<PAGE>
[LOGO]
GROWTH EQUITY FUND
ANNUAL REPORT
1995
<PAGE>
RCM GROWTH EQUITY FUND
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
The value of an investment in the RCM Growth Equity Fund (the "Fund")
appreciated by 34.53% over the 12 months ended December 31, 1995. The Fund
finished the year 8 basis points ahead of its primary benchmark, the Russell
Midcap Index, which registered a return of 34.45% for the year. However the
Fund's primary emphasis, intermediate capitalization growth stocks,
disadvantaged the Fund in comparison to broader market benchmarks such as the
S&P 500 Composite Index, which returned 37.59% in 1995.
U.S. stocks and bonds rallied strongly in the first half of 1995 after
performing poorly in 1994. Investors appeared to have abandoned their fears
that the Federal Reserve Board would tighten monetary policy and embraced the
"soft landing" economic scenario. Returns on equities of all capitalization
ranges benefited from declining interest rates. RCM Capital Management, a
California Limited Partnership ("RCM"), the Fund's investment manager, believes
that weakness in the U.S. dollar and increasing evidence of economic strength in
Europe were among the factors which led to the relative outperformance of large
and medium capitalization equities versus small cap stocks, particularly in the
first quarter of 1995. At mid-year, the Russell Midcap benchmark was up 19.65%,
compared to the S&P 500 return of 20.19%. However, the Fund trailed its primary
benchmark by 307 basis points through the first six months of the year.
Contributing factors included the Fund's underweighting in the strong interest
sensitive sectors of the market and an overweighting in health care services
stocks, which were disastrous performers in the first half of the year.
The stock market continued its impressive advance through the third quarter.
The summer months of 1995 were characterized by powerful rallies in medium and
small capitalization universes, which were fueled by strong cash flows into
mutual funds, an upward move in the U.S. dollar and positive earnings reports.
The technology sector continued to lead the market (though it showed signs of
topping by the end of the third quarter) and the health care services group
rebounded from a weak performance in the second quarter. The Fund outperformed
the Russell Midcap Index in July and September of the third quarter, more than
making up for the shortfall versus this benchmark in the first half of the year.
Although the performance of mid capitalization stocks relative to large caps
cooled in the fourth quarter and the technology sector entered into a full-blown
correction, the Fund's performance for the second half of 1995 was 302 basis
points above the Russell Midcap Index.
Looking at the year as a whole, the Fund's strategy on industry weightings was a
positive contributor to performance, particularly in the technology sector. The
Fund finished 1995 with nearly 27% of its total investments invested in
technology-related issues (about double the benchmark weighting). The Fund held
meaningful positions in strong subgroups within technology, including
networking, components and technology services. Despite overweighting the
electronics/new technology sector, the Fund was not heavily exposed to the
commodity semiconductor and semiconductor equipment stocks. While this lack of
exposure hurt the Fund's performance in the first half of 1995, it enhanced
relative returns late in the year when these stocks came under extreme selling
pressure. Meanwhile, a significant overweighting in the technology services
area enabled the Fund to benefit from favorable fundamental business trends
coupled with the stability of strong cash flow and
(Continued)
<PAGE>
recurring revenue characteristics. The Fund's overweighting in the
communications services sector also contributed to relative performance. This
group comprised approximately 7% of total investments at the end of the year, or
about triple the benchmark weighting. The Fund's holdings in this sector
emphasized potential beneficiaries of regulatory reform and industry
consolidation, as well as providers of emerging communication services and
technologies. Raw/basic materials and consumer durables were lagging industry
groups underweighted by the Fund in 1995, thereby adding to performance.
A significant overweighting in health care services had a negative impact on the
Fund's relative performance for the full year 1995. However, all of the
underperformance of this sector occurred in the first half of the year, as
investors' concerns about pricing and reimbursement issues caused HMO and
nursing home stocks in particular to come under severe pressure. Health care
services stocks were strong performers in the second half, and the Fund's
overweighting (approximately triple the benchmark) made a positive contribution
to performance in both the third and fourth quarters. The Fund's underweighting
in the interest sensitive and financial industry groups (6% versus 20%,
excluding utilities, in the Russell Midcap at the end of 1995) was also a
negative factor in relative performance from an industry strategy perspective.
These groups were strong performers during 1995 as interest rates declined.
