<PAGE>
RS INVESTMENT MANAGEMENT
www.rsim.com
99 ANNUAL REPORT
[LOGO]
RS INVESTMENT MANAGEMENT
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SAN FRANCISCO, CA
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RS FUNDS
1-800-766-FUND
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[email protected]
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ACCOUNTLINK
1-800-624-8025
24 hour automated
account information
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[LOGO]
<TABLE>
<CAPTION>
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TOTAL RETURN SUMMARY - AS OF DECEMBER 31, 1999
AVERAGE
FIVE-YEAR TEN-YEAR ANNUAL
INCEPTION ONE-YEAR AVERAGE AVERAGE SINCE
RS FUNDS DATE TOTAL ANNUAL ANNUAL INCEPTION
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
The Contrarian Fund -TM- 6/30/93 38.31% 0.88% - 1.54%
Diversified Growth 8/1/96 150.21% - - 57.08%
Emerging Growth 11/30/87 182.56% 44.36% 28.52% 30.73%
Global Natural Resources 11/15/95 22.39% - - -1.24%
The Information Age Fund 11/15/95 126.22% - - 42.43%
- -Registered Trademark-
RS Internet Age Fund -TM- 12/1/99 - - - -*
MicroCap Growth 8/15/96 56.66% - - 26.86%
MidCap Opportunities 7/12/95 56.12% - - 27.62%
Partners 7/12/95 3.73% - - 6.50%
Value + Growth 5/12/92 28.43% 24.85% - 23.43%
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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
FUND INFORMATION
The Contrarian Fund-TM- ...........................5
Diversified Growth Fund ...........................9
Emerging Growth Fund .............................13
Global Natural Resources Fund ....................19
The Information Age Fund-Registered Trademark- ...23
RS Internet Age Fund-TM- .........................27
MicroCap Growth Fund .............................31
MidCap Opportunities Fund ........................35
Partners Fund ....................................39
Value + Growth Fund ..............................43
FINANCIALS
Schedule of Investments ..........................48
Statement of Assets and Liabilities ..............68
Statement of Operations ..........................70
Statement of Changes in Net Assets ...............72
Financial Highlights .............................76
Notes to Financial Statements ....................80
<PAGE>
ANNUAL REPORT
DEAR FELLOW SHAREHOLDERS
[PHOTO]
G. RANDY HECHT
CHAIRMAN & CEO
Our firm's investment focus on New Economy companies in 1999 resulted in
dramatic rewards for our shareholders. For the year, three of our ten funds had
returns in excess of 100%, another two had returns in excess of 50%, and three
more outperformed the S&P 500 Index(1). Of our two remaining funds, one was a
small-cap value fund that exceeded its benchmark and the other was our newly
opened RS Internet Age Fund-TM- that was only open for the month of December and
was still up 21.80%.
This outstanding performance was recognized by the industry through two very
important year-end awards. Jim Callinan, manager of the RS Emerging Growth Fund
and co-manager of the new RS Internet Age Fund-TM- was named Morningstar's
Domestic Fund Manager of the Year. The RS Emerging Growth Fund was up a
staggering 182.56% for the year. Just as importantly, this Fund's long-term
record of accomplishment is stellar. At year-end, it had the second best
performance record for 10 years of any diversified mutual fund in the country.
Morningstar mentioned in its write-up that the strength of the organization and
the consistency of the Fund's record had been important factors in their Manager
of the Year selection. These are two areas in which we work very hard to excel.
The second award was given by MONEY MAGAZINE, which named John Wallace one of
the top ten managers of the decade. MONEY recognized John's combined record at
Oppenheimer Capital Management, where he ran their Main Street Growth and Income
Fund through 1995, with the record he has compiled at RS, running both the
Diversified Growth and MidCap Opportunities Funds. MONEY reported his combined
record to be up 731% for the decade. John is one of the best-kept secrets in the
mutual fund industry, as he manages less than $800 million.
As of December 31, 1999, three of our funds had received Morningstar's 5-star
rating(2) for their overall performance: RS Emerging Growth, RS Diversified
Growth and The Information Age Fund-Registered Trademark-. Additionally, the RS
MidCap Opportunities Fund received a four star rating. The funds were rated
among 3,469, 2,180, and 770 domestic equity funds for the three-, five-, and
10-year periods respectively.
We continue to be very excited about investments in New Economy companies
despite the fact that many investment pundits have expressed concern over this
investment area. Our optimism is based on information that many "experts" are
not in a position to obtain. We are located in San Francisco--part of the
greater Silicon Valley area. We have been building relationships with key
venture capitalists since 1978 and are well connected with Silicon Valley
entrepreneurs. From these relationships, we know that new, private company
formation is still very robust and the quality of the new companies is high.
Senior venture capitalists are very bullish on the prospects of the companies
they are funding.
2
<PAGE>
From this increasing number of new private companies will come increasing
numbers of new public companies, some of which are highly likely to become very
significant and valuable. We are well positioned with our location, quality
analysts, and relationships to be successful in picking the winners.
Outstanding analysts are the backbone of our investment process. To that end, I
am pleased to report that we have signed two new analysts to our team. Both
analysts are receiving their M.B.A.s from Harvard University in June and will be
joining us shortly thereafter. Both have outstanding backgrounds and prior
investing experience. They competed against a number of candidates in a very
rigorous interviewing process that included making presentations to our managers
on stocks they were assigned to analyze. We strongly believe in hiring the
highest quality people with a history of winning.
As we move into the new millennium, I want to remind you to expect volatility.
It is not unusual for our growth funds and the NASDAQ to correct by 20% over a
relatively short period of time. We believe it is in your best interest to stay
invested over the long-term as outperformance tends to occur in ways that make
it very hard to time the market. Also, keep in mind the very high absolute
returns we achieved in 1999 are unlikely to be repeated.
If you would like more frequent information on our funds, I recommend that you
visit our Web site at www.rsim.com. If you have not tried our site, please do.
You will find daily NAVs, archived news articles on our funds and managers,
updates from our managers, descriptions of the way our funds are managed, and
other useful investor information.
Sincerely,
/s/ Randy Hecht
G. Randy Hecht
CHAIRMAN & CEO
RS Investment Management
[email protected]
Past performance is no guarantee of future results.
(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.
(2) Morningstar proprietary ratings reflect historical risk-adjusted performance
as of 12/31/99. The ratings are subject to change every month. Morningstar
ratings are calculated from a fund's three-, five-, and 10-year average
annual returns (if applicable) in excess of 90-day Treasury bill returns
with appropriate fee adjustments, and a risk factor that reflects fund
performance below 90-day T-bill returns. RS Emerging Growth received 5 stars
for the three-, five-, and 10-year periods. RS Diversified Growth received 5
stars for the three-year period. The Information Age Fund-Registered
Trademark- received 5 stars for the three-year period. RS MidCap
Opportunities received 4 stars for the three-year period. The top 10% of
the funds in a broad asset class receive 5 stars and the next 22.5% receive
4 stars.
[SIDENOTE]
WE HAVE BEEN BUILDING RELATIONSHIPS WITH KEY VENTURE CAPITALISTS SINCE 1978 AND
ARE WELL CONNECTED WITH SILICON VALLEY ENTREPRENEURS.
3
<PAGE>
THE CONTRARIAN FUND-TM-
SEEKING OUT OF FAVOR INVESTMENTS AND
SHORTING OVERVALUED STOCKS
[PICTURE OF TOY SOLDIERS]
<PAGE>
ANNUAL REPORT
THE CONTRARIAN FUND-TM-
Investment Style*
LARGE CAP MID CAP SMALL CAP
------------------------------
VALUE BLEND GROWTH
SENIOR PORTFOLIO
MANAGERS
PAUL H. STEPHENS
ANDREW P. PILARA, JR.
RICK BARRY
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.
- --------------------------------------------------------------------------------
FUND UPDATE
The Contrarian Fund-TM- returned a strong 38.31% in 1999, outperforming the MSCI
AC World Index(2), which finished up 25.49%. Additionally, our performance
exceeded that of the S&P 500 Index(3), which returned 21.03%. The Fund finished
the fourth quarter with an increase of 3.95%. It was a good year for the Fund.
We have rebounded from our poor performance of 1997 and 1998. We believe we have
established the analytical and investment platform for better performance moving
forward. The Fund is certainly more widely diversified. We have been patient
with old names--Ivanhoe Energy, Inc. (8.31% of the Fund as of 12/31/99), which
was up 49.6% this year. We have also been early with new ideas--our cost on
QUALCOMM, Inc. (13.93%) is $6.37 and it was trading at $176.12 as of
December 31, 1999.
The unique nature of the Fund, with our ability to short, should serve us well
in these volatile markets. Currently our short position is approximately 20% of
total assets. Our blend of longs and shorts allows us to dynamically balance
investment risk. We made money on our shorts in 1999 (+ 4%). The fact that our
shorts made money in the bull market of 1999 and 1998 (+17.6%) lends credibility
to our long/short contrarian thesis. We have an excellent team dedicated to the
short portion of our portfolio. In a bull market, we will give up some
performance because of our short positions, but in a bear market, we expect our
shorts to help our performance.
Once again, our gold and mining investments did not perform up to expectations
in 1999. To limit our exposure to these volatile sectors, we have reduced our
gold and other smaller mining company positions. Earlier in the year, we did not
think it prudent to eliminate these positions at "fire sale" prices. With the
recovery in resource stocks, we were able to get better prices as we sold some
of these stocks later in the year. Our sale program continues.
We have retained and added to our energy positions. It is hard to remember when
the underlying fundamentals of the oil and gas business have ever been better.
Despite the positive operating fundamentals and the higher cash flow returns on
capital, energy stocks are about as cheap as we have seen them in the decade of
the `90's. We particularly like natural gas. With increased drilling for natural
gas, the United States energy companies still produced less gas in the fourth
quarter of 1999 versus the fourth quarter of 1998. Led by increasing demand from
the electric generating industry, we expect natural gas demand to ratchet up to
over 4% in 2000 and 2001. With smaller supply additions and improving demand, we
expect natural gas prices to move significantly higher in the next 18 months.
Our favorite gas "plays" are:
<TABLE>
<CAPTION>
CANADA UNITED STATES
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<S> <C> <S> <C>
Anderson Exploration (2.06%) Devon (3.12%)
Encal (0.86%) EOG Resources (3.18%)
Ivanhoe Energy, Inc. (8.31%)
</TABLE>
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*Due to the investment style of the Fund, all categories within the Investment
Style box are applicable.
6
<PAGE>
RS FUNDS
THE CONTRARIAN FUND-TM- UPDATE -- CONTINUED
The following companies demonstrate a number of the qualities we look for in
contrarian investments and represent some of our largest holdings.
IVANHOE ENERGY, INC.
Ivanhoe Energy is involved in national and international exploration and
development of petroleum products. Through appreciation, it has become one of
our largest positions. As a result of land acquisitions in the San Joaquin
Valley, the company has become an important player in the California deep gas
play. The current officers and exploration team were formerly at Occidental
Petroleum and have significant experience in and around this very large natural
gas play. It looks like there is a lot of natural gas here. The question is, can
they economically recover it?
QUALCOMM, INC.
The technology sector even presented us with an opportunity. QUALCOMM is the
pioneer of code-division multiple access (CDMA) technology, used in cell phones,
wireless telecom equipment, and satellite ground stations. As mentioned
previously, our cost basis on Qualcomm is $6.37. Recently we have taken some
profits but it is still a substantial position in the Fund.
SIRIUS SATELLITE RADIO, INC. (3.84%)
This is one of two companies building a satellite radio system for automobiles.
The company intends to offer various channels of commercial-free music and
channels of news, sport, and entertainment programming for a monthly
subscription fee. Now you will be able to receive CNBC "Squawk Box" on your car
radio. We are expecting a 2001 launch for this product. Sirius currently has
alliances with Ford, Mazda, Jaguar, Volvo, BMW, and Land Rover.
We look to build on the strong performance of 1999. Our three-portfolio manager
strategy has produced good results and our ability to short puts us in a strong
position in the current market environment.
Thank you for your trust and support.
/s/ Paul H. Stephens
Paul H. Stephens
PORTFOLIO MANAGER
/s/ Andrew P. Pilara, Jr.
Andrew P. Pilara, Jr.
PORTFOLIO MANAGER
/s/ Rick Barry
Rick Barry
PORTFOLIO MANAGER
<TABLE>
<CAPTION>
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GOOD IDEAS THAT WORKED
REALIZED AND UNREALIZED GAIN
YEAR-TO-DATE THROUGH 12/31/99
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<S> <C>
Qualcomm, Inc. $22,102,160
Apple Computer 4,339,851
Inco, Ltd. 4,176,495
Ivanhoe Energy, Inc. 3,896,794
Ivanhoe Mines Ltd. 1,684,439
PT Apac Centertex Corp. 1,416,168
Diamond Fields Int'l. 1,183,121
FORE Systems, Inc. 1,063,141
China Yuchai International 921,378
Seagate Technology, Inc. 906,113
<CAPTION>
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GOOD IDEAS AT THE TIME
REALIZED AND UNREALIZED LOSS
YEAR-TO-DATE THROUGH 12/31/99
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<S> <C>
Phillip Morris $ 1,618,940
Kmart 1,000,375
DiamondWorks, Ltd. 835,894
Micron Electronics 718,731
Policy Management Systems 675,578
EOG Resources Inc. 664,798
Central European Media Enterprises 662,509
Lafarge Corporation 647,423
Atlantic Gulf Comm. 636,926
Southdown, Inc. 597,416
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</TABLE>
December 31, 1999
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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.
7
<PAGE>
ANNUAL REPORT
ASSETS UNDER MANAGEMENT: $115.91 million
ASSET ALLOCATION
[PIE CHART]
<TABLE>
<S> <C>
Shorts 18.7%
Financial Services 3.2%
Transportation Services 3.4%
Gold Mining 4.3%
Other & Other Assets 1.5%
Construction/Infrastructure 6.3%
Nickel Mining 6.6%
Media 7.5%
Computer Technology Services 13.8%
Telecommunications 15.1%
Energy 19.6%
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100.0%
</TABLE>
DATA AS OF DECEMBER 31, 1999
TOP TEN HOLDINGS
QUALCOMM, Inc. .........................13.93%
Ivanhoe Energy, Inc. ....................8.31%
Inco Ltd. ...............................6.59%
Sirius Satellite Radio, Inc. ............3.84%
Metromedia International Group, Inc. ....3.65%
EOG Resources, Inc. .....................3.18%
Dundee Bancorp, Inc. ....................3.18%
Devon Energy Corporation ................3.12%
Apple Computer, Inc. ....................3.09%
Sapient Corporation .....................3.02%
RESULTS OF A HYPOTHETICAL $10,000 INVESTMENT (if invested on 6/30/93)
[CHART]
<TABLE>
<CAPTION>
The Contrarian MSCI AC
Fund-TM- World Index(2)
<S> <C> <C>
06/93 $ 10,000 $ 10,000
09/94 $ 11,078 $ 11,348
09/95 $ 13,308 $ 12,384
09/96 $ 16,440 $ 13,741
09/97 $ 15,244 $ 16,695
09/98 $ 7,520 $ 15,916
12/99 $ 11,042 $ 24,086
</TABLE>
PERFORMANCE UPDATE
<TABLE>
<CAPTION>
FIVE-YEAR TOTAL AVERAGE ANNUAL
ONE-YEAR AVERAGE ANNUAL RETURN SINCE RETURN SINCE
TOTAL RETURN RETURN INCEPTION(1) INCEPTION(1)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
The Contrarian Fund-TM- 38.31% 0.88% 10.42% 1.54%
MSCI AC World Index(2) 25.49% 16.76% 140.86% 14.46%
S&P 500 Index(3) 21.03% 28.55% 273.22% 22.43%
Performance data quoted represents past performance, and past performance is no 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 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.
8
<PAGE>
DIVERSIFIED GROWTH FUND
FOCUSING ON
SMALL-CAP COMPANIES
[PICTURE OF FOUR PLANTS]
<PAGE>
ANNUAL REPORT
DIVERSIFIED GROWTH FUND
INVESTMENT STYLE
LARGE CAP MID CAP SMALL CAP
VALUE BLEND GROWTH
[PHOTO]
JOHN L. WALLACE
FUND PHILOSOPHY
The RS Diversified Growth Fund seeks to achieve long-term capital growth by
investing primarily in small-cap value and growth stocks across diverse
companies and sectors. Our flexible, bottom-up approach is based on our search
for a growth catalyst and trend analysis. We look for well-managed companies
with improving fundamentals that may be positioned for growth. Our formula for
long-term success also includes a disciplined approach to risk: losses are
eliminated quickly, and we are constantly looking for attractive new
opportunities.
[PHOTO]
JOHN H. SEABERN
- --------------------------------------------------------------------------------
FUND UPDATE
For the year, the RS Diversified Growth Fund returned an exemplary 150.21%. We
are quite pleased with our performance, especially compared to our primary
benchmark, the Russell 2000 Index(2), which returned 21.26% for the same period.
We are also pleased to have outperformed the S&P 500 Index(3), up 21.03% for the
year. The Fund recorded a strong fourth quarter return of 62.94%.
The Fund primarily invests in equity securities with market capitalizations
under $1.5 billion. While small-cap companies, as defined by the Russell 2000
Index, have underperformed the large-cap S&P 500 since early 1994, they have
shown signs of improvement in 1999--outperforming in the fourth quarter by over
300 basis points. Not only have small-cap stocks recently begun to outperform
their large-cap counterparts, there continues to be a strong case for investing
in small-cap companies. Reasons include their 50% valuation discount and more
rapid earnings growth relative to large-cap stocks. We remain very bullish on
the small-cap sector.
There is no question that last year was an exceedingly strong year for
investors, with many equity market indices up over 20% in 1999. However, when
one looks at the stocks that make up such averages, it is surprising that there
were more stocks down than were up in 1999. In fact, of the 4,900 actively
traded issues, only 49% had higher prices at the close on December 31, 1999 than
on the same day in 1998. To make matters even tougher in 1999, it was a market
where strong stocks got stronger and weak stocks remained weak. This was
evidenced by the fact that stocks that were up showed an average appreciation of
135%, far exceeding the 31% depreciation of the average stock that was down for
the year (source: Jarrett Investment Research). This means that sector and stock
selection has been, and will continue to be, key to generating top quartile
returns. This requires an active, bottom-up management style.
Our success in 1999 was primarily due to our exposure in the market's leading
sectors: telecommunications, technology, media and the Internet. While all of
these sectors have their own improving fundamentals, we can attribute the
success in our non-Internet investments largely to the additional opportunities
brought out by the rapid growth of the Internet. The Internet revolution
continues to affect a wide range of businesses and is creating new opportunities
for products and services while altering the business plans of many existing
industrial and consumer service companies. We believe the Internet will provide
us with many short- and long-term opportunities as this sector experiences the
inevitable shakeout and reappraisal in expectations and valuations.
One of our more successful investments in 1999 was ValueVision International,
Inc. (1.50% of the Fund as of 12/31/99). ValueVision is the nation's third
largest home shopping network as measured by the number of households reaching
their broadcast signal. We began buying shares of ValueVision in March 1999
after NBC announced they were taking a 20% stake in the company and would be an
integral strategic partner in negotiating carriage agreements with cable system
operators and helping to develop a coherent e-commerce strategy.
- --------------------------------------------------------------------------------
10
<PAGE>
RS FUNDS
DIVERSIFIED GROWTH FUND UPDATE -- CONTINUED
The company has also made changes to its merchandising and programming
initiative, which was designed to differentiate the channel from larger
competitors while also aiming to increase revenues per household. So far the
company has exceeded our expectations and appears to be on its way to becoming a
fully integrated entertainment/commerce network. Despite our investment almost
quadrupling in 1999, we believe ValueVision still has plenty of upside.
Our underweighting in the healthcare sector, our limited exposure to biotech
industries in particular, resulted in some missed opportunities late in 1999. We
believe there are many innovative companies in the biotech sub-sector and are
seeking additional investment opportunities.
As we begin the year 2000, crosscurrents in the equity market are very strong.
The market has been making new highs in the face of rising interest rates. The
biggest driver to the stock market has been the incredible strength of the U.S.
economy and recovering foreign economies, which has translated into better than
expected corporate profits. The increase in interest rates has been somewhat
surprising, but at the same time needed to cool off expanding economic growth.
We do not think interest rates will exceed 7% during the year. We base this
opinion on the fact that global bond yields have already risen 200 basis points,
oil prices are at new highs, refinancing of home mortgages has slowed
dramatically and a reversal of Y2K related spending should all temper growth.
Finally, we believe the unprecedented volatility in today's market is due in
part to an important underlying trend--a gradual shift in leadership from
large-cap growth stocks to small-cap growth stocks.
Our philosophy of searching for above average growth prospects and a disciplined
approach to risk management paid off in 1999. We are very excited about the
prospects for small-cap growth stocks in the year 2000 and feel the Fund is well
positioned for the future. We want to remind investors that successful equity
investing is not a short-term proposition and therefore, we remain focused on
the long-term.
A word of caution as we conclude--stocks of New Economy companies are subject to
periods of high volatility. It is not unusual for the stocks to make a 20%
correction. Additionally, it is highly unlikely that the 1999 returns will be
repeated. Having said this, we are very excited about the prospects for New
Economy stocks going forward.
On behalf of the entire Diversified Growth Fund team, we thank you for your
support.
/s/ John L. Wallace
John L. Wallace
PORTFOLIO MANAGER
/s/ John H. Seabern
John H. Seabern
CO-PORTFOLIO MANAGER
<TABLE>
<CAPTION>
- ------------------------------------------------
GOOD IDEAS THAT WORKED
REALIZED AND UNREALIZED GAIN
YEAR-TO-DATE THROUGH 12/31/99
- ------------------------------------------------
<S> <C>
Primus Telecommunications Grp. $5,070,406
ValueVision International, Inc. 3,658,954
Startec Global Communication 3,165,522
MRV Communications, Inc. 3,040,812
InfoNow Corp. 3,007,272
The Titan Corp. 2,777,206
CapRock Communications Corp. 2,614,708
DSET Corporation 2,607,450
Sawtek, Inc. 2,475,719
Abgenix 2,384,695
- ------------------------------------------------
<CAPTION>
- ------------------------------------------------
GOOD IDEAS AT THE TIME
REALIZED AND UNREALIZED LOSS
YEAR-TO-DATE THROUGH 12/31/99
- ------------------------------------------------
<S> <C>
Amer. Bank Note Holographic $1,973,195
Condor Technology Solutions 1,313,743
Sabratek Corp. 850,255
Frontier Insurance Group 816,640
Boston Communications Group 589,955
Stamps.Com 576,912
Digi International, Inc. 559,770
First Sierra Financial, Inc. 554,699
SportsLine.com, Inc. 516,701
Balanced Care Corp. 509,252
- ------------------------------------------------
</TABLE>
December 31, 1999
- --------------------------------------------------------------------------------
International investing can involve greater currency fluctuations and less
political and economic stability. Investing in smaller companies can involve
more volatility, less liquidity, and less publicly available information.
Options and futures may not be perfectly correlated to the underlying index or
security. High-yielding, lower-quality debt securities may be considered to be
of lower standing and more speculative.
11
<PAGE>
ANNUAL REPORT
ASSETS UNDER MANAGEMENT: $304.75 million
ASSET ALLOCATION
[PIE CHART]
<TABLE>
<S> <C>
Food & Restaurants 1.1%
Industrial 1.7%
Other & Other Assets 3.2%
Consumer & Specialty Retail 3.3%
Business/Commercial Services 3.9%
Media 6.3%
Medical/Healthcare/Biotech 7.4%
Energy 7.7%
Short Term Investments 10.0%
Construction/Infrastructure 0.5%
Technology 23.9%
Internet Commerce & Services 17.4%
Telecommunications Equip. & Svcs. 13.6%
</TABLE>
DATA AS OF DECEMBER 31, 1999
TOP TEN HOLDINGS
<TABLE>
<S> <C>
Primus Telecom. Group, Inc. .............3.03%
Startec Global Communications Corp. .....1.78%
Computer Associates Intl., Inc. .........1.72%
Verity, Inc. ............................1.69%
ValueVision International, Inc. .........1.50%
Ziff-Davis, Inc. ........................1.50%
Stamps.com, Inc. ........................1.42%
United Shipping & Technology, Inc. ......1.41%
LodgeNet Entertainment Corp. ............1.34%
UnitedGlobalCom, Inc. ...................1.32%
</TABLE>
RESULTS OF A HYPOTHETICAL $10,000 INVESTMENT (IF INVESTED ON 8/1/96)
[CHART]
<TABLE>
<CAPTION>
Diversified Growth Russell 2000
Fund Index(2)
<C> <C> <C>
08/96 $ 10,000 $ 10,000
03/97 $ 11,870 $ 10,847
09/97 $ 16,670 $ 14,482
03/98 $ 18,665 $ 15,405
09/98 $ 14,405 $ 11,728
03/99 $ 20,976 $ 12,901
09/99 $ 28,705 $ 13,965
12/99 $ 46,774 $ 16,540
</TABLE>
PERFORMANCE UPDATE
<TABLE>
<CAPTION>
THREE-YEAR TOTAL AVERAGE ANNUAL
ONE-YEAR AVERAGE ANNUAL RETURN SINCE RETURN SINCE
TOTAL RETURN RETURN INCEPTION(1) INCEPTION(1)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Diversified Growth Fund 150.21% 55.58% 367.74% 57.08%
Russell 2000 Index(2) 21.26% 13.08% 65.40% 15.87%
S&P 500 Index(3) 21.03% 27.55% 138.63% 28.99%
</TABLE>
Performance data quoted represents past performance, and past performance is
no guarantee of future results. You should realize that investment return and
principal value will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost.
- -------------------------------------------------------------------------------
(1)Inception date 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
$467 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.
12
<PAGE>
EMERGING GROWTH FUND
SEEKING TO INVEST IN AMERICA'S MOST DYNAMIC,
GROWTH-ORIENTED COMPANIES
[PICTURE OF BABY BIRD AND EGG]
<PAGE>
ANNUAL REPORT
EMERGING GROWTH FUND
INVESTMENT STYLE
LARGE CAP MID CAP SMALL CAP
VALUE BLEND GROWTH
[PHOTO]
JAMES L. CALLINAN
FUND PHILOSOPHY
The RS Emerging Growth Fund seeks capital appreciation by investing primarily in
smaller, rapidly growing companies. The Fund is actively managed, involving
hands-on fundamental research that includes extensive travel and visits with
company managements. The Fund seeks to invest in companies that are growing at
least 20% annually, are market share leaders, and are managed by executives who
can leverage a competitive advantage and consistently execute in today's
business environment. The Fund is intended for investors with long-term
investment goals.
- --------------------------------------------------------------------------------
FUND UPDATE
The stock market held a party in 1999, but invited very few segments of the
market. We happened to have many relatives on the guest list from the
technology, Internet and biotech branches of the family. The RS Emerging Growth
Fund saw an increase of 75.17% in the fourth quarter, against a gain of 33.39%
in the benchmark Russell 2000 Growth Index(2). We managed to outperform the
benchmark in every quarter this year, leading to a calendar-year return of
182.56% for the Fund, against a 43.09% rise in the benchmark.
True revenue growth, it seems, is an elusive attribute in the S&P 500 Index(3).
Fund managers need it like they need oxygen and will buy virtually anything to
get it. Large-cap managers were so desperate for faster earnings growth that
they pushed QUALCOMM's stock price up 40-fold in 1999 after only a 25% revenue
growth year. Happily, small-cap growth managers have quite the opposite
situation.
Our universe of 900 stocks is what we research and select from to build the
Fund's portfolio. This universe is blessed with an overabundance of firms
enjoying accelerating revenue growth. After a quick study of prior years'
universes, we noticed that our 1997 universe holdings enjoyed accelerating
revenue growth rates from 32% in 1997, to 55% in 1998, and to 85% in 1999. This
1997 universe did not include 1998 or 1999 Initial Public Offerings.
We believe that the Internet, technology, and biotechnology firms stimulated
this revenue acceleration. We feel that our opportunities for uncovering
fast-growing companies are open-ended because the present 1999 universe of
holdings generated even faster growth rates, averaging 105% in 1999. Technology
stocks in the universe in 1999 produced revenue growth of 125%, so as these
names become a larger percentage of the Fund, the overall revenue growth rates
of companies owned by the Fund should grow. The Fund's 182.56% gain in 1999
seems more reasonable in light of ever faster revenue growth rates. We believe
that strong stock market demand for these emerging growth companies will
continue in 2000.
The superlative performance recorded in 1999 was what we had believed would
happen someday. Many positive forces collided in the fourth quarter of 1999 to
promote such gains. Mid- and large-cap funds capitulated, selling the Cokes and
Gillettes and buying fast growth technology issues. Large company earnings
growth slowed relative to smaller technology issues. The NASDAQ exchange was
unable to handle the dramatic surge in demand from mutual funds and "day trader"
volumes. Prices of the best firms went up dramatically. The only prediction of
ours that went against us was interest rates. Unfortunately for us, the Fed will
probably make our perennial bullish interest rate outlook untrue again in 2000.
14
<PAGE>
RS FUNDS
EMERGING GROWTH FUND UPDATE -- CONTINUED
That being said, we believe large-cap growth funds will continue to seek faster
growth through technology shares. Pension plan sponsors will reallocate assets
toward small-cap managers (heretofore woefully underweighted in pension plans),
and away from large-cap index funds. Many exciting new IPOs in the fastest
growth segments of the U.S. economy will propel the revenue growth rates of many
small-cap holdings and should keep small-cap funds performance strong in 2000.
Most intriguing about 1999's performance, besides the narrowness of the market,
was the breadth of our winners. We had about 100 different stocks that more than
doubled in price. Of these, one of our best performers was Knight/Trimark Group,
Inc. (2.05% of the Fund as of 12/31/99). Knight/Trimark's revenue benefited from
explosive "day trading" activity in Internet and technology stocks. Several
times during 1999, Knight/Trimark's stock price soared to seemingly
unsustainable heights and fell quickly thereafter only to reach an even higher
pinnacle several months later. As we have stated many times before, we try to
profit from the price volatility of our companies. Knight/Trimark was such a
position during 1999. Upon each high in price, we sold; and close to the interim
lows, we repurchased shares, adding to our already respectable gains.
Another large return came from Network Solutions, Inc. (1.99%), which had a
superstar year in 1999. Network Solutions management steered the firm through
two equity offerings, tackled regulatory governance issues, tacked on over 100%
revenue growth, and still enjoyed a 232% gain in 1999. They hired a new CEO, the
former co-founder of First Call (division of Thompson Information). Network
Solutions lobbied the Clinton Administration very hard, dealt with two different
White House over-seers, and beat back a potentially onerous regulatory scheme.
Network Solutions counterattacked the Internet Corporation for Assigned Names
and Numbers (ICANN) board, who sought to wrest control of the domain name
registration business and, more importantly, its day-to-day maintenance from
U.S. firms. Fortunately, ICANN's plans were incomprehensible to trademark
attorneys, legislators, and the Clinton Administration. Network Solutions picked
up its revenue growth pace in 1999 from 100% in 1998 to 130% in 1999, despite a
35-40% price cut. We are still of the opinion that there will be 300 million
names issued over the next 3-5 years. We believe Network Solutions will have a
50-60% market share and garner revenue of $20-25 per year from each name,
yielding $3-4 billion in annual revenues and 20% operating margins. We made a
return in excess of 300% on Network Solutions in 1999.
Another big winner came from an emerging media industry subsegment, satellite
broadcasting. Its valuation benefited from highly valued cable television
acquisitions by AT&T. Our EchoStar Communications Corporation (1.35%) investment
idea was a result of our realization that the digital broadcast satellite (DBS)
industry's 500 channel video product offering was far superior to cable
television's, and that this emerging industry had consolidated down to only two
players. Regulatory decrees, capital intensity, and the burdensome expense of
subscriber marketing forced 3-4 secondary players into the arms of Direct TV
(owned by GM Hughes) and EchoStar's Dish Network. Almost immediately after this
consolidation, Congress passed legislation allowing the DBS players to carry
local broadcast signals. For many major metropolitan dwellers, the absence of
local stations was the only reason not to subscribe.
<TABLE>
<CAPTION>
- -------------------------------------------------
GOOD IDEAS THAT WORKED
REALIZED AND UNREALIZED GAIN
YEAR-TO-DATE THROUGH 12/31/99
- -------------------------------------------------
<S> <C>
Bea Systems, Inc. $89,215,192
Network Solutions 51,359,339
Knight/Trimark Group Inc. 49,982,964
EchoStar Communications 40,176,625
Check Pt. Software Tech. 36,223,637
Proxicom, Inc. 33,166,186
E-Tek Dynamics, Inc. 30,942,900
Veritas Software 26,118,603
Broadvision, Inc. 25,783,562
Emmis Communications 23,526,217
- -------------------------------------------------
<CAPTION>
- -------------------------------------------------
GOOD IDEAS AT THE TIME
REALIZED AND UNREALIZED LOSS
YEAR-TO-DATE THROUGH 12/31/99
- -------------------------------------------------
<S> <C>
EToys, Inc. $ 7,463,772
Biomatrix, Inc. 4,758,215
Espeed, Inc. 4,613,341
Stamps.Com 4,447,884
Infoseek Corporation 4,348,118
ECsoft Group plc 4,314,919
E-Loan, Inc. 4,238,780
J. Jill Group, Inc. 4,218,068
Wet Seal, Inc. 3,909,676
Liquid Audio, Inc. 3,805,349
- -------------------------------------------------
</TABLE>
15
<PAGE>
ANNUAL REPORT
EMERGING GROWTH FUND UPDATE -- CONTINUED
Almost overnight, what was supposed to be a "rural only" market was transformed
into the leading form of video entertainment in the U.S. Of the new subscribers,
75% come from the suburbs and major metropolitan areas. A formerly optimistic
scenario of a potential 15-20 million-subscriber market segment suddenly grew to
100 million households. We believe the duopoly status of the industry and the
barriers created by capital intensity, satellite slot ownership, and economies
of scale in marketing costs ensure a rosy future for EchoStar. In the future, as
Internet content forms become more segmented, the Internet hosting industry will
broadcast these data feeds to homes at very high speeds, using the more
efficient point-to-multipoint configuration of satellite technologies, rather
than the confusing jumble of the telephone system. Incremental revenues from
these and other such exploitations will more than double monthly revenues per
subscriber from $40-50 to $80-100 per month. As revenue growth rates accelerate,
our view is that DBS stocks will sell at a significant premium to the cable
firms' private market values of $5,000 per subscriber. We believe that the stock
market will value future subscribers at $10,000 per subscriber on 15-20 million
subscribers for each company. This implies a stock price increase of over 10
times from today's level.
Another fruitful vein of the mine this year was the Internet software and
service sub-sector. Our leading software gainers here were Macromedia, Inc.
(0.59%), BEA Systems, Inc. (3.88%), Business Objects S.A. (1.04%), Check Point
Software Technologies, Ltd. (1.31%), VeriSign, Inc. (0.00%), and Vignette
Corporation (0.61%). We found gold in three different segments of the software
field. First, the Internet as a software platform, separate and distinct from
the personal computer, breathed new life into Macromedia, BEA Systems, and
Business Objects, which quickly repositioned or restarted product lines to
attack the Internet. Prior to that, these firms had established but withering
franchises to protect, but they quickly retargeted their businesses to exploit
the Internet.
