<PAGE>
RCM LARGE CAP GROWTH FUND
ANNUAL REPORT
DECEMBER 31, 1996
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of RCM Large Cap Growth Fund and
Board of Directors of RCM Equity Funds, Inc.:
We have audited the accompanying statement of assets and liabilities of RCM
Large Cap Growth 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 period 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 audit 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
Large Cap Growth Fund as of December 31, 1996, and the results of its
operations, the changes in its net assets, and the financial highlights for the
period indicated therein, in conformity with generally accepted accounting
principles.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
February 28, 1997
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RCM LARGE CAP FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
DECEMBER 31, 1996
% OF
SHARES EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- ----------- -------------------------------- ------------- --------------
CONSUMER NON-DURABLES SECTOR 2.90%
GENERAL RETAIL 1.02%
300 Gucci Group NV $ 19,169
800 Saks Holdings Inc. * 21,548
-----------
40,717
-----------
LEISURE TIME PRODUCTS/SERVICES 1.88%
800 Doubletree Corp. * 35,000
2,500 Host Marriott Corp. * 40,075
-----------
75,075
-----------
CYCLICAL/CAPITAL GOODS SECTOR 1.49%
ELECTRICAL EQUIPMENT 1.49%
600 General Electric Co. 59,718
ENERGY SECTOR 2.00%
OIL AND RELATED SERVICES 2.00%
800 Schlumberger Ltd. 79,816
HEALTH CARE SECTOR 5.42%
DRUGS & HOSPITAL SERVICES 5.42%
350 Amgen Inc. 19,250
500 Eli Lilly & Co 36,952
1,000 Pharmacia & Upjohn Inc. 39,905
500 Pfizer Inc. 41,854
600 Smithkline Beecham PLC (ADR) 41,136
500 Warner Lambert Co. 37,950
-----------
217,047
-----------
The accompanying notes are an integral part of the financial statements.
Page 2
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RCM LARGE CAP FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
DECEMBER 31, 1996
% OF
SHARES EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- ----------- -------------------------------- ----------- --------------
INTEREST SENSITIVE SECTOR 3.76%
BANKING 1.83%
700 Citicorp $ 73,120
GENERAL FINANCE 0.97%
1,000 Federal National Mortgage Association 38,708
INSURANCE 0.96%
350 American International Group Inc. 38,204
SERVICES/MEDIA SECTOR 2.99%
BUSINESS AND FOOD SERVICES 1.96%
2,200 Danka Business Systems PLC Sponsored ADR 78,375
COMMUNICATION SERVICES 1.03%
1,600 WorldCom Inc. 41,400
TECHNOLOGY SECTOR 7.31%
COMPUTERS AND OFFICE EQUIPMENT 0.95%
250 International Business Machines Corp. 38,228
ELECTRONICS AND NEW TECHNOLOGY 5.38%
900 Cisco Systems Inc. * 57,825
700 Ericsson LM Telephone Co. Sponsored ADR 21,175
300 Intel Corp. 39,338
350 Nokia Corp.Sponsored ADR A 20,139
800 3Com Corp. * 58,800
250 U. S. Robotics Corp. * 18,062
-----------
215,339
-----------
The accompanying notes are an integral part of the financial statements.
Page 3
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RCM LARGE CAP FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
DECEMBER 31, 1996
% OF
SHARES EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- ----------- -------------------------------- ----------- --------------
TECHNOLOGY SERVICES 0.980%
500 First Data Corp. $ 18,448
1,000 Informix Corp. * 20,625
-----------
39,073
-----------
25.87%
TOTAL EQUITY INVESTMENTS
(COST $1,034,820) 25.87% 1,034,820
-----------
SHORT-TERM INVESTMENTS
PRINCIPAL U.S. GOVERNMENT 99.91%
- ------------
$ 4,000,000 U.S. Treasury Bill
maturing 1/9/97 3,996,344
-----------
TOTAL SHORT-TERM INVESTMENTS 99.91% 3,996,344
(COST $3,996,344) -----------
TOTAL INVESTMENTS (COST $5,031,164) 125.78% 5,031,164
OTHER ASSETS LESS LIABILITIES -25.78% (1,031,164)
-----------
NET ASSETS 100.00% $ 4,000,000
-----------
-----------
* Non-income producing security.