However, due to the growth stock orientation of RCM, it is typical for the Fund
to have only modest exposure in the interest sensitive sector. Although the
Fund's average cash position of about 6% for the year was within its "normal"
range, cash was a negative contributor to relative performance given the rising
market environment.
Stock picking by RCM added value, particularly in the business services, drugs
and hospital supplies and health care services groups. Business services stocks
held by the Fund (including Wallace Computer Services, Danka Business Services
and Robert Half International) were up 49% compared to a gain of 30% for
business services stocks in the Russell Midcap Index. The Fund's holdings in
the drugs and hospital supplies group gained 68%, compared to a return of 41%
for the stocks in this sector in the benchmark index. Boston Scientific, Idexx
Labs and Nellcor were significant holdings and were among the Fund's strongest
performers in this group. The Fund also experienced positive stock selection in
the health care services group (up 37% versus 27% for the Russell Midcap group),
with contributions from such issues as Omnicare, Maxicare Health Plans and
Healthsource. On the negative side, stock selection in the transportation
services area hurt relative performance. The Fund's holdings in the regional
trucking group came under pressure due to intensified competition and a weak
pricing environment, and exposure to this industry was reduced significantly in
the second half of 1995.
Clearly 1995 was an extraordinary year in terms of absolute returns for
investors in U.S. stocks and bonds, and RCM believes that similar gains are
unlikely in the current year. Going into 1996, signs of slowing economic growth
are abundant, and earnings expectations are undergoing downward revisions in
some industries. However, RCM believes that a slow growth macroeconomic
environment is likely to favor the growth style of investing, particularly if
Federal Reserve policy is oriented toward lowering interest rates. Within this
context , RCM believes that medium capitalization growth stocks are favorably
positioned, given the higher relative earnings growth rates of mid-sized
companies.
Page 2
<PAGE>
RCM GROWTH EQUITY FUND
PERFORMANCE SUMMARY
________________________________________________________________________________
[GRAPH]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
The chart above shows the performance of the RCM Growth Equity Fund since the
Fund's inception versus the Russell Midcap Index. The chart represents a
cumulative return of 1,778.80%+ for the Fund. The average annual total return
from the Fund's inception was 19.90%*+. 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
1 YEAR 5 YEAR 10 YEAR FUND*
- -------------------------------------
34.53% 18.95% 15.56% 19.90%
- -------------------------------------
+ Returns assume reinvestment of all dividends and capital gains distributions
at net asset value.
* The Fund began operations on November 6, 1979.
The data above represent 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.
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
Growth Equity Fund (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 statements of changes in net assets for
each of the two years in the period then ended and financial highlights for each
of the ten years in the period then ended. 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
Growth Equity Fund as of December 31, 1995, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended, and financial highlights for each of the ten years in the
period then ended in conformity with generally accepted accounting principles.
COOPERS & LYBRAND, L.L.P.
Boston, Massachusetts
February 9, 1996
Page 4
<PAGE>
RCM GROWTH EQUITY FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
% OF
SHARES EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- ------------------ --------------------------------------------- ---------- --------------------
<S> <C> <C> <C>
CONSUMER DURABLES SECTOR 0.42%
OTHER CONSUMER DURABLES 0.42%
110,000 Bemis Co. Inc. $ 2,818,750
42,200 Newell Co. 1,091,925
60,000 Sealed Air Corp.* 1,687,500
--------------------
5,598,175
--------------------
--------------------
CONSUMER NON-DURABLES SECTOR 12.87%
BEVERAGE AND TOBACCO 0.03%
40,000 P.T. Hanjaya Mandala Sampoerna * 416,357
