<PAGE>
RCM GLOBAL HEALTH CARE FUND
SEMI-ANNUAL REPORT
JUNE 30, 1997
<PAGE>
RCM GLOBAL HEALTH CARE FUND
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
In the first half of 1997, the RCM Global Health Care Fund (the "Fund") returned
16.60%, compared to 12.01% for the Russell Midcap Health Care Index, 20.61% for
the S&P 500 Stock Index, and 14.34% for the average of the 29 health care mutual
funds reported by Morningstar, Inc. The primary source of performance in the
first six months of the year was the strong move of large capitalization
pharmaceutical and medical device stocks.
The remarkable performance of pharmaceutical stocks in the first half of 1997
was fueled by strong financial results, successful introduction of new products
and improving visibility of the longer-term product pipelines. RCM Capital
Management, L.L.C. ("RCM"), the Fund's investment manager, believes that the
current economic environment also favors stocks with predictable growth, and
many health care product companies offer those characteristics. For the coming
months RCM believes that these stocks will continue to perform well, though far
more modestly than in the last six months.
Over the last decade, much has been made of the power of biotechnology to aid in
the research and development of new drugs and other products. RCM believes that
new products will be introduced in the coming years that will validate all the
publicity. In addition, RCM believes many smaller biotech companies have been
overlooked in this market which generally has focused on the large, liquid
names. The Fund has been increasing its commitment in these stocks as the
disparity in valuation with better recognized companies widens.
Investing in health care service companies has been treacherous in the last
several months. The debate over Medicare cuts has whipsawed these stocks as
proposals were floated, discussed, and discarded. Investigations at both the
State and Federal levels have been expanded dramatically to both root out fraud
and to frighten providers into a more cautious attitude in seeking reimbursement
from the government. As we write this, Congress is in the final stages of
budget negotiations, and the cuts that will be applied to the various service
industries that do business with Medicare are more visible. There is both risk
and opportunity in the nuance of each proposal, and the Fund is investing very
cautiously in these companies.
The pace of change in the area of medical devices has accelerated dramatically,
but for those companies that are able to keep ahead the rewards are high. RCM
believes that its knowledge and expertise in technology-based medical products
has served the Fund very well in finding the companies whose products are likely
to be successful. As the valuations of the larger, more liquid medical device
stocks
<PAGE>
have climbed, RCM has become more cautious. Unlike the market for
pharmaceutical products, medical device consumers are fickle, and it is not
unusual to see dramatic shifts in market share as new products are introduced.
This fact is often ignored by investors in medical device stocks during
optimistic times. The Fund is currently shifting its focus to investment in
smaller medical device companies with strong product portfolios. These
companies have not yet participated fully in the bull market of 1997.
RCM expects the second half of 1997 to continue the strong trends in health care
that were demonstrated in the first half of 1997. This is a time of
unprecedented development of new medical products for both devices and drugs,
aided by remarkable new technologies, a more cooperative global regulatory
environment, and a managed care environment that encourages the adaptation of
new, cost-effective therapies. Health care services are in a state of dramatic
flux. For many companies this will be a difficult time, for others there will
be opportunity. Information-based technologies have the potential to
dramatically change the delivery as well as the effectiveness of health care.
Stock performance thus far in 1997 has reflected many of these important
dynamics that affect the health care industries.
Page 2
<PAGE>
RCM GLOBAL HEALTH CARE FUND
PERFORMANCE SUMMARY
[CHART]
RCM Healthcare Fund S&P 500 Russel Midcap Healthcare Index
------------------- ------- ------------------------------
Dec-96 10,000 10,000 10,000
Jan-97 10,700 10,625 10,353
Feb-97 10,650 10,708 10,552
Mar-97 9,910 10,268 9,637
Apr-97 10,050 10,881 9,786
May-97 11,140 11,544 10,712
Jun-97 11,660 12,061 11,201
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
The chart above shows the performance of the RCM Global Health Care Fund since
the Fund's inception versus the Standard & Poor's 500 Stock Index(a) and the
Russell Midcap Health Care Index.(b) The chart represents a cumulative
return(c)(d) of 16.60% for the Fund. The chart assumes a hypothetical $10,000
initial investment in the Fund and reflects all Fund expenses.
TOTAL RETURNS(c)
JUNE 30, 1997
- -------------------------
LIFE OF
YTD FUND(d)
- -------------------------
16.60% 16.60%
- -------------------------
The data above represent past performance of the Fund and may not be indicative
of future performance. The investment return and principal value of an
investment in the Fund will fluctuate, so that shares, when redeemed, may be
worth more or less than their original cost.
