<PAGE>
RS INVESTMENT MANAGEMENT
www.rsim.com
2000 SEMIANNUAL REPORT
<PAGE>
RS FUNDS
1-800-766-FUND
--------------------
www.rsim.com
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[email protected]
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AccountLink
1-800-624-8025
24 hour automated
account information
<TABLE>
<CAPTION>
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TOTAL RETURN SUMMARY - AS OF JUNE 30, 2000
AVERAGE
THREE-YEAR FIVE-YEAR TEN-YEAR ANNUAL
INCEPTION ONE-YEAR AVERAGE AVERAGE AVERAGE SINCE
RS GROWTH FUNDS DATE TOTAL ANNUAL ANNUAL ANNUAL INCEPTION
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Aggressive Growth - RSAGX 5/1/00 - - - - -*
Diversified Growth - RSDGX 8/1/96 73.83% 52.30% - - 48.53%
Emerging Growth - RSEGX 11/30/87 100.58% 62.75% 44.98% 27.12% 29.98%
The Information Age
Fund-REGISTERED TRADEMARK- - RSIFX 11/15/95 92.17% 56.82% - - 39.94%
RS Internet Age Fund -TM- - RIAFX 12/1/99 - - - - -*
MicroCap Growth - RSMGX 8/15/96 60.21% 29.85% - - 29.86%
MidCap Opportunities - RSMOX 7/12/95 29.03% 25.96% - - 25.06%
Value + Growth - RSVPX 5/12/92 22.57% 20.71% 18.36% - 22.91%
<CAPTION>
RS VALUE FUNDS
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<S> <C> <C> <C> <C> <C> <C>
The Contrarian Fund -TM- - RSCOX 6/30/93 15.46% -9.74% -1.35% - 2.38%
Global Natural Resources - RSNRX 11/15/95 3.20% -7.85% - - 1.55%
Partners - RSPFX 7/12/95 4.73% -3.61% - - 7.74%
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</TABLE>
Performance data quoted represents past performance. Past performance is no
guarantee of future results.
* Performance has not been annualized.
<PAGE>
TABLE OF CONTENTS
OUR PEOPLE
Portfolio Manager Biographies 4
GROWTH FUNDS
Aggressive Growth Fund 7
Diversified Growth Fund 11
Emerging Growth Fund 15
The Information Age Fund-REGISTERED TRADEMARK- 19
RS Internet Age Fund-TM- 23
MicroCap Growth Fund 27
MidCap Opportunities Fund 31
Value + Growth Fund 35
VALUE FUNDS
The Contrarian Fund-TM- 39
Global Natural Resources Fund 43
Partners Fund 47
FINANCIALS
Schedule of Investments 52
Statement of Assets and Liabilities 74
Statement of Operations 76
Statement of Changes in Net Assets 78
Financial Highlights 82
Notes to Financial Statements 86
<PAGE>
SEMIANNUAL REPORT
Dear Fellow Shareholders
[PHOTO]
G. RANDY HECHT
CHAIRMAN & CEO
After reporting to you that three of our funds had posted 100%+ returns in 1999,
I suggested in my last letter that you should expect volatility as the new
millennium began. I wrote that it is not unusual for growth funds and the NASDAQ
Composite Index(1) to correct by 20% over a relatively short period of time.
Shortly thereafter, the NASDAQ fell about 40% between early March and late May,
with Internet stocks falling even more. In addition, the NASDAQ experienced an
unprecedented level of volatility, with 100 out of 126 trading days in the first
half of 2000 reflecting at least a 1% change in price levels.
To be sure, the Federal Reserve Board was the cause of some of this volatility.
It continued to raise short-term interest rates in an effort to cool the
supercharged U.S. economy. Meanwhile, investors shifted their attention away
from growth and toward value, a neglected part of the market for much of the
past few years. Our value funds benefited from this trend, particularly our
holdings in energy, real estate, and utilities.
Of course, there's no way to predict what's going to happen in the stock market
over the short-term. Indeed, a hallmark of successful investing is to take a
long-term view. Despite the gyrations, the NASDAQ was only down 2.56% for the
six-month period while the S&P 500 Index(2) was only down 0.47%. By and large,
this difficult market environment hurt the RS funds performance, although most
of our funds outperformed their benchmarks. One fund, the RS MicroCap Growth
Fund, returned 23.28%, dwarfing its benchmark, the Russell 2000 Growth
Index(3), which gained only 1.23% for the period.
In the meantime, a number of exciting developments took place at RS Investment
Management. We added a new fund, the RS Aggressive Growth Fund, which invests in
fast-growing companies of any size. During the course of our research, we often
come across large-cap companies--often too large for our small-cap funds--that
are experiencing dynamic growth, expanding market share, and other desirable
investment characteristics. The new fund was launched on May 1 and is managed by
Jim Callinan, who was named 1999's Domestic Portfolio Manager of the Year by
Morningstar, Inc., a Chicago-based firm that is the leading provider of mutual
fund data and analysis.
Jim also manages the RS Emerging Growth Fund, which was closed to new investors
on April 28. We closed the Fund because the Fund's assets had grown dramatically
due to strong investment performance and substantial cash inflows. Identifying
new, exciting companies requires rigorous fundamental research and it is not
always possible to stay fully invested when the level of assets reaches a
certain level.
2
<PAGE>
RS FUNDS
That is why we are particularly pleased to have deepened our already strong
analyst team by adding two newly minted Harvard MBA graduates to our research
staff. In addition, we have hired a very talented senior technology analyst who
has extensive research experience with a very successful hedge fund located in
the Silicon Valley area. We believe that our deep research staff will be a
significant competitive edge in ferreting out the best smaller growing
companies.
On the following pages, you will find letters from each of our fund's portfolio
managers as well as financial statements as of June 30, 2000. In addition, we
have added a new feature, "A Commitment to Quality," which provides portfolio
manager biographies. For additional insight into our managers' investment
strategy, go to "Managers' Corner," a new section on our web site at
www.rsim.com. Beyond that, our web site provides daily NAVs, archived news
articles on our funds and managers, descriptions of the way our funds are
managed, and other useful investor information.
We also have expanded AccountLink ONLINE, adding the flexibility to buy, sell,
and exchange shares online. You can also access your account balances, recent
account activity, and your account transaction history. To register for
AccountLink ONLINE, visit our web site or call 1-800-624-8025.
The Federal Reserve Board is unlikely to make substantial moves until after the
November elections, suggesting that the investment climate may be more serene
for the balance of 2000. With interest rate jitters largely behind us, the
market should once again reward those companies with outstanding fundamental
strength.
Sincerely,
/s/ Randy Hecht
G. Randy Hecht
CHAIRMAN & CEO
RS Investment Management
[email protected]
THERE'S NO WAY TO PREDICT WHAT'S GOING TO HAPPEN IN THE STOCK MARKET OVER THE
SHORT-TERM. INDEED, A HALLMARK OF SUCCESSFUL INVESTING IS TO TAKE A LONG-TERM
VIEW.
(1) The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based
common stocks listed on the NASDAQ Stock Market. The index is market-value
weighted and contains over 5,000 companies. The broad base of this index
makes it one of the most widely followed. You cannot invest in an index.
(2) 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.
(3) The Russell 2000 Index is an unmanaged market capitalization-weighted index
composed of 2,000 U.S. companies with an average market capitalization of
$637 million. Investment results assume the reinvestment of dividends paid
on the stocks constituting the index. You cannot invest in an index.
3
<PAGE>
SEMIANNUAL REPORT
OUR PEOPLE
A COMMITMENT TO QUALITY
A COMMITMENT TO QUALITY
AT RS INVESTMENT MANAGEMENT, WE BELIEVE OUR PEOPLE AND THEIR PROCESSES ARE WHAT
SET US APART AND DIFFERENTIATE OUR FAMILY OF FUNDS. BY BUILDING ON A FOUNDATION
OF QUALITY INDIVIDUALS, WITH EXCEPTIONAL EDUCATIONAL BACKGROUNDS, EXTENSIVE
INVESTMENT EXPERIENCE, AND A WIDE VARIETY OF PROFESSIONAL EXPERIENCE AND
KNOWLEDGE, WE HAVE ESTABLISHED A MOST REMARKABLE ORGANIZATION.
GROWTH TEAM
[PHOTO]
CATHERINE BAKER is a principal and co-portfolio manager of the RS Internet Age
Fund-TM- and a senior analyst at RS Investment Management (RSIM). She joined the
RSIM research team in March 1997. Cathy is responsible for covering software,
Internet, and information and business services companies. Previously she was a
senior analyst covering information services companies at Robertson, Stephens &
Company (RS&Co., now Robertson Stephens) beginning in the spring of 1995. Prior
to joining RS&Co. she served as an analyst at Cowen & Company. She also has
previous brokerage analyst experience at J.P. Morgan Securities and industry
experience at IBM as an analyst in software acquisitions. Cathy has a B.S.E. in
electrical engineering from the University of Michigan and holds a M.B.A. from
Carnegie-Mellon University.
[PHOTO]
RODERICK R. BERRY is president of Elijah Asset Management (EAM). Currently he
serves as co-portfolio manager of The Information Age Fund-Registered
Trademark- in a sub-advisory role. Prior to EAM, Rod joined Robertson Stephens
Investment Management in April 1995 as an industry analyst to cover data
networking, telecommunications, PC manufacturers, and passive electronics
corporations. Prior to that time, Rod worked for USL Capital for six years as
both an investment officer and a financial manager. Prior to joining USL
Capital, he was the assistant product manager for interest-bearing checking at
Wells Fargo Bank. From 1987-1989, Rod was president and founder of the Bay
Area Optical Laboratory, Inc., a wholesale optical laboratory. Rod holds a B.A.
in economics from Stanford and a M.B.A. from the J. L. Kellogg School at
Northwestern.
[PHOTO]
JAMES L. CALLINAN is a managing director and portfolio manager of the RS
Aggressive Growth Fund, RS Emerging Growth Fund, RS Internet Age Fund-TM-, and
emerging growth separate accounts. He joined RS Investment Management (RSIM) in
June 1996. Prior to joining RSIM, he was portfolio manager for Putnam's OTC
Emerging Growth, Emerging Information Science Trust, and Emerging Health
Sciences Funds for three years. While at Putnam Jim spent several years as an
equity analyst covering small-cap growth stocks. Jim received an A.B. in
economics from Harvard University, a M.S. in accounting from NYU Business
School, and a M.B.A. from Harvard Business School.
4
<PAGE>
RS FUNDS
[PHOTO]
RONALD E. ELIJAH is chief executive officer of Elijah Asset Management (EAM) and
was formerly a managing director of Robertson Stephens Investment Management. He
has been portfolio manager of the RS Value + Growth Fund and The Information Age
Fund-Registered Trademark- since their inceptions and currently serves as
portfolio manager in a sub-advisory role. Ron began his career as a technology
analyst with Montgomery Securities (now Banc of America Securities). In 1985, he
joined Robertson, Stephens & Company (now Robertson Stephens) as a research
analyst covering several sectors, including technology and environmental and
business services. From 1990 to 1992, Ron worked as an investment analyst for a
$400 million hedge fund where he broadened his research expertise to include
such sectors as consumer retailing and wholesaling, and natural resources. He
received a master's degree in economics from Humboldt State University and a
M.B.A. degree with an emphasis in finance from Golden Gate University.
[PHOTO]
DAVID J. EVANS is a managing director and portfolio manager of the RS MicroCap
Growth Fund and small-cap growth separate accounts. He joined RS Investment
Management (RSIM) in September 1989 as vice president, director of research, and
participated in the portfolio management process for the RS Emerging Growth Fund
and small-cap growth separate accounts. Prior to joining RSIM, Dave was vice
president and portfolio manager for the CIGNA Aggressive Growth Fund, as well as
manager for CIGNA's aggressive growth separate account relationships. While at
CIGNA, Dave also spent several years as a research analyst for aerospace,
defense, technology, and electronics companies. Dave received a B.A. in history
from Muskingum College and a M.B.A. in finance from the Wharton School of the
University of Pennsylvania.
[PHOTO]
RAINERIO J. REYES is a principal and co-portfolio manager of the RS MicroCap
Growth Fund and the small-cap growth separate accounts. He joined the RS
Investment Management (RSIM) research team in 1994. Prior to joining RSIM, Rai
was a management consultant with Ernst & Young. During the Aquino
Administration, Rai served as executive assistant to the Secretary of
Transportation and Communications, Republic of the Philippines. While with
Hilton Hotels Corporation, Rai held various positions in operations management.
Rai received a B.S. from Cornell University and a M.B.A. from the Wharton School
of the University of Pennsylvania.
[PHOTO]
JOHN H. SEABERN is a vice president and co-portfolio manager of the RS
Diversified Growth Fund. He has served on the management team of the RS
Diversified Growth Fund since its inception. He joined the RS Investment
Management (RSIM) research team in September 1993. Prior to joining RSIM, John
worked at Duncan-Hurst Capital Management as a performance analyst for two
years. He holds a B.S. degree in finance from the University of Colorado and is
a CFA.
[PHOTO]
JOHN L. WALLACE is a managing director and portfolio manager of the RS MidCap
Opportunities Fund, RS Diversified Growth Fund, and related separate accounts.
He joined RS Investment Management (RSIM) in July 1995. Prior to joining RSIM,
John was vice president and portfolio manager of Oppenheimer's Main Street
Income & Growth and Total Return mutual funds, where he managed more than $4
billion in assets. Before going to work on Wall Street, John was co-founder,
owner, and operator of an Ecuadorian export firm. He holds a B.A. from the
University of Idaho and a M.B.A. from Pace University.
5
<PAGE>
SEMIANNUAL REPORT
A COMMITMENT TO QUALITY
OUR PEOPLE -- CONTINUED
VALUE TEAM
RICK BARRY is managing general partner of Eastbourne Capital Management LLC
and currently manages a portion of assets in The Contrarian FundT-TM- in a
sub-advisory role. Prior to Eastbourne, he joined Robertson Stephens
Investment Management as an analyst for The Contrarian Fund-TM- in September
1995. He has 18 years of investment experience, most recently as an analyst
focusing on hedge funds for Banyan Securities. Prior to that time, Rick
worked with Regal Asset Management as a portfolio manager and with the
Feshbach Brothers in Dallas, Texas, as an analyst. The Feshbach Brothers
managed an incentive-based partnership specializing in short selling. From
1982-1990, Rick worked in the brokerage industry, starting as a retail
account executive with Merrill Lynch, and ending as a vice president of
institutional sales at Lazard Freres in New York. He graduated Magna Cum
Laude from Pennsylvania State University with a degree in political science.
[PHOTO]
ANDREW P. PILARA, JR. is a managing director and has been responsible for
managing the RS Partners Fund since the Fund's inception in July 1995. He is
responsible for managing the RS Global Natural Resources Fund and has been a
member of the management team for The Contrarian Fund-TM- since August 1993.
Andy has been involved in the securities business for over 25-years, with
experience in portfolio management, research, trading, and sales. Prior to
joining RS Investment Management, he founded and was president of Pilara
Associates, an investment management firm established in 1974. He had
previously worked in institutional sales at Dean Witter Reynolds and J. Barth
& Company. He holds a B.A. in economics from St. Mary's College.
[PHOTO]
PAUL H. STEPHENS was a founding partner of Robertson, Stephens & Company
(RS&Co., now Robertson Stephens) and is now a managing director of RS
Investment Management where he manages The Contrarian Fund-TM- with a team of
investment professionals. In addition to managing private investment
portfolios for individuals since 1975, he led the venture capital group from
1985 to 1990. Prior to founding RS&Co., he was a partner of Robertson,
Colman, Siebel & Weisel (now Banc of America Securities) and with Smith
Barney & Company. Paul received B.S. and M.B.A. degrees from the University
of California at Berkeley.
6
<PAGE>
AGGRESSIVE GROWTH FUND
INVESTING IN SMALL-, MID-, AND
LARGE-CAP GROWTH COMPANIES
NEW
FUND
<PAGE>
SEMIANNUAL REPORT
AGGRESSIVE GROWTH FUND INVESTMENT STYLE
LARGE CAP MID CAP SMALL CAP
VALUE BLEND GROWTH
FUND PHILOSOPHY
[PHOTO]
JAMES L. CALLINAN
FOR BIO SEE PAGE 4
The RS Aggressive Growth Fund invests in companies of any size that we believe
offer the potential for significant increases in value. The Fund generally
invests in industry segments that are experiencing rapid growth and in companies
with competitive advantages such as superior technology, profitability,
management, or market share.
--------------------------------------------------------------------------------
FUND UPDATE
The RS Aggressive Growth Fund was launched on May 1, 2000 with a net asset value
(NAV) of $10.00. For the two-month period ending June 30, 2000, the Fund's total
return was 9.20% outperforming the S&P 500 Index(1), which returned -0.74% for
the same period. Although two months is too short a period of time to make a
sweeping conclusion, we are nevertheless gratified that the Fund outperformed
the S&P 500 in this initial reporting period.
During the two-month period in which the Fund operated, the Federal Reserve
Board raised short-term interest rates by 0.50%, its sixth increase in a year.
By the end of May, there were indications that the economy was slowing and that
the Federal Reserve Board might be nearing the end of its tightening campaign.
After a ten-week bear market, the environment for growth stocks was finally
improving.
The Fund's performance was driven by superior results in the optical networking,
semiconductor and hardware segments and underperformance in software,
information technology services and Internet services. Investors shifted from
buying the "gold prospectors" represented by Internet stocks to speculating on
the "purveyors" represented by networking and telecommunication equipment
companies. Investors began focusing on companies rather than concepts, and
business models began to matter as much as potentially enormous end markets.
Why did we start this fund? The primary reason is that during our research
process we often come across large-cap companies that have many of the same
investment characteristics that would make them desirable for the RS Emerging
Growth Fund except for the fact that their market capitalizations are larger
than appropriate for that fund. Yet, the companies are experiencing dynamic
growth, are gaining market share, and are fast becoming leaders in their
industry. While many of these companies are operating in emerging industries
like the Internet, they are no longer small-cap. Because the Emerging Growth
Fund tends to focus on small-cap stocks, we have limited our investments in many
of these great companies. The Aggressive Growth Fund gives us the flexibility to
invest in these larger, rapidly growing companies.
We are applying the same investment strategy to both funds. That is, we look for
companies with distinct proprietary advantages such as hard-to-copy products or
services. In addition, we look for companies that participate in emerging
industries with a large market opportunity. We also look for companies with
superior profit margins.
Some of the larger-cap names in Aggressive Growth include Akamai Technologies
(0.95% of the Fund as of 6/30/00), Bed, Bath & Beyond (1.38%) and Calpine
(2.12%). Akamai provides a global delivery service for Internet content.
--------------------------------------------------------------------------------
8
<PAGE>
RS FUNDS
AGGRESSIVE GROWTH FUND UPDATE -- CONTINUED
Its streaming media and applications improves web site speed, quality and
reliability, and protects against web site crashes due to demand overloads.
Using software that is based on Akamai's proprietary mathematical formulas, the
company monitors Internet traffic patterns and delivers its customers' content
and applications by the most efficient route available.
Of course, not all fast-growing companies are technology oriented. For example,
Bed, Bath & Beyond sells high-end home furnishings such as bed linens and bath
and kitchen items throughout the U.S. Investors rewarded this company for
producing excellent sales and earnings growth. In its most recent quarter ending
May 27, 2000, net sales rose 29% to $463 million, while net income rose 31% to
$23 million. Another fast growing company is Calpine, which is engaged in the
ownership and operation of power generation facilities as well as the sale of
electricity.
Although this portfolio may focus on larger-cap stocks, it still involves
significant volatility. It's not unusual for these aggressive growth sectors to
experience dramatic corrections of 20% or more in the course of a few months or
even over a few weeks. While investors may find these periods of volatility
unsettling, we believe that our experienced team can offer value to shareholders
because these downdrafts are the best opportunity to buy stocks that we like at
much lower prices. To help mitigate some of the risks in this portfolio, we keep
it well diversified. While we are investing a significant portion of its assets
in technology, we are also investing in healthcare, media, energy and consumer
products.
We wish to welcome our new investors to the RS Aggressive Growth Fund. We are
pleased with the Fund's relatively strong start and look forward to building a
broadly diversified portfolio of fast-growing companies.
/s/ James L. Callinan
James L. Callinan
PORTFOLIO MANAGER
--------------------------------------------------------------------------------
Investing in a particular sector can involve greater market fluctuation.
Investments in high-technology and Internet-related sectors may be highly
volatile. Investing in smaller companies can involve risks such as less publicly
available information than larger companies, volatility, and less liquidity.
International investing may involve greater currency fluctuations and less
political and economic stability. 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.
9
<PAGE>
SEMIANNUAL REPORT
ASSETS UNDER MANAGEMENT: $136.18 million
ASSET ALLOCATION
[CHART]
<TABLE>
<S> <C>
Internet Commerce and Services 27.9%
Computer Software & Svcs. 20.6%
Telecom. Equip. & Svcs. 18.3%
Computer Hardware & Components 9.0%
Short Term Investments 7.4%
Financial Services 3.6%
Medical/Healthcare/Biotech 3.2%
Network Systems & Products 2.5%
Media 2.3%
Energy 2.1%
Other & Other Assets 1.7%
Consumer Specialty Retail 1.4%
Total 100.0%
</TABLE>
DATA AS OF JUNE 30, 2000
TOP TEN HOLDINGS
<TABLE>
<S> <C>
Efficient Networks, Inc. ..................................... 3.58%
Alteon Websystems, Inc. ...................................... 3.08%
Informatica Corporation ...................................... 2.79%
E.piphany, Inc. .............................................. 2.72%
TIBCO Software, Inc. ......................................... 2.57%
Cree, Inc. ................................................... 2.53%
Siebel Systems, Inc. ......................................... 2.51%
Agile Software Corporation ................................... 2.50%
Kana Communications, Inc. .................................... 2.47%
Quest Software, Inc. ......................................... 2.45%
</TABLE>
RESULTS OF A HYPOTHETICAL $10,000 INVESTMENT (IF INVESTED ON 5/1/00)
Investment operations of the Aggressive Growth Fund commenced on May 1, 2000. In
the interest of our shareholders, results of a hypothetical $10,000 investment
in the Fund versus its benchmark for this brief amount of time is not included.
We believe this time period does not reflect a meaningful historical viewpoint.
We want to remind investors that successful investing is not a short-term
proposition. We remain focused on the Fund's goal of long-term capital
appreciation.
--------------------------------------------------------------------------------
(1) The S&P 500 Index is an unmanaged market capitalization-weighted index of
500 stocks designed to measure performance of the broad domestic economy
through changes in the aggregate market value of 500 stocks representing
all major industries. 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.
10
<PAGE>
DIVERSIFIED GROWTH FUND
FOCUSING ON
SMALL-CAP COMPANIES
[GRAPHIC]
<PAGE>
SEMIANNUAL REPORT
DIVERSIFIED GROWTH FUND INVESTMENT STYLE
LARGE CAP MID CAP SMALL CAP
VALUE BLEND GROWTH
FUND PHILOSOPHY
[PHOTO] [PHOTO]
JOHN L. WALLACE JOHN H. SEABERN
FOR BIOS SEE PAGE 5
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 approach to risk: losses are
eliminated quickly, and we are constantly looking for attractive new
opportunities.
--------------------------------------------------------------------------------
FUND UPDATE
The RS Diversified Growth Fund finished the first half of 2000 with a return of
0.61% versus our primary benchmark, the Russell 2000 Index(2), which was up
3.04% for the same period. The market has been extremely volatile during the
first six months of the year as investors have grappled with rising interest
rates, prospects for slowing growth, and extended valuations.
In addition, the narrowness of the overall market, as measured by the NYSE
cumulative advance-decline line, has had negative implications for broadly
diversified portfolios such as ours. We want to remind investors that the
Diversified Growth Fund is not a fund that makes large sector bets or has
concentrated positions in individual stocks. The high degree of volatility in
today's market can make this an extremely risky strategy, but at the same time
has rewarded funds with aggressively high weightings in the technology,
biotechnology, and telecommunications equipment sectors. We believe
diversification is a great risk management tool and will manage the Fund
accordingly.
During the first half of 2000, we made a few shifts in our sector exposure,
notably an increase in the energy weighting during the first quarter and a
reduction in an exposure to pure play Internet stocks.
Although our energy investments were selected on an individual basis, we cannot
ignore the macro trends that dictate the health of the overall sector. We
believe industry fundamentals today are better than they were in 1997, the peak
of the last cycle. Recent oil output increases by OPEC to meet strong global
demand have done very little to alleviate higher-than-expected commodity prices.
We feel that prices are likely to stay higher than consensus estimates due to
several factors: OPEC production reaching capacity limitations, stable global
demand, low inventory levels, and accelerating depletion rates of reserves. We
remain overweighted in energy and think this group could outperform the broader
market for the balance of the year. Our biggest winners in this sector during
the last six months were EOG Resources (1.78% of the Fund as of 6/30/00), Dynegy
(0.00%), and R&B Falcon (1.59%).
We reduced our exposure to Internet stocks during the correction in the
March/April time frame when it became clear that investors were finally
questioning the validity of business models, funding of growth, and most
importantly, valuations. While we think the Internet is real and is changing the
way people are conducting and transacting business, we have seen very few
companies with a sustainable competitive advantage and profitable business
plans.
--------------------------------------------------------------------------------
12
<PAGE>
RS FUNDS
DIVERSIFIED GROWTH FUND UPDATE -- CONTINUED
GOOD IDEAS THAT WORKED
Realized and Unrealized Gain (YEAR-TO-DATE THROUGH 6/30/00)
<TABLE>
<S> <C>
EOG Resources, Inc. .......................................... $6,862,836
Dynegy, Inc. ................................................. $5,407,906
Oak Technology, Inc. ......................................... $5,056,990
R&B Falcon Corp. ............................................. $5,015,917
Protein Design Labs, Inc. .................................... $4,285,637
Chesapeake Energy Corp. ...................................... $3,565,478
Brocade Communication Systems, Inc. .......................... $3,343,564
MDSI Mobile Data Solutions, Inc. ............................. $3,054,759
Global Marine ................................................ $2,963,555
El Paso Energy Corporation ................................... $2,668,984
</TABLE>
GOOD IDEAS AT THE TIME
Realized and Unrealized Loss (YEAR-TO-DATE THROUGH 6/30/00)
<TABLE>
<S> <C>
Stamps.com, Inc. ............................................. $17,428,518
Primus Telecommunications Group, Inc. ........................ $7,774,878
Startec Global Communications ................................ $6,340,654
Auspex Systems ............................................... $5,539,765
Skymall, Inc. ................................................ $5,068,042
MedicaLogic/Medscape, Inc. ................................... $5,039,434
Cyberian Outpost, Inc. ....................................... $4,665,087
Commerce One, Inc. ........................................... $4,310,367
3Com Corporation ............................................. $4,243,925
Agile Software Corp. ......................................... $4,162,176
</TABLE>
Our most disappointing investment this year has been Stamps.com (1.21%), one of
only three companies with the technology to allow consumers and businesses to
purchase stamps and event tickets online. Additionally, Stamps.com has a unit
that allows businesses to ship packages online at significant cost savings to
current methods. Although we are disappointed with the performance of this
investment, we think the stock still has significant appreciation potential.
The dominant theme in the U.S., and around the world, is slowing economic
growth. Rate hikes started twelve months ago, but because of the lag effect, it
takes 6-12 months for rising interest rates to trickle down and affect the
economy. We are starting to see signs of a slowdown: recent data indicates that
retail and auto sales are slowing, house starts are coming to an abrupt halt,
and consumer loan activity is drying up. The Fed continues to express its
concern over inflation and has signaled to the market repeatedly that it may not
yet be finished with its rate hikes. If the Fed can successfully engineer a
"soft landing," which so far seems to be working, the price erosion and P/E
contraction of many small-cap growth stocks may end.
While the first half of the year was challenging, we do not feel the portfolio
has suffered from fundamental deterioration and we are optimistic about its
growth prospects. We continue to find many well-managed companies that have
excellent appreciation potential with limited downside risk.
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
--------------------------------------------------------------------------------
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.
13
<PAGE>
SEMIANNUAL REPORT
ASSETS UNDER MANAGEMENT: $705.66 million
ASSET ALLOCATION
[CHART]
<TABLE>
<S> <C>
Energy 19.8%
Telecom. Equip. & Svcs. 14.9%
Computer Software & Svcs. 14.0%
Computer Hardware & Components 13.5%
Internet Commerce and Services 10.8%
Medical/Healthcare/Biotech 9.4%
Financial Services 3.6%
Business/Commercial Services 2.7%
Media 2.5%
Consumer Specialty Retail 2.3%
Network Systems & Products 2.0%
Construction/Infrastructure 1.9%
Transportation 1.3%
Other & Other Assets 1.1%
Short Term Investments 0.2%
100.0%
</TABLE>
DATA AS OF JUNE 30, 2000
TOP TEN HOLDINGS
<TABLE>
<S> <C>
Motient Corporation ....................................... 3.55%
Fleetwood Enterprises, Inc. .................................. 1.92%
Primus Telecommunications Group, Inc. ........................ 1.84%
The 3DO Company .............................................. 1.83%
EOG Resources, Inc. .......................................... 1.78%
Peregrine Systems, Inc. ...................................... 1.67%
R & B Falcon Corporation ..................................... 1.59%
e.spire Communications, Inc. ................................. 1.55%
Informix Corporation ......................................... 1.54%
Valero Energy Corporation .................................... 1.52%
</TABLE>
RESULTS OF A HYPOTHETICAL $10,000 INVESTMENT (IF INVESTED ON 8/1/96)
[GRAPH]
<TABLE>
<CAPTION>
DG % S&P 500 Div. % R 2000 DG S&P 500 Div. R 2000
Date Cumulative Cumulative Cumulative 10k 10k 10k
<S> <C> <C> <C> <C> <C> <C>
8/1/96 0.00% 0.00% 0.00% $10,000 $10,000 $10,000
9/96 11.10% 6.13% 8.73% $11,110 $10,613 $10,873
12/96 24.20% 15.01% 14.39% $12,420 $11,501 $11,439
3/97 18.70% 18.08% 8.47% $11,870 $11,808 $10,847
6/97 33.20% 38.63% 26.06% $13,320 $13,863 $12,606
9/97 66.70% 49.03% 44.82% $16,670 $14,903 $14,482
12/97 60.77% 53.36% 39.97% $16,077 $15,336 $13,997
3/98 86.65% 74.74% 54.05% $18,665 $17,474 $15,405
6/98 71.99% 80.39% 46.87% $17,199 $18,039 $14,687
9/98 44.05% 62.50% 17.28% $14,405 $16,250 $11,728
12/98 86.94% 97.17% 36.41% $18,694 $19,717 $13,641
3/99 109.76% 106.92% 29.01% $20,976 $20,692 $12,901
6/99 170.70% 121.46% 49.07% $27,070 $22,146 $14,907
9/99 187.05% 107.62% 39.65% $28,705 $20,762 $13,965
12/99 367.74% 138.63% 65.40% $46,774 $23,863 $16,540
3/00 486.83% 144.00% 77.12% $58,683 $24,400 $17,712
6/00 370.57% 137.50% 70.42% $47,057 $23,750 $17,042
</TABLE>
PERFORMANCE UPDATE
<TABLE>
<CAPTION>
THREE-YEAR TOTAL AVERAGE ANNUAL
YEAR TO DATE ONE-YEAR AVERAGE ANNUAL RETURN SINCE RETURN SINCE
TOTAL RETURN TOTAL RETURN RETURN INCEPTION(1) INCEPTION(1)
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Diversified Growth Fund 0.61% 73.83% 52.30% 370.57% 48.53%
Russell 2000 Index(2) 3.04% 14.32% 10.57% 70.42% 14.59%
S&P 500 Index(3) -0.47% 7.24% 19.66% 137.50% 24.73%
</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
$637 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.
14
<PAGE>
EMERGING GROWTH FUND
SEEKING TO INVEST IN AMERICA'S MOST DYNAMIC,
GROWTH-ORIENTED COMPANIES
[GRAPHIC]
<PAGE>
SEMIANNUAL REPORT
EMERGING GROWTH FUND INVESTMENT STYLE
FUND PHILOSOPHY LARGE CAP MID CAP SMALL CAP
VALUE BLEND GROWTH
[PHOTO]
JAMES L. CALLINAN
FOR BIO SEE PAGE 4
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 environment. The Fund is intended for investors
with long-term investment goals.
-------------------------------------------------------------------------------
FUND UPDATE
The Federal Reserve thankfully ended the speculative Internet bubble, which
had been stoked by venture capitalists, investment bankers, and I must admit,
my fellow mutual fund managers. Our folly was to believe that a multifaceted
and multi-billion dollar industry could be created in the span of 2-3 years,
without threats from entrenched corporate competition and without the failure
of many companies to execute their business plans. For the first time in six
quarters, the RS Emerging Growth Fund fell on an absolute basis, declining
11.02% in the second quarter versus -13.27% for the NASDAQ Composite Index(4)
and -7.37% for the Russell 2000 Growth Index(2). On a positive note, we
posted a positive result for the first half of 2000, returning 6.25% vs.
-2.54% for the NASDAQ and 1.23% for the Russell 2000 Growth.
The silver lining of a Federal Reserve hike lies in its temporary and
artificial nature. In today's economy, start-ups are driven almost
exclusively by venture capitalists who invest cash from heavily insulated
institutional investors such as endowments, universities, and state pension
plans. The Fed can marginally hurt venture capitalists by shutting the IPO
window, but its interest rate lever serves only to delay, not stop, the New
Economy. The real impact of rate hikes is felt by more established industries
and lower end consumers who borrow heavily to own homes with adjustable rate
mortgages.
The new economic animal, the "day trader" is most impacted by the Fed's
interest rate hikes. The day trader feels the full weight of the Fed hike on
margin loans in his brokerage account.
One thing is certain: even if he does not notice the 25% boost in interest
rate charges, he undoubtedly felt the sting of the 50% collapse in stock
prices. Unfortunately for us, the day trader again "threw out the baby with
the bath water" and took our portfolio down almost as much as the over-hyped
consumer Internet service companies such as Amazon.com, eBay, and Priceline.
I would not be writing of the day trader if it were not for his increased
importance in the pricing of our stocks. Knowingly, or unknowingly, he
coalesces around hot issues, over-hyped Internet stocks, and rock solid
emerging growth firms. He drives prices to unsustainable heights; then, if
the stock prices falter, this same unwitting manipulator panics the prices
down with volatile swings in investor sentiment. The day trader is a new
breed who markedly changes stock price trading charts, thoroughly confusing
the growth stock "chartist" investors, or more commonly called momentum
investors. Their stock-in-trade is reading charts, which formerly told these
types of investors the "real story" about the firm's prospects. Charts
formerly reflected the accumulated wisdom of fundamentally driven
institutional investors who based their judgements on discussions with
management, analyses of corporate financial reports, and competitive
analysis. They believed that upwardly sloping graphs represented good
investments. Today's price charts no longer accurately reflect the input of
institutional money managers.
-------------------------------------------------------------------------------
16
<PAGE>
RS FUNDS
EMERGING GROWTH FUND UPDATE -- CONTINUED
GOOD IDEAS THAT WORKED
Realized and Unrealized Gain (YEAR-TO-DATE THROUGH 6/30/00)
<TABLE>
<S> <C>
Globespan, Inc. .............................................. $63,280,226
VeriSign, Inc. ............................................... $54,350,932
Check Point Software Technologies, Ltd. ...................... $54,309,611
Aspect Development, Inc. ..................................... $51,938,451
BEA Systems, Inc. ............................................ $46,848,317
Abgenix, Inc. ................................................ $41,609,451
Network Appliance, Inc. ...................................... $35,766,355
Medarex, Inc. ................................................ $25,585,898
Enron Corp. .................................................. $25,487,545
Software.com, Inc. ........................................... $25,326,867
</TABLE>
GOOD IDEAS AT THE TIME
Realized and Unrealized Loss (YEAR-TO-DATE THROUGH 6/30/00)
<TABLE>
<S> <C>
Glenayre Technologies, Inc. .................................. $40,929,617
24/7 Media, Inc. ............................................. $35,435,679
Crossroads Systems, Inc. ..................................... $33,564,089
HomeStore.com, Inc. .......................................... $33,136,386
Sagent Technologies, Inc. .................................... $29,095,840
DoubleClick, Inc. ............................................ $27,563,845
Power Integrations, Inc. ..................................... $27,157,281
Intermedia Communications, Inc. .............................. $23,487,854
Knight Trading Group, Inc. ................................... $21,522,777
Emmis Communications ......................................... $21,227,820
</TABLE>
-------------------------------------------------------------------------------
Now the market is beset with the day trader keying off intraday moves, whose
weekly patterns are religiously studied by large fund managers for their
soothsaying predictive value. It is as if first year medical students were
suddenly teaching experienced cardiologists how to read EKG's.
Into this environment, the Emerging Growth Fund plunged ahead with its
holdings of some of the fastest revenue growth companies in the U.S. At the
end of the first quarter, our stocks grew their collective revenue at a rate
of over 120% on a year-over-year basis. In the second quarter of 2000, the
average revenue growth of the Fund again hit new highs at over 130%. Our
types of companies are still at unprecedented levels of revenue growth.
Results in the first half of 2000 were driven by outperformance in the
optical networking, semiconductor, and hardware segments and underperformance
in software, IT services, and Internet services. We were equally represented
in both camps and thus had average performance against our peers. Investors
shifted from buying the "gold prospectors" represented by the Internet
stocks, to speculating on the "purveyors," represented by networking and
telecommunications equipment firms. However, they sought only companies with
positive earnings levels.
We believe that corporate spending on Internet initiatives will take over as
the driving force of Internet-related demand; in the long run, service
provider spending will lag corporate spending. Our focus now is shifting away
from hardware and networking to software and IT services. Just as Windows
revolutionized the personal computer, Internet software code will
revolutionize corporate communication and interaction. We believe that we are
well positioned for a chain-reaction along this line.
We are appreciative of the patience of our new investors who may have
purchased the Fund at higher levels. We strive to take advantage of these
dramatic declines in emerging growth stocks and find new investments, which
we hope will have equally dramatic rises in prices in the near future.
Thank you for your trust and support.
/s/ James L. Callinan
James L. Callinan
PORTFOLIO MANAGER
-------------------------------------------------------------------------------
Investing in smaller companies can involve risks such as less publicly
available information than larger companies, volatility, and less liquidity.
