<PAGE>
Semiannual Report
<TABLE>
<S><C>
[GRAPHIC] [GRAPHIC] [GRAPHIC]
The Contrarian Fund-TM- Diversified Growth Fund Emerging Growth Fund
[GRAPHIC] [GRAPHIC] [GRAPHIC]
Global Natural Resources Fund Global Value Fund The Information Age Fund-TM-
[GRAPHIC] [GRAPHIC] [GRAPHIC] [GRAPHIC]
MicroCap Growth Fund MidCap Opportunities Fund Partners Fund Value + Growth Fund
</TABLE>
RS Funds
For the Six Months Ended
June 30, 1999
<PAGE>
[LETTERHEAD]
1-800-766-3863
CURRENT INFORMATION
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asset values.
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information, 24 hours a day.
<PAGE>
RS FUNDS
The Contrarian Fund-TM-
Diversified Growth Fund
Emerging Growth Fund
Global Natural Resources Fund
Global Value Fund
The Information Age Fund-TM-
MicroCap Growth Fund
MidCap Opportunities Fund
Partners Fund
Value + Growth Fund
[LOGO]
<PAGE>
SEMIANNUAL REPORT
Dear Shareholder: August 1999
[PHOTO]
I am pleased to report that RS Investment Management enjoyed an excellent first
half as most of our funds exceeded their respective benchmarks and also did well
on an absolute return basis. Moreover, on June 30, 1999, Morningstar awarded the
RS Emerging Growth Fund (our oldest fund) a five star rating for its performance
over the last ten years.* Building an outstanding long-term performance record
is what we work towards every day and thus achieving this award is very
gratifying. At RS Investment Management, we emphasize long-term returns, in part
because many of our funds invest in small- and mid-cap companies that have
higher price volatility than large-cap companies. With these funds, it is normal
from time to time for them to correct 20 to 25% during a quarter and then
rebound in subsequent periods. Maintaining a long-term perspective is a key
element to investment success--both for you and us.
Our buyout of RS Investment Management, which was completed February 28, has
gone very smoothly. As discussed in previous communications, the final step in
this transition occurred in early August. At that time, we changed all newspaper
and investment publication listings from Robertson Stephens Funds to RS Funds.
If you have not already done so, please make a note of this change.
You will notice we have included a new feature in this report--investment
styleboxes for each fund. These are designed to make it easier for you to
evaluate how our funds impact your overall investment portfolio. In addition, we
are continually seeking out new ways to provide you timely information, and we
believe the Internet is the ideal tool. For example, the managers' letters and
performance statistics included in this report, have been available on our web
site since they were completed, which is several weeks before you receive this
printed version. This is due to the time it takes to print and mail these
reports. If you would like to be automatically notified by e-mail of these types
of postings, you may sign up by visiting our web site at www.rsim.com.
Additionally, if you have suggestions on how we can make our reports more useful
to you, please e-mail me directly with your ideas.
As I look over our managers' letters, I cannot help but notice the numerous
discussions of new business opportunities that are being created by new
technologies and its impact on how we live in this world. The rate of new
technology development is not slowing. Being located in the heart of the venture
capital community in San Francisco gives us an inside look at these
developments. The pace of venture capital activity is at record levels and
accelerating. These new companies developing businesses in new markets should be
very positive for investors in general and for active investors, like our firm
in particular, in the years to come.
Thank you for your support as shareholders.
/s/ G. Randy Hecht
G. Randy Hecht
CHAIRMAN & CEO
RS Investment Management
[email protected]
* Overall Morningstar ranking out of 189 small-cap stock equity funds.
Morningstar's proprietary risk-adjusted ratings reflect the Fund's 10-year
historical performance through 6/30/99. The star ratings are recalculated
monthly. If the fund scores in the top 10% of its broad investment category, it
receives five stars (Highest); if it falls in the next 22.5%, it receives four
stars.
2
<PAGE>
RS FUNDS
<TABLE>
<CAPTION>
TABLE OF CONTENTS
FUND INFORMATION
<S> <C>
The Contrarian Fund-TM- ................................. 4
Diversified Growth Fund ................................. 7
Emerging Growth Fund .................................... 10
Global Natural Resources Fund ........................... 13
Global Value Fund ....................................... 16
The Information Age Fund-TM- ............................ 19
MicroCap Growth Fund .................................... 22
MidCap Opportunities Fund ............................... 25
Partners Fund ........................................... 28
Value + Growth Fund ..................................... 31
FINANCIALS
Schedule of Investments ................................. 34
Statement of Assets and Liabilities ..................... 52
Statement of Operations ................................. 54
Statement of Changes in Net Assets ...................... 56
Financial Highlights .................................... 60
Notes to Financial Statements ........................... 64
</TABLE>
3
<PAGE>
SEMIANNUAL REPORT
THE CONTRARIAN FUND-TM-
[GRAPHIC]
Investment Style*
Large Cap Mid Cap Small Cap
Growth Blend Value
FUND PHILOSOPHY
SENIOR PORTFOLIO The Contrarian Fund-TM- seeks to achieve
MANAGERS maximum long-term growth of capital by
investing worldwide in growing companies
Paul H. Stephens that are attractively priced. The Fund
invests on a global basis in an effort to
Andrew P. Pilara, Jr. make timely investments in new discovery
ideas or in companies and industries that
Rick Barry are neglected, unpopular or overlooked. When
appropriate, the Fund will short sell
stocks.
- --------------------------------------------------------------------------------
FUND UPDATE
The Contrarian Fund-TM- had an excellent first half of the year, closing up
27.94%, and outperformed its primary benchmark, the MSCI AC World Index,(2)
which closed up 12.34%. We have begun the climb back from our poor
performance of 1997-1998. There is a lot more work to do, and I believe we
are up to the task.
The initial results of our three-manager strategy have been very favorable. We
have increased diversification within the Fund and reduced our volatility, but
have not deviated from our contrarian style. We strive to be contrarian when it
counts, with the potential to perform better than our competition in market
declines. That will, of course, not always happen. Our unique ability to short
gives us an advantage, versus most other mutual funds, in a declining market. In
bull markets we will give up some performance because of our short positions,
but in a bear market we would expect our shorts to help our performance.
Like everyone else, we are cognizant of the record high valuations and we are
hedging with our short positions. We are "plain vanilla" hedgers--we do not use
futures or options. We can be called fundamental short sellers. We short stocks
with poor and deteriorating fundamentals.
Although reduced, we still have a core position in resource companies. We did
not sell our core resource positions at the bottom. Both the Inco Ltd., VBN
shares (5.77% of the Fund as of 6/30/99) and Ivanhoe Energy, Inc. (formerly
Black Sea Energy, Ltd.) (5.59%) were stand-out performers in the first half of
1999. We handled our gold investments differently. With the continuing decline
in the price of gold and the central banks selling their reserves, we felt it
was prudent to reduce our position in gold stocks, which is currently 5.8%.
Ivanhoe Energy, Inc., with new management, has developed a significant position
in the San Joaquin Basin (California) deep gas play. This is one of the most
intriguing North American natural gas exploration prospects. The blow-out of the
East Lost Hills Well (Berkley Petroleum group) has focused exploration companies
in lands that have historically produced a lot of oil. In the next year, we
expect to see a number of joint ventures, seismic shoots, and 4 - 5 exploratory
wells drilled. The potential reserve numbers are very substantial.
The fundamental backdrop for resource stocks is improving. While we are not
expecting a global v-shaped economic recovery, we are likely to see economic
expansion in Asia and other emerging markets, and we expect an increased demand
in base metals. Last year our Fund was negatively impacted by the Asian crisis.
For the next two years, I believe the forecasted Asian recovery will have a very
positive influence on our resource investments.
We have new contrarian investments in cement, retail, technology, and airlines.
We own three cement companies--Lafarge Corporation (0.79%), Lone Star
Industries, Inc. (2.51%), and Southdown, Inc. (0.95%). As a result of the new
- --------------------------------------------------------------------------------
*Due to the investment style of the Fund, all categories within the Investment
Style box are applicable.
4
<PAGE>
RS FUNDS
THE CONTRARIAN FUND-TM- UPDATE -- CONTINUED
highway bill, we expect to see an increase in construction material expenditures
in the next six years, which we believe will surpass the construction costs of
the original interstate highway system in the 1950's. Cement prices are going
up, and cement companies are generating significant cash flow.
Our retail investments include: Payless ShoeSource, Inc. (1.98%)--the dominant
shoe company in the United States; Kmart Corporation (2.19%)--a new format, an
improved balance sheet, and a restructuring nearing completion; and Liz
Claiborne, Inc. (0.95%)--an undervalued high-return retailer.
Our technology investments include QUALCOMM, Inc. (3.23%), when it was a
contrarian investment (our cost $26) and Apple Computer, Inc. (3.36%), where we
bought a cheap stock in front of a hot selling new product.
Warren Buffet said he would never own an airline, so you know this is
contrarian. We own AMR Corporation (American Airlines) (2.30%). Even Mr. Buffet
might look at an airline at less than 5x 1999 earnings. This airline is
currently under 5x earnings, excluding the market value of Sabre, Inc., a
computer reservation system.
We had an excellent first half of 1999. We believe our Fund is well positioned,
long and short, for where we are in this stock market cycle.
Thank you for your support and trust.
/s/ Paul H. Stephens
Paul H. Stephens
PORTFOLIO MANAGER
/s/ Andrew P. Pilara, Jr.
Andrew P. Pilara, Jr.
PORTFOLIO MANAGER
/s/ Rick Barry
Rick Barry
PORTFOLIO MANAGER
July 26, 1999
- --------------------------------------------------------------------------------
International investing can involve greater currency fluctuations and less
political and economic stability. Investing in smaller companies can involve
more volatility, less liquidity, and less publicly available information.
Investing in a more limited number of issuers and sectors can be subject to
greater market fluctuation. Short selling is the sale of a borrowed security,
and the price of the security can increase between the date the security is sold
and the date when the fund must replace it. Options and futures may not be
perfectly correlated to the underlying index or security. High-yielding,
lower-quality debt securities may be considered to be of lower standing and more
speculative.
5
<PAGE>
SEMIANNUAL REPORT
ASSETS UNDER MANAGEMENT: $134.92 million
ASSET ALLOCATION
RS FUNDS
DATA AS OF JUNE 30, 1999
CONTRARIAN
[CHART]
<TABLE>
<CAPTION>
SECTOR
<S> <C>
Energy 16.8%
Short Positions(net) 21.7%
Media 10.5%
Computers - Hardware and Software 10.2%
Financial Services 6.6%
Construction/Infrastructure 6.3%
Gold Mining 5.8%
Nickel Mining 5.8%
Consumer & Specialty Retail 4.7%
Consumer & Business Services 4.1%
Transportation 3.7%
Telecommunications 3.4%
Other & Other Liabilities, Net 0.4%
Total 100.00%
</TABLE>
DATA AS OF JUNE 30, 1999
<TABLE>
<CAPTION>
TOP TEN HOLDINGS
<S> <C>
Dundee Bancorp, Inc. 6.61%
Inco Ltd., VBN Shares 5.77%
Metromedia International Group, Inc. 5.73%
Ivanhoe Energy, Inc.(4) 5.59%
CD Radio, Inc. 4.23%
Apple Computer, Inc. 3.36%
PennzEnergy Company 3.27%
QUALCOMM, Inc. 3.23%
Indochina Goldfields, Ltd. 3.17%
Consolidated African Mines, Ltd. 2.57%
</TABLE>
RESULTS OF A HYPOTHETICAL $10,000 INVESTMENT (IF INVESTED ON 6/30/93)
[CHART]
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
CF MSCI AC WORLD
DATE 10K 10K
- ---------------------------------------------------------------------
<S> <C> <C>
6/93 $ 10,000 $ 10,000
9/93 $ 9,559 $ 10,439
12/93 $ 11,186 $ 10,756
3/94 $ 12,098 $ 10,730
6/94 $ 11,618 $ 10,987
9/94 $ 11,078 $ 11,348
12/94 $ 10,568 $ 11,101
3/95 $ 10,739 $ 11,391
6/95 $ 12,626 $ 11,831
9/95 $ 13,308 $ 12,384
12/95 $ 13,830 $ 12,847
3/96 $ 16,731 $ 13,308
6/96 $ 16,038 $ 13,682
9/96 $ 16,440 $ 13,741
12/96 $ 16,828 $ 14,240
3/97 $ 17,062 $ 14,326
6/97 $ 16,036 $ 16,389
9/97 $ 15,244 $ 16,695
12/97 $ 11,862 $ 16,036
3/98 $ 12,127 $ 18,186
6/98 $ 10,769 $ 18,226
9/98 $ 7,520 $ 15,916
12/98 $ 7,984 $ 19,194
3/99 $ 8,392 $ 19,899
6/99 $ 10,214 $ 21,563
</TABLE>
PERFORMANCE UPDATE
<TABLE>
<CAPTION>
FIVE-YEAR TOTAL AVERAGE ANNUAL
YEAR TO DATE ONE-YEAR AVERAGE RETURN SINCE RETURN SINCE
TOTAL RETURN TOTAL RETURN ANNUAL RETURN INCEPTION(1) INCEPTION(1)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
The Contrarian Fund-TM- 27.94% -5.15% -2.54% 2.14% 0.35%
MSCI AC World Index(2) 12.34% 18.31% 14.44% 115.63% 13.66%
S&P 500 Index(3) 12.32% 22.77% 27.85% 246.37% 22.99%
</TABLE>
Performance data quoted represents past performance, and past performance is no
guarantee of future results. You should realize that investment return and
principal value will fluctuate so that shares, when redeemed, may be worth more
or less than their original cost.
- --------------------------------------------------------------------------------
(1) Inception date 6/30/93
(2) The Morgan Stanley Capital International (MSCI) All Country World Index is
an unmanaged, market capitalization-weighted index composed of companies
representative of the market structure of 47 developed and emerging market
countries. You cannot invest in an index.
(3) 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. It is widely recognized as representative of the stock
market in general. Investment results assume the reinvestment of dividends
paid on the stocks constituting the index. You cannot invest in an index.
(4) Formerly Black Sea Energy Ltd. New name effective 7/2/99.
6
<PAGE>
RS FUNDS
DIVERSIFIED GROWTH FUND
[GRAPHIC]
INVESTMENT STYLE
Small Cap
Blend
FUND PHILOSOPHY
The RS Diversified Growth Fund seeks to achieve
long-term capital growth by investing primarily in
small-cap value and growth stocks across diverse
companies and sectors. Our flexible, bottom-up
approach is based on our search for a growth
catalyst and trend analysis. We look for
well-managed companies with improving fundamentals
that may be positioned for growth. Our formula for
long-term success also includes a disciplined
[PHOTO] approach to risk: losses are eliminated quickly, and [PHOTO]
John L. we are constantly looking for attractive new John H.
Wallace opportunities. Seabern
- --------------------------------------------------------------------------------
FUND UPDATE
The RS Diversified Growth Fund returned 44.81% for the six months ending June
30, 1999. We were quite pleased with our performance, especially when
compared to our primary benchmark, the Russell 2000 Index,(2) which returned
9.28% for the same period. We were also pleased to have outperformed the S&P
500 Index,(3) up only 12.32% for the six months ending June 30, 1999.
Small-cap stocks came to life and dramatically outperformed in April and May of
this year. Since 1994 small stocks have dramatically underperformed the market.
During that time, there have been only three short periods where small-caps have
outperformed, summer of 1995, first half of 1996, and fall of 1997, before
large-cap stocks regained superior relative performance.
Small stocks have done quite well since March of this year, and we think that
the bear market for small-cap stocks that began in October 1997 may have ended.
Relative valuations of small-caps are attractive, especially on such measures of
price to cash flow, and price to sales which are at twenty-year lows. Merger and
acquisition activity among smaller companies is at a fifteen-year high, while
money flows into small-cap mutual funds are at a ten-year low. Almost the entire
net inflow into U.S. mutual funds in the first quarter of 1999 went into
large-cap growth and S&P 500 Index funds as investors overlooked the small-cap
sector. We use this as a contrary indicator, which has stood the test of time
and, along with valuations, makes a convincing case for the return of
small-caps.
The technology and telecommunications revolution continues to impact our lives.
Our investments in this area were the primary contributors to our performance
during the last six months. It has been difficult to keep up with the changes in
computer and communications technologies during the past decade. Moore's Law
states that microchip power doubles every eighteen months. As semiconductors
become faster, computers are able to access and store more information. The
carrying capacity of communications lines (aka bandwidth) is expanding at
breakneck speed, and its implications for high speed Internet access and data
and video products and services are broad. E-commerce and the Internet are a
revolution unto themselves. All of these areas have provided positive investment
opportunities year to date.
The enormity and rapidity of these changes often makes it difficult to predict
the ultimate long-term winners. Our discipline and focus have been on
well-managed companies that are at the forefront of new product cycles in the
following primary technology sectors: telecom services, wireless, cable,
semiconductors, and Internet access and content. We are investing in companies
that are adopting new strategies to take advantage of this growth: Primus
Telecommunications Group, Inc. (2.61% of the Fund as of 6/30/99), and Startec
Global
- --------------------------------------------------------------------------------
7
<PAGE>
SEMIANNUAL REPORT
DIVERSIFIED GROWTH FUND UPDATE -- CONTINUED
Communications Corporation (3.01%) in the international long distance arena; and
CapRock Communications Corporation (3.69%) and IXC Communications, Inc. (2.19%)
are competitive local exchange carriers that are attractive, especially with the
likelihood of increased consolidation with established carriers and Regional
Bell Operating Companies.
Cellular demand is continuing to rise. The transition from analog to digital is
driving penetration levels in the U.S. higher. Our investments in Western
Wireless Corporation (1.23%) and Omnipoint Corporation Combination (1.47%) paid
off due to accelerated consolidation in the industry. Cable revenue growth
continues as new services are being developed and deployed through digital set
top boxes. Rollouts of high-speed cable modems continue to be strong. Over the
next several years we expect all computers to have built in cable modems. Our
favorite stocks in this area include several programming and content providers:
New Frontier Media, Inc. (3.30%), AT&T Corporation-Liberty Media Group (1.30%),
and Shop At Home, Inc. (0.14%)
Semiconductor sales seem to be improving after a three-year slump. Average
selling prices and unit volumes are improving, especially in the
communications-end markets. We think that our investments in ANADIGICS, Inc.
(1.50%), Cypress Semiconductor Corporation (1.17%), and SpeedFam-IPEC, Inc.
(0.81%) will be beneficiaries of this trend.
The Internet is changing the way people communicate, buy and sell goods and
services, and spend their leisure time. Its growth and influence on our lives is
coming at a record pace. The Internet industry is broad, encompassing many
companies. The challenge for investors is to distinguish the long-term profit
potential of many Internet businesses. With many early-stage Internet stocks
receiving multi-billion dollar market capitalizations, valuations are virtual,
reflecting extremely high expectations of investors. The supply of stock offered
by Internet IPOs (according to Ned Davis Research, over 70 YTD vs. 96 total from
the last three years) will eventually overwhelm demand.
The Internet is still in a developmental stage and economic profits are a
fantasy for most companies. Time will separate the long-term survivors from the
"also-rans." We are focusing on quality companies and paying attention to risk.
Since 1996, we have been long-term bullish on energy and the oil service sector.
The Asian crisis in late 1997-1998 reduced global demand sharply and was
instrumental in driving oil prices to the mid-1980's low of $9-10 per barrel.
This year the economies of Asia are improving. OPEC members have cut output
quotas and the prices have risen sharply. We have positioned the portfolio to
take advantage of what we believe could be a strong rebound in profitability for
the service sector in late 1999 and beyond. Growing global demand from countries
seeking higher standards of living will lead to increased production and higher
prices for oil and natural gas. We know there will be cyclical price swings
within the secular trend. Offshore drillers and service companies such as ENSCO
International, Inc. (0.81%), Rowan Companies, Inc. (0.75%), and BJ Services
Company (1.07%) should benefit from a spending increase by major oil companies.
Exploration and production companies such as Apache Corporation (1.09%) and
Devon Energy Corporation (0.91%) have good production profiles and will benefit
from stronger natural gas prices.
Our philosophy of searching for above average growth with a disciplined approach
to risk management has paid off in the first half of 1999. We want to remind
investors that successful equity investing is not a short-term proposition. We
remain focused on the long-term. On behalf of the entire Diversified Growth
team, we thank you for your support.
/s/ John L. Wallace /s/ John H. Seabern
John L. Wallace John H. Seabern
Portfolio Manager Co-Portfolio Manager
July 15, 1999
- --------------------------------------------------------------------------------
International investing can involve greater currency fluctuations and less
political and economic stability. Investing in smaller companies can involve
more volatility, less liquidity, and less publicly available information.
Options and futures may not be perfectly correlated to the underlying index or
security. High-yielding, lower-quality debt securities may be considered to be
of lower standing and more speculative.
8
<PAGE>
RS FUNDS
ASSETS UNDER MANAGEMENT: $98.73 million
ASSET ALLOCATION
RS FUNDS
Data as of 6-30-99
DIVERSIFIED GROWTH
[CHART]
<TABLE>
<CAPTION>
SECTOR
<S> <C>
Telecom Equipment & Services 27.4%
Computer Technology 17.6%
Internet Services 9.8%
Energy & Energy Services 9.4%
Media 8.4%
Health / Medical / Biotechnology 5.6%
Business / Commercial Services 4.1%
Consumer & Specialty Retail 3.4%
Convertible Preferred 2.5%
Financial 2.1%
Options 0.3%
Total Short Term Investments 0.5%
Other & Other Liabilities, Net 8.9%
Total 100.00%
</TABLE>
DATA AS OF JUNE 30, 1999
<TABLE>
<CAPTION>
TOP TEN HOLDINGS
<S> <C>
CapRock Communications Corporation ......3.69%
New Frontier Media, Inc. ................3.30%
Startec Global Communications Corp. .....3.01%
Primus Telecommunications Group, Inc. ...2.61%
IXC Communication, Inc. .................2.19%
First Sierra Financial, Inc. ............2.08%
Sabratek Corporation ....................1.77%
Sawtek, Inc. ............................1.74%
Excel Switching Corporation .............1.67%
Verity, Inc. ............................1.65%
</TABLE>
RESULTS OF A HYPOTHETICAL $10,000 INVESTMENT (IF INVESTED ON 8/1/96)
[CHART]
<TABLE>
<CAPTION>
- ---------------------------------------------------
DG R 2000
DATE 10K 10K
- ---------------------------------------------------
<S> <C> <C>
8/1/96 $ 10,000 $ 10,000
9/96 $ 11,110 $ 10,873
12/96 $ 12,420 $ 11,439
3/97 $ 11,870 $ 10,847
6/97 $ 13,320 $ 12,606
9/97 $ 16,670 $ 14,482
12/97 $ 16,077 $ 13,997
3/98 $ 18,665 $ 15,405
6/98 $ 17,199 $ 14,687
9/98 $ 14,405 $ 11,728
12/98 $ 18,694 $ 13,641
3/99 $ 20,976 $ 12,901
6/99 $ 27,070 $ 14,907
</TABLE>
PERFORMANCE UPDATE
<TABLE>
<CAPTION>
TOTAL AVERAGE ANNUAL
YEAR TO DATE ONE-YEAR RETURN SINCE RETURN SINCE
TOTAL RETURN TOTAL RETURN INCEPTION(1) INCEPTION(1)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Diversified Growth Fund 44.81% 57.39% 170.70% 40.77%
Russell 2000 Index(2) 9.28% 1.50% 49.07% 14.69%
S&P 500 Index(3) 12.32% 22.77% 121.46% 31.39%
</TABLE>
Performance data quoted represents past performance, and past performance is no
guarantee of future results. You should realize that investment return and
principal value will fluctuate so that shares, when redeemed, may be worth more
or less than their original cost.
- --------------------------------------------------------------------------------
(1) Inception date 8/1/96.
(2) The Russell 2000 Index is an unmanaged market capitalization-weighted index
composed of 2,000 U.S. companies with an average market capitalization of
$406.5 million. Investment results assume the reinvestment of dividends paid
on the stocks constituting the index. You cannot invest in an index.
(3) 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. It is widely recognized as representative of the stock
market in general. Investment results assume the reinvestment of dividends
paid on the stocks constituting the index. You cannot invest in an index.
9
<PAGE>
SEMIANNUAL REPORT
EMERGING GROWTH FUND
[GRAPHIC]
INVESTMENT STYLE
Small Cap
Growth
FUND PHILOSOPHY
The RS Emerging Growth Fund seeks capital appreciation
by investing primarily in smaller, rapidly growing
companies. The Fund is actively managed, involving
hands-on fundamental research that includes extensive
travel and visits with company managements. The Fund
seeks to invest in companies that are growing at least
20% annually, are market share leaders, and are managed
by executives who can leverage a competitive advantage
and consistently execute in today's business
[PHOTO] environment. The Fund is intended for investors with
James L. Callinan long-term investment goals.
- --------------------------------------------------------------------------------
FUND UPDATE
The RS Emerging Growth Fund experienced outstanding performance in the first
half of 1999, closing up 49.67%. Driven by Internet, technology and media
stock price appreciation, it significantly outperformed its benchmark, the
Russell 2000 Growth Index,(2) which closed up 12.82%. Second quarter
performance for the Fund was 17.00% while the Russell 2000 Growth Index was
up 14.75%. We believe that we are still at the early stages of a small
capitalization growth stock rally and that our Fund is well positioned to
benefit from continued demand by the stock market for the fastest growing
smaller companies.
The characteristics of our largest holdings remain those who can show explosive
revenue growth, market share gains, proprietary advantages, strong profit
margins and great management. Examples of several outstanding companies of this
ilk include EchoStar Communications Corporation (DISH) (1.65% of the Fund as of
6/30/99), Check Point Software Technologies, Ltd. (CHKP) (1.02%), and Power
Integrations, Inc. (POWI) (1.55%). Each company has a number of qualities we
like to see: an emerging industry with attractive secular revenue growth rates,
open ended markets, and a demonstrated proprietary advantage with attendant
barriers to entry and competition.
EchoStar Communications is one of two participants in the satellite broadcasting
industry, which is benefiting from the growing consumer demand for high quality
video entertainment delivered through satellite dishes. Its Dish Network offers
more extensive programming of pay per view and premium television channels than
cable does. It will also benefit from government deregulation of local
broadcasting, which will permit satellite firms to offer local programs over the
air. Its technological advantage lies primarily in program delivery, in that its
channel capacity will soon be 10 times that of the average cable television
network. Interestingly enough, satellite players may extend this lead as many
cable companies intend to invest in providing Internet access rather than
increased channel capacity. As such, cable companies have left their core
business vulnerable to attack from a premium product. We believe that EchoStar
Communications will increase its subscriber base from 3 million to 10-15 million
over the next 5 years and these subscribers are usually valued at $3,000-$4,000
per subscriber in the stock market.
Check Point Software is the leading company in the firewall market, another
emerging subsegment of the Internet, with a 50% market share. Currently,
firewalls are by far the most important security product used on the Internet.
As corporations launch transaction and interactive sites, firewalls block access
by unauthorized users of a corporation's most precious Information Technology
(IT) assets. Firewalls protect IT assets from points of connection to the
Internet, and as the number of these connections per organization increases,
firewall demand rises similarly. We expect its unit volume will grow linearly
with the sheer explosion of web and e-mail sites on the Internet. Check Point
Software's advantage lies in the simplicity of installation, programmability,
and in the broad range of
- --------------------------------------------------------------------------------
10
<PAGE>
RS FUNDS
EMERGING GROWTH FUND UPDATE -- CONTINUED
complex transactions and functionality it supports. Check Point Software
participates in a market with the potential to sell 100 million firewall units
cumulatively over the next 5 years. At an estimated price of $500 per unit,
these unit sales could top $50 billion of cumulative revenue, which contrasts
quite dramatically to its present market share of 50% and its market
capitalization of $2 billion.
Power Integrations supplies a key integrated circuit used in power supplies for
cellular phones, notebooks, personal computers, hand-held devices, and, in the
future, electrical appliances. The key product benefits for buyers of its
circuits are a smaller form factor and reduced power requirements. Power
Integrations principal advantages are its ultra low manufacturing costs which is
75-85% lower than the costs of its competitors and its voluminous patent
portfolio. Power Integrations receives about 50% of revenues from cell phones
and notebooks, but these two industry segments are dwarfed by the vast potential
of the television, electrical and electronic appliance markets. A huge target
market, low-cost producer status, and an environmentally friendly product add up
to continued outperformance potential.
The preceding investments are held in the Fund and demonstrate a number of the
qualities we look for in emerging growth companies. The common themes are fast
revenue growth, a recently emerged industry segment, a proprietary advantage
that allows the firm to gain market share, and open-ended revenue potential that
will sustain 20% growth for at least 3-5 years.
We have not changed our strategy of searching for new firms that demonstrate
these attractive characteristics. Initial Public Offerings are coming at a
furious pace and presently require extensive analytical resources and effort.
However, we believe that this is time well spent, as these new firms may become
the bedrock holdings of the Fund in 2-3 years, just as EchoStar Communications,
Check Point Software, and Power Integrations are now. Additionally, we pursue
greater in-depth knowledge of these immature public companies because we find
that they are frequently priced inefficiently. The wild swings that they enjoy,
or endure as the case may be, provide us our livelihood in that we seek to
profit from these sell-offs and run-ups, respectively. Our knowledge levels on
companies covered by our internal analysts give us an edge, a greater degree of
confidence, if you will, to step in and buy when others fear a steep decline.
We want to thank our loyal shareholders for sticking with us to enjoy this
unusually good first half of 1999. We also would like to extend a warm welcome
to our newest holders who joined us in 1999 and introduce you to our philosophy
of "profiting from volatility." Because our asset class, small capitalization
growth stocks, is the most price volatile, we ask that, to the best of your
ability, you ignore these wild swings and allow us to find the best bargains and
opportunities when the inevitable 25% or greater correction occurs. If you sell
your shares during these inevitable rocky times, you leave during the time when
I get most excited about managing the Fund: I can buy the best companies at
steep price discounts due to the panic of others. We hope that you will place
your trust in our ability to seek out some great ideas for you coming out of
these dramatic price declines. Our goal is to let you sleep well at night,
knowing that we are looking out for your portfolio of small company, emerging
growth stocks.
/s/ James L. Callinan
James L. Callinan
PORTFOLIO MANAGER
July 16, 1999
- --------------------------------------------------------------------------------
Investing in smaller companies can involve risks such as less publicly available
information than larger companies, volatility, and less liquidity.
11
<PAGE>
SEMIANNUAL REPORT
ASSETS UNDER MANAGEMENT: $1.01 BILLION
ASSET ALLOCATION
[CHART]
<TABLE>
<CAPTION>
RS Funds
Data as of 6-30-99
EMERGING GROWTH
SECTOR %
<S> <C>
Technology 26.6%
Internet Commerce & Services 17.5%
Telecom Equipment / Services 12.7%
Medical / Healthcare / Biotech 8.6%
Financial Services 4.9%
Media 4.7%
Business Services/ Commercial Services 4.7%
Consumer & Specialty Retail 4.6%
Broadcasting/Radio/TV 2.3%
Advertising 2.0%
Energy 2.0%
Network Systems 1.5%
Travel Services 1.2%
Total Short Term Investments 3.8%
Other & Other Assets, Net 2.9%
Total 100.00%
</TABLE>
<TABLE>
<CAPTION>
DATA AS OF JUNE 30, 1999
TOP TEN HOLDINGS
<S> <C>
Exodus Communications, Inc. .............1.80%
Cree Research, Inc. .....................1.67%
EchoStar Communications Corporation .....1.65%
Siebel Systems, Inc. ....................1.58%
Laser Vision Centers, Inc. ..............1.56%
Power Intergrations, Inc. ...............1.55%
Knight/Trimark Group, Inc. ..............1.51%
Gemstar International Group, Ltd. .......1.46%
Allegiance Telecom, Inc. ................1.41%
MindSpring Enterprises, Inc. ............1.14%
</TABLE>
RESULTS OF A HYPOTHETICAL $10,000 INVESTMENT (IF INVESTED ON 11/30/87)
[CHART]
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
EGF R 2000 DIV GROWTH
DATE 10K 10K
- -----------------------------------------------------------
<S> <C> <C>
11/30/87 $ 10,000 $ 10,000
12/87 $ 12,611 $ 11,040
3/88 $ 13,892 $ 12,963
6/88 $ 15,222 $ 13,786
9/88 $ 14,114 $ 13,406
12/88 $ 14,383 $ 13,289
3/89 $ 15,728 $ 14,276
6/89 $ 16,709 $ 15,200
9/89 $ 18,924 $ 16,558
12/89 $ 20,776 $ 15,970
3/90 $ 21,139 $ 15,545
6/90 $ 24,638 $ 16,526
9/90 $ 19,290 $ 12,214
12/90 $ 22,765 $ 13,189
3/91 $ 29,339 $ 17,219
6/91 $ 26,862 $ 16,622
9/91 $ 31,544 $ 18,415
12/91 $ 36,140 $ 19,940
3/92 $ 35,561 $ 20,486
6/92 $ 29,428 $ 18,026
9/92 $ 28,974 $ 18,375
12/92 $ 35,218 $ 21,490
3/93 $ 30,891 $ 21,105
6/93 $ 30,744 $ 21,713
9/93 $ 35,365 $ 23,740
12/93 $ 37,759 $ 24,364
3/94 $ 38,578 $ 23,371
6/94 $ 35,428 $ 21,898
9/94 $ 41,014 $ 23,944
12/94 $ 40,765 $ 23,772
3/95 $ 43,213 $ 25,076
6/95 $ 42,392 $ 27,563
9/95 $ 49,180 $ 30,698
12/95 $ 49,045 $ 31,151
3/96 $ 50,730 $ 32,941
6/96 $ 57,062 $ 34,866
9/96 $ 57,884 $ 34,569
12/96 $ 59,585 $ 34,660
3/97 $ 51,242 $ 31,025
6/97 $ 62,969 $ 36,471
9/97 $ 76,240 $ 42,642
12/97 $ 70,633 $ 39,147
3/98 $ 83,544 $ 43,798
6/98 $ 85,280 $ 41,282
9/98 $ 65,347 $ 32,052
12/98 $ 90,424 $ 39,628
3/99 $ 115,680 $ 38,962
6/99 $ 135,341 $ 44,708
</TABLE>
PERFORMANCE UPDATE
<TABLE>
<CAPTION>
FIVE-YEAR TEN-YEAR
AVERAGE AVERAGE TOTAL AVERAGE ANNUAL
YEAR TO DATE ONE-YEAR ANNUAL ANNUAL RETURN SINCE RETURN SINCE
TOTAL RETURN TOTAL RETURN RETURN RETURN INCEPTION(1) INCEPTION(1)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Emerging Growth Fund 49.67% 58.70% 30.75% 23.27% 1253.41% 25.21%
Russell 2000 Growth Index(2) 12.82% 8.30% 15.34% 11.39% 347.08% 13.79%
S&P 500 Index(3) 12.32% 22.77% 27.85% 18.76% 715.63% 19.85%
</TABLE>
Performance data quoted represents past performance, and past performance is no
guarantee of future results. You should realize that investment return and
principal value will fluctuate so that shares, when redeemed, may be worth more
or less than their original cost.
