<PAGE>
[LOGO]
INTERNATIONAL GROWTH EQUITY FUND A
ANNUAL REPORT
1995
<PAGE>
RCM INTERNATIONAL GROWTH EQUITY FUND A
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
The year just completed was a very good one for investments worldwide. While the
S&P 500 in the United States led the major markets of the world with a 37.59%
total return, markets outside the United States produced more modest but still
respectable rates of return. The Morgan Stanley EAFE Index (Europe, Asia and the
Far East, and Australia) returned 11.55% for the year; laggards include the
Japanese market with only a 1.0% return in dollars, and the Morgan Stanley
Emerging Markets Free Index, which showed a negative 5.20% rate of return for
the year. Total return for RCM International Growth Equity Fund A (the "Fund")
was 17.98% for the year.
The differences in performance among these markets can largely be explained
through a comparison of the direction of interest rates and earnings. The United
States benefited both from a decline in long-term interest rates from 8% to 6%
over the year and an estimated 17% increase in S&P earnings. Europe and Japan
were also advantaged by falling long-term rates, but earnings gains were more
modest owing to a combination of over-valued currencies, less progress in
restructuring and cost cutting, as well as a much lower exposure to the booming
technology area. While there were wildly disparate conditions in the various
countries that make up the Emerging Market Index, it can be generalized that the
Southeast Asian economies were disadvantaged by rising interest rates from near
overheated conditions, and other markets, such as many of those in Latin
America, were hurt by being in full-scale recession.
In 1996, RCM Capital Management, a California Limited Partnership ("RCM"), the
Fund's investment manager, looks for a reversal in the order of performance from
the various regions of the world. The United States should continue to be helped
by falling interest rates -- in fact, short-term interest rates could fall
substantially - but earnings are likely to be sluggish at best. Europe offers a
similar prospect, but RCM believes that it's a bit farther along in the process.
Also, there seems to be greater willingness on the part of the Bundesbank to
provide a stimulative monitoring policy, and the benefits of restructuring and
cost cutting are still ahead for many companies. In Japan, after a prolonged
recession, monetary policy has finally turned very positive, and a recovery
appears to be in progress. The severe banking crisis has not been resolved as
yet, and will retard the rate of economic growth if not dealt with aggressively.
It is possible that the new Prime Minister Hashimoto could lead the country to
face up to this severe problem and, if so, Japan could be the surprise of the
year. RCM is not betting on it, but is watching developments very closely.
RCM has conviction regarding many of the emerging markets, especially those that
were in recession in 1995. Southeast Asian countries continue to be in a well-
managed boom, and RCM is looking for an easing of the stringent monetary
policies of 1995, which would be very favorable for financial markets. Other
areas, such as China and many Latin American countries, suffered significant
slowdowns in economic activity in 1995 and are poised for recovery over the next
six to
(Continued)
<PAGE>
eighteen months. RCM is also looking for selected Eastern European countries to
begin to benefit from the progress that they have made in the development of
their economic and financial infrastructure that will allow them to take
advantage of their low-cost, highly educated workforce in the middle of Europe.
Most of these emerging markets in Asia, Latin America and Eastern Europe have
experienced sideways to negative stock markets over the past two years, despite
advances in earnings. They have increased in attractiveness, both from the
prospect of relative earnings growth in 1996 and relative valuation, given the
dramatic fall in long-term interest rates in the major markets.
The Fund's portfolio is currently structured for a market environment where
excess liquidity from the slowing U.S. and European economies seeks growth
wherever it can be found. In Europe RCM prefers visible earnings growth
companies, such as pharmaceuticals and consumer nondurables. In Japan RCM is
allowing a greater cyclical exposure from the expectation of a recovering
economy, and has increased the Fund's exposure in Southeast Asia and Latin
America to reflect our positive view on those regions. RCM anticipates that any
increased weighting in Eastern European markets will be funded from Western
Europe. Currently, 12 1/2% of the Fund is hedged against the Japanese yen and
2 1/2% against the Deutsche mark, reflecting our view that the dollar will
continue to appreciate against these currencies.
