<PAGE>
As filed with the Securities and Exchange Commission on December 31, 1997
1933 Act File No. 33-97572
1940 Act File No. 811-9100
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Post-Effective Amendment No. 6
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 7
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DRESDNER RCM EQUITY FUNDS, INC.
Four Embarcadero Center
San Francisco, California 94111
(415) 954-5400
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Richard W. Ingram, President, Treasurer and Chief Financial Officer
DRESDNER RCM EQUITY FUNDS, INC.
Four Embarcadero Center
San Francisco, California 94111
(800) 726-7240
(Name and Address of Agent for Service)
Copies to:
Timothy B. Parker, Deputy General Counsel Michael Glazer
Dresdner RCM Global Investors LLC Paul, Hastings, Janofsky & Walker LLP
Four Embarcadero Center 555 South Flower Street
San Francisco, California 94111 Los Angeles, California 90071
It is proposed that this filing will become effective:
[x] Immediately upon filing pursuant to paragraph (b)
[ ] On _________________ pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] On _________________ pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] On _________________ pursuant to paragraph (a)(2) of rule 485
<PAGE>
DRESDNER RCM EQUITY FUNDS, INC.
DRESDNER RCM BIOTECHNOLOGY FUND
CROSS REFERENCE SHEET
BETWEEN ITEMS OF PART A AND B OF FORM N-1A AND THE
PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION
ITEM NUMBER OF PART A OF FORM N-1A CAPTIONS IN PROSPECTUS
1. Cover Page Cover Page
2. Synopsis Prospectus Summary; Summary of Fees and
Expenses
3. Condensed Financial Information *
4. General Description of Registrant Investment Objective and Policies;
Investment and Risk Considerations;
General Information
5. Management of the Fund Organization and Management
5A. Management's Description of *
Fund Performance
6. Capital Stock and Other Dividends, Distributions and Taxes;
Securities General Information;
7. Purchase of Securities Being Organization and Management; How to
Offered Purchase Shares;
8. Redemption or Repurchase Redemption of Shares
9. Pending Legal Proceedings *
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*Not applicable
<PAGE>
DRESDNER RCM EQUITY FUNDS, INC.
DRESDNER RCM BIOTECHNOLOGY FUND
CROSS REFERENCE SHEET
BETWEEN ITEMS OF PART A AND B OF FORM N-1A AND THE
PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION
(CONTINUED)
ITEM NUMBER OF PART B OF FORM N-1A CAPTIONS IN PROSPECTUS AND STATEMENT
OF ADDITIONAL INFORMATION
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History *
13. Investment Objective and Investment Objective and Policies;
Policies Investment and Risk Considerations;
Investment Restrictions
14. Management of the Fund Directors and Officers
15. Control Persons and Principal Description of Capital Shares; Directors
Holders of Securities and Officers
16. Investment Advisory and Other The Investment Manager; Additional
Services Information
17. Brokerage Allocation Execution of Portfolio Transactions
18. Capital Stock and Other Description of Capital Stock
Securities
19. Purchase, Redemption and How to Purchase Shares
Pricing of Securities Being
Offered
20. Tax Status Dividends, Distributions and Taxes
21. Underwriter The Distributor
22. Calculation of Performance Data Investment Results
23. Financial Statements Additional Information
<PAGE>
DRESDNER RCM EQUITY FUNDS, INC.
DRESDNER RCM EMERGING MARKETS FUND
CROSS REFERENCE SHEET
BETWEEN ITEMS OF PART A AND B OF FORM N-1A AND THE
PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION
ITEM NUMBER OF PART A OF FORM N-1A CAPTIONS IN PROSPECTUS
1. Cover Page Cover Page
2. Synopsis Prospectus Summary; Summary of Fees and
Expenses
3. Condensed Financial Information *
4. General Description of Registrant Investment Objective and Policies;
Investment and Risk Considerations;
General Information
5. Management of the Fund Organization and Management
5A. Management's Description of *
Fund Performance
6. Capital Stock and Other Dividends, Distributions and Taxes;
Securities General Information;
7. Purchase of Securities Being Organization and Management; How to
Offered Purchase Shares;
8. Redemption or Repurchase Redemption of Shares
9. Pending Legal Proceedings *
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*Not applicable
<PAGE>
DRESDNER RCM EQUITY FUNDS, INC.
DRESDNER RCM EMERGING MARKETS FUND
CROSS REFERENCE SHEET
BETWEEN ITEMS OF PART A AND B OF FORM N-1A AND THE
PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION
(CONTINUED)
ITEM NUMBER OF PART B OF FORM N-1A CAPTIONS IN PROSPECTUS AND STATEMENT
OF ADDITIONAL INFORMATION
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History *
13. Investment Objective and Investment Objective and Policies;
Policies Investment and Risk Considerations;
Investment Restrictions
14. Management of the Fund Directors and Officers
15. Control Persons and Principal Description of Capital Shares; Directors
Holders of Securities and Officers
16. Investment Advisory and Other The Investment Manager; Additional
Services Information
17. Brokerage Allocation Execution of Portfolio Transactions
18. Capital Stock and Other Description of Capital Stock
Securities
19. Purchase, Redemption and How to Purchase Shares
Pricing of Securities Being
Offered
20. Tax Status Dividends, Distributions and Taxes
21. Underwriter The Distributor
22. Calculation of Performance Data Investment Results
23. Financial Statements Additional Information
<PAGE>
DRESDNER RCM BIOTECHNOLOGY FUND
OFFERED BY:
DRESDNER RCM EQUITY FUNDS, INC.
FOUR EMBARCADERO CENTER
SAN FRANCISCO, CALIFORNIA 94111
(800) 726-7240
THIS PROSPECTUS RELATES TO DRESDNER RCM BIOTECHNOLOGY FUND
WHICH SPECIALIZES IN EQUITY AND EQUITY-RELATED SECURITIES OF
BIOTECHNOLOGY COMPANIES
---------------
DRESDNER RCM BIOTECHNOLOGY FUND (THE "FUND") is a non-diversified series of
Dresdner RCM Equity Funds, Inc. (the "Company"), an open-end management
investment company. Shares of the Fund may be purchased at their net asset
value per share next calculated after an order is received in proper form.
(See HOW TO PURCHASE SHARES.)
The Fund's investment objective is to seek long-term appreciation of capital,
primarily through investment in equity and equity-related securities of
companies in the biotechnology industry. Such investments will be chosen
primarily with regard to their potential for capital appreciation. Current
income will be considered only as part of total investment return and will
not be emphasized. (See INVESTMENT OBJECTIVE AND POLICIES.)
Investments in equity and equity-related securities of companies in the
biotechnology industry involve significant risks, some of which are not
typically associated with investments in securities of issuers engaged in other
types of business. There can be no assurance that the Fund will achieve its
investment objective. (See INVESTMENT AND RISK CONSIDERATIONS.)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
This Prospectus sets forth concisely the information about the Fund that
prospective investors should know before investing. Investors should read this
document and retain it for future use. A Statement of Additional Information
for the Fund dated December 31, 1997 has been filed with the Securities and
Exchange Commission and is incorporated by reference into this Prospectus. The
Statement may be obtained, without charge, by writing or calling the Company at
the address or telephone number set forth above.
Shares of the Fund are not deposits, obligations of, or endorsed or guaranteed
in any way by, Dresdner Bank AG, or any other depository institution. Shares of
the Fund are not insured by the Federal Deposit Insurance Corporation, or any
other agency, and are subject to investment risks, including possible loss of
principal amount invested.
The date of this Prospectus is December 31, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
Prospectus Summary ............................................... 3
Summary of Fees and Expenses ..................................... 5
Investment Objective and Policies ................................ 7
Investment and Risk Considerations ............................... 13
Organization and Management ...................................... 15
How to Purchase Shares ........................................... 18
Stockholder Services ............................................. 20
Redemption of Shares ............................................. 21
Investment Results ............................................... 22
Dividends, Distributions and Taxes ............................... 22
General Information .............................................. 23
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION
WITH THE OFFER CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS IS NOT AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
<PAGE>
DRESDNER RCM BIOTECHNOLOGY FUND
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by
the detailed information appearing elsewhere in this
Prospectus:
WHAT IS THE FUND'S The Fund's investment objective is to seek long-term
OBJECTIVE? appreciation of capital, primarily through investment
in equity and equity-related securities of companies
in the biotechnology industry. Such investments will
be chosen primarily with regard to their potential
for capital appreciation. Current income will be
considered only as part of total return and will not
be emphasized. There can be no assurance that the
Fund will achieve its investment objective. (See
INVESTMENT OBJECTIVE AND POLICIES.)
WHAT DOES THE FUND Under normal market conditions, the Fund will invest
INVEST IN? at least 65% of the value of its total assets in
equity and equity-related securities of companies in
the biotechnology industry. The Fund will seek
investment opportunities in companies engaged in the
research, development, provision and/or manufacture
of biotechnological products, services and processes.
Such companies generally employ genetic engineering
to develop new drugs and apply new and innovative
processes to discover and develop diagnostic and
therapeutic products and services. The biotechnology
industry includes pharmaceutical, biochemical,
medical/surgical, human health care, agricultural and
industrial oriented companies. However, the industry
makeup is not static due to the rapid advances being
made and over time it can be expected that new and
different companies will be included in the
biotechnology industry.
DOES THE FUND INVEST The Fund may invest up to 100% of the value of its
GLOBALLY? total assets in equity and equity-related securities
of foreign issuers, including emerging market
issuers. While there is no limitation on the
countries in which the Fund may invest, the Fund
currently expects that the majority of its
investments will be in securities of companies
organized or headquartered in the United States. Up
to 15% of the value of the Fund's total assets may be
invested in securities of companies organized or
headquartered in emerging market countries. However,
the Fund will not invest more than 10% of the value
of its total assets in securities of issuers that are
organized or headquartered in any one emerging market
country. Investment in emerging markets may involve
greater risks than investments in other foreign
markets, as a result of factors such as less-
developed economic and legal structures, less stable
political systems, and less liquid securities
markets.
WHAT ARE SOME OF THE Investments in equity and equity-related securities
POTENTIAL INVESTMENT of biotechnology companies may involve significant
RISKS? risks, some of which are not typically associated
with investment in securities of other issuers.
These include patent considerations, substantial
competitive and pricing pressures, rapid product
obsolescence, dependence on extensive research and
development, and sensitivity to changes in
governmental regulations and policies. An investment
in the Fund does not constitute a balanced investment
plan.
The Fund's investments will be focused in the
biotechnology industry. As a result of the Fund's
focus on a single industry, the Fund's net asset
value may be more volatile in price than the net
asset value of a more broadly diversified portfolio.
It is likely that a significant portion of the
companies in which the Fund will invest will have
market capitalizations below $1 billion. Investing
in these types of companies involves
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<PAGE>
greater risk and the possibility of greater portfolio
price volatility than investing in larger
capitalization companies. Furthermore, securities of
such companies are often less liquid than securities
of larger companies, and may be subject to erratic or
abrupt price movements. To dispose of these
securities, the Fund may have to sell them over an
extended period of time below the original purchase
price.
Investment in securities of foreign companies
involves significant additional risks, including
fluctuations in foreign exchange rates, political or
economic instability in the country of issue, and the
possible imposition of exchange controls or other
laws or restrictions. Foreign issuers generally are
not subject to accounting and financial reporting
standards or to other regulatory practices and
requirements comparable to those applicable to U.S.
issuers. There is generally less government
regulation of securities markets, exchanges and
dealers than in the United States, and the costs
associated with transactions in and custody of
securities traded on foreign markets are generally
higher than in the United States. (See INVESTMENT
AND RISK CONSIDERATIONS.)
WHO OPERATES THE FUND? The Fund's investment manager is Dresdner RCM Global
Investors LLC ("Dresdner RCM" or the "Investment
Manager"), a registered investment adviser with its
principal offices in San Francisco, California.
Dresdner RCM and its predecessors have over 25 years
of experience in investing in equity securities.
Dresdner RCM currently manages approximately $30
billion of assets for institutional and individual
clients, and registered investment companies. (See
ORGANIZATION AND MANAGEMENT.) The custodian of the
Fund's assets is State Street Bank and Trust Company.
SHOULD I INVEST IN THE The Fund believes that there are attractive
FUND? investment opportunities in the biotechnology
industry. In the last several years, biotechnology
companies have developed new techniques to
efficiently discover and produce superior diagnostic
and therapeutic products and services. As a result
of these advances and advances likely to occur in the
future, the Fund believes that biotechnology is
likely to become an important economic industry. Yet
the stocks of individual biotechnology companies can
be volatile, and analyzing individual companies can
be time-intensive. A biotechnology fund offers
experienced professional management to investors who
wish to invest in these industries.
The Fund is designed for investors who recognize and
are prepared to accept these risks in exchange for
the possibility of higher returns. Consider your
investment goals, your time horizon for achieving
them, and your tolerance for risk. If you seek an
aggressive approach to capital growth, and can accept
the above-average level of price fluctuations that
the Fund may experience, the Fund may be an
appropriate part of your overall investment strategy.
DOES THE FUND HEDGE The Fund may use a variety of techniques to hedge
ITS INVESTMENTS? investments. These include currency management
techniques; options on securities, indices and
currencies; financial and foreign currency futures
contracts and options; and currency swaps. Each of
these hedging techniques also involves certain risks.
(See INVESTMENT OBJECTIVE AND POLICIES and INVESTMENT
AND RISK CONSIDERATIONS.)
IS THERE A The minimum initial investment is $5,000, and the
MINIMUM INVESTMENT? minimum subsequent investment is $250 (other than
investments through the Fund's automatic dividend
reinvestment plan). However, for investors
purchasing shares through a broker-dealer or other
financial institution having a service agreement with
the Investment Manager and maintaining an omnibus
account with the Fund, the minimum initial investment
may vary. Shares of the Fund may be purchased at
their net asset value per share next calculated after
an order is received in proper form. (See
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<PAGE>
HOW TO PURCHASE SHARES.)
CAN I REDEEM SHARES AT You may redeem your shares at any time at their net
ANY TIME? asset value, without a redemption charge. (See
REDEMPTION OF SHARES.)
SUMMARY OF FEES AND EXPENSES
WHAT EXPENSES WILL THE The following information is designed to help you
FUND INCUR? understand various costs and expenses of the Fund
that an investor may bear directly or indirectly.
The information is based on the Fund's expected
expenses for its first year of operation, and should
not be considered a representation of future expenses
or returns. Actual expenses and returns may be
greater or less than those shown below.
STOCKHOLDER TRANSACTION EXPENSES
Maximum sales load imposed on None
purchases (as a percentage of offering price)
Sales load imposed on reinvested dividends None
Deferred sales loads None
Redemption fees None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE
OF AVERAGE NET ASSETS)
Investment management fees 1.00%
Rule 12b-1 expenses 0.25%
Other expenses (after expense reduction*) 0.25%
Total Fund operating expenses (after
expense reduction*) 1.50%
EXAMPLE OF PORTFOLIO EXPENSES 1 Yr 3 Yrs
---- -----
You would pay the following total
expenses on a $1,000 investment,
assuming (1) a 5% annual
return and (2) redemption
at the end of each time period $ 15 $ 47
*The Investment Manager has voluntarily agreed, until
at least December 31, 1998, to pay the Fund on a
quarterly basis the amount, if any, by which ordinary
operating expenses of the Company attributable to the
Fund for the quarter (except interest, taxes and
extraordinary expenses) exceed the annualized rate of
1.50% of the value of the average daily net assets of
the Fund. In subsequent years, the Fund will
reimburse the Investment Manager for any such
payments to the extent that the Fund's operating
expenses are otherwise below this expense cap. (See
ORGANIZATION AND
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<PAGE>
MANAGEMENT.) Other expenses and total Fund operating
expenses for the first year of operation of the Fund,
without expense reduction, are estimated to be 1.76%
and 2.76%, respectively, of the Fund's average daily
net assets.
In accordance with applicable regulations of the
Securities and Exchange Commission (the "SEC"), the
Example of Portfolio Expenses assumes that (1) the
percentage amounts listed under Annual Fund Operating
Expenses will remain the same in each of the one and
three year periods; and (2) all dividends and
distributions are reinvested by the stockholder. SEC
regulations require that the example be based on a
$1,000 investment, although the minimum initial
purchase for some investors may be higher. (See HOW
TO PURCHASE SHARES.)
For more information concerning fees and expenses of
the Fund, see ORGANIZATION AND MANAGEMENT and
DIVIDENDS, DISTRIBUTIONS AND TAXES.
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<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
WHAT IS THE FUND'S The Fund's investment objective is to seek long-term
OBJECTIVE? appreciation of capital, primarily through investment
in a portfolio of equity and equity-related
securities of companies in the biotechnology
industry. Under normal market conditions, the Fund
will invest at least 65% of the value of its total
assets in such securities. The Fund's investments
will be chosen primarily with regard to their
potential for capital appreciation. Current income
will be considered only as part of total return and
will not be emphasized. There can be no assurance
that the Fund will achieve its investment objective.
HOW DOES THE FUND The Fund intends to invest primarily in equity and
SELECT SECURITIES FOR equity-related securities of companies in the
ITS PORTFOLIO? biotechnology industry. In most cases, these
companies will have one or more of the following
characteristics: superior management; strong balance
sheets; differentiated or superior products or
services; substantial capacity for growth in revenue,
through either an expanding market or through
expanding market share; strong commitment to research
and development; or a steady stream of new products
or services.
The Investment Manager will seek to identify
companies that are expected to have
higher-than-average rates of growth and strong
potential for capital appreciation relative to the
potential downside risk of an investment. While the
Fund will emphasize investments in growth companies,
the Fund also expects to invest in other companies
that are not traditionally considered to be growth
companies, such as emerging growth companies and
cyclical and semi-cyclical companies in developing
economies, if the Investment Manager believes that
such companies have above-average growth potential.
In determining whether securities of particular
issuers are believed to have the potential for
capital appreciation, the Investment Manager will
evaluate the fundamental value of each enterprise, as
well as its prospects for growth. Because current
income is not the Fund's investment objective, the
Fund will not restrict its investments in equity and
equity-related securities to those issuers with a
record of dividend payments.
There is no limitation on the market capitalization
of the companies in which the Fund will invest.
However, as of the date of this Prospectus, the
Investment Manager does not intend to invest more
than 15% of the value of the Fund's total assets in
securities of companies with market capitalizations
below $100 million at the time of purchase.
WHAT ARE BIOTECHNOLOGY Biotechnology companies are companies which are
COMPANIES? principally engaged in the research, development,
provision and/or manufacture of biotechnological
products, services and processes. These companies
include, but are not limited to, pharmaceutical,
biochemical, medical/surgical, human health care,
agricultural and industrial oriented companies.
However, the industry makeup is not static due to the
rapid advances being made and over time it can be
expected that new and different companies will be
included in the biotechnology industry. As a result,
the types of companies that the Fund may invest in
will be broadly interpreted by the Investment Manager
so that the Fund will be positioned to benefit from
holdings in all companies that may benefit from the
biotechnology business.
WHAT ARE EQUITY AND Equity and equity-related securities in which the
EQUITY-RELATED Fund has the authority to invest include common
SECURITIES? stock, preferred stock, convertible preferred stock,
convertible debt obligations, warrants or other
rights to acquire stock, and options on stock and
stock indices. In addition, equity and equity-related
securities may include securities sold in the form of
depositary receipts and securities issued by other
investment companies. The Fund currently intends to
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<PAGE>
invest primarily in common stock and depositary
receipts.
WHAT KINDS OF FOREIGN Currently it is anticipated that the majority of the
SECURITIES WILL THE Fund's investments will be in securities of companies
FUND INVEST IN? organized or headquartered in the United States.
However, the Fund may invest in foreign securities
from time-to-time, depending on the Investment
Manager's view of foreign investment opportunities
and risks. For purposes of this restriction, "foreign
securities" includes (i) securities of companies that
are organized or headquartered, or whose operations
principally are conducted, outside the United States;
(ii) securities that are principally traded outside
the United States, regardless of where the issuer of
such securities is organized or headquartered or
where its operations principally are conducted;
(iii) depositary receipts; and (iv) securities of
other investment companies investing primarily in
such equity and equity-related securities.
Under normal market conditions, the Fund will not
invest more than 25% of the value of its total assets
in securities of issuers that are organized or
headquartered in any one foreign country. In
evaluating particular investment opportunities, the
Investment Manager may consider, in addition to the
factors described above, the anticipated economic
growth rate, the political outlook, the anticipated
inflation rate, the currency outlook, and the
interest rate environment for the country and the
region in which a particular company is located, as
well as other factors it deems relevant.
The Fund expects that its investments in foreign
securities will be comprised primarily of securities
that are traded on recognized foreign securities
exchanges. However, the Fund also may invest in
securities that are traded only over-the-counter,
either in the United States or in foreign markets,
when the Investment Manager believes that such
securities meet the Fund's investment criteria.
Subject to the Fund's restrictions on investment in
foreign securities (see WHAT OTHER INVESTMENT
PRACTICES SHOULD I KNOW ABOUT?), the Fund also may
invest in securities that are not publicly traded
either in the United States or in foreign markets.
WILL THE FUND INVEST The Fund may invest up to 15% of the value of its
IN EMERGING MARKETS? total assets in securities of companies that are
organized or headquartered in developing countries
with emerging markets. However, the Fund will not
invest more than 10% of the value of its total assets
in securities of issuers that are organized or
headquartered in any one emerging market country.
The term "emerging market countries" includes any
country that is generally considered to be an
emerging or developing country by the World Bank, the
International Finance Corporation, the United Nations
or its authorities, or other recognized financial
institutions. As of the date of this Prospectus, the
term "emerging market countries" is deemed to include
for purposes of this Prospectus all foreign countries
other than Australia, Austria, Belgium, Canada,
Denmark, Finland, France, Germany, Hong Kong,
Ireland, Italy, Japan, Luxembourg, The Netherlands,
New Zealand, Norway, Singapore, Spain, Sweden,
Switzerland, and the United Kingdom.
DOES THE FUND BUY AND The Fund presently expects to purchase or sell
SELL FOREIGN CURRENCY? foreign currency primarily to settle foreign
securities transactions. However, the Fund may also
engage in currency management transactions to hedge
currency exposure related to securities it owns or
that it anticipates purchasing. (See DOES THE FUND
HEDGE ITS INVESTMENTS?)
For purposes of the percentage limitations on the
Fund's investments in foreign securities, the term
securities does not include foreign currencies. This
means that the Fund could have more than the
percentages of its total assets indicated above
denominated in foreign currencies or multinational
currency units such as the European Currency Unit (a
"basket" comprised of specified amounts of currencies
of certain of the members of the European Union). As
a
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<PAGE>
result, gains in a particular securities market may
be affected, either positively or negatively, by
changes in exchange rates.
DOES THE FUND HEDGE For hedging purposes, the Fund may purchase options
ITS INVESTMENTS? on stock indices and on securities that are
authorized for purchase by the Fund. If the Fund
purchases a "put" option on a security, the Fund
acquires the right to sell the underlying security at
a specified price at any time during the term of the
option (for "American-style" options) or on the
option expiration date (for "European-style"
options). If the Fund purchases a "call" option on a
security, it acquires the right to purchase the
underlying security at a specified price at any time
during the term of the option (or on the option
expiration date). An option on a stock index gives
the Fund the right to receive a cash payment equal to
the difference between the closing price of the index
and the exercise price of the option. The Fund may
"close out" an option prior to its exercise or
expiration by selling an option of the same series as
the option previously purchased.
The Fund may employ certain currency management
techniques to hedge against currency exchange rate
fluctuations. These include forward currency
exchange contracts, currency options, futures
contracts (and related options), and currency swaps.
A forward currency exchange contract is an obligation
to purchase or sell a specific currency at a future
date at a price set at the time of the contract.
Currency options are rights to purchase or sell a
specific currency at a future date at a specified
price. Futures contracts are agreements to take or
make delivery of an amount of cash equal to the
difference between the value of the currency at the
close of the last trading day of the contract and the
contract price. Currency swaps involve the exchange
of rights to make or receive payments in specified
currencies.
The Fund may cross-hedge currencies, which involves
writing or purchasing options or entering into
foreign exchange contracts on one currency to hedge
against changes in exchange rates for a different
currency, if, in the judgment of the Investment
Manager, there is a pattern of correlation between
the two currencies. In addition, the Fund may hold
foreign currency received in connection with
investments in foreign securities when, in the
judgment of the Investment Manager, it would be
beneficial to convert such currency into U.S. dollars
at a later date, based on anticipated changes in the
relevant exchange rates. The Fund is also authorized
to employ currency management techniques to enhance
its total return, although it presently does not
intend to do so.
WHAT OTHER INVESTMENT DEPOSITARY RECEIPTS. The Fund may invest in
PRACTICES SHOULD I securities of foreign companies in the form of
KNOW ABOUT? American Depositary Receipts ("ADRs"), European
Depositary Receipts ("EDRs"), Global Depositary
Receipts ("GDRs"), or other similar instruments
representing securities of foreign companies. ADRs
are receipts for ordinary shares of foreign companies
that typically are issued by U.S. banks and entitle
the holder to all dividends and all capital gains
associated with the underlying ordinary shares.
These securities may not be denominated in the same
currency as the underlying securities that they
represent. EDRs and GDRs are receipts issued by a
non-U.S. financial institution evidencing a similar
arrangement. When it is possible to invest either in
an ADR, EDR, or GDR, or to invest directly in the
underlying security, the Investment Manager will
evaluate which investment opportunity is preferable,
based on price differences, relative trading volume,
anticipated liquidity, differences in currency risk,
and other factors.
Although investment in ADRs does not involve the
currency exchange risk that is present when investing
in the underlying securities, depositary receipts may
have risks that are similar to those of foreign
equity securities. Therefore, for purposes of the
Fund's investment policies and restrictions,
depositary receipts will be treated as foreign equity
securities, based on the
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country in which the underlying issuer is organized
or headquartered. (See WHAT KINDS OF FOREIGN
SECURITIES WILL THE FUND INVEST IN?)
OTHER INVESTMENT COMPANIES. The laws of some foreign
countries may make it difficult or impossible for the
Fund to invest directly in issuers organized or
headquartered in those countries, or may place
limitations on such investments. The only practical
means of investing in such issuers may be through
investment in other investment companies that in turn
are authorized to invest in the securities of such
issuers. In such cases and in other appropriate
circumstances, and subject to the restrictions
referred to above regarding investments in companies
organized or headquartered in foreign countries (see
WHAT KINDS OF FOREIGN SECURITIES WILL THE FUND INVEST
IN?), the Fund may invest up to 10% of the value of
its total assets in other investment companies.
However, the Fund may not invest more than 5% of the
value of its total assets in the securities of any
one investment company or acquire more than 3% of the
voting securities of any other investment company.
To the extent that the Fund invests in other
investment companies, the Fund would bear its
proportionate share of any management or
administration fees and other expenses paid by
investment companies in which it invests. At the
same time, the Fund would continue to pay its own
management fees and other expenses.
SHORT SELLING. The Fund may make short sales of
securities that it owns or has the right to acquire
at no added cost through conversion or exchange of
other securities it owns (referred to as short sales
"against the box") and may also make short sales of
securities which it does not own or have the right to
acquire. In order to deliver a security that is sold
short to the buyer, the Fund must arrange through a
broker to borrow the security, and becomes obligated
to replace the security borrowed at its market price
at the time of replacement, whatever that price may
be. When the Fund makes a short sale, the proceeds
of the sale are retained by the broker until the Fund
replaces the borrowed security.
The value of securities of any issuer in which the
Fund maintains a short position that is not "against
the box" may not exceed the lesser of 5% of the value
of the Fund's net assets or 5% of the securities of
such class of the issuer. The Fund's ability to
enter into short sales transactions is limited by the
requirements of the Investment Company Act of 1940
(the "1940 Act").
WHEN ISSUED, FIRM COMMITMENT AND DELAYED SETTLEMENT
TRANSACTIONS. The Fund may purchase securities on a
delayed delivery or "when issued" basis and may enter
into firm commitment agreements (transactions in
which the payment obligation and interest rate are
fixed at the time of the transaction but the
settlement is delayed). Delivery and payment for
these securities typically occur 15 to 45 days after
the commitment to purchase, but delivery and payment
can be scheduled for shorter or longer periods, based
upon the agreement of the buyer and the seller. No
interest accrues to the purchaser during the period
before delivery. The Fund generally does not intend
to enter into these transactions for the purpose of
leverage, but may sell the right to receive delivery
of the securities before the settlement date. The
value of the securities at settlement may be more or
less than the agreed upon price.
The Fund will segregate cash, U.S. Government
securities or other liquid debt or equity securities
in an amount sufficient to meet its payment
obligations with respect to any such transactions. To
the extent that assets are segregated for this
purpose, the Fund's liquidity and the ability of the
Investment Manager to manage its portfolio may be
adversely affected.
DEBT SECURITIES. The Fund may invest in short-term
debt obligations (with maturities of less than one
year) issued or guaranteed by the U.S. Government and
foreign governments
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<PAGE>
(including their respective agencies,
instrumentalities, authorities and political
subdivisions), debt obligations issued or guaranteed
by international or supranational governmental
entities, and debt obligations of corporate issuers.
Such debt obligations will be rated, at the time of
purchase, investment grade by Standard & Poor's,
Moody's Investors Service, or another recognized
rating organization, or if unrated will be determined
by the Investment Manager to be of comparable
investment quality. Investment grade means the issuer
of the security is believed to have adequate capacity
to pay interest and repay principal, although certain
of such securities in the lower grades have
speculative characteristics, and changes in economic
conditions or other circumstances may be more likely
to lead to a weakened capacity to pay interest and
principal than would be the case with higher-rated
securities.
Under normal market conditions, no more than 10% of
the value of the Fund's total assets will be invested
in debt obligations. However, during times when the
Investment Manager believes a temporary defensive
posture is warranted, including times involving
international, political or economic uncertainty, the
Fund may hold all or a substantial portion of its
assets in such debt securities. When the Fund is so
invested, it may not be achieving its investment
objective.
BORROWING MONEY. From time-to-time, it may be
advantageous for the Fund to borrow money rather than
sell portfolio positions to raise the cash to meet
redemption requests. In order to meet such
redemption requests, the Fund may borrow from banks
or enter into reverse repurchase agreements. The
Fund also may borrow up to 5% of the value of its
total assets for temporary or emergency purposes
other than to meet redemptions. However, the Fund
will not borrow money for leveraging purposes. The
Fund may continue to purchase securities while
borrowings are outstanding, but will not do so when
the Fund's borrowings (including reverse repurchase
agreements) exceed 5% of the value of its total
assets. The 1940 Act permits the Fund to borrow only
from banks and only to the extent that the value of
its total assets, less its liabilities other than
borrowings, is equal to at least 300% of all
borrowings (including the proposed borrowing), and
requires the Fund to take prompt action to reduce its
borrowings if this limit is exceeded. For the
purpose of the 300% borrowing limitation, reverse
repurchase transactions are considered to be
borrowings.
A reverse repurchase agreement involves a transaction
by which a borrower (such as the Fund) sells a
security to a purchaser (a member bank of the Federal
Reserve System or a broker-dealer deemed creditworthy
pursuant to standards adopted by the Company's Board
of Directors) and simultaneously agrees to repurchase
the security at an agreed-upon price on an
agreed-upon date within a number of days (usually not
more than seven) from the date of purchase.
LENDING PORTFOLIO SECURITIES. The Fund is authorized
to make loans of portfolio securities, for the
purpose of realizing additional income, to
broker-dealers or other institutional investors
deemed creditworthy pursuant to standards adopted by
the Company's Board of Directors. The borrower must
maintain with the Fund's custodian collateral
consisting of cash, U.S. Government securities or
other liquid debt or equity securities equal to at
least 100% of the value of the borrowed securities,
plus any accrued interest. The Fund will receive any
interest paid on the loaned securities, and a fee
and/or a portion of the interest earned on the
collateral, less any fees and administrative expenses
associated with the loan.
ILLIQUID SECURITIES. The Fund may invest up to 15%
of the value of its net assets in illiquid
securities. Securities may be considered illiquid if
the Fund cannot reasonably expect to receive
approximately the amount at which the Fund values
such securities within seven days. The Investment
Manager has the authority to determine whether
specific securities are liquid
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<PAGE>
or illiquid pursuant to standards adopted by the
Company's Board of Directors.
The Fund's investments in illiquid securities may
include securities that are not registered for resale
under the Securities Act of 1933 (the "Securities
Act"), and therefore are subject to restrictions on
resale. When the Fund purchases unregistered
securities, the Fund may, in appropriate
circumstances, obtain the right to register such
securities at the expense of the issuer. In such
cases there may be a lapse of time between the Fund's
decision to sell any such security and the
registration of the security permitting sale. During
any such period, the price of the security will be
subject to market fluctuations.
The fact that there are contractual or legal
restrictions on resale of certain securities to the
general public or to certain institutions may not be
indicative of the liquidity of such investments. If
such securities are subject to purchase by
institutional buyers in accordance with Rule 144A
under the Securities Act, the Investment Manager may
determine in particular cases, pursuant to standards
adopted by the Company's Board of Directors, that
such securities are not illiquid securities
notwithstanding the legal or contractual restrictions
on their resale. Investing in Rule 144A securities
could have the effect of increasing the Fund's
illiquidity to the extent that qualified
institutional buyers become, for a time, uninterested
in purchasing such securities.
CAN THE FUND'S The Fund's investment objective is a fundamental
OBJECTIVE AND POLICIES policy that may not be changed without a vote of its
BE CHANGED? stockholders. However, except as otherwise indicated
in this Prospectus or the Statement of Additional
Information, the Fund's other investment policies and
restrictions are not fundamental and may be changed
without a vote of the stockholders. If there is a
change in the Fund's investment objective or
policies, stockholders should consider whether the
Fund remains an appropriate investment in light of
their then current financial position and needs.
The various percentage limitations referred to in
this Prospectus apply immediately after a purchase or
initial investment. Except as specifically indicated
to the contrary, the Fund is not required to sell any
security in its portfolio as a result of change in
any applicable percentage resulting from market
fluctuations.
WHAT IS THE FUND'S The Fund may invest in securities on either a
PORTFOLIO TURNOVER long-term or short-term basis. The Investment
RATE? Manager anticipates that the Fund's annual portfolio
turnover rate should not exceed 150%, although for
the first year of operations of the Fund, the
portfolio turnover rate may exceed 150%. The turnover
rate will not be a limiting factor when the
Investment Manager deems portfolio changes
appropriate. Securities in the Fund's portfolio will
be sold whenever the Investment Manager believes it
is appropriate to do so, regardless of the length of
time that securities have been held, and securities
may be purchased or sold for short-term profits
whenever the Investment Manager believes it is
appropriate or desirable to do so. Turnover will be
influenced by sound investment practices, the Fund's
investment objective and the need for funds for the
redemption of the Fund's shares.
Because the Investment Manager will purchase and sell
securities for the Fund's portfolio without regard to
the length of the holding period for such securities,
it is possible that the Fund's portfolio will have a
higher turnover rate than might be expected for
investment companies that invest substantially all of
their funds for long-term capital appreciation or
generation of current income. A high portfolio
turnover rate would increase aggregate brokerage
commission expenses and other transaction costs,
which must be borne directly by the Fund and
ultimately by the Fund's stockholders.
INVESTMENT AND RISK CONSIDERATIONS
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<PAGE>
Investment in the Fund is subject to a variety of
risks, including the following:
RISKS OF INVESTING IN Because the Fund will focus its investments in
BIOTECHNOLOGY STOCKS. biotechnology companies, the Fund will be more
susceptible than other investment companies to market
and other conditions affecting biotechnology
companies. Such conditions include patent
considerations, competitive pressures affecting the
financial condition of biotechnology companies, rapid
product obsolescence, dependence on extensive
research and development, aggressive pricing and
greater sensitivity to changes in governmental
regulation and policies. As a result of the Fund's
concentration on a single industry, the Fund's net
assets may be more volatile in price than the net
asset value of a company with a more broadly
diversified portfolio.
RISKS OF INVESTING IN Investing in securities of issuers with market
SMALLER CAPITALIZATION capitalizations below $1 billion at or near the time
COMPANIES. of purchase ("smaller capitalization companies")
involves greater risk and the possibility of greater
portfolio price volatility than investing in larger
capitalization companies. For example, smaller
capitalization companies may have less certain growth
prospects, may be more sensitive to changing economic
conditions, may have more limited financial and
management resources, and may have less liquid
markets for their securities, than larger, more
established firms.
RISKS OF INVESTING IN Investing in foreign equity securities involves
FOREIGN MARKETS significant risks, some of which are not typically
GENERALLY. associated with investing in securities of U.S.
issuers. For example, the value of investments in
such securities may fluctuate based on changes in the
value of one or more foreign currencies relative to
the U.S. dollar. In addition, information about
foreign issuers may be less readily available than
information about domestic issuers. Foreign issuers
generally are not subject to accounting, auditing and
financial reporting standards, or to other regulatory
practices and requirements, comparable to those
applicable to U.S. issuers. Furthermore, with
respect to certain foreign countries, the possibility
exists of political instability, expropriation or
nationalization of assets, revaluation of currencies,
confiscatory taxation, and limitations on foreign
investment and use or removal of funds or other
assets of the Fund (including the withholding of
dividends and limitations on the repatriation of
currencies). The Fund may also experience
difficulties or delays in obtaining or enforcing
judgments.
Most foreign securities markets have substantially
less volume than U.S. securities markets, and the
securities of many foreign issuers may be less liquid
and more volatile than securities of comparable U.S.
issuers. In addition, there is generally less
government regulation of securities markets,
securities exchanges, securities dealers, and listed
and unlisted companies in foreign countries than in
the United States. Foreign markets also have
different clearance and settlement procedures, and in
certain markets there have been times when
settlements have been unable to keep pace with the
volume of securities transactions, making it
difficult to conduct and complete such transactions.
In addition, the costs associated with transactions
in securities traded on foreign markets or of foreign
issuers, and the expense of maintaining custody of
such securities with foreign custodians, generally
are higher than the costs associated with
transactions in U.S. securities on U.S. markets.
RISKS OF INVESTING IN There are special additional risks associated with
EMERGING MARKETS. investments in emerging markets. The securities
markets of emerging market countries are
substantially smaller, less developed, less liquid,
and more volatile than the securities markets of the
United States and developed foreign markets.
Disclosure and regulatory standards in many respects
are less stringent than in the United States and
developed foreign markets. There also may be a lower
level of monitoring and regulation of securities
markets in emerging market countries and the
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<PAGE>
activities of investors in such markets, and
enforcement of existing regulations has been
extremely limited.
Economies in emerging markets generally are heavily
dependent upon international trade, and may be
affected adversely by the economic conditions of the
countries in which they trade, as well as by trade
barriers, exchange controls, managed adjustments in
relative currency values, and other protectionist
measures imposed or negotiated by the countries with
which they trade. In many cases, governments of
emerging market countries continue to exercise a
significant degree of control over the economies of
such countries. In addition, certain of such
countries have in the past failed to recognize
private property rights and have at times
nationalized or expropriated the assets of private
companies. There is a heightened possibility of
confiscatory taxation, imposition of withholding
taxes on interest payments, or other similar
developments that could affect investments in those
countries. Unanticipated political or social
developments may also affect the value of the Fund's
investments in those countries.
RISKS OF HEDGING There are a number of risks associated with
TECHNIQUES. transactions in options on securities. Options may
be more volatile than the underlying instruments.
Differences between the options and securities
markets could result in an imperfect correlation
between these markets, causing a given transaction
not to achieve its objective. In addition, a liquid
secondary market for particular options may be absent
for a variety of reasons. When trading options on
foreign exchanges, many of the protections afforded
to participants in the United States will not be
available. Although the purchaser of an option
cannot lose more than the amount of the premium plus
transaction costs, this entire amount could be lost.
The Fund's currency management techniques involve
risks different from those that arise in connection
with investments in dollar-denominated securities.
To the extent that the Fund is invested in foreign
securities while also maintaining currency positions,
it may be exposed to greater combined risk than would
otherwise be the case. Transactions in futures
contracts and options on futures contracts involve
risks similar to those of options on securities. In
addition, the potential loss incurred by the Fund in
such transactions is unlimited.
The use of hedging techniques is a highly specialized
activity, and there can be no assurance as to the
success of any hedging operations which the Fund may
implement. Gains and losses in such transactions
depend upon the Investment Manager's ability to
predict correctly the direction of stock prices,
interest rates, currency exchange rates, and other
economic factors. Although such operations could
reduce the risk of loss due to a decline in the value
of the hedged security or currency, they could also
limit the potential gain from an increase in the
value of the security or currency.
RISKS OF SHORT Short sales by the Fund that are not made "against
SELLING. the box" create opportunities to increase the Fund's
return but, at the same time, involve special risk
considerations and may be considered a speculative
technique. The Fund's net asset value per share will
tend to be more volatile than would be the case if it
did not engage in short sales. Short sales that are
not "against the box" also theoretically involve
unlimited loss potential, as the market price of
securities sold short may continuously increase,
although the Fund may mitigate such losses by
replacing the securities sold short before the market
price has increased significantly. Under adverse
market conditions, the Fund might have difficulty in
purchasing securities to meet its short sale delivery
obligations, might have to purchase such securities
at higher prices than would otherwise be the case,
and might have to sell portfolio securities to raise
the capital necessary to meet its short sale
obligations at a time when fundamental investment
considerations would not favor such sales.
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<PAGE>
WHAT OTHER RISK CONVERTIBLE SECURITIES AND WARRANTS. The value of a
FACTORS SHOULD I BE convertible security is a function of both its yield
AWARE OF? in comparison with the yields of similar non-
convertible securities and the value of the
underlying stock. A convertible security held by the
Fund may be subject to redemption at the option of
the issuer at a fixed price, in which event the Fund
will be required to permit the issuer to redeem the
security, convert it into the underlying common
stock, or sell it to a third party. Investment in
warrants also involves certain risks, including the
possible lack of a liquid market for resale,
potential price fluctuations as a result of
speculation or other factors, and the failure of the
price of the underlying security to reach or have
reasonable prospects of reaching the exercise price,
in which event the warrant may expire without being
exercised, resulting in a loss of the Fund's entire
investment in the warrant.
CREDIT OF COUNTERPARTIES. A number of transactions
in which the Fund may engage are subject to the risks
of default by the other party to the transaction.
When the Fund engages in repurchase, reverse
repurchase, when-issued, forward commitment, delayed
settlement and securities lending transactions, it
relies on the other party to consummate the
transaction. Failure of the other party to do so may
result in the Fund's incurring a loss or missing an
opportunity to obtain a price believed to be
advantageous.
BORROWING. Borrowing also involves special risk
considerations. Interest costs of borrowings may
fluctuate with changing market rates of interest and
may partially offset or exceed the return earned on
the borrowed funds (or on the assets that were
retained rather than sold to meet the needs for which
funds were borrowed). Under adverse market
conditions, the Fund might have to sell portfolio
securities to meet interest or principal payments at
a time when fundamental investment considerations
would not favor such sales. To the extent the Fund
enters into reverse repurchase agreements, the Fund
is subject to risks that are similar to those of
borrowing.
NON-DIVERSIFICATION. The Fund will be non-
diversified within the meaning of the 1940 Act. As a
non-diversified fund, the Fund may invest a greater
percentage of its assets in the securities of any
single issuer than diversified funds, and may be more
susceptible to risks associated with a single
economic, political or regulatory occurrence than
diversified funds. However, in order to meet the
requirements of the Internal Revenue Code of 1986 for
qualification as a regulated investment company, the
Fund must diversify its holdings so that, at the end
of each quarter of its taxable year, (i) at least 50%
of the market value of its assets is represented by
cash, U.S. Government securities, the securities of
other regulated investment companies and other
securities, with such other securities of any one
issuer limited for purposes of this calculation to an
amount not greater than 5% of the value of the Fund's
total assets, and (ii) not more than 25% of the value
of the Fund's total assets may be invested in the
securities of any one issuer (other than the U.S.
Government or other regulated investment companies).
ORGANIZATION AND MANAGEMENT
WHO MANAGES THE FUND? The Company was incorporated in Maryland in
September 1995, and is an open-end management
investment company or mutual fund. The Company's
Board of Directors has overall responsibility for the
operation of the Fund. Pursuant to such
responsibility, the Board has approved contracts for
various financial organizations to provide, among
other things, day-to-day management services required
by the Fund.
The Company, on behalf of the Fund, has retained as
the Fund's investment manager Dresdner RCM Global
Investors LLC, a Delaware limited liability company
with principal
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<PAGE>
offices at Four Embarcadero Center, San Francisco,
California 94111. The Investment Manager provides the
Fund with investment supervisory services pursuant to
an Investment Management Agreement, Power of Attorney
and Service Agreement (the "Management Agreement")
dated as of December 30, 1997. The Investment Manager
manages the Fund's investments, provides various
administrative services, and supervises the Fund's
daily business affairs, subject to the authority of
the Board of Directors.
The Investment Manager is actively engaged in
providing investment supervisory services to
institutional and individual clients, and is
registered under the Investment Advisers Act of 1940.
The Investment Manager was established in April 1996,
and is the successor to the business and operations
of RCM Capital Management, a California Limited
Partnership, which, with its predecessors, has been
in operation since 1970. The Investment Manager is a
wholly owned subsidiary of Dresdner Bank AG
("Dresdner"), an international banking organization
with principal executive offices located in Frankfurt,
Germany. Shares of the Fund are not deposits,
obligations of, or endorsed or guaranteed in any
way by, Dresdner Bank AG, or any other
depository institution. Shares of the Fund are
not insured by the Federal Deposit Insurance
Corporation, or any other agency, and are
subject to investment risks, including
possible loss of principal amount invested.
Pursuant to an agreement among RCM Limited L.P. ("RCM
Limited"), the Investment Manager and Dresdner, RCM
Limited manages, operates and makes all decisions
regarding the day-to-day business and affairs of the
Investment Manager, subject to the oversight of
Dresdner RCM's Board of Managers. RCM Limited is a
California limited partnership consisting of
37 limited partners and one general partner,
RCM General Corporation, a California corporation
("RCM General"). Twenty-four of the limited
partners of RCM Limited are also principals of
the Investment Manager, and the shareholders of
RCM General.
The Investment Manager's equity philosophy is to
invest in growth stocks -- stocks of companies that
are expected to have superior and predictable growth.
Through fundamental research and a series of
valuation screens, the Investment Manager seeks to
purchase securities of those companies whose expected
growth in earnings and dividends will provide a
risk-adjusted return in excess of the market.
The Investment Manager has a long history of
investing in biotechnology stocks. Its research
analysts have been researching biotechnology
companies for purchase in domestic equity portfolios
for approximately 10 years, and have been managing
biotechnology portfolios for approximately 5 years.
The research team consults regularly with the senior
members of the Investment Manager's equity portfolio
management team concerning the prospects for the
biotechnology industry generally as well as specific
biotechnology companies. The equity investment
process also incorporates the Investment Manager's
own macroeconomic views of the economy.
In addition to traditional research activities, the
Investment Manager utilizes research produced by
Grassroots Research, an operating group within the
Investment Manager. Grassroots Research prepares
research reports based on field interviews with
customers, distributors, and competitors of the
companies that the Investment Manager follows. In
the biotechnology area, Grassroots Research can be a
valuable adjunct to the Investment Manager's
traditional research efforts by providing a "second
look" at biotechnology companies in which the Fund is
considering investing and by checking marketplace
assumptions concerning market demand for particular
products and services.
Selena A. Chaisson, M.D. and Jeffrey J. Wiggins are
primarily responsible for the day-to-day management
of the Fund. Dr. Chaisson is a Senior Vice President
of the Investment Manager, with which she has been
associated since 1994. She has participated in the
management of portfolios since 1996. Mr. Wiggins is
a Principal of the Investment Manager, with which he
has been associated since 1992. He has managed
institutional portfolios for the Investment
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<PAGE>
Manager since 1992.
WHAT ARE THE FUND'S For the services rendered by the Investment Manager
MANAGEMENT FEES? under the Management Agreement, the Fund will pay a
monthly fee to the Investment Manager based on the
average daily net assets of the Fund. The fee shall
be determined pursuant to the following schedule:
<TABLE>
<CAPTION>
VALUE OF SECURITIES AND CASH OF FUND FEE
<S> <C>
the first $500 million 1.00% annually
above $500 million and below $1 billion 0.95% annually
above $1 billion 0.90% annually
</TABLE>
WHAT OTHER EXPENSES The Fund is responsible for the payment of its
DOES THE FUND PAY? operating expenses, including brokerage and
commission expenses; taxes levied on the Fund;
interest charges on borrowings (if any); charges and
expenses of the Fund's custodian; investment
management fees due to the Investment Manager; fees
paid pursuant to the Fund's Rule 12b-1 plan; and all
of the Fund's other ordinary operating expenses
(e.g., legal and audit fees, securities registration
expenses, and compensation of directors of the
Company who are not affiliated with the Investment
Manager).
To limit the expenses of the Fund, the Investment
Manager has agreed, until at least December 31, 1998,
to pay the Fund on a quarterly basis the amount, if
any, by which the ordinary operating expenses of the
Company attributable to the Fund for the quarter
(except interest, taxes and extraordinary expenses)
exceed the annual rate of 1.50% of the value of the
average daily net assets of the Fund. The Fund will
reimburse the Investment Manager for fees deferred or
other expenses paid by the Investment Manager
pursuant to this agreement in later years in which
operating expenses for the Fund are otherwise less
than such expense limitation. Accordingly, until all
such amounts are reimbursed, the Fund's expenses will
be higher, and its total return will be lower, than
would otherwise have been the case. No interest,
carrying or finance charge will be paid by the Fund
with respect to any amounts representing fees
deferred or other expenses paid by the Investment
Manager. In addition, the Fund will not be required
to repay any unreimbursed amounts to the Investment
Manager upon termination of the Management Agreement.
HOW DOES THE FUND The Investment Manager, subject to the overall
DECIDE WHICH BROKERS supervision of the Company's Board of Directors,
TO USE? makes the Fund's investment decisions and selects the
broker or dealer to be used in each specific
transaction using its judgment to choose the broker
or dealer most capable of providing the services
necessary to obtain the best execution of that
transaction. In seeking the best execution of each
transaction, the Investment Manager evaluates a wide
range of criteria. Subject to the requirement of
seeking best execution, the Investment Manager may,
in circumstances in which two or more brokers are in
a position to offer comparable execution, give
preference to a broker that has provided investment
information to the Investment Manager. In so doing,
the Investment Manager may effect securities
transactions which cause the Fund to pay an amount of
commission in excess of the amount of commission
another broker would have charged. Subject to the
requirement of seeking the best available execution,
the Investment Manager may also place orders with
brokerage firms that have sold shares of the Fund.
The Fund may in some instances invest in foreign
and/or U.S. securities that are not listed on a
national securities exchange but are traded in the
over-the-counter market. The Fund may also purchase
listed securities through the third market (over-the-
counter trades of exchange-listed securities) or
fourth market (direct trades of securities between
institutional investors without the intermediation of
a broker-dealer). When transactions are executed in
the over-the-counter
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<PAGE>
market or the third or fourth market, the Investment
Manager will seek to deal with the counterparty that
the Investment Manager believes can provide the best
execution, whether or not that counterparty is the
primary market maker for that security.
When appropriate and to the extent consistent with
applicable laws and regulations, the Fund may execute
brokerage transactions through Dresdner Kleinwort
Benson North America LLC, a wholly owned subsidiary
of Dresdner, or other broker-dealer subsidiaries or
affiliates of Dresdner.
WHO IS THE FUND'S Funds Distributor, Inc. (the "Distributor"), whose
DISTRIBUTOR? principal place of business is 60 State Street, Suite
1300, Boston, Massachusetts 02109, acts as
distributor of shares of the Fund. The Distributor
is engaged in the business of providing mutual fund
distribution services to registered investment
companies, and is an indirect wholly owned subsidiary
of Boston Institutional Group, Inc., which is not
affiliated with the Investment Manager or Dresdner.
The Company has adopted a distribution plan
pursuant to Rule 12b-1 under the 1940 Act with
respect to the Fund. Under the distribution
plan, which is a "reimbursement plan," the Fund
pays the Distributor an annual fee of up to
0.25% of the Fund's average daily net assets as
reimbursement for certain expenses actually
incurred by the Distributor in connection with
distribution of shares of the Fund. These
expenses include advertising and marketing
expenses, payments to broker-dealers and others
who have entered into agreements with the
Distributor, the expenses of preparing,
printing and distributing the prospectuses of
the Fund to persons who are not already
stockholders, and indirect and overhead costs
associated with the sale of shares of the Fund.
If in any month the Distributor is due more
monies for such services than are immediately
payable because of the expense limitation under
the plan, the unpaid amount is carried forward
from month to month while the plan is in effect
until such time as it may be paid. However, no
amounts carried forward are payable beyond the
fiscal year during which they were incurred,
and no interest, carrying or other finance
charge is borne by the Fund with respect to any
amount carried forward.
WHO IS THE FUND'S State Street Bank and Trust Company acts as the
CUSTODIAN AND TRANSFER Fund's custodian, transfer agent, redemption agent
AGENT? and dividend paying agent (the "Custodian"). The
Custodian's principal business address is 1776
Heritage Drive, North Quincy, Massachusetts 02171.
HOW TO PURCHASE SHARES
WHAT IS THE OFFERING Shares of the Fund are offered on a continuous basis
PRICE FOR SHARES OF at the offering price next determined after receipt of
THE FUND? an order in proper form. The offering price is the net
asset value per share. The minimum initial investment
is $5,000, and the minimum subsequent investment is
$250 (other than investments through the Fund's
automatic dividend reinvestment plan). However, for
investors purchasing shares through a broker-dealer
or other financial instution having a service
agreement with the Investment Manager and maintaining
an omnibus account with the Fund, the minimum initial
investment may vary. (See STOCKHOLDER SERVICES.)
HOW CAN I PURCHASE Investors or their duly authorized agents may purchase
SHARES OF THE FUND? shares of the Fund by sending a signed, completed
subscription form to National Financial Data Services
("NFDS"), an affiliate of the Custodian, at P.O. Box
419927, Kansas City, Missouri 64141-6927, and paying
for the shares as described below. Shares may also be
purchased through certain brokers which have entered
into a selling group agreement with the Distributor.
Brokers may charge a fee for their services at the
time of purchase or redemption. Subscription forms
can be obtained from the
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Company.
Orders for shares received by NFDS prior to the close
of regular trading on the New York Stock Exchange on
each day the New York Stock Exchange is open for
trading will be priced at the net asset value (see HOW
ARE SHARES PRICED?) computed as of the close of regular
trading on the New York Stock Exchange on that day.
The Company reserves the right to reject any
subscription at its sole discretion. Orders received
after the close of regular trading on the New York
Stock Exchange, or on any day on which the New York
Stock Exchange is not open for trading, will be priced
at the close of regular trading on the New York Stock
Exchange on the next succeeding day on which the New
York Stock Exchange is open for trading.
Upon receipt of the order in proper form, NFDS will
open a stockholder account in accordance with the
investor's registration instructions. A confirmation
statement reflecting the current transaction will be
forwarded to the investor.
WHERE SHOULD I SEND MY Payment for shares purchased should be made by check or
SUBSCRIPTION PAYMENT? money order, made payable to Dresdner RCM Biotechnology
Fund. Checks should be bank or certified checks. The
Company, at its option, may accept a check that is not
a bank or certified check; however, third party checks
will not be accepted. Payments should be sent to:
Dresdner RCM Equity Funds, Inc.
P.O. Box 419927
Kansas City, MO 64141-6927
Attn: Dresdner RCM Biotechnology Fund
Account 630
Investors may also make initial or subsequent
investments by electronic transfer of funds or wire
transfer of federal funds to the Company. Before
transferring or wiring funds, an investor must first
telephone the Company at (800) 726-7240 for
instructions. On the telephone, the following
information will be requested: name of authorized
person; stockholder account number (if such account
number is in existence); name of Fund; amount being
transferred or wired; and transferring or wiring bank
name.
Investors may be charged a fee if they effect
transactions through a broker or agent. Your dealer is
responsible for forwarding payment promptly to NFDS.
The Company reserves the right to cancel any purchase
order for which payment has not been received by the
third business day following the investment.
The Company will issue share certificates of the Fund
only for full shares and only upon the specific request
of the stockholder. Confirmation statements showing
transactions in the stockholder's account and a summary
of the status of the account serve as evidence of
ownership of shares of the Fund.
CAN I PAY FOR SHARES In its discretion, the Company may accept securities of
WITH INVESTMENT equal value instead of cash in payment of all or part
SECURITIES? of the subscription price for the Fund's shares offered
by this Prospectus. Any such securities (i) will be
valued at the close of the New York Stock Exchange
composite tape on the day of acceptance of the
subscription in accordance with the method of valuing
the Fund's portfolio described under HOW ARE SHARES
PRICED? below; (ii) will have a tax basis to the Fund
equal to such value; (iii) must not be "restricted
securities"; and (iv) must be permitted to be purchased
in accordance with the Fund's investment objective and
policies set forth in this Prospectus and must be
securities that the Fund would be willing to purchase
at
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that time. Prospective stockholders considering this
method of payment should contact the Company in advance
to discuss the securities in question and the
documentation necessary to complete the transaction.
HOW ARE SHARES PRICED? The net asset value of each share of the Fund on which
the subscription and redemption prices are based is
determined by the sum of the market value of the
securities and other assets owned by the Fund less its
liabilities, computed pursuant to standards adopted by
the Company's Board of Directors. The net asset value
of a share is the quotient obtained by dividing the net
assets of the Fund (i.e., the value of the assets of
the Fund less its liabilities, including expenses
payable or accrued but excluding capital stock and
surplus) by the total number of shares of the Fund
outstanding. The net asset value of the Fund's shares
will be calculated as of the close of regular trading
on the New York Stock Exchange, normally 4:00 p.m.
Eastern Time, on each day that the New York Stock
Exchange is open for trading.
STOCKHOLDER SERVICES
WHAT SERVICES ARE AUTOMATIC REINVESTMENT. Each income dividend and
PROVIDED TO capital gains distribution, if any, declared by the
STOCKHOLDERS? Fund will be reinvested in full and fractional shares
based on the net asset value as determined on the
payment date for such distributions, unless the
stockholder or his or her duly authorized agent has
elected to receive all such payments or the dividend or
distribution portions thereof in cash. Changes in the
manner in which dividend and distribution payments are
made may be requested by the stockholder or his or her
duly authorized agent at any time through written
notice to the Company and will be effective as to any
subsequent payment if such notice is received by the
Company prior to the record date used for determining
the stockholders entitled to such payment. Any dividend
and distribution election will remain in effect until
the Company is notified by the stockholder in writing
to the contrary.
EXCHANGE PRIVILEGE. You may exchange shares of the
Fund into shares of any other series of the Company,
without a sales charge or other fee, by contacting
NFDS. Before effecting an exchange, you should obtain
the currently effective prospectus of the series into
which the exchange is to be made. Exchange purchases
are subject to the minimum investment requirements of
the series purchased. An exchange will be treated as a
redemption and purchase for tax purposes.
Shares will be exchanged at the net asset value per
share of the Fund and the series into which the
exchange is to be made, next determined after receipt
by NFDS of (i) a written request for exchange, signed
by each registered owner or his or her duly authorized
agent exactly as the shares are registered, which
clearly identifies the exact names in which the account
is registered, the account number and the number of
shares or the dollar amount to be exchanged; and (ii)
stock certificates for any shares to be exchanged which
are held by the stockholder. Exchanges will not become
effective until all documents in the form required
have been received by NFDS. A stockholder in doubt as
to what documents are required should contact NFDS.
ACCOUNT STATEMENTS. Your account is opened in
accordance with your registration instructions.
Transactions in the account, such as additional
investments and dividend reinvestments, will be
reflected on regular confirmation statements from the
Company.
REPORTS TO STOCKHOLDERS. The fiscal year of the Fund
ends on December 31 of each year. The Fund will issue
to its stockholders semi-annual and annual reports;
each annual report will contain a schedule of the
Fund's portfolio securities, audited annual financial
statements, and
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<PAGE>
information regarding purchases and sales of securities
during the period covered by the report as well as
information concerning the Fund's performance in
accordance with rules promulgated by the SEC. In
addition, stockholders will receive quarterly statements
of the status of their accounts reflecting all
transactions having taken place within that quarter.
The federal income tax status of stockholders'
distributions will also be reported to stockholders
after the end of each fiscal year.
STOCKHOLDER INQUIRIES. Stockholder inquiries should be
addressed to the Company at the address or telephone
number on the front page of this Prospectus.
REDEMPTION OF SHARES
HOW DO I REDEEM MY Subject only to the limitations described below, the
SHARES? Company will redeem the shares of the Fund tendered to
it, as described below, at a redemption price equal to
the net asset value per share as next computed
following the receipt of all necessary redemption
documents. Because the net asset value of the Fund's
shares will fluctuate as a result of changes in the
market value of securities owned, the amount a
stockholder receives upon redemption may be more or
less than the amount paid for those shares.
Redemption payments will be made wholly in cash unless
the Company's Board of Directors believes that unusual
conditions exist which would make such a practice
detrimental to the best interests of the Fund. Under
such circumstances, payment of the redemption price
could be made in whole or in part in portfolio
securities.
Stockholders may be charged a fee if they effect
transactions through a broker or agent.
WHEN WILL I RECEIVE MY PAYMENT FOR SHARES. Payment for shares redeemed will
REDEMPTION PAYMENT? be made within seven days after receipt by the Company
of: (i) a written request for redemption, signed by
each registered owner or his or her duly authorized
agent exactly as the shares are registered, which
clearly identifies the exact names in which the account
is registered, the account number and the number of
shares or the dollar amount to be redeemed; (ii) stock
certificates for any shares to be redeemed which are
held by the stockholder; and (iii) the additional
documents required for redemptions by corporations,
executors, administrators, trustees and guardians.
Redemptions will not become effective until all
documents in the form required have been received by
the Company. A stockholder in doubt as to what
documents are required should contact the Company.
If the Company is requested to redeem shares for which
it has not yet received payment, the Company will
delay, or cause to be delayed, the mailing of a
redemption check until such time as it has assured
itself that payment has been collected, which may take
up to 15 days. Delays in the receipt of redemption
proceeds may be avoided if shares are purchased through
the use of wire-transferred funds or other methods
which do not entail a clearing delay in the Fund
receiving "good funds" for its use.
Upon execution of the redemption order, a confirmation
statement will be forwarded to the stockholder
indicating the number of shares sold and the proceeds
thereof. Proceeds of all redemptions will be paid by
check or federal funds wire no later than seven days
subsequent to execution of the redemption order except
as may be provided below.
