<PAGE>
RCM GLOBAL TECHNOLOGY FUND
ANNUAL REPORT
DECEMBER 31, 1996
<PAGE>
RCM GLOBAL TECHNOLOGY FUND
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
The Fund had a good 1996. The Fund returned 26.41%, compared to 22.96% for
the S&P 500 Stock Index and 16.82% for the Lipper Science & Technology Fund
Index. In what was a very volatile year, RCM Capital Management, L.L.C.
("RCM"), the Fund's investment manager, generally performed well during both
the precarious market of the first half of the year and the favorable market
of the second half of the year.
However, since 1997 promises to be every bit as challenging as 1996, RCM
will not dwell on the past. RCM is still enthusiastic about the Fund's
industries, for it thinks they represent most of the growth sectors for the
world economy for the next several years. In general, the universe RCM
follows for the Fund is reasonably valued, so stocks offer good appreciation
potential. But if you detect a bit of caution, it is because the Fund has
appreciated about 30% from its low in July, and a surge of this magnitude,
without a meaningful correction, is large by historical standards. RCM has
seen increasing volatility in the technology sector, possibly foreshadowing
greater risk in the coming months.
In this environment, RCM's philosophy of industry and geographic
diversification has served the Fund well. The three Nordic data services
companies in which the Fund invested have done extremely well, and the Fund's
cellular equipment holdings have paid-off with excellent recent performance.
The wireless industry benefited from the new generation of services and
phones, which attracted many customers. RCM continues to believe in
communications infrastructure companies, and also believes in the
inevitability of the Internet. The semiconductor industry rebounded sharply
in the second half, with Intel triggering the rebound with steady, positive
announcements throughout the fall. The end of the inventory correction and
the resumption of order growth also helped investors forget the unfavorable
performance of 1996.
In the hardware industry, RCM focused on the storage and storage management
sector, where valuations were low and the industry emerged from a long
consolidation period. The Fund's investments benefited from the high end of
the market, which was less exposed to the PC industry and more of a
beneficiary of the networking of storage solutions.
RCM broadened the Fund's holdings in the health care area, since many fine
companies saw their stocks come under pressure in the latter part of 1996.
RCM believes these companies will see accelerating growth now that the
medical industry has begun to see some success with cost reduction
<PAGE>
efficiency efforts. The Fund now owns a mixture of medical device,
biotechnology, and pharmaceutical companies. This sector provides balance to
the computer technology area.
The Fund continues to have significant investments in the business and
technical software sectors. These areas continue to rank at the top of
priority lists of corporate spending, and the barriers to entry are
formidable. These companies supply the databases, the operating systems, the
training systems and the utilities to run these environments. RCM believes
these companies will prosper in most environments and will appreciate in
value. The Fund's holdings in the aerospace sectors also have performed
well. This sector is in the middle of a long upcycle, and RCM is optimistic
about the Fund's exposure in this area.
In summary, as we reflect on our first year as a public fund, we are
grateful for your confidence in the Fund. RCM believes that the outlook for
the Fund's universe is exciting and potentially rewarding.
Page 2
<PAGE>
RCM GLOBAL TECHNOLOGY FUND
PERFORMANCE SUMMARY
- ------------------------------------------------------------------------------
[CHART]
LIPPER SCIENCE &
TECHNOLOGY FUND S & P 500
FUND INDEX STOCK INDEX
-----------------------------------------------------------
12/27/95 25,000 25,000 25,000
1/31/96 25,925 24,741 25,910
2/29/96 26,650 25,784 26,151
3/31/96 26,550 24,643 26,402
4/30/96 28,950 27,099 26,792
5/31/96 29,825 27,745 27,483
6/30/96 28,450 25,830 27,587
7/31/96 25,675 23,913 26,369
8/31/96 26,925 25,138 26,925
9/30/96 29,675 27,467 28,440
10/31/96 29,250 27,056 29,224
11/30/96 31,925 29,592 31,433
12/31/96 31,730 29,066 30,811
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
The chart above shows the performance of the RCM Global Technology Fund since
the Fund's inception versus the Standard & Poor's 500 Stock Index+ and the
Lipper Science & Technology Fund Index++. The chart represents a cumulative
return+* of 26.92% for the Fund. The chart assumes a hypothetical $25,000
initial investment in the Fund and reflects all Fund expenses.
