<PAGE>
RCM CAPITAL FUNDS, INC.
SEMI-ANNUAL REPORT
JUNE 30, 1997
<PAGE>
RCM GROWTH EQUITY FUND
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
The RCM Growth Equity Fund (the "Fund") registered excellent performance in the
second quarter of 1997, rising 18.77% and outperforming its primary benchmark,
the Russell Midcap Index, by 521 basis points. Over the first six months of the
year, the value of an investment in the Fund appreciated 8.75%. Despite these
results, however, the Fund finished behind the 12.63% return posted by its
primary benchmark for the same period.
Perhaps the most prominent characteristic of the stock market's action during
the "summer correction" of 1996 and its subsequent advance through the first
half 1997 has been the persistent leadership of very large capitalization
issues. Investors who had participated in the blistering advance and subsequent
collapse of mid and small cap stocks in the first half of 1996 have since been
willing to accord a premium to liquidity and the perception of "visible growth"
as embodied in the stocks of the biggest multinational corporations. The
decline in small and midcap universes in the correction of 1996 was much more
violent than that of the large cap market. The resumption of huge cash flows
into the stock market from institutional and equity mutual fund investors after
the correction coincided with a rise in the popularity of passive indexing tied
to large cap universes, which has only exacerbated the pronounced performance
divergence between capitalization tiers.
Despite the lagging performance of midcap stock universes in the second half of
1996, there were reasons to be optimistic about a turn in relative performance
of these stocks going into 1997. Seasonal factors for so-called "secondary cap"
sectors of the market traditionally are favorable early in a new year. RCM
Capital Management, L.L.C. ("RCM"), the Fund's investment manager was
encouraged by evidence of improved relative strength in midcap stocks in the
final month of 1996, and hopeful that seasonal strength in mutual fund cash
flows would support a catch-up move versus very large capitalization equities in
early 1997. Importantly, valuations of midcap universes had become attractive
versus their own historical ranges and relative to large caps, especially in
light of RCM's outlook for higher relative earnings growth in the midcap sector.
Based on these considerations and RCM's commitment to a quality growth approach
to investing, the Fund entered 1997 with overweighted positions in high-growth
areas such as technology, business services and health care. While the Fund did
maintain some exposure to the banking and financial services industry groups,
these were underweighted areas relative to the primary benchmark, which has
heavy weightings in these groups. (As a growth manager, RCM typically maintains
only modest exposure to these interest rate-sensitive industries.)
The relative move in the midcap sector did not materialize in the first quarter,
however, and market leadership continued to narrow, concentrating in stocks of
the very large cap multinationals. By late February, a more pronounced
secondary cap decline was evident, particularly in technology stocks. Federal
Reserve Chairman Greenspan's cautionary comments regarding "irrational
exuberance" early in the first quarter did not slow seasonally strong mutual
fund cash flows, but did seem to intensify investors' preference for large cap,
liquid names. Midcaps -- especially higher growth and higher P/E multiple
sectors -- underperformed when the market corrected in February and March on
fears of rising interest rates, but the worst relative performance of the year
occurred in April. By the end of April 1997, the spread between the 12-month
S&P 500 return and Russell Midcap Index performance had opened to -14%. Due to
the Fund's growth-stock orientation, Fund performance trailed the Russell Midcap
Index benchmark by 821 basis points through the first four months of 1997.
Large cap stocks reached a major bottom with the easing of rate fears in
mid-April, and midcap stocks soon followed. Relative valuation and performance
disparities set up a powerful midcap rally in May. The Fund was well positioned
to benefit, as extremely compressed multiples of quality growth issues expanded
and technology stocks re-emerged as market leaders. The Russell Midcap Index
outperformed
<PAGE>
the S&P 500 by 124 basis points in May and posted strong absolute returns in
June. The Fund outperformed the Russell Midcap Index benchmark by 557 basis
points in the final two months of the first half of 1997.
Individual stock selection in the aerospace industry made a positive
contribution to relative performance in the first half. The Fund's holdings in
this group were up an aggregate of 24% versus a gain of approximately 10% for
the Russell Midcap Index stocks in this group. The Fund's major holdings in
this industry were Sundstrand Corporation (+28% total return for the first half
of 1997) and Wyman Gordon (+21%). Stock selection was also positive in the
communications services industry group, where Fund holdings were up 16% on
average versus essentially flat performance for the Russell Midcap Index stocks
in this group. Major holdings in this industry included Nextel Communications
(+45%), McLeod USA (+32%) and Worldcom (+23%). Stock picking in the technology
services and banking industry groups also had a positive impact on relative
performance during the first half.
Negative stock selection was experienced in the electronics and new
technology group. Relative performance was hurt in particular by
declines in Network General (-51%), Ascend Communications (-37%) and
Altron (-29%), causing the aggregate performance of the Fund's holdings in
this industry to be down about 3% for the first half of 1997 versus the
average gain of approximately 9% posted by the Russell Midcap Index stocks in
the group. The Fund experienced smaller negative contributions to relative
performance from stock selection in the retail trade sector and in business
services.
Industry strategies that were positive contributors to the Fund's relative
performance in the first half included overweightings in the strong health care
services group (9% weighting in the Fund versus 4% in the Russell Midcap Index).
Relative performance of the Fund also benefited from a strategic underweighting
in energy and in the lagging utilities industry group. (Due to RCM's
growth-stock orientation, the Fund typically does not maintain exposure to
utility stocks.)
On the negative side, overweighting the poorly performing technology services
industry group hurt the Fund's relative performance in the first six months of
1997. Technology services stocks in the Russell Midcap Index underperformed the
overall benchmark by almost 12% for the period. This sector had traditionally
been a "defensive" subsector within the technology universe, and RCM believed
that these stocks would fare relatively better than other areas of technology in
a group correction. However, technology service stocks came under severe
pressure in the first quarter, as a bellwether large cap service stock
(Electronic Data Systems) posted disappointing earnings, and questions arose
surrounding the ability of services companies to contain costs. In fact, the
Fund's technology services holdings generally had excellent fundamentals, and
these holdings rebounded powerfully in the May rally and through the end of the
first half. The Fund's underweighted positions in insurance and banking also
had a modestly negative impact on relative performance for the period. Due to
RCM's growth-stock orientation, it is typical for the Fund to have only modest
relative exposure in these industries. The Fund's average cash position of
about 4.5% during the first half of 1997 was at the low end of its "normal"
range, but had a slight negative impact on relative performance due to the
rising market environment.
Going into the second half of 1997, the equity market environment appears to
reflect an extremely favorable economic outlook: low inflation, continued
healthy -- but not overheated -- GDP growth, and no immediate reason to
anticipate an interest rate hike by the Federal Reserve. Stocks reached new
highs early in the third quarter, surprising many observers who had not expected
1997 to repeat the exceptional returns of the previous two years. Heightened
vigilance to potential changes in the environment is certainly warranted given
current market levels, but RCM is encouraged by the improved relative
performance of midcap stocks at the end of the first half of the year. Although
it is not clear that a
Page 2
<PAGE>
sustained period of outperformance lies ahead, RCM continues to believe that
relative valuations of midcap stocks are attractive, especially in light of
RCM's outlook for higher relative growth in this sector. The Fund retains
significant overweightings in growth industries such as technology, health care,
and telecommunications, with a cash position at the lower end of a "normal"
range.
Page 3
<PAGE>
RCM GROWTH EQUITY FUND
PERFORMANCE SUMMARY
- --------------------------------------------------------------------------------
RCM GROWTH RUSSELL MIDCAP INDEX
Nov-79 $10,000 $10,000
Nov-79 $10,393 $10,740
Dec-79 $10,719 $11,158
Jan-80 $11,210 $11,777
Feb-80 $10,792 $11,516
Mar-80 $9,599 $9,996
Apr-80 $10,028 $10,641
May-80 $10,856 $11,467
Jun-80 $11,315 $12,024
Jul-80 $12,980 $13,034
Aug-80 $13,656 $13,375
Sep-80 $14,396 $13,821
Oct-80 $14,878 $13,966
Nov-80 $15,935 $15,074
Dec-80 $15,665 $14,784
Jan-81 $15,304 $14,439
Feb-81 $15,725 $14,694
Mar-81 $17,588 $15,843
Apr-81 $18,134 $15,918
May-81 $19,279 $16,306
Jun-81 $18,560 $16,008
Jul-81 $18,247 $15,809
Aug-81 $17,371 $14,908
Sep-81 $16,587 $13,951
Oct-81 $18,157 $14,914
Nov-81 $18,503 $15,518
Dec-81 $18,211 $15,139
Jan-82 $17,929 $14,583
Feb-82 $17,527 $13,964
Mar-82 $17,476 $13,825
<PAGE>
Apr-82 $18,682 $14,486
May-82 $18,511 $13,970
Jun-82 $18,441 $13,595
Jul-82 $18,512 $13,274
Aug-82 $20,047 $14,871
Sep-82 $20,666 $15,293
Oct-82 $23,233 $17,338
Nov-82 $25,235 $18,395
Dec-82 $25,710 $18,660
Jan-83 $27,172 $19,319
Feb-83 $28,967 $19,987
Mar-83 $30,108 $20,691
Apr-83 $32,700 $21,984
May-83 $34,645 $22,903
Jun-83 $36,064 $23,737
Jul-83 $34,391 $22,991
Aug-83 $33,610 $22,846
Sep-83 $34,935 $23,486
Oct-83 $33,413 $22,575
Nov-83 $34,930 $23,541
Dec-83 $34,348 $23,105
Jan-84 $32,764 $22,449
Feb-84 $31,089 $21,235
Mar-84 $31,709 $21,587
Apr-84 $31,839 $21,350
May-84 $30,674 $20,146
Jun-84 $32,051 $20,774
Jul-84 $31,196 $20,166
Aug-84 $34,191 $22,684
Sep-84 $33,648 $22,791
Oct-84 $33,611 $22,880
<PAGE>
Nov-84 $32,993 $22,784
Dec-84 $33,496 $23,435
Jan-85 $37,254 $25,659
2/29/1985 $38,042 $26,119
Mar-85 $37,399 $25,970
Apr-85 $36,747 $25,894
May-85 $39,165 $27,365
Jun-85 $39,965 $28,030
Jul-85 $40,928 $27,994
Aug-85 $40,385 $27,876
Sep-85 $38,429 $26,510
Oct-85 $40,118 $27,883
Nov-85 $42,578 $29,810
Dec-85 $44,235 $30,937
Jan-86 $45,046 $31,633
Feb-86 $48,307 $34,205
Mar-86 $49,783 $36,003
Apr-86 $50,541 $35,845
May-86 $52,554 $37,701
Jun-86 $51,571 $38,216
Jul-86 $47,374 $35,687
Aug-86 $49,140 $38,219
Sep-86 $45,601 $35,511
Oct-86 $48,335 $37,364
Nov-86 $48,946 $37,640
Dec-86 $48,361 $36,569
Jan-87 $54,951 $41,072
Feb-87 $59,189 $43,530
Mar-87 $60,968 $43,942
Apr-87 $60,390 $42,842
May-87 $62,092 $42,989
<PAGE>
Jun-87 $64,592 $44,737
Jul-87 $67,740 $46,653
Aug-87 $70,486 $48,302
Sep-87 $68,483 $47,379
Oct-87 $49,455 $35,710
Nov-87 $47,006 $33,727
Dec-87 $53,665 $36,652
Jan-88 $53,930 $38,355
Feb-88 $58,780 $41,072
Mar-88 $60,415 $41,126
Apr-88 $61,386 $41,380
May-88 $60,234 $41,283
Jun-88 $64,720 $44,110
Jul-88 $63,335 $43,225
Aug-88 $61,789 $42,264
Sep-88 $64,192 $43,702
Oct-88 $63,486 $43,889
Nov-88 $62,127 $42,836
Dec-88 $64,859 $43,910
Jan-89 $68,192 $46,537
Feb-89 $67,612 $46,427
Mar-89 $68,994 $47,190
Apr-89 $73,125 $49,465
May-89 $77,254 $51,695
Jun-89 $74,440 $51,503
Jul-89 $79,915 $55,093
Aug-89 $83,387 $56,935
Sep-89 $83,428 $56,413
Oct-89 $79,787 $53,752
Nov-89 $80,873 $54,489
Dec-89 $82,292 $55,446
<PAGE>
Jan-90 $75,120 $50,999
Feb-90 $77,825 $52,033
Mar-90 $80,029 $53,300
Apr-90 $78,163 $51,011
May-90 $86,194 $55,632
Jun-90 $87,034 $55,271
Jul-90 $84,425 $53,628
Aug-90 $75,868 $47,860
Sep-90 $71,033 $44,312
Oct-90 $69,568 $42,913
Nov-90 $75,112 $47,046
Dec-90 $78,902 $49,072
Jan-91 $85,003 $52,398
Feb-91 $92,631 $56,764
Mar-91 $97,028 $59,119
Apr-91 $96,459 $59,474
May-91 $101,948 $62,298
Jun-91 $96,909 $59,427
Jul-91 $102,335 $62,340
Aug-91 $105,602 $64,204
Sep-91 $105,329 $63,830
Oct-91 $108,557 $65,138
Nov-91 $104,724 $62,445
Dec-91 $116,960 $69,442
Jan-92 $119,326 $70,748
Feb-92 $120,948 $72,373
Mar-92 $115,847 $70,524
Apr-92 $113,545 $71,075
May-92 $114,312 $71,534
Jun-92 $108,991 $70,374
Jul-92 $112,618 $73,316
<PAGE>
Aug-92 $110,272 $71,628
Sep-92 $113,146 $73,113
Oct-92 $117,301 $74,902
Nov-92 $122,190 $78,677
Dec-92 $125,186 $80,789
Jan-93 $125,594 $82,405
Feb-93 $121,886 $82,496
Mar-93 $124,822 $85,179
Apr-93 $121,150 $82,922
May-93 $126,171 $85,555
Jun-93 $126,630 $86,522
Jul-93 $125,543 $86,939
Aug-93 $131,747 $90,806
Sep-93 $134,398 $91,153
Oct-93 $135,795 $91,229
Nov-93 $131,931 $89,113
Dec-93 $138,604 $92,341
Jan-94 $143,687 $94,889
Feb-94 $142,568 $93,598
Mar-94 $134,622 $89,611
Apr-94 $135,889 $90,226
May-94 $134,603 $90,349
Jun-94 $130,975 $87,673
Jul-94 $132,730 $90,682
Aug-94 $141,423 $94,981
Sep-94 $140,120 $92,660
Oct-94 $142,420 $93,369
Nov-94 $137,052 $89,250
Dec-94 $139,650 $90,409
Jan-95 $140,145 $92,266
Feb-95 $146,023 $97,042
<PAGE>
Mar-95 $151,805 $99,819
Apr-95 $152,385 $101,324
May-95 $155,053 $104,654
Jun-95 $162,810 $108,171
Jul-95 $174,821 $113,423
Aug-95 $177,454 $115,160
Sep-95 $183,158 $117,762
Oct-95 $179,789 $115,128
Nov-95 $185,416 $120,853
Dec-95 $187,880 $121,558
Jan-96 $190,835 $124,137
Feb-96 $200,326 $127,052
Mar-96 $203,882 $128,890
Apr-96 $212,394 $132,542
May-96 $215,917 $134,544
Jun-96 $206,821 $132,526
Jul-96 $188,917 $124,324
Aug-96 $198,795 $130,243
Sep-96 $211,760 $136,676
Oct-96 $211,966 $137,772
Nov-96 $222,461 $146,165
Dec-96 $223,710 $144,673
Jan-97 $229,653 $150,085
Feb-97 $218,817 $149,858
Mar-97 $204,835 $143,388
Apr-97 $209,029 $147,059
May-97 $236,993 $157,788
Jun-97 $243,285 $162,951
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.(a) The chart represents a
cumulative return of 2,332.84%(b) for the Fund. The average annual total return
from the Fund's inception was 19.80%.(b)(c) The chart assumes a hypothetical
$10,000 initial investment in the Fund and reflects all Fund expenses.