- --------------------------------------------------------------------------------
(1) Inception date 11/30/87.
(2) The Russell 2000 Growth Index is an unmanaged market capitalization-weighted
index containing those securities in the Russell 2000 Index with higher
price-to-book ratios and higher forecasted growth values. Investment results
assume the reinvestment of dividends paid on the stocks constituting the
index. You cannot invest in an index.
(3) 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. It is widely recognized as representative of the stock
market in general. Investment results assume the reinvestment of dividends
paid on the stocks constituting the index. You cannot invest in an index.
12
<PAGE>
RS FUNDS
GLOBAL NATURAL RESOURCES FUND
[GRAPHIC]
INVESTMENT STYLE*
Large Cap Mid Cap Small Cap
Growth Blend Value
FUND PHILOSOPHY
The RS Global Natural Resources Fund seeks to achieve
long-term capital appreciation by investing in companies
principally engaged in the discovery, development,
production, or distribution of natural resources; the
development of technologies for the production or
[PHOTO] efficient use of natural resources; or the furnishing of
Andrew P. Pilara, Jr. related supplies or services.
- --------------------------------------------------------------------------------
FUND UPDATE
The RS Global Natural Resources Fund was the #1 natural resources fund for
the second quarter according to Lipper.(4) We are obviously pleased with our
performance in the first half of 1999, as the Fund closed up 34.05% and
outperformed its benchmark, the Lipper Natural Resources Index,(2) which
closed up 29.64%. We believe that we are early in a secular upswing in
resource stocks. The corporate mind-set of many of these companies has
shifted from increasing volume at all costs to improving profitability
(returns). The majority of resource stocks have destroyed shareholder value
for the last twenty years. Commodity prices affect stock prices short-term,
but companies' capital deployment strategies affect stock prices long-term.
We have benefited from our energy exposure and, in particular, our natural gas
investments. We like commodities with increasing demand and decreasing supply.
In the United States the rig count is still down about 35% versus last year. The
situation in Canada is even more dramatic with natural gas prices up 100% year
over year. Canadian gas pipeline capacity to the United States is in the process
of increasing 30%. At the same time, decline rates for Canadian gas production
continue to increase--exceeding 20%. Canadian gas companies are shaping up to be
one of our best resource opportunities. We believe that we are well positioned
with investments in:
- - Anderson Exploration, Ltd. (4.53% of the Fund as of 6/30/99)
- - Beau Canada Exploration, Ltd. (2.21%)
- - Calahoo Petroleum, Ltd.(2.59%)
- - Canadian Hunter Exploration, Ltd. (6.71%)
Another energy theme I want to highlight is coal bed methane--the extraction of
gas from coal seams. Our investments are primarily in the Rockies. These wells
are usually small, shallow, and cheap, but most importantly the companies are
experiencing rates of return of 35-40% on these prospects. I believe it is
probably the hottest resource play in the United States. We are participating
with investments in:
- - Evergreen Resources, Inc. (1.45%)
- - Pennaco Energy, Inc.(1.69%)
- - Western Gas Resources, Inc. (6.92%)
Our "sleeper" investment in coal bed methane is PennzEnergy Company (5.30%).
With the announced merger into Devon Energy, the combined company will bring
together Devon's expertise in San Juan Basin and Powder River coal bed methane
with PennzEnergy's acreage position in coal bed
- --------------------------------------------------------------------------------
*Due to the investment style of the Fund, all categories within the Investment
Style box are applicable.
13
<PAGE>
SEMIANNUAL REPORT
GLOBAL NATURAL RESOURCES FUND UPDATE -- CONTINUED
methane properties in the Raton Basin of Colorado and New Mexico. PennzEnergy
has a 600,000 acre position in the Raton Basin in a joint venture with Sonat,
Inc. The company stated that the Raton Basin properties could yield 1 to 3
Trillion Cubic Feet of recoverable gas, approximately 25% to 75% of the combined
company's year end 1998 reserves. This merger brings together Devon's balance
sheet and management team with PennzEnergy's property portfolio.
With our natural gas emphasis, we acknowledge the possibility of OPEC raising
their oil quota at the September OPEC meeting. The stock market's initial
response will most likely be negative. Longer-term, we still believe the oil
inventory surplus, with the last OPEC quota reduction, has been eliminated. We
still believe OPEC is managing for a $19-$21 West Texas Intermediate. The OPEC
ministers appear to be focused on eliminating the inventory surplus to achieve a
higher benchmark for oil prices. One thing we can count on is continued oil
price volatility in the second half of 1999. While we are not currently
targeting oil investments, some of our companies have at least 50% of their
production coming from oil.
We are also trying to capture the upside in what we consider to be some of the
more exciting exploration plays around the world.
- - East Coast of Canada - Petro-Canada (3.92%)
- - Northwest Territories - Berkley Petroleum Corporation (3.85%); Purcell Energy,
Ltd. (2.35%)
- - San Joaquin Basin, California - Berkley Petroleum Corporation
We have balanced our energy exposure with investments in paper and forest
products, real estate, and agriculture. Even though we diversify our Fund
investments, it is difficult to achieve negative covariance amongst stocks in a
sector portfolio. You should therefore expect more volatility from a sector
fund. In the second quarter we were beneficiaries of this volatility.
Resource stocks are still cheap! Does it make any difference if we are in a
deflationary environment? With grain prices at 26-year lows, agriculture prices
are helping to keep the consumer and producer price indicies in check. Looking
at indicies with heavier weightings in base metals and energy you see a
different picture. The Goldman Sachs Commodity Price Index is up 17% year to
date. We are seeing very good returns in resource stocks in what most people
would say is a "deflationary" time. What would happen to resource stocks in an
inflationary environment?
Thank you for your support and trust.
/s/ Andrew P. Pilara, Jr.
Andrew P. Pilara, Jr.
PORTFOLIO MANAGER
July 26, 1999
- --------------------------------------------------------------------------------
International investing can involve greater currency fluctuations and less
political and economic stability. Investing in smaller companies can involve
more volatility, less liquidity, and less publicly available information.
Investing in a more limited number of issuers and sectors can be subject to
greater market fluctuation. Options and futures may not be perfectly correlated
to the underlying index or security. Short selling is the sale of a borrowed
security, and the price of the security can increase between the date the
security is sold and the date when the fund must replace it.
14
<PAGE>
RS FUNDS
ASSETS UNDER MANAGEMENT: $34.66 MILLION
ASSET ALLOCATION
[CHART]
<TABLE>
<CAPTION>
RS Funds
Data as of 6-30-99
GLOBAL NATURAL RESOURCES
SECTOR
<S> <C>
Energy 66.4%
Utilities/Pipeline 6.9%
Real Estate 5.9%
Paper & Forest 5.5%
Aluminum 4.6%
Food 4.3%
Energy Services 3.7%
Total Short Term Investments 1.1%
Other & Other Liabilities, Net 1.6%
Total 100.00%
</TABLE>
DATA AS OF JUNE 30, 1999
<TABLE>
<CAPTION>
TOP TEN HOLDINGS
<S> <C>
Western Gas Resources, Inc. .............6.92%
Canadian Hunter Exploration, Ltd. .......6.71%
Plains Resources, Inc. ..................5.48%
PennzEnergy Company .....................5.30%
Alliance Forest Products, Inc. ..........4.82%
MAXXAM, Inc. ............................4.60%
Anderson Exploration, Ltd. ..............4.53%
Fresh Del Monte Produce, Inc. ...........4.36%
Ocean Energy, Inc. ......................4.23%
Petro-Canada ............................3.92%
</TABLE>
RESULTS OF A HYPOTHETICAL $10,000 INVESTMENT (IF INVESTED ON 11/15/95)
[CHART]
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NR LIPPER NR
DATE 10K 10K
- -------------------------------------------------
<S> <C> <C>
11/15/95 $ 10,000 $ 10,000
12/95 $ 10,120 $ 10,824
3/96 $ 11,860 $ 11,706
6/96 $ 12,330 $ 12,245
9/96 $ 13,140 $ 12,705
12/96 $ 14,290 $ 13,949
3/97 $ 13,340 $ 13,414
6/97 $ 13,720 $ 14,793
9/97 $ 14,770 $ 17,274
12/97 $ 11,840 $ 16,005
3/98 $ 12,459 $ 16,610
6/98 $ 11,110 $ 15,528
9/98 $ 8,614 $ 13,011
12/98 $ 7,761 $ 12,305
3/99 $ 8,125 $ 13,434
6/99 $ 10,403 $ 15,952
</TABLE>
PERFORMANCE UPDATE
<TABLE>
<CAPTION>
TOTAL AVERAGE ANNUAL
YEAR TO DATE ONE-YEAR RETURN SINCE RETURN SINCE
TOTAL RETURN TOTAL RETURN INCEPTION(1) INCEPTION(1)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Global Natural Resources Fund 34.05% -6.36% 4.03% 1.10%
Lipper Natural Resources Index(2) 29.64% 2.73% 59.52% 13.75%
S&P 500 Index(3) 12.32% 22.77% 146.26% 28.23%
</TABLE>
Performance data quoted represents past performance, and past performance is no
guarantee of future results. You should realize that investment return and
principal value will fluctuate so that shares, when redeemed, may be worth more
or less than their original cost.
- --------------------------------------------------------------------------------
(1) Inception date 11/15/95.
(2) The Lipper Natural Resources Index is an equally weighted index of the
largest mutual funds in the Lipper Natural Resources investment objective,
adjusted for the reinvestment of capital gains distributions and income
dividends. You cannot invest in an index.
(3) 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. It is widely recognized as representative of the stock
market in general. Investment results assume the reinvestment of dividends
paid on the stocks constituting the index. You cannot invest in an index.
(4) Second Quarter 1999, Lipper Analytical Services ranked the RS Global Natural
Resources Fund #1 out of 60 Natural Resource Funds. Lipper is an independent
mutual fund reporting service. Lipper rankings are based on total returns.
15
<PAGE>
SEMIANNUAL REPORT
GLOBAL VALUE FUND
[GRAPHIC]
INVESTMENT STYLE
Large Cap Mid Cap
Value
FUND PHILOSOPHY
The RS Global Value Fund seeks to achieve long-term
capital growth by investing primarily in equity
securities of mid- and large-cap companies worldwide
[PHOTO] using a value methodology combining Graham & Dodd
Andrew P. Pilara, Jr. balance sheet analysis with cash flow analysis.
- --------------------------------------------------------------------------------
FUND UPDATE
The RS Global Value Fund, after declining 5.43% in the first quarter, finished
the first half of 1999 with positive performance, up 3.88%. In the second
quarter we were up 9.84%, as performance for most of our investments improved.
To put the value sector in perspective, I would like to reference the work of
Richard Bernstein, quantitative market analyst at Merrill Lynch. He looked at
the S&P 500 Index(3) breaking it down by the "nifty 50" companies and the
not-so-nifty 450. Of the 450, 374 companies were in the S&P value index. We can
therefore use the 450 as a proxy for large-cap value stocks--high-quality stocks
that are not part of the nifty 50. The relative P/E multiple of the nifty 50
versus the not-so-nifty 450 remains close to its high of the last 13 1/2 years.
Mr. Bernstein goes on to say that the nifty 50 currently sells at a 38% premium
to the 450. The nifty 50 sold at a 20% premium to the 450 at the end of 1990,
but then underperformed for the next four years. At the end of that four-year
period, the nifty 50 then sold at an approximate 15% discount to the 450.
Mr. Bernstein has also been publishing a style-rotation indicator. This
indicator has strongly favored growth over value for more than four years. At
the beginning of May, however, this indicator suggested that value was more
attractive than growth for the first time since the end of 1994. Now that same
indicator shows 9 out of 10 indicies favoring value. I believe this research
strongly suggests that investors should again look at value stocks, and also
that the largest companies do not always sell at a premium valuation. Our
large-cap value investments may certainly benefit if the Merrill Lynch
conclusions are correct.
I would like to briefly update you on some of our holdings:
- - LIZ CLAIBORNE, INC. (5.39% as of 6/30/99) - Our favorite apparel company, Liz
Claiborne, has a portfolio of brands for almost all consumers, and an
infrastructure to support these brands. They have a pristine balance sheet,
are buying back stock, and making "brand addition" acquisitions. Although Liz
Claiborne has been producing lower returns on capital in the last ten years,
its returns are still significantly above its cost of capital.
- - THE COASTAL CORPORATION (5.62%) - This is our conservative natural gas play.
We feel the company's production subsidiary is one of the most attractive
natural gas producers. Production is projected to increase 30% in 1999 and
20% in 2000. Although currently its refining division is hurting operating
results, we expect future results to improve from this present 15-year low
base in refining margins. We also expect rapid growth from the power
operations, and think shareholders would benefit if the exploration and
production subsidiary was a separately traded public company.
- --------------------------------------------------------------------------------
16
<PAGE>
RS FUNDS
GLOBAL VALUE FUND UPDATE -- CONTINUED
- - BROOKFIELD PROPERTIES CORPORATION (7.21%) - This is one of North America's
largest owner/managers of commercial properties, with a net ownership interest
of 30.4 million square feet. These properties are located primarily in New
York (World Financial Center), Boston (75 State Street), Denver (Republic
Plaza), and Toronto (BCE Place). The company is selling at a 30% discount to
net asset value, with cash flows forecasted to grow 25% in 1999, 18% in 2000,
and 16% in 2001.
- - ENRON OIL & GAS (4.69%)(4) - Enron, the 53% owner of Enron Oil & Gas (EOG),
is selling the majority of its stock back to EOG for cash plus the EOG
international assets in India and China. EOG will now primarily be a North
American natural gas company. The company has locked-in oilfield service
contracts for three years at very good low-cost rates, and has an unhedged
production book.
In thumbing through Phil Fisher's 1960 investment classic Common Stocks and
Uncommon Profits (New York: Harper, 1960) I found the following investment
advice:
"...IT IS OFTEN EASIER TO TELL WHAT WILL HAPPEN TO THE PRICE OF A STOCK THAN
HOW MUCH TIME WILL ELAPSE BEFORE IT HAPPENS. THE OTHER IS THE INHERENTLY
DECEPTIVE NATURE OF THE STOCK MARKET. DOING WHAT EVERYBODY ELSE IS DOING AT
THE MOMENT, AND THEREFORE WHAT YOU HAVE AN ALMOST IRRESISTIBLE URGE TO DO, IS
OFTEN THE WRONG THING TO DO AT ALL."
Thank you for your trust and support.
/s/ Andrew P. Pilara, Jr.
Andrew P. Pilara, Jr.
PORTFOLIO MANAGER
July 30, 1999
- --------------------------------------------------------------------------------
International investing can involve greater currency fluctuations and less
political and economic stability. Investing in smaller companies can involve
more volatility, less liquidity, and less publicly available information.
Investing in a more limited number of issuers and sectors can be subject to
greater market fluctuation. Options and futures may not be perfectly correlated
to the underlying index or security. High-yielding, lower-quality debt
securities may be considered to be of lower standing and more speculative.
17
<PAGE>
SEMIANNUAL REPORT
ASSETS UNDER MANAGEMENT: $6.77 MILLION
ASSET ALLOCATION
[CHART]
<TABLE>
<CAPTION>
<S> <C>
Energy 17.9%
Textiles 13.5%
Construction/Infrastructure 12.1%
Energy Services 10.5%
Consumer & Specialty Retail 10.4%
Total Short Term Investments 10.0%
Real Estate 7.2%
Insurance 6.6%
Telecommunications 6.2%
Other & Other Assets, Net 5.6%
</TABLE>
DATA AS OF JUNE 30, 1999
<TABLE>
<CAPTION>
TOP TEN HOLDINGS
<S> <C>
Texaco, Inc. ............................8.31%
Jones Apparel Group, Inc. ...............8.11%
Brookfield Properties Corporation .......7.21%
Southdown, Inc. .........................6.93%
CIGNA Corporation .......................6.58%
Telecom Italia S.p.A. ...................6.19%
Unicom Corporation ......................5.70%
The Coastal Corporation .................5.62%
Payless ShoeSource, Inc. ................5.53%
Liz Claiborne, Inc. .....................5.39%
</TABLE>
RESULTS OF A HYPOTHETICAL $10,000 INVESTMENT (IF INVESTED ON 4/1/97)
[CHART]
<TABLE>
<CAPTION>
- --------------------------------------------------------
GLOBAL VALUE MSCI WORLD VALUE
DATE FUND INDEX(2)
- --------------------------------------------------------
<S> <C> <C>
4/1/97 $ 10,000 $ 10,000
4/97 $ 10,120 $ 10,272
5/97 $ 10,260 $ 10,923
6/97 $ 10,690 $ 11,391
7/97 $ 11,310 $ 11,895
8/97 $ 10,960 $ 11,173
9/97 $ 11,580 $ 11,724
10/97 $ 11,280 $ 11,224
11/97 $ 11,631 $ 11,318
12/97 $ 11,997 $ 11,472
1/98 $ 12,029 $ 11,695
2/98 $ 12,449 $ 12,376
3/98 $ 13,493 $ 12,977
4/98 $ 13,525 $ 13,136
5/98 $ 13,525 $ 12,934
6/98 $ 13,148 $ 12,973
7/98 $ 12,933 $ 12,934
8/98 $ 12,008 $ 10,966
9/98 $ 12,481 $ 11,089
10/98 $ 12,858 $ 12,110
11/98 $ 13,116 $ 12,751
12/98 $ 13,330 $ 13,039
3/99 $ 12,607 $ 13,522
6/99 $ 13,847 $ 14,458
</TABLE>
PERFORMANCE UPDATE
<TABLE>
<CAPTION>
TOTAL AVERAGE ANNUAL
YEAR TO DATE ONE-YEAR RETURN SINCE RETURN SINCE
TOTAL RETURN TOTAL RETURN INCEPTION(1) INCEPTION(1)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Global Value Fund 3.88% 5.31% 38.47% 15.59%
MSCI World Value Index(2) 10.88% 11.44% 44.58% 17.83%
S&P 500 Index(3) 12.32% 22.77% 86.92% 32.10%
</TABLE>
Performance data quoted represents past performance, and past performance is no
guarantee of future results. You should realize that investment return and
principal value will fluctuate so that shares, when redeemed, may be worth more
or less than their original cost.
- --------------------------------------------------------------------------------
(1) Inception date 4/1/97.
(2) The Morgan Stanley Capital International (MSCI) World Value Index is a
market capitalization-weighted index composed of companies representative of
the market structure of 22 developed market countries in North America,
Europe, and the Pacific Basin. You cannot invest in an index.
(3) 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. It is widely recognized as representative of the stock
market in general. Investment results assume the reinvestment of dividends
paid on the stocks constituting the index. You cannot invest in an index.
(4) Added to portfolio 7/20/99. Holding percentage is as of this date.
18
<PAGE>
RS FUNDS
THE INFORMATION AGE FUND-TM-
[GRAPHIC]
INVESTMENT STYLE*
LARGE CAP MID CAP SMALL CAP
GROWTH BLEND VALUE
FUND PHILOSOPHY
The Information Age Fund-TM- seeks to achieve
long-term capital appreciation by aggressively
investing in companies primarily within the
information technology sector. The Fund is designed
[PHOTO] for investors who believe that aggressive investment [PHOTO]
RONALD E. in these companies provides significant RODERICK R.
ELIJAH opportunities for capital appreciation. BERRY
- --------------------------------------------------------------------------------
FUND UPDATE
The Information Age Fund-TM- recorded another strong quarter on the heels of an
exceptional first quarter. During the second quarter, the Fund returned 11.41%
for a year to date return of 29.40%. In comparison, the S&P 500 Index(3) was up
7.03% during the quarter (12.32% year to date), and the PSE Technology
Index(2) was up 23.22% (36.42% year to date).
As we saw last quarter, and the quarter before that, the technology sector
continues to be buffeted by volatility. During the second quarter we endured
three drops in the NASDAQ Composite of approximately 10% or more, and each of
these drops took place over a period of ten days or less. However, it is also
important to note that each of these precipitous drops was followed by an even
greater charge forward by the market. In fact, if an investor had missed the top
five performance days for The Information Age Fund-TM- during the second
quarter, their return for the quarter would have been -13.02% instead of the
+11.41% recorded. We mention this to illustrate the point that investors still
need to take a long-term approach to investing in the technology sector. As has
been the case in the past, we believe that patient investors will be rewarded
with returns that outperform the market.
While much of the Fund's success in the first quarter was attributable to the
surge in Internet stocks, the second quarter saw a sector rotation out of the
Internet names and into the semiconductor sector. During the quarter, the
semiconductor sector, as measured by the Philadelphia Semiconductor Index, was
up over 30% while the Internet sector, as measured by the Goldman Sachs Internet
Index was down over 10%. In addition, the communications sector continued the
strength shown during the first quarter. Exiting the second quarter, 23% of the
Fund was invested in the semiconductor sector while nearly 26% was invested in
the communication sector. The Fund's Internet weighting was trimmed during the
quarter from first quarter's 22% to 10%.
In the semiconductor sector, we are beginning to see strong industry
fundamentals allay investor fears of a Y2K induced PC slowdown, and a supply
imbalance of semiconductors. To the contrary, memory chip prices on the spot
market are beginning to move back up as increasing demand for memory has begun
to outstrip supply. Many of the semiconductor equipment companies we are
invested in were the first to see a resumption of the semiconductor cycle after
years of industry under-spending on new equipment.
As mentioned above, the communications equipment sector remained a stellar
performer in the second quarter. We have seen the emerging markets continue to
rebound with a resumption of aggressive telecommunication infrastructure
building. In addition, we have also seen many of the telecommunication service
providers in the United States increase their forecasted capital expenditure
budgets in response to
- --------------------------------------------------------------------------------
*Due to the investment style of the Fund, all categories within the Investment
Style box are applicable.
19
<PAGE>
SEMIANNUAL REPORT
THE INFORMATION AGE FUND-TM- UPDATE -- CONTINUED
exploding data traffic and increased competition for the end-user. Early signs
of broader market acceptance of broadband services such as cable modems and
other high-speed access technologies have begun to emerge, ensuring that a
strong upgrade cycle is in place. On the wireless front, growth is so explosive
that we are now seeing industry experts shorten their projections for one
billion worldwide users from the year 2005 to 2003.
With favorable June quarter earnings currently being reported, we are very
encouraged by the sustainable growth being exhibited by the technology sector.
We continue to be in the midst of a very strong domestic economy, coupled with a
solid recovery of the emerging Asian economies, which bodes well for continued
spending on technology. We are also encouraged by the monumental paradigm shift
that is taking place with the growth of the Internet. We do not view the
Internet as simply a technology shift, but rather a shift in the way business is
being executed in general. Many of the companies we invest in should benefit as
traditional retailers scramble to build a web presence for the upcoming holiday
selling season. In addition, more and more companies are utilizing the Internet
to streamline the way they conduct business to business transactions. We remain
in the early stages of a worldwide technology revolution, fueled by cheaper and
more advanced semiconductors, and we believe that the patient technology
investor will continue to be rewarded with market-beating returns.
On behalf of the entire Information Age team, thank you for your continued
support.
/s/ Ronald E. Elijah /s/ Roderick R. Berry
Ronald E. Elijah Roderick R. Berry
PORTFOLIO MANAGER CO-PORTFOLIO MANAGER
July 20, 1999
- --------------------------------------------------------------------------------
International investing can involve greater currency fluctuations and less
political and economic stability. Investing in smaller companies can involve
more volatility, less liquidity, and less publicly available information.
Options and futures may not be perfectly correlated to the underlying index or
security. Investing in a particular sector can involve greater market
fluctuation.
20
<PAGE>
RS FUNDS
ASSETS UNDER MANAGEMENT: $188.59 million
ASSET ALLOCATION
[CHART]
<TABLE>
<CAPTION>
<S> <C>
Semiconductors 23.3%
Telecom Equipment/ Services 19.6%
Computer Software & Services 18.0%
Internet Commerce 9.5%
Computer Hardware 8.8%
Electronic Components 7.8%
Communications Equipment & Services 6.4%
Other & Other Assets, Net 4.7%
Total Short Term Investments 1.9%
Total 100.00%
</TABLE>
DATA AS OF JUNE 30, 1999
<TABLE>
<CAPTION>
TOP TEN HOLDINGS
<S> <C>
Cisco Systems, Inc. .....................6.43%
Microsoft Corporation ...................6.22%
America Online, Inc. ....................5.92%
Lucent Technologies, Inc. ...............5.39%
Teradyne, Inc. ..........................4.45%
Texas Instruments, Inc. .................4.23%
Nokia Corporation - ADR .................3.92%
Xilinx, Inc. ............................3.90%
Applied Materials, Inc. .................3.60%
Uniphase Corporation ....................3.52%
</TABLE>
RESULTS OF A HYPOTHETICAL $10,000 INVESTMENT (IF INVESTED ON 11/15/95)
[CHART]
<TABLE>
<CAPTION>
- ----------------------------------------------------------
The Information PSE TECHNOLOGY
DATE Age Fund INDEX(2)
- ----------------------------------------------------------
<S> <C> <C>
11/15/95 $ 10,000 $ 10,000
12/95 $ 9,300 $ 9,819
3/96 $ 9,340 $ 9,790
6/96 $ 10,710 $ 10,123
9/96 $ 11,790 $ 10,803
12/96 $ 11,785 $ 11,786
3/97 $ 10,351 $ 11,775
6/97 $ 12,276 $ 13,735
9/97 $ 15,982 $ 16,360
12/97 $ 12,509 $ 14,140
3/98 $ 14,269 $ 16,837
6/98 $ 14,958 $ 16,834
9/98 $ 13,421 $ 15,562
12/98 $ 19,040 $ 21,860
3/99 $ 22,114 $ 24,203
6/99 $ 24,637 $ 29,822
</TABLE>
PERFORMANCE UPDATE
<TABLE>
<CAPTION>
TOTAL AVERAGE ANNUAL
YEAR TO DATE ONE-YEAR RETURN SINCE RETURN SINCE
TOTAL RETURN TOTAL RETURN INCEPTION(1) INCEPTION(1)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
The Information Age Fund-TM- 29.40% 64.71% 146.37% 28.24%
PSE Technology Index(2) 36.42% 77.15% 198.22% 35.18%
S&P 500 Index(3) 12.32% 22.77% 146.26% 28.23%
</TABLE>
Performance data quoted represents past performance, and past performance is no
guarantee of future results. You should realize that investment return and
principal value will fluctuate so that shares, when redeemed, may be worth more
or less than their original cost.
- --------------------------------------------------------------------------------
(1) Inception date 11/15/95.
(2) The Pacific Stock Exchange (PSE) Technology Index is an unmanaged,
price-weighted index of the top 100 U.S. technology stocks. You cannot
invest in an index.
(3) 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. It is widely recognized as representative of the stock
market in general. Investment results assume the reinvestment of dividends
paid on the stocks constituting the index. You cannot invest in an index.
21
<PAGE>
SEMIANNUAL REPORT
MICROCAP GROWTH FUND
[GRAPHIC]
INVESTMENT STYLE
GROWTH SMALL CAP
FUND PHILOSOPHY
The RS MicroCap Growth Fund invests in a diversified
portfolio of equity securities of companies with
market capitalizations of $500 million or less. We
seek micro-cap companies that we believe have the
[PHOTO] potential for long-term capital appreciation based [PHOTO]
DAVID J. on superior or niche products or services, operating RAINERIO J.
EVANS characteristics, management, or other factors. REYES
- --------------------------------------------------------------------------------
FUND UPDATE
The RS MicroCap Growth Fund finished the first half of 1999 on a strong note,
posting a gain of 19.29% in the second quarter. This compares to a quarterly
return of 14.75% for the benchmark Russell 2000 Growth Index.(2) The Fund's
return for the first half of the year was 20.55% compared to 12.82% for the
Russell 2000 Growth Index.
The second quarter saw a reversal from the first quarter as small stocks
outperformed large stocks, as measured by the Russell 2000 and S&P 500 Index.(3)
Interestingly, this occurred despite the fact that the Internet sector, which
accounted for nearly 10% of the Russell 2000 at the start of the quarter,
weakened during this time frame. We believe that weakness in Internet stocks led
to a broadening of investor interest within the small-cap sector, reversing a
trend that began during the fourth quarter of 1998. As long as it was possible
to achieve spectacular gains in almost every Internet Initial Public Offering
(IPO), many traditional investors in small-cap stocks looked no further. As the
market began to differentiate among Internet stocks and question valuations for
the group as a whole, the already attractive micro-cap sector began to receive
more attention. Importantly, despite this outperformance, small-cap growth
price/earnings ratios (P/Es) advanced modestly and valuations remained at
40-year lows. For this reason, we remain optimistic that investor interest and
dollars will continue to seek out opportunities in small- and micro-cap stocks.
Both established holdings as well as recent purchases drove performance in the
second quarter. The technology sector was especially strong, but individual
securities in healthcare and in products and services made substantial
contributions as well. Within technology, we participated in the strong trends
exhibited by semiconductors and related capital equipment vendors. Specialty
component suppliers such as Cree Research, Inc. (2.66% of the Fund as of
6/30/99) and QLogic Corporation (2.28%) compounded earlier gains with dramatic
growth, again validating our efforts at early identification of underfollowed
growth companies. Telecommunications and networking continued to exhibit
powerful growth dynamics, and holdings such as Performance Technologies, Inc.
(2.09%) and Transaction Network Services, Inc. (2.02%) rewarded our patience in
accumulating these stocks over the past few years. The greatest contribution to
the quarter belonged to Power Integrations, Inc. (2.53%)--a manufacturer of
analog integrated circuits that enable more efficient conversion of electric
power from AC to DC. These power supply products are used
- --------------------------------------------------------------------------------
22
<PAGE>
RS FUNDS
MICROCAP GROWTH FUND UPDATE -- CONTINUED
to charge cell phone batteries and power a wide range of consumer products.
Future applications will result in energy savings, affecting a wide range of
appliances.
Due to the negative impact of Medicare reimbursement and the evolution of
managed care, the healthcare sector continues to attract less of our assets than
it has historically. Nevertheless, opportunities are available and MedE America
Corporation (1.09%) stood out in the second quarter. MedE America was an IPO
investment during the first quarter and its good performance accelerated when it
agreed to merge with Healtheon Corporation--an early leader in adapting the
Internet to healthcare. The company is involved in electronic claims processing
and this combination will accelerate its utilization of the Internet.
Once again, our product and services sector produced its share of winners from
among its eclectic holdings. Among these were some established positions such as
CapRock Communications Corporation (2.33%), a facilities-based integrated
communications provider of Internet, multi-media and voice services; Coinstar,
Inc. (2.81%), a manufacturer of coin counting machines placed in supermarkets;
and Cost Plus, Inc. (1.57%), a retailer of home furnishings and consumables.
Newer contributors included Meade Instruments Corporation (0.89%), maker of high
quality telescopes for the amateur astronomer; ThrustMaster, Inc. (0.55%),
developers of innovative peripherals for PC, video and Internet games; and
Universal Electronics, Inc. (0.65%), which manufactures and markets
pre-programmed universal remote controls for consumer electronics devices.
However, it was Trex Company, Inc. (1.17%) which led the way in the quarter. An
IPO that had trouble finding an audience amid the frenzy of Internet fever in
April, Trex manufactures an alternative to pressure treated lumber for
constructing residential, as well as commercial decks. We had the opportunity to
meet management during its IPO road show and found the company to be a
compelling growth situation, at a very attractive valuation. Fully expecting
that it might take many quarters to attract an audience, we purchased stock on
the IPO. We were positively surprised when the discovery process was accelerated
beyond all expectations, causing the stock to more than double by quarter end.
