RCM EQUITY FUNDS INC, 485APOS, 1998-10-16

RCM EQUITY FUNDS INC
485APOS, 1998-10-16

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As filed with the Securities and Exchange Commission on October 16, 1998
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. 8

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 9

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DRESDNER RCM EQUITY FUNDS, INC.
Four Embarcadero Center
San Francisco, California 94111
(415) 954-5400
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George A. Rio, 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:

Robert J. Goldstein, Michael Glazer
Associate General Counsel Paul, Hastings, Janofsky & Walker LLP
Dresdner RCM Global Investors LLC 555 South Flower Street
Four Embarcadero Center Los Angeles, California 90071
San Francisco, California 94111

It is proposed that this filing will become effective:

[ ] 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)
[X] 75 days after filing pursuant to paragraph (a)(2)
[ ] On _________________ pursuant to paragraph (a)(2) of rule 485

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DRESDNER RCM GLOBAL FUNDS, INC.
DRESDNER RCM TAX MANAGED GROWTH FUND
DRESDNER RCM GLOBAL EQUITY FUND
DRESDNER RCM CALIFORNIA TAX EXEMPT BOND FUND
DRESDNER RCM STRATEGIC INCOME FUND
DRESDNER RCM GLOBAL BOND FUND
DRESDNER RCM INTERMEDIATE INVESTMENT GRADE BOND 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 Overview; Summary of Fees and
Expenses

3. Condensed Financial Information *

4. General Description of Registrant Dresdner RCM Global Funds;
Investment Policies; Investment and
Risk Considerations; and General
Information

5. Management of the Fund Organization and Management

5A. Management's Description of Fund *
Performance

6. Capital Stock and Other Securities Dividends, Distributions and Taxes;
General Information

7. Purchase of Securities Being Offered Organization and Management; How to
Purchase Shares

8. Redemption or Repurchase Redemption of Shares

9. Pending Legal Proceedings *

- -------------------------
*Not applicable

C-1

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DRESDNER RCM GLOBAL FUNDS, INC.
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 Objectives and Investment Objectives 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;
Holders of Securities Directors 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 Shares
Securities

19. Purchase, Redemption and Purchase and Redemption of Shares
Pricing of Securities
Being Offered

20. Tax Status Dividends, Distributions and Tax
Status

21. Underwriters The Distributor

22. Calculation of Performance Data Investment Results

23. Financial Statements *

C-2

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Dresdner RCM Global Funds, Inc.
Four Embarcadero Center
San Francisco, California 94111
(800) 726-7240

Dresdner RCM Tax Managed Growth Fund
Dresdner RCM Global Equity Fund
Dresdner RCM California Tax Exempt Bond Fund
Dresdner RCM Strategic Income Fund
Dresdner RCM Global Bond Fund
Dresdner RCM Intermediate Investment Grade Bond Fund

Dresdner RCM Global Funds, Inc. (the "Global Funds" or the "Company") is a
professionally managed, no-load, open-end management investment company. The
Company currently consists of a number of distinct portfolios with separate
investment objectives and strategies. Information about six of the portfolios
(each a "Fund" and collectively, the "Funds"), including the investment
objectives of each Fund, the types of securities in which each Fund may invest,
and the applicable investment policies and restrictions for each Fund, is set
forth in this Prospectus.

This Prospectus sets forth concisely the information about the Funds that
prospective investors should know before investing. Investors should read this
document and retain it for future use. A Statement of Additional Information
("SAI") for the Funds dated December __, 1998 has been filed with the Securities
and Exchange Commission ("SEC") and is incorporated by reference into this
Prospectus. The SAI may be obtained, without charge, by writing or calling the
Company at the address or telephone number set forth above.

Shares of the Funds are not deposits, obligations of, or endorsed or
guaranteed in any way by Dresdner Bank AG or any other depository institution.
Shares of the Funds are not insured by the Federal Deposit Insurance
Corporation, or any other agency, and are subject to investment risks, including
possible loss of the principal amount invested.

The Dresdner RCM Strategic Income Fund may invest a significant portion of
its assets in debt securities rated below investment grade, sometimes referred
to as high-yield debt securities or "junk bonds." These securities carry
greater risk, such as the risk of default, than higher-rated debt securities.
For further details, please refer to the section entitled "Investment and Risk
Considerations" beginning on page __.

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.

The date of this Prospectus is December __, 1998

1
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TABLE OF CONTENTS

Overview

Summary of Fees and Expenses

Dresdner RCM Global Funds

Investment Policies

Investment and Risk Considerations

Organization and Management

How to Purchase Shares

Stockholder Services

Redemption of Shares

Dividends, Distributions and Taxes

General Information

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.

2
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OVERVIEW

The Funds, each of which offers a Non-Institutional Class (the "N Class")
and an Institutional Class (the "I Class") of shares, are designed to provide
investors with the opportunity to develop an investment program across a broad
range of financial markets and sectors. Each Fund has its own investment
objective, policies and associated risks. One or more of the Funds may be an
appropriate part of your overall investment strategy. Consider your investment
goals, your time horizon for achieving them, and your tolerance for risk. As
with any mutual fund, there is no assurance that any of the Funds will achieve
its investment objective.

This summary is designed to provide a brief overview of each of the Funds.
A more detailed discussion of each Fund's objective and investment policies can
be found in the sections entitled "Dresdner RCM Global Funds" and "Investment
Policies" beginning on pages __ and __, respectively.

Each Fund is managed by Dresdner RCM Global Investors LLC ("Dresdner RCM"
or the "Investment Manager"). Dresdner RCM is an investment adviser registered
with the Securities and Exchange Commission with principal offices in San
Francisco, California. Dresdner RCM, together with its predecessors, have over
25 years of experience in the investment advisory business. Dresdner RCM,
together with its affiliates, currently provides investment management services
to institutional and individual clients and registered investment companies with
aggregate assets in excess of $60 billion.

EQUITY FUNDS

The investment objective of the Dresdner RCM Tax Managed Growth Fund and
the Dresdner RCM Global Equity Fund is long-term appreciation of capital.
Current income is considered only as part of total return and is not emphasized.
The Dresdner RCM Tax Managed Growth Fund also considers the impact of capital
gains taxes on investors' returns.

DRESDNER RCM TAX MANAGED GROWTH FUND invests primarily in a diversified
portfolio of equity and equity-related securities of U.S. companies of all sizes
which the Investment Manager believes have superior earnings growth potential.

DRESDNER RCM GLOBAL EQUITY FUND invests primarily in a diversified
portfolio of equity and equity-related securities of domestic and foreign
companies of all sizes.

FIXED-INCOME FUNDS

The investment objective of the Dresdner RCM California Tax Exempt Bond
Fund is current income free from both California personal income tax and federal
income tax. The investment objective of each of the Strategic Income Fund,
Global Bond Fund and Intermediate Investment Grade Bond Fund is current income,
with capital appreciation as a secondary objective.

Dresdner RCM California Tax Exempt Bond Fund invests primarily in a non-
diversified portfolio of investment grade California municipal securities.
Under normal market conditions, the Fund maintains a dollar weighted average
portfolio maturity between three and ten years.

DRESDNER RCM STRATEGIC INCOME FUND invests primarily in a diversified
portfolio of U.S. and foreign debt securities, including securities rated below
investment grade. Under normal market conditions, the Fund maintains a dollar
weighted average portfolio maturity between three and ten years.

