-----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, CZaWShgSf9MwDKUxc25pY/goLEiAuAvpy2n/LEJzuVc12+qdpCu8oyklY3uB1A9c TYErXdD98rRZniLdh8/N2A== 0001047469-99-007750.txt : 19990302 0001047469-99-007750.hdr.sgml : 19990302 ACCESSION NUMBER: 0001047469-99-007750 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990301 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: 99553082 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 February 22, 1999 Dear Shareholders: We are pleased to present the Dresdner RCM Capital Funds (the "Funds") Annual Shareholder Report for the 12 months ended December 31, 1998. Inside, you will find discussions from the individual fund managers that describe the investment strategies they employed in response to last year's economic and market conditions. Each report also includes performance summaries, and lists of holdings and portfolio weightings as of the end of the reporting period. In identifying possible fund holdings, the Funds' managers draw on the research of more than 175 investment professionals. They also investigate market and economic variables through Grassroots Research -SM-, a division of Dresdner RCM Global Investors LLC. The Funds' managers believe that Grassroots Research -SM- can be a valuable adjunct to their traditional research efforts by providing a "second look" at companies or by checking marketplace assumptions concerning market demands for particular products and services. A seasoned team of staff economists supplements these reports with macroeconomics assessments of regional and global trends. While markets performed relatively well in the first half of the year, the fragility of emerging markets in Asia and Latin America led to a market downturn by the third quarter, after Russia announced it was defaulting on its foreign debt. As the fourth quarter got underway, central banks in the U.S. and elsewhere instituted a series of cuts in short-term interest rates in an effort to reverse slowing economic growth. These measures reassured investors and the markets rebounded dramatically toward year-end, leading the blue chip indices to a record fourth consecutive year of strong returns. Over this challenging period, the Funds continued to focus on a bottom-up analysis of company fundamentals combined with a careful assessment of projected earnings growth. The fund managers applied these criteria to selecting attractive stocks with quality earnings and buying them at reasonable valuations. We would also like to take this opportunity to assure shareholders that Dresdner RCM has committed considerable effort and resources to avoid difficulties related to the so-called "Y2K" effect associated with the Year 2000. Beginning with a study initiated in 1996 that detailed the need to replace the core portfolio accounting system with new Y2K-compliant technology, the company has made Year 2000 readiness a priority. A three-step process has been established to address Y2K dating issues. Our first objective is to make critical in-house applications compliant by the end of the first quarter of 1999, either through upgrading or the acquisition of new technology. These applications include portfolio accounting and trade support. Our second objective is to ensure critical vendor systems (including Custody and Transfer Agent) are Y2K-compliant by mid-1999. The third objective is to perform all other upgrades necessary to make the company's internal environment fully compliant. As a result, no disruption to client services is anticipated before, during or after the turn of the century. However, while Dresdner RCM is taking all precautions as an organization, Y2K problems could adversely affect companies in which the Fund invests. For example, companies may incur substantial costs to address the problem or they may suffer losses caused by corporate or governmental data-processing errors. To the extent that the repercussion on a portfolio holding is negative, it might impact the Fund's investment return. We believe that our strong commitment to value and performance built on a rigorous company-by-company approach has served the Funds well in 1998 and we are looking forward to another successful year in 1999. We thank you for your continued interest and support. Sincerely, /s/ DeWitt Bowman DeWitt Bowman Chairman of the Funds 1 Dresdner RCM Growth Equity Fund Management's Performance Review For the 12 months ended December 31, 1998, the Dresdner RCM Growth Equity Fund (the "Fund") earned a total return of 15.06%. Solid performance in the first half of the year and a very strong fourth quarter helped the Fund to outperform its primary benchmark, the Russell Midcap Index, by a margin of nearly 5%. The Russell Midcap Index had a return of 10.10% for 1998, while the average return of 327 mid cap funds tracked by Lipper Analytical Services was 12.16% for the year. MARKET OVERVIEW In the first half of the year, persistent concerns about the economic viability of the Asian economies and the potential negative impact a further decline in this region might have on U.S. equity markets caused a major move to the "safer" and more liquid large cap stocks. As the third quarter got under way, continuing economic weakness in Asia and a declining trend in corporate earnings caused equity markets to cool. Investor confidence was further shaken by Russia's debt default in late August, and global equity markets experienced a sharp sell-off as investors sought the relative safety of U.S. Treasury bonds. Throughout this process, we concentrated the portfolio on stocks with consistent, high-quality earnings with a low reliance on external financing and limited foreign exposure. By the fourth quarter, we believed that conditions had reached a point where the correction more than adequately reflected the current market fundamentals. During the fourth quarter, we upgraded the quality of the portfolio to position ourselves to participate in any market rebound. This positioning helped the Fund achieve a return of 29.63%, the second-best quarter in its history. INVESTMENT APPROACH We focus on those companies with sustainable earnings growth, unique market niches, and proprietary products and services. Additionally, the integrity of management with common incentives and a well-capitalized balance sheet are important drivers in our purchase decision. Finally, we look for companies with attractive valuations relative to the market, their peer group or their historical trading range. We use the Russell Midcap Index for performance comparisons, but it is not a factor in determining sector weightings. SECTOR HIGHLIGHTS The Fund's outperformance was due to a combination of industry weighting and security selection. Our focus on growth investing led to our decision to overweight the technology, healthcare and consumer discretionary industries. In technology, our positions in software and telecommunications equipment added to our performance as both expectations and near-term catalysts were achieved. Meanwhile, our Internet holdings including Yahoo Inc. and Amazon.com Inc. positively impacted results as investors focused on the upside potential inherent in their business models and more specifically, the success of electronic commerce during the holiday season. Additionally, our holdings in the healthcare sector including Guidant Corp., Stryker Corp., Bausch and Lomb and Sofamor-Danek Corp. benefited from strong fundamental operating performance and a favorable valuation