<PAGE>
RCM GLOBAL SMALL CAP FUND
SEMI-ANNUAL REPORT
JUNE 30, 1997
<PAGE>
RCM GLOBAL SMALL CAP FUND
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
The value of an investment in the RCM Global Small Cap Fund (the "Fund")
appreciated 17.50% for the six-month period ended June 30, 1997. This
performance far surpassed the Fund's benchmark, the Salomon Brothers Extended
Market Index, which returned 6.89% for the same period. The Fund registered
especially strong performance in the second quarter of 1997, supported by the
strong recovery in its U.S. holdings and continued performance in its
international holdings.
A common characteristic of the world stock markets during the first half 1997
was the persistent leadership of very large capitalization issues. The
respective small cap universes in the Fund's two largest markets, the U.S. and
the U.K., both underperformed their large capitalization benchmarks. In the U.S.
the Russell 2000 benchmark (+10.2%) lagged the S&P 500 (+20.6%) by 1,040 basis
points. In the U.K., the Small Cap index (+1.6%) underperformed the FTSE 100
(+11.8%) by 1,020 basis points. The same phenomenon of small cap
underperformance during the first half of this year took place in France and, to
a lesser degree, in Japan. In the major markets, only the German and Dutch small
caps outperformed with exceptional absolute performance of 37.4% and 129.0%,
respectively.
The Fund's country weightings varied little for the period. Our most significant
country weighting shift was in the U.S. Early in the year, RCM Capital
Management, L.L.C. ("RCM"), the Fund's investment manager, was anticipating the
traditional seasonal factors favoring "secondary cap" stocks, based on evidence
of improved relative strength in small cap stocks in the final months of 1996.
Importantly, RCM believed that the valuations of small cap universes had become
attractive versus their own historical ranges and relative to large caps. Based
on these considerations, RCM chose to overweight the U.S. with a 60% allocation
against an approximate 50% benchmark weighting. The Fund's other significant
regional exposures at the beginning of the year were Europe at 23%, Latin
America at under 7%, Canada at over 6% and Asia at under 4%. By the end of the
first quarter, however, the underperformance of the U.S. markets and continued
deterioration of the environment for U.S. small caps led to a minor shift toward
a 50% U.S. weighting in the Fund.
This approximation of the benchmark U.S. weighting worked well for the Fund up
through May, at which point the Fund's investments performed well as the small
cap rally began. U.S. small caps -- especially higher growth and higher P/E
multiple sectors -- underperformed when the market corrected in March on fears
of rising interest rates, but the worst relative performance of the first half
of the year occurred in April. By the end of April 1997, the spread between
12-month S&P returns and Russell 2000 performance had reached its highest level
ever, at -25%. As the U.S. market recovered, the Fund's portfolio was well-
<PAGE>
positioned to benefit, as extremely compressed multiples of quality growth
issues expanded and technology stocks re-emerged as market leaders.
Despite the challenges presented by the majority of our markets, the Fund
benefited from the many opportunities discovered in selected, quality small cap
stocks during the first six months of 1997. U.S. holdings in telecommunications,
technology, and business services made a positive contribution to the Fund's
relative performance in the first half. The Fund's major U.S. holding was
International Telecommunication Data Systems, which registered a total return
in excess of 100% in the second quarter.
Outside the U.S., stock selection was again a key factor in the Fund's
performance. Over the first half, Sixt AG, the German car rental and leasing
company, had appreciated by over 200%. The Fund's exposure in the leisure time
products and services group also added to relative performance, owing largely to
substantial positions in lodging stocks, such as Four Seasons Hotels in Canada
(+43% total return in the first half of 1997), Sol Melia in Spain (+24%), and
CapStar Hotel Co. in the U.S.(+62%).
In Latin America, the Fund had strong performance in several holdings. Vina
Concha Y Toro, the Chilean wine producer, returned 21% over our brief
holding period, while the Mexican home builder, Consorcio ARA, returned over
59% over our holding period. In Canada, the Fund's holding in Leitch
Technology performed well with a return of 27% in the first half of 1997.
