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) |
Matthew H. Scanlan
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, 2012
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.
2012 Semiannual Report
All data as of June 30, 2012
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, 2012. 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
Highlights
| Ÿ | | The U.S. equity market measured by the S&P 500® Index1 delivered positive performance during the first half of 2012 despite continued economic uncertainty, increased investors risk aversion and concerns over the potential outcomes of the European debt crisis. |
| Ÿ | | During the first half of 2012, RS Large Cap Alpha VIP Series (the “Fund”) underperformed its benchmarks, the Russell 1000® Value Index2 and the S&P 500® Index. The Fund’s performance relative to the Russell 1000® Value Index was held back by stock selection in the financial services, materials & processing, and producer durables sectors. Conversely, stock selection in the consumer discretionary, consumer staples, and health care sectors aided relative performance. |
| Ÿ | | The Fund seeks long-term capital appreciation by seeking to identify large cap companies with improving returns on invested capital, based on the investment team’s assessment of risk (the possibility of permanent capital impairment) and its assessment of reward (the future value of an enterprise). |
Market Overview
Equity markets measured by the S&P 500® Index started out the year on a positive note, aided by encouraging economic news and low U.S. interest rates. Against this backdrop, equities delivered strong performance during the first quarter. The market experienced renewed downward pressure during the second quarter, however, as persistent high unemployment and lackluster corporate and consumer spending trends raised concerns over the strength of the economic recovery. Adding to investor unease were the ongoing debt crisis in Europe and signs of slowing economic growth in China and other economies in Asia. While the resulting sell-off was widespread, the equity markets did recover some in June. As such, most sectors of the Russell 1000® Value Index delivered positive performance during the six-month period. The exception was the energy sector, where share prices fell due to declines in oil and natural gas prices.
Fund Performance Overview
RS Large Cap Alpha VIP Series returned 7.44% for the six month period ended June 30, 2012, underperforming
the benchmark Russell 1000® Value Index, which returned 8.68%, and the benchmark S&P 500® Index, which returned 9.49%.
Global economic uncertainty once again contributed to volatility in commodity prices and downward pressure on natural resource equity prices, notably during the second quarter. This uncertainty created a difficult environment for a number of holdings in the Fund, including diversified upstream oil and gas company Talisman Energy Inc. and Goldcorp Inc., an operator of gold mines across North and South America. Both stocks were detractors from the Fund’s performance relative to the benchmarks. Despite the recent difficult environment for many raw-materials-related stocks, we believe that the longer-term outlook for many commodities remains intact, driven primarily by limited spare capacity and rising marginal costs of supply.
In a challenging environment for many technology stocks, security software and services provider Symantec also detracted from the Fund’s relative performance. The company’s stock traded down due to some weakness in its storage and server management business. Nonetheless, in our view, Symantec remains well positioned to capitalize on the longer term need and desire for enterprise investment in technology to fend off increasingly sophisticated cyber threats.
On a positive note, relative performance was assisted by stock selection in the consumer discretionary sector, due in part to an investment in specialty apparel retailer Gap Inc. The retailer reported solid store-based and online sales trends for its line-up of global brands, including Gap, Old Navy, Banana Republic and Athleta. With the stock price responding to the resulting improvement in both margins and ROIC, we exited our position during the second quarter.
Another positive contributor during the period, internet commerce pioneer eBay benefited from growing sales volumes, as well as its expanding PayPal online payments business. PayPal has continued its torrid growth rate and at the end of the period was beginning to see substantial margin improvement as more revenues are driven over a largely fixed cost base and ongoing penetration of markets abroad.
Relative performance was also supported by an investment in property and casualty insurer Allstate Corp. In line with our original thesis, Allstate has been more
RS LARGE CAP ALPHA VIP SERIES
disciplined in its approach to underwriting in both its homeowner and auto segments. We believe that this improvement, combined with Allstate’s superior captive agency distribution model, is a competitive advantage that will allow the company to continue to generate improving returns.
Outlook
Entering 2012, our outlook was one of cautious optimism. Many of the fundamental factors that have plagued the market over the past few years – a constrained consumer, mounting budget deficits, unfunded entitlement programs, potential changes to U.S. tax policies, concerns regarding Europe, historically high corporate margins and returns, limited reinvestment opportunities as reflected in large corporate cash balances, and the inevitable impact of global deleveraging – remain in place. However, there are other variables that we view as positive. These include the slow
re-emergence of US manufacturing, a growing appreciation of our country’s advantaged energy position, the partial disintermediation of global supply chains due to rising transportation and local labor costs, a vastly improved local and regional banking industry, and initial signs of improvement in the housing market.
We continue to study our investment universe, seeking those companies that we believe have a business plan in place that will drive future value creation for owners, in situations where we believe we can define our downside risk and be adequately compensated for deploying our investors’ capital. Over the last several years, the market has been characterized by periods of elevated levels of correlations across and within asset classes. For fundamental business analysts, these conditions can be frustrating. However, we will continue to seek to find ways to exploit the company-specific value creation that we believe remains largely ignored by many investors in today’s public equity markets.
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, 2012.
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 (unaudited)
| | |
| Total Net Assets: $944,613,148 | | |
| | |
| |
| Sector Allocation vs. Index3 |
 |
| | | | |
| | |
| Top Ten Holdings4 | | | |
| | |
| Holding | | % of Total
Net Assets | |
| Southwestern Energy Co. | | | 5.66% | |
| Microsoft Corp. | | | 5.57% | |
| Motorola Solutions, Inc. | | | 4.01% | |
| Symantec Corp. | | | 3.98% | |
| Pfizer, Inc. | | | 3.96% | |
| United Parcel Service, Inc., Class B | | | 3.95% | |
| News Corp., Class A | | | 3.95% | |
| Martin Marietta Materials, Inc. | | | 3.91% | |
| Merck & Co., Inc. | | | 3.91% | |
| Praxair, Inc. | | | 3.76% | |
| Total | | | 42.66% | |
| 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 (unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
| 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 | | | | 7.44% | | | | -4.26% | | | | 11.38% | | | | 0.25% | | | | 5.14% | | | | 10.03% | |
| Russell 1000® Value Index2 | | | | | | | 8.68% | | | | 3.01% | | | | 15.80% | | | | -2.19% | | | | 5.28% | | | | 11.03% | |
| S&P 500® Index1 | | | | | | | 9.49% | | | | 5.45% | | | | 16.40% | | | | 0.22% | | | | 5.33% | | | | 10.52% | |
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
1/1/12 | | Ending
Account Value
6/30/12 | | | Expenses Paid
During Period*
1/1/12-6/30/12 | | | Expense Ratio
During Period
1/1/12-6/30/12 | |
| Based on Actual Return | | $1,000.00 | | | $1,074.40 | | | | $2.84 | | | | 0.55% | |
| Based on Hypothetical Return (5% Return Before Expenses) | | $1,000.00 | | | $1,022.13 | | | | $2.77 | | | | 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 182/366 (to reflect the one-half year period). |
SCHEDULE OF INVESTMENTS – RS LARGE CAP ALPHA VIP SERIES
| | | | | | | | |
June 30, 2012 (unaudited) | | Shares | | | Value | |
Common Stocks – 96.8% | |
| Aerospace – 2.5% | | | | | | | | |
Lockheed Martin Corp. | | | 274,693 | | | $ | 23,920,267 | |
| | | | | | | | | |
| | | | | | | | 23,920,267 | |
| Asset Management & Custodian – 4.0% | |
Franklin Resources, Inc. | | | 129,500 | | | | 14,373,205 | |
State Street Corp. | | | 519,120 | | | | 23,173,517 | |
| | | | | | | | | |
| | | | | | | | 37,546,722 | |
| Banks: Diversified – 3.4% | |
KeyCorp | | | 4,196,120 | | | | 32,477,969 | |
| | | | | | | | | |
| | | | | | | | 32,477,969 | |
| Building Materials – 3.9% | |
Martin Marietta Materials, Inc. | | | 468,635 | | | | 36,937,811 | |
| | | | | | | | | |
| | | | | | | | 36,937,811 | |
| Chemicals: Specialty – 3.8% | |
Praxair, Inc. | | | 326,337 | | | | 35,482,622 | |
| | | | | | | | | |
| | | | | | | | 35,482,622 | |
| Computer Services, Software & Systems – 11.6% | |
Microsoft Corp. | | | 1,719,547 | | | | 52,600,943 | |
Symantec Corp.(1) | | | 2,570,430 | | | | 37,553,982 | |
Yahoo! Inc.(1) | | | 1,217,480 | | | | 19,272,708 | |
| | | | | | | | | |
| | | | | | | | 109,427,633 | |
Consumer Services: Miscellaneous – 2.2% | |
eBay, Inc.(1) | | | 485,790 | | | | 20,408,038 | |
| | | | | | | | | |
| | | | | | | | 20,408,038 | |
| Diversified Manufacturing Operations – 2.3% | |
Honeywell International, Inc. | | | 386,505 | | | | 21,582,439 | |
| | | | | | | | | |
| | | | | | | | 21,582,439 | |
| Diversified Media – 3.9% | |
News Corp., Class A | | | 1,673,275 | | | | 37,297,300 | |
| | | | | | | | | |
| | | | | | | | 37,297,300 | |
| Drug & Grocery Store Chains – 3.5% | |
CVS Caremark Corp. | | | 697,800 | | | | 32,608,194 | |
| | | | | | | | | |
| | | | | | | | 32,608,194 | |
| Electronic Entertainment – 3.1% | |
Activision Blizzard, Inc. | | | 2,454,462 | | | | 29,428,999 | |
| | | | | | | | | |
| | | | | | | | 29,428,999 | |
| Financial Data & Systems – 3.0% | |
Thomson Reuters Corp. | | | 993,044 | | | | 28,252,102 | |
| | | | | | | | | |
| | | | | | | | 28,252,102 | |
| Foods – 1.6% | |
Kellogg Co. | | | 297,580 | | | | 14,679,621 | |
| | | | | | | | | |
| | | | | | | | 14,679,621 | |
| Health Care Management Services – 1.5% | |
UnitedHealth Group, Inc. | | | 235,000 | | | | 13,747,500 | |
| | | | | | | | | |
| | | | | | | | 13,747,500 | |
| | | | | | | | |
June 30, 2012 (unaudited) | | Shares | | | Value | |
| Insurance: Life – 4.5% | |
Aflac, Inc. | | | 455,974 | | | $ | 19,419,933 | |
Prudential Financial, Inc. | | | 484,340 | | | | 23,456,586 | |
| | | | | | | | | |
| | | | | | | | 42,876,519 | |
| Insurance: Property-Casualty – 3.7% | |
The Allstate Corp. | | | 993,530 | | | | 34,862,968 | |
| | | | | | | | | |
| | | | | | | | 34,862,968 | |
| Metals & Minerals: Diversified – 1.9% | |
BHP Billiton Ltd., ADR | | | 269,707 | | | | 17,611,867 | |
| | | | | | | | | |
| | | | | | | | 17,611,867 | |
| Oil: Crude Producers – 11.7% | |
Occidental Petroleum Corp. | | | 314,874 | | | | 27,006,743 | |
Southwestern Energy Co.(1) | | | 1,674,202 | | | | 53,457,270 | |
Talisman Energy, Inc. | | | 2,654,327 | | | | 30,418,587 | |
| | | | | | | | | |
| | | | | | | | 110,882,600 | |
| Pharmaceuticals – 11.2% | |
Merck & Co., Inc. | | | 883,771 | | | | 36,897,439 | |
Pfizer, Inc. | | | 1,625,080 | | | | 37,376,840 | |
Warner Chilcott PLC, Class A(1) | | | 1,785,821 | | | | 32,001,913 | |
| | | | | | | | | |
| | | | | | | | 106,276,192 | |
| Precious Metals & Minerals – 2.6% | |
Goldcorp, Inc. | | | 643,605 | | | | 24,186,676 | |
| | | | | | | | | |
| | | | | | | | 24,186,676 | |
| Scientific Instruments: Control & Filter – 2.0% | |
Parker Hannifin Corp. | | | 243,580 | | | | 18,726,430 | |
| | | | | | | | | |
| | | | | | | | 18,726,430 | |
| Securities Brokerage & Services – 1.0% | |
The Charles Schwab Corp. | | | 742,400 | | | | 9,599,232 | |
| | | | | | | | | |
| | | | | | | | 9,599,232 | |
| Telecommunications Equipment – 4.0% | |
Motorola Solutions, Inc. | | | 787,740 | | | | 37,898,171 | |
| | | | | | | | | |
| | | | | | | | 37,898,171 | |
| Transportation Miscellaneous – 3.9% | |
United Parcel Service, Inc., Class B | | | 473,920 | | | | 37,325,939 | |
| | | | | | | | | |
| | | | | | | | 37,325,939 | |
Total Common Stocks
(Cost $871,022,973) | | | | 914,043,811 | |
| | | | |
| 8 | | | | The accompanying notes are an integral part of these financial statements. |
RS LARGE CAP ALPHA VIP SERIES
| | | | | | | | |
| June 30, 2012 (unaudited) | | Principal
Amount | | | Value | |
| Repurchase Agreements – 3.0% | | | | | |
| | | |
State Street Bank and Trust Co. Repurchase Agreement, 0.01%, dated 6/29/2012, maturity value of $28,411,024, due 7/2/2012(2) | | $ | 28,411,000 | | | $ | 28,411,000 | |
Total Repurchase Agreements
(Cost $28,411,000) | | | | 28,411,000 | |
Total Investments - 99.8%
(Cost $899,433,973) | | | | 942,454,811 | |
| Other Assets, Net - 0.2% | | | | 2,158,337 | |
| Total Net Assets - 100.0% | | | $ | 944,613,148 | |
| (1) | Non-income producing security. |
| (2) | The table below presents collateral for repurchase agreements. |
| | | | | | | | | | | | |
| Security | | Coupon | | | Maturity
Date | | | Value | |
| U.S. Treasury Bond | | | 4.625% | | | | 2/15/2040 | | | $ | 28,985,755 | |
Legend:
ADR — American Depositary Receipt.
The following is a summary of the inputs used as of June 30, 2012 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 | | $ | 914,043,811 | | | $ | — | | | $ | — | | | $ | 914,043,811 | |
Repurchase Agreements | | | — | | | | 28,411,000 | | | | — | | | | 28,411,000 | |
| Total | | $ | 914,043,811 | | | $ | 28,411,000 | | | $ | — | | | $ | 942,454,811 | |
| | | | |
| 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, 2012 (unaudited) | | | |
Assets | | | | |
Investments, at value | | $ | 942,454,811 | |
Cash and cash equivalents | | | 630 | |
Receivable for investments sold | | | 18,351,398 | |
Dividends/interest receivable | | | 1,072,719 | |
Receivable for fund shares subscribed | | | 137,265 | |
| | | | | |
Total Assets | | | 962,016,823 | |
| | | | | |
| | |
Liabilities | | | | |
Payable for investments purchased | | | 16,808,349 | |
Payable to adviser | | | 372,000 | |
Payable for fund shares redeemed | | | 83,609 | |
Accrued trustees’ fees | | | 6,328 | |
Accrued expenses/other liabilities | | | 133,389 | |
| | | | | |
Total Liabilities | | | 17,403,675 | |
| | | | | |
Total Net Assets | | $ | 944,613,148 | |
| | | | | |
| | |
Net Assets Consist of: | | | | |
Paid-in capital | | $ | 1,040,115,012 | |
Accumulated undistributed net investment income | | | 5,606,206 | |
Accumulated net realized loss from investments | | | (144,128,908 | ) |
Net unrealized appreciation on investments | | | 43,020,838 | |
| | | | | |
Total Net Assets | | $ | 944,613,148 | |
| | | | | |
Investments, at Cost | | $ | 899,433,973 | |
| | | | | |
| | |
Pricing of Shares | | | | |
Shares of Beneficial Interest Outstanding with no Par Value | | | 25,743,252 | |
Net Asset Value Per Share | | | $36.69 | |
| | | | | |
| | | | |
Statement of Operations
For the Six-Month Period Ended June 30, 2012 (unaudited) | |
Investment Income | | | | |
Dividends | | $ | 8,317,290 | |
Interest | | | 6,292 | |
Withholding taxes on foreign dividends | | | (157,388 | ) |
| | | | | |
Total Investment Income | | | 8,166,194 | |
| | | | | |
| | |
Expenses | | | | |
Investment advisory fees | | | 2,324,133 | |
Administrative service fees | | | 53,429 | |
Shareholder reports | | | 50,132 | |
Professional fees | | | 45,139 | |
Custodian fees | | | 41,404 | |
Trustees’ fees | | | 20,527 | |
Other expenses | | | 25,226 | |
| | | | | |
Total Expenses | | | 2,559,990 | |
| | |
Less: Custody credits | | | (2 | ) |
| | | | | |
Total Expenses, Net | | | 2,559,988 | |
| | | | | |
Net Investment Income | | | 5,606,206 | |
| | | | | |
| | |
Realized Gain/(Loss) and Change in Unrealized Appreciation/Depreciation on Investments | | | | |
Net realized gain from investments | | | 37,443,755 | |
Net change in unrealized appreciation/depreciation on investments | | | 22,341,959 | |
| | | | | |
Net Gain on Investments | | | 59,785,714 | |
| | | | | |
Net Increase in Net Assets Resulting from Operations | | $ | 65,391,920 | |
| | | | | |
| | | | | |
| | | | |
| 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
6/30/12 | | | For the
Year Ended
12/31/11 | |
| | | | |
Operations | | | | | | | | |
Net investment income | | $ | 5,606,206 | | | $ | 9,114,628 | |
Net realized gain from investments | | | 37,443,755 | | | | 81,132,185 | |
Net change in unrealized appreciation/depreciation on investments | | | 22,341,959 | | | | (178,820,648 | ) |
| | | | | | | | | |
Net Increase/(Decrease) in Net Assets Resulting from Operations | | | 65,391,920 | | | | (88,573,835 | ) |
| | | | | | | | | |
| | | |
Distributions to Shareholders | | | | | | | | |
Net investment income | | | — | | | | (9,165,005 | ) |
| | | | | | | | | |
Total Distributions | | | — | | | | (9,165,005 | ) |
| | | | | | | | | |
| | | |
Capital Share Transactions | | | | | | | | |
Proceeds from sales of shares | | | 58,483,675 | | | | 104,608,313 | |
Reinvestment of distributions | | | — | | | | 9,165,005 | |
Cost of shares redeemed | | | (54,366,197 | ) | | | (115,825,574 | ) |
| | | | | | | | | |
Net Increase/(Decrease) in Net Assets Resulting from Capital Share Transactions | | | 4,117,478 | | | | (2,052,256 | ) |
| | | | | | | | | |
Net Increase/(Decrease) in Net Assets | | | 69,509,398 | | | | (99,791,096 | ) |
| | | | | | | | | |
| | | |
Net Assets | | | | | | | | |
Beginning of period | | | 875,103,750 | | | | 974,894,846 | |
| | | | | | | | | |
End of period | | $ | 944,613,148 | | | $ | 875,103,750 | |
| | | | | | | | | |
Accumulated Undistributed Net Investment Income Included in Net Assets | | $ | 5,606,206 | | | $ | — | |
| | | | | | | | | |
| | | |
Other Information: | | | | | | | | |
Shares | | | | | | | | |
Sold | | | 1,607,826 | | | | 2,893,849 | |
Reinvested | | | — | | | | 276,220 | |
Redeemed | | | (1,491,473 | ) | | | (3,175,038 | ) |
| | | | | | | | | |
Net Increase/(Decrease) | | | 116,353 | | | | (4,969 | ) |
| | | | | | | | | |
| | | | | | | | | |
| | | | |
| 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 6/30/121 | | $ | 34.15 | | | $ | 0.22 | | | $ | 2.32 | | | $ | 2.54 | | | $ | — | | | $ | — | | | $ | — | |
Year Ended 12/31/11 | | | 38.03 | | | | 0.36 | | | | (3.88 | ) | | | (3.52 | ) | | | (0.36 | ) | | | — | | | | (0.36 | ) |
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 | ) |
| | | | |
| 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 | |
| $ | 36.69 | | | | 7.44% | | | $ | 944,613 | | | | 0.55% | | | | 0.55% | | | | 1.21% | | | | 1.21% | | | | 27% | |
| | 34.15 | | | | (9.22)% | | | | 875,104 | | | | 0.57% | | | | 0.57% | | | | 0.98% | | | | 0.98% | | | | 51% | |
| | 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% | |
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 and expense limitations and exclude the effect of 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, 2012 (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 nine 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. The Fund currently offers only Class I shares. 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 (See Note 4d). 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 in accordance with guidelines and procedures adopted 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 (“FASB”) 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 |
NOTES TO FINANCIAL STATEMENTS — RS LARGE CAP ALPHA VIP SERIES (UNAUDITED)
| | | 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.
The FASB 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, 2012, the Fund had no securities classified as Level 3.
The Fund’s policy is to recognize transfers between Level 1, Level 2 and Level 3 at the end of the reporting period. For the six months ended June 30, 2012, there were no transfers between Level 1 and Level 2.
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, including securities whose prices may have been affected by events occurring after the close of trading on their principal exchange or market and, as a result, whose values are determined by a pricing service as described above, or securities whose values are otherwise determined using fair valuation methods approved by the Fund’s Board of Trustees.
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, for example, 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. 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, 2012, 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 Trust is
NOTES TO FINANCIAL STATEMENTS — RS LARGE CAP ALPHA VIP SERIES (UNAUDITED)
not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next twelve months. 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, 2012, the Fund did not incur any such interest or penalties. The Fund is not subject to examination by U.S. federal tax authorities for tax years before 2008 and by 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.
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 (but not in the Financial Highlights) as a reduction to the Fund’s expenses.
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, 2011, which is the most recently completed tax year, was as follows:
| | |
Ordinary Income |
| $9,165,005 |
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
NOTES TO FINANCIAL STATEMENTS — RS LARGE CAP ALPHA VIP SERIES (UNAUDITED)
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, 2011, the Fund made the following reclassifications of permanent book and tax basis differences:
| | | | | | | | |
| Paid-in-Capital | | Accumulated Net Investment Income | | | Accumulated
Net Realized Loss | |
| $(9,695,238) | | $ | 48,062 | | | $ | 9,647,176 | |
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, 2011, the Fund utilized $86,289,646 of capital loss carryovers. Capital loss carryovers available to the Fund at December 31, 2011 were as follows:
| | | | |
| Expiring | |
Amount | |
| 2015 | | $ | 63,066 | |
| 2016 | | | 15,285,989 | |
| 2017 | | | 160,708,957 | |
| | | | | |
| Total | | $ | 176,058,012 | |
| | | | | |
| | | | | |
Capital loss carryovers of $9,649,292 expired in the year ended December 31, 2011.
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, 2011, the Fund elected to defer net capital and currency losses of $5,114,092.
b. Tax Basis of Investments The cost of investments for federal income tax purposes at June 30, 2012, was $899,746,711. The gross unrealized appreciation and depreciation on investments, on a tax basis, at June 30, 2012, aggregated $71,143,987 and $(28,435,887), respectively, resulting in net unrealized appreciation of $42,708,100.
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 $301,400,174 and $226,663,696, respectively, for the six months ended June 30, 2012.
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 $100 million committed revolving credit 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.
For the six months ended June 30, 2012, the Fund did not borrow under the facility.
NOTES TO FINANCIAL STATEMENTS — RS LARGE CAP ALPHA VIP SERIES (UNAUDITED)
Note 6. Review for Subsequent Events
Management 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.
Note 8. New Accounting Pronouncement
In December 2011, the Financial Accounting Standards Board issued Accounting Standards Update 2011-11, Balance Sheet (Topic 210) — Disclosures about Offsetting Assets and Liabilities (“ASU 2011-11”). Effective for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods, ASU 2011-11 is intended to enhance disclosure requirements on the offsetting of financial assets and liabilities. At this time, management is evaluating the implications of ASU 2011-11 and its impact of the financial statements.
SUPPLEMENTAL INFORMATION (UNAUDITED)
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 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.
2012 Semiannual Report
All data as of June 30, 2012
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, 2012. 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 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 Small Cap Growth Equity VIP Series
Highlights
| Ÿ | | Small cap growth stocks as measured by the Russell 2000® Growth Index1 advanced in the first six months of 2012, despite uncertainty over the economic outlook and the future of the European monetary union. The Russell 2000® Index2 underperformed the larger cap S&P 500® Index3, due in part to heightened investor risk aversion later in the period. |
| Ÿ | | RS Small Cap Growth Equity VIP Series outperformed the benchmark Russell 2000® Growth Index and the Russell 2000® Index for the six-month period ended June 30, 2012. Fund performance relative to the Russell 2000® Growth Index was supported by stock selection in the technology, health care, energy and consumer staples sectors. Stock selection in the materials, producer durables, and utilities sectors detracted from relative performance. |
| Ÿ | | RS Small Cap Growth Equity VIP Series seeks long-term capital growth by normally investing in small-cap companies that we believe will produce sustainable earnings growth over a multi-year horizon. |
Market Overview
Equity markets measured by the S&P 500® Index started out the year on a positive note, as investors welcomed encouraging economic news and low U.S. interest rates. Against this backdrop, small cap growth stocks delivered strong performance, aided by more attractive valuations and a pickup in IPO and merger and acquisition activity. But optimism on the economy appeared to fade in the spring, as persistent high unemployment and weaker than expected corporate and consumer spending raised fears that the recovery might stall. Adding to this cloud of uncertainty were the ongoing debt crisis in Europe and signs of slowing economic growth in China and other Asian economies. As a result, investors became more risk averse and sold out of growth-oriented names, particularly in the technology sector. Energy stocks also fell sharply late in the period, as investors reassessed their expectations for global economic growth and raw materials demand.
Fund Performance Overview
RS Small Cap Growth Equity VIP Series returned 10.12% over the six-month period ended June 30, 2012, and outperformed its benchmarks, the Russell 2000®
Growth Index, which returned 8.81% and the Russell 2000® Index, which returned 8.53%.
Portfolio Review
The Fund’s performance relative to the Russell 2000® Growth Index was aided by several investments in the health care sector. These included Medivation Inc., a biopharmaceutical company focused on the development of small molecule drugs to address serious diseases for which there are limited treatment options. The stock gained support from positive trial results for the company’s new prostate cancer drug, which is awaiting both U.S. Food and Drug Administration approval and approval in the European Union.
The recent pickup in mergers and acquisition activity in the health care area also benefited Fund performance during the period. Notably, Inhibitex Inc., one of our holdings, announced it was being acquired by pharmaceutical company Bristol-Myers Squibb Co. for $2.4 billion, a significant premium. Inhibitex is an early-stage biotech company focused on oral, small molecule compounds to treat viral infections such as Hepatitis C. The stock proved a strong contributor to the Fund’s relative performance.
Relative results were also supported by an investment in Ulta Salon, Cosmetics & Fragrance Inc. The retailer of both high end and discount beauty supply brands has been capitalizing on its store expansion plans and innovative customer strategy.
On a negative note, several of the Fund’s other consumer discretionary investments weighed on relative performance in a challenging environment for many retailers. Detractors included beverage chain Caribou Coffee Co. Inc., as well as Body Central Corp., a retailer of trendy young women’s apparel. We decided to sell both positions later in the period given the economic sensitivity of their models.
While the Fund’s overall stock selection in the energy sector assisted relative performance, our investment in CARBO Ceramics Inc. hurt our results. The company makes a key material used in the hydraulic fracturing, or fracking, process to improve oil and natural gas drilling production. The downward volatility in natural gas prices dampened the company’s earnings prospects earlier in the year, and we chose to exit the position.
RS SMALL CAP GROWTH EQUITY VIP SERIES
Outlook
As we look ahead, we remain cautiously optimistic on the economic outlook even as we acknowledge near-term risks including the potential for slowing growth in Europe and China. Nonetheless, we believe that low interest rates and modest inflation in the United States will provide a favorable environment for small cap stocks. We remain focused on identifying what we believe are
well-managed, well-capitalized growth companies that in our view will be able to grow their revenues and tap new market opportunities even in a less certain economic environment. We continue to spend much of our time visiting companies in person and seeing first-hand how they are adapting to changing conditions.
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, 2012.
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 (unaudited)
| | |
| Total Net Assets: $89,555,511 | | |
| | | | |
| |
| Sector Allocation vs. Index4 | |
 | |
| | |
| Top Ten Holdings5 | | | |
| | |
| Holding | | % of Total
Net Assets | |
| Vitamin Shoppe, Inc. | | | 1.93% | |
| Portfolio Recovery Associates, Inc. | | | 1.93% | |
| Ultimate Software Group, Inc. | | | 1.91% | |
| Grand Canyon Education, Inc. | | | 1.79% | |
| BioMarin Pharmaceutical, Inc. | | | 1.79% | |
| Aspen Technology, Inc. | | | 1.77% | |
| Fortinet, Inc. | | | 1.75% | |
| Old Dominion Freight Line, Inc. | | | 1.74% | |
| Hexcel Corp. | | | 1.73% | |
| AmTrust Financial Services, Inc. | | | 1.72% | |
| Total | | | 18.06% | |
| 1 | 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. |
| 2 | 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. |
| 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 (unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| |
| 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 | | | | 10.12% | | | | -5.35% | | | | 19.57% | | | | 2.79% | | | | 7.91% | | | | 8.00% | |
| Russell 2000® Growth Index1 | | | | | | | 8.81% | | | | -2.71% | | | | 18.09% | | | | 1.99% | | | | 7.39% | | | | 5.25% | |
| Russell 2000® Index2 | | | | | | | 8.53% | | | | -2.08% | | | | 17.80% | | | | 0.54% | | | | 7.00% | | | | 7.05% | |
| |
| 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
1/1/12 | | Ending
Account Value
6/30/12 | | | Expenses Paid
During Period*
1/1/12-6/30/12 | | | Expense Ratio
During Period
1/1/12-6/30/12 | |
| Based on Actual Return | | $1,000.00 | | | $1,101.20 | | | | $4.55 | | | | 0.87% | |
| Based on Hypothetical Return (5% Return Before Expenses) | | $1,000.00 | | | $1,020.54 | | | | $4.37 | | | | 0.87% | |
| * | Expenses are equal to the Fund’s annualized expense ratio as indicated, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). |
SCHEDULE OF INVESTMENTS — RS SMALL CAP GROWTH EQUITY VIP SERIES
| | | | | | | | |
| June 30, 2012 (unaudited) | | Shares | | | Value | |
| Common Stocks – 97.9% | |
| Aerospace – 2.9% | |
BE Aerospace, Inc.(1) | | | 27,228 | | | $ | 1,188,774 | |
HEICO Corp., Class A | | | 44,941 | | | | 1,449,797 | |
| | | | | | | | | |
| | | | | 2,638,571 | |
| Asset Management & Custodian – 1.1% | | | | | |
Financial Engines, Inc.(1) | | | 48,028 | | | | 1,030,201 | |
| | | | | | | | | |
| | | | | 1,030,201 | |
| Auto Parts – 1.6% | | | | | | | | |
LKQ Corp.(1) | | | 42,446 | | | | 1,417,696 | |
| | | | | | | | | |
| | | | | 1,417,696 | |
| Back Office Support, HR and Consulting – 2.0% | |
Huron Consulting Group, Inc.(1) | | | 26,500 | | | | 838,725 | |
Robert Half International, Inc. | | | 33,820 | | | | 966,237 | |
| | | | | | | | | |
| | | | | 1,804,962 | |
| Banks: Diversified – 1.3% | | | | | | | | |
Signature Bank(1) | | | 18,739 | | | | 1,142,517 | |
| | | | | | | | | |
| | | | | 1,142,517 | |
| Biotechnology – 5.4% | | | | | | | | |
Aegerion Pharmaceuticals, Inc.(1) | | | 42,812 | | | | 635,330 | |
Amicus Therapeutics, Inc.(1) | | | 84,200 | | | | 463,100 | |
Dynavax Technologies Corp.(1) | | | 120,500 | | | | 520,560 | |
Idenix Pharmaceuticals, Inc.(1) | | | 56,639 | | | | 583,381 | |
Medivation, Inc.(1) | | | 11,127 | | | | 1,017,008 | |
NPS Pharmaceuticals, Inc.(1) | | | 128,208 | | | | 1,103,871 | |
Seattle Genetics, Inc.(1) | | | 18,800 | | | | 477,332 | |
| | | | | | | | | |
| | | | | 4,800,582 | |
| Building: Roofing, Wallboard & Plumbing – 1.2% | |
Beacon Roofing Supply, Inc.(1) | | | 41,200 | | | | 1,039,064 | |
| | | | | | | | | |
| | | | | 1,039,064 | |
| Commercial Vehicles & Parts – 0.7% | | | | | |
Commercial Vehicle Group, Inc.(1) | | | 72,085 | | | | 621,373 | |
| | | | | | | | | |
| | | | | 621,373 | |
| Computer Services, Software & Systems – 17.7% | |
Aspen Technology, Inc.(1) | | | 68,279 | | | | 1,580,659 | |
BroadSoft, Inc.(1) | | | 30,774 | | | | 891,215 | |
CommVault Systems, Inc.(1) | | | 13,816 | | | | 684,859 | |
Concur Technologies, Inc.(1) | | | 20,600 | | | | 1,402,860 | |
Demand Media, Inc.(1) | | | 30,000 | | | | 336,000 | |
ExactTarget, Inc.(1) | | | 53,000 | | | | 1,158,580 | |
Fortinet, Inc.(1) | | | 67,625 | | | | 1,570,252 | |
Gartner, Inc.(1) | | | 24,847 | | | | 1,069,663 | |
Infoblox, Inc.(1) | | | 52,800 | | | | 1,210,704 | |
InterXion Holding N.V.(1) | | | 40,800 | | | | 738,888 | |
Proofpoint, Inc.(1) | | | 50,300 | | | | 852,585 | |
SPS Commerce, Inc.(1) | | | 33,100 | | | | 1,005,578 | |
Tangoe, Inc.(1) | | | 44,100 | | | | 939,771 | |
Ultimate Software Group, Inc.(1) | | | 19,171 | | | | 1,708,520 | |
VeriFone Systems, Inc.(1) | | | 20,220 | | | | 669,080 | |
| | | | | | | | | |
| | | | | 15,819,214 | |
| | | | | | | | |
| June 30, 2012 (unaudited) | | Shares | | | Value | |
| Consumer Lending – 1.9% | | | | | | | | |
Portfolio Recovery Associates, Inc.(1) | | | 18,893 | | | $ | 1,724,175 | |
| | | | | | | | | |
| | | | | 1,724,175 | |
| Containers & Packaging – 1.0% | | | | | | | | |
Rock-Tenn Co., Class A | | | 16,616 | | | | 906,403 | |
| | | | | | | | | |
| | | | | 906,403 | |
| Cosmetics – 1.7% | | | | | | | | |
Elizabeth Arden, Inc.(1) | | | 38,700 | | | | 1,501,947 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | 1,501,947 | |
| Diversified Materials & Processing – 1.7% | | | | | |
Hexcel Corp.(1) | | | 59,938 | | | | 1,545,801 | |
| | | | | | | | | |
| | | | | 1,545,801 | |
| Education Services – 1.8% | | | | | | | | |
Grand Canyon Education, Inc.(1) | | | 76,519 | | | | 1,602,308 | |
| | | | | | | | | |
| | | | | 1,602,308 | |
| Financial Data & Systems – 1.0% | | | | | | | | |
Wright Express Corp.(1) | | | 14,610 | | | | 901,729 | |
| | | | | | | | | |
| | | | | 901,729 | |
| Foods – 2.1% | | | | | | | | |
The Chefs’ Warehouse, Inc.(1) | | | 38,281 | | | | 690,972 | |
The Hain Celestial Group, Inc.(1) | | | 21,049 | | | | 1,158,537 | |
| | | | | | | | | |
| | | | | 1,849,509 | |
| Health Care Facilities – 0.6% | | | | | | | | |
VCA Antech, Inc.(1) | | | 23,900 | | | | 525,322 | |
| | | | | | | | | |
| | | | | 525,322 | |
| Health Care Services – 3.8% | | | | | | | | |
Acadia Healthcare Co., Inc.(1) | | | 49,600 | | | | 869,984 | |
HMS Holdings Corp.(1) | | | 36,441 | | | | 1,213,849 | |
Team Health Holdings, Inc.(1) | | | 53,953 | | | | 1,299,728 | |
| | | | | | | | | |
| | | | | 3,383,561 | |
| Insurance: Property-Casualty – 1.7% | | | | | |
AmTrust Financial Services, Inc. | | | 51,823 | | | | 1,539,661 | |
| | | | | | | | | |
| | | | | 1,539,661 | |
| Leisure Time – 0.5% | | | | | | | | |
Life Time Fitness, Inc.(1) | | | 9,900 | | | | 460,449 | |
| | | | | | | | | |
| | | | | 460,449 | |
| Machinery: Industrial – 1.3% | | | | | | | | |
Middleby Corp.(1) | | | 11,300 | | | | 1,125,593 | |
| | | | | | | | | |
| | | | | 1,125,593 | |
| Machinery: Specialty – 1.2% | | | | | | | | |
Graco, Inc. | | | 24,315 | | | | 1,120,435 | |
| | | | | | | | | |
| | | | | 1,120,435 | |
| Medical & Dental Instruments & Supplies – 4.9% | |
ABIOMED, Inc.(1) | | | 40,508 | | | | 924,393 | |
Align Technology, Inc.(1) | | | 44,890 | | | | 1,502,019 | |
Endologix, Inc.(1) | | | 65,228 | | | | 1,007,120 | |
OraSure Technologies, Inc.(1) | | | 86,300 | | | | 970,012 | |
| | | | | | | | | |
| | | | | 4,403,544 | |
| | | | |
| 8 | | | | The accompanying notes are an integral part of these financial statements. |
RS SMALL CAP GROWTH EQUITY VIP SERIES
| | | | | | | | |
| June 30, 2012 (unaudited) | | Shares | | | Value | |
| Medical Equipment – 2.6% | | | | | | | | |
Cyberonics, Inc.(1) | | | 30,591 | | | $ | 1,374,759 | |
Dexcom, Inc.(1) | | | 77,059 | | | | 998,685 | |
| | | | | | | | | |
| | | | | 2,373,444 | |
| Metal Fabricating – 1.4% | | | | | | | | |
RBC Bearings, Inc.(1) | | | 27,216 | | | | 1,287,317 | |
| | | | | | | | | |
| | | | | | | | 1,287,317 | |
| Metals & Minerals: Diversified – 1.6% | |
Compass Minerals International, Inc. | | | 18,817 | | | | 1,435,361 | |
| | | | | | | | | |
| | | | | | | | 1,435,361 | |
| Offshore Drilling & Other Services – 1.0% | |
Atwood Oceanics, Inc.(1) | | | 23,800 | | | | 900,592 | |
| | | | | | | | | |
| | | | | | | | 900,592 | |
| Oil Well Equipment & Services – 2.1% | |
Core Laboratories N.V. | | | 7,785 | | | | 902,282 | |
OYO Geospace Corp.(1) | | | 10,784 | | | | 970,452 | |
| | | | | | | | | |
| | | | | | | | 1,872,734 | |
| Oil: Crude Producers – 3.0% | |
Energy XXI (Bermuda) Ltd. | | | 33,078 | | | | 1,035,010 | |
Kodiak Oil & Gas Corp.(1) | | | 107,171 | | | | 879,874 | |
Oasis Petroleum, Inc.(1) | | | 33,700 | | | | 814,866 | |
| | | | | | | | | |
| | | | | | | | 2,729,750 | |
| Pharmaceuticals – 3.9% | | | | | | | | |
Amarin Corp. PLC, ADR(1) | | | 30,100 | | | | 435,246 | |
BioMarin Pharmaceutical, Inc.(1) | | | 40,407 | | | | 1,599,309 | |
Jazz Pharmaceuticals PLC(1) | | | 31,900 | | | | 1,435,819 | |
| | | | | | | | | |
| | | | | | | | 3,470,374 | |
| Production Technology Equipment – 0.9% | |
FEI Co.(1) | | | 16,200 | | | | 775,008 | |
| | | | | | | | | |
| | | | | | | | 775,008 | |
| Restaurants – 0.8% | | | | | | | | |
BJ’s Restaurants, Inc.(1) | | | 19,595 | | | | 744,610 | |
| | | | | | | | | |
| | | | | | | | 744,610 | |
| Scientific Instruments: Pollution Control – 1.0% | |
Clean Harbors, Inc.(1) | | | 15,735 | | | | 887,769 | |
| | | | | | | | | |
| | | | | | | | 887,769 | |
| Securities Brokerage & Services – 1.7% | |
FX Alliance, Inc.(1) | | | 45,791 | | | | 719,377 | |
MarketAxess Holdings, Inc. | | | 29,474 | | | | 785,187 | |
| | | | | | | | | |
| | | | | | | | 1,504,564 | |
| Semiconductors & Components – 5.2% | |
CEVA, Inc.(1) | | | 17,159 | | | | 302,170 | |
Cirrus Logic, Inc.(1) | | | 25,600 | | | | 764,928 | |
Cree, Inc.(1) | | | 48,979 | | | | 1,257,291 | |
Intermolecular, Inc.(1) | | | 68,509 | | | | 530,945 | |
Microsemi Corp.(1) | | | 71,546 | | | | 1,322,885 | |
SemiLEDs Corp.(1) | | | 147,685 | | | | 456,347 | |
| | | | | | | | | |
| | | | | | | | 4,634,566 | |
| | | | | | | | |
| June 30, 2012 (unaudited) | | Shares | | | Value | |
| Specialty Retail – 7.0% | | | | | | | | |
Cabela’s, Inc.(1) | | | 28,500 | | | $ | 1,077,585 | |
DSW, Inc., Class A | | | 16,700 | | | | 908,480 | |
Express, Inc.(1) | | | 57,733 | | | | 1,049,009 | |
Ulta Salon, Cosmetics & Fragrance, Inc. | | | 15,990 | | | | 1,493,146 | |
Vitamin Shoppe, Inc.(1) | | | 31,446 | | | | 1,727,329 | |
| | | | | | | | | |
| | | | | | | | 6,255,549 | |
| Telecommunications Equipment – 0.5% | |
Vocera Communications, Inc.(1) | | | 15,610 | | | | 418,192 | |
| | | | | | | | | |
| | | | | | | | 418,192 | |
| Textiles, Apparel & Shoes – 3.2% | |
Crocs, Inc.(1) | | | 51,843 | | | | 837,265 | |
Tumi Holdings, Inc.(1) | | | 36,000 | | | | 630,000 | |
Under Armour, Inc., Class A(1) | | | 14,915 | | | | 1,409,169 | |
| | | | | | | | | |
| | | | | | | | 2,876,434 | |
| Truckers – 2.9% | | | | | | | | |
Old Dominion Freight Line, Inc.(1) | | | 35,899 | | | | 1,554,068 | |
Roadrunner Transportation Systems, Inc.(1) | | | 63,900 | | | | 1,079,271 | |
| | | | | | | | | |
| | | | | | | | 2,633,339 | |
Total Common Stocks
(Cost $76,689,995) | | | | 87,704,220 | |
| | | | | | | | |
| | | Principal
Amount | | | Value | |
| Repurchase Agreements – 4.1% | |
| | | |
State Street Bank and Trust Co. Repurchase Agreement, 0.01%, dated 6/29/2012, maturity value of $3,633,003, due 7/2/2012(2) | | $ | 3,633,000 | | | | 3,633,000 | |
Total Repurchase Agreements
(Cost $3,633,000) | | | | 3,633,000 | |
Total Investments - 102.0%
(Cost $80,322,995) | | | | | | | 91,337,220 | |
| Other Liabilities, Net - (2.0)% | | | | (1,781,709 | ) |
| Total Net Assets - 100.0% | | | $ | 89,555,511 | |
| (1) | Non-income producing security. |
| (2) | The table below presents collateral for repurchase agreements. |
| | | | | | | | | | | | |
| Security | | Coupon | | | Maturity
Date | | | Value | |
| U.S. Treasury Bond | | | 4.625% | | | | 2/15/2040 | | | $ | 3,710,737 | |
Legend:
ADR — American Depositary Receipt.
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 9 |
SCHEDULE OF INVESTMENTS — RS SMALL CAP GROWTH EQUITY VIP SERIES
The following is a summary of the inputs used as of June 30, 2012 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 | | $ | 87,704,220 | | | $ | — | | | $ | — | | | $ | 87,704,220 | |
| Repurchase Agreements | | | — | | | | 3,633,000 | | | | — | | | | 3,633,000 | |
| Total | | $ | 87,704,220 | | | $ | 3,633,000 | | | $ | — | | | $ | 91,337,220 | |
| | | | |
| 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, 2012 (unaudited) | | | |
Assets | | | | |
Investments, at value | | $ | 91,337,220 | |
Cash and cash equivalents | | | 59 | |
Dividends/interest receivable | | | 5,184 | |
Receivable for fund shares subscribed | | | 5 | |
| | | | | |
Total Assets | | | 91,342,468 | |
| | | | | |
| | |
Liabilities | | | | |
Payable for investments purchased | | | 1,571,868 | |
Payable for fund shares redeemed | | | 144,827 | |
Payable to adviser | | | 53,061 | |
Accrued trustees’ fees | | | 642 | |
Accrued expenses/other liabilities | | | 16,559 | |
| | | | | |
Total Liabilities | | | 1,786,957 | |
| | | | | |
Total Net Assets | | $ | 89,555,511 | |
| | | | | |
| | |
Net Assets Consist of: | | | | |
Paid-in capital | | $ | 82,391,716 | |
Accumulated net investment loss | | | (362,955 | ) |
Accumulated net realized loss from investments | | | (3,487,475 | ) |
Net unrealized appreciation on investments | | | 11,014,225 | |
| | | | | |
Total Net Assets | | $ | 89,555,511 | |
| | | | | |
Investments, at Cost | | $ | 80,322,995 | |
| | | | | |
| | |
Pricing of Shares | | | | |
Shares of Beneficial Interest Outstanding with no Par Value | | | 6,332,475 | |
Net Asset Value Per Share | | | $14.14 | |
| | | | | |
| | | | |
Statement of Operations For the Six-Month Period Ended June 30, 2012 (unaudited) | |
Investment Income | | | | |
Dividends | | $ | 115,740 | |
Interest | | | 135 | |
Withholding taxes on foreign dividends | | | (856 | ) |
| | | | | |
Total Investment Income | | | 115,019 | |
| | | | | |
| | |
Expenses | | | | |
Investment advisory fees | | | 343,113 | |
Custodian fees | | | 19,178 | |
Shareholder reports | | | 13,215 | |
Professional fees | | | 11,679 | |
Administrative service fees | | | 5,380 | |
Trustees’ fees | | | 2,056 | |
Other expenses | | | 2,584 | |
| | | | | |
Total Expenses | | | 397,205 | |
| | | | | |
Net Investment Loss | | | (282,186 | ) |
| | | | | |
| | |
Realized Gain/(Loss) and Change in Unrealized Appreciation/Depreciation on Investments | | | | |
Net realized gain from investments | | | 6,133,315 | |
Net change in unrealized appreciation/depreciation on investments | | | 2,793,292 | |
| | | | | |
Net Gain on Investments | | | 8,926,607 | |
| | | | | |
Net Increase in Net Assets Resulting from Operations | | $ | 8,644,421 | |
| | | | | |
| | | | | |
| | | | |
| 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
6/30/12 | | | For the
Year Ended
12/31/11 | |
| | | | |
Operations | | | | | | | | |
Net investment loss | | $ | (282,186 | ) | | $ | (619,245 | ) |
Net realized gain from investments | | | 6,133,315 | | | | 13,933,320 | |
Net change in unrealized appreciation/depreciation on investments | | | 2,793,292 | | | | (15,191,646 | ) |
| | | | | | | | | |
Net Increase/(Decrease) in Net Assets Resulting from Operations | | | 8,644,421 | | | | (1,877,571 | ) |
| | | | | | | | | |
| | | |
Capital Share Transactions | | | | | | | | |
Proceeds from sales of shares | | | 4,598,494 | | | | 10,876,447 | |
Cost of shares redeemed | | | (8,910,989 | ) | | | (24,004,736 | ) |
| | | | | | | | | |
Net Decrease in Net Assets Resulting from Capital Share Transactions | | | (4,312,495 | ) | | | (13,128,289 | ) |
| | | | | | | | | |
Net Increase/(Decrease) in Net Assets | | | 4,331,926 | | | | (15,005,860 | ) |
| | | | | | | | | |
| | | |
Net Assets | | | | | | | | |
Beginning of period | | | 85,223,585 | | | | 100,229,445 | |
| | | | | | | | | |
End of period | | $ | 89,555,511 | | | $ | 85,223,585 | |
| | | | | | | | | |
Accumulated Net Investment Loss Included in Net Assets | | $ | (362,955 | ) | | $ | (80,769 | ) |
| | | | | | | | | |
| | | |
Other Information: | | | | | | | | |
Shares | | | | | | | | |
Sold | | | 323,625 | | | | 791,722 | |
Redeemed | | | (626,398 | ) | | | (1,784,950 | ) |
| | | | | | | | | |
Net Decrease | | | (302,773 | ) | | | (993,228 | ) |
| | | | | | | | | |
| | | | | | | | | |
| | | | |
| 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 6/30/121 | | $ | 12.84 | | | $ | (0.05 | ) | | $ | 1.35 | | | $ | 1.30 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Year Ended 12/31/11 | | | 13.14 | | | | (0.09 | ) | | | (0.21 | ) | | | (0.30 | ) | | | — | | | | — | | | | — | | | | — | |
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 | ) |
| | | | |
| 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 | |
| $ | 14.14 | | | | 10.12% | | | $ | 89,556 | | | | 0.87% | | | | 0.87% | | | | (0.62)% | | | | (0.62)% | | | | 55% | |
| | 12.84 | | | | (2.28)% | | | | 85,224 | | | | 0.86% | | | | 0.86% | | | | (0.63)% | | | | (0.63)% | | | | 97% | |
| | 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% | |
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 and expense limitations and exclude the effect of 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, 2012 (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 nine 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. The Fund currently offers only Class I shares. 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 (See Note 4d). 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 in accordance with guidelines and procedures adopted 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 (“FASB”) 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 |
NOTES TO FINANCIAL STATEMENTS — RS SMALL CAP GROWTH EQUITY VIP SERIES (UNAUDITED)
| 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.