TOTAL RETURN+
DECEMBER 31, 1996
- ----------------------
1 YEAR LIFE OF
FUND*
- ----------------------
26.41% 26.92%
- ----------------------
The data above represents past performance of the Fund, and may not be
indicative of future results. 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.
- --------------
+ The Standard & Poor's 500 Index is a 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.
++ The Lipper Science & Technology Fund Index is an equally weighted index of
the 10 largest science and technology mutual funds.
+ Returns assume reinvestment of all dividends and capital gains
distributions at net asset value.
* The Fund commenced operations on December 27, 1995.
Page 3
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of RCM Global Technology Fund and
Board of Directors of RCM Equity Funds, Inc.:
We have audited the accompanying statement of assets and liabilities of RCM
Global Technology Fund (the "Fund"), including the statement of investments
in securities and net assets, as of December 31, 1996, and the related
statement of operations, the statement of changes in net assets, and the
financial highlights for the periods indicated therein. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 1996, by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of RCM
Global Technology Fund as of December 31, 1996, the results of its operations
for the year then ended, the changes in its net assets, and the financial
highlights for the periods indicated therein, in conformity with generally
accepted accounting principles.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
February 20, 1997
Page 4
<PAGE>
RCM GLOBAL TECHNOLOGY FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
DECEMBER 31, 1996
% OF
SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- ------- --------- -------------------- ------------ --------------
BIOTECH AND BIOPHARMACEUTICAL 1.8%
2,600 US Centocor Inc. * $ 92,950
BUSINESS EQUIPMENT 0.8%
3,000 FR Business Objects S A (Sponsored ADR) * 40,500
BUSINESS SERVICES 1.0%
2,000 US TeleTech Holdings Inc. * 52,000
BUSINESS SOFTWARE 15.9%
1,255 IRE CBT Group PLC (Sponsored ADR) * 68,084
1,670 US Computer Associates International Inc. 83,082
420 US Documentum Inc. * 14,175
2,750 US FileNet Corp. * 88,000
2,510 US Informix Corp. * 51,141
1,040 US Microsoft Corp. * 85,930
2,300 US Pure Atria Corp. * 56,925
3,000 US Raptor Systems Inc. * 60,375
5,250 US Transaction Network Services Inc. * 60,375
2,500 US Unison Software Inc. * 66,875
2,557 US Veritas Software Co. * 127,211
1,100 US Wind River Systems Inc. * 52,112
-------------
814,285
-------------
COMMERCIAL/SPECIALTY 3.0%
3,850 US Rohr Industries Inc. * 87,106
1,510 US Sundstrand Corp. 64,175
-------------
151,281
-------------
COMPONENTS 10.7%
4,100 US Analog Devices Inc. * 138,887
1,245 US Intel Corp. 163,017
2,280 US Microchip Technology Inc. * 115,995
1,150 FR SGS Thomson Microelectronics N.V. * 80,500
1,360 US Xilink Inc. * 50,065
-------------
548,464
-------------
The accompanying notes are an integral part of the financial statements.
Page 5
<PAGE>
RCM GLOBAL TECHNOLOGY FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
DECEMBER 31, 1996
% OF
SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- ------- --------- -------------------- ------------ --------------
COMPUTERS 3.8%
1,210 US Compaq Computer Corp. * $ 89,842
700 US International Business Machines Corp. 105,700
-------------
195,542
-------------
CONGLOMERATES 1.0%
760 US United Technologies Corp. 50,160
CONSUMER SOFTWARE 4.0%
2,210 US Electronics Arts Inc. * 66,162
2,500 US Intuit Inc. * 78,750
2,000 JPN NAMCO 61,307
-------------
206,219
-------------
DATA PROCESSING AND SERVICES 9.8%
3,000 SWDN Enator AB * 76,761
4,000 NOR Merkantildata ASA * 72,636
1,100 FIN TT Tieto OY * 92,998
1,440 US Ceridian Corp. * 58,320
910 US Computer Sciences Corp. * 74,734
1,600 US First Data Corp. 58,400
1,590 US Gemstar International Group Ltd. * 27,825
2,220 US PMT Services Inc. * 38,850
-------------
500,524
-------------
DEFENSE-RELATED ELECTRONICS 2.4%
925 US General Motors Corp. 52,031
3,900 US Loral Space & Communications Ltd. * 71,662
-------------
123,693
-------------
ETHICAL PHARMACEUTICALS 1.5%
3,000 US SangStat Medical Corp. * 79,500
HEALTH CARE SERVICES 1.3%
2,390 US Curative Technologies Inc. * 66,173
The accompanying notes are an integral part of the financial statements.
