-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SzJqRAS+ZlV3sSxJ0hoJj8RNtly+hO6bQ8/V8mB2mE8+BZgNV51G30f7uObqn9tJ Tf0DyG3H8TTRJEcIPmaJgA== 0000912057-96-003110.txt : 19960228 0000912057-96-003110.hdr.sgml : 19960228 ACCESSION NUMBER: 0000912057-96-003110 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960227 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: RCM CAPITAL FUNDS INC CENTRAL INDEX KEY: 0000310619 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 942564439 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-02913 FILM NUMBER: 96525978 BUSINESS ADDRESS: STREET 1: FOUR EMBARCADERO CTR STREET 2: STE 2900 CITY: SAN FRANCISCO STATE: CA ZIP: 94111 BUSINESS PHONE: 4159545474 FORMER COMPANY: FORMER CONFORMED NAME: RCM GROWTH EQUITY FUND INC DATE OF NAME CHANGE: 19920126 N-30D 1 N-30D [LOGO] GROWTH EQUITY FUND ANNUAL REPORT 1995 RCM GROWTH EQUITY FUND MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE The value of an investment in the RCM Growth Equity Fund (the "Fund") appreciated by 34.53% over the 12 months ended December 31, 1995. The Fund finished the year 8 basis points ahead of its primary benchmark, the Russell Midcap Index, which registered a return of 34.45% for the year. However the Fund's primary emphasis, intermediate capitalization growth stocks, disadvantaged the Fund in comparison to broader market benchmarks such as the S&P 500 Composite Index, which returned 37.59% in 1995. U.S. stocks and bonds rallied strongly in the first half of 1995 after performing poorly in 1994. Investors appeared to have abandoned their fears that the Federal Reserve Board would tighten monetary policy and embraced the "soft landing" economic scenario. Returns on equities of all capitalization ranges benefited from declining interest rates. RCM Capital Management, a California Limited Partnership ("RCM"), the Fund's investment manager, believes that weakness in the U.S. dollar and increasing evidence of economic strength in Europe were among the factors which led to the relative outperformance of large and medium capitalization equities versus small cap stocks, particularly in the first quarter of 1995. At mid-year, the Russell Midcap benchmark was up 19.65%, compared to the S&P 500 return of 20.19%. However, the Fund trailed its primary benchmark by 307 basis points through the first six months of the year. Contributing factors included the Fund's underweighting in the strong interest sensitive sectors of the market and an overweighting in health care services stocks, which were disastrous performers in the first half of the year. The stock market continued its impressive advance through the third quarter. The summer months of 1995 were characterized by powerful rallies in medium and small capitalization universes, which were fueled by strong cash flows into mutual funds, an upward move in the U.S. dollar and positive earnings reports. The technology sector continued to lead the market (though it showed signs of topping by the end of the third quarter) and the health care services group rebounded from a weak performance in the second quarter. The Fund outperformed the Russell Midcap Index in July and September of the third quarter, more than making up for the shortfall versus this benchmark in the first half of the year. Although the performance of mid capitalization stocks relative to large caps cooled in the fourth quarter and the technology sector entered into a full-blown correction, the Fund's performance for the second half of 1995 was 302 basis points above the Russell Midcap Index. Looking at the year as a whole, the Fund's strategy on industry weightings was a positive contributor to performance, particularly in the technology sector. The Fund finished 1995 with nearly 27% of its total investments invested in technology-related issues (about double the benchmark weighting). The Fund held meaningful positions in strong subgroups within technology, including networking, components and technology services. Despite overweighting the electronics/new technology sector, the Fund was not heavily exposed to the commodity semiconductor and semiconductor equipment stocks. While this lack of exposure hurt the Fund's performance in the first half of 1995, it enhanced relative returns late in the year when these stocks came under extreme selling pressure. Meanwhile, a significant overweighting in the technology services area enabled the Fund to benefit from favorable fundamental business trends coupled with the stability of strong cash flow and (Continued) recurring revenue characteristics. The Fund's overweighting in the communications services sector also contributed to relative performance. This group comprised approximately 7% of total investments at the end of the year, or about triple the benchmark weighting. The Fund's holdings in this sector emphasized potential beneficiaries of regulatory reform and industry consolidation, as well as providers of emerging communication services and technologies. Raw/basic materials and consumer durables were lagging industry groups underweighted by the Fund in 1995, thereby adding