The FASB 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, 2012, the Fund had no securities classified as Level 3.
The Fund’s policy is to recognize transfers between Level 1, Level 2 and Level 3 at the end of the reporting period. For the six months ended June 30, 2012, there were no transfers between Level 1 and Level 2.
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, including securities whose prices may have been affected by events occurring after the close of trading on their principal exchange or market and, as a result, whose values are determined by a pricing service as described above, or securities whose values are otherwise determined using fair valuation methods approved by the Fund’s Board of Trustees.
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, for example, 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. 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.
NOTES TO FINANCIAL STATEMENTS — RS SMALL CAP GROWTH EQUITY VIP SERIES (UNAUDITED)
As of June 30, 2012, 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 Trust is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next twelve months. 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, 2012, the Fund did not incur any such interest or penalties. The Fund is not subject to examination by U.S. federal tax authorities for tax years before 2008 and by 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.
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
(but not in the Financial Highlights) as a reduction to the Fund’s expenses.
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, 2011, 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.
NOTES TO FINANCIAL STATEMENTS — RS SMALL CAP GROWTH EQUITY 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 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, 2011, the Fund made the following reclassifications of permanent book and tax basis differences:
| | | | | | | | |
| Paid-in-Capital | | Accumulated Net Investment Income | | | Accumulated
Net Realized (Loss) | |
| $(339,054) | | $ | 538,476 | | | $ | (199,422 | ) |
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, 2011, the Fund utilized $16,036,851 of capital loss carryovers. Capital loss carryovers available to the Fund at December 31, 2011 were $6,946,531, 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, 2011, the Fund elected to defer net capital and currency losses of $1,971,584.
b. Tax Basis of Investments The cost of investments for federal income tax purposes at June 30, 2012, was $80,689,480. The gross unrealized appreciation and depreciation on investments, on a tax basis, at June 30, 2012, aggregated $14,529,559 and $(3,881,819), respectively, resulting in net unrealized appreciation of $10,647,740.
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 $49,173,085 and $53,715,337, respectively, for the six months ended June 30, 2012.
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 $100 million committed revolving credit 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.
For the six months ended June 30, 2012, the Fund did not borrow under the facility.
Note 6. Review for Subsequent Events
Management 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 SMALL CAP GROWTH EQUITY 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.
Note 8. New Accounting Pronouncement
In December 2011, the Financial Accounting Standards Board issued Accounting Standards Update 2011-11, Balance Sheet (Topic 210) — Disclosures about Offsetting Assets and Liabilities (“ASU 2011-11”). Effective for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods, ASU 2011-11 is intended to enhance disclosure requirements on the offsetting of financial assets and liabilities. At this time, management is evaluating the implications of ASU 2011-11 and its impact on the financial statements.
SUPPLEMENTAL INFORMATION (UNAUDITED)
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 website 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 website at http://www.sec.gov.
The Statement of Additional Information includes 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.
2012 Semiannual Report
All data as of June 30, 2012
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, 2012. 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
Highlights
| Ÿ | | RS S&P 500 Index VIP Series (the “Fund”) slightly underperformed its benchmark, the S&P 500® Index1 (the “Index”), for the six months ended June 30, 2012. |
| Ÿ | | While the market proved less volatile in the first six months of 2012 than it did in 2011, volatility increased somewhat in the second quarter as economic uncertainty and the deepening debt crisis in Europe weighed on investors’ tolerance for risk. |
| Ÿ | | In managing the Fund, our goals are to track the investment performance of the Index, remain close to being fully invested in stocks, and keep trading costs to a minimum. |
Market Overview
Equities delivered strong performance in the first quarter of 2012, with investors embracing risk as decisively as they had shunned it at other times during the prior year. The Index returned 12.59% in the first quarter, its best quarterly performance since the third quarter of 2009, and its best first quarter performance since 1998.
In the second quarter, signs of slowing U.S. economic growth and worries over the deepening debt crisis in Europe dampened investor appetites for risk and contributed to renewed volatility in the equity market. The Index’s volatility was 16.63% in the second quarter, up
from 9.35% in the first. Virtually every major U.S. and global equity index ended the second quarter in negative territory, with double-digit declines for many European indexes.
Nonetheless, given the strength of first quarter gains, most U.S. equity market indexes had positive returns for the six-month period overall. Telecommunications services and technology were the Index’s leading performers over the six-month period. Energy was the weakest performer and the only sector to post a negative return for the period. Utilities were the second weakest performer.
Fund Performance Overview
The Fund returned 9.32% for the six months ended June 30, 2012. The Index returned 9.49% 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.
Outlook
We anticipate continued market volatility in the second half of 2012 as investors await more clarity on the condition of the global economy and developments in Europe. We will continue to manage the portfolio with the intention of being substantially fully invested in stocks, while we attempt to track the Index and 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, 2012.
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
Characteristics (unaudited)
| | |
| Total Net Assets: $107,772,992 | | |
|
| |
| Sector Allocation2 |
 |
| | | | |
| | |
| Top Ten Holdings3 | | | |
| | |
| Holding | | % of Total
Net Assets | |
| Apple, Inc. | | | 4.27% | |
| Exxon Mobil Corp. | | | 3.13% | |
| Microsoft Corp. | | | 1.79% | |
| International Business Machines Corp. | | | 1.76% | |
| General Electric Co. | | | 1.73% | |
| AT&T, Inc. | | | 1.64% | |
| Chevron Corp. | | | 1.63% | |
| Johnson & Johnson | | | 1.45% | |
| Wells Fargo & Co. | | | 1.39% | |
| The Coca-Cola Co. | | | 1.38% | |
| Total | | | 20.17% | |
| 1 | The S&P 500® Index is an unmanaged market-capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. 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 and expenses. Statistical data for the Index is as of 6/30/2012. |
| 2 | 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. |
| 3 | 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 (unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
| 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 | | | | 9.32% | | | | 5.22% | | | | 16.09% | | | | -0.01% | | | | 5.05% | | | | 1.52% | |
| S&P 500® Index1 | | | | | | | 9.49% | | | | 5.45% | | | | 16.40% | | | | 0.22% | | | | 5.33% | | | | 1.74% | |
| | | | | | | | | | | | |
| | | | | | |
| 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
1/1/12 | | Ending
Account Value
6/30/12 | | | Expenses Paid
During Period*
1/1/12-6/30/12 | | | Expense Ratio
During Period
1/1/12-6/30/12 | |
| Based on Actual Return | | $1,000.00 | | | $1,093.20 | | | | $1.46 | | | | 0.28% | |
| Based on Hypothetical Return (5% Return Before Expenses) | | $1,000.00 | | | $1,023.47 | | | | $1.41 | | | | 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 182/366 (to reflect the one-half year period). |
SCHEDULE OF INVESTMENTS — RS S&P 500 INDEX VIP SERIES
| | | | | | | | |
| June 30, 2012 (unaudited) | | Shares | | | Value | |
| Common Stocks – 96.1% | | | | | |
| Advertising Agencies – 0.1% | | | | | |
Omnicom Group, Inc. | | | 2,293 | | | $ | 111,440 | |
The Interpublic Group of Companies, Inc. | | | 3,718 | | | | 40,340 | |
| | | | | | | | | |
| | | | | | | | 151,780 | |
| Aerospace – 1.9% | | | | | |
FLIR Systems, Inc. | | | 1,303 | | | | 25,408 | |
General Dynamics Corp. | | | 3,033 | | | | 200,057 | |
Goodrich Corp. | | | 1,063 | | | | 134,895 | |
L-3 Communications Holdings, Inc. | | | 818 | | | | 60,540 | |
Lockheed Martin Corp. | | | 2,232 | | | | 194,363 | |
Northrop Grumman Corp. | | | 2,124 | | | | 135,490 | |
Raytheon Co. | | | 2,805 | | | | 158,735 | |
Rockwell Collins, Inc. | | | 1,226 | | | | 60,503 | |
Textron, Inc. | | | 2,363 | | | | 58,768 | |
The Boeing Co. | | | 6,305 | | | | 468,461 | |
United Technologies Corp. | | | 7,675 | | | | 579,693 | |
| | | | | | | | | |
| | | | | | | | 2,076,913 | |
| Air Transport – 0.3% | | | | | |
FedEx Corp. | | | 2,662 | | | | 243,866 | |
Southwest Airlines Co. | | | 6,454 | | | | 59,506 | |
| | | | | | | | | |
| | | | | | | | 303,372 | |
| Aluminum – 0.1% | | | | | |
Alcoa, Inc. | | | 8,977 | | | | 78,549 | |
| | | | | | | | | |
| | | | | | | | 78,549 | |
| Asset Management & Custodian – 0.8% | | | | | |
BlackRock, Inc. | | | 1,081 | | | | 183,575 | |
Federated Investors, Inc., Class B | | | 784 | | | | 17,130 | |
Franklin Resources, Inc. | | | 1,196 | | | | 132,744 | |
Invesco Ltd. | | | 3,773 | | | | 85,270 | |
Legg Mason, Inc. | | | 1,056 | | | | 27,847 | |
Northern Trust Corp. | | | 2,028 | | | | 93,329 | |
State Street Corp. | | | 4,117 | | | | 183,783 | |
T. Rowe Price Group, Inc. | | | 2,148 | | | | 135,238 | |
| | | | | | | | | |
| | | | | | | | 858,916 | |
| Auto Parts – 0.3% | | | | | |
BorgWarner, Inc.(1) | | | 961 | | | | 63,032 | |
Genuine Parts Co. | | | 1,326 | | | | 79,892 | |
Johnson Controls, Inc. | | | 5,733 | | | | 158,861 | |
| | | | | | | | | |
| | | | | | | | 301,785 | |
| Auto Services – 0.0% | | | | | |
The Goodyear Tire & Rubber Co.(1) | | | 2,051 | | | | 24,222 | |
| | | | | | | | | |
| | | | | | | | 24,222 | |
| Automobiles – 0.3% | | | | | |
Ford Motor Co. | | | 32,147 | | | | 308,290 | |
| | | | | | | | | |
| | | | | | | | 308,290 | |
| Back Office Support, HR and Consulting – 0.7% | |
Accenture PLC, Class A | | | 5,424 | | | | 325,928 | |
Automatic Data Processing, Inc. | | | 4,111 | | | | 228,818 | |
Iron Mountain, Inc. | | | 1,463 | | | | 48,221 | |
| | | | | | | | | |
| | | | | | | | |
| June 30, 2012 (unaudited) | | Shares | | | Value | |
| Back Office Support, HR and Consulting (continued) | |
Paychex, Inc. | | | 2,722 | | | $ | 85,498 | |
Robert Half International, Inc. | | | 1,199 | | | | 34,255 | |
| | | | | | | | | |
| | | | | | | | 722,720 | |
| Banks: Diversified – 3.5% | | | | | |
Bank of America Corp.(2) | | | 90,789 | | | | 742,654 | |
BB&T Corp. | | | 5,883 | | | | 181,491 | |
Comerica, Inc. | | | 1,650 | | | | 50,671 | |
Fifth Third Bancorp | | | 7,748 | | | | 103,823 | |
First Horizon National Corp. | | | 2,116 | | | | 18,303 | |
Huntington Bancshares, Inc. | | | 7,282 | | | | 46,605 | |
KeyCorp | | | 7,994 | | | | 61,874 | |
M&T Bank Corp. | | | 1,073 | | | | 88,598 | |
PNC Financial Services Group, Inc. | | | 4,454 | | | | 272,184 | |
Regions Financial Corp. | | | 11,906 | | | | 80,365 | |
SunTrust Banks, Inc. | | | 4,527 | | | | 109,689 | |
U.S. Bancorp | | | 15,955 | | | | 513,113 | |
Wells Fargo & Co. | | | 44,757 | | | | 1,496,674 | |
Zions Bancorporation | | | 1,545 | | | | 30,004 | |
| | | | | | | | | |
| | | | | | | | 3,796,048 | |
| Banks: Savings, Thrift & Mortgage Lending – 0.1% | |
Hudson City Bancorp, Inc. | | | 4,421 | | | | 28,162 | |
People’s United Financial, Inc. | | | 3,024 | | | | 35,108 | |
| | | | | | | | | |
| | | | | | | | 63,270 | |
| Beverage: Brewers & Distillers – 0.2% | | | | | |
Beam, Inc. | | | 1,331 | | | | 83,174 | |
Brown-Forman Corp., Class B | | | 842 | | | | 81,548 | |
Constellation Brands, Inc., Class A(1) | | | 1,359 | | | | 36,775 | |
Molson Coors Brewing Co., Class B | | | 1,333 | | | | 55,466 | |
| | | | | | | | | |
| | | | | | | | 256,963 | |
| Beverage: Soft Drinks – 2.4% | | | | | |
Coca-Cola Enterprises, Inc. | | | 2,521 | | | | 70,689 | |
Dr. Pepper Snapple Group, Inc. | | | 1,813 | | | | 79,319 | |
PepsiCo, Inc. | | | 13,148 | | | | 929,037 | |
The Coca-Cola Co. | | | 19,017 | | | | 1,486,939 | |
| | | | | | | | | |
| | | | | | | | 2,565,984 | |
| Biotechnology – 1.4% | | | | | |
Alexion Pharmaceuticals, Inc.(1) | | | 1,618 | | | | 160,667 | |
Amgen, Inc. | | | 6,559 | | | | 479,069 | |
Baxter International, Inc. | | | 4,653 | | | | 247,307 | |
Biogen Idec, Inc.(1) | | | 2,019 | | | | 291,503 | |
Celgene Corp.(1) | | | 3,709 | | | | 237,970 | |
Life Technologies Corp.(1) | | | 1,497 | | | | 67,350 | |
| | | | | | | | | |
| | | | | | | | 1,483,866 | |
| Building Materials – 0.1% | | | | | |
Masco Corp. | | | 3,012 | | | | 41,777 | |
Vulcan Materials Co. | | | 1,086 | | | | 43,125 | |
| | | | | | | | | |
| | | | | | | | 84,902 | |
| Cable Television Services – 1.2% | | | | | |
Cablevision Systems Corp., Class A | | | 1,801 | | | | 23,935 | |
| | | | | | | | | |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 7 |
SCHEDULE OF INVESTMENTS — RS S&P 500 INDEX VIP SERIES
| | | | | | | | |
| June 30, 2012 (unaudited) | | Shares | | | Value | |
| Cable Television Services (continued) | | | | | |
Comcast Corp., Class A | | | 22,704 | | | $ | 725,847 | |
DIRECTV, Class A(1) | | | 5,529 | | | | 269,926 | |
Scripps Networks Interactive, Inc., Class A | | | 777 | | | | 44,180 | |
Time Warner Cable, Inc. | | | 2,636 | | | | 216,416 | |
| | | | | | | | | |
| | | | | | | | 1,280,304 | |
| Casinos & Gambling – 0.0% | | | | | |
International Game Technology | | | 2,507 | | | | 39,485 | |
| | | | | | | | | |
| | | | | | | | 39,485 | |
| Chemicals: Diversified – 1.1% | | | | | |
Airgas, Inc. | | | 586 | | | | 49,230 | |
E.I. du Pont de Nemours & Co. | | | 7,893 | | | | 399,149 | |
Eastman Chemical Co. | | | 1,162 | | | | 58,530 | |
Ecolab, Inc. | | | 2,464 | | | | 168,858 | |
FMC Corp. | | | 1,152 | | | | 61,609 | |
Sigma-Aldrich Corp. | | | 1,013 | | | | 74,891 | |
The Dow Chemical Co. | | | 10,071 | | | | 317,236 | |
| | | | | | | | | |
| | | | | | | | 1,129,503 | |
| Chemicals: Specialty – 0.4% | |
Air Products & Chemicals, Inc. | | | 1,772 | | | | 143,054 | |
International Flavors & Fragrances, Inc. | | | 690 | | | | 37,812 | |
Praxair, Inc. | | | 2,515 | | | | 273,456 | |
| | | | | | | | | |
| | | | | | | | 454,322 | |
| Coal – 0.1% | |
Alpha Natural Resources, Inc.(1) | | | 1,847 | | | | 16,087 | |
CONSOL Energy, Inc. | | | 1,915 | | | | 57,910 | |
Peabody Energy Corp. | | | 2,293 | | | | 56,224 | |
| | | | | | | | | |
| | | | | | | | 130,221 | |
| Commercial Services: Rental & Leasing – 0.0% | |
Ryder System, Inc. | | | 435 | | | | 15,664 | |
| | | | | | | | | |
| | | | | | | | 15,664 | |
| Commercial Vehicles & Parts – 0.1% | |
PACCAR, Inc. | | | 3,006 | | | | 117,805 | |
| | | | | | | | | |
| | | | | | | | 117,805 | |
| Communications Technology – 1.7% | |
Cisco Systems, Inc. | | | 45,147 | | | | 775,174 | |
Harris Corp. | | | 960 | | | | 40,176 | |
JDS Uniphase Corp.(1) | | | 1,954 | | | | 21,494 | |
Juniper Networks, Inc.(1) | | | 4,467 | | | | 72,857 | |
QUALCOMM, Inc. | | | 14,439 | | | | 803,963 | |
TE Connectivity Ltd. | | | 3,611 | | | | 115,227 | |
| | | | | | | | | |
| | | | | | | | 1,828,891 | |
| Computer Services, Software & Systems – 5.3% | |
Adobe Systems, Inc.(1) | | | 4,177 | | | | 135,209 | |
Akamai Technologies, Inc.(1) | | | 1,506 | | | | 47,816 | |
Autodesk, Inc.(1) | | | 1,932 | | | | 67,601 | |
BMC Software, Inc.(1) | | | 1,359 | | | | 58,002 | |
CA, Inc. | | | 2,982 | | | | 80,782 | |
Citrix Systems, Inc.(1) | | | 1,565 | | | | 131,366 | |
| | | | | | | | | |
| | | | | | | | |
| June 30, 2012 (unaudited) | | Shares | | | Value | |
| Computer Services, Software & Systems (continued) | |
Cognizant Technology Solutions Corp., Class A(1) | | | 2,560 | | | $ | 153,600 | |
Computer Sciences Corp. | | | 1,305 | | | | 32,390 | |
F5 Networks, Inc.(1) | | | 670 | | | | 66,705 | |
Google, Inc., Class A(1) | | | 2,142 | | | | 1,242,510 | |
Intuit, Inc. | | | 2,476 | | | | 146,951 | |
Microsoft Corp.(2) | | | 62,994 | | | | 1,926,986 | |
Oracle Corp. | | | 32,685 | | | | 970,745 | |
Red Hat, Inc.(1) | | | 1,618 | | | | 91,385 | |
SAIC, Inc. | | | 2,328 | | | | 28,215 | |
Salesforce.com, Inc.(1) | | | 1,161 | | | | 160,520 | |
Symantec Corp.(1) | | | 6,086 | | | | 88,916 | |
Teradata Corp.(1) | | | 1,421 | | | | 102,326 | |
VeriSign, Inc.(1) | | | 1,338 | | | | 58,297 | |
Yahoo! Inc.(1) | | | 10,250 | | | | 162,258 | |
| | | | | | | | | |
| | | | | | | | 5,752,580 | |
| Computer Technology – 7.2% | |
Apple, Inc.(2) | | | 7,877 | | | | 4,600,168 | |
Dell, Inc.(1) | | | 12,542 | | | | 157,026 | |
EMC Corp.(1) | | | 17,682 | | | | 453,190 | |
Hewlett-Packard Co. | | | 16,663 | | | | 335,093 | |
International Business Machines Corp.(2) | | | 9,718 | | | | 1,900,646 | |
NetApp, Inc.(1) | | | 3,056 | | | | 97,242 | |
NVIDIA Corp.(1) | | | 5,212 | | | | 72,030 | |
SanDisk Corp.(1) | | | 2,052 | | | | 74,857 | |
Western Digital Corp.(1) | | | 1,969 | | | | 60,015 | |
| | | | | | | | | |
| | | | | | | | 7,750,267 | |
| Consumer Electronics – 0.0% | |
Harman International Industries, Inc. | | | 606 | | | | 23,998 | |
| | | | | | | | | |
| | | | | | | | 23,998 | |
| Consumer Lending – 0.1% | |
SLM Corp. | | | 4,099 | | | | 64,395 | |
| | | | | | | | | |
| | | | | | | | 64,395 | |
| Consumer Services: Miscellaneous – 0.4% | |
eBay, Inc.(1) | | | 9,683 | | | | 406,783 | |
H & R Block, Inc. | | | 2,471 | | | | 39,486 | |
| | | | | | | | | |
| | | | | | | | 446,269 | |
| Containers & Packaging – 0.1% | |
Ball Corp. | | | 1,318 | | | | 54,104 | |
Bemis Co., Inc. | | | 834 | | | | 26,138 | |
Owens-Illinois, Inc.(1) | | | 1,382 | | | | 26,493 | |
Sealed Air Corp. | | | 1,644 | | | | 25,383 | |
| | | | | | | | | |
| | | | | | | | 132,118 | |
| Copper – 0.3% | |
Freeport-McMoran Copper & Gold, Inc. | | | 7,996 | | | | 272,424 | |
| | | | | | | | | |
| | | | | | | | 272,424 | |
| Cosmetics – 0.2% | |
Avon Products, Inc. | | | 3,641 | | | | 59,021 | |
Estee Lauder Companies, Inc., Class A | | | 1,892 | | | | 102,395 | |
| | | | | | | | | |
| | | | | | | | 161,416 | |
| | | | |
| 8 | | | | The accompanying notes are an integral part of these financial statements. |
RS S&P 500 INDEX VIP SERIES
| | | | | | | | |
| June 30, 2012 (unaudited) | | Shares | | | Value | |
| Diversified Financial Services – 2.8% | |
Ameriprise Financial, Inc. | | | 1,837 | | | $ | 96,002 | |
Bank of New York Mellon Corp. | | | 10,050 | | | | 220,597 | |
Capital One Financial Corp. | | | 4,884 | | | | 266,959 | |
Citigroup, Inc. | | | 24,702 | | | | 677,082 | |
JPMorgan Chase & Co.(2) | | | 32,064 | | | | 1,145,647 | |
Leucadia National Corp. | | | 1,665 | | | | 35,415 | |
Morgan Stanley | | | 12,831 | | | | 187,204 | |
The Goldman Sachs Group, Inc. | | | 4,144 | | | | 397,244 | |
| | | | | | | | | |
| | | | | | | | 3,026,150 | |
| Diversified Manufacturing Operations – 3.5% | |
3M Co. | | | 5,849 | | | | 524,070 | |
Danaher Corp. | | | 4,844 | | | | 252,276 | |
Dover Corp. | | | 1,555 | | | | 83,364 | |
Eaton Corp. | | | 2,843 | | | | 112,668 | |
General Electric Co.(2) | | | 89,287 | | | | 1,860,741 | |
Honeywell International, Inc. | | | 6,558 | | | | 366,199 | |
Illinois Tool Works, Inc. | | | 4,024 | | | | 212,829 | |
Ingersoll-Rand PLC | | | 2,520 | | | | 106,294 | |
Tyco International Ltd. | | | 3,897 | | | | 205,956 | |
| | | | | | | | | |
| | | | | | | | 3,724,397 | |
| Diversified Media – 0.8% | |
Discovery Communications, Inc., Class A(1) | | | 2,145 | | | | 115,830 | |
News Corp., Class A | | | 17,751 | | | | 395,670 | |
Time Warner, Inc. | | | 8,074 | | | | 310,849 | |
| | | | | | | | | |
| | | | | | | | 822,349 | |
| Diversified Retail – 2.7% | |
Amazon.com, Inc.(1) | | | 3,034 | | | | 692,814 | |
Big Lots, Inc.(1) | | | 538 | | | | 21,945 | |
Costco Wholesale Corp. | | | 3,646 | | | | 346,370 | |
Dollar Tree, Inc.(1) | | | 1,950 | | | | 104,910 | |
Family Dollar Stores, Inc. | | | 989 | | | | 65,749 | |
J.C. Penney Co., Inc. | | | 1,237 | | | | 28,834 | |
Kohl’s Corp. | | | 2,025 | | | | 92,117 | |
Macy’s, Inc. | | | 3,476 | | | | 119,401 | |
Nordstrom, Inc. | | | 1,352 | | | | 67,181 | |
Sears Holdings Corp.(1) | | | 322 | | | | 19,223 | |
Target Corp. | | | 5,573 | | | | 324,293 | |
Wal-Mart Stores, Inc. | | | 14,534 | | | | 1,013,311 | |
| | | | | | | | | |
| | | | | | | | 2,896,148 | |
| Drug & Grocery Store Chains – 0.9% | |
CVS Caremark Corp. | | | 10,794 | | | | 504,404 | |
Safeway, Inc. | | | 2,010 | | | | 36,482 | |
The Kroger Co. | | | 4,741 | | | | 109,944 | |
Walgreen Co. | | | 7,266 | | | | 214,928 | |
Whole Foods Market, Inc. | | | 1,376 | | | | 131,160 | |
| | | | | | | | | |
| | | | | | | | 996,918 | |
| Education Services – 0.0% | |
Apollo Group, Inc., Class A(1) | | | 908 | | | | 32,861 | |
DeVry, Inc. | | | 498 | | | | 15,423 | |
| | | | | | | | | |
| | | | | | | | 48,284 | |
| | | | | | | | |
| June 30, 2012 (unaudited) | | Shares | | | Value | |
| Electronic Components – 0.3% | |
Amphenol Corp., Class A | | | 1,365 | | | $ | 74,966 | |
Corning, Inc. | | | 12,799 | | | | 165,491 | |
Molex, Inc. | | | 1,163 | | | | 27,842 | |
| | | | | | | | | |
| | | | | | | | 268,299 | |
| Electronic Entertainment – 0.0% | |
Electronic Arts, Inc.(1) | | | 2,684 | | | | 33,147 | |
| | | | | | | | | |
| | | | | | | | 33,147 | |
| Energy Equipment – 0.0% | |
First Solar, Inc.(1) | | | 496 | | | | 7,470 | |
| | | | | | | | | |
| | | | | | | | 7,470 | |
| Engineering & Contracting Services – 0.1% | |
Fluor Corp. | | | 1,423 | | | | 70,211 | |
Jacobs Engineering Group, Inc.(1) | | | 1,084 | | | | 41,040 | |
Quanta Services, Inc.(1) | | | 1,794 | | | | 43,182 | |
| | | | | | | | | |
| | | | | | | | 154,433 | |
| Entertainment – 0.9% | |
The Walt Disney Co. | | | 15,057 | | | | 730,264 | |
Viacom, Inc., Class B | | | 4,443 | | | | 208,910 | |
| | | | | | | | | |
| | | | | | | | 939,174 | |
| Environmental, Maintenance, And Security Services – 0.0% | |
Cintas Corp. | | | 930 | | | | 35,907 | |
| | | | | | | | | |
| | | | | | | | 35,907 | |
| Fertilizers – 0.6% | |
CF Industries Holdings, Inc. | | | 552 | | | | 106,944 | |
Monsanto Co. | | | 4,493 | | | | 371,931 | |
The Mosaic Co. | | | 2,500 | | | | 136,900 | |
| | | | | | | | | |
| | | | | | | | 615,775 | |
| Financial Data & Systems – 1.8% | |
American Express Co. | | | 8,437 | | | | 491,118 | |
Discover Financial Services | | | 4,462 | | | | 154,296 | |
Equifax, Inc. | | | 1,018 | | | | 47,439 | |
Fidelity National Information Services, Inc. | | | 2,014 | | | | 68,637 | |
Fiserv, Inc.(1) | | | 1,147 | | | | 82,836 | |
MasterCard, Inc., Class A | | | 894 | | | | 384,518 | |
Moody’s Corp. | | | 1,668 | | | | 60,965 | |
The Dun & Bradstreet Corp. | | | 404 | | | | 28,753 | |
Total System Services, Inc. | | | 1,361 | | | | 32,569 | |
Visa, Inc., Class A | | | 4,195 | | | | 518,628 | |
Western Union Co. | | | 5,169 | | | | 87,046 | |
| | | | | | | | | |
| | | | | | | | 1,956,805 | |
| Foods – 1.7% | |
Campbell Soup Co. | | | 1,513 | | | | 50,504 | |
ConAgra Foods, Inc. | | | 3,484 | | | | 90,340 | |
Dean Foods Co.(1) | | | 1,549 | | | | 26,379 | |
General Mills, Inc. | | | 5,403 | | | | 208,232 | |
H.J. Heinz Co. | | | 2,712 | | | | 147,479 | |
Hormel Foods Corp. | | | 1,112 | | | | 33,827 | |
Kellogg Co. | | | 2,096 | | | | 103,396 | |
Kraft Foods, Inc., Class A | | | 14,905 | | | | 575,631 | |
| | | | | | | | | |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 9 |
SCHEDULE OF INVESTMENTS — RS S&P 500 INDEX VIP SERIES
| | | | | | | | |
| June 30, 2012 (unaudited) | | Shares | | | Value | |
| Foods (continued) | |
McCormick & Co., Inc. | | | 1,106 | | | $ | 67,079 | |
Mead Johnson Nutrition Co. | | | 1,711 | | | | 137,753 | |
Sysco Corp. | | | 4,934 | | | | 147,082 | |
The Hershey Co. | | | 1,284 | | | | 92,486 | |
The JM Smucker Co. | | | 970 | | | | 73,254 | |
Tyson Foods, Inc., Class A | | | 2,466 | | | | 46,435 | |
| | | | | | | | | |
| | | | | | | | 1,799,877 | |
| Forms And Bulk Printing Services – 0.0% | |
R.R. Donnelley & Sons Co. | | | 1,510 | | | | 17,773 | |
| | | | | | | | | |
| | | | | | | | 17,773 | |
| Fruit & Grain Processing – 0.2% | |
Archer-Daniels-Midland Co. | | | 5,558 | | | | 164,072 | |
| | | | | | | | | |
| | | | | | | | 164,072 | |
| Gas Pipeline – 0.3% | |
EQT Corp. | | | 1,257 | | | | 67,413 | |
Kinder Morgan, Inc. | | | 4,257 | | | | 137,160 | |
Spectra Energy Corp. | | | 5,500 | | | | 159,830 | |
| | | | | | | | | |
| | | | | | | | 364,403 | |
| Gold – 0.2% | |
Newmont Mining Corp. | | | 4,174 | | | | 202,481 | |
| | | | | | | | | |
| | | | | | | | 202,481 | |
| Health Care Facilities – 0.1% | |
DaVita, Inc.(1) | | | 794 | | | | 77,979 | |
Tenet Healthcare Corp.(1) | | | 3,460 | | | | 18,130 | |
| | | | | | | | | |
| | | | | | | | 96,109 | |
| Health Care Management Services – 1.0% | |
Aetna, Inc. | | | 2,932 | | | | 113,674 | |
CIGNA Corp. | | | 2,409 | | | | 105,996 | |
Coventry Health Care, Inc. | | | 1,187 | | | | 37,735 | |
Humana, Inc. | | | 1,373 | | | | 106,325 | |
UnitedHealth Group, Inc. | | | 8,746 | | | | 511,641 | |
WellPoint, Inc. | | | 2,788 | | | | 177,846 | |
| | | | | | | | | |
| | | | | | | | 1,053,217 | |
| Health Care Services – 0.6% | |
Cerner Corp.(1) | | | 1,236 | | | | 102,168 | |
Express Scripts Holding Co.(1) | | | 6,784 | | | | 378,750 | |
McKesson Corp. | | | 1,988 | | | | 186,375 | |
| | | | | | | | | |
| | | | | | | | 667,293 | |
| Home Building – 0.1% | |
D.R. Horton, Inc. | | | 2,362 | | | | 43,414 | |
Lennar Corp., Class A | | | 1,372 | | | | 42,408 | |
Pulte Group, Inc.(1) | | | 2,839 | | | | 30,377 | |
| | | | | | | | | |
| | | | | | | | 116,199 | |
| Hotel/Motel – 0.3% | |
Marriott International, Inc., Class A | | | 2,227 | | | | 87,298 | |
Starwood Hotels & Resorts Worldwide, Inc. | | | 1,666 | | | | 88,365 | |
Wyndham Worldwide Corp. | | | 1,231 | | | | 64,923 | |
Wynn Resorts Ltd. | | | 669 | | | | 69,389 | |
| | | | | | | | | |
| | | | | | | | 309,975 | |
| | | | | | | | |
| June 30, 2012 (unaudited) | | Shares | | | Value | |
| Household Appliances – 0.0% | |
Whirlpool Corp. | | | 650 | | | $ | 39,754 | |
| | | | | | | | | |
| | | | | | | | 39,754 | |
| Household Equipment & Products – 0.1% | |
Newell Rubbermaid, Inc. | | | 2,439 | | | | 44,243 | |
Snap-On, Inc. | | | 490 | | | | 30,503 | |
| | | | | | | | | |
| | | | | | | | 74,746 | |
| Household Furnishings – 0.0% | |
Leggett & Platt, Inc. | | | 1,174 | | | | 24,807 | |
| | | | | | | | | |
| | | | | | | | 24,807 | |
| Insurance: Life – 0.5% | |
Aflac, Inc. | | | 3,935 | | | | 167,592 | |
Lincoln National Corp. | | | 2,405 | | | | 52,597 | |
Principal Financial Group, Inc. | | | 2,540 | | | | 66,624 | |
Prudential Financial, Inc. | | | 3,950 | | | | 191,299 | |
Torchmark Corp. | | | 827 | | | | 41,805 | |
Unum Group | | | 2,434 | | | | 46,562 | |
| | | | | | | | | |
| | | | | | | | 566,479 | |
| Insurance: Multi-Line – 2.0% | |
American International Group, Inc.(1) | | | 5,386 | | | | 172,837 | |
Aon PLC | | | 2,733 | | | | 127,850 | |
Assurant, Inc. | | | 722 | | | | 25,155 | |
Berkshire Hathaway, Inc., Class B(1) | | | 14,808 | | | | 1,233,951 | |
Genworth Financial, Inc., Class A(1) | | | 4,129 | | | | 23,370 | |
Loews Corp. | | | 2,577 | | | | 105,425 | |
Marsh & McLennan Companies, Inc. | | | 4,583 | | | | 147,710 | |
MetLife, Inc. | | | 8,944 | | | | 275,922 | |
The Hartford Financial Services Group, Inc. | | | 3,702 | | | | 65,266 | |
| | | | | | | | | |
| | | | | | | | 2,177,486 | |
| Insurance: Property-Casualty – 0.9% | |
ACE Ltd. | | | 2,853 | | | | 211,493 | |
Cincinnati Financial Corp. | | | 1,354 | | | | 51,547 | |
The Allstate Corp. | | | 4,140 | | | | 145,273 | |
The Chubb Corp. | | | 2,277 | | | | 165,811 | |
The Progressive Corp. | | | 5,130 | | | | 106,858 | |
The Travelers Companies, Inc. | | | 3,265 | | | | 208,437 | |
XL Group PLC | | | 2,713 | | | | 57,081 | |
| | | | | | | | | |
| | | | | | | | 946,500 | |
| Leisure Time – 0.4% | |
Carnival Corp. | | | 3,807 | | | | 130,466 | |
Expedia, Inc. | | | 762 | | | | 36,629 | |
Priceline.com, Inc.(1) | | | 420 | | | | 279,098 | |
TripAdvisor, Inc.(1) | | | 792 | | | | 35,395 | |
| | | | | | | | | |
| | | | | | | | 481,588 | |
| Luxury Items – 0.1% | |
Fossil, Inc.(1) | | | 439 | | | | 33,601 | |
Tiffany & Co. | | | 1,062 | | | | 56,233 | |
| | | | | | | | | |
| | | | | | | | 89,834 | |
| | | | |
| 10 | | | | The accompanying notes are an integral part of these financial statements. |
RS S&P 500 INDEX VIP SERIES
| | | | | | | | |
| June 30, 2012 (unaudited) | | Shares | | | Value | |
| Machinery: Agricultural – 0.3% | |
Deere & Co. | | | 3,352 | | | $ | 271,076 | |
| | | | | | | | | |
| | | | | | | | 271,076 | |
| Machinery: Construction & Handling – 0.4% | |
Caterpillar, Inc. | | | 5,495 | | | | 466,580 | |
| | | | | | | | | |
| | | | | | | | 466,580 | |
| Machinery: Engines – 0.1% | |
Cummins, Inc. | | | 1,619 | | | | 156,897 | |
| | | | | | | | | |
| | | | | | | | 156,897 | |
| Machinery: Industrial – 0.0% | |
Joy Global, Inc. | | | 894 | | | | 50,717 | |
| | | | | | | | | |
| | | | | | | | 50,717 | |
| Machinery: Tools – 0.1% | |
Stanley Black & Decker, Inc. | | | 1,440 | | | | 92,678 | |
| | | | | | | | | |
| | | | | | | | 92,678 | |
| Medical & Dental Instruments & Supplies – 0.7% | |
Becton, Dickinson and Co. | | | 1,720 | | | | 128,570 | |
Boston Scientific Corp.(1) | | | 12,027 | | | | 68,193 | |
C.R. Bard, Inc. | | | 708 | | | | 76,068 | |
DENTSPLY International, Inc. | | | 1,208 | | | | 45,674 | |
Edwards Lifesciences Corp.(1) | | | 959 | | | | 99,065 | |
Patterson Companies, Inc. | | | 744 | | | | 25,646 | |
St. Jude Medical, Inc. | | | 2,639 | | | | 105,322 | |
Stryker Corp. | | | 2,731 | | | | 150,478 | |
Zimmer Holdings, Inc. | | | 1,486 | | | | 95,639 | |
| | | | | | | | | |
| | | | | | | | 794,655 | |
| Medical Equipment – 1.0% | |
CareFusion Corp.(1) | | | 1,868 | | | | 47,970 | |
Covidien PLC | | | 4,058 | | | | 217,103 | |
Intuitive Surgical, Inc.(1) | | | 338 | | | | 187,181 | |
Medtronic, Inc. | | | 8,781 | | | | 340,088 | |
PerkinElmer, Inc. | | | 952 | | | | 24,562 | |
Thermo Fisher Scientific, Inc. | | | 3,090 | | | | 160,402 | |
Varian Medical Systems, Inc.(1) | | | 938 | | | | 57,002 | |
| | | | | | | | | |
| | | | | | | | 1,034,308 | |
| Medical Services – 0.1% | |
Laboratory Corp. of America Holdings(1) | | | 821 | | | | 76,033 | |
Quest Diagnostics, Inc. | | | 1,342 | | | | 80,386 | |
| | | | | | | | | |
| | | | | | | | 156,419 | |
| Metal Fabricating – 0.3% | |
Fastenal Co. | | | 2,491 | | | | 100,412 | |
Precision Castparts Corp. | | | 1,227 | | | | 201,829 | |
| | | | | | | | | |
| | | | | | | | 302,241 | |
| Metals & Minerals: Diversified – 0.1% | |
Cliffs Natural Resources, Inc. | | | 1,201 | | | | 59,198 | |
Titanium Metals Corp. | | | 691 | | | | 7,815 | |
| | | | | | | | | |
| | | | | | | | 67,013 | |
| Office Supplies & Equipment – 0.1% | |
Avery Dennison Corp. | | | 869 | | | | 23,758 | |
| | | | | | | | | |
| | | | | | | | |
| June 30, 2012 (unaudited) | | Shares | | | Value | |
| Office Supplies & Equipment (continued) | |
Lexmark International Group, Inc., Class A | | | 610 | | | $ | 16,214 | |
Pitney Bowes, Inc. | | | 1,694 | | | | 25,359 | |
Xerox Corp. | | | 11,362 | | | | 89,419 | |
| | | | | | | | | |
| | | | | | | | 154,750 | |
| Offshore Drilling & Other Services – 0.0% | |
Diamond Offshore Drilling, Inc. | | | 601 | | | | 35,537 | |
| | | | | | | | | |
| | | | | | | | 35,537 | |
| Oil Well Equipment & Services – 1.6% | |
Baker Hughes, Inc. | | | 3,692 | | | | 151,741 | |
Cameron International Corp.(1) | | | 2,069 | | | | 88,367 | |
FMC Technologies, Inc.(1) | | | 2,004 | | | | 78,617 | |
Halliburton Co. | | | 7,779 | | | | 220,846 | |
Helmerich & Payne, Inc. | | | 911 | | | | 39,610 | |
Nabors Industries Ltd.(1) | | | 2,449 | | | | 35,266 | |
National Oilwell Varco, Inc. | | | 3,592 | | | | 231,468 | |
Noble Corp.(1) | | | 2,118 | | | | 68,899 | |
Rowan Companies PLC(1) | | | 1,046 | | | | 33,817 | |
Schlumberger Ltd. | | | 11,237 | | | | 729,394 | |
| | | | | | | | | |
| | | | | | | | 1,678,025 | |
| Oil: Crude Producers – 2.1% | |
Anadarko Petroleum Corp. | | | 4,213 | | | | 278,901 | |
Apache Corp. | | | 3,294 | | | | 289,510 | |
Cabot Oil & Gas Corp. | | | 1,767 | | | | 69,620 | |
Chesapeake Energy Corp. | | | 5,579 | | | | 103,769 | |
Denbury Resources, Inc.(1) | | | 3,294 | | | | 49,772 | |
Devon Energy Corp. | | | 3,406 | | | | 197,514 | |
EOG Resources, Inc. | | | 2,270 | | | | 204,550 | |
Newfield Exploration Co.(1) | | | 1,136 | | | | 33,296 | |
Noble Energy, Inc. | | | 1,498 | | | | 127,060 | |
Occidental Petroleum Corp. | | | 6,831 | | | | 585,895 | |
Pioneer Natural Resources Co. | | | 1,028 | | | | 90,680 | |
QEP Resources, Inc. | | | 1,504 | | | | 45,075 | |
Range Resources Corp. | | | 1,364 | | | | 84,391 | |
Southwestern Energy Co.(1) | | | 2,923 | | | | 93,331 | |
WPX Energy, Inc.(1) | | | 1,685 | | | | 27,263 | |
| | | | | | | | | |
| | | | | | | | 2,280,627 | |
| Oil: Integrated – 5.8% | |
Chevron Corp. | | | 16,628 | | | | 1,754,254 | |
ConocoPhillips | | | 10,640 | | | | 594,563 | |
Exxon Mobil Corp.(2) | | | 39,401 | | | | 3,371,544 | |
Hess Corp. | | | 2,559 | | | | 111,188 | |
Marathon Oil Corp. | | | 5,942 | | | | 151,937 | |
Murphy Oil Corp. | | | 1,638 | | | | 82,375 | |
Williams Companies, Inc. | | | 5,267 | | | | 151,795 | |
| | | | | | | | | |
| | | | | | | | 6,217,656 | |
| Oil: Refining And Marketing – 0.5% | |
Marathon Petroleum Corp. | | | 2,867 | | | | 128,786 | |
Phillips 66 | | | 5,268 | | | | 175,108 | |
Sunoco, Inc. | | | 892 | | | | 42,370 | |
| | | | | | | | | |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 11 |
SCHEDULE OF INVESTMENTS — RS S&P 500 INDEX VIP SERIES
| | | | | | | | |
| June 30, 2012 (unaudited) | | Shares | | | Value | |
| Oil: Refining And Marketing (continued) | |
Tesoro Corp.(1) | | | 1,177 | | | $ | 29,378 | |
Valero Energy Corp. | | | 4,659 | | | | 112,515 | |
| | | | | | | | | |
| | | | | | | | 488,157 | |
| Paints & Coatings – 0.2% | |
PPG Industries, Inc. | | | 1,284 | | | | 136,258 | |
The Sherwin-Williams Co. | | | 723 | | | | 95,689 | |
| | | | | | | | | |
| | | | | | | | 231,947 | |
| Paper – 0.1% | |
International Paper Co. | | | 3,684 | | | | 106,504 | |
MeadWestvaco Corp. | | | 1,454 | | | | 41,803 | |
| | | | | | | | | |
| | | | | | | | 148,307 | |
| Personal Care – 2.0% | |
Clorox Co. | | | 1,118 | | | | 81,010 | |
Colgate-Palmolive Co. | | | 4,023 | | | | 418,794 | |
Kimberly-Clark Corp. | | | 3,311 | | | | 277,363 | |
The Procter & Gamble Co.(2) | | | 23,105 | | | | 1,415,181 | |
| | | | | | | | | |
| | | | | | | | 2,192,348 | |
| Pharmaceuticals – 6.5% | |
Abbott Laboratories | | | 13,268 | | | | 855,388 | |
Allergan, Inc. | | | 2,588 | | | | 239,571 | |
AmerisourceBergen Corp. | | | 2,136 | | | | 84,052 | |
Bristol-Myers Squibb Co. | | | 14,228 | | | | 511,497 | |
Cardinal Health, Inc. | | | 2,891 | | | | 121,422 | |
Eli Lilly & Co. | | | 8,575 | | | | 367,953 | |
Forest Laboratories, Inc.(1) | | | 2,252 | | | | 78,797 | |
Gilead Sciences, Inc.(1) | | | 6,381 | | | | 327,218 | |
Hospira, Inc.(1) | | | 1,387 | | | | 48,517 | |
Johnson & Johnson(2) | | | 23,097 | | | | 1,560,433 | |
Merck & Co., Inc. | | | 25,613 | | | | 1,069,343 | |
Mylan, Inc.(1) | | | 3,607 | | | | 77,082 | |
Perrigo Co. | | | 798 | | | | 94,108 | |
Pfizer, Inc. | | | 63,076 | | | | 1,450,748 | |
Watson Pharmaceuticals, Inc.(1) | | | 1,085 | | | | 80,279 | |
| | | | | | | | | |
| | | | | | | | 6,966,408 | |
| Producer Durables: Miscellaneous – 0.1% | |
W.W. Grainger, Inc. | | | 519 | | | | 99,254 | |
| | | | | | | | | |
| | | | | | | | 99,254 | |
| Production Technology Equipment – 0.3% | |
Applied Materials, Inc. | | | 10,829 | | | | 124,100 | |
KLA-Tencor Corp. | | | 1,408 | | | | 69,344 | |
Lam Research Corp.(1) | | | 1,689 | | | | 63,743 | |
Teradyne, Inc.(1) | | | 1,581 | | | | 22,229 | |
| | | | | | | | | |
| | | | | | | | 279,416 | |
| Publishing – 0.1% | |
Gannett Co., Inc. | | | 1,972 | | | | 29,047 | |
The McGraw-Hill Companies, Inc. | | | 2,357 | | | | 106,065 | |
The Washington Post Co., Class B | | | 41 | | | | 15,327 | |
| | | | | | | | | |
| | | | | | | | 150,439 | |
| | | | | | | | |
| June 30, 2012 (unaudited) | | Shares | | | Value | |
| Radio & TV Broadcasters – 0.2% | |
CBS Corp., Class B | | | 5,461 | | | $ | 179,012 | |
| | | | | | | | | |
| | | | | | | | 179,012 | |
| Railroads – 0.8% | |
CSX Corp. | | | 8,761 | | | | 195,896 | |
Norfolk Southern Corp. | | | 2,752 | | | | 197,511 | |
Union Pacific Corp. | | | 4,012 | | | | 478,672 | |
| | | | | | | | | |
| | | | | | | | 872,079 | |
| Real Estate – 0.0% | |
CBRE Group, Inc.(1) | | | 2,767 | | | | 45,268 | |
| | | | | | | | | |
| | | | | | | | 45,268 | |
| Real Estate Investment Trusts – 2.1% | |
American Tower Corp. | | | 3,325 | | | | 232,451 | |
Apartment Investment & Management Co., Class A | | | 1,107 | | | | 29,922 | |
AvalonBay Communities, Inc. | | | 809 | | | | 114,457 | |
Boston Properties, Inc. | | | 1,258 | | | | 136,329 | |
Equity Residential | | | 2,516 | | | | 156,898 | |
HCP, Inc. | | | 3,541 | | | | 156,335 | |
Health Care REIT, Inc. | | | 1,805 | | | | 105,231 | |
Host Hotels & Resorts, Inc. | | | 6,047 | | | | 95,664 | |
Kimco Realty Corp. | | | 3,434 | | | | 65,349 | |
Plum Creek Timber Co., Inc. | | | 1,349 | | | | 53,555 | |
ProLogis, Inc. | | | 3,882 | | | | 128,999 | |
Public Storage, Inc. | | | 1,207 | | | | 174,303 | |
Simon Property Group, Inc. | | | 2,554 | | | | 397,556 | |
Ventas, Inc. | | | 2,432 | | | | 153,508 | |
Vornado Realty Trust | | | 1,561 | | | | 131,093 | |
Weyerhaeuser Co. | | | 4,537 | | | | 101,447 | |
| | | | | | | | | |
| | | | | | | | 2,233,097 | |
| Recreational Vehicles & Boats – 0.1% | |
Harley-Davidson, Inc. | | | 1,949 | | | | 89,128 | |
| | | | | | | | | |
| | | | | | | | 89,128 | |
| Restaurants – 1.4% | |
Chipotle Mexican Grill, Inc.(1) | | | 266 | | | | 101,067 | |
Darden Restaurants, Inc. | | | 1,085 | | | | 54,934 | |
McDonald’s Corp. | | | 8,567 | | | | 758,437 | |
Starbucks Corp. | | | 6,389 | | | | 340,661 | |
Yum! Brands, Inc. | | | 3,877 | | | | 249,756 | |
| | | | | | | | | |
| | | | | | | | 1,504,855 | |
| Scientific Instruments: Control & Filter – 0.4% | |
Flowserve Corp. | | | 460 | | | | 52,785 | |
Pall Corp. | | | 967 | | | | 53,001 | |
Parker Hannifin Corp. | | | 1,267 | | | | 97,407 | |
Rockwell Automation, Inc. | | | 1,204 | | | | 79,536 | |
Roper Industries, Inc. | | | 828 | | | | 81,624 | |
Waters Corp.(1) | | | 752 | | | | 59,762 | |
| | | | | | | | | |
| | | | | | | | 424,115 | |
| Scientific Instruments: Electrical – 0.4% | |
Cooper Industries PLC | | | 1,342 | | | | 91,497 | |
| | | | | | | | | |
| | | | |
| 12 | | | | The accompanying notes are an integral part of these financial statements. |
RS S&P 500 INDEX VIP SERIES
| | | | | | | | |
| June 30, 2012 (unaudited) | | Shares | | | Value | |
| Scientific Instruments: Electrical (continued) | |
Emerson Electric Co. | | | 6,174 | | | $ | 287,585 | |
| | | | | | | | | |
| | | | | | | | 379,082 | |
| Scientific Instruments: Gauges & Meters – 0.1% | |
Agilent Technologies, Inc. | | | 2,930 | | | | 114,973 | |
| | | | | | | | | |
| | | | | | | | 114,973 | |
| Scientific Instruments: Pollution Control – 0.3% | |
Republic Services, Inc. | | | 2,641 | | | | 69,881 | |
Stericycle, Inc.(1) | | | 727 | | | | 66,644 | |
Waste Management, Inc. | | | 3,913 | | | | 130,694 | |
Xylem, Inc. | | | 1,576 | | | | 39,668 | |
| | | | | | | | | |
| | | | | | | | 306,887 | |
| Securities Brokerage & Services – 0.4% | |
CME Group, Inc. | | | 567 | | | | 152,018 | |
E*TRADE Financial Corp.(1) | | | 2,142 | | | | 17,222 | |
IntercontinentalExchange, Inc.(1) | | | 614 | | | | 83,492 | |
NYSE Euronext | | | 2,144 | | | | 54,844 | |
The Charles Schwab Corp. | | | 9,112 | | | | 117,818 | |
The NASDAQ OMX Group, Inc. | | | 1,044 | | | | 23,667 | |
| | | | | | | | | |
| | | | | | | | 449,061 | |
| Semiconductors & Components – 1.9% | |
Advanced Micro Devices, Inc.(1) | | | 4,982 | | | | 28,547 | |
Altera Corp. | | | 2,719 | | | | 92,011 | |
Analog Devices, Inc. | | | 2,499 | | | | 94,137 | |
Broadcom Corp., Class A(1) | | | 4,165 | | | | 140,777 | |
Intel Corp. | | | 42,381 | | | | 1,129,454 | |
Linear Technology Corp. | | | 1,929 | | | | 60,436 | |
LSI Corp.(1) | | | 4,789 | | | | 30,506 | |
Microchip Technology, Inc. | | | 1,626 | | | | 53,788 | |
Micron Technology, Inc.(1) | | | 8,327 | | | | 52,543 | |
Texas Instruments, Inc. | | | 9,652 | | | | 276,916 | |
Xilinx, Inc. | | | 2,207 | | | | 74,089 | |
| | | | | | | | | |
| | | | | | | | 2,033,204 | |
| Specialty Retail – 1.9% | |
Abercrombie & Fitch Co., Class A | | | 694 | | | | 23,693 | |
AutoNation, Inc.(1) | | | 363 | | | | 12,807 | |
AutoZone, Inc.(1) | | | 225 | | | | 82,613 | |
Bed, Bath & Beyond, Inc.(1) | | | 1,958 | | | | 121,004 | |
Best Buy Co., Inc. | | | 2,336 | | | | 48,963 | |
CarMax, Inc.(1) | | | 1,915 | | | | 49,675 | |
GameStop Corp., Class A | | | 1,093 | | | | 20,067 | |
Limited Brands, Inc. | | | 2,036 | | | | 86,591 | |
Lowe’s Companies, Inc. | | | 9,918 | | | | 282,068 | |
Netflix, Inc.(1) | | | 471 | | | | 32,249 | |
O’Reilly Automotive, Inc.(1) | | | 1,063 | | | | 89,048 | |
Ross Stores, Inc. | | | 1,902 | | | | 118,818 | |
Staples, Inc. | | | 5,841 | | | | 76,225 | |
The Gap, Inc. | | | 2,800 | | | | 76,608 | |
The Home Depot, Inc. | | | 12,893 | | | | 683,200 | |
The TJX Companies, Inc. | | | 6,236 | | | | 267,712 | |
Urban Outfitters, Inc.(1) | | | 946 | | | | 26,100 | |
| | | | | | | | | |
| | | | | | | | 2,097,441 | |
| | | | | | | | |
| June 30, 2012 (unaudited) | | Shares | | | Value | |
| Steel – 0.1% | |
Allegheny Technologies, Inc. | | | 906 | | | $ | 28,892 | |
Nucor Corp. | | | 2,675 | | | | 101,383 | |
United States Steel Corp. | | | 1,212 | | | | 24,967 | |
| | | | | | | | | |
| | | | | | | | 155,242 | |
| Technology: Miscellaneous – 0.0% | |
Jabil Circuit, Inc. | | | 1,536 | | | | 31,227 | |
| | | | | | | | | |
| | | | | | | | 31,227 | |
| Telecommunications Equipment – 0.2% | |
Crown Castle International Corp.(1) | | | 2,178 | | | | 127,761 | |
Motorola Solutions, Inc. | | | 2,461 | | | | 118,399 | |
| | | | | | | | | |
| | | | | | | | 246,160 | |
| Textiles, Apparel & Shoes – 0.5% | |
Coach, Inc. | | | 2,418 | | | | 141,405 | |
NIKE, Inc., Class B | | | 3,091 | | | | 271,328 | |
Ralph Lauren Corp. | | | 550 | | | | 77,033 | |
VF Corp. | | | 728 | | | | 97,151 | |
| | | | | | | | | |
| | | | | | | | 586,917 | |
| Tobacco – 2.0% | |
Altria Group, Inc. | | | 17,169 | | | | 593,189 | |
Lorillard, Inc. | | | 1,097 | | | | 144,749 | |
Philip Morris International, Inc. | | | 14,365 | | | | 1,253,490 | |
Reynolds American, Inc. | | | 2,802 | | | | 125,726 | |
| | | | | | | | | |
| | | | | | | | 2,117,154 | |
| Toys – 0.1% | |
Hasbro, Inc. | | | 973 | | | | 32,955 | |
Mattel, Inc. | | | 2,870 | | | | 93,103 | |
| | | | | | | | | |
| | | | | | | | 126,058 | |
| Transportation Miscellaneous – 0.7% | |
Expeditors International of Washington, Inc. | | | 1,781 | | | | 69,014 | |
United Parcel Service, Inc., Class B | | | 8,087 | | | | 636,932 | |
| | | | | | | | | |
| | | | | | | | 705,946 | |
| Truckers – 0.1% | |
C.H. Robinson Worldwide, Inc. | | | 1,365 | | | | 79,893 | |
| | | | | | | | | |
| | | | | | | | 79,893 | |
| Utilities: Electrical – 3.2% | |
Ameren Corp. | | | 2,038 | | | | 68,355 | |
American Electric Power, Inc. | | | 4,066 | | | | 162,233 | |
CMS Energy Corp. | | | 2,187 | | | | 51,395 | |
Consolidated Edison, Inc. | | | 2,459 | | | | 152,925 | |
Dominion Resources, Inc. | | | 4,796 | | | | 258,984 | |
DTE Energy Co. | | | 1,431 | | | | 84,901 | |
Duke Energy Corp. | | | 11,254 | | | | 259,517 | |
Edison International | | | 2,748 | | | | 126,958 | |
Entergy Corp. | | | 1,487 | | | | 100,952 | |
Exelon Corp. | | | 7,172 | | | | 269,811 | |
FirstEnergy Corp. | | | 3,522 | | | | 173,247 | |
NextEra Energy, Inc. | | | 3,526 | | | | 242,624 | |
Northeast Utilities | | | 2,687 | | | | 104,282 | |
| | | | | | | | | |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 13 |
SCHEDULE OF INVESTMENTS — RS S&P 500 INDEX VIP SERIES
| | | | | | | | |
| June 30, 2012 (unaudited) | | Shares | | | Value | |
| Utilities: Electrical (continued) | |
NRG Energy, Inc.(1) | | | 1,924 | | | $ | 33,401 | |
Pepco Holdings, Inc. | | | 1,917 | | | | 37,516 | |
PG&E Corp. | | | 3,549 | | | | 160,663 | |
Pinnacle West Capital Corp. | | | 921 | | | | 47,653 | |
PPL Corp. | | | 4,863 | | | | 135,240 | |
Progress Energy, Inc. | | | 2,485 | | | | 149,522 | |
Public Service Enterprise Group, Inc. | | | 4,239 | | | | 137,767 | |
SCANA Corp. | | | 989 | | | | 47,314 | |
Southern Co. | | | 7,313 | | | | 338,592 | |
TECO Energy, Inc. | | | 1,846 | | | | 33,339 | |
The AES Corp.(1) | | | 5,445 | | | | 69,859 | |
Wisconsin Energy Corp. | | | 1,933 | | | | 76,489 | |
Xcel Energy, Inc. | | | 4,087 | | | | 116,112 | |
| | | | | | | | | |
| | | | | | | | 3,439,651 | |
| Utilities: Gas Distributors – 0.4% | |
AGL Resources, Inc. | | | 964 | | | | 37,355 | |
CenterPoint Energy, Inc. | | | 3,570 | | | | 73,792 | |
NiSource, Inc. | | | 2,395 | | | | 59,276 | |
ONEOK, Inc. | | | 1,754 | | | | 74,212 | |
Sempra Energy | | | 2,028 | | | | 139,689 | |
| | | | | | | | | |
| | | | | | | | 384,324 | |
| Utilities: Miscellaneous – 0.0% | |
Integrys Energy Group, Inc. | | | 667 | | | | 37,932 | |
| | | | | | | | | |
| | | | | | | | 37,932 | |
| Utilities: Telecommunications – 3.0% | |
AT&T, Inc.(2) | | | 49,420 | | | | 1,762,317 | |
CenturyLink, Inc. | | | 5,230 | | | | 206,533 | |
Frontier Communications Corp. | | | 8,424 | | | | 32,264 | |
MetroPCS Communications, Inc.(1) | | | 2,473 | | | | 14,962 | |
Sprint Nextel Corp.(1) | | | 25,275 | | | | 82,396 | |
Verizon Communications, Inc. | | | 23,919 | | | | 1,062,960 | |
Windstream Corp. | | | 4,953 | | | | 47,846 | |
| | | | | | | | | |
| | | | | | | | 3,209,278 | |
Total Common Stocks
(Cost $62,517,719) | | | | 103,558,530 | |
| | | | | | | | |
| | | Principal
Amount | | | Value | |
| U.S. Government Securities – 0.4% | |
U.S. Treasury Bills | | | | | | | | |
0.077% due 9/6/2012(2) | | $ | 150,000 | | | | 149,979 | |
0.105% due 7/26/2012(2) | | | 10,000 | | | | 9,999 | |
0.115% due 8/30/2012(2) | | | 50,000 | | | | 49,990 | |
0.193% due 3/7/2013(2) | | | 25,000 | | | | 24,967 | |
0.20% due 3/7/2013(2) | | | 50,000 | | | | 49,931 | |
U.S. Treasury Note
3.125% due 5/15/2019(2) | | | 145,000 | | | | 164,801 | |
| | | | | | | | | |
Total U.S. Government Securities
(Cost $427,570) | | | | 449,667 | |
| | | | | | | | |
| June 30, 2012 (unaudited) | | Principal
Amount | | | Value | |
| Repurchase Agreements – 3.3% | |
| | | |
State Street Bank and Trust Co. Repurchase Agreement, 0.01%, dated 6/29/2012, maturity value of $3,508,003, due 7/2/2012(3) | | $ | 3,508,000 | | | $ | 3,508,000 | |
Total Repurchase Agreements
(Cost $3,508,000) | | | | 3,508,000 | |
Total Investments - 99.8%
(Cost $66,453,289) | | | | 107,516,197 | |
| Other Assets, Net - 0.2% | | | | 256,795 | |
| Total Net Assets - 100.0% | | | $ | 107,772,992 | |
| (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 | |
| FHLMC | | | 2.50% | | | | 5/27/2016 | | | $ | 3,579,867 | |
The table below presents futures contracts as of June 30, 2012.