3
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DRESDNER RCM GLOBAL BOND FUND invests primarily in a diversified portfolio
of investment grade U.S. and foreign debt securities. Under normal market
conditions, the Fund maintains a dollar weighted average portfolio maturity
between three and ten years.

DRESDNER RCM INTERMEDIATE INVESTMENT GRADE BOND FUND invests primarily in
a diversified portfolio of investment grade U.S. debt securities. Under normal
market conditions, the Fund maintains a dollar weighted average portfolio
maturity between two and seven years.

4
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SUMMARY OF FEES AND EXPENSES

The following information is designed to help you understand various costs
and expenses of each Fund that you as an investor may bear directly or
indirectly. Information about all of the Funds is based on their expected
expenses for their first full year of operation. Actual expenses and returns may
be greater or less than those shown below.

SHAREHOLDER TRANSACTION EXPENSES
(applicable to each Fund)

Sales load imposed on purchases None
Sales load imposed on reinvested dividends None
Deferred sales charges on redemptions None
Redemption Fee None
Exchange Fee None

ANNUAL OPERATING EXPENSES (expressed as a percentage of average net assets)

Other Total
Management Fee 12b-1 Fee Expenses (1) Expenses(1)
-------------- ------------------------- -----------
<S> <C> <C> <C> <C>
NON-INSTITUTIONAL SHARES - N CLASS
Tax Managed Growth 0.75% 0.25% 0.50% 1.50%
Global Equity 0.75% 0.25% 0.50% 1.50%
California Tax Exempt Bond 0.45% 0.25% 0.20% 0.90%
Strategic Income 0.75% 0.25% 0.50% 1.50%
Global Bond 0.75% 0.25% 0.50% 1.50%
Intermediate Investment 0.45% 0.25% 0.20% 0.90%
Grade Bond

INSTITUTIONAL SHARES - I CLASS

Tax Managed Growth 0.75% - 0.50% 1.25%
Global Equity 0.75% - 0.50% 1.25%
California Tax Exempt Bond 0.45% - 0.20% 0.65%
Strategic Income 0.75% - 0.50% 1.25%
Global Bond 0.75% - 0.50% 1.25%
Intermediate Investment 0.45% - 0.20% 0.65%
Grade Bond

</TABLE>

(1) The Investment Manager has voluntarily agreed, until at least December 31,
1999, to pay each Fund, on behalf of its N Class and I Class shares, the
amounts, if any, by which ordinary operating expenses of the Company
attributable to such class for each quarter (except interest, taxes and
extraordinary expenses) exceed its annualized total expense ratio noted
above as a percentage of its average daily net assets. In subsequent
years, each Fund, on behalf of its Class N and Class I shares, will
reimburse the Investment Manager for any such payments during a ___ year
period to the extent that such class's operating expenses are otherwise
below the expense cap. Other expenses and Total expenses for the first
year of operation for each Fund's N Class and I Class shares, without
expense reduction, are estimated to be as follows:
<TABLE>
<CAPTION>

Other Expenses Total Expenses
-------------- --------------
<S> <C> <C>
NON-INSTITUTIONAL SHARES- N CLASS
Tax Managed Growth 1.15% 1.90%
Global Equity 1.18% 1.93%
California Tax Exempt Bond 2.54% 2.99%
Strategic Income 1.15% 1.90%
Global Bond 2.24% 2.99%
Intermediate Investment Grade Bond 0.98% 1.43%

</TABLE>
5
<PAGE>

Other Expenses Total Expenses
-------------- --------------
<S> <C> <C>
INSTITUTIONAL SHARES - I CLASS
Tax Managed Growth 0.90% 1.65%
Global Equity 0.93% 1.68%
California Tax Exempt Bond 2.29% 2.74%
Strategic Income 0.90% 1.65%
Global Bond 1.99% 2.74%
Intermediate Investment Grade Bond 0.73% 1.18%

</TABLE>

EXAMPLE

The following tables illustrate the expenses you as a stockholder would pay on a
$1,000 investment over various time periods assuming (1) a 5% annual return (2)
expenses as set forth above and (3) redemption at the end of each time period.

1 Year 3 Years
------ -------
<S> <C> <C>
NON-INSTITUTIONAL SHARES - N CLASS

Tax-Managed Growth $15 $47
Global Equity 15 47
California Tax Exempt Bond 9 29
Strategic Income 15 47
Global Bond 15 47
Intermediate Investment Grade Bond 9 29

INSTITUTIONAL SHARES - I CLASS

Tax-Managed Growth $13 $40
Global Equity 13 40
California Tax Exempt Bond 7 21
Strategic Income 13 40
Global Bond 13 40
Intermediate Investment Grade Bond 7 21

</TABLE>

These examples should not be considered as representations of past or future
returns or expenses, which may be more or less than those shown.

6
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THE DRESDNER RCM GLOBAL FUNDS

The following section describes the goals and strategies for the Dresdner
RCM Global Funds offered pursuant to this Prospectus. An investment in any one
of the Funds is subject to a variety of risks. For a detailed description of the
risks associated with an investment in any one of the Funds, refer to the
section entitled "Investment and risk considerations" beginning on page __.
Please read that section carefully before investing.

The Global Funds also offer, pursuant to a separate prospectus, the
following funds: Dresdner RCM Large Cap Growth Fund; Dresdner RCM Global Small
Cap Fund; Dresdner RCM Global Technology Fund; Dresdner RCM Global Health Care
Fund; Dresdner RCM Biotechnology Fund and Dresdner RCM Emerging Markets Fund.
The International Growth Equity Fund A, offered by the Dresdner RCM Capital
Funds, Inc., is also included in the same prospectus. For a copy of the most
recent prospectus, please write or call the Company at the address or telephone
number set forth on the front page of this Prospectus.

7
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DRESDNER RCM TAX MANAGED GROWTH FUND - GOAL AND STRATEGY

Dresdner RCM Tax Managed Growth Fund (the "Tax Managed Growth Fund")
seeks long-term capital appreciation by investing in a broadly diversified
portfolio of equity and equity-related securities of U.S. companies while
seeking to enhance the after-tax returns of its stockholders. The Fund invests
primarily in companies the Investment Manager believes have superior earnings
growth potential.

In pursuit of its investment objective, the Fund may invest up to 25% of
its total assets in equity and equity-related securities of foreign companies.
Under normal market conditions, the Fund will not invest more than 10% of its
total assets in securities of issuers that are organized or headquartered in any
one foreign country. The Fund may also invest up to 5% of its total assets in
securities of companies organized or headquartered in emerging market countries,
all of which may be invested in securities of issuers organized or headquartered
in any one emerging market country.

The Fund may invest in companies of any size, which may range from larger
well-established issuers to smaller emerging growth companies. However, the
Investment Manager currently does not intend to invest more than 20% of the
Fund's total assets in securities of companies with market capitalizations below
$500 million at the time of purchase. The Fund may also invest up to 10% of its
total assets in investment grade U.S. and foreign debt securities.