umbrella provided by their large cap pharmaceutical brethren. Furthermore, Office Depot, Circuit City and Costco positively impacted the portfolio as management teams consistently executed during the year and strong consumer spending trends continued into the holiday season. Meanwhile, the Fund was negatively impacted on a stock-specific level in individual holdings and in the health care services industry broadly. OUTLOOK Looking forward, we remain committed to our intensive bottom-up, research-driven decision-making process. Specifically, our strategy in the retail sector has focused on consumer-driven companies given our expectation that sales trends will continue to be above the general consensus view as a result of the strong consumer trends witnessed during the fourth quarter. Additionally, our technology investments emphasize the cyclical industries tied to the strong demand for PC's and semiconductors as well as the demand for increased storage tied to the rapid development of the data market. Finally, we plan to continue to underweight the cyclical sectors of the portfolio while focusing on domestic, consistent and predictable growth companies which should continue to benefit in this market environment. Page 2 Dresdner RCM Growth Equity Fund Performance Summary [EDGAR REPRESENTATION OF PLOT POINTS USED IN GRAPHIC]
FUND RUSSELL MIDCAP INDEX 1979 $10,000 $10,000 1979 $10,393 $10,740 1979 $10,719 $11,158 1980 $11,210 $11,777 1980 $10,792 $11,516 1980 $9,599 $9,996 1980 $10,028 $10,641 1980 $10,856 $11,467 1980 $11,315 $12,024 1980 $12,980 $13,034 1980 $13,656 $13,375 1980 $14,396 $13,821 1980 $14,878 $13,966 1980 $15,935 $15,074 1980 $15,665 $14,784 1981 $15,304 $14,439 1981 $15,725 $14,694 1981 $17,588 $15,843 1981 $18,134 $15,918 1981 $19,279 $16,306 1981 $18,560 $16,008 1981 $18,247 $15,809 1981 $17,371 $14,908 1981 $16,587 $13,951 1981 $18,157 $14,914 1981 $18,503 $15,518 1981 $18,211 $15,139 1982 $17,929 $14,583 1982 $17,527 $13,964 1982 $17,476 $13,825 1982 $18,682 $14,486 1982 $18,511 $13,970 1982 $18,441 $13,595 1982 $18,512 $13,274 1982 $20,047 $14,871 1982 $20,666 $15,293 1982 $23,233 $17,338 1982 $25,235 $18,395 1982 $25,710 $18,660 1983 $27,172 $19,319 1983 $28,967 $19,987 1983 $30,108 $20,691 1983 $32,700 $21,984 1983 $34,645 $22,903 1983 $36,064 $23,737 1983 $34,391 $22,991 1983 $33,610 $22,846 1983 $34,935 $23,486 1983 $33,413 $22,575 1983 $34,930 $23,541 1983 $34,348 $23,105 1984 $32,764 $22,449 1984 $31,089 $21,235 1984 $31,709 $21,587 1984 $31,839 $21,350 1984 $30,674 $20,146 1984 $32,051 $20,774 1984 $31,196 $20,166 1984 $34,191 $22,684 1984 $33,648 $22,791 1984 $33,611 $22,880 1984 $32,993 $22,784 1984 $33,496 $23,435 1985 $37,254 $25,659 1985 $38,042 $26,119 1985 $37,399 $25,970 1985 $36,747 $25,894 1985 $39,165 $27,365 1985 $39,965 $28,030 1985 $40,928 $27,994 1985 $40,385 $27,876 1985 $38,429 $26,510 1985 $40,118 $27,883 1985 $42,578 $29,810 1985 $44,235 $30,937 1986 $45,046 $31,633 1986 $48,307 $34,205 1986 $49,783 $36,003 1986 $50,541 $35,845 1986 $52,554 $37,701 1986 $51,571 $38,216 1986 $47,374 $35,687 1986 $49,140 $38,219 1986 $45,601 $35,511 1986 $48,335 $37,364 1986 $48,946 $37,640 1986 $48,361 $36,569 1987 $54,951 $41,072 1987 $59,189 $43,530 1987 $60,968 $43,942 1987 $60,390 $42,842 1987 $62,092 $42,989 1987 $64,592 $44,737 1987 $67,740 $46,653 1987 $70,486 $48,302 1987 $68,483 $47,379 1987 $49,455 $35,710 1987 $47,006 $33,727 1987 $53,665 $36,652 1988 $53,930 $38,355 1988 $58,780 $41,072 1988 $60,415 $41,126 1988 $61,386 $41,380 1988 $60,234 $41,283 1988 $64,720 $44,110 1988 $63,335 $43,225 1988 $61,789 $42,264 1988 $64,192 $43,702 1988 $63,486 $43,889 1988 $62,127 $42,836 1988 $64,859 $43,910 1989 $68,192 $46,537 1989 $67,612 $46,427 1989 $68,994 $47,190 1989 $73,125 $49,465 1989 $77,254 $51,695 1989 $74,440 $51,503 1989 $79,915 $55,093 1989 $83,387 $56,935 1989 $83,428 $56,413 1989 $79,787 $53,752 1989 $80,873 $54,489 1989 $82,292 $55,446 1990 $75,120 $50,999 1990 $77,825 $52,033 1990 $80,029 $53,300 1990 $78,163 $51,011 1990 $86,194 $55,632 1990 $87,034 $55,271 1990 $84,425 $53,628 1990 $75,868 $47,860 1990 $71,033 $44,312 1990 $69,568 $42,913 1990 $75,112 $47,046 1990 $78,902 $49,072 1991 $85,003 $52,398 1991 $92,631 $56,764 1991 $97,028 $59,119 1991 $96,459 $59,474 1991 $101,948 $62,298 1991 $96,909 $59,427 1991 $102,335 $62,340 1991 $105,602 $64,204 1991 $105,329 $63,830 1991 $108,557 $65,138 1991 $104,724 $62,445 1991 $116,960 $69,442 1992 $119,326 $70,748 1992 $120,948 $72,373 1992 $115,847 $70,524 1992 $113,545 $71,075 1992 $114,312 $71,534 1992 $108,991 $70,374 1992 $112,618 $73,316 1992 $110,272 $71,628 1992 $113,146 $73,113 1992 $117,301 $74,902 1992 $122,190 $78,677 1992 $125,186 $80,789 1993 $125,594 $82,405 1993 $121,886 $82,496 1993 $124,822 $85,179 1993 $121,150 $82,922 1993 $126,171 $85,555 1993 $126,630 $86,522 1993 $125,543 $86,939 1993 $131,747 $90,806 1993 $134,398 $91,153 1993 $135,795 $91,229 1993 $131,931 $89,113 1993 $138,604 $92,341 1994 $143,687 $94,889 1994 $142,568 $93,598 1994 $134,622 $89,611 1994 $135,889 $90,226 1994 $134,603 $90,349 1994 $130,975 $87,673 1994 $132,730 $90,682 1994 $141,423 $94,981 1994 $140,120 $92,660 1994 $142,420 $93,369 1994 $137,052 $89,250 1994 $139,650 $90,409 1995 $140,145 $92,266 1995 $146,023 $97,042 1995 $151,805 $99,819 1995 $152,385 $101,324 1995 $155,053 $104,654 1995 $162,810 $108,171 1995 $174,821 $113,423 1995 $177,454 $115,160 1995 $183,158 $117,762 1995 $179,789 $115,128 1995 $185,416 $120,853 1995 $187,880 $121,558 1996 $190,835 $124,137 1996 $200,326 $127,052 1996 $203,882 $128,890 1996 $212,394 $132,542 1996 $215,917 $134,544 1996 $206,821 $132,526 1996 $188,917 $124,324 1996 $198,795 $130,243 1996 $211,760 $136,676 1996 $211,966 $137,772 1996 $222,461 $146,165 1996 $223,710 $144,673 1997 $229,653 $150,085 1997 $218,817 $149,858 1997 $204,835 $143,388 1997 $209,029 $147,059 1997 $236,993 $157,788 1997 $243,285 $162,951 1997 $260,762 $176,549 1997 $257,966 $174,642 1997 $275,443 $184,614 1997 $259,015 $177,433 1997 $257,966 $181,656 1997 $262,848 $186,669 1998 $259,895 $183,160 1998 $287,741 $197,483 1998 $303,773 $206,843 1998 309,680.18 $207,360 1998 $291,960 $200,953 1998 $302,508 $203,746 1998 $285,210 $194,028 1998 $224,033 $162,983 1998 $233,315 $173,528 1998 $256,520 $185,363 1998 $273,396 $194,149 1998 $302,435 $205,546
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 2,924.35%(b) for the Fund. The average annual total return from the Fund's inception was 19.47%.(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, 1998 - --------------------------------------------- LIFE OF 1 YEAR 5 YEAR 10 YEAR FUND(c) - --------------------------------------------- 15.06% 16.89% 16.65% 19.47% - ---------------------------------------------
The data above represents 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 the 3,000 largest U.S. companies by 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 November 6, 1979. Page 3 Dresdner RCM Growth Equity Fund Portfolio of Investments December 31, 1998