Macromedia had a dominant position in CD-ROM development; their new products
design and build Web sites. BEA System's original Tuxedo product formed the
infrastructure for many mainframe and client-server transaction processing
services; they now provide the underlying infrastructure for the most complex
Web site activities. Business Objects found the Web to be a much broader market
for its analysis software. Business Objects' products analyze behavior and data
patterns streaming from Web sites and Internet activity to help business
analysts. New Internet-centric products sold easily into the hungry, installed
bases for these three firms.
Secondly, as Internet software became mission critical and as corporations
rushed to catch the venture-driven, "dot.com" company technology spending, many
newly invented software products became indispensable utilities to run Web
sites. Check Point Software makes the leading firewall software platform to
protect corporations from unwarranted access. Its Firewall-1 product fought back
against Cisco Systems and became the leading Virtual Private Network (VPN)
firewall provider as well. Firewall-1 is easy-to-use, easy-to-program for uses
that are more complex, and well designed to please Corporate America's newest
rising Management Information System (MIS) star--the Network Administrator.
Check Point Software also hired an ex-IBM executive to become their U.S.
operations president. He has penetrated larger existing accounts as only an
IBM'er can. Check Point Software rose from $18 to $110 during 1999. Its VPN
market now forms the nucleus of business-to-business e-commerce.
Another mission critical software pillar upon which the Internet rests is
VeriSign. VeriSign encrypts web sites, messages, and transactions. It is
embedded into many important operating systems, such as Windows NT and several
flavors of UNIX. VeriSign is embryonic compared to Check Point Software, but its
outsourcing strategy, accompanied by a recurring revenue business model, is
potentially more attractive.
16
<PAGE>
RS FUNDS
EMERGING GROWTH FUND UPDATE -- CONTINUED
Vignette Corporation competes in the very crowded field of content management.
It came public first and grabbed the fickle interest of Wall Street analysts and
product communities. Its product holds content for Web publishing on corporate
Web sites, which must change and evolve frequently to retain Web surfers
interests. However, given the growing disenchantment of the Internet public with
business-to-consumer e-commerce, it may be fortunate that its Web commerce
product did not become a mainstay of revenues. Vignette may not remain a leading
seller in 2000, but it has leading Web publishing, content, and management
mindshare.
Above, we discussed examples of the explosive revenue-growth companies for which
general mutual fund mangers are hungry. We believe that this will continue into
2000. We stand ready to uncover the newest generation of these emerging growth
firms, just as we have since 1996.
A word of caution as we conclude--stocks of New Economy companies are subject to
periods of high volatility. It is not unusual for the stocks to make a 20%
correction. Additionally, it is highly unlikely that the 1999 returns will be
repeated. Having said this, we are very excited about the prospects for New
Economy stocks going forward.
Thank you for your support.
/s/ JAMES L. CALLINAN
James L. Callinan
PORTFOLIO MANAGER
December 31, 1999
- --------------------------------------------------------------------------------
Investing in smaller companies can involve risks such as less publicly available
information than larger companies, volatility, and less liquidity.
17
<PAGE>
ANNUAL REPORT
ASSETS UNDER MANAGEMENT: $3.58 billion
ASSET ALLOCATION
[PIE CHART]
<TABLE>
<S> <C>
Transportation 0.6%
Consumer Specialty Retail 1.6%
Network Systems & Products 2.4%
Short Term Investments 2.9%
Other & Other Assets 3.6%
Financial Services 3.8%
Medical/Healthcare/Biotech 4.6%
Media 8.7%
Telecommunications Equip. & Svcs. 13.0%
Internet Commerce and Services 23.7%
Computer Software 21.2%
Technology 13.9%
</TABLE>
DATA AS OF DECEMBER 31, 1999
TOP TEN HOLDINGS
<TABLE>
<S> <C>
BEA Systems, Inc. 3.88%
Knight/Trimark Group, Inc. 2.05%
Network Solutions, Inc. 1.99%
E-Tek Dynamics, Inc. 1.65%
EchoStar Communications Corp. 1.35%
Check Point Software Tech., Ltd. 1.31%
Proxicom, Inc. 1.20%
24 / 7 Media, Inc. 1.15%
Emmis Communications Corp. 1.14%
Netopia, Inc. 1.09%
</TABLE>
RESULTS OF A HYPOTHETICAL $10,000 INVESTMENT (IF INVESTED ON 11/30/87)
[CHART]
<TABLE>
<CAPTION>
Emerging Growth Russell 2000
Fund Growth Index(2)
<S> <C> <C>
11/30/87 $ 10,000 $ 10,000
12/89 $ 20,776 $ 15,970
12/91 $ 36,140 $ 19,940
12/93 $ 37,759 $ 24,364
12/95 $ 49,045 $ 31,151
12/97 $ 70,633 $ 39,147
12/99 $ 255,502 $ 56,705
</TABLE>
PERFORMANCE UPDATE
<TABLE>
<CAPTION>
FIVE-YEAR TEN-YEAR
AVERAGE AVERAGE TOTAL AVERAGE ANNUAL
ONE-YEAR ANNUAL ANNUAL RETURN SINCE RETURN SINCE
TOTAL RETURN RETURN RETURN INCEPTION(1) INCEPTION(1)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Emerging Growth Fund 182.56% 44.36% 28.52% 2455.02% 30.73%
Russell 2000 Growth Index(2) 43.09% 18.99% 13.51% 467.05% 15.43%
S&P 500 Index(3) 21.03% 28.55% 18.20% 778.85% 19.69%
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 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.
18
<PAGE>
GLOBAL NATURAL RESOURCES
PRIMARILY FOCUSING
ON HARD ASSET COMPANIES
[PICTURE OF HAMMER BALANCING ON A LOG]
<PAGE>
ANNUAL REPORT
GLOBAL NATURAL RESOURCES FUND
INVESTMENT STYLE*
LARGE CAP MID CAP SMALL CAP
VALUE BLEND GROWTH
[PHOTO]
ANDREW P. PILARA, JR.
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.
FUND UPDATE
- --------------------------------------------------------------------------------
The RS Global Natural Resources Fund finished the year with a strong 22.39%
against the Lipper Natural Resources Index's(2) return of 31.40%. The Fund was
down 9.78% in the fourth quarter. The improved performance of resource stocks
followed increases in commodity prices. Oil prices are currently at a nine-year
high. Prices have increased to levels not seen since the Gulf War in 1990. Even
with the warmest November in 50 years, and increased natural gas drilling, the
price of natural gas is moving higher. This is a reflection of strong and
increasing demand. Additionally, pulp prices are increasing, as are base metal
prices. The operating fundamentals of natural resource companies are
underpinning stronger stock prices. In 1987-88 and 1993-94, the last two
occasions when commodity prices spiked upwards, value cyclicals (resource
stocks) outperformed growth stocks.
Our Canadian natural gas investments did not live up to our expectations in
1999, but we still feel that the supply/demand characteristics are very positive
for those companies. For more than a year, we have been talking about the
positive fundamentals in energy, and in particular Canadian natural gas. Even
with the warm November weather, Canadian natural gas prices were higher in 1999
than at any time since the industry was deregulated in 1986. Prices averaged
about $2.70 (Canadian) per thousand cubic feet in 1999 versus $1.95 (Canadian)
in 1998. This price increase has been supported by increased demand from
pipeline expansion into the United States and declining United States supply.
Natural gas demand in the United States is growing at 2.6% annually, and is
seeing increased demand from both retail-level and utility usage. Utilities in
the U.S. are increasingly shifting to natural gas feed in the search for cleaner
burning, more efficient fuels. Canadian gas could feed this demand, but has long
been stranded in Canada due to limited regional gas-gathering and national
pipeline infrastructure. Canadian natural gas companies could not find
ready-access to important U.S. markets, and so sold at discount prices. During
1999, the long-needed Canadian pipeline infrastructure projects approached
completion, resulting in better deliverability of Canadian gas to U.S. markets,
and much stronger pricing--nearly on-par with U.S. gas prices. Thus, without any
increased capital spending on the part of Canadian exploration and production
companies, their operating margins and profitability have improved markedly.
It looks like the U.S. needs more Canadian gas at a time when Canada is very
short of gas. Our thesis on this natural gas shortage is taking place during
record natural gas drilling activity in Canada and increased gas drilling in the
U.S. Like the Queen of Hearts in Alice in Wonderland, the natural gas producers
are running fast to increase production, but they are "standing in place" as
demand continues to outstrip supply additions. Commodity prices and fundamentals
are very strong, yet the prices of Canadian energy stocks have only just begun
to reflect this economic reality.
- --------------------------------------------------------------------------------
*Due to the investment style of the Fund, all categories within the Investment
Style box are applicable.
20
<PAGE>
RS FUNDS
GLOBAL NATURAL RESOURCES FUND UPDATE -- CONTINUED
Our natural gas favorites are (percentages of the Fund as of December 31, 1999):
<TABLE>
<CAPTION>
CANADA UNITED STATES
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Anderson Exploration, Ltd. (6.11%) The Coastal Corp. (2.72%)
Berkley Petroleum Corp. (3.84%) Devon Energy Corp. (3.60%)
Calahoo Petroleum Corp. (3.65%) EOG Resources, Inc. (3.08%)
Encal Energy, Ltd. (6.19%)
Place Resources Corp. (6.24%)
</TABLE>
Unlike natural gas, oil prices are driven more by politics than they are by
fundamentals. Currently, there is a lot of discussion concerning OPEC's desire
to sustain current supply cuts until the OPEC heads of state meet in September
2000. We believe this would create oil shortages with oil prices approaching
$40. We do not think this is what Saudi Arabia has in mind. It is our
expectation that the Saudi's will increase production by at least 1 million
barrels per day. Even with full restoration of the production cuts, we estimate
that demand would still exceed supply in the fourth quarter of 2000. We are
still very comfortable predicting $20-22 a barrel for this year. That is still
an attractive price considering exploration costs are $6-8 a barrel. Therefore,
an average price of $20-22 is very favorable for our energy investments.
We also like pulp market oppotunities. Pulp is used in the production of paper
and paper products. Pulp inventories are at their lowest level in five years.
There is currently a 19-day supply and no new pulp capacity is scheduled in
North America for the next 12-18 months. We are estimating pulp demand growth of
5% this year. We own Canfor Corporation (5.90%), the second largest pulp
producer in Canada. Under CEO David Emerson the company has established a more
dynamic growth strategy.
With these supply shortages and price increases, we are expecting their earnings
to increase 45% this year.
We also like the current environment for real estate companies (C corporations).
We favor Class A office buildings in central business districts (CBD). Occupancy
rates are at all-time highs. The Real Estate Investment Trust market has dried
up for raising equity, so we see very little CBD office development in most
cities. Capital has been restricted in the real estate industry since the fall
of 1998. Supply and demand shifts make real estate appreciate. The potential
restrictions on supply should continue to drive returns on real property. We own
Brookfield Properties Corporation (5.41%), which primarily owns Class A office
buildings in New York, Boston, and Toronto. This is a superbly managed company
that is repurchasing significant amounts of its stock. We estimate that the
stock is selling at 50% of net asset value.
While we achieved good performance in 1999, we believe this is the beginning of
a secular recovery in resource stocks. We see increasing worldwide industrial
production growth in the next two years, a changed mindset of resource company
management that is now looking to increase capital returns, and very cheap
stocks.
Thank you for your trust and support.
/s/ ANDREW P. PILARA, JR.
Andrew P. Pilara, Jr.
PORTFOLIO MANAGER
<TABLE>
<CAPTION>
- ------------------------------------------------
GOOD IDEAS THAT WORKED
REALIZED AND UNREALIZED GAIN
YEAR-TO-DATE THROUGH 12/31/99
- ------------------------------------------------
<S> <C>
Western Gas Resources, Inc. $1,620,304
Canadian Hunter Exploration 1,480,244
Precision Drilling Corporation 550,549
Canfor Corp. 544,323
Berkley Petroleum Corp. 468,286
Cypress Energy, Inc. 421,471
Purcell Energy, Ltd. 392,179
Petro-Canada 290,370
Compton Petroleum Corp. 256,659
Texaco, Inc. 242,483
<CAPTION>
- ------------------------------------------------
GOOD IDEAS AT THE TIME
REALIZED AND UNREALIZED LOSS
YEAR-TO-DATE THROUGH 12/31/99
- ------------------------------------------------
<S> <C>
Fresh Del Monte Produce, Inc. $ 863,376
MAXXAM 354,929
EEX Corp. 322,273
Elk Point Resources, Inc. 234,307
Richland Petroleum Corp. 195,993
Brookfield Properties 185,858
Ashanti Goldfields Co., Ltd. 175,612
EOG Resources, Inc. 162,971
EdperBrascan Corp. 125,278
Nuevo Energy Company 118,390
</TABLE>
December 31, 1999
- --------------------------------------------------------------------------------
International investing can involve greater currency fluctuations and less
political and economic stability. Investing in smaller companies can involve
more volatility, less liquidity, and less publicly available information.
Investing in a more limited number of issuers and sectors can be subject to
greater market fluctuation. Options and futures may not be perfectly correlated
to the underlying index or security. Short selling is the sale of a borrowed
security, and the price of the security can increase between the date the
security is sold and the date when the fund must replace it. Investing in a
particular sector can involve greater market fluctuation.
21
<PAGE>
ANNUAL REPORT
ASSETS UNDER MANAGEMENT: $22.82 million
ASSET ALLOCATION
[PIE CHART]
<TABLE>
<S> <C>
Other & Other Assets 0.6%
Utilities/Pipeline 1.2%
Diversified Operations 3.5%
Aluminum 4.4%
Energy Services 5.1%
Real Estate 5.4%
Food 5.9%
Paper & Forest Products 14.5%
Energy 59.4%
</TABLE>
DATA AS OF DECEMBER 31, 1999
TOP TEN HOLDINGS
<TABLE>
<S> <C>
Place Resources Corp. 6.24%
Encal Energy, Ltd. 6.19%
Anderson Exploration Ltd. 6.11%
Fresh Del Monte Produce, Inc. 5.92%
Canfor Corp. 5.90%
Brookfield Properties 5.41%
Alliance Forest Products, Inc. 5.38%
Oiltec Resources 4.73%
Shaw Industries, Ltd. 4.48%
MAXXAM 4.40%
</TABLE>
RESULTS OF A HYPOTHETICAL $10,000 INVESTMENT (IF INVESTED ON 11/15/95)
[CHART]
<TABLE>
<CAPTION>
Global Natural Lipper Natural Resources
Resources Fund Index(2)
<S> <C> <C>
11/15/95 $ 10,000 $ 10,000
06/96 $ 12,330 $ 12,245
09/96 $ 13,140 $ 12,705
12/96 $ 14,290 $ 13,949
06/97 $ 13,720 $ 14,793
12/97 $ 11,840 $ 16,005
06/98 $ 11,110 $ 15,528
12/98 $ 7,761 $ 12,305
06/99 $ 10,403 $ 15,952
12/99 $ 9,498 $ 16,169
</TABLE>
PERFORMANCE UPDATE
<TABLE>
<CAPTION>
THREE-YEAR TOTAL AVERAGE ANNUAL
ONE-YEAR AVERAGE ANNUAL RETURN SINCE RETURN SINCE
TOTAL RETURN RETURN INCEPTION(1) INCEPTION(1)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Global Natural Resources Fund 22.39% -12.73% -5.02% -1.24%
Lipper Natural Resources Index(2) 31.40% 5.05% 61.69% 12.34%
S&P 500 Index(3) 21.03% 27.55% 165.35% 26.66%
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 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.
22
<PAGE>
THE INFORMATION AGE FUND-Registered Trademark-
TARGETING INVESTMENTS IN
THE INFORMATION TECHNOLOGY SECTOR
[PROJECTION OF A COMPACT DISC ON A SILHOUETTED HAND]
<PAGE>
ANNUAL REPORT
THE INFORMATION AGE FUND-Registered Trademark-
INVESTMENT STYLE
LARGE CAP MID CAP SMALL CAP
VALUE BLEND GROWTH
[PHOTO]
RONALD E. ELIJAH
FUND PHILOSOPHY
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.
[PHOTO]
RODERICK R. BERRY
- --------------------------------------------------------------------------------
FUND UPDATE
The Information Age Fund-Registered Trademark- closed out 1999 on a high note,
returning 126.22% for the year, easily outpacing the 85.59% performance of the
NASDAQ composite(4) and the 116.40% return for the PSE Technology Index(2). The
Fund recorded a 59.77% return in the fourth quarter.
Despite the strong performance of the Fund during 1999, the year did not come
without its challenges. The market has become increasingly volatile. 1999 proved
to be one of the most volatile years to date with four NASDAQ corrections of
greater than 10%. However, it is worth noting that the subsequent market rallies
averaged over 30%. By focusing on the less volatile large capitalization stocks,
and a wide range of technology sub-sectors, we were able to mitigate some of
this volatility.
During 1999, the volatile Internet sector proved to be one of the most
challenging investment areas for the Fund. As we have seen with other emerging
sub-sectors of technology, volatility tends to be highest in the immature,
highly fragmented market sectors. This volatility benefited the Fund during the
first quarter when the Internet sector, as measured by the Goldman Sachs
Internet Index(5), soared over 60%. We exited the first quarter with a 25%
weighting in the Internet space. Although we had trimmed the portfolio weighting
down to the low teens during Q2, the underperformance of the sector from April
through August had a negative impact on the Fund's overall performance. Looking
forward, we have bolstered our analyst resources in this area and hope to take
better advantage of this exciting new growth area.
As we exit 1999, technology accounts for almost 30% of the S&P 500 Index(3), up
from 9% a decade ago. By any measure, the technology sector has been the fastest
growing sector of our economy over the past decade.
We are often asked how long these growth rates can last. The bear-case would
suggest that high PC penetration in the U.S. is a warning sign of an imminent
slow-down in the sector. We do not share this view. To begin with, the U.S.
makes up only 5% of the world's total population, but accounts for 44% of total
information technology (IT) spending. The opportunity for global expansion is
enormous. Recently liberalized Eastern Europe as well as the emerging economic
powers of Asia should sustain strong growth in IT spending for many years to
come.
Not only have the end-markets for technology expanded, but so too, has the
number of devices and applications. Ten years ago, most people only associated
computers with technology. Today, many new forms of technology such as wireless
phones and Internet access devices have emerged. Expanding end-markets alone
would be enough to fuel a long and powerful cycle for technology. However, we
are also fortunate to be in the early stages of a new emerging growth
driver--the Internet. Powered by the cheap fuel of the new
millennium--semiconductors--the Internet is radically redefining how people
conduct business globally.
More specifically, we see strong growth themes across many of the technology
sub-sectors in which we invest.
24
<PAGE>
RS FUNDS
THE INFORMATION AGE FUND-Registered Trademark- UPDATE -- CONTINUED
The semiconductor industry is the most cyclical sub-sector of technology.
Characterized by two to four year "boom/bust" cycles, the semiconductor industry
can easily outperform the general market when chip supplies become tight. At
present, we are in the first year of a tightening semiconductor market. After
three years of below normal capital expenditures, the semiconductor industry is
now faced with end markets that are demanding more chips than can be supplied.
For the first time since 1995, the semiconductor industry is in the midst of a
boom cycle. Capital equipment vendors such as Teradyne, Inc. (4.35% of the Fund
as of 12/31/99) and Applied Materials, Inc. (3.28%) continue to benefit from
this event as semiconductor manufacturers scramble to add capacity.
Two factors are driving the multi-year boom we are presently seeing in the
communications space. First, deregulation throughout the world has opened the
telecommunications market to new competitors, driving down telecom tariffs and
expanding equipment deployment. Second, the increase in data traffic, largely
driven by the Internet, has resulted in a massive overhaul of existing telecom
infrastructure. JDS Uniphase Corporation (7.28%), the Fund's top performer in
1999 will continue to benefit from the demand for fiber optic components.
As the world becomes more competitive, companies are forced to incorporate new
forms of technology to compete more effectively. This is the key driver of
technology spending in the U.S. In the software sub-sector, we are seeing the
use of the Internet as a way for companies to gain an advantage over their
competition. Cisco Systems, Inc. (4.76%) now derives over 80% of their revenue
from sales that are conducted over the Internet.
This has allowed Cisco to remove tremendous operational costs from their
system. We are now seeing the emergence of software companies that enable
"e-procurement," or "business-to-business" e-commerce--a more efficient way
of sourcing both direct and indirect supplies that are essential to running a
business.
The Internet is also driving the accelerated demand in the hardware sub-sector.
Beyond the obvious need for more PCs, there is now an expanding demand for
servers that are used for hosting thousands of emerging Internet sites and
applications. We are also seeing PCs replace more expensive proprietary hardware
in other industry sectors such as telecommunications.
We are excited about the prospects that lie ahead for technology investing and
look forward to investing for you in one of the greatest growth sectors this
economy has ever seen. On behalf of the entire Information Age team, thank you
for your continued support.
A word of caution as we conclude--stocks of technology companies are subject to
periods of high volatility. It is not unusual for the stocks to make a 20%
correction. Additionally, it is highly unlikely that the 1999 returns will be
repeated. Having said this, we are very excited about the prospects for
technology stocks going forward.
/s/ RONALD E. ELIJAH /s/ RODERICK R. BERRY
Ronald E. Elijah Roderick R. Berry
PORTFOLIO MANAGER CO-PORTFOLIO MANAGER
<TABLE>
<CAPTION>
- -------------------------------------------------
GOOD IDEAS THAT WORKED
REALIZED AND UNREALIZED GAIN
YEAR-TO-DATE THROUGH 12/31/99
- -------------------------------------------------
<S> <C>
JDS Uniphase Corp. $23,169,376
Qualcomm, Inc. 17,821,751
Teradyne, Inc. 10,486,125
Nokia Corporation 10,385,094
America Online, Inc. 10,245,323
Cisco Systems, Inc. 9,398,676
Yahoo! Inc. 8,832,952
Xilinx, Inc. 7,492,486
Novellus Systems, Inc. 7,404,302
Applied Materials, Inc. 7,168,037
<CAPTION>
- -------------------------------------------------
GOOD IDEAS AT THE TIME
REALIZED AND UNREALIZED LOSS
YEAR-TO-DATE THROUGH 12/31/99
- -------------------------------------------------
<S> <C>
Compaq Computer Corporation $ 2,300,775
Charles Schwab 1,694,234
Dell Computer 1,560,660
3Com Corporation 1,434,811
Amazon.com 1,102,810
Compuware Corp. 1,044,329
Sapient Corporation 839,464
eBay, Inc. 706,998
Robert Half International, Inc. 696,158
Altera Corporation 611,615
</TABLE>
December 31, 1999
- --------------------------------------------------------------------------------
International investing can involve greater currency fluctuations and less
political and economic stability. Investing in smaller companies can involve
more volatility, less liquidity, and less publicly available information.
Options and futures may not be perfectly correlated to the underlying index or
security. Investing in a particular sector can involve greater market
fluctuation.
25
<PAGE>
ANNUAL REPORT
ASSETS UNDER MANAGEMENT: $354.64 million
ASSET ALLOCATION
[PIE CHART]
<TABLE>
<S> <C>
Other Assets, Net 0.4%
Consumer & Specialty Retail 1.0%
Short Term Investments 1.6%
Financial 2.2%
Communications Equipment & Services 4.8%
Electronic Components 8.7%
Computer Hardware & Components 9.3%
Internet Commerce & Services 11.0%
Semiconductors & Components 25.4%
Telecommunications Equipment & Services 22.3%
Computer Software & Services 13.3%
</TABLE>
DATA AS OF DECEMBER 31, 1999
TOP TEN HOLDINGS
<TABLE>
<S> <C>
JDS Uniphase Corporation ................7.28%
QUALCOMM, Inc. ..........................5.96%
Cisco Systems, Inc. .....................4.76%
Teradyne, Inc. ..........................4.35%
Nokia Corporation .......................4.33%
America Online, Inc. ....................4.30%
Microsoft Corporation ...................4.28%
Novellus Systems, Inc. ..................3.77%
EMC Corporation .........................3.34%
Intel Corporation .......................3.30%
</TABLE>
RESULTS OF A HYPOTHETICAL $10,000 INVESTMENT (IF INVESTED ON 11/15/95)
[CHART]
<TABLE>
<CAPTION>
The Information PSE Technology
Age Fund(2) Index(2)
<S> <C> <C>
11/15/95 $ 10,000 $ 10,000
06/96 $ 10,710 $ 10,123
12/96 $ 11,785 $ 11,786
06/97 $ 12,276 $ 13,735
12/97 $ 12,509 $ 14,140
06/98 $ 14,958 $ 16,834
12/98 $ 19,040 $ 21,860
06/99 $ 24,637 $ 29,822
12/99 $ 43,072 $ 47,305
</TABLE>
PERFORMANCE UPDATE
<TABLE>
<CAPTION>
THREE-YEAR TOTAL AVERAGE ANNUAL
ONE-YEAR AVERAGE ANNUAL RETURN SINCE RETURN SINCE
TOTAL RETURN RETURN INCEPTION(1) INCEPTION(1)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
The Information Age Fund-Registered Trademark- 126.22% 54.04% 330.72% 42.43%
PSE Technology Index(2) 116.40% 58.92% 373.05% 45.70%
S&P 500 Index(3) 21.03% 27.55% 165.35% 26.66%
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 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.
(5)The CBOE Goldman Sachs Technology Internet Index is a modified
capitalization-weighted index of companies involved in the Internet-related
sector of the technology industry. The index is adjusted on a semiannual
basis.
26
<PAGE>
RS INTERNET AGE FUND-TM-
INVESTING IN COMPANIES LIKELY TO BENEFIT
FROM THE DEVELOPMENT OF THE INTERNET
NEW FUND
<PAGE>
ANNUAL REPORT
RS INTERNET AGE FUND-TM-
INVESTMENT STYLE
LARGE CAP MID CAP SMALL CAP
VALUE BLEND GROWTH
[PHOTO]
CATHERINE BAKER
FUND PHILOSOPHY
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]
JAMES L. CALLINAN
- --------------------------------------------------------------------------------
FUND UPDATE
The RS Internet Age Fund-TM- opened to investors on December 1, 1999 with a net
asset value (NAV) of $10.00. Through December 31, the Fund was up 21.80% on the
back of a very strong market for Internet and technology stocks in December. In
the first couple of weeks of the Fund's operation, we were unable to take full
advantage of the rally because investor enthusiasm resulted in strong fund
inflows causing us to enter each day with a significant cash position. This
condition has since stabilized.
Following a strong couple of years for Internet stocks, we continue to be
bullish on the Internet in general and believe that it is still in the early
innings in terms of fundamentals and in remaking the world economy. With less
than 1% penetration of high bandwidth access, the unique nature of the medium is
spurring growth in new applications. We believe the virtuous cycle between
applications and bandwidth is just beginning. There are already over 500
publicly traded Internet companies and the market is becoming more selective
with regard to stocks as well as sub-sectors within the Internet universe.
Unlike the more nascent days of public market Internet investing, Internet
stocks no longer trade as a group. We believe bottom-up stock selection is
becoming more important to investing in this area and that this market shift
plays to the strengths of our organization.
We continue to invest in infrastructure stocks that have led the most recent
Internet market rally. Fortune 1000 companies as well as venture-backed
companies rushing to market have been in "panic buy" mode for the products and
services necessary for building out e-businesses. We believe this spending
pattern has just begun. We expect the 60% of corporate Information Technology
(IT) spending that was held back due to the Y2K conversion will be spent on
Internet solutions, which should provide a catalyst to many of our investments
in the coming year.
Additionally, we are very positive about infrastructure software plays. In the
last few years, venture capitalists have funded an array of exciting and
innovative software companies that have just this year begun to go public. We
especially like middleware technologies, which allow various applications,
either within one company, or between companies, to work together. Fund
investments in the middleware space include BEA Systems, Inc. (1.96% of the Fund
as of 12/31/99), Active Software, Inc. (1.42%) and Vitria Technology, Inc.
(0.50%). On the applications software side we own stock in several companies
that allow businesses to better manage relationships with their customers,
including: BroadVision, Inc. (1.07%), Broadbase Software, Inc. (0.51%), Siebel
Systems, Inc. (0.71%) and Vignette Corporation (0.42%).
Following the theme of companies that are benefiting from "panic buying" on the
part of Corporate America, we have investments in services companies that help
design and deploy Internet solutions such as Diamond Technology Partners, Inc.
(1.37%), Cysive, Inc. (1.74%), Sapient Corporation (1.16%), Scient Corporation
(0.32%) and Viant Corporation (0.53%).
28
<PAGE>
RS FUNDS
RS INTERNET AGE FUND-TM- UPDATE -- CONTINUED
By 2003, 25-30% of Internet users are expected to access the Web via a broadband
solution, up from less than 1% today. We believe this is an enormous opportunity
and will invest in stocks of access infrastructure companies--the hardware,
software, networking and services companies that should benefit from the
build-out of access infrastructure particularly in the DSL, cable, wireless, and
satellite area. Stocks we own in this category include: ITXC Corporation
(0.51%), iBasis, Inc. (0.86%), Aware, Inc. (0.82%), Brocade Communications
Systems, Inc. (1.66%), GlobeSpan, Inc. (0.89%), Copper Mountain Networks, Inc.
(0.96%) and Netopia, Inc. (1.03%).
In the consumer commerce category, we are investing in selective companies,
which we believe can achieve high market share in their vertical niche.
Companies that can deliver a digital or non-physical good thus avoiding
inventory, distribution and logistics costs, and complexity are truly leveraging
the power of the Internet. We also like companies that have unique distribution
channels and can lower their costs to acquire customers. We own NextCard, Inc.
(1.23%), which markets credit cards online, and ValueVision International, Inc.
(1.17%), which we believe is well positioned for broadband e-commerce.
We are investing in the emerging business-to-business (B2B) Internet sector as
well. For example, we own VeriSign, Inc. (3.68%), an infrastructure platform for
secure electronic business; VerticalNet, Inc. (3.17%), which owns and operates
55 industry specific vertical trading communities; and Aspect Development, Inc.
(1.21%), which provides content and software necessary to derive benefits from
B2B commerce for inbound supply and collaboration.
We also like Internet media as well as radio and traditional media companies,
which are getting a disproportionate share of Internet companies' branding and
traffic building advertising. These media companies are capturing significant
revenue from the ongoing Initial Public Offering financing boom.
Across the board, we look to invest in companies with current or potential
leadership in large and vibrant industry sectors, solid business models with
high margin potential, the opportunity to develop significant proprietary
advantage, and strong management teams.
Currently less than 10% of the Fund is in stocks that are derivative plays on
the Internet such as the radio industry, with the vast majority invested in
Internet hardware, software, services and telecommunications infrastructure
plays, in addition to commerce and content stocks.
It is important to remember the tremendous volatility in the Internet sector. It
is not unusual for stocks in the sector, and the sector as a whole, to have
dramatic upward and downward moves based on news events as well as interest rate
and sentiment fluctuations. To capitalize on market volatility we take a
longer-term investment philosophy in most of our Internet investments and
upgrade the quality of stocks in the portfolio, frequently buying the most
expensive stocks on dips.
We wish to welcome our new investors to the RS Internet Age Fund(-TM-). We are
very excited about the strong start to the Fund and look forward to building a
strong portfolio to capitalize on what we believe are still early days for the
Internet.
/s/ Catherine Baker
Catherine Baker
CO-PORTFOLIO MANAGER
/s/ James L. Callinan
James L. Callinan
CO-PORTFOLIO MANAGER
December 31, 1999
- --------------------------------------------------------------------------------
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
29
<PAGE>
ANNUAL REPORT
ASSETS UNDER MANAGEMENT: $103.59 million
ASSET ALLOCATION
[PIE CHART]
<TABLE>
<S> <C>
Internet Commerce 0.5%
Consumer & Specialty Retail 0.6%
Network Systems & Products 1.1%
Advertising 1.6%
Short Term Investments 2.2%
Business/Commercial Services 2.7%
Other Assets, Net 2.9%
Financial 3.7%
Media 5.1%
Semiconductors & Components 5.5%
Telecommunications Equipment and Services 11.2%
Internet Capital Services 30.7%
Computer Software & Services 19.6%
Computer Components and Services 12.6%
</TABLE>
DATA AS OF DECEMBER 31, 1999
TOP TEN HOLDINGS
<TABLE>
<S> <C>
VeriSign, Inc. 3.68%
VerticalNet, Inc. 3.17%
Yahoo!, Inc. 2.09%
BEA Systems, Inc. 1.96%
Cysive, Inc. 1.74%
Brocade Comm. Systems, Inc. 1.66%
Knight/Trimark Group, Inc. 1.66%
Network Solutions, Inc. 1.55%
Active Software, Inc. 1.42%
NetIQ Corporation 1.39%
</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.
30
<PAGE>
MICROCAP GROWTH FUND
FOCUSING ON COMPANIES WITH MARKET CAPS
OF $500 MILLION OR LESS
[PHOTO OF SAPLING IN A FLOWER POT]
<PAGE>
ANNUAL REPORT
MICROCAP GROWTH FUND
INVESTMENT STYLE
LARGE CAP MID CAP SMALL CAP
VALUE BLEND GROWTH
[PHOTO]
DAVID J. EVANS
FUND PHILOSOPHY
The RS MicroCap Growth Fund invests in a diversified portfolio of equity
securities of companies with market capitalizations of $500 million or less. We
seek micro-cap companies that we believe have the potential for long-term
capital appreciation based on superior or niche products or services, operating
characteristics, management, or other factors.
[PHOTO]
RAINERIO J. REYES
- --------------------------------------------------------------------------------
FUND UPDATE
The RS MicroCap Growth Fund completed 1999 with a fourth quarter return of
34.90%, resulting in an annual return of 56.66%. This performance compared to
returns for the Russell 2000 Growth Index(2) of 33.39% and 43.09% respectively.
Technology was the big story in the final quarter as it had been for much of the
year. Continued economic strength, the impact of the Internet, and the explosion
of other communications technologies, including wireless, helped to drive the
performance of technology stocks. The Fund exploited many of these trends, often
through investments in specialty semiconductor and component suppliers or in
small companies with dominant positions in niche markets. Biotechnology
accelerated its outperformance during the quarter, while selected healthcare
stocks began to recover from a difficult year. The consumer area continued to be
challenging. We believe that these fourth quarter trends will continue to drive
returns in the first half of 2000, and we continue to seek companies that will
benefit.
The beauty of micro-cap investing is the opportunity to discover companies that
can participate in major developments and generate substantial returns. Examples
include Interlink Electronics, Inc. (2.56% of the Fund as of 12/31/99), a
manufacturer of handheld, wireless remotes, which benefited from interest in its
new product for interactive TV, featured at the Western Cable Show in
December--up 629% in the quarter.
