<PAGE>
RCM LARGE CAP GROWTH FUND
SEMI-ANNUAL REPORT
JUNE 30, 1997
<PAGE>
RCM LARGE CAP GROWTH FUND
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
The value of an investment in the RCM Large Cap Growth Fund (the "Fund")
appreciated by 18.80% over the six months ended June 30, 1997. The Fund finished
the period 81 basis points behind its primary benchmark, the S&P 500, which
registered a total return of 20.61% for the first half of the year.
After posting outstanding returns in 1996, U.S. stocks and bonds finished the
first half of 1997 in a similar fashion. The six-month period was extremely
volatile, however, and both the stock and bond markets reacted violently to
shifting economic currents in both directions. After a very strong start of the
year, due to positive flows into equity mutual funds combined with benign
inflation data, the S&P 500 declined 9.6% from its February high to its
mid-April low. This decline was due to stronger-than-expected GDP growth in the
first quarter which weakened the U.S. bond market, and wage cost pressures which
caused the Federal Reserve to hike interest rates in the last week of March.
During this market decline, small and mid cap stocks suffered disproportionately
compared with large capitalization issues as the 12-month relative
underperformance by the Russell 2000 of the S&P 500 reached the widest negative
gap (-25%) in the former's 18-year history.
The stock market bottomed in mid-April when several economic indicators showed
inflation slowing and cost pressures stabilizing. The Federal Reserve surprised
the equity markets by not hiking rates any further and the S&P 500 responded
with the largest quarterly gain in over 10 years: +17.5%. Small and mid cap
stocks rose as well during the period, but the best performers continued to be
the largest capitalization issues. For instance, the 20 largest stocks in the
S&P 500 gained 21.9% in the second quarter, whereas the remaining 480 rose just
15.7%. For the six months ended June 30,1997, the largest 20 were up 28.1%
versus 17.8% for the remaining 480, and for the 12 months ended June 30, 1997,
the top 20 were up 48.6%, compared to 29.6% for the rest of the S&P 500. Only
179 stocks in the S&P 500 gained more than the Index in the six months ended
June 30, 1997, meaning that 321 stocks underperformed. The Fund outperformed the
S&P 500 during the second quarter, returning 19.76% compared to a S&P 500 return
of 17.46%, and is several hundred basis points ahead of the Index as of
mid-July.
The Fund's performance so far this year has been helped substantially by its
significant overweighting in large cap pharmaceuticals. This overweighting has
helped by approximately 184 basis points as this group has outperformed the
S&P 500. The Fund has approximately 20% of its assets in these stocks versus
only a 10% weighting in the S&P 500. The Fund's largest positions in
pharmaceuticals include Warner Lambert, Pfizer, Eli Lilly and SmithKline Beecham
PLC ADR representing 4.7%, 3.5%, 4.8% and 4.4% of net assets, respectively. All
four have positive relative outperformance to the S&P 500 through the six
<PAGE>
months ended June 30, 1997. An area of weakness so far for the Fund has been
its holdings in electronics and technology services, which together cost the
Fund approximately 240 basis points versus the S&P 500. The Fund was
overweighted in these two areas versus the S&P 500, but stock selection hurt our
performance as companies such as Intel and Ascend underperformed the Index. RCM
Capital Management, L.L.C. ("RCM"), the Fund's investment manager, has
maintained the Fund's large overweight in these categories as RCM expects a
recovery in the second half of the year in demand for semiconductors due to PC
price cutting and accelerated buying for networking equipment by the
telecommunications industry. Another factor that hurt the Fund's performance
during the first half of 1997 was RCM's premature conclusion that the largest
stocks were relatively overvalued compared with the small and mid cap sectors.
As a result, RCM overweighted these two sectors relative to the S&P 500, which
is a major part of why the Fund underperformed the S&P 500. RCM continues to
believe, however, that the combination of lower rates and lack of inflation will
cause the market's advance to broaden into the small and mid cap sectors. This
is beginning to happen as the S&P 500 is up 3.4% with the S&P 400 Midcap up 5.9%
(as of July 18, 1997) since June 30, 1997.
Overall, RCM's market outlook is positive. RCM believes that the best of all
possible worlds exists for the U.S. -- moderate growth, good profitability,
virtually full employment, and yet declining inflation. Most classes of
investors continue to pour money into equities as the investment of choice. RCM
believes that this influx into equities will continue, pushing valuations to
even higher levels, until some "event" occurs to stop it. RCM cannot forecast
what that event might be, but history assures us that eventually something will
happen. RCM's concerns include an upturn in inflation, a downturn in profits, a
period of real deflation, a loss of confidence in the White House, or a
significant negative occurrence overseas. RCM's philosophy of owning
high-quality growth companies which, in periods of overvaluation, can grow their
earnings to a level at which they are no longer overvalued, is currently serving
the Fund well. Further, most stocks in the Fund's portfolio do not appear
overvalued given their prospects for earnings growth combined with the economic
conditions we are currently experiencing. We look forward to a better remainder
of 1997.