Page 6
<PAGE>
RCM GLOBAL TECHNOLOGY FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
DECEMBER 31, 1996
% OF
SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- ------- --------- -------------------- ------------ --------------
INFORMATION SERVICES 2.0%
2,910 US Sterling Commerce Inc. * $ 102,577
LOCAL AREA COMMUNICATIONS 6.6%
1,200 US 3Com Corp. * 88,050
2,380 US Cabletron Systems Inc. * 79,135
1,670 US Cisco Systems Inc. * 106,254
2,700 US Proxim Inc. * 62,100
-------------
335,539
-------------
LONG DISTANCE TELEPHONE 1.2%
2,350 US WorldCom Inc. * 61,247
MEDICAL PRODUCTS AND TECHNOLOGY 2.6%
1,000 US Guidant Corp. 57,000
2,550 US Sofamor/Danek Group Inc. * 77,775
-------------
134,775
-------------
PERIPHERAL EQUIPMENT 6.5%
2,885 US EMC Corp. * 95,566
3,110 US Quantum Corp. * 89,024
3,740 US Seagate Technology Inc. * 147,730
-------------
332,320
-------------
SPECIALTY COST CONTAINMENT 3.6%
9,715 US Medaphis Corp. * 108,687
1,840 US Medic Computer Systems Inc. * 74,175
-------------
182,862
-------------
SPECIALTY DRUGS 1.2%
9,700 US CIMA Labs Inc. * 59,413
The accompanying notes are an integral part of the financial statements.
Page 7
<PAGE>
RCM GLOBAL TECHNOLOGY FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
DECEMBER 31, 1996
% OF
SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- ------- --------- -------------------- ------------ --------------
TECHNICAL SOFTWARE 3.6%
2,200 US Macromedia Inc. * $ 39,600
8,500 US Peerless Systems Corp. * 144,500
-------------
184,100
-------------
WIDE AREA COMMUNICATIONS 12.9%
1,305 US Ascend Communications Inc. * 81,073
3,730 SWDN Ericsson LM Telephone Co. (Sponsored ADR) 112,599
3,700 CAN Newbridge Networks Corp. * 104,525
2,915 FIN Nokia Corp. (Sponsored ADR A) 167,977
1,325 US Tencor Instruments * 34,947
680 US U.S. Robotics Corp. 48,960
2,100 US Uniphase Corp. * 110,250
-------------
660,331
-------------
TOTAL EQUITY INVESTMENTS (COST $4,215,473) 97.2% 4,974,455
-------------
OPTIONS
4,500 US Qualcom Inc. Call Option, strike price 40,
expire 1/17/98 * 44,438
-------------
TOTAL OPTIONS INVESTMENTS (COST $68,198) 0.9% 44,438
-------------
SHORT-TERM INVESTMENTS
44,991 US SSgA Money Market Fund 44,991
44,991 US SSgA U.S. Government Money Market Fund 44,991
-------------
TOTAL SHORT-TERM INVESTMENTS (COST $89,982) 1.7% 89,982
-------------
TOTAL INVESTMENTS (COST $4,373,653) ** 5,108,875
OTHER ASSETS LESS LIABILITIES 0.2% 7,964
-------------
NET ASSETS 100.0% $ 5,116,839
-------------
-------------
* Non-income producing security.
The accompanying notes are an integral part of the financial statements.