While long-term capital appreciation is the Fund's primary objective, the
Investment Manager may use certain investment techniques designed to reduce
capital gains distributions to shareholders in an effort to maximize after-tax
total return. These techniques include holding securities long enough to avoid
higher, short-term capital gains taxes, selling shares with a higher cost basis
first, and offsetting gains realized in one security by selling another security
at a capital loss. Such techniques will not completely eliminate taxable
distributions by the Fund. As a result of such techniques, the Investment
Manager may take different actions than it would take if reduction of taxable
distributions were not an important consideration.

For a full description of the Fund's investments and their associated
risks, please refer to the sections entitled "Investment Policies" and
"Investment and Risk Considerations" beginning on pages __ and __, respectively.

8
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DRESDNER RCM GLOBAL EQUITY FUND - GOAL AND STRATEGY

Dresdner RCM Global Equity Fund (the "Global Equity Fund") seeks long-term
appreciation of capital by investing primarily in a diversified portfolio of
equity and equity-related securities of U.S. and foreign companies. Under
normal market conditions, as a fundamental policy which cannot be changed
without stockholder approval, the Fund invests at least 65% of its assets in
securities of issuers located in at least three different countries, including
the United States. In pursuit of its investment objective, the Fund may invest
in companies of any size, which may range from larger well-established issuers
to smaller emerging growth companies.

The Fund may invest up to 30% of its total assets in securities of
companies organized or headquartered in emerging market countries; however, the
Fund will not invest more than 10% of its total assets in securities of issuers
organized or headquartered in any one emerging market country. The Fund may
also invest up to 10% of its total assets in U.S. and foreign debt securities,
including securities rated below investment grade. Debt securities rated below
investment grade involve greater risk of default or price declines than
investment grade debt securities. Further information regarding investment
ratings is included in Appendix A.

9
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DRESDNER RCM CALIFORNIA TAX EXEMPT BOND FUND - GOAL AND STRATEGY

The Dresdner RCM California Tax Exempt Bond Fund (the "California Tax
Exempt Bond Fund") seeks current income. The Fund pursues its objective by
investing primarily in investment grade municipal securities whose interest is,
in the opinion of the issuer's counsel, free from California personal income tax
and federal income tax. The Fund's debt securities may be of any maturity;
however, under normal market conditions, the Fund maintains a dollar weighted
average maturity between three and ten years.

Under normal market conditions, as a matter of fundamental policy which
cannot be changed without stockholder approval, the Fund invests at least 80% of
its total assets in securities issued by the State of California and its
political subdivisions, agencies and instrumentalities ("California municipal
securities.") The Fund does not intend to invest in taxable municipal
obligations. However, the Fund may invest up to 20% of its total assets in
municipal securities of issuers outside California whose interest is, in the
opinion of the issuer's counsel, exempt from federal income tax but not
California personal income tax.

The Fund will invest primarily in investment grade municipal securities.
The Fund may invest up to 20% of its total assets in municipal securities issued
to finance private activities. The interest from these securities is a
tax-preference item for purposes of the federal alternative minimum tax. The
Fund may also invest up to 10% of its total assets in securities rated below
investment grade. Debt securities rated below investment grade involve greater
risk of default or price declines than investment grade debt securities.
Further information regarding investment ratings is included in Appendix A.

By investing in securities of municipal issuers located in a single state,
the Fund is less diversified than a fund that invests in securities of municipal
issuers located in many states. The Fund's performance will be directly
affected by the economic and political conditions within the State of
California.

10
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DRESDNER RCM STRATEGIC INCOME FUND - GOAL AND STRATEGY

Dresdner RCM Strategic Income Fund (the "Strategic Income Fund") seeks
current income by investing primarily in a diversified portfolio of debt
securities of issuers in both U.S. and foreign markets, including emerging
markets. Capital appreciation is a secondary investment objective.

The Fund seeks to diversify its portfolio by allocating its assets across
the following categories: (i) investment grade U.S. and foreign government debt
securities; (ii) investment grade U.S. and foreign corporate debt securities;
(iii) emerging market debt securities; and (iv) U.S. and foreign debt securities
rated below investment grade. The Fund's allocation of investments among these
categories is based on the Investment Manager's evaluation of expected
performance and risk of each type of investment. The Fund may invest all of its
assets in any one category if, in the opinion of the Investment Manager, an
opportunity exists to generate higher income without undue risk to principal.
There is no current limitation on the level of the Fund's investment in any one
foreign country. Debt securities rated below investment grade involve greater
risk of default or price declines than investment grade debt securities.
Further information regarding investment ratings is included in Appendix A.

The Fund's investments may be denominated in various currencies including
U.S. dollars, foreign currencies and multinational currencies such as the Euro.
The Fund's debt securities may be of any maturity; however, under normal market
conditions the Fund maintains a dollar weighted average portfolio maturity
between three and ten years. The Fund may also invest up to 10% of its total
assets in equity and equity-related securities of U.S. and foreign issuers.

11
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DRESDNER RCM GLOBAL BOND FUND - GOAL AND STRATEGY

Dresdner RCM Global Bond Fund (the "Global Bond Fund") seeks current income
by investing primarily in investment grade U.S. and foreign debt securities.
Capital appreciation is a secondary investment objective.

Under normal market conditions, as a fundamental policy which cannot be
changed without stockholder approval, the Fund invests at least 65% of its total
assets in investment grade debt securities of issuers organized or headquartered
in at least three different countries, including the United States. The Fund
may invest up to 20% of its total assets in debt securities rated below
investment grade. Debt securities rated below investment grade involve greater
risk of default or price declines than investment grade debt securities.
Further information regarding investment ratings is included in Appendix A.

The Fund may invest up to 10% of its total assets in debt securities of
issuers organized or headquartered in emerging market countries, all of which
may be invested in securities of issuers organized or headquartered in any one
emerging market country. The Fund may also invest up to 10% of its total assets
in equity and equity-related securities of U.S. and foreign issuers.

The Fund's debt securities may be denominated in various currencies
including, U.S. dollars, foreign currencies and multinational currencies such as
the Euro. Debt securities which are eligible investments for the Fund include,
but are not limited to, the following:

- Debt securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities
- Debt securities issued or guaranteed by foreign national
governments, their agencies or instrumentalities
- Debt securities issued or guaranteed by supranational
organizations (e.g. European Investment Bank or the World Bank)
- Corporate debt securities

The Fund's debt securities may be of any maturity; however, under normal
market conditions the Fund maintains a dollar weighted average portfolio
maturity between three and ten years.

12
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DRESDNER RCM INTERMEDIATE INVESTMENT GRADE BOND FUND - GOAL AND STRATEGY

Dresdner RCM Intermediate Investment Grade Bond Fund (the "Intermediate
Investment Grade Bond Fund") seeks current income by investing primarily in a
diversified portfolio of investment grade U.S. Government and corporate debt
securities. Capital appreciation is a secondary investment objective.

Under normal market conditions, as a fundamental policy which cannot be
changed without stockholder approval, the Fund invests at least 65% of its
assets in intermediate investment grade debt securities. The Fund's debt
securities may be denominated in various currencies including, U.S. dollars,
foreign currencies and multinational currencies such as the Euro.