to performance. A significant overweighting in health care services had a negative impact on the Fund's relative performance for the full year 1995. However, all of the underperformance of this sector occurred in the first half of the year, as investors' concerns about pricing and reimbursement issues caused HMO and nursing home stocks in particular to come under severe pressure. Health care services stocks were strong performers in the second half, and the Fund's overweighting (approximately triple the benchmark) made a positive contribution to performance in both the third and fourth quarters. The Fund's underweighting in the interest sensitive and financial industry groups (6% versus 20%, excluding utilities, in the Russell Midcap at the end of 1995) was also a negative factor in relative performance from an industry strategy perspective. These groups were strong performers during 1995 as interest rates declined. However, due to the growth stock orientation of RCM, it is typical for the Fund to have only modest exposure in the interest sensitive sector. Although the Fund's average cash position of about 6% for the year was within its "normal" range, cash was a negative contributor to relative performance given the rising market environment. Stock picking by RCM added value, particularly in the business services, drugs and hospital supplies and health care services groups. Business services stocks held by the Fund (including Wallace Computer Services, Danka Business Services and Robert Half International) were up 49% compared to a gain of 30% for business services stocks in the Russell Midcap Index. The Fund's holdings in the drugs and hospital supplies group gained 68%, compared to a return of 41% for the stocks in this sector in the benchmark index. Boston Scientific, Idexx Labs and Nellcor were significant holdings and were among the Fund's strongest performers in this group. The Fund also experienced positive stock selection in the health care services group (up 37% versus 27% for the Russell Midcap group), with contributions from such issues as Omnicare, Maxicare Health Plans and Healthsource. On the negative side, stock selection in the transportation services area hurt relative performance. The Fund's holdings in the regional trucking group came under pressure due to intensified competition and a weak pricing environment, and exposure to this industry was reduced significantly in the second half of 1995. Clearly 1995 was an extraordinary year in terms of absolute returns for investors in U.S. stocks and bonds, and RCM believes that similar gains are unlikely in the current year. Going into 1996, signs of slowing economic growth are abundant, and earnings expectations are undergoing downward revisions in some industries. However, RCM believes that a slow growth macroeconomic environment is likely to favor the growth style of investing, particularly if Federal Reserve policy is oriented toward lowering interest rates. Within this context , RCM believes that medium capitalization growth stocks are favorably positioned, given the higher relative earnings growth rates of mid-sized companies. Page 2 RCM GROWTH EQUITY FUND PERFORMANCE SUMMARY ________________________________________________________________________________ [GRAPH] PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. The chart above shows the performance of the RCM Growth Equity Fund since the Fund's inception versus the Russell Midcap Index. The chart represents a cumulative return of 1,778.80%+ for the Fund. The average annual total return from the Fund's inception was 19.90%*+. The chart assumes a hypothetical $10,000 initial investment in the Fund and reflects all Fund expenses. Average Annual Total Returns+ December 31, 1995 - ------------------------------------- LIFE OF 1 YEAR 5 YEAR 10 YEAR FUND* - ------------------------------------- 34.53% 18.95% 15.56% 19.90% - ------------------------------------- + Returns assume reinvestment of all dividends and capital gains distributions at net asset value. * The Fund began operations on November 6, 1979. The data above represent past performance of the Fund, and may not be indicative of future results. The investment return and principal value of an investment in the Fund will fluctuate, so that shares, when redeemed, may be worth more or less than their original cost. Page 3 REPORT OF INDEPENDENT ACCOUNTANTS To the Shareholders and Board of Directors of RCM Capital Funds, Inc: We have audited the accompanying statement of assets and liabilities of RCM Growth Equity Fund (the "Fund"), including the statement of investments in securities and net assets as of December 31, 1995, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended and financial highlights for each of the ten years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1995 by correspondence with custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of RCM Growth Equity Fund as of December 31, 1995, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and financial highlights for each of the ten years in the period then ended in conformity with generally accepted accounting principles. COOPERS & LYBRAND, L.L.P. Boston, Massachusetts February 9, 1996 Page 4 RCM GROWTH EQUITY FUND INVESTMENTS IN SECURITIES AND NET ASSETS DECEMBER 31, 1995