17
<PAGE>
SEMIANNUAL REPORT
ASSETS UNDER MANAGEMENT: $5.66 billion DATA AS OF JUNE 30, 2000
ASSET ALLOCATION
[CHART]
<TABLE>
<S> <C>
Internet Commerce and Services 20.8%
Computer Software & Svcs. 20.2%
Telecom. Equip. & Svcs. 15.1%
Medical/Healthcare/Biotech 9.5%
Computer Hardware & Components 9.2%
Other & Other Assets 6.5%
Network Systems & Products 5.6%
Short Term Investments 5.4%
Media 3.2%
Commercial Services 1.9%
Financial Services 1.5%
Consumer Specialty Retail 1.1%
TOTAL 100.0%
</TABLE>
DATA AS OF JUNE 30, 2000
TOP TEN HOLDINGS
<TABLE>
<S> <C>
BEA Systems, Inc. ............................................ 2.25%
VeriSign, Inc. ............................................... 2.07%
Abgenix, Inc. ................................................ 1.86%
GlobeSpan, Inc. .............................................. 1.60%
Software.com, Inc. ........................................... 1.42%
Alteon Websystems, Inc. ...................................... 1.42%
ISS Group, Inc. .............................................. 1.38%
Efficient Networks, Inc. ..................................... 1.34%
Check Point Software Technologies, Ltd. ...................... 1.31%
Medarex, Inc. ................................................ 1.23%
</TABLE>
RESULTS OF A HYPOTHETICAL $10,000 INVESTMENT (IF INVESTED ON 11/30/87)
[GRAPH]
<TABLE>
<CAPTION>
EGF % S&P 500 Div. % Lipper Small R 2000 Growth EGF S&P 500 Lipper Small R 2000 Div
Date Cumulative Cumulative Co % Cumulative Div % Cumulative 10k Div. 10k Co. 10k Growth 10k
<S> <C> <C> <C> <C> <C> <C> <C> <C>
11/30/87 0.00% 0.00% 0.00% 0.00% $ 10,000 $10,000 $10,000 $10,000
12/87 26.11% 7.63% 8.53% 10.40% $ 12,611 $10,763 $10,853 $11,040
3/88 38.92% 13.75% 24.15% 29.63% $ 13,892 $11,375 $12,415 $12,963
6/88 52.22% 21.32% 33.38% 37.86% $ 15,222 $12,132 $13,338 $13,786
9/88 41.14% 21.74% 30.57% 34.06% $ 14,114 $12,174 $13,057 $13,406
12/88 43.83% 25.46% 31.10% 32.89% $ 14,383 $12,546 $13,110 $13,289
3/89 57.28% 34.32% 41.12% 42.76% $ 15,728 $13,432 $14,112 $14,276
6/89 67.09% 46.19% 50.31% 52.00% $ 16,709 $14,619 $15,031 $15,200
9/89 89.24% 61.44% 63.29% 65.58% $ 18,924 $16,144 $16,329 $16,558
12/89 107.76% 65.16% 58.34% 59.70% $ 20,776 $16,516 $15,834 $15,970
3/90 111.39% 60.17% 54.99% 55.45% $ 21,139 $16,017 $15,499 $15,545
6/90 146.38% 70.23% 64.01% 65.26% $ 24,638 $17,023 $16,401 $16,526
9/90 92.90% 46.82% 27.02% 22.14% $ 19,290 $14,682 $12,702 $12,214
12/90 127.65% 59.98% 36.41% 31.89% $ 22,765 $15,998 $13,641 $13,189
3/91 193.39% 83.16% 68.59% 72.19% $ 29,339 $18,316 $16,859 $17,219
6/91 168.62% 82.75% 66.89% 66.22% $ 26,862 $18,275 $16,689 $16,622
9/91 215.44% 92.54% 83.64% 84.15% $ 31,544 $19,254 $18,364 $18,415
12/91 261.40% 108.69% 102.48% 99.40% $ 36,140 $20,869 $20,248 $19,940
3/92 255.61% 103.09% 105.51% 104.86% $ 35,561 $20,309 $20,551 $20,486
6/92 194.28% 107.26% 88.55% 80.26% $ 29,428 $20,726 $18,855 $18,026
9/92 189.74% 113.81% 94.81% 83.75% $ 28,974 $21,381 $19,481 $18,375
12/92 252.18% 124.59% 125.97% 114.90% $ 35,218 $22,459 $22,597 $21,490
3/93 208.91% 134.51% 128.86% 111.05% $ 30,891 $23,451 $22,886 $21,105
6/93 207.44% 135.48% 135.67% 117.13% $ 30,744 $23,548 $23,567 $21,713
9/93 253.65% 141.62% 157.11% 137.40% $ 35,365 $24,162 $25,711 $23,740
12/93 277.59% 147.25% 164.19% 143.64% $ 37,759 $24,725 $26,419 $24,364
3/94 285.78% 137.80% 154.65% 133.71% $ 38,578 $23,780 $25,465 $23,371
6/94 254.28% 138.62% 140.89% 118.98% $ 35,428 $23,862 $24,089 $21,898
9/94 310.14% 150.51% 163.36% 139.44% $ 41,014 $25,051 $26,336 $23,944
12/94 307.65% 150.40% 163.08% 137.72% $ 40,765 $25,040 $26,308 $23,772
3/95 332.13% 174.87% 177.83% 150.76% $ 43,213 $27,487 $27,783 $25,076
6/95 323.92% 200.70% 203.56% 175.63% $ 42,392 $30,070 $30,356 $27,563
9/95 391.80% 224.93% 241.52% 206.98% $ 49,180 $32,493 $34,152 $30,698
12/95 390.45% 244.38% 245.75% 211.51% $ 49,045 $34,438 $34,575 $31,151
3/96 407.30% 262.94% 265.25% 229.41% $ 50,730 $36,294 $36,525 $32,941
6/96 470.62% 278.97% 295.39% 248.66% $ 57,062 $37,897 $39,539 $34,866
9/96 478.84% 290.85% 299.93% 245.69% $ 57,884 $39,085 $39,993 $34,569
12/96 495.85% 323.56% 296.42% 246.60% $ 59,585 $42,356 $39,642 $34,660
3/97 412.42% 334.87% 256.26% 210.25% $ 51,242 $43,487 $35,626 $31,025
6/97 529.69% 410.54% 264.71% $ 62,969 $51,054 $10,000 $36,471
9/97 662.40% 448.85% 326.42% $ 76,240 $54,885 $10,000 $42,642
12/97 606.33% 464.80% 291.47% $ 70,633 $56,480 $10,000 $39,147
3/98 735.44% 543.53% 337.98% $ 83,544 $64,353 $10,000 $43,798
6/98 752.80% 564.37% 312.82% $ 85,280 $66,437 $10,000 $41,282
9/98 553.47% 498.46% 220.52% $ 65,347 $59,846 $10,000 $32,052
12/98 804.24% 626.17% 296.28% $ 90,424 $72,617 $10,000 $39,628
3/99 1056.80% 662.07% 289.62% $115,680 $76,207 $10,000 $38,962
6/99 1253.41% 715.63% 347.08% $135,341 $81,563 $10,000 $44,708
9/99 1358.61% 664.62% 325.09% $145,861 $76,462 $10,000 $42,509
12/99 2455.02% 778.85% 467.05% $255,502 $87,885 $10,000 $56,705
3/00 2950.69% 798.63% 519.68% $305,069 $89,863 $10,000 $61,968
6/00 2614.63% 774.70% 474.00% $271,463 $87,470 $10,000 $57,400
</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 6.25% 100.58% 44.98% 27.12% 2614.63% 29.98%
Russell 2000 Growth Index(2) 1.23% 28.39% 15.80% 13.26% 474.00% 14.89%
S&P 500 Index(3) -0.47% 7.24% 23.81% 17.78% 774.70% 18.80%
</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.
(4) The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based
common stocks listed on the NASDAQ Stock Market. The index is market-value
weighted and contains over 5,000 companies. The broad base of this index
makes it one of the most widely followed. You cannot invest in an index.
18
<PAGE>
THE INFORMATION AGE FUND-Registered Trademark-
TARGETING INVESTMENTS IN
THE INFORMATION TECHNOLOGY SECTOR
[GRAPHIC]
<PAGE>
SEMIANNUAL REPORT
THE INFORMATION AGE FUND-Registered Trademark- INVESTMENT STYLE
FUND PHILOSOPHY LARGE CAP MID CAP SMALL CAP
VALUE BLEND GROWTH
[PHOTO] [PHOTO]
RONALD E. ELIJAH RODERICK R. BERRY
FOR BIOS SEE PAGES 4 & 5
The Information Age Fund-Registered Trademark- seeks to achieve long-term
capital appreciation by aggressively investing in companies primarily within
the information technology sector. The Fund is designed for investors who
believe that aggressive investment in these companies provides significant
opportunities for capital appreciation.
--------------------------------------------------------------------------------
FUND UPDATE
The first half of 2000 proved to be a very challenging period for technology
investors--not surprising considering the tremendous gains achieved by the
sector in 1999, despite a rising interest rate environment that continued
into the New Year. The Information Age Fund-Registered Trademark- was up 9.92%
at the end of the first half of 2000 versus the PSE Technology Index(2), which
was up 13.31% for the same period.
From the market top on March 10, 2000 to the intraday low on May 24, the
NASDAQ Composite Index(4) lost over 40% of its value. Fortunately, we had
already begun to position the portfolio more defensively in early March, as
we became increasingly concerned about valuations. To protect our
shareholders, we continued to increase the portfolio's cash position from
10.7% at the end of the first quarter to an unprecedented level of over 15%
in April. In addition, we increased the liquidity of the portfolio by moving
up in market capitalization. At the end of the first quarter, the median
market capitalization of the Fund was $49.6 billion versus the $26.9 billion
median recorded at the end of 1999.
During the first half of the year, we benefited from our over-weighting in
the semiconductor sector. Our conviction remained high during the correction
because our semiconductor investments possessed the greatest earnings
visibility in a capacity-constrained market environment.
During the first half, our three top performing stocks Micron Technology
(2.67% of the Fund as of 6/30/00), Xilinx (4.84%), and Intel (4.81%)
experienced strong growth as demand continued to outpace supply. We continue
to maintain an overweighted position in semiconductor manufacturers but have
slightly trimmed our capital equipment investments as we enter a period of
slower growth.
Driven by global telecommunications deregulation and an explosion in data
traffic, the telecommunications equipment sector has also continued the strong
performance established in 1999. During the first half of the year, two
investments, Corning (4.25%) and JDS Uniphase (4.09%), were among our list of
top-ten performing investments. Both companies give the Fund direct exposure to
the rapidly growing fiber optics area.
The worst performing sector for the Fund during the first half was the Internet
space. Although we had trimmed the Fund's exposure to this sector, we entered
the correction with a 7.5% weighting in Internet-focused companies. Our
investments in Yahoo! (2.57%), America Online (0.00%), Exodus Communications
(0.00%), and DoubleClick (0.00%) suffered along with the rest of the Internet
sector as they all finished among our ten worst performing investments for the
first half.
-------------------------------------------------------------------------------
20
<PAGE>
RS FUNDS
THE INFORMATION AGE FUND-REGISTERED TRADEMARK- UPDATE -- CONTINUED
GOOD IDEAS THAT WORKED
Realized and Unrealized Gain (YEAR-TO-DATE THROUGH 6/30/00)
<TABLE>
<S> <C>
Micron Technology, Inc. ...................................... $12,807,045
Xilinx, Inc. ................................................. $9,860,514
Intel Corporation ............................................ $7,314,053
Corning, Inc. ................................................ $6,016,457
EMC Corporation .............................................. $5,670,456
JDS Uniphase Corporation ..................................... $5,276,082
Applied Micro Circuits Corporation ........................... $5,246,592
Applied Materials, Inc. ...................................... $5,008,837
LSI Logic Corporation ........................................ $4,588,730
Novellus Systems, Inc. ....................................... $4,535,096
</TABLE>
GOOD IDEAS AT THE TIME
Realized and Unrealized Loss (YEAR-TO-DATE THROUGH 6/30/00)
<TABLE>
<S> <C>
Qualcomm, Inc. ............................................... $13,647,694
Microsoft Corporation ........................................ $6,752,887
Motorola, Inc. ............................................... $5,355,181
Yahoo! Inc. .................................................. $5,318,270
Legato Systems, Inc. ......................................... $5,004,611
Exodus Communications, Inc. .................................. $4,179,250
America Online, Inc. ......................................... $3,976,913
DoubleClick, Inc. ............................................ $3,210,109
Intuit, Inc. ................................................. $2,043,799
Gateway, Inc. ................................................ $1,620,709
</TABLE>
--------------------------------------------------------------------------------
The recent market correction has given us the opportunity to re-establish
positions in some of our favorite stocks that had reached unsustainable
valuations during the early months of 2000. Because software companies have
the least earnings visibility, they tend to correct harder in a market
downturn. Therefore, we under-weighted this sector. We have since been able
to rebuild our positions in the strongest software names at a much lower
cost-basis. Exiting the second quarter, the Fund's software weighting
exceeded 10%, up from about 4% during the first quarter.
Looking forward, we are encouraged by the return of more realistic valuations
in many of the areas in which we invest. Our companies continue to experience
strong global demand, and in many instances are selling into
capacity-constrained market segments. Although we believe that the larger,
more established companies will lead the market, we have begun to broaden the
Fund into smaller names that compete in some of the higher growth, emerging
market segments.
We have also begun to build a portfolio weighting in some of the high-growth
telecommunications service providers.
During the second quarter, we bought VoiceStream Wireless (1.76%), Western
Wireless (0.95%), Nextel Communications (2.12%), and Allegiance Telecom
(1.81%). Both VoiceStream and Nextel own valuable national footprints in the
U.S., a scarce resource. Western Wireless is a super-regional wireless
provider that is benefiting from high levels of roaming revenue in their
highly defensible rural regions. Allegiance is one of the best-managed new
competitive local exchange carriers and is showing tremendous customer growth
due to their broad service offering.
The fundamental outlook for the companies that we own in The Information Age
Fund-Registered Trademark- remains strong and we anticipate a continuation of
the market recovery in the second half of 2000.
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
--------------------------------------------------------------------------------
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.
21
<PAGE>
SEMIANNUAL REPORT
ASSETS UNDER MANAGEMENT: $395.98 million
ASSET ALLOCATION
[CHART]
<TABLE>
<S> <C>
Telecom. Equip. & Svcs. 30.5%
Semiconductors & Components 24.1%
Computer Hardware & Components 12.7%
Computer Software & Svcs. 10.2%
Electronic Components 10.2%
Internet Commerce and Services 6.4%
Network Systems & Products 4.7%
Short Term Investments 0.8%
Other & Other Assets 0.4%
100.0%
</TABLE>
DATA AS OF JUNE 30, 2000
TOP TEN HOLDINGS
<TABLE>
<S> <C>
EMC Corporation .............................................. 5.38%
Xilinx, Inc. ................................................. 4.84%
Intel Corporation ............................................ 4.81%
Cisco Systems, Inc. .......................................... 4.66%
Teradyne, Inc. ............................................... 4.34%
Corning, Inc. ................................................ 4.25%
Nokia Corporation, ADR ....................................... 4.23%
Applied Materials, Inc. ...................................... 4.20%
Microsoft Corporation ........................................ 4.14%
JDS Uniphase Corporation ..................................... 4.09%
</TABLE>
RESULTS OF A HYPOTHETICAL $10,000 INVESTMENT (IF INVESTED ON 11/15/95)
[GRAPH]
<TABLE>
<CAPTION>
IA % S&P 500 Div. % PSE % IA S&P 500 Div. PSE
Date Cumulative Cumulative Technology 10k 10k Technology
<S> <C> <C> <C> <C> <C> <C>
11/15/95 0.00% 0.00% 0.00% $10,000 $10,000 $10,000
12/95 -7.00% 3.98% -1.81% $ 9,300 $10,398 $ 9,819
3/96 -6.60% 9.58% -2.10% $ 9,340 $10,958 $ 9,790
6/96 7.10% 14.42% 1.23% $10,710 $11,442 $10,123
9/96 17.90% 18.01% 8.03% $11,790 $11,801 $10,803
12/96 17.85% 27.88% 17.86% $11,785 $12,788 $11,786
3/97 3.51% 31.30% 17.75% $10,351 $13,130 $11,775
6/97 22.76% 54.15% 37.35% $12,276 $15,415 $13,735
9/97 59.82% 65.71% 63.60% $15,982 $16,571 $16,360
12/97 25.09% 70.53% 41.40% $12,509 $17,053 $14,140
3/98 42.69% 94.30% 68.37% $14,269 $19,430 $16,837
6/98 49.58% 100.59% 68.34% $14,958 $20,059 $16,834
9/98 34.21% 80.69% 55.62% $13,421 $18,069 $15,562
12/98 90.40% 119.25% 118.60% $19,040 $21,925 $21,860
3/99 121.14% 130.09% 142.03% $22,114 $23,009 $24,203
6/99 146.37% 146.26% 198.22% $24,637 $24,626 $29,822
9/99 169.59% 130.86% 205.42% $26,959 $23,086 $30,542
12/99 330.72% 165.35% 373.05% $43,072 $26,535 $47,305
3/00 405.22% 171.32% 465.49% $50,522 $27,132 $56,549
6/00 373.45% 164.10% 436.01% $47,345 $26,410 $53,601
</TABLE>
PERFORMANCE UPDATE
<TABLE>
<CAPTION>
THREE-YEAR TOTAL AVERAGE ANNUAL
YEAR TO DATE ONE-YEAR AVERAGE ANNUAL RETURN SINCE RETURN SINCE
TOTAL RETURN TOTAL RETURN RETURN INCEPTION(1) INCEPTION(1)
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
The Information Age Fund-Registered Trademark- 9.92% 92.17% 56.82% 373.45% 39.94%
PSE Technology Index(2) 13.31% 79.74% 57.44% 436.01% 43.74%
S&P 500 Index(3) -0.47% 7.24% 19.66% 164.10% 23.35%
</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.
(4) The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based
common stocks listed on the NASDAQ Stock Market. The index is market-value
weighted and contains over 5,000 companies. The broad base of this index
makes it one of the most widely followed. You cannot invest in an index.
22
<PAGE>
RS INTERNET AGE FUND-TM-
INVESTING IN COMPANIES LIKELY TO BENEFIT
FROM THE DEVELOPMENT OF THE INTERNET
[GRAPHIC]
<PAGE>
SEMIANNUAL REPORT
RS INTERNET AGE FUND-TM-
INVESTMENT STYLE
LARGE CAP MID CAP SMALL CAP
VALUE BLEND GROWTH
FUND PHILOSOPHY
The RS Internet Age Fund-TM- seeks capital appreciation by identifying
high-quality companies and business models in emerging and rapid growth sectors
whose prospects are driven by the Internet. Investment criteria include:
increasing market share, high margin potential, a proprietary advantage, and a
management team that can leverage that advantage. We conduct fundamental
research, including extensive travel and frequent visits with company management
teams. We seek to adapt quickly to industry developments. The Fund is intended
for investors with long-term investment horizons.
[PHOTO] [PHOTO]
CATHERINE BAKER JAMES L. CALLINAN
FOR BIOS SEE PAGE 4
--------------------------------------------------------------------------------
FUND UPDATE
Although the RS Internet Age Fund-TM- finished the first half of 2000 with a
1.40% loss, it substantially outperformed TheStreet.com's Internet Sector
Index(2) and Inter@ctive Week Internet Index(4), which had returns of -27.08%,
and -13.61% respectively. The S&P 500 Index(3) was off 0.47% in the first half
as well.
The overall market has been very volatile and difficult in 2000, with especially
intense volatility in the Internet and technology sectors. Through the high of
March 10, the NASDAQ Composite Index(5) was up 24.07% year-to-date and at the
low on May 24, the Index was down 25.23%. Internet indices are even more
volatile and large intraday stock price swings have become the norm.
We believe there are many contributors to the overall market nervousness and the
sharp March and April price declines in growth and technology stocks. These
contributors include interest rate concerns, a heavy IPO and secondary offering
calendar, and speculative valuations on most growth stocks. In addition, as the
Internet economy has begun to mature, investors are beginning to focus on
companies rather than concepts, and business models have begun to matter as much
as potentially enormous end markets. We are no longer in an environment where
every Internet stock is a buy. While this makes Internet investing more
challenging, we believe this focus on real businesses feeds into our expertise
in emerging company analysis and our bottom-up, research-driven investment
process.
Given the difficult market environment, the Fund performed relatively well. We
believe a major reason we outperformed the indices was that we were not heavily
invested in the business-to-consumer (B2C) Internet sector. Our focus on
Internet infrastructure stocks helped us during periods when the market was
doing well, although it did not protect us during the correction, as all
Internet-related stocks suffered. In addition, we actively managed the Fund
following the market correction. We tightened up the portfolio, eliminating our
most speculative positions and upgrading quality. We also sold several
conservative, slower-growth names that had held up well in favor of stocks that
we believe are likely to come back more rapidly in a market recovery.
Some examples of companies that helped us include Globespan (2.30% of the Fund
as of 6/30/00), Efficient Networks (1.76%) and Terayon (0.39%) in broadband
infrastructure; Aspect Development (0.49%) and TIBCO (2.68%) in
business-to-business (B2B) infrastructure; and Mercury Interactive (3.15%) and
BEA Systems (1.72%) in software. Included among companies that hurt performance
in the first half were those exposed to the B2C sector such as About.com
(0.64%), MyPoints.com (0.00%), BeFree (0.51%), and Netcentives (0.00%). In
addition, we lost money in Digital Island (2.33%), a hosting and content
distribution company, as well as in i2 Technologies (3.03%), a supply chain
management company that made a large acquisition during the first half of 2000.
We have always had less than 10% of the portfolio in the B2C sector. However, we
continue to own About.com because it has achieved a critical mass of users and
we like its innovative management team. We also remain optimistic on enabling
infrastructure for building out Internet businesses.
--------------------------------------------------------------------------------
24
<PAGE>
RS FUNDS
RS INTERNET AGE FUND-TM- UPDATE -- CONTINUED
GOOD IDEAS THAT WORKED
Realized and Unrealized Gain (YEAR-TO-DATE THROUGH 6/30/00)
<TABLE>
<S> <C>
Globespan, Inc. .............................................. $4,770,411
Check Point Software Technologies, Ltd. ...................... $2,264,277
TIBCO Software, Inc. ......................................... $2,232,835
Brocade Communication Systems, Inc. .......................... $2,135,726
Mercury Interactive Corporation .............................. $1,942,537
Efficient Networks, Inc. ..................................... $1,773,082
BEA Systems, Inc. ............................................ $1,692,064
Forrester Research, Inc. ..................................... $1,632,488
Terayon Communications Systems, Inc. ......................... $1,353,121
Exchange Applications, Inc. .................................. $1,344,191
</TABLE>
GOOD IDEAS AT THE TIME
Realized and Unrealized Loss (YEAR-TO-DATE THROUGH 6/30/00)
<TABLE>
<S> <C>
Digital Island, Inc. ......................................... $6,350,691
About.com, Inc. .............................................. $4,136,570
Witness Systems, Inc. ........................................ $4,074,847
24/7 Media, Inc. ............................................. $3,423,439
MyPoints.com, Inc. ........................................... $2,761,518
Be Free, Inc. ................................................ $2,728,460
Netcentives, Inc. ............................................ $2,274,369
Firepond, Inc. ............................................... $2,110,332
Crossroads Systems, Inc. ..................................... $2,059,910
Stamps.com, Inc. ............................................. $1,902,121
</TABLE>
--------------------------------------------------------------------------------
As technologies become more sophisticated, the network is becoming integrated
with computing. This trend feeds demand into the hosting and content
distribution market. We continue to have confidence in Digital Island because it
has the strongest integrated services offering in the space and represents an
attractive acquisition target in this consolidating market.
We maintain large positions in the B2B infrastructure area, which we believe is
even earlier in its evolution than broadband adoption. In order for businesses
to utilize the Internet when communicating with other businesses, computer
systems at one company must exchange information with computer systems at other
companies. An area that represents enormous opportunity within this theme is
supply chain optimization. i2 Technologies has purchased Aspect Development and
together, these companies have the most valuable suite of enabling software for
the supply chain, as well as the broadest distribution channels.
We also remain optimistic regarding prospects for our broadband infrastructure
investments. It is very early in this high-demand market since less than 3-4% of
the U.S. population currently has Internet access via cable, DSL, or broadband
wireless.
Despite the potentially volatile stock market, we remain very bullish on the
Internet picture. We are convinced that long-term fundamental themes such as
wireless, broadband access, content as well as the Internet network upgrade
and buildout are still in very early stages. We believe the struggles of the
online retailers are relatively inconsequential to the overall Internet
buildout. The drive of the largest companies worldwide to take advantage of
Internet technologies more than compensates for the weaker e-tailer spending.
Our research with these companies indicates their level of urgency to apply
Internet technologies to their businesses has accelerated significantly within
the last six months. In the Fund, we focus heavily on infrastructure building,
both for the overall Internet and by corporations taking advantage of the
Internet in business. We are convinced corporations will spend billions of
dollars in the next few years to communicate better with customers and to open
their internal systems to trading partners. The B2B buildout will be critical
to enable all companies in the economy to offer new services, to be leading
edge on delivery, and to retain a competitive cost structure. It is a matter
of survival and most of those who do not webify will die. We believe that this
spending cycle has just begun.
We thank you for your trust and support and are working hard to continue to
identify emerging opportunities driven by the development of the Internet.
/s/ Catherine Baker /s/ James L. Callinan
Catherine Baker James L. Callinan
CO-PORTFOLIO MANAGER CO-PORTFOLIO MANAGER
--------------------------------------------------------------------------------
Investments in high-technology and Internet-related sectors may be highly
volatile. Companies in these sectors operate in markets that are characterized
by rapid change, evolving industry standards, frequent new service and product
announcements, introductions, enhancements and changing customer demands.
Investing in smaller companies can involve risks such as less publicly available
information than larger companies, volatility and less liquidity. International
investing can involve greater currency fluctuations and less political and
economic stability. 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. Investing in a particular sector can involve
greater market fluctuation. Past performance is no guarantee of future results
25
<PAGE>
SEMIANNUAL REPORT
ASSETS UNDER MANAGEMENT: $242.92 million
ASSET ALLOCATION
[CHART]
<TABLE>
<S> <C>
Computer Hardware & Components 8.0%
Computer Software & Svcs. 31.8%
Network Systems and Products 2.4%
Internet Capital Services 31.7%
Telecom. Equip. & Svcs. 10.5%
Financial Services 2.4%
Business/Commercial Services 8.2%
Short Term Investments and other Liabilities 5.0%
100.0%
</TABLE>
DATA AS OF JUNE 30, 2000
TOP TEN HOLDINGS
<TABLE>
<S> <C>
Mercury Interactive Corporation .............................. 3.15%
i2 Technologies, Inc. ........................................ 3.03%
Peregrine Systems, Inc. ...................................... 2.90%
Proxicom, Inc. ............................................... 2.87%
TIBCO Software, Inc. ......................................... 2.68%
Diamond Technology Partners, Inc. ............................ 2.53%
NetIQ Corporation ............................................ 2.52%
Digital Island, Inc. ......................................... 2.33%
Check Point Software Technologies, Ltd. ...................... 2.30%
GlobeSpan, Inc. .............................................. 2.30%
</TABLE>
RESULTS OF A HYPOTHETICAL $10,000 INVESTMENT
Investment operations of the RS Internet Age Fund-TM- commenced on December 1,
1999. In the interest of our shareholders, results of a hypothetical $10,000
investment in the Fund versus its benchmark for this brief amount of time is not
included. We believe this time period does not reflect a meaningful historical
viewpoint. We want to remind investors that successful investing is not a
short-term proposition. We remain focused on the Fund's goal of long-term
capital appreciation.
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>
RS Internet Age Fund-TM- -1.40% n/a(6) 20.10% n/a(7)
TheStreet.com/PHLX
Internet Sector Index - DOT(2) -27.08% n/a - 9.02% n/a
S&P 500 Index(3) -0.47% n/a 4.58% n/a
</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 12/1/99.
(2) TheStreet.com's Internet Sector Index contains 20 different leading Internet
stocks involved in Internet commerce, service and software. DOT was set to
an initial value of 200 on September 30, 1998. The index is equal
dollar-weighted which assigns an equivalent value to each component stock.
For accurate representation of the Internet sector, the composition of the
index is monitored frequently by the PHLX and TheStreet.com. 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) The American Stock Exchange and Inter@ctive Week created the The Inter@ctive
Week Internet Index. The index measures of wide range of Internet related
companies involved in internet infrastructure and access, development and
marketing of internet content and software, and conducting business over the
internet. The Index, which contains 50 securities, is modified
market-capitalization weighted. You cannot invest in an index.
(5) The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based
common stocks listed on the NASDAQ Stock Market. The index is market-value
weighted and contains over 5,000 companies. The broad base of this index
makes it one of the most widely followed. You cannot invest in an index.
(6) Fund was not in existence for entire year.
(7) Performance has not been annualized.
26
<PAGE>
MICROCAP GROWTH FUND
FOCUSING ON COMPANIES WITH MARKET CAPS
OF $750 MILLION OR LESS
[GRAPHIC]
<PAGE>
SEMIANNUAL REPORT
MICROCAP GROWTH FUND
INVESTMENT STYLE
LARGE CAP MID CAP SMALL CAP
VALUE BLEND GROWTH
FUND PHILOSOPHY
The RS MicroCap Growth Fund invests in a diversified portfolio of equity
securities of companies with market capitalizations of $750 million or less. We
seek micro-cap companies that we believe have the potential for long-term
capital appreciation based on superior or niche products or services, operating
characteristics, management, or other factors.
[PHOTO] [PHOTO]
DAVID J. EVANS RAINERIO J. REYES
FOR BIOS SEE PAGE 5
--------------------------------------------------------------------------------
FUND UPDATE
For the first half of 2000, the RS MicroCap Growth Fund overwhelmingly
outperformed the Russell 2000 Growth Index(2) with a return of 23.28% compared
to 1.23% for the Index.
The small-cap market was characterized by extreme volatility. After a strong
start in the first 70 days of the year, a break in biotechnology stocks on March
10 prompted small stocks to decline in March and then enter a period of
volatility in April and most of May in which the general trend was down. The
Russell 2000 Growth declined 35.01% from the peak on March 10 to the low on
May 25.
Investors should not be surprised by the correction. Valuations of technology
stocks were reaching historic levels up to March 10. The rising interest rate
environment finally made an impact and investors began to question the
valuations and business models of many Internet related companies. In this
environment the initial public offering market cooled off dramatically. Record
one-day "pops" out of new issues became rare and the deal flow slowed
considerably.
Given this environment, we are particularly proud of the Fund's performance. Our
bottom-up approach led us to cut our technology holdings back before the market
corrected on March 10. Despite the volatility in the sector, the remaining
technology positions we did hold were net positive contributors for the period.
Further, our increased weightings in the products and services sector helped
greatly through April and May.
Some examples that helped us include Applied Films (2.18% of the Fund as of
6/30/00) and AstroPower, Inc. (1.08%) in technology, Molecular Devices (1.24%)
and Albany Molecular (1.08%) in healthcare, and 1-800-Contacts (1.87%) and PC
Connection (0.77%) in products and services. Included among the companies that
hurt us during the quarter was T/R Systems, Inc. (0.51%), which specializes in
digital document processing.
Applied Films Corporation and AstroPower, Inc. are very good examples of
companies that dominate a niche that is experiencing rapid growth. Applied Films
develops, produces, and sells proprietary thin film coated glass for the flat
panel display market. They are the market leaders, with a 20% market share. The
flat panel display market is projected to grow from $15 billion at present to
$50 billion by 2005. AstroPower, Inc. is the low cost producer of solar cells
used for powering applications in remote locations, such as those used in
wireless communications infrastructure.
Two longer-term holdings, Molecular Devices Corporation and Albany Molecular
Research, Inc. are both great derivative plays on the ongoing biotechnology
revolution. Molecular Devices is the world's leading designer, manufacturer, and
marketer of high performance microplate readers for molecular and cellular
analysis. Albany Molecular provides a broad array of chemistry research and
development services, as well as bulk commercial manufacturing services. On June
26, 2000, much excitement was created by the announcement that the human genome
has been completely mapped.
--------------------------------------------------------------------------------
28
<PAGE>
RS FUNDS
MICROCAP GROWTH FUND UPDATE -- CONTINUED
GOOD IDEAS THAT WORKED
Realized and Unrealized Gain (YEAR-TO-DATE THROUGH 6/30/00)
<TABLE>
<S> <C>
Cree, Inc. ................................................... $1,508,749
Anaren Microwave, Inc. ....................................... $1,395,097
Photon Dynamics, Inc. ........................................ $1,310,091
Powerwave Technologies, Inc. ................................. $1,282,493
Celgene Corporation .......................................... $1,250,230
AstroPower, Inc. ............................................. $1,228,338
Zygo Corporation ............................................. $1,206,978
QLogic Corporation ........................................... $1,170,098
1-800-Contacts, Inc. ......................................... $1,112,959
Alexion Pharmaceuticals, Inc. ................................ $1,095,478
</TABLE>
GOOD IDEAS AT THE TIME
Realized and Unrealized Loss (YEAR-TO-DATE THROUGH 6/30/00)
<TABLE>
<S> <C>
T/R Systems, Inc. ............................................ $1,417,401
QRS Corporation .............................................. $1,219,275
Power Integrations, Inc. ..................................... $ 924,191
Fargo Electronics ............................................ $ 789,710
Netzee, Inc. ................................................. $ 699,299
Eltrax Systems, Inc. ......................................... $ 697,336
Intercept Group, Inc. ........................................ $ 664,805
Segue Software, Inc .......................................... $ 571,958
Pilot Network Services, Inc. ................................. $ 563,465
DoubleClick, Inc. ............................................ $ 491,111
</TABLE>
--------------------------------------------------------------------------------
Making productive use of this information, i.e. developing revolutionary new
drugs will require geometric increases in research and development efforts.
Molecular Devices and Albany Molecular are ready to "sell their picks and axes
to the gold miners."
During the first half of 2000, 1-800-Contacts and PC Connection contributed
strongly to the products and services sectors. 1-800-Contacts, Inc., is a
profitable, rapidly growing direct marketer of contact lenses at discount prices
over the phone and through the Internet. The company, another long-term holding,
addresses a growing multi-billion dollar market, and has limited competition. PC
Connection is one of the leading direct marketers of personal computers,
accessories, software, and networking products. They have emerged as one of the
three largest companies in its space and the scale it has achieved is now a
sustainable competitive advantage.
Despite its negative impact on our first quarter results, we maintain a
position in T/R Systems, Inc. The company continues to successfully execute
its strategy in digital document processing, beating earnings estimates and
introducing new products. Using its proprietary software and hardware, T/R
Systems has introduced cluster printing, which permits printers across a
network to operate as one device. Its stock price has suffered as investors
mistakenly linked its prospects with that of larger industry players such as
Xerox and Electronics for Imaging. We believe that the unique attributes of
T/R Systems will gain proper recognition over time, justifying our patience.
As we look to the second half of 2000, we believe the prospects for the overall
U.S. stock market are good as the economy remains healthy and efforts by the Fed
to restrain inflation appear to be successful. We are particularly excited about
the opportunities within the micro-cap sector. The companies that are currently
in the portfolio, as well as the many prospects we are considering, are
fundamentally sound and can now be purchased at bargain prices. History has
shown that coming out of corrections, small-cap stocks are capable of
significantly outperforming the S&P 500 Index(3).
As bottom-up stock pickers, we continue to focus on individual company
fundamentals, with the aim of creating a broadly diversified portfolio. In this
volatile environment, that strategy helped us greatly.
Thank you again for your continued support.
/s/ David J. Evans /s/ Rainerio J. Reyes
David J. Evans Rainerio J. Reyes
PORTFOLIO MANAGER CO-PORTFOLIO MANAGER
--------------------------------------------------------------------------------
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.
29
<PAGE>
SEMIANNUAL REPORT
ASSETS UNDER MANAGEMENT: $125.84 million
ASSET ALLOCATION
[CHART]
<TABLE>
<S> <C>
Computer Hardware & Components 12.3%
Medical/Healthcare/Biotech 11.9%
Telecom. Equip. & Svcs. 11.8%
Electronic Components 10.2%
Business/Commercial Services 9.9%
Consumer Specialty Retail 9.6%
Other & Other Assets 9.0%
Short Term Investments 7.9%
Computer Software & Svcs. 3.7%
Manufacturing & Machinary 4.0%
Restaurants & Food 3.1%
Construction/Infrastructure 2.3%
Education & Training 1.6%
Broadcasting/Radio/TV 1.4%
Transportation 1.3%
100.0%
</TABLE>
DATA AS OF JUNE 30, 2000
TOP TEN HOLDINGS
<TABLE>
<S> <C>
Applied Films Corporation .................................... 2.18%
1-800-Contacts, Inc. ......................................... 1.87%
California Amplifier, Inc. ................................... 1.82%
Universal Electronics, Inc. .................................. 1.77%
Interlink Electronics, Inc. .................................. 1.66%
Newgen Results Corporation ................................... 1.66%
Rent Way, Inc. ............................................... 1.62%
Pericom Semiconductor Corporation ............................ 1.62%
Gaiam, Inc. .................................................. 1.54%
Photon Dynamics, Inc. ........................................ 1.48%
</TABLE>
RESULTS OF A HYPOTHETICAL $10,000 INVESTMENT (IF INVESTED ON 8/15/96)
[GRAPH]
<TABLE>
<CAPTION>
MCG % S&P 500 Div. % R2000G Div. % MCG S&P 500 Div. R2000G Div.
Date Cumulative Cumulative Cumulative 10k 10k 10k
<S> <C> <C> <C> <C> <C> <C>
8/15/96 0.00% 0.00% 0.00% $10,000 $10,000 $10,000
9/96 5.70% 4.07% 7.94% $10,570 $10,407 $10,794
12/96 10.00% 12.78% 8.22% $11,000 $11,278 $10,822
3/97 2.00% 15.79% -3.13% $10,200 $11,579 $ 9,687
6/97 25.70% 35.94% 13.88% $12,570 $13,594 $11,388
9/97 59.90% 46.14% 33.15% $15,990 $14,614 $13,315
12/97 43.50% 50.38% 22.23% $14,350 $15,038 $12,223
3/98 65.70% 71.35% 36.76% $16,570 $17,135 $13,676
6/98 54.20% 76.90% 28.90% $15,420 $17,690 $12,890
9/98 16.30% 59.35% 0.08% $11,630 $15,935 $10,008
12/98 42.60% 93.35% 23.74% $14,260 $19,335 $12,374
3/99 44.10% 102.91% 21.66% $14,410 $20,291 $12,166
6/99 71.90% 117.17% 39.60% $17,190 $21,717 $13,960
9/99 65.60% 103.59% 32.73% $16,560 $20,359 $13,273
12/99 123.40% 134.00% 77.06% $22,340 $23,400 $17,706
3/00 198.80% 139.27% 93.49% $29,880 $23,927 $19,349
6/00 175.40% 132.90% 79.23% $27,540 $23,290 $17,923
</TABLE>
PERFORMANCE UPDATE
<TABLE>
<CAPTION>
THREE-YEAR TOTAL AVERAGE ANNUAL
YEAR TO DATE ONE-YEAR AVERAGE ANNUAL RETURN SINCE RETURN SINCE
TOTAL RETURN TOTAL RETURN RETURN INCEPTION(1) INCEPTION(1)
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MicroCap Growth Fund 23.28% 60.21% 29.85% 175.40% 29.86%
Russell 2000 Growth Index(2) 1.23% 28.39% 16.32% 79.23% 16.24%
S&P 500 Index(3) -0.47% 7.24% 19.66% 132.90% 24.37%
</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.
30
<PAGE>
MIDCAP OPPORTUNITIES FUND
SEEKING GROWTH IN MID-CAP COMPANIES
WHILE ATTEMPTING TO MODERATE RISK
[GRAPHIC]
<PAGE>
SEMIANNUAL REPORT
MIDCAP OPPORTUNITIES FUND
INVESTMENT STYLE
LARGE CAP MID CAP SMALL CAP
VALUE BLEND GROWTH
FUND PHILOSOPHY
[PHOTO]
JOHN L. WALLACE
FOR BIO SEE PAGE 5
The RS MidCap Opportunities 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 eliminated quickly, and we are
constantly looking for new opportunities.
--------------------------------------------------------------------------------
FUND UPDATE
The RS MidCap Opportunities Fund finished the first half of 2000 with a
return of 2.14% versus our primary benchmark, the Russell Midcap Index(2), which
was up 5.12% for the same period. The market has experienced abnormal volatility
during the first six months of the year as investors have grappled with rising
interest rates, prospects for slowing growth, and extended valuations.