Page 8
<PAGE>
RCM GLOBAL TECHNOLOGY FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
DECEMBER 31, 1996
TAX INFORMATION:
** For Federal income tax purposes, cost is $4,393,321 and unrealized
appreciation (depreciation) of equity securities is as follows:
Unrealized appreciation $ 923,016
Unrealized depreciation (207,462)
-----------
Net unrealized appreciation $ 715,554
-----------
-----------
===============================================================================
The Fund's investments in securities and net assets at December 31,1996
categorized by country:
% of
Country Net Assets
-------- ------------
Canada 2.0%
Finland 5.1%
France 2.4%
Ireland 1.3%
Japan 1.2%
Norway 1.4%
Sweden 3.7%
United States 82.9%
------
100.0%
------
------
The accompanying notes are an integral part of the financial statements.
Page 9
<PAGE>
RCM GLOBAL TECHNOLOGY FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
ASSETS:
Investments in securities, at value (cost $4,373,653) (Note 1) $ 5,108,875
Foreign Currency, at value (cost $574) 567
Deferred organizational costs (Note 6) 59,753
Receivable from investment manager (Note 7) 34,657
Prepaid assets 9,454
Dividends receivable 627
----------
Total Assets 5,213,933
----------
LIABILITIES:
Payable for investments purchased 2,337
Payable for legal fees 29,401
Payable for printing expenses 21,501
Payable for Directors' fees 18,000
Payable for audit fees 11,250
Payable for transfer agent fees 8,784
Payable for miscellaneous expenses 4,902
Payable for custodian fees 919
----------
Total Liabilities 97,094
----------
NET ASSETS $ 5,116,839
----------
----------
NET ASSETS CONSIST OF:
Paid in capital $ 4,255,045
Accumulated net realized gain on investments and foreign
currency transactions 126,579
Net unrealized appreciation on investments and translation of
other assets and liabilities on foreign currencies 735,215
----------
NET ASSETS $ 5,116,839
----------
----------
NET ASSET VALUE PER SHARE
($5,116,839 DIVIDED BY 406,240 shares outstanding) $ 12.60
----------
----------
The accompanying notes are an integral part of the financial statements.
Page 10
<PAGE>
RCM GLOBAL TECHNOLOGY FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
INVESTMENT INCOME:
Income:
Dividends (net of foreign withholding tax of $130) $ 12,116
Expenses:
Legal fees 44,104
Directors' fees 40,000
Registration and filing fees 35,965
Investment management fees (Note 7) 30,827
Printing expenses 21,972
Transfer agent fees 18,245
Audit fees 17,500
Amortization of organizational costs (Note 6) 15,205
Custodian fees 8,694
Miscellaneous expenses 5,000
Insurance expenses 1,374
---------
Total expenses before reimbursements 238,886
Expenses reimbursed by investment manager (Note 7) (185,551)
---------
Total net expenses 53,335
---------
Net investment loss (41,219)
---------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain from investments 203,648
Net realized gain from foreign currency transactions 294
---------
Net realized gain 203,942
---------
Net change in unrealized appreciation on investments 731,362
---------
Net realized and unrealized gain during the year 935,304
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 894,085
---------
---------
The accompanying notes are an integral part of the financial statements.
