchange Commission’s Web site at http://www.sec.gov.
The Statement of Additional Information includes additional information about the Trust’s Trustees and Officers and is available, without charge, upon request by calling toll-free 800-221-3253.
This report is transmitted to shareholders only. It is not authorized for use as an offer of sale or a solicitation of an offer to buy shares of a Fund unless accompanied or preceded by that Fund’s current prospectus. Past performance results shown in this report should not be considered a representation of future performance. Investment returns and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Statements and other information herein are as dated and are subject to change.
2011 Semiannual Report
All data as of June 30, 2011
RS Variable Products Trust
| Ÿ | | RS Global Natural Resources VIP Series |
| | | | |
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE | | |  | |
TABLE OF CONTENTS
Except as otherwise specifically stated, all information and investment team commentary, including portfolio security positions, is as of June 30, 2011. The views expressed in the investment team letters are those of the Fund’s portfolio manager(s) and are subject to change without notice. They do not necessarily represent the views of RS Investments. The letters contain some forward-looking statements providing current expectations or forecasts of future events; they do not necessarily relate to historical or current facts. There can be no guarantee that any forward-looking statement will be realized. We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events, or otherwise. Any discussions of specific securities should not be considered a recommendation to buy or sell those securities. Fund holdings will vary.
RS GLOBAL NATURAL RESOURCES VIP SERIES
The Statement of Additional Information provides further information about the investment teams, including information regarding their compensation, other accounts they manage, and their ownership interests in the Fund. For information on how to receive a copy of the Statement of Additional Information, please see the back cover of the relevant Prospectus or visit our Web site at www.guardianinvestor.com.
RS Global Natural Resources VIP Series Commentary
Highlights
| Ÿ | | Natural resources stocks, as defined by the S&P North American Natural Resources Sector IndexTM1, delivered positive but volatile performance during the first half of 2011 as investors confronted global economic uncertainty and concerns over multiple issues including the Japanese earthquake and European debt crisis. |
| Ÿ | | RS Global Natural Resources VIP Series delivered positive absolute performance in the first half of 2011, while underperforming the benchmark S&P North American Natural Resources Sector IndexTM, and outperforming the MSCI World Commodity Producers Index2. In addition, The Fund underperformed the broad market S&P 500® Index3. |
| Ÿ | | RS Global Natural Resources VIP Series seeks long-term capital appreciation by focusing on what we believe to be low-cost producing companies with “advantaged assets.” |
Market Overview
The broad U.S. equity market, as defined by the S&P 500® Index, started out the year on a positive note, delivering positive absolute first quarter returns as investors focused on generally healthy corporate profits and better market liquidity in the wake of the Federal Reserve’s most recent round of quantitative easing. The market experienced renewed downward volatility in March, however, as economic fears resurfaced, aggravated by the earthquake in Japan, the debt crisis in Europe, and a spike in oil prices. Investors were also uneasy regarding how the economy might fare if the Federal Reserve were to wind down its quantitative easing efforts. As employment growth continued to stagnate and the housing market remained weak, economic fears took center stage during the second quarter, contributing to downward volatility in equity prices. As many investors lost their appetites for risk, they sought refuge in more economically defensive investments in areas such as utilities.
Fund Performance Overview
RS Global Natural Resources VIP Series returned 4.56% for the six-month period ended June 30, 2011, underperforming a 5.62% return by the benchmark S&P
North American Natural Resources Sector IndexTM, and outperforming the MSCI World Commodity Producers Index, which returned 4.06%. The Fund underperformed the broad market S&P 500® Index which returned 6.02%.
The Fund’s underweighting in energy stocks negatively impacted our relative performance in the early part of 2011, as oil-related shares spiked along with underlying oil prices. Other detractors from the Fund’s relative performance included Martin Marietta Materials, Inc., a producer of construction aggregates, which was pressured by economic concerns, as well as Canadian gold producer Agnico-Eagle Mines Ltd., which suffered along with the weakness in gold prices.
On a positive note, relative performance for the overall six-month period was aided by our investments in a number of North American natural gas companies, notably Southwestern Energy Co. In our view, our natural gas holdings are positioned to deliver solid economic returns, even at current depressed gas prices, due to their low-cost structures. Furthermore, we believe that gas prices will eventually move back toward the marginal cost of supply as higher cost producers are forced to reduce production.
On a final note, investors’ renewed risk aversion later in the period worked in favor of our single utility investment. Calpine Corp. is an independent wholesale power company that we believe benefits from an advantaged market position. It proved another strong contributor to the Fund’s relative performance in the first half of 2011.
Outlook
We believe that the longer-term outlook for natural resources remains positive. In our view, supply costs for many commodities continue to rise for geological reasons, excess capacity remains relatively low, the longer-term demand trends from emerging market countries remain favorable, and the risk of inflation in basic commodities continues to increase. We will attempt to use short-term dislocations between price and underlying economic value to establish positions in what we believe to be the most advantaged assets at reasonable prices. Conversely, we will attempt to use periods of strength to reduce exposure to businesses when valuations look stretched. Our objective is to expose our shareholders to the most advantaged natural resource companies across the commodities spectrum with the simultaneous goal of mitigating risk.
RS GLOBAL NATURAL RESOURCES VIP SERIES
RS Funds are sold by prospectus only. You should carefully consider the investment objectives, risks, charges and expenses of the RS Funds before making an investment decision. The prospectus contains this and other important information. Please read it carefully before investing or sending money. Please visit our web site at www.guardianinvestor.com or to obtain a printed copy, call 800-221-3253.
As with all mutual funds, the value of an investment in the Fund could decline, in which case you could lose money. Investing in small- and mid-size companies can involve risks such as having less publicly available information, higher volatility, and less liquidity than in the case of larger companies. Funds that concentrate investments in a certain sector may be subject to greater risk than funds that invest more broadly, as companies in that sector may share common characteristics and may react similarly to market developments or other factors affecting their values. Investments in companies in natural resources industries may involve risks including changes in commodities prices, changes in demand for various natural resources, changes in energy prices, and international political and economic developments. Foreign securities are subject to political, regulatory, economic, and exchange-rate risks not present in domestic investments. The value of a debt security is affected by changes in interest rates and is subject to any credit risk of the issuer or guarantor of the security.
Any discussions of specific securities should not be considered a recommendation to buy or sell those securities. Fund holdings will vary.
Except as otherwise specifically stated, all information and investment team commentary, including portfolio security positions, is as of June 30, 2011.
RS GLOBAL NATURAL RESOURCES VIP SERIES
Characteristics
| | |
| Total Net Assets: $19,455,077 | | |
| | |
| | |
| Sector Allocation vs. Index4 | | |
 |
| | | | |
| | |
| Top Ten Holdings5 | | | |
| | |
| Holding | | % of Total
Net Assets | |
| Southwestern Energy Co. | | | 5.40% | |
| Talisman Energy, Inc. | | | 4.79% | |
| Denbury Resources, Inc. | | | 4.66% | |
| Antofagasta PLC | | | 4.62% | |
| Goldcorp, Inc. | | | 4.41% | |
| Range Resources Corp. | | | 4.17% | |
| Occidental Petroleum Corp. | | | 4.11% | |
| Oil Search Ltd. | | | 4.07% | |
| Compass Minerals International, Inc. | | | 3.36% | |
| Calpine Corp. | | | 3.33% | |
| Total | | | 42.92% | |
| 1 | The S&P North American Natural Resources Sector IndexTM is a modified cap-weighted index designed as a benchmark for U.S.-traded securities in the natural resources sector. The index includes companies involved in the following categories: extractive industries, energy companies, owners and operators of timber tracts, forestry services, producers of pulp and paper, and owners of plantations. Index results assume the reinvestment of dividends paid on the stocks constituting the index. You may not invest in the index, and, unlike the Fund, the index does not incur fees or expenses. |
| 2 | The MSCI World Commodity Producers Index is an equity-based index designed to reflect the performance related to commodity producers stocks. The index is a free float-adjusted market capitalization-weighted index comprised of commodity producer companies based on the Global Industry Classification Standard (GICS®). Index results assume the reinvestment of dividends paid on the stocks constituting the index. You may not invest in the index, and, unlike the Fund, the index does not incur fees or expenses. |
| 3 | The S&P 500® Index is an unmanaged market-capitalization-weighted index generally considered to be representative of U.S. equity market activity. The index consists of 500 stocks representing leading industries of the U.S. economy. Index results assume the reinvestment of dividends paid on the stocks constituting the index. You may not invest in the index, and, unlike the Fund, the index does not incur fees or expenses. |
| 4 | The Fund’s holdings are allocated to each sector based on their Russell Global Sector classification. If a holding is not classified by Russell, it is assigned a Russell designation by RS Investments. Cash includes short-term investments and net other assets and liabilities. |
| 5 | Portfolio holdings are subject to change and should not be considered a recommendation to buy or sell individual securities. |
RS GLOBAL NATURAL RESOURCES VIP SERIES
Performance Update
| | | | | | | | | | | | | | | | | | | | |
| | | | | | |
| Average Annual Returns | | | | | | | | | | | | | | | |
| | | | | | |
| | | Inception Date | | | Year-to-Date | | | 1 Year | | | 3 Year | | | Since Inception | |
| RS Global Natural Resources VIP Series | | | 7/31/07 | | | | 4.56% | | | | 38.28% | | | | -1.33% | | | | 4.59% | |
| S&P North American Natural Resources Sector IndexTM 1 | | | | | | | 5.62% | | | | 44.29% | | | | -3.41% | | | | 3.92% | |
| MSCI World Commodity Producers Index2 | | | | | | | 4.06% | | | | 43.30% | | | | -4.59% | | | | 2.16% | |
| S&P 500® Index3 | | | | | | | 6.02% | | | | 30.69% | | | | 3.34% | | | | -0.27% | |
| | | | | | |
| | | | |
| Results of a Hypothetical $10,000 Investment | | | | | | |
 |
The chart above shows the performance of a hypothetical $10,000 investment made on 7/31/07 in RS Global Natural Resources VIP Series, the S&P North American Natural Resources Sector Index, the MSCI World Commodity Producers Index, and the S&P 500® Index. Index returns do not include the fees and expenses of the Fund, but do include the reinvestment of dividends.
Performance quoted represents past performance and does not guarantee or predict future results. Investment return and principal value will fluctuate, so shares, when redeemed, may be worth more or less than their original cost. Please keep in mind that any high doubledigit returns are highly unusual and cannot be sustained. The Fund’s fees and expenses are detailed in the Financial Highlights section of this report. Fees and expenses are factored into the net asset value of your shares and any performance numbers we release. Performance results assume the reinvestment of dividends and capital gains. The return figures shown do not reflect the deduction of taxes that a contractowner/policyholder may pay on Fund distributions or redemption units. The actual total returns for owners of variable annuity contracts or variable life insurance policies that provide for investment in the Fund will be lower to reflect separate account and contract/policy charges. Current and month-end performance information, which may be lower or higher than that cited, is available by calling 800-221-3253 and is periodically updated on our Web site: www.guardianinvestor.com.