Some of our holdings have been highlighted above in order to demonstrate the
diversity of businesses in which we invest. These examples also serve to remind
us that few stocks enjoy the rapid near-term returns of a Trex, while many can
contribute over time if management is consistent in executing a sound business
strategy. Our investment process constantly seeks this type of investment
opportunity and we remain confident that long-term investments in under-followed
and undervalued micro-cap stocks will prove rewarding. We thank our shareholders
for their support and encourage new investors to join us.
/s/ David J. Evans /s/ Rainerio J. Reyes
David J. Evans Rainerio J. Reyes
PORTFOLIO MANAGER CO-PORTFOLIO MANAGER
July 15, 1999
- --------------------------------------------------------------------------------
International investing can involve greater currency fluctuations and less
political and economic stability. Investing in smaller companies can involve
more volatility, less liquidity, and less publicly available information. Short
selling is the sale of a borrowed security, and the price of the security can
increase between the date the security is sold and the date when the fund must
replace it. Options and futures may not be perfectly correlated to the
underlying index or security.
23
<PAGE>
SEMIANNUAL REPORT
ASSETS UNDER MANAGEMENT: $86.83 million
ASSET ALLOCATION
[CHART]
<TABLE>
<CAPTION>
RS Funds
Data as of 6-30-99
MICROCAP GROWTH
Sector
<S> <C>
Computer Technology 15.9%
Health/Medical/Biotechnology 12.5%
Semiconductors 11.4%
Consumer/Retail 8.7%
Business/Commercial Services 7.8%
Telecommunications 7.3%
Electronic Components 7.2%
Restaurants/Lodging 3.1%
Financial Services 3.1%
Manufacturing/Machinery 2.6%
Miscellaneous/Other Services 2.5%
Broadcast/Radio/Television 2.2%
Total Short Term Investments 6.3%
Other & Other Assets, Net 9.4%
Total 100.00%
</TABLE>
DATA AS OF JUNE 30, 1999
<TABLE>
<CAPTION>
TOP TEN HOLDINGS
<S> <C>
Coinstar, Inc. ..........................2.81%
Cree Research, Inc. .....................2.66%
Power Intergrations, Inc. ...............2.53%
Pervasive Software, Inc. ................2.44%
Vista Information Solutions, Inc. .......2.36%
CapRock Communications Corporation ......2.33%
QLogic Corporation ......................2.28%
American Xtal Technology, Inc. ..........2.19%
Performance Technologies, Inc. ..........2.09%
Transaction Network Services, Inc. ......2.02%
</TABLE>
RESULTS OF A HYPOTHETICAL $10,000 INVESTMENT (IF INVESTED ON 8/15/96)
[CHART]
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
MCG R2000G DIV.
DATE 10K 10K
- --------------------------------------------------------
<S> <C> <C>
8/15/96 $ 10,000 $ 10,000
9/96 $ 10,570 $ 10,794
12/96 $ 11,000 $ 10,822
3/97 $ 10,200 $ 9,687
6/97 $ 12,570 $ 11,388
9/97 $ 15,990 $ 13,315
12/97 $ 14,350 $ 12,223
3/98 $ 16,570 $ 13,676
6/98 $ 15,420 $ 12,890
9/98 $ 11,630 $ 10,008
12/98 $ 14,260 $ 12,374
3/99 $ 14,410 $ 12,166
6/99 $ 17,190 $ 13,960
</TABLE>
PERFORMANCE UPDATE
<TABLE>
<CAPTION>
TOTAL AVERAGE ANNUAL
YEAR TO DATE ONE-YEAR RETURN SINCE RETURN SINCE
TOTAL RETURN TOTAL RETURN INCEPTION(1) INCEPTION(1)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MicroCap Growth Fund 20.55% 11.48% 71.90% 20.74%
Russell 2000 Growth Index(2) 12.82% 8.30% 39.60% 12.31%
S&P 500 Index(3) 12.32% 22.77% 117.17% 30.98%
</TABLE>
Performance data quoted represents past performance, and past performance is no
guarantee of future results. You should realize that investment return and
principal value will fluctuate so that shares, when redeemed, may be worth more
or less than their original cost.
- --------------------------------------------------------------------------------
(1) Inception date 8/15/96.
(2) The Russell 2000 Growth Index is an unmanaged market capitalization-weighted
index containing those securities in the Russell 2000 Index with higher
price-to-book ratios and higher forecasted growth values. Investment results
assume the reinvestment of dividends paid on the stocks constituting the
index. You cannot invest in an index.
(3) 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. It is widely recognized as representative of the stock
market in general. Investment results assume the reinvestment of dividends
paid on the stocks constituting the index. You cannot invest in an index.
24
<PAGE>
RS FUNDS
MIDCAP OPPORTUNITIES FUND
[GRAPHIC]
INVESTMENT STYLE
MIDCAP
BLEND
FUND PHILOSOPHY
The RS MidCap Opportunities Fund, formerly the Growth &
Income Fund, seeks to achieve long-term total return by
investing primarily in mid-cap stocks, convertible
bonds, and preferreds. Our flexible, bottom-up approach
is based on value recognition and trend analysis. We
look for well-managed companies with improving
fundamentals that may be positioned for growth. Our
formula for long-term success also includes a
disciplined approach to managing risk: losses are
[PHOTO] eliminated quickly, and we are constantly looking for
JOHN L. WALLACE new opportunities.
- --------------------------------------------------------------------------------
FUND UPDATE
The RS MidCap Opportunities Fund returned 23.58% for the six months ending June
30, 1999. We were quite pleased with our performance, especially when compared
to our primary benchmark, the Russell Midcap Index(2) which returned 10.34% for
the same period. We were also pleased to have outperformed the S&P 500 Index,(3)
up only 12.32% for the six months ending June 30.
The MidCap Opportunities Fund primarily invests in equity securities with market
capitalizations from $1.5 billion to $10 billion. While mid-cap companies, as
defined by the Russell Midcap Index, modestly underperformed large-cap S&P 500
companies for the first six months of 1999, there continues to be a strong case
for investing in mid-cap companies. Several such reasons include their 20-25%
valuation discount to large-cap stocks and nearly equal earnings growth compared
to large-caps, and that liquidity and sponsorship for mid-caps is far better
than for small-caps.
The technology and telecommunications revolution continues to impact our lives.
Our investments in this area were the primary contributors to our performance
during the last six months. It has been difficult to keep up with the changes in
computer and communications technologies during the past decade. Moore's Law
states that microchip power doubles every eighteen months. As semiconductors
become faster, computers are able to access and store more information.
The carrying capacity of communications lines (aka bandwidth) is expanding at
breakneck speed and its implications for high speed Internet access and data and
video products and services are broad. E-commerce and the Internet are a
revolution unto themselves. All of these areas have provided positive investment
opportunities year to date.
The enormity and rapidity of these changes often makes it difficult to predict
the ultimate long-term winners. Our discipline and focus have been on
well-managed companies that are at the forefront of new product cycles in the
following primary technology sectors: telecom services, wireless, cable,
semiconductors, and Internet access and content. We are investing in companies
that are adopting new strategies to take advantage of this growth: Primus
Telecommunications Group, Inc. (1.26% of the Fund as of 6/30/99) and CapRock
Communications Corporation (2.47%) in the telecom services arena are attractive,
especially with the likelihood of increased consolidation with established
carriers and Regional Bell Operating Companies.
Cellular demand is continuing to rise. The transition from analog to digital is
driving penetration levels in the U.S. higher. Our investments in Western
Wireless Corporation (0.96%) and Voicestream Wireless (0.54% of the Fund as of
5/3/99) paid off due to accelerated consolidation in the industry. Cable revenue
growth continues as new services are being developed and deployed through
digital set top boxes.
- --------------------------------------------------------------------------------
25
<PAGE>
SEMIANNUAL REPORT
MIDCAP OPPORTUNITIES FUND UPDATE -- CONTINUED
Rollouts of high speed cable modems continue to be strong. Over the next several
years we expect all computers to have built in cable modems. Our favorite stocks
in this area include MediaOne Group, Inc. (2.27%), a major cable system operator
in the United States, and AT&T Corporation - Liberty Media Group (2.80%), a
leading cable and Internet content provider.
Semiconductor sales seem to be improving after a three-year slump. Average
selling prices and unit volumes are improving especially in the communications
end markets. We think that our investments in Altera Corporation (0.98%), and
Teradyne, Inc. (1.28%) will be beneficiaries of this trend.
The Internet is changing the way people communicate, buy and sell goods and
services, and spend their leisure time. Its growth and influence on our lives is
coming at a record pace. The Internet industry is broad, encompassing many
companies. The challenge for investors is to distinguish the long-term profit
potential of many Internet businesses. With many early-stage Internet stocks
receiving multi-billion dollar market capitalizations, valuations are virtual,
reflecting extremely high expectations of investors. The supply of stock offered
by Internet IPOs (according to Ned Davis Research, over 70 YTD vs. 96 total from
the last three years) will eventually overwhelm demand. The Internet is still in
a developmental stage and economic profits are a fantasy for most companies.
Time will separate the long-term survivors from the "also-rans." We are focusing
on quality companies and paying attention to risk.
Since 1996 we have been long-term bullish on energy and the oil service sector.
The Asian crisis in late 1997-1998 reduced global demand sharply and was
instrumental in driving oil prices to the mid-1980's low of $9-10 per barrel.
This year the economies of Asia are improving. OPEC members have cut output
quotas and the prices have risen sharply. We have positioned the portfolio to
take advantage of what we believe could be a strong rebound in profitability for
the service sector in late 1999 and beyond. Growing global demand from countries
seeking higher standards of living will lead to increased production and higher
prices for oil and natural gas. We know there will be cyclical price swings
within the secular trend. Offshore drillers and service companies such as ENSCO
International, Inc. (1.32%), Rowan Companies, Inc. (0.94%), and BJ Services
Company (0.82%) should benefit from a spending increase by major oil companies.
Exploration and production companies such as Apache Corporation (1.29%) and
Anadarko Petroleum Corporation (0.96%) have good production profiles and will
benefit from stronger natural gas prices.
Our philosophy of searching for above average growth with a disciplined approach
to risk management has paid off in the first half of 1999. We want to remind
investors that successful equity investing is not a short-term proposition. We
remain focused on the long-term.
On behalf of the entire MidCap Opportunities team, we thank you for your
support.
/s/ John L. Wallace
John L. Wallace
PORTFOLIO MANAGER
July 15, 1999
- --------------------------------------------------------------------------------
International investing can involve greater currency fluctuations and less
political and economic stability. Investing in smaller companies can involve
more volatility, less liquidity, and less publicly available information.
Options and futures may not be perfectly correlated to the underlying index or
security. High-yielding, lower-quality debt securities may be considered to be
of lower standing and more speculative.
26
<PAGE>
RS FUNDS
ASSETS UNDER MANAGEMENT: $196.65 million
ASSET ALLOCATION
[CHART]
<TABLE>
<CAPTION>
RS Funds
Data as of 6-30-99
MIDCAP OPPORTUNITIES
SECTOR
<S> <C>
Telecom Equipment & Services 14.8%
Energy 12.3%
Media 8.6%
Convertible Bonds/Preferred 8.2%
Computer Technology 8.3%
Electronic Components 7.2%
Transportation 3.2%
Consumer & Specialty Retail 5.7%
Other Services 5.5%
Financial 5.0%
Healthcare 3.1%
Business/Commercial Services 2.8%
Environmental Services 2.4%
Network Systems 2.3%
Total Short Term Investments 2.7%
Other & Other Assets, Net 7.9%
Total 100.00%
</TABLE>
DATA AS OF JUNE 30, 1999
<TABLE>
<CAPTION>
TOP TEN HOLDINGS
<S> <C>
AT&T Corporation - Liberty Media Group ..2.80%
Trans World Airlines, Inc. ..............2.48%
CapRock Communications Corp. ............2.47%
MediaOne Group, Inc. ....................2.27%
First Sierra Financial, Inc. ............2.10%
Comdisco, Inc. ..........................1.89%
Alliant Techsystems, Inc. ...............1.76%
Montana Power Company ...................1.74%
EchoStar Communications Corp. ...........1.56%
American Power Conversion Corp. .........1.54%
</TABLE>
RESULTS OF A HYPOTHETICAL $10,000 INVESTMENT (IF INVESTED ON 7/12/95)
[CHART]
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
G&I RUSSELL MIDCAP
DATE 10K 10K
- ----------------------------------------------------
<S> <C> <C>
7/12/95 $ 10,000 $ 10,000
9/95 $ 10,760 $ 10,476
12/95 $ 11,240 $ 10,814
3/96 $ 12,200 $ 11,465
6/96 $ 13,330 $ 11,788
9/96 $ 13,340 $ 12,157
12/96 $ 13,956 $ 12,868
3/97 $ 13,526 $ 12,763
6/97 $ 15,216 $ 14,494
9/97 $ 17,850 $ 16,419
12/97 $ 17,082 $ 16,601
3/98 $ 19,103 $ 18,395
6/98 $ 18,396 $ 18,118
9/98 $ 15,907 $ 15,432
12/98 $ 19,071 $ 18,277
3/99 $ 20,416 $ 18,192
6/99 $ 23,567 $ 20,166
</TABLE>
The Russell Midcap Index replaced the Russell MidCap Growth Index as our primary
fund benchmark to more accurately reflect the Fund's investments in mid-cap
companies. A hypothetical $10,000 investment in the Russell MidCap Growth Index,
if invested on 7/12/95, would have grown to $20,766 as of 6/30/99.
PERFORMANCE UPDATE
<TABLE>
<CAPTION>
TOTAL AVERAGE ANNUAL
YEAR TO DATE ONE-YEAR RETURN SINCE RETURN SINCE
TOTAL RETURN TOTAL RETURN INCEPTION(1) INCEPTION(1)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MidCap Opportunities Fund 23.58% 28.11% 135.67% 24.10%
Russell Midcap Index(2) 10.34% 11.31% 101.66% 19.33%
S&P 500 Index(3) 12.32% 22.77% 163.27% 27.61%
</TABLE>
Performance data quoted represents past performance, and past performance is no
guarantee of future results. You should realize that investment return and
principal value will fluctuate so that shares, when redeemed, may be worth more
or less than their original cost.
- --------------------------------------------------------------------------------
(1) Inception date 7/12/95.
(2) The Russell Midcap Index consists of the smallest 800 securities in the
Russell 1000 Index, as ranked by total market capitalization. This index
accurately captures the medium sized universe of securities and represents
approximately 30% of the Russell 1000 total market capitalization. You
cannot invest in an index.
(3) 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. It is widely recognized as representative of the stock
market in general. Investment results assume the reinvestment of dividends
paid on the stocks constituting the index. You cannot invest in an index.
27
<PAGE>
SEMIANNUAL REPORT
PARTNERS FUND
[GRAPHIC]
INVESTMENT STYLE
SMALLCAP
VALUE
FUND PHILOSOPHY
The RS Partners Fund seeks long-term capital growth by
investing in equity securities primarily of companies
with market capitalization of up to $1 billion, using a
[PHOTO] value methodology, combining Graham & Dodd balance sheet
ANDREW P. PILARA, JR. analysis with cash flow analysis.
- --------------------------------------------------------------------------------
FUND UPDATE
-----------------
Let me begin by saying that the small-cap value sector has been the
worst-performing sector. At the end of the first quarter, the one year return to
March 31, 1999 for the Russell 2000 Value Index(2) was down 22.03%. Except for
mid-cap value, the other value and growth indicies were up.
This year the RS Partners Fund is showing improved performance closing up 8.24%
year to date, and outperforming its benchmark, the Russell 2000 Value Index,
which closed up 5.26%. During the turmoil in the small-cap category we have held
to our cash flow discipline and painfully watched stock prices continue to
decline. During the second quarter, our patience was rewarded as the Fund
provided solid results. Oil and gas price increases helped our energy
investments and value stock fundamentals were recognized with better stock
prices.
According to the work we are doing with the Holt Advisory cash flow model, the
valuation disparity, as measured by cap-rates, between small-cap stocks and
large-cap stocks reached record proportions in the first half of the year. We
expect that gap to close and for small-caps to trade at a premium to large-caps,
as the mature, large companies have difficulty sustaining their historically
high returns on capital.
I want to mention one more style indicator before discussing some of our
investments. Merrill Lynch quantitative strategist, Richard Bernstein has been
producing a quantitative style-rotation indicator. This indicator has strongly
favored growth over value for more than four years. At the beginning of May, his
indicator suggested that value was more attractive than growth for the first
time since the end of 1994. Now that indicator shows 9 of 10 indicies favoring
value.
The following are some of the companies we recently purchased or in which we
increased our position:
- - HON INDUSTRIES, INC. (1.77% of the Fund as of 6/30/99) - The office furniture
business had a tough year last year. Expectations are low and industry
fundamentals are strong. White-collar employment continues to increase. The
emergence of the small-office/home-office (SOHO) market is a plus. Hon has
some of the best returns in the industry as the company has been able to
effectively allocate capital at high returns to profitably grow their
business.
- - PITTSTON BRINK'S GROUP (6.24%) - We were able to increase our position in
Pittston Brink's in April at historically low valuations. The new CEO of
Pittston Brink's, Michael Dan, is using EVA-TM- to focus on increasing
shareholder value, including possibly eliminating the tracking stock.
- - SUPERIOR TELECOM, INC. (2.27%) - The CEO, Steven Elbaum, has created the
market leader in copper wire and
- --------------------------------------------------------------------------------
28
<PAGE>
RS FUNDS
PARTNERS FUND UPDATE -- CONTINUED
cable. Superior TeleCom has had the highest returns on capital in its industry
and is in position to play off the growth of the telecommunications market
while enjoying the steady cash flows of its building wire business.
- - HOLLINGER INTERNATIONAL, INC. (3.06%) - This is one of the cheapest stocks in
the newspaper group. We feel that we are getting the company's Internet assets
in the U.K. and Canada, including a large ownership position in the
TheTrip.com, for free.
Our energy investments helped boost our performance in the first half of 1999.
However, we still see significant upside potential in the area. The small-cap
Canadian natural gas producers are still cheap versus their U.S. counterparts
even with more favorable fundamentals and a rapidly increasing Canadian natural
gas price. We expect significant increases in demand for Canadian natural gas
with the opening of new pipelines into the U.S. Meanwhile, despite significant
stock price moves to the upside, most of our energy companies are still selling
at significant discounts to their Net Asset Values. We are beginning to see
mergers and acquisitions activity in the energy area. One of our investments,
Canadian Conquest, was purchased by Cypress Energy, Inc. (7.30%). Canadian
Conquest's stock price increased 50% in the process. We have held on to the
Cypress Energy stock received in the transaction because Cypress Energy is a
gas-weighted company with strong management.
We have managed to withstand the under-performance of small-cap stocks of 1998
and early 1999 while maintaining our investment style. While we have diversified
in order to bring more balance to the portfolio, we have adhered to our cash
flow methodology and valuation metrics. Statistics show that stock price
performance correlates closely with returns on capital and very poorly with P/E,
so we will continue to look for undervalued companies with superior or improving
returns on capital. You can expect us to continue pursuing good business
opportunities on a value investor's terms.
Thank you for your support and trust.
/s/ Andrew P. Pilara, Jr.
Andrew P. Pilara, Jr.
PORTFOLIO MANAGER
July 26, 1999
- --------------------------------------------------------------------------------
International investing can involve greater currency fluctuations and less
political and economic stability. Investing in smaller companies can involve
more volatility, less liquidity, and less publicly available information.
Investing in a more limited number of issuers and sectors can be subject to
greater market fluctuation. Options and futures may not be perfectly correlated
to the underlying index or security.
29
<PAGE>
SEMIANNUAL REPORT
ASSETS UNDER MANAGEMENT: $33.03 million
ASSET ALLOCATION
[CHART]
<TABLE>
<CAPTION>
PARTNERS FUND
SECTOR %
<S> <C>
Energy 27.6%
Consumer & Business Services 12.8%
Food 10.5%
Aluminum 9.0%
Energy Services 8.1%
Financial Services 7.0%
Telecommunications 6.1%
Construction and Infrastructure 4.0%
Consumer Goods and Retail 3.1%
Publishing 3.1%
Total Short Term Investments 2.5%
Other & Other Liabilities, Net 6.2%
Total 100.00%
</TABLE>
DATA AS OF JUNE 30, 1999
<TABLE>
<CAPTION>
TOP TEN HOLDINGS
<S> <C>
MAXXAM, Inc. ........................... 8.98%
Cypress Energy, Inc. ................... 7.30%
Pittston Brink's Group ................. 6.24%
Fresh Del Monte Produce, Inc. .......... 6.20%
Place Resources Corporation ............ 5.52%
Desjardins Laurentian Financial Corp. .. 5.20%
Sobeys Canada, Inc. .................... 4.33%
NQL Drilling Tools, Inc. ............... 4.30%
Meritage Corporation ................... 4.01%
Paging Network, Inc. ................... 3.79%
</TABLE>
RESULTS OF A HYPOTHETICAL $10,000 INVESTMENT (IF INVESTED ON 7/12/95)
[CHART]
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
PF RUSSELL 2000
DATE 10K VALUE DIV. 10K
- ---------------------------------------------
<S> <C> <C>
7/12/95 $ 10,000 $10,000
9/95 $ 10,190 $10,532
12/95 $ 10,390 $10,839
3/96 $ 12,300 $11,314
6/96 $ 13,640 $11,777
9/96 $ 14,070 $11,952
12/96 $ 14,873 $13,155
3/97 $ 14,975 $13,122
6/97 $ 16,177 $15,103
9/97 $ 18,173 $17,049
12/97 $ 17,561 $17,336
3/98 $ 18,999 $18,784
6/98 $ 17,146 $18,105
9/98 $ 13,167 $14,869
12/98 $ 12,779 $16,218
3/99 $ 12,391 $14,646
6/99 $ 13,832 $17,070
</TABLE>
PERFORMANCE UPDATE
<TABLE>
<CAPTION>
TOTAL AVERAGE ANNUAL
YEAR TO DATE ONE-YEAR RETURN SINCE RETURN SINCE
TOTAL RETURN TOTAL RETURN INCEPTION(1) INCEPTION(1)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Partners Fund 8.24% -19.33% 38.32% 8.51%
Russell 2000 Value Index(2) 5.26% -5.72% 70.70% 14.42%
S&P 500 Index(3) 12.32% 22.77% 163.27% 27.61%
</TABLE>
Performance data quoted represents past performance, and past performance is no
guarantee of future results. You should realize that investment return and
principal value will fluctuate so that shares, when redeemed, may be worth more
or less than their original cost.
- --------------------------------------------------------------------------------
(1) Inception date 7/12/95.
(2) The Russell 2000 Value Index is an unmanaged market capitalization-weighted
index composed of those securities in the Russell 2000 Index with lower
price-to-book ratios and lower forecasted growth values. Investment results
assume the reinvestment of dividends paid on the stocks constituting the
index. You cannot invest in an index.
(3) 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. It is widely recognized as representative of the stock
market in general. Investment results assume the reinvestment of dividends
paid on the stocks constituting the index. You cannot invest in an index.
30
<PAGE>
RS FUNDS
VALUE + GROWTH FUND
[GRAPHIC]
INVESTMENT STYLE
LARGE CAP MID CAP
GROWTH
FUND PHILOSOPHY
The RS Value + Growth Fund seeks capital appreciation by
investing primarily in companies with favorable
relationships between price/earnings ratios and growth
rates, and in sectors offering above-average growth
potential. We seek to identify specific business sectors
poised to benefit from major changes in the marketplace
and societal trends. Within these sectors, we conduct
bottom-up research, looking for well-managed companies
[PHOTO] that have low-multiple valuations relative to their
RONALD E. ELIJAH peers and are poised to leverage growth opportunities.
- --------------------------------------------------------------------------------
FUND UPDATE
-----------------
The RS Value + Growth Fund recorded modest gains for the second quarter of 1999
after a strong first quarter. During the second quarter, the Fund was up 2.42%,
and year to date the Fund was up 12.46%. For the overall market, the S&P 500
Index(3) was up 7.03% for the second quarter and 12.32% year to date.
The second quarter witnessed some exceptional volatility, particularly in the
growth sector. The NASDAQ Composite, a more suited measure for growth stocks,
experienced no fewer than three drops of approximately 10% or more and each drop
occurred in fewer than ten trading sessions. For investors that maintained their
long-term conviction that the equity environment is generally still positive,
the subsequent rally that followed each decline took the NASDAQ to new record
highs. Fortunately, after an early period of market rotation out of growth
stocks and into cyclicals, growth stocks returned to favor late in the June
quarter lifting the Value + Growth Fund into positive territory for the quarter.
The Value + Growth Fund achieved its late quarter rally due to our adherence to
our conviction that the U.S. Federal Reserve Bank was not going to adopt an
aggressive position on rates. Since rates bottomed out in October 1998 in
response to the international currency crisis and deflation fears, the 30-year
long bond rate has climbed more than 140 basis points from 4.7% to 6.17% in
eight months, an event that generally puts downward pressure on growth stocks.
Despite the fact that the U.S. market has rotated into cyclical stocks that tend
to do well in inflationary environments, our work continues to convince us that
the U.S. economic climate is not inflationary, that interest rates are not going
significantly higher, and that growth companies with strong earnings prospects
are poised to go higher. We believe this market adjustment process of moving
back into growth stocks started late in the June quarter and should continue
well into 1999's second half.
The Fund's thematic investment approach remains intact. As we have mentioned in
the past, we continue to focus the Fund's investments in sectors of the U.S.
economy that we believe possess the best growth prospects for the next five
years, which includes consumer retail, healthcare, financial services and
technology. These sectors are strong beneficiaries of the aging of the U.S.
"baby boomer" generation (almost 80 million strong) and the U.S. and global push
for productivity improvement.
The Fund continues to take advantage of the positive impact of the aging baby
boomer on the U.S. retail sector. Not only are baby boomers entering their peak
earnings years, but they are also currently enjoying the strongest growth in
real purchasing power in more than 25 years. Americans are spending this new
wealth shopping, as evidenced by the strong U.S. retail sales. The Fund's
investments in Circuit City Stores - Circuit City Group (3.59% of the Fund as of
June 30, 1999) and Best Buy Co., Inc. (3.80%) did particularly well in
- --------------------------------------------------------------------------------
31
<PAGE>
SEMIANNUAL REPORT
VALUE + GROWTH FUND UPDATE -- CONTINUED
the first quarter as they benefited not only from a robust economy but also from
the new digital product cycles. Digital Video Disc (DVD) technology continues to
drive consumers into electronics stores. The early adoption of DVD players has
significantly outpaced the adoption of the VCR, however, with only a small
percentage of the U.S. market penetrated, we continue to remain bullish on these
names.
The healthcare sector occasionally runs into periods of uncertainty as it takes
center stage in the Washington political arena, accounting for volatility within
the healthcare stocks. However, it cannot be ignored that the healthcare sector
remains probably the single biggest beneficiary of the aging of the U.S. baby
boomer for now, and well into the new millennium. Over the last five years,
demand for pharmaceuticals has been experiencing a slight creep in annual
demand. This continual increase in the annual demand for pharmaceuticals is
expected to persist for at least the next three decades. Remember, the first
baby boomer just turned 50 in 1996, with 80 million more to follow in the next
15 years. We continue to be bullish on healthcare and particularly the
pharmaceutical industry for the foreseeable future.
Our financial services theme has been in place for a number of years and we
believe it is still a very attractive growth sector. After the disturbing second
half of 1998 that saw many disappointing earnings announcements, U.S. financial
institutions have quickly turned to the positive side with most companies
recovering from last Fall's financial crisis and again reporting sequential
earnings growth in the March quarter with many expected to report record
earnings for the June quarter. A true testament to our long-term investment
theme that the low inflationary environment in the U.S. and the baby boomer
retirement investing will continue to benefit the financial services industry
for 1999 and well into the next decade. Additionally, many of the companies
within this sector have or are developing promising web presences that are
transforming the delivery of financial services. We regard this as a positive
for the sector.
We believe the information technology (IT) sector continues to transform the
U.S. and global economy. The IT sector accounts for 8% of U.S. gross domestic
product up from 6% a decade ago and has been responsible for 28% of U.S.
economic growth since 1991. In the U.S., the IT industry has replaced the
automobile industry as the number one manufacturing sector in the economy,
having produced 6 million new jobs since 1991, or 40% of total job growth. We
believe that the strong growth of the IT sector has resulted from the continual
advancement of the microprocessor. The microprocessor's power continues to
double about every 24 months, while its cost declines about 20% annually. The
result of the microprocessor's increasing power and declining cost has
stimulated the worldwide installed base of computers from approximately 50,000
units in 1971 to over 200 million today. As the advancement in microprocessor
technology is projected by Intel to continue for another decade, the IT sector
continues to offer investors exceptional return opportunities for at least
another decade.
In our current economic environment, modest interest rates and no evidence of
inflation, we believe that we can continue to be optimistic for the prospects of
the companies in which we have invested. We are wary, however, of the nature of
markets to constantly undergo change. Therefore, we continue to carefully
monitor both macroeconomic and company-specific data. As always, we remain
selective in our investments and focused within the business sectors that we
believe contain the greatest growth potential for the next five years.
Thank you for your ongoing support.
/s/ Ronald E. Elijah
Ronald E. Elijah
PORTFOLIO MANAGER
July 23, 1999
- --------------------------------------------------------------------------------
Investing in smaller companies may involve risks such as less publicly available
information than larger companies, volatility, and illiquidity. Short selling is
the sale of a borrowed security and may involve the risk that the price of the
security may increase between the date it is sold and the date the fund must
replace the borrowed security. Options and futures involve the risk that their
value may not be perfectly correlated to that of the underlying index or
security.
32
<PAGE>
RS FUNDS
ASSETS UNDER MANAGEMENT: $669.61 million
ASSET ALLOCATION
[CHART]
<TABLE>
<CAPTION>
RS Funds
Data as of 6-30-99
VALUE + GROWTH
SECTOR %
<S> <C>
Retail 27.0%
Computer Technology 23.8%
Financial 16.5%
Telecom Equipment & Services 8.3%
Pharmaceuticals 6.9%
Medical/HMO's 5.5%
Media 4.9%
Total Short Term Investments 1.4%
Other & Other Liabilities, Net 5.7%
Total 100.00%
</TABLE>
DATA AS OF JUNE 30, 1999
<TABLE>
<CAPTION>
TOP TEN HOLDINGS
<S> <C>
Microsoft Corporation ...................4.53%
Texas Instruments, Inc. .................4.06%
MCI WorldCom, Inc. ......................3.95%
Best Buy Co., Inc. ......................3.80%
Circuit City Stores-Circuit City Group ..3.59%
Intel Corporation .......................3.56%
Merrill Lynch & Co., Inc. ...............3.44%
Costco Cos., Inc. .......................3.29%
Staples, Inc. ...........................3.12%
CVS Corporation .........................2.99%
</TABLE>
RESULTS OF A HYPOTHETICAL $10,000 INVESTMENT (IF INVESTED ON 5/12/92)
[CHART]
<TABLE>
<CAPTION>
- -------------------------------------------
V+G R1000 GROWTH
DATE 10k 10k
- -------------------------------------------
<S> <C> <C>
5/12/92 $ 10,000 $ 10,000
6/92 $ 9,801 $ 9,766
9/92 $ 10,099 $ 10,193
12/92 $ 11,004 $ 10,903
3/93 $ 11,933 $ 10,810
6/93 $ 11,943 $ 10,643
9/93 $ 12,843 $ 10,801
12/93 $ 13,378 $ 11,217
3/94 $ 13,890 $ 10,722
6/94 $ 13,276 $ 10,611
9/94 $ 15,560 $ 11,428
12/94 $ 16,469 $ 11,511
3/95 $ 18,927 $ 12,607
6/95 $ 23,086 $ 13,845
9/95 $ 27,536 $ 15,102
12/95 $ 23,501 $ 15,790
3/96 $ 22,651 $ 16,638
6/96 $ 23,429 $ 17,696
9/96 $ 24,964 $ 18,334
12/96 $ 26,819 $ 19,441
3/97 $ 26,198 $ 19,545
6/97 $ 30,483 $ 23,242
9/97 $ 35,511 $ 24,989
12/97 $ 30,523 $ 25,368
3/98 $ 34,486 $ 29,212
6/98 $ 36,066 $ 30,538
9/98 $ 31,352 $ 27,764
12/98 $ 38,898 $ 35,187
3/99 $ 42,710 $ 37,424
6/99 $ 43,746 $ 38,864
</TABLE>
PERFORMANCE UPDATE
<TABLE>
<CAPTION>
FIVE-YEAR
AVERAGE TOTAL AVERAGE ANNUAL
YEAR TO DATE ONE-YEAR ANNUAL RETURN SINCE RETURN SINCE
TOTAL RETURN TOTAL RETURN RETURN INCEPTION(1) INCEPTION(1)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Value + Growth Fund 12.46% 21.29% 26.93% 337.46% 22.97%
Russell 1000 Growth Index(2) 10.45% 27.26% 29.65% 288.64% 20.95%
S&P 500 Index(3) 12.32% 22.77% 27.85% 287.46% 20.90%
</TABLE>
Performance data quoted represents past performance, and past performance is no
guarantee of future results. You should realize that investment return and
principal value will fluctuate so that shares, when redeemed, may be worth more
or less than their original cost.
- --------------------------------------------------------------------------------
(1) Inception date 5/12/92.
(2) The Russell 1000 Growth Index is an unmanaged market capitalization-weighted
index containing those securities in the Russell 1000 Index with higher
price-to-book ratios and higher forecasted growth values. Investment results
assume the reinvestment of dividends paid on the stocks constituting the
index. You cannot invest in an index.