% OF MARKET VALUE SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS (NOTE 1) - ----------------------------------------------------------------------------------------------------------------------------- CONSUMER DURABLES SECTOR 1.6% AUTOMOTIVE RELATED 1.4% 567,200 US Tower Automotive Inc. $ 14,144,550 CONSUMER DURABLES 0.2% 82,000 US Furniture Brands International Inc. 2,234,500 CONSUMER NON-DURABLES SECTOR 14.8% BEVERAGE/TOBACCO 0.3% 90,000 US Coca-Cola Enterprises Inc. 3,217,500 FOOD/FOOD PROCESSING 0.5% 84,000 US Hershey Foods Corp. 5,223,750 HOUSEHOLD/RELATED NON-DURABLES 1.0% 64,000 US Avon Products Inc. 2,832,000 19,000 US Clorox Co. 2,219,438 158,000 US Dial Corp. 4,562,250 ------------------ 9,613,688 ------------------ LEISURE TIME PRODUCTS/SERVICES 2.8% 439,700 US Host Marriott Corp. 6,073,356 194,700 US Speedway Motorsports Inc. * 5,548,950 305,900 US Tricon Global Restaurants Inc. 15,333,238 ------------------ 26,955,544 ------------------ RETAIL TRADE 10.2% 161,900 US Bed Bath & Beyond Inc. 5,524,838 369,300 US Circuit City Stores Inc. 18,441,919 253,700 US Costco Cos. Inc. * 18,313,969 659,600 US Family Dollar Stores Inc. 14,511,200 97,000 US Fred Meyer Inc. * 5,844,250 55,100 US Lowe's Companies Inc. 2,820,431 430,300 US Nordstrom Inc. 14,926,031 525,000 US Office Depot Inc. * 19,392,188 ------------------ 99,774,826 ------------------
The accompanying notes are an integral part of the financial statements. Page 4
% OF MARKET VALUE SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS (NOTE 1) - ----------------------------------------------------------------------------------------------------------------------------- CYCLICAL/CAPITAL GOODS SECTOR 6.4% AEROSPACE/DEFENSE 0.6% 96,000 US General Dynamics Corp. * $ 5,628,000 BUILDING/CONSTRUCTION 2.0% 307,900 US Martin Marietta Materials Inc. 19,147,531 CHEMICALS/TEXTILES 0.4% 112,000 US Praxair Inc. 3,948,000 ELECTRICAL EQUIPMENT 1.7% 112,500 US Honeywell Inc. 8,472,656 126,000 US Rockwell International Corp. 6,118,875 50,000 US W. W. Grainger Inc. 2,081,250 ------------------ 16,672,781 ------------------ TRANSPORTATION SERVICES 1.7% 290,600 US CNF Transportation Inc. 10,915,663 189,000 US Swift Transportation Co. Inc. 5,297,906 ------------------ 16,213,569 ------------------ ENERGY SECTOR 2.2% ENERGY 2.2% 314,300 US Burlington Resources Inc. 11,255,869 167,000 FR Coflexip S.A. (ADR) 5,364,875 665,000 US Stolt Comex Seaway S.A. 4,488,750 ------------------ 21,109,494 ------------------ HEALTH CARE SECTOR 18.2% DRUGS AND HOSPITAL SUPPLIES 8.9% 353,900 US Alza Corp. * 18,491,275 220,600 US Bausch & Lomb Inc. 13,236,000 129,100 US Genentech Inc. 10,287,656 89,100 US Guidant Corp. 9,823,275 26,200 US Perkin Elmer Corp. 2,556,138 31,000 US Sepracor Inc. * 2,731,875 88,300 US Sofamor/Danek Group Inc. * 10,750,525 348,600 US Stryker Corp. 19,194,788 ------------------ 87,071,532 ------------------
The accompanying notes are an integral part of the financial statements. Page 5
% OF MARKET VALUE SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS (NOTE 1) - ----------------------------------------------------------------------------------------------------------------------------- HEALTH CARE SERVICES 9.3% 150,800 US Allegiance Corp. $ 7,031,050 404,700 US Bergen Brunswig Corp. 14,113,913 238,700 US Cardinal Health Inc. 18,111,363 284,500 US Covance Inc. * 8,286,063 211,600 US HCR Manor Care Inc. * 6,215,750 422,700 US Health Management Associates Inc. 9,140,888 311,500 US Omnicare Inc. 10,824,625 120,000 US Orthodontic Centers of America Inc. * 2,332,500 279,200 US Universal Health Services Inc. Class B * 14,483,500 ------------------ 90,539,652 ------------------ INTEREST-SENSITIVE SECTOR 9.2% BANKING 7.1% 83,000 US CCB Financial Corp. 4,731,000 267,200 US City National Corp. 11,122,200 180,000 US First Security Corp. 4,207,500 147,000 US Firstar Corp. 13,707,750 555,000 US North Fork Bancorporation Inc. 13,285,313 94,000 US Southtrust Corp. 3,472,125 290,300 US WestAmerica Bancorporation 10,668,525 124,200 US Zions Bancorp 7,746,975 ------------------ 68,941,388 ------------------ GENERAL FINANCE 2.1% 168,000 US AMRESCO Inc. * 1,470,000 159,000 US Charter One Financial Inc. 4,412,250 43,970 US Crestline Capital Corp. * 643,061 573,500 US Federated Investors Inc. Class B 10,394,688 144,000 US TCF Financial Corp. 3,483,000 ------------------ 20,402,999 ------------------ TECHNOLOGY SECTOR 24.4% COMPUTERS/OFFICE EQUIPMENT 2.5% 241,600 US Network Appliance Inc. 10,872,000 374,500 US Seagate Technology * 11,328,625 60,000 US Tech Data Corp. * 2,415,000 ------------------ 24,615,625 ------------------
The accompanying notes are an integral part of the financial statements. Page 6
% OF MARKET VALUE SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS (NOTE 1) - ----------------------------------------------------------------------------------------------------------------------------- ELECTRONICS/NEW TECHNOLOGY 10.7% 303,900 US 3Com Corp. * $ 13,618,519 224,200 US Altera Corp. * 13,648,175 215,400 US Ascend Communications Inc. * 14,162,550 100,000 US KLA Tencor Corp. * 4,337,500 250,100 US Maxim Integrated Products Inc. * 10,926,244 180,500 US Micron Technologies Inc. * 9,126,531 347,100 CA Newbridge Networks Corp. * 10,543,163 112,500 US Sanmina Corp. 7,031,250 118,040 US STMicroelectronics N.V. NY Registry * 9,214,498 164,500 US Uniphase Corp. * 11,412,188 ------------------ 104,020,618 ------------------ TECHNOLOGY SERVICES 11.2% 6,880 US Amazon.com Inc. 2,210,200 321,000 US Aspen Technologies Inc. * 4,654,500 194,200 US BMC Software Inc. 8,654,038 254,000 IE CBT Group PLC (ADR) 3,778,250 106,100 US Ceridian Corp. * 7,407,106 143,800 US Citrix Systems Inc. 13,957,588 92,400 US Electronics Arts Inc. * 5,185,950 152,600 US I2 Technologies Inc. 4,635,225 77,650 US Infoseek Corp. * 3,833,969 269,400 US Network Associates Inc. 17,847,750 7,400 IE Saville Systems PLC (ADR) * 140,600 68,000 US Sterling Commerce Inc. * 3,060,000 195,500 US VERITAS Software Co. 11,717,781 435,600 US Visio Corp. * 15,926,625 54,000 US Wind River Systems Inc. * 2,538,000 18,000 US Yahoo Inc. * 4,264,865 ------------------ 109,812,447 ------------------ TELEMEDIA/SERVICES SECTOR 16.0% BUSINESS SERVICES 4.3% 761,000 US Allied Waste Industries Inc. 17,978,625 116,500 US Fiserv Inc. 5,992,469 7,000 US MSC Industrial Direct Inc. 158,375 34,400 UK Select Appointments Holdings PLC (ADR) 739,600 620,500 US Sybron International Corp. Wisconsin 16,869,844 ------------------ 41,738,913 ------------------
The accompanying notes are an integral part of the financial statements. Page 7
% OF MARKET VALUE SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS (NOTE 1) - ----------------------------------------------------------------------------------------------------------------------------- COMMUNICATIONS SERVICES 9.4% 305,900 US Cincinnati Bell Inc. $ 6,594,738 98,000 US Frontier Corp. 3,332,000 228,400 US Global TeleSystems Group Inc. * 12,733,300 680,300 US ICG Communications Inc. * 14,626,450 230,000 US Intermedia Communications of Florida Inc. 3,967,500 183,500 BE Loral Space & Communications * 3,268,594 262,900 US McLeod Inc. * 8,215,625 552,900 US Nextel Communications Inc. * 13,062,263 316,000 US Omnipoint Corp. 2,942,750 220,200 US Snyder Communications Inc. * 7,431,750 714,700 US Western Wireless Corp. Class A * 15,723,400 ------------------ 91,898,370 ------------------ MEDIA 2.3% 42,000 US Acxiom Corp. * 1,302,000 121,300 US Apollo Group Inc. 4,109,038 550,500 US Sylvan Learning Systems Inc. 16,790,250 ------------------ 22,201,288 ------------------ TOTAL EQUITY INVESTMENTS (COST $772,258,805) 92.8% 905,126,565 ------------------ SHORT-TERM INVESTMENTS MONEY MARKET FUNDS 5.0% 24,486,079 US SSgA Money Market Fund 24,486,079 24,486,080 US SSgA U.S. Government Money Market Fund 24,486,080 ------------------ ------------------ 48,972,159 ------------------ TOTAL SHORT-TERM INVESTMENTS (COST $48,972,159) 5.0% 48,972,159 ------------------ TOTAL INVESTMENTS (COST $821,230,964) ** 97.8% 954,098,724 OTHER ASSETS LESS LIABILITIES 2.2% 21,164,053 ------------------ NET ASSETS 100.0% $ 975,262,777 ------------------ ------------------