UNDERSTANDING YOUR FUND’S EXPENSES (UNAUDITED)
By investing in the Fund, you incur two types of costs: (1) transaction costs, including, as applicable, sales charges (loads) on purchase payments; redemption fees; and exchange fees; and (2) ongoing costs, including as applicable, investment advisory fees; distribution (12b-1) fees; and other Fund expenses. The example below is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period indicated. The table below shows the Fund’s expenses in two ways:
Expenses based on actual return
This section of the table provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Expenses based on hypothetical 5% return for comparison purposes
This section of the table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund with the cost of investing in other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore the second section is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If these transactional costs were included, your costs would have been higher.
| | | | | | | | | | | | | | |
| | | Beginning
Account Value 1/1/11 | | Ending
Account Value 6/30/11 | | | Expenses Paid During Period*
1/1/11-6/30/11 | | | Expense Ratio
During Period 1/1/11-6/30/11 | |
| Based on Actual Return | | $1,000.00 | | $ | 1,045.60 | | | $ | 6.59 | | | | 1.30% | |
| Based on Hypothetical Return (5% Return Before Expenses) | | $1,000.00 | | $ | 1,018.35 | | | $ | 6.51 | | | | 1.30% | |
| * | Expenses are equal to the Fund’s annualized expense ratio as indicated, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). |
SCHEDULE OF INVESTMENTS — RS GLOBAL NATURAL RESOURCES VIP SERIES
| | | | | | | | | | | | |
| June 30, 2011 (unaudited) | | Foreign
Currency | | | Shares | | | Value | |
| Common Stocks – 94.7% | |
| Building Materials – 3.0% | |
Martin Marietta Materials, Inc. | | | | | | | 7,312 | | | $ | 584,741 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 584,741 | |
| Chemicals: Diversified – 5.3% | |
Eastman Chemical Co. | | | | | | | 3,633 | | | | 370,820 | |
FMC Corp. | | | | | | | 7,525 | | | | 647,301 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 1,018,121 | |
| Chemicals: Specialty – 2.0% | |
Praxair, Inc. | | | | | | | 3,488 | | | | 378,064 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 378,064 | |
| Coal – 2.6% | |
Peabody Energy Corp. | | | | | | | 8,610 | | | | 507,215 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 507,215 | |
| Copper – 7.9% | |
Antofagasta PLC | | | GBP | | | | 40,146 | | | | 898,282 | |
Taseko Mines Ltd.(1) | | | | | | | 128,224 | | | | 635,991 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 1,534,273 | |
| Fertilizers – 1.1% | |
Potash Corp. of Saskatchewan, Inc. | | | | | | | 3,830 | | | | 218,272 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 218,272 | |
| Gas Pipeline – 3.3% | |
EQT Corp. | | | | | | | 12,233 | | | | 642,477 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 642,477 | |
| Insurance: Multi-Line – 1.3% | |
PICO Holdings, Inc.(1) | | | | | | | 8,872 | | | | 257,288 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 257,288 | |
| Metals & Minerals: Diversified – 7.0% | |
BHP Billiton Ltd., ADR | | | | | | | 4,160 | | | | 393,661 | |
Compass Minerals International, Inc. | | | | | | | 7,599 | | | | 654,046 | |
Vale S.A., ADR | | | | | | | 9,890 | | | | 315,985 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 1,363,692 | |
| Oil Well Equipment & Services – 1.5% | |
Key Energy Services, Inc.(1) | | | | | | | 16,247 | | | | 292,446 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 292,446 | |
| Oil: Crude Producers – 43.8% | |
ARC Resources Ltd. | | | CAD | | | | 24,873 | | | | 645,004 | |
Canadian Natural Resources Ltd. | | | | | | | 11,980 | | | | 501,483 | |
Concho Resources, Inc.(1) | | | | | | | 5,157 | | | | 473,670 | |
Denbury Resources, Inc.(1) | | | | | | | 45,361 | | | | 907,220 | |
Occidental Petroleum Corp. | | | | | | | 7,680 | | | | 799,027 | |
Oil Search Ltd. | | | AUD | | | | 110,718 | | | | 791,571 | |
Peyto Exploration & Development Corp. | | | CAD | | | | 8,510 | | | | 189,709 | |
QEP Resources, Inc. | | | | | | | 15,229 | | | | 637,029 | |
Range Resources Corp. | | | | | | | 14,631 | | | | 812,021 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | |
| June 30, 2011 (unaudited) | | Foreign
Currency | | | Shares | | | Value | |
| Oil: Crude Producers (continued) | | | | | |
Salamander Energy PLC(1) | | | GBP | | | | 88,482 | | | $ | 398,950 | |
Southwestern Energy Co.(1) | | | | | | | 24,518 | | | | 1,051,332 | |
Talisman Energy, Inc. | | | CAD | | | | 45,338 | | | | 931,252 | |
Tullow Oil PLC | | | GBP | | | | 19,179 | | | | 381,717 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 8,519,985 | |
| Precious Metals & Minerals – 12.6% | |
Agnico-Eagle Mines Ltd. | | | | | | | 7,580 | | | | 478,526 | |
Barrick Gold Corp. | | | | | | | 10,670 | | | | 483,244 | |
Goldcorp, Inc. | | | CAD | | | | 17,720 | | | | 857,108 | |
New Gold, Inc.(1) | | | | | | | 61,862 | | | | 636,560 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 2,455,438 | |
| Utilities: Miscellaneous – 3.3% | |
Calpine Corp.(1) | | | | | | | 40,187 | | | | 648,216 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 648,216 | |
Total Common Stocks
(Cost $14,166,779) | | | | | | | | | | | 18,420,228 | |
| | | | | | | | |
| | | Principal
Amount | | | Value | |
| Repurchase Agreements – 5.4% | |
State Street Bank and Trust Co. Repurchase Agreement, 0.01%, dated 6/30/2011, maturity value of $1,050,000, due 7/1/2011(2) | | $ | 1,050,000 | | | | 1,050,000 | |
Total Repurchase Agreements
(Cost $1,050,000) | | | | | | | 1,050,000 | |
Total Investments - 100.1%
(Cost $15,216,779) | | | | | | | 19,470,228 | |
| Other Liabilities, Net - (0.1)% | | | | | | | (15,151 | ) |
| Total Net Assets - 100.0% | | | | | | $ | 19,455,077 | |
| (1) | Non-income producing security. |
| (2) | The table below presents collateral for repurchase agreements. |
| | | | | | | | | | | | |
| Security | | Coupon | | | Maturity
Date | | | Value | |
| U.S. Treasury Note | | | 1.00% | | | | 3/31/2012 | | | $ | 1,074,319 | |
Legend:
Foreign-Denominated Security
AUD — Australian Dollar
CAD — Canadian Dollar
GBP — Great British Pound
ADR — American Depositary Receipt.
| | | | |
| 8 | | | | The accompanying notes are an integral part of these financial statements. |
RS GLOBAL NATURAL RESOURCES VIP SERIES
The following is a summary of the inputs used as of June 30, 2011 in valuing the Fund’s investments. For more information on valuation inputs, please refer to Note 1a of the accompanying Notes to Financial Statements.
| | | | | | | | | | | | | | | | |
| | | Valuation Inputs | | | | |
| Investments in Securities (unaudited) | | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
| Common Stocks | | $ | 15,949,708 | | | $ | 2,470,520 | * | | $ | — | | | $ | 18,420,228 | |
| Repurchase Agreements | | | — | | | | 1,050,000 | | | | — | | | | 1,050,000 | |
| Total | | $ | 15,949,708 | | | $ | 3,520,520 | | | $ | — | | | $ | 19,470,228 | |
| * | Consists of foreign securities whose values were determined by a pricing service as a result of movement in the U.S. markets. These investments in securities were classified as Level 2 rather than Level 1. |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 9 |
FINANCIAL INFORMATION — RS GLOBAL NATURAL RESOURCES VIP SERIES
| | | | |
Statement of Assets and Liabilities As of June 30, 2011 (unaudited) | | | |
Assets | | | | |
Investments, at value | | $ | 19,470,228 | |
Cash and cash equivalents | | | 953 | |
Foreign currency, at value | | | 4,938 | |
Receivable for fund shares subscribed | | | 47,358 | |
Dividends receivable | | | 10,388 | |
Receivable for investments sold | | | 87 | |
| | | | | |
Total Assets | | | 19,533,952 | |
| | | | | |
| | |
Liabilities | | | | |
Payable for investments purchased | | | 23,675 | |
Payable for fund shares redeemed | | | 19,792 | |
Payable to adviser | | | 12,439 | |
Payable to distributor | | | 894 | |
Accrued trustees’ fees | | | 188 | |
Accrued expenses/other liabilities | | | 21,887 | |
| | | | | |
Total Liabilities | | | 78,875 | |
| | | | | |
Total Net Assets | | $ | 19,455,077 | |
| | | | | |
| | |
Net Assets Consist of: | | | | |
Paid-in capital | | $ | 19,166,885 | |
Accumulated net investment loss | | | (41,760 | ) |
Accumulated net realized loss from investments and foreign currency transactions | | | (3,923,266 | ) |
Net unrealized appreciation on investments and translation of assets and liabilities in foreign currencies | | | 4,253,218 | |
| | | | | |
Total Net Assets | | $ | 19,455,077 | |
| | | | | |
Investments, at Cost | | $ | 15,216,779 | |
| | | | | |
Foreign Currency, at Cost | | $ | 4,907 | |
| | | | | |
| | |
Pricing of Shares | | | | |
Shares of Beneficial Interest Outstanding with no Par Value | | | 1,632,071 | |
Net Asset Value Per Share | | | $11.92 | |
| | | | | |
| | | | |
Statement of Operations For the Six-Month Period Ended June 30, 2011 (unaudited) | |
Investment Income | | | | |
Dividends | | $ | 106,364 | |
Interest | | | 102 | |
Withholding taxes on foreign dividends | | | (4,973 | ) |
| | | | | |
Total Investment Income | | | 101,493 | |
| | | | | |
| | |
Expenses | | | | |
Investment advisory fees | | | 96,070 | |
Distribution fees | | | 24,017 | |
Custodian fees | | | 10,197 | |
Professional fees | | | 8,852 | |
Shareholder reports | | | 5,807 | |
Administrative service fees | | | 1,102 | |
Trustees’ fees | | | 386 | |
Other expenses | | | 522 | |
| | | | | |
Total Expenses | | | 146,953 | |
| | |
Less: Fee waiver by adviser | | | (22,065 | ) |
| | | | | |
Total Expenses, Net | | | 124,888 | |
| | | | | |
Net Investment Loss | | | (23,395 | ) |
| | | | | |
| | |
Realized Gain/(Loss) and Change in Unrealized Appreciation/Depreciation on Investments and Foreign Currency Transactions | | | | |
Net realized gain from investments | | | 969,129 | |
Net realized loss from foreign currency transactions | | | (1,177 | ) |
Net change in unrealized appreciation/depreciation on investments | | | (253,750 | ) |
Net change in unrealized appreciation/depreciation on translation of assets and liabilities in foreign currencies | | | (280 | ) |
| | | | | |
Net Gain on Investments and Foreign Currency Transactions | | | 713,922 | |
| | | | | |
Net Increase in Net Assets Resulting from Operations | | $ | 690,527 | |
| | | | | |
| | | | | |
| | | | |
| 10 | | | | The accompanying notes are an integral part of these financial statements. |
FINANCIAL INFORMATION — RS GLOBAL NATURAL RESOURCES VIP SERIES
| | | | | | | | |
Statements of Changes in Net Assets Six-month-ended numbers are unaudited | | | | | | |
| | | |
| | | For the Six Months Ended 6/30/11 | | | For the Year Ended
12/31/10 | |
| | | | |
Operations | | | | | | | | |
Net investment loss | | $ | (23,395 | ) | | $ | (37,727 | ) |
Net realized gain from investments and foreign currency transactions | | | 967,952 | | | | 657,135 | |
Net change in unrealized appreciation/depreciation on investments and translation of assets and liabilities in foreign currencies | | | (254,030 | ) | | | 2,878,539 | |
| | | | | | | | | |
Net Increase in Net Assets Resulting from Operations | | | 690,527 | | | | 3,497,947 | |
| | | | | | | | | |
| | | |
Capital Share Transactions | | | | | | | | |
Proceeds from sales of shares | | | 7,793,490 | | | | 6,633,793 | |
Cost of shares redeemed | | | (6,192,451 | ) | | | (6,506,015 | ) |
| | | | | | | | | |
Net Increase in Net Assets Resulting from Capital Share
Transactions | | | 1,601,039 | | | | 127,778 | |
| | | | | | | | | |
Net Increase in Net Assets | | | 2,291,566 | | | | 3,625,725 | |
| | | | | | | | | |
| | | |
Net Assets | | | | | | | | |
Beginning of period | | | 17,163,511 | | | | 13,537,786 | |
| | | | | | | | | |
End of period | | $ | 19,455,077 | | | $ | 17,163,511 | |
| | | | | | | | | |
Accumulated Net Investment Loss Included in Net Assets | | $ | (41,760 | ) | | $ | (18,365 | ) |
| | | | | | | | | |
| | | |
Other Information: | | | | | | | | |
Shares | | | | | | | | |
Sold | | | 651,658 | | | | 680,682 | |
Redeemed | | | (524,959 | ) | | | (681,487 | ) |
| | | | | | | | | |
Net Increase/(Decrease) | | | 126,699 | | | | (805 | ) |
| | | | | | | | | |
| | | | | | | | | |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 11 |
FINANCIAL INFORMATION — RS GLOBAL NATURAL RESOURCES VIP SERIES
The financial highlights table is intended to help you understand the Fund’s financial performance for the past six reporting periods (or, if shorter, the period since the Fund’s inception). Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the Fund (assuming reinvestment of all distributions).