AVERAGE ANNUAL TOTAL RETURNS(b)
JUNE 30, 1997
- ---------------------------------------
1 5 10 LIFE OF
YEAR YEAR YEAR FUND(c)
- ---------------------------------------
17.63% 17.42% 14.18% 19.80%
- ---------------------------------------
The data above represent past performance of the Fund and may not be indicative
of future performance. The investment return and principal value of an
investment in the Fund will fluctuate, so that shares, when redeemed, may be
worth more or less than their original cost.
- -------------
(a) The 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.
(b) Returns assume reinvestment of all dividends and capital gains
distributions at net asset value.
(c) The Fund began operations on November 6, 1979.
Page 4
<PAGE>
RCM GROWTH EQUITY FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
JUNE 30, 1997
(UNAUDITED)
% OF
SHARES EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- ---------- ---------------------------------- ---------- -------------
CONSUMER DURABLES SECTOR 3.38%
AUTOMOTIVE RELATED 3.14%
180,000 Johnson Controls Inc. $ 7,391,250
275,000 Lear Corp. * 12,203,125
229,000 Tower Automotive Inc. * 9,847,000
--------------
29,441,375
--------------
OTHER CONSUMER DURABLES 0.24%
24,000 Harman International Industries Inc. 1,011,000
38,200 Sola International Inc. 1,279,700
--------------
2,290,700
--------------
CONSUMER NON-DURABLES SECTOR 9.78%
BEVERAGE/TOBACCO 0.30%
80,000 Coca Cola Enterprises Inc. 1,840,000
19,500 Robert Mondavi Corp. * 921,375
--------------
2,761,375
--------------
HOUSEHOLD/RELATED NON-DURABLES 0.36%
42,000 Nu Skin Asia Pacific Inc. * 1,113,000
15,000 Revlon Inc. Class A * 777,188
52,000 Scotts Co. * 1,508,000
--------------
3,398,188
--------------
LEISURE TIME PRODUCTS/SERVICES 6.03%
42,000 CKE Restaurants Inc. 1,328,250
376,500 Doubletree Corp. * 15,483,563
101,000 Four Seasons Hotels Inc. 2,992,125
455,000 Hasbro Inc. 12,910,625
1,030,900 Host Marriott Corp. * 18,362,906
80,800 Interstate Hotels Co. * 2,378,550
132,000 Planet Hollywood International Inc. * 3,036,000
--------------
56,492,019
--------------
RETAIL TRADE 3.09%
77,000 American Stores Co. * 3,801,875
61,800 Bed Bath & Beyond Inc. * 1,877,175
34,000 Circuit City Stores Inc. 1,209,125
218,125 Consolidated Stores Corp. * 7,579,844
50,000 Global DirectMail Corp. * 1,303,125
49,000 Hannaford Bros. Co. 1,742,563
42,900 PETsMART Inc. * 493,350
The accompanying notes are an integral part of the financial statements.
Page 5
<PAGE>
RCM GROWTH EQUITY FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
JUNE 30, 1997
(UNAUDITED)
% OF
SHARES EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- ---------- ---------------------------------- ---------- -------------
RETAIL TRADE
(CONTINUED)
33,000 Samsonite Corp. * $ 1,456,125
464,000 Viking Office Products Inc. * 8,816,000
12,000 Walgreen Co. 643,500
-------------
28,922,682
-------------
CYCLICAL/CAPITAL GOODS SECTOR 14.76%
AEROSPACE/DEFENSE 4.21%
75,000 Rohr Industries Inc. * 1,645,313
583,000 Sundstrand Corp. 32,538,688
197,500 Wyman-Gordon Co. * 5,332,500
------------
39,516,501
------------
BUILDING/CONSTRUCTION 0.33%
145,000 Apogee Enterprises Inc. 3,117,500
CHEMICALS/TEXTILES 1.86%
100,000 Avery Dennison Corp. 4,012,500
92,500 Bemis Co. Inc. 4,000,625
95,000 BetzDearborn Inc. 6,270,000
105,000 Morton International Inc. 3,169,688
------------
17,452,813
------------
ELECTRICAL EQUIPMENT 2.65%
197,000 Honeywell Inc. 14,947,375
85,000 Hubbell Inc. Class B 3,740,000
62,500 Raychem Corp. 4,648,438
25,000 Rockwell International Corp. 1,475,000
------------
24,810,813
------------
INDUSTRIAL EQUIPMENT 1.57%
71,500 Danaher Corp. 3,633,094
80,000 Illinois Tool Works Inc. 3,995,000
65,000 Omniquip International Inc. * 1,503,125
80,000 Tyco International Ltd. 5,565,000
------------
14,696,219
------------
RAW/BASIC MATERIALS 0.52%
150,000 Commercial Metals Co. 4,837,500
The accompanying notes are an integral part of the financial statements.
Page 6
<PAGE>
RCM GROWTH EQUITY FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
JUNE 30, 1997
(UNAUDITED)
% OF
SHARES EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- ---------- ---------------------------------- ---------- -------------
TRANSPORTATION SERVICES 3.62%
225,000 Air Express International Corp. $ 8,943,750
238,500 Expeditors International of
Washington Inc. 6,767,438
165,000 Heartland Express Inc. * 3,877,500
100,000 Knight Transportation Inc. * 2,537,500
315,000 Swift Transportation Co. Inc. * 9,292,500
130,000 Werner Enterprises Inc. 2,518,750
------------
33,937,438
------------
ENERGY SECTOR 2.24%
OIL AND RELATED SERVICES 2.24%
8,000 BJ Services Co. * 429,000
209,300 Camco International Inc. 11,459,175
135,000 Forcenergy Gas Exploration Inc. * 4,100,625
278,100 Houston Exploration Co. * 4,327,931
15,000 Noble Affiliates Inc. 580,313
5,400 Veritas DGC Inc. * 122,850
------------
21,019,894
------------
HEALTH CARE SECTOR 17.25%
DRUGS AND HOSPITAL SUPPLIES 6.19%
25,300 Algos Pharmaceutical Corp. * 461,725
46,000 Amgen Inc. 2,673,750
29,300 Anesta Corp. * 556,700
170,000 Biomet Inc. 3,166,250
410,500 Centocor Inc. * 12,751,156
89,100 CIMA Labs Inc. * 367,538
37,414 Guidant Corp. 3,180,190
14,600 Synthelabo 1,902,422
22,200 MedImmune Inc. * 410,700
28,100 Medtronic Inc. 2,276,100
94,700 Penederm Inc. * 1,278,450
102,600 Physio-Control International Corp. * 1,539,000
43,200 Respironics Inc. * 912,600
42,000 SangStat Medical Corp. * 971,250
98,400 Sepracor Inc. * 2,539,950
320,300 Sofamor/Danek Group Inc. * 14,653,725
354,000 VISX Inc. * 8,407,500
------------
58,049,006
------------
HEALTH CARE SERVICES 11.06%
156,400 AmeriSource Health Corp. * 7,800,450
195,500 Bergen Brunswig Corp. 5,449,563
75,000 CRA Managed Care Inc. * 3,914,063
49,000 Cardinal Health Inc. 2,805,250
The accompanying notes are an integral part of the financial statements.
Page 7
<PAGE>
RCM GROWTH EQUITY FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
JUNE 30, 1997
(UNAUDITED)
% OF
SHARES EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- ---------- ---------------------------------- ---------- -------------
HEALTH CARE SERVICES
(CONTINUED)
69,000 Columbia/HCA Healthcare Corp. $ 2,712,563
142,000 Genesis Health Ventures Inc. * 4,792,500
135,200 HBO & Co. 9,311,900
328,000 Maxicare Health Plans Inc. * 7,339,000
112,000 Medaphis Corp. * 1,127,000
40,000 OccuSystems Inc. * 1,160,000
116,500 Oxford Health Plans Inc. * 8,358,875
327,000 PhyCor Inc. * 11,261,063
9,200 Quintiles Transnational Corp. * 640,550
358,000 Renal Treatment Centers Inc. * 9,621,250
225,000 RoTech Medical Corp. * 4,514,063
46,000 Service Corp International 1,512,250
113,000 Stewart Enterprises Inc. Class A 4,746,000
94,500 Sun Healthcare Group * 1,966,781
52,500 Sunquest Information Systems Inc. * 787,500
282,700 Tenet Healthcare Corp. * 8,357,319
48,000 Universal Health Services Inc. Class B * 1,848,000
87,000 Vencor Inc. * 3,675,750
------------
103,701,690
------------
INTEREST-SENSITIVE SECTOR 8.16%
BANKING 5.28%
75,500 BB&T Corp. 3,397,500
30,000 Bank of New York Inc. 1,305,000
301,800 Community First Bankshares Inc. 11,581,575
53,750 Compass Bancshares Inc. 1,807,344
51,000 First American Corp. of Tennessee 1,957,125
70,700 First Security Corp. 1,930,994
60,600 Firstar Corp. 1,848,300
286,400 North Fork Bancorporation Inc. 6,121,800
37,300 Popular Inc. 1,505,988
120,200 WestAmerica Bancorporation 9,135,200
237,000 Zions Bancorp 8,917,125
------------
49,507,951
------------
GENERAL FINANCE 2.29%
76,400 AMRESCO Inc. * 1,642,600
17,500 Bank United Corp. Class A 665,000
61,400 Bay View Capital Corp. 1,611,750
40,122 Charter One Financial Inc. 2,161,573
529,200 Glendale Federal Bank FSB (California) * 13,825,350
32,450 TCF Financial Corp. 1,602,219
------------
21,508,492
------------
The accompanying notes are an integral part of the financial statements.
