-----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, N4cUr0fhFy14VRSmWT9Og1pZwX5xvs1voLCJQniUHvStPZAh5S658BHx4wZsoO2P AWxJLdHjblpERu0l3qTn5Q== 0000912057-97-018857.txt : 19970529 0000912057-97-018857.hdr.sgml : 19970529 ACCESSION NUMBER: 0000912057-97-018857 CONFORMED SUBMISSION TYPE: N-30B-2 PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970528 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: RCM INTERNATIONAL GROWTH EQUITY FUND A 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-30B-2 SEC ACT: 1940 Act SEC FILE NUMBER: 811-02913 FILM NUMBER: 97615052 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 CAPITAL FUNDS INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: RCM GROWTH EQUITY FUND INC DATE OF NAME CHANGE: 19920126 N-30B-2 1 N-30B-2 - -------------------------------------------------------------------------------- LETTER TO SHAREHOLDERS - -------------------------------------------------------------------------------- May 28, 1997 Dear Shareholder, We are pleased to present to shareholders of The Emerging Germany Fund Inc. the Fund's report for the quarter ended March 31, 1997. Low interest rates, improved corporate earnings and increased liquidity inflows propelled the German equity market to record highs in the first quarter 1997. Exports continued to serve as the main engine of growth for the German economy, and helped offset the effects of weak private consumption, high unemployment and ongoing public spending cuts. Our outlook for the German stock market remains positive in view of a favorable interest rate environment, the development of an increasingly energetic equity culture and the overall underrepresentation in the equity markets of domestic and foreign institutional investors. At the end of the first quarter 1997, the Fund had a net asset value of $161.3 million, or $11.52 per share, compared with $149.3 million or $10.66 per share, net of a dividend of $0.02 per share, at year-end 1996. This represented a gain in net asset value of 8.1% in the first quarter, compared with a gain in the DAX100 Index of 9.7% in dollar terms. The market price of the Fund's shares increased by 7.7% to $8.75. At March 31, 1997, the Fund's invested position comprised 99.6% of net assets and consisted of 44 common stocks and five preferred stocks of German companies. We thank our shareholders for their continued interest and support. Sincerely, [SIGNATURE] [SIGNATURE] Rolf Passow William S. Stack Chairman President
1 - -------------------------------------------------------------------------------- MANAGEMENT DISCUSSION - -------------------------------------------------------------------------------- STOCK MARKET In the first quarter of 1997 the German stock market reached record highs. Improved earnings forecasts, low interest rates and liquidity inflows provided strong support. The DAX Index gained more than 18% in DM terms. Steel companies showed the strongest performance, achieving a return of more than 30% in the first quarter, in large part due to the announced merger of the steel production areas of Thyssen and Krupp-Hoesch. The automobile sector also outperformed the market with a return of 29%. Companies in the technology, retail, finance, construction and insurance industries also outperformed the market, while the utility, chemical and machinery industries underperformed. We believe that the prospects for the German equity market remain favorable. Low interest rates are an incentive and major domestic and foreign investors are still underrepresented in the German equity market. The Spezialfonds, tax-driven investment vehicles for German institutions and insurance companies, exhibit a growing tendency to switch out of bonds into stocks. Moreover, Spezialfonds are enjoying a brisk inflow of funds, as are equity funds open to the public. ECONOMY The release of economic data on GDP growth and its component parts for the fourth quarter of 1996 made clear the relative weaknesses and strengths of the German economy. Weak areas include private consumption, which was hit by a combination of low wage increases, high social security contributions and high unemployment. Also weak was the construction sector, which was hit by cold weather, the expiration of several tax subsidies and lower public sector investment in eastern Germany. In addition, government spending fell 0.6% as a result of Germany's drive to meet the Maastricht criteria. The strongest growth stimulus came from exports, which rose nearly 5% in the fourth quarter of 1996. Available indicators for the current year support our view that growth will continue to be driven by exports. Nonetheless, we believe that economic growth may be held back by continuing weak consumer demand given the high unemployment rate of more than 11% and continuing spending cuts in the public sector in order to meet the Maastricht deficit target. Although the increase in German prices accelerated temporarily in the beginning of the year due to weather-related factors (higher prices for food and heating oil), the inflation rate is generally expected to remain at last year's level of around 1.5%. Finally, in the present economic environment we believe there is little reason for the Bundesbank to change its interest rate policy. In the eyes