-----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, Cs0ZVRU1XsP8CgM/Pf3+l6yuRcsMAQY4HUN7W9c4WxJuEGzgLKnBxoD3yVYjOZ38 DYD6Lb3wtO9KsW4XQX8kaQ== 0001047469-98-008165.txt : 19980304 0001047469-98-008165.hdr.sgml : 19980304 ACCESSION NUMBER: 0001047469-98-008165 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980302 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: RCM CAPITAL FUNDS INC /MD/ 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: SEC FILE NUMBER: 811-02913 FILM NUMBER: 98553956 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-30D 1 N-30D Dresdner RCM Capital Funds Annual December 31, Report 1997
---------------------------------------------------------------------- Dresdner RCM Global Funds ---------------------------------------------------------------------- Dresdner RCM Growth Equity Fund Management's Performance Review The U.S. stock market in 1997 provided a roller coaster ride for investors in midcap equities. After plunging at the end of the first quarter, the Russell Midcap Index (the "Index") rose powerfully from April through September, then dropped precipitously in October, as a currency crisis in Asia unfolded. As in 1996, the major midcap benchmarks underperformed large cap indices like the Dow Jones Industrial Average and the Standard & Poor's 500 Composite Index. In 1997, however, growth style components of the midcap universe, represented by the Russell Midcap Growth Index, lagged stocks in the Russell Midcap Value Index by an unusual 11.83%. For the 12 months ended December 31, 1997, the Dresdner RCM Growth Equity Fund (the "Fund") earned a total return of 17.50%. With an excellent performance in the second and third quarters, the Fund outperformed its primary benchmark, the Russell Midcap Index, during that time. Due to the extremely difficult investment environment for midcap growth stocks in the first and fourth quarters, however, the Fund finished 11.53% behind the Index, which returned 29.03%. Although midcap stocks had lagged in 1996, we were optimistic going into 1997 that the relative performance of this sector would improve. Seasonal trends traditionally favor so-called "secondary cap" market sectors early in a new year. Meanwhile, the valuations of midcap stocks had become attractive compared to both their historical averages and the valuations of large cap issues. We hoped that these factors, plus strong mutual fund cash flows, would help midcap stocks catch up with very large cap equities early in 1997. Given this environment, and our commitment to quality growth investments, the Fund entered 1997 overweighted in high-growth areas like technology, business services, and health care relative to the Index. The Fund maintained some exposure to banking and financial services shares, but significantly underweighted these areas versus the Index. As growth managers, we typically maintain modest exposures to sectors sensitive to interest rates and do not invest at all in utilities. Unfortunately, the first-quarter catch-up we expected for midcap stocks did not materialize. Instead, market leadership continued to narrow, concentrating in stocks of very large cap multinational firms. By late February, a more pronounced decline in secondary-cap issues was evident -- particularly in the technology sector. When interest rate jitters sparked a market correction in February and March, midcaps suffered sharp absolute declines and lost further ground against large cap shares, especially issues representing higher growth and P/E multiples. Because the Fund was oriented toward growth stocks and overweighted in high-growth groups like technology, it trailed the Index by 7.62% for the quarter. With the easing of interest rate fears in mid-April, large cap stocks reached a major bottom, and midcap stocks soon followed. The valuation and performance disparities that occurred in the first quarter set up a powerful midcap rally in May. Although penalized by its growth orientation in the first quarter, the Fund was well positioned to benefit from this rally -- as the extremely compressed multiples of quality issues expanded, and technology stocks reemerged as market leaders. A favorable environment for stocks of all capitalizations persisted through the third quarter. In what came to be called a "Goldilocks" economic climate, inflation fell, growth remained healthy, but did not overheat, and investors became less worried that the Federal Reserve would raise interest rates. Over the middle quarters of 1997, the broad U.S. equity market (represented by the S&P 500 Index) gained 26.26%, the Russell Midcap Index gained 28.64%, and the Fund returned 34.47%. Overweighted positions in technology and other high-growth groups contributed significantly to the Fund's outperformance. In the fourth quarter of 1997, the outperformance by midcap stocks was interrupted by a severe currency crisis in Asia that brought turmoil to equity markets worldwide. As is typical in such cases, U.S. financial markets exhibited a pronounced flight to liquidity and quality. Faced with increased uncertainty and volatility, investors flocked to fixed-income securities and large cap equities in defensive sectors. While growth sectors of all capitalizations meaningfully underperformed their value counterparts, the effect was most extreme in the mid- and small-cap sectors. During the quarter the Russell Midcap Growth Index trailed the Russell Midcap Value Index by 6.82%. The technology sector, in particular, was decimated by concerns about the near- and long-term impacts of slowing Asian growth and intensified competitive pressures. With overweighted positions in growth stocks and the electronics/ Page 1 Dresdner RCM Growth Equity Fund Management's Performance Review new technology group -- and no exposure to the strongly performing utilities area -- the Fund lagged the Russell Midcap Index by 5.68%. For 1997 as a whole, stock selection in the drug and hospital supplies group made the largest positive contribution to Fund performance against the Index. Fund holdings gained an average 25%, versus a gain of approximately 18% for drug and hospital supplies stocks in the Index. Primary holdings in this sector included Sofamor Danek Group (+114%) and Guidant (+119%). Stock picking in the technology-services and banking groups also boosted Fund performance against the Index. Several industry strategies further enhanced relative returns. These included a 4% weighting in the strongly performing transportation-services group, versus a 2% weighting in the Index. The Fund also benefited from an underweighting in the lagging energy and raw/basic materials groups. During the year an overweighting in the poorly performing electronics/new technology group hurt Fund returns relative to the Index. Within the Index, this group underperformed by more than 28%, as semiconductors and semiconductor-related capital-equipment stocks bore the brunt of the fourth quarter's violent technology sell-off. The Fund's underweight positions in insurance, general finance, and banking stocks also hurt its performance against the Index. Over the year we increased Fund exposure to these areas, and the Fund was actually overweighted versus the Russell Midcap Growth Index. The Fund's average cash position of about 4.9% had a slight negative impact on relative performance during the year. Despite the fourth-quarter turbulence, 1997 became the third consecutive year of exceptional absolute returns for U.S. stocks. Going into 1998, domestic equity investors are preoccupied with assessing the potential fall-out from the Asian crisis on the earnings of U.S. companies. We believe that the bottom-up estimates for U.S. corporate profits may undergo downward revisions in the early months of the year. Although such revisions may dampen stock returns early on, we believe that quality midcap stocks with superior relative growth will be well positioned as earnings growth slows for stocks in the S&P 500. We have now implemented the structural and management changes in the Fund that we previously disclosed to clients. We expect the increased investment concentration will be apparent in the Fund's 1998 performance. Page 2 Dresdner RCM Growth Equity Fund Performance Summary EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Fund Russell Midcap Index 1980 $11,210 $11,777 $10,792 $11,516 $9,599 $9,996 $10,028 $10,641 $10,856 $11,467 $11,315 $12,024 $12,980 $13,034 $13,656 $13,375 $14,396 $13,821 $14,878 $13,966 $15,935 $15,074 $15,665 $14,784 1981 $15,304 $14,439 $15,725 $14,694 $17,588 $15,843 $18,134 $15,918 $19,279 $16,306 $18,560 $16,008 $18,247 $15,809 $17,371 $14,908 $16,587 $13,951 $18,157 $14,914 $18,503 $15,518 $18,211 $15,139 1982 $17,929 $14,583 $17,527 $13,964 $17,476 $13,825 $18,682 $14,486 $18,511 $13,970 $18,441 $13,595 $18,512 $13,274 $20,047 $14,871 $20,666 $15,293 $23,233 $17,338 $25,235 $18,395 $25,710 $18,660 1983 $27,172 $19,319 $28,967 $19,987 $30,108 $20,691 $32,700 $21,984 $34,645 $22,903 $36,064 $23,737 $34,391 $22,991 $33,610 $22,846 $34,935 $23,486 $33,413 $22,575 $34,930 $23,541 $34,348 $23,105 1984 $32,764 $22,449 $31,089 $21,235 $31,709 $21,587 $31,839 $21,350 $30,674 $20,146 $32,051 $20,774 $31,196 $20,166 $34,191 $22,684 $33,648 $22,791 $33,611 $22,880 $32,993 $22,784 $33,496 $23,435 1985 $37,254 $25,659 $38,042 $26,119 $37,399 $25,970 $36,747 $25,894 $39,165 $27,365 $39,965 $28,030 $40,928 $27,994 $40,385 $27,876 $38,429 $26,510 $40,118 $27,883 $42,578 $29,810 $44,235 $30,937 1986 $45,046 $31,633 $48,307 $34,205 $49,783 $36,003 $50,541 $35,845 $52,554 $37,701 $51,571 $38,216 $47,374 $35,687 $49,140 $38,219 $45,601 $35,511 $48,335 $37,364 $48,946 $37,640 $48,361 $36,569 1987 $54,951 $41,072 $59,189 $43,530 $60,968 $43,942 $60,390 $42,842 $62,092 $42,989 $64,592 $44,737 $67,740 $46,653 $70,486 $48,302 $68,483 $47,379 $49,455 $35,710 $47,006 $33,727 $53,665 $36,652 1988 $53,930 $38,355 $58,780 $41,072 $60,415 $41,126 $61,386 $41,380 $60,234 $41,283 $64,720 $44,110 $63,335 $43,225 $61,789 $42,264 $64,192 $43,702 $63,486 $43,889 $62,127 $42,836 $64,859 $43,910 1989 $68,192 $46,537 $67,612 $46,427 $68,994 $47,190 $73,125 $49,465 $77,254 $51,695 $74,440 $51,503 $79,915 $55,093 $83,387 $56,935 $83,428 $56,413 $79,787 $53,752 $80,873 $54,489 $82,292 $55,446 1990 $75,120 $50,999 $77,825 $52,033 $80,029 $53,300 $78,163 $51,011 $86,194 $55,632 $87,034 $55,271 $84,425 $53,628 $75,868 $47,860 $71,033 $44,312 $69,568 $42,913 $75,112 $47,046 $78,902 $49,072 1991 $85,003 $52,398 $92,631 $56,764 $97,028 $59,119 $96,459 $59,474 $101,948 $62,298 $96,909 $59,427 $102,335 $62,340 $105,602 $64,204 $105,329 $63,830 $108,557 $65,138 $104,724 $62,445 $116,960 $69,442 1992 $119,326 $70,748 $120,948 $72,373 $115,847 $70,524 $113,545 $71,075 $114,312 $71,534 $108,991 $70,374 $112,618 $73,316 $110,272 $71,628 $113,146 $73,113 $117,301 $74,902 $122,190 $78,677 $125,186 $80,789 1993 $125,594 $82,405 $121,886 $82,496 $124,822 $85,179 $121,150 $82,922 $126,171 $85,555 $126,630 $86,522 $125,543 $86,939 $131,747 $90,806 $134,398 $91,153 $135,795 $91,229 $131,931 $89,113 $138,604 $92,341 1994 $143,687 $94,889 $142,568 $93,598 $134,622 $89,611 $135,889 $90,226 $134,603 $90,349 $130,975 $87,673 $132,730 $90,682 $141,423 $94,981 $140,120 $92,660 $142,420 $93,369 $137,052 $89,250 $139,650 $90,409 1995 $140,145 $92,266 $146,023 $97,042 $151,805 $99,819 $152,385 $101,324 $155,053 $104,654 $162,810 $108,171 $174,821 $113,423 $177,454 $115,160 $183,158 $117,762 $179,789 $115,128 $185,416 $120,853 $187,880 $121,558 1996 $190,835 $124,137 $200,326 $127,052 $203,882 $128,890 $212,394 $132,542 $215,917 $134,544 $206,821 $132,526 $188,917 $124,324 $198,795 $130,243 $211,760 $136,676 $211,966 $137,772 $222,461 $146,165 $223,710 $144,673 1997 $229,653 $150,085 $218,817 $149,858 $204,835 $143,388 $209,029 $147,059 $236,993 $157,788 $243,285 $162,951 $260,762 $176,549 $257,966 $174,642 $275,443 $184,614 $259,015 $177,433 $257,966 $181,656 $262,848 $186,669
