<PAGE>
<TABLE>
<C> <S>
Dresdner RCM
Capital
Funds
Annual
December 31, Report
1997
</TABLE>
----------------------------------------------------------------------
Dresdner RCM Global Funds
----------------------------------------------------------------------
<PAGE>
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
<PAGE>
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
<PAGE>
Dresdner RCM Growth Equity Fund
Performance Summary
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Fund Russell Midcap Index
<S> <C> <C>
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
</TABLE>
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
<TABLE>
<CAPTION>
Life of
1 Year 5 Year 10 Year Fund(c)
<S> <C> <C> <C>
17.50% 15.99% 17.22% 19.72%
</TABLE>
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
<PAGE>
Dresdner RCM Growth Equity Fund
Investments in Securities and Net Assets
December 31, 1997
<TABLE>
<CAPTION>
% of Market
Shares Equity Investments Net Assets Value
- ------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
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
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 4
<PAGE>
Dresdner RCM Growth Equity Fund
Investments in Securities and Net Assets
December 31, 1997
<TABLE>
<CAPTION>
% of Market
Shares Equity Investments Net Assets Value
- ------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
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
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 5
<PAGE>
Dresdner RCM Growth Equity Fund
Investments in Securities and Net Assets
December 31, 1997
<TABLE>
<CAPTION>
% of Market
Shares Equity Investments Net Assets Value
- ------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
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
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 6
<PAGE>
Dresdner RCM Growth Equity Fund
Investments in Securities and Net Assets
December 31, 1997
<TABLE>
<CAPTION>
% of Market
Shares Equity Investments Net Assets Value
- ------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
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
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 7
<PAGE>
Dresdner RCM Growth Equity Fund
Investments in Securities and Net Assets
December 31, 1997
<TABLE>
<CAPTION>
% of Market
Shares Equity Investments Net Assets Value
- ------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
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
-------------
-------------
</TABLE>
- ------------------------------------
* Non-income producing security.
The accompanying notes are an integral part of the financial statements.
Page 8
<PAGE>
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:
<TABLE>
<S> <C>
Unrealized appreciation $ 116,377,609
Unrealized depreciation (17,522,749)
-------------
Net unrealized
appreciation $ 98,854,860
-------------
-------------
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Fund's investments in securities at December 31, 1997, categorized by
country:
<TABLE>
<CAPTION>
% of Net Assets
-----------------------------------------
Short-Term and
Country Equities Other Total
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------
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%
--- --- ----------
--- --- ----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 9
<PAGE>
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
<PAGE>
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
<PAGE>
Dresdner RCM Small Cap Fund
Performance Summary
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Fund Russell 2000 Index
<S> <C> <C>
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
</TABLE>
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
<TABLE>
<CAPTION>
Life of
1 Year 5 Year Fund(c)
<S> <C> <C>
19.49% 18.13% 18.79%
</TABLE>
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
<PAGE>
Dresdner RCM Small Cap Fund
Investments in Securities and Net Assets
December 31, 1997
<TABLE>
<CAPTION>
% of Market
Shares Equity Investments Net Assets Value
- ------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
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
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 13
<PAGE>
Dresdner RCM Small Cap Fund
Investments in Securities and Net Assets
December 31, 1997
<TABLE>
<CAPTION>
% of Market
Shares Equity Investments Net Assets Value
- ------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
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
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 14
<PAGE>
Dresdner RCM Small Cap Fund
Investments in Securities and Net Assets
December 31, 1997
<TABLE>
<CAPTION>
% of Market
Shares Equity Investments Net Assets Value
- ------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
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
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 15
<PAGE>
Dresdner RCM Small Cap Fund
Investments in Securities and Net Assets
December 31, 1997
<TABLE>
<CAPTION>
% of Market
Shares Equity Investments Net Assets Value
- ------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
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
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 16
<PAGE>
Dresdner RCM Small Cap Fund
Investments in Securities and Net Assets
December 31, 1997
<TABLE>
<CAPTION>
% of Market
Shares Equity Investments Net Assets Value
- ------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
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
-------------
-------------
</TABLE>
- ------------------------------------
* 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
<PAGE>
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:
<TABLE>
<S> <C>
Unrealized appreciation $ 113,474,213
Unrealized depreciation (26,532,307)
-------------
Net unrealized
appreciation $ 86,941,906
-------------
-------------
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Fund's investments in securities at December 31, 1997 categorized by
country:
<TABLE>
<CAPTION>
% of Net Assets
------------------------------------------
Short-Term
Country Equities and Other Total
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------
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%
--
--
--- ----------
--- ----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 18
<PAGE>
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
<PAGE>
Dresdner RCM International Growth Equity Fund A
Performance Summary
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PERFORMANCE FROM COMMENCEMENT OF OPERATIONS
<S> <C> <C> <C>
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
</TABLE>
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
<TABLE>
<CAPTION>
Life of Fund
Annualized since
1 Year 12/28/94(d) 5/22/95(e)
<S> <C> <C>
17.93% 18.36% 19.99%
</TABLE>
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
<PAGE>
Dresdner RCM International Growth Equity Fund A
Investments in Securities and Net Assets
December 31, 1997
<TABLE>
<CAPTION>
% of Market
Shares Country Equity Investments Net Assets Value
- ------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C>
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
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 21
<PAGE>
Dresdner RCM International Growth Equity Fund A
Investments in Securities and Net Assets
December 31, 1997
<TABLE>
<CAPTION>
% of Market
Shares Country Equity Investments Net Assets Value
