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Previous: RCM CAPITAL FUNDS INC /MD/, NSAR-B, 1999-03-01 |
Next: CENTENNIAL MONEY MARKET TRUST, NSAR-A, 1999-03-01 |
<PAGE>
February 22, 1999
Dear Shareholders:
We are pleased to present the Dresdner RCM Capital Funds (the
"Funds") Annual Shareholder Report for the 12 months ended December 31, 1998.
Inside, you will find discussions from the individual fund managers that
describe the investment strategies they employed in response to last year's
economic and market conditions. Each report also includes performance
summaries, and lists of holdings and portfolio weightings as of the end of
the reporting period.
In identifying possible fund holdings, the Funds' managers draw on
the research of more than 175 investment professionals. They also investigate
market and economic variables through Grassroots Research -SM-, a division of
Dresdner RCM Global Investors LLC. The Funds' managers believe that
Grassroots Research -SM- can be a valuable adjunct to their traditional
research efforts by providing a "second look" at companies or by checking
marketplace assumptions concerning market demands for particular products and
services. A seasoned team of staff economists supplements these reports with
macroeconomics assessments of regional and global trends.
While markets performed relatively well in the first half of the
year, the fragility of emerging markets in Asia and Latin America led to a
market downturn by the third quarter, after Russia announced it was
defaulting on its foreign debt. As the fourth quarter got underway, central
banks in the U.S. and elsewhere instituted a series of cuts in short-term
interest rates in an effort to reverse slowing economic growth. These
measures reassured investors and the markets rebounded dramatically toward
year-end, leading the blue chip indices to a record fourth consecutive year
of strong returns.
Over this challenging period, the Funds continued to focus on a
bottom-up analysis of company fundamentals combined with a careful assessment
of projected earnings growth. The fund managers applied these criteria to
selecting attractive stocks with quality earnings and buying them at
reasonable valuations.
We would also like to take this opportunity to assure shareholders
that Dresdner RCM has committed considerable effort and resources to avoid
difficulties related to the so-called "Y2K" effect associated with the Year
2000. Beginning with a study initiated in 1996 that detailed the need to
replace the core portfolio accounting system with new Y2K-compliant
technology, the company has made Year 2000 readiness a priority.
A three-step process has been established to address Y2K dating
issues. Our first objective is to make critical in-house applications
compliant by the end of the first quarter of 1999, either through upgrading
or the acquisition of new technology. These applications include portfolio
accounting and trade support. Our second objective is to ensure critical
vendor systems (including Custody and Transfer Agent) are Y2K-compliant by
mid-1999. The third objective is to perform all other upgrades necessary to
make the company's internal environment fully compliant. As a result, no
disruption to client services is anticipated before, during or after the turn
of the century.
However, while Dresdner RCM is taking all precautions as an
organization, Y2K problems could adversely affect companies in which the Fund
invests. For example, companies may incur substantial costs to address the
problem or they may suffer losses caused by corporate or governmental
data-processing errors. To the extent that the repercussion on a portfolio
holding is negative, it might impact the Fund's investment return.
We believe that our strong commitment to value and performance built
on a rigorous company-by-company approach has served the Funds well in 1998
and we are looking forward to another successful year in 1999. We thank you
for your continued interest and support.
Sincerely,
/s/ DeWitt Bowman
DeWitt Bowman
Chairman of the Funds
1
<PAGE>
Dresdner RCM Growth Equity Fund
Management's Performance Review
For the 12 months ended December 31, 1998, the Dresdner RCM Growth
Equity Fund (the "Fund") earned a total return of 15.06%. Solid performance in
the first half of the year and a very strong fourth quarter helped the Fund to
outperform its primary benchmark, the Russell Midcap Index, by a margin of
nearly 5%. The Russell Midcap Index had a return of 10.10% for 1998, while the
average return of 327 mid cap funds tracked by Lipper Analytical Services was
12.16% for the year.
MARKET OVERVIEW
In the first half of the year, persistent concerns about the economic
viability of the Asian economies and the potential negative impact a further
decline in this region might have on U.S. equity markets caused a major move to
the "safer" and more liquid large cap stocks.
As the third quarter got under way, continuing economic weakness in
Asia and a declining trend in corporate earnings caused equity markets to cool.
Investor confidence was further shaken by Russia's debt default in late August,
and global equity markets experienced a sharp sell-off as investors sought the
relative safety of U.S. Treasury bonds. Throughout this process, we concentrated
the portfolio on stocks with consistent, high-quality earnings with a low
reliance on external financing and limited foreign exposure.
By the fourth quarter, we believed that conditions had reached a point
where the correction more than adequately reflected the current market
fundamentals. During the fourth quarter, we upgraded the quality of the
portfolio to position ourselves to participate in any market rebound. This
positioning helped the Fund achieve a return of 29.63%, the second-best quarter
in its history.
INVESTMENT APPROACH
We focus on those companies with sustainable earnings growth, unique
market niches, and proprietary products and services. Additionally, the
integrity of management with common incentives and a well-capitalized balance
sheet are important drivers in our purchase decision. Finally, we look for
companies with attractive valuations relative to the market, their peer group or
their historical trading range. We use the Russell Midcap Index for performance
comparisons, but it is not a factor in determining sector weightings.
SECTOR HIGHLIGHTS
The Fund's outperformance was due to a combination of industry
weighting and security selection. Our focus on growth investing led to our
decision to overweight the technology, healthcare and consumer discretionary
industries.
In technology, our positions in software and telecommunications
equipment added to our performance as both expectations and near-term catalysts
were achieved. Meanwhile, our Internet holdings including Yahoo Inc. and
Amazon.com Inc. positively impacted results as investors focused on the upside
potential inherent in their business models and more specifically, the success
of electronic commerce during the holiday season.
Additionally, our holdings in the healthcare sector including Guidant
Corp., Stryker Corp., Bausch and Lomb and Sofamor-Danek Corp. benefited from
strong fundamental operating performance and a favorable valuation umbrella
provided by their large cap pharmaceutical brethren.
Furthermore, Office Depot, Circuit City and Costco positively impacted
the portfolio as management teams consistently executed during the year and
strong consumer spending trends continued into the holiday season.
Meanwhile, the Fund was negatively impacted on a stock-specific level
in individual holdings and in the health care services industry broadly.
OUTLOOK
Looking forward, we remain committed to our intensive bottom-up,
research-driven decision-making process. Specifically, our strategy in the
retail sector has focused on consumer-driven companies given our expectation
that sales trends will continue to be above the general consensus view as a
result of the strong consumer trends witnessed during the fourth quarter.
Additionally, our technology investments emphasize the cyclical industries tied
to the strong demand for PC's and semiconductors as well as the demand for
increased storage tied to the rapid development of the data market. Finally, we
plan to continue to underweight the cyclical sectors of the portfolio while
focusing on domestic, consistent and predictable growth companies which should
continue to benefit in this market environment.
