-----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, Khe7sjMxHBnm/4yheHUDRC9Kviko069hwhx0W48uVuLhjr83WwoFHzxb1AI+Z/MG p494cDF86PNf16iMXmNelA== 0000912057-96-019166.txt : 19960830 0000912057-96-019166.hdr.sgml : 19960830 ACCESSION NUMBER: 0000912057-96-019166 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960829 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: 96623292 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] SMALL CAP FUND SEMI-ANNUAL REPORT JUNE 30, 1996 RCM SMALL CAP FUND MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE The value of an investment in the RCM Small Cap Fund (the "Fund") appreciated 19.98% over the six months ended June 30, 1996. In addition to registering strong absolute performance for the period, the Fund finished significantly ahead of the 10.36% return posted by its primary benchmark, the Russell 2000 Index. U.S. equities posted strong positive returns in the first half of 1996, extending the extraordinary gains of the prior year, and surprising many observers. Consensus expectations going into the year called for a slowing economic environment including low inflation and continued declines in interest rates. By early in the second quarter, however, signs of economic re-acceleration appeared, and inflation fears began to surface. Despite the shifting consensus macroeconomic outlook, equity mutual fund cash flows reached record levels in the first half of 1996, and the market for initial public offerings exploded. Stocks of all capitalizations participated in the advance, although small cap issues got off to a very weak start in the month of January. The relative strength of the small cap sector bottomed in February, and the Russell 2000 Index finished the first quarter just slightly behind the broader large cap market (as measured by the S&P 500 Stock Index). Small cap stocks continued to register strong gains in April and May and the Russell 2000 Index outperformed the S&P 500 Stock Index in the second quarter and the six month period overall, but the relative strength of the secondary cap sector versus large cap equities deteriorated markedly by the end of the first half. In addition to outperforming its primary benchmark, the Fund's performance for the year-to-date period through June 30, 1996 was 988 basis points ahead of the S&P 500's. Returns were aided by the growth stock focus of RCM Capital Management, L.L.C. ("RCM"), investment manager of the Fund. Growth investment styles significantly outperformed value styles in the first half of 1996. Industry strategies that were positive contributors to the Fund's relative performance in the first half included overweightings in the strong business services sector (10% versus 5% in the Russell 2000 Index) and in the leisure time products and services group (5% versus 3% in the benchmark). These strategic overweightings contributed approximately 120 basis points in relative performance for the period. Utilities, general finance and banking were lagging industry groups which were underweighted in the Fund, thereby adding to relative performance. On the negative side, overweighting the poorly performing electronics/new technology industry group hurt the Fund's relative performance in the first six months of 1996. This sector suffered from a prolonged inventory correction experience by semiconductor manufacturers and other technology component suppliers. Performance in the group came under additional pressure at the end of the first half as several technology companies announced that they would post disappointing earnings reports for the second quarter. The Fund's underweighted positioning in energy 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 exposure in this