FOOD AND FOOD PROCESSING 0.04%
16,000 Dreyers Grand Ice Cream Inc. 532,000
GENERAL RETAIL 7.96%
578,800 Autozone Inc.* 16,712,850
173,800 Barnes & Noble Inc.* 5,040,200
475,000 Big B Inc. 4,750,000
29,700 Circuit City Stores Inc. 820,463
210,000 Consolidated Stores Corp.* 4,567,500
341,993 Dollar General Corp. 7,096,355
73,300 Federated Department Stores Inc.* 2,015,750
242,500 Global DirectMail Corp. * 6,668,750
192,800 Gucci Group NV * 7,495,100
56,000 Hannaford Bros. Co. 1,379,000
29,200 Kohls Corp. * 1,533,000
180,800 Movie Gallery Inc. * 5,514,400
20,000 Nine West Group Inc.* 750,000
410,000 OfficeMax Inc.* 9,173,750
160,000 PETsMART Inc. * 4,960,000
307,000 Proffitts Inc.* 8,058,750
409,000 Rite Aid Corp. 14,008,250
57,300 Safeway Stores Inc.* 2,950,950
12,000 Staples Inc.* 292,500
58,200 Talbots Inc. 1,673,250
--------------------
105,460,818
--------------------
</TABLE>
* Non-income producing
The accompanying notes are an integral part of the financial statements
Page 5
<PAGE>
RCM GROWTH EQUITY FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
% OF
SHARES EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- ------------------ --------------------------------------------- ---------- --------------------
<S> <C> <C> <C>
HOUSEHOLD/RELATED NON-DURABLES 1.14%
46,500 American Greetings Corp. Class A $ 1,284,563
639,700 Armor All Products Corp. 11,594,563
89,400 Sola International Inc. * 2,257,350
--------------------
15,136,476
--------------------
LEISURE TIME PRODUCTS/SERVICES 3.70%
437,000 Apple South Inc. 9,395,500
474,000 Doubletree Corp.* 12,442,500
320,000 Host Marriott Corp. * 4,240,000
428,000 Marriott International Inc. 16,371,000
215,521 Mattel Inc. 6,627,271
--------------------
49,076,271
--------------------
CYCLICAL/CAPITAL GOODS SECTOR 12.07%
AEROSPACE/DEFENSE 2.56%
482,000 Sundstrand Corp. 33,920,750
BUILDING AND CONSTRUCTION 2.34%
249,600 Michael Baker Corp.* 1,248,000
276,000 Foster Wheeler Corp. 11,730,000
466,500 Jacobs Engineering Group Inc. * 11,662,500
155,000 Sherwin Williams Co. 6,316,250
--------------------
30,956,750
--------------------
CHEMICALS AND TEXTILES 0.96%
75,000 Millipore Corp. 3,084,375
212,000 Minerals Technologies Inc. 7,738,000
43,000 Valspar Corp. 1,918,875
--------------------
12,741,250
--------------------
ELECTRICAL EQUIPMENT 0.44%
67,500 Hubbell Inc. Class B 4,438,125
50,000 Elsag Bailey Process Auto NV* 1,343,750
--------------------
5,781,875
--------------------
</TABLE>
* Non-income producing
The accompanying notes are an integral part of the financial statements
Page 6
<PAGE>
RCM GROWTH EQUITY FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
% OF
SHARES EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- ------------------ --------------------------------------------- ---------- --------------------
<S> <C> <C> <C>
INDUSTRIAL EQUIPMENT 3.81%
178,200 American Standard Cos. Inc. * $ 4,989,600
180,000 Applied Power Inc. Class A 5,400,000
698,900 Duriron Co. Inc. 16,336,788
412,000 Furon Co. 8,240,000
132,000 Illinois Tool Works Inc. 7,788,000
25,000 Johnson Controls Inc. 1,718,750
170,000 Tyco International Ltd. 6,056,250
--------------------
50,529,388
--------------------
RAW AND BASIC MATERIALS 0.65%
350,000 Commercial Metals Co. 8,662,500
TRANSPORTATION SERVICES 1.31%
347,800 Expeditors International of Washington Inc. 9,086,275
310,000 Harper Group Inc. 5,502,500
135,000 TNT Freightways Corp. 2,716,875
--------------------
17,305,650
--------------------
ENERGY SECTOR 1.68%
OIL AND RELATED SERVICES 1.68%
187,000 BJ Services Co.* 5,423,000
20,000 Devon Energy Corp. 510,000
118,500 Kerr McGee Corp. 7,524,750
267,000 Nowsco Well Service Ltd. 3,337,500
25,000 Nuevo Energy Co.* 559,375
173,000 Pogo Producing Co. 4,887,250
--------------------
22,241,875
--------------------
HEALTHCARE SECTOR 17.34%
DRUGS & HOSPITAL SERVICES 7.49%
36,000 Allergan Inc 1,170,000
136,100 Anesta Corp.* 1,258,925
227,900 Arrow International Inc. 9,059,025
144,100 Autoimmune Inc.* 1,621,125
69,000 Boston Scientific Corp.* 3,381,000
318,800 Centocor Inc. * 9,842,950
</TABLE>
* Non-income producing
The accompanying notes are an integral part of the financial statements
Page 7
<PAGE>
RCM GROWTH EQUITY FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
% OF
SHARES EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- ------------------ --------------------------------------------- ---------- --------------------