Photon Dynamics, Inc. (1.50%), which manufactures test and repair equipment for
flat panel displays, soared as the flat panel display market took off, gaining
85% in the quarter and 317% since our May purchase. The contributions of these
newcomers were complemented by the gains of companies such as Cree Research,
Inc. (3.11%) and QLogic Corporation (2.68%) that we have owned for a number of
years. Purchasing micro-cap stocks of $500 million in market capitalization and
below often results in the identification of future leaders and can sometimes
provide multiple years of substantial returns.
We are opportunistic in managing our positions in companies that have been
acquired by larger companies, as well as companies that have experienced
significant market cap expansion. DoubleClick, Inc. (2.02%), the Fund's largest
cap stock, entered the portfolio as the result of the acquisition of two of our
companies--Abacus Direct and NetGravity, during the fourth quarter. These
companies were purchased as micro-cap stocks and, given the attractiveness of
the DoubleClick business opportunity, we have held the shares received upon
completion of the mergers. DoubleClick appreciated 67% by year-end. We pursued a
similar strategy when PSINet, Inc. (0.53%) acquired Transaction Network
Services.
32
<PAGE>
RS FUNDS
MICROCAP GROWTH FUND UPDATE -- CONTINUED
On the flip side of the ledger, our worst performing stock in the quarter,
Pervasive Software (0.0%), had been at the top of the list in the third quarter.
While we had taken profits in this security as a result of our
position-management discipline, it remained a considerable holding when the
management announced a substantial change in the operating strategy of the
company. They decided to sacrifice profits in the year 2000 in order to pursue
an expensive new strategy for a promising Web development product. The new
strategy took investors by surprise, resulting in a precipitous decline in the
price of the stock. Despite having a strong relationship with management, dating
from their IPO road show, we were as surprised as everyone else was by these
developments. This experience validates the importance of constructing a
diversified portfolio when investing in micro-cap stocks and provides another
argument for a mutual fund approach to investing in this sector.
As the year 2000 begins, we remain enthusiastic about the prospects for the Fund
and the micro-cap universe. The strong comeback of this sector during the fourth
quarter and the outperformance by small stocks early in the new year is most
encouraging. We have already expressed the opinion that the growth prospects for
many technology companies remain strong, however, we also believe that renewed
interest in small growth stocks will prove rewarding to our holdings in other
sectors as well.
We expect that investors seeking alternatives to fully exploited large-cap
growth stocks will prefer small growth stocks to depressed value stocks which,
even in today's robust economy, do not seem to offer compelling growth
opportunities.
We would like to close with a reminder that the Fund seeks long-term capital
appreciation through investments in microcap stocks. We thank current holders
for their support and welcome new investors who share this vision.
Sincerely,
/s/ David J. Evans
David J. Evans
PORTFOLIO MANAGER
/s/ Rainerio J. Reyes
Rainerio J. Reyes
CO-PORTFOLIO MANAGER
<TABLE>
<CAPTION>
- ------------------------------------------------
GOOD IDEAS THAT WORKED
REALIZED AND UNREALIZED GAIN
YEAR-TO-DATE THROUGH 12/31/99
- ------------------------------------------------
<S> <C>
Interlink Electronics $3,795,654
QLogic Corporation 3,087,139
InterVU, Inc. 2,774,156
Cree, Inc. 2,763,502
Power Integrations, Inc. 2,385,431
CapRock Communications Corp. 1,905,557
Adaptive Broadband Corp. 1,698,687
Hot Topic, Inc. 1,563,399
Performance Technologies, Inc. 1,527,126
QRS, Inc. 1,461,650
<CAPTION>
- ------------------------------------------------
GOOD IDEAS AT THE TIME
REALIZED AND UNREALIZED LOSS
YEAR-TO-DATE THROUGH 12/31/99
- ------------------------------------------------
<S> <C>
CareMatrix Corp. $1,618,804
Secure Computing Corporation 1,085,675
Superior Consultant Holdings Corp. 1,036,345
Kendle International, Inc. 957,952
Cornell Corrections, Inc. 838,156
Vista Information Solutions 730,718
ResortQuest International, Inc. 724,411
Medialink Worldwide, Inc. 706,591
Res-Care, Inc. 665,031
Enamelon, Inc. 583,282
</TABLE>
December 31, 1999
- --------------------------------------------------------------------------------
International investing can involve greater currency fluctuations and less
political and economic stability. Investing in smaller companies can involve
more volatility, less liquidity, and less publicly available information. Short
selling is the sale of a borrowed security, and the price of the security can
increase between the date the security is sold and the date when the fund must
replace it. Options and futures may not be perfectly correlated to the
underlying index or security.
33
<PAGE>
ANNUAL REPORT
ASSETS UNDER MANAGEMENT: $103.31 million
ASSET ALLOCATION
[PIE CHART]
<TABLE>
<S> <C>
Short Term Investments 0.6%
Aerospace 1.1%
Construction/Infrastructure 1.9%
Transportation 2.3%
Media Broadcasting/Radio/TV 2.5%
Manufacturing & Machinery 2.9%
Restaurants & Lodging 3.0%
Other & Other Assets 5.7%
Financial Services 7.9%
Telecommunications 7.9%
Consumer & Specialty Retail 8.2%
Computer Technology 14.0%
Health/Medical/Biotechnology 13.2%
Computer Services & Software 10.1%
Electronic Components 9.9%
Business/Commercial Services 8.8%
</TABLE>
DATA AS OF DECEMBER 31, 1999
TOP TEN HOLDINGS
<TABLE>
<S> <C>
Cree Research, Inc. 3.11%
QLogic Corporation 2.68%
Interlink Electronics, Inc. 2.56%
Adaptive Broadband Corporation 2.20%
DoubleClick, Inc. 2.02%
QRS Corporation 1.97%
Power Intergrations, Inc. 1.86%
Molecular Devices Corporation 1.72%
Cybex Computer Products Corp. 1.70%
Asyst Technologies, Inc. 1.59%
</TABLE>
RESULTS OF A HYPOTHETICAL $10,000 INVESTMENT (IF INVESTED ON 8/15/96)
[CHART]
<TABLE>
<CAPTION>
MicroCap Growth Russell 2000 Growth
Fund Index(2)
<S> <C> <C>
8/15/96 $ 10,000 $ 10,000
03/97 $ 10,200 $ 9,687
09/97 $ 15,990 $ 13,315
03/98 $ 16,570 $ 13,676
09/98 $ 11,630 $ 10,008
03/99 $ 14,410 $ 12,166
09/99 $ 16,560 $ 13,273
12/99 $ 22,340 $ 17,706
</TABLE>
PERFORMANCE UPDATE
<TABLE>
<CAPTION>
THREE-YEAR TOTAL AVERAGE ANNUAL
ONE-YEAR AVERAGE ANNUAL RETURN SINCE RETURN SINCE
TOTAL RETURN RETURN INCEPTION(1) INCEPTION(1)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MicroCap Growth Fund 56.66% 26.64% 123.40% 26.86%
Russell 2000 Growth Index(2) 43.09% 17.83% 77.06% 18.43%
S&P 500 Index(3) 21.03% 27.55% 134.00% 28.62%
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 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.
34
<PAGE>
MIDCAP OPPORTUNITIES FUND
SEEKING GROWTH IN MID-CAP COMPANIES
WHILE ATTEMPTING TO MODERATE RISK
[PHOTO OF FRUIT TREE]
<PAGE>
ANNUAL REPORT
MIDCAP OPPORTUNITIES FUND
INVESTMENT STYLE
LARGE CAP MID CAP SMALL CAP
VALUE BLEND GROWTH
[PHOTO]
JOHN L. WALLACE
FUND PHILOSOPHY
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 returned 33.16% in the fourth quarter and
56.12% for the year ending December 31, 1999. We are quite pleased with our
performance, especially compared to our primary benchmark, the Russell Midcap
Index(2), which returned 17.23% and 18.23% respectively. We are also pleased to
have outperformed the S&P 500 Index(3), which returned 14.94% and 21.03%
respectively.
The MidCap Opportunities Fund primarily invests in equity securities with market
capitalizations from $1.5 billion to $10 billion. While mid-cap companies, as
defined by the Russell Midcap Index, have underperformed the large-cap, S&P 500
since early 1994, they have shown signs of improvement in 1999, outperforming in
the fourth quarter by over 200 basis points. Not only have mid-cap stocks
recently begun to outperform their large-cap counterparts, there continues to be
a strong case for investing in mid-cap companies. Reasons include their 50%
valuation discount and nearly equal earnings momentum to large-cap stocks.
There is no question that last year was an exceedingly strong year for investors
with many equity market indices up over 20% in 1999. However, when one looks at
the stocks that make up such averages, it is surprising that there were more
stocks down than were up in 1999.
In fact, according to Jarrett Investment Research, of the 4,900 actively traded
issues, only 49% had higher prices at the close on December 31, 1999 than the
same day in 1998. To make matters even tougher in 1999, it was a market where
strong stocks got stronger and weak stocks remained weak. This was evidenced by
the fact that stocks that were up showed an average appreciation of 135%, far
exceeding the 31% depreciation of the average stock that was down for the year.
While 1999 was clearly a difficult year due to the narrow market, we expect 2000
to have a broader participation among stocks, if for no other reason than the
narrow market of 1999 is not sustainable.
Our success in 1999 was primarily a result of our investments in two sectors:
telecommunications and the Internet. While both of these sectors have their own
improving fundamentals, we can attribute the success in our telecommunications
investments largely to the rapid growth of the Internet. The expansion of the
Internet has breathed new life into the old telecom companies by giving them an
opportunity to sell additional services such as high speed Internet access.
One of our more successful investments in 1999 was Primus Telecommunications
Group, Inc. (5.07% of the Fund as of 12/31/99). Primus is a facilities-based
global telecommunications company, offering long-distance, Internet, and data
access.
36
<PAGE>
RS FUNDS
MIDCAP OPPORTUNITIES FUND UPDATE -- CONTINUED
At the time of our original investment in Primus, the company was primarily
positioned as a wholesale international long distance provider. This type of
business is typically rewarded with a low multiple given the almost nonexistent
barriers to entry. However, upon meeting management, we quickly realized that
Primus was in the process of transitioning itself from a commodity
telecommunications company to a full-service voice and data telecommunications
provider. Primus has deployed a global network that will enable it to
successfully migrate its traffic onto its owned and operated network. We believe
this will result in an extremely low cost structure leading to higher margins
and more predictable revenue and multiple expansion. As the largest position in
the MidCap Opportunities Fund, despite the investment almost doubling in 1999,
we believe Primus still has plenty of upside.
Our underweighting in the healthcare sector, our limited exposure to biotech
industries in particular, resulted in some missed opportunities late in 1999. We
believe there are many innovative companies in the biotech sub-sector and are
seeking additional investment opportunities.
As we begin the year 2000, crosscurrents in the equity market are very strong.
The market has been making new highs in the face of rising interest rates. The
biggest driver of the stock market had been the incredible strength of the U.S.
economy and recovering foreign economies, which has translated into better than
expected corporate profits. The increase in interest rates has been somewhat
surprising, but at the same time needed to cool off expanding economic growth.
We don't think interest rates will exceed 7% during the year. We base this
opinion on the fact that global bond yields have already risen 200 basis points,
oil prices are at new highs, refinancing of home mortgages has slowed
dramatically and a reversal of Y2K related spending should all temper growth.
Finally, we believe the unprecedented volatility in today's market is due in
part to an important underlying trend-- a gradual shift in leadership from
large-cap growth stocks to small- and mid-cap growth stocks.
Our philosophy of searching for above average growth with a disciplined approach
to risk management paid off in 1999. We want to remind investors that successful
equity investing is not a short-term proposition and therefore, we remain
focused on the long-term.
On behalf of the entire MidCap Opportunities team, we thank you for your
support.
/s/ John L. Wallace
John L. Wallace
PORTFOLIO MANAGER
<TABLE>
<CAPTION>
- ------------------------------------------------
GOOD IDEAS THAT WORKED
REALIZED AND UNREALIZED GAIN
YEAR-TO-DATE THROUGH 12/31/99
- ------------------------------------------------
<S> <C>
Primus Telecommunications Grp. $5,747,689
AT&T Liberty Media 5,629,255
Conexant Systems 4,658,524
Network Solutions 3,734,898
ValueVision International, Inc. 3,615,775
Knight/Trimark Group, Inc. 3,430,635
CapRock Communications Corp. 3,244,990
Administaff, Inc. 3,199,502
RSA Security, Inc. 2,875,730
Intuit, Inc. 2,655,866
<CAPTION>
- ------------------------------------------------
GOOD IDEAS AT THE TIME
REALIZED AND UNREALIZED LOSS
YEAR-TO-DATE THROUGH 12/31/99
- ------------------------------------------------
<S> <C>
Trans World Airlines $3,006,063
Seminis, Inc. 2,261,083
Amer. Bank Note Holographic 2,259,517
System Software & Associates 2,109,671
MicroWarehouse, Inc. 1,697,338
Secure Computing Corporation 1,260,336
First Sierra Financial, Inc. 1,227,102
Kushner-Locke Company 1,081,096
Polaroid Corp. 844,293
Bergen Brunswig Corporation 784,559
</TABLE>
December 31, 1999
- --------------------------------------------------------------------------------
International investing can involve greater currency fluctuations and less
political and economic stability. Investing in smaller companies can involve
more volatility, less liquidity, and less publicly available information.
Options and futures may not be perfectly correlated to the underlying index or
security. High-yielding, lower-quality debt securities may be considered to be
of lower standing and more speculative.
37
<PAGE>
ANNUAL REPORT
ASSETS UNDER MANAGEMENT: $226.53 million
ASSET ALLOCATION
[PIE CHART]
<TABLE>
<S> <C>
Business & Commercial Services 5.8%
Healthcare 4.8%
Consumer & Specialty Retail 1.3%
Financial 13.7%
Electronic Components 2.4%
Telecom Equipment & Services 13.0%
Energy 9.1%
Media 10.6%
Printing & Publishing 2.0%
Computer Software & Services 17.2%
Computer Technology & Instruments 9.4%
Construction/Infrastructure 1.9%
Agricultural Products 1.3%
Aerospace 1.3%
Convertible Preferred Stocks 3.3%
Other & Other Assets 1.5%
Short Term Investments 1.4%
</TABLE>
DATA AS OF DECEMBER 31, 1999
TOP TEN HOLDINGS
<TABLE>
<S> <C>
Primus Telecommunications Grp., Inc. 5.07%
AT&T Liberty Media Group 3.01%
Administaff, Inc. 2.67%
ValueVision International, Inc 2.40%
Montana Power Company 2.07%
UnitedGlobalCom, Inc. 1.82%
Network Solutions 1.73%
Symantec Corporation 1.68%
Legato Systems, Inc. 1.67%
Stamps.Com 1.62%
</TABLE>
RESULTS OF A HYPOTHETICAL $10,000 INVESTMENT (IF INVESTED ON 7/12/95)
[CHART]
<TABLE>
<CAPTION>
MidCap Opportunities Russell Midcap
Fund Index(2)
<S> <C> <C>
7/12/95 $ 10,000 $ 10,000
03/96 $ 12,200 $ 11,465
09/96 $ 13,340 $ 12,157
03/97 $ 13,526 $ 12,763
09/97 $ 17,850 $ 16,419
03/98 $ 19,103 $ 18,395
09/98 $ 15,907 $ 15,432
03/99 $ 20,416 $ 18,192
09/99 $ 22,358 $ 18,433
12/99 $ 29,773 $ 21,609
</TABLE>
The Russell Midcap Index replaced the Russell Midcap Growth Index as our
primary fund benchmark to more accurately reflect the Fund's investments in
mid-cap companies. A hypothetical $10,000 investment in the Russell Midcap
Growth Index, if invested on 7/12/95, would have grown to $27,512 as of
12/31/99.
PERFORMANCE UPDATE
<TABLE>
<CAPTION>
THREE-YEAR TOTAL AVERAGE ANNUAL
ONE-YEAR AVERAGE ANNUAL RETURN SINCE RETURN SINCE
TOTAL RETURN RETURN INCEPTION INCEPTION
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MidCap Opportunities Fund 56.12% 28.73% 197.73% 27.62%
Russell Midcap Index(2) 18.23% 18.86% 116.09% 18.79%
S&P 500 Index(3) 21.03% 27.55% 183.68% 26.24%
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 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.
38
<PAGE>
PARTNERS FUND
A SMALL-CAP FUND USING A CASH FLOW
VALUE METHODOLOGY
[PHOTO OF BASEBALL BAT AND BALL]
<PAGE>
ANNUAL REPORT
PARTNERS FUND
INVESTMENT STYLE
LARGE CAP MID CAP SMALL CAP
VALUE BLEND GROWTH
[PHOTO]
ANDREW P. PILARA, JR.
FUND PHILOSOPHY
The RS Partners Fund seeks long-term capital growth by investing in equity
securities primarily of companies with market capitalization of up to $1
billion, using a value methodology, combining Graham & Dodd balance sheet
analysis with cash flow analysis.
- --------------------------------------------------------------------------------
FUND UPDATE
The RS Partners Fund was up 3.73% for the year. This lagged well behind the
Russell 2000 Index(4) gain of 21.26%. Isolating the performance of the value
component of the Russell 2000 is a better comparison for the Fund. Our benchmark
is the Russell 2000 Value Index(2), which comprises the value component of the
Russell 2000. This Index was down 1.49% for the year. The growth/value disparity
was particularly wide in the fourth quarter, with the growth component up
33.39%, versus the value component's gain of 1.53%. The performance and
valuation disparities between value and growth have never been this large.
The market's preference for growth or value is cyclical. Investing styles tend
to regress to the mean just after investors conclude that they will not! The
mutual fund money flows and price momentum continue to favor growth. The main
thing that small-cap value has in its favor is valuation. We do not think the
rules of valuation have changed. When you buy good companies at low prices, you
do quite well in the long-term.
Most of the companies within the Partners Fund are either selling at a material
discount from net asset value, have cash flow multiples below five, or have
single digit price earnings multiples. The opportunities to buy solid, "old
economy" businesses at a very cheap price has never been better. Small-cap value
stocks are on sale!
The buying interest in a number of our stocks is coming from the companies
themselves. Many of these companies are repurchasing stock and insiders also
have been purchasing stock.
The return on investment from repurchasing stock is better than building new
facilities or in acquiring private businesses. We also expect merger and
acquisition activity to pick up in the small-cap value sector if current
valuations persist. In certain industries, it is now cheaper to acquire public
companies rather than negotiate to purchase a private company. This is
particularly evident in the energy and real estate sectors.
In the following paragraphs, we will recap some of the good businesses we own.
As value investors, we are interested in the underlying value of the business
and its dynamics. We look to buy into quality business models at a big discount
from intrinsic value. Our primary valuation metric is a discounted cash flow
model.
Fresh Del Monte Produce, Inc. (7.04% of the Fund as of 12/31/99) is our
investment choice in the food business. The company is perceived as a banana
company when in reality it is a diversified fresh fruit company. With Dole and
Chiquita discussing the possible sale or reorganization of their companies,
Fresh Del Monte should benefit from a rationalization of the fresh fruit
business. Last year was one of the worst years for the major banana producers
and still they will report 1999 earnings of $1.00 - $1.10. We estimate $1.50 -
$2.00 in earnings in 2000. This is a free cash flow business with returns on
capital nicely above the cost of capital. We believe that within the next five
years Fresh Del Monte could become the largest fresh fruit company.
40
<PAGE>
RS FUNDS
PARTNERS FUND UPDATE -- CONTINUED
Pittston Brink's Group (3.80%) owns three good businesses: Brinks, Brinks Home
Security, and the freight forwarding company called Bax Global. These company
tracking stocks were recently put back together. We expect further
restructurings in the next two years. The businesses have good growth prospects
and have returns above the cost of capital, yet the price earnings multiple is
less than 10 times.
Harman International Industries, Inc. (5.02%) is primarily known as a consumer
audio/video company. After a restructuring, the company now derives its profits
and growth from multimedia systems for automobiles; speakers to cellular phone
customers like Nokia, QUALCOMM, and Sony; and systems for Apple, Compaq, Dell,
and IBM. Additionally, they have reallocated capital to higher return, faster
growing businesses. We seldom get the opportunity to buy a brand name business
with these growth prospects at such a reasonable price.
Meritage Corporation (5.92%) is a homebuilder in Arizona, California, and Texas.
They are doing business in three states with rapid growth. Their returns on
capital are almost twice the average industrial company and the price earnings
multiple is only 3.5 times the year 2000 earnings.
We also own a package of smaller Canadian oil and gas companies that sell at one
to three times cash flow and at a material discount to their net asset value. At
the current prices for Canadian oil and gas, this is an extremely profitable
business. It is hard to remember when the underlying funda- mentals of the oil
and gas business have ever been better. Despite the positive operating
fundamentals and the higher cash flow returns on capital, energy stocks are
about as cheap as we have seen them in the 1990's. We particularly like natural
gas. Our Canadian natural gas investments did not live up to our expectations in
1999, but we still feel that the supply/demand characteristics are very positive
for those companies. With increased drilling for natural gas, the United States
energy companies still produced less gas in the fourth quarter of 1999 versus
the fourth quarter of 1998. Led by increasing demand from the electric
generating industry, we expect natural gas demand to ratchet up to over 4% in
2000 and 2001. With smaller supply additions and improving demand, we expect
natural gas prices to move significantly higher in the next 18 months. Canada
has become an important supplier of natural gas to the United States.
Maybe it is a new paradigm with New Economy stocks, but there is still great
opportunity in solid, small-cap companies. We are finding great values in the
small-cap value sector.
Thank you for your trust and support.
/s/ Andrew P. Pilara, Jr.
Andrew P. Pilara, Jr.
PORTFOLIO MANAGER
<TABLE>
<CAPTION>
- ------------------------------------------------
GOOD IDEAS THAT WORKED
REALIZED AND UNREALIZED GAIN
YEAR-TO-DATE THROUGH 12/31/99
- ------------------------------------------------
<S> <C>
CMP Media, Inc. $1,608,628
Cypress Energy, Inc. 1,319,191
Snyder Communication 555,255
Symmetry Resources, Inc. 483,045
NQL Drilling Tools, Inc. 388,742
Ryan Energy Technologies 355,981
MedPartners, Inc. 322,156
Sobeys, Inc. 320,244
Place Resources Corp. 290,717
Best Pacific Resources Ltd. 261,912
<CAPTION>
- ------------------------------------------------
GOOD IDEAS AT THE TIME
REALIZED AND UNREALIZED LOSS
YEAR-TO-DATE THROUGH 12/31/99
- ------------------------------------------------
<S> <C>
Fresh Del Monte Produce, Inc. $1,741,051
Pittston Brink's Group 881,000
HEALTHSOUTH Rehabilitation 621,273
MAXXAM 472,666
Superior Telecom, Inc. 471,989
Houston Exploration Company 466,223
Desjardins Laurentian Financial Corp. 404,725
Paging Network, Inc. 344,321
Hollinger Int'l, Inc. 280,850
TB Wood's Corporation 276,338
</TABLE>
December 31, 1999
- --------------------------------------------------------------------------------
International investing can involve greater currency fluctuations and less
political and economic stability. Investing in smaller companies can involve
more volatility, less liquidity, and less publicly available information.
Investing in a more limited number of issuers and sectors can be subject to
greater market fluctuation. Options and futures may not be perfectly correlated
to the underlying index or security.
41
<PAGE>
ANNUAL REPORT
ASSETS UNDER MANAGEMENT: $22.37 million
ASSET ALLOCATION
[PIE CHART]
<TABLE>
<S> <C>
Advertising 3.8%
Consumer Goods & Retail 5.0%
Construction & Infrastructure 7.9%
Financial Services 14.3%
Energy Services 5.2%
Energy 29.6%
Food 12.9%
Aluminum 5.9%
Transportation 3.8%
Technology 4.8%
Manufacturing 2.7%
Other Assets 4.1%
</TABLE>
DATA AS OF DECEMBER 31, 1999
TOP TEN HOLDINGS
<TABLE>
<S> <C>
Place Resources Corp. 8.77%
Fresh Del Monte Produce, Inc. 7.04%
Symmetry Resources, Inc. 6.17%
MAXXAM 5.94%
Meritage Corporation 5.92%
Sobeys, Inc. 5.88%
Desjardins Laurentian Financial 5.55%
Harman International 5.02%
Oiltec Resources 4.28%
Gentra, Inc. 4.25%
</TABLE>
RESULTS OF A HYPOTHETICAL $10,000 INVESTMENT (IF INVESTED ON 7/12/95)
[CHART]
<TABLE>
<CAPTION>
Partners Russell 2000
Fund Value Index(2)
<S> <C> <C>
7/12/95 $ 10,000 $ 10,000
03/96 $ 12,300 $ 11,314
09/96 $ 14,070 $ 11,952
03/97 $ 14,975 $ 13,122
09/97 $ 18,173 $ 17,049
03/98 $ 18,999 $ 18,784
09/98 $ 13,167 $ 14,869
03/99 $ 12,391 $ 14,646
09/99 $ 13,234 $ 15,735
12/99 $ 13,256 $ 15,976
</TABLE>
PERFORMANCE UPDATE
<TABLE>
<CAPTION>
THREE-YEAR TOTAL AVERAGE ANNUAL
ONE-YEAR AVERAGE ANNUAL RETURN SINCE RETURN SINCE
TOTAL RETURN RETURN INCEPTION(1) INCEPTION(1)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Partners Fund 3.73% -3.76% 32.56% 6.50%
Russell 2000 Value Index(2) -1.49% 6.69% 59.76% 11.04%
S&P 500 Index(3) 21.03% 27.55% 183.68% 26.24%
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.
(4)The Russell 2000 Index is an unmanaged market capitalization-weighted index
composed of 2,000 U.S. companies with an average market capitalization of
$467 million. Investment results assume the reinvestment of dividends paid
on the stocks constituting the index. You cannot invest in an index.
42
<PAGE>
VALUE + GROWTH FUND
A FUND SEEKING CAPITAL APPRECIATION
FOR THE LONG-TERM INVESTOR
[PHOTO OF SCALE]
<PAGE>
ANNUAL REPORT
VALUE + GROWTH FUND
INVESTMENT STYLE
LARGE CAP MID CAP SMALL CAP
VALUE BLEND GROWTH
[PHOTO]
RONALD E. ELIJAH
FUND PHILOSOPHY
The RS Value + Growth Fund seeks capital appreciation by investing primarily
in companies with favorable relationships between price/earnings ratios and
growth rates, and in sectors offering above-average growth potential. We seek
to identify specific business sectors poised to benefit from major changes in
the marketplace and societal trends. Within these sectors, we conduct
bottom-up research, looking for well-managed companies that have low-multiple
valuations relative to their peers and are poised to leverage growth
opportunities.
- -------------------------------------------------------------------------------
Fund Update
The RS Value + Growth Fund finished 1999 with strong performance. The Fund
was up 22.12% for the fourth quarter and 28.43% for the year, which compares
to 25.14% and 33.16% respectively for its primary benchmark, the Russell 1000
Growth Index(2), and 14.94% and 21.03% respectively for the S&P 500 Index(3).
Significantly outperforming the S&P 500 Index in 1999 was an excellent result
for the Value + Growth Fund and its large capitalization growth strategy.
Specifically, the Fund's technology investments contributed strongly to the
Fund's 1999 return. Technology investing has always been an investment focus
of the Fund. The market trends we saw developing at mid-year came through for
the Fund, particularly a strong second half for technology stocks. Even
though the low multiple price/earnings (P/E) approach the Fund takes toward
growth investing prevents it from investing in many of the Internet stocks,
all technology companies can benefit from the roar of the information age and
not just "dot.com" companies.
As we enter a new decade, we expect the technology sector to be one of the best
investment sectors within the U.S. equity market for many years. The `90's were
an amazing decade for technology investing. The technology sector at the close
of 1999 accounted for approximately 30% of the S&P 500 Index, up from 9% in
1990. Due to the innovative nature of the sector, from its global business
prospects to its low penetration of various business markets, technology
companies should prosper for the foreseeable future, and their equities should
continue to increase as a percentage of overall U.S. equity
investing--heightening its investment importance.
The Value + Growth Fund maintains its focus upon investment themes. For 1999,
two of our more prominent investment themes, healthcare and financial services,
lagged behind the overall market, while our main investment sector, technology,
pushed through 1999 with an exceptional year. We still see a positive outlook
for healthcare and financial services moving into 2000. Our basic thesis behind
our investment focus in these sectors is 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 well as the
financial services sector as "boomers" focus their attention on financial
planning and retirement.
We believe the aging of the baby boomers bodes well for investing in the
healthcare and financial services industries for the next decade. We believe
these sectors were held back in 1999 by a surging economy and rising interest
rates. When the economy surges, the relative attractiveness of the earnings
growth of these two sectors declines against more economically sensitive
industries. Thus, as the economy surged in late 1999, interest rates rose and
these two investment sectors stalled. For 2000 though, we expect the Federal
Reserve's interest rate increases will take hold and slow U.S. economic growth,
which should improve the relative earnings attractiveness and equity
performances for healthcare and financial services industries. We are quite
upbeat about the great investment values we are seeing in these sectors.
44
<PAGE>
RS FUNDS
VALUE + GROWTH FUND UPDATE -- CONTINUED
Technology continues as one of our primary themes within the Value + Growth
portfolio. After finishing a year of great returns, technology investors
often wonder if the sector's forceful returns can continue. Demand for
technology products shows no sign of abating. As recently as 1997, the U.S.
accounted for almost half of the world's information technology (IT)
spending, but only 5% of the world's population. Correcting this imbalance
alone will lead to years of strong global IT spending. With all parts of the
globe participating, demand for IT products could be very strong in 2000. The
U.S. and European economies seem healthy, Eastern Europe is showing signs of
finally emerging, and Southeast Asian economies are recovering from the
currency crisis of late '97 and early '98. Finally, as always, new product
developments will stimulate demand with the Pentium III from Intel and
Windows 2000 from Microsoft. Also, the world is in the early phase of an
explosive new technology adoption that will change the way all of us
work--the Internet.
Volatility and stock market corrections are real market events that are
uncomfortable and unfortunately, a part of equity investing. Corrections are
events that come periodically, unfortunately however; they seem to be happening
more often. In the decade of the `90's, the NASDAQ market experienced 15
corrections of 10% or more from intra-day high to intra-day low. Seven of these
10% corrections happened in the last two years. Even though we are experiencing
more frequent corrections, the NASDAQ returns have been exceptional the last two
years.
Investors should keep the investment goal--seeking long-term equity
appreciation--paramount in this period of rising volatility.
We believe the rising volatility is a function of a high multiple market and the
great rewards the market has experienced the last few years, not a suggestion
that the market is signaling that long-term investment rewards are no longer
possible.
With all the recent volatility the market is experiencing, the temptation to
"time" market swings always comes to mind. We have always encouraged investors
to maintain a long-term focus. The market advances in surges. Most often,
market-timing investors either are out of the market or under-invested when the
market experiences a surge. We still believe we have another decade of good
investment returns to be earned from the U.S. equity market.
We believe 2000 will be a good investment year, although it is hard to imagine
that it can match either '98 or '99. We see the upcoming year with its
challenges, just as '98 and '99 had theirs. We will experience market
corrections in 2000, but a good economy, low inflation, and easing of interest
rates should translate into a good equity-investing year. We see the first half
of the year challenged by fears that the economy is growing too fast, with the
second half surging as the market senses that U.S. economic growth is easing. We
believe technology stocks will give us another good investment year, with our
other two favorite sectors, healthcare and financial services, recovering from a
sluggish 1999 and providing investment rewards in 2000.
As always, thank you for your ongoing support.
/s/ Ronald E. Elijah
Ronald E. Elijah
PORTFOLIO MANAGER
<TABLE>
<CAPTION>
- -------------------------------------------------
GOOD IDEAS THAT WORKED
REALIZED AND UNREALIZED GAIN
YEAR-TO-DATE THROUGH 12/31/99
- -------------------------------------------------
<S> <C>
Applied Materials, Inc. $22,075,200
Texas Instruments 20,864,417
Microsoft Corporation 14,150,180
Morgan Stanley Dean Witter 14,105,298
Amgen 12,543,712
Xilinx, Inc. 12,480,382
Nortel Networks Corp. 11,971,911
Best Buy Company, Inc. 11,583,708
Oracle Corporation 11,536,770
Intel Corporation 9,705,494
<CAPTION>
- -------------------------------------------------
GOOD IDEAS AT THE TIME
REALIZED AND UNREALIZED LOSS
YEAR-TO-DATE THROUGH 12/31/99
- -------------------------------------------------
<S> <C>
Safeway, Inc. $ 9,412,256
Rite Aid Corp. 6,222,002
CVS Corporation 5,830,463
Staples, Inc. 5,653,125
Eli Lilly & Company 5,585,356
Compaq Computer Corporation 5,190,371
3Com Corporation 4,349,456
Omnicare, Inc. 3,710,136
Pfizer, Inc. 3,459,841
America Online, Inc. 3,193,057
</TABLE>
December 31, 1999
- --------------------------------------------------------------------------------
Investing in smaller companies may involve risks such as less publicly available
information than larger companies, volatility, and illiquidity. Short selling is
the sale of a borrowed security and may involve the risk that the price of the
security may increase between the date it is sold and the date the fund must
replace the borrowed security. Options and futures involve the risk that their
value may not be perfectly correlated to that of the underlying index or
security.
45
<PAGE>
ANNUAL REPORT
ASSETS UNDER MANAGEMENT: $673.90 million
ASSET ALLOCATION
[PIE CHART]
<TABLE>
<S> <C>
Media 5.6%
Financial 16.9%
Computer Technology 34.5%
Medical/HMOs 6.9%
Pharmaceuticals 4.2%
Telecom Equipment & Services 8.1%
Consumer & Retail 20.9%
Diversified operations 1.5%
Short Term Investments & Other Liabilities 1.4%
</TABLE>
DATA AS OF DECEMBER 31, 1999
TOP TEN HOLDINGS
<TABLE>
<S> <C>
Microsoft Corporation 5.64%
Applied Materials, Inc. 4.94%
Intel Corporation 4.56%
Texas Instruments 4.37%
Morgan Stanley, Dean Witter 4.02%
Amgen 3.80%
Xilinx, Inc. 3.64%
MCIWorldCom, Inc. 3.63%
Costco Wholesale Corp. 3.62%
Merrill Lynch 3.58%
</TABLE>
RESULTS OF A HYPOTHETICAL $10,000 INVESTMENT (IF INVESTED ON 5/12/92)
[CHART]
<TABLE>
<CAPTION>
Value + Growth Russell 1000
Fund Growth Index(2)
<S> <C> <C>
5/12/92 $ 10,000 $ 10,000
6/93 $ 11,943 $ 10,643
6/94 $ 13,276 $ 10,611
6/95 $ 23,086 $ 13,845
6/96 $ 23,429 $ 17,696
6/97 $ 30,483 $ 23,242
6/98 $ 36,066 $ 30,538
6/99 $ 43,746 $ 38,864
12/99 $ 49,958 $ 46,855
</TABLE>
PERFORMANCE UPDATE
<TABLE>
<CAPTION>
FIVE-YEAR TOTAL AVERAGE ANNUAL
ONE-YEAR AVERAGE ANNUAL RETURN SINCE RETURN SINCE
TOTAL RETURN RETURN INCEPTION(1) INCEPTION(1)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Value + Growth Fund 28.43% 24.85% 399.58% 23.43%
Russell 1000 Growth Index(2) 33.16% 32.41% 368.55% 22.40%
S&P 500 Index(3) 21.03% 28.55% 317.50% 20.57%
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 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.