% OF SHARES EQUITY INVESTMENTS NET ASSETS MARKET VALUE - ------------------ --------------------------------------------- ---------- -------------------- CONSUMER DURABLES SECTOR 0.42% OTHER CONSUMER DURABLES 0.42% 110,000 Bemis Co. Inc. $ 2,818,750 42,200 Newell Co. 1,091,925 60,000 Sealed Air Corp.* 1,687,500 -------------------- 5,598,175 -------------------- -------------------- CONSUMER NON-DURABLES SECTOR 12.87% BEVERAGE AND TOBACCO 0.03% 40,000 P.T. Hanjaya Mandala Sampoerna * 416,357 FOOD AND FOOD PROCESSING 0.04% 16,000 Dreyers Grand Ice Cream Inc. 532,000 GENERAL RETAIL 7.96% 578,800 Autozone Inc.* 16,712,850 173,800 Barnes & Noble Inc.* 5,040,200 475,000 Big B Inc. 4,750,000 29,700 Circuit City Stores Inc. 820,463 210,000 Consolidated Stores Corp.* 4,567,500 341,993 Dollar General Corp. 7,096,355 73,300 Federated Department Stores Inc.* 2,015,750 242,500 Global DirectMail Corp. * 6,668,750 192,800 Gucci Group NV * 7,495,100 56,000 Hannaford Bros. Co. 1,379,000 29,200 Kohls Corp. * 1,533,000 180,800 Movie Gallery Inc. * 5,514,400 20,000 Nine West Group Inc.* 750,000 410,000 OfficeMax Inc.* 9,173,750 160,000 PETsMART Inc. * 4,960,000 307,000 Proffitts Inc.* 8,058,750 409,000 Rite Aid Corp. 14,008,250 57,300 Safeway Stores Inc.* 2,950,950 12,000 Staples Inc.* 292,500 58,200 Talbots Inc. 1,673,250 -------------------- 105,460,818 --------------------
* Non-income producing The accompanying notes are an integral part of the financial statements Page 5 RCM GROWTH EQUITY FUND INVESTMENTS IN SECURITIES AND NET ASSETS DECEMBER 31, 1995
% OF SHARES EQUITY INVESTMENTS NET ASSETS MARKET VALUE - ------------------ --------------------------------------------- ---------- -------------------- HOUSEHOLD/RELATED NON-DURABLES 1.14% 46,500 American Greetings Corp. Class A $ 1,284,563 639,700 Armor All Products Corp. 11,594,563 89,400 Sola International Inc. * 2,257,350 -------------------- 15,136,476 -------------------- LEISURE TIME PRODUCTS/SERVICES 3.70% 437,000 Apple South Inc. 9,395,500 474,000 Doubletree Corp.* 12,442,500 320,000 Host Marriott Corp. * 4,240,000 428,000 Marriott International Inc. 16,371,000 215,521 Mattel Inc. 6,627,271 -------------------- 49,076,271 -------------------- CYCLICAL/CAPITAL GOODS SECTOR 12.07% AEROSPACE/DEFENSE 2.56% 482,000 Sundstrand Corp. 33,920,750 BUILDING AND CONSTRUCTION 2.34% 249,600 Michael Baker Corp.* 1,248,000 276,000 Foster Wheeler Corp. 11,730,000 466,500 Jacobs Engineering Group Inc. * 11,662,500 155,000 Sherwin Williams Co. 6,316,250 -------------------- 30,956,750 -------------------- CHEMICALS AND TEXTILES 0.96% 75,000 Millipore Corp. 3,084,375 212,000 Minerals Technologies Inc. 7,738,000 43,000 Valspar Corp. 1,918,875 -------------------- 12,741,250 -------------------- ELECTRICAL EQUIPMENT 0.44% 67,500 Hubbell Inc. Class B 4,438,125 50,000 Elsag Bailey Process Auto NV* 1,343,750 -------------------- 5,781,875 --------------------
* Non-income producing The accompanying notes are an integral part of the financial statements Page 6 RCM GROWTH EQUITY FUND INVESTMENTS IN SECURITIES AND NET ASSETS DECEMBER 31, 1995
% OF SHARES EQUITY INVESTMENTS NET ASSETS MARKET VALUE - ------------------ --------------------------------------------- ---------- -------------------- INDUSTRIAL EQUIPMENT 3.81% 178,200 American Standard Cos. Inc. * $ 4,989,600 180,000 Applied Power Inc. Class A 5,400,000 698,900 Duriron Co. Inc. 16,336,788 412,000 Furon Co. 8,240,000 132,000 Illinois Tool Works Inc. 7,788,000 25,000 Johnson Controls Inc. 1,718,750 170,000 Tyco International Ltd. 6,056,250 -------------------- 50,529,388 -------------------- RAW AND BASIC MATERIALS 0.65% 350,000 Commercial Metals Co. 8,662,500 TRANSPORTATION SERVICES 1.31% 347,800 Expeditors International of Washington Inc. 9,086,275 310,000 Harper Group Inc. 5,502,500 135,000 TNT Freightways Corp. 2,716,875 -------------------- 17,305,650 -------------------- ENERGY SECTOR 1.68% OIL AND RELATED SERVICES 1.68% 187,000 BJ Services Co.* 5,423,000 20,000 Devon Energy Corp. 510,000 118,500 Kerr McGee Corp. 7,524,750 267,000 Nowsco Well Service Ltd. 3,337,500 25,000 Nuevo Energy Co.* 559,375 173,000 Pogo Producing Co. 4,887,250 -------------------- 22,241,875 -------------------- HEALTHCARE SECTOR 17.34% DRUGS & HOSPITAL SERVICES 7.49% 36,000 Allergan Inc 1,170,000 136,100 Anesta Corp.* 1,258,925 227,900 Arrow International Inc. 9,059,025 144,100 Autoimmune Inc.* 1,621,125 69,000 Boston Scientific Corp.* 3,381,000 318,800 Centocor Inc. * 9,842,950
* Non-income producing The accompanying notes are an integral part of the financial statements Page 7 RCM GROWTH EQUITY FUND INVESTMENTS IN SECURITIES AND NET ASSETS DECEMBER 31, 1995