- --------------------
(a) The Standard & Poor's 500 Stock Index is a capitalization-weighted index of
500 stocks that attempts to measure performance of the broad domestic
economy through changes in the aggregate market value of 500 stocks
representing major industries.
(b) The Russell Midcap Health Care Index is composed of all medium and
medium/small health care companies in the Russell 1000 Index. The Russell
1000 Index measures the performance of the 1,000 largest companies in the
Russell 3000 Index, which represents approximately 90% of the total market
capitalization of the Russell 3000 Index.
(c) Returns assume reinvestment of all dividends and capital gains
distributions at net asset value.
(d) The Fund commenced operations on December 31, 1996.
Page 3
<PAGE>
RCM GLOBAL HEALTH CARE FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
JUNE 30, 1997
(UNAUDITED)
% OF
SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS MARKET VALUE
-------- --------- -------------------------------- ---------- --------------
DRUGS AND HOSPITAL SERVICES 60.3%
3,400 US Algos Pharmaceutical Corp. * $ 62,050
2,800 US Amgen Inc. 162,750
2,600 US Anesta Corp. * 49,400
3,900 US Biomet Inc. 72,637
4,200 US Centocor Inc. * 130,462
13,300 US CIMA Labs Inc. * 54,862
2,800 US Creative BioMolecules Inc. * 19,775
2,100 US Eli Lilly & Co. 229,556
4,400 US Endosonics Corp. * 47,850
3,100 GB Glaxo Wellcome PLC (Sponsored ADR) 129,619
2,300 US Guidant Corp. 195,500
3,200 US Medimmune Inc. * 59,200
2,600 US Medtronic Inc. 210,600
3,000 US NaPro BioTherapeutics Inc. * 21,750
2,200 US NeXstar Pharmaceuticals Inc. * 31,350
2,100 FI Orion-Yhtymae 79,565
1,700 US PathoGensis Corp. * 49,513
6,700 US Penederm Inc. * 90,450
1,900 US Pfizer Inc. 227,050
7,300 US Physio-Control International Corp. * 109,500
2,100 US Respironics Inc. * 44,363
1,400 US SangStat Medical Corp. * 32,375
4,100 US Sepracor Inc. * 105,831
1,900 GB Smithkline Beecham PLC (ADR) 174,088
3,600 US Sofamor/Danek Group Inc. * 164,700
300 US VISX Inc. * 7,125
2,000 US Warner Lambert Co. 248,500
-------------
2,810,421
-------------
HEALTH CARE SERVICES 30.7%
2,800 US AmeriSource Health Corp. * 139,650
4,375 US Bergen Brunswig Corp. 121,953
1,500 US Cardinal Health Inc. 85,875
4,900 US Columbia/HCA Healthcare Corp. 192,631
1,200 US CRA Managed Care Inc. * 62,625
1,500 US Genesis Health Ventures Inc. * 50,625
1,500 US HBO & Co. 103,313
4,500 US PhyCor Inc. * 154,969
500 US Quintiles Transnational Corp. * 34,813
3,800 US Renal Treatment Centers Inc. * 102,125
1,200 US Stewart Enterprises Inc. Class A 50,400
5,300 US Sun Healthcare Group * 110,306
3,200 US Tenet Healthcare Corp. * 94,600
3,500 US Transition Systems Inc. * 63,656
1,700 US Universal Health Services Inc. Class B * 65,450
-------------
1,432,991
-------------
The accompanying notes are an integral part of the financial statements.
Page 4
<PAGE>
RCM GLOBAL HEALTH CARE FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
JUNE 30, 1997
(UNAUDITED)
% OF
SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS MARKET VALUE
-------- --------- -------------------------------- ---------- --------------
TOTAL EQUITY INVESTMENTS
(COST $3,643,463) 91.0% $ 4,243,412
-------------
SHORT-TERM INVESTMENTS
MONEY MARKET FUNDS
190,000 US SSgA Money Market Fund 190,000
190,000 US SSgA U.S. Government Money
Market Fund 190,000
-------------
TOTAL SHORT-TERM INVESTMENTS 8.2%
(COST $380,000) 380,000
-------------
TOTAL INVESTMENTS (COST $4,023,463) 99.2% 4,623,412
OTHER ASSETS LESS LIABILITIES 0.8% 38,798
-------------
NET ASSETS 100.0% $ 4,662,210
-------------
* Non-income producing security.