Going into the second half of 1997, the world equity market environment
appears to reflect a continued favorable economic outlook: low inflation,
continued healthy -- but not overheated -- GDP growth and no immediate reason
to anticipate significant interest-rate hikes by the world's major central
banks. Only in the United Kingdom does RCM believe that rates have bottomed.
There have also been currency-related rate hikes in parts of Asia and Eastern
Europe, but the Fund has very limited exposure to these regions. RCM has been
encouraged by the improved relative performance of secondary capitalization
stocks at the end of the first half of the year and believes that this trend
supports its primary task of discovering attractively valued growth stocks
around the world. The Fund retains significant overweightings in growth
industries such as technology, health care and telecommunications, with a
cash position at the lower end of a "normal" range.
Page 2
<PAGE>
RCM GLOBAL SMALL CAP FUND
PERFORMANCE SUMMARY
- --------------------------------------------------------------------------------
[GRAPH]
RCM Global Small Cap Salomon EMI's Index
-------------------- -------------------
Dec-96 10,000 10,000
Jan-97 10,290 10,021
Feb-97 10,010 10,005
Mar-97 9,410 9,665
Apr-97 9,340 9,620
May-97 10,730 10,370
Jun-97 11,750 10,689
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
The chart above shows the performance of the RCM Global Small Cap Fund since the
Fund's inception versus the Salomon Brothers Extended Market Index.(a) The
chart represents a cumulative return(b)(c) of 17.50% 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)
- ------------------
17.50% 17.50%
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 Salomon Brothers Extended Market Index ("EMI") is a component of the
Salomon Brothers Broad Market Index ("BMI") which includes listed shares of
5,409 companies with a total available market capitalization of at least
the local equivalent of US$100 million on the last business day of May each
year. The BMI consists of two components: the Primary Market Index ("PMI")
is the large-capitalization stock component and the EMI is the small-
capitalization stock component. The PMI universe is defined as those
stocks falling within the top 80% of the cumulative available capital level
in each country. The EMI includes the bottom 20% of the cumulative
available capital level in each country.
(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 GLOBAL SMALL CAP 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 DURABLES SECTOR 3.6%
AUTOMOTIVE RELATED 1.4%
1,500 US Tower Automotive Inc. * $ 64,500
OTHER CONSUMER DURABLES 2.2%
1,500 NL Koninklijke Ahrend Groep N.V. 101,438
CONSUMER NON-DURABLES SECTOR 20.8%
FOOD AND FOOD PROCESSING 5.5%
2,340 JP Hokuto Corp. 82,819
440 FR Lambert Dodard Chancereul S.A. 80,716