Page 2
<PAGE>
Dresdner RCM Growth Equity Fund
Performance Summary
[EDGAR REPRESENTATION OF PLOT POINTS USED IN GRAPHIC]
<TABLE>
<CAPTION>
FUND RUSSELL MIDCAP INDEX
<S> <C> <C>
1979 $10,000 $10,000
1979 $10,393 $10,740
1979 $10,719 $11,158
1980 $11,210 $11,777
1980 $10,792 $11,516
1980 $9,599 $9,996
1980 $10,028 $10,641
1980 $10,856 $11,467
1980 $11,315 $12,024
1980 $12,980 $13,034
1980 $13,656 $13,375
1980 $14,396 $13,821
1980 $14,878 $13,966
1980 $15,935 $15,074
1980 $15,665 $14,784
1981 $15,304 $14,439
1981 $15,725 $14,694
1981 $17,588 $15,843
1981 $18,134 $15,918
1981 $19,279 $16,306
1981 $18,560 $16,008
1981 $18,247 $15,809
1981 $17,371 $14,908
1981 $16,587 $13,951
1981 $18,157 $14,914
1981 $18,503 $15,518
1981 $18,211 $15,139
1982 $17,929 $14,583
1982 $17,527 $13,964
1982 $17,476 $13,825
1982 $18,682 $14,486
1982 $18,511 $13,970
1982 $18,441 $13,595
1982 $18,512 $13,274
1982 $20,047 $14,871
1982 $20,666 $15,293
1982 $23,233 $17,338
1982 $25,235 $18,395
1982 $25,710 $18,660
1983 $27,172 $19,319
1983 $28,967 $19,987
1983 $30,108 $20,691
1983 $32,700 $21,984
1983 $34,645 $22,903
1983 $36,064 $23,737
1983 $34,391 $22,991
1983 $33,610 $22,846
1983 $34,935 $23,486
1983 $33,413 $22,575
1983 $34,930 $23,541
1983 $34,348 $23,105
1984 $32,764 $22,449
1984 $31,089 $21,235
1984 $31,709 $21,587
1984 $31,839 $21,350
1984 $30,674 $20,146
1984 $32,051 $20,774
1984 $31,196 $20,166
1984 $34,191 $22,684
1984 $33,648 $22,791
1984 $33,611 $22,880
1984 $32,993 $22,784
1984 $33,496 $23,435
1985 $37,254 $25,659
1985 $38,042 $26,119
1985 $37,399 $25,970
1985 $36,747 $25,894
1985 $39,165 $27,365
1985 $39,965 $28,030
1985 $40,928 $27,994
1985 $40,385 $27,876
1985 $38,429 $26,510
1985 $40,118 $27,883
1985 $42,578 $29,810
1985 $44,235 $30,937
1986 $45,046 $31,633
1986 $48,307 $34,205
1986 $49,783 $36,003
1986 $50,541 $35,845
1986 $52,554 $37,701
1986 $51,571 $38,216
1986 $47,374 $35,687
1986 $49,140 $38,219
1986 $45,601 $35,511
1986 $48,335 $37,364
1986 $48,946 $37,640
1986 $48,361 $36,569
1987 $54,951 $41,072
1987 $59,189 $43,530
1987 $60,968 $43,942
1987 $60,390 $42,842
1987 $62,092 $42,989
1987 $64,592 $44,737
1987 $67,740 $46,653
1987 $70,486 $48,302
1987 $68,483 $47,379
1987 $49,455 $35,710
1987 $47,006 $33,727
1987 $53,665 $36,652
1988 $53,930 $38,355
1988 $58,780 $41,072
1988 $60,415 $41,126
1988 $61,386 $41,380
1988 $60,234 $41,283
1988 $64,720 $44,110
1988 $63,335 $43,225
1988 $61,789 $42,264
1988 $64,192 $43,702
1988 $63,486 $43,889
1988 $62,127 $42,836
1988 $64,859 $43,910
1989 $68,192 $46,537
1989 $67,612 $46,427
1989 $68,994 $47,190
1989 $73,125 $49,465
1989 $77,254 $51,695
1989 $74,440 $51,503
1989 $79,915 $55,093
1989 $83,387 $56,935
1989 $83,428 $56,413
1989 $79,787 $53,752
1989 $80,873 $54,489
1989 $82,292 $55,446
1990 $75,120 $50,999
1990 $77,825 $52,033
1990 $80,029 $53,300
1990 $78,163 $51,011
1990 $86,194 $55,632
1990 $87,034 $55,271
1990 $84,425 $53,628
1990 $75,868 $47,860
1990 $71,033 $44,312
1990 $69,568 $42,913
1990 $75,112 $47,046
1990 $78,902 $49,072
1991 $85,003 $52,398
1991 $92,631 $56,764
1991 $97,028 $59,119
1991 $96,459 $59,474
1991 $101,948 $62,298
1991 $96,909 $59,427
1991 $102,335 $62,340
1991 $105,602 $64,204
1991 $105,329 $63,830
1991 $108,557 $65,138
1991 $104,724 $62,445
1991 $116,960 $69,442
1992 $119,326 $70,748
1992 $120,948 $72,373
1992 $115,847 $70,524
1992 $113,545 $71,075
1992 $114,312 $71,534
1992 $108,991 $70,374
1992 $112,618 $73,316
1992 $110,272 $71,628
1992 $113,146 $73,113
1992 $117,301 $74,902
1992 $122,190 $78,677
1992 $125,186 $80,789
1993 $125,594 $82,405
1993 $121,886 $82,496
1993 $124,822 $85,179
1993 $121,150 $82,922
1993 $126,171 $85,555
1993 $126,630 $86,522
1993 $125,543 $86,939
1993 $131,747 $90,806
1993 $134,398 $91,153
1993 $135,795 $91,229
1993 $131,931 $89,113
1993 $138,604 $92,341
1994 $143,687 $94,889
1994 $142,568 $93,598
1994 $134,622 $89,611
1994 $135,889 $90,226
1994 $134,603 $90,349
1994 $130,975 $87,673
1994 $132,730 $90,682
1994 $141,423 $94,981
1994 $140,120 $92,660
1994 $142,420 $93,369
1994 $137,052 $89,250
1994 $139,650 $90,409
1995 $140,145 $92,266
1995 $146,023 $97,042
1995 $151,805 $99,819
1995 $152,385 $101,324
1995 $155,053 $104,654
1995 $162,810 $108,171
1995 $174,821 $113,423
1995 $177,454 $115,160
1995 $183,158 $117,762
1995 $179,789 $115,128
1995 $185,416 $120,853
1995 $187,880 $121,558
1996 $190,835 $124,137
1996 $200,326 $127,052
1996 $203,882 $128,890
1996 $212,394 $132,542
1996 $215,917 $134,544
1996 $206,821 $132,526
1996 $188,917 $124,324
1996 $198,795 $130,243
1996 $211,760 $136,676
1996 $211,966 $137,772
1996 $222,461 $146,165
1996 $223,710 $144,673
1997 $229,653 $150,085
1997 $218,817 $149,858
1997 $204,835 $143,388
1997 $209,029 $147,059
1997 $236,993 $157,788
1997 $243,285 $162,951
1997 $260,762 $176,549
1997 $257,966 $174,642
1997 $275,443 $184,614
1997 $259,015 $177,433
1997 $257,966 $181,656
1997 $262,848 $186,669
1998 $259,895 $183,160
1998 $287,741 $197,483
1998 $303,773 $206,843
1998 309,680.18 $207,360
1998 $291,960 $200,953
1998 $302,508 $203,746
1998 $285,210 $194,028
1998 $224,033 $162,983
1998 $233,315 $173,528
1998 $256,520 $185,363
1998 $273,396 $194,149
1998 $302,435 $205,546
</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 2,924.35%(b) for the Fund. The average annual
total return from the Fund's inception was 19.47%.(b)(c) The chart assumes a
hypothetical $10,000 initial investment in the Fund and reflects all Fund
expenses.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS(b)
DECEMBER 31, 1998
- ---------------------------------------------
LIFE OF
1 YEAR 5 YEAR 10 YEAR FUND(c)
- ---------------------------------------------
<S> <C> <C> <C>
15.06% 16.89% 16.65% 19.47%
- ---------------------------------------------
</TABLE>
The data above represents past performance of the Fund and may not be
indicative of future performance. The investment return and principal value of
an investment in the Fund will fluctuate, so that shares, when redeemed, may be
worth more or less than their original cost.
- ----------------------------------
(a) The Russell Midcap Index is composed of the smallest 800 companies in the
Russell 1000 Index. The Russell 1000 Index is made up of the 1,000 largest
companies in the Russell 3000 Index, which is composed of the 3,000 largest
U.S. companies by market capitalization and represents approximately 98% of
the investable U.S. equity market.
(b) Returns assume reinvestment of all dividends and capital gains
distributions at net asset value.
(c) The Fund began operations on November 6, 1979.