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Financial Highlights Six-month-ended numbers are unaudited | | | | | | | | | | | | | | | | |
| | | Net Asset Value,
Beginning of
Period | | | Net Investment
Income/(Loss) | | | Net Realized
and Unrealized
Gain/(Loss) | | | Total
Operations | | | Distributions
From Net
Investment
Income | | | Distributions
From Net
Realized
Capital Gains | | | Total
Distributions | |
Six Months Ended 6/30/111 | | $ | 11.40 | | | $ | (0.01 | ) | | $ | 0.53 | | | $ | 0.52 | | | $ | — | | | $ | — | | | $ | — | |
Year Ended 12/31/10 | | | 8.99 | | | | (0.03 | ) | | | 2.44 | | | | 2.41 | | | | — | | | | — | | | | — | |
Year Ended 12/31/09 | | | 5.97 | | | | 0.01 | | | | 3.01 | | | | 3.02 | | | | — | | | | — | | | | — | |
Year Ended 12/31/08 | | | 10.75 | | | | 0.01 | | | | (4.79 | ) | | | (4.78 | ) | | | — | | | | — | | | | — | |
Period From 7/31/074 to 12/31/071 | | | 10.00 | | | | (0.08 | ) | | | 0.83 | | | | 0.75 | | | | — | | | | — | | | | — | |
| | | | |
| 12 | | | | The accompanying notes are an integral part of these financial statements. |
FINANCIAL INFORMATION — RS GLOBAL NATURAL RESOURCES VIP SERIES
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Net Asset
Value, End of
Period | | | Total
Return2 | | | Net Assets, End
of Period (000s) | | | Net Ratio of
Expenses to
Average Net
Assets3 | | | Gross Ratio of
Expenses to
Average Net
Assets | | | Net Ratio of Net
Investment Income/(Loss)
to Average Net Assets3 | | | Gross Ratio of Net
Investment Loss
to Average
Net Assets | | | Portfolio
Turnover Rate | |
| $ | 11.92 | | | | 4.56% | | | $ | 19,455 | | | | 1.30% | | | | 1.53% | | | | (0.24)% | | | | (0.47)% | | | | 18% | |
| | 11.40 | | | | 26.81% | | | | 17,164 | | | | 1.30% | | | | 1.63% | | | | (0.26)% | | | | (0.59)% | | | | 55% | |
| | 8.99 | | | | 50.59% | | | | 13,538 | | | | 1.30% | | | | 1.68% | | | | 0.03% | | | | (0.35)% | | | | 58% | |
| | 5.97 | | | | (44.47)% | | | | 8,669 | | | | 1.76% | | | | 2.14% | | | | (0.26)% | | | | (0.64)% | | | | 57% | |
|
10.75 |
| | | 7.50% | | | | 3,138 | | | | 3.78% | | | | 3.78% | | | | (1.51)% | | | | (1.51)% | | | | 7% | |
| 1 | Ratios for periods less than one year have been annualized, except for total return and portfolio turnover rate. |
| 2 | Total returns do not reflect the effects of charges deducted pursuant to the terms of The Guardian Insurance & Annuity Company, Inc.’s variable contracts. Inclusion of such charges would reduce the total returns for all periods shown. |
| 3 | Net Ratio of Expenses to Average Net Assets and Net Ratio of Net Investment Income/(Loss) to Average Net Assets include the effect of fee waivers, expense limitations and custody credits, if applicable. |
| 4 | Commencement of operations. |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 13 |
NOTES TO FINANCIAL STATEMENTS — RS GLOBAL NATURAL RESOURCES VIP SERIES (UNAUDITED)
June 30, 2011 (unaudited)
RS Variable Products Trust (the “Trust”), a Massachusetts business trust organized on May 18, 2006, is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust currently offers twelve series. RS Global Natural Resources VIP Series (the “Fund”) is a series of the Trust. The Fund is a diversified fund. The financial statements for the other remaining series of the Trust are presented in separate reports.
The Fund has authorized an unlimited number of shares of beneficial interest with no par value. Shares are bought and sold at closing net asset value (“NAV”), which is the price for all outstanding shares of the Fund. Class II shares of the Fund are only sold to certain separate accounts of The Guardian Insurance & Annuity Company, Inc. (“GIAC”). GIAC is a wholly-owned subsidiary of The Guardian Life Insurance Company of America (“Guardian Life”). The Fund is currently offered to insurance company separate accounts that fund certain variable annuity and variable life insurance contracts issued by GIAC.
Note 1. Significant Accounting Policies
The following policies are in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
a. Investment Valuations Marketable securities are valued at the last reported sale price on the principal exchange or market on which they are traded; or, if there were no sales that day, at the mean between the closing bid and asked prices. Securities traded on the NASDAQ Stock Market, LLC (“NASDAQ”) are generally valued at the NASDAQ official closing price, which may not be the last sale price. If the NASDAQ official closing price is not available for a security, that security is generally valued using the last reported sale price, or, if no sales are reported, at the mean between the closing bid and asked prices. Short-term investments that will mature in 60 days or less are valued at amortized cost, which approximates market value. Repurchase agreements are carried at cost, which approximates market value. Foreign securities are valued in the currencies of the markets in which they trade and then converted to U.S. dollars using the prevailing exchange rates at the close of the New York Stock Exchange (“NYSE”).
Securities for which market quotations are not readily available or for which market quotations may be considered unreliable are valued at their fair values as determined in accordance with guidelines and procedures adopted by the Trust’s Board of Trustees.
Securities whose values have been materially affected by events occurring before the Fund’s valuation time but after the close of the securities’ principal exchange or market may be fair valued using methods approved by the Board of Trustees. In addition, if there has been a movement in the U.S. markets that exceeds a specified threshold, the values of the Fund’s investments in foreign securities are generally determined by a pricing service using pricing models designed to estimate likely changes in the values of those securities.
The Fund has adopted the authoritative guidance under GAAP on determining fair value when the volume and level of activity for an asset or liability have significantly decreased and for identifying transactions that are not orderly. Accordingly, if the Fund determines that either the volume and/or level of activity for an asset or liability has significantly decreased (from normal conditions for that asset or liability) or price quotations or observable inputs are not associated with orderly transactions, increased analysis and management judgment will be required to estimate fair value.
In accordance with Financial Accounting Standards Board Codification Topic 820 (“ASC Topic 820”), fair value is defined as the price that the Fund would receive upon selling an investment in an “arm’s length” transaction to a willing buyer in the principal or most advantageous market for the investment. ASC Topic 820 established a hierarchy for classification of fair value measurements for disclosure purposes. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances. The hierarchy of inputs is summarized in the three broad levels listed below.
| Ÿ | | Level 1 — unadjusted quoted prices in active markets for identical investments |
| Ÿ | | Level 2 — inputs other than unadjusted quoted prices that are observable either directly or indirectly (including adjusted quoted prices for similar investments, interest rates, prepayment speeds, credit risks, etc.) |
NOTES TO FINANCIAL STATEMENTS — RS GLOBAL NATURAL RESOURCES VIP SERIES (UNAUDITED)
| Ÿ | | Level 3 — significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments) |
Inputs may include price information, volatility statistics, specific and broad credit data, liquidity statistics, and other factors. A security’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires significant judgment by the Trust. The Trust considers observable data to be that market data which is readily available, regularly distributed or updated, reliable and verifiable, and provided by independent sources that are actively involved in the relevant market. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. Changes in valuation techniques may result in transfers into or out of an investment’s assigned level within the hierarchy.
Effective beginning with the Fund’s current fiscal year, the Financial Accounting Standards Board requires reporting entities to make disclosures about purchases, sales, issuances and settlements of Level 3 securities on a gross basis. For the six months ended June 30, 2011, the Fund had no securities classified as Level 3.
There were no significant transfers between Level 1 and Level 2 for the six months end June 30, 2011.
In determining a security’s placement within the hierarchy, the Trust separates the Fund’s investment portfolio into two categories: investments and derivatives (e.g., futures).
Investments Investments whose values are based on quoted market prices in active markets, and are therefore classified within Level 1, include active listed equities. The Trust does not adjust the quoted price for such instruments, even in situations where the Fund holds a large position and a sale could reasonably be expected to impact the quoted price.
Investments that trade in markets that are not considered to be active, but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within Level 2. These include certain U.S. government and sovereign obligations, most government agency securities, investment-grade corporate bonds, certain mortgage products, state, municipal and provincial obligations, and certain foreign equity securities.
Investments classified within Level 3 have significant unobservable inputs, as they trade infrequently or not at all. Level 3 investments include, among others, private
placement securities. When observable prices are not available for these securities, the Trust uses one or more valuation techniques for which sufficient and reliable data is available. The inputs used by the Trust in estimating the value of Level 3 investments include the original transaction price, recent transactions in the same or similar instruments, completed or pending third-party transactions in the underlying investment or comparable issuers, subsequent rounds of financing, recapitalizations, and other transactions across the capital structure. Level 3 investments may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the Trust in the absence of market information. Assumptions used by the Trust due to the lack of observable inputs may significantly impact the resulting fair value and therefore the Fund’s results of operations.
Derivatives Exchange-traded derivatives, such as futures contracts and exchange traded option contracts, are typically classified within Level 1 or Level 2 of the fair value hierarchy depending on whether or not they are deemed to be actively traded. Certain derivatives, such as generic forwards, swaps and options, have inputs which can generally be corroborated by market data and are therefore classified within Level 2.
b. Federal Income Taxes The Fund intends to continue complying with the requirements of the Internal Revenue Code to qualify as a regulated investment company and to distribute substantially all net investment income and realized net capital gains, if any, to shareholders. Therefore, the Fund does not expect to be subject to income tax, and no provision for such tax has been made.
From time to time, however, the Fund may choose to pay an excise tax if the cost of making the required distribution exceeds the amount of the excise tax.
As of June 30, 2011, the Trust has reviewed the tax positions for open periods, as applicable to the Fund, and has determined that no provision for income tax is required in the Fund’s financial statements. The Fund recognizes interest and penalties, if any, related to unrecognized tax positions as income tax expense in the Statement of Operations. For the six months ended June 30, 2011, the Fund did not incur any interest or penalties. The Fund is not subject to examination by U.S. federal tax authorities and state authorities for tax years before 2007.
c. Securities Transactions Securities transactions are accounted for on the date securities are purchased or sold (trade date). Realized gains or losses on securities transactions are determined on the basis of specific identification.