SUSPENSION OF REDEMPTIONS. The right of redemption may
not be suspended or the date of payment upon redemption
postponed for more than seven days after shares are
tendered for
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<PAGE>
redemption, except for any period during which the New
York Stock Exchange is closed (other than a customary
weekend or holiday closing) or during which the SEC
determines that trading thereon is restricted, or for
any period during which an emergency (as determined by
the SEC) exists as a result of which disposal by the
Fund of securities it owns is not reasonably
practicable, or as a result of which it is not
reasonably practical for the Fund fairly to determine
the value of its net assets, or for such other periods
as the SEC may by order permit for the protection of
stockholders.
WHAT ELSE SHOULD I REINSTATEMENT PRIVILEGE. You may reinvest proceeds
KNOW ABOUT from a redemption of shares of the Fund, or proceeds of
REDEMPTIONS? a dividend or capital gain distribution paid to you
with respect to shares of the Fund, in the Fund or any
other series of the Company. Send a written request
and a check to the Company within 90 days after the
date of the redemption, dividend or distribution.
Reinvestment will be at the next calculated net asset
value after receipt. The tax status of a gain realized
on a redemption will not be affected by exercise of the
reinstatement privilege, but a loss may be nullified if
you reinvest in the same series within 30 days.
INVOLUNTARY REDEMPTION. In order to reduce expenses of
the Fund, the Company may redeem all of the shares of
any investor whose account has a net asset value of
less than $5,000 due to redemptions (other than a
stockholder who is a participant in a qualified
retirement plan or whose initial investment is below
$5,000). The Company will give such stockholders
60 days' prior written notice in which to purchase
sufficient additional shares to avoid such redemption.
INVESTMENT RESULTS
WILL THE FUND REPORT The Fund may, from time-to-time, include information on
ITS PERFORMANCE? its investment results and/or comparisons of its
investment results to various unmanaged indices (which
generally do not reflect deductions for administrative
and management costs and expenses), indices prepared by
consultants, mutual fund ranking entities, and
financial publications, or results of other mutual
funds or groups of mutual funds, in advertisements or
in reports furnished to present or prospective
investors. Investment results will include information
calculated on a total return basis (total return is the
change in value of an investment in the Fund over a
given period, assuming reinvestment of any dividend and
capital gain distributions). Such indices and rankings
may include the following, among others:
1. The American Stock Exchange Biotechnology Index.
2. The Russell 2000 Index.
3. Data and mutual fund rankings published or
prepared by Lipper Analytical Services, Inc. and
Morningstar, which rank mutual funds by overall
performance, investment objectives, and assets.
DIVIDENDS, DISTRIBUTIONS AND TAXES
WHAT DIVIDENDS DOES The Fund intends to distribute to its stockholders all
THE FUND PAY? of each fiscal year's net investment income and net
realized capital gains, if any, on the Fund's
investment portfolio. The amount and time of any such
distribution must necessarily depend upon the
realization by the Fund of income and capital gains
from investments. Any dividend or distribution
received by a stockholder on shares of the Fund shortly
after the purchase of such shares by the stockholder
will have the effect of reducing the net asset value of
such shares by the amount of such dividend or
distribution.
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<PAGE>
WHAT TAXES WILL I PAY Dividends generally are taxable to stockholders at the
ON FUND DIVIDENDS? time they are paid. However, dividends declared in
October, November and December by the Fund and made
payable to stockholders of record in such a month are
treated as paid and are thereby taxable as of
December 31, provided that the Fund pays the dividend
no later than January 31 of the following year.
Federal law requires the Company to withhold 31% of
income from dividends, capital gains distributions
and/or redemptions that occur in certain stockholder
accounts if the stockholder has not properly furnished
a certified correct Taxpayer Identification Number and
has not certified that withholding does not apply.
Amounts withheld are applied to the stockholder's
federal tax liability, and a refund may be obtained
from the Internal Revenue Service if withholding
results in an overpayment of taxes. Under the Code,
distributions of net investment income and net
long-term capital gains by the Fund to a stockholder
who, as to the United States, is a non-resident alien
individual, non-resident alien fiduciary of a trust or
estate, foreign corporation, or foreign partnership may
also be subject to U.S. withholding tax.
WILL THE FUND ALSO PAY The Company intends to qualify the Fund as a "regulated
TAXES? investment company" under Subchapter M of the Code. By
complying with the applicable provisions of the Code,
the Fund will not be subject to federal income taxes
with respect to net investment income and net realized
capital gains distributed to its stockholders.
The Fund may be required to pay withholding and other
taxes imposed by foreign countries, generally at rates
from 10% to 40%, which would reduce the Fund's
investment income. Tax conventions between certain
countries and the United States may reduce or eliminate
such taxes. The Fund may elect to "pass through" to
its stockholders the amount of foreign income taxes
paid by the Fund, if such election is deemed to be in
the best interests of stockholders. If this election
is made, stockholders will be required to include in
their gross income their pro rata share of foreign
taxes paid by the Fund, and will be able to treat such
taxes as either an itemized deduction or a foreign
credit against U.S. income taxes (but not both) on
their tax returns. If the Fund does not make that
election, stockholders will not be able to deduct their
pro rata share of such taxes in computing their taxable
income and will not be able to take their share of such
taxes as a credit against their U.S. income taxes.
WHEN WILL I RECEIVE Each stockholder will receive, at the end of each
TAX INFORMATION? fiscal year of the Company, full information on
dividends, capital gains distributions and other
reportable amounts with respect to shares of the Fund
for tax purposes, including information such as the
portion taxable as capital gains, and the amount of
dividends, if any, eligible for the federal dividends
received deduction for corporate taxpayers.
The foregoing is a general abbreviated summary of
present U.S. federal income tax laws and regulations
applicable to dividends and distributions by the Fund.
Investors are urged to consult their own tax advisers
for more detailed information and for information
regarding any foreign, state, and local tax laws and
regulations applicable to dividends and distributions
received.
GENERAL INFORMATION
WHAT OTHER INFORMATION The authorized capital stock of the Company is
SHOULD I KNOW ABOUT 1,000,000,000 shares of capital stock (par value $.0001
THE FUND? per share), of which 50,000,000 shares have been
designated as shares of the Fund. In addition,
50,000,000 shares have been designated as shares of the
Dresdner RCM Global Technology Fund, 50,000,000 shares
have been designated as shares of the Dresdner RCM
Global Small Cap Fund, 50,000,000 shares have been
designated as shares of the
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<PAGE>
Dresdner RCM Global Health Care Fund, 50,000,000 shares
have been designated as shares of the Dresdner RCM Large
Cap Growth Fund, and 50,000,000 shares have been
designated as shares of the Dresdner RCM Emerging
Markets Fund. The Company's Board of Directors may, in
the future, authorize the issuance of other classes of
shares of the Fund (with, for example, different sales
loads, or other distribution or service fee
arrangements), or of other series of capital stock of
the Company representing shares of additional investment
portfolios or funds.
All shares of the Company have equal voting rights and
will be voted in the aggregate, and not by series,
except where voting by series is required by law or
where the matter involved affects only one series.
There are no conversion or preemptive rights in
connection with any shares of the Company. All shares
of the Fund when duly issued will be fully paid and
non-assessable. The rights of the holders of shares of
the Fund may not be modified except by vote of the
majority of the outstanding shares of the Fund.
Certificates are not issued unless requested and are
never issued for fractional shares. Fractional shares
are liquidated when an account is closed. As of
December 31, 1997, there were 300,000 shares of the
Fund outstanding, which were beneficially owned by
clients of Dresdner Bank AG.
Shares of the Company have non-cumulative voting
rights, which means that the holders of more than 50%
of all series of the Company's shares voting for the
election of directors can elect 100% of the directors
if they wish to do so. In such event, the holders of
the remaining less than 50% of the shares voting for
the election of directors will not be able to elect any
person to the Board of Directors.
The Company is not required to hold a meeting of
stockholders in any year in which the 1940 Act does not
require a stockholder vote on a particular matter, such
as election of directors. The Company will hold a
meeting of its stockholders for the purpose of voting
on the question of removal of one or more directors if
requested in writing by the holders of at least 10% of
the Company's outstanding voting securities, and will
assist in communicating with its stockholders as
required by Section 16(c) of the 1940 Act.
This Prospectus does not contain all of the information
set forth in the Company's registration statement and
related forms as filed with the SEC, certain portions
of which are omitted in accordance with rules and
regulations of the SEC. The registration statements
and related forms may be inspected at the Public
Reference Room of the SEC at Room 1024, 450 5th Street,
N.W., Judiciary Plaza, Washington, D.C. 20549, and
copies thereof may be obtained from the SEC at
prescribed rates.
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<PAGE>
THIS PAGE MUST BE KEPT AS THE LAST PAGE OF THE DOCUMENT.
SoftSolution Network ID: LA-BLD-B54541.8 Type: PRS
12/28/97 1:10 PM
<PAGE>
DRESDNER RCM EQUITY FUNDS, INC.
DRESDNER RCM BIOTECHNOLOGY FUND
FOUR EMBARCADERO CENTER
SAN FRANCISCO, CALIFORNIA 94111
(800) 726-7240
STATEMENT OF ADDITIONAL INFORMATION
December 31, 1997
Dresdner RCM Biotechnology Fund (the "Biotechnology Fund" or "Fund") is a
non-diversified no-load series of Dresdner RCM Equity Funds, Inc. (the
"Company"), an open-end management investment company. The Fund's investment
manager is Dresdner RCM Global Investors LLC (the "Investment Manager").
This Statement of Additional Information is not a prospectus, but contains
information in addition to and more detailed than that set forth in the Fund's
Prospectus and should be read in conjunction with such Prospectus. The
Prospectus may be obtained without charge by writing or calling the Company at
the address and phone number above.
<TABLE>
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TABLE OF CONTENTS
PAGE
<S> <C>
Investment Objective and Policies.............................................. 2
Investment and Risk Considerations............................................. 11
Investment Restrictions........................................................ 16
Execution of Portfolio Transactions............................................ 18
Directors and Officers......................................................... 20
The Investment Manager......................................................... 22
The Distributor................................................................ 24
Net Asset Value................................................................ 25
Purchase and Redemption of Shares.............................................. 26
Dividends, Distributions and Tax Status........................................ 27
Investment Results............................................................. 30
Description of Capital Shares.................................................. 30
Additional Information......................................................... 31
</TABLE>
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INVESTMENT OBJECTIVE AND POLICIES
----------------------------------
INVESTMENT CRITERIA
In evaluating particular investment opportunities, the Investment Manager may
consider, in addition to the factors described in the Prospectus, the
anticipated economic growth rate, the political outlook, the anticipated
inflation rate, the currency outlook, and the interest rate environment for the
country and the region in which a particular issuer is located. When the
Investment Manager believes it would be appropriate and useful, the Investment
Manager's personnel may visit the issuer's headquarters and plant sites to
assess an issuer's operations and to meet and evaluate its key executives. The
Investment Manager also will consider whether other risks may be associated with
particular securities.
INVESTMENT IN FOREIGN SECURITIES
The Fund may invest in foreign securities. The securities markets of many
countries have at times in the past moved relatively independently of one
another due to different economic, financial, political, and social factors. In
seeking to achieve the Fund's investment objective, the Investment Manager will
allocate the Fund's assets among securities of countries and in currency
denominations where opportunities for meeting the Fund's investment objective
are expected to be the most attractive, subject to the percentage limitations
set forth in the Prospectus. In addition, from time-to-time, the Fund may
strategically adjust its investments among issuers based in various countries
and among the various equity markets of the world in order to take advantage of
diverse global opportunities or capital appreciation, based on the Investment
Manager's evaluation of prevailing trends and developments, as well as on the
Investment Manager's assessment of the potential for capital appreciation (as
compared to the risks) of particular companies, industries, countries, and
regions.
INVESTMENT IN DEVELOPED FOREIGN COUNTRIES. The Fund may invest in securities of
companies that are organized or headquartered in developed foreign countries.
The Fund may not be invested in all developed foreign countries at one time, and
may not invest in particular developed foreign countries at any time, depending
on the Investment Manager's view of the investment opportunities available.
Although these countries have developed economies, even developed countries are
subject to periods of economic or political instability. For example, efforts by
the member countries of the European Union to eliminate internal barriers to the
free movement of goods, persons, services and capital have encountered
opposition arising from the conflicting economic, political and cultural
interests and traditions of the member countries and their citizens. The
reunification of the former German Democratic Republic (East Germany) with the
Federal Republic of Germany (West Germany) and other political and social events
in Europe have caused considerable economic and social dislocations. Such events
can materially affect securities markets and have also disrupted the
relationship of such currencies with each other and with the U.S. dollar.
Similarly, events in the Japanese economy and social developments may affect
Japanese securities and currency markets, as well as the relationship of the
Japanese Yen to the U.S. dollar. Future political, economic and social
developments can be expected to produce continuing effects on securities and
currency markets.
INVESTMENT IN EMERGING MARKETS. The Fund may invest in securities of companies
organized or headquartered in developing countries with emerging markets. As a
general matter, countries that are not considered to be developed foreign
countries by the Investment Manager will be deemed to be emerging market
countries. (See INVESTMENT IN DEVELOPED FOREIGN COUNTRIES.) As their economies
grow and their markets grow and mature, some countries that currently may be
characterized by the Investment Manager as emerging market countries may be
deemed by the Investment Manager to be developed foreign countries. In the event
that the Investment Manager deems a particular
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<PAGE>
country to be a developed foreign country, any investment in securities
issued by that country's government or by an issuer located in that country
would not be subject to the Fund's overall limitations on investments in
emerging market countries.
Securities of issuers organized or headquartered in emerging market countries
may, at times, offer excellent opportunities for capital appreciation. However,
prospective investors should be aware that the markets of emerging market
countries historically have been more volatile than the markets of the United
States and developed foreign countries, and thus the risks of investing in
securities of issuers organized or headquartered in emerging market countries
may be far greater than the risks of investing in developed foreign markets. See
"INVESTMENT AND RISK CONSIDERATIONS -- EMERGING MARKET SECURITIES" for a more
detailed discussion of the risk factors associated with investments in emerging
market securities. In addition, movements of emerging market currencies
historically have had little correlation with movements of developed foreign
market currencies. Prospective investors should consider these risk factors
carefully before investing in the Fund. Some emerging market countries have
currencies whose value is closely linked to the U.S. dollar. Emerging market
countries also may issue debt denominated in U.S. dollars and other currencies.
It is unlikely that the Fund will be invested in equity securities in all
emerging market countries at any time. Moreover, investing in some emerging
markets currently may not be desirable or feasible, due to lack of adequate
custody arrangements for the Fund's assets, overly burdensome repatriation or
similar restrictions, the lack of organized and liquid securities markets,
unacceptable political risks, poor values of investments in those markets
relative to investments in other emerging markets, in developed foreign markets,
or in the United States, or for other reasons.
CURRENCY MANAGEMENT
Securities purchased by the Fund may be denominated in U.S. dollars, foreign
currencies, or multinational currency units such as the European Currency Unit,
and the Fund will incur costs in connection with conversions between various
currencies. Movements in the various securities markets may be offset by changes
in foreign currency exchange rates. Exchange rates frequently move independently
of securities markets in a particular country. As a result, gains in a
particular securities market may be affected, either positively or negatively,
by changes in exchange rates, and the Fund's net currency positions may expose
it to risks independent of its securities positions.
From time-to-time, the Fund may employ currency management techniques to enhance
its total returns, although it presently does not intend to do so. The Fund may
not employ more than 30% of the value of its total assets in currency management
techniques for the purpose of enhancing returns. To the extent that such
techniques are used to enhance return, they are considered speculative.
The Fund's ability and decisions to purchase or sell portfolio securities also
may be affected by the laws or regulations in particular countries relating to
convertibility and repatriation of assets. Because the shares of the Fund are
redeemable in U.S. dollars each day the Fund determines its net asset value, the
Fund must have the ability at all times to obtain U.S. dollars to the extent
necessary to meet redemptions. Under present conditions, the Investment Manager
does not believe that these considerations will have any significant adverse
effect on its portfolio strategies, although there can be no assurances in this
regard.
GENERAL CURRENCY CONSIDERATIONS. Currency exchange rates may fluctuate
significantly over short periods of time causing, along with other factors, the
Fund's net asset value to fluctuate as well. Currency exchange rates generally
are determined by the forces of supply and demand in the foreign exchange
markets and the relative merits of investments in different countries, actual or
anticipated changes in interest rates and other complex factors, as seen from an
international perspective. Currency exchange rates also can be affected
unpredictably by intervention, or failure to do so, by U.S. or foreign
governments or central banks or by currency controls or political developments
in the United States or abroad. The market in forward foreign currency exchange
contracts, currency swaps and other privately negotiated currency instruments
offers less protection against defaults by the other party to such instruments
than is available for currency instruments traded on an exchange. To the extent
that a substantial portion
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of the Fund's total assets, adjusted to reflect the Fund's net position after
giving effect to currency transactions, is denominated or quoted in the
currencies of foreign countries, the Fund will be more susceptible to the
risk of adverse economic and political developments within those countries.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. The Fund may purchase or sell
forward foreign currency exchange contracts for hedging purposes or to seek to
increase total return when the Investment Manager anticipates that the foreign
currency will appreciate or depreciate in value, but securities denominated or
quoted in that currency do not present attractive investment opportunities and
are not held in the Fund's portfolio. When purchased or sold to increase total
return, forward foreign currency exchange contracts are considered speculative.
In addition, the Fund may enter into forward foreign currency exchange contracts
in order to protect against anticipated changes in future foreign currency
exchange rates. The Fund may engage in cross-hedging by using forward contracts
in a currency different from that in which the hedged security is denominated or
quoted if the Investment Manager determines that there is a pattern of
correlation between the two currencies. The Fund may also engage in proxy
hedging, by using forward contracts in a series of foreign currencies for
similar purposes.
The Fund may enter into contracts to purchase foreign currencies to protect
against an anticipated rise in the U.S. dollar price of securities it intends to
purchase. The Fund may enter into contracts to sell foreign currencies to
protect against the decline in value of its foreign currency denominated or
quoted portfolio securities, or a decline in the value of anticipated dividends
from such securities, due to a decline in the value of foreign currencies
against the U.S. dollar. Contracts to sell foreign currency could limit any
potential gain which might be realized by the Fund if the value of the hedged
currency increased.
If the Fund enters into a forward foreign currency exchange contract to sell
foreign currency to increase total return, the Fund will place cash, U.S.
Government securities, or other liquid debt or equity securities in a segregated
account with the Fund's custodian in an amount equal to the value of the Fund's
total assets committed to the consummation of the forward contract. If the value
of the securities placed in the segregated account declines, additional assets
will be placed in the account so that the value of the account will equal the
amount of the Fund's commitment with respect to the contract.
Forward contracts are subject to the risk that the counterparty to such contract
will default on its obligations. Since a forward foreign currency exchange
contract is not guaranteed by an exchange or clearinghouse, a default on the
contract would deprive a Fund of unrealized profits, transaction costs or the
benefits of a currency hedge or force the Fund to cover its purchase or sale
commitments, if any, at the current market price. The Fund will enter into such
transactions only with primary dealers or others deemed creditworthy by the
Investment Manager.
OPTIONS ON FOREIGN CURRENCIES. The Fund may purchase and sell (write) put and
call options on foreign currencies for the purpose of protecting against
declines in the U.S. dollar value of foreign portfolio securities and
anticipated dividends on such securities and against increases in the U.S.
dollar cost of foreign securities to be acquired. The Fund may also use options
on currency to cross-hedge, which involves writing or purchasing options on one
currency to hedge against changes in exchange rates for a different currency, if
the Investment Manager believes there is a pattern of correlation between the
two currencies. Options on foreign currencies to be written or purchased by the
Fund will be traded on U.S. and foreign exchanges.
The writer of a put or call option receives a premium and gives the purchaser
the right to sell (or buy) the currency underlying the option at the exercise
price. The writer has the obligation upon exercise of the option to purchase (or
deliver) the currency during the option period. A writer of an option who wishes
to terminate the obligation may effect a "closing transaction" by buying an
option of the same series as the option previously written. A writer may not
effect a closing purchase transaction after being notified of the exercise of an
option. The writing of an option on foreign currency will constitute only a
partial hedge, up to the amount of the premium received; the Fund could be
required to purchase or sell additional foreign currencies at disadvantageous
exchange rates, thereby incurring losses. The purchase of an option on foreign
currency may constitute an effective hedge against exchange rate fluctuations;
however, in the event of exchange rate movements adverse to the Fund's position,
the Fund may forfeit the entire amount of the premium plus related transaction
costs.
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The Fund may purchase call or put options on currency to seek to increase total
return when the Investment Manager anticipates that the currency will appreciate
or depreciate in value, but the securities quoted or denominated in that
currency do not present attractive investment opportunities and are not held in
the Fund's portfolio. When purchased or sold to increase total return, options
on currencies are considered speculative.
When the Fund writes a call option on a foreign currency, an amount of cash,
U.S. Government securities, or other liquid debt or equity securities equal to
the market value of its obligations under the option will be deposited by the
Fund in a segregated account with the Fund's custodian to collateralize the
position.
CURRENCY SWAPS. The Fund may enter into currency swaps for both hedging and to
seek to increase total return. Currency swaps involve the exchange of rights to
make or receive payments in specified currencies. Since currency swaps are
individually negotiated, the Fund expects to achieve an acceptable degree of
correlation between its portfolio investments and its currency swap positions
entered into for hedging purposes. Currency swaps may involve the delivery of
the entire principal value of one designated currency in exchange for the other
designated currency, or the delivery of the net amount of a party's obligations
over its entitlements. Therefore, the entire principal value of a currency swap
may be subject to the risk that the other party to the swap will default on its
contractual delivery obligations. The Fund will maintain in a segregated account
with the Fund's custodian cash, U.S. Government securities, or other liquid debt
or equity securities equal to the amount of the Fund's obligations, or the net
amount (if any) of the excess of the Fund's obligations over its entitlements,
with respect to swap transactions. To the extent that such amount of a swap is
held in such a segregated account the Company and the Investment Manager believe
that swaps do not constitute senior securities under the Investment Company Act
of 1940 (the "1940 Act") and, accordingly, will not treat them as being subject
to the Fund's borrowing restriction.
The currency swap market has grown substantially in recent years, with a large
number of banks and investment banking firms acting both as principals and
agents utilizing standard swap documentation, and the Investment Manager has
determined that the currency swap market has become relatively liquid. However,
the use of currency swaps is a highly specialized activity which involves
investment techniques and risks different from those associated with ordinary
portfolio securities transactions. If the Investment Manager is incorrect in its
forecasts of market values and currency exchange rates, the investment
performance of the Fund entering into a currency swap would be less favorable
than it would have been if this investment technique were not used.
OPTIONS TRANSACTIONS
The Fund may purchase listed put and call options on stocks and stock indices as
a hedge against changes in market conditions that may result in changes in the
value of the Fund's portfolio securities. The aggregate premiums on put options
and call options purchased by the Fund may not in each case exceed 5% of the
value of the net assets of the Fund. In addition, the Fund will not purchase or
sell options if more than 25% of the value of its net assets would be hedged.
A put gives the holder the right, in return for the premium paid, to require the
writer of the put to purchase from the holder a security at a specified price. A
call gives the holder the right, in return for the premium paid, to require the
writer of the call to sell a security to the holder at a specified price. Put
and call options are traded on U.S. and foreign exchanges. A put option is
covered if the writer maintains cash, U.S. Government securities or other liquid
debt or equity securities equal to the exercise price in a segregated account. A
call option is covered if the writer owns the security underlying the call or
has an absolute and immediate right to acquire the security without additional
cash consideration upon conversion or exchange of other securities held by it.
PUT OPTIONS. Purchasing put options may be used as a portfolio investment
strategy when the Investment Manager perceives significant short-term risk but
substantial long-term appreciation for the underlying security. The put option
acts as an insurance policy, as it protects against significant downward price
movement while it allows full participation in any upward movement. If the Fund
is holding a stock which the Investment Manager feels has strong fundamentals,
but for some reason may be weak in the near term, the Fund may purchase a put
option on such security, thereby giving itself the right to sell such security
at a certain strike price throughout the term of the
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option. Consequently, the Fund will exercise the put only if the price of
such security falls below the strike price of the put. The difference between
the put's strike price and the market price of the underlying security on the
date the Fund exercises the put, less transaction costs, will be the amount
by which the Fund will be able to hedge against a decline in the underlying
security. If during the period of the option the market price for the
underlying security remains at or above the put's strike price, the put will
expire worthless, representing a loss of the price the Fund paid for the put,
plus transaction costs. If the price of the underlying security increases,
the profit the Fund realizes on the sale of the security will be reduced by
the premium paid for the put option less any amount for which the put may be
sold.
CALL OPTIONS. The purchase of a call option is a type of insurance policy to
hedge against losses that could incur if the Fund intends to purchase the
underlying security and the security thereafter increases in price. The Fund
will exercise a call option only if the price of the underlying security is
above the strike price at the time of exercise. If during the option period the
market price for the underlying security remains at or below the strike price of
the call option, the option will expire worthless, representing a loss of the
price paid for the option, plus transaction costs. If the price of the
underlying security thereafter falls, the price the Fund pays for the security
will in effect be increased by the premium paid for the call option less any
amount for which such option may be sold.
STOCK INDEX OPTIONS. The Fund may purchase put and call options with respect to
the stock indices such as the S&P 500 Index. Such options may be purchased as a
hedge against changes resulting from market conditions in the values of
securities which are held in the Fund's portfolio or which it intends to
purchase or sell, or when they are economically appropriate for the reduction of
risks inherent in the ongoing management of the Fund.
The distinctive characteristics of options on stock indices create certain risks
that are not present with stock options generally. Because the value of an index
option depends upon movements in the level of the index rather than the price of
a particular stock, whether the Fund will realize a gain or loss on the purchase
or sale of an index option depends upon movements in the level of stock prices
in the stock market generally rather than movements in the price of a particular
stock. Accordingly, successful use by the Fund of options on a stock index will
be subject to the Investment Manager's ability to predict correctly movements in
the direction of the stock market generally. This requires different skills and
techniques than predicting changes in the prices of individual stocks.
Index prices may be distorted if trading of certain stocks included in an index
is interrupted. Trading of index options also may be interrupted in certain
circumstances, such as if trading were halted in a substantial number of stocks
included in the index. If this were to occur, the Fund would not be able to
close out options which it had purchased, and if restrictions on exercise were
imposed, the Fund might be unable to exercise an option it holds, which could
result in substantial losses to the Fund. It is the policy of the Fund to
purchase put or call options only with respect to an index which the Investment
Manager believes includes a sufficient number of stocks to minimize the
likelihood of a trading halt in the index.
DEALER OPTIONS. The Fund may engage in transactions involving dealer options as
well as exchange-traded options. Options not traded on an exchange generally
lack the liquidity of an exchange-traded option, and may be subject to the
Fund's restriction on investment in illiquid securities. In addition, dealer
options may involve the risk that the securities dealers participating in such
transactions will fail to meet their obligations under the terms of the option.
SHORT SALES
The Fund may engage in short sales transactions. A short sale that is not made
"against the box" is a transaction in which the Fund sells a security it does
not own in anticipation of a decline in market price. When the Fund makes a
short sale, the proceeds it receives are retained by the broker until the Fund
replaces the borrowed security. In order to deliver the security to the buyer,
the Fund must arrange through a broker to borrow the security and, in so doing,
the Fund becomes obligated to replace the security borrowed at its market price
at the time of replacement, whatever that price may be.
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Short sales by the Fund that are not made "against the box" create opportunities
to increase the Fund's return but, at the same time, involve special risk
considerations and may be considered a speculative technique. Since the Fund in
effect profits from a decline in the price of the securities sold short without
the need to invest the full purchase price of the securities on the date of the
short sale, the Fund's net asset value per share will tend to increase more when
the securities it has sold short decrease in value, and to decrease more when
the securities it has sold short increase in value, than would otherwise be the
case if it had not engaged in such short sales. Short sales theoretically
involve unlimited loss potential, as the market price of securities sold short
may continuously increase, although the Fund may mitigate such losses by
replacing the securities sold short before the market price has increased
significantly. Under adverse market conditions, the Fund might have difficulty
purchasing securities to meet its short sale delivery obligations, and might
have to sell portfolio securities to raise the capital necessary to meet its
short sale obligations at a time when fundamental investment considerations
would not favor such sales.
If the Fund makes a short sale "against the box," the Fund would not immediately
deliver the securities sold and would not receive the proceeds from the sale.
The seller is said to have a short position in the securities sold until it
delivers the securities sold, at which time it receives the proceeds of the
sale. The Fund's decision to make a short sale "against the box" may be a
technique to hedge against market risks when the Investment Manager believes
that the price of a security may decline, causing a decline in the value of a
security owned by the Fund or a security convertible into or exchangeable for
such security. In such case, any future losses in the Fund's long position would
be reduced by a gain in the short position.
In the view of the Securities and Exchange Commission ("SEC"), a short sale
involves the creation of a "senior security" as such term is defined in the 1940
Act, unless the sale is "against the box" and the securities sold are placed in
a segregated account (not with the broker), or unless the Fund's obligation to
deliver the securities sold short is "covered" by placing in a segregated
account (not with the broker) cash, U.S. Government securities or other liquid
debt or equity securities in an amount equal to the difference between the
market value of the securities sold short at the time of the short sale and any
cash or securities required to be deposited as collateral with a broker in
connection with the sale (not including the proceeds from the short sale), which
difference is adjusted daily for changes in the value of the securities sold
short. The total value of the cash and securities deposited with the broker and
otherwise segregated may not at any time be less than the market value of the
securities sold short at the time of the short sale.
To avoid limitations under the 1940 Act on borrowing by investment companies,
short sales by the Fund will be against the box, or the Fund's obligation to
deliver the securities sold short will be "covered" by placing in segregated
account cash, U.S. Government securities or other liquid debt or equity
securities in an amount equal to the market value of its delivery obligation.
The Fund will not make short sales of securities or maintain a short position if
doing so could create liabilities or require collateral deposits and segregation
of assets aggregating more than 25% of the value of the Fund's total assets.
FUTURES TRANSACTIONS
The Fund may purchase and sell currency futures contracts and futures options,
in accordance with the strategies more specifically described below, to hedge
against currency exchange rate fluctuations or to enhance returns.
FUTURES CHARACTERISTICS. A futures contract is an agreement between two parties
(buyer and seller) to take or make delivery of an amount of cash equal to the
difference between the value of currency at the close of the last trading day of
the contract and the price at which the currency contract was originally
written. In the case of futures contracts traded on U.S. exchanges, the exchange
itself or an affiliated clearing corporation assumes the opposite side of each
transaction (i.e., as buyer or seller). A futures contract may be satisfied or
closed out by payment of the change in the cash value of the currency. No
physical delivery of the underlying currency is made.
Unlike when the Fund purchases or sells a security, no price is paid or received
by the Fund upon the purchase or sale of a futures contract. Initially, the Fund
will be required to deposit with the Fund's custodian or such other parties as
may be authorized by the SEC (in the name of the futures commission merchant
(the "FCM")) an amount
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of cash or U.S. Treasury bills which is referred to as an "initial margin"
payment. The nature of initial margin in futures transactions is different
from that of margin in security transactions in that a futures contract
margin does not involve the borrowing of funds by the Fund to finance the
transactions. Rather, the initial margin is in the nature of a performance
bond or good faith deposit on the contract which is returned to the Fund upon
termination of the futures contract, assuming all contractual obligations
have been satisfied. Futures contracts customarily are purchased and sold
with initial margins that may range upwards from less than 5% of the value of
the futures contract being traded. Subsequent payments, called variation
margin, to and from the FCM, will be made on a daily basis as the price of
the underlying currency varies, making the long and short positions in the
futures contract more or less valuable. This process is known as "marking to
the market." For example, when the Fund has purchased a currency futures
contract and the price of the underlying currency has risen, that position
will have increased in value and the Fund will receive from the FCM a
variation margin payment equal to that increased value. Conversely, when the
Fund has purchased a currency futures contract and the price of the
underlying currency has declined, the position would be less valuable and the
Fund would be required to make a variation margin payment to the FCM. At any
time prior to expiration of the futures contract, the Fund may elect to close
the position by taking an identical opposite position which will operate to
terminate the Fund's position in the futures contract. A final determination
of variation margin is then made, additional cash is required to be paid by
or released to the Fund, and the Fund realizes a loss or a gain.
CHARACTERISTICS OF FUTURES OPTIONS. The Fund may also purchase call options and
put options on currency futures contracts ("futures options"). A futures option
gives the holder the right, in return for the premium paid, to assume a long
position (in the case of a call) or short position (in the case of a put) in a
futures contract at a specified exercise price prior to the expiration of the
option. Upon exercise of a call option, the holder acquires a long position in
the futures contract and the writer is assigned the opposite short position. In
the case of a put option, the opposite is true. A futures option may be closed
out (before exercise or expiration) by an offsetting purchase or sale of a
futures option of the same series.
PURCHASE OF FUTURES. The Investment Manager may purchase a currency futures
contract when it anticipates the subsequent purchase of particular securities
and has the necessary cash, but expects the currency exchange rates then
available in the applicable market to be less favorable than rates that are
currently available, or to attempt to enhance return when it anticipates that
future currency exchange rates will be more favorable than current rates.
SALE OF FUTURES. The Investment Manager may sell a currency futures contract to
hedge against an anticipated decline in foreign currency rates that would
adversely affect the dollar value of the Fund's portfolio securities denominated
in such currency, or may sell a currency futures contract in one currency to
hedge against fluctuations in the value of securities denominated in a different
currency if there is an established historical pattern or correlation between
the two currencies.
PURCHASE OF PUT OPTIONS ON FUTURES. The purchase of a put option on a currency
futures contract is analogous to the purchase of a put on an individual stock,
where an absolute level of protection from price fluctuation is sought below
which no additional economic loss would be incurred by the Fund. The purchase of
a put option on a currency futures contract can be used to hedge against
unfavorable movements in currency exchange rates, or to attempt to enhance
returns in contemplation of movements in such rates.
PURCHASE OF CALL OPTIONS ON FUTURES. The purchase of a call option on a currency
futures contract represents a means of obtaining temporary exposure to favorable
currency exchange rate movements with risk limited to the premium paid for the
call option. It is analogous to the purchase of a call option on an individual
stock, which can be used as a substitute for a position in the stock itself.
Depending on the pricing of the option compared to either the futures contract
upon which it is based, or to the price of the underlying currency itself, the
call option may be less risky, because losses are limited to the premium paid
for the call option, when compared to the ownership of the underlying currency.
Like the purchase of a currency futures contract, the Fund would purchase a call
option on a currency futures contract to hedge against an unfavorable movement
in exchange rates.
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LIMITATIONS ON PURCHASE AND SALE OF FUTURES AND FUTURES OPTIONS. The Fund may
not purchase or sell futures contracts or purchase futures options if,
immediately thereafter, more than 30% of the value of its net assets would be
hedged. In addition, the Fund may not purchase or sell futures or purchase
futures options if, immediately thereafter, the sum of the amount of margin
deposits on the Fund's existing futures positions and premiums paid for futures
options would exceed 5% of the market value of the Fund's total assets. In Fund
transactions involving futures contracts, to the extent required by applicable
SEC guidelines, an amount of cash, U.S. Government securities, or other liquid
debt or equity securities equal to the market value of the futures contracts
will be deposited by the Fund in a segregated account with the Fund's Custodian,
or in other segregated accounts as regulations may allow, to collateralize the
position and thereby to insure that the use of such futures is unleveraged.
REGULATORY MATTERS. The Company has filed a claim of exemption from registration
of the Fund as a commodity pool with the Commodity Futures Trading Commission
(the "CFTC"). The Fund intends to conduct its futures trading activity in a
manner consistent with that exemption. The Investment Manager is registered with
the CFTC as both a Commodity Pool Operator and as a Commodity Trading Advisor.
DEBT SECURITIES
The Fund may purchase debt obligations. The timing of purchase and sale
transactions in debt obligations may result in capital appreciation or
depreciation because the value of debt obligations varies inversely with
prevailing interest rates.
The debt obligations in which the Fund will invest will be rated, at the time of
purchase, BBB or higher by Standard & Poor's or Baa or higher by Moody's
Investors Service ("Moody's") or equivalent ratings by other rating
organizations, or, if unrated, will be determined by the Investment Manager to
be of comparable investment quality. If the rating of an investment grade
security held by the Fund is downgraded, the Investment Manager will determine
whether it is in the best interests of the Fund to continue to hold the security
in its investment portfolio.
U.S. Government obligations include obligations issued or guaranteed as to
principal and interest by the U.S. Government and its agencies and
instrumentalities, by the right of the issuer to borrow from the U.S. Treasury,
by the discretionary authority of the U.S. Government to purchase certain
obligations of the agency or instrumentality, or only by the credit of the
agency or instrumentality.
PREFERRED STOCKS
The Fund may purchase preferred stocks. Preferred stock, unlike common stock,
offers a stated dividend rate payable from a corporation's earnings. Such
preferred stock dividends may be cumulative or non-cumulative, participating, or
auction rate. If interest rates rise, the fixed dividend on preferred stocks may
be less attractive, causing the price of preferred stocks to decline. Preferred
stock may have mandatory sinking fund provisions, as well as call/redemption
provisions prior to maturity, a negative feature when interest rates decline.
Dividends on some preferred stock may be "cumulative," requiring all or a
portion of prior unpaid dividends to be paid prior to payment of dividends on
the issuer's common stock. Preferred stock also generally has a preference over
common stock on the distribution of a corporation's assets in the event of
liquidation of the corporation, and may be "participating," which means that it
may be entitled to a dividend exceeding the stated dividend in certain cases.
The rights of preferred stocks on the distribution of a corporation's assets in
the event of a liquidation are generally subordinate to the rights associated
with a corporation's debt securities.
INVESTMENT IN ILLIQUID SECURITIES
The Fund may purchase illiquid securities. The Investment Manager takes into
account a number of factors in reaching liquidity decisions, including, but not
limited to: the listing of the security on an exchange or national market
system; the frequency of trading in the security; the number of dealers who
publish quotes for the security; the number of dealers who serve as market
makers for the security; the apparent number of other potential
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purchasers; and the nature of the security and how trading is effected (e.g.,
the time needed to sell the security, how offers are solicited, and the
mechanics of transfer).
CASH-EQUIVALENT INVESTMENTS
Other than as described below under INVESTMENT RESTRICTIONS, the Fund is not
restricted with regard to the types of cash-equivalent investments it may make.
When the Investment Manager believes that such investments are an appropriate
part of the Fund's overall investment strategy, the Fund may hold or invest, for
investment purposes, a portion of its assets in any of the following,
denominated in U.S. dollars, foreign currencies, or multinational currency
units: cash; short-term U.S. or foreign government securities; commercial paper
rated at least A-2 by Standard & Poor's or P-2 by Moody's; certificates of
deposit or other deposits of banks deemed creditworthy by the Investment Manager
pursuant to standards adopted by the Company's Board of Directors; time
deposits; bankers' acceptances; and repurchase agreements related to any of the
foregoing. In addition, for temporary defensive purposes under abnormal market
or economic conditions, the Fund may invest up to 100% of its assets in such
cash-equivalent investments.
A certificate of deposit is a short-term obligation of a commercial bank. A
bankers' acceptance is a time draft drawn on a commercial bank by a borrower,
usually in connection with international commercial transactions. A repurchase
agreement involves a transaction by which an investor (such as the Fund)
purchases a security and simultaneously obtains the commitment of the seller (a
member bank of the Federal Reserve System or a securities dealer deemed
creditworthy by the Investment Manager pursuant to standards adopted by the
Company's Board of Directors) to repurchase the security at an agreed-upon price
on an agreed-upon date within a number of days (usually not more than seven)
from the date of purchase.
PORTFOLIO TURNOVER
The Fund may invest in securities on either a long-term or short-term basis. The
Fund may invest with the expectation of short-term capital appreciation if the
Investment Manager believes that such action will benefit the Fund's
stockholders. The Fund also may sell securities that have been held on a
short-term basis if the Investment Manager believes that circumstances make the
sale of such securities advisable. This may result in a taxable stockholder
paying higher income taxes than would be the case with investment companies
emphasizing the realization of long-term capital gains. Because the Investment
Manager will purchase and sell securities for the Fund's portfolio without
regard to the length of the holding period for such securities, it is possible
that the Fund's portfolio will have a higher turnover rate than might be
expected for investment companies that invest substantially all of their funds
for long-term capital appreciation or generation of current income. Securities
in the Fund's portfolio will be sold whenever the Investment Manager believes it
is appropriate to do so, regardless of the length of time that securities have
been held, and securities may be purchased or sold for short-term profits
whenever the Investment Manager believes it is appropriate or desirable to do
so. Turnover will be influenced by sound investment practices, the Fund's
investment objective, and the need for funds for the redemption of the Fund's
shares.
For example, a 150% portfolio turnover rate would occur if the value of
purchases or sales of portfolio securities (whichever is less) by the Fund for a
year (excluding purchases of U.S. Treasury issues and securities with a maturity
of one year or less) were equal to 150% of the average monthly value of the
securities held by the Fund during such year. As a result of the manner in which
turnover is measured, a high turnover rate could also occur during the first
year of the Fund's operations, and during periods when the Fund's assets are
growing or shrinking.
INVESTMENT RESTRICTIONS
In making purchases within the foregoing policies, the Fund and the Investment
Manager will be subject to all of the restrictions referred to under "INVESTMENT
RESTRICTIONS". If a percentage restriction on the Fund's investment or
utilization of assets set forth above or under "INVESTMENT RESTRICTIONS" is
adhered to at the time the investment is made, a later change in percentage
resulting from changing value or a similar type of event will not be considered
a
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violation of the Fund's investment policies or restrictions. The Fund may
exchange securities, exercise conversions or subscription rights, warrants or
other rights to purchase common stock or other equity securities and may hold,
except to the extent limited by the 1940 Act, any such securities so acquired
without regard to the Fund's investment policies and restrictions.
----------------------------------
INVESTMENT AND RISK CONSIDERATIONS
----------------------------------
INVESTMENTS IN FOREIGN SECURITIES GENERALLY
Investments in foreign equity securities may offer investment opportunities and
potential benefits not available from investments solely in securities of U.S.
issuers. Such benefits may include the opportunity to invest in foreign issuers
that appear, in the opinion of the Investment Manager, to offer better
opportunity for long-term capital appreciation than investments in securities of
U.S. issuers, the opportunity to invest in foreign countries with economic
policies or business cycles different from those of the United States and the
opportunity to reduce fluctuations in portfolio value by taking advantage of
foreign stock markets that do not necessarily move in a manner parallel to U.S.
stock markets.
At the same time, however, investing in foreign equity securities involves
significant risks, some of which are not typically associated with investing in
securities of U.S. issuers. For example, the value of investments in such
securities may fluctuate based on changes in the value of one or more foreign
currencies relative to the U.S. dollar, and a change in the exchange rate of one
or more foreign currencies could reduce the value of certain portfolio
securities. Currency exchange rates may fluctuate significantly over short
periods of time, and are generally determined by the forces of supply and demand
and other factors beyond the Fund's control. Changes in currency exchange rates
may, in some circumstances, have a greater effect on the market value of a
security than changes in the market price of the security. To the extent that a
substantial portion of the Fund's total assets is denominated or quoted in the
currency of a foreign country, the Fund will be more susceptible to the risk of
adverse economic and political developments within that country. As discussed
above, the Fund may employ certain investment techniques to hedge its foreign
currency exposure; however, such techniques also entail certain risks.
In addition, information about foreign issuers may be less readily available
than information about domestic issuers. Foreign issuers generally are not
subject to accounting, auditing, and financial reporting standards or to other
regulatory practices and requirements comparable to those applicable to U.S.
issuers. Furthermore, with respect to certain foreign countries, the possibility
exists of expropriation, nationalization, revaluation of currencies,
confiscatory taxation, and limitations on foreign investment and the use or
removal of funds or other assets of the Fund, including the withholding of
dividends and limitations on the repatriation of currencies. In addition, the
Fund may experience difficulties or delays in obtaining or enforcing judgments.
Foreign securities may be subject to foreign government taxes that could reduce
the yield on such securities.
Foreign equity securities may be traded on an exchange in the issuer's country,
an exchange in another country, or over-the-counter in one or more countries.
Most foreign securities markets, including over-the-counter markets, have
substantially less volume than U.S. securities markets, and the securities of
many foreign issuers may be less liquid and more volatile than securities of
comparable U.S. issuers. In addition, there is generally less government
regulation of securities markets, securities exchanges, securities dealers, and
listed and unlisted companies in foreign countries than in the United States.
Foreign markets also have different clearance and settlement procedures, and in
certain markets there have been times when settlements have been unable to keep
pace with the volume of securities transactions, making it difficult to conduct
and complete such transactions. Inability to dispose of a portfolio security
caused by settlement problems
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could result either in losses to the Fund due to subsequent declines in the
value of the portfolio security or, if the Fund has entered into a contract
to sell that security, could result in possible liability of the Fund to the
purchaser. Delays in settlement could adversely affect the Fund's ability to
implement its investment strategies and to achieve its investment objective.
In addition, the costs associated with transactions in securities traded on
foreign markets or of foreign issuers, and the expense of maintaining custody of
such securities with foreign custodians, generally are higher than the costs
associated with transactions in U.S. securities on U.S. markets. Investments in
foreign securities may result in higher expenses due to the cost of converting
foreign currency to U.S. dollars, the payment of fixed brokerage commissions on
foreign exchanges, the expense of maintaining securities with foreign custodians
and the imposition of transfer taxes or transaction charges associated with
foreign exchanges.
Investment in debt obligations of supranational organizations involves
additional risks. Such organizations' debt obligations generally are not
guaranteed by their member governments, and payment depends on their financial
solvency and/or the willingness and ability of their member governments to
support their obligations. Continued support of a supranational organization by
its government members is subject to a variety of political, economic and other
factors, as well as the financial performance of the organization.
DEPOSITARY RECEIPTS
In many respects, the risks associated with investing in depositary receipts are
similar to the risks associated with investing in foreign equity securities
directly. In addition, to the extent that the Fund acquires depositary receipts
through banks that do not have a contractual relationship with the foreign
issuer of the security underlying the depositary receipts to issue and service
depositary receipts, there may be an increased possibility that the Fund would
not become aware of and be able to respond to corporate actions, such as stock
splits or rights offerings, involving the foreign issuer in a timely manner.
The information available for American Depositary Receipts ("ADRs") sponsored by
the issuers of the underlying securities is subject to the accounting, auditing,
and financial reporting standards of the domestic market or exchange on which
they are traded, which standards generally are more uniform and more exacting
than those to which many non-domestic issuers may be subject. However, some ADRs
are sponsored by persons other than the issuers of the underlying securities.
Issuers of the stock on which such ADRs are based are not obligated to disclose
material information in the United States. The information that is available
concerning the issuers of the securities underlying European Depositary Receipts
("EDRs") and Global Depositary Receipts ("GDRs") may be less than the
information that is available about domestic issuers, and EDRs and GDRs may be
traded in markets or on exchanges that have lesser standards than those
applicable to the markets for ADRs.
A depositary receipt will be treated as an illiquid security for purposes of the
Fund's restriction on the purchases of such securities unless the depositary
receipt is convertible into cash by the Fund within seven days.
EMERGING MARKET SECURITIES
There are special risks associated with investments in securities of companies
organized or headquartered in developing countries with emerging markets that
are in addition to the usual risks of investing in securities of issuers located
in developed foreign markets around the world, and investors in the Fund are
strongly advised to consider those risks carefully. The securities markets of
emerging market countries are substantially smaller, less developed, less
liquid, and more volatile than the securities markets of the United States and
developed foreign markets. As a result, the prices of emerging market securities
may increase or decrease much more rapidly and much more dramatically than the
prices of securities of issuers located in developed foreign markets. Disclosure
and regulatory standards in many respects are less stringent than in the United
States and developed foreign markets. There also may be a lower level of
monitoring and regulation of securities markets in emerging market countries and
the activities of investors in such markets, and enforcement of existing
regulations has been extremely limited.
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Many emerging market countries have experienced substantial, and in some periods
extremely high, rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates have had and may continue to have very negative
effects on the economies and securities markets of certain emerging market
countries. Economies in emerging markets generally are heavily dependent upon
international trade and, accordingly, have been and may continue to be affected
adversely by trade barriers, exchange controls, managed adjustments in relative
currency values, and other protectionist measures imposed or negotiated by the
countries with which they trade. These economies also have been and may continue
to be adversely affected by economic conditions in the countries in which they
trade. In addition, custodial services and other costs related to investment in
foreign markets may be more expensive in emerging markets than in many developed
foreign markets, which could reduce the Fund's investment returns from such
securities.
In many cases, governments of emerging market countries continue to exercise a
significant degree of control over the economies of such countries, and
government actions relative to the economy, as well as economic developments
generally, also may have a major effect on an issuer's prospects. In addition,
certain of such governments have in the past failed to recognize private
property rights and have at times naturalized or expropriated the assets of
private companies. There is also a heightened possibility of confiscatory
taxation, imposition of withholding taxes on interest payments, or other similar
developments that could affect investments in those countries. As a result,
there can be no assurance that adverse political changes will not cause the Fund
to suffer a loss with respect to any of its holdings. In addition, political and
economic structures in many of such countries may be undergoing significant
evolution and rapid development, and such countries may lack the social,
political and economic stability characteristics of more developed countries.
Unanticipated political or social developments may affect the value of the
Fund's investments in those countries and the availability of additional
investments in those countries.
INVESTMENTS IN SMALLER COMPANIES
Investment by the Fund in the securities of companies with market
capitalizations below $1 billion involves greater risk and the possibility of
greater portfolio price volatility than investing in larger capitalization
companies. For example, smaller capitalization companies may have less certain
growth prospects, and may be more sensitive to changing economic conditions,
than large, more established companies. Moreover, smaller capitalization
companies often face competition from larger or more established companies that
have greater resources. In addition, the smaller capitalization companies in
which the Fund may invest may have limited or unprofitable operating histories,
limited financial resources, and inexperienced management. Furthermore,
securities of such companies are often less liquid than securities of larger
companies, and may be subject to erratic or abrupt price movements. To dispose
of these securities, the Fund may have to sell them over an extended period of
time below the original purchase price. Investments by the Fund in smaller
capitalization companies may be regarded as speculative.
The Fund will invest no more than 5% of the value of its total assets in
securities issued by companies (including predecessors) that have operated for
less than three years. The securities of such companies may have limited
liquidity which can result in their prices being lower than might otherwise be
the case. In addition, investments in such companies are more speculative and
entail greater risk than do investments in companies with established operating
records.
CONVERTIBLE SECURITIES
Investment in convertible securities involves certain risks. The value of a
convertible security is a function of its "investment value" (determined by its
yield in comparison with the yields of other securities of comparable maturity
and quality that do not have a conversion privilege) and its "conversion value"
(the security's worth, at market value, if converted into the underlying stock).
If the conversion value is low relative to the investment value, the price of
the convertible security will be governed principally by its yield, and thus may
not decline in price to the same extent as the underlying stock; to the extent
the market price of the underlying common stock approaches or exceeds the
conversion price, the price of the convertible security will be influenced
increasingly by its conversion value. A convertible security held by the Fund
may be subject to redemption at the option of the issuer at a price
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established in the instrument governing the convertible security, in which
event the Fund will be required to permit the issuer to redeem the security,
convert it into the underlying common stock, or sell it to a third party.
DEBT OBLIGATIONS
Although securities rated BBB by Standard & Poor's or Baa by Moody's are
considered to be of "investment grade," and are considered to have adequate
capacity to pay interest and repay principal, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to pay
interest and principal than higher-rated securities. Credit ratings evaluate the
safety of principal and interest payments of securities, not their market value.
The rating of an issuer is also heavily weighted by past developments and does
not necessarily reflect probable future conditions. There is frequently a lag
between the time a rating is assigned and the time it is updated.
OPTIONS
There are several risks associated with transactions in options on securities
and indices. Options may be more volatile than the underlying instruments and,
therefore, on a percentage basis, an investment in options may be subject to
greater fluctuation than an investment in the underlying instruments themselves.
There are also significant differences between the securities and options
markets that could result in an imperfect correlation between these markets,
causing a given transaction not to achieve its objective. In addition, a liquid
secondary market for particular options may be absent for reasons which include
the following: there may be insufficient trading interest in certain options;
restrictions may be imposed by an exchange on opening transactions or closing
transactions or both; trading halts, suspensions or other restrictions may be
imposed with respect to particular classes or series of options or underlying
instruments; unusual or unforeseen circumstances may interrupt normal operations
on an exchange; the facilities of an exchange or clearing corporation may not at
all times be adequate to handle current trading volume; or one or more exchanges
could, for economic or other reasons, decide, or be compelled at some future
date, to discontinue the trading of options (or a particular class or series of
options), in which event the secondary market on that exchange (or in that class
or series of options) would cease to exist, although outstanding options that
had been issued by a clearing corporation as a result of trades on that exchange
would continue to be exercisable in accordance with their terms.
A decision as to whether, when and how to use options involves the exercise of
skill and judgment, and even a well-conceived transaction may be unsuccessful to
some degree because of market behavior or unexpected events. The extent to which
the Fund may enter into options transactions may be limited by the Internal
Revenue Code requirements for qualification as a regulated investment company.
In addition, when trading options on foreign exchanges, many of the protections
afforded to participants in U.S. option exchanges will not be available. For
example, there may be no daily price fluctuation limits in such exchanges or
markets, and adverse market movements could therefore continue to an unlimited
extent over a period of time. Although the purchaser of an option cannot lose
more than the amount of the premium plus related transaction costs, this entire
amount could be lost.
Potential losses to the writer of an option are not limited to the loss of the
option premium received by the writer, and thus may be greater than the losses
incurred in connection with the purchasing of an option.
FUTURES TRANSACTIONS
There are several risks in connection with the use of futures in the Fund as a
hedging device. One risk arises because the correlation between movements in the
price of the future and movements in the price of the currencies which are the
subject of the hedge is not always perfect. The price of the future acquired by
the Fund may move more than, or less than, the price of the currencies being
hedged. If the price of the future moves less than the price of the currencies
which are the subject of the hedge, the hedge will not be fully effective but,
if the price of the currencies being hedged has moved in an unfavorable
direction, the Fund would be in a better position than if it had not
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hedged at all. If the price of the currencies being hedged has moved in a
favorable direction, this advantage will be partially offset by movement in
the value of the future. If the price of the future moves more than the price
of the currencies, the Fund will experience either a loss or a gain on the
future which will not be completely offset by movements in the price of the
currencies which are the subject of the hedge.
To compensate for the imperfect correlation of movements in the price of
currencies being hedged and movements in the price of the futures, the Fund may
buy or sell futures contracts in a greater dollar amount than the dollar amount
of currencies being hedged, if the historical volatility of the price of such
currencies has been greater than the historical volatility of the currencies.
Conversely, the Fund may buy or sell fewer futures contracts if the historical
volatility of the price of the currencies being hedged is less than the
historical volatility of the currencies.
Because of the low margins required, futures trading involves a high degree of
leverage. As a result, a relatively small investment in a futures contract by
the Fund may result in immediate and substantial loss, as well as gain, to the
Fund. A purchase or sale of a futures contract may result in losses in excess of
the initial margin for the futures contract. However, the Fund would have
sustained comparable losses if, instead of the futures contract, it had invested
in the underlying currencies and sold the instrument after the decline.
When futures are purchased by the Fund to hedge against a possible unfavorable
movement in a currency exchange rate before the Fund is able to invest its cash
(or cash equivalents) in stock in an orderly fashion, it is possible that the
currency exchange rate may move in a favorable manner instead. If the Fund then
decides not to invest in stock at that time because of concern as to possible
further market decline or for other reasons, the Fund will realize a loss on the
futures contract that is not offset by a reduction in the price of securities
purchased.
In addition to the possibility that there may be an imperfect correlation, or no
correlation at all, between movements in the futures and the currencies which
are the subject of a hedge, the price of futures contracts may not correlate
perfectly with movement in the currency due to certain market distortions.
First, all participants in the futures market are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin deposit
requirements, investors may close futures contracts through offsetting
transactions. This practice could distort the normal relationship between the
currency and futures markets. Second, from the point of view of speculators, the
deposit requirements in the futures market may be less onerous than margin
requirements in the currency market. Therefore, increased participation by
speculators in the futures market also may cause temporary price distortions.
Due to the possibility of price distortion in the futures market and because of
the imperfect correlation between movements in the currency and movements in the
price of currency futures, a correct forecast of general currency trends by the
Investment Manager still may not result in a successful hedging transaction over
a very short time frame.
Futures exchanges may limit the amount of fluctuation permitted in certain
futures contract prices during a single trading day. Once the daily limit has
been reached, no more trades may be made on that day at a price beyond the
limit. The daily limit governs only price movements during a particular trading
day and therefore does not limit potential losses, because the limit may prevent
the liquidation of unfavorable positions.
Compared to the use of futures contracts, the purchase of options on futures
contracts involves less potential risk to the Fund because the maximum amount at
risk is the premium paid for the options (plus transaction costs). However,
there may be circumstances when the use of an option on a futures contract would
result in loss to the Fund when the use of a futures contract would not, such as
when there is no movement in the level of an index. In addition, daily changes
in the value of the option due to changes in the value of the underlying futures
contract are reflected in the net asset value of the Fund.
The Fund will only enter into futures contracts or purchase futures options that
are standardized and traded in a U.S. or foreign exchange or board of trade, or
similar entity, or quoted on an automated quotation system. However, there is no
assurance that a liquid secondary market on an exchange or board of trade will
exist for any particular futures contract or futures option or at any particular
time. In such event, it may not be possible to close a futures position, and, in
the event of adverse price movements, the Fund would continue to be required to
make daily cash
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payments of variation margin. In the event futures contracts have been used
to hedge currencies, an increase in the price of the currencies, if any, may
partially or completely offset losses on the futures contract. However, as
described above, there is no guarantee that the price of the currency will,
in fact, correlate with the movements in the futures contract and thus
provide an offset to losses on a futures contract.
Successful use of futures by the Fund for hedging purposes or to enhance returns
is subject to the Investment Manager's ability to predict correctly movements in
the direction of the currency markets. For example, if the Fund purchased
currency futures contracts with the intention of profiting from a favorable
change in currency exchange rates, and the change was unfavorable, the Fund
would incur a loss, and might have to sell securities to meet daily variation
margin requirements at a time when it might be disadvantageous to do so. The
Investment Manager and its predecessor have been actively engaged in the
provision of investment supervisory services for institutional and individual
accounts since 1970, but the skills required for the successful use of futures
and options on futures are different from those needed to select portfolio
securities, and the Investment Manager has limited prior experience in the use
of futures or options techniques in the management of assets under its
supervision.
OTHER RISK CONSIDERATIONS
Investment in illiquid securities involves potential delays on resale as well as
uncertainty in valuation. Limitations on resale may have an adverse effect on
the marketability of portfolio securities, and the Fund might not be able to
dispose of such securities promptly or at reasonable prices.
A number of transactions in which the Fund may engage are subject to the risks
of default by the other party of the transaction. If the seller of securities
pursuant to a repurchase agreement entered into by the Fund defaults and the
value of the collateral securing the repurchase agreement declines, the Fund may
incur a loss. If bankruptcy proceedings are commenced with respect to the
seller, realization of the collateral by the Fund may be delayed or limited.
Similarly, when the Fund engages in when-issued, reverse repurchase, forward
commitment and relayed settlement transactions, it relies on the other party to
consummate the trade; failure of the other party to do so may result in the Fund
incurring a loss or missing an opportunity to obtain a price the Investment
Manager believed to be advantageous. The risks in lending portfolio securities,
as with other extensions of secured credit, consist of a possible delay in
receiving additional collateral or in recovery of the securities or possible
loss of rights in the collateral should the borrower fail financially.
----------------------------------
INVESTMENT RESTRICTIONS
----------------------------------
FUNDAMENTAL POLICIES
The Fund has adopted certain investment restrictions that are fundamental
policies and that may not be changed without approval by the vote of a majority
of the Fund's outstanding voting securities, as defined in the 1940 Act. The
"vote of a majority of the outstanding voting securities" of the Fund, as
defined in Section 2(a)(42) of the 1940 Act, means the vote of (i) 67% or more
of the voting securities of the Fund present at any meeting, if the holders of
more than 50% of the outstanding voting securities of the Fund are present or
represented by proxy, or (ii) more than 50% of the outstanding voting securities
of the Fund, whichever is less. These restrictions provide that the Fund may
not:
1. Acquire more than 10% of the outstanding voting securities, or 10% of all
of the securities, of any one issuer;
2. Invest in companies for the purpose of exercising control or management;
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3. Borrow money, except from banks to meet redemption requests or for
temporary or emergency purposes; provided that borrowings for temporary or
emergency purposes other than to meet redemption requests shall not exceed
5% of the value of its total assets; and provided further that total
borrowings shall be made only to the extent that the value of the Fund's
total assets, less its liabilities other than borrowings, is equal to at
least 300% of all borrowings (including the proposed borrowing). For
purposes of the foregoing limitations, reverse repurchase agreements and
other borrowing transactions covered by segregated accounts are considered
to be borrowings. The Fund will not mortgage, pledge, hypothecate, or in
any other manner transfer as security for an indebtedness any of its
assets. This investment restriction shall not prohibit the Fund from
engaging in futures contracts, futures options, forward foreign currency
exchange transactions, and currency options;
4. Purchase securities on margin, but it may obtain such short-term credit
from banks as may be necessary for the clearance of purchases and sales of
securities;
5. Make loans of its funds or assets to any other person, which shall not be
considered as including: (i) the purchase of a portion of an issue of
publicly distributed debt securities, (ii) the purchase of bank obligations
such as certificates of deposit, bankers' acceptances and other short-term
debt obligations, (iii) entering into repurchase agreements with respect to
commercial paper, certificates of deposit and obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities, and
(iv) the loan of portfolio securities to brokers, dealers and other
financial institutions where such loan is callable by the Fund at any time
on reasonable notice and is fully secured by collateral in the form of cash
or cash equivalents. The Fund will not enter into repurchase agreements
with maturities in excess of seven days if immediately after and as a
result of such transaction the value of the Fund's holdings of such
repurchase agreements exceeds 10% of the value of the Fund's total assets;
6. Act as an underwriter of securities issued by other persons, except insofar
as it may be deemed an underwriter under the Securities Act of 1933 in
selling portfolio securities, or invest more than 15% of the value of its
net assets in securities that are illiquid;
7. Purchase the securities of any other investment company or investment
trust, except by purchase in the open market where, to the best information
of the Company, no commission or profit to a sponsor or dealer (other than
the customary broker's commission) results from such purchase and such
purchase does not result in such securities exceeding 10% of the value of
the Fund's total assets, or except when such purchase is part of a merger,
consolidation, acquisition of assets, or other reorganization approved by
the Fund's stockholders;
8. Purchase portfolio securities from or sell portfolio securities to the
officers, directors, or other "interested persons" (as defined in the 1940
Act) of the Company, other than otherwise unaffiliated broker-dealers;
9. Purchase commodities or commodity contracts, except that the Fund may
purchase securities of an issuer which invests or deals in commodities or
commodity contracts, and except that the Fund may enter into futures and
options contracts in accordance with the applicable rules of the CFTC. The
Fund has no current intention of entering into commodities contracts except
for currency futures and futures options;
10. Issue senior securities, except that the Fund may borrow money as permitted
by restriction 3 above. This restriction shall not prohibit the Fund from
engaging in short sales, options, futures and foreign currency
transactions; and
11. Purchase or sell real estate; provided that the Fund may invest in readily
marketable securities secured by real estate or interests therein or issued
by companies which invest in real estate or interests therein.