Page 2
<PAGE>
RCM LARGE CAP GROWTH FUND
PERFORMANCE SUMMARY
RCM LARGE CAP GROWTH S&P 500
-------------------- -------
DEC-96 10,000 10,000
JAN-97 10,640 10,625
FEB-97 10,570 10,708
MAR-97 9,920 10,268
APR-97 10,490 10,881
MAY-97 11,300 11,544
JUN-97 11,880 12,061
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
The chart above shows the performance of the RCM Large Cap Growth Fund since the
Fund's inception versus the Standard & Poor's 500 Stock Index.(a) The chart
represents a cumulative return(b)(c) of 18.80% for the Fund. The chart assumes a
hypothetical $10,000 initial investment in the Fund and reflects all Fund
expenses.
TOTAL RETURNS(b)
JUNE 30, 1997
- ---------------------
LIFE OF
YTD FUND(c)
- ---------------------
18.80% 18.80%
- ---------------------
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) Returns assume reinvestment of all dividends and capital gains
distributions at net asset value.
(c) The Fund commenced operations on December 31, 1996.
Page 3
<PAGE>
RCM LARGE CAP GROWTH FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
% OF
SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- ------ ------- -------------------------- ---------- -------------
<S> <C> <C> <C> <C>
CONSUMER NON-DURABLES SECTOR 19.7%
BEVERAGE AND TOBACCO 3.7%
1,100 US Coca-Cola Co. $ 74,250
800 PA Pan American Beverages Inc. Class A 26,300
1,700 US Philip Morris Co. Inc. 75,437
--------------
175,987
--------------
FOOD AND FOOD PROCESSING 0.5%
300 US Pioneer Hi Bred International Inc. 24,000
GENERAL RETAIL 2.9%
800 US Bed Bath & Beyond Inc. * 24,300
500 US CVS Corp. 25,625
750 US Consolidated Stores Corp. * 26,063
1,300 US Liz Claiborne Inc. 60,613
--------------
136,601
--------------
HOUSEHOLD/RELATED NON-DURABLES 8.1%
2,300 US Colgate-Palmolive Co. 150,075
900 US Gillette Co. 85,275
1,000 US Kimberly-Clark Corp. 49,750
500 US Procter & Gamble Co. 70,625
600 US Revlon Inc. Class A * 31,087
--------------
386,812
--------------
LEISURE TIME PRODUCTS/SERVICES 4.5%
1,200 US Doubletree Corp. * 49,350
800 US Hasbro Inc. 22,700
8,000 US Host Marriott Corp. * 142,500
--------------
214,550
--------------
CYCLICAL/CAPITAL GOODS SECTOR 8.7%
AEROSPACE AND DEFENSE 2.7%
400 US Boeing Co. 21,225
1,900 US Sundstrand Corp. 106,044
--------------
127,269
--------------
ELECTRICAL EQUIPMENT 4.4%
1,800 US General Electric Co. 117,675
1,200 US Honeywell Inc. 91,050
--------------
208,725
--------------
INDUSTRIAL EQUIPMENT 1.6%
1,100 US Tyco International Ltd. 76,519
</TABLE>
The accompanying notes are an integral part of the fianancial statements.