| | | | | | | | | | | | | | | | | | |
| Description | | Counter
party | | Number
of
Contracts | | | Expiration | | | Face
Value
(000s) | | | Unrealized
Appreciation | |
| Purchased Futures Contracts | | | | | | | | | |
E-mini S&P
500
Futures | | Goldman Sachs &
Co. | | | 61 | | | | 9/21/2012 | | | $ | 4,137 | | | $ | 140,988 | |
| | | | |
| 14 | | | | The accompanying notes are an integral part of these financial statements. |
RS S&P 500 INDEX VIP SERIES
The following is a summary of the inputs used as of June 30, 2012 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 | | $ | 103,558,530 | | | $ | — | | | $ | — | | | $ | 103,558,530 | |
| U.S. Government Securities | | | — | | | | 449,667 | | | | — | | | | 449,667 | |
| Repurchase Agreements | | | — | | | | 3,508,000 | | | | — | | | | 3,508,000 | |
Other Financial Instruments: Financial Futures Contracts | | | 140,988 | | | | — | | | | — | | | | 140,988 | |
| Total | | $ | 103,699,518 | | | $ | 3,957,667 | | | $ | — | | | $ | 107,657,185 | |
| | | | |
| 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, 2012 (unaudited) | | | |
Assets | | | | |
Investments, at value | | $ | 107,516,197 | |
Cash and cash equivalents | | | 457 | |
Dividends/interest receivable | | | 135,510 | |
Receivable for variation margin | | | 103,700 | |
Receivable for investments sold | | | 92,263 | |
Due from distributor | | | 8,107 | |
Receivable for fund shares subscribed | | | 1,997 | |
| | | | | |
Total Assets | | | 107,858,231 | |
| | | | | |
| | |
Liabilities | | | | |
Payable for fund shares redeemed | | | 52,986 | |
Payable to adviser | | | 21,543 | |
Accrued trustees’ fees | | | 757 | |
Accrued expenses/other liabilities | | | 9,953 | |
| | | | | |
Total Liabilities | | | 85,239 | |
| | | | | |
Total Net Assets | | $ | 107,772,992 | |
| | | | | |
| | |
Net Assets Consist of: | | | | |
Paid-in capital | | $ | 100,221,613 | |
Accumulated undistributed net investment income | | | 959,937 | |
Accumulated net realized loss from investments and futures contracts | | | (34,612,454 | ) |
Net unrealized appreciation on investments and futures contracts | | | 41,203,896 | |
| | | | | |
Total Net Assets | | $ | 107,772,992 | |
| | | | | |
Investments, at Cost | | $ | 66,453,289 | |
| | | | | |
| | |
Pricing of Shares | | | | |
Shares of Beneficial Interest Outstanding with no Par Value | | | 10,804,379 | |
Net Asset Value Per Share | | | $9.97 | |
| | | | | |
| | | | |
Statement of Operations For the Six-Month Period Ended June��30, 2012 (unaudited) | |
Investment Income | | | | |
Dividends | | $ | 1,106,013 | |
Interest | | | 2,672 | |
| | | | | |
Total Investment Income | | | 1,108,685 | |
| | | | | |
| | |
Expenses | | | | |
Investment advisory fees | | | 132,811 | |
Custodian fees | | | 20,099 | |
Professional fees | | | 17,435 | |
Shareholder reports | | | 11,546 | |
Administrative service fees | | | 6,103 | |
Trustees’ fees | | | 2,341 | |
Other expenses | | | 7,568 | |
| | | | | |
Total Expenses | | | 197,903 | |
| | |
Less: Expense reimbursement by distributor | | | (49,155 | ) |
| | | | | |
Total Expenses, Net | | | 148,748 | |
| | | | | |
Net Investment Income | | | 959,937 | |
| | | | | |
| | |
Realized Gain/(Loss) and Change in Unrealized Appreciation/Depreciation on Investments and Futures Contracts | | | | |
Net realized gain from investments | | | 1,026,119 | |
Net realized gain from futures contracts | | | 233,038 | |
Net change in unrealized appreciation/depreciation on investments | | | 7,112,525 | |
Net change in unrealized appreciation/depreciation on futures contracts | | | 97,774 | |
| | | | | |
Net Gain on Investments and Futures Contracts | | | 8,469,456 | |
| | | | | |
Net Increase in Net Assets Resulting from Operations | | $ | 9,429,393 | |
| | | | | |
| | | | | |
| | | | |
| 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
6/30/12 | | | For the Year Ended 12/31/11 | |
| | | | |
Operations | | | | | | | | |
Net investment income | | $ | 959,937 | | | $ | 1,865,479 | |
Net realized gain from investments and futures contracts | | | 1,259,157 | | | | 2,833,230 | |
Net change in unrealized appreciation/depreciation on investments and futures contracts | | | 7,210,299 | | | | (2,506,706 | ) |
| | | | | | | | | |
Net Increase in Net Assets Resulting from Operations | | | 9,429,393 | | | | 2,192,003 | |
| | | | | | | | | |
| | | |
Distributions to Shareholders | | | | | | | | |
Net investment income | | | — | | | | (1,854,887 | ) |
| | | | | | | | | |
Total Distributions | | | — | | | | (1,854,887 | ) |
| | | | | | | | | |
| | | |
Capital Share Transactions | | | | | | | | |
Proceeds from sales of shares | | | 8,965,586 | | | | 9,975,108 | |
Reinvestment of distributions | | | — | | | | 1,854,887 | |
Cost of shares redeemed | | | (10,915,313 | ) | | | (21,674,444 | ) |
| | | | | | | | | |
Net Decrease in Net Assets Resulting from Capital Share
Transactions | | | (1,949,727 | ) | | | (9,844,449 | ) |
| | | | | | | | | |
Net Increase/(Decrease) in Net Assets | | | 7,479,666 | | | | (9,507,333 | ) |
| | | | | | | | | |
| | | |
Net Assets | | | | | | | | |
Beginning of period | | | 100,293,326 | | | | 109,800,659 | |
| | | | | | | | | |
End of period | | $ | 107,772,992 | | | $ | 100,293,326 | |
| | | | | | | | | |
Accumulated Undistributed Net Investment Income Included in Net Assets | | $ | 959,937 | | | $ | — | |
| | | | | | | | | |
| | | |
Other Information: | | | | | | | | |
Shares | | | | | | | | |
Sold | | | 917,609 | | | | 1,084,293 | |
Reinvested | | | — | | | | 210,543 | |
Redeemed | | | (1,108,633 | ) | | | (2,333,356 | ) |
| | | | | | | | | |
Net Decrease | | | (191,024 | ) | | | (1,038,520 | ) |
| | | | | | | | | |
| | | | | | | | | |
| | | | |
| 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 6/30/121 | | $ | 9.12 | | | $ | 0.09 | | | $ | 0.76 | | | $ | 0.85 | | | $ | — | | | $ | — | | | $ | — | |
Year Ended 12/31/11 | | | 9.12 | | | | 0.17 | | | | — | | | | 0.17 | | | | (0.17 | ) | | | — | | | | (0.17 | ) |
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 | ) |
| | | | |
| 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 | |
| $ | 9.97 | | | | 9.32% | | | $ | 107,773 | | | | 0.28% | | | | 0.37% | | | | 1.81% | | | | 1.72% | | | | 1% | |
| | 9.12 | | | | 1.95% | | | | 100,293 | | | | 0.28% | | | | 0.38% | | | | 1.76% | | | | 1.66% | | | | 3% | |
| | 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% | |
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 and expense limitations and exclude the effect of 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, 2012 (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 nine 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. The Fund currently offers only Class I shares. 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 (See Note 4c). 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 (“FASB”) 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) |
NOTES TO FINANCIAL STATEMENTS — RS S&P 500 INDEX VIP SERIES (UNAUDITED)
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.
The FASB 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, 2012, the Fund had no securities classified as Level 3.
The Fund’s policy is to recognize transfers between Level 1, Level 2 and Level 3 at the end of the reporting period. For the six months ended June 30, 2012, there were no transfers between Level 1 and Level 2.
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, for example, 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. 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, 2012, 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 Trust is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next twelve months. 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, 2012, the Fund did not incur any such interest or penalties. The Fund is not subject to
NOTES TO FINANCIAL STATEMENTS — RS S&P 500 INDEX VIP SERIES (UNAUDITED)
examination by U.S. federal tax authorities for tax years before 2008 and by 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.
d. Futures Contracts The Fund may enter into financial futures contracts. In entering into such contracts, the 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 (but not in the Financial Highlights) as a reduction to the Fund’s expenses.
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.
An expense limitation has been imposed pursuant to a written agreement between RS Investments and the Trust in effect through April 30, 2013 to limit the Fund’s total annual fund operating expenses (excluding expenses indirectly incurred by the Fund through investments in pooled investment vehicles, interest, taxes, investment-related expenses (e.g., brokerage commissions), and extraordinary 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 expenses 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. The Expense Reimbursement Agreement provides that GIS will reimburse RS
NOTES TO FINANCIAL STATEMENTS — RS S&P 500 INDEX VIP SERIES (UNAUDITED)
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, 2011, which is the most recently completed tax year, was as follows:
|
| Ordinary Income |
| $1,854,887 |
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, 2011, the Fund made the following reclassifications of permanent book and tax basis differences:
| | | | | | | | |
| Paid-in-Capital | | Accumulated Net Investment Income | | | Accumulated
Net Realized Loss | |
| $(9,522,727) | | $ | (16,641 | ) | | $ | 9,539,368 | |
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, 2011, the Fund utilized $2,424,861 of capital loss carryovers. Capital
loss carryovers available to the Fund at December 31, 2011 were as follows:
| | | | |
| Expiring | |
Amount | |
| 2013 | | $ | 549,960 | |
| 2016 | | | 7,289,622 | |
| 2017 | | | 17,800,138 | |
| 2018 | | | 2,431,713 | |
| | | | | |
| Total | | $ | 28,071,433 | |
| | | | | |
| | | | | |
Capital loss carryovers of $9,513,948 expired in the year ended December 31, 2011.
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, 2011, the Fund had no such losses.
b. Tax Basis of Investments The cost of investments for federal income tax purposes at June 30, 2012, was $74,181,254. The gross unrealized appreciation and depreciation on investments, on a tax basis, at June 30, 2012, aggregated $38,575,153 and $(5,240,210), respectively, resulting in net unrealized appreciation of $33,334,943.
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 $1,132,147 and $2,906,785, respectively, for the six months ended June 30, 2012.
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, 2012.
| | | | | | |
| Derivative Instrument Type | | Statement of Assets
and Liabilities Location | | Value | |
| Financial Futures Contracts | | Net unrealized appreciation on investments and futures contracts* | | $ | 140,988 | |
| * | The cumulative appreciation 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. |
NOTES TO FINANCIAL STATEMENTS — RS S&P 500 INDEX VIP SERIES (UNAUDITED)
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, 2012.
| | | | | | |
| Derivative Instrument Type | | Location of Gain/
(Loss) on Derivatives Recognized in Income | | Amount | |
Financial Futures Contracts | | Net realized gain from futures contracts | | $ | 233,038 | |
| | | |
| | | Net change in unrealized appreciation/depreciation on futures contracts | | | 97,774 | |
The Fund held an average daily face value of $2,686,000 E-mini S&P 500 Futures Contracts for the six months ended June 30, 2012.
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 $100 million committed revolving credit 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.
For the six months ended June 30, 2012, the Fund did not borrow under 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 was filed in Delaware Superior Court and has since been transferred to a consolidated proceeding in the U.S. District Court for the Southern District of New York. 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
Management 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.
Note 9. New Accounting Pronouncement
In December 2011, the Financial Accounting Standards Board issued Accounting Standards Update 2011-11, Balance Sheet (Topic 210) — Disclosures about Offsetting Assets and Liabilities (“ASU 2011-11”). Effective for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods, ASU 2011-11 is intended to enhance disclosure requirements on the offsetting of financial assets and liabilities. At this time, management is evaluating the implications of ASU 2011-11 and its impact on the financial statements.
SUPPLEMENTAL INFORMATION (UNAUDITED)
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 website 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 (ii) on Guardian Investor Services LLC’s website at www.guardianinvestor.com; and (iii) on the Securities and Exchange Commission’s website 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.
2012 Semiannual Report
All data as of June 30, 2012
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, 2012. 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
Highlights
| Ÿ | | International equity markets, measured by the MSCI EAFE Index (Gross)1, returned 3.38% during the first half of 2012. |
| Ÿ | | RS International Growth VIP Series returned 4.06% during the first half of 2012. The Fund’s materials, retail and health care holdings added positively to relative returns. Technology holdings were among the top and bottom contributors to performance, while energy and automobiles holdings 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
After a healthy start to the year, during the second quarter of 2012 investors experienced the return of the fear and risk aversion that have become a frequent occurrence since the global financial crisis. The latest developments in the Eurozone, a moderation of growth in the US, and signs of a slowdown in China coincided to renew investors’ worry about synchronised economic weakness.
Performance Update
RS International Growth VIP Series returned 4.06% in the first half of 2012, outperforming the benchmark MSCI EAFE Index (Gross) return of 3.38%. The Fund underperformed the benchmark MSCI EAFE Growth Index (Gross)2 return of 4.19%.
Portfolio Review
Technology holdings were among both the top and bottom contributors to relative performance. The Chinese social network Tencent was the strongest performer, due to, we believe, its successfully monetizing its vast user base and moving into the mobile arena. In contrast, Japanese online gaming company Gree performed poorly following a well-publicized regulatory crackdown on the so-called ‘kompu gacha’ payment method for online
games. We think that the company can continue to grow its earnings in Japan in the absence of this payment method. The company is also investing in overseas ventures and has just launched its global smart phone platform, which will be available in 153 countries by the end of this year. UK technology stock Arm Holdings also performed weakly. We believe the weakness was driven by economic and political concerns and the cyclical nature of the semiconductor industry, rather than any specific concerns about Arm.
Spanish-based clothing retailer Inditex defied challenging conditions in its home market to perform well as its global expansion continued. First quarter 2012 results were considerably better than we expected. Total sales grew 15% as more stores continued to open in 26 markets during the first quarter. Furthermore, margins expanded slightly, as input costs fell, resulting in earnings growth of 30%. In general, bank stocks rallied during the first half of 2012, and Turkish bank Garanti Bankasi was a significant positive contributor to performance.
The Brazilian oil explorer OGX was a significant detractor from performance during the period as a result of disappointing production news and a management reshuffle.
Outlook
We believe that important and positive developments took place during the last six months. America began to show signs of sustainable recovery, the Chinese economy continued to evolve towards the consumption-driven model that we believe is necessary for its long-term prosperity, and important structural reforms in Europe were well underway. Going forward, we believe that there are many challenges countries will face, but we believe that challenging environments can also foster positive change.
The overarching themes in the Fund have remained constant during the first half of 2012. We believe that the emergence of a large number of people from poverty offers great growth opportunities to the Eastern consumer goods companies, particularly in China. We also believe that the increasingly rapid speed of technological change should allow many companies in the internet, electronics, and medical areas to expand at a rapid pace.
RS INTERNATIONAL GROWTH 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, 2012.
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 (unaudited)
| | |
| Total Net Assets: $210,132,694 | | |
| | | | | | |
| | | |
| Geographical Location3 | | | | | |
 | |
| | | |
| Top Ten Holdings3 | | | | | |
| | | |
| Holding | | Country | | % of Total
Net Assets | |
| Baidu, Inc., ADR | | People’s Republic of China | | | 4.66% | |
| Atlas Copco AB, Class B | | Sweden | | | 3.46% | |
| Industria de Diseno Textil S.A. | | Spain | | | 3.26% | |
| Tencent Holdings Ltd. | | People’s Republic of China | | | 3.25% | |
| Rakuten, Inc. | | Japan | | | 3.00% | |
| Prudential PLC | | United Kingdom | | | 2.83% | |
| BHP Billiton PLC | | United Kingdom | | | 2.83% | |
| Rolls-Royce Holdings PLC | | United Kingdom | | | 2.70% | |
| British American Tobacco PLC | | United Kingdom | | | 2.70% | |
| Standard Chartered PLC | | United Kingdom | | | 2.70% | |
| Total | | | | | 31.39% | |
| 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 (unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
| 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 | | | | 4.06% | | | | -12.84% | | | | 9.44% | | | | -2.91% | | | | 5.72% | | | | 6.77% | |
| MSCI EAFE Index1 | | | | | | | 3.38% | | | | -13.38% | | | | 6.45% | | | | -5.63% | | | | 5.62% | | | | 5.19% | |
| MSCI EAFE Growth Index2 | | | | | | | 4.19% | | | | -12.22% | | | | 7.98% | | | | -4.25% | | | | 5.28% | | | | 3.80% | |
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
1/1/12 | | Ending
Account Value
6/30/12 | | | Expenses Paid
During Period*
1/1/12-6/30/12 | | | Expense Ratio
During Period
1/1/12-6/30/12 | |
| Based on Actual Return | | $1,000.00 | | | $1,040.60 | | | | $4.57 | | | | 0.90% | |
| Based on Hypothetical Return (5% Return Before Expenses) | | $1,000.00 | | | $1,020.39 | | | | $4.52 | | | | 0.90% | |
| * | Expenses are equal to the Fund’s annualized expense ratio as indicated, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). |
SCHEDULE OF INVESTMENTS — RS INTERNATIONAL GROWTH VIP SERIES
| | | | | | | | |
| June 30, 2012 (unaudited) | | Shares | | | Value | |
| Common Stocks – 97.7% | | | | | |
| Australia – 7.0% | | | | | |
Brambles Ltd. | | | 411,004 | | | $ | 2,606,709 | |
Fortescue Metals Group Ltd. | | | 828,599 | | | | 4,233,833 | |
James Hardie Industries SE | | | 142,882 | | | | 1,178,056 | |
Woodside Petroleum Ltd. | | | 116,268 | | | | 3,725,928 | |
Woolworths Ltd. | | | 110,844 | | | | 3,051,330 | |
| | | | | | | | | |
| | | | | | | | 14,795,856 | |
| Brazil – 1.1% | | | | | |
BM&F BOVESPA S.A. | | | 306,000 | | | | 1,561,613 | |
OGX Petroleo e Gas Participacoes S.A.(1) | | | 233,600 | | | | 639,682 | |
| | | | | | | | | |
| | | | | | | | 2,201,295 | |
| Chile – 0.6% | | | | | |
Sociedad Quimica y Minera de Chile S.A., ADR | | | 22,700 | | | | 1,263,709 | |
| | | | | | | | | |
| | | | | | | | 1,263,709 | |
| Denmark – 3.7% | | | | | |
Novo Nordisk A/S, Class B | | | 36,511 | | | | 5,295,437 | |
Novozymes A/S, Class B | | | 80,960 | | | | 2,099,406 | |
Vestas Wind Systems A/S(1) | | | 66,888 | | | | 370,836 | |
| | | | | | | | | |
| | | | | | | | 7,765,679 | |
| France – 6.9% | | | | | |
Essilor International S.A. | | | 38,600 | | | | 3,585,928 | |
L’Oreal S.A. | | | 45,825 | | | | 5,361,765 | |
PPR | | | 38,960 | | | | 5,553,024 | |
| | | | | | | | | |
| | | | | | | | 14,500,717 | |
| Germany – 4.1% | | | | | |
Adidas AG | | | 55,413 | | | | 3,971,885 | |
Aixtron AG | | | 105,081 | | | | 1,505,947 | |
Axel Springer AG | | | 24,195 | | | | 1,039,514 | |
HeidelbergCement AG | | | 26,600 | | | | 1,277,048 | |
SMA Solar Technology AG | | | 22,241 | | | | 762,846 | |
| | | | | | | | | |
| | | | | | | | 8,557,240 | |
| Hong Kong – 2.4% | | | | | |
AIA Group Ltd. | | | 826,800 | | | | 2,855,814 | |
Hong Kong Exchanges & Clearing Ltd. | | | 146,900 | | | | 2,111,789 | |
| | | | | | | | | |
| | | | | | | | 4,967,603 | |
| India – 0.7% | | | | | |
Housing Development Finance Corp. Ltd. | | | 82,500 | | | | 969,129 | |
Reliance Capital Ltd. | | | 64,826 | | | | 421,717 | |
| | | | | | | | | |
| | | | | | | | 1,390,846 | |
| Israel – 0.6% | | | | | |
Teva Pharmaceutical Industries Ltd., ADR | | | 33,200 | | | | 1,309,408 | |
| | | | | | | | | |
| | | | | | | | 1,309,408 | |
| Italy – 2.1% | | | | | |
Fiat SpA(1) | | | 638,695 | | | | 3,220,171 | |
UniCredit SpA(1) | | | 335,840 | | | | 1,273,372 | |
| | | | | | | | | |
| | | | | | | | 4,493,543 | |
| | | | | | | | |
| June 30, 2012 (unaudited) | | Shares | | | Value | |
| Japan – 8.7% | | | | | |
Canon, Inc. | | | 23,000 | | | $ | 917,942 | |
Gree, Inc. | | | 174,000 | | | | 3,461,291 | |
Hoya Corp. | | | 51,300 | | | | 1,130,139 | |
Kyocera Corp. | | | 11,600 | | | | 1,003,863 | |
Rakuten, Inc. | | | 609,500 | | | | 6,301,414 | |
Rohm Co. Ltd. | | | 19,700 | | | | 759,127 | |
SMC Corp. | | | 22,600 | | | | 3,918,336 | |
Yamada Denki Co. Ltd. | | | 15,360 | | | | 786,407 | |
| | | | | | | | | |
| | | | | | | | 18,278,519 | |
| People’s Republic of China – 9.5% | | | | | |
Baidu, Inc., ADR(1) | | | 85,200 | | | | 9,796,296 | |
China Merchants Bank Co. Ltd., H shares | | | 381,500 | | | | 725,358 | |
CNOOC Ltd. | | | 745,000 | | | | 1,502,009 | |
Ports Design Ltd. | | | 166,500 | | | | 174,836 | |
Tencent Holdings Ltd. | | | 231,000 | | | | 6,821,722 | |
Youku, Inc., ADR(1) | | | 44,696 | | | | 969,009 | |
| | | | | | | | | |
| | | | | | | | 19,989,230 | |
| Peru – 0.7% | | | | | |
Credicorp Ltd. | | | 10,974 | | | | 1,381,517 | |
| | | | | | | | | |
| | | | | | | | 1,381,517 | |
| Portugal – 0.9% | | | | | |
Jeronimo Martins, SGPS, S.A. | | | 117,148 | | | | 1,980,594 | |
| | | | | | | | | |
| | | | | | | | 1,980,594 | |
| Singapore – 0.6% | | | | | |
Singapore Exchange Ltd. | | | 255,000 | | | | 1,281,079 | |
| | | | | | | | | |
| | | | | | | | 1,281,079 | |
| South Africa – 0.3% | | | | | |
Impala Platinum Holdings Ltd. | | | 42,800 | | | | 710,690 | |
| | | | | | | | | |
| | | | | | | | 710,690 | |
| South Korea – 3.1% | | | | | |
Celltrion, Inc. | | | 61,219 | | | | 1,636,643 | |
NHN Corp. | | | 10,257 | | | | 2,249,710 | |
Samsung Electronics Co. Ltd. | | | 2,467 | | | | 2,612,520 | |
| | | | | | | | | |
| | | | | | | | 6,498,873 | |
| Spain – 5.0% | | | | | |
Banco Santander S.A. | | | 547,700 | | | | 3,623,173 | |
Industria de Diseno Textil S.A. | | | 66,336 | | | | 6,856,832 | |
| | | | | | | | | |
| | | | | | | | 10,480,005 | |
| Sweden – 8.5% | | | | | |
Alfa Laval AB | | | 134,371 | | | | 2,302,415 | |
Atlas Copco AB, Class B | | | 381,429 | | | | 7,268,198 | |
Oriflame Cosmetics S.A., SDR | | | 32,015 | | | | 1,073,665 | |
Sandvik AB | | | 212,554 | | | | 2,725,943 | |
Svenska Handelsbanken AB, Class A | | | 139,216 | | | | 4,576,835 | |
| | | | | | | | | |
| | | | | | | | 17,947,056 | |
| | | | |
| 8 | | | | The accompanying notes are an integral part of these financial statements. |
RS INTERNATIONAL GROWTH VIP SERIES
| | | | | | | | |
| June 30, 2012 (unaudited) | | Shares | | | Value | |
| Switzerland – 7.9% | | | | | |
ABB Ltd. (Reg S)(1) | | | 141,639 | | | $ | 2,312,710 | |
Compagnie Financiere Richemont S.A., Class A | | | 98,574 | | | | 5,412,674 | |
Geberit AG(1) | | | 14,434 | | | | 2,847,512 | |
Syngenta AG (Reg S) | | | 15,202 | | | | 5,204,025 | |
The Swatch Group AG | | | 2,287 | | | | 903,917 | |
| | | | | | | | | |
| | | | | | | | 16,680,838 | |
| Taiwan – 0.9% | | | | | |
Taiwan Semiconductor Mfg. Co. Ltd., ADR(1) | | | 137,566 | | | | 1,920,421 | |
| | | | | | | | | |
| | | | | | | | 1,920,421 | |
| Turkey – 1.4% | | | | | |
BIM Birlesik Magazalar A.S. | | | 25,835 | | | | 1,066,503 | |
Turkiye Garanti Bankasi A.S. | | | 455,857 | | | | 1,794,483 | |
| | | | | | | | | |
| | | | | | | | 2,860,986 | |
| United Kingdom – 21.0% | | | | | |
ARM Holdings PLC | | | 551,000 | | | | 4,365,362 | |
BG Group PLC | | | 141,790 | | | | 2,902,651 | |
BHP Billiton PLC | | | 209,000 | | | | 5,940,289 | |
British American Tobacco PLC | | | 111,500 | | | | 5,668,659 | |
Meggitt PLC | | | 558,508 | | | | 3,379,557 | |
Prudential PLC | | | 513,000 | | | | 5,948,244 | |
Rolls-Royce Holdings PLC(1) | | | 421,000 | | | | 5,674,135 | |
SABMiller PLC | | | 79,600 | | | | 3,193,651 | |
Signet Jewelers Ltd. | | | 30,525 | | | | 1,347,015 | |
Standard Chartered PLC | | | 260,900 | | | | 5,667,524 | |
| | | | | | | | | |
| | | | | | | | 44,087,087 | |
Total Common Stocks
(Cost $174,934,719) | | | | 205,342,791 | |
| | | | | | | | |
| | | Shares | | | Value | |
| Preferred Stocks – 1.6% | | | | | |
| Brazil – 0.8% | | | | | |
Itau Unibanco Holding S.A., ADR | | | 123,940 | | | | 1,725,245 | |
| | | | | | | | | |
| | | | | | | | 1,725,245 | |
| Germany – 0.8% | | | | | |
Porsche Automobil Holding SE | | | 31,100 | | | | 1,547,029 | |
| | | | | | | | | |
| | | | | | | | 1,547,029 | |
Total Preferred Stocks
(Cost $4,379,488) | | | | 3,272,274 | |
| | | | | | | | |
| June 30, 2012 (unaudited) | | Principal
Amount | | | Value | |
| Repurchase Agreements – 0.7% | | | | | |
| | | |
State Street Bank and Trust Co. Repurchase Agreement, 0.01%, dated 6/29/2012, maturity value of $1,448,001, due 7/2/2012(2) | | $ | 1,448,000 | | | $ | 1,448,000 | |
Total Repurchase Agreements
(Cost $1,448,000) | | | | 1,448,000 | |
Total Investments - 100.0%
(Cost $180,762,207) | | | | 210,063,065 | |
| Other Assets, Net - 0.0% | | | | 69,629 | |
| Total Net Assets - 100.0% | | | $ | 210,132,694 | |
| (1) | Non-income producing security. |
| (2) | The table below presents collateral for repurchase agreements. |
| | | | | | | | | | | | |
| Security | | Coupon | | | Maturity
Date | | | Value | |
| U.S. Treasury Note | | | 2.625% | | | | 11/15/2020 | | | $ | 1,481,505 | |
Legend:
ADR — American Depositary Receipt.
SDR — Swedish Depository Receipt.
The following is a summary of the inputs used as of June 30, 2012 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 | | $ | 18,841,655 | | | $ | 186,501,136 | * | | $ | — | | | $ | 205,342,791 | |
| Preferred Stocks | | | 1,725,245 | | | | 1,547,029 | * | | | — | | | | 3,272,274 | |
| Repurchase Agreements | | | — | | | | 1,448,000 | | | | — | | | | 1,448,000 | |
| Total | | $ | 20,566,900 | | | $ | 189,496,165 | | | $ | — | | | $ | 210,063,065 | |
| * | 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, 2012 (unaudited) | |
Assets | | | | |
Investments, at value | | $ | 210,063,065 | |
Cash and cash equivalents | | | 995 | |
Foreign currency, at value | | | 54,978 | |
Receivable for investments sold | | | 1,086,128 | |
Dividends/interest receivable | | | 260,534 | |
Receivable for fund shares subscribed | | | 946 | |
| | | | | |
Total Assets | | | 211,466,646 | |
| | | | | |
| | |
Liabilities | | | | |
Payable for investments purchased | | | 1,129,440 | |
Payable to adviser | | | 132,970 | |
Payable for fund shares redeemed | | | 34,339 | |
Accrued trustees’ fees | | | 1,642 | |
Accrued expenses/other liabilities | | | 35,561 | |
| | | | | |
Total Liabilities | | | 1,333,952 | |
| | | | | |
Total Net Assets | | $ | 210,132,694 | |
| | | | | |
| | |
Net Assets Consist of: | | | | |
Paid-in capital | | $ | 183,091,535 | |
Accumulated undistributed net investment income | | | 1,651,269 | |
Accumulated net realized loss from investments and foreign currency transactions | | | (3,894,690 | ) |
Net unrealized appreciation on investments and translation of assets and liabilities in foreign currencies | | | 29,284,580 | |
| | | | | |
Total Net Assets | | $ | 210,132,694 | |
| | | | | |
Investments, at Cost | | $ | 180,762,207 | |
| | | | | |
Foreign Currency, at Cost | | $ | 55,085 | |
| | | | | |
| | |
Pricing of Shares | | | | |
Shares of Beneficial Interest Outstanding with no Par Value | | | 11,884,432 | |
Net Asset Value Per Share | | | $17.68 | |
| | | | | |
| | | | |
Statement of Operations For the Six-Month Period Ended June 30, 2012 (unaudited) | |
Investment Income | | | | |
Dividends | | $ | 3,337,215 | |
Interest | | | 107 | |
Withholding taxes on foreign dividends | | | (280,653 | ) |
| | | | | |
Total Investment Income | | | 3,056,669 | |
| | | | | |
| | |
Expenses | | | | |
Investment advisory fees | | | 868,354 | |
Custodian fees | | | 43,229 | |
Shareholder reports | | | 22,735 | |
Professional fees | | | 17,524 | |
Administrative service fees | | | 12,795 | |
Trustees’ fees | | | 4,935 | |
Other expenses | | | 6,308 | |
| | | | | |
Total Expenses | | | 975,880 | |
| | | | | |
Net Investment Income | | | 2,080,789 | |
| | | | | |
| | |
Realized Gain/(Loss) and Change in Unrealized Appreciation/Depreciation on Investments and Foreign Currency Transactions | | | | |
Net realized loss from investments | | | (2,663,923 | ) |
Net realized loss from foreign currency transactions | | | (34,132 | ) |
Net change in unrealized appreciation/depreciation on investments | | | 10,166,177 | |
Net change in unrealized appreciation/depreciation on translation of assets and liabilities in foreign currencies | | | (25,378 | ) |
| | | | | |
Net Gain on Investments and Foreign Currency Transactions | | | 7,442,744 | |
| | | | | |
Net Increase in Net Assets Resulting from Operations | | $ | 9,523,533 | |
| | | | | |
| | | | | |
| | | | |
| 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
6/30/12 | | | For the
Year Ended
12/31/11 | |
| | | | |
Operations | | | | | | | | |
Net investment income | | $ | 2,080,789 | | | $ | 3,336,942 | |
Net realized gain/(loss) from investments and foreign currency transactions | | | (2,698,055 | ) | | | 7,863,383 | |
Net change in unrealized appreciation/depreciation on investments and translation of assets and liabilities in foreign currencies | | | 10,140,799 | | | | (38,446,345 | ) |
| | | | | | | | | |
Net Increase/(Decrease) in Net Assets Resulting from Operations | | | 9,523,533 | | | | (27,246,020 | ) |
| | | | | | | | | |
| | | |
Distributions to Shareholders | | | | | | | | |
Net investment income | | | — | | | | (2,670,171 | ) |
Net realized gain on investments | | | — | | | | (1,973,395 | ) |
| | | | | | | | | |
Total Distributions | | | — | | | | (4,643,566 | ) |
| | | | | | | | | |
| | | |
Capital Share Transactions | | | | | | | | |
Proceeds from sales of shares | | | 8,370,916 | | | | 16,292,194 | |
Reinvestment of distributions | | | — | | | | 4,643,566 | |
Cost of shares redeemed | | | (16,009,051 | ) | | | (36,732,397 | ) |
| | | | | | | | | |
Net Decrease in Net Assets Resulting from Capital Share
Transactions | | | (7,638,135 | ) | | | (15,796,637 | ) |
| | | | | | | | | |
Net Increase/(Decrease) in Net Assets | | | 1,885,398 | | | | (47,686,223 | ) |
| | | | | | | | | |
| | | |
Net Assets | | | | | | | | |
Beginning of period | | | 208,247,296 | | | | 255,933,519 | |
| | | | | | | | | |
End of period | | $ | 210,132,694 | | | $ | 208,247,296 | |
| | | | | | | | | |
Distributions in Excess of Net Investment Income Included in Net Assets | | $ | — | | | $ | (429,520 | ) |
| | | | | | | | | |
Accumulated Undistributed Net Investment Income Included in Net Assets | | $ | 1,651,269 | | | $ | — | |
| | | | | | | | | |
| | | |
Other Information: | | | | | | | | |
Shares | | | | | | | | |
Sold | | | 494,133 | | | | 861,750 | |
Reinvested | | | — | | | | 282,455 | |
Redeemed | | | (866,658 | ) | | | (1,891,716 | ) |
| | | | | | | | | |
Net Decrease | | | (372,525 | ) | | | (747,511 | ) |
| | | | | | | | | |
| | | | | | | | | |
| | | | |
| 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 6/30/121 | | $ | 16.99 | | | $ | 0.17 | | | $ | 0.52 | | | $ | 0.69 | | | $ | — | | | $ | — | | | $ | — | |
Year Ended 12/31/11 | | | 19.68 | | | | 0.27 | | | | (2.58 | ) | | | (2.31 | ) | | | (0.22 | ) | | | (0.16 | ) | | | (0.38 | ) |
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 | ) |
| | | | |
| 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 | |
| $ | 17.68 | | | | 4.06% | | | $ | 210,133 | | | | 0.90% | | | | 0.90% | | | | 1.92% | | | | 1.92% | | | | 11% | |
| | 16.99 | | | | (11.65)% | | | | 208,247 | | | | 0.91% | | | | 0.91% | | | | 1.40% | | | | 1.40% | | | | 14% | |
| | 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% | |
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 and expense limitations and exclude the effect of 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, 2012 (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 nine 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. The Fund currently offers only Class I shares. 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 (See Note 4d). 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 in accordance with guidelines and procedures adopted 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 (“FASB”) 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 INTERNATIONAL GROWTH 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.
