<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 19.07% over the 12 months ended December 31, 1996. The Fund
finished the year 7 basis points ahead of its primary benchmark, the Russell
Midcap Index, which registered a total return of 19.00% for the same period.
These results were achieved in the context of a market environment which
strongly favored large capitalization equities over medium and small
capitalization equities, especially after the June/July correction. 1996 was
a year in which the major mid cap benchmarks significantly underperformed
large cap indices such as the Dow Jones Industrial Average and the S&P 500
Composite Index, which returned 28.91% and 22.96%, respectively.
After posting outstanding returns in 1995, U.S. stocks and bonds rallied
strongly again in the first half of 1996. Consensus expectations going into the
year called for a slowing economic environment including low inflation and
continued declines in interest rates. By early in the second quarter, however,
signs of economic re-acceleration appeared, and inflation fears began to
surface. Despite the shifting macroeconomic outlook, equity mutual fund cash
flows reached record levels in the first half of 1996, and the market for
initial public offerings (IPOs) exploded. Stocks of all capitalizations
participated in this first half advance, although mid cap issues got off to a
weak start in the month of January. The relative strength of the mid cap sector
bottomed in February, though, and the Russell Midcap Index outperformed the S&P
500 Index in the months of March, April and May. By June, however, the relative
strength of the mid cap sector versus large cap equities began to deteriorate
markedly. At midyear, the Russell Midcap Index lagged the S&P 500 by 109 basis
points. The Fund's performance, however, was ahead of its primary benchmark and
essentially matched the return on the S&P 500. Factors contributing to
outperformance in the first half of the year included the Fund's overweightings
in communications services and in leisure time products and services. Returns
were also aided by the growth stock focus of RCM Capital Management, L.L.C.
("RCM"), investment manager of the Fund. Growth investment styles significantly
outperformed value styles in the first six months of 1996.
U.S. stocks began to weaken in June and suffered a violent correction in the
month of July. A series of stronger-than-expected economic releases generated
fears that the Federal Reserve would be forced into a series of rate hikes to
keep growth and inflation in tow. As is typical, the mid and small cap sectors
of the market exhibited significantly more volatility on the downside during
this corrective phase, especially given their appreciation through May. Equity
mutual fund cash contributions evaporated and the IPO market "window" slammed
shut. The broader market began to recover in the late summer as rate fears
eased again and investors began to embrace a "Goldilocks" economic scenario
(slow-to-moderate growth with little or no inflation.) Mutual fund cash inflows
resumed, albeit not at the record levels of the first half. The Dow Jones
Industrial Average and the S&P 500 Index posted exceptional gains from late
summer through the end of the year. But while mid cap universes recorded
respectable absolute returns - and did better than small cap stocks - they
severely underperformed large cap indices, as investors appeared willing to
accord a premium to liquidity after the summer correction.
The Fund's outperformance relative to the Russell Midcap Index in 1996 was
attributable to stock selection, which was positive in several industries.
Electronics and new technology was a highly volatile sector during 1996, but
individual issue selection in this area was a strong contributor to relative
performance versus the Fund's primary benchmark. The Fund's holdings in this
group were up an aggregate of 20% versus a gain of approximately 10% for the
Russell Midcap Index stocks in this group. The Fund's major holdings in this
group included Sanmina Corp. (+118% total return for the year), Network General
(+81%) and 3COM Corporation (+57%). The Fund's
<PAGE>
holdings in the business services sector gained 26% on average, compared to an
average return of 6% for the benchmark stocks in this group. Significant
positive contributions came from issues such as G&K Services, United Waste
Systems and Robert Half International. Technology services stocks held by the
Fund were up approximately 15%, compared to an average gain of only about 4% for
the technology services stocks in the Russell Midcap Index. CBT Group, Sterling
Commerce, American Management Systems and Veritas Software were among the Fund's
strongest performers in this industry segment. On the negative side, stock
selection in the health care services area hurt relative performance. In
general, mid and small cap health care services stocks were weak performers in
1996, as investors' concerns about pricing and reimbursement issues caused HMO,
home health care and nursing home stocks to come under pressure. The Fund's
holdings in this industry segment were down an average of 9%, compared to a gain
of about 6% for the stocks in the benchmark health care services group. RCM's
stocks in the insurance group also registered a modest negative impact from
adverse stock selection.
Overall, the Fund's strategy on industry weightings was not a favorable element
in performance relative to the Russell Midcap Index in 1996. Nevertheless,
industry strategies that were positive contributors included an overweighting in
the strong aerospace sector (3.5% versus 1.5% in the Russell Midcap Index).
Several lagging industry groups were underweighted by the Fund in 1996, thereby
adding to relative performance. These included raw and basic materials, retail
trade and utilities (the latter is not typically an industry in which the Fund
would have significant investment). Unfortunately, several key growth
industries in which RCM traditionally maintains high relative weightings were
severely punished during the mid summer correction and in the market's pull-back
in the October time frame. Overweightings in technology services, health care
services, drugs and hospital supplies and business services resulted in negative
contributions from industry strategy (although, as noted above, individual issue
selection was significantly positive in technology services and business
services). The Fund's weightings in health care services were reduced
significantly in the first half of the year. Technology holdings were also
reduced to less significant overweightings before the summer correction, then
raised again going into the fall time frame. The Fund's underweighting in the
interest sensitive and financial industry groups (6.5% versus 18%, excluding
utilities, in the Russell Midcap Index) was also a negative factor in relative
performance from an industry strategy perspective. Due to the growth stock
orientation of RCM, it is typical for the Fund to be underweighted in the
interest sensitive area versus the large weighting in these groups in the
Russell Midcap Index. Although the Fund's average cash position of about 4% for
the year was at the low end of its "normal" range, cash was a negative
contributor to relative performance given the rising market environment.