% OF SHARES EQUITY INVESTMENTS NET ASSETS MARKET VALUE - ------------------ --------------------------------------------- ---------- -------------------- DRUGS & HOSPITAL SERVICES (CONTINUED) 53,981 Chiron Corp.* $ 5,964,901 185,000 Cyberonics Inc.* 878,750 357,800 Forest Laboratories Inc.* 16,190,450 127,314 Guidant Corp. 5,379,017 116,200 ImmuLogic Pharmaceutical Corp.* 2,236,850 150,000 Invacare Corp. 3,787,500 315,200 Nellcor Inc.* 18,281,600 190,000 Physio-Control International * 3,396,250 109,000 Respironics Inc. * 2,289,000 101,200 Sepracor Inc.* 1,859,550 150,000 Sofamor/Danek Group Inc. * 4,256,250 50,000 Synthelabo * 3,132,530 157,900 Thermolase Corp. * 4,085,663 15,000 Thermedics Inc. * 416,250 60,800 Vical Inc.* 737,200 -------------------- 99,224,786 -------------------- HEALTH CARE SERVICES 9.85% 150,000 American Medical Response Inc. * 4,875,000 80,000 Amerisource Health Corp. * 2,640,000 188,000 Arbor Health Care Co.* 3,290,000 130,000 Columbia / HCA Healthcare Corp. 6,597,500 290,000 Community Health Systems Inc.* 10,331,250 180,000 Genesis Health Ventures Inc. * 6,570,000 245,000 Health Care & Retirement Corp.* 8,575,000 313,600 Healthsource Inc.* 11,289,600 97,000 Humana Inc.* 2,655,375 181,100 Manor Care Inc. 6,338,500 470,000 Maxicare Health Plans Inc. * 12,631,250 49,800 Orthodontic Centers of America Inc. * 2,402,850 30,700 Oxford Health Plans Inc. * 2,267,963 44,000 Pacificare Health Systems Inc. Class A * 3,828,000 123,500 Pacificare Health Systems Inc. Class B * 10,744,500 33,000 Phycor Inc.* 1,668,563 103,900 Renal Treatment Centers Inc.* 4,571,600 55,000 Service Corp. International 2,420,000 34,000 United HealthCare Corp. 2,227,000 979,500 Vivra Inc.* 24,609,938 -------------------- 130,533,889 --------------------
* Non-income producing The accompanying notes are an integral part of the financial statements Page 8 RCM GROWTH EQUITY FUND INVESTMENTS IN SECURITIES AND NET ASSETS DECEMBER 31, 1995
% OF SHARES EQUITY INVESTMENTS NET ASSETS MARKET VALUE - ------------------ --------------------------------------------- ---------- -------------------- INTEREST SENSITIVE SECTOR 5.65% BANKING 2.62% 15,900 BayBanks Inc. $ 1,562,175 170,000 Community First Bankshares 3,867,500 76,000 Compass Bancshares Inc. 2,508,000 48,400 First American Corp. of Tennessee 2,292,950 56,000 First Security Corp. 2,156,000 44,300 Mercantile Bancorporation Inc. 2,037,800 104,800 North Fork Bancorporation Inc. 2,646,200 348,700 ValliCorp Holdings Inc. 4,838,213 173,000 WestAmerica Bancorporation 7,482,250 66,600 Zions Bancorp 5,344,650 -------------------- 34,735,738 -------------------- GENERAL FINANCE 0.44% 88,700 Charter One Financial Inc. 2,716,438 21,000 First Financial Corp. 483,000 80,200 TCF Financial Corp. 2,656,625 -------------------- 5,856,063 -------------------- INSURANCE 2.59% 70,400 Allied Group Inc 2,534,400 33,500 CMAC Investment Corp. 1,474,000 115,400 Executive Risk Inc. 3,346,600 163,500 PMI Group Inc. 7,398,375 195,700 Transatlantic Holdings Inc. 14,359,488 48,500 Trenwick Group Inc. 2,728,125 62,000 Ace Limited 2,464,500 -------------------- 34,305,488 -------------------- SERVICES/MEDIA SECTOR 19.52% BUSINESS AND FOOD SERVICES 9.87% 320,000 ADT Ltd.* 4,800,000 212,000 Alco Standard Corp. 9,672,500 592,000 Avery Dennison Corp. 29,674,000 481,300 Danka Business Systems PLC ADR 17,808,100 288,800 Franklin Quest Co.* 5,631,600
* Non-income producing The accompanying notes are an integral part of the financial statements Page 9 RCM GROWTH EQUITY FUND INVESTMENTS IN SECURITIES AND NET ASSETS DECEMBER 31, 1995
% OF SHARES EQUITY INVESTMENTS NET ASSETS MARKET VALUE - ------------------ --------------------------------------------- ---------- -------------------- BUSINESS AND FOOD SERVICES (CONTINUED) 475,400 G & K Services Inc. Class A $ 12,122,700 253,300 Manpower Inc. 7,124,063 406,000 Olsten Corp. 16,037,000 80,000 Reynolds & Reynolds Class A 3,110,000 198,000 Robert Half International Inc.* 8,291,250 200,000 USA Waste Services Inc.* 3,775,000 90,700 United Waste Systems Inc.* 3,378,575 160,000 Unitog Co. 3,860,000 100,000 Wallace Computer Services Inc. 5,462,500 -------------------- 130,747,288 -------------------- COMMUNICATION SERVICES 7.58% 333,000 American Mobile Satellite Corp.* 10,198,125 50,000 Cellular Communications Inc. * 2,487,500 53,000 Cellular Communications Inc. Convertible Preferred* 2,636,750 208,000 CommNet Cellular Inc.* 6,006,000 1,122,600 Frontier Corp. 33,678,000 287,600 MFS Communications Inc.* 15,314,700 25,000 MFS Communications Inc. Depositary Shares (representing Series A, 8% convertible preferred stock) * 1,217,188 120,000 Orbital Sciences Corp.* 1,530,000 40,500 Paging Network Inc.* 987,188 120,000 PanAmSat Corp.* 2,647,500 708,000 Vanguard Cellular Systems Inc. Class A* 14,337,000 267,000 WorldCom Inc.* 9,411,750 -------------------- 100,451,701 -------------------- MEDIA SERVICES 2.07% 60,000 CableVision Systems Corp. Class A* 3,255,000 30,000 Central European Media Entertainment Ltd. Class A* 615,000 175,000 Comcast Corp Special Class A 3,182,813 180,000 Comcast UK Cable Partners Ltd. * 2,250,000 40,000 Gartner Group Inc. Class A* 1,915,000 256,000 Harcourt General Inc. 10,720,000 77,000 Heritage Media Corp. Class A* 1,973,125 70,000 Readers Digest Assn. Inc. Class A Non-Voting 3,587,500 -------------------- 27,498,438 --------------------