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OPERATING POLICIES
The Fund has adopted certain investment restrictions that are not fundamental
policies and may be changed by the Company's Board of Directors without approval
of the Fund's outstanding voting securities. These restrictions provide that the
Fund may not:
1. Invest in interests in oil, gas, or other mineral exploration or
development programs;
2. Invest more than 5% of the value of its total assets in the securities of
any issuer which has a record of less than three years of continuous
operation (including the operation of any predecessor);
3. Participate on a joint or a joint-and-several basis in any trading account
in securities (the aggregation of orders for the sale or purchase of
marketable portfolio securities with other accounts under the management of
the Investment Manager to save brokerage costs, or to average prices among
them, is not deemed to result in a securities trading account); and
4. Purchase or sell futures or purchase related options if, immediately
thereafter, the sum of the amount of "margin" deposits on the Fund's
existing futures positions and premiums paid for related options entered
into for the purpose of seeking to increase total return would exceed 5% of
the value of the Fund's net assets.
The Fund is also subject to other restrictions under the 1940 Act; however, the
registration of the Company under the 1940 Act does not involve any supervision
by any federal or other agency of the Company's management or investment
practices or policies, other than incident to occasional or periodic compliance
examinations conducted by the SEC staff.
-----------------------------------
EXECUTION OF PORTFOLIO TRANSACTIONS
-----------------------------------
The Investment Manager, subject to the overall supervision of the Company's
Board of Directors, makes the Fund's investment decisions and selects the broker
or dealer to be used in each specific transaction using its best judgment to
choose the broker or dealer most capable of providing the services necessary to
obtain the best execution of that transaction. In seeking the best execution of
a transaction, the Investment Manager evaluates a wide range of criteria
including any or all of the following: the broker's commission rate, promptness,
reliability and quality of executions, trading expertise, positioning and
distribution capabilities, back-office efficiency, ability to handle difficult
trades, knowledge of other buyers and sellers, confidentiality, capital strength
and financial stability, and prior performance in serving the Investment Manager
and its clients and other factors affecting the overall benefit to be received
in the transaction. When circumstances relating to a proposed transaction
indicate that a particular broker is in a position to obtain the best execution,
the order is placed with that broker. This may or may not be a broker that has
provided investment information and research services to the Investment Manager.
Such investment information may include, among other things, a wide variety of
written reports or other data on the individual companies and industries; data
and reports on general market or economic conditions; information concerning
pertinent federal and state legislative and regulatory developments and other
developments that could affect the value of actual or potential investments;
companies in which the Investment Manager has invested or may consider
investing; attendance at meetings with corporate management personnel, industry
experts, economists, government personnel, and other financial analysts;
comparative issuer performance and evaluation and technical measurement
services; subscription to publications that provide investment-related
information; accounting and tax law interpretations; availability of economic
advice; quotation equipment and services; execution measurement services;
market-related and survey data concerning the products and services of an issuer
and its competitors or concerning a
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particular industry that are used in reports prepared by the Investment
Manager to enhance its ability to analyze an issuer's financial condition and
prospects; and other services provided by recognized experts on investment
matters of particular interest to the Investment Manager. In addition, the
foregoing services may include the use of, or be delivered by, computer
systems whose hardware and/or software components may be provided to the
Investment Manager as part of the services. In any case in which information
and other services can be used for both research and non-research purposes,
the Investment Manager makes an appropriate allocation of those uses and pays
directly for that portion of the services to be used for non-research
purposes.
Subject to the requirement of seeking the best execution, the Investment Manager
may, in circumstances in which two or more brokers are in a position to offer
comparable execution, give preference to a broker or dealer that has provided
investment information to the Investment Manager. In so doing, the Investment
Manager may effect securities transactions which cause the Fund to pay an amount
of commission in excess of the amount of commission another broker would have
charged. In electing such broker or dealer, the Investment Manager will make a
good faith determination that the amount of commission is reasonable in relation
to the value of the brokerage services and research and investment information
received, viewed in terms of either the specific transaction or the Investment
Manager's overall responsibility to the accounts for which the Investment
Manager exercises investment discretion. The Investment Manager continually
evaluates all commissions paid in order to ensure that the commissions represent
reasonable compensation for the brokerage and research services provided by such
brokers. Such investment information as is received from brokers or dealers may
be used by the Investment Manager in servicing all of its clients (including the
Fund) and it is recognized that the Fund may be charged commission paid to a
broker or dealer who supplied research services not utilized by the Fund.
However, the Investment Manager expects that the Fund will benefit overall by
such practice because it is receiving the benefit of research services and the
execution of such transactions not otherwise available to it without the
allocation of transactions based on the recognition of such research services.
Subject to the requirement of seeking the best execution, the Investment Manager
may also place orders with brokerage firms that have sold shares of the Fund.
The Investment Manager has made and will make no commitments to place orders
with any particular broker or group of brokers. It is anticipated that a
substantial portion of all brokerage commissions will be paid to brokers who
supply investment information to the Investment Manager.
The Fund may in some instances invest in foreign and/or U.S. securities that
are not listed on a national securities exchange but are traded in the
over-the-counter market. The Fund may also purchase listed securities through
the third market or fourth market. When transactions are executed in the
over-the-counter market or the third or fourth market, the Investment Manager
will seek to deal with the counterparty that the Investment Manager believes
can provide the best execution, whether or not that counterparty is the
primary market maker for that security.
As noted below, the Investment Manager is a wholly owned subsidiary of Dresdner
Bank AG ("Dresdner"). Dresdner Kleinwort Benson North America LLC ("Dresdner
Kleinwort Benson") and other Dresdner subsidiaries may be broker-dealers
(collectively, the "Dresdner Affiliates"). The Investment Manager believes that
it is in the best interests of the Fund to have the ability to execute brokerage
transactions, when appropriate, through the Dresdner Affiliates. Accordingly,
the Investment Manager intends to execute brokerage transactions on behalf of
the Fund through the Dresdner Affiliates, when appropriate and to the extent
consistent with applicable laws and regulations, including federal banking laws.
In all such cases, the Dresdner Affiliates will act as agent for the Fund, and
the Investment Manager will not enter into any transaction on behalf of the Fund
in which a Dresdner Affiliate is acting as principal for its own account. In
connection with such agency transactions, the Dresdner Affiliates will receive
compensation in the form of a brokerage commission separate from the Investment
Manager's management fee. It is the Investment Manager's policy that such
commissions be reasonable and fair when compared to the commissions received by
other brokers in connection with comparable transactions involving similar
securities and that the commissions paid to a Dresdner Affiliate be no higher
than the commissions paid to that broker by any other similar customer of that
broker who receives brokerage and research services that are similar in scope
and quality to those received by the Fund.
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The Investment Manager performs investment management and advisory services for
various clients, including other registered investment companies, and pension,
profit-sharing and other employee benefit plans, as well as individuals. In many
cases, portfolio transactions for the Fund may be executed in an aggregated
transaction as part of concurrent authorizations to purchase or sell the same
security for numerous accounts served by the Investment Manager, some of which
accounts may have investment objectives similar to those of the Fund. The
objective of aggregated transactions is to obtain favorable execution and/or
lower brokerage commissions, although there is no certainty that such objective
will be achieved. Although executing portfolio transactions in an aggregated
transaction potentially could be either advantageous or disadvantageous to any
one or more particular accounts, aggregated transactions in which the Fund
participates will be effected only when the Investment Manager believes that to
do so will be in the best interest of the Fund, and the Investment Manager is
not obligated to aggregate orders into larger transactions. These orders
generally will be averaged as to price. When such aggregated transactions occur,
the objective will be to allocate the executions in a manner which is deemed
fair and equitable to each of the accounts involved over time. In making such
allocation decisions, the Investment Manager will use its business judgment and
will consider, among other things, any or all of the following: each client's
investment objectives, guidelines, and restrictions, the size of each client's
order, the amount of investment funds available in each client's account, the
amount already committed by each client to that or similar investments, and the
structure of each client's portfolio. Although the Investment Manager will use
its best efforts to be fair and equitable to all clients, including the Fund,
there can be no assurance that any investment will be proportionately allocated
among clients according to any particular or predetermined standard or criteria.
-----------------------------------
DIRECTORS AND OFFICERS
-----------------------------------
The names and addresses of the directors and officers of the Company and their
principal occupations and certain other affiliations during the past five years
are given below. Unless otherwise specified, the address of each of the
following persons is Four Embarcadero Center, Suite 3000, San Francisco,
California 94111.
DEWITT F. BOWMAN, Chairman and Director. Mr. Bowman is a Principal of Pension
Investment Consulting, with which he has been associated since February 1994.
From February 1989 to January 1994 he was Chief Investment Officer for
California Public Employees Retirement System, a public pension fund. He serves
as a director of RREEF America REIT, Inc., the Wilshire Target Funds, and a
trustee of Brandes Investment Trust and Pacific Gas and Electric Nuclear
Decommissioning Trust. He also serves as a director of Dresdner RCM Capital
Funds, Inc. ("Capital Funds").
PAMELA A. FARR, Director. Ms. Farr is a partner in Best & Co. LLC - a
manufacturer and retailer of children's clothing and accessories. From 1991
to 1994, she was President of Banyan Homes, Inc., a real estate development
and construction firm; for eight years she was a management consultant for
McKinsey & Company, where she served a variety of Fortune 500 companies in
all aspects of strategic management and organizational structure. She also
serves as a director of Capital Funds.
FRANK P. GREENE, Director. Mr. Greene is a partner and portfolio manager of Wood
Island Associates, Inc., a registered investment adviser, with which he has been
associated since August 1991. From November 1987 to August 1991, he was a Senior
Vice President and Portfolio Manager of Siebel Capital Management, Inc., a
registered investment adviser. He also serves as a director of Capital Funds.
GEORGE G.C. PARKER, Director. Mr. Parker is Associate Dean for Academic Affairs,
and Director of the MBA Program and Dean Witter Professor of Finance at the
Graduate School of Business at Stanford University, with which he has been
associated since 1973. Mr. Parker has served on the Board of Directors of the
California Casualty Group of Insurance Companies since 1977; BB&K Holdings,
Inc., a holding company for financial services companies, since 1980; H. Warshow
& Sons, Inc., a manufacturer of specialty textiles, since 1982; Zurich
20
<PAGE>
Reinsurance Centre, Inc., a large reinsurance underwriter, since 1994; and
Continental Airlines, since 1996. Mr. Parker served on the Board of Directors of
the University National Bank & Trust Company from 1986 to 1995. He also serves
as a director of Capital Funds.
RICHARD W. INGRAM, President, Treasurer and Chief Financial Officer. Mr. Ingram
is Executive Vice President and Director of Client Services and Treasury
Administration of Funds Distributor, Inc., ("FDI"), the ultimate parent of which
is Boston Institutional Group, Inc. From March 1994 to November 1995, Mr. Ingram
was Vice President and Division Manager of First Data Investor Services Group.
From 1989 to 1994, Mr. Ingram was Vice President, Assistant Treasurer and Tax
Director - Mutual Funds of The Boston Company. He is also President, Treasurer
and Chief Financial Officer of Capital Funds; President, Chief Financial Officer
and Assistant Treasurer of RCM Strategic Global Government Fund, Inc. ("RCS");
and an officer of certain investment companies distributed or administered by
FDI. His address is 60 State Street, Suite 1300, Boston, Massachusetts 02109.
ELIZABETH A. KEELEY, Vice President and Assistant Secretary. Ms. Keeley is Vice
President and Senior Counsel of FDI, with which she has been associated since
September 1994. Since September 1995 she has also served as Counsel to Premier
Mutual Fund Services, Inc. Prior to September 1995, she was enrolled at Fordham
University School of Law and received her J.D. in May 1995. Prior to September
1992, Ms. Keeley was an Assistant at the National Association for Public
Interest Law. She is also Vice President and Assistant Secretary of Capital
Funds and RCS, and an officer of certain investment companies advised or
administered by Dreyfus, Waterhouse, Harris, Montgomery and Morgan Guaranty.
Her address is 200 Park Avenue, 45th Floor, New York, New York 10166.
GARY S. MACDONALD, Vice President and Assistant Treasurer. Mr. MacDonald is Vice
President of FDI, with which he has been associated since November 1996. From
September 1992 to November 1996, he was Vice President of BayBanks Investment
Management/BayBanks Financial Services; and from April 1989 to September 1992 he
was an analyst at Wellington Management Company. He is also Vice President and
Assistant Treasurer of Capital Funds and RCS. His address is 60 State Street,
Suite 1300, Boston Massachusetts 02109.
DOUGLAS C. CONROY, Vice President and Assistant Treasurer. Mr. Conroy is
Assistant Vice President and Assistant Department Manager of Treasury Services
and Administration of FDI since April 1997. Prior to April 1997, Mr. Conroy was
Supervisor of Treasury Services and Administration of FDI. From April 1993 to
January 1995, Mr. Conroy was a Senior Fund Accountant for Investors Bank & Trust
Company. From December 1991 to March 1993, Mr. Conroy was employed as a Fund
Accountant at The Boston Company, Inc. He is also Assistant Treasurer of Capital
Funds and an officer of certain investment companies distributed or administered
by FDI. His address is 60 State Street, Suite 1300, Boston, Massachusetts 02109.
KAREN JACOPPO-WOOD, Assistant Secretary. Ms. Jacoppo-Wood is Vice President and
Counsel of FDI, with which she has been associated since January 1996. From June
1994 to January 1996, she was a Manager of SEC Registration for Scudder, Stevens
& Clark, Inc. From 1988 to May 1994, she was Senior Paralegal at The Boston
Company Advisors, Inc. She is also Assistant Secretary of Capital Funds, and an
officer of certain investment companies distributed or administered by
Waterhouse, Harris, Montgomery and Morgan Guaranty. Her address is 60 State
Street, Suite 1300, Boston, Massachusetts 02109.
MARY A. NELSON, Assistant Treasurer. Ms. Nelson is Vice President of Treasury
Administration and Operations for FDI, with which she has been associated since
1994. From 1989 to 1994, she was an Assistant Vice President and Client Manager
for The Boston Company. She is also Assistant Treasurer of Capital Funds and an
officer of certain investment companies distributed or administered by FDI. Her
address is 60 State Street, Suite 1300, Boston, Massachusetts 02109.
It is presently anticipated that regular meetings of the Company's Board of
Directors will be held on a quarterly basis. The Company's Audit Committee,
whose present members are DeWitt F. Bowman and Frank P. Greene, meets with the
Company's independent accountants to exchange views and information and to
assist the full Board in fulfilling its responsibilities relating to corporate
accounting and reporting practices. Each director of the
21
<PAGE>
Company receives a fee of $1,000 per year plus $500 for each Board meeting
attended, and is reimbursed for travel and other expenses incurred in
connection with attending Board meetings.
The following table sets forth the aggregate compensation paid by the Company
for the fiscal year ending December 31, 1996, to the Directors and the aggregate
compensation paid to the Directors for service on the Company's Board and that
of all other funds in the "Company complex" (as defined in Schedule 14A under
the Securities Exchange Act of 1934):
<TABLE>
<CAPTION>
Pension or Total
Retirement Compensation
Benefits Estimate from Company
Accrued Annual and Company
Aggregate as Part of Benefits Complex
Compensation Company Upon Paid to
Name from Company Expenses Retirement Director (1)
- ------------------- -------------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
DeWitt F. Bowman $15,000 None N/A $33,000
Pamela A. Farr (2) $ 9,000 None N/A $27,000
Thomas S. Foley (2) $ 8,000 None N/A $23,000
Frank P. Greene $14,000 None N/A $32,000
George G.C. Parker(2) $ 9,000 None N/A $27,000
</TABLE>
- -------------------------
(1) During the fiscal year ended December 31, 1996, there were seven funds in
the complex.
(2) Elected as a Director on May 28, 1996.
As of December 31, 1996, no Director or officer of the Company was a beneficial
owner of any shares of the outstanding Common Stock of any series of the
Company.
-----------------------------------
THE INVESTMENT MANAGER
-----------------------------------
The Company's Board of Directors has overall responsibility for the operation of
the Fund. Pursuant to such responsibility, the Board has approved various
contracts for various financial organizations to provide, among other things,
day to day management services required by the Fund. The Company, on behalf of
the Fund, has retained as the Fund's Investment Manager Dresdner RCM Global
Investors LLC, a Delaware limited liability company with principal offices at
Four Embarcadero Center, San Francisco, California 94111. The Investment Manager
is actively engaged in providing investment supervisory services to
institutional and individual clients, and is registered under the Investment
Advisers Act of 1940. The Investment Manager was established in April 1996, as
the successor to the business and operations of RCM Capital Management, a
California Limited Partnership, which, with its predecessors, has been in
operation since 1970.
The Investment Manager is a wholly owned subsidiary of Dresdner, an
international banking organization with principal executive offices located at
Gallunsanlage 7, 60041 Frankfurt, Germany. With total consolidated assets as of
December 31, 1996, of DM 561 billion ($388 billion), and approximately 1,600
offices and 45,000 employees in over 60 countries around the world, Dresdner is
the world's fourteenth largest bank. Dresdner provides a full range of banking
services, including traditional lending activities, mortgages, securities,
project finance and leasing, to private customers and financial and
institutional clients. In the United States, Dresdner maintains branches in New
22
<PAGE>
York and Chicago and an agency in Los Angeles. As of the date of this
Prospectus, the members of the Board of Managers of the Investment Manager are
William L. Price (Chairman), Gerhard Eberstadt, Michael J. Apatoff, Joachim
Madler, George N. Fugelsang, Eamonn F. Dolan, Jeffrey S. Rudsten, William S.
Stack, and Kenneth B. Weeman, Jr.
Banking laws and regulations, including the Glass-Steagall Act as presently
interpreted by the Board of Governors of the Federal Reserve System, prohibit
certain banking entities, such as Dresdner, from sponsoring, organizing,
controlling or distributing the shares of a registered investment company
continuously engaged in the issuance of its shares, and prohibit banks generally
from underwriting securities. However, banks and their affiliates generally can
act as adviser to an investment company and can purchase shares of an investment
company as agent for and upon the order of customers. The Investment Manager
believes that it may perform the services contemplated by the investment
management agreement without violating these banking laws or regulations.
However, future changes in legal requirements relating to the permissible
activities of banks and their affiliates, as well as future interpretations of
current requirements, could prevent the Investment Manager from continuing to
perform investment management services for the Company.
Pursuant to an agreement among RCM Limited L.P. ("RCM Limited"), the Investment
Manager, and Dresdner, RCM Limited manages, operates and makes all decisions
regarding the day-to-day business and affairs of the Investment Manager, subject
to the oversight of the Board of Managers. RCM Limited is a California limited
partnership consisting of 37 limited partners and one general partner, RCM
General Corporation, a California corporation ("RCM General"). Twenty-four of
the limited partners of RCM Limited are also principals of the Investment
Manager, and the shareholders of RCM General. As of the date of this Prospectus,
the following persons are limited partners of RCM Limited and shareholders of
RCM General: William L. Price, Michael J. Apatoff, Eamonn F. Dolan, John D.
Leland, Jr., Jeffrey S. Rudsten, William S. Stack, Kenneth B. Weeman, Jr.,
Anthony Ain, Donna L. Avedisian, John L. Bernard, Huachen Chen, Jacqueline M.
Cormier, G. Nicholas Farwell, Joanne L. Howard, Stephen Kim, John A. Kriewall,
Allan C. Martin, Andrew H. Massie, Jr., Melody L. McDonald, Lee N. Price, Walter
C. Price, Jr., Gary B. Sokol, Andrew C. Whitelaw, and Jeffrey J. Wiggins.
The Investment Manager provides the Fund with investment supervisory services
pursuant to an Investment Management Agreement, Power of Attorney and Service
Agreement dated as of December 30, 1997. The Investment Manager manages the
Fund's investments, provides various administrative services, and supervises
the Fund's daily business affairs, subject to the authority of the Board of
Directors. The Investment Manager is also the investment manager for each
series of Dresdner RCM Capital Funds, Inc., an open-end management investment
company consisting of three series, and RCM Strategic Global Government Fund,
Inc. and The Emerging Germany Fund Inc., closed-end management investment
companies. The Investment Manager also acts as sub-adviser to Bergstrom
Capital Corporation, a closed-end management investment company.
The Management Agreement with respect to the Fund was approved by the
stockholders of the Fund as of December 30, 1997, and by the unanimous vote of
the Company's Board of Directors on December 11, 1997, and will continue in
effect until December 30, 1999. The Management Agreement may be renewed from
year-to-year after its initial term, provided that any such renewals have been
specifically approved at least annually by (i) the vote of a majority of the
Company's Board of Directors, including a majority of the Directors who are not
parties to the Management Agreement or interested persons of any such person,
cast in person at a meeting called for the purpose of voting on such approval,
or (ii) the vote of a majority (as defined in the 1940 Act) of the outstanding
voting securities of the Fund and the vote of a majority of the Directors who
are not parties to the contract or interested persons of any such party.
The Fund has, under the Management Agreement, assumed the obligation for payment
of all of its ordinary operating expenses, including: (a) brokerage and
commission expenses, (b) federal, state, or local taxes incurred by, or levied
on, the Fund, (c) interest charges on borrowings, (d) charges and expenses of
the Fund's custodian, (e) investment advisory fees (including fees payable to
the Investment Manager under the Management Agreement), (f) fees pursuant to the
Fund's Rule 12b-1 plan, (g) legal and audit fees, (h) SEC and "Blue Sky"
registration expenses, and (i) compensation, if any, paid to officers and
employees of the Company who are not employees of the
23
<PAGE>
Investment Manager (see DIRECTORS AND OFFICERS). The Investment Manager is
responsible for all of its own expenses in providing services to the Fund.
Expenses attributable to the Fund are charged against the assets of the Fund.
The Investment Manager has voluntarily agreed to limit the Fund's expenses as
described in its Prospectus. In subsequent years, the Fund has agreed to
reimburse the Investment Manager for any such payments to the extent that the
Fund's operating expenses are otherwise below this expense cap. This obligation
will not be recorded on the books of the Fund to the extent that the total
operating expenses of the Fund are at or above the expense cap. However, if the
total operating expenses of the Fund fall below the expense cap, the
reimbursement to the Investment Manager will be accrued by the Fund as a
liability.
The Management Agreement provides that the Investment Manager will not be liable
for any error of judgment or for any loss suffered by the Fund in connection
with the matters to which the Management Agreement relates, except for liability
resulting from willful misfeasance, bad faith or gross negligence in the
performance of its duties or by reason of the Investment Manager's reckless
disregard of its duties and obligations under the Management Agreement. The
Company has agreed to indemnify the Investment Manager against liabilities,
costs and expenses that the Investment Manager may incur in connection with any
action, suit, investigation or other proceeding arising out of or otherwise
based on any action actually or allegedly taken or omitted to be taken by the
Investment Manager in connection with the performance of its duties or
obligations under the Management Agreement or otherwise as investment manager of
the Fund. The Investment Manager is not entitled to indemnification with respect
to any liability to the Fund or its stockholders by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties, or
of its reckless disregard of its duties and obligations under the Management
Agreement.
The Management Agreement is terminable without penalty on 60 days' written
notice by a vote of the majority of the outstanding voting securities of the
Fund which is the subject of the Management Agreement, by a vote of the majority
of the Company's Board of Directors, or by the Investment Manager on 60 days'
written notice and will automatically terminate in the event of its assignment
(as defined in the 1940 Act).
----------------------------------
THE DISTRIBUTOR
----------------------------------
Funds Distributor, Inc., 60 State Street, Suite 1300, Boston, Massachusetts
02109, serves as distributor to the Fund. The Distributor has provided mutual
fund distribution services since 1976, and is a subsidiary of Boston
Institutional Group, Inc., which provides distribution and other related
services with respect to investment products.
DISTRIBUTION AGREEMENT
Pursuant to a Distribution Agreement with the Company, the Distributor has
agreed to use its best efforts to effect sales of shares of the Fund, but is not
obligated to sell any specified number of shares. The Distribution Agreement
contains provisions with respect to renewal and termination similar to those in
the Fund's Management Agreement discussed above. Pursuant to the Distribution
Agreement, the Company has agreed to indemnify the Distributor to the extent
permitted by applicable law against certain liabilities under the Securities Act
of 1933.
Pursuant to an Agreement among the Manager, the Company, Capital Funds and the
Distributor, the Distributor has also agreed to provide regulatory, compliance
and related technical services to the Fund; to provide services with regard to
advertising, marketing and promotional activities; and to provide officers to
the Company. The Manager is required to reimburse the Company for any fees and
expenses of the Distributor pursuant to the Agreement.
24
<PAGE>
DISTRIBUTION PLAN
Under a plan of distribution for the Company with respect to the Fund (the
"Distribution Plan") adopted pursuant to Rule 12b-1 under the 1940 Act, the
Distributor incurs the expense of distributing shares of the Fund. The
Distribution Plan provides for reimbursement to the Distributor for the services
it provides, and the costs and expenses it incurs, related to marketing shares
of the Fund. The Distributor is reimbursed for: (a) expenses incurred in
connection with advertising and marketing shares of the Fund, including but not
limited to any advertising by radio, television, newspapers, magazines,
brochures, sales literature, telemarketing or direct mail solicitations; (b)
periodic payments of fees or commissions for distribution assistance made to one
or more securities brokers, dealers or other industry professionals such as
investment advisers, accountants, estate planning firms and the Distributor
itself in respect of the average daily value of shares owned by clients of such
service organizations, and (c) expenses incurred in preparing, printing and
distributing the Fund's prospectus and statement of additional information.
The Distribution Plan continues in effect from year to year with respect to the
Fund, provided that each such continuance is approved at least annually by a
vote of the Board of Directors of the Company, including a majority vote of the
Directors who are not "interested persons" of the Company within the meaning of
the 1940 Act and have no direct or indirect financial interest in the Plan or in
any agreement related to the Plan, cast in person at a meeting called for the
purpose of voting on such continuance. The Distribution Plan may be terminated
with respect to the Fund at any time, without penalty, by the vote of a majority
of the outstanding shares of the Fund. The Distribution Plan may not be amended
to increase materially the amounts to be paid by the Fund for the services
described therein without approval by the shareholders of the Fund, and all
material amendments are required to be approved by the Board of Directors in the
manner described above. The Distribution Plan will automatically terminate in
the event of its assignment.
The Distributor pays broker-dealers and others out of its distribution fees
quarterly trail commissions of up to 0.25% of the average daily net assets
attributable to shares of the Fund held in the accounts of their customers.
Pursuant to the Distribution Plan, the Board of Directors will review at least
quarterly a written report of the distribution expenses incurred on behalf of
shares of the Fund by the Distributor. The report will include an itemization of
the distribution and service expenses and the purposes of such expenditures. In
addition, as long as the Plan remains in effect, the selection and nomination of
Directors who are not "interested persons" of the Company within the meaning of
the 1940 Act will be committed to the Directors who are not interested persons
of the Company.
----------------------------------
NET ASSET VALUE
----------------------------------
For purposes of the computation of the net asset value of each share of the
Fund, 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. In cases where securities are traded on more than one exchange,
the securities are valued on the exchange determined by the Investment Manager
to be the primary market for the securities. If there has been no sale on such
day, 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 Company's Board of Directors 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 such
other comparable sources as the Company's Board of Directors deems appropriate
to reflect their fair market value. Other
25
<PAGE>
portfolio securities held by the Fund 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
Company's Board of Directors deems appropriate to reflect their fair market
value.
Futures contracts and related options are valued at their last sale or
settlement price as of the close of the exchange on which they are traded or, if
no sales are reported, at the mean between the last reported bid and asked
prices. All other assets of the Fund will be valued in such manner as a duly
constituted committee of the Company's Board of Directors in good faith deems
appropriate to reflect their fair market value.
Trading in securities on foreign exchanges and over-the-counter markets is
normally completed at times other than the close of the business day in New
York. In addition, foreign securities and commodities trading may not take place
on all business days in New York, and may occur in various foreign markets on
days which are not business days in New York and on which net asset value is not
calculated. The calculation of net asset value may not take place
contemporaneously with the determination of the prices of portfolio securities
used in such calculation. Events affecting the values of portfolio securities
that occur between the time their prices are determined and the close of the New
York Stock Exchange will not be reflected in the calculation of net asset value
unless the Board of Directors determines that a particular event would
materially affect net asset value, in which case an adjustment will be made.
Assets or liabilities initially expressed in terms of foreign currencies are
translated prior to the next determination of net asset value into U.S. dollars
at the spot exchange rates at 12:00 p.m. Eastern time or at such other rates as
the Investment Manager may determine to be appropriate in computing net asset
value.
Debt obligations with maturities of 60 days or less are valued at amortized
cost. The Fund may use a pricing service approved by the Company's Board of
Directors to value other debt obligations. Prices provided by such a service
represent evaluations of the mean between current bid and asked market prices,
may be determined without exclusive reliance on quoted prices, and may reflect
appropriate factors such as institution-size trading in similar groups of
securities, yield, quality, coupon rate, maturity, type of issue, individual
rating characteristics, indications of value from dealers, and other market
data. Such services may use electronic data processing techniques and/or a
matrix system to determine valuations. The procedures of such services are
reviewed periodically by the officers of the Investment Manager under the
general supervision of the Company's Board of Directors. Short-term investments
are amortized to maturity based on their cost, adjusted for foreign exchange
translation, provided such valuations equal fair market value.
----------------------------------
PURCHASE AND REDEMPTION OF SHARES
----------------------------------
The price paid for purchase and redemption of shares of the Fund is based on the
net asset value per share, which is calculated once daily at the close of
trading (currently 4:00 P.M. New York time) each day the New York Stock Exchange
is open. The New York Stock Exchange is currently closed on weekends and on the
following holidays: New Year's Day, Washington's Birthday, Martin Luther King
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas Day. The offering price is effective for orders received by National
Financial Data Services ("NFDS") prior to the time of determination of net asset
value. Dealers are responsible for promptly transmitting purchase orders to
NFDS. The Company reserves the right in its sole discretion to suspend the
continued offering of the Fund's shares and to reject purchase orders in whole
or in part when such rejection is in the best interests of the Company and the
Fund.
26
<PAGE>
REDEMPTION OF SHARES
Payments will be made wholly in cash unless the Company's Board of Directors
believes that economic conditions exist which would make such a practice
detrimental to the best interests of the Fund. Under such circumstances, payment
of the redemption price could be made either in cash or in portfolio securities
taken at their value used in determining the redemption price (and, to the
extent practicable, representing a pro rata portion of each of the portfolio
securities held by the Fund), or partly in cash and partly in portfolio
securities. Payment for shares redeemed also may be made wholly or partly in the
form of a pro rata portion of each of the portfolio securities held by the Fund
at the request of the redeeming stockholder, if the Company believes that
honoring such request is in the best interests of the Fund. If payment for
shares redeemed were to be made wholly or partly in portfolio securities,
brokerage costs would be incurred by the stockholder in converting the
securities to cash.
----------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAX STATUS
----------------------------------
Each income dividend and capital gains distribution, if any, declared by the
Fund will be reinvested in full and fractional shares based on the net asset
value as determined on the payment date for such distributions, unless the
stockholder or his or her duly authorized agent has elected to receive all such
payments or the dividend or distribution portions thereof in cash. Changes in
the manner in which dividend and distribution payments are made may be requested
by the stockholder or his or her duly authorized agent at any time through
written notice to the Company and will be effective as to any subsequent payment
if such notice is received by the Company prior to the record date used for
determining the stockholders entitled to such payment. Any dividend and
distribution election will remain in effect until the Company is notified by the
stockholder in writing to the contrary.
REGULATED INVESTMENT COMPANY. The Company intends to qualify the Fund as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"). The Fund will be treated as a separate
Corporation for tax purposes and thus the provisions of the Code generally
applicable to regulated investment companies will be applied to the Fund. In
addition, net capital gains, net investment income, and operating expenses will
be determined separately for the Fund. By complying with the applicable
provisions of the Code, the Fund will not be subject to federal income taxes
with respect to net investment income and net realized capital gains distributed
to its stockholders.
To qualify under Subchapter M, the Fund must (i) derive at least 90% of its
gross income from dividends, interest, payments with respect to securities
loans, and gains from the sale or other disposition of stock, securities or
currencies and certain options, futures, forward contracts and foreign
currencies; and (ii) diversify its holdings so that, at the end of each fiscal
quarter, (a) at least 50% of the market value of the Fund's assets is
represented by cash, cash items, U.S. Government securities and other
securities, limited, in respect of any one issuer, to an amount not greater than
5% of the Fund's assets and 10% of the outstanding voting securities of such
issuer, and (b) not more than 25% of the value of its total assets is invested
in the securities of any one issuer (other than U.S. Government securities or
the securities of other regulated investment companies), or in two or more
issuers which the Fund controls and which are engaged in the same or similar
trades or businesses.
In any fiscal year in which the Fund so qualifies and distributes at least
90% of the sum of its investment company taxable income (consisting of net
investment income and the excess of net short-term capital gains over net
long-term capital losses) and its tax-exempt interest income (if any), it
will be taxed only on that portion, if any, of such investment company
taxable income and any net capital gain that it retains. The Fund expects to
distribute all of such income and gains on an annual basis, and thus will
generally avoid any such taxation.
27
<PAGE>
Even though the Fund qualifies as a "regulated investment company," it may be
subject to certain federal excise taxes unless the Fund meets certain additional
distribution requirements. Under the Code, a nondeductible excise tax of 4% is
imposed on the excess of a regulated investment company's "required
distribution" for the calendar year ending within the regulated investment
company's taxable year over the "distributed amount" for such calendar year. The
term "required distribution" means the sum of (i) 98% of ordinary income
(generally net investment income) for the calendar year, (ii) 98% of capital
gain net income (both long-term and short-term) for the one-year period ending
on October 31 (as though the one year period ending on October 31 were the
regulated investment company's taxable year), and (iii) the sum of any untaxed,
undistributed net investment income and net capital gains of the regulated
investment company for prior periods. The term "distributed amount" generally
means the sum of (i) amounts actually distributed by the Fund from its current
year's ordinary income and capital gain net income and (ii) any amount on which
the Fund pays income tax for the year. The Fund intends to meet these
distribution requirements to avoid the excise tax liability.
Stockholders who are subject to federal or state income or franchise taxes will
be required to pay taxes on dividends and capital gains distributions they
receive from the Fund whether paid in additional shares of the Fund or in cash.
To the extent that dividends received by the Fund would qualify for the 70%
dividends-received deduction available to corporations, the Fund must designate
in a written notice to stockholders, within 60 days after the close of the
Fund's taxable year, the amount of the Fund's dividends that would be eligible
for this treatment. In order to qualify for the dividends-received deduction
with respect to common stock, a corporate stockholder must hold the Fund shares
paying the dividends upon which a dividend received deduction is based for at
least 46 days during the 90 day period that begins 45 days before the shares
become ex-dividend with respect to the dividend. Stockholders, such as qualified
employee benefit plans, who are exempt from federal and state taxation generally
would not have to pay income tax on dividend or capital gain distributions.
Prospective tax-exempt investors should consult their own tax advisers with
respect to the tax consequences of an investment in the Fund under federal,
state, and local tax laws.
Investors who purchase shares of the Fund shortly before the record date of a
dividend or capital gain distribution will pay full price for those shares
("buying a dividend") and then receive some portion of the price back as a
taxable dividend or capital gain distribution.
WITHHOLDING. Under the Code, distributions of net investment income by the Fund
to a stockholder who, as to the U.S., is a nonresident alien individual,
nonresident alien fiduciary of a trust or estate, foreign corporation, or
foreign partnership (a "foreign stockholder") will be subject to U.S.
withholding tax (at a rate of 30% or a lower treaty rate, if applicable).
Withholding will not apply if a dividend paid by the Fund to a foreign
stockholder is "effectively connected" with a U.S. trade or business, in which
case the reporting and withholding requirements applicable to U.S. citizens or
domestic corporations will apply. Distributions of net long-term capital gains
to foreign stockholders who are neither U.S. resident aliens nor engaged in a
U.S. trade or business are not subject to tax withholding, but in the case of a
foreign stockholder who is a nonresident alien individual, such distributions
ordinarily will be subject to U.S. federal income tax at a rate of 30% if the
individual is physically present in the U.S. for more than 182 days during the
taxable year.
SECTION 1256 CONTRACTS. Many of the options, futures contracts and forward
contracts entered into by the Fund are "Section 1256 contracts." Any gains or
losses on Section 1256 contracts are generally considered 60% long-term and 40%
short-term capital gains or losses, although certain foreign currency gains and
losses from such contracts may be treated as ordinary income in character.
Section 1256 contracts held by the Fund at the end of each taxable year (and for
purposes of 4% nondeductible excise tax on October 31 or such other dates as
prescribed under the Code) are "marked to market," with the result that
unrealized gains or losses are treated as though they were realized.
STRADDLE RULES. Generally, the hedging transactions and other transactions in
options, futures and forward contracts undertaken by the Fund may result in
"straddles" for U.S. federal income tax purposes. The straddle rules may affect
the character of gains or losses realized by the Fund. In addition, losses
realized by the Fund on positions that are part of a straddle position may be
deferred under the straddle rules, rather than being taken into account for the
28
<PAGE>
taxable year in which these losses are realized. Because limited regulations
implementing the straddle rules have been promulgated, the tax consequences of
hedging transactions and options, futures and forward contracts to the Fund are
not entirely clear.
Hedging transactions may increase the amount of short-term capital gain realized
by the Fund which is taxed as ordinary income when distributed to stockholders.
The Fund may make one or more of the elections available under the Code which
are applicable to straddle positions. If the Fund makes any of the elections,
the amount, character and timing of the recognition of gains or losses from the
affected straddle positions will be determined under the rules that vary
according to elections made. The rules applicable under certain of the elections
operate to accelerate the recognition of gains or losses from the affected
straddle positions. Because the application of the straddle rules may affect the
character of gains or losses, defer losses and/or accelerate the recognition of
gains or losses from the affected straddle positions, the amount which must be
distributed to stockholders, and which will be taxed to stockholders as ordinary
income or long-term capital gain, may be increased or decreased substantially as
compared to a fund that did not engage in such hedging transactions.
SECTION 988 GAINS AND LOSSES. Under the Code, gains or losses attributable to
fluctuations in exchange rates which occur between the time the Fund accrues
interest or other receivables, or accrues expenses or other liabilities,
denominated in a foreign currency and the time the Fund actually collects such
receivables or pays such liabilities, generally are treated as ordinary income
or loss. Similarly, on the disposition of debt securities denominated in foreign
currency and on the disposition of certain future contracts, forward contracts
and options, gains or losses attributable to fluctuation in the value of foreign
currency between the date of acquisition of the debt security or contract and
the date of disposition are also treated as ordinary gain or loss. These gains
or losses, referred to under the Code as "Section 988" gains or losses, may
increase or decrease the amount of the Fund's investment company taxable income
to be distributed to stockholders as ordinary income.
FOREIGN TAXES. The Fund may be required to pay withholding and other taxes
imposed by foreign countries which would reduce the Fund's investment income,
generally at rates from 10% to 40%. Tax conventions between certain countries
and the United States may reduce or eliminate such taxes. If more than 50% of
the value of the Fund's total assets at the close of its taxable year consists
of securities of foreign corporations, the Fund will be eligible to elect to
"pass-through" to the Fund's stockholders the amount of foreign income and
similar taxes paid by the Fund. If this election is made, stockholders generally
subject to tax will be required to include in gross income (in addition to
taxable dividends actually received) their pro rata share of the foreign income
taxes paid by the Fund, and may be entitled either to deduct (as an itemized
deduction) their pro rata share of foreign taxes in computing their taxable
income or to use such amount (subject to limitations) as a foreign tax credit
against their U.S. federal income tax liability. No deduction for foreign taxes
may be claimed by a stockholder who does not itemize deductions. Each
stockholder will be notified within 60 days after the close of the Fund's
taxable year whether the foreign taxes paid by the Fund will be "pass-through"
for that year.
Generally, a credit for foreign taxes is subject to the limitation that it may
not exceed the stockholder's U.S. tax attributable to his or her total foreign
source taxable income. For this purpose, if the pass-through election is made,
the source of the Fund's income will flow through to stockholders of the Fund.
With respect to such election, gains from the sale of securities will be treated
as derived from U.S. sources and certain currency fluctuation gains, including
fluctuation gains from foreign currency denominated debt securities, receivables
and payables will be treated as ordinary income derived from U.S. sources. The
limitation on the foreign tax credit is applied separately to foreign source
passive income, and to certain other types of income. Stockholders may be unable
to claim a credit for the full amount of their proportionate share of the
foreign taxes paid by the Fund. The foreign tax credit is modified for purposes
of the federal alternative minimum tax and can be used to offset only 90% of the
alternative minimum tax imposed on corporations and individuals and foreign
taxes generally are not deductible in computing alternative minimum taxable
income.
The foregoing is a general abbreviated summary of present U.S. federal income
tax laws and regulations applicable to dividends and capital gain distributions
by the Fund. Stockholders are urged to consult their own tax advisers for
29
<PAGE>
more detailed information and for information regarding any foreign, state,
and local tax laws and regulations applicable to dividends and distributions
received.
----------------------------------
INVESTMENT RESULTS
----------------------------------
Average total return ("T") of the Fund will be calculated as follows: an initial
hypothetical investment of $1,000 ("P") is divided by the net asset value of
shares of the Fund as of the first day of the period in order to determine the
initial number of shares purchased. Subsequent dividends and capital gain
distributions by the Fund are reinvested at net asset value on the reinvestment
date determined by the Board of Directors. The sum of the initial shares
purchased and shares acquired through reinvestment is multiplied by the net
asset value per share of the Fund as of the end of the period ("n") to determine
ending redeemable value ("ERV"). The ending value divided by the initial
investment converted to a percentage equals total return. The formula thus used,
as required by the SEC, is:
P(1+T)n = ERV
The resulting percentage indicates the positive or negative investment results
that an investor would have experienced from reinvested dividends and capital
gain distributions and changes in share price during the period.
This formula reflects the following assumptions: (i) all share sales at net
asset value, without a sales load reduction from the $1,000 initial investment;
(ii) reinvestment of dividends and distributions at net asset value on the
reinvestment date determined by the Board; and (iii) complete redemption at the
end of any period illustrated. Total return may be calculated for one year, five
years, ten years, and for other periods, and will typically be updated on a
quarterly basis. The average annual compound rate of return over various periods
may also be computed by utilizing ending values as determined above.
In addition, in order to more completely represent the Fund's performance or
more accurately compare such performance to other measures of investment
return, the Fund also may include in advertisements and stockholder reports
other total return performance data based on time-weighted, monthly-linked
total returns computed on the percentage change of the month end net asset
value of the Fund after allowing for the effect of any cash additions and
withdrawals recorded during the month. Returns may be quoted for the same or
different periods as those for which average total return is quoted. The
Fund's investment results will vary from time-to-time depending upon market
conditions, the composition of the Fund's portfolio, and operating expenses,
so that any investment results reported should not be considered
representative of what an investment in the Fund may earn in any future
period. These factors and possible differences in calculation methods should
be considered when comparing the Fund's investment results with those
published for other investment companies, other investment vehicles and
unmanaged indices. Results also should be considered relative to the risks
associated with the Fund's investment objective and policies.
----------------------------------
DESCRIPTION OF CAPITAL SHARES
----------------------------------
Stockholders are entitled to one vote for each full share held and fractional
votes for fractional shares held. Unless otherwise provided by law or Articles
of Incorporation or Bylaws, the Company generally may take or authorize any
action upon the favorable vote of the holders of more than 50% of the
outstanding shares of the Company.
30
<PAGE>
As of the date of this Statement of Additional Information, there were
300,000 outstanding shares of the Fund. As of that date, the following were
known to the Company to own of record more than 5% of the Fund's capital
stock:
<TABLE>
<CAPTION>
Name and Address of
Beneficial Owner Shares Held % Shares Outstanding
- ---------------- ----------- --------------------
<S> <C> <C>
Clients of Dresdner Bank AG/ 300,000 100%
Investment Management Institutional
Asset Management Division
Jurgen-Ponto-Platz 60301
Frankfurt, Germany
</TABLE>
----------------------------------
ADDITIONAL INFORMATION
----------------------------------
COUNSEL
Certain legal matters in connection with the capital shares offered by the
Prospectus have been passed upon for the Fund by Paul, Hastings, Janofsky &
Walker LLP, 555 South Flower Street, Los Angeles, California 90071. The validity
of the capital stock offered by the Prospectus has been passed upon by Venable,
Baetjer and Howard, LLP, 1800 Mercantile Bank & Trust Building, 2 Hopkins Plaza,
Baltimore, Maryland 21201. Paul, Hastings, Janofsky & Walker LLP has acted and
will continue to act as counsel to the Investment Manager in various matters.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., One Post Office Square, Boston, Massachusetts 02109,
have been appointed as independent auditors for the Company. Coopers & Lybrand
L.L.P. will conduct an annual audit of the Fund, assist in the preparation of
the Fund's federal and state income tax returns, and consult with the Company as
to matters of accounting, regulatory filings, and federal and state income
taxation.
LICENSE AGREEMENT
Under a License Agreement as of December 11, 1997, the Investment Manager has
granted the Company the right to use the "Dresdner RCM" name and has reserved
the right to withdraw its consent to the use of such name by the Company at any
time, or to grant the use of such name to any other company. In addition, the
Company has granted the Investment Manager, under certain conditions, the use of
any other name it might assume in the future, with respect to any other
investment company sponsored by the Investment Manager.
FINANCIAL STATEMENTS
Copies of the Fund's Annual and Semi-Annual Reports to Shareholders will be
available, upon request, by calling to Company at (800) 726-7240, or by writing
the Company at Four Embarcadero Center, San Francisco, California 94111.
REGISTRATION STATEMENT
The Fund's Prospectus and this Statement of Additional Information do not
contain all of the information set forth in the Company's registration statement
and related forms as filed with the SEC, certain portions of which are omitted
in accordance with rules and regulations of the SEC. The registration statement
and related forms may be
31
<PAGE>
inspected at the Public Reference Room of the SEC at Room 1024, 450 5th
Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and copies thereof may
be obtained from the SEC at prescribed rates.
Statements contained in the Prospectus or this Statement of Additional
Information as to the contents of any contract or other document referred to
herein or in the Prospectuses are not necessarily complete, and, in each
instance, reference is made to the copy of such contract or other document filed
as an exhibit to the Company's Registration Statement, each such statement being
qualified in all respects by such reference.
32
<PAGE>
DRESDNER RCM EMERGING MARKETS FUND
Offered by:
DRESDNER RCM EQUITY FUNDS, INC.
Four Embarcadero Center
San Francisco, California 94111
(800) 726-7240
THIS PROSPECTUS RELATES TO DRESDNER RCM EMERGING MARKETS FUND,
WHICH SPECIALIZES IN EQUITY AND EQUITY-RELATED
SECURITIES OF EMERGING MARKET COMPANIES
_______________
DRESDNER RCM EMERGING MARKETS FUND (THE "FUND") is a diversified series of
Dresdner RCM Equity Funds, Inc. (the "Company"), an open-end management
investment company. Shares of the Fund may be purchased at their net asset
value per share next calculated after an order is received in proper form.
(See HOW TO PURCHASE SHARES.)
The Fund's investment objective is to seek appreciation of capital, primarily
through investment in equity and equity-related securities of emerging market
companies. Such investments will be chosen primarily with regard to their
potential for capital appreciation. Current income will be considered only as
part of total investment return and will not be emphasized. "Emerging market
companies" is defined as companies organized or headquartered in any country
that is generally considered to be an emerging or developing country by the
World Bank, the International Finance Corporation, the United Nations or its
authorities, or other recognized financial institutions. (See INVESTMENT
OBJECTIVE AND POLICIES.)
Investments in equity and equity-related securities of emerging market
companies involve significant risks, some of which are not typically
associated with investments in securities of domestic companies and companies
organized or headquartered in developed foreign countries. There can be no
assurance that the Fund will achieve its investment objective. (See
INVESTMENT AND RISK CONSIDERATIONS.)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus sets forth concisely the information about the Fund that
prospective investors should know before investing. Investors should read
this document and retain it for future use. A Statement of Additional
Information for the Fund dated December 31, 1997 has been filed with the
Securities and Exchange Commission and is incorporated by reference into this
Prospectus. The Statement may be obtained, without charge, by writing or
calling the Company at the address or telephone number set forth above.
Shares of the Fund are not deposits, obligations of, or endorsed or
guaranteed in any way by Dresdner Bank AG, or any other depository
institution. Shares of the Fund are not insured by the Federal Deposit
Insurance Corporation, or any other agency, and are subject to investment
risks, including possible loss of principal amount invested.
_______________
The date of this Prospectus is December 31, 1997
<PAGE>
TABLE OF CONTENTS
Page
Prospectus Summary .................................................... 3
Summary of Fees and Expenses .......................................... 4
Investment Objective and Policies ..................................... 6
Investment and Risk Considerations .................................... 11
Organization and Management ........................................... 14
How to Purchase Shares ................................................ 16
Stockholder Services .................................................. 18
Redemption of Shares .................................................. 19
Investment Results .................................................... 20
Dividends, Distributions and Taxes .................................... 21
General Information ................................................... 22
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus in connection
with the offer contained in this Prospectus and, if given or made, such
information or representations must not be relied upon as having been
authorized by the Company. This Prospectus is not an offer to sell or a
solicitation of an offer to buy any of the securities offered hereby in any
jurisdiction or to any person to whom it is unlawful to make such offer or
solicitation.
<PAGE>
DRESDNER RCM EMERGING MARKETS FUND
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the detailed
information appearing elsewhere in this Prospectus:
WHAT IS THE FUND'S OBJECTIVE?
The Fund's investment objective is to seek appreciation of capital, primarily
through investment in equity and equity-related securities of emerging market
companies. Such investments will be chosen primarily with regard to their
potential for capital appreciation. Current income will be considered only as
part of total return and will not be emphasized. There can be no assurance
that the Fund will achieve its investment objective. (See INVESTMENT
OBJECTIVE AND POLICIES.)
WHAT DOES THE FUND INVEST IN?
Under normal market conditions, the Fund will invest at least 80% of the
value of its total assets in emerging market companies. "Emerging market
companies" is defined as companies organized or headquartered in any country
that is generally considered to be an emerging or developing country by the
World Bank, the International Finance Corporation, the United Nations or its
authorities, or other recognized financial institutions. The Fund will not
invest more than 15% of the value of its total assets in securities of
issuers that are organized or headquartered in any one emerging market
country.
SHOULD I INVEST IN THE FUND?
Dresdner RCM believes that emerging market companies can offer attractive
investment opportunities. Such companies have, from time-to-time, offered
greater potential investment returns than those associated with companies in
developed markets of the world. However, the stocks of emerging market
companies can be very volatile, and analyzing individual companies can be
time-intensive. An emerging markets fund offers experienced professional
management to investors who wish to invest in a diversified portfolio of
companies organized or headquartered in developing countries.
The Fund is designed for investors who recognize and are prepared to accept
these risks in exchange for the possibility of higher returns. Consider your
investment goals, your time horizon for achieving them, and your tolerance
for risk. If you seek an aggressive approach to capital growth, and can
accept the above-average level of price fluctuations that the Fund may
experience, the Fund may be an appropriate part of your overall investment
strategy.
WHO OPERATES THE FUND?
The Fund's investment manager is Dresdner RCM Global Investors LLC ("Dresdner
RCM" or the "Investment Manager"), a registered investment adviser with
principal offices in San Francisco, California. Dresdner RCM and its
predecessors have over 25 years of experience in investing in equity
securities. Dresdner RCM currently provides investment management services to
institutional and individual clients and registered investment companies with
aggregate assets in excess of $30 billion.
The custodian of the Fund's assets is Brown Brothers Harriman & Co.
-3-
<PAGE>
WHAT ARE SOME OF THE POTENTIAL INVESTMENT RISKS?
The value of the Fund's shares will fluctuate because of the fluctuations in the
value of securities in the Fund's portfolio. Investment in the Fund is subject
to a variety of risks in addition to those normally associated with investments
in a portfolio of equity securities. (See INVESTMENT AND RISK CONSIDERATIONS.)
Investment in securities of foreign companies involves significant additional
risks, including fluctuations in foreign exchange rates, political or
economic instability in the country of issue, and the possible imposition of
exchange controls or other laws or restrictions. Foreign issuers generally
are not subject to accounting and financial reporting standards or to other
regulatory practices and requirements comparable to those applicable to U.S.
issuers. There is generally less government regulation of securities markets,
exchanges and dealers than in the United States, and the costs associated
with transactions in and custody of securities traded on foreign markets
generally are higher than in the United States. Investment in emerging
markets may involve greater risks than investments in other foreign markets,
as a result of factors such as less developed economic and legal structures,
less stable political systems, and less liquid securities markets.
Investments in equity and equity-related securities of small-sized companies may
involve significant risks, some of which are not typically associated with
investment in securities of larger or more established firms. These firms may
have limited or unprofitable operating histories, limited financial resources
and inexperienced management, and they may face competition from larger or more
established firms that have greater resources. Their securities are frequently
traded in the over-the-counter market or on regional exchanges where low trading
volumes may result in erratic or abrupt price movements.
DOES THE FUND HEDGE ITS INVESTMENTS?
The Fund may use a variety of techniques to hedge its foreign currency exposure.
These currency management techniques include options on currencies, foreign
currency futures contracts, forward foreign currency exchange contracts,
currency options, and currency swaps. Each of these techniques also involves
certain risks. (See INVESTMENT OBJECTIVE AND POLICIES AND INVESTMENT AND RISK
CONSIDERATIONS.)
IS THERE A MINIMUM INVESTMENT?
The minimum initial investment is $5,000, and the minimum subsequent
investment is $250 (other than investments through the Fund's automatic
dividend reinvestment plan). However, for investors purchasing shares through
a broker-dealer or other financial institution having a service agreement
with the Investment Manager and maintaining an omnibus account with the Fund,
the minimum initial investment may vary. Shares of the fund may be purchased
at their net asset value per share next calculated after an order is received
in proper form. (See HOW TO PURCHASE SHARES.)
CAN I REDEEM SHARES AT ANY TIME?
You may redeem your shares at any time at their net asset value, without a
redemption charge. (See REDEMPTION OF SHARES.)
SUMMARY OF FEES AND EXPENSES
WHAT EXPENSES WILL THE FUND INCUR?
The following information is designed to help you understand various costs
and expenses of the Fund that an investor may bear directly or indirectly.
The information is based on the Fund's expected expenses for its first year
of operation, and should not be considered a representation of future
expenses or returns. Actual expenses and returns may be greater or less than
those shown below.
-4-
<PAGE>
Stockholder Transaction Expenses
- --------------------------------
Maximum sales load imposed on purchases None
Sales load imposed on reinvested dividends None
Deferred sales loads None
Redemption fees None
Annual Fund Operating Expenses (as a percentage of average net assets)
- -------------------------------------------------------------------------
Investment management fees 1.00%
Other expenses (after expense reduction*) 0.50%
Total Fund operating expenses (after expense reduction*) 1.50%
Example of Portfolio Expenses 1 Year 3 Years
- ------------------------------ -------- --------
You would pay the following total
expenses on a $1,000 investment,
assuming (1) a 5% annual
return and (2) redemption
at the end of each time period $15 $47
* The Investment Manager has voluntarily agreed, until at least December
31, 1998, to pay the Fund on a quarterly basis the amount, if any, by which
certain ordinary operating expenses of the Fund exceed the annual rate of
1.50% of the average daily net assets of the Fund. In subsequent years, the
Fund will reimburse the Investment Manager for any such payments to the
extent that the Fund's operating expenses are otherwise below this expense
cap. (See ORGANIZATION AND MANAGEMENT.) Other expenses and total Fund
operating expenses for the first year of operation of the Fund, without
expense reduction, are estimated to be 2.96% and 3.96%, respectively, of the
Fund's average daily net assets.
In accordance with applicable regulations of the Securities and Exchange
Commission (the "SEC"), the Example of Portfolio Expenses assumes that (1)
the percentage amounts listed under Annual Fund Operating Expenses will
remain the same in each of the one and three year periods; and (2) all
dividends and distributions will be reinvested by the stockholder. SEC
regulations require that the example be based on a $1,000 investment,
although the minimum initial purchase of Fund shares for some investors may
be higher. (See HOW TO PURCHASE SHARES.)
For more information concerning fees and expenses of the Fund, see
ORGANIZATION AND MANAGEMENT and DIVIDENDS, DISTRIBUTIONS AND TAXES.
-5-
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
WHAT IS THE FUND'S OBJECTIVE?
The Fund's investment objective is to seek appreciation of capital, primarily
through investment in equity and equity-related securities of emerging market
companies. Under normal market conditions, the Fund will invest at least 80%
of the value of its total assets in such securities. The Fund's investments
will be chosen primarily with regard to their potential for capital
appreciation. Current income will be considered only as part of total return
and will not be emphasized. There can be no assurance that the Fund will
achieve its investment objective.
HOW DOES THE FUND SELECT SECURITIES FOR ITS PORTFOLIO?
The Fund intends to invest primarily in equity and equity-related securities
of emerging market companies. The Investment Manager's primary emphasis is on
a "top-down" strategy which seeks to take advantage of market inefficiencies
and the lack of correlation among emerging markets. The Investment Manager
seeks to control risk by maintaining a portfolio which holds securities in a
range of emerging market countries, regions and industries.
There is no limitation on the market capitalization of the companies in which
the Fund will invest. However, as of the date of this Prospectus, the
Investment Manager intends to invest primarily in equity and equity-related
securities of companies with market capitalizations in excess of $100
million.
WHAT ARE EMERGING MARKET COMPANIES?
The term emerging market companies includes any company organized or
headquartered in any country that is generally considered to be an emerging
or developing country by the World Bank, the International Finance
Corporation, the United Nations or its authorities, or other recognized
financial institutions. As of the date of this Prospectus, emerging market
countries is deemed to include, for purposes of this Prospectus, all foreign
countries other than Australia, Austria, Belgium, Canada, Denmark, Finland,
France, Germany, Ireland, Italy, Japan, Luxembourg, The Netherlands, New
Zealand, Norway, Singapore, Spain, Sweden, Switzerland, and the United
Kingdom. The Fund will not invest more than 15% of the value of its total
assets in securities of issuers that are organized or headquartered in any
one emerging market country. In addition, the Fund may invest up to 15% of
its total assets in securities of issuers that are not organized or
headquartered in developing countries, but that have or will have substantial
assets in developing countries or derive or expect to derive a substantial
portion of their total revenues from goods and services produced in, or sales
made in, developing countries.
WHAT ARE EQUITY AND EQUITY-RELATED SECURITIES?
Equity and equity-related securities in which the Fund has the authority to
invest include common stock, preferred stock, convertible preferred stock,
convertible debt obligations, and warrants. In addition, equity and
equity-related securities may include securities sold in the form of
depositary receipts and securities issued by other investment companies. The
Fund currently intends to invest primarily in common stock and depositary
receipts.
The Fund expects that its investments in equity and equity-related securities
will be comprised primarily of securities that are traded on recognized
foreign securities exchanges. However, the Fund also may invest in securities
that are traded only over-the-counter when the Investment Manager believes
that such securities meet the Fund's investment criteria. Subject to the
Fund's restrictions on investment in illiquid securities (see WHAT OTHER
INVESTMENT PRACTICES SHOULD I KNOW ABOUT?), the Fund also may invest in
securities that are not publicly traded.
-6-
<PAGE>
Does The Fund Invest In Debt Securities?
Under normal market conditions, the Fund may invest up to 5% of its total
assets in debt securities which the Investment Manager believes present
attractive opportunities for capital growth. These debt securities will be
issued or guaranteed by an emerging market company or government (including
such government's agencies, instrumentalities, authorities and political
subdivisions), or denominated in the currencies of emerging market countries.
There is no limit on the average maturity of the debt securities in the
Fund's portfolio.
Such debt obligations may be unrated or rated, at the time of purchase, below
investment grade by Standard & Poor's, Moody's Investors Service, or
another recognized international rating organization. Bonds rated below
investment grade are often referred to as "junk bonds," and involve greater
risk of default or price declines than investment grade securities.
During times when the Investment Manager believes a temporary defensive
posture is warranted, including times involving international, political or
economic uncertainty, the Fund may hold all or a substantial portion of its
assets in investment grade debt securities, including debt securities issued
by the U.S. Government, and developed foreign countries (including their
respective agencies, instrumentalities, authorities and political
subdivisions). When the Fund is so invested, it may not be achieving its
investment objective.
DOES THE FUND BUY AND SELL FOREIGN CURRENCY?
The Fund presently expects to purchase or sell foreign currency primarily to
settle foreign securities transactions. However, the Fund may also engage in
currency management transactions to hedge currency exposure related to
securities it owns or that it anticipates purchasing.
Currency management techniques include forward currency exchange contracts,
currency options, futures contracts (and related options), and currency
swaps. A forward currency exchange contract is an obligation to purchase or
sell a specific currency at a future date at a price set at the time of the
contract. Currency options are rights to purchase or sell a specific currency
at a future date at a specified price. Futures contracts are agreements to
take or make delivery of an amount of cash equal to the difference between
the value of the currency at the close of the last trading day of the
contract and the contract price. Currency swaps involve the exchange of
rights to make or receive payments in specified currencies. The Fund may also
cross-hedge currencies, which involves writing or purchasing options or
entering into foreign exchange contracts on one currency to hedge against
changes in exchange rates for a different currency if, in the judgment of the
Investment Manager, there is a pattern of correlation between the two
currencies. In addition, the Fund may hold foreign currency received in
connection with investments in foreign securities when, in the judgment of
the Investment Manager, it would be beneficial to convert such currency into
U.S. dollars at a later date, based on anticipated changes in the relevant
exchange rates.
For purposes of the percentage limitation on the Fund's investments in
issuers in particular emerging markets, the term securities does not include
foreign currencies. This means that the Fund could have more than the
percentages of its total assets indicated above denominated in the currency
of one or more emerging market countries. As a result, gains in a particular
securities market may be affected, either positively or negatively, by
changes in exchange rates.
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WHAT OTHER INVESTMENT PRACTICES SHOULD I KNOW ABOUT?