Like 1995, the past year was an exceptional one in terms of absolute returns for
investors in U.S. stocks across all capitalization ranges, even though mid cap
universes did not match the returns of the Dow Jones Industrial Average or the
S&P 500 Index. While RCM is not bearish going into 1997, historical precedent
and RCM's valuations argue strongly against placing a high probability on
similar gains for the overall market for 1997. Nevertheless, RCM believes that
a slow-to-moderate growth macroeconomic environment is likely to favor the
growth style of investing. Furthermore, RCM believes that the conspicuous
outperformance of large capitalization equities in the second half of 1996
(exacerbated by the surging popularity of indexing) has resulted in attractive
relative valuations in mid and small capitalization stocks early in 1997,
especially given the higher relative earnings growth rates of medium and
small-sized companies.
Page 2
<PAGE>
RCM GROWTH EQUITY FUND
PERFORMANCE SUMMARY
- -------------------------------------------------------------------------------
[GRAPHIC]
RCM Growth Equity Fund Russell Midcap Index
11/6/79 10,000 10,000
11/30/79 10,393 10,740
12/31/79 10,719 11,158
1/31/80 11,210 11,777
2/28/80 10,792 11,516
3/31/80 9,599 9,996
4/30/80 10,028 10,641
5/31/80 10,856 11,467
6/30/80 11,315 12,024
7/31/80 12,980 13,034
8/31/80 13,656 13,375
9/30/80 14,396 13,821
10/31/80 14,878 13,966
11/30/80 15,935 15,074
12/31/80 15,665 14,784
1/31/81 15,304 14,439
2/28/81 15,725 14,694
3/31/81 17,588 15,843
4/30/81 18,134 15,918
5/31/81 19,279 16,306
6/30/81 18,560 16,008
7/31/81 18,247 15,809
8/31/81 17,371 14,908
9/30/81 16,587 13,951
10/31/81 18,157 14,914
11/30/81 18,503 15,518
12/31/81 18,211 15,139
1/31/82 17,929 14,583
2/28/82 17,527 13,964
3/31/82 17,476 13,825
4/30/82 18,682 14,486
5/31/82 18,511 13,970
6/30/82 18,441 13,595
7/31/82 18,512 13,274
8/31/82 20,047 14,871
9/30/82 20,666 15,293
10/31/82 23,233 17,338
11/30/82 25,235 18,395
12/31/82 25,710 18,660
1/31/83 27,172 19,319
2/28/83 28,967 19,987
3/31/83 30,108 20,691
4/30/83 32,700 21,984
5/31/83 34,645 22,903
6/30/83 36,064 23,737
7/31/83 34,391 22,991
8/31/83 33,610 22,846
9/30/83 34,935 23,486
10/31/83 33,413 22,575
11/30/83 34,930 23,541
12/31/83 34,348 23,105
1/31/84 32,764 22,449
2/29/84 31,089 21,235
3/31/84 31,709 21,587
4/30/84 31,839 21,350
5/31/84 30,674 20,146
6/30/84 32,051 20,774
7/31/84 31,196 20,166
8/31/84 34,191 22,684
9/30/84 33,648 22,791
10/31/84 33,611 22,880
11/30/84 32,993 22,784
12/31/84 33,496 23,435
1/31/85 37,254 25,659
2/29/1985 38,042 26,119
3/31/85 37,399 25,970
4/30/85 36,747 25,894
5/31/85 39,165 27,365
6/30/85 39,965 28,030
7/31/85 40,928 27,994
8/31/85 40,385 27,876
9/30/85 38,429 26,510
10/31/85 40,118 27,883
11/30/85 42,578 29,810
12/31/85 44,235 30,937
1/31/86 45,046 31,633
2/28/86 48,307 34,205
3/31/86 49,783 36,003
4/30/86 50,541 35,845
5/31/86 52,554 37,701
6/30/86 51,571 38,216
7/31/86 47,374 35,687
8/31/86 49,140 38,219
9/30/86 45,601 35,511
10/31/86 48,335 37,364
11/30/86 48,946 37,640
12/31/86 48,361 36,569
1/31/87 54,951 41,072
2/28/87 59,189 43,530
3/31/87 60,968 43,942
4/30/87 60,390 42,842
5/31/87 62,092 42,989
6/30/87 64,592 44,737
7/31/87 67,740 46,653
8/31/87 70,486 48,302
9/30/87 68,483 47,379
10/31/87 49,455 35,710
11/30/87 47,006 33,727
12/31/87 53,665 36,652
1/31/88 53,930 38,355
2/29/88 58,780 41,072
3/31/88 60,415 41,126
4/30/88 61,386 41,380
5/31/88 60,234 41,283
6/30/88 64,720 44,110
7/31/88 63,335 43,225
8/31/88 61,789 42,264
9/30/88 64,192 43,702
10/31/88 63,486 43,889
11/30/88 62,127 42,836
12/31/88 64,859 43,910
1/31/89 68,192 46,537
2/28/89 67,612 46,427
3/31/89 68,994 47,190
4/30/89 73,125 49,465
5/31/89 77,254 51,695
6/30/89 74,440 51,503
7/31/89 79,915 55,093
8/31/89 83,387 56,935
9/30/89 83,428 56,413
10/31/89 79,787 53,752
11/30/89 80,873 54,489
12/31/89 82,292 55,446
1/31/90 75,120 50,999
2/28/90 77,825 52,033
3/31/90 80,029 53,300
4/30/90 78,163 51,011
5/31/90 86,194 55,632
6/30/90 87,034 55,271
7/31/90 84,425 53,628
8/31/90 75,868 47,860
9/30/90 71,033 44,312
10/31/90 69,568 42,913
11/30/90 75,112 47,046
12/31/90 78,902 49,072
1/31/91 85,003 52,398
2/28/91 92,631 56,764
3/31/91 97,028 59,119
4/30/91 96,459 59,474
5/31/91 101,948 62,298
6/30/91 96,909 59,427
7/31/91 102,335 62,340
8/31/91 105,602 64,204
9/30/91 105,329 63,830
10/31/91 108,557 65,138
11/30/91 104,724 62,445
12/31/91 116,960 69,442
1/31/92 119,326 70,748
2/28/92 120,948 72,373
3/31/92 115,847 70,524
4/30/92 113,545 71,075
5/31/92 114,312 71,534
6/30/92 108,991 70,374
7/31/92 112,618 73,316
8/31/92 110,272 71,628
9/30/92 113,146 73,113
10/31/92 117,301 74,902
11/30/92 122,190 78,677
12/31/92 125,186 80,789
1/31/93 125,594 82,405
2/28/93 121,886 82,496
3/31/93 124,822 85,179
4/30/93 121,150 82,922