Page 2
<PAGE>
RCM INTERNATIONAL GROWTH EQUITY FUND A
PERFORMANCE SUMMARY
- --------------------------------------------------------------------------------
PERFORMANCE FROM COMMENCEMENT OF OPERATIONS
[Line Graph]
PERFORMANCE FROM FIRST PUBLIC OFFERING
[Line Graph]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
The chart above shows the performance of the RCM International Growth Equity
Fund A versus the Morgan Stanley Capital International Europe, Australia, Far
East Index (MSCI-EAFE) (1) and a blended index including 90% of MSCI-EAFE and
10% Morgan Stanley Capital International Emerging Markets Free Index (MSCI-EMF)
(2). The charts represent cumulative returns of 17.99% and 14.30% for the Fund
from December 28, 1994* to December 31, 1995 and from May 22, 1995** to December
31, 1995, respectively. The chart assumes a hypothetical $10,000 initial
investment in the Fund and reflects all Fund expenses.
AVERAGE ANNUAL TOTAL RETURNS+
DECEMBER 31,1995
LIFE OF FUND
---------------------------
12/28/94* TO 5/22/95** TO
1 YEAR 12/31/95 12/31/95
- -----------------------------------------
17.98% 17.99% 14.30%
- -----------------------------------------
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.
- -----------------
+ Returns assume reinvestment of all dividends and capital gains distributions
at net asset value.
* The Fund commenced operations on December 28, 1994.
** The Fund's shares were first offered to the public on May 22, 1995.
(1)The MSCI-EAFE Index is an arithmetic, market value-weighted average of the
performance of over 900 securities listed on the stock exchanges of counties in
Europe, Australia, and the Far East. The index is calculated on a total return
basis, which includes reinvestment of gross dividends before deduction of
withholding taxes.
(2) The MSCI-EMF Index includes only those countries open to non-local
investors. The index is currently calculated price-only without dividends
reinvested.
Page 3
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of RCM Capital Funds, Inc:
We have audited the accompanying statement of assets and liabilities of RCM
International Growth Equity Fund A (the "Fund"), including the statement of
investments in securities and net assets as of December 31, 1995, and the
related statement of operations for the year then ended, the statement of
changes in net assets and financial highlights for the year then ended and for
the period from December 28, 1994 (commencement of operations) to December 31,
1994. 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
audits.
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, 1995 by correspondence with 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
International Growth Equity Fund A as of December 31, 1995, the results of its
operations for the year then ended, the changes in its net assets and financial
highlights for the year then ended and for the period from December 28, 1994
(commencement of operations) to December 31, 1994 in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND, L.L.P.
Boston, Massachusetts
February 9, 1996
Page 4
<PAGE>
RCM INTERNATIONAL GROWTH EQUITY FUND A
INVESTMENTS IN SECURITIES AND NET ASSETS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
% OF
SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS MARKET VALUE
------ ------- ------------------------------- ---------- ------------
<C> <C> <S> <C> <C>
CONSUMER DURABLES SECTOR 3.8%
AUTOMOTIVE RELATED 2.2%
3,000 JPN Autobacs Seven Co., Ltd. $ 249,298
8,900 SWDN Autoliv AB 520,084
----------
769,382
----------
OTHER CONSUMER DURABLES 1.6%
10,000 JPN Hoya Corp. 343,825
4,300 ITLY Industrie Natuzzi S.P.A. ADR 195,113