of the Bundesbank, the recent weakening of the DM has already provided sufficient growth stimulus. Further monetary easing would also harbor the risk of accelerating currency depreciation and, with inflation likely to remain at its current low levels and only moderate growth expectations for the overall economy, there is even less reason to expect a rate hike. PERFORMANCE REVIEW In the first quarter of 1997, the Fund's net asset value gained 8.1% compared with a rise in dollar terms of 9.5% in the DAX, 9.7% in the DAX100 and 11.4% in the MSCI Germany Index. The market price of the Fund's shares increased 7.7% to $8.75. One of the main reasons for the relative underperformance in the first quarter was the extraordinary rise of Allianz following a long period of underperformance. Allianz's share price gained almost 10% in 2 less than one week, and helped raise the whole insurance industry in which the Fund had been underweighted. Chemicals showed a relative underperformance in the first quarter after a very strong 1996, and the Fund's exposure to the chemical sector is substantial. In addition, the Fund had a limited exposure to a number of companies that performed well in the first quarter 1997. They included several small companies with a history of weak performance which rallied in the first quarter from their very low levels. Sixt, a car rental company, was the best performer in the Fund's portfolio with a gain of approximately 80% in the first quarter. Volkswagen was also an excellent performer with a return of more than 45%. Disappointing, by contrast, was Hoechst which, after rising by 116% in 1996, suffered in the first quarter of 1997. Against the economic background of strong export growth, particularly in the auto industry, the Fund continued to increase its exposure to the automobile industry by increasing its positions in Volkswagen and Daimler and by acquiring new positions in BMW and Kolbenschmidt, a manufacturer of motor vehicle parts. Daimler and Volkswagen were among the largest portfolio holdings at the end of the first quarter and together represented 14% of the Fund's net assets. The largest industry class in the Fund's portfolio is chemicals. In view of continuing cost cutting and corporate restructuring, our outlook for the chemical industry remains positive. Nevertheless, we have slightly pared down our chemicals exposure in the wake of a very strong 1996. We also reduced our weighting in the health care sector by trimming the position in Altana and by selling the positions in Schering and Gehe. The Fund remains slightly overweighted in banks. We believe that there is a high probability of consolidation among banks due to the industry's need to cut costs and enhance its global competitiveness. In the insurance industry we increased our positions in Allianz and Munchener Ruckversicherung. In transportation services we increased our weighting in Sixt and eliminated the position in Lufthansa. In industrial equipment, we sold the position in Buderus. In the utilities industry, we reduced the weighting in Rheinelektra. Our strategy remains focused on export-oriented companies. In this respect we acquired Vossloh, a manufacturer of rail-track components and machining units for railway wheel sets and a service provider to the rail sector. More than 70% of Vossloh's sales in the transport technology division is generated outside Germany. Companies with a primarily domestic emphasis are minimally represented in the portfolio. 3 Stocks of the following companies represented the Fund's ten largest positions at March 31, 1997:
MARKET VALUE PERCENT OF COMPANY IN USD NET ASSETS - -------------------------------------------------- ------------ ---------- Daimler-Benz AG................................... $ 12,797,698 7.9% Allianz AG Holding................................ 9,811,578 6.1 Volkswagen AG..................................... 9,674,421 6.0 Bayer AG.......................................... 9,362,633 5.8 Veba AG........................................... 8,494,724 5.3 Hoechst AG........................................ 8,100,492 5.0 SAP AG............................................ 7,657,393 4.7 BASF AG........................................... 6,610,505 4.1 Deutsche Bank AG.................................. 6,474,697 4.0 Bayerische Hypotheken- und Wechsel-Bank AG........ 6,117,340 3.8 ------------ --- $ 85,101,481 52.7% ------------ --- ------------ ---
PERCENT OF NET ASSETS BY INDUSTRY
PERCENT OF INDUSTRY CLASS NET ASSETS - ---------------------------------------------------------------------------------------------------- --------------- Automotive Related.................................................................................. 16.6% Banking............................................................................................. 15.0 Building and Construction........................................................................... 2.4 Chemicals and Textiles.............................................................................. 17.3 Communication Services.............................................................................. 2.0 Drugs and Hospital Supplies......................................................................... 