sector. Although the Fund's average cash position of about 5% during the first half of 1996 was at the lower end of its "normal" range, cash had a negative impact on relative performance given the rising market environment. Stock picking was a much more important factor in the Fund's relative outperformance in the first half than was industry strategy. Individual stock selection within the electronics/new technology sector was actually a strong positive contributor to relative performance. The Fund's holdings in this group were up an aggregate of 13% versus a decline of approximately 4% for the Russell 2000 Index stocks in this group. During the first half of 1996, the Fund's major holdings in this industry included Computer Products (+85% total return during the period), Methode Electronics (+56%), and Allen Group (+41%). Stock selection in the health care services group also added to relative performance, owing to the Fund's meaningful positions in stocks such as Rural/Metro Corporation (+100%), Community Health Systems (+45%), and Orthodontic Centers of America (+54%). The Fund experienced positive contributions from stock picking in several additional industry groups during the first half, including technology services, drugs/hospital supplies, and business services. Negative stock selection was experienced in the computer and office equipment group. Relative performance was hurt in particular by a large drop in Micros Systems (-76%), causing the aggregate performance of RCM's holdings to fall well short of the total return of approximately 33% posted by the Russell 2000 Index stocks in this industry. Going into the second half of 1996, the equity investment environment turned quite treacherous. A series of stronger-than-expected economic releases generated fears that the Federal Reserve would be forced into a series of rate hikes to keep growth and inflation in tow. U.S. stocks suffered a violent correction in the first few weeks of July. As is typical, the small cap sector of the market has exhibited more volatility on the downside than have the larger cap universes during this corrective phase. RCM acknowledges that volatility in both directions may remain high in the near term, but believes that significant longer-term investment opportunities continue to exist in quality small capitalization growth stocks. Page 2 RCM SMALL CAP FUND PERFORMANCE SUMMARY ______________________________________________________________________________ $22,000 $20,993 $20,000 $19,596 $18,000 $16,000 $14,000 $12,000 $10,000 $8,000 -------------------------------------------------------------------- 1992 1993 1994 1995 1996 _____ RCM Small Cap Fund ===== Russell 2000 Index 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.# The chart represents a cumulative return of 109.93%+ for the Fund. The average annual total return from the Fund's inception was 20.37%*+. The chart assumes a hypothetical $10,000 initial investment in the Fund and reflects all Fund expenses. AVERAGE ANNUAL TOTAL RETURNS+ JUNE 30, 1996 - ----------------------- 1 Year | Life of | Fund* - ----------|------------ 42.53% | 20.37% - ----------------------- The data above represents past performance of the Fund, and may not be indicative of future results. The investment return and principal value of an investment in the Fund will fluctuate, so that shares, when redeemed, may be worth more or less than their original cost. # The Russell 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. + Returns assume reinvestment of all dividends and capital gains distributions at net asset value. * The Fund began operations on January 4, 1992. Page 3 RCM CAPITAL FUNDS, INC. STOCKHOLDER MEETING RESULTS A Special Meeting of Stockholders of the RCM