The FASB 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, 2012, the Fund had no securities classified as Level 3.
The Fund’s policy is to recognize transfers between Level 1, Level 2 and Level 3 at the end of the reporting period. For the six months ended June 30, 2012, there were no transfers between Level 1 and Level 2.
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, including securities whose prices may have been affected by events occurring after the close of trading on their principal exchange or market and, as a result, whose values are determined by a pricing service as described above, or securities whose values are otherwise determined using fair valuation methods approved by the Fund’s Board of Trustees.
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, for example, 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. 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, 2012, the Trust has reviewed the tax positions for open periods, as applicable to the Fund,
NOTES TO FINANCIAL STATEMENTS — RS INTERNATIONAL GROWTH VIP SERIES (UNAUDITED)
and has determined that no provision for income tax is required in the Fund’s financial statements. The Trust is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next twelve months. 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, 2012, the Fund did not incur any such interest or penalties. The Fund is not subject to examination by U.S. federal tax authorities for tax years before 2008 and by 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.
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 (but not in the Financial Highlights) as a reduction to the Fund’s expenses.
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
NOTES TO FINANCIAL STATEMENTS — RS INTERNATIONAL GROWTH VIP SERIES (UNAUDITED)
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. 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. 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, 2011, which is the most recently completed tax year, was as follows:
| | | | | | |
Ordinary Income | | | Long-Term Capital Gains | |
| $ | 2,670,456 | | | $ | 1,973,110 | |
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, 2011, the Fund made the following reclassifications of permanent book and tax basis differences:
| | | | | | |
Accumulated Net Investment Loss | | | Accumulated
Net Realized Loss | |
| | $(13,600) | | | $ | 13,600 | |
The tax basis of distributable earnings as of December 31, 2011 was as follows:
|
| Undistributed Ordinary Income |
| $30,823 |
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, 2011, the Fund utilized $7,100,222 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, 2011, the Fund elected to defer net capital losses of $1,233,106.
b. Tax Basis of Investments The cost of investments for federal income tax purposes at June 30, 2012, was $181,530,163. The gross unrealized appreciation and depreciation on investments, on a tax basis, at June 30, 2012, aggregated $46,289,750 and $(17,756,848), respectively, resulting in net unrealized appreciation of $28,532,902.
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 $22,593,766 and $27,096,345, respectively, for the six months ended June 30, 2012.
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
NOTES TO FINANCIAL STATEMENTS — RS INTERNATIONAL GROWTH VIP SERIES (UNAUDITED)
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 $100 million committed revolving credit 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.
For the six months ended June 30, 2012, the Fund borrowed under the facility as follows:
| | | | | | | | | | | | | | |
Amount
Outstanding at 6/30/12 | | | Average
Borrowing* | | | Days
Borrowings
Outstanding | | | Average
Interest Rate* | |
| $ | — | | | $ | 301,734 | | | | 7 | | | | 1.39% | |
| * | For the six months ended June 30, 2012, based on the number of days borrowings were outstanding. |
Note 6. Review for Subsequent Events
Management 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.
Note 8. New Accounting Pronouncement
In December 2011, the Financial Accounting Standards Board issued Accounting Standards Update 2011-11, Balance Sheet (Topic 210) — Disclosures about Offsetting Assets and Liabilities (“ASU 2011-11”). Effective for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods, ASU 2011-11 is intended to enhance disclosure requirements on the offsetting of financial assets and liabilities. At this time, management is evaluating the implications of ASU 2011-11 and its impact on the financial statements.
SUPPLEMENTAL INFORMATION (UNAUDITED)
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 website 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 (ii) on Guardian Investor Services LLC’s website at www.guardianinvestor.com; and (iii) on the Securities and Exchange Commission’s website 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.
2012 Semiannual Report
All data as of June 30, 2012
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, 2012. 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
Highlights
| Ÿ | | Emerging markets, measured by the MSCI Emerging Markets Index (Gross)1, rose 4.12% in the first half of 2012. |
| Ÿ | | RS Emerging Markets VIP Series returned 4.29% during the first half of the year, outperforming the 4.12% return of the benchmark MSCI Emerging Markets Index (Gross). Stocks selected in China and South Korea were notable contributors to relative performance but stock selection in India and the materials sector detracted. |
| 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
Emerging market returns, measured by the MSCI Emerging Markets Index (Gross), were modestly positive over the first six months of the year. The smaller, peripheral country indexes delivered the strongest returns — for example, the Egyptian market rose 34.5%, rebounding from its lows and a successful Presidential election, while Turkey’s index was up 28.7%, a beneficiary of the faltering price of oil. This improvement was in stark contrast to Brazil where the market fell 7.5%, driven by concerns over the rate of global growth.
After a relatively buoyant start to the year, the second quarter saw the unwelcome return of the fear and risk aversion that have repeatedly come to the fore since the onset of the global financial crisis. The latest developments in the Eurozone, a moderation of growth in the US, and signs of a slowdown in China coincided to renew investors’ worry about synchronised economic weakness. In this cautious environment, the energy and materials sectors delivered negative returns.
Performance Update
RS Emerging Markets VIP Series returned 4.29% in the first half of 2012, outperforming the benchmark MSCI Emerging Markets Index (Gross), which returned 4.12%.
Portfolio Review
The top and bottom contributors to relative performance were all energy sector holdings. The sector as a whole was weak during the first half of the year. Energy is an overweight position for the Fund, which has holdings in a number of smaller exploration and production (E&P) companies that possess licenses in attractive areas and that we believe have shown themselves adept at deploying the latest seismic technology to increase greatly their drilling success rates. Nevertheless, the share price performance of these companies tends to be very volatile, on the back of news flow and fluctuations in the oil price.
Over the period the top contributor to Fund performance was the holding in African Petroleum Corp. This oil and gas exploration company is focused on offshore West Africa with current projects off the coast of The Gambia and Liberia. Dragon Oil, an oil E&P company with assets in Turkmenistan, also performed well following the release of 2011 results that were better than the market expected and the news that gross production rose over 20% in the first quarter of 2012. The underweight position in Petrobras, the Brazilian offshore oil company, also boosted relative performance. The share price has been weak as we believe the market has taken a dim view of its capex program and the costs associated with its political obligations. The holding has now been sold completely.
On the negative side, Niko Resources (which holds E&P assets in India and Indonesia) was the top detractor from relative performance. The share price fell following a 70% downgrade to its Indian gas reserves. However, we believe the company’s Indonesian oil exploration activities are more attractive. The coal companies Bumi Resources (Indonesia) and China Shenhua Energy also detracted. We have sold China Shenhua Energy and trimmed Bumi Resources given concerns over increased coal supplies from Mongolia at the same time as Chinese coal demand is weakening.
Outlook
It is difficult to predict when a sense of optimism will return to markets. We believe that it is possible that markets will be challenged until we have greater clarity on areas of concern such as a Chinese property collapse or the demise of the euro. We also believe that the manner in which China manages its transition from an investment-led to consumption-led economy will be
RS EMERGING MARKETS VIP SERIES
crucial for the well-being of companies held in the Fund for the near term and believe the outcome will be positive in the long term.
In the meantime, we seek businesses that we believe will continue to benefit from a backdrop of buoyant domestic growth, with currencies and balance sheets that are not
heavily stretched. We believe that many of these types of investments may be found among Asian stocks, where we are currently finding more companies with the ability to deliver sustainable rather than cyclical growth, operating in countries that have prioritized the creation of lasting employment and investment in the capital stock.
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, 2012.
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 (unaudited)
| | |
| Total Net Assets: $93,239,779 | | |
| | | | | | |
| | | |
| Geographical Location2 | | | | | |
 | |
| | | |
| Top Ten Holdings2 | | | | | |
| | | |
| Holding | | Country | | % of Total
Net Assets | |
| Samsung Electronics Co. Ltd. | | South Korea | | | 6.01% | |
| Dragon Oil PLC | | Turkmenistan | | | 3.86% | |
| Taiwan Semiconductor Manufacturing Co. Ltd. | | Taiwan | | | 3.18% | |
| Hon Hai Precision Industry Co. Ltd. | | Taiwan | | | 2.98% | |
| Tullow Oil PLC | | Ghana | | | 2.77% | |
| Sberbank of Russia, ADR | | Russia | | | 2.31% | |
| China Life Insurance Co. Ltd. | | Taiwan | | | 2.30% | |
| China Mobile Ltd. | | People’s Republic of China | | | 2.07% | |
| NHN Corp. | | South Korea | | | 1.95% | |
| Want Want China Holdings Ltd. | | People’s Republic of China | | | 1.76% | |
| Total | | | | | 29.19% | |
| 1 | The MSCI Emerging Markets Index 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 (unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
| 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 | | | | 4.29% | | | | -14.69% | | | | 10.33% | | | | 0.54% | | | | 14.59% | | | | 8.81% | |
| MSCI Emerging Markets Index1 | | | | | | | 4.12% | | | | -15.67% | | | | 10.10% | | | | 0.21% | | | | 14.42% | | | | 5.33% | |
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
1/1/12 | | Ending
Account Value
6/30/12 | | | Expenses Paid
During Period*
1/1/12-6/30/12 | | | Expense Ratio
During Period
1/1/12-6/30/12 | |
| Based on Actual Return | | $1,000.00 | | | $1,042.90 | | | | $6.30 | | | | 1.24% | |
| Based on Hypothetical Return (5% Return Before Expenses) | | $1,000.00 | | | $1,018.70 | | | | $6.22 | | | | 1.24% | |
| * | Expenses are equal to the Fund’s annualized expense ratio as indicated, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). |
SCHEDULE OF INVESTMENTS — RS EMERGING MARKETS VIP SERIES
| | | | | | | | |
| June 30, 2012 (unaudited) | | Shares | | | Value | |
| Common Stocks – 92.8% | | | | | |
| Brazil – 3.7% | | | | | |
Embraer S.A., ADR | | | 46,700 | | | $ | 1,238,951 | |
JBS S.A.(1) | | | 356,400 | | | | 1,069,999 | |
MercadoLibre, Inc. | | | 8,200 | | | | 621,560 | |
Tractebel Energia S.A. | | | 30,700 | | | | 567,839 | |
| | | | | | | | | |
| | | | | | | | 3,498,349 | |
| Egypt – 0.6% | | | | | |
Commercial International Bank
Egypt SAE | | | 62,516 | | | | 272,045 | |
Egyptian Financial Group-Hermes Holding SAE(1) | | | 142,455 | | | | 247,166 | |
| | | | | | | | | |
| | | | | | | | 519,211 | |
| Ghana – 2.8% | | | | | |
Tullow Oil PLC | | | 111,650 | | | | 2,580,519 | |
| | | | | | | | | |
| | | | | | | | 2,580,519 | |
| India – 4.7% | | | | | |
ACC Ltd. | | | 27,800 | | | | 635,269 | |
Housing Development Finance
Corp. Ltd. | | | 83,000 | | | | 975,002 | |
Infrastructure Development Finance Co. Ltd. | | | 380,200 | | | | 936,003 | |
Mahindra & Mahindra Ltd. | | | 68,900 | | | | 874,989 | |
Niko Resources Ltd. | | | 36,500 | | | | 481,122 | |
Titan Industries Ltd. | | | 119,500 | | | | 478,384 | |
| | | | | | | | | |
| | | | | | | | 4,380,769 | |
| Indonesia – 4.3% | | | | | |
PT Astra International Tbk | | | 630,500 | | | | 464,804 | |
PT Bank Mandiri (Persero) Tbk | | | 659,000 | | | | 511,335 | |
PT Bank Negara Indonesia
(Persero) Tbk | | | 1,811,000 | | | | 744,630 | |
PT Bank Rakyat Indonesia Tbk | | | 1,286,000 | | | | 880,788 | |
PT Bumi Resources Tbk | | | 411,500 | | | | 49,303 | |
PT Perusahaan Gas Negara
(Persero) Tbk | | | 1,225,000 | | | | 463,765 | |
PT Semen Gresik (Persero) Tbk | | | 742,000 | | | | 900,521 | |
| | | | | | | | | |
| | | | | | | | 4,015,146 | |
| Kenya – 0.8% | | | | | |
Africa Oil Corp.(1) | | | 95,000 | | | | 731,559 | |
| | | | | | | | | |
| | | | | | | | 731,559 | |
| Kurdistan – 1.7% | | | | | |
Gulf Keystone Petroleum Ltd.(1) | | | 628,900 | | | | 1,612,708 | |
| | | | | | | | | |
| | | | | | | | 1,612,708 | |
| Liberia – 1.7% | | | | | |
African Petroleum Corp. Ltd.(1) | | | 1,236,800 | | | | 1,582,330 | |
| | | | | | | | | |
| | | | | | | | 1,582,330 | |
| Malaysia – 2.0% | | | | | |
CIMB Group Holdings Berhad | | | 387,400 | | | | 928,365 | |
Public Bank Berhad | | | 212,300 | | | | 922,718 | |
| | | | | | | | | |
| | | | | | | | 1,851,083 | |
| | | | | | | | |
| June 30, 2012 (unaudited) | | Shares | | | Value | |
| Mexico – 2.4% | | | | | |
America Movil S.A.B. de C.V., ADR, Series L | | | 36,900 | | | $ | 961,614 | |
Wal-Mart de Mexico S.A.B. de C.V. | | | 489,084 | | | | 1,308,531 | |
| | | | | | | | | |
| | | | | | | | 2,270,145 | |
| Namibia – 0.7% | | | | | |
Chariot Oil & Gas Ltd.(1) | | | 399,242 | | | | 643,021 | |
| | | | | | | | | |
| | | | | | | | 643,021 | |
| Panama – 0.6% | | | | | |
Copa Holdings S.A. | | | 6,840 | | | | 564,163 | |
| | | | | | | | | |
| | | | | | | | 564,163 | |
| People’s Republic of China – 19.9% | | | | | |
Baidu, Inc., ADR(1) | | | 9,600 | | | | 1,103,808 | |
Bank of China Ltd., H shares | | | 2,843,900 | | | | 1,092,413 | |
Beijing Enterprises Holdings Ltd. | | | 87,500 | | | | 527,952 | |
China Construction Bank Corp.,
H shares | | | 688,830 | | | | 475,895 | |
China Mobile Ltd. | | | 175,500 | | | | 1,928,823 | |
China Petroleum & Chemical Corp., H shares | | | 884,000 | | | | 790,054 | |
China Railway Construction Corp. Ltd., H shares | | | 1,578,000 | | | | 1,327,128 | |
China Resources Enterprise Ltd. | | | 308,000 | | | | 920,231 | |
China Taiping Insurance Holdings Co. Ltd.(1) | | | 336,000 | | | | 549,846 | |
CNOOC Ltd. | | | 688,000 | | | | 1,387,090 | |
CSR Corp. Ltd., H shares | | | 1,583,000 | | | | 1,244,612 | |
Focus Media Holding Ltd., ADR | | | 34,800 | | | | 817,104 | |
Hang Lung Properties Ltd. | | | 359,000 | | | | 1,228,002 | |
Hengan International Group Co. Ltd. | | | 46,000 | | | | 447,495 | |
Industrial & Commercial Bank of China | | | 795,000 | | | | 445,668 | |
Kunlun Energy Co. Ltd. | | | 314,000 | | | | 506,667 | |
Lenovo Group Ltd. | | | 1,082,000 | | | | 921,893 | |
Tencent Holdings Ltd. | | | 42,000 | | | | 1,240,313 | |
Want Want China Holdings Ltd. | | | 1,325,000 | | | | 1,641,998 | |
| | | | | | | | | |
| | | | | | | | 18,596,992 | |
| Peru – 0.7% | | | | | |
Credicorp Ltd. | | | 5,100 | | | | 642,039 | |
| | | | | | | | | |
| | | | | | | | 642,039 | |
| Russia – 4.3% | | | | | |
NovaTek OAO, GDR (Reg S) | | | 10,300 | | | | 1,099,812 | |
Sberbank of Russia, ADR(1) | | | 199,160 | | | | 2,155,149 | |
X5 Retail Group N.V., GDR (Reg S)(1) | | | 32,520 | | | | 743,890 | |
| | | | | | | | | |
| | | | | | | | 3,998,851 | |
| South Africa – 1.7% | | | | | |
Massmart Holdings Ltd. | | | 24,754 | | | | 512,541 | |
Naspers Ltd., N shares | | | 20,390 | | | | 1,089,079 | |
| | | | | | | | | |
| | | | | | | | 1,601,620 | |
| | | | |
| 8 | | | | The accompanying notes are an integral part of these financial statements. |
RS EMERGING MARKETS VIP SERIES
| | | | | | | | |
| June 30, 2012 (unaudited) | | Shares | | | Value | |
| South Korea – 18.4% | | | | | |
Celltrion, Inc. | | | 14,866 | | | $ | 397,431 | |
Cheil Industries, Inc. | | | 11,900 | | | | 1,049,978 | |
Daum Communications Corp. | | | 11,100 | | | | 998,322 | |
E-Mart Co. Ltd. | | | 4,412 | | | | 968,410 | |
Fila Korea Ltd. | | | 4,655 | | | | 317,894 | |
Hankook Tire Co. Ltd. | | | 12,200 | | | | 486,528 | |
Hyundai Glovis Co. Ltd. | | | 6,547 | | | | 1,252,742 | |
Hyundai Marine & Fire Insurance
Co. Ltd. | | | 20,300 | | | | 528,920 | |
Hyundai Mobis | | | 3,870 | | | | 938,072 | |
Hyundai Wia Corp. | | | 3,058 | | | | 456,823 | |
LG Display Co. Ltd.(1) | | | 26,500 | | | | 500,304 | |
LG Household & Health Care Ltd. | | | 1,000 | | | | 539,518 | |
Mando Corp. | | | 3,500 | | | | 522,437 | |
NCSoft Corp. | | | 4,100 | | | | 983,589 | |
NHN Corp. | | | 8,300 | | | | 1,820,473 | |
Samsung Electronics Co. Ltd. | | | 3,876 | | | | 4,104,632 | |
Samsung Fire & Marine Insurance Co. Ltd. | | | 6,700 | | | | 1,329,553 | |
| | | | | | | | | |
| | | | | | | | 17,195,626 | |
| Taiwan – 11.8% | | | | | |
China Life Insurance Co. Ltd. | | | 2,261,507 | | | | 2,139,998 | |
Delta Electronics, Inc. | | | 494,000 | | | | 1,516,384 | |
Far Eastern Department Stores Ltd. | | | 809,884 | | | | 763,981 | |
Hon Hai Precision Industry Co. Ltd. | | | 920,089 | | | | 2,781,930 | |
HTC Corp. | | | 61,000 | | | | 805,385 | |
Taiwan Semiconductor Manufacturing Co. Ltd. | | | 1,083,385 | | | | 2,965,730 | |
| | | | | | | | | |
| | | | | | | | 10,973,408 | |
| Thailand – 3.0% | | | | | |
Bank of Ayudhya Public Co. Ltd. | | | 1,235,600 | | | | 1,157,559 | |
Kasikornbank Public Co. Ltd. | | | 105,700 | | | | 545,027 | |
Siam Commercial Bank Public
Co. Ltd. | | | 231,400 | | | | 1,082,889 | |
| | | | | | | | | |
| | | | | | | | 2,785,475 | |
| Turkey – 1.8% | | | | | |
Turkiye Garanti Bankasi A.S. | | | 272,825 | | | | 1,073,977 | |
Turkiye Is Bankasi | | | 230,900 | | | | 614,753 | |
| | | | | | | | | |
| | | | | | | | 1,688,730 | |
| Turkmenistan – 3.9% | | | | | |
Dragon Oil PLC | | | 422,802 | | | | 3,600,974 | |
| | | | | | | | | |
| | | | | | | | 3,600,974 | |
| Zambia – 1.3% | | | | | |
First Quantum Minerals Ltd. | | | 66,200 | | | | 1,170,416 | |
| | | | | | | | | |
| | | | | | | | 1,170,416 | |
Total Common Stocks
(Cost $68,714,480) | | | | 86,503,134 | |
| | | | | | | | |
| June 30, 2012 (unaudited) | | Shares | | | Value | |
| Preferred Stocks – 6.2% | | | | | |
| Brazil – 4.6% | | | | | |
Banco Bradesco S.A. | | | 83,542 | | | $ | 1,245,331 | |
Bradespar S.A. | | | 6,400 | | | | 104,962 | |
Companhia Energetica de Minas Gerais | | | 51,971 | | | | 971,113 | |
Itau Unibanco Holding S.A. | | | 55,800 | | | | 785,951 | |
Itausa-Investimentos Itau S.A. | | | 283,175 | | | | 1,198,401 | |
| | | | | | | | | |
| | | | | | | | 4,305,758 | |
| South Korea – 1.6% | | | | | |
Samsung Electronics Co. Ltd. | | | 2,274 | | | | 1,501,184 | |
| | | | | | | | | |
| | | | | | | | 1,501,184 | |
Total Preferred Stocks
(Cost $3,034,212) | | | | 5,806,942 | |
| | | | | | | | |
| | | Principal
Amount | | | Value | |
| Repurchase Agreements – 0.4% | | | | | |
| | | |
State Street Bank and Trust Co. Repurchase Agreement, 0.01%, dated 6/29/2012, maturity value of $366,000, due 7/2/2012(2) | | $ | 366,000 | | | | 366,000 | |
Total Repurchase Agreements
(Cost $366,000) | | | | 366,000 | |
Total Investments - 99.4%
(Cost $72,114,692) | | | | 92,676,076 | |
| Other Assets, Net - 0.6% | | | | 563,703 | |
| Total Net Assets - 100.0% | | | $ | 93,239,779 | |
| (1) | Non-income producing security. |
| (2) | The table below presents collateral for repurchase agreements. |
| | | | | | | | | | | | |
| Security | | Coupon | | | Maturity
Date | | | Value | |
| U.S. Treasury Note | | | 2.50% | | | | 6/30/2017 | | | $ | 378,638 | |
Legend:
ADR — American Depositary Receipt.
GDR — Global Depositary Receipt.
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 9 |
SCHEDULE OF INVESTMENTS — RS EMERGING MARKETS VIP SERIES
The following is a summary of the inputs used as of June 30, 2012 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 | | $ | 12,861,035 | | | $ | 73,642,099 | * | | $ | — | | | $ | 86,503,134 | |
| Preferred Stocks | | | 4,305,758 | | | | 1,501,184 | * | | | — | | | | 5,806,942 | |
| Repurchase Agreements | | | — | | | | 366,000 | | | | — | | | | 366,000 | |
| Total | | $ | 17,166,793 | | | $ | 75,509,283 | | | $ | — | | | $ | 92,676,076 | |
| * | Consists of certain 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. |
| | | | |
| 10 | | | | The accompanying notes are an integral part of these financial statements. |
FINANCIAL INFORMATION — RS EMERGING MARKETS VIP SERIES
| | | | |
Statement of Assets and Liabilities As of June 30, 2012 (unaudited) | | | |
Assets | | | | |
Investments, at value | | $ | 92,676,076 | |
Cash and cash equivalents | | | 921 | |
Foreign currency, at value | | | 136,060 | |
Receivable for investments sold | | | 711,769 | |
Dividends/interest receivable | | | 355,108 | |
Receivable for fund shares subscribed | | | 201 | |
| | | | | |
Total Assets | | | 93,880,135 | |
| | | | | |
| | |
Liabilities | | | | |
Payable for investments purchased | | | 317,839 | |
Accrued foreign capital gains tax | | | 141,266 | |
Payable to adviser | | | 74,515 | |
Payable for fund shares redeemed | | | 60,679 | |
Accrued trustees’ fees | | | 890 | |
Accrued expenses/other liabilities | | | 45,167 | |
| | | | | |
Total Liabilities | | | 640,356 | |
| | | | | |
Total Net Assets | | $ | 93,239,779 | |
| | | | | |
| | |
Net Assets Consist of: | | | | |
Paid-in capital | | $ | 75,594,535 | |
Accumulated net investment loss | | | (1,344,836 | ) |
Accumulated net realized loss from investments and foreign currency transactions | | | (1,397,316 | ) |
Net unrealized appreciation on investments, foreign capital gains tax and translation of assets and liabilities in foreign currencies | | | 20,387,396 | |
| | | | | |
Total Net Assets | | $ | 93,239,779 | |
| | | | | |
Investments, at Cost | | $ | 72,114,692 | |
| | | | | |
Foreign Currency, at Cost | | $ | 136,004 | |
| | | | | |
| | |
Pricing of Shares | | | | |
Shares of Beneficial Interest Outstanding with no Par Value | | | 5,398,210 | |
Net Asset Value Per Share | | | $17.27 | |
| | | | | |
| | | | |
Statement of Operations For the Six-Month Period Ended June 30, 2012 (unaudited) | |
Investment Income | | | | |
Dividends | | $ | 1,090,091 | |
Interest | | | 63 | |
Withholding taxes on foreign dividends | | | (95,391 | ) |
| | | | | |
Total Investment Income | | | 994,763 | |
| | | | | |
| | |
Expenses | | | | |
Investment advisory fees | | | 514,063 | |
Custodian fees | | | 85,411 | |
Professional fees | | | 12,885 | |
Shareholder reports | | | 12,272 | |
Administrative service fees | | | 6,155 | |
Trustees’ fees | | | 2,389 | |
Other expenses | | | 3,257 | |
| | | | | |
Total Expenses | | | 636,432 | |
| | | | | |
Net Investment Income | | | 358,331 | |
| | | | | |
| | |
Realized Gain/(Loss) and Change in Unrealized Appreciation/Depreciation on Investments, Foreign Currency Transactions and Foreign Capital Gains Tax | | | | |
Net realized gain from investments | | | 296,447 | |
Net realized loss from foreign currency transactions | | | (92,535 | ) |
Net change in unrealized appreciation/depreciation on investments | | | 4,187,562 | |
Net change in unrealized appreciation/depreciation on translation of assets and liabilities in foreign currencies | | | 17,000 | |
Net change in accrued foreign capital gains tax | | | (110,388 | ) |
| | | | | |
Net Gain on Investments and Foreign Currency Transactions | | | 4,298,086 | |
| | | | | |
Net Increase in Net Assets Resulting from Operations | | $ | 4,656,417 | |
| | | | | |
| | | | | |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 11 |
FINANCIAL INFORMATION — RS EMERGING MARKETS VIP SERIES
| | | | | | | | |
Statements of Changes in Net Assets Six-month-ended numbers are unaudited | | | | | | |
| | | |
| | | For the
Six Months Ended
6/30/12 | | | For the
Year Ended
12/31/11 | |
| | | | |
Operations | | | | | | | | |
Net investment income | | $ | 358,331 | | | $ | 745,288 | |
Net realized gain from investments and foreign currency transactions | | | 203,912 | | | | 10,601,260 | |
Net change in unrealized appreciation/depreciation on investments, foreign capital gains tax and translation of assets and liabilities in foreign currencies | | | 4,094,174 | | | | (39,268,736 | ) |
| | | | | | | | | |
Net Increase/(Decrease) in Net Assets Resulting from Operations | | | 4,656,417 | | | | (27,922,188 | ) |
| | | | | | | | | |
| | | |
Distributions to Shareholders | | | | | | | | |
Net realized gain on investments | | | — | | | | (13,709,912 | ) |
| | | | | | | | | |
Total Distributions | | | — | | | | (13,709,912 | ) |
| | | | | | | | | |
| | | |
Capital Share Transactions | | | | | | | | |
Proceeds from sales of shares | | | 4,516,279 | | | | 9,388,168 | |
Reinvestment of distributions | | | — | | | | 13,709,912 | |
Cost of shares redeemed | | | (13,065,518 | ) | | | (36,864,420 | ) |
| | | | | | | | | |
Net Decrease in Net Assets Resulting from Capital Share
Transactions | | | (8,549,239 | ) | | | (13,766,340 | ) |
| | | | | | | | | |
Net Decrease in Net Assets | | | (3,892,822 | ) | | | (55,398,440 | ) |
| | | | | | | | | |
| | | |
Net Assets | | | | | | | | |
Beginning of period | | | 97,132,601 | | | | 152,531,041 | |
| | | | | | | | | |
End of period | | $ | 93,239,779 | | | $ | 97,132,601 | |
| | | | | | | | | |
Distributions in Excess of Net Investment Income Included in Net Assets | | $ | — | | | $ | (1,703,167 | ) |
| | | | | | | | | |
Accumulated Net Investment Loss Included in Net Assets | | $ | (1,344,836 | ) | | $ | — | |
| | | | | | | | | |
| | | |
Other Information: | | | | | | | | |
Shares | | | | | | | | |
Sold | | | 241,825 | | | | 430,698 | |
Reinvested | | | — | | | | 851,019 | |
Redeemed | | | (709,951 | ) | | | (1,646,558 | ) |
| | | | | | | | | |
Net Decrease | | | (468,126 | ) | | | (364,841 | ) |
| | | | | | | | | |
| | | | | | | | | |
| | | | |
| 12 | | | | The accompanying notes are an integral part of these financial statements. |
This Page Intentionally Left Blank
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 | | | 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 6/30/121 | | $ | 16.56 | | | $ | 0.04 | | | $ | 0.67 | | | $ | 0.71 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Year Ended 12/31/11 | | | 24.48 | | | | 0.09 | | | | (5.30 | ) | | | (5.21 | ) | | | — | | | | (2.71 | ) | | | — | | | | (2.71 | ) |
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 | ) |
| | | | |
| 14 | | | | 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 | |
| $ | 17.27 | | | | 4.29% | | | $ | 93,240 | | | | 1.24% | | | | 1.24% | | | | 0.70% | | | | 0.70% | | | | 30% | |
| | 16.56 | | | | (20.97)% | | | | 97,133 | | | | 1.19% | | | | 1.19% | | | | 0.60% | | | | 0.60% | | | | 41% | |
| | 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% | |
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 and expense limitations and exclude the effect of custody credits, if applicable. |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 15 |
NOTES TO FINANCIAL STATEMENTS — RS EMERGING MARKETS VIP SERIES (UNAUDITED)
June 30, 2012 (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 nine 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. The Fund currently offers only Class I shares. 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 (See Note 4d). 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 in accordance with guidelines and procedures adopted 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 (“FASB”) 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.
The FASB 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, 2012, the Fund had no securities classified as Level 3.
The Fund’s policy is to recognize transfers between Level 1, Level 2 and Level 3 at the end of the reporting period. For the six months ended June 30, 2012, there were no transfers between Level 1 and Level 2.
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, including securities whose prices may have been affected by events occurring after the close of trading on their principal exchange or market and, as a result, whose values are determined by a pricing service as described above, or securities whose values are otherwise determined using fair valuation methods approved by the Fund’s Board of Trustees.
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, for example, 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. 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, 2012, 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 EMERGING MARKETS VIP SERIES (UNAUDITED)
required in the Fund’s financial statements. The Trust is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next twelve months. 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, 2012, the Fund did not incur any such interest or penalties. The Fund is not subject to examination by U.S. federal tax authorities for tax years before 2008 and by 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.
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 (but not in the Financial Highlights) as a reduction to the Fund’s expenses.
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 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.
NOTES TO FINANCIAL STATEMENTS — RS EMERGING MARKETS VIP SERIES (UNAUDITED)
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 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. 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, 2011, which is the most recently completed tax year, was as follows:
|
| Long-Term Capital Gains |
| $13,709,912 |
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, 2011, the Fund made the following reclassifications of permanent book and tax basis differences:
| | | | | | | | | | |
| Paid-in-Capital | | | Accumulated Net Investment Loss | | | Accumulated
Net Realized Loss | |
| $ | (352,354 | ) | | $ | 1,395,393 | | | $ | (1,043,039 | ) |
The tax basis of distributable earnings as of December 31, 2011 was as follows:
|
| Undistributed Long-Term Capital Gains |
| $44,864 |
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, 2011, the Fund elected to defer net capital and currency losses of $617,398.
b. Tax Basis of Investments The cost of investments for federal income tax purposes at June 30, 2012, was $74,470,845. The gross unrealized appreciation and depreciation on investments, on a tax basis, at June 30, 2012, aggregated $22,629,875 and $(4,424,644), respectively, resulting in net unrealized appreciation of $18,205,231.
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 $30,030,942 and $37,701,306, respectively, for the six months ended June 30, 2012.
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,
NOTES TO FINANCIAL STATEMENTS — RS EMERGING MARKETS VIP SERIES (UNAUDITED)
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 $100 million committed revolving credit 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.
For the six months ended June 30, 2012, the Fund borrowed under the facility as follows:
| | | | | | | | | | | | | | |
Amount
Outstanding at 6/30/12 | | | Average
Borrowing* | | | Days
Borrowings
Outstanding | | | Average
Interest Rate* | |
| $ | — | | | $ | 106,967 | | | | 18 | | | | 1.41% | |
| * | For the six months ended June 30, 2012, based on the number of days borrowings were outstanding. |
Note 6. Review for Subsequent Events
Management 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.
Note 8. New Accounting Pronouncement
In December 2011, the Financial Accounting Standards Board issued Accounting Standards Update 2011-11, Balance Sheet (Topic 210) — Disclosures about Offsetting Assets and Liabilities (“ASU 2011-11”). Effective for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods, ASU 2011-11 is intended to enhance disclosure requirements on the offsetting of financial assets and liabilities. At this time, management is evaluating the implications of ASU 2011-11 and its impact on the financial statements.
SUPPLEMENTAL INFORMATION (UNAUDITED)
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 website 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 (ii) on Guardian Investor Services LLC’s website at www.guardianinvestor.com; and (iii) on the Securities and Exchange Commission’s website 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.
2012 Semiannual Report
All data as of June 30, 2012
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, 2012. 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
Highlights
| Ÿ | | Despite a second quarter flight to quality that benefited the Treasury market, non-Treasury investments outperformed similar-duration Treasury securities for the first six months of 2012. |
| Ÿ | | RS Investment Quality Bond VIP Series (the “Fund”) delivered a positive return for the six months ended June 30, 2012, and outperformed its benchmark, the Barclays U.S. Aggregate Bond Index1 (the “Index”). |
| Ÿ | | The Fund seeks to provide high current income and capital appreciation without undue risk to principal by investing primarily in investment-grade debt securities. |
Market Overview
The markets started out the year on a positive note as optimism over the U.S. economic outlook and hopes for some resolution to the European debt crisis prompted yield-hungry investors to embrace risk. As a result, non-Treasury securities outperformed the broader fixed income market in the first quarter. Investor optimism appeared to fade in the second quarter, however, as political and economic uncertainty in Europe and signs of weaker economic growth in the U.S. led investors to once again seek safety in the Treasury market. As a result, the yield on the 10-year Treasury bond hit a record low of 1.44% at the start of June. Corporate bonds bore the brunt of the market volatility, losing a substantial portion of the first quarter’s gains in the second quarter.
For the six-month period as a whole, non-Treasury fixed income sectors including corporate bonds, mortgage-backed securities (MBS), and commercial mortgage-backed securities (CMBS) generally outperformed Treasury securities with similar durations.
Fund Performance Overview
For the six months ended June 30, 2012, the Fund returned 3.58%, outperforming a 2.37% return by the Index.
The Fund continued its strategy of overweighting non-Treasury segments of the fixed income market, notably investment-grade corporate bonds, CMBS, asset-backed securities (ABS), and non-Agency mortgage-backed securities (non-Agency MBS). While we retained the Fund’s overweight in corporate bonds relative to the Index, we reduced exposure to issuers with significant exposure to Europe or its peripheral countries in the first quarter. In the second quarter, we also scaled back our domestic bank holdings in a defensive move. By the end of June, the Fund’s holdings in corporate bonds stood at around 30%. This strategy had a positive impact on relative returns for the six months overall.
The Fund’s overweight position in the CMBS sector also supported relative performance in the first quarter, but proved detrimental in the second. In CMBS, we continued to emphasize the most seasoned bonds, which we generally regarded as less risky because they were backed by greater credit enhancements that we believed should leave them better insulated from any deterioration in market fundamentals. That said, we reduced the Fund’s overweight in CMBS in the second quarter, selling bonds that in our view had the greatest probability of underperforming should investor concerns intensify. At the end of the second quarter, the Fund held just under an 18% weighting in CMBS.
As of June 30, 2012, the Fund held nearly a 9% weighting in non-Agency MBS. During the period we continued the Fund’s strategy of owning seasoned bonds that we believed would provide ample credit support and were backed by mortgages that were, in our view, underwritten with stronger credit standards than bonds issued during the housing boom that peaked in 2007.
The Fund began the second quarter with an underweight in Agency MBS because we believed there were more attractive opportunities in other sectors. In June, however, we decided to take advantage of more attractive prices in the sector and added to our position. We believed that Agency MBS might offer better risk-reward characteristics than competing assets in the event of another investor flight to quality.
RS INVESTMENT QUALITY BOND VIP SERIES
Outlook
We anticipate continued market volatility in the second half of 2012 as investors await more clarity on the condition of the global economy and developments in Europe. On a positive note, the Federal Reserve has indicated its intention to keep interest rates near zero into 2014, and has left open the possibility of additional
stimulus if the U.S. economy weakens or risks from Europe escalate. In these challenging times, we believe a disciplined investment process is more crucial than ever. We continue to rigorously measure each investment’s upside potential against its downside risk, while we remain focused on potential market risks in today’s uncertain investment environment.
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, 2012.
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 (unaudited)
| | |
| Total Net Assets: $718,340,911 | | |
|
| |
| Sector Allocation |
 |
| |
| Bond Quality Allocation2 |
 |
RS INVESTMENT QUALITY BOND VIP SERIES
| | | | | | | | | | | | |
| | | | |
| Top Ten Holdings3 | | | | | | | | | |
| | | | |
| Holding | | Coupon | | | Maturity Date | | | % of Total
Net Assets | |
| U.S. Treasury Notes | | | 0.875% | | | | 1/31/2017 | | | | 3.27% | |
| FNMA Mortgage Pass-Through | | | 4.000% | | | | 9/1/2040 | | | | 2.44% | |
| U.S. Treasury Bonds | | | 3.125% | | | | 11/15/2041 | | | | 2.33% | |
| U.S. Treasury Notes | | | 0.875% | | | | 2/28/2017 | | | | 2.27% | |
| FNMA Mortgage Pass-Through | | | 4.000% | | | | 12/1/2042 | | | | 1.79% | |
| FNMA Mortgage Pass-Through | | | 4.500% | | | | 6/1/2041 | | | | 1.58% | |
| U.S. Treasury Bonds | | | 4.250% | | | | 11/15/2040 | | | | 1.49% | |
| FHLMC Mortgage Pass-Through | | | 4.000% | | | | 1/1/2041 | | | | 1.41% | |
| FNMA Mortgage Pass-Through | | | 5.500% | | | | 5/1/2038 | | | | 1.30% | |
FHLMC CMO | | | 5.500% | | | | 9/15/2035 | | | | 1.29% | |
| Total | | | | | | | | | | | 19.17% | |
| 1 | The Barclays U.S. Aggregate Bond Index is generally considered to be representative of U.S. bond market activity. The Barclays 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. Statistical data for the Index is as of 6/30/2012. |
| 2 | Source: Moody’s, Standard and Poor’s, Fitch Investor Services. |
| 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. 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 (unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
| 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 | | | | 3.58% | | | | 8.10% | | | | 8.23% | | | | 7.06% | | | | 5.73% | | | | 7.66% | |
| Barclays U.S. Aggregate Bond Index1 | | | | | | | 2.37% | | | | 7.47% | | | | 6.93% | | | | 6.79% | | | | 5.63% | | | | 8.05% | |
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 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 1/1/12 | | Ending Account Value 6/30/12 | | | Expenses Paid During Period* 1/1/12-6/30/12 | | | Expense Ratio During Period 1/1/12-6/30/12 | |
| Based on Actual Return | | $1,000.00 | | | $1,035.80 | | | | $2.83 | | | | 0.56% | |
| Based on Hypothetical Return (5% Return Before Expenses) | | $1,000.00 | | | $1,022.08 | | | | $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 182/366 (to reflect the one-half year period). |
SCHEDULE OF INVESTMENTS — RS INVESTMENT QUALITY BOND VIP SERIES
| | | | | | | | |
| June 30, 2012 (unaudited) | | Principal Amount | | | Value | |
| Asset Backed Securities – 3.5% | |
Ally Master Owner Trust
2012-1 A2
1.44% due 2/15/2017 | | $ | 7,000,000 | | | $ | 7,041,875 | |
Ameriquest Mortgage Securities, Inc.
2003-5 A6
4.541% due 4/25/2033(1) | | | 1,089,555 | | | | 1,015,993 | |
Chase Funding Mortgage Loan Trust
2004-1 1A6
4.266% due 6/25/2015 | | | 206,971 | | | | 208,754 | |
CitiFinancial Mortgage Securities, Inc.
2003-3 AF5
5.053% due 8/25/2033(1) | | | 661,220 | | | | 655,244 | |
Dominos Pizza Master Issuer LLC 2012-1A A2
5.216% due 1/25/2042(2) | | | 6,276,375 | | | | 6,544,770 | |
GE Capital Credit Card Master Note Trust
2010-3 A
2.21% due 6/15/2016 | | | 650,000 | | | | 660,053 | |
Hyundai Auto Receivables Trust 2012-A A4
0.95% due 12/15/2016 | | | 3,250,000 | | | | 3,267,713 | |
Miramax LLC
2011-1A A
6.25% due 10/20/2021(2) | | | 5,225,714 | | | | 5,420,476 | |
| | | | | | | | | |
Total Asset Backed Securities
(Cost $24,344,667) | | | | | | | 24,814,878 | |
| | | | | | | | |
| | | Principal Amount | | | Value | |
| Collateralized Mortgage Obligations – 11.8% | |
Banc of America Alternative Loan Trust
2004-1 2A1
6.00% due 2/25/2034(3) | | | 3,847,229 | | | | 3,998,529 | |
Cendant Mortgage Corp.
2003-4 1A1
4.85% due 5/25/2033 | | | 434,567 | | | | 439,879 | |
Chase Mortgage Finance Corp. 2003-S11 3A1
5.50% due 10/25/2033 | | | 959,272 | | | | 991,555 | |
Citicorp Mortgage Securities, Inc. 2007-8 1A3
6.00% due 9/25/2037 | | | 1,314,987 | | | | 1,318,214 | |
Countrywide Alternative Loan Trust 2004-35T2 A1
6.00% due 2/25/2035 | | | 600,747 | | | | 601,487 | |
2006-19CB A15
6.00% due 8/25/2036 | | | 1,436,334 | | | | 1,061,129 | |
Countrywide Home Loans Trust 2003-J7 2A12
5.00% due 8/25/2033 | | | 2,707,711 | | | | 2,827,652 | |
2004-5 2A9
5.25% due 5/25/2034 | | | 1,599,369 | | | | 1,641,882 | |
| | | | | | | | | |
| | | | | | | | |
| June 30, 2012 (unaudited) | | Principal Amount | | | Value | |
| Collateralized Mortgage Obligations (continued) | |
2003-11 A31
5.50% due 5/25/2033 | | $ | 3,405,838 | | | $ | 3,531,012 | |
2002-19 1A1
6.25% due 11/25/2032 | | | 591,553 | | | | 630,877 | |
FHLMC 2663 VQ
5.00% due 6/15/2022 | | | 2,800,000 | | | | 3,022,962 | |
1534 Z
5.00% due 6/15/2023 | | | 465,937 | | | | 465,853 | |
3227 PR
5.50% due 9/15/2035 | | | 8,458,331 | | | | 9,259,563 | |
FNMA
2002-77 QG
5.50% due 12/25/2032 | | | 4,110,000 | | | | 4,709,161 | |
2002-52 PB
6.00% due 2/25/2032 | | | 297,865 | | | | 299,026 | |
GNMA
1997-19 PG
6.50% due 12/20/2027 | | | 2,247,465 | | | | 2,552,956 | |
GSR Mortgage Loan Trust 2004-10F 6A1
5.00% due 9/25/2034 | | | 2,929,162 | | | | 3,058,125 | |
J.P. Morgan Mortgage Trust 2005-A3 11A2
4.485% due 6/25/2035(1)(3) | | | 5,913,000 | | | | 5,943,156 | |
2004-S2 1A3
4.75% due 11/25/2019 | | | 2,823,670 | | | | 2,851,003 | |
Master Asset Securitization Trust 2003-5 2A1
5.00% due 6/25/2018 | | | 904,237 | | | | 944,448 | |
2003-10 3A7
5.50% due 11/25/2033 | | | 1,036,367 | | | | 1,087,890 | |
Prime Mortgage Trust
2004-2 A3
5.25% due 11/25/2019 | | | 705,863 | | | | 738,417 | |
2003-3 A9
5.50% due 1/25/2034 | | | 3,639,909 | | | | 3,733,975 | |
Residential Asset Mortgage Products, Inc.
2005-SL1 A4
6.00% due 5/25/2032 | | | 654,057 | | | | 665,450 | |
Residential Funding Mortgage Securities I
2005-S1 2A1
4.75% due 2/25/2020 | | | 1,440,860 | | | | 1,486,061 | |
2005-S3 A1
4.75% due 3/25/2020 | | | 2,792,923 | | | | 2,837,032 | |
2006-S3 A7
5.50% due 3/25/2036 | | | 1,308,195 | | | | 1,088,192 | |
Structured Asset Securities Corp. 2004-21XS 2A6A
4.74% due 12/25/2034(1) | | | 2,490,899 | | | | 2,523,470 | |
2005-1 4A1
5.00% due 2/25/2020 | | | 1,578,991 | | | | 1,614,755 | |
2004-20 7A1
5.25% due 11/25/2034 | | | 2,771,631 | | | | 2,859,303 | |
Wells Fargo Mortgage Backed Securities Trust
2005-1 1A1
4.75% due 1/25/2020 | | | 1,887,598 | | | | 1,932,570 | |
| | | | | | | | | |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 9 |
SCHEDULE OF INVESTMENTS — RS INVESTMENT QUALITY BOND VIP SERIES
| | | | | | | | |
| June 30, 2012 (unaudited) | | Principal Amount | | | Value | |
| Collateralized Mortgage Obligations (continued) | |
Wells Fargo Mortgage Backed Securities Trust (continued) | |
2005-2 2A1
4.75% due 4/25/2020(3) | | $ | 1,605,968 | | | $ | 1,675,315 | |
2004-2 A1
5.00% due 1/25/2019 | | | 1,052,777 | | | | 1,077,127 | |
2006-1 A3
5.00% due 3/25/2021 | | | 2,762,451 | | | | 2,792,598 | |
2006-7 1A1
5.25% due 6/25/2021 | | | 641,646 | | | | 652,571 | |
2003-9 1A3
5.25% due 8/25/2033 | | | 1,754,592 | | | | 1,836,986 | |
2005-6 A1
5.25% due 8/25/2035 | | | 1,691,933 | | | | 1,695,700 | |
2004-6 A4
5.50% due 6/25/2034 | | | 2,607,299 | | | | 2,758,113 | |
2007-13 A7
6.00% due 9/25/2037 | | | 1,861,654 | | | | 1,699,277 | |
| | | | | | | | | |
Total Collateralized Mortgage Obligations
(Cost $83,296,082) | | | | 84,903,271 | |
| | | | | | | | |
| | | Principal Amount | | | Value | |
| Senior Secured Loans – 1.6% | |
| Consumer Cyclical Services – 0.2% | |
Weight Watchers International, Inc. Term Loan F
3.75% due 3/15/2019(1) | | | 1,500,000 | | | | 1,464,540 | |
| | | | | | | | | |
| | | | | | | | 1,464,540 | |
| Healthcare – 0.1% | |
IMS Health, Inc.
New Term Loan B
4.50% due 8/25/2017(1) | | | 733,137 | | | | 727,947 | |
| | | | | | | | | |
| | | | | | | | 727,947 | |
| Metals And Mining – 0.2% | |
Novelis, Inc.