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. The chart above shows the performance of the Dresdner RCM Growth Equity Fund since the Fund's inception versus the Russell Midcap Index.(a) The chart represents a cumulative return of 2,528.48%(b) for the Fund. The average annual total return from the Fund's inception was 19.72%.(b)(c) The chart assumes a hypothetical $10,000 initial investment in the Fund and reflects all Fund expenses. Average Annual Total Returns(b) December 31, 1997
Life of 1 Year 5 Year 10 Year Fund(c) 17.50% 15.99% 17.22% 19.72%
The data above represent past performance of the Fund and may not be indicative of future performance. The investment return and principal value of an investment in the Fund will fluctuate, so that shares, when redeemed, may be worth more or less than their original cost. - -------------------------------- (a) The Russell Midcap Index is composed of the smallest 800 companies in the Russell 1000 Index. The Russell 1000 Index is made up of the 1,000 largest companies in the Russell 3000 Index, which is composed of 3,000 large U.S. companies by market capitalization and represents approximately 98% of the U.S. equity market. (b) Returns assume reinvestment of all dividends and capital gains distributions at net asset value. (c) The Fund began operations on November 6, 1979. Page 3 Dresdner RCM Growth Equity Fund Investments in Securities and Net Assets December 31, 1997
% of Market Shares Equity Investments Net Assets Value - ------------------------------------------------------------------------------------------------------ CONSUMER DURABLES SECTOR 3.15% AUTOMOTIVE RELATED 2.69% 304,000 Lear Corp. * $ 14,440,000 270,000 Tower Automotive Inc. * 11,356,875 ------------- 25,796,875 ------------- CONSUMER DURABLES 0.46% 136,000 Sola International Inc. * 4,420,000 CONSUMER NON-DURABLES SECTOR 12.59% BEVERAGE/TOBACCO 0.42% 83,000 Robert Mondavi Corp. * 4,046,250 FOOD/FOOD PROCESSING 0.81% 131,000 Suiza Foods Corp. * 7,802,688 HOUSEHOLD/RELATED NONDURABLES 0.43% 118,000 Revlon Inc. Class A * 4,166,875 LEISURE TIME PRODUCTS/SERVICES 5.43% 287,000 CKE Restaurants Inc. 12,089,875 393,000 Hasbro Inc. 12,379,500 575,000 Host Marriott Corp. * 11,284,375 75,000 Interstate Hotels Co. * 2,629,688 328,500 Promus Hotel Corp. * 13,797,000 ------------- 52,180,438 ------------- RETAIL TRADE 5.50% 407,000 Bed Bath & Beyond Inc. * 15,669,500 204,000 Circuit City Stores Inc. 7,254,750 105,000 Consolidated Stores Corp. * 4,613,438 348,200 Family Dollar Stores Inc. 10,206,613 76,000 Hannaford Bros. Co. 3,301,250 378,000 Office Depot Inc. * 9,048,375 119,000 Zale Corp. * 2,737,000 ------------- 52,830,926 ------------- CYCLICAL/CAPITAL GOODS SECTOR 13.22% AEROSPACE/DEFENSE 1.87% 223,500 Sundstrand Corp. 11,258,813 340,000 Wyman-Gordon Co. * 6,672,500 ------------- 17,931,313 ------------- BUILDING/CONSTRUCTION 0.34% 277,000 Apogee Enterprises Inc. 3,289,375
The accompanying notes are an integral part of the financial statements. Page 4 Dresdner RCM Growth Equity Fund Investments in Securities and Net Assets December 31, 1997
% of Market Shares Equity Investments Net Assets Value - ------------------------------------------------------------------------------------------------------ CHEMICALS/TEXTILES 1.82% 210,000 Cytec Industries Inc. * $ 9,856,875 170,000 Praxair Inc. 7,650,000 ------------- 17,506,875 ------------- ELECTRICAL EQUIPMENT 4.05% 45,000 W. W. Grainger Inc. 4,373,438 223,000 Honeywell Inc. 15,275,500 242,000 Hubbell Inc. Class B 11,933,625 170,000 Raychem Corp. 7,320,625 ------------- 38,903,188 ------------- INDUSTRIAL EQUIPMENT 1.40% 260,000 Kennametal Inc. 13,471,250 TRANSPORTATION SERVICES 3.74% 300,900 Air Express International Corp. 9,177,450 440,000 Swift Transportation Co. Inc. * 14,245,000 611,100 Werner Enterprises Inc. 12,527,550 ------------- 35,950,000 ------------- ENERGY SECTOR 1.59% ENERGY 1.59% 115,000 Camco International Inc. 7,324,063 305,000 Forcenergy Gas Exploration Inc. * 7,987,188 ------------- 15,311,251 ------------- HEALTH CARE SECTOR 16.85% DRUGS & HOSPITAL SUPPLIES 5.68% 201,300 Alza Corp. * 6,403,856 106,000 Boston Scientific Corp. * 4,862,750 386,000 Centocor Inc. * 12,834,500 44,328 Guidant Corp. 2,759,418 82,400 Orion Yhtyma OY Series B * 2,178,980 377,000 Sofamor/Danek Group Inc. * 24,528,563 44,400 VISX Inc. * 982,350 ------------- 54,550,417 ------------- HEALTH CARE SERVICES 11.17% 67,600 AmeriSource Health Corp. * 3,937,700 320,050 Bergen Brunswig Corp. 13,482,106 46,000 Cardinal Health Inc. 3,455,750 276,062 Concentra Managed Care Inc. * 9,317,093 248,400 HBO & Co. 11,923,200 457,000 Healthsouth Corp. * 12,681,750 66,000 Health Care & Retirement Corp. * 2,656,500
The accompanying notes are an integral part of the financial statements. Page 5 Dresdner RCM Growth Equity Fund Investments in Securities and Net Assets December 31, 1997
% of Market Shares Equity Investments Net Assets Value - ------------------------------------------------------------------------------------------------------ HEALTH CARE SERVICES (Continued) 150,000 Orthodontic Centers of America Inc. * $ 2,493,750 746,000 PhyCor Inc. * 20,142,000 503,800 Tenet Healthcare Corp. * 16,688,375 119,000 Universal Health Services Inc. Class B * 5,994,625 186,200 Vencor Inc. * 4,550,263 ------------- 107,323,112 ------------- INTEREST SENSITIVE SECTOR 12.00% BANKING 8.35% 21,300 CCB Financial Corp. 2,289,750 343,400 City National Corp. 12,684,338 100,000 Community First Bankshares Inc. 5,325,000 114,650 Compass Bancshares Inc. 5,015,938 13,200 First American Corp. of Tennessee 656,700 124,200 First Security Corp. 5,200,875 106,700 Firstar Corp. 4,528,081 542,000 North Fork Bancorporation Inc. 18,190,875 156,600 Southtrust Corp. 9,934,313 125,300 WestAmerica Bancorporation 12,811,925 80,000 Zions Bancorp 3,630,000 ------------- 80,267,795 ------------- GENERAL FINANCE 3.12% 356,000 AMRESCO Inc. * 10,546,500 72,778 Charter One Financial Inc. 4,594,111 105,000 Golden State Bancorp Inc. * 3,924,375 322,300 TCF Financial Corp. 10,938,056 ------------- 30,003,042 ------------- INSURANCE 0.53% 70,700 Transatlantic Holdings Inc. 5,055,050 TELEMEDIA/SERVICES SECTOR 13.12% BUSINESS SERVICES 2.41% 358,200 The Registry Inc. * 16,432,425 369,000 Select Appointments Holdings PLC (Sponsored ADR) 6,734,250 ------------- 23,166,675 ------------- COMMUNICATIONS SERVICES 8.43% 140,000 Cable & Wireless Communications PLC (ADR) * 3,412,500 344,000 ICG Communications Inc. * 9,374,000 176,000 Intermedia Communications of Florida * 10,692,000 315,000 LCI International Inc. * 9,686,250 307,000 McLeod Inc. * 9,824,000 430,000 Nextel Communications Inc. * 11,180,000
The accompanying notes are an integral part of the financial statements. Page 6 Dresdner RCM Growth Equity Fund Investments in Securities and Net Assets December 31, 1997
% of Market Shares Equity Investments Net Assets Value - ------------------------------------------------------------------------------------------------------ COMMUNICATIONS SERVICES (Continued) 375,000 SITEL Corp. * $ 3,421,875 105,000 Smartalk Teleservices Inc. * 2,388,750 260,300 Snyder Communications Inc. * 9,500,950 577,000 Tel-Save Holdings Inc. * 11,467,875 ------------- 80,948,200 ------------- MEDIA 2.28% 105,000 Gartner Group Inc. Class A * 3,911,250 175,000 Regal Cinemas Inc. * 4,878,125 248,000 Sylvan Learning Systems Inc. * 9,672,000 135,000 Central European Media Entertainment Ltd. Class A * 3,408,750 ------------- 21,870,125 ------------- TECHNOLOGY SECTOR 24.46% COMPUTERS/OFFICE EQUIPMENT 0.17% 59,100 E M C Corp. * 1,621,556 ELECTRONICS/NEW TECHNOLOGY 8.44% 309,000 Advanced Fibre Communication * 8,999,625 247,002 Analog Devices Inc. * 6,838,868 350,000 Andrew Corp. 8,400,000 70,000 Hadco Corp. * 3,167,500 410,000 Maxim Integrated Products Inc. * 14,145,000 80,600 Microchip Technology Inc. * 2,418,000 238,300 Molex Inc. Class A 6,851,125 266,000 Network Appliance Inc. * 9,443,000 269,400 Newbridge Networks Corp. * 9,395,325 223,100 Uniphase Corp. * 9,230,763 34,000 ASE Test Limited * 2,222,750 ------------- 81,111,956 ------------- TECHNOLOGY SERVICES 15.85% 171,800 America Online Inc. * 15,322,413 70,000 Aspen Technologies Inc. * 2,397,500 49,800 CBT Group PLC (Sponsored ADR) * 4,089,825 138,500 Cambridge Technology Partners (Mass.) Inc. * 5,765,063 165,000 Ceridian Corp. * 7,559,063 148,000 Citrix Systems Inc. * 11,248,000 124,000 Computer Sciences Corp. * 10,354,000 88,000 Electronics Arts Inc. * 3,327,500 207,800 I2 Technologies Inc. * 10,961,450 130,000 National Data Corp. 4,696,250 142,000 Network Associates Inc. * 7,508,250 292,000 PeopleSoft Inc. * 11,388,000 313,900 Saville Systems PLC (Sponsored ADR) * 13,026,850 260,425 Sterling Commerce Inc. * 10,010,086 58,900 Vantive Corp. * 1,487,225
The accompanying notes are an integral part of the financial statements. Page 7 Dresdner RCM Growth Equity Fund Investments in Securities and Net Assets December 31, 1997
% of Market Shares Equity Investments Net Assets Value - ------------------------------------------------------------------------------------------------------ TECHNOLOGY SERVICES (Continued) 251,700 VERITAS Software Co. * $ 12,836,700 255,000 Visio Corp. * 9,785,625 155,600 Wind River Systems Inc. * 6,175,375 63,350 Yahoo Inc. * 4,386,980 ------------- 152,326,155 ------------- TOTAL EQUITY INVESTMENTS (COST $826,316,281) 96.98% 931,851,387 ------------- SHORT-TERM INVESTMENTS 4.69% MONEY MARKET FUNDS 2.61% 6,913,929 SSgA U.S. Government Money Market Fund 6,913,929 18,140,411 SSgA Money Market Fund 18,140,411 ------------- 25,054,340 ------------- COMMERCIAL PAPER 2.08% 20,000,000 General Electric Capital Corp. 5.8% maturing 01/05/98 19,987,111 ------------- TOTAL SHORT-TERM INVESTMENTS (COST $45,041,451) 45,041,451 ------------- TOTAL INVESTMENTS (COST $871,357,732) ** 101.67% 976,892,838 OTHER ASSETS LESS LIABILITIES (1.67)% (16,067,800) ------------- NET ASSETS 100.00% $ 960,825,038 ------------- -------------
- ------------------------------------ * Non-income producing security. The accompanying notes are an integral part of the financial statements. Page 8 Dresdner RCM Growth Equity Fund Investments in Securities and Net Assets December 31, 1997 Tax Information: ** For Federal income tax purposes, cost is $878,037,978 and unrealized appreciation (depreciation) of equity securities is as follows: Unrealized appreciation $ 116,377,609 Unrealized depreciation (17,522,749) ------------- Net unrealized appreciation $ 98,854,860 ------------- -------------
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The Fund's investments in securities at December 31, 1997, categorized by country:
% of Net Assets ----------------------------------------- Short-Term and Country Equities Other Total - ---------------------------------------------------------------------------------------- Bermuda 0.4% 0.0% 0.4% Canada 1.0% 0.0% 1.0% Finland 0.2% 0.1% 0.3% Ireland 1.8% 0.0% 1.8% Taiwan 0.2% 0.0% 0.2% United Kingdom 1.1% 0.0% 1.1% United States 92.3% 2.9% 95.2% --- --- ---------- Total 97.0% 3.0% 100.0% --- --- ---------- --- --- ----------