Page 8
<PAGE>
RCM GROWTH EQUITY FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
JUNE 30, 1997
(UNAUDITED)
% OF
SHARES EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- ---------- ---------------------------------- ---------- -------------
INSURANCE 0.59%
32,350 Executive Risk Inc. $ 1,682,200
30,300 PMI Group Inc. 1,889,963
19,800 Transatlantic Holdings Inc. 1,965,150
--------------
5,537,313
--------------
SERVICES/MEDIA SECTOR 12.53%
BUSINESS SERVICES 6.06%
111,000 ABR Information Services Inc. * 3,219,000
130,000 AccuStaff Inc. * 3,079,375
33,000 Caribiner International Inc. * 1,076,625
226,000 Danka Business Systems PLC (Sponsored ADR) 9,237,750
70,000 G & K Services Inc. Class A 2,607,500
88,600 JLK Direct Distribution Inc. Class A * 2,270,375
30,000 Manpower Inc. 1,335,000
412,300 Olsten Corp. 8,014,081
282,300 The Registry Inc. * 12,985,800
110,000 TeleTech Holdings Inc. * 2,887,500
119,000 United Waste Systems Inc. * 4,879,000
173,100 Wallace Computer Services Inc. 5,203,819
--------------
56,795,825
--------------
COMMUNICATIONS SERVICES 5.06%
68,000 Brooks Fiber Properties Inc. * 2,295,000
55,511 Cable & Wireless Communications PLC (ADR) * 1,491,858
162,000 McLeod Inc. * 5,467,500
390,000 Nextel Communications Inc. * 7,385,625
65,000 Orbital Sciences Corp. * 1,031,875
15,000 Pacific Gateway Exchange Inc. * 423,750
145,000 Precision Response Corp. * 2,392,500
24,000 Qwest Communications International Inc. * 654,000
40,300 Saville Systems PLC (Sponsored ADR) * 2,095,600
297,000 SITEL Corp. * 6,125,625
74,100 Smartalk Teleservices Inc. * 1,148,550
267,000 Tel-Save Holdings Inc. * 4,071,750
403,000 WorldCom Inc. 12,896,000
--------------
47,479,633
--------------
MEDIA 1.41%
74,000 CKS Group Inc. * 2,497,500
247,700 Central European Media Entertainment Ltd. Class A * 6,440,200
7,000 Clear Channel Communications Inc. * 430,500
85,000 Comcast UK Cable Partners Ltd. * 1,020,000
The accompanying notes are an integral part of the financial statements.
Page 9
<PAGE>
RCM GROWTH EQUITY FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
JUNE 30, 1997
(UNAUDITED)
% OF
SHARES EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- ---------- ---------------------------------- ---------- -------------
MEDIA
(CONTINUED)
40,000 Gartner Group Inc. Class A * $ 1,437,500
11,000 Outdoor Systems Inc. * 420,750
28,500 Sylvan Learning Systems Inc. * 969,000
-------------
13,215,450
-------------
TECHNOLOGY SECTOR 28.35%
COMPUTERS/OFFICE EQUIPMENT 1.62%
300,000 Black Box Corp. * 12,075,000
80,250 E M C Corp. * 3,129,750
-------------
15,204,750
-------------
ELECTRONICS/NEW TECHNOLOGY 16.31%
65,100 ASE Test Limited * 2,750,475
59,200 ASM Lithography Holdings N.V. * 3,463,200
225,000 Altron Inc. * 3,375,000
662,137 Analog Devices Inc. * 17,588,014
38,450 Applied Materials Inc. 2,722,741
217,112 Ascend Communications Inc. * 8,548,785
6,000 Cisco Systems Inc. * 402,750
404,200 Computer Products Inc. * 10,105,000
45,400 Cymer Inc. * 2,213,250
395,000 Cypress Semiconductor Corp. * 5,727,500
17,000 Ericsson LM Telephone Co. (Sponsored ADR) 669,375
49,000 KLA Instruments Corp. * 2,388,750
181,000 LSI Logic Corp. * 5,792,000
22,400 Linear Technology Corp. 1,159,200
144,000 Maxim Integrated Products Inc. * 8,190,000
238,100 Microchip Technology Inc. * 7,083,475
242,000 Molex Inc. Class A 8,439,750
30,000 Network Equipment Technologies Inc. * 540,000
679,400 Network General Corp. * 10,106,075
160,500 Newbridge Networks Corp. * 6,981,750
109,450 Nokia Corp. (Sponsored ADR A) 8,071,938
258,435 Octel Communications Corp. * 6,057,070
14,350 QUALCOMM Inc. * 730,056
115,000 Sanmina Corp. * 7,302,500
18,000 Thermo Electron Corp. * 612,000
191,900 Uniphase Corp. * 11,178,175
219,500 Xilink Inc.* 10,769,219
-------------
152,968,048
-------------
TECHNOLOGY SERVICES 10.42%
50,500 America Online Inc. * 2,809,063
186,000 American Management Systems Inc. * 4,975,500
The accompanying notes are an integral part of the financial statements.
Page 10
<PAGE>
RCM GROWTH EQUITY FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
JUNE 30, 1997
(UNAUDITED)
% OF
SHARES EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- ---------- ---------------------------------- ---------- -------------
TECHNOLOGY SERVICES
(CONTINUED)
15,000 Aspen Technologies Inc. * $ 564,375
208,600 BISYS Group Inc. * 8,709,050
73,150 Business Objects S.A. (Sponsored ADR) * 713,213
41,200 CBT Group PLC (Sponsored ADR) * 2,600,750
143,900 CUC International Inc. * 3,714,419
73,400 Ceridian Corp. * 3,101,150
28,300 Computer Associates International Inc. 1,575,956
43,100 Computer Sciences Corp. * 3,108,588
62,250 Electronics Arts Inc. * 2,093,156
208,600 McAfee Associates Inc. * 13,167,875
33,250 National Data Corp. 1,440,141
193,300 PeopleSoft Inc. * 10,196,575
15,000 Renaissance Solutions Inc. * 555,000
455,825 Sterling Commerce Inc. * 14,985,247
87,000 Vantive Corp. * 2,457,750
247,050 VERITAS Software Co. * 12,414,263
210,000 Wind River Systems Inc. * 8,032,500
12,740 Yahoo Inc. * 449,073
-------------
97,663,644
-------------
TOTAL EQUITY INVESTMENTS 96.45% 904,326,819
(COST $741,476,210) -------------
SHORT-TERM INVESTMENTS
MONEY MARKET FUNDS 3.56%
1,204,982 SSgA U.S. Government Money Market Fund 1,204,982
32,163,250 SSgA Money Market Fund 32,163,250
-------------
33,368,232
-------------
TOTAL SHORT-TERM INVESTMENTS
(COST $33,368,232) 3.56% 33,368,232
-------------
TOTAL INVESTMENTS (COST $774,844,442)** 937,695,051
OTHER ASSETS LESS LIABILITIES -0.01% (54,063)
-------------
NET ASSETS 100.00% $ 937,640,988
-------------
-------------
* Non-income producing security.
The accompanying notes are an integral part of the financial statements.
Page 11
<PAGE>
RCM GROWTH EQUITY FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
JUNE 30, 1997
(UNAUDITED)
_____________________
TAX INFORMATION:
** For Federal income tax purposes, cost is $780,288,664 and unrealized
appreciation (depreciation) of equity securities is as follows:
Unrealized appreciation $ 173,402,858
Unrealized depreciation (15,996,471)
-------------
Net unrealized appreciation $ 157,406,387
-------------
-------------
The accompanying notes are an integral part of the financial statements.
Page 12
<PAGE>
This page intentionally left blank
Page 13
<PAGE>
RCM SMALL CAP FUND
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
The RCM Small Cap Fund (the "Fund") registered excellent performance in the
second quarter of 1997, rising 21.24% and outperforming its primary benchmark,
the Russell 2000 Index, by 503 basis points. Over the first six months of the
year, the value of an investment in the Fund appreciated 7.65%. Despite these
results, however, the Fund finished behind the 10.20% return posted by its
primary benchmark for the same period.
Perhaps the most prominent characteristic of the stock market's action during
the "summer correction" of 1996 and its subsequent advance through the first
half 1997 has been the persistent leadership of very large capitalization
issues. Investors who had participated in the blistering advance and subsequent
collapse of small cap stocks in the first half of 1996 have since been willing
to accord a premium to liquidity and the perception of "visible growth" as
embodied in the stocks of the biggest multinational corporations. The decline
in small cap universes in the correction of 1996 was much more violent than that
of the large cap market. The resumption of huge cash flows into the stock
market from institutional and equity mutual fund investors after the correction
coincided with a rise in the popularity of passive indexing tied to large cap
universes, which has only exacerbated the pronounced performance divergence
between capitalization tiers.
Despite the lagging performance of small cap stock universes in the second half
of 1996, there were reasons to be optimistic about a turn in relative
performance for quality small cap stocks going into 1997. Seasonal factors for
so-called "secondary cap" sectors of the market traditionally are favorable
early in a new year, as smaller capitalization stocks typically register their
strongest monthly relative performance in the January/February period. RCM
Capital Management, L.L.C. ("RCM"), the Fund's investment manager, was
encouraged by evidence of improved relative strength in small cap stocks in the
final month of 1996, and hopeful that seasonal strength in mutual fund cash
flows would support a catch-up move versus large capitalization equities in
early 1997. Importantly, valuations of small cap universes had become
attractive versus their own historical ranges and relative to large caps,
especially given RCM's outlook for higher relative earnings growth in the small
cap sector. Based on these considerations and RCM's commitment to a quality
growth approach to investing, the Fund entered 1997 with overweighted positions
in high-growth areas such as technology, business services and health care.
While the Fund did maintain some exposure to the banking and financial services
industry groups, these were underweighted areas relative to the primary
benchmark, which has heavy weightings in these groups. (As a growth manager,
RCM typically maintains only modest exposure to these interest-rate-sensitive
industries.)
The relative move in the small cap sector did not materialize in the first
quarter, however, and market leadership continued to narrow, concentrating in
stocks of the very large cap multinationals. The much-anticipated small cap
"January Effect" failed to occur for the third consecutive year, and by late
February a more pronounced secondary cap decline was evident, particularly in
technology stocks. Federal Reserve Chairman Greenspan's cautionary comments
regarding "irrational exuberance" early in the first quarter did not slow
seasonally strong mutual fund cash flows, but did seem to intensify investors'
preference for large cap, liquid names. Small caps -- especially higher growth
and higher P/E multiple sectors -- underperformed when the market corrected in
March on fears of rising interest rates, but the worst relative performance of
the year occurred in April. By the end of April 1997, the spread between the
12-month S&P 500 return and Russell 2000 Index performance had reached its
highest level ever, at -25%. Due to the Fund's growth-stock orientation, Fund
performance trailed the Russell 2000 Index by 852 basis points through the first
four months of 1997.
Page 14
<PAGE>
Large cap stocks made a major bottom with the easing of interest rate fears in
mid-April, but it took a few weeks before small caps joined the move. Relative
valuation and performance disparities set up an explosive small cap rally in
May. The Fund was well positioned to benefit, as extremely compressed multiples
of quality growth issues expanded and technology stocks re-emerged as market
leaders. The Russell 2000 Index outperformed the S&P 500 by 506 basis points
for the month of May alone, and essentially matched the performance of the S&P
500 in June. The Fund outperformed the Russell 2000 Index by 845 basis points
in the final two months of the first half of 1997.
Despite the severity of the correction in small cap technology in March,
individual stock selection in computers and office equipment made a positive
contribution to the Fund's relative performance in the first half. The Fund's
holdings in this group were up an aggregate of 23% versus a gain of
approximately 3% for the Russell 2000 Index stocks in this group. The Fund's
major holding in this industry was Micros Systems, which registered a total
return of +37% in the first half of 1997. Stock selection in the leisure time
products and services group also added to relative performance, owing largely to
the Fund's meaningful positions in lodging stocks such as Four Seasons Hotels
(+26% total return in the first half of 1997) and CapStar Hotel Co. (+61%). The
Fund also experienced positive contributions from stock picking in the banking,
industrial equipment, and automotive-related industry groups during the first
half.
Negative stock selection was experienced in the electronics and new technology
group. Relative performance was hurt in particular by declines in Network
General (-51%), Altron (-29%) and Actel (-28%), causing the aggregate
performance of the Fund's holdings to fall short of the average gain of
approximately 7% posted by the Russell 2000 Index stocks in this industry for
the first half of 1997. The Fund also experienced a negative contribution to
relative performance from stock selection in the retail trade sector.
Industry strategies that were positive contributors to the Fund's relative
performance in the first half included overweightings in the strong business
services sector (12% weighting in the Fund versus 5% in the Russell 2000 Index)
and in the electronics and new technology group (14% versus 7% in the
benchmark). Relative performance of the Fund also benefited from a strategic
underweighting in the lagging utilities industry group. (Due to RCM's
growth-stock orientation, the Fund typically does not maintain exposure to
utility stocks.)
On the negative side, overweighting the poorly performing technology services
industry group hurt the Fund's relative performance in the first six months of
1997. Technology services stocks in the Russell 2000 Index underperformed the
overall benchmark by about 13% for the period. This sector had traditionally
been a "defensive" subsector within the technology universe, and RCM believed
that these stocks would fare relatively better than other areas of technology in
a group correction. However, technology service stocks came under severe
pressure in the first quarter, as a bellwether large cap service stock
(Electronic Data Systems) posted disappointing earnings and questions arose
surrounding the ability of services companies to contain costs. In fact, the
Fund's technology service holdings generally had excellent fundamentals, and
these holdings rebounded powerfully in the May rally and through the end of the
first half. The Fund's underweighted positions in insurance and banking also
had a modestly negative impact on relative performance for the period. Due to
RCM's growth-stock orientation, it is typical for the Fund to have only modest
relative exposure in these industries. The Fund's average cash position of
about 3% during the first half of 1997 was at the low end of its "normal" range,
and cash had negligible impact on relative performance despite the rising market
environment.
Page 15
<PAGE>
Going into the second half of 1997, the equity market environment appears to
reflect an extremely favorable economic outlook: low inflation, continued
healthy -- but not overheated -- GDP growth, and no immediate reason to
anticipate an interest rate hike by the Federal Reserve. Stocks reached new
highs early in the third quarter, surprising many observers who had not expected
1997 to repeat the exceptional returns of the previous two years. Heightened
vigilance to potential changes in the environment is certainly warranted given
current market levels, but RCM is encouraged by the improved relative
performance of secondary capitalization stocks at the end of the first half of
the year. Although it is not clear that a sustained period of outperformance
lies ahead, RCM continues to believe that relative valuations of small cap
stocks are attractive, especially in light of RCM's outlook for higher relative
growth in this sector. The Fund retains significant overweightings in growth
industries such as technology, health care, and telecommunications, with a cash
position at the lower end of a "normal" range.