Term Loan
4.00% due 3/10/2017(1) | | | 1,576,000 | | | | 1,543,172 | |
| | | | | | | | | |
| | | | | | | | 1,543,172 | |
| Pharmaceuticals – 1.1% | |
Grifols, Inc.
New Term Loan B
4.50% due 6/1/2017(1) | | | 1,977,124 | | | | 1,955,592 | |
RPI Finance Trust
Term Loan Tranche 1
3.75% due 11/9/2016(1) | | | 5,930,460 | | | | 5,861,904 | |
| | | | | | | | | |
| | | | | | | | 7,817,496 | |
Total Senior Secured Loans
(Cost $11,707,337) | | | | 11,553,155 | |
| | | | | | | | |
| | | Principal Amount | | | Value | |
| Commercial Mortgage-Backed Securities – 17.5% | |
American Tower Trust
2007-1A AFX
5.42% due 4/15/2037(2)(3) | | | 6,420,000 | | | | 6,810,400 | |
| | | | | | | | | |
| | | | | | | | |
| June 30, 2012 (unaudited) | | Principal Amount | | | Value | |
| Commercial Mortgage-Backed Securities (continued) | |
Banc of America Commercial Mortgage, Inc.
2005-6 A4
5.366% due 9/10/2047(1)(3) | | $ | 5,800,000 | | | $ | 6,485,073 | |
2006-2 A4
5.919% due 5/10/2045(1)(3) | | | 3,400,000 | | | | 3,876,245 | |
Bear Stearns Commercial Mortgage Securities
2003-T10 A2
4.74% due 3/13/2040 | | | 4,191,004 | | | | 4,265,394 | |
2005-PW10 A4
5.405% due 12/11/2040(1) | | | 3,735,000 | | | | 4,173,702 | |
2005-PW10 AM
5.449% due 12/11/2040(1) | | | 3,466,000 | | | | 3,620,878 | |
Chase Commercial Mortgage Securities Corp.
1998-1 F
6.56% due 5/18/2030(1)(2) | | | 1,780,248 | | | | 1,813,271 | |
Citigroup Commercial Mortgage Trust
2006-C5 A4
5.431% due 10/15/2049(3) | | | 6,320,000 | | | | 7,191,060 | |
Crown Castle Towers LLC
Sr. Sec. Nt.
6.113% due 1/15/2040(2)(3) | | | 5,800,000 | | | | 6,714,173 | |
CS First Boston Mortgage Securities Corp.
2005-C5 AM
5.10% due 8/15/2038(1) | | | 2,100,000 | | | | 2,275,781 | |
DBUBS Mortgage Trust
2011-LC3A A2
3.642% due 8/10/2044 | | | 6,400,000 | | | | 6,898,675 | |
GE Capital Commercial Mortgage Corp.
2003-C2 A4
5.145% due 7/10/2037 | | | 4,925,436 | | | | 5,059,108 | |
GMAC Commercial Mortgage Securities, Inc.
2006 C1 AM
5.29% due 11/10/2045(1) | | | 2,100,000 | | | | 2,136,590 | |
Greenwich Capital Commercial Funding Corp.
2003-C2 A4
4.915% due 1/5/2036 | | | 3,900,000 | | | | 4,031,134 | |
2004-GG1 A7
5.317% due 6/10/2036(1) | | | 3,764,000 | | | | 3,989,162 | |
GS Mortgage Securities Corp. II 2012-GCJ7 A4
3.377% due 5/10/2045 | | | 7,300,000 | | | | 7,455,446 | |
J.P. Morgan Chase Commercial Mortgage Securities Corp.
2005-LDP3 A4
4.936% due 8/15/2042(1)(3) | | | 4,000,000 | | | | 4,403,748 | |
2005-LDP5 A4
5.20% due 12/15/2044(1)(3) | | | 4,705,000 | | | | 5,263,578 | |
| | | | | | | | | |
| | | | |
| 10 | | | | The accompanying notes are an integral part of these financial statements. |
RS INVESTMENT QUALITY BOND VIP SERIES
| | | | | | | | |
| June 30, 2012 (unaudited) | | Principal Amount | | | Value | |
| Commercial Mortgage-Backed Securities (continued) | |
LB Commercial Conduit Mortgage Trust
1998-C1 F
6.30% due 2/18/2030(2) | | $ | 5,000,000 | | | $ | 5,067,545 | |
LB UBS Commercial Mortgage Trust
2003-C8 A4
5.124% due 11/15/2032(1) | | | 1,000,000 | | | | 1,042,125 | |
Merrill Lynch Mortgage Trust
2005-CKI1 A6
5.39% due 11/12/2037(1) | | | 6,250,000 | | | | 6,969,331 | |
Morgan Stanley Capital I
2005-IQ10 A4A
5.23% due 9/15/2042(1) | | | 1,760,000 | | | | 1,944,047 | |
2005-HQ7 AAB
5.346% due 11/14/2042(1) | | | 3,295,000 | | | | 3,310,889 | |
NCUA Guaranteed Notes 2010-C1 A2
2.90% due 10/29/2020 | | | 2,190,000 | | | | 2,335,088 | |
Salomon Brothers Mortgage Securities VII, Inc.
1999-C1 G
7.271% due 5/18/2032(1)(2) | | | 4,236,850 | | | | 4,379,979 | |
SBA Tower Trust
Nt.
4.254% due 4/15/2015(2)(3) | | | 5,970,000 | | | | 6,243,539 | |
Wachovia Bank Commercial Mortgage Trust
2004-C10 A4
4.748% due 2/15/2041 | | | 1,721,713 | | | | 1,806,086 | |
2005-C18 A4
4.935% due 4/15/2042 | | | 2,495,000 | | | | 2,724,423 | |
2004-C11 A5
5.215% due 1/15/2041(1) | | | 3,477,000 | | | | 3,696,882 | |
| | | | | | | | | |
Total Commercial Mortgage-Backed Securities
(Cost $121,160,313) | | | | 125,983,352 | |
| | | | | | | | |
| | | Principal Amount | | | Value | |
| Corporate Bonds – 28.7% | |
| Aerospace & Defense – 0.1% | |
Northrop Grumman Space
7.75% due 6/1/2029 | | | 500,000 | | | | 673,872 | |
| | | | | | | | | |
| | | | | | | | 673,872 | |
| Automotive – 0.9% | |
Banque PSA Finance
Sr. Nt.
5.75% due 4/4/2021(2) | | | 1,100,000 | | | | 1,010,910 | |
BorgWarner, Inc.
Sr. Nt.
4.625% due 9/15/2020 | | | 1,500,000 | | | | 1,633,747 | |
Ford Motor Credit Co. LLC
Sr. Nt.
8.00% due 6/1/2014 | | | 2,250,000 | | | | 2,495,914 | |
| | | | | | | | | |
| | | | | | | | |
| June 30, 2012 (unaudited) | | Principal Amount | | | Value | |
| Automotive (continued) | |
RCI Banque SA
Sr. Nt.
4.60% due 4/12/2016(2) | | $ | 1,500,000 | | | $ | 1,493,700 | |
| | | | | | | | | |
| | | | | | | | 6,634,271 | |
| Banking – 4.4% | |
Bank of America Corp.
Sr. Nt.
5.70% due 1/24/2022 | | | 1,700,000 | | | | 1,872,200 | |
7.375% due 5/15/2014 | | | 1,500,000 | | | | 1,613,151 | |
Citigroup, Inc.
Sr. Nt.
6.125% due 11/21/2017 | | | 1,400,000 | | | | 1,551,092 | |
City National Corp.
Sr. Nt.
5.125% due 2/15/2013 | | | 700,000 | | | | 713,538 | |
Credit Suisse/New York NY
Sr. Nt.
3.50% due 3/23/2015 | | | 1,000,000 | | | | 1,036,652 | |
5.30% due 8/13/2019 | | | 1,200,000 | | | | 1,350,061 | |
Discover Bank
Sub. Nt.
7.00% due 4/15/2020 | | | 1,350,000 | | | | 1,571,226 | |
Fifth Third Capital Trust IV
6.50% due 4/15/2037(1) | | | 1,500,000 | | | | 1,490,625 | |
HSBC USA, Inc.
Sub. Nt.
4.625% due 4/1/2014 | | | 700,000 | | | | 729,687 | |
Huntington BancShares, Inc. Sub. Nt.
7.00% due 12/15/2020 | | | 1,500,000 | | | | 1,756,386 | |
JPMorgan Chase Bank N.A.
Sub. Nt.
6.00% due 10/1/2017 | | | 1,500,000 | | | | 1,679,433 | |
Lloyds TSB Bank PLC
5.80% due 1/13/2020(2) | | | 1,300,000 | | | | 1,389,714 | |
Merrill Lynch & Co., Inc.
Sr. Nt. Ser. C
6.05% due 8/15/2012 | | | 1,000,000 | | | | 1,005,500 | |
Morgan Stanley
Sr. Nt.
5.95% due 12/28/2017 | | | 1,150,000 | | | | 1,181,235 | |
Northern Trust Corp.
Sr. Nt.
3.375% due 8/23/2021 | | | 1,400,000 | | | | 1,504,187 | |
PNC Bank N.A.
Sub. Nt.
6.875% due 4/1/2018 | | | 800,000 | | | | 954,312 | |
Regions Financial Corp.
Sr. Nt.
4.875% due 4/26/2013 | | | 1,500,000 | | | | 1,522,500 | |
The Bank of New York Mellon Corp.
Sr. Nt.
3.55% due 9/23/2021 | | | 1,600,000 | | | | 1,701,403 | |
The Bear Stearns Cos. LLC
Sub. Nt.
5.55% due 1/22/2017 | | | 800,000 | | | | 863,454 | |
| | | | | | | | | |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 11 |
SCHEDULE OF INVESTMENTS — RS INVESTMENT QUALITY BOND VIP SERIES
| | | | | | | | |
| June 30, 2012 (unaudited) | | Principal Amount | | | Value | |
| Banking (continued) | |
The Goldman Sachs Group, Inc. Sr. Nt.
5.125% due 1/15/2015 | | $ | 1,600,000 | | | $ | 1,670,482 | |
Sub. Nt.
5.625% due 1/15/2017 | | | 370,000 | | | | 388,094 | |
UBS AG Stamford CT
Sr. Nt.
4.875% due 8/4/2020 | | | 1,600,000 | | | | 1,709,475 | |
USB Realty Corp.
Jr. Sub. Nt.
1.614% due 1/15/2017(1)(2)(4) | | | 950,000 | | | | 705,745 | |
Wells Fargo Bank N.A.
Sub. Nt.
5.75% due 5/16/2016 | | | 1,700,000 | | | | 1,922,935 | |
| | | | | | | | | |
| | | | | | | | 31,883,087 | |
| Brokerage – 0.6% | |
BlackRock, Inc.
Sr. Nt.
4.25% due 5/24/2021 | | | 1,700,000 | | | | 1,859,081 | |
Raymond James Financial
Sr. Nt.
4.25% due 4/15/2016 | | | 1,200,000 | | | | 1,247,846 | |
The Charles Schwab Corp.
Sr. Nt.
4.95% due 6/1/2014 | | | 1,000,000 | | | | 1,072,472 | |
| | | | | | | | | |
| | | | | | | | 4,179,399 | |
| Building Materials – 0.4% | |
CRH America, Inc.
6.00% due 9/30/2016 | | | 1,350,000 | | | | 1,477,769 | |
Masco Corp.
Sr. Nt.
5.875% due 7/15/2012 | | | 1,500,000 | | | | 1,501,125 | |
| | | | | | | | | |
| | | | | | | | 2,978,894 | |
| Chemicals – 0.7% | |
Celanese US Holdings LLC
5.875% due 6/15/2021 | | | 800,000 | | | | 858,000 | |
Ecolab, Inc.
Sr. Nt.
5.50% due 12/8/2041 | | | 1,300,000 | | | | 1,559,733 | |
FMC Corp.
Sr. Nt.
5.20% due 12/15/2019 | | | 500,000 | | | | 562,243 | |
Lubrizol Corp.
8.875% due 2/1/2019 | | | 500,000 | | | | 682,609 | |
LyondellBasell Industries NV
Sr. Nt.
5.00% due 4/15/2019(2) | | | 1,500,000 | | | | 1,573,125 | |
| | | | | | | | | |
| | | | | | | | 5,235,710 | |
| Construction Machinery – 0.2% | |
Joy Global, Inc.
6.00% due 11/15/2016 | | | 1,200,000 | | | | 1,371,352 | |
| | | | | | | | | |
| | | | | | | | 1,371,352 | |
| Diversified Manufacturing – 0.6% | |
ABB Finance USA, Inc.
2.875% due 5/8/2022 | | | 1,700,000 | | | | 1,719,645 | |
| | | | | | | | | |
| | | | | | | | |
| June 30, 2012 (unaudited) | | Principal Amount | | | Value | |
| Diversified Manufacturing (continued) | |
Siemens Financieringsmat N.V.
6.125% due 8/17/2026(2) | | $ | 750,000 | | | $ | 932,135 | |
United Technologies Corp.
Sr. Nt.
4.50% due 6/1/2042 | | | 1,600,000 | | | | 1,757,448 | |
| | | | | | | | | |
| | | | | | | | 4,409,228 | |
| Electric – 1.2% | |
Alabama Power Co.
Sr. Nt.
5.65% due 3/15/2035 | | | 750,000 | | | | 798,004 | |
Duquesne Light Holdings, Inc. Sr. Nt.
5.50% due 8/15/2015 | | | 1,515,000 | | | | 1,603,338 | |
Florida Power & Light Co.
4.95% due 6/1/2035 | | | 750,000 | | | | 880,227 | |
Nevada Power Co.
6.65% due 4/1/2036 | | | 600,000 | | | | 807,653 | |
PPL Electric Utilities Corp.
6.25% due 5/15/2039 | | | 1,455,000 | | | | 2,003,747 | |
San Diego Gas & Electric Co.
3.00% due 8/15/2021 | | | 1,300,000 | | | | 1,373,300 | |
Virginia Electric and Power Co. Sr. Nt.
8.875% due 11/15/2038 | | | 800,000 | | | | 1,335,790 | |
| | | | | | | | | |
| | | | | | | | 8,802,059 | |
| Energy - Integrated – 0.8% | |
BP Capital Markets PLC
4.50% due 10/1/2020 | | | 1,600,000 | | | | 1,801,338 | |
Hess Corp.
Sr. Nt.
5.60% due 2/15/2041 | | | 1,700,000 | | | | 1,803,979 | |
Suncor Energy, Inc.
Sr. Nt.
6.50% due 6/15/2038 | | | 1,000,000 | | | | 1,190,883 | |
Tosco Corp.
Sr. Nt.
8.125% due 2/15/2030 | | | 500,000 | | | | 750,063 | |
| | | | | | | | | |
| | | | | | | | 5,546,263 | |
| Entertainment – 0.6% | |
Time Warner, Inc.
4.00% due 1/15/2022 | | | 1,000,000 | | | | 1,057,660 | |
7.57% due 2/1/2024 | | | 1,450,000 | | | | 1,870,943 | |
Viacom, Inc.
Sr. Nt.
6.875% due 4/30/2036 | | | 800,000 | | | | 1,035,789 | |
| | | | | | | | | |
| | | | | | | | 3,964,392 | |
| Food And Beverage – 0.8% | |
Beam, Inc.
Sr. Nt.
1.875% due 5/15/2017 | | | 1,700,000 | | | | 1,708,189 | |
Kraft Foods, Inc.
Sr. Nt.
6.50% due 2/9/2040 | | | 500,000 | | | | 642,295 | |
Mead Johnson Nutrition Co.
Sr. Nt.
4.90% due 11/1/2019 | | | 1,200,000 | | | | 1,364,892 | |
| | | | | | | | | |
| | | | |
| 12 | | | | The accompanying notes are an integral part of these financial statements. |
RS INVESTMENT QUALITY BOND VIP SERIES
| | | | | | | | |
| June 30, 2012 (unaudited) | | Principal Amount | | | Value | |
| Food And Beverage (continued) | |
Pernod-Ricard S.A.
Sr. Nt.
5.75% due 4/7/2021(2) | | $ | 1,800,000 | | | $ | 2,032,050 | |
| | | | | | | | | |
| | | | | | | | 5,747,426 | |
| Gaming – 0.1% | |
Seminole Tribe of Fla
Sr. Sec. Nt.
5.798% due 10/1/2013(2) | | | 1,030,000 | | | | 1,056,904 | |
| | | | | | | | | |
| | | | | | | | 1,056,904 | |
| Government Related – 0.9% | |
Korea Electric Power Corp.
Sr. Nt.
5.50% due 7/21/2014(2) | | | 1,500,000 | | | | 1,596,456 | |
Pemex Project Funding Master Trust
5.75% due 3/1/2018 | | | 700,000 | | | | 791,000 | |
Petrobras International Finance Co.
5.875% due 3/1/2018 | | | 1,250,000 | | | | 1,385,575 | |
RAS Laffan Liquefied Natural Gas Co. Ltd.
Sr. Sec. Nt.
6.75% due 9/30/2019(2) | | | 2,300,000 | | | | 2,753,776 | |
| | | | | | | | | |
| | | | | | | | 6,526,807 | |
| Health Insurance – 0.2% | |
UnitedHealth Group, Inc.
Sr. Nt.
6.50% due 6/15/2037 | | | 500,000 | | | | 662,912 | |
WellPoint, Inc.
Sr. Nt.
4.35% due 8/15/2020 | | | 600,000 | | | | 659,732 | |
| | | | | | | | | |
| | | | | | | | 1,322,644 | |
| Healthcare – 0.7% | |
Bio-Rad Laboratories, Inc.
Sr. Nt.
4.875% due 12/15/2020 | | | 650,000 | | | | 681,850 | |
Fresenius Medical Care US Finance, Inc.
6.875% due 7/15/2017 | | | 1,500,000 | | | | 1,666,875 | |
Hospira, Inc.
Sr. Nt.
6.05% due 3/30/2017 | | | 1,600,000 | | | | 1,804,755 | |
McKesson Corp.
Sr. Nt.
7.50% due 2/15/2019 | | | 600,000 | | | | 771,603 | |
| | | | | | | | | |
| | | | | | | | 4,925,083 | |
| Independent Energy – 0.7% | |
Canadian Natural Resources Ltd. Sr. Nt.
6.25% due 3/15/2038 | | | 600,000 | | | | 735,064 | |
Dolphin Energy Ltd.
Sr. Sec. Nt.
5.888% due 6/15/2019(2) | | | 1,600,800 | | | | 1,752,876 | |
Nexen, Inc.
Sr. Nt.
6.20% due 7/30/2019 | | | 900,000 | | | | 1,042,447 | |
| | | | | | | | | |
| | | | | | | | |
| June 30, 2012 (unaudited) | | Principal Amount | | | Value | |
| Independent Energy (continued) | |
Whiting Petroleum Corp.
6.50% due 10/1/2018 | | $ | 1,600,000 | | | $ | 1,704,000 | |
| | | | | | | | | |
| | | | | | | | 5,234,387 | |
| Industrial - Other – 0.5% | |
Princeton University
Sr. Nt.
5.70% due 3/1/2039 | | | 1,600,000 | | | | 2,238,160 | |
URS Corp.
Sr. Nt.
5.00% due 4/1/2022(2) | | | 1,500,000 | | | | 1,481,649 | |
| | | | | | | | | |
| | | | | | | | 3,719,809 | |
| Insurance - Life – 1.1% | |
American International Group, Inc. Sr. Nt.
5.85% due 1/16/2018 | | | 1,000,000 | | | | 1,105,523 | |
MetLife, Inc.
Jr. Sub. Nt.
6.40% due 12/15/2036 | | | 500,000 | | | | 490,138 | |
New York Life Insurance Co.
Sub. Nt.
6.75% due 11/15/2039(2) | | | 1,000,000 | | | | 1,321,819 | |
Prudential Financial, Inc.
Sr. Nt.
7.375% due 6/15/2019 | | | 1,100,000 | | | | 1,342,527 | |
Symetra Financial Corp.
Sr. Nt.
6.125% due 4/1/2016(2) | | | 800,000 | | | | 817,936 | |
Teachers Insurance & Annuity Association of America
Sub. Nt.
6.85% due 12/16/2039(2) | | | 1,200,000 | | | | 1,549,516 | |
UnumProvident Finance Co.
6.85% due 11/15/2015(2) | | | 1,100,000 | | | | 1,228,637 | |
| | | | | | | | | |
| | | | | | | | 7,856,096 | |
| Insurance P&C – 0.8% | |
Ace INA Holdings, Inc.
5.80% due 3/15/2018 | | | 1,000,000 | | | | 1,202,274 | |
Allied World Assurance Co. Hldgs. Ltd.
7.50% due 8/1/2016 | | | 1,100,000 | | | | 1,268,268 | |
Berkshire Hathaway Finance Corp.
5.75% due 1/15/2040 | | | 1,500,000 | | | | 1,819,406 | |
ZFS Finance USA Trust II
Jr. Sub. Nt.
6.45% due 12/15/2065(1)(2) | | | 1,600,000 | | | | 1,600,000 | |
| | | | | | | | | |
| | | | | | | | 5,889,948 | |
| Media Cable – 1.0% | |
Comcast Corp.
6.45% due 3/15/2037 | | | 1,000,000 | | | | 1,216,098 | |
6.50% due 1/15/2017 | | | 500,000 | | | | 595,236 | |
DirecTV Holdings LLC
3.80% due 3/15/2022 | | | 1,600,000 | | | | 1,618,069 | |
Time Warner Cable, Inc.
5.85% due 5/1/2017 | | | 2,000,000 | | | | 2,350,112 | |
Virgin Media Secured Finance PLC Sr. Sec. Nt.
6.50% due 1/15/2018 | | | 1,500,000 | | | | 1,631,250 | |
| | | | | | | | | |
| | | | | | | | 7,410,765 | |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 13 |
SCHEDULE OF INVESTMENTS — RS INVESTMENT QUALITY BOND VIP SERIES
| | | | | | | | |
| June 30, 2012 (unaudited) | | Principal Amount | | | Value | |
| Media Noncable – 0.4% | |
Scholastic Corp.
Sr. Nt.
5.00% due 4/15/2013 | | $ | 1,500,000 | | | $ | 1,518,750 | |
The Interpublic Group of Companies, Inc.
Sr. Nt.
4.00% due 3/15/2022 | | | 1,500,000 | | | | 1,522,837 | |
| | | | | | | | | |
| | | | | | | | 3,041,587 | |
| Metals And Mining – 1.1% | |
Allegheny Technologies, Inc.
Sr. Nt.
9.375% due 6/1/2019 | | | 1,500,000 | | | | 1,908,774 | |
Cliffs Natural Resources, Inc.
Sr. Nt.
5.90% due 3/15/2020 | | | 1,250,000 | | | | 1,320,205 | |
FMG Resources August 2006
6.375% due 2/1/2016(2) | | | 2,000,000 | | | | 2,025,000 | |
Freeport-McMoRan Copper & Gold, Inc.
Sr. Nt.
3.55% due 3/1/2022 | | | 600,000 | | | | 590,327 | |
Steel Dynamics, Inc.
6.75% due 4/1/2015 | | | 1,500,000 | | | | 1,522,500 | |
Vale Overseas Ltd.
6.25% due 1/23/2017 | | | 400,000 | | | | 454,917 | |
| | | | | | | | | |
| | | | | | | | 7,821,723 | |
| Non Captive Consumer – 0.5% | |
HSBC Finance Corp.
Sr. Nt.
6.375% due 11/27/2012 | | | 1,000,000 | | | | 1,021,160 | |
SLM Corp.
Sr. Nt.
6.25% due 1/25/2016 | | | 1,200,000 | | | | 1,260,000 | |
7.25% due 1/25/2022 | | | 1,000,000 | | | | 1,057,500 | |
| | | | | | | | | |
| | | | | | | | 3,338,660 | |
| Non Captive Diversified – 1.1% | |
Ally Financial, Inc.
4.50% due 2/11/2014 | | | 1,500,000 | | | | 1,520,625 | |
CIT Group, Inc.
Sr. Nt.
4.75% due 2/15/2015(2) | | | 1,500,000 | | | | 1,535,625 | |
GATX Corp.
Sr. Nt.
4.75% due 10/1/2012 | | | 650,000 | | | | 655,407 | |
General Electric Capital Corp.
Sr. Nt.
5.625% due 5/1/2018 | | | 1,200,000 | | | | 1,379,448 | |
6.75% due 3/15/2032 | | | 1,000,000 | | | | 1,238,183 | |
KKR Group Finance Co.
6.375% due 9/29/2020(2) | | | 1,600,000 | | | | 1,734,490 | |
| | | | | | | | | |
| | | | | | | | 8,063,778 | |
| Oil Field Services – 0.4% | |
Transocean, Inc.
6.00% due 3/15/2018 | | | 550,000 | | | | 614,353 | |
Weatherford Bermuda
5.15% due 3/15/2013 | | | 700,000 | | | | 718,923 | |
6.50% due 8/1/2036 | | | 1,200,000 | | | | 1,303,751 | |
| | | | | | | | | |
| | | | | | | | 2,637,027 | |
| | | | | | | | |
| June 30, 2012 (unaudited) | | Principal Amount | | | Value | |
| Packaging – 0.6% | |
Ball Corp.
5.00% due 3/15/2022 | | $ | 2,600,000 | | | $ | 2,704,000 | |
Silgan Holdings, Inc.
Sr. Nt.
5.00% due 4/1/2020(2) | | | 1,500,000 | | | | 1,533,750 | |
| | | | | | | | | |
| | | | | | | | 4,237,750 | |
| Paper – 0.6% | |
Georgia-Pacific LLC
5.40% due 11/1/2020(2) | | | 1,000,000 | | | | 1,160,369 | |
Rock-Tenn Co.
4.90% due 3/1/2022(2) | | | 3,200,000 | | | | 3,296,608 | |
| | | | | | | | | |
| | | | | | | | 4,456,977 | |
| Pharmaceuticals – 0.9% | |
Abbott Laboratories
Sr. Nt.
5.125% due 4/1/2019 | | | 1,100,000 | | | | 1,310,326 | |
Gilead Sciences, Inc.
Sr. Nt.
4.40% due 12/1/2021 | | | 2,150,000 | | | | 2,373,125 | |
Pfizer, Inc.
Sr. Nt.
6.20% due 3/15/2019 | | | 800,000 | | | | 1,002,680 | |
Teva Pharmaceutical Finance IV BV
3.65% due 11/10/2021 | | | 1,400,000 | | | | 1,472,489 | |
| | | | | | | | | |
| | | | | | | | 6,158,620 | |
| Pipelines – 0.8% | |
Boardwalk Pipelines LP
5.75% due 9/15/2019 | | | 1,600,000 | | | | 1,756,670 | |
El Paso Pipeline Partners Operating Co. LLC
5.00% due 10/1/2021 | | | 1,600,000 | | | | 1,731,085 | |
Energy Transfer Partners LP
Sr. Nt.
8.50% due 4/15/2014 | | | 750,000 | | | | 830,279 | |
Enterprise Products Operating LLC
8.375% due 8/1/2066(1) | | | 400,000 | | | | 433,500 | |
Williams Partners LP
Sr. Nt.
5.25% due 3/15/2020 | | | 1,000,000 | | | | 1,123,556 | |
| | | | | | | | | |
| | | | | | | | 5,875,090 | |
| Railroads – 0.2% | |
CSX Corp.
Sr. Nt.
4.75% due 5/30/2042 | | | 1,250,000 | | | | 1,288,815 | |
| | | | | | | | | |
| | | | | | | | 1,288,815 | |
| Refining – 0.5% | |
Motiva Enterprises LLC
Nt.
5.75% due 1/15/2020(2) | | | 1,000,000 | | | | 1,168,652 | |
Phillips 66
4.30% due 4/1/2022(2) | | | 1,400,000 | | | | 1,472,754 | |
Valero Energy Corp.
Sr. Nt.
9.375% due 3/15/2019 | | | 600,000 | | | | 788,534 | |
| | | | | | | | | |
| | | | | | | | 3,429,940 | |
| | | | |
| 14 | | | | The accompanying notes are an integral part of these financial statements. |
RS INVESTMENT QUALITY BOND VIP SERIES
| | | | | | | | |
| June 30, 2012 (unaudited) | | Principal Amount | | | Value | |
| REITs – 1.4% | |
CommonWealth REIT
Sr. Nt.
5.875% due 9/15/2020 | | $ | 1,200,000 | | | $ | 1,242,052 | |
DDR Corp.
Sr. Nt.
4.75% due 4/15/2018 | | | 2,000,000 | | | | 2,074,390 | |
Equity One, Inc.
6.25% due 12/15/2014 | | | 1,100,000 | | | | 1,178,098 | |
ERP Operating LP
Sr. Nt.
5.375% due 8/1/2016 | | | 775,000 | | | | 868,050 | |
ProLogis LP
6.875% due 3/15/2020 | | | 1,500,000 | | | | 1,794,064 | |
Simon Property Group LP
Sr. Nt.
4.125% due 12/1/2021 | | | 1,600,000 | | | | 1,704,616 | |
WEA FIN LLC/WCI FIN LLC
5.40% due 10/1/2012(2) | | | 900,000 | | | | 908,940 | |
| | | | | | | | | |
| | | | | | | | 9,770,210 | |
| Retailers – 0.5% | |
QVC, Inc.
Sr. Sec. Nt.
5.125% due 7/2/2022(2) | | | 2,100,000 | | | | 2,143,625 | |
Target Corp.
Sr. Nt.
4.00% due 7/1/2042 | | | 1,600,000 | | | | 1,576,040 | |
| | | | | | | | | |
| | | | | | | | 3,719,665 | |
| Technology – 0.6% | |
Hewlett-Packard Co.
Sr. Nt.
4.05% due 9/15/2022 | | | 1,600,000 | | | | 1,611,902 | |
KLA-Tencor Corp.
Sr. Nt.
6.90% due 5/1/2018 | | | 1,500,000 | | | | 1,791,632 | |
National Semiconductor Corp.
Sr. Nt.
6.60% due 6/15/2017 | | | 500,000 | | | | 618,092 | |
| | | | | | | | | |
| | | | | | | | 4,021,626 | |
| Wireless – 0.6% | |
America Movil S.A.B. de C.V.
5.00% due 10/16/2019 | | | 1,500,000 | | | | 1,702,183 | |
American Tower Corp.
Sr. Nt.
4.625% due 4/1/2015 | | | 1,500,000 | | | | 1,587,746 | |
Cellco Partnership
Sr. Nt.
5.55% due 2/1/2014 | | | 500,000 | | | | 535,266 | |
Vodafone Group PLC
Sr. Nt.
6.15% due 2/27/2037 | | | 350,000 | | | | 447,344 | |
| | | | | | | | | |
| | | | | | | | 4,272,539 | |
| Wirelines – 1.2% | |
AT&T, Inc.
Sr. Nt.
6.30% due 1/15/2038 | | | 1,200,000 | | | | 1,494,709 | |
Deutsche Telekom International Finance BV
8.75% due 6/15/2030 | | | 850,000 | | | | 1,179,828 | |
| | | | | | | | | |
| | | | | | | | |
| June 30, 2012 (unaudited) | | Principal Amount | | | Value | |
| Wirelines (continued) | |
France Telecom S.A.
Sr. Nt.
8.50% due 3/1/2031 | | $ | 335,000 | | | $ | 470,149 | |
Qwest Communications International, Inc.
7.125% due 4/1/2018 | | | 1,500,000 | | | | 1,582,500 | |
Telecom Italia Capital
5.25% due 10/1/2015 | | | 550,000 | | | | 544,500 | |
Telecom Italia Capital SA
5.25% due 11/15/2013 | | | 1,500,000 | | | | 1,503,750 | |
Verizon Communications, Inc. Sr. Nt.
6.40% due 2/15/2038 | | | 1,250,000 | | | | 1,623,215 | |
| | | | | | | | | |
| | | | | | | | 8,398,651 | |
Total Corporate Bonds
(Cost $187,288,279) | | | | 205,901,054 | |
| | | | | | | | |
| | | Principal
Amount | | | Value | |
| Hybrid ARMS – 0.2% | |
FNMA
2.44% due 8/1/2046(1) | | | 263,484 | | | | 278,096 | |
2.551% due 12/1/2036(1) | | | 781,083 | | | | 831,683 | |
| | | | | | | | | |
Total Hybrid ARMS
(Cost $1,050,653) | | | | 1,109,779 | |
| | | | | | | | |
| | | Principal
Amount | | | Value | |
| Mortgage Pass-Through Securities – 16.1% | |
FHLMC
4.00% due 12/1/2040 - 1/1/2041 | | | 14,213,000 | | | | 15,102,002 | |
5.50% due 2/1/2037 - 6/1/2038 | | | 2,037,231 | | | | 2,218,044 | |
7.00% due 9/1/2038 | | | 457,346 | | | | 530,566 | |
FNMA
3.00% due 12/1/2042(5) | | | 1,500,000 | | | | 1,538,203 | |
3.50% due 6/1/2042 | | | 5,360,000 | | | | 5,652,981 | |
3.50% due 12/1/2042(5) | | | 2,400,000 | | | | 2,522,625 | |
4.00% due 9/1/2040 - 11/1/2040 | | | 24,724,873 | | | | 26,346,278 | |
4.00% due 12/1/2042(5) | | | 12,100,000 | | | | 12,877,048 | |
4.50% due 6/1/2041 | | | 10,500,000 | | | | 11,320,368 | |
5.00% due 4/1/2023 - 12/1/2039 | | | 19,400,401 | | | | 21,010,977 | |
5.50% due 1/1/2038 - 2/1/2039 | | | 13,790,857 | | | | 15,049,367 | |
6.00% due 8/1/2021 | | | 419,443 | | | | 461,425 | |
6.50% due 7/1/2014 - 12/1/2014 | | | 41,894 | | | | 43,300 | |
7.00% due 9/1/2014 - 6/1/2032 | | | 187,238 | | | | 215,780 | |
7.50% due 12/1/2029 | | | 192,523 | | | | 234,299 | |
8.00% due 1/1/2030 - 9/1/2030 | | | 74,105 | | | | 91,545 | |
GNMA
6.00% due 10/15/2032 - 12/15/2033 | | | 497,370 | | | | 566,629 | |
| | | | | | | | | |
Total Mortgage Pass-Through Securities
(Cost $112,333,322) | | | | 115,781,437 | |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 15 |
SCHEDULE OF INVESTMENTS — RS INVESTMENT QUALITY BOND VIP SERIES
| | | | | | | | |
| June 30, 2012 (unaudited) | | Principal Amount | | | Value | |
| Municipal Bonds – 2.1% | |
Arizona Wtr. Infrastructure Fin. Auth. Rev.
Wtr. Quality Ser. A
5.00% due 10/1/2027 | | $ | 1,200,000 | | | $ | 1,388,772 | |
California St. G.O.
5.25% due 4/1/2014 | | | 800,000 | | | | 857,448 | |
Chicago Illinois Metropolitan Wtr. Reclamation Dist. Greater Chicago G.O.
Build America Bonds Taxable Direct Payment
5.72% due 12/1/2038 | | | 1,600,000 | | | | 2,020,352 | |
Illinois St. G.O.
4.511% due 3/1/2015 | | | 700,000 | | | | 741,489 | |
Illinois St. Toll Hwy. Auth. Toll Hwy. Rev.
Build America Bonds Ser. A
6.184% due 1/1/2034 | | | 1,000,000 | | | | 1,240,130 | |
Massachusetts Bay Transn. Auth. Rev.
Ser. A
5.25% due 7/1/2034 | | | 2,400,000 | | | | 2,764,992 | |
Massachusetts St. Health & Ed. Facs. Auth. Rev.
Harvard Univ. Ser. A
5.50% due 11/15/2036 | | | 1,190,000 | | | | 1,434,426 | |
New York City Muni. Wtr. Fin. Auth. Wtr. & Swr. Rev.
Build America Bonds Ser. EE
6.011% due 6/15/2042 | | | 1,600,000 | | | | 2,118,336 | |
Oregon Sch. Brd. Association
4.759% due 6/30/2028 | | | 450,000 | | | | 527,301 | |
San Diego Cnty. California Wtr. Auth. Fing. Agcy. Wtr. Rev. Build America Bonds Ser. B
6.138% due 5/1/2049 | | | 1,500,000 | | | | 1,985,760 | |
| | | | | | | | | |
Total Municipal Bonds
(Cost $12,568,750) | | | | 15,079,006 | |
| | | | | | | | |
| | | Principal Amount | | | Value | |
| U.S. Government Securities – 14.4% | |
U.S. Treasury Bonds
3.00% due 5/15/2042 | | | 2,150,000 | | | | 2,251,790 | |
3.125% due 11/15/2041 - 2/15/2042 | | | 16,525,000 | | | | 17,763,465 | |
3.75% due 8/15/2041 | | | 3,970,000 | | | | 4,787,574 | |
4.25% due 11/15/2040 | | | 8,200,000 | | | | 10,726,625 | |
U.S. Treasury Notes
0.25% due 2/28/2014 - 3/31/2014 | | | 4,645,000 | | | | 4,640,061 | |
0.375% due 3/15/2015 | | | 1,540,000 | | | | 1,539,037 | |
0.875% due 1/31/2017 - 4/30/2017 | | | 45,145,000 | | | | 45,530,316 | |
| | | | | | | | | |
| | | | | | | | |
| June 30, 2012 (unaudited) | | Principal Amount | | | Value | |
1.00% due 3/31/2017 - 6/30/2019 | | $ | 10,705,000 | | | $ | 10,782,693 | |
1.75% due 5/15/2022 | | | 5,485,000 | | | | 5,529,566 | |
| | | | | | | | | |
Total U.S. Government Securities
(Cost $98,330,060) | | | | 103,551,127 | |
| | | | | | | | |
| | | Principal Amount | | | Value | |
| Short-Term Investments – 2.2% | |
American Transmission Co.
0.17% due 7/9/2012(3) | | | 5,000,000 | | | | 4,999,811 | |
EI DuPont
0.14% due 7/6/2012(3) | | | 1,000,000 | | | | 999,981 | |
Emerson Electric Co.
0.12% due 7/9/2012(3) | | | 5,000,000 | | | | 4,999,867 | |
Roche Holdings, Inc.
0.11% due 7/12/2012(3) | | | 5,000,000 | | | | 4,999,832 | |
| | | | | | | | | |
Total Short-Term Investments
(Cost $15,999,491) | | | | 15,999,491 | |
| | | | | | | | |
| | | Principal Amount | | | Value | |
| Repurchase Agreements – 4.4% | |
State Street Bank and Trust Co. Repurchase Agreement, 0.01%, dated 6/29/2012, maturity value of $31,538,026, due 7/2/2012(6) | | | 31,538,000 | | | | 31,538,000 | |
| | | | | | | | | |
Total Repurchase Agreements
(Cost $31,538,000) | | | | 31,538,000 | |
Total Investments – 102.5%
(Cost $699,616,954) | | | | 736,214,550 | |
| Other Liabilities, Net – (2.5)% | | | | (17,873,639 | ) |
| Total Net Assets – 100.0% | | | $ | 718,340,911 | |
| (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, 2012. |
| (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, 2012, the aggregate market value of these securities amounted to $84,270,914, representing 11.7% 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) | TBA — To be announced. |
| (6) | The table below presents collateral for repurchase agreements. |
| | | | | | | | | | | | |
| Security | | Coupon | | | Maturity Date | | | Value | |
| FHLB | | | 0.32% | | | | 12/11/2013 | | | $ | 19,665,476 | |
| FHLB | | | 0.875% | | | | 12/27/2013 | | | | 2,536,300 | |
| FHLB | | | 1.75% | | | | 8/22/2012 | | | | 9,832,524 | |
| U.S. Treasury Note | | | 1.5% | | | | 12/31/2013 | | | | 138,401 | |
| | | | |
| 16 | | | | The accompanying notes are an integral part of these financial statements. |
RS INVESTMENT QUALITY BOND VIP SERIES
The following is a summary of the inputs used as of June 30, 2012 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 | | $ | — | | | $ | 24,814,878 | | | $ | — | | | $ | 24,814,878 | |
| Collateralized Mortgage Obligations | | | — | | | | 84,903,271 | | | | — | | | | 84,903,271 | |
| Senior Secured Loans | | | — | | | | 11,553,155 | | | | — | | | | 11,553,155 | |
| Commercial Mortgage-Backed Securities | | | — | | | | 125,983,352 | | | | — | | | | 125,983,352 | |
| Corporate Bonds | | | — | | | | 205,901,054 | | | | — | | | | 205,901,054 | |
| Hybrid ARMS | | | — | | | | 1,109,779 | | | | — | | | | 1,109,779 | |
| Mortgage Pass-Through Securities | | | — | | | | 115,781,437 | | | | — | | | | 115,781,437 | |
| Municipal Bonds | | | — | | | | 15,079,006 | | | | — | | | | 15,079,006 | |
| U.S. Government Securities | | | — | | | | 103,551,127 | | | | — | | | | 103,551,127 | |
| Short-Term Investments | | | — | | | | 15,999,491 | | | | — | | | | 15,999,491 | |
| Repurchase Agreements | | | — | | | | 31,538,000 | | | | — | | | | 31,538,000 | |
| Total | | $ | — | | | $ | 736,214,550 | | | $ | — | | | $ | 736,214,550 | |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 17 |
FINANCIAL INFORMATION — RS INVESTMENT QUALITY BOND VIP SERIES
| | | | |
Statement of Assets and Liabilities As of June 30, 2012 (unaudited) | | | |
Assets | | | | |
Investments, at value | | $ | 736,214,550 | |
Cash and cash equivalents | | | 458 | |
Dividends/interest receivable | | | 4,482,250 | |
Receivable for investments sold | | | 1,508,740 | |
Receivable for fund shares subscribed | | | 284,633 | |
| | | | | |
Total Assets | | | 742,490,631 | |
| | | | | |
| | |
Liabilities | | | | |
Payable for investments purchased | | | 23,673,560 | |
Payable to adviser | | | 294,550 | |
Payable for fund shares redeemed | | | 107,829 | |
Accrued trustees’ fees | | | 5,018 | |
Accrued expenses/other liabilities | | | 68,763 | |
| | | | | |
Total Liabilities | | | 24,149,720 | |
| | | | | |
Total Net Assets | | $ | 718,340,911 | |
| | | | | |
| | |
Net Assets Consist of: | | | | |
Paid-in capital | | $ | 661,440,717 | |
Accumulated undistributed net investment income | | | 11,701,205 | |
Accumulated net realized gain from investments | | | 8,601,393 | |
Net unrealized appreciation on investments | | | 36,597,596 | |
| | | | | |
Total Net Assets | | $ | 718,340,911 | |
| | | | | |
Investments, at Cost | | $ | 699,616,954 | |
| | | | | |
| | |
Pricing of Shares | | | | |
Shares of Beneficial Interest Outstanding with no Par Value | | | 55,187,009 | |
Net Asset Value Per Share | | | $13.02 | |
| | | | | |
| | | | |
Statement of Operations For the Six-Month Period Ended June 30, 2012 (unaudited) | |
Investment Income | | | | |
Interest | | $ | 13,659,604 | |
| | | | | |
Total Investment Income | | | 13,659,604 | |
| | | | | |
| | |
Expenses | | | | |
Investment advisory fees | | | 1,759,746 | |
Custodian fees | | | 48,417 | |
Shareholder reports | | | 40,961 | |
Administrative service fees | | | 39,256 | |
Professional fees | | | 36,787 | |
Trustees’ fees | | | 15,407 | |
Other expenses | | | 17,837 | |
| | | | | |
Total Expenses | | | 1,958,411 | |
| | |
Less: Custody credits | | | (12 | ) |
| | | | | |
Total Expenses, Net | | | 1,958,399 | |
| | | | | |
Net Investment Income | | | 11,701,205 | |
| | | | | |
| | |
Realized Gain/(Loss) and Change in Unrealized Appreciation/Depreciation on Investments | | | | |
Net realized gain from investments | | | 8,315,065 | |
Net change in unrealized appreciation/depreciation on investments | | | 4,420,270 | |
| | | | | |
Net Gain on Investments | | | 12,735,335 | |
| | | | | |
Net Increase in Net Assets Resulting from Operations | | $ | 24,436,540 | |
| | | | | |
| | | | | |
| | | | |
| 18 | | | | The accompanying notes are an integral part of these financial statements. |
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 6/30/12 | | | For the Year Ended 12/31/11 | |
| | | | |
Operations | | | | | | | | |
Net investment income | | $ | 11,701,205 | | | $ | 24,753,330 | |
Net realized gain from investments | | | 8,315,065 | | | | 6,939,651 | |
Net change in unrealized appreciation/depreciation on investments | | | 4,420,270 | | | | 14,003,882 | |
| | | | | | | | | |
Net Increase in Net Assets Resulting from Operations | | | 24,436,540 | | | | 45,696,863 | |
| | | | | | | | | |
| | | |
Distributions to Shareholders | | | | | | | | |
Net investment income | | | — | | | | (24,984,835 | ) |
Net realized gain on investments | | | — | | | | (6,483,567 | ) |
| | | | | | | | | |
Total Distributions | | | — | | | | (31,468,402 | ) |
| | | | | | | | | |
| | | |
Capital Share Transactions | | | | | | | | |
Proceeds from sales of shares | | | 72,183,507 | | | | 110,638,125 | |
Reinvestment of distributions | | | — | | | | 31,468,402 | |
Cost of shares redeemed | | | (50,161,506 | ) | | | (115,589,205 | ) |
| | | | | | | | | |
Net Increase in Net Assets Resulting from Capital Share
Transactions | | | 22,022,001 | | | | 26,517,322 | |
| | | | | | | | | |
Net Increase in Net Assets | | | 46,458,541 | | | | 40,745,783 | |
| | | | | | | | | |
| | | |
Net Assets | | | | | | | | |
Beginning of period | | | 671,882,370 | | | | 631,136,587 | |
| | | | | | | | | |
End of period | | $ | 718,340,911 | | | $ | 671,882,370 | |
| | | | | | | | | |
Accumulated Undistributed Net Investment Income Included in Net Assets | | $ | 11,701,205 | | | $ | — | |
| | | | | | | | | |
| | | |
Other Information: | | | | | | | | |
Shares | | | | | | | | |
Sold | | | 5,651,266 | | | | 8,743,837 | |
Reinvested | | | — | | | | 2,511,445 | |
Redeemed | | | (3,896,813 | ) | | | (9,051,795 | ) |
| | | | | | | | | |
Net Increase | | | 1,754,453 | | | | 2,203,487 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 19 |
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 6/30/121 | | $ | 12.57 | | | $ | 0.21 | | | $ | 0.24 | | | $ | 0.45 | | | $ | — | | | $ | — | | | $ | — | |
Year Ended 12/31/11 | | | 12.32 | | | | 0.49 | | | | 0.38 | | | | 0.87 | | | | (0.49 | ) | | | (0.13 | ) | | | (0.62 | ) |
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 | ) |
| | | | |
| 20 | | | | 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 | |
| $ | 13.02 | | | | 3.58% | | | $ | 718,341 | | | | 0.56% | | | | 0.56% | | | | 3.32% | | | | 3.32% | | | | 56% | |
| | 12.57 | | | | 7.08% | | | | 671,882 | | | | 0.57% | | | | 0.57% | | | | 3.75% | | | | 3.75% | | | | 102% | |
| | 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% | |
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 and expense limitations and exclude the effect of custody credits, if applicable. |
| 4 | Includes return of capital distribution rounding to $0.00 per share. |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 21 |
NOTES TO FINANCIAL STATEMENTS — RS INVESTMENT QUALITY BOND VIP SERIES (UNAUDITED)
June 30, 2012 (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 nine 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. The Fund currently offers only Class I shares. 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. The valuations of debt securities, including bank loans, 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 at the bid price by independent pricing services (each, a “Service”). Debt securities with more than 60 days to maturity for which quoted bid prices are not readily available and representative of market value are valued by a 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 (See Note 4b). 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 in accordance with guidelines and procedures adopted 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 (“FASB”) 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.
The FASB 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, 2012, the Fund had no securities classified as Level 3.
The Fund’s policy is to recognize transfers between Level 1, Level 2 and Level 3 at the end of the reporting period. For the six months ended June 30, 2012, there were no transfers between Level 1 and Level 2.
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, for example, 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. 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.
NOTES TO FINANCIAL STATEMENTS — RS INVESTMENT QUALITY BOND VIP SERIES (UNAUDITED)
As of June 30, 2012, 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 Trust is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next twelve months. 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, 2012, the Fund did not incur any such interest or penalties. The Fund is not subject to examination by U.S. federal tax authorities for tax years before 2008 and by 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.
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 (but not in the Financial Highlights) as a reduction to the Fund’s expenses.