5/31/93 126,171 85,555
6/30/93 126,630 86,522
7/31/93 125,543 86,939
8/31/93 131,747 90,806
9/30/93 134,398 91,153
10/31/93 135,795 91,229
11/30/93 131,931 89,113
12/31/93 138,604 92,341
1/31/94 143,687 94,889
2/28/94 142,568 93,598
3/31/94 134,622 89,611
4/30/94 135,889 90,226
5/31/94 134,603 90,349
6/30/94 130,975 87,673
7/31/94 132,730 90,682
8/31/94 141,423 94,981
9/30/94 140,120 92,660
10/31/94 142,420 93,369
11/30/94 137,052 89,250
12/31/94 139,650 90,409
1/31/95 140,145 92,266
2/28/95 146,023 97,042
3/31/95 151,805 99,819
4/30/95 152,385 101,324
5/31/95 155,053 104,654
6/30/95 162,810 108,171
7/31/95 174,821 113,423
8/31/95 177,454 115,160
9/30/95 183,158 117,762
10/31/95 179,789 115,128
11/30/95 185,416 120,853
12/31/95 187,880 121,558
1/31/96 190,835 124,137
2/28/96 200,326 127,052
3/31/96 203,882 128,890
4/30/96 212,394 132,542
5/31/96 215,917 134,544
6/30/96 206,821 132,526
7/31/96 188,917 124,324
8/31/96 198,795 130,243
9/30/96 211,760 136,676
10/31/96 211,966 137,772
11/30/96 222,461 146,165
12/31/96 223,710 144,673
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
The chart above shows the performance of the RCM Growth Equity Fund since its
inception versus the Russell Midcap Index.# The chart represents a cumulative
return of 2,137.10%+ for the Fund. The average annual total return from the
Fund's inception was 19.85%*+. The chart assumes a hypothetical $10,000 initial
investment in the Fund and reflects all Fund expenses.
AVERAGE ANNUAL TOTAL RETURNS+
DECEMBER 31, 1996
LIFE OF
1 YEAR 5 YEAR 10 YEAR FUND*
- ------ ------ ------- -------
19.07% 13.85% 16.55% 19.85%
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.
- -------------------------
# The Russell Midcap Index is composed of the smallest 800 companies in the
Russell 1000 Index. The Russell 1000 Index is made up of the 1,000 largest
companies in the Russell 3000 Index, which is composed of 3,000 large U.S.
companies by market capitalization and represents approximately 98% of the
U.S. equity market.
+ Returns assume reinvestment of all dividends and capital gains
distributions at net asset value.
* The Fund began operations on November 6, 1979.
Page 3
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of RCM Growth Equity Fund 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, 1996, 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 the financial highlights for
each of the periods indicated therein. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our 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, 1996, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of RCM
Growth Equity Fund as of December 31, 1996, 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 the financial highlights for each of the periods
indicated therein, in conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
February 20, 1997
Page 4
<PAGE>
RCM GROWTH EQUITY FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
DECEMBER 31, 1996
% OF
SHARES EQUITY INVESTMENTS NET ASSETS MARKET VALUE
---------- ---------------------------- -------------- --------------
CONSUMER DURABLES SECTOR 2.17%
AUTOMOTIVE RELATED 1.82%
362,000 Lear Corp. * $ 12,353,250
126,800 Tower Automotive Inc. * 3,962,500
-------------
16,315,750
-------------
OTHER CONSUMER DURABLES 0.35%
57,500 Bemis Co. Inc. 2,120,313
31,000 Newell Co. 976,500
------------
3,096,813
------------
CONSUMER NON-DURABLES SECTOR 9.89%
BEVERAGE AND TOBACCO 0.44%
33,500 Coca Cola Enterprises Inc. 1,624,750
26,000 Robert Mondavi Corp. * 949,000
28,000 Pan American Beverages Inc. Class A 1,312,500
------------
3,886,250
------------
GENERAL RETAIL 3.26%
31,000 CVS Corp. 1,282,625
18,000 Circuit City Stores Inc. 542,250
36,500 Consolidated Stores Corp. * 1,172,563
88,000 Global DirectMail Corp. * 3,839,000
64,000 Hannaford Bros. Co. 2,176,000
40,500 Nine West Group Inc. * 1,878,188
142,000 PETsMART Inc. * 3,106,250
70,000 Proffitt's Inc. * 2,581,250
153,800 Saks Holdings Inc. * 4,152,600
318,000 Viking Office Products Inc. * 8,486,625
------------
29,217,351
------------
HOUSEHOLD/RELATED NON-DURABLES 0.59%
59,500 Designer Holdings Ltd. * 959,438
54,000 Nu Skin Asia Pacific Inc. * 1,667,250
9,828 Salton/Maxim Housewares Inc. 68,796
35,700 Sola International Inc. 1,356,600
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, 1996
% OF
SHARES EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- ---------- ---------------------------------- -------------- --------------
HOUSEHOLD/RELATED NON-DURABLES
(CONTINUED)
39,000 Unifi Inc. $ 1,252,875
-------------
5,304,959
-------------
LEISURE TIME PRODUCTS/SERVICES 5.60%
297,500 Doubletree Corp. * 13,387,500
18,000 Family Golf Centers Inc. * 542,250
195,000 Hasbro Inc. 7,580,625
1,050,900 Host Marriott Corp. * 16,814,400
125,000 Interstate Hotels Co. * 3,531,250