DEPOSITARY RECEIPTS. The Fund may invest in securities of foreign companies
in the form of American Depositary Receipts ("ADRs"), European Depositary
Receipts ("EDRs"), Global Depositary Receipts ("GDRs"), International
Depositary Receipts ("IDRs"), or other similar instruments representing
securities of foreign companies. ADRs are receipts for ordinary shares of
foreign companies that typically are issued by an American bank or trust
company, and entitle the holder to all dividends and capital gains associated
with the underlying ordinary shares. EDRs, GDRs and IDRs are receipts issued
by a non-U.S. financial institution evidencing a similar arrangement. When it
is possible to invest either in an ADR, EDR, GDR, or IDR, or to invest
directly in the underlying security, the Investment Manager will evaluate
which investment opportunity is preferable, based on price differences,
relative trading volume, anticipated liquidity, differences in currency risk,
and other factors.
Depositary receipts have risks that are similar to those of foreign equity
securities. Therefore, for purposes of the Fund's investment policies and
restrictions, depositary receipts will be treated as foreign equity
securities, based on the country in which the underlying issuer is organized
or headquartered. (See WHAT KINDS OF FOREIGN SECURITIES WILL THE FUND INVEST
IN?)
OTHER INVESTMENT COMPANIES. The laws of some foreign countries may make it
difficult or impossible for the Fund to invest directly in issuers organized
or headquartered in those countries, or may place limitations on such
investments. The only practical means of investing in such issuers may be
through investment in other investment companies that in turn are authorized
to invest in the securities of such issuers. In such cases and in other
appropriate circumstances, and subject to the restrictions referred to above
regarding investments in companies organized or headquartered in any one
country (see WHAT ARE EMERGING MARKET COMPANIES?), the Fund may invest up to
10% of the value of its total assets in other investment companies. However,
the Fund may not invest more than 5% of the value of its total assets in the
securities of any one investment company or acquire more than 3% of the
voting securities of any other investment company.
To the extent that the Fund invests in other investment companies, the Fund
would bear its proportionate share of any management or administration fees
and other expenses paid by investment companies in which it invests. At the
same time, the Fund would continue to pay its own management fees and other
expenses.
WHEN ISSUED, FIRM COMMITMENT AND DELAYED SETTLEMENT TRANSACTIONS. The Fund
may purchase securities on a delayed delivery or "when issued" basis and may
enter into firm commitment agreements (transactions in which the payment
obligation and interest rate are fixed at the time of the transaction but the
settlement is delayed). Delivery and payment for these securities typically
occur 15 to 45 days after the commitment to purchase, but delivery and
payment can be scheduled for shorter or longer periods, based upon the
agreement of the buyer and the seller. No interest accrues to the purchaser
during the period before delivery. The Fund generally does not intend to
enter into these transactions for the purpose of leverage, but may sell the
right to receive delivery of the securities before the settlement date. The
value of the securities at settlement may be more or less than the agreed
upon price.
The Fund will segregate cash, U.S. Government securities or other liquid debt
or equity securities in an amount sufficient to meet its payment obligations
with respect to any such transactions. To the extent that assets are
segregated for this purpose, the Fund's liquidity and the ability of the
Investment Manager to manage its portfolio may be adversely affected.
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BORROWING MONEY. From time-to-time, it may be advantageous for the Fund to
borrow money rather than sell portfolio positions to raise the cash to meet
redemption requests. In order to meet such redemption requests, the Fund may
borrow from banks or enter into reverse repurchase agreements. The Fund also
may borrow up to 5% of the value of its total assets for temporary or
emergency purposes other than to meet redemptions. However, the Fund will not
borrow money for leveraging purposes. The Fund may continue to purchase
securities while borrowings are outstanding, but will not do so when the
Fund's borrowings (including reverse repurchase agreements) exceed 5% of the
value of its total assets. The 1940 Act permits the Fund to borrow only from
banks and only to the extent that the value of its total assets, less its
liabilities other than borrowings, is equal to at least 300% of all
borrowings (including the proposed borrowing), and requires the Fund to take
prompt action to reduce its borrowings if this limit is exceeded. For the
purpose of the 300% borrowing limitation, reverse repurchase transactions are
considered to be borrowings.
A reverse repurchase agreement involves a transaction by which a borrower
(such as the Fund) sells a security to a purchaser (a member bank of the
Federal Reserve System or a broker-dealer deemed creditworthy pursuant to
standards adopted by the Company's Board of Directors) and simultaneously
agrees to repurchase the security at an agreed-upon price on an agreed-upon
date within a number of days (usually not more than seven) from the date of
purchase.
LENDING PORTFOLIO SECURITIES. The Fund is authorized to make loans of
portfolio securities, for the purpose of realizing additional income, to
broker-dealers or other institutional investors deemed creditworthy pursuant
to standards adopted by the Company's Board of Directors. The borrower must
maintain with the Fund's custodian collateral consisting of cash, U.S.
Government securities or other liquid debt or equity securities equal to at
least 100% of the value of the borrowed securities, plus any accrued
interest. The Fund will receive any interest paid on the loaned securities,
and a fee and/or a portion of the interest earned on the collateral, less any
fees and administrative expenses associated with the loan.
ILLIQUID SECURITIES. The Fund may invest up to 15% of the value of its net
assets in illiquid securities. Securities may be considered illiquid if the
Fund cannot reasonably expect to receive approximately the amount at which the
Fund values such securities within seven days. The Investment Manager has the
authority to determine whether specific securities are liquid or illiquid
pursuant to standards adopted by the Company's Board of Directors.
The Fund's investments in illiquid securities may include securities that are
not registered for resale under the Securities Act of 1933 (the "Securities
Act"), and therefore are subject to restrictions on resale. When the Fund
purchases unregistered securities, the Fund may, in appropriate
circumstances, obtain the right to register such securities at the expense of
the issuer. In such cases there may be a lapse of time between the Fund's
decision to sell any such security and the registration of the security
permitting sale. During any such period, the price of the security will be
subject to market fluctuations.
The fact that there are contractual or legal restrictions on resale of
certain securities to the general public or to certain institutions may not
be indicative of the liquidity of such investments. If such securities are
subject to purchase by institutional buyers in accordance with Rule 144A
under the Securities Act, the Investment Manager may determine in particular
cases, pursuant to standards adopted by the Company's Board of Directors,
that such securities are not illiquid securities notwithstanding the legal or
contractual restrictions on their resale. Investing in Rule 144A securities
could have the effect of increasing the Fund's illiquidity to the extent that
qualified institutional buyers become, for a time, uninterested in purchasing
such securities.
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CAN THE FUND'S OBJECTIVE AND POLICIES BE CHANGED?
The Fund's investment objective is a fundamental policy that may not be
changed without a vote of its stockholders. However, except as otherwise
indicated in this Prospectus or the Statement of Additional Information, the
Fund's other investment policies and restrictions are not fundamental and may
be changed without a vote of the stockholders. If there is a change in the
Fund's investment objective or policies, stockholders should consider whether
the Fund remains an appropriate investment in light of their then current
financial position and needs.
The various percentage limitations referred to in this Prospectus apply
immediately after a purchase or initial investment. Except as specifically
indicated to the contrary, the Fund is not required to sell any security in
its portfolio as a result of any change in any applicable percentage
resulting from market fluctuations.
WHAT IS THE FUND'S PORTFOLIO TURNOVER RATE?
The Fund may invest in securities on either a long-term or short-term basis.
The Investment Manager anticipates that the Fund's annual portfolio turnover
rate should not exceed 125%, but the turnover rate will not be a limiting
factor when the Investment Manager deems portfolio changes appropriate.
Securities in the Fund's portfolio will be sold whenever the Investment
Manager believes it is appropriate to do so, regardless of the length of time
that securities have been held, and securities may be purchased or sold for
short-term profits whenever the Investment Manager believes it is appropriate
or desirable to do so. Turnover will be influenced by sound investment
practices, the Fund's investment objective and the need for funds for the
redemption of the Fund's shares.
Because the Investment Manager will purchase and sell securities for the
Fund's portfolio without regard to the length of the holding period for such
securities, it is possible that the Fund's portfolio will have a higher
turnover rate than might be expected for investment companies that invest
substantially all of their funds for long-term capital appreciation or
generation of current income. A high portfolio turnover rate would increase
aggregate brokerage commission expenses and other transaction costs, which
must be borne directly by the Fund and ultimately by the Fund's stockholders,
and may under certain circumstances make it more difficult for the Fund to
qualify as a regulated investment company under the Internal Revenue Code of
1986, as amended (the "Code"). (See DIVIDENDS, DISTRIBUTIONS AND TAXES.)
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INVESTMENT AND RISK CONSIDERATIONS
Investment in the Fund is subject to a variety of risks, including the
following:
RISKS OF EQUITY INVESTMENTS.
Although equity securities have a history of long term growth in value, their
prices fluctuate based on changes in the issuer's financial condition and
prospects and on overall market and economic conditions. The value of the
Fund's net assets can be expected to fluctuate.
RISKS OF INVESTING IN FOREIGN MARKETS.
Investing in foreign equity securities involves significant risks, some of
which are not typically associated with investing in securities of U.S.
issuers. For example, the value of investments in such securities may
fluctuate based on changes in the value of one or more foreign currencies
relative to the U.S. dollar. In addition, information about foreign issuers
may be less readily available than information about domestic issuers.
Foreign issuers generally are not subject to accounting, auditing and
financial reporting standards, or to other regulatory practices and
requirements, comparable to those applicable to U.S. issuers. Furthermore,
with respect to certain foreign countries, the possibility exists of
political instability, expropriation or nationalization of assets,
revaluation of currencies, confiscatory taxation, and limitations on foreign
investment and use or removal of funds or other assets of the Fund (including
the withholding of dividends and limitations on the repatriation of
currencies). The Fund may also experience difficulties or delays in obtaining
or enforcing judgments.
Most foreign securities markets have substantially less volume than U.S.
securities markets, and the securities of many foreign issuers may be less
liquid and more volatile than securities of comparable U.S. issuers. In
addition, there is generally less government regulation of securities markets,
securities exchanges, securities dealers, and listed and unlisted companies in
foreign countries than in the United States. Foreign markets also have
different clearance and settlement procedures, and in certain markets there have
been times when settlements have been unable to keep pace with the volume of
securities transactions, making it difficult to conduct and complete such
transactions. In addition, the costs associated with transactions in securities
traded on foreign markets or of foreign issuers, and the expense of maintaining
custody of such securities with foreign custodians, generally are higher than
the costs associated with transactions in U.S. securities on U.S. markets.
RISKS OF INVESTING IN EMERGING MARKETS.
There are special additional risks associated with investments in emerging
markets. The securities markets of emerging market countries are
substantially smaller, less developed, less liquid, and more volatile than
the securities markets of the United States and developed foreign markets.
Disclosure and regulatory standards in many respects are less stringent than
in the United States and developed foreign markets. There also may be a lower
level of monitoring and regulation of securities markets in emerging market
countries and the activities of investors in such markets, and enforcement of
existing regulations has been extremely limited.
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<PAGE>
Economies in emerging markets generally are heavily dependent upon international
trade, and may be affected adversely by the economic conditions of the countries
in which they trade, as well as by trade barriers, exchange controls, managed
adjustments in relative currency values, and other protectionist measures
imposed or negotiated by the countries with which they trade. In many cases,
governments of emerging market countries continue to exercise a significant
degree of control over the economies of such countries. In addition, certain of
such countries have in the past failed to recognize private property rights and
have at times nationalized or expropriated the assets of private companies.
There is a heightened possibility of confiscatory taxation, imposition of
withholding taxes on interest payments, or other similar developments that could
affect investments in those countries. Unanticipated political or social
developments may also affect the value of the Fund's investments in those
countries.
RISKS OF INVESTING IN SMALL-SIZED COMPANIES.
Investments in small-sized concerns may involve greater risks than
investments in larger companies. The securities of small-sized companies, as
a class, have shown market behavior which has had periods of more favorable
results, and periods of less favorable results, than securities of larger
companies as a class. In addition, small-sized companies in which the Fund
will invest may be unseasoned; that is, these companies may have limited or
unprofitable operating histories, limited financial resources and
inexperienced management. Small-sized companies often face competition from
larger or more established firms that have greater resources. Small-sized
companies may not have as great an ability to raise additional capital, may
have a less diversified product line (making them susceptible to market
pressure), and may have a smaller public market for their shares than larger
companies. Securities of small and unseasoned companies are often less liquid
than securities of larger companies and are frequently traded in the
over-the-counter market or on regional exchanges where low trading volumes
may result in erratic or abrupt price movements. To dispose of these
securities, the Fund may have to sell them over an extended period of time or
below the original purchase price. Investment by the Fund in these small or
unseasoned companies may be regarded as speculative. The Fund has investment
restrictions that prohibit investment of more than 15% of the value of its
net assets in securities that are illiquid. However, as a result of these
factors, the Fund's net assets may be more volatile in price than the net
asset value of a fund investing principally in larger companies.
RISKS OF CURRENCY HEDGING TECHNIQUES.
The Fund's currency management techniques involve risks different than those
that arise in connection with investments in dollar-denominated securities.
To the extent that the Fund is invested in foreign securities while also
maintaining currency positions, it may be exposed to greater combined risk
than would otherwise be the case.
Currency options may be more volatile than the underlying currencies.
Differences between the options and currency markets could result in an
imperfect correlation between these markets, causing a given transaction not
to achieve its objective. In addition, a liquid secondary market for
particular currencies may be absent for a variety of reasons. When trading
options on foreign exchanges, many of the protections afforded to
participants in the United States will not be available. Although the
purchaser of an option cannot lose more than the amount of the premium plus
transaction costs, this entire amount could be lost. Transactions in future
contracts and options on future contracts involve risks similar to those of
currency options. In addition, the potential loss incurred by the Fund in
such transactions is unlimited.
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<PAGE>
The use of currency hedging techniques is a highly specialized activity, and
there can be no assurance as to the success of any hedging operations which
the Fund may implement. Gains and losses in such transactions depend upon the
Investment Manager's ability to predict correctly the direction of currency
exchange rates and other economic factors. Although such operations could
reduce the risk of loss due to a decline in the value of the hedged currency,
they could also limit the potential gain from an increase in the value of the
currency.
WHAT OTHER RISK FACTORS SHOULD I BE AWARE OF?
CONVERTIBLE SECURITIES AND WARRANTS. The value of a convertible security is a
function of both its yield in comparison with the yields of similar
non-convertible securities and the value of the underlying stock. A
convertible security held by the Fund may be subject to redemption at the
option of the issuer at a fixed price, in which event the Fund will be
required to permit the issuer to redeem the security, convert it into the
underlying common stock, or sell it to a third party. Investment in warrants
also involves certain risks, including the possible lack of a liquid market
for resale, potential price fluctuations as a result of speculation or other
factors, and the failure of the price of the underlying security to reach or
have reasonable prospects of reaching the exercise price, in which event the
warrant may expire without being exercised, resulting in a loss of the Fund's
entire investment in the warrant.
CREDIT OF COUNTERPARTIES. A number of transactions in which the Fund may engage
are subject to the risks of default by the other party to the transaction. When
the Fund engages in repurchase, reverse repurchase, when-issued, forward
commitment, delayed settlement and securities lending transactions, it relies on
the other party to consummate the transaction. Failure of the other party to do
so may result in the Fund's incurring a loss or missing an opportunity to obtain
a price believed to be advantageous.
BORROWING. Borrowing also involves special risk considerations. Interest
costs of borrowings may fluctuate with changing market rates of interest and
may partially offset or exceed the return earned on the borrowed funds (or on
the assets that were retained rather than sold to meet the needs for which
funds were borrowed). Under adverse market conditions, the Fund might have to
sell portfolio securities to meet interest or principal payments at a time
when fundamental investment considerations would not favor such sales. To the
extent the Fund enters into reverse repurchase agreements, the Fund is
subject to risks that are similar to those of borrowing.
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ORGANIZATION AND MANAGEMENT
WHO MANAGES THE FUND?
The Company was incorporated in Maryland in September 1995, and is an
open-end management investment company or mutual fund. The Company's Board of
Directors has overall responsibility for the operation of the Fund. Pursuant
to such responsibility, the Board has approved contracts for various
financial organizations to provide, among other things, day-to-day management
services required by the Fund.
WHO IS THE INVESTMENT MANAGER?
The Company, on behalf of the Fund, has retained as the Fund's investment
manager Dresdner RCM Global Investors LLC, a Delaware limited liability
company with principal offices at Four Embarcadero Center, San Francisco,
California 94111. The Investment Manager provides the Fund with services
pursuant to an Investment Management Agreement, Power of Attorney and Service
Agreement (the "Management Agreement") dated as of December 30, 1997. The
Investment Manager supervises management of the Fund's investments, provides
various administrative services, and supervises the Fund's daily business
affairs, subject to the authority of the Board of Directors.
The Investment Manager is actively engaged in providing investment
supervisory services to institutional and individual clients, and is
registered under the Investment Advisers Act of 1940. The Investment Manager
was established in April 1996, as the successor to the business and
operations of RCM Capital Management, a California Limited Partnership,
which, with its predecessors, has been in operation since 1970. The
Investment Manager is a wholly owned subsidiary of Dresdner Bank AG
("Dresdner"), an international banking organization with principal executive
offices located in Frankfurt, Germany. Shares of the Fund are not deposits,
obligations of, or endorsed or guaranteed in any way by Dresdner Bank AG, or
any other depository institution. Shares of the Fund are not insured by the
Federal Deposit Insurance Corporation, or any other agency, and are subject
to investment risks, including possible loss of principal amount invested.
Pursuant to an agreement among RCM Limited L.P. ("RCM Limited"), the
Investment Manager, and Dresdner, RCM Limited manages, operates and makes all
decisions regarding the day-to-day business and affairs of the Investment
Manager, subject to the oversight of Dresdner RCM's Board of Managers. RCM
Limited is a California limited partnership consisting of 37 limited partners
and one general partner, RCM General Corporation, a California corporation
("RCM General"). Twenty-three of the limited partners of RCM Limited are also
principals of the Investment Manager, and the shareholders of RCM General.
The Investment Manager's equity philosophy is to invest in growth stocks --
stocks of companies that are expected to have superior and predictable
growth. Through fundamental research and a series of valuation screens, the
Investment Manager seeks to purchase securities of those companies whose
expected growth in earnings and dividends will provide a risk-adjusted return
in excess of the market.
The Investment Manager has a history of investing in emerging market stocks.
The research team consults regularly with the senior members of the
Investment Manager's portfolio management team concerning the prospects for
emerging markets generally as well as specific emerging market companies.
The equity investment process also incorporates the Investment Manager's own
macroeconomic views of the economy. In addition, the Investment Manager has
access to the proprietary research and information obtained by other Dresdner
investment management subsidiaries doing business under the brand name
Dresdner RCM Global Investors.
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In addition to traditional research activities, the Investment Manager
utilizes research produced by Grassroots Research, an operating group within
the Investment Manager. Grassroots Research prepares research reports based
on field interviews with customers, distributors, and competitors of the
companies that the Investment Manager follows. In the emerging markets area,
Grassroots Research can be a valuable adjunct to the Investment Manager's
traditional research efforts by providing a "second look" at emerging market
companies in which the Fund is considering investing and by checking
marketplace assumptions concerning market demand for particular products and
services.
William S. Stack and Ana Wiechers-Marshall are primarily responsible for the
day-to-day management of the Fund. Mr. Stack is a Principal of the Investment
Manager, with which he has been associated since 1994, and is a member of its
Board of Managers. He has managed domestic and international equity
portfolios since 1976. Ms. Wiechers-Marshall is a Senior Analyst of the
Investment Manager, with which she has been associated since 1995. She has
participated in the management of portfolios since 1997.
WHAT ARE THE FUND'S MANAGEMENT FEES?
For the services rendered by Dresdner RCM under the Management Agreement, the
Fund will pay a monthly fee to Dresdner RCM based on the average daily net
assets of the Fund, at the annualized rate of 1.00% of the value of the Fund's
average daily net assets.
What Other Expenses Does The Fund Pay?
The Fund is responsible for the payment of its operating expenses, including
brokerage and commission expenses; taxes levied on the Fund; interest charges
on borrowings (if any); charges and expenses of the Fund's custodian;
management fees due to the Investment Manager; and all of the Fund's other
ordinary operating expenses (e.g., legal and audit fees, securities
registration expenses, and compensation of non-interested directors of the
Company).
To limit the expenses of the Fund, the Investment Manager has agreed, until
at least December 31, 1998, to pay the Fund on a quarterly basis the
amount, if any, by which the ordinary operating expenses of the Company
attributable to the Fund for the quarter (except interest, taxes and
extraordinary expenses) exceed the annual rate of 1.50% of the value of the
average daily net assets of the Fund. The Fund will reimburse the Investment
Manager for fees deferred or other expenses paid by the Investment Manager
pursuant to this agreement in later years in which operating expenses for the
Fund are otherwise less than such expense limitation. Accordingly, until all
such amounts are reimbursed, the Fund's expenses will be higher, and its
total return will be lower, than would otherwise have been the case. No
interest, carrying or finance charge will be paid by the Fund with respect to
any amounts representing fees deferred or other expenses paid by the
Investment Manager. In addition, the Fund will not be required to repay any
unreimbursed amounts to the Investment Manager upon termination of the
Management Agreement.
HOW DOES THE FUND DECIDE WHICH BROKERS TO USE?
The Investment Manager, subject to the overall supervision of the Company's
Board of Directors, makes the Fund's investment decisions and selects the
broker or dealer to be used in each specific transaction using its judgment
to choose the broker or dealer most capable of providing the services
necessary to obtain the best execution of that transaction. In seeking the
best execution of each transaction, the Investment Manager evaluates a wide
range of criteria. Subject to the requirement of seeking best execution, the
Investment Manager may, in circumstances in which two or more brokers are in
a position to offer comparable execution, give preference to a broker that
has provided investment information to the Investment Manager. In so doing,
the Investment Manager may effect securities transactions which cause the
Fund to pay an amount of commission in excess of the amount of commission
another broker would have charged. Subject to the requirement of seeking the
best available execution, the Investment Manager may also place orders with
brokerage firms that have sold shares of the Fund.
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The Fund may in some instances invest in securities that are not listed on a
national securities exchange but are traded in the over-the-counter market.
The Fund may also purchase listed securities through the third market
(over-the-counter trades of exchange-listed securities) or fourth market
(direct trades of securities between institutional investors without the
intermediation of a broker-dealer). When transactions are executed in the
over-the-counter market or the third or fourth market, the Investment Manager
will seek to deal with the counterparty that the Investment Manager believes
can provide the best execution, whether or not that counterparty is the
primary market maker for that security.
When appropriate and to the extent consistent with applicable laws and
regulations, the Fund may execute brokerage transactions through Dresdner
North America LLC, a wholly owned subsidiary of Dresdner, or other
broker-dealer subsidiaries or affiliates of Dresdner.
WHO IS THE FUND'S DISTRIBUTOR?
Funds Distributor, Inc. (the "Distributor"), whose principal place of
business is 60 State Street, Suite 1300, Boston, Massachusetts 02109, acts as
distributor of shares of the Fund. The Distributor is engaged in the business
of providing mutual fund distribution services to registered investment
companies, and is an indirect wholly owned subsidiary of Boston Institutional
Group, Inc., which is not affiliated with the Investment Manager or Dresdner.
WHO IS THE FUND'S CUSTODIAN AND TRANSFER AGENT?
State Street Bank and Trust Company acts as the Fund's transfer agent,
redemption agent and dividend paying agent (the "Transfer Agent"). The
Transfer Agent's principal business address is 1776 Heritage Drive, North
Quincy, Massachusetts 02171.
Brown Brothers Harriman & Co. Acts as the Fund's Custodian (the
"Custodian"). The Custodian's principal business address is 40 Water Street,
Boston, Massachusetts 02109.
HOW TO PURCHASE SHARES
WHAT IS THE OFFERING PRICE FOR SHARES OF THE FUND?
Shares of the Fund are offered on a continuous basis at the offering price
next determined after receipt of an order in proper form. The offering price
is the net asset value per share. The minimum initial investment is $5,000,
and the minimum subsequent investment is $250 (other than investments through
the Fund's automatic dividend reinvestment plan). However, for investors
purchasing shares through a broker-dealer or other financial institution
having a service agreement with the Investment Manager and maintaining an
omnibus account with the Fund, the minimum initial investment may vary. (See
HOW TO PURCHASE SHARES AND STOCKHOLDER SERVICES.)
HOW CAN I PURCHASE SHARES OF THE FUND?
Investors or their duly authorized agents may purchase shares of the Fund by
sending a signed, completed subscription form to Dresdner RCM Equity Funds,
Inc., P.O. Box 419927, Kansas City, Missouri 64141-6927, and paying for the
shares as described below. Shares may also be purchased through certain
brokers which have entered into a selling group agreement with the
Distributor. Brokers may charge a fee for their services at the time of
purchase or redemption. Subscription forms can be obtained from the Company.
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Orders for shares received prior to the close of regular trading on the New
York Stock Exchange on each day the New York Stock Exchange is open for
trading will be priced at the net asset value (see HOW ARE SHARES PRICED?)
computed as of the close of regular trading on the New York Stock Exchange.
The Company reserves the right to reject any subscription at its sole
discretion. Orders received after the close of regular trading on the New
York Stock Exchange, or on any day on which the New York Stock Exchange is
not open for trading, will be priced at the close of regular trading on the
New York Stock Exchange on the next succeeding day on which the New York
Stock Exchange is open for trading.
Upon receipt of the order in proper form, the Transfer Agent will open a
stockholder account in accordance with the investor's registration
instructions. A confirmation statement reflecting the current transaction
will be forwarded to the investor.
WHERE SHOULD I SEND MY SUBSCRIPTION PAYMENT?
Payment for shares purchased should be made by check or money order, made
payable to Dresdner RCM Emerging Markets Fund. Checks should be bank or
certified checks. The Company, at its option, may accept a check that is not
a bank or certified check; however, third party checks will not be accepted.
Payments should be sent to:
Dresdner RCM Equity Funds, Inc.
P.O. Box 419927
Kansas City, Missouri 64141-6927
Attn: Dresdner RCM Emerging Markets Fund
Account 684
Investors may also make initial or subsequent investments by electronic
transfer of funds or wire transfer of federal funds to the Company. Before
transferring or wiring funds, an investor must first telephone the Company at
(800) 726-7240 for instructions. On the telephone, the following information
will be requested: name of authorized person; stockholder account number (if
such account number is in existence); name of Fund; amount being transferred
or wired; and transferring or wiring bank name.
Investors may be charged a fee if they effect transactions through a broker
or agent. Your dealer is responsible for forwarding payment promptly. The
Company reserves the right to cancel any purchase order for which payment has
not been received by the third business day following the investment.
The Company will not issue share certificates of the Fund. Confirmation
statements showing transactions in the stockholder's account and a summary of
the status of the account serve as evidence of ownership of shares of the Fund.
CAN I PAY FOR SHARES WITH INVESTMENT SECURITIES?
In its discretion, the Company may accept securities of equal value instead
of cash in payment of all or part of the subscription price for the Fund's
shares. Any such securities (i) will be valued at the close of the New
York Stock Exchange composite tape on the day of acceptance of the
subscription in accordance with the method of valuing the Fund's portfolio
described under HOW ARE SHARES PRICED? below; (ii) will have a tax basis
to the Fund equal to such value; (iii) must not be "restricted
securities"; and (iv) must be permitted to be purchased in accordance with
the Fund's investment objective and policies set forth in this Prospectus and
must be securities that the Fund would be willing to purchase at that time.
Prospective stockholders considering this method of payment should contact
the Company in advance to discuss the securities in question and the
documentation necessary to complete the transaction.
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HOW ARE SHARES PRICED?
The net asset value of each share of the Fund on which the subscription and
redemption prices are based is determined by the sum of the market value of
the securities and other assets owned by the Fund less its liabilities,
computed pursuant to standards adopted by the Company's Board of Directors.
The net asset value of a share is the quotient obtained by dividing the net
assets of the Fund (i.e., the value of the assets of the Fund less its
liabilities, including expenses payable or accrued but excluding capital
stock and surplus) by the total number of shares of the Fund outstanding. The
net asset value of the Fund's shares will be calculated as of the close of
regular trading on the New York Stock Exchange, currently 4:00 p.m. Eastern
Time, on each day that the New York Stock Exchange is open for trading.
STOCKHOLDER SERVICES
WHAT SERVICES ARE PROVIDED TO STOCKHOLDERS?
AUTOMATIC REINVESTMENT. Each income dividend and capital gains distribution,
if any, declared by the Fund will be reinvested in full and fractional shares
based on the net asset value as determined on the payment date for such
distributions, unless the stockholder or his or her duly authorized agent has
elected to receive all such payments or the dividend or distribution portions
thereof in cash. Changes in the manner in which dividend and distribution
payments are made may be requested by the stockholder or his or her duly
authorized agent at any time through written notice to the Company and will
be effective as to any subsequent payment if such notice is received by the
Company prior to the record date used for determining the stockholders
entitled to such payment. Any dividend and distribution election will remain
in effect until the Company is notified by the stockholder in writing to the
contrary.
EXCHANGE PRIVILEGE. You may exchange shares of the Fund into shares of any
other series of the Company, by contacting the Transfer Agent. Before
effecting an exchange, you should obtain the currently effective prospectus
of the series into which the exchange is to be made. Exchange purchases are
subject to the minimum investment requirements of the series purchased. An
exchange will be treated as a redemption and purchase for tax purposes.
Shares will be exchanged at the net asset value per share of the Fund, and
the series into which the exchange is to be made, plus a sales charge if
applicable, next determined after receipt by the Transfer Agent of (i) a
written request for exchange, signed by each registered owner or his or her
duly authorized agent exactly as the shares are registered, which clearly
identifies the exact names in which the account is registered, the account
number and the number of shares or the dollar amount to be exchanged; and
(ii) stock certificates for any shares to be exchanged which are held by
the stockholder. Exchanges will not become effective until all documents in
the form required have been received by the Transfer Agent. A stockholder in
doubt as to what documents are required should contact the Transfer Agent.
ACCOUNT STATEMENTS. Your account is opened in accordance with your
registration instructions. Transactions in the account, such as additional
investments and dividend reinvestments, will be reflected on regular
confirmation statements from the Company.
REPORTS TO STOCKHOLDERS. The fiscal year of the Fund ends on December 31
of each year. The Fund will issue to its stockholders semi-annual and annual
reports; each annual report will contain a schedule of the Fund's portfolio
securities, audited annual financial statements, and information regarding
purchases and sales of securities during the period covered by the report as
well as information concerning the Fund's performance in accordance with
rules promulgated by the SEC. In addition, stockholders will receive
quarterly statements of the status of their accounts reflecting all
transactions having taken place within that quarter. The federal income tax
status of stockholders' distributions will also be reported to stockholders
after the end of each fiscal year.
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STOCKHOLDER INQUIRIES. Stockholder inquiries should be addressed to the
Company at the address or telephone number on the front page of this
Prospectus.
REDEMPTION OF SHARES
HOW DO I REDEEM MY SHARES?
Subject only to the limitations described below, the Company will redeem the
shares of the Fund tendered to it, as described below, at a redemption price
equal to the net asset value per share as next computed following the receipt
of all necessary redemption documents. Because the net asset value of the
Fund's shares will fluctuate as a result of changes in the market value of
securities owned, the amount a stockholder receives upon redemption may be
more or less than the amount paid for those shares.
Redemption payments will be made wholly in cash unless the Company's Board of
Directors believes that unusual conditions exist which would make such a
practice detrimental to the best interests of the Fund. Under such
circumstances, payment of the redemption price could be made in whole or in
part in portfolio securities.
Stockholders may be charged a fee if they effect transactions through a
broker or agent.
WHEN WILL I RECEIVE MY REDEMPTION PAYMENT?
Payment for Shares. Payment for shares redeemed will be made within seven
days after receipt by the Company of: (i) a written request for
redemption, signed by each registered owner or his or her duly authorized
agent exactly as the shares are registered, which clearly identifies the
exact names in which the account is registered, the account number and the
number of shares or the dollar amount to be redeemed; (ii) stock
certificates for any shares to be redeemed which are held by the stockholder;
and (iii) the additional documents required for redemptions by
corporations, executors, administrators, trustees and guardians. Redemptions
will not become effective until all documents in the form required have been
received by the Company. A stockholder in doubt as to what documents are
required should contact the Company.
If the Company is requested to redeem shares for which it has not yet
received payment, the Company will delay, or cause to be delayed, the mailing
of a redemption check until such time as it has assured itself that payment
has been collected, which may take up to 15 days. Delays in the receipt of
redemption proceeds may be avoided if shares are purchased through the use of
wire-transferred funds or other methods which do not entail a clearing delay
in the Fund receiving "good funds" for its use.
Upon execution of the redemption order, a confirmation statement will be
forwarded to the stockholder indicating the number of shares sold and the
proceeds thereof. Proceeds of all redemptions will be paid by check or
federal funds wire no later than seven days after execution of the redemption
order except as may be provided below.
SUSPENSION OF REDEMPTIONS. The right of redemption may not be suspended or
the date of payment upon redemption postponed for more than seven days after
shares are tendered for redemption, except for any period during which the
New York Stock Exchange is closed (other than a customary weekend or holiday
closing) or during which the SEC determines that trading thereon is
restricted, or for any period during which an emergency (as determined by the
SEC) exists as a result of which disposal by the Fund of securities it owns
is not reasonably practicable, or as a result of which it is not reasonably
practical for the Fund fairly to determine the value of its net assets, or
for such other periods as the SEC may by order permit for the protection of
stockholders.
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INVESTMENT RESULTS
WILL THE FUND REPORT ITS PERFORMANCE?
The Fund may, from time-to-time, include information on its investment
results and/or comparisons of its investment results to various unmanaged
indices (which generally do not reflect deductions for administrative and
management costs and expenses), indexes prepared by consultants, mutual fund
ranking entities, and financial publications, or results of other mutual
funds or groups of mutual funds, in advertisements or in reports furnished to
present or prospective investors. Investment results will include information
calculated on a total return basis (total return is the change in value of an
investment in the Fund over a given period, assuming reinvestment of any
dividends and capital gain distributions). Such indexes and rankings may
include the following, among others:
1. The IFC Index of Investable Emerging Markets.
2. The MSCI Emerging Markets Free Index.
3. The Standard & Poor's 500 Stock Price Index.
4. Data and mutual fund rankings published or prepared by Lipper Analytical
Services, Inc. and Morningstar, which rank mutual funds by overall
performance, investment objectives, and assets.
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DIVIDENDS, DISTRIBUTIONS AND TAXES
WHAT DIVIDENDS DOES THE FUND PAY?
The Fund intends to distribute to its stockholders all of each fiscal year's
net investment income and net realized capital gains, if any, on the Fund's
investment portfolio. The amount and time of any such distribution must
necessarily depend upon the realization by the Fund of income and capital
gains from investments. Any dividend or distribution received by a
stockholder on shares of the Fund shortly after the purchase of such shares
by the stockholder will have the effect of reducing the net asset value of
such shares by the amount of such dividend or distribution.
WHAT TAXES WILL I PAY ON FUND DIVIDENDS?
Dividends generally are taxable to stockholders at the time they are paid.
However, dividends declared in October, November and December by the
Fund and made payable to stockholders of record in such a month are
treated as paid and are thereby taxable as of December 31, provided that
the Fund pays the dividend no later than January 31 of the following year.
Federal law requires the Company to withhold 31% of income from dividends,
capital gains distributions and/or redemptions that occur in certain stockholder
accounts if the stockholder has not properly furnished a certified correct
Taxpayer Identification Number and has not certified that withholding does not
apply. Amounts withheld are applied to the stockholder's federal tax liability,
and a refund may be obtained from the Internal Revenue Service if withholding
results in an overpayment of taxes. Under the Code, distributions of net
investment income and net long-term capital gains by the Fund to a stockholder
who, as to the United States, is a non-resident alien individual, non-resident
alien fiduciary of a trust or estate, foreign corporation, or foreign
partnership may also be subject to U.S. withholding tax.
WILL THE FUND ALSO PAY TAXES?
The Company intends to qualify the Fund as a "regulated investment company"
under Subchapter M of the Code. By complying with the applicable provisions
of the Code, the Fund will not be subject to federal income taxes with
respect to net investment income and net realized capital gains distributed
to its stockholders.
The Fund may be required to pay withholding and other taxes imposed by
foreign countries, generally at rates from 10% to 40%, which would reduce the
Fund's investment income. Tax conventions between certain countries and the
United States may reduce or eliminate such taxes. The Fund may elect to "pass
through" to its stockholders the amount of foreign income taxes paid by the
Fund, if such election is deemed to be in the best interests of stockholders.
If this election is made, stockholders will be required to include in their
gross income their pro rata share of foreign taxes paid by the Fund, and will
be able to treat such taxes as either an itemized deduction or a foreign
credit against U.S. income taxes (but not both) on their tax returns. If the
Fund does not make that election, stockholders will not be able to deduct
their pro rata share of such taxes in computing their taxable income and will
not be able to take their share of such taxes as a credit against their U.S.
income taxes.
WHEN WILL I RECEIVE TAX INFORMATION?
Each stockholder will receive, at the end of each fiscal year of the Company,
full information on dividends, capital gains distributions and other
reportable amounts with respect to shares of the Fund for tax purposes,
including information such as the portion taxable as capital gains, and the
amount of dividends, if any, eligible for the federal dividends received
deduction for corporate taxpayers.
The foregoing is a general abbreviated summary of present U.S. federal income
tax laws and regulations applicable to dividends and distributions by the
Fund. Investors are urged to consult their own tax advisers for more detailed
information and for information regarding any foreign, state, and local tax
laws and regulations applicable to dividends and distributions received.
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GENERAL INFORMATION
WHAT OTHER INFORMATION SHOULD I KNOW ABOUT THE FUND?
The authorized capital stock of the Company is 1,000,000,000 shares of
capital stock (par value $.0001 per share), of which 50,000,000 shares have
been designated as shares of the Fund. In addition, 50,000,000 shares have
been designated as shares of Dresdner RCM Global Technology Fund, 50,000,000
shares have been designated as shares of Dresdner RCM Global Health Care
Fund, 50,000,000 shares have been designated as shares of Dresdner RCM Global
Small Cap Fund, 50,000,000 shares have been designated as shares of Dresdner
RCM Large Cap Growth Fund, and 50,000,000 shares have been designated as
shares of Dresdner RCM Biotechnology Fund. The Company's Board of Directors
may, in the future, authorize the issuance of other classes of shares of the
Fund (with, for example, different sales loads, or other distribution or
service fee arrangements), or of other series of capital stock of the
Company, representing shares of additional investment portfolios or funds.
All shares of the Company have equal voting rights and will be voted in the
aggregate, and not by series, except where voting by series is required by
law or where the matter involved affects only one series. There are no
conversion or preemptive rights in connection with any shares of the Company.
All shares of the Fund when duly issued will be fully paid and
non-assessable. The rights of the holders of shares of the Fund may not be
modified except by vote of the majority of the outstanding shares of the
Fund. Certificates are not issued. As of December 31, 1997, there were
300,000 shares of the Fund outstanding, which were beneficially owned by
clients of Dresdner Bank AG.
Shares of the Company have non-cumulative voting rights, which means that the
holders of more than 50% of all series of the Company's shares voting for the
election of directors can elect 100% of the directors if they wish to do so.
In such event, the holders of the remaining less than 50% of the shares
voting for the election of directors will not be able to elect any person to
the Board of Directors.
The Company is not required to hold a meeting of stockholders in any year in
which the 1940 Act does not require a stockholder vote on a particular
matter, such as election of directors. The Company will hold a meeting of its
stockholders for the purpose of voting on the question of removal of one or
more directors if requested in writing by the holders of at least 10% of the
Company's outstanding voting securities, and will assist in communicating
with its stockholders as required by Section 16(c) of the 1940 Act.
This Prospectus does not contain all of the information set forth in the
Company's registration statement and related forms as filed with the SEC,
certain portions of which are omitted in accordance with rules and regulations
of the SEC. The registration statements and related forms may be inspected at
the Public Reference Room of the SEC at Room 1024, 450 5th Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549, and copies thereof may be obtained from
the SEC at prescribed rates.
<PAGE>
DRESDNER RCM EQUITY FUNDS, INC.
DRESDNER RCM EMERGING MARKETS FUND
Four Embarcadero Center
San Francisco, California 94111
(800) 726-7240
STATEMENT OF ADDITIONAL INFORMATION
December 31, 1997
Dresdner RCM Emerging Markets Fund (the "Emerging Markets Fund" or "Fund") is
a no-load series of Dresdner RCM Equity Funds, Inc. (the "Company"), an
open-end management investment company. The Fund's investment manager and
administrator is Dresdner RCM Global Investors LLC (the "Investment Manager").
This Statement of Additional Information is not a prospectus, but contains
information in addition to and more detailed than that set forth in the
Fund's Prospectus and should be read in conjunction with such Prospectus. The
Prospectus may be obtained without charge by calling or writing the Company
at the address and phone number above.
TABLE OF CONTENTS
Page
Investment Objective and Policies. . . . . . . . . . . . . . . . . . . 2
Investment and Risk Considerations . . . . . . . . . . . . . . . . . . 9
Investment Restrictions. . . . . . . . . . . . . . . . . . . . . . . . 16
Execution of Portfolio Transactions. . . . . . . . . . . . . . . . . . 18
Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . 20
The Investment Manager . . . . . . . . . . . . . . . . . . . . . . . . 23
The Distributor. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Net Asset Value. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Purchase and Redemption of Shares. . . . . . . . . . . . . . . . . . . 27
Dividends, Distributions and Tax Status. . . . . . . . . . . . . . . . 27
Investment Results . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Description of Capital Shares. . . . . . . . . . . . . . . . . . . . . 32
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . 32
<PAGE>
__________________________________
INVESTMENT OBJECTIVE AND POLICIES
__________________________________
INVESTMENT CRITERIA
In evaluating particular investment opportunities, the Investment Manager may
consider, in addition to the factors described in the Prospectus, the
anticipated economic growth rate, the political outlook, the anticipated
inflation rate, the currency outlook, and the interest rate environment for
the country and the region in which a particular issuer is located. When the
Investment Manager believes it would be appropriate and useful, the
Investment Manager's personnel may visit the issuer's headquarters and plant
sites to assess an issuer's operations and to meet and evaluate its key
executives. The Investment Manager also will consider whether other risks may
be associated with particular securities.
INVESTMENT IN FOREIGN SECURITIES
The Fund will invest in foreign securities. The securities markets of many
countries have at times in the past moved relatively independently of one
another due to different economic, financial, political, and social factors.
In seeking to achieve the Fund's investment objective, the Investment Manager
will allocate the Fund's assets among securities of countries and in currency
denominations where opportunities for meeting the Fund's investment objective
are expected to be the most attractive, subject to the percentage
limitations set forth in the Prospectus. In addition, from time-to-time, the
Fund may strategically adjust its investments among issuers based in various
countries and among the various equity markets of the world in order to take
advantage of diverse global opportunities or capital appreciation, based on
the Investment Manager's evaluation of prevailing trends and developments, as
well as on the Investment Manager's assessment of the potential for capital
appreciation (as compared to the risks) of particular companies, industries,
countries, and regions.
Investment in Emerging Markets. The Fund will invest primarily in securities
of companies organized or headquartered in developing countries with emerging
markets. As a general matter, countries that are not considered to be
developed foreign countries will be deemed to be emerging market countries.
(See Investment in Developed Foreign Countries.) As their economies grow and
their markets grow and mature, some countries that currently may be
characterized as emerging market countries may be deemed to be developed
foreign countries. In the event that the Investment Manager deems a
particular country to have become a developed foreign country, the Fund will
not be required to dispose of any investment in securities issued by that
country's government or by an issuer located in that country.
Securities of issuers organized or headquartered in emerging market countries
may, at times, offer excellent opportunities for capital appreciation.
However, prospective investors should be aware that the markets of emerging
market countries historically have been more volatile than the markets of the
United States and developed foreign countries, and thus the risks of
investing in securities of issuers organized or headquartered in emerging
market countries may be far greater than the risks of investing in developed
foreign markets. See "Investment and Risk Considerations -- Emerging
Market Securities" for a more detailed discussion of the risk factors
associated with investments in emerging market securities. In addition,
movements of emerging market currencies historically have had little
correlation with movements of developed foreign market currencies.
Prospective investors should consider these risk factors carefully before
investing in the Fund. Some emerging market countries have currencies whose
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value is closely linked to the U.S. dollar. Emerging market countries also
may issue debt denominated in U.S. dollars and other currencies.
It is unlikely that the Fund will be invested in equity securities in all
emerging market countries at any time. Moreover, investing in some emerging
markets currently may not be desirable or feasible, due to lack of adequate
custody arrangements for the Fund's assets, overly burdensome repatriation or
similar restrictions, the lack of organized and liquid securities markets,
unacceptable political risks, poor values of investments in those markets
relative to investments in other emerging markets, in developed foreign
markets, or in the United States, or for other reasons.
INVESTMENT IN DEVELOPED FOREIGN COUNTRIES. The Fund may invest in securities
of companies that are organized or headquartered in developed foreign
countries. Although these countries have developed economies, even developed
countries are subject to periods of economic or political instability. For
example, efforts by the member countries of the European Community to
eliminate internal barriers to the free movement of goods, persons, services
and capital have encountered opposition arising from the conflicting
economic, political and cultural interests and traditions of the member
countries and their citizens. The reunification of the former German
Democratic Republic (East Germany) with the Federal Republic of Germany (West
Germany) and other political and social events in Europe have caused
considerable economic and social dislocations. Such events can materially
affect securities markets and have also disrupted the relationship of such
currencies with each other and with the U.S. dollar. Similarly, events in the
Japanese economy and social developments may affect Japanese securities and
currency markets, as well as the relationship of the Japanese Yen to the U.S.
dollar. Future political, economic and social developments can be expected to
produce continuing effects on securities and currency markets.
CURRENCY MANAGEMENT
Securities purchased by the Fund may be denominated in U.S. dollars, foreign
currencies, or multinational currency units such as the European Currency
Unit, and the Fund will incur costs in connection with conversions between
various currencies. Movements in the various securities markets may be offset
by changes in foreign currency exchange rates. Exchange rates frequently move
independently of securities markets in a particular country. As a result,
gains in a particular securities market may be affected, either positively or
negatively, by changes in exchange rates, and the Fund's net currency
positions may expose it to risks independent of its securities positions.
The Fund's ability to engage in currency transactions may be limited by the
requirements of the Internal Revenue Code of 1986, as amended (the "Code")
for qualification as a regulated investment company and the Fund's intention
to continue to qualify as such. (See Dividends, Distributions and Tax
Status.) The Fund's ability and decisions to purchase or sell portfolio
securities also may be affected by the laws or regulations in particular
countries relating to convertibility and repatriation of assets. Because the
shares of the Fund are redeemable in U.S. dollars each day the Fund
determines its net asset value, the Fund must have the ability at all times
to obtain U.S. dollars to the extent necessary to meet redemptions. Under
present conditions, the Investment Manager does not believe that these
considerations will have any significant adverse effect on its portfolio
strategies, although there can be no assurances in this regard.
GENERAL CURRENCY CONSIDERATIONS. Currency exchange rates may fluctuate
significantly over short periods of time causing, along with other factors,
the Fund's net asset value to fluctuate as well. Currency exchange rates
generally are determined by the forces of supply and demand in the foreign
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exchange markets and the relative merits of investments in different
countries, actual or anticipated changes in interest rates and other complex
factors, as seen from an international perspective. Currency exchange rates
also can be affected unpredictably by intervention, or failure to do so, by
U.S. or foreign governments or central banks or by currency controls or
political developments in the United States or abroad. The market in forward
foreign currency exchange contracts, currency swaps and other privately
negotiated currency instruments offers less protection against defaults by
the other party to such instruments than is available for currency
instruments traded on an exchange. To the extent that a substantial portion
of the Fund's total assets, adjusted to reflect the Fund's net position after
giving effect to currency transactions, is denominated or quoted in the
currencies of foreign countries, the Fund will be more susceptible to the
risk of adverse economic and political developments within those countries.
Forward Foreign Currency Exchange Contracts. The Fund may enter into forward
foreign currency exchange contracts in order to protect against anticipated
changes in future foreign currency exchange rates. The Fund may engage in
cross-hedging by using forward contracts in a currency different from that in
which the hedged security is denominated or quoted if the Investment Manager
determines that there is a pattern of correlation between the two currencies.
The Fund may also engage in proxy hedging, by using forward contracts in a
series of foreign currencies for similar purposes.
The Fund may enter into contracts to purchase foreign currencies to protect
against an anticipated rise in the U.S. dollar price of securities it intends
to purchase. The Fund may enter into contracts to sell foreign currencies to
protect against the decline in value of its foreign currency denominated or
quoted portfolio securities, or a decline in the value of anticipated
dividends from such securities, due to a decline in the value of foreign
currencies against the U.S. dollar. Contracts to sell foreign currency could
limit any potential gain which might be realized by the Fund if the value of
the hedged currency increased.
Forward contracts are subject to the risk that the counterparty to such
contract will default on its obligations. Since a forward foreign currency
exchange contract is not guaranteed by an exchange or clearinghouse, a
default on the contract would deprive the Fund of unrealized profits,
transaction costs or the benefits of a currency hedge or force the Fund to
cover its purchase or sale commitments, if any, at the current market price.
The Fund will enter into such transactions only with primary dealers or
others deemed creditworthy by the Investment Manager.
OPTIONS ON FOREIGN CURRENCIES. The Fund may purchase and sell (write) put and
call options on foreign currencies for the purpose of protecting against
declines in the U.S. dollar value of foreign portfolio securities and
anticipated dividends on such securities and against increases in the U.S.
dollar cost of foreign securities to be acquired. The Fund may also use
options on currency to cross-hedge, which involves writing or purchasing
options on one currency to hedge against changes in exchange rates for a
different currency, if the Investment Manager believes there is a pattern of
correlation between the two currencies. Options on foreign currencies to be
written or purchased by the Fund will be traded on U.S. and foreign exchanges.
The writer of a put or call option receives a premium and gives the purchaser
the right to sell (or buy) the currency underlying the option at the exercise
price. The writer has the obligation upon exercise of the option to purchase
(or deliver) the currency during the option period. A writer of an option who
wishes to terminate the obligation may effect a "closing transaction" by
buying an option of the same series as the option previously written. A
writer may not effect a closing purchase transaction after being notified of
the exercise of an option. The writing of an option on foreign currency will
constitute only a partial hedge, up to the amount of the premium received;
the Fund could be required to purchase or sell
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additional foreign currencies at disadvantageous exchange rates, thereby
incurring losses. The purchase of an option on foreign currency may
constitute an effective hedge against exchange rate fluctuations; however, in
the event of exchange rate movements adverse to the Fund's position, the Fund
may forfeit the entire amount of the premium plus related transaction costs.
When the Fund writes a call option on a foreign currency, an amount of cash,
U.S. Government securities, or other liquid debt or equity securities equal
to the market value of its obligations under the option will be deposited by
the Fund in a segregated account with the Fund's custodian to collateralize
the position.
CURRENCY SWAPS. The Fund may enter into currency swaps for hedging purposes.
Currency swaps involve the exchange of rights to make or receive payments in
specified currencies. Since currency swaps are individually negotiated, the
Fund expects to achieve an acceptable degree of correlation between its
portfolio investments and its currency swap positions entered into for
hedging purposes. Currency swaps may involve the delivery of the entire
principal value of one designated currency in exchange for the other
designated currency, or the delivery of the net amount of a party's
obligations over its entitlements. Therefore, the entire principal value of a
currency swap may be subject to the risk that the other party to the swap
will default on its contractual delivery obligations. The Fund will maintain
in a segregated account with the Fund's custodian cash, U.S. Government
securities, or other liquid debt or equity securities equal to the amount of
the Fund's obligations, or the net amount (if any) of the excess of the
Fund's obligations over its entitlements, with respect to swap transactions.
To the extent that such amount of a swap is held in such a segregated account
the Company believes that swaps do not constitute senior securities under the
Investment Company Act of 1940 (the "1940 Act") and, accordingly, will not
treat them as being subject to the Fund's borrowing restriction.
The currency swap market has grown substantially in recent years, with a
large number of banks and investment banking firms acting both as principals
and agents utilizing standard swap documentation, and the Investment Manager
has determined that the currency swap market has become relatively liquid.
However, the use of currency swaps is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. If the Investment Manager is
incorrect in its forecasts of market values and currency exchange rates, the
investment performance of the Fund entering into a currency swap would be
less favorable than it would have been if this investment technique were not
used.
FUTURES TRANSACTIONS
The Fund may purchase and sell currency futures contracts and futures
options, in accordance with the strategies more specifically described below,
to hedge against currency exchange rate fluctuations.
FUTURES CHARACTERISTICS. A futures contract is an agreement between two
parties (buyer and seller) to take or make delivery of an amount of cash
equal to the difference between the value of currency at the close of the
last trading day of the contract and the price at which the currency contract
was originally written. In the case of futures contracts traded on U.S.
exchanges, the exchange itself or an affiliated clearing corporation assumes
the opposite side of each transaction (i.e., as buyer or seller). A futures
contract may be satisfied or closed out by payment of the change in the cash
value of the currency. No physical delivery of the underlying currency is
made.
Unlike when the Fund purchases or sells a security, no price is paid or
received by the Fund upon the purchase or sale of a futures contract.
Initially, the Fund will be required to deposit with the Fund's
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custodian or futures commission merchant (the "FCM") an amount of cash or
U.S. Treasury bills which is referred to as an "initial margin" payment.
The nature of initial margin in futures transactions is different from that
of margin in security transactions in that a futures contract margin does not
involve the borrowing of funds by the Fund to finance the transactions.
Rather, the initial margin is in the nature of a performance bond or good
faith deposit on the contract which is returned to the Fund upon termination
of the futures contract, assuming all contractual obligations have been
satisfied. Futures contracts customarily are purchased and sold with initial
margins that may range upwards from less than 5% of the value of the futures
contract being traded. Subsequent payments, called variation margin, to and
from the FCM, will be made on a daily basis as the price of the underlying
currency varies, making the long and short positions in the futures contract
more or less valuable. This process is known as "marking to the market."
For example, when the Fund has purchased a currency futures contract and the
price of the underlying currency has risen, that position will have increased
in value and the Fund will receive from the FCM a variation margin payment
equal to that increased value. Conversely, when the Fund has purchased a
currency futures contract and the price of the underlying currency has
declined, the position would be less valuable and the Fund would be required
to make a variation margin payment to the FCM. At any time prior to
expiration of the futures contract, the Fund may elect to close the position
by taking an identical opposite position which will operate to terminate the
Fund's position in the futures contract. A final determination of variation
margin is then made, additional cash is required to be paid by or released to
the Fund, and the Fund realizes a loss or a gain.
CHARACTERISTICS OF FUTURES OPTIONS. The Fund may also purchase call options
and put options on currency futures contracts ("futures options"). A
futures option gives the holder the right, in return for the premium paid, to
assume a long position (in the case of a call) or short position (in the case
of a put) in a futures contract at a specified exercise price prior to the
expiration of the option. Upon exercise of a call option, the holder acquires
a long position in the futures contract and the writer is assigned the
opposite short position. In the case of a put option, the opposite is true. A
futures option may be closed out (before exercise or expiration) by an
offsetting purchase or sale of a futures option of the same series.
PURCHASE OF FUTURES. The Investment Manager may purchase a currency futures
contract when it anticipates the subsequent purchase of particular securities
and has the necessary cash, but expects the currency exchange rates then
available in the applicable market to be less favorable than rates that are
currently available.
SALE OF FUTURES. The Investment Manager may sell a currency futures contract
to hedge against an anticipated decline in foreign currency rates that would
adversely affect the dollar value of the Fund's portfolio securities
denominated in such currency, or may sell a currency futures contract in one
currency to hedge against fluctuations in the value of securities denominated
in a different currency if there is an established historical pattern or
correlation between the two currencies.
PURCHASE OF PUT OPTIONS ON FUTURES. The purchase of a put option on a
currency futures contract is analogous to the purchase of a put on a
currency, where an absolute level of protection from price fluctuation is
sought below which no additional economic loss would be incurred by the Fund.
PURCHASE OF CALL OPTIONS ON FUTURES. The purchase of a call option on a
currency futures contract represents a means of obtaining temporary exposure
to favorable currency exchange rate movements with risk limited to the
premium paid for the call option. It is analogous to the purchase of a call
option on a currency, which can be used as a substitute for a position in the
currency itself. Depending on the pricing of the option compared to either
the futures contract upon which it is based, or to the price of the
underlying currency itself, the call option may be less risky, because losses
are limited to the premium
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paid for the call option, when compared to the ownership of the underlying
currency. Like the purchase of a currency futures contract, the Fund would
purchase a call option on a currency futures contract to hedge against an
unfavorable movement in exchange rates.
LIMITATIONS ON PURCHASE AND SALE OF FUTURES AND FUTURES OPTIONS. When
purchasing a futures contract, the Fund will maintain with its custodian
cash, U.S. Government securities, or other liquid debt or equity securities
that, when added to the amounts deposited with its custodian or an FCM as
margin, are equal to the market value of the futures contract. Alternatively,
the Fund may cover its position by purchasing a put option on the same
futures contract with a strike price as high or higher than the price of the
contract held by the Fund. The Fund may not purchase or sell futures
contracts or purchase futures options if, immediately thereafter, more than
30% of the value of its net assets would be hedged. In addition, the Fund may
not purchase or sell futures or purchase futures options if, immediately
thereafter, the sum of the amount of margin deposits on the Fund's existing
futures positions and premiums paid for futures options would exceed 5% of
the market value of the Fund's total assets.
TAX TREATMENT. The extent to which the Fund may engage in futures and futures
option transactions may be limited by the requirements of the Code for
qualification as a regulated investment company and the Fund's intention to
continue to qualify as such. See Dividends, Distributions and Taxes.
REGULATORY MATTERS. The Company has filed a claim of exemption from
registration of the Fund as a commodity pool with the Commodity Futures
Trading Commission (the "CFTC"). The Fund intends to conduct its futures
trading activity in a manner consistent with that exemption. The Investment
Manager is registered with the CFTC as both a Commodity Pool Operator and as
a Commodity Trading Advisor.
DEBT SECURITIES
The Fund may purchase debt obligations, which may be rated below investment
grade by Standard & Poor's, Moody's Investors Service ("Moody's") or
other rating organizations, or may be unrated. The timing of purchase and
sale transactions in debt obligations may result in capital appreciation or
depreciation because the value of debt obligations varies inversely with
prevailing interest rates.
U.S. Government obligations include obligations issued or guaranteed as to
principal and interest by the U.S. Government and its agencies and
instrumentalities, by the right of the issuer to borrow from the U.S.
Treasury, by the discretionary authority of the U.S. Government to purchase
certain obligations of the agency or instrumentality, or only by the credit
of the agency or instrumentality.
PREFERRED STOCKS
The Fund may purchase preferred stocks. Preferred stock, unlike common stock,
offers a stated dividend rate payable from a corporation's earnings. Such
preferred stock dividends may be cumulative or non-cumulative, participating,
or auction rate. If interest rates rise, the fixed dividend on preferred
stocks may be less attractive, causing the price of preferred stocks to
decline. Preferred stock may have mandatory sinking fund provisions, as well
as call/redemption provisions prior to maturity, a negative feature when
interest rates decline. Dividends on some preferred stock may be
"cumulative," requiring all or a portion of prior unpaid dividends to be
paid prior to payment of dividends on the issuer's common stock. Preferred
stock also generally has a preference over common stock on the distribution
of a corporation's assets in the event of liquidation of the corporation, and
may be "participating," which means that it may be entitled to a dividend
exceeding the stated dividend in certain cases. The rights of
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preferred stocks on the distribution of a corporation's assets in the event
of a liquidation are generally subordinate to the rights associated with a
corporation's debt securities.
INVESTMENT IN ILLIQUID SECURITIES
The Fund may purchase illiquid securities. The Investment Manager takes into
account a number of factors in reaching liquidity decisions, including, but
not limited to: the listing of the security on an exchange or national market
system; the frequency of trading in the security; the number of dealers who
publish quotes for the security; the number of dealers who serve as market
makers for the security; the apparent number of other potential purchasers;
and the nature of the security and how trading is effected (e.g., the time
needed to sell the security, how offers are solicited, and the mechanics of
transfer).
CASH-EQUIVALENT INVESTMENTS
Other than as described below under Investment Restrictions, the Fund is not
restricted with regard to the types of cash-equivalent investments it may
make. When the Investment Manager believes that such investments are an
appropriate part of the Fund's overall investment strategy, the Fund may hold
or invest, for investment purposes, a portion of its assets in any of the
following, denominated in U.S. dollars, foreign currencies, or multinational
currency units: cash; short-term U.S. or foreign government securities;
commercial paper rated at least A-2 by Standard & Poor's or P-2 by
Moody's; certificates of deposit or other deposits of banks deemed
creditworthy by the Investment Manager pursuant to standards adopted by the
Company's Board of Directors; time deposits; bankers' acceptances; and
repurchase agreements related to any of the foregoing. In addition, for
temporary defensive purposes under abnormal market or economic conditions,
the Fund may invest up to 100% of its assets in such cash-equivalent
investments.
A certificate of deposit is a short-term obligation of a commercial bank. A
bankers' acceptance is a time draft drawn on a commercial bank by a borrower,
usually in connection with international commercial transactions. A
repurchase agreement involves a transaction by which an investor (such as the
Fund) purchases a security and simultaneously obtains the commitment of the
seller (a member bank of the Federal Reserve System or a securities dealer
deemed creditworthy by the Investment Manager pursuant to standards adopted
by the Company's Board of Directors) to repurchase the security at an
agreed-upon price on an agreed-upon date within a number of days (usually not
more than seven) from the date of Purchase.
DIVERSIFICATION
The Fund is "diversified" within the meaning of the 1940 Act. In order to
qualify as diversified, the Fund must diversify its holdings so that at all
times at least 75% of the value of its total assets is represented by cash
and cash items (including receivables), securities issued or guaranteed as to
principal or interest by the United States or its agencies or
instrumentalities, securities of other investment companies, and other
securities (for this purpose other securities of any one issuer are limited
to an amount not greater than 5% of the value of the total assets of the Fund
and to not more than 10% of the outstanding voting securities of the issuer).
PORTFOLIO TURNOVER
The Fund may invest in securities on either a long-term or short-term basis.
The Fund may invest with the expectation of short-term capital appreciation
if the Investment Manager believes that such action will
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benefit the Fund's stockholders. The Fund also may sell securities that have
been held on a short-term basis if the Investment Manager believes that
circumstances make the sale of such securities advisable. This may result in
a taxable stockholder paying higher income taxes than would be the case with
investment companies emphasizing the realization of long-term capital gains.