The accompanying notes are an integral part of the financial statements. Page 9 Dresdner RCM Small Cap Fund Management's Performance Review In 1997, as in 1996, major benchmarks for small cap stocks underperformed large cap indices like the Dow Jones Industrial Average and the Standard & Poor's 500 Composite Index. A particularly noteworthy characteristic of 1997, however, was the dramatic underperformance of growth stocks in the small cap universe. For the year, the Russell 2000 Growth Index lagged the Russell 2000 Value Index by a differential of 18.83%. For the 12 months ended December 31, 1997, the Dresdner RCM Small Cap Fund (the "Fund") earned a total return of 19.49%. The Fund performed exceptionally well in the second and third quarters of the year -- outpacing its primary benchmark, the Russell 2000 Index (the "Index") during that time. For the year, however, the Fund finished 2.88% behind the Index, which returned 22.37%, due to the extremely difficult investment environment for small cap growth stocks in the first and fourth quarters. Although small cap stocks had lagged in 1996, we were optimistic going into 1997 that the relative performance of this sector would improve. Seasonal trends traditionally favor so-called "secondary cap" market sectors early in a new year. Meanwhile, the valuations of small cap stocks had become attractive compared to both their historical averages and the valuations of large cap issues. We hoped that these factors, plus strong mutual fund cash flows, would help small cap stocks catch up with very large cap equities early in 1997. Given this environment, and our commitment to quality growth investments, the Fund entered 1997 overweighted in high-growth areas like technology, business services, and health care relative to the Index. The Fund maintained some exposure to banking and financial services shares, but significantly underweighted these areas versus the Index. As growth managers we typically maintain modest exposures to sectors sensitive to interest rates and do not invest at all in utilities. Unfortunately, the first-quarter catch-up we expected for small cap stocks did not materialize. Instead, market leadership continued to narrow, concentrating in stocks of very large cap multinational firms. By late February, a more pronounced decline in secondary-cap issues was evident -- particularly in the technology sector. When interest rate jitters sparked a market correction in February and March, small caps suffered sharp absolute declines and lost further ground against large cap shares, especially issues representing higher growth and P/E multiples. Because the Fund was oriented toward growth stocks and overweighted in high-growth groups like technology, it trailed the Index by 6.04% for the quarter. With the easing of interest rate fears in mid-April, large cap stocks reached a major bottom, and small cap stocks followed by the end of that month. The valuation and performance disparities that occurred in the first quarter set up a powerful small cap rally in May. Although penalized by its growth orientation in the first quarter, the Fund was well positioned to benefit from this rally, as the extremely compressed multiples of quality issues expanded, and technology stocks reemerged as market leaders. A favorable environment for stocks of all capitalizations persisted through the third quarter. In what came to be called a "Goldilocks" economic climate, inflation fell, growth remained healthy, but did not overheat, and investors became less worried that the Federal Reserve would raise interest rates. Over the middle quarters of 1997, the broad U.S. equity market (represented by the S&P 500 Index) gained 26.26%, the Russell 2000 Index gained 33.50%, and the Fund returned 43.06%. The overweighted positions in technology and other high-growth groups contributed significantly to the Fund's outperformance. In the fourth quarter of 1997, the outperformance by small cap stocks was interrupted by a severe currency crisis in Asia that brought turmoil to equity markets worldwide. As is typical in such cases, U.S. financial markets exhibited a pronounced flight to liquidity and quality. Faced with increased uncertainty and volatility, investors flocked to fixed-income securities and large cap equities in defensive sectors. While growth universes of all capitalizations meaningfully underperformed their value counterparts, the effect was most extreme in the small cap sector. During the quarter the Russell 2000 Growth Index trailed the Russell 2000 Value Index by 9.88%. The technology group, in particular, was decimated by concerns about the near-and long-term impacts of slowing Asian growth and intensified competitive pressures. With overweighted positions in growth stocks and the electronics/new technology Page 10 Dresdner RCM Small Cap Fund Management's Performance Review group -- and no exposure to the strongly performing utilities area -- the Fund lagged the Russell 2000 Index by 2.57%. For 1997 as a whole, stock selection in the computers/office equipment industry group made the largest positive contribution to Fund performance against the Index. The Fund's holdings in this group gained an average 25% in 1997, versus a loss of approximately 8% for computer and office equipment stocks in the Index. Among the top performers were Micros Systems (+46%) and Radiant Systems (+200%). Stock selection was also positive in the drug and hospital supplies group, where Fund holdings gained 16% on average, versus an average gain of approximately 6% for drug and hospital supplies shares in the Index. Major holdings in this sector included Sofamor Danek Group (+114%) and Sangstat (+53%). Stock picking in the technology services and industrial equipment groups also improved the Fund's performance against the Index. Several industry strategies further enhanced relative returns. These included a 13% weighting in the strongly performing business services versus an Index weighting of 4%. The Fund also benefited from an underweighting in the lagging raw/basic materials group. Stock selection in the electronics/new technology area hurt the Fund's relative performance during the year. Especially poor performances by Network General (-38%), Actel (-47%), and Altron (-37%) helped create an average 12% loss in this group of Fund holdings. That compares with an average gain of about 2% for technology stocks in the Index. Stock selection in the aerospace and building/construction areas also contributed negatively to the Fund's performance against the Index. A general overweighting in the poorly performing technology services group further damaged Fund returns versus the Index. Underweighting the interest rate-sensitive general finance, utilities and insurance industries also hurt the Fund's relative performance. Over the year we increased Fund exposure to these areas, and the Fund was actually overweighted versus the Russell 2000 Growth Index. The Fund's average cash position of about 3.8% had an essentially neutral impact on relative performance for the full year. Despite the fourth-quarter turbulence, 1997 became the third consecutive year of exceptional absolute returns for U.S. stock investors. Going into 1998, domestic equity investors are preoccupied with assessing the potential fallout from the Asian crisis on the earnings of U.S. companies. We believe that the bottom-up estimates for U.S. corporate profits may undergo downward revisions in the early months of the year. Although such revisions may dampen stock returns early on, we believe that quality small cap stocks with superior relative growth will be well positioned as earnings growth slows for stocks in the S&P 500. Page 11 Dresdner RCM Small Cap Fund Performance Summary EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Fund Russell 2000 Index 1992 $10,786 $10,811 $11,118 $11,127 $10,850 $10,751 $10,613 $10,373 $10,703 $10,511 $10,165 $10,017 $10,530 $10,366 $10,336 $10,072 $10,603 $10,304 $11,002 $10,630 $11,807 $11,444 $12,214 $11,842 1993 $12,212 $12,242 $11,792 $11,960 $12,082 $12,348 $11,636 $12,008 $12,102 $12,539 $12,134 $12,617 $12,126 $12,791 $12,580 $13,344 $13,037 $13,720 $13,186 $14,074 $12,728 $13,615 $13,337 $14,080 1994 $13,592 $14,522 $13,431 $14,469 $12,712 $13,707 $12,637 $13,788 $12,411 $13,633 $11,990 $13,173 $12,173 $13,390 $13,095 $14,136 $13,073 $14,088 $13,240 $14,031 $12,765 $13,464 $13,049 $13,824 1995 $12,958 $13,649 $13,392 $14,217 $13,900 $14,461 $14,064 $14,782 $14,030 $15,037 $14,728 $15,817 $15,706 $16,728 $16,245 $17,074 $16,900 $17,380 $16,330 $16,602 $16,882 $17,300 $17,496 $17,756 1996 $17,973 $17,737 $18,914 $18,290 $19,374 $18,662 $20,684 $19,660 $21,660 $20,435 $20,993 $19,596 $18,958 $17,884 $20,592 $18,923 $22,457 $19,662 $22,226 $19,359 $22,488 $20,157 $23,514 $20,685 1997 $23,754 $21,098 $22,335 $20,587 $20,877 $19,615 $20,357 $19,670 $23,953 $21,858 $25,312 $22,795 $26,750 $23,856 $27,350 $24,403 $29,867 $26,189 $28,508 $25,039 $28,329 $24,877 $28,098 $25,312
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. The chart above shows the performance of the Dresdner RCM Small Cap Fund since the Fund's inception versus the Russell 2000 Index.(a) The chart represents a cumulative return of 180.98%(b) for the Fund. The average annual total return from the Fund's inception was 18.79%.(b)(c) The chart assumes a hypothetical $10,000 initial investment in the Fund and reflects all Fund expenses. Average Annual Total Returns(b) December 31, 1997
Life of 1 Year 5 Year Fund(c) 19.49% 18.13% 18.79%
The data above represent past performance of the Fund and may not be indicative of future performance. The investment return and principal value of an investment in the Fund will fluctuate, so that shares, when redeemed, may be worth more or less than their original cost. - -------------------------------- (a) The Russell 2000 Index is composed of the 2,000 smallest securities in the Russell 3000 Index, which is composed of the 3,000 largest U.S. companies based on market capitalization and represents approximately 98% of the investable U.S. equity market. (b) Returns assume reinvestment of all dividends and capital gains distributions at net asset value. (c) The Fund began operations on January 3, 1992. Page 12 Dresdner RCM Small Cap Fund Investments in Securities and Net Assets December 31, 1997
% of Market Shares Equity Investments Net Assets Value - ------------------------------------------------------------------------------------------------------ CONSUMER DURABLES SECTOR 4.14% AUTOMOTIVE RELATED 4.03% 163,000 Dura Automotive Systems Inc. * $ 4,034,250 358,000 Keystone Automotive Industries Inc. * 8,502,500 336,000 Tower Automotive Inc. * 14,133,000 ------------- 26,669,750 ------------- CONSUMER DURABLES 0.11% 22,000 Sola International Inc. * 715,000 CONSUMER NON-DURABLES SECTOR 10.03% BEVERAGE/TOBACCO 0.27% 36,000 Robert Mondavi Corp. * 1,755,000 FOOD/FOOD PROCESSING 0.34% 7,800 American Italian Pasta Co. * 195,000 35,000 Suiza Foods Corp. * 2,084,688 ------------- 2,279,688 ------------- HOUSEHOLD/RELATED NONDURABLES 3.86% 194,000 Carson Inc. * 1,297,375 263,000 Ocular Sciences Inc. * 6,903,750 385,000 Rayovac Corp. * 7,411,250 327,600 Scotts Co. * 9,909,900 ------------- 25,522,275 ------------- LEISURE TIME PRODUCTS/SERVICES 2.89% 343,300 CapStar Hotel Co. * 11,779,481 325,000 Dave & Buster's Inc. * 7,312,500 ------------- 19,091,981 ------------- RETAIL TRADE 2.67% 11,400 Cole National Corp. * 341,288 415,100 Regis Corp. 10,429,388 182,300 Tefron Ltd. * 4,192,900 117,000 Zale Corp. * 2,691,000 ------------- 17,654,576 ------------- CYCLICAL/CAPITAL GOODS SECTOR 12.81% AEROSPACE/DEFENSE 1.40% 130,500 Doncasters PLC * 2,756,813 330,000 Wyman-Gordon Co. * 6,476,250 ------------- 9,233,063 -------------
The accompanying notes are an integral part of the financial statements. Page 13 Dresdner RCM Small Cap Fund Investments in Securities and Net Assets December 31, 1997