- --------------------------------------------------------------------------------
The Fund's investments in securities at June 30, 1997, categorized by country:
% of Net Assets
------------------------------------
Country Short-Term
Country Code Equities and Other Total
------- ---- ---------- ---------- --------
Finland FI 1.7% 1.7%
United Kingdom GB 6.5% 6.5%
United States US 82.8% 9.0% 91.8%
---------- ---------- --------
Total 91.0% 9.0% 100.0%
---------- ---------- --------
---------- ---------- --------
The accompanying notes are an integral part of the financial statements.
Page 5
<PAGE>
RCM GLOBAL HEALTH CARE FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997
(UNAUDITED)
ASSETS:
Investments in securities, at value
(cost $4,023,463) (Note 1) $ 4,623,412
Cash 67,175
Deferred organizational costs (Note 5) 9,000
Dividends receivable 2,232
------------
Total Assets 4,701,819
------------
LIABILITIES:
Payable for organizational costs (Note 5) 8,032
Payable for legal fees 7,439
Payable for Directors' fees (Note 7) 7,439
Payable for audit fees 7,439
Payable for transfer agent fees 3,100
Payable for investment management fees (Note 6) 2,937
Payable for miscellaneous expenses 3,223
------------
Total Liabilities 39,609
------------
NET ASSETS $ 4,662,210
------------
------------
NET ASSETS CONSIST OF:
Paid-in capital (Note 3) $ 4,000,100
Net investment loss (18,107)
Accumulated net realized gain on investments and foreign
currency transactions 80,268
Net unrealized appreciation on investments and translation of
other assets and liabilities on foreign currencies 599,949
------------
NET ASSETS $ 4,662,210
------------
------------
NET ASSET VALUE PER SHARE
($4,662,210 DIVIDED BY 400,010 shares outstanding) $ 11.66
------------
------------
The accompanying notes are an integral part of the financial statements.
Page 6
<PAGE>
RCM GLOBAL HEALTH CARE FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
INVESTMENT INCOME:
Income:
Dividends (net of foreign withholding tax of $580) $ 26,039
Expenses:
Investment management fees (Note 6) 21,023
Directors' fees (Note 7) 12,439
Transfer agent fees 10,231
Legal fees 7,439
Audit fees 7,439
Registration and filing fees 4,185
Custodian fees 2,062
Amortization of organizational costs (Note 5) 1,000
Miscellaneous expenses 3,906
------------
Total expenses before reimbursements 69,724
Expenses reimbursed by investment manager (Note 6) (25,578)
------------
Total net expenses 44,146
------------
Net investment loss (18,107)
------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain from investments 80,293
Net realized loss from foreign currency transactions (25)
------------
Net realized gain 80,268
------------
Net change in unrealized appreciation on investments and
translation of other assets and liabilities
on foreign currencies 599,949
------------
Net realized and unrealized gain during the period 680,217
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 662,110
------------
------------
The accompanying notes are an integral part of the financial statements.
Page 7
<PAGE>
RCM GLOBAL HEALTH CARE FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
December 31, 1996
Six Months Ended (commencement
June 30, 1997 of operations) to
(Unaudited) December 31, 1996
---------------- -----------------
<S> <C> <C>
OPERATIONS:
Net investment loss $ (18,107) $ -
Net realized gain on investments and foreign
currency transactions 80,268 -
Net change in unrealized appreciation on
investments and translation of other assets
and liabilities on foreign currencies 599,949 -
------------ ------------
Net increase in net assets resulting from
operations 662,110 -
NET INCREASE FROM CAPITAL SHARES TRANSACTIONS
(Note 3) 100 4,000,000
------------ ------------
TOTAL INCREASE IN NET ASSETS 662,210 4,000,000
NET ASSETS:
Beginning of period 4,000,000 -
------------ ------------
End of period * $ 4,662,210 $ 4,000,000
------------ ------------
------------ ------------
____________________
* Includes accumulated net investment loss of: $ (18,107) $ -
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 8
<PAGE>
RCM GLOBAL HEALTH CARE FUND
FINANCIAL HIGHLIGHTS
Selected data for each share of capital stock outstanding are as follows:
<TABLE>
<CAPTION>
December 31, 1996
Six Months Ended (commencement
June 30, 1997 of operations) to
(Unaudited) December 31, 1996
----------------- -----------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.00 $ 10.00
--------- --------
Net investment loss (a) (0.05)(b) -
Net realized and unrealized gain
on investments (a) 1.71 -
--------- --------
Net increase in net asset value
resulting from investment operations (a) 1.66 -
--------- --------
NET ASSET VALUE, END OF PERIOD $ 11.66 $ 10.00
--------- --------
--------- --------
TOTAL RETURN (c) 16.60% 0.00%
--------- --------
RATIOS AND SUPPLEMENTAL DATA:
Average commission rate paid per share (d) $ 0.0498 $ 0.0326
--------- --------
--------- --------
Net assets, end of period (in 000's) $ 4,662 $ 4,000
--------- --------
--------- --------
Ratio of expenses to average net assets 2.10%(b)(e) 0.00%(f)
--------- --------
--------- --------
Ratio of net investment loss to average
net assets (0.86%)(b)(e) 0.00%(f)
--------- --------
--------- --------
Portfolio turnover 57.11%(g) 0.00%(f)
--------- --------
--------- --------
</TABLE>
- ----------------
(a) Calculated using the average share method.