* Non-income producing The accompanying notes are an integral part of the financial statements Page 10 RCM GROWTH EQUITY FUND INVESTMENTS IN SECURITIES AND NET ASSETS DECEMBER 31, 1995
% OF SHARES EQUITY INVESTMENTS NET ASSETS MARKET VALUE - ------------------ --------------------------------------------- ---------- -------------------- TECHNOLOGY SECTOR 27.64% COMPUTERS AND OFFICE EQUIPMENT 0.67% 69,800 Dell Computer Corp.* $ 2,416,825 195,800 E M C Corp.* 3,010,425 110,015 Paxar Corp.* 1,457,699 143,100 STAC Inc.* 2,057,063 -------------------- 8,942,012 -------------------- ELECTRONICS AND NEW TECHNOLOGY 17.10% 387,600 Allen Group Inc. 8,672,550 136,200 Altera Corp.* 6,775,950 562,800 Analog Devices Inc.* 19,909,050 28,300 Ascend Communications Inc.* 2,295,838 256,950 Bay Networks Inc.* 10,567,069 535,000 Black Box Corp.* 8,760,625 187,300 Cabletron Systems Inc.* 15,171,300 74,400 Ericsson LM Telephone Co. ADR 1,450,800 42,100 Glenayre Technologies Inc.* 2,620,725 19,100 Information Storage Devices Inc.* 212,488 210,000 Kent Electronics Corp.* 12,258,750 294,000 LSI Logic Corp.* 9,628,500 8,000 Lattice Semiconductor Corp.* 261,000 219,000 Linear Technology Corp. 8,595,750 262,200 Maxim Integrated Products Inc.* 10,094,700 517,100 Microchip Technology Inc.* 18,874,150 397,500 Molex Inc. Class A 12,173,438 289,600 Network Equipment Technologies Inc.* 7,927,800 583,000 Network General Corp.* 19,457,625 225,900 Nokia Corp. Sponsored ADR Preferred 8,781,863 52,200 Oak Technology Inc.* 2,205,450 52,300 Qualcomm Inc.* 2,248,900 91,500 SGS Thomson Microelectronics NV* 3,682,875 34,400 Samsung Electronics Co., Ltd. GDS 144A* 2,064,000 13,952 Samsung Electronics Co., Ltd. GDR 144A Non-Voting* 837,120 1,048 Samsung Electronics Co., Ltd. GDR 144A New Common* 92,224 124,500 Sanmina Corp.* 6,458,438 169,200 Scientific Atlanta Inc. 2,538,000 161,000 Sierra Semiconductor Corp.* 2,233,875 93,900 StrataCom Inc.* 6,901,650 117,000 Thermo Electron Corp.* 6,084,000
* Non-income producing The accompanying notes are an integral part of the financial statements Page 11 RCM GROWTH EQUITY FUND INVESTMENTS IN SECURITIES AND NET ASSETS DECEMBER 31, 1995
% OF SHARES EQUITY INVESTMENTS NET ASSETS MARKET VALUE - ------------------ --------------------------------------------- ---------- -------------------- ELECTRONICS AND NEW TECHNOLOGY (CONTINUED) 50,200 U S Robotics Corp.* $ 4,405,050 65,000 Zilog Inc.* 2,380,625 -------------------- 226,622,178 -------------------- TECHNOLOGY SERVICES 9.87% 89,500 America Online Inc. * 3,356,250 530,150 American Management Systems Inc.* 15,904,500 312,200 BISYS Group Inc.* 9,600,150 103,600 H & R Block Inc. 4,195,800 51,200 CBT Group PLC Sponsored ADR * 2,713,600 428,208 Ceridian Corp.* 17,663,580 95,300 Cerner Corp. * 1,953,650 47,800 Citrix Systems Inc. * 1,553,500 64,200 Computer Sciences Corp.* 4,510,050 12,650 DST Systems Inc. * 360,525 52,200 Expert Software Inc. * 730,800 122,000 FileNet Corp.* 5,734,000 169,002 First Data Corp. 11,302,009 13,000 HBO & Co. 996,125 832,400 Informix Corp. * 24,972,000 141,600 Medaphis Corp. * 5,239,200 32,100 Medic Computer Systems Inc.* 1,942,050 99,600 National Data Corp. 2,465,100 122,400 PMT Services Inc.* 3,702,600 29,000 Security Dynamics Technologies Inc. * 1,580,500 165,900 Sterling Software Inc.* 10,348,000 -------------------- 130,823,989 -------------------- TOTAL EQUITY INVESTMENTS (COST $1,022,611,382) 97.19% 1,288,101,705 --------------------
* Non-income producing The accompanying notes are an integral part of the financial statements Page 12 RCM GROWTH EQUITY FUND INVESTMENTS IN SECURITIES AND NET ASSETS DECEMBER 31, 1995
% OF PRINCIPAL SHORT TERM INVESTMENTS NET ASSETS MARKET VALUE - ------------------ --------------------------------------------- ---------- -------------------- COMMERCIAL PAPER 1.43% $ 12,000,000 Ford Motor Credit Co. $ 11,996,053 5.92% maturing 1/3/96 7,000,000 Ford Motor Credit Co. 6,987,701 5.75% maturing 1/12/96 -------------------- 18,983,754 -------------------- SHARES MONEY MARKET FUNDS 0.43% - ------------------ 5,625,447 Seven Seas Series U.S. Government Money Market Fund 5,625,447 -------------------- TOTAL SHORT-TERM INVESTMENTS 1.86% (COST $24,609,201) 24,609,201 -------------------- TOTAL INVESTMENTS (COST $1,047,220,583) (a) 1,312,710,906 OTHER ASSETS LESS LIABILITIES 0.95% 12,579,580 -------------------- NET ASSETS 100.00% $ 1,325,290,486 -------------------- --------------------
- ------------------------- (a) For Federal income tax purposes, cost is $1,048,957,197 and unrealized appreciation (depreciation) of equity securities is as follows:
Unrealized appreciation $ 286,017,030 Unrealized depreciation (22,263,321) -------------------- Net unrealized appreciation $ 263,753,709 -------------------- --------------------