Page 3
<PAGE>
Dresdner RCM Growth Equity Fund
Portfolio of Investments
December 31, 1998
<TABLE>
<CAPTION>
% OF MARKET VALUE
SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS (NOTE 1)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CONSUMER DURABLES SECTOR 1.6%
AUTOMOTIVE RELATED 1.4%
567,200 US Tower Automotive Inc. $ 14,144,550
CONSUMER DURABLES 0.2%
82,000 US Furniture Brands International Inc. 2,234,500
CONSUMER NON-DURABLES SECTOR 14.8%
BEVERAGE/TOBACCO 0.3%
90,000 US Coca-Cola Enterprises Inc. 3,217,500
FOOD/FOOD PROCESSING 0.5%
84,000 US Hershey Foods Corp. 5,223,750
HOUSEHOLD/RELATED NON-DURABLES 1.0%
64,000 US Avon Products Inc. 2,832,000
19,000 US Clorox Co. 2,219,438
158,000 US Dial Corp. 4,562,250
------------------
9,613,688
------------------
LEISURE TIME PRODUCTS/SERVICES 2.8%
439,700 US Host Marriott Corp. 6,073,356
194,700 US Speedway Motorsports Inc. * 5,548,950
305,900 US Tricon Global Restaurants Inc. 15,333,238
------------------
26,955,544
------------------
RETAIL TRADE 10.2%
161,900 US Bed Bath & Beyond Inc. 5,524,838
369,300 US Circuit City Stores Inc. 18,441,919
253,700 US Costco Cos. Inc. * 18,313,969
659,600 US Family Dollar Stores Inc. 14,511,200
97,000 US Fred Meyer Inc. * 5,844,250
55,100 US Lowe's Companies Inc. 2,820,431
430,300 US Nordstrom Inc. 14,926,031
525,000 US Office Depot Inc. * 19,392,188
------------------
99,774,826
------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 4
<PAGE>
<TABLE>
<CAPTION>
% OF MARKET VALUE
SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS (NOTE 1)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CYCLICAL/CAPITAL GOODS SECTOR 6.4%
AEROSPACE/DEFENSE 0.6%
96,000 US General Dynamics Corp. * $ 5,628,000
BUILDING/CONSTRUCTION 2.0%
307,900 US Martin Marietta Materials Inc. 19,147,531
CHEMICALS/TEXTILES 0.4%
112,000 US Praxair Inc. 3,948,000
ELECTRICAL EQUIPMENT 1.7%
112,500 US Honeywell Inc. 8,472,656
126,000 US Rockwell International Corp. 6,118,875
50,000 US W. W. Grainger Inc. 2,081,250
------------------
16,672,781
------------------
TRANSPORTATION SERVICES 1.7%
290,600 US CNF Transportation Inc. 10,915,663
189,000 US Swift Transportation Co. Inc. 5,297,906
------------------
16,213,569
------------------
ENERGY SECTOR 2.2%
ENERGY 2.2%
314,300 US Burlington Resources Inc. 11,255,869
167,000 FR Coflexip S.A. (ADR) 5,364,875
665,000 US Stolt Comex Seaway S.A. 4,488,750
------------------
21,109,494
------------------
HEALTH CARE SECTOR 18.2%
DRUGS AND HOSPITAL SUPPLIES 8.9%
353,900 US Alza Corp. * 18,491,275
220,600 US Bausch & Lomb Inc. 13,236,000
129,100 US Genentech Inc. 10,287,656
89,100 US Guidant Corp. 9,823,275
26,200 US Perkin Elmer Corp. 2,556,138
31,000 US Sepracor Inc. * 2,731,875
88,300 US Sofamor/Danek Group Inc. * 10,750,525
348,600 US Stryker Corp. 19,194,788
------------------
87,071,532
------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 5
<PAGE>
<TABLE>
<CAPTION>
% OF MARKET VALUE
SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS (NOTE 1)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HEALTH CARE SERVICES 9.3%
150,800 US Allegiance Corp. $ 7,031,050
404,700 US Bergen Brunswig Corp. 14,113,913
238,700 US Cardinal Health Inc. 18,111,363
284,500 US Covance Inc. * 8,286,063
211,600 US HCR Manor Care Inc. * 6,215,750
422,700 US Health Management Associates Inc. 9,140,888
311,500 US Omnicare Inc. 10,824,625
120,000 US Orthodontic Centers of America Inc. * 2,332,500
279,200 US Universal Health Services Inc. Class B * 14,483,500
------------------
90,539,652
------------------
INTEREST-SENSITIVE SECTOR 9.2%
BANKING 7.1%
83,000 US CCB Financial Corp. 4,731,000
267,200 US City National Corp. 11,122,200
180,000 US First Security Corp. 4,207,500
147,000 US Firstar Corp. 13,707,750
555,000 US North Fork Bancorporation Inc. 13,285,313
94,000 US Southtrust Corp. 3,472,125
290,300 US WestAmerica Bancorporation 10,668,525
124,200 US Zions Bancorp 7,746,975
------------------
68,941,388
------------------
GENERAL FINANCE 2.1%
168,000 US AMRESCO Inc. * 1,470,000
159,000 US Charter One Financial Inc. 4,412,250
43,970 US Crestline Capital Corp. * 643,061
573,500 US Federated Investors Inc. Class B 10,394,688
144,000 US TCF Financial Corp. 3,483,000
------------------
20,402,999
------------------
TECHNOLOGY SECTOR 24.4%
COMPUTERS/OFFICE EQUIPMENT 2.5%
241,600 US Network Appliance Inc. 10,872,000
374,500 US Seagate Technology * 11,328,625
60,000 US Tech Data Corp. * 2,415,000
------------------
24,615,625
------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 6
<PAGE>
<TABLE>
<CAPTION>
% OF MARKET VALUE
SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS (NOTE 1)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ELECTRONICS/NEW TECHNOLOGY 10.7%
303,900 US 3Com Corp. * $ 13,618,519
224,200 US Altera Corp. * 13,648,175
215,400 US Ascend Communications Inc. * 14,162,550
100,000 US KLA Tencor Corp. * 4,337,500
250,100 US Maxim Integrated Products Inc. * 10,926,244
180,500 US Micron Technologies Inc. * 9,126,531
347,100 CA Newbridge Networks Corp. * 10,543,163
112,500 US Sanmina Corp. 7,031,250
118,040 US STMicroelectronics N.V. NY Registry * 9,214,498
164,500 US Uniphase Corp. * 11,412,188
------------------
104,020,618
------------------
TECHNOLOGY SERVICES 11.2%
6,880 US Amazon.com Inc. 2,210,200
321,000 US Aspen Technologies Inc. * 4,654,500
194,200 US BMC Software Inc. 8,654,038
254,000 IE CBT Group PLC (ADR) 3,778,250
106,100 US Ceridian Corp. * 7,407,106
143,800 US Citrix Systems Inc. 13,957,588
92,400 US Electronics Arts Inc. * 5,185,950
152,600 US I2 Technologies Inc. 4,635,225
77,650 US Infoseek Corp. * 3,833,969
269,400 US Network Associates Inc. 17,847,750
7,400 IE Saville Systems PLC (ADR) * 140,600
68,000 US Sterling Commerce Inc. * 3,060,000
195,500 US VERITAS Software Co. 11,717,781
435,600 US Visio Corp. * 15,926,625
54,000 US Wind River Systems Inc. * 2,538,000
18,000 US Yahoo Inc. * 4,264,865
------------------
109,812,447
------------------
TELEMEDIA/SERVICES SECTOR 16.0%
BUSINESS SERVICES 4.3%
761,000 US Allied Waste Industries Inc. 17,978,625
116,500 US Fiserv Inc. 5,992,469
7,000 US MSC Industrial Direct Inc. 158,375
34,400 UK Select Appointments Holdings PLC (ADR) 739,600
620,500 US Sybron International Corp. Wisconsin 16,869,844
------------------
41,738,913
------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 7
<PAGE>
<TABLE>
<CAPTION>
% OF MARKET VALUE
SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS (NOTE 1)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMUNICATIONS SERVICES 9.4%
305,900 US Cincinnati Bell Inc. $ 6,594,738
98,000 US Frontier Corp. 3,332,000
228,400 US Global TeleSystems Group Inc. * 12,733,300
680,300 US ICG Communications Inc. * 14,626,450
230,000 US Intermedia Communications of Florida Inc. 3,967,500
183,500 BE Loral Space & Communications * 3,268,594
262,900 US McLeod Inc. * 8,215,625
552,900 US Nextel Communications Inc. * 13,062,263
316,000 US Omnipoint Corp. 2,942,750
220,200 US Snyder Communications Inc. * 7,431,750
714,700 US Western Wireless Corp. Class A * 15,723,400
------------------
91,898,370
------------------
MEDIA 2.3%
42,000 US Acxiom Corp. * 1,302,000
121,300 US Apollo Group Inc. 4,109,038
550,500 US Sylvan Learning Systems Inc. 16,790,250
------------------
22,201,288
------------------
TOTAL EQUITY INVESTMENTS (COST $772,258,805) 92.8% 905,126,565
------------------
SHORT-TERM INVESTMENTS
MONEY MARKET FUNDS 5.0%
24,486,079 US SSgA Money Market Fund 24,486,079
24,486,080 US SSgA U.S. Government Money Market Fund 24,486,080
------------------
------------------
48,972,159
------------------
TOTAL SHORT-TERM INVESTMENTS (COST $48,972,159) 5.0% 48,972,159
------------------
TOTAL INVESTMENTS (COST $821,230,964) ** 97.8% 954,098,724
OTHER ASSETS LESS LIABILITIES 2.2% 21,164,053
------------------
NET ASSETS 100.0% $ 975,262,777
------------------
------------------
</TABLE>
- ------------------------------
* Non-income producing security.