NOTES TO FINANCIAL STATEMENTS — RS GLOBAL NATURAL RESOURCES VIP SERIES (UNAUDITED)
d. Foreign Currency Translation The accounting records of the Fund are maintained in U.S. dollars. Investment securities and all other assets and liabilities of the Fund denominated in a foreign currency are generally translated into U.S. dollars at the exchange rates quoted at the close of the NYSE on each business day. Purchases and sales of securities, income receipts, and expense payments are translated into U.S. dollars at the exchange rates in effect on the dates of the respective transactions. The Fund does not isolate the portion of the fluctuations on investments resulting from changes in foreign currency exchange rates from the fluctuations in market prices of investments held. Such fluctuations are included with the net realized and unrealized gain or loss from investments.
e. Investment Income Dividend income is generally recorded on the ex-dividend date. Interest income, which includes amortization/accretion of premium/discount, is accrued and recorded daily.
f. Expenses Many expenses of the Trust can be directly attributed to a specific series of the Trust. Expenses that cannot be directly attributed to a specific series of the Trust are generally apportioned among all the series in the Trust, based on relative net assets.
g. Custody Credits The Fund has entered into an arrangement with its custodian, State Street Bank and Trust Company, whereby credits realized as a result of uninvested cash balances are used to reduce the Fund’s custodian expenses. The Fund’s custody credits, if any, are shown in the accompanying Statement of Operations.
h. Distributions to Shareholders The Fund intends to declare and distribute substantially all net investment income, if any, at least once a year. Distributions of net realized capital gains, if any, are declared and paid at least once a year. Unless the Fund is instructed otherwise, all distributions to shareholders are credited in the form of additional shares of the Fund at the net asset value, recorded on the ex-dividend date.
i. Capital Accounts Due to the timing of dividend distributions and the differences in accounting for income and realized gains/(losses) for financial statement purposes versus federal income tax purposes, the fiscal year in which amounts are distributed may differ from the year in which the income and realized gains/(losses) were recorded by the Fund.
Note 2. Transactions with Affiliates
a. Advisory Fee and Expense Limitation Under the terms of the advisory agreement, which is reviewed and approved annually by the Board of Trustees, the Fund
pays an investment advisory fee to RS Investment Management Co. LLC (“RS Investments”). Guardian Investor Services LLC (“GIS”), a subsidiary of Guardian Life, holds a majority interest in RS Investments. RS Investments receives an investment advisory fee based on the average daily net assets of the Fund at an annual rate of 1.00%.
Pursuant to a written agreement in effect through April 30, 2012, an expense limitation has been imposed whereby RS Investments agreed to limit the Fund’s total annual fund operating expenses to 1.30% of the average daily net assets of the Fund.
RS Investments and GIS do not intend to recoup any reimbursed expenses or waived advisory fees from a prior year under expense limitations then in effect for the Fund.
b. Compensation of Trustees and Officers Trustees and officers of the Trust who are interested persons, as defined in the 1940 Act, of RS Investments receive no compensation from the Fund for acting as such. Trustees of the Trust who are not interested persons of RS Investments receive compensation and reimbursement of expenses from the Trust.
c. Distribution Fees The Fund has entered into an agreement with GIS for distribution services with respect to its shares and has adopted a distribution plan pursuant to Rule 12b-1 under the 1940 Act, whose continuance is reviewed annually by the Trust’s Board of Trustees. Under the plan, GIS is compensated for the services it provides and for the expenses it bears in connection with the distribution of the Fund’s Class II shares at an annual rate of up to 0.25% of the average daily net assets of Class II shares of the Fund.
RS Investments may pay GIAC or other insurance companies or financial institutions compensation, at an annual rate of up to 0.15% of the Fund’s average daily net assets, for providing administrative and shareholder services. Payment of this compensation does not represent a separate or additional expense to the Fund.
Note 3. Federal Income Taxes
a. Distributions to Shareholders No distributions were paid to shareholders during the year ended December 31, 2010, which is the most recently completed tax year.
Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. These differences are primarily due to differing treatments of income and gains on various investment securities held
NOTES TO FINANCIAL STATEMENTS — RS GLOBAL NATURAL RESOURCES VIP SERIES (UNAUDITED)
by the Fund, timing differences, and differing characterizations of distributions made by the Fund. Permanent book and tax basis differences will result in reclassifications to paid-in capital, undistributed net investment income and accumulated undistributed net realized gain/(loss) on investments and foreign currency transactions. Undistributed net investment income and accumulated undistributed net realized gain/(loss) on investments and foreign currency transactions may include temporary book and tax differences, which will reverse in a subsequent period.
As of December 31, 2010, the Fund made the following reclassifications of permanent book and tax basis differences:
| | | | | | | | |
| Paid-in-Capital | | Accumulated Net Investment Loss | | | Accumulated
Net Realized Loss | |
| $(44,857) | | $ | 39,551 | | | $ | 5,306 | |
During any particular year, net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed and, therefore, are normally distributed to shareholders annually.
During the year ended December 31, 2010, the Fund utilized $261,659 of capital loss carryovers. Capital loss carryovers available to the Fund at December 31, 2010 were as follows:
| | | | |
| Expiring | |
Amount | |
| 2016 | | $ | 1,249,980 | |
| 2017 | | | 3,092,554 | |
| | | | | |
| Total | | $ | 4,342,534 | |
| | | | | |
| | |
| | | | | |
In determining its taxable income, current tax law permits the Fund to elect to treat all or a portion of any net capital or currency loss realized after October 31 as occurring on the first day of the following fiscal year. For the year ended December 31, 2010, the Fund had no such losses.
On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted. The Act modernizes several of the federal income and excise tax rules related to regulated investment companies, and with certain exceptions, is effective for taxable years beginning after December 22, 2010.
Among the changes are revisions to capital loss carryforward rules allowing for capital losses to be carried forward to one or more subsequent taxable years without
expiration. Rules previously in effect limited the carryforward period to eight taxable years. Capital loss carryforwards generated in taxable years beginning after the effective date of the Act must be fully used before capital loss carryforwards generated in taxable years prior to the effective date of the Act. Changes to excise tax rules include timing of recognition of certain income and a change in the required distribution rate for capital gains.
b. Tax Basis of Investments The cost of investments for federal income tax purposes at June 30, 2011, was $15,650,808. The gross unrealized appreciation and depreciation on investments, on a tax basis, at June 30, 2011, aggregated $3,852,777 and $(33,357), respectively, resulting in net unrealized appreciation of $3,819,420.
Note 4. Investments
a. Investment Purchases and Sales The cost of investments purchased and the proceeds from investments sold (excluding short-term investments) amounted to $6,347,984 and $3,203,470, respectively, for the six months ended June 30, 2011.
b. Foreign Securities Foreign securities investments involve special risks and considerations not typically associated with those of U.S. origin. These risks include, but are not limited to, currency risk; adverse political, social, and economic developments; and less reliable information about issuers. Moreover, securities of some foreign companies may be less liquid and their prices more volatile than those of comparable U.S. companies.
c. Industry or Sector Concentration In its normal course of business, the Fund may invest a significant portion of its assets in companies within a limited number of industries or sectors. As a result, the Fund may be subject to a greater risk of loss than that of a fund invested in a wider spectrum of industries or sectors because the stocks of many or all of the companies in the industry, group of industries, sector, or sectors may decline in value due to developments adversely affecting the industry, group of industries, sector, or sectors.
d. Repurchase Agreements The collateral for repurchase agreements is either cash or fully negotiable U.S. government securities (including U.S. government agency securities). Repurchase agreements are fully collateralized (including the interest accrued thereon) and such collateral is marked-to-market daily while the agreements remain in force. If the value of the collateral falls below the repurchase price plus accrued interest, the Fund will typically require the seller to deposit additional collateral by the next business day. If the
NOTES TO FINANCIAL STATEMENTS — RS GLOBAL NATURAL RESOURCES VIP SERIES (UNAUDITED)
request for additional collateral is not met, or the seller defaults, the Fund maintains the right to sell the collateral (although it may be prevented or delayed from doing so in certain circumstances) and may claim any resulting loss against the seller.
Note 5. Temporary Borrowings
The Fund, with other funds managed by RS Investments, shares in a $75 million committed revolving credit/overdraft protection facility from State Street Bank and Trust Company for temporary purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. Interest is calculated based on market rates at the time of borrowing; all the funds that are parties to the facility share in a commitment fee that is allocated among the funds on the basis of their respective net assets. The Fund may borrow up to the lesser of one-third of its total assets (including amounts borrowed) or any lower limit specified in the Fund’s Statement of Additional Information or Prospectus.
For the six months ended June 30, 2011, the Fund did not borrow from the facility.
Note 6. Review for Subsequent Events
The Trust has evaluated subsequent events through the issuance of the Fund’s financial statements and determined that no material events have occurred that require disclosure.
Note 7. Indemnifications
Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, in the normal course of business, the Fund enters into contracts with its vendors and others that provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund. However, based on experience, the Fund expects the risk of loss to be remote.
SUPPLEMENTAL INFORMATION (UNAUDITED)
Meeting of Shareholders
A special meeting of the shareholders of RS Variable Products Trust (“the Trust”) was held on May 20, 2011. At the meeting, the shareholders of the Trust elected Judson Bergman, Kenneth R. Fitzsimmons, Jr., Anne M. Goggin, Christopher C. Melvin, Jr., Deanna M. Mulligan, Gloria S. Nelund, Terry R. Otton, and John P. Rohal as trustees of the Trust.
Proposal To Elect Trustees
| | | | |
Nominee | | Votes For | | Votes Against/Withheld |
| Judson Bergman | | 264,351,869.410 | | 14,579,441.977 |
| Kenneth R. Fitzsimmons, Jr. | | 264,417,319.717 | | 14,513,991.670 |
| Anne M. Goggin | | 265,496,967.524 | | 13,434,343.863 |
| Christopher C. Melvin, Jr. | | 264,182,743.884 | | 14,748,567.503 |
| Deanna M. Mulligan | | 264,603,554.628 | | 14,327,756.759 |
| Gloria S. Nelund | | 265,607,677.552 | | 13,323,633.835 |
| Terry R. Otton | | 265,360,024.512 | | 13,571,286.875 |
| John P. Rohal | | 264,052,063.420 | | 14,879,247.967 |
Portfolio Holdings and Proxy Voting Procedures
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Form N-Q is available on the Securities and Exchange Commission’s Web site at http://www.sec.gov. The Fund’s Form N-Q may be reviewed and copied at the Commission’s Public Reference Room in Washington, DC, and information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330. This information is also available, without charge, upon request, by calling toll-free 800-221-3253.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 will be available (i) without charge, upon request, by calling toll-free 800-221-3253; and (ii) on the Securities and Exchange Commission’s Web site at http://www.sec.gov.
The Statement of Additional Information includes additional information about the Trust’s Trustees and Officers and is available, without charge, upon request by calling toll-free 800-221-3253.
This report is transmitted to shareholders only. It is not authorized for use as an offer of sale or a solicitation of an offer to buy shares of a Fund unless accompanied or preceded by that Fund’s current prospectus. Past performance results shown in this report should not be considered a representation of future performance. Investment returns and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Statements and other information herein are as dated and are subject to change.
2011 Semiannual Report
All data as of June 30, 2011
RS Variable Products Trust
| | | | |
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE | | |  | |
TABLE OF CONTENTS
Except as otherwise specifically stated, all information and investment team commentary, including portfolio security positions, is as of June 30, 2011. The views expressed in the investment team letters are those of the Fund’s portfolio manager(s) and are subject to change without notice. They do not necessarily represent the views of RS Investments. The letters contain some forward-looking statements providing current expectations or forecasts of future events; they do not necessarily relate to historical or current facts. There can be no guarantee that any forward-looking statement will be realized. We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events, or otherwise. Any discussions of specific securities should not be considered a recommendation to buy or sell those securities. Fund holdings will vary.