* Non-income producing The accompanying notes are an integral part of the financial statements. Page 13 RCM GROWTH EQUITY FUND STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1995 ASSETS: Investments in securities, at value (cost $1,047,220,583) (Note 1) $ 1,312,710,906 Foreign currency, at value (cost $3,009,310) 3,010,723 Receivable for securities sold 16,551,639 Dividends receivable 610,474 Receivable for Fund shares sold 225,178 ------------------ Total Assets 1,333,108,920 ------------------ LIABILITIES: Payable for securities purchased 4,719,061 Payable for investment management fees (Note 5) 3,034,931 Payable for custodian fees 45,442 Payable for Fund shares repurchased 19,000 ------------------ Total Liabilities 7,818,434 ------------------ NET ASSETS $ 1,325,290,486 ------------------ ------------------ NET ASSET VALUE PER SHARE ($1,325,290,486 divided by 5,806,825 shares outstanding) $ 228.23 ------------------ ------------------ NET ASSETS CONSIST OF: Paid in capital $ 992,951,928 Undistributed net investment income 49,873 Accumulated net realized gain on investments and foreign currency transactions 66,845,126 Net unrealized depreciation on foreign currency transactions (46,764) Net unrealized appreciation on investments 265,490,323 ------------------ NET ASSETS $ 1,325,290,486 ------------------ ------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. Page 14 RCM GROWTH EQUITY FUND STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1995
INVESTMENT INCOME: Income: Dividends (net of foreign withholding tax of $65,304) $ 9,579,076 Interest 4,876,934 --------------- Total income 14,456,010 --------------- Expenses: Investment management fees (Note 5) 11,038,366 Custodian fees 169,987 Miscellaneous expenses 1,505 --------------- Total expenses 11,209,858 --------------- Net investment income 3,246,152 --------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS: Net realized gain on investments 280,162,016 Net realized gain on foreign currency transactions 830,455 --------------- Net realized gain during the year 280,992,471 --------------- Net unrealized depreciation on foreign currency transactions (46,764) Net unrealized appreciation on investments 152,217,554 --------------- Net unrealized appreciation during the year 152,170,790 --------------- Net realized and unrealized gain on investments and foreign currency transactions 433,163,261 --------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 436,409,413 --------------- ---------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. Page 15 RCM GROWTH EQUITY FUND STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 1995 and 1994
1995 1994 ---------------- ---------------- OPERATIONS: Net investment income $ 3,246,152 $ 3,790,123 Net realized gain on investments and foreign currency transactions 280,992,471 253,475,641 Net unrealized appreciation (depreciation) on investments and foreign currency 152,170,790 (251,884,031) ---------------- ---------------- Net increase in net assets resulting from operations 436,409,413 5,381,733 DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 2): Net investment income (3,221,602) (4,164,653) Net realized gain on investments (203,938,943) (334,279,337) NET DECREASE FROM CAPITAL SHARES TRANSACTIONS (NOTE 3) (269,044,478) (350,660,663) ---------------- ---------------- NET DECREASE IN NET ASSETS (39,795,610) (683,722,920) NET ASSETS: Beginning of year 1,365,086,096 2,048,809,016 ---------------- ---------------- End of year $ 1,325,290,486 $ 1,365,086,096 ---------------- ---------------- ---------------- ----------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. Page 16 RCM GROWTH EQUITY FUND FINANCIAL HIGHLIGHTS Selected data for each share of capital stock outstanding for the ten years ended December 31, 1995 are as follows:
-------------------------------------------------------------------------- 1995 1994 1993 1992 1991 1990 --------- ---------- ---------- ---------- ---------- ---------- Per Share Operating Performance: Net asset value, beginning of year $ 197.31 $ 260.43 $ 274.14 $ 288.48 $ 212.27 $ 228.09 ---------- ---------- ---------- ---------- ---------- ---------- Net investment income 0.57 0.74 0.97 1.68 2.31 3.67 Net realized and unrealized gain (loss) on investments 66.36 0.34 26.95 17.74 98.11 (13.14) ---------- ---------- ---------- ---------- ---------- ---------- Net increase (decrease) in net asset value 66.93 1.08 27.92 19.42 100.42 (9.47) resulting from investment operations ---------- ---------- ---------- ---------- ---------- ---------- Distributions: Net investment income (0.56) (0.79) (1.00) (1.70) (2.29) (4.21) Net realized gain on investments (35.45) (63.41) (40.63) (32.06) (21.92) (2.14) ---------- ---------- ---------- ---------- ---------- ---------- Total distributions (36.01) (64.20) (41.63) (33.76) (24.21) (6.35) ---------- ---------- ---------- ---------- ---------- ---------- Net asset value, end of year $ 228.23 $ 197.31 $ 260.43 $ 274.14 $ 288.48 $ 212.27 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Total Return (b) 34.53% 0.76% 10.72% 7.03% 48.23% (4.12%) ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Ratios and supplemental data: Net assets, end of year (in millions) $ 1,325 $ 1,365 $ 2,049 $ 2,122 $ 2,138 $ 1,300 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Ratio of expenses to average net assets 0.8% 0.8% 0.8% 0.8% 0.7% 0.8% ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Ratio