The Fund may invest up to 20% of its total assets in investment grade non-
U.S. dollar denominated debt securities rated at least A or the equivalent by
Standard & Poor's Ratings Services ("Standard & Poor's") or Moody's Investors
Service ("Moody's"). Up to 10% of the Fund's total assets may be unhedged.
The Fund may also invest up to 15% of its total assets in investment grade U.S.
dollar denominated debt securities issued by foreign national governments and
corporations, such as "Yankee bonds" or "Eurodollar bonds." Debt securities
which are eligible investments for the Fund include, but are not limited to,
the following:

The Fund will not invest more than 15% of its total assets in debt
securities rated BBB- by Standard & Poor's or equivalently rated by another
nationally recognized rating agency, and may not invest in below investment
grade debt securities. The Fund's debt securities may be of any maturity;
however, under normal market conditions, the Fund maintains a dollar weighted
average portfolio maturity between two and seven years.

13
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INVESTMENT POLICIES

HOW DO THE FUNDS SELECT PORTFOLIO SECURITIES?

EQUITY PHILOSOPHY

In making investments in equity securities, the Investment Manager seeks to
identify companies that it expects to have higher-than-average rates of growth
and strong potential for capital appreciation relative to downside exposure.
The Investment Manager may also consider for investment, 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
it believes that such companies have above-average growth potential.

In determining whether it believes that securities of particular issuers
have the potential for capital appreciation, the Investment Manager evaluates
the fundamental value of each enterprise, as well as its prospects for growth.
In most cases, these companies 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; and a steady stream of new products or
services. Because current income is not the focus of the Tax Managed Growth Fund
or the Global Equity Fund, they do not restrict their investments in equity and
equity-related securities to those issuers with a record of dividend payments.

In evaluating particular equity and equity-related foreign 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.

FIXED-INCOME PHILOSOPHY

The Investment Manager's fixed-income philosophy focuses on a top-down
investment process that begins with the development of an economic outlook. Data
on economic sectors and industries, in conjunction with analysis of monetary and
fiscal policy within the context of the business cycle, underlie the analysis of
the investment environment. Total rates of return are projected for bond market
sectors under various market scenarios that incorporate potential interest rate
shifts over a specified time period. Market sectors and maturity ranges that
offer optimal risk/reward tradeoffs are overweighted relative to the broad
market benchmark.

In evaluating individual investment opportunities, the Investment Manager
employs a variety of proprietary and vendor systems that provide analytical
tools and information and trade management in support of its selection process.

WHAT ARE EQUITY AND EQUITY-RELATED SECURITIES?

Equity and equity-related securities include common 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 Tax
Managed Growth Fund and Global Equity Fund intend to invest primarily in common
stock.

14
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WHAT ARE DEBT SECURITIES?

Debt securities include bonds and other debt instruments used by issuers to
borrow money from investors. The issuer generally pays the investor a fixed,
variable, or floating rate of interest, and must repay the amount borrowed at
maturity. Some debt securities, such as zero coupon bonds, do not pay current
interest, but are sold at a discount from their face values.

In general, debt securities held by a Fund will be treated as investment
grade if rated by at least one major rating agency in one of its top
four rating categories at the time of purchase or, if unrated, are determined
by the Investment Manager to be of comparable 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.

BELOW INVESTMENT GRADE DEBT SECURITIES

Lower quality debt securities which may be held by the Global Equity
Fund, California Tax Exempt Bond Fund, Strategic Income Fund and Global Bond
Fund will be rated at least B by Standard & Poor's, an equivalent rating by
another recognized rating agency or, if unrated, judged by the Investment
Manager to be of comparable quality. Such securities are predominately
speculative with respect to the issuer's capacity to meet required principal
and interest payments. Further information regarding investment ratings is
located in Appendix A.

MUNICIPAL SECURITIES

Municipal debt securities are issued by state and local governments, their
agencies and instrumentalities, and other issuers to raise money for a variety
of public or private purposes, including general financing for state and local
governments, or financing for specific projects or public facilities. They may
be fully or partially backed by the local government, or by the credit of a
private issuer or the current or anticipated revenues from specific projects or
assets.

U.S. GOVERNMENT SECURITIES

U.S. Government Securities are high-quality debt instruments issued or
guaranteed by the U.S. Treasury or by an agency or instrumentality of the U.S.
Government. Not all U.S. Government securities are backed by the full faith and
credit of the United States. For example, securities such as those issued by
the Federal National Mortgage Association ("FNMA") are supported by the
instrumentality's right to borrow money from the U.S. Treasury under certain
circumstances. Securities such as those issued by the Federal Farm Credit Banks
Funding Corporation are supported only by the credit of the entity that issued
them.

MORTGAGE-RELATED SECURITIES

Mortgage-related securities are securities that directly or indirectly
represent a participation in, or are secured by or payable from, mortgage
loans secured by real or commercial property, and include pass-through
securities, collateralized mortgage obligations ("CMOs"), real estate
mortgage conduits ("REMICS"), and adjustable rate mortgage securities
("ARMS"). There are currently three basic types of mortgage-related
securities; (i) those issued or guaranteed by the U.S. Government or one of
its agencies or instrumentalities such as the Government National Mortgage
Association GNMA; (ii) those issued by private issuers which represent an
interest in or are collateralized by mortgage-related securities issued or
guaranteed by the U.S. Government or one of its agencies or
instrumentalities; and (iii) those issued by private

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issuers which represent an interest in or are collateralized by whole mortgage
loans or mortgage-related securities without a government guarantee.

ASSET BACKED SECURITIES

Asset-backed securities represent undivided fractional interests in a trust
with assets consisting of a pool of domestic loans such as motor vehicle retail
installment sales contracts or credit card receivables. Payments are typically
made monthly, consisting of both principal and interest payments. Although
generally rated AAA, it is possible that the securities could become illiquid or
experience losses if guarantors or insurers default.

WHAT KINDS OF FOREIGN SECURITIES WILL THE FUNDS INVEST IN?

Each Fund except the California Tax Exempt Bond Fund and the Intermediate
Investment Grade Bond Fund may invest in foreign equity and equity-related
securities. The types of foreign equity and equity-related securities that
these Funds may invest in include: (i) securities of companies that are
organized or headquartered, or whose operations are principally 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 foreign securities.

Each Fund except the California Tax Exempt Bond Fund may invest in foreign
debt securities. Eligible foreign debt securities include, but are not limited
to, debt securities issued or guaranteed by foreign corporations, certain
supranational entities, and foreign governments or their agencies or
instrumentalities, and in debt obligations issued by U.S. corporations
denominated in non U.S. currencies.

Each Fund expects that its investments in foreign securities will be
comprised primarily of securities that are traded on recognized foreign
securities exchanges. However, each 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 a Fund's
investment criteria. Subject to each Fund's restrictions on investment in
foreign debt and equity securities, the Funds also may invest in securities that
are publicly traded either in the United States or in foreign markets.

DO THE FUNDS BUY AND SELL FOREIGN CURRENCIES?

Each Fund except the California Tax Exempt Bond Fund expects to purchase or
sell foreign currencies primarily to settle foreign securities transactions.
However, each such Fund may also engage in currency management transactions to
hedge currency exposure related to securities it owns or that it anticipates
purchasing. (See Do the Funds hedge their investments?) In addition, a 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 limitations on each Fund's investments in
foreign securities, the term securities does not include foreign currencies.
This means that a Fund's exposure to foreign currencies or multinational
currencies such as the "Euro" (the common currency to be adopted by eleven
member countries of the European Union on January 1, 1999) may be greater than
its percentage limitation on investments in foreign securities denominated in
foreign currencies and multinational currencies. Each Fund will incur costs
in connection with

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<PAGE>

conversions between various currencies and gains in a particular securities
market may be affected, either positively or negatively, by changes in exchange
rates.