Page 16
<PAGE>
[RCM SMALL CAP FUND
PERFORMANCE SUMMARY
- --------------------------------------------------------------------------------
RCM RUSSELL
SMALL 2000
CAP FUND INDEX
--------- ---------
Dec-91 $10,000 $10,000
Jan-92 $10,786 $10,811
Feb-92 $11,118 $11,127
Mar-92 $10,850 $10,751
Apr-92 $10,613 $10,373
May-92 $10,703 $10,511
Jun-92 $10,165 $10,017
Jul-92 $10,530 $10,366
Aug-92 $10,336 $10,072
Sep-92 $10,603 $10,304
Oct-92 $11,002 $10,630
Nov-92 $11,807 $11,444
Dec-92 $12,214 $11,842
Jan-93 $12,212 $12,242
Feb-93 $11,792 $11,960
Mar-93 $12,082 $12,348
Apr-93 $11,636 $12,008
May-93 $12,102 $12,539
Jun-93 $12,134 $12,617
Jul-93 $12,126 $12,791
Aug-93 $12,580 $13,344
Sep-93 $13,037 $13,720
Oct-93 $13,186 $14,074
Nov-93 $12,728 $13,615
Dec-93 $13,337 $14,080
Jan-94 $13,592 $14,522
Jan-94 $13,431 $14,469
Jan-94 $12,712 $13,707
Jan-94 $12,637 $13,788
Jan-94 $12,411 $13,633
Jan-94 $11,990 $13,173
Jan-94 $12,173 $13,390
Jan-94 $13,095 $14,136
Jan-94 $13,073 $14,088
Jan-94 $13,240 $14,031
Jan-94 $12,765 $13,464
Jan-94 $13,049 $13,824
Jan-95 $12,958 $13,649
Jan-95 $13,392 $14,217
Jan-95 $13,900 $14,461
Jan-95 $14,064 $14,782
Jan-95 $14,030 $15,037
Jun-95 $14,728 $15,817
Jun-95 $15,706 $16,728
Jun-95 $16,245 $17,074
Jun-95 $16,900 $17,380
Jun-95 $16,330 $16,602
Jun-95 $16,882 $17,300
Jun-95 $17,496 $17,756
Jan-96 $17,973 $17,737
Jan-96 $18,914 $18,290
Jan-96 $19,374 $18,662
Jan-96 $20,684 $19,660
Jan-96 $21,660 $20,435
Jun-96 $20,993 $19,596
Jul-96 $18,958 $17,884
Aug-96 $20,592 $18,923
Sep-96 $22,457 $19,662
Oct-96 $22,226 $19,359
Nov-96 $22,488 $20,157
Dec-96 $23,514 $20,685
Jan-97 $23,754 $21,098
Feb-97 $22,335 $20,587
Mar-97 $20,877 $19,615
Apr-97 $20,357 $19,670
May-97 $23,953 $21,858
Jun-97 $25,312 $22,795
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
The chart above shows the performance of the RCM Small Cap Fund since the Fund's
inception versus the Russell 2000 Index.(a) The chart represents a cumulative
return of 153.12%(b) for the Fund. The average annual total return from the
Fund's inception was 18.39%.(b)(c) The chart assumes a hypothetical $10,000
initial investment in the Fund and reflects all Fund expenses.
AVERAGE ANNUAL TOTAL RETURNS(b)
JUNE 30, 1997
- -----------------------------
LIFE OF
1 YEAR 5 YEAR FUND(c)
- -----------------------------
20.58% 20.02% 18.39%
- -----------------------------
The data above represent past performance of the Fund and may not be indicative
of future performance. The investment return and principal value of an
investment in the Fund will fluctuate, so that shares, when redeemed, may be
worth more or less than their original cost.
- ----------------------
(a) The Russell 2000 Index is composed of the 2,000 smallest securities 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.
(b) Returns assume reinvestment of all dividends and capital gains
distributions at net asset value.
(c) The Fund began operations on January 4, 1992.
Page 17
<PAGE>
RCM SMALL CAP FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
JUNE 30, 1997
(UNAUDITED)
% OF
SHARES EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- --------- ---------------------------------- ---------- -------------
CONSUMER DURABLES SECTOR 3.21%
AUTOMOTIVE RELATED 2.92%
143,900 Dura Automotive Systems Inc. * $ 4,029,200
186,000 Keystone Automotive Industries Inc. * 3,162,000
221,700 Tower Automotive Inc. * 9,533,100
-------------
16,724,300
-------------
CONSUMER DURABLES 0.29%
50,000 Sola International Inc. * 1,675,000
CONSUMER NON-DURABLES SECTOR 8.88%
FOOD/FOOD PROCESSING 0.48%
66,400 Suiza Foods Corp. * 2,722,400
HOUSEHOLD/RELATED NON-DURABLES 1.88%
257,000 Carson Inc. * (a) 2,762,750
276,000 Scotts Co. * 8,004,000
-------------
10,766,750
-------------
LEISURE TIME PRODUCTS/SERVICES 3.44%
451,500 CapStar Hotel Co. * 14,448,000
29,000 Four Seasons Hotels Inc. 859,125
148,000 Interstate Hotels Co. * 4,356,750
-------------
19,663,875
-------------
RETAIL TRADE 3.08%
113,200 Cole National Corp. * 4,980,800
17,700 Linens 'n' Things Inc. * 524,363
264,000 Regis Corp. 6,237,000
133,000 Samsonite Corp. * 5,868,625
-------------
17,610,788
-------------
The accompanying notes are an integral part of the financial statements.
Page 18
<PAGE>
RCM SMALL CAP FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
JUNE 30, 1997
(UNAUDITED)
% OF
SHARES EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- --------- ---------------------------------- ---------- -------------
CYCLICAL/CAPITAL GOODS SECTOR 14.35%
AEROSPACE/DEFENSE 3.22%
260,800 Doncasters PLC * $ 6,031,000
460,000 Wyman-Gordon Co. * 12,420,000
-------------
18,451,000
-------------
BUILDING/CONSTRUCTION 1.81%
40,000 Apogee Enterprises Inc. 860,000
145,300 Comfort Systems USA Inc. * 2,270,313
204,000 NCI Building Systems Inc. * 6,604,500
25,000 Service Experts Inc. * 612,500
-------------
10,347,313
-------------
ELECTRICAL EQUIPMENT 0.54%
108,500 Littelfuse Inc. * 3,065,125
INDUSTRIAL EQUIPMENT 1.52%
75,000 Furon Co. 2,353,125
273,300 Omniquip International Inc. * 6,320,063
-------------
8,673,188
-------------
TRANSPORTATION SERVICES 7.26%
196,000 Air Express International Corp. 7,791,000
354,000 Covenant Transport Inc. Class A * 5,796,750
225,000 Expeditors International of
Washington Inc. 6,384,375
145,000 Heartland Express Inc. * 3,407,500
105,200 Hub Group Inc. * 3,169,150
354,200 Kitty Hawk Inc. * 5,313,000
32,500 Knight Transportation Inc. * 824,688
157,000 Mark VII Inc. * 5,024,000
75,000 Swift Transportation Co. Inc. * 2,212,500
86,000 Werner Enterprises Inc. 1,666,250
-------------
41,589,213
-------------
The accompanying notes are an integral part of the financial statements.
Page 19
<PAGE>
RCM SMALL CAP FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
JUNE 30, 1997
(UNAUDITED)
% OF
SHARES EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- --------- ---------------------------------- ---------- -------------
ENERGY SECTOR 2.95%
ENERGY 2.95%
15,000 Camco International Inc. $ 821,250
133,100 Forcenergy Gas Exploration Inc. * 4,042,913
8,500 Hanover Compressor Co. * 165,750
467,500 Houston Exploration Co. * 7,275,469
201,600 Veritas DGC Inc. * 4,586,400
-------------
16,891,782
-------------
HEALTH CARE SECTOR 17.14%
DRUGS AND HOSPITAL SUPPLIES 7.90%
106,000 Algos Pharmaceutical Corp. * 1,934,500
59,100 Anesta Corp. * 1,122,900
142,500 Bone Care International Inc. * 1,852,500
14,000 Cardiac Pathways Corp. * 126,000
365,000 CIMA Laboratories Inc. * 1,505,625
79,000 Closure Medical Corp. * 1,520,750
54,000 COR Therapeutics Inc. * 573,750
56,000 Creative BioMolecules Inc. * 395,500
206,000 Endosonics Corp. * 2,240,250
49,000 GelTex Pharmaceuticals Inc. * 986,125
29,000 Inhale Therapeutic Systems * 717,750
47,000 Ligand Pharmaceuticals Inc. Class B * 605,125
210,000 LUNAR Corp. * 4,567,500
33,000 MedImmune Inc. * 610,500
52,000 NPS Pharmaceuticals Inc. * 500,500
137,800 NaPro BioTherapeutics Inc. * 999,050
47,500 NeXstar Pharmaceuticals Inc. * 676,875
10,000 PathoGensis Corp. * 291,250
90,000 Penederm Inc. * (b) 1,215,000
7,000 Protein Design Laboratories Inc. * 199,500
219,000 SangStat Medical Corp. * 5,064,375
124,700 Sepracor Inc. * 3,218,819
121,300 Sofamor/Danek Group Inc. * 5,549,475
8,000 Vertex Pharmaceuticals Inc. * 306,000
356,200 VISX Inc. * 8,459,750
-------------
45,239,369
-------------
The accompanying notes are an integral part of the financial statements.
Page 20
<PAGE>
RCM SMALL CAP FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
JUNE 30, 1997
(UNAUDITED)
% OF
SHARES EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- --------- ---------------------------------- ---------- -------------
HEALTH CARE SERVICES 9.24%
234,400 Advanced Health Corp. * $ 4,307,100
261,200 American Retirement Corp. * 4,636,300
43,000 Arbor Health Care Co. * 1,333,000
54,000 CRA Managed Care Inc. * 2,818,125
217,500 Curative Technologies Inc. * 6,253,125
90,700 Harborside Healthcare Corp. * 1,292,475
235,000 Home Health Corp. of America Inc. * 2,232,500
386,300 Maxicare Health Plans Inc. * 8,643,463
75,000 OccuSystems Inc. * 2,175,000
230,000 Raytel Medical Corporation * 2,645,000
195,600 Renal Treatment Centers Inc. * 5,256,750
55,600 Renal Care Group Inc. * 2,317,825
180,000 RoTech Medical Corp. * 3,611,250
233,200 Sun Healthcare Group * 4,853,475
30,000 Transition Systems Inc. * 545,625
-------------
52,921,013
-------------
INTEREST-SENSITIVE SECTOR 7.35%
BANKING 5.19%
243,300 Community First Bankshares Inc. 9,336,638
120,000 Silicon Valley Bancshares * 5,430,000
170,000 Texas Regional Bancshares Inc. Class A 7,140,000
102,800 WestAmerica Bancorporation 7,812,800
-------------
29,719,438
-------------
GENERAL FINANCE 1.75%
232,000 AMRESCO Inc. * 4,988,000
145,000 Glendale Federal Bank FSB (California) * 3,788,125
38,900 OCWEN Financial Corp. * 1,269,113
-------------
10,045,238
-------------
INSURANCE 0.41%
49,100 CMAC Investment Corp. 2,344,525
The accompanying notes are an integral part of the financial statements.
Page 21
<PAGE>
RCM SMALL CAP FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
JUNE 30, 1997
(UNAUDITED)
% OF
SHARES EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- --------- ---------------------------------- ---------- -------------
SERVICES/MEDIA SECTOR 15.83%
BUSINESS SERVICES 10.72%
172,500 ABR Information Services Inc. * $ 5,002,500
159,000 Caribiner International Inc. * 5,187,375
186,500 Data Processing Corp. * 4,359,438
283,300 F. Y. I. Inc. * 6,799,200
314,000 Healthcare Recoveries Inc. * 6,083,750
142,000 Iron Mountain Inc. * 4,260,000
203,000 JLK Direct Distribution Inc. Class A * 5,201,875
299,000 Personnel Group of America Inc. * 8,614,938
133,100 The Registry Inc. * 6,122,600
86,500 Romac International * 2,832,875
98,100 Source Services Corp. * 2,636,438
176,000 Wilmar Industries Inc. * 4,290,000
-------------
61,390,989
-------------
COMMUNICATIONS SERVICES 2.78%
168,200 Channell Commercial Corp. * 2,270,700
200,000 Precision Response Corp. * 3,300,000
30,000 SITEL Corp. * 618,750
447,400 Smartalk Teleservices Inc. * 6,934,700
182,000 Tel-Save Holdings Inc. * 2,775,500
-------------
15,899,650
-------------
MEDIA 2.33%
276,300 Central European Media Entertainment
Ltd. Class A * 7,183,800
81,800 Regal Cinemas Inc. * 2,699,400
101,900 Sylvan Learning Systems Inc. * 3,464,600
-------------
13,347,800
-------------
TECHNOLOGY SECTOR 27.74%
COMPUTERS/OFFICE EQUIPMENT 5.28%
385,000 Black Box Corp. * 15,496,250
322,000 Micros Systems Inc. * 13,524,000
57,000 Radiant Systems Inc. * 1,189,875
-------------
30,210,125
-------------
The accompanying notes are an integral part of the financial statements.