In addition, the narrowness of the overall market, as measured by the NYSE
cumulative advance-decline line, has had negative implications for broadly
diversified portfolios such as ours. We want to remind investors that the MidCap
Opportunities Fund is not a fund that makes large sector bets or has
concentrated positions in individual stocks. The high degree of volatility in
today's market can make this an extremely risky strategy, but at the same time
has rewarded funds with aggressively high weightings in the technology,
biotechnology, and telecommunications equipment sectors. We believe
diversification is a great risk management tool and will manage the Fund
accordingly.
During the first half of 2000, we made a few shifts in our sector exposure,
notably an increase in the energy weighting during the first quarter and a
reduction in the exposure to pure play Internet stocks.
Although our energy investments were selected on an individual basis, we cannot
ignore the macro trends that dictate the health of the overall sector. We
believe industry fundamentals today are better than they were in 1997, the peak
of the last cycle. Recent oil output increases by OPEC to meet strong global
demand have done very little to alleviate higher-than-expected commodity prices.
We feel that prices are likely to stay higher than consensus estimates due to
several factors: OPEC production reaching capacity limitations, stable global
demand, low inventory levels, and accelerating depletion rates of reserves. We
remain overweighted in energy and think this group could outperform the broader
market for the balance of the year. Our biggest winners during the last six
months were EOG Resources (1.79% of the Fund as of 6/30/00), ENSCO (1.07%), and
Global Marine (1.62%).
We reduced our exposure to telecommunications stocks in the second quarter when
we became concerned with funding needs, competitive pricing, and provisioning
issues. We feel, however, that some of these concerns are unwarranted and remain
committed to several investments including Primus Telecommunications (1.75%
common stock, 1.19% convertible bonds), Motient (1.09%), and e.spire
Communications (1.01%).
--------------------------------------------------------------------------------
32
<PAGE>
RS FUNDS
MIDCAP OPPORTUNITIES FUND UPDATE -- CONTINUED
GOOD IDEAS THAT WORKED
Realized and Unrealized Gain (YEAR-TO-DATE THROUGH 6/30/00)
<TABLE>
<S> <C>
Administaff, Inc. ............................................ $3,255,472
Tektronix, Inc. .............................................. $3,165,114
TransSwitch Corporation ...................................... $3,122,657
Advanced Micro Devices ....................................... $2,696,316
EOG Resources, Inc. .......................................... $2,261,214
Ivax Corporation ............................................. $1,953,982
Cephalon, Inc. ............................................... $1,821,750
ENSCO International .......................................... $1,797,960
PerkinElmer, Inc. ............................................ $1,692,559
Global Marine ................................................ $1,548,855
</TABLE>
GOOD IDEAS AT THE TIME
Realized and Unrealized Loss (YEAR-TO-DATE THROUGH 6/30/00)
<TABLE>
<S> <C>
Stamps.com, Inc. ............................................. $4,377,604
Primus Telecommunications Group, Inc. ........................ $4,198,897
Legato Systems, Inc. ......................................... $3,240,884
Motient Corporation .......................................... $2,023,623
Getty Images, Inc. ........................................... $1,923,291
FLAG Telecommunications Holdings Ltd. ........................ $1,720,721
RealNetworks, Inc. ........................................... $1,709,763
Seminis, Inc. ................................................ $1,674,139
Modis Professional Services .................................. $1,655,839
e.spire Communications, Inc. ................................. $1,589,178
</TABLE>
--------------------------------------------------------------------------------
The dominant theme in the U.S., and around the world, is slowing economic
growth. Rate hikes started twelve months ago, but because of the lag effect, it
takes 6-12 months for rising interest rates to trickle down and affect the
economy. We are starting to see signs of a slow down: retail and auto sales are
slowing, house starts are coming to an abrupt halt, and consumer loan activity
is drying up. The Fed continues to express its concern over inflation and has
signaled to the market repeatedly that it may not yet be finished with its rate
hikes. If the Fed can successfully engineer a "soft landing," which so far seems
to be working, the price erosion and P/E contraction of many mid-cap growth
stocks may end.
While the first half of the year was challenging, we do not feel the portfolio
has suffered from fundamental deterioration and we are optimistic about its
growth prospects. We continue to find many well-managed companies that have
excellent appreciation potential with limited downside risk. On behalf of the
entire MidCap Opportunities team, we thank you for your support.
/s/ John L. Wallace
John L. Wallace
PORTFOLIO MANAGER
--------------------------------------------------------------------------------
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.
33
<PAGE>
SEMIANNUAL REPORT
ASSETS UNDER MANAGEMENT: $234.40 million
ASSET ALLOCATION
[CHART]
<TABLE>
<S> <C>
Energy 22.4%
Computer Hardware & Components 19.9%
Telecom. Equip. & Svcs. 9.6%
Short Term Investments 8.2%
Medical/Healthcare/Biotech 8.0%
Financial Services 7.8%
Other & Other Assets 5.2%
Consumer Specialty Retail 3.7%
Computer Software & Svcs. 3.7%
Electronic Components 3.5%
Construction/Infrastructure 2.1%
Media 1.9%
Hotels & Motels 1.6%
Environmental Services 1.2%
Business Services 0.6%
Agricultural Products 0.6%
100.0%
</TABLE>
DATA AS OF JUNE 30, 2000
TOP TEN HOLDINGS
<TABLE>
<S> <C>
Tektronix, Inc. .............................................. 2.48%
Thermo Electron Corporation .................................. 2.48%
Southdown, Inc. .............................................. 2.09%
Apache Corporation ........................................... 2.07%
Nabors Industries, Inc. ...................................... 1.99%
Tenet Healthcare Corporation ................................. 1.84%
Montana Power Company ........................................ 1.81%
AES Corporation .............................................. 1.79%
EOG Resources, Inc. .......................................... 1.79%
Primus Telecommunications Group, Inc. ........................ 1.75%
</TABLE>
RESULTS OF A HYPOTHETICAL $10,000 INVESTMENT (IF INVESTED ON 7/12/95)
[GRAPH]
<TABLE>
<CAPTION>
MidCap Opp % S&P 500 Div. % Russell G&I S&P 500 Div. Russell MidCap
Date Cumulative Cumulative MidCap % 10k 10k 10k
<S> <C> <C> <C> <C> <C> <C>
7/12/95 0.00% 0.00% 0.00% $10,000 $10,000 $10,000
9/95 7.60% 4.88% 4.76% $10,760 $10,488 $10,476
12/95 12.40% 11.16% 8.14% $11,240 $11,116 $10,814
3/96 22.00% 17.15% 14.65% $12,200 $11,715 $11,465
6/96 33.30% 22.33% 17.88% $13,330 $12,233 $11,788
9/96 33.40% 26.16% 21.57% $13,340 $12,616 $12,157
12/96 39.56% 36.72% 28.68% $13,956 $13,672 $12,868
3/97 35.26% 40.37% 27.63% $13,526 $14,037 $12,763
6/97 52.16% 64.79% 44.94% $15,216 $16,479 $14,494
9/97 78.50% 77.16% 64.19% $17,850 $17,716 $16,419
12/97 70.82% 82.31% 66.01% $17,082 $18,231 $16,601
3/98 91.03% 107.72% 83.95% $19,103 $20,772 $18,395
6/98 83.96% 114.45% 81.18% $18,396 $21,445 $18,118
9/98 59.07% 93.17% 54.32% $15,907 $19,317 $15,432
12/98 90.71% 134.39% 82.77% $19,071 $23,439 $18,277
3/99 104.16% 145.98% 81.92% $20,416 $24,598 $18,192
6/99 135.67% 163.27% 101.66% $23,567 $26,327 $20,166
9/99 123.58% 146.81% 84.33% $22,358 $24,681 $18,433
12/99 197.73% 183.68% 116.09% $29,773 $28,368 $21,609
3/00 251.78% 190.06% 137.89% $35,178 $29,006 $23,789
6/00 204.09% 182.34% 127.15% $30,409 $28,234 $22,715
</TABLE>
PERFORMANCE UPDATE
<TABLE>
<CAPTION>
THREE-YEAR TOTAL AVERAGE ANNUAL
YEAR TO DATE ONE-YEAR AVERAGE ANNUAL RETURN SINCE RETURN SINCE
TOTAL RETURN TOTAL RETURN RETURN INCEPTION(1) INCEPTION(1)
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MidCap Opportunities Fund 2.14% 29.03% 25.96% 204.09% 25.06%
Russell Midcap Index(2) 5.12% 12.64% 16.16% 127.15% 17.94%
S&P 500 Index(3) -0.47% 7.24% 19.66% 182.34% 23.21%
</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.
34
<PAGE>
VALUE + GROWTH FUND
A FUND SEEKING CAPITAL APPRECIATION
FOR THE LONG-TERM INVESTOR
[GRAPHIC]
<PAGE>
SEMIANNUAL REPORT
VALUE + GROWTH FUND
INVESTMENT STYLE
LARGE CAP MID CAP SMALL CAP
VALUE BLEND GROWTH
FUND PHILOSOPHY
[PHOTO]
RONALD E. ELIJAH
FOR BIO SEE PAGE 5
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 that have low-multiple valuations
relative to their peers and are poised to leverage growth opportunities.
--------------------------------------------------------------------------------
FUND UPDATE
For the first half of 2000, the RS Value + Growth Fund was up 7.33% compared to
a 0.47% loss for the S&P 500 Index(3) and a 4.23% gain for the Russell 1000
Growth Index(2). Technology investing has always been an investment focus of the
Fund, which in the past has handsomely rewarded the Fund's investors. Largely
driven by the first quarter surge in the technology sector, the Fund has been
able to exceed its benchmark during the first half of the year. However, our
long-term "bullish" view for technology investing was severely tested in the
second quarter when the Fund suffered a 6.10% setback versus the 2.66% loss for
the S&P 500 and a 2.70% loss for the Russell 1000 Growth. The significance of
the second quarter technology correction is perhaps best illustrated by the
declines seen by the S&P Technology Index(4) (-8.61%) and the NASDAQ Composite
Index(5) (-13.27%).
Although our long-term view on technology remained bullish as we entered 2000,
we became cautious about the overall "dot.com" mania that was enveloping the
equity market. By far, the most extraordinary event was the devastation wrought
upon the NASDAQ as it declined 37% from its March peak to its May trough. True,
the market often alternates from excessively euphoric to overly negative, but we
do not believe that the assault upon the dot.com stocks was excessive. At the
same time, a number of excellent technology companies were beaten down as
investors and portfolio managers were forced to find liquidity to satisfy margin
requirements and investor redemptions. This has provided us with an opportunity
to buy good technology companies at reasonable valuations.
Motorola (1.44% of the Fund as of 6/30/00) is a great example of a stock that in
one quarter has swung from being a Wall Street darling to a misunderstood
technology company. Before peaking in early March, Motorola stock had
appreciated approximately 150% over the prior twelve months. Suffering from an
extremely overbought situation, coupled with confusion about its future profit
potentials in the wireless handset business, Motorola stock declined 50% in the
second quarter. Based on our research work and our overall view that the
wireless communications industry's long-term growth prospects remain intact for
several years to come, we concluded that Motorola's growth and profit potentials
remain solid. We believe its equity is an exceptional value, suffering only from
a perception problem.
With the market excess removed and growing signs that the U.S. economy is
slowing, the Federal Reserve passed on its opportunity to raise interest rates
during June. It seems likely the Fed is close to concluding its yearlong program
of trying to restrain U.S. GDP growth. However, the Fed does admit that it is
currently too early to make that judgment. For investors, uncertainty at the Fed
means that market volatility will likely continue. Nonetheless, we believe that
equities should be a better investment in the second half than they were during
the first half of 2000, particularly in technology. We expect earnings to come
through exceptionally strong for the technology sector at mid-year and
accelerate in the second half as the sector heads into its seasonally strong
period.
--------------------------------------------------------------------------------
36
<PAGE>
RS FUNDS
VALUE + GROWTH FUND UPDATE -- CONTINUED
GOOD IDEAS THAT WORKED
Realized and Unrealized Gain (YEAR-TO-DATE THROUGH 6/30/00)
<TABLE>
<S> <C>
Xilinx, Inc. ................................................. $19,713,724
Intel Corporation ............................................ $19,173,150
Applied Materials, Inc. ...................................... $14,839,629
Texas Instruments, Inc. ...................................... $14,234,763
Merrill Lynch & Co., Inc. .................................... $9,088,947
UnitedHealth Group, Inc. ..................................... $7,281,900
Altera Corporation ........................................... $5,873,700
Best Buy Co., Inc. ........................................... $5,252,775
Cardinal Health, Inc. ........................................ $4,949,544
Morgan Stanley Dean Witter & Company ......................... $4,555,119
</TABLE>
GOOD IDEAS AT THE TIME
Realized and Unrealized Loss (YEAR-TO-DATE THROUGH 6/30/00)
<TABLE>
<S> <C>
Microsoft Corporation ........................................ $11,962,125
BMC Software, Inc. ........................................... $6,369,353
Motorola, Inc. ............................................... $6,312,569
Costco Wholesale Corp. ....................................... $5,806,639
Worldcom, Inc. ............................................... $4,938,220
Staples, Inc. ................................................ $4,155,318
Comcast Corporation .......................................... $3,900,000
Wal-Mart Stores, Inc. ........................................ $3,569,600
Oracle Corporation ........................................... $3,319,776
Home Depot, Inc. ............................................. $2,926,778
</TABLE>
--------------------------------------------------------------------------------
We focus the Fund's investments within sectors of the U.S. economy that we
believe possess the best growth prospects for the next three to five years,
which includes technology, healthcare, and financial services. Our investment
focus in the latter two sectors is based on the aging of the "baby boom"
generation. This generation, which numbers almost 86 million Americans, is
placing increasing demands on the healthcare system each year as they age and on
financial services as "boomers" focus their attention on financial planning and
retirement.
Healthcare and financial services lagged the overall market in 1999, because
they historically do not perform well in rising interest rate environments. In
2000, both sectors have responded positively to the declining interest rate
environment since early March, and to early indications that U.S. economic
growth is easing. Within our healthcare investments, it was gratifying to
finally be rewarded as an investor in UnitedHealth Group (3.01%). We have been a
long-term shareholder of UnitedHealth and have always had great respect for
management and agree with their strategy of creating a preeminent national
healthcare organization. The success of this strategy is beginning to be
revealed by the company's earnings growth acceleration. UnitedHealth stock
appreciated almost 50% during the six-month period. Further, we continue to see
good values and great investment merit within the healthcare and financial
services sectors for the second half of 2000 and into 2001.
Given the concentrated nature of our portfolio, we are very pleased to have
performed well during a period of extreme stress and volatility that gripped the
equity market. The first six months of 2000 tested us to stay focused on our
investment objectives--to participate in the great growth potential of our
capital markets, while avoiding overexposure of our capital during periods of
excessive market speculation.
Temptations to "time" the market rise in periods of volatility. However, we have
always encouraged investors to maintain a longer investment horizon if the
long-term fundamentals remain bright, which we believe they still are. Once
investors recognize that values still exist in an overall positive equity
environment, the market often surges. Predicting the timing of these market
advances is extremely difficult. A good economy--although slowing, low
inflation, and easing of interest rates, should translate to an overall positive
investment year for all of us during the rest of 2000.
As always, thank you for your ongoing support.
/s/ Ronald E. Elijah
Ronald E. Elijah
PORTFOLIO MANAGER
--------------------------------------------------------------------------------
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.
37
<PAGE>
SEMIANNUAL REPORT
ASSETS UNDER MANAGEMENT: $636.36 million
ASSET ALLOCATION
[CHART]
<TABLE>
<S> <C>
Computer Hardware & Components 30.1%
Financial Services 19.6%
Consumer Specialty Retail 16.1%
Medical/Healthcare/Biotech 11.7%
Telecom. Equip. & Svcs. 6.6%
Computer Software & Svcs. 6.4%
Media 5.4%
Distribution/Wholesale 3.4%
Other & Other Assets 0.6%
Short Term Investments 0.1%
100.00%
</TABLE>
DATA AS OF JUNE 30, 2000
TOP TEN HOLDINGS
<TABLE>
<S> <C>
Intel Corporation ............................................ 7.84%
Applied Materials, Inc. ...................................... 5.55%
Texas Instruments, Inc. ...................................... 5.27%
Merrill Lynch & Co., Inc. .................................... 5.21%
Xilinx, Inc. ................................................. 5.19%
Morgan Stanley Dean Witter & Co. ............................. 4.71%
Microsoft Corporation ........................................ 4.09%
Bristol-Myers Squibb Company ................................. 3.43%
Best Buy Co., Inc. ........................................... 3.33%
Citigroup, Inc. .............................................. 3.10%
</TABLE>
RESULTS OF A HYPOTHETICAL $10,000 INVESTMENT (IF INVESTED ON 5/12/92)
[GRAPH]
<TABLE>
<CAPTION>
V+G % S&P 500 Div. % R1000 Growth V+G S&P 500 Div. R1000 Growth
Date Cumulative Cumulative Cumulative 10k 10k 10k
<S> <C> <C> <C> <C> <C> <C>
5/12/92 0.00% 0.00% 0.00% $10,000 $10,000 $10,000
6/92 -1.99% -1.54% -2.34% $ 9,801 $ 9,846 $ 9,766
9/92 0.99% 1.57% 1.93% $10,099 $10,157 $10,193
12/92 10.04% 6.69% 9.03% $11,004 $10,669 $10,903
3/93 19.33% 11.40% 8.10% $11,933 $11,140 $10,810
6/93 19.43% 11.86% 6.43% $11,943 $11,186 $10,643
9/93 28.43% 14.78% 8.01% $12,843 $11,478 $10,801
12/93 33.78% 17.46% 12.17% $13,378 $11,746 $11,217
3/94 38.90% 12.97% 7.22% $13,890 $11,297 $10,722
6/94 32.76% 13.35% 6.11% $13,276 $11,335 $10,611
9/94 55.60% 19.00% 14.28% $15,560 $11,900 $11,428
12/94 64.69% 18.95% 15.11% $16,469 $11,895 $11,511
3/95 89.27% 30.58% 26.07% $18,927 $13,058 $12,607
6/95 130.86% 42.85% 38.45% $23,086 $14,285 $13,845
9/95 175.36% 54.36% 51.02% $27,536 $15,436 $15,102
12/95 135.01% 63.60% 57.90% $23,501 $16,360 $15,790
3/96 126.51% 72.41% 66.38% $22,651 $17,241 $16,638
6/96 134.29% 80.03% 76.96% $23,429 $18,003 $17,696
9/96 149.64% 85.67% 83.34% $24,964 $18,567 $18,334
12/96 168.19% 101.21% 94.41% $26,819 $20,121 $19,441
3/97 161.98% 106.59% 95.45% $26,198 $20,659 $19,545
6/97 204.83% 142.53% 132.42% $30,483 $24,253 $23,242
9/97 255.11% 160.73% 149.89% $35,511 $26,073 $24,989
12/97 205.23% 168.31% 153.68% $30,523 $26,831 $25,368
3/98 244.86% 205.71% 192.12% $34,486 $30,571 $29,212
6/98 260.66% 215.61% 205.38% $36,066 $31,561 $30,538
9/98 213.52% 184.30% 177.64% $31,352 $28,430 $27,764
12/98 288.98% 244.97% 251.87% $38,898 $34,497 $35,187
3/99 327.10% 262.02% 274.24% $42,710 $36,202 $37,424
6/99 337.46% 287.46% 288.64% $43,746 $38,746 $38,864
9/99 309.09% 263.23% 274.41% $40,909 $36,323 $37,441
12/99 399.58% 317.50% 368.55% $49,958 $41,750 $46,855
3/00 471.00% 326.90% 401.94% $57,100 $42,690 $50,194
6/00 436.20% 315.53% 388.38% $53,620 $41,553 $48,838
</TABLE>
PERFORMANCE UPDATE
<TABLE>
<CAPTION>
THREE-YEAR TOTAL AVERAGE ANNUAL
YEAR TO DATE ONE-YEAR AVERAGE ANNUAL RETURN SINCE RETURN SINCE
TOTAL RETURN TOTAL RETURN RETURN INCEPTION(1) INCEPTION(1)
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Value + Growth Fund 7.33% 22.57% 18.36% 436.20% 22.91%
Russell 1000 Growth Index(2) 4.23% 25.66% 28.67% 388.38% 21.51%
S&P 500 Index(3) -0.47% 7.24% 23.81% 315.53% 19.12%
</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.
(4) The S&P Technology Index is a sector index of the S&P 500 Index. It
represents the technology portion of the S&P 500 Index which is an
unmanaged market capitalization-weighted index of 500 stocks designed to
measure the broad domestic economy. The S&P 500 Index is broken down into
10 sectors, including the technology sector to which 78 holdings in the
broader index are currently classified. You cannot invest in an index.
(5) The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based
common stocks listed on the NASDAQ Stock Market. The index is market-value
weighted and contains over 5,000 companies. The broad base of this index
makes it one of the most widely followed. You cannot invest in an index.
38
<PAGE>
THE CONTRARIAN FUND(TM)
SEEKING OUT OF FAVOR INVESTMENTS AND
SHORTING OVERVALUED STOCKS
[GRAPHIC]
<PAGE>
SEMIANNUAL REPORT
THE CONTRARIAN FUND-TM-
INVESTMENT STYLE*
LARGE CAP MID CAP SMALL CAP
VALUE BLEND GROWTH
FUND PHILOSOPHY
The Contrarian Fund-TM- seeks to achieve maximum long-term growth of capital by
investing worldwide in growing companies that are attractively priced. The Fund
invests on a global basis in an effort to make timely investments in new
discovery ideas or in companies and industries that are neglected, unpopular, or
overlooked. When appropriate, the Fund will short sell stocks.
SENIOR PORTFOLIO
MANAGERS
PAUL H. STEPHENS
ANDREW P. PILARA, JR.
RICK BARRY
FOR BIOS SEE PAGE 6
--------------------------------------------------------------------------------
FUND UPDATE
In the first six months of this year, we continued the performance turnaround
that began in 1999. The Contrarian Fund-TM- returned 6.80% in the first half of
2000, outperforming the MSCI AC World Index(2), which returned -3.22% and the
S&P 500 Index(3), which returned -0.47% for the same period. In addition, the
Fund finished the second quarter with an increase of 10.22%, significantly
outperforming both the MSCI AC World and S&P 500, which returned -4.18% and
-2.66%, respectively.
The energy sector has been an important part of the Fund's performance and
currently is a significant percentage of its total assets. In 1999, we began
investing in energy with a particular emphasis on natural gas stocks, which
proved to be our best performers in the first six months. In the past year, the
price of natural gas has doubled and the stocks have rebounded accordingly.
We believe the fundamentals point to still higher stock prices. Demand growth is
increasing and supply is not keeping pace. In fact, natural gas supplies in the
United States have not increased since 1994 and were actually down in 1998 and
1999. In addition to the more commonly recognized uses for natural gas, it is
also a preferred feed stock for generating electricity. Thus, the New Economy's
heavy demand for electricity has made natural gas stocks a derivative Internet
play.
Our investment strategy is to continue owning energy companies, with particular
emphasis on natural gas companies. We see the possibility of electricity
brownouts this summer and natural gas shortage this winter.
Even with an increasing rig count and milder weather, the energy companies
cannot bring on enough gas soon enough to satisfy demand. If we have a cold
winter, industrial plants may possibly have to shut down due to a shortage of
natural gas.
Ivanhoe Energy (19.23% of the Fund as of 6/30/00), which we wrote about in our
1999 Annual Report letter, was our best performing stock for the first half of
2000. Coming into this year, it was our second largest position and year-to-date
it is up 150%. The company has amassed a large portion of land in California's
San Joaquin Basin, which is in close proximity to the recent deep gas discovery
of Berkley Petroleum. Although it is early in the exploration stage, this could
be one of the biggest onshore gas fields in the United States. This is high
value gas (liquids-rich gas) within a basin with a well-developed
infrastructure. The natural gas can be easily sold into the strong California
market. Ivanhoe continues to conduct a large 3-D survey and they have identified
more than 20 exploration prospects in the basin.
For an early stage energy company, an impressive management team has been
assembled. The chairman is David Martin, formerly the CEO and president of
Occidental Oil and Gas; CEO Leon Daniels previously headed up worldwide business
development for Occidental; and John Carver, a director, was formerly head of
Occidental's worldwide exploration team. We believe we own a company with very
good management that has "home run" potential in its California properties. Our
research analyst/geologist, Borden Putnam, is also evaluating a number of
additional companies active in the San Joaquin Basin.
--------------------------------------------------------------------------------
*Due to the investment style of the Fund, all categories within the Investment
Style box are applicable.
40
<PAGE>
RS FUNDS
THE CONTRARIAN FUND-TM- UPDATE -- CONTINUED
GOOD IDEAS THAT WORKED
Realized and Unrealized Gain (YEAR-TO-DATE THROUGH 6/30/00)
<TABLE>
<S> <C>
Ivanhoe Energy, Inc. ......................................... $12,822,654
EOG Resources, Inc. .......................................... $3,346,875
Anderson Exploration, Ltd. ................................... $1,400,518
Devon Energy Corp. ........................................... $1,368,498
Vengold ...................................................... $1,128,377
African Minerals Ltd. ........................................ $ 827,839
Brookfield Properties ........................................ $ 824,488
Talisman ..................................................... $ 780,312
Seagate Technology, Inc. ..................................... $ 437,313
Coastal Corporation .......................................... $ 416,861
</TABLE>
GOOD IDEAS AT THE TIME
Realized and Unrealized Loss (YEAR-TO-DATE THROUGH 6/30/00)
<TABLE>
<S> <C>
Inco, Ltd. ................................................... $3,516,236
Qualcomm, Inc. ............................................... $3,205,783
Consolidated African Mines Ltd. .............................. $ 914,347
Intervoice, Inc. ............................................. $ 838,271
Unisys Corp. ................................................. $ 823,205
Pittston Brink's Group ....................................... $ 762,125
Lafarge Corporation .......................................... $ 686,133
USG Corporation .............................................. $ 632,991
AMR Corporation .............................................. $ 563,520
Diamond Fields Int'l ......................................... $ 502,032
</TABLE>
--------------------------------------------------------------------------------
We have also started buying electric utilities that have not locked themselves
into low-priced, long-term contracts. As mentioned earlier, the New Economy is
placing increasing demands on our electric generation infrastructure. It is
estimated that the New Economy currently consumes 13% of the total electricity
produced, up from 3% in 1995. Power prices spiked last summer, reflecting a
shortage of domestic generation capacity. Secretary of Energy Bill Richardson
has voiced his concern over summer power shortages and the power grid
infrastructure. It is a simple fact--the demand for power is accelerating. We
currently own Southern Company (1.12%) and Duke Energy (1.08%) both of which are
utility companies that have not restricted their pricing with long-term
contracts. Each of these companies possesses excellent growth components, above
average yields, and good total return potential.
We are expanding on our "old economy" investments. This is certainly a
contrarian position. We have added aluminum, cement, real estate, and paper
companies to our portfolio because we believe that these companies are now more
focused on profitability (return on capital). Except for energy, commodity
prices have not yet risen to reflect the more favorable supply/demand
fundamentals. These old economy companies are the cheapest that we have seen
them in many years, despite the fact that the majority are seeing their best
returns in two decades. In addition to our "old economy" industrial focus, we
plan to increase our consumer staple and financial services weightings.
Our four poorest performers have either been sold or sold down to a smaller
percentage of the Fund. Two of the four, Qualcomm (0.00%) and Inco-VBN (1.45%),
were big winners for us up until this year, but they have declined since the
beginning of the year.
We believe that The Contrarian Fund-TM- continues to be uniquely positioned
versus growth mutual funds--with only 1% of its assets in technology. We see
many opportunities for our style of investing and we believe this is a good
time to be a contrarian.
Thank you for your trust and support.
/s/ Paul H. Stephens
Paul H. Stephens
PORTFOLIO MANAGER
/s/ Andrew Pilara, Jr
Andrew P. Pilara, Jr.
PORTFOLIO MANAGER
/s/ Rick Barry
Rick Barry
PORTFOLIO MANAGER
--------------------------------------------------------------------------------
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.
41
<PAGE>
SEMIANNUAL REPORT
ASSETS UNDER MANAGEMENT: $104.14 million
ASSET ALLOCATION
[CHART]
<TABLE>
<S> <C>
Media 7.6%
Energy 46.2%
Computer Technology & Services 5.3%
Construction/Infrastructure 2.0%
Copper/Gold Mining 2.6%
Consumer Specialty Retail 1.8%
Financial Services 3.8%
Diversified Operations 1.7%
Food 1.6%
Gold Mining 1.9%
Nickel Mining 1.4%
Printing & Publishing 2.6%
Real Estate 4.0%
Transportation Services 3.8%
Short Term Investments & Other Liabilities 4.2%
Securities Sold Short 9.5%
Total 100.0%
</TABLE>
DATA AS OF JUNE 30, 2000
TOP TEN HOLDINGS
<TABLE>
<S> <C>
Ivanhoe Energy, Inc. ......................................... 19.23%
EOG Resources, Inc. .......................................... 6.76%
Anderson Exploration, Ltd. ................................... 4.88%
Metromedia International Group, Inc. ......................... 3.92%
Brookfield Properties Corporation ............................ 3.80%
Dundee Bancorp, Inc. ......................................... 3.37%
Talisman Energy, Inc. ........................................ 3.34%
Ivanhoe Mines, Ltd. .......................................... 2.65%
Hollinger International, Inc. ................................ 2.62%
Sirius Satellite Radio, Inc. ................................. 2.55%
</TABLE>
RESULTS OF A HYPOTHETICAL $10,000 INVESTMENT (IF INVESTED ON 6/30/93)
[GRAPH]
<TABLE>
<CAPTION>
CF % S&P 500 Div. % MSCI AC World CF S&P 500 Div. MSCI AC World
Date Cumulative Cumulative Cumulative 10k 10k 10k
<S> <C> <C> <C> <C> <C> <C>
6/93 0.00% 0.00% 0.00% $10,000 $10,000 $10,000
9/93 -4.41% 2.59% 4.39% $ 9,559 $10,259 $10,439
12/93 11.86% 4.97% 7.56% $11,186 $10,497 $10,756
3/94 20.98% 0.99% 7.30% $12,098 $10,099 $10,730
6/94 16.18% 1.39% 9.87% $11,618 $10,139 $10,987
9/94 10.78% 6.36% 13.48% $11,078 $10,636 $11,348
12/94 5.68% 6.34% 11.01% $10,568 $10,634 $11,101
3/95 7.39% 16.73% 13.91% $10,739 $11,673 $11,391
6/95 26.26% 27.70% 18.31% $12,626 $12,770 $11,831
9/95 33.08% 37.99% 23.84% $13,308 $13,799 $12,384
12/95 38.30% 46.25% 28.47% $13,830 $14,625 $12,847
3/96 67.31% 54.13% 33.08% $16,731 $15,413 $13,308
6/96 60.38% 60.94% 36.82% $16,038 $16,094 $13,682
9/96 64.40% 65.98% 37.41% $16,440 $16,598 $13,741
12/96 68.28% 79.87% 42.40% $16,828 $17,987 $14,240
3/97 70.62% 84.68% 43.26% $17,062 $18,468 $14,326
6/97 60.36% 116.81% 63.89% $16,036 $21,681 $16,389
9/97 52.44% 133.08% 66.95% $15,244 $23,308 $16,695
12/97 18.62% 139.85% 60.36% $11,862 $23,985 $16,036
3/98 21.27% 173.29% 81.86% $12,127 $27,329 $18,186
6/98 7.69% 182.14% 82.26% $10,769 $28,214 $18,226
9/98 -24.80% 154.15% 59.16% $ 7,520 $25,415 $15,916
12/98 -20.16% 208.38% 91.94% $ 7,984 $30,838 $19,194
3/99 -16.08% 223.63% 98.99% $ 8,392 $32,363 $19,899
6/99 2.14% 246.37% 115.63% $10,214 $34,637 $21,563
9/99 6.23% 224.71% 105.81% $10,623 $32,471 $20,581
12/99 10.42% 273.22% 140.86% $11,042 $37,322 $24,086
3/00 7.00% 281.62% 143.28% $10,700 $38,162 $24,328
6/00 17.93% 271.46% 133.11% $11,793 $37,146 $23,311
</TABLE>
PERFORMANCE UPDATE
<TABLE>
<CAPTION>
FIVE-YEAR TOTAL AVERAGE ANNUAL
YEAR TO DATE ONE-YEAR AVERAGE ANNUAL RETURN SINCE RETURN SINCE
TOTAL RETURN TOTAL RETURN RETURN INCEPTION(1) INCEPTION(1)
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
The Contrarian Fund-TM- 6.80% 15.46% -1.35% 17.93% 2.38%
MSCI AC World Index(2) -3.22% 8.10% 14.53% 133.11% 12.84%
S&P 500 Index(3) -0.47% 7.24% 23.81% 271.46% 20.60%
</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.
42
<PAGE>
GLOBAL NATURAL RESOURCES
PRIMARILY FOCUSING
ON HARD ASSET COMPANIES
[GRAPHIC]
<PAGE>
SEMIANNUAL REPORT
GLOBAL NATURAL RESOURCES FUND
INVESTMENT STYLE*
LARGE CAP MID CAP SMALL CAP
VALUE BLEND GROWTH
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 efficient use of natural resources; or the
furnishing of related supplies or services.
[PHOTO]
ANDREW P. PILARA, JR
FOR BIO SEE PAGE 6
--------------------------------------------------------------------------------
FUND UPDATE
For the first half of 2000, the Fund posted a 13.03% gain, with 9.09% of that
derived during the second quarter. The benchmark, Lipper Natural Resources
Index(2) returned 16.08% year-to-date (3.83% in the second quarter), while the
S&P 500 Index(3) returned -0.47% year-to-date (-2.66% in the second quarter).
Our investment strategy remains unchanged and is providing good performance,
acting as a "natural hedge" in this volatile market.
The Fund is maintaining its heavy exposure to the energy sector, particularly
natural gas-weighted exploration and production (E&P) companies that are reaping
the benefits of sustained high commodity prices.
Oil demand is at all-time record levels, and although OPEC strives for
maintaining prices in the mid-$20 range, recent announcements of production
increases have failed to ease market tightness. We believe that high oil prices
will be sustained for at least the next 12- to 18-months.
Natural gas has even better fundamentals than oil, and is a commodity with an
excellent price outlook due to very tight supplies, strong demand, and no OPEC
to turn to for increasing output. The U.S. is increasingly turning to natural
gas as the "feedstock of choice" for power generation due to its high-energy,
clean burning, and low-sulfur characteristics. Electricity demand in the U.S. is
growing at approximately 5% annually, with much of the growth being driven by
demand from the Internet and high-tech industry, which by some estimates may
comprise 13% of total demand.
We see electricity demand continuing to grow, and the emphasis on clean-burning
fuels increasing, painting a very rosy picture for natural gas.
For some time, we have focussed our investing in gas-weighted Canadian E&P
companies because we recognized that Canadian gas was the expected solution for
the growing energy demands here in the U.S. Domestic gas demand is growing at 3%
annually, but there are insufficient domestic supplies to replace production,
and so we are heavily reliant upon Canadian gas. Until recently, there was
insufficient pipeline capacity to transport available Canadian gas into the
highly competitive U.S. market. Since Canadian gas could not find its way into
the U.S. markets, it sold at discounts to U.S. pricing. However, with an
increasing number of pipelines now crossing into the U.S., the discount imposed
on Canadian gas has lessened, substantially improving the already robust
operating margins of the Canadian E&P companies.
One of our favorite Canadian companies, Anderson Exploration (7.46% of the Fund
as of 6/30/00), has appreciated 50% since our purchase on June 2, 1999. Their
production is 72% natural gas. Anderson is taking important, long-range
strategic positions in the MacKenzie Delta and Beaufort Sea regions of the
Northwest Territories where the potential exists for discoveries of vast
untapped natural gas resources. Strategic acquisitions and successful
exploration continue to add incremental growth to their reserves and production.
Anderson has a healthy balance sheet, and has sufficient lines of credit
available for acquisition or investment opportunities with which it is
presented.
--------------------------------------------------------------------------------
*Due to the investment style of the Fund, all categories within the Investment
Style box are applicable.
44
<PAGE>
RS FUNDS
GLOBAL NATURAL RESOURCES FUND UPDATE -- CONTINUED
<TABLE>
GOOD IDEAS THAT WORKED
Realized and Unrealized Gain (YEAR-TO-DATE THROUGH 6/30/00)
<S> <C>
Anderson Exploration Ltd. .................................... $734,785
EOG Resources, Inc. .......................................... $637,500
Vermilion Resources .......................................... $546,587
Encal Energy, Ltd. ........................................... $456,869
Fletcher Challenge Canada .................................... $428,721
Calahoo Petroleum Ltd. ....................................... $385,135
Brookfield Properties ........................................ $325,646
Oiltec Resources ............................................. $293,303
Hugoton Royalty Trust ........................................ $273,463
African Minerals Ltd. ........................................ $241,356
</TABLE>
GOOD IDEAS AT THE TIME
Realized and Unrealized Loss (YEAR-TO-DATE THROUGH 6/30/00)
<TABLE>
<S> <C>
MAXXAM ....................................................... $587,925
Fresh Del Monte Produce, Inc. ................................ $338,662
Canfor Corp. ................................................. $323,129
Berkley Petroleum Corp. ...................................... $195,406
Titan Exploration, Inc. ...................................... $173,621
Northern States Power Company ................................ $160,767
Brascan Corp. ................................................ $100,787
Southern Co. ................................................. $ 89,231
Pechiney S.A. ADR ............................................ $ 74,159
Domtar, Inc. ................................................. $ 56,434
</TABLE>
--------------------------------------------------------------------------------
Another of our favorite Canadian companies is Encal Energy, Ltd. (2.18%). The
position has appreciated 45% since our purchase on October 15, 1999. Encal is
well recognized for its steady, consistent growth. In baseball parlance, the
company consistently hits singles and doubles, while taking advantage of
acceptable risk-reward opportunities. Since 1996, Encal has sustained a 19%
compounded annual growth rate in production, while growing reserves at 16%.
Encal continues to reduce its low cost structure, improving profitability. Their
production is presently 52% natural gas, with only 18% of volumes hedged by
fixed-price contracts--so 82% of Encal's production is fully exposed to, and
benefits from the current prevailing high gas prices.
In the U.S., our favorite name is EOG Resources (4.59%), one of the super
independent U.S. E&P companies. About 67% of EOG's annual production comes from
natural gas. EOG was spun-out from Enron Corp. during 1999 to provide pure
exposure to their E&P business, uncluttered by the natural gas pipeline and
intermediation business now core at Enron. EOG has appreciated over 61% since
our investment.
Two of our poorer performing stocks--Maxxam (1.42%) and Fresh Del Monte (3.88%)
are two of the companies we are most excited about over the next 12 months.
Although MAXXAM's current value is $17.75 (as of 6/30/00), we believe its
intrinsic value exceeds $100 per share. It holds the controlling interest in
Kaiser Aluminum Corporation, with its equity investment valued at more than $60
per share. We like the prospects for aluminum, and Maxxam is the cheapest
aluminum company we follow.
Fresh Del Monte is a $2 billion fresh produce company selling at less than three
times its earnings power. The produce category has become an increasingly
important growth vehicle and differentiating factor for supermarkets. The
company is building a national produce infrastructure to service the
supermarkets. They are also expanding into the fresh-cut produce business--a 20%
plus growth business. Although it has been one of our poorer performers, we
believe Fresh Del Monte is a solid company and will continue to own it.
We continue to believe that natural resource fundamentals will improve as
managements refocus on return-on-capital rather than volume growth and market
share. In a number of commodities, inventories are declining--in some cases, at
alarming rates. Supply/demand fundamentals are tight. Free cash flows are
increasing and balance sheets are improving--especially at energy companies.
In these volatile times we believe natural resource companies are an excellent
balance to technology investing. Thank you for your trust and support.