(b) Includes reimbursement by the Fund's investment manager of certain ordinary
operating expenses equal to $0.06 per share (calculated using the average
share method). Without such reimbursement, the ratio of expenses to
average net assets would have been 3.32% and the ratio of net investment
loss to average net assets would have been (2.08%) (see Note 6).
(c) Total return measures the change in value of an investment in the Fund over
the period indicated.
(d) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for security
trades on which commissions are charged. This amount may vary from period
to period and fund to fund depending on the mix of trades executed in
various markets where trading practices and commission structures may
differ.
(e) Annualized.
(f) Not annualized. Fund was in operation for one day.
(g) Not annualized.
Page 9
<PAGE>
RCM GLOBAL HEALTH CARE FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
RCM Global Health Care Fund (the "Fund") is a non-diversified series of RCM
Equity Funds, Inc. (the "Company"). The Company is organized as a Maryland
corporation and is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company. The Fund commenced
operations on December 31, 1996.
The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements. The policies are in conformity with generally accepted
accounting principles which require management to make estimates and
assumptions that affect the reported amount of assets and liabilities.
Actual results may differ from these estimates.
A. SECURITIES VALUATIONS:
Investment securities are stated at fair market value. Equity securities
traded on stock exchanges are valued at the last sale price on the exchange
or in the principal over-the-counter market in which such securities are
traded as of the close of business on the day the securities are being
valued. If there has been no sale on such day, then the security will be
valued at the closing bid price on such day. If no bid price is quoted on
such day, then the security will be valued by such method as the Board of
Directors of the Company in good faith deems appropriate to reflect its
fair market value. Readily marketable securities traded only in the over-
the-counter market that are not listed on the National Association of
Securities Dealers, Inc. Automated Quotation System or similar foreign
reporting service will be valued at the mean bid price, or using such other
comparable sources as the Board of Directors of the Company deems
appropriate to reflect their fair market value. Other portfolio securities
held by the Fund will be valued at current market value, if current market
quotations are readily available for such securities. To the extent that
market quotations are not readily available, such securities will be valued
by whatever means the Board of Directors of the Company in good faith deems
appropriate to reflect their fair market value. Short-term investments
with a maturity of 60 days or less are valued at amortized cost, which
approximates market value.
B. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME:
Security transactions are recorded as of the date of purchase or sale.
Realized gains and losses on security transactions are determined on the
identified cost basis for both financial statement and federal income tax
purposes. Interest income, foreign taxes and expenses are accrued daily.
Dividends are recorded on the ex-dividend date.
C. FOREIGN CURRENCY TRANSACTIONS:
The records of the Fund are maintained in U.S. dollars. Foreign
currencies, investments, and other assets and liabilities are translated
into U.S. dollars at current exchange rates. Purchases and sales of
foreign securities and income and withholding taxes are translated on the
respective dates of such transactions. Net realized currency gains and
losses include foreign currency gains and losses between trade date and
settlement date and foreign currency transactions. The Fund does not
isolate that portion of foreign currency exchange fluctuation on
investments from unrealized appreciation and depreciation which arises from
changes in market prices. Such fluctuations are included with the net
unrealized appreciation or depreciation on investments.
Page 10
<PAGE>
RCM GLOBAL HEALTH CARE FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
D. FEDERAL INCOME TAXES:
It is the policy of the Fund to comply with the requirements for
qualification as a "regulated investment company" under the Internal
Revenue Code of 1986, as amended (the "Code"). It is also the intention of
the Fund to make distributions sufficient to avoid imposition of any excise
tax under Section 4982 of the Code. Therefore, no provision has been made
for Federal or excise taxes on income and capital gains.