- ------------------------------ * Non-income producing security. ADR American Depository Receipt? Tax information: ** For Federal income tax purposes, cost is $849,159,046 and the gross aggregate unrealized appreciation (depreciation) for all securities is as follows: Unrealized appreciation $ 140,808,851 Unrealized depreciation (35,869,173) --------------- Net unrealized appreciation $ 104,939,678 --------------- ---------------
The accompanying notes are an integral part of the financial statements. Page 8 Dresdner RCM Growth Equity Fund Portfolio of Investments December 31, 1998 The Fund's investments in securities at December 31, 1998, categorized by country:
% OF NET ASSETS ------------------------------------------- COUNTRY SHORT-TERM COUNTRY CODE EQUITIES AND OTHER TOTAL ----------------------------------------------------------------------------------- Bermuda BE 0.3% 0.3% Canada CA 1.1% 1.1% France FR 0.6% 0.6% Ireland IE 0.4% 0.4% United Kingdom UK 0.1% 0.1% United States US 90.3% 7.2% 97.5% ------------------------------------------- ------------------------------------------- Total 92.8% 7.2% 100.0% ------------------------------------------- -------------------------------------------
The accompanying notes are an integral part of the financial statements. Page 9 Dresdner RCM Small Cap Fund Management's Performance Review For the 12 months ended December 31, 1998, the Dresdner RCM Small Cap Fund (the "Fund") earned a total return of 1.11%, versus a return of -2.54% for the Fund's primary benchmark, the Russell 2000 Index. MARKET OVERVIEW The gulf between small cap and large cap stocks continued to widen in 1998 as nervous investors sought the liquidity and familiarity of blue chip growth stocks, particularly in the second and third quarters. During the third quarter retreat from equities brought on by turmoil in the world's financial markets, we remained committed to staying as fully invested as possible. Opportunistic positioning of the portfolio allowed the Fund to take full advantage of the fourth quarter rally that occurred in the wake of interest rate cuts by the Federal Reserve. While reflecting trends in the broader market, growth stocks did experience unaccustomed dominance over value in the small cap universe, a trend that benefited the Fund. For the year, the Russell 2000 Value Index lagged the Russell 2000 Growth Index by a margin of 7.68%. INVESTMENT APPROACH As bottom-up investors, we focus primarily on well-managed companies with clearly defined market niches, as well as quality products and services with attractive growth prospects. In last year's difficult small cap environment, the Fund's outperformance owed more to industry strategy - which added 4.62% to the portfolio's overall return - than selection of individual issues. However, our exceptional fourth quarter performance was a function of both relative industry selection and individual stock selection. SECTOR HIGHLIGHTS In the first half of the year, investments in growth issues such as VISX, Lason Holdings and Micros Systems contributed most to the portfolio's momentum. During this period, we also began to trim our exposure to a number of sectors. We cut back on health care services because of concerns surrounding federal reimbursement policies, and trimmed our energy exposure because of sharp declines in world oil prices. At the same time, we increased our holdings in technology and business services with outsourcing themes, continuing this strategy into the second half of the year. Even as prices in the technology sector dropped in the wake of market turbulence in late summer and early fall, we had been taking advantage of increasingly reasonable valuations to add high-quality stocks to our holdings, both in software and hardware. We also increased existing positions we deemed to have above-average growth potential. When the market rebounded in early October, we were well positioned to take advantage of the upturn, particularly because the rally in the Russell 2000 was very narrowly focused on technology. Holdings that made substantial contributions to the Fund's performance include Sanmina Corp., Semtech, Hadco, Visio, Maxtor, and Rational Software. Outside of technology, we strongly favored companies with strong cash flows that had the ability to grow without borrowing from the capital markets. Many of these additions, which we acquired at very attractive prices, were in the business services group and included F.Y.I. Inc., Travel Services, Personnel Group of America, Romac International, SFX and especially NCO Group. These are all strong franchises that contributed significantly to the Fund's outpacing its benchmark by a 10% margin. OUTLOOK As we begin 1999, the spread between the valuations of large cap and small cap stocks continues to widen, despite the higher expected earnings growth of smaller stocks. We believe that this presents attractive opportunities. The relative strength of the small caps is broadening and this will be beneficial to the overall indices going forward. In the longer term, a shift in investor focus may have to await a general improvement in the health of world equity markets. Our approach will be to continue to apply rigorous bottom-up analysis, focus on high-quality growth stocks within and across industries, and to remain fully invested. Page 10 Dresdner RCM Small Cap Fund Performance Summary [cad 157]EDGAR REPRESENTATION OF PLOT POINTS USED IN GRAPHIC[cad 179]
FUND RUSSELL 2000 INDEX 12/31/91 $10,000 $10,000 92 $10,000 $10,000 92 $10,786 $10,811 92 $11,118 $11,127 92 $10,850 $10,751 92 $10,613 $10,373 92 $10,703 $10,511 92 $10,165 $10,017 92 $10,530 $10,366 92 $10,336 $10,072 92 $10,603 $10,304 92 $11,002 $10,630 92 $11,807 $11,444 92 $12,214 $11,842 93 $12,212 $12,242 93 $11,792 $11,960 93 $12,082 $12,348 93 $11,636 $12,008 93 $12,102 $12,539 93 $12,134 $12,617 93 $12,126 $12,791 93 $12,580 $13,344 93 $13,037 $13,720 93 $13,186 $14,074 93 $12,728 $13,615 93 $13,337 $14,080 94 $13,592 $14,522 94 $13,431 $14,469 94 $12,712 $13,707 94 $12,637 $13,788 94 $12,411 $13,633 94 $11,990 $13,173 6/31/94 $12,173 $13,390 94 $13,095 $14,136 94 $13,073 $14,088 94 $13,240 $14,031 94 $12,765 $13,464 94 $13,049 $13,824 95 $12,958 $13,649 95 $13,392 $14,217 95 $13,900 $14,461 95 $14,064 $14,782 95 $14,030 $15,037 95 $14,728 $15,817 95 $15,706 $16,728 95 $16,245 $17,074 95 $16,900 $17,380 95 $16,330 $16,602 11/31/95 $16,882 $17,300 95 $17,496 $17,756 96 $17,973 $17,737 96 $18,914 $18,290 96 $19,374 $18,662 4//30/96 $20,684 $19,660 96 $21,660 $20,435 96 $20,993 $19,596 96 $18,958 $17,884 96 $20,592 $18,923 96 $22,457 $19,662 96 $22,226 $19,359 96 $22,488 $20,157 96 $23,514 $20,685 97 $23,754 $21,098 97 $22,335 $20,587 97 $20,877 $19,615 97 $20,357 $19,670 97 $23,953 $21,858 97 $25,312 $22,795 97 $26,750 $23,856 97 $27,350 $24,403 97 $29,867 $26,189 97 $28,508 $25,039 97 $28,329 $24,877 97 $28,098 $25,312 98 $27,929 $24,912 98 $30,435 $26,753 98 $31,520 $27,855 98 $31,496 $28,009 98 $29,688 $26,499 98 $30,700 $26,555 98 $28,339 $24,404 98 $20,989 $19,664 98 $22,531 $21,204 98 $24,290 $22,069 98 $26,483 $23,226 98 $28,411 $24,663