46
<PAGE>
FINANCIAL INFORMATION
YEAR ENDED
DECEMBER 31, 1999
[GRAPHIC]
<PAGE>
ANNUAL REPORT
SCHEDULE OF INVESTMENTS -- THE CONTRARIAN FUND-TM-
<TABLE>
<CAPTION>
DECEMBER 31, 1999 FOREIGN CURRENCY(2) SHARES VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 95.3%
- ---------------------------------------------------------------------------
AGRICULTURAL PRODUCTS - 0.1%
AgrioBioTech, Inc. 44,700 $ 106,163
- ---------------------------------------------------------------------------
106,163
- ---------------------------------------------------------------------------
BROADCASTING/RADIO/TV - 3.8%
Sirius Satellite Radio, Inc. 100,000 4,450,000
- ---------------------------------------------------------------------------
4,450,000
- ---------------------------------------------------------------------------
BUSINESS SERVICES - 1.7%
Pittston Brink's Group(1) 90,000 1,980,000
- ---------------------------------------------------------------------------
1,980,000
- ---------------------------------------------------------------------------
COMPUTER HARDWARE & COMPONENTS - 6.9%
Apple Computer, Inc. 34,800 3,577,875
S3, Inc. 85,700 990,906
Seagate Technology, Inc. 74,400 3,464,250
- ---------------------------------------------------------------------------
8,033,031
- ---------------------------------------------------------------------------
COMPUTER SERVICES - 4.9%
Intelligroup, Inc. 27,800 688,050
Sapient Corporation 24,800 3,495,250
Unisys Corporation 48,300 1,542,581
- ---------------------------------------------------------------------------
5,725,881
- ---------------------------------------------------------------------------
COMPUTER SOFTWARE & SERVICES - 1.4%
Engineering Animation, Inc. 21,570 188,737
Infocure Corporation 8,000 249,500
Open Text Corporation 42,500 765,000
QuadraMed Coporation 42,700 372,290
- ---------------------------------------------------------------------------
1,575,527
- ---------------------------------------------------------------------------
CONSTRUCTION/INFRASTRUCTURE - 6.3%
Lafarge Corporation(1) 110,000 3,038,750
Southdown, Inc.(1) 30,000 1,548,750
USG Corporation(1) 57,800 2,723,825
- ---------------------------------------------------------------------------
7,311,325
- ---------------------------------------------------------------------------
CONSUMER & SPECIALTY RETAIL - 0.8%
Action Performance Companies, Inc. 34,900 401,350
Ames Department Stores, Inc. 18,600 535,913
- ---------------------------------------------------------------------------
937,263
- ---------------------------------------------------------------------------
COPPER/GOLD MINING - 2.5%
Ivanhoe Mines, Ltd. CAD 4,000,000 2,854,174
- ---------------------------------------------------------------------------
2,854,174
- ---------------------------------------------------------------------------
DIAMOND MINING - 1.7%
Diamond Fields International Ltd. Note CAD 1,580,000 1,860,755
DiamondWorks, Ltd. CAD 3,571,485 86,596
- ---------------------------------------------------------------------------
1,947,351
- ---------------------------------------------------------------------------
DIVERSIFIED OPERATIONS - 1.3%
EdperBrascan Corporation(1) CAD 117,000 1,548,112
- ---------------------------------------------------------------------------
1,548,112
- ---------------------------------------------------------------------------
ELECTRONIC COMPONENTS - 0.6%
Solectron Corporation 6,885 654,935
- ---------------------------------------------------------------------------
654,935
- ---------------------------------------------------------------------------
ENERGY - 19.6%
Abacan Resource Corporation 105,000 9,975
Abacan Resource Corporation CAD 400,000 41,566
Anderson Exploration, Ltd. CAD 200,000 2,390,024
Anzoil N.L. AUD 3,577,471 246,792
Coastal Corporation(1) 60,000 2,126,250
Devon Energy Corporation(1) 110,000 3,616,250
Encal Energy, Ltd. CAD 219,000 1,001,316
EOG Resources, Inc.(1) 210,000 3,688,125
Ivanhoe Energy, Inc. CAD 5,150,180 9,633,174
- ---------------------------------------------------------------------------
22,753,472
- ---------------------------------------------------------------------------
FINANCIAL SERVICES - 3.2%
Dundee Bancorp, Inc., Class A CAD 358,300 3,686,010
- ---------------------------------------------------------------------------
3,686,010
- ---------------------------------------------------------------------------
FOOD - 1.6%
Fresh Del Monte Produce, Inc. 200,000 1,800,000
- ---------------------------------------------------------------------------
1,800,000
- ---------------------------------------------------------------------------
GOLD MINING - 4.3%
Consolidated African Mines, Ltd. SAR 17,568,800 2,254,972
Etruscan Resources, Inc. CAD 2,325,680 547,787
Franco-Nevada Mining Corporation, Ltd.(1) CAD 40,000 613,786
Randgold Resources, Ltd. 86,956 339,672
Randgold Resources, Ltd. GDR(3) 318,300 1,273,200
- ---------------------------------------------------------------------------
5,029,417
- ---------------------------------------------------------------------------
HEALTH CARE SERVICES - 0.3%
Pediatrix Medical Group, Inc. 42,600 298,200
- ---------------------------------------------------------------------------
298,200
- ---------------------------------------------------------------------------
MANUFACTURING - 0.4%
Zoltek Companies, Inc. 59,200 510,600
- ---------------------------------------------------------------------------
510,600
- ---------------------------------------------------------------------------
MEDIA - 3.7%
Metromedia International Group, Inc. 890,000 4,227,500
- ---------------------------------------------------------------------------
4,227,500
- ---------------------------------------------------------------------------
MEDICAL - INSTRUMENTS & DEVICES - 0.2%
Ventana Medical Systems, Inc. 9,200 228,850
- ---------------------------------------------------------------------------
228,850
- ---------------------------------------------------------------------------
NICKEL MINING - 6.6%
Inco Ltd., VBN Shares CAD 857,750 7,635,669
- ---------------------------------------------------------------------------
7,635,669
- ---------------------------------------------------------------------------
PAPER & FOREST PRODUCTS - 1.0%
Canfor Corporation CAD 100,000 1,170,766
- ---------------------------------------------------------------------------
1,170,766
- ---------------------------------------------------------------------------
PLATINUM GROUP METALS - 0.1%
African Minerals, Ltd., Restricted (4),(5) 698,422 103,366
- ---------------------------------------------------------------------------
103,366
- ---------------------------------------------------------------------------
PRINTING & PUBLISHING - 1.1%
Hollinger International, Inc.(1) 100,000 1,293,750
- ---------------------------------------------------------------------------
1,293,750
- ---------------------------------------------------------------------------
See notes to Schedule of Investments on page 67.
The accompanying notes are an integral part of these financial statements.
48
<PAGE>
RS FUNDS
<CAPTION>
DECEMBER 31, 1999 FOREIGN CURRENCY(2) SHARES VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
REAL ESTATE - 2.7%
Atlantic Gulf Communities Corporation 638,130 $ 31,907
Brookfield Properties Corporation(1) CAD 298,000 3,127,607
- ---------------------------------------------------------------------------
3,159,514
- ---------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT - 14.8%
Pairgain Technologies, Inc. 67,300 954,819
QUALCOMM, Inc. 91,600 16,144,500
- ---------------------------------------------------------------------------
17,099,319
- ---------------------------------------------------------------------------
TELECOMMUNICATIONS SERVICES - 0.3%
Talk.Com, Inc. 22,200 394,050
- ---------------------------------------------------------------------------
394,050
- ---------------------------------------------------------------------------
TRANSPORTATION SERVICES - 3.4%
AMR Corporation 33,600 2,251,200
China Yuchai International, Ltd. 1,430,000 1,698,125
- ---------------------------------------------------------------------------
3,949,325
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
TOTAL COMMON STOCKS (Cost $132,650,651) 110,463,570
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS - 1.1%
- ---------------------------------------------------------------------------
Atlantic Gulf Communities Corporation,
Series B 206,778 1,240,668
- ---------------------------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $2,049,780) 1,240,668
- ---------------------------------------------------------------------------
<CAPTION>
PAR VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
CONVERTIBLE BONDS - 1.7%
- ---------------------------------------------------------------------------
Randgold and Exploration Company, Ltd.
7.00%, Due 10/3/01(1) GBP 2,750,000 1,993,750
- ---------------------------------------------------------------------------
TOTAL CONVERTIBLE BONDS (Cost $2,750,000) 1,993,750
- ---------------------------------------------------------------------------
<CAPTION>
WARRANTS VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
WARRANTS - 0.1%
- ---------------------------------------------------------------------------
Atlantic Gulf Communities Corporation
Warrants, Strike $5.75, Expire
6/23/04(6) 413,556 16,542
PT Apac Centertex Corporation, Warrants,
Strike IDR 1,000, Expire 7/14/01(6) IDR 2,700,000 85,009
Vengold, Inc., Warrants, Strike $1.30,
Expire 6/30/00(6) CAD 1,286,000 31,181
- ---------------------------------------------------------------------------
TOTAL WARRANTS (Cost $173,436) 132,732
- ---------------------------------------------------------------------------
<CAPTION>
OPTIONS VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
OPTIONS - 0.1%
- ---------------------------------------------------------------------------
Harmony Gold Mining Company, Ltd. Options,
Strike SAR 6,000, Expire 7/31/01(6) SAR 9,900 7,640
Normandy Mining, Ltd., Options, Strike
AUD 2.50, Expire 4/30/01(6) AUD 1,673,426 74,762
- ---------------------------------------------------------------------------
TOTAL OPTIONS (Cost $43,533) 82,402
- ---------------------------------------------------------------------------
<CAPTION>
DECEMBER 31, 1999 FOREIGN CURRENCY(2) SHARES VALUE
- ---------------------------------------------------------------------------
<S> <C>
- ---------------------------------------------------------------------------
TOTAL INVESTMENTS - 98.3% (Cost $137,667,400) $113,913,122
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
DEPOSITS WITH BROKERS FOR SECURITIES SOLD SHORT - 19.3% 22,333,358
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
SECURITIES SOLD SHORT - (18.7%) (Proceeds $35,633,775) (21,659,094)
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
OTHER ASSETS, NET - 1.1% 1,323,512
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
TOTAL NET ASSETS - 100.0% $115,910,898
- ---------------------------------------------------------------------------
</TABLE>
See notes to Schedule of Investments on page 67.
The accompanying notes are an integral part of these financial statements.
49
<PAGE>
ANNUAL REPORT
SCHEDULE OF SECURITIES SOLD SHORT -- THE CONTRARIAN FUND-TM-
<TABLE>
<CAPTION>
DECEMBER 31, 1999 FOREIGN CURRENCY(2) SHARES VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 18.7%
- ---------------------------------------------------------------------------
AGRICULTURAL PRODUCTS - 0.1%
AgriBioTech, Inc. 44,700 $ 106,163
- ---------------------------------------------------------------------------
106,163
- ---------------------------------------------------------------------------
COMMERCIAL SERVICES - 0.2%
Source Information Management Company 12,000 201,000
- ---------------------------------------------------------------------------
201,000
- ---------------------------------------------------------------------------
COMPUTER SERVICES - 3.8%
Acxiom Corporation 10,700 256,800
Intelligroup, Inc. 27,800 688,050
Sapient Corporation 24,800 3,495,250
- ---------------------------------------------------------------------------
4,440,100
- ---------------------------------------------------------------------------
COMPUTER SOFTWARE - 1.5%
Diversinet Corporation 6,900 151,800
Sapiens International Corporation N.V. 4,800 78,900
Transactions Systems Architects, Inc. 52,800 1,478,400
- ---------------------------------------------------------------------------
1,709,100
- ---------------------------------------------------------------------------
COMPUTER SOFTWARE & SERVICES - 3.9%
Engineering Animation, Inc. 21,570 188,738
InfoCure Corporation 36,000 1,122,750
InteliData Technologies Corporation 159,100 661,259
Open Text Corporation 75,900 1,366,200
QuadraMed Corporation 42,700 372,291
TenFold Corporation 20,000 798,750
- ---------------------------------------------------------------------------
4,509,988
- ---------------------------------------------------------------------------
CONSUMER & SPECIALTY RETAIL - 0.8%
Action Performance Companies, Inc. 55,200 634,800
French Fragrances, Inc. 51,100 328,956
- ---------------------------------------------------------------------------
963,756
- ---------------------------------------------------------------------------
DATA PROCESSING SERVICES/SYSTEM
INTEGRATION - 0.1%
LHS Group, Inc. 3,800 93,337
- ---------------------------------------------------------------------------
93,337
- ---------------------------------------------------------------------------
ELECTRONICS - 0.6%
Lernout & Hauspie Speech Products NV 14,169 655,316
- ---------------------------------------------------------------------------
655,316
- ---------------------------------------------------------------------------
ELECTRONIC COMPONENTS - 0.6%
Solectron Corporation 6,885 654,935
- ---------------------------------------------------------------------------
654,935
- ---------------------------------------------------------------------------
FINANCIAL SERVICES - 1.2%
Delta Financial Corporation 340,418 1,404,224
- ---------------------------------------------------------------------------
1,404,224
- ---------------------------------------------------------------------------
HEALTH CARE SERVICES - 0.3%
Pediatrix Medical Group, Inc. 43,000 301,000
- ---------------------------------------------------------------------------
301,000
- ---------------------------------------------------------------------------
INSURANCE - 0.9%
Conseco, Inc. 60,900 1,088,588
- ---------------------------------------------------------------------------
1,088,588
- ---------------------------------------------------------------------------
INTERNET CAPITAL SERVICES - 0.3%
F5 Networks, Inc. 2,900 330,600
- ---------------------------------------------------------------------------
330,600
- ---------------------------------------------------------------------------
MANUFACTURING - 1.1%
Zoltek Companies, Inc. 146,300 1,261,838
- ---------------------------------------------------------------------------
1,261,838
- ---------------------------------------------------------------------------
MEDICAL - INSTRUMENTS & DEVICES - 1.6%
Ventana Medical Systems, Inc. 73,300 1,823,337
- ---------------------------------------------------------------------------
1,823,337
- ---------------------------------------------------------------------------
MEDICAL SUPPLIES - 1.0%
Enzo Biochem, Inc. 25,385 1,143,912
- ---------------------------------------------------------------------------
1,143,912
- ---------------------------------------------------------------------------
OFFICE EQUIPMENT - 0.5%
Xeikon N.V. ADR 32,100 577,800
- ---------------------------------------------------------------------------
577,800
- ---------------------------------------------------------------------------
TELECOMMUNICATIONS SERVICES - 0.3%
SmarTalk TeleServices, Inc. 50,400 50
Talk.com, Inc. 22,200 394,050
- ---------------------------------------------------------------------------
394,100
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
TOTAL SECURITIES SOLD SHORT (Proceeds $35,633,775) $ 21,659,094
- ---------------------------------------------------------------------------
</TABLE>
See notes to Schedule of Investments on page 67.
The accompanying notes are an integral part of these financial statements.
50
<PAGE>
RS FUNDS
SCHEDULE OF INVESTMENTS -- DIVERSIFIED GROWTH FUND
<TABLE>
<CAPTION>
DECEMBER 31, 1999 FOREIGN CURRENCY(2) SHARES VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 88.3%
- ---------------------------------------------------------------------------
ADVERTISING - 0.4%
HA-LO Industries, Inc. 150,000 $ 1,125,000
- ---------------------------------------------------------------------------
1,125,000
- ---------------------------------------------------------------------------
BEVERAGES - 0.6%
Todhunter International, Inc. 197,800 1,804,925
- ---------------------------------------------------------------------------
1,804,925
- ---------------------------------------------------------------------------
BIOTECHNOLOGY - 0.5%
Abgenix, Inc. 11,500 1,523,750
- ---------------------------------------------------------------------------
1,523,750
- ---------------------------------------------------------------------------
BROADCASTING/RADIO/TV - 1.2%
NTN Communications, Inc. 115,000 431,250
TCI Satellite Entertainment, Inc. 60,000 960,000
Wink Communications, Inc. 35,900 2,156,244
- ---------------------------------------------------------------------------
3,547,494
- ---------------------------------------------------------------------------
BUSINESS SERVICES - 1.6%
United Shipping & Technology, Inc. 537,587 4,300,696
United Shipping & Technology, Inc.
Restricted (4),(5) 100,000 640,000
- ---------------------------------------------------------------------------
4,940,696
- ---------------------------------------------------------------------------
COMMERCIAL SERVICES - 1.6%
Optimal Robotics Corporation 30,000 1,117,500
Precision Response Corporation 4,000 97,000
SITEL Corporation 350,000 2,450,000
Student Advantage, Inc. 60,000 1,331,250
- ---------------------------------------------------------------------------
4,995,750
- ---------------------------------------------------------------------------
COMPUTER HARDWARE & COMPONENTS - 1.4%
Brocade Communications Systems, Inc. 7,300 1,292,100
Media 100, Inc. 70,000 1,850,625
Redback Networks, Inc. 6,800 1,207,000
- ---------------------------------------------------------------------------
4,349,725
- ---------------------------------------------------------------------------
COMPUTER SERVICES - 3.9%
ALPNET, Inc. 140,000 665,000
Ciber, Inc. 58,000 1,595,000
Intelligroup, Inc. 70,000 1,732,500
InterVoice-Brite, Inc. 55,000 1,301,094
Metamor Worldwide, Inc. 95,000 2,766,875
RSA Security, Inc. 13,000 1,007,500
VeriSign, Inc. 15,000 2,861,250
- ---------------------------------------------------------------------------
11,929,219
- ---------------------------------------------------------------------------
COMPUTER SOFTWARE - 9.6%
Computer Associates International, Inc.(1) 75,000 5,245,313
Datastream Systems, Inc. 77,000 1,891,312
Evolving Systems, Inc. 50,000 425,000
Fast Search & Transfer ASA NOK 43,000 3,084,648
FileNET Corporation 100,000 2,550,000
Inso Corporation 110,000 3,547,500
Pinnacle Systems, Inc. 94,500 3,844,969
Portal Software, Inc. 20,000 2,057,500
TeleComputing ASA NOK 51,400 2,565,030
The 3DO Company 232,500 2,114,297
Wind River Systems, Inc. 50,000 1,837,500
- ---------------------------------------------------------------------------
29,163,069
- ---------------------------------------------------------------------------
COMPUTER SOFTWARE & SERVICES - 4.2%
InfoNow Corporation 182,500 3,011,250
JDA Software Group, Inc. 107,500 1,760,312
Symantec Corporation 20,000 1,172,500
TSI International Software, Ltd. 30,000 1,698,750
Verity, Inc. 120,750 5,139,422
- ---------------------------------------------------------------------------
12,782,234
- ---------------------------------------------------------------------------
CONSTRUCTION/INFRASTRUCTURE - 0.5%
Coachmen Industries, Inc.(1) 100,000 1,512,500
- ---------------------------------------------------------------------------
1,512,500
- ---------------------------------------------------------------------------
CONSUMER & SPECIALTY RETAIL - 3.3%
American Eagle Outfitters, Inc. 51,000 2,295,000
Charlotte Russe Holding, Inc. 73,800 1,549,800
Hanover Direct, Inc. 110,000 398,750
Krause's Furniture, Inc. 304,900 876,587
Shop At Home, Inc. 318,200 3,162,112
Skymall, Inc. 108,500 800,187
Value City Department Stores, Inc. 60,000 907,500
- ---------------------------------------------------------------------------
9,989,936
- ---------------------------------------------------------------------------
DATA PROCESSING SERVICES - 0.7%
Intranet Solutions, Inc. 60,000 2,220,000
- ---------------------------------------------------------------------------
2,220,000
- ---------------------------------------------------------------------------
EDUCATION & TRAINING - 0.1%
Educational Video Conferencing, Inc. 13,700 277,425
- ---------------------------------------------------------------------------
277,425
- ---------------------------------------------------------------------------
ELECTRONIC COMPONENTS - 2.7%
Cymer, Inc. 30,000 1,380,000
Hitachi Ltd.(1) 15,000 2,428,125
Photon Dynamics, Inc. 20,000 775,000
Sawtek, Inc. 52,500 3,494,531
- ---------------------------------------------------------------------------
8,077,656
- ---------------------------------------------------------------------------
ENERGY - 1.4%
Ensign Resource Service Group, Inc.(1) CAD 30,000 701,420
EOG Resources, Inc.(1) 90,000 1,580,625
Independent Energy Holdings PLC ADR(3) 63,400 2,112,012
- ---------------------------------------------------------------------------
4,394,057
- ---------------------------------------------------------------------------
ENERGY SERVICES - 6.3%
BJ Services Company 50,000 2,090,625
Bonus Resource Services Corporation CAD 470,000 765,154
ENSCO International, Inc.(1) 75,000 1,715,625
Global Marine, Inc. 150,000 2,493,750
Marine Drilling Companies, Inc. 100,000 2,243,750
Newpark Resources, Inc. 150,000 918,750
R & B Falcon Corporation 100,000 1,325,000
See notes to Schedule of Investments on page 67.
The accompanying notes are an integral part of these financial statements.
51
<PAGE>
ANNUAL REPORT
SCHEDULE OF INVESTMENTS -- DIVERSIFIED GROWTH FUND -- CONTINUED
<CAPTION>
DECEMBER 31, 1999 FOREIGN CURRENCY(2) SHARES VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
The Montana Power Company(1) 87,200 $ 3,144,650
UTI Energy Corporation 100,000 2,306,250
Weatherford International, Inc. 55,000 2,196,562
- ---------------------------------------------------------------------------
19,200,116
- ---------------------------------------------------------------------------
INDUSTRIAL - 1.7%
Cognex Corporation 46,200 1,801,800
Maverick Tube Corporation 64,650 1,596,047
PRI Automation, Inc. 26,300 1,765,387
- ---------------------------------------------------------------------------
5,163,234
- ---------------------------------------------------------------------------
INSTRUMENTS - 0.4%
Newport Corporation(1) 28,000 1,281,000
- ---------------------------------------------------------------------------
1,281,000
- ---------------------------------------------------------------------------
INTERNET CAPITAL SERVICES - 15.7%
24/7 Media, Inc. 35,000 1,968,750
Art Technology Group, Inc. 15,000 1,950,000
bamboo.com, Inc. 120,000 1,987,500
Billserv.com, Inc. 84,900 663,281
Billserv.com, Inc. Restricted(4,5) 301,538 2,120,189
Clarent Corporation 25,000 1,943,750
Commtouch Software Ltd. 57,500 2,792,344
Concentric Networking Corporation 101,000 3,112,063
Covad Communications Group, Inc. 30,000 1,678,125
Earthweb, Inc. 60,000 3,018,750
eGain Communications Corporation 45,000 1,698,750
E-Stamp Corporation 21,300 473,925
Euro909.com A/S ADR(3) 109,000 2,997,500
EuroWeb International Corporation 60,000 693,750
Geoworks Corporation 85,000 1,423,750
Internet Capital Group, Inc. 13,000 2,210,000
Mpath Interactive, Inc. 28,700 764,138
NBC Internet, Inc. 28,000 2,163,000
Network Solutions, Inc. 17,000 3,698,563
PC-Tel, Inc. 62,000 3,255,000
WorldGate Communications, Inc. 57,500 2,734,844
Ziff-Davis, Inc. 217,000 4,557,000
- ---------------------------------------------------------------------------
47,904,972
- ---------------------------------------------------------------------------
INTERNET COMMERCE - 1.7%
ShopNow.com, Inc. 45,000 852,187
Stamps.com, Inc. 104,000 4,329,000
- ---------------------------------------------------------------------------
5,181,187
- ---------------------------------------------------------------------------
MACHINERY - 0.5%
Asyst Technologies, Inc. 25,000 1,639,062
- ---------------------------------------------------------------------------
1,639,062
- ---------------------------------------------------------------------------
MEDIA - 5.1%
LodgeNet Entertainment Corporation 164,300 4,086,962
Network Event Theater, Inc. 35,000 1,041,250
New Frontier Media, Inc. 300,000 1,275,000
The Kushner-Locke Company, Inc. 100,000 434,375
United GlobalCom, Inc., Class A 57,000 $4,025,625
ValueVision International, Inc., Class A 80,000 4,585,000
- ---------------------------------------------------------------------------
15,448,212
- ---------------------------------------------------------------------------
MEDICAL - BIOMEDICAL/GENETICS - 2.2%
Bio-Technology General Corporation 90,000 1,372,500
Enzon, Inc. 60,000 2,602,500
Novavax, Inc. 188,700 1,061,438
Protein Design Labs, Inc. 25,000 1,750,000
- ---------------------------------------------------------------------------
6,786,438
- ---------------------------------------------------------------------------
MEDICAL - INSTRUMENTS & DEVICES - 2.1%
Closure Medical Corporation 100,000 1,287,500
Cyberonics, Inc. 40,000 637,500
Cytyc Corporation 55,000 3,358,438
Endocardial Solutions, Inc. 129,750 1,135,313
- ---------------------------------------------------------------------------
6,418,751
- ---------------------------------------------------------------------------
NETWORK SYSTEMS - 0.5%
Network Access Solutions Corporation 50,000 1,650,000
- ---------------------------------------------------------------------------
1,650,000
- ---------------------------------------------------------------------------
PHARMACEUTICALS - 2.6%
DUSA Pharmaceuticals, Inc. 58,500 1,667,250
Gilead Sciences, Inc. 50,000 2,706,250
Neurocrine Biosciences, Inc. 100,000 2,475,000
NPS Pharmaceuticals, Inc. 75,000 918,750
- ---------------------------------------------------------------------------
7,767,250
- ---------------------------------------------------------------------------
RESTAURANTS - 0.5%
Steakhouse Partners, Inc. 240,800 1,459,850
- ---------------------------------------------------------------------------
1,459,850
- ---------------------------------------------------------------------------
SEMICONDUCTORS & COMPONENTs - 1.7%
General Semiconductor, Inc. 75,000 1,064,063
LTX Corporation 60,000 1,342,500
Oak Technology, Inc. 300,000 2,831,250
- ---------------------------------------------------------------------------
5,237,813
- ---------------------------------------------------------------------------
TELECOMMUNICATIONS - 3.0%
Primus Telecommunications Group, Inc. 241,500 9,237,375
- ---------------------------------------------------------------------------
9,237,375
- ---------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT - 4.0%
Advanced Radio Telecom Corporation 57,400 1,377,600
Aware, Inc. 25,000 909,375
Carrier Access Corporation 45,000 3,029,063
Digital Microwave Corporation 75,000 1,757,813
General Motors Corporation, Class H 20,000 1,920,000
SeaChange International, Inc. 60,000 2,122,500
Sycamore Networks, Inc. 3,000 924,000
- ---------------------------------------------------------------------------
12,040,351
- ---------------------------------------------------------------------------
TELECOMMUNICATIONS SERVICES - 6.6%
American Mobile Satellite Corporation 138,900 2,925,581
BroadWing, Inc.(1) 50,000 1,843,750
DSET Corporation 70,000 2,616,250
See notes to Schedule of Investments on page 67.
The accompanying notes are an integral part of these financial statements.
52
<PAGE>
RS FUNDS
<CAPTION>
DECEMBER 31, 1999 FOREIGN CURRENCY(2) SHARES VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
FiberNet Telecom Group, Inc. 32,400 $ 490,050
General Magic, Inc. 81,200 314,650
MRV Communications, Inc. 60,000 3,772,500
Startec Global Communications Corporation 253,300 5,414,288
Startec Global Communications Corporation
Private Placement(4,5) 40,000 684,000
Tele1 Europe AB NOK 10,000 2,120,891
- ---------------------------------------------------------------------------
20,181,960
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
TOTAL COMMON STOCKS (Cost $188,277,302) 269,231,007
- ---------------------------------------------------------------------------
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
CONVERTIBLE PREFERRED STOCKS - 0.4%
- ---------------------------------------------------------------------------
COAL - 0.2%
Westmoreland Coal, Inc., 8.50%, Series A 44,000 695,750
- ---------------------------------------------------------------------------
695,750
- ---------------------------------------------------------------------------
ENERGY - 0.1%
Contour Energy Company, $2.625 Series 100,000 187,500
- ---------------------------------------------------------------------------
187,500
- ---------------------------------------------------------------------------
TRANSPORTATION - 0.1%
Trans World Airlines, Inc. 8%(1) 27,000 300,375
- ---------------------------------------------------------------------------
300,375
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $1,480,120) 1,183,625
- ---------------------------------------------------------------------------
<CAPTION>
WARRANTS VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
WARRANTS - 0.6%
- ---------------------------------------------------------------------------
Billserv.com, Inc. Warrants, Restricted,
Strike $3.75, Expire 10/15/02(4,5,6) 301,538 1,677,127
Novavax, Inc. Warrants, Strike $3.75,
Expire 4/13/02(4,6) 40,000 111,387
- ---------------------------------------------------------------------------
TOTAL WARRANTS (Cost $438,393) 1,788,514
- ---------------------------------------------------------------------------
<CAPTION>
CONTRACTS VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
CALL OPTIONS - 0.1%
- ---------------------------------------------------------------------------
Oil Service Index, Strike 85,
Expire 01/22/00(6) 650 329,063
The Philadelphia Oil Service Sector Index,
Strike 80, Expire 1/22/00(6) 100 67,500
- ---------------------------------------------------------------------------
TOTAL CALL OPTIONS (Cost $330,375) 396,563
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
PUT OPTIONS - 0.4%
- ---------------------------------------------------------------------------
S&P 500 Index, Strike 1440, Expire 01/22/00(6) 200 350,000
S&P 500 Index, Strike 1450, Expire 01/22/00(6) 200 440,000
S&P 500 Index, Strike 1460, Expire 01/22/00(6) 175 402,500
- ---------------------------------------------------------------------------
TOTAL PUT OPTIONS (Cost $1,244,225) 1,192,500
- ---------------------------------------------------------------------------
<CAPTION>
December 31, 1999 VALUE
- ---------------------------------------------------------------------------
<S> <C>
SHORT TERM INVESTMENTS - 10.0%
- ---------------------------------------------------------------------------
Temporary Investment Cash Fund $ 15,175,912
Temporary Investment Fund 15,175,912
- ---------------------------------------------------------------------------
TOTAL SHORT TERM INVESTMENTS (Cost $30,351,824) 30,351,824
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
TOTAL INVESTMENTS - 99.8% (Cost $222,122,239) 304,144,033
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
OTHER ASSETS, NET - 0.2% 602,066
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
TOTAL NET ASSETS - 100.0% $304,746,099
- ---------------------------------------------------------------------------
</TABLE>
See notes to Schedule of Investments on page 67.
The accompanying notes are an integral part of these financial statements.
53
<PAGE>
ANNUAL REPORT
SCHEDULE OF INVESTMENTS -- EMERGING GROWTH FUND
<TABLE>
<CAPTION>
DECEMBER 31, 1999 SHARES VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 96.4%
- ---------------------------------------------------------------------------
ADVERTISING - 0.9%
Lamar Advertising Company 306,050 $ 18,535,153
TMP Worldwide, Inc. 102,600 14,569,200
- ---------------------------------------------------------------------------
33,104,353
- ---------------------------------------------------------------------------
BIOTECHNOLOGY - 0.9%
Abgenix, Inc. 246,500 32,661,250
- ---------------------------------------------------------------------------
32,661,250
- ---------------------------------------------------------------------------
BROADCASTING/RADIO/TV - 6.8%
AMFM, Inc. 275,654 21,569,925
Citadel Communications Corporation 415,350 26,945,831
Classic Communications, Inc. 2,600 95,062
Cox Radio, Inc., Class A 239,700 23,910,075
Cumulus Media, Inc., Class A 372,100 18,884,075
Emmis Communications Corporation, Class A 326,400 40,682,700
EnterCom Communications Corporation 482,300 31,831,800
Hispanic Broadcasting Corporation 211,500 19,504,266
Infinity Broadcasting Corporation 872,725 31,581,736
Spanish Broadcasting System, Inc. 603,900 24,306,975
XM Satellite Radio Holdings, Inc. 122,700 4,677,937
- ---------------------------------------------------------------------------
243,990,382
- ---------------------------------------------------------------------------
BUSINESS SERVICES - 0.1%
@plan.Inc. 62,500 617,187
On Assignment, Inc. 132,400 3,955,450
- ---------------------------------------------------------------------------
4,572,637
- ---------------------------------------------------------------------------
COMMERCIAL SERVICES - 0.8%
eBenX, Inc. 52,000 2,353,000
MemberWorks, Inc. 161,600 5,363,100
Precision Response Corporation 150,800 3,656,900
Student Advantage, Inc. 458,400 10,170,750
TeleTech Holdings, Inc. 250,800 8,452,744
- ---------------------------------------------------------------------------
29,996,494
- ---------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 0.2%
Research in Motion, Ltd. 122,100 5,639,494
- ---------------------------------------------------------------------------
5,639,494
- ---------------------------------------------------------------------------
COMPUTER HARDWARE & COMPONENTS - 3.1%
Brocade Communications Systems, Inc. 188,000 33,276,000
Immersion Corporation 200,000 7,675,000
M-Systems Flash Disk Pioneers, Ltd. 166,000 5,457,250
NetScout Systems, Inc. 38,800 1,202,800
Redback Networks, Inc. 164,700 29,234,250
SanDisk Corporation 12,300 1,183,875
Silicon Storage Technology, Inc. 190,800 7,870,500
VERITAS Software Corporation 180,150 25,783,969
- ---------------------------------------------------------------------------
111,683,644
- ---------------------------------------------------------------------------
COMPUTER SERVICES - 3.2%
Acxiom Corporation 811,000 19,464,000
Answerthink Consulting Group, Inc. 175,100 5,997,175
CheckFree Holdings Corporation 174,100 18,193,450
McAfee.com Corporation 6,550 294,750
PSW Technologies, Inc. 260,100 5,185,744
RSA Security, Inc. 301,900 23,397,250
Sapient Corporation 170,100 23,973,469
Segue Software, Inc. 121,700 3,042,500
Tanning Technology Corporation 115,600 $6,813,175
The BISYS Group, Inc. 125,000 8,156,250
- ---------------------------------------------------------------------------
114,517,763
- ---------------------------------------------------------------------------
COMPUTER SOFTWARE - 13.0%
Accrue Software, Inc. 205,800 11,138,925
Active Software, Inc. 203,700 18,740,400
Aspect Development, Inc. 558,200 38,236,700
Brio Technology, Inc. 349,800 14,691,600
Broadbase Software, Inc. 141,000 15,862,500
Business Objects S.A., ADR 279,400 37,334,825
Concentric Networking Corporation 476,300 14,675,994
Cysive, Inc. 199,600 14,383,675
Digex, Inc. 249,250 17,135,937
Electronic Arts, Inc. 165,000 13,860,000
Exchange Applications, Inc. 555,300 31,027,387
FileNET Corporation 640,100 16,322,550
HNC Software, Inc. 230,900 24,417,675
Informatica Corporation 59,300 6,308,037
Interactive Intelligence, Inc. 420,650 11,199,806
IXnet, Inc. 150,000 4,518,750
J.D. Edwards & Company 225,000 6,721,875
Legato Systems, Inc. 356,200 24,511,012
Macromedia, Inc. 289,300 21,155,062
Macrovision Corporation 124,000 9,176,000
NetIQ Corporation 278,650 14,507,216
OnDisplay, Inc. 8,400 763,350
Pinnacle Holdings, Inc. 377,400 15,992,325
Pivotal Corporation 115,500 4,879,875
RAVISENT Technologies, Inc. 25,000 960,937
Sagent Technology, Inc. 609,600 18,249,900
Scientific Learning Corporation 294,150 10,736,475
Siebel Systems, Inc. 265,000 22,260,000
TIBCO Software, Inc. 67,000 10,251,000
VA Linux Systems, Inc. 8,700 1,797,637
Verity, Inc. 71,600 3,047,475
Vitria Technology, Inc. 41,050 9,605,700
- ---------------------------------------------------------------------------
464,470,600
- ---------------------------------------------------------------------------
COMPUTER SOFTWARE & SERVICES - 8.2%
Advent Software, Inc. 195,825 12,618,473
BEA Systems, Inc. 1,984,000 138,756,000
Check Point Software Technologies, Ltd. 235,900 46,885,125
ISS Group, Inc. 482,200 34,296,475
Mercury Interactive Corporation 227,600 24,566,575
Netegrity, Inc. 377,300 21,482,519
TSI International Software, Ltd. 274,200 15,526,575
- ---------------------------------------------------------------------------
294,131,742
- ---------------------------------------------------------------------------
CONSUMER & SPECIALTY RETAIL - 1.6%
99 Cents Only Stores 257,700 9,857,025
Abercrombie & Fitch Company 200,000 5,337,500
American Eagle Outfitters, Inc. 300,000 13,500,000
Bed, Bath & Beyond, Inc. 479,300 16,655,675
Factory 2-U Stores, Inc. 312,700 8,872,862
Linens 'n Things, Inc. 149,800 4,437,825
- ---------------------------------------------------------------------------
58,660,887
- ---------------------------------------------------------------------------
See notes to Schedule of Investments on page 67.