% of Market Shares Equity Investments Net Assets Value - ------------------------------------------------------------------------------------------------------ BUILDING/CONSTRUCTION 3.21% 196,700 Apogee Enterprises Inc. $ 2,335,813 339,000 Comfort Systems USA Inc. * 6,695,250 189,000 NCI Building Systems Inc. * 6,709,500 190,900 Service Experts Inc. * 5,464,513 ------------- 21,205,076 ------------- INDUSTRIAL EQUIPMENT 1.50% 490,000 Flanders Corp. * 4,532,500 150,000 Furon Co. 3,131,250 113,000 Omniquip International Inc. 2,252,938 ------------- 9,916,688 ------------- TRANSPORTATION SERVICES 6.70% 255,000 Air Express International Corp. 7,777,500 290,000 Covenant Transport Inc. Class A * 4,422,500 125,000 Expeditors International of Washington Inc. 4,812,500 80,000 Heartland Express Inc. * 2,150,000 125,100 Hub Group Inc. * 3,721,725 128,400 Knight Transportation Inc. * 3,563,100 340,000 Mark VII Inc. * 5,652,500 250,000 Swift Transportation Co. Inc. * 8,093,750 200,000 Virgin Express Holdings PLC (Sponsored ADR) * 4,150,000 ------------- 44,343,575 ------------- ENERGY SECTOR 2.26% ENERGY 2.26% 353,000 Forcenergy Gas Exploration Inc. * 9,244,188 222,900 Houston Exploration Co. * 4,095,788 70,000 Newfield Exploration Co. * 1,631,875 ------------- 14,971,851 ------------- HEALTH CARE SECTOR 13.03% DRUGS & HOSPITAL SUPPLIES 6.50% 55,000 Algos Pharmaceutical Corp. * 1,650,000 70,400 Anesta Corp. * 1,152,800 178,500 Bone Care International Inc. * 1,818,469 418,600 CIMA Labs Inc. * 1,779,050 55,000 Coulter Pharmaceuticals Inc. * 1,113,750 70,000 Endosonics Corp. * 752,500 35,000 GelTex Pharmaceuticals Inc. * 927,500 1,033,300 Gensia Sicor Inc. * 6,006,056 29,000 Inhale Therapeutic Systems * 754,000 32,100 Life Technologies Inc. 1,067,325 19,000 Ligand Pharmaceuticals Inc. Class B * 244,625 58,000 Molecular Biosystems Inc. * 493,000
The accompanying notes are an integral part of the financial statements. Page 14 Dresdner RCM Small Cap Fund Investments in Securities and Net Assets December 31, 1997
% of Market Shares Equity Investments Net Assets Value - ------------------------------------------------------------------------------------------------------ DRUGS & HOSPITAL SUPPLIES (Continued) 137,800 NaPro BioTherapeutics Inc. * $ 344,500 217,300 Novoste Corp * 4,889,250 10,000 PathoGensis Corp. * 371,250 73,200 Penederm Inc. * (b) 732,000 159,000 SangStat Medical Corp. * 6,439,500 22,700 Sepracor Inc. * 909,419 12,300 Transkaryotic Therapies Inc. * 432,038 8,000 Vertex Pharmaceuticals Inc. * 264,000 490,000 VISX Inc. * 10,841,250 ------------- 42,982,282 ------------- HEALTH CARE SERVICES 6.53% 311,000 American Retirement Corp. * 6,220,000 424,000 Atria Communities Inc. * 7,261,000 216,500 Centennial HealthCare Corp. * 4,925,375 334,000 Curative Health Services Inc. * 10,145,250 35,000 Harborside Healthcare Corp. * 691,250 201,400 Home Health Corp. of America Inc. * 2,089,525 410,000 Orthodontic Centers of America Inc. * 6,816,250 198,000 Raytel Medical Corp. * 2,301,750 71,100 Renal Care Group Inc. * 2,275,200 36,500 Veterinary Centers of America Inc. * 490,469 ------------- 43,216,069 ------------- INTEREST SENSITIVE SECTOR 8.19% BANKING 6.81% 329,800 Community First Bankshares Inc. 17,561,850 150,000 Silicon Valley Bancshares * 8,437,500 27,800 Southwest Bancorporation Texas * 865,275 275,000 Texas Regional Bancshares Inc. Class A 8,387,500 96,000 WestAmerica Bancorporation 9,816,000 ------------- 45,068,125 ------------- GENERAL FINANCE 1.27% 325,000 American Capital Strategies Ltd. 5,890,625 84,000 AMRESCO Inc. * 2,488,500 ------------- 8,379,125 ------------- INSURANCE 0.11% 22,000 Penn Treaty American Corp. * 698,500 TELEMEDIA/SERVICES SECTOR 20.74% BUSINESS SERVICES 15.84% 107,000 ABR Information Services Inc. * 2,554,625 55,800 Caribiner International Inc. * 2,483,100
The accompanying notes are an integral part of the financial statements. Page 15 Dresdner RCM Small Cap Fund Investments in Securities and Net Assets December 31, 1997
% of Market Shares Equity Investments Net Assets Value - ------------------------------------------------------------------------------------------------------ BUSINESS SERVICES (Continued) 119,100 Cornell Corrections Inc. * $ 2,471,325 319,700 Eastern Environmental Services Inc. * 7,033,400 345,400 F. Y. I. Inc. * 7,944,200 322,000 Healthcare Recoveries Inc. * 7,164,500 239,000 Industrial Distribution Group Inc. * 3,749,313 44,700 Iron Mountain Inc. * 1,609,200 266,700 JLK Direct Distribution Inc. Class A * (a) 7,467,600 110,000 Lamalie Associates Inc. * 2,200,000 177,000 Lason Holdings Inc. * 4,712,625 299,000 Personnel Group of America, Inc. * 9,867,000 529,000 The Registry Inc. * 24,267,875 76,500 Romac International * 1,874,250 192,600 Source Services Corp. * 4,164,975 286,400 Vestcom International Inc. * 6,408,200 369,000 Wilmar Industries Inc. * 8,809,875 ------------- 104,782,063 ------------- COMMUNICATIONS SERVICES 2.15% 250,500 LCC International Inc. * 3,632,250 466,200 Smartalk Teleservices Inc. * 10,606,050 ------------- 14,238,300 ------------- MEDIA 2.75% 399,000 Central European Media Entertainment Ltd. Class A * 10,074,750 150,000 Regal Cinemas Inc. * 4,181,250 100,000 Sylvan Learning Systems Inc. * 3,900,000 ------------- 18,156,000 ------------- TECHNOLOGY SECTOR 21.93% COMPUTERS/OFFICE EQUIPMENT 5.45% 325,000 Black Box Corp. * 11,496,875 525,700 CHS Electronics Inc. * 9,002,613 264,900 Micros Systems Inc. * 11,920,500 128,000 Radiant Systems Inc. * 3,648,000 ------------- 36,067,988 ------------- ELECTRONICS/NEW TECHNOLOGY 12.11% 188,000 Actel Corp. * 2,373,500 184,800 ADE Corp. * 3,234,000 10,000 ASE Test Ltd. * 653,750 293,000 Burr-Brown Corp. * 9,412,625 937,200 Computer Products Inc. * 21,204,150 212,500 Continental Circuits Corp. * 2,961,719 349,200 General Scanning Inc. * 6,023,700 247,000 Hadco Corp. * 11,176,750 190,000 Kent Electronics Corp. * 4,773,750
The accompanying notes are an integral part of the financial statements. Page 16 Dresdner RCM Small Cap Fund Investments in Securities and Net Assets December 31, 1997
% of Market Shares Equity Investments Net Assets Value - ------------------------------------------------------------------------------------------------------ ELECTRONICS/NEW TECHNOLOGY (Continued) 170,000 Littelfuse Inc. * $ 4,228,750 50,000 Network Equipment Technologies Inc. * 731,250 118,900 PRI Automation Inc. * 3,433,238 236,000 Radisys Corp. * 8,791,000 28,800 Semtech Corp. * 1,126,800 ------------- 80,124,982 ------------- TECHNOLOGY SERVICES 4.37% 121,800 Aspen Technologies Inc. * 4,171,650 151,000 Engineering Animation Inc. * 6,946,000 153,700 Industri Matematik International Corp. * 4,534,150 228,400 International Telecommunication Systems Inc. * 7,308,800 81,500 VERITAS Software Co. * 4,156,500 45,000 Wind River Systems Inc. * 1,785,931 ------------- 28,903,031 ------------- TOTAL EQUITY INVESTMENTS (COST $525,897,152) 93.13% 615,974,988 SHORT-TERM INVESTMENTS 4.95% COMMERCIAL PAPER 1.50% 10,000,000 General Electric Capital Corp. 5.85% maturing 01/16/98 9,975,625 MONEY MARKET FUNDS 3.45% 7,363,204 SSgA U.S. Government Money Market Fund 7,363,204 15,426,474 SSgA Money Market Fund 15,426,474 ------------- 22,789,678 ------------- TOTAL SHORT-TERM INVESTMENTS (COST $32,765,303) 32,765,303 ------------- TOTAL INVESTMENTS (COST $558,662,455) ** 98.08% 648,740,291 OTHER ASSETS LESS LIABILITIES 1.92% 12,670,345 ------------- NET ASSETS 100.00% $ 661,410,636 ------------- -------------
- ------------------------------------ * Non-income producing security. (a) The Fund holds 5% or more of the outstanding shares of the issuer. As defined by the Investment Company Act of 1940, companies in which a fund holds 5% or more of the outstanding voting shares of an issuer are considered affiliated. (b) Shares purchased through a private placement. The Investment Manager is required to deliver the issuer's current prospectus and financial reports upon resale of such shares. The accompanying notes are an integral part of the financial statements. Page 17 Dresdner RCM Small Cap Fund Investments in Securities and Net Assets December 31, 1997 Tax Information: ** For Federal income tax purposes, cost is $561,798,385 and unrealized appreciation (depreciation) of equity securities is as follows: Unrealized appreciation $ 113,474,213 Unrealized depreciation (26,532,307) ------------- Net unrealized appreciation $ 86,941,906 ------------- -------------
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The Fund's investments in securities at December 31, 1997 categorized by country:
% of Net Assets ------------------------------------------ Short-Term Country Equities and Other Total - ----------------------------------------------------------------------------------------- Belgium 0.6% 0.6% Bermuda 1.5% 1.5% Taiwan 0.0% 0.0% United Kingdom 0.4% 0.4% United States 90.6% 6.9% 97.5% -- --- ---------- Total 93.1% 6.9% 100.0% -- -- --- ---------- --- ----------
The accompanying notes are an integral part of the financial statements. Page 18 Dresdner RCM International Growth Equity Fund A Management's Performance Review In the second half of 1997, global equity markets retraced most of their gains from the first half of the year, with the Morgan Stanley Europe, Australia, Far East Index falling 8.35%. Stocks in Europe returned 8.5% during this time, on benign inflation news and a positive outlook for growth. After rising sharply in the first half of 1997, the U.S. dollar stabilized against major European currencies but continued to strengthen significantly against the Japanese yen. Despite a strong performance in the second quarter, stocks in Japan lost 29.96% in the quarters that followed. With the worsening of Asia's currency problems, returns for Asia's emerging markets fell 55.50% in the second half of the year, spurring a 24.93% decline in returns for emerging markets as a whole. For the six months ended December 31, 1997, the Dresdner RCM International Growth Equity Fund A (the "Fund") earned a total return of 0.61%, versus a return of -8.35% for the EAFE Index. The Fund enjoyed a similar outperformance for the 12 months ended December 31, 1997. During that time the Fund returned 17.93%, versus 2.06% for the EAFE Index and 2.05% for the ACW Free Ex-US Index, the Fund's secondary benchmark. With expanding resources around the world, and a growing pool of Grassroots research, we have increased our capacity for finding high-growth companies around the world. Our strategy has been to search for quality companies with strong management, organic sales growth, and restructuring or niche market positions that can generate visible and sustainable-earnings growth. This led us to increase the Fund's overweightings in Europe and Mexico and remain overweighted in Canada. With negative macroeconomic factors and a lack of visible earnings growth, we further underweighted stocks in Japan and emerging Asian markets. Europe continued to be one of the few sources of global growth, as economies there exited the recessions resulting from self-imposed fiscal austerity. Consolidation and restructuring continue to benefit stocks in the region, as well as the technological preparations required for the new millennium and the EMU. We believe the Fund is positioned to take advantage of consolidation among insurance and banking firms, as well as improvements in business and consumer sentiment. Economic conditions in Japan worsened significantly in the second half of 1997, as Prime Minister Hashimoto's fiscal austerity plan took its toll. An unsupportive monetary policy magnified the slowdown. Asia's currency problems caused both business and consumer sentiment to turn more bearish, since the Asian exposure for Japanese banking and corporate investment had become quite significant in the last few years. We believe Japan's central bank will continue to add massive liquidity to the market to stave off further bankruptcies and, in the absence of major policy changes, may fail to coordinate foreign exchange policies. We remain positioned in exporters that will benefit from a weak yen and, in some cases, from lower production costs in Southeast Asia. Southeast Asian markets fell sharply in the second half of 1997, as the region's currency regimes gave up their peg to the U.S. dollar, and problems in local banking systems emerged. We continue to search for oversold stocks in the region but are cautious absent policies for a sustainable economic recovery. During the period, stocks in Latin America lost 6.5%, as investors transferred worry about fragile Asian economies to Brazil. Stocks in Mexico rallied 17.76%, however, on sound macroeconomic variables and continued positive surprises in corporate profitability. Here, the Fund is focused on world-class companies that have demonstrated high sustainable-earnings growth and can benefit from consumer recovery in the region. The higher global inflation and interest rates we envisioned six months ago have failed to materialize, helping to support current equity valuations. As the economic slowdown in Asia curbs growth elsewhere in the world, the one trigger that could shift investor perceptions of risk, reward, and valuations is doubt about whether companies can deliver expected earnings growth. Volatility is likely to continue as long as there is uncertainty about the recovery and growth potential of economies in Japan and Asia, which account for more than 25% of world GDP. We remain relatively encouraged, however, by supportive bond yields and increased global liquidity. Our central forecast for 1998 calls for low interest rates, stable growth in the U.S., and higher growth in Europe. We remain focused on valuations to maintain a disciplined investment process, as investors focus on opportunities in companies with clear vision and strong earnings growth. Page 19 Dresdner RCM International Growth Equity Fund A Performance Summary EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