53,000 ID PT Daya Guna Samudera, Foreign * 95,363
-------
258,898
-------
GENERAL RETAIL 4.2%
134,000 HK Glorious Sun Enterprises * 63,564
3,000 US Samsonite Corp. * 132,375
-------
195,939
-------
HOUSEHOLD/RELATED NON-DURABLES 6.0%
10,000 US Carson Inc. * 107,500
3,500 US Scotts Co. * 101,500
5,000 CH Tag Heuer International S.A. (Sponsored ADR) * 75,313
-------
284,313
-------
LEISURE TIME PRODUCTS/SERVICES 5.1%
2,500 US CapStar Hotel Co. * 80,000
1,600 CA Four Seasons Hotels Inc. 47,400
265 FR Grand Optical-Photoservice 40,263
1,800 ES Sol Melia S.A. * 74,046
-------
241,709
-------
CYCLICAL/CAPITAL GOODS SECTOR 9.1%
AEROSPACE AND DEFENSE 1.0%
2,000 GB Doncasters PLC * 46,250
</TABLE>
The accompanying notes are an integral part of the financial statements
Page 4
<PAGE>
<TABLE>
<CAPTION>
% OF
SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- ---------- ------- ------------------------------- ---------- ------------
<S> <C> <C> <C> <C>
BUILDING AND CONSTRUCTION 2.4%
17,000 MX Consorcio ARA S.A. * $ 59,733
10,000 IE Green Property PLC 52,425
-------
112,158
-------
CHEMICALS AND TEXTILES 0.7%
320 AT Wolford AG 31,058
INDUSTRIAL EQUIPMENT 3.3%
4,200 GB Powerscreen International PLC 45,925
2,500 US Rofin-Sinar Technologies * 47,813
3,100 NO Tomra Systems A/S 63,518
-------
157,256
-------
TRANSPORTATION SERVICES 1.7%
500 DE Sixt AG 47,775
313 DE Sixt AG Bonus Rights * 30,438
-------
78,213
-------
ENERGY SECTOR 5.0%
ENERGY 5.0%
2,000 CA Ballard Power Systems Inc. * 67,775
2,000 GB British-Borneo Petroleum Syndicate PLC 47,100
3,000 US Houston Exploration Co. * 46,687
3,000 NO Smedvig ASA 74,992
-------
236,554
-------
HEALTH CARE SECTOR 14.9%
DRUGS & HOSPITAL SUPPLIES 6.8%
2,000 US Closure Medical Corp. * 38,500
1,000 HU Gedeon Richter Ltd. 144A (GDR) (a) 92,000
2,200 CL Laboratorio Chile S.A. (ADR) 62,975
2,200 US OxiGENE Inc. 71,983
1,200 US Sofamor/Danek Group Inc. * 54,900
-------
320,358
-------
</TABLE>
The accompanying notes are an integral part of the financial statements
Page 5
<PAGE>
<TABLE>
<CAPTION>
% OF
SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- ---------- ------- ------------------------------- ---------- ------------
<S> <C> <C> <C> <C>
HEALTH CARE SERVICES 8.1%
5,000 US Advanced Health Corp. * $ 91,875
2,000 US Curative Technologies Inc. * 57,500
7,000 US Harborside Healthcare Corp. * 99,750
3,000 US OccuSystems Inc. 87,000
2,500 US Transition Systems Inc. * 45,469
-------
381,594
-------
INTEREST-SENSITIVE SECTOR 3.8%
BANKING 3.8%
1,800 US Community First Bankshares Inc. 69,075
19,600 HK Dah Sing Financial Holdings Ltd. 108,534
-------
177,609
-------
TECHNOLOGY SECTOR 22.5%
ELECTRONICS AND NEW TECHNOLOGY 7.5%
2,000 TW ASE Test Ltd. * 84,500
4,000 US Computer Products Inc. * 100,000
2,200 CA Leitch Technology Corp. * 51,908
2,000 US Uniphase Corp. * 116,500
-------
352,908
-------
TECHNOLOGY SERVICES 15.0%
150 FR Group Axime * 17,757