<S> <C> <C> <C>
DRUGS & HOSPITAL SERVICES (CONTINUED)
53,981 Chiron Corp.* $ 5,964,901
185,000 Cyberonics Inc.* 878,750
357,800 Forest Laboratories Inc.* 16,190,450
127,314 Guidant Corp. 5,379,017
116,200 ImmuLogic Pharmaceutical Corp.* 2,236,850
150,000 Invacare Corp. 3,787,500
315,200 Nellcor Inc.* 18,281,600
190,000 Physio-Control International * 3,396,250
109,000 Respironics Inc. * 2,289,000
101,200 Sepracor Inc.* 1,859,550
150,000 Sofamor/Danek Group Inc. * 4,256,250
50,000 Synthelabo * 3,132,530
157,900 Thermolase Corp. * 4,085,663
15,000 Thermedics Inc. * 416,250
60,800 Vical Inc.* 737,200
--------------------
99,224,786
--------------------
HEALTH CARE SERVICES 9.85%
150,000 American Medical Response Inc. * 4,875,000
80,000 Amerisource Health Corp. * 2,640,000
188,000 Arbor Health Care Co.* 3,290,000
130,000 Columbia / HCA Healthcare Corp. 6,597,500
290,000 Community Health Systems Inc.* 10,331,250
180,000 Genesis Health Ventures Inc. * 6,570,000
245,000 Health Care & Retirement Corp.* 8,575,000
313,600 Healthsource Inc.* 11,289,600
97,000 Humana Inc.* 2,655,375
181,100 Manor Care Inc. 6,338,500
470,000 Maxicare Health Plans Inc. * 12,631,250
49,800 Orthodontic Centers of America Inc. * 2,402,850
30,700 Oxford Health Plans Inc. * 2,267,963
44,000 Pacificare Health Systems Inc. Class A * 3,828,000
123,500 Pacificare Health Systems Inc. Class B * 10,744,500
33,000 Phycor Inc.* 1,668,563
103,900 Renal Treatment Centers Inc.* 4,571,600
55,000 Service Corp. International 2,420,000
34,000 United HealthCare Corp. 2,227,000
979,500 Vivra Inc.* 24,609,938
--------------------
130,533,889
--------------------
</TABLE>
* Non-income producing
The accompanying notes are an integral part of the financial statements
Page 8
<PAGE>
RCM GROWTH EQUITY FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
% OF
SHARES EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- ------------------ --------------------------------------------- ---------- --------------------
<S> <C> <C> <C>
INTEREST SENSITIVE SECTOR 5.65%
BANKING 2.62%
15,900 BayBanks Inc. $ 1,562,175
170,000 Community First Bankshares 3,867,500
76,000 Compass Bancshares Inc. 2,508,000
48,400 First American Corp. of Tennessee 2,292,950
56,000 First Security Corp. 2,156,000
44,300 Mercantile Bancorporation Inc. 2,037,800
104,800 North Fork Bancorporation Inc. 2,646,200
348,700 ValliCorp Holdings Inc. 4,838,213
173,000 WestAmerica Bancorporation 7,482,250
66,600 Zions Bancorp 5,344,650
--------------------
34,735,738
--------------------
GENERAL FINANCE 0.44%
88,700 Charter One Financial Inc. 2,716,438
21,000 First Financial Corp. 483,000
80,200 TCF Financial Corp. 2,656,625
--------------------
5,856,063
--------------------
INSURANCE 2.59%
70,400 Allied Group Inc 2,534,400
33,500 CMAC Investment Corp. 1,474,000
115,400 Executive Risk Inc. 3,346,600
163,500 PMI Group Inc. 7,398,375
195,700 Transatlantic Holdings Inc. 14,359,488
48,500 Trenwick Group Inc. 2,728,125
62,000 Ace Limited 2,464,500
--------------------
34,305,488
--------------------
SERVICES/MEDIA SECTOR 19.52%
BUSINESS AND FOOD SERVICES 9.87%
320,000 ADT Ltd.* 4,800,000
212,000 Alco Standard Corp. 9,672,500
592,000 Avery Dennison Corp. 29,674,000
481,300 Danka Business Systems PLC ADR 17,808,100
288,800 Franklin Quest Co.* 5,631,600
</TABLE>
* Non-income producing
The accompanying notes are an integral part of the financial statements
Page 9
<PAGE>
RCM GROWTH EQUITY FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
% OF
SHARES EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- ------------------ --------------------------------------------- ---------- --------------------
<S> <C> <C> <C>
BUSINESS AND FOOD SERVICES (CONTINUED)
475,400 G & K Services Inc. Class A $ 12,122,700
253,300 Manpower Inc. 7,124,063
406,000 Olsten Corp. 16,037,000
80,000 Reynolds & Reynolds Class A 3,110,000
198,000 Robert Half International Inc.* 8,291,250
200,000 USA Waste Services Inc.* 3,775,000
90,700 United Waste Systems Inc.* 3,378,575
160,000 Unitog Co. 3,860,000
100,000 Wallace Computer Services Inc. 5,462,500
--------------------
130,747,288
--------------------
COMMUNICATION SERVICES 7.58%
333,000 American Mobile Satellite Corp.* 10,198,125
50,000 Cellular Communications Inc. * 2,487,500
53,000 Cellular Communications Inc.