Because the Investment Manager will purchase and sell securities for the
Fund's portfolio without regard to the length of the holding period for such
securities, it is possible that the Fund's portfolio will have a higher
turnover rate than might be expected for investment companies that invest
substantially all of their funds for long-term capital appreciation or
generation of current income. Securities in the Fund's portfolio will be sold
whenever the Investment Manager believes it is appropriate to do so,
regardless of the length of time that securities have been held, and
securities may be purchased or sold for short-term profits whenever the
Investment Manager believes it is appropriate or desirable to do so. Turnover
will be influenced by sound investment practices, the Fund's investment
objective, and the need for funds for the redemption of the Fund's shares.
For example, a 125% portfolio turnover rate would occur if the value of
purchases or sales of portfolio securities whichever is less) by the Fund for
a year (excluding purchases of U.S. Treasury issues and securities with a
maturity of one year or less) were equal to 125% of the average monthly
value of the securities held by the Fund during such year. As a result of the
manner in which turnover is measured, a high turnover rate could also occur
during the first year of the Fund's operations, and during periods when the
Fund's assets are growing or shrinking.
INVESTMENT RESTRICTIONS
In making purchases within the foregoing policies, the Fund and the
Investment Manager will be subject to all of the restrictions referred to
under "Investment Restrictions". If a percentage restriction on the
Fund's investment or utilization of assets set forth above or under
"Investment Restrictions" is adhered to at the time the investment is made,
a later change in percentage resulting from changing value or a similar
type of event will not be considered a violation of the Fund's investment
policies or restrictions. The Fund may exchange securities, exercise
conversions or subscription rights, warrants or other rights to purchase
common stock or other equity securities and may hold, except to the extent
limited by the 1940 Act, any such securities so acquired without regard to
the Fund's investment policies and restrictions.
__________________________________
INVESTMENT AND RISK CONSIDERATIONS
__________________________________
INVESTMENTS IN FOREIGN SECURITIES GENERALLY
Investments in foreign equity securities may offer investment opportunities
and potential benefits not available from investments solely in securities of
U.S. issuers. Such benefits may include the opportunity to invest in foreign
issuers that appear, in the opinion of the Investment Manager, to offer
better opportunity for long-term capital appreciation than investments in
securities of U.S. issuers, the opportunity to invest in foreign countries
with economic policies or business cycles different from those of the United
States and the opportunity to reduce fluctuations in portfolio value by
taking advantage of foreign stock markets that do not necessarily move in a
manner parallel to U.S. stock markets.
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At the same time, however, investing in foreign equity securities involves
significant risks, some of which are not typically associated with investing
in securities of U.S. issuers. For example, the value of investments in such
securities may fluctuate based on changes in the value of one or more foreign
currencies relative to the U.S. dollar, and a change in the exchange rate of
one or more foreign currencies could reduce the value of certain portfolio
securities. Currency exchange rates may fluctuate significantly over short
periods of time, and are generally determined by the forces of supply and
demand and other factors beyond the Fund's control. Changes in currency
exchange rates may, in some circumstances, have a greater effect on the
market value of a security than changes in the market price of the security.
To the extent that a substantial portion of the Fund's total assets is
denominated or quoted in the currency of a foreign country, the Fund will be
more susceptible to the risk of adverse economic and political developments
within that country. As discussed above, the Fund may employ certain
investment techniques to hedge its foreign currency exposure; however, such
techniques also entail certain risks.
In addition, information about foreign issuers may be less readily available
than information about domestic issuers. Foreign issuers generally are not
subject to accounting, auditing, and financial reporting standards or to
other regulatory practices and requirements comparable to those applicable to
U.S. issuers. Furthermore, with respect to certain foreign countries, the
possibility exists of expropriation, nationalization, revaluation of
currencies, confiscatory taxation, and limitations on foreign investment and
the use or removal of funds or other assets of the Fund, including the
withholding of dividends and limitations on the repatriation of currencies.
The Fund may also experience difficulties or delays in obtaining or enforcing
judgments. Foreign securities may be subject to foreign government taxes that
could reduce the yield on such securities.
Foreign equity securities may be traded on an exchange in the issuer's
country, an exchange in another country, or over-the-counter in one or more
countries. Most foreign securities markets, including over-the-counter
markets, have substantially less volume than U.S. securities markets, and the
securities of many foreign issuers may be less liquid and more volatile than
securities of comparable U.S. issuers. In addition, there is generally less
government regulation of securities markets, securities exchanges, securities
dealers, and listed and unlisted companies in foreign countries than in the
United States.
Foreign markets also have different clearance and settlement procedures, and
in certain markets there have been times when settlements have been unable to
keep pace with the volume of securities transactions, making it difficult to
conduct and complete such transactions. Inability to dispose of a portfolio
security caused by settlement problems could result either in losses to the
Fund due to subsequent declines in the value of the portfolio security or, if
the Fund has entered into a contract to sell that security, could result in
possible liability of the Fund to the purchaser. Delays in settlement could
adversely affect the Fund's ability to implement its investment strategies
and to achieve its investment objective.
In addition, the costs associated with transactions in securities traded on
foreign markets or of foreign issuers, and the expense of maintaining custody
of such securities with foreign custodians, generally are higher than the
costs associated with transactions in U.S. securities on U.S. markets.
Investments in foreign securities may result in higher expenses due to the
cost of converting foreign currency to U.S. dollars, the payment of fixed
brokerage commissions on foreign exchanges, the expense of maintaining
securities with foreign custodians and the imposition of transfer taxes or
transaction charges associated with foreign exchanges.
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Investment in debt obligations of supranational organizations involves
additional risks. Such organizations' debt obligations generally are not
guaranteed by their member governments, and payment depends on their
financial solvency and/or the willingness and ability of their member
governments to support their obligations. Continued support of a
supranational organization by its government members is subject to a variety
of political, economic and other factors, as well as the financial
performance of the organization.
EMERGING MARKET SECURITIES
There are special risks associated with investments in securities of
companies organized or headquartered in developing countries with emerging
markets that are in addition to the usual risks of investing in securities of
issuers located in developed foreign markets around the world, and investors
in the Fund are strongly advised to consider those risks carefully. The
securities markets of emerging market countries are substantially smaller,
less developed, less liquid, and more volatile than the securities markets of
the United States and developed foreign markets. As a result, the prices of
emerging market securities may increase or decrease much more rapidly and
much more dramatically than the prices of securities of issuers located in
developed foreign markets. Disclosure and regulatory standards in many
respects are less stringent than in the United States and developed foreign
markets. There also may be a lower level of monitoring and regulation of
securities markets in emerging market countries and the activities of
investors in such markets, and enforcement of existing regulations has been
extremely limited.
Many emerging market countries have experienced substantial, and in some
periods extremely high, rates of inflation for many years. Inflation and
rapid fluctuations in inflation rates have had and may continue to have very
negative effects on the economies and securities markets of certain emerging
market countries. Economies in emerging markets generally are heavily
dependent upon international trade and, accordingly, have been and may
continue to be affected adversely by trade barriers, exchange controls,
managed adjustments in relative currency values, and other protectionist
measures imposed or negotiated by the countries with which they trade. These
economies also have been and may continue to be adversely affected by
economic conditions in the countries in which they trade. In addition,
custodial services and other costs related to investment in foreign markets
may be more expensive in emerging markets than in many developed foreign
markets, which could reduce the Fund's investment returns from such
securities.
In many cases, governments of emerging market countries continue to exercise
a significant degree of control over the economies of such countries, and
government actions relative to the economy, as well as economic developments
generally, also may have a major effect on an issuer's prospects. In
addition, certain of such governments have in the past failed to recognize
private property rights and have at times naturalized or expropriated the
assets of private companies. There is also a heightened possibility of
confiscatory taxation, imposition of withholding taxes on interest payments,
or other similar developments that could affect investments in those
countries. As a result, there can be no assurance that adverse political
changes will not cause the Fund to suffer a loss with respect to any of its
holdings. In addition, political and economic structures in many of such
countries may be undergoing significant evolution and rapid development, and
such countries may lack the social, political and economic stability
characteristic of more developed countries. Unanticipated political or social
developments may affect the value of the Fund's investments in those
countries and the availability of additional investments in those countries.
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INVESTMENTS IN SMALLER COMPANIES
Investment by the Fund in the securities of companies with market
capitalizations below $1 billion involves greater risk and the possibility
of greater portfolio price volatility than investing in larger capitalization
companies. For example, smaller capitalization companies may have less
certain growth prospects, and may be more sensitive to changing economic
conditions, than large, more established companies. Moreover, smaller
capitalization companies often face competition from larger or more
established companies that have greater resources. In addition, the smaller
capitalization companies in which the Fund may invest may have limited or
unprofitable operating histories, limited financial resources, and
inexperienced management. Furthermore, securities of such companies are often
less liquid than securities of larger companies, and may be subject to
erratic or abrupt price movements. To dispose of these securities, the Fund
may have to sell them over an extended period of time below the original
purchase price.
DEPOSITARY RECEIPTS
In many respects, the risks associated with investing in depositary receipts
are similar to the risks associated with investing in foreign equity
securities directly. In addition, to the extent that the Fund acquires
depositary receipts through banks that do not have a contractual relationship
with the foreign issuer of the security underlying the depositary receipts to
issue and service depositary receipts, there may be an increased possibility
that the Fund would not become aware of and be able to respond to corporate
actions, such as stock splits or rights offerings, involving the foreign
issuer in a timely manner.
The information available for American Depositary Receipts ("ADRs")
sponsored by the issuers of the underlying securities is subject to the
accounting, auditing, and financial reporting standards of the domestic
market or exchange on which they are traded, which standards generally are
more uniform and more exacting than those to which many non-domestic issuers
may be subject. However, some ADRs are sponsored by persons other than the
issuers of the underlying securities. Issuers of the stock on which such ADRs
are based are not obligated to disclose material information in the United
States. The information that is available concerning the issuers of the
securities underlying European Depositary Receipts ("EDRs"), Global
Depositary Receipts ("GDRs") and International Depositary Receipts
("IDRs") may be less than the information that is available about domestic
issuers, and EDRs, GDRs and IDRs may be traded in markets or on exchanges
that have lesser standards than those applicable to the markets for ADRs.
A depositary receipt will be treated as an illiquid security for purposes of
the Fund's restriction on the purchases of such securities unless the
depositary receipt is convertible into cash by the Fund within seven days.
CONVERTIBLE SECURITIES
Investment in convertible securities involves certain risks. The value of a
convertible security is a function of its "investment value" (determined by
its yield in comparison with the yields of other securities of comparable
maturity and quality that do not have a conversion privilege) and its
"conversion value" (the security's worth, at market value, if converted
into the underlying stock). If the conversion value is low relative to the
investment value, the price of the convertible security will be governed
principally by its yield, and thus may not decline in price to the same
extent as the underlying stock; to the extent the market price of the
underlying common stock approaches or exceeds the conversion price, the price
of the convertible security will be influenced increasingly by its conversion
value. A
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convertible security held by the Fund may be subject to redemption at the
option of the issuer at a price established in the instrument governing the
convertible security, in which event the Fund will be required to permit the
issuer to redeem the security, convert it into the underlying common stock,
or sell it to a third party.
JUNK BOND CONSIDERATIONS.
The Fund may invest up to 5% of its total assets in debt securities rated
below "Baa" by Moody's, below "BBB" by S&P, or below investment grade by
other recognized rating agencies, or in unrated securities determined by the
Investment Manager to be of comparable quality, if the Investment Manager
believes that the financial condition of the issuer or the protection
afforded to the particular securities is stronger than would otherwise be
indicated by such low ratings or the lack thereof. Securities rated below
"Baa" or "BBB" or equivalent ratings, commonly referred to as "junk
bonds," are subject to greater risk of loss of income and principal than
higher-rated bonds and are considered to be predominantly speculative with
respect to the issuer's capacity to pay interest and repay principal, which
may in any case decline during sustained periods of deteriorating economic
conditions or rising interest rates. Junk bonds are also generally considered
to be subject to greater market risk in times of deteriorating economic
conditions, and to wider market and yield fluctuations, than higher-rated
securities. Junk bonds may also be more susceptible to real or perceived
adverse economic and competitive industry conditions than investment grade
securities. The market for such securities may be thinner and less active
than that for higher-rated securities, which can adversely affect the prices
at which these securities can be sold. To the extent that there is no
established secondary market for lower-rated securities, the Fund may
experience difficulty in valuing such securities and, in turn, its assets. In
addition, adverse publicity and investor perceptions about junk bonds,
whether or not based on fundamental analysis, may tend to decrease the market
value and liquidity of such securities.
Legislation has been and could be adopted limiting the use, or tax and other
advantages, of junk bonds which could adversely affect their value. Under the
Financial Institutions Reform, Recovery, and Enforcement Act of 1989, for
example, federally insured savings and loan associations were required to
divest their investments in non-investment grade corporate debt securities by
July 1, 1994. Such legislation could have a material adverse effect on the
market for, and prices of, such securities.
The Investment Manager will try to reduce the risk inherent in the Fund's
investment in such securities through credit analysis, diversification and
attention to current developments and trends in interest rates and economic
conditions. However, there can be no assurance that losses will not occur.
Since the risk of default is higher for lower-rated bonds, the Investment
Manager's research and credit analysis are a correspondingly more important
aspect of its program for managing the Fund's investments in such debt
securities. The Investment Manager will attempt to identify those issuers of
high-yielding securities whose financial condition is adequate to meet future
obligations, or has improved or is expected to improve in the future.
Credit ratings evaluate the safety of principal and interest payments of
securities, not their market value. The rating of an issuer is also heavily
weighted by past developments and does not necessarily reflect probable
future conditions. There is frequently a lag between the time a rating is
assigned and the time it is updated. As credit rating agencies may fail to
timely change credit ratings of securities to reflect subsequent events, the
Investment Manager will also monitor issuers of such securities to determine
if such issuers will have sufficient cash flow and profits to meet required
principal and interest payments and to assure their liquidity.
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FUTURES TRANSACTIONS
There are several risks in connection with the use of futures in the Fund as
a hedging device. One risk arises because the correlation between movements
in the price of the future and movements in the price of the currencies which
are the subject of the hedge is not always perfect. The price of the future
acquired by the Fund may move more than, or less than, the price of the
currencies being hedged. If the price of the future moves less than the price
of the currencies which are the subject of the hedge, the hedge will not be
fully effective but, if the price of the currencies being hedged has moved in
an unfavorable direction, the Fund would be in a better position than if it
had not hedged at all. If the price of the currencies being hedged has moved
in a favorable direction, this advantage will be partially offset by movement
in the value of the future. If the price of the future moves more than the
price of the currencies, the Fund will experience either a loss or a gain on
the future which will not be completely offset by movements in the price of
the currencies which are the subject of the hedge.
To compensate for the imperfect correlation of movements in the price of
currencies being hedged and movements in the price of the futures, the Fund
may buy or sell futures contracts in a greater dollar amount than the dollar
amount of currencies being hedged, if the historical volatility of the price
of such currencies has been greater than the historical volatility of the
currencies. Conversely, the Fund may buy or sell fewer futures contracts if
the historical volatility of the price of the currencies being hedged is less
than the historical volatility of the currencies.
Because of the low margins required, futures trading involves a high degree
of leverage. As a result, a relatively small investment in a futures contract
by the Fund may result in immediate and substantial loss, as well as gain, to
the Fund. A purchase or sale of a futures contract may result in losses in
excess of the initial margin for the futures contract. However, the Fund
would have sustained comparable losses if, instead of the futures contract,
it had invested in the underlying currencies and sold the instrument after
the decline.
When futures are purchased by the Fund to hedge against a possible
unfavorable movement in a currency exchange rate before the Fund is able to
invest its cash (or cash equivalents) in stock in an orderly fashion, it is
possible that the currency exchange rate may move in a favorable manner
instead. If the Fund then decides not to invest in stock at that time because
of concern as to possible further market decline or for other reasons, the
Fund will realize a loss on the futures contract that is not offset by a
reduction in the price of securities purchased.
In addition to the possibility that there may be an imperfect correlation, or
no correlation at all, between movements in the futures and the currencies
which are the subject of a hedge, the price of futures contracts may not
correlate perfectly with movement in the currency due to certain market
distortions. First, all participants in the futures market are subject to
margin deposit and maintenance requirements. Rather than meeting additional
margin deposit requirements, investors may close futures contracts through
offsetting transactions. This practice could distort the normal relationship
between the currency and futures markets. Second, from the point of view of
speculators, the deposit requirements in the futures market may be less
onerous than margin requirements in the currency market. Therefore, increased
participation by speculators in the futures market also may cause temporary
price distortions. Due to the possibility of price distortion in the futures
market and because of the imperfect correlation between movements in the
currency and movements in the price of currency futures, a correct forecast
of general currency trends by the Investment Manager still may not result in
a successful hedging transaction over a very short time frame.
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Futures exchanges may limit the amount of fluctuation permitted in certain
futures contract prices during a single trading day. Once the daily limit has
been reached, no more trades may be made on that day at a price beyond the
limit. The daily limit governs only price movements during a particular
trading day and therefore does not limit potential losses, because the limit
may prevent the liquidation of unfavorable positions.
Compared to the use of futures contracts, the purchase of options on futures
contracts involves less potential risk to the Fund because the maximum amount
at risk is the premium paid for the options (plus transaction costs).
However, there may be circumstances when the use of an option on a futures
contract would result in loss to the Fund when the use of a futures contract
would not, such as when there is no movement in the level of an index. In
addition, daily changes in the value of the option due to changes in the
value of the underlying futures contract are reflected in the net asset value
of the Fund.
The Fund will only enter into futures contracts or purchase futures options
that are standardized and traded in a U.S. or foreign exchange or board of
trade, or similar entity, or quoted on an automated quotation system.
However, there is no assurance that a liquid secondary market on an exchange
or board of trade will exist for any particular futures contract or futures
option or at any particular time. In such event, it may not be possible to
close a futures position, and, in the event of adverse price movements, the
Fund would continue to be required to make daily cash payments of variation
margin. In the event futures contracts have been used to hedge currencies, an
increase in the price of the currencies, if any, may partially or completely
offset losses on the futures contract. However, as described above, there is
no guarantee that the price of the currency will, in fact, correlate with the
movements in the futures contract and thus provide an offset to losses on a
futures contract.
Successful use of futures by the Fund for hedging purposes is subject to the
Investment Manager's ability to predict correctly movements in the direction
of the currency markets. The Investment Manager has been actively engaged in
the provision of investment supervisory services for institutional and
individual accounts since 1970, but the skills required for the successful
use of futures and options on futures are different from those needed to
select portfolio securities, and the Investment Manager has limited prior
experience in the use of futures or options techniques in the management of
assets under its supervision.
OTHER RISK CONSIDERATIONS
Investment in illiquid securities involves potential delays on resale as well
as uncertainty in valuation. Limitations on resale may have an adverse effect
on the marketability of portfolio securities, and the Fund might not be able
to dispose of such securities promptly or at reasonable prices.
A number of transactions in which the Fund may engage are subject to the
risks of default by the other party of the transaction. If the seller of
securities pursuant to a repurchase agreement entered into by the Fund
defaults and the value of the collateral securing the repurchase agreement
declines, the Fund may incur a loss. If bankruptcy proceedings are commenced
with respect to the seller, realization on the collateral by the Fund may be
delayed or limited. Similarly, when the Fund engages in when-issued, reverse
repurchase, forward commitment and delayed settlement transactions, it relies
on the other party to consummate the trade; failure of the other party to do
so may result in the Fund incurring a loss or missing an opportunity to
obtain a price the Investment Manager believed to be advantageous. The risks
in lending portfolio securities, as with other extensions of secured credit,
consist of a possible delay in receiving additional collateral or in recovery
of the securities or possible loss of rights in the collateral should the
borrower fail financially.
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<PAGE>
__________________________________
INVESTMENT RESTRICTIONS
__________________________________
FUNDAMENTAL POLICIES
The Fund has adopted certain investment restrictions that are fundamental
policies and that may not be changed without approval by the vote of a
majority of the Fund's outstanding voting securities, as defined in the 1940
Act. The "vote of a majority of the outstanding voting securities" of the
Fund, as defined in Section 2(a)(42) of the 1940 Act, means the vote of (i)
67% or more of the voting securities of the Fund present at any meeting, if
the holders of more than 50% of the outstanding voting securities of the Fund
are present or represented by proxy, or (ii) more than 50% of the outstanding
voting securities of the Fund, whichever is less. These restrictions provide
that the Fund may not:
1. Invest more than 25% the value of its total assets in the securities of
companies primarily engaged in any one industry (other than the United
States of America, its agencies and instrumentalities);
2. Acquire more than 10% of the outstanding voting securities, or 10% of all
of the securities, of any one issuer;
3. Invest in companies for the purpose of exercising control or management;
4. Borrow money, except from banks to meet redemption requests or for
temporary or emergency purposes; provided that borrowings for temporary or
emergency purposes other than to meet redemption requests shall not exceed
5% of the value of its total assets; and provided further that total
borrowings shall be made only to the extent that the value of the Fund's
total assets, less its liabilities other than borrowings, is equal to at
least 300% of all borrowings (including the proposed borrowing). For
purposes of the foregoing limitations, reverse repurchase agreements and
other borrowing transactions covered by segregated accounts are considered
to be borrowings. The Fund will not mortgage, pledge, hypothecate, or in
any other manner transfer as security for an indebtedness any of its
assets. This investment restriction shall not prohibit the Fund from
engaging in futures contracts, futures options, forward foreign currency
exchange transactions, and currency options;
5. Purchase securities on margin, but it may obtain such short-term credit
from banks as may be necessary for the clearance of purchases and sales of
securities;
6. Make loans of its funds or assets to any other person, which shall not be
considered as including: (i) the purchase of a portion of an issue of
publicly distributed debt securities, (ii) the purchase of bank
obligations such as certificates of deposit, bankers' acceptances and
other short-term debt obligations, (iii) entering into repurchase
agreements with respect to commercial paper, certificates of deposit and
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, and (iv) the loan of portfolio securities to brokers,
dealers and other financial institutions where such loan is callable by
the Fund at any time on reasonable notice and is fully secured by
collateral in the form of cash or cash equivalents. The Fund will
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<PAGE>
not enter into repurchase agreements with maturities in excess of
seven days if immediately after and as a result of such transaction the
value of the Fund's holdings of such repurchase agreements exceeds
10% of the value of the Fund's total assets:
7. Act as an underwriter of securities issued by other persons, except
insofar as it may be deemed an underwriter under the Securities Act of
1933 in selling portfolio securities, or invest more than 15% of the value
of its net assets in securities that are illiquid;
8. Purchase the securities of any other investment company or investment
trust, except by purchase in the open market where, to the best
information of the Company, no commission or profit to a sponsor or dealer
(other than the customary broker's commission) results from such purchase
and such purchase does not result in such securities exceeding 10% of the
value of the Fund's total assets, or except when such purchase is part of
a merger, consolidation, acquisition of assets, or other reorganization
approved by the Fund's stockholders;
9. Purchase portfolio securities from or sell portfolio securities to the
officers, directors, or other "interested persons" (as defined in the 1940
Act) of the Company, other than otherwise unaffiliated broker-dealers;
10. Purchase commodities or commodity contracts, except that the Fund may
purchase securities of an issuer which invests or deals in commodities or
commodity contracts, and except that the Fund may enter into futures and
options contracts in accordance with the applicable rules of the CFTC. The
Fund has no current intention of entering into commodities contracts
except for currency futures and futures options;
11. Issue senior securities, except that the Fund may borrow money as
permitted by restriction 4 above. This restriction shall not prohibit a
Fund from engaging in short sales, options, futures and foreign currency
transactions; and
12. Purchase or sell real estate; provided that the Fund may invest in
readily marketable securities secured by real estate or interests therein
or issued by companies which invest in real estate or interests therein.
OPERATING POLICIES
The Fund has adopted certain investment restrictions that are not fundamental
policies and may be changed by the Company's Board of Directors without
approval of the Fund's outstanding voting securities. These restrictions
provide that the Fund may not:
1. participate on a joint or a joint-and-several basis in any trading account
in securities (the aggregation of orders for the sale or purchase of
marketable portfolio securities with other accounts under the management
of the Investment Manager to save brokerage costs, or to average prices
among them, is not deemed to result in a securities trading account).
The Fund also is subject to other restrictions under the 1940 Act; however,
the registration of the Company under the 1940 Act does not involve any
supervision by any federal or other agency of the Company's management or
investment practices or policies, other than incident to occasional or
periodic compliance examinations conducted by the SEC staff.
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<PAGE>
__________________________________
EXECUTION OF PORTFOLIO TRANSACTIONS
__________________________________
The Investment Manager, subject to the overall supervision of the Company's
Board of Directors, makes the Fund's investment decisions and selects the
broker or dealer to be used in each specific transaction using its best
judgment to choose the broker or dealer most capable of providing the
services necessary to obtain the best execution of that transaction. In
seeking the best execution of a transaction, the Investment Manager evaluates
a wide range of criteria including any or all of the following: the broker's
commission rate, promptness, reliability and quality of executions, trading
expertise, positioning and distribution capabilities, back-office efficiency,
ability to handle difficult trades, knowledge of other buyers and sellers,
confidentiality, capital strength and financial stability, and prior
performance in serving the Investment Manager and its clients and other
factors affecting the overall benefit to be received in the transaction. When
circumstances relating to a proposed transaction indicate that a particular
broker is in a position to obtain the best execution, the order is placed
with that broker. This may or may not be a broker that has provided
investment information and research services to the Investment Manager. Such
investment information may include, among other things, a wide variety of
written reports or other data on the individual companies and industries;
data and reports on general market or economic conditions; information
concerning pertinent federal and state legislative and regulatory
developments and other developments that could affect the value of actual or
potential investments; companies in which the Investment Manager has invested
or may consider investing; attendance at meetings with corporate management
personnel, industry experts, economists, government personnel, and other
financial analysts; comparative issuer performance and evaluation and
technical measurement services; subscription to publications that provide
investment-related information; accounting and tax law interpretations;
availability of economic advice; quotation equipment and services; execution
measurement services; market-related and survey data concerning the products
and services of an issuer and its competitors or concerning a particular
industry that are used in reports prepared by the Investment Manager to
enhance its ability to analyze an issuer's financial condition and prospects;
and other services provided by recognized experts on investment matters of
particular interest to the Investment Manager. In addition, the foregoing
services may include the use of or be delivered by computer systems whose
hardware and/or software components may be provided to the Investment Manager
as part of the services. In any case in which information and other services
can be used for both research and non-research purposes, the Investment
Manager makes an appropriate allocation of those uses and pays directly for
that portion of the services to be used for non-research purposes.
Subject to the requirement of seeking the best execution, the Investment
Manager may, in circumstances in which two or more brokers are in a position
to offer comparable execution, give preference to a broker or dealer that has
provided investment information to the Investment Manager. In so doing, the
Investment Manager may effect securities transactions which cause the Fund to
pay an amount of commission in excess of the amount of commission another
broker would have charged. In electing such broker or dealer, the Investment
Manager will make a good faith determination that the amount of commission is
reasonable in relation to the value of the brokerage services and research
and investment information received, viewed in terms of either the specific
transaction or the Investment Manager's overall responsibility to the
accounts for which the Investment Manager exercises investment discretion.
The Investment Manager continually evaluates all commissions paid in order to
ensure that the commissions represent reasonable compensation for the
brokerage and research services provided by such
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<PAGE>
brokers. Such investment information as is received from brokers or dealers
may be used by the Investment Manager in servicing all of its clients
(including the Fund) and it is recognized that the Fund may be charged
commission paid to a broker or dealer who supplied research services not
utilized by the Fund. However, the Investment Manager expects that the Fund
will benefit overall by such practice because it is receiving the benefit of
research services and the execution of such transactions not otherwise
available to it without the allocation of transactions based on the
recognition of such research services.
Subject to the requirement of seeking the best execution, the Investment
Manager may also place orders with brokerage firms that have sold shares of
the Fund. The Investment Manager has made and will make no commitments to
place orders with any particular broker or group of brokers. It is
anticipated that a substantial portion of all brokerage commissions will be
paid to brokers who supply investment information to the Investment Manager.
The Fund may in some instances invest in foreign and/or U.S. securities that
are not listed on a national securities exchange but are traded in the
over-the-counter market. The Fund may also purchase listed securities through
the third market or fourth market. When transactions are executed in the
over-the-counter market or the third or fourth market, the Investment Manager
will seek to deal with the counterparty that the Investment Manager believes
can provide the best execution, whether or not that counterparty is the
primary market maker for that security.
As noted below, the Investment Manager is an affiliate of Dresdner. Dresdner
Kleinwort Benson North America LLC ("Dresdner Kleinwort Benson") and other
Dresdner subsidiaries may be broker-dealers (collectively, the "Dresdner
Affiliates"). The Investment Manager believes that it is in the best
interests of the Fund to have the ability to execute brokerage transactions,
when appropriate, through the Dresdner Affiliates. Accordingly, the
Investment Manager intends to execute brokerage transactions on behalf of the
Fund through the Dresdner Affiliates, when appropriate and to the extent
consistent with applicable laws and regulations, including federal banking
laws.
In all such cases, the Dresdner Affiliates will act as agent for the Fund,
and the Investment Manager will not enter into any transaction on behalf of
the Fund in which a Dresdner Affiliate is acting as principal for its own
account. In connection with such agency transactions, the Dresdner Affiliates
will receive compensation in the form of a brokerage commission separate from
the Investment Manager's management fee. It is the Investment Manager's
policy that such commissions be reasonable and fair when compared to the
commissions received by other brokers in connection with comparable
transactions involving similar securities and that the commissions paid to a
Dresdner Affiliate be no higher than the commissions paid to that broker by
any other similar customer of that broker who receives brokerage and research
services that are similar in scope and quality to those received by the Fund.
The Investment Manager performs investment management and advisory services
for various clients, including other registered investment companies, and
pension, profit-sharing and other employee benefit plans. In many cases,
portfolio transactions for the Fund may be executed in an aggregated
transaction as part of concurrent authorizations to purchase or sell the same
security for numerous accounts served by the Investment Manager, some of
which accounts may have investment objectives similar to those of the Fund.
The objective of aggregated transactions is to obtain favorable execution
and/or lower brokerage commissions, although there is no certainty that such
objective will be achieved. Although executing portfolio transactions in an
aggregated transaction potentially could be either advantageous or
disadvantageous to any one or more particular accounts, aggregated
transactions in which the Fund participates will be effected only when the
Investment Manager believes that to do so will be in the best
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<PAGE>
interest of the Fund, and the Investment Manager is not obligated to
aggregate orders into larger transactions. These orders generally will be
averaged as to price. When such aggregated transactions occur, the objective
will be to allocate the executions in a manner which is deemed fair and
equitable to each of the accounts involved over time. In making such
allocation decisions, the Investment Manager will use its business judgment
and will consider, among other things, any or all of the following: each
client's investment objectives, guidelines, and restrictions, the size of
each client's order, the amount of investment funds available in each
client's account, the amount already committed by each client to that or
similar investments, and the structure of each client's portfolio. Although
the Investment Manager will use its best efforts to be fair and equitable to
all clients, including the Fund, there can be no assurance that any
investment will be proportionately allocated among clients according to any
particular or predetermined standard or criteria.
__________________________________
DIRECTORS AND OFFICERS
__________________________________
The names and addresses of the directors and officers of the Company and
their principal occupations and certain other affiliations during the past
five years are given below. Unless otherwise specified, the address of each
of the following persons is Four Embarcadero Center, San Francisco,
California 94111.
DEWITT F. BOWMAN, Chairman and Director. Mr. Bowman is a Principal of Pension
Investment Consulting, with which he has been associated since February 1994.
From February 1989 to January 1994 he was Chief Investment Officer for
California Public Employees Retirement System, a public pension fund. He
serves as a director of RREEF America REIT, Inc., the Wilshire Target Funds
and a trustee of Brandes Investment Trust and Pacific Gas and Electric
Nuclear Decommissioning Trust. He also serves as a director of Dresdner RCM
Capital Fund, Inc. ("Capital Fund").
PAMELA A. FARR, Director. Ms. Farr is a partner in Best & Co. LLC - a
manufacturer and retailer of children's clothing and accessories. From 1991
to 1994, she was President of Banyan Homes, Inc., a real estate development
and construction firm; for eight years she was a management consultant for
McKinsey & Company, where she served a variety of Fortune 500 companies in
all aspects of strategic management and organizational structure. She also
serves as a director of Capital Funds.
FRANK P. GREENE, Director. Mr. Greene is a partner and portfolio manager of
Wood Island Associates, Inc., a registered investment adviser, with which he
has been associated since August 1991. From November 1987 to August 1991, he
was a Senior Vice President and Portfolio Manager of Siebel Capital
Management, Inc., a registered investment adviser. He also serves as a
director of Capital Funds.
GEORGE G.C. PARKER, Director. Mr. Parker is Associate Dean for Academic
Affairs, and Director of the MBA Program and Dean Witter Professor of Finance
at the Graduate School of Business at Stanford University, with which he has
been associated since 1973. Mr. Parker has served on the Board of Directors
of the California Casualty Group of Insurance Companies since 1977; BB&K
Holdings, Inc., a holding company for financial services companies, since
1980; H. Warshow & Sons, Inc., a manufacturer of specialty textiles, since
1982; Zurich Reinsurance Centre, Inc., a large reinsurance
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<PAGE>
underwriter, since 1994; and Continental Airlines, since 1996. Mr. Parker
served on the Board of Directors of the University National Bank & Trust
Company from 1986 to 1995. He also serves as a director of Capital Funds.
RICHARD W. INGRAM, President, Treasurer and Chief Financial Officer. Mr.
Ingram is Executive Vice President and Director of Client Services and
Treasury Administration of Funds Distributor, Inc., ("FDI"), the ultimate
parent of which is Boston Institutional Group, Inc. From March 1994 to
November 1995, Mr. Ingram was Vice President and Division Manager of First
Data Investor Services Group. From 1989 to 1994, Mr. Ingram was Vice
President, Assistant Treasurer and Tax Director - Mutual Funds of The Boston
Company. He is also President, Treasurer and Chief Financial Officer of
Capital Funds; President, Chief Financial Officer and Assistant Treasurer of
RCM Strategic Global Government Fund, Inc.; and an officer of certain
investment companies distributed or administered by FDI. His address is 60
State Street, Suite 1300, Boston, Massachusetts 02109.
ELIZABETH A. KEELEY, Vice President and Assistant Secretary. Ms. Bachman is
Vice President and Senior Counsel of FDI, with which she has been associated
since September 1994. Since September 1995 to present, she has also served as
Counsel to Premier Mutual Fund Services, Inc. Prior to September 1995, she
was enrolled at Fordham University School of Law and received her J.D. in May
1995. Prior to September 1992, Ms. Bachman was an Assistant at the National
Association for Public Interest Law. She is also Vice President and Assistant
Secretary of Capital Funds and RCS, and an officer of certain investment
companies advised or administrated by Dreyfus, Waterhouse, Harris, Montgomery
and Morgan Guaranty. Her address is 200 Park Avenue, 45th Floor, New York,
New York 10166.
GARY S. MACDONALD, Vice President and Assistant Treasurer. Mr. MacDonald is
vice President of FDI, with which he has been associated since November 1996.
From September 1992 to November 1996, he was Vice President of BayBanks
Investment Management/BayBanks Financial Services; and from April 1989 to
September 1992 he was an analyst at Wellington Management Company. He is also
Vice President and Assistant Treasurer of Capital funds and RCS. His address
is 60 State Street, Suite 1300, Boston, Massachusetts 02109.
DOUGLAS C. CONROY, Vice President and Assistant Treasurer. Mr. Conroy is
Assistant Vice President and Assistant Department Manager of Treasury
Services and Administration of FDI since April 1997. Prior to April 1997, Mr.
Conroy was Supervisor of Treasury Services and Administration of FDI. From
April 1993 to January 1995, Mr. Conroy was a Senior Fund Accountant for
Investors Bank & Trust Company. From December 1991 to March 1993, Mr. Conroy
was employed as a Fund Accountant at The Boston Company, Inc. He is also
Assistant Treasurer of Capital Funds and an officer of certain investment
companies distributed or administered by FDI. His address is 60 State Street,
Suite 1300, Boston, Massachusetts 02109.
KAREN JACOPPO-WOOD, Assistant Secretary. Ms. Jacoppo-Wood is a Vice President
and Counsel of FDI, with which she has been associated since January 1996.
From June 1994 to January 1996, she was a Manager of SEC Registration for
Scudder, Stevens & Clark, Inc. From 1988 to May 1994, she was Senior
Paralegal at The Boston Company Advisors, Inc. She is also an Assistant
Secretary of Capital Funds, and an officer of certain investment companies
advised or administrated by Waterhouse, Harris, Montgomery and Morgan
Guaranty. Her address is 60 State Street, Suite 1300, Boston, Massachusetts
02109.
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<PAGE>
MARY A. NELSON, Assistant Treasurer. Ms. Nelson is the Manager of Treasury,
Services and Administration and Operations for FDI, with which she has been
associated since 1994. From 1989 to 1994, she was an Assistant Vice President
and Client Manager for The Boston Company. She is also Assistant Treasurer of
Capital Funds, and an officer of certain investment companies advised or
administered by Waterhouse, Harris, Montgomery and Morgan Guaranty. Her
address is 60 State Street, Suite 1300, Boston, Massachusetts 02109.
It is presently anticipated that regular meetings of the Company's Board of
Directors will be held on a quarterly basis. The Company's Audit Committee,
whose present members are DeWitt F. Bowman and Frank P. Greene, meets with
the Company's independent accountants to change views and information and to
assist the full Board in fulfilling its responsibilities relating to
corporate accounting and reporting practices. Each director of the Company
receives a fee of $1,000 per year plus $500 for each Board meeting attended,
and is reimbursed for travel and other expenses incurred in connection with
attending Board meetings.
The following table sets forth the aggregate compensation paid by the Company
for the fiscal year ending December 31, 1996, to the Directors and the
aggregate compensation paid to the Directors for service on the Company's
Board and that of all other funds in the "Company complex" as defined in
Schedule 14A under the Securities Exchange Act of 1934):
<TABLE>
<CAPTION>
Pension or
Retirement Estimate Total Compensation
Aggregate Benefits Accrued Annual from Company and
Compensation as Part of Benefits Upon Company Complex
Name from Company Company Expenses Retirement Paid to Director (1)
_______________________________________________________________________________________________________
<S> <C> <C> <C> <C>
DeWitt F. Bowman $15,000 None N/A $33,000
Pamela A. Farr (2) $ 9,000 None N/A $27,000
Thomas S. Foley (2) $ 8,000 None N/A $23,000
Frank P. Greene $14,000 None N/A $32,000
George G.C. Parker (2) $ 9,000 None N/A $27,000
_____________________
</TABLE>
(1) During the fiscal year ended December 31, 1996, there were seven funds in
the Company complex.
(2) Elected as a Director on May 28, 1996.
As of December 31, 1996, no Director or officer of the Company was a
beneficial owner of any shares of the outstanding Common Stock of any series
of the Company.
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<PAGE>
__________________________________
THE INVESTMENT MANAGER
__________________________________
The Company's Board of Directors has overall responsibility for the operation
of the Fund. Pursuant to such responsibility, the Board has approved various
contracts for various financial organizations to provide, among other things,
day to day management services required by the Fund. The Company, on behalf
of each Fund, has retained as the Fund's investment manager and administrator
Dresdner RCM Global Investors LLC, a Delaware limited liability company with
principal offices at Four Embarcadero Center, San Francisco, California
94111. The Investment Manager is actively engaged in providing investment
supervisory services to institutional and individual clients, and is
registered under the Investment Advisers Act of 1940. The Investment Manager
was established in April 1996, as the successor to the business and
operations of RCM Capital Management, a California Limited Partnership,
which, with its predecessors, has been in operation since 1970.
The Investment Manager is a wholly owned subsidiary of Dresdner, an
international banking organization with principal executive offices located
at Gallunsanlage 7, 60041 Frankfurt, Germany. With total consolidated assets
as of December 31, 1996, of DM 561 billion ($388 billion), and approximately
1,600 offices and 45,000 employees in over 60 countries around the world,
Dresdner is the world's fourteenth largest bank. Dresdner provides a full
range of banking services, including traditional lending activities,
mortgages, securities, project finance and leasing, to private customers and
financial and institutional clients. In the United States, Dresdner maintains
branches in New York and Chicago and an agency in Los Angeles. As of the date
of this Prospectus, the members of the Board of Managers of the Investment
Manager are William L. Price (Chairman), Gerhard Ebersdadt, Michael J.
Apatoff, George N. Fugelsang, Joachim Madler, Jeffrey S. Rudsten, William S.
Stack, Kenneth B. Weeman, Jr., and Eamonn F. Dolan.
Banking laws and regulations, including the Glass-Steagall Act as presently
interpreted by the Board of Governors of the Federal Reserve System, prohibit
certain banking entities, such as Dresdner, from sponsoring, organizing,
controlling or distributing the shares of a registered investment company
continuously engaged in the issuance of its shares, and prohibit banks
generally from underwriting securities. However, banks and their affiliates
generally can act as adviser to an investment company and can purchase shares
of an investment company as agent for and upon the order of customers. The
Investment Manager believes that it may perform the services contemplated by
the investment management agreement without violating these banking laws or
regulations. However, future changes in legal requirements relating to the
permissible activities of banks and their affiliates, as well as future
interpretations of current requirements, could prevent the Investment Manager
from continuing to perform investment management services for the Company.
Pursuant to an agreement among RCM Limited L.P. ("RCM Limited"), the
Investment Manager, and Dresdner, RCM Limited manages, operates and makes all
decisions regarding the day-to-day business and affairs of the Investment
Manager, subject to the oversight of the Board of Managers. RCM Limited is a
California limited partnership consisting of 37 limited partners and one
general partner, RCM General Corporation, a California corporation ("RCM
General"). Twenty-four of the limited partners of RCM Limited are also
principals of the Investment Manager, and the shareholders of RCM General. As
of the date of this Prospectus, the following persons are limited partners of
RCM Limited and shareholders of RCM General: William L. Price, Michael J.
Apatoff, Eamonn F. Dolan, John D.
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<PAGE>
Leland, Jr., Jeffrey S. Rudsten, William S. Stack, Kenneth B. Weeman, Jr.,
Anthony Ain, Donna L. Avedisian, John L. Bernard, Huachen Chen, Jacqueline M.
Cormier, G. Nicholas Farwell, Joanne L. Howard, Stephen Kim, John A.
Kriewall, Allan C. Martin, Andrew H. Massie, Jr., Melody L. McDonald, Lee N.
Price, Walter C. Price, Jr., Gary B. Sokol, Andrew C. Whitelaw, and Jeffrey
J. Wiggins.
The Investment Manager provides the Fund with services pursuant to an
Investment Management Agreement, Power of Attorney and Service Agreement (the
"Management Agreement") and an Administration Agreement, each dated as of
December 30, 1997. The Investment Manager provides various administrative
services, and supervises the Fund's daily business affairs, subject to the
authority of the Board of Directors. The Investment Manager is also the
investment manager for each series of Dresdner RCM Capital Funds, Inc., an
open-end management investment company consisting of three series, and RCM
Strategic Global Government Fund, Inc. and The Emerging Germany Fund, Inc.,
closed-end management investment companies. The Investment Manager also acts
as sub-adviser to Bergstrom Capital Corporation, a closed-end management
investment company.
The Management Agreement with respect to the Fund was approved by the
stockholders of the Fund as of December 30, 1997, and by the unanimous vote
of the Company's Board of Directors on March 24, 1997, and will continue in
effect until December 30, 1999. The Management Agreement may be renewed from
year-to-year after its initial term, provided that any such renewals have
been specifically approved at least annually by (i) a majority of the
Company's Board of Directors, including a majority of the Directors who are
not parties to the Management Agreement or interested persons of any such
person, cast in person at a meeting called for the purpose of voting on such
approval, or (ii) the vote of a majority (as defined in the 1940 Act) of the
outstanding voting securities of the Fund and the vote of a majority of the
Directors who are not parties to the contract or interested persons of any
such party.
The Fund has, under the Management Agreement, assumed the obligation for
payment of all of its ordinary operating expenses, including: (a) brokerage
and commission expenses, (b) federal, state, or local taxes incurred by, or
levied on, the Fund, (c) interest charges on borrowings, (d) charges and
expenses of the Fund's custodian, (e) investment advisory fees (including
fees payable to the Investment Manager under the Management Agreement), (f)
legal and audit fees, (g) SEC and "Blue Sky" registration expenses, and (h)
compensation, if any, paid to officers and employees of the Company who are
not employees of the Investment Manager or Investment Manager (see Directors
and Officers). The Investment Manager is responsible for all of its own
expenses in providing services to the Fund. Expenses attributable to the Fund
are charged against the assets of the Fund.
The Investment Manager has voluntarily agreed to limit the Fund's expenses as
described in its Prospectus. In subsequent years, the Fund has agreed to
reimburse the Investment Manager for any such payments to the extent that the
Fund's operating expenses are otherwise below this expense cap. This
obligation will not be recorded on the books of the Fund to the extent that
the total operating expenses of the Fund are at or above the expense cap.
However, if the total operating expenses of the Fund fall below the expense
cap, the reimbursement to the Investment Manager will be accrued by the Fund
as a liability.
The Management Agreement provides that the Investment Manager will not be
liable for any error of judgment or for any loss suffered by the Fund in
connection with the matters to which the Management Agreement relates, except
for liability resulting from willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of the Investment
Manager's reckless disregard of its duties and obligations under the
Management Agreement. The Company has agreed to indemnify the
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<PAGE>
Investment Manager against liabilities, costs and expenses that the
Investment Manager may incur in connection with any action, suit,
investigation or other proceeding arising out of or otherwise based on any
action actually or allegedly taken or omitted to be taken by the Investment
Manager in connection with the performance of its duties or obligations under
the Management Agreement or otherwise as investment manager of the Fund. The
Investment Manager is not entitled to indemnification with respect to any
liability to the Fund or its stockholders by reason of willful misfeasance,
bad faith or gross negligence in the performance of its duties, or of its
reckless disregard of its duties and obligations under the Management
Agreement.
The Management Agreement is terminable without penalty on 60 days' written
notice by a vote of the majority of the outstanding voting securities of the
Fund, by a vote of the majority of the Company's Board of Directors, or by
the Investment Manager on 60 days' written notice and will automatically
terminate in the event of its assignment (as defined in the 1940 Act).
__________________________________
THE DISTRIBUTOR
__________________________________
Funds Distributor, Inc., 60 State Street, Suite 1300, Boston, Massachusetts
02109, serves as distributor to the Fund. The Distributor has provided mutual
fund distribution services since 1976, and is a subsidiary of Boston
Institutional Group, Inc., which provides distribution and other related
services with respect to investment products.
DISTRIBUTION AGREEMENT
Pursuant to a Distribution Agreement with the Company, the Distributor has
agreed to use its best efforts to effect sales of shares of the various
series of the Company, including the Fund, but is not obligated to sell any
specified number of shares. The Distribution Agreement contains provisions
with respect to renewal and termination similar to those in the Fund's
Management Agreement discussed above. Pursuant to the Distribution Agreement,
the Company has agreed to indemnify the Distributor to the extent permitted
by applicable law against certain liabilities under the Securities Act of
1933.
Pursuant to an Agreement among the Manager, the Company, Capital Funds and
the Distributor, the Distributor has also agreed to provide regulatory,
compliance and related technical services to the various series of the
Company, including the Fund; to provide services with regard to advertising,
marketing and promotional activities; and to provide officers to the Company.
The Manager is required to reimburse the Company for any fees and expenses of
the Distributor pursuant to the Agreement.
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<PAGE>
__________________________________
NET ASSET VALUE
__________________________________
For purposes of the computation of the net asset value of each share of the
Fund, 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. In cases where securities are traded on more
than one exchange, the securities are valued on the exchange determined by
the Investment Manager to be the primary market for the securities. If there
has been no sale on such day, 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
Company's Board of Directors 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 such other
comparable sources as the Company's Board of Directors deems appropriate to
reflect their fair market value. Other portfolio securities held by the Fund
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 Company's Board of Directors deems
appropriate to reflect their fair market value.
Futures contracts and related options are valued at their last sale or
settlement price as of the close of the exchange on which they are traded or,
if no sales are reported, at the mean between the last reported bid and asked
prices. All other assets of the Fund will be valued in such manner as a duly
constituted committee of the Company's Board of Directors in good faith deems
appropriate to reflect their fair market value.
Trading in securities on foreign exchanges and over-the-counter markets is
normally completed at times other than the close of the business day in New
York. In addition, foreign securities and futures trading may not take place
on all business days in New York, and may occur in various foreign markets on
days which are not business days in New York and on which net asset value is
not calculated. The calculation of net asset value may not take place
contemporaneously with the determination of the prices of portfolio
securities used in such calculation. Events affecting the values of portfolio
securities that occur between the time their prices are determined and the
close of the New York Stock Exchange will not be reflected in the calculation
of net asset value unless the Board of Directors determines that a particular
event would materially affect net asset value, in which case an adjustment
will be made.
Assets or liabilities initially expressed in terms of foreign currencies are
translated prior to the next determination of net asset value into U.S.
dollars at the spot exchange rates at 12:00 p.m. Eastern time or at such
other rates as the Investment Manager may determine to be appropriate in
computing net asset value.
Debt obligations with maturities of 60 days or less are valued at amortized
cost. The Fund may use a pricing service approved by the Company's Board of
Directors to value other debt obligations. Prices provided by such a service
represent evaluations of the mean between current bid and asked market
prices, may be determined without exclusive reliance on quoted prices, and
may reflect appropriate factors such as institution-size trading in similar
groups of securities, yield, quality, coupon rate, maturity, type of issue,
individual rating characteristics, indications of value from dealers, and
other
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<PAGE>
market data. Such services may use electronic data processing techniques
and/or a matrix system to determine valuations. The procedures of such
services are reviewed periodically by the officers of the Investment Manager
under the general supervision of the Company's Board of Directors. Short-term
investments are amortized to maturity based on their cost, adjusted for
foreign exchange translation, provided such valuations equal fair market
value.
__________________________________
PURCHASE AND REDEMPTION OF SHARES
__________________________________
The price paid for purchase and redemption of shares of the Fund is based on
the net asset value per share, which is calculated once daily at the close of
trading (currently 4:00 P.M. New York time) each day the New York Stock
Exchange is open. The New York Stock Exchange is currently closed on weekends
and on the following holidays: New Year's Day, Washington's Birthday, Martin
Luther King Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas Day. The offering price is effective for orders
received by State Street Bank and Trust Company (the "Transfer Agent") prior
to the time of determination of net asset value. Dealers are responsible for
promptly transmitting purchase orders to the Transfer Agent. The Company
reserves the right in its sole discretion to suspend the continued offering
of the Fund's shares and to reject purchase orders in whole or in part when
such rejection is in the best interests of the Company and the Fund.
Redemption payments will be made wholly in cash unless the Company's Board of
Directors believes that economic conditions exist which would make such a
practice detrimental to the best interests of the Fund. Under such
circumstances, payment of the redemption price could be made either in cash
or in portfolio securities taken at their value used in determining the
redemption price (and, to the extent practicable, representing a pro rata
portion of each of the portfolio securities held by the Fund), or partly in
cash and partly in portfolio securities. Payment for shares redeemed also may
be made wholly or partly in the form of a pro rata portion of each of the
portfolio securities held by the Fund at the request of the redeeming
stockholder, if the Company believes that honoring such request is in the
best interests of the Fund. If payment for shares redeemed were to be made
wholly or partly in portfolio securities, brokerage costs would be incurred
by the stockholder in converting the securities to cash.
__________________________________
DIVIDENDS, DISTRIBUTIONS AND TAX STATUS
__________________________________
Each income dividend and capital gains distribution, if any, declared by the
Fund will be reinvested in full and fractional shares based on the net asset
value as determined on the payment date for such distributions, unless the
stockholder or his or her duly authorized agent has elected to receive all
such payments or the dividend or distribution portions thereof in cash.
Changes in the manner in which dividend and distribution payments are made
may be requested by the stockholder or his or her duly authorized agent at
any time through written notice to the Company and will be effective as to
any subsequent payment if such notice is received by the Company prior to the
record date used for
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determining the stockholders entitled to such payment. Any dividend and
distribution election will remain in effect until the Company is notified by
the stockholder in writing to the contrary.
REGULATED INVESTMENT COMPANY. The Company intends to qualify the Fund as a
"regulated investment company" under Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"). The Fund will be treated as a separate
fund for tax purposes and thus the provisions of the Code generally
applicable to regulated investment companies will be applied to the Fund. In
addition, net capital gains, net investment income, and operating expenses
will be determined separately for the Fund. By complying with the applicable
provisions of the Code, the Fund will not be subject to federal income taxes
with respect to net investment income and net realized capital gains
distributed to their stockholders.
To qualify under Subchapter M, the Fund must (i) derive at least 90% of its
gross income from dividends, interest, payments with respect to securities
loans, and gains from the sale or other disposition of stock, securities or
currencies and certain options, futures, forward contracts and foreign
currencies; (ii) derive less than 30% of its gross income from the sale or
other disposition of stock or securities held less than three months; and
(iii) diversify its holdings so that, at the end of each fiscal quarter, (a)
at least 50% of the market value of the Fund's assets is represented by cash,
cash items, U.S. Government securities and other securities, limited, in
respect of any one issuer, to an amount not greater than 5% of the Fund's
assets and 10% of the outstanding voting securities of such issuer, and (b)
not more than 25% of the value of its total assets is invested in the
securities of any one issuer (other than U.S. Government securities or the
securities of other regulated investment companies), or in two or more
issuers which the Fund controls and which are engaged in the same or similar
trades or businesses.
In any fiscal year in which the Fund so qualifies and distributes at least
90% of the sum of its investment company taxable income (consisting of net
investment income and the excess of net short-term capital gains over net
long-term capital losses) and its tax-exempt interest income (if any), it
will be taxed only on that portion, if any, of such investment company
taxable income and any net capital gain that it retains. The Fund expects to
so distribute all of such income and gains on an annual basis, and thus will
generally avoid any such taxation.
Even though the Fund qualifies as a "regulated investment company," it may be
subject to certain federal excise taxes unless the Fund meets certain
additional distribution requirements. Under the Code, a nondeductible excise
tax of 4% is imposed on the excess of a regulated investment company's
"required distribution" for the calendar year ending within the regulated
investment company's taxable year over the "distributed amount" for such
calendar year. The term "required distribution" means the sum of (i) 98% of
ordinary income (generally net investment income) for the calendar year, (ii)
98% of capital gain net income (both long-term and short-term) for the
one-year period ending on October 31 (as though the one year period ending on
October 31 were the regulated investment company's taxable year), and (iii)
the sum of any untaxed, undistributed net investment income and net capital
gains of the regulated investment company for prior periods. The term
"distributed amount" generally means the sum of (i) amounts actually
distributed by the Fund from its current year's ordinary income and capital
gain net income and (ii) any amount on which the Fund pays income tax for the
year. The Fund intends to meet these distribution requirements to avoid the
excise tax liability.
Stockholders who are subject to federal or state income or franchise taxes
will be required to pay taxes on dividends and capital gains distributions
they receive from a Fund whether paid in additional shares of the Fund or in
cash. To the extent that dividends received by the Fund would qualify for the
70% dividends received deduction available to corporations, the Fund must
designate in a written notice to
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stockholders the amount of the Fund's dividends that would be eligible for
this treatment. In order to qualify for the dividends received deduction, a
corporate stockholder must hold the Fund shares paying the dividends upon
which a dividend received deduction is based for at least 46 days.
Stockholders, such as qualified employee benefit plans, who are exempt from
federal and state taxation generally would not have to pay income tax on
dividend or capital gain distributions. Prospective tax-exempt investors
should consult their own tax advisers with respect to the tax consequences of
an investment in the Fund under federal, state, and local tax laws.
Investors who purchase shares of the Fund shortly before the record date of a
dividend or capital gain distribution will pay full price for those shares
("buying a dividend") and then receive some portion of the price back as a
taxable dividend or capital gain distribution.
WITHHOLDING. Under the Code, distributions of net investment income by the
Fund to a stockholder who, as to the U.S., is a nonresident alien individual,
nonresident alien fiduciary of a trust or estate, foreign corporation, or
foreign partnership (a "foreign stockholder") will be subject to U.S.
withholding tax (at a rate of 30% or a lower treaty rate, whichever is less).
Withholding will not apply if a dividend paid by the Fund to a foreign
stockholder is "effectively connected" with a U.S. trade or business, in
which case the reporting and withholding requirements applicable to U.S.
citizens or domestic corporations will apply. Distributions of net long-term
capital gains to foreign stockholders who are neither U.S. resident aliens
nor engaged in a U.S. trade or business are not subject to tax withholding,
but in the case of a foreign stockholder who is a nonresident alien
individual, such distributions ordinarily will be subject to U.S. federal
income tax at a rate of 30% if the individual is physically present in the
U.S. for more than 182 days during the taxable year.
SECTION 1256 CONTRACTS. Many of the options, futures contracts and forward
contracts entered into by the Fund are "Section 1256 contracts." Any gains or
losses on Section 1256 contracts are generally considered 50% long-term and
40% short-term capital gains or losses, although certain foreign currency
gains and losses from such contracts may be treated as ordinary income in
character. Section 1256 contracts held by the Fund at the end of each taxable
year (and for purposes of 4% nondeductible excise tax on October 31 or such
other dates as prescribed under the Code) are "marked to market," with the
result that unrealized gains or losses are treated as though they were
realized.
STRADDLE RULES. Generally, the hedging transactions and other transactions in
options, futures and forward contracts undertaken by the Fund may result in
"straddles" for U.S. federal income tax purposes. The straddle rules may
affect the character of gains or losses realized by the Fund. In addition,
losses realized by the Fund on positions that are part of a straddle position
may be deferred under the straddle rules, rather than being taken into
account for the taxable year in which these losses are realized. Because only
a few regulations implementing the straddle rules have been promulgated, the
tax consequences of hedging transactions and options, futures and forward
contracts to the Fund are not entirely clear.
Hedging transactions may increase the amount of short-term capital gain
realized by the Fund which is taxed as ordinary income when distributed to
stockholders. The Fund may make one or more of the elections available under
the Code which are applicable to straddle positions. If the Fund makes any of
the elections, the amount, character and timing of the recognition of gains
or losses from the affected straddle positions will be determined under the
rules that vary according to elections made. The rules applicable under
certain of the elections operate to accelerate the recognition of gains or
losses from the affected straddle
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<PAGE>
positions. Because the application of the straddle rules may affect the
character of gains or losses, defer losses and/or accelerate the recognition
of gains or losses from the affected straddle positions, the amount which
must be distributed to stockholders, and which will be taxed to stockholders
as ordinary income or long-term capital gain, may be increased or decreased
substantially as compared to a fund that did not engage in such hedging
transactions. The qualification rules of Subchapter M may limit the extent to
which the Fund will be able to engage in hedging transactions and other
transactions involving options, futures contracts or forward contracts.
SECTION 988 GAINS AND LOSSES. Under the Code, gains or losses attributable to
fluctuations in exchange rates which occur between the time the Fund accrues
interest or other receivables, or accrues expenses or other liabilities,
denominated in a foreign currency and the time the Fund actually collects
such receivables or pays such liabilities, generally are treated as ordinary
income or loss. Similarly, on the disposition of debt securities denominated
in foreign currency and on the disposition of certain future contracts,
forward contracts and options, gains or losses attributable to fluctuation in
the value of foreign currency between the date of acquisition of the debt
security or contract and the date of disposition are also treated as ordinary
gain or loss. These gains or losses, referred to under the Code as "Section
988" gain or losses, may increase or decrease the amount of the Fund's
investment company taxable income to be distributed to stockholders as
ordinary income.
FOREIGN TAXES. The Fund may be required to pay withholding and other taxes
imposed by foreign countries which would reduce the Fund's investment income,
generally at rates from 10% to 40%. Tax conventions between certain countries
and the United States may reduce or eliminate such taxes. If more than 50% of
the value of the Fund's total assets at the close of its taxable year
consists of securities of foreign corporations, the Fund will be eligible to
elect to "pass-through" to the Fund's stockholders the amount of foreign
income and similar taxes paid by the Fund. If this election is made,
stockholders generally subject to tax will be required to include in gross
income (in addition to taxable dividends actually received) their pro rata
share of the foreign income taxes paid by the Fund, and may be entitled
either to deduct (as an itemized deduction) their pro rata share of foreign
taxes in computing their taxable income or to use it (subject to limitations)
as a foreign tax credit against their U.S. federal income tax liability. No
deduction for foreign taxes may be claimed by a stockholder who does not
itemize deductions. Each stockholder will be notified within 60 days after
the close of the Fund's taxable year whether the foreign taxes paid by the
Fund will be "pass-through" for that year.
Generally, a credit for foreign taxes is subject to the limitation that it
may not exceed the stockholder's U.S. tax attributable to his or her total
foreign source taxable income. For this purpose, if the pass-through election
is made, the source of the Fund's income will flow through to stockholders of
the Fund. With respect to such election, gains from the sale of securities
will be treated as derived from U.S. sources and certain currency fluctuation
gains, including fluctuation gains from foreign currency denominated debt
securities, receivables and payables will be treated as ordinary income
derived from U.S. sources. The limitation on the foreign tax credit is
applied separately to foreign source passive income, and to certain other
types of income. Stockholders may be unable to claim a credit for the full
amount of their proportionate share of the foreign taxes paid by the Fund.
The foreign tax credit is modified for purposes of the federal alternative
minimum tax and can be used to offset only 90% of the alternative minimum tax
imposed on corporations and individuals and foreign taxes generally are not
deductible in computing alternative minimum taxable income.
The foregoing is a general abbreviated summary of present U.S. federal income
tax laws and regulations applicable to dividends and distributions by the
Fund. Stockholders are urged to consult their own tax advisers for more
detailed information and for information regarding any foreign, state, and
local tax laws and regulations applicable to dividends and distributions
received.
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__________________________________
INVESTMENT RESULTS
__________________________________
Average total return ("T") of the Fund will be calculated as follows: an
initial hypothetical investment of $1000 ("P") is divided by the net asset
value of shares of the Fund as of the first day of the period in order to
determine the initial number of shares purchased. Subsequent dividends and
capital gain distributions by the Fund are reinvested at net asset value on
the reinvestment date determined by the Board of Directors. The sum of the
initial shares purchased and shares acquired through reinvestment is
multiplied by the net asset value per share of the Fund as of the end of the
period ("n") to determine ending redeemable value ("ERV"). The ending value
divided by the initial investment converted to a percentage equals total
return. The formula thus used, as required by the SEC, is:
P(1+T)n = ERV
The resulting percentage indicates the positive or negative investment
results that an investor would have experienced from reinvested dividends and
capital gain distributions and changes in share price during the period.