Each Fund except the California Tax Exempt Bond Fund and the Intermediate
Investment Grade Bond Fund is also authorized to use currency management
techniques to enhance its total return, although it has no current intention to
do so. A Fund may not employ more than 30% of the value of its total assets,
calculated at the time of purchase, in currency management techniques for the
purpose of enhancing return.

DO THE FUNDS HEDGE THEIR INVESTMENTS?

For hedging purposes, each Fund may purchase options on financial indices
and on securities that are authorized for purchase by the Fund. If a 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 a 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 financial index gives a 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. A 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.

Each Fund except the California Tax Exempt Bond Fund, may also use certain
currency management techniques to hedge against currency exchange rate
fluctuations. These 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.

Each Fund except the California Tax Exempt Bond Fund and may cross-hedge
currencies, which involves writing or purchasing options or entering into
forward currency 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.

WHAT OTHER INVESTMENT PRACTICES SHOULD I KNOW ABOUT?

DEPOSITARY RECEIPTS

Each Fund, except the California Tax Exempt Bond Fund and the Intermediate
Investment Grade Bond Fund, may invest in securities of foreign companies in the
form of American Depositary Receipts ("ADRs"), European Depositary Receipts
("EDRs"), Global Depositary Receipts ("GDRs"), or other similar depositary
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

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<PAGE>

opportunity is preferable, based on price differences, relative trading volumes,
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 each Fund's investment policies and restrictions,
depositary receipts are treated as foreign equity securities, based on the
country in which the underlying issuer is organized or headquartered.

INVESTMENT POLICIES IN UNCERTAIN MARKETS

During times when the Investment Manager believes a temporary defensive
posture is warranted, including times involving international, political or
economic uncertainty, each Fund may hold all or a substantial portion of its
assets in: investment grade debt securities issued or guaranteed by the U.S.
Government or foreign governments (including their respective agencies,
instrumentalities, authorities and political subdivisions); investment grade
debt obligations issued or guaranteed by international or supranational
government entities; investment grade debt obligations of corporate issuers; and
short-term money market instruments. When a Fund is so invested, it may not be
achieving its investment objective.

OTHER INVESTMENT COMPANIES

The laws of some foreign countries may make it difficult or impossible for
a 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
each Fund's restrictions on investments in issuers organized
or headquartered in foreign countries, each Fund may invest up to 10% of its
total assets in other investment companies. However, no Fund may acquire more
than 3% of the voting securities of any other investment company. The
California Tax Exempt Bond Fund does not intend to invest in the securities of
other investment companies.

To the extent that a Fund invests in other investment companies, it will
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

Each 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, a 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 a 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 a 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

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<PAGE>

securities of such class of the issuer. A 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

Each 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 Funds generally do 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.

A 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, a Fund's liquidity and the ability of the Investment Manager
to manage its portfolio may be adversely affected.

BORROWING MONEY

From time to time, it may be advantageous for a Fund to borrow money rather
than sell portfolio securities to raise the cash to meet redemption requests. In
order to meet such redemption requests, each Fund may borrow from banks or enter
into reverse repurchase agreements. Each Fund may also borrow up to 5% of the
value of its total assets for temporary or emergency purposes other than to meet
redemptions. However, the Funds will not borrow money for leveraging purposes. A
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 a
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 a 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 Board of Directors of the Company (the "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.

REPURCHASE AGREEMENTS

For the purpose of maintaining liquidity or realizing additional income,
each Fund may enter into repurchase agreements (agreements to purchase U.S.
Treasury notes and bills, subject to the seller's agreement to repurchase them
at a specified time and price) with well-established registered securities
dealers or banks. Repurchase agreements are the economic equivalent of loans by
a Fund. In the event of a bankruptcy or default of any such dealer or bank, a
Fund could experience costs and delays in liquidating the underlying securities
which are held as collateral, and the Fund might incur a loss if the value of
the collateral held declines during this period.

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<PAGE>

LENDING PORTFOLIO SECURITIES

Each 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 its 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

Each Fund may invest up to 15% of the value of its net assets in illiquid
securities. Securities may be considered illiquid if a 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 certain securities held by a Fund are liquid or illiquid
pursuant to standards adopted by the Board of Directors.

The Funds' 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 a Fund
purchases unregistered securities, it 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
determine the liquidity of such investments. If such securities are subject to
the re-sale restrictions of Rule 144A under the Securities Act, the Investment
Manager nonetheless may determine in particular cases, pursuant to standards
adopted by the 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 a
Fund's illiquidity to the extent that qualified institutional buyers become, for
a time, uninterested in purchasing such securities.

CAN THE FUNDS' OBJECTIVES AND POLICIES BE CHANGED?

Each Fund's investment objective is a fundamental policy that may not be
changed without stockholder approval. However, except as otherwise indicated in
this Prospectus or the SAI, each Fund's other investment policies and
restrictions are not fundamental and may be changed without stockholder
approval. If there is a change in a 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, a Fund is not required to sell any security in its
portfolio as a result of change in any applicable percentage resulting from
market fluctuations.

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<PAGE>

WHAT ARE THE FUNDS' PORTFOLIO TURNOVER RATES?

Each Fund may invest in securities on either a long-term or short-term
basis. The Investment Manager anticipates that the annual portfolio turnover
rate for the Funds will not exceed the amounts indicated below during the Funds'
first full year of operation. Due to a Fund's investment program, the Fund's
turnover rate may exceed 100%.

Tax Managed Growth ___%
Global Equity ___%
California Tax Exempt Bond ___%
Strategic Income ___%
Global Bond ___%
Intermediate Investment Grade ___%

Except for the Tax Managed Growth Fund, a Fund's portfolio turnover rate is
not a limiting factor when the Investment Manager deems portfolio changes
appropriate. Securities in a 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, each Fund's investment objective and the need for funds
for the redemption of a Fund's shares. A high portfolio turnover rate would
increase aggregate brokerage commission expenses and other transaction costs,
which must be borne directly by a Fund and ultimately by the Fund's
stockholders.

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<PAGE>

INVESTMENT AND RISK CONSIDERATIONS

Investment in the Funds is subject to a variety of risks, including the
following. See the SAI for further information about these and other risks. The
value of each Fund's net assets can be expected to fluctuate.

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.

DEBT SECURITIES

The yield and price of a debt security changes daily based on changes in
interest rates and market conditions, and in response to other economic,
political or financial events. The following are some of the more common risk
factors associated with investments in debt securities:

INTEREST RATE RISK. The change in the prices of debt securities that
accompany changes in the overall level of interest rates. Debt securities have
varying levels of sensitivity to changes in interest rates. In general, bond
prices rise when interest rates fall, and fall when interest rates rise.
Longer-term bonds, lower quality bonds and zero coupon bonds are generally more
sensitive to interest rate changes.

CREDIT RISK. The chance that any of a Fund's holdings will have its credit
rating downgraded or will default (fail to make scheduled interest and principal
payments), potentially reducing the Fund's income level and share price. By
definition, lower-rated securities carry a higher credit risk.