The accompanying notes are an integral part of these financial statements.
54
<PAGE>
RS FUNDS
<CAPTION>
DECEMBER 31, 1999 SHARES VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
ELECTRONIC COMPONENTS - 2.6%
Dionex Corporation 50,000 $ 2,059,375
Integrated Device Technology, Inc. 637,500 18,487,500
Power Integrations, Inc. 687,400 32,952,237
Sanmina Corporation 115,000 11,485,625
Sawtek, Inc. 412,800 27,477,000
- ---------------------------------------------------------------------------
92,461,737
- ---------------------------------------------------------------------------
ENERGY - 0.3%
Calpine Corporation 175,000 11,200,000
- ---------------------------------------------------------------------------
11,200,000
- ---------------------------------------------------------------------------
ENERGY SERVICES - 0.3%
BJ Services Company 150,000 6,271,875
Noble Drilling Corporation 125,000 4,093,750
- ---------------------------------------------------------------------------
10,365,625
- ---------------------------------------------------------------------------
FINANCIAL SERVICES - 3.6%
Ameritrade Holding Corporation, Class A 350,000 7,590,625
E-LOAN, Inc. 522,400 8,489,000
Financial Federal Corporation 364,100 8,306,031
Fiserv, Inc. 150,000 5,746,875
Knight/Trimark Group, Inc. 1,597,900 73,503,400
Legg Mason, Inc.(1) 50,000 1,812,500
MBNA Corporation(1) 232,100 6,324,725
SEI Investments Company(1) 98,900 11,770,645
Web Street, Inc. 457,550 5,662,181
- ---------------------------------------------------------------------------
129,205,982
- ---------------------------------------------------------------------------
HEALTHCARE SERVICES - 0.1%
Allscripts, Inc. 100,000 4,400,000
- ---------------------------------------------------------------------------
4,400,000
- ---------------------------------------------------------------------------
INTERNET CAPITAL SERVICES - 21.2%
24/7 Media, Inc. 730,000 41,062,500
About.com, Inc. 171,400 15,383,150
AGENCY.COM, Inc. 4,350 221,850
AppliedTheory Corporation 254,700 7,067,925
Autoweb.com, Inc. 440,200 4,787,175
Bluestone Software, Inc. 138,800 15,962,000
BroadVision, Inc. 159,600 27,141,975
C-bridge Internet Solutions, Inc. 22,250 1,081,906
Clarent Corporation 289,100 22,477,525
CMGI, Inc. 32,600 9,026,125
CNet, Inc. 200,000 11,350,000
Critical Path, Inc. 50,000 4,718,750
DoubleClick, Inc. 85,100 21,535,619
DSL. net, Inc. 317,400 4,582,462
eCollege.com, Inc. 17,650 193,047
eGain Communications Corporation 83,600 3,155,900
Egreetings Network, Inc. 5,450 55,181
El Sitio, Inc. 54,200 1,991,850
eSPEED, Inc. 439,200 15,619,050
Flycast Communications Corporation 50,000 6,496,875
GRIC Communications, Inc. 42,950 1,089,856
HomeStore.com, Inc. 146,600 10,885,050
HotJobs.com, Ltd. 570,600 24,928,087
Internap Network Services Corporation 167,300 28,942,900
Intraware, Inc. 272,200 21,503,800
ITXC Corporation 368,850 $12,402,581
Lifeminders.com, Inc. 200,000 11,550,000
Liquid Audio, Inc. 420,150 11,028,937
Lycos, Inc. 300,000 23,868,750
Mediaplex, Inc. 7,700 483,175
MedicaLogic, Inc. 4,800 100,800
Medscape, Inc. 148,950 1,489,500
Multex.com, Inc. 165,700 6,234,462
MyPoints.com, Inc. 105,400 7,799,600
National Information Consortium, Inc. 284,150 9,092,800
NaviSite, Inc. 125,850 12,585,000
NBC Internet, Inc. 399,800 30,884,550
Netcentives, Inc. 209,900 13,079,394
NetCreations, Inc. 50,800 2,235,200
Netopia, Inc. 716,650 38,923,053
Network Solutions, Inc. 327,500 71,251,719
pcOrder.com, Inc. 274,000 13,974,000
PC-Tel, Inc. 24,400 1,281,000
Primus Knowledge Solutions, Inc. 402,000 18,215,625
Proxicom, Inc. 346,600 43,086,712
PSINet, Inc. 263,000 16,240,250
Ramp Networks, Inc. 180,000 2,745,000
RealNetworks, Inc. 156,000 18,768,750
Scient Corporation 266,800 23,061,525
Silknet Software, Inc. 158,600 26,287,950
Software.com, Inc. 115,400 11,078,400
SonicWALL, Inc. 9,550 384,387
The Knot, Inc. 3,500 29,531
Verio, Inc. 254,600 11,759,337
Viant Corporation 73,250 7,251,750
Webstakes.com, Inc. 205,600 4,060,600
Xpedior, Inc. 19,150 550,563
Yesmail.com, Inc. 172,100 5,819,131
- ---------------------------------------------------------------------------
758,864,590
- ---------------------------------------------------------------------------
INTERNET COMMERCE - 2.5%
Covad Communications Group, Inc. 448,200 25,071,188
CyberSource Corporation 159,300 8,243,775
Expedia, Inc., Class A 196,200 6,867,000
Fogdog, Inc. 6,000 57,000
FreeMarkets, Inc. 2,600 887,413
GoTo.com, Inc. 162,250 9,532,188
MotherNature.com, Inc. 41,350 302,372
Sportsline USA, Inc. 131,100 6,571,388
Stamps.com, Inc. 201,500 8,387,437
Vignette Corporation 134,800 21,972,400
VitaminShoppe.com, Inc. 62,000 565,750
- ---------------------------------------------------------------------------
88,457,911
- ---------------------------------------------------------------------------
INVESTMENT MANAGEMENT - 0.2%
Affiliated Managers Group, Inc. 40,000 1,617,500
Waddell & Reed Financial, Inc.(1) 256,100 6,946,712
- ---------------------------------------------------------------------------
8,564,212
- ---------------------------------------------------------------------------
MEDIA - 1.9%
Gemstar International Group, Ltd. 231,400 16,487,250
UnitedGlobalCom, Inc., Class A 239,000 16,879,375
See notes to Schedule of Investments on page 67.
The accompanying notes are an integral part of these financial statements.
55
<PAGE>
ANNUAL REPORT
SCHEDULE OF INVESTMENTS -- EMERGING GROWTH FUND -- CONTINUED
<CAPTION>
DECEMBER 31, 1999 SHARES VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
Univision Communications, Inc. 261,200 $ 26,691,375
Valuevision International, Inc., Class A 154,100 8,831,856
- ---------------------------------------------------------------------------
68,889,856
- ---------------------------------------------------------------------------
MEDICAL - BIOMEDICAL/GENETICS - 0.7%
Cell Genesys, Inc. 100,000 1,281,250
Maxygen, Inc. 3,600 255,600
Millennium Pharmaceuticals, Inc. 73,289 8,941,258
Protein Design Labs, Inc. 168,600 11,802,000
Visible Genetics, Inc. 30,000 900,000
- ---------------------------------------------------------------------------
23,180,108
- ---------------------------------------------------------------------------
MEDICAL - INSTRUMENTS & DEVICES - 1.2%
Biomatrix, Inc. 359,500 6,920,375
Cytyc Corporation 417,300 25,481,381
ResMed, Inc. 208,300 8,696,525
VISX, Inc. 50,000 2,587,500
- ---------------------------------------------------------------------------
43,685,781
- ---------------------------------------------------------------------------
NETWORK SYSTEMS & PRODUCTS - 2.4%
Cobalt Networks, Inc. 12,800 1,387,200
Extreme Networks, Inc. 221,450 18,491,075
Foundry Networks, Inc. 13,050 3,937,022
Juniper Networks, Inc. 45,600 15,504,000
MMC Networks, Inc. 359,400 12,354,375
Network Appliance, Inc. 425,000 35,301,563
- ---------------------------------------------------------------------------
86,975,235
- ---------------------------------------------------------------------------
PHARMACEUTICALS - 1.7%
Anesta Corporation 47,500 816,406
Cephalon, Inc. 300,000 10,368,750
Dusa Pharmaceuticals, Inc. 175,700 5,007,450
Medarex, Inc. 391,000 14,564,750
Medicis Pharmaceutical Corporation, Class A 100,000 4,256,250
Pharmacyclics, Inc. 70,500 2,908,125
Progenics Pharmaceuticals, Inc. 100,000 4,887,500
QLT PhotoTherapeutics, Inc. 300,000 17,625,000
Tularik, Inc. 2,000 64,750
- ---------------------------------------------------------------------------
60,498,981
- ---------------------------------------------------------------------------
SEMICONDUCTORS & COMPONENTS - 5.0%
Applied Micro Circuits Corporation 38,096 4,847,716
Caliper Technologies Corporation 3,250 216,938
Conexant Systems, Inc. 353,800 23,483,475
Cree Research, Inc. 297,600 25,407,600
Globespan, Inc. 150,000 9,768,750
Lattice Semiconductor Corporation 233,500 11,003,688
LTX Corporation 291,000 6,511,125
Metalink, Ltd. 14,300 291,363
MIPS Technologies, Inc. 174,100 9,053,200
PMC-Sierra, Inc. 87,800 14,075,438
QLogic Corporation 178,700 28,569,663
Silicon Image, Inc. 115,000 8,057,188
Taiwan Semiconductor Manufacturing Co., Ltd. 493,133 22,190,985
TranSwitch Corporation 159,900 11,602,744
Zoran Corporation 66,950 3,732,463
- ---------------------------------------------------------------------------
178,812,336
- ---------------------------------------------------------------------------
TELECOMMUNICATIONS - 3.2%
AirGate PCS, Inc. 67,500 3,560,625
Crown Castle International Corporation 506,300 16,264,888
EchoStar Communications Corporation 495,200 $48,282,000
Metromedia Fiber Network, Inc., Class A 233,400 11,188,613
Nextel Communications, Inc. 25,000 2,578,125
Primus Telecommunications Group, Inc. 488,000 18,666,000
Tritel, Inc. 5,150 163,191
Triton PCS Holdings, Inc., Class A 262,450 11,941,475
- ---------------------------------------------------------------------------
112,644,917
- ---------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT - 6.9%
Advanced Fibre Communications, Inc. 400,000 17,875,000
Airnet Communications Corporation 1,850 67,294
American Tower Corporation, Class A 172,700 5,278,144
Aware, Inc. 544,500 19,806,188
Digital Lightwave, Inc. 277,300 17,747,200
Ditech Communications Corporation 225,850 21,116,975
E-Tek Dynamics, Inc. 439,100 59,113,838
Efficient Networks, Inc. 219,400 14,919,200
Gilat Satellite Networks Ltd. 289,700 34,401,875
Orckit Communications, Ltd. 461,700 15,842,081
RF Micro Devices, Inc. 112,700 7,712,906
Sycamore Networks, Inc. 103,300 31,816,400
- ---------------------------------------------------------------------------
245,697,101
- ---------------------------------------------------------------------------
TELECOMMUNICATION SERVICES - 2.7%
Allegiance Telecom, Inc. 220,600 20,350,350
Copper Mountain Networks, Inc. 200,000 9,750,000
iBasis, Inc. 22,100 635,375
Infonet Services Corporation 25,550 670,688
Korea Thrunet Co., Ltd. 3,850 261,319
McLeodUSA, Inc. 239,600 14,106,450
Pac-West Telecomm, Inc. 13,650 361,725
PanAmSat Corporation 125,600 7,457,500
Powerwave Technologies, Inc. 242,500 14,155,938
Teligent, Inc., Class A 157,900 9,750,325
Viatel, Inc. 260,600 13,974,675
Z-Tel Technologies, Inc. 125,250 5,056,969
- ---------------------------------------------------------------------------
96,531,314
- ---------------------------------------------------------------------------
TRANSPORTATION - 0.6%
Forward Air Corporation 490,700 21,284,113
- ---------------------------------------------------------------------------
21,284,113
- ---------------------------------------------------------------------------
TRAVEL SERVICES - 0.5%
Four Seasons Hotels, Inc.(1) 320,300 17,055,975
- ---------------------------------------------------------------------------
17,055,975
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
TOTAL COMMON STOCKS (Cost $1,969,240,580) 3,452,205,020
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
SHORT TERM INVESTMENTS - 2.9%
- ---------------------------------------------------------------------------
Temporary Investment Cash Fund 51,736,131
Temporary Investment Fund 51,736,131
- ---------------------------------------------------------------------------
TOTAL SHORT TERM INVESTMENTS (Cost $103,472,262) 103,472,262
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
TOTAL INVESTMENTS - 99.3% (Cost $2,072,712,842) 3,555,677,282
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
OTHER ASSETS, Net - 0.7% 23,942,252
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
TOTAL NET ASSETS - 100.0% $3,579,619,534
- ---------------------------------------------------------------------------
</TABLE>
See notes to Schedule of Investments on page 67.
The accompanying notes are an integral part of these financial statements.
56
<PAGE>
RS FUNDS
SCHEDULE OF INVESTMENTS -- GLOBAL NATURAL RESOURCES FUND
<TABLE>
<CAPTION>
DECEMBER 31, 1999 FOREIGN CURRENCY(2) SHARES VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 99.6%
- ---------------------------------------------------------------------------
ALUMINUM - 4.4%
MAXXAM, Inc. 23,400 $ 1,003,275
- ---------------------------------------------------------------------------
1,003,275
- ---------------------------------------------------------------------------
DIVERSIFIED OPERATIONS - 3.5%
EdperBrascan Corporation(1) CAD 60,000 793,904
- ---------------------------------------------------------------------------
793,904
- ---------------------------------------------------------------------------
ENERGY - 59.4%
Anderson Exploration, Ltd. CAD 116,700 1,394,579
Bellwether Exploration Company 40,000 192,500
Berkley Petroleum Corporation CAD 100,000 876,342
Calahoo Petroleum, Ltd. CAD 633,333 833,622
Compton Petroleum Corporation CAD 450,000 748,182
Cypress Energy, Inc., Class A CAD 40,000 169,034
Devon Energy Corporation(1) 25,000 821,875
EEX Corporation 70,000 205,625
Elk Point Resources, Inc. CAD 161,800 437,146
Encal Energy, Ltd. CAD 309,000 1,412,816
EOG Resources, Inc.(1) 40,000 702,500
Hugoton Royalty Trust(1) 30,000 243,750
Oiltec Resources, Ltd. CAD 1,730,000 1,078,628
Pennaco Energy, Inc. 40,000 320,000
Place Resources Corporation CAD 642,100 1,423,429
Richland Petroleum Corporation CAD 400,000 997,575
The Coastal Corporation(1) 17,500 620,156
Titan Exploration, Inc. 181,500 986,906
Vermilion Resources, Ltd. CAD 35,000 107,897
- ---------------------------------------------------------------------------
13,572,562
- ---------------------------------------------------------------------------
ENERGY SERVICES - 5.1%
Bowridge Resource Group, Inc.(1) CAD 361,000 137,548
Shaw Industries, Ltd., Class A(1) CAD 112,700 1,022,771
- ---------------------------------------------------------------------------
1,160,319
- ---------------------------------------------------------------------------
FOOD - 5.9%
Fresh Del Monte Produce, Inc. 150,000 1,350,000
- ---------------------------------------------------------------------------
1,350,000
- ---------------------------------------------------------------------------
GOLD MINING - 0.1%
St. Jude Resources, Ltd. CAD 69,500 24,073
St. Jude Resources, Ltd.(4) CAD 7,000 2,425
- ---------------------------------------------------------------------------
26,498
- ---------------------------------------------------------------------------
PAPER & FOREST PRODUCTS - 14.5%
Alliance Forest Products, Inc. CAD 104,000 1,228,403
Canfor Corporation(1) CAD 115,000 1,346,380
Nexfor, Inc.(1) CAD 125,000 727,399
- ---------------------------------------------------------------------------
3,302,182
- ---------------------------------------------------------------------------
PLATINUM GROUP METALS - 0.1%
African Minerals, Ltd., Restricted(4),(5) 203,624 30,136
- ---------------------------------------------------------------------------
30,136
- ---------------------------------------------------------------------------
REAL ESTATE - 5.4%
Brookfield Properties Corporation(1) CAD 117,700 1,235,300
- ---------------------------------------------------------------------------
1,235,300
- ---------------------------------------------------------------------------
UTILITIES/PIPELINES - 1.2%
Western Gas Resources, Inc.(1) 20,000 $ 263,750
- ---------------------------------------------------------------------------
263,750
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
TOTAL COMMON STOCKS (Cost $23,808,892) 22,737,926
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
TOTAL INVESTMENTS - 99.6% (Cost $23,808,892) 22,737,926
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
OTHER ASSETS, Net - 0.4% 80,000
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
TOTAL NET ASSETS - 100.0% $22,817,926
- ---------------------------------------------------------------------------
See notes to Schedule of Investments on page 67.
The accompanying notes are an integral part of these financial statements.
57
<PAGE>
ANNUAL REPORT
SCHEDULE OF INVESTMENTS -- THE INFORMATION AGE FUND-Registered Trademark-
<CAPTION>
DECEMBER 31, 1999 SHARES VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 98.0%
- ---------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT & SERVICES - 4.8%
Cisco Systems, Inc. 157,714 $ 16,895,112
- ---------------------------------------------------------------------------
16,895,112
- ---------------------------------------------------------------------------
COMPUTER HARDWARE & COMPONENTS - 9.3%
Applied Materials, Inc. 91,800 11,629,912
EMC Corporation 108,400 11,842,700
Gateway, Inc. 130,000 9,368,125
- ---------------------------------------------------------------------------
32,840,737
- ---------------------------------------------------------------------------
COMPUTER SOFTWARE - 9.4%
BMC Software, Inc. 47,000 3,757,062
Legato Systems, Inc. 130,000 8,945,625
Microsoft Corporation 130,000 15,177,500
Oracle Corporation 50,000 5,603,125
- ---------------------------------------------------------------------------
33,483,312
- ---------------------------------------------------------------------------
COMPUTER SOFTWARE & SERVICES - 3.9%
Intuit, Inc. 178,000 10,668,875
Sun Microsystems, Inc. 42,000 3,252,375
- ---------------------------------------------------------------------------
13,921,250
- ---------------------------------------------------------------------------
CONSUMER & SPECIALTY RETAIL - 1.0%
CDW Computer Centers, Inc. 45,000 3,538,125
- ---------------------------------------------------------------------------
3,538,125
- ---------------------------------------------------------------------------
ELECTRONIC COMPONENTS - 8.7%
Flextronics International, Ltd. 72,000 3,312,000
Linear Technology Corporation(1) 45,000 3,220,313
Solectron Corporation 94,400 8,979,800
Teradyne, Inc. 234,000 15,444,000
- ---------------------------------------------------------------------------
30,956,113
- ---------------------------------------------------------------------------
INTERNET CAPITAL SERVICES - 9.6%
America Online, Inc. 202,200 15,253,462
DoubleClick, Inc. 31,000 7,844,938
Yahoo!, Inc. 25,000 10,817,188
- ---------------------------------------------------------------------------
33,915,588
- ---------------------------------------------------------------------------
INTERNET COMMERCE - 1.4%
Amazon.com, Inc. 67,000 5,100,375
- ---------------------------------------------------------------------------
5,100,375
- ---------------------------------------------------------------------------
INVESTMENT MANAGEMENT - 2.2%
Charles Schwab Corporation(1) 200,000 7,675,000
- ---------------------------------------------------------------------------
7,675,000
- ---------------------------------------------------------------------------
SEMICONDUCTORS & COMPONENTS - 25.4%
Altera Corporation 86,800 4,302,025
Applied Micro Circuits Corporation 46,000 5,853,500
Atmel Corporation 200,000 5,912,500
Intel Corporation(1) 142,366 11,718,501
KLA-Tencor Corporation 59,000 6,571,125
Lam Research Corporation 75,000 8,367,188
LSI Logic Corporation 59,684 4,028,670
Micron Technology, Inc. 79,000 6,142,250
Motorola, Inc.(1) 48,000 7,068,000
Novellus Systems, Inc. 109,043 13,361,175
Texas Instruments, Inc.(1) 51,162 4,956,319
Xilinx, Inc. 257,000 11,685,469
- ---------------------------------------------------------------------------
89,966,722
- ---------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT - 16.7%
JDS Uniphase Corporation 160,000 25,810,000
Lucent Technologies, Inc.(1) 45,750 3,422,672
Nortel Networks Corporation(1) 89,000 8,989,000
QUALCOMM, Inc. 120,000 21,150,000
- ---------------------------------------------------------------------------
59,371,672
- ---------------------------------------------------------------------------
TELECOMMUNICATIONS SERVICES - 5.6%
MCI WorldCom, Inc. 82,950 4,401,534
Nokia Corporation ADR(1),(3) 80,800 15,352,000
- ---------------------------------------------------------------------------
19,753,534
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
TOTAL COMMON STOCKS (Cost $134,029,334) 347,417,540
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
SHORT TERM INVESTMENTS - 1.6%
- ---------------------------------------------------------------------------
Temporary Investment Cash Fund 2,838,862
Temporary Investment Fund 2,838,863
- ---------------------------------------------------------------------------
TOTAL SHORT TERM INVESTMENTS (Cost $5,677,725) 5,677,725
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
TOTAL INVESTMENTS - 99.6% (Cost $139,707,059) 353,095,265
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
OTHER ASSETS, NET - 0.4% 1,540,587
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
TOTAL NET ASSETS - 100.0% $ 354,635,852
- ---------------------------------------------------------------------------
</TABLE>
See notes to Schedule of Investments on page 67.
The accompanying notes are an integral part of these financial statements.
58
<PAGE>
RS FUNDS
SCHEDULE OF INVESTMENTS -- RS INTERNET AGE FUND-TM-
<TABLE>
<CAPTION>
DECEMBER 31, 1999 SHARES VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 94.9%
- ---------------------------------------------------------------------------
ADVERTISING - 1.6%
Lamar Advertising Company 18,100 $ 1,096,181
TMP Worldwide, Inc. 4,000 568,000
- ---------------------------------------------------------------------------
1,664,181
- ---------------------------------------------------------------------------
BROADCASTING/RADIO/TV - 3.2%
AMFM, Inc. 16,800 1,314,600
Emmis Communications Corporation, Class A 2,500 311,602
EnterCom Communications Corporation 15,300 1,009,800
Infinity Broadcasting Corporation 19,800 716,512
- ---------------------------------------------------------------------------
3,352,514
- ---------------------------------------------------------------------------
BUSINESS SERVICES - 1.4%
Diamond Technology Partners, Inc. 16,500 1,417,969
- ---------------------------------------------------------------------------
1,417,969
- ---------------------------------------------------------------------------
COMMERCIAL SERVICES - 1.3%
eBenX, Inc. 50 2,262
MemberWorks, Inc. 27,800 922,612
Student Advantage, Inc. 18,500 410,469
- ---------------------------------------------------------------------------
1,335,343
- ---------------------------------------------------------------------------
COMPUTER HARDWARE & COMPONENTS - 4.1%
Brocade Communications Systems, Inc. 9,700 1,716,900
Integral Systems, Inc. 13,500 595,687
Redback Networks, Inc. 6,200 1,100,500
VERITAS Software Corporation 6,000 858,750
- ---------------------------------------------------------------------------
4,271,837
- ---------------------------------------------------------------------------
COMPUTER SERVICES - 7.2%
CheckFree Holdings Corporation 7,000 731,500
PSW Technologies, Inc. 22,100 440,619
RSA Security, Inc. 3,800 294,500
Sapient Corporation 8,500 1,197,969
Segue Software, Inc. 30,100 752,500
Tanning Technology Corporation 4,000 235,750
VeriSign, Inc. 20,000 3,815,000
- ---------------------------------------------------------------------------
7,467,838
- ---------------------------------------------------------------------------
COMPUTER SOFTWARE - 15.6%
Active Software, Inc. 16,000 1,472,000
Activision, Inc. 50,200 768,687
Aspect Development, Inc. 18,300 1,253,550
Business Objects S.A. ADR(3) 5,400 721,575
Broadbase Software, Inc. 4,700 528,750
Cysive, Inc. 25,000 1,801,562
Digex, Inc. 19,900 1,368,125
E.piphany, Inc. 2,000 446,250
Exchange Applications, Inc. 12,600 704,025
FileNET Corporation 33,600 856,800
Macromedia, Inc. 5,100 372,937
NetIQ Corporation 27,750 1,444,734
Pinnacle Holdings, Inc. 25,000 1,059,375
Portal Software, Inc. 7,700 792,137
Siebel Systems, Inc. 8,700 730,800
TIBCO Software, Inc. 8,500 1,300,500
Vitria Technology, Inc. 2,200 514,800
- ---------------------------------------------------------------------------
16,136,607
- ---------------------------------------------------------------------------
COMPUTER SOFTWARE & SERVICES - 4.0%
BEA Systems, Inc. 29,000 2,028,187
Check Point Software Technologies, Ltd. 5,000 993,750
Silverstream Software, Inc. 9,600 1,142,400
- ---------------------------------------------------------------------------
4,164,337
- ---------------------------------------------------------------------------
CONSUMER & SPECIALTY RETAIL - 0.6%
SkyMall, Inc. 80,000 590,000
- ---------------------------------------------------------------------------
590,000
- ---------------------------------------------------------------------------
ELECTRONIC COMPONENTS - 1.3%
Integrated Device Technology, Inc. 23,100 669,900
Power Integrations, Inc. 15,100 723,856
- ---------------------------------------------------------------------------
1,393,756
- ---------------------------------------------------------------------------
FINANCIAL SERVICES - 3.6%
E*TRADE Group, Inc. 28,200 736,725
Knight/Trimark Group, Inc. 37,300 1,715,800
NextCard, Inc. 44,100 1,273,388
- ---------------------------------------------------------------------------
3,725,913
- ---------------------------------------------------------------------------
INTERNET CAPITAL SERVICES - 30.7%
24/7 Media, Inc. 16,500 928,125
About.com, Inc. 14,500 1,301,375
America Online, Inc. 10,700 807,181
Audible, Inc. 65,900 988,500
Autoweb.com, Inc. 111,000 1,207,125
BroadVision, Inc. 6,500 1,105,406
C-bridge Internet Solutions, Inc. 100 4,862
CMGI, Inc. 4,000 1,107,500
CNET, Inc. 16,100 913,675
Covad Communications Group, Inc. 7,800 436,313
Critical Path, Inc. 6,900 651,188
DoubleClick, Inc. 4,200 1,062,863
drkoop.com, Inc. 25,000 296,875
DSL.net, Inc. 28,300 408,581
Earthlink Network, Inc. 17,600 748,000
El Sitio, Inc. 100 3,675
eSPEED, Inc., Class A 11,450 407,191
Euro909.com A/S ADR(3) 20,000 550,000
Exodus Communications, Inc. 5,200 461,825
go.com 31,500 750,094
Internap Network Services Corporation 6,200 1,072,600
ITXC Corporation 15,600 524,550
Liquid Audio, Inc. 21,550 565,688
Loislaw.com, Inc. 32,200 1,259,825
Lycos, Inc. 9,900 787,669
Mpath Interactive, Inc. 29,600 788,100
Multex.com, Inc. 22,800 857,850
See notes to Schedule of Investments on page 67.
The accompanying notes are an integral part of these financial statements.
59
<PAGE>
ANNUAL REPORT
SCHEDULE OF INVESTMENTS -- RS INTERNET AGE FUND-TM- -- CONTINUED
<CAPTION>
DECEMBER 31, 1999 SHARES VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
NetCreations, Inc. 12,100 $ 532,400
Netopia, Inc. 19,600 1,064,525
Network Solutions, Inc. 7,400 1,609,963
pcOrder.com, Inc. 3,200 163,200
RealNetworks, Inc. 1,800 216,563
Scient Corporation 3,800 328,463
Silknet Software, Inc. 4,500 745,875
SportsLine.com, Inc. 13,800 691,725
VerticalNet, Inc. 20,000 3,280,000
Viant Corporation 5,500 544,500
Vignette Corporation 2,700 440,100
Yahoo!, Inc. 5,000 2,163,438
- ---------------------------------------------------------------------------
31,777,388
- ---------------------------------------------------------------------------
INTERNET COMMERCE - 0.5%
MotherNature.com, Inc. 25,450 186,103
Stamps.com, Inc. 7,200 299,700
- ---------------------------------------------------------------------------
485,803
- ---------------------------------------------------------------------------
INVESTMENT MANAGEMENT - 0.1%
Charles Schwab Corporation(1) 3,900 149,663
- ---------------------------------------------------------------------------
149,663
- ---------------------------------------------------------------------------
MEDIA - 1.9%
CBS Corporation 11,600 741,675
ValueVision International, Inc., Class A 21,200 1,215,025
- ---------------------------------------------------------------------------
1,956,700
- ---------------------------------------------------------------------------
NETWORK SYSTEMS & PRODUCTS - 1.1%
Extreme Networks, Inc. 13,100 1,093,850
- ---------------------------------------------------------------------------
1,093,850
- ---------------------------------------------------------------------------
SEMICONDUCTORS & COMPONENTS - 5.5%
Applied Micro Circuits Corporation 7,500 954,375
Conexant Systems, Inc. 17,100 1,135,013
GlobeSpan, Inc. 14,200 924,775
PMC-Sierra, Inc. 2,900 464,906
QLogic Corporation 5,800 927,275
TranSwitch Corporation 18,500 1,342,406
- ---------------------------------------------------------------------------
5,748,750
- ---------------------------------------------------------------------------
TELECOMMUNICATIONS - 1.3%
Crown Castle International Corporation 13,500 433,687
NEXTLINK Communications, Inc. 4,900 407,006
Primus Telecommunications Group, Inc. 12,100 462,825
- ---------------------------------------------------------------------------
1,303,518
- ---------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT - 6.4%
American Tower Corporation, Class A 29,500 901,594
AudioCodes, Ltd. 10,100 929,200
Aware, Inc. 23,400 851,175
Efficient Networks, Inc. 8,400 571,200
General Motors Corporation, Class H 11,800 1,132,800
Gilat Satellite Networks, Ltd. 3,900 463,125
Harmonic, Inc. 8,600 816,463
JDS Uniphase Corporation 3,400 548,463
Spectrasite Holdings, Inc. 40,400 439,350
- ---------------------------------------------------------------------------
6,653,370
- ---------------------------------------------------------------------------
TELECOMMUNICATIONS SERVICES - 3.5%
Allegiance Telecom, Inc. 5,900 544,275
Copper Mountain Networks, Inc. 20,400 994,500
iBasis, Inc. 31,100 894,125
Powerwave Technologies, Inc. 11,700 682,987
Viatel, Inc. 8,700 466,537
- ---------------------------------------------------------------------------
3,582,424
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
TOTAL COMMON STOCKS (Cost $87,432,164) 98,271,761
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
SHORT TERM INVESTMENTS - 2.2%
- ---------------------------------------------------------------------------
Temporary Investment Cash Fund 1,175,218
Temporary Investment Fund 1,175,218
- ---------------------------------------------------------------------------
TOTAL SHORT TERM INVESTMENTS (Cost $2,350,436) 2,350,436
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
TOTAL INVESTMENTS - 97.1% (Cost $89,782,600) 100,622,197
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
OTHER ASSETS, NET - 2.9% 2,962,899
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
TOTAL NET ASSETS - 100.0% $103,585,096
- ---------------------------------------------------------------------------
</TABLE>
See notes to Schedule of Investments on page 67.
The accompanying notes are an integral part of these financial statements.