Page 22
<PAGE>
RCM SMALL CAP FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
JUNE 30, 1997
(UNAUDITED)
% OF
SHARES EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- --------- ---------------------------------- ---------- -------------
ELECTRONICS/NEW TECHNOLOGY 12.81%
185,000 ADE Corp. * $ 5,503,750
81,100 ASE Test Limited * 3,426,475
538,300 Actel Corp. * 9,184,744
346,000 Altron Inc. * 5,190,000
847,000 Computer Products Inc. * 21,175,000
183,000 Continental Circuits Corp. * 2,539,125
45,000 Cymer Inc. * 2,193,750
195,000 Network Equipment Technologies Inc. * 3,510,000
417,000 Network General Corp. * 6,202,875
29,000 Octel Communications Corp. * 679,688
91,000 Sanmina Corp. * 5,778,500
136,000 Uniphase Corp. * 7,922,000
-------------
73,305,907
-------------
TECHNOLOGY SERVICES 9.65%
125,800 American Management Systems Inc. * 3,365,150
127,000 Aspen Technologies Inc. * 4,778,375
141,000 BISYS Group Inc. * 5,886,750
8,000 CBT Group PLC (Sponsored ADR) * 505,000
220,000 Engineering Animation Inc. * 7,425,000
196,400 The Indus Group Inc. * 3,977,100
288,500 International Telecommunication
Systems Inc. * 7,068,250
254,500 Renaissance Solutions Inc. * 9,416,500
231,100 Unison Software Inc. * 1,617,700
20,000 Vantive Corp. * 565,000
98,600 VERITAS Software Co. * 4,954,650
148,600 Wind River Systems Inc. * 5,683,943
-------------
55,243,418
-------------
TOTAL EQUITY INVESTMENTS 97.45% 557,848,206
(COST $448,680,810) -------------
The accompanying notes are an integral part of the financial statements.
Page 23
<PAGE>
RCM SMALL CAP FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
JUNE 30, 1997
(UNAUDITED)
% OF
SHARES EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- ---------- ---------------------------------- ---------- -------------
SHORT-TERM INVESTMENTS
MONEY MARKET FUNDS 3.61%
146,765 SSgA U.S. Government Money Market Fund $ 146,765
20,490,371 SSgA Money Market Fund 20,490,371
-------------
20,637,136
-------------
TOTAL SHORT-TERM INVESTMENTS 3.61% 20,637,136
(COST $20,637,136) -------------
TOTAL INVESTMENTS (COST $469,317,946) ** 101.06% 578,485,342
OTHER ASSETS LESS LIABILITIES -1.06% (6,057,864)
-------------
NET ASSETS 100.00% $572,427,478
-------------
-------------
* Non-income producing security.
(a) Affiliate at June 30, 1997. Affiliates, as defined by the Investment
Company Act of 1940, are those companies in which a fund holds 5% or more
of the outstanding voting securities.
(b) Shares require prospectus on sale.
- ---------------------
TAX INFORMATION:
** For Federal income tax purposes, cost is $470,532,539 and unrealized
appreciation (depreciation) of equity securities is as follows:
Unrealized appreciation $122,136,365
Unrealized depreciation (14,183,562)
-------------
Net unrealized appreciation $107,952,803
-------------
-------------
The accompanying notes are an integral part of the financial statements.
Page 24
<PAGE>
This page intentionally left blank
Page 25
<PAGE>
RCM INTERNATIONAL GROWTH EQUITY FUND A
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
In the first half of 1997, global equity markets enjoyed a significant rally,
with the EAFE Index rising 11.36% as the German sector surged 17% (32% in local
currency terms). Equity markets benefited from a relatively benign environment.
During the second quarter, the U.S. dollar continued to edge higher against the
German mark and other core European currencies, reflecting the convergence into
a single currency bloc, while weakening slightly against the Japanese yen.
Emerging markets in Latin America posted a 40% rise, while those in Southeast
Asia (+6.5%) and in Eastern Europe (-3.5%) lagged behind.
The RCM International Growth Equity Fund A (the "Fund") had a portfolio return
of 17.22% for the six months ended June 30, 1997, which exceeded the EAFE Index
by 586 basis points. For the 12-month period ended June 30, 1997, the Fund
enjoyed a portfolio return of 23.58%--1,043 basis points above the EAFE Index.
The Fund's other benchmark, the MSCI All Country World Free Ex-US Index (ACWI),
returned 12.70% in the 6-month period and 14.14% in the last twelve months.
RCM Capital Management, L.L.C. ("RCM"), the Fund's investment manager, firmly
believes in its investment philosophy of seeking out the highest-growth
companies in the world. This philosophy has remained the same since inception
of the Fund and its implementation is expected to be enhanced by additional
research resources located around the globe. RCM's philosophy of seeking out
companies with world-class managements that--through either organic sales
growth, restructuring, or demographic change--are able to increase earnings in a
sustainable manner has led the Fund over the last six months to maintain an
overweight in European and Latin American stocks. The Fund remained
overweighted in Canada and underweighted in Southeast Asia and Eastern Europe.
Improved earnings forecasts for both Japanese exporters and electronics firms
prompted RCM to increase the Fund's weighting in Japanese equities during the
last six months, contributing to performance during the second quarter when the
Japanese equity market rose 23%.
Europe continues to benefit from accommodative monetary policies as governments
attempt to reduce fiscal spending ahead of Maastricht. The effect on corporate
earnings from reduced fiscal spending has been more than offset by significant
restructuring taking place in the corporate sector, as well as consolidation
within industry groups. RCM expects economic growth to improve in the latter
part of this year--however, growth is expected to be gradual enough to allow the
regional central banks to maintain neutral positions. The Fund's portfolio is
positioned to benefit from improved efficiencies in the financial and insurance
sectors, improved business and consumer sentiment, and the technological demands
of preparing for a single currency and the millennium.
Japan seems to have finally embarked upon a plan to reform its financial system.
While the ruling Liberal-Democratic Party (LDP) will not gain a full majority of
the Diet (and thus ensure passage of reforms) until next year, investors are
beginning to see a loosening of Japan's regulatory reins. The economic recovery
brought forth in part by a weakening of the yen resulted in the segregation of
two corporate sectors in Japan--the large exporters showing record profits and
the smaller domestic-oriented manufacturers continuing to struggle. RCM
believes that the central bank remains acutely aware of the fragility of the
domestic recovery and is likely to maintain current monetary and foreign
exchange policies for the foreseeable future. The Fund's portfolio is
positioned to take advantage of anticipated improved productivity and higher
sales generated by exporters, as well as by domestic companies involved in
technology.
Latin America rallied strongly in the first six months of 1997 as the difficult
economic policies implemented over the last two years began to show positive
results. Corporate profitability continues to surprise as managements adopt
management systems from abroad and are able to improve productivity by tying
wages to efficiency gains. The Fund's portfolio is focused on what RCM believes
to be high-quality companies that should benefit from the cyclical expansion in
the region and should be able to deliver sustainable earnings growth.
Page 26
<PAGE>
Southeast Asia, where the Fund has been underweighted for the last six months,
underperformed the rest of the advancing global markets. The rapid growth rate
of the last several years and expansion in productive capacity finally stretched
the abilities of these markets to finance the growth from increased offshore
borrowings. For much of the second quarter, investors waited for the region's
currency regimes to give up on a fixed exchange-rate system and allow the free
market to set the appropriate exchange levels. As these events have unfolded,
RCM has sought out companies with high internal-cash generation that will allow
them to grow without requiring additional capital.
While RCM believes the current benign conditions will continue in place for the
foreseeable future, it is worthwhile to point out certain triggers that could
cause a shift in investors' perceptions of risk and reward:
* A higher U.S. interest-rate environment that would lead to an upward bias
in global rates, reduce global liquidity, and stymie flows into emerging
markets.
* A weaker U.S. dollar which could trigger capital flow reversal. Foreign
flows of capital into U.S. markets, especially bonds, have helped to keep
U.S. rates low.
* Higher Japanese interest rates without any policy shift in the United
States and/or Germany could trigger capital flow reversal and result in a
weakening of the U.S. dollar.
In the past, RCM has stated that the kind of global interest rate and inflation
scenario as reflected in the current market environment favors RCM's
growth-stock philosophy of investing. RCM's central forecast for the next six
months maintains that global liquidity should continue to be ample and that
cyclical recoveries in several major economies should favor an earnings
growth-stock environment. RCM's enthusiasm is somewhat tempered by current
valuations, which in some equity markets around the world have been taken to
historical highs. Nevertheless, RCM believes these levels are justifiable as we
live through the lowest interest-rate environment in several decades.
Volatility has been increasing as these markets reach new highs--however,
earnings growth due to expanding margins, as companies around the globe
restructure and improve productivity, has to date warranted neither higher risk
premiums nor lower market multiples. Investors continue to place premiums on
companies that can show sustainable earnings growth. RCM remains focused on
valuations relative to local markets and global peer groups in order to maintain
a disciplined approach to international investing. RCM's expanding resources
and research produced by Grassroots Research should enable RCM to generate new
investment ideas.
Page 27
<PAGE>
RCM INTERNATIONAL GROWTH EQUITY FUND A
PERFORMANCE SUMMARY
- --------------------------------------------------------------------------------
PERFORMANCE FROM COMMENCEMENT OF OPERATIONS
[GRAPH]
Fund EAFE ACWI
-----------------------------------
12/28/94 50,000 50,000 50,000
47,772 48,090 48,146
47,881 47,965 47,881
3/31/95 50,264 50,972 50,586
52,453 52,904 52,559
52,815 52,285 52,328
6/30/95 54,230 51,381 51,605
57,845 54,590 54,537
57,095 52,520 52,644
9/30/95 58,320 53,560 53,544
57,440 52,140 52,115
57,605 53,605 53,340
12/31/95 58,995 55,770 55,446
60,630 56,010 56,206
61,355 56,215 56,206
3/31/96 63,240 57,420 57,251
65,480 59,105 58,986
66,315 58,030 58,101
6/30/96 66,766 58,370 58,398
64,611 56,677 56,459
65,541 56,813 56,792
9/30/96 67,021 58,336 58,200
66,510 57,753 57,618
69,318 60,063 59,843
12/31/96 70,391 59,306 59,148
71,775 57,242 58,060
72,383 58,192 59,123
3/31/97 72,051 58,419 58,998
73,269 58,740 59,494
78,028 62,576 63,171
6/30/97 82,510 66,043 66,658
PERFORMANCE FROM FIRST PUBLIC OFFERING
5/22/95 50,000 50,000 50,000
52,900 49,800 52,775
51,160 49,920 51,110
6/30/95 52,535 49,054 50,405
56,035 52,122 53,268
55,310 50,146 51,419
9/30/95 56,495 51,138 52,299
55,645 49,777 50,902
55,805 51,175 52,098
12/31/95 57,150 53,250 54,156
58,735 53,481 54,898
59,435 53,675 54,898
3/31/96 61,270 54,829 55,919
63,430 56,436 57,614
64,240 55,411 56,749
6/30/96 64,677 55,737 57,039
62,105 54,120 55,145
63,490 54,250 55,471
9/30/96 64,924 55,704 56,846
64,429 55,147 56,278
67,149 57,353 58,450
12/31/96 68,189 56,630 57,772
69,529 54,659 56,709
70,119 55,567 57,747
3/31/97 69,797 55,784 57,626
70,976 56,090 58,110
75,587 59,753 61,701
6/30/97 79,929 63,063 65,107
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
The charts above show the performance of the RCM International Growth Equity
Fund A versus the Morgan Stanley Capital International Europe, Australia, Far
East Index (MSCI-EAFE)(a) and the Morgan Stanley Capital International All
Country World Free Ex-US Index (MSCI-ACWI)(b). The charts represent cumulative
returns of 65.02%(c) and 59.86%(c) for the Fund from December 28, 1994(d) to
June 30, 1997 and from May 22, 1995(e) to June 30, 1997, respectively. The
charts assume a hypothetical $50,000 initial investment in the Fund and reflect
all Fund expenses.
AVERAGE ANNUAL TOTAL RETURNS(c)
JUNE 30,1997
LIFE OF FUND
ANNUALIZED SINCE
-----------------------------
1 YEAR 12/28/94(d) 5/22/95(e)
- ---------------------------------------
23.58% 22.11% 24.93%
- ---------------------------------------
The data above represent past performance of the Fund and may not be indicative
of future performance. The investment return and principal value of an
investment in the Fund will fluctuate, so that shares, when redeemed, may be
worth more or less than their original cost.
- ---------------------
(a) The MSCI-EAFE Index is an arithmetic, market value-weighted average of the
performance of over 900 securities listed on the stock exchanges of
countries in Europe, Australia, and the Far East. The index is calculated
on a total return basis, which includes reinvestment of gross dividends
before deduction of withholding taxes.
(b) The MSCI-ACWI Index is a market capitalization-weighted index composed of
companies representative of the market structure of 47 developed and
emerging market countries excluding the United States. Stock selection
excludes securities which are not purchasable by foreigners. The index is
calculated on a total return basis, which includes reinvestment of gross
dividends before deduction of withholding taxes.