----------
538,938
----------
CONSUMER NON-DURABLES SECTOR 24.8%
BEVERAGE AND TOBACCO 5.1%
13,300 NETH Grolsch NV 462,479
64,000 INDO P.T. Hanjaya Mandala Sampoerna 666,171
7,700 MEX Panamerican Beverages Inc. 246,400
10,700 FR Seita 387,839
----------
1,762,889
----------
FOOD AND FOOD PROCESSING 1.3%
61,000 MEX Gruma S.A. de C.V. * 171,575
372,000 INDO P.T. Mayora Indah 268,445
----------
440,020
----------
GENERAL RETAIL 10.9%
650 FR Carrefour Supermarche SA 394,354
23,000 JPN Credit Saison Co., Ltd. 547,990
17,000 JPN Daiichi Corp. 401,743
34,000 UK Dixons Group PLC 234,446
189,000 HK Giordano International Ltd. 161,319
2,000 NETH Gucci Group NV * 77,750
4,000 SWDN Hennes & Mauritz AB 222,902
68,100 UK Next PLC 482,274
6,000 JPN Seven-Eleven Japan Co., Ltd. 423,051
11,000 JPN Shimamura Co. Ltd. 425,085
20,000 JPN Uny Co., Ltd. 375,787
----------
3,746,701
----------
* Non-income producing.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
Page 5
<PAGE>
RCM INTERNATIONAL GROWTH EQUITY FUND A
INVESTMENTS IN SECURITIES AND NET ASSETS
DECEMBER 31, 1995
<CAPTION>
% OF
SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS MARKET VALUE
------ ------- ------------------------------- ---------- ------------
<C> <C> <S> <C> <C>
HOUSEHOLD/RELATED NON-DURABLES 4.3%
2,700 GER Adidas AG * $ 142,858
3,085 FR Clarins SA 293,570
8,000 ITLY De Rigo SpA ADS * 182,000
13,000 MEX Kimberly Clark de Mexico, S.A.
de C.V. 196,137
2,400 FR LVMH Moet Hennessy Loiuis Vuitton 499,898
250 SWTZ SMH Swiss Corp. for
Microelectronics and Watchmaking
Industrie 149,545
----------
1,464,008
----------
LEISURE TIME PRODUCTS/SERVICES 3.2%
2,700 FR Club Mediterranee SA * 215,581
22,000 JPN Royal Co., Ltd. 357,966
900 FR Salomon SA 523,790
----------
1,097,337
----------
CYCLICAL/CAPITAL GOODS SECTOR 22.2%
BUILDING AND CONSTRUCTION 3.7%
497,900 PHIL C & P Homes Inc. * 365,405
3,100 NETH Hunter Douglas N.V. 143,728
55,000 JPN Obayashi Corp. 436,804
26,000 JPN Sekisui House, Ltd. 332,397
----------
1,278,334
----------
CHEMICALS AND TEXTILES 1.1%
8,000 CHLE Sociedad Quimica y Minera de
Chile SA * 376,000
ELECTRICAL EQUIPMENT 2.2%
5,300 JPN Hirose Electric Co., Ltd. 304,910
18,000 JPN Nitto Denko Corp. 278,935
4,500 NETH Philips Electronics N.V. 162,647
----------
746,492
----------
INDUSTRIAL EQUIPMENT 9.4%
43,000 SWDN IRO AB 144A * 485,715
47,000 JPN Komatsu, Ltd. 386,925
1,500 GER Mannesmann AG 477,553
74,000 JPN NTN Corp. 494,529
1,090 FR Sidel SA 339,665
* Non-income producing.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
Page 6
<PAGE>
RCM INTERNATIONAL GROWTH EQUITY FUND A
INVESTMENTS IN SECURITIES AND NET ASSETS
DECEMBER 31, 1995
<CAPTION>
% OF
SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS MARKET VALUE
------ ------- ------------------------------- ---------- ------------
<C> <C> <S> <C> <C>
INDUSTRIAL EQUIPMENT
(CONTINUED)
900 GER Siemens AG $ 492,506
44,000 NOR Tomra Systems A/S 347,326
59,000 SING Venture Manufacturing Ltd. 197,709
----------
3,221,928
----------
RAW AND BASIC MATERIALS 3.8%
2,500 SPN Acerinox, SA 252,885
45,000 JPN Kawasaki Steel Corp. 156,901
27,000 JPN New Oji Paper Co., Ltd. 244,242
128,000 JPN NKK Corp. * 344,639
21,965 INDO P.T. Indah Kiat Pulp & Paper 16,091
1,600 GER SGL Carbon AG 144A * 123,806
21,000 JPN Yodogawa Steel Works 164,746
----------
1,303,310
----------
TRANSPORTATION SERVICES 2.0%
37,156 UK BAA PLC 281,021
32,000 JPN Mitsubishi Corp. 393,608
----------
674,629
----------
ENERGY SECTOR 5.7%
OIL AND RELATED SERVICES 5.7%
43,119 UK British Petroleum Co., PLC 359,939
3,200 UK British Petroleum Co., PLC ADR 326,800
17,100 NOR Petroleum Geo-Services A/S * 423,849