5,800 FR Business Objects S.A. (Sponsored ADR) * 56,550
2,600 GB Dr. Solomons Group PLC (Sponsored ADR) * 65,975
1,500 SE Enator AB * 26,771
2,000 US Engineering Animation Inc. * 67,500
6,000 US International Telecommunication Systems Inc. * 147,000
4,000 JP Nippon Systems Development 95,429
7,000 CA Open Text Corp. 65,625
2,400 US Renaissance Solutions Inc. * 88,800
1,500 US VERITAS Software Co. * 75,375
-------
706,782
-------
TELEMEDIA/SERVICES SECTOR 18.3%
BUSINESS SERVICES 10.5%
1,500 US Caribiner International Inc. * 48,937
6,000 GB Delphi Group PLC 73,895
3,000 US F. Y. I. Inc. * 72,000
3,000 US Healthcare Recoveries Inc. * 58,125
</TABLE>
The accompanying notes are an integral part of the financial statements
Page 6
<PAGE>
<TABLE>
<CAPTION>
% OF
SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- ---------- ------- ------------------------------- ---------- ------------
<S> <C> <C> <C> <C>
BUSINESS SERVICES
(CONTINUED)
4,600 CA Philip Services Corp. * $ 73,025
2,000 US Romac International * 65,500
1,200 US The Registry Inc. * 55,200
2,000 US Wilmar Industries Inc. * 48,750
-------
495,432
-------
COMMUNICATION SERVICES 5.0%
2,500 US LHS Group Inc. * 109,531
3,000 US Precision Response Corp. 49,500
5,000 US Smartalk Teleservices Inc. * 77,500
-------
236,531
-------
MEDIA SERVICES 2.8%
5,000 BM Central European Media Entertainment Ltd. Class A * 130,000
-------
TOTAL EQUITY INVESTMENTS
(COST $3,994,888) 98.0% 4,609,500
---------
SHORT-TERM INVESTMENTS
MONEY MARKET FUNDS 3.5%
165,119 US SSgA U.S. Government Money Market Fund 165,119
-------
TOTAL SHORT-TERM INVESTMENTS 3.5%
(COST $165,119) 165,119
-------
TOTAL INVESTMENTS (COST $4,160,007) 101.5% 4,774,619
OTHER ASSETS LESS LIABILITIES (1.5%) (72,785)
-------
NET ASSETS 100.0% $ 4,701,834
---------
---------
</TABLE>
* Non-income producing security.
(a) Security is purchased pursuant to Rule 144A of the Securities Act of 1933
and may be resold only to qualified institutional buyers.
The accompanying notes are an integral part of the financial statements.
Page 7
<PAGE>
RCM GLOBAL SMALL CAP FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
JUNE 30, 1997
(UNAUDITED)
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
------- ------- -------- ---------- -----
Austria AT 0.6% 0.6%
Bermuda BM 2.7% 2.7%
Canada CA 6.5% 6.5%
Chile CL 1.3% 1.3%
France FR 4.1% 4.1%
Germany DE 1.7% 1.7%
Hong Kong HK 3.7% 3.7%
Hungary HU 2.0% 2.0%
Indonesia ID 2.0% 2.0% 4.0%
Ireland IE 1.1% 1.1%
Japan JP 3.8% 3.8%
Mexico MX 1.3% 1.3%
Netherlands NL 2.2% 2.2%
Norway NO 2.9% 2.9%
Spain ES 1.6% 1.6%
Sweden SE 0.6% 0.6%
Switzerland CH 1.6% 1.6%
Taiwan TW 1.8% 1.8%
United Kingdom GB 5.9% 5.9%
United States US 54.1% (3.5%) 50.6%
------ ------ ------
Total 101.5% (1.5%) 100.0%
------ ------ ------
------ ------ ------
The accompanying notes are an integral part of the financial statements.