(c) Returns assume reinvestment of all dividends and capital gains
distributions at net asset value.
(d) The Fund commenced operations on December 28, 1994.
(e) The Fund's shares were first offered to the public on May 22, 1995.
Page 28
<PAGE>
RCM INTERNATIONAL GROWTH EQUITY FUND A
INVESTMENTS IN SECURITIES AND NET ASSETS
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
% OF
SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS MARKET VALUE
------ ------- -------------------------------------- ---------- ------------
<S> <C> <C> <C>
CONSUMER DURABLES SECTOR 5.34%
AUTOMOTIVE RELATED 3.15%
14,000 SE Autoliv AB $ 547,750
2,475 DE Volkswagen AG 1,898,999
-------------
2,446,749
-------------
CONSUMER DURABLES 2.19%
19,500 JP Sony Corp. 1,702,394
CONSUMER NON-DURABLES SECTOR 15.07%
BEVERAGE/TOBACCO 2.95%
140,000 MX Fomento Economico Mexicano Series B 828,963
25,000 PA Pan American Beverages Inc. Class A 821,875
190,000 SE Swedish Match AB 638,872
-------------
2,289,710
-------------
FOOD/FOOD PROCESSING 3.00%
220,000 ID PT Daya Guna Samudera 395,846
25,220 JP Hokuto Corp. 892,607
5,650 FR Lambert Dodard Chancereul S.A. 1,036,470
-------------
2,324,923
-------------
HOUSEHOLD/RELATED NON-DURABLES 1.07%
55,000 CH Tag Heuer International S.A. (Sponsored ADR)* 828,438
LEISURE TIME PRODUCTS/SERVICES 3.11%
13,000 CA Four Seasons Hotels Inc. 385,125
30,000 JP NAMCO 1,158,787
6,000 FR Salomon S.A. 457,951
10,000 ES Sol Melia S.A. 411,369
-------------
2,413,232
-------------
RETAIL TRADE 4.94%
7,800 DE Adidas AG 863,914
665,000 MX Cifra S.A. de CV Class B 1,237,285
13,500 JP Circle K Japan Co. * 776,282
85,000 GB Next PLC 959,136
-------------
3,836,617
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 29
<PAGE>
RCM INTERNATIONAL GROWTH EQUITY FUND A
INVESTMENTS IN SECURITIES AND NET ASSETS
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
% OF
SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS MARKET VALUE
------ ------- -------------------------------------- ---------- ------------
<S> <C> <C> <C>
CYCLICAL/CAPITAL GOODS SECTOR 14.64%
BUILDING/CONSTRUCTION 4.02%
100,000 HK China Resources Enterprises Ltd. * $ 490,495
197,000 MX Consorcio ARA S.A. * 692,204
12,214 NL Hunter Douglas N.V. 1,041,043
65,000 JP Mitsui Fudosan Co. Ltd. 897,492
-------------
3,121,234
-------------
CHEMICALS/TEXTILES 3.32%
17,000 DE Bayer AG 653,841
17,300 DE Hoechst AG 734,479
18,000 CL Sociedad Quimica y Minera de Chile S.A. (Sponsored ADR) 1,190,250
-------------
2,578,570
-------------
ELECTRICAL EQUIPMENT 1.40%
15,800 JP Hirose Electric Co. Ltd. 1,085,275
INDUSTRIAL EQUIPMENT 3.89%
11,700 DE Pfeiffer Vacuum Technology AG (Sponsored ADR) * 340,763
39,000 GB Powerscreen International PLC 426,444
82,000 AU Smith (Howard) * 774,017
720 CH Sulzer AG 617,347
720 CH Sulzer AG Rights expiring 7/9/97 * -
42,000 NO Tomra Systems A/S 860,562
-------------
3,019,133
-------------
RAW/BASIC MATERIALS 1.59%
9,000 DE SGL Carbon AG 144A (a) 1,233,376
TRANSPORTATION SERVICES 0.42%
12,000 IE Ryanair Holdings PLC (Sponsored ADR) * 325,500
ENERGY SECTOR 2.29%
ENERGY 2.29%
6,600 GB British Petroleum Co. PLC (ADR) 494,175
51,332 GB British Petroleum Co. PLC 638,176
114,000 IT ENI SpA 644,872
-------------
1,777,223
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 30
<PAGE>
RCM INTERNATIONAL GROWTH EQUITY FUND A
INVESTMENTS IN SECURITIES AND NET ASSETS
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
% OF
SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS MARKET VALUE
------ ------- -------------------------------------- ---------- ------------
<S> <C> <C> <C>
HEALTH CARE SECTOR 13.39%
DRUGS & HOSPITAL SUPPLIES 12.11%
15,000 CA Biochem Pharma Inc. * $ 333,750
4,800 HU Gedeon Richter Ltd. (GDR) 144A * (a) 441,600
32,487 GB Glaxo Wellcome PLC 671,797
18,500 GB Glaxo Wellcome PLC (Sponsored ADR) 773,531
16,000 CL Laboratorio Chile S.A. (ADR) 458,000
1,200 CH Novartis AG 1,921,185
118 CH Roche Holdings Ltd. 1,068,827
22,200 GB Smithkline Beecham PLC (ADR) 2,034,075
13,000 FR Synthelabo 1,693,937
-------------
9,396,702
-------------
HEALTH CARE SERVICES 1.28%
17,800 JP Nichii Gakken Co. 995,543
INTEREST-SENSITIVE SECTOR 20.95%
BANKING 10.78%
21,000 CL Banco Santander Chile (Sponsored ADR A) * 309,750
50,973 IE Bank of Ireland 559,912
26,600 DE Bayerische Hypotheken- und Wechsel-Bank AG 796,076
25,000 IT Banca Popolare di Bergamo * 369,527
13,000 ES Banco Bilbao Vizcaya S.A. 1,058,067
157,000 HK Dah Sing Financial Holdings Ltd. 869,376
23,500 DE Deutsche Bank AG 1,374,234
42,000 JP Fuji Bank Ltd. * 631,303
24,698 GB HSBC Holdings PLC 742,794
82,611 GB Lloyds TSB Group PLC 848,310
36,000 SE Sparbanken Sverige AB 800,788
-------------
8,360,137
-------------
GENERAL FINANCE 3.76%
78,000 IT IMI Instituto Mobiliare Italiano SpA 701,381
27,000 CA Newcourt Credit Group Inc. 704,573
13,000 JP Nichiei Construction Company Ltd. 1,510,967
-------------
2,916,921
-------------
INSURANCE 4.15%
3,500 DE Allianz AG 733,128
17,300 FR AXA-UAP 1,077,026
15,200 ES Mapfre Vida Seguros 987,013
150 DE Munchener Ruckversicherungs-Gesellschaft * 420,939
-------------
3,218,106
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 31
<PAGE>
RCM INTERNATIONAL GROWTH EQUITY FUND A
INVESTMENTS IN SECURITIES AND NET ASSETS
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
% OF
SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS MARKET VALUE
------ ------- -------------------------------------- ---------- -------------
<S> <C> <C> <C>
UTILITIES 2.26%
6,500 PT Electricidade De Portugal SP * $ 234,000
11,000 CL Enersis S.A. (Sponsored ADR) * 391,188
1,765,600 BR Light Servicios de Electricidad S.A. 878,643
4,500 DE Veba AG 253,080
-------------
1,756,911
-------------
SERVICES/MEDIA SECTOR 8.44%
BUSINESS SERVICES 2.71%
2,200 CH Adecco S.A. 845,080
16,000 GB Danka Business Systems PLC (Sponsored ADR) 654,000
38,000 CA Philip Services Corp. * 603,250
-------------
2,102,330
-------------
COMMUNICATIONS SERVICES 4.22%
8,071 FR Alcatel Alsthom Compagnie Generale d'Electricite 1,011,807
90,000 GB Cable & Wireless Communications PLC 823,829
6,037 GB Cable & Wireless Communications PLC (ADR) 162,240
11,000 CL Cia de Telecomunicaciones de Chile S.A.
(Sponsored ADR) * 363,000
106,050 JP Nippon Denwa Shisetsu 911,939
-------------
3,272,815
-------------
MEDIA 1.51%
125,000 GB General Cable PLC * 339,101
86,000 GB Reed International 830,153
-------------
1,169,254
-------------
TECHNOLOGY SECTOR 18.56%
COMPUTERS/OFFICE EQUIPMENT 1.70%
29,000 JP Canon Inc. 790,702
22,700 JP Canon Sales Co. Inc. 529,660
-------------
1,320,362
-------------
ELECTRONICS/NEW TECHNOLOGY 12.31%
1,300 JP Advantest Corp. 99,974
30,030 SE Ericsson LM Telephone Co. 1,182,577
58,000 JP Fujitsu Ltd. * 805,907
71,000 JP NEC Corp. 992,746
32,000 CA Newbridge Networks Corp. * 1,392,000
15,000 FI Nokia Corp. A 1,120,180
9,000 CA Northern Telecom Ltd. 819,000
6,000 JP Rohm Co. Ltd. * 618,719
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 32
<PAGE>
RCM INTERNATIONAL GROWTH EQUITY FUND A
INVESTMENTS IN SECURITIES AND NET ASSETS
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
% OF
SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS MARKET VALUE
------ ------- -------------------------------------- ---------- ------------
<S> <C> <C> <C>
ELECTRONICS/NEW TECHNOLOGY
(CONTINUED)
5,820 KR Samsung Electronics Co. $ 646,885
5,820 KR Samsung Electronics Rights expiring 7/1/97 * -
4,500 FR SGS Thomson Microelectronics N.V. * 360,000
19,000 JP Shinko Electric Industries 695,709
17,000 JP Tokyo Electron Ltd. * 814,122
-------------
9,547,819
-------------
TECHNOLOGY SERVICES 4.55%
4,120 FR AXIME * 487,725
16,000 GB Dr. Solomons Group PLC (Sponsored ADR) * 406,000
32,173 NL Getronics N.V. 1,041,058
23,000 SE Intentia International AB * 251,346
3,700 DE SAP AG 743,171
29,000 GB SEMA Group PLC 598,482
-------------
3,527,782
-------------
TOTAL EQUITY INVESTMENTS
(COST $60,711,405) 98.68% 76,567,056
-------------
SHORT-TERM INVESTMENTS
MONEY MARKET FUNDS 1.31%
1,015,744 US SSgA U.S. Government Money Market Fund 1,015,744
TOTAL SHORT-TERM INVESTMENTS 1.31%
(COST $1,015,744) 1,015,744
-------------
TOTAL INVESTMENTS (COST $61,727,149)** 99.99% 77,582,800
OTHER ASSETS LESS LIABILITIES 0.01% 7,687
-------------
NET ASSETS 100.00% $ 77,590,487
-------------
-------------
</TABLE>
* Non-income producing security.
(a) Security is purchased pursuant to Rule 144A of the Securities Act of 1933
and may be resold only to qualified institutional buyers.
- -------------------------
TAX INFORMATION:
** For Federal income tax purposes, cost is $61,890,969 and unrealized
appreciation (depreciation) of equity securities is as follows:
<TABLE>
<CAPTION>
<S> <C>
Unrealized appreciation $ 16,147,875
Unrealized depreciation (456,044)
-------------
Net unrealized appreciation $ 15,691,831
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 33
<PAGE>
RCM INTERNATIONAL GROWTH EQUITY FUND A
INVESTMENTS IN SECURITIES AND NET ASSETS
JUNE 30, 1997
(UNAUDITED)
The Fund's investments in securities at June 30, 1997 categorized by country:
% of Net Assets
-----------------------------------
Country Short-Term
Country Code Equities and Other Total
------- ------- -------- ---------- -----
Australia AU 1.0% 1.0%
Brazil BR 1.1% 1.1%
Canada CA 5.5% 5.5%
Chile CL 3.5% 3.5%
Finland FI 1.4% 1.4%
France FR 7.9% 0.6% 8.5%
Germany DE 13.0% 13.0%
Hong Kong HK 1.7% 1.7%
Hungary HU 0.6% 0.6%
Indonesia ID 0.5% 0.5% 1.0%
Ireland IE 1.1% 1.1%
Italy IT 2.2% 2.2%
Japan JP 20.5% 20.5%
Korea KR 0.8% 0.8%
Mexico MX 3.6% 3.6%
Netherlands NL 2.7% 2.7%
Norway NO 1.1% 1.1%
Panama PA 1.1% 1.1%
Portugal PT 0.3% 0.3%
Spain ES 3.2% 3.2%
Sweden SE 4.4% 4.4%
Switzerland CH 6.8% 6.8%
United Kingdom GB 14.7% 14.7%
United States US 0.2% 0.2%
----- ---- ------
Total 98.7% 1.3% 100.0%
----- ---- ------
----- ---- ------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
Page 34
<PAGE>
This page intentionally left blank
Page 35
<PAGE>
<TABLE>
<CAPTION>
RCM CAPITAL FUNDS, INC.