Page 4
<PAGE>
RCM LARGE CAP GROWTH FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
% OF
SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- ------ ------- -------------------------- ---------- -------------
<S> <C> <C> <C> <C>
ENERGY SECTOR 4.1%
ENERGY 4.1%
1,100 US Baker Hughes Inc. $ 42,556
600 GB British Petroleum Co. PLC (ADR) 44,925
600 US Camco International Inc. 32,850
300 US Chevron Corp. 22,181
400 NL Schlumberger Ltd. 50,000
--------------
192,512
--------------
HEALTH CARE SECTOR 29.8%
DRUGS & HOSPITAL SERVICES 27.4%
1,600 US Amgen Inc. 93,000
2,200 US Centocor Inc. * 68,338
1,600 US Guidant Corp. 136,000
2,100 US Eli Lilly & Co. 229,556
1,200 US Medtronic Inc. 97,200
500 US Merck & Co. Inc. 51,750
1,400 US Pfizer Inc. 167,300
1,000 US SangStat Medical Corp. * 23,125
2,300 GB Smithkline Beecham PLC (ADR) 210,737
1,800 US Warner-Lambert Co. 223,650
--------------
1,300,656
--------------
HEALTH CARE SERVICES 2.4%
600 US Cardinal Health Inc. 34,350
600 US HBO & Co. 41,325
1,100 US PhyCor Inc. * 37,881
--------------
113,556
--------------
INTEREST-SENSITIVE SECTOR 9.5%
BANKING 2.5%
1,000 US Citicorp 120,562
GENERAL FINANCE 4.5%
2,400 US AMRESCO Inc. * 51,600
1,500 US Federal National Mortgage Association 65,438
2,200 US Glendale Federal Bank FSB
(California)* 57,475
350 US Household Int'l Inc. 41,103
--------------
215,616
--------------
INSURANCE 2.5%
800 US American International Group Inc. 119,500
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 5
<PAGE>
RCM LARGE CAP GROWTH FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
% OF
SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- ------ ------- -------------------------- ---------- ---------------
<S> <C> <C> <C> <C>
TECHNOLOGY SECTOR 20.5%
COMPUTERS AND OFFICE EQUIPMENT 3.4%
1,100 US E M C Corp. * $ 42,900
800 US International Business Machines Corp. 72,150
600 US Sun Microsystems Inc. * 22,331
300 US Xerox Corp. 23,663
---------------
161,044
---------------
ELECTRONICS AND NEW TECHNOLOGY 6.6%
700 US Cisco Systems Inc. * 46,987
1,200 SE Ericsson LM Telephone Co.
(Sponsored ADR) 47,250
300 US Intel Corp. 42,544
1,300 CA Newbridge Networks Corp. * 56,550
1,300 FI Nokia Corp. (Sponsored ADR A) 95,875
600 US 3Com Corp. * 27,000
---------------
316,206
---------------
TECHNOLOGY SERVICES 10.5%
700 US America Online Inc. * 38,937
1,000 US CUC International Inc. * 25,812
650 US Computer Sciences Corp. * 46,881
1,200 US Electronics Arts Inc. * 40,350
600 US First Data Corp. 26,363
350 US McAfee Associates Inc. * 22,094
1,500 US Microsoft Corp. * 189,563
700 US Oracle Systems Corp. * 35,263
500 US PeopleSoft Inc. * 26,375
1,400 US Sterling Commerce Inc. * 46,025
---------------
497,663
---------------
TELEMEDIA/SERVICES SECTOR 6.1%
BUSINESS SERVICES 1.2%
1,400 GB Danka Business Systems PLC
(Sponsored ADR) 57,225
COMMUNICATION SERVICES 4.9%
2,200 US Nextel Communications Inc. * 41,663
1,100 US Qwest Communications International
Inc. * 29,975
5,000 US WorldCom Inc. * 160,000
---------------
231,638
---------------
TOTAL EQUITY INVESTMENTS
(COST $3,980,215) 98.4% 4,676,641
---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 6
<PAGE>
RCM LARGE CAP GROWTH FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
% OF
SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- ------ ------- -------------------------- ---------- ---------------
<S> <C> <C> <C> <C>
SHORT-TERM INVESTMENTS
MONEY MARKET FUNDS 1.3%
62,988 US SSgA U.S. Government Money
Market Fund $ 62,988
---------------
TOTAL SHORT-TERM INVESTMENTS 1.3%
(COST $62,988) 62,988
---------------
TOTAL INVESTMENTS (COST $4,043,203) 99.7% 4,739,629
OTHER ASSETS LESS LIABILITIES 0.3% 12,107
---------------
NET ASSETS 100.0% $ 4,751,736
---------------
---------------
* Non-income producing security.
- ------------------------------------------------------------------------------------
</TABLE>
The Fund's investments in securities at June 30, 1997, categorized by country:
<TABLE>
<CAPTION>
% of Net Assets
--------------------------------------
Country Short-Term
Country Code Equities and Other Total
------- --------------- -------- ------------ -------------
<S> <C> <C> <C> <C>
Canada CA 1.2% 1.2%
Finland FI 2.0% 2.0%
Netherlands NL 1.0% 1.0%
Panama PA 0.6% 0.6%
Sweden SE 1.0% 1.0%
United Kingdom GB 6.6% 6.6%
United States US 86.0% 1.6% 87.6%
-------- ------------ -------------
Total 98.4% 1.6% 100.0%
-------- ------------ -------------
-------- ------------ -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 7
<PAGE>
RCM LARGE CAP GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997
(UNAUDITED)
ASSETS:
Investments in securities, at value (cost $4,043,203) (Note 1) $ 4,739,629
Receivable for investments sold 51,012
Deferred organizational costs (Note 5) 9,000
Dividends receivable 3,402
Receivable from investment manager (Note 6) 1,148
------------
Total Assets 4,804,191
------------
LIABILITIES:
Payable for investments purchased 15,452
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 miscellaneous expenses 3,554
------------
Total Liabilities 52,455
------------
NET ASSETS $ 4,751,736
------------
------------
NET ASSETS CONSIST OF:
Paid-in capital $ 4,000,100
Net investment loss (11,939)
Accumulated net realized gain on investments and foreign
currency transactions 67,149
Net unrealized appreciation on investments and translation of
other assets and liabilities in foreign currencies 696,426
------------
NET ASSETS $ 4,751,736
------------
------------
NET ASSET VALUE PER SHARE
($4,751,736 DIVIDED BY 400,009 shares outstanding) $ 11.88
-------------
-------------
The accompanying notes are an integral part of the financial statements.