(3) 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. It is widely recognized as representative of the stock
market in general. Investment results assume the reinvestment of dividends
paid on the stocks constituting the index. You cannot invest in an index.
33
<PAGE>
SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS -- THE CONTRARIAN FUND-TM-
<TABLE>
<CAPTION>
JUNE 30, 1999 (UNAUDITED) FOREIGN CURRENCY(2) SHARES VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMON STOCKS - 93.1%
- --------------------------------------------------------------------------------
<S> <C> <C>
ADVERTISING - 0.5%
Snyder Communications, Inc. 20,000 $ 655,000
- ------------------------------------------------------------------------------
655,000
- ------------------------------------------------------------------------------
AGRICULTURAL PRODUCTS - 0.2%
AgriBioTech, Inc. 44,700 270,994
- --------------------------------------------------------------------------------
270,994
- --------------------------------------------------------------------------------
COMPUTER HARDWARE & COMPONENTS - 8.7%
Apple Computer, Inc. 98,000 4,538,625
Intelligroup, Inc. 27,800 198,075
Micron Electronics, Inc. 139,000 1,398,687
S3, Inc. 122,500 1,113,984
Seagate Technology, Inc. 93,500 2,395,937
Silicon Graphics, Inc. 114,000 1,866,750
SMART Modular Technologies, Inc. 13,500 234,562
- --------------------------------------------------------------------------------
11,746,620
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE & SERVICES - 1.5%
Engineering Animation, Inc. 21,570 457,014
Open Text Corporation 42,100 1,263,000
QuadraMed Corporation 42,700 346,937
- --------------------------------------------------------------------------------
2,066,951
- --------------------------------------------------------------------------------
CONSTRUCTION/INFRASTRUCTURE - 6.3%
Lafarge Corporation(1) 30,000 1,063,125
Lone Star Industries, Inc.(1) 90,000 3,380,625
Southdown, Inc.(1) 20,000 1,285,000
USG Corporation(1) 49,500 2,772,000
- --------------------------------------------------------------------------------
8,500,750
- --------------------------------------------------------------------------------
CONSUMER & SPECIALTY RETAIL - 4.7%
CompUSA, Inc. 100,000 743,750
Kmart Corporation 180,000 2,958,750
Payless ShoeSource, Inc. 50,000 2,675,000
- --------------------------------------------------------------------------------
6,377,500
- --------------------------------------------------------------------------------
CONSUMER/BUSINESS SERVICES - 4.1%
Pennzoil-Quaker State Company(1) 190,000 2,850,000
Pittston Brink's Group(1) 100,000 2,675,000
- --------------------------------------------------------------------------------
5,525,000
- --------------------------------------------------------------------------------
COPPER/GOLD MINING - 3.2%
Indochina Goldfields, Ltd. CAD 4,359,990 4,271,468
- --------------------------------------------------------------------------------
4,271,468
- --------------------------------------------------------------------------------
DIAMOND MINING - 2.0%
Diamond Fields International, Ltd. Note CAD 1,671,900 1,581,474
DiamondWorks, Ltd. CAD 9,876,485 1,167,788
- --------------------------------------------------------------------------------
2,749,262
- --------------------------------------------------------------------------------
DIVERSIFIED OPERATIONS - 1.6%
EdperBrascan Corporation(1) CAD 60,000 910,104
Onex Corporation(1) CAD 65,000 1,229,688
- --------------------------------------------------------------------------------
2,139,792
- --------------------------------------------------------------------------------
<CAPTION>
JUNE 30, 1999 (UNAUDITED) FOREIGN CURRENCY(2) SHARES VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<S> <C> <C>
ENERGY - 16.8%
Abacan Resource Corporation 180,000 $ 22,500
Abacan Resource Corporation CAD 445,000 60,133
Anderson Exploration, Ltd. CAD 200,000 2,614,777
Anzoil N.L. AUD 3,577,471 296,000
Beau Canada Exploration, Ltd. CAD 700,000 1,064,153
Black Sea Energy, Ltd. CAD 5,094,600 6,884,363
Black Sea Energy, Ltd. 144A(7) CAD 485,280 655,761
Eurogas Corporation, 144A(7) CAD 5,762,400 817,610
K N Energy, Inc.(1) 240,000 3,210,000
PennzEnergy Company(1) 264,600 4,415,512
Petro-Canada(1) CAD 125,000 1,697,578
Petsec Energy, Ltd. AUD 226,000 62,829
Petsec Energy, Ltd., ADR(3) 195,100 317,037
Vastar Resources, Inc.(1) 11,000 576,813
- --------------------------------------------------------------------------------
22,695,066
- --------------------------------------------------------------------------------
FINANCIAL SERVICES - 6.6%
Dundee Bancorp, Inc., Class A CAD 843,200 8,915,969
- --------------------------------------------------------------------------------
8,915,969
- --------------------------------------------------------------------------------
GOLD MINING - 5.8%
Consolidated African Mines, Ltd. SAR 22,000,000 3,463,522
Durban Roodepoort Deep, Ltd. SAR 58,400 100,651
Etruscan Resources, Inc. CAD 2,968,900 1,203,567
First Dynasty Mines, Ltd. CAD 2,532,850 128,350
Golden Star Resouces, Ltd. CAD 962,600 699,162
GTL Resources PLC GBP 1,903,132 262,491
Guyanor Resources S.A. CAD 138,300 44,853
Queenstake Resources, Ltd. CAD 1,001,000 114,976
Randgold & Exploration Company, Ltd. SAR 200,000 238,635
Randgold Resources, Ltd. GDR(3) 405,256 1,561,242
- --------------------------------------------------------------------------------
7,817,449
- --------------------------------------------------------------------------------
HEALTH CARE SERVICES - 0.3%
Pediatrix Medical Group, Inc. 20,400 433,500
- --------------------------------------------------------------------------------
433,500
- --------------------------------------------------------------------------------
MANUFACTURING - 0.3%
Zoltek Companies, Inc. 46,500 369,094
- --------------------------------------------------------------------------------
369,094
- --------------------------------------------------------------------------------
MEDIA - 10.5%
CD Radio, Inc. 187,500 5,712,891
Central European Media Enterprises, Ltd., Class A 120,000 780,000
Metromedia International Group, Inc. 1,030,000 7,725,000
- --------------------------------------------------------------------------------
14,217,891
- --------------------------------------------------------------------------------
NICKEL MINING - 5.8%
Inco Ltd., VBN Shares(1) CAD 1,043,050 7,787,374
- --------------------------------------------------------------------------------
7,787,374
- --------------------------------------------------------------------------------
PLATINUM GROUP METALS - 0.1%
African Minerals, Ltd., 144A, Restricted(4),(5),(7) 698,422 103,367
- --------------------------------------------------------------------------------
103,367
- --------------------------------------------------------------------------------
</TABLE>
See notes to Schedule of Investments on page 51.
The accompanying notes are an integral part of these financial statements.
34
<PAGE>
- --------------------------------------------------------------------------------
RS FUNDS
<TABLE>
<CAPTION>
JUNE 30, 1999 (UNAUDITED) FOREIGN CURRENCY(2) SHARES VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PUBLISHING - NEWSPAPERS - 0.9%
- --------------------------------------------------------------------------------
<S> <C> <C>
Hollinger International, Inc.(1) 100,000 $ 1,187,500
- --------------------------------------------------------------------------------
1,187,500
- --------------------------------------------------------------------------------
REAL ESTATE - 2.7%
Atlantic Gulf Communities Corporation 638,130 418,773
Brookfield Properties Corporation(1) CAD 248,000 3,208,811
- --------------------------------------------------------------------------------
3,627,584
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS - 3.2%
QUALCOMM, Inc. 30,400 4,362,400
- --------------------------------------------------------------------------------
4,362,400
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS SERVICES - 0.2%
Talk.Com, Inc. 22,200 249,750
- --------------------------------------------------------------------------------
249,750
- --------------------------------------------------------------------------------
TEXTILE-APPAREL MANUFACTURING - 3.4%
Jones Apparel Group, Inc. 30,000 1,029,375
Liz Claiborne, Inc.(1) 35,000 1,277,500
PT Apac Centertex Corporation, Foreign(8) IDR 17,668,000 2,309,614
- --------------------------------------------------------------------------------
4,616,489
- --------------------------------------------------------------------------------
TRANSPORTATION SERVICES - 3.7%
AMR Corporation 45,400 3,098,550
China Yuchai International, Ltd. 1,467,925 1,926,652
- --------------------------------------------------------------------------------
5,025,202
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS (Cost $211,589,063) 125,711,972
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS - 1.1%
- --------------------------------------------------------------------------------
Atlantic Gulf Communities Corporation, Series B 206,778 1,473,293
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $2,049,780) 1,473,293
- --------------------------------------------------------------------------------
Par Value
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONVERTIBLE BONDS - 1.2%
- --------------------------------------------------------------------------------
Randgold and Exploration Company, Ltd.,
7.00 %, Due 10/3/01(1) 2,750,000 1,581,250
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL CONVERTIBLE BONDS (Cost $2,750,000) 1,581,250
- --------------------------------------------------------------------------------
Warrants Value
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
WARRANTS - 0.2%
- --------------------------------------------------------------------------------
Atlantic Gulf Communities Corporation,
Warrants, Strike $5.75, Expire 6/23/04(6) 413,556 129,236
DiamondWorks, Ltd., Warrants, Strike
CAD 1.65, Expire 7/15/99(6) CAD 848,485 49
PT Apac Centertex Corporation, Warrants,
Strike IDR 1,000, Expire 7/14/01(6) IDR 2,700,000 103,925
Vengold, Inc., Warrants, Strike $1.30,
Expire 6/30/00(6) CAD 1,286,000 17,378
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL WARRANTS (Cost $436,091) 250,588
<CAPTION>
JUNE 30, 1999 (UNAUDITED) FOREIGN CURRENCY(2) OPTIONS VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<S> <C> <C>
OPTIONS - 0.1%
- --------------------------------------------------------------------------------
Harmony Gold Mining Company, Ltd.,
Options, Strike SAR 6,000,
Expire 7/31/01(6) SAR 9,900 $ 6,562
Normandy Mining, Ltd., Options, Strike
AUD 2.50, Expire 4/30/01(6) AUD 1,673,426 90,829
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL OPTIONS (Cost $43,533) 97,391
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS - 95.7% (Cost $216,868,467) 129,114,494
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DEPOSITS WITH BROKERS FOR SECURITIES SOLD SHORT - 23.8% 32,166,078
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES SOLD SHORT - (21.7%) (Proceeds $47,636,757) (29,236,216)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OTHER ASSETS, NET - 2.2% 2,884,143
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL NET ASSETS - 100.0% $134,928,499
- --------------------------------------------------------------------------------
</TABLE>
See notes to Schedule of Investments on page 51.
The accompanying notes are an integral part of these financial statements.
35
<PAGE>
SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
SCHEDULE OF SECURITIES SOLD SHORT -- THE CONTRARIAN FUND-TM-
<TABLE>
<CAPTION>
JUNE 30, 1999 (UNAUDITED) FOREIGN CURRENCY(2) SHARES VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMON STOCKS - 21.7%
- --------------------------------------------------------------------------------
<S> <C> <C>
Agricultural Products - 0.3%
AgriBioTech, Inc. 74,500 $ 451,657
- --------------------------------------------------------------------------------
451,657
- --------------------------------------------------------------------------------
COMPUTER HARDWARE & COMPONENTS - 0.2%
SMART Modular Technologies, Inc. 13,500 234,562
- --------------------------------------------------------------------------------
234,562
- --------------------------------------------------------------------------------
COMPUTER SERVICES - 1.0%
Ceridian Corporation 34,700 1,134,256
Intelligroup, Inc. 27,800 198,075
Sapient Corporation 1,200 67,950
- --------------------------------------------------------------------------------
1,400,281
- --------------------------------------------------------------------------------
COMPUTER-SOFTWARE - 1.8%
Engineering Animation, Inc. 21,570 457,014
Open Text Corporation 63,700 1,911,000
Peregrine Systems, Inc. 1,600 41,100
- --------------------------------------------------------------------------------
2,409,114
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE & SERVICES - 1.2%
DAOU Systems, Inc. 1,700 9,775
InteliData Technologies Corporation 159,100 397,750
MICROS Systems, Inc. 27,500 935,000
QuadraMed Corporation 42,700 346,937
- --------------------------------------------------------------------------------
1,689,462
- --------------------------------------------------------------------------------
CONSULTING SERVICES - 0.6%
USWeb Corporation 34,100 756,594
- --------------------------------------------------------------------------------
756,594
- --------------------------------------------------------------------------------
CONSUMER & SPECIALTY RETAIL - 1.9%
Action Performance Companies, Inc. 41,300 1,362,900
French Fragrances, Inc. 62,600 457,763
West Marine, Inc. 55,800 812,588
- --------------------------------------------------------------------------------
2,633,251
- --------------------------------------------------------------------------------
DATA PROCESSING SERVICES/SYSTEM INTEGRATION - 0.8%
Acxiom Corporation 34,800 867,825
INSpire Insurance Solutions, Inc. 2,800 40,600
LHS Group, Inc. 3,400 112,625
- --------------------------------------------------------------------------------
1,021,050
- --------------------------------------------------------------------------------
EDUCATION & TRAINING - 0.4%
Sylvan Learning Systems, Inc. 21,700 589,969
- --------------------------------------------------------------------------------
589,969
- --------------------------------------------------------------------------------
ELECTRONICS - 0.4%
Lernout & Hauspie Speech Products NV 14,369 509,201
- --------------------------------------------------------------------------------
509,201
- --------------------------------------------------------------------------------
FINANCIAL SERVICES - 1.8%
Delta Financial Corporation 377,318 2,405,402
- --------------------------------------------------------------------------------
2,405,402
- --------------------------------------------------------------------------------
HEALTH CARE SERVICES - 1.0%
Pediatrix Medical Group, Inc. 64,300 1,366,375
- --------------------------------------------------------------------------------
1,366,375
- --------------------------------------------------------------------------------
<CAPTION>
JUNE 30, 1999 (UNAUDITED) FOREIGN CURRENCY(2) SHARES VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MANUFACTURING - 1.1%
- --------------------------------------------------------------------------------
<S> <C> <C>
Zoltek Companies, Inc. 184,400 $ 1,463,675
- --------------------------------------------------------------------------------
1,463,675
- --------------------------------------------------------------------------------
MEDICAL SERVICES - 0.7%
STERIS Corporation 49,700 962,938
- --------------------------------------------------------------------------------
962,938
- --------------------------------------------------------------------------------
MEDICAL-INSTRUMENTS & DEVICES - 1.2%
Ventana Medical Systems, Inc. 82,000 1,568,250
- --------------------------------------------------------------------------------
1,568,250
- --------------------------------------------------------------------------------
MEDICAL-SUPPLIES - 0.2%
Enzo Biochem, Inc. 25,385 250,677
- --------------------------------------------------------------------------------
250,677
- --------------------------------------------------------------------------------
OFFICE EQUIPMENT - 0.5%
Xeikon N.V. ADR(3) 30,500 693,875
- --------------------------------------------------------------------------------
693,875
- --------------------------------------------------------------------------------
PHARMACEUTICALS - 3.3%
Elan Corporation PLC ADR(3) 81,400 2,258,850
Watson Pharmaceuticals, Inc. 61,499 2,156,309
- --------------------------------------------------------------------------------
4,415,159
- --------------------------------------------------------------------------------
SEMICONDUCTORS & COMPONENTS - 3.1%
Micron Technology, Inc. 67,300 2,713,031
Rambus, Inc. 15,700 1,447,344
- --------------------------------------------------------------------------------
4,160,375
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES - 0.2%
SmarTalk TeleServices, Inc. 51,100 4,599
Talk.Com, Inc. 22,200 249,750
- --------------------------------------------------------------------------------
254,349
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL SECURITIES SOLD SHORT (Proceeds $47,636,757) $ 29,236,216
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
See notes to Schedule of Investments on page 51.
The accompanying notes are an integral part of these financial statements.
36
<PAGE>
RS FUNDS
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS -- DIVERSIFIED GROWTH FUND
<TABLE>
<CAPTION>
JUNE 30, 1999 (UNAUDITED) FOREIGN CURRENCY(2) SHARES VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 94.7%
- --------------------------------------------------------------------------------
BROADCASTING/RADIO/TV - 0.1%
Film Roman, Inc. 40,000 $ 117,500
- --------------------------------------------------------------------------------
117,500
- --------------------------------------------------------------------------------
BUSINESS SERVICES - 1.0%
United Shipping & Technology, Inc. 337,586 970,560
- --------------------------------------------------------------------------------
970,560
- --------------------------------------------------------------------------------
CHEMICALS - 0.5%
Airgas, Inc. 43,000 526,750
- --------------------------------------------------------------------------------
526,750
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES - 3.1%
Condor Technology Solutions, Inc. 173,000 810,937
Medaphis Corporation 139,200 800,400
Quanta Services, Inc. 32,500 1,430,000
- --------------------------------------------------------------------------------
3,041,337
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 1.4%
Research in Motion Ltd. 70,000 1,417,500
- --------------------------------------------------------------------------------
1,417,500
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE - 6.9%
Artisoft, Inc. 210,000 1,063,125
BEA Systems, Inc. 45,000 1,285,312
Concentric Networking Corporation 25,000 993,750
Macromedia, Inc. 32,500 1,145,625
Verity, Inc. 30,000 1,625,625
WebTrends Corporation 15,000 691,875
- --------------------------------------------------------------------------------
6,805,312
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE & SERVICES - 1.4%
InfoNow Corporation 250,000 1,031,250
Information Advantage, Inc. 95,000 388,906
- --------------------------------------------------------------------------------
1,420,156
- --------------------------------------------------------------------------------
CONSUMER & SPECIALTY RETAIL - 3.4%
BJ's Wholesale Club, Inc. 35,000 1,052,187
CompUSA, Inc. 140,000 1,041,250
Krause's Furniture, Inc. 390,000 1,145,625
Shop At Home, Inc. 15,600 138,937
- --------------------------------------------------------------------------------
3,377,999
- --------------------------------------------------------------------------------
DATA PROCESSING SERVICES - 0.8%
Intranet Solutions, Inc. 93,000 784,687
- --------------------------------------------------------------------------------
784,687
- --------------------------------------------------------------------------------
ELECTRONIC COMPONENTS - 5.5%
American Power Conversion Corporation 65,000 1,308,125
Cymer, Inc. 35,000 875,000
Photon Dynamics, Inc. 35,000 420,000
Sanmina Corp. 15,000 1,138,125
Sawtek, Inc. 37,500 1,720,312
- --------------------------------------------------------------------------------
5,461,562
- --------------------------------------------------------------------------------
ENERGY - 3.8%
Apache Corporation(1) 27,500 1,072,500
Devon Energy Corporation(1) 25,000 893,750
Ensign Resource Service Group, Inc.(1) CAD 35,000 701,159
Key Energy Services, Inc. 175,000 623,438
Noble Drilling Corporation 22,500 442,969
- --------------------------------------------------------------------------------
3,733,816
- --------------------------------------------------------------------------------
ENERGY SERVICES - 5.6%
BJ Services Company 30,000 883,125
Bonus Resource Services Corporation CAD 621,300 944,512
ENSCO International, Inc.(1) 40,000 797,500
NS Group, Inc. 60,000 555,000
Rowan Companies, Inc. 40,000 737,500
The Montana Power Company(1) 23,000 1,621,500
- --------------------------------------------------------------------------------
5,539,137
- --------------------------------------------------------------------------------
<CAPTION>
JUNE 30, 1999 (UNAUDITED) FOREIGN CURRENCY(2) SHARES VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<S> <C> <C>
ENTERTAINMENT - 0.2%
Carmike Cinemas, Inc. 14,300 $ 227,906
- --------------------------------------------------------------------------------
227,906
- --------------------------------------------------------------------------------
ENVIROMENTAL SERVICES - 2.2%
Capital Enviromental Resource, Inc. 90,000 1,305,000
Republic Services, Inc., Class A 35,000 866,250
- --------------------------------------------------------------------------------
2,171,250
- --------------------------------------------------------------------------------
FINANCIAL SERVICES - 2.1%
First Sierra Financial, Inc. 82,100 2,052,500
- --------------------------------------------------------------------------------
2,052,500
- --------------------------------------------------------------------------------
INTERNET CAPITAL SERVICES - 9.3%
About.com, Inc. 10,000 518,750
Backweb Technologies Ltd. 2,000 54,750
F5 Networks, Inc. 25,000 1,025,000
Netmoves Corporation 185,000 1,017,500
Netopia, Inc. 50,000 1,137,500
Network Solutions, Inc., Class A 17,500 1,384,687
nFront, Inc. 31,000 470,813
Persistance Software, Inc. 2,400 32,700
Security First Technologies Corporation 25,000 1,128,125
SoftNet Systems, Inc. 50,000 1,393,750
StarMedia Network, Inc. 850 54,506
Telescan, Inc. 35,000 850,938
Viant Corporation 4,300 150,500
- --------------------------------------------------------------------------------
9,219,519
- --------------------------------------------------------------------------------
INTERNET COMMERCE - 0.5%
Goto.com, Inc. 8,900 249,200
Homeseekers.com, Inc. 32,600 154,850
Stamps.com, Inc. 5,000 87,500
- --------------------------------------------------------------------------------
491,550
- --------------------------------------------------------------------------------
MACHINERY - 1.5%
SpeedFam-IPEC, Inc. 50,000 803,125
Turbochef Technologies, Inc. 65,000 625,625
- --------------------------------------------------------------------------------
1,428,750
- --------------------------------------------------------------------------------
MEDIA - 8.4%
AT&T Corp. - Liberty Media Group, Class A 35,000 1,286,250
LodgeNet Entertainment Corporation 87,200 1,215,350
New Frontier Media, Inc., Private Placement(4,5) 500,000 3,262,500
The Kushner-Locke Company, Inc. 149,700 973,050
ValueVision International, Inc., Class A 80,000 1,590,000
- --------------------------------------------------------------------------------
8,327,150
- --------------------------------------------------------------------------------
MEDICAL - BIOMEDICAL/GENETICS - 1.3%
Enzon, Inc. 35,000 724,062
Novavax, Inc., Private Placement(4,5) 180,000 567,000
- --------------------------------------------------------------------------------
1,291,062
- --------------------------------------------------------------------------------
MEDICAL INSTRUMENTS & DEVICES - 3.5%
CardioThoracic Systems, Inc. 52,500 735,000
Endocardial Solutions, Inc. 100,000 943,750
Sabratek Corporation 80,000 1,750,000
- --------------------------------------------------------------------------------
3,428,750
- --------------------------------------------------------------------------------
PHARMACEUTICALS - 0.8%
Guilford Pharmaceuticals, Inc. 60,000 765,000
- --------------------------------------------------------------------------------
765,000
- --------------------------------------------------------------------------------
RESTAURANTS - 1.4%
Galveston's Steakhouse Corp. 24,500 165,375
Taco Cabana, Inc., Class A 120,000 1,222,500
- --------------------------------------------------------------------------------
1,387,875
- --------------------------------------------------------------------------------
</TABLE>
See notes to Schedule of Investments on page 51.
The accompanying notes are an integral part of these financial statements.
37
<PAGE>
SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS -- DIVERSIFIED GROWTH FUND -- CONTINUED
<TABLE>
<CAPTION>
JUNE 30, 1999 (UNAUDITED) FOREIGN CURRENCY(2) SHARES VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<S> <C> <C>
SEMICONDUCTORS & COMPONENTS - 3.0%
Altera Corporation 25,000 $ 920,313
Cypress Semiconductor Corporation 70,000 1,155,000
ESS Technology, Inc. 65,000 873,437
- --------------------------------------------------------------------------------
2,948,750
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS - 4.7%
Advanced Radio Telecom Corporation 50,000 718,750
Aerial Communications, Inc. 30,000 405,000
Primus Telecommunications Group, Inc. 115,000 2,580,313
PT Telekomunikasi Indonesia ADR(1,3) 72,900 906,694
- --------------------------------------------------------------------------------
4,610,757
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT - 5.2%
ANADIGICS, Inc. 40,000 1,480,000
Digital Microwave Corporation 90,000 1,147,500
Excel Switching Corporation 55,000 1,646,563
Picturetel Corporation 50,000 400,000
SymmetriCom, Inc. 45,000 365,625
Vari-L Company, Inc. 15,000 128,438
- --------------------------------------------------------------------------------
5,168,126
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS SERVICES - 16.1%
CapRock Communications Corporation 90,000 3,645,000
Cyberfast Systems, Inc. 45,000 476,719
DSET Corporation 100,000 1,393,750
ICG Communications, Inc. 35,000 748,125
ICO Global Communications (Holdings) Ltd. 5,000 30,156
IXC Communication, Inc. 55,000 2,162,188
MGC Communications, Inc. 25,000 650,000
Omnipoint Corporation 50,000 1,446,875
Startec Global Communications Corporation 245,400 2,975,475
Viatel, Inc. 20,000 1,122,500
Western Wireless Corporation, Class A 45,000 1,215,000
- --------------------------------------------------------------------------------
15,865,788
- --------------------------------------------------------------------------------
TRANSPORTATION SERVICES - 1.0%
Simon Transportation Services, Inc. 188,600 931,213
- --------------------------------------------------------------------------------
931,213
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS (Cost $75,608,920) 93,512,262
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS - 2.5%
- --------------------------------------------------------------------------------
AIRLINES - 0.5%
Trans World Airlines, Inc., 8.00%,
Expire 12/31/49(1) 27,000 523,125
- --------------------------------------------------------------------------------
523,125
- --------------------------------------------------------------------------------
BUSINESS SERVICES - 0.6%
United Shipping & Technology, Inc.,
Series A 200,000 575,000
- --------------------------------------------------------------------------------
575,000
- --------------------------------------------------------------------------------
COAL - 0.9%
Westmoreland Coal, Inc., 8.50%,
Series A, Expire 12/31/49 50,000 912,500
- --------------------------------------------------------------------------------
912,500
- --------------------------------------------------------------------------------
ENERGY - 0.5%
Kelley Oil & Gas Corporation, $2.625,
Expire 12/31/49 100,000 487,500
- --------------------------------------------------------------------------------
487,500
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $1,645,112) 2,498,125
- --------------------------------------------------------------------------------
<CAPTION>
JUNE 30, 1999 (UNAUDITED) RIGHTS VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
RIGHTS - 0.0%
- --------------------------------------------------------------------------------
ICO Global Communications (Holdings) Ltd. $ 5,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL RIGHTS (Cost $0) 5,000
- --------------------------------------------------------------------------------
WARRANTS VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
WARRANTS - 0.2%
- --------------------------------------------------------------------------------
Novavax, Inc., Warrants, Restricted, Strike $3.75,
Expire 4/13/02(4,5,6) 40,000 62,510
United Shipping & Technology, Inc., Warrants
Strike $1.75, Expire 4/30/01(6) 100,000 155,834
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL WARRANTS (Cost $95,086) 218,344
- --------------------------------------------------------------------------------
CONTRACTS VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CALL OPTIONS - 0.3%
- --------------------------------------------------------------------------------
AT&T Corporation-Liberty Media Group,
Strike 35, Expire 7/17/99(6) 400 92,500
CompUSA, Inc., Strike 10, Expire 7/17/99(6) 650 9,375
The Bank of Tokyo-Mitsubishi, Ltd.,
Strike 15, Expire 7/17/99(6) 1,000 16,250
The Montana Power Company, Strike 75,
Expire 7/17/99(6) 600 112,500
The Montana Power Company, Strike 80,
Expire 7/17/99(6) 400 21,250
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL CALL OPTIONS (Cost $554,025) 251,875
- --------------------------------------------------------------------------------
VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHORT TERM INVESTMENTS - 0.5%
- --------------------------------------------------------------------------------
Temporary Investment Cash Fund 244,124
Temporary Investment Fund 244,123
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL SHORT TERM INVESTMENTS (Cost $488,247) 488,247
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS - 98.2% (Cost $78,391,390) 96,968,853
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHORT PUT OPTIONS - (0.1%) (Premiums $156,875) (70,000)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OTHER ASSETS, NET - 1.9% 1,830,218
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL NET ASSETS - 100.0% $98,729,071
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
SHORT PUT OPTIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JUNE 30, 1999 (UNAUDITED) CONTRACTS VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<S> <C> <C>
SHORT PUT OPTIONS - 0.0%
- --------------------------------------------------------------------------------
Philadelphia Stock Exchange/KBW Bank Index,
Strike 830, Expire 7/17/99(6) 200 $ 70,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL SHORT PUT OPTIONS (Premiums $156,875) $ 70,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
See notes to Schedule of Investments on page 51.
The accompanying notes are an integral part of these financial statements.
38
<PAGE>
RS FUNDS
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS -- EMERGING GROWTH FUND
<TABLE>
<CAPTION>
JUNE 30, 1999 (UNAUDITED) SHARES VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 96.6%
- --------------------------------------------------------------------------------
ADVERTISING - 2.0%
Lamar Advertising Company 160,250 $ 6,560,234
Outdoor Systems, Inc. 221,500 8,084,750
TMP Worldwide, Inc. 92,600 5,880,100
- --------------------------------------------------------------------------------
20,525,084
- --------------------------------------------------------------------------------
BIOTECHNOLOGY - 1.8%
Abgenix, Inc. 40,800 810,900
Albany Molecular Research, Inc. 25,000 743,750
Gilead Sciences, Inc. 82,500 4,310,625
Leukosite, Inc. 170,600 2,047,200
Medimmune, Inc. 146,900 9,952,475
- --------------------------------------------------------------------------------
17,864,950
- --------------------------------------------------------------------------------
BROADCASTING/RADIO/TV - 2.3%
Capstar Broadcasting Corporation, Class A 74,000 2,025,750
Chancellor Media Corporation, Class A 92,000 5,071,500
Citadel Communications Corporation 212,950 7,706,128
Clear Channel Communications, Inc. 1 69
Cox Radio, Inc., Class A 34,600 1,877,050
Hispanic Broadcasting Corporation 85,800 6,510,075
- --------------------------------------------------------------------------------
23,190,572
- --------------------------------------------------------------------------------
BUSINESS SERVICES - 2.4%
@plan.Inc. 259,850 3,897,750
Diamond Technology Partners, Inc. 127,800 2,859,525
Labor Ready, Inc. 189,450 6,157,125
Nextera Enterprises, Inc., Class A 179,500 1,155,531
On Assignment, Inc. 170,400 4,451,700
Provant, Inc. 174,800 2,720,325
StaffMark, Inc. 50,000 501,562
USWeb Corporation 104,600 2,320,812
- --------------------------------------------------------------------------------
24,064,330
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES - 2.3%
Coinstar, Inc. 285,800 8,198,887
Concord EFS, Inc. 86,500 3,660,031
MemberWorks, Inc. 57,500 1,667,500
Nielson Media Research, Inc. 149,100 4,361,175
Student Advantage, Inc. 430,000 4,085,000
Towne Services, Inc. 128,100 1,008,787
- --------------------------------------------------------------------------------
22,981,380
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 1.0%
Research in Motion, Ltd. 485,700 9,835,425
- --------------------------------------------------------------------------------
9,835,425
- --------------------------------------------------------------------------------
COMPUTER HARDWARE & COMPONENTS - 0.1%
Brocade Communications Systems, Inc. 4,450 429,147
- --------------------------------------------------------------------------------
429,147
- --------------------------------------------------------------------------------
COMPUTER SERVICES - 1.1%
Answerthink Consulting Group, Inc. 264,500 6,678,625
Cognizant Technology Solutions Corporation 85,000 2,215,312
ECsoft Group, ADR(3) 134,500 2,109,969
- --------------------------------------------------------------------------------
11,003,906
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE - 8.5%
BEA Systems, Inc. 136,200 3,890,212
Check Point Software Technologies, Ltd. 190,900 10,237,012
<CAPTION>
JUNE 30, 1999 (UNAUDITED) SHARES VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<S> <C> <C>
Concentric Networking Corporation 279,200 $ 11,098,200
Cybear, Inc. 208,450 2,905,272
ESPS, Inc. 301,200 2,240,175
Exchange Applications, Inc. 17,500 713,125
Inktomi Corporation 57,100 7,455,119
Legato Systems, Inc. 70,000 4,042,500
Macromedia, Inc. 179,400 6,323,850
Macrovision Corporation 62,000 4,642,250
Micromuse, Inc. 10,900 543,637
Rational Software Corporation 145,000 4,775,937
Sagent Technology, Inc. 27,400 236,325
SERENA Software, Inc. 25,000 335,937
Siebel Systems, Inc. 239,700 15,910,087
VERITAS Software Corporation 80,500 7,642,469
Verity, Inc. 50,000 2,709,375
- --------------------------------------------------------------------------------
85,701,482
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE & SERVICES - 4.7%
Advent Software, Inc. 48,350 3,239,450
BindView Development Corporation 146,500 3,479,375
Business Objects S.A., ADR(3) 80,000 2,920,000
Cambridge Technology Partners, Inc. 105,000 1,844,062
Concord Communications, Inc. 55,000 2,475,000
ISS Group, Inc. 108,000 4,077,000
MASTECH Corporation 221,800 4,131,025
Mercury Interactive Corporation 227,600 8,051,350
Netegrity, Inc. 377,300 6,225,450
PeopleSoft, Inc. 200,000 3,450,000
TSI International Software, Ltd. 274,200 7,780,425
- --------------------------------------------------------------------------------
47,673,137
- --------------------------------------------------------------------------------
CONSUMER & SPECIALTY RETAIL - 4.6%
1-800-Contacts, Inc. 20,000 375,000
American Eagle Outfitters, Inc. 150,000 6,825,000
Bebe Stores, Inc. 231,300 7,864,200
Cost Plus, Inc. 40,000 1,820,000
Factory 2-U Stores, Inc. 85,200 1,576,200
General Nutrition Companies, Inc. 50,000 1,165,625
Linens 'n Things, Inc. 186,500 8,159,375
Pacific Sunwear of California, Inc. 297,150 7,243,031
The J. Jill Group, Inc. 396,150 5,793,694
The Wet Seal, Inc. 193,000 5,524,625
- --------------------------------------------------------------------------------
46,346,750
- --------------------------------------------------------------------------------
DATA PROCESSING SERVICES/SYSTEM INTEGRATION - 1.3%
International Network Services, Inc. 145,250 5,864,469
SEI Investments Company(1) 78,900 6,962,925
- --------------------------------------------------------------------------------
12,827,394
- --------------------------------------------------------------------------------
EDUCATION & TRAINING - 0.3%
Education Management Corporation 139,000 2,884,250
- --------------------------------------------------------------------------------
2,884,250
- --------------------------------------------------------------------------------
ELECTRONIC COMPONENTS - 3.2%
American Power Conversion Corporation 120,000 2,415,000
Dionex Corporation 50,000 2,025,000
Power Intergrations, Inc. 214,100 15,656,062
Sawtek, Inc. 196,400 9,009,850
</TABLE>
See notes to Schedule of Investments on page 51.