PERFORMANCE FROM COMMENCEMENT OF OPERATIONS Fund EAFE ACWI 12/28/94 $ 50,000 $ 50,000 $ 50,000 47,772 48,090 48,146 47,881 47,965 47,881 3/31/95 50,264 50,972 50,586 52,453 52,904 52,559 52,815 52,285 52,328 6/30/95 54,230 51,381 51,605 57,845 54,590 54,537 57,095 52,520 52,644 9/30/95 58,320 53,560 53,544 57,440 52,140 52,115 57,605 53,605 53,340 12/31/95 58,995 55,770 55,446 60,630 56,010 56,206 61,355 56,215 56,206 3/31/96 63,240 57,420 57,251 65,480 59,105 58,986 66,315 58,030 58,101 6/30/96 66,766 58,370 58,398 64,611 56,677 56,459 65,541 56,813 56,792 9/30/96 67,021 58,336 58,200 66,510 57,753 57,618 69,318 60,063 59,843 12/31/96 70,391 59,306 59,148 71,775 57,242 58,060 72,383 58,192 59,123 3/31/97 72,051 58,419 58,998 73,269 58,740 59,494 78,028 62,576 63,171 6/30/97 82,510 66,043 66,658 87,546 67,126 68,004 81,459 62,125 62,653 9/30/97 88,100 65,617 66,042 82,289 60,591 60,422 82,068 59,985 59,667 12/31/97 83,015 60,524 60,353 PERFORMANCE FROM FIRST PUBLIC OFFERING Fund EAFE ACWI 5/22/95 $ 50,000 $ 50,000 $ 50,000 52,900 49,800 52,775 51,160 49,920 51,110 6/30/95 52,535 49,054 50,405 56,035 52,122 53,268 55,310 50,146 51,419 9/30/95 56,495 51,138 52,299 55,645 49,777 50,902 55,805 51,175 52,098 12/31/95 57,150 53,250 54,156 58,735 53,481 54,898 59,435 53,675 54,898 3/31/96 61,270 54,829 55,919 63,430 56,436 57,614 64,240 55,411 56,749 6/30/96 64,677 55,737 57,039 62,105 54,120 55,145 63,490 54,250 55,471 9/30/96 64,924 55,704 56,846 64,429 55,147 56,278 67,149 57,353 58,450 12/31/96 68,189 59,303 57,772 69,529 57,239 56,709 70,119 58,189 57,747 3/31/97 69,797 58,416 57,626 70,976 58,738 58,110 75,587 62,573 61,701 6/30/97 79,929 66,040 65,107 84,807 67,123 66,422 78,910 62,122 61,195 9/30/97 85,343 65,613 64,505 79,714 60,587 59,016 79,500 59,982 58,278 12/31/97 80,415 60,521 58,948
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. The charts above show the performance of the Dresdner RCM International Growth Equity Fund A versus the Morgan Stanley Capital International Europe, Australia, Far East Index (MSCI-EAFE)(a) and the Morgan Stanley Capital International All Country World Free Ex-US Index (MSCI-ACWI)(b). The charts represent cumulative returns of 66.03%(c) and 60.83%(c) for the Fund from December 28, 1994(d) to December 31, 1997 and from May 22, 1995,(e) to December 31, 1997, respectively. The charts assume a hypothetical $50,000 initial investment in the Fund and reflect all Fund expenses. Average Annual Total Returns(c) December 31, 1997
Life of Fund Annualized since 1 Year 12/28/94(d) 5/22/95(e) 17.93% 18.36% 19.99%
The data above represent past performance of the Fund and may not be indicative of future performance. The investment return and principal value of an investment in the Fund will fluctuate, so that shares, when redeemed, may be worth more or less than their original cost. - -------------------------------- (a) The MSCI-EAFE Index is an arithmetic, market value-weighted average of the performance of over 900 securities listed on the stock exchanges of countries in Europe, Australia, and the Far East. The index is calculated on a total return basis, which includes reinvestment of gross dividends before deduction of withholding taxes. (b) The MSCI-ACWI Index is a market capitalization-weighted index composed of companies representative of the market structure of 47 developed and emerging market countries excluding the United States. Stock selection excludes securities which are not purchasable by foreigners. The index is calculated on a total return basis, which includes reinvestment of gross dividends before deduction of withholding taxes. (c) Returns assume reinvestment of all dividends and capital gains distributions at net asset value. (d) The Fund commenced operations on December 28, 1994. (e) The Fund's shares were first offered to the public on May 22, 1995. Page 20 Dresdner RCM International Growth Equity Fund A Investments in Securities and Net Assets December 31, 1997
% of Market Shares Country Equity Investments Net Assets Value - ------------------------------------------------------------------------------------------------------ CONSUMER DURABLES SECTOR 4.77% AUTOMOTIVE RELATED 1.39% 12,000 SE Autoliv AB $ 393,000 340 DE Porsche AG Non-Voting Preferred 567,283 725 DE Volkswagen AG 408,055 ------------ 1,368,338 ------------ CONSUMER DURABLES 3.38% 18,000 SE Electrolux AB * 1,250,006 375,000 CN Guangdong Kelon Elect Holding H 384,763 19,000 JP Sony Corp. 1,695,110 ------------ 3,329,879 ------------ CONSUMER NON-DURABLES SECTOR 13.73% BEVERAGE/TOBACCO 2.96% 13,600 MX Coca Cola FEMSA S.A. de C.V. (ADR) * 788,800 19,000 CL Compania Cervecerias Unidas S.A. (ADR) * 558,125 136,000 MX Fomento Economico Mexicano Series B 1,088,093 252,000 AU Fosters Brewing Group Ltd. * 479,448 ------------ 2,914,466 ------------ FOOD/FOOD PROCESSING 1.05% 20 JP Hokuto Corp. 446 34,000 NL Nutricia Verenidge Bedrijven CVA * 1,031,458 ------------ 1,031,904 ------------ HOUSEHOLD/RELATED NONDURABLES 1.04% 14,000 FR Societe Bic S.A. * 1,022,331 LEISURE TIME PRODUCTS/SERVICES 2.88% 8,000 FR Accor S.A. * 1,488,066 50,000 JP Hitachi Credit Corp. * 826,789 13,000 ES Sol Melia S.A. 520,289 ------------ 2,835,144 ------------ RETAIL TRADE 5.80% 11,300 DE Adidas AG 1,486,939 19,000 NL Koninklijke Ahold N.V. * 495,800 224,022 MX Cifra S.A. de CV Class B * 552,982 82,000 GB Dixons Group PLC * 824,378 10,000 JP Ito Yokado Co. * 511,455 11,800 CA Loblaw Cos. Ltd. * 213,980 1,500 FR Promodes * 622,604 121,000 GB Tesco PLC * 999,528 ------------ 5,707,666 ------------
The accompanying notes are an integral part of the financial statements. Page 21 Dresdner RCM International Growth Equity Fund A Investments in Securities and Net Assets December 31, 1997
% of Market Shares Country Equity Investments Net Assets Value - ------------------------------------------------------------------------------------------------------ CYCLICAL/CAPITAL GOODS SECTOR 7.78% AEROSPACE/DEFENSE 1.01% 35,000 GB British Aerospace PLC * $ 999,169 BUILDING/CONSTRUCTION 2.06% 99,000 MX Cemex S.A. de CV (Sponsored ADR) * 1,045,688 36,300 MX Consorcio ARA S.A. * 176,506 23,030 NL Hunter Douglas N.V. 806,585 ------------ 2,028,779 ------------ ELECTRICAL EQUIPMENT 1.45% 5,700 JP Hirose Electric Co. Ltd. 292,406 19,000 NL Philips Electronics N.V. * 1,139,685 ------------ 1,432,091 ------------ INDUSTRIAL EQUIPMENT 1.92% 61,000 JP Omron Corp. * 957,076 61,000 AU Smith (Howard) 506,358 19,000 NO Tomra Systems A/S 425,247 ------------ 1,888,681 ------------ RAW/BASIC MATERIALS 1.34% 62,000 MX Alfa S.A. de CV Class A 420,675 7,000 DE SGL Carbon AG 144A (a) 903,204 ------------ 1,323,879 ------------ ENERGY SECTOR 5.69% ENERGY 5.69% 117,000 GB British-Borneo Petroleum Syndicate PLC 820,100 1,500 GB British Petroleum Co. PLC (ADR) 119,531 64,963 GB British Petroleum Co. PLC 860,882 175,000 IT ENI SpA 992,791 13,000 NO Petroleum Geo-Services A/S * 819,974 283,000 GB Shell Transportation & Trading Co. PLC 1,988,318 ------------ 5,601,596 ------------ HEALTH CARE SECTOR 9.15% DRUGS & HOSPITAL SUPPLIES 9.12% 5,200 HU Gedeon Richter Ltd. (GDR) 144A (a) * 599,300 83,487 GB Glaxo Wellcome PLC 1,993,891 14,000 GB Glaxo Wellcome PLC (Sponsored ADR) 670,250 1,590 CH Novartis AG 2,583,592 18,200 FI Orion Yhtyma OY Series B * 481,280 32,000 GB Smithkline Beecham PLC (ADR) 1,646,000 8,000 FR Synthelabo 1,000,023 ------------ 8,974,336 ------------
The accompanying notes are an integral part of the financial statements. Page 22 Dresdner RCM International Growth Equity Fund A Investments in Securities and Net Assets December 31, 1997
% of Market Shares Country Equity Investments Net Assets Value - ------------------------------------------------------------------------------------------------------ HEALTH CARE SERVICES 0.03% 800 JP Nichii Gakken Co. $ 27,688 INTEREST SENSITIVE SECTOR 23.60% BANKING 14.08% 33,000 CA Bank of Nova Scotia, Halifax 1,553,123 125,000 GB Bank of Scotland 1,137,383 38,500 GB Barclays PLC * 1,026,736 17,000 DE Bayerische Vereinsbank AG 1,112,821 26,700 ES Banco Bilbao Viscaya S.A. 863,633 51,000 PT Banco Comercial Portugues S.A. * 1,044,166 7,300 FR Credit Commercial de France S.A. 500,552 560,000 IT Credito Italiano SpA * 1,727,832 30,000 DE Deutsche Bank AG 2,118,981 294 GB HSBC Holdings PLC 7,342 742 GB Lloyds TSB Group PLC 9,670 141,400 SE Nordbanken Holding * 800,173 1,350 CH Union Bank of Switzerland * 1,954,817 ------------ 13,857,229 ------------ GENERAL FINANCE 4.42% 106,000 GB Amvesco PLC 908,287 17,000 DE Deutsche Pfandbrief und Hypothekenbank AG 1,007,874 41,000 CA Newcourt Credit Group Inc. 1,369,967 10,000 JP Nichiei Costruction Company Ltd. 1,069,057 ------------ 4,355,185 ------------ INSURANCE 4.14% 6,400 DE Allianz AG 1,658,692 7,000 FR AXA-UAP 541,884 570,000 IT INA -- Instituto Nazionala delle Assianzioni * 1,155,800 1,900 DE Munchener Ruckversicherungs-Gesellschaft 716,446 ------------ 4,072,822 ------------ UTILITIES 0.96% 14,000 PT Electricidade De Portugal SP * 542,500 14,000 CL Enersis S.A. (Sponsored ADR) 406,000 ------------ 948,500 ------------ SERVICES/MEDIA SECTOR 7.34% BUSINESS SERVICES 2.94% 3,100 CH Adecco S.A. 900,106 71,000 GB Granada Group PLC * 1,086,458 24,000 NL Randstad Holding N.V. 903,303 ------------ 2,889,867 ------------
The accompanying notes are an integral part of the financial statements. Page 23 Dresdner RCM International Growth Equity Fund A Investments in Securities and Net Assets December 31, 1997
% of Market Shares Country Equity Investments Net Assets Value - ------------------------------------------------------------------------------------------------------ COMMUNICATIONS SERVICES 3.50% 12,271 FR Alcatel Alsthom Compagnie Generale d'Electricitie $ 1,560,427 12,000 VE Compania Anonima Nacional Telefonos de Venezuela (CANTV) (ADR) * 499,500 81,050 JP Nippon Denwa Shisetsu 311,680 168,000 IT Telecom Italia SpA 1,073,758 ------------ 3,445,365 ------------ MEDIA 0.90% 198,000 GB WPP Group 882,889 TECHNOLOGY SECTOR 17.50% COMPUTERS/OFFICE EQUIPMENT 2.56% 44,000 JP Canon Inc. 1,028,756 700 JP Canon Sales Co. Inc. 8,022 119,000 JP RICOH Co. Ltd. 1,482,683 ------------ 2,519,461 ------------ ELECTRONICS/NEW TECHNOLOGY 7.73% 14,300 TW ASE Test Ltd. * 934,863 20,030 SE Ericsson LM Telephone Co. 753,552 94,000 JP Fujitsu Ltd. * 1,012,144 35,000 CA Newbridge Networks Corp. * 1,220,625 10,800 FI Nokia Corp. A 767,535 11,000 CA Northern Telecom Ltd. 979,000 15,000 JP Rohm Co. Ltd 1,534,366 12,000 JP Shinko Electric Industries 403,319 ------------ 7,605,404 ------------ TECHNOLOGY SERVICES 7.21% 8,000 FR Atos S.A. 1,031,939 6,000 FR Cap Gemini 492,199 53,973 NL Getronics N.V. 1,719,914 24 JP NTT Data Corp. * 1,297,636 4,900 DE SAP AG 1,489,314 44,000 GB SEMA Group PLC 1,071,480 ------------ 7,102,482 ------------ TOTAL EQUITY INVESTMENTS (COST $81,610,619) 89.56% 88,165,151 SHORT-TERM INVESTMENTS 9.54% COMMERCIAL PAPER 3.04% 3,000,000 Ford Motor Credit Co. 5.95% maturing 1/5/98 2,998,017