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997
(UNAUDITED)
RCM
International
RCM Growth RCM Small Growth Equity
Equity Fund Cap Fund Fund A
-------------- -------------- --------------
<S> <C> <C> <C>
ASSETS:
Investments at cost $ 774,844,442 $ 469,317,946 $ 61,727,149
-------------- -------------- --------------
-------------- -------------- --------------
Foreign currency at cost $ 11,573 $ -- $ 831,050
-------------- -------------- --------------
-------------- -------------- --------------
Investments at value (Note 1) $ 937,695,051 $ 578,485,342 $ 77,582,800
Foreign currency at value (Note 1) 11,485 - 830,677
Cash 340,614 91,864 -
Receivables:
Investments sold 10,312,324 14,011,748 1,076,697
Fund shares sold 971,538 - -
Dividends and dividend reclaims 282,729 1,979 176,845
Other - - 3,375
-------------- -------------- --------------
Total Assets 949,613,741 592,590,933 79,670,394
-------------- -------------- --------------
LIABILITIES:
Payables:
Investments purchased 7,547,415 18,324,759 1,931,205
Fund shares repurchased 3,827,815 1,371,236 -
Investment management fees (Note 5) 574,342 454,357 43,464
Custodian fees 23,181 13,103 13,284
Professional fees - - 37,518
Directors' fees (Note 6) - - 28,000
Accounting fees - - 8,000
Printing expenses - - 6,730
Registration and filing fees - - 5,502
Miscellaneous expenses - - 6,204
-------------- -------------- --------------
Total Liabilities 11,972,753 20,163,455 2,079,907
-------------- -------------- --------------
NET ASSETS $ 937,640,988 $ 572,427,478 $ 77,590,487
-------------- -------------- --------------
-------------- -------------- --------------
NET ASSETS CONSIST OF:
Paid-in capital (Note 3) $ 702,373,079 $ 416,499,557 $ 59,131,343
Accumulated net investment income (loss) (845,228) (1,946,798) 182,763
Accumulated net realized gain on investments
and foreign currency transactions 73,265,753 48,707,323 2,403,671
Net unrealized appreciation (depreciation)
on foreign currency transactions (3,225) - 17,059
Net unrealized appreciation on investments 162,850,609 109,167,396 15,855,651
-------------- -------------- --------------
NET ASSETS $ 937,640,988 $ 572,427,478 $ 77,590,487
-------------- -------------- --------------
-------------- -------------- --------------
SHARES OUTSTANDING 134,793,224 45,190,750 5,204,578
-------------- -------------- --------------
-------------- -------------- --------------
NET ASSET VALUE PER SHARE $ 6.96 $ 12.67 $ 14.91
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 36
<PAGE>
<TABLE>
<CAPTION>
RCM CAPITAL FUNDS, INC.
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
RCM
International
RCM Growth RCM Small Growth Equity
Equity Fund Cap Fund Fund A
-------------- -------------- --------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Income:
Dividends $ 2,327,240 $ 649,298 $ 719,791
Interest 156,205 28,712 27,283
Foreign tax withheld (18,867) (239) (91,207)
-------------- -------------- ---------------
Total income 2,464,578 677,771 655,867
-------------- -------------- ---------------
Expenses:
Investment management fees (Note 5) 3,258,889 2,595,251 238,982
Custodian fees 50,117 28,518 45,147
Directors' fees (Note 6) - - 28,000
Accounting fees - - 24,000
Professional fees - - 13,750
Miscellaneous expenses 800 800 7,000
-------------- -------------- ---------------
Total expenses before reimbursements 3,309,806 2,624,569 356,879
Expenses reimbursed by investment
manager (Note 5) - - (38,236)
-------------- -------------- ---------------
Total net expenses 3,309,806 2,624,569 318,643
-------------- -------------- ---------------
Net investment income (loss) (845,228) (1,946,798) 337,224
-------------- -------------- ---------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain on investments 59,190,712 47,279,019 3,232,830
Net realized loss on foreign currency
transactions (158,773) - (1,011,058)
-------------- -------------- ---------------
Net realized gain 59,031,939 47,279,019 2,221,772
-------------- -------------- ---------------
Net change in unrealized depreciation
on foreign currency transactions (3,542) - (151,735)
Net change in unrealized appreciation
(depreciation) on investments 16,573,716 (4,875,041) 8,503,013
-------------- -------------- ---------------
Net unrealized appreciation (depreciation) 16,570,174 (4,875,041) 8,351,278
-------------- -------------- ---------------
Net realized and unrealized gain
during the period 75,602,113 42,403,978 10,573,050
-------------- -------------- ---------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 74,756,885 $ 40,457,180 $ 10,910,274
-------------- -------------- ---------------
-------------- -------------- ---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 37
<PAGE>
<TABLE>
<CAPTION>
RCM CAPITAL FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
RCM Growth Equity Fund RCM Small Cap Fund
--------------------------------------- --------------------------------
Six months ended Six months ended
June 30, 1997 Year ended June 30, 1997 Year ended
(Unaudited) December 31, 1996 (Unaudited) December 31, 1996
----------------- -------------------- ---------------- ----------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ (845,228) $ (1,190,805) $ (1,946,798) $ (2,677,087)
Net realized gain on investments and foreign
currency transactions 59,031,939 303,698,527 47,279,019 107,844,093
Net change in unrealized appreciation
(depreciation) on investments and foreign
currency transactions 16,570,174 (119,166,349) (4,875,041) 29,605,875
---------------- ------------- ------------ --------------
Net increase in net assets resulting from
operations 74,756,885 183,341,373 40,457,180 134,772,881
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income - - - -
Net realized gain on investments - (355,168,907) - (123,397,033)
NET INCREASE (DECREASE) FROM CAPITAL
SHARE TRANSACTIONS (Note 3) (33,436,047) (257,142,802) (36,630,818) 147,658,599
---------------- ------------- ------------ --------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 41,320,838 (428,970,336) 3,826,362 159,034,447
NET ASSETS:
Beginning of period 896,320,150 1,325,290,486 568,601,116 409,566,669
---------------- ------------- ------------ --------------
End of period* $ 937,640,988 $ 896,320,150 $ 572,427,478 $ 568,601,116
---------------- ------------- ------------ --------------
---------------- ------------- ------------ --------------
* Includes accumulated net investment
income (loss) of: (845,228) - (1,946,798) -
---------------- ------------- ------------ --------------
---------------- ------------- ------------ --------------
RCM International Growth Equity Fund A
----------------------------------------
Six months ended
June 30, 1997 Year ended
(Unaudited) December 31, 1996
------------------ --------------------
OPERATIONS:
Net investment income (loss) $ 337,224 $ 131,186
Net realized gain on investments and foreign
currency transactions 2,221,772 3,309,861
Net change in unrealized appreciation
(depreciation) on investments and foreign
currency transactions 8,351,278 3,732,232
------------ -----------
Net increase in net assets resulting from
operations 10,910,274 7,173,279
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income - (558,945)
Net realized gain on investments - (3,074,200)
NET INCREASE (DECREASE) FROM CAPITAL
SHARE TRANSACTIONS (Note 3) 14,075,264 14,718,007
------------ -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS 24,985,538 18,258,141
NET ASSETS:
Beginning of period 52,604,949 34,346,808
------------ -----------
End of period* $ 77,590,487 $ 52,604,949
------------ -----------
------------ -----------
* Includes accumulated net investment
income (loss) of: 182,763 (154,461)
------------ -----------
------------ -----------
The accompanying notes are an integral part of the financial statements.
Page 38
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RCM CAPITAL FUNDS, INC.
RCM GROWTH EQUITY FUND
FINANCIAL HIGHLIGHTS
Selected data for each share of capital stock outstanding for the ten years ended December 31, 1996, and the six
months ended June 30, 1997, are as follows:
Six months ended Year Ended December 31,
June 30, 1997 ---------------------------------------------------------
(Unaudited) 1996*(a) 1995 1994 1993 1992 1991
----------- ----- ----- ---- ---- ---- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE: (b)
Net asset value, beginning of period $ 6.40 $ 9.13 $ 7.89 $ 10.42 $ 10.97 $ 11.54 $ 8.49
------- ------- ------- -------- -------- -------- -------
Net investment income (loss) (0.01) (0.01) 0.02 0.03 0.04 0.07 0.09
Net realized and unrealized gain (loss)
on investments 0.57 1.59 2.66 0.01 1.08 0.71 3.93
------- ------- ------- -------- -------- -------- -------
Net increase (decrease) in net asset
value resulting from investment 0.56 1.58 2.68 0.04 1.12 0.78 4.02
operations ------- ------- ------- -------- -------- -------- -------
Distributions:
Net investment income (0.00) (0.00) (0.02) (0.03) (0.04) (0.07) (0.09)
Net realized gain on investments (0.00) (4.31) (1.42) (2.54) (1.63) (1.28) (0.88)
------- ------- ------- -------- -------- -------- -------
Total distributions - (4.31) (1.44) (2.57) (1.67) (1.35) (0.97)
------- ------- ------- -------- -------- -------- -------
NET ASSET VALUE, END OF PERIOD $ 6.96 $ 6.40 $ 9.13 $ 7.89 $ 10.42 $ 10.97 $ 11.54
------- ------- ------- -------- -------- -------- -------
------- ------- ------- -------- -------- -------- -------
TOTAL RETURN (c) 8.75% 19.07% 34.53% 0.76% 10.72% 7.03% 48.23%
------- ------- ------- -------- -------- -------- -------
------- ------- ------- -------- -------- -------- -------
RATIOS AND SUPPLEMENTAL DATA:
Average commission rate paid per share (d) $ 0.0570 $0.0571 - - - - -
--------- -------
--------- -------
Net assets, end of period (in millions) $ 938 $ 896 $ 1,325 $ 1,365 $ 2,049 $ 2,122 $ 2,138
------- ------- ------- -------- -------- -------- -------
------- ------- ------- -------- -------- -------- -------
Ratio of expenses to average net assets 0.8%(e) 0.8% 0.8% 0.8% 0.8% 0.8% 0.7%
------- ------- ------- -------- -------- -------- -------
------- ------- ------- -------- -------- -------- -------
Ratio of net investment income to
average net assets (0.2%)(e) (0.1%) 0.2% 0.2% 0.3% 0.6% 0.9%
------- ------- ------- -------- -------- -------- -------
------- ------- ------- -------- -------- -------- -------
Portfolio turnover 66.1%(f) 115.9% 96.5% 111.1% 67.0% 56.8% 62.7%
------- ------- ------- -------- -------- -------- -------
------- ------- ------- -------- -------- -------- -------
1990 1989 1988 1987 1986(b) 1985
-------- ------- ------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE: (b)
Net asset value, beginning of period $ 9.12 $ 8.00 $ 7.09 $ 8.30 $ 8.47 $ 169.44
-------- ------- ------- ------- ------- -------
Net investment income (loss) 0.15 0.16 0.11 0.07 0.06 3.68
Net realized and unrealized gain (loss)
on investments (0.53) 1.98 1.36 0.82 0.72 52.64
-------- ------- ------- ------- ------- -------
Net increase (decrease) in net asset
value resulting from investment
operations (0.38) 2.14 1.47 0.89 0.78 56.32
-------- ------- ------- ------- ------- -------
Distributions:
Net investment income (0.17) (0.16) (0.12) (0.16) (0.16) (3.68)
Net realized gain on investments (0.08) (0.86) (0.44) (1.94) (0.79) (10.25)
-------- ------- ------- ------- ------- -------
Total distributions (0.25) (1.02) (0.56) (2.10) (0.95) (13.93)
-------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 8.49 $ 9.12 $ 8.00 $ 7.09 $ 8.30 $ 211.83
-------- ------- ------- ------- ------- -------
-------- ------- ------- ------- ------- -------
TOTAL RETURN (c) (4.12%) 26.87% 20.86% 10.97% 9.33% 32.06%
-------- ------- ------- ------- ------- -------
-------- ------- ------- ------- ------- -------
RATIOS AND SUPPLEMENTAL DATA:
Average commission rate paid per share (d) - - - - - -
Net assets, end of period (in millions) $ 1,300 $ 1,284 $ 964 $ 553 $ 461 $ 289
-------- ------- ------- ------- ------- -------
-------- ------- ------- ------- ------- -------
Ratio of expenses to average net assets 0.8% 0.7% 0.7% 0.8% 0.7% 0.7%
-------- ------- ------- ------- ------- -------
-------- ------- ------- ------- ------- -------
Ratio of net investment income to
average net assets 1.8% 1.8% 1.8% 0.9% 1.3% 2.1%
-------- ------- ------- ------- ------- -------
-------- ------- ------- ------- ------- -------
Portfolio turnover 50.0% 70.8% 64.7% 79.9% 78.2% 80.0%
-------- ------- ------- ------- ------- -------
-------- ------- ------- ------- ------- -------
- --------------------------------
* Calculated using the average share method.
(a) On June 14, 1996, RCM Capital Management, L.L.C. became the investment manager.
(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.
(e) Annualized.
(f) Not annualized.
</TABLE>
Page 39
<PAGE>
RCM CAPITAL FUNDS, INC.