Capital Funds, Inc. (the "Company") was held on Tuesday, May 28, 1996. The number of shares issued, outstanding and eligible to vote as of April 18, 1996 (the "Record Date") was 7,110,217. Present were 5,477,386 shares in person or represented by proxy, or 77.04% of the shares outstanding on the Record Date. The matters voted upon by stockholders and the resulting votes for each matter are presented below: 1. Each person nominated as a director was elected as set forth below: For Withhold ----------- ------------ Kenneth E. Scott 5,109,781 332,162 DeWitt F. Bowman 5,245,037 196,905 Thomas S. Foley 4,910,846 531,097 Frank P. Greene 5,109,781 332,162 Pamela A. Farr 5,109,781 332,162 George G.C. Parker 5,109,781 332,162 2. An Amendment to the Articles of Incorporation of the Company to reduce the par value of the shares of the Company was approved: For: 4,849,864; Against: 517,895; Abstain 74,184. 3. The selection by the Board of Directors of Coopers & Lybrand L.L.P. as independent public accountants for the fiscal year ending December 31, 1996 was approved: For: 5,367,761; Against: 0; Abstain: 74,182. In addition, certain matters were presented to the stockholders of the RCM Small Cap Fund (the "Fund") for approval or ratification. As of the Record Date, there were 2,950,841 shares of the Fund outstanding and eligible to vote. At the Special Meeting 2,306,393 shares were present in person or by proxy, or 78.16% of the shares outstanding on the Record Date. The matters voted upon by stockholders of the Fund and the resulting votes for each matter are presented below: 1. The new Investment Management Agreement between the Company, on behalf of the Fund, and RCM Capital Management, L.L.C. was approved: For: 2,249,677; Against: 0; Abstain: 43,811. 2. Certain revisions to the investment objectives of the Fund were approved: For: 1,904,118; Against: 345,624; Abstain: 43,745. 3. A revision to the fundamental investment policies of the Fund regarding investment in warrants was approved: For: 1,903,958; Against: 345,746; Abstain: 43,783. Page 4 RCM SMALL CAP FUND INVESTMENTS IN SECURITIES AND NET ASSETS JUNE 30, 1996 (UNAUDITED)
% OF SHARES EQUITY INVESTMENTS NET ASSETS MARKET VALUE - ------ ------------------------------------------- ---------- ------------ CONSUMER DURABLES SECTOR 1.36% AUTOMOTIVE RELATED 0.92% 173,000 Tower Automotive Inc. * $ 4,238,500 OTHER CONSUMER DURABLES 0.44% 66,500 AptarGroup Inc. 2,011,625 CONSUMER NON-DURABLES SECTOR 11.04% FOOD AND FOOD PROCESSING 0.73% 201,100 UniMark Group Inc. * 3,343,288 GENERAL RETAIL 1.58% 20,000 Big B Inc. 190,000 92,400 Loehmann's Inc. * 2,125,200 99,000 Orchard Supply Hardware Stores Corp. * 2,982,375 55,000 Proffitt's Inc. * 1,952,500 ------------ 7,250,075 ------------ HOUSEHOLD/RELATED NON-DURABLES 1.41% 290,100 Armor All Products Corp. 4,315,238 145,300 Guest Supply Inc. * 2,179,500 ------------ 6,494,738 ------------ LEISURE TIME PRODUCTS/SERVICES 7.32% 233,600 Apple South Inc. 6,248,800 176,000 Bristol Hotel Co. * 5,720,000 293,000 Cooker Restaurant Corp. 3,918,875 247,500 Doubletree Corp. * 8,786,250 273,000 Interstate Hotels Co. * 6,074,250 390,000 Uno Restaurant Corp. * 2,925,000 ------------ 33,673,175 ------------
The accompanying notes are an integral part of the financial statements. Page 5 RCM SMALL CAP FUND INVESTMENTS IN SECURITIES AND NET ASSETS JUNE 30, 1996 (UNAUDITED)