RS VALUE VIP SERIES
The Statement of Additional Information provides further information about the investment team, including information regarding their compensation, other accounts they manage, and their ownership interests in the Fund. For information on how to receive a copy of the Statement of Additional Information, please see the back cover of the relevant Prospectus or visit our Web site at www.guardianinvestor.com.
RS Value VIP Series Commentary
Highlights
| Ÿ | | U.S. equity markets, as defined by the S&P 500® Index1, delivered positive returns in the first half of 2011 despite continued economic uncertainty. |
| Ÿ | | RS Value VIP Series delivered positive absolute performance, but underperformed the benchmark Russell Midcap® Value Index2. Detracting from relative returns were select stocks in the financial services sector. On a positive note, stock selection in the technology sector aided relative performance. |
| Ÿ | | RS Value VIP Series seeks long-term capital appreciation by identifying mid-cap companies with improving returns on invested capital (ROIC). |
Market Overview
The broad U.S. equity market, as defined by the S&P 500® Index, started out the year on a positive note, delivering positive absolute first quarter returns as investors focused on generally healthy corporate profits and better market liquidity in the wake of the Federal Reserve’s most recent round of quantitative easing. The market experienced renewed downward volatility in March, however, as economic fears resurfaced, aggravated by the earthquake in Japan, the debt crisis in Europe, and a spike in oil prices. Investors were also uneasy regarding how the economy might fare if the Federal Reserve were to wind down its quantitative easing efforts. As employment growth continued to stagnate and the housing market remained weak, economic fears took center stage during the second quarter, contributing to downward volatility in equity prices. As many investors lost their appetites for risk, they sought refuge in more economically defensive investments in areas such as consumer staples and health care.
Fund Performance Overview
RS Value VIP Series returned 1.90% for the six-month period ended June 30, 2011, underperforming a 6.69% return by the benchmark Russell Midcap® Value Index.
Regulatory uncertainty and concerns over the implications of the European debt crisis created a
difficult environment for some of the Fund’s financial services stocks. The Fund’s stock selection in this area detracted from relative returns, due in part to our investments in Tennessee-based bank holding company First Horizon National Corp. and supplemental insurance provider Aflac, Inc. We remain positive on prospects for First Horizon National, given that we believe it has a strong market footprint, an experienced management team, and is focused on core relationship lending. We also welcome signs of improved capital, liquidity, and underwriting standards across the financial services sector.
We also remain positive on Aflac, which generates over 70% of its cash flows from Japan, and consequently faced questions over its financial exposure tied to the recent earthquake disaster. We believe that the tragic events in Japan will not have a material impact on Aflac’s overall long-term return profile. We also believe that the company’s efforts to reduce risk will ultimately benefit shareholders. We continue to focus our financial services investments on insurance companies that we believe offer structurally superior distribution models, as well as on banks that we believe possess low cost core deposit franchises and emphasize “relationship lending.”
Other significant detractors for the period included companies with perceived cyclical sensitivity, which worked to their disadvantage later in the period as economic concerns increased. These included Martin Marietta Materials, Inc., a producer of aggregates for the construction industry.
On a positive note, the Fund’s investments in the technology sector delivered solid performance relative to benchmark holdings. Among the strongest positive contributors to the Fund’s absolute and relative performance for the period was microprocessor manufacturer Atmel Corp., which is benefiting from strong demand for its components used in smartphone touch screens. Within the technology area, we continue to allocate capital to businesses that we believe have understandable and predictable revenue streams, high customer retention rates, and recurring cash flow characteristics. Along these lines, strong demand for technology security aided our investment in Symantec, which benefited from healthy subscription rates for its security software products.
RS VALUE VIP SERIES
Another positive relative contributor for the first half of 2011 was our utilities investment, Calpine Corp., an independent wholesale power company.
Outlook
We believe that we are in a period of protracted volatility as the markets grapple with a variety of issues, including ongoing deleveraging, deflation/inflation risks, government budget deficits, higher taxes, and the
potential for rising risk premiums. We have never attempted to maximize short-term results, as we do not believe that our investors would be adequately compensated for the level of risk that we would have to assume. Instead, we focus on delivering long-term performance to our investors, supported by our investments in companies that we believe are undergoing specific structural change and improving returns on invested capital.
RS Funds are sold by prospectus only. You should carefully consider the investment objectives, risks, charges and expenses of the RS Funds before making an investment decision. The prospectus contains this and other important information. Please read it carefully before investing or sending money. Please visit our web site at www.guardianinvestor.com or to obtain a printed copy, call 800-221-3253.
As with all mutual funds, the value of an investment in the Fund could decline, in which case you could lose money. Investing in small- and mid-size companies can involve risks such as having less publicly available information, higher volatility, and less liquidity than in the case of larger companies. Overweighting investments in certain sectors or industries increases the risk of loss due to general declines in the prices of stocks in those sectors or industries. Foreign securities are subject to political, regulatory, economic, and exchange-rate risks not present in domestic investments. The value of a debt security is affected by changes in interest rates and is subject to any credit risk of the issuer or guarantor of the security.
Any discussions of specific securities should not be considered a recommendation to buy or sell those securities. Fund holdings will vary.
Except as otherwise specifically stated, all information and investment team commentary, including portfolio security positions, is as of June 30, 2011.
RS VALUE VIP SERIES
Characteristics
| | |
| Total Net Assets: $2,544,762 | | |
|
| |
| Sector Allocation vs. Index3 |
 |
| | |
| | |
| Top Ten Holdings4 | | |
| | |
| Holding | | % of Total
Net Assets |
| | | | |
| Praxair, Inc. | | | 4.54% | |
| Atmel Corp. | | | 4.33% | |
| Warner Chilcott PLC, Class A | | | 3.90% | |
| Talisman Energy, Inc. | | | 3.74% | |
| Aflac, Inc. | | | 3.71% | |
| eBay, Inc. | | | 3.71% | |
| FMC Corp. | | | 3.59% | |
| Symantec Corp. | | | 3.59% | |
| Southwestern Energy Co. | | | 3.45% | |
| Ameriprise Financial, Inc. | | | 3.44% | |
| Total | | | 38.00% | |
| 1 | The S&P 500® Index is an unmanaged market-capitalization-weighted index generally considered to be representative of U.S. equity market activity. The index consists of 500 stocks representing leading industries of the U.S. economy. Index results assume the reinvestment of dividends paid on the stocks constituting the index. You may not invest in the index, and, unlike the Fund, the index does not incur fees or expenses. |
| 2 | The Russell Midcap® Value Index is an unmanaged market-capitalization-weighted index that measures the performance of those companies in the Russell Midcap® Index with lower price-to-book ratios and lower forecasted growth values. (The Russell Midcap® Index measures the performance of the 800 smallest companies in the Russell 1000® Index, which consists of the 1,000 largest U.S. companies based on total market capitalization.) Index results assume the reinvestment of dividends paid on the stocks constituting the index. You may not invest in the index, and, unlike the Fund, the index does not incur fees or expenses. |
| 3 | The Fund’s holdings are allocated to each sector based on their Russell Global Sector classification. If a holding is not classified by Russell, it is assigned a Russell designation by RS Investments. Cash includes short-term investments and net other assets and liabilities. |
| 4 | Portfolio holdings are subject to change and should not be considered a recommendation to buy or sell individual securities. |
RS VALUE VIP SERIES
Performance Update
| | | | | | | | | | | | | | | | | | | | |
| | | | | | |
| Average Annual Returns | | | | | | | | | | | | | | | |
| | | | | | |
| | | Inception Date | | | Year-to-Date | | | 1 Year | | | 3 Year | | | Since Inception | |
| RS Value VIP Series | | | 7/31/07 | | | | 1.90% | | | | 28.15% | | | | 1.95% | | | | -0.84% | |
| Russell Midcap® Value Index2 | | | | | | | 6.69% | | | | 34.28% | | | | 6.35% | | | | 1.40% | |
| | | | | | | | |
| | | | | |
| Results of a Hypothetical $10,000 Investment | | | | | | | | |
 |
The chart above shows the performance of a hypothetical $10,000 investment made on 7/31/07 in RS Value VIP Series and the Russell Midcap® Value Index. Index returns do not include the fees and expenses of the Fund, but do include the reinvestment of dividends.
Performance quoted represents past performance and does not guarantee or predict future results. Investment return and principal value will fluctuate, so shares, when redeemed, may be worth more or less than their original cost. Please keep in mind that any high doubledigit returns are highly unusual and cannot be sustained. The Fund’s fees and expenses are detailed in the Financial Highlights section of this report. Fees and expenses are factored into the net asset value of your shares and any performance numbers we release. Performance results assume the reinvestment of dividends and capital gains. The return figures shown do not reflect the deduction of taxes that a contractowner/policyholder may pay on Fund distributions or redemption units. The actual total returns for owners of variable annuity contracts or variable life insurance policies that provide for investment in the Fund will be lower to reflect separate account and contract/policy charges. Current and month-end performance information, which may be lower or higher than that cited, is available by calling 800-221-3253 and is periodically updated on our Web site: www.guardianinvestor.com.
UNDERSTANDING YOUR FUND’S EXPENSES (UNAUDITED)
By investing in the Fund, you incur two types of costs: (1) transaction costs, including, as applicable, sales charges (loads) on purchase payments; redemption fees; and exchange fees; and (2) ongoing costs, including as applicable, investment advisory fees; distribution (12b-1) fees; and other Fund expenses. The example below is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period indicated. The table below shows the Fund’s expenses in two ways:
Expenses based on actual return
This section of the table provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Expenses based on hypothetical 5% return for comparison purposes
This section of the table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund with the cost of investing in other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore the second section is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If these transactional costs were included, your costs would have been higher.