Convertible Preferred* 2,636,750
208,000 CommNet Cellular Inc.* 6,006,000
1,122,600 Frontier Corp. 33,678,000
287,600 MFS Communications Inc.* 15,314,700
25,000 MFS Communications Inc. Depositary Shares
(representing Series A, 8% convertible
preferred stock) * 1,217,188
120,000 Orbital Sciences Corp.* 1,530,000
40,500 Paging Network Inc.* 987,188
120,000 PanAmSat Corp.* 2,647,500
708,000 Vanguard Cellular Systems Inc. Class A* 14,337,000
267,000 WorldCom Inc.* 9,411,750
--------------------
100,451,701
--------------------
MEDIA SERVICES 2.07%
60,000 CableVision Systems Corp. Class A* 3,255,000
30,000 Central European Media Entertainment
Ltd. Class A* 615,000
175,000 Comcast Corp Special Class A 3,182,813
180,000 Comcast UK Cable Partners Ltd. * 2,250,000
40,000 Gartner Group Inc. Class A* 1,915,000
256,000 Harcourt General Inc. 10,720,000
77,000 Heritage Media Corp. Class A* 1,973,125
70,000 Readers Digest Assn. Inc. Class A Non-Voting 3,587,500
--------------------
27,498,438
--------------------
</TABLE>
* Non-income producing
The accompanying notes are an integral part of the financial statements
Page 10
<PAGE>
RCM GROWTH EQUITY FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
% OF
SHARES EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- ------------------ --------------------------------------------- ---------- --------------------
<S> <C> <C> <C>
TECHNOLOGY SECTOR 27.64%
COMPUTERS AND OFFICE EQUIPMENT 0.67%
69,800 Dell Computer Corp.* $ 2,416,825
195,800 E M C Corp.* 3,010,425
110,015 Paxar Corp.* 1,457,699
143,100 STAC Inc.* 2,057,063
--------------------
8,942,012
--------------------
ELECTRONICS AND NEW TECHNOLOGY 17.10%
387,600 Allen Group Inc. 8,672,550
136,200 Altera Corp.* 6,775,950
562,800 Analog Devices Inc.* 19,909,050
28,300 Ascend Communications Inc.* 2,295,838
256,950 Bay Networks Inc.* 10,567,069
535,000 Black Box Corp.* 8,760,625
187,300 Cabletron Systems Inc.* 15,171,300
74,400 Ericsson LM Telephone Co. ADR 1,450,800
42,100 Glenayre Technologies Inc.* 2,620,725
19,100 Information Storage Devices Inc.* 212,488
210,000 Kent Electronics Corp.* 12,258,750
294,000 LSI Logic Corp.* 9,628,500
8,000 Lattice Semiconductor Corp.* 261,000
219,000 Linear Technology Corp. 8,595,750
262,200 Maxim Integrated Products Inc.* 10,094,700
517,100 Microchip Technology Inc.* 18,874,150
397,500 Molex Inc. Class A 12,173,438
289,600 Network Equipment Technologies Inc.* 7,927,800
583,000 Network General Corp.* 19,457,625
225,900 Nokia Corp. Sponsored ADR Preferred 8,781,863
52,200 Oak Technology Inc.* 2,205,450
52,300 Qualcomm Inc.* 2,248,900
91,500 SGS Thomson Microelectronics NV* 3,682,875
34,400 Samsung Electronics Co., Ltd. GDS 144A* 2,064,000
13,952 Samsung Electronics Co., Ltd. GDR 144A
Non-Voting* 837,120
1,048 Samsung Electronics Co., Ltd. GDR 144A
New Common* 92,224
124,500 Sanmina Corp.* 6,458,438
169,200 Scientific Atlanta Inc. 2,538,000
161,000 Sierra Semiconductor Corp.* 2,233,875
93,900 StrataCom Inc.* 6,901,650
117,000 Thermo Electron Corp.* 6,084,000