% OF SHARES EQUITY INVESTMENTS NET ASSETS MARKET VALUE - ------ ------------------------------------------- ---------- ------------ CYCLICAL/CAPITAL GOODS SECTOR 14.64% AEROSPACE/DEFENSE 1.26% 327,000 Wyman-Gordon Co. * $ 5,804,250 BUILDING AND CONSTRUCTION 2.87% 212,000 Jacobs Engineering Group Inc. * 5,591,500 85,000 NCI Building Systems Inc. * 2,868,750 225,000 Watsco Inc. 4,725,000 ------------ 13,185,250 ------------ CHEMICALS AND TEXTILES 0.48% 97,500 Osmonics Inc. * 2,193,750 INDUSTRIAL EQUIPMENT 2.44% 100,000 Applied Power Inc. Class A 2,800,000 222,000 Duriron Co. Inc. 5,328,000 125,000 Furon Co. 3,093,750 ------------ 11,221,750 ------------ RAW AND BASIC MATERIALS 1.21% 168,000 Commercial Metals Co. 5,586,000 TRANSPORTATION SERVICES 6.38% 301,400 Covenant Transport Inc. Class A * 5,123,800 303,000 Expeditors International of Washington Inc. 9,393,000 128,000 Heartland Express Inc. * 3,424,000 172,900 Mark VII Inc. * 3,479,613 256,200 Railtex Inc. * 6,597,150 70,000 Swift Transportation Co. Inc. * 1,338,750 ------------ 29,356,313 ------------
The accompanying notes are an integral part of the financial statements. Page 6 RCM SMALL CAP FUND INVESTMENTS IN SECURITIES AND NET ASSETS JUNE 30, 1996 (UNAUDITED)
% OF SHARES EQUITY INVESTMENTS NET ASSETS MARKET VALUE - ------ ------------------------------------------- ---------- ------------ ENERGY SECTOR 2.07% OIL AND RELATED SERVICES 2.07% 10,000 BJ Services Co. * $ 351,250 12,000 Barrett Resources Corp. * 357,000 109,000 Camco International Inc. 3,692,375 270,000 Forcenergy Gas Exploration Inc. * 5,096,250 ------------ 9,496,875 ------------ HEALTHCARE SECTOR 21.88% DRUGS & HOSPITAL SERVICES 8.51% 35,500 Allergan Ligand Retinoid Theraputics Inc. * 1,011,750 53,100 Anesta Corp. * 650,475 79,500 Autoimmune Inc. * 745,313 26,000 Cardiac Pathways Corp. * 377,000 50,250 Cyberonics Inc. * 301,500 182,800 Endosonics Corp. * 3,267,550 311,200 Gelman Sciences Inc. * 7,040,900 24,500 IDEC Pharmaceuticals Corp. * 566,563 38,500 ImmuLogic Pharmaceutical Corp. * 351,313 66,100 LUNAR Corp. * 2,280,450 45,750 Magainin Pharmaceuticals Inc. * + 480,375 33,000 MedImmune Inc. * 561,000 72,300 Penederm Inc. * 1,229,100 309,800 Physio-Control International Corp. * 5,460,225 89,000 SangStat Medical Corp. * 1,513,000 107,700 Sepracor Inc. * 1,615,500 60,000 Sofamor/Danek Group Inc. * 1,665,000 42,000 Virus Research Institute Inc. * 383,250 282,000 VISX Inc. * 9,623,250 ------------ 39,123,514 ------------ DRUGS & HOSPITAL SUPPLIES 0.20% 143,000 Bone Care International Inc. * 929,500 HEALTH CARE SERVICES 13.17% 30,000 American HomePatient Inc. * 1,327,500
The accompanying notes are an integral part of the financial statements. Page 7 RCM SMALL CAP FUND INVESTMENTS IN SECURITIES AND NET ASSETS JUNE 30, 1996 (UNAUDITED)
% OF SHARES EQUITY INVESTMENTS NET ASSETS MARKET VALUE - ------ ------------------------------------------- ---------- ------------ HEALTH CARE SERVICES (CONTINUED) 148,000 American Medical Response Inc. * $ 5,217,000 85,000 Arbor Health Care Co. * 2,316,250 295,000 CIMA Labs Inc. * 2,212,500 206,000 Curative Technologies Inc. * 5,407,500 70,000 Genesis Health Ventures Inc. * 2,196,250 70,000 Harborside Healthcare Corp. * 717,500 193,600 Home Health Corp. of America Inc. * 2,625,700 400,900 Maxicare Health Plans Inc. * 7,566,988 264,000 Multicare Cos. Inc. * 5,016,000 111,900 Orthodontic Centers of America Inc. * 2,965,350 181,100 Renal Treatment Centers Inc. * 5,206,625 143,600 RoTech Medical Corp. * 2,800,200 116,000 Rural/Metro Corp. * 3,973,000 271,500 Summit Care Corp. * 5,973,000 6,600 Total Renal Care Holdings Inc. * 278,850 29,900 Transition Systems Inc. * 852,150 8,700 Universal Health Services Inc., Class B * 227,288 165,000 Veterinary Centers of America Inc. * 3,691,875 ------------ 60,571,526 ------------ INTEREST SENSITIVE SECTOR 6.34% BANKING 3.61% 170,000 Community First Bankshares Inc. 3,995,000 133,100 Silicon Valley Bancshares * 3,427,325 145,000 Texas Regional Bancshares Inc. Class A 3,625,000 100,000 ValliCorp Holdings Inc. 1,700,000 77,000 WestAmerica Bancorporation 3,869,250 ------------ 16,616,575 ------------ GENERAL FINANCE 1.07% 198,900 AMRESCO Inc. * 3,406,163 66,000 Oxford Resources Corp. * 1,534,500 ------------ 4,940,663 ------------