RCM SMALL CAP FUND
FINANCIAL HIGHLIGHTS
Selected data for each share of capital stock outstanding are as follows:
<TABLE>
<CAPTION>
Six months ended Year Ended December 31,
June 30, 1997 ------------------------------------------------------
(Unaudited)* 1996*(a) 1995 1994 1993 1992
---------------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE: (b)
Net asset value, beginning of period $ 11.77 $ 11.35 $ 9.42 $ 10.41 $ 10.15 $ 8.33
--------- --------- ------- ------- ------- -------
Net investment income (loss) (0.04) (0.08) (0.04) (0.04) (0.00) 0.03
Net realized and unrealized gain (loss) on investments 0.94 3.82 3.21 (0.20) 0.91 1.82
--------- --------- ------- ------- ------- -------
Net increase (decrease) in net asset value
resulting from investment operations 0.90 3.74 3.17 (0.24) 0.91 1.85
--------- --------- ------- ------- ------- -------
Distributions:
Net investment income (0.00) (0.00) (0.00) (0.00) (0.00) (0.03)
Net realized gain on investments (0.00) (3.32) (1.24) (0.75) (0.65) (0.00)
--------- --------- ------- ------- ------- -------
Total distributions (0.00) (3.32) (1.24) (0.75) (0.65) (0.03)
--------- --------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 12.67 $ 11.77 $ 11.35 $ 9.42 $ 10.41 $ 10.15
--------- --------- ------- ------- ------- -------
--------- --------- ------- ------- ------- -------
TOTAL RETURN (c) 7.65% 34.39% 34.08% (2.16%) 9.20% 22.14%
--------- --------- ------- ------- ------- -------
--------- --------- ------- ------- ------- -------
RATIOS AND SUPPLEMENTAL DATA:
Average commission rate paid per share (d) $ 0.0516 $ 0.0538 - - - -
--------- ---------
--------- ---------
Net assets, end of period (in millions) $ 578 $ 569 $ 410 $ 416 $ 660 $ 458
--------- --------- ------- ------- ------- -------
--------- --------- ------- ------- ------- -------
Ratio of expenses to average net assets 1.0% (e) 1.0% 1.0% 1.1% 0.9% 0.7%
--------- --------- ------- ------- ------- -------
--------- --------- ------- ------- ------- -------
Ratio of net investment income (loss) to average net assets (0.7%)(e) (0.6%) (0.2%) (0.3%) 0.0% 0.4%
--------- --------- ------- ------- ------- -------
--------- --------- ------- ------- ------- -------
Portfolio turnover 53.6% (f) 117.0% 83.9% 117.7% 80.0% 72.0%
--------- --------- ------- ------- ------- -------
--------- --------- ------- ------- ------- -------
</TABLE>
- ------------------------
* Calculated using the average share method.
(a) On June 14, 1996, RCM Capital Management, L.L.C. became the investment
manager.
(b) Stock split 12:1 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.
(e) Annualized.
(f) Not annualized.
Page 40
<PAGE>
RCM CAPITAL FUNDS, INC.
RCM INTERNATIONAL GROWTH EQUITY FUND A
FINANCIAL HIGHLIGHTS
Selected data for each share of capital stock outstanding are as follows:
<TABLE>
<CAPTION>
December 28, 1994
Six months ended (commencement
June 30, 1997* Year ended Year ended of operations) to
(Unaudited) December 31, 1996*(a) December 31, 1995 December 31, 1994
--------------- --------------------- ----------------- -----------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE: (b)
Net asset value, beginning of period $ 12.72 $ 11.56 $ 10.00 $ 10.00
--------- --------- --------- ---------
Net investment income 0.07 (c) 0.04 (c) 0.12 (d) 0.00
Net realized and unrealized gain (loss) on investments 2.12 2.16 1.68 (0.00)
--------- --------- --------- ---------
Net increase in net asset value resulting from
investment operations 2.19 2.20 1.80 0.00
--------- --------- --------- ---------
Distributions:
Net investment income (0.00) (0.16) (0.11) (0.00)
Net realized gain on investments (0.00) (0.88) (0.13) (0.00)
--------- --------- --------- ---------
Total distributions (0.00) (1.04) (0.24) (0.00)
--------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 14.91 $ 12.72 $ 11.56 $ 10.00
--------- --------- --------- ---------
--------- --------- --------- ---------
TOTAL RETURN (d) 17.22% 19.31% 17.98% 0.01%
--------- --------- --------- ---------
--------- --------- --------- ---------
RATIOS AND SUPPLEMENTAL DATA:
Average commission rate paid per share (e) $ 0.0196 $ 0.0179 - -
---------- ---------
---------- ---------
Net assets, end of period (in millions) $ 78 $ 53 $ 34 $ 25
---------- --------- --------- ---------
---------- --------- --------- ---------
Ratio of expenses to average net assets 1.00% (c)(f) 0.99% (c) 0.75% (d) 0.00% (g)
---------- --------- --------- ---------
---------- --------- --------- ---------
Ratio of net investment income to average net assets 1.05% (c)(f) 0.32% (c) 1.19% (d) 0.01% (g)
---------- --------- --------- ---------
---------- --------- --------- ---------
Portfolio turnover 41.2% (h) 119.1% 87.4% 0.00% (g)
---------- --------- --------- --------
---------- --------- --------- --------
</TABLE>
* Calculated using the average share method.
(a) On June 14, 1996, RCM Capital Management, L.L.C. became the investment
manager.
(b) Stock split 10:1 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) Includes reimbursement by the Fund's investment manager of investment
management fees and other expenses equal to $0.01, $0.03 and $0.03 per
share (calculated using the average share method) for the six months ended
June 30, 1997 and the years ended December 31, 1996 and 1995, respectively.
Without such reimbursement, the ratio of expenses would have been 1.11%,
1.25% and 1.11%, respectively, and the ratio of net investment income to
average net assets would have been 0.93%, 0.06% and 0.83%, respectively.
(d) Total return measures the change in value of an investment over the period
indicated.
(e) 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.
(f) Annualized.
(g) Not annualized. Fund was in operation for four days.
(h) Not annualized.
Page 41
<PAGE>
RCM CAPITAL FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
RCM Capital Funds, Inc. (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 Company
consists of three series: RCM Growth Equity Fund ("Growth Fund") and RCM
Small Cap Fund ("Small Cap Fund") are diversified, no-load series of the
Company, and RCM International Growth Equity Fund A ("International Fund")
is a non-diversified, no-load series of the Company. These three series
are collectively referred to as the "Funds."
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements.
The policies are in conformity with generally accepted accounting principles
which require management to make estimates and assumptions that affect the
report 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 a duly
constituted committee of the Board of Directors of the Company shall
determine in good faith to reflect its fair market value. Readily
marketable securities traded only in the over-the-counter market that are
not listed on NASDAQ or similar foreign reporting service will be valued
at the mean bid price, or using such other comparable sources as the Board
of Directors of the Company in good faith deems appropriate to reflect
their fair market value. Other portfolio securities held by the Funds 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 a duly
constituted committee of 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 Funds do not isolate that portion of
foreign currency exchange fluctuation on investments from unrealized
appreciation and depreciation which arises
Page 42
<PAGE>
RCM CAPITAL FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
c. FOREIGN CURRENCY TRANSACTIONS:
from changes in market prices. Such fluctuations are included with the net
unrealized appreciation or depreciation on investments.
d. FORWARD FOREIGN CURRENCY CONTRACTS:
A forward foreign currency contract ("Forward") is an agreement between two
parties to buy and sell a currency at a set price on a future date. The
International Fund may enter into Forwards in order to hedge foreign
currency risk associated with its portfolio securities or for other risk
management or investment purposes. The market value of the Forward
fluctuates with changes in currency exchange rates. The Forward is
marked-to-market daily and the change in market value is recorded by the
International Fund as an unrealized appreciation or depreciation. When the
Forward is closed, the International Fund records a realized gain or loss
equal to the difference between the value at the time the Forward was
opened and the value at the time it was closed. The International Fund
could be exposed to risk of loss if the counterparty is unable to meet the
terms of the contract or if the value of the currency changes unfavorably.
e. FEDERAL INCOME TAXES:
It is the policy of the Funds 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 Funds to make distributions sufficient to avoid imposition of any
excise tax under Section 4982 of the Code. Therefore, no provision has
been made for Federal or excise taxes on income and capital gains.
f. DISTRIBUTIONS:
Distributions to shareholders are recorded by the Funds 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, foreign currency
transactions and/or passive foreign investment companies.
2. INVESTMENT IN FOREIGN SECURITY AND CURRENCY
Investing in foreign equity securities and currency transactions involves
significant risks, some of which are not typically associated with
investments of domestic origin. The International Fund's investments in
foreign and emerging markets will subject the International Fund to the
risk of foreign currency exchange rate fluctuations, perceived credit risk
and adverse economic and political developments.
Page 43
<PAGE>
RCM CAPITAL FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
3. CAPITAL SHARES
At June 30, 1997, 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 Growth Fund; 100,000,000 were classified as
shares of the Small Cap Fund; 100,000,000 were classified as shares of the
International Fund; 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 Funds was split as follows:
Stock Outstanding
Split Shares
--------- -----------
Growth Fund 25 to 1 91,056,470
Small Cap Fund 12 to 1 33,476,643
International Fund 10 to 1 3,080,990
Transactions in capital shares for the Funds shown below were restated to
reflect the stock split:
<TABLE>
<CAPTION>
CAPITAL SHARE TRANSACTIONS
GROWTH FUND Six Months ended June 30, 1997
(Unaudited) Year ended December 31, 1996
------------------------------ -----------------------------
Shares Amount Shares Amount
------------------------------ -----------------------------
<S> <C> <C> <C> <C>
Shares sold 6,800,562 $ 43,427,063 5,272,649 $ 49,629,302
Shares issued in connection
with reinvestment of
distributions - - 56,967,931 351,492,134
Shares repurchased (11,982,886) (76,863,110) (67,435,650) (658,264,238)
------------------------------ -----------------------------
Net decrease (5,182,324) $ (33,436,047) (5,195,070) $(257,142,802)
------------------------------ -----------------------------
------------------------------ -----------------------------
Six Months ended June 30, 1997
SMALL CAP FUND (Unaudited) Year ended December 31, 1996
------------------------------ -----------------------------
Shares Amount Shares Amount
------------------------------ -----------------------------
Shares sold 3,490,849 $ 39,099,367 10,624,664 $ 145,473,916
Shares issued in connection
with reinvestment of
distributions - - 10,879,522 121,959,444
Shares repurchased (6,619,507) (75,730,185) (9,267,406) (119,774,761)
------------------------------ -----------------------------
Net decrease (3,128,658) $ (36,630,818) 12,236,780 $ 147,658,599
------------------------------ -----------------------------
------------------------------ -----------------------------
INTERNATIONAL FUND
Six Months ended June 30, 1997
(Unaudited) Year ended December 31, 1996
------------------------------ -----------------------------
Shares Amount Shares Amount
------------------------------ -----------------------------
Shares sold 1,073,899 $ 14,163,305 958,208 $ 12,239,598
Shares issued in connection
with reinvestment of
distributions - - 293,007 3,621,573
Shares repurchased (6,226) (88,041) (86,083) (1,143,164)
------------------------------ -----------------------------
Net decrease 1,067,673 $ 14,075,264 1,165,132 $ 14,718,007
------------------------------ -----------------------------
------------------------------ -----------------------------
</TABLE>
Page 44
<PAGE>
RCM CAPITAL FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
3. CAPITAL SHARES (CONTINUED)
At June 30, 1997, seven shareholders in the Growth Fund, five shareholders
in the Small Cap Fund and three shareholders in the International Fund each
held more than 5% of the outstanding shares of the respective Funds.
4. PURCHASES AND SALES OF SECURITIES
The following summarizes purchases and sales of investment securities,
other than short-term investments, by each Fund, for the six months ended
June 30, 1997:
PURCHASES AND SALES OF SECURITIES
PURCHASES
--------------------------------------------
U.S. Government Other Issues
-------------------- -------------------
Growth Fund - $ 557,786,357
Small Cap Fund - $ 276,070,283
International Fund - $ 42,517,722
SALES
--------------------------------------------
U.S. Government Other Issues
-------------------- -------------------
Growth Fund - $ 597,302,939
Small Cap Fund - $ 311,763,051
International Fund - $ 25,534,127
5. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
RCM manages the Funds' investments and provides various administrative
services, subject to the authority of the Board of Directors. The Growth
Fund, Small Cap Fund and International Fund pay investment management fees
monthly at an annualized rate of 0.75%, 1.00% and 0.75%, respectively, of
the Funds' average daily net assets. For the six months ended June 30,
1997, investment management fees were $3,258,889 for the Growth Fund,
$2,595,251 for the Small Cap Fund and $238,982 for the International Fund.
RCM has voluntarily agreed to pay the International Fund on a monthly basis
the amount, if any, by which certain ordinary operating expenses of the
Fund exceed the annualized rate of 1% of the International Fund's average
daily net assets. For the six months ended June 30, 1997, RCM reimbursed
the International Fund for operating expenses totaling $38,236.
On June 30, 1997, the RCM Capital Management Profit Sharing Plan,
participation in which is limited to employees of RCM, owned 274,001 shares
of the Growth Fund, 412,112 shares of the Small Cap Fund and 435,586 shares
of the International Fund.
6. DIRECTORS' FEES
Each Director who is not an interested person of the Company receives from
the Company an annual retainer of $9,000 (the retainer is evenly prorated
among each series of the Company), plus $1,500 for each meeting of the
Board attended and $500 for each committee meeting attended.
Page 45
<PAGE>
INVESTMENT MANAGER
RCM Capital Management, L.L.C.
Four Embarcadero Center
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
1776 Heritage Drive
North Quincy, Massachusetts 02171
LEGAL COUNSEL
Paul, Hastings, Janofsky & Walker LLP
555 South Flower Street
Los Angeles, California 90071
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
<PAGE>
NOTES
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<PAGE>
NOTES
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