45,000 Marriott International Inc. 2,486,250
297,000 Planet Hollywood International Inc. * 5,865,750
-------------
50,208,025
-------------
CYCLICAL/CAPITAL GOODS SECTOR 12.95%
AEROSPACE/DEFENSE 3.57%
670,000 Sundstrand Corp. 28,475,000
160,000 Wyman-Gordon Co. * 3,560,000
-------------
32,035,000
-------------
BUILDING AND CONSTRUCTION 0.32%
40,000 Foster Wheeler Corp. 1,485,000
60,000 Jacobs Engineering Group Inc. * 1,417,500
-------------
2,902,500
-------------
CHEMICALS AND TEXTILES 0.52%
35,000 Cytec Industries Inc. * 1,421,875
40,000 Rohm & Haas Co. 3,265,000
-------------
4,686,875
-------------
ELECTRICAL EQUIPMENT 1.66%
66,000 Honeywell Inc. 4,339,500
62,500 Hubbell Inc. Class B 2,703,125
97,500 Raychem Corp. 7,812,188
-------------
14,854,813
-------------
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, 1996
% OF
SHARES EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- ---------- ---------------------------------- -------------- --------------
INDUSTRIAL EQUIPMENT 2.48%
87,500 Duriron Co. Inc. $ 2,373,438
50,000 Illinois Tool Works Inc. 3,993,750
62,000 Johnson Controls Inc. 5,138,250
133,500 Tyco International Ltd. 7,058,813
65,000 York International Corp. 3,631,875
-------------
22,196,126
-------------
RAW AND BASIC MATERIALS 1.89%
331,000 Commercial Metals Co. 9,971,375
185,000 UCAR International Inc. * 6,960,625
-------------
16,932,000
-------------
TRANSPORTATION SERVICES 2.51%
444,000 Expeditors International of Washington Inc. 10,212,000
83,900 Heartland Express Inc. * 2,045,063
75,000 Southwest Airlines Co. 1,659,375
265,000 Swift Transportation Co. Inc. * 6,227,500
130,000 Werner Enterprises Inc. 2,356,250
-------------
22,500,188
-------------
ENERGY SECTOR 2.74%
OIL AND RELATED SERVICES 2.74%
172,000 BJ Services Co. * 8,772,000
102,000 Camco International Inc. 4,704,750
180,000 Forcenergy Gas Exploration Inc. * 6,525,000
225,000 Houston Exploration Co. * 3,937,500
12,500 Noble Affiliates Inc. 598,438
-------------
24,537,688
-------------
HEALTH CARE SECTOR 14.25%
DRUGS & HOSPITAL SERVICES 6.27%
29,400 Allergan Inc. 1,047,375
25,000 Amgen Inc. * 1,359,375
29,300 Anesta Corp. * 564,025
27,200 Autoimmune Inc. * 418,200
1,400 Boston Scientific Corp. * 84,000
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, 1996
% OF
SHARES EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- ---------- ---------------------------------- -------------- --------------
DRUGS & HOSPITAL SERVICES
(CONTINUED)
345,100 Centocor Inc. * $ 12,337,325
109,100 CIMA Labs Inc. * 668,238
85,000 Dura Pharmaceuticals Inc. * 4,058,750
121,614 Guidant Corp. 6,931,998
63,000 Invacare Corp. 1,732,500
28,000 Mentor Corp. Minn. 826,000
65,600 Pharmacia & Upjohn Inc. 2,599,400
74,600 Physio-Control International Corp. * 1,678,500
128,000 Respironics Inc. * 2,224,000
31,000 SangStat Medical Corp. * 821,500
32,700 Sepracor Inc. * 543,638
266,100 Sofamor/Danek Group Inc. * 8,116,050
17,600 Synthelabo 1,902,978
37,000 Thermo Cardiosystems Inc. * 1,110,000
13,700 Thermolase Corp. * 215,775
315,000 VISX Inc. * 6,969,375
-------------
56,209,002
-------------
HEALTH CARE SERVICES 7.98%
78,300 American Medical Response Inc. * 2,544,750
73,800 AmeriSource Health Corp. * 3,560,850
27,000 Cardinal Health Inc. 1,572,750
255,000 Health Care & Retirement Corp. * 7,299,375
335,000 Maxicare Health Plans Inc. * 7,453,750
133,900 Medaphis Corp. * 1,498,006
130,000 Multicare Cos. Inc. * 2,632,500
38,200 Orthodontic Centers of America Inc. * 611,200
30,100 Oxford Health Plans Inc. * 1,762,731
16,300 Pacificare Health Systems Inc. Class A * 1,324,375
15,100 Pacificare Health Systems Inc. Class B * 1,287,275
185,500 PhyCor Inc. * 5,263,563
5,000 Quintiles Transnational Corp. * 331,250
417,800 Renal Treatment Centers Inc. * 10,653,900
250,000 RoTech Medical Corp. * 5,250,000
46,000 Service Corp International 1,288,000
52,500 Sunquest Information Systems Inc. * 748,125
24,500 Total Renal Care Holdings Inc. * 888,125
32,000 Universal Health Services Inc., Class B * 916,000
531,200 Vivra Inc. * 14,674,400
-------------
71,560,925
-------------
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, 1996
% OF
SHARES EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- ---------- ---------------------------------- -------------- --------------
INTEREST SENSITIVE SECTOR 7.41%
BANKING 2.97%
39,800 BanPonce Corp. $ 1,343,250
256,800 Community First Bankshares Inc. 7,062,000
40,300 Compass Bancshares Inc. 1,601,925
27,000 First American Corp. of Tennessee 1,555,875
53,200 First Security Corp. 1,795,500
31,900 Firstar Corp. 1,674,750
48,200 North Fork Bancorporation Inc. 1,717,125
98,700 WestAmerica Bancorporation 5,699,925
40,000 Zions Bancorp 4,160,000
-------------
26,610,350
-------------
GENERAL FINANCE 3.33%