The accompanying notes are an integral part of the financial statements. Page 24 Dresdner RCM International Growth Equity Fund A Investments in Securities and Net Assets December 31, 1997
% of Market Shares Country Equity Investments Net Assets Value - ------------------------------------------------------------------------------------------------------ MONEY MARKET FUNDS 6.50% 3,198,045 SSgA U.S. Government Money Market Fund $ 3,198,045 3,198,045 SSgA Money Market Fund 3,198,045 ------------ 6,396,090 ------------ TOTAL SHORT-TERM INVESTMENTS (COST $9,394,107) 9,394,107 ------------ TOTAL INVESTMENTS (COST $91,004,726) ** 99.10% 97,559,258 OTHER ASSETS LESS LIABILITIES 0.90% 883,671 ------------ NET ASSETS 100.00% $ 98,442,929 ------------ ------------
- ------------------------------------ * Non-income producing security. (a) Security is purchased pursuant to Rule 144A of the Securities Act of 1933 and may be resold only to qualified institutional buyers. Tax Information: ** For Federal income tax purposes, cost is $91,731,417 and appreciation (depreciation) of equity securities is as follows: Unrealized appreciation $ 8,661,235 Unrealized depreciation (2,833,394) ------------- Net unrealized appreciation $ 5,827,841 ------------- -------------
The accompanying notes are an integral part of the financial statements. Page 25 Dresdner RCM International Growth Equity Fund A Investments in Securities and Net Assets December 31, 1997 The Fund's investments in securities at December 31, 1997 categorized by country:
% of Net Assets ----------------------------------------- Country Short-Term Country Code Equities and Other Total - ---------------------------------------------------------------------- Australia AU 1.0% 0.0% 1.0% Canada CA 5.4% 0.0% 5.4% Chile CL 1.0% 0.0% 1.0% China CN 0.4% 0.0% 0.4% Finland FI 1.3% 0.0% 1.3% France FR 8.4% 0.0% 8.4% Germany DE 11.7% 0.0% 11.7% Hungary HU 0.6% 0.0% 0.6% Italy IT 5.0% 0.0% 5.0% Japan JP 12.7% 1.0% 13.7% Mexico MX 4.1% 0.2% 4.3% Netherlands NL 6.2% 0.0% 6.2% Norway NO 1.3% 0.0% 1.3% Portugal PT 1.6% 0.0% 1.6% Spain ES 1.4% 0.0% 1.4% Sweden SE 3.2% 0.0% 3.2% Switzerland CH 5.5% 0.0% 5.5% Taiwan TW 0.9% 0.0% 0.9% United Kingdom GB 17.3% 0.1% 17.4% United States US 0.0% 9.2% 9.2% Venezuela VE 0.5% 0.0% 0.5% --- --- ---------- Total 89.5% 10.5% 100.0% --- --- ---------- --- --- ----------
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Forward Foreign Currency Contracts Outstanding December 31, 1997
Delivery Contract Unrealized Face Value Date Price Appreciation -------------------------------------------- Sale: Japanese Yen 5,125,000 2/12/98 111.5300 $ 719,722 Buy: Japanese Yen 2,655,000 5/14/98 122.9900 $ 103,818 Japanese Yen 2,235,000 5/14/98 122.0775 $ 103,329 ------------- Total open forward foreign currency contracts (Note 1) $ 926,869 ------------- -------------
The accompanying notes are an integral part of the financial statements. Page 26 Dresdner RCM Capital Funds, Inc. Statements of Assets and Liabilities December 31, 1997
Dresdner RCM -------------------------------------------- International Growth Equity Small Cap Growth Equity Fund Fund Fund A -------------- ------------ -------------- Assets: Investments at cost $871,357,732 $558,662,455 $ 91,004,726 -------------- ------------ -------------- -------------- ------------ -------------- Foreign currency at cost $ 795,844 $ -- $ 257,834 -------------- ------------ -------------- -------------- ------------ -------------- Investments at value (Note 1) $976,892,838 648,740,291 97,559,258 Foreign currency at value (Note 1) 791,469 -- 255,622 Receivables: Investments sold 14,800,064 6,524,319 10,258,729 Fund shares sold 1,730,203 14,459,467 -- Open forward foreign currency contracts (Note 1) -- -- 926,869 Dividends and dividend reclaims 226,551 34,505 78,599 Interest 152,063 106,530 31,766 -------------- ------------ -------------- Total Assets 994,593,188 669,865,112 109,110,843 -------------- ------------ -------------- Liabilities: Payables: Investments purchased 21,253,943 7,724,178 10,493,674 Fund shares repurchased 11,857,703 162,000 -- Management fees (Note 6) 606,864 537,304 61,264 Custodian fees 49,640 30,994 23,543 Audit fees -- -- 29,413 Legal fees -- -- 17,893 Directors' fees and expenses (Note 7) -- -- 13,428 Miscellaneous expenses -- -- 28,699 -------------- ------------ -------------- Total Liabilities 33,768,150 8,454,476 10,667,914 -------------- ------------ -------------- Net Assets $960,825,038 $661,410,636 $ 98,442,929 -------------- ------------ -------------- -------------- ------------ -------------- Net assets consist of: Paid-in capital (Note 4) $811,384,420 $550,321,311 $ 88,860,712 Accumulated net investment loss -- -- (540,987) Accumulated net realized gain on investments and foreign currency transactions 43,910,100 21,011,489 2,644,893 Net unrealized appreciation (depreciation) on foreign currency transactions (4,588) -- 923,779 Net unrealized appreciation on investments 105,535,106 90,077,836 6,554,532 -------------- ------------ -------------- Net Assets $960,825,038 $661,410,636 $ 98,442,929 -------------- ------------ -------------- -------------- ------------ -------------- Shares outstanding 154,155,407 56,715,179 7,183,935 -------------- ------------ -------------- -------------- ------------ -------------- Net asset value per share $ 6.23 $ 11.66 $ 13.70 -------------- ------------ -------------- -------------- ------------ --------------
The accompanying notes are an integral part of the financial statements. Page 27 Dresdner RCM Capital Funds, Inc. Statements of Operations For the year ended December 31, 1997
Dresdner RCM -------------------------------------------- International Growth Equity Small Cap Growth Equity Fund Fund Fund A -------------- ------------ -------------- Investment Income: Income: Dividends $ 3,409,396 $ 751,063 $ 1,171,825 Interest 2,128,863 1,196,718 102,709 Foreign tax withheld (25,107) (175) (123,113) -------------- ------------ -------------- Total income 5,513,152 1,947,606 1,151,421 -------------- ------------ -------------- Expenses: Investment management fees (Note 6) 7,008,712 5,759,180 611,884 Custodian fees 100,665 59,789 109,402 Directors' fees and expenses (Note 7) -- -- 56,000 Accounting expense -- -- 48,000 Audit fees -- -- 27,500 Insurance expense -- -- 14,448 Registration and filing fees -- -- 500 Miscellaneous expense 800 800 -- -------------- ------------ -------------- Total expenses before reimbursements 7,110,177 5,819,769 867,734 Expenses reimbursed by investment manager (Note 6) -- -- (52,016) -------------- ------------ -------------- Total net expenses 7,110,177 5,819,769 815,718 -------------- ------------ -------------- Net investment income (loss) (1,597,025) (3,872,163) 335,703 -------------- ------------ -------------- Net Realized and Unrealized Gain (Loss): Net realized gain on investments 193,437,239 131,224,344 13,462,120 Net realized gain (loss) on foreign currency transactions (369,678) 28 (3,264,704) -------------- ------------ -------------- Net realized gain 193,067,561 131,224,372 10,197,416 -------------- ------------ -------------- Net change in unrealized appreciation (depreciation) on foreign currency transactions (4,905) -- 754,985 Net change in unrealized appreciation (depreciation) on investments (40,741,787) (23,964,601) (798,106) -------------- ------------ -------------- Net unrealized depreciation (40,746,692) (23,964,601) (43,121) -------------- ------------ -------------- Net realized and unrealized gain during the year 152,320,869 107,259,771 10,154,295 -------------- ------------ -------------- Net Increase in Net Assets Resulting from Operations $150,723,844 $103,387,608 $ 10,489,998 -------------- ------------ -------------- -------------- ------------ --------------
The accompanying notes are an integral part of the financial statements. Page 28
Dresdner RCM Capital Funds, Inc. Statements of Changes in Net Assets Dresdner RCM -------------------------------------------------------------------------------------------- International Growth Growth Equity Fund Small Cap Fund Equity Fund A ----------------------------- ----------------------------- ----------------------------- Year ended Year ended Year ended Year ended Year ended Year ended Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1997 Dec. 31, 1996 ------------- -------------- ------------- -------------- ------------- ------------- Operations: Net investment income (loss) $ (1,597,025 ) $ (1,190,805) $ (3,872,163 ) $ (2,677,087) $ 335,703 $ 131,186 Net realized gain on investments and foreign currency transactions 193,067,561 303,698,527 131,224,372 107,844,093 10,197,416 3,309,861 Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions (40,746,692 ) (119,166,349) (23,964,601 ) 29,605,875 (43,121) 3,732,232 ------------- -------------- ------------- -------------- ------------- ------------- Net increase in net assets resulting from operations 150,723,844 183,341,373 103,387,608 134,772,881 10,489,998 7,173,279 Distributions to Shareholders from: Net investment income (Notes 1 and 2) -- -- -- -- (910,716) (558,945) Net realized gain on investments (Notes 1 and 2) (161,794,250 ) (355,168,907) (107,769,024 ) (123,397,033) (7,545,935) (3,074,200) Net increase (decrease) from capital share transactions (Note 4) 75,575,294 (257,142,802) 97,190,936 147,658,599 43,804,633 14,718,007 ------------- -------------- ------------- -------------- ------------- ------------- Total increase (decrease) in net assets 64,504,888 (428,970,336) 92,809,520 159,034,447 45,837,980 18,258,141 Net Assets: Beginning of year 896,320,150 1,325,290,486 568,601,116 409,566,669 52,604,949 34,346,808 ------------- -------------- ------------- -------------- ------------- ------------- End of year $960,825,038 $ 896,320,150 $661,410,636 $ 568,601,116 $98,442,929 $52,604,949 ------------- -------------- ------------- -------------- ------------- ------------- ------------- -------------- ------------- -------------- ------------- ------------- End of period net assets include accumulated net investment loss of: -- -- -- -- (540,987) (154,461) ------------- -------------- ------------- -------------- ------------- ------------- ------------- -------------- ------------- -------------- ------------- -------------
The accompanying notes are an integral part of the financial statements. Page 29
Dresdner RCM Capital Funds, Inc. Dresdner RCM Growth Equity Fund Financial Highlights For a share outstanding throughout each fiscal year ended December 31 1997(1) 1996(1)(2) 1995 1994 1993 - --------------------------------------------------------- --------- ----------- --------- --------- --------- Per Share Operating Performance: Net asset value, beginning of period $ 6.40 $ 9.13 $ 7.89 $ 10.42 $ 10.97 --------- ----------- --------- --------- --------- Net investment income (loss) (0.01) (0.01) 0.02 0.03 0.04 Net realized and unrealized gain (loss) on investments 1.08 1.59 2.66 0.01 1.08 --------- ----------- --------- --------- --------- Net increase (decrease) in net asset value resulting from investment operations 1.07 1.58 2.68 0.04 1.12 --------- ----------- --------- --------- --------- Distributions: Net investment income (0.00) (0.00) (0.02) (0.03) (0.04) Net realized gain on investments (1.24) (4.31) (1.42) (2.54) (1.63) --------- ----------- --------- --------- --------- Total distributions (1.24) (4.31) (1.44) (2.57) (1.67) --------- ----------- --------- --------- --------- Net asset value, end of period $ 6.23 $ 6.40 $ 9.13 $ 7.89 $ 10.42 --------- ----------- --------- --------- --------- --------- ----------- --------- --------- --------- Total Return (3) 17.50% 19.07% 34.53% 0.76% 10.72% --------- ----------- --------- --------- --------- --------- ----------- --------- --------- --------- Ratios and supplemental data: Net assets, end of period (in millions) $ 961 $ 896 $ 1,325 $ 1,365 $ 2,049 --------- ----------- --------- --------- --------- --------- ----------- --------- --------- --------- Ratio of expenses to average net assets 0.76% 0.84% 0.76% 0.83% 0.80% --------- ----------- --------- --------- --------- --------- ----------- --------- --------- --------- Ratio of net investment income (loss) to average net assets (0.17)% (0.12 )% 0.22% 0.22% 0.30% --------- ----------- --------- --------- --------- --------- ----------- --------- --------- --------- Portfolio turnover rate 155.10% 115.89% 96.46% 111.06% 67.00% --------- ----------- --------- --------- --------- --------- ----------- --------- --------- --------- Average commission per share (4) $ 0.0564 $ 0.0571 -- -- -- --------- ----------- --------- --------- --------- --------- ----------- --------- --------- ---------