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. 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, 2011, which is the most recently completed tax year, was as follows:
| | | | |
Ordinary
Income | | Long-Term Capital Gains | |
| $28,152,789 | | $ | 3,315,613 | |
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
NOTES TO FINANCIAL STATEMENTS — RS INVESTMENT QUALITY BOND VIP SERIES (UNAUDITED)
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, 2011, the Fund made the following reclassifications of permanent book and tax basis differences:
| | | | |
Accumulated Net Investment Income/(Loss) | | Accumulated
Net Realized Gain | |
| $267,366 | | $ | (267,366 | ) |
The tax basis of distributable earnings as of December 31, 2011 was as follows:
| | | | | | |
| | | Undistributed
Ordinary
Income | | | |
| | | | $372,136 | | | |
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, 2011, the Fund elected to defer net capital losses of $27,025.
b. Tax Basis of Investments The cost of investments for federal income tax purposes at June 30, 2012, was $699,754,546. The gross unrealized appreciation and depreciation on investments, on a tax basis, at June 30, 2012, aggregated $38,410,644 and $(1,950,640), respectively, resulting in net unrealized appreciation of $36,460,004.
Note 4. Investments
a. Investment Purchases and Sales The cost of investments and U.S. government agency obligations purchased and the proceeds from and U.S. government
agency obligations and other investments sold (excluding short-term investments) for the six months ended June 30, 2012 were as follows:
| | | | | | | | |
| | | Other Investments | | | U.S. Government and Agency Obligations | |
| Purchases | | $ | 93,810,408 | | | $ | 345,236,814 | |
| Sales | | | 88,121,435 | | | | 295,511,191 | |
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 investments and may be, or 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 or Delayed Delivery Basis The Fund may purchase securities on a when-issued or delayed delivery basis, with payment and delivery scheduled for a future date. These transactions are subject to market fluctuations and
NOTES TO FINANCIAL STATEMENTS — RS INVESTMENT QUALITY BOND VIP SERIES (UNAUDITED)
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 enter into these transactions with the intention of taking delivery of the securities, it may sell the securities before the settlement date. Assets will be segregated when a Fund agrees to purchase securities on a when-issued or delayed delivery basis.
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, if any, in the Schedule of Investments.
f. Below Investment Grade Securities The Fund may invest in below investment grade securities (i.e. lower-quality “junk” 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 $100 million committed revolving credit 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.
For the six months ended June 30, 2012, the Fund did not borrow under the facility.
Note 6. Review for Subsequent Events
Management 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.
Note 8. New Accounting Pronouncement
In December 2011, the Financial Accounting Standards Board issued Accounting Standards Update 2011-11, Balance Sheet (Topic 210) — Disclosures about Offsetting Assets and Liabilities (“ASU 2011-11”). Effective for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods, ASU 2011-11 is intended to enhance disclosure requirements on the offsetting of financial assets and liabilities. At this time, management is evaluating the implications of ASU 2011-11 and its impact on the financial statements.
SUPPLEMENTAL INFORMATION (UNAUDITED)
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 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.
2012 Semiannual Report
All data as of June 30, 2012
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, 2012. 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
Highlights
| Ÿ | | In a volatile six-month period for investment markets, the Barclays U.S. Government 1-3 Year Bond Index1 (the “Index”) had a modestly positive return. Non-Treasury sectors of the fixed income market generally outperformed the market as a whole, over the period, even though investor risk aversion in the second quarter benefited shorter-term Treasury securities. |
| Ÿ | | RS Low Duration Bond VIP Series (the “Fund”) delivered a positive return for the six months ended June 30, 2012, while also outperforming the Index. The Fund’s performance relative to the Index was aided by its exposure to non-Treasury sectors, such as high quality corporate bonds, non-Agency mortgage-backed securities (MBS) and commercial mortgage-backed securities (CMBS). |
| Ÿ | | The Fund seeks to deliver high levels of current income while preserving capital by investing primarily in investment-grade debt securities with durations consistent with that of the Index. |
Market Overview
The markets started out the year on a positive note as optimism over the U.S. economic outlook and hopes for some resolution to the European debt crisis prompted yield-hungry investors to embrace risk. As a result, non-Treasury securities outperformed the broader fixed income market in the first quarter. Investor optimism appeared to fade in the second quarter, however, as political and economic uncertainty in Europe and signs of weaker economic growth in the U.S. led investors to once again seek safety in the Treasury market. As a result, the yield on the 10-year Treasury bond hit a record low of 1.44% at the start of June. Corporate bonds bore the brunt of the market volatility, losing a substantial portion of the first quarter’s gains in the second quarter.
Over the six-month period as a whole, non-Treasury fixed income sectors including corporate bonds, mortgage-backed securities (MBS), and commercial mortgage-backed securities (CMBS) generally outperformed Treasury securities with similar durations. Shorter-term securities escaped some of the volatility that plagued the broader market.
Fund Performance Overview
The Fund returned 1.74% for the six months ended June 30, 2012, compared to a 0.18% Index return for the period1.
The Fund continued its strategy of overweighting non-Treasury segments of the fixed income market, notably investment-grade corporate bonds, CMBS, asset-backed securities (ABS), and non-Agency MBS. While we retained the Fund’s overweight in corporate bonds relative to the Index, we reduced exposure to issuers with significant exposure to Europe or its peripheral countries in the first quarter. Additionally, we raised our weighting in higher quality investment grade bonds at the expense of high yield investments. By the end of the second quarter, the Fund’s weighting in corporate bonds was around 38%, about three-quarters of which was investment grade. This strategy had a positive impact on relative returns for the six-month period.
As of June 30, 2012, the Fund held approximately a 9% weighting in non-Agency MBS. During the period we continued the Fund’s strategy of owning seasoned bonds that we believed would provide ample credit support and were backed by mortgages that were, in our view, underwritten with stronger credit standards than those issued during the housing boom that peaked in 2007.
The Fund’s overweight position in the CMBS sector supported relative performance. In the CMBS sector, we continued to emphasize the most seasoned CMBS bonds that we generally regarded as less risky because they were backed by greater credit enhancements that we believed should leave them better insulated from any deterioration in market fundamentals. That said, we reduced the Fund’s overweight in the CMBS sector in the second quarter, selling bonds that, in our view, had the greatest potential to underperform should investor concerns intensify. At the end of the second quarter, the Fund held about an 18% weighting in CMBS. Given the reduced supply of new CMBS and non-Agency MBS relative to past years, we believe the real challenge at this time is to find sufficient assets that meet our investment criteria.
RS LOW DURATION BOND VIP SERIES
Outlook
We anticipate continued market volatility in the second half of 2012 as investors await more clarity on the condition of the global economy and developments in Europe. On a positive note, the Federal Reserve has indicated its intention to keep interest rates near zero into 2014, and has left open the possibility of additional
stimulus if the U.S. economy weakens or risks from Europe escalate. In these challenging times, we believe a disciplined investment process is more crucial than ever. We continue to rigorously measure each investment’s upside potential against its downside risk, while we remain focused on potential market risks in today’s uncertain investment environment.
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, 2012.
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 (unaudited) Total Net Assets: $181,335,947 | | |
|
| |
| Sector Allocation |
 |
| |
| Bond Quality Allocation2 |
 |
RS LOW DURATION BOND VIP SERIES
| | | | | | | | | | | | |
| | | | |
| Top Ten Holdings3 | | | | | | | | | |
| | | | |
| Holding | | Coupon | | | Maturity Date | | | % of Total
Net Assets | |
| U.S. Treasury Notes | | | 0.625% | | | | 5/31/2017 | | | | 3.55% | |
| U.S. Treasury Notes | | | 0.250% | | | | 6/30/2014 | | | | 3.03% | |
U.S. Treasury Notes | | | 0.375% | | | | 3/15/2015 | | | | 2.54% | |
| U.S. Treasury Notes | | | 0.250% | | | | 5/15/2015 | | | | 1.98% | |
| U.S. Treasury Notes | | | 0.250% | | | | 2/15/2015 | | | | 1.90% | |
| Federal Home Loan Mortgage Corp. | | | 2.000% | | | | 8/25/2016 | | | | 1.74% | |
U.S. Treasury Notes | | | 0.875% | | | | 11/30/2016 | | | | 1.31% | |
U.S. Treasury Notes | | | 1.000% | | | | 8/31/2016 | | | | 1.30% | |
| Miramax LLC | | | 6.250% | | | | 10/20/2021 | | | | 0.96% | |
| American Tower Trust | | | 5.420% | | | | 4/15/2037 | | | | 0.92% | |
| Total | | | | | | | | | | | 19.23% | |
| 1 | The Barclays 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 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. Statistical data for the Index is as of 6/30/2012. |
| 2 | Source: Moody’s, Standard and Poors, Fitch Investors Service. |
| 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. |
RS LOW DURATION BOND VIP SERIES
Performance Update (unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
| 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 | | | | 1.74% | | | | 2.31% | | | | 3.84% | | | | 4.31% | | | | 3.48% | |
| Barclays U.S. Government 1-3 Year Bond Index1 | | | | | | | 0.18% | | | | 0.86% | | | | 1.69% | | | | 3.40% | | | | 3.07% | |
| | | | | | | | | | |
| |
| 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 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
1/1/12 | | | Ending
Account Value
6/30/12 | | | Expenses Paid
During Period*
1/1/12-6/30/12 | | | Expense Ratio
During Period
1/1/12-6/30/12 | |
| Based on Actual Return | | $ | 1,000.00 | | | $ | 1,017.40 | | | $ | 2.71 | | | | 0.54% | |
| Based on Hypothetical Return (5% Return Before Expenses) | | $ | 1,000.00 | | | $ | 1,022.18 | | | $ | 2.72 | | | | 0.54% | |
| * | Expenses are equal to the Fund’s annualized expense ratio as indicated, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). |
SCHEDULE OF INVESTMENTS — RS LOW DURATION BOND VIP SERIES
| | | | | | | | |
| June 30, 2012 (unaudited) | | Principal
Amount | | | Value | |
| Asset Backed Securities – 12.9% | |
Ally Auto Receivables Trust
2010-3 A3
1.11% due 10/15/2014 | | $ | 916,322 | | | $ | 919,244 | |
Ally Master Owner Trust
2012-1 A2
1.44% due 2/15/2017 | | | 300,000 | | | | 301,795 | |
2011-1 A2
2.15% due 1/15/2016 | | | 550,000 | | | | 559,973 | |
2010-3 A
2.88% due 4/15/2015(1) | | | 800,000 | | | | 810,709 | |
AmeriCredit Automobile Receivables Trust
2010-3 A3
1.14% due 4/8/2015 | | | 877,642 | | | | 879,656 | |
Ameriquest Mortgage Securities, Inc.
2003-5 A6
4.541% due 4/25/2033(2) | | | 99,907 | | | | 93,162 | |
Avis Budget Rental Car Funding AESOP LLC
2012-1A A
2.054% due 8/20/2016(1) | | | 825,000 | | | | 832,925 | |
Bank of America Auto Trust
2010-1A A4
2.18% due 2/15/2017(1) | | | 450,000 | | | | 455,322 | |
2009-2A A4
3.03% due 10/15/2016(1) | | | 601,208 | | | | 606,832 | |
Capital One Multi-Asset Execution Trust
2005-A10 A
0.322% due 9/15/2015(2) | | | 260,000 | | | | 259,929 | |
2005-A7 A7
4.70% due 6/15/2015 | | | 850,000 | | | | 854,576 | |
Chase Funding Mortgage Loan Trust
2004-1 1A6
4.266% due 6/25/2015 | | | 160,235 | | | | 161,616 | |
Citibank Credit Card Issuance Trust
2004-A8 A8
4.90% due 12/12/2016 | | | 950,000 | | | | 1,046,566 | |
CitiFinancial Mortgage Securities, Inc.
2003-3 AF5
5.053% due 8/25/2033(2) | | | 131,961 | | | | 130,769 | |
CNH Equipment Trust
2009-C A4
3.00% due 8/17/2015(3) | | | 868,845 | | | | 879,241 | |
Ford Credit Auto Lease Trust
2011-B A3
1.05% due 10/15/2014 | | | 1,000,000 | | | | 1,005,388 | |
Ford Credit Floorplan Master Owner Trust
2010-3 A2
1.942% due 2/15/2017(1)(2) | | | 985,000 | | | | 1,016,811 | |
GE Capital Credit Card Master Note Trust
2010-3 A
2.21% due 6/15/2016 | | | 1,250,000 | | | | 1,269,333 | |
| | | | | | | | | |
| | | | | | | | |
| June 30, 2012 (unaudited) | | Principal
Amount | | | Value | |
| Asset Backed Securities (continued) | |
GE Equipment Transportation LLC
2012-1 A3
0.99% due 11/23/2015 | | $ | 800,000 | | | $ | 801,792 | |
Harley-Davidson Motorcycle Trust
2009-2 A4
3.32% due 2/15/2017 | | | 724,432 | | | | 728,134 | |
Honda Auto Receivables Owner Trust
2010-3 A4
0.94% due 12/21/2016 | | | 954,000 | | | | 957,160 | |
Huntington Auto Trust
2011-1A A3
1.01% due 1/15/2016(1) | | | 1,000,000 | | | | 1,004,471 | |
Hyundai Auto Receivables Trust
2012-A A4
0.95% due 12/15/2016 | | | 500,000 | | | | 502,725 | |
2009-A A4
3.15% due 3/15/2016 | | | 600,000 | | | | 613,015 | |
John Deere Owner Trust
2009-B A4
2.33% due 5/16/2016(3) | | | 666,384 | | | | 667,790 | |
Mercedes-Benz Auto Lease Trust
2011-B A3
1.07% due 8/15/2014(1) | | | 500,000 | | | | 502,609 | |
Miramax LLC
2011-1A A
6.25% due 10/20/2021(1) | | | 1,685,714 | | | | 1,748,540 | |
PG&E Energy Recovery Funding LLC
2005-1 A5
4.47% due 12/25/2014 | | | 420,000 | | | | 426,083 | |
Residential Asset Mortgage Products, Inc.
2002-RS4 AI5
6.163% due 8/25/2032(2) | | | 20,695 | | | | 12,601 | |
Toyota Auto Receivables Owner Trust
2010-C A4
1.09% due 12/15/2014 | | | 500,000 | | | | 503,275 | |
Volkswagen Auto Lease Trust
2012-A A3
0.87% due 7/20/2015 | | | 800,000 | | | | 800,476 | |
2010-A A4
1.18% due 10/20/2015 | | | 900,000 | | | | 903,969 | |
Wheels SPV LLC
2012-1 A2
1.19% due 3/20/2021(1) | | | 500,000 | | | | 500,127 | |
World Omni Auto Receivables Trust
2010-A A4
2.21% due 5/15/2015 | | | 600,000 | | | | 608,530 | |
| | | | | | | | | |
Total Asset Backed Securities
(Cost $23,233,809) | | | | | | | 23,365,144 | |
| | | | | | | | |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 9 |
SCHEDULE OF INVESTMENTS — RS LOW DURATION BOND VIP SERIES
| | | | | | | | |
| June 30, 2012 (unaudited) | | Principal
Amount | | | Value | |
| Collateralized Mortgage Obligations – 9.2% | |
Banc of America Mortgage Securities, Inc.
2003-J 2A2
2.84% due 11/25/2033(2) | | $ | 316,979 | | | $ | 306,424 | |
Cendant Mortgage Corp.
2003-4 1A1
4.85% due 5/25/2033 | | | 106,499 | | | | 107,802 | |
2004-3 A5
5.369% due 6/25/2034(2) | | | 78,614 | | | | 78,788 | |
Chase Mortgage Finance Corp.
2007-A1 2A1
2.985% due 2/25/2037(2) | | | 417,340 | | | | 417,550 | |
2003-S10 A1
4.75% due 11/25/2018 | | | 292,109 | | | | 301,414 | |
2003-S14 3A1
5.50% due 1/25/2034 | | | 10,070 | | | | 10,051 | |
Countrywide Alternative Loan Trust
2004-35T2 A1
6.00% due 2/25/2035 | | | 130,163 | | | | 130,323 | |
Countrywide Home Loans Trust
2003-50 A1
5.00% due 11/25/2018 | | | 717,927 | | | | 739,610 | |
2004-9 A1
5.00% due 6/25/2034 | | | 196,760 | | | | 198,480 | |
2003-11 A31
5.50% due 5/25/2033 | | | 596,841 | | | | 618,776 | |
2002-19 1A1
6.25% due 11/25/2032 | | | 35,317 | | | | 37,664 | |
CS First Boston Mortgage Securities Corp.
2003-23 2A8
4.50% due 10/25/2018 | | | 188,840 | | | | 194,636 | |
2003-8 2A1
5.00% due 4/25/2018 | | | 288,797 | | | | 296,886 | |
2004-5 5A1
5.00% due 8/25/2019 | | | 439,460 | | | | 450,199 | |
FHLMC
1534 Z
5.00% due 6/15/2023 | | | 63,618 | | | | 63,607 | |
20 H
5.50% due 10/25/2023 | | | 34,110 | | | | 37,613 | |
First Horizon Mortgage Pass-Through Trust
2004-4 2A3
4.50% due 7/25/2019 | | | 297,684 | | | | 302,281 | |
FNMA
2003-63 GU
4.00% due 7/25/2033 | | | 1,325 | | | | 1,347 | |
2002-52 PB
6.00% due 2/25/2032 | | | 22,042 | | | | 22,128 | |
J.P. Morgan Mortgage Trust
2006-A2 5A1
2.66% due 11/25/2033(2) | | | 623,370 | | | | 624,639 | |
2005-A1 5A1
4.433% due 2/25/2035(2) | | | 25,496 | | | | 25,616 | |
2004-S2 1A3
4.75% due 11/25/2019 | | | 185,402 | | | | 187,197 | |
2004-S1 1A7
5.00% due 9/25/2034 | | | 74,051 | | | | 76,232 | |
| | | | | | | | | |
| | | | | | | | |
| June 30, 2012 (unaudited) | | Principal
Amount | | | Value | |
| Collateralized Mortgage Obligations (continued) | |
2005-A1 3A1
5.005% due 2/25/2035(2) | | $ | 646,527 | | | $ | 657,296 | |
Master Adjustable Rate Mortgages Trust
2004-13 2A1
2.634% due 4/21/2034(2) | | | 749,941 | | | | 742,515 | |
2004-13 3A7
2.62% due 11/21/2034(2) | | | 965,000 | | | | 952,935 | |
Master Asset Securitization Trust
2003-9 5A2
4.75% due 10/25/2018 | | | 1,057,698 | | | | 1,098,845 | |
2003-5 2A1
5.00% due 6/25/2018 | | | 149,595 | | | | 156,247 | |
Morgan Stanley Mortgage Loan Trust
2004-1 1A9
4.50% due 11/25/2018 | | | 187,010 | | | | 191,283 | |
Prime Mortgage Trust
2004-2 A2
4.75% due 11/25/2019 | | | 293,414 | | | | 305,701 | |
2003-3 A9
5.50% due 1/25/2034 | | | 325,953 | | | | 334,377 | |
Residential Asset Mortgage Products, Inc.
2005-SL1 A4
6.00% due 5/25/2032 | | | 22,461 | | | | 22,852 | |
Residential Asset Securitization Trust
2003-A2 A1
4.25% due 5/25/2033 | | | 583,801 | | | | 575,245 | |
Residential Funding Mortgage Securities I, Inc.
2004-S9 2A1
4.75% due 12/25/2019 | | | 251,011 | | | | 257,193 | |
2005-S1 2A1
4.75% due 2/25/2020 | | | 218,320 | | | | 225,169 | |
2005-S3 A1
4.75% due 3/25/2020 | | | 158,461 | | | | 160,963 | |
Structured Asset Securities Corp.
2004-21XS 2A6A
4.74% due 12/25/2034(2) | | | 442,571 | | | | 448,359 | |
2005-1 4A1
5.00% due 2/25/2020 | | | 255,630 | | | | 261,420 | |
2003-29 2A1
5.25% due 9/25/2023 | | | 439,836 | | | | 447,237 | |
2004-3 3A1
5.50% due 3/25/2019 | | | 225,994 | | | | 234,063 | |
Wells Fargo Mortgage Backed Securities Trust
2004-Z 2A2
2.615% due 12/25/2034(2) | | | 404,263 | | | | 399,492 | |
2005-AR12 2A5
2.624% due 6/25/2035(2) | | | 930,879 | | | | 919,711 | |
2005-AR12 2A6
2.624% due 6/25/2035(2) | | | 494,219 | | | | 485,423 | |
2005-AR10 2A6
2.627% due 6/25/2035(2) | | | 515,613 | | | | 514,892 | |
2003-J 2A1
4.43% due 10/25/2033(2) | | | 164,721 | | | | 165,106 | |
| | | | | | | | | |
| | | | |
| 10 | | | | The accompanying notes are an integral part of these financial statements. |
RS LOW DURATION BOND VIP SERIES
| | | | | | | | |
| June 30, 2012 (unaudited) | | Principal
Amount | | | Value | |
| Collateralized Mortgage Obligations (continued) | |
2003-J 1A9
4.581% due 10/25/2033(2) | | $ | 747,256 | | | $ | 748,952 | |
2003-N 2A1
4.744% due 12/25/2033(2) | | | 459,577 | | | | 460,718 | |
2003-15 1A1
4.75% due 12/25/2018 | | | 48,806 | | | | 50,578 | |
2005-1 1A1
4.75% due 1/25/2020 | | | 252,332 | | | | 258,344 | |
2004-2 A1
5.00% due 1/25/2019 | | | 308,230 | | | | 315,359 | |
2006-7 1A1
5.25% due 6/25/2021 | | | 100,175 | | | | 101,881 | |
| | | | | | | | | |
Total Collateralized Mortgage Obligations
(Cost $16,618,757) | | | | 16,721,419 | |
| | | | | | | | |
| | | Principal
Amount | | | Value | |
| Senior Secured Loans – 2.7% | |
| Gaming – 0.3% | |
Pinnacle Entertainment, Inc.
Series A Incremental Term Loan
4.00% due 3/19/2019(2) | | | 500,000 | | | | 498,595 | |
| | | | | | | | | |
| | | | | | | | 498,595 | |
| Healthcare – 0.1% | |
IMS Health, Inc.
New Term Loan B
4.50% due 8/25/2017(2) | | | 244,379 | | | | 242,649 | |
| | | | | | | | | |
| | | | | | | | 242,649 | |
| Non Captive Diversified – 0.1% | |
Istar Financial, Inc.
Term Loan A1
5.00% due 6/28/2013(2) | | | 197,251 | | | | 196,547 | |
| | | | | | | | | |
| | | | | | | | 196,547 | |
| Pharmaceuticals – 1.0% | |
Grifols, Inc.
New Term Loan B
4.50% due 6/1/2017(2) | | | 644,552 | | | | 637,533 | |
RP Select Finance Trust
Term Loan A
2.72% due 8/9/2016(2) | | | 1,230,367 | | | | 1,227,290 | |
| | | | | | | | | |
| | | | | | | | 1,864,823 | |
| Real Estate Investment Trusts – 0.2% | |
LNR Property Corp.
Term Loan B
4.75% due 4/29/2016(2) | | | 450,000 | | | | 446,999 | |
| | | | | | | | | |
| | | | | | | | 446,999 | |
| Refining – 0.2% | |
Citgo Petroleum Corp. Term Loan C
9.00% due 6/23/2017(2) | | | 294,000 | | | | 295,961 | |
| | | | | | | | | |
| | | | | | | | 295,961 | |
| Retailers – 0.5% | |
BJ’s Wholesale Club, Inc.
1st Lien Term Loan
5.25% due 9/28/2018(2) | | | 348,250 | | | | 348,758 | |
| | | | | | | | | |
| | | | | | | | |
| June 30, 2012 (unaudited) | | Principal
Amount | | | Value | |
| Retailers (continued) | |
Lord & Taylor Holdings LLC
Term Loan B
5.75% due 1/11/2019(2) | | $ | 498,750 | | | $ | 497,713 | |
| | | | | | | | | |
| | | | | | | | 846,471 | |
| Wireless – 0.3% | |
Crown Castle International Corp.
Term Loan B
4.00% due 1/31/2019(2) | | | 497,500 | | | | 489,416 | |
| | | | | | | | | |
| | | | | | | | 489,416 | |
Total Senior Secured Loans
(Cost $4,888,002) | | | | | | | 4,881,461 | |
| | | | | | | | |
| | | Principal
Amount | | | Value | |
| Commercial Mortgage-Backed Securities – 17.7% | |
American Tower Trust
2007-1A AFX
5.42% due 4/15/2037(1) | | | 1,580,000 | | | | 1,676,080 | |
Banc of America Commercial Mortgage, Inc.
2005-5 A4
5.115% due 10/10/2045(2) | | | 1,145,000 | | | | 1,277,199 | |
2005-6 A4
5.366% due 9/10/2047(2) | | | 1,000,000 | | | | 1,118,116 | |
Bear Stearns Commercial Mortgage Securities
2004-PWR3 A4
4.715% due 2/11/2041 | | | 540,000 | | | | 563,809 | |
2003-T10 A2
4.74% due 3/13/2040 | | | 512,234 | | | | 521,326 | |
2003-PWR2 A4
5.186% due 5/11/2039(2) | | | 696,053 | | | | 715,503 | |
2005-PW10 A4
5.405% due 12/11/2040(2) | | | 1,015,000 | | | | 1,134,219 | |
Chase Commercial Mortgage Securities Corp.
1998-1 F
6.56% due 5/18/2030(1)(2) | | | 214,138 | | | | 218,111 | |
Citigroup Commercial Mortgage Trust
2006-C5 A4
5.431% due 10/15/2049 | | | 1,300,000 | | | | 1,479,174 | |
2004-C1 A4
5.36% due 4/15/2040(2) | | | 1,030,000 | | | | 1,098,724 | |
Citigroup/Deutsche Bank Commercial Mortgage Trust
2005-CD1 A4
5.22% due 7/15/2044(2) | | | 500,000 | | | | 556,412 | |
Commercial Mortgage Asset Trust
1999-C1 B
7.23% due 1/17/2032(2) | | | 1,000,000 | | | | 1,053,379 | |
Commercial Mortgage Pass-Through Certificates
2005-LP5 A4
4.982% due 5/10/2043(2) | | | 530,000 | | | | 579,218 | |
| | | | | | | | | |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 11 |
SCHEDULE OF INVESTMENTS — RS LOW DURATION BOND VIP SERIES
| | | | | | | | |
| June 30, 2012 (unaudited) | | Principal
Amount | | | Value | |
| Commercial Mortgage-Backed Securities (continued) | |
Crown Castle Towers LLC
Sr. Sec. Nt.
3.214% due 8/15/2035(1) | | $ | 350,000 | | | $ | 355,952 | |
4.523% due 1/15/2035(1) | | | 550,000 | | | | 576,482 | |
CS First Boston Mortgage Securities Corp.
2003-C3 A5
3.936% due 5/15/2038 | | | 1,063,004 | | | | 1,078,853 | |
2004-C2 A2
5.416% due 5/15/2036(2) | | | 1,362,000 | | | | 1,449,186 | |
1997-C2 F
7.46% due 1/17/2035(2) | | | 490,120 | | | | 498,960 | |
First Union-Lehman Brothers-Bank of America
1998-C2 E
6.778% due 11/18/2035 | | | 872,000 | | | | 895,632 | |
GE Capital Commercial Mortgage Corp.
2004-C1 A3
4.596% due 11/10/2038 | | | 572,042 | | | | 590,417 | |
2004-C1 B
4.692% due 11/10/2038(2) | | | 385,000 | | | | 394,914 | |
2003-C2 A4
5.145% due 7/10/2037 | | | 539,571 | | | | 554,214 | |
GMAC Commercial Mortgage Securities, Inc.
2003-C2 A2
5.64% due 5/10/2040(2) | | | 730,000 | | | | 759,128 | |
Greenwich Capital Commercial Funding Corp.
2005-GG3 A3
4.569% due 8/10/2042 | | | 851,596 | | | | 861,792 | |
2004-GG1 A7
5.317% due 6/10/2036(2) | | | 1,075,000 | | | | 1,139,306 | |
J.P. Morgan Chase Commercial Mortgage Securities Corp.
2004-C3 A5
4.878% due 1/15/2042 | | | 675,000 | | | | 719,179 | |
2003-CB6 A2
5.255% due 7/12/2037(2) | | | 800,000 | | | | 827,350 | |
2005-LDP5 A4
5.20% due 12/15/2044(2) | | | 650,000 | | | | 727,168 | |
LB UBS Commercial Mortgage Trust
2003-C7 A4
4.931% due 9/15/2035(2) | | | 1,005,000 | | | | 1,040,632 | |
2003-C8 A4
5.124% due 11/15/2032(2) | | | 500,000 | | | | 521,062 | |
2006-C1 A4
5.156% due 2/15/2031 | | | 400,000 | | | | 445,587 | |
Merrill Lynch Mortgage Trust
2004-BPC1 A5
4.855% due 10/12/2041(2) | | | 700,000 | | | | 749,239 | |
2003-KEY1 A4
5.236% due 11/12/2035(2) | | | 500,000 | | | | 522,337 | |
Morgan Stanley Capital I
2004-HQ3 A4
4.80% due 1/13/2041 | | | 891,598 | | | | 922,433 | |
| | | | | | | | | |
| | | | | | | | |
| June 30, 2012 (unaudited) | | Principal
Amount | | | Value | |
| Commercial Mortgage-Backed Securities (continued) | |
2005-IQ10 A4A
5.23% due 9/15/2042(2) | | $ | 1,165,000 | | | $ | 1,286,826 | |
2005-HQ7 AAB
5.346% due 11/14/2042(2) | | | 329,500 | | | | 331,089 | |
Nomura Asset Securities Corp.
1998-D6 B1
6.00% due 3/15/2030(1) | | | 580,000 | | | | 589,441 | |
Salomon Brothers Mortgage Securities VII, Inc.
1999-C1 G
7.271% due 5/18/2032(1)(2) | | | 450,484 | | | | 465,702 | |
Wachovia Bank Commercial Mortgage Trust
2003-C8 A3
4.445% due 11/15/2035 | | | 600,244 | | | | 604,881 | |
2004-C10 A4
4.748% due 2/15/2041 | | | 515,908 | | | | 541,190 | |
2004-C11 A5
5.215% due 1/15/2041(2) | | | 575,000 | | | | 611,362 | |
| | | | | | | | | |
Total Commercial Mortgage-Backed Securities
(Cost $32,100,593) | | | | 32,051,584 | |
| | | | | | | | |
| | | Principal
Amount | | | Value | |
| Corporate Bonds – 35.6% | | | | | | | | |
| Aerospace/Defense – 0.4% | | | | | | | | |
BE Aerospace, Inc.
Sr. Nt.
8.50% due 7/1/2018 | | | 500,000 | | | | 546,875 | |
L-3 Communications Corp.
Ser. B
6.375% due 10/15/2015 | | | 237,000 | | | | 242,184 | |
| | | | | | | | | |
| | | | | | | | 789,059 | |
| Automotive – 1.6% | | | | | | | | |
Banque PSA Finance
Sr. Nt.
3.375% due 4/4/2014(1) | | | 500,000 | | | | 499,075 | |
Daimler Finance North America LLC
1.875% due 9/15/2014(1) | | | 350,000 | | | | 351,868 | |
Ford Motor Credit Co. LLC
Sr. Nt.
2.75% due 5/15/2015 | | | 500,000 | | | | 504,057 | |
7.50% due 8/1/2012 | | | 500,000 | | | | 501,971 | |
RCI Banque S.A.
Sr. Nt.
3.40% due 4/11/2014(1) | | | 500,000 | | | | 498,997 | |
Volkswagen International Finance NV
1.625% due 3/22/2015(1) | | | 500,000 | | | | 501,732 | |
| | | | | | | | | |
| | | | | | | | 2,857,700 | |
| Banking – 7.8% | | | | | | | | |
Abbey National Treasury Services PLC
2.875% due 4/25/2014 | | | 500,000 | | | | 487,596 | |
| | | | | | | | | |
| | | | |
| 12 | | | | The accompanying notes are an integral part of these financial statements. |
RS LOW DURATION BOND VIP SERIES
| | | | | | | | |
| June 30, 2012 (unaudited) | | Principal
Amount | | | Value | |
| Banking (continued) | | | | | | | | |
American Express Credit Corp.
Sr. Nt.
2.375% due 3/24/2017 | | $ | 500,000 | | | $ | 512,466 | |
Amsouth Bank
Sub. Nt.
5.20% due 4/1/2015 | | | 150,000 | | | | 153,000 | |
ANZ National Int’l Ltd.
2.375% due 12/21/2012(1) | | | 500,000 | | | | 503,378 | |
Bank of America Corp.
Sr. Nt.
4.50% due 4/1/2015 | | | 150,000 | | | | 154,614 | |
Barclays Bank PLC
Sr. Nt.
2.50% due 1/23/2013 | | | 400,000 | | | | 402,916 | |
Capital One Financial Corp.
Sr. Nt.
2.125% due 7/15/2014 | | | 500,000 | | | | 504,257 | |
Citigroup, Inc.
Sr. Nt.
5.50% due 4/11/2013 | | | 300,000 | | | | 308,483 | |
Credit Suisse/New York NY
Sr. Nt.
5.00% due 5/15/2013 | | | 250,000 | | | | 257,806 | |
Deutsche Bank AG
Sr. Nt.
2.375% due 1/11/2013 | | | 300,000 | | | | 301,808 | |
Fifth Third Capital Trust IV
6.50% due 4/15/2067(2) | | | 650,000 | | | | 645,937 | |
ING Bank N.V.
Sr. Nt.
2.375% due 6/9/2014(1) | | | 600,000 | | | | 595,406 | |
JPMorgan Chase & Co.
Sr. Nt.
2.05% due 1/24/2014 | | | 500,000 | | | | 505,467 | |
Merrill Lynch & Co., Inc.
Sr. Nt. Ser. C
6.05% due 8/15/2012 | | | 350,000 | | | | 351,925 | |
Morgan Stanley
Sr. Nt.
2.875% due 1/24/2014 | | | 250,000 | | | | 247,187 | |
5.30% due 3/1/2013 | | | 250,000 | | | | 254,823 | |
National Bank of Canada
1.50% due 6/26/2015 | | | 500,000 | | | | 501,539 | |
PNC Preferred Funding Trust III
Jr. Sub. Nt.
8.70% due 3/15/2013(1)(2)(4) | | | 400,000 | | | | 408,956 | |
Rabobank Nederland N.V.
Sr. Nt.
2.65% due 8/17/2012(1) | | | 250,000 | | | | 250,500 | |
Regions Financial Corp.
Sr. Nt.
4.875% due 4/26/2013 | | | 500,000 | | | | 507,500 | |
Royal Bank of Canada
Sr. Nt.
1.45% due 10/30/2014 | | | 500,000 | | | | 506,342 | |
| | | | | | | | | |
| | | | | | | | |
| June 30, 2012 (unaudited) | | Principal
Amount | | | Value | |
| Banking (continued) | | | | | | | | |
Royal Bank of Scotland PLC
3.25% due 1/11/2014 | | $ | 500,000 | | | $ | 501,978 | |
Sumitomo Mitsui Banking Corp.
Sr. Nt.
1.90% due 1/12/2015(1) | | | 500,000 | | | | 506,680 | |
SunTrust Banks, Inc.
Sr. Nt.
3.60% due 4/15/2016 | | | 400,000 | | | | 415,349 | |
The Bank of New York Mellon Corp.
Sr. Nt.
1.20% due 2/20/2015 | | | 300,000 | | | | 301,622 | |
The Goldman Sachs Group, Inc.
Sr. Nt.
3.30% due 5/3/2015 | | | 500,000 | | | | 499,931 | |
3.625% due 8/1/2012 | | | 500,000 | | | | 500,915 | |
Toronto-Dominion Bank
Sr. Nt.
1.375% due 7/14/2014 | | | 500,000 | | | | 506,207 | |
U.S. Bancorp
Sr. Nt
2.875% due 11/20/2014 | | | 500,000 | | | | 521,753 | |
Jr. Sub. Nt.
3.442% due 2/1/2016 | | | 500,000 | | | | 518,424 | |
UBS AG Stamford CT
Sr. Nt.
2.25% due 8/12/2013 | | | 500,000 | | | | 501,537 | |
Union Bank N.A.
Sr. Nt.
2.125% due 12/16/2013 | | | 500,000 | | | | 507,583 | |
Wells Fargo Bank N.A.
Sub. Nt.
5.75% due 5/16/2016 | | | 100,000 | | | | 113,114 | |
Westpac Banking Corp.
Sr. Nt.
2.10% due 8/2/2013 | | | 300,000 | | | | 304,438 | |
| | | | | | | | | |
| | | | | | | | 14,061,437 | |
| Brokerage – 0.3% | |
E*Trade Financial Corp.
Sr. Nt.
6.75% due 6/1/2016 | | | 500,000 | | | | 508,750 | |
| | | | | | | | | |
| | | | | | | | 508,750 | |
| Building Materials – 0.1% | |
Masco Corp.
Sr. Nt.
5.875% due 7/15/2012 | | | 250,000 | | | | 250,188 | |
| | | | | | | | | |
| | | | | | | | 250,188 | |
| Chemicals – 0.8% | |
Airgas, Inc.
Sr. Nt.
2.85% due 10/1/2013 | | | 500,000 | | | | 510,758 | |
Ecolab, Inc.
Sr. Nt.
2.375% due 12/8/2014 | | | 400,000 | | | | 413,182 | |
Yara International ASA
Sr. Nt.
5.25% due 12/15/2014(1) | | | 500,000 | | | | 535,895 | |
| | | | | | | | | |
| | | | | | | | 1,459,835 | |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 13 |
SCHEDULE OF INVESTMENTS — RS LOW DURATION BOND VIP SERIES
| | | | | | | | |
| June 30, 2012 (unaudited) | | Principal
Amount | | | Value | |
| Construction Machinery – 0.1% | |
Case New Holland, Inc.
7.75% due 9/1/2013 | | $ | 250,000 | | | $ | 265,625 | |
| | | | | | | | | |
| | | | | | | | 265,625 | |
| Diversified Manufacturing – 0.7% | |
ADT Corp.
2.25% due 7/15/2017(1) | | | 500,000 | | | | 502,345 | |
Danaher Corp.
Sr. Nt.
1.30% due 6/23/2014 | | | 200,000 | | | | 202,081 | |
Textron, Inc.
Sr. Nt.
6.20% due 3/15/2015 | | | 500,000 | | | | 549,486 | |
| | | | | | | | | |
| | | | | | | | 1,253,912 | |
| Electric – 1.7% | |
AEP Texas North Co.
Sr. Nt. Ser. B
5.50% due 3/1/2013 | | | 150,000 | | | | 154,626 | |
Calpine Construction Finance Co. LP
Sr. Sec. Nt.
8.00% due 6/1/2016(1) | | | 500,000 | | | | 540,000 | |
CMS Energy Corp.
Sr. Nt.
6.55% due 7/17/2017 | | | 500,000 | | | | 566,630 | |
EDP Finance BV
Sr. Nt.
5.375% due 11/2/2012(1) | | | 500,000 | | | | 500,950 | |
Great Plains Energy, Inc.
Sr. Nt.
2.75% due 8/15/2013 | | | 200,000 | | | | 202,929 | |
MidAmerican Energy Holdings Co.
Sr. Nt.
3.15% due 7/15/2012 | | | 200,000 | | | | 200,146 | |
National Rural Utilities Cooperative Finance Corp.
1.125% due 11/1/2013 | | | 500,000 | | | | 503,015 | |
2.625% due 9/16/2012 | | | 200,000 | | | | 200,788 | |
The AES Corp.
Sr. Nt.
7.75% due 3/1/2014 | | | 250,000 | | | | 271,250 | |
| | | | | | | | | |
| | | | | | | | 3,140,334 | |
| Energy - Integrated – 0.2% | |
Husky Energy, Inc.
Sr. Nt.
5.90% due 6/15/2014 | | | 400,000 | | | | 434,841 | |
| | | | | | | | | |
| | | | | | | | 434,841 | |
| Entertainment – 0.2% | |
Time Warner, Inc.
3.15% due 7/15/2015 | | | 300,000 | | | | 316,388 | |
| | | | | | | | | |
| | | | | | | | 316,388 | |
| Food and Beverage – 1.6% | |
Anheuser-Busch InBev Worldwide, Inc.
2.50% due 3/26/2013 | | | 450,000 | | | | 456,286 | |
3.00% due 10/15/2012 | | | 200,000 | | | | 201,354 | |
| | | | | | | | | |
| | | | | | | | |
| June 30, 2012 (unaudited) | | Principal
Amount | | | Value | |
| Food and Beverage (continued) | |
Coca-Cola Enterprises, Inc.
Sr. Nt.
1.125% due 11/12/2013 | | $ | 300,000 | | | $ | 301,244 | |
General Mills, Inc.
Sr. Nt.
1.55% due 5/16/2014 | | | 250,000 | | | | 253,620 | |
Kraft Foods, Inc.
Sr. Nt.
2.625% due 5/8/2013 | | | 600,000 | | | | 608,879 | |
Pernod-Ricard SA
Sr. Nt.
2.95% due 1/15/2017(1) | | | 500,000 | | | | 506,123 | |
SABMiller Holdings, Inc.
1.85% due 1/15/2015(1) | | | 500,000 | | | | 507,141 | |
Wm. Wrigley Jr. Co.
Sr. Sec. Nt.
3.05% due 6/28/2013(1) | | | 150,000 | | | | 151,745 | |
| | | | | | | | | |
| | | | | | | | 2,986,392 | |
| Gaming – 0.1% | |
Seminole Tribe of Fla
Sr. Sec. Nt.
5.798% due 10/1/2013(1) | | | 205,000 | | | | 210,355 | |
| | | | | | | | | |
| | | | | | | | 210,355 | |
| Government Related – 0.3% | |
Petrobras International Finance
Co. - Pifco
2.875% due 2/6/2015 | | | 200,000 | | | | 203,000 | |
Ras Laffan Liquefied Natural Gas
Co. Ltd.
Sr. Sec. Nt.
4.50% due 9/30/2012(1) | | | 250,000 | | | | 251,875 | |
| | | | | | | | | |
| | | | | | | | 454,875 | |
| Health Insurance – 0.3% | |
UnitedHealth Group, Inc.
Sr. Nt.
4.875% due 4/1/2013 | | | 500,000 | | | | 515,405 | |
| | | | | | | | | |
| | | | | | | | 515,405 | |
| Healthcare – 1.5% | |
AmerisourceBergen Corp.
5.625% due 9/15/2012 | | | 250,000 | | | | 252,402 | |
CareFusion Corp.
Sr. Nt.
4.125% due 8/1/2012 | | | 250,000 | | | | 250,668 | |
Covidien International Finance SA
1.35% due 5/29/2015 | | | 500,000 | | | | 500,649 | |
Hospira, Inc.
Sr. Nt.
6.05% due 3/30/2017 | | | 250,000 | | | | 281,993 | |
Life Technologies Corp.
Sr. Nt.
3.375% due 3/1/2013 | | | 550,000 | | | | 556,601 | |
Owens & Minor, Inc.
6.35% due 4/15/2016 | | | 490,000 | | | | 534,976 | |
| | | | | | | | | |
| | | | |
| 14 | | | | The accompanying notes are an integral part of these financial statements. |
RS LOW DURATION BOND VIP SERIES
| | | | | | | | |
| June 30, 2012 (unaudited) | | Principal
Amount | | | Value | |
| Healthcare (continued) | |
Thermo Fisher Scientific, Inc.
Sr. Nt.
2.15% due 12/28/2012 | | $ | 300,000 | | | $ | 301,482 | |
| | | | | | | | | |
| | | | | | | | 2,678,771 | |
| Independent Energy – 1.6% | |
Anadarko Petroleum Corp.
Sr. Nt.
5.95% due 9/15/2016 | | | 300,000 | | | | 340,433 | |
Canadian Natural Resources Ltd.
Sr. Nt.
1.45% due 11/14/2014 | | | 350,000 | | | | 354,267 | |
Chesapeake Energy Corp.
7.625% due 7/15/2013 | | | 350,000 | | | | 360,937 | |
Newfield Exploration Co.
Sr. Sub. Nt.
6.625% due 4/15/2016 | | | 500,000 | | | | 512,500 | |
Petrohawk Energy Corp.
7.875% due 6/1/2015 | | | 400,000 | | | | 415,826 | |
Quicksilver Resources, Inc.
8.25% due 8/1/2015 | | | 300,000 | | | | 280,500 | |
Woodside Finance Ltd.
5.00% due 11/15/2013(1) | | | 600,000 | | | | 625,556 | |
| | | | | | | | | |
| | | | | | | | 2,890,019 | |
| Industrial - Other – 0.3% | |
URS Corp.
Sr. Nt.
3.85% due 4/1/2017(1) | | | 500,000 | | | | 493,765 | |
| | | | | | | | | |
| | | | | | | | 493,765 | |
| Insurance - Life – 2.3% | |
Aegon N.V.
Sr. Nt.
4.75% due 6/1/2013 | | | 500,000 | | | | 514,917 | |
American International Group, Inc.
Sr. Nt.
3.65% due 1/15/2014 | | | 500,000 | | | | 510,710 | |
Assurant, Inc.
Sr. Nt.
5.625% due 2/15/2014 | | | 500,000 | | | | 522,357 | |
Hartford Financial Services Group, Inc.
Sr. Nt.
4.625% due 7/15/2013 | | | 250,000 | | | | 256,670 | |
Lincoln National Corp.
Sr. Nt.
4.30% due 6/15/2015 | | | 500,000 | | | | 526,787 | |
5.65% due 8/27/2012 | | | 600,000 | | | | 604,123 | |
Metropolitan Life Global Funding I
Sr. Sec. Nt.
2.00% due 1/9/2015(1) | | | 500,000 | | | | 507,327 | |
New York Life Global Funding
2.25% due 12/14/2012(1) | | | 200,000 | | | | 201,290 | |
Prudential Financial, Inc.
Sr. Nt.
3.625% due 9/17/2012 | | | 200,000 | | | | 201,155 | |
4.75% due 9/17/2015 | | | 300,000 | | | | 322,984 | |
| | | | | | | | | |
| | | | | | | | 4,168,320 | |
| | | | | | | | |
| June 30, 2012 (unaudited) | | Principal
Amount | | | Value | |
| Insurance P&C – 1.1% | |
Aspen Insurance Holdings Ltd.
Sr. Nt.
6.00% due 8/15/2014 | | $ | 350,000 | | | $ | 372,154 | |
Axis Capital Holdings Ltd.
Sr. Nt.
5.75% due 12/1/2014 | | | 300,000 | | | | 317,881 | |
Berkshire Hathaway Finance Corp.
1.50% due 1/10/2014 | | | 250,000 | | | | 253,591 | |
Marsh & McLennan Cos., Inc.
Sr. Nt.
4.85% due 2/15/2013 | | | 500,000 | | | | 510,692 | |
Willis Group Holdings PLC
4.125% due 3/15/2016 | | | 500,000 | | | | 522,706 | |
| | | | | | | | | |
| | | | | | | | 1,977,024 | |
| Lodging – 0.2% | |
Royal Caribbean Cruises Ltd.
Sr. Nt.
7.00% due 6/15/2013 | | | 300,000 | | | | 312,000 | |
| | | | | | | | | |
| | | | | | | | 312,000 | |
| Media Noncable – 1.3% | |
NBCUniversal Media LLC
Sr. Nt.
2.10% due 4/1/2014 | | | 500,000 | | | | 508,881 | |
News America, Inc.
5.30% due 12/15/2014 | | | 500,000 | | | | 548,013 | |
RR Donnelley & Sons Co.
Sr. Nt.
5.50% due 5/15/2015 | | | 500,000 | | | | 510,000 | |
Scholastic Corp.
Sr. Nt.
5.00% due 4/15/2013 | | | 250,000 | | | | 253,125 | |
The Interpublic Group of Companies, Inc.
Sr. Nt.
6.25% due 11/15/2014 | | | 500,000 | | | | 546,250 | |
| | | | | | | | | |
| | | | | | | | 2,366,269 | |
| Metals and Mining – 1.5% | |
Anglo American Capital PLC
2.15% due 9/27/2013(1) | | | 300,000 | | | | 302,229 | |
ArcelorMittal
Sr. Nt.
3.75% due 2/25/2015 | | | 500,000 | | | | 506,841 | |
5.375% due 6/1/2013 | | | 250,000 | | | | 257,116 | |
BHP Billiton Finance USA Ltd.
1.125% due 11/21/2014 | | | 300,000 | | | | 301,753 | |
FMG Resources August 2006 Pty Ltd.
7.00% due 11/1/2015(1) | | | 500,000 | | | | 510,000 | |
Freeport-McMoRan Copper & Gold, Inc.
Sr. Nt.
1.40% due 2/13/2015 | | | 300,000 | | | | 298,976 | |
Steel Dynamics, Inc.
7.375% due 11/1/2012 | | | 300,000 | | | | 303,000 | |
Xstrata Canada Financial Corp.