9,900 SPN Repsol, SA 324,423
3,800 NETH Royal Dutch Petroleum Co. 530,915
----------
1,965,926
----------
HEALTHCARE SECTOR 8.2%
DRUGS & HOSPITAL SERVICES 5.3%
2,100 CAN Biochem Pharma Inc. * 84,263
4,000 JPN Nichii Gakkan Co. * 187,506
100 SWTZ Roche Holdings Ltd. 791,071
7,500 UK Smithkline Beecham PLC ADR 416,250
5,600 FR Synthelabo 350,843
----------
1,829,933
----------
* Non-income producing.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
Page 7
<PAGE>
RCM INTERNATIONAL GROWTH EQUITY FUND A
INVESTMENTS IN SECURITIES AND NET ASSETS
DECEMBER 31, 1995
<CAPTION>
% OF
SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS MARKET VALUE
------ ------- ------------------------------- ---------- ------------
<C> <C> <S> <C> <C>
DRUGS & HOSPITAL SUPPLIES 2.9%
8,800 SWDN AB Astra $ 351,221
5,600 US Pharmacia & Upjohn Inc. 217,000
19,000 JPN Sankyo Co., Ltd 426,925
----------
995,146
----------
INTEREST SENSITIVE SECTOR 12.7%
BANKING 8.1%
19,000 ITLY Banca Popolare Di Bergamo 262,605
5,600 PAN Banco Latinamericano de
Exportaciones 260,400
23,000 IRE Bank of Ireland 167,883
1,100 GER Bankgesellschaft Berlin AG 280,272
135,000 NOR Christiania Bank OG Kreditkasse 315,436
1,450 GER Commerz Bank AG 342,663
90,000 THAI Krung-Thai Bank Public Co., Ltd.
Foreign 371,576
33,800 UK Lloyds TSB Group Plc. 174,013
15,800 PHIL Philippine Commercial
International Bank * 145,772
3,800 FR Societe Generale 469,471
----------
2,790,091
----------
GENERAL FINANCE 0.5%
25,000 THAI Finance One Public Co., Ltd. 173,680
INSURANCE 1.0%
500 SWTZ Winterthur Schweizer
Versicherings-Gesellschaft 353,706
UTILITIES 3.1%
13,400 SPN Empresa Nacional de Electridad SA 758,928
7,500 GER Veba AG 318,404
----------
1,077,332
----------
TELEMEDIA/SERVICES SECTOR 9.5%
BUSINESS SERVICES 1.1%
8,000 NETH Randstad Holding N.V. 362,934
* Non-income producing.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
Page 8
<PAGE>
RCM INTERNATIONAL GROWTH EQUITY FUND A
INVESTMENTS IN SECURITIES AND NET ASSETS
DECEMBER 31, 1995
<CAPTION>
% OF
SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS MARKET VALUE
------ ------- ------------------------------ ---------- ------------
<C> <C> <S> <C> <C>
COMMUNICATION SERVICES 5.0%
130,000 PER CPT - Telefonica del Peru S.A. $ 278,451
66 JPN DDI Corp. 511,380
6,500 KOR Korea Mobile Telecommunications
Corp. GDR * 287,625
18,500 UK Vodafone Group PLC ADR 652,125
----------
1,729,581
----------
MEDIA SERVICES 3.4%
10,700 UK British Sky Broadcasting Group ADR 402,588
3,100 FR CEP Communications 257,015
32,900 UK Reed International PLC 501,495
----------
1,161,098
----------
TECHNOLOGY SECTOR 8.4%
COMPUTERS AND OFFICE EQUIPMENT 1.4%
17,850 JPN Canon Sales Co., Inc. 475,424
ELECTRONICS AND NEW TECHNOLOGY 6.4%
4,100 JPN Advantest Corp. 210,460
21,230 SWDN Ericsson LM Telephone Co. 415,666
2,000 JPN Kyocera Corp. 148,571
12,000 FIN Nokia Corp. AB Preferred 471,789
7,000 JPN Rohm Co., Ltd 395,254
14,100 FR SGS Thomson Microelectronics NV * 567,525
----------
2,209,265
----------
TECHNOLOGY SERVICES 0.6%
4,308 NETH Getronics NV 201,346
----------
TOTAL EQUITY INVESTMENTS (COST $29,112,513) 95.3% 32,745,430
----------
* Non-income producing.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
Page 9
<PAGE>
RCM INTERNATIONAL GROWTH EQUITY FUND A
INVESTMENTS IN SECURITIES AND NET ASSETS
DECEMBER 31, 1995
<CAPTION>
% OF
SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS MARKET VALUE
------ ------- ------------------------------ ---------- ------------
<C> <C> <S> <C> <C>
SHORT-TERM INVESTMENTS 4.4%
1,510,711 US Seven Seas Series U.S. Government
Money Market Fund $ 1,510,711
-----------