This formula reflects the following assumptions: (i) all share sales at net
asset value, without a sales load reduction from the $1,000 initial
investment; (ii) reinvestment of dividends and distributions at net asset
value on the reinvestment date determined by the Board; and (iii) complete
redemption at the end of any period illustrated. Total return may be
calculated for one year, five years, ten years, and for other periods, and
will typically be updated on a quarterly basis. The average annual compound
rate of return over various periods may also be computed by utilizing ending
values as determined above.
In addition, in order more completely to represent the Fund's performance or
more accurately to compare such performance to other measures of investment
return, the Fund also may include in advertisements and stockholder reports
other total return performance data based on time-weighted, monthly-linked
total returns computed on the percentage change of the month end net asset
value of the Fund after allowing for the effect of any cash additions and
withdrawals recorded during the month. Returns may be quoted for the same or
different periods as those for which average total return is quoted. The
Fund's investment results will vary from time-to-time depending upon market
conditions, the composition of the Fund's portfolio, and operating expenses,
so that any investment results reported should not be considered
representative of what an investment in the Fund may earn in any future
period. These factors and possible differences in calculation methods should
be considered when comparing the Fund's investment results with those
published for other investment companies, other investment vehicles and
unmanaged indices. Results also should be considered relative to the risks
associated with the Fund's investment objective and policies.
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<PAGE>
__________________________________
DESCRIPTION OF CAPITAL SHARES
__________________________________
Stockholders are entitled to one vote for each full share held and fractional
votes for fractional shares held. Unless otherwise provided by law or
Articles of Incorporation or Bylaws, generally the Company may take or
authorize any action upon the favorable vote of the holders of more than 50%
of the outstanding shares of the Company.
As of the date of this Statement of Additional Information, there were
300,000 outstanding shares of the Fund. As of that date, the following were
known to the Company to own of record more than 5% of the Fund's capital
stock:
Name and Address of
Beneficial Owner Shares Held % of Shares Outstanding
_______________________________________________________________________________
Clients of Dresdner Bank 300,000 100%
AG/Investment Management
Institutional Asset Management
Division, Jurgen-Ponto-Platz
60301 Frankfurt, Germany
__________________________________
ADDITIONAL INFORMATION
__________________________________
COUNSEL
Certain legal matters in connection with the capital shares offered by the
Prospectus have been passed upon for the Fund by Paul, Hastings, Janofsky &
Walker LLP, 555 South Flower Street, Los Angeles, California 90071. The
validity of the capital stock offered by the Prospectus has been passed upon
by Venable, Baetjer and Howard, LLP, 1800 Mercantile Bank & Trust Building, 2
Hopkins Plaza, Baltimore, Maryland 21201. Paul, Hastings, Janofsky & Walker
LLP has acted and will continue to act as counsel to the Investment Manager
in various matters.
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INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., One Post Office Square, Boston, Massachusetts
02109, have been appointed as independent auditors for the Company. Coopers &
Lybrand L.L.P. will conduct an annual audit of each Fund, assist in the
preparation of each Fund's federal and state income tax returns, and consult
with the Company as to matters of accounting, regulatory filings, and federal
and state income taxation.
LICENSE AGREEMENT
Under a License Agreement dated as of December 11, 1997, the Investment
Manager has granted the Company the right to use the "Dresdner RCM" name and
has reserved the right to withdraw its consent to the use of such name by the
Company at any time, or to grant the use of such name to any other company.
In addition, the Company has granted the Investment Manager, under certain
conditions, the use of any other name it might assume in the future, with
respect to any other investment company sponsored by the Investment Manager.
FINANCIAL STATEMENTS
Copies of the Fund's Annual and Semi-Annual Reports to Shareholders will be
available, upon request, by calling the Company at (800) 726-7240, or by
writing the Company at Four Embarcadero Center, San Francisco, California
94111.
REGISTRATION STATEMENT
The Fund's Prospectus and this Statement of Additional Information do not
contain all of the information set forth in the Company's registration
statement and related forms as filed with the SEC, certain portions of which
are omitted in accordance with rules and regulations of the SEC. The
registration statement and related forms may be inspected at the Public
Reference Room of the SEC at Room 1024, 450 5th Street, N.W., Judiciary
Plaza, Washington, D.C. 20549, and copies thereof may be obtained from the
SEC at prescribed rates.
Statements contained in the Prospectus or this Statement of Additional
Information as to the contents of any contract or other document referred to
herein or in the Prospectus are not necessarily complete, and, in each
instance, reference is made to the copy of such contract or other document
filed as an exhibit to the Company's Registration Statement, each such
statement being qualified in all respects by such reference.
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<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS
None
(b) EXHIBITS
1. (a) Articles of Incorporation of Registrant are incorporated herein
by reference to Exhibit 1 of Pre-Effective Amendment No.1.
(b) Articles Supplementary to Articles of Incorporation of Registrant
with respect to RCM Global Health Care Fund, RCM Global Small Cap
Fund and RCM Large Cap Growth Fund (currently known as Dresdner
RCM Global Health Care Fund, Dresdner RCM Global Small Cap Fund
and Dresdner RCM Large Cap Growth Fund, respectively), are
incorporated herein by reference to Exhibit 1(b) of
Post-Effective Amendment No. 2.
(c) Articles Supplementary to Articles of Incorporation of Registrant
with respect to Dresdner RCM Emerging Markets Fund is
incorporated herein by reference to Exhibit 1(c) of
Post-Effective Amendment No. 5.
(d) Articles Supplementary to Articles of Incorporation of Registrant
with respect to Dresdner RCM Biotechnology Fund is filed herein
as Exhibit 1(d).
(e) Articles of Amendment to Articles of Incorporation of Registrant
with respect to Dresdner RCM Global Technology Fund, Dresdner RCM
Global Health Care Fund, Dresdner RCM Global Small Cap Fund and
Dresdner RCM Large Cap Growth Fund, is filed herein as Exhibit
1(e).
2. (a) Bylaws of Registrant are incorporated herein by reference to
Exhibit 2 of Pre-Effective Amendment No. 2.
(b) Form of Amendments to Bylaws of Registrant are incorporated
herein by reference to Exhibit 2(b) of Post-Effective Amendment
No. 3.
3. None
4. (a) Proof of specimen of certificate for capital stock ($0.0001 par
value) of Registrant, on behalf of RCM Global Technology Fund
(currently known as Dresdner RCM Global Technology Fund), and
excerpts from Articles of
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<PAGE>
Incorporation and Bylaws, are incorporated herein by reference to
Exhibit 4 of Pre-Effective Amendment No. 2.
(b) Proof of specimen of certificate for capital stock ($0.0001 par
value) of Registrant, on behalf of RCM Global Health Care Fund
(currently known as Dresdner RCM Global Health Care Fund), is
incorporated herein by reference to Exhibit 4(b) of
Post-Effective Amendment No. 1.
(c) Proof of specimen of certificate for capital stock ($0.0001 par
value) of Registrant, on behalf of RCM Global Small Cap Fund
(currently known as Dresdner RCM Global Small Cap Fund), is
incorporated herein by reference to Exhibit 4(c) of
Post-Effective Amendment No. 1.
(d) Proof of specimen of certificate for capital stock ($0.0001 par
value) of Registrant, on behalf of RCM Large Cap Growth Fund
(currently known as Dresdner RCM Large Cap Growth Fund), is
incorporated herein by reference to Exhibit 4(d) of
Post-Effective Amendment No. 1.
(e) Proof of specimen of certificate for capital stock ($0.0001 par
value) of Registrant, on behalf of Dresdner RCM Emerging Markets
Fund, is incorporated herein by reference to Exhibit 4(e) of
Post-Effective Amendment No. 2.
(f) Proof of specimen of certificate for capital stock ($0.0001 par
value) of Registrant, on behalf of Dresdner RCM Biotechnology
Fund, is incorporated herein by reference to Exhibit 4(f) of
Post-Effective Amendment No. 5.
5. (a) Investment Management Agreement, Power of Attorney and Service
Agreement between Registrant, on behalf of RCM Global Technology
Fund (currently known as Dresdner RCM Global Technology Fund),
and RCM Capital Management, L.L.C. (currently known as Dresdner
RCM Global Investors LLC), dated as of June 14, 1996, is
incorporated herein by reference to Exhibit 5(a) of
Post-Effective Amendment No. 1.
(b) Investment Management Agreement, Power of Attorney and Service
Agreement between Registrant, on behalf of RCM Global Health Care
Fund (currently known as Dresdner RCM Global Health Care Fund)
and RCM Capital Management, L.L.C. (currently known as Dresdner
RCM Global Investors LLC) dated as of December 27, 1996 and
Appendix A (Schedule of Fees) dated as of December 30, 1997, are
filed herein as Exhibit 5(b).
(c) Investment Management Agreement, Power of Attorney and Service
Agreement between Registrant, on behalf of RCM Global Small Cap
Growth Fund (currently known as Dresdner RCM Small Cap Growth
Fund),
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<PAGE>
and RCM Capital Management, L.L.C. (currently known as Dresdner
RCM Global Investors LLC) dated as of December 27, 1996 and
Appendix A (Schedule of Fees) dated as of December 30, 1997, are
filed herein as Exhibit 5(c).
(d) Investment Management Agreement, Power of Attorney and Service
Agreement between Registrant, on behalf of RCM Large Cap Growth
Fund (currently known as Dresdner RCM Large Cap Growth Fund) and
RCM Capital Management, L.L.C. (currently known as Dresdner RCM
Global Investors LLC) dated as of December 27, 1996 and Appendix
A (Schedule of Fees) dated as of December 30, 1997, are filed
herein as Exhibit 5(d).
(e) Investment Management Agreement, Power of Attorney and Service
Agreement and Appendix A (Schedule of Fees) between Registrant,
on behalf of Dresdner RCM Emerging Markets Fund, and RCM Capital
Management, L.L.C. (currently known as Dresdner RCM Global
Investors LLC) dated as of December 30, 1997, is filed herein as
Exhibit 5(e).
(f) Investment Management Agreement, Power of Attorney and Service
Agreement and Appendix A (Schedule of Fees) between Registrant,
on behalf of Dresdner RCM Biotechnology Fund, and Dresdner RCM
Global Investors LLC dated as of December 30, 1997, is filed
herein as Exhibit 5(f).
6. (a) Agreement among RCM Capital Management, a California Limited
Partnership (currently known as Dresdner RCM Global Investors
LLC), RCM Equity Funds, Inc., RCM Capital Funds, Inc. (currently
known as Dresdner RCM Equity Funds, Inc. and Dresdner RCM Capital
Funds, Inc., respectively) and Funds Distributor, Inc. ("FDI"),
dated June 13, 1996, is incorporated herein by reference to
Exhibit 6(a) of Post-Effective Amendment No. 1.
(b) Distribution Agreement between Registrant and Funds Distributor
Inc., dated June 13, 1996 is incorporated herein by reference to
Exhibit 6(b) of Post-Effective Amendment No. 1.
(c) Fee Letter Agreement between Registrant, RCM Capital Management,
a California Limited Partnership, (currently known as Dresdner
RCM Global Investors LLC), RCM Equity Funds, Inc., RCM Capital
Funds, Inc. (currently known as Dresdner RCM Equity Funds, Inc.
and Dresdner RCM Capital Funds, Inc., respectively), and Funds
Distributor Inc., dated June 13, 1996 is incorporated herein by
reference to Exhibit 6(c) of Post-Effective Amendment No. 1.
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(d) Form of Selling Agreement is incorporated herein by reference to
Exhibit 6(d) of Post-Effective Amendment No. 1.
7. None
8. (a) Custodian Contract and remuneration schedule between Registrant,
on behalf of RCM Global Technology Fund (currentlly known as
Dresdner RCM Global Technology Fund) and State Street Bank and
Trust Company is incorporated herein by reference to Exhibit 8(a)
of Post-Effective Amendment No. 5.
(b) Form of Amendment to Custodian Contract between Registrant, on
behalf of to RCM Global Health Care Fund (currently known as
Dresdner RCM Global Health Care Fund), and State Street Bank and
Trust Company is incorporated herein by reference to Exhibit 8(b)
of Post-Effective Amendment No. 1.
(c) Form of Amendment to Custodian Contract between Registrant, on
behalf of to RCM Global Small Cap Fund (currently known as
Dresdner RCM Global Small Cap Fund), and State Street Bank and
Trust Company is incorporated herein by reference to Exhibit
8(c) of Post-Effective Amendment No. 1.
(d) Form of Amendment to Custodian Contract between Registrant, on
behalf of to RCM Large Cap Growth Fund (currently known as
Dresdner RCM Large Cap Growth Fund), and State Street Bank and
Trust Company is incorporated herein by reference to Exhibit
8(d) of Post-Effective Amendment No. 1.
(e) Custodian Agreement between Registrant, on behalf of Dresdner
RCM Emerging Markets Fund, and Brown Brothers Harriman & Co. is
filed herein as Exhibit 8(e).
(f)* Amendment to Custodian Agreement between Registrant on behalf
of Dresdner RCM Emerging Markets Fund, and Brown Brothers
Harriman & Co. is filed herein as Exhibit 8(f).
(g) Form of Amendment to Custodian Contract between Registrant, on
behalf of Dresdner RCM Biotechnology Fund, and State Street Bank
and Trust Company is incorporated herein by reference to Exhibit
8(g) of Post-Effective Amendment No. 5.
9. (a) License Agreement between Dresdner RCM Global Investors LLC and
Registrant, related to the use by Registrant of the mark
"Dresdner RCM", is filed herein as Exhibit 9(a).
10. (a) Opinion and consent of Baetjer, Venable and Howard, LLP as to the
legality of securities being registered is filed herein as
Exhibit 10(a).
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(b) Consent of Paul, Hastings, Janofsky & Walker LLP is incorporated
herein by reference to Exhibit 10(b) of Post-Effective Amendment
No. 4.
11. None
12. None
13. None
14. None
15. (a) Amended and Restated Rule 12b-1 Plan of Registrant, on behalf of
Dresdner RCM Global Health Care Fund, Dresdner RCM Global Small
Cap Fund and Dresdner RCM Large Cap Growth Fund is filed herein
as Exhibit 15(a).
(b) Rule 12b-1 Plan of Registrant, on behalf of Dresdner RCM
Biotechnology Fund is filed herein as Exhibit 15(b).
16. None
17. None
18. None
19. Power of Attorney for DeWitt F. Bowman, Pamela A. Farr, Frank P.
Greene and George G.C. Parker, is incorporated herein by reference to
Exhibit 19 of Post-Effective Amendment No. 1.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Dresdner RCM Growth Equity Fund, Dresdner RCM Small Cap Fund and
Dresdner RCM International Growth Equity Fund A are each series of Dresdner RCM
Capital Funds, Inc., an open-end management investment company ("Capital
Funds"), for which Dresdner RCM Global Investors LLC, acts as investment
manager. RCM Strategic Global Government Fund, Inc. is a closed-end management
investment company ("RCS"), for which Dresdner RCM Global Investors LLC acts as
investment manager. Certain officers and/or directors of Capital Funds and RCS
are also officers and/or directors of Registrant. Accordingly, Capital Funds and
RCS may be deemed to be under common control with Registrant.
Funds Distributor, Inc. ("FDI") acts as distributor of shares of the
funds of Registrant. Certain officers or employees of FDI also serve as officers
of Registrant, Capital Funds and RCS. Accordingly, FDI may be deemed to be under
common control with Registrant.
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<PAGE>
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
As of November 30, 1997
TITLE OF CLASS NUMBER OF RECORD-HOLDERS
Dresdner RCM Global Technology Fund 43
Capital Stock
($0.0001 par value)
Dresdner RCM Global Health Care Fund 5
Capital Stock
($0.0001 par value)
Dresdner RCM Large Cap Growth Fund 5
Capital Stock
($0.0001 par value)
Dresdner RCM Global Small Cap Fund 6
Capital Stock
($0.0001 par value)
Dresdner RCM Emerging Markets Fund 0
Capital Stock
($0.0001 par value)
Dresdner RCM Biotechnology Fund 0
Capital Stock
($0.0001 par value)
ITEM 27. INDEMNIFICATION.
Section 2-418 of the General Corporation Law of Maryland empowers a
corporation to indemnify directors and officers of the corporation under various
circumstances as provided in such statute. A director or officer who has been
successful on the merits or otherwise, in the defense of any proceeding, must be
indemnified against reasonable expenses incurred by such person in connection
with the proceeding. Reasonable expenses may be paid or reimbursed by the
corporation in advance of the final disposition of the proceeding, after a
determination that the facts then known to those making the determination would
not preclude indemnification under the statute, and following receipt by the
corporation of a written affirmation by the person that his or her standard of
conduct necessary for indemnification has been met and upon delivery of a
written undertaking by or on behalf of the person to repay the amount advanced
if it is ultimately determined that the standard of conduct has not been met.
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<PAGE>
Article VI of the Bylaws of Registrant contains indemnification
provisions conforming to the above statute and to the provisions of Section 17
of the Investment Company Act of 1940, as amended.
The Registrant and the directors and officers of Registrant obtained
coverage under an Errors and Omissions insurance policy. The terms and
conditions of policy coverage conform generally to the standard coverage
available throughout the investment company industry. The coverage also applies
to Registrant's investment manager and its members and employees.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of Registrant pursuant to the provisions of Maryland law and
Registrant's Articles of Incorporation and Bylaws, or otherwise, Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in said Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by Registrant of expenses incurred or
paid by a director, officer or controlling person of Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Registrant's investment manager, Dresdner RCM Global Investors LLC, is
a Delaware limited liability company, whose two members are Dresdner Bank AG
("Dresdner") and Dresdner Kleinwort Benson North America, Inc. ("Dresdner
Kleinwort Benson"). Dresdner is an international banking organization whose
principal executive offices are located at Gallunsanlage 7, 60041 Frankfurt am
Main, Frankfurt, Germany. Dresdner Kleinwort Benson is a wholly owned subsidiary
of Dresdner whose principal executive offices are located at 75 Wall Street, New
York, New York 10005.
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) Funds Distributor, Inc. ("FDI"), whose principal offices are
located at 60 State Street, Suite 1300, Boston Massachusetts
02109, is the principal underwriter of Registrant. FDI is an
indirect, wholly owned subsidiary of Boston Institutional Group,
Inc., a holding company, all of whose outstanding shares are
owned by key employees. FDI is a broker-dealer registered under
the Securities Exchange Act of 1934, as amended, and is a member
of the National Association of Securities Dealers, Inc. FDI also
serves as principal underwriter of the following other investment
companies:
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BJB Investment Funds
The Brinson Funds
Burridge Funds
HT Insight Funds, Inc. d/b/a Harris Insight Funds
Harris Insight Funds Trust
The JPM Institutional Funds
The JPM Pierpont Funds
The JPM Series Trust
The JPM Series Trust II
Monetta Fund, Inc.
Monetta Trust
The Montgomery Funds
The Montgomery Funds II
The Munder Framlington Funds Trust
The Munder Funds, Inc.
The Munder Funds Trust
Orbitex Group of Funds
The PanAgora Institutional Funds
Dresdner RCM Capital Funds, Inc.
St. Clair Funds, Inc.
The Skyline Funds
Waterhouse Investors Family of Funds Inc.
WEBS Index Fund, Inc.
FDI does not act as a depositor or investment adviser of any
investment company.
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<PAGE>
(b) The directors and executive officers of FDI are set forth below:
NAME AND PRINCIPAL POSITIONS AND OFFICES WITH POSITIONS AND OFFICES
BUSINESS ADDRESS FUNDS DISTRIBUTOR, INC. WITH REGISTRANT
- --------------------------------------------------------------------------------
Marie E. Connolly Director, President and None
Chief Executive Officer
Richard W. Ingram Executive Vice President President, Treasurer and
Chief Financial Officer
Donald R. Roberson Executive Vice President None
Michael S. Petrucelli Senior Vice President None
Joseph F. Tower III Director, Senior Vice None
President, Treasurer and
Chief Financial Officer
Paula R. David Senior Vice President None
Bernard A. Whalen Senior Vice President None
William S. Nichols Senior Vice President None
William J. Nutt Director None
(c) Not Applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
Accounts, books and other records required by Rules 31a-1 and 31a-2
under the Investment Company Act of 1940, as amended, are maintained and held in
the offices of Registrant's investment manager, Dresdner RCM Global Investors
LLC, Four Embarcadero Center, San Francisco, California 94111 and/or
Registrant's distributor, Funds Distributor, Inc., 60 State Street, Suite 1300,
Boston, Massachusetts 02109.
Records covering portfolio transactions are also maintained and kept
by the funds' custodian, State Street Bank and Trust Company, U.S. Mutual Funds
Services Division, P.O. Box 1713, Boston, Massachusetts 02105, with respect to
Dresdner RCM Biotechnology Fund and Brown Brothers Harriman & Co., 40 Water
Street, Boston, Massachusetts 02109, with respect to Dresdner RCM Emerging
Markets Fund.
ITEM 31. MANAGEMENT SERVICES.
None
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ITEM 32. UNDERTAKINGS.
(a) Not applicable
(b) Registrant undertakes to file a post-effective amendment,
containing reasonably current financial statements with respect to Dresdner
RCM Biotechnology Fund and Dresdner RCM Emerging Markets Fund, which need not
be certified, within four to six months from the effective date of the
Registrant's 1933 Act Registration Statement with respect to such series.
Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of Registrant's latest annual report to shareholders, upon
request and without charge.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, Dresdner RCM Equity Funds, Inc. certifies
that it meets all of the requirements for effectiveness of this
Post-Effective Amendment No. 6 to the Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment No. 6 to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Boston, Commonwealth of Massachusetts, on December 31, 1997.
DRESDNER RCM EQUITY FUNDS, INC.
By: /s/Richard W. Ingram, President
-------------------------------
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 6 to the Registration Statement has been signed
below by the following persons in the capacities and on the date indicated.
Signature Title Date
(1) Principal Executive Officer President December 31, 1997
/s/Richard W. Ingram*
------------------------------
Richard W. Ingram
(2) Chief Financial and Accounting Treasurer December 31, 1997
Officer
/s/Richard W. Ingram*
------------------------------
Richard W. Ingram
<PAGE>
Signature Title Date
(4) Directors
/s/ DeWitt F. Bowman* December 31, 1997
------------------------------
DeWitt F. Bowman
/s/ Pamela A. Farr* December 31, 1997
------------------------------
Pamela A. Farr
/s/ Frank P. Greene * December 31, 1997
------------------------------
Frank P. Greene
/s/ George G.C. Parker * December 31, 1997
------------------------------
George G.C. Parker
*By: /s/Richard W. Ingram December 31, 1997
------------------------------
Richard W. Ingram
as Attorney-in-Fact
- --------------------
* By Richard W. Ingram, pursuant to Power of Attorney dated June 14, 1996, and
incorporated herein by reference to Exhibit 5(a) of Post-Effective Amendment
No. 1.
<PAGE>
RCM EQUITY FUNDS, INC.
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
- --------------------------------------------------------------------------------
RCM Equity Funds, Inc., a Maryland corporation having its principal office
in the State of Maryland in Baltimore City (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The Board of Directors has classified 50,000,000 unissued shares of
capital stock, par value $.0001 per share, of the Corporation, which shares are
currently unclassified, into shares of capital stock, par value $.0001 per
share, of the Corporation of a new series of capital stock having the following
designation:
Designation Number of Shares
----------- ----------------
Dresdner RCM Biotechnology Fund 50,000,000
SECOND: The shares of Dresdner RCM Biotechnology Fund of the Corporation
so classified by the Board of Directors shall have the preferences, conversion
and other rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption set forth in Article IV(5)
of the Corporation's Articles of Incorporation and shall be subject to all
provisions of the Charter of the Corporation relating to stock of the
Corporation generally.
THIRD: The series known as Dresdner RCM Biotechnology Fund has been
classified by the Board of Directors pursuant to authority contained in the
Charter of the Corporation.
IN WITNESS WHEREOF, RCM Equity Funds, Inc. has caused these Articles
Supplementary to be executed by its President and witnessed by its Assistant
Secretary on this 12th day of December, 1997. The President of the Corporation
who signed these Articles Supplementary acknowledges them to be the act of the
Corporation and states under penalties of perjury that, to the best of his
knowledge, information and belief, the matters and facts set forth herein
relating to authorization and approval hereof are true in all material respects.
WITNESS: RCM EQUITY FUNDS, INC.
By: /s/Karen Jacoppo-Wood By: /s/Richard W. Ingram
------------------------------- ------------------------------------
Karen Jacoppo-Wood Richard W. Ingram
Assistant Secretary President
<PAGE>
RCM EQUITY FUNDS, INC.
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
- --------------------------------------------------------------------------------
RCM Equity Funds, Inc., a Maryland corporation, having its principal office
in the State of Maryland in Baltimore City (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The Charter of the Corporation, is amended by;
(a) Amending the corporate name from "RCM Equity Funds, Inc." as stated in
the Corporation's Articles of Incorporation to "Dresdner RCM Equity Funds, Inc".
(b) Amending the names of the corporate series of stock from "RCM Global
Technology Fund", "RCM Global Health Care Fund", "RCM Global Small Cap Fund" and
"RCM Large Cap Growth Fund" to the following, respectively;
Dresdner RCM Global Technology Fund
Dresdner RCM Global Health Care Fund
Dresdner RCM Global Small Cap Fund
Dresdner RCM Large Cap Growth Fund
SECOND: The Corporation is registered as an open-end investment company
under the Investment Company Act of 1940.
THIRD: The amendments to the Charter of the Corporation as set forth
above have been approved by at least a majority of the Board of Directors of
the Corporation and are limited to changes expressly permitted by Section
2-605 of subtitle 6 of Title 2 of the Maryland General Corporation Law to be
made without action by the stockholders of the Corporation.
IN WITNESS WHEREOF, RCM Equity Funds, Inc. has caused these Articles of
Amendment to be executed by its President and witnessed by its Assistant
Secretary on this 12th day of December, 1997. The President of the Corporation
who signed these Articles of Amendment acknowledges them to be the act of the
Corporation and states under penalties of perjury that, to the best of his
knowledge, information and belief, the matters and facts set forth herein
relating to authorization and approval hereof are true in all material respects.
WITNESS: RCM EQUITY FUNDS, INC.
By: /s/Karen Jacoppo-Wood By: /s/Richard W. Ingram
------------------------------- ------------------------------------
Karen Jacoppo-Wood Richard W. Ingram
Assistant Secretary President
<PAGE>
INVESTMENT MANAGEMENT AGREEMENT, POWER OF ATTORNEY
AND SERVICE AGREEMENT
THIS AGREEMENT is entered into this 27th day of December, 1996 by and
between RCM Equity Funds, Inc. (the "Company"), on behalf of RCM Global Health
Care Fund, a series of the Company (the "Fund") and RCM Capital Management,
L.L.C. (the "Investment Manager").
1. APPOINTMENT AND ACCEPTANCE OF APPOINTMENT OF THE INVESTMENT MANAGER
(a) Subject to express provisions and limitations set forth in the
Company's Articles of Incorporation, Bylaws, Form N-lA Registration
Statement under the Investment Company Act of 1940, as amended (the "1940
Act") and under the Securities Act of 1933, as amended (the "1933 Act"),
and the Fund's prospectus as in use from time to time, as well as to the
factors affecting the Company's status as a regulated investment company
under the Internal Revenue Code of 1986, as amended, the Company hereby
grants to the Investment Manager and the Investment Manager hereby accepts
full discretionary authority to manage the investment and reinvestment of
the cash, securities, and other assets of the Fund (the "Portfolio")
presently held by State Street Bank & Trust Company (the "Custodian"), any
proceeds thereof, and any additions thereto, in the Investment Manager's
discretion. In the performance of its duties hereunder, the Investment
Manager shall further be bound by any and all determinations by the Board
of Directors of the Company relating to the investment objectives policies
or restrictions of the Fund, which determinations shall be communicated in
writing to the Investment Manager. For all purposes herein, the Investment
Manager shall be deemed an independent contractor of the Company.
2. POWERS OF THE INVESTMENT MANAGER
Subject to the limitations provided in Section 1 hereof, the Investment
Manager is empowered hereby, through any of its partners, principals, or
appropriate employees, for the benefit of the Fund:
(a) to invest and reinvest in shares, stocks, bonds, notes and other
obligations of every description issued or incurred by governmental bodies,
corporations, mutual funds, trusts, associations or firms, in trade
acceptances and other commercial paper, and in loans and deposits at
interest on call or on time, whether or not secured by collateral;
1
<PAGE>
(b) to purchase and sell commodities or commodities contracts and
investments in put, call, straddle, or spread options;
(c) to enter into forward, future, or swap contracts with respect to the
purchase and sale of securities, currencies, commodities, and commodities
contracts;
(d) to lend its portfolio securities to brokers, dealers and other
financial institutions;
(e) to buy, sell, or exercise options, rights and warrants to subscribe
for stock or securities;
(f) to engage in any other types of investment transactions described in
the Fund's Prospectus and Statement of Additional Information; and
(g) to take such other action, or to direct the Custodian to take such
other action, as may be necessary or desirable to carry out the purpose and
intent of the foregoing.
3. EXECUTION OF PORTFOLIO TRANSACTIONS
(a) The Investment Manager shall provide adequate facilities and qualified
personnel for the placement of, and shall place, orders for the purchase,
or other acquisition, and sale, or other disposition, of portfolio
securities or other portfolio assets for the Fund.
(b) Unless otherwise specified in writing to the Investment Manager by the
Fund, all orders for the purchase and sale of securities for the Portfolio
shall be placed in such markets and through such brokers as in the
Investment Manager's best judgment shall offer the most favorable price and
market for the execution of each transaction; provided, however, that,
subject to the above, the Investment Manager may place orders with
brokerage firms that have sold shares of the Fund or that furnish
statistical and other information to the Investment Manager, taking into
account the value and quality of the brokerage services of such firms,
including the availability and quality of such statistical and other
information. Receipt by the Investment Manager of any such statistical and
other information and services shall not be deemed to give rise to any
requirement for abatement of the advisory fee payable to the Investment
Manager pursuant to Section 5 hereof and Appendix A hereto.
(c) The Fund understands and agrees that the Investment Manager may effect
securities transactions which cause the Fund to pay an amount of commission
in excess of the amount of commission another broker would have charged,
provided, however, that the Investment Manager determines in good faith
that such amount of commission is reasonable in relation to the value of
Fund share sales, statistical, brokerage and other services provided by
such broker, viewed in terms of either the specific transaction or the
2
<PAGE>
Investment Manager's overall responsibilities to the Fund and other clients
for which the Investment Manager exercises investment discretion. The Fund
also understands that the receipt and use of such services will not reduce
the Investment Manager's customary and normal research activities.
(d) The Fund understands and agrees that:
(i) the Investment Manager performs investment management services
for various clients and that the Investment Manager may take action with
respect to any of its other clients which may differ from action taken
or from the timing or nature of action taken with respect to the
Portfolio, so long as it is the Investment Manager's policy, to the
extent practical, to allocate investment opportunities to the Portfolio
over a period of time on a fair and equitable basis relative to other
clients;
(ii) the Investment Manager shall have no obligation to purchase or
sell for the Portfolio any security which the Investment Manager, or its
principals or employees, may purchase or sell for its or their own
accounts or the account of any other client, if in the opinion of the
Investment Manager such transaction or investment appears unsuitable,
impractical or undesirable for the Portfolio;
(iii) on occasions when the Investment Manager deems the purchase or
sale of a security to be in the best interests of the Fund as well as
other clients of the Investment Manager, the Investment Manager, to the
extent permitted by applicable laws and regulations, may aggregate the
securities to be so sold or purchased when the Investment Manager
believes that to do so will be in the best interests of the Fund. In
such event, allocation of the securities so purchased or sold, as well
as the expenses incurred in the transaction, shall be made by the
Investment Manager in the manner the Investment Manager considers to be
the most equitable and consistent with its fiduciary obligations to the
Fund and to such other clients; and
(iv) the Investment Manager does not prohibit any of its principals
or employees from purchasing or selling for their own accounts
securities that may be recommended to or held by the Investment
Manager's clients, subject to the provisions of the Investment Manager's
Code of Ethics and that of the Company.
4. ALLOCATION OF EXPENSES OF THE COMPANY AND THE FUND
(a) The Investment Manager will bear all expenses related to salaries of
its employees and to the Investment Manager's overhead in connection with
its duties under this Agreement. The Investment Manager also will pay all
fees and salaries of the Company's directors and officers who are
affiliated persons (as such term is defined in the 1940 Act) of the
Investment Manager.
3
<PAGE>
(b) Except for the expenses specifically assumed by the Investment
Manager, the Fund will pay all of its expenses, including, without
limitation, fees and expenses of the directors not affiliated with the
Investment Manager attributable to the Fund; fees of the Investment
Manager; fees of the Fund's administrator, custodian and subcustodians for
all services to the Fund (including safekeeping of funds and securities and
maintaining required books and accounts); transfer agent, registrar and
dividend reinvestment and disbursing agent interest charges; taxes;
charges and expenses of the Fund's legal counsel and independent
accountants; charges and expenses of legal counsel provided to the
non-interested directors of the Company; expenses of repurchasing shares of
the Fund; expenses of printing and mailing share certificates, stockholder
reports, notices, proxy statements and reports to governmental agencies;
brokerage and other expenses connected with the execution, recording and
settlement of portfolio security transactions; expenses connected with
negotiating, or effecting purchases or sales of portfolio securities or
registering privately issued portfolio securities; expenses of calculating
and publishing the net asset value of the Fund's shares; expenses of
membership in investment company associations; premiums and other costs
associated with the acquisition of a mutual fund directors and officers
errors and omissions liability insurance policy; expenses of fidelity
bonding and other insurance premiums; expenses of stockholders' meetings;
and SEC and state blue sky registration fees.
(c) The expenses borne by the Fund pursuant to Section 4(b) shall include
the Fund's proportionate share of any such expenses of the Company, which
shall be allocated among the Fund and the other series of the Company on
such basis as the Company shall deem appropriate.
5. COMPENSATION OF THE INVESTMENT MANAGER
(a) In consideration of the services performed by the Investment Manager
hereunder, the Fund will pay or cause to be paid to the Investment Manager,
as they become due and payable, management fees determined in accordance
with the attached Schedule of Fees (Appendix A). In the event of
termination, any management fees paid in advance pursuant to such fee
schedule will be prorated as of the date of termination and the unearned
portion thereof will be returned to the Fund.
(b) The net asset value of the Fund's portfolio used in fee calculations
shall be determined in the manner set forth in the Articles of
Incorporation and Bylaws of the Company and the Fund's prospectus as of the
close of regular trading on the New York Stock Exchange on each business
day the New York Stock Exchange is open.
(c) The Fund hereby authorizes the Investment Manager to charge the
Portfolio, subject to the provisions in Section 6 hereof, for the full
amount of fees as they become due and
4
<PAGE>
payable pursuant to the attached schedule of fees; provided, however, that
a copy of a fee statement covering said payment shall be sent to the
Custodian and to the Company.
(d) The Investment Manager may from time to time voluntarily agree to
limit the aggregate operating expenses of the Fund for one or more fiscal
years of the Company, as set forth in Appendix A hereto or in any other
written agreement with the Company. If in any such fiscal year the
aggregate operating expenses of the Fund (as defined in Appendix A or such
other written agreement) exceed the applicable percentage of the average
daily net assets of the Fund for such fiscal year, the Investment Manager
shall reimburse the Fund for such excess operating expenses. Such
operating expense reimbursement, if any, shall be estimated, reconciled and
paid on a quarterly basis, or such more frequent basis as the Investment
Manager may agree in writing. Any such reimbursement of the Fund shall be
repaid to the Investment Manager by the Fund, without interest, at such
later time or times as it may be repaid without causing the aggregating
operating expenses of the Fund to exceed the applicable percentage of the
average daily net assets of the Fund for the period in which it is repaid;
provided, however, that upon termination of this Agreement, the Fund shall
have no further obligation to repay any such reimbursements.
6. SERVICE TO OTHER CLIENTS
Nothing contained in this Agreement shall be construed to prohibit the
Investment Manager from performing investment advisory, management,
distribution or other services for other investment companies and other
persons, trusts or companies, or to prohibit affiliates of the Investment
Manager from engaging in such businesses or in other related or unrelated
businesses.
7. STANDARD OF CARE
The Investment Manager shall have no liability to the Fund, or its
stockholders, for any error of judgment, mistake of law, loss arising out
of any investment, or other act or omission in the performance of its
obligations to the Fund not involving willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations and duties hereunder.
The federal securities laws impose liabilities under certain circumstances
on persons who act in good faith, and therefore nothing herein shall in any
way constitute a waiver or limitation of any rights which the undersigned
may have under any federal securities laws.
8. DURATION OF AGREEMENT
5
<PAGE>
This Agreement shall continue in effect until the close of business on
December 27, 1998. This Agreement may thereafter be renewed from year to
year by mutual consent, provided that such renewal shall be specifically
approved at least annually by (i) the Board of Directors of the Company, or
by the vote of a majority (as defined in the 1940 Act) of the outstanding
voting securities of the Company, and (ii) a majority of those directors
who are not parties to this Agreement or interested persons (as defined in
the 1940 Act) of any such party cast in person at a meeting called for the
purpose of voting on such approval.
9. TERMINATION
This Agreement may be terminated at any time, without payment of any
penalty, by the Board of Directors of the Company or by the vote of a
majority (as defined in the 1940 Act) of the outstanding voting securities
of the Company on sixty (60) days' written notice to the Investment
Manager, or by the Investment Manager on like notice to the Company. This
Agreement shall automatically terminate in the event of its assignment (as
defined in the 1940 Act).
10. REPORTS, BOOKS AND RECORDS
The Investment Manager shall render to the Board of Directors of the
Company such periodic and other reports as the Board may from time to time
reasonably request. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Investment Manager hereby agrees that all records
which it maintains for the Company are property of the Company. The
Investment Manager shall surrender promptly to the Company any of such
records upon the Company's request, and shall preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act the records required to be
maintained by Rule 31a-1 under the 1940 Act.
11. REPRESENTATIONS AND WARRANTIES
The Investment Manager represents and warrants to the Company that the
Investment Manager is registered as an investment adviser under the
Investment Advisers Act of 1940. During the term of this Agreement, the
Investment Manager shall notify the Company of any change in the membership
of the Investment Manager's partnership within a reasonable time after such
change. The Company represents and warrants to the Investment Manager that
the company is registered as an open-end management investment company
under the 1940 Act. Each party further represents and warrants to the
other that this Agreement has been duly authorized by such party and
constitutes the legal, valid and binding obligation of such party in
accordance with its terms.
6
<PAGE>
12. AMENDMENT OF THIS AGREEMENT
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination
is sought.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate originals by their officers thereunto duly authorized as
of the date first above written.
RCM CAPITAL MANAGEMENT, L.L.C. RCM EQUITY FUNDS, INC.
ON BEHALF OF RCM GLOBAL HEALTH
CARE FUND
By: /s/William L. Price By: /s/Richard W. Ingram
------------------- --------------------
ATTEST: ATTEST:
By: /s/Tim Parker By: /s/Karen Jacoppo-Wood
------------- ---------------------
7
<PAGE>
APPENDIX A
INVESTMENT MANAGEMENT AGREEMENT, POWER OF ATTORNEY,
AND SERVICE AGREEMENT
BETWEEN DRESDNER RCM GLOBAL INVESTORS LLC (the "INVESTMENT MANAGER")
AND DRESDNER RCM EQUITY FUNDS, INC.
SCHEDULE OF FEES
FOR DRESDNER RCM GLOBAL HEALTH CARE FUND
Effective Date: January 1, 1997
The Fund will pay a monthly fee to the Investment Manager based on the average
daily net assets of the Fund. The fee shall be determined pursuant to the
following schedule:
Value of Securities and Cash of Fund Fee
------------------------------------ ---
the first $500 million 1.00% annually
above $500 million and below $1 billion 0.95% annually
above $1 billion 0.90% annually
The Investment Manager, until at least December 31, 1998, shall pay the Fund on
a quarterly basis the amount, if any, by which ordinary operating expenses of
the Company attributable to the Fund for the quarter (except interest, taxes and
extraordinary expenses) exceed the annualized rate of 1.50% of the value of the
average daily net assets of the Fund. In subsequent years the Fund with
reimburse the Investment Manager for any such payments to the extent that the
Fund's operating expenses are otherwise below this expense cap.
Dated: as of December 30, 1997
DRESNDER RCM GLOBAL INVESTORS LLC DRESDNER RCM EQUITY FUNDS, INC.
ON BEHALF OF DRESDNER RCM GLOBAL
HEALTH CARE FUND
By: /s/William L. Price By: /s/Richard W. Ingram
------------------- --------------------
ATTEST: ATTEST:
By: /s/Tim Parker By: /s/Karen Jacoppo-Wood
------------- ---------------------
8
<PAGE>
INVESTMENT MANAGEMENT AGREEMENT, POWER OF ATTORNEY
AND SERVICE AGREEMENT
THIS AGREEMENT is entered into this 27th day of December, 1996 by and
between RCM Equity Funds, Inc. (the "Company"), on behalf of RCM Global Small
Cap Fund, a series of the Company (the "Fund") and RCM Capital Management,
L.L.C. (the "Investment Manager").
1. APPOINTMENT AND ACCEPTANCE OF APPOINTMENT OF THE INVESTMENT MANAGER
(a) Subject to express provisions and limitations set forth in the
Company's Articles of Incorporation, Bylaws, Form N-lA Registration
Statement under the Investment Company Act of 1940, as amended (the "1940
Act") and under the Securities Act of 1933, as amended (the "1933 Act"),
and the Fund's prospectus as in use from time to time, as well as to the
factors affecting the Company's status as a regulated investment company
under the Internal Revenue Code of 1986, as amended, the Company hereby
grants to the Investment Manager and the Investment Manager hereby accepts
full discretionary authority to manage the investment and reinvestment of
the cash, securities, and other assets of the Fund (the "Portfolio")
presently held by State Street Bank & Trust Company (the "Custodian"), any
proceeds thereof, and any additions thereto, in the Investment Manager's
discretion. In the performance of its duties hereunder, the Investment
Manager shall further be bound by any and all determinations by the Board
of Directors of the Company relating to the investment objectives policies
or restrictions of the Fund, which determinations shall be communicated in
writing to the Investment Manager. For all purposes herein, the Investment
Manager shall be deemed an independent contractor of the Company.
2. POWERS OF THE INVESTMENT MANAGER
Subject to the limitations provided in Section 1 hereof, the Investment
Manager is empowered hereby, through any of its partners, principals, or
appropriate employees, for the benefit of the Fund:
(a) to invest and reinvest in shares, stocks, bonds, notes and other
obligations of every description issued or incurred by governmental bodies,
corporations, mutual funds, trusts, associations or firms, in trade
acceptances and other commercial paper, and in loans and deposits at
interest on call or on time, whether or not secured by collateral;
1
<PAGE>
(b) to purchase and sell commodities or commodities contracts and
investments in put, call, straddle, or spread options;
(c) to enter into forward, future, or swap contracts with respect to the
purchase and sale of securities, currencies, commodities, and commodities
contracts;
(d) to lend its portfolio securities to brokers, dealers and other
financial institutions;
(e) to buy, sell, or exercise options, rights and warrants to subscribe
for stock or securities;
(f) to engage in any other types of investment transactions described in
the Fund's Prospectus and Statement of Additional Information; and
(g) to take such other action, or to direct the Custodian to take such
other action, as may be necessary or desirable to carry out the purpose and
intent of the foregoing.
3. EXECUTION OF PORTFOLIO TRANSACTIONS
(a) The Investment Manager shall provide adequate facilities and qualified
personnel for the placement of, and shall place, orders for the purchase,
or other acquisition, and sale, or other disposition, of portfolio
securities or other portfolio assets for the Fund.
(b) Unless otherwise specified in writing to the Investment Manager by the
Fund, all orders for the purchase and sale of securities for the Portfolio
shall be placed in such markets and through such brokers as in the
Investment Manager's best judgment shall offer the most favorable price and
market for the execution of each transaction; provided, however, that,
subject to the above, the Investment Manager may place orders with
brokerage firms that have sold shares of the Fund or that furnish
statistical and other information to the Investment Manager, taking into
account the value and quality of the brokerage services of such firms,
including the availability and quality of such statistical and other
information. Receipt by the Investment Manager of any such statistical and
other information and services shall not be deemed to give rise to any
requirement for abatement of the advisory fee payable to the Investment
Manager pursuant to Section 5 hereof and Appendix A hereto.
(c) The Fund understands and agrees that the Investment Manager may effect
securities transactions which cause the Fund to pay an amount of commission
in excess of the amount of commission another broker would have charged,
provided, however, that the Investment Manager determines in good faith
that such amount of commission is reasonable in relation to the value of
Fund share sales, statistical, brokerage and other services provided by
such broker, viewed in terms of either the specific transaction or the
2
<PAGE>
Investment Manager's overall responsibilities to the Fund and other clients
for which the Investment Manager exercises investment discretion. The Fund
also understands that the receipt and use of such services will not reduce
the Investment Manager's customary and normal research activities.
(d) The Fund understands and agrees that:
(i) the Investment Manager performs investment management services
for various clients and that the Investment Manager may take action with
respect to any of its other clients which may differ from action taken or
from the timing or nature of action taken with respect to the Portfolio, so
long as it is the Investment Manager's policy, to the extent practical, to
allocate investment opportunities to the Portfolio over a period of time on
a fair and equitable basis relative to other clients;
(ii) the Investment Manager shall have no obligation to purchase or
sell for the Portfolio any security which the Investment Manager, or its
principals or employees, may purchase or sell for its or their own accounts
or the account of any other client, if in the opinion of the Investment
Manager such transaction or investment appears unsuitable, impractical or
undesirable for the Portfolio;
(iii) on occasions when the Investment Manager deems the purchase or
sale of a security to be in the best interests of the Fund as well as other
clients of the Investment Manager, the Investment Manager, to the extent
permitted by applicable laws and regulations, may aggregate the securities
to be so sold or purchased when the Investment Manager believes that to do
so will be in the best interests of the Fund. In such event, allocation of
the securities so purchased or sold, as well as the expenses incurred in
the transaction, shall be made by the Investment Manager in the manner the
Investment Manager considers to be the most equitable and consistent with
its fiduciary obligations to the Fund and to such other clients; and
(iv) the Investment Manager does not prohibit any of its principals
or employees from purchasing or selling for their own accounts securities
that may be recommended to or held by the Investment Manager's clients,
subject to the provisions of the Investment Manager's Code of Ethics and
that of the Company.
4. ALLOCATION OF EXPENSES OF THE COMPANY AND THE FUND
(a) The Investment Manager will bear all expenses related to salaries of
its employees and to the Investment Manager's overhead in connection with
its duties under this Agreement. The Investment Manager also will pay all
fees and salaries of the Company's directors and officers who are
affiliated persons (as such term is defined in the 1940 Act) of the
Investment Manager.
3
<PAGE>
(b) Except for the expenses specifically assumed by the Investment
Manager, the Fund will pay all of its expenses, including, without
limitation, fees and expenses of the directors not affiliated with the
Investment Manager attributable to the Fund; fees of the Investment
Manager; fees of the Fund's administrator, custodian and subcustodians for
all services to the Fund (including safekeeping of funds and securities and
maintaining required books and accounts); transfer agent, registrar and
dividend reinvestment and disbursing agent interest charges; taxes;
charges and expenses of the Fund's legal counsel and independent
accountants; charges and expenses of legal counsel provided to the
non-interested directors of the Company; expenses of repurchasing shares of
the Fund; expenses of printing and mailing share certificates, stockholder
reports, notices, proxy statements and reports to governmental agencies;
brokerage and other expenses connected with the execution, recording and
settlement of portfolio security transactions; expenses connected with
negotiating, or effecting purchases or sales of portfolio securities or
registering privately issued portfolio securities; expenses of calculating
and publishing the net asset value of the Fund's shares; expenses of
membership in investment company associations; premiums and other costs
associated with the acquisition of a mutual fund directors and officers
errors and omissions liability insurance policy; expenses of fidelity
bonding and other insurance premiums; expenses of stockholders' meetings;
and SEC and state blue sky registration fees.
(c) The expenses borne by the Fund pursuant to Section 4(b) shall include
the Fund's proportionate share of any such expenses of the Company, which
shall be allocated among the Fund and the other series of the Company on
such basis as the Company shall deem appropriate.
5. COMPENSATION OF THE INVESTMENT MANAGER
(a) In consideration of the services performed by the Investment Manager
hereunder, the Fund will pay or cause to be paid to the Investment Manager,
as they become due and payable, management fees determined in accordance
with the attached Schedule of Fees (Appendix A). In the event of
termination, any management fees paid in advance pursuant to such fee
schedule will be prorated as of the date of termination and the unearned
portion thereof will be returned to the Fund.
(b) The net asset value of the Fund's portfolio used in fee calculations
shall be determined in the manner set forth in the Articles of
Incorporation and Bylaws of the Company and the Fund's prospectus as of the
close of regular trading on the New York Stock Exchange on each business
day the New York Stock Exchange is open.
(c) The Fund hereby authorizes the Investment Manager to charge the
Portfolio, subject to the provisions in Section 6 hereof, for the full
amount of fees as they become due and
4
<PAGE>
payable pursuant to the attached schedule of fees; provided, however, that
a copy of a fee statement covering said payment shall be sent to the
Custodian and to the Company.
(d) The Investment Manager may from time to time voluntarily agree to
limit the aggregate operating expenses of the Fund for one or more fiscal
years of the Company, as set forth in Appendix A hereto or in any other
written agreement with the Company. If in any such fiscal year the
aggregate operating expenses of the Fund (as defined in Appendix A or such
other written agreement) exceed the applicable percentage of the average
daily net assets of the Fund for such fiscal year, the Investment Manager
shall reimburse the Fund for such excess operating expenses. Such
operating expense reimbursement, if any, shall be estimated, reconciled and
paid on a quarterly basis, or such more frequent basis as the Investment
Manager may agree in writing. Any such reimbursement of the Fund shall be
repaid to the Investment Manager by the Fund, without interest, at such
later time or times as it may be repaid without causing the aggregating
operating expenses of the Fund to exceed the applicable percentage of the
average daily net assets of the Fund for the period in which it is repaid;
provided, however, that upon termination of this Agreement, the Fund shall
have no further obligation to repay any such reimbursements.
6. SERVICE TO OTHER CLIENTS
Nothing contained in this Agreement shall be construed to prohibit the
Investment Manager from performing investment advisory, management,
distribution or other services for other investment companies and other
persons, trusts or companies, or to prohibit affiliates of the Investment
Manager from engaging in such businesses or in other related or unrelated
businesses.
7. STANDARD OF CARE
The Investment Manager shall have no liability to the Fund, or its
stockholders, for any error of judgment, mistake of law, loss arising out
of any investment, or other act or omission in the performance of its
obligations to the Fund not involving willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations and duties hereunder.
The federal securities laws impose liabilities under certain circumstances
on persons who act in good faith, and therefore nothing herein shall in any
way constitute a waiver or limitation of any rights which the undersigned
may have under any federal securities laws.
8. DURATION OF AGREEMENT
5
<PAGE>
This Agreement shall continue in effect until the close of business on
December 27, 1998. This Agreement may thereafter be renewed from year to
year by mutual consent, provided that such renewal shall be specifically
approved at least annually by (i) the Board of Directors of the Company, or
by the vote of a majority (as defined in the 1940 Act) of the outstanding
voting securities of the Company, and (ii) a majority of those directors
who are not parties to this Agreement or interested persons (as defined in
the 1940 Act) of any such party cast in person at a meeting called for the
purpose of voting on such approval.
9. TERMINATION
This Agreement may be terminated at any time, without payment of any
penalty, by the Board of Directors of the Company or by the vote of a
majority (as defined in the 1940 Act) of the outstanding voting securities
of the Company on sixty (60) days' written notice to the Investment
Manager, or by the Investment Manager on like notice to the Company. This
Agreement shall automatically terminate in the event of its assignment (as
defined in the 1940 Act).
10. REPORTS, BOOKS AND RECORDS
The Investment Manager shall render to the Board of Directors of the
Company such periodic and other reports as the Board may from time to time
reasonably request. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Investment Manager hereby agrees that all records
which it maintains for the Company are property of the Company. The
Investment Manager shall surrender promptly to the Company any of such
records upon the Company's request, and shall preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act the records required to be
maintained by Rule 31a-1 under the 1940 Act.
11. REPRESENTATIONS AND WARRANTIES
The Investment Manager represents and warrants to the Company that the
Investment Manager is registered as an investment adviser under the
Investment Advisers Act of 1940. During the term of this Agreement, the
Investment Manager shall notify the Company of any change in the membership
of the Investment Manager's partnership within a reasonable time after such
change. The Company represents and warrants to the Investment Manager that
the company is registered as an open-end management investment company
under the 1940 Act. Each party further represents and warrants to the
other that this Agreement has been duly authorized by such party and
constitutes the legal, valid and binding obligation of such party in
accordance with its terms.
6
<PAGE>
12. AMENDMENT OF THIS AGREEMENT
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination
is sought.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate originals by their officers thereunto duly authorized as
of the date first above written.
RCM CAPITAL MANAGEMENT, L.L.C. RCM EQUITY FUNDS, INC.
ON BEHALF OF RCM GLOBAL SMALL CAP
FUND
By: /s/William L. Price By: /s/Richard W. Ingram
------------------- --------------------
ATTEST: ATTEST:
By:/s/Tim Parker By: /s/Karen Jacoppo-Wood
------------- ---------------------
7
<PAGE>
APPENDIX A
INVESTMENT MANAGEMENT AGREEMENT, POWER OF ATTORNEY,
AND SERVICE AGREEMENT
BETWEEN DRESDNER RCM GLOBAL INVESTORS LLC (the "INVESTMENT MANAGER")
AND DRESDNER RCM EQUITY FUNDS, INC.
SCHEDULE OF FEES
FOR DRESDNER RCM GLOBAL SMALL CAP FUND
Effective Date: January 1, 1997
The Fund will pay a monthly fee to the Investment Manager based on the average
daily net assets of the Fund. The fee shall be determined pursuant to the
following schedule:
Value of Securities and Cash of Fund Fee
------------------------------------ ---
the first $500 million 1.00% annually
above $500 million and below $1 billion 0.95% annually
above $1 billion 0.90% annually
The Investment Manager, until at least December 31, 1998, shall pay the Fund on
a quarterly basis the amount, if any, by which ordinary operating expenses of
the Company attributable to the Fund for the quarter (except interest, taxes and
extraordinary expenses) exceed the annualized rate of 1.75% of the value of the
average daily net assets of the Fund. In subsequent years, the Fund will
reimburse the Investment Manager for any such payments to the extent that the
Fund's operating expenses are otherwise below this expense cap.
Dated: as of December 30, 1997
DRESDNER RCM GLOBAL INVESTORS LLC DRESDNER RCM EQUITY FUNDS, INC.
ON BEHALF OF DRESDNER RCM GLOBAL
SMALL CAP FUND
By: /s/William L. Price By: /s/Richard W. Ingram
------------------- --------------------
ATTEST: ATTEST:
By: /s/Tim Parker By: /s/Karen Jacoppo-Wood
------------- ---------------------
8
<PAGE>
INVESTMENT MANAGEMENT AGREEMENT, POWER OF ATTORNEY
AND SERVICE AGREEMENT
THIS AGREEMENT is entered into this 27th day of December, 1996 by and
between RCM Equity Funds, Inc. (the "Company"), on behalf of RCM Large Cap
Growth Fund, a series of the Company (the "Fund") and RCM Capital Management,
L.L.C. (the "Investment Manager").
1. APPOINTMENT AND ACCEPTANCE OF APPOINTMENT OF THE INVESTMENT MANAGER
(a) Subject to express provisions and limitations set forth in the
Company's Articles of Incorporation, Bylaws, Form N-lA Registration
Statement under the Investment Company Act of 1940, as amended (the
"1940 Act") and under the Securities Act of 1933, as amended (the
"1933 Act"), and the Fund's prospectus as in use from time to time, as
well as to the factors affecting the Company's status as a regulated
investment company under the Internal Revenue Code of 1986, as
amended, the Company hereby grants to the Investment Manager and the
Investment Manager hereby accepts full discretionary authority to
manage the investment and reinvestment of the cash, securities, and
other assets of the Fund (the "Portfolio") presently held by State
Street Bank & Trust Company (the "Custodian"), any proceeds thereof,
and any additions thereto, in the Investment Manager's discretion. In
the performance of its duties hereunder, the Investment Manager shall
further be bound by any and all determinations by the Board of
Directors of the Company relating to the investment objectives
policies or restrictions of the Fund, which determinations shall be
communicated in writing to the Investment Manager. For all purposes
herein, the Investment Manager shall be deemed an independent
contractor of the Company.
2. POWERS OF THE INVESTMENT MANAGER
Subject to the limitations provided in Section 1 hereof, the
Investment Manager is empowered hereby, through any of its partners,
principals, or appropriate employees, for the benefit of the Fund:
(a) to invest and reinvest in shares, stocks, bonds, notes and other
obligations of every description issued or incurred by governmental
bodies, corporations, mutual funds, trusts, associations or firms, in
trade acceptances and other commercial paper, and in loans and
deposits at interest on call or on time, whether or not secured by
collateral;
1
<PAGE>
(b) to purchase and sell commodities or commodities contracts and
investments in put, call, straddle, or spread options;
(c) to enter into forward, future, or swap contracts with respect to
the purchase and sale of securities, currencies, commodities, and
commodities contracts;
(d) to lend its portfolio securities to brokers, dealers and other
financial institutions;
(e) to buy, sell, or exercise options, rights and warrants to
subscribe for stock or securities;
(f) to engage in any other types of investment transactions described
in the Fund's Prospectus and Statement of Additional Information; and
(g) to take such other action, or to direct the Custodian to take
such other action, as may be necessary or desirable to carry out the
purpose and intent of the foregoing.
3. EXECUTION OF PORTFOLIO TRANSACTIONS
(a) The Investment Manager shall provide adequate facilities and
qualified personnel for the placement of, and shall place, orders for
the purchase, or other acquisition, and sale, or other disposition, of
portfolio securities or other portfolio assets for the Fund.
(b) Unless otherwise specified in writing to the Investment Manager
by the Fund, all orders for the purchase and sale of securities for
the Portfolio shall be placed in such markets and through such brokers
as in the Investment Manager's best judgment shall offer the most
favorable price and market for the execution of each transaction;
provided, however, that, subject to the above, the Investment Manager
may place orders with brokerage firms that have sold shares of the
Fund or that furnish statistical and other information to the
Investment Manager, taking into account the value and quality of the
brokerage services of such firms, including the availability and
quality of such statistical and other information. Receipt by the
Investment Manager of any such statistical and other information and
services shall not be deemed to give rise to any requirement for
abatement of the advisory fee payable to the Investment Manager
pursuant to Section 5 hereof and Appendix A hereto.
(c) The Fund understands and agrees that the Investment Manager may
effect securities transactions which cause the Fund to pay an amount
of commission in excess of the amount of commission another broker
would have charged, provided, however, that the Investment Manager
determines in good faith that such amount of commission is reasonable
in relation to the value of Fund share sales, statistical, brokerage
and other services provided by such broker, viewed in terms of either
the specific transaction or the
2
<PAGE>
Investment Manager's overall responsibilities to the Fund and
other clients for which the Investment Manager exercises investment
discretion. The Fund also understands that the receipt and use of such
services will not reduce the Investment Manager's customary and normal
research activities.
(d) The Fund understands and agrees that:
(i) the Investment Manager performs investment management
services for various clients and that the Investment Manager may take
action with respect to any of its other clients which may differ from
action taken or from the timing or nature of action taken with respect
to the Portfolio, so long as it is the Investment Manager's policy, to
the extent practical, to allocate investment opportunities to the
Portfolio over a period of time on a fair and equitable basis relative
to other clients;
(ii) the Investment Manager shall have no obligation to
purchase or sell for the Portfolio any security which the Investment
Manager, or its principals or employees, may purchase or sell for its
or their own accounts or the account of any other client, if in the
opinion of the Investment Manager such transaction or investment
appears unsuitable, impractical or undesirable for the Portfolio;
(iii) on occasions when the Investment Manager deems the
purchase or sale of a security to be in the best interests of the Fund
as well as other clients of the Investment Manager, the Investment
Manager, to the extent permitted by applicable laws and regulations,
may aggregate the securities to be so sold or purchased when the
Investment Manager believes that to do so will be in the best
interests of the Fund. In such event, allocation of the securities so
purchased or sold, as well as the expenses incurred in the
transaction, shall be made by the Investment Manager in the manner the
Investment Manager considers to be the most equitable and consistent
with its fiduciary obligations to the Fund and to such other clients;
and
(iv) the Investment Manager does not prohibit any of its
principals or employees from purchasing or selling for their own
accounts securities that may be recommended to or held by the
Investment Manager's clients, subject to the provisions of the
Investment Manager's Code of Ethics and that of the Company.
4. ALLOCATION OF EXPENSES OF THE COMPANY AND THE FUND
(a) The Investment Manager will bear all expenses related to salaries
of its employees and to the Investment Manager's overhead in
connection with its duties under this Agreement. The Investment
Manager also will pay all fees and salaries of the Company's directors
and officers who are affiliated persons (as such term is defined in
the 1940 Act) of the Investment Manager.
3
<PAGE>
(b) Except for the expenses specifically assumed by the Investment
Manager, the Fund will pay all of its expenses, including, without
limitation, fees and expenses of the directors not affiliated with the
Investment Manager attributable to the Fund; fees of the Investment
Manager; fees of the Fund's administrator, custodian and subcustodians
for all services to the Fund (including safekeeping of funds and
securities and maintaining required books and accounts); transfer
agent, registrar and dividend reinvestment and disbursing agent
interest charges; taxes; charges and expenses of the Fund's legal
counsel and independent accountants; charges and expenses of legal
counsel provided to the non-interested directors of the Company;
expenses of repurchasing shares of the Fund; expenses of printing and
mailing share certificates, stockholder reports, notices, proxy
statements and reports to governmental agencies; brokerage and other
expenses connected with the execution, recording and settlement of
portfolio security transactions; expenses connected with negotiating,
or effecting purchases or sales of portfolio securities or registering
privately issued portfolio securities; expenses of calculating and
publishing the net asset value of the Fund's shares; expenses of
membership in investment company associations; premiums and other
costs associated with the acquisition of a mutual fund directors and
officers errors and omissions liability insurance policy; expenses of
fidelity bonding and other insurance premiums; expenses of
stockholders' meetings; and SEC and state blue sky registration fees.
(c) The expenses borne by the Fund pursuant to Section 4(b) shall
include the Fund's proportionate share of any such expenses of the
Company, which shall be allocated among the Fund and the other series
of the Company on such basis as the Company shall deem appropriate.
5. COMPENSATION OF THE INVESTMENT MANAGER
(a) In consideration of the services performed by the Investment
Manager hereunder, the Fund will pay or cause to be paid to the
Investment Manager, as they become due and payable, management fees
determined in accordance with the attached Schedule of Fees
(Appendix A). In the event of termination, any management fees paid in
advance pursuant to such fee schedule will be prorated as of the date
of termination and the unearned portion thereof will be returned to
the Fund.