DOMESTIC POLITICAL RISK. The chance that a significant restructuring of
federal income tax rates could cause municipal bond prices to fall. The demand
for municipal bonds is strongly influenced by the value of tax-exempt income to
investors. Broadly lower income tax rates could reduce the advantage of owning
municipal bonds.

CONCENTRATION RISK. The California Tax Exempt Bond Fund, Strategic Income
Fund, Global Bond Fund and Intermediate Investment Grade Bond Fund may each
invest 25% or more of their total assets in obligations that generate income
from similar types of projects (for example, health care, electric, water/sewer,
education, and transportation). Political or economic developments affecting a
single issuer or industry or similar types of projects may have a significant
effect on a Fund's performance.

GEOGRAPHIC RISK. The chance of price declines resulting from developments
in a single state. Because the California Tax Exempt Bond Fund invests primarily
in California municipal securities, the Fund's yield and share price are
affected by political and economic developments within the State of California.
For example, restrictions on taxes and spending, such as "Proposition 13" and
other California constitutional, statutory, and legislative initiatives, have
limited the ability of California taxing entities to increase real property
taxes and other tax revenues.

CALL RISK. Debt obligations may be issued with a call feature (call
features include a date on which the issuer has reserved the right to redeem the
obligation prior to maturity). An obligation may be called for redemption before
the Investment Manager would otherwise choose to eliminate it from a Fund's
holdings. A call may also reduce an obligation's yield to maturity.

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<PAGE>

PREPAYMENT RISK. Mortgage-related and asset-backed securities are subject
to prepayment risk. Such securities may be prepaid prior to maturity, and hence
the actual life of the security cannot be accurately predicted. During periods
of falling interest rates, prepayments may accelerate, which would require a
Fund to reinvest the proceeds at a lower interest rate. Securities subject to
prepayment risk generally offer less potential for gains during a declining
interest rate environment, and similar or greater potential for loss in a rising
interest rate environment.

BELOW INVESTMENT GRADE SECURITIES, sometimes called high-yield securities
or "junk bonds", are considered to have speculative characteristics, and involve
greater risk of default or price changes due to changes in the issuer's
creditworthiness. The market prices of these securities may fluctuate more than
higher-quality securities and may decline significantly in periods of general or
regional economic difficulty. In addition, the secondary market may be less
liquid for debt securities rated below investment grade. This lack of liquidity
at certain times may affect the values of these securities and may make the
valuation and sale of these securities more difficult. If an issuer of such
securities defaults, a Fund may incur additional expenses to enforce its rights
or to participate in a restructuring of the obligation.

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 a Fund may
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, a Fund may have to sell them
over an extended period of time or below the original purchase price. Investment
by a Fund in these small or unseasoned companies may be regarded as speculative.
As a result of these factors, to the extent a Fund invests in small-sized
companies, its net assets may be more volatile in price than would otherwise be
the case.

FOREIGN SECURITIES

Investing in foreign 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 a Fund
(including the withholding of dividends and limitations on the repatriation of
currencies). A Fund may also experience difficulties or delays in obtaining or
enforcing judgments.

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<PAGE>

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.

EMERGING MARKETS

Emerging markets countries include any country generally considered to be
an emerging market 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 are 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.

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.

Economies in emerging market countries generally depend heavily upon
international trade, and may be affected adversely by the economic conditions of
the countries with 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 a Fund's
investments in those countries.

Options, currency hedging and currency management

There are a number of risks associated with 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
are not 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.

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<PAGE>

A Fund's currency management techniques involve risks different from those
that arise in connection with investments in U.S. dollar-denominated securities.
To the extent that a 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 currency futures contracts and
options on currency futures contracts involve risks similar to those of options
on securities; in addition, the potential loss incurred by a Fund in such
transactions is unlimited. To the extent that such techniques are used to
enhance return, they are considered speculative.

The use of hedging and currency management techniques is a highly
specialized activity, and there can be no assurance as to the success of any
such operations which a 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.

SHORT SELLING

Short sales by a Fund that are not made "against the box" create
opportunities to increase a Fund's return but, at the same time, involve special
risk considerations and may be considered a speculative technique. The net asset
value per share of a Fund engaging in short sales will tend to be more volatile
than would otherwise be the case. 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 a Fund may mitigate
such losses by replacing the securities sold short before the market price has
increased significantly. Under adverse market conditions, a 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.

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 a 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 a Fund's
entire investment in the warrant.

WHAT OTHER RISK FACTORS SHOULD I BE AWARE OF?

CREDIT OF COUNTERPARTIES

A number of transactions in which the Funds may engage are subject to the
risks of default by the other party to the transaction. When a 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 a
Fund's incurring a loss or missing an opportunity to obtain a price believed to
be advantageous.

25
<PAGE>

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, a 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
a Fund enters into reverse repurchase agreements, the Fund is subject to risks
that are similar to those of borrowing.

NON-DIVERSIFICATION

The California Tax Exempt Bond Fund is non-diversified within the meaning
of the 1940 Act. As a non-diversified fund, it may invest a greater percentage
of its assets in the securities of any single issuer than a diversified fund,
and may be more susceptible to risks associated with a single economic,
political or regulatory occurrence than a diversified fund. However, in order to
meet the requirements of the Internal Revenue Code of 1986, as amended (the
"Code"), for qualification as a regulated investment company, a 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 representing not more than 10% of the issuer's
outstanding voting securities, 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).

YEAR 2000

Many computer programs employed throughout the world use two digits rather
than four to identify the year. These programs, if not adapted, will not
correctly handle the change from "99" to "00" on January 1, 2000, and will not
be able to perform necessary functions critical to the Fund's operations. The
"Year 2000 issue" affects all companies and organizations.

The Company understands that its key service providers, including the Investment
Manager, are taking steps to address the issue. The Year 2000 problem may
adversely affect the issuers in which the Funds invest. For example, issuers
may incur substantial costs to address the problem. They may also suffer
losses caused by corporate and governmental data processing errors. The Company
and the Investment Manager will continue to monitor developments relating to
this issue.

EURO INTRODUCTION

The European Union's planned introduction of a single European currency,
the Euro, on January 1, 1999 creates various uncertainties, including whether
the payment and operational systems of banks and other financial institutions
will be prepared for the change, the legal treatment of certain outstanding
financial contracts that refer to existing currencies, and the creation of
suitable clearing and settlement payment systems for the new currency. These or
other related factors could cause market disruptions before or after the
introduction of the Euro. The Company understands that the Investment Manager
and other key service providers are taking steps to address Euro-related issues.

26
<PAGE>

ORGANIZATION AND MANAGEMENT

WHO MANAGES THE FUNDS?

Each Fund is a series of the Company. The Company was incorporated in
Maryland as an open-end management investment company in September 1995.

The Company's Board of Directors has overall responsibility for the
operation of the series of the Company. Pursuant to such responsibility, the
Board of Directors has approved contracts for various financial organizations to
provide, among other things, day-to-day management services required by its
series.

The Company has retained, as the Funds' 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 manages each Fund's investments, provides various
administrative services, and supervises each Fund's daily business affairs,
subject to the authority of the Company's 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 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 Funds
are not deposits, obligations of, or endorsed or guaranteed in any way by,
Dresdner Bank AG, or any other depository institution. Shares of the Funds 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.

EQUITY PHILOSOPHY

The Investment Manager's equity philosophy is to invest in growth 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
markets.