| | | | | | | | | | | | | | |
| | | Beginning Account Value 1/1/11 | | Ending Account Value 6/30/11 | | | Expenses Paid During Period* 1/1/11-6/30/11 | | | Expense Ratio During Period 1/1/11-6/30/11 | |
| Based on Actual Return | | $1,000.00 | | | $1,019.00 | | | | $5.01 | | | | 1.00% | |
| Based on Hypothetical Return (5% Return Before Expenses) | | $1,000.00 | | | $1,019.84 | | | | $5.01 | | | | 1.00% | |
| * | Expenses are equal to the Fund’s annualized expense ratio as indicated, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). |
SCHEDULE OF INVESTMENTS — RS VALUE VIP SERIES
| | | | | | | | | | | | |
| June 30, 2011 (unaudited) | | Foreign Currency | | | Shares | | | Value | |
| Common Stocks – 97.0% | | | | | | | | | |
| Aerospace – 2.0% | | | | | | | | | | | | |
Rockwell Collins, Inc. | | | | | | | 836 | | | $ | 51,573 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 51,573 | |
| Auto Parts – 2.2% | | | | | | | | | |
BorgWarner, Inc.(1) | | | | | | | 705 | | | | 56,957 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 56,957 | |
| Back Office Support, HR and Consulting – 1.8% | | | | | |
Synopsys, Inc.(1) | | | | | | | 1,785 | | | | 45,892 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 45,892 | |
| Banks: Diversified – 9.1% | | | | | | | | | |
Associated Banc-Corp. | | | | | | | 5,351 | | | | 74,379 | |
First Horizon National Corp. | | | | | | | 7,991 | | | | 76,234 | |
KeyCorp | | | | | | | 9,852 | | | | 82,067 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 232,680 | |
| Building Materials – 3.2% | | | | | | | | | |
Martin Marietta Materials, Inc. | | | | | | | 1,007 | | | | 80,530 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 80,530 | |
| Chemicals: Diversified – 6.3% | | | | | | | | | |
Eastman Chemical Co. | | | | | | | 682 | | | | 69,612 | |
FMC Corp. | | | | | | | 1,063 | | | | 91,439 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 161,051 | |
| Chemicals: Specialty – 4.6% | | | | | | | | | |
Praxair, Inc. | | | | | | | 1,067 | | | | 115,652 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 115,652 | |
| Coal – 2.6% | | | | | | | | | | | | |
Peabody Energy Corp. | | | | | | | 1,100 | | | | 64,801 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 64,801 | |
| Computer Services, Software & Systems – 3.7% | | | | | |
DST Systems, Inc. | | | | | | | 48 | | | | 2,534 | |
Symantec Corp.(1) | | | | | | | 4,630 | | | | 91,304 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 93,838 | |
| Consumer Services: Miscellaneous – 3.7% | | | | | |
eBay, Inc.(1) | | | | | | | 2,924 | | | | 94,358 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 94,358 | |
| Copper – 1.5% | | | | | | | | | | | | |
Antofagasta PLC | | | GBP | | | | 1,708 | | | | 38,217 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 38,217 | |
| Diversified Financial Services – 3.4% | | | | | |
Ameriprise Financial, Inc. | | | | | | | 1,519 | | | | 87,616 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 87,616 | |
| Electronic Entertainment – 3.3% | | | | | |
Activision Blizzard, Inc. | | | | | | | 7,133 | | | | 83,313 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 83,313 | |
| Insurance: Life – 3.7% | | | | | | | | | | | | |
Aflac, Inc. | | | | | | | 2,024 | | | | 94,480 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 94,480 | |
| | | | | | | | | | | | |
| June 30, 2011 (unaudited) | | Foreign Currency | | | Shares | | | Value | |
| Insurance: Multi-Line – 2.3% | | | | | | | | | |
Willis Group Holdings PLC | | | | | | | 1,425 | | | $ | 58,582 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 58,582 | |
| Insurance: Property-Casualty – 2.0% | | | | | |
RenaissanceRe Holdings Ltd. | | | | | | | 731 | | | | 51,133 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 51,133 | |
| Medical Equipment – 1.9% | | | | | | | | | |
CareFusion Corp.(1) | | | | | | | 1,780 | | | | 48,363 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 48,363 | |
| Oil: Crude Producers – 12.3% | | | | | | | | | |
ARC Resources Ltd. | | | CAD | | | | 2,210 | | | | 57,310 | |
Denbury Resources, Inc.(1) | | | | | | | 3,580 | | | | 71,600 | |
Southwestern Energy Co.(1) | | | | | | | 2,050 | | | | 87,904 | |
Talisman Energy, Inc. | | | | | | | 4,639 | | | | 95,286 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 312,100 | |
| Pharmaceuticals – 3.9% | | | | | | | | | |
Warner Chilcott PLC, Class A | | | | | | | 4,117 | | | | 99,343 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 99,343 | |
| Securities Brokerage & Services – 2.8% | | | | | |
E*TRADE Financial Corp.(1) | | | | | | | 5,123 | | | | 70,697 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 70,697 | |
| Semiconductors & Components – 4.3% | | | | | |
Atmel Corp.(1) | | | | | | | 7,829 | | | | 110,154 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 110,154 | |
| Specialty Retail – 7.9% | | | | | | | | | |
Advance Auto Parts, Inc. | | | | | | | 856 | | | | 50,068 | |
GameStop Corp., Class A(1) | | | | | | | 3,224 | | | | 85,984 | |
The Gap, Inc. | | | | | | | 3,523 | | | | 63,766 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 199,818 | |
| Toys – 5.1% | | | | | | | | | | | | |
Hasbro, Inc. | | | | | | | 1,602 | | | | 70,376 | |
Mattel, Inc. | | | | | | | 2,128 | | | | 58,499 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 128,875 | |
| Utilities: Miscellaneous – 3.4% | | | | | | | | | |
Calpine Corp.(1) | | | | | | | 5,400 | | | | 87,102 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | 87,102 | |
Total Common Stocks
(Cost $1,864,686) | | | | | | | | | | | 2,467,125 | |
| | | | |
| 8 | | | | The accompanying notes are an integral part of these financial statements. |
RS VALUE VIP SERIES
| | | | | | | | | | |
| June 30, 2011(unaudited) | | | | Principal Amount | | | Value | |
| Repurchase Agreements – 4.0% | | | | | | | | |
State Street Bank and Trust Co.
Repurchase Agreement, 0.01%,
dated 6/30/2011, maturity value of $102,000, due 7/1/2011(2) | | $ | 102,000 | | | $ | 102,000 | |
Total Repurchase Agreements
(Cost $102,000) | | | | | | | 102,000 | |
Total Investments - 101.0%
(Cost $1,966,686) | | | | | | | 2,569,125 | |
| Other Liabilities, Net - (1.0)% | | | | | | | (24,363 | ) |
| Total Net Assets - 100.0% | | | | | | $ | 2,544,762 | |
| (1) | Non-income producing security. |
| (2) | The table below presents collateral for repurchase agreements. |
| | | | | | | | | | | | |
| Security | | Coupon | | | Maturity Date | | | Value | |
| U.S. Treasury Note | | | 1.00% | | | | 4/30/2012 | | | $ | 105,871 | |
Legend:
Foreign-Denominated Security
CAD — Canadian Dollar
GBP — Great British Pound
The following is a summary of the inputs used as of June 30, 2011 in valuing the Fund’s investments. For more information on valuation inputs, please refer to Note 1a of the accompanying Notes to Financial Statements.
| | | | | | | | | | | | | | | | |
| | | Valuation Inputs | | | | |
| Investments in Securities | | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
Common Stocks | | $ | 2,428,908 | | | $ | 38,217 | * | | $ | — | | | $ | 2,467,125 | |
Repurchase Agreements | | | — | | | | 102,000 | | | | — | | | | 102,000 | |
| Total | | $ | 2,428,908 | | | $ | 140,217 | | | $ | — | | | $ | 2,569,125 | |
| * | Consists of a foreign security whose value was determined by a pricing service as a result of movement in the U.S. markets. This investment in securities was classified as Level 2 rather than Level 1. |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 9 |
FINANCIAL INFORMATION — RS VALUE VIP SERIES
| | | | |
Statement of Assets and Liabilities As of June 30, 2011 (unaudited) | | | |
Assets | | | | |
Investments, at value | | $ | 2,569,125 | |
Cash and cash equivalents | | | 627 | |
Foreign currency, at value | | | 483 | |
Receivable for investments sold | | | 3,711 | |
Dividends receivable | | | 1,174 | |
Due from adviser | | | 437 | |
Receivable for fund shares subscribed | | | 249 | |
| | | | | |
Total Assets | | | 2,575,806 | |
| | | | | |
| | |
Liabilities | | | | |
Payable for investments purchased | | | 2,490 | |
Payable to distributor | | | 118 | |
Accrued trustees’ fees | | | 62 | |
Accrued expenses/other liabilities | | | 28,374 | |
| | | | | |
Total Liabilities | | | 31,044 | |
| | | | | |
Total Net Assets | | $ | 2,544,762 | |
| | | | | |
| | |
Net Assets Consist of: | | | | |
Paid-in capital | | $ | 1,962,930 | |
Accumulated undistributed net investment loss | | | (20,988 | ) |
Accumulated net realized gain from investments and foreign currency transactions | | | 374 | |
Net unrealized appreciation on investments and translation of assets and liabilities in foreign currencies | | | 602,446 | |
| | | | | |
Total Net Assets | | $ | 2,544,762 | |
| | | | | |
Investments, at Cost | | $ | 1,966,686 | |
| | | | | |
Foreign Currency, at Cost | | $ | 480 | |
| | | | | |
| | |
Pricing of Shares | | | | |
Shares of Beneficial Interest Outstanding with no Par Value | | | 263,679 | |
Net Asset Value Per Share | | | $9.65 | |
| | | | | |
| | | | |
Statement of Operations For the Six-Month Period Ended June 30, 2011 (unaudited) | |
Investment Income | | | | |
Dividends | | $ | 13,719 | |
Interest | | | 28 | |
Withholding taxes on foreign dividends | | | (307 | ) |
| | | | | |
Total Investment Income | | | 13,440 | |
| | | | | |
| | |
Expenses | | | | |
Investment advisory fees | | | 13,506 | |
Custodian fees | | | 10,103 | |
Professional fees | | | 8,239 | |
Shareholder reports | | | 6,803 | |
Distribution fees | | | 3,972 | |
Administrative service fees | | | 263 | |
Trustees’ fees | | | 97 | |
Other expenses | | | 145 | |
| | | | | |
Total Expenses | | | 43,128 | |
| | |
Less: Fee waiver/reimbursement by adviser | | | (27,240 | ) |
| | | | | |
Total Expenses, Net | | | 15,888 | |
| | | | | |
Net Investment Loss | | | (2,448 | ) |
| | | | | |
| | |
Realized Gain/(Loss) and Change in Unrealized Appreciation/Depreciation on Investments and Foreign Currency Transactions | | | | |
Net realized gain from investments | | | 380,973 | |
Net realized loss from foreign currency transactions | | | (517 | ) |
Net change in unrealized appreciation/depreciation on investments | | | (296,430 | ) |
Net change in unrealized appreciation/depreciation on translation of assets and liabilities in foreign currencies | | | 2 | |
| | | | | |
Net Gain on Investments and Foreign Currency Transactions | | | 84,028 | |
| | | | | |
Net Increase in Net Assets Resulting from Operations | | $ | 81,580 | |
| | | | | |
| | | | | |
| | | | |
| 10 | | | | The accompanying notes are an integral part of these financial statements. |
FINANCIAL INFORMATION — RS VALUE VIP SERIES
| | | | | | | | |
Statements of Changes in Net Assets Six-month-ended numbers are unaudited | | | | | | |
| | | |
| | | For the Six Months Ended 6/30/11 | | | For the Year Ended 12/31/10 | |
| | | | |
Operations | | | | | | | | |
Net investment loss | | $ | (2,448 | ) | | $ | (7,648 | ) |
Net realized gain from investments and foreign currency transactions | | | 380,456 | | | | 122,104 | |
Net change in unrealized appreciation/depreciation on investments and translation of
assets and liabilities in foreign currencies | | | (296,428 | ) | | | 663,479 | |
| | | | | | | | | |
Net Increase in Net Assets Resulting from Operations | | | 81,580 | | | | 777,935 | |
| | | | | | | | | |
| | | |
Capital Share Transactions | | | | | | | | |
Proceeds from sales of shares | | | 676,289 | | | | 3,160,885 | |
Cost of shares redeemed | | | (2,083,006 | ) | | | (2,237,247 | ) |
| | | | | | | | | |
Net Increase/(Decrease) in Net Assets Resulting from Capital Share
Transactions | | | (1,406,717 | ) | | | 923,638 | |
| | | | | | | | | |
Net Increase/(Decrease) in Net Assets | | | (1,325,137 | ) | | | 1,701,573 | |
| | | | | | | | | |
| | | |
Net Assets | | | | | | | | |
Beginning of period | | | 3,869,899 | | | | 2,168,326 | |
| | | | | | | | | |
End of period | | $ | 2,544,762 | | | $ | 3,869,899 | |
| | | | | | | | | |
Accumulated Undistributed Net Investment Loss Included in Net Assets | | $ | (20,988 | ) | | $ | (18,540 | ) |
| | | | | | | | | |
| | | |
Other Information: | | | | | | | | |
Shares | | | | | | | | |
Sold | | | 71,119 | | | | 382,590 | |
Redeemed | | | (216,259 | ) | | | (262,131 | ) |
| | | | | | | | | |
Net Increase/(Decrease) | | | (145,140 | ) | | | 120,459 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 11 |
FINANCIAL INFORMATION — RS VALUE VIP SERIES
The financial highlights table is intended to help you understand the Fund’s financial performance for the past six reporting periods (or, if shorter, the period since the Fund’s inception). Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the Fund (assuming reinvestment of all distributions).