(b) The net asset value of the Fund's portfolio used in fee
calculations shall be determined in the manner set forth in the
Articles of Incorporation and Bylaws of the Company and the Fund's
prospectus as of the close of regular trading on the New York Stock
Exchange on each business day the New York Stock Exchange is open.
(c) The Fund hereby authorizes the Investment Manager to charge the
Portfolio, subject to the provisions in Section 6 hereof, for the full
amount of fees as they become due and
4
<PAGE>
payable pursuant to the attached schedule of fees; provided, however,
that a copy of a fee statement covering said payment shall be sent to
the Custodian and to the Company.
(d) The Investment Manager may from time to time voluntarily agree to
limit the aggregate operating expenses of the Fund for one or more
fiscal years of the Company, as set forth in Appendix A hereto or in
any other written agreement with the Company. If in any such fiscal
year the aggregate operating expenses of the Fund (as defined in
Appendix A or such other written agreement) exceed the applicable
percentage of the average daily net assets of the Fund for such fiscal
year, the Investment Manager shall reimburse the Fund for such excess
operating expenses. Such operating expense reimbursement, if any,
shall be estimated, reconciled and paid on a quarterly basis, or such
more frequent basis as the Investment Manager may agree in writing.
Any such reimbursement of the Fund shall be repaid to the Investment
Manager by the Fund, without interest, at such later time or times as
it may be repaid without causing the aggregating operating expenses of
the Fund to exceed the applicable percentage of the average daily net
assets of the Fund for the period in which it is repaid; provided,
however, that upon termination of this Agreement, the Fund shall have
no further obligation to repay any such reimbursements.
6. SERVICE TO OTHER CLIENTS
Nothing contained in this Agreement shall be construed to prohibit the
Investment Manager from performing investment advisory, management,
distribution or other services for other investment companies and
other persons, trusts or companies, or to prohibit affiliates of the
Investment Manager from engaging in such businesses or in other
related or unrelated businesses.
7. STANDARD OF CARE
The Investment Manager shall have no liability to the Fund, or its
stockholders, for any error of judgment, mistake of law, loss arising
out of any investment, or other act or omission in the performance of
its obligations to the Fund not involving willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations and
duties hereunder. The federal securities laws impose liabilities
under certain circumstances on persons who act in good faith, and
therefore nothing herein shall in any way constitute a waiver or
limitation of any rights which the undersigned may have under any
federal securities laws.
8. DURATION OF AGREEMENT
5
<PAGE>
This Agreement shall continue in effect until the close of business on
December 27, 1998. This Agreement may thereafter be renewed from year
to year by mutual consent, provided that such renewal shall be
specifically approved at least annually by (i) the Board of Directors
of the Company, or by the vote of a majority (as defined in the 1940
Act) of the outstanding voting securities of the Company, and (ii) a
majority of those directors who are not parties to this Agreement or
interested persons (as defined in the 1940 Act) of any such party cast
in person at a meeting called for the purpose of voting on such
approval.
9. TERMINATION
This Agreement may be terminated at any time, without payment of any
penalty, by the Board of Directors of the Company or by the vote of a
majority (as defined in the 1940 Act) of the outstanding voting
securities of the Company on sixty (60) days' written notice to the
Investment Manager, or by the Investment Manager on like notice to the
Company. This Agreement shall automatically terminate in the event of
its assignment (as defined in the 1940 Act).
10. REPORTS, BOOKS AND RECORDS
The Investment Manager shall render to the Board of Directors of the
Company such periodic and other reports as the Board may from time to
time reasonably request. In compliance with the requirements of Rule
31a-3 under the 1940 Act, the Investment Manager hereby agrees that
all records which it maintains for the Company are property of the
Company. The Investment Manager shall surrender promptly to the
Company any of such records upon the Company's request, and shall
preserve for the periods prescribed by Rule 31a-2 under the 1940 Act
the records required to be maintained by Rule 31a-1 under the 1940
Act.
11. REPRESENTATIONS AND WARRANTIES
The Investment Manager represents and warrants to the Company that the
Investment Manager is registered as an investment adviser under the
Investment Advisers Act of 1940. During the term of this Agreement,
the Investment Manager shall notify the Company of any change in the
membership of the Investment Manager's partnership within a reasonable
time after such change. The Company represents and warrants to the
Investment Manager that the company is registered as an open-end
management investment company under the 1940 Act. Each party further
represents and warrants to the other that this Agreement has been duly
authorized by such party and constitutes the legal, valid and binding
obligation of such party in accordance with its terms.
6
<PAGE>
12. AMENDMENT OF THIS AGREEMENT
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the
party against which enforcement of the change, waiver, discharge or
termination is sought.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in duplicate originals by their officers thereunto duly
authorized as of the date first above written.
RCM CAPITAL MANAGEMENT, L.L.C. RCM EQUITY FUNDS, INC.
ON BEHALF OF RCM LARGE CAP GROWTH
FUND
By: /s/WILLIAM L. PRICE By: /s/RICHARD W. INGRAM
------------------------ ------------------------
ATTEST: ATTEST:
By: /s/TIM PARKER By: /s/KAREN JACOPPO-WOOD
------------------------ ------------------------
7
<PAGE>
APPENDIX A
INVESTMENT MANAGEMENT AGREEMENT, POWER OF ATTORNEY,
AND SERVICE AGREEMENT
BETWEEN DRESDNER RCM GLOBAL INVESTORS LLC (the "INVESTMENT MANAGER")
AND DRESDNER RCM EQUITY FUNDS, INC.
SCHEDULE OF FEES
FOR DRESDNER RCM LARGE CAP GROWTH FUND
Effective Date: January 1, 1997
The Fund will pay a monthly fee to the Investment Manager based on the
average daily net assets of the Fund. The fee shall be determined pursuant
to the following schedule:
VALUE OF SECURITIES AND CASH OF FUND FEE
------------------------------------ ---
the first $500 million 0.70% annually
above $500 million and below $1billion 0.65% annually
above $1 billion 0.60% annually
The Investment Manager, until at least December 31, 1998, shall pay the
Fund on a quarterly basis the amount, if any, by which ordinary operating
expenses of the Company attributable to the Fund for the quarter (except
interest, taxes and extraordinary expenses) exceed the annualized rate of
0.95% of the value of the average daily net assets of the Fund. In
subsequent years, the Fund will reimburse the Investment Manager for any
such payments to the extent that the Fund's operating expenses are
otherwise below this expense cap.
Dated: as of December 30, 1997
DRESNDER RCM GLOBAL INVESTORS LLC DRESDNER RCM EQUITY FUNDS, INC.
ON BEHALF OF DRESDNER RCM LARGE
CAP GROWTH FUND
By: /s/WILLIAM L. PRICE By: /s/RICHARD W. INGRAM
--------------------- -----------------------
ATTEST: ATTEST:
By: /s/TIM PARKER By: /s/KAREN JACOPPO-WOOD
--------------------- -----------------------
8
<PAGE>
INVESTMENT MANAGEMENT AGREEMENT, POWER OF ATTORNEY
AND SERVICE AGREEMENT
THIS AGREEMENT is entered into as of the 30th day of December, 1997 by
and between Dresdner RCM Equity Funds, Inc. (the "Company"), on behalf of
Dresdner RCM Emerging Markets Fund, a series of the Company (the "Fund") and
Dresdner RCM Global Investors LLC (the "Investment Manager").
1. APPOINTMENT AND ACCEPTANCE OF APPOINTMENT OF THE INVESTMENT MANAGER
(a) Subject to express provisions and limitations set forth in the
Company's Articles of Incorporation, Bylaws, Form N-lA Registration
Statement under the Investment Company Act of 1940, as amended (the
"1940 Act") and under the Securities Act of 1933, as amended (the
"1933 Act"), and the Fund's prospectus as in use from time to time, as
well as to the factors affecting the Company's status as a regulated
investment company under the Internal Revenue Code of 1986, as
amended, the Company hereby grants to the Investment Manager and the
Investment Manager hereby accepts full discretionary authority to
manage the investment and reinvestment of the cash, securities, and
other assets of the Fund (the "Portfolio") presently held by Brown
Brothers Harriman & Co. (the "Custodian"), any proceeds thereof,
and any additions thereto, in the Investment Manager's discretion. In
the performance of its duties hereunder, the Investment Manager shall
further be bound by any and all determinations by the Board of
Directors of the Company relating to the investment objectives
policies or restrictions of the Fund, which determinations shall be
communicated in writing to the Investment Manager. For all purposes
herein, the Investment Manager shall be deemed an independent
contractor of the Company.
2. POWERS OF THE INVESTMENT MANAGER
Subject to the limitations provided in Section 1 hereof, the
Investment Manager is empowered hereby, through any of its partners,
principals, or appropriate employees, for the benefit of the Fund:
(a) to invest and reinvest in shares, stocks, bonds, notes and other
obligations of every description issued or incurred by governmental
bodies, corporations, mutual funds, trusts, associations or firms, in
trade acceptances and other commercial paper, and in loans and
deposits at interest on call or on time, whether or not secured by
collateral;
(b) to purchase and sell commodities or commodities contracts and
investments in put, call, straddle, or spread options;
1
<PAGE>
(c) to enter into forward, future, or swap contracts with respect to
the purchase and sale of securities, currencies, commodities, and
commodities contracts;
(d) to lend its portfolio securities to brokers, dealers and other
financial institutions;
(e) to buy, sell, or exercise options, rights and warrants to
subscribe for stock or securities;
(f) to engage in any other types of investment transactions described
in the Fund's Prospectus and Statement of Additional Information; and
(g) to take such other action, or to direct the Custodian to take
such other action, as may be necessary or desirable to carry out the
purpose and intent of the foregoing.
3. EXECUTION OF PORTFOLIO TRANSACTIONS
(a) The Investment Manager shall provide adequate facilities and
qualified personnel for the placement of, and shall place, orders for
the purchase, or other acquisition, and sale, or other disposition, of
portfolio securities or other portfolio assets for the Fund.
(b) Unless otherwise specified in writing to the Investment Manager
by the Fund, all orders for the purchase and sale of securities for
the Portfolio shall be placed in such markets and through such brokers
as in the Investment Manager's best judgment shall offer the most
favorable price and market for the execution of each transaction;
provided, however, that, subject to the above, the Investment Manager
may place orders with brokerage firms that have sold shares of the
Fund or that furnish statistical and other information to the
Investment Manager, taking into account the value and quality of the
brokerage services of such firms, including the availability and
quality of such statistical and other information. Receipt by the
Investment Manager of any such statistical and other information and
services shall not be deemed to give rise to any requirement for
abatement of the advisory fee payable to the Investment Manager
pursuant to Section 5 hereof and Appendix A hereto.
(c) The Fund understands and agrees that the Investment Manager may
effect securities transactions which cause the Fund to pay an amount
of commission in excess of the amount of commission another broker
would have charged, provided, however, that the Investment Manager
determines in good faith that such amount of commission is reasonable
in relation to the value of Fund share sales, statistical, brokerage
and other services provided by such broker, viewed in terms of either
the specific transaction or the Investment Manager's overall
responsibilities to the Fund and other clients for which the
Investment Manager exercises investment discretion. The Fund also
understands that the
2
<PAGE>
receipt and use of such services will not reduce the Investment
Manager's customary and normal research activities.
(d) The Fund understands and agrees that:
(i) the Investment Manager performs investment management
services for various clients and that the Investment Manager may take
action with respect to any of its other clients which may differ from
action taken or from the timing or nature of action taken with respect
to the Portfolio, so long as it is the Investment Manager's policy, to
the extent practical, to allocate investment opportunities to the
Portfolio over a period of time on a fair and equitable basis relative
to other clients;
(ii) the Investment Manager shall have no obligation to
purchase or sell for the Portfolio any security which the Investment
Manager, or its principals or employees, may purchase or sell for its
or their own accounts or the account of any other client, if in the
opinion of the Investment Manager such transaction or investment
appears unsuitable, impractical or undesirable for the Portfolio;
(iii) on occasions when the Investment Manager deems the
purchase or sale of a security to be in the best interests of the Fund
as well as other clients of the Investment Manager, the Investment
Manager, to the extent permitted by applicable laws and regulations,
may aggregate the securities to be so sold or purchased when the
Investment Manager believes that to do so will be in the best
interests of the Fund. In such event, allocation of the securities so
purchased or sold, as well as the expenses incurred in the
transaction, shall be made by the Investment Manager in the manner the
Investment Manager considers to be the most equitable and consistent
with its fiduciary obligations to the Fund and to such other clients;
and
(iv) the Investment Manager does not prohibit any of its
principals or employees from purchasing or selling for their own
accounts securities that may be recommended to or held by the
Investment Manager's clients, subject to the provisions of the
Investment Manager's Code of Ethics and that of the Company.
4. ALLOCATION OF EXPENSES OF THE COMPANY AND THE FUND
(a) The Investment Manager will bear all expenses related to salaries
of its employees and to the Investment Manager's overhead in
connection with its duties under this Agreement. The Investment
Manager also will pay all fees and salaries of the Company's directors
and officers who are affiliated persons (as such term is defined in
the 1940 Act) of the Investment Manager.
3
<PAGE>
(b) Except for the expenses specifically assumed by the Investment
Manager, the Fund will pay all of its expenses, including, without
limitation, fees and expenses of the directors not affiliated with the
Investment Manager attributable to the Fund; fees of the Investment
Manager; fees of the Fund's administrator, custodian and subcustodians
for all services to the Fund (including safekeeping of funds and
securities and maintaining required books and accounts); transfer
agent, registrar and dividend reinvestment and disbursing agent
interest charges; taxes; charges and expenses of the Fund's legal
counsel and independent accountants; charges and expenses of legal
counsel provided to the non-interested directors of the Company;
expenses of repurchasing shares of the Fund; expenses of printing and
mailing share certificates, stockholder reports, notices, proxy
statements and reports to governmental agencies; brokerage and other
expenses connected with the execution, recording and settlement of
portfolio security transactions; expenses connected with negotiating,
or effecting purchases or sales of portfolio securities or registering
privately issued portfolio securities; expenses of calculating and
publishing the net asset value of the Fund's shares; expenses of
membership in investment company associations; premiums and other
costs associated with the acquisition of a mutual fund directors and
officers errors and omissions liability insurance policy; expenses of
fidelity bonding and other insurance premiums; expenses of
stockholders' meetings; and SEC and state blue sky registration fees.
(c) The expenses borne by the Fund pursuant to Section 4(b) shall
include the Fund's proportionate share of any such expenses of the
Company, which shall be allocated among the Fund and the other series
of the Company on such basis as the Company shall deem appropriate.
5. COMPENSATION OF THE INVESTMENT MANAGER
(a) In consideration of the services performed by the Investment
Manager hereunder, the Fund will pay or cause to be paid to the
Investment Manager, as they become due and payable, management fees
determined in accordance with the attached Schedule of Fees
(Appendix A). In the event of termination, any management fees paid in
advance pursuant to such fee schedule will be prorated as of the date
of termination and the unearned portion thereof will be returned to
the Fund.
(b) The net asset value of the Fund's portfolio used in fee
calculations shall be determined in the manner set forth in the
Articles of Incorporation and Bylaws of the Company and the Fund's
prospectus as of the close of regular trading on the New York Stock
Exchange on each business day the New York Stock Exchange is open.
(c) The Fund hereby authorizes the Investment Manager to charge the
Portfolio, subject to the provisions in Section 6 hereof, for the full
amount of fees as they become due and
4
<PAGE>
payable pursuant to the attached schedule of fees; provided, however,
that a copy of a fee statement covering said payment shall be sent to
the Custodian and to the Company.
(d) The Investment Manager may from time to time voluntarily agree to
limit the aggregate operating expenses of the Fund for one or more
fiscal years of the Company, as set forth in Appendix A hereto or in
any other written agreement with the Company. If in any such fiscal
year the aggregate operating expenses of the Fund (as defined in
Appendix A or such other written agreement) exceed the applicable
percentage of the average daily net assets of the Fund for such fiscal
year, the Investment Manager shall reimburse the Fund for such excess
operating expenses. Such operating expense reimbursement, if any,
shall be estimated, reconciled and paid on a quarterly basis, or such
more frequent basis as the Investment Manager may agree in writing.
Any such reimbursement of the Fund shall be repaid to the Investment
Manager by the Fund, without interest, at such later time or times as
it may be repaid without causing the aggregating operating expenses of
the Fund to exceed the applicable percentage of the average daily net
assets of the Fund for the period in which it is repaid; provided,
however, that upon termination of this Agreement, the Fund shall have
no further obligation to repay any such reimbursements.
6. SERVICE TO OTHER CLIENTS
Nothing contained in this Agreement shall be construed to prohibit the
Investment Manager from performing investment advisory, management,
distribution or other services for other investment companies and
other persons, trusts or companies, or to prohibit affiliates of the
Investment Manager from engaging in such businesses or in other
related or unrelated businesses.
7. STANDARD OF CARE
The Investment Manager shall have no liability to the Fund, or its
stockholders, for any error of judgment, mistake of law, loss arising
out of any investment, or other act or omission in the performance of
its obligations to the Fund not involving willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations and
duties hereunder. The federal securities laws impose liabilities
under certain circumstances on persons who act in good faith, and
therefore nothing herein shall in any way constitute a waiver or
limitation of any rights which the undersigned may have under any
federal securities laws.
8. DURATION OF AGREEMENT
5
<PAGE>
This Agreement shall continue in effect until the close of business on
the second anniversary on the date hereof. This Agreement may
thereafter be renewed from year to year by mutual consent, provided
that such renewal shall be specifically approved at least annually by
(i) the Board of Directors of the Company, or by the vote of a
majority (as defined in the 1940 Act) of the outstanding voting
securities of the Company, and (ii) a majority of those directors who
are not parties to this Agreement or interested persons (as defined in
the 1940 Act) of any such party cast in person at a meeting called for
the purpose of voting on such approval.
9. TERMINATION
This Agreement may be terminated at any time, without payment of any
penalty, by the Board of Directors of the Company or by the vote of a
majority (as defined in the 1940 Act) of the outstanding voting
securities of the Company on sixty (60) days' written notice to the
Investment Manager, or by the Investment Manager on like notice to the
Company. This Agreement shall automatically terminate in the event of
its assignment (as defined in the 1940 Act).
10. REPORTS, BOOKS AND RECORDS
The Investment Manager shall render to the Board of Directors of the
Company such periodic and other reports as the Board may from time to
time reasonably request. In compliance with the requirements of Rule
31a-3 under the 1940 Act, the Investment Manager hereby agrees that
all records which it maintains for the Company are property of the
Company. The Investment Manager shall surrender promptly to the
Company any of such records upon the Company's request, and shall
preserve for the periods prescribed by Rule 31a-2 under the 1940 Act
the records required to be maintained by Rule 31a-1 under the 1940
Act.
11. REPRESENTATIONS AND WARRANTIES
The Investment Manager represents and warrants to the Company that the
Investment Manager is registered as an investment adviser under the
Investment Advisers Act of 1940. During the term of this Agreement,
the Investment Manager shall notify the Company of any change in the
membership of the Investment Manager's partnership within a reasonable
time after such change. The Company represents and warrants to the
Investment Manager that the company is registered as an open-end
management investment company under the 1940 Act. Each party further
represents and warrants to the other that this Agreement has been duly
authorized by such party and constitutes the legal, valid and binding
obligation of such party in accordance with its terms.
12. AMENDMENT OF THIS AGREEMENT
6
<PAGE>
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the
party against which enforcement of the change, waiver, discharge or
termination is sought.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in duplicate originals by their officers thereunto duly
authorized as of the date first above written.
DRESDNER RCM GLOBAL INVESTORS LLC DRESDNER RCM EQUITY FUNDS, INC.
ON BEHALF OF DRESDNER
RCM EMERGING MARKETS FUND
By: /s/WILLIAM L. PRICE By: /s/RICHARD W. INGRAM
-------------------- --------------------
ATTEST: ATTEST:
By: /s/TIM PARKER By: KAREN JACOPPO-WOOD
--------------- ------------------
7
<PAGE>
APPENDIX A
INVESTMENT MANAGEMENT AGREEMENT, POWER OF ATTORNEY,
AND SERVICE AGREEMENT
BETWEEN DRESDNER RCM GLOBAL INVESTORS LLC (the "INVESTMENT MANAGER")
AND DRESDNER RCM EQUITY FUNDS, INC.
SCHEDULE OF FEES
FOR DRESDNER RCM EMERGING MARKETS FUND
Effective Date: as of December 30, 1997
The Fund will pay a monthly fee to the Investment Manager based on the
average daily net assets of the Fund at the annualized rate of 1.00% of the
value of the Fund's average daily net assets.
VALUE OF SECURITIES AND CASH OF FUND FEE
------------------------------------ ---
On all sums 1.00% annually
The Investment Manager, until at least December 31, 1998, shall reimburse
the Fund on a quarterly basis the amount, if any, by which certain ordinary
operating expenses of the Fund exceed the annual rate of 1.50 % of the
average daily net assets of the Fund. In subsequent years, the Fund will
reimburse the Investment Manager for any such payments to the extent that
the Fund's operating expenses are otherwise below this expense cap.
Dated: as of December 30, 1997
DRESDNER RCM GLOBAL INVESTORS LLC DRESDNER RCM EQUITY FUNDS, INC.
ON BEHALF OF DRESDNER
RCM EMERGING MARKETS FUND
By: /s/WILLIAM L. PRICE By: /s/RICHARD W. INGRAM
-------------------- ---------------------
ATTEST: ATTEST:
By: /s/TIM PARKER By: /s/KAREN JACOPPO-WOOD
------------- ---------------------
8
<PAGE>
INVESTMENT MANAGEMENT AGREEMENT, POWER OF ATTORNEY
AND SERVICE AGREEMENT
THIS AGREEMENT is entered into as of the 30th day of December, 1997
by and between Dresdner RCM Equity Funds, Inc. (the "Company"), on behalf of
Dresdner RCM Biotechnology Fund, a series of the Company (the "Fund") and
Dresdner RCM Global Investors LLC (the "Investment Manager").
1. APPOINTMENT AND ACCEPTANCE OF APPOINTMENT OF THE INVESTMENT MANAGER
(a) Subject to express provisions and limitations set forth in the
Company's Articles of Incorporation, Bylaws, Form N-lA Registration
Statement under the Investment Company Act of 1940, as amended (the "1940
Act") and under the Securities Act of 1933, as amended (the "1933 Act"),
and the Fund's prospectus as in use from time to time, as well as to the
factors affecting the Company's status as a regulated investment company
under the Internal Revenue Code of 1986, as amended, the Company hereby
grants to the Investment Manager and the Investment Manager hereby accepts
full discretionary authority to manage the investment and reinvestment of
the cash, securities, and other assets of the Fund (the "Portfolio")
presently held by State Street Bank & Trust Company (the "Custodian"), any
proceeds thereof, and any additions thereto, in the Investment Manager's
discretion. In the performance of its duties hereunder, the Investment
Manager shall further be bound by any and all determinations by the Board
of Directors of the Company relating to the investment objectives policies
or restrictions of the Fund, which determinations shall be communicated in
writing to the Investment Manager. For all purposes herein, the Investment
Manager shall be deemed an independent contractor of the Company.
2. POWERS OF THE INVESTMENT MANAGER
Subject to the limitations provided in Section 1 hereof, the Investment
Manager is empowered hereby, through any of its partners, principals, or
appropriate employees, for the benefit of the Fund:
(a) to invest and reinvest in shares, stocks, bonds, notes and other
obligations of every description issued or incurred by governmental bodies,
corporations, mutual funds, trusts, associations or firms, in trade
acceptances and other commercial paper, and in loans and deposits at
interest on call or on time, whether or not secured by collateral;
1
<PAGE>
(b) to purchase and sell commodities or commodities contracts and
investments in put, call, straddle, or spread options;
(c) to enter into forward, future, or swap contracts with respect to the
purchase and sale of securities, currencies, commodities, and commodities
contracts;
(d) to lend its portfolio securities to brokers, dealers and other
financial institutions;
(e) to buy, sell, or exercise options, rights and warrants to subscribe
for stock or securities;
(f) to engage in any other types of investment transactions described in
the Fund's Prospectus and Statement of Additional Information; and
(g) to take such other action, or to direct the Custodian to take such
other action, as may be necessary or desirable to carry out the purpose and
intent of the foregoing.
3. EXECUTION OF PORTFOLIO TRANSACTIONS
(a) The Investment Manager shall provide adequate facilities and qualified
personnel for the placement of, and shall place, orders for the purchase,
or other acquisition, and sale, or other disposition, of portfolio
securities or other portfolio assets for the Fund.
(b) Unless otherwise specified in writing to the Investment Manager by the
Fund, all orders for the purchase and sale of securities for the Portfolio
shall be placed in such markets and through such brokers as in the
Investment Manager's best judgment shall offer the most favorable price and
market for the execution of each transaction; provided, however, that,
subject to the above, the Investment Manager may place orders with
brokerage firms that have sold shares of the Fund or that furnish
statistical and other information to the Investment Manager, taking into
account the value and quality of the brokerage services of such firms,
including the availability and quality of such statistical and other
information. Receipt by the Investment Manager of any such statistical and
other information and services shall not be deemed to give rise to any
requirement for abatement of the advisory fee payable to the Investment
Manager pursuant to Section 5 hereof and Appendix A hereto.
(c) The Fund understands and agrees that the Investment Manager may effect
securities transactions which cause the Fund to pay an amount of commission
in excess of the amount of commission another broker would have charged,
provided, however, that the Investment Manager determines in good faith
that such amount of commission is reasonable in relation to the value of
Fund share sales, statistical, brokerage and other services provided by
such broker, viewed in terms of either the specific transaction or the
2
<PAGE>
Investment Manager's overall responsibilities to the Fund and other clients
for which the Investment Manager exercises investment discretion. The Fund
also understands that the receipt and use of such services will not reduce
the Investment Manager's customary and normal research activities.
(d) The Fund understands and agrees that:
(i) the Investment Manager performs investment management services
for various clients and that the Investment Manager may take action with
respect to any of its other clients which may differ from action taken or
from the timing or nature of action taken with respect to the Portfolio, so
long as it is the Investment Manager's policy, to the extent practical, to
allocate investment opportunities to the Portfolio over a period of time on
a fair and equitable basis relative to other clients;
(ii) the Investment Manager shall have no obligation to purchase or
sell for the Portfolio any security which the Investment Manager, or its
principals or employees, may purchase or sell for its or their own accounts
or the account of any other client, if in the opinion of the Investment
Manager such transaction or investment appears unsuitable, impractical or
undesirable for the Portfolio;
(iii) on occasions when the Investment Manager deems the purchase or
sale of a security to be in the best interests of the Fund as well as other
clients of the Investment Manager, the Investment Manager, to the extent
permitted by applicable laws and regulations, may aggregate the securities
to be so sold or purchased when the Investment Manager believes that to do
so will be in the best interests of the Fund. In such event, allocation of
the securities so purchased or sold, as well as the expenses incurred in
the transaction, shall be made by the Investment Manager in the manner the
Investment Manager considers to be the most equitable and consistent with
its fiduciary obligations to the Fund and to such other clients; and
(iv) the Investment Manager does not prohibit any of its principals
or employees from purchasing or selling for their own accounts securities
that may be recommended to or held by the Investment Manager's clients,
subject to the provisions of the Investment Manager's Code of Ethics and
that of the Company.
4. ALLOCATION OF EXPENSES OF THE COMPANY AND THE FUND
(a) The Investment Manager will bear all expenses related to salaries of
its employees and to the Investment Manager's overhead in connection with
its duties under this Agreement. The Investment Manager also will pay all
fees and salaries of the Company's directors and officers who are
affiliated persons (as such term is defined in the 1940 Act) of the
Investment Manager.
3
<PAGE>
(b) Except for the expenses specifically assumed by the Investment
Manager, the Fund will pay all of its expenses, including, without
limitation, fees and expenses of the directors not affiliated with the
Investment Manager attributable to the Fund; fees of the Investment
Manager; fees of the Fund's administrator, custodian and subcustodians for
all services to the Fund (including safekeeping of funds and securities and
maintaining required books and accounts); transfer agent, registrar and
dividend reinvestment and disbursing agent interest charges; taxes;
charges and expenses of the Fund's legal counsel and independent
accountants; charges and expenses of legal counsel provided to the
non-interested directors of the Company; expenses of repurchasing shares of
the Fund; expenses of printing and mailing share certificates, stockholder
reports, notices, proxy statements and reports to governmental agencies;
brokerage and other expenses connected with the execution, recording and
settlement of portfolio security transactions; expenses connected with
negotiating, or effecting purchases or sales of portfolio securities or
registering privately issued portfolio securities; expenses of calculating
and publishing the net asset value of the Fund's shares; expenses of
membership in investment company associations; premiums and other costs
associated with the acquisition of a mutual fund directors and officers
errors and omissions liability insurance policy; expenses of fidelity
bonding and other insurance premiums; expenses of stockholders' meetings;
and SEC and state blue sky registration fees.
(c) The expenses borne by the Fund pursuant to Section 4(b) shall include
the Fund's proportionate share of any such expenses of the Company, which
shall be allocated among the Fund and the other series of the Company on
such basis as the Company shall deem appropriate.
5. COMPENSATION OF THE INVESTMENT MANAGER
(a) In consideration of the services performed by the Investment Manager
hereunder, the Fund will pay or cause to be paid to the Investment Manager,
as they become due and payable, management fees determined in accordance
with the attached Schedule of Fees (Appendix A). In the event of
termination, any management fees paid in advance pursuant to such fee
schedule will be prorated as of the date of termination and the unearned
portion thereof will be returned to the Fund.
(b) The net asset value of the Fund's portfolio used in fee calculations
shall be determined in the manner set forth in the Articles of
Incorporation and Bylaws of the Company and the Fund's prospectus as of the
close of regular trading on the New York Stock Exchange on each business
day the New York Stock Exchange is open.
(c) The Fund hereby authorizes the Investment Manager to charge the
Portfolio, subject to the provisions in Section 6 hereof, for the full
amount of fees as they become due and
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payable pursuant to the attached schedule of fees; provided, however, that
a copy of a fee statement covering said payment shall be sent to the
Custodian and to the Company.
(d) The Investment Manager may from time to time voluntarily agree to
limit the aggregate operating expenses of the Fund for one or more fiscal
years of the Company, as set forth in Appendix A hereto or in any other
written agreement with the Company. If in any such fiscal year the
aggregate operating expenses of the Fund (as defined in Appendix A or such
other written agreement) exceed the applicable percentage of the average
daily net assets of the Fund for such fiscal year, the Investment Manager
shall reimburse the Fund for such excess operating expenses. Such
operating expense reimbursement, if any, shall be estimated, reconciled and
paid on a quarterly basis, or such more frequent basis as the Investment
Manager may agree in writing. Any such reimbursement of the Fund shall be
repaid to the Investment Manager by the Fund, without interest, at such
later time or times as it may be repaid without causing the aggregating
operating expenses of the Fund to exceed the applicable percentage of the
average daily net assets of the Fund for the period in which it is repaid;
provided, however, that upon termination of this Agreement, the Fund shall
have no further obligation to repay any such reimbursements.
6. SERVICE TO OTHER CLIENTS
Nothing contained in this Agreement shall be construed to prohibit the
Investment Manager from performing investment advisory, management,
distribution or other services for other investment companies and other
persons, trusts or companies, or to prohibit affiliates of the Investment
Manager from engaging in such businesses or in other related or unrelated
businesses.
7. STANDARD OF CARE
The Investment Manager shall have no liability to the Fund, or its
stockholders, for any error of judgment, mistake of law, loss arising out
of any investment, or other act or omission in the performance of its
obligations to the Fund not involving willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations and duties hereunder.
The federal securities laws impose liabilities under certain circumstances
on persons who act in good faith, and therefore nothing herein shall in any
way constitute a waiver or limitation of any rights which the undersigned
may have under any federal securities laws.
8. DURATION OF AGREEMENT
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This Agreement shall continue in effect until the close of business on
the second anniversary on the date hereof. This Agreement may thereafter
be renewed from year to year by mutual consent, provided that such renewal
shall be specifically approved at least annually by (i) the Board of
Directors of the Company, or by the vote of a majority (as defined in the
1940 Act) of the outstanding voting securities of the Company, and (ii) a
majority of those directors who are not parties to this Agreement or
interested persons (as defined in the 1940 Act) of any such party cast in
person at a meeting called for the purpose of voting on such approval.
9. TERMINATION
This Agreement may be terminated at any time, without payment of any
penalty, by the Board of Directors of the Company or by the vote of a
majority (as defined in the 1940 Act) of the outstanding voting securities
of the Company on sixty (60) days' written notice to the Investment
Manager, or by the Investment Manager on like notice to the Company. This
Agreement shall automatically terminate in the event of its assignment (as
defined in the 1940 Act).
10. REPORTS, BOOKS AND RECORDS
The Investment Manager shall render to the Board of Directors of the
Company such periodic and other reports as the Board may from time to time
reasonably request. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Investment Manager hereby agrees that all records
which it maintains for the Company are property of the Company. The
Investment Manager shall surrender promptly to the Company any of such
records upon the Company's request, and shall preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act the records required to be
maintained by Rule 31a-1 under the 1940 Act.
11. REPRESENTATIONS AND WARRANTIES
The Investment Manager represents and warrants to the Company that the
Investment Manager is registered as an investment adviser under the
Investment Advisers Act of 1940. During the term of this Agreement, the
Investment Manager shall notify the Company of any change in the membership
of the Investment Manager's partnership within a reasonable time after such
change. The Company represents and warrants to the Investment Manager that
the company is registered as an open-end management investment company
under the 1940 Act. Each party further represents and warrants to the
other that this Agreement has been duly authorized by such party and
constitutes the legal, valid and binding obligation of such party in
accordance with its terms.
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12. AMENDMENT OF THIS AGREEMENT
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination
is sought.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate originals by their officers thereunto duly authorized as
of the date first above written.
DRESDNER RCM GLOBAL INVESTORS LLC DRESDNER RCM EQUITY FUNDS, INC.
ON BEHALF OF DRESDNER
RCM BIOTECHNOLOGY FUND
By: /s/William L. Price By: /s/Richard W. Ingram
------------------- --------------------
ATTEST: ATTEST:
By: /s/Tim Parker By: Karen Jacoppo-Wood
------------- ------------------
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APPENDIX A
INVESTMENT MANAGEMENT AGREEMENT, POWER OF ATTORNEY,
AND SERVICE AGREEMENT
BETWEEN DRESDNER RCM GLOBAL INVESTORS LLC (the "INVESTMENT MANAGER")
AND DRESDNER RCM EQUITY FUNDS, INC.
SCHEDULE OF FEES
FOR DRESDNER RCM BIOTECHNOLOGY FUND
Effective Date: as of December 30, 1997
The Fund will pay a monthly fee to the Investment Manager based on the average
daily net assets of the Fund. The fee shall be determined pursuant to the
following schedule:
Value of Securities and Cash of Fund Fee
------------------------------------ ---
the first $500 million 1.00 % annually
above $500 million and below $1 billion 0.95% annually
above $1 billion 0.90% annually
The Investment Manager until at least December 31, 1998, shall reimburse the
Fund on a quarterly basis the amount, if any, by which ordinary operating
expenses of the Company attributable to the Fund for the quarter (except
interest, taxes and extraordinary expenses) exceed the annualized rate of 1.50 %
of the value of the average daily net assets of the Fund. In subsequent years,
the Fund will reimburse the Investment Manager for any such payments to the
extent that the Fund's operating expenses are otherwise below this expense cap.
Dated: as of December 30, 1997
DRESDNER RCM GLOBAL INVESTORS LLC DRESDNER RCM EQUITY FUNDS, INC.
ON BEHALF OF DRESDNER
RCM BIOTECHNOLOGY FUND
By: /s/William L. Price By: /s/Richard W. Ingram
------------------- --------------------
ATTEST: ATTEST:
By: /s/Tim Parker By: /s/Karen Jacoppo-Wood
------------- ---------------------
8
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CUSTODIAN AGREEMENT
AGREEMENT made as of this 29th day of December 1997 between
DRESDNER RCM EQUITY FUNDS, INC. (the "Fund") on behalf of Dresdner RCM Emerging
Markets Fund (the "Portfolio" ), and BROWN BROTHERS HARRIMAN & CO. (the
"Custodian").
WITNESSETH
WHEREAS the Fund is organized as a Maryland Corporation with one or more
series of shares, and is an open-end management investment company registered
with the Securities and Exchange Commission.
WHEREAS the Fund, on behalf of the Portfolio, wishes to employ the
Custodian and the Custodian has agreed to provide custodial, banking and related
services to the Portfolio in accordance with the terms and conditions of this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the Fund and the Custodian agree as follows:
1. APPOINTMENT OF CUSTODIAN. Upon the terms and conditions set forth in
this Agreement, the Fund hereby
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appoints the Custodian as a custodian, and the Custodian hereby accepts such
appointment. The Fund shall deliver or shall cause to be delivered to the
Custodian cash, securities and other property ("Property") owned by the
Portfolio from time to time during the term of this Agreement. The Custodian
shall be under no obligation to request or to require that any or all Property
of the Fund be delivered to it, and the Custodian shall have no responsibility
with respect to any Property not delivered to it.
2. DEFINITIONS.
In this Agreement, the following words shall, unless the context
otherwise requires, have the following meanings:
(i) "1940 Act" - the Investment Company Act of 1940 and the rules and
regulations thereunder.
(ii) "Advances" - shall have the meaning ascribed to it in Section 11 hereof.
(iii) "Agency Accounts" - shall have the meaning ascribed to it in Section 5
hereof.
(iv) "Agent" - shall have the meaning ascribed to it in Section 7 hereof.
(v) "BBH Accounts" - shall have the meaning ascribed to it in Section 5
hereof.
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(vi) "Book-Entry Agent" - shall have the meaning ascribed to it in Section
4.1(b) hereof.
(vii) "Derivative Instruments and Commodities" - any form of risk transfer
contract in which a gain or loss is recognized from fluctuations in
market price levels or rates, indexes or benchmarks, and which includes
without limitation futures, forwards, options, swaps, forward rate and
forward exchange contracts, leverage- or commodity-related similar
contracts and any other risk transfer contract whether traded on or off
an exchange.
(viii) "Electronic Instructions" - shall have the meaning ascribed to it in
Section 8.3 hereof.
(ix) "Electronic Reports" - shall have the meaning ascribed to it in Section
8.3 hereof.
(x) "Force Majeure" - shall have the meaning ascribed to it in Section 10.4
hereof.
(xi) "Investments" - assets of the Portfolio, other than Property held by the
Custodian, a Subcustodian or a Securities Depository, but which the
Custodian may note on its records as being assets of the Portfolio
including without limitation Derivative Instruments and Commodities.
(xii) "Liability" - shall have the meaning ascribed to it in
Section 11 hereof.
(xiii) "Margin Account" - shall have the meaning ascribed
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to it in Section 4.2(d) hereof.
(xiv) "Margin Agreement" - shall have the meaning ascribed to it in Section
4.2(d) hereof.
(xv) "Omnibus Accounts" - accounts established in the name of the Custodian on
behalf of its customers in which assets on deposit with the Custodian by
one or several customers may be deposited. Omnibus Accounts may be
established for the purpose of holding cash or securities.
(xvi) "Proper Instructions" - any direction to take or not to take action in
respect of Property (including cash) or Investments which the Custodian
reasonably believes to be sent by an authorized person and to be genuine.
Proper Instructions may be sent via the media set forth in Section 6
hereof or as otherwise agreed between the Custodian and the Fund on
behalf of the Portfolio.
(xvii) "Property" - shall have the meaning ascribed to it in Section 1
hereof.
(xviii) "Securities Accounts" - shall have the meaning ascribed to it in
Section 4 hereof.
(xix) "Securities Depository" - a generally recognized book-entry system or a
clearing agency which acts as a securities depository in any country in
which securities are maintained under this Agreement and with which the
Custodian or a Subcustodian may maintain
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<PAGE>
securities or other Property owned by or held on behalf of the Fund,
pursuant to the provisions hereof, including Euroclear and Cedel.
(xx) "Segregated Accounts" - shall have the meaning ascribed to it in
Section 4.2(d) hereof.
(xxi) "Subcustodian" - shall mean any subcustodian appointed pursuant to
Section 7 of this Agreement.
(xxii) "Voluntary Corporate Actions" - corporate actions (as further
described in Section 8.4) in respect of portfolio securities of the
Fund which require an investment decision.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE FUND. The Fund
represents and warrants that the execution, delivery and performance by the
Fund of this Agreement on behalf of the Portfolio are within the Fund's
corporate, trust or other constitutive powers, have been duly authorized by
all necessary corporate, trust or other appropriate action under its
constitutive documents, and do not contravene or constitute a default under
any provision of applicable law or regulation or of the constitutive
documents of the Fund or of any agreement, judgment, injunction, order,
decree or other instrument binding upon the Fund. The Fund agrees to inform
the Custodian reasonably promptly if any statement set forth in this Section
3 or
5
<PAGE>
elsewhere made by the Fund in this Agreement ceases to be true and correct. The
Fund shall safeguard and shall solely be responsible for the safekeeping of any
testkeys, identification codes, other security devices or statements of account
with which the Custodian provides it. If and when applicable, the Fund shall
execute a license agreement or sublicense agreement in form and substance
satisfactory to it governing its use of any electronic instruction system
proprietary to the Custodian or an affiliate of the Custodian or proprietary to
a third party which has licensed such system to the Custodian or an affiliate of
the Custodian.
The Fund hereby represents and warrants that in its reasonable opinion it
has disclosed appropriately and adequately, or will in its reasonable opinion
appropriately and adequately disclose, all material investment risks, including
without limitation those relating to the custody, settlement or servicing of
foreign securities in the markets in which the Fund invests or intends to
invest, to the shareholders or other investors in the Portfolio or to other
persons who have property or contractual rights to or interests in the assets of
the Portfolio which are the subject of this Custodian Agreement.
4. SECURITIES ACCOUNT. The Fund hereby authorizes the Custodian to open and
maintain, with itself or with
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Subcustodians, securities accounts (each a "Securities Account") and authorizes
the Custodian to deposit or record, as the case may be, in such Securities
Account the Portfolio's Property delivered to and accepted by the Custodian, or
such other Investments as the Fund, on behalf of the Portfolio requests the
Custodian to record by notation only. The Custodian shall keep safely all
Property delivered to it. In the event of a loss of a security for which the
Custodian would be liable under the provisions of this Agreement, the Custodian
shall be responsible for either replacing the security or for reimbursing the
Fund the value of the security . The Securities Account shall be maintained in
the manner and on the terms set forth below. (All references in this Section to
the Custodian shall include a Subcustodian, Securities Depository or any agent
of the Custodian.)
4.1 MANNER OF HOLDING OR RECORDING SECURITIES AND OTHER INVESTMENTS -
(a) SECURITIES REPRESENTED BY PHYSICAL CERTIFICATES - Securities
represented by share certificates or other instruments shall be held in
registered or bearer form (i) in the Custodian's vault, (ii) in the vault
of a Subcustodian or other agent of the Custodian, (iii) in an account
maintained by the Custodian or a Subcustodian at a Securities Depository,
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<PAGE>
or (iv) in accordance with customary market practice in the Custodian's
discretion (x) in the country in which settlement is to occur or (y) for
the particular security in respect of which settlement is instructed.
Securities held at a Subcustodian will be held subject to the terms of
the Subcustodian Agreement in effect between the Custodian and the
Subcustodian.
Securities held in a Securities Depository will be held subject to the
agreement, rules, statement of terms and conditions or other document or
conditions effective between the Securities Depository and the Custodian or
the Subcustodian. Such securities shall be held (i) in an account which
contains only assets of the Custodian held as custodian or otherwise on
behalf of others if such account is maintained by the Custodian with a
Securities Depository (unless market practice or Securities Depository
rules and regulations require the Custodian also to hold its own assets in
such account), or (ii) in an account which contains only assets of the
Subcustodian or other agent held as custodian or otherwise on behalf of
others if such account is maintained by the Subcustodian or other agent
with a Securities Depository (unless market practice or Securities
Depository rules and regulations require a Subcustodian also to hold its
own assets in such account).
8
<PAGE>
Registered securities of the Portfolio may be registered in the name
of the Custodian, the Fund on behalf of the Portfolio or a nominee of
either of them and may be held in any manner set forth above, with or
without any indication of fiduciary capacity, provided that securities are
held in an account of the Custodian or a Subcustodian containing only
assets of the Portfolio or only assets held by the Custodian or a
Subcustodian as custodian for its customers or are otherwise held on
behalf of others.
(b) SECURITIES REPRESENTED BY BOOK-ENTRY - Securities represented by
book-entry on the books of the issuer, a registrar, a clearing agency or
other agent of the issuer (a "Book-Entry Agent") may be so held in an
account of the Custodian or a Subcustodian or other Agent maintained with
such Book-Entry Agent provided such account contains only assets of the
Portfolio or only assets held as custodian for customers or are otherwise
held on behalf of others.
(c) OTHER INVESTMENTS - At the specific request of the Fund, the
Custodian shall note on its records Investments owned by the Portfolio that
are not represented by physical securities or by book-entry, including
without limitation Derivative Instruments and Commodities. The Fund
acknowledges that such notation is for recordkeeping purposes only, that
the Custodian
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<PAGE>
may not be able to exercise control over such Investments and that such
Investments may represent contractual rights of the Fund which the
Custodian cannot enforce. The Fund shall be responsible for requesting that
any statements applicable to such Investments, including brokerage
statements, be sent to the Custodian.
4.2 POWERS AND DUTIES OF THE CUSTODIAN WITH RESPECT TO THE SECURITIES
ACCOUNT - The Custodian shall have the following powers and duties with respect
to the Securities Account:
(a) PURCHASES - Upon receipt of Proper Instructions, insofar as funds
are available or as funds are otherwise provided by the Custodian at its
discretion pursuant to Section 11 hereof for the purpose, to pay for and
receive securities purchased for the account of the Portfolio, payment
being made (i) upon receipt of the securities by the Custodian, by a
clearing corporation of a securities exchange of which the Custodian or a
Subcustodian is a member, or by a Securities Depository, or (ii) otherwise
in accordance with (A) governmental regulations, (B) rules of Securities
Depositories or other U.S. or foreign clearing agencies, (C) generally
accepted trade practice in the applicable local market, (D) the terms
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<PAGE>
of the instrument representing the security, or (E) the terms of Proper
Instructions.
(b) SALES - Upon receipt of Proper Instructions, to make delivery
of securities which have been sold for the account of the Portfolio (i)
against payment therefor in cash, by check or by bank wire transfer;
(ii) by credit to the account of the Custodian or Subcustodian with a
clearing corporation of a securities exchange of which the Custodian or
a Subcustodian is a member; (iii) by credit to the account of the
Custodian or Subcustodian with a Securities Depository; or (iv)
otherwise in accordance with (A) governmental regulations, (B) rules of
Securities Depositories or other U.S. or foreign clearing agencies, (C)
generally accepted trade practice in the applicable local market, (D)
the terms of the instrument representing the security, or (E) the terms
of Proper Instructions.
(c) OTHER TRANSFERS - To deliver Property of the Portfolio to a
Subcustodian, another custodian or another third party as necessary to
effect transactions authorized by Proper Instructions, and upon receipt of
Proper Instructions, to make such other disposition of Property of the
Portfolio in a manner other than or for purposes other than as enumerated
elsewhere in this Agreement, provided that the instructions relating to
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<PAGE>
such disposition shall state the amount of Property to be delivered and the
name of the person or persons to whom delivery is to be made.
(d) FUTURES; OPTIONS; SEGREGATED ACCOUNTS - Upon the receipt of
Proper Instructions and the execution of any agreements relating to margin
in respect of a Derivative Instrument or Commodity ("Margin Agreements"),
to establish and maintain on its books a segregated account or accounts for
and on behalf of the Portfolio, into which account or accounts may be
transferred cash and/or securities of the Portfolio in accordance with the
terms of such Margin Agreements and any Proper Instructions ("Segregated
Accounts").
Upon receipt of Proper Instructions or upon receipt of instructions given
pursuant to any Margin Agreement, or pursuant to the terms of such Agreement,
the Custodian shall (i) receive and retain, confirmations or other documents
evidencing the purchase or sale of such Derivative Instruments or Commodities
by the Fund on behalf of the Portfolio; (ii) deposit and maintain, pursuant
to a Margin Agreement, in a segregated account, either physically or by
book-entry in a Securities Depository, for the benefit of any futures
commission merchant ("Margin Account"), or pay pursuant to Proper [EU1]
Instructions to such broker, dealer or futures commission merchant, such
securities, cash or other assets as are designated by the Fund on behalf of
the Portfolio as initial, maintenance or variation "margin" deposits or other
collateral intended to secure the Fund's performance of its obligations under
the terms of any Derivative Instrument or Commodity, in accordance with
the provisions of any Margin Agreement relating thereto; and (iii) otherwise
pay, release and/or transfer securities, cash or other assets into or out of
such Margin Accounts only in [EU2]accordance with the provisions of any such
Margin Agreement. Unless otherwise agreed to in writing by the Custodian
(which may be in the form of an applicable Margin Agreement), the Custodian
shall not be responsible for the sufficiency of assets held in any Segregated
Account
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established in compliance with applicable margin maintenance requirements or for
the performance of the other terms of any agreement relating to a Derivative
Instrument or Commodity, PROVIDED HOWEVER, the Custodian shall in any event be
responsible for the execution of a Proper Instruction with respect to such
Segregated Account.
Notwithstanding anything in this Agreement to the contrary, the Fund,
on behalf of the Portfolio agrees that the Custodian's responsibility for
any Derivative Instruments and Commodities shall be limited to the exercise
of reasonable care with respect to any confirmations or other documents
evidencing the purchase or sale of such Derivative Instrument by the Fund
on behalf of the Portfolio which the Custodian receives.
(e) STOCK LENDING - Upon receipt of Proper Instructions, to deliver
securities of the Portfolio, in connection with loans of securities by the
Portfolio, to the borrower thereof prior to receipt of the collateral, if
any, for such borrowing consistent with the terms and conditions contained
in a separate agreement specifically relating to securities lending.
(f) NON-DISCRETIONARY DETAILS - Without the necessity of express
authorization from the Fund, (1) to attend to all nondiscretionary details
in connection with the sale, exchange, substitution, purchase, transfer or
other dealings with securities, cash or other Property of the Portfolio
held by the Custodian except as otherwise directed from time to time by the
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Directors or Trustees of the Fund on behalf of the Portfolio, and (2) to
make payments to itself or others for minor expenses of handling securities
or other similar items relating to the Custodian's duties under this
Agreement, provided that all such payments shall be accounted for to the
Fund on behalf of the Portfolio.
4.3 CORPORATE ACTIONS - Unless the Custodian receives timely Proper
Instructions to the contrary, the Custodian will perform or will cause the
Subcustodian to perform the following:
(i) exchange securities held by it for the account of the Portfolio
for other securities in connection with any reorganization,
recapitalization, split-up of shares, change of par value, conversion or
other event relating to the securities or the issuer of such securities,
and shall deposit any such securities in accordance with the terms of any
reorganization or protective plan;
(ii) surrender securities in temporary form for definitive
securities; surrender securities for transfer into the name of the
Custodian, the Portfolio or a nominee of either of them, as permitted by
Section 4.1(a); and surrender securities for a different number of
certificates or instruments representing the same number of shares or same
principal amount of indebtedness;
(iii) deliver warrants, puts, calls, rights or similar securities to
the issuer or trustee thereof, or to the agent of such issuer or trustee,
for the purpose of exercise or sale, and deposit securities upon
invitations for tenders thereof;
(iv) take all necessary action to comply with the terms of all
mandatory
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<PAGE>
or compulsory exchanges, calls, tenders, redemptions, or similar rights of
security ownership, and promptly notify the Portfolio of such action, and
collect all stock dividends, rights and other items of like nature;
(v) collect amounts due and payable to the Fund on behalf of the
Portfolio with respect to portfolio securities of the Portfolio, and
promptly credit to the account of the Fund on behalf of the Portfolio all
income and other payments relating to portfolio securities and other assets
held by the Custodian hereunder upon Custodian's receipt of such income or
payments or as otherwise agreed in writing by the Custodian and the Fund,
provided that the Custodian shall not be responsible for the collection of
amounts due and payable with respect to portfolio securities that are in
default;
(vi) endorse and deliver any instruments required to effect
collection of any amount due and payable to the Fund on behalf of the
Portfolio with respect to securities; execute ownership and other
certificates and affidavits on the Fund's behalf for all federal, state and
foreign tax purposes in connection with receipt of income, capital gains or
other payments with respect to portfolio securities and other assets of the
Portfolio, or in connection with the purchase, sale or transfer of such
securities or other assets; and file any certificates or other affidavits
for the refund or reclaim of foreign taxes paid;
(vii) deliver to the Portfolio all forms of proxies, all notices of
meetings, and any other notices or announcements affecting or relating to
securities owned by the Portfolio that are received by the Custodian, any
Subcustodian, or any nominee of either of them, and, upon receipt of Proper
Instructions, the Custodian shall execute and deliver, or cause such
Subcustodian or nominee to execute and deliver, such proxies or other
authorizations as may be required. Except as directed pursuant to Proper
Instructions, neither the Custodian nor any
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<PAGE>
Subcustodian or nominee shall vote upon any such securities, or execute any
proxy to vote thereon, or give any consent or take any other action with
respect thereto.
In fulfilling the duties set forth above, the Custodian shall be
responsible for sending to the Portfolio all information pertaining to the
relevant terms of a corporate action which it in fact receives, provided that
the Custodian has exercised the standard of care set forth herein, the Custodian
shall not be responsible for incorrect information it receives, or information
it has not received but should have received, from industry-accepted third-party
securities information vendors.
Notwithstanding any provision of this Agreement to the contrary, with
respect to portfolio securities registered in so-called street name, the
Custodian shall use reasonable efforts to collect cash or share entitlements due
and payable to the Portfolio but shall not be responsible for its inability to
collect such cash or share entitlements.
The Custodian shall only be responsible for acting on the Proper
Instructions of the Fund in respect of any Voluntary Corporate Action provided
the Custodian has received a Proper Instruction requesting such action a
reasonable time prior to expiration of the time within which action in respect
of such Voluntary Corporate Action may be taken, in order to ensure that
Custodian has sufficient time to take such action. The deadline for the
acceptance of such instruction may be set forth by the Custodian in its
communication of the terms of such action to the Fund and shall take into
consideration delays which occur due to (i) the involvement of a Subcustodian,
Securities Depository or other intermediary; (ii) differences in time zones; or
(iii) other factors particular to a given market, exchange or issuer.
Any advance credit of cash or shares by the Custodian or a Subcustodian
expected to be received as a result of any corporate event shall be subject to
actual collection and may, when the Custodian deems such collection unlikely, be
reversed by the Custodian
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upon written notice to the Fund. As used herein, an "advance credit of cash or
shares" shall mean any credit of cash or shares to any account maintained
hereunder prior to actual receipt and collection of such cash or shares in
anticipation of a distribution expected to be received in the future.
5. CASH ACCOUNTS.
5.1 OPENING AND MAINTAINING CASH ACCOUNTS - Subject to the terms and
conditions set forth in this Section 5, the Fund on behalf of the Portfolio,
hereby authorizes the Custodian to open and maintain, with itself or with
Subcustodians, cash accounts in United States Dollars and in such other
currencies as the Fund shall from time to time request or as are in the
Custodian's discretion required in order for the Custodian to carry out the
terms of this Agreement. The Custodian shall make payments from or deposits to
any of said accounts upon its receipt of Proper Instructions from the Fund
providing sufficient details to effect such transaction.
Cash accounts opened on the books of the Custodian ("BBH Accounts") shall
be opened in the name of the Fund on behalf of the Portfolio. Subject always to
the provisions of Section 10 hereof, the Custodian shall be liable for repayment
of any and all deposits carried on its books as principal, whether denominated
in United States Dollars or in other currencies.
Cash accounts opened on the books of Subcustodians
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appointed pursuant to Section 7 hereof may be opened in the name of the
Portfolio or the Custodian or in the name of the Custodian for its customers
generally ("Agency Accounts"). Such deposits shall be treated as portfolio
securities, and accordingly the Custodian shall be responsible for the exercise
of reasonable care in respect of the administration of such Agency Accounts but
so long as the Custodian exercises reasonable care as herein defined in
attempting to obtain repayments, the Custodian shall not be liable for their
repayment in the event the Subcustodian fails to make repayment (including in
the event of the Subcustodian's bankruptcy or insolvency). Both BBH Accounts and
Agency Accounts shall have the benefit of the provisions of Section 10 of this
Agreement.
The Fund bears all risks of holding or transacting in any currency. Any
credit made to any Agency or BBH Account shall be provisional and may be
reversed by the Custodian in the event such payment is not actually collected.
The Custodian shall not be liable for any loss or damage arising from the
applicability of any law or regulation now or hereafter in effect, or from the
occurrence of any event, which may delay or affect the transferability,
convertibility or availability of any currency in the country (i) in which such
BBH or Agency Accounts are maintained or (ii) in which such currency is issued,
and in no event shall the Custodian be obligated to
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make payment of a deposit denominated in a currency during the period during
which its transferability, convertibility or availability has been affected
by any such law, regulation or event. Without limiting the generality of the
foregoing, neither the Custodian nor any Subcustodian shall be required to
repay any deposit made at a foreign branch of either the Custodian or
Subcustodian during such time as such branch cannot repay the deposit due to
(i) an act of [EU3]war, insurrection or civil strife; or (ii) an action by a
foreign government or instrumentality, whether de jure or de facto, in the
country in which the branch is located preventing such repayment, unless the
Custodian or such Subcustodian expressly agrees in writing to repay the
deposit under such circumstances.
All currency transactions in any account opened pursuant to this Agreement
are subject to exchange control regulations of the United States and of the
country where such currency is the lawful currency or where the account is
maintained. Any taxes, costs, charges or fees imposed on the convertibility of a
currency held by the Portfolio shall be for the account of the Portfolio.
5.2 FOREIGN EXCHANGE TRANSACTIONS - The Custodian shall, pursuant to
Proper Instructions, settle foreign exchange transactions (including contracts,
futures, options and options on futures) on behalf and for the account of the
Portfolio with such currency brokers or banking institutions, including
Subcustodians, as the Fund may direct pursuant to Proper Instructions. The
Custodian shall be responsible for the transmission of cash and instructions to
and from the currency broker or banking institution with which the contract or
option is made and the safekeeping of
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all certificates and other documents and agreements evidencing or relating to
such foreign exchange transactions as the Custodian may receive. In connection
with such transactions, the Custodian is authorized to make free outgoing
payments of cash in the form of U. S. Dollars or foreign currency without
receiving confirmation of a foreign exchange contract or option or confirmation
that the countervalue currency completing the foreign exchange contract has been
delivered or received or that the option has been delivered or received. The
Fund, on behalf of the Portfolio, accepts full responsibility for its use of
third-party foreign exchange dealers and for execution of said foreign exchange
contracts and options and understands that the Fund shall be responsible for any
and all costs and interest charges which may be incurred by the Fund or the
Custodian as a result of the failure or delay of third parties to deliver
foreign exchange.
Foreign exchange transactions (including without limitation contracts,
futures, options, and options on futures), other than those executed with the
Custodian as principal, but including those executed with Subcustodians, shall
be deemed to be portfolio securities of the Portfolio and accordingly the
Custodian shall only be responsible for delivering or receiving currency on
behalf of the Portfolio in respect of such contracts pursuant to Proper
Instructions subject to the fourth paragraph of this Section 5. The
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Custodian shall not be responsible for the failure of any counterparty in such
agency transaction to perform its obligations thereunder.
Alternatively, such transactions may be undertaken by the Custodian as
principal, if instructed by the Portfolio and accepted by the Custodian, which
instructions may be in the form of a standing instruction.
The obligations of the Custodian in respect of all foreign exchange
transactions shall be contingent on the free, unencumbered transferability of
the currency transacted on the actual settlement date of the transaction.
5.3 DELAYS - In the event a delay is caused by the negligence or willful
misconduct of the Custodian in carrying out a Proper Instruction to transfer
cash in connection with any transaction referred to in Section 5.1 or 5.2 above,
the Custodian shall be liable to the Portfolio for interest to be calculated at
the rate customarily paid by the Custodian on overnight deposits at the time the
delay occurs for the period from the day when the transfer should have been
effected until the day it is in fact effected. The Custodian shall not be liable
for delays in carrying out such instructions to transfer cash which are not due
to the Custodian's own negligence or willful misconduct.
6. PROPER INSTRUCTIONS. Proper Instructions shall include, in the following
21
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order of the preferred method of giving such instructions, authenticated
electromechanical communications including direct electronic transmissions,
authenticated SWIFT and tested telex, including Electronic Instructions as
described in Section 8.3,; a written request signed by two or more authorized
persons as set forth below; telefax transmissions; and oral instructions,
including telephone. Proper Instructions may also include such other methods
of communicating Proper Instructions as the parties hereto may from time to
time agree. Each of the first four methods of communicating Proper
Instructions is described and defined below and may from time to time be
described and defined in written operating memoranda between the Custodian
and the Fund. The Custodian is hereby authorized to act on instructions sent
via any of the foregoing methods from any director, employee or officer of
the Fund or from any other agent of the Fund as the Fund shall from time to
time instruct.
Authenticated electro-mechanical communications shall include
communications effected directly between electromechanical or electronic
devices or systems, including authenticated SWIFT and tested telex
transmissions, and other forms of communications involving or between such
electro-mechanical or electronic devices or systems as the parties may from
time to time agree upon in writing. In the event media other than tested
telex transmissions are agreed upon, the Custodian may in its discretion
require that the Fund on behalf of the Portfolio or other agent and the
Custodian enter into certain operating memoranda which shall set forth the
media through which such Proper Instructions shall be transmitted and the
data which must be included in such Proper Instructions in order for such
instructions to be complete. Once such operating memoranda shall have been
instituted, the Fund, or Agent shall be responsible for sending instructions
which meet the requirements set forth in such operating memoranda and the
Custodian shall only be
22
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responsible for acting on instructions which meet such requirements. The
Custodian shall not be liable for damages of any kind, including direct or
consequential losses resulting from technological or equipment failures or
communications system failures of any kind in respect of instructions sent or
attempted to be sent via electromechanical communications.
A written request signed by two or more authorized persons shall include
a written request, direction, instruction or certification signed or
initialed on behalf of the Fund by two or more persons as the Directors or
Trustees of the Fund shall have from time to time authorized, or by such
other written procedure as the Custodian and the Fund shall from time to time
agree in writing. Those persons authorized to give Proper Instructions may be
identified by the Directors or Trustees by name, title or position (including
any of its directors, employees or agents or person or entity with similar
responsibilities which is authorized to give Proper Instructions on behalf of
the Fund to the Custodian) and will include at least one officer empowered by
the Directors or Trustees to name other individuals or entities who are
authorized to give Proper Instructions on behalf of the Fund.