Page 11
<PAGE>
RCM GLOBAL TECHNOLOGY FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
December 27, 1995
(commencement
Year Ended of operations) to
December 31, 1996 December 31, 1995
------------------- -------------------
<S> <C> <C>
OPERATIONS:
Net investment loss $ (41,219) $ (149)
Net realized gain on investments and foreign
currency transactions 203,942 -
Net change in unrealized appreciation on
investments and translation of other assets
and liabilities on foreign currencies 731,362 3,853
----------- ---------
Net increase in net assets resulting from
operations 894,085 3,704
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investments (Note 2) (36,142) -
NET INCREASE FROM CAPITAL SHARES TRANSACTIONS
(NOTE 4) 3,305,192 850,000
----------- ---------
TOTAL INCREASE IN NET ASSETS 4,163,135 853,704
NET ASSETS:
Beginning of year 953,704 100,000
----------- ---------
End of year * $ 5,116,839 $ 953,704
----------- ---------
----------- ---------
______________________
* Includes accumulated net investment loss of $ - $ (149)
----------- ---------
----------- ---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 12
<PAGE>
RCM GLOBAL TECHNOLOGY FUND
FINANCIAL HIGHLIGHTS
Selected data for each share of capital stock outstanding are as follows:
<TABLE>
<CAPTION>
December 27, 1995
(commencement
Year Ended of operations) to
December 31, 1996 + December 31, 1995
------------------ -----------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.04 $ 10.00
------------------ -----------------
Net investment loss* (0.15) ++ -
Net realized and unrealized gain
on investments* 2.80 0.04
------------------ -----------------
Net increase in net asset value
resulting from investment operations* 2.65 0.04
------------------ -----------------
Distributions from net realized gains on
investments (0.09) -
------------------ -----------------
NET ASSET VALUE, END OF PERIOD $ 12.60 $ 10.04
------------------ -----------------
------------------ -----------------
TOTAL RETURN ** 26.41% 0.40%
------------------ -----------------
------------------ -----------------
RATIOS AND SUPPLEMENTAL DATA:
Average commission rate paid per share + $ 0.0599 $ -
------------------ -----------------
------------------ -----------------
Net assets, end of period (in 000's) $ 5,117 $ 954
------------------ -----------------
------------------ -----------------
Ratio of expenses to average net assets 1.73% ++ 0.00% ++
------------------ -----------------
------------------ -----------------
Ratio of net investment loss to average
net assets (1.34%) ++ (0.02%) ++
------------------ -----------------
------------------ -----------------
Portfolio turnover 155.58% 0.00% ++
------------------ -----------------
------------------ -----------------
</TABLE>
- ----------------------------
+ On June 14, 1996, RCM Capital Management, L.L.C. became the investment
manager (see Note 7).
++ Includes reimbursement by the Fund's investment manager of certain ordinary
operating expenses equal to $0.70* per share. Without such reimbursement,
the ratio of expenses to average net assets would have been 7.75% and the
ratio of net investment loss to average net assets would have been (7.36%)
(see Note 7).
* Calculated using the average share method.
** Total return measures the change in value of an investment over the period
indicated.
+ 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.
++ Not annualized. Fund was in operations for five days, ratios are not
meaningful.
Page 13
<PAGE>
RCM GLOBAL TECHNOLOGY FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. SIGNIFICANT ACCOUNTING POLICIES
RCM Global Technology 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 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 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 14
<PAGE>
RCM GLOBAL TECHNOLOGY FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
d. PURCHASED OPTION ACCOUNTING PRINCIPLES:
The premium paid by the Fund for the purchase of a call or put option is
included in the Fund's "Statement of Assets and Liabilities" as an
investment and subsequently "marked-to-market" to reflect the current market
value of the options. If an option which the Fund has purchased expires on
the stipulated expiration date, the Fund realizes a loss in the amount of
the cost of the option. If the Fund enters into a closing sale transaction,
the Fund realizes a gain or loss, depending on whether proceeds from the
closing sale transaction are greater or less than the cost of the option.
If the Fund exercises a call option, the cost of the securities acquired by
exercising the call is increased by the premium paid to buy the call.
If the Fund exercises a put option, it realizes a gain or loss from the
sale of the underlying security, and the proceeds from such sale are
decreased by the premium originally paid.
e. 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.
f. 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 for foreign currency transactions and losses due to
wash sales.
2. DISTRIBUTIONS
On December 17, 1996, a distribution of $0.09 per share, aggregating
$36,142, was paid from investment operations. This per share amount
consisted of $0.09 short-term capital gains. The dividend was recorded
on December 17, 1996 to shareholders of record on the same date.
3. 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.