63,300 AMRESCO Inc. * 1,693,275
25,000 Bank United Corp. Class A 668,750
30,700 Bay View Capital Corp. 1,300,913
40,122 Charter One Financial Inc. 1,685,124
36,500 Credit Acceptance Corp. * 857,750
25,000 First Financial Corp. 612,500
37,800 First USA Inc. 1,308,825
349,900 Glendale Federal Bank FSB (California) * 8,135,175
2,000 Household International Inc. 184,500
212,500 The Money Store Inc. 5,870,313
54,700 Newcourt Credit Group Inc. 1,889,513
12,000 Charles Schwab Corp. 384,000
120,550 TCF Financial Corp. 5,243,925
-------------
29,834,563
-------------
INSURANCE 1.11%
32,350 Executive Risk Inc. 1,196,950
168,100 MMI Companies Inc. 5,421,225
30,300 PMI Group Inc. 1,677,863
20,800 Transatlantic Holdings Inc. 1,674,400
-------------
9,970,438
-------------
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, 1996
% OF
SHARES EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- ---------- ---------------------------------- -------------- --------------
SERVICES/MEDIA SECTOR 16.82%
BUSINESS AND FOOD SERVICES 9.63%
8,000 ABR Information Services Inc. * $ 315,000
236,800 AccuStaff Inc. * 5,002,400
490,000 Avery Dennison Corp. 17,333,750
268,400 CUC International Inc. * 6,374,500
20,000 Caribiner International Inc. * 1,005,000
197,500 Danka Business Systems PLC Sponsored ADR 6,986,563
329,500 G & K Services Inc. Class A 12,438,625
30,000 Olsten Corp. 453,750
19,200 Precision Response Corp. * 674,400
22,300 The Registry Inc. * 1,028,588
155,000 Reynolds & Reynolds Co. Class A 4,030,000
63,000 Robert Half International Inc. * 2,165,625
18,000 SITEL Corp. * 254,250
15,000 Snyder Communications Inc. * 405,000
210,000 Tetra Tech Inc. * 4,147,500
135,000 USA Waste Services Inc. * 4,303,125
120,000 United Waste Systems Inc. * 4,125,000
80,000 Unitog Co. 2,180,000
380,500 Wallace Computer Services Inc. 13,127,250
-------------
86,350,326
-------------
COMMUNICATION SERVICES 5.06%
125,000 ICG Communications Inc. * 2,203,125
253,000 LCI International Inc. * 5,439,500
283,636 MFS Communications Inc. * 15,458,162
213,500 McLeod Inc. * 5,444,250
111,000 Nextel Communications Inc. * 1,449,938
108,500 Orbital Sciences Corp. * 1,871,625
18,000 Pacific Gateway Exchange Inc. * 657,000
78,400 Smartalk Teleservices Inc. * 1,332,800
258,200 Tel-Save Holdings Inc. * 7,487,800
38,000 Teleport Communications Group Inc. * 1,159,000
105,000 Vanguard Cellular Systems Inc. Class A * 1,653,750
132,000 Viatel Inc. * 1,188,000
-------------
45,344,950
-------------
MEDIA SERVICES 2.13%
68,000 Bell Cablemedia PLC * 1,054,000
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, 1996
<TABLE>
<CAPTION>
% OF
SHARES EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- ------ --------------------------------------------------- ---------- ------------
<S> <C> <C> <C>
MEDIA SERVICES
(CONTINUED)
287,400 Central European Media Entertainment Ltd. Class A * $ 9,124,950
120,000 Comcast UK Cable Partners Ltd. * 1,635,000
77,500 Gartner Group Inc. Class A * 3,017,656
50,000 Harcourt General Inc. 2,306,250
160,000 Metromedia International Group Inc. * 1,580,000
13,000 Regal Cinemas Inc. * 399,750
-----------
19,117,606
-----------
TECHNOLOGY SECTOR 30.71%
COMPUTERS AND OFFICE EQUIPMENT 2.51%
159,000 Black Box Corp. * 6,558,750
34,500 Compaq Computer Corp. * 2,561,625
15,000 Comverse Technology Inc. * 567,188
70,000 E M C Corp. * 2,318,750
56,050 Quantum Corp. * 1,604,431
81,400 Seagate Technology Inc. * 3,215,300
222,000 Sun Microsystems Inc. * 5,702,625
-----------
22,528,669
-----------
ELECTRONICS AND NEW TECHNOLOGY 18.06%
26,800 Altera Corp. * 1,948,025
249,600 Altron Inc. * 5,241,600
401,300 Analog Devices Inc. * 13,594,038
203,500 Ascend Communications Inc. * 12,642,438
205,600 Cabletron Systems Inc. * 6,836,200
5,000 Cisco Systems Inc. * 318,125
36,000 Ericsson LM Telephone Co. Sponsored ADR 1,086,750
49,000 Gemstar International Group Ltd. 857,500
320,150 LSI Logic Corp. * 8,564,013
8,000 Maxim Integrated Products Inc. * 346,000
208,000 Microchip Technology Inc. * 10,582,000
210,000 Molex Inc. Class A 7,481,250
25,000 Network Equipment Technologies Inc. * 412,500
51,100 Network Appliance Inc. * 2,599,713
660,000 Network General Corp. * 19,965,000
219,900 Newbridge Networks Corp. * 6,212,175
59,900 Nokia Corp.Sponsored ADR A 3,451,738
97,000 PairGain Technologies Inc. * 2,952,438
</TABLE>
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, 1996
<TABLE>
<CAPTION>
% OF
SHARES EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- ------ --------------------------------------------------- ---------- ------------
<S> <C> <C> <C>
ELECTRONICS AND NEW TECHNOLOGY
(CONTINUED)
56,000 Qualcomm Inc. * $ 2,233,000
13,300 SGS Thomson Microelectronics N.V. * 931,000
189,700 Sanmina Corp. * 10,718,050
101,000 Thermo Electron Corp. * 4,166,250