60
<PAGE>
RS FUNDS
SCHEDULE OF INVESTMENTS -- MICROCAP GROWTH FUND
<TABLE>
<CAPTION>
DECEMBER 31, 1999 SHARES VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 99.5%
- ---------------------------------------------------------------------------
AEROSPACE - 1.1%
REMEC, Inc. 46,600 $ 1,188,300
- ---------------------------------------------------------------------------
1,188,300
- ---------------------------------------------------------------------------
AUTOMOBILES & OTHER MOTOR VEHICLES - 1.3%
Oshkosh Truck Corporation(1) 15,000 439,687
Rush Enterprises, Inc. 60,000 870,000
- ---------------------------------------------------------------------------
1,309,687
- ---------------------------------------------------------------------------
BATTERIES - 0.4%
BOLDER Technologies Corporation 35,000 446,250
- ---------------------------------------------------------------------------
446,250
- ---------------------------------------------------------------------------
BIOTECHNOLOGY - 0.9%
LifeCell Corporation 180,000 922,500
- ---------------------------------------------------------------------------
922,500
- ---------------------------------------------------------------------------
BROADCASTING/RADIO/TV - 0.7%
Spanish Broadcasting System, Inc. 17,450 702,362
- ---------------------------------------------------------------------------
702,362
- ---------------------------------------------------------------------------
BUSINESS SERVICES - 0.9%
AHL Services, Inc. 17,300 361,137
On Assignment, Inc. 18,000 537,750
- ---------------------------------------------------------------------------
898,887
- ---------------------------------------------------------------------------
CHEMICALS - 0.4%
Uniroyal Technology Corporation 15,000 382,500
- ---------------------------------------------------------------------------
382,500
- ---------------------------------------------------------------------------
COMMERCIAL SERVICES - 4.4%
Cornell Corrections, Inc. 30,600 256,275
eBenX, Inc. 7,250 328,062
Gaiam, Inc. 31,500 500,063
Innotrac Corporation 19,500 268,125
MemberWorks, Inc. 13,400 444,712
Optimal Robotics Corporation 39,500 1,471,375
Student Advantage, Inc. 30,000 665,625
Towne Services, Inc. 141,100 564,400
- ---------------------------------------------------------------------------
4,498,637
- ---------------------------------------------------------------------------
COMPUTER HARDWARE & COMPONENTS - 3.4%
Cybex Computer Products Corporation 43,400 1,757,700
Datalink Corporation 35,000 673,750
Hauppauge Digital, Inc. 20,000 402,500
NetSolve, Inc. 1,600 50,400
RadiSys Corporation 11,550 589,050
- ---------------------------------------------------------------------------
3,473,400
- ---------------------------------------------------------------------------
COMPUTER SERVICES - 1.1%
Segue Software, Inc. 45,000 1,125,000
- ---------------------------------------------------------------------------
1,125,000
- ---------------------------------------------------------------------------
COMPUTER SOFTWARE - 6.4%
AremisSoft Corporation 30,000 975,000
Broadbase Software, Inc. 4,000 450,000
Exchange Applications, Inc. 10,000 558,750
Interactive Intelligence, Inc. 20,000 532,500
InterVU, Inc. 11,000 1,155,000
Pivotal Corporation 12,950 547,137
QRS Corporation 19,500 2,034,094
The 3DO Company 40,000 363,750
- ---------------------------------------------------------------------------
6,616,231
- ---------------------------------------------------------------------------
COMPUTER SOFTWARE & SERVICES - 1.0%
Netegrity, Inc. 19,000 1,081,812
- ---------------------------------------------------------------------------
1,081,812
- ---------------------------------------------------------------------------
CONSTRUCTION/INFRASTRUCTURE - 1.9%
Shaw Group, Inc. 30,000 759,375
Trex Company, Inc. 45,000 1,203,750
- ---------------------------------------------------------------------------
1,963,125
- ---------------------------------------------------------------------------
CONSULTING SERVICES - 0.6%
Superior Consultant Holdings Corporation 40,000 570,000
- ---------------------------------------------------------------------------
570,000
- ---------------------------------------------------------------------------
CONSUMER & SPECIALTY RETAIL - 8.2%
1-800-Contacts, Inc. 35,000 947,187
Blue Rhino Corporation 65,200 635,700
Cost Plus, Inc. 16,000 570,000
Fred's, Inc.(1) 40,000 637,500
Gadzooks, Inc. 35,600 349,325
Hibbit Sporting Goods, Inc. 30,000 510,000
Hot Topic, Inc. 62,400 1,450,800
Krause's Furniture, Inc. 119,000 342,125
Rent Way, Inc. 40,000 747,500
Shop At Home, Inc. 51,200 508,800
Tweeter Home Entertainment Group, Inc. 30,000 1,065,000
Whitehall Jewellers, Inc. 20,000 737,500
- ---------------------------------------------------------------------------
8,501,437
- ---------------------------------------------------------------------------
DATA PROCESSING SERVICES - 2.9%
Best Software, Inc. 52,800 1,557,600
Intercept Group, Inc. 50,000 1,484,375
- ---------------------------------------------------------------------------
3,041,975
- ---------------------------------------------------------------------------
DISTRIBUTION/WHOLESALE - 0.3%
SCP Pool Corporation 10,000 259,375
- ---------------------------------------------------------------------------
259,375
- ---------------------------------------------------------------------------
EDUCATION & TRAINING - 1.4%
Bright Horizons Family Solutions, Inc. 36,500 684,375
Career Education Corporation 20,000 767,500
- ---------------------------------------------------------------------------
1,451,875
- ---------------------------------------------------------------------------
ELECTRONIC COMPONENTS - 9.9%
Aavid Thermal Technologies, Inc. 35,700 876,881
Audiovox Corporation 24,200 735,075
Cohu, Inc.(1) 11,200 347,200
Interlink Electronics, Inc. 45,000 2,643,750
Meade Instruments Corporation 50,000 1,425,000
Photon Dynamics, Inc. 40,000 1,550,000
</TABLE>
See notes to Schedule of Investments on page 67.
The accompanying notes are an integral part of these financial statements.
61
<PAGE>
ANNUAL REPORT
SCHEDULE OF INVESTMENTS -- MICROCAP GROWTH FUND -- CONTINUED
<TABLE>
<CAPTION>
DECEMBER 31, 1999 SHARES VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
Power Integrations, Inc. 40,000 $ 1,917,500
Universal Electronics, Inc. 17,000 782,000
- ---------------------------------------------------------------------------
10,277,406
- ---------------------------------------------------------------------------
FINANCIAL SERVICES - 0.5%
Creditrust Corporation 28,100 216,019
Web Street, Inc. 25,000 309,375
- ---------------------------------------------------------------------------
525,394
- ---------------------------------------------------------------------------
FOOD - 0.4%
Monterey Pasta Company 96,700 380,756
- ---------------------------------------------------------------------------
380,756
- ---------------------------------------------------------------------------
HEALTH CARE SERVICES - 0.6%
Res-Care, Inc. 45,000 573,750
- ---------------------------------------------------------------------------
573,750
- ---------------------------------------------------------------------------
INSURANCE - 0.7%
Annuity and Life Re(Holdings), Ltd.(1) 28,300 739,338
- ---------------------------------------------------------------------------
739,338
- ---------------------------------------------------------------------------
INTERNET CAPITAL SERVICES - 6.7%
Autoweb.com, Inc. 42,000 456,750
Crosswalk.com, Inc. 40,000 205,000
DoubleClick, Inc. 8,250 2,087,766
drkoop.com, Inc. 31,200 370,500
EarthWeb, Inc. 12,100 608,781
Healtheon/WebMD Corporation 8,233 308,738
Loislaw.com, Inc. 11,900 465,588
Mpath Interactive, Inc. 15,000 399,375
Multex.com, Inc. 25,000 940,625
Netzee, Inc. 32,000 532,000
PSINet, Inc. 8,799 543,338
- ---------------------------------------------------------------------------
6,918,461
- ---------------------------------------------------------------------------
INTERNET COMMERCE - 0.3%
MotherNature.com, Inc. 5,300 38,756
VitaminShoppe.com, Inc. 28,200 257,325
- ---------------------------------------------------------------------------
296,081
- ---------------------------------------------------------------------------
MACHINERY - 1.6%
Asyst Technologies, Inc. 25,000 1,639,063
- ---------------------------------------------------------------------------
1,639,063
- ---------------------------------------------------------------------------
MANUFACTURING - 1.3%
FARO Technologies, Inc. 92,100 270,544
Koala Corporation 80,000 1,120,000
- ---------------------------------------------------------------------------
1,390,544
- ---------------------------------------------------------------------------
MEDIA - 1.8%
Faroudja, Inc. 190,000 955,938
LodgeNet Entertainment Corporation 35,000 870,625
- ---------------------------------------------------------------------------
1,826,563
- ---------------------------------------------------------------------------
MEDICAL - BIOMEDICAL/GENETICS - 1.8%
Alexion Pharmaceuticals, Inc. 27,500 828,438
CuraGen Corporation 15,000 1,046,250
- ---------------------------------------------------------------------------
1,874,688
- ---------------------------------------------------------------------------
MEDICAL - INSTRUMENTS & DEVICES - 3.9%
ArthroCare Corporation 10,000 610,000
Candela Laser Corporation 32,700 609,038
Closure Medical Corporation 40,000 515,000
Cytyc Corporation 20,500 1,251,781
ZEVEX International, Inc. 205,000 1,050,625
- ---------------------------------------------------------------------------
4,036,444
- ---------------------------------------------------------------------------
MEDICAL PRODUCTS - 1.7%
Molecular Devices Corporation 34,100 1,773,200
- ---------------------------------------------------------------------------
1,773,200
- ---------------------------------------------------------------------------
MISCELLANEOUS - 0.7%
Rainbow Rentals, Inc. 102,000 733,125
- ---------------------------------------------------------------------------
733,125
- ---------------------------------------------------------------------------
NETWORK SYSTEMS - 1.3%
Performance Technologies, Inc. 80,000 1,390,000
- ---------------------------------------------------------------------------
1,390,000
- ---------------------------------------------------------------------------
PHARMACEUTICALS - 4.3%
Anesta Corporation 50,000 859,375
Celgene Corporation 18,000 1,260,000
Kendle International, Inc. 70,000 691,250
Natrol, Inc. 65,000 455,000
Neurogen Corporation 50,000 825,000
Noven Pharmaceuticals, Inc 22,200 402,375
- ---------------------------------------------------------------------------
4,493,000
- ---------------------------------------------------------------------------
PHOTOGRAPHY EQUIPMENT - 1.1%
Concord Camera Corporation 49,500 1,126,125
- ---------------------------------------------------------------------------
1,126,125
- ---------------------------------------------------------------------------
RESEARCH & DEVELOPMENT - 1.1%
Albany Molecular Research, Inc. 36,000 1,098,000
- ---------------------------------------------------------------------------
1,098,000
- ---------------------------------------------------------------------------
RESTAURANTS - 3.0%
Buca, Inc. 30,000 307,500
Garden Fresh Restaurant Corporation 40,300 690,138
P.F. Chang's China Bistro, Inc. 20,000 497,500
PJ America, Inc. 30,000 465,000
RARE Hospitality International, Inc. 45,200 978,156
Rubio's Restaurants, Inc. 25,200 201,600
- ---------------------------------------------------------------------------
3,139,894
- ---------------------------------------------------------------------------
SEMICONDUCTORS & COMPONENTS - 10.6%
ACT Manufacturing, Inc. 33,500 1,256,250
American Xtal Technology, Inc. 39,500 688,781
AstroPower, Inc. 65,000 910,000
ATMI, Inc. 44,700 1,477,894
Brooks Automation, Inc. 18,600 605,662
Cree Research, Inc. 37,600 3,210,100
QLogic Corporation 17,300 2,765,838
- ---------------------------------------------------------------------------
10,914,525
- ---------------------------------------------------------------------------
See notes to Schedule of Investments on page 67.
The accompanying notes are an integral part of these financial statements.
62
<PAGE>
RS FUNDS
<CAPTION>
DECEMBER 31, 1999 SHARES VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
TELECOMMUNICATIONS - 0.7%
Metro One Telecommunications, Inc. 55,000 $ 715,000
- ---------------------------------------------------------------------------
715,000
- ---------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT - 3.4%
Anaren Microwave, Inc. 12,600 681,975
Gentner Communications Corporation 35,000 490,000
P-Com, Inc. 82,200 726,956
SeaChange International, Inc. 30,600 1,082,475
Somera Communications, Inc. 18,000 223,875
SpectraLink Corporation 50,000 356,250
- ---------------------------------------------------------------------------
3,561,531
- ---------------------------------------------------------------------------
TELECOMMUNICATIONS SERVICES - 3.8%
Adaptive Broadband Corporation 30,800 2,273,425
Powerwave Technologies, Inc. 13,500 788,063
Startec Global Communications Corporation
Restricted(4),(5) 50,000 855,000
- ---------------------------------------------------------------------------
3,916,488
- ---------------------------------------------------------------------------
TRANSPORTATION - 1.0%
Forward Air Corporation 23,400 1,014,975
- ---------------------------------------------------------------------------
1,014,975
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
TOTAL COMMON STOCKS (Cost $63,122,750) 102,787,704
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
SHORT TERM INVESTMENTS - 0.6%
- ---------------------------------------------------------------------------
Temporary Investment Cash Fund 297,731
Temporary Investment Fund 297,731
- ---------------------------------------------------------------------------
TOTAL SHORT TERM INVESTMENTS (Cost $595,462) 595,462
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.1% (Cost $63,718,212) 103,383,166
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
OTHER LIABILITIES, NET - (0.1%) (71,083)
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
TOTAL NET ASSETS - 100.0% $103,312,083
- ---------------------------------------------------------------------------
</TABLE>
See notes to Schedule of Investments on page 67.
The accompanying notes are an integral part of these financial statements.
63
<PAGE>
ANNUAL REPORT
SCHEDULE OF INVESTMENTS -- MIDCAP OPPORTUNITIES FUND
<TABLE>
<CAPTION>
DECEMBER 31, 1999 SHARES VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 93.8%
- ---------------------------------------------------------------------------
AEROSPACE - 1.3%
Alliant Techsystems, Inc. 47,500 $ 2,959,844
- ---------------------------------------------------------------------------
2,959,844
- ---------------------------------------------------------------------------
AGRICULTURAL PRODUCTS - 1.3%
Seminis, Inc. 447,800 2,826,737
- ---------------------------------------------------------------------------
2,826,737
- ---------------------------------------------------------------------------
BROADCASTING/RADIO/TV - 1.0%
Infinity Broadcasting Corporation 60,000 2,171,250
- ---------------------------------------------------------------------------
2,171,250
- ---------------------------------------------------------------------------
BUSINESS SERVICES - 4.6%
Administaff, Inc. 200,000 6,050,000
Getty Images, Inc. 47,500 2,321,562
United Shipping & Technology, Inc. 260,000 2,080,000
- ---------------------------------------------------------------------------
10,451,562
- ---------------------------------------------------------------------------
COMMERCIAL SERVICES - 1.2%
TeleTech Holdings, Inc. 80,000 2,696,250
- ---------------------------------------------------------------------------
2,696,250
- ---------------------------------------------------------------------------
COMPUTER HARDWARE & COMPONENTS - 1.1%
Seagate Technology, Inc. 55,000 2,560,937
- ---------------------------------------------------------------------------
2,560,937
- ---------------------------------------------------------------------------
COMPUTER SERVICES - 2.6%
CheckFree Holdings Corporation 30,000 3,135,000
RSA Security, Inc. 35,000 2,712,500
- ---------------------------------------------------------------------------
5,847,500
- ---------------------------------------------------------------------------
COMPUTER SOFTWARE - 4.9%
Broadbase Software, Inc. 15,000 1,687,500
J.D. Edwards & Company 55,000 1,643,125
Legato Systems, Inc. 55,000 3,784,688
Project Software & Development, Inc. 40,000 2,220,000
Wind River Systems, Inc. 45,000 1,653,750
- ---------------------------------------------------------------------------
10,989,063
- ---------------------------------------------------------------------------
COMPUTER SOFTWARE & SERVICES - 5.4%
Hyperion Solutions Corporation 50,000 2,175,000
Intuit, Inc. 40,000 2,397,500
PeopleSoft, Inc. 100,000 2,131,250
Symantec Corporation 65,000 3,810,625
TSI International Software Ltd. 30,000 1,698,750
- ---------------------------------------------------------------------------
12,213,125
- ---------------------------------------------------------------------------
CONSTRUCTION/INFRASTRUCTURE - 1.0%
Texas Industries, Inc.(1) 55,000 2,340,937
- ---------------------------------------------------------------------------
2,340,937
- ---------------------------------------------------------------------------
CONSUMER & SPECIALTY RETAIL - 1.3%
Abercrombie & Fitch Company 65,000 1,734,687
Federated Department Stores, Inc. 25,000 1,264,063
- ---------------------------------------------------------------------------
2,998,750
- ---------------------------------------------------------------------------
DATA PROCESSING SOFTWARE & SERVICES - 1.7%
Informix Corporation 150,000 1,706,250
Sterling Software, Inc. 70,000 2,205,000
- ---------------------------------------------------------------------------
3,911,250
- ---------------------------------------------------------------------------
ELECTRONIC COMPONENTS - 2.4%
Sawtek, Inc. 46,200 3,075,187
Sensormatic Electronics Corporation 135,000 2,354,062
- ---------------------------------------------------------------------------
5,429,249
- ---------------------------------------------------------------------------
ENERGY - 3.5%
Devon Energy Corporation(1) 70,000 2,301,250
EOG Resources, Inc.(1) 140,000 2,458,750
Murphy Oil Corporation(1) 30,000 1,721,250
Unocal Corporation(1) 40,000 1,342,500
- ---------------------------------------------------------------------------
7,823,750
- ---------------------------------------------------------------------------
ENERGY SERVICES - 5.6%
BJ Services Company 65,000 2,717,812
Cooper Cameron Corporation 37,500 1,835,156
ENSCO International, Inc.(1) 150,000 3,431,250
Montana Power Company(1) 130,200 4,695,337
- ---------------------------------------------------------------------------
12,679,555
- ---------------------------------------------------------------------------
ENTERTAINMENT - 1.0%
Metro-Goldwyn-Mayer, Inc. 100,000 2,356,250
- ---------------------------------------------------------------------------
2,356,250
- ---------------------------------------------------------------------------
FINANCIAL SERVICES - 2.6%
American Express Company(1) 13,000 2,161,250
Edwards (A.G.), Inc.(1) 55,000 1,763,437
Knight/Trimark Group, Inc. 40,000 1,840,000
- ---------------------------------------------------------------------------
5,764,687
- ---------------------------------------------------------------------------
HEALTH CARE SERVICES - 0.7%
First Health Group Corporation 60,000 1,612,500
- ---------------------------------------------------------------------------
1,612,500
- ---------------------------------------------------------------------------
HEALTH MAINTENANCE ORGANIZATIONS - 0.7%
United HealthCare Corporation(1) 30,000 1,593,750
- ---------------------------------------------------------------------------
1,593,750
- ---------------------------------------------------------------------------
INDUSTRIAL - 0.9%
Cognex Corporation 52,500 2,047,500
- ---------------------------------------------------------------------------
2,047,500
- ---------------------------------------------------------------------------
INSTRUMENTS - 3.0%
Mettler-Toledo International, Inc. 40,000 1,527,500
PerkinElmer, Inc.(1) 65,000 2,709,687
Tektronix, Inc.(1) 65,000 2,526,875
- ---------------------------------------------------------------------------
6,764,062
- ---------------------------------------------------------------------------
INSURANCE - 0.4%
Core Cap, Inc., Class A Restricted(4),(5) 75,000 949,500
- ---------------------------------------------------------------------------
949,500
- ---------------------------------------------------------------------------
INTERNET CAPITAL SERVICES - 9.5%
America Online, Inc. 25,000 1,885,937
CNET, Inc. 25,000 1,418,750
Commtouch Software Ltd. 44,000 2,136,750
Concentric Networking Corporation 60,000 1,848,750
E-Stamp Corporation 14,900 331,525
eGain Communications Corporation 38,500 1,453,375
Internet Capital Group, Inc. 7,000 1,190,000
Network Solutions, Inc. 18,000 3,916,125
StarMedia Network, Inc. 55,000 2,203,438
S1 Corporation 40,000 3,125,000
Ziff-Davis, Inc. 100,000 2,100,000
- ---------------------------------------------------------------------------
21,609,650
- ---------------------------------------------------------------------------
See notes to Schedule of Investments on page 67.
The accompanying notes are an integral part of these financial statements.
64
<PAGE>
RS FUNDS
<CAPTION>
DECEMBER 31, 1999 SHARES VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
INTERNET COMMERCE - 2.6%
Covad Communications Group, Inc. 39,700 $ 2,220,719
Stamps.com, Inc. 88,400 3,679,650
- ---------------------------------------------------------------------------
5,900,369
- ---------------------------------------------------------------------------
INVESTMENT MANAGEMENT - 1.2%
Lehman Brothers Holdings, Inc.(1) 32,500 2,752,344
- ---------------------------------------------------------------------------
2,752,344
- ---------------------------------------------------------------------------
MEDIA - 9.6%
AT&T Corporation - Liberty Media Group, Grade A 120,000 6,810,000
CBS Corporation 55,000 3,516,563
UnitedGlobalCom, Inc., Class A 58,500 4,131,563
Univision Communications, Inc. 17,500 1,788,281
ValueVision International, Inc., Class A 95,000 5,444,688
- ---------------------------------------------------------------------------
21,691,095
- ---------------------------------------------------------------------------
MEDICAL - BIOMEDICAL/GENETICS - 1.2%
Amgen, Inc. 45,000 2,702,812
- ---------------------------------------------------------------------------
2,702,812
- ---------------------------------------------------------------------------
PHARMACEUTICALS - 2.2%
Ivax Corporation 100,000 2,575,000
MedImmune, Inc. 15,000 2,488,125
- ---------------------------------------------------------------------------
5,063,125
- ---------------------------------------------------------------------------
PRINTING & PUBLISHING - 1.0%
Knight-Ridder, Inc. 37,300 2,219,350
- ---------------------------------------------------------------------------
2,219,350
- ---------------------------------------------------------------------------
SEMICONDUCTORS & COMPONENTS - 5.3%
Applied Micro Circuits Corporation 17,500 2,226,875
Atmel Corporation 60,000 1,773,750
Lam Research Corporation 27,500 3,067,969
LSI Logic Corporation 25,000 1,687,500
TranSwitch Corporation 45,000 3,265,312
- ---------------------------------------------------------------------------
12,021,406
- ---------------------------------------------------------------------------
TELECOMMUNICATIONS - 5.1%
Primus Telecommunications Group, Inc. 300,000 11,475,000
- ---------------------------------------------------------------------------
11,475,000
- ---------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT - 4.4%
American Tower Corporation, Class A 65,000 1,986,563
Aware, Inc. 75,000 2,728,125
Digital Microwave Corporation 80,000 1,875,000
General Motors Corporation, Class H 17,500 1,680,000
RF Micro Devices, Inc. 25,000 1,710,938
- ---------------------------------------------------------------------------
9,980,626
- ---------------------------------------------------------------------------
TELECOMMUNICATIONS SERVICES - 3.5%
BroadWing, Inc.(1) 85,000 3,134,375
Level 3 Communications, Inc. 27,500 2,251,563
Qwest Communications International, Inc. 60,000 2,580,000
- ---------------------------------------------------------------------------
7,965,938
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
TOTAL COMMON STOCKS (Cost $159,636,306) 212,369,723
- ---------------------------------------------------------------------------
<CAPTION>
SHARES VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
CONVERTIBLE PREFERRED STOCKS - 3.3%
- ---------------------------------------------------------------------------
INSURANCE - 0.6%
Core Cap, Inc., Series A, 10.00%,
Expires 12/31/49, Restricted(4),(5) 75,000 1,417,500
- ---------------------------------------------------------------------------
1,417,500
- ---------------------------------------------------------------------------
<CAPTION>
DECEMBER 31, 1999 SHARES VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
PHARMACEUTICALS - 1.6%
Cephalon, Inc. 7.25% Series 144A,
Expires 12/31/49(7) 35,000 3,482,500
- ---------------------------------------------------------------------------
3,482,500
- ---------------------------------------------------------------------------
TRANSPORTATION - 1.1%
Trans World Airlines, Inc. 4.625% Series 144A(7) 26,500 493,563
Trans World Airlines, Inc. 8.00% 75,500 839,938
Trans World Airlines, Inc. 9.25% 63,500 1,182,688
- ---------------------------------------------------------------------------
2,516,189
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $10,033,984) 7,416,189
- ---------------------------------------------------------------------------
<CAPTION>
PAR VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
CONVERTIBLE BONDS - 1.0%
- ---------------------------------------------------------------------------
COMPUTER HARDWARE & COMPONENTS - 0.6%
Silicon Graphics, Inc., 5.25%, Due 9/01/04 2,000,000 1,510,000
- ---------------------------------------------------------------------------
1,510,000
- ---------------------------------------------------------------------------
COMPUTER SOFTWARE - 0.4%
System Software Assocation, Inc., 7.00%,
Due 9/15/02 2,500,000 837,500
- ---------------------------------------------------------------------------
837,500
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
TOTAL CONVERTIBLE BONDS (Cost $3,260,924) 2,347,500
- ---------------------------------------------------------------------------
<CAPTION>
WARRANTS VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
WARRANTS - 0.1%
- ---------------------------------------------------------------------------
United Shipping and Technology, Inc.,
Strike $2.00, Expire 7/02/00(4),(6) 30,000 182,031
- ---------------------------------------------------------------------------
TOTAL WARRANTS (Cost $34,643) 182,031
- ---------------------------------------------------------------------------
<CAPTION>
CONTRACTS VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
PUT OPTIONS - 0.2%
- ---------------------------------------------------------------------------
S&P 500 Index, Strike 1440, Expires 01/22/00(6) 145 253,750
S&P 500 Index, Strike 1450, Expires 01/22/00(6) 125 275,000
- ---------------------------------------------------------------------------
TOTAL PUT OPTIONS (Cost $568,310) 528,750
- ---------------------------------------------------------------------------
VALUE
- ---------------------------------------------------------------------------
SHORT TERM INVESTMENTS - 1.4%
- ---------------------------------------------------------------------------
Temporary Investment Cash Fund 1,642,584
Temporary Investment Fund 1,642,583
- ---------------------------------------------------------------------------
TOTAL SHORT TERM INVESTMENTS (Cost $3,285,167) 3,285,167
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
TOTAL INVESTMENTS - 99.8% (Cost $176,819,334) 226,129,360
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
OTHER ASSETS, NET - 0.2% 399,733
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
TOTAL NET ASSETS - 100.0% $226,529,093
- ---------------------------------------------------------------------------
</TABLE>
See notes to Schedule of Investments on page 67.
The accompanying notes are an integral part of these financial statements.
65
<PAGE>
ANNUAL REPORT
SCHEDULE OF INVESTMENTS -- PARTNERS FUND
<TABLE>
<CAPTION>
DECEMBER 31, 1999 FOREIGN CURRENCY(2) SHARES VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 95.9%
- ---------------------------------------------------------------------------
ADVERTISING - 3.8%
Snyder Communications, Inc. 44,000 $ 847,000
- ---------------------------------------------------------------------------
847,000
- ---------------------------------------------------------------------------
ALUMINUM - 5.9%
MAXXAM, Inc. 31,000 1,329,125
- ---------------------------------------------------------------------------
1,329,125
- ---------------------------------------------------------------------------
BUILDING/CONSTRUCTION PRODUCTS - 2.0%
Elcor Corporation(1) 15,000 451,875
- ---------------------------------------------------------------------------
451,875
- ---------------------------------------------------------------------------
CLOSED-END FUNDS - 1.5%
Cathay Investment Fund, Ltd.(4) HKD 525,000 326,171
- ---------------------------------------------------------------------------
326,171
- ---------------------------------------------------------------------------
COAL - 0.2%
Pittston Minerals Group(1) 30,000 48,750
- ---------------------------------------------------------------------------
48,750
- ---------------------------------------------------------------------------
COMPUTER SOFTWARE - 2.2%
Datastream Systems, Inc. 20,000 491,250
- ---------------------------------------------------------------------------
491,250
- ---------------------------------------------------------------------------
CONSTRUCTION/INFRASTRUCTURE - 5.9%
Meritage Corporation 121,200 1,325,625
- ---------------------------------------------------------------------------
1,325,625
- ---------------------------------------------------------------------------
CONSUMER GOODS - 5.0%
Harman International Industries, Inc.(1) 20,000 1,122,500
- ---------------------------------------------------------------------------
1,122,500
- ---------------------------------------------------------------------------
ENERGY - 29.4%
Alliance Energy, Inc., 144A(7) CAD 1,500,000 498,788
Best Pacific Resources, Ltd. CAD 1,500,000 768,964
Calahoo Petroleum, Ltd. CAD 247,866 326,253
Cypress Energy, Inc. CAD 161,600 682,896
Oiltec Resources Ltd., 144A(7) CAD 1,536,400 957,922
Place Resources Corporation CAD 884,800 1,961,455
Symmetry Resources, Inc. CAD 1,952,100 1,379,385
- ---------------------------------------------------------------------------
6,575,663
- ---------------------------------------------------------------------------
ENERGY SERVICES - 5.2%
Bowridge Resource Group, Inc. CAD 1,700,000 647,731
Northstar Drilling Systems, Inc. CAD 500,000 432,975
Northstar Drilling Systems, Inc., 144A(7) CAD 100,000 86,595
- ---------------------------------------------------------------------------
1,167,301
- ---------------------------------------------------------------------------
FOOD - 7.0%
Fresh Del Monte Produce, Inc. 175,000 1,575,000
- ---------------------------------------------------------------------------
1,575,000
- ---------------------------------------------------------------------------
FOOD RETAIL/WHOLESALE - 5.9%
Sobeys Canada, Inc.(1) CAD 95,000 1,316,245
- ---------------------------------------------------------------------------
1,316,245
- ---------------------------------------------------------------------------
INSURANCE - 5.6%
Desjardins Laurentian Financial
Corporation, Class A(1) CAD 128,000 1,241,427
- ---------------------------------------------------------------------------
1,241,427
- ---------------------------------------------------------------------------
INTERNET CAPITAL SERVICES - 2.9%
CryptoLogic, Inc. 36,100 647,724
- ---------------------------------------------------------------------------
647,724
- ---------------------------------------------------------------------------
MANUFACTURING - 2.7%
TB Wood's Corporation(1) 71,000 603,500
- ---------------------------------------------------------------------------
603,500
- ---------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST - 4.3%
Gentra, Inc. CAD 100,500 950,346
- ---------------------------------------------------------------------------
950,346
- ---------------------------------------------------------------------------
SEMICONDUCTORS & COMPONENTS - 2.6%
Oak Technology, Inc. 61,900 584,181
- ---------------------------------------------------------------------------
584,181
- ---------------------------------------------------------------------------
TRANSPORTATION - 3.8%
Pittston BAX Group(1) 80,000 850,000
- ---------------------------------------------------------------------------
850,000
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
TOTAL COMMON STOCKS (Cost $21,343,508) 21,453,683
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
TOTAL INVESTMENTS - 95.9% (Cost $21,343,508) 21,453,683
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
OTHER ASSETS, NET - 4.1% 919,895
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
NET ASSETS - 100.0% $22,373,578
- ---------------------------------------------------------------------------
</TABLE>
See notes to Schedule of Investments on page 67.
The accompanying notes are an integral part of these financial statements.
66
<PAGE>
RS FUNDS
SCHEDULE OF INVESTMENTS -- VALUE + GROWTH FUND
<TABLE>
<CAPTION>
DECEMBER 31, 1999 SHARES VALUE
- ---------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 98.6%
- ---------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT & SERVICES - 1.8%
Cisco Systems, Inc. 110,048 $ 11,788,892
- ---------------------------------------------------------------------------
11,788,892
- ---------------------------------------------------------------------------
COMPUTER HARDWARE & COMPONENTS - 4.9%
Applied Materials, Inc. 262,800 33,293,475
- ---------------------------------------------------------------------------
33,293,475
- ---------------------------------------------------------------------------
COMPUTER - SOFTWARE - 11.5%
BMC Software, Inc. 213,000 17,026,687
Microsoft Corporation 325,500 38,002,125
Oracle Corporation 200,000 22,412,500
- ---------------------------------------------------------------------------
77,441,312
- ---------------------------------------------------------------------------
CONSUMER & SPECIALTY RETAIL - 20.9%
Best Buy Co., Inc. 376,600 18,900,613
Circuit City Stores-Circuit City Group(1) 342,000 15,411,375
Costco Wholesale Corporation 267,500 24,409,375
CVS Corporation(1) 436,200 17,420,738
Home Depot, Inc.(1) 172,500 11,827,031
Staples, Inc. 675,000 14,006,250
Wal-Mart Stores, Inc.(1) 310,400 21,456,400
Walgreen Company(1) 600,000 17,550,000
- ---------------------------------------------------------------------------
140,981,782
- ---------------------------------------------------------------------------
DIVERSIFIED OPERATIONS - 1.5%
General Electric Company(1) 65,000 10,058,750
- ---------------------------------------------------------------------------
10,058,750
- ---------------------------------------------------------------------------
FINANCIAL SERVICES - 12.0%
American Express Company(1) 86,000 14,297,500
Citigroup, Inc.(1) 382,500 21,252,656
Morgan Stanley Dean Witter & Company(1) 190,000 27,122,500
The Goldman Sachs Group, Inc.(1) 194,000 18,272,375
- ---------------------------------------------------------------------------
80,945,031
- ---------------------------------------------------------------------------
HEALTH MAINTENANCE ORGANIZATIONS - 1.8%
United Healthcare Corporation(1) 223,200 11,857,500
- ---------------------------------------------------------------------------
11,857,500
- ---------------------------------------------------------------------------
INVESTMENT MANAGEMENT - 4.9%
Charles Schwab Corporation1 240,000 9,210,000
Merrill Lynch & Co., Inc.(1) 288,538 24,092,923
- ---------------------------------------------------------------------------
33,302,923
- ---------------------------------------------------------------------------
MEDIA - 5.6%
Comcast Corporation, Class A(1) 400,000 20,100,000
Time Warner, Inc.(1) 240,000 17,385,000
- ---------------------------------------------------------------------------
37,485,000
- ---------------------------------------------------------------------------
MEDICAL-BIOMEDICAL/GENETICS - 3.8%
Amgen, Inc. 426,000 25,586,625
- ---------------------------------------------------------------------------
25,586,625
- ---------------------------------------------------------------------------
MEDICAL PRODUCTS & SERVICES - 1.3%
Bristol-Myers Squibb Company(1) 135,000 8,665,313
- ---------------------------------------------------------------------------
8,665,313
- ---------------------------------------------------------------------------
PHARMACEUTICALS - 4.2%
Eli Lilly & Company(1) 195,000 12,967,500
Merck & Co., Inc.(1) 226,600 15,196,363
- ---------------------------------------------------------------------------
28,163,863
- ---------------------------------------------------------------------------
SEMICONDUCTORS & COMPONENTS - 18.1%
Altera Corporation 248,150 12,298,934
Intel Corporation(1) 373,200 30,719,025
Micron Technology, Inc. 125,000 9,718,750
Motorola, Inc.(1) 105,100 15,475,975
Texas Instruments, Inc.(1) 304,200 29,469,375
Xilinx, Inc. 540,000 24,553,125
- ---------------------------------------------------------------------------
122,235,184
- ---------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT - 2.7%
Nortel Networks Corporation(1) 180,600 18,240,600
- ---------------------------------------------------------------------------
18,240,600
- ---------------------------------------------------------------------------
TELECOMMUNICATIONS SERVICES - 3.6%
MCI WorldCom, Inc. 460,500 24,435,281
- ---------------------------------------------------------------------------
24,435,281
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
TOTAL COMMON STOCKS (Cost $344,639,238) 664,481,531
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
SHORT TERM INVESTMENTS - 1.8%
- ---------------------------------------------------------------------------
Temporary Investment Cash Fund 6,001,099
Temporary Investment Fund 6,001,098
- ---------------------------------------------------------------------------
TOTAL SHORT TERM INVESTMENTS (Cost $12,002,197) 12,002,197
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.4% (Cost $356,641,435) 676,483,728
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
OTHER LIABILITIES, NET - (0.4%) (2,583,290)
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
TOTAL NET ASSETS - 100.0% $673,900,438
- ---------------------------------------------------------------------------
</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
(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
The accompanying notes are an integral part of these financial statements.