/s/ Andrew Pilara, Jr.
Andrew P. Pilara, Jr.
PORTFOLIO MANAGER
--------------------------------------------------------------------------------
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. Investing in a
particular sector can involve greater market fluctuation.
45
<PAGE>
SEMIANNUAL REPORT
ASSETS UNDER MANAGEMENT: $29.22 million
ASSET ALLOCATION
[CHART]
<TABLE>
<S> <C>
Energy 62.5%
Energy Services 6.8%
Other and Other Liabilities 2.5%
Aluminum 5.3%
Paper & Forest Products 7.5%
Real Estate 11.5%
Platinum Group Metals 3.9%
100.0%
</TABLE>
DATA AS OF JUNE 30, 2000
TOP TEN HOLDINGS
<TABLE>
<S> <C>
Anderson Exploration, Ltd. ................................... 7.46%
Canfor Corporation ........................................... 6.53%
Brookfield Properties Corporation ............................ 5.34%
Talisman Energy, Inc. ........................................ 5.10%
Vermilion Resources, Ltd. .................................... 4.98%
Place Resources Corporation .................................. 4.97%
Duke Energy Corporation ...................................... 4.82%
Petro-Canada ................................................. 4.79%
Oiltec Resources, Ltd. ....................................... 4.69%
EOG Resources, Inc. .......................................... 4.59%
</TABLE>
RESULTS OF A HYPOTHETICAL $10,000 INVESTMENT (IF INVESTED ON 11/15/95)
[GRAPH]
<TABLE>
<CAPTION>
NR % Lipper NR Lipper NR
Date Cumulative Natural Resources 10k 10k
<S> <C> <C> <C> <C>
11/15/95 0.00% 0.00% $10,000 $10,000
12/95 1.20% 8.24% $10,120 $10,824
3/96 18.60% 17.06% $11,860 $11,706
6/96 23.30% 22.45% $12,330 $12,245
9/96 31.40% 27.05% $13,140 $12,705
12/96 42.90% 39.49% $14,290 $13,949
3/97 33.40% 34.14% $13,340 $13,414
6/97 37.20% 47.93% $13,720 $14,793
9/97 47.70% 72.74% $14,770 $17,274
12/97 18.40% 60.05% $11,840 $16,005
3/98 24.59% 66.10% $12,459 $16,610
6/98 11.10% 55.28% $11,110 $15,528
9/98 -13.86% 30.11% $ 8,614 $13,011
12/98 -22.39% 23.05% $ 7,761 $12,305
3/99 -18.75% 34.34% $ 8,125 $13,434
6/99 4.03% 59.52% $10,403 $15,952
9/99 5.28% 61.14% $10,528 $16,114
12/99 -5.02% 64.30% $ 9,498 $16,430
3/00 -1.58% 83.69% $ 9,842 $18,369
6/00 7.36% 90.72% $10,736 $19,072
</TABLE>
PERFORMANCE UPDATE
<TABLE>
<CAPTION>
THREE-YEAR TOTAL AVERAGE ANNUAL
YEAR TO DATE ONE-YEAR AVERAGE ANNUAL RETURN SINCE RETURN SINCE
TOTAL RETURN TOTAL RETURN RETURN INCEPTION(1) INCEPTION(1)
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Global Natural Resources Fund 13.03% 3.20% -7.85% 7.36% 1.55%
Lipper Natural Resources Index(2) 16.08% 19.56% 8.84% 90.72% 14.97%
S&P 500 Index(3) -0.47% 7.24% 19.66% 164.10% 23.35%
</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.
46
<PAGE>
PARTNERS FUND
A SMALL-CAP FUND USING A CASH FLOW
VALUE METHODOLOGY
[GRAPHIC]
<PAGE>
SEMIANNUAL REPORT
PARTNERS FUND
[GRAPHIC]
INVESTMENT STYLE
LARGE CAP MID CAP SMALL CAP
VALUE BLEND GROWTH
FUND PHILOSOPHY
[PHOTO]
ANDREW P. PILARA, JR.
FOR BIO SEE PAGE 6
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 value methodology, combining Graham & Dodd balance sheet
analysis with cash flow analysis.
--------------------------------------------------------------------------------
FUND UPDATE
The RS Partners Fund returned 9.28% in the first half of the year, outperforming
the Russell 2000 Value Index(2), which returned 5.85% and the S&P 500 Index(3),
which returned -0.47% for the same period. The Fund finished the second quarter
with an increase of 5.49%, outperforming both the Russell 2000 Value and S&P
500, which returned 1.95% and -2.66%, respectively.
The year started out with a whole new dictionary of buzzwords. The "paradigm
shift" was on, B2B and genomics were red-hot and no one could get enough
semiconductors or fiber optics. In addition to buzzwords, there seemed to be a
new way of valuing companies. No one seemed to care about the underlying
business; it was all about the pie-in-the-sky future. Trying to run discounted
cash flow models was an impossibility. An analyst told me, "Valuation is not a
catalyst." We took the fact that "investors" would not buy a good business
because it is cheap as a signal that the future was bright for value investors.
As long as people felt that way, we could continue to buy good, quality
businesses at historically low valuations, and we did. Through it all, the RS
Partners Fund has maintained its focus on companies with good business models at
cheap valuations--always a catalyst for us.
In the following paragraphs, we will recap some of our positions that helped us
and those that hurt us in the first half of the year. We will also discuss some
good businesses we own that have yet to be recognized. We are always interested
in the underlying value of the business and its value drivers, often asking
ourselves, "Is this a business that I would want to own 100 percent by myself?"
We pay attention to: (1) cash flow rate of returns on capital; (2) levels of
invested capital and how management allocates capital; (3) weighted average cost
of capital; and (4) the sustainability of returns above the cost of capital.
After a long wait, we are beginning to benefit from our energy investments. Even
with the recent share price appreciation, these companies still sell at a
material discount from net asset value. Alliance Energy (5.29% of the Fund as of
6/30/00) was our biggest winner in the first half of 2000, up 118%. Alliance is
a small-cap Canadian energy company that is still trading at just two times 2000
cash flow and 50% of net asset value, despite the stock price doubling since
January 1, 2000. This means that Alliance was trading at one times 2000 cash
flow and 25% of net asset value at the beginning of the year. Again, the stock
is selling at approximately one times 2001 cash flow and greater than a 50%
discount to year-end estimated net asset value. This valuation, as well as good
management, makes Alliance the type of uncommon value we strive to find.
Magna Entertainment (4.50%), the largest operators of major horse racetracks in
the United States, was also a contributor to our performance in the first half.
Since its spin-off from Magna International, an auto parts company in March
2000, Magna Entertainment has been completely ignored by Wall Street. Magna
currently trades at 86% of book value. Its market capitalization is $480 million
and we estimate its non-racetrack real estate alone to be worth $360 million. We
also believe Magna will sell most, if not all, of this real estate.
--------------------------------------------------------------------------------
48
<PAGE>
RS FUNDS
PARTNERS FUND UPDATE -- CONTINUED
<TABLE>
<CAPTION>
GOOD IDEAS THAT WORKED
Realized and Unrealized Gain (YEAR-TO-DATE THROUGH 6/30/00)
<S> <C>
Alliance Energy, Inc. ........................................ $606,235
COR Therapeutics, Inc. ....................................... $423,079
Best Pacific Resources ....................................... $395,263
Magna Entertainment .......................................... $385,322
Oak Technologies, Inc. ....................................... $379,437
Brookfield Properties ........................................ $347,051
Oiltec Resources ............................................. $260,480
Cabot MicroElectronics ....................................... $250,978
Bowridge Resources Group ..................................... $224,258
Hollinger Canadian Newspaper ................................. $208,241
<CAPTION>
GOOD IDEAS AT THE TIME
Realized and Unrealized Loss (YEAR-TO-DATE THROUGH 6/30/00)
<S> <C>
MAXXAM ....................................................... $778,875
Fresh Del Monte Produce, Inc. ................................ $371,875
Circle.com ................................................... $261,974
Symmetry Resources, Inc. ..................................... $246,310
Pittston Brink's Group ....................................... $239,420
UCAR International ........................................... $166,536
Datastream Systems, Inc. ..................................... $136,493
Sobeys, Inc. ................................................. $113,326
Berkley Petroleum Corp. ...................................... $107,516
Cardinal Health, Inc. ........................................ $ 94,163
</TABLE>
--------------------------------------------------------------------------------
Brookfield Properties (6.81%) was another one of our top performers in the first
half of the year. Brookfield is a Canadian office real estate company that
trades at a significant discount to its U.S. counterparts despite the fact that
the majority of Brookfield's assets are Class-A office buildings in New York,
Boston and Toronto.
Throughout the first half of 2000, the Partners Fund had its share of
underperformers. Most were sold off as the business fundamentals changed.
However, a few are still very attractive. These are businesses at even cheaper
prices and, unless business fundamentals change, they will remain core holdings
of the Partners Fund.
Two of our poorer performing stocks--MAXXAM (2.81%) and Fresh Del Monte
(6.15%)--are two of the companies we are most excited about over the next 12
months. Although MAXXAM's current value is $17.75 (as of 6/30/00), we believe
its intrinsic value exceeds $100 per share. We like the prospects for aluminum
and MAXXAM, which holds the controlling interest in Kaiser Aluminum Corporation,
is the cheapest aluminum company we follow.
Fresh Del Monte is a $2 billion in revenue fresh produce company selling at
under three times its earnings power. The company is building a national produce
infrastructure to service the supermarkets. The produce category has become an
increasingly important growth vehicle and differentiating factor for
supermarkets. Fresh Del Monte is also expanding into the fresh-cut produce
business--a 20% plus growth business. Despite weak banana prices, we believe
Fresh Del Monte is creating a high return, free cash flow, and diversified fresh
produce business. Although it has been one of our poorer performers, we believe
it is a solid company and will continue to own it.
We also continue to diversify our portfolio with the addition of Hollinger
International (media) (5.57%), Activision (technology) (3.99%), and Worldport
Communications (technology) (3.26%). We believe we have been able to build a
portfolio of "old economy" (energy and industrials) and "new economy"
(technology) companies purchased at very cheap prices. This diversity of
business opportunities results in a portfolio that is not subject to one
exogenous event. We would therefore expect less price volatility in our funds'
net asset value.
We continue to see many opportunities to buy good businesses at bargain prices.
We love the undervalued, unpopular and under-owned companies. We believe now is
a great time for value investors.
Thank you for your trust and support.
/s/ Andrew P. Pilara, Jr.
Andrew P. Pilara, Jr.
PORTFOLIO MANAGER
--------------------------------------------------------------------------------
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.
49
<PAGE>
SEMIANNUAL REPORT
ASSETS UNDER MANAGEMENT: $19.56 million
ASSET ALLOCATION
[CHART]
<TABLE>
<S> <C>
Printing & Publishing 11.4%
Consumer Goods 2.2%
Construction & Infrastructure 6.4%
Internet Capital Services 6.3%
Energy Services 8.3%
Energy 30.3%
Food 6.1%
Aluminum 2.8%
Real Estate 11.8%
Computer Software 4.0%
Telecommunications Services 4.1%
Entertainment 4.5%
Short Term Investments and other Liabilities 1.8%
100.00%
</TABLE>
DATA AS OF JUNE 30, 2000
<TABLE>
<CAPTION>
TOP TEN HOLDINGS
<S> <C>
Place Resources Corporation .................................. 10.23%
Brookfield Properties Corporation ............................ 6.81%
Meritage Corporation ......................................... 6.39%
Oiltec Resources, Ltd. ....................................... 6.23%
Fresh Del Monte Produce, Inc. ................................ 6.15%
Best Pacific Resources, Ltd. ................................. 5.95%
Hollinger Canadian Newspapers, Ltd. .......................... 5.80%
Hollinger International, Inc. ................................ 5.57%
Alliance Energy, Inc. ........................................ 5.29%
CryptoLogic, Inc. ............................................ 4.77%
</TABLE>
RESULTS OF A HYPOTHETICAL $10,000 INVESTMENT (IF INVESTED ON 7/12/95)
[CHART]
<TABLE>
<CAPTION>
PF % S&P 500 Div. % Russell 2000 PF S&P 500 Div. Russell 2000
Date Cumulative Cumulative Value Div % 10k 10k Value Div. 10k
<S> <C> <C> <C> <C> <C> <C>
7/12/95 0.00% 0.00% 0.00% $10,000 $ 10,000 $10,000
9/95 1.90% 4.88% 5.32% $10,190 $ 10,488 $10,532
12/95 3.90% 11.16% 8.39% $10,390 $ 11,116 $10,839
3/96 23.00% 17.15% 13.14% $12,300 $ 11,715 $11,314
6/96 36.40% 22.33% 17.77% $13,640 $ 12,233 $11,777
9/96 40.70% 26.16% 19.52% $14,070 $ 12,616 $11,952
12/96 48.73% 36.72% 31.55% $14,873 $ 13,672 $13,155
3/97 49.75% 40.37% 31.22% $14,975 $ 14,037 $13,122
6/97 61.77% 64.79% 51.03% $16,177 $ 16,479 $15,103
9/97 81.73% 77.16% 70.49% $18,173 $ 17,716 $17,049
12/97 75.61% 82.31% 73.36% $17,561 $ 18,231 $17,336
3/98 89.99% 107.72% 87.84% $18,999 $ 20,772 $18,784
6/98 71.46% 114.45% 81.05% $17,146 $ 21,445 $18,105
9/98 31.67% 93.17% 48.69% $13,167 $ 19,317 $14,869
12/98 27.79% 134.39% 62.18% $12,779 $ 23,439 $16,218
3/99 23.91% 145.98% 46.46% $12,391 $ 24,598 $14,646
6/99 38.32% 163.27% 70.70% $13,832 $ 26,327 $17,070
9/99 32.34% 146.81% 57.35% $13,234 $ 24,681 $15,735
12/99 32.56% 183.68% 59.76% $13,256 $ 28,368 $15,976
3/00 37.32% 190.06% 65.87% $13,732 $ 29,006 $16,587
6/00 44.86% 182.34% 69.11% $14,486 $ 28,234 $16,911
</TABLE>
PERFORMANCE UPDATE
<TABLE>
<CAPTION>
THREE-YEAR TOTAL AVERAGE ANNUAL
YEAR TO DATE ONE-YEAR AVERAGE ANNUAL RETURN SINCE RETURN SINCE
TOTAL RETURN TOTAL RETURN RETURN INCEPTION(1) INCEPTION(1)
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Partners Fund 9.28% 4.73% -3.61% 44.86% 7.74%
Russell 2000 Value Index(2) 5.85% -0.94% 3.84% 69.11% 11.14%
S&P 500 Index(3) -0.47% 7.24% 19.66% 182.34% 23.21%
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.
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
(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.
50
<PAGE>
FINANCIAL INFORMATION
FOR THE SIX MONTHS ENDED
JUNE 30, 2000
[GRAPHIC]
<PAGE>
SEMIANNUAL REPORT
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS -- AGGRESSIVE GROWTH FUND
JUNE 30, 2000 (UNAUDITED) SHARES VALUE
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 94.9%
-----------------------------------------------------------------------------------------------------
ADVERTISING - 0.8%
Lamar Advertising Company 25,900 $ 1,121,794
-----------------------------------------------------------------------------------------------------
1,121,794
-----------------------------------------------------------------------------------------------------
BIOTECHNOLOGY - 1.2%
Abgenix, Inc. 13,900 1,666,045
-----------------------------------------------------------------------------------------------------
1,666,045
-----------------------------------------------------------------------------------------------------
BROADCASTING/RADIO/TV - 1.5%
Infinity Broadcasting Corporation, Class A 57,300 2,087,869
-----------------------------------------------------------------------------------------------------
2,087,869
-----------------------------------------------------------------------------------------------------
COMPUTER HARDWARE & COMPONENTS - 1.7%
Mobility Electronics, Inc. 950 12,350
SanDisk Corporation 10,000 611,875
VERITAS Software Corporation 14,600 1,650,028
-----------------------------------------------------------------------------------------------------
2,274,253
-----------------------------------------------------------------------------------------------------
COMPUTER SERVICES - 1.4%
Entrust Technologies, Inc. 23,000 1,903,250
-----------------------------------------------------------------------------------------------------
1,903,250
-----------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE - 10.4%
Kana Communications, Inc. 54,300 3,359,813
Micromuse, Inc. 3,000 496,453
Quest Software, Inc. 60,366 3,342,767
Siebel Systems, Inc. 20,900 3,418,456
TIBCO Software, Inc. 32,600 3,495,841
Virage, Inc. 50 903
-----------------------------------------------------------------------------------------------------
14,114,233
-----------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE & SERVICES - 8.8%
BEA Systems, Inc. 44,800 2,214,800
Check Point Software Technologies, Ltd. 11,600 2,456,300
i2 Technologies, Inc. 13,900 1,449,292
Informatica Corporation 46,400 3,801,900
Mercury Interactive Corporation 21,300 2,060,775
-----------------------------------------------------------------------------------------------------
11,983,067
-----------------------------------------------------------------------------------------------------
CONSUMER & SPECIALTY RETAIL - 1.4%
Bed, Bath & Beyond, Inc. 51,800 1,877,750
-----------------------------------------------------------------------------------------------------
1,877,750
-----------------------------------------------------------------------------------------------------
ELECTRONIC COMPONENTS - 1.1%
Sanmina Corporation 16,800 1,436,400
-----------------------------------------------------------------------------------------------------
1,436,400
-----------------------------------------------------------------------------------------------------
ENERGY - 2.1%
Calpine Corporation 43,900 2,886,425
-----------------------------------------------------------------------------------------------------
2,886,425
-----------------------------------------------------------------------------------------------------
FINANCIAL SERVICES - 1.5%
MBNA Corporation(1) 76,800 $ 2,083,200
-----------------------------------------------------------------------------------------------------
2,083,200
-----------------------------------------------------------------------------------------------------
HOTELS & MOTELS - 1.2%
MGM Grand, Inc.(1) 52,200 1,676,925
-----------------------------------------------------------------------------------------------------
1,676,925
-----------------------------------------------------------------------------------------------------
INSURANCE - 2.1%
Conseco, Inc.(1) 289,000 2,817,750
-----------------------------------------------------------------------------------------------------
2,817,750
-----------------------------------------------------------------------------------------------------
INTERNET CAPITAL SERVICES - 27.9%
Agile Software Corporation 48,100 3,400,069
Akamai Technologies, Inc. 10,900 1,294,205
Alteon Websystems, Inc. 41,900 4,192,619
Ariba, Inc. 16,100 1,578,555
Be Free, Inc. 262,600 2,363,400
Digital Island, Inc. 62,700 3,048,787
E.piphany, Inc. 34,600 3,708,687
HomeStore.com, Inc. 61,600 1,797,950
LifeMinders, Inc. 51,600 1,525,425
Netcentives, Inc. 128,900 2,400,763
RealNetworks, Inc. 57,200 2,892,175
Software.com, Inc. 22,700 2,948,162
VeriSign, Inc. 13,400 2,365,100
Viant Corporation 75,000 2,221,875
Vignette Corporation 16,500 858,258
Vitria Technology, Inc. 21,700 1,326,413
-----------------------------------------------------------------------------------------------------
37,922,443
-----------------------------------------------------------------------------------------------------
MEDIA - 0.8%
Univision Communications, Inc., Class A 10,600 1,097,100
-----------------------------------------------------------------------------------------------------
1,097,100
-----------------------------------------------------------------------------------------------------
MEDICAL INSTRUMENTS & DEVICES - 1.1%
Cytyc Corporation 29,300 1,563,887
-----------------------------------------------------------------------------------------------------
1,563,887
-----------------------------------------------------------------------------------------------------
NETWORK SYSTEMS AND PRODUCTS - 2.5%
Foundry Networks, Inc. 11,500 1,270,750
Network Appliance, Inc. 26,700 2,149,350
-----------------------------------------------------------------------------------------------------
3,420,100
-----------------------------------------------------------------------------------------------------
PHARMACEUTICALS - 0.9%
COR Therapeutics, Inc. 14,500 1,237,031
-----------------------------------------------------------------------------------------------------
1,237,031
-----------------------------------------------------------------------------------------------------
</TABLE>
See notes to Schedule of Investments on page 73.
The accompanying notes are an integral part of these financial statements.
52
<PAGE>
RS FUNDS
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
JUNE 30, 2000 (UNAUDITED) SHARES VALUE
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
SEMICONDUCTORS & COMPONENTS - 6.2%
Applied Micro Circuits Corporation 16,300 $ 1,609,625
Cree, Inc. 25,800 3,444,300
GlobeSpan, Inc. 27,300 3,332,733
-----------------------------------------------------------------------------------------------------
8,386,658
-----------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS - 7.3%
EchoStar Communications, Inc., Class A 61,200 2,026,294
Metromedia Fiber Network, Inc., Class A 68,600 2,722,563
Nextel Communications, Inc., Class A 47,700 2,918,644
NEXTLINK Communications, Inc., Class A 60,000 2,276,250
-----------------------------------------------------------------------------------------------------
9,943,751
-----------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT - 11.0%
American Tower Corporation, Class A 44,300 1,846,756
AudioCodes, Ltd. 19,600 2,352,000
Efficient Networks, Inc. 66,200 4,869,838
Exfo Electro-Optical Engineering, Inc. 350 15,356
General Motors Corporation, Class H 19,100 1,676,025
SDL, Inc. 8,300 2,367,056
Sycamore Networks, Inc. 16,700 1,843,262
-----------------------------------------------------------------------------------------------------
14,970,293
-----------------------------------------------------------------------------------------------------
TRAVEL SERVICES - 2.0%
Four Seasons Hotels, Inc.(1) 43,900 2,730,031
-----------------------------------------------------------------------------------------------------
2,730,031
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS (Cost $111,547,245) 129,200,255
-----------------------------------------------------------------------------------------------------
<CAPTION>
VALUE
-----------------------------------------------------------------------------------------------------
<S> <C>
SHORT TERM INVESTMENTS - 7.4%
-----------------------------------------------------------------------------------------------------
Temporary Investment Cash Fund 5,027,998
Temporary Investment Fund 5,027,998
-----------------------------------------------------------------------------------------------------
TOTAL SHORT TERM INVESTMENTS (Cost $10,055,996) 10,055,996
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS - 102.3% (Cost $121,603,241) 139,256,251
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
OTHER LIABILITIES, NET - (2.3%) (3,073,020)
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
TOTAL NET ASSETS - 100.0% $136,183,231
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
</TABLE>
See notes to Schedule of Investments on page 73.
The accompanying notes are an integral part of these financial statements.
53
<PAGE>
SEMIANNUAL REPORT
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS -- DIVERSIFIED GROWTH FUND
JUNE 30, 2000 (UNAUDITED) FOREIGN CURRENCY(2) SHARES VALUE
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS - 101.0%
-----------------------------------------------------------------------------------------------------
BEVERAGES - 0.2%
Todhunter International, Inc. 197,800 $ 1,557,675
-----------------------------------------------------------------------------------------------------
1,557,675
-----------------------------------------------------------------------------------------------------
BUSINESS SERVICES - 1.3%
Administaff, Inc. 70,000 4,445,000
United Shipping & Technology, Inc. 530,000 4,240,000
United Shipping & Technology, Inc.,
Restricted(4),(5) 100,000 720,000
-----------------------------------------------------------------------------------------------------
9,405,000
-----------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES - 1.4%
Optimal Robotics Corporation 170,000 6,523,750
SITEL Corporation 655,100 3,275,500
-----------------------------------------------------------------------------------------------------
9,799,250
-----------------------------------------------------------------------------------------------------
COMPUTER HARDWARE & COMPONENTS - 3.2%
Blue Wave Systems, Inc. 227,200 2,343,000
Diebold, Inc.(1) 173,700 4,841,887
Maxtor Corporation 400,000 4,225,000
Media 100, Inc. 115,000 2,961,250
SanDisk Corporation 82,500 5,047,969
Splash Technology Holdings, Inc. 400,000 3,150,000
-----------------------------------------------------------------------------------------------------
22,569,106
-----------------------------------------------------------------------------------------------------
COMPUTER SERVICES - 3.1%
Acxiom Corporation 260,000 7,085,000
CheckFree Holdings Corporation 100,000 5,156,250
iXL Enterprises, Inc. 650,000 9,425,000
-----------------------------------------------------------------------------------------------------
21,666,250
-----------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE - 8.5%
AVT Corporation 1,200,000 8,850,000
Caminus Corporation 180,000 4,410,000
Exchange Applications, Inc. 170,000 4,526,250
Fast Search & Transfer ASA NOK 39,000 1,870,731
Legato Systems, Inc. 225,000 3,403,125
MetaCreations Corporation 858,400 10,300,800
Peregrine Systems, Inc. 340,000 11,793,750
Precise Software Solutions Ltd. 62,500 1,500,000
The 3DO Company 1,650,000 12,942,187
Witness Systems, Inc. 13,200 321,750
-----------------------------------------------------------------------------------------------------
59,918,593
-----------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE & SERVICES - 0.8%
Check Point Software Technologies, Ltd. 27,500 5,823,125
-----------------------------------------------------------------------------------------------------
5,823,125
-----------------------------------------------------------------------------------------------------
CONSTRUCTION/INFRASTRUCTURE - 1.9%
Fleetwood Enterprises, Inc.(1) 950,000 13,537,500
-----------------------------------------------------------------------------------------------------
13,537,500
-----------------------------------------------------------------------------------------------------
CONSUMER & SPECIALTY RETAIL - 2.3%
Krause's Furniture, Inc. 372,400 418,950
Pacific Sunwear of California, Inc. 231,200 4,335,000
Ross Stores, Inc.(1) 250,000 4,265,625
-----------------------------------------------------------------------------------------------------
CONSUMER & SPECIALTY RETAIL - CONTINUED
Shop at Home, Inc. 1,055,900 4,933,033
Skymall, Inc. 911,400 2,164,575
Skymall, Inc. Private Placement(5) 160,000 304,000
-----------------------------------------------------------------------------------------------------
16,421,183
-----------------------------------------------------------------------------------------------------
DATA PROCESSING SOFTWARE & SERVICES - 1.6%
Informix Corporation 1,465,700 10,901,144
-----------------------------------------------------------------------------------------------------
10,901,144
-----------------------------------------------------------------------------------------------------
ELECTRONIC COMPONENTS - 2.5%
American Power Conversion Corporation 115,000 4,693,437
Amphenol Corporation, Class A 85,000 5,625,938
CyberOptics Corporation 19,600 906,500
Linear Technology Corporation(1) 50,000 3,196,875
Maxim Integrated Products, Inc. 51,800 3,519,163
-----------------------------------------------------------------------------------------------------
17,941,913
-----------------------------------------------------------------------------------------------------
ENERGY - 7.4%
Barrett Resources Corporation 230,200 7,006,712
Chesapeake Energy Corporation 1,000,000 7,750,000
Devon Energy Corporation(1) 85,000 4,775,937
EOG Resources, Inc.(1) 375,000 12,562,500
Ocean Energy, Inc. 450,000 6,384,375
Talisman Energy, Inc. 125,000 4,140,625
Triton Energy, Ltd. 100,000 3,931,250
Union Pacific Resources Group, Inc.(1) 250,000 5,500,000
-----------------------------------------------------------------------------------------------------
52,051,399
-----------------------------------------------------------------------------------------------------
ENERGY SERVICES - 12.4%
Bonus Resource Services Corporation CAD 470,000 1,157,815
El Paso Energy Corporation(1) 135,000 6,876,562
Global Industries, Ltd. 290,000 5,473,750
Global Marine, Inc. 345,000 9,724,687
Key Energy Services, Inc. 475,000 4,571,875
Marine Drilling Companies, Inc. 125,000 3,335,937
Metretek Technologies, Inc. 379,400 2,560,950
Montana Power Company(1) 150,000 5,296,875
Newpark Resources, Inc. 447,500 4,223,281
Precision Drilling Corporation 138,000 5,330,250
R & B Falcon Corporation 475,000 11,192,187
Universal Compression Holdings, Inc. 135,000 4,522,500
UTI Energy Corporation 125,000 5,031,250
Valero Energy Corporation(1) 337,000 10,699,750
Veritas DGC, Inc. 285,000 7,410,000
-----------------------------------------------------------------------------------------------------
87,407,669
-----------------------------------------------------------------------------------------------------
FINANCIAL SERVICES - 3.6%
Factual Data Corporation 55,000 508,750
Golden State Bancorp, Inc. 300,000 5,400,000
Hudson United Bancorp(1) 100,000 2,243,750
U.S. Bancorp(1) 410,000 7,892,500
Washington Mutual, Inc.(1) 160,000 4,620,000
</TABLE>
See notes to Schedule of Investments on page 73.
The accompanying notes are an integral part of these financial statements.
54
<PAGE>
RS FUNDS
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
JUNE 30, 2000 (UNAUDITED) FOREIGN CURRENCY(2) SHARES VALUE
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FINANCIAL SERVICES - CONTINUED
Zions BanCorporation(1) 100,000 $ 4,589,062
-----------------------------------------------------------------------------------------------------
25,254,062
-----------------------------------------------------------------------------------------------------
HEALTH CARE SERVICES - 2.2%
Caremark Rx, Inc. 1,150,000 7,834,375
Community Health Systems 200,000 3,237,500
Omnicare, Inc.(1) 506,000 4,585,625
-----------------------------------------------------------------------------------------------------
15,657,500
-----------------------------------------------------------------------------------------------------
HEALTH MAINTENANCE ORGANIZATIONS - 0.4%
Oxford Health Plans, Inc. 125,000 2,976,562
-----------------------------------------------------------------------------------------------------
2,976,562
-----------------------------------------------------------------------------------------------------
INDUSTRIAL - 0.4%
Maverick Tube Corporation 100,000 2,912,500
-----------------------------------------------------------------------------------------------------
2,912,500
-----------------------------------------------------------------------------------------------------
INSTRUMENTS - 0.4%
Nanometrics, Inc. 25,800 1,062,638
Varian, Inc. 42,500 1,960,313
-----------------------------------------------------------------------------------------------------
3,022,951
-----------------------------------------------------------------------------------------------------
INTERNET CAPITAL SERVICES - 9.0%
Ariba, Inc. 26,500 2,598,242
Billserv.com, Inc. 870,200 7,994,962
Clarent Corporation 18,500 1,322,750
Digital Island, Inc. 62,500 3,039,063
Firepond, Inc. 41,000 1,476,000
HomeStore.com, Inc. 190,000 5,545,625
Inktomi Corporation 24,500 2,897,125
Interwoven, Inc. 42,500 4,674,336
Lycos, Inc. 80,000 4,320,000
MP3.com, Inc. 77,100 1,045,669
Pilot Network Services, Inc. 600,000 8,925,000
Retek, Inc. 66,100 2,115,200
Scient Corporation 125,000 5,515,625
WatchGuard Technologies, Inc. 100,000 5,493,750
Ziff-Davis, Inc. 693,300 6,239,700
-----------------------------------------------------------------------------------------------------
63,203,047
-----------------------------------------------------------------------------------------------------
INTERNET COMMERCE - 1.8%
Cyberian Outpost, Inc. 900,000 4,331,250
Stamps.com, Inc. 1,170,100 8,556,356
-----------------------------------------------------------------------------------------------------
12,887,606
-----------------------------------------------------------------------------------------------------
MACHINERY - 1.0%
McDermott International, Inc.(1) 550,000 4,846,875
SpeedFam-IPEC, Inc. 109,700 1,995,169
-----------------------------------------------------------------------------------------------------
6,842,044
-----------------------------------------------------------------------------------------------------
MEDIA - 2.5%
LodgeNet Entertainment Corporation 300,000 7,275,000
Valuevision International, Inc., Class A 230,000 5,520,000
Viacom, Inc., Class B 75,000 5,114,063
-----------------------------------------------------------------------------------------------------
17,909,063
-----------------------------------------------------------------------------------------------------
MEDICAL-BIOMEDICAL/GENETICS - 2.1%
Celera Genomics 45,000 4,207,500
Maxygen, Inc. 55,000 3,122,109
Millennium Pharmaceuticals, Inc. 20,000 2,237,500
Novavax, Inc. 341,121 2,494,447
Sequenom, Inc. 62,500 2,835,938
-----------------------------------------------------------------------------------------------------
14,897,494
-----------------------------------------------------------------------------------------------------
MEDICAL INSTRUMENTS & DEVICES - 2.0%
Cytyc Corporation 140,000 7,472,500
Endocardial Solutions, Inc. 396,200 3,367,700
InnerDyne, Inc. 420,000 3,097,500
-----------------------------------------------------------------------------------------------------
13,937,700
-----------------------------------------------------------------------------------------------------
MEDICAL PRODUCTS & SERVICES - 0.2%
BioSource International, Inc. 42,500 945,625
Precision Optics Corporation, Inc. 32,500 542,344
-----------------------------------------------------------------------------------------------------
1,487,969
-----------------------------------------------------------------------------------------------------
NETWORK SYSTEMS & PRODUCTS - 2.0%
Adaptec, Inc. 265,000 6,028,750
Auspex Systems, Inc. 860,200 4,247,237
Finisar Corporation 150,000 3,928,125
-----------------------------------------------------------------------------------------------------
14,204,112
-----------------------------------------------------------------------------------------------------
PHARMACEUTICALS - 2.5%
Alkermes, Inc. 60,000 2,827,500
Anesta Corporation 52,000 1,293,500
Elan Corporation PLC, ADR(3) 150,000 7,265,625
Neurocrine Biosciences, Inc. 180,000 6,401,250
-----------------------------------------------------------------------------------------------------
17,787,875
-----------------------------------------------------------------------------------------------------
RENTAL AUTO/EQUIPMENT - 0.5%
United Rentals, Inc. 220,000 3,767,500
-----------------------------------------------------------------------------------------------------
3,767,500
-----------------------------------------------------------------------------------------------------
RESTAURANTS - 0.2%
Steakhouse partners, Inc. 513,300 1,539,900
-----------------------------------------------------------------------------------------------------
1,539,900
-----------------------------------------------------------------------------------------------------
SEMICONDUCTORS & COMPONENTS - 7.4%
American Superconductor Corporation 37,000 1,785,250
Applied Micro Circuits Corporation 45,000 4,443,750
Conductus, Inc. 220,800 4,360,800
Diodes, Inc. 63,300 2,713,988
Elantec Semiconductor, Inc. 39,600 2,757,150
GlobeSpan, Inc. 15,000 1,831,172
International Rectifier Corporation 108,800 6,092,800
Novellus Systems, Inc. 130,000 7,353,125
Oak Technology, Inc. 450,000 9,703,125
STMicroelectronics N.V.(1) 100,000 6,418,750
Virata Corporation 27,500 1,639,688
Vitesse Semiconductor Corporation 40,000 2,942,500
-----------------------------------------------------------------------------------------------------
52,042,098
-----------------------------------------------------------------------------------------------------
</TABLE>
See notes to Schedule of Investments on page 73.
The accompanying notes are an integral part of these financial statements.
55
<PAGE>
SEMIANNUAL REPORT
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS -- DIVERSIFIED GROWTH FUND -- CONTINUED
JUNE 30, 2000 (UNAUDITED) FOREIGN CURRENCY(2) SHARES VALUE
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TELECOMMUNICATIONS - 2.4%
Adaptive Broadband Corporation 50,000 $ 1,837,500
Dobson Communications Corporation, Class A 103,500 1,992,375
Primus Telecommunications Group, Inc. 523,100 13,012,113
-----------------------------------------------------------------------------------------------------
16,841,988
-----------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT - 2.6%
Comtech Telecommunications Corporation 200,900 3,314,850
Digital Lightwave, Inc. 20,000 2,010,000
JDS Uniphase Corporation 36,800 4,411,400
Netro Corporation 33,000 1,897,500
SpectraLink Corporation 293,500 4,292,438
Superconductor Technologies, Inc. 65,000 2,555,313
-----------------------------------------------------------------------------------------------------
18,481,501
-----------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS SERVICES - 9.9%
CapRock Communications Corporation 217,800 4,247,100
Copper Mountain Networks, Inc. 42,500 3,745,312
e.spire Communications, Inc. 1,621,100 10,942,425
ICG Communications, Inc. 300,000 6,618,750
Latitude Communications, Inc. 567,700 6,351,144
Motient Corporation 1,594,800 25,018,425
Startec Global Communications Corporation 636,100 6,798,319
Startec Global Communications Corporation,
Private Placement(5) 140,000 1,496,250
Tele1 Europe Holding AB SEK 200,000 2,527,067
WorldQuest Networks, Inc. 259,000 1,845,375
-----------------------------------------------------------------------------------------------------
69,590,167
-----------------------------------------------------------------------------------------------------
TRANSPORTATION - 1.3%
Landstar System, Inc. 130,000 7,743,125
OMI Corporation 200,000 1,087,500
-----------------------------------------------------------------------------------------------------
8,830,625
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS (Cost $703,692,665) 713,074,071
-----------------------------------------------------------------------------------------------------
<CAPTION>
SHARES VALUE
-----------------------------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS - 0.2%
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
ENERGY - 0.1%
Contour Energy Company, $2.625 Series(1) 100,000 662,500
-----------------------------------------------------------------------------------------------------
662,500
-----------------------------------------------------------------------------------------------------
ENERGY SERVICES - 0.1%
Boots & Coots International Well
Control, Inc., Series B(1),(4),(5) 11,675 582,291
-----------------------------------------------------------------------------------------------------
582,291
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $2,072,140) 1,244,791
-----------------------------------------------------------------------------------------------------
<CAPTION>
PAR VALUE
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
CONVERTIBLE BONDS - 0.2%
-----------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS - 0.2%
Primus Telecommunications Group, Inc.,
5.75%, Due 2/15/07(1) 2,000 $ 1,397,500
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
TOTAL CONVERTIBLE BONDS (Cost $1,780,431) 1,397,500
-----------------------------------------------------------------------------------------------------
<CAPTION>
CONTRACTS VALUE
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
CALL OPTIONS - 0.1%
-----------------------------------------------------------------------------------------------------
Lycos, Inc., Strike 45, Expires 10/21/00(6) 250 356,250
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
TOTAL CALL OPTIONS (Cost $507,000) 356,250
-----------------------------------------------------------------------------------------------------
<CAPTION>
VALUE
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
<S> <C>
SHORT TERM INVESTMENTS - 7.7%
-----------------------------------------------------------------------------------------------------
Short Term Investments Held as Collateral
for Loaned Securities(8) 53,057,800
Temporary Investment Cash Fund 703,028
Temporary Investment Fund 703,027
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
TOTAL SHORT TERM INVESTMENTS (Cost $54,463,855) 54,463,855
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS - 109.2% (Cost $762,516,091) 770,536,467
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
SHORT CALL OPTIONS - (0.0%) (Premiums $20,474) (19,375)
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
COLLATERAL ON SECURITIES LOANED, AT VALUE - (7.5%) (53,057,800)
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
OTHER LIABILITIES, NET - (1.7%) (11,803,614)
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
TOTAL NET ASSETS - 100.0% $ 705,655,678
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
SHORT CALL OPTIONS
-----------------------------------------------------------------------------------------------------
<CAPTION>
CONTRACTS VALUE
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
SHORT CALL OPTIONS - 0.0%
-----------------------------------------------------------------------------------------------------
Lycos, Inc., Strike 70, Expires 10/21/00(6) 50 $ 19,375
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
TOTAL SHORT CALL OPTIONS (Premiums $20,474) $ 19,375
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
</TABLE>
See notes to Schedule of Investments on page 73.
The accompanying notes are an integral part of these financial statements.