Page 8
<PAGE>
RCM GLOBAL SMALL CAP FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value (cost $4,160,007) (Note 1) $ 4,774,619
Foreign currency, at value (cost $92,415) (Note 1) 92,383
Receivable for investments sold 78,997
Deferred organizational costs (Note 5) 9,000
Dividends receivable 1,735
------------
Total Assets 4,956,734
------------
LIABILITIES:
Payable for investments purchased 211,438
Payable for professional fees 14,878
Payable for organizational costs (Note 5) 8,032
Payable for Directors' fees (Note 7) 7,439
Payable for management fees (Note 6) 5,019
Payable for miscellaneous expenses 8,094
------------
Total Liabilities 254,900
------------
NET ASSETS $ 4,701,834
------------
------------
NET ASSETS CONSIST OF:
Paid-in capital (Note 3) $ 4,000,100
Net investment loss (35,153)
Accumulated net realized gain on investments and foreign
currency transactions 122,156
Net unrealized appreciation on investments and translation of
other assets and liabilities in foreign currencies 614,731
------------
NET ASSETS $ 4,701,834
-------------
-------------
NET ASSET VALUE PER SHARE
($4,701,834 DIVIDED BY 400,010 shares outstanding) $ 11.75
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 9
<PAGE>
RCM GLOBAL SMALL CAP FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME:
Income:
Dividends (net of foreign withholding tax of $1,031) $ 15,110
Expenses:
Investment management fees (Note 6) 25,132
Directors' fees (Note 7) 12,439
Transfer agent fees 10,152
Legal fees 7,439
Audit fees 7,439
Custodian fees 4,673
Registration and filing fees 4,169
Amortization of organizational costs (Note 5) 1,000
Miscellaneous expenses 4,164
---------
Total expenses before reimbursements 76,607
Expenses reimbursed by investment manager (Note 6) (26,344)
---------
Total net expenses 50,263
---------
Net investment loss (35,153)
---------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain from investments 136,236
Net realized loss from foreign currency transactions (14,080)
---------
Net realized gain 122,156
---------
Net change in unrealized appreciation on investments and
translation of other assets and liabilities in foreign currencies 614,731
---------
Net realized and unrealized gain during the period 736,887
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 701,734
----------
----------
</TABLE>
The accompanying notes are an integral part of the financisl statements.
Page 10
<PAGE>
RCM GLOBAL SMALL CAP 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 $ (35,153) $ -
Net realized gain on investments and foreign
currency transactions 122,156 -
Net change in unrealized appreciation on
investments and translation of other assets
and liabilities in foreign currencies 614,731 -
---------- ----------
Net increase in net assets resulting from
operations 701,734 -
NET INCREASE FROM CAPITAL SHARES TRANSACTIONS
(Note 3) 100 4,000,000
---------- ----------
TOTAL INCREASE IN NET ASSETS 701,834 4,000,000
NET ASSETS:
Beginning of period 4,000,000 -
---------- ----------
End of period * $4,701,834 $4,000,000
---------- ----------
---------- ----------
- --------------------
* Includes accumulated net investment loss of: $ (35,153) $ -
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 11
<PAGE>
RCM GLOBAL SMALL CAP 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) (0.09) (b) -
Net realized and unrealized gain
on investments (a) 1.84 -
--------- ---------
Net increase in net asset value
resulting from investment operations (a) 1.75 -
--------- ---------
NET ASSET VALUE, END OF PERIOD $ 11.75 $ 10.00
--------- ---------
--------- ---------
TOTAL RETURN (c) 17.50% 0.00%
--------- ---------
--------- ---------
RATIOS AND SUPPLEMENTAL DATA:
Average commission rate paid per share (d) $ 0.0260 $ 0.0465
--------- ---------
--------- ---------
Net assets, end of period (in 000's) $ 4,702 $ 4,000
--------- ---------
--------- ---------
Ratio of expenses to average net assets 2.50% (b)(e) 0.00% (g)
--------- ---------
--------- ---------
Ratio of net investment loss to average
net assets (1.75%) (b)(e) 0.00% (g)
--------- ----------
--------- ----------
Portfolio turnover 73.57% (f) 0.00% (g)
--------- ----------
--------- ----------
</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 3.81% and the ratio of net investment
loss to average net assets would have been (3.06%) (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.
(g) Not annualized. Fund was in operation for one day.
Page 12
<PAGE>
RCM GLOBAL SMALL CAP FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
RCM Global Small Cap 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 13
<PAGE>
RCM GLOBAL SMALL CAP 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 Health Care 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 $4,227,118 and $2,806,205, respectively.
During the same period, short-term sales/maturities of U.S. government
obligations aggregated $3,998,761, 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 14
<PAGE>
RCM GLOBAL SMALL CAP 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 1.25% of the Fund's average daily net assets.
For the six months ended June 30, 1997, the Fund recorded investment
management fees of $25,132.
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 2.50% 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
$26,344 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.
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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