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 184.11%(b) for the Fund. The average annual total return from the Fund's inception was 16.09%.(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, 1998
- ------------------------------------------------------ LIFE OF 1 YEAR 5 YEAR FUND(c) - ------------------------------------------------------ 1.11% 16.33% 16.09% - ------------------------------------------------------
The data above represents 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 by 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 11 Dresdner RCM Small Cap Fund Portfolio of Investments December 31, 1998
% OF MARKET VALUE SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS (NOTE 1) - ----------------------------------------------------------------------------------------------------------------------------- CONSUMER DURABLES SECTOR 3.9% AUTOMOTIVE RELATED 2.7% 202,600 US Dura Automotive Systems Inc. * $ 6,913,725 385,000 US Keystone Automotive Industries Inc. * 8,060,938 ----------------- 14,974,663 ----------------- CONSUMER DURABLES 1.2% 125,000 US Furniture Brands International Inc. 3,391,700 408,844 US Windmere Durable Holdings Inc. * 3,168,541 ----------------- 6,560,241 ----------------- CONSUMER NON-DURABLES SECTOR 18.9% FOOD/FOOD PROCESSING TOTAL 1.1% 600,057 US Omega Protein Corp. * 6,075,577 HOUSEHOLD/RELATED NON-DURABLES 3.7% 532,925 US French Fragrances Inc. * 3,863,706 266,600 US Ocular Sciences Inc. * 7,131,550 246,132 US Scotts Co. * 9,460,699 ----------------- 20,455,955 ----------------- LEISURE TIME PRODUCTS/SERVICES 5.5% 357,600 US Cheesecake Factory Inc. 10,605,075 356,665 US Dave & Buster's Inc. * 8,225,587 75,000 US Family Golf Centers Inc. 1,481,250 132,900 US Speedway Motorsports Inc. * 3,787,650 221,300 US Travel Services International Inc. 6,749,650 ----------------- 30,849,212 ----------------- RETAIL TRADE 8.6% 75,000 US Cost Plus Inc. * 2,353,125 442,000 US CSK Auto Corp. * 11,795,875 320,800 US Electronics Boutique Holdings Corp. * 6,536,300 365,000 US Regis Corp. 14,600,000 244,500 US Select Comfort Corp. * 6,463,969 333,000 US Trans World Entertaniment Corp. 6,347,813 ----------------- 48,097,082 -----------------
The accompanying notes are an integral part of the financial statements. Page 12
% OF MARKET VALUE SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS (NOTE 1) - ----------------------------------------------------------------------------------------------------------------------------- CYCLICAL/CAPITAL GOODS SECTOR 9.7% BUILDING/CONSTRUCTION 4.1% 456,498 US Comfort Systems USA Inc. * $ 8,159,902 371,500 US Integrated Electrical Services * 8,265,875 77,000 US NCI Building Systems Inc. * 2,165,625 145,000 US Service Experts Inc. * 4,241,250 ----------------- 22,832,652 ----------------- ELECTRICAL EQUIPMENT 0.5% 137,800 US Quanta Services Inc. * 3,040,213 INDUSTRIAL EQUIPMENT 1.2% 108,600 US Federal Signal Corp. 2,972,925 356,668 US Tokheim Corp. * 3,477,513 ----------------- 6,450,438 ----------------- RAW/BASIC MATERIALS 1.2% 247,800 US Metals USA Inc. * 2,416,050 341,000 US Oregon Steel Mills Inc. 4,049,375 ----------------- 6,465,425 ----------------- TRANSPORTATION SERVICES 2.7% 170,000 US Covenant Transport Inc. Class A * 3,038,750 100,000 US Knight Transportation Inc. 2,668,750 328,525 US Mark VII Inc. * 6,118,778 125,000 US Swift Transportation Co. Inc. 3,503,906 ----------------- 15,330,184 ----------------- ENERGY SECTOR 2.4% ENERGY 2.4% 325,500 US Global Industries Inc. * 1,993,688 125,000 US Hanover Compressor Co. * 3,210,938 299,100 US Houston Exploration Co. * 5,944,613 121,000 US Newfield Exploration Co. * 2,525,875 ----------------- 13,675,114 -----------------
The accompanying notes are an integral part of the financial statements. Page 13
% OF MARKET VALUE SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS (NOTE 1) - ----------------------------------------------------------------------------------------------------------------------------- HEALTH CARE SECTOR 9.9% DRUGS AND HOSPITAL SUPPLIES 3.0% 40,929 US Algos Pharmaceutical Corp. * $ 1,064,154 14,000 US Anesta Corp.* 372,750 184,000 US Bone Care International Inc. * 2,139,000 270,000 US CIMA Labs Inc. * 708,750 621,282 US Gensia Sicor Inc. * 2,815,184 17,000 US Gilead Sciences Inc. * 698,063 516,403 US Heska Corp. * 2,291,538 108,896 US Inhale Therapeutic Systems * 3,593,568 26,226 US Ligand Pharmaceuticals Inc. Class B * 304,877 59,000 US Novoste Corp. * 1,674,125 46,600 US SangStat Medical Corp. * 990,250 ----------------- - 16,652,259 ----------------- HEALTH CARE SERVICES 6.9% 353,982 US American Retirement Corp. 5,553,093 165,700 US Assisted Living Concepts Inc. * 2,174,813 445,570 US Centennial HealthCare Corp. * 6,906,335 150,000 US Kendle International Inc. * 3,506,250 125,000 US Orthodontic Centers of America Inc. * 2,429,688 233,100 US Pharmaceutical Product Development Inc. * 7,007,569 100,000 US Province Healthcare Co. 3,587,500 255,600 US Renal Care Group Inc. 7,364,475 ----------------- 38,529,723 ----------------- INTEREST-SENSITIVE SECTOR 4.9% BANKING 1.9% 95,000 US Silicon Valley Bancshares 1,617,969 240,000 US WestAmerica Bancorporation 8,820,000 ----------------- 10,437,969 ----------------- GENERAL FINANCE 2.4% 163,000 US American Capital Strategies Ltd. 2,811,750 208,000 US Federated Investors Inc. Class B 3,770,000 916,000 US UniCapital Corp. * 6,755,500 ----------------- 13,337,250 ----------------- INSURANCE 0.6% 99,000 US MONY Group Inc. * 3,099,938
The accompanying notes are an integral part of the financial statements. Page 14
% OF MARKET VALUE SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS (NOTE 1) - ----------------------------------------------------------------------------------------------------------------------------- TECHNOLOGY SECTOR 22.7% COMPUTERS/OFFICE EQUIPMENT 6.6% 292,000 US Black Box Corp. * $ 11,059,500 475,000 US CHS Electronics Inc. * 8,045,313 225,000 US Maxtor Corp. * 3,150,000 445,000 US Micros Systems Inc. 14,629,375 ----------------- 36,884,188 ----------------- ELECTRONICS/NEW TECHNOLOGY 7.0% 918,100 US Artesyn Technologies Inc. * 12,853,400 189,300 US Burr-Brown Corp. 4,436,719 355,000 US Hadco Corp. * 12,425,000 530,000 US MMC Networks Inc. * 7,022,500 70,000 US Semtech Corp. * 2,511,250 ----------------- 39,248,869 ----------------- TECHNOLOGY SERVICES 9.1% 190,000 US Aspen Technologies Inc. * 2,755,000 147,000 US HNC Software Inc. * 5,944,313 41,000 US Infoseek Corp. * 2,024,375 299,500 US Micromuse Inc. * 5,840,250 382,000 US Rational Software Corp. * 10,123,000 370,600 US Renaissance Worldwide Inc. 2,269,925 11,400 IE Saville Systems PLC (ADR) * 216,600 740,000 US Technology Solutions Co. 7,931,875 374,000 US Visio Corp. * 13,674,366 ----------------- 50,779,704 ----------------- TELEMEDIA/SERVICES SECTOR 19.0% BUSINESS SERVICES 13.9% 19,500 US Choicepoint Inc. * 1,257,750 306,365 US FYI Inc. * 9,803,680 17,100 US INSpire Insurance Solutions Inc. 314,213 154,201 US Iron Mountain Inc. 5,560,874 232,000 US Lamalie Associates Inc. 1,406,500 124,825 US Lason Holdings Inc. * 7,263,255 107,000 US NCO Group Inc. * 4,815,000 690,000 US Personnel Group of America, Inc. 12,075,000 691,400 US Romac International Inc. * 15,383,650 216,000 US School Specialty Inc. * 4,617,000 188,000 UK Select Appointments Holdings PLC (ADR) 4,042,000 138,965 US Vestcom International Inc. * 1,250,685
The accompanying notes are an integral part of the financial statements. Page 15