TOTAL INVESTMENTS (COST $30,623,224) (a) 99.7% 34,256,141
OTHER ASSETS LESS LIABILITIES 0.3% 90,667
-----------
NET ASSETS 100.0% $34,346,808
-----------
-----------
</TABLE>
- ---------------------------
(a) For Federal income tax purposes, cost is $30,732,190 and unrealized
appreciation (depreciation) of equity securities is as follows:
<TABLE>
<S> <C>
Unrealized appreciation $ 4,066,773
Unrealized depreciation (542,822)
-------------
Net unrealized appreciation $ 3,523,951
-------------
-------------
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING
DECEMBER 31, 1995
<TABLE>
Unrealized
Delivery Contract Appreciation
Face Value Date Price (Depreciation)
----------- ---------- --------- --------------
<S> <C> <C> <C> <C>
SALES:
Deutsche Mark 950,000 2/20/96 1.4819 $ (22,960)
Japanese Yen 93,000,000 2/20/96 96.5100 56,161
Japanese Yen 83,520,000 2/20/96 100.7600 13,934
Japanese Yen 83,520,000 2/20/96 98.560 32,437
Japanese Yen 158,400,000 2/21/96 97.5890 77,303
----------
Total open forward foreign currency contracts, net (Note 1) $ 156,875
----------
----------
</TABLE>
* Non-income producing.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
Page 10
<PAGE>
RCM INTERNATIONAL GROWTH EQUITY FUND A
INVESTMENTS IN SECURITIES AND NET ASSETS
DECEMBER 31, 1995
The Fund's investments in securities at December 31, 1995 categorized by
country:
<TABLE>
<CAPTION>
% of Net Assets
--------------------------------------------
Short Term
Country Equities and Other Total
- -------- ------------- ------------ -----------
<S> <C> <C> <C>
Canada 0.2% 0.2%
Chile 1.1% 1.1%
Finland 1.4% 1.4%
France 12.4% 12.4%
Germany 6.3% 6.3%
Hong Kong 0.5% 0.5%
Indonesia 2.8% 2.8%
Ireland 0.5% 0.5%
Italy 1.9% 1.9%
Japan 26.3% 26.3%
Korea 0.8% 0.8%
Mexico 1.8% 1.8%
Netherlands 5.7% 5.7%
Norway 3.2% 3.2%
Peru 0.8% 0.8%
Panama 0.8% 0.8%
Philippines 1.5% 1.5%
Singapore 0.5% 0.5%
Spain 3.9% 3.9%
Sweden 5.8% 5.8%
Switzerland 3.8% 3.8%
Thailand 1.5% 1.5%
United Kingdom 11.2% 11.2%
United States 0.6% 4.7% 5.3%
------------- ------------ -----------
Total 95.3% 4.7% 100.0%
------------- ------------ -----------
------------- ------------ -----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
Page 11
<PAGE>
RCM INTERNATIONAL GROWTH EQUITY FUND A
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value (cost $30,623,224) (Note 1) $34,256,141
Cash 1,045
Receivable for open forward foreign currency contracts, net (Note 1) 156,875
Receivable for investments sold 138,177
Dividends and dividend reclaims receivable 59,998
Prepaid Insurance 8,100
-----------
Total Assets 34,620,336
-----------
LIABILITIES:
Payable for investments purchased 114,813
Payable for investment management fees (Note 6) 39,767
Payable for legal fees 29,287
Payable for custodian fees 26,587
Payable for audit fees 25,000
Payable for Directors' fees 10,000
Payable for accounting fees 9,000
Payable for Fund shares repurchased 8,125
Payable for registration and filing fees 7,151
Payable for printing expenses 1,810
Payable for miscellaneous expenses 1,988
-----------
Total Liabilities 273,528
-----------
NET ASSETS $34,346,808
-----------
-----------
NET ASSET VALUE PER SHARE
($34,346,808 DIVIDED BY 297,177 shares outstanding) $ 115.58
-----------
-----------
NET ASSETS CONSIST OF:
Paid in capital $30,344,830
Accumulated net investment loss (64,136)
Accumulated net realized gain on investments and foreign
currency transactions 276,914
Net unrealized appreciation on forward foreign currency contracts
and foreign currency transactions 156,283
Net unrealized appreciation on investments 3,632,917
-----------
NET ASSETS $34,346,808
-----------