Telephonic or other oral instructions or instructions given by telefax
transmission may be given by any one of the persons referred to in the
preceding paragraph and will be considered Proper Instructions if the
Custodian believes them to have been given by a person authorized to give
such instructions with respect to the transaction involved.
With respect to telefax transmissions, the Fund and the Custodian hereby
acknowledge that the Custodian cannot verify that authorized signatures on
telefax instructions are original or properly affixed. Accordingly, so long
as the Custodian has no actual knowledge to the contrary, the Custodian shall
not be responsible for losses or expenses incurred through actions taken in
reliance on unauthorized telefax instructions. Oral instructions will be
confirmed by authenticated electro-mechanical communications
23
<PAGE>
or written instructions in the manner set forth above, but the lack of such
confirmation shall in no way affect any action taken by the Custodian in
reliance upon such oral instructions. The Fund hereby authorizes the
Custodian to tape record any and all telephonic or other oral instructions
given to the Custodian by or on behalf of the Portfolio (including any of its
Directors, Trustees, employees or agents or any other person or entity with
similar responsibilities which is authorized to give Proper Instructions on
behalf of the Fund to the Custodian).
Proper Instructions may relate to specific transactions or to types or
classes of transactions, and may be in the form of standing instructions.
The Custodian shall not be responsible for its failure to act on any
instruction received from the Fund which the Custodian in good faith believes
does not meet the requirements set forth herein, provided that the Custodian
promptly notifies the Fund that the instruction in question does not conform
to the requirements for Proper Instruction.
7. AUTHORITY TO APPOINT SUBCUSTODIANS AND AGENTS AND TO UTILIZE SECURITIES
DEPOSITORIES. Subject to the provisions hereinafter set forth in this
Section 7, the Fund hereby authorizes the Custodian to utilize Securities
Depositories to act on behalf of the Portfolio and to appoint from time to
time and to utilize Subcustodians.
The Custodian may deposit and/or maintain Property of the Portfolio in
any non-U.S. Securities Depository provided such Securities Depository meets
the requirements of an "eligible foreign custodian" under Rule 17f-5
promulgated under the 1940 Act, or any successor rule or regulation ("Rule
17f-5") or which by order of the Securities and Exchange Commission is
exempted therefrom. The Custodian may deposit and/or maintain, either
directly or through one or more agents appointed by the Custodian, Property
of the Portfolio in any Securities Depository in the United States, including
The Depository Trust Company,
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<PAGE>
provided such Depository meets applicable requirements of the Federal Reserve
Bank or of the Securities and Exchange Commission. Notwithstanding anything
in this Agreement to the contrary, any Property held in a Securities
Depository, whether or not the Custodian is a direct participant or member,
will be held subject to the rules, regulations, operating memoranda or other
conditions of participation in such Securities Depository.
Subject to the succeeding paragraph, the Custodian may, at any time and
from time to time, appoint any bank as defined in Section 2(a)(5) of the 1940
Act meeting the requirements of a custodian under Section 17(f) of the 1940
Act and the rules and regulations thereunder, to act on behalf of the
Portfolio as a subcustodian for purposes of holding Property of the Portfolio
in the United States. Additionally, the Custodian may, at any time and from
time to time, appoint (i) any bank, trust company or other entity meeting the
requirements of an "eligible foreign custodian" under Rule 17f-5 or which by
order of the Securities and Exchange Commission is exempted therefrom, or
(ii) any bank as defined in Section 2(a)(5) of the 1940 Act meeting the
requirements of a custodian under Section 17(f) of the 1940 Act and the rules
and regulations thereunder, to act on behalf of the Portfolio as a
subcustodian for purposes of holding Property of the Portfolio outside the
United States. Any bank, trust company or other entity appointed pursuant to
the foregoing provisions shall be a Subcustodian.
Prior to the appointment of any Subcustodian for purposes of holding
Property of the Portfolio outside the United States, the Custodian shall have
obtained written
25
<PAGE>
confirmation of the approval of the Board of Trustees or Directors of the
Fund with respect to (i) the identity of a Subcustodian, (ii) the country or
countries in which, and the Securities Depositories, if any, through which,
any proposed Subcustodian is authorized to hold Property of the Portfolio,
and (iii) the subcustodian agreement which shall govern such appointment.
Each such duly approved Subcustodian and the countries where and Securities
Depositories through which they may hold Property of the Customer shall be
listed on Appendix A attached hereto as the same may from time to time be
amended. The Custodian may, at any time in its discretion, remove any
Subcustodian that has been appointed as such but will promptly notify the
Fund of any such action. In addition, the Fund on behalf of the Portfolio,
may instruct the Custodian to terminate the use of one or more Subcustodians.
The Fund shall be responsible for informing the Custodian sufficiently in
advance of a proposed investment which is to be held in a country in which no
Subcustodian is authorized to act in order that the Custodian shall have
sufficient time to establish a subcustodial arrangement in accordance herewith.
In the event, however, the Custodian is unable to establish such arrangements
prior to the time such investment is to be acquired, the Custodian is authorized
to designate at its discretion a local safekeeping agent, and the use of such
local safekeeping agent shall be at the sole
26
<PAGE>
risk of the Portfolio, and accordingly the Custodian shall be responsible to the
Portfolio for the actions of such agent if and only to the extent the Custodian
shall have recovered from such agent for any damages caused the Portfolio by
such agent.
With respect to securities and funds held by a Subcustodian, either
directly or indirectly (including by a Securities Depository or clearing
agency), notwithstanding any provisions of this Agreement to the contrary,
payment for securities purchased and delivery of securities sold may be made
prior to receipt of securities or payment, respectively, and securities or
payment may be received in a form, in accordance with (i) governmental
regulations, (ii) rules of Securities Depositories and clearing agencies, (iii)
generally accepted trade practice in the applicable local market, (iv) the terms
of the instrument representing the security, or (v) the terms of Proper
Instructions.
In the event the Custodian receives a claim from a Subcustodian under the
indemnification provisions of any subcustodian agreement, the Custodian shall
promptly give written notice to the Fund of such claim. No more than thirty days
after written notice to the Fund of the Custodian's intention to make such
payment, if the Fund in its reasonable opinion believes that such claim is
entitled to indemnity, the Fund will reimburse the Custodian the amount of such
payment except in respect of any negligence
27
<PAGE>
or misconduct of the Custodian or Subcustodian.
The Custodian may at any time or times in its discretion appoint (and may
at any time remove) any other bank or trust company as its agent (an "Agent") to
carry out such of the provisions of this Agreement as the Custodian may from
time to time direct, provided, however, that the appointment of such Agent shall
not relieve the Custodian of any of its responsibilities under this Agreement.
8. REPORTING; RECORDS. The Custodian shall have and perform the following
duties with respect to recordkeeping.
8.1 RECORDS - The Custodian shall create, maintain and retain such
records relating to its activities and obligations under this Agreement as will
enable the Custodian to comply with its obligations hereunder and as are
customarily maintained by a professional custodian.
8.2 ACCESS TO RECORDS - The books and records maintained by the Custodian
pursuant to this Section 8 shall at reasonable times during the Custodian's
regular business hours be open to inspections and audit by the auditors and by
employees and agents of the Fund and the Securities and Exchange Commission
provided that all such individuals shall observe all security requirements of
the Custodian applicable to its own employees having access to similar records
and such rules as may be reasonably imposed by the Custodian.
8.3 ELECTRONIC RECORDS AND COMMUNICATIONS - The Custodian may make any of
its records available to the Fund via electronic reporting which may include
without limitation on-line software systems ("Electronic Reports").
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<PAGE>
The Fund understands that such Electronic Reports may include data provided to
the Custodian by outside sources which may not have been independently verified
by the Custodian and is subject to change. Accordingly, the Custodian shall not
be liable for inaccuracies, errors or incomplete information furnished by such
sources, provided the Custodian has exercised the standard of care as set forth
herein.
The Custodian shall upon request, also make available to the Fund certain
software to be used to initiate payment and securities transfer instructions,
affirm brokerage transactions reported through the Institutional Delivery System
or initiate other transaction instructions for the Custodian's processing
("Electronic Instructions").
The Fund agrees that it shall be responsible for protecting and maintaining
the confidentiality and security of any codes assigned in respect of the Fund's
access to such Electronic Reports or Electronic Instructions and that, absent
any actual knowledge that the confidentiality of the Electronic Instructions
system has been compromised, any instructions received through such system using
the client code assigned to the Fund shall be deemed to have originated from or
on behalf of the Fund and to be Proper Instructions.
The Custodian shall not be responsible for information added to, changed or
omitted by electronic programming malfunction, unauthorized access or other
failure of such
29
<PAGE>
systems unless such actions are the direct result of the Custodian's negligence,
bad faith or willful malfeasance.
8.5 APPOINTMENT AS RECORDKEEPING AND NET ASSET VALUE CALCULATION AGENT -
The Custodian is hereby appointed recordkeeping and net asset value calculation
agent responsible for creating, maintaining and retaining such records relating
to its obligations under this Agreement as are required under the 1940 Act
(including Section 31 thereof and Rules 31a-1 and 31a-2 thereunder). All such
records will be the property of the Fund.
The Custodian shall compute and determine the net asset value per share of
the Fund as of the close of business on the New York Stock Exchange on each day
on which such Exchange is open, unless otherwise directed by Proper
Instructions. Such computation and determination shall be made in accordance
with (1) the provisions of the Fund's Declaration of Trust or Certificate of
Incorporation and By-Laws, as they may from time to time be amended and
delivered to the Custodian, (2) the votes of the Board of Trustees or Directors
of the Fund at the time in force and applicable, as they may from time to time
be delivered to the Custodian, and (3) Proper Instructions. On each day that
the Custodian shall compute the net asset value per share of the Fund, the
Custodian shall provide the Fund with written reports.
In computing the net asset value, the Custodian may rely upon any
information furnished by Proper Instructions, including without limitation any
information (1) regarding accrual of liabilities of the Fund and liabilities
of the Fund not appearing on the books of account kept by the Custodian, (2)
regarding the existence, status and proper treatment of reserves, if any,
authorized by the Fund, (3) regarding the sources of
30
<PAGE>
quotations to be used in computing the net asset value, including those listed
in Appendix B, (4) regarding the fair value to be assigned to any securities or
other property for which price quotations are not readily available, and (5)
regarding the sources of information with respect to "corporate actions"
affecting portfolio securities of the Fund, including those listed in Appendix
B. (Information as to "corporate actions" shall include information as to
dividends, distributions, stock splits, stock dividends, rights offerings,
conversions, exchanges, recapitalizations, mergers, redemptions, calls, maturity
dates and similar transactions, including the ex- and record dates and the
amounts or other terms thereof.) The Fund may instruct the Custodian to utilize
a particular source for the valuation of a specific Security or other Property
so long as the Custodian has exercised the standard of care set forth herein,
the Custodian shall be protected in utilizing the valuation provided by such
source without further inquiry in order to effect calculation of the Fund's net
asset value. The Fund agrees to provide the Custodian with Proper Instructions
setting forth all liabilities which ought to be included in the calculation of
the Fund's net asset value.
In like manner, the Custodian shall compute and determine the net asset
value as of such other times as the Board of Trustees or Directors of the Fund
from time to time may reasonably request.
Notwithstanding any other provisions of this Agreement, including Section
10.1, the following provisions shall apply with respect to the Custodian's
foregoing responsibilities in this Section 8.5: The Custodian shall be held to
the exercise of reasonable care in computing and determining net asset value as
provided in this Section 8.5, but shall not be held accountable or liable for
any losses or damages the Fund or any shareholder or former shareholder of the
Fund or any other person may suffer or incur arising from or based upon errors
or delays in the determination of such net asset value resulting from any
31
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event beyond the reasonable control of the Custodian unless such error or delay
was due to the Custodian's negligence or reckless or willful misconduct in
determination of such net asset value. (The parties hereto acknowledge, however,
that the Custodian's causing an error or delay in the determination of net asset
value may, but does not in and of itself, constitute negligence or reckless or
willful misconduct.) In the absence of negligence or failure to inform the Fund
of any error or delay of which it is aware, the Custodian shall not be liable or
responsible to the Fund, any present or former shareholder of the Fund or any
other person for any error or delay which continued or was undetected after the
date of an audit performed by the certified public accountants employed by the
Fund if, in the exercise of reasonable care in accordance with generally
accepted accounting standards, such accountants should have become aware of such
error or delay in the course of performing such audit. The Custodian's
liability for any such negligence or reckless or willful misconduct which
results in an error in determination of such net asset value shall be limited
exclusively to the direct, out-of-pocket loss the Fund, shareholders or former
shareholders shall actually incur, measured by the difference between the actual
and the erroneously computed net asset value, and any expenses the Fund shall
incur in connection with correcting the records of the Fund affected by such
error (including charges made by the Fund's registrar and transfer agent for
making such corrections) or communicating with shareholders or former
shareholders of the Fund affected by such error.
Without limiting the foregoing, so long as the Custodian has exercised the
standard of care set forth herein the Custodian shall not be held accountable or
liable to the Fund, any shareholder or former shareholder thereof or any other
person for any delays or losses, damages or expenses any of them may suffer or
incur resulting from (1) the Custodian's failure to receive timely and suitable
notification concerning quotations or corporate actions relating to or affecting
portfolio securities of the Fund or (2) any errors
32
<PAGE>
in the computation of the net asset value based upon or arising out of
quotations or information as to corporate actions if received by the Custodian
either (i) from a source which the Custodian was authorized pursuant to the
third paragraph of this Section 8.5 to rely upon, (ii) from a source which in
the Custodian's reasonable judgment was as reliable a source for such quotations
or information as the sources authorized pursuant to that third paragraph, or
(iii) from relevant information known to the Fund which would impact the
calculation of net asset value but which is not communicated by the Fund or the
to the Custodian.
In the event of any error or delay in the determination of such net asset
value for which the Custodian may be liable, the Fund and the Custodian will
consult and make good faith efforts to reach agreement on what actions should be
taken in order to mitigate any loss suffered by the Fund or its present or
former shareholders, in order that the Custodian's exposure to liability shall
be reduced to the extent possible after taking into account all relevant factors
and alternatives. It is understood that in attempting to reach agreement on
the actions to be taken or the amount of the loss which should appropriately be
borne by the Custodian, the Fund and the Custodian will consider such relevant
factors as the amount of the loss involved, the Fund's desire to avoid loss of
shareholder good will, the fact that other persons or entities could have been
reasonably expected to have detected the error sooner than the time it was
actually discovered, the appropriateness of limiting or eliminating the benefit
which shareholders or former shareholders might have obtained by reason of the
error, and the possibility that other parties providing services to the Fund
might be induced to absorb a portion of the loss incurred. [EU5]
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<PAGE>
9. RESPONSIBILITY OF CUSTODIAN. In carrying out the provisions of this
Agreement, the Custodian and its nominees shall be held to the exercise of
reasonable care, provided that the Custodian shall not thereby be required to
take any action which is in contravention of any law, rule or regulation or any
order of any court of competent jurisdiction. As used in this Agreement,
"reasonable care" shall mean the level of care which a professional custodian
providing custody services to institutional investors would provide in light of
the circumstances and events which reasonably influence its performance in the
market where the securities are held or the transaction is effected, including
without limitation local market practices relating to securities settlement and
safekeeping, and "negligence" shall mean the failure to exercise reasonable care
as herein defined. The Custodian shall, subject to the provisions set forth in
Sections 9 and 10 hereof, be responsible to the Fund for any direct loss or
damage (without taking into account special circumstances) which the Fund incurs
by reason of the Custodian's negligence, bad faith or willful malfeasance.
With respect to securities and funds held by a Subcustodian, either
directly or [EU6]indirectly (including by a Securities Depository or foreign
clearing agency), including demand deposits, currencies or other deposits
and foreign exchange contracts as referred to herein, the
34
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Custodian agrees to monitor the activities of the Subcustodians and to use its
best efforts to recover from the Subcustodians any amounts the Subcustodian may
owe to the Custodian or the Fund and, consistent therewith, shall be liable to
the Fund if and only to the extent that such Subcustodian is liable to the
Custodian and the Custodian recovers under the applicable subcustodian
agreement.
With respect to the securities, cash and other Property of the Portfolio
held by a Securities Depository utilized by the Custodian or any Subcustodian or
any agent of the Custodian, the Custodian shall not be liable for the acts and
omissions of such Securities Depository unless and only to the extent that such
Securities Depository is liable to the Custodian and the Custodian recovers from
such Securities Depository, provided always that the Custodian shall be liable
to the Fund only for any direct loss or damage to the Fund resulting from use of
the Securities Depository if caused by the negligence, bad faith or willful
malfeasance of the Custodian. In the event of a loss of Fund assets held at a
Securities Depository, the Custodian shall use reasonable efforts to recover or
cause a Subcustodian to use reasonable efforts to recover such assets from such
Securities Depository.
The Fund agrees to indemnify and hold harmless the Custodian and its
nominees from all claims and liabilities (including reasonable counsel fees)
incurred or assessed against it or its nominees in connection with the
performance of this Agreement, except such as may arise from
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its or its nominees breach of the relevant standard of conduct set forth herein
and is not inconsistent with any provision contained herein. The Fund shall in
no event be liable for indirect or consequential damages or for loss of goodwill
incurred by the Custodian. Without limiting the foregoing indemnification
obligation of the Fund, the Fund agrees to indemnify the Custodian and any
nominee in whose name portfolio securities or other property of the Fund is
registered against any liability the Custodian or such nominee may incur by
reason of taxes assessed to the Custodian or such nominee or other reasonable
costs, liability or expense incurred by the Custodian or such nominee resulting
directly or indirectly from the fact that portfolio securities or other property
of the Portfolio is registered in the name of the Custodian or such nominee.
10. LIMITATIONS TO CUSTODIAN'S RESPONSIBILITY.
10.1 LIABILITY IN GENERAL - Except as otherwise provided in this
Agreement, the Custodian shall be responsible for loss or damage which the Fund
may incur by reason of the Custodian's negligence, bad faith or willful
malfeasance, PROVIDED ALWAYS that such loss or damage shall be limited to direct
damages incurred by the Fund without taking into account special circumstances,
and PROVIDED FURTHER that the Custodian shall in no event be liable for
36
<PAGE>
indirect or consequential damages or for loss of goodwill, even if the Custodian
has been advised of the likelihood of such loss or damage and regardless of the
form of action.
10.2 LIABILITY OF THE CUSTODIAN WITH RESPECT TO PROPER INSTRUCTIONS;
EVIDENCE OF AUTHORITY; ETC. the Custodian shall not be liable for, and shall be
indemnified by the Fund for losses or damages incurred or assessed against the
Custodian as a result of, any action taken or omitted in reliance upon Proper
Instructions or upon any other written notice, request, direction, instruction,
certificate or other instrument believed by it to be genuine provided that the
Custodian shall be responsible for losses, costs or expenses which the Fund
incurs as direct result of the Custodian's negligence in carrying out any Proper
Instruction.
The Custodian shall be entitled to receive and act upon advice of (a) its
own counsel or counsel which it selects, (b) counsel for the Fund, or (c) such
other counsel as the Fund and the Custodian may agree upon, with respect to all
matters. The Custodian shall be without liability for any action taken or
omitted pursuant to advice given by counsel previously approved by the Fund.
10.3 TITLE TO SECURITIES, FRAUDULENT SECURITIES - So long as and to the
extent that it is in the exercise of reasonable care, the Custodian shall not be
responsible for the title, validity or genuineness of any Property or
37
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evidence of title thereto received by it or delivered by it pursuant to this
Agreement.
10.4 FORCE MAJEURE - Notwithstanding any other provision contained herein,
the Custodian shall not be liable for any action taken, or for any failure to
take any action required to be taken hereunder, or otherwise for its failure to
fulfill its obligations hereunder (including without limitation the failure to
receive or deliver securities or the failure to receive or make any payment) in
the event and to the extent that the taking of such action or such failure
arises out of or is caused by civil commotion, act of God, accident, fire, water
damage, explosion, mechanical breakdown, computer or system failure or other
equipment failure, malfunction or failure caused by computer virus, failure or
malfunctioning of any communications medium for whatever reason, interruption
(whether partial or total) of power supplies or other utility service, strike or
other stoppage (whether partial or total) of labor, market conditions which
prevent the orderly execution of securities transactions or affect the value of
Property, any law, decree, regulation or order of any government or governmental
body, de facto or de jure (including any court or tribunal), rules or
regulations of any Securities Depository or clearing agency or any other cause
whatsoever (whether similar or dissimilar to the foregoing) beyond its control
or the control of its
38
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Subcustodian or other agent (collectively, "Force Majeure").
[EU7]10.5 SOVEREIGN RISK - Without limiting the generality of the foregoing
Section 10.4, the Custodian shall not be liable for any losses resulting from a
Sovereign Risk. As used herein, a Sovereign Risk shall mean any act of war,
terrorism, riot, insurrection or civil commotion; the imposition of exchange
control restrictions; confiscation, expropriation or nationalization of any
property including without limitation cash, cash equivalents, securities or the
assets of any issuer of securities by any governmental or quasi-governmental
authority (including without limitation those authorities which are judicial,
legislative, executive, military or religious in nature), whether de facto or de
jure; currency devaluation or revaluation; the imposition of taxes, levies or
other charges affecting the Fund's property, or any other political risk
(whether similar or dissimilar to the foregoing) incurred in respect of the
country in which the issuer of such securities is organized or in which such
securities are held or such payments are held or effected.
10.6 CURRENCY RISKS - The Portfolio bears all risks of holding or
transacting in any currency. Without limiting the generality of the foregoing,
the Fund bears all risks that rules or procedures imposed by Securities
Depositories, exchange controls, asset freezes or other laws or regulations
shall prohibit or impose burdens on or costs relating to the transfer by or for
the account of the Fund of securities, cash or currency held outside the United
States or denominated in a currency other than U. S. dollars or on the
conversion of any currency so held. The Custodian shall in no event be obligated
to substitute another
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currency (including U.S. dollars) for a currency whose transferability,
convertibility or availability has been affected by any such law, regulation,
rule or procedure.
10.7 INVESTMENT RISKS NOT ASSUMED BY CUSTODIAN - The Custodian shall have
no liability in respect of any loss or damage suffered by the Portfolio, insofar
as such loss or damage arises from commercial or other investment risks inherent
in investing in capital markets or in holding securities in a particular
jurisdiction or country including without limitation: (i) political, legal,
economic, settlement and custody infrastructure, exchange rate and currency
risks; (ii) investment and repatriation restrictions; (iii) the Fund's or
Custodian's inability to protect and enforce any local legal rights including
rights of title and beneficial ownership; (iv) corruption and crime in the local
market; (v) unreliable information which emanates from the local market; (vi)
volatility of banking and financial systems and infrastructure; (vii) bankruptcy
and insolvency risks of any and all local banking agents, counterparties to
cash and securities transactions or registrars or transfer agents; (viii) risk
of issuer insolvency or default; and (ix) market conditions which prevent the
orderly execution of transactions or the value of assets.
10.8 INVESTMENT LIMITATIONS - In performing its duties generally, and more
particularly in connection with the purchase, sale and exchange of securities
made by or for the Portfolio, the Custodian may assume unless and until notified
in writing to the contrary that Proper Instructions received by it are not in
conflict with or in any way contrary to any provisions of the Fund's Declaration
of Trust or Certificate of Incorporation or By-Laws (or comparable documents) or
votes or proceedings of the
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shareholders or Trustees or Directors of the Fund. The Custodian shall not be
liable to the Fund for any violation which occurs in the course of carrying out
instructions given in accordance with this Agreement by the Fund or any of any
investment limitations to which the Fund is subject or other limitations with
respect to the Fund's powers to make expenditures, encumber securities, borrow
or take similar actions affecting the Fund.
10.9 FOREIGN OWNERSHIP LIMITATIONS - The Fund shall be responsible for
monitoring foreign ownership limitations in any markets in which it invests.
10.10 RESTRICTED SECURITIES - The Custodian shall only be responsible
for notifying the Portfolio of any restrictions on the transfer of securities
held in the Securities Account of which the Custodian is in fact aware. In no
event shall the Custodian be responsible for the inability of a the Portfolio to
sell or transfer restricted securities or for delays incurred in the sale or
transfer of restricted securities if such inability or delay is the result of
the terms of the security itself, actions of the issuer, its counsel or other
representative (including without limitation its registrar), or limitations due
to laws, regulations or other applicable rules. The Custodian shall only be
responsible for transmitting information to the Fund as to those corporate
actions in respect of restricted securities which it in fact receives.
41
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10.11 MARKET INFORMATION - The Custodian may in its discretion make
market information available to the Fund. This service is for informational
purposes only and is not to be construed as a recommendation to buy or sell a
particular security, to invest or not to invest in a particular country, or
to take any action whatsoever. Although information reported therein is
believed to be accurate, the Custodian does not represent or warrant its
accuracy or completeness. The Fund accordingly acknowledges that the
Custodian provides market information on a best [EU8]efforts basis and
recognizes its responsibility to consult with its own independent sources
before making any investment or other decisions.
11. ADVANCES AND SECURITY FOR ADVANCES. In the event that the Custodian is
directed by Proper Instructions to make any payment or transfer of funds from
any BBH or Agency Account on behalf of the Portfolio for which there would be,
at the close of business on the date of such payment or transfer, whether known
at that time or subsequently determined, insufficient funds held by the
Custodian or any Subcustodian, Securities Depository, or otherwise on behalf of
the Fund, or if the Custodian or any nominee thereof shall incur or be assessed
any taxes, charges, expenses, assessments, claims or liabilities in connection
with the performance of this Agreement, except as such may arise from its or its
nominees own negligent action, negligent failure to act or willful misconduct
(collectively a "Liability"),
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the Custodian may, in its discretion without further Proper Instructions,
provide or authorize an advance ("Advance") for the account of the Fund in an
amount sufficient to satisfy such Liability or to allow the settlement or
completion of the transaction by reason of which such payment or transfer of
funds is to be made. Any Advance shall be payable on demand made by the
Custodian, unless otherwise agreed by the Fund and the Custodian, and shall
accrue interest from the date of the Advance to the date of payment by the Fund
at a rate agreed upon from time to time by the Custodian and the Fund or
otherwise at the rate the Custodian customarily charges on loans to customers.
It is understood that any transaction in respect of which the Custodian shall
have made an Advance, including but not limited to a foreign exchange contract
or transaction in respect of which the Custodian is not acting as a principal,
is for the account of and at the risk of the Portfolio, and not, by reason of
such Advance, deemed to be a transaction undertaken by the Custodian for its own
account and risk. If the Custodian shall make or authorize any Advance to the
Fund or incur any Liability, then in such event any property at any time held
for the account of the Portfolio by the Custodian, a Subcustodian, a Securities
Depository or otherwise ("Collateral") shall be security for such Liability or
for such Advance and the interest thereon, and if the Fund shall fail to pay
such Advance or interest when
43
<PAGE>
due or shall fail to reimburse or indemnify the Custodian promptly in respect of
a Liability, the Custodian shall be entitled to utilize available cash and to
dispose of the Portfolio's property, including securities and balances in any
BBH or Agency Account, to the extent necessary (which shall include the right to
sell or assign securities or otherwise assign its security interest to third
parties) to obtain repayment, reimbursement or indemnification.
For purposes of this Section 11, all such Collateral shall be treated as
financial assets credited to securities accounts under revised Articles 8 and 9
of the Uniform Commercial Code (1994), whether such Articles have in fact been
adopted in the jurisdiction in which the securities are held or the Advance is
granted. Accordingly, with respect to any Collateral, the Custodian shall have
the rights and benefits of a secured creditor that is a securities intermediary
for the Fund under the Uniform Commercial Code as revised.
Deposits maintained in Agency Accounts and BBH Accounts (including all
accounts denominated in any currency) shall collectively constitute a single and
indivisible current account with respect to the Fund's obligations to the
Custodian or any Subcustodian hereunder. Accordingly, balances in all such
Agency and BBH Accounts shall at all times be available for satisfaction of the
Fund's obligations under this Agreement to the Custodian or any of
44
<PAGE>
its Subcustodians or agents including without limitation any Advances incurred
pursuant to this Section.
12. COMPENSATION. The Portfolio shall pay the Custodian a custody fee based on
such fee schedule as may from time to time be agreed upon in writing by the
Custodian and the Fund. Such fee, together with all out-of-pocket expenses for
which the Custodian is to be reimbursed, shall be billed to the Portfolio and be
paid by cash or wire transfer to the
Custodian.
13. TERMINATION. This Agreement shall continue in full force and effect until
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid, to the other party, such termination to take effect not sooner
than thirty (30) days after the date of such delivery or mailing. In the event
of termination the Custodian shall be entitled to receive, prior to delivery of
the securities, cash and other Property held by it, payment of all accrued fees
and unreimbursed expenses and all Advances and Liabilities, upon receipt by the
Fund of a statement setting forth such fees, expenses, Advances and Liabilities.
In the event of the appointment of a successor custodian, it is agreed that
the cash, securities and
45
<PAGE>
other Property owned by the Fund and held by the Custodian or any Subcustodian
shall be delivered to the successor custodian, and the Custodian agrees to
cooperate with the Fund in execution of documents and performance of other
actions necessary or desirable in order to substitute the successor custodian
for the Custodian under this Agreement.
14. MISCELLANEOUS. The following miscellaneous provisions shall govern the
relationship between the parties --
14.1. EXECUTION OF DOCUMENTS, ETC. - Upon request, the Fund shall execute
and deliver to the Custodian such proxies, powers of attorney or other
instruments as may be reasonable and necessary or desirable in connection with
the performance by the Custodian or any Subcustodian of their respective
obligations to the Fund under this Agreement or any applicable subcustodian
agreement with respect to the Fund.
14.2. ENTIRE AGREEMENT - This Agreement constitutes the entire
understanding and agreement of the Fund on behalf of the Portfolio, on the one
hand, and the Custodian, on the other, with respect to the subject matter hereof
and accordingly, supersedes as of the effective date of this Agreement any
custodian agreement or other oral or written agreements heretofore in effect
between the Fund and the Custodian with respect to custody of the Fund's
Property.
14.3. WAIVERS AND AMENDMENTS - No provision of this Agreement may be
waived, amended or terminated except by a statement in writing signed by the
party against which enforcement of such waiver, amendment or termination is
sought; PROVIDED HOWEVER any appendix or addendum to this Agreement may be added
or amended from time to time by
46
<PAGE>
the Fund's execution and delivery to the Custodian of such additional or amended
appendix or addendum, in which case the terms thereof shall take effect
immediately upon execution by the Custodian or otherwise as set forth in this
Agreement.
14.4. INTERPRETATION - In connection with the operation of this
Agreement, the Custodian and the Fund may agree in writing from time to time on
such provisions interpretative of or in addition to the provisions of this
Agreement with respect to the Fund as may be consistent with the general tenor
of this Agreement. No interpretative or additional provisions made as provided
in the preceding sentence shall be deemed to be an amendment of this Agreement.
14.5. CAPTIONS - Headings contained in this Agreement, which are
included as convenient references only, shall have no bearing upon the
interpretation of the terms of the Agreement or the obligations of the parties
hereto.
14.6. GOVERNING LAW - The provisions of this Agreement shall be
construed in accordance with and governed by the laws of the State of New
York without giving effect to principles of conflicts of law. The parties
hereto irrevocably consent to the exclusive jurisdiction of the courts of the
State of New York and the federal courts located in New York City in the
borough of Manhattan.
14.7 NOTICES - Except in the case of Proper Instructions, notices and
other writings contemplated by this Agreement shall be delivered by hand or by
facsimile transmission (provided that in the case of delivery by facsimile
transmission, such notice or other writing shall also be mailed postage prepaid)
to the parties at the following addresses:
(a) If to the Fund:
Dresdner RCM Global Investors LLC
Four Embarcadero Center
San Francisco, CA 4411-4189
Attn: Legal Services Department
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<PAGE>
Telephone (415) 954-5359
Telefax (415) 954-5420
(b) If to the Custodian:
Brown Brothers Harriman & Co.
40 Water Street
Boston, Massachusetts 02109
Attn: Manager, Securities Department
Telephone (617) 742-1818
Telefax: (617) 772-2263
or to such other address as the Fund or the Custodian may have designated in
writing to the other.
14.8. ASSIGNMENT - This Agreement shall be binding on and shall inure to
the benefit of the Fund on behalf of the Portfolio and the Custodian and their
respective successors and assigns, provided that neither the Custodian nor the
Fund may assign this Agreement or any of its rights or obligations hereunder
without the prior written consent of the other party.
14.9. COUNTERPARTS - This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original. This Agreement shall
become effective when one or more counterparts have been signed and delivered
by the Fund and the Custodian.
14.10. CONFIDENTIALITY; SURVIVAL OF OBLIGATIONS - The parties hereto
agree that each shall treat confidentially the terms and conditions of this
Agreement and all information provided by each party to the other regarding its
business and operations. All confidential information provided by a party
hereto shall be used by any other party hereto solely for
48
<PAGE>
the purpose of rendering or obtaining services pursuant to this Agreement and,
except as may be required in carrying out this Agreement, shall not be disclosed
to any third party without the prior consent of such providing party. The
foregoing shall not be applicable to any information that is publicly available
when provided or thereafter becomes publicly available other than through a
breach of this Agreement, or that is required to be disclosed by or to any bank
examiner of the Custodian or any Subcustodian, any regulatory authority, any
auditor of the parties hereto, or by judicial or administrative process or
otherwise by applicable law or regulation. The provisions of this Agreement and
any other rights or obligations incurred or accrued by any party hereto prior to
termination of this Agreement shall survive any termination of this Agreement.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed in its name and behalf on the day and year first above written.
Dresdner RCM Equity Funds, Inc.
on behalf Dresdner RCM Emerging BROWN BROTHERS HARRIMAN & CO.
Markets Fund.
By /s/ Richard W. Ingram By /s/ Kristen F. Giarrusso
----------------------------- ---------------------------
Name: Richard W. Ingram Name: Kristen F. Giarrusso
Title: President Title: Partner
49
<PAGE>
<PAGE>
AMENDMENT TO THE CUSTODIAN AGREEMENT
AMENDMENT entered into as of this 29th day of December, 1997 to the
Custodian Agreement between DRESDNER RCM EQUITY FUNDS, INC. (the "Fund"), on
behalf of the DRESDNER RCM EMERGING MARKETS FUND and BROWN BROTHERS HARRIMAN &
CO. (the "Custodian") dated as of 29th December 1997 (the "Agreement").
In consideration of the Custodian's offering subcustodial services to the
Fund in Russia, the Fund and the Custodian agree that the Agreement is hereby
amended as follows:
1. Section 4. SECURITIES ACCOUNT is amended by the addition of the
following phrase at the end of said Section:
"provided, however, that the Custodian's responsibility for safekeeping
equity securities of Russian issuers ("Russian Equities") hereunder shall
be limited to the safekeeping of relevant share extracts from the share
registration books maintained by the entities providing share registration
services to issuers of Russian Equities (each a "Registrar") indicating an
investor's ownership of such securities (each a "Share Extract"); provided
further, that at such time as the laws and regulations in Russia with
respect to the registration of Russian securities are modified, the
Custodian shall use its best efforts to comply with such new regulations."
2. Section 4.1 (b) SECURITIES REPRESENTED BY BOOK-ENTRY, is amended by
the addition of the following at the end of said Section:
"However, with respect to Russian Equities, the Custodian shall instruct a
Subcustodian to endeavor to assure that registration thereof shall be
reflected on the books of the issuer's Registrar, subject to the following
conditions, but shall in no event be liable for losses or costs incurred as
a result of delays or failures in the registration process that are beyond
the Custodian's reasonable control, including without limitation the
inability to obtain or enforce relevant Share Extracts. Such registration
may be in the name of a nominee of a Subcustodian. In the event
registration is in the name of the Fund, the Fund hereby acknowledges that
only the Custodian or Subcustodian may give instructions to the Registrar
to transfer or engage in other transactions involving the Russian Equities
so registered.
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<PAGE>
A Subcustodian may from time to time enter into contracts with
Registrars with respect to the registration of Russian Equities ("Registrar
Contracts"). Such Registrar Contracts may provide for (i) regular share
confirmations by the Subcustodian, (ii) reregistrations within set
timeframes, (iii) use of a Subcustodian's nominee name, (iv) direct access
by auditors of the Subcustodian or its clients to share registers, and (v)
specification of the Registrar's responsibilities and liabilities. It is
hereby acknowledged and agreed that the Custodian does not represent or
warrant that such Registrar Contracts are enforceable.
If the Fund instructs the Custodian to settle a purchase of a Russian
Equity, the Custodian will instruct a Subcustodian to endeavor on a best
efforts basis to reregister the Russian Equity and obtain a Share Extract
in a timely manner.
After completion of reregistration of a Russian Equity in respect of
which a Subcustodian has entered into a Registrar Contract, the Custodian
shall instruct the Subcustodian to monitor such registrar on a best efforts
basis and to notify the Custodian upon the Subcustodian's obtaining
knowledge of the occurrence of any of the following events ("Registrar
Events"): (i) a Registrar has eliminated a shareholder from the register or
has altered registration records; (ii) a Registrar has refused to register
securities in the name of a particular purchaser and the purchaser or
seller has alleged that the registrar's refusal to so register was
unlawful; (iii) a Registrar holds for its own account shares of an issuer
for which it serves as registrar; (iv) if a Registrar Contract is in effect
with a Registrar, the Registrar notifies the Subcustodian that it will no
longer be able materially to comply with the terms of the Registrar
Contract; or (v) if a Registrar Contract is in effect with a Registrar,
the Registrar has materially breached such Contract. The Custodian shall
inform the Funds of the occurrence of a Registrar Event promptly upon
becoming aware of such occurrence from the Subcustodian.
It shall be the sole responsibility of the Fund to contact the
Custodian prior to executing any transaction in a Russian Equity to
determine whether a Registrar Contract exists in respect of such issuer.
If the Fund instructs the Custodian by Proper Instruction to settle a
purchase of a Russian Equity in respect of which the Subcustodian has not
entered into a Registrar Contract, then the Custodian shall instruct the
Subcustodian to endeavor to settle such transaction in accordance with the
Proper Instruction and with the provisions of Section 4.2 (a) of this
Agreement, notwithstanding the absence of any such Registrar Contract and
without the Custodian being required to notify the Fund that no such
Registrar Contract is then in effect, and it being understood that neither
the Custodian nor the Subcustodian shall be required to follow the
procedure set forth in the second preceding paragraph."
3. Section 4.2 (a) PURCHASES, is amended by the addition of the
following at the end of said Section:
"Without limiting the generality of the foregoing, the following
provisions shall apply with respect to settlement of purchases of
securities in Russia. Unless otherwise instructed by Proper Instructions
acceptable to the Custodian, the Custodian shall only
2
<PAGE>
authorize a Subcustodian to make payment for purchases of Russian Equities
upon receipt of the relevant Share Extract in respect of the Fund's
purchases. With respect to securities other than Russian Equities,
settlement of purchases shall be made in accordance with securities
processing or settlement practices which the Custodian in its discretion
determines to be a market practice. The Custodian shall only be responsible
for securities purchased upon actual receipt of such securities at the
premises of its Subcustodian, provided that the Custodian's responsibility
for securities represented by Share Extracts shall be limited to the
safekeeping of the relevant Share Extract upon actual receipt of such Share
Extract at the premises of the Subcustodian."
4. SECTION 4.2 (B) SALES- is amended by the addition of the following at
the end of said Section:
"Without limiting the generality of the foregoing, the following
provisions shall apply with respect to settlement of sales of securities in
Russia. Unless otherwise expressly instructed by Proper Instructions
acceptable to the Custodian, settlement of sales of securities shall be
made in accordance with securities processing or settlement practices which
the Custodian in its discretion determines to be a market practice. The
Fund hereby expressly acknowledges that such market practice might require
delivery of securities prior to receipt of payment and that the Fund bears
the risk of payment in instances where delivery of securities is made prior
to receipt of payment therefor in accordance with Proper Instructions
received by the Custodian or pursuant to the Custodian's determination in
its discretion that such delivery is in accordance with market practice.
The Custodian shall not be responsible for any securities delivered from
the premises of the Subcustodian from the time they leave such premises
absent negligence on the part of the Subcustodian or its employees in
effecting any such delivery."
5. SECTION 7 AUTHORITY TO APPOINT SUBCUSTODIANS AND AGENTS AND TO UTILIZE
SECURITIES DEPOSITORIES is amended by the addition of the following at the end
of the first paragraph of Section 7:
"With respect to Russia, the Fund hereby expressly acknowledges that a
Subcustodian for Russian securities may from time to time delegate any of
its duties and responsibilities to any securities depository, clearing
agency, share registration agent or sub-subcustodian (collectively,
"Russian Agent") in Russia, including without limitation Rosvneshtorgbank
(also called Vneshtorgbank RF) ("VTB"). The Fund acknowledges that the
rights of the Subcustodian against any such Russian Agent may consist only
of a contractual claim against the Russian Agent. Notwithstanding any
provision of this Agreement to the contrary, neither the Custodian
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<PAGE>
nor the Subcustodian shall be responsible or liable to the Fund or its
shareholders for the acts or omissions of any such Russian Agent. In the
event of a loss of securities or cash held on behalf of the Fund through
any Russian Agent, the Custodian shall not be responsible to the Fund or
its shareholders unless and to the extent it in fact recovers from the
Subcustodian."
6. SECTION 10.2 LIABILITY OF THE CUSTODIAN WITH RESPECT TO PROPER
INSTRUCTIONS; EVIDENCE OF AUTHORITY; ETC. is amended by the insertion of the
following at the end of the first paragraph of said Section:
"It is also agreed that the Fund shall be responsible for preparation
and filing of tax returns, reports and other documents on any activities
it undertakes in Russia which are to be filed with any relevant
governmental or other authority and for the payment of any taxes, levies,
duties or similar liability the Fund incurs in respect of property held or
sold in Russia or of payments or distributions received in respect thereof
in Russia. Accordingly, the Fund hereby agrees to indemnify and hold
harmless the Custodian from any loss, cost or expense resulting from the
imposition or assessment of any such tax, duty, levy or liability or any
expenses related thereto."
7. A new SECTION 15, RISK DISCLOSURE ACKNOWLEDGMENT, is added at the end
of the present Section 14.10:
"The Fund hereby acknowledges that it has received, has read and has
understood the Custodian's Risk Disclosure Statement, a copy of which is
attached hereto and is incorporated herein by reference. The Fund further
acknowledges that the Risk Disclosure Statement is not comprehensive, and
warrants and represents to the Custodian that it has undertaken its own
review of the risks associated with investment in Russia and has concluded
that such investment is appropriate for the Fund and in no way conflicts
with the Fund's constitutive documents, investment objective, duties to its
shareholders or with any regulatory requirements applicable to the Fund."
4
<PAGE>
Except as amended above, all the provisions of the Agreement as heretofore
in effect shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first set forth above.
RCM EQUITY FUNDS, INC. BROWN BROTHERS HARRIMAN & CO.
on behalf of the DRESDNER
RCM EMERGING MARKETS
FUND
/s/ Richard W. Ingram /s/ Kristen F. Giarrusso
- ---------------------------------- -------------------------------------
Name: Richard W. Ingram Name: Kristen F. Giarrusso
Title: President Title: Partner
5
<PAGE>
LICENSE AGREEMENT
This License Agreement ("License") is entered into as of the 11th day of
December, 1997 by and between Dresdner RCM Global Investors LLC, a Delaware
limited liability company ("Licensor") and RCM Equity Funds, Inc., a Maryland
corporation ("Licensee").
RECITALS
WHEREAS, Licensor desires to license the mark DRESDNER RCM (the "Mark") to
Licensee, and Licensee desires to receive a license of the Mark, in its name and
business operations ("Business").
WHEREAS, Licensee is registered with the Securities and Exchange Commission
as an open-end management investment company.
WHEREAS, Licensee, pursuant to a License Agreement between Licensee and
Licensor ("Prior License") granted to Licensee a license to use the phrase "RCM"
in its name and business operations.
WHEREAS, Licensee now desires to use the Mark in connection with said
Business.
WHEREAS, Licensor is willing to grant such right on the terms and
conditions hereinafter provided.
WHEREAS, in connection with granting a license in the Mark pursuant to this
Agreement, Licensee and Licensor desire to terminate the Prior License.
NOW THEREFORE, in consideration of the mutual promises hereinafter set
forth, and for good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, Licensor and Licensee agree as follows:
1. GRANT OF LICENSE.
a. Dresdner RCM hereby grants to Licensee a non-transferable,
non-exclusive, royalty-free license to use the Mark in connection
with its Business.
b. Licensor will take, at Licensor's expense, all steps necessary to
maintain registration of the Mark.
c. Licensee will provide all reasonable assistance to Licensor in
maintaining registration of the Mark.
2. RESTRICTIONS ON USE.
a. Licensee will use the Mark only in connection with its Business.
Licensee will not use the Mark for any other purpose, and all
rights to use the Mark other than for the purpose as set forth
herein will remain with Licensor.
b. Licensee acknowledges that Licensee will not acquire any
proprietary interest whatsoever in the Mark by virtue of this
License. Licensee's right to use the Mark is derived solely from
this License and is subject to the terms, conditions, and
limitations set forth herein. Any unauthorized use of the Mark
by Licensee will
<PAGE>
constitute an infringement of the rights of Licensor in and to
the Mark. Licensor makes no warranty that Licensee's use of the
Mark will not infringe third-party rights.
c. Licensee acknowledges further that this License does not confer
any goodwill or other interests in the Mark upon Licensee, and
that any goodwill associated with Licensee's use of the Mark will
inure to the exclusive benefit of Licensor.
3. QUALITY STANDARDS.
a. Advertising, promotional, and other related uses of the Mark by
Licensee shall conform to standards set by and be under the
control of Licensor and shall be in compliance with all
applicable Federal, State, non-United States, and local laws,
rules and regulations. Licensee shall assist Licensor to
ascertain Licensee's compliance with Section 3(a) by permitting
Licensor to ascertain to review from time to time that the
applicable standard of quality is being satisfied by Licensee.
Licensee shall supply Licensor with specimens of all uses of the
Mark upon request. Licensee agrees that the ultimate
determination of quality standards and compliance by Licensee
with such standards is made by Licensor in its sole discretion.
b. Licensee at all times shall use its best efforts to ensure that
its actions preserve and enhance the value of the Mark. If
Licensee learns of any unauthorized use of the Mark, or any
confusingly similar variation thereof, by a third party, it
agrees to notify Licensor promptly of such unauthorized use.
4. TERM; TERMINATION.
a. The term of this License (the "Term") will commence on the date
first set forth above and will continue indefinitely thereafter
until terminated in accordance with the terms of this License.
b. Any party to this agreement may terminate this License without
cause or liability upon the giving of written notice to the other
party.
c. Upon termination of this License, Licensee will immediately
discontinue all use of the Mark and any term confusingly similar
thereto, including, but not limited to, deleting the Mark and any
term confusingly similar thereto from its corporate or business
name and destroying all printed materials bearing the Mark and
any term confusingly similar thereto.
5. GENERAL
a. NOTICES. Any notice or other communication required under
this License shall be sufficiently given if sent by facsimile,
hand delivery, or certified mail, postage prepaid, and addressed
to such person(s) at such addresses as shall be provided from
time to time for that purpose.
b. PRIOR LICENSE; INTEGRATED WRITING. Each of the Parties hereto
agree that effective as of the date hereof, the Prior License is
terminated and is no longer in
<PAGE>
force or effect. This License constitutes the whole and only
existing and binding agreement among the parties on the subject
matter hereof, superseding all prior understandings, whether
written or oral, including, but not limited to, the Prior
License. Other than the representations expressly stated as such
in this License, there are no warranties, promises, or
representations of any kind, express or implied, upon which any
party has relied in entering into the License, or as to the
future relations or dealings of the parties.
c. AMENDMENTS. This License may be modified or amended only by a
writing signed by the party against whom modification is sought.
d. GOVERNING LAW. This License will be governed by the laws of
the State of California applicable to contracts made and wholly
performed in California, other than the governing conflicts of
law. Any dispute arising hereunder will be adjudicated
exclusively in the courts of the State of California, with venue
in San Francisco County, or in the United State District Court
for the Northern District of California.
e. SEVERABILITY. Invalidation of any of the provisions contained
herein, or the application of such invalidation thereof to any
person, by legislation, judgment, or court order shall in no way
affect any of the other provisions hereof or the application
thereof to any other person, and the same shall remain in full
force and effect, unless enforcement as so modified would be
unreasonable or inequitable under all the circumstances, would
constitute a failure of consideration, or would frustrate the
purposes hereof.
f. NO WAIVER. The waiver by any party hereto of any right,
privilege, covenant, or condition hereunder will not operate as
or indicate a continuing waiver of the same or any other right,
privilege, covenant, or condition hereunder.
g. AUTHORITY. Each individual executing this License on behalf
of an entity represents and warrants that he or she is a duly
authorized representative of that entity with full power and
authority to bind the entity to each term and condition hereof.
h. FURTHER ACTS. Each party hereto will cooperate and use its
best efforts to take all actions necessary to effectuate all
terms and conditions of this License.
i. EXECUTION IN COUNTERPART. This License may be executed in
counterparts, each of which, when executed and delivered, shall
be an original, and taken together will constitute one and the
same agreement.
j. SUCCESSORS. This License shall inure to the benefit of and be
binding upon the parties hereto and their respective successors
and permitted assigns.
k. HEADINGS. Article, Section, and Subsection headings contained
in this License are inserted for convenience or reference only,
will not be deemed to be a part of this License for any purpose,
and will not in any way define or affect the meaning,
construction, or scope or any of the provisions hereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this License to be
executed by duly authorized officers and representatives as of the date first
written above.
DRESDNER RCM GLOBAL INVESTORS LLC RCM EQUITY FUNDS, INC.
By:/s/William L. Price By:/s/Richard W. Ingram
------------------- --------------------
Attest: /s/Tim Parker Attest: Karen Jacoppo-Wood
------------- ------------------
<PAGE>
December 29, 1997
Dresdner RCM Equity Funds, Inc.
Four Embarcadero Center
Suite 3000
San Francisco, California 94111-4189
RE: Dresdner RCM Equity Funds, Inc.
Ladies and Gentlemen:
We have acted as special Maryland counsel for Dresdner RCM Equity Funds,
Inc., a Maryland corporation (the "Company"), in connection with the issuance of
its Dresdner RCM Biotechnology Fund and Dresdner RCM Emerging Markets Fund
shares, par value $.0001 per share (each Fund a "Series" and, collectively, the
"Shares").
As special Maryland counsel for the Company, we are familiar with its
Charter and Bylaws. We have examined the prospectuses and statements of
additional information included in Post Effective Amendment No. 6 to its
Registration Statement on Form N-1A, Securities Act File No. 33-97572 and
Investment Company Act File No. 811-9100 (the "Registration Statement")
substantially in the form in which they are to become effective (collectively,
the "Prospectuses"). We have further examined and relied upon a certificate of
the Maryland State Department of Assessments and Taxation to the effect that the
Company is duly incorporated and existing under the laws of the State of
Maryland and is in good standing and duly authorized to transact business in the
State of Maryland.
We have also examined and relied upon such corporate records of the Company
and other documents and certificates with respect to factual matters as we have
deemed necessary to render the opinion expressed herein. We have assumed,
without independent verification, the genuineness of all signatures on documents
submitted to us, the authenticity of all documents submitted to us as originals,
and the conformity with originals of all documents submitted to us as copies.
Based on such examination, we are of the opinion and so advise you that:
1. The Company is duly authorized and validly existing as a corporation
in good standing under the laws of the State of Maryland.
2. The Shares to be offered for sale pursuant to the Prospectuses are, to
the extent of the respective number of Shares of each Series authorized to be
issued by the Company in its Charter, duly authorized and, when sold, issued and
paid for as contemplated by the Prospectuses, will have been validly and legally
issued and will be fully paid and nonassessble.
<PAGE>
This letter expresses our opinion with respect to the Maryland General
Corporation Law governing matters such as due organization and the authorization
and issuance of stock. It does not extend to the securities or "blue sky" laws
of Maryland, to federal securities laws or to other laws.
We consent to the filing of this opinion as an exhibit to the Registration
Statement and to the reference to us in the statement of additional information
under the caption "Counsel." We do not thereby admit that we are "experts"
within the meaning of the Securities Act of 1933 and the regulations thereunder.
Very truly yours,
Venable, Baetjer and Howard, LLP
<PAGE>
DRESDNER RCM EQUITY FUNDS, INC.
AMENDED AND RESTATED
DISTRIBUTION PLAN
INTRODUCTION
The Board of Directors (the "Board") of Dresdner RCM Equity Funds, Inc., a
Maryland Corporation (the "Company"), has approved the adoption of the
Distribution Plan (the "Plan") set forth below with respect to the distribution
of shares of capital stock (the "Shares") of its Dresdner RCM Global Health Care
Fund, Dresdner Global Small Cap Fund and Dresdner RCM Large Cap Growth Fund
series (each a "Fund" and collectively the "Funds"). This Plan is designed to
conform to the requirements of Rule 12b-1 promulgated under the Investment
Company Act of 1940, as amended (the "Act").
The Company on behalf of the Funds has entered into a distribution
agreement pursuant to which the Company will employ Funds Distributor, Inc. (the
"Distributor") to distribute shares of the Fund. Under this Plan, the Company
of behalf of the Funds intends to compensate the Distributor for expenses
incurred, and services and facilities provided, by the Distributor in
distributing Shares of the Funds.
THE PLAN
The material aspects of the Plan are as follows:
SECTION 1. The Funds will pay the Distributor for: (a) expenses
incurred in connection with advertising and marketing shares of the Funds
including but not limited to any advertising or marketing via radio, television,
newspapers, magazines, telemarketing or direct dial mail solicitations; (b)
periodic payments of fees for distribution assistance made to one or more
securities dealers, or other industry professionals, such as investment
advisers, accountants, estate planning firms and the Distributor itself
(collectively "Service Organizations") in respect of the average daily value of
the Funds' Shares beneficially owned by persons ("Clients") for whom the Service
Organization is the dealer of record or holder of record or with whom the
Service Organization has a servicing relationship, and (c) expenses incurred in
preparing, printing and distributing the Funds' prospectuses and statement of
additional information (except those used for regulatory purposes or for
distribution to existing shareholders of the Funds).
SECTION 2. While this Plan is in effect the Distributor will be
compensated by each Fund for such distribution expenses that are incurred,
and services and facilities that are provided, in connection with Shares of
each Fund on a monthly basis, at the following annual rate of up to 0.25% for
Dresdner RCM Global Health Care Fund and Dresdner RCM Global Small Cap Fund
and up to 0.15% for Dresdner RCM Large Cap Growth Fund of each Fund's average
daily net assets during such month. These monthly payments to the
Distributor will be made in accordance with and subject to the conditions set
forth below. For the purposes of determining the amounts payable under the
Plan, the value of a Fund's net assets shall be computed in the manner
specified in the Fund's prospectus and statement of additional information as
then in effect for the computation of the value of the Fund's net assets.
1
<PAGE>
The distribution fees payable to the Distributor are designed to reimburse
the Distributor for the expenses it incurs and services it renders in
distributing shares of the Funds. If in any year the Distributor's expenses
incurred in connection with the distribution of Shares of a Fund exceed the
distribution fees paid by the Fund, the Distributor will recover such excess
only if this Plan continues to be in effect with respect to the Fund in some
later year when the distribution fees exceed the Distributor's expenses. There
is no limit on the periods during which unreimbursed expenses may be carried
forward, although the Company is not obligated to repay any unreimbursed
expenses for a Fund that may exist at such time, if any, as this Plan terminates
or is not continued with respect to the Fund. No interest, carrying or finance
charge will be imposed on any amounts carried forward.
Payment made out of or charged against the assets of a particular Fund must
be in payment for distribution expenses incurred on behalf of such Fund and
which are described herein.
SECTION 3. Payments by the Distributor to a Service Organization
described in this Plan shall be subject to compliance by the Service
Organization with the terms of a written agreement between the Service
Organization and the Distributor. If an investor in a Fund ceases to be a
client of a Service Organization that has entered into a selling group agreement
with the Distributor, but continues to hold shares of the Fund, the Distributor
will be entitled to receive similar payments in respect of the distribution
assistance provided with respect to such investor.
SECTION 4. The Distributor shall provide the Board, at least quarterly,
with a written report of all amounts expended pursuant to this Plan. The report
shall state the purposes for which the amounts were expended.
SECTION 5. This Plan shall become effective with respect to a Fund upon
its adoption by the Board and, unless earlier terminated with respect to a Fund
in accordance with its terms, the Plan shall continue automatically with respect
to such Fund for successive annual periods provided such continuance is approved
by a majority of the Board, including a majority of the Directors who are not
"interested persons" (as defined in the Act) of the Company and who have no
direct or indirect financial interest in the operation of this Plan or in any
agreements entered into in connection with this Plan (the "Disinterested
Directors"), pursuant to a vote cast in person at a meeting called for the
purpose of voting on the continuance of the Plan.
SECTION 6. This Plan may be amended at any time by the Board provided
that (i) any amendment to increase materially the costs which any Fund may bear
for distribution pursuant to this Plan shall be effective only upon approval by
a vote of a majority of the outstanding voting securities of the respective
Fund, and (ii) any material amendments of the terms of this Plan shall become
effective only upon approval by a majority of the Board and a majority of the
Disinterested Directors pursuant to a vote cast in person at a meeting called
for the purpose of voting on the Plan.
SECTION 7. This Plan is terminable, as to any Fund, without penalty at
any time by (i) vote of the majority of the Disinterested Directors, or (ii)
vote of a majority of the outstanding voting securities of the Fund.
SECTION 8. The Board has adopted this Plan as of
______________________1996.
2
<PAGE>
RCM EQUITY FUNDS, INC.
DISTRIBUTION PLAN
INTRODUCTION
The Board of Directors (the "Board") of RCM Equity Funds, Inc., a Maryland
Corporation (the "Company"), has approved the adoption of the Distribution Plan
(the "Plan") set forth below with respect to the distribution of shares of
capital stock (the "Shares") of its Dresdner RCM Biotechnology Fund (the
"Fund"). This Plan is designed to conform to the requirements of Rule 12b-1
promulgated under the Investment Company Act of 1940, as amended (the "Act").
The Company on behalf of the Fund has entered into a distribution agreement
pursuant to which the Company will employ Funds Distributor, Inc. (the
"Distributor") to distribute shares of the Fund. Under this Plan, the Company
of behalf of the Fund intends to compensate the Distributor for expenses
incurred, and services and facilities provided, by the Distributor in
distributing Shares of the Fund.
THE PLAN
The material aspects of the Plan are as follows:
SECTION 1. The Fund will pay the Distributor for: (a) expenses
incurred in connection with advertising and marketing shares of the Fund
including but not limited to any advertising or marketing via radio, television,
newspapers, magazines, telemarketing or direct dial mail solicitations; (b)
periodic payments of fees for distribution assistance made to one or more
securities dealers, or other industry professionals, such as investment
advisers, accountants, estate planning firms and the Distributor itself
(collectively "Service Organizations") in respect of the average daily value of
the Fund's Shares beneficially owned by persons ("Clients") for whom the Service
Organization is the dealer of record or holder of record or with whom the
Service Organization has a servicing relationship, and (c) expenses incurred in
preparing, printing and distributing the Fund's prospectus and statement of
additional information (except those used for regulatory purposes or for
distribution to existing shareholders of the Fund).
SECTION 2. While this Plan is in effect the Distributor will be
compensated by the Fund for such distribution expenses that are incurred, and
services and facilities that are provided, in connection with Shares of the Fund
on a monthly basis, at the annual rate of up to 0.25% of the Fund's average
daily net assets during such month. These monthly payments to the Distributor
will be made in accordance with and subject to the conditions set forth below.
For the purposes of determining the amounts payable under the Plan, the value of
the Fund's net assets shall be computed in the manner specified in the Fund's
prospectus and statement of additional information as then in effect for the
computation of the value of the Fund's net assets.
The distribution fees payable to the Distributor are designed to reimburse
the Distributor for the expenses it incurs and services it renders in
distributing shares of the Fund. If in any year the Distributor's expenses
incurred in connection with the distribution of Shares of the Fund exceed the
distribution fees paid by the Fund, the Distributor will recover such excess
only if this Plan continues to be in effect with respect to the Fund in some
later year when the distribution fees exceed the Distributor's expenses. There
is no limit on the periods during which
1
<PAGE>
unreimbursed expenses may be carried forward, although the Company is not
obligated to repay any unreimbursed expenses for the Fund that may exist at such
time, if any, as this Plan terminates or is not continued with respect to the
Fund. No interest, carrying or finance charge will be imposed on any amounts
carried forward.
Payment made out of or charged against the assets of the Fund must be in
payment for distribution expenses incurred on behalf of the Fund and which are
described herein.
SECTION 3. Payments by the Distributor to a Service Organization
described in this Plan shall be subject to compliance by the Service
Organization with the terms of a written agreement between the Service
Organization and the Distributor. If an investor in the Fund ceases to be a
client of a Service Organization that has entered into a selling group agreement
with the Distributor, but continues to hold shares of the Fund, the Distributor
will be entitled to receive similar payments in respect of the distribution
assistance provided with respect to such investor.
SECTION 4. The Distributor shall provide the Board, at least quarterly,
with a written report of all amounts expended pursuant to this Plan. The report
shall state the purposes for which the amounts were expended.
SECTION 5. This Plan shall become effective with respect to the Fund
upon its adoption by the Board and, unless earlier terminated with respect to
the Fund in accordance with its terms, the Plan shall continue automatically
with respect to the Fund for successive annual periods provided such continuance
is approved by a majority of the Board, including a majority of the Directors
who are not "interested persons" (as defined in the Act) of the Company and who
have no direct or indirect financial interest in the operation of this Plan or
in any agreements entered into in connection with this Plan (the "Disinterested
Directors"), pursuant to a vote cast in person at a meeting called for the
purpose of voting on the continuance of the Plan.
SECTION 6. This Plan may be amended at any time by the Board provided
that (i) any amendment to increase materially the costs which the Fund may bear
for distribution pursuant to this Plan shall be effective only upon approval by
a vote of a majority of the outstanding voting securities of the Fund, and (ii)
any material amendments of the terms of this Plan shall become effective only
upon approval by a majority of the Board and a majority of the Disinterested
Directors pursuant to a vote cast in person at a meeting called for the purpose
of voting on the Plan.
SECTION 7. This Plan is terminable, as to the Fund, without penalty at
any time by (i) vote of the majority of the Disinterested Directors, or (ii)
vote of a majority of the outstanding voting securities of the Fund.
SECTION 8. The Board has adopted this Plan as of December 29, 1997.
2