ADR American Depository Receipt?
Tax information:
** For Federal income tax purposes, cost is $849,159,046 and the gross
aggregate unrealized appreciation (depreciation) for all securities is as
follows:
<TABLE>
<S> <C>
Unrealized appreciation $ 140,808,851
Unrealized depreciation (35,869,173)
---------------
Net unrealized appreciation $ 104,939,678
---------------
---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 8
<PAGE>
Dresdner RCM Growth Equity Fund
Portfolio of Investments
December 31, 1998
The Fund's investments in securities at December 31, 1998, categorized by
country:
<TABLE>
<CAPTION>
% OF NET ASSETS
-------------------------------------------
COUNTRY SHORT-TERM
COUNTRY CODE EQUITIES AND OTHER TOTAL
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Bermuda BE 0.3% 0.3%
Canada CA 1.1% 1.1%
France FR 0.6% 0.6%
Ireland IE 0.4% 0.4%
United Kingdom UK 0.1% 0.1%
United States US 90.3% 7.2% 97.5%
-------------------------------------------
-------------------------------------------
Total 92.8% 7.2% 100.0%
-------------------------------------------
-------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 9
<PAGE>
Dresdner RCM Small Cap Fund
Management's Performance Review
For the 12 months ended December 31, 1998, the Dresdner RCM Small Cap
Fund (the "Fund") earned a total return of 1.11%, versus a return of -2.54% for
the Fund's primary benchmark, the Russell 2000 Index.
MARKET OVERVIEW
The gulf between small cap and large cap stocks continued to widen in
1998 as nervous investors sought the liquidity and familiarity of blue chip
growth stocks, particularly in the second and third quarters. During the third
quarter retreat from equities brought on by turmoil in the world's financial
markets, we remained committed to staying as fully invested as possible.
Opportunistic positioning of the portfolio allowed the Fund to take full
advantage of the fourth quarter rally that occurred in the wake of interest rate
cuts by the Federal Reserve.
While reflecting trends in the broader market, growth stocks did
experience unaccustomed dominance over value in the small cap universe, a trend
that benefited the Fund. For the year, the Russell 2000 Value Index lagged the
Russell 2000 Growth Index by a margin of 7.68%.
INVESTMENT APPROACH
As bottom-up investors, we focus primarily on well-managed companies
with clearly defined market niches, as well as quality products and services
with attractive growth prospects. In last year's difficult small cap
environment, the Fund's outperformance owed more to industry strategy - which
added 4.62% to the portfolio's overall return - than selection of individual
issues. However, our exceptional fourth quarter performance was a function of
both relative industry selection and individual stock selection.
SECTOR HIGHLIGHTS
In the first half of the year, investments in growth issues such as
VISX, Lason Holdings and Micros Systems contributed most to the portfolio's
momentum. During this period, we also began to trim our exposure to a number of
sectors. We cut back on health care services because of concerns surrounding
federal reimbursement policies, and trimmed our energy exposure because of sharp
declines in world oil prices. At the same time, we increased our holdings in
technology and business services with outsourcing themes, continuing this
strategy into the second half of the year.
Even as prices in the technology sector dropped in the wake of market
turbulence in late summer and early fall, we had been taking advantage of
increasingly reasonable valuations to add high-quality stocks to our holdings,
both in software and hardware. We also increased existing positions we deemed to
have above-average growth potential. When the market rebounded in early October,
we were well positioned to take advantage of the upturn, particularly because
the rally in the Russell 2000 was very narrowly focused on technology. Holdings
that made substantial contributions to the Fund's performance include Sanmina
Corp., Semtech, Hadco, Visio, Maxtor, and Rational Software.
Outside of technology, we strongly favored companies with strong cash
flows that had the ability to grow without borrowing from the capital markets.
Many of these additions, which we acquired at very attractive prices, were in
the business services group and included F.Y.I. Inc., Travel Services, Personnel
Group of America, Romac International, SFX and especially NCO Group. These are
all strong franchises that contributed significantly to the Fund's outpacing its
benchmark by a 10% margin.
OUTLOOK
As we begin 1999, the spread between the valuations of large cap and
small cap stocks continues to widen, despite the higher expected earnings growth
of smaller stocks. We believe that this presents attractive opportunities. The
relative strength of the small caps is broadening and this will be beneficial to
the overall indices going forward. In the longer term, a shift in investor focus
may have to await a general improvement in the health of world equity markets.
Our approach will be to continue to apply rigorous bottom-up analysis, focus on
high-quality growth stocks within and across industries, and to remain fully
invested.
Page 10
<PAGE>
Dresdner RCM Small Cap Fund
Performance Summary
[cad 157]EDGAR REPRESENTATION OF PLOT POINTS USED IN GRAPHIC[cad 179]
<TABLE>
<CAPTION>
FUND RUSSELL 2000 INDEX
<S> <C> <C>
12/31/91 $10,000 $10,000
92 $10,000 $10,000
92 $10,786 $10,811
92 $11,118 $11,127
92 $10,850 $10,751
92 $10,613 $10,373
92 $10,703 $10,511
92 $10,165 $10,017
92 $10,530 $10,366
92 $10,336 $10,072
92 $10,603 $10,304
92 $11,002 $10,630
92 $11,807 $11,444
92 $12,214 $11,842
93 $12,212 $12,242
93 $11,792 $11,960
93 $12,082 $12,348
93 $11,636 $12,008
93 $12,102 $12,539
93 $12,134 $12,617
93 $12,126 $12,791
93 $12,580 $13,344
93 $13,037 $13,720
93 $13,186 $14,074
93 $12,728 $13,615
93 $13,337 $14,080
94 $13,592 $14,522
94 $13,431 $14,469
94 $12,712 $13,707
94 $12,637 $13,788
94 $12,411 $13,633
94 $11,990 $13,173
6/31/94 $12,173 $13,390
94 $13,095 $14,136
94 $13,073 $14,088
94 $13,240 $14,031
94 $12,765 $13,464
94 $13,049 $13,824
95 $12,958 $13,649
95 $13,392 $14,217
95 $13,900 $14,461
95 $14,064 $14,782
95 $14,030 $15,037
95 $14,728 $15,817
95 $15,706 $16,728
95 $16,245 $17,074
95 $16,900 $17,380
95 $16,330 $16,602
11/31/95 $16,882 $17,300
95 $17,496 $17,756
96 $17,973 $17,737
96 $18,914 $18,290
96 $19,374 $18,662
4//30/96 $20,684 $19,660
96 $21,660 $20,435
96 $20,993 $19,596
96 $18,958 $17,884
96 $20,592 $18,923
96 $22,457 $19,662
96 $22,226 $19,359
96 $22,488 $20,157
96 $23,514 $20,685
97 $23,754 $21,098
97 $22,335 $20,587
97 $20,877 $19,615
97 $20,357 $19,670
97 $23,953 $21,858
97 $25,312 $22,795
97 $26,750 $23,856
97 $27,350 $24,403
97 $29,867 $26,189
97 $28,508 $25,039
97 $28,329 $24,877
97 $28,098 $25,312
98 $27,929 $24,912
98 $30,435 $26,753
98 $31,520 $27,855
98 $31,496 $28,009
98 $29,688 $26,499
98 $30,700 $26,555
98 $28,339 $24,404
98 $20,989 $19,664
98 $22,531 $21,204
98 $24,290 $22,069
98 $26,483 $23,226
98 $28,411 $24,663
</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 184.11%(b) for the Fund. The average annual total return
from the Fund's inception was 16.09%.(b)(c) The chart assumes a hypothetical
$10,000 initial investment in the Fund and reflects all Fund expenses.