Page 8
<PAGE>
RCM LARGE CAP GROWTH FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Dividends (net of foreign withholding tax of $511) $ 27,276
Expenses:
Investment management fees (Note 6) 15,898
Directors' fees (Note 7) 12,439
Transfer agent fees 10,233
Legal fees 7,439
Audit fees 7,439
Registration and filing fees 4,186
Custodian fees 4,131
Amortization of organizational costs (Note 5) 1,000
Miscellaneous expenses 3,907
-----------
Total expenses before reimbursements 66,672
Expenses reimbursed by investment manager (Note 6) (27,457)
-----------
Total net expenses 39,215
-----------
Net investment loss (11,939)
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain from investments 68,856
Net realized loss from foreign currency transactions (1,707)
-----------
Net realized gain 67,149
-----------
Net change in unrealized appreciation on investments and
translation of other assets and liabilities on foreign currencies 696,426
-----------
Net realized and unrealized gain during the period 763,575
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 751,636
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 9
<PAGE>
RCM LARGE CAP GROWTH 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 $ (11,939) $ -
Net realized gain on investments and foreign
currency transactions 67,149 -
Net change in unrealized appreciation on
investments and translation of other assets
and liabilities on foreign currencies 696,426 -
-------------- -------------
Net increase in net assets resulting from
operations 751,636 -
NET INCREASE FROM CAPITAL SHARES TRANSACTIONS
(Note 3) 100 4,000,000
-------------- --------------
TOTAL INCREASE IN NET ASSETS 751,736 4,000,000
NET ASSETS:
Beginning of period 4,000,000 -
-------------- --------------
End of period * $ 4,751,736 $ 4,000,000
-------------- --------------
-------------- --------------
- --------------------
* Includes accumulated net investment loss of: $ (11,939) $ -
-------------- --------------
-------------- --------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 10
<PAGE>
RCM LARGE CAP GROWTH 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) (0.03)(b) -
Net realized and unrealized gain
on investments (a) 1.91 -
----------- -----------
Net increase in net asset value
resulting from investment operations (a) 1.88 -
----------- -----------
NET ASSET VALUE, END OF PERIOD $ 11.88 $ 10.00
----------- -----------
----------- -----------
TOTAL RETURN (c) 18.80% 0.00%
----------- -----------
----------- -----------
RATIOS AND SUPPLEMENTAL DATA:
Average commission rate paid per share (d) $ 0.0439 $ 0.0326
----------- -----------
----------- -----------
Net assets, end of period (in 000's) $ 4,752 $ 4,000
----------- -----------
----------- -----------
Ratio of expenses to average net assets 1.85%(b)(e) 0.00%(f)
----------- -----------
----------- -----------
Ratio of net investment loss to average
net assets (0.56%)(b)(e) 0.00%(f)
----------- -----------
----------- -----------
Portfolio turnover 78.59%(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 $0.07 per share (calculated using the average
share method). Without such reimbursement, the ratio of expenses to average
net assets would have been 3.15% and the ratio of net investment loss to
average net assets would have been (1.86%) (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 11
<PAGE>
RCM LARGE CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
RCM Large Cap Growth Fund (the "Fund") is a 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 12
<PAGE>
RCM LARGE CAP GROWTH 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 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 Global
Technology 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 9 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 400,009 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 $5,871,490 and $2,993,412, respectively.
During the same period, short-term sales/maturities of U.S. government
obligations aggregated $3,999,077, and there were no purchases of U.S.
government obligations by the Fund. At June 30, 1997, the aggregate cost
of investments was the same for book and federal income tax purposes.
Page 13
<PAGE>
RCM LARGE CAP GROWTH 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 0.75% of the Fund's average daily net assets.
For the six months ended June 30, 1997, the Fund recorded investment
management fees of $15,898.
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 1.85% 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
$27,457 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 14
<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