- ------------------------------------ (1) Calculated using the average share method. (2) Stock split 25:1 at the close of business on June 17, 1996 (Note 4). All prior period per share amounts were restated to reflect the stock split. (3) Total return measures the change in value of an investment over the period indicated. (4) For fiscal years beginning on or after September 1, 1995, a fund is required to disclose its average commission rate per share for security trades on which commissions are charged. This amount may vary from period to period and fund to fund depending on the mix of trades executed in various markets where trading practices and commission rate structures may differ. The accompanying notes are an integral part of the financial statements. Page 30
Dresdner RCM Capital Funds, Inc. Dresdner RCM Small Cap Fund Financial Highlights For a share outstanding throughout each fiscal year ended December 31 1997(1) 1996(1)(2) 1995 1994 1993 - ---------------------------------------------------- ----------- ----------- --------- --------- --------- Per Share Operating Performance: Net asset value, beginning of period $ 11.77 $ 11.35 $ 9.42 $ 10.41 $ 10.15 ----------- ----------- --------- --------- --------- Net investment loss (0.08) (0.08) (0.04) (0.04) (0.00) Net realized and unrealized gain (loss) on investments 2.29 3.82 3.21 (0.20) 0.91 ----------- ----------- --------- --------- --------- Net increase (decrease) in net asset value resulting from investment operations 2.21 3.74 3.17 (0.24) 0.91 ----------- ----------- --------- --------- --------- Distributions: Net realized gain on investments (2.32) (3.32) (1.24) (0.75) (0.65) ----------- ----------- --------- --------- --------- Net asset value, end of period $ 11.66 $ 11.77 $ 11.35 $ 9.42 $ 10.41 ----------- ----------- --------- --------- --------- ----------- ----------- --------- --------- --------- Total Return (3) 19.49% 34.39% 34.08% (2.16)% 9.20% ----------- ----------- --------- --------- --------- ----------- ----------- --------- --------- --------- Ratios and supplemental data: Net assets, end of period (in millions) $ 661 $ 569 $ 410 $ 416 $ 660 ----------- ----------- --------- --------- --------- ----------- ----------- --------- --------- --------- Ratio of expenses to average net assets 1.02% 1.00% 1.01% 1.11% 0.90% ----------- ----------- --------- --------- --------- ----------- ----------- --------- --------- --------- Ratio of net investment income (loss) to average net assets (0.68 )% (0.58 )% (0.22)% (0.33)% 0.00% ----------- ----------- --------- --------- --------- ----------- ----------- --------- --------- --------- Portfolio turnover rate 117.64% 117.00% 83.91% 117.71% 80.00% ----------- ----------- --------- --------- --------- ----------- ----------- --------- --------- --------- Average commission per share (4) $ 0.0510 $ 0.0538 -- -- -- ----------- ----------- --------- --------- --------- ----------- ----------- --------- --------- ---------
- ------------------------------------ (1) Calculated using the average share method. (2) Stock split 12:1 at the close of business on June 17, 1996 (Note 4). All prior period per share amounts were restated to reflect the stock split. (3) Total return measures the change in value of an investment over the period indicated. (4) For fiscal years beginning on or after September 1, 1995, a fund is required to disclose its average commission rate per share for security trades on which commissions are charged. This amount may vary from period to period and fund to fund depending on the mix of trades executed in various markets where trading practices and commission rate structures may differ. The accompanying notes are an integral part of the financial statements. Page 31
Dresdner RCM Capital Funds, Inc. Dresdner RCM International Growth Equity Fund A Financial Highlights For a share outstanding throughout each fiscal year ended December 31 1997(1) 1996(1)(2) 1995 1994(3) - ------------------------------------------------------------ ----------- ----------- --------- ----------- Per Share Operating Performance: Net asset value, beginning of period $ 12.72 $ 11.56 $ 10.00 $ 10.00 ----------- ----------- --------- ----------- Net investment income 0.06 0.04 0.12 0.00 Net realized and unrealized gain (loss) on investments 2.22 2.16 1.68 (0.00) ----------- ----------- --------- ----------- Net increase in net asset value resulting from investment operations 2.28 2.20 1.80 0.00 ----------- ----------- --------- ----------- Distributions: Net investment income (0.14) (0.16) (0.11) (0.00) Net realized gain on investments (1.16) (0.88) (0.13) (0.00) ----------- ----------- --------- ----------- Total distributions (1.30) (1.04) (0.24) (0.00) ----------- ----------- --------- ----------- Net asset value, end of period $ 13.70 $ 12.72 $ 11.56 $ 10.00 ----------- ----------- --------- ----------- ----------- ----------- --------- ----------- Total Return (4) 17.93% 19.31% 17.98% 0.01% ----------- ----------- --------- ----------- ----------- ----------- --------- ----------- Ratios and supplemental data: Net assets, end of period (in millions) $ 98 $ 53 $ 34 $ 25 ----------- ----------- --------- ----------- ----------- ----------- --------- ----------- Ratio of expenses to average net assets: With reimbursement (Note 6) 1.00% 0.99% 0.75% 0.00%(6) ----------- ----------- --------- ----------- ----------- ----------- --------- ----------- Without reimbursement 1.06% 1.25% 1.11% -- ----------- ----------- --------- ----------- ----------- ----------- --------- ----------- Ratio of net investment income to average net assets: With reimbursement (Note 6) 0.41% 0.32% 1.19% 0.01%(6) ----------- ----------- --------- ----------- ----------- ----------- --------- ----------- Without reimbursement 0.35% 0.06% 0.83% -- ----------- ----------- --------- ----------- ----------- ----------- --------- ----------- Portfolio turnover rate 122.43% 119.09% 87.40% 0.00%(6) ----------- ----------- --------- ----------- ----------- ----------- --------- ----------- Average commission per share (5) $ 0.0235 $ 0.0179 $ -- $ -- ----------- ----------- --------- ----------- ----------- ----------- --------- -----------
- ------------------------------------ (1) Calculated using the average share method. (2) Stock split 10:1 at the close of business on June 17, 1996 (Note 4). All prior period per share amounts were restated to reflect the stock split. (3) Commencement of operation was December 28, 1994. (4) Total return measures the change in value of an investment over the period indicated. (5) For fiscal years beginning on or after September 1, 1995, a fund is required to disclose its average commission rate per share for security trades on which commissions are charged. This amount may vary from period to period and fund to fund depending on the mix of trades executed in various markets where trading practices and commission rate structures may differ. (6) Not annualized. Fund was in operation for four days. The accompanying notes are an integral part of the financial statements. Page 32 Dresdner RCM Capital Funds, Inc. Notes to Financial Statements December 31, 1997 1. SIGNIFICANT ACCOUNTING POLICIES Dresdner RCM Capital Funds, Inc. (previously RCM Capital Funds, Inc.) (the "Company") is organized as a Maryland corporation and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The Company consists of three series: Dresdner RCM Growth Equity Fund ("Growth Fund") and Dresdner RCM Small Cap Fund ("Small Cap Fund") are diversified, no-load series of the Company, and Dresdner RCM International Growth Equity Fund A ("International Fund") is a non-diversified, no-load series of the Company. These three series are collectively referred to as the "Funds." The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of their financial statements. The policies are in conformity with generally accepted accounting principles which require management to make estimates and assumptions that affect the reported amount of assets and liabilities. Actual results may differ from these estimates. A. SECURITIES VALUATIONS: Investment securities are stated at fair market value. Equity securities traded on stock exchanges are valued at the last sale price on the exchange or in the principal over-the-counter market in which such securities are traded as of the close of business on the day the securities are being valued. If there has been no sale on such day, then the security will be valued at the closing bid price on such day. If no bid price is quoted on such day, then the security will be valued by such method as a duly constituted committee of the Board of Directors of the Company shall determine in good faith to reflect its fair market value. Readily marketable securities traded only in the over-the-counter market that are not listed on NASDAQ or similar foreign reporting service will be valued at the mean bid price, or using such other comparable sources as the Board of Directors of the Company in good faith deems appropriate to reflect their fair market value. Other portfolio securities held by the Funds will be valued at current market value, if current market quotations are readily available for such securities. To the extent that market quotations are not readily available, such securities will be valued by whatever means a duly constituted committee of the Board of Directors of the Company in good faith deems appropriate to reflect their fair market value. Short-term investments with a maturity of 60 days or less are valued at amortized cost, which approximates market value. B. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME: Security transactions are recorded as of the date of purchase or sale. Realized gains and losses on security transactions are determined on the identified cost basis for both financial statement and federal income tax purposes. Interest income, foreign taxes and expenses are accrued daily. Dividends are recorded on the ex-dividend date, except certain dividends from foreign securities where the ex-dividend date may have passed, are recorded as soon as the Funds are informed of the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the security received. C. FOREIGN CURRENCY TRANSLATIONS: The books and records of the Funds are maintained in U.S. dollars. The value of investments, assets and liabilities denominated in currencies other than U.S. dollars are translated into U.S. dollars based upon current foreign exchange rates. Purchases and sales of foreign investments and income and expenses are converted into U.S. dollars based on currency exchange rates prevailing on the respective dates of such transactions. Net realized and unrealized Page 33 Dresdner RCM Capital Funds, Inc. Notes to Financial Statements December 31, 1997 1. SIGNIFICANT ACCOUNTING POLICIES (Continued) gain (loss) on foreign currency transactions represent: (1) foreign exchange gains and losses from the sale and holdings of foreign currencies; (2) gains and losses between trade date and settlement date on investment securities transactions and forward foreign currency exchange contracts; and (3) gains and losses from the difference between amounts of interest and dividends recorded and the amounts actually received. In addition, the Funds do not isolate that portion of the results of operations resulting from changes in exchange rates from the fluctuations resulting from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments. D. FORWARD FOREIGN CURRENCY CONTRACTS: A forward foreign currency contract ("Forward") is an agreement between two parties to buy and sell a currency at a set price on a future date. The International Fund may enter into Forwards in order to hedge foreign currency risk associated with its portfolio securities or for other risk management or investment purposes. The market value of the Forward fluctuates with changes in currency exchange rates. The Forward is marked-to-market daily and the change in market value is recorded by the International Fund as an unrealized appreciation or depreciation. When the Forward is closed, the International Fund records a realized gain or loss equal to the difference between the value at the time the Forward was opened and the value at the time it was closed. The International Fund could be exposed to risk of loss if the counterparty is unable to meet the terms of the contract or if the value of the currency changes unfavorably. E. FEDERAL INCOME TAXES: It is the policy of each of the Funds to comply with the requirements for qualification as a "regulated investment company" under the Internal Revenue Code of 1986, as amended (the "Code"). It is also the intention of the Funds to make distributions sufficient to avoid imposition of any excise tax under Section 4982 of the Code. Therefore, no provision has been made for Federal or excise taxes on income and capital gains. F. DISTRIBUTIONS: Distributions to shareholders are recorded by the Funds on the ex-dividend date. Income and capital gain distributions are determined in accordance with Federal income tax regulations which may differ from generally accepted accounting principles. These differences are primarily due to differing treatments for losses as a result of wash sales, foreign currency transactions and/or passive foreign investment companies. Page 34 Dresdner RCM Capital Funds, Inc. Notes to Financial Statements December 31, 1997 2. DISTRIBUTIONS On December 17, 1997, distributions were paid from investment operations for the Growth Fund, Small Cap Fund, and International Fund as indicated below. The dividends were recorded on December 17, 1997, to shareholders of record on the beginning of the day on December 17, 1997.
Investment Short-term Long-term Total Fund Income Capital Gain Capital Gain Distributions - ------------------------------------------------------------------------------------- Growth Fund Per Share -- $ 0.58 $ 0.66 $ 1.24 Amount -- $75,677,956 $86,116,294 1$61,794,250 Small Cap Fund Per Share -- $ 1.13 $ 1.19 $ 2.32 Amount -- $52,490,947 $55,278,077 1$07,769,024 International Fund Per Share $ 0.14 $ 0.57 $ 0.59 $ 1.30 Amount $ 910,716 $3,707,916 $3,838,019 $8,456,651
3. INVESTMENT IN FOREIGN SECURITIES AND CURRENCY Investing in foreign equity securities and currency transactions involves significant risks, some of which are not typically associated with investments of domestic origin. The International Fund's investments in foreign and emerging markets will subject the International Fund to the risk of foreign currency exchange rate fluctuations, perceived credit risk and adverse economic and political developments. 4. CAPITAL SHARES At December 31, 1997, there were 1,000,000,000 shares of the Company's common stock authorized, at $0.0001 par value. Of this amount, 300,000,000 were classified as shares of the Growth Fund; 100,000,000 were classified as shares of the Small Cap Fund; 100,000,000 were classified as shares of the International Fund; and 500,000,000 shares remain unclassified. As of the close of business on June 17, 1996, each outstanding share of capital stock of the Funds was split as follows:
Stock Outstanding Split Shares --------- ------------ Growth Fund 25 to 1 91,056,470 Small Cap Fund 12 to 1 33,476,643 International Fund 10 to 1 3,080,990
Page 35 Dresdner RCM Capital Funds, Inc. Notes to Financial Statements December 31, 1997 4. CAPITAL SHARES (Continued) Transactions in capital shares for the Funds shown below were restated to reflect the stock split: Capital Share Transactions
Year ended Year ended December 31, 1997 December 31, 1996 ------------------------ ------------------------ Growth Fund Shares Amount Shares Amount ---------- ------------ ---------- ------------ Shares sold 8,822,435 $ 58,202,047 5,272,649 $ 49,629,302 Shares issued in connection with reinvestment of distributions 26,780,241 160,413,644 56,967,931 351,492,134 Shares repurchased (21,422,817) (143,040,397) (67,435,650) (658,264,238) ---------- ------------ ---------- ------------ Net increase (decrease) 14,179,859 $ 75,575,294 (5,195,070) $(257,142,802) ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
Year ended Year ended December 31, 1997 December 31, 1996 ------------------------ ------------------------ Small Cap Fund Shares Amount Shares Amount ---------- ------------ ---------- ------------ Shares sold 7,791,481 $ 96,712,138 10,624,664 $145,473,916 Shares issued in connection with reinvestment of distributions 9,386,666 105,599,978 10,879,522 121,959,444 Shares repurchased (8,781,376) (105,121,180) (9,267,406) (119,774,761) ---------- ------------ ---------- ------------ Net increase 8,396,771 $ 97,190,936 12,236,780 $147,658,599 ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
Year ended Year ended December 31, 1997 December 31, 1996 ------------------------ ------------------------ International Fund Shares Amount Shares Amount ---------- ------------ ---------- ------------ Shares sold 2,586,189 $ 37,727,115 958,208 $ 12,239,598 Shares issued in connection with reinvestment of distributions 609,312 8,341,482 293,007 3,621,573 Shares repurchased (148,471) (2,263,964) (86,083) (1,143,164) ---------- ------------ ---------- ------------ Net increase 3,047,030 $ 43,804,633 1,165,132 $ 14,718,007 ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
At December 31, 1997, seven shareholders in the Growth Fund, five shareholders in the Small Cap Fund and four shareholders in the International Fund each held more than 5% of the outstanding shares of the respective Funds. These shareholders, in aggregate, held approximately 61% of the Growth Fund, 45% of the Small Cap Fund, and 77% of the International Fund. Page 36 Dresdner RCM Capital Funds, Inc. Notes to Financial Statements December 31, 1997 5. PURCHASES AND SALES OF SECURITIES The following summarizes purchases and sales of investment securities, other than short-term investments, by each Fund, for the year ended December 31, 1997. There were no purchases or sales of U.S. Government obligations by the Funds during the year. Purchases and Sales of Securities
Purchases ------------- Growth Fund $1,378,049,572 Small Cap Fund $ 655,148,852 International Fund $ 123,386,039
Sales ------------- Growth Fund $1,466,511,589 Small Cap Fund $ 697,560,723 International Fund $ 93,499,006
6. TRANSACTIONS WITH RELATED PARTIES Dresdner RCM Global Investors LLC (previously RCM Capital Management, L.L.C.) ("Dresdner RCM") manages the Funds' investments and provides various administrative services, subject to the authority of the Board of Directors. The Growth Fund, Small Cap Fund and International Fund pay investment management fees monthly at an annualized rate of 0.75%, 1.00% and 0.75%, respectively, of the Fund's respective average daily net assets. For the year ended December 31, 1997, investment management fees were $7,008,712 for the Growth Fund, $5,759,180 for the Small Cap Fund and $611,884 for the International Fund. The Funds are each responsible for the payment of certain of their operating expenses, including brokerage and commission expenses; taxes levied on the Funds; interest charges on borrowings (if any); charges and expenses of their custodian; and payment of investment management fees due to the Investment Manager. The International Fund is responsible for all of its other ordinary operating expenses (e.g., legal and audit fees, and SEC and "Blue Sky" registrations expenses), including its proportionate share of the compensation of the Company's directors; the Investment Manager is responsible for those expenses incurred by the Growth Fund and the Small Cap Fund. Dresdner RCM has voluntarily agreed to pay the International Fund on a monthly basis the amount, if any, by which certain ordinary operating expenses of the Fund exceed the annualized rate of 1.00% of the International Fund's average daily net assets. For the year ended December 31, 1997, Dresdner RCM reimbursed the International Fund for operating expenses totaling $52,016. On December 31, 1997, the Dresdner RCM Profit Sharing Plan, participation in which is limited to employees of Dresdner RCM, owned 337,106 shares of the Growth Fund, 601,276 shares of the Small Cap Fund and 392,048 shares of the International Fund. 7. DIRECTORS' FEES Each Director who is not an interested person of the Company receives from the Company an annual retainer of $9,000 (the retainer is evenly prorated among each series of the Company), plus $1,500 for each Board meeting attended for each series and $500 for each audit committee meeting attended for each series. Page 37 Report of Independent Accountants To the Board of Directors and Shareholders of Dresdner RCM Capital Funds, Inc.: We have audited the accompanying statements of assets and liabilities of Dresdner RCM Growth Equity Fund, Dresdner RCM Small Cap Fund, and Dresdner RCM International Growth Equity Fund A, three series of Dresdner RCM Capital Funds, Inc. (previously RCM Capital Funds, Inc.) (the "Funds"), including the statements of investments in securities and net assets, as of December 31, 1997, the related statements of operations for the year then ended and the related statements of changes in net assets and financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds' 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, 1997 by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial positions of the aforementioned series of Dresdner RCM Capital Funds, Inc., as of December 31, 1997, the results of their operations, changes in their net assets and their financial highlights for each of the periods indicated therein, in conformity with generally accepted accounting principles. Coopers & Lybrand L.L.P. Boston, Massachusetts February 20, 1998 Page 38 Tax Information (Unaudited) During the taxable year ended December 31, 1997, the Dresdner RCM International Growth Equity Fund A (the "Fund") paid foreign taxes of $123,113 and recognized $1,274,534 of foreign source income. Pursuant to section 853 of the Code, the Fund designates $0.02 per share of creditable foreign taxes paid and $0.18 of income from foreign sources received in the taxable year ended December 31, 1997. Page 39 INVESTMENT MANAGER Dresdner RCM Global Investors LLC Four Embarcadero Center San Francisco, California 94111 TRANSFER AND REDEMPTION AGENT State Street Bank and Trust Company 1776 Heritage Drive North Quincy, Massachusetts 02171 DISTRIBUTOR Funds Distributor, Inc. 60 State Street, Suite 1300 Boston, Massachusetts 02109 CUSTODIAN State Street Bank and Trust Company 1776 Heritage Drive North Quincy, Massachusetts 02171 LEGAL COUNSEL Paul, Hastings, Janofsky & Walker LLP 555 South Flower Street Los Angeles, California 90071 INDEPENDENT ACCOUNTANTS Coopers & Lybrand L.L.P. One Post Office Square Boston, Massachusetts 02109 Page 40 -----END PRIVACY-ENHANCED MESSAGE-----