56
<PAGE>
RS FUNDS
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS -- EMERGING GROWTH FUND
JUNE 30, 2000 (UNAUDITED) SHARES VALUE
----------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 92.3%
----------------------------------------------------------------------------------------------
ADVERTISING - 1.1%
Lamar Advertising Company 334,850 $ 14,503,191
TMP Worldwide, Inc. 617,900 45,608,744
----------------------------------------------------------------------------------------------
60,111,935
----------------------------------------------------------------------------------------------
BIOTECHNOLOGY - 1.8%
Abgenix, Inc. 876,500 105,056,742
----------------------------------------------------------------------------------------------
105,056,742
----------------------------------------------------------------------------------------------
BROADCASTING/RADIO/TV - 2.6%
Citadel Communications Corporation 420,150 14,678,991
Cox Radio, Inc., Class A 1,102,400 30,867,200
EnterCom Communications Corporation 760,700 37,084,125
Hispanic Broadcasting Corporation 427,800 14,170,875
Infinity Broadcasting Corporation, Class A 1,026,100 37,388,519
Spanish Broadcasting System, Inc. 610,900 12,561,631
----------------------------------------------------------------------------------------------
146,751,341
----------------------------------------------------------------------------------------------
BUSINESS SERVICES - 0.0%
Management Network Group, Inc. 5,000 175,000
On Assignment, Inc. 42,500 1,296,250
----------------------------------------------------------------------------------------------
1,471,250
----------------------------------------------------------------------------------------------
COMMERCIAL SERVICES - 1.9%
eBenX, Inc. 398,900 8,451,694
Forrester Research, Inc. 363,600 26,474,625
MemberWorks, Inc. 163,500 5,497,687
Professional Detailing, Inc. 675,200 22,999,000
Student Advantage, Inc. 463,700 3,390,806
TeleTech Holdings, Inc. 832,500 25,859,531
Ventiv Health, Inc. 303,500 3,376,437
Wireless Facilities, Inc. 232,200 11,827,687
----------------------------------------------------------------------------------------------
107,877,467
----------------------------------------------------------------------------------------------
COMPUTER HARDWARE & COMPONENTS - 0.4%
Immersion Corporation 436,100 13,083,000
Integral Systems, Inc. 202,300 3,388,525
Mobility Electronics, Inc. 177,800 2,311,400
M-Systems Flash Disk Pioneers, Ltd. 37,500 2,920,313
----------------------------------------------------------------------------------------------
21,703,238
----------------------------------------------------------------------------------------------
COMPUTER SERVICES - 1.1%
Acxiom Corporation 696,044 18,967,199
Entrust Technologies, Inc. 401,350 33,211,712
Sykes Enterprises, Inc. 967,800 12,460,425
----------------------------------------------------------------------------------------------
64,639,336
----------------------------------------------------------------------------------------------
COMPUTER SOFTWARE - 10.9%
Accrue Software, Inc. 487,400 17,302,700
Active Software, Inc. 506,100 39,317,644
Business Objects S.A., ADR(3) 531,900 46,873,687
Concero, Inc. 222,600 2,726,850
Cysive, Inc. 1,397,500 33,365,312
Digex, Inc. 424,600 28,846,262
Exchange Applications, Inc. 1,414,100 37,650,412
Interactive Intelligence, Inc. 445,750 16,715,625
Kana Communications, Inc. 1,086,896 67,251,690
----------------------------------------------------------------------------------------------
COMPUTER SOFTWARE - CONTINUED
Macromedia, Inc. 348,200 33,666,587
Micromuse, Inc. 130,000 21,512,969
NetIQ Corporation 834,450 49,754,081
NVIDIA Corporation 571,900 36,351,394
OnDisplay, Inc. 229,700 18,706,194
Peregrine Systems, Inc. 617,100 21,405,656
Pinnacle Holdings, Inc. 498,150 26,900,100
Pivotal Corporation 525,400 12,346,900
Portal Software, Inc. 363,000 23,186,625
Quest Software, Inc. 814,871 45,123,482
Scientific Learning Corporation 346,350 7,662,994
TIBCO Software, Inc. 285,900 30,658,308
Virage, Inc. 4,700 84,894
----------------------------------------------------------------------------------------------
617,410,366
----------------------------------------------------------------------------------------------
COMPUTER SOFTWARE & SERVICES - 7.7%
BEA Systems, Inc. 2,573,500 127,227,406
Check Point Software Technologies, Ltd. 350,800 74,281,900
Informatica Corporation 721,900 59,150,681
ISS Group, Inc. 791,300 78,128,511
Mercator Software, Inc. 557,800 38,348,750
Mercury Interactive Corporation 490,600 47,465,550
Sonic Foundry, Inc. 523,570 10,994,970
----------------------------------------------------------------------------------------------
435,597,768
----------------------------------------------------------------------------------------------
CONSUMER & SPECIALTY RETAIL - 1.1%
99 Cents Only Stores 678,300 27,047,212
Bed, Bath & Beyond, Inc. 730,800 26,491,500
Factory 2-U Stores, Inc. 316,300 11,960,094
----------------------------------------------------------------------------------------------
65,498,806
----------------------------------------------------------------------------------------------
DATA PROCESSING SOFTWARE & SERVICES - 0.5%
Fiserv, Inc. 354,100 15,314,825
Informix Corporation 1,581,800 11,764,637
----------------------------------------------------------------------------------------------
27,079,462
----------------------------------------------------------------------------------------------
ELECTRONIC COMPONENTS - 3.1%
ANADIGICS, Inc. 242,150 8,248,234
Cymer, Inc. 322,600 15,404,150
Integrated Device Technology, Inc. 897,400 53,731,825
Interlink Electronics, Inc. 250,350 10,483,406
Manufacturers' Services, Ltd. 52,250 1,074,391
Power Integrations, Inc. 1,412,100 33,272,606
Sanmina Corporation 606,700 51,872,850
----------------------------------------------------------------------------------------------
174,087,462
----------------------------------------------------------------------------------------------
ENERGY - 1.1%
Calpine Corporation 646,600 42,513,950
Enron Corporation(1) 352,200 22,716,900
----------------------------------------------------------------------------------------------
65,230,850
----------------------------------------------------------------------------------------------
FINANCIAL SERVICES - 0.9%
Financial Federal Corporation 368,300 6,399,212
Knight Trading Group, Inc. 747,100 22,272,919
SEI Investments Company(1) 616,800 24,556,350
----------------------------------------------------------------------------------------------
53,228,481
----------------------------------------------------------------------------------------------
</TABLE>
See notes to Schedule of Investments on page 73.
The accompanying notes are an integral part of these financial statements.
57
<PAGE>
SEMIANNUAL REPORT
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS -- EMERGING GROWTH FUND -- CONTINUED
JUNE 30, 2000 (UNAUDITED) SHARES VALUE
----------------------------------------------------------------------------------------------
<S> <C> <C>
HEALTHCARE SERVICES - 1.9%
Aurora Biosciences Corporation 419,100 $ 28,577,381
Community Health Care 300,600 4,865,963
Health Management Associates, Inc., Class A 3,052,400 39,871,975
Sunrise Assisted Living, Inc. 1,718,800 31,797,800
----------------------------------------------------------------------------------------------
105,113,119
----------------------------------------------------------------------------------------------
HEALTH MAINTENANCE ORGANIZATIONS - 0.1%
Oxford Health Plans, Inc. 328,800 7,829,550
----------------------------------------------------------------------------------------------
7,829,550
----------------------------------------------------------------------------------------------
INSURANCE - 0.2%
Conseco, Inc.(1) 1,000,000 9,750,000
----------------------------------------------------------------------------------------------
9,750,000
----------------------------------------------------------------------------------------------
INTERNET CAPITAL SERVICES - 20.7%
24 / 7 Media, Inc. 1,070,700 16,729,687
Alteon Websystems, Inc. 803,450 80,395,216
Ariba, Inc. 220,700 21,638,945
Art Technology Group, Inc. 438,000 44,210,625
Be Free, Inc. 857,600 7,718,400
C-bridge Internet Solutions, Inc. 450,200 7,822,225
Coolsavings.com, Inc. 275,100 1,667,794
Critical Path, Inc. 526,000 30,672,375
Digital Insight Corporation 70,000 2,380,000
Digital Island, Inc. 869,100 42,259,987
DSL. net, Inc. 1,688,400 17,411,625
EarthLink, Inc. 252,900 3,904,144
E.piphany, Inc. 204,700 21,941,281
eSPEED, Inc., Class A 930,100 40,401,219
Firepond, Inc. 659,650 23,747,400
HomeStore.com, Inc. 1,160,350 33,867,716
HotJobs.com, Ltd. 374,300 5,170,019
Internap Network Services Corporation 488,600 20,284,534
ITXC Corporation 378,150 13,388,873
Lante Corporation 49,900 1,019,831
LifeMinders, Inc. 338,100 9,995,081
Mediaplex, Inc. 331,300 6,398,231
Multex.com, Inc. 1,050,200 26,451,912
MyPoints.com, Inc. 1,009,700 19,136,970
National Information Consortium, Inc. 186,250 2,118,594
NaviSite, Inc. 671,100 28,060,369
Netcentives, Inc. 551,100 10,264,237
NetCreations, Inc. 213,200 9,767,225
Netopia, Inc. 876,650 35,285,162
Primus Knowledge Solutions, Inc. 507,100 22,819,500
Proxicom, Inc. 964,700 46,185,012
PSINet, Inc. 1,007,500 25,313,438
RealNetworks, Inc. 1,135,700 57,423,831
Register.com, Inc. 464,650 14,200,866
Scient Corporation 796,250 35,134,531
Software.com, Inc. 619,100 80,405,613
SonicWALL, Inc. 185,850 16,366,416
Tumbleweed Communications Corporation 202,300 10,292,013
VeriSign, Inc. 664,027 117,200,765
Versata, Inc. 202,300 8,155,219
----------------------------------------------------------------------------------------------
INTERNET CAPITAL SERVICES - CONTINUED
Viant Corporation 1,082,800 32,077,950
Vignette Corporation 508,700 26,460,348
Vitria Technology, Inc. 708,700 43,319,287
WatchGuard Technologies, Inc. 554,550 30,465,591
webMethods, Inc. 145,000 22,792,187
----------------------------------------------------------------------------------------------
1,172,722,244
----------------------------------------------------------------------------------------------
INTERNET COMMERCE - 0.1%
Expedia, Inc., Class A 400,800 5,936,850
----------------------------------------------------------------------------------------------
5,936,850
----------------------------------------------------------------------------------------------
INVESTMENT MANAGEMENT - 0.6%
Waddell & Reed Financial, Inc., Class A(1) 1,022,000 33,534,375
----------------------------------------------------------------------------------------------
33,534,375
----------------------------------------------------------------------------------------------
MEDIA - 0.6%
Univision Communications, Inc., Class A 314,800 32,581,800
----------------------------------------------------------------------------------------------
32,581,800
----------------------------------------------------------------------------------------------
MEDICAL - BIOMEDICAL/GENETICS - 0.7%
Charles River Laboratories International, Inc. 79,600 1,766,125
Inhale Therapeutic Systems, Inc. 112,300 11,394,941
Millennium Pharmaceuticals, Inc. 241,378 27,004,164
----------------------------------------------------------------------------------------------
40,165,230
----------------------------------------------------------------------------------------------
MEDICAL INSTRUMENTS & DEVICES - 1.9%
Cytyc Corporation 958,600 51,165,275
ResMed, Inc. 706,300 18,893,525
Techne Corporation 235,200 30,576,000
Thoratec Laboratories Corporation 302,600 4,898,338
----------------------------------------------------------------------------------------------
105,533,138
----------------------------------------------------------------------------------------------
MEDICAL PRODUCTS & SERVICES - 0.2%
Molecular Devices Corporation 143,300 9,914,569
----------------------------------------------------------------------------------------------
9,914,569
----------------------------------------------------------------------------------------------
NETWORK SYSTEMS & PRODUCTS - 5.6%
Cobalt Networks, Inc. 807,200 46,716,700
Crossroads Systems, Inc. 295,900 7,471,475
Extreme Networks, Inc. 202,300 21,342,650
Finisar Corporation 963,800 25,239,513
Foundry Networks, Inc. 511,400 56,509,700
MMC Networks, Inc. 1,172,200 62,639,438
Network Appliance, Inc. 657,500 52,928,750
Stratos Lightwave, Inc. 26,400 735,900
Turnstone System, Inc. 264,000 43,737,375
----------------------------------------------------------------------------------------------
317,321,501
----------------------------------------------------------------------------------------------
PHARMACEUTICALS - 3.2%
Cephalon, Inc. 303,500 18,172,063
COR Therapeutics, Inc. 284,800 24,297,000
Cubist Pharmaceuticals, Inc. 681,500 33,563,875
Gilead Sciences, Inc. 311,800 22,176,775
Medarex, Inc. 821,400 69,408,300
Neurocrine Biosciences, Inc. 191,400 6,806,663
PRAECIS Pharmaceuticals, Inc. 203,800 5,680,925
----------------------------------------------------------------------------------------------
180,105,601
----------------------------------------------------------------------------------------------
PRINTING & PUBLISHING - 0.2%
Information Holdings, Inc. 251,000 9,287,000
----------------------------------------------------------------------------------------------
9,287,000
----------------------------------------------------------------------------------------------
</TABLE>
See notes to Schedule of Investments on page 73.
The accompanying notes are an integral part of these financial statements.
58
<PAGE>
RS FUNDS
<TABLE>
<CAPTION>
JUNE 30, 2000 (UNAUDITED) SHARES VALUE
----------------------------------------------------------------------------------------------
SEMICONDUCTORS & COMPONENTS - 5.7%
Alpha Industries, Inc. 157,400 $ 6,935,437
Applied Micro Circuits Corporation 479,492 47,349,835
Cree, Inc. 481,200 64,240,200
Exar Corporation 171,700 14,970,094
GlobeSpan, Inc. 743,400 90,752,878
LTX Corporation 511,900 17,884,506
Marvell Technology Group, Ltd. 11,750 669,750
Microsemi Corporation 101,200 3,434,475
PLX Technology, Inc. 1,112,700 46,177,050
TranSwitch Corporation 242,650 18,729,547
TriQuint Semiconductor, Inc. 100,000 9,568,750
----------------------------------------------------------------------------------------------
320,712,522
----------------------------------------------------------------------------------------------
TELECOMMUNICATIONS - 4.1%
AirGate PCS, Inc. 455,200 23,926,450
Crown Castle International Corporation 562,700 20,538,550
Dobson Communications Corporation, Class A 552,800 10,641,400
EchoStar Communications Corporation, Class A 1,440,800 47,703,988
Intermedia Communications, Inc. 606,900 18,055,275
Metrocall, Inc. 2,614,500 23,530,500
Metromedia Fiber Network, Inc., Class A 710,500 28,197,969
NEXTLINK Communications, Inc., Class A 628,263 23,834,728
Primus Telecommunications Group, Inc. 493,700 12,280,788
Triton PCS Holdings, Inc., Class A 385,450 22,259,738
----------------------------------------------------------------------------------------------
230,969,386
----------------------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT - 7.7%
American Tower Corporation, Class A 506,100 21,098,044
Anaren Microwave, Inc. 96,900 12,716,611
AudioCodes, Ltd. 358,900 43,068,000
Ditech Communications Corporation 289,600 27,385,300
Efficient Networks, Inc. 1,030,550 75,809,834
Exfo Electro-Optical Engineering, Inc. 113,600 4,984,200
Glenayre Technologies, Inc. 2,763,900 29,193,694
Handspring, Inc. 9,500 256,500
Metawave Communications Corporation 612,550 16,347,428
Netro Corporation 1,051,500 60,329,813
New Focus, Inc. 6,450 529,706
Next Level Communications, Inc. 535,500 45,919,125
Paging Network, Inc. 959,200 689,425
Spectrasite Holdings, Inc. 2,220,500 63,006,688
Terayon Communications Systems, Inc. 350,000 22,482,031
Weblink Wireless, Inc. 715,800 9,484,350
----------------------------------------------------------------------------------------------
433,300,749
----------------------------------------------------------------------------------------------
TELECOMMUNICATIONS SERVICES - 3.3%
Allegiance Telecom, Inc. 490,800 31,411,200
CapRock Communications Corporation 147,200 2,870,400
Copper Mountain Networks, Inc. 723,800 63,784,875
Leap Wireless International, Inc. 343,300 16,135,100
McLeodUSA, Inc. 1,472,600 30,464,413
Powerwave Technologies, Inc. 448,700 19,742,800
Teligent, Inc., Class A 262,500 6,201,563
Viatel, Inc. 263,600 7,529,075
West TeleServices Corporation 353,150 8,939,109
----------------------------------------------------------------------------------------------
187,078,535
----------------------------------------------------------------------------------------------
TRANSPORTATION - 0.4%
Forward Air Corporation 581,150 23,246,000
----------------------------------------------------------------------------------------------
23,246,000
----------------------------------------------------------------------------------------------
TRAVEL SERVICES - 0.9%
Four Seasons Hotels, Inc.(1) 839,300 52,193,969
----------------------------------------------------------------------------------------------
52,193,969
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $4,058,649,043) 5,223,040,642
----------------------------------------------------------------------------------------------
<CAPTION>
WARRANTS VALUE
----------------------------------------------------------------------------------------------
<S> <C> <C>
WARRANTS - 0.0%
----------------------------------------------------------------------------------------------
Acclaim Entertainment, Inc.(4),(6) 4,537 3,569
----------------------------------------------------------------------------------------------
TOTAL WARRANTS (COST $0) 3,569
----------------------------------------------------------------------------------------------
<CAPTION>
VALUE
----------------------------------------------------------------------------------------------
<S> <C>
SHORT TERM INVESTMENTS - 18.3%
----------------------------------------------------------------------------------------------
Short Term Investments Held as Collateral
for Loaned Securities(8) 728,232,350
Temporary Investment Cash Fund 152,196,068
Temporary Investment Fund 152,196,068
----------------------------------------------------------------------------------------------
TOTAL SHORT TERM INVESTMENTS (COST $1,032,624,486) 1,032,624,486
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
TOTAL INVESTMENTS - 110.6% (COST $5,091,273,529) 6,255,668,697
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
COLLATERAL ON SECURITIES LOANED, AT VALUE - (12.9%) (728,232,350)
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
OTHER ASSETS, NET - 2.3% 128,905,090
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
TOTAL NET ASSETS - 100.0% 5,656,341,437
----------------------------------------------------------------------------------------------
</TABLE>
See notes to Schedule of Investments on page 73.
The accompanying notes are an ingtegral part of these financial statements.
59
<PAGE>
SEMIANNUAL REPORT
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS -- THE INFORMATION AGE FUND-Registered Trademark-
JUNE 30, 2000 (UNAUDITED) SHARES VALUE
----------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 98.8%
----------------------------------------------------------------------------------------------
COMPUTER HARDWARE & COMPONENTS - 12.7%
Applied Materials, Inc. 183,600 $ 16,638,750
Compaq Computer Corporation(1) 321,000 8,205,562
EMC Corporation 276,800 21,296,300
VERITAS Software Corporation 36,400 4,113,769
----------------------------------------------------------------------------------------------
50,254,381
----------------------------------------------------------------------------------------------
COMPUTER SOFTWARE - 7.3%
Adobe Systems, Inc.(1) 64,200 8,346,000
Microsoft Corporation 205,000 16,400,000
National Instruments Corporation 100,000 4,362,500
----------------------------------------------------------------------------------------------
29,108,500
----------------------------------------------------------------------------------------------
COMPUTER SOFTWARE & SERVICES - 2.9%
Sun Microsystems, Inc. 127,000 11,549,062
----------------------------------------------------------------------------------------------
11,549,062
----------------------------------------------------------------------------------------------
ELECTRONIC COMPONENTS - 10.2%
Flextronics International, Ltd. 72,000 4,945,500
Linear Technology Corporation(1) 90,000 5,754,375
Maxim Integrated Products, Inc. 65,000 4,415,937
Solectron Corporation 188,800 7,906,000
Teradyne, Inc. 234,000 17,199,000
----------------------------------------------------------------------------------------------
40,220,812
----------------------------------------------------------------------------------------------
INTERNET CAPITAL SERVICES - 6.4%
Ariba, Inc. 48,750 4,779,785
BroadVision, Inc. 202,750 10,302,234
Yahoo!, Inc. 82,050 10,163,944
----------------------------------------------------------------------------------------------
25,245,963
----------------------------------------------------------------------------------------------
NETWORK SYSTEMS & PRODUCTS - 4.7%
Cisco Systems, Inc. 290,428 18,460,330
----------------------------------------------------------------------------------------------
18,460,330
----------------------------------------------------------------------------------------------
SEMICONDUCTORS & COMPONENTS - 24.1%
Altera Corporation 88,000 8,970,500
Atmel Corporation 167,800 6,187,625
Intel Corporation(1) 142,366 19,032,555
KLA-Tencor Corporation 118,000 6,910,375
Lam Research Corporation 225,000 8,437,500
Micron Technology, Inc. 120,000 10,567,500
Motorola, Inc.(1) 318,000 9,241,875
Texas Instruments, Inc.(1) 102,324 7,028,380
Xilinx, Inc. 232,000 19,154,500
----------------------------------------------------------------------------------------------
95,530,810
----------------------------------------------------------------------------------------------
TELECOMMUNICATIONS - 4.8%
Nextel Communications, Inc., Class A 137,000 8,382,687
VoiceStream Wireless Corporation 60,000 6,977,813
Western Wireless Corporation, Class A 69,000 3,760,500
----------------------------------------------------------------------------------------------
19,121,000
----------------------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT - 19.7%
Comverse Technology, Inc. 80,000 7,440,000
Corning, Inc.(1) 62,350 16,826,706
JDS Uniphase Corporation 135,000 16,183,125
Lucent Technologies, Inc.(1) 136,000 8,058,000
Nortel Networks Corporation(1) 188,000 12,831,000
Telefonaktiebolaget LM Ericsson, ADR(1),(3) 400,000 8,000,000
Tellabs, Inc. 125,000 8,554,688
----------------------------------------------------------------------------------------------
77,893,519
----------------------------------------------------------------------------------------------
TELECOMMUNICATIONS SERVICES - 6.0%
Allegiance Telecom, Inc. 112,050 7,171,200
Nokia Corporation, ADR(1),(3) 335,200 16,739,050
----------------------------------------------------------------------------------------------
23,910,250
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $256,763,437) 391,294,627
----------------------------------------------------------------------------------------------
<CAPTION>
VALUE
----------------------------------------------------------------------------------------------
<S> <C>
SHORT TERM INVESTMENTS - 0.8%
----------------------------------------------------------------------------------------------
Temporary Investment Cash Fund 1,569,681
Temporary Investment Fund 1,569,680
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
TOTAL SHORT TERM INVESTMENTS (COST $3,139,361) 3,139,361
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
TOTAL INVESTMENTS - 99.6% (COST $259,902,798) 394,433,988
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
OTHER ASSETS, NET - 0.4% 1,543,919
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
TOTAL NET ASSETS - 100.0% 395,977,907
----------------------------------------------------------------------------------------------
</TABLE>
See notes to Schedule of Investments on page 73.
The accompanying notes are an integral part of these financial statements.
60
<PAGE>
RS FUNDS
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS -- RS INTERNET AGE FUND-TM-
JUNE 30, 2000 (UNAUDITED) SHARES VALUE
----------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 95.0%
----------------------------------------------------------------------------------------------
BUSINESS SERVICES - 3.4%
Diamond Technology partners, Inc. 69,800 $ 6,142,400
Hall, Kinion & Associates, Inc. 66,000 2,198,625
----------------------------------------------------------------------------------------------
8,341,025
----------------------------------------------------------------------------------------------
COMMERCIAL SERVICES - 4.8%
eBenX, Inc. 86,150 1,825,303
Forrester Research, Inc. 60,000 4,368,750
MemberWorks, Inc. 93,100 3,130,487
META Group, Inc. 124,600 2,398,550
----------------------------------------------------------------------------------------------
11,723,090
----------------------------------------------------------------------------------------------
COMPUTER HARDWARE & COMPONENTS - 1.2%
Brocade Communications Systems, Inc. 15,800 2,899,053
----------------------------------------------------------------------------------------------
2,899,053
----------------------------------------------------------------------------------------------
COMPUTER SERVICES - 1.9%
Acxiom Corporation 46,727 1,273,311
Entrust Technologies, Inc. 40,900 3,384,475
----------------------------------------------------------------------------------------------
4,657,786
----------------------------------------------------------------------------------------------
COMPUTER SOFTWARE - 17.2%
Cysive, Inc. 131,200 3,132,400
Digex, Inc. 50,400 3,424,050
Exchange Applications, Inc. 201,900 5,375,587
Macromedia, Inc. 28,200 2,726,587
NetIQ Corporation 102,650 6,120,506
OnDisplay, Inc. 39,800 3,241,212
Peregrine Systems, Inc. 203,050 7,043,297
Pinnacle Holdings, Inc. 25,000 1,350,000
Portal Software, Inc. 15,400 983,675
Quest Software, Inc. 33,900 1,877,212
TIBCO Software, Inc. 60,800 6,519,850
----------------------------------------------------------------------------------------------
41,794,376
----------------------------------------------------------------------------------------------
COMPUTER SOFTWARE & SERVICES - 12.0%
BEA Systems, Inc. 84,700 4,187,356
Check Point Software Technologies, Ltd. 26,400 5,590,200
i2 Technologies, Inc. 70,595 7,360,632
Mercator Software, Inc. 41,000 2,818,750
Mercury Interactive Corporation 79,100 7,652,925
Sonic Foundry, Inc. 76,580 1,608,180
----------------------------------------------------------------------------------------------
29,218,043
----------------------------------------------------------------------------------------------
DATA PROCESSING SOFTWARE & SERVICES - 0.7%
eXcelon Corporation 203,000 1,611,312
----------------------------------------------------------------------------------------------
1,611,312
----------------------------------------------------------------------------------------------
ELECTRONIC COMPONENTS - 0.5%
Power Integrations, Inc. 50,000 1,178,125
----------------------------------------------------------------------------------------------
1,178,125
----------------------------------------------------------------------------------------------
FINANCIAL SERVICES - 2.4%
Knight Trading Group, Inc. 118,800 3,541,725
NextCard, Inc. 258,500 2,197,250
----------------------------------------------------------------------------------------------
5,738,975
----------------------------------------------------------------------------------------------
INTERNET CAPITAL SERVICES - 31.7%
24 / 7 Media, Inc. 161,400 2,521,875
About.com, Inc. 49,100 1,546,650
Alteon Websystems, Inc. 42,200 4,222,637
Ariba, Inc. 29,000 2,843,359
Be Free, Inc. 139,000 1,251,000
C-bridge Internet Solutions, Inc. 102,700 1,784,412
Digital Island, Inc. 116,400 5,659,950
E.piphany, Inc. 27,100 2,904,781
EarthLink, Inc. 220,171 3,398,890
eSPEED, Inc., Class A 119,450 5,188,609
Firepond, Inc. 108,200 3,895,200
ITXC Corporation 48,000 1,699,500
Proxicom, Inc. 145,500 6,965,812
RealNetworks, Inc. 100,800 5,096,700
Register.com, Inc. 82,100 2,509,181
Scient Corporation 58,900 2,598,963
Software.com, Inc. 19,600 2,545,550
SportsLine.com, Inc. 224,800 3,835,650
VeriSign, Inc. 15,910 2,808,115
VIA NET.WORKS, Inc. 1,700 26,244
Viant Corporation 43,900 1,300,538
Vignette Corporation 78,300 4,072,823
Vitria Technology, Inc. 52,700 3,221,288
WatchGuard Technologies, Inc. 52,000 2,856,750
webMethods, Inc. 14,000 2,200,625
----------------------------------------------------------------------------------------------
76,955,102
----------------------------------------------------------------------------------------------
NETWORK SYSTEMS AND PRODUCTS - 2.4%
Extreme Networks, Inc. 14,000 1,477,000
Foundry Networks, Inc. 21,000 2,320,500
Turnstone System, Inc. 12,200 2,021,197
----------------------------------------------------------------------------------------------
5,818,697
----------------------------------------------------------------------------------------------
SEMICONDUCTORS & COMPONENTS - 6.3%
Alpha Industries, Inc. 5,900 259,969
Applied Micro Circuits Corporation 30,500 3,011,875
GlobeSpan, Inc. 45,700 5,578,970
QLogic Corporation 39,800 2,629,288
TriQuint Semiconductor, Inc. 14,500 1,387,469
Virata Corporation 42,800 2,551,950
----------------------------------------------------------------------------------------------
15,419,521
----------------------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT - 7.1%
American Tower Corporation, Class A 14,500 604,469
Efficient Networks, Inc. 58,200 4,281,338
Exfo Electro-Optical Engineering, Inc. 5,700 250,087
General Motors Corporation, Class H 27,000 2,369,250
JDS Uniphase Corporation 26,600 3,188,675
Netro Corporation 31,100 1,784,363
Next Level Communications, Inc. 24,300 2,083,725
Spectrasite Holdings, Inc. 62,450 1,772,019
</TABLE>
See notes to Schedule of Investments on page 73.
The accompanying notes are an integral part of these financial statements.
61
<PAGE>
SEMIANNUAL REPORT
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS -- RS INTERNET AGE FUND-TM- -- CONTINUED
JUNE 30, 2000 (UNAUDITED) SHARES VALUE
----------------------------------------------------------------------------------------------
<S> <C> <C>
TELECOMMUNICATIONS EQUIPMENT - CONTINUED
Terayon Communications Systems, Inc. 14,800 $ 950,669
----------------------------------------------------------------------------------------------
17,284,595
----------------------------------------------------------------------------------------------
TELECOMMUNICATIONS SERVICES - 3.4%
Aspect Communications Corporation 30,200 1,187,238
Copper Mountain Networks, Inc. 36,300 3,198,938
Motient Corporation 156,200 2,450,388
West TeleServices Corporation 55,800 1,412,438
----------------------------------------------------------------------------------------------
8,249,002
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $228,608,729) 230,888,702
----------------------------------------------------------------------------------------------
<CAPTION>
VALUE
----------------------------------------------------------------------------------------------
<S> <C>
SHORT TERM INVESTMENTS - 16.5%
----------------------------------------------------------------------------------------------
Short Term Investments Held as Collateral
for Loaned Securities(8) 26,632,600
Temporary Investment Cash Fund 6,610,556
Temporary Investment Fund 6,610,555
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
TOTAL SHORT TERM INVESTMENTS (COST $39,853,711) 39,853,711
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
TOTAL INVESTMENTS - 111.5% (COST $268,462,440) 270,742,413
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
COLLATERAL ON SECURITIES LOANED, AT VALUE - (11.0) (26,632,600)
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
OTHER LIABILITIES, NET - (0.5%) (1,189,044)
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
TOTAL NET ASSETS - 100.0% $242,920,769
----------------------------------------------------------------------------------------------
</TABLE>
See notes to Schedule of Investments on page 73.
The accompanying notes are an integral part of these financial statements.
62
<PAGE>
RS FUNDS
SCHEDULE OF INVESTMENTS -- MICROCAP GROWTH FUND
<TABLE>
<CAPTION>
JUNE 30, 2000 (UNAUDITED) SHARES VALUE
===================================================================================================
<S> <C> <C>
COMMON STOCKS - 89.5%
---------------------------------------------------------------------------------------------------
AEROSPACE - 0.8%
REMEC, Inc. 25,000 $ 1,046,875
---------------------------------------------------------------------------------------------------
1,046,875
---------------------------------------------------------------------------------------------------
AUTOMOBILES & OTHER MOTOR VEHICLES - 0.5%
Oshkosh Truck Corporation(1) 19,600 700,700
---------------------------------------------------------------------------------------------------
700,700
---------------------------------------------------------------------------------------------------
BIOTECHNOLOGY - 0.8%
LifeCell Corporation 155,300 990,037
---------------------------------------------------------------------------------------------------
990,037
---------------------------------------------------------------------------------------------------
BROADCASTING/RADIO/TV - 0.5%
Granite Broadcasting Corporation 80,000 590,000
---------------------------------------------------------------------------------------------------
590,000
---------------------------------------------------------------------------------------------------
BUSINESS SERVICES - 1.8%
Hall, Kinion & Associates, Inc. 38,500 1,282,531
On Assignment, Inc. 31,600 963,800
---------------------------------------------------------------------------------------------------
2,246,331
---------------------------------------------------------------------------------------------------
CHEMICALS - 0.7%
Uniroyal Technology Corporation 75,000 829,687
---------------------------------------------------------------------------------------------------
829,687
---------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES - 7.6%
Clark/Bardes Holdings, Inc. 30,300 499,950
eBenX, Inc. 18,800 398,325
Gaiam, Inc. 104,600 1,935,100
MemberWorks, Inc. 28,100 944,862
Mobile Mini, Inc. 54,300 1,197,994
NCO Group, Inc. 19,700 455,562
Newgen Results Corporation 126,400 2,085,600
Optimal Robotics Corporation 40,000 1,535,000
Student Advantage, Inc. 70,100 512,606
---------------------------------------------------------------------------------------------------
9,564,999
---------------------------------------------------------------------------------------------------
COMPUTER HARDWARE & COMPONENTS - 4.3%
Concurrent Computer Corporation 67,700 888,563
Cybex Computer Products Corporation 37,050 1,593,150
Datalink Corporation 70,000 1,045,625
Qualstar Corporation 110,000 842,188
RadiSys Corporation 17,550 995,962
---------------------------------------------------------------------------------------------------
5,365,488
---------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE - 2.2%
Exchange Applications, Inc. 40,000 1,065,000
Moldflow Corporation 70,000 1,133,125
QRS Corporation 23,000 564,937
---------------------------------------------------------------------------------------------------
2,763,062
---------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE & SERVICES - 0.8%
Netegrity, Inc. 10,000 753,125
Sonic Foundry, Inc. 10,000 210,000
---------------------------------------------------------------------------------------------------
963,125
---------------------------------------------------------------------------------------------------
CONSTRUCTION/INFRASTRUCTURE - 2.3%
Shaw Group, Inc. 24,800 1,168,700
Trex Company, Inc. 33,800 1,690,000
---------------------------------------------------------------------------------------------------
2,858,700
---------------------------------------------------------------------------------------------------
CONSUMER & SPECIALTY RETAIL - 9.6%
1-800-Contacts, Inc. 50,000 2,350,000
A.C. Moore Arts & Crafts, Inc. 52,100 332,138
AG Services of America, Inc. 16,100 245,525
Chico's FAS, Inc. 33,200 664,000
Cost Plus, Inc. 20,200 579,487
Fred's, Inc.(1) 92,500 1,665,000
Guitar Center, Inc. 70,000 735,000
Hibbett Sporting Goods, Inc. 30,000 705,000
Hot Topic, Inc. 36,400 1,164,800
PC Connection, Inc. 17,100 974,700
Rent Way, Inc. 70,000 2,043,125
Shop at Home, Inc. 124,300 580,714
---------------------------------------------------------------------------------------------------
12,039,489
---------------------------------------------------------------------------------------------------
DATA PROCESSING SOFTWARE & SERVICES - 0.7%
Intercept Group, Inc. 55,000 935,000
---------------------------------------------------------------------------------------------------
935,000
---------------------------------------------------------------------------------------------------
DISTRIBUTION/WHOLESALE - 1.3%
SCP Pool Corporation 71,850 1,688,475
---------------------------------------------------------------------------------------------------
1,688,475
---------------------------------------------------------------------------------------------------
EDUCATION & TRAINING - 1.6%
Bright Horizons Family Solutions, Inc. 45,000 961,875
Career Education Corporation 21,000 1,018,500
---------------------------------------------------------------------------------------------------
1,980,375
---------------------------------------------------------------------------------------------------
ELECTRONIC COMPONENTS - 10.2%
ACT Manufacturing, Inc. 23,600 1,095,925
DuraSwitch Industries, Inc. 125,000 875,000
Interlink Electronics, Inc. 50,000 2,093,750
Merix Corporation 25,000 1,175,000
Photon Dynamics, Inc. 25,000 1,867,187
See notes to Schedule of Investments on page 73.
The accompanying notes are an integral part of these financial statements.
63
<PAGE>
SEMIANNUAL REPORT
SCHEDULE OF INVESTMENTS -- MICROCAP GROWTH FUND -- CONTINUED
<CAPTION>
JUNE 30, 2000 (UNAUDITED) SHARES VALUE
===================================================================================================
<S> <C> <C>
ELECTRONIC COMPONENTS - CONTINUED
Power Integrations, Inc. 46,300 $ 1,090,944
Signal Technology Corporation 60,000 1,500,000
Universal Electronics, Inc. 90,600 2,225,362
Zygo Corporation 10,000 908,125
---------------------------------------------------------------------------------------------------
12,831,293
---------------------------------------------------------------------------------------------------
FOOD - 0.4%
Monterey Pasta Company 131,700 551,494
---------------------------------------------------------------------------------------------------
551,494
---------------------------------------------------------------------------------------------------
HEALTHCARE SERVICES - 1.3%
Accredo Health, Inc. 19,800 684,338
Province Healthcare Company 27,400 989,825
---------------------------------------------------------------------------------------------------
1,674,163
---------------------------------------------------------------------------------------------------
INTERNET CAPITAL SERVICES - 0.8%
click2learn.com, Inc. 12,500 220,313
Multex.com, Inc. 30,000 755,625
---------------------------------------------------------------------------------------------------
975,938
---------------------------------------------------------------------------------------------------
MACHINERY - 0.7%
Asyst Technologies, Inc. 26,700 914,475
---------------------------------------------------------------------------------------------------
914,475
---------------------------------------------------------------------------------------------------
MANUFACTURING - 3.3%
Applied Films Corporation 75,000 2,746,875
Koala Corporation 100,000 1,412,500
---------------------------------------------------------------------------------------------------
4,159,375
---------------------------------------------------------------------------------------------------
MEDIA - 0.9%
LodgeNet Entertainment Corporation 47,000 1,139,750
---------------------------------------------------------------------------------------------------
1,139,750
---------------------------------------------------------------------------------------------------
MEDICAL-BIOMEDICAL/GENETICS - 1.5%
Alexion Pharmaceuticals, Inc. 12,000 858,000
CuraGen Corporation 9,300 353,981
Genzyme Transgenics Corporation 23,700 642,863
---------------------------------------------------------------------------------------------------
1,854,844
---------------------------------------------------------------------------------------------------
MEDICAL INSTRUMENTS & DEVICES - 1.5%
Closure Medical Corporation 38,300 880,900
Cytyc Corporation 18,000 960,750
---------------------------------------------------------------------------------------------------
1,841,650
---------------------------------------------------------------------------------------------------
MEDICAL PRODUCTS & SERVICES - 2.3%
Molecular Devices Corporation 22,600 1,563,638
Zoll Medical Corporation 27,500 1,347,500
---------------------------------------------------------------------------------------------------
2,911,138
---------------------------------------------------------------------------------------------------
MISCELLANEOUS - 0.8%
Rainbow Rentals, Inc. 92,000 1,052,250
---------------------------------------------------------------------------------------------------
1,052,250
---------------------------------------------------------------------------------------------------
NETWORK SYSTEMS AND PRODUCTS - 0.9%
SBE, Inc. 53,600 1,112,200
---------------------------------------------------------------------------------------------------
1,112,200
---------------------------------------------------------------------------------------------------
OFFICE EQUIPMENT - 0.5%
T/R Systems, Inc. 100,000 637,500
---------------------------------------------------------------------------------------------------
637,500
---------------------------------------------------------------------------------------------------
PHARMACEUTICALS - 4.5%
Anesta Corporation 55,000 1,368,125
Celgene Corporation 30,000 1,766,250
CIMA Labs, Inc. 30,000 607,500
Neurogen Corporation 40,000 1,155,000
Noven Pharmaceuticals, Inc. 25,200 757,575
---------------------------------------------------------------------------------------------------
5,654,450
---------------------------------------------------------------------------------------------------
RESEARCH & DEVELOPMENT - 1.1%
Albany Molecular Research, Inc. 25,000 1,360,938
---------------------------------------------------------------------------------------------------
1,360,938
---------------------------------------------------------------------------------------------------
RESTAURANTS - 2.7%
Buca, Inc. 60,000 937,500
P.F. Chang's China Bistro, Inc. 7,100 226,756
RARE Hospitality International, Inc. 47,100 1,330,575
Rubio's Restaurants, Inc. 112,000 924,000
---------------------------------------------------------------------------------------------------
3,418,831
---------------------------------------------------------------------------------------------------
SEMICONDUCTORS & COMPONENTS - 8.0%
American Xtal Technology, Inc. 33,000 1,427,250
AstroPower, Inc. 50,000 1,356,250
ATMI, Inc. 11,900 553,350
Brooks Automation, Inc. 10,000 639,375
Cree, Inc. 8,100 1,081,350
Pericom Semiconductor Corporation 30,000 2,040,000
QLogic Corporation 10,000 660,625
Sage, Inc. 69,050 893,334
Supertex, Inc. 15,000 753,750
Zoran Corporation 10,900 718,719
---------------------------------------------------------------------------------------------------
10,124,003
---------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS - 2.1%
Boston Communications Group, Inc. 109,200 1,528,800
Metro One Telecommunications, Inc. 90,200 1,133,138
---------------------------------------------------------------------------------------------------
2,661,938
---------------------------------------------------------------------------------------------------
See notes to Schedule of Investments on page 73.