of net investment income to average net assets 0.2% 0.2% 0.3% 0.6% 0.9% 1.8% ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Portfolio turnover 96.5% 111.1% 67.0% 56.8% 62.7% 50.0% ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- 1989 1988 1987 1986(a) ---------- ---------- ---------- ---------- Per Share Operating Performance: Net asset value, beginning of year $ 199.99 $ 177.22 $ 207.52 $ 211.83 ---------- ---------- ---------- ---------- Net investment income 3.94 2.83 1.72 1.59 Net realized and unrealized gain (loss) on investments 49.62 33.89 20.52 17.83 ---------- ---------- ---------- ---------- Net increase (decrease) in net asset value 53.56 36.72 22.24 19.42 resulting from investment operations ---------- ---------- ---------- ---------- Distributions: Net investment income (3.98) (2.92) (4.06) (3.94) Net realized gain on investments (21.48) (11.03) (48.48) (19.79) ---------- ---------- ---------- ---------- Total distributions (25.46) (13.95) (52.54) (23.73) ---------- ---------- ---------- ---------- Net asset value, end of year $ 228.09 $ 199.99 $ 177.22 $ 207.52 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Total Return (b) 26.87% 20.86% 10.97% 9.33% ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Ratios and supplemental data: Net assets, end of year (in millions) 1,284 $ 964 $ 553 $ 461 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Ratio of expenses to average net assets 0.7% 0.7% 0.8% 0.7% ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Ratio of net investment income to average net assets 1.8% 1.8% 0.9% 1.3% ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Portfolio turnover 70.8% 64.7% 79.9% 78.2% ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
- ------------------- (a) On July 9, 1986, RCM Capital Management, the successor to the business and operations of Rosenberg Capital Management, became the investment manager. (b) Total return measures the change in value of an investment over the period indicated. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. Page 17 RCM GROWTH EQUITY FUND NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995 1. SIGNIFICANT ACCOUNTING POLICIES RCM Growth Equity Fund (the "Fund") is a diversified series of RCM Capital Funds, Inc. (the "Company"). The Company is organized as a Maryland corporation and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. The policies are in conformity with generally accepted accounting principles which require management to make estimates and assumptions that affect the reported amount of assets and liabilities. a. SECURITIES VALUATIONS: Investment securities are stated at fair market value. Equity securities traded on stock exchanges are valued at the last sale price on the exchange or in the principal over-the-counter market in which such securities are traded as of the close of business on the day the securities are being valued. If there has been no sale on such day, then the security will be valued at the closing bid price on such day. If no bid price is quoted on such day, then the security will be valued by such method as the Board of Directors of the Company in good faith deems appropriate to reflect its fair market value. Readily marketable securities traded only in the over-the-counter market that are not listed on the National Association of Securities Dealers, Inc. Automated Quotation System or similar foreign reporting service will be valued at the mean bid price, or such other comparable sources as the Board of Directors of the Company deems appropriate to reflect their fair market value. Other portfolio securities held by the Fund will be valued at current market value, if current market quotations are readily available for such securities. To the extent that market quotations are not readily available such securities will be valued by whatever means the Board of Directors of the Company in good faith deems appropriate to reflect their fair market value. Short-term investments with a maturity of 60 days or less are valued at amortized cost, which approximates market value. b. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME: Security transactions are recorded as of the date of purchase or sale. Realized gains and losses on security transactions are determined on identified cost basis for both financial statement and federal income tax purposes. Interest income, foreign taxes and expenses are accrued daily. c. FOREIGN CURRENCY TRANSLATIONS: The records of the Fund are maintained in U.S. dollars. Foreign currencies, investments and other assets and liabilities are translated into U.S. dollars at current exchange rates. Purchases and sales of foreign securities and income and withholding taxes are translated on the respective dates of such transactions. Net realized currency gains and losses include foreign currency gains and losses between trade date and settlement date, sales and foreign currency transactions. The Fund does not isolate that portion of foreign currency exchange fluctuation on investments from unrealized appreciation and depreciation which arises from