67
<PAGE>
ANNUAL REPORT
STATEMENT OF ASSETS & LIABILITIES
<TABLE>
<CAPTION>
THE
AS OF DECEMBER 31, 1999 CONTRARIAN DIVERSIFIED EMERGING
(ALL NUMBERS IN THOUSANDS EXCEPT FOR PRICING OF SHARES SECTION) FUND-TM- GROWTH GROWTH
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
- ----------------------------------------------------------------------------------------------------------------------
Investments, at value $113,913 $304,144 $3,555,677
Deposits with brokers for securities sold short 21,920 - -
Cash - 2,461 -
Receivable for investments sold 2,659 9,310 -
Receivable for fund shares subscribed 19 4,099 36,880
Dividends/interest receivable 131 108 489
Prepaid expenses 5 3 25
- ----------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 138,647 320,125 3,593,071
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
LIABILITIES
- ----------------------------------------------------------------------------------------------------------------------
Securities sold short 21,659 - -
Temporary borrowings 543 - -
Payable for investments purchased - 14,534 3,100
Payable for fund shares redeemed 248 481 5,988
Payable to adviser 141 205 2,645
Payable to distributor 23 51 661
Accrued expenses/other liabilities 122 108 1,057
- ----------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 22,736 15,379 13,451
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS $115,911 $304,746 $3,579,620
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
- ----------------------------------------------------------------------------------------------------------------------
Paid-in capital 268,126 195,792 1,924,492
Accumulated undistributed net investment income/(loss) (33) (67) (1,505)
Accumulated net realized gain/(loss) from investments
and from securities and options sold short, and
foreign currency transactions (142,384) 26,999 173,669
Net unrealized appreciation/(depreciation) on investments
and on securities and options sold short, and translation
of assets and liablities in foreign currencies (9,798) 82,022 1,482,964
- ----------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS $115,911 $304,746 $3,579,620
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
INVESTMENTS, AT COST $137,667 $222,122 $2,072,713
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
PROCEEDS FROM SECURITIES SOLD SHORT $35,634 - -
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
PRICING OF SHARES:
Net Asset Value, offering, and redemption price per share $10.00 $32.99 $60.67
Net assets $115,910,898 $304,746,099 $3,579,619,534
Shares of beneficial interest outstanding with no par value 11,590,116 9,238,437 59,001,903
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
68
<PAGE>
RS FUNDS
<TABLE>
<CAPTION>
THE INFORMATION
GLOBAL AGE FUND- THE
AS OF DECEMBER 31, 1999 NATURAL -REGISTERED RS INTERNET MICROCAP
(ALL NUMBERS IN THOUSANDS EXCEPT FOR PRICING OF SHARES SECTION) RESOURCES TRADEMARK- AGE FUND-TM- GROWTH
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
- -----------------------------------------------------------------------------------------------------------------------------------
Investments, at value $22,738 $353,095 $100,622 $103,383
Deposits with brokers for securities sold short - - - -
Cash - - - -
Receivable for investments sold 170 - - 555
Receivable for fund shares subscribed 202 2,372 3,696 118
Dividends/interest receivable 19 32 23 12
Prepaid expenses 1 6 32 3
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 23,130 355,505 104,373 104,071
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
- -----------------------------------------------------------------------------------------------------------------------------------
Securities sold short - - - -
Temporary borrowings 146 - - -
Payable for investments purchased 44 - 1 -
Payable for fund shares redeemed 65 397 704 569
Payable to adviser 15 270 69 108
Payable to distributor 5 67 14 20
Accrued expenses/other liabilities 37 135 - 62
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 312 869 788 759
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS $22,818 $354,636 $103,585 $103,312
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
- -----------------------------------------------------------------------------------------------------------------------------------
Paid-in capital 45,623 138,253 92,915 62,792
Accumulated undistributed net investment income/(loss) (48) (48) - (25)
Accumulated net realized gain/(loss) from investments and
from securities and options sold short, and
foreign currency transactions (21,688) 3,043 (169) 880
Net unrealized appreciation/(depreciation) on investments
and on securities and options sold short, and translation
of assets and liablities in foreign currencies (1,069) 213,388 10,839 39,665
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS $22,818 $354,636 $103,585 $103,312
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
INVESTMENTS, AT COST $23,809 $139,707 $89,783 $63,718
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
PROCEEDS FROM SECURITIES SOLD SHORT - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
PRICING OF SHARES:
Net Asset Value, offering, and redemption price per share $9.13 $35.79 $12.18 $22.34
Net assets $22,817,926 $354,635,852 $103,585,096 $103,312,083
Shares of beneficial interest outstanding with no par value 2,498,416 9,907,609 8,501,538 4,623,967
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
AS OF DECEMBER 31, 1999 MIDCAP VALUE +
(ALL NUMBERS IN THOUSANDS EXCEPT FOR PRICING OF SHARES SECTION) OPPORTUNITIES PARTNERS GROWTH
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
- -----------------------------------------------------------------------------------------------------------------------------------
Investments, at value $226,129 $21,454 $676,484
Deposits with brokers for securities sold short - - -
Cash - - -
Receivable for investments sold 9,225 1,126 8,357
Receivable for fund shares subscribed 644 266 1,247
Dividends/interest receivable 134 4 120
Prepaid expenses 7 2 23
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 236,139 22,852 686,231
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
- -----------------------------------------------------------------------------------------------------------------------------------
Securities sold short - - -
Temporary borrowings - 356 -
Payable for investments purchased 9,110 - 10,197
Payable for fund shares redeemed 157 56 1,083
Payable to adviser 178 5 549
Payable to distributor 45 5 137
Accrued expenses/other liabilities 120 56 365
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 9,610 478 12,331
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS $226,529 $22,374 $673,900
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
- -----------------------------------------------------------------------------------------------------------------------------------
Paid-in capital 159,453 24,549 347,333
Accumulated undistributed net investment income/(loss) 249 (104) -
Accumulated net realized gain/(loss) from investments and
from securities and options sold short, and
foreign currency transactions 17,517 (2,181) 6,725
Net unrealized appreciation/(depreciation) on investments
and on securities and options sold short, and translation
of assets and liablities in foreign currencies 49,310 110 319,842
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS $226,529 $22,374 $673,900
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
INVESTMENTS, AT COST $176,819 $21,344 $356,642
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
PROCEEDS FROM SECURITIES SOLD SHORT - - -
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
PRICING OF SHARES:
Net Asset Value, offering, and redemption price per share $15.92 $11.96 $30.43
Net assets $226,529,093 $22,373,578 $673,900,438
Shares of beneficial interest outstanding with no par value 14,231,118 1,871,013 22,142,906
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
69
<PAGE>
ANNUAL REPORT
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
THE
FOR THE PERIOD ENDED DECEMBER 31, 1999 CONTRARIAN DIVERSIFIED EMERGING
(ALL NUMBERS IN THOUSANDS) FUND-TM- GROWTH GROWTH
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
- ---------------------------------------------------------------------------------------------------------------------
Interest $ 647 $ 257 $ 3,103
Dividends 629 185 551
Withholding taxes on foreign dividends (20) (1) (11)
Other income - 50 233
- ---------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 1,256 491 3,876
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
EXPENSES
- ---------------------------------------------------------------------------------------------------------------------
Investment advisory fees 1,884 1,270 12,120
Distribution fees 315 277 3,033
Transfer agent fees 236 106 892
Dividend expense for securities sold short 15 - -
Custodian fees 94 81 98
Accounting/administrative service fees 163 142 950
Shareholder reports 39 26 262
Professional fees 123 47 427
Registration fees 79 46 355
Interest expense 93 70 26
Trustees' fees and expenses 10 8 75
Other expense 5 2 63
- ---------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 3,056 2,075 18,301
Less: Expense waiver by adviser - - -
Other, including accounting/administrative fee waivers (332) (53) -
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES, NET 2,724 2,022 18,301
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME/(LOSS) (1,468) (1,531) (14,425)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
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 (90,745) 56,134 317,152
Net realized gain/(loss) from securities and options sold short 3,838 (771) -
Net change in unrealized appreciation/depreciation on investments
and on translation on assets and liabilities in foreign currency 132,093 72,978 1,365,258
Net change in unrealized appreciation/depreciation on securities
and options sold short (4,276) 113 -
- ---------------------------------------------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS AND SECURITIES SOLD SHORT 40,910 128,454 1,682,410
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 39,442 $ 126,923 $ 1,667,985
The accompanying notes are an integral part of these financial statements.
70
<PAGE>
RS FUNDS
<CAPTION>
THE
INFORMATION
GLOBAL AGE FUND- THE
FOR THE PERIOD ENDED DECEMBER 31, 1999 NATURAL -REGISTERED RS INTERNET*
(ALL NUMBERS IN THOUSANDS) RESOURCES TRADEMARK- AGE FUND-TM-
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
- ----------------------------------------------------------------------------------------------------------------------------------
Interest $ 32 $ 183 $ 23
Dividends 222 108 -
Withholding taxes on foreign dividends (150) (7) -
Other income - - -
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 104 284 23
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
EXPENSES
- ----------------------------------------------------------------------------------------------------------------------------------
Investment advisory fees 383 2,051 69
Distribution fees 71 513 14
Transfer agent fees 80 138 6
Dividend expense for securities sold short - - -
Custodian fees 9 27 2
Accounting/administrative service fees 48 248 6
Shareholder reports 9 52 1
Professional fees 18 94 1
Registration fees 37 62 1
Interest expense 10 65 -
Trustees' fees and expenses 3 15 -
Other expense 14 204 -
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 682 3,469 100
Less: Expense waiver by adviser - - -
Other, including accounting/administrative fee waivers (93) (30) (3)
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES, NET 589 3,439 97
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME/(LOSS) (485) (3,155) (74)
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
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 (1,234) 35,799 (169)
Net realized gain/(loss) from securities and options sold short - - -
Net change in unrealized appreciation/depreciation on investments
and on translation on assets and liabilities in foreign currency 7,009 157,859 10,839
Net change in unrealized appreciation/depreciation on securities
and options sold short - - -
- ----------------------------------------------------------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS AND SECURITIES SOLD SHORT 5,775 193,658 10,670
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 5,290 $ 190,503 $ 10,596
<CAPTION>
FOR THE PERIOD ENDED DECEMBER 31, 1999 MICROCAP MIDCAP VALUE +
(ALL NUMBERS IN THOUSANDS) GROWTH OPPORTUNITIES PARTNERS GROWTH
- --------------------------------------------------------------------------------------------------------------------------------
<S> C> <C> <C> <C>
Investment Income
- -------------------------------------------------------------------------------------------------------------------------------
Interest $ 198 $ 1,616 $ 64 $ 69
Dividends 13 1,968 238 2,511
Withholding taxes on foreign dividends - (3) (11) (3)
Other income - - - 11
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 211 3,581 291 2,588
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
EXPENSES
- -------------------------------------------------------------------------------------------------------------------------------
Investment advisory fees 1,082 1,888 409 6,577
Distribution fees 212 476 82 1,648
Transfer agent fees 98 143 93 508
Dividend expense for securities sold short - - - -
Custodian fees 28 51 11 65
Accounting/administrative service fees 111 234 53 687
Shareholder reports 23 53 10 182
Professional fees 45 94 60 328
Registration fees 36 47 36 97
Interest expense 12 53 14 102
Trustees' fees and expenses 7 15 3 52
Other expense 7 101 142 237
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 1,661 3,155 913 10,483
Less: Expense waiver by adviser - (120) (176) -
Other, including accounting/administrative fee waivers (37) (35) (41) -
TOTAL EXPENSES, NET 1,624 3,000 696 10,483
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME/(LOSS) (1,413) 581 (405) (7,895)
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
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 12,030 71,193 2,755 66,300
Net realized gain/(loss) from securities and options sold short - 2,907 - -
Net change in unrealized appreciation/depreciation on investments
and on translation on assets and liabilities in foreign currency 27,658 10,718 (1,559) 106,621
Net change in unrealized appreciation/depreciation on securities
and options sold short - (81) - -
- -------------------------------------------------------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS AND SECURITIES SOLD SHORT 39,688 84,737 1,196 172,921
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 38,275 $ 85,318 $ 791 $ 165,026
</TABLE>
*Investment operations commenced on December 1, 1999.
The accompanying notes are an integral part of these financial statements.
71
<PAGE>
ANNUAL REPORT
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
THE CONTRARIAN FUND-TM-
---------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
(ALL NUMBERS IN THOUSANDS) DEC. 31, 1999 DEC. 31, 1998
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
OPERATIONS
- -------------------------------------------------------------------------------------------------------------------------
Net investment income/(loss) $ (1,468) $ (2,143)
Net realized gain/(loss) from investments and foreign currency transactions (90,745) (69,899)
Net realized gain/(loss) from securities and options sold short 3,838 16,087
Net change in unrealized appreciation/depreciation on investments and
on translation of assets and liabilities in foreign currency 132,093 (37,723)
Net change in unrealized appreciation/depreciation on securities and options sold short (4,276) (3,940)
- -------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 39,442 (97,618)
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------------------------
Net investment income-Class A Shares - -
Net investment income-Class C Shares* - -
Realized gain on investments and securities sold short-Class A Shares - (9,423)
Realized gain on investments and securities sold short-Class C Shares* - (45)
- -------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS - (9,468)
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
- -------------------------------------------------------------------------------------------------------------------------
Net increase/(decrease) in net assets resulting from capital share transactions (48,766) (169,975)
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) FROM CAPITAL SHARE TRANSACTIONS (48,766) (169,975)
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS (9,324) (277,061)
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
- -------------------------------------------------------------------------------------------------------------------------
Beginning of Period 125,235 402,296
End of Period $ 115,911 $125,235
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
UNDISTRIBUTED NET INVESTMENT INCOME/(LOSS) INCLUDED IN NET ASSETS (33) (3,564)
- -------------------------------------------------------------------------------------------------------------------------
*Effective April 16, 1999, the Funds liquidated Class C shares.
The accompanying notes are an integral part of these financial statements.
72
<PAGE>
RS FUNDS
<CAPTION>
DIVERSIFIED GROWTH
-------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
(ALL NUMBERS IN THOUSANDS) DEC. 31, 1999 DEC. 31, 1998
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
- -----------------------------------------------------------------------------------------------------------------------
Net investment income/(loss) ($1,531) ($953)
Net realized gain/(loss) from investments and foreign currency transactions 56,134 6,579
Net realized gain/(loss) from securities and options sold short (771) 1,385
Net change in unrealized appreciation/depreciation on investments and
on translation of assets and liabilities in foreign currency 72,978 2,763
Net change in unrealized appreciation/depreciation on securities and options sold short 113 (519)
- -----------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 126,923 9,255
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------
Net investment income-Class A Shares - -
Net investment income-Class C Shares* - -
Realized gain on investments and securities sold short-Class A Shares (32,715) (1,605)
Realized gain on investments and securities sold short-Class C Shares* - (25)
- -----------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (32,715) (1,630)
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
- -----------------------------------------------------------------------------------------------------------------------
Net increase/(decrease) in net assets resulting from capital share transactions 140,380 (18,121)
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) FROM CAPITAL SHARE TRANSACTIONS 140,380 (18,121)
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS 234,588 (10,496)
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
NET ASSETS:
- -----------------------------------------------------------------------------------------------------------------------
Beginning of Period 70,158 80,654
End of Period $304,746 $70,158
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
UNDISTRIBUTED NET INVESTMENT INCOME/(LOSS) INCLUDED IN NET ASSETS (67) (34)
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
EMERGING GROWTH
------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
(ALL NUMBERS IN THOUSANDS) DEC. 31, 1999 DEC. 31, 1998
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income/(loss) ($14,425) ($2,927)
Net realized gain/(loss) from investments and foreign currency transactions 317,152 (14,071)
Net realized gain/(loss) from securities and options sold short - -
Net change in unrealized appreciation/depreciation on investments and
on translation of assets and liabilities in foreign currency 1,365,258 100,440
Net change in unrealized appreciation/depreciation on securities and options sold short - -
- ---------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 1,667,985 83,442
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income-Class A Shares - -
Net investment income-Class C Shares* - -
Realized gain on investments and securities sold short-Class A Shares (166,209) (14,201)
Realized gain on investments and securities sold short-Class C Shares* - (38)
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (166,209) (14,239)
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
- ---------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS 1,673,408 86,173
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) FROM CAPITAL SHARE TRANSACTIONS 1,673,408 86,173
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS 3,175,184 155,376
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
- ---------------------------------------------------------------------------------------------------------------------------
Beginning of Period 404,436 249,060
End of Period $3,579,620 $404,436
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
UNDISTRIBUTED NET INVESTMENT INCOME/(LOSS) INCLUDED IN NET ASSETS (1,505) (2,983)
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
GLOBAL NATURAL RESOURCES
-----------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
(ALL NUMBERS IN THOUSANDS) DEC. 31, 1999 DEC. 31, 1998
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
- -----------------------------------------------------------------------------------------------------------------------
Net investment income/(loss) ($485) ($352)
Net realized gain/(loss) from investments and foreign currency transactions (1,234) (20,494)
Net realized gain/(loss) from securities and options sold short - -
Net change in unrealized appreciation/depreciation on investments and
on translation of assets and liabilities in foreign currency 7,009 3,193
Net change in unrealized appreciation/depreciation on securities and options sold short - -
- -----------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 5,290 (17,653)
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------
Net investment income-Class A Shares - -
Net investment income-Class C Shares* - -
Realized gain on investments and securities sold short-Class A Shares - (628)
Realized gain on investments and securities sold short-Class C Shares* - (1)
- -----------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS - (629)
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
- -----------------------------------------------------------------------------------------------------------------------
Net increase/(decrease) in net assets resulting from capital share transactions (5,979) (36,612)
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) FROM CAPITAL SHARE TRANSACTIONS (5,979) (36,612)
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS (689) (54,894)
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
NET ASSETS:
- -----------------------------------------------------------------------------------------------------------------------
Beginning of Period 23,507 78,401
End of Period $22,818 $23,507
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
UNDISTRIBUTED NET INVESTMENT INCOME/(LOSS) INCLUDED IN NET ASSETS (48) (24)
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
THE INFORMATION AGE FUND-Registered Trademark-
------------------------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
(ALL NUMBERS IN THOUSANDS) DEC. 31, 1999 DEC. 31, 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income/(loss) ($3,155) ($1,831)
Net realized gain/(loss) from investments and foreign currency transactions 35,799 11,928
Net realized gain/(loss) from securities and options sold short - -
Net change in unrealized appreciation/depreciation on investments and
on translation of assets and liabilities in foreign currency 157,859 42,133
Net change in unrealized appreciation/depreciation on securities and options
sold short - -
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 190,503 52,230
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income-Class A Shares - -
Net investment income-Class C Shares* - -
Realized gain on investments and securities sold short-Class A Shares (33,195) -
Realized gain on investments and securities sold short-Class C Shares* - -
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (33,195) -
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS 37,596 (11,409)
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) FROM CAPITAL SHARE TRANSACTIONS 37,596 (11,409)
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS 194,904 40,821
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
- ---------------------------------------------------------------------------------------------------------------------------------
Beginning of Period 159,732 118,911
End of Period $354,636 $159,732
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
UNDISTRIBUTED NET INVESTMENT INCOME/(LOSS) INCLUDED IN NET ASSETS (48) (36)
- ---------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
73
<PAGE>
ANNUAL REPORT
STATEMENT OF CHANGES IN NET ASSETS -- CONTINUED
<CAPTION>
RS INTERNET AGE FUND-TM-
--------------------------------
FOR THE
YEAR ENDED
(ALL NUMBERS IN THOUSANDS) DEC. 31, 1999*
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
OPERATIONS
- -------------------------------------------------------------------------------------------------------------------------
Net investment income/(loss) ($74)
Net realized gain/(loss) from investments and foreign currency transactions (169)
Net realized gain/(loss) from securities and options sold short -
Net change in unrealized appreciation/depreciation on investments and
on translation of assets and liabilities in foreign currency 10,839
Net change in unrealized appreciation/depreciation on securities and options sold short -
- -------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 10,596
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------------------------
Net investment income-Class A Shares -
Net investment income-Class C Shares -
Realized gain on investments and securities sold short-Class A Shares -
Realized gain on investments and securities sold short-Class C Shares -
- -------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS -
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Net increase/(decrease) in net assets resulting from capital share transactions 92,989
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) FROM CAPITAL SHARE TRANSACTIONS 92,989
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS 103,585
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
- -------------------------------------------------------------------------------------------------------------------------
Beginning of Period -
End of Period $103,585
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
UNDISTRIBUTED NET INVESTMENT INCOME/(LOSS) INCLUDED IN NET ASSETS -
- -------------------------------------------------------------------------------------------------------------------------
*Investment operations commenced on December 1, 1999.
The accompanying notes are an integral part of these financial statements.
74
<PAGE>
RS FUNDS
<CAPTION>
MICROCAP GROWTH
-------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
(ALL NUMBERS IN THOUSANDS) Dec. 31, 1999 Dec. 31, 1998
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
- -------------------------------------------------------------------------------------------------------------------------
Net investment income/(loss) ($1,413) ($1,634)
Net realized gain/(loss) from investments and foreign currency transactions 12,030 (7,901)
Net realized gain/(loss) from securities and options sold short - -
Net change in unrealized appreciation/depreciation on investments and
on translation of assets and liabilities in foreign currency 27,658 9,287
Net change in unrealized appreciation/depreciation on securities and options sold short - -
- -------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 38,275 (248)
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------------------------
Net investment income-Class A Shares - -
Net investment income-Class C Shares* - -
Realized gain on investments and securities sold short-Class A Shares - -
Realized gain on investments and securities sold short-Class C Shares* - -
- -------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS - -
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Net increase/(decrease) in net assets resulting from capital share transactions (30,250) (10,727)
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) FROM CAPITAL SHARE TRANSACTIONS (30,250) (10,727)
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS 8,025 (10,975)
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
- -------------------------------------------------------------------------------------------------------------------------
Beginning of Period 95,287 106,262
End of Period $103,312 $95,287
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
UNDISTRIBUTED NET INVESTMENT INCOME/(LOSS) INCLUDED IN NET ASSETS (25) (32)
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
MIDCAP OPPORTUNITIES
------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
(ALL NUMBERS IN THOUSANDS) DEC. 31, 1999 DEC. 31, 1998
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income/(loss) $581 $2,433
Net realized gain/(loss) from investments and foreign currency transactions 71,193 20,462
Net realized gain/(loss) from securities and options sold short 2,907 (2,859)
Net change in unrealized appreciation/depreciation on investments and
on translation of assets and liabilities in foreign currency 10,718 1,306
Net change in unrealized appreciation/depreciation on securities and options sold short (81) 96
- ---------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 85,318 21,438
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income-Class A Shares (658) (2,455)
Net investment income-Class C Shares - (25)
Realized gain on investments and securities sold short-Class A Shares (54,894) (9,852)
Realized gain on investments and securities sold short-Class C Shares - (115)
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (55,552) (12,447)
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Net increase/(decrease) in net assets resulting from capital share transactions 10,611 (122,897)
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) FROM CAPITAL SHARE TRANSACTIONS 10,611 (122,897)
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS 40,377 (113,906)
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
- ---------------------------------------------------------------------------------------------------------------------------
Beginning of Period 186,152 300,058
End of Period $226,529 $186,152
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
UNDISTRIBUTED NET INVESTMENT INCOME/(LOSS) INCLUDED IN NET ASSETS 249 330
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
PARTNERS
-----------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
(ALL NUMBERS IN THOUSANDS) DEC. 31, 1999 DEC. 31, 1998
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
- ------------------------------------------------------------------------------------------------------------------------
Net investment income/(loss) ($405) ($312)
Net realized gain/(loss) from investments and foreign currency transactions 2,755 (3,585)
Net realized gain/(loss) from securities and options sold short - -
Net change in unrealized appreciation/depreciation on investments and
on translation of assets and liabilities in foreign currency (1,559) (24,734)
Net change in unrealized appreciation/depreciation on securities and options sold short - -
- ------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 791 (28,631)
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------------
Net investment income-Class A Shares - (2,472)
Net investment income-Class C Shares - (10)
Realized gain on investments and securities sold short-Class A Shares - (1,523)
Realized gain on investments and securities sold short-Class C Shares - (6)
- ------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS - (4,011)
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Net increase/(decrease) in net assets resulting from capital share transactions (26,487) (114,422)
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) FROM CAPITAL SHARE TRANSACTIONS (26,487) (114,422)
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS (25,696) (147,064)
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
- ------------------------------------------------------------------------------------------------------------------------
Beginning of Period 48,070 195,134
End of Period $22,374 $48,070
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
UNDISTRIBUTED NET INVESTMENT INCOME/(LOSS) INCLUDED IN NET ASSETS (104) (70)
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
VALUE + GROWTH
--------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
(ALL NUMBERS IN THOUSANDS) DEC. 31, 1999 DEC. 31, 1998
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income/(loss) ($7,895) ($6,887)
Net realized gain/(loss) from investments and foreign currency transactions 66,300 74,024
Net realized gain/(loss) from securities and options sold short - -
Net change in unrealized appreciation/depreciation on investments and
on translation of assets and liabilities in foreign currency 106,621 98,703
Net change in unrealized appreciation/depreciation on securities and options sold short - -
- ------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 165,026 165,840
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income-Class A Shares - -
Net investment income-Class C Shares* - -
Realized gain on investments and securities sold short-Class A Shares (55,449) (79,376)
Realized gain on investments and securities sold short-Class C Shares* - (188)
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (55,449) (79,564)
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
- ------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Net increase/(decrease) in net assets resulting from capital share transactions (114,762) (161,431)
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) FROM CAPITAL SHARE TRANSACTIONS (114,762) (161,431)
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS (5,185) (75,155)
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
- ------------------------------------------------------------------------------------------------------------------------------
Beginning of Period 679,085 754,240
End of Period $673,900 $679,085
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
UNDISTRIBUTED NET INVESTMENT INCOME/(LOSS) INCLUDED IN NET ASSETS - -
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
75
<PAGE>
ANNUAL REPORT
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
DISTRIBUTIONS DISTRIBUTIONS
NET ASSET VALUE, NET NET REALIZED FROM NET FROM NET
BEGINNING INVESTMENT AND UNREALIZED TOTAL INVESTMENT REALIZED
OF PERIOD INCOME/(LOSS) GAIN/(LOSS) OPERATIONS INCOME CAPITAL GAINS
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
THE CONTRARIAN FUND-TM-
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended 12/31/99 $7.23 $0.20 $2.57 $2.77 $ - $ -
Year Ended 12/31/98(7) 11.61 (0.08) (3.72) (3.80) - (0.58)
Year Ended 12/31/97(7) 16.57 - (4.88) (4.88) - (0.08)
Year Ended 12/31/96(7) 13.78 - 2.99 2.99 - (0.20)
Nine Months Ended 12/31/95(7) 10.70 (0.01) 3.09 3.08 - -
Year Ended 3/31/95(7) 12.34 (0.04) (1.35) (1.39) - (0.25)
DIVERSIFIED GROWTH
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended 12/31/99 15.89 - 22.58 22.58 - (5.48)
Year Ended 12/31/98(7) 14.04 (0.19) 2.43 2.24 - (0.39)
Year Ended 12/31/97(7) 12.42 (0.17) 3.72 3.55 - (1.93)
Period Ended 12/31/96(2),(7) 10.00 (0.05) 2.47 2.42 - -
EMERGING GROWTH
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended 12/31/99 22.95 0.14 40.89 41.03 - (3.31)
Year Ended 12/31/98(7) 18.71 (0.20) 5.32 5.12 - (0.88)
Year Ended 12/31/97(7) 20.07 (0.14) 3.80 3.66 - (5.02)
Year Ended 12/31/96(7) 19.21 (0.17) 4.23 4.06 - (3.20)
Nine Months Ended 12/31/95(7) 18.36 (0.15) 2.58 2.43 - (1.58)
Year Ended 3/31/95(7) 18.37 (0.17) 2.26 2.09 - (2.10)
GLOBAL NATURAL RESOURCES
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended 12/31/99 7.46 (0.01) 1.68 1.67 - -
Year Ended 12/31/98(7) 11.67 (0.07) (3.95) (4.02) - (0.19)
Year Ended 12/31/97(7) 14.29 (0.05) (2.39) (2.44) - (0.18)
Year Ended 12/31/96(7) 10.12 (0.06) 4.24 4.18 (0.01) -
Period Ended 12/31/95(3),(7) 10.00 0.02 0.10 0.12 - -
THE INFORMATION AGE
FUND-Registered Trademark-
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended 12/31/99 17.96 - 21.72 21.72 - (3.89)
Year Ended 12/31/98(7) 11.80 (0.20) 6.36 6.16 - -
Year Ended 12/31/97(7) 11.51 (0.22) 0.95 0.73 - (0.44)
Year Ended 12/31/96(7) 9.30 (0.20) 2.68 2.48 - (0.27)
Period Ended 12/31/95(3),(7) 10.00 (0.01) (0.69) (0.70) - -
See notes to Financial Highlights on page 79.
The accompanying notes are an integral part of these financial statements.
76
<PAGE>
RS FUNDS
<CAPTION>
NET RATIO GROSS RATIO
NET ASSET NET ASSETS OF EXPENSES OF EXPENSES
VALUE, END TOTAL END OF TO AVERAGE TO AVERAGE
OF PERIOD RETURN(1) PERIOD (000S) NET ASSETS(1) NET ASSETS(1)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
THE CONTRARIAN FUND-TM-
- -----------------------------------------------------------------------------------------------------------------------------
Year Ended 12/31/99 $10.00 38.31% $115,911 2.17% 2.43%
Year Ended 12/31/98(7) 7.23 (32.69)% 124,666 2.83% 2.83%
Year Ended 12/31/97(7) 11.61 (29.51)% 398,242 2.48% 2.48%
Year Ended 12/31/96(7) 16.57 21.68% 1,063,438 2.46% 2.46%
Nine Months Ended 12/31/95(7) 13.78 28.79% 507,477 2.54% 2.54%
Year Ended 3/31/95(7) 10.70 (11.23)% 397,646 2.46% 2.58%
DIVERSIFIED GROWTH
- -----------------------------------------------------------------------------------------------------------------------------
Year Ended 12/31/99 32.99 150.21% 304,746 1.84% 1.89%
Year Ended 12/31/98(7) 15.89 16.28% 69,031 1.89% 1.95%
Year Ended 12/31/97(7) 14.04 29.45% 80,278 1.94% 2.14%
Period Ended 12/31/96(2),(7) 12.42 24.20% 59,588 2.28% 2.44%
EMERGING GROWTH
- -----------------------------------------------------------------------------------------------------------------------------
Year Ended 12/31/99 60.67 182.56% 3,579,620 1.51% 1.51%
Year Ended 12/31/98(7) 22.95 28.02% 403,330 1.47% 1.47%
Year Ended 12/31/97(7) 18.71 18.54% 248,730 1.50% 1.50%
Year Ended 12/31/96(7) 20.07 21.53% 210,404 1.60% 1.60%
Nine Months Ended 12/31/95(7) 19.21 13.50% 167,728 1.64% 1.64%
Year Ended 3/31/95(7) 18.36 12.01% 182,275 1.56% 1.56%
GLOBAL NATURAL RESOURCES
- -----------------------------------------------------------------------------------------------------------------------------
Year Ended 12/31/99 9.13 22.39% 22,818 2.09% 2.42%
Year Ended 12/31/98(7) 7.46 (34.45)% 23,476 1.95% 2.21%
Year Ended 12/31/97(7) 11.67 (17.14)% 78,371 1.81% 1.82%
Year Ended 12/31/96(7) 14.29 41.21% 120,521 1.94% 2.16%
Period Ended 12/31/95(3),(7) 10.12 1.20% 792 2.60% 14.25%
THE INFORMATION AGE
FUND-Registered Trademark-
- -----------------------------------------------------------------------------------------------------------------------------
Year Ended 12/31/99 35.79 126.22% 354,636 1.68% 1.69%
Year Ended 12/31/98(7) 17.96 52.20% 159,604 1.74% 1.74%
Year Ended 12/31/97(7) 11.80 6.15% 118,832 1.82% 1.82%
Year Ended 12/31/96(7) 11.51 26.72% 106,264 2.03% 2.03%
Period Ended 12/31/95(3),(7) 9.30 (7.00)% 32,826 2.13% 2.13%
<CAPTION>
NET RATIO OF GROSS RATIO OF
NET INVESTMENT NET INVESTMENT PORTFOLIO
INCOME/(LOSS) TO INCOME/(LOSS) TO TURNOVER
AVERAGE NET ASSETS(1) AVERAGE NET ASSETS(1) RATE(1)
- --------------------------------------------------------------------------------------------------
<S> C> <C> <C>
THE CONTRARIAN FUND-TM-
- --------------------------------------------------------------------------------------------------
Year Ended 12/31/99 (1.17)% (1.43)% 86%
Year Ended 12/31/98(7) (0.80)% (0.80)% 39%
Year Ended 12/31/97(7) 0.01% 0.01% 36%
Year Ended 12/31/96(7) (0.02)% (0.02)% 44%
Nine Months Ended 12/31/95(7) (0.20)% (0.20)% 29%
Year Ended 3/31/95(7) (0.27)% (0.27)% 79%
DIVERSIFIED GROWTH
- --------------------------------------------------------------------------------------------------
Year Ended 12/31/99 (1.40)% (1.44)% 473%
Year Ended 12/31/98(7) (1.29)% (1.35)% 403%
Year Ended 12/31/97(7) (1.20)% (1.40)% 370%
Period Ended 12/31/96(2),(7) (1.05)% (1.21)% 69%
EMERGING GROWTH
- --------------------------------------------------------------------------------------------------
Year Ended 12/31/99 (1.19)% (1.19)% 177%
Year Ended 12/31/98(7) (1.03)% (1.03)% 291%
Year Ended 12/31/97(7) (0.68)% (0.68)% 462%
Year Ended 12/31/96(7) (0.83)% (0.83)% 270%
Nine Months Ended 12/31/95(7) (0.99)% (0.99)% 147%
Year Ended 3/31/95(7) (0.96)% (0.96)% 280%
GLOBAL NATURAL RESOURCES
- --------------------------------------------------------------------------------------------------
Year Ended 12/31/99 (1.72)% (2.05)% 140%
Year Ended 12/31/98(7) (0.69)% (0.96)% 63%
Year Ended 12/31/97(7) (0.38)% (0.38)% 97%
Year Ended 12/31/96(7) (0.45)% (0.67)% 82%
Period Ended 12/31/95(3),(7) 1.84% (9.81)% 0%
THE INFORMATION AGE
FUND-Registered Trademark-
- --------------------------------------------------------------------------------------------------
Year Ended 12/31/99 (1.54)% (1.55)% 182%
Year Ended 12/31/98(7) (1.55)% (1.55)% 224%
Year Ended 12/31/97(7) (1.71)% (1.71)% 369%
Year Ended 12/31/96(7) (1.85)% (1.85)% 452%
Period Ended 12/31/95(3),(7) (0.89)% (0.89)% 89%
See notes to Financial Highlights on page 79.