The accompanying notes are an integral part of these financial statements.
39
<PAGE>
SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS -- EMERGING GROWTH FUND -- CONTINUED
<TABLE>
<CAPTION>
JUNE 30, 1999 (UNAUDITED) SHARES VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<S> <C> <C>
Teradyne, Inc. 50,000 $ 3,587,500
- --------------------------------------------------------------------------------
32,693,412
- --------------------------------------------------------------------------------
ENERGY - 0.4%
Patterson Energy, Inc. 423,800 4,185,025
- --------------------------------------------------------------------------------
4,185,025
- --------------------------------------------------------------------------------
ENERGY SERVICES - 1.6%
Cooper Cameron Corporation 263,600 9,769,675
Smith International, Inc. 151,400 6,576,438
- --------------------------------------------------------------------------------
16,346,113
- --------------------------------------------------------------------------------
ENTERTAINMENT - 0.4%
JAKKS Pacific, Inc. 136,400 4,066,425
- --------------------------------------------------------------------------------
4,066,425
- --------------------------------------------------------------------------------
ENVIRONMENTAL SERVICES - 0.3%
Superior Services, Inc. 105,200 2,807,525
- --------------------------------------------------------------------------------
2,807,525
- --------------------------------------------------------------------------------
FINANCIAL SERVICES - 3.7%
Donaldson, Lufkin & Jenrette, Inc.- DLJdirect 12,900 380,550
E-Loan, Inc. 16,300 628,569
Financial Federal Corporation 204,700 4,503,400
Investment Technology Group, Inc.(1) 120,870 3,913,166
Knight/Trimark Group, Inc. 252,600 15,234,937
MBNA Corporation(1) 212,100 6,495,562
Microfinancial, Inc.(1) 175,700 2,514,706
National Discount Brokers Group, Inc. 35,150 2,038,700
TD Waterhouse Group, Inc. 3,800 95,237
Wit Capital Group, Inc. 42,550 1,446,700
- --------------------------------------------------------------------------------
37,251,527
- --------------------------------------------------------------------------------
HEALTH CARE SERVICES - 0.2%
Covance, Inc. 65,000 1,555,938
- --------------------------------------------------------------------------------
1,555,938
- --------------------------------------------------------------------------------
INSURANCE - 0.6%
Nationwide Financial Services, Inc.(1) 102,700 4,647,175
Stewart Information Services Corporation(1) 50,000 1,056,250
- --------------------------------------------------------------------------------
5,703,425
- --------------------------------------------------------------------------------
INTERNET CAPITAL SERVICES - 13.8%
24/7 Media, Inc. 31,700 1,220,450
About.com, Inc. 73,500 3,812,812
Backweb Technologies Ltd. 1,600 43,800
CMG Information Services, Inc. 50,000 5,703,125
DoubleClick, Inc. 119,100 10,927,425
drkoop.com, Inc. 13,300 211,969
Earthlink Network, Inc. 116,800 7,175,900
Exodus Communications, Inc. 151,100 18,122,556
F5 Networks, Inc. 94,050 3,856,050
High Speed Access Corp. 17,650 452,281
Juno Online Services, Inc. 111,800 2,571,400
Lycos, Inc. 100,000 9,187,500
Mapquest.com, Inc. 23,300 380,081
MarketWatch.com, Inc. 35,000 2,060,625
MindSpring Enterprises, Inc. 260,200 11,530,112
Mpath Interactive, Inc. 32,800 721,600
Netopia, Inc. 125,100 2,846,025
Net Perceptions, Inc. 20,000 436,250
Network Solutions, Inc. 124,400 9,843,150
<CAPTION>
JUNE 30, 1999 (UNAUDITED) SHARES VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<S> <C> <C>
nFront, Inc. 58,350 $ 886,191
NorthPoint Communications Group, Inc. 116,800 4,263,200
Phone.Com, Inc. 15,350 859,600
Proxicom, Inc. 211,500 5,432,906
PSINet, Inc. 161,500 7,065,625
Ramp Networks, Inc. 31,500 450,844
RealNetworks, Inc. 68,200 4,697,275
Scient Corporation 145,900 6,939,369
Software.com, Inc. 15,400 357,087
StarMedia Network, Inc. 1,600 102,600
TheStreet.com, Inc. 10,000 360,000
USinternetworking, Inc. 123,000 5,166,000
Verio, Inc. 156,600 10,883,700
Viant Corporation 8,200 287,000
- --------------------------------------------------------------------------------
138,854,508
- --------------------------------------------------------------------------------
INTERNET COMMERCE - 3.7%
Alloy Online, Inc. 105,700 1,208,944
Amazon.com, Inc. 35,000 4,379,375
AppNet Systems, Inc. 100,000 1,343,750
Beyond.com Corporation 181,100 5,195,306
Covad Communications Group, Inc. 40,000 2,132,500
Cybersource Corporation 17,900 264,025
GoTo.com, Inc. 247,650 6,934,200
Sportsline USA, Inc. 222,100 7,967,837
Stamps.com, Inc. 7,200 126,000
Vignette Corporation 102,000 7,650,000
- --------------------------------------------------------------------------------
37,201,937
- --------------------------------------------------------------------------------
INVESTMENT MANAGEMENT - 0.4%
Waddell & Reed Financial, Inc.(1) 136,100 3,734,244
- --------------------------------------------------------------------------------
3,734,244
- --------------------------------------------------------------------------------
MEDIA - 4.7%
ACTV, Inc. 120,800 1,676,100
Century Communications Corporation, Class A 50,000 2,300,000
Emmis Broadcasting Corporation, Class A 110,900 5,475,688
Gemstar International Group, Ltd. 224,800 14,668,200
Playboy Enterprises, Inc. 90,650 2,407,891
TCA Cable TV, Inc.(1) 100,000 5,550,000
United International Holdings, Inc., Class A 70,000 4,733,750
Univision Communications, Inc. 155,500 10,263,000
Valuevision International, Inc., Class A 7,800 155,025
- --------------------------------------------------------------------------------
47,229,654
- --------------------------------------------------------------------------------
MEDICAL-BIOMEDICAL/GENETICS - 0.1%
Biogen, Inc. 20,000 1,286,250
Protein Design Labs, Inc. 7,700 170,847
- --------------------------------------------------------------------------------
1,457,097
- --------------------------------------------------------------------------------
MEDICAL-INSTRUMENTS & DEVICES - 6.1%
Biomatrix, Inc. 195,000 4,216,875
CLOSURE Medical Corporation 25,000 750,000
Cytyc Corporation 262,300 5,114,850
Eclipse Surgical Technologies, Inc. 233,900 2,529,044
Laser Vision Centers, Inc. 250,300 15,768,900
LaserSight, Inc. 70,000 1,137,500
LCA-Vision, Inc. 523,000 4,870,438
ResMed, Inc. 178,300 5,917,331
</TABLE>
See notes to Schedule of Investments on page 51.
The accompanying notes are an integral part of these financial statements.
40
<PAGE>
RS FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JUNE 30, 1999 (UNAUDITED) SHARES VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<S> <C> <C>
Summit Technology, Inc. 222,500 $ 4,895,000
TLC, The Laser Center, Inc. 80,350 3,856,800
VISIX, Inc. 94,200 7,459,463
Xomed Surgical Products, Inc. 96,600 4,703,213
- --------------------------------------------------------------------------------
61,219,414
- --------------------------------------------------------------------------------
NETWORK SYSTEMS - 1.5%
Network Appliance, Inc. 141,800 7,923,075
Novell, Inc. 275,000 7,287,500
- --------------------------------------------------------------------------------
15,210,575
- --------------------------------------------------------------------------------
PHARMACEUTICALS - 0.4%
Dusa Pharmaceuticals, Inc. 175,700 2,031,531
Pharmacyclics, Inc. 40,900 1,145,200
VaxGen, Inc. 80,100 1,311,637
- --------------------------------------------------------------------------------
4,488,368
- --------------------------------------------------------------------------------
REAL ESTATE - 0.9%
CB Richard Ellis Services, Inc. 265,400 6,601,825
Trammell Crow Company 164,200 2,699,038
- --------------------------------------------------------------------------------
9,300,863
- --------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST - 0.2%
Patriot American Hospitality, Inc.(1) 497,200 2,237,400
- --------------------------------------------------------------------------------
2,237,400
- --------------------------------------------------------------------------------
RESTAURANTS - 0.2%
Garden Fresh Restaurant Corporation 50,000 937,500
PJ America, Inc. 61,000 1,292,438
- --------------------------------------------------------------------------------
2,229,938
- --------------------------------------------------------------------------------
SEMICONDUCTORS & COMPONENTS - 6.8%
Alpha Industries, Inc. 100,000 4,762,500
American Xtal Technology, Inc. 20,000 476,250
Applied Micro Circuits Corporation 101,648 8,360,548
Conexant Systems, Inc. 141,900 8,239,069
Cree Research, Inc. 218,100 16,780,069
Dupont Photomasks, Inc. 7,500 359,063
Genesis Microchip, Inc. 167,600 3,959,550
KLA-Tencor Corporation 25,000 1,621,875
Lam Research Corporation 50,000 2,334,375
MIPS Technologies, Inc. 50,000 2,396,875
MKS Instruments, Inc. 50,000 931,250
Novellus Systems, Inc. 25,000 1,706,250
TranSwitch Corporation 229,000 10,848,875
Triquint Semiconductor, Inc. 107,000 6,078,938
- --------------------------------------------------------------------------------
68,855,487
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS - 4.9%
Allegiance Telecom, Inc. 259,200 14,223,600
EchoStar Communications Corporation 108,600 16,663,313
Harmonic, Inc. 45,000 2,584,688
Metromedia Fiber Network, Inc., Class A 125,800 4,520,938
Metro One Telecommunications, Inc. 50,000 687,500
Midcom Communications, Inc. 60,000 2,100
Primus Telecommunications Group, Inc. 488,000 10,949,500
- --------------------------------------------------------------------------------
49,631,639
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT - 2.1%
American Tower Corporation, Class A 176,900 4,245,600
ANADIGICS, Inc. 60,000 2,220,000
<CAPTION>
JUNE 30, 1999 (UNAUDITED) SHARES VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<S> <C> <C>
ANTEC Corporation 65,000 $ 2,084,063
Ditech Communications Corp. 125,500 2,510,000
Pinnacle Holdings, Inc. 90,000 2,205,000
RF Micro Devices, Inc. 104,200 7,775,925
- --------------------------------------------------------------------------------
21,040,588
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS SERVICES - 5.7%
CapRock Communications Corporation 189,700 7,682,850
Cox Communications, Inc. 117,800 4,336,512
Destia Communications, Inc. 163,250 2,020,219
DSET Corporation 239,800 3,342,213
ICG Communications, Inc. 270,700 5,786,213
McLeodUSA, Inc. 119,800 6,589,000
Nextlink Communications, Inc. 66,400 4,938,500
PanAmSat Corporation 200,600 7,810,863
Powerwave Technologies, Inc. 125,000 4,031,250
Teligent, Inc., Class A 69,900 4,180,894
Viatel, Inc. 116,200 6,521,725
- --------------------------------------------------------------------------------
57,240,239
- --------------------------------------------------------------------------------
TEXTILE-APPAREL MANUFACTURING - 0.8%
Quicksilver, Inc. 207,050 5,396,241
Tarrant Apparel Group 104,800 2,384,200
- --------------------------------------------------------------------------------
7,780,441
- --------------------------------------------------------------------------------
TRANSPORTATION - 0.3%
Forward Air Corporation 111,000 3,121,875
- --------------------------------------------------------------------------------
3,121,875
- --------------------------------------------------------------------------------
TRAVEL SERVICES - 1.2%
Extended Stay America, Inc. 435,800 5,229,600
Four Seasons Hotels, Inc.(1) 161,300 7,107,281
Interstate Hotels Corp. 16,573 68,365
- --------------------------------------------------------------------------------
12,405,246
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS (Cost $740,500,219) 973,176,710
<CAPTION>
PAR VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<S> <C> <C>
CONVERTIBLE BONDS - 0.0%
- --------------------------------------------------------------------------------
Midcom Communications, Inc., 8.25%,
Due 8/15/03, 144A(4,7,10) 1,000,000 160,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL CONVERTIBLE BONDS (Cost $1,000,000) 160,000
<CAPTION>
VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHORT TERM INVESTMENTS - 3.8%
- --------------------------------------------------------------------------------
Temporary Investment Cash Fund 18,973,359
Temporary Investment Fund 18,973,359
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL SHORT TERM INVESTMENTS (Cost $37,946,718) 37,946,718
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.4% (Cost $779,446,937) 1,011,283,428
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OTHER LIABILITIES, NET - (0.4%) (3,581,336)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL NET ASSETS - 100.0% $1,007,702,092
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
See notes to Schedule of Investments on page 51.
The accompanying notes are an integral part of these financial statements.
41
<PAGE>
SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS -- GLOBAL NATURAL RESOURCES FUND
<TABLE>
<CAPTION>
JUNE 30, 1999 (UNAUDITED) FOREIGN CURRENCY(2) SHARES VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMON STOCKS - 99.5%
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
ALUMINUM - 4.6%
MAXXAM, Inc. 24,700 $ 1,593,150
- --------------------------------------------------------------------------------
1,593,150
- --------------------------------------------------------------------------------
ENERGY - 66.4%
Anadarko Petroleum Corporation(1) 32,000 1,178,000
Anderson Exploration, Ltd. CAD 120,000 1,568,866
Beau Canada Exploration, Ltd. CAD 504,600 767,103
Berkley Petroleum Corporation CAD 160,000 1,335,090
Burlington Resources, Inc.(1) 23,000 994,750
Calahoo Petroleum, Ltd. CAD 633,333 898,618
Canadian Hunter Exploration, Ltd. CAD 155,000 2,324,921
Cypress Energy, Inc., Class A CAD 207,611 834,624
EEX Corporation 162,300 1,125,956
Enron Corporation 10,000 817,500
Evergreen Resources, Inc. 20,000 503,750
Eurogas Corporation CAD 637,514 90,455
Ocean Energy, Inc. 152,500 1,467,813
Oiltec Resources, Ltd. CAD 1,730,000 1,268,234
Pennaco Energy, Inc. 50,000 587,500
PennzEnergy Company(1) 110,000 1,835,625
Petro-Canada(1) CAD 100,000 1,358,062
Petsec Energy, Ltd., ADR(3) 14,748 23,966
Place Resources Corporation CAD 642,100 1,323,202
Plains Resources, Inc. 100,000 1,900,000
Purcell Energy, Ltd. CAD 539,300 816,210
- --------------------------------------------------------------------------------
23,020,245
- --------------------------------------------------------------------------------
ENERGY SERVICES - 3.7%
Bowridge Resource Group, Inc. CAD 361,000 143,907
Shaw Industries, Ltd., Class A(1) CAD 120,300 1,125,742
- --------------------------------------------------------------------------------
1,269,649
- --------------------------------------------------------------------------------
FINANCIAL SERVICES - 1.8%
Dundee Bancorp, Class A CAD 59,000 623,864
- --------------------------------------------------------------------------------
623,864
- --------------------------------------------------------------------------------
FOOD - 4.3%
Fresh Del Monte Produce, Inc. 107,000 1,511,375
- --------------------------------------------------------------------------------
1,511,375
- --------------------------------------------------------------------------------
GOLD MINING - 0.3%
St. Jude Resources, Ltd. CAD 135,000 59,289
St. Jude Resources, Ltd., 144A(7) CAD 82,500 36,232
- --------------------------------------------------------------------------------
95,521
- --------------------------------------------------------------------------------
PAPER & FOREST - 5.5%
Alliance Forest Products, Inc. CAD 136,300 1,671,460
Fletcher Challenge Canada, Ltd.(1) CAD 20,000 227,695
- --------------------------------------------------------------------------------
1,899,155
- --------------------------------------------------------------------------------
PLATINUM GROUP METALS - 0.1%
African Minerals, Ltd., Restricted(4,5) 203,624 30,136
- --------------------------------------------------------------------------------
30,136
- --------------------------------------------------------------------------------
<CAPTION>
JUNE 30, 1999 (UNAUDITED) FOREIGN CURRENCY(2) SHARES VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
REAL ESTATE - 5.9%
Brookfield Properties Corporation(1) CAD 100,000 $ 1,293,875
Cadillac Fairview Corporation CAD 40,000 749,975
- --------------------------------------------------------------------------------
2,043,850
- --------------------------------------------------------------------------------
UTILITIES/PIPELINES - 6.9%
Western Gas Resources, Inc.(1) 150,000 2,400,000
- --------------------------------------------------------------------------------
2,400,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS (Cost $32,340,031) 34,486,945
- --------------------------------------------------------------------------------
FOREIGN CURRENCY(2) SHARES VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
WARRANTS - 0.0%
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Solomon Resources, Ltd., 1/2 Warrants,
Strike CAD 1.05, Expire 7/19/99(6) CAD 37,500 -
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL WARRANTS (Cost $6,219) -
- --------------------------------------------------------------------------------
<CAPTION>
VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHORT TERM INVESTMENTS - 1.1%
- --------------------------------------------------------------------------------
<S> <C>
Temporary Investment Cash Fund 185,691
Temporary Investment Fund 185,692
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL SHORT TERM INVESTMENTS (Cost $371,383) 371,383
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.6% (Cost $32,717,633) 34,858,328
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OTHER LIABILITIES, NET - (0.6%) (193,672)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL NET ASSETS - 100.0% $34,664,656
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
See notes to Schedule of Investments on page 51.
The accompanying notes are an integral part of these financial statements.
42
<PAGE>
RS FUNDS
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS -- GLOBAL VALUE FUND
<TABLE>
<CAPTION>
JUNE 30, 1999 (UNAUDITED) FOREIGN CURRENCY(2) SHARES VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMON STOCKS - 84.4%
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
CONSTRUCTION/INFRASTRUCTURE - 12.1%
Lafarge Corporation(1) 10,000 $ 354,375
Southdown, Inc.(1) 7,300 469,025
- --------------------------------------------------------------------------------
823,400
- --------------------------------------------------------------------------------
CONSUMER & SPECIALTY RETAIL - 10.4%
Kmart Corporation 20,000 328,750
Payless ShoeSource, Inc. 7,000 374,500
- --------------------------------------------------------------------------------
703,250
- --------------------------------------------------------------------------------
ENERGY - 17.9%
K N Energy, Inc.(1) 20,000 267,500
Texaco, Inc.(1) 9,000 562,500
The Coastal Corporation(1) 9,500 380,000
- --------------------------------------------------------------------------------
1,210,000
- --------------------------------------------------------------------------------
ENERGY SERVICES - 10.5%
Nevada Power Company(1) 13,000 325,000
Unicom Corporation(1) 10,000 385,625
- --------------------------------------------------------------------------------
710,625
- --------------------------------------------------------------------------------
INSURANCE - 6.6%
CIGNA Corporation(1) 5,000 445,000
- --------------------------------------------------------------------------------
445,000
- --------------------------------------------------------------------------------
REAL ESTATE - 7.2%
Brookfield Properties Corporation(1) CAD 37,700 487,791
- --------------------------------------------------------------------------------
487,791
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS - 6.2%
Telecom Italia S.p.A., ADR(1,3) 2,500 262,969
Telecom Italia S.p.A.(1) ITL 15,000 155,927
- --------------------------------------------------------------------------------
418,896
- --------------------------------------------------------------------------------
TEXTILE-APPAREL MANUFACTURING - 13.5%
Jones Apparel Group, Inc. 16,000 549,000
Liz Claiborne, Inc.(1) 10,000 365,000
- --------------------------------------------------------------------------------
914,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS (Cost $4,840,308) 5,712,962
- --------------------------------------------------------------------------------
<CAPTION>
VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHORT TERM INVESTMENTS - 10.0%
<S> <C>
Temporary Investment Cash Fund 337,275
Temporary Investment Fund 337,275
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL SHORT TERM INVESTMENTS (Cost $674,550) $ 674,550
<CAPTION>
JUNE 30, 1999 (UNAUDITED) FOREIGN CURRENCY(2) SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
TOTAL INVESTMENTS - 94.4% (Cost $5,514,858) $ 6,387,512
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OTHER ASSETS, NET - 5.6% 379,123
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL NET ASSETS - 100.0% $ 6,766,635
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
See notes to Schedule of Investments on page 51.
The accompanying notes are an integral part of these financial statements.
43
<PAGE>
SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS -- THE INFORMATION AGE FUND-TM-
<TABLE>
<CAPTION>
JUNE 30, 1999 (UNAUDITED) SHARES VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMON STOCKS - 99.4%
- --------------------------------------------------------------------------------
<S> <C> <C>
BIOTECHNOLOGY - 1.9%
Immunex Corporation 27,500 $ 3,504,531
- --------------------------------------------------------------------------------
3,504,531
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT & SERVICES - 6.4%
Cisco Systems, Inc. 187,914 12,120,453
- --------------------------------------------------------------------------------
12,120,453
- --------------------------------------------------------------------------------
COMPUTER HARDWARE & COMPONENTS - 8.8%
Applied Materials, Inc. 91,800 6,781,725
EMC Corporation 108,400 5,962,000
Gateway, Inc. 65,000 3,835,000
- --------------------------------------------------------------------------------
16,578,725
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE - 10.9%
BMC Software, Inc. 60,000 3,240,000
Legato Systems, Inc. 65,000 3,753,750
Microsoft Corporation 130,000 11,724,375
Oracle Systems Corporation 50,000 1,856,250
- --------------------------------------------------------------------------------
20,574,375
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE & SERVICES - 7.1%
Compuware Corporation 130,000 4,135,625
Intuit, Inc. 46,000 4,145,750
Sapient Corporation 90,000 5,096,250
- --------------------------------------------------------------------------------
13,377,625
- --------------------------------------------------------------------------------
ELECTRONIC COMPONENTS - 7.8%
Solectron Corporation 94,400 6,295,300
Teradyne, Inc. 117,000 8,394,750
- --------------------------------------------------------------------------------
14,690,050
- --------------------------------------------------------------------------------
INTERNET CAPITAL SERVICES - 9.5%
America Online, Inc. 101,100 11,171,550
E*TRADE Group, Inc. 50,000 1,996,875
Yahoo!, Inc. 27,600 4,754,100
- --------------------------------------------------------------------------------
17,922,525
- --------------------------------------------------------------------------------
INVESTMENT MANAGEMENT - 3.1%
Ameritrade Holding Corp., Class A 22,000 2,332,000
Charles Schwab Corporation(1) 32,500 3,570,937
- --------------------------------------------------------------------------------
5,902,937
- --------------------------------------------------------------------------------
MEDICAL-BIOMEDICAL/GENETICS - 1.0%
Biogen, Inc. 30,200 1,942,238
- --------------------------------------------------------------------------------
1,942,238
- --------------------------------------------------------------------------------
SEMICONDUCTORS & COMPONENTS - 23.3%
Altera Corporation 90,000 3,313,125
Intel Corporation(1) 86,600 5,152,700
Level One Communications, Inc. 108,000 5,285,250
LSI Logic Corporation 126,000 5,811,750
Motorola, Inc.(1) 48,000 4,548,000
Novellus Systems, Inc. 66,000 4,504,500
Texas Instruments, Inc.(1) 55,000 7,975,000
Xilinx, Inc. 128,500 7,356,625
- --------------------------------------------------------------------------------
43,946,950
- --------------------------------------------------------------------------------
<CAPTION>
JUNE 30, 1999 (UNAUDITED) SHARES VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT - 11.2%
<S> <C> <C>
Lucent Technologies, Inc.(1) 150,750 $ 10,166,203
QUALCOMM, Inc. 30,000 4,305,000
Uniphase Corporation 40,000 6,640,000
- --------------------------------------------------------------------------------
21,111,203
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES - 8.4%
General Instrument Corp. 73,000 3,102,500
MCI WorldCom, Inc. 61,800 5,330,250
Nokia Corporation - ADR(1,3) 80,800 7,398,250
- --------------------------------------------------------------------------------
15,831,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS (Cost $118,955,814) 187,502,612
- --------------------------------------------------------------------------------
<CAPTION>
VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHORT TERM INVESTMENTS - 1.9%
- --------------------------------------------------------------------------------
<S> <C>
Temporary Investment Cash Fund 1,822,400
Temporary Investment Fund 1,822,399
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL SHORT TERM INVESTMENTS (Cost $3,644,799) 3,644,799
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS - 101.3% (Cost $122,600,613) 191,147,411
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OTHER LIABILITIES, NET - (1.3%) (2,554,619)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL NET ASSETS - 100.0% $188,592,792
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
See notes to Schedule of Investments on page 51.
The accompanying notes are an integral part of these financial statements.
44
<PAGE>
RS FUNDS
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS -- MICROCAP GROWTH FUND
<TABLE>
<CAPTION>
JUNE 30, 1999 (UNAUDITED) SHARES VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 92.9%
- --------------------------------------------------------------------------------
Aerospace - 0.6%
REMEC, Inc. 30,000 $ 483,750
- --------------------------------------------------------------------------------
483,750
- --------------------------------------------------------------------------------
AUTOMOBILES & OTHER MOTOR VEHICLES - 0.7%
Rush Entertprises, Inc. 40,000 645,000
- --------------------------------------------------------------------------------
645,000
- --------------------------------------------------------------------------------
BIOTECHNOLOGY - 1.0%
LifeCell Corporation 210,000 866,250
- --------------------------------------------------------------------------------
866,250
- --------------------------------------------------------------------------------
BROADCASTING/RADIO/TV - 1.1%
Medialink Worldwide, Inc. 60,000 960,000
- --------------------------------------------------------------------------------
960,000
- --------------------------------------------------------------------------------
CHEMICALS - 0.6%
Eco Soil Systems, Inc. 95,000 510,625
- --------------------------------------------------------------------------------
510,625
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES - 7.8%
Abacus Direct Corporation 9,900 905,850
Coinstar, Inc. 85,000 2,438,437
Condor Technology Solutions, Inc. 40,000 187,500
Cornell Corrections, Inc. 80,000 1,315,000
International Telecommunication Data Systems, Inc. 45,000 720,000
Novacare Employee Services Corporation 11,500 31,625
Optimal Robotics Corporation 50,000 496,875
Towne Services, Inc. 85,000 669,375
- --------------------------------------------------------------------------------
6,764,662
- --------------------------------------------------------------------------------
COMPUTER HARDWARE & COMPONENTS - 2.3%
Cybex Computer Products Corporation 55,000 1,533,125
ThrustMaster, Inc. 20,000 480,000
- --------------------------------------------------------------------------------
2,013,125
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE - 6.8%
AremisSoft Corporation 70,000 310,625
ESPS, Inc. 50,000 371,875
InterVU, Inc. 31,500 1,206,844
MySoftware Company 57,500 888,555
Pervasive Software, Inc. 85,000 2,114,375
QRS Corporation 13,000 1,014,000
- --------------------------------------------------------------------------------
5,906,274
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE & SERVICES - 2.9%
Netegrity, Inc. 30,000 495,000
Vista Information Solutions, Inc. 177,500 2,052,344
- --------------------------------------------------------------------------------
2,547,344
- --------------------------------------------------------------------------------
CONSTRUCTION/INFRASTRUCTURE - 1.2%
Trex Company, Inc. 40,000 1,015,000
- --------------------------------------------------------------------------------
1,015,000
- --------------------------------------------------------------------------------
CONSULTING SERVICES - 0.7%
Superior Consultant Holdings Corporation 25,000 617,187
- --------------------------------------------------------------------------------
617,187
- --------------------------------------------------------------------------------
<CAPTION>
JUNE 30, 1999 (UNAUDITED) SHARES VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<S> <C> <C>
CONSUMER & SPECIALTY RETAIL - 8.7%
1-800-Contacts, Inc. 35,000 $ 656,250
Blue Rhino Corporation 45,200 415,275
Cost Plus, Inc. 30,000 1,365,000
Enamelon, Inc. 120,000 150,000
Happy Kids, Inc. 25,000 217,187
Hibbit Sporting Goods, Inc. 30,000 660,000
Hot Topic, Inc. 50,000 1,350,000
MarineMax, Inc. 20,000 236,250
Movie Gallery, Inc. 75,000 403,125
Natrol, Inc. 65,000 487,500
Paul Harris Stores, Inc. 20,900 142,381
Rent Way, Inc. 50,000 1,231,250
U.S. Home & Garden, Inc. 55,000 206,250
- --------------------------------------------------------------------------------
7,520,468
- --------------------------------------------------------------------------------
DATA PROCESSING SERVICES - 1.8%
Best Software, Inc. 52,800 851,400
Intercept Group, Inc. 45,000 697,500
- --------------------------------------------------------------------------------
1,548,900
- --------------------------------------------------------------------------------
EDUCATION & TRAINING - 1.3%
Bright Horizons Family Solutions, Inc. 26,600 502,075
Career Education Corporation 20,000 676,250
- --------------------------------------------------------------------------------
1,178,325
- --------------------------------------------------------------------------------
ELECTRONIC COMPONENTS - 7.2%
Aavid Thermal Technologies, Inc. 73,300 1,658,412
Interlink Electronics, Inc. 50,000 496,875
Meade Instruments Corporation 45,000 776,250
Photon Dynamics, Inc. 50,000 600,000
Power Intergrations, Inc. 30,000 2,193,750
Universal Electronics, Inc. 20,000 561,250
- --------------------------------------------------------------------------------
6,286,537
- --------------------------------------------------------------------------------
FINANCIAL SERVICES - 1.9%
Creditrust Corporation 40,000 1,110,000
Rock Financial Corporation(1) 35,000 546,875
- --------------------------------------------------------------------------------
1,656,875
- --------------------------------------------------------------------------------
HEALTH CARE SERVICES - 4.4%
CareMatrix Corporation 50,000 621,875
MEDE AMERICA Corporation 25,000 943,750
MedQuist, Inc. 25,000 1,093,750
Res-Care, Inc. 50,000 1,137,500
- --------------------------------------------------------------------------------
3,796,875
- --------------------------------------------------------------------------------
INSURANCE - 1.2%
Annuity and Life Re(Holdings), Ltd.(1) 45,000 1,009,687
- --------------------------------------------------------------------------------
1,009,687
- --------------------------------------------------------------------------------
INTERNET CAPITAL SERVICES - 1.8%
About.com, Inc. 4,000 207,500
Crosswalk.com, Inc. 35,000 341,250
drkoop.com, Inc. 7,500 119,531
</TABLE>
See notes to Schedule of Investments on page 51.
The accompanying notes are an integral part of these financial statements.