192,700 3Com Corp.* 14,139,363
100,350 U. S. Robotics Corp. * 7,225,200
164,800 Uniphase Corp. * 8,652,000
235,650 Xilink Inc. * 8,674,866
-----------
161,831,232
-----------
TECHNOLOGY SERVICES 10.14%
133,800 American Management Systems Inc. * 3,278,100
4,000 Aspen Technologies Inc. * 321,000
377,000 BISYS Group Inc. * 13,972,563
92,000 Business Objects S A Sponsored ADR * 1,242,000
45,500 CBT Group PLC Sponsored ADR * 2,468,375
124,300 Ceridian Corp. * 5,034,150
26,300 Computer Sciences Corp. * 2,159,888
19,000 Concord EFS Inc. * 536,750
21,000 Documentum Inc. * 708,750
57,300 Electronics Arts Inc. * 1,715,419
164,100 FileNet Corp. * 5,251,200
114,600 HBO & Co. 6,804,375
180,250 Informix Corp. * 3,672,594
52,000 Intuit Inc. * 1,638,000
23,000 Macromedia Inc * 414,000
8,000 McAfee Associates Inc. * 352,000
67,400 Medic Computer Systems Inc. * 2,717,063
37,000 National Data Corp. 1,609,500
399,000 PMT Services Inc. * 6,982,500
33,100 PeopleSoft Inc. * 1,586,731
90,200 Raptor Systems Inc. * 1,815,275
8,000 Rational Software Corp. * 316,500
604,000 Sterling Commerce Inc. * 21,291,000
42,500 Transaction Network Services Inc. * 488,750
29,000 Vantive Corp. * 906,250
34,600 VERITAS Software Co. * 1,721,350
39,300 Wind River Systems Inc. * 1,861,824
-----------
90,865,907
-----------
</TABLE>
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, 1996
<TABLE>
<CAPTION>
% OF
SHARES EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- ------ --------------------------------------------------- ---------- ------------
<S> <C> <C> <C>
TOTAL EQUITY INVESTMENTS
(COST $722,621,413) 96.94% $ 868,898,306
-----------
SHORT-TERM INVESTMENTS
MONEY MARKET FUNDS 1.27%
96,713 SSgA U.S. Government Money Market Fund 96,713
11,309,015 SSgA Money Market Fund 11,309,015
-----------
11,405,728
-----------
PRINCIPAL COMMERCIAL PAPER 1.67%
---------
$ 15,000,000 General Electric Capital Corp.
5.31% maturing 01/13/1997 14,973,450
-----------
TOTAL SHORT-TERM INVESTMENTS
(COST $26,379,178) 2.94% 26,379,178
-----------
TOTAL INVESTMENTS (COST $749,000,591) ** 895,277,484
OTHER ASSETS LESS LIABILITIES 0.12% 1,042,666
-----------
NET ASSETS 100.00% $ 896,320,150
-----------
-----------
* Non-income producing security
- ----------------------
TAX INFORMATION:
** For Federal income tax purposes, cost is $754,444,813 and unrealized
appreciation (depreciation) of equity securities is as follows:
Unrealized appreciation $ 163,725,733
Unrealized depreciation (22,893,062)
-----------
Net unrealized appreciation $ 140,832,671
-----------
-----------
</TABLE>
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, 1996
ASSETS:
Investments in securities, at value
(cost $749,00,591) (Note 1) $ 895,277,484
Cash 49,330
Foreign currency, at value (cost $202,649) 202,693
Receivable for securities sold 11,216,724
Dividends and dividend reclaims receivable 258,350
--------------
Total Assets 907,004,581
--------------
LIABILITIES:
Payable for securities purchased 9,440,436
Payable for Fund shares repurchased 664,754
Payable for investment management fees (Note 5) 556,688
Payable for custodian fees 22,553
--------------
Total Liabilities 10,684,431
--------------
NET ASSETS $ 896,320,150
--------------
--------------
NET ASSETS CONSIST OF:
Paid in capital (Note 3) 735,809,126
Accumulated net realized gain on investments
and foreign currency transactions 14,233,814
Net unrealized appreciation on foreign currency
transactions 317
Net unrealized appreciation on investments 146,276,893
--------------
NET ASSETS $ 896,320,150
--------------
--------------
NET ASSET VALUE PER SHARE
($896,320,150 divided by 139,975,548 shares outstanding) $ 6.40
--------------
--------------
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, 1996
INVESTMENT INCOME:
Income:
Dividends (net of foreign withholding tax of $14,889) $ 6,163,761
Interest 878,979
--------------
Total income 7,042,740
--------------
Expenses:
Investment management fees (Note 5) 8,121,322
Custodian fees 111,423
Miscellaneous expenses 800
--------------
Total expenses 8,233,545
--------------
Net investment loss (1,190,805)
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS): (NOTE 1)
Net realized gain on investments 303,746,862
Net realized loss on foreign currency transactions (48,335)
--------------
Net realized gain 303,698,527
--------------
Net change in unrealized appreciation on foreign
currency transactions 47,081
Net change in unrealized depreciation on investments (119,213,430)
--------------
Net unrealized depreciation (119,166,349)
--------------
Net realized and unrealized gain during the year 184,532,178
--------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 183,341,373
--------------
--------------
The accompanying notes are an integral part of the financial statements.