-----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
Page 12
<PAGE>
RCM INTERNATIONAL GROWTH EQUITY FUND A
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Dividends (net of foreign withholding tax of $65,283) $ 433,479
Interest 125,927
----------
Total income 559,406
----------
Expenses:
Investment management fees (Note 6) 218,054
Custodian fees 41,741
Legal fees 40,000
Accounting fees 36,000
Audit fees 25,000
Directors' fees 10,000
Registration and filing fees 10,000
Printing expenses 6,667
Miscellaneous expenses 5,333
----------
Total expenses before reimbursements and waivers 392,795
Expenses waived and reimbursed by investment manager (Note 6) (176,179)
----------
Total net expenses 216,616
----------
Net investment income 342,790
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS:
Net realized gain on investments 39,840
Net realized gain on foreign currency transactions 508,053
----------
Net realized gain 547,893
----------
Net unrealized appreciation on forward foreign currency
contracts and foreign currency transactions 156,283
Net unrealized appreciation on investments 3,640,167
----------
Net unrealized appreciation during the year 3,796,450
----------
Net realized and unrealized gain 4,344,343
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $4,687,133
----------
----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
Page 13
<PAGE>
RCM INTERNATIONAL GROWTH EQUITY FUND A
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
December 28, 1994
(commencement of
Year ended operations) to
December 31, 1995 December 31, 1994
----------------- -----------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 342,790 $ 10,926
Net realized gain on investments and foreign
currency transactions 547,893 --
Net unrealized appreciation (depreciation) on
investments, forward foreign currency
contracts and foreign currency transactions 3,796,450 (7,250)
---------- ------------
Net increase in net assets resulting from operations 4,687,133 3,676
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 3):
Net investment income (320,285) --
Net realized gain on investments (369,783) --
NET INCREASE FROM CAPITAL SHARES TRANSACTIONS 5,346,067 25,000,000
---------- ------------
(NOTE 4)
NET INCREASE IN NET ASSETS 9,343,132 25,003,676
NET ASSETS:
Beginning of period 25,003,676 --
---------- ------------
End of period $ 34,346,808 $25,003,676
---------- ------------
---------- ------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
Page 14
<PAGE>
RCM INTERNATIONAL GROWTH EQUITY FUND A
FINANCIAL HIGHLIGHTS
Selected data for each share of capital stock outstanding are as follows:
<TABLE>
<CAPTION>
December 28, 1994
(commencement
Year ended of operations) to
December 31, 1995 December 31, 1994
----------------- -----------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 100.01 $ 100.00
------- ---------
Net investment income 1.17+ 0.04
Net realized and unrealized gain (loss)
on investments 16.77 (0.03)
------- ---------
Net increase in net asset value
resulting from investment operations 17.94 0.01
------- ---------
Distributions:
Net investment income (1.10) --
Net realized gain on investments (1.27) --
------- ---------
Total distributions (2.37) --
------- ---------
NET ASSET VALUE, END OF PERIOD $115.58 $100.01
------- ---------
------- ---------
TOTAL RETURN * 17.98% 0.01%
------- ---------
------- ---------
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $34,347 $25,004
------- ---------
------- ---------
Ratio of expenses to average net assets 0.75%+ .00%++
Ratio of net investment income to
average net assets 1.19%+ 0.01%++
------- ---------
------- ---------
Portfolio turnover 87.4% 0.00%++