The accompanying notes are an integral part of these financial statements.
64
<PAGE>
RS FUNDS
<CAPTION>
JUNE 30, 2000 (UNAUDITED) SHARES VALUE
===================================================================================================
<S> <C> <C>
TELECOMMUNICATIONS EQUIPMENT - 7.6%
Anaren Microwave, Inc. 12,150 $ 1,594,498
California Amplifier, Inc. 50,000 2,287,500
Gentner Communications Corporation 65,000 910,000
P-Com, Inc. 40,200 228,638
SeaChange International, Inc. 38,400 1,108,800
Somera Communications, Inc. 82,400 1,122,700
SpectraLink Corporation 90,000 1,316,250
SymmetriCom, Inc. 40,000 1,010,000
---------------------------------------------------------------------------------------------------
9,578,386
---------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS SERVICES - 2.1%
Adaptive Broadband Corporation 27,000 992,250
CapRock Communications Corporation 33,100 645,450
SCC Communications Corporation 63,600 429,300
Startec Global Communications Corporation(5) 50,000 534,375
---------------------------------------------------------------------------------------------------
2,601,375
---------------------------------------------------------------------------------------------------
TRANSPORTATION - 0.8%
Forward Air Corporation 25,100 1,004,000
---------------------------------------------------------------------------------------------------
1,004,000
---------------------------------------------------------------------------------------------------
===================================================================================================
TOTAL COMMON STOCKS (Cost $70,537,987) 112,622,334
---------------------------------------------------------------------------------------------------
VALUE
===================================================================================================
<S> <C>
SHORT TERM INVESTMENTS - 21.9%
---------------------------------------------------------------------------------------------------
Short Term Investments Held as Collateral
for Loaned Securities(8) 17,552,800
Temporary Investment Cash Fund 4,973,872
Temporary Investment Fund 4,973,872
===================================================================================================
TOTAL SHORT TERM INVESTMENTS (Cost $27,500,544) 27,500,544
---------------------------------------------------------------------------------------------------
===================================================================================================
TOTAL INVESTMENTS - 111.4% (Cost $98,038,531) 140,122,878
---------------------------------------------------------------------------------------------------
===================================================================================================
COLLATERAL ON SECURITIES LOANED, AT VALUE - (14.0%) (17,552,800)
---------------------------------------------------------------------------------------------------
===================================================================================================
OTHER ASSETS, NET - 2.6% 3,265,330
---------------------------------------------------------------------------------------------------
===================================================================================================
TOTAL NET ASSETS - 100.0% $125,835,408
===================================================================================================
See notes to Schedule of Investments on page 73.
The accompanying notes are an integral part of these financial statements.
65
</TABLE>
<PAGE>
SEMIANNUAL REPORT
SCHEDULE OF INVESTMENTS -- MIDCAP OPPORTUNITIES FUND
<TABLE>
<CAPTION>
JUNE 30, 2000 (UNAUDITED) SHARES VALUE
===================================================================================================
<S> <C> <C>
COMMON STOCKS - 91.0%
---------------------------------------------------------------------------------------------------
AGRICULTURAL PRODUCTS - 0.6%
Seminis, Inc., Class A 500,000 $ 1,312,500
---------------------------------------------------------------------------------------------------
1,312,500
---------------------------------------------------------------------------------------------------
BROADCASTING/RADIO/TV - 1.0%
Macrovision Corporation 37,500 2,397,070
---------------------------------------------------------------------------------------------------
2,397,070
---------------------------------------------------------------------------------------------------
BUSINESS SERVICES - 0.6%
United Shipping & Technology, Inc. 155,000 1,240,000
United Shipping & Technology, Inc., Restricted(4),(5) 30,000 216,000
---------------------------------------------------------------------------------------------------
1,456,000
---------------------------------------------------------------------------------------------------
COMPUTER HARDWARE & COMPONENTS - 1.1%
Jack Henry & Associates, Inc.(1) 50,000 2,506,250
---------------------------------------------------------------------------------------------------
2,506,250
---------------------------------------------------------------------------------------------------
COMPUTER SERVICES - 1.1%
SunGard Data Systems, Inc. 83,400 2,585,400
---------------------------------------------------------------------------------------------------
2,585,400
---------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE - 1.7%
MetaCreations Corporation 130,000 1,560,000
Siebel Systems, Inc. 15,000 2,454,375
---------------------------------------------------------------------------------------------------
4,014,375
---------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE & SERVICES - 0.9%
Check Point Software Technologies, Ltd. 10,000 2,117,500
---------------------------------------------------------------------------------------------------
2,117,500
---------------------------------------------------------------------------------------------------
CONSTRUCTION/INFRASTRUCTURE - 2.1%
Southdown, Inc.(1) 85,000 4,908,750
---------------------------------------------------------------------------------------------------
4,908,750
---------------------------------------------------------------------------------------------------
CONSUMER & SPECIALTY RETAIL - 3.7%
CDW Computer Centers, Inc. 40,000 2,500,000
Kroger Company 170,000 3,750,625
RadioShack Corporation(1) 50,000 2,368,750
---------------------------------------------------------------------------------------------------
8,619,375
---------------------------------------------------------------------------------------------------
ELECTRONIC COMPONENTS - 3.5%
Maxim Integrated Products, Inc. 47,400 3,220,238
Molex, Inc.(1) 59,400 2,858,625
Sanmina Corporation 25,000 2,137,500
---------------------------------------------------------------------------------------------------
8,216,363
---------------------------------------------------------------------------------------------------
ENERGY - 11.8%
AES Corporation 92,000 4,197,500
Apache Corporation(1) 82,500 4,852,031
Barrett Resources Corporation 46,800 1,424,475
Burlington Resources, Inc.(1) 75,000 2,868,750
EOG Resources, Inc.(1) 125,000 4,187,500
Noble Affiliates, Inc.(1) 70,000 2,607,500
Ocean Energy, Inc. 175,000 2,482,812
Phillips Petroleum Company(1) 51,600 2,615,475
Texaco, Inc.(1) 45,000 2,396,250
---------------------------------------------------------------------------------------------------
27,632,293
---------------------------------------------------------------------------------------------------
ENERGY SERVICES - 10.6%
Baker Hughes, Inc.(1) 115,000 3,680,000
ENSCO International, Inc.(1) 70,000 2,506,875
Global Marine, Inc. 135,000 3,805,312
Montana Power Company(1) 120,000 4,237,500
Nabors Industries, Inc. 112,500 4,675,781
Rowan Companies, Inc. 112,500 3,417,188
Santa Fe International Corporation 72,500 2,532,969
---------------------------------------------------------------------------------------------------
24,855,625
---------------------------------------------------------------------------------------------------
ENVIRONMENTAL SERVICES - 1.2%
Republic Services, Inc. 180,000 2,880,000
---------------------------------------------------------------------------------------------------
2,880,000
---------------------------------------------------------------------------------------------------
FINANCIAL SERVICES - 6.3%
AmSouth BanCorporation(1) 140,000 2,205,000
Concord EFS, Inc. 90,000 2,340,000
FleetBoston Financial Corporation(1) 69,000 2,346,000
Paychex, Inc.(1) 55,000 2,310,000
U.S. Bancorp(1) 135,000 2,598,750
Washington Mutual, Inc.(1) 100,000 2,887,500
---------------------------------------------------------------------------------------------------
14,687,250
---------------------------------------------------------------------------------------------------
HEALTHCARE SERVICES - 2.7%
HCA-The Healthcare Corporation(1) 64,900 1,971,338
Tenet Healthcare Corporation(1) 160,000 4,320,000
---------------------------------------------------------------------------------------------------
6,291,338
---------------------------------------------------------------------------------------------------
HEALTH MAINTENANCE ORGANIZATIONS - 1.3%
UnitedHealth Group, Inc.(1) 35,000 3,001,250
---------------------------------------------------------------------------------------------------
3,001,250
---------------------------------------------------------------------------------------------------
HOTELS & MOTELS - 1.6%
Hilton Hotels Corporation(1) 400,000 3,750,000
---------------------------------------------------------------------------------------------------
3,750,000
---------------------------------------------------------------------------------------------------
INSTRUMENTS - 8.2%
Cognex Corporation 40,000 2,070,000
Millipore Corporation(1) 37,500 2,826,562
PerkinElmer, Inc.(1) 42,500 2,810,313
Tektronix, Inc.(1) 80,000 5,820,000
Thermo Electron Corporation 275,000 5,809,375
---------------------------------------------------------------------------------------------------
19,336,250
---------------------------------------------------------------------------------------------------
INTERNET CAPITAL SERVICES - 2.4%
Lycos, Inc. 40,000 2,160,000
Software.com, Inc. 26,400 3,428,700
---------------------------------------------------------------------------------------------------
5,588,700
---------------------------------------------------------------------------------------------------
INVESTMENT MANAGEMENT - 1.5%
Merrill Lynch & Co., Inc.(1) 11,000 1,265,000
T. Rowe Price Associates, Inc.(1) 55,000 2,337,500
---------------------------------------------------------------------------------------------------
3,602,500
---------------------------------------------------------------------------------------------------
MANUFACTURING - 0.9%
Packaging Corporation of America 220,000 2,227,500
---------------------------------------------------------------------------------------------------
2,227,500
---------------------------------------------------------------------------------------------------
MEDIA - 0.9%
Viacom, Inc., Class B 30,000 2,045,625
---------------------------------------------------------------------------------------------------
2,045,625
---------------------------------------------------------------------------------------------------
MEDICAL-BIOMEDICAL/GENETICS - 3.0%
Amgen, Inc. 54,200 3,807,550
Biogen, Inc. 25,500 1,644,750
Celera Genomics 17,000 1,589,500
---------------------------------------------------------------------------------------------------
7,041,800
---------------------------------------------------------------------------------------------------
See notes to Schedule of Investments on page 73.
The accompanying notes are an integral part of these financial statements.
66
<PAGE>
RS FUNDS
<CAPTION>
JUNE 30, 2000 (UNAUDITED) SHARES VALUE
===================================================================================================
<S> <C> <C>
PHARMACEUTICALS - 1.0%
Elan Corporation PLC, ADR(3) 50,000 $ 2,421,875
---------------------------------------------------------------------------------------------------
2,421,875
---------------------------------------------------------------------------------------------------
R.E.I.T. - 0.3%
Anthracite Capital, Inc.(1) 96,247 685,760
---------------------------------------------------------------------------------------------------
685,760
---------------------------------------------------------------------------------------------------
SEMICONDUCTORS & COMPONENTS - 10.6%
Atmel Corporation 86,600 3,193,375
Cypress Semiconductor Corporation 50,000 2,112,500
GlobeSpan, Inc. 27,000 3,296,109
International Rectifier Corporation 45,000 2,520,000
LSI Logic Corporation 45,000 2,435,625
Novellus Systems, Inc. 50,000 2,828,125
STMicroelectronics N.V.(1) 45,000 2,888,437
Taiwan Semiconductor Manufacturing
Company, Ltd., ADR(3) 65,000 2,518,750
TriQuint Semiconductor, Inc. 20,000 1,913,750
Xilinx, Inc. 13,800 1,139,363
---------------------------------------------------------------------------------------------------
24,846,034
---------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS - 1.7%
Primus Telecommunications Group, Inc. 165,000 4,104,375
---------------------------------------------------------------------------------------------------
4,104,375
---------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT - 4.9%
ADC Telecommunications, Inc. 30,000 2,516,250
Harris Corporation(1) 100,000 3,275,000
Nortel Networks Corporation(1) 40,000 2,730,000
Tekelec 60,000 2,891,250
---------------------------------------------------------------------------------------------------
11,412,500
---------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS SERVICES - 3.0%
Broadwing, Inc.(1) 78,602 2,038,739
e.spire Communications, Inc. 350,000 2,362,500
Motient Corporation 163,600 2,566,475
---------------------------------------------------------------------------------------------------
6,967,714
---------------------------------------------------------------------------------------------------
TOYS - 0.8%
Mattel, Inc.(1) 135,000 1,780,313
---------------------------------------------------------------------------------------------------
1,780,313
---------------------------------------------------------------------------------------------------
===================================================================================================
TOTAL COMMON STOCKS (Cost $196,194,099) 213,292,285
---------------------------------------------------------------------------------------------------
===================================================================================================
CONVERTIBLE PREFERRED STOCKS - 0.5%
---------------------------------------------------------------------------------------------------
INSURANCE - 0.5%
Anthracite Capital, Inc., Series B(1),(4),(5) 75,000 1,298,250
===================================================================================================
Total Convertible Preferred Stocks (Cost $1,298,250) 1,298,250
---------------------------------------------------------------------------------------------------
<CAPTION>
PAR VALUE
===================================================================================================
<S> <C> <C>
CONVERTIBLE BONDS - 3.6%
---------------------------------------------------------------------------------------------------
COMPUTER HARDWARE & COMPONENTS - 0.5%
Silicon Graphics, Inc., 5.25%, Due 09/01/04(1) 2,000,000 1,265,000
---------------------------------------------------------------------------------------------------
1,265,000
---------------------------------------------------------------------------------------------------
ENERGY SERVICES - 0.3%
Transocean Sedco Rig, 0.00%, Due 05/24/20(1) 1,000,000 600,000
---------------------------------------------------------------------------------------------------
600,000
---------------------------------------------------------------------------------------------------
INTERNET CAPITAL SERVICES - 0.8%
Digital Island, Inc., 6.00%, Due 02/15/05(1) 2,500,000 1,784,375
---------------------------------------------------------------------------------------------------
1,784,375
---------------------------------------------------------------------------------------------------
MEDICAL-BIOMEDICAL/GENETICS - 0.3%
Human Genome Sciences, Inc., 144A,
3.75%, Due 03/15/07(1),(7) 1,000,000 827,500
---------------------------------------------------------------------------------------------------
827,500
---------------------------------------------------------------------------------------------------
PHARMACEUTICALS - 0.5%
CV Theraputics Inc., 144A, 4.75%,
Due 03/07/07(1),(7) 1,000,000 1,205,000
---------------------------------------------------------------------------------------------------
1,205,000
---------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS - 1.2%
Primus Telecomm Group, Inc., 144A,
5.75%, Due 02/15/07(1),(7) 4,000,000 2,795,000
---------------------------------------------------------------------------------------------------
2,795,000
---------------------------------------------------------------------------------------------------
===================================================================================================
TOTAL CONVERTIBLE BONDS (Cost $8,565,358) 8,476,875
---------------------------------------------------------------------------------------------------
<CAPTION>
VALUE
===================================================================================================
<S> <C>
SHORT TERM INVESTMENTS - 11.3%
---------------------------------------------------------------------------------------------------
Short Term Investments Held as Collateral
for Loaned Securities(8) 7,404,700
Temporary Investment Cash Fund 9,496,122
Temporary Investment Fund 9,496,123
===================================================================================================
TOTAL SHORT TERM INVESTMENTS (Cost $26,396,945) 26,396,945
---------------------------------------------------------------------------------------------------
===================================================================================================
TOTAL INVESTMENTS - 106.4% (Cost $232,454,652) 249,464,355
---------------------------------------------------------------------------------------------------
===================================================================================================
SHORT CALL OPTIONS - (0.1%) (Premiums $189,268) (122,500)
---------------------------------------------------------------------------------------------------
===================================================================================================
COLLATERAL ON SECURITIES LOANED, AT VALUE - (3.1%) (7,404,700)
---------------------------------------------------------------------------------------------------
===================================================================================================
OTHER LIABILITIES, NET - (3.2%) (7,540,173)
---------------------------------------------------------------------------------------------------
===================================================================================================
TOTAL NET ASSETS - 100.0% $234,396,982
===================================================================================================
SHORT CALL OPTIONS
<CAPTION>
JUNE 30, 2000 (UNAUDITED) CONTRACTS VALUE
===================================================================================================
<S> <C> <C>
SHORT CALL OPTIONS - 0.1%
---------------------------------------------------------------------------------------------------
Sanmina, Inc., Strike 90, Expires 07/22/00(6) 250 $ 93,750
TriQuint Semiconductor, Inc., Strike 130,
Expires 07/22/00(6) 200 28,750
===================================================================================================
TOTAL SHORT CALL OPTIONS (Premiums $189,268) $ 122,500
===================================================================================================
See notes to Schedule of Investments on page 73.
The accompanying notes are an integral part of these financial statements.
67
</TABLE>
<PAGE>
SEMIANNUAL REPORT
SCHEDULE OF INVESTMENTS -- VALUE + GROWTH FUND
<TABLE>
<CAPTION>
JUNE 30, 2000 (UNAUDITED) SHARES VALUE
===================================================================================================
<S> <C> <C>
COMMON STOCKS - 99.3%
---------------------------------------------------------------------------------------------------
COMPUTER HARDWARE & COMPONENTS - 6.7%
Applied Materials, Inc. 389,850 $ 35,330,156
Compaq Computer Corporation(1) 297,000 7,592,062
---------------------------------------------------------------------------------------------------
42,922,218
---------------------------------------------------------------------------------------------------
COMPUTER SERVICES - 0.4%
Affiliated Computer Services, Inc., Class A 84,450 2,792,128
---------------------------------------------------------------------------------------------------
2,792,128
---------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE - 6.0%
Computer Associates International, Inc.(1) 236,400 12,100,725
Microsoft Corporation 325,500 26,040,000
---------------------------------------------------------------------------------------------------
38,140,725
---------------------------------------------------------------------------------------------------
CONSUMER & SPECIALTY RETAIL - 16.1%
Best Buy Co., Inc. 335,150 21,198,237
CVS Corporation(1) 436,200 17,448,000
Home Depot, Inc.(1) 100,000 4,993,750
Safeway, Inc. 378,000 17,057,250
Staples, Inc. 310,000 4,766,250
Wal-Mart Stores, Inc.(1) 310,400 17,886,800
Walgreen Company(1) 600,000 19,312,500
---------------------------------------------------------------------------------------------------
102,662,787
---------------------------------------------------------------------------------------------------
DISTRIBUTION/WHOLESALE - 3.4%
Arrow Electronics, Inc. 203,550 6,310,050
Costco Wholesale Corporation 473,800 15,635,400
---------------------------------------------------------------------------------------------------
21,945,450
---------------------------------------------------------------------------------------------------
ELECTRONIC COMPONENTS - 1.0%
Avnet, Inc.(1) 107,400 6,363,450
---------------------------------------------------------------------------------------------------
6,363,450
---------------------------------------------------------------------------------------------------
FINANCIAL SERVICES - 13.6%
American Express Company(1) 130,200 6,786,675
Chase Manhattan Corporation(1) 255,000 11,745,938
Citigroup, Inc.(1) 327,400 19,725,850
The Goldman Sachs Group, Inc.(1) 194,000 18,405,750
Morgan Stanley Dean Witter & Company(1) 360,000 29,970,000
---------------------------------------------------------------------------------------------------
86,634,213
---------------------------------------------------------------------------------------------------
HEALTHCARE SERVICES - 2.5%
Cardinal Health, Inc.(1) 211,000 15,614,000
---------------------------------------------------------------------------------------------------
15,614,000
---------------------------------------------------------------------------------------------------
HEALTH MAINTENANCE ORGANIZATIONS - 3.0%
UnitedHealth Group, Inc.(1) 223,200 19,139,400
---------------------------------------------------------------------------------------------------
19,139,400
---------------------------------------------------------------------------------------------------
INSURANCE - 0.8%
MetLife, Inc. 236,600 4,983,388
---------------------------------------------------------------------------------------------------
4,983,388
---------------------------------------------------------------------------------------------------
INVESTMENT MANAGEMENT - 5.2%
Nerrill Lynch & Co., Inc.(1) 288,538 33,181,870
---------------------------------------------------------------------------------------------------
33,181,870
---------------------------------------------------------------------------------------------------
MEDIA - 5.4%
Comcast Corporation, Class A 400,000 16,200,000
Time Warner, Inc.(1) 240,000 18,240,000
---------------------------------------------------------------------------------------------------
34,440,000
---------------------------------------------------------------------------------------------------
PHARMACEUTICALS - 6.2%
Bristol-Myers Squibb Company(1) 374,900 21,837,925
Merck & Co., Inc.(1) 110,000 8,428,750
Pfizer, Inc.(1) 190,000 9,120,000
---------------------------------------------------------------------------------------------------
39,386,675
---------------------------------------------------------------------------------------------------
SEMICONDUCTORS & COMPONENTS - 22.4%
Intel Corporation(1) 373,200 49,892,175
LSI Logic Corporation 125,000 6,765,625
Motorola, Inc.(1) 315,300 9,163,406
SCG Holding Corporation 456,950 9,995,781
Texas Instruments, Inc.(1) 488,400 33,546,975
Xilinx, Inc. 400,000 33,025,000
---------------------------------------------------------------------------------------------------
142,388,962
---------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS - 1.9%
WorldCom, Inc. 257,400 11,808,225
---------------------------------------------------------------------------------------------------
11,808,225
---------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT - 4.7%
Telefonaktiebolaget LM Ericsson AB ADR(1),(3) 616,600 12,332,000
Lucent Technologies, Inc.(1) 298,350 17,677,238
---------------------------------------------------------------------------------------------------
30,009,238
---------------------------------------------------------------------------------------------------
===================================================================================================
TOTAL COMMON STOCKS (Cost $357,943,557) 632,412,729
---------------------------------------------------------------------------------------------------
<CAPTION>
VALUE
===================================================================================================
<S> <C>
SHORT TERM INVESTMENTS - 0.1%
---------------------------------------------------------------------------------------------------
Temporary Investment Cash Fund 219,350
Temporary Investment Fund 219,349
===================================================================================================
TOTAL SHORT TERM INVESTMENTS (Cost $438,699) 438,699
---------------------------------------------------------------------------------------------------
===================================================================================================
TOTAL INVESTMENTS - 99.4% (Cost $358,382,256) 632,851,428
---------------------------------------------------------------------------------------------------
===================================================================================================
OTHER ASSETS, NET - 0.6% 3,512,037
---------------------------------------------------------------------------------------------------
===================================================================================================
TOTAL NET ASSETS - 100.0% $636,363,465
===================================================================================================
See notes to Schedule of Investments on page 73.
The accompanying notes are an integral part of these financial statements.
68
</TABLE>
<PAGE>
RS FUNDS
SCHEDULE OF INVESTMENTS -- THE CONTRARIAN FUND-TM-
<TABLE>
<CAPTION>
JUNE 30, 2000 (UNAUDITED) FOREIGN CURRENCY(2) SHARES VALUE
===================================================================================================
<S> <C> <C> <C>
COMMON STOCKS - 95.2%
---------------------------------------------------------------------------------------------------
AEROSPACE - 0.2%
B.F. Goodrich Company(1) 6,500 $ 221,406
---------------------------------------------------------------------------------------------------
221,406
---------------------------------------------------------------------------------------------------
AGRICULTURAL PRODUCTS - 0.0%
AgriBioTech, Inc. 35,600 890
---------------------------------------------------------------------------------------------------
890
---------------------------------------------------------------------------------------------------
ALUMINUM - 0.9%
Kaiser Aluminum Corporation 243,500 974,000
---------------------------------------------------------------------------------------------------
974,000
---------------------------------------------------------------------------------------------------
BATTERIES - 0.0%
Valence Technology, Inc. 2,300 42,406
---------------------------------------------------------------------------------------------------
42,406
---------------------------------------------------------------------------------------------------
BROADCASTING/RADIO/TV - 2.6%
Sirius Satellite Radio, Inc. 60,000 2,658,750
---------------------------------------------------------------------------------------------------
2,658,750
---------------------------------------------------------------------------------------------------
BUSINESS SERVICES - 1.3%
Pittston Brink's Group(1) 95,000 1,300,313
---------------------------------------------------------------------------------------------------
1,300,313
---------------------------------------------------------------------------------------------------
COMPUTER HARDWARE & COMPONENTS - 0.0%
InFocus Corporation 100 3,219
---------------------------------------------------------------------------------------------------
3,219
---------------------------------------------------------------------------------------------------
COMPUTER SERVICES - 3.4%
Intelligroup, Inc. 27,800 333,600
Sapient Corporation 24,800 2,652,050
Unisys Corporation 39,700 578,131
---------------------------------------------------------------------------------------------------
3,563,781
---------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE - 0.4%
Diversinet Corporation 34,600 410,875
---------------------------------------------------------------------------------------------------
410,875
---------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE & SERVICES - 0.9%
Engineering Animation, Inc. 21,570 201,545
Open Text Corporation 26,400 567,600
QuadraMed Corporation 42,700 106,750
---------------------------------------------------------------------------------------------------
875,895
---------------------------------------------------------------------------------------------------
CONSTRUCTION/INFRASTRUCTURE - 2.0%
Lafarge Corporation(1) 100,000 2,100,000
---------------------------------------------------------------------------------------------------
2,100,000
---------------------------------------------------------------------------------------------------
CONSUMER & SPECIALTY RETAIL - 1.8%
Action Performance Companies, Inc. 54,900 398,025
SUPERVALU, Inc.(1) 77,500 1,477,344
---------------------------------------------------------------------------------------------------
1,875,369
---------------------------------------------------------------------------------------------------
COPPER/GOLD MINING - 2.6%
Ivanhoe Mines, Ltd. CAD 3,405,000 2,757,699
---------------------------------------------------------------------------------------------------
2,757,699
---------------------------------------------------------------------------------------------------
DIAMOND MINING - 1.2%
Diamond Fields International, Ltd. CAD 1,465,200 1,226,216
---------------------------------------------------------------------------------------------------
1,226,216
---------------------------------------------------------------------------------------------------
DISTRIBUTION/WHOLESALE - 0.5%
Arrow Electronics, Inc. 8,900 275,900
Tech Data Corporation 6,600 287,513
---------------------------------------------------------------------------------------------------
563,413
---------------------------------------------------------------------------------------------------
DIVERSIFIED OPERATIONS - 1.7%
Brascan Corporation(1) CAD 155,000 1,820,243
---------------------------------------------------------------------------------------------------
1,820,243
---------------------------------------------------------------------------------------------------
ELECTRONIC COMPONENTS - 0.6%
Solectron Corporation 13,770 576,619
---------------------------------------------------------------------------------------------------
576,619
---------------------------------------------------------------------------------------------------
ENERGY - 44.8%
Abacan Resource Corporation 505,000 5,050
Anderson Exploration, Ltd. CAD 280,000 5,083,453
Anzoil N.L. AUD 3,577,471 94,511
Coastal Corporation(1) 9,000 547,875
Conoco, Inc., Class A(1) 45,000 990,000
Duke Energy Corporation(1) 20,000 1,127,500
Encal Energy, Ltd. CAD 197,500 1,252,978
EOG Resources, Inc.(1) 210,000 7,035,000
Ivanhoe Energy, Inc. CAD 4,238,280 20,023,325
Kinder Morgan, Inc.(1) 17,000 587,562
Noble Affiliates, Inc.(1) 10,000 372,500
Petro-Canada(1) CAD 142,000 2,649,915
Southern Company(1) 50,000 1,165,625
Talisman Energy, Inc. CAD 105,000 3,475,976
Tosco Corporation(1) 15,900 455,138
Unocal Corporation(1) 53,300 1,765,562
---------------------------------------------------------------------------------------------------
46,631,970
---------------------------------------------------------------------------------------------------
ENERGY SERVICES - 1.4%
Syntroleum Corporation 50,000 856,250
Ultramar Diamond Shamrock Corporation(1) 25,000 620,312
---------------------------------------------------------------------------------------------------
1,476,562
---------------------------------------------------------------------------------------------------
FINANCIAL SERVICES - 3.8%
Dundee Bancorp, Inc., Class A CAD 319,900 3,508,457
KeyCorp(1) 23,000 405,375
---------------------------------------------------------------------------------------------------
3,913,832
---------------------------------------------------------------------------------------------------
FOOD - 1.6%
Fresh Del Monte Produce, Inc. 240,000 1,650,000
---------------------------------------------------------------------------------------------------
1,650,000
---------------------------------------------------------------------------------------------------
GOLD MINING - 1.9%
Consolidated African Mines, Ltd. SAR 10,493,100 773,854
Etruscan Resources, Inc. CAD 1,965,680 596,999
Franco-Nevada Mining Corporation, Ltd.(1) CAD 55,200 637,065
Newmont Mining Corporation(1) 700 15,138
---------------------------------------------------------------------------------------------------
2,023,056
---------------------------------------------------------------------------------------------------
HEALTHCARE SERVICES - 0.4%
Pediatrix Medical Group, Inc. 35,800 416,175
---------------------------------------------------------------------------------------------------
416,175
---------------------------------------------------------------------------------------------------
See notes to Schedule of Investments on page 73.
The accompanying notes are an integral part of these financial statements.
69
<PAGE>
SEMIANNUAL REPORT
SCHEDULE OF INVESTMENTS -- THE CONTRARIAN FUND-TM- -- CONTINUED
<CAPTION>
JUNE 30, 2000 (UNAUDITED) FOREIGN CURRENCY(2) SHARES VALUE
===================================================================================================
<S> <C> <C> <C>
MANUFACTURING - 0.6%
Zoltek Companies, Inc. 68,300 $ 580,550
---------------------------------------------------------------------------------------------------
580,550
---------------------------------------------------------------------------------------------------
MEDIA - 5.0%
Metromedia International Group, Inc. 860,000 4,085,000
News Corporation, Ltd., ADR(1),(3) 20,000 1,090,000
---------------------------------------------------------------------------------------------------
5,175,000
---------------------------------------------------------------------------------------------------
MEDICAL INSTRUMENTS & DEVICES - 0.2%
Ventana Medical Systems, Inc. 9,200 216,200
---------------------------------------------------------------------------------------------------
216,200
---------------------------------------------------------------------------------------------------
NETWORK SYSTEMS & PRODUCTS - 0.1%
Adaptec, Inc. 4,500 102,375
---------------------------------------------------------------------------------------------------
102,375
---------------------------------------------------------------------------------------------------
NICKEL MINING - 1.4%
Inco Ltd., VBN Shares CAD 333,450 1,507,836
---------------------------------------------------------------------------------------------------
1,507,836
---------------------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS - 1.3%
Canfor Corporation(1) CAD 95,000 843,136
Domtar, Inc.(1) CAD 50,000 464,003
---------------------------------------------------------------------------------------------------
1,307,139
---------------------------------------------------------------------------------------------------
PLATINUM GROUP METALS - 0.9%
African Minerals, Ltd., Restricted(4),(5) 698,422 931,206
---------------------------------------------------------------------------------------------------
931,206
---------------------------------------------------------------------------------------------------
PRINTING & PUBLISHING - 2.6%
Hollinger International, Inc.(1) 200,000 2,725,000
---------------------------------------------------------------------------------------------------
2,725,000
---------------------------------------------------------------------------------------------------
REAL ESTATE - 3.8%
Atlantic Gulf Communities Corporation 638,130 51,050
Brookfield Properties Corporation(1) CAD 298,000 3,952,095
---------------------------------------------------------------------------------------------------
4,003,145
---------------------------------------------------------------------------------------------------
R.E.I.T. - 0.2%
Equity Office Properties Trust(1) 6,800 187,425
---------------------------------------------------------------------------------------------------
187,425
---------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS - 0.9%
GTE Corporation(1) 2,900 180,525
SBC Communications, Inc.(1) 16,600 717,950
---------------------------------------------------------------------------------------------------
898,475
---------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS SERVICES - 0.1%
Talk.com, Inc. 22,200 129,038
---------------------------------------------------------------------------------------------------
129,038
---------------------------------------------------------------------------------------------------
TOBACCO - 0.3%
Philip Morris Companies, Inc.(1) 11,400 302,813
---------------------------------------------------------------------------------------------------
302,813
---------------------------------------------------------------------------------------------------
TRANSPORTATION SERVICES - 3.8%
Canadian Pacific, Ltd.(1) CAD 96,175 2,492,539
China Yuchai International, Ltd. 1,430,000 1,474,688
---------------------------------------------------------------------------------------------------
3,967,227
---------------------------------------------------------------------------------------------------
===================================================================================================
TOTAL COMMON STOCKS (Cost $117,060,856) 99,116,118
---------------------------------------------------------------------------------------------------
===================================================================================================
CONVERTIBLE PREFERRED STOCKS - 1.1%
---------------------------------------------------------------------------------------------------
Atlantic Gulf Communities Corporation, Series B 206,778 1,111,432
===================================================================================================
TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $2,042,967) 1,111,432
<CAPTION>
PAR VALUE
===================================================================================================
<S> <C> <C> <C>
CONVERTIBLE BONDS - 0.6%
---------------------------------------------------------------------------------------------------
Randgold and Exploration Company, Ltd.
7.50%, Due 10/03/01(1) GBP 850,000 616,250
===================================================================================================
TOTAL CONVERTIBLE BONDS (Cost $850,000) 616,250
---------------------------------------------------------------------------------------------------
<CAPTION>
WARRANTS VALUE
===================================================================================================
<S> <C> <C> <C>
WARRANTS - 0.0%
---------------------------------------------------------------------------------------------------
Atlantic Gulf Communities Corporation,
Strike $5.75, Expire 06/23/04(6) 413,556 24,813
PT Apac Centertex Corporation, Strike IDR
1,000, Expire 07/14/01(6) IDR 2,700,000 33,934
===================================================================================================
TOTAL WARRANTS (Cost $167,389) 58,747
---------------------------------------------------------------------------------------------------
<CAPTION>
OPTIONS VALUE
===================================================================================================
<S> <C> <C> <C>
OPTIONS - 0.0%
---------------------------------------------------------------------------------------------------
Harmony Gold Mining Company, Ltd.,
Strike SAR 6,000, Expire 07/31/01(6) SAR 9,900 4,381
Normandy Mining, Ltd., Strike AUD 2.50,
Expire 04/30/01(6) AUD 1,673,426 11,052
===================================================================================================
TOTAL OPTIONS (Cost $43,533) 15,433
---------------------------------------------------------------------------------------------------
<CAPTION>
VALUE
===================================================================================================
<S> <C>
SHORT TERM INVESTMENTS - 2.3%
---------------------------------------------------------------------------------------------------
Temporary Investment Cash Fund 1,215,220
Temporary Investment Fund 1,215,220
===================================================================================================
TOTAL SHORT TERM INVESTMENTS (Cost $2,430,440) 2,430,440
---------------------------------------------------------------------------------------------------
===================================================================================================
TOTAL INVESTMENTS - 99.2% (Cost $122,595,185) 103,348,420
---------------------------------------------------------------------------------------------------
===================================================================================================
DEPOSITS WITH BROKERS FOR SECURITIES SOLD SHORT - 9.8% 10,179,234
---------------------------------------------------------------------------------------------------
===================================================================================================
SECURITIES SOLD SHORT - (9.5%) (Proceeds $18,705,630) (9,871,359)
---------------------------------------------------------------------------------------------------
===================================================================================================
OTHER ASSETS, NET - 0.5% 481,854
---------------------------------------------------------------------------------------------------
===================================================================================================
TOTAL NET ASSETS - 100.0% $104,138,149
---------------------------------------------------------------------------------------------------
See notes to Schedule of Investments on page 73.
The accompanying notes are an integral part of these financial statements.
</TABLE>
70
<PAGE>
RS FUNDS
SCHEDULE OF SECURITIES SOLD SHORT -- THE CONTRARIAN FUND-TM-
<TABLE>
<CAPTION>
JUNE 30, 2000 (UNAUDITED) SHARES VALUE
===================================================================================================
<S> <C> <C>
COMMON STOCKS - 9.5%
---------------------------------------------------------------------------------------------------
AEROSPACE - 0.1%
Titan Corporation 1,800 $ 80,550
---------------------------------------------------------------------------------------------------
80,550
---------------------------------------------------------------------------------------------------
AGRICULTURAL PRODUCTS - 0.0%
AgriBioTech, Inc. 44,700 1,118
---------------------------------------------------------------------------------------------------
1,118
---------------------------------------------------------------------------------------------------
BATTERIES - 0.1%
Valence Technology, Inc. 5,900 108,781
---------------------------------------------------------------------------------------------------
108,781
---------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES - 0.3%
Source Information Management Company 22,600 344,650
---------------------------------------------------------------------------------------------------
344,650
---------------------------------------------------------------------------------------------------
COMPUTER SERVICES - 3.0%
4Front Technologies, Inc. 2,400 28,800
CGI Group, Inc. 8,000 65,000
Electronic Data Systems Corporation 800 33,000
Intelligroup, Inc. 27,800 333,600
Predictive Systems, Inc. 200 7,187
Sapient Corporation 24,800 2,652,050
---------------------------------------------------------------------------------------------------
3,119,637
---------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE - 0.5%
Diversinet Corporation 44,900 533,188
---------------------------------------------------------------------------------------------------
533,188
---------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE & SERVICES - 1.0%
Engineering Animation, Inc. 21,570 201,545
Open Text Corporation 35,200 756,800
QuadraMed Corporation 42,700 106,750
---------------------------------------------------------------------------------------------------
1,065,095
---------------------------------------------------------------------------------------------------
CONSUMER & SPECIALTY RETAIL - 0.7%
Action Performance Companies, Inc. 55,200 400,200
Gap, Inc. 1,700 53,125
Home Depot, Inc. 1,900 94,881
Kenneth Cole Productions, Inc. 2,000 80,000
WestPoint Stevens, Inc. 3,100 34,488
Williams-Sonoma, Inc. 2,500 81,094
---------------------------------------------------------------------------------------------------
743,788
---------------------------------------------------------------------------------------------------
DISTRIBUTION/WHOLESALE - 0.1%
Costco Wholesale Corporation 3,500 115,500
---------------------------------------------------------------------------------------------------
115,500
---------------------------------------------------------------------------------------------------
ELECTRONIC COMPONENTS - 0.7%
ACT Manufacturing, Inc. 2,600 120,737
Solectron Corporation 13,770 576,619
Symbol Technologies, Inc. 1,400 77,963
---------------------------------------------------------------------------------------------------
775,319
---------------------------------------------------------------------------------------------------
FINANCIAL SERVICES - 0.1%
Southwest Securities Group, Inc. 1,800 67,050
---------------------------------------------------------------------------------------------------
67,050
---------------------------------------------------------------------------------------------------
HEALTHCARE SERVICES - 0.5%
Pediatrix Medical Group, Inc. 42,700 496,388
---------------------------------------------------------------------------------------------------
496,388
---------------------------------------------------------------------------------------------------
HEALTH MAINTENANCE ORGANIZATIONS - 0.1%
PacifiCare Health Systems, Inc., Class A 1,200 72,225
---------------------------------------------------------------------------------------------------
72,225
---------------------------------------------------------------------------------------------------
INSTRUMENTS - 0.0%
Meade Instruments Corporation 500 12,562
---------------------------------------------------------------------------------------------------
12,562
---------------------------------------------------------------------------------------------------
INSURANCE - 0.0%
E. W. Blanch Holdings, Inc. 1,000 20,312
---------------------------------------------------------------------------------------------------
20,312
---------------------------------------------------------------------------------------------------
INTERNET CAPITAL SERVICES - 0.1%
Cyber-Care, Inc. 7,000 69,672
Information Architects Corporation 1,800 12,487
Persistance Software, Inc. 500 9,062
Ramp Networks, Inc. 1,600 19,000
---------------------------------------------------------------------------------------------------
110,221
---------------------------------------------------------------------------------------------------
MANUFACTURING - 1.2%
Zoltek Companies, Inc. 146,300 1,243,550
---------------------------------------------------------------------------------------------------
1,243,550
---------------------------------------------------------------------------------------------------
MEDICAL INSTRUMENTS & DEVICES - 0.3%
Sunrise Technologies International, Inc. 4,900 49,000
Ventana Medical Systems, Inc. 9,200 216,200
---------------------------------------------------------------------------------------------------
265,200
---------------------------------------------------------------------------------------------------
MEDICAL PRODUCTS & SERVICES - 0.0%
Enzo Biochem, Inc. 1 69
---------------------------------------------------------------------------------------------------
69
---------------------------------------------------------------------------------------------------
PHARMACEUTICALS - 0.0%
Watson Pharmaceuticals, Inc. 900 48,375
---------------------------------------------------------------------------------------------------
48,375
---------------------------------------------------------------------------------------------------
RESTAURANTS - 0.2%
P.F. Chang's China Bistro, Inc. 200 6,387
Starbucks Corporation 4,100 156,569
---------------------------------------------------------------------------------------------------
162,956
---------------------------------------------------------------------------------------------------
SEMICONDUCTORS & COMPONENTS - 0.0%
EMCORE Corporation 400 48,000
---------------------------------------------------------------------------------------------------
48,000
---------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT - 0.2%
Lucent Technologies, Inc. 1,800 106,650
Proxim, Inc. 600 59,381
---------------------------------------------------------------------------------------------------
166,031
---------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS SERVICES - 0.3%
Copper Mountain Networks, Inc. 1,600 141,000
SmarTalk TeleServices, Inc. 50,400 756
Talk.com, Inc. 22,200 129,038
---------------------------------------------------------------------------------------------------
270,794
---------------------------------------------------------------------------------------------------
===================================================================================================
TOTAL SECURITIES SOLD SHORT (Proceeds $18,705,630) $9,871,359
===================================================================================================
See notes to Schedule of Investments on page 73.