Page 15
<PAGE>
RCM GLOBAL TECHNOLOGY FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
4. CAPITAL SHARES
At December 31, 1996, 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 Health Care 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; and 800,000,000 shares remain unclassified. There were 84,980
shares sold for a total of $850,000 from December 27, 1995 (commencement of
operations) to December 31, 1995 and transactions in capital shares for the
year ended December 31, 1996 were as follows:
CAPITAL SHARE TRANSACTIONS
Year ended December 31, 1996
----------------------------
Shares Amount
---------- ------------
Shares sold 314,233 $ 3,338,002
Shares issued in connection with
reinvestment of distributions 2,926 36,110
Shares repurchased (5,899) (68,920)
---------- ------------
Net decrease 311,260 $ 3,305,192
---------- ------------
---------- ------------
At December 31, 1996, two affiliated shareholders held more than 5% of the
outstanding shares of the Fund individually and 67% in aggregate.
5. PURCHASES AND SALES OF SECURITIES
For the year ended December 31, 1996, purchases and sales proceeds of
investment securities by the Fund, other than U.S. government obligations
and short-term securities, aggregated $7,835,767 and $4,473,403,
respectively. There were no purchases or sales of U.S. government
obligations by the Fund during the year.
6. DEFERRED ORGANIZATIONAL COSTS
Costs incurred by the Fund in connection with its organization aggregated
$75,000. These costs are being amortized on a straight-line basis over a
five-year period beginning at the commencement of the Fund's operations.
In the event that any of the initial shares of the Fund are redeemed during
the amortization period, the redemption proceeds will be reduced by any
unamortized organizational expense allocable to the shares redeemed.
7. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
On June 14, 1996, all of the outstanding general and limited partnership
interests in the Fund's investment manager, RCM Capital Management, a
California Limited Partnership ("Old RCM"), were acquired by RCM Capital
Management, L.L.C. ("RCM"), a wholly owned subsidiary of Dresdner Bank AG,
an international banking organization headquartered in Frankfurt, Germany.
Because the transaction may have constituted an "assignment" of the Fund's
management agreement with
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RCM GLOBAL TECHNOLOGY FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
7. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (CONTINUED)
Old RCM under the Investment Company Act of 1940, and thus a termination of
such management agreement, the Fund sought and obtained prior approval of a
new management agreement from the Company's Board of Directors and from the
Fund's stockholders at a special meeting of stockholders of the Company
held on May 28, 1996. The terms of the new management agreement are
substantially the same as those of the previous management agreement.
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 year ended December 31, 1996,
the Fund recorded investment management fees of $30,827.
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 1.75% 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 reimbursed Fund operating expenses totaling $185,551 for
the year ended December 31, 1996.
The RCM Capital Management Profit Sharing Plan, participation in which is
limited to employees of RCM, owned 186,072 shares of the Fund on
December 31, 1996.
The Company pays each of its Directors who is not an interested person of
the Fund $6,000 annually plus $1,000 for each meeting of the board or any
committee thereof attended by the Director.
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RCM EQUITY FUNDS, INC.
STOCKHOLDER MEETING RESULTS
(UNAUDITED)
A Special Meeting of Stockholders of the RCM Equity Funds, Inc. (the
"Company") was held on Tuesday, May 28, 1996. The number of shares
issued, outstanding and eligible to vote as of April 18, 1996 (the
"Record Date") was 239,094. Present were 157,436 shares in person or
represented by proxy or 65.85% of the shares outstanding on the Record
Date. The matters voted upon by stockholders and the resulting votes for
each matter are presented below:
1. The new Investment Management Agreement between the Company, on behalf
of the Fund, and RCM Capital Management, L.L.C. was approved:
For: 157,436, Against: 0, Abstain: 0.
2. Each person nominated as a director was elected as set forth below:
For Withhold
-------- --------
DeWitt F. Bowman 157,402 34
Frank P. Greene 157,402 34
Pamela A. Farr 157,402 34
Thomas S. Foley 136,361 21,075
George G.C. Parker 157,402 34
3. The selection by the Board of Directors of Coopers & Lybrand L.L.P. as
independent public accountants for the fiscal year ending December 31,
1996 was approved: For: 157,436, Against: 0, Abstain: 0.
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INVESTMENT MANAGER
RCM Capital Management, L.L.C.
Four Embarcadero Center, Suite 3000
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
555 South Flower Street
Los Angeles, California 90071
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
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