</TABLE>
* Non-income producing
The accompanying notes are an integral part of the financial statements
Page 11
<PAGE>
RCM GROWTH EQUITY FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
% OF
SHARES EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- ------------------ --------------------------------------------- ---------- --------------------
<S> <C> <C> <C>
ELECTRONICS AND NEW TECHNOLOGY (CONTINUED)
50,200 U S Robotics Corp.* $ 4,405,050
65,000 Zilog Inc.* 2,380,625
--------------------
226,622,178
--------------------
TECHNOLOGY SERVICES 9.87%
89,500 America Online Inc. * 3,356,250
530,150 American Management Systems Inc.* 15,904,500
312,200 BISYS Group Inc.* 9,600,150
103,600 H & R Block Inc. 4,195,800
51,200 CBT Group PLC Sponsored ADR * 2,713,600
428,208 Ceridian Corp.* 17,663,580
95,300 Cerner Corp. * 1,953,650
47,800 Citrix Systems Inc. * 1,553,500
64,200 Computer Sciences Corp.* 4,510,050
12,650 DST Systems Inc. * 360,525
52,200 Expert Software Inc. * 730,800
122,000 FileNet Corp.* 5,734,000
169,002 First Data Corp. 11,302,009
13,000 HBO & Co. 996,125
832,400 Informix Corp. * 24,972,000
141,600 Medaphis Corp. * 5,239,200
32,100 Medic Computer Systems Inc.* 1,942,050
99,600 National Data Corp. 2,465,100
122,400 PMT Services Inc.* 3,702,600
29,000 Security Dynamics Technologies Inc. * 1,580,500
165,900 Sterling Software Inc.* 10,348,000
--------------------
130,823,989
--------------------
TOTAL EQUITY INVESTMENTS
(COST $1,022,611,382) 97.19% 1,288,101,705
--------------------
</TABLE>
* Non-income producing
The accompanying notes are an integral part of the financial statements
Page 12
<PAGE>
RCM GROWTH EQUITY FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
% OF
PRINCIPAL SHORT TERM INVESTMENTS NET ASSETS MARKET VALUE
- ------------------ --------------------------------------------- ---------- --------------------
<S> <C> <C> <C>
COMMERCIAL PAPER 1.43%
$ 12,000,000 Ford Motor Credit Co. $ 11,996,053
5.92% maturing 1/3/96
7,000,000 Ford Motor Credit Co. 6,987,701
5.75% maturing 1/12/96
--------------------
18,983,754
--------------------
SHARES MONEY MARKET FUNDS 0.43%
- ------------------
5,625,447 Seven Seas Series U.S. Government
Money Market Fund 5,625,447
--------------------
TOTAL SHORT-TERM INVESTMENTS 1.86%
(COST $24,609,201) 24,609,201
--------------------
TOTAL INVESTMENTS (COST $1,047,220,583) (a) 1,312,710,906
OTHER ASSETS LESS LIABILITIES 0.95% 12,579,580
--------------------
NET ASSETS 100.00% $ 1,325,290,486
--------------------
--------------------
</TABLE>
- -------------------------
(a) For Federal income tax purposes, cost is $1,048,957,197
and unrealized appreciation (depreciation) of equity
securities is as follows:
<TABLE>
<CAPTION>
<S> <C>
Unrealized appreciation $ 286,017,030
Unrealized depreciation (22,263,321)
--------------------
Net unrealized appreciation $ 263,753,709
--------------------
--------------------
</TABLE>
* Non-income producing
The accompanying notes are an integral part of the financial statements.