% OF MARKET VALUE SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS (NOTE 1) - ----------------------------------------------------------------------------------------------------------------------------- BUSINESS SERVICES (Continued) 111,200 US Wackenhut Corrections Corp. * $ 3,183,100 337,000 US Wilmar Industries Inc. * 6,845,313 ----------------- 77,818,020 ----------------- COMMUNICATIONS SERVICES 1.7% 264,000 US ICG Communications Inc. * 5,676,000 258,800 US International Telecommunication Systems Inc. 3,817,300 ----------------- 9,493,300 ----------------- MEDIA 3.4% 53,700 US Bright Horizons Family Solutions 1,449,900 243,000 US SFX Entertainment Inc. Class A * 13,334,625 140,000 US Sylvan Learning Systems Inc. 4,270,000 ----------------- 19,054,525 ----------------- TOTAL EQUITY INVESTMENTS (COST $485,347,248) 91.4% 510,142,501 ----------------- SHORT-TERM INVESTMENTS FACE VALUE COMMERCIAL PAPER 1.8% 10,000,000 US Ford Motor Credit Co. 4.91% maturing 01/14/99 9,982,269 SHARES MONEY MARKET FUNDS 8.1% 26,002,000 US SSgA U.S. Government Money Market Fund 26,002,000 18,934,870 US SsgA Money Market Fund 18,934,870 ----------------- 44,936,870 ----------------- TOTAL SHORT-TERM INVESTMENTS (COST $54,919,139) 9.9% 54,919,139 ----------------- TOTAL INVESTMENTS (COST $540,266,387) ** 101.3% 565,061,640 OTHER ASSETS LESS LIABILITIES (1.3%) (7,096,760) ----------------- NET ASSETS 100.0% $ 557,964,880 =================
- ------------------------------- * Non-income producing security. ADR American Depository Receipt Tax Information: ** For Federal income tax purposes, cost is $547,064,163 and the gross aggregate unrealized appreciation (depreciation) for all securities is as follows: Unrealized appreciation $ 70,850,305 Unrealized depreciation (52,852,828) =================== Net unrealized $ 17,997,477 appreciation ===================
The accompanying notes are an integral part of the financial statements. Page 16 The Fund's investments in securities at December 31, 1998, categorized by country:
% OF NET ASSETS ------------------------------------------- COUNTRY SHORT-TERM COUNTRY CODE EQUITIES AND OTHER TOTAL ----------------------------------------------------------------------------------- Ireland IE 0.04% 0.04% United Kingdom UK 0.73% 0.73% United States US 90.67% 8.56% 99.23% =========================================== Total 91.44% 8.56% 100.00% ===========================================
The accompanying notes are an integral part of the financial statements. Page 17 Dresdner RCM Capital Funds, Inc. Statements of Assets and Liabilities December 31, 1998
GROWTH EQUITY SMALL CAP FUND FUND --------------- ---------------- ASSETS: Investments at cost $ 821,230,964 $ 540,266,387 --------------- ---------------- --------------- ---------------- Investments at value (Note 1) $ 954,098,724 $ 565,061,640 Receivables: Investments sold 55,596,869 2,268,345 Fund shares sold 447,743 1,744,954 Dividends and dividend reclaims 1,600,599 100,150 Interest 81,524 75,760 --------------- ---------------- Total Assets 1,011,825,459 569,250,849 --------------- ---------------- LIABILITIES: Payables: Investments purchased 34,144,700 10,798,134 Fund shares repurchased 1,823,285 44,000 Management fees (Note 2) 574,847 436,437 Custodian fees 19,850 7,398 --------------- ---------------- Total Liabilities 36,562,682 11,285,969 --------------- ---------------- NET ASSETS $ 975,262,777 $ 557,964,880 --------------- ---------------- --------------- ---------------- NET ASSETS CONSIST OF: Paid-in capital (Note 3) $ 842,525,774 $ 530,995,460 Accumulated net realized gain (loss) on investments and foreign currency transactions (130,757) 2,174,167 Net unrealized appreciation on investments 132,867,760 24,795,253 --------------- ---------------- --------------- ---------------- NET ASSETS $ 975,262,777 $ 557,964,880 SHARES OUTSTANDING 166,021,831 59,606,705 --------------- ---------------- --------------- ---------------- NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE $ 5.87 $ 9.36 --------------- ---------------- --------------- ----------------
The accompanying notes are an integral part of the financial statements. 18 Dresdner RCM Capital Funds, Inc. Statements of Operations For the Year Ended December 31, 1998
GROWTH EQUITY SMALL CAP FUND FUND --------------- ---------------- INVESTMENT INCOME: (NOTE 1) Income: Dividends $ 6,929,944 $ 2,095,554 Interest 112,549 221,804 Foreign tax withheld (29,784) -- --------------- ---------------- Total investment income 7,012,709 2,317,358 --------------- ---------------- Expenses: Investment management fees (Note 2) 7,043,731 5,821,282 Custodian fees 104,875 58,134 Miscellaneous expenses 800 800 --------------- ---------------- Total expenses 7,149,406 5,880,216 --------------- ---------------- Net investment loss (136,697) (3,562,858) --------------- ---------------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain on investments 115,661,248 87,203,805 Net realized loss on foreign currency transactions (390,916) -- Net realized gain 115,270,332 87,203,805 --------------- ---------------- Net change in unrealized appreciation on foreign currency transactions 4,588 -- Net change in unrealized appreciation (depreciation) on investments 27,332,654 (65,282,583) --------------- ---------------- Net unrealized appreciation (depreciation) 27,337,242 (65,282,583) --------------- ---------------- Net realized and unrealized gain during the year 142,607,574 21,921,222 --------------- ---------------- NET INCREASE IN NET ASSETS FROM OPERATIONS $ 142,470,877 $ 18,358,364 --------------- ---------------- --------------- ----------------
The accompanying notes are an integral part of the financial statements. 19 Dresdner RCM Capital Funds, Inc. Statements of Changes in Net Assets
GROWTH EQUITY FUND SMALL CAP FUND YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 1998 1997 1998 1997 ----------- ----------- ----------- ------------- OPERATIONS: Net investment loss $ (136,697) $ (1,597,025) $ (3,562,858) $ (3,872,163) Net realized gain on investments and foreign currency transactions 115,270,332 193,067,561 87,203,805 131,224,372 Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions 27,337,242 (40,746,692) (65,282,583) (23,964,601) ------------- ------------- ------------ ------------- Net increase in net assets from operations 142,470,877 150,723,844 18,358,364 103,387,608 DISTRIBUTIONS TO SHAREHOLDERS FROM: Net realized gain on investments (Note 1) (158,525,243) (161,794,250) (102,478,286) (107,769,024) NET INCREASE (DECREASE) FROM CAPITA SHARE TRANSACTIONS (NOTE 3) 30,492,105 75,575,294 (19,325,834) 97,190,936 ------------- ------------- ------------ ------------- TOTAL INCREASE (DECREASE) IN NET ASSETS 14,437,739 64,504,888 (103,445,756) 92,809,520 NET ASSETS: Beginning of year 960,825,038 896,320,150 661,410,636 568,601,116 ------------- ------------- ------------ ------------- End of year $975,262,777 $ 960,825,038 $557,964,880 $661,410,636 ------------- ------------- ------------ ------------- ------------- ------------- ------------ -------------
The accompanying notes are an integral part of the financial statements. 20 Dresdner RCM Capital Funds, Inc. Dresdner RCM Growth Equity Fund Financial Highlights For a share outstanding during the fiscal year ended December 31:
1998 (2) 1997 (2) 1996 (1)(2) 1995 1994 ------- -------- ------- ------ ------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 6.23 $ 6.40 $ 9.13 $ 7.89 $ 10.42 ------- -------- ------- ------ ------- Income from investment operations: Net investment income (loss) -- (0.01) (0.01) 0.02 0.03 Net realized and unrealized gain on investmen 0.81 1.08 1.59 2.66 0.01 ------- -------- ------- ------ ------- Total from investment operations 0.81 1.07 1.58 2.68 0.04 ------- -------- ------- ------ ------- Less distributions: From net investment income -- -- -- (0.02) (0.03) From net realized gain on investments (1.17) (1.24) (4.31) (1.42) (2.54) ------- -------- ------- ------ ------- Total distributions (1.17) (1.24) (4.31) (1.44) (2.57) ------- -------- ------- ------ ------- NET ASSET VALUE, END OF YEAR $ 5.87 $ 6.23 $ 6.40 $ 9.13 $ 7.89 ------- -------- ------- ------ ------- ------- -------- ------- ------ ------- TOTAL RETURN (3) 15.06% 17.50% 19.07% 34.53% 0.76% ------- -------- ------- ------ ------- ------- -------- ------- ------ ------- RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in millions) $ 975 $ 961 $ 896 $1,325 $ 1,365 ------- -------- ------- ------ ------- ------- -------- ------- ------ ------- Ratio of operating expenses to average net assets 0.76% 0.76% 0.84% 0.76% 0.83% ------- -------- ------- ------ ------- ------- -------- ------- ------ ------- Ratio of net investment income to average net assets (0.01)% (0.17)% (0.12)% 0.22% 0.22% ------- -------- ------- ------ ------- ------- -------- ------- ------ ------- Portfolio turnover 168.24% 155.10% 115.89% 96.46% 111.06% ------- -------- ------- ------ ------- ------- -------- ------- ------ -------
- ----------------------------------------- (1) Stock split 25:1 at the close of business on June 17, 1996. All prior period per share amounts were restated to reflect the stock split. (2) Calculated using the average share method. (3) Total return measures the change in value of an investment over the period indicated. The accompanying notes are an integral part of the financial statements. 21 Dresdner RCM Capital Funds, Inc. Dresdner RCM Small Cap Fund Financial Highlights For a share outstanding during the fiscal year ended December 31:
1998 (2) 1997 (2) 1996 (1)(2) 1995 1994 PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 11.66 $ 11.77 $ 11.35 $ 9.42 $ 10.41 ------- ------- ------- ------ ------- Income from investment operations: Net investment loss (0.07) (0.08) (0.08) (0.04) (0.04) Net realized and unrealized gain (loss) on investments -- (3) 2.29 3.82 3.21 (0.20) ------- ------- ------- ------ ------- Total from investment operations (0.07) 2.21 3.74 3.17 (0.24) ------- ------- ------- ------ ------- Less distributions: From net realized gain on investments (2.23) (2.32) (3.32) (1.24) (0.75) ------- ------- ------- ------ ------- NET ASSET VALUE, END OF YEAR $ 9.36 $ 11.66 $ 11.77 $11.35 $ 9.42 ------- ------- ------- ------ ------- ------- ------- ------- ------ ------- TOTAL RETURN (4) 1.11% 19.49% 34.39% 34.08% (2.16)% ------- ------- ------- ------ ------- ------- ------- ------- ------ ------- RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in millions) $ 558 $ 661 $ 569 $ 410 $ 416 ------- ------- ------- ------ ------- ------- ------- ------- ------ ------- Ratio of operating expenses to average net assets 1.01% 1.02% 1.00% 1.01% 1.11% ------- ------- ------- ------ ------- ------- ------- ------- ------ ------- Ratio of net investment income to average net assets (0.61)% (0.68)% (0.58)% (0.22)% (0.33)% ------- ------- ------- ------ ------- ------- ------- ------- ------ ------- Portfolio turnover 131.85% 117.64% 117.00% 83.91% 117.71% ------- ------- ------- ------ ------- ------- ------- ------- ------ -------
- ----------------------------------------- (1) Stock split 12:1 at the close of business on June 17, 1996. All prior period per share amounts were restated to reflect the stock split. (2) Calculated using the average share method. (3) The amount shown for a share outstanding does not correspond with the aggregate net gain on investments for the period due to timing of sales and repurchases of Fund shares in relation to fluctuating market values of the investments of the Fund. (4) Total return measures the change in value of an investment over the period indicated. The accompanying notes are an integral part of the financial statements. 21 Dresdner RCM Capital Funds, Inc. Notes to Financial Statements December 31, 1998 1. SIGNIFICANT ACCOUNTING POLICIES Dresdner RCM Capital Funds, Inc. ("Capital Company") is organized as a Maryland corporation and is registered as an open-end management investment company under the Investment Company Act of 1940, as amended. The Capital Company consists of three series: Dresdner RCM Growth Equity Fund ("Growth Fund") and Dresdner RCM Small Cap Fund ("Small Cap Fund") are diversified, noload series of the Capital Company. These two series are collectively referred to as the "Funds." The Dresdner RCM International Growth Equity Fund ("International Fund") is a non-diversified, no load series of the Capital Company. The International Fund's financial statements and financial highlights are included in the annual report of the Dresdner RCM Global 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 and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results may differ from these estimates. A. PORTFOLIO VALUATION: 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 is valued at the closing bid price on such day. If no bid price is quoted on such day, then the security is valued by such method as a duly constituted committee of the Board of Directors of the Company determines 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 are 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 are 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 are 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, RELATED INVESTMENT INCOME AND EXPENSES: Security transactions are recorded as of the date of purchase or sale. Dividends are recorded on the ex-dividend date. Interest income is recorded on the accrual basis and includes amortization of discounts and premiums. Realized gains and losses on security transactions are determined on the identified cost basis for both financial statement and federal income tax purposes. Each Fund bears expenses incurred specifically on its behalf as well as a portion of any general expenses. C. FOREIGN CURRENCY TRANSACTIONS AND FOREIGN INVESTMENTS: The records of the Funds are maintained in U.S. dollars. Foreign currencies, foreign investments and other assets and liabilities denominated in currencies other than U.S. dollars are translated into U.S. dollars based upon foreign exchange rates prevailing at the end of the period. Purchases and sales of foreign securities and income and withholding taxes are translated on the respective dates of such transactions. Net realized currency gains and losses include foreign currency gains and losses between trade date and settlement date and foreign currency translations. The Funds do not isolate that portion of foreign currency exchange fluctuation on investments from unrealized appreciation and depreciation which arises from changes in market prices. Such fluctuations are included with the net unrealized appreciation or depreciation on investments. Page 23 Dresdner RCM Capital Funds, Inc. Notes to Financial Statements December 31, 1998 1. SIGNIFICANT ACCOUNTING POLICIES (Continued) D. FEDERAL INCOME TAXES: It is the policy of the Funds to comply with the requirements for qualification as a "regulated investment company" under the Internal Revenue Code of 1986, as amended (the "Code"). It is also the intention of the Funds to make distributions sufficient to avoid imposition of any excise tax under Section 4982 of the Code. Therefore, no provision has been made for Federal income or excise taxes on income and capital gains. E. DISTRIBUTIONS: Dividends and capital gains (if any) are declared and distributed to shareholders annually. Distributions to shareholders are recorded by the Funds on the ex-dividend date. Income and capital gain distributions are determined in accordance with Federal income tax regulations which may differ from generally accepted accounting principles. These differences are primarily due to differing treatments for losses as a result of wash sales, foreign currency transactions and/or passive foreign investment companies. 2. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES Dresdner RCM Global Investors LLC ("Dresdner RCM") serves as the Funds' investment manager and provides various administrative services, subject to the authority of the Board of Directors. The Growth Fund and Small Cap Fund pay investment management fees monthly at annualized rates of 0.75% and 1.00% respectively, of the Funds' average daily net assets. 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 the custodian; and payment of investment management fees due to Dresdner RCM. Dresdner RCM is responsible for all other expenses incurred by the Growth Fund and the Small Cap Fund. On December 31, 1998, the Dresdner RCM Profit Sharing Plan, participation in which is limited to employees of Dresdner RCM, owned 888,710 shares of the Growth Fund and 515,747 shares of the Small Cap Fund. 3. CAPITAL SHARES At December 31, 1998, there were 1,000,000,000 shares of the Capital Company's common stock authorized, at $0.0001 par value. Of this amount, 300,000,000 were classified as shares of the Growth Fund and 100,000,000 were classified as shares of the Small Cap Fund. Capital share transactions were as follows:
GROWTH FUND YEAR ENDED YEAR ENDED DECEMBER 31, 1998 DECEMBER 31, 1997 ------------------------------ ------------------------------- SHARES AMOUNT SHARES AMOUNT ------------- --------------- ------------- --------------- Shares sold 21,101,977 $ 127,963,744 8,822,435 $ 58,202,047 Shares issued in connection with reinvestment of distributions 29,534,789 156,239,035 26,780,241 160,413,644 Shares repurchased (38,770,342) (253,710,674) (21,422,817) (143,040,397) Net increase 11,866,424 $ 30,492,105 14,179,859 $ 75,575,294 ------------- --------------- ------------- --------------- ------------- --------------- ------------- ---------------
Page 24 Dresdner RCM Capital Funds, Inc. Notes to Financial Statements December 31, 1998 3. CAPITAL SHARES (CONTINUED)
SMALL CAP FUND YEAR ENDED YEAR ENDED DECEMBER 31, 1998 DECEMBER 31, 1997 ------------------------------ ------------------------------- SHARES AMOUNT SHARES AMOUNT ------------- --------------- ------------- --------------- Shares sold 10,548,412 $ 111,486,975 7,791,481 $ 96,712,138 Shares issued in connection with reinvestment of distributions 11,705,171 100,547,419 9,386,666 105,599,978 Shares repurchased (19,362,057) (231,360,228) (8,781,376) (105,121,180) ------------- --------------- ------------- --------------- Net increase (decrease) 2,891,526 $ (19,325,834) 8,396,771 $ 97,190,936 ------------- --------------- ------------- --------------- ------------- --------------- ------------- ---------------
At December 31, 1998, seven shareholders in the Growth Fund and five shareholders in the Small Cap Fund each held more than 5% of the outstanding shares of the respective Funds. These shareholders, in aggregate, held approximately 67% of the Growth Fund and 50% of the Small Cap Fund. 4. INVESTMENTS IN FOREIGN SECURITIES AND CURRENCY Investing in foreign equity securities and currency transactions involves significant risks, some of which are not typically associated with domestic investments. The Funds' investments in foreign markets will subject the Funds to the risk of foreign currency exchange rate fluctuations, perceived credit risk and adverse economic and political developments. 5. PURCHASES AND SALES OF SECURITIES The following summarizes purchases and sales of investment securities, excluding short-term investments, for each Fund, for the year ended December 31, 1998:
PURCHASES ---------------------------------- U.S. Government Other Issues --------------- --------------- Growth Fund -- $1,517,507,845 Small Cap Fund -- $ 738,646,439
SALES ---------------------------------- U.S. Government Other Issues --------------- --------------- Growth Fund -- $1,686,060,991 Small Cap Fund -- $ 866,195,243
6. DIRECTORS' FEES Each Director who is not an interested person of the Capital Company receives from the Capital Company an annual retainer of $9,000 (the retainer is evenly prorated among each series of the Capital Company), plus $1,500 for each Board meeting attended for each series, and $500 for each committee meeting attended for each series. Each Director who is not an interested person of the Capital Company may elect to defer receipt of all or a portion of his or her fees for service as a director in accordance with the terms of a Deferred Compensation Plan for Non-Interested Directors ("Directors' Plan"). Under the Directors' Plan, an eligible Director may elect to have his or her deferred fees deemed invested either in 90-day U.S. Treasury bills or shares of the Common Stock of the Capital Company or of the Dresdner RCM Global Funds, Inc., or a combination of these options, and the amount of deferred fees payable to such director under the Directors' Plan will be determined by reference to the return on such deemed investments. Generally, the deferred fees (reflecting any earnings, gains or losses thereon) become payable upon the Director's retirement or disability. Page 25 Report of Independent Accountants TO THE SHAREHOLDERS AND THE BOARD OF DIRECTORS OF THE DRESDNER RCM CAPITAL FUNDS, INC.: In our opinion, the accompanying statements of assets and liabilities, including the portfolio of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Dresdner RCM Capital Funds, Inc. (consisting of the Dresdner RCM Growth Equity Fund and the Dresdner RCM Small Cap Fund), collectively, the "Funds," at December 31, 1998, the results of their operations, the changes in their net assets and the financial highlights for the periods indicated, in conformity with generally accepted accounting principles. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Funds' management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of investments owned at December 31, 1998 by correspondence with the custodian and brokers, provide a reasonable basis for the opinion expressed above. PricewaterhouseCoopers LLP Boston, Massachusetts February 22, 1999 Page 26 TAX INFORMATION (UNAUDITED) On December 16, 1998, distributions were paid from investment operations for the Funds. The dividends were recorded on December 16, 1998, to shareholders of record on December 15, 1998.
ORDINARY LONG-TERM TOTAL FUND INCOME CAPITAL GAIN DISTRIBUTIONS - ------------------------- ----------- -------------- -------------- Growth Fund Per Share $0.24 $0.93 $1.17 Amount $32,517,999 $126,007,244 $158,525,243 Small Cap Fund Per Share $0.39 $1.84 $2.23 Amount $17,922,211 $84,556,075 $102,478,286
Page 27 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 PricewaterhouseCoopers LLP One Post Office Square Boston, Massachusetts 02109 Page 28 -----END PRIVACY-ENHANCED MESSAGE-----