The accompanying notes are an integral part of these financial statements.
71
</TABLE>
<PAGE>
SEMIANNUAL REPORT
SCHEDULE OF INVESTMENTS -- GLOBAL NATURAL RESOURCES FUND
<TABLE>
<CAPTION>
JUNE 30, 2000 (UNAUDITED) FOREIGN CURRENCY(2) SHARES VALUE
===================================================================================================
<S> <C> <C> <C>
COMMON STOCKS - 101.4%
---------------------------------------------------------------------------------------------------
ALUMINUM - 5.3%
Kaiser Aluminum Corporation 286,500 $1,146,000
MAXXAM, Inc. 23,400 415,350
---------------------------------------------------------------------------------------------------
1,561,350
---------------------------------------------------------------------------------------------------
ENERGY - 62.5%
Anderson Exploration, Ltd. CAD 120,000 2,178,623
Benson Petroleum, Ltd. CAD 476,100 546,255
Compton Petroleum Corporation CAD 229,700 403,072
Cypress Energy, Inc., Class A CAD 40,000 180,877
Duke Energy Corporation(1) 25,000 1,409,375
Elk Point Resources, Inc. CAD 136,900 369,583
Encal Energy, Ltd. CAD 100,500 637,591
EOG Resources, Inc.(1) 40,000 1,340,000
Hugoton Royalty Trust(1) 84,500 1,050,969
Northern States Power Company(1) 52,600 1,061,862
Oiltec Resources, Ltd. CAD 1,730,000 1,371,932
Petro-Canada(1) CAD 75,000 1,399,603
Place Resources Corporation CAD 642,100 1,451,764
Richland Petroleum Corporation CAD 398,000 980,448
Southern Company(1) 40,000 932,500
Talisman Energy, Inc. CAD 45,000 1,489,704
Vermilion Resources, Ltd. CAD 303,715 1,455,369
---------------------------------------------------------------------------------------------------
18,259,527
---------------------------------------------------------------------------------------------------
ENERGY SERVICES - 6.8%
Bowridge Resource Group, Inc.(1) CAD 361,000 185,169
Command Drilling, Inc. CAD 500,000 620,921
Shaw Industries, Ltd., Class A(1) CAD 112,700 1,178,974
---------------------------------------------------------------------------------------------------
1,985,064
---------------------------------------------------------------------------------------------------
FOOD - 3.9%
Fresh Del Monte Produce, Inc. 165,000 1,134,375
---------------------------------------------------------------------------------------------------
1,134,375
---------------------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS - 7.5%
Canfor Corporation(1) CAD 214,900 1,907,263
Domtar, Inc.(1) CAD 30,000 278,402
---------------------------------------------------------------------------------------------------
2,185,665
---------------------------------------------------------------------------------------------------
PLATINUM GROUP METALS - 3.9%
African Minerals, Ltd.(4),(5) 203,624 271,492
Impala Platinum Holdings, Ltd.(1) SAR 23,500 874,174
---------------------------------------------------------------------------------------------------
1,145,666
---------------------------------------------------------------------------------------------------
REAL ESTATE - 11.5%
Brookfield Properties Corporation(1) CAD 117,700 1,560,945
Dundee Realty Corporation CAD 940,400 729,893
Gentra, Inc. CAD 114,600 1,078,965
---------------------------------------------------------------------------------------------------
3,369,803
---------------------------------------------------------------------------------------------------
===================================================================================================
TOTAL COMMON STOCKS (Cost $29,072,930) 29,641,450
---------------------------------------------------------------------------------------------------
<CAPTION>
JUNE 30, 2000 (UNAUDITED) FOREIGN CURRENCY(2) WARRANTS VALUE
===================================================================================================
<S> <C> <C> <C>
WARRANTS - 0.2%
---------------------------------------------------------------------------------------------------
Command Drilling, Inc., Strike CAD $2.50,
Expires 06/29/01(6) CAD 250,000 $ 50,619
===================================================================================================
TOTAL WARRANTS (Cost $0) 50,619
---------------------------------------------------------------------------------------------------
===================================================================================================
TOTAL INVESTMENTS - 101.6% (Cost $29,072,930) $29,692,069
---------------------------------------------------------------------------------------------------
===================================================================================================
OTHER LIABILITIES, NET - (1.6%) (468,889)
---------------------------------------------------------------------------------------------------
===================================================================================================
TOTAL NET ASSETS - 100.0% $29,223,180
===================================================================================================
See notes to Schedule of Investments on page 73.
The accompanying notes are an integral part of these financial statements.
72
<PAGE>
RS FUNDS
SCHEDULE OF INVESTMENTS -- PARTNERS FUND
<CAPTION>
JUNE 30, 2000 (UNAUDITED) FOREIGN CURRENCY(2) SHARES VALUE
===================================================================================================
<S> <C> <C> <C>
COMMON STOCKS - 99.8%
---------------------------------------------------------------------------------------------------
ALUMINUM - 2.8%
MAXXAM, Inc. 31,000 $ 550,250
---------------------------------------------------------------------------------------------------
550,250
---------------------------------------------------------------------------------------------------
CLOSED-END FUNDS - 1.6%
Cathay Investment Fund, Ltd.(4) HKD 525,000 318,703
---------------------------------------------------------------------------------------------------
318,703
---------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE - 4.0%
Activision, Inc. 120,000 780,000
---------------------------------------------------------------------------------------------------
780,000
---------------------------------------------------------------------------------------------------
CONSTRUCTION/INFRASTRUCTURE - 6.4%
Meritage Corporation 117,000 1,250,438
---------------------------------------------------------------------------------------------------
1,250,438
---------------------------------------------------------------------------------------------------
CONSUMER GOODS - 2.2%
Harman International Industries, Inc.(1) 7,000 427,000
---------------------------------------------------------------------------------------------------
427,000
---------------------------------------------------------------------------------------------------
ENERGY - 30.3%
Alliance Energy, Inc., 144A(7) CAD 1,406,000 1,034,333
Best Pacific Resources, Ltd. CAD 1,500,000 1,164,227
Cypress Energy, Inc., Class A CAD 115,000 520,021
Oiltec Resources, Ltd. 144A(7) CAD 1,536,400 1,218,402
Place Resources Corporation CAD 884,800 2,000,500
---------------------------------------------------------------------------------------------------
5,937,483
---------------------------------------------------------------------------------------------------
ENERGY SERVICES - 8.3%
Atmos Energy Corporation(1) 4,500 78,750
Bowridge Resource Group, Inc.(1) CAD 1,700,000 871,989
Northstar Drilling Systems, Inc. CAD 500,000 556,804
Northstar Drilling Systems, Inc., 144A(7) CAD 100,000 111,361
---------------------------------------------------------------------------------------------------
1,618,904
---------------------------------------------------------------------------------------------------
ENTERTAINMENT - 4.5%
Magna Entertainment Corporation CAD 10,000 65,804
Magna Entertainment Corporation 125,000 814,453
---------------------------------------------------------------------------------------------------
880,257
---------------------------------------------------------------------------------------------------
FOOD - 6.1%
Fresh Del Monte Produce, Inc. 175,000 1,203,125
---------------------------------------------------------------------------------------------------
1,203,125
---------------------------------------------------------------------------------------------------
INTERNET CAPITAL SERVICES - 6.3%
CryptoLogic, Inc. CAD 45,000 933,912
Internet Pictures Corporation 20,000 302,500
---------------------------------------------------------------------------------------------------
1,236,412
---------------------------------------------------------------------------------------------------
PRINTING & PUBLISHING - 11.4%
Hollinger Canadian Newspapers, Ltd.(1) CAD 204,500 1,135,214
Hollinger International, Inc.(1) 80,000 1,090,000
---------------------------------------------------------------------------------------------------
2,225,214
---------------------------------------------------------------------------------------------------
REAL ESTATE - 11.8%
Brookfield Properties Corporation(1) CAD 100,500 1,332,837
Dundee Realty Corporation CAD 425,500 330,252
Gentra, Inc. CAD 68,100 641,165
---------------------------------------------------------------------------------------------------
2,304,254
---------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS SERVICES - 4.1%
Motient Corporation 10,000 156,875
WorldPort Communications, Inc. 261,800 638,138
---------------------------------------------------------------------------------------------------
795,013
---------------------------------------------------------------------------------------------------
===================================================================================================
TOTAL COMMON STOCKS (Cost $18,983,291) 19,527,053
---------------------------------------------------------------------------------------------------
<CAPTION>
VALUE
===================================================================================================
<S> <C>
SHORT TERM INVESTMENTS - 0.4%
---------------------------------------------------------------------------------------------------
Temporary Investment Cash Fund 38,815
Temporary Investment Fund 38,814
===================================================================================================
TOTAL SHORT TERM INVESTMENTS (Cost $77,629) 77,629
---------------------------------------------------------------------------------------------------
===================================================================================================
TOTAL INVESTMENTS - 100.2% (Cost $19,060,920) 19,604,682
---------------------------------------------------------------------------------------------------
===================================================================================================
OTHER LIABILITIES, NET - (0.2%) (41,803)
---------------------------------------------------------------------------------------------------
===================================================================================================
TOTAL NET ASSETS - 100.0% $19,562,879
===================================================================================================
</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,
NOK-Norwegian Krone, SAR-South African Rand, SEK-Swedish Krona
(3) ADR-American Depository Receipt; GDR-Global Depository Receipt
(4) Fair-Valued 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) See 5 in Notes to Financial Statements
The accompanying notes are an integral part of these financial statements.
73
<PAGE>
SEMIANNUAL REPORT
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
STATEMENT OF ASSETS & LIABILITIES
AS OF JUNE 30, 2000 (UNAUDITED) AGGRESSIVE DIVERSIFIED EMERGING
(ALL NUMBERS IN THOUSANDS EXCEPT FOR PRICING OF SHARES SECTION) GROWTH GROWTH GROWTH
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
------------------------------------------------------------------------------------------------------------------------------------
Investments, at value $ 139,256 $ 770,536 $ 6,255,669
Deposits with brokers for securities sold short - - -
Receivable for investments sold 212 11,433 106,168
Receivable for fund shares subscribed 1,649 9,387 68,977
Dividends/interest receivable 66 409 3,016
Prepaid Expenses - 1 5
Other Receivables - 107 1,085
------------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 141,183 791,873 6,434,920
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
------------------------------------------------------------------------------------------------------------------------------------
Securities sold short - 19 -
Temporary borrowings - - -
Collateral on securities loaned, at value - 53,058 728,232
Payable for investments purchased 2,828 30,947 40,077
Payable for fund shares redeemed 2,046 1,232 3,629
Payable to adviser 93 552 4,276
Payable to distributor 23 138 1,069
Accrued expenses/other liabilities 10 271 1,296
------------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 5,000 86,217 778,579
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS $ 136,183 $ 705,656 $ 5,656,341
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
------------------------------------------------------------------------------------------------------------------------------------
Paid-in capital 121,495 655,748 3,981,188
Accumulated undistributed net investment loss (140) (3,152) (26,908)
Accumulated net realized gain/(loss) from investments and from securities
sold short, and foreign currency transactions (2,825) 45,039 537,666
Net unrealized appreciation/(depreciation) on investments and on securities
sold short, and translation of assets and liabilities in foreign currencies 17,653 8,021 1,164,395
------------------------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS $ 136,183 $ 705,656 $ 5,656,341
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
INVESTMENTS, AT COST $ 121,603 $ 762,516 $ 5,091,274
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
PROCEEDS FROM SECURITIES SOLD SHORT - - -
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
PREMIUMS FROM WRITTEN OPTIONS - $20 -
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
PRICING OF SHARES:
Net Asset Value, offering, and redemption price per share $10.92 $33.19 $64.46
Net assets $136,183,231 $705,655,678 $5,656,341,437
Shares of beneficial interest outstanding with no par value 12,469,957 21,260,453 87,746,504
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
74
<PAGE>
RS FUNDS
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
THE INFORMATION
AGE FUND-REGISTERED RS INTERNET MICROCAP MIDCAP
TRADEMARK- AGE FUND-TM- GROWTH OPPORTUNITIES
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
------------------------------------------------------------------------------------------------------------------------------------
Investments, at value $ 394,434 $ 270,742 $ 140,123 $ 249,464
Deposits with brokers for securities sold short - - - -
Receivable for investments sold - 2,811 335 4,794
Receivable for fund shares subscribed 2,534 447 5,945 316
Dividends/interest receivable 78 105 64 433
Prepaid Expenses 1 11 1 2
Other Receivables - 47 28 47
------------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 397,047 274,163 146,496 255,056
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
------------------------------------------------------------------------------------------------------------------------------------
Securities sold short - - - 123
Temporary borrowings - - - -
Collateral on securities loaned, at value - 26,633 17,553 7,405
Payable for investments purchased - 2,813 2,029 12,783
Payable for fund shares redeemed 544 1,431 909 18
Payable to adviser 324 233 116 195
Payable to distributor 81 47 22 49
Accrued expenses/other liabilities 120 85 32 86
------------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 1,069 31,242 20,661 20,659
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS $ 395,978 $ 242,921 $ 125,835 $ 234,397
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
------------------------------------------------------------------------------------------------------------------------------------
Paid-in capital 149,586 273,757 60,377 166,679
Accumulated undistributed net investment loss (2,154) (1,688) (989) (143)
Accumulated net realized gain/(loss) from investments
and from securities sold short, and foreign
currency transactions 114,015 (31,428) 24,363 50,785
Net unrealized appreciation/(depreciation) on investments
and on securities sold short, and translation of assets
and liabilities in foreign currencies 134,531 2,280 42,084 17,076
------------------------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS $ 395,978 $ 242,921 $ 125,835 $ 234,397
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
INVESTMENTS, AT COST $ 259,903 $ 268,462 $ 98,039 $ 232,455
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
PROCEEDS FROM SECURITIES SOLD SHORT - - - -
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
PREMIUMS FROM WRITTEN OPTIONS - - - $189
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
PRICING OF SHARES:
Net Asset Value, offering, and redemption price per share $39.34 $12.01 $27.54 $16.26
Net assets $395,977,907 $242,920,769 $125,835,408 $234,396,982
Shares of beneficial interest outstanding with no par value 10,066,066 20,226,969 4,569,369 14,415,736
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
THE GLOBAL
VALUE + CONTRARIAN NATURAL
GROWTH FUND-TM- RESOURCES PARTNERS
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
------------------------------------------------------------------------------------------------------------------------------------
Investments, at value $632,851 $ 103,348 $ 29,692 $19,605
Deposits with brokers for securities sold short - 10,179 - -
Receivable for investments sold 25,041 1,307 2,108 -
Receivable for fund shares subscribed 3,514 1,239 111 -
Dividends/interest receivable 118 166 41 42
Prepaid Expenses 5 1 - -
Other Receivables - - - -
------------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 661,529 116,240 31,952 19,647
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
------------------------------------------------------------------------------------------------------------------------------------
Securities sold short - 9,871 - --
Temporary borrowings - - 2,120 --
Collateral on securities loaned, at value - - - --
Payable for investments purchased 24,030 1,744 - --
Payable for fund shares redeemed 262 233 529 18
Payable to adviser 525 121 35 16
Payable to distributor 131 20 7 4
Accrued expenses/other liabilities 218 113 38 46
------------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 25,166 12,102 2,729 84
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS $636,363 $104,138 $29,223 $19,563
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
------------------------------------------------------------------------------------------------------------------------------------
Paid-in capital 264,900 250,837 48,790 19,911
Accumulated undistributed net investment loss (3,468) (666) (168) (229)
Accumulated net realized gain/(loss) from investments
and from securities sold short, and foreign currency
transactions 100,462 (135,621) (20,018) (663)
Net unrealized appreciation/(depreciation) on investments
and on securities sold short, and translation of assets
and liabilities in foreign currencies 274,469 (10,412) 619 544
------------------------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS $636,363 $104,138 $ 29,223 19,563
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
INVESTMENTS, AT COST $358,382 $122,595 $ 29,073 19,061
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
PROCEEDS FROM SECURITIES SOLD SHORT - $ 18,706 - -
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
PREMIUMS FROM WRITTEN OPTIONS - - - -
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
PRICING OF SHARES:
Net Asset Value, offering, and redemption price per share $32.66 $10.68 $10.32 $13.07
Net assets $636,363,465 $104,138,149 $ 29,223,180 $ 19,562,879
Shares of beneficial interest outstanding with no par value 19,484,229 9,754,555 2,830,654 1,496,880
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
75
<PAGE>
<TABLE>
<CAPTION>
SEMIANNUAL REPORT
------------------------------------------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED JUNE 30, 2000 (UNAUDITED) AGGRESSIVE DIVERSIFIED EMERGING
(ALL NUMBERS IN THOUSANDS) GROWTH* GROWTH GROWTH
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
------------------------------------------------------------------------------------------------------------------------------------
Interest $ 90 $ 754 $ 7,937
Dividends 8 595 392
Withholding taxes on foreign dividends - - (5)
------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 98 1,349 8,324
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
EXPENSES
------------------------------------------------------------------------------------------------------------------------------------
Investment advisory fees 141 2,969 25,375
Distribution fees 35 742 6,344
Transfer agent fees 31 448 3,324
Dividend expense for securities sold short - - -
Custodian fees 6 73 230
Accounting/administrative service fees 17 310 1,095
Shareholder reports 2 28 314
Professional fees 5 26 251
Registration fees 9 79 391
Interest expense - 10 -
Trustees' fees and expenses - 6 64
Other expense - 3 28
------------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 246 4,694 37,416
Less: Expense waiver by adviser - - -
Other waivers and expense offsets (8) (260) (3,689)
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES, NET 238 4,434 33,727
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT LOSS (140) (3,085) (25,403)
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
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 (2,825) 19,084 363,997
Net realized gain/(loss) from securities sold short - (1,044) -
Net change in unrealized appreciation/depreciation on investments and on
translation on assets and liabilities in foreign currency 17,653 (74,002) (318,569)
Net change in unrealized appreciation/depreciation on securities sold short - 1 -
------------------------------------------------------------------------------------------------------------------------------------
NET GAIN/(LOSS) ON INVESTMENTS AND SECURITIES SOLD SHORT 14,828 (55,961) 45,428
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $14,688 $(59,046) $20,025
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Investment operations commenced on May 1, 2000.
The accompanying notes are an integral part of these financial statements.
76
<PAGE>
RS FUNDS
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
THE INFORMATION
AGE FUND-REGISTERED RS INTERNET MICROCAP MIDCAP
TRADEMARK- AGE FUND-TM- GROWTH OPPORTUNITIES
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
------------------------------------------------------------------------------------------------------------------------------------
Interest $ 545 $ 272 $ 83 $ 646
Dividends 157 - 13 701
Withholding taxes on foreign dividends (22) - - -
------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 680 272 96 1,347
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
EXPENSES
------------------------------------------------------------------------------------------------------------------------------------
Investment advisory fees 1,832 1,340 815 1,236
Distribution fees 458 268 151 309
Transfer agent fees 166 274 65 110
Dividend expense for securities sold short - - - -
Custodian fees 20 22 18 26
Accounting/administrative service fees 209 125 72 144
Shareholder reports 25 11 9 21
Professional fees 17 12 5 13
Registration fees 37 55 22 37
Interest expense 14 2 1 5
Trustees' fees and expenses 5 3 2 3
Other expense 3 20 1 1
------------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 2,786 2,132 1,161 1,905
Less: Expense waiver by adviser - - - -
Other waivers and expense offsets - (172) (101) (166)
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES, NET 2,786 1,960 1,060 1,739
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT LOSS (2,106) (1,688) (964) (392)
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
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 110,972 (31,007) 23,483 31,508
Net realized gain/(loss) from securities sold short - (252) - 1,760
Net change in unrealized appreciation/depreciation on investments and on
translation on assets and liabilities in foreign currency (78,857) (8,559) 2,419 (32,300)
Net change in unrealized appreciation/depreciation on securities sold short - - - 66
------------------------------------------------------------------------------------------------------------------------------------
NET GAIN/(LOSS) ON INVESTMENTS AND SECURITIES SOLD SHORT 32,115 (39,818) 25,902 1,034
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $30,009 ($41,506) $24,938 $642
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
THE GLOBAL
VALUE + CONTRARIAN NATURAL
GROWTH FUND-TM- RESOURCES PARTNERS
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
------------------------------------------------------------------------------------------------------------------------------------
Interest $ 305 $ 227 $ 34 $ 20
Dividends 1,184 317 133 59
Withholding taxes on foreign dividends - (22) (12) (6)
------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 1,489 522 155 73
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
EXPENSES
------------------------------------------------------------------------------------------------------------------------------------
Investment advisory fees 3,246 744 151 128
Distribution fees 811 124 34 26
Transfer agent fees 328 114 46 43
Dividend expense for securities sold short - 2 - -
Custodian fees 30 31 11 7
Accounting/administrative service fees 335 60 17 13
Shareholder reports 58 13 3 3
Professional fees 23 12 3 1
Registration fees 83 53 20 21
Interest expense 28 12 8 5
Trustees' fees and expenses 8 1 - -
Other expense 7 1 - -
------------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 4,957 1,167 293 247
------------------------------------------------------------------------------------------------------------------------------------
Less: Expense waiver by adviser - - (5) (40)
Other waivers and expense offsets - (12) (13) (9)
------------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES, NET 4,957 1,155 275 198
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT LOSS (3,468) (633) (120) (125)
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
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 93,737 3,750 1,670 1,518
Net realized gain/(loss) from securities sold short - 3,013 - -
Net change in unrealized appreciation/depreciation on investments and on
translation on assets and liabilities in foreign currency (45,373) 4,526 1,688 434
Net change in unrealized appreciation/depreciation on securities sold short - (5,140) - -
------------------------------------------------------------------------------------------------------------------------------------
NET GAIN/(LOSS) ON INVESTMENTS AND SECURITIES SOLD SHORT 48,364 6,149 3,358 1,952
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $44,896 $5,516 $3,238 $1,827
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
77
<PAGE>
<TABLE>
<CAPTION>
SEMIANNUAL REPORT
------------------------------------------------------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
AGGRESSIVE GROWTH DIVERSIFIED GROWTH
------------------------ -----------------------------
FOR THE FOR THE SIX FOR THE
PERIOD ENDED MONTHS ENDED YEAR ENDED
JUNE 30, 2000* JUNE 30, 2000 DEC. 31, 1999
(ALL NUMBERS IN THOUSANDS, SIX MONTH ENDED NUMBERS ARE UNAUDITED)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATIONS
------------------------------------------------------------------------------------------------------------------------------------
Net investment income/(loss) ($140) ($3,085) ($1,531)
Net realized gain/(loss) from investments and foreign
currency transactions (2,825) 19,084 56,134
Net realized gain/(loss) from securities sold short - (1,044) (771)
Net change in unrealized appreciation/depreciation on
investments and on translation of assets and liabilities in
foreign currency 17,653 (74,002) 72,978
Net change in unrealized appreciation/depreciation on securities
sold short - 1 113
------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 14,688 (59,046) 126,923
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
------------------------------------------------------------------------------------------------------------------------------------
Net investment income - - -
Realized gain on investments and securities sold short - - (32,715)
------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS - - (32,715)
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
------------------------------------------------------------------------------------------------------------------------------------
Net increase/(decrease) in net assets resulting from
capital share transactions 121,495 459,956 140,380
------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) FROM CAPITAL SHARE TRANSACTIONS 121,495 459,956 140,380
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS 136,183 400,910 234,588
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
Beginning of Period - 304,746 70,158
End of Period $136,183 $705,656 $304,746
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
UNDISTRIBUTED NET INVESTMENT INCOME/(LOSS) INCLUDED IN NET ASSETS (140) (3,152) (67)
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Investment operations commenced on May 1, 2000.
**Investment operations commenced on December 1, 1999.
The accompanying notes are an integral part of these financial statements.
78
<PAGE>
RS FUNDS
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
THE INFORMATION AGE
EMERGING GROWTH FUND-REGISTERED TRADEMARK-
----------------------------- -----------------------------
FOR THE SIX FOR THE FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DEC. 31, 1999 JUNE 30, 2000 DEC. 31, 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
------------------------------------------------------------------------------------------------------------------------------------
Net investment income/(loss) ($25,403) ($14,425) ($2,106) ($3,155)
Net realized gain/(loss) from investments and foreign
currency transactions 363,997 317,152 110,972 35,799
Net realized gain/(loss) from securities sold short - - - -
Net change in unrealized appreciation/depreciation on
investments and
on translation of assets and liabilities in foreign currency (318,569) 1,365,258 (78,857) 157,859
Net change in unrealized appreciation/depreciation on securities
sold short - - - -
------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 20,025 1,667,985 30,009 190,503
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
------------------------------------------------------------------------------------------------------------------------------------
Net investment income - - - -
Realized gain on investments and securities sold short - (166,209) - (33,195)
------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS - (166,209) - (33,195)
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
------------------------------------------------------------------------------------------------------------------------------------
Net increase/(decrease) in net assets resulting from
capital share transactions 2,056,696 1,673,408 11,333 37,596
------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) FROM CAPITAL SHARE TRANSACTIONS 2,056,696 1,673,408 11,333 37,596
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS 2,076,721 3,175,184 41,342 194,904
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
------------------------------------------------------------------------------------------------------------------------------------
Beginning of Period 3,579,620 404,436 354,636 159,732
End of Period $5,656,341 $3,579,620 $395,978 $354,636
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
UNDISTRIBUTED NET INVESTMENT INCOME/(LOSS) INCLUDED IN NET ASSETS (26,908) (1,505) (2,154) (48)
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
RS INTERNET AGE FUND-TM- MICROCAP GROWTH
---------------------------------- -----------------------------
FOR THE SIX FOR THE FOR THE SIX FOR THE
MONTHS ENDED PERIOD ENDED MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DEC. 31, 1999** JUNE 30, 2000 DEC. 31, 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
------------------------------------------------------------------------------------------------------------------------------------
Net investment income/(loss) ($1,688) ($74) ($964) ($1,413)
Net realized gain/(loss) from investments and foreign
currency transactions (31,007) (169) 23,483 12,030
Net realized gain/(loss) from securities sold short (252) - - -
Net change in unrealized appreciation/depreciation on
investments and on translation of assets and
liabilities in foreign currency (8,559) 10,839 2,419 27,658
Net change in unrealized appreciation/depreciation on securities
sold short - - - -
------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (41,506) 10,596 24,938 38,275
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
------------------------------------------------------------------------------------------------------------------------------------
Net investment income - - - -
Realized gain on investments and securities sold short - - - -
------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS - - - -
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
------------------------------------------------------------------------------------------------------------------------------------
Net increase/(decrease) in net assets resulting from
capital share transactions 180,842 92,989 (2,415) (30,250)
------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) FROM CAPITAL SHARE TRANSACTIONS 180,842 92,989 (2,415) (30,250)
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS 139,336 103,585 22,523 8,025
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
------------------------------------------------------------------------------------------------------------------------------------
Beginning of Period 103,585 - 103,312 95,287
End of Period $242,921 $103,585 $125,835 $103,312
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
UNDISTRIBUTED NET INVESTMENT INCOME/(LOSS) INCLUDED IN NET ASSETS (1,688) - (989) (25)
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
79
<PAGE>
SEMIANNUAL REPORT
STATEMENT OF CHANGES IN NET ASSETS -- CONTINUED
<TABLE>
<CAPTION>
MIDCAP OPPORTUNITIES
-------------------------------
(ALL NUMBERS IN THOUSANDS, FOR THE SIX FOR THE
SIX MONTH ENDED NUMBERS MONTHS ENDED YEAR ENDED
ARE UNAUDITED) JUNE 30, 2000 DEC. 31, 1999
-----------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Net investment
income/(loss) $ (392) $ 581
Net realized gain/(loss) from
investments and foreign
currency transactions 31,508 71,193
Net realized gain/(loss) from
securities sold short 1,760 2,907
Net change in unrealized
appreciation/depreciation on
investments and on translation
of assets and liabilities
in foreign currency (32,300) 10,718
Net change in unrealized
appreciation/depreciation on
securities sold short 66 (81)
NET INCREASE/(DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS 642 85,318
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income -- (658)
Realized gain on investments and
securities sold short -- (54,894)
TOTAL DISTRIBUTIONS -- (55,552)
CAPITAL SHARE TRANSACTIONS:
Net increase/(decrease) in net
assets resulting from capital
share transactions 7,226 10,611
NET INCREASE/(DECREASE) FROM
CAPITAL SHARE TRANSACTIONS 7,226 10,611
NET INCREASE/(DECREASE) IN
NET ASSETS 7,868 40,377
NET ASSETS:
Beginning of Period 226,529 186,152
End of Period $234,397 $226,529
UNDISTRIBUTED NET INVESTMENT
INCOME/(LOSS) INCLUDED IN
NET ASSETS (143) 249
</TABLE>
The accompanying notes are an integral part of these financial statements.
80
<PAGE>
RS FUNDS
<TABLE>
<CAPTION>
VALUE + GROWTH THE CONTRARIAN FUND-TM- GLOBAL NATURAL RESOURCES
---------------------------- ---------------------------- ----------------------------
(ALL NUMBERS IN THOUSANDS, FOR THE SIX FOR THE FOR THE SIX FOR THE FOR THE SIX FOR THE
SIX MONTH ENDED NUMBERS MONTHS ENDED YEAR ENDED MONTHS ENDED YEAR ENDED MONTHS ENDED YEAR ENDED
ARE UNAUDITED) JUNE 30, 2000 DEC. 31, 1999 JUNE 30, 2000 DEC. 31, 1999 JUNE 30, 2000 DEC. 31, 1999
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS
Net investment
income/(loss) $ (3,468) $ (7,895) $ (633) $ (1,468) $ (120) $ (485)
Net realized gain/(loss) from
investments and foreign
currency transactions 93,737 66,300 3,750 (90,745) 1,670 (1,234)
Net realized gain/(loss) from
securities sold short -- -- 3,013 3,838 -- --
Net change in unrealized
appreciation/depreciation on
investments and on translation
of assets and liabilities
in foreign currency (45,373) 106,621 4,526 132,093 1,688 7,009
Net change in unrealized
appreciation/depreciation on
securities sold short -- -- (5,140) (4,276) -- --
NET INCREASE/(DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS 44,896 165,026 5,516 39,442 3,238 5,290
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income -- -- -- -- -- --
Realized gain on investments and
securities sold short -- (55,449) -- -- -- --
TOTAL DISTRIBUTIONS -- (55,449) -- -- -- --
CAPITAL SHARE TRANSACTIONS:
Net increase/(decrease) in net
assets resulting from capital
share transactions (82,433) (114,762) (17,289) (48,766) 3,167 (5,979)
NET INCREASE/(DECREASE) FROM
CAPITAL SHARE TRANSACTIONS (82,433) (114,762) (17,289) (48,766) 3,167 (5,979)
NET INCREASE/(DECREASE) IN
NET ASSETS (37,537) (5,185) (11,773) (9,324) 6,405 (689)
NET ASSETS:
Beginning of Period 673,900 679,085 115,911 125,235 22,818 23,507
End of Period $636,363 $ 673,900 $104,138 $115,911 $29,223 $22,818
UNDISTRIBUTED NET INVESTMENT
INCOME/(LOSS) INCLUDED IN
NET ASSETS (3,468) -- (666) (33) (168) (48)
</TABLE>
<TABLE>
<CAPTION>
PARTNERS
----------------------------
(ALL NUMBERS IN THOUSANDS, FOR THE SIX FOR THE
SIX MONTH ENDED NUMBERS MONTHS ENDED YEAR ENDED
ARE UNAUDITED) JUNE 30, 2000 DEC. 31, 1999
-----------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Net investment
income/(loss) $ (125) $ (405)
Net realized gain/(loss) from
investments and foreign
currency transactions 1,518 2,755
Net realized gain/(loss) from
securities sold short -- --
Net change in unrealized
appreciation/depreciation on
investments and on translation
of assets and liabilities
in foreign currency 434 (1,559)
Net change in unrealized
appreciation/depreciation on
securities sold short -- --
NET INCREASE/(DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS 1,827 791
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income -- --
Realized gain on investments and
securities sold short -- --
TOTAL DISTRIBUTIONS -- --
CAPITAL SHARE TRANSACTIONS:
Net increase/(decrease) in net
assets resulting from capital
share transactions (4,638) (26,487)
NET INCREASE/(DECREASE) FROM
CAPITAL SHARE TRANSACTIONS (4,638) (26,487)
NET INCREASE/(DECREASE) IN
NET ASSETS (2,811) (25,696)
NET ASSETS:
Beginning of Period 22,374 48,070
End of Period $19,563 $ 22,374
UNDISTRIBUTED NET INVESTMENT
INCOME/(LOSS) INCLUDED IN
NET ASSETS (229) (104)
</TABLE>
The accompanying notes are an integral part of these financial statements.
81
<PAGE>
SEMIANNUAL REPORT
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
DISTRIBUTIONS DISTRIBUTIONS
NET ASSET VALUE, NET NET REALIZED FROM NET FROM NET
(SIX MONTH ENDED BEGINNING INVESTMENT AND UNREALIZED TOTAL INVESTMENT REALIZED
NUMBERS ARE UNAUDITED) OF PERIOD INCOME/(LOSS) GAIN/(LOSS) OPERATIONS INCOME CAPITAL GAINS
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
AGGRESSIVE GROWTH
Period Ended 6/30/00(2) $ 10.00 $(0.01) $ 0.93 $0.92 $ -- $ --
DIVERSIFIED GROWTH
Six Months Ended 6/30/00 32.99 (0.14) 0.34 0.20 -- --
Year Ended 12/31/99 15.89 -- 22.58 22.58 -- (5.48)
Year Ended 12/31/98(6) 14.04 (0.19) 2.43 2.24 -- (0.39)
Year Ended 12/31/97(6) 12.42 (0.17) 3.72 3.55 -- (1.93)
Period Ended 12/31/96(3,6) 10.00 (0.05) 2.47 2.42 -- --
EMERGING GROWTH
Six Months Ended 6/30/00 60.67 (0.28) 4.07 3.79 -- --
Year Ended 12/31/99 22.95 0.14 40.89 41.03 -- (3.31)
Year Ended 12/31/98(6) 18.71 (0.20) 5.32 5.12 -- (0.88)
Year Ended 12/31/97(6) 20.07 (0.14) 3.80 3.66 -- (5.02)
Year Ended 12/31/96(6) 19.21 (0.17) 4.23 4.06 -- (3.20)
THE INFORMATION AGE FUND-Registered Trademark-
Six Months Ended 6/30/00 35.79 (0.21) 3.76 3.55 -- --
Year Ended 12/31/99 17.96 -- 21.72 21.72 -- (3.89)
Year Ended 12/31/98(6) 11.80 (0.20) 6.36 6.16 -- --
Year Ended 12/31/97(6) 11.51 (0.22) 0.95 0.73 -- (0.44)
Year Ended 12/31/96(6) 9.30 (0.20) 2.68 2.48 -- (0.27)
RS INTERNET AGE FUND-TM-
Six Months Ended 6/30/00 12.18 (0.08) (0.09) (0.17) -- --
Period Ended 12/31/99(4) 10.00 -- 2.18 2.18 -- --
MICROCAP GROWTH
Six Months Ended 6/30/00 22.34 (0.21) 5.41 5.20 -- --
Year Ended 12/31/99 14.26 -- 8.08 8.08 -- --
Year Ended 12/31/98(6) 14.35 (0.21) 0.12 (0.09) -- --
Year Ended 12/31/97(6) 11.00 (0.19) 3.54 3.35 -- --
Period Ended 12/31/96(5,6) 10.00 (0.08) 1.08 1.00 -- --
</TABLE>
See notes to Financial Highlights on page 85.
The accompanying notes are an integral part of these financial statements.