45
<PAGE>
SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS -- MICROCAP GROWTH FUND -- CONTINUED
<TABLE>
<CAPTION>
JUNE 30, 1999 (UNAUDITED) SHARES VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<S> <C> <C>
Multex.com, Inc. 14,500 $ 378,813
NetGravity, Inc. 20,000 455,000
Onesource Information Services, Inc. 10,000 87,500
- --------------------------------------------------------------------------------
1,589,594
- --------------------------------------------------------------------------------
LEISURE - 0.6%
American Coin Merchandising, Inc. 74,900 486,850
- --------------------------------------------------------------------------------
486,850
- --------------------------------------------------------------------------------
MACHINERY - 0.7%
Asyst Technologies, Inc. 20,000 598,750
- --------------------------------------------------------------------------------
598,750
- --------------------------------------------------------------------------------
MANUFACTURING - 1.9%
FARO Technologies, Inc. 115,000 575,000
Koala Corporation 40,000 1,070,000
- --------------------------------------------------------------------------------
1,645,000
- --------------------------------------------------------------------------------
MEDIA - 1.1%
Faroudja, Inc. 190,000 534,375
LodgeNet Entertainment Corporation 30,000 418,125
- --------------------------------------------------------------------------------
952,500
- --------------------------------------------------------------------------------
MEDICAL-INSTRUMENTS & DEVICES - 3.5%
Closure Medical Corporation 35,000 1,050,000
LCA-Vision, Inc. 70,000 651,875
Photoelectron Corporation 75,000 234,375
ZEVEX International, Inc. 210,000 1,089,375
- --------------------------------------------------------------------------------
3,025,625
- --------------------------------------------------------------------------------
MEDICAL SUPPLIES - 1.6%
Molecular Devices Corporation 37,500 1,406,250
- --------------------------------------------------------------------------------
1,406,250
- --------------------------------------------------------------------------------
MISCELLANEOUS - 1.6%
Rainbow Rentals, Inc. 125,000 1,437,500
- --------------------------------------------------------------------------------
1,437,500
- --------------------------------------------------------------------------------
NETWORK SYSTEMS - 2.1%
Performance Technologies, Inc. 90,000 1,811,250
- --------------------------------------------------------------------------------
1,811,250
- --------------------------------------------------------------------------------
PHARMACEUTICALS - 2.0%
Anesta Corp. 25,000 510,938
Kendle International, Inc. 75,000 1,200,000
- --------------------------------------------------------------------------------
1,710,938
- --------------------------------------------------------------------------------
RESEARCH & DEVELOPMENT - 1.2%
Albany Molecular Research, Inc. 35,000 1,041,250
- --------------------------------------------------------------------------------
1,041,250
- --------------------------------------------------------------------------------
RESTAURANTS - 3.1%
Garden Fresh Restaurant Corporation 60,000 1,125,000
PJ America, Inc. 45,000 953,438
RARE Hospitality International, Inc. 25,000 637,500
- --------------------------------------------------------------------------------
2,715,938
- --------------------------------------------------------------------------------
SEMICONDUCTORS - 11.4%
American Xtal Technology, Inc. 80,000 1,905,000
AstroPower, Inc. 40,000 700,000
ATMI, Inc. 49,300 1,466,675
<CAPTION>
JUNE 30, 1999 (UNAUDITED) SHARES VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<S> <C> <C>
Cerprobe Corporation 45,000 $ 450,000
Cree Research, Inc. 30,000 2,308,125
hi/fn Inc. 14,500 1,103,813
QLogic Corporation 15,000 1,980,000
- --------------------------------------------------------------------------------
9,913,613
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS - 1.2%
Metro One Telecommunications, Inc. 75,000 1,031,250
- --------------------------------------------------------------------------------
1,031,250
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT - 0.5%
P-Com, Inc. 80,000 418,750
- --------------------------------------------------------------------------------
418,750
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS SERVICES - 5.6%
Adaptive Broadband Corporation 20,000 437,500
CapRock Communications Corporation 50,000 2,025,000
Powerwave Technologies, Inc. 20,000 645,000
Transaction Network Services, Inc. 60,000 1,755,000
- --------------------------------------------------------------------------------
4,862,500
- --------------------------------------------------------------------------------
TEXTILE-APPAREL & MANUFACTURING - 0.6%
Gildan Activewear, Inc. 30,000 506,250
- --------------------------------------------------------------------------------
506,250
- --------------------------------------------------------------------------------
TRAVEL SERVICES - 0.2%
ResortQuest International, Inc. 20,200 166,650
- --------------------------------------------------------------------------------
166,650
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS (Cost $57,513,420) 80,647,342
- --------------------------------------------------------------------------------
<CAPTION>
VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<S> <C>
SHORT TERM INVESTMENTS - 6.3%
Temporary Investment Cash Fund 2,734,061
Temporary Investment Fund 2,734,061
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL SHORT TERM INVESTMENTS (Cost $5,468,122) 5,468,122
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS - 99.2% (Cost $62,981,542) 86,115,464
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OTHER ASSETS, NET - 0.8% 712,839
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL NET ASSETS - 100.0% $86,828,303
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
See notes to Schedule of Investments on page 51.
The accompanying notes are an integral part of these financial statements.
46
<PAGE>
RS FUNDS
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS -- MIDCAP OPPORTUNITIES FUND
<TABLE>
<CAPTION>
JUNE 30, 1999 (UNAUDITED) SHARES VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMON STOCKS - 89.7%
- --------------------------------------------------------------------------------
<S> <C> <C>
Aerospace - 1.7%
Alliant Techsystems, Inc. 40,000 $ 3,460,000
- --------------------------------------------------------------------------------
3,460,000
- --------------------------------------------------------------------------------
AGRICULTURAL PRODUCTS - 1.0%
Seminis, Inc. 135,000 2,033,437
- --------------------------------------------------------------------------------
2,033,437
- --------------------------------------------------------------------------------
AIRLINES - 0.9%
Northwest Airlines Corporation 55,000 1,787,500
- --------------------------------------------------------------------------------
1,787,500
- --------------------------------------------------------------------------------
BANKS - 1.0%
Fleet Financial Group, Inc.(1) 45,000 1,996,875
- --------------------------------------------------------------------------------
1,996,875
- --------------------------------------------------------------------------------
BUSINESS SERVICES - 1.8%
Administaff, Inc. 185,000 2,960,000
United Shipping & Technology, Inc. 220,000 632,500
- --------------------------------------------------------------------------------
3,592,500
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES - 1.0%
Quintiles Transnational Corporation 45,000 1,890,000
- --------------------------------------------------------------------------------
1,890,000
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 1.0%
Research in Motion, Ltd. 100,000 2,025,000
- --------------------------------------------------------------------------------
2,025,000
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE - 2.4%
Concentric Networking Corporation 50,000 1,987,500
Macromedia, Inc. 45,000 1,586,250
SalesLogix Corporation 73,800 1,097,775
- --------------------------------------------------------------------------------
4,671,525
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE & SERVICES - 2.5%
Comverse Technology, Inc. 27,000 2,038,500
Intuit, Inc. 16,000 1,442,000
PeopleSoft, Inc. 85,000 1,466,250
- --------------------------------------------------------------------------------
4,946,750
- --------------------------------------------------------------------------------
CONSTRUCTION/INFRASTRUCTURE - 2.0%
Fleetwood Enterprises, Inc.(1) 60,000 1,586,250
Texas Industries, Inc.(1) 60,000 2,325,000
- --------------------------------------------------------------------------------
3,911,250
- --------------------------------------------------------------------------------
CONSULTING SERVICES - 1.9%
Comdisco, Inc.(1) 145,000 3,715,625
- --------------------------------------------------------------------------------
3,715,625
- --------------------------------------------------------------------------------
CONSUMER & SPECIALTY RETAIL - 5.7%
American Eagle Outfitters 40,000 1,820,000
Linens 'N Things, Inc. 52,500 2,296,875
Payless ShoeSource, Inc. 40,000 2,140,000
Pep Boys Manny, Moe & Jack(1) 90,000 1,946,250
Tandy Corporation(1) 60,000 2,932,500
- --------------------------------------------------------------------------------
11,135,625
- --------------------------------------------------------------------------------
<CAPTION>
JUNE 30, 1999 (UNAUDITED) SHARES VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONSUMER PRODUCTS & SERVICES - 0.9%
Dial Corporation(1) 45,000 $ 1,673,437
- --------------------------------------------------------------------------------
1,673,437
- --------------------------------------------------------------------------------
DATA PROCESSING SERVICES - 1.0%
First Data Corporation(1) 40,000 1,957,500
- --------------------------------------------------------------------------------
1,957,500
- --------------------------------------------------------------------------------
DISTRIBUTION/WHOLESALE - 1.0%
WESCO International, Inc. 96,500 1,978,250
- --------------------------------------------------------------------------------
1,978,250
- --------------------------------------------------------------------------------
ELECTRONIC COMPONENTS - 7.2%
Altera Corporation 52,500 1,932,656
American Power Conversion Corporation 150,000 3,018,750
EG & G, Inc.(1) 55,000 1,959,375
Jabil Circuit, Inc. 62,000 2,797,750
Millipore Corporation 50,000 2,028,125
Teradyne, Inc. 35,000 2,511,250
- --------------------------------------------------------------------------------
14,247,906
- --------------------------------------------------------------------------------
ENERGY - 1.0%
Anadarko Petroleum Corporation(1) 51,500 1,895,844
- --------------------------------------------------------------------------------
1,895,844
- --------------------------------------------------------------------------------
ENERGY SERVICES - 11.3%
Apache Corporation(1) 65,000 2,535,000
Baker Hughes, Inc.(1) 65,000 2,177,500
BJ Services Company 55,000 1,619,062
ENSCO International, Inc.(1) 130,000 2,591,875
Montana Power Company(1) 48,500 3,419,250
Noble Drilling Corporation 50,000 984,375
Potomac Electric Power Company(1) 80,000 2,355,000
Rowan Companies, Inc. 100,000 1,843,750
Tidewater, Inc.(1) 50,000 1,525,000
Tosco Corporation(1) 65,000 1,685,937
Weatherford International, Inc. 40,000 1,465,000
- --------------------------------------------------------------------------------
22,201,749
- --------------------------------------------------------------------------------
ENTERTAINMENT - 0.8%
SFX Entertainment, Inc. 25,000 1,664,062
- --------------------------------------------------------------------------------
1,664,062
- --------------------------------------------------------------------------------
ENVIRONMENTAL SERVICES - 2.4%
Republic Services, Inc. 100,000 2,475,000
Waste Management, Inc.(1) 40,000 2,150,000
- --------------------------------------------------------------------------------
4,625,000
- --------------------------------------------------------------------------------
FINANCIAL SERVICES - 3.0%
First Sierra Financial, Inc. 165,100 4,127,500
Golden State Bancorp, Inc. 80,000 1,760,000
- --------------------------------------------------------------------------------
5,887,500
- --------------------------------------------------------------------------------
INSURANCE - 0.5%
Core Cap Inc., Class A Restricted(4,5) 75,000 1,045,500
- --------------------------------------------------------------------------------
1,045,500
- --------------------------------------------------------------------------------
</TABLE>
See notes to Schedule of Investments on page 51.
The accompanying notes are an integral part of these financial statements.
47
<PAGE>
SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS -- MIDCAP OPPORTUNITIES FUND -- CONTINUED
<TABLE>
<CAPTION>
JUNE 30, 1999 (UNAUDITED) SHARES VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<S> <C> <C>
INTERNET CAPITAL SERVICES - 1.1%
EDGAR Online, Inc. 65,000 $ 520,000
Security First Technologies Corporation 37,500 1,692,187
- --------------------------------------------------------------------------------
2,212,187
- --------------------------------------------------------------------------------
MANUFACTURING - 1.1%
Tyco International Ltd.(1) 22,000 2,084,500
- --------------------------------------------------------------------------------
2,084,500
- --------------------------------------------------------------------------------
MEDIA - 8.6%
Adelphia Communications Corporation, Class A 25,000 1,590,625
AT&T Corporation - Liberty Media Group, Grade A 150,000 5,512,500
Gemstar International Group, Ltd. 27,500 1,794,375
MediaOne Group, Inc. 60,000 4,462,500
The Kushner-Locke Company 175,000 1,137,500
Univision Communications, Inc. 38,000 2,508,000
- --------------------------------------------------------------------------------
17,005,500
- --------------------------------------------------------------------------------
MEDICAL INSTRUMENTS & DEVICES - 2.2%
MiniMed, Inc. 30,000 2,308,125
TLC, The Laser Center, Inc. 41,750 2,004,000
- --------------------------------------------------------------------------------
4,312,125
- --------------------------------------------------------------------------------
NETWORK SYSTEMS - 2.3%
Adaptec, Inc. 65,000 2,295,312
Novell, Inc. 85,000 2,252,500
- --------------------------------------------------------------------------------
4,547,812
- --------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS - 1.0%
Mead Corporation(1) 45,000 1,878,750
- --------------------------------------------------------------------------------
1,878,750
- --------------------------------------------------------------------------------
PHARMACEUTICALS - 0.9%
Cephalon, Inc. 100,000 1,737,500
- --------------------------------------------------------------------------------
1,737,500
- --------------------------------------------------------------------------------
R.E.I.T. - 0.5%
FBR Asset Investment Corporation 75,000 1,012,500
- --------------------------------------------------------------------------------
1,012,500
- --------------------------------------------------------------------------------
RENTAL AUTO/EQUIPMENT - 0.9%
Avis Rent A Car, Inc. 60,000 1,747,500
- --------------------------------------------------------------------------------
1,747,500
- --------------------------------------------------------------------------------
SEMICONDUCTORS & COMPONENTS - 2.3%
Lam Research Corporation 45,000 2,100,937
Motorola, Inc.(1) 25,000 2,368,750
- --------------------------------------------------------------------------------
4,469,687
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS - 3.4%
EchoStar Communications Corporation 20,000 3,068,750
ICG Communications, Inc. 50,000 1,068,750
Primus Telecommunications Group, Inc. 110,000 2,468,125
- --------------------------------------------------------------------------------
6,605,625
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT - 8.0%
ADC Telecommunications, Inc. 35,000 1,594,687
Associated Group, Inc. 30,000 1,955,625
CIENA Corporation 55,000 1,660,313
Digital Microwave Corporation 50,000 637,500
<CAPTION>
JUNE 30, 1999 (UNAUDITED) SHARES VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<S> <C> <C>
DSP Communications, Inc. 75,000 $ 2,165,625
Excel Switching Corporation 85,000 2,544,688
Picturetel, Inc. 120,000 960,000
RF Micro Devices, Inc. 30,500 2,276,063
Uniphase Corporation 12,000 1,992,000
- --------------------------------------------------------------------------------
15,786,501
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES - 3.4%
CapRock Communications Corporation 120,000 4,860,000
Western Wireless Corporation, Class A 70,000 1,890,000
- --------------------------------------------------------------------------------
6,750,000
- --------------------------------------------------------------------------------
TRANSPORTATION - 0.6%
Knightsbridge Tankers Ltd.(1) 70,000 1,225,000
- --------------------------------------------------------------------------------
1,225,000
- --------------------------------------------------------------------------------
TRAVEL SERVICES - 1.4%
Galileo International, Inc.(1) 50,000 2,671,875
- --------------------------------------------------------------------------------
2,671,875
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS (Cost $142,285,614) 176,389,897
<CAPTION>
SHARES VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS - 3.7%
<S> <C> <C>
DATA TELECOMMUNICATIONS - 0.4%
CellNet Funding LLC, 7.00%,
Expires 6/01/10 140,000 780,000
- --------------------------------------------------------------------------------
780,000
- --------------------------------------------------------------------------------
INSURANCE - 0.8%
Core Cap, Inc., Series A, 10.00%,
Expires 12/31/49, Restricted(4,5) 75,000 1,559,250
- --------------------------------------------------------------------------------
1,559,250
- --------------------------------------------------------------------------------
TRANSPORTATION - 2.5%
Trans World Airlines, Inc., 4.625%,
Series 144A, Expires 12/31/497 36,500 1,245,563
Trans World Airlines, Inc., 8.00%,
Expires 12/31/49 75,500 1,462,813
Trans World Airlines, Inc., 9.25%,
Expires 12/31/49 63,500 2,166,938
- --------------------------------------------------------------------------------
4,875,314
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $9,782,897) 7,214,564
<CAPTION>
PAR VALUE
- --------------------------------------------------------------------------------
CONVERTIBLE BONDS - 4.5%
<S> <C> <C>
COMPUTER HARDWARE & COMPONENTS - 0.2%
HMT Technology Corporation, 5.75%,
Due 1/15/04 1,250,000 473,438
- --------------------------------------------------------------------------------
473,438
- --------------------------------------------------------------------------------
</TABLE>
See notes to Schedule of Investments on page 51.
The accompanying notes are an integral part of these financial statements.
48
<PAGE>
RS FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JUNE 30, 1999 (UNAUDITED) PAR VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE - 1.1%
System Software Assocation, Inc., 7.00%,
Due 9/15/02 6,000,000 $2,160,000
- --------------------------------------------------------------------------------
2,160,000
- --------------------------------------------------------------------------------
CONSUMER & SPECIALTY RETAIL - 0.7%
The Sports Authority, Inc., 5.25%,
Due 9/15/01 2,000,000 1,400,000
- --------------------------------------------------------------------------------
1,400,000
- --------------------------------------------------------------------------------
ENERGY SERVICES - 1.0%
Halter Marine Corporation, 4.50%,
Due 9/15/04 1,750,000 1,087,188
Key Energy Group, Inc., 144A, 5.00%,
Due 9/15/04(7) 1,250,000 785,938
- --------------------------------------------------------------------------------
1,873,126
- --------------------------------------------------------------------------------
ENVIRONMENTAL SERVICES - 0.0%
Molten Metal Technology, Inc., 5.50%,
Due 5/01/06(4,10) 5,000,000 500
- --------------------------------------------------------------------------------
500
- --------------------------------------------------------------------------------
HEALTHCARE SERVICES - 0.4%
Alternative Living Services, Inc., 5.25%,
Due 12/15/02 950,000 735,063
- --------------------------------------------------------------------------------
735,063
- --------------------------------------------------------------------------------
HEALTHCARE/HMO - 0.1%
Assisted Living Concepts, Inc., 6.00%,
Due 11/01/02 525,000 288,750
- --------------------------------------------------------------------------------
288,750
- --------------------------------------------------------------------------------
INTERNET CAPITAL SERVICES - 0.4%
Sportsline USA Inc., 5.00%, Due 4/01/09 1,000,000 727,500
- --------------------------------------------------------------------------------
727,500
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES - 0.6%
ITC Deltacom, 144A, 4.50%, Due 5/15/06(7) 1,000,000 1,230,000
- --------------------------------------------------------------------------------
1,230,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL CONVERTIBLE BONDS (Cost $12,785,842) 8,888,377
- --------------------------------------------------------------------------------
<CAPTION>
VALUE
- --------------------------------------------------------------------------------
SHORT TERM INVESTMENTS - 2.7%
- --------------------------------------------------------------------------------
<S> <C>
Temporary Investment Cash Fund 2,661,413
Temporary Investment Fund 2,661,412
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL SHORT TERM INVESTMENTS (Cost $5,322,825) 5,322,825
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.6% (Cost $170,177,178) 197,815,663
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHORT CALL OPTIONS - (0.1%) (Premium $142,125) (175,000)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OTHER LIABILITIES, NET - (0.5%) (992,911)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL NET ASSETS - 100.0% $ 196,647,752
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
SHORT CALL OPTIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JUNE 30, 1999 (UNAUDITED) CONTRACTS VALUE
SHORT CALL OPTIONS - 0.1%
- --------------------------------------------------------------------------------
<S> <C> <C>
Echostar Communications Corporation,
Strike 155, Expire 7/17/99(6) 200 $ 175,000
- --------------------------------------------------------------------------------
TOTAL SHORT CALL OPTIONS (Premium $142,125) $ 175,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
See notes to Schedule of Investments on page 51.
The accompanying notes are an integral part of these financial statements.
49
<PAGE>
SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS -- PARTNERS FUND
<TABLE>
<CAPTION>
JUNE 30, 1999 (UNAUDITED) FOREIGN CURRENCY(2) SHARES VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMON STOCKS - 97.6%
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
ALUMINUM - 9.0%
MAXXAM, Inc. 46,000 $ 2,967,000
- --------------------------------------------------------------------------------
2,967,000
- --------------------------------------------------------------------------------
CLOSED-END FUNDS - 0.4%
Cathay Investment Fund, Ltd.(4) HKD 525,000 131,274
- --------------------------------------------------------------------------------
131,274
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE - 1.2%
Artisoft, Inc. 80,000 405,000
- --------------------------------------------------------------------------------
405,000
- --------------------------------------------------------------------------------
CONSTRUCTION/INFRASTRUCTURE - 4.0%
Meritage Corporation 121,200 1,325,625
- --------------------------------------------------------------------------------
1,325,625
- --------------------------------------------------------------------------------
CONSUMER & SPECIALTY RETAIL - 1.3%
CompUSA, Inc. 60,000 446,250
- --------------------------------------------------------------------------------
446,250
- --------------------------------------------------------------------------------
CONSUMER GOODS - 1.8%
Nu Skin Enterprises, Inc. 30,000 598,125
- --------------------------------------------------------------------------------
598,125
- --------------------------------------------------------------------------------
CONSUMER/BUSINESS SERVICES - 12.8%
Midas, Inc.(1) 36,600 1,038,525
Pennzoil-Quaker State Company(1) 75,000 1,125,000
Pittston Brink's Group(1) 77,000 2,059,750
- --------------------------------------------------------------------------------
4,223,275
- --------------------------------------------------------------------------------
ENERGY - 27.6%
Alliance Energy, Inc., 144A(7) CAD 1,500,000 304,044
Best Pacific Resources, Ltd. CAD 1,500,000 709,435
Calahoo Petroleum, Ltd. CAD 247,866 351,690
Cypress Energy, Inc. CAD 600,000 2,412,081
Oiltec Resources Ltd., 144A(7) CAD 1,536,400 1,126,309
Petsec Energy Ltd., ADR(3) 82,452 133,985
Place Resources Corporation CAD 884,800 1,823,344
Plains All American Pipeline, L.P.(1) 30,000 556,875
Ryan Energy Technologies, Inc. CAD 269,000 772,440
Symmetry Resources, Inc. CAD 1,952,100 923,259
- --------------------------------------------------------------------------------
9,113,462
- --------------------------------------------------------------------------------
ENERGY SERVICES - 8.1%
Bowridge Resource Group, Inc. CAD 1,700,000 677,680
Northstar Drilling Systems, Inc. CAD 500,000 472,957
Northstar Drilling Systems, Inc., 144A(7) CAD 100,000 94,591
NQL Drilling Tools, Inc., 144A(7) CAD 175,000 827,675
NQL Drilling Tools, Inc., Class A CAD 125,000 591,196
- --------------------------------------------------------------------------------
2,664,099
- --------------------------------------------------------------------------------
FOOD - 6.2%
Fresh Del Monte Produce, Inc. 145,000 2,048,125
- --------------------------------------------------------------------------------
8 2,048,125
- --------------------------------------------------------------------------------
FOOD RETAIL/WHOLESALE - 4.3%
Sobeys Canada, Inc.(1) CAD 122,700 1,430,070
- --------------------------------------------------------------------------------
1,430,070
- --------------------------------------------------------------------------------
<CAPTION>
JUNE 30, 1999 (UNAUDITED) FOREIGN CURRENCY(2) SHARES VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FURNITURE - 1.8%
<S> <C> <C> <C>
Hon Industries, Inc.(1) 20,000 $ 583,750
- --------------------------------------------------------------------------------
583,750
- --------------------------------------------------------------------------------
HOLDING COMPANIES, DIVERSIFIED - 1.4%
Jascan Resources, Inc. CAD 854,500 467,650
- --------------------------------------------------------------------------------
467,650
- --------------------------------------------------------------------------------
INSURANCE - 5.2%
Desjardins Laurentian Financial
Corporation, Class A(1) CAD 157,000 1,718,455
- --------------------------------------------------------------------------------
1,718,455
- --------------------------------------------------------------------------------
MANUFACTURING - 2.6%
TB Wood's Corporation(1) 80,000 875,000
- --------------------------------------------------------------------------------
875,000
- --------------------------------------------------------------------------------
PUBLISHING-NEWSPAPERS - 3.1%
Hollinger International, Inc.(1) 85,000 1,009,375
- --------------------------------------------------------------------------------
1,009,375
- --------------------------------------------------------------------------------
RESTAURANTS - 0.7%
IHOP Corporation 10,000 240,625
- --------------------------------------------------------------------------------
240,625
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT - 2.3%
Superior TeleCom, Inc.(1) 30,000 750,000
- --------------------------------------------------------------------------------
750,000
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS SERVICES - 3.8%
Paging Network, Inc. 260,000 1,251,250
- --------------------------------------------------------------------------------
1,251,250
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS (Cost $32,412,031) 32,248,410
- --------------------------------------------------------------------------------
<CAPTION>
WARRANTS VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
WARRANTS - 0.0%
- --------------------------------------------------------------------------------
<S> <C> <C>
Magin Energy, Inc., Warrants, Strike CAD 9.50,
Expire 9/1/00(4,6) 217,310 734
Solomon Resources, Ltd., 1/2 Warrants,
Strike CAD 1.05, Expire 7/19/99(4,6) 37,500 -
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL WARRANTS (Cost $71,260) 734
- --------------------------------------------------------------------------------
<CAPTION>
VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 2.5%
<S> <C>
Temporary Investment Cash Fund 412,961
Temporary Investment Fund 412,961
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (Cost $825,922) 825,922
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.1% (Cost $33,309,213) 33,075,066
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OTHER LIABILITIES, NET - (0.1%) (40,778)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL NET ASSETS - 100.0% $ 33,034,288
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
See notes to Schedule of Investments on page 51.
The accompanying notes are an integral part of these financial statements.
50
<PAGE>
RS FUNDS
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS -- VALUE + GROWTH FUND
<TABLE>
<CAPTION>
JUNE 30, 1999 (UNAUDITED) SHARES VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMON STOCKS - 98.7%
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT & SERVICES - 2.3%
<S> <C> <C>
Cisco Systems, Inc. 238,548 $ 15,386,346
15,386,346
COMPUTER HARDWARE & COMPONENTS - 5.9%
Applied Materials, Inc. 262,800 19,414,350
Dell Computer Corporation 270,000 9,990,000
International Business Machines Corp.(1) 80,100 10,352,925
- --------------------------------------------------------------------------------
39,757,275
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE - 6.2%
BMC Software, Inc. 213,000 11,502,000
Microsoft Corporation 336,000 30,303,000
- --------------------------------------------------------------------------------
41,805,000
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE & SERVICES - 0.3%
Compuware Corporation 60,000 1,908,750
- --------------------------------------------------------------------------------
1,908,750
- --------------------------------------------------------------------------------
CONSUMER & SPECIALTY RETAIL - 27.0%
Best Buy Co., Inc. 376,600 25,420,500
Circuit City Stores-Circuit City Group(1) 258,500 24,040,500
Costco Cos., Inc. 275,000 22,017,187
CVS Corporation(1) 391,200 20,000,100
Home Depot, Inc.(1) 115,000 7,410,313
Safeway, Inc. 394,400 19,522,800
Staples, Inc. 675,000 20,882,812
The Gap, Inc.(1) 174,150 8,772,806
Wal-Mart Stores, Inc.(1) 310,400 14,976,800
Walgreen Company(1) 600,000 17,625,000
- --------------------------------------------------------------------------------
180,668,818
- --------------------------------------------------------------------------------
DISTRIBUTION/WHOLESALE - 1.1%
Ingram Micro, Inc., Class A 290,100 7,470,075
- --------------------------------------------------------------------------------
7,470,075
- --------------------------------------------------------------------------------
FINANCIAL SERVICES - 10.0%
American Express Company(1) 74,000 9,629,250
Citigroup, Inc.(1) 382,500 18,168,750
Donaldson, Lufkin & Jenrette, Inc.(1) 199,400 12,013,850
Household International, Inc.(1) 145,000 6,869,375
Morgan Stanley Dean Witter & Co.(1) 195,000 19,987,500
- --------------------------------------------------------------------------------
66,668,725
- --------------------------------------------------------------------------------
HEALTH MAINTENANCE ORGANIZATIONS - 1.4%
United Healthcare Corporation(1) 148,500 9,299,813
- --------------------------------------------------------------------------------
9,299,813
- --------------------------------------------------------------------------------
INSURANCE - 1.1%
CIGNA Corporation(1) 86,000 7,654,000
- --------------------------------------------------------------------------------
7,654,000
- --------------------------------------------------------------------------------
INVESTMENT MANAGEMENT - 5.4%
Charles Schwab Corporation(1) 120,000 13,185,000
Merrill Lynch & Co., Inc.(1) 288,538 23,065,006
- --------------------------------------------------------------------------------
36,250,006
- --------------------------------------------------------------------------------
MEDIA - 4.9%
Comcast Corporation, Class A(1) 400,000 15,375,000
Time Warner, Inc.(1) 240,000 17,640,000
- --------------------------------------------------------------------------------
33,015,000
- --------------------------------------------------------------------------------
MEDICAL-BIOMEDICAL/GENETICS - 2.5%
Amgen, Inc. 180,000 10,957,500
Biogen, Inc. 94,000 6,045,375
- --------------------------------------------------------------------------------
17,002,875
- --------------------------------------------------------------------------------
<CAPTION>
JUNE 30, 1999 (UNAUDITED) SHARES VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MEDICAL PRODUCTS & SERVICES - 1.6%
<S> <C> <C>
Johnson & Johnson(1) 109,200 $ 10,701,600
- --------------------------------------------------------------------------------
10,701,600
PHARMACEUTICALS - 6.9%
Eli Lilly & Co.(1) 220,000 15,757,500
Merck & Co., Inc.(1) 226,600 16,768,400
Pfizer, Inc.(1) 121,500 13,334,625
45,860,525
- --------------------------------------------------------------------------------
SEMICONDUCTORS & EQUIPMENT - 11.4%
Intel Corporation(1) 400,200 23,811,900
Motorola, Inc.(1) 105,100 9,958,225
Texas Instruments, Inc.(1) 187,700 27,216,500
Xilinx, Inc. 270,000 15,457,500
76,444,125
- --------------------------------------------------------------------------------
SHOES & RELATED APPAREL - 2.4%
Nike, Inc., Class B(1) 248,400 15,726,825
15,726,825
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT - 2.2%
Lucent Technologies, Inc.(1) 100,000 6,743,750
Nortel Networks Corporation(1) 90,300 7,839,169
14,582,919
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS SERVICES - 6.1%
MCI WorldCom, Inc. 307,000 26,478,750
Sprint Corporation(1) 274,000 14,470,625
40,949,375
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS (Cost $418,489,550) 661,152,052
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<CAPTION>
VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHORT TERM INVESTMENTS - 1.4%
- --------------------------------------------------------------------------------
<S> <C>
Temporary Investment Cash Fund 4,618,212
Temporary Investment Fund 4,618,212
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL SHORT TERM INVESTMENTS (Cost $9,236,424) 9,236,424
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.1% (Cost $427,725,974) 670,388,476
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OTHER LIABILITIES, NET - (0.1%) (774,320)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL NET ASSETS - 100.0% $669,614,156
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
(1) Income producing security
(2) Foreign denominated security; AUD-Australian Dollar, CAD-Canadian Dollar,
GBP-British Pound, HKD-Hong Kong Dollar, IDR-Indonesian Rupiah, ITL-Italian
Lira, SAR South African Rand
(3) ADR-American Depository Receipt; GDR-Global Depository Receipt
(4) Fair-Value Security. See 1.a in Notes to Financial Statements
(5) Restricted Security. See 4.e in Notes to Financial Statements
(6) See 4.f in Notes to Financial Statements
(7) These securities may be resold in transactions under rule 144A of the
Securities Act of 1933, normally to qualified institutional buyers
(8) Shares registered for foreign investors
(9) When-issued security
(10) Defaulted security
The accompanying notes are an integral part of these financial statements.