changes in market prices. Such fluctuations are included with the net unrealized appreciation and depreciation on investments. (Continued) Page 18 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) d. FEDERAL INCOME TAXES: It is the policy of the Fund to comply with the requirements for qualifications as a "regulated investment company" under the Internal Revenue Code of 1986, as amended (the "Code"). It is also the intention of the Fund to make distributions sufficient to avoid imposition of any excise tax under Section 4982 of the Code. Therefore, no provision has been made for Federal or excise taxes on income and capital gains. e. DISTRIBUTIONS: Distributions to shareholders are recorded by the Fund on the ex-dividend date. Income and capital gain distributions are determined in accordance with Federal income tax regulations which may differ from generally accepted accounting principles. These differences are primarily due to differing treatments of income and gains on various investment securities held by the Fund and timing differences. 2. DISTRIBUTIONS On December 14, 1995 a distribution of $36.01 per share, aggregating $207,160,545, was paid from investment operations. This per share amount consisted of $0.56 net investment income, $12.70 short-term capital gains and $22.75 long-term capital gains. The dividend was recorded on December 14, 1995 to shareholders of record on the same date. 3. CAPITAL SHARES At December 31, 1995, there were 25,000,000 shares of the Company's common stock authorized, at $0.10 par value. Of this amount, 12,000,000 were classified as shares of the Fund; 8,000,000 were classified as shares of RCM Small Cap Fund; 4,500,000 were classified as shares of RCM International Growth Equity Fund A; and 500,000 shares remain unclassified. Transactions in capital shares of the Fund were as follows:
Year ended December 31, 1995 ------------------------------- Shares Amount ------------- ---------------- Shares sold 371,800 $ 87,032,923 Shares issued in connection with reinvestment 921,263 203,424,163 of distributions Shares repurchased (2,404,710) (559,501,564) ------------- ---------------- Net decrease (1,111,647) $ (269,044,478) ------------- ---------------- ------------- ----------------
Year ended December 31, 1995 ------------------------------- Shares Amount ------------- ---------------- Shares sold 247,311 $ 61,789,994 Shares issued in connection with reinvestment 1,712,075 333,257,117 of distributions Shares repurchased (2,907,908) (745,707,774) ------------- ---------------- Net decrease (948,522) $ (350,660,663) ------------- ---------------- ------------- ----------------
At December 31, 1995, two unaffiliated shareholders individually held greater than 10%, and in aggregate held 30%, of the outstanding shares of the Fund. (Continued) Page 19 4. PURCHASES AND SALES OF SECURITIES Purchases and sales proceeds of investment securities by the Fund, excluding short-term securities, aggregated $1,337,896,346 and $1,784,347,355, respectively, for the year ended December 31, 1995. 5. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES RCM Capital Management, a California Limited Partnership ("RCM"), is the Fund's investment manager. RCM manages the Fund's investments, provides various administrative services, and supervises the Fund's daily business affairs, subject to the authority of the Board of Directors. The Fund pays investment management fees quarterly to RCM at a rate of 3/16 of 1% (approximately 3/4 of 1% on an annual basis) of the average net assets of the Fund during the preceding quarter. For the year ended December 31, 1995, the Fund paid investment management fees aggregated $11,038,366. The RCM Capital Management Profit Sharing Plan ("the Plan"), participation in which is limited to officers and employees of RCM, owned 10,399 shares of the Fund on December 31, 1995. Certain officers and directors of the Company are beneficiaries of the Plan and have vested rights in its assets. In December 1995, RCM entered into an Agreement of Purchase and Sale pursuant to which RCM will become a wholly owned subsidiary of Dresdner Bank AG, an international banking organization with headquarters in Frankfurt, Germany. It is expected that the day-to-day operations of RCM will not be affected and that the individuals who are primarily responsible for the management of the Fund's portfolio will remain the same. The closing of the transaction is subject to a number of contingencies, including the receipt of certain regulatory approvals. The transaction is currently expected to close in mid-1996. Because the transaction will constitute an "assignment" of the Fund's management agreement with RCM under the Investment Company Act of 1940, and thus a termination of such management agreement, the Fund will seek prior approval of a new management agreement from the Fund's Board of Directors and shareholders prior to the closing of the transaction. The terms of the new management agreement are expected to be substantially the same as those of the current management agreement. Page 20 -----END PRIVACY-ENHANCED MESSAGE-----