The accompanying notes are an integral part of these financial statements.
77
<PAGE>
ANNUAL REPORT
FINANCIAL HIGHLIGHTS -- CONTINUED
<CAPTION>
NET ASSET VALUE, NET NET REALIZED
BEGINNING INVESTMENT AND UNREALIZED
OF PERIOD INCOME/(LOSS) GAIN/(LOSS)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
RS INTERNET AGE FUND-TM-
- -------------------------------------------------------------------------------------------------
Period Ended 12/31/99(4) $10.00 $ - $2.18
MICROCAP GROWTH
- -------------------------------------------------------------------------------------------------
Year Ended 12/31/99 14.26 - 8.08
Year Ended 12/31/98(7) 14.35 (0.21) 0.12
Year Ended 12/31/97(7) 11.00 (0.19) 3.54
Period Ended 12/31/96(5,7) 10.00 (0.08) 1.08
MIDCAP OPPORTUNITIES
- -------------------------------------------------------------------------------------------------
Year Ended 12/31/99 14.04 0.04 6.95
Year Ended 12/31/98(7) 13.52 0.14 1.34
Year Ended 12/31/97(7) 13.62 0.07 2.90
Year Ended 12/31/96(7) 11.24 0.02 2.70
Period Ended 12/31/95(6,7) 10.00 - 1.24
PARTNERS
- -------------------------------------------------------------------------------------------------
Year Ended 12/31/99 11.53 (0.04) 0.47
Year Ended 12/31/98(7) 16.49 (0.04) (4.31)
Year Ended 12/31/97(7) 14.60 0.13 2.52
Year Ended 12/31/96(7) 10.39 0.13 4.36
Period Ended 12/31/95(6,7) 10.00 0.06 0.33
VALUE + GROWTH
- -------------------------------------------------------------------------------------------------
Year Ended 12/31/99 25.92 - 7.16
Year Ended 12/31/98(7) 23.18 (0.25) 6.33
Year Ended 12/31/97(7) 24.16 (0.26) 3.71
Year Ended 12/31/96(7) 22.66 (0.24) 3.47
Nine Months Ended 12/31/95(7) 18.25 (0.16) 4.57
Year Ended 3/31/95(7) 13.56 (0.18) 5.07
<CAPTION>
DISTRIBUTIONS DISTRIBUTIONS
FROM NET FROM NET
TOTAL INVESTMENT REALIZED
OPERATIONS INCOME CAPITAL GAINS
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
RS INTERNET AGE FUND-TM-
- -----------------------------------------------------------------------------------------
Period Ended 12/31/99(4) $2.18 $ - $ -
MICROCAP GROWTH
- -----------------------------------------------------------------------------------------
Year Ended 12/31/99 8.08 - -
Year Ended 12/31/98(7) (0.09) - -
Year Ended 12/31/97(7) 3.35 - -
Period Ended 12/31/96(5,7) 1.00 - -
MIDCAP OPPORTUNITIES
- -----------------------------------------------------------------------------------------
Year Ended 12/31/99 6.99 (0.05) (5.06)
Year Ended 12/31/98(7) 1.48 (0.19) (0.77)
Year Ended 12/31/97(7) 2.97 (0.04) (3.03)
Year Ended 12/31/96(7) 2.72 (0.02) (0.32)
Period Ended 12/31/95(6,7) 1.24 - -
PARTNERS
- -----------------------------------------------------------------------------------------
Year Ended 12/31/99 0.43 - -
Year Ended 12/31/98(7) (4.35) (0.38) (0.23)
Year Ended 12/31/97(7) 2.65 (0.12) (0.64)
Year Ended 12/31/96(7) 4.49 (0.06) (0.22)
Period Ended 12/31/95(6,7) 0.39 - -
VALUE + GROWTH
- -----------------------------------------------------------------------------------------
Year Ended 12/31/99 7.16 - (2.65)
Year Ended 12/31/98(7) 6.08 - (3.34)
Year Ended 12/31/97(7) 3.45 - (4.43)
Year Ended 12/31/96(7) 3.23 - (1.73)
Nine Months Ended 12/31/95(7) 4.41 - -
Year Ended 3/31/95(7) 4.89 - (0.20)
See notes to Financial Highlights on page 79.
The accompanying notes are an integral part of these financial statements.
78
<PAGE>
RS FUNDS
<CAPTION>
NET RATIO
NET ASSET, NET ASSETS OF EXPENSES
VALUE END TOTAL END OF TO AVERAGE
OF PERIOD RETURN(1) PERIOD (000S) NET ASSETS(1)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
RS INTERNET AGE FUND-TM-
- ------------------------------------------------------------------------------------------
Period Ended 12/31/99(4) $12.18 21.80% $103,585 1.76%
MICROCAP GROWTH
- ------------------------------------------------------------------------------------------
Year Ended 12/31/99 22.34 56.66% 103,312 1.92%
Year Ended 12/31/98(7) 14.26 (0.63)% 94,723 1.91%
Year Ended 12/31/97(7) 14.35 30.45% 104,858 1.95%
Period Ended 12/31/96(5,7) 11.00 10.00% 9,464 3.08%
MIDCAP OPPORTUNITIES
- ------------------------------------------------------------------------------------------
Year Ended 12/31/99 15.92 56.12% 226,529 1.59%
Year Ended 12/31/98(7) 14.04 11.65% 183,910 1.30%
Year Ended 12/31/97(7) 13.52 22.40% 298,669 1.30%
Year Ended 12/31/96(7) 13.62 24.16% 309,775 1.71%
Period Ended 12/31/95(6,7) 11.24 12.40% 136,902 1.94%
PARTNERS
- ------------------------------------------------------------------------------------------
Year Ended 12/31/99 11.96 3.73% 22,374 2.13%
Year Ended 12/31/98(7) 11.53 (27.38)% 47,936 1.88%
Year Ended 12/31/97(7) 16.49 18.08% 194,133 1.78%
Year Ended 12/31/96(7) 14.60 43.15% 127,268 1.93%
Period Ended 12/31/95(6,7) 10.39 3.90% 7,480 2.41%
VALUE + GROWTH
- ------------------------------------------------------------------------------------------
Year Ended 12/31/99 30.43 28.43% 673,900 1.59%
Year Ended 12/31/98(7) 25.92 27.44% 677,505 1.46%
Year Ended 12/31/97(7) 23.18 13.81% 752,994 1.44%
Year Ended 12/31/96(7) 24.16 14.12% 643,157 1.51%
Nine Months Ended 12/31/95(7) 22.66 24.16% 1,140,151 1.45%
Year Ended 3/31/95(7) 18.25 36.27% 428,903 1.68%
<CAPTION>
GROSS RATIO NET RATIO OF GROSS RATIO OF
OF EXPENSES NET INVESTMENT NET INVESTMENT PORTFOLIO
TO AVERAGE INCOME/(LOSS) TO INCOME/(LOSS) TO TURNOVER
NET ASSETS(1) AVERAGE NET ASSETS(1) AVERAGE NET ASSETS(1) RATE(1)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
RS INTERNET AGE FUND-TM-
- -------------------------------------------------------------------------------------------------------------------
Period Ended 12/31/99(4) 1.82% (1.34)% (1.40)% 2%
MICROCAP GROWTH
- -------------------------------------------------------------------------------------------------------------------
Year Ended 12/31/99 1.97% 1.67)% (1.72)% 90%
Year Ended 12/31/98(7) 2.01% (1.46)% (1.56)% 108%
Year Ended 12/31/97(7) 2.60% (1.35)% (2.00)% 170%
Period Ended 12/31/96(5,7) 6.40% (2.13)% (5.45)% 22%
MIDCAP OPPORTUNITIES
- -------------------------------------------------------------------------------------------------------------------
Year Ended 12/31/99 1.67% 0.31% 0.23% 408%
Year Ended 12/31/98(7) 1.64% 1.00% 0.65% 212%
Year Ended 12/31/97(7) 1.72% 0.45% 0.03% 236%
Year Ended 12/31/96(7) 1.76% 0.18% 0.13% 212%
Period Ended 12/31/95(6,7) 1.94% (0.01)% (0.01)% 97%
PARTNERS
- -------------------------------------------------------------------------------------------------------------------
Year Ended 12/31/99 2.79% (1.24)% (1.90)% 84%
Year Ended 12/31/98(7) 2.07% (0.26)% (0.46)% 73%
Year Ended 12/31/97(7) 1.78% 0.82% 0.82% 78%
Year Ended 12/31/96(7) 2.15% 0.95% 0.73% 101%
Period Ended 12/31/95(6,7) 5.12% 1.34% (1.37)% 71%
VALUE + GROWTH
- -------------------------------------------------------------------------------------------------------------------
Year Ended 12/31/99 1.59% (1.20)% (1.20)% 80%
Year Ended 12/31/98(7) 1.46% (0.96)% (0.96)% 190%
Year Ended 12/31/97(7) 1.44% (0.96)% (0.96)% 228%
Year Ended 12/31/96(7) 1.51% (1.06)% (1.06)% 221%
Nine Months Ended 12/31/95(7) 1.45% (1.04)% (1.04)% 104%
Year Ended 3/31/95(7) 1.68% (1.09)% (1.09)% 232%
</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) Diversified Growth Fund shares were first issued on 8/1/96.
(3) Global Natural Resources and The Information Age Fund-Registered Trademark-
shares were first issued on 11/15/95.
(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) MidCap Opportunities Fund and Partners Fund shares were first issued on
7/12/95.
(7) 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.
79
<PAGE>
ANNUAL 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 ten portfolios. The RS Emerging Growth Fund, the RS Value + Growth Fund,
the RS MidCap Opportunities Fund (formerly the Growth & Income Fund), The
Information Age Fund-Registered Trademark-, the RS Global Natural Resources
Fund, the RS Diversified Growth Fund, RS MicroCap Growth Fund, and the RS
Internet Age Fund-TM- are registered as diversified funds. The Contrarian
Fund-TM- and the RS Partners Fund are registered as non-diversified funds.
Subsequent to April 16, 1999, each Portfolio consists of a single class of
shares.
NOTE 1 SIGNIFICANT ACCOUNTING POLICIES:
The following policies are in conformity with generally accepted accounting
principles. The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
a. INVESTMENT VALUATIONS:
Marketable securities are valued at the last sale price on the principal
exchange or market on which they are traded; or, if there were no sales that
day, at the mean between the closing bid and asked prices. Short-term
investments that will mature in 60 days or less are stated at amortized cost,
which approximates market value. Foreign securities are generally denominated in
foreign currencies. The currencies are translated into U.S. dollars by using the
exchange rates quoted at the close of The London Stock Exchange prior to when
each Funds' net asset value is next determined.
Securities for which market quotations are not readily available are valued at
their fair value as determined in accordance with the guidelines and procedures
adopted by the Funds' Board of Trustees. The guidelines and procedures use
fundamental valuation methods which include, but are not limited to, the
analysis of: the effect of any restrictions on the sale of the security, product
development and trends of the security's issuer, changes in the industry and
other competing companies, significant changes in the issuer's financial
position, and any other event that could have a significant impact on the value
of the security. The approximate percentages of each Funds' long positions
valued using these guidelines and procedures at December 31, 1999, were as
follows:
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
OF LONG OF LONG
FUND POSITIONS FUND POSITIONS
- --------------------------------------- -------------------------------------
<S> <C> <C> <C>
The Contrarian Fund-TM- 0.1% RS Internet Age Fund-TM- 0%
Diversified Growth 1.7% MicroCap Growth 0.8%
Emerging Growth 0% MidCap Opportunities 1.1%
Global Natural Resources 0.1% Partners 1.9%
The Information Age Value + Growth 0%
Fund-Registered Trademark- 0%
- --------------------------------------- -------------------------------------
</TABLE>
In their normal course of business, some of the Funds may invest a significant
portion of their assets in companies concentrated within a number of industries.
Accordingly, the performance of these Funds may be subject to a greater risk of
market fluctuation than that of a fund invested in a wider spectrum of market or
industrial sectors.
Options and warrants for which market quotations were not readily available were
priced using the modified Black-Scholes Valuation Formula. The Black-Scholes
Valuation Formula values an option or warrant by determining the differential
between the exercise price of the option or warrant and the current price of the
underlying stock, based on a number of factors.
These factors include, but are not limited to, current price of the underlying
stock, exercise price of the option or warrant, time to expiration, assumed
riskless rate of interest, compounded rate of return on the stock, and standard
deviation of the return on the stock. This valuation method is subject to
frequent review and is in accordance with the guidelines and procedures adopted
by the Funds' Board of Trustees.
b. FEDERAL INCOME TAXES:
The Funds intend to comply with requirements of the Internal Revenue Code,
qualifying as a regulated investment company and to distribute all net
investment income and realized net capital gains, if any, to shareholders.
Therefore, the Funds do not expect to be subject to income tax, and no provision
for such tax will be made.
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 expense includes the adjustment of prior year expense underaccruals.
Furthermore, other, including accounting/administrative fee waivers, represents
the adjustment of prior year expense overaccruals and the waiver of fees by the
Funds' accounting agent/administrator.
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.
80
<PAGE>
RS FUNDS
At December 31, 1999, 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 12/31/99 BORROWING RATE (%)
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
The Contrarian Fund-TM- $542,528 $890,203 5.01
Diversified Growth - 790,250 5.01
Emerging Growth - 107,837 5.01
Global Natural Resources 146,165 165,276 5.01
The Information Age Fund-Registered Trademark- - 970,302 5.01
RS Internet Age Fund-TM- - 8,394 5.01
MicroCap Growth - - 5.01
MidCap Opportunities - 59,989 5.01
Partners 356,295 50,052 5.01
Value + Growth - 1,634,011 5.01
- -------------------------------------------------------------------------------------
</TABLE>
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 year ended December 31, 1999, and the year ended December
31, 1998 are outlined on the following page. Transactions in capital shares for
Class C for the period from January 1, 1999 through April 16, 1999 and for the
year ended December 31, 1998 are also outlined on the following page.
81
<PAGE>
ANNUAL REPORT
(ALL NUMBERS IN THOUSANDS) TRANSACTIONS IN CAPITAL SHARES
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
THE CONTRARIAN FUND-TM- DIVERSIFIED GROWTH
CLASS A 1/1/98 - 12/31/98 1/1/99 - 12/31/99 1/1/98 - 12/31/98 1/1/99 - 12/31/99
- ----------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares Sold 4,353 $45,839 3,969 $34,206 10,171 $146,788 11,436 $266,962
Shares Reinvested 1,248 8,922 - - 110 1,563 1,185 31,668
Shares Redeemed (22,667) (222,337) (9,615) (82,336) (11,654) (167,133) (7,728) (156,877)
Net Increase/(Decrease) (17,066) (167,576) (5,646) (48,130) (1,373) (18,782) 4,893 141,753
<CAPTION>
CLASS C 1/1/98 - 12/31/98 1/1/99 - 4/16/99* 1/1/98 - 12/31/98 1/1/99 - 4/16/99*
- ----------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares Sold 115 $1,118 - $ - 49 $694 1 $26
Shares Reinvested 6 42 - - 2 21 - -
Shares Redeemed (391) (3,559) (81) (636) (4) (54) (75) (1,399)
Net Increase/(Decrease) (270) (2,399) (81) (636) 47 661 (74) (1,373)
<CAPTION>
- -----------------------------------------------------------------
EMERGING GROWTH
CLASS A 1/1/98 - 12/31/98 1/1/99 - 12/31/99
- -----------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares Sold 27,699 $547,574 91,950 $3,447,594
Shares Reinvested 665 13,368 3,211 154,579
Shares Redeemed (24,081) (475,458) (53,735) (1,927,232)
Net Increase/(Decrease) 4,283 85,484 41,426 1,674,941
<CAPTION>
CLASS C 1/1/98 - 12/31/98 1/1/99 - 4/16/99*
- -----------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares Sold 51 $1,021 10 $228
Shares Reinvested 2 35 - -
Shares Redeemed (20) (367) (61) (1,761)
Net Increase/(Decrease) 33 689 (51) (1,533)
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
GLOBAL NATURAL RESOURCES THE INFORMATION AGE FUND-Registered Trademark-
CLASS A 1/1/98 - 12/31/98 1/1/99 - 12/31/99 1/1/98 - 12/31/98 1/1/99 - 12/31/99
- --------------------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares Sold 2,776 $29,887 5,014 $44,758 535 $6,360 18,710 $439,505
Shares Reinvested 81 615 - - 264 2,352 1,122 32,267
Shares Redeemed (6,428) (67,134) (5,662) (50,702) (1,769) (20,777) (18,810) (434,019)
Net Increase/(Decrease) (3,571) (36,632) (648) (5,944) (970) (12,065) 1,022 37,753
<CAPTION>
CLASS C 1/1/98 - 12/31/98 1/1/99 - 4/16/99* 1/1/98 - 12/31/98 1/1/99 - 4/16/99*
- --------------------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares Sold 2 $20 - $ - 24 $279 4 $71
Shares Reinvested - - - - 11 98 - -
Shares Redeemed - - (4) (35) (10) (117) (12) (228)
Net Increase/(Decrease) 2 20 (4) (35) 25 260 (8) (157)
<CAPTION>
- -----------------------------------------------------------------
RS INTERNET AGE FUND-TM-
CLASS A 12/1/99** - 12/31/99
- -----------------------------------------------------------------
SHARES AMOUNT
<S> <C> <C>
Shares Sold 8,967 $98,384
Shares Reinvested - -
Shares Redeemed (465) (5,395)
Net Increase/(Decrease) 8,502 92,989
<CAPTION>
CLASS C
- -----------------------------------------------------------------
<S>
Shares Sold
Shares Reinvested
Shares Redeemed
Net Increase/(Decrease)
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
MICROCAP GROWTH MIDCAP OPPORTUNITIES
CLASS A 1/1/98 - 12/31/98 1/1/99 - 12/31/99 1/1/98 - 12/31/98 1/1/99 - 12/31/99
- ---------------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares Sold 14,939 $213,493 6,193 $96,638 7,689 $105,065 8,061 $142,199
Shares Reinvested - - - - 931 11,976 3,935 53,323
Shares Redeemed (15,604) (223,561) (8,211) (126,300) (17,613) (240,743) (10,860) (182,406)
Net Increase/(Decrease) (665) (10,068) (2,018) (29,662) (8,993) (123,702) 1,136 13,116
<CAPTION>
CLASS C 1/1/98 - 12/31/98 1/1/99 - 4/16/99* 1/1/98 - 12/31/98 1/1/99 - 4/16/99*
- ---------------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares Sold 37 $584 1 $19 88 $1,152 3 $46
Shares Reinvested - - - - 11 135 - -
Shares Redeemed (95) (1,243) (42) (607) (36) (482) (169) (2,551)
Net Increase/(Decrease) (58) (659) (41) (588) 63 805 (166) (2,505)
<CAPTION>
- -----------------------------------------------------------------
PARTNERS
CLASS A 1/1/98 - 12/31/98 1/1/99 - 12/31/99
- -----------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares Sold 3,638 $56,348 1,799 $21,154
Shares Reinvested 263 3,912 - -
Shares Redeemed (11,828) (178,562) (4,084) (47,507)
Net Increase/(Decrease) (7,617) (113,694) (2,285) (26,353)
<CAPTION>
CLASS C 1/1/98 - 12/31/98 1/1/99 - 4/16/99*
- -----------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares Sold 2 $25 - $ -
Shares Reinvested 1 14 - -
Shares Redeemed (54) (804) (12) (134)
Net Increase/(Decrease) (48) (728) (12) (134)
<CAPTION>
- ---------------------------------------------------------------
VALUE + GROWTH
CLASS A 1/1/98 - 12/31/98 1/1/99 - 12/31/99
- ---------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares Sold 9,535 $243,579 7,452 $210,841
Shares Reinvested 3,151 75,308 1,885 59,792
Shares Redeemed (19,034) (480,538) (13,328) (383,700)
Net Increase/(Decrease) (6,348) (161,651) (3,991) (113,067)
<CAPTION>
CLASS C 1/1/98 - 12/31/98 1/1/99 - 4/16/99*
- ---------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares Sold 22 $531 1 $16
Shares Reinvested 8 185 - -
Shares Redeemed (21) (496) (64) (1,711)
Net Increase/(Decrease) 9 220 (63) (1,695)
</TABLE>
* Effective April 16, 1999, the Funds liquidated Class C shares.
** Commencement of investment operations.
82
<PAGE>
RS FUNDS
NOTE 3 TRANSACTIONS WITH AFFILIATES:
a. ADVISORY FEES AND EXPENSE LIMITATION:
Under the terms of advisory agreements, which are reviewed and approved annually
by the Board of Trustees, after an initial two-year term, the Funds pay RS
Investment Management, L.P. ("RSIM, L.P.") or RS Investment Management, Inc.
("RSIM, Inc.") an investment advisory fee calculated at an annual rate of the
average daily net assets of the Funds as disclosed below.
<TABLE>
<CAPTION>
INVESTMENT
FUND ADVISORY FEES
- --------------------------------------------------------------------------------
<S> <C>
The Contrarian Fund-TM- 1.50%
Diversified Growth 1.00%
Emerging Growth 1.00%
Global Natural Resources 1.00%
The Information Age Fund-Registered Trademark- 1.00%
RS Internet Age Fund-TM- 1.25%
MicroCap Growth 1.25%
MidCap Opportunities 1.00%
Partners 1.25%
Value + Growth 1.00%
- --------------------------------------------------------------------------------
</TABLE>
RSIM, L.P. and RSIM, Inc. may voluntarily agree to waive any annual operating
expenses, excluding interest, taxes, deferred organizational and extraordinary
expenses, and dividend expenses related to short sales, of a Fund exceeding an
agreed annual expense ratio of the Fund.
RSIM, L.P. and RSIM, Inc. may recoup waived or reimbursed operating expenses
over the succeeding two years, subject to expense limitations then applicable to
the Funds. Such recoupments are included in investment advisory fees on the
Statement of Operations.
During the period ended December 31, 1999, RSIM, L.P. and RSIM, Inc. recouped
the following amounts:
<TABLE>
<CAPTION>
FUND
- --------------------------------------------------------------------------------
<S> <C>
The Contrarian Fund-TM- $ -
Diversified Growth 208,158
Emerging Growth -
Global Natural Resources 130,305
The Information Age Fund-Registered Trademark- -
RS Internet Age Fund-TM- -
MicroCap Growth 53,478
MidCap Opportunities -
Partners -
Value + Growth -
- --------------------------------------------------------------------------------
</TABLE>
At December 31, 1999, the balance of recoupable expenses for each fund was:
<TABLE>
<CAPTION>
FUND 1998 1999 TOTAL
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
The Contrarian Fund-TM- $ - $ - $ -
Diversified Growth - - -
Emerging Growth - - -
Global Natural Resources 11,404 29,580 40,984
The Information Age Fund-Registered Trademark- - - -
RS Internet Age Fund-TM- - - -
MicroCap Growth 104,172 27,155 131,327
MidCap Opportunities 853,895 120,329 974,224
Partners 236,741 175,552 412,293
Value + Growth - - -
- --------------------------------------------------------------------------------
</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 December 31,
1999.
c. DISTRIBUTION FEES:
Provident Distributors, Inc. ("Provident"), a non-affiliate, has been designated
as the Funds' distributor, as of 12/31/98. Prior to such date, Edgewood
Services, Inc., also a non-affiliate of RSIM, L.P. and RSIM, Inc., was the
Funds' distributor.
The Funds have entered into agreements with Provident for distribution services
with respect to its shares and adopted Plans of Distribution pursuant to Rule
12b-1 under the 1940 Act, 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.
83
<PAGE>
ANNUAL 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>
The Contrarian Fund-TM- $102,850,057 $(10,596,039) $59,065,515 $69,661,554
Diversified Growth 222,786,570 81,357,463 85,558,381 4,200,918
Emerging Growth 2,082,302,312 1,473,374,970 1,512,593,048 39,218,078
Global Natural Resources 23,809,396 (1,071,470) 2,352,916 3,424,386
The Information Age
Fund-Registered Trademark- 141,085,220 212,010,045 213,068,015 1,057,970
RS Internet Age Fund-TM- 89,795,158 10,827,039 13,997,613 3,170,574
MicroCap Growth 64,175,398 39,207,768 45,173,334 5,965,566
MidCap Opportunities 177,359,587 48,769,773 59,539,899 10,770,126
Partners 21,424,263 29,420 2,991,502 2,962,082
Value + Growth 357,864,379 318,619,349 320,942,521 2,323,172
- -----------------------------------------------------------------------------------------------------------------------------------
</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 December 31, 1999, for each Fund is listed above.
The net unrealized appreciation/depreciation on investments and securities sold
short which consists of gross unrealized appreciation and depreciation are also
disclosed in the chart above.
b. INVESTMENT PURCHASES AND SALES:
The cost of investments purchased and the proceeds from investments sold
(excluding options, securities sold short and short-term investments) for the
period ended December 31, 1999, were as follows:
<TABLE>
<CAPTION>
COST OF INVESTMENTS PROCEEDS FROM
FUND PURCHASE INVESTMENTS SOLD
- --------------------------------------------------------------------------------
<S> <C> <C>
The Contrarian Fund-TM- $100,246,686 $128,508,250
Diversified Growth 600,567,716 527,734,739
Emerging Growth 3,507,181,812 2,117,429,715
Global Natural Resources 37,989,295 43,595,657
The Information Age Fund-Registered Trademark- 384,241,676 368,985,457
RS Internet Age Fund-TM- 89,992,227 2,390,841
MicroCap Growth 73,887,191 102,062,741
MidCap Opportunities 749,840,824 789,363,632
Partners 26,403,294 54,056,299
Value + Growth 522,656,361 710,679,419
- --------------------------------------------------------------------------------
</TABLE>
c. FOREIGN SECURITIES:
Foreign securities investments involve special risks and considerations not
typically associated with those of U.S. origin. These risks include, but are not
limited to, revaluation of currencies, adverse political, social, and economic
developments, and less reliable information about issuers. Moreover, securities
of many foreign companies and markets may be less liquid and their prices more
volatile than those of U.S. companies and markets.
d. SHORT SALES:
Short sales are transactions in which a fund sells a security it does not own,
in anticipation of a decline in the market value of that security. To complete
such a transaction, the Fund must borrow the security to deliver to the buyer
upon the short sale; the Fund then is obligated to replace the security borrowed
by purchasing it in the open market at some later date. The following Funds may
sell securities short: The Contrarian Fund-TM-, RS Internet Age Fund-TM- Global
Natural Resources, MicroCap Growth and Value + Growth. The Funds will incur a
loss if the market price of the security increases between the date of the short
sale and the date on which the Funds replace the borrowed security. The Funds
will typically realize a gain if the security declines in value between those
dates. All short sales must be 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 year ended December 31, 1999, the cost
of investments purchased to cover short sales and proceeds from investments sold
short were as follows:
84
<PAGE>
RS FUNDS
<TABLE>
<CAPTION>
COST OF INVESTMENTS PROCEEDS FROM
PURCHASED TO INVESTMENTS
FUND COVER SHORT SELLS SOLD SHORT
- --------------------------------------------------------------------------------
<S> <C> <C>
The Contrarian Fund-TM- $60,901,651 $49,717,658
Diversified Growth 15,188,598 14,064,374
Emerging Growth - -
Global Natural Resources - -
The Information Age Fund-Registered Trademark- - -
RS Internet Age Fund-TM- - -
MicroCap Growth - -
MidCap Opportunities 7,102,590 7,894,607
Partners - -
Value + Growth - -
- --------------------------------------------------------------------------------
</TABLE>
e. RESTRICTED SECURITIES:
A restricted security cannot be resold to the general public without prior
registration under the Securities Act of 1933. If the security is subsequently
reregistered and resold, the issuers would bear the expense of all registrations
at no cost to the Fund. Restricted securities are valued according to the
guidelines and procedures adopted by the Funds' Board of Trustees as outlined in
Note 1.a., paragraph 2. See detail of transactions in restricted securities
below.
f. OPTIONS AND WARRANTS:
Options and warrants normally entitle the holder to purchase 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 year ended December 31, 1999 were as
follows:
<TABLE>
<CAPTION>
NUMBER
AMOUNT OF OF CONTRACTS
PREMIUMS OPTIONED
- --------------------------------------------------------------------------------
<S> <C> <C>
Outstanding at 12/31/98 $ 125,946 100.00
Options written 6,281,141 7,200.00
Options expired (818,053) (1,800.00)
Options exercised - -
Options closed (5,589,034) (5,500.00)
- --------------------------------------------------------------------------------
Outstanding at 12/31/99 $ 0.00 0.00
- --------------------------------------------------------------------------------
</TABLE>
MIDCAP OPPORTUNITIES: WRITTEN OPTIONS
Transactions in written options for the year ended December 31, 1999 were as
follows:
<TABLE>
<CAPTION>
NUMBER
AMOUNT OF OF CONTRACTS
PREMIUMS OPTIONED
- --------------------------------------------------------------------------------
<S> <C> <C>
Outstanding at 12/31/98 $ 188,919 150.00
Options written 3,363,123 4,625.00
Options expired (391,162) (650.00)
Options exercised - -
Options closed (3,160,880) (4,125.00)
- --------------------------------------------------------------------------------
Outstanding at 12/31/99 $ 0.00 0.00
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RESTRICTED SECURITIES
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
% OF FUNDS'
FUND SECURITY SHARES COST VALUE ACQUISITION DATE NET ASSETS
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
The Contrarian Fund-TM- African Minerals, Ltd. 698,422 $2,837,501 $103,366 4/25/97 - 5/7/98
- ----------------------------------------------------------------------------------------------------------------------------------
2,837,501 103,366 0.09%
- ----------------------------------------------------------------------------------------------------------------------------------
Diversified Growth Billserv.com, Inc. 301,538 597,047 2,120,189 10/1/99
Billserv.com, Inc., Warrants 301,538 382,953 1,677,127 10/1/99
Startec Global Com. Corp. 40,000 660,000 684,000 12/21/99
United Shipping & Tech., Inc. 100,000 214,646 640,000 10/8/99
- ----------------------------------------------------------------------------------------------------------------------------------
1,854,646 5,121,316 1.68%
- ----------------------------------------------------------------------------------------------------------------------------------
Global Natural
Resources African Minerals, Ltd. 203,624 784,997 30,136 4/25/97 - 5/7/98
- ----------------------------------------------------------------------------------------------------------------------------------
784,997 30,136 0.13%
- ----------------------------------------------------------------------------------------------------------------------------------
MicroCap Growth Startec Global Com. Corp. 50,000 825,000 855,000 12/22/99
- ----------------------------------------------------------------------------------------------------------------------------------
825,000 855,000 0.83%
- ----------------------------------------------------------------------------------------------------------------------------------
MidCap Opportunities Core Cap, Inc., Common 75,000 1,500,000 949,500 10/29/97
Core Cap, Inc., Pref 75,000 1,875,000 1,417,500 10/29/97
- ----------------------------------------------------------------------------------------------------------------------------------
3,375,000 2,367,000 1.04%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
85
<PAGE>
ANNUAL REPORT
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS
OF THE RS INVESTMENT TRUST
- --------------------------------------------------------------------------------
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of each of the funds constituting the
RS Investment Trust (hereinafter referred to as the "Funds") at December 31,
1999, the results of each of their operations for the year then ended, and the
changes in each of their net assets for each of the two years then ended and the
financial highlights for each of the periods presented, in conformity with
accounting principles generally accepted in the United States of America. These
financial statements and financial highlights (hereinafter referred to as
"financial statements") are the responsibility of the Funds' management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States of America which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1999 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
San Francisco, California
February 11, 2000
86
<PAGE>
RS FUNDS
SUPPLEMENTAL INFORMATION--UNAUDITED
TAX INFORMATION
YEAR ENDED DECEMBER 31, 1999
In accordance with the Internal Revenue Code, the following funds are
designating the following amounts of long-term capital gain dividends:
<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
Diversified Growth $ 1,010,688
Emerging Growth 27,404,461
The Information Age Fund-Registered Trademark- 13,963,450
MidCap Opportunities 20,228,129
Value + Growth 31,118,437
- --------------------------------------------------------------------------------
</TABLE>
MEETING OF SHAREHOLDERS
A Meeting of shareholders of the Trust was held on February 26, 1999. At the
meeting, shareholders approved each of the proposals described briefly below.
PROPOSAL 1:
To approve or disapprove a new Investment Advisory Agreement between the Trust,
on behalf of each of the Funds, and RS Investment Management, L.P., or RS
Investment Management, Inc., as the case may be.
<TABLE>
<CAPTION>
FUND FOR AGAINST ABSTAIN
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
The Contrarian Fund-TM- 8,741,987 498,381 292,578
Diversified Growth 3,194,716 44,545 112,617
Emerging Growth 12,948,269 201,567 445,056
Global Natural Resources 2,351,466 91,749 85,520
The Information Age Fund-Registered Trademark- 7,016,931 103,365 157,810
MicroCap Growth 3,805,649 41,600 78,418
MidCap Opportunities 7,888,361 139,685 289,488
Partners 2,229,193 105,429 89,030
Value + Growth 15,167,240 439,420 559,104
- -----------------------------------------------------------------------------------
</TABLE>
PROPOSAL 2:
To approve or disapprove a new Sub-Advisory Agreement among the Trust, on behalf
of The Information Age Fund-Registered Trademark-, RS Investment Management,
L.P., and Elijah Asset Management, LLC.
<TABLE>
<CAPTION>
FUND FOR AGAINST ABSTAIN
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
The Information Age Fund-Registered Trademark- 7,004,523 128,009 145,574
</TABLE>
PROPOSAL 3:
To approve or disapprove a new Sub-Advisory Agreement among the Trust, on behalf
of Value + Growth Fund, RS Investment Management, L.P., and Elijah Asset
Management, LLC.
<TABLE>
<CAPTION>
FUND FOR AGAINST ABSTAIN
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Value + Growth 15,118,040 489,504 558,220
</TABLE>
PROPOSAL 4:
To approve or disapprove a new Sub-Advisory Agreement among the Trust, on behalf
of The Contrarian Fund-TM-, RS Investment Management, L.P., and Eastbourne
Management, L.L.C.
<TABLE>
<CAPTION>
FUND FOR AGAINST ABSTAIN
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
The Contrarian Fund-TM- 8,710,393 532,080 290,473
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ANNUAL 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 February 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.
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MUTUAL FUND SHARES ARE NOT INSURED BY THE FDIC OR ANY OTHER GOVERNMENTAL
ENTITY AND ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE
PRINCIPAL AMOUNT INVESTED.
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RS FUNDS
GROWTH
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 Jim Callinan and
Cathy Baker. The computer
quotation symbol is RIAFX.
MICROCAP GROWTH FUND
FOCUSING ON COMPANIES WITH MARKET
CAPS OF $500 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.
[Sidenote]
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.
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[GRAPHIC]
RS INVESTMENT MANAGEMENT
388 Market Street San Francisco CA 94111
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(800) 766-FUND www.rsim.com