E. DISTRIBUTIONS:
Distributions to shareholders are recorded by the Fund on the ex-dividend
date. Income and capital gain distributions are determined in accordance
with Federal income tax regulations, which may differ from generally
accepted accounting principles. These differences are primarily due to
differing treatments of income and gains on various investment securities
held by the Fund and timing differences.
2. INVESTMENT IN FOREIGN SECURITIES
Investing in foreign equity securities and currency transactions involves
significant risks, some of which are not typically associated with
investments of domestic origin. The Fund's investments in foreign markets
will subject the Fund to the risk of foreign currency exchange rate
fluctuations, perceived credit risk, and adverse economic and political
developments.
3. CAPITAL SHARES
At June 30, 1997, there were 1,000,000,000 shares of the Company's capital
stock authorized at $0.0001 par value. Of this amount, 50,000,000 were
classified as shares of the Fund; 50,000,000 were classified as shares of
RCM Global Technology Fund; 50,000,000 were classified as shares of RCM
Global Small Cap Fund; 50,000,000 were classified as shares of RCM Large
Cap Growth Fund; 50,000,000 were classified as shares of Dresdner RCM
Emerging Markets Fund; and 750,000,000 shares remain unclassified. There
were 400,000 shares sold for a total of $4,000,000 on December 31, 1996
(commencement of operations) and 10 shares sold for a total of $100 during
the six months ended June 30, 1997. At June 30, 1997, 400,000 shares of
the total 400,010 outstanding shares of the Fund were beneficially owned by
clients of Dresdner Bank AG/Investment Management/Institutional Asset
Management Division.
4. PURCHASES AND SALES OF SECURITIES
For the six months ended June 30, 1997, purchases and sales of investment
securities by the Fund, other than U.S. government obligations and short-
term securities, aggregated $4,984,104 and $2,249,065, respectively. During
the same period, short-term purchases and sales/maturities of U.S.
government obligations by the Fund aggregated $2,795,919 and $6,799,487.
At June 30, 1997, the aggregate cost of investments was the same for book
and federal income tax purposes.
Page 11
<PAGE>
RCM GLOBAL HEALTH CARE FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
5. DEFERRED ORGANIZATIONAL COSTS
Costs incurred by the Fund in connection with its organization aggregated
$10,000. These costs are being amortized on a straight-line basis over a
five-year period beginning at the commencement of the Fund's operations.
6. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
RCM Capital Management, L.L.C. ("RCM") manages the Fund's investments and
provides various administrative services, subject to the authority of the
Board of Directors. The Fund pays investment management fees monthly to
RCM at an annualized rate of 1.00% of the Fund's average daily net assets.
For the six months ended June 30, 1997, the Fund recorded investment
management fees of $21,023.
RCM has voluntarily agreed, until at least December 31, 1997, to pay the
Fund on a quarterly basis the amount, if any, by which the ordinary
operating expenses of the Company attributable to the Fund for the quarter
(except interest, taxes, and extraordinary expenses) exceed the annualized
rate of 2.10% of the value of the average daily net assets of the Fund. In
subsequent years, the Fund will reimburse RCM for any such payments to the
extent that the Fund's operating expenses are otherwise below this expense
cap. RCM recorded reimbursement of Fund operating expenses totaling
$25,578 for the six months ended June 30, 1997.
Funds Distributor, Inc. (the "Distributor") acts as distributor of shares
of the Fund. The Distributor retains a portion of any initial sales charge
upon the purchase of shares of the Fund. The Company has adopted a
distribution plan pursuant to Rule 12b-1 under the 1940 Act with respect to
the Fund. Under the distribution plan, which is a "reimbursement plan,"
the Fund pays the Distributor an annual fee of up to 0.30% of the Fund's
average daily net assets as reimbursement for certain expenses actually
incurred by the Distributor in connection with distribution of shares of
the Fund. For the six months ended June 30, 1997, the Fund did not record
any 12b-1 fees.
7. DIRECTORS' FEES
Each Director who is not an interested person of the Company receives from
the Company an annual retainer of $1,000 (the retainer is evenly prorated
among each series of the Company), plus $500 for each meeting of the Board
attended and $250 for each committee meeting attended.
Page 12
<PAGE>
INVESTMENT MANAGER
RCM Capital Management, L.L.C.
Four Embarcadero Center
San Francisco, California 94111
TRANSFER AND REDEMPTION AGENT
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
DISTRIBUTOR
Funds Distributor, Inc.
60 State Street, Suite 1300
Boston, Massachusetts 02109
CUSTODIAN
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
LEGAL COUNSEL
Paul, Hastings, Janofsky & Walker LLP
555 South Flower Street
Los Angeles, California 90071
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