AVERAGE ANNUAL TOTAL RETURNS(b)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
- ------------------------------------------------------
LIFE OF
1 YEAR 5 YEAR FUND(c)
- ------------------------------------------------------
<S> <C> <C>
1.11% 16.33% 16.09%
- ------------------------------------------------------
</TABLE>
The data above represents past performance of the Fund and may not be
indicative of future performance. The investment return and principal value of
an investment in the Fund will fluctuate, so that shares, when redeemed, may be
worth more or less than their original cost.
- ----------------------------------
(a) The Russell 2000 Index is composed of the 2,000 smallest securities in the
Russell 3000 Index, which is composed of the 3,000 largest U.S. companies
by market capitalization and represents approximately 98% of the investable
U.S. equity market.
(b) Returns assume reinvestment of all dividends and capital gains distributions
at net asset value.
(c) The Fund began operations on January 3, 1992.
Page 11
<PAGE>
Dresdner RCM Small Cap Fund
Portfolio of Investments
December 31, 1998
<TABLE>
<CAPTION>
% OF MARKET VALUE
SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS (NOTE 1)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CONSUMER DURABLES SECTOR 3.9%
AUTOMOTIVE RELATED 2.7%
202,600 US Dura Automotive Systems Inc. * $ 6,913,725
385,000 US Keystone Automotive Industries Inc. * 8,060,938
-----------------
14,974,663
-----------------
CONSUMER DURABLES 1.2%
125,000 US Furniture Brands International Inc. 3,391,700
408,844 US Windmere Durable Holdings Inc. * 3,168,541
-----------------
6,560,241
-----------------
CONSUMER NON-DURABLES SECTOR 18.9%
FOOD/FOOD PROCESSING TOTAL 1.1%
600,057 US Omega Protein Corp. * 6,075,577
HOUSEHOLD/RELATED NON-DURABLES 3.7%
532,925 US French Fragrances Inc. * 3,863,706
266,600 US Ocular Sciences Inc. * 7,131,550
246,132 US Scotts Co. * 9,460,699
-----------------
20,455,955
-----------------
LEISURE TIME PRODUCTS/SERVICES 5.5%
357,600 US Cheesecake Factory Inc. 10,605,075
356,665 US Dave & Buster's Inc. * 8,225,587
75,000 US Family Golf Centers Inc. 1,481,250
132,900 US Speedway Motorsports Inc. * 3,787,650
221,300 US Travel Services International Inc. 6,749,650
-----------------
30,849,212
-----------------
RETAIL TRADE 8.6%
75,000 US Cost Plus Inc. * 2,353,125
442,000 US CSK Auto Corp. * 11,795,875
320,800 US Electronics Boutique Holdings Corp. * 6,536,300
365,000 US Regis Corp. 14,600,000
244,500 US Select Comfort Corp. * 6,463,969
333,000 US Trans World Entertaniment Corp. 6,347,813
-----------------
48,097,082
-----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 12
<PAGE>
<TABLE>
<CAPTION>
% OF MARKET VALUE
SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS (NOTE 1)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CYCLICAL/CAPITAL GOODS SECTOR 9.7%
BUILDING/CONSTRUCTION 4.1%
456,498 US Comfort Systems USA Inc. * $ 8,159,902
371,500 US Integrated Electrical Services * 8,265,875
77,000 US NCI Building Systems Inc. * 2,165,625
145,000 US Service Experts Inc. * 4,241,250
-----------------
22,832,652
-----------------
ELECTRICAL EQUIPMENT 0.5%
137,800 US Quanta Services Inc. * 3,040,213
INDUSTRIAL EQUIPMENT 1.2%
108,600 US Federal Signal Corp. 2,972,925
356,668 US Tokheim Corp. * 3,477,513
-----------------
6,450,438
-----------------
RAW/BASIC MATERIALS 1.2%
247,800 US Metals USA Inc. * 2,416,050
341,000 US Oregon Steel Mills Inc. 4,049,375
-----------------
6,465,425
-----------------
TRANSPORTATION SERVICES 2.7%
170,000 US Covenant Transport Inc. Class A * 3,038,750
100,000 US Knight Transportation Inc. 2,668,750
328,525 US Mark VII Inc. * 6,118,778
125,000 US Swift Transportation Co. Inc. 3,503,906
-----------------
15,330,184
-----------------
ENERGY SECTOR 2.4%
ENERGY 2.4%
325,500 US Global Industries Inc. * 1,993,688
125,000 US Hanover Compressor Co. * 3,210,938
299,100 US Houston Exploration Co. * 5,944,613
121,000 US Newfield Exploration Co. * 2,525,875
-----------------
13,675,114
-----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 13
<PAGE>
<TABLE>
<CAPTION>
% OF MARKET VALUE
SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS (NOTE 1)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HEALTH CARE SECTOR 9.9%
DRUGS AND HOSPITAL SUPPLIES 3.0%
40,929 US Algos Pharmaceutical Corp. * $ 1,064,154
14,000 US Anesta Corp.* 372,750
184,000 US Bone Care International Inc. * 2,139,000
270,000 US CIMA Labs Inc. * 708,750
621,282 US Gensia Sicor Inc. * 2,815,184
17,000 US Gilead Sciences Inc. * 698,063
516,403 US Heska Corp. * 2,291,538
108,896 US Inhale Therapeutic Systems * 3,593,568
26,226 US Ligand Pharmaceuticals Inc. Class B * 304,877
59,000 US Novoste Corp. * 1,674,125
46,600 US SangStat Medical Corp. * 990,250
-----------------
- 16,652,259
-----------------
HEALTH CARE SERVICES 6.9%
353,982 US American Retirement Corp. 5,553,093
165,700 US Assisted Living Concepts Inc. * 2,174,813
445,570 US Centennial HealthCare Corp. * 6,906,335
150,000 US Kendle International Inc. * 3,506,250
125,000 US Orthodontic Centers of America Inc. * 2,429,688
233,100 US Pharmaceutical Product Development Inc. * 7,007,569
100,000 US Province Healthcare Co. 3,587,500
255,600 US Renal Care Group Inc. 7,364,475
-----------------
38,529,723
-----------------
INTEREST-SENSITIVE SECTOR 4.9%
BANKING 1.9%
95,000 US Silicon Valley Bancshares 1,617,969
240,000 US WestAmerica Bancorporation 8,820,000
-----------------
10,437,969
-----------------
GENERAL FINANCE 2.4%
163,000 US American Capital Strategies Ltd. 2,811,750
208,000 US Federated Investors Inc. Class B 3,770,000
916,000 US UniCapital Corp. * 6,755,500
-----------------
13,337,250
-----------------
INSURANCE 0.6%
99,000 US MONY Group Inc. * 3,099,938
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 14
<PAGE>
<TABLE>
<CAPTION>
% OF MARKET VALUE
SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS (NOTE 1)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TECHNOLOGY SECTOR 22.7%
COMPUTERS/OFFICE EQUIPMENT 6.6%
292,000 US Black Box Corp. * $ 11,059,500
475,000 US CHS Electronics Inc. * 8,045,313
225,000 US Maxtor Corp. * 3,150,000
445,000 US Micros Systems Inc. 14,629,375
-----------------
36,884,188
-----------------
ELECTRONICS/NEW TECHNOLOGY 7.0%
918,100 US Artesyn Technologies Inc. * 12,853,400
189,300 US Burr-Brown Corp. 4,436,719
355,000 US Hadco Corp. * 12,425,000
530,000 US MMC Networks Inc. * 7,022,500
70,000 US Semtech Corp. * 2,511,250
-----------------
39,248,869
-----------------
TECHNOLOGY SERVICES 9.1%
190,000 US Aspen Technologies Inc. * 2,755,000
147,000 US HNC Software Inc. * 5,944,313