51
<PAGE>
SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS & LIABILITIES
<TABLE>
<CAPTION>
THE
AS OF JUNE 30, 1999 (UNAUDITED) CONTRARIAN DIVERSIFIED EMERGING
(ALL NUMBERS IN THOUSANDS EXCEPT FOR PRICING OF SHARES SECTION) FUND-TM- GROWTH GROWTH
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investments, at value $129,115 $96,969 $1,011,283
Deposits with brokers for securities sold short 32,166 1,549 -
Cash - - -
Receivable for investments sold 6,006 5,076 11,015
Receivable for fund shares subscribed 440 526 22,976
Dividends/interest receivable 239 13 400
Organization cost - - -
Prepaid Expenses 3 - -
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 167,969 104,133 1,045,674
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
- ------------------------------------------------------------------------------------------------------------------------------
Securities sold short 29,236 - -
Written options - 70 -
Payable to custodian bank 2,425 - -
Payable for investments purchased 609 5,116 34,875
Payable for fund shares redeemed 581 80 2,028
Payable to adviser 162 95 701
Payable to distributor 27 19 175
Accrued expenses/other liabilities - 24 193
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 33,040 5,404 37,972
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS $134,929 $98,729 $1,007,702
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
- ------------------------------------------------------------------------------------------------------------------------------
Paid-in capital $301,504 $56,062 $665,139
Accumulated undistributed net investment income/(loss) (4,100) (612) (6,258)
Accumulated net realized gain/(loss) from investments and from securities
and options sold short, and foreign currency transactions (93,091) 24,615 116,985
Net unrealized appreciation/(depreciation) on investments and on securities
and options sold short, and translation of assets and liabilities in
foreign currencies (69,384) 18,664 231,836
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS $134,929 $98,729 $1,007,702
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
INVESTMENTS, AT COST $216,868 $78,391 $779,447
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
PROCEEDS FROM SECURITIES SOLD SHORT $47,637 - -
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
PREMIUMS FROM WRITTEN OPTIONS - $157 -
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
PRICING OF SHARES:
Net Asset Value, offering, and redemption price per share $9.25 $23.01 $34.35
Net assets $134,928,499 $98,729,071 $1,007,702,092
Shares of beneficial interest outstanding with no par value 14,588,892 4,290,805 29,336,186
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
52
<PAGE>
RS FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL THE
AS OF JUNE 30, 1999 (UNAUDITED) NATURAL GLOBAL INFORMATION
(ALL NUMBERS IN THOUSANDS EXCEPT FOR PRICING OF SHARES SECTION) RESOURCES VALUE AGE FUND-TM-
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investments, at value $34,858 $6,388 $191,147
Deposits with brokers for securities sold short - - -
Cash - 368 -
Receivable for investments sold 11 - 2,839
Receivable for fund shares subscribed 12 4 909
Dividends/interest receivable 90 16 12
Organization cost 8 - 8
Prepaid Expenses 1 - -
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 34,980 6,776 194,915
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
LIABILITIES
- ----------------------------------------------------------------------------------------------------------------------------
Securities sold short - - -
Written options - - -
Payable to custodian bank - - -
Payable for investments purchased - - 5,733
Payable for fund shares redeemed 272 2 369
Payable to adviser 36 4 141
Payable to distributor 7 1 35
Accrued expenses/other liabilities - 2 44
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 315 9 6,322
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS $34,665 $6,767 $188,593
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
- ----------------------------------------------------------------------------------------------------------------------------
Paid-in capital $55,196 $5,922 $86,582
Accumulated undistributed net investment income/(loss) (122) 10 (1,439)
Accumulated net realized gain/(loss) from investments and from securities
and options sold short, and foreign currency transactions (22,551) (37) 34,903
Net unrealized appreciation/(depreciation) on investments and on securities
and options sold short, and translation of assets and liabilities in
foreign currencies 2,142 872 68,547
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS $34,665 $6,767 $188,593
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
INVESTMENTS, AT COST $32,718 $5,515 $122,601
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
PROCEEDS FROM SECURITIES SOLD SHORT - - -
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
PREMIUMS FROM WRITTEN OPTIONS - - -
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
PRICING OF SHARES:
Net Asset Value, offering, and redemption price per share $10.00 $9.38 $23.24
Net assets $34,664,656 $6,766,635 $188,592,792
Shares of beneficial interest outstanding with no par value 3,465,221 721,716 8,113,479
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
RS FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AS OF JUNE 30, 1999 (UNAUDITED) MICROCAP MIDCAP VALUE +
(ALL NUMBERS IN THOUSANDS EXCEPT FOR PRICING OF SHARES SECTION) GROWTH OPPORTUNITIES PARTNERS GROWTH
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investments, at value $86,115 $197,816 $33,075 $670,388
Deposits with brokers for securities sold short - 1,651 - -
Cash - - - -
Receivable for investments sold 1,214 5,726 - 18,900
Receivable for fund shares subscribed 162 760 2 266
Dividends/interest receivable 21 453 30 177
Organization cost - - - -
Prepaid Expenses - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 87,512 206,406 33,107 689,731
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
- ------------------------------------------------------------------------------------------------------------------------------------
Securities sold short - - - -
Written options - 175 - -
Payable to custodian bank - - - -
Payable for investments purchased 169 8,321 - 17,728
Payable for fund shares redeemed 379 1,011 18 1,521
Payable to adviser 94 153 34 517
Payable to distributor 17 38 7 129
Accrued expenses/other liabilities 25 60 14 222
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 684 9,758 73 20,117
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS $86,828 $196,648 $33,034 $669,614
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
- ------------------------------------------------------------------------------------------------------------------------------------
Paid-in capital $71,825 $107,909 $32,183 $366,155
Accumulated undistributed net investment income/(loss) (752) 944 (269) (3,888)
Accumulated net realized gain/(loss) from investments and from securities
and options sold short, and foreign currency transactions (7,379) 60,189 1,354 64,684
Net unrealized appreciation/(depreciation) on investments and on securities
and options sold short, and translation of assets and liabilities in
foreign currencies 23,134 27,606 (234) 242,663
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS $86,828 $196,648 $33,034 $669,614
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENTS, AT COST $62,982 $170,177 $33,309 $427,726
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
PROCEEDS FROM SECURITIES SOLD SHORT - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
PREMIUMS FROM WRITTEN OPTIONS - $142 - -
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
PRICING OF SHARES:
Net Asset Value, offering, and redemption price per share $17.19 $17.35 $12.48 $29.15
Net assets $86,828,303 $196,647,752 $33,034,288 $669,614,156
Shares of beneficial interest outstanding with no par value 5,050,581 11,337,109 2,647,221 22,974,719
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
53
<PAGE>
SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THE
FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED) CONTRARIAN DIVERSIFIED EMERGING
(ALL NUMBERS IN THOUSANDS) FUND-TM- GROWTH GROWTH
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
- ------------------------------------------------------------------------------------------------------------------------------------
Interest $215 $71 $956
Dividends 406 85 459
Withholding taxes on foreign dividends (7) - (1)
Other income - - 206
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 614 156 1,620
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES
- ------------------------------------------------------------------------------------------------------------------------------------
Investment advisory fees 917 445 3,168
Distribution fees 154 98 795
Transfer agent fees 124 40 198
Dividend expense for securities sold short 7 - -
Custodian fees 39 42 48
Accounting/Administrative service fees 84 55 333
Shareholder reports 18 11 94
Professional fees 34 14 113
Registration fees 15 17 57
Interest expense 73 49 12
Trustees' fees and expenses 5 3 26
Other expense 2 2 51
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 1,472 776 4,895
Expenses waived by adviser - - -
Other, including accounting/administrative fee waivers (322) (42) -
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES, NET 1,150 734 4,895
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME/(LOSS) (536) (578) (3,275)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
REALIZED GAIN/(LOSS) AND CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION ON INVESTMENTS AND SECURITIES SOLD SHORT
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain/(loss) from investments and foreign currency transactions (40,165) 17,727 145,509
Net realized gain/(loss) from securities and options sold short 2,685 1,039 -
Net change in unrealized appreciation/depreciation on investments and on
translation of assets and liabilities in foreign currency 68,081 9,533 114,130
Net change in unrealized appreciation/depreciation on securities and options
sold short 150 200 -
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS AND SECURITIES SOLD SHORT 30,751 28,499 259,639
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $30,215 $27,921 $256,364
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
54
<PAGE>
RS FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL THE
FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED) NATURAL GLOBAL INFORMATION
(ALL NUMBERS IN THOUSANDS) RESOURCES VALUE AGE FUND-TM-
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
- ---------------------------------------------------------------------------------------------------------------------------------
Interest $22 $12 $98
Dividends 152 49 65
Withholding taxes on foreign dividends (14) (1) (6)
Other income - - -
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 160 60 157
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
EXPENSES
- ---------------------------------------------------------------------------------------------------------------------------------
Investment advisory fees 199 50 868
Distribution fees 33 11 217
Transfer agent fees 39 28 55
Dividend expense for securities sold short - - -
Custodian fees 6 3 14
Accounting/Administrative service fees 28 15 111
Shareholder reports 4 1 26
Professional fees 5 1 31
Registration fees 13 12 15
Interest expense 3 - 46
Trustees' fees and expenses 1 - 7
Other expense 6 2 193
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 337 123 1,583
Expenses waived by adviser - - -
Other, including accounting/administrative fee waivers (79) (50) (23)
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES, NET 258 73 1,560
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME/(LOSS) (98) (13) (1,403)
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
REALIZED GAIN/(LOSS) AND CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION ON INVESTMENTS AND SECURITIES SOLD SHORT
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized gain/(loss) from investments and foreign currency transactions (2,054) (122) 31,321
Net realized gain/(loss) from securities and options sold short - - -
Net change in unrealized appreciation/depreciation on investments and on
translation of assets and liabilities in foreign currency 10,220 276 13,018
Net change in unrealized appreciation/depreciation on securities and options
sold short - - -
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS AND SECURITIES SOLD SHORT 8,166 154 44,339
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $8,068 $141 $42,936
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
RS FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED) MICROCAP MIDCAP VALUE +
(ALL NUMBERS IN THOUSANDS) GROWTH OPPORTUNITIES PARTNERS GROWTH
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
- ----------------------------------------------------------------------------------------------------------------------------------
Interest $84 $971 $20 $48
Dividends 6 1,077 155 1,438
Withholding taxes on foreign dividends - - (8) -
Other income - - - 12
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 90 2,048 167 1,498
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
EXPENSES
- ----------------------------------------------------------------------------------------------------------------------------------
Investment advisory fees 534 901 235 3,365
Distribution fees 104 230 47 845
Transfer agent fees 47 66 55 250
Dividend expense for securities sold short - - - -
Custodian fees 21 34 8 34
Accounting/Administrative service fees 60 117 34 353
Shareholder reports 12 27 6 99
Professional fees 15 32 7 120
Registration fees 15 14 13 18
Interest expense 12 52 12 46
Trustees' fees and expenses 3 7 2 27
Other expense 12 98 140 229
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 835 1,578 559 5,386
Expenses waived by adviser - (120) (165) -
Other, including accounting/administrative fee waivers (25) (24) (28) -
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES, NET 810 1,434 366 5,386
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME/(LOSS) (720) 614 (199) (3,888)
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
REALIZED GAIN/(LOSS) AND CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION ON INVESTMENTS AND SECURITIES SOLD SHORT
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized gain/(loss) from investments and foreign currency transactions 3,771 46,406 4,488 54,381
Net realized gain/(loss) from securities and options sold short - 2,628 - -
Net change in unrealized appreciation/depreciation on investments and on
translation of assets and liabilities in foreign currency 11,127 (10,954) (1,903) 29,442
Net change in unrealized appreciation/depreciation on securities and options
sold short - (113) - -
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS AND SECURITIES SOLD SHORT 14,898 37,967 2,585 83,823
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $14,178 $38,581 $2,386 $79,935
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
55
<PAGE>
SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THE CONTRARIAN FUND-TM-
----------------------------------
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, 1999 DECEMBER 31, 1998
(ALL NUMBERS IN THOUSANDS, SIX MONTHS ENDED NUMBERS ARE UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net investment income/(loss) ($536) ($2,143)
Net realized gain/(loss) from investments and foreign currency transactions (40,165) (69,899)
Net realized gain/(loss) from securities and options sold short 2,685 16,087
Net change in unrealized appreciation/depreciation on investments and
on translation of assets and liabilities in foreign currency 68,081 (37,723)
Net change in unrealized appreciation/depreciation on securities and options sold short 150 (3,940)
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 30,215 (97,618)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income - Class A Shares - -
Net investment income - Class C Shares - -
Realized gain on investments and securities sold short - Class A Shares - (9,423)
Realized gain on investments and securities sold short - Class C Shares - (45)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS - (9,468)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase/(decrease) in net assets resulting from capital share transactions (20,521) (169,975)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) FROM CAPITAL SHARE TRANSACTIONS (20,521) (169,975)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS 9,694 (277,061)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
Beginning of Period 125,235 402,296
End of Period $134,929 $125,235
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
UNDISTRIBUTED NET INVESTMENT INCOME/(LOSS) INCLUDED IN NET ASSETS (4,100) (3,564)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
56
<PAGE>
RS FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DIVERSIFIED GROWTH EMERGING GROWTH
-------------------------------- -------------------------------
FOR THE SIX FOR THE FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED MONTHS ENDED YEAR ENDED
JUNE 30, 1999 DECEMBER 31, 1998 JUNE 30, 1999 DECEMBER 31, 1998
(ALL NUMBERS IN THOUSANDS, SIX MONTHS ENDED NUMBERS ARE UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <S> <C> <C> <C>
Net investment income/(loss) ($578) ($953) ($3,275) ($2,927)
Net realized gain/(loss) from investments and foreign currency
transactions 17,727 6,579 145,509 (14,071)
Net realized gain/(loss) from securities and options sold short 1,039 1,385 - -
Net change in unrealized appreciation/depreciation on investments
and on translation of assets and liabilities in foreign
currency 9,533 2,763 114,130 100,440
Net change in unrealized appreciation/depreciation on securities
and options sold short 200 (519) - -
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 27,921 9,255 256,364 83,442
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income - Class A Shares - - - -
Net investment income - Class C Shares - - - -
Realized gain on investments and securities sold
short - Class A Shares - (1,605) - (14,201)
Realized gain on investments and securities sold
short - Class C Shares - (25) - (38)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS - (1,630) - (14,239)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase/(decrease) in net assets resulting from capital
share transactions 650 (18,121) 346,902 86,173
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) FROM CAPITAL SHARE TRANSACTIONS 650 (18,121) 346,902 86,173
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS 28,571 (10,496) 603,266 155,376
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
Beginning of Period 70,158 80,654 404,436 249,060
End of Period $98,729 $70,158 $1,007,702 $404,436
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
UNDISTRIBUTED NET INVESTMENT INCOME/(LOSS) INCLUDED IN
NET ASSETS (612) (34) (6,258) (2,983)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
RS FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL NATURAL RESOURCES GLOBAL VALUE
------------------------------- --------------------------------
FOR THE SIX FOR THE FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED MONTHS ENDED YEAR ENDED
JUNE 30, 1999 DECEMBER 31, 1998 JUNE 30, 1999 DECEMBER 31, 1998
(ALL NUMBERS IN THOUSANDS, SIX MONTHS ENDED NUMBERS ARE UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net investment income/(loss) ($98) ($352) ($13) $231
Net realized gain/(loss) from investments and foreign currency
transactions (2,054) (20,494) (122) 2,072
Net realized gain/(loss) from securities and options sold short - - - -
Net change in unrealized appreciation/depreciation on investments
and on translation of assets and liabilities in foreign
currency 10,220 3,193 276 (571)
Net change in unrealized appreciation/depreciation on securities
and options sold short - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 8,068 (17,653) 141 1,732
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income - Class A Shares - - - (55)
Net investment income - Class C Shares - - - (1)
Realized gain on investments and securities sold
short - Class A Shares - (628) - (2,344)
Realized gain on investments and securities sold
short - Class C Shares - (1) - (98)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS - (629) - (2,498)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase/(decrease) in net assets resulting from capital
share transactions 3,090 (36,612) (2,015) (11,805)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) FROM CAPITAL SHARE TRANSACTIONS 3,090 (36,612) (2,015) (11,805)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS 11,158 (54,894) (1,874) (12,571)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
Beginning of Period 23,507 78,401 8,641 21,212
End of Period $34,665 $23,507 $6,767 $8,641
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
UNDISTRIBUTED NET INVESTMENT INCOME/(LOSS) INCLUDED IN
NET ASSETS (122) (24) 10 23
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
57
<PAGE>
SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS - CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THE INFORMATION AGE FUND-TM-
--------------------------------
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
JUNE 30, 1999 DECEMBER 31, 1998
(ALL NUMBERS IN THOUSANDS)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net investment income/(loss) ($1,403) ($1,831)
Net realized gain/(loss) from investments and foreign currency transactions 31,321 11,928
Net realized gain/(loss) from securities and options sold short - -
Net change in unrealized appreciation/depreciation on investments and
on translation of assets and liabilities in foreign currency 13,018 42,133
Net change in unrealized appreciation/depreciation on securities and options sold short - -
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 42,936 52,230
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income - Class A Shares - -
Net investment income - Class C Shares - -
Realized gain on investments and securities sold short - Class A Shares - -
Realized gain on investments and securities sold short - Class C Shares - -
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS - -
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase/(decrease) in net assets resulting from capital share transactions (14,075) (11,409)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) FROM CAPITAL SHARE TRANSACTIONS (14,075) (11,409)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS 28,861 40,821
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
Beginning of Period 159,732 118,911
End of Period $188,593 $159,732
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
UNDISTRIBUTED NET INVESTMENT INCOME/(LOSS) INCLUDED IN NET ASSETS (1,439) (36)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
58
<PAGE>
RS FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MICROCAP GROWTH MIDCAP OPPORTUNITIES
-------------------------------- -------------------------------
FOR THE SIX FOR THE FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED MONTHS ENDED YEAR ENDED
JUNE 30, 1999 DECEMBER 31, 1998 JUNE 30, 1999 DECEMBER 31, 1998
(ALL NUMBERS IN THOUSANDS)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net investment income/(loss) ($720) ($1,634) $614 $2,433
Net realized gain/(loss) from investments and foreign currency
transactions 3,771 (7,901) 46,406 20,462
Net realized gain/(loss) from securities and options sold short - - 2,628 (2,859)
Net change in unrealized appreciation/depreciation on investments
and on translation of assets and liabilities in foreign
currency 11,127 9,287 (10,954) 1,306
Net change in unrealized appreciation/depreciation on securities
and options sold short - - (113) 96
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 14,178 (248) 38,581 21,438
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income - Class A Shares - - - (2,455)
Net investment income - Class C Shares - - - (25)
Realized gain on investments and securities sold
short - Class A Shares - - - (9,852)
Realized gain on investments and securities sold
short - Class C Shares - - - (115)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS - - - (12,447)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase/(decrease) in net assets resulting from capital
share transactions (22,637) (10,727) (28,085) (122,897)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) FROM CAPITAL SHARE TRANSACTIONS (22,637) (10,727) (28,085) (122,897)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS (8,459) (10,975) 10,496 (113,906)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
Beginning of Period 95,287 106,262 186,152 300,058
End of Period $86,828 $95,287 $196,648 $186,152
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
UNDISTRIBUTED NET INVESTMENT INCOME/(LOSS) INCLUDED IN NET ASSETS (752) (32) 944 330
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
RS FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PARTNERS VALUE + GROWTH
------------------------------- --------------------------------
FOR THE SIX FOR THE FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED MONTHS ENDED YEAR ENDED
JUNE 30, 1999 DECEMBER 31, 1998 JUNE 30, 1999 DECEMBER 31, 1998
(ALL NUMBERS IN THOUSANDS)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net investment income/(loss) ($199) ($312) ($3,888) ($6,887)
Net realized gain/(loss) from investments and foreign currency
transactions 4,488 (3,585) 54,381 74,024
Net realized gain/(loss) from securities and options sold short - - - -
Net change in unrealized appreciation/depreciation on investments
and on translation of assets and liabilities in foreign
currency (1,903) (24,734) 29,442 98,703
Net change in unrealized appreciation/depreciation on securities
and options sold short - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 2,386 (28,631) 79,935 165,840
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income - Class A Shares - (2,472) - -
Net investment income - Class C Shares - (10) - -
Realized gain on investments and securities sold
short - Class A Shares - (1,523) - (79,376)
Realized gain on investments and securities sold
short - Class C Shares - (6) - (188)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS - (4,011) - (79,564)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase/(decrease) in net assets resulting from capital
share transactions (17,422) (114,422) (89,406) (161,431)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) FROM CAPITAL SHARE TRANSACTIONS (17,422) (114,422) (89,406) (161,431)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS (15,036) (147,064) (9,471) (75,155)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
Beginning of Period 48,070 195,134 679,085 754,240
End of Period $33,034 $48,070 $669,614 $679,085
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
UNDISTRIBUTED NET INVESTMENT INCOME/(LOSS) INCLUDED IN NET ASSETS (269) (70) (3,888) -
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
59
<PAGE>
SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DISTRIBUTIONS DISTRIBUTIONS
NET ASSET VALUE, NET NET REALIZED FROM NET FROM NET
BEGINNING INVESTMENT AND UNREALIZED TOTAL INVESTMENT REALIZED
OF PERIOD INCOME/(LOSS) GAIN/(LOSS) OPERATIONS INCOME CAPITAL GAINS
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
THE CONTRARIAN FUND-TM-
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Six Months Ended 6/30/99 $7.23 $(0.07) $2.09 $2.02 $ - $ -
Year Ended 12/31/98 11.61 (0.08) (3.72) (3.80) - (0.58)
Year Ended 12/31/97 16.57 - (4.88) (4.88) - (0.08)
Year Ended 12/31/96 13.78 - 2.99 2.99 - (0.20)
Nine Months Ended 12/31/95(1) 10.70 (0.01) 3.09 3.08 - -
Year Ended 3/31/95 12.34 (0.04) (1.35) (1.39) - (0.25)
DIVERSIFIED GROWTH
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months Ended 6/30/99 15.89 (0.13) 7.25 7.12 - -
Year Ended 12/31/98 14.04 (0.19) 2.43 2.24 - (0.39)
Year Ended 12/31/97 12.42 (0.17) 3.72 3.55 - (1.93)
Period Ended 12/31/96(1,2) 10.00 (0.05) 2.47 2.42 - -
EMERGING GROWTH
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months Ended 6/30/99 22.95 (0.04) 11.44 11.40 - -
Year Ended 12/31/98 18.71 (0.20) 5.32 5.12 - (0.88)
Year Ended 12/31/97 20.07 (0.14) 3.80 3.66 - (5.02)
Year Ended 12/31/96 19.21 (0.17) 4.23 4.06 - (3.20)
Nine Months Ended 12/31/95(1) 18.36 (0.15) 2.58 2.43 - (1.58)
Year Ended 3/31/95 18.37 (0.17) 2.26 2.09 - (2.10)
GLOBAL NATURAL RESOURCES
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months Ended 6/30/99 7.46 (0.03) 2.57 2.54 - -
Year Ended 12/31/98 11.67 (0.07) (3.95) (4.02) - (0.19)
Year Ended 12/31/97 14.29 (0.05) (2.39) (2.44) - (0.18)
Year Ended 12/31/96 10.12 (0.06) 4.24 4.18 (0.01) -
Period Ended 12/31/95(1,3) 10.00 0.02 0.10 0.12 - -
GLOBAL VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months Ended 6/30/99 9.03 (0.01) 0.36 0.35 - -
Year Ended 12/31/98 11.15 0.16 1.03 1.19 (0.08) (3.23)
Period Ended 12/31/97(1,4) 10.00 0.28 1.69 1.97 (0.22) (0.60)
</TABLE>
See notes to Financial Highlights on page 63.
The accompanying notes are an integral part of these financial statements.
60
<PAGE>
RS FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NET RATIO
NET ASSET NET ASSETS OF EXPENSES
VALUE, END TOTAL END OF TO AVERAGE
OF PERIOD RETURN(1) PERIOD (000s) NET ASSETS(1)
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
THE CONTRARIAN FUND-TM-
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Six Months Ended 6/30/99 $9.25 27.94% $134,929 1.87%
Year Ended 12/31/98 7.23 (32.69)% 124,666 2.83%
Year Ended 12/31/97 11.61 (29.51)% 398,242 2.48%
Year Ended 12/31/96 16.57 21.68% 1,063,438 2.46%
Nine Months Ended 12/31/95(1) 13.78 28.79% 507,477 2.54%
Year Ended 3/31/95 10.70 (11.23)% 397,646 2.46%
DIVERSIFIED GROWTH
- --------------------------------------------------------------------------------------
Six Months Ended 6/30/99 23.01 44.81% 98,729 1.90%
Year Ended 12/31/98 15.89 16.28% 69,031 1.89%
Year Ended 12/31/97 14.04 29.45% 80,278 1.94%
Period Ended 12/31/96(1,2) 12.42 24.20% 59,588 2.28%
EMERGING GROWTH
- --------------------------------------------------------------------------------------
Six Months Ended 6/30/99 34.35 49.67% 1,007,702 1.53%
Year Ended 12/31/98 22.95 28.02% 403,330 1.47%
Year Ended 12/31/97 18.71 18.54% 248,730 1.50%
Year Ended 12/31/96 20.07 21.53% 210,404 1.60%
Nine Months Ended 12/31/95(1) 19.21 13.50% 167,728 1.64%
Year Ended 3/31/95 18.36 12.01% 182,275 1.56%
GLOBAL NATURAL RESOURCES
- --------------------------------------------------------------------------------------
Six Months Ended 6/30/99 10.00 34.05% 34,665 1.93%
Year Ended 12/31/98 7.46 (34.45)% 23,476 1.95%
Year Ended 12/31/97 11.67 (17.14)% 78,371 1.81%
Year Ended 12/31/96 14.29 41.21% 120,521 1.94%
Period Ended 12/31/95(1,3) 10.12 1.20% 792 2.60%
GLOBAL VALUE
- --------------------------------------------------------------------------------------
Six Months Ended 6/30/99 9.38 3.88% 6,767 1.95%
Year Ended 12/31/98 9.03 11.11% 8,229 1.95%
Period Ended 12/31/97(1,4) 11.15 19.97% 21,019 1.95%
</TABLE>
RS FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROSS RATIO NET RATIO OF GROSS RATIO OF
OF EXPENSES NET INVESTMENT NET INVESTMENT PORTFOLIO
TO AVERAGE INCOME/(LOSS) TO INCOME/(LOSS) TO TURNOVER
NET ASSETS(1) AVERAGE NET ASSETS(1) AVERAGE NET ASSETS(1) RATE(1)
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
THE CONTRARIAN FUND-TM-
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Six Months Ended 6/30/99 2.39% (0.87)% (1.39)% 56%
Year Ended 12/31/98 2.83% (0.80)% (0.80)% 39%
Year Ended 12/31/97 2.48% 0.01% 0.01% 36%
Year Ended 12/31/96 2.46% (0.02)% (0.02)% 44%
Nine Months Ended 12/31/95(1) 2.54% (0.20)% (0.20)% 29%
Year Ended 3/31/95 2.58% (0.27)% (0.27)% 79%
DIVERSIFIED GROWTH
- ----------------------------------------------------------------------------------------------------------
Six Months Ended 6/30/99 2.00% (1.49)% (1.60)% 279%
Year Ended 12/31/98 1.95% (1.29)% (1.35)% 403%
Year Ended 12/31/97 2.14% (1.20)% (1.40)% 370%
Period Ended 12/31/96(1,2) 2.44% (1.05)% (1.21)% 69%
EMERGING GROWTH
- ----------------------------------------------------------------------------------------------------------
Six Months Ended 6/30/99 1.53% (1.03)% (1.03)% 118%
Year Ended 12/31/98 1.47% (1.03)% (1.03)% 291%
Year Ended 12/31/97 1.50% (0.68)% (0.68)% 462%
Year Ended 12/31/96 1.60% (0.83)% (0.83)% 270%
Nine Months Ended 12/31/95(1) 1.64% (0.99)% (0.99)% 147%
Year Ended 3/31/95 1.56% (0.96)% (0.96)% 280%
GLOBAL NATURAL RESOURCES
- ----------------------------------------------------------------------------------------------------------
Six Months Ended 6/30/99 2.53% (0.73)% (1.33)% 71%
Year Ended 12/31/98 2.21% (0.69)% (0.96)% 63%
Year Ended 12/31/97 1.82% (0.38)% (0.38)% 97%
Year Ended 12/31/96 2.16% (0.45)% (0.67)% 82%
Period Ended 12/31/95(1,3) 14.25% 1.84% (9.81)% 0%
GLOBAL VALUE
- ----------------------------------------------------------------------------------------------------------
Six Months Ended 6/30/99 3.30% (0.35)% (1.69)% 77%
Year Ended 12/31/98 2.99% 1.37% 0.33% 279%
Period Ended 12/31/97(1,4) 3.21% 3.50% 2.24% 234%
</TABLE>
See notes to Financial Highlights on page 63.
The accompanying notes are an integral part of these financial statements.
61
<PAGE>
SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DISTRIBUTIONS DISTRIBUTIONS
NET ASSET VALUE, NET NET REALIZED FROM NET FROM NET
BEGINNING INVESTMENT AND UNREALIZED TOTAL INVESTMENT REALIZED
OF PERIOD INCOME/(LOSS) GAIN/(LOSS) OPERATIONS INCOME CAPITAL GAINS
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
THE INFORMATION AGE FUND-TM-
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Six Months Ended 6/30/99 $17.96 $(0.17) $5.45 $5.28 $ - $ -
Year Ended 12/31/98 11.80 (0.20) 6.36 6.16 - -
Year Ended 12/31/97 11.51 (0.22) 0.95 0.73 - (0.44)
Year Ended 12/31/96 9.30 (0.20) 2.68 2.48 - (0.27)
Period Ended 12/31/95(1,3) 10.00 (0.01) (0.69) (0.70) - -
MICROCAP GROWTH
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months Ended 6/30/99 14.26 (0.14) 3.07 2.93 - -
Year Ended 12/31/98 14.35 (0.21) 0.12 (0.09) - -
Year Ended 12/31/97 11.00 (0.19) 3.54 3.35 - -
Period Ended 12/31/96(1,5) 10.00 (0.08) 1.08 1.00 - -
MIDCAP OPPORTUNITIES
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months Ended 6/30/99 14.04 0.06 3.25 3.31 - -
Year Ended 12/31/98 13.52 0.14 1.34 1.48 (0.19) (0.77)
Year Ended 12/31/97 13.62 0.07 2.90 2.97 (0.04) (3.03)
Year Ended 12/31/96 11.24 0.02 2.70 2.72 (0.02) (0.32)
Period Ended 12/31/95(1,6) 10.00 - 1.24 1.24 - -
PARTNERS
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months Ended 6/30/99 11.53 (0.08) 1.03 0.95 - -
Year Ended 12/31/98 16.49 (0.04) (4.31) (4.35) (0.38) (0.23)
Year Ended 12/31/97 14.60 0.13 2.52 2.65 (0.12) (0.64)
Year Ended 12/31/96 10.39 0.13 4.36 4.49 (0.06) (0.22)
Period Ended 12/31/95(1,6) 10.00 0.06 0.33 0.39 - -
VALUE + GROWTH
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months Ended 6/30/99 25.92 (0.17) 3.40 3.23 - -
Year Ended 12/31/98 23.18 (0.25) 6.33 6.08 - (3.34)
Year Ended 12/31/97 24.16 (0.26) 3.71 3.45 - (4.43)
Year Ended 12/31/96 22.66 (0.24) 3.47 3.23 - (1.73)
Nine Months Ended 12/31/95(1) 18.25 (0.16) 4.57 4.41 - -
Year Ended 3/31/95 13.56 (0.18) 5.07 4.89 - (0.20)
</TABLE>
See notes to Financial Highlights on page 63.
The accompanying notes are an integral part of these financial statements.
62
<PAGE>
RS FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NET RATIO
NET ASSET, NET ASSETS OF EXPENSES
VALUE END TOTAL END OF TO AVERAGE
OF PERIOD RETURN(1) PERIOD (000S) NET ASSETS(1)
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
THE INFORMATION AGE FUND-TM-
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Six Months Ended 6/30/99 $23.24 29.40% $188,593 1.78%
Year Ended 12/31/98 17.96 52.20% 159,604 1.74%
Year Ended 12/31/97 11.80 6.15% 118,832 1.82%
Year Ended 12/31/96 11.51 26.72% 106,264 2.03%
Period Ended 12/31/95(1,3) 9.30 (7.00)% 32,826 2.13%
MICROCAP GROWTH
- --------------------------------------------------------------------------------------
Six Months Ended 6/30/99 17.19 20.55% 86,828 1.93%
Year Ended 12/31/98 14.26 (0.63)% 94,723 1.91%
Year Ended 12/31/97 14.35 30.45% 104,858 1.95%
Period Ended 12/31/96(1,5) 11.00 10.00% 9,464 3.08%
MIDCAP OPPORTUNITIES
- --------------------------------------------------------------------------------------
Six Months Ended 6/30/99 17.35 23.58% 196,648 1.58%
Year Ended 12/31/98 14.04 11.65% 183,910 1.30%
Year Ended 12/31/97 13.52 22.40% 298,669 1.30%
Year Ended 12/31/96 13.62 24.16% 309,775 1.71%
Period Ended 12/31/95(1,6) 11.24 12.40% 136,902 1.94%
PARTNERS
- --------------------------------------------------------------------------------------
Six Months Ended 6/30/99 12.48 8.24% 33,034 1.93%
Year Ended 12/31/98 11.53 (27.38)% 47,936 1.88%
Year Ended 12/31/97 16.49 18.08% 194,133 1.78%
Year Ended 12/31/96 14.60 43.15% 127,268 1.93%
Period Ended 12/31/95(1,6) 10.39 3.90% 7,480 2.41%
VALUE + GROWTH
- --------------------------------------------------------------------------------------
Six Months Ended 6/30/99 29.15 12.46% 669,614 1.59%
Year Ended 12/31/98 25.92 27.44% 677,505 1.46%
Year Ended 12/31/97 23.18 13.81% 752,994 1.44%
Year Ended 12/31/96 24.16 14.12% 643,157 1.51%
Nine Months Ended 12/31/95(1) 22.66 24.16% 1,140,151 1.45%
Year Ended 3/31/95 18.25 36.27% 428,903 1.68%
</TABLE>
RS FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROSS RATIO NET RATIO OF GROSS RATIO OF
OF EXPENSES NET INVESTMENT NET INVESTMENT PORTFOLIO
TO AVERAGE INCOME/(LOSS) TO INCOME/(LOSS) TO TURNOVER
NET ASSETS(1) AVERAGE NET ASSETS(1) AVERAGE NET ASSETS(1) RATE(1)
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
THE INFORMATION AGE FUND-TM-
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Six Months Ended 6/30/99 1.81% (1.60)% (1.63)% 149%
Year Ended 12/31/98 1.74% (1.55)% (1.55)% 224%
Year Ended 12/31/97 1.82% (1.71)% (1.71)% 369%
Year Ended 12/31/96 2.03% (1.85)% (1.85)% 452%
Period Ended 12/31/95(1,3) 2.13% (0.89)% (0.89)% 89%
MICROCAP GROWTH
- -------------------------------------------------------------------------------------------------------
Six Months Ended 6/30/99 1.99% (1.72)% (1.78)% 43%
Year Ended 12/31/98 2.01% (1.46)% (1.56)% 108%
Year Ended 12/31/97 2.60% (1.35)% (2.00)% 170%
Period Ended 12/31/96(1,5) 6.40% (2.13)% (5.45)% 22%
MIDCAP OPPORTUNITIES
- -------------------------------------------------------------------------------------------------------
Six Months Ended 6/30/99 1.74% 0.68% 0.52% 223%
Year Ended 12/31/98 1.64% 1.00% 0.65% 212%
Year Ended 12/31/97 1.72% 0.45% 0.03% 236%
Year Ended 12/31/96 1.76% 0.18% 0.13% 212%
Period Ended 12/31/95(1,6) 1.94% (0.01)% (0.01)% 97%
PARTNERS
- -------------------------------------------------------------------------------------------------------
Six Months Ended 6/30/99 2.95% (1.05)% (2.07)% 43%
Year Ended 12/31/98 2.07% (0.26)% (0.46)% 73%
Year Ended 12/31/97 1.78% 0.82% 0.82% 78%
Year Ended 12/31/96 2.15% 0.95% 0.73% 101%
Period Ended 12/31/95(1,6) 5.12% 1.34% (1.37)% 71%
VALUE + GROWTH
- -------------------------------------------------------------------------------------------------------
Six Months Ended 6/30/99 1.59% (1.15)% (1.15)% 51%
Year Ended 12/31/98 1.46% (0.96)% (0.96)% 190%
Year Ended 12/31/97 1.44% (0.96)% (0.96)% 228%
Year Ended 12/31/96 1.51% (1.06)% (1.06)% 221%
Nine Months Ended 12/31/95(1) 1.45% (1.04)% (1.04)% 104%
Year Ended 3/31/95 1.68% (1.09)% (1.09)% 232%
</TABLE>
Per-share data has been determined by using the average number of shares
outstanding throughout the period. Distributions reflect actual per-share
amounts distributed for the period.