The accompanying notes are an integral part of the financial statements. Page 8 RCM SMALL CAP FUND INVESTMENTS IN SECURITIES AND NET ASSETS JUNE 30, 1996 (UNAUDITED)
% OF SHARES EQUITY INVESTMENTS NET ASSETS MARKET VALUE - ------ ------------------------------------------- ---------- ------------ INSURANCE 1.66% 192,000 American Travellers Corp. * $ 4,416,000 48,000 CMAC Investment Corp. 2,760,000 12,000 Executive Risk Inc. 459,000 ------------ 7,635,000 ------------ SERVICES/MEDIA SECTOR 15.22% BUSINESS AND FOOD SERVICES 12.36% 555,000 Allied Waste Industries Inc. * 4,925,625 101,000 Caribiner International Inc. * 3,244,625 239,200 G & K Services Inc. Class A 6,817,200 204,400 Inference Corp. Class A * 4,905,600 221,000 Iron Mountain Inc. * 4,641,000 214,000 Personnel Group of America, Inc. * 5,269,750 492,000 Philip Environmental Inc. * 3,874,500 158,000 The Registry Inc. * 4,621,500 106,800 Renaissance Solutions Inc. * 3,030,450 76,000 Romac International * 1,938,000 12,000 SITEL Corp. * 504,000 335,000 Tetra Tech Inc. * 6,700,000 46,000 United Waste Systems Inc. * 1,483,500 90,800 Unitog Co. 2,565,100 90,000 Wilmar Industries Inc. * 2,340,000 ------------ 56,860,850 ------------ COMMUNICATION SERVICES 2.06% 102,500 American Mobile Satellite Corp . * 1,588,750 102,000 Arch Communications Group Inc . * 1,899,750 85,000 CommNet Cellular Inc . * 2,550,000 83,000 Orbital Sciences Corp . * 1,348,750 98,300 Tel-Save Holdings Inc. * 2,088,875 ------------ 9,476,125 ------------ MEDIA SERVICES 0.80% 83,000 Heritage Media Corp. Class A * 3,309,625 15,000 Central European Media Entertainment Ltd. Class A * 375,000 ------------ 3,684,625 ------------
The accompanying notes are an integral part of the financial statements. Page 9 RCM SMALL CAP FUND INVESTMENTS IN SECURITIES AND NET ASSETS JUNE 30, 1996 (UNAUDITED)
% OF SHARES EQUITY INVESTMENTS NET ASSETS MARKET VALUE - ------ ------------------------------------------- ---------- ------------ TECHNOLOGY SECTOR 23.81% COMPUTERS AND OFFICE EQUIPMENT 4.53% 410,000 Black Box Corp. * $ 9,737,500 146,800 Comverse Technology Inc. * 4,477,400 236,000 Micros Systems Inc. * 6,578,500 8,405 Radius Inc. * 23,114 ------------ 20,816,514 ------------ ELECTRONICS AND NEW TECHNOLOGY 13.92% 322,000 Actel Corp. * 5,957,000 14,000 Allen Group Inc. * 304,500 168,000 Altron Inc. * 3,402,000 105,000 CP Clare Corp. * 2,703,750 785,000 Computer Products Inc. * 13,443,125 225,000 Continental Circuits Corp. * 2,643,750 71,000 Elantec Semiconductor Inc. * 639,000 323,000 Kent Electronics Corp. * 10,093,750 301,000 Methode Electronics Inc. Class A 5,117,000 227,000 Network Equipment Technologies Inc. * 4,823,750 367,600 Network General Corp. * 7,903,400 258,100 Sanmina Corp. * 6,968,700 ------------ 63,999,725 ------------ TECHNOLOGY SERVICES 5.36% 72,000 Aspen Technologies Inc. * 3,960,000 112,000 BISYS Group Inc. * 4,228,000 57,200 FileNet Corp. * 2,087,800 48,400 Integrated Systems Inc. * 1,939,025 8,000 NETCOM On-line Communications Services Inc. * 216,000 67,000 PMT Services Inc. * 1,917,875 96,800 SPSS Inc. * 2,420,000 186,800 Unison Software Inc. * 4,716,700 167,000 Wonderware Corp. * 3,152,120 ------------ 24,637,520 ------------ TOTAL EQUITY INVESTMENTS (COST $350,667,827) 96.36% 443,147,726 ------------
The accompanying notes are an integral part of the financial statements. Page 10 RCM SMALL CAP FUND INVESTMENTS IN SECURITIES AND NET ASSETS JUNE 30, 1996 (UNAUDITED)