41,000 US Infoseek Corp. * 2,024,375
299,500 US Micromuse Inc. * 5,840,250
382,000 US Rational Software Corp. * 10,123,000
370,600 US Renaissance Worldwide Inc. 2,269,925
11,400 IE Saville Systems PLC (ADR) * 216,600
740,000 US Technology Solutions Co. 7,931,875
374,000 US Visio Corp. * 13,674,366
-----------------
50,779,704
-----------------
TELEMEDIA/SERVICES SECTOR 19.0%
BUSINESS SERVICES 13.9%
19,500 US Choicepoint Inc. * 1,257,750
306,365 US FYI Inc. * 9,803,680
17,100 US INSpire Insurance Solutions Inc. 314,213
154,201 US Iron Mountain Inc. 5,560,874
232,000 US Lamalie Associates Inc. 1,406,500
124,825 US Lason Holdings Inc. * 7,263,255
107,000 US NCO Group Inc. * 4,815,000
690,000 US Personnel Group of America, Inc. 12,075,000
691,400 US Romac International Inc. * 15,383,650
216,000 US School Specialty Inc. * 4,617,000
188,000 UK Select Appointments Holdings PLC (ADR) 4,042,000
138,965 US Vestcom International Inc. * 1,250,685
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 15
<PAGE>
<TABLE>
<CAPTION>
% OF MARKET VALUE
SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS (NOTE 1)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BUSINESS SERVICES (Continued)
111,200 US Wackenhut Corrections Corp. * $ 3,183,100
337,000 US Wilmar Industries Inc. * 6,845,313
-----------------
77,818,020
-----------------
COMMUNICATIONS SERVICES 1.7%
264,000 US ICG Communications Inc. * 5,676,000
258,800 US International Telecommunication Systems Inc. 3,817,300
-----------------
9,493,300
-----------------
MEDIA 3.4%
53,700 US Bright Horizons Family Solutions 1,449,900
243,000 US SFX Entertainment Inc. Class A * 13,334,625
140,000 US Sylvan Learning Systems Inc. 4,270,000
-----------------
19,054,525
-----------------
TOTAL EQUITY INVESTMENTS (COST $485,347,248) 91.4% 510,142,501
-----------------
SHORT-TERM INVESTMENTS
FACE VALUE COMMERCIAL PAPER 1.8%
10,000,000 US Ford Motor Credit Co. 4.91% maturing 01/14/99 9,982,269
SHARES MONEY MARKET FUNDS 8.1%
26,002,000 US SSgA U.S. Government Money Market Fund 26,002,000
18,934,870 US SsgA Money Market Fund 18,934,870
-----------------
44,936,870
-----------------
TOTAL SHORT-TERM INVESTMENTS (COST $54,919,139) 9.9% 54,919,139
-----------------
TOTAL INVESTMENTS (COST $540,266,387) ** 101.3% 565,061,640
OTHER ASSETS LESS LIABILITIES (1.3%) (7,096,760)
-----------------
NET ASSETS 100.0% $ 557,964,880
=================
</TABLE>
- -------------------------------
* Non-income producing security.
ADR American Depository Receipt
Tax Information:
** For Federal income tax purposes, cost is $547,064,163 and the gross
aggregate unrealized appreciation (depreciation) for all securities is as
follows:
<TABLE>
<S> <C>
Unrealized appreciation $ 70,850,305
Unrealized depreciation (52,852,828)
===================
Net unrealized $ 17,997,477
appreciation
===================
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 16
<PAGE>
The Fund's investments in securities at December 31, 1998, categorized by
country:
<TABLE>
<CAPTION>
% OF NET ASSETS
-------------------------------------------
COUNTRY SHORT-TERM
COUNTRY CODE EQUITIES AND OTHER TOTAL
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Ireland IE 0.04% 0.04%
United Kingdom UK 0.73% 0.73%
United States US 90.67% 8.56% 99.23%
===========================================
Total 91.44% 8.56% 100.00%
===========================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 17
<PAGE>
Dresdner RCM Capital Funds, Inc.
Statements of Assets and Liabilities
December 31, 1998
<TABLE>
<CAPTION>
GROWTH EQUITY SMALL CAP
FUND FUND
--------------- ----------------
<S> <C> <C>
ASSETS:
Investments at cost $ 821,230,964 $ 540,266,387
--------------- ----------------
--------------- ----------------
Investments at value (Note 1) $ 954,098,724 $ 565,061,640
Receivables:
Investments sold 55,596,869 2,268,345
Fund shares sold 447,743 1,744,954
Dividends and dividend reclaims 1,600,599 100,150
Interest 81,524 75,760
--------------- ----------------
Total Assets 1,011,825,459 569,250,849
--------------- ----------------
LIABILITIES:
Payables:
Investments purchased 34,144,700 10,798,134
Fund shares repurchased 1,823,285 44,000
Management fees (Note 2) 574,847 436,437
Custodian fees 19,850 7,398
--------------- ----------------
Total Liabilities 36,562,682 11,285,969
--------------- ----------------
NET ASSETS $ 975,262,777 $ 557,964,880
--------------- ----------------
--------------- ----------------
NET ASSETS CONSIST OF:
Paid-in capital (Note 3) $ 842,525,774 $ 530,995,460
Accumulated net realized gain (loss) on investments and foreign
currency transactions (130,757) 2,174,167
Net unrealized appreciation on investments 132,867,760 24,795,253
--------------- ----------------
--------------- ----------------
NET ASSETS $ 975,262,777 $ 557,964,880
SHARES OUTSTANDING 166,021,831 59,606,705
--------------- ----------------
--------------- ----------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE $ 5.87 $ 9.36
--------------- ----------------
--------------- ----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
Dresdner RCM Capital Funds, Inc.
Statements of Operations
For the Year Ended December 31, 1998
<TABLE>
<CAPTION>
GROWTH EQUITY SMALL CAP
FUND FUND
--------------- ----------------
<S> <C> <C>
INVESTMENT INCOME: (NOTE 1)
Income:
Dividends $ 6,929,944 $ 2,095,554
Interest 112,549 221,804
Foreign tax withheld (29,784) --
--------------- ----------------
Total investment income 7,012,709 2,317,358
--------------- ----------------
Expenses:
Investment management fees (Note 2) 7,043,731 5,821,282
Custodian fees 104,875 58,134
Miscellaneous expenses 800 800
--------------- ----------------
Total expenses 7,149,406 5,880,216
--------------- ----------------
Net investment loss (136,697) (3,562,858)
--------------- ----------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain on investments 115,661,248 87,203,805
Net realized loss on foreign currency transactions (390,916) --
Net realized gain 115,270,332 87,203,805
--------------- ----------------
Net change in unrealized appreciation on foreign currency
transactions 4,588 --
Net change in unrealized appreciation (depreciation) on investments 27,332,654 (65,282,583)
--------------- ----------------
Net unrealized appreciation (depreciation) 27,337,242 (65,282,583)
--------------- ----------------
Net realized and unrealized gain during the year 142,607,574 21,921,222
--------------- ----------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 142,470,877 $ 18,358,364
--------------- ----------------
--------------- ----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
Dresdner RCM Capital Funds, Inc.