- ------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C>
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
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 22
<PAGE>
Dresdner RCM International Growth Equity Fund A
Investments in Securities and Net Assets
December 31, 1997
<TABLE>
<CAPTION>
% of Market
Shares Country Equity Investments Net Assets Value
- ------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C>
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
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 23
<PAGE>
Dresdner RCM International Growth Equity Fund A
Investments in Securities and Net Assets
December 31, 1997
<TABLE>
<CAPTION>
% of Market
Shares Country Equity Investments Net Assets Value
- ------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C>
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
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 24
<PAGE>
Dresdner RCM International Growth Equity Fund A
Investments in Securities and Net Assets
December 31, 1997
<TABLE>
<CAPTION>
% of Market
Shares Country Equity Investments Net Assets Value
- ------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C>
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
------------
------------
</TABLE>
- ------------------------------------
* 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:
<TABLE>
<S> <C>
Unrealized appreciation $ 8,661,235
Unrealized depreciation (2,833,394)
-------------
Net unrealized
appreciation $ 5,827,841
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 25
<PAGE>
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:
<TABLE>
<CAPTION>
% of Net Assets
-----------------------------------------
Country Short-Term
Country Code Equities and Other Total
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------
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%
--- --- ----------
--- --- ----------
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Forward Foreign Currency Contracts Outstanding
December 31, 1997
<TABLE>
<CAPTION>
Delivery Contract Unrealized
Face Value Date Price Appreciation
<S> <C> <C> <C> <C>
--------------------------------------------
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
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 26
<PAGE>
Dresdner RCM Capital Funds, Inc.
Statements of Assets and Liabilities
December 31, 1997
<TABLE>
<CAPTION>
Dresdner RCM
--------------------------------------------
International
Growth Equity Small Cap Growth Equity
Fund Fund Fund A
-------------- ------------ --------------
<S> <C> <C> <C>
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
-------------- ------------ --------------
-------------- ------------ --------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 27
<PAGE>
Dresdner RCM Capital Funds, Inc.
Statements of Operations
For the year ended December 31, 1997
<TABLE>
<CAPTION>
Dresdner RCM
--------------------------------------------
International
Growth Equity Small Cap Growth Equity
Fund Fund Fund A
-------------- ------------ --------------
<S> <C> <C> <C>
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
-------------- ------------ --------------
-------------- ------------ --------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 28
<PAGE>
<TABLE>
<CAPTION>
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
------------- -------------- ------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
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)
------------- -------------- ------------- -------------- ------------- -------------
------------- -------------- ------------- -------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 29
<PAGE>
<TABLE>
<CAPTION>
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
- --------------------------------------------------------- --------- ----------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
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 -- -- --
--------- ----------- --------- --------- ---------
--------- ----------- --------- --------- ---------
</TABLE>
- ------------------------------------
(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
<PAGE>
<TABLE>
<CAPTION>
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
- ---------------------------------------------------- ----------- ----------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
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 -- -- --
----------- ----------- --------- --------- ---------
----------- ----------- --------- --------- ---------
</TABLE>
- ------------------------------------
(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
<PAGE>
<TABLE>
<CAPTION>
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)
- ------------------------------------------------------------ ----------- ----------- --------- -----------
<S> <C> <C> <C> <C>
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 $ -- $ --
----------- ----------- --------- -----------
----------- ----------- --------- -----------
</TABLE>
- ------------------------------------
(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
<PAGE>
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
<PAGE>
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
<PAGE>
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.
<TABLE>
<CAPTION>
Investment Short-term Long-term Total
Fund Income Capital Gain Capital Gain Distributions
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------
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
</TABLE>
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:
<TABLE>
<CAPTION>
Stock Outstanding
Split Shares
--------- ------------
<S> <C> <C>
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
</TABLE>
Page 35
<PAGE>
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
<TABLE>
<CAPTION>
Year ended Year ended
December 31, 1997 December 31, 1996
------------------------ ------------------------
Growth Fund Shares Amount Shares Amount
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
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)
---------- ------------ ---------- ------------
---------- ------------ ---------- ------------
</TABLE>
<TABLE>
<CAPTION>
Year ended Year ended
December 31, 1997 December 31, 1996
------------------------ ------------------------
Small Cap Fund Shares Amount Shares Amount
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
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
---------- ------------ ---------- ------------
---------- ------------ ---------- ------------
</TABLE>
<TABLE>
<CAPTION>
Year ended Year ended
December 31, 1997 December 31, 1996
------------------------ ------------------------
International Fund Shares Amount Shares Amount
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
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
---------- ------------ ---------- ------------
---------- ------------ ---------- ------------
</TABLE>
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
<PAGE>
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
<TABLE>
<CAPTION>
Purchases
-------------
<S> <C>
Growth Fund $1,378,049,572
Small Cap Fund $ 655,148,852
International Fund $ 123,386,039
</TABLE>
<TABLE>
<CAPTION>
Sales
-------------
<S> <C>
Growth Fund $1,466,511,589
Small Cap Fund $ 697,560,723
International Fund $ 93,499,006
</TABLE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