% OF SHARES EQUITY INVESTMENTS NET ASSETS MARKET VALUE - ------ ------------------------------------------- ---------- ------------ SHORT-TERM INVESTMENTS MONEY MARKET FUNDS 0.53% 2,444,858 Seven Seas Series Money Market Fund $ 2,444,858 Principal COMMERCIAL PAPER 2.17% - ----------- 10,000,000 General Electric Capital Corp. 5.32% maturing 7/8/96 9,989,656 ------------ TOTAL SHORT-TERM INVESTMENTS (COST $12,434,514) 2.70% 12,434,514 ------------ TOTAL INVESTMENTS (COST $363,102,341) ** 99.06% 455,582,240 OTHER ASSETS LESS LIABILITIES 0.94% 4,316,439 ------------ NET ASSETS 100.00% $459,898,679 ============
________________ * Non income-producing security. ** For Federal income tax purposes, cost is $364,305,259 and unrealized appreciation (depreciation) of equity securities is as follows: Unrealized appreciation $ 99,577,821 Unrealized depreciation (8,300,840) ------------ Net unrealized appreciation $ 91,276,981 ============ + Securities are registered pursuant to Rule 144A and may be deemed to be restricted for resale. The accompanying notes are an integral part of the financial statements. Page 11 RCM SMALL CAP FUND STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1996 (UNAUDITED) ASSETS: Investments in securities, at value (cost $363,102,341) (Note 1) $ 455,582,240 Cash 572,100 Receivable for Fund shares sold 6,491,381 Receivable for securities sold 4,106,440 Interest receivable 55,230 Dividends receivable 45,440 ------------- Total Assets 466,852,831 ------------- LIABILITIES: Payable for securities purchased 5,797,283 Payable for investment management fees (Note 4) 1,046,680 Payable for Fund shares repurchased 96,800 Payable for custodian fees 13,389 ------------- Total Liabilities 6,954,152 ------------- NET ASSETS $ 459,898,679 ------------- ------------- NET ASSET VALUE PER SHARE ($459,898,679 DIVIDED BY 33,776,658 shares outstanding) $ 13.62 ------------- ------------- NET ASSETS CONSIST OF: Paid in capital $ 277,643,688 Accumulated net investment loss (1,104,077) Accumulated net realized gain on investments 90,879,169 Net unrealized appreciation of investments 92,479,899 ------------- NET ASSETS $ 459,898,679 ------------- -------------
The accompanying notes are an integral part of the financial statements. Page 12 RCM SMALL CAP FUND STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED) INVESTMENT INCOME: Income: Interest $ 580,475 Dividends 519,255 ------------ Total income 1,099,730 ------------ Expenses: Investment management fees (Note 4) 2,176,107 Custodian fees 26,900 Miscellaneous expenses 800 ------------ Total expenses 2,203,807 ------------ Net investment loss (1,104,077) ------------ NET REALIZED AND UNREALIZED GAIN: Net realized gain on investments 71,220,838 Net unrealized appreciation of investments 8,043,337 ------------ Net realized and unrealized gain for the period 79,264,175 ------------ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 78,160,098 ------------ ------------
The accompanying notes are an integral part of the financial statements. Page 13 RCM SMALL CAP FUND STATEMENTS OF CHANGES IN NET ASSETS
Six months ended June 30, 1996 Year ended (Unaudited) December 31, 1995 ----------------- ----------------- OPERATIONS: Net investment loss $ (1,104,077) $ (978,987) Net realized gain on investments 71,220,838 63,212,427 Net unrealized appreciation on investments 8,043,337 66,594,922 ------------- ------------- Net increase in net assets resulting from operations 78,160,098 128,828,362 DISTRIBUTIONS TO SHAREHOLDERS FROM: Net realized gain on investments (Note 1) - (47,579,854) NET DECREASE FROM CAPITAL SHARE TRANSACTIONS (NOTE 2) (27,828,088) (87,329,307) ------------- ------------- NET INCREASE (DECREASE) IN NET ASSETS 50,332,010 (6,080,799) NET ASSETS: Beginning of period 409,566,669 415,647,468 ------------- ------------- End of period $ 459,898,679 $ 409,566,669 ------------- ------------- ------------- -------------