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
GROWTH EQUITY FUND SMALL CAP FUND
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1998 1997
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment loss $ (136,697) $ (1,597,025) $ (3,562,858) $ (3,872,163)
Net realized gain on investments
and foreign currency
transactions 115,270,332 193,067,561 87,203,805 131,224,372
Net change in unrealized
appreciation (depreciation)
on investments and foreign
currency transactions 27,337,242 (40,746,692) (65,282,583) (23,964,601)
------------- ------------- ------------ -------------
Net increase in net assets from
operations 142,470,877 150,723,844 18,358,364 103,387,608
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investments
(Note 1) (158,525,243) (161,794,250) (102,478,286) (107,769,024)
NET INCREASE (DECREASE) FROM CAPITA
SHARE TRANSACTIONS (NOTE 3) 30,492,105 75,575,294 (19,325,834) 97,190,936
------------- ------------- ------------ -------------
TOTAL INCREASE (DECREASE) IN NET
ASSETS 14,437,739 64,504,888 (103,445,756) 92,809,520
NET ASSETS:
Beginning of year 960,825,038 896,320,150 661,410,636 568,601,116
------------- ------------- ------------ -------------
End of year $975,262,777 $ 960,825,038 $557,964,880 $661,410,636
------------- ------------- ------------ -------------
------------- ------------- ------------ -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
Dresdner RCM Capital Funds, Inc.
Dresdner RCM Growth Equity Fund
Financial Highlights
For a share outstanding during the fiscal year ended December 31:
<TABLE>
<CAPTION>
1998 (2) 1997 (2) 1996 (1)(2) 1995 1994
------- -------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 6.23 $ 6.40 $ 9.13 $ 7.89 $ 10.42
------- -------- ------- ------ -------
Income from investment operations:
Net investment income (loss) -- (0.01) (0.01) 0.02 0.03
Net realized and unrealized gain on investmen 0.81 1.08 1.59 2.66 0.01
------- -------- ------- ------ -------
Total from investment operations 0.81 1.07 1.58 2.68 0.04
------- -------- ------- ------ -------
Less distributions:
From net investment income -- -- -- (0.02) (0.03)
From net realized gain on investments (1.17) (1.24) (4.31) (1.42) (2.54)
------- -------- ------- ------ -------
Total distributions (1.17) (1.24) (4.31) (1.44) (2.57)
------- -------- ------- ------ -------
NET ASSET VALUE, END OF YEAR $ 5.87 $ 6.23 $ 6.40 $ 9.13 $ 7.89
------- -------- ------- ------ -------
------- -------- ------- ------ -------
TOTAL RETURN (3) 15.06% 17.50% 19.07% 34.53% 0.76%
------- -------- ------- ------ -------
------- -------- ------- ------ -------
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in millions) $ 975 $ 961 $ 896 $1,325 $ 1,365
------- -------- ------- ------ -------
------- -------- ------- ------ -------
Ratio of operating expenses to average net assets 0.76% 0.76% 0.84% 0.76% 0.83%
------- -------- ------- ------ -------
------- -------- ------- ------ -------
Ratio of net investment income to average net assets (0.01)% (0.17)% (0.12)% 0.22% 0.22%
------- -------- ------- ------ -------
------- -------- ------- ------ -------
Portfolio turnover 168.24% 155.10% 115.89% 96.46% 111.06%
------- -------- ------- ------ -------
------- -------- ------- ------ -------
</TABLE>
- -----------------------------------------
(1) Stock split 25:1 at the close of business on June 17, 1996. All prior
period per share amounts were restated to reflect the stock split.
(2) Calculated using the average share method.
(3) Total return measures the change in value of an investment over the period
indicated.
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
Dresdner RCM Capital Funds, Inc.
Dresdner RCM Small Cap Fund
Financial Highlights
For a share outstanding during the fiscal year ended December 31:
<TABLE>
<CAPTION>
1998 (2) 1997 (2) 1996 (1)(2) 1995 1994
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 11.66 $ 11.77 $ 11.35 $ 9.42 $ 10.41
------- ------- ------- ------ -------
Income from investment operations:
Net investment loss (0.07) (0.08) (0.08) (0.04) (0.04)
Net realized and unrealized gain (loss) on
investments -- (3) 2.29 3.82 3.21 (0.20)
------- ------- ------- ------ -------
Total from investment operations (0.07) 2.21 3.74 3.17 (0.24)
------- ------- ------- ------ -------
Less distributions:
From net realized gain on investments (2.23) (2.32) (3.32) (1.24) (0.75)
------- ------- ------- ------ -------
NET ASSET VALUE, END OF YEAR $ 9.36 $ 11.66 $ 11.77 $11.35 $ 9.42
------- ------- ------- ------ -------
------- ------- ------- ------ -------
TOTAL RETURN (4) 1.11% 19.49% 34.39% 34.08% (2.16)%
------- ------- ------- ------ -------
------- ------- ------- ------ -------
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in millions) $ 558 $ 661 $ 569 $ 410 $ 416
------- ------- ------- ------ -------
------- ------- ------- ------ -------
Ratio of operating expenses to average net assets 1.01% 1.02% 1.00% 1.01% 1.11%
------- ------- ------- ------ -------
------- ------- ------- ------ -------
Ratio of net investment income to average net assets (0.61)% (0.68)% (0.58)% (0.22)% (0.33)%
------- ------- ------- ------ -------
------- ------- ------- ------ -------
Portfolio turnover 131.85% 117.64% 117.00% 83.91% 117.71%
------- ------- ------- ------ -------
------- ------- ------- ------ -------
</TABLE>
- -----------------------------------------
(1) Stock split 12:1 at the close of business on June 17, 1996. All prior
period per share amounts were restated to reflect the stock split.
(2) Calculated using the average share method.
(3) The amount shown for a share outstanding does not correspond with the
aggregate net gain on investments for the period due to timing of sales and
repurchases of Fund shares in relation to fluctuating market values of the
investments of the Fund.
(4) Total return measures the change in value of an investment over the period
indicated.
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
Dresdner RCM Capital Funds, Inc.
Notes to Financial Statements
December 31, 1998
1. SIGNIFICANT ACCOUNTING POLICIES
Dresdner RCM Capital Funds, Inc. ("Capital Company") is organized as a
Maryland corporation and is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended. The Capital
Company consists of three series: Dresdner RCM Growth Equity Fund ("Growth
Fund") and Dresdner RCM Small Cap Fund ("Small Cap Fund") are diversified,
noload series of the Capital Company. These two series are collectively
referred to as the "Funds." The Dresdner RCM International Growth Equity Fund
("International Fund") is a non-diversified, no load series of the Capital
Company. The International Fund's financial statements and financial highlights
are included in the annual report of the Dresdner RCM Global Funds.
The following is a summary of significant accounting policies
consistently followed by the Funds in the preparation of their financial
statements. The policies are in conformity with generally accepted accounting
principles which require management to make estimates and assumptions that
affect the reported amount of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results may differ from these estimates.
A. PORTFOLIO VALUATION:
Investment securities are stated at fair market value. Equity
securities traded on stock exchanges are valued at the last sale price on the
exchange or in the principal over-the-counter market in which such securities
are traded as of the close of business on the day the securities are being
valued. If there has been no sale on such day, then the security is valued at
the closing bid price on such day. If no bid price is quoted on such day, then
the security is valued by such method as a duly constituted committee of the
Board of Directors of the Company determines in good faith to reflect its fair
market value. Readily marketable securities traded only in the over-the-counter
market that are not listed on NASDAQ or similar foreign reporting service are
valued at the mean bid price, or using such other comparable sources as the
Board of Directors of the Company in good faith deems appropriate to reflect
their fair market value. Other portfolio securities held by the Funds are valued
at current market value, if current market quotations are readily available for
such securities. To the extent that market quotations are not readily available,
such securities are valued by whatever means a duly constituted committee of the
Board of Directors of the Company in good faith deems appropriate to reflect
their fair market value. Short-term investments with a maturity of 60 days or
less are valued at amortized cost, which approximates market value.
B. SECURITY TRANSACTIONS, RELATED INVESTMENT INCOME AND EXPENSES:
Security transactions are recorded as of the date of purchase or sale.
Dividends are recorded on the ex-dividend date. Interest income is recorded on
the accrual basis and includes amortization of discounts and premiums. Realized
gains and losses on security transactions are determined on the identified cost
basis for both financial statement and federal income tax purposes. Each Fund
bears expenses incurred specifically on its behalf as well as a portion of any
general expenses.