(1) Ratios, except for total return and portfolio turnover rate, have been
annualized.
(2) Diversified Growth Fund shares were first issued on 8/1/96.
(3) Global Natural Resources and The Information Age Fund-TM- shares were first
issued on 11/15/95.
(4) Global Value Fund shares were first issued on 4/1/97.
(5) MicroCap Growth shares were first issued on 8/15/96.
(6) MidCap Opportunities Fund and Partners Fund shares were first issued on
7/12/95.
The accompanying notes are an integral part of these financial statements.
63
<PAGE>
SEMIANNUAL REPORT
NOTES TO FINANCIAL STATEMENTS
The RS Mutual Funds (a "Fund," the "Funds") are a series of the RS Investment
Trust (the "Trust"), a Massachusetts business trust organized on May 11, 1987.
The Funds are registered under the Investment Company Act of 1940, as amended
(the "1940 Act"), as open-end management investment companies. The Trust
currently offers ten portfolios. The RS Emerging Growth Fund, the RS Value +
Growth Fund, the RS MidCap Opportunities Fund (formerly Growth & Income), The
Information Age Fund-TM-, the RS Global Natural Resources Fund, the RS
Diversified Growth Fund, and the RS MicroCap Growth Fund are registered as
diversified funds. The Contrarian Fund-TM-, the RS Partners Fund, and the RS
Global Value Fund are registered as non-diversified funds. Each Portfolio
consists of a single class of shares.
NOTE 1 SIGNIFICANT ACCOUNTING POLICIES:
The following policies are in conformity with generally accepted accounting
principles. 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 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. Short-term
investments that will mature in 60 days or less are stated at amortized cost,
which approximates market value. Foreign securities are generally denominated in
foreign currencies. The currencies are translated into U.S. dollars by using the
exchange rates quoted at the close of The London Stock Exchange prior to when
each Funds' net asset value is next determined.
Securities for which market quotations are not readily available are valued at
their fair value as determined in accordance with the guidelines and procedures
adopted by the Funds' Board of Trustees. The guidelines and procedures use
fundamental valuation methods which include, but are not limited to, the
analysis of: the effect of any restrictions on the sale of the security, product
development and trends of the security's issuer, changes in the industry and
other competing companies, significant changes in the issuer's financial
position, and any other event that could have a significant impact on the value
of the security. The approximate percentages of each Funds' long positions
valued using these guidelines and procedures at June 30, 1999, were as follows:
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
OF LONG OF LONG
FUND POSITIONS FUND POSITIONS
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
The Contrarian Fund-TM- 0.1% The Information Age Fund-TM- 0%
Diversified Growth 4.0% MicroCap Growth 0%
Emerging Growth 0% MidCap Opportunities 0.8%
Global Natural Resources 0.1% Partners 0.4%
Global Value 0% Value + Growth 0%
- --------------------------------------------------------------------------------
</TABLE>
In their normal course of business, some of the Funds may invest a significant
portion of their assets in companies concentrated within a number of industries.
Accordingly, the performance of these Funds may be subject to a greater risk of
market fluctuation than that of a fund invested in a wider spectrum of market or
industrial sectors.
Options and warrants for which market quotations were not readily available were
priced using the modified Black-Scholes Valuation Formula. The Black-Scholes
Valuation Formula values an option or warrant by determining the differential
between the exercise price of the option or warrant and the current price of the
underlying stock, based on a number of factors. These factors include, but are
not limited to, current price of the underlying stock, exercise price of the
option or warrant, time to expiration, assumed riskless rate of interest,
compounded rate of return on the stock, and standard deviation of the return on
the stock. This valuation method is subject to frequent review and is in
accordance with the guidelines and procedures adopted by the Funds' Board of
Trustees.
b. REPURCHASE AGREEMENTS:
Repurchase agreements are fully collateralized by U.S. government securities.
All collateral is held by the Funds' custodian and is monitored daily to ensure
that the collateral's market value equals at least 100% of the repurchase price
under the agreement. However, in the event of default or bankruptcy, realization
and/or retention of the collateral may be subject to legal proceedings. Each
Fund's policy is to limit repurchase agreement transactions to those parties
deemed by the Fund's Investment Adviser to have satisfactory creditworthiness.
c. FEDERAL INCOME TAXES:
The Funds intend to comply with requirements of the Internal Revenue Code,
qualifying as a regulated investment company and to distribute all net
investment income and realized net capital gains, if any, to shareholders.
Therefore, the Funds do not expect to be subject to income tax, and no provision
for such tax will be made.
d. SECURITIES TRANSACTIONS:
Securities transactions are accounted for on the date securities are purchased,
sold, or sold short (trade date). Realized gains or losses on securities
transactions are determined on the basis of specific identification.
e. FOREIGN CURRENCY TRANSLATION:
The accounting records of the Funds are maintained in U.S. dollars. Investments
securities and all other assets and liabilities of the Funds denominated in a
foreign currency are translated into U.S. dollars at the exchange rate each day.
Purchases and sales of securities, income receipts, and expense payments are
translated into U.S. dollars at the exchange rate in effect on the dates of the
respective transactions. The Funds do 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.
f. INVESTMENT INCOME:
Dividend income is recorded on the ex-dividend date, except certain cash
dividends from foreign securities that are recorded as soon as the Funds are
informed of the ex-dividend date. Interest income, which includes accretion, is
accrued and recorded daily.
g. EXPENSES:
Most expenses of the Trust can be directly attributed to a specific Fund.
Expenses that cannot be directly attributed to a specific fund are apportioned
between the Funds in the Trust, based on relative net assets.
Other expense includes the adjustment of prior year expense underaccruals.
Furthermore, other, including accounting/administrative fee waivers, represents
the adjustment of prior year expense overaccruals and the waiver of fees by the
Funds' accounting agent/administrator.
h. DISTRIBUTIONS TO SHAREHOLDERS:
Dividends to shareholders are recorded on the ex-dividend date. 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
64
<PAGE>
RS FUNDS
gains on various investment securities held by the Funds, timing differences and
differing characterizations of distributions made by the Funds. Permanent book
and tax basis differences relating to shareholder distributions 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 may include temporary book and tax differences which will
reverse in a subsequent period. During any particular year net realized gains
from investment transactions, in excess of available capital loss carryforwards,
would be taxable to the Funds if not distributed and, therefore, would be
distributed to shareholders annually.
At June 30, 1999, the Funds had the following capital loss carryovers available:
<TABLE>
<CAPTION>
EXPIRING 2004 2005 2006 TOTAL
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MicroCap Growth 80,838 1,072,261 7,549,652 8,702,751
Partners - - 3,133,817 3,133,817
Contrarian - - 49,471,550 49,471,550
- --------------------------------------------------------------------------------
</TABLE>
i. CLASS ALLOCATIONS:
Income, common expenses, and realized and unrealized gains/(losses) are
determined at the Fund level and allocated daily to each class of shares based
on the appropriate net assets of the respective classes.
Distribution/shareholder service fees, and any other class specific expenses, if
any, are calculated daily at the class level based on the appropriate daily net
assets of each class and the specific expense rate applicable to each class.
Effective April 16, 1999, the Funds' outstanding Class C shares were converted
to Class A shares.
j. CAPITAL ACCOUNTS:
Due to the timing of dividend distributions and the differences in accounting
for income and realized gains/(losses) for financial statement and 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 Funds.
k. TEMPORARY BORROWINGS:
All Funds within the Trust share in a $40 million, uncommitted revolving credit
and/or overdraft protection facility (expiring September 1, 1999) from
Wilmington 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 the market rates at the time of
borrowing. Each Fund may borrow up to a maximum of 10 percent of its total
assets under the agreement.
NOTE 2 CAPITAL SHARES:
a. TRANSACTIONS:
The Funds have authorized an unlimited number of shares of beneficial interest
with no par value. Prior to April 16, 1999, the Funds offered two classes of
shares, Class A and C shares. Effective April 16, 1999, the Funds' outstanding
Class C shares were converted to Class A shares. Transactions in capital shares
for Class A for the six months ended June 30, 1999, and the year ended December
31, 1998 are outlined on the following page. Transactions in capital shares for
Class C for the period from January 1, 1999 through April 16, 1999 and for the
year ended December 31, 1998 are also outlined on the following page.
65
<PAGE>
SEMIANNUAL REPORT
<TABLE>
<CAPTION>
(ALL NUMBERS IN THOUSANDS) TRANSACTIONS IN CAPITAL SHARES
- -----------------------------------------------------------------------------------------------------------------------------------
THE CONTRARIAN FUND-TM- DIVERSIFIED GROWTH FUND EMERGING GROWTH
CLASS A 1/1/98 - 12/31/98 1/1/99 - 6/30/99 1/1/98 - 12/31/98 1/1/99 - 6/30/99 1/1/98 - 12/31/98 1/1/99 - 6/30/99
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
Shares Sold 4,353 $45,839 2,560 $20,550 10,171 $146,788 5,438 $99,816 27,699 $547,574 37,299 $1,080,688
Shares Reinvested 1,248 8,922 - - 110 1,563 - - 665 13,368 - -
Shares Redeemed (22,667) (222,337) (5,208)(40,435) (11,654) (167,133) (5,493) (97,793) (24,081) (475,458) (25,538) (732,253)
Net Increase/
(Decrease) (17,066) (167,576) (2,648)(19,885) (1,373) (18,782) (55) 2,023 4,283 85,484 11,761 348,435
CLASS C 1/1/98 - 12/31/98 1/1/99 - 4/16/99** 1/1/98 - 12/31/98 1/1/99 - 4/16/99** 1/1/98 - 12/31/98 1/1/99 - 4/16/99**
- -----------------------------------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
Shares Sold 115 $1,118 - $ - 49 $694 1 $26 51 $1,021 10 $228
Shares Reinvested 6 42 - - 2 21 - - 2 35 - -
Shares Redeemed (391) (3,559) (81) (636) (4) (54) (75) (1,399) (20) (367) (61) (1,761)
Net Increase/
(Decrease) (270) (2,399) (81) (636) 47 661 (74) (1,373) 33 689 (51) (1,533)
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
GLOBAL NATURAL RESOURCES GLOBAL VALUE THE INFORMATION AGE FUND-TM-
CLASS A 1/1/98 - 12/31/98 1/1/99 - 6/30/99 1/1/98 - 12/31/98 1/1/99 - 6/30/99 1/1/98 - 12/31/98 1/1/99 - 6/30/99
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
Shares Sold 2,776 $29,887 3,230 $27,060 535 $6,360 298 $2,742 22,520 $304,952 10,819 $219,383
Shares Reinvested 81 615 - - 264 2,352 - - - - - -
Shares Redeemed (6,428) (67,134) (2,911)(23,935) (1,769) (20,777) (492) (4,397) (23,704) (316,347) (11,591) (233,301)
Net Increase/
(Decrease) (3,571) (36,632) 319 3,125 (970) (12,065) (194) (1,655) (1,184) (11,395) (772) (13,918)
CLASS C 1/1/98 - 12/31/98 1/1/99 - 4/16/99** 1/1/98 - 12/31/98 1/1/99 - 4/16/99** 1/1/98 - 12/31/98 1/1/99 - 4/16/99**
- -----------------------------------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
Shares Sold 2 $20 - $ - 24 $279 - $5 22 $277 4 $71
Shares Reinvested - - - - 11 98 - - - - - -
Shares Redeemed - - (4) (35) (10) (117) (42) (365) (21) (291) (12) (228)
Net Increase/
(Decrease) 2 20 (4) (35) 25 260 (42) (360) 1 (14) (8) (157)
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
MICROCAP GROWTH MIDCAP OPPORTUNITIES PARTNERS
CLASS A 1/1/98 - 12/31/98 1/1/99 - 6/30/99 1/1/98 - 12/31/98 1/1/99 - 6/30/99 1/1/98 - 12/31/98 1/1/99 - 6/30/99
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
Shares Sold 14,939 $213,493 5,232 $79,326 7,689 $105,065 4,665 $71,297 3,638 $56,348 1,599 $18,667
Shares Reinvested - - - - 931 11,976 - - 263 3,912 - -
Shares Issued* - - - - - - - - 310 4,608 - -
Shares Redeemed (15,604) (223,561) (6,823)(101,375) (17,613) (240,743) (6,423) (96,877) (11,828) (178,562) (3,108)(35,955)
Net Increase/
(Decrease) (665) (10,068) (1,591) (22,049) (8,993) (123,702) (1,758) (25,580) (7,617) (113,694) (1,509)(17,288)
CLASS C 1/1/98 - 12/31/98 1/1/99 - 4/16/99** 1/1/98 - 12/31/98 1/1/99 - 4/16/99** 1/1/98 - 12/31/98 1/1/99 - 4/16/99**
- -----------------------------------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
Shares Sold 37 $584 1 $19 88 $1,152 3 $46 2 $25 - $ -
Shares Reinvested - - - - 11 135 - - 1 14 - -
Shares Issued* - - - - - - - - 3 37 - -
Shares Redeemed (95) (1,243) (42) (607) (36) (482) (169) (2,551) (54) (804) (12) (134)
Net Increase/
(Decrease) (58) (659) (41) (588) 63 805 (166) (2,505) (48) (728) (12) (134)
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------
VALUE + GROWTH
CLASS A 1/1/98 - 12/31/98 1/1/99 - 6/30/99
- --------------------------------------------------------
<S> <C> <C> <C> <C>
SHARES AMOUNT SHARES AMOUNT
Shares Sold 9,535 $243,579 4,545 $126,725
Shares Reinvested 3,151 75,308 - -
Shares Redeemed (19,034) (480,538) (7,705) (214,436)
Net Increase/
(Decrease) (6,348) (161,651) (3,160) (87,711)
<CAPTION>
CLASS C 1/1/98 - 12/31/98 1/1/99 - 4/16/99**
- --------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
Shares Sold 22 $531 1 $16
Shares Reinvested 8 185 - -
Shares Redeemed (21) (496) (64) (1,711)
Net Increase/
(Decrease) 9 220 (63) (1,695)
</TABLE>
* Shares issued in connection with tax-free merger
** Effective April 16, 1999, the Funds liquidated
Class C shares
66
<PAGE>
RS FUNDS
NOTE 3 TRANSACTIONS WITH AFFILIATES:
a. ADVISORY FEES AND EXPENSE LIMITATION:
Under the terms of advisory agreements, which are reviewed and approved annually
by the Board of Trustees, after an initial two-year term, the Funds pay RS
Investment Management, L.P. ("RSIM, L.P.") or RS Investment Management, Inc.
("RSIM, Inc.") an investment advisory fee calculated at an annual rate of the
average daily net assets of the Funds as disclosed below.
<TABLE>
<CAPTION>
INVESTMENT
FUND ADVISORY FEES
- -----------------------------------------------------------------
<S> <C>
The Contrarian Fund-TM- 1.50%
Diversified Growth 1.00%
Emerging Growth 1.00%
Global Natural Resources 1.00%
Global Value 1.00%
The Information Age Fund-TM- 1.00%
MicroCap Growth 1.25%
MidCap Opportunities 1.00%
Partners 1.25%
Value + Growth 1.00%
- ------------------------------------------------------------------
</TABLE>
RSIM, L.P. and RSIM, Inc. may voluntarily agree to waive any annual operating
expenses, excluding interest, taxes, deferred organizational and extraordinary
expenses, and dividend expenses related to short sales, of the Funds exceeding
the annual expense ratio of any Fund.
RSIM, L.P. and RSIM, Inc. may recoup waived or reimbursed operating expenses
over the succeeding two years, subject to expense limitations then applicable to
the Funds.
During the period ended June 30, 1999, RSIM, L.P. and RSIM, Inc. recouped the
following amounts:
<TABLE>
<CAPTION>
FUND
- -----------------------------------------------------------------
<S> <C>
The Contrarian Fund-TM- -
Diversified Growth 60,668
Emerging Growth -
Global Natural Resources 66,225
Global Value 12,669
The Information Age Fund-TM- -
MicroCap Growth 13,464
MidCap Opportunities -
Partners -
Value + Growth -
- -----------------------------------------------------------------
</TABLE>
At June 30, 1999, the balance of recoupable expenses for each fund was:
<TABLE>
<CAPTION>
FUND 1997 1998 1999 TOTAL
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
The Contrarian Fund-TM- - - - -
Diversified Growth 65,809 46,618 - 112,427
Emerging Growth - - - -
Global Natural Resources - 75,484 - 75,484
Global Value 151,029 175,876 - 326,905
The Information Age Fund-TM- - - - -
MicroCap Growth 260,588 104,172 - 364,760
MidCap Opportunities 1,235,367 853,895 120,329 2,209,591
Partners 1,746 236,741 165,204 403,691
Value + Growth - - - -
- -----------------------------------------------------------------------
</TABLE>
At June 30, 1999, affiliates of the Funds held 26.28% of Global Value's total
outstanding shares for a total of 189,638 shares with a value of $1,778,808.
b. COMPENSATION OF TRUSTEES AND OFFICERS:
Trustees and officers of the Funds who are affiliated persons receive no
compensation from the Funds. Trustees of the Funds who are not interested
persons of the Trust, as defined in the 1940 Act, did collectively receive
compensation and reimbursement of expenses for the period ended June 30, 1999.
c. DISTRIBUTION FEES:
Provident Distributors, Inc. ("Provident"), a non-affiliate, has been designated
as the Funds' distributor, as of 12/31/98. Prior to such date, Edgewood
Services, Inc., also a non-affiliate, was the Funds' distributor.
The Funds have entered into agreements with Provident for distribution services
with respect to its shares and adopted Plans of Distribution pursuant to Rule
12b-1 under the 1940 Act, where continuance is reviewed annually by the Funds'
Board of Trustees. Under these Plans, Provident is compensated for services in
such capacity including its expenses in connection with the promotion and
distribution of the Funds. RSIM, L.P. and RSIM, Inc. or its affiliates provide
certain services to Provident in respect of the promotion of the Funds' shares
and are compensated by Provident for those services. The distribution fees are
calculated at annual rates based on the average daily net assets for each Fund.
The following chart details the rate at which each fund paid fees under the
plans (calculated as a percentage of the average daily net assets).
<TABLE>
<CAPTION>
FUND 12b-1 FEE
- -----------------------------------------------------------------
<S> <C>
The Contrarian Fund-TM- 0.25%
Diversified Growth 0.25%
Emerging Growth 0.25%
Global Natural Resources 0.25%
Global Value 0.25%
The Information Age Fund-TM- 0.25%
MicroCap Growth 0.25%
MidCap Opportunities 0.25%
Partners 0.25%
Value + Growth 0.25%
- -----------------------------------------------------------------
</TABLE>
67
<PAGE>
SEMIANNUAL REPORT
COST OF INVESTMENTS AND PROCEEDS FROM SECURITIES SOLD SHORT (SEE NOTE 4a BELOW)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
ACCUMULATED UNREALIZED
COST OF INVESTMENTS/ APPRECIATION/DEPRECIATION
PROCEEDS OF ON INVESTMENTS AND GROSS UNREALIZED GROSS UNREALIZED
FUND SECURITIES SOLD SHORT SECURITIES SOLD SHORT APPRECIATION DEPRECIATION
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
The Contrarian Fund-TM- $169,231,710 $(69,353,432) $43,580,332 $112,933,764
Diversified Growth 78,234,515 18,664,338 21,923,417 3,259,079
Emerging Growth 779,446,937 231,836,491 253,406,933 21,570,442
Global Natural Resources 32,717,633 2,140,695 5,952,227 3,811,532
Global Value 5,514,858 872,654 1,025,660 153,006
The Information Age Fund-TM- 122,600,613 68,546,798 69,842,744 1,295,946
MicroCap Growth 62,981,542 23,133,922 30,274,974 7,141,052
MidCap Opportunities 170,035,053 27,605,610 37,787,465 10,181,855
Partners 33,309,213 (234,147) 3,973,834 4,207,981
Value + Growth 427,725,974 242,662,502 243,874,940 1,212,438
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 4 INVESTMENTS:
a. TAX BASIS OF INVESTMENTS:
The cost of investments purchased and proceeds of securities sold short for
federal income tax purposes at June 30, 1999, for each Fund is listed above. The
net unrealized appreciation/depreciation on investments and securities sold
short which consists of gross unrealized appreciation and depreciation are also
disclosed in the chart above.
b. INVESTMENT PURCHASES AND SALES:
The cost of investments purchased and the proceeds from investments sold
(excluding options, securities sold short and short-term investments) for the
period ended June 30, 1999, were as follows:
<TABLE>
<CAPTION>
COST OF INVESTMENTS PROCEEDS FROM
FUND PURCHASED INVESTMENTS SOLD
- ------------------------------------------------------------------------
<S> <C> <C>
The Contrarian Fund-TM- 62,834,274 62,429,087
Diversified Growth 220,422,320 221,052,711
Emerging Growth 1,057,459,331 723,805,056
Global Natural Resources 22,452,066 18,834,489
Global Value 5,078,729 7,456,499
The Information Age Fund-TM- 258,836,416 254,175,291
MicroCap Growth 35,427,840 61,968,090
MidCap Opportunities 404,381,489 426,845,615
Partners 16,047,044 34,285,275
Value + Growth 347,704,199 449,957,497
- ------------------------------------------------------------------------
</TABLE>
c. 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, revaluation of currencies, adverse political, social, and economic
developments, and less reliable information about issuers. Moreover, securities
of many foreign companies and markets may be less liquid and their prices more
volatile than those of U.S. companies and markets.
d. SHORT SALES:
Short sales are transactions in which a fund sells a security it does not
own, in anticipation of a decline in the market value of that security. To
complete such a transaction, the Fund must borrow the security to deliver to
the buyer upon the short sale; the Fund then is obligated to replace the
security borrowed by purchasing it in the open market at some later date. The
following Funds may sell securities short: The Contrarian Fund-TM-, Global
Natural Resources, MicroCap Growth and Value + Growth. The Funds will incur a
loss if the market price of the security increases between the date of the
short sale and the date on which the Funds replace the borrowed security. The
Funds will typically realize a gain if the security declines in value between
those dates. All short sales must be fully collateralized. The Funds maintain
their collateral in a segregated account consisting of cash, equities, and/or
U.S. government securities sufficient to collateralize the obligation on the
short positions. The Funds may also sell short "against the box" (i.e., the
Funds enter into a short sale as described above while holding an offsetting
long position in the security which is sold short). If the Funds enter into a
short sale against the box, they will hold an equivalent amount of the
securities to cover their position while the short sale is outstanding. The
Funds limit the value of short sale positions (excluding short sales against
the box) to 25% (The Contrarian Fund-TM- is allowed up to 40%) of the Fund's
total assets in short positions. For the six months ended June 30, 1999, the
cost of investments purchased to cover short sales and proceeds from
investments sold short were as follows:
68
<PAGE>
RS FUNDS
<TABLE>
<CAPTION>
COST OF INVESTMENTS PROCEEDS FROM
PURCHASED TO INVESTMENTS
FUND COVER SHORT SELLS SOLD SHORT
- -----------------------------------------------------------------------
<S> <C> <C>
The Contrarian Fund-TM- 35,023,840 36,776,798
Diversified Growth 12,133,431 9,366,188
Emerging Growth - -
Global Natural Resources - -
Global Value - -
The Information Age Fund-TM- - -
MicroCap Growth - -
MidCap Opportunities 5,771,515 7,038,836
Partners - -
Value + Growth - -
- -----------------------------------------------------------------------
</TABLE>
e. RESTRICTED SECURITIES:
A restricted security cannot be resold to the general public without prior
registration under the Securities Act of 1933. If the security is subsequently
reregistered and resold, the issuers would bear the expense of all registrations
at no cost to the Fund. Restricted securities are valued according to the
guidelines and procedures adopted by the Funds' Board of Trustees as outlined in
Note 1.a., paragraph 2. See detail of transactions in restricted securities
below.
f. OPTIONS AND WARRANTS:
Options and warrants normally entitle the holder to purchase a proportionate
amount of a particular class of the issuer's securities at a predetermined price
during a specific period. When a fund is the writer of index or security
options, the writer of the option grants the buyer of the option the right to
purchase from (call option), or sell to (put option), the writer a designated
instrument at a specified price within a specified period of time. Certain
options, including options on indices, will require cash settlement by the Fund
if the option is exercised.
DIVERSIFIED GROWTH: WRITTEN OPTIONS
Transactions in written options for the six months ended June 30, 1999 were as
follows:
<TABLE>
<CAPTION>
NUMBER
AMOUNT OF OF CONTRACTS
PREMIUMS OPTIONED
- ----------------------------------------------------------------
<S> <C> <C>
Outstanding at 12/31/98 $ 125,946 100.00
Options written 5,877,554 6,400.00
Options expired (655,428) (1,100.00)
Options exercised - -
Options closed (5,191,197) (5,200.00)
- ----------------------------------------------------------------
Outstanding at 6/30/99 $ 156,875 200.00
- ----------------------------------------------------------------
</TABLE>
MIDCAP OPPORTUNITIES: WRITTEN OPTIONS
Transactions in written options for the six months ended June 30, 1999 were as
follows:
<TABLE>
<CAPTION>
NUMBER
AMOUNT OF OF CONTRACTS
PREMIUMS OPTIONED
- ----------------------------------------------------------------
<S> <C> <C>
Outstanding at 12/31/98 $ 188,919 150.00
Options written 2,633,547 3500.00
Options expired (391,162) (650.00)
Options exercised - -
Options closed (2,289,179) (2800.00)
- ----------------------------------------------------------------
Outstanding at 6/30/99 $ 142,125 200.00
- ----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RESTRICTED SECURITIES
- ---------------------------------------------------------------------------------------------------------------------------------
% OF FUNDS'
FUND SECURITY SHARES/WARRANTS COST VALUE ACQUISITION DATE NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
The Contrarian Fund-TM- African Minerals, Ltd. 698,422 $2,837,501 $103,367 4/25/97 - 5/7/98
- ---------------------------------------------------------------------------------------------------------------------------------
2,837,501 103,367 0.08%
- ---------------------------------------------------------------------------------------------------------------------------------
Diversified Growth New Frontier Media, Inc. 500,000 1,000,000 3,262,500 3/5/99
Novavax, Inc. 180,000 417,035 567,000 4/13/99
Novavax, Inc., Warrants 40,000 55,440 62,510 4/13/99
- ---------------------------------------------------------------------------------------------------------------------------------
1,472,475 3,892,010 3.94%
- ---------------------------------------------------------------------------------------------------------------------------------
Global Natural
Resources African Minerals, Ltd. 203,624 784,997 30,136 4/25/97 - 5/7/98
- ---------------------------------------------------------------------------------------------------------------------------------
784,997 30,136 0.09%
- ---------------------------------------------------------------------------------------------------------------------------------
MidCap Opportunities Core Cap, Inc., Class A Common 75,000 1,500,000 1,045,500 10/29/97
Core Cap, Inc., Series A Pref 75,000 1,875,000 1,559,250 10/29/97
- ---------------------------------------------------------------------------------------------------------------------------------
3,375,000 2,604,750 1.32%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
69
<PAGE>
SEMIANNUAL REPORT
70
<PAGE>
RF FUNDS
71
<PAGE>
SEMIANNUAL REPORT
ADMINISTRATION
OFFICERS AND TRUSTEES
G. Randall Hecht, Trustee
President
Leonard B. Auerbach, Trustee
President and CEO, Center Capital
Group, Inc. (an AIG member company)
John W. Glynn, Jr., Trustee
Principal and Chairman of
Glynn Capital Management
James K. Peterson, Trustee
Former Director of Investment Man-
agement of the IBM Retirement Funds
Steven M. Cohen
Treasurer The views expressed in this
report were those of the
Suzanne M. DuFrane Funds' portfolio managers as
Secretary of the date specified, and
may not reflect the views of
the portfolio managers on the
INVESTMENT ADVISER date they are first published
RS Investment Management, L.P. or at any other time
388 Market Street, Suite 200 thereafter. RSIM and its
San Francisco, CA 94111 affiliates may buy or sell
investments at any time for
RS Investment Management, Inc. the Funds, their other
(Emerging Growth Fund) clients or for their own
40 Tower Lane, Avon Park South accounts, and may not
Avon, Connecticut 06011 necessarily do so in a manner
consistent with the views
DISTRIBUTOR expressed in this report. The
Provident Distributors, Inc. prices at which they buy or
Four Falls Corporate Center, 6th Floor sell investments may be
West Conshohocken, PA affected favorably by the
contents of this report or
TRANSFER AGENT AND DISBURSING AGENT the timing of its
State Street Bank & Trust Company publication. THE VIEWS
c/o National Financial Data Services EXPRESSED IN THIS REPORT ARE
Kansas City, MO INTENDED TO ASSIST
1-800-624-8025 SHAREHOLDERS OF THE FUNDS IN
UNDERSTANDING THEIR
CUSTODIAN INVESTMENT IN THE FUNDS AND
PFPC Trust Company DO NOT CONSTITUTE INVESTMENT
Wilmington, DE ADVICE; INVESTORS SHOULD
CONSULT THEIR OWN INVESTMENT
INDEPENDENT ACCOUNTANTS PROFESSIONALS AS TO THEIR
PricewaterhouseCoopers LLP INDIVIDUAL INVESTMENT
San Francisco, CA PROGRAMS.
LEGAL COUNSEL
Ropes & Gray
Boston, MA
This report is submitted for the
information of shareholders of
the RS Funds. It is not
authorized for distribution to
prospective investors unless
preceded or accompanied by an
effective prospectus.
Published August 18, 1999
- --------------------------------------------------------------------------------
MUTUAL FUND SHARES ARE NOT INSURED BY THE FDIC OR ANY OTHER GOVERNMENTAL ENTITY
AND ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL
AMOUNT INVESTED.
- --------------------------------------------------------------------------------
72
<PAGE>
RS FUNDS
GROWTH VALUE
Diversified Growth Fund The Contrarian Fund-TM-
FOCUSING ON SMALL-CAP COMPANIES SEEKING OUT OF FAVOR INVESTMENTS
Managed by John Wallace AND SHORTING OVERVALUED STOCKS
and John Seabern. Managed by a team of investment
professionals at RS Investment
The computer quotation symbol is RSDGX. Management.
Emerging Growth Fund The computer quotation symbol is
SEEKING TO INVEST IN AMERICA'S RSCOX.
MOST DYNAMIC, GROWTH-
ORIENTED COMPANIES Global Natural Resources Fund
Managed by Jim Callinan. PRIMARILY FOCUSING ON HARD ASSET
COMPANIES
The computer quotation symbol is Managed by Andy Pilara.
RSEGX.
The computer quotation symbol is
The Information Age Fund-TM- RSNRX.
TARGETING INVESTMENTS IN THE
INFORMATION TECHNOLOGY SECTOR Global Value Fund
Managed by Ron Elijah and SEEKING UNDERVALUED INVESTMENTS
Rod Berry WORLDWIDE
Managed by Andy Pilara.
The computer quotation symbol is RSIFX.
The computer quotation symbol is
MicroCap Growth Fund RSGAX.
FOCUSING ON COMPANIES WITH MARKET
CAPS OF $500 MILLION OR LESS Partners Fund
Managed by Dave Evans A SMALL-CAP FUND USING A CASH
and Rainerio Reyes. FLOW VALUE METHODOLOGY
Managed by Andy Pilara.
The computer quotation symbol is RSMGX.
The computer quotation symbol is
MidCap Opportunities Fund RSPFX.
SEEKING GROWTH IN MID-CAP
COMPANIES WHILE ATTEMPTING TO MODERATE RISK Please read the prospectus to
Managed by John Wallace. learn about the Funds'
objectives, investment policies,
The computer quotation symbol is RSMOX. and the special risks associated
with the RS Funds, including
Value + Growth Fund international investing,
A FUND SEEKING CAPITAL APPRECIATION investing in smaller companies,
FOR THE LONG-TERM INVESTOR investing in a more limited
Managed by Ron Elijah. number of issuers and sectors or
The computer quotation symbol is RSVPX. a particular sector, short
selling, using options and
futures, and investing in
high-yielding, lower-quality
debt securities.
FUND LISTINGS
Our Funds are listed in THE WALL
STREET JOURNAL, USA TODAY,
INVESTOR'S BUSINESS DAILY, and
most local newspapers under the
heading RS Funds.
<PAGE>
[LOGO] Bulk Rate
RS INVESTMENT U.S. Postage
MANAGEMENT PAID
Permit #4118
388 Market Street, Suite 200 San Francisco, CA
San Francisco, California 94111