2.85% due 11/10/2014(1) | | | 250,000 | | | | 254,753 | |
| | | | | | | | | |
| | | | | | | | 2,734,668 | |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 15 |
SCHEDULE OF INVESTMENTS — RS LOW DURATION BOND VIP SERIES
| | | | | | | | |
| June 30, 2012 (unaudited) | | Principal
Amount | | | Value | |
| Non Captive Consumer – 0.6% | |
HSBC Finance Corp.
Sr. Nt.
4.75% due 7/15/2013 | | $ | 500,000 | | | $ | 516,099 | |
SLM Corp.
Sr. Nt. Ser. A
5.00% due 10/1/2013 | | | 300,000 | | | | 309,000 | |
Sr. Nt.
5.00% due 4/15/2015 | | | 300,000 | | | | 302,757 | |
| | | | | | | | | |
| | | | | | | | 1,127,856 | |
| Non Captive Diversified – 1.1% | |
Ally Financial, Inc.
4.50% due 2/11/2014 | | | 450,000 | | | | 456,187 | |
CIT Group, Inc.
Sr. Nt.
4.75% due 2/15/2015(1) | | | 500,000 | | | | 511,875 | |
GATX Corp.
Sr. Nt.
4.75% due 10/1/2012 | | | 300,000 | | | | 302,496 | |
General Electric Capital Corp.
Sr. Nt.
2.80% due 1/8/2013 | | | 650,000 | | | | 657,580 | |
| | | | | | | | | |
| | | | | | | | 1,928,138 | |
| Oil Field Services – 0.7% | |
Transocean Ltd.
5.25% due 3/15/2013 | | | 550,000 | | | | 564,847 | |
Weatherford Bermuda
5.15% due 3/15/2013 | | | 761,000 | | | | 781,572 | |
| | | | | | | | | |
| | | | | | | | 1,346,419 | |
| Packaging – 0.2% | |
Sealed Air Corp.
Sr. Nt.
5.625% due 7/15/2013(1) | | | 400,000 | | | | 413,000 | |
| | | | | | | | | |
| | | | | | | | 413,000 | |
| Pharmaceuticals – 0.6% | |
Amgen, Inc.
Sr. Nt.
1.875% due 11/15/2014 | | | 500,000 | | | | 507,761 | |
Gilead Sciences, Inc.
Sr. Nt.
2.40% due 12/1/2014 | | | 500,000 | | | | 515,314 | |
| | | | | | | | | |
| | | | | | | | 1,023,075 | |
| Pipelines – 0.7% | |
Enterprise Products Operating LLC
4.60% due 8/1/2012 | | | 300,000 | | | | 300,869 | |
Kinder Morgan, Inc.
Sr. Nt.
6.50% due 9/1/2012 | | | 400,000 | | | | 401,420 | |
Plains All American Pipeline LP
4.25% due 9/1/2012 | | | 500,000 | | | | 502,278 | |
| | | | | | | | | |
| | | | | | | | 1,204,567 | |
| Refining – 0.2% | |
Phillips 66
1.95% due 3/5/2015(1) | | | 300,000 | | | | 302,149 | |
| | | | | | | | | |
| | | | | | | | 302,149 | |
| | | | | | | | |
| June 30, 2012 (unaudited) | | Principal
Amount | | | Value | |
| REITs – 1.8% | |
BioMed Realty LP
3.85% due 4/15/2016 | | $ | 300,000 | | | $ | 308,806 | |
Camden Property Trust
Sr. Nt.
5.875% due 11/30/2012 | | | 250,000 | | | | 254,617 | |
CommonWealth REIT
Sr. Nt.
6.40% due 2/15/2015 | | | 200,000 | | | | 211,860 | |
ERP Operating LP
Sr. Nt.
5.20% due 4/1/2013 | | | 600,000 | | | | 617,875 | |
HCP, Inc.
Sr. Nt.
5.65% due 12/15/2013 | | | 300,000 | | | | 316,852 | |
Liberty Property LP
Sr. Nt.
6.375% due 8/15/2012 | | | 200,000 | | | | 201,322 | |
ProLogis LP
5.625% due 11/15/2015 | | | 400,000 | | | | 435,939 | |
Tanger Properties LP
Sr. Nt.
6.15% due 11/15/2015 | | | 500,000 | | | | 555,834 | |
WEA Finance LLC
5.75% due 9/2/2015(1) | | | 400,000 | | | | 434,985 | |
| | | | | | | | | |
| | | | | | | | 3,338,090 | |
| Retailers – 0.4% | |
Home Depot, Inc.
Sr. Nt.
5.25% due 12/16/2013 | | | 600,000 | | | | 639,996 | |
| | | | | | | | | |
| | | | | | | | 639,996 | |
| Supermarkets – 0.1% | |
TESCO PLC
Sr. Nt.
2.00% due 12/5/2014(1) | | | 200,000 | | | | 202,050 | |
| | | | | | | | | |
| | | | | | | | 202,050 | |
| Technology – 1.7% | |
Agilent Technologies, Inc.
Sr. Nt.
2.50% due 7/15/2013 | | | 200,000 | | | | 202,731 | |
4.45% due 9/14/2012 | | | 300,000 | | | | 302,050 | |
Avnet, Inc.
Sr. Nt.
6.00% due 9/1/2015 | | | 350,000 | | | | 384,097 | |
Broadcom Corp.
Sr. Nt.
1.50% due 11/1/2013 | | | 500,000 | | | | 506,142 | |
Computer Sciences Corp.
Sr. Nt.
5.50% due 3/15/2013 | | | 400,000 | | | | 410,000 | |
Hewlett-Packard Co.
Sr. Nt.
2.35% due 3/15/2015 | | | 300,000 | | | | 304,682 | |
Lexmark International, Inc.
Sr. Nt.
5.90% due 6/1/2013 | | | 350,000 | | | | 361,841 | |
| | | | | | | | | |
| | | | |
| 16 | | | | The accompanying notes are an integral part of these financial statements. |
RS LOW DURATION BOND VIP SERIES
| | | | | | | | |
| June 30, 2012 (unaudited) | | Principal
Amount | | | Value | |
| Technology (continued) | |
Maxim Integrated Products, Inc.
Sr. Nt.
3.45% due 6/14/2013 | | $ | 250,000 | | | $ | 256,195 | |
Pitney Bowes, Inc.
Sr. Nt.
3.875% due 6/15/2013 | | | 400,000 | | | | 409,193 | |
| | | | | | | | | |
| | | | | | | | 3,136,931 | |
| Transportation Services – 0.4% | |
BAA Funding Ltd.
Sr. Sec Nt.
2.50% due 6/25/2015(1) | | | 300,000 | | | | 301,679 | |
ERAC USA Finance LLC
2.25% due 1/10/2014(1) | | | 500,000 | | | | 503,001 | |
| | | | | | | | | |
| | | | | | | | 804,680 | |
| Wireless – 0.3% | |
America Movil SAB de C.V.
3.625% due 3/30/2015 | | | 500,000 | | | | 531,781 | |
| | | | | | | | | |
| | | | | | | | 531,781 | |
| Wirelines – 0.8% | |
British Telecommunications PLC
Sr. Nt.
2.00% due 6/22/2015 | | | 300,000 | | | | 304,122 | |
Telecom Italia Capital
5.25% due 11/15/2013 | | | 500,000 | | | | 501,250 | |
Telefonica Emisiones SAU
2.582% due 4/26/2013 | | | 700,000 | | | | 689,538 | |
| | | | | | | | | |
| | | | | | | | 1,494,910 | |
Total Corporate Bonds
(Cost $64,171,409) | | | | 64,619,574 | |
| | | | | | | | |
| | | Principal
Amount | | | Value | |
| Hybrid ARMS – 0.0% | |
FNMA
2.44% due 8/1/2046(2) | | | 19,778 | | | | 20,874 | |
| | | | | | | | | |
Total Hybrid ARMS
(Cost $19,946) | | | | 20,874 | |
| | | | | | | | |
| | | Principal
Amount | | | Value | |
| Mortgage-Backed Securities – 0.0% | |
FHLMC
7.00% due 9/1/2038 | | | 38,900 | | | | 45,128 | |
| | | | | | | | | |
Total Mortgage-Backed Securities
(Cost $40,379) | | | | 45,128 | |
| | | | | | | | |
| June 30, 2012 (unaudited) | | Principal
Amount | | | Value | |
| U.S. Agencies – 1.8% | |
Federal Home Loan Mortgage Corp.
2.00% due 8/25/2016 | | $ | 3,000,000 | | | $ | 3,152,289 | |
| | | | | | | | | |
Total U.S. Agencies
(Cost $3,099,670) | | | | 3,152,289 | |
| | | | | | | | |
| | | | | | | | |
| | | Principal
Amount | | | Value | |
| U.S. Government Securities – 17.2% | |
U.S. Treasury Notes
0.25% due 6/30/2014 - 5/15/2015 | | | 12,755,000 | | | | 12,719,649 | |
0.375% due 3/15/2015 - 6/15/2015 | | | 6,770,000 | | | | 6,765,498 | |
0.625% due 5/31/2017 | | | 6,460,000 | | | | 6,430,226 | |
0.875% due 11/30/2016 - 12/31/2016 | | | 2,568,000 | | | | 2,593,278 | |
1.00% due 8/31/2016 - 10/31/2016 | | | 2,630,000 | | | | 2,671,151 | |
| | | | | | | | | |
Total U.S. Government Securities
(Cost $31,111,965) | | | | 31,179,802 | |
| | | | | | | | |
| | | Principal
Amount | | | Value | |
| Municipal Bonds – 0.6% | |
Illinois St. G.O.
4.511% due 3/1/2015 | | | 600,000 | | | | 635,562 | |
Puerto Rico Comwlth. Govt. Dev. Bk.
Sr. Nt. Ser. A
3.448% due 2/1/2015 | | | 500,000 | | | | 504,535 | |
| | | | | | | | | |
Total Municipal Bonds
(Cost $1,129,957) | | | | 1,140,097 | |
| | | | | | | | |
| | | Principal
Amount | | | Value | |
| Short-Term Investments – 0.4% | |
Credit Suisse/New York NY
Sr. Nt.
3.45% due 7/2/2012 | | | 200,000 | | | | 200,000 | |
Time Warner Cable, Inc.
5.40% due 7/2/2012 | | | 500,000 | | | | 500,000 | |
| | | | | | | | | |
Total Short-Term Investments
(Cost $700,009) | | | | | | | 700,000 | |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 17 |
SCHEDULE OF INVESTMENTS — RS LOW DURATION BOND VIP SERIES
| | | | | | | | |
| June 30, 2012 (unaudited) | | Principal
Amount | | | Value | |
| Repurchase Agreements – 4.9% | |
| | | |
State Street Bank and Trust Co. Repurchase Agreement, 0.01%, dated 6/29/2012, maturity value of $8,832,007, due 7/2/2012(5) | | $ | 8,832,000 | | | $ | 8,832,000 | |
Total Repurchase Agreements
(Cost $8,832,000) | | | | 8,832,000 | |
Total Investments – 103.0%
(Cost $185,946,496) | | | | 186,709,372 | |
| Other Liabilities, Net - (3.0)% | | | | (5,373,425 | ) |
| Total Net Assets - 100.0% | | | $ | 181,335,947 | |
| (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, 2012, the aggregate market value of these securities amounted to $24,746,794, representing 13.6% 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, 2012. |
| (3) | Securities are segregated for anticipated collateral requirements. |
| (4) | Maturity is perpetual. Maturity date presented represents the next call date. |
| (5) | The table below presents collateral for repurchase agreements. |
| | | | | | | | | | | | |
| Security | | Coupon | | | Maturity
Date | | | Value | |
| FHLB | | | 0.37% | | | | 5/1/2013 | | | $ | 9,011,250 | |
| | | | |
| 18 | | | | The accompanying notes are an integral part of these financial statements. |
The following is a summary of the inputs used as of June 30, 2012 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 | |
| Asset Backed Securities | | $ | — | | | $ | 23,365,144 | | | $ | — | | | $ | 23,365,144 | |
| Collateralized Mortgage Obligations | | | — | | | | 16,721,419 | | | | — | | | | 16,721,419 | |
| Senior Secured Loans | | | — | | | | 4,881,461 | | | | — | | | | 4,881,461 | |
| Commercial Mortgage-Backed Securities | | | — | | | | 32,051,584 | | | | — | | | | 32,051,584 | |
| Corporate Bonds | | | — | | | | 64,619,574 | | | | — | | | | 64,619,574 | |
| Hybrid ARMS | | | — | | | | 20,874 | | | | — | | | | 20,874 | |
| Mortgage-Backed Securities | | | — | | | | 45,128 | | | | — | | | | 45,128 | |
| U.S. Agencies | | | — | | | | 3,152,289 | | | | — | | | | 3,152,289 | |
| U.S. Government Securities | | | — | | | | 31,179,802 | | | | — | | | | 31,179,802 | |
| Municipal Bonds | | | — | | | | 1,140,097 | | | | — | | | | 1,140,097 | |
| Short-Term Investments | | | — | | | | 700,000 | | | | — | | | | 700,000 | |
| Repurchase Agreements | | | — | | | | 8,832,000 | | | | — | | | | 8,832,000 | |
| Total | | $ | — | | | $ | 186,709,372 | | | $ | — | | | $ | 186,709,372 | |
FINANCIAL INFORMATION — RS LOW DURATION BOND VIP SERIES
| | | | |
Statement of Assets and Liabilities As of June 30, 2012 (unaudited) | | | |
Assets | | | | |
Investments, at value | | $ | 186,709,372 | |
Interest receivable | | | 963,305 | |
Receivable for investments sold | | | 141,014 | |
Receivable for fund shares subscribed | | | 120,464 | |
| | | | | |
Total Assets | | | 187,934,155 | |
| | | | | |
| | |
Liabilities | | | | |
Payable for investments purchased | | | 6,491,860 | |
Payable to adviser | | | 66,216 | |
Payable for fund shares redeemed | | | 8,470 | |
Accrued trustees’ fees | | | 935 | |
Accrued expenses/other liabilities | | | 30,727 | |
| | | | | |
Total Liabilities | | | 6,598,208 | |
| | | | | |
Total Net Assets | | $ | 181,335,947 | |
| | | | | |
| | |
Net Assets Consist of: | | | | |
Paid-in capital | | $ | 178,524,135 | |
Accumulated undistributed net investment income | | | 2,030,219 | |
Accumulated net realized gain from investments | | | 18,717 | |
Net unrealized appreciation on investments | | | 762,876 | |
| | | | | |
Total Net Assets | | $ | 181,335,947 | |
| | | | | |
Investments, at Cost | | $ | 185,946,496 | |
| | | | | |
| | |
Pricing of Shares | | | | |
Shares of Beneficial Interest Outstanding with no Par Value | | | 17,251,660 | |
Net Asset Value Per Share | | | $10.51 | |
| | | | | |
| | | | |
Statement of Operations For the Six-Month Period Ended June 30, 2012 (unaudited) | |
Investment Income | | | | |
Interest | | $ | 2,479,295 | |
| | | | | |
Total Investment Income | | | 2,479,295 | |
| | | | | |
| | |
Expenses | | | | |
Investment advisory fees | | | 374,024 | |
Custodian fees | | | 27,232 | |
Shareholder reports | | | 16,451 | |
Professional fees | | | 15,669 | |
Administrative service fees | | | 8,707 | |
Trustees’ fees | | | 3,379 | |
Other expenses | | | 3,621 | |
| | | | | |
Total Expenses | | | 449,083 | |
| | |
Less: Custody credits | | | (7 | ) |
| | | | | |
Total Expenses, Net | | | 449,076 | |
| | | | | |
Net Investment Income | | | 2,030,219 | |
| | | | | |
| | |
Realized Gain/(Loss) and Change in Unrealized Appreciation/Depreciation on Investments | | | | |
Net realized loss from investments | | | (19,811 | ) |
Net change in unrealized appreciation/depreciation on investments | | | 721,012 | |
| | | | | |
Net Gain on Investments | | | 701,201 | |
| | | | | |
Net Increase in Net Assets Resulting from Operations | | $ | 2,731,420 | |
| | | | | |
| | | | | |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 19 |
FINANCIAL INFORMATION – RS LOW DURATION BOND VIP SERIES
| | | | | | | | |
Statements of Changes in Net Assets Six-month-ended numbers are unaudited | | | | | | |
| | | |
| | | For the
Six Months Ended
6/30/12 | | | For the
Year Ended
12/31/11 | |
| | | | |
Operations | | | | | | | | |
Net investment income | | $ | 2,030,219 | | | $ | 3,441,837 | |
Net realized gain/(loss) from investments | | | (19,811 | ) | | | 92,245 | |
Net change in unrealized appreciation/depreciation on investments | | | 721,012 | | | | (1,136,567 | ) |
| | | | | | | | | |
Net Increase in Net Assets Resulting from Operations | | | 2,731,420 | | | | 2,397,515 | |
| | | | | | | | | |
| | | |
Distributions to Shareholders | | | | | | | | |
Net investment income | | | — | | | | (3,443,871 | ) |
Net realized gain on investments | | | — | | | | (76,318 | ) |
| | | | | | | | | |
Total Distributions | | | — | | | | (3,520,189 | ) |
| | | | | | | | | |
| | | |
Capital Share Transactions | | | | | | | | |
Proceeds from sales of shares | | | 39,495,689 | | | | 58,673,331 | |
Reinvestment of distributions | | | — | | | | 3,520,189 | |
Cost of shares redeemed | | | (7,209,395 | ) | | | (19,293,766 | ) |
| | | | | | | | | |
Net Increase in Net Assets Resulting from Capital Share
Transactions | | | 32,286,294 | | | | 42,899,754 | |
| | | | | | | | | |
Net Increase in Net Assets | | | 35,017,714 | | | | 41,777,080 | |
| | | | | | | | | |
| | | |
Net Assets | | | | | | | | |
Beginning of period | | | 146,318,233 | | | | 104,541,153 | |
| | | | | | | | | |
End of period | | $ | 181,335,947 | | | $ | 146,318,233 | |
| | | | | | | | | |
Accumulated Undistributed Net Investment Income Included in Net Assets | | $ | 2,030,219 | | | $ | — | |
| | | | | | | | | |
| | | |
Other Information: | | | | | | | | |
Shares | | | | | | | | |
Sold | | | 3,783,742 | | | | 5,592,979 | |
Reinvested | | | — | | | | 341,103 | |
Redeemed | | | (689,936 | ) | | | (1,836,665 | ) |
| | | | | | | | | |
Net Increase | | | 3,093,806 | | | | 4,097,417 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | |
| 20 | | | | 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/(Loss) | | | Total
Operations | | | Distributions
From Net
Investment
Income | | | Distributions
From Net
Realized
Capital Gains | | | Total
Distributions | |
Six Months Ended 6/30/121 | | $ | 10.33 | | | $ | 0.12 | | | $ | 0.06 | | | $ | 0.18 | | | $ | — | | | $ | — | | | $ | — | |
Year Ended 12/31/11 | | | 10.39 | | | | 0.25 | | | | (0.05 | ) | | | 0.20 | | | | (0.25 | ) | | | (0.01 | ) | | | (0.26 | ) |
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 | ) |
| | | | |
| 22 | | | | 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 | |
| $ | 10.51 | | | | 1.74% | | | $ | 181,336 | | | | 0.54% | | | | 0.54% | | | | 2.44% | | | | 2.44% | | | | 28% | |
| | 10.33 | | | | 1.91% | | | | 146,318 | | | | 0.57% | | | | 0.57% | | | | 2.71% | | | | 2.71% | | | | 58% | |
| | 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% | |
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 and expense limitations and exclude the effect of custody credits, if applicable. |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 23 |
NOTES TO FINANCIAL STATEMENTS — RS LOW DURATION BOND VIP SERIES (UNAUDITED)
June 30, 2012 (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 nine 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. The Fund currently offers only Class I shares. 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. The valuations of debt securities, including bank loans, 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 at the bid price by independent pricing services (each, a “Service”). Debt securities with more than 60 days to maturity for which quoted bid prices are not readily available and representative of market value are valued by a 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 (See Note 4b). 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 in accordance with guidelines and procedures adopted 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 (“FASB”) 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 LOW DURATION 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.
The FASB 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, 2012, the Fund had no securities classified as Level 3.
The Fund’s policy is to recognize transfers between Level 1, Level 2 and Level 3 at the end of the reporting period. For the six months ended June 30, 2012, there were no transfers between Level 1 and Level 2.
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, for example, 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. 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.
NOTES TO FINANCIAL STATEMENTS — RS LOW DURATION BOND VIP SERIES (UNAUDITED)
As of June 30, 2012, 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 Trust is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next twelve months. 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, 2012, the Fund did not incur any such interest or penalties. The Fund is not subject to examination by U.S. federal tax authorities for tax years before 2008 and by 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.
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 (but not in the Financial Highlights) as a reduction to the Fund’s expenses.
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. 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, 2011, which is the most recently completed tax year, was as follows:
| | | | |
Ordinary
Income | | Long-Term
Capital Gains | |
| $3,505,384 | | $ | 14,805 | |
NOTES TO FINANCIAL STATEMENTS — RS LOW DURATION BOND 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, 2011, the Fund made the following reclassifications of permanent book and tax basis differences:
| | | | | | |
Accumulated
Net Investment
Income/(Loss) | | | Accumulated
Net Realized
Gain/(Loss) | |
| | $2,034 | | | $ | (2,034 | ) |
The tax basis of distributable earnings as of December 31, 2011 was as follows:
| | | | | | |
| | | Undistributed
Ordinary
Income | | | |
| | | | $38,665 | | | |
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, 2011, the Fund had no such losses.
b. Tax Basis of Investments The cost of investments for federal income tax purposes at June 30, 2012, was $185,952,412. The gross unrealized appreciation and depreciation on investments, on a tax basis, at June 30, 2012, aggregated $1,328,386 and $(571,426), respectively, resulting in net unrealized appreciation of $756,960.
Note 4. Investments
a. Investment Purchases and Sales The cost of investments and U.S. government agency obligations purchased and the proceeds from and U.S. government agency obligations and other investments sold (excluding short-term investments) for the six months ended June 30, 2012, were as follows:
| | | | | | | | |
| | | Other Investments | | | U.S. Government and Agency Obligations | |
| Purchases | | $ | 43,565,182 | | | $ | 43,996,158 | |
| Sales | | | 19,685,193 | | | | 26,191,558 | |
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 investments and may be, or 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.
NOTES TO FINANCIAL STATEMENTS — RS LOW DURATION BOND VIP SERIES (UNAUDITED)
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 and are noted, if any, in the Schedule of Investments.
e. Below Investment Grade Securities The Fund may invest in below investment grade securities (i.e. lower-quality “junk” 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 $100 million committed revolving credit 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.
For the six months ended June 30, 2012, the Fund did not borrow under the facility.
Note 6. Review for Subsequent Events
Management 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.
Note 8. New Accounting Pronouncement
In December 2011, the Financial Accounting Standards Board issued Accounting Standards Update 2011-11, Balance Sheet (Topic 210) — Disclosures about Offsetting Assets and Liabilities (“ASU 2011-11”). Effective for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods, ASU 2011-11 is intended to enhance disclosure requirements on the offsetting of financial assets and liabilities. At this time, management is evaluating the implications of ASU 2011-11 and its impact on the financial statements.
SUPPLEMENTAL INFORMATION (UNAUDITED)
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 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.
2012 Semiannual Report
All data as of June 30, 2012
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, 2012. 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
Highlights
| Ÿ | | The high yield market delivered positive performance in the first half of 2012, supported by generally healthy corporate earnings and low default rates. |
| Ÿ | | RS High Yield VIP Series (the “Fund”) had a positive return for the six months ended June 30, 2012, but it underperformed its benchmark, the Barclays U.S. Corporate High-Yield Index1 (the “Index”). |
| Ÿ | | The Fund invests primarily in high yield securities. It aims to provide high current income, with capital appreciation as a secondary objective. |
Market Overview
The markets started out the year on a positive note as optimism over the U.S. economic outlook and hopes for some resolution to the European debt crisis prompted yield-hungry investors to embrace risk. As a result, credit sensitive securities outperformed the broader fixed income market in the first quarter. Investor optimism appeared to fade in the second quarter, however, as political and economic uncertainty in Europe and signs of weaker economic growth in the U.S. led investors to once again seek safety in the Treasury market. As a result, the yield on the 10-year Treasury hit a record low of 1.44% in early June.
Against this backdrop, high yield bonds benefited from heightened investor confidence in the first quarter, as well as from record mutual fund inflows, sound corporate fundamentals, and a low default rate. While high yield market spreads narrowed in the first quarter, they widened during the second quarter as risk-averse investors exited the high yield market. Nonetheless, high yield bonds delivered positive results for the six-month period overall. Fundamentals also remained relatively sound during the period. The high yield default rate remained at 2.16%, well below the 25-year average rate of 4.21%. New issuance in the second quarter was $54.7 billion, well off from the $107 billion of new issuance in the first quarter.
Fund Performance Overview
The Fund returned 6.54% for the six months ended June 30, 2012, compared to a 7.27% return by the Index.
We positioned the Fund for moderate spread tightening in 2012 despite our concerns about the ongoing sovereign debt problems in Europe. This decision reflected our view that the high yield sector was attractive both on a fundamental basis and relative to other asset classes. This decision paid off in the first quarter, but the Fund gave back some gains as spreads widened in the second quarter.
The Fund underperformed the Index for the six-month period as a result of negative sector selection, which outweighed positive security selection. Energy, which was our largest overweight, was the sector that detracted most from relative performance as energy-related bonds declined sharply along with oil and gas prices. Security selection within the sector was positive overall as contributions from independent energy and refining offset a detraction by oil field services. Despite the volatility in the energy sector, we remain positive on the longer-term fundamental outlook for oil-related investments, particularly given the current shale boom in the U.S. and Canada. The Fund’s relative performance benefited most from its healthcare holdings, where security selection was particularly strong.
From a risk management standpoint, we scaled back the Fund’s exposure to investments that we believed might be sensitive to developments in Europe. This approach benefited relative performance for the six-month period.
RS HIGH YIELD VIP SERIES
Outlook
Despite uncertainty stemming from the European debt situation and questions about the strength of the U.S. economic recovery, we still view the outlook for the high yield market as positive. We believe that spreads could narrow somewhat as investors start to focus once again on fundamentals and yield. We think corporate fundamentals remain sound given generally healthy balance sheets, improved liquidity, strong recent refinancing activity, and a lack of near-term bond maturities that we expect will help to keep the default
rate low over the next two years. In addition, the Federal Reserve (the “Fed”) has indicated its intention to keep the Fed Funds target rate close to zero into 2014, and has left open the possibility that it would provide additional monetary stimulus should the U.S. economy falter or risks from Europe escalate. Nonetheless, we recognize the risks associated with Europe and the uncertain global economic outlook, and we will continue to emphasize rigorous credit analysis and seek to avoid companies with substantial European exposure.
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, 2012.
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 (unaudited)
| | |
| Total Net Assets: $69,942,881 | | |
| | | | | | |
| | | |
| Bond Quality Allocation2 | | | | |
 |
| | | | | | | | | | | | |
| | | | |
| Top Ten Holdings3 | | | | | | | | | |
| | | | |
| Holding | | Coupon | | | Maturity Date | | | % of Total
Net Assets | |
| AMSCAN Holdings, Inc. | | | 9.500% | | | | 6/28/2013 | | | | 1.43% | |
| Exopack LLC | | | 6.500% | | | | 5/31/2017 | | | | 1.41% | |
| E*Trade Financial Corp. | | | 12.500% | | | | 11/30/2017 | | | | 1.34% | |
| Block Communications, Inc. | | | 7.250% | | | | 2/1/2020 | | | | 1.31% | |
| DPL, Inc. | | | 7.250% | | | | 10/15/2021 | | | | 1.22% | |
| Michael Foods, Inc. | | | 9.750% | | | | 7/15/2018 | | | | 1.18% | |
| Sabra Health Care L.P. | | | 8.125% | | | | 11/1/2018 | | | | 1.12% | |
| Clear Channel Communications, Inc. | | | 3.895% | | | | 1/28/2016 | | | | 1.08% | |
| Burlington Coat Factory Warehouse Corp. | | | 10.000% | | | | 2/15/2019 | | | | 1.06% | |
| Lawson Software, Inc. | | | 11.500% | | | | 7/15/2018 | | | | 1.02% | |
| Total | | | | | | | | | | | 12.17% | |
| 1 | The Barclays 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 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. Statistical data for the Index is as of 6/30/2012. |
| 2 | Source: Moody’s, Standard and Poor’s, Fitch Investors Service. |
| 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. |
RS HIGH YIELD VIP SERIES
Performance Update (unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
| 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 | | | | 6.54% | | | | 6.33% | | | | 13.58% | | | | 6.36% | | | | 7.56% | | | | 5.79% | |
| Barclays U.S. Corporate High-Yield Index1 | | | | | | | 7.27% | | | | 7.27% | | | | 16.29% | | | | 8.45% | | | | 10.16% | | | | 7.45% | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | |
| 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 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
1/1/12 | | Ending
Account Value
6/30/12 | | | Expenses Paid
During Period*
1/1/12-6/30/12 | | | Expense Ratio
During Period
1/1/12-6/30/12 | |
| Based on Actual Return | | $1,000.00 | | | $1,065.40 | | | | $3.80 | | | | 0.74% | |
| Based on Hypothetical Return (5% Return Before Expenses) | | $1,000.00 | | | $1,021.18 | | | | $3.72 | | | | 0.74% | |
| * | Expenses are equal to the Fund's annualized expense ratio as indicated, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). |
SCHEDULE OF INVESTMENTS — RS HIGH YIELD VIP SERIES
| | | | | | | | |
| June 30, 2012 (unaudited) | | Principal
Amount | | | Value | |
| Corporate Bonds – 86.9% | | | | | | | | |
| Aerospace/Defense – 0.5% | | | | | | | | |
Moog, Inc.
Sr. Sub. Nt.
7.25% due 6/15/2018 | | $ | 325,000 | | | $ | 344,500 | |
| | | | | | | | | |
| | | | | | | | 344,500 | |
| Automotive – 4.5% | | | | | | | | |
American Axle & Manufacturing, Inc.
7.75% due 11/15/2019 | | | 70,000 | | | | 74,025 | |
7.875% due 3/1/2017 | | | 400,000 | | | | 413,000 | |
Ford Motor Credit Co. LLC
Sr. Nt.
8.00% due 12/15/2016 | | | 300,000 | | | | 354,827 | |
8.125% due 1/15/2020 | | | 440,000 | | | | 537,424 | |
General Motors Financial Co., Inc.
6.75% due 6/1/2018 | | | 360,000 | | | | 393,525 | |
JB Poindexter & Co., Inc.
Sr. Nt.
9.00% due 4/1/2022(1) | | | 330,000 | | | | 330,000 | |
Schaeffler Finance BV
Sr. Sec. Nt.
7.75% due 2/15/2017(1) | | | 130,000 | | | | 135,525 | |
8.50% due 2/15/2019(1) | | | 250,000 | | | | 266,875 | |
The Goodyear Tire & Rubber Co.
7.00% due 5/15/2022 | | | 250,000 | | | | 249,687 | |
Visteon Corp.
6.75% due 4/15/2019 | | | 370,000 | | | | 359,825 | |
| | | | | | | | | |
| | | | | | | | 3,114,713 | |
| Banking – 0.5% | | | | | | | | |
Royal Bank of Scotland Group PLC
Jr. Sub. Nt.
7.648% due 8/29/2049(2)(3) | | | 200,000 | | | | 160,000 | |
9.118% due 11/22/2012(3) | | | 200,000 | | | | 172,000 | |
| | | | | | | | | |
| | | | | | | | 332,000 | |
| Brokerage – 1.8% | | | | | | | | |
E*Trade Financial Corp.
Sr. Nt.
6.75% due 6/1/2016 | | | 300,000 | | | | 305,250 | |
12.50% due 11/30/2017 | | | 818,000 | | | | 937,633 | |
| | | | | | | | | |
| | | | | | | | 1,242,883 | |
| Building Materials – 0.9% | | | | | | | | |
Norcraft Cos. L.P.
Sec. Nt.
10.50% due 12/15/2015 | | | 270,000 | | | | 267,300 | |
USG Corp.
7.875% due 3/30/2020(1) | | | 360,000 | | | | 372,600 | |
| | | | | | | | | |
| | | | | | | | 639,900 | |
| Chemicals – 1.0% | | | | | | | | |
Huntsman International LLC
8.625% due 3/15/2020 | | | 250,000 | | | | 280,625 | |
LyondellBasell Industries NV
Sr. Nt.
5.00% due 4/15/2019(1) | | | 400,000 | | | | 419,500 | |
| | | | | | | | | |
| | | | | | | | 700,125 | |
| | | | | | | | |
| June 30, 2012 (unaudited) | | Principal
Amount | | | Value | |
| Construction Machinery – 1.3% | | | | | | | | |
Ashtead Capital, Inc.
6.50% due 7/15/2022(1) | | $ | 200,000 | | | $ | 202,450 | |
Terex Corp.
6.50% due 4/1/2020 | | | 400,000 | | | | 405,000 | |
UR Financing Escrow Corp.
Sec. Nt.
5.75% due 7/15/2018(1) | | | 150,000 | | | | 156,000 | |
7.625% due 4/15/2022(1) | | | 150,000 | | | | 157,125 | |
| | | | | | | | | |
| | | | | | | | 920,575 | |
| Consumer Cyclical Services – 0.7% | |
Monitronics International, Inc.
Sr. Nt.
9.125% due 4/1/2020(1) | | | 330,000 | | �� | | 316,800 | |
The Geo Group, Inc.
6.625% due 2/15/2021 | | | 200,000 | | | | 206,500 | |
| | | | | | | | | |
| | | | | | | | 523,300 | |
| Consumer Products – 0.9% | | | | | | | | |
NBTY, Inc.
9.00% due 10/1/2018 | | | 600,000 | | | | 663,000 | |
| | | | | | | | | |
| | | | | | | | 663,000 | |
| Electric – 4.9% | | | | | | | | |
Calpine Corp.
Sr. Sec. Nt.
7.50% due 2/15/2021(1) | | | 200,000 | | | | 216,000 | |
7.875% due 7/31/2020(1) | | | 400,000 | | | | 441,000 | |
Covanta Holding Corp.
Sr. Nt.
6.375% due 10/1/2022 | | | 330,000 | | | | 348,808 | |
DPL, Inc.
Sr. Nt.
7.25% due 10/15/2021(1) | | | 770,000 | | | | 854,700 | |
Mirant Americas Generation LLC
Sr. Nt.
8.50% due 10/1/2021 | | | 50,000 | | | | 45,000 | |
North American Energy Alliance LLC Sec. Nt
10.875% due 6/1/2016 | | | 490,000 | | | | 537,775 | |
NRG Energy, Inc.
8.50% due 6/15/2019 | | | 400,000 | | | | 418,000 | |
The AES Corp.
Sr. Nt.
7.375% due 7/1/2021(1) | | | 270,000 | | | | 300,375 | |
8.00% due 6/1/2020 | | | 260,000 | | | | 298,350 | |
| | | | | | | | | |
| | | | | | | | 3,460,008 | |
| Entertainment – 0.9% | | | | | | | | |
NAI Entertainment Holdings LLC
Sr. Sec. Nt.
8.25% due 12/15/2017(1) | | | 300,000 | | | | 331,500 | |
WMG Acquisition Corp.
Sr. Sec. Nt.
9.50% due 6/15/2016 | | | 300,000 | | | | 327,000 | |
| | | | | | | | | |
| | | | | | | | 658,500 | |
| | | | |
| 8 | | | | The accompanying notes are an integral part of these financial statements. |
RS HIGH YIELD VIP SERIES
| | | | | | | | |
| June 30, 2012 (unaudited) | | Principal
Amount | | | Value | |
| Food And Beverage – 2.4% | | | | | | | | |
Aramark Corp.
3.966% due 2/1/2015(2) | | $ | 108,000 | | | $ | 107,190 | |
ARAMARK Holdings Corp.
Sr. Nt.
8.625% due 5/1/2016(1)(4) | | | 400,000 | | | | 409,504 | |
Del Monte Corp.
7.625% due 2/15/2019 | | | 300,000 | | | | 302,625 | |
Michael Foods, Inc.
9.75% due 7/15/2018 | | | 750,000 | | | | 823,125 | |
| | | | | | | | | |
| | | | | | | | 1,642,444 | |
| Gaming – 2.7% | | | | | | | | |
Caesar’s Entertainment Operating Co., Inc.
5.625% due 6/1/2015 | | | 400,000 | | | | 329,000 | |
CityCenter Holdings LLC
Sr. Sec. Nt.
7.625% due 1/15/2016(1) | | | 220,000 | | | | 231,550 | |
MGM Resorts International
Sr. Sec. Nt.
9.00% due 3/15/2020 | | | 400,000 | | | | 444,000 | |
Pinnacle Entertainment, Inc.
8.75% due 5/15/2020 | | | 350,000 | | | | 383,250 | |
Scientific Games International, Inc. 9.25% due 6/15/2019 | | | 480,000 | | | | 525,600 | |
| | | | | | | | | |
| | | | | | | | 1,913,400 | |
| Government Related – 0.8% | | | | | | | | |
Citgo Petroleum Corp.
Sr. Sec. Nt.
11.50% due 7/1/2017(1) | | | 525,000 | | | | 589,313 | |
| | | | | | | | | |
| | | | | | | | 589,313 | |
| Health Insurance – 0.5% | | | | | | | | |
AMERIGROUP Corp.
Sr. Nt.
7.50% due 11/15/2019 | | | 325,000 | | | | 349,375 | |
| | | | | | | | | |
| | | | | | | | 349,375 | |
| Healthcare – 4.0% | | | | | | | | |
DaVita, Inc.
6.625% due 11/1/2020 | | | 400,000 | | | | 417,000 | |
HCA, Inc.
Sr. Sec. Nt.
7.875% due 2/15/2020 | | | 200,000 | | | | 222,000 | |
8.50% due 4/15/2019 | | | 260,000 | | | | 291,200 | |
9.875% due 2/15/2017 | | | 143,000 | | | | 155,155 | |
IMS Health, Inc.
Sr. Nt.
12.50% due 3/1/2018(1) | | | 330,000 | | | | 391,875 | |
INC Research LLC
Sr. Nt.
11.50% due 7/15/2019(1) | | | 320,000 | | | | 310,400 | |
Kinetic Concepts, Inc.
12.50% due 11/1/2019(1) | | | 300,000 | | | | 271,500 | |
Rural/Metro Corp.
Sr. Nt.
10.125% due 7/15/2019(1) | | | 250,000 | | | | 240,000 | |
| | | | | | | | |
| June 30, 2012 (unaudited) | | Principal
Amount | | | Value | |
| Healthcare (continued) | | | | | | | | |
Teleflex, Inc.
6.875% due 6/1/2019 | | $ | 170,000 | | | $ | 180,625 | |
Universal Hospital Services, Inc.
Sec. Nt.
8.50% due 6/1/2015(2) | | | 300,000 | | | | 305,812 | |
| | | | | | | | | |
| | | | | | | | 2,785,567 | |
| Home Construction – 1.6% | | | | | | | | |
Beazer Homes USA, Inc.
9.125% due 5/15/2019 | | | 250,000 | | | | 218,125 | |
Meritage Homes Corp.
7.15% due 4/15/2020 | | | 550,000 | | | | 572,000 | |
Taylor Morrison Communities, Inc.
Sr. Nt.
7.75% due 4/15/2020(1) | | | 310,000 | | | | 323,950 | |
| | | | | | | | | |
| | | | | | | | 1,114,075 | |
| Independent Energy – 10.3% | | | | | | | | |
Alta Mesa Holdings
9.625% due 10/15/2018 | | | 500,000 | | | | 493,750 | |
BreitBurn Energy Partners L.P.
7.875% due 4/15/2022(1) | | | 350,000 | | | | 350,000 | |
Chesapeake Energy Corp.
9.50% due 2/15/2015 | | | 400,000 | | | | 431,000 | |
Clayton Williams Energy, Inc.
7.75% due 4/1/2019 | | | 320,000 | | | | 313,600 | |
Connacher Oil and Gas Ltd.
Sec. Nt.
8.50% due 8/1/2019(1) | | | 210,000 | | | | 178,500 | |
Continental Resources, Inc.
8.25% due 10/1/2019 | | | 230,000 | | | | 257,025 | |
Eagle Rock Energy Partners L.P.
8.375% due 6/1/2019 | | | 180,000 | | | | 179,550 | |
Energy XXI Gulf Coast, Inc.
9.25% due 12/15/2017 | | | 100,000 | | | | 107,000 | |
EV Energy Partners L.P.
8.00% due 4/15/2019 | | | 360,000 | | | | 357,300 | |
Halcon Resources Corp.
9.75% due 7/15/2020(1) | | | 330,000 | | | | 325,532 | |
Harvest Operations Corp.
6.875% due 10/1/2017(1) | | | 500,000 | | | | 531,250 | |
Kodiak Oil & Gas Corp.
8.125% due 12/1/2019(1) | | | 210,000 | | | | 216,300 | |
Laredo Petroleum, Inc.
7.375% due 5/1/2022(1) | | | 125,000 | | | | 130,000 | |
Linn Energy LLC
6.25% due 11/1/2019(1) | | | 300,000 | | | | 294,000 | |
6.50% due 5/15/2019(1) | | | 60,000 | | | | 59,400 | |
7.75% due 2/1/2021 | | | 260,000 | | | | 271,700 | |
Newfield Exploration Co.
Sr. Nt.
5.625% due 7/1/2024 | | | 350,000 | | | | 357,875 | |
Oasis Petroleum, Inc.
6.50% due 11/1/2021 | | | 500,000 | | | | 495,000 | |
OGX Austria GmbH
8.375% due 4/1/2022(1) | | | 330,000 | | | | 284,625 | |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 9 |
SCHEDULE OF INVESTMENTS — RS HIGH YIELD VIP SERIES
| | | | | | | | |
| June 30, 2012 (unaudited) | | Principal
Amount | | | Value | |
| Independent Energy (continued) | |
Plains Exploration & Production Co.
6.125% due 6/15/2019 | | $ | 200,000 | | | $ | 201,000 | |
6.625% due 5/1/2021 | | | 370,000 | | | | 373,700 | |
6.75% due 2/1/2022 | | | 200,000 | | | | 204,000 | |
Samson Investment Co.
Sr. Nt.
9.75% due 2/15/2020(1) | | | 170,000 | | | | 169,150 | |
SandRidge Energy, Inc.
7.50% due 3/15/2021 | | | 350,000 | | | | 345,625 | |
Vanguard Natural Resources LLC
7.875% due 4/1/2020 | | | 270,000 | | | | 270,000 | |
| | | | | | | | | |
| | | | | | | | 7,196,882 | |
| Insurance–Life – 1.1% | | | | | | | | |
CNO Financial Group, Inc.
Sr. Sec. Nt.
9.00% due 1/15/2018(1) | | | 300,000 | | | | 323,250 | |
Symetra Financial Corp.
Jr. Sub. Nt.
8.30% due 10/15/2037(1)(2) | | | 440,000 | | | | 429,000 | |
| | | | | | | | | |
| | | | | | | | 752,250 | |
| Media Cable – 2.3% | | | | | | | | |
CCO Holdings LLC
6.625% due 1/31/2022 | | | 200,000 | | | | 214,000 | |
7.375% due 6/1/2020 | | | 130,000 | | | | 142,838 | |
7.875% due 4/30/2018 | | | 250,000 | | | | 271,875 | |
CSC Holdings LLC
Sr. Nt.
6.75% due 11/15/2021(1) | | | 450,000 | | | | 479,250 | |
DISH DBS Corp.
4.625% due 7/15/2017(1) | | | 170,000 | | | | 170,212 | |
5.875% due 7/15/2022(1) | | | 330,000 | | | | 333,300 | |
| | | | | | | | | |
| | | | | | | | 1,611,475 | |
| Media Noncable – 8.6% | | | | | | | | |
AMC Networks, Inc.
7.75% due 7/15/2021(1) | | | 280,000 | | | | 308,700 | |
Block Communications, Inc.
Sr. Nt.
7.25% due 2/1/2020(1) | | | 900,000 | | | | 913,500 | |
Clear Channel Worldwide Holdings, Inc.
7.625% due 3/15/2020(1) | | | 400,000 | | | | 390,000 | |
Entravision Communications Corp.
Sr. Sec. Nt.
8.75% due 8/1/2017 | | | 133,000 | | | | 140,980 | |
Hughes Satellite Systems Corp.
Sr. Sec. Nt.
6.50% due 6/15/2019 | | | 240,000 | | | | 255,000 | |
7.625% due 6/15/2021 | | | 500,000 | | | | 543,750 | |
Intelsat Jackson Holdings S.A.
7.25% due 4/1/2019 | | | 200,000 | | | | 210,000 | |
7.25% due 10/15/2020(1) | | | 330,000 | | | | 346,500 | |
7.50% due 4/1/2021 | | | 460,000 | | | | 486,450 | |
11.25% due 6/15/2016 | | | 438,000 | | | | 458,805 | |
Intelsat Luxembourg S.A.
11.50% due 2/4/2017(1)(4) | | | 300,000 | | | | 309,750 | |
| | | | | | | | |
| June 30, 2012 (unaudited) | | Principal
Amount | | | Value | |
| Media Noncable (continued) | | | | | | | | |
Lamar Media Corp.
5.875% due 2/1/2022(1) | | $ | 300,000 | | | $ | 307,500 | |
RR Donnelley & Sons Co.
Sr. Nt.
8.25% due 3/15/2019 | | | 330,000 | | | | 323,400 | |
Telesat LLC
Sr. Nt.
6.00% due 5/15/2017(1) | | | 470,000 | | | | 478,225 | |
Univision Communications, Inc.
Sr. Sec. Nt.
6.875% due 5/15/2019(1) | | | 190,000 | | | | 195,700 | |
7.875% due 11/1/2020(1) | | | 320,000 | | | | 342,400 | |
| | | | | | | | | |
| | | | | | | | 6,010,660 | |
| Metals And Mining – 1.7% | | | | | | | | |
FMG Resources August 2006 Pty Ltd.
Sr. Nt.
6.00% due 4/1/2017(1) | | | 300,000 | | | | 301,500 | |
FMG Resources August 2006 Pty. Ltd.
7.00% due 11/1/2015(1) | | | 500,000 | | | | 510,000 | |
Penn Virginia Resource Partners L.P.
8.25% due 4/15/2018 | | | 270,000 | | | | 272,700 | |
8.375% due 6/1/2020(1) | | | 100,000 | | | | 101,500 | |
| | | | | | | | | |
| | | | | | | | 1,185,700 | |
| Non Captive Diversified – 3.2% | | | | | | | | |
AerCap Aviation Solutions BV
6.375% due 5/30/2017(1) | | | 300,000 | | | | 301,500 | |
Ally Financial, Inc.
8.00% due 11/1/2031 | | | 300,000 | | | | 351,750 | |
CIT Group, Inc.
Sr. Nt.
5.00% due 5/15/2017 | | | 330,000 | | | | 339,900 | |
5.25% due 3/15/2018 | | | 270,000 | | | | 278,775 | |
5.50% due 2/15/2019(1) | | | 150,000 | | | | 154,125 | |
International Lease Finance Corp.
Sr. Nt.
5.875% due 4/1/2019 | | | 500,000 | | | | 500,485 | |
8.625% due 9/15/2015 | | | 250,000 | | | | 276,250 | |
| | | | | | | | | |
| | | | | | | | 2,202,785 | |
| Oil Field Services – 2.5% | | | | | | | | |
Basic Energy Services, Inc.
7.75% due 2/15/2019 | | | 500,000 | | | | 480,000 | |
Key Energy Services, Inc.
6.75% due 3/1/2021(1) | | | 400,000 | | | | 388,000 | |
Oil States International, Inc.
6.50% due 6/1/2019 | | | 180,000 | | | | 187,200 | |
Precision Drilling Corp.
6.50% due 12/15/2021 | | | 200,000 | | | | 204,000 | |
SESI LLC
7.125% due 12/15/2021(1) | | | 200,000 | | | | 217,500 | |
Stallion Oilfield Holdings Ltd.
Sr. Sec. Nt.
10.50% due 2/15/2015 | | | 239,000 | | | | 253,340 | |
| | | | | | | | | |
| | | | | | | | 1,730,040 | |
| | | | |
| 10 | | | | The accompanying notes are an integral part of these financial statements. |
RS HIGH YIELD VIP SERIES
| | | | | | | | |
| June 30, 2012 (unaudited) | | Principal
Amount | | | Value | |
| Packaging – 2.7% | | | | | | | | |
Reynolds Group Issuer, Inc.
Sr. Sec. Nt.