2.6 Electrical Equipment................................................................................ 0.4 Electronics and New Technology...................................................................... 0.4 General Retail...................................................................................... 1.2 Household/Related Non-Durables...................................................................... 3.7 Industrial Equipment................................................................................ 6.6 Insurance........................................................................................... 11.4 Media Services...................................................................................... 0.6 Other Consumer Durables............................................................................. 0.9 Raw and Basic Materials............................................................................. 4.1 Technology Services................................................................................. 4.7 Transportation Services............................................................................. 0.9 Utilities........................................................................................... 8.8 --- Percent of Net Assets............................................................................. 99.6% --- ---
OTHER MATTERS The Fund's 1996 Annual Report erroneously listed the Fund's portfolio turnover rate at 90% for the fiscal year ended December 31, 1996. The rate for such period was in fact 51%. In addition, the shareholder proposal addressing the discount to net asset value and submitted for shareholder approval at the Fund's 1997 Annual Meeting did not carry. Of the Fund's 7,332,143 shares voting on the proposal, 2,708,991 shares were cast for, 3,607,076 shares were cast against, and 1,016,076 shares abstained from voting on the proposal. 4 - ------------------------------------------------- THE EMERGING GERMANY FUND INC. INVESTMENTS IN SECURITIES AND NET ASSETS MARCH 31, 1997 (UNAUDITED)
- ---------------------------------------------------------------------------- SHARES EQUITY INVESTMENTS MARKET VALUE - ---------------------------------------------------------------------------- CONSUMER DURABLES SECTOR--17.5% AUTOMOTIVE RELATED--16.6% 1,500 Bayerische Motoren Werke AG............. $ 1,232,972 100,000 Continental AG **....................... 2,224,487 160,000 Daimler-Benz AG *....................... 12,797,698 50,000 Kolbenschmidt AG *...................... 869,409 17,500 Volkswagen AG........................... 9,674,421 ------------------- 26,798,987 ------------------- OTHER CONSUMER DURABLES--0.9% 5,000 Friedrich Grohe AG Pfd.................. 1,549,946 ------------------- CONSUMER NON-DURABLES SECTOR--4.9% GENERAL RETAIL--1.2% 50,000 Douglas Holding AG...................... 1,855,738 ------------------- HOUSEHOLD/RELATED NON-DURABLES--3.7% 15,000 Adidas AG............................... 1,704,341 1,500 Hugo Boss AG Pfd. **.................... 2,050,606 4,000 Wella AG................................ 2,194,508 ------------------- 5,949,455 ------------------- CYCLICAL/CAPITAL GOODS SECTOR--31.3% BUILDING AND CONSTRUCTION--2.4% 7,000 Dyckerhoff AG Pfd. **................... 2,530,879 30,000 Industrieverwaltungs-Gesellschaft AG.... 1,039,693 7,500 Industrieverwaltungs-Gesellschaft AG New *..................................... 247,332 ------------------- 3,817,904 ------------------- CHEMICALS AND TEXTILES--17.3% 175,000 BASF AG................................. 6,610,505 225,000 Bayer AG................................ 9,362,633 15,000 Henkel KGaA Pfd......................... 827,437 15,724 Henkel KGaA *........................... 802,322 200,000 Hoechst AG **........................... 8,100,492 70,000 SKW Trostberg AG **..................... 2,245,473 ------------------- 27,948,862 ------------------- INDUSTRIAL EQUIPMENT--6.6% 47,500 Durr AG................................. 1,780,040 5,000 IWKA AG................................. 1,217,172 2,500 Linde AG................................ 1,761,302 8,500 Mannesmann AG........................... 3,251,589 50,000 Siemens AG.............................. 2,695,167 ------------------- 10,705,270 ------------------- - ---------------------------------------------------------------------------- SHARES EQUITY INVESTMENTS MARKET VALUE - ---------------------------------------------------------------------------- RAW AND BASIC MATERIALS--4.1% 2,500 Degussa AG.............................. $ 1,067,274 7,500 Fried, Krupp AG Hoesch-Krupp **......... 1,461,506 30,000 SGL Carbon AG........................... 4,119,199 ------------------- 6,647,979 ------------------- TRANSPORTATION SERVICES--0.9% 1,920 Sixt AG................................. 1,151,217 500 Sixt AG Pfd............................. 299,796 ------------------- 1,451,013 ------------------- HEALTHCARE SECTOR--2.6% DRUGS AND HOSPITAL SUPPLIES--2.6% 3,000 Altana AG............................... 2,403,166 22,500 Schwarz Pharma AG....................... 1,767,298 ------------------- 4,170,464 ------------------- INTEREST-SENSITIVE SECTOR--35.2% BANKING--15.0% 175,000 Bayerische Hypotheken- und Wechsel-Bank AG.................................... 6,117,340 120,000 Bayerische Vereinsbank AG **............ 