------- ---------
------- ---------
</TABLE>
- ------------------
* Total return measures the change in value of an investment over the period
indicated.
+ Includes reimbursement by the Fund's investment manager of investment
management fees and other expenses equal to $0.35 per share. Without such
reimbursement, the ratio of expenses would have been 1.11% and the ratio of
net investment income to average net assets would have been 0.83%.
Management fees began to accrue on May 22, 1995, the date on which the Fund
was ordered effective by the SEC. Had the Fund accrued management fees from
January 1, 1995, the expense ratio without reimbursement and management fee
waiver would have been 1.36% (see Note 6).
++ Not Annualized. Fund was in operation for four days, ratios are not
meaningful.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
Page 15
<PAGE>
RCM INTERNATIONAL GROWTH EQUITY FUND A
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. SIGNIFICANT ACCOUNTING POLICIES
RCM International Growth Equity Fund A (the "Fund") is a non-diversified
series of RCM Capital 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.
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 an
identified cost basis for both financial statement and federal income tax
purposes. Interest income, foreign taxes and expenses are accrued daily.
c. FOREIGN CURRENCY TRANSLATIONS:
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, sales, forward foreign currency contracts 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 and
depreciation on investments.
(Continued)
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<PAGE>
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
d. FORWARD FOREIGN CURRENCY CONTRACTS:
A forward foreign currency contract ("Forward") is an agreement between two
parties to buy and sell a currency at a set price on a future date. The
Fund may enter into Forwards in order to hedge foreign currency risk
associated with its portfolio securities or for other risk management or
investment purposes. The net U.S. dollar value of foreign currency
underlying all contractual commitments held by the Fund on each day and the
resulting net unrealized appreciation (depreciation) and related net
receivable (payable) amount is determined by using the appropriate current
or forward exchange rate. Realized gain (loss) on foreign currency
includes net gains or losses realized by the Fund on contracts which have
matured or which the Fund has terminated by entering into an offsetting
closing transaction. Unrealized gains or losses are included in the
Statement of Assets and Liabilities and are carried on a net basis. The
portfolio could be exposed to risk of loss if the counterparty is unable to
meet the terms of the contract or if the value of the currency changes
unfavorably.
e. FEDERAL INCOME TAXES:
It is the policy of the Fund to comply with the requirements for
qualifications 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-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. SECURITIES IN FOREIGN SECURITY AND CURRENCY
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 and
emerging markets will subject the Fund to the risk of foreign currency
exchange rate fluctuations, perceived credit risk and adverse economic and
political developments.
3. DISTRIBUTIONS
On December 14, 1995 a distribution of $2.37 per share, aggregating
$690,068, was paid from investment operations. This per share amount
consisted of $1.10 net investment income, $1.25 short-term capital gains
and $0.02 long-term capital gains. The dividend was recorded on December
14, 1995 to shareholders of record on the same date.