FIXED-INCOME PHILOSOPHY

The Investment Manager's fixed-income philosophy is to invest in debt
securities that offer higher than expected income and, in some instances, the
potential for high total return. Through the use of a top-down core strategy,
the Investment Manager seeks to actively manage exposure in four areas:
duration, yield curve, sector and issue allocation.

GRASSROOTS RESEARCH

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. The Investment Manager believes that Grassroots
Research can be a valuable adjunct to its traditional research efforts by
providing a "second look" at companies in which a Fund is considering investing
and by checking marketplace assumptions concerning market demand for particular
products and services.

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<PAGE>

TAX MANAGED GROWTH FUND

________ and ___________ are primarily responsible for the day-to-day
management of the Tax-Managed Growth Fund. (Bios to be provided)

GLOBAL EQUITY FUND

________ and _______ are primarily responsible for the day-to-day
management of the Global Equity Fund. (Bios to be provided)

CALIFORNIA TAX EXEMPT BOND FUND

________ and _______ are primarily responsible for the day-to-day management of
the California Tax Exempt Bond Fund. (Bios to be provided)

STRATEGIC INCOME FUND

_________ and ________ are primarily responsible for the day-to-day management
of the Strategic Income Fund. (Bios to be provided)

GLOBAL BOND FUND

__________ and __________________ are primarily responsible for the day-to-day
management of the Global Bond Fund. (Bios to be provided)

INTERMEDIATE INVESTMENT GRADE BOND FUND

____________ and ________________ are primarily responsible for the day-to-day
management of the Intermediate Investment Grade Bond Fund.
(Bios to be provided)

WHAT ARE THE FUNDS' MANAGEMENT FEES?

Each Fund pays the Investment Manager a monthly fee pursuant to an
investment management agreement, based on the Fund's average daily net assets,
at the following annual rate:

Name of Fund Average Daily Net Assets Fee
- ------------ ------------------------ ---
<S> <C> <C>
Tax Managed Growth Fund The first $500 million 0.75%
Above $500 million and below $1 billion 0.70%
Above $1 billion 0.65%

Global Equity Fund The first $500 million 0.75%
Above $500 million and below $1 billion 0.70%
Above $1 billion 0.65%

California Tax Exempt The first $500 million 0.45%
Bond Fund Above $500 million and below $1 billion 0.40%
Above $1 billion 0.35%
</TABLE>

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<PAGE>

Name of Fund Average Daily Net Assets Fee
- ------------ ------------------------ ---
<S> <C> <C>
Strategic Income Fund The first $500 million 0.75%
Above $500 million and below $1 billion 0.70%
Above $1 billion 0.65%

Global Bond Fund The first $500 million 0.75%
Above $500 million and below $1 billion 0.70%
Above $1 billion 0.65%

Intermediate Investment The first $500 million 0.45%
Grade Bond Fund Above $500 million and below $1 billion 0.40%
Above $1 billion 0.35%

</TABLE>

WHAT OTHER EXPENSES DO THE FUNDS PAY?

Each Fund is responsible for the payment of its expenses, including:
brokerage and commission expenses; taxes; interest charges on borrowings (if
any); custodial charges and expenses; investment management fees due to the
Investment Manager; and all other operating expenses (e.g., legal and audit
fees, securities registration expenses, and compensation of directors who are
not affiliated with the Investment Manager). These expenses are allocated to
each class of shares based on the assets of each class. In addition, each class
bears certain class-specific expenses, such as Rule 12b-1 expenses payable by
each Fund's N Class of shares.

To limit the expenses of each Fund, the Investment Manager has agreed to
pay each Fund on a quarterly basis the amount, if any, by which the ordinary
operating expenses of the Company attributable to such Fund for the quarter
(except interest, taxes and extraordinary expenses) exceed the following expense
ratios on an annual basis through December 31, 1999: 1.50% and 1.25% for the N
Class and I Class, respectively, of the Tax Managed Growth Fund, Global Equity
Fund, Strategic Income Fund and Global Bond Fund; and 0.90% and 0.65% for the N
Class and I Class, respectively, of the California Tax Exempt Bond Fund and
Intermediate Investment Grade Bond Fund. A Fund will reimburse the Investment
Manager for such payments for a period of up to five years after they are made,
to the extent that the Fund's ordinary operating expenses are less than the
expense limit.

HOW DO THE FUNDS DECIDE WHICH BROKERS TO USE?

A 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. A Fund may also

29
<PAGE>

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 seeks 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, a 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 FUNDS' DISTRIBUTOR?

Funds Distributor, Inc. (the "Distributor"), whose principal place of
business is 60 State Street, Suite 1300, Boston, Massachusetts 02109, acts as
distributor of each class of shares of the Funds. 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, on behalf of the N Class of shares of each Fund, a
distribution plan pursuant to Rule 12b-1 under the 1940 Act. Under the
distribution plan each Fund pays the Distributor an annual fee of up to 0.25% of
the average daily net assets of its N Class shares as reimbursement for certain
expenses actually incurred by the Distributor in connection with distribution of
such shares. 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 prospectus
to persons who are not already stockholders, and indirect and overhead costs
associated with the sale of the N Class shares. If in any month the Distributor
is due more for such services, with respect to the N Class of a Fund, than is
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.

WHO ARE THE FUNDS' CUSTODIAN, ADMINISTRATOR AND TRANSFER AGENT?

State Street Bank and Trust Company acts as the custodian, administrator
and transfer agent, redemption agent and dividend paying agent for each Fund.
State Street's principal business address is 1776 Heritage Drive, North Quincy,
Massachusetts 02171.

30
<PAGE>

HOW TO PURCHASE SHARES

WHAT IS THE OFFERING PRICE FOR FUND SHARES?

Each Fund offers an N Class and an I Class. Shares of each class of the
Funds 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 for the N Class of each Fund is
$5,000, and the minimum subsequent investment is $250. The minimum initial
investment for the I Class of each Fund is $1,000,000, and the minimum
subsequent investment is $50,000. Minimum subsequent investment requirements do
not apply to investors purchasing shares through a Fund's automatic dividend
reinvestment plan. In addition, minimum initial investments may vary for
investors purchasing shares through a broker-dealer or other intermediary having
a service agreement with the Investment Manager and maintaining an omnibus
account with any of the Funds.

HOW CAN I PURCHASE FUND SHARES BY MAIL?

Investors or their duly authorized agents may purchase shares of any of the
Funds by sending a signed, completed subscription form to Boston Financial Data
Services ("BFDS"), an affiliate of State Street Bank and Trust Company, at P.O.
Box 8025, Boston, Massachusetts 02266-8025, and paying for the shares as
described below. Shares may also be purchased through certain brokers which have
entered into selling group agreements 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.

Orders for shares received by BFDS, or any other authorized agent of the
Company, prior to the close of regular trading on the New York Stock Exchange on
each day the 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
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 Exchange is not open for
trading, will be priced at the close of regular trading on the Exchange on the
next succeeding day on which the Exchange is open for trading.

Upon receipt of an order in proper form, BFDS 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. Checks
should be bank or certified checks. The Company may, at its option, accept a
check that is not a bank or certified check; however, third-party checks will
not be accepted. Payments should be sent to:

Fund Name
P.O. Box 8025
Boston, Massachusetts 02266-8025

HOW CAN I PURCHASE FUND SHARES BY WIRE?