7.125% due 4/15/2019(1) | | $ | 400,000 | | | $ | 419,000 | |
Sr. Nt.
9.875% due 8/15/2019(1) | | | 500,000 | | | | 518,750 | |
Sealed Air Corp.
Sr. Nt.
8.125% due 9/15/2019(1) | | | 600,000 | | | | 669,000 | |
8.375% due 9/15/2021(1) | | | 250,000 | | | | 282,500 | |
| | | | | | | | | |
| | | | | | | | 1,889,250 | |
| Paper – 0.5% | | | | | | | | |
Longview Fibre Paper & Packaging, Inc. Sr. Sec. Nt.
8.00% due 6/1/2016(1) | | | 380,000 | | | | 380,000 | |
| | | | | | | | | |
| | | | | | | | 380,000 | |
| Pharmaceuticals – 0.8% | | | | | | | | |
Grifols, Inc.
8.25% due 2/1/2018 | | | 200,000 | | | | 214,500 | |
Jaguar Holding Co./Merger
Sr. Nt.
9.50% due 12/1/2019(1) | | | 300,000 | | | | 328,125 | |
| | | | | | | | | |
| | | | | | | | 542,625 | |
| Pipelines – 3.7% | | | | | | | | |
Atlas Pipeline Partners L.P.
8.75% due 6/15/2018 | | | 260,000 | | | | 277,550 | |
Copano Energy LLC
7.125% due 4/1/2021 | | | 500,000 | | | | 515,000 | |
Crosstex Energy L.P.
7.125% due 6/1/2022(1) | | | 100,000 | | | | 98,500 | |
MarkWest Energy Partners L.P.
6.50% due 8/15/2021 | | | 400,000 | | | | 417,000 | |
Martin Midstream Partners L.P.
8.875% due 4/1/2018 | | | 262,000 | | | | 264,620 | |
Niska Gas Storage US LLC
8.875% due 3/15/2018 | | | 440,000 | | | | 429,000 | |
Regency Energy Partners L.P.
6.50% due 7/15/2021 | | | 280,000 | | | | 294,000 | |
Targa Resources Partners L.P.
6.375% due 8/1/2022(1) | | | 120,000 | | | | 119,700 | |
6.875% due 2/1/2021 | | | 150,000 | | | | 156,000 | |
| | | | | | | | | |
| | | | | | | | 2,571,370 | |
| Refining – 0.9% | | | | | | | | |
Calumet Specialty Products Partners L.P.
9.375% due 5/1/2019 | | | 380,000 | | | | 380,950 | |
Northern Tier Energy LLC
Sr. Sec Nt.
10.50% due 12/1/2017 | | | 200,000 | | | | 214,000 | |
| | | | | | | | | |
| | | | | | | | 594,950 | |
| REITs – 1.1% | | | | | | | | |
Sabra Health Care L.P.
8.125% due 11/1/2018 | | | 720,000 | | | | 784,800 | |
| | | | | | | | | |
| | | | | | | | 784,800 | |
| | | | | | | | |
| June 30, 2012 (unaudited) | | Principal
Amount | | | Value | |
| Retailers – 2.7% | | | | | | | | |
99 Cents Only Stores
11.00% due 12/15/2019(1) | | $ | 500,000 | | | $ | 540,000 | |
Burlington Coat Factory
Warehouse Corp.
10.00% due 2/15/2019 | | | 700,000 | | | | 742,000 | |
The Neiman Marcus Group, Inc.
10.375% due 10/15/2015 | | | 280,000 | | | | 290,503 | |
YCC Holdings LLC
Sr. Nt.
10.25% due 2/15/2016(4) | | | 340,000 | | | | 345,950 | |
| | | | | | | | | |
| | | | | | | | 1,918,453 | |
| Supermarkets – 0.7% | | | | | | | | |
Tops Holding Corp.
Sr. Sec. Nt.
10.125% due 10/15/2015 | | | 470,000 | | | | 499,375 | |
| | | | | | | | | |
| | | | | | | | 499,375 | |
| Technology – 5.2% | | | | | | | | |
Amkor Technology, Inc.
Sr. Nt.
7.375% due 5/1/2018 | | | 50,000 | | | | 51,937 | |
Avaya, Inc.
10.125% due 11/1/2015 | | | 400,000 | | | | 332,000 | |
CDW LLC
8.50% due 4/1/2019 | | | 600,000 | | | | 639,000 | |
DuPont Fabros Technology L.P.
8.50% due 12/15/2017 | | | 380,000 | | | | 418,000 | |
First Data Corp.
Sec. Nt.
8.75% due 1/15/2022(1)(4) | | | 706,000 | | | | 711,295 | |
12.625% due 1/15/2021 | | | 100,000 | | | | 100,125 | |
Lawson Software, Inc.
Sr. Nt.
11.50% due 7/15/2018(1) | | | 630,000 | | | | 711,900 | |
Sanmina-SCI Corp.
7.00% due 5/15/2019(1) | | | 280,000 | | | | 271,600 | |
Sophia Finance, Inc.
9.75% due 1/15/2019(1) | | | 400,000 | | | | 425,000 | |
| | | | | | | | | |
| | | | | | | | 3,660,857 | |
| Transportation Services – 2.3% | | | | | | | | |
Avis Budget Car Rental LLC | | | | | | | | |
7.75% due 5/15/2016 | | | 255,000 | | | | 262,331 | |
9.625% due 3/15/2018 | | | 350,000 | | | | 383,250 | |
9.75% due 3/15/2020 | | | 300,000 | | | | 333,375 | |
Hertz Corp.
7.50% due 10/15/2018 | | | 300,000 | | | | 321,750 | |
Navios Maritime Holdings, Inc.
Sr. Sec. Nt.
8.875% due 11/1/2017 | | | 280,000 | | | | 282,100 | |
| | | | | | | | | |
| | | | | | | | 1,582,806 | |
| Wireless – 5.3% | | | | | | | | |
Cricket Communications, Inc.
7.75% due 10/15/2020 | | | 330,000 | | | | 315,150 | |
Digicel Ltd.
Sr. Nt.
8.25% due 9/1/2017(1) | | | 600,000 | | | | 610,500 | |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 11 |
SCHEDULE OF INVESTMENTS — RS HIGH YIELD VIP SERIES
| | | | | | | | |
| June 30, 2012 (unaudited) | | Principal
Amount | | | Value | |
| Wireless (continued) | |
MetroPCS Wireless, Inc.
7.875% due 9/1/2018 | | $ | 250,000 | | | $ | 259,375 | |
NII Capital Corp.
7.625% due 4/1/2021 | | | 225,000 | | | | 192,938 | |
8.875% due 12/15/2019 | | | 660,000 | | | | 598,125 | |
10.00% due 8/15/2016 | | | 270,000 | | | | 281,475 | |
Sprint Nextel Corp.
Sr. Nt.
6.00% due 12/1/2016 | | | 530,000 | | | | 507,475 | |
7.00% due 3/1/2020(1) | | | 100,000 | | | | 104,000 | |
9.00% due 11/15/2018(1) | | | 325,000 | | | | 363,187 | |
Trilogy International Partners LLC Sr. Sec. Nt.
10.25% due 8/15/2016(1) | | | 300,000 | | | | 244,500 | |
ViaSat, Inc.
6.875% due 6/15/2020(1) | | | 250,000 | | | | 252,500 | |
| | | | | | | | | |
| | | | | | | | 3,729,225 | |
| Wirelines – 1.4% | | | | | | | | |
Frontier Communications Corp.
Sr. Nt.
8.125% due 10/1/2018 | | | 460,000 | | | | 488,750 | |
8.25% due 4/15/2017 | | | 220,000 | | | | 236,500 | |
Windstream Corp.
7.875% due 11/1/2017 | | | 240,000 | | | | 261,600 | |
| | | | | | | | | |
| | | | | | | | 986,850 | |
Total Corporate Bonds
(Cost $58,752,545) | | | | | | | 60,824,031 | |
| | | | | | | | |
| | | Principal
Amount | | | Value | |
| Senior Secured Loans – 4.6% | | | | | | | | |
| Gaming – 0.7% | | | | | | | | |
Harrah’s Prop Co.
Senior Note
3.24% due 2/13/2013(2) | | | 600,000 | | | | 459,000 | |
| | | | | | | | | |
| | | | | | | | 459,000 | |
| Media Noncable – 1.1% | | | | | | | | |
Clear Channel Communications, Inc. Term Loan B
3.895% due 1/28/2016(2) | | | 948,857 | | | | 755,926 | |
| | | | | | | | | |
| | | | | | | | 755,926 | |
| Paper – 1.4% | | | | | | | | |
Exopack LLC
Term Loan
6.50% due 5/31/2017(2) | | | 990,000 | | | | 983,813 | |
| | | | | | | | | |
| | | | | | | | 983,813 | |
| Retailers – 1.4% | | | | | | | | |
AMSCAN Holdings, Inc.
Bridge Term Loan
9.50% due 6/28/2013(2)(6) | | | 1,000,000 | | | | 1,000,000 | |
| | | | | | | | | |
| | | | | | | | 1,000,000 | |
| | | | | | | | |
| June 30, 2012 (unaudited) | | | | | Value | |
Total Senior Secured Loans
(Cost $3,440,710) | | | | | | $ | 3,198,739 | |
| | | | | | | | |
| | | Shares | | | Value | |
| Common Stocks – 0.5% | | | | | | | | |
| Banking – 0.5% | | | | | | | | |
Citigroup, Inc. | | | 12,569 | | | | 344,516 | |
| | | | | | | | | |
| | | | | | | | 344,516 | |
Total Common Stocks
(Cost $378,402) | | | | | | | 344,516 | |
| | | | | | | | |
| | | Principal
Amount | | | Value | |
| Repurchase Agreements – 7.2% | | | | | | | | |
| | | |
State Street Bank and Trust Co. Repurchase Agreement, 0.01%, dated 6/29/2012, maturity value of $5,038,004, due 7/2/2012(5) | | $ | 5,038,000 | | | | 5,038,000 | |
Total Repurchase Agreements
(Cost $5,038,000) | | | | | | | 5,038,000 | |
Total Investments – 99.2%
(Cost $67,609,657) | | | | | | | 69,405,286 | |
| Other Assets, Net – 0.8% | | | | | | | 537,595 | |
| Total Net Assets – 100.0% | | | | | | $ | 69,942,881 | |
| (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, 2012, the aggregate market value of these securities amounted to $24,158,768, representing 34.5% 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, 2012. |
| (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 | |
| FHLB | | | 1.75% | | | | 8/22/2012 | | | $ | 5,143,166 | |
| (6) | The table below presents securities deemed illiquid by the investment adviser. |
| | | | | | | | | | | | | | | | | | | | |
| Security | | Principal
Amount | | | Cost | | | Value | | | Acquisition
Date | | | % of
Fund’s
Net
Assets | |
AMSCAN Holdings,
Inc.
Bridge
Term
Loan 9.50% due 6/28/2013 | | $ | 1,000,000 | | | $ | 1,000,000 | | | $ | 1,000,000 | | | | 6/28/2012 | | | | 1.43% | |
| | | | |
| 12 | | | | The accompanying notes are an integral part of these financial statements. |
RS HIGH YIELD VIP SERIES
The following is a summary of the inputs used as of June 30, 2012 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 | |
| Corporate Bonds | | $ | — | | | $ | 60,824,031 | | | $ | — | | | $ | 60,824,031 | |
| Senior Secured Loans | | | — | | | | 3,198,739 | | | | — | | | | 3,198,739 | |
| Common Stocks | | | 344,516 | | | | — | | | | — | | | | 344,516 | |
| Repurchase Agreements | | | — | | | | 5,038,000 | | | | — | | | | 5,038,000 | |
| Total | | $ | 344,516 | | | $ | 69,060,770 | | | $ | — | | | $ | 69,405,286 | |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 13 |
FINANCIAL INFORMATION — RS HIGH YIELD VIP SERIES
| | | | |
Statement of Assets and Liabilities As of June 30, 2012 (unaudited) | | | |
Assets | | | | |
Investments, at value | | | $69,405,286 | |
Cash and cash equivalents | | | 595 | |
Receivable for investments sold | | | 1,287,913 | |
Interest receivable | | | 1,165,426 | |
Receivable for fund shares subscribed | | | 97,322 | |
| | | | | |
Total Assets | | | 71,956,542 | |
| | | | | |
Liabilities | | | | |
Payable for investments purchased | | | 1,951,109 | |
Payable to adviser | | | 33,919 | |
Payable for fund shares redeemed | | | 5,097 | |
Accrued trustees’ fees | | | 546 | |
Accrued expenses/other liabilities | | | 22,990 | |
| | | | | |
Total Liabilities | | | 2,013,661 | |
| | | | | |
Total Net Assets | | | $69,942,881 | |
| | | | | |
Net Assets Consist of: | | | | |
Paid-in capital | | | $70,297,908 | |
Accumulated undistributed net investment income | | | 2,404,836 | |
Accumulated net realized loss from investments | | | (4,555,492 | ) |
Net unrealized appreciation on investments | | | 1,795,629 | |
| | | | | |
Total Net Assets | | | $69,942,881 | |
| | | | | |
Investments, at Cost | | | $67,609,657 | |
| | | | | |
Pricing of Shares | | | | |
Shares of Beneficial Interest Outstanding with no Par Value | | | 9,125,152 | |
Net Asset Value Per Share | | | $7.66 | |
| | | | | |
| | | | |
Statement of Operations For the Six-Month Period Ended June 30, 2012 (unaudited) | |
Investment Income | | | | |
Interest | | $ | 2,662,708 | |
Dividends | | | 251 | |
| | | | | |
Total Investment Income | | | 2,662,959 | |
| | | | | |
| | |
Expenses | | | | |
Investment advisory fees | | | 208,779 | |
Custodian fees | | | 20,039 | |
Professional fees | | | 10,994 | |
Shareholder reports | | | 10,812 | |
Administrative service fees | | | 3,944 | |
Trustees’ fees | | | 1,579 | |
Other expenses | | | 1,977 | |
| | | | | |
Total Expenses | | | 258,124 | |
| | |
Less: Custody credits | | | (1 | ) |
| | | | | |
Total Expenses, Net | | | 258,123 | |
| | | | | |
Net Investment Income | | | 2,404,836 | |
| | | | | |
| | |
Realized Gain/(Loss) and Change in Unrealized Appreciation/Depreciation on Investments | | | | |
Net realized gain from investments | | | 62,820 | |
Net change in unrealized appreciation/depreciation on investments | | | 2,020,900 | |
| | | | | |
Net Gain on Investments | | | 2,083,720 | |
| | | | | |
Net Increase in Net Assets Resulting from Operations | | $ | 4,488,556 | |
| | | | | |
| | | | | |
| | | | |
| 14 | | | | The accompanying notes are an integral part of these financial statements. |
FINANCIAL INFORMATION — RS HIGH YIELD VIP SERIES
| | | | | | | | |
Statements of Changes in Net Assets Six-month-ended numbers are unaudited | | | | | | |
| | | |
| | | For the Six Months Ended
6/30/12 | | | For the Year Ended
12/31/11 | |
| | | | |
Operations | | | | | | | | |
Net investment income | | $ | 2,404,836 | | | $ | 5,366,466 | |
Net realized gain from investments | | | 62,820 | | | | 2,374,238 | |
Net change in unrealized appreciation/depreciation on investments | | | 2,020,900 | | | | (4,537,277 | ) |
| | | | | | | | | |
Net Increase in Net Assets Resulting from Operations | | | 4,488,556 | | | | 3,203,427 | |
| | | | | | | | | |
| | | |
Distributions to Shareholders | | | | | | | | |
Net investment income | | | — | | | | (5,392,869 | ) |
| | | | | | | | | |
Total Distributions | | | — | | | | (5,392,869 | ) |
| | | | | | | | | |
| | | |
Capital Share Transactions | | | | | | | | |
Proceeds from sales of shares | | | 3,995,626 | | | | 10,062,588 | |
Reinvestment of distributions | | | — | | | | 5,392,869 | |
Cost of shares redeemed | | | (5,995,912 | ) | | | (24,889,219 | ) |
| | | | | | | | | |
Net Decrease in Net Assets Resulting from Capital Share
Transactions | | | (2,000,286 | ) | | | (9,433,762 | ) |
| | | | | | | | | |
Net Increase/(Decrease) in Net Assets | | | 2,488,270 | | | | (11,623,204 | ) |
| | | | | | | | | |
| | | |
Net Assets | | | | | | | | |
Beginning of period | | | 67,454,611 | | | | 79,077,815 | |
| | | | | | | | | |
End of period | | $ | 69,942,881 | | | $ | 67,454,611 | |
| | | | | | | | | |
Accumulated Undistributed Net Investment Income Included in Net Assets | | $ | 2,404,836 | | | $ | — | |
| | | | | | | | | |
| | | |
Other Information: | | | | | | | | |
Shares | | | | | | | | |
Sold | | | 532,712 | | | | 1,317,521 | |
Reinvested | | | — | | | | 760,630 | |
Redeemed | | | (795,788 | ) | | | (3,220,861 | ) |
| | | | | | | | | |
Net Decrease | | | (263,076 | ) | | | (1,142,710 | ) |
| | | | | | | | | |
| | | | | | | | | |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 15 |
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 6/30/121 | | $ | 7.19 | | | $ | 0.26 | | | $ | 0.21 | | | $ | 0.47 | | | $ | — | | | $ | — | | | $ | — | |
Year Ended 12/31/11 | | | 7.51 | | | | 0.63 | | | | (0.32 | ) | | | 0.31 | | | | (0.63 | ) | | | — | | | | (0.63 | ) |
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 | ) |
| | | | |
| 16 | | | | The accompanying notes are an integral part of these financial statements. |
FINANCIAL INFORMATION — 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 | |
| $ | 7.66 | | | | 6.54% | | | $ | 69,943 | | | | 0.74% | | | | 0.74% | | | | 6.91% | | | | 6.91% | | | | 47% | |
| | 7.19 | | | | 4.19% | | | | 67,455 | | | | 0.74% | | | | 0.74% | | | | 7.22% | | | | 7.22% | | | | 92% | |
| | 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% | |
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 and expense limitations and exclude the effect of custody credits, if applicable. |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 17 |
NOTES TO FINANCIAL STATEMENTS — RS HIGH YIELD VIP SERIES (UNAUDITED)
June 30, 2012 (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 nine series. RS High Yield 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. The Fund currently offers only Class I shares. 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. The valuations of debt securities, including bank loans, 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 at the bid price by independent pricing services (each, a “Service”). Debt securities with more than 60 days to maturity for which quoted bid prices are not readily available and representative of market value are valued by a 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 (See Note 4b). 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 in accordance with guidelines and procedures adopted 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 (“FASB”) 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 HIGH YIELD 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.
The FASB 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, 2012, the Fund had no securities classified as Level 3.
The Fund’s policy is to recognize transfers between Level 1, Level 2 and Level 3 at the end of the reporting period. For the six months ended June 30, 2012, there were no transfers between Level 1 and Level 2.
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, for example, 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. 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.
NOTES TO FINANCIAL STATEMENTS — RS HIGH YIELD VIP SERIES (UNAUDITED)
As of June 30, 2012, 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 Trust is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next twelve months. 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, 2012, the Fund did not incur any such interest or penalties. The Fund is not subject to examination by U.S. federal tax authorities for tax years before 2008 and by 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.
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 (but not in the Financial Highlights) as a reduction to the Fund’s expenses.
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. 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, 2011, which is the most recently completed tax year, was as follows:
|
| Ordinary Income |
| $5,392,869 |
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
NOTES TO FINANCIAL STATEMENTS — RS HIGH YIELD VIP SERIES (UNAUDITED)
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, 2011, the Fund made the following reclassifications of permanent book and tax basis differences:
| | | | |
| Paid-in-Capital | | Accumulated Net Investment Income/(Loss) | |
| $(26,405) | | $ | 26,405 | |
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, 2011, the Fund utilized $2,759,789 of capital loss carryovers. Capital loss carryovers available to the Fund at December 31, 2011 were as follows:
| | | | |
| Expiring | | Amount | |
| 2016 | | $ | 2,003,207 | |
| 2017 | | | 2,229,558 | |
| | | | | |
| Total | | $ | 4,232,765 | |
| | | | | |
| | | | | |
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, 2011, the Fund elected to defer net capital losses of $385,551.
b. Tax Basis of Investments The cost of investments for federal income tax purposes at June 30, 2012, was $67,611,674. The gross unrealized appreciation and depreciation on investments, on a tax basis, at June 30, 2012, aggregated $2,687,490 and $(893,878), respectively, resulting in net unrealized appreciation of $1,793,612.
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 $31,908,466 and $31,420,949, respectively, for the six months ended June 30, 2012.
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 investments and may be, or 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.
NOTES TO FINANCIAL STATEMENTS — RS HIGH YIELD VIP SERIES (UNAUDITED)
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, if any, in the Schedule of Investments.
f. Below Investment Grade Securities The Fund may invest in below investment grade securities (i.e. lower-quality “junk” 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 $100 million committed revolving credit 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.
For the six months ended June 30, 2012, the Fund did not borrow under the facility.
Note 6. Review for Subsequent Events
Management 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.
Note 8. New Accounting Pronouncement
In December 2011, the Financial Accounting Standards Board issued Accounting Standards Update 2011-11, Balance Sheet (Topic 210) – Disclosures about Offsetting Assets and Liabilities (“ASU 2011-11”). Effective for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods, ASU 2011-11 is intended to enhance disclosure requirements on the offsetting of financial assets and liabilities. At this time, management is evaluating the implications of ASU 2011-11 and its impact on the financial statements.
SUPPLEMENTAL INFORMATION (UNAUDITED)
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 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.
2012 Semiannual Report
All data as of June 30, 2012
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, 2012. 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
Highlights
| Ÿ | | Financial markets remained volatile as investor optimism over the prospect of improvement in the U.S. economy gave way to renewed recession fears and concerns about the deepening debt crisis in Europe. |
| Ÿ | | RS Money Market VIP Series (the “Fund”) returned 0.00% for the six month-period ended June 30, 2012, and underperformed its benchmark, the Barclays U.S. Treasury Bellwethers (3 Month) Index1 (the “Index”). |
| Ÿ | | The Fund seeks a high level of current income consistent with liquidity and preservation of capital by normally investing in money market instruments. |
Market Overview
The markets started out the year on a positive note as optimism over the U.S. economic outlook and hopes for some resolution to the European debt crisis prompted yield-hungry investors to embrace risk. As a result, credit sensitive securities outperformed the broader fixed income market in the first quarter. Investor optimism appeared to fade in the second quarter, however, as political and economic uncertainty in Europe and signs of weaker economic growth in the U.S. prompted investors to once again seek safety in the Treasury market. As a result, the yield on the 10-year Treasury hit a record low of 1.44% in early June. Against this backdrop, liquidity and funding in money market funds deteriorated as many money managers increased cash positions and shunned commercial paper issues they deemed less creditworthy.
Fund Performance Overview
The Fund returned 0.00% for the six months ended June 30, 2012, compared with a 0.04% return by the Index. Guardian Investor Services, LLC voluntarily reimbursed expenses to maintain a minimum yield threshold for the Fund during the period.
The Fund holds the majority of its assets in high grade Tier 1 commercial paper of either financial or industrial issuers. In the first half of 2012, the Fund was overweight in high quality industrial investments. We also began to add high quality insurance and finance investments. Additionally, we maintained positions in high grade taxable municipal paper and floating rate taxable municipal bonds due to our belief that they were offering attractive rates. We also increased the Fund’s exposure to U.S. Treasury bills and U.S. Agency repurchase agreements. The Fund did not have any exposure to commercial paper issued by European banks or European certificates of deposit as of June 30, 2012.
Several factors affected the performance of money market funds overall in the first half of 2012. The federal funds rate remained anchored in the range of 0.00% to 0.25%, reducing available returns. Proceeds from maturing investments were being reinvested at interest rates that were among the lowest ever offered.
As of June 30, 2012, the effective 7-day annualized yield2 for the Fund was 0.01%. The effective 7-day annualized yield of Tier One money market funds, as measured by iMoneyNet, Inc. was 0.01%3; iMoneyNet, Inc. (formerly IBC Financial Data, Inc.) is a research firm that tracks money market funds.
Outlook
We anticipate modest U.S. economic growth for the balance of 2012, and we believe that additional Federal Reserve action to try to bolster the economy is a strong possibility. We expect to focus on issuers that we believe can weather the less certain economic environment. We also remain committed to intensive research as we strive to understand evolving economic conditions as well as the fundamentals of each investment we make.
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, 2012.
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 (unaudited)
| | |
| Total Net Assets: $161,187,336 | | |
| | | | | | |
| | | |
| Portfolio Statistics | | | | | Sector Allocation |
| Average Maturity (days) | | | 46 | | | 
|
| Current 7-Day Yield2 | | | | | |
| With expense limitation and yield maintenance | | | 0.01% | | |
| Without expense limitation and yield maintenance | | | -0.36% | | |
| Effective 7-Day Yield2 | | | | | |
| With expense limitation and yield maintenance | | | 0.01% | | |
| Without expense limitation and yield maintenance | | | -0.36% | | |
| | | | | | | | | | | | |
| | | | |
| Top Ten Holdings4 | | | | | | | | | |
| | | | |
| Holding | | Discount/
Coupon | | | Maturity
Date | | | % of Total
Net Assets | |
| Connecticut St. Housing Fin. Auth. | | | 0.200% | | | | 7/5/2012 | | | | 3.96% | |
| Rockwell Collins, Inc. | | | 0.110% | | | | 7/3/2012 | | | | 3.10% | |
| NetJets, Inc. | | | 0.120% | | | | 7/6/2012 | | | | 3.10% | |
| Cargill Global Funding | | | 0.100% | | | | 7/9/2012 | | | | 3.10% | |
| Philip Morris International, Inc. | | | 0.110% | | | | 7/16/2012 | | | | 3.10% | |
| Texas Instruments, Inc. | | | 0.110% | | | | 7/17/2012 | | | | 3.10% | |
| Baker Hughes, Inc. | | | 0.150% | | | | 7/13/2012 | | | | 3.10% | |
| U.S. Treasury Bills | | | 0.057% | | | | 8/9/2012 | | | | 3.10% | |
| Illinois Tool Works, Inc. | | | 0.130% | | | | 7/19/2012 | | | | 3.10% | |
| Pfizer, Inc. | | | 0.100% | | | | 7/25/2012 | | | | 3.10% | |
| Total | | | | | | | | | | | 31.86% | |
| 1 | The Barclays U.S. Treasury Bellwethers (3 Month) Index is generally considered to be representative of the average yield of three-month Treasury Bills. The Barclays 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. Statistical data for the Index is as of 6/30/2012. |
| 2 | Annualized historical yields for the 7-day period ended June 30, 2012. Effective yield assumes reinvested income. Yields will vary. |
| 3 | Source: iMoneyNet report as of June 30, 2012. |
| 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. |
RS MONEY MARKET VIP SERIES
Performance Update (unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
| 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% | | | | 0.03% | | | | 0.03% | | | | 0.89% | | | | 1.60% | | | | 4.70% | |
| Barclays U.S. Treasury Bellwethers (3 Month) Index1 | | | | | | | 0.04% | | | | 0.07% | | | | 0.14% | | | | 1.05% | | | | 1.90% | | | | 4.89% | |
Please refer to the preceding page 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.
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
1/1/12 | | Ending
Account Value
6/30/12 | | | Expenses Paid
During Period*
1/1/12-6/30/12 | | | Expense Ratio
During Period
1/1/12-6/30/12 | |
| Based on Actual Return | | $1,000.00 | | | $1,000.00 | | | | $0.50 | | | | 0.10% | |
| Based on Hypothetical Return (5% Return Before Expenses) | | $1,000.00 | | | $1,022.28 | | | | $0.50 | | | | 0.10% | |
| * | Expenses are equal to the Fund’s annualized expense ratio as indicated, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). |
SCHEDULE OF INVESTMENTS — RS MONEY MARKET VIP SERIES
| | | | | | | | |
| June 30, 2012 (unaudited) | | Principal
Amount | | | Value | |
| Commercial Paper – 69.2% | | | | | | | | |
| Aerospace & Defense – 3.1% | |
Rockwell Collins, Inc.
0.11% due 7/3/2012(1) | | $ | 5,000,000 | | | $ | 4,999,969 | |
| | | | | | | | | |
| | | | | | | | 4,999,969 | |
| Agricultural – 3.1% | | | | | | | | |
Cargill Global Funding
0.10% due 7/9/2012(1) | | | 5,000,000 | | | | 4,999,889 | |
| | | | | | | | | |
| | | | | | | | 4,999,889 | |
| Chemicals – 3.1% | | | | | | | | |
BASF SE
0.18% due 9/18/2012(1) | | | 5,000,000 | | | | 4,998,025 | |
| | | | | | | | | |
| | | | | | | | 4,998,025 | |
| Conglomerates – 1.9% | | | | | | | | |
General Electric Capital Corp.
0.04% due 7/27/2012 | | | 3,000,000 | | | | 2,999,913 | |
| | | | | | | | | |
| | | | | | | | 2,999,913 | |
| Diversified Manufacturing – 3.1% | |
Illinois Tool Works, Inc.
0.13% due 7/19/2012(1) | | | 5,000,000 | | | | 4,999,675 | |
| | | | | | | | | |
| | | | | | | | 4,999,675 | |
| Education Revenue – 3.1% | | | | | | | | |
Yale University
0.15% due 8/7/2012 | | | 5,000,000 | | | | 4,999,229 | |
| | | | | | | | | |
| | | | | | | | 4,999,229 | |
| Electric – 3.1% | | | | | | | | |
American Transmission Co., LLC
0.12% due 7/30/2012(1) | | | 5,000,000 | | | | 4,999,517 | |
| | | | | | | | | |
| | | | | | | | 4,999,517 | |
| Entertainment – 2.5% | | | | | | | | |
The Walt Disney Co.
0.11% due 7/13/2012(1) | | | 4,000,000 | | | | 3,999,853 | |
| | | | | | | | | |
| | | | | | | | 3,999,853 | |
| Food And Beverage – 6.2% | | | | | | | | |
Nestle Capital Corp.
0.01% due 7/5/2012(1) | | | 2,500,000 | | | | 2,499,997 | |
The Coca-Cola Co.
0.19% due 9/24/2012(1) | | | 5,000,000 | | | | 4,997,757 | |
Unilever Capital Corp.
0.21% due 8/20/2012(1) | | | 2,500,000 | | | | 2,499,271 | |
| | | | | | | | | |
| | | | | | | | 9,997,025 | |
| Household Products - Wares – 3.1% | |
Kimberly-Clark Worldwide, Inc.
0.09% due 7/10/2012(1) | | | 3,000,000 | | | | 2,999,933 | |
Proctor & Gamble Co.
0.14% due 7/30/2012(1) | | | 2,000,000 | | | | 1,999,774 | |
| | | | | | | | | |
| | | | | | | | 4,999,707 | |
| Insurance - Life – 3.1% | | | | | | | | |
Massachusetts Mutual Life Insurance Co.
0.16% due 7/10/2012(1) | | | 2,500,000 | | | | 2,499,900 | |
The Travelers Companies, Inc.
0.07% due 7/10/2012(1) | | | 2,500,000 | | | | 2,499,956 | |
| | | | | | | | | |
| | | | | | | | 4,999,856 | |
| | | | | | | | |
| June 30, 2012 (unaudited) | | Principal
Amount | | | Value | |
| Internet – 3.1% | | | | | | | | |
Google, Inc.
0.13% due 8/14/2012(1) | | $ | 5,000,000 | | | $ | 4,999,206 | |
| | | | | | | | | |
| | | | | | | | 4,999,206 | |
| Oil & Gas Services – 3.1% | |
Baker Hughes, Inc.
0.15% due 7/13/2012(1) | | | 5,000,000 | | | | 4,999,750 | |
| | | | | | | | | |
| | | | | | | | 4,999,750 | |
| Personal Products – 3.1% | | | | | | | | |
L’Oreal U.S.A., Inc.
0.13% due 8/2/2012(1) | | | 5,000,000 | | | | 4,999,422 | |
| | | | | | | | | |
| | | | | | | | 4,999,422 | |
| Pharmaceuticals – 7.4% | | | | | | | | |
Johnson & Johnson
0.11% due 8/13/2012(1) | | | 2,000,000 | | | | 1,999,737 | |
Medtronic, Inc.
0.11% due 7/27/2012-9/25/2012(1) | | | 5,000,000 | | | | 4,999,144 | |
Pfizer, Inc.
0.10% due 7/25/2012(1) | | | 5,000,000 | | | | 4,999,667 | |
| | | | | | | | | |
| | | | | | | | 11,998,548 | |
| Restaurants – 1.6% | | | | | | | | |
McDonald’s Corp.
0.11% due 7/30/2012(1) | | | 2,500,000 | | | | 2,499,779 | |
| | | | | | | | | |
| | | | | | | | 2,499,779 | |
| Retailers – 3.1% | | | | | | | | |
Wal-Mart Stores, Inc. 0.12% due 7/26/2012(1) | | | 2,000,000 | | | | 1,999,833 | |
0.13% due 7/27/2012(1) | | | 3,000,000 | | | | 2,999,719 | |
| | | | | | | | | |
| | | | | | | | 4,999,552 | |
| Semiconductors & Components – 3.1% | |
Texas Instruments, Inc.
0.11% due 7/17/2012(1) | | | 5,000,000 | | | | 4,999,756 | |
| | | | | | | | | |
| | | | | | | | 4,999,756 | |
| Tobacco – 3.1% | | | | | | | | |
Philip Morris International, Inc.
0.11% due 7/16/2012(1) | | | 5,000,000 | | | | 4,999,771 | |
| | | | | | | | | |
| | | | | | | | 4,999,771 | |
| Transportation – 3.1% | | | | | | | | |
NetJets, Inc.
0.12% due 7/6/2012(1) | | | 5,000,000 | | | | 4,999,917 | |
| | | | | | | | | |
| | | | | | | | 4,999,917 | |
| Utilities - Electric & Water – 3.1% | |
National Rural Utilities Cooperative Finance Corp. 0.14% due 8/3/2012 | | | 5,000,000 | | | | 4,999,358 | |
| | | | | | | | | |
| | | | | | | | 4,999,358 | |
Total Commercial Paper
(Cost $111,487,717) | | | | 111,487,717 | |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 7 |
RS MONEY MARKET VIP SERIES
| | | | | | | | |
| June 30, 2012 (unaudited) | | Principal
Amount | | | Value | |
| Municipal Securities – 5.7% | | | | | | | | |
| Connecticut – 4.0% | | | | | | | | |
Connecticut St. Housing Fin. Auth. Ser. B-4
0.20% due 7/5/2012(2)(3) | | $ | 6,385,000 | | | $ | 6,385,000 | |
| | | | | | | | | |
| | | | | | | | 6,385,000 | |
| Iowa – 1.7% | | | | | | | | |
Iowa Fin. Auth. Single Family Mtg. Rev.
Mtg. Bkd. Secs. Prog. Ser. C
0.19% due 7/5/2012(2)(4) | | | 2,805,000 | | | | 2,805,000 | |
| | | | | | | | | |
| | | | | | | | 2,805,000 | |
Total Municipal Securities (Cost $9,190,000) | | | | 9,190,000 | |
| | | | | | | | |
| | | Principal
Amount | | | Value | |
| U.S. Government Securities – 22.3% | |
U.S. Treasury Bills | | | | | | | | |
0.051% due 8/23/2012 | | | 2,500,000 | | | | 2,499,812 | |
0.055% due 9/20/2012 | | | 2,500,000 | | | | 2,499,691 | |
0.057% due 7/26/2012–8/9/2012 | | | 7,500,000 | | | | 7,499,592 | |
0.07% due 8/23/2012–10/18/2012 | | | 7,500,000 | | | | 7,498,955 | |
0.124% due 11/15/2012 | | | 3,000,000 | | | | 2,998,585 | |
0.132% due 12/6/2012 | | | 5,000,000 | | | | 4,997,114 | |
0.14% due 12/13/2012 | | | 3,000,000 | | | | 2,998,075 | |
0.148% due 2/7/2013 | | | 5,000,000 | | | | 4,995,457 | |
| | | | | | | | | |
Total U.S. Government Securities
(Cost $35,987,281) | | | | 35,987,281 | |
| | | | | | | | |
| June 30, 2012 (unaudited) | | Principal
Amount | | | Value | |
| Repurchase Agreements – 2.8% | |
| | | |
State Street Bank and Trust Co. Repurchase Agreement, 0.01%, dated 6/29/2012, maturity value of $4,463,004, due 7/2/2012(5) | | $ | 4,463,000 | | | $ | 4,463,000 | |
Total Repurchase Agreements
(Cost $4,463,000) | | | | 4,463,000 | |
Total Investments – 100.0%
(Cost $161,127,998) | | | | 161,127,998 | |
| Other Assets, Net – 0.0% | | | | 59,338 | |
| Total Net Assets – 100.0% | | | $ | 161,187,336 | |
| (1) | Security issued in an exempt transaction without registration under the Securities Act of 1933. At June 30, 2012, the aggregate market value of these securities amounted to $98,489,217, representing 61.1% 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, 2012. |
| (3) | Issue supported by a standby purchase agreement with Helabe Landesbank Hessen-Thuringen. |
| (4) | Issue supported by a standby purchase agreement with Federal Home Loan Bank. |
| (5) | The table below presents collateral for repurchase agreements. |
| | | | | | | | | | | | |
| Security | | Coupon | | | Maturity
Date | | | Value | |
| U.S. Treasury Note | | | 0.25% | | | | 2/28/2014 | | | $ | 4,555,000 | |
The following is a summary of the inputs used as of June 30, 2012 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 | |
| Commercial Paper | | $ | — | | | $ | 111,487,717 | | | $ | — | | | $ | 111,487,717 | |
| Municipal Securities | | | — | | | | 9,190,000 | | | | — | | | | 9,190,000 | |
| U.S. Government Securities | | | — | | | | 35,987,281 | | | | — | | | | 35,987,281 | |
| Repurchase Agreements | | | — | | | | 4,463,000 | | | | — | | | | 4,463,000 | |
| Total | | $ | — | | | $ | 161,127,998 | | | $ | — | | | $ | 161,127,998 | |
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.
| | | | |
| 8 | | | | 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, 2012 (unaudited) | | | |
Assets | | | | |
Investments, at value | | $ | 161,127,998 | |
Cash and cash equivalents | | | 955 | |
Receivable for fund shares subscribed | | | 133,128 | |
Due from distributor | | | 49,955 | |
Interest receivable | | | 2,290 | |
| | | | | |
Total Assets | | | 161,314,326 | |
| | | | | |
| | |
Liabilities | | | | |
Payable to adviser | | | 60,061 | |
Payable for fund shares redeemed | | | 45,960 | |
Accrued trustees’ fees | | | 1,352 | |
Accrued expenses/other liabilities | | | 19,617 | |
| | | | | |
Total Liabilities | | | 126,990 | |
| | | | | |
Total Net Assets | | $ | 161,187,336 | |
| | | | | |
| | |
Net Assets Consist of: | | | | |
Paid-in capital | | $ | 161,213,649 | |
Accumulated undistributed net investment income | | | 1,135 | |
Accumulated net realized loss from investments | | | (27,448 | ) |
| | | | | |
Total Net Assets | | $ | 161,187,336 | |
| | | | | |
Investments, at Cost | | $ | 161,127,998 | |
| | | | | |
| | |
Pricing of Shares | | | | |
Shares of Beneficial Interest Outstanding with no Par Value | | | 161,224,277 | |
Net Asset Value Per Share | | | $1.00 | |
| | | | | |
| | | | |
Statement of Operations For the Six-Month Period Ended June 30, 2012 (unaudited) | |
Investment Income | | | | |
Interest | | $ | 87,052 | |
| | | | | |
Total Investment Income | | | 87,052 | |
| | | | | |
| | |
Expenses | | | | |
Investment advisory fees | | | 351,295 | |
Professional fees | | | 13,827 | |
Custodian fees | | | 12,875 | |
Shareholder reports | | | 10,864 | |
Administrative service fees | | | 9,199 | |
Trustees’ fees | | | 3,622 | |
Other expenses | | | 3,236 | |
| | | | | |
Total Expenses | | | 404,918 | |
| | |
Less: Expense reimbursement by distributor | | | (325,699 | ) |
| | | | | |
Total Expenses, Net | | | 79,219 | |
| | | | | |
Net Investment Income and Net Increase in Net Assets Resulting from Operations | | $ | 7,833 | |
| | | | | |
| | | | | |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 9 |
FINANCIAL INFORMATION — RS MONEY MARKET VIP SERIES
| | | | | | | | |
Statements of Changes in Net Assets Six-month-ended numbers are unaudited | | | | | | |
| | | |
| | | For the
Six Months Ended
6/30/12 | | | For the
Year Ended
12/31/11 | |
| | | | |
Operations | | | | | | | | |
Net investment income | | $ | 7,833 | | | $ | 21,478 | |
| | | | | | | | | |
Net Increase in Net Assets Resulting from Operations | | | 7,833 | | | | 21,478 | |
| | | | | | | | | |
| | | |
Distributions to Shareholders | | | | | | | | |
Net investment income | | | (7,833 | ) | | | (50,952 | ) |
| | | | | | | | | |
Total Distributions | | | (7,833 | ) | | | (50,952 | ) |
| | | | | | | | | |
| | | |
Capital Share Transactions | | | | | | | | |
Proceeds from sales of shares | | | 42,014,114 | | | | 92,623,193 | |
Reinvestment of distributions | | | 7,835 | | | | 50,955 | |
Cost of shares redeemed | | | (46,002,516 | ) | | | (93,276,098 | ) |
| | | | | | | | | |
Net Decrease in Net Assets Resulting from Capital Share
Transactions | | | (3,980,567 | ) | | | (601,950 | ) |
| | | | | | | | | |
Net Decrease in Net Assets | | | (3,980,567 | ) | | | (631,424 | ) |
| | | | | | | | | |
| | | |
Net Assets | | | | | | | | |
Beginning of period | | | 165,167,903 | | | | 165,799,327 | |
| | | | | | | | | |
End of period | | $ | 161,187,336 | | | $ | 165,167,903 | |
| | | | | | | | | |
Accumulated Undistributed Net Investment Income Included in Net Assets | | $ | 1,135 | | | $ | 1,135 | |
| | | | | | | | | |
| | | |
Other Information: | | | | | | | | |
Shares | | | | | | | | |
Sold | | | 42,014,114 | | | | 92,623,193 | |
Reinvested | | | 7,835 | | | | 50,955 | |
Redeemed | | | (46,002,516 | ) | | | (93,276,098 | ) |
| | | | | | | | | |
Net Decrease | | | (3,980,567 | ) | | | (601,950 | ) |
| | | | | | | | | |
| | | | | | | | | |
| | | | |
| 10 | | | | 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 6/30/121 | | $ | 1.00 | | | $ | — | 4 | | $ | — | | | $ | — | 4 | | $ | — | 4 | | $ | — | | | $ | — | 4 |
Year Ended 12/31/11 | | | 1.00 | | | | — | 4 | | | — | | | | — | 4 | | | — | 4 | | | — | | | | — | 4 |
Year Ended 12/31/10 | | | 1.00 | | | | — | 4 | | | — | 4 | | | — | 4 | | | — | 4 | | | — | | | | — | 4 |
Year Ended 12/31/09 | | | 1.00 | | | | — | 4 | | | — | | | | — | 4 | | | — | 4 | | | — | | | | — | 4 |
Year Ended 12/31/086 | | | 1.00 | | | | 0.02 | | | | — | | | | 0.02 | | | | (0.02 | ) | | | — | | | | (0.02 | ) |
Year Ended 12/31/076 | | | 1.00 | | | | 0.05 | | | | — | | | | 0.05 | | | | (0.05 | ) | | | — | | | | (0.05 | ) |
| | | | |
| 12 | | | | 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 | | | | —% | 5 | | $ | 161,187 | | | | 0.10% | 8 | | | 0.52% | | | | 0.01% | 8 | | | (0.41)% | |
| | 1.00 | | | | 0.03% | | | | 165,168 | | | | 0.13% | 8 | | | 0.53% | | | | 0.01% | 8 | | | (0.39)% | |
| | 1.00 | | | | 0.02% | | | | 165,799 | | | | 0.20% | 8 | | | 0.52% | | | | 0.02% | 8�� | | | (0.30)% | |
| | 1.00 | | | | 0.06% | | | | 214,475 | | | | 0.38% | 8 | | | 0.54% | | | | 0.06% | 8 | | | (0.10)% | |
| | 1.00 | | | | 2.03% | 7 | | | 289,173 | | | | 0.51% | | | | 0.52% | | | | 2.00% | | | | 1.99% | |
| | 1.00 | | | | 4.71% | | | | 243,759 | | | | 0.58% | | | | 0.58% | | | | 4.61% | | | | 4.61% | |
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 and expense limitations and exclude the effect of custody credits, if applicable. |
| 4 | Rounds to $0.00 per share. |
| 6 | 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. |
| 7 | Without the effect of the voluntary contribution by the distributor, total return would have been 1.98%. |
| 8 | Includes additional subsidies to maintain a minimum yield threshold (See Note 2a). |
| | | | |
| The accompanying notes are an integral part of these financial statements. | | | | 13 |
NOTES TO FINANCIAL STATEMENTS — RS MONEY MARKET VIP SERIES (UNAUDITED)
June 30, 2012 (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 nine 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. The Fund currently offers only Class I shares. 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 (See Note 4a). The Fund values its investments based on amortized cost in accordance with Rule 2a-7 under 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 (“FASB”) 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.
The FASB 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, 2012, the Fund had no securities classified as Level 3.
The Fund’s policy is to recognize transfers between Level 1, Level 2 and Level 3 at the end of the reporting period. For the six months ended June 30, 2012, there were no transfers between Level 1 and Level 2.
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, for example, 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. 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, 2012, 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 Trust is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next twelve months. 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, 2012, the Fund did not incur any such interest or penalties. The Fund is not subject to examination by U.S. federal tax authorities for tax years before 2008 and by 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.
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 (but not in the Financial Highlights) as a reduction to the Fund’s expenses.
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
NOTES TO FINANCIAL STATEMENTS — RS MONEY MARKET VIP SERIES (UNAUDITED)
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 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.
An expense limitation has been imposed pursuant to a written agreement between RS Investments and the Trust in effect through April 30, 2013 to limit the Fund’s total annual fund operating expenses (excluding expenses indirectly incurred by the Fund through investments in pooled investment vehicles, interest, taxes, investment-related expenses (e.g., brokerage commissions), and extraordinary 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, 2012. 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. 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, 2011, 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 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, 2011, the Fund made the following reclassifications of permanent book and tax basis differences:
| | | | | | | | |
| Paid-in-Capital | | Accumulated Net Investment Income | | | Accumulated
Net Realized Loss | |
| $(9,044) | | $ | 1,135 | | | $ | 7,909 | |
NOTES TO FINANCIAL STATEMENTS — RS MONEY MARKET VIP SERIES (UNAUDITED)
The tax basis of distributable earnings as of December 31, 2011 was as follows:
| | | | | | |
| | | Undistributed Ordinary Income | | | |
| | | | $ 1,135 | | | |
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, 2011, the Fund did not utilize capital loss carryovers. Capital loss carryovers available to the Fund at December 31, 2011 were as follows:
| | | | |
Expiring | | Amount | |
| 2012 | | $ | 3,238 | |
| 2015 | | | 3,788 | |
| 2016 | | | 18,099 | |
| 2017 | | | 1,824 | |
| 2018 | | | 500 | |
| | | | | |
| Total | | $ | 27,449 | |
| | | | | |
| | | | | |
Capital loss carryovers of $7,909 expired in the year ended December 31, 2011.
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, 2011, the Fund had no such losses.
b. Tax Basis of Investments The cost of investments for federal income tax purposes at June 30, 2012, was $161,127,998 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
Management 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.
Note 7. New Accounting Pronouncement
In December 2011, the Financial Accounting Standards Board issued Accounting Standards Update 2011-11, Balance Sheet (Topic 210) — Disclosures about Offsetting Assets and Liabilities (“ASU 2011-11”). Effective for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods, ASU 2011-11 is intended to enhance disclosure requirements on the offsetting of financial assets and liabilities. At this time, management is evaluating the implications of ASU 2011-11 and its impact on the financial statements.
SUPPLEMENTAL INFORMATION (UNAUDITED)
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 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 Rule 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/ Matthew H. Scanlan |
| | Matthew H. Scanlan, President (Principal Executive Officer) |
Date: September 5, 2012
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/ Matthew H. Scanlan |
| | Matthew H. Scanlan, President (Principal Executive Officer) |
Date: September 5, 2012
| | |
| |
By (Signature and Title)* | | /s/ Glen M. Wong |
| | Glen M. Wong, Treasurer (Principal Financial Officer) |
Date: September 5, 2012