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Financial Highlights Six-month-ended numbers are unaudited | |
| | | Net Asset Value,
Beginning of
Period | | | Net Investment
Income/(Loss) | | | Net Realized
and Unrealized
Gain/(Loss) | | | Total
Operations | | | Distributions
From Net
Investment
Income | | |
Distributions
From Net
Realized
Capital Gains | | | Total
Distributions | |
Six Months Ended 6/30/111 | | $ | 9.47 | | | $ | (0.03 | ) | | $ | 0.21 | | | $ | 0.18 | | | $ | — | | | $ | — | | | $ | — | |
Year Ended 12/31/10 | | | 7.52 | | | | — | 4 | | | 1.95 | | | | 1.95 | | | | — | | | | — | | | | — | |
Year Ended 12/31/09 | | | 5.65 | | | | 0.06 | | | | 1.83 | | | | 1.89 | | | | (0.02 | ) | | | — | | | | (0.02 | ) |
Year Ended 12/31/08 | | | 9.49 | | | | (0.11 | ) | | | (3.73 | ) | | | (3.84 | ) | | | — | | | | — | | | | — | |
Period From 7/31/075 to 12/31/071 | | | 10.00 | | | | (0.20 | ) | | | (0.31 | ) | | | (0.51 | ) | | | — | | | | — | | | | — | |
| | | | |
| 12 | | | | The accompanying notes are an integral part of these financial statements. |
FINANCIAL INFORMATION — RS VALUE VIP SERIES
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Net Asset Value, End of Period | | Total
Return2 | | | Net Assets, End
of Period (000s) | | | Net Ratio of
Expenses to
Average Net
Assets3 | | | Gross Ratio of
Expenses to
Average Net
Assets | | | Net Ratio of
Net Investment
Income/(Loss)
to Average Net Assets3 | | | Gross Ratio of Net
Investment Loss
to Average Net Assets | | | Portfolio
Turnover Rate | |
| $9.65 | | | 1.90% | | | $ | 2,545 | | | | 1.00% | | | | 2.71% | | | | (0.15)% | | | | (1.86)% | | | | 29% | |
| 9.47 | | | 25.93% | | | | 3,870 | | | | 1.00% | | | | 2.49% | | | | (0.21)% | | | | (1.70)% | | | | 89% | |
| 7.52 | | | 33.42% | | | | 2,168 | | | | 1.00% | | | | 4.01% | | | | 0.40% | | | | (2.61)% | | | | 63% | |
| 5.65 | | | (40.46)% | | | | 1,143 | | | | 3.85% | | | | 6.66% | | | | (2.12)% | | | | (4.93)% | | | | 67% | |
9.49 | | | (5.09)% | | | | 1,291 | | | | 5.55% | | | | 5.55% | | | | (3.51)% | | | | (3.51)% | | | | 33% | |
Distributions reflect actual per-share amounts distributed for the period.
| 1 | Ratios for periods less than one year have been annualized, except for total return and portfolio turnover rate. |
| 2 | Total returns do not reflect the effects of charges deducted pursuant to the terms of The Guardian Insurance & Annuity Company, Inc.’s variable contracts. Inclusion of such charges would reduce the total returns for all periods shown. |
| 3 | Net Ratio of Expenses to Average Net Assets and Net Ratio of Net Investment Income/(Loss) to Average Net Assets include the effect of fee waivers, expense limitations and custody credits, if applicable. |
| 4 | Rounds to $0.00 per share. |
| 5 | Commencement of operations. |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 13 |
NOTES TO FINANCIAL STATEMENTS — RS VALUE VIP SERIES (UNAUDITED)
June 30, 2011 (unaudited)
RS Variable Products Trust (the “Trust”), a Massachusetts business trust organized on May 18, 2006, is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust currently offers twelve series. RS Value VIP Series (the “Fund”) is a series of the Trust. The Fund is a diversified fund. The financial statements for the other remaining series of the Trust are presented in separate reports.
The Fund has authorized an unlimited number of shares of beneficial interest with no par value. Shares are bought and sold at closing net asset value (“NAV”), which is the price for all outstanding shares of the Fund. Class II shares of the Fund are only sold to certain separate accounts of The Guardian Insurance & Annuity Company, Inc. (“GIAC”). GIAC is a wholly-owned subsidiary of The Guardian Life Insurance Company of America (“Guardian Life”). The Fund is currently offered to insurance company separate accounts that fund certain variable annuity and variable life insurance contracts issued by GIAC.
Note 1. Significant Accounting Policies
The following policies are in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
a. Investment Valuations Marketable securities are valued at the last reported sale price on the principal exchange or market on which they are traded; or, if there were no sales that day, at the mean between the closing bid and asked prices. Securities traded on the NASDAQ Stock Market, LLC (“NASDAQ”) are generally valued at the NASDAQ official closing price, which may not be the last sale price. If the NASDAQ official closing price is not available for a security, that security is generally valued using the last reported sale price, or, if no sales are reported, at the mean between the closing bid and asked prices. Short-term investments that will mature in 60 days or less are valued at amortized cost, which approximates market value. Repurchase agreements are carried at cost, which approximates market value. Foreign securities are valued in the currencies of the markets in which they trade and then converted to U.S. dollars using the prevailing exchange rates at the close of the New York Stock Exchange (“NYSE”).
Securities for which market quotations are not readily available or for which market quotations may be considered unreliable are valued at their fair values as determined in accordance with guidelines and procedures adopted by the Trust’s Board of Trustees.
Securities whose values have been materially affected by events occurring before the Fund’s valuation time but after the close of the securities’ principal exchange or market may be fair valued using methods approved by the Board of Trustees. In addition, if there has been a movement in the U.S. markets that exceeds a specified threshold, the values of the Fund’s investments in foreign securities are generally determined by a pricing service using pricing models designed to estimate likely changes in the values of those securities.
The Fund has adopted the authoritative guidance under GAAP on determining fair value when the volume and level of activity for an asset or liability have significantly decreased and for identifying transactions that are not orderly. Accordingly, if the Fund determines that either the volume and/or level of activity for an asset or liability has significantly decreased (from normal conditions for that asset or liability) or price quotations or observable inputs are not associated with orderly transactions, increased analysis and management judgment will be required to estimate fair value.
In accordance with Financial Accounting Standards Board Codification Topic 820 (“ASC Topic 820”), fair value is defined as the price that the Fund would receive upon selling an investment in an “arm’s length” transaction to a willing buyer in the principal or most advantageous market for the investment. ASC Topic 820 established a hierarchy for classification of fair value measurements for disclosure purposes. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances. The hierarchy of inputs is summarized in the three broad levels listed below.
| Ÿ | | Level 1 — unadjusted quoted prices in active markets for identical investments |
| Ÿ | | Level 2 — inputs other than unadjusted quoted prices that are observable either directly or indirectly (including adjusted quoted prices for similar investments, interest rates, prepayment speeds, credit risks, etc.) |
NOTES TO FINANCIAL STATEMENTS — RS VALUE VIP SERIES (UNAUDITED)
| Ÿ | | Level 3 — significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments) |
Inputs may include price information, volatility statistics, specific and broad credit data, liquidity statistics, and other factors. A security’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires significant judgment by the Trust. The Trust considers observable data to be that market data which is readily available, regularly distributed or updated, reliable and verifiable, and provided by independent sources that are actively involved in the relevant market. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. Changes in valuation techniques may result in transfers into or out of an investment’s assigned level within the hierarchy.
Effective beginning with the Fund’s current fiscal year, the Financial Accounting Standards Board requires reporting entities to make disclosures about purchases, sales, issuances and settlements of Level 3 securities on a gross basis. For the six months ended June 30, 2011, the Fund had no securities classified as Level 3.
There were no significant transfers between Level 1 and Level 2 for the six months end June 30, 2011.
In determining a security’s placement within the hierarchy, the Trust separates the Fund’s investment portfolio into two categories: investments and derivatives (e.g., futures).
Investments Investments whose values are based on quoted market prices in active markets, and are therefore classified within Level 1, include active listed equities. The Trust does not adjust the quoted price for such instruments, even in situations where the Fund holds a large position and a sale could reasonably be expected to impact the quoted price.
Investments that trade in markets that are not considered to be active, but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within Level 2. These include certain U.S. government and sovereign obligations, most government agency securities, investment-grade corporate bonds, certain mortgage products, state, municipal and provincial obligations, and certain foreign equity securities.
Investments classified within Level 3 have significant unobservable inputs, as they trade infrequently or not at
all. Level 3 investments include, among others, private placement securities. When observable prices are not available for these securities, the Trust uses one or more valuation techniques for which sufficient and reliable data is available. The inputs used by the Trust in estimating the value of Level 3 investments include the original transaction price, recent transactions in the same or similar instruments, completed or pending third-party transactions in the underlying investment or comparable issuers, subsequent rounds of financing, recapitalizations, and other transactions across the capital structure. Level 3 investments may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the Trust in the absence of market information. Assumptions used by the Trust due to the lack of observable inputs may significantly impact the resulting fair value and therefore the Fund’s results of operations.
Derivatives Exchange-traded derivatives, such as futures contracts and exchange traded option contracts, are typically classified within Level 1 or Level 2 of the fair value hierarchy depending on whether or not they are deemed to be actively traded. Certain derivatives, such as generic forwards, swaps and options, have inputs which can generally be corroborated by market data and are therefore classified within Level 2.
b. Federal Income Taxes The Fund intends to continue complying with the requirements of the Internal Revenue Code to qualify as a regulated investment company and to distribute substantially all net investment income and realized net capital gains, if any, to shareholders. Therefore, the Fund does not expect to be subject to income tax, and no provision for such tax has been made.
From time to time, however, the Fund may choose to pay an excise tax if the cost of making the required distribution exceeds the amount of the excise tax.
As of June 30, 2011, the Trust has reviewed the tax positions for open periods, as applicable to the Fund, and has determined that no provision for income tax is required in the Fund’s financial statements. The Fund recognizes interest and penalties, if any, related to unrecognized tax positions as income tax expense in the Statement of Operations. For the six months ended June 30, 2011, the Fund did not incur any interest or penalties. The Fund is not subject to examination by U.S. federal tax authorities and state authorities for tax years before 2007.
c. Securities Transactions Securities transactions are accounted for on the date securities are purchased or
NOTES TO FINANCIAL STATEMENTS — RS VALUE VIP SERIES (UNAUDITED)
sold (trade date). Realized gains or losses on securities transactions are determined on the basis of specific identification.
d. Foreign Currency Translation The accounting records of the Fund are maintained in U.S. dollars. Investment securities and all other assets and liabilities of the Fund denominated in a foreign currency are generally translated into U.S. dollars at the exchange rates quoted at the close of the NYSE on each business day. Purchases and sales of securities, income receipts, and expense payments are translated into U.S. dollars at the exchange rates in effect on the dates of the respective transactions. The Fund does not isolate the portion of the fluctuations on investments resulting from changes in foreign currency exchange rates from the fluctuations in market prices of investments held. Such fluctuations are included with the net realized and unrealized gain or loss from investments.
e. Investment Income Dividend income is generally recorded on the ex-dividend date. Interest income, which includes amortization/accretion of premium/discount, is accrued and recorded daily.
f. Expenses Many expenses of the Trust can be directly attributed to a specific series of the Trust. Expenses that cannot be directly attributed to a specific series of the Trust are generally apportioned among all the series in the Trust, based on relative net assets.
g. Custody Credits The Fund has entered into an arrangement with its custodian, State Street Bank and Trust Company, whereby credits realized as a result of uninvested cash balances are used to reduce the Fund’s custodian expenses. The Fund’s custody credits, if any, are shown in the accompanying Statement of Operations.
h. Distributions to Shareholders The Fund intends to declare and distribute substantially all net investment income, if any, at least once a year. Distributions of net realized capital gains, if any, are declared and paid at least once a year. Unless the Fund is instructed otherwise, all distributions to shareholders are credited in the form of additional shares of the Fund at the net asset value, recorded on the ex-dividend date.
i. Capital Accounts Due to the timing of dividend distributions and the differences in accounting for income and realized gains/(losses) for financial statement purposes versus federal income tax purposes, the fiscal year in which amounts are distributed may differ from the year in which the income and realized gains/(losses) were recorded by the Fund.