82
<PAGE>
RS FUNDS
<TABLE>
<CAPTION>
NET RATIO GROSS RATIO
NET ASSET NET ASSETS OF EXPENSES OF EXPENSES
(SIX MONTH ENDED VALUE, END TOTAL END OF TO AVERAGE TO AVERAGE
NUMBERS ARE UNAUDITED) OF PERIOD RETURN(1) PERIOD (000S) NET ASSETS(1) NET ASSETS(1)
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AGGRESSIVE GROWTH
Period Ended 6/30/00(2) $10.92 9.20% $ 136,183 1.69% 1.74%
DIVERSIFIED GROWTH
Six Months Ended 6/30/00 33.19 0.61% 705,656 1.49% 1.58%
Year Ended 12/31/99 32.99 150.21% 304,746 1.84% 1.89%
Year Ended 12/31/98(6) 15.89 16.28% 69,031 1.89% 1.95%
Year Ended 12/31/97(6) 14.04 29.45% 80,278 1.94% 2.14%
Period Ended 12/31/96(3,6) 12.42 24.20% 59,588 2.28% 2.44%
EMERGING GROWTH
Six Months Ended 6/30/00 64.46 6.25% 5,656,341 1.33% 1.48%
Year Ended 12/31/99 60.67 182.56% 3,579,620 1.51% 1.51%
Year Ended 12/31/98(6) 22.95 28.02% 403,330 1.47% 1.47%
Year Ended 12/31/97(6) 18.71 18.54% 248,730 1.50% 1.50%
Year Ended 12/31/96(6) 20.07 21.53% 210,404 1.60% 1.60%
THE INFORMATION AGE FUND-Registered Trademark-
Six Months Ended 6/30/00 39.34 9.92% 395,978 1.52% 1.52%
Year Ended 12/31/99 35.79 126.22% 354,636 1.68% 1.69%
Year Ended 12/31/98(6) 17.96 52.20% 159,604 1.74% 1.74%
Year Ended 12/31/97(6) 11.80 6.15% 118,832 1.82% 1.82%
Year Ended 12/31/96(6) 11.51 26.72% 106,264 2.03% 2.03%
RS INTERNET AGE FUND-TM-
Six Months Ended 6/30/00 12.01 (1.40)% 242,921 1.83% 1.99%
Period Ended 12/31/99(4) 12.18 21.80% 103,585 1.76% 1.82%
MICROCAP GROWTH
Six Months Ended 6/30/00 27.54 23.28% 125,835 1.76% 1.93%
Year Ended 12/31/99 22.34 56.66% 103,312 1.92% 1.97%
Year Ended 12/31/98(6) 14.26 (0.63)% 94,723 1.91% 2.01%
Year Ended 12/31/97(6) 14.35 30.45% 104,858 1.95% 2.60%
Period Ended 12/31/96(5,6) 11.00 10.00% 9,464 3.08% 6.40%
</TABLE>
<TABLE>
<CAPTION>
NET RATIO OF GROSS RATIO OF
NET INVESTMENT NET INVESTMENT PORTFOLIO
(SIX MONTH ENDED INCOME/(LOSS) TO INCOME/(LOSS) TO TURNOVER
NUMBERS ARE UNAUDITED) AVERAGE NET ASSETS(1) AVERAGE NET ASSETS(1) RATE(1)
----------------------------------------------------------------------------------
<S> <C> <C> <C>
AGGRESSIVE GROWTH
Period Ended 6/30/00(2) (0.99)% (1.04)% 28%
DIVERSIFIED GROWTH
Six Months Ended 6/30/00 (1.04)% (1.13)% 171%
Year Ended 12/31/99 (1.40)% (1.44)% 473%
Year Ended 12/31/98(6) (1.29)% (1.35)% 403%
Year Ended 12/31/97(6) (1.20)% (1.40)% 370%
Period Ended 12/31/96(3,6) (1.05)% (1.21)% 69%
EMERGING GROWTH
Six Months Ended 6/30/00 (1.00)% (1.15)% 68%
Year Ended 12/31/99 (1.19)% (1.19)% 177%
Year Ended 12/31/98(6) (1.03)% (1.03)% 291%
Year Ended 12/31/97(6) (0.68)% (0.68)% 462%
Year Ended 12/31/96(6) (0.83)% (0.83)% 270%
THE INFORMATION AGE FUND-Registered Trademark-
Six Months Ended 6/30/00 (1.15)% (1.15)% 99%
Year Ended 12/31/99 (1.54)% (1.55)% 182%
Year Ended 12/31/98(6) (1.55)% (1.55)% 224%
Year Ended 12/31/97(6) (1.71)% (1.71)% 369%
Year Ended 12/31/96(6) (1.85)% (1.85)% 452%
RS INTERNET AGE FUND-TM-
Six Months Ended 6/30/00 (1.58)% (1.74)% 107%
Period Ended 12/31/99(4) (1.34)% (1.40)% 2%
MICROCAP GROWTH
Six Months Ended 6/30/00 (1.60)% (1.77)% 73%
Year Ended 12/31/99 (1.67)% (1.72)% 90%
Year Ended 12/31/98(6) (1.46)% (1.56)% 108%
Year Ended 12/31/97(6) (1.35)% (2.00)% 170%
Period Ended 12/31/96(5,6) (2.13)% (5.45)% 22%
</TABLE>
See notes to Financial Highlights on page 85.
The accompanying notes are an integral part of these financial statements.
83
<PAGE>
SEMIANNUAL REPORT
FINANCIAL HIGHLIGHTS -- CONTINUED
<TABLE>
<CAPTION>
DISTRIBUTIONS DISTRIBUTIONS
NET ASSET VALUE, NET NET REALIZED FROM NET FROM NET
(SIX MONTHS ENDED BEGINNING INVESTMENT AND UNREALIZED TOTAL INVESTMENT REALIZED
NUMBERS ARE UNAUDITED) OF PERIOD INCOME/(LOSS) GAIN/(LOSS) OPERATIONS INCOME CAPITAL GAINS
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
MIDCAP OPPORTUNITIES
Six Months Ended 6/30/00 $15.92 $(0.03) $ 0.37 $ 0.34 $ -- $ --
Year Ended 12/31/99 14.04 0.04 6.95 6.99 (0.05) (5.06)
Year Ended 12/31/98(6) 13.52 0.14 1.34 1.48 (0.19) (0.77)
Year Ended 12/31/97(6) 13.62 0.07 2.90 2.97 (0.04) (3.03)
Year Ended 12/31/96(6) 11.24 0.02 2.70 2.72 (0.02) (0.32)
VALUE + GROWTH
Six Months Ended 6/30/00 30.43 (0.18) 2.41 2.23 -- --
Year Ended 12/31/99 25.92 -- 7.16 7.16 -- (2.65)
Year Ended 12/31/98(6) 23.18 (0.25) 6.33 6.08 -- (3.34)
Year Ended 12/31/97(6) 24.16 (0.26) 3.71 3.45 -- (4.43)
Year Ended 12/31/96(6) 22.66 (0.24) 3.47 3.23 -- (1.73)
THE CONTRARIAN FUND-TM-
Six Months Ended 6/30/00 10 (0.07) 0.75 0.68 -- --
Year Ended 12/31/99 7.23 0.20) 2.57 2.77 -- --
Year Ended 12/31/98(6) 11.61 (0.08) (3.72) (3.80) -- (0.58)
Year Ended 12/31/97(6) 16.57 -- (4.88) (4.88) -- (0.08)
Year Ended 12/31/96(6) 13.78 -- 2.99 2.99 -- (0.20)
GLOBAL NATURAL RESOURCES
Six Months Ended 6/30/00 9.13 (0.04) 1.23 1.19 -- --
Year Ended 12/31/99 7.46 (0.01) 1.68 1.67 -- --
Year Ended 12/31/98(6) 11.67 (0.07) (3.95) (4.02) -- (0.19)
Year Ended 12/31/97(6) 14.29 (0.05) (2.39) (2.44) -- (0.18)
Year Ended 12/31/96(6) 10.12 (0.06) 4.24 4.18 (0.01) --
PARTNERS
Six Months Ended 6/30/00 11.96 (0.10) 1.21 1.11 -- --
Year Ended 12/31/99 11.53 (0.04) 0.47 0.43 -- --
Year Ended 12/31/98(6) 16.49 (0.04) (4.31) (4.35) (0.38) (0.23)
Year Ended 12/31/97(6) 14.60 0.13 2.52 2.65 (0.12) (0.64)
Year Ended 12/31/96(6) 10.39 0.13 4.36 4.49 (0.06) (0.22)
</TABLE>
See notes to Financial Highlights on page 85.
The accompanying notes are an integral part of these financial statements.
84
<PAGE>
RS FUNDS
<TABLE>
<CAPTION>
NET RATIO GROSS RATIO
NET ASSET, NET ASSETS OF EXPENSES OF EXPENSES
(SIX MONTHS ENDED VALUE END TOTAL END OF TO AVERAGE TO AVERAGE
NUMBERS ARE UNAUDITED) OF PERIOD RETURN(1) PERIOD (000S) NET ASSETS(1) NET ASSETS(1)
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MIDCAP OPPORTUNITIES
Six Months Ended 6/30/00 $16.26 2.14% $ 234,397 1.41% 1.54%
Year Ended 12/31/99 15.92 56.12% 226,529 1.59% 1.67%
Year Ended 12/31/98(6) 14.04 11.65% 183,910 1.30% 1.64%
Year Ended 12/31/97(6) 13.52 22.40% 298,669 1.30% 1.72%
Year Ended 12/31/96(6) 13.62 24.16% 309,775 1.71% 1.76%
VALUE + GROWTH
Six Months Ended 6/30/00 32.66 7.33% 636,363 1.53% 1.53%
Year Ended 12/31/99 30.43 28.43% 673,900 1.59% 1.59%
Year Ended 12/31/98(6) 25.92 27.44% 677,505 1.46% 1.46%
Year Ended 12/31/97(6) 23.18 13.81% 752,994 1.44% 1.44%
Year Ended 12/31/96(6) 24.16 14.12% 643,157 1.51% 1.51%
THE CONTRARIAN FUND-TM-
Six Months Ended 6/30/00 10.68 6.80% 104,138 2.33% 2.35%
Year Ended 12/31/99 10 38.31% 115,911 2.17% 2.43%
Year Ended 12/31/98(6) 7.23 (32.69)% 124,666 2.83% 2.83%
Year Ended 12/31/97(6) 11.61 (29.51)% 398,242 2.48% 2.48%
Year Ended 12/31/96(6) 16.57 21.68% 1,063,438 2.46% 2.46%
GLOBAL NATURAL RESOURCES
Six Months Ended 6/30/00 10.32 13.03% 29,223 2.01% 2.14%
Year Ended 12/31/99 9.13 22.39% 22,818 2.09% 2.42%
Year Ended 12/31/98(6) 7.46 (34.45)% 23,476 1.95% 2.21%
Year Ended 12/31/97(6) 11.67 (17.14)% 78,371 1.81% 1.82%
Year Ended 12/31/96(6) 14.29 41.21% 120,521 1.94% 2.16%
PARTNERS
Six Months Ended 6/30/00 13.07 9.28% 19,563 1.93% 2.42%
Year Ended 12/31/99 11.96 3.73% 22,374 2.13% 2.79%
Year Ended 12/31/98(6) 11.53 (27.38)% 47,936 1.88% 2.07%
Year Ended 12/31/97(6) 16.49 18.08% 194,133 1.78% 1.78%
Year Ended 12/31/96(6) 14.6 43.15% 127,268 1.93% 2.15%
</TABLE>
<TABLE>
<CAPTION>
NET RATIO OF GROSS RATIO OF
NET INVESTMENT NET INVESTMENT PORTFOLIO
(SIX MONTHS ENDED INCOME/(LOSS) TO INCOME/(LOSS) TO TURNOVER
NUMBERS ARE UNAUDITED) AVERAGE NET ASSETS(1) AVERAGE NET ASSETS(1) RATE(1)
-------------------------------------------------------------------------------------
<S> <C> <C> <C>
MIDCAP OPPORTUNITIES
Six Months Ended 6/30/00 (0.32)% (0.45)% 238%
Year Ended 12/31/99 0.31% 0.23% 408%
Year Ended 12/31/98(6) 1.00% 0.65% 212%
Year Ended 12/31/97(6) 0.45% 0.03% 236%
Year Ended 12/31/96(6) 0.18% 0.13% 212%
VALUE + GROWTH
Six Months Ended 6/30/00 (1.07)% (1.07)% 46%
Year Ended 12/31/99 (1.20)% (1.20)% 80%
Year Ended 12/31/98(6) (0.96)% (0.96)% 190%
Year Ended 12/31/97(6) (0.96)% (0.96)% 228%
Year Ended 12/31/96(6) (1.06)% (1.06)% 221%
THE CONTRARIAN FUND-TM-
Six Months Ended 6/30/00 (1.28)% (1.30)% 53%
Year Ended 12/31/99 (1.17)% (1.43)% 86%
Year Ended 12/31/98(6) (0.80)% (0.80)% 39%
Year Ended 12/31/97(6) 0.01% 0.01% 36%
Year Ended 12/31/96(6) (0.02)% (0.02)% 44%
GLOBAL NATURAL RESOURCES
Six Months Ended 6/30/00 (0.88)% (1.01)% 97%
Year Ended 12/31/99 (1.72)% (2.05)% 140%
Year Ended 12/31/98(6) (0.69)% (0.96)% 63%
Year Ended 12/31/97(6) (0.38)% (0.38)% 97%
Year Ended 12/31/96(6) (0.45)% (0.67)% 82%
PARTNERS
Six Months Ended 6/30/00 (1.22)% (1.71)% 79%
Year Ended 12/31/99 (1.24)% (1.90)% 84%
Year Ended 12/31/98(6) (0.26)% (0.46)% 73%
Year Ended 12/31/97(6) 0.82% 0.82% 78%
Year Ended 12/31/96(6) 0.95% 0.73% 101%
</TABLE>
Distributions reflect actual per-share amounts distributed for the period.
(1) Ratios for periods less than one year have been annualized, except for
total return and portfolio turnover rate.
(2) Aggressive Growth shares were first issued on 5/1/00.
(3) Diversified Growth Fund shares were first issued on 8/1/96.
(4) RS Internet Age Fund-TM- shares were first issued on 12/1/99.
(5) MicroCap Growth shares were first issued on 8/15/96.
(6) Per-share data has been determined by using the average number of shares
outstanding throughout the period.
The accompanying notes are an integral part of these financial statements.
85
<PAGE>
SEMIANNUAL REPORT
NOTES TO FINANCIAL STATEMENTS
The RS Mutual Funds (a "Fund," the "Funds") are series of 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 eleven portfolios. The RS Emerging Growth Fund, the RS Value + Growth
Fund, the RS MidCap Opportunities Fund, The Information Age Fund-Registered
Trademark-, the RS Global Natural Resources Fund, the RS Diversified Growth
Fund, RS MicroCap Growth Fund, the RS Internet Age Fund-TM-, and the
RS Aggressive Growth Fund are registered as diversified funds. The Contrarian
Fund-TM- and the RS Partners Fund are registered as non-diversified funds.
Each Fund 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 Fund's 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, 2000, were as follows:
<TABLE>
<CAPTION>
PERCENTAGE
OF LONG
FUND POSITIONS
----------------------------------------------
<S> <C>
Aggressive Growth 0.0%
Diversified Growth 0.2%
Emerging Growth 0.0%
The Information Age
Fund-Registered Trademark- 0.0%
RS Internet Age Fund-TM- 0.0%
MicroCap Growth 0.0%
----------------------------------------------
<CAPTION>
PERCENTAGE
OF LONG
FUND POSITIONS
----------------------------------------------
<S> <C>
MidCap Opportunities 0.7%
Value + Growth 0.0%
The Contrarian Fund-TM- 0.9%
Global Natural Resources 0.9%
Partners 1.6%
----------------------------------------------
</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. FEDERAL INCOME TAXES:
The Funds intend to comply with requirements of the Internal Revenue Code, to
qualify 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.
c. 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.
d. 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.
e. 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.
f. 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 waivers and expense offsets represent the waiver of fees by the Funds'
accounting agent/administrator and expense offsets due to securities lending.
(See Note 5)
g. 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 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.
86
<PAGE>
RS FUNDS
At June 30, 2000, the Funds had the following capital loss carryovers available:
<TABLE>
<CAPTION>
EXPIRING 2005 2006 2007 TOTAL
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
The Contrarian Fund-TM- $ -- $48,582,052 $72,006,203 $120,588,255
Global Natural Resources -- 10,763,082 10,576,876 21,339,958
Partners 1,435,497 738,051 -- 2,173,548
--------------------------------------------------------------------------------
</TABLE>
h. 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.
i. TEMPORARY BORROWINGS:
All Funds within the Trust share in a $40 million, uncommitted revolving credit
and/or overdraft protection facility 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.
<TABLE>
<CAPTION>
AMOUNT AVERAGE
OUTSTANDING AVERAGE INTEREST
FUND AT 6/30/00 BORROWING* RATE (%)
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Aggressive Growth $ -- $ -- 6.80
Diversified Growth -- 279,042 6.80
Emerging Growth -- -- 6.80
The Information Age
Fund-Registered Trademark- -- 414,798 6.80
RS Internet Age Fund-TM- -- 55,734 6.80
MicroCap Growth -- 18,905 6.80
MidCap Opportunities -- 139,591 6.80
Value + Growth -- 833,424 6.80
The Contrarian Fund-TM- -- 361,018 6.80
Global Natural Resources 2,119,927 227,330 6.80
Partners -- 164,042 6.80
--------------------------------------------------------------------------------
</TABLE>
*FOR THE SIX MONTHS ENDED 6/30/00.
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 period ended June 30, 2000, and the year ended December 31,
1999 are outlined on the following page. Transactions in capital shares for
Class C for the period from January 1, 1999 through April 16, 1999 are also
outlined on the following page.
87
<PAGE>
SEMIANNUAL REPORT
(ALL NUMBERS IN THOUSANDS) TRANSACTIONS IN CAPITAL SHARES
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
AGGRESSIVE GROWTH DIVERSIFIED GROWTH EMERGING GROWTH
Class A 5/1/00** - 6/30/00 1/1/99 - 12/31/99 1/1/00 - 6/30/00 1/1/99 - 12/31/99 1/1/00 - 6/30/00
------------------------------------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shares Sold 13,747 $133,856 11,436 $266,962 21,527 $799,995 91,950 $3,447,594 86,300 $5,802,971
Shares Reinvested -- -- 1,185 31,668 -- -- 3,211 154,579 -- (19)
Shares Redeemed (1,277) (12,361) (7,728) (156,877) (9,505 (340,039) (53,735) (1,927,232) (57,555) (3,746,256)
Net Increase/(Decrease) 12,470 121,495 4,893 141,753 12,022 459,956 41,426 1,674,941 28,745 2,056,696
Class C 1/1/99 - 4/16/99* 1/1/99 - 4/16/99*
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares Sold 1 $26 10 $228
Shares Reinvested -- -- -- --
Shares Redeemed (75) (1,399) (61) (1,761)
Net Increase/(Decrease) (74) (1,373) (51) (1,533)
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
THE INFORMATION AGE
FUND-REGISTERED TRADEMARK- RS INTERNET AGE FUND-TM- MICROCAP GROWTH
Class A 1/1/99 - 12/31/99 1/1/00 - 6/30/00 12/1/99** - 12/31/99 1/1/00 - 6/30/00 1/1/99 - 12/31/99 1/1/00 - 6/30/00
------------------------------------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shares Sold 18,710 $439,505 10,576 $412,637 8,967 $98,384 19,800 $278,859 6,193 $96,638 3,861 105,269
Shares Reinvested 1,122 32,267 -- 3 -- -- -- -- -- -- -- -
Shares Redeemed (18,810) (434,019) (10,418) (401,307) (465) (5,395) (8,075) (98,017) (8,211) (126,300) (3,916) (107,684)
Net Increase/(Decrease) 1,022 37,753 158 11,333 8,502 92,989 11,725 180,842 (2,018) (29,662) (55) (2,415)
Class C 1/1/99 - 4/16/99* 1/1/99 - 4/16/99*
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares Sold 4 $71 1 $19
Shares Reinvested -- -- -- --
Shares Redeemed (12) (228) (42) (607)
Net Increase/(Decrease) (8) (157) (41) (588)
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
MIDCAP OPPORTUNITIES VALUE + GROWTH THE CONTRARIAN FUND-TM-
Class A 1/1/99 - 12/31/99 1/1/00 - 6/30/00 1/1/99 - 12/31/99 1/1/00 - 6/30/00 1/1/99 - 12/31/99 1/1/00 - 6/30/00
------------------------------------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shares Sold 8,061 $142,199 7,318 129,948 7,452 $210,841 8,470 277,591 3,969 $34,206 1,647 $16,551
Shares Reinvested 3,935 53,323 -- -- 1,885 59,792 -- (3) -- -- -- --
Shares Redeemed (10,860) (182,406) (7,133) (122,722) (13,328) (383,700) (11,129) (360,021) (9,615) (82,336) (3,483) (33,840)
Net Increase/(Decrease) 1,136 13,116 185 7,226 (3,991) (113,067) (2,659) (82,433) (5,646) (48,130) (1,836) (17,289)
Class C 1/1/99 - 4/16/99* 1/1/99 - 4/16/99* 1/1/99 - 4/16/99*
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C>
Shares Sold 3 $46 1 $16 -- $ --
Shares Reinvested -- -- -- -- -- --
Shares Redeemed (169) (2,551) (64) (1,711) (81) (636)
Net Increase/(Decrease) (166) (2,505) (63) (1,695) (81) (636)
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
GLOBAL NATURAL RESOURCES PARTNERS
Class A 1/1/99 - 12/31/99 1/1/00 - 6/30/00 1/1/99 - 12/31/99 1/1/00 - 6/30/00
------------------------------------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares Sold 5,014 $44,758 3,610 $36,174 1,799 $21,154 1,122 13,537
Shares Reinvested -- -- -- -- -- -- -- --
Shares Redeemed (5,662) (50,702) (3,278) (33,007) (4,084) (47,507) (1,496) (18,175)
Net Increase/(Decrease) (648) (5,944) 332 3,167 (2,285) (26,353) (374) (4,638)
Class C 1/1/99 - 4/16/99* 1/1/99 - 4/16/99*
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares Sold -- $ -- -- $ --
Shares Reinvested -- -- -- --
Shares Redeemed (4) (35) (12) (134)
Net Increase/(Decrease) (4) (35) (12) (134)
</TABLE>
* Effective April 16, 1999, the Funds liquidated Class C shares.
** Commencement of investment operations.
88
<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>
Aggressive Growth 1.00%
Diversified Growth 1.00%
Emerging Growth 1.00%
The Information Age
Fund-Registered Trademark- 1.00%
RS Internet Age Fund-TM- 1.25%
MicroCap Growth 1.25%
MidCap Opportunities 1.00%
Value + Growth 1.00%
The Contrarian Fund-TM- 1.50%
Global Natural Resources 1.00%
Partners 1.25%
--------------------------------------
</TABLE>
RSIM, L.P. and RSIM, Inc. may voluntarily agree to bear operating expenses of a
Fund (excluding interest, taxes, deferred organizational and extraordinary
expenses and dividend expenses related to short sales) to the extent they exceed
a stated limit, either by reimbursement of expenses to the Fund or by means of
an advisory fee waiver.
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. Such recoupments are included in investment advisory fees on the
Statement of Operations.
During the period ended June 30, 2000, RSIM, L.P. and RSIM, Inc. recouped the
following amounts:
<TABLE>
<CAPTION>
FUND
------------------------------------
<S> <C>
Aggressive Growth $--
Diversified Growth --
Emerging Growth --
The Information Age
Fund-Registered Trademark- --
RS Internet Age Fund-TM- --
MicroCap Growth 62,648
MidCap Opportunities --
Value + Growth --
The Contrarian Fund-TM- --
Global Natural Resources 14,886
Partners --
------------------------------------
</TABLE>
At June 30, 2000, the balance of recoupable expenses for each fund was:
<TABLE>
<CAPTION>
FUND 1998 1999 2000 TOTAL
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aggressive Growth $-- $-- $-- $--
Diversified Growth -- -- -- --
Emerging Growth -- -- -- --
The Information Age
Fund-Registered Trademark- -- -- -- --
RS Internet Age Fund-TM- -- -- -- --
MicroCap Growth 41,524 27,155 -- 68,679
MidCap Opportunities 853,895 120,329 -- 974,224
Value + Growth -- -- -- --
The Contrarian Fund-TM- -- -- -- --
Global Natural Resources -- 26,098 5,245 31,343
Partners 236,741 175,552 40,064 452,357
--------------------------------------------------------------------
</TABLE>
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, 2000.
c. DISTRIBUTION FEES:
Provident Distributors, Inc. ("Provident"), a non-affiliate, is 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, whose 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 at an annual rate of
0.25% of the daily average net assets. RSIM, L.P. and RSIM, Inc. or their
affiliates provide certain services to Provident in respect of the promotion of
the Funds' shares and are compensated by Provident for those services.
89
<PAGE>
SEMIANNUAL REPORT
TAX 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>
Aggressive Growth $ 121,603,241 $ 17,653,010 $ 20,142,050 $ 2,489,040
Diversified Growth 762,495,617 8,021,475 94,039,527 86,018,052
Emerging Growth 5,091,273,529 1,164,395,168 1,582,819,912 418,424,744
The Information Age
Fund-Registered Trademark- 259,902,798 134,531,190 142,899,654 8,368,464
RS Internet Age Fund-TM- 268,462,440 2,279,973 36,377,869 34,097,896
MicroCap Growth 98,038,531 42,084,347 45,148,187 3,063,840
MidCap Opportunities 232,265,383 17,076,471 27,030,000 9,953,529
Value + Growth 358,382,256 274,469,172 279,477,256 5,008,084
The Contrarian Fund-TM- 103,889,625 (10,412,494) 42,160,130 52,572,624
Global Natural Resources 29,072,930 619,139 3,883,918 3,264,779
Partners 19,060,920 543,762 3,650,690 3,106,928
------------------------------------------------------------------------------------------------------------------------
</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, 2000, 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, 2000, were as follows:
<TABLE>
<CAPTION>
COST OF INVESTMENTS PROCEEDS FROM
FUND PURCHASED INVESTMENTS SOLD
--------------------------------------------------------------------------------
<S> <C> <C>
Aggressive Growth $ 139,066,685 $ 24,694,889
Diversified Growth 1,462,795,289 962,064,102
Emerging Growth 4,892,136,586 3,166,725,731
The Information Age
Fund-Registered Trademark- 352,647,906 340,886,366
RS Internet Age Fund-TM- 385,861,944 213,678,082
MicroCap Growth 81,849,234 97,916,827
MidCap Opportunities 553,654,892 552,219,302
Value + Growth 290,995,176 371,428,005
The Contrarian Fund-TM- 52,194,426 73,510,297
Global Natural Resources 28,168,935 24,622,007
Partners 15,484,958 18,888,059
--------------------------------------------------------------------------------
</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
currently sell securities short: Aggressive Growth, RS Internet Age Fund-TM-,
MicroCap Growth, Value + Growth, The Contrarian Fund-TM-, and Global Natural
Resources. 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
collateralized as required by law or agreement with a Fund's broker. 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). 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. For the
period ended June 30, 2000, the cost of investments purchased to cover short
sales and proceeds from investments sold short were as follows:
90
<PAGE>
RS FUNDS
<TABLE>
<CAPTION>
COST OF INVESTMENTS PROCEEDS FROM
PURCHASED TO INVESTMENTS
FUND COVER SHORT SELLS SOLD SHORT
----------------------------------------------------------------------
<S> <C> <C>
Aggressive Growth $ -- $ --
Diversified Growth 150,450 593,743
Emerging Growth -- --
The Information Age
Fund-Registered Trademark- -- --
RS Internet Age Fund-TM- 1,883,079 1,630,955
MicroCap Growth -- --
MidCap Opportunities 403,856 1,232,787
Value + Growth -- --
The Contrarian Fund-TM- 21,713,933 7,729,192
Global Natural Resources -- --
Partners -- --
----------------------------------------------------------------------
</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 specified
securities at a predetermined price during a specific period. When a fund is the
writer of 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 or, in the case of an index option, a notional index
amount 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, 2000 were as
follows:
<TABLE>
<CAPTION>
NUMBER
AMOUNT OF OF CONTRACTS
PREMIUMS OPTIONED
----------------------------------------------------------
<S> <C> <C>
Outstanding at 12/31/99 $ -- --
Options written 593,743 1,225
Options expired (33,624) (250)
Options exercised (39,699) (100)
Options closed (499,946) (825)
----------------------------------------------------------
Outstanding at 6/30/00 $ 20,474 50
----------------------------------------------------------
</TABLE>
MIDCAP OPPORTUNITIES: WRITTEN OPTIONS
Transactions in written options for the six months ended June 30, 2000 were
as follows:
<TABLE>
<CAPTION>
NUMBER
AMOUNT OF OF CONTRACTS
PREMIUMS OPTIONED
----------------------------------------------------------
<S> <C> <C>
Outstanding at 12/31/99 $ -- --
Options written 1,232,787 2,978
Options expired (502,943) (1,126)
Options exercised -- --
Options closed (540,576) (1,402)
----------------------------------------------------------
Outstanding at 6/30/00 $ 189,268 450
----------------------------------------------------------
</TABLE>
RESTRICTED SECURITIES
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
% OF FUNDS'
FUND SECURITY SHARES COST VALUE ACQUISITION DATE NET ASSETS
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Diversified Growth Boots & Coots International
Well Control, Inc., Series B 11,675 $1,536,202 $ 582,219 2/10/00 - 3/16/00
Skymall, Inc. 160,000 320,000 304,000 6/30/00
Startec Global Com. Corp. 140,000 1,860,000 1,496,250 12/21/99 - 4/28/00
United Shipping & Tech., Inc. 100,000 214,646 720,000 10/8/99
------------------------------------------------------------------------------------------------------------------------------
3,930,848 3,102,541 0.44%
------------------------------------------------------------------------------------------------------------------------------
MicroCap Growth Startec Global Com. Corp. 50,000 825,000 534,375 12/22/99
------------------------------------------------------------------------------------------------------------------------------
825,000 534,375 0.42%
------------------------------------------------------------------------------------------------------------------------------
MidCap Opportunities Anthracite Capital, Inc.,
Series B 75,000 1,500,000 1,298,250 10/29/97
United Shipping & Tech., Inc. 30,000 94,643 216,000 2/10/00
------------------------------------------------------------------------------------------------------------------------------
1,594,643 1,514,250 0.65%
------------------------------------------------------------------------------------------------------------------------------
The Contrarian Fund-TM- African Minerals, Ltd. 698,422 2,837,501 931,206 4/25/97 - 5/7/98
------------------------------------------------------------------------------------------------------------------------------
2,837,501 931,206 0.89%
------------------------------------------------------------------------------------------------------------------------------
Global Natural
Resources African Minerals, Ltd. 203,624 784,997 271,492 4/25/97 - 5/7/98
------------------------------------------------------------------------------------------------------------------------------
784,997 271,492 0.93%
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
91
<PAGE>
SEMIANNUAL REPORT
NOTE 5 SECURITIES LENDING:
Certain of the Funds lend their portfolio securities. The borrower pays fees,
at the Funds' direction, to service providers of those Funds, including RSIM.
Those payments are applied to offset amounts owed to the service providers by
the Funds. Such amounts are shown as offsets in the Statement of Operations.
During the period ended June 30, 2000, the following Funds had security
lending fees totaling:
<TABLE>
<CAPTION>
FUND FEES
-------------------------------------------------------
<S> <C>
Aggressive Growth $ --
Diversified Growth 260,252
Emerging Growth 3,688,677
The Information Age
Fund-Registered Trademark- --
RS Internet Age Fund-TM- 165,019
MicroCap Growth 91,199
MidCap Opportunities 160,189
Value + Growth --
The Contrarian Fund-TM- --
Global Natural Resources --
Partners --
-------------------------------------------------------
</TABLE>
Funds that lend securities generally receive securities issued or guaranteed
by the U.S. government or its agencies or cash as collateral in an amount at
least equal to 100% of the current market value of loaned securities. The
market value of the loaned securities is determined at the close of business
of the Funds and any additional required collateral is delivered to the Fund
on the next business day. The value of loaned securities and the value of
collateral at June 30, 2000, were as follows:
<TABLE>
<CAPTION>
VALUE OF VALUE OF
FUND LOANED SECURITIES COLLATERAL
-------------------------------------------------------------------------
<S> <C> <C>
Aggressive Growth $ -- $ --
Diversified Growth 51,185,098 53,057,800
Emerging Growth 734,555,686 728,232,350
The Information Age
Fund-Registered Trademark- -- --
RS Internet Age Fund-TM- 27,045,098 26,632,600
MicroCap Growth 17,105,686 17,552,800
MidCap Opportunities 7,523,235 7,404,700
Value + Growth -- --
The Contrarian Fund-TM- -- --
Global Natural Resources -- --
Partners -- --
-------------------------------------------------------------------------
</TABLE>
92
<PAGE>
RS FUNDS
SUPPLEMENTAL INFORMATION--UNAUDITED
MEETING OF SHAREHOLDERS
A meeting of shareholders of the RS Emerging Growth Fund was held on March
13, 2000. At the meeting, shareholders approved each of the proposals
described briefly below.
PROPOSAL 1:
To approve or disapprove the revision of the fundamental restriction relating
to investments in commodities.
PROPOSAL 2:
To approve or disapprove the revision of the fundamental restriction relating
to investments in real estate.
PROPOSAL 3:
To approve or disapprove the elimination of the fundamental restriction
relating to short sales and purchasing on margin.
PROPOSAL 4:
To approve or disapprove the revision of the fundamental restriction relating
to investments in one issuer.
PROPOSAL 5:
To approve or disapprove the revision of the fundamental restriction relating
to concentration of investments in one industry.
PROPOSAL 6:
To approve or disapprove the elimination of the fundamental restriction
relating to pledging assets.
PROPOSAL 7:
To approve of disapprove the revision of the fundamental restriction relating
to making loans.
PROPOSAL 8:
To approve or disapprove the revision of the fundamental restriction relating
to borrowings.
PROPOSAL 9:
To approve or disapprove the revision of the fundamental restriction relating
to underwriting of securities.
PROPOSAL 10:
To approve or disapprove the fundamental restriction relating to issuance of
senior securities.
PROPOSAL 11:
To approve of disapprove the elimination of the fundamental restriction
relating to investments made for the purpose of exercising control or
management.
PROPOSAL 12:
To approve or disapprove the elimination of the fundamental restriction
relating to the purchase of more than 10% of the securities of any one issuer.
PROPOSAL 13:
To approve of disapprove the elimination of the fundamental restriction
relating to investments in other investment companies.
PROPOSAL 14:
To approve of disapprove the elimination of the fundamental restriction
relating to investments in businesses less than three years old.
PROPOSAL 15:
To approve or disapprove the elimination of the fundamental restriction
relating to investments in illiquid securities.
<TABLE>
<CAPTION>
EMERGING GROWTH FOR AGAINST ABSTAIN TOTAL
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Proposal 1 25,187,853 2,517,220 1,257,386 28,962,459
Proposal 2 25,546,458 2,193,268 1,222,733 28,962,459
Proposal 3 24,874,181 2,840,188 1,248,090 28,962,459
Proposal 4 25,914,088 1,772,441 1,275,930 28,962,459
Proposal 5 26,249,299 1,549,119 1,164,041 28,962,459
Proposal 6 24,739,180 2,883,534 1,339,745 28,962,459
Proposal 7 24,999,942 2,700,505 1,262,012 28,962,459
Proposal 8 25,023,769 2,661,679 1,277,011 28,962,459
Proposal 9 25,816,453 1,821,904 1,324,102 28,962,459
Proposal 10 25,567,514 2,049,842 1,345,103 28,962,459
Proposal 11 25,619,379 2,088,425 1,245,655 28,953,459
Proposal 12 25,368,408 2,220,634 1,373,417 28,962,459
Proposal 13 25,655,884 2,129,798 1,176,777 28,962,459
Proposal 14 26,273,863 1,517,768 1,170,828 28,962,459
Proposal 15 24,906,999 2,791,222 1,264,238 28,962,459
-----------------------------------------------------------------------------------------
</TABLE>
93
<PAGE>
SEMIANNUAL REPORT
94
<PAGE>
RS FUNDS
95
<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
MANAGEMENT OF THE IBM
RETIREMENT FUNDS
Steven M. Cohen
TREASURER
Suzanne M. DuFrane
SECRETARY
INVESTMENT ADVISER
RS Investment Management, L.P.
388 Market Street, Suite 200
San Francisco, CA 94111
RS Investment Management, Inc.
(Emerging Growth Fund)
40 Tower Lane, Avon Park South
Avon, Connecticut 06011
DISTRIBUTOR
Provident Distributors, Inc.
Four Falls Corporate Center,
6th Floor
West Conshohocken, PA
TRANSFER AGENT AND DISBURSING AGENT
State Street Bank & Trust Company
c/o National Financial Data Services
Kansas City, MO
1-800-624-8025
CUSTODIAN
PFPC Trust Company
Wilmington, DE
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
San Francisco, CA
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 2000
The views expressed in this report
were those of the Funds' portfolio
managers as of the date specified,
and may not reflect the views of the
portfolio managers on the date they
are first published or at any other
time thereafter. RSIM and its
affiliates may buy or sell investments
at any time for the Funds, their other
clients or for their own accounts, and
may not necessarily do so in a
manner consistent with the views
expressed in this report. The prices
at which they buy or sell investments
may be affected favorably by the
contents of this report or the timing
of its publication. THE VIEWS EXPRESSED
IN THIS REPORT ARE INTENDED TO ASSIST
SHAREHOLDERS OF THE FUNDS IN UNDERSTANDING
THEIR INVESTMENT IN THE FUNDS
AND DO NOT CONSTITUTE INVESTMENT ADVICE;
INVESTORS SHOULD CONSULT THEIR OWN
INVESTMENT PROFESSIONALS AS TO THEIR
INDIVIDUAL INVESTMENT PROGRAMS.
96
<PAGE>
RS Funds
GROWTH
AGGRESSIVE GROWTH FUND
INVESTING IN SMALL-, MID-, AND
LARGE-CAP GROWTH COMPANIES
Managed by Jim Callinan. The
computer quotation symbol is RSAGX.
DIVERSIFIED GROWTH FUND
FOCUSING ON SMALL-CAP COMPANIES
Managed by John Wallace and John
Seabern. The computer quotation
symbol is RSDGX.
EMERGING GROWTH FUND
SEEKING TO INVEST IN AMERICA'S MOST
DYNAMIC, GROWTH-ORIENTED COMPANIES
Managed by Jim Callinan. The
computer quotation symbol is RSEGX.
THE INFORMATION AGE FUND-Registered Trademark-
TARGETING INVESTMENTS IN THE
INFORMATION TECHNOLOGY SECTOR
Managed by Ron Elijah and Rod
Berry. The computer quotation
symbol is RSIFX.
RS INTERNET AGE FUND-TM-
INVESTING IN COMPANIES LIKELY TO
BENEFIT FROM THE DEVELOPMENT OF
THE INTERNET
Managed by Cathy Baker and Jim Callinan.
The computer quotation symbol is RIAFX.
MICROCAP GROWTH FUND
FOCUSING ON COMPANIES WITH MARKET
CAPS OF $750 MILLION OR LESS
Managed by Dave Evans and Rainerio
Reyes. The computer quotation symbol is RSMGX.
MIDCAP OPPORTUNITIES FUND
SEEKING GROWTH IN MID-CAP COMPANIES
WHILE ATTEMPTING TO MODERATE RISK
Managed by John Wallace. The computer
quotation symbol is RSMOX.
VALUE + GROWTH FUND
A FUND SEEKING CAPITAL APPRECIATION
FOR THE LONG-TERM INVESTOR
Managed by Ron Elijah. The computer
quotation symbol is RSVPX.
VALUE
THE CONTRARIAN FUND-TM-
SEEKING OUT OF FAVOR INVESTMENTS
AND SHORTING OVERVALUED STOCKS
Managed by a team of investment
professionals at RS Investment Management.
The computer quotation symbol is RSCOX.
GLOBAL NATURAL RESOURCES FUND
PRIMARILY FOCUSING ON HARD ASSET
COMPANIES
Managed by Andy Pilara. The computer
quotation symbol is RSNRX.
PARTNERS FUND
A SMALL-CAP FUND USING A CASH FLOW
VALUE METHODOLOGY
Managed by Andy Pilara. The computer
quotation symbol is RSPFX.
Please read the prospectus to
learn about the Funds' objectives;
investment policies; and the special
risks associated with the RS Funds,
including international investing,
investing in smaller companies,
investing in a more limited number
of issuers and sectors or 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.