4,971,819 125,000 BHF-Bank AG **.......................... 3,259,534 50,000 Commerzbank AG.......................... 1,439,021 115,000 Deutsche Bank AG........................ 6,474,697 35,000 DT Pfandbrief- und Hypothekenbank AG.... 1,899,209 ------------------- 24,161,620 ------------------- INSURANCE--11.4% 4,750 Allianz AG Holding...................... 9,811,578 17,500 CKAG Colonia Konzern AG................. 1,647,380 3,000 DBV Holding AG.......................... 1,077,467 2,250 Munchener Ruckversicherungs-Gesellschaft AG.................................... 5,855,019 ------------------- 18,391,444 ------------------- UTILITIES--8.8% 1,000 Rheinelektra AG......................... 737,499 110,000 RWE AG.................................. 4,910,361 150,000 Veba AG................................. 8,494,724 ------------------- 14,142,584 ------------------- TELEMEDIA/SERVICES SECTOR--2.6% COMMUNICATION SERVICES--2.0% 150,000 Deutsche Telekom AG *................... 3,281,250 ------------------- MEDIA SERVICES--0.6% 1,250 Axel Springer Verlag AG................. 929,368 -------------------
5
- ---------------------------------------------------------------------------- SHARES EQUITY INVESTMENTS MARKET VALUE - ---------------------------------------------------------------------------- TECHNOLOGY SECTOR--5.5% ELECTRICAL EQUIPMENT--0.4% 15,000 Vossloh AG.............................. $ 611,584 ------------------- ELECTRONICS AND NEW TECHNOLOGY--0.4% 15,000 eff-eff Fritz Fuss GmbH & Co. KGaA.................................. 647,560 ------------------- TECHNOLOGY SERVICES--4.7% 45,000 SAP AG.................................. 7,657,393 ------------------- Total Equity Investments (Cost $122,477,976)-- 99.6%................................. 160,718,421 Other Assets Less Liabilities--0.4%..... 627,519 ------------------- Net Assets--100.00%..................... $ 161,345,940 ------------------- -------------------
- ---------------- Percentages are of net assets. * Non-income producing security. ** Part of this security is on loan. 6 THE EMERGING GERMANY FUND INC. - -------------------------------------------------------------------------------- BOARD OF DIRECTORS Rolf Passow, Chairman* Robert J. Birnbaum Carroll Brown Theodore J. Coburn James E. Dowd** Alfred W. Fiore George N. Fugelsang* Siegfried A. Kessler** Gottfried W. Perbix** Jacob Saliba * Interested person within the meaning of the Investment Company Act of 1940 ** Member, Audit Committee - -------------------------------------------------------------------------------- OFFICERS William S. Stack, President Barbel Lenz, Vice President Alexandra Simou, Secretary Caroline M. Hirst, Treasurer and Assistant Secretary Judith W. O'Connell, Assistant Treasurer Jennie M. Wong, Assistant Treasurer - -------------------------------------------------------------------------------- INVESTMENT MANAGER RCM Capital Management, L.L.C. Four Embarcadero Center San Francisco, California 94111 - -------------------------------------------------------------------------------- CUSTODIAN State Street Bank and Trust Company 225 Franklin Street Boston, Massachusetts 02110 DIVIDEND PAYING AGENT TRANSFER AGENT AND REGISTRAR State Street Bank and Trust Company P.O. Box 8209 Boston, Massachusetts 02266-8209 INDEPENDENT ACCOUNTANTS Coopers & Lybrand L.L.P. One Post Office Square Boston, Massachusetts 02109 LEGAL COUNSEL Shaw, Pittman, Potts & Trowbridge 2300 N Street, N.W. Washington, D.C. 20037 THE EMERGING GERMANY FUND INC. SUMMARY OF GENERAL INFORMATION - --------------------------------------- SHAREHOLDER INFORMATION Daily market prices for the Fund's shares are published in the New York Exchange Composite Transaction section of THE WALL STREET JOURNAL (designation "EmergGerFd" under the letter "G"). The Fund's NYSE trading symbol is "FRG." Weekly comparative net asset value (NAV) and market price information about the Fund is published each Monday in THE WALL STREET JOURNAL, each Sunday in THE NEW YORK TIMES, as well as in BARRON'S and other newspapers in a table called "Closed End Funds." Additional information about the Fund is available by calling 1-800-356-6122. DIVIDEND REINVESTMENT PLAN Through the Fund's voluntary Dividend Reinvestment Plan, shareholders may elect to receive dividends and capital gains distributions in the form of additional shares of the Fund. A brochure describing the Plan is available from the Plan Agent, State Street Bank and Trust Company, by calling 1-800-426-5523. This report is furnished to shareholders of The Emerging Germany Fund Inc. for their information. This is not a prospectus, circular or representation intended for use in the purchase or sale of shares of the Fund or any securities mentioned in this report. All references in this report to "dollars" or "$" are to United States dollars. Comparisons between changes in the Fund's net asset value per share and changes in the DAX100 Index should be considered in light of the Fund's investment objective and policies, the characteristics and quality of the Fund's investments, the size of the Fund and variations in the Deutsche Mark/ dollar exchange rate. [LOGO] THE EMERGING GERMANY FUND INC. QUARTERLY REPORT MARCH 31, 1997 -----END PRIVACY-ENHANCED MESSAGE-----