C. FOREIGN CURRENCY TRANSACTIONS AND FOREIGN INVESTMENTS:
The records of the Funds are maintained in U.S. dollars. Foreign
currencies, foreign investments and other assets and liabilities denominated in
currencies other than U.S. dollars are translated into U.S. dollars based upon
foreign exchange rates prevailing at the end of the period. Purchases and sales
of foreign securities and income and withholding taxes are translated on the
respective dates of such transactions. Net realized currency gains and losses
include foreign currency gains and losses between trade date and settlement date
and foreign currency translations. The Funds do not isolate that portion of
foreign currency exchange fluctuation on investments from unrealized
appreciation and depreciation which arises from changes in market prices. Such
fluctuations are included with the net unrealized appreciation or depreciation
on investments.
Page 23
<PAGE>
Dresdner RCM Capital Funds, Inc.
Notes to Financial Statements
December 31, 1998
1. SIGNIFICANT ACCOUNTING POLICIES (Continued)
D. FEDERAL INCOME TAXES:
It is the policy of the Funds to comply with the requirements for
qualification as a "regulated investment company" under the Internal Revenue
Code of 1986, as amended (the "Code"). It is also the intention of the Funds to
make distributions sufficient to avoid imposition of any excise tax under
Section 4982 of the Code. Therefore, no provision has been made for Federal
income or excise taxes on income and capital gains.
E. DISTRIBUTIONS:
Dividends and capital gains (if any) are declared and distributed to
shareholders annually. Distributions to shareholders are recorded by the Funds
on the ex-dividend date. Income and capital gain distributions are determined in
accordance with Federal income tax regulations which may differ from generally
accepted accounting principles. These differences are primarily due to differing
treatments for losses as a result of wash sales, foreign currency transactions
and/or passive foreign investment companies.
2. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Dresdner RCM Global Investors LLC ("Dresdner RCM") serves as the Funds'
investment manager and provides various administrative services, subject to the
authority of the Board of Directors. The Growth Fund and Small Cap Fund pay
investment management fees monthly at annualized rates of 0.75% and 1.00%
respectively, of the Funds' average daily net assets.
The Funds are each responsible for the payment of certain of their
operating expenses, including brokerage and commission expenses; taxes levied on
the Funds; interest charges on borrowings (if any); charges and expenses of the
custodian; and payment of investment management fees due to Dresdner RCM.
Dresdner RCM is responsible for all other expenses incurred by the Growth Fund
and the Small Cap Fund.
On December 31, 1998, the Dresdner RCM Profit Sharing Plan,
participation in which is limited to employees of Dresdner RCM, owned 888,710
shares of the Growth Fund and 515,747 shares of the Small Cap Fund.
3. CAPITAL SHARES
At December 31, 1998, there were 1,000,000,000 shares of the Capital
Company's common stock authorized, at $0.0001 par value. Of this amount,
300,000,000 were classified as shares of the Growth Fund and 100,000,000 were
classified as shares of the Small Cap Fund. Capital share transactions were as
follows:
<TABLE>
<CAPTION>
GROWTH FUND YEAR ENDED YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997
------------------------------ -------------------------------
SHARES AMOUNT SHARES AMOUNT
------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C>
Shares sold 21,101,977 $ 127,963,744 8,822,435 $ 58,202,047
Shares issued in connection with reinvestment of
distributions 29,534,789 156,239,035 26,780,241 160,413,644
Shares repurchased (38,770,342) (253,710,674) (21,422,817) (143,040,397)
Net increase 11,866,424 $ 30,492,105 14,179,859 $ 75,575,294
------------- --------------- ------------- ---------------
------------- --------------- ------------- ---------------
</TABLE>
Page 24
<PAGE>
Dresdner RCM Capital Funds, Inc.
Notes to Financial Statements
December 31, 1998
3. CAPITAL SHARES (CONTINUED)
<TABLE>
<CAPTION>
SMALL CAP FUND YEAR ENDED YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997
------------------------------ -------------------------------
SHARES AMOUNT SHARES AMOUNT
------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C>
Shares sold 10,548,412 $ 111,486,975 7,791,481 $ 96,712,138
Shares issued in connection with reinvestment of
distributions 11,705,171 100,547,419 9,386,666 105,599,978
Shares repurchased (19,362,057) (231,360,228) (8,781,376) (105,121,180)
------------- --------------- ------------- ---------------
Net increase (decrease) 2,891,526 $ (19,325,834) 8,396,771 $ 97,190,936
------------- --------------- ------------- ---------------
------------- --------------- ------------- ---------------
</TABLE>
At December 31, 1998, seven shareholders in the Growth Fund and five
shareholders in the Small Cap Fund each held more than 5% of the outstanding
shares of the respective Funds. These shareholders, in aggregate, held
approximately 67% of the Growth Fund and 50% of the Small Cap Fund.
4. INVESTMENTS IN FOREIGN SECURITIES AND CURRENCY
Investing in foreign equity securities and currency transactions
involves significant risks, some of which are not typically associated with
domestic investments. The Funds' investments in foreign markets will subject the
Funds to the risk of foreign currency exchange rate fluctuations, perceived
credit risk and adverse economic and political developments.
5. PURCHASES AND SALES OF SECURITIES
The following summarizes purchases and sales of investment securities,
excluding short-term investments, for each Fund, for the year ended December 31,
1998:
<TABLE>
<CAPTION>
PURCHASES
----------------------------------
U.S. Government Other Issues
--------------- ---------------
<S> <C> <C>
Growth Fund -- $1,517,507,845
Small Cap Fund -- $ 738,646,439
</TABLE>
<TABLE>
<CAPTION>
SALES
----------------------------------
U.S. Government Other Issues
--------------- ---------------
<S> <C> <C>
Growth Fund -- $1,686,060,991
Small Cap Fund -- $ 866,195,243
</TABLE>
6. DIRECTORS' FEES
Each Director who is not an interested person of the Capital Company
receives from the Capital Company an annual retainer of $9,000 (the retainer is
evenly prorated among each series of the Capital Company), plus $1,500 for each
Board meeting attended for each series, and $500 for each committee meeting
attended for each series.
Each Director who is not an interested person of the Capital Company
may elect to defer receipt of all or a portion of his or her fees for service as
a director in accordance with the terms of a Deferred Compensation Plan for
Non-Interested Directors ("Directors' Plan"). Under the Directors' Plan, an
eligible Director may elect to have his or her deferred fees deemed invested
either in 90-day U.S. Treasury bills or shares of the Common Stock of the
Capital Company or of the Dresdner RCM Global Funds, Inc., or a combination of
these options, and the amount of deferred fees payable to such director under
the Directors' Plan will be determined by reference to the return on such deemed
investments. Generally, the deferred fees (reflecting any earnings, gains or
losses thereon) become payable upon the Director's retirement or disability.
Page 25
<PAGE>
Report of Independent Accountants
TO THE SHAREHOLDERS AND THE BOARD OF DIRECTORS OF
THE DRESDNER RCM CAPITAL FUNDS, INC.:
In our opinion, the accompanying statements of assets and liabilities,
including the portfolio of investments, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Dresdner RCM Capital Funds,
Inc. (consisting of the Dresdner RCM Growth Equity Fund and the Dresdner RCM
Small Cap Fund), collectively, the "Funds," at December 31, 1998, the results of
their operations, the changes in their net assets and the financial highlights
for the periods indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Funds'
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of investments owned at December 31, 1998 by correspondence with
the custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 22, 1999
Page 26
<PAGE>
TAX INFORMATION (UNAUDITED)
On December 16, 1998, distributions were paid from investment
operations for the Funds. The dividends were recorded on December 16, 1998, to
shareholders of record on December 15, 1998.
<TABLE>
<CAPTION>
ORDINARY LONG-TERM TOTAL
FUND INCOME CAPITAL GAIN DISTRIBUTIONS
- ------------------------- ----------- -------------- --------------
<S> <C> <C> <C>
Growth Fund
Per Share $0.24 $0.93 $1.17
Amount $32,517,999 $126,007,244 $158,525,243
Small Cap Fund
Per Share $0.39 $1.84 $2.23
Amount $17,922,211 $84,556,075 $102,478,286
</TABLE>
Page 27
<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
PricewaterhouseCoopers LLP
One Post Office Square
Boston, Massachusetts 02109
Page 28
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