The accompanying notes are an integral part of the financial statements. Page 14 RCM SMALL CAP FUND FINANCIAL HIGHLIGHTS Selected data for each share of capital stock outstanding for the four years ended December 31, 1995 and the six months ended June 30, 1996 are as follows:
Six months ended Year Ended December 31, June 30, 1996 ------------------------------------------------------------ (Unaudited) (a) 1995 1994 1993 1992 ----------------- ---------- ---------- ---------- ---------- PER SHARE OPERATING PERFORMANCE: (b) Net asset value, beginning of period $ 11.35 $ 9.42 $ 10.41 $ 10.15 $ 8.33 --------- -------- --------- --------- --------- Net investment income (loss) (0.03) (0.04) (0.04) (0.00) 0.03 Net realized and unrealized gain (loss) on investments 2.30 3.21 (0.20) 0.91 1.82 --------- -------- --------- --------- --------- Net increase (decrease) in net asset value resulting from investment operations 2.27 3.17 (0.24) 0.91 1.85 --------- -------- --------- --------- --------- Distributions: Net investment income (0.00) (0.00) (0.00) (0.00) (0.03) Net realized gain on investments (0.00) (1.24) (0.75) (0.65) (0.00) --------- -------- --------- --------- --------- Total distributions (0.00) (1.24) (0.75) (0.65) (0.03) --------- -------- --------- --------- --------- NET ASSET VALUE, END OF PERIOD $ 13.62 $ 11.35 $ 9.42 $ 10.41 $ 10.15 --------- -------- --------- --------- --------- --------- -------- --------- --------- --------- TOTAL RETURN (c) 19.98% 34.08% (2.16%) 9.20% 22.14% --------- -------- --------- --------- --------- --------- -------- --------- --------- --------- RATIOS AND SUPPLEMENTAL DATA: Average commission rate paid per share $ 0.05444 $ 0.05421 - - - --------- -------- --------- -------- Net assets, end of period (in 000's) $ 459,899 $ 409,567 $ 415,647 $ 660,049 $ 457,994 --------- -------- --------- --------- --------- --------- -------- --------- --------- --------- Ratio of expenses to average net assets 1.0% (d) 1.0% 1.1% 0.9% 0.7% --------- -------- --------- --------- --------- --------- -------- --------- --------- --------- Ratio of net investment income (loss) to average net assets (0.5%)(d) (0.2%) (0.3%) 0.0% 0.4% --------- -------- --------- --------- --------- --------- -------- --------- --------- --------- Portfolio turnover 56.1% (e) 83.9% 117.7% 80.0% 72.0% --------- -------- --------- --------- --------- --------- -------- --------- --------- ---------
- ----------------- (a) On June 14, 1996, RCM Capital Management, L.L.C. became the investment manager (see Note 4). (b) Stock split 12:1 at the close of business on June 17, 1996 (see Note 2). 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) Annualized. (e) Not annualized. The accompanying notes are an integral part of the financial statements. Page 15 RCM SMALL CAP FUND NOTES TO FINANCIAL STATEMENTS JUNE 30, 1996 (UNAUDITED) 1. SIGNIFICANT ACCOUNTING POLICIES RCM Small Cap 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 and expenses are accrued daily. c. FEDERAL INCOME TAXES: It is the policy of the Fund to comply with the requirements for qualification as a "regulated investment company" under the Internal Revenue Code of 1986, as amended (the "Code"). It is also the intention of the Fund to make distributions sufficient to avoid imposition of any excise tax under Section 4982 of the Code. Therefore, no provision has been made for Federal or excise taxes on income and capital gains. Page 16 RCM SMALL CAP FUND NOTES TO FINANCIAL STATEMENTS JUNE 30, 1996 (UNAUDITED) 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) d. 