Investors may also make initial or subsequent investments by electronic
transfer of funds or wire transfer of federal funds. Before transferring or
wiring funds, an investor must first call (800) 726-7240 for instructions. On
the telephone, the following information will be requested: name

31
<PAGE>

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 broker or agent is responsible for forwarding payment promptly to
BFDS. The Company reserves the right to cancel any purchase order for which
payment has not been received by the third business day following the order.

Share certificates will be issued 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 a 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 Fund shares. Any
such securities: (i) will be valued at the close of regular trading on the New
York Stock Exchange on the day of acceptance of the subscription in accordance
with the method of valuing a 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 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.

HOW ARE SHARES PRICED?

For each class of shares, the net asset value is determined 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 by
dividing the difference between the value of assets and liabilities (including
expenses payable and accrued) of the class by the number of shares of that class
outstanding. The net asset value per share of each class will vary due to
differences in expenses charged to each class.

32
<PAGE>

STOCKHOLDER SERVICES

WHAT SERVICES ARE PROVIDED TO STOCKHOLDERS?

AUTOMATIC REINVESTMENT

Each income dividend and capital gain distribution, if any, declared by a
Fund will be reinvested in full and fractional shares of the same class based on
the net asset value as determined on the payment date, unless the stockholder or
his or her duly authorized agent has elected to receive all such payments, or
only the dividend or distribution portions thereof, in cash. Changes in the
manner in which dividend and distribution payments are made may be requested by
you or your duly authorized agent at any time through written notice to BFDS and
will be effective as to any subsequent payment if such notice is received prior
to the record date used for determining the stockholders entitled to such
payment. Any dividend and distribution election will remain in effect until you
notify BFDS in writing to the contrary.

EXCHANGE PRIVILEGE

You may exchange shares of either class of a Fund into shares of the same
class of any other Fund offered through this Prospectus, without a sales charge
or other fee, by contacting BFDS. Exchange purchases are subject to the minimum
investment requirements of the class purchased. An exchange will be treated as a
redemption and purchase for tax purposes.

Shares will be exchanged at net asset value per share next determined after
receipt by BFDS 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 BFDS. A stockholder in
doubt as to what documents are required should contact BFDS.

TELEPHONE PURCHASES AND REDEMPTIONS

You may purchase or redeem shares by calling (800) 726-7240. If you call
before 1:00 p.m. (Pacific Time), the purchase or redemption will be at the net
asset value determined that day; if you call after 1:00 p.m. (Pacific Time), the
purchase or redemption will be at the net asset value determined on the next
business day.

By using the telephone privilege you may be giving up a measure of security
that you may have if you were to purchase or redeem your shares in writing. The
Company will employ procedures designed to provide reasonable assurance that
instructions communicated by telephone are genuine and, if it does not do so,
may be liable for any losses due to unauthorized or fraudulent instructions. The
Company reserves the right to refuse a telephone purchase or redemption request
if it believes that the person making the request is not authorized by the
investor to make the request. Neither the Company nor its agents will be liable
for any loss, liability or cost which results from acting upon instructions of a
person reasonably believed to be a stockholder with respect to the telephone
privilege.

33
<PAGE>

ACCOUNT STATEMENTS

Stockholder accounts are 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.

REPORTS TO STOCKHOLDERS

Each Fund's fiscal year ends on December 31. Each Fund will issue to its
stockholders semi-annual and annual reports. In addition, stockholders will
receive quarterly statements of the status of their accounts reflecting all
transactions having taken place within that quarter. In order to reduce
duplicate mailings and printing costs, the Company will provide one annual and
semi-annual report and annual prospectus per household. Information regarding
the tax status of income dividends and capital gains distributions will be
mailed to stockholders on or before January 31st of each year. Account tax
information will also be sent to the IRS.

STOCKHOLDER INQUIRIES

Stockholder inquiries should be addressed to the Company at the address or
telephone number on the front page of this Prospectus.

34
<PAGE>

REDEMPTION OF SHARES

HOW DO I REDEEM MY SHARES?

Subject to the limitations described below, the Company will redeem the
shares of its series tendered to it, 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 a Fund's shares will
fluctuate as a result of changes in the market value of securities owned, the
amount you receive upon redemption may be more or less than the amount you paid
for those shares.

Redemption payments will be made wholly in cash unless the Board of
Directors believes that unusual conditions exist which would make such payment
detrimental to the best interests of a Fund. Under such circumstances, payment
of the redemption price could be made in whole or in part in portfolio
securities. You would incur brokerage costs to sell such securities.

You may be charged a fee if you 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
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. If you are unsure as to what documents are required you should contact
the Company.

If the Company is requested to redeem shares for which it has not yet
received payment,the mailing of a redemption check will be delayed until such
time as 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.

Upon execution of the redemption order, a confirmation statement will be
forwarded to you 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 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 a Fund of securities it owns is not reasonably practicable, or as a
result of which it is not reasonably practical for a 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.

35
<PAGE>

WHAT ELSE SHOULD I KNOW ABOUT REDEMPTIONS?

REINSTATEMENT PRIVILEGE

You may reinvest proceeds from a redemption of shares of a Fund, or
proceeds of a dividend or capital gain distribution paid to you with respect to
shares of a Fund, in shares of the same class of the same Fund or of any of the
other Funds offered through this Prospectus. Send a written request and a check
to the Dresdner RCM Global Funds 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 taxability 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 a Fund's expenses, it may redeem all of the shares of
any Class N 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). A Fund may also
redeem all of the shares of any Class I investor whose account has a net asset
value of less than $1,000,000 due to redemptions. The Fund will give you
60 days' prior written notice in which to purchase sufficient additional shares
to avoid such redemption.

36
<PAGE>

DIVIDENDS, DISTRIBUTIONS AND TAXES

WHAT DIVIDENDS AND OTHER DISTRIBUTIONS DO THE FUNDS PAY?

Each Fund intends to pay to its stockholders all of each fiscal year's net
investment income and net realized capital gains, if any, on its investment
portfolio and net gains, if any, from foreign currency transactions. The amount
and time of any such dividend or other distribution depends upon the realization
by a Fund of income and capital gains from investments. Normally, dividend and
other distribution payments are declared and paid by each Fund in December.

If you purchase a Fund's shares shortly before the record date for a
dividend or other distribution thereon, you pay full price for the shares (known
as buying a distribution) and then will receive some portion of your purchase
price back as a taxable distribution even though, because the amount of the
dividend or other distribution reduces the shares' net asset value, it actually
represents a return of invested capital.

WHAT TAXES WILL I PAY ON THE FUNDS DIVIDENDS AND OTHER DISTRIBUTIONS?

Each Fund will distribute substantially all of its net investment income in
the form of dividends. Although the Tax Managed Growth Fund seeks to minimize
taxable distributions, it will earn and distribute taxable income and may also
realize and distribute capital gains from time to time.

Dividends from a Fund's investment company taxable income (whether paid in cash
or reinvested in additional shares) generally will be taxable to you as ordinary
income. Distributions of a Fund's net capital gain (the excess of net long-term
capital gain over net short-term capital loss), when designated as such, will be
taxable to you as long-term capital gain, regardless of how long you have held
your Fund shares