Note 2. Transactions with Affiliates
a. Advisory Fee and Expense Limitation Under the terms of the advisory agreement, which is reviewed and approved annually by the Board of Trustees, the Fund pays an investment advisory fee to RS Investment Management Co. LLC (“RS Investments”). Guardian Investor Services LLC (“GIS”), a subsidiary of Guardian Life, holds a majority interest in RS Investments. RS Investments receives an investment advisory fee based on the average daily net assets of the Fund at an annual rate of 0.85%.
Pursuant to a written agreement in effect through April 30, 2012, an expense limitation has been imposed whereby RS Investments agreed to limit the Fund’s total annual fund operating expenses to 1.00% of the average daily net assets of the Fund.
RS Investments and GIS do not intend to recoup any reimbursed expenses or waived advisory fees from a prior year under expense limitations then in effect for the Fund.
b. Compensation of Trustees and Officers Trustees and officers of the Trust who are interested persons, as defined in the 1940 Act, of RS Investments receive no compensation from the Fund for acting as such. Trustees of the Trust who are not interested persons of RS Investments receive compensation and reimbursement of expenses from the Trust.
c. Distribution Fees The Fund has entered into an agreement with GIS for distribution services with respect to its shares and has adopted a distribution plan pursuant to Rule 12b-1 under the 1940 Act, whose continuance is reviewed annually by the Trust’s Board of Trustees. Under the plan, GIS is compensated for the services it provides and for the expenses it bears in connection with the distribution of the Fund’s Class II shares at an annual rate of up to 0.25% of the average daily net assets of Class II shares of the Fund.
RS Investments may pay GIAC or other insurance companies or financial institutions compensation, at an annual rate of up to 0.15% of the Fund’s average daily net assets, for providing administrative and shareholder services. Payment of this compensation does not represent a separate or additional expense to the Fund.
Note 3. Federal Income Taxes
a. Distributions to Shareholders No distributions were paid to shareholders during the year ended December 31, 2010, which is the most recently completed tax year.
NOTES TO FINANCIAL STATEMENTS — RS VALUE VIP SERIES (UNAUDITED)
Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. These differences are primarily due to differing treatments of income and gains on various investment securities held by the Fund, timing differences, and differing characterizations of distributions made by the Fund. Permanent book and tax basis differences will result in reclassifications to paid-in capital, undistributed net investment income and accumulated undistributed net realized gain/(loss) on investments and foreign currency transactions. Undistributed net investment income and accumulated undistributed net realized gain/(loss) on investments and foreign currency transactions may include temporary book and tax differences, which will reverse in a subsequent period.
As of December 31, 2010, the Fund made the following reclassifications of permanent book and tax basis differences:
| | | | | | | | |
| Paid-in-Capital | | Accumulated Net Investment Loss | | | Accumulated
Net Realized Loss | |
| $(9,149) | | $ | 9,276 | | | $ | (127 | ) |
During any particular year, net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed and, therefore, are normally distributed to shareholders annually.
During the year ended December 31, 2010, the Fund utilized $132,095 of capital loss carryovers. Capital loss carryovers available to the Fund at December 31, 2010 were $340,144, expiring in 2017.
In determining its taxable income, current tax law permits the Fund to elect to treat all or a portion of any net capital or currency loss realized after October 31 as occurring on the first day of the following fiscal year. For the year ended December 31, 2010, the Fund elected to defer net capital and currency losses of $9,401.
On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted. The Act modernizes several of the federal income and excise tax rules related to regulated investment companies, and with certain exceptions, is effective for taxable years beginning after December 22, 2010.
Among the changes are revisions to capital loss carryforward rules allowing for capital losses to be carried forward to one or more subsequent taxable years without expiration. Rules previously in effect limited the carryforward period to eight taxable years. Capital loss
carryforwards generated in taxable years beginning after the effective date of the Act must be fully used before capital loss carryforwards generated in taxable years prior to the effective date of the Act. Changes to excise tax rules include timing of recognition of certain income and a change in the required distribution rate for capital gains.
b. Tax Basis of Investments The cost of investments for federal income tax purposes at June 30, 2011, was $1,994,056. The gross unrealized appreciation and depreciation on investments, on a tax basis, at June 30, 2011, aggregated $592,610 and $(17,541), respectively, resulting in net unrealized appreciation of $575,069.
Note 4. Investments
a. Investment Purchases and Sales The cost of investments purchased and the proceeds from investments sold (excluding short-term investments) amounted to $844,597 and $1,921,659, respectively, for the six months ended June 30, 2011.
b. Foreign Securities Foreign securities investments involve special risks and considerations not typically associated with those of U.S. origin. These risks include, but are not limited to, currency risk; adverse political, social, and economic developments; and less reliable information about issuers. Moreover, securities of some foreign companies may be less liquid and their prices more volatile than those of comparable U.S. companies.
c. Industry or Sector Concentration In its normal course of business, the Fund may invest a significant portion of its assets in companies within a limited number of industries or sectors. As a result, the Fund may be subject to a greater risk of loss than that of a fund invested in a wider spectrum of industries or sectors because the stocks of many or all of the companies in the industry, group of industries, sector, or sectors may decline in value due to developments adversely affecting the industry, group of industries, sector, or sectors.
d. Repurchase Agreements The collateral for repurchase agreements is either cash or fully negotiable U.S. government securities (including U.S. government agency securities). Repurchase agreements are fully collateralized (including the interest accrued thereon) and such collateral is marked-to-market daily while the agreements remain in force. If the value of the collateral falls below the repurchase price plus accrued interest, the Fund will typically require the seller to deposit additional collateral by the next business day. If the request for additional collateral is not met, or the seller defaults, the Fund maintains the right to sell the collateral
NOTES TO FINANCIAL STATEMENTS — RS VALUE VIP SERIES (UNAUDITED)
(although it may be prevented or delayed from doing so in certain circumstances) and may claim any resulting loss against the seller.
Note 5. Temporary Borrowings
The Fund, with other funds managed by RS Investments, shares in a $75 million committed revolving credit/overdraft protection facility from State Street Bank and Trust Company for temporary purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. Interest is calculated based on market rates at the time of borrowing; all the funds that are parties to the facility share in a commitment fee that is allocated among the funds on the basis of their respective net assets. The Fund may borrow up to the lesser of one-third of its total assets (including amounts borrowed) or any lower limit specified in the Fund’s Statement of Additional Information or Prospectus.
For the six months ended June 30, 2011, the Fund borrowed from the facility as follows:
| | | | | | | | |
Amount Outstanding
at 6/30/11 | | Average
Borrowing* | | | Average
Interest Rate* | |
| $— | | $ | 273,079 | | | | 1.47% | |
| * | | For the six months ended June 30, 2011, based on the number of days borrowings were outstanding. |
Note 6. Review for Subsequent Events
The Trust has evaluated subsequent events through the issuance of the Fund’s financial statements and determined that no material events have occurred that require disclosure.
Note 7. Indemnifications
Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, in the normal course of business, the Fund enters into contracts with its vendors and others that provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund. However, based on experience, the Fund expects the risk of loss to be remote.
SUPPLEMENTAL INFORMATION (UNAUDITED)
Meeting of Shareholders
A special meeting of the shareholders of RS Variable Products Trust (“the Trust”) was held on May 20, 2011. At the meeting, the shareholders of the Trust elected Judson Bergman, Kenneth R. Fitzsimmons, Jr., Anne M. Goggin, Christopher C. Melvin, Jr., Deanna M. Mulligan, Gloria S. Nelund, Terry R. Otton, and John P. Rohal as trustees of the Trust.
Proposal To Elect Trustees
| | | | |
Nominee | | Votes For | | Votes Against/Withheld |
| Judson Bergman | | 264,351,869.410 | | 14,579,441.977 |
| Kenneth R. Fitzsimmons, Jr. | | 264,417,319.717 | | 14,513,991.670 |
| Anne M. Goggin | | 265,496,967.524 | | 13,434,343.863 |
| Christopher C. Melvin, Jr. | | 264,182,743.884 | | 14,748,567.503 |
| Deanna M. Mulligan | | 264,603,554.628 | | 14,327,756.759 |
| Gloria S. Nelund | | 265,607,677.552 | | 13,323,633.835 |
| Terry R. Otton | | 265,360,024.512 | | 13,571,286.875 |
| John P. Rohal | | 264,052,063.420 | | 14,879,247.967 |
Portfolio Holdings and Proxy Voting Procedures
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Form N-Q is available on the Securities and Exchange Commission’s Web site at http://www.sec.gov. The Fund’s Form N-Q may be reviewed and copied at the Commission’s Public Reference Room in Washington, DC, and information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330. This information is also available, without charge, upon request, by calling toll-free 800-221-3253.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 will be available (i) without charge, upon request, by calling toll-free 800-221-3253; and (ii) on the Securities and Exchange Commission’s Web site at http://www.sec.gov.
The Statement of Additional Information includes additional information about the Trust’s Trustees and Officers and is available, without charge, upon request by calling toll-free 800-221-3253.
This report is transmitted to shareholders only. It is not authorized for use as an offer of sale or a solicitation of an offer to buy shares of a Fund unless accompanied or preceded by that Fund’s current prospectus. Past performance results shown in this report should not be considered a representation of future performance. Investment returns and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Statements and other information herein are as dated and are subject to change.
Not required.
| Item 3. | Audit Committee Financial Expert. |
Not required.
| Item 4. | Principal Accountant Fees and Services. |
Not required.
| Item 5. | Audit Committee of Listed registrants. |
Not applicable to the registrant.
| | (a) | Schedule of Investments in securities of unaffiliated issuers as of the close of the reporting period is included as part of the report to shareholders filed under Item 1 of this form. |
| Item 7. | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. |
Not applicable to the registrant.
| Item 8. | Portfolio Managers of Closed-End Management Investment Companies. |
Not applicable to the registrant.
| Item 9. | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. |
Not applicable to the registrant.
| Item 10. | Submission of Matters to a Vote of Security Holders. |
There have been no material changes to the procedures by which shareholders may recommend nominees to the registrant’s Board of Trustees, where those changes were implemented after the registrant last provided disclosure in response to the requirements of Item 407(c) (2)(iv) of Regulation S-K (as required by Item 22(b)(15) of Schedule 14A) or this Item.
| Item 11. | Controls and Procedures. |
| | (a) | The registrant’s principal executive and principal financial officers have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30a-3(c)) are effective, as of a date within 90 days of the filing date of this Form N-CSR, to provide reasonable assurance that the information required to be disclosed by the registrant on Form N-CSR is recorded, processed, summarized, and reported within the time periods specified in the Commission’s rules and forms, based on their evaluation of these disclosure controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934 (17 CFR 240.13a-15(b) or 240.15d-15(b)). |
| | (b) | There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the registrant’s second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
| | (a)(2) | Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto. |
| | (b) | Certification pursuant to Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes-Oxley Act of 2002 is attached hereto. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | |
(Registrant) | | RS Variable Products Trust |
| |
By (Signature and Title)* | | /s/ Terry R. Otton |
| | Terry R. Otton, President |
| | (Principal Executive Officer) |
Date: September 2, 2011
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| | |
By (Signature and Title)* | | /s/ Terry R. Otton |
| | Terry R. Otton, President |
| | (Principal Executive Officer) |
Date: September 2, 2011
| | |
By (Signature and Title)* | | /s/ James E. Klescewski |
| | James E. Klescewski, Treasurer |
| | (Principal Financial Officer) |
Date: September 2, 2011