Page 13
<PAGE>
RCM GROWTH EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value (cost $1,047,220,583) (Note 1) $ 1,312,710,906
Foreign currency, at value (cost $3,009,310) 3,010,723
Receivable for securities sold 16,551,639
Dividends receivable 610,474
Receivable for Fund shares sold 225,178
------------------
Total Assets 1,333,108,920
------------------
LIABILITIES:
Payable for securities purchased 4,719,061
Payable for investment management fees (Note 5) 3,034,931
Payable for custodian fees 45,442
Payable for Fund shares repurchased 19,000
------------------
Total Liabilities 7,818,434
------------------
NET ASSETS $ 1,325,290,486
------------------
------------------
NET ASSET VALUE PER SHARE
($1,325,290,486 divided by 5,806,825 shares outstanding) $ 228.23
------------------
------------------
NET ASSETS CONSIST OF:
Paid in capital $ 992,951,928
Undistributed net investment income 49,873
Accumulated net realized gain on investments and foreign
currency transactions 66,845,126
Net unrealized depreciation on foreign currency transactions (46,764)
Net unrealized appreciation on investments 265,490,323
------------------
NET ASSETS $ 1,325,290,486
------------------
------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
Page 14
<PAGE>
RCM GROWTH EQUITY FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME:
Income:
Dividends (net of foreign withholding tax of $65,304) $ 9,579,076
Interest 4,876,934
---------------
Total income 14,456,010
---------------
Expenses:
Investment management fees (Note 5) 11,038,366
Custodian fees 169,987
Miscellaneous expenses 1,505
---------------
Total expenses 11,209,858
---------------
Net investment income 3,246,152
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS:
Net realized gain on investments 280,162,016
Net realized gain on foreign currency transactions 830,455
---------------
Net realized gain during the year 280,992,471
---------------
Net unrealized depreciation on foreign currency transactions (46,764)
Net unrealized appreciation on investments 152,217,554
---------------
Net unrealized appreciation during the year 152,170,790
---------------
Net realized and unrealized gain on investments
and foreign currency transactions 433,163,261
---------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 436,409,413
---------------
---------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
Page 15
<PAGE>
RCM GROWTH EQUITY FUND
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
---------------- ----------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 3,246,152 $ 3,790,123
Net realized gain on investments and
foreign currency transactions 280,992,471 253,475,641
Net unrealized appreciation (depreciation)
on investments and foreign currency 152,170,790 (251,884,031)
---------------- ----------------
Net increase in net assets resulting from
operations 436,409,413 5,381,733
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 2):
Net investment income (3,221,602) (4,164,653)
Net realized gain on investments (203,938,943) (334,279,337)
NET DECREASE FROM CAPITAL SHARES
TRANSACTIONS (NOTE 3) (269,044,478) (350,660,663)
---------------- ----------------
NET DECREASE IN NET ASSETS (39,795,610) (683,722,920)
NET ASSETS:
Beginning of year 1,365,086,096 2,048,809,016
---------------- ----------------
End of year $ 1,325,290,486 $ 1,365,086,096
---------------- ----------------
---------------- ----------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
Page 16
<PAGE>
RCM GROWTH EQUITY FUND
FINANCIAL HIGHLIGHTS
Selected data for each share of capital stock outstanding for the ten years
ended December 31, 1995 are as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990
--------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of year $ 197.31 $ 260.43 $ 274.14 $ 288.48 $ 212.27 $ 228.09
---------- ---------- ---------- ---------- ---------- ----------
Net investment income 0.57 0.74 0.97 1.68 2.31 3.67
Net realized and unrealized gain (loss)
on investments 66.36 0.34 26.95 17.74 98.11 (13.14)
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) in net asset value 66.93 1.08 27.92 19.42 100.42 (9.47)
resulting from investment operations ---------- ---------- ---------- ---------- ---------- ----------
Distributions:
Net investment income (0.56) (0.79) (1.00) (1.70) (2.29) (4.21)
Net realized gain on investments (35.45) (63.41) (40.63) (32.06) (21.92) (2.14)
---------- ---------- ---------- ---------- ---------- ----------
Total distributions (36.01) (64.20) (41.63) (33.76) (24.21) (6.35)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 228.23 $ 197.31 $ 260.43 $ 274.14 $ 288.48 $ 212.27
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
Total Return (b) 34.53% 0.76% 10.72% 7.03% 48.23% (4.12%)
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
Ratios and supplemental data:
Net assets, end of year (in millions) $ 1,325 $ 1,365 $ 2,049 $ 2,122 $ 2,138 $ 1,300
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
Ratio of expenses to average net assets 0.8% 0.8% 0.8% 0.8% 0.7% 0.8%