Page 15
<PAGE>
RCM GROWTH EQUITY FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year ended Year ended
December 31, 1996 December 31, 1996
----------------- -----------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (1,190,805) $ 3,246,152
Net realized gain on investments and
foreign currency transactions 303,698,527 280,992,471
Net change in unrealized appreciation
(depreciation) on investments and foreign
currency transactions (119,166,349) 152,170,790
----------------- -----------------
Net increase in net assets resulting from
operations 183,341,373 436,409,413
DISTRIBUTIONS TO SHAREHOLDERS FROM: (NOTE 2)
Net investment income --- (3,221,602)
Net realized gain on investments (355,168,907) (203,938,943)
NET DECREASE FROM CAPITAL SHARE
TRANSACTIONS (NOTE 3) (257,142,802) (269,044,478)
----------------- -----------------
TOTAL DECREASE IN NET ASSETS (428,970,336) (39,795,610)
NET ASSETS:
Beginning of year 1,325,290,486 1,365,086,096
----------------- -----------------
End of year * $ 896,320,150 $ 1,325,290,486
----------------- -----------------
- ---------------------- ----------------- -----------------
* Includes undistributed net investment income of $ --- $ 49,873
----------------- -----------------
----------------- -----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 16
<PAGE>
RCM GROWTH EQUITY FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Selected data for each share of capital stock outstanding for the ten years ended December 31, 1996 are as follows:
Year Ended December 31,
----------------------------------------------------------------------------------
1996*(a) 1995 1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:(b)
Net asset value, beginning of period $ 9.13 $ 7.89 $ 10.42 $ 10.97 $ 11.54 $ 8.49 $ 9.12
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net investment income (loss) (0.01) 0.02 0.03 0.04 0.07 0.09 0.15
Net realized and unrealized gain (loss)
on investments 1.59 2.66 0.01 1.08 0.71 3.93 (0.53)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) in net asset value
resulting from investment operations 1.58 2.68 0.04 1.12 0.78 4.02 (0.38)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Distributions:
Net investment income (0.00) (0.02) (0.03) (0.04) (0.07) (0.09) (0.17)
Net realized gain on investments (4.31) (1.42) (2.54) (1.63) (1.28) (0.88) (0.08)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total distributions (4.31) (1.44) (2.57) (1.67) (1.35) (0.97) (0.25)
---------- ---------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 6.40 $ 9.13 $ 7.89 $ 10.42 $ 10.97 $ 11.54 $ 8.49
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL RETURN(c) 19.07% 34.53% 0.76% 10.72% 7.03% 48.23% (4.12%)
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
RATIOS AND SUPPLEMENTAL DATA:
Average commission rate paid per share(d) $ 0.0571 - - - - - -
----------
----------
Net assets, end of period (in millions) $ 896 $ 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% 0.8% 0.7% 0.8%
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
Ratio of net investment income to
average net assets -0.1% 0.2% 0.2% 0.3% 0.6% 0.9% 1.8%
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
Portfolio turnover 115.9% 96.5% 111.1% 67.0% 56.8% 62.7% 50.0%
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------
1989 1988 1987
---------- ---------- ----------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:(b)
Net asset value, beginning of period $ 8.00 $ 7.09 $ 8.30
---------- ---------- ----------
Net investment income (loss) 0.16 0.11 0.07
Net realized and unrealized gain (loss)
on investments 1.98 1.36 0.82
---------- ---------- ----------
Net increase (decrease) in net asset value
resulting from investment operations 2.14 1.47 0.89
---------- ---------- ----------
Distributions:
Net investment income (0.16) (0.12) (0.16)
Net realized gain on investments (0.86) (0.44) (1.94)
---------- ---------- ----------
Total distributions (1.02) (0.56) (2.10)
---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 9.12 $ 8.00 $ 7.09
---------- ---------- ----------
---------- ---------- ----------
TOTAL RETURN(c) 26.87% 20.86% 10.97%
---------- ---------- ----------
---------- ---------- ----------
RATIOS AND SUPPLEMENTAL DATA:
Average commission rate paid per share(d) - - -
Net assets, end of period (in millions) $ 1,284 $ 964 $ 553
---------- ---------- ----------
---------- ---------- ----------
Ratio of expenses to average net assets 0.7% 0.7% 0.8%
---------- ---------- ----------
---------- ---------- ----------
Ratio of net investment income to
average net assets 1.8% 1.8% 0.9%
---------- ---------- ----------
---------- ---------- ----------
Portfolio turnover 70.8% 64.7% 79.9%
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
- -----------------------------
* Calculated using the average share method.
(a) On June 14, 1996, RCM Capital Management, L.L.C. became the investment
manager (see Note 5).
(b) Stock split 25:1 at the close of business on June 17, 1996 (see Note 3).
All prior period per share amounts were restated to reflect the stock split.
(c) Total return measures the change in value of an investment 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 rate structures may differ.
Page 17
<PAGE>
RCM GROWTH EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
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. Actual results may differ from
these estimates.
A. SECURITIES VALUATIONS:
Investment securities are stated at fair market value. Equity securities
traded on stock exchanges are valued at the last sale price on the exchange
or in the principal over-the-counter market in which such securities are
traded as of the close of business on the day the securities are being
valued. If there has been no sale on such day, then the security will be
valued at the closing bid price on such day. If no bid price is quoted on
such day, then the security will be valued by such method as the Board of
Directors of the Company in good faith deems appropriate to reflect its fair
market value. Readily marketable securities traded only in the
over-the-counter market that are not listed on the National Association of
Securities Dealers, Inc. Automated Quotation System or similar foreign
reporting service will be valued at the mean bid price, or such other
comparable sources as the Board of Directors of the Company deems appropriate
to reflect their fair market value. Other portfolio securities held by the
Fund will be valued at current market value, if current market quotations are
readily available for such securities. To the extent that market quotations
are not readily available, such securities will be valued by whatever means
the Board of Directors of the Company in good faith deems appropriate to
reflect their fair market value.
Short-term investments with a maturity of 60 days or less are valued at
amortized cost, which approximates market value.
B. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME:
Security transactions are recorded as of the date of purchase or sale.
Realized gains and losses on security transactions are determined on the
identified cost basis for both financial statement and federal income tax
purposes. Interest income, foreign taxes and expenses are accrued daily.
Dividends are recorded on the ex-dividend date.
C. 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 18
<PAGE>
RCM GROWTH EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
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 for losses as a result of wash
sales.
2. DISTRIBUTIONS
On December 17, 1996, a distribution of $4.31 per share, aggregating
$355,168,907, was paid from investment operations. This per share
amount consisted of $1.55 short-term capital gains and $2.76 long-term
capital gains. The dividend was recorded on December 17, 1996 to
shareholders of record on the same date.