The accompanying notes are an integral part of the financial statements.
Page 4
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RCM LARGE CAP GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
ASSETS:
Investments in securities, at value
(cost $5,031,164) (Note 1) $ 5,031,164
Cash 4,000,000
----------------
Total Assets 9,031,164
----------------
LIABILITIES:
Payable for securities purchased 5,031,164
----------------
Total Liabilities 5,031,164
----------------
NET ASSETS $ 4,000,000
----------------
----------------
NET ASSETS CONSIST OF:
Paid in capital (Note 2) $ 4,000,000
----------------
NET ASSETS $ 4,000,000
----------------
----------------
NET ASSET VALUE PER SHARE
($4,000,000 DIVIDED BY 400,000 shares outstanding) $ 10.00
----------------
----------------
The accompanying notes are an integral part of the financial statements.
Page 5
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RCM LARGE CAP GROWTH FUND
STATEMENT OF OPERATIONS
FROM DECEMBER 31, 1996* TO DECEMBER 31, 1996
INVESTMENT INCOME:
Income $ -
Expenses -
----------------
Net investment income -
----------------
NET REALIZED AND UNREALIZED GAIN:
Net realized and unrealized Gain -
----------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ -
----------------
----------------
- ------------------
* Commencement of operations
The accompanying notes are an integral part of the financial statements.
Page 6
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RCM LARGE CAP GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
FROM DECEMBER 31, 1996** TO DECEMBER 31, 1996
OPERATIONS:
Net investment income $ -
Net realized and unrealized Gain -
----------------
Net increase in net assets resulting from operations -
NET INCREASE FROM CAPITAL SHARES TRANSACTIONS (NOTE 2) 4,000,000
----------------
TOTAL INCREASE IN NET ASSETS 4,000,000
NET ASSETS:
Beginning of period -
----------------
End of period * $ 4,000,000
----------------
----------------
* Includes undistributed net investment income of $ -
----------------
----------------
- ------------------
** Commencement of operations
The accompanying notes are an integral part of the financial statements.
Page 7
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RCM LARGE CAP GROWTH FUND
FINANCIAL HIGHLIGHTS
Selected data for each share of capital stock outstanding are as follows:
December 31, 1996
(commencement
of operations) to
December 31, 1996
------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.00
-------------
Net investment income -
Net realized and unrealized gain -
-------------
Net increase in net asset value
resulting from investment operations -
-------------
NET ASSET VALUE, END OF PERIOD $ 10.00
-------------
-------------
TOTAL RETURN 0.00% *
-------------
-------------
RATIOS AND SUPPLEMENTAL DATA:
Average commission rate paid per share $ 0.0326 +
-------------
-------------
Net assets, end of period (in 000's) $ 4,000
-------------
-------------
Ratio of expenses to average net assets 0.00% ++
-------------
-------------
Ratio of net investment income to average net assets 0.00% ++
-------------
-------------
Portfolio turnover 0.00% ++
-------------
-------------
- ------------------
* 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 operation for one day, ratios are not
meaningful.
Page 8
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RCM LARGE CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
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 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. 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.
Page 9
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RCM LARGE CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
d. 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. 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 Global
Technology Fund; and 800,000,000 shares remain unclassified. There were
400,000 shares sold for a total of $4,000,000 on December 31, 1996
(commencement of operations).
At December 31, 1996, all the outstanding shares of the Fund were
beneficially owned by clients of Dresdner Bank AG/Investment
Management/Institutional Assets Management Division.
3. PURCHASES AND SALES OF SECURITIES
For the one day period ended December 31, 1996 (commencement of
operations), purchases of investment securities by the Fund, other than
U.S. government obligations and short-term securities, aggregated
$1,034,820. Purchases of U.S. government obligations by the Fund for the
period ended December 31, 1996, aggregated $3,996,344. There were no sales
of investment securities or U.S. government obligations by the Fund for the
period ended December 31, 1996. At December 31, 1996, the aggregate cost
of investments was the same for book and federal income tax purposes.
4. 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 one day period ended December 31, 1996, the Fund did not record
investment management fees.
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.
Page 10
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RCM LARGE CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
4. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (CONTINUED)
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.
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.
Page 11
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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
Page 12