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
Ratio of net investment income to
average net assets 0.2% 0.2% 0.3% 0.6% 0.9% 1.8%
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
Portfolio turnover 96.5% 111.1% 67.0% 56.8% 62.7% 50.0%
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
<CAPTION>
1989 1988 1987 1986(a)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of year $ 199.99 $ 177.22 $ 207.52 $ 211.83
---------- ---------- ---------- ----------
Net investment income 3.94 2.83 1.72 1.59
Net realized and unrealized gain (loss)
on investments 49.62 33.89 20.52 17.83
---------- ---------- ---------- ----------
Net increase (decrease) in net asset value 53.56 36.72 22.24 19.42
resulting from investment operations ---------- ---------- ---------- ----------
Distributions:
Net investment income (3.98) (2.92) (4.06) (3.94)
Net realized gain on investments (21.48) (11.03) (48.48) (19.79)
---------- ---------- ---------- ----------
Total distributions (25.46) (13.95) (52.54) (23.73)
---------- ---------- ---------- ----------
Net asset value, end of year $ 228.09 $ 199.99 $ 177.22 $ 207.52
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Total Return (b) 26.87% 20.86% 10.97% 9.33%
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Ratios and supplemental data:
Net assets, end of year (in millions) 1,284 $ 964 $ 553 $ 461
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Ratio of expenses to average net assets 0.7% 0.7% 0.8% 0.7%
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Ratio of net investment income to
average net assets 1.8% 1.8% 0.9% 1.3%
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Portfolio turnover 70.8% 64.7% 79.9% 78.2%
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
- -------------------
(a) On July 9, 1986, RCM Capital Management, the successor to the business and
operations of Rosenberg Capital Management, became the investment manager.
(b) Total return measures the change in value of an investment over the period
indicated.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
Page 17
<PAGE>
RCM GROWTH EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. SIGNIFICANT ACCOUNTING POLICIES
RCM Growth Equity Fund (the "Fund") is a 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 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 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)
Page 18
<PAGE>
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
d. 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.
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. DISTRIBUTIONS
On December 14, 1995 a distribution of $36.01 per share, aggregating
$207,160,545, was paid from investment operations. This per share amount
consisted of $0.56 net investment income, $12.70 short-term capital gains and
$22.75 long-term capital gains. The dividend was recorded on December 14, 1995
to shareholders of record on the same date.
3. 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, 12,000,000 were classified as
shares of the Fund; 8,000,000 were classified as shares of RCM Small Cap Fund;
4,500,000 were classified as shares of RCM International Growth Equity Fund A;
and 500,000 shares remain unclassified. Transactions in capital shares of the
Fund were as follows:
<TABLE>
<CAPTION>
Year ended December 31, 1995
-------------------------------
Shares Amount
------------- ----------------
<S> <C> <C>
Shares sold 371,800 $ 87,032,923
Shares issued in connection with reinvestment 921,263 203,424,163
of distributions
Shares repurchased (2,404,710) (559,501,564)
------------- ----------------
Net decrease (1,111,647) $ (269,044,478)
------------- ----------------
------------- ----------------
</TABLE>
<TABLE>
<CAPTION>
Year ended December 31, 1995
-------------------------------
Shares Amount
------------- ----------------
<S> <C> <C>
Shares sold 247,311 $ 61,789,994
Shares issued in connection with reinvestment 1,712,075 333,257,117
of distributions
Shares repurchased (2,907,908) (745,707,774)
------------- ----------------
Net decrease (948,522) $ (350,660,663)
------------- ----------------
------------- ----------------
</TABLE>
At December 31, 1995, two unaffiliated shareholders individually held greater
than 10%, and in aggregate held 30%, of the outstanding shares of the Fund.
(Continued)
Page 19
<PAGE>
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales proceeds of investment securities by the Fund, excluding
short-term securities, aggregated $1,337,896,346 and $1,784,347,355,
respectively, for the year ended December 31, 1995.
5. 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 a rate of 3/16 of 1% (approximately 3/4 of
1% on an annual basis) of the average net assets of the Fund during the
preceding quarter. For the year ended December 31, 1995, the Fund paid
investment management fees aggregated $11,038,366.
The RCM Capital Management Profit Sharing Plan ("the Plan"), participation in
which is limited to officers and employees of RCM, owned 10,399 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.
Page 20