3. CAPITAL SHARES
At December 31, 1996, there were 1,000,000,000 shares of the Company's
common stock authorized, at $0.0001 par value. Of this amount,
300,000,000 were classified as shares of the Fund; 100,000,000 were
classified as shares of RCM Small Cap Fund; 100,000,000 were
classified as shares of RCM International Growth Equity Fund A; and
500,000,000 shares remain unclassified. As of the close of business on
June 17, 1996, each outstanding share of capital stock of the Fund was
split into 25 shares of capital stock, resulting in 91,056,470
outstanding shares of capital stock of the Fund. Transactions in
capital shares for the Fund shown below were restated to reflect the
stock split:
CAPITAL SHARE TRANSACTIONS
Year ended December 31, 1996
----------------------------
Shares Amount
------------ -------------
Shares sold 5,272,649 $ 49,629,302
Shares issued in connection with reinvestment
of distributions 56,967,931 351,492,134
Shares repurchased (67,435,650) (658,264,238)
------------ -------------
Net decrease (5,195,070) $(257,142,802)
------------ -------------
------------ -------------
Page 19
<PAGE>
RCM GROWTH EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
3. CAPITAL SHARES (CONTINUED)
Year ended December 31, 1996
----------------------------
Shares Amount
------------ -------------
Shares sold 9,295,000 $ 87,032,923
Shares issued in connection with reinvestment
of distributions 23,031,575 203,424,163
Shares repurchased (60,117,757) (559,501,564)
------------ -------------
Net decrease (27,791,182) $(269,044,478)
------------ -------------
------------ -------------
At December 31, 1996, seven shareholders held more than 5% of the outstanding
shares of the Fund individually and 57.6% in aggregate.
4. PURCHASES AND SALES OF SECURITIES
For the year ended December 31, 1996, purchases and sales proceeds of
investment securities by the Fund, other than U.S. government obligations and
short-term securities, aggregated $1,095,771,941 and $1,696,778,562,
respectively. Purchases and sales/maturities of U.S. government obligations
by the Fund aggregated $9,989,792 and $10,000,000, respectively.
5. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
On June 14, 1996, all of the outstanding general and limited partnership
interests in the Fund's investment manager, RCM Capital Management, a
California Limited Partnership ("Old RCM"), were acquired by RCM Capital
Management, L.L.C. ("RCM"), a wholly owned subsidiary of Dresdner Bank AG, an
international banking organization headquartered in Frankfurt, Germany.
Because the transaction may have constituted an "assignment" of the Fund's
management agreement with Old RCM under the Investment Company Act of 1940,
and thus a termination of such management agreement, the Fund sought and
obtained prior approval of a new management agreement from the Company's
Board of Directors and from the Fund's stockholders at a special meeting of
stockholders of the Company held on May 28, 1996. The terms of the new
management agreement are substantially the same as those of the previous
management agreement.
RCM manages the Fund's investments and provides various administrative
services, subject to the authority of the Board of Directors. For the period
from January 1, 1996 to June 30, 1996, the Fund paid 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. As discussed above, the stockholders approved a new investment
management agreement between the Company, on behalf of the Fund, and RCM.
Pursuant to this new investment management agreement, beginning July 1, 1996,
the Fund pays investment management fees monthly at an annualized rate of
0.75% of the Fund's average daily net assets. For the year ended December
31, 1996, the Fund recorded investment management fees of $8,121,322.
The RCM Capital Management Profit Sharing Plan, participation in which is
limited to employees of RCM, owned 416,698 shares of the Fund on December 31,
1996.
Page 20
<PAGE>
RCM CAPITAL FUNDS, INC.
STOCKHOLDER MEETING RESULTS
(UNAUDITED)
A Special Meeting of Stockholders of the RCM Capital Funds, Inc. (the
"Company") was held on Tuesday, May 28, 1996. The number of shares issued,
outstanding and eligible to vote as of April 18, 1996 (the "Record Date") was
7,110,217. Present were 5,477,386 shares in person or represented by proxy,
or 77% of the shares outstanding on the Record Date. The matters voted upon
by stockholders and the resulting votes for each matter are presented below:
1. Each person nominated as a director was elected as set forth below:
For Withhold
--------- --------
Kenneth E. Scott 5,109,781 332,162
DeWitt F. Bowman 5,245,037 196,905
Thomas S. Foley 4,910,846 531,097
Frank P. Greene 5,109,781 332,162
Pamela A. Farr 5,109,781 332,162
George G.C. Parker 5,109,781 332,162
2. An Amendment to the Articles of Incorporation of the Company to reduce the
par value of the shares of the Company was approved: For: 4,849,864;
Against: 517,895; Abstain 74,184.
3. The selection by the Board of Directors of Coopers & Lybrand L.L.P. as
independent public accountants for the fiscal year ending December 31, 1996
was approved: For: 5,367,761; Against: 0; Abstain: 74,182.
In addition, certain matters were presented to the stockholders of the RCM
Growth Equity Fund (the "Fund") for approval or ratification. As of the
Record Date, there were 3,852,312 shares of the Fund outstanding and eligible
to vote. At the Special Meeting 2,864,752 shares were present in person or by
proxy, or 74.36% of the shares outstanding on the Record Date. The matters
voted upon by stockholders of the Fund and the resulting votes for each
matter are presented below:
1. The new Investment Management Agreement between the Company, on behalf of
the Fund, and RCM Capital Management, L.L.C. was approved: For: 2,828,176;
Against: 0; Abstain: 30,389.
2. Certain revisions to the investment objectives of the Fund were approved:
For: 2,459,253; Against: 368,909; Abstain: 30,389.
3. A revision to the fundamental investment policies of the Fund regarding
investment in companies without a three-year operating history was
approved. For: 2,459,253; Against: 368,909; Abstain: 30,389.
4. A revision to the fundamental investment policies of the Fund regarding
investment in warrants was approved: For: 2,459,253; Against: 368,909;
Abstain: 30,389.
Page 21
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INVESTMENT MANAGER
RCM Capital Management, L.L.C.
Four Embarcadero Center, Suite 3000
San Francisco, California 94111
TRANSFER AND REDEMPTION AGENT
RCM Capital Trust Company
Four Embarcadero Center, Suite 2800
San Francisco, California 94111
DISTRIBUTOR
Funds Distributor, Inc.
60 State Street, Suite 1300
Boston, Massachusetts 02109
CUSTODIAN
State Street Bank and Trust Company
P.O. Box 1713
Boston, Massachusetts 02105
LEGAL COUNSEL
Paul, Hastings, Janofsky & Walker
555 South Flower Street
Los Angeles, California 90071
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
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NOTES
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NOTES
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[LOGO]
GROWTH EQUITY FUND
ANNUAL REPORT
DECEMBER 31, 1996