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. CAPITAL SHARES At June 30, 1996, there were 1,000,000,000 shares of the Company's common stock authorized, at $0.0001 par value. Of this amount, 100,000,000 were classified as shares of the Fund; 300,000,000 were classified as shares of RCM Growth Equity Fund; 100,000,000 were classified as shares of RCM International Growth Equity Fund A; and 500,000,000 shares remain unclassified. As of the close of business on June 17, 1996, each outstanding share of capital stock of the Fund was split into 12 shares of capital stock, resulting in a total of 33,476,643 outstanding shares of capital stock of the Fund. Transactions in capital shares for the Fund shown below were retroactively restated to reflect the stock split: CAPITAL SHARE TRANSACTIONS Six months ended June 30, 1996 (Unaudited) ----------------------------------- Shares Amount ------------ ------------ Shares sold 3,564,953 $ 45,891,938 Shares repurchased (5,869,923) (73,720,026) ------------ ------------- Net decrease (2,304,970) $(27,828,088) ============ ============= Year ended December 31, 1995 ------------------------------------ Shares Amount ------------ ------------- Shares sold 6,672,852 $ 75,194,368 Shares issued in connection with reinvestment of distributions 4,215,828 46,437,296 Shares repurchased (18,943,232) (208,960,971) ------------ -------------- Net decrease (8,054,552) $ (87,329,307) ============ ============== At June 30, 1996, five shareholders held more than 5% of the outstanding shares of the Fund individually and 46% in aggregate. Page 17 RCM SMALL CAP FUND NOTES TO FINANCIAL STATEMENTS JUNE 30, 1996 (UNAUDITED) 3. PURCHASES AND SALES OF SECURITIES Purchases and sales proceeds of investment securities by the Fund, excluding short-term securities, aggregated $233,529,566 and $269,866,788, respectively, for the six months ended June 30, 1996. 4. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES On June 14, 1996, all of the outstanding general and limited partnership interests in the Fund's investment manager, RCM Capital Management, a California Limited Partnership ("Old RCM"), were acquired by RCM Capital Management, L.L.C. ("RCM"), a wholly owned subsidiary of Dresdner Bank AG, an international banking organization headquartered in Frankfurt, Germany. Because the transaction may have constituted an "assignment" of the Fund's management agreement with Old RCM under the Investment Company Act of 1940, and thus a termination of such management agreement, the Fund sought and obtained prior approval of a new management agreement from the Company's Board of Directors and from the Fund's stockholders at a special meeting of stockholders of the Company held on May 28, 1996. The terms of the new management agreement are substantially the same as those of the previous management agreement. RCM manages the Fund's investments and provides various administrative services, subject to the authority of the Board of Directors. The Fund paid investment management fees quarterly to RCM at a rate of 1/4 of 1% (approximately 1% on an annual basis) of the average net assets of the Fund during the preceding quarter. For the six months ended June 30, 1996, the Fund recorded investment management fees aggregated $2,176,107. As discussed above, the stockholders approved a new investment management agreement between the Company, on behalf of the Fund, and RCM. Pursuant to this new investment management agreement, the Fund pays investment management fees monthly at an annualized rate of 1.0% of the Fund's average daily net assets beginning July 1, 1996. The RCM Capital Management Profit Sharing Plan, participation in which is limited to employees of RCM, owned 312,910 shares of the Fund on June 30, 1996. Page 18 -----END PRIVACY-ENHANCED MESSAGE-----