4. CAPITAL SHARES
At December 31, 1995, there were 25,000,000 shares of the Company's common
stock authorized, at $0.10 par value. Of this amount, 4,500,000 were
classified as shares of the Fund; 12,000,000 were classified as shares of
RCM Growth Equity Fund; 8,000,000 were classified as shares of RCM Small
Cap Fund; and 500,000 shares remain unclassified. There were 250,000
shares sold for a total of $25,000,000 from December 28, 1994 (commencement
of operations) to December 31, 1994 and transactions in capital shares for
the year ended December 31, 1995 were as follows:
(Continued)
Page 17
<PAGE>
4. CAPITAL SHARES (CONTINUED)
CAPITAL SHARE TRANSACTIONS
<TABLE>
<CAPTION>
Year ended December 31, 1995
----------------------------
Shares Amount
------ ----------
<S> <C> <C>
Shares sold 41,488 $4,700,579
Shares issued in connection with reinvestment 6,080 690,068
of distributions
Shares repurchased (391) (44,580)
------ ----------
Net increase 47,177 $5,346,067
------ ----------
------ ----------
</TABLE>
5. PURCHASES AND SALES OF SECURITIES
Purchases and sales proceeds of investment securities by the Fund,
excluding short-term securities, aggregated $32,872,757 and $22,771,134,
respectively, for the year ended December 31, 1995.
6. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
RCM Capital Management, a California Limited Partnership, ("RCM"), is the
Fund's investment manager. RCM manages the Fund's investments, provides
various administrative services, and supervises the Fund's daily business
affairs, subject to the authority of the Board of Directors. The Fund pays
investment management fees quarterly to RCM at an annualized rate of 0.75%
of the Fund's average monthly net assets. RCM waived investment management
fees for the period from December 28, 1994 (commencement of operations) to
May 22, 1995 (the date the Fund's shares were first offered to the public).
For the year ended December 31, 1995, the Fund recorded net investment
management fees of $41,875; without such waiver the Fund would have paid
investment management fees aggregated $114,952. In addition, RCM
reimbursed the Fund operating expenses totaling $103,102. RCM has
voluntarily agreed, for at least the first year of public operation of the
Fund, to pay the Fund on a quarterly basis the amount, if any, by which
certain ordinary operating expenses of the Fund exceed the annual rate of
1% of the Fund's average net assets.
Travelers Group Inc. ("Travelers") was the sole shareholder of the Fund
from December 28, 1994 (commencement of operations) to May 22, 1995 (the
date the Fund's shares were first offered to the public). At December 31,
1995, Travelers owned 255,220 shares, approximately 86% of the Fund.
Travelers indirectly owns 100% of the outstanding shares of RCM
Acquisition, Inc., the sole limited partner of RCM.
The RCM Capital Management Profit Sharing Plan (the "Plan"), participation
in which is limited to officers and employees of RCM, owned 23,138 shares
of the Fund on December 31, 1995. Certain officers and directors of the
Company are beneficiaries of the Plan and have vested rights in its assets.
In December 1995, RCM entered into an Agreement of Purchase and Sale
pursuant to which RCM will become a wholly owned subsidiary of Dresdner
Bank AG, an international banking organization with headquarters in
Frankfurt, Germany. It is expected that the day-to-day operations of RCM
will not be affected and that the individuals who are primarily responsible
for the management of the Fund's portfolio will remain the same. The
closing of the transaction is subject to a number of contingencies,
including the receipt of certain regulatory approvals. The transaction is
currently expected to close in mid-1996. Because the transaction will
constitute an "assignment" of the Fund's management agreement with RCM
under the Investment Company Act of 1940, and thus a termination of such
management agreement, the Fund will seek prior approval of a new management
agreement from the Fund's Board of Directors and shareholders prior to the
closing of the transaction. The terms of the new management agreement are
expected to be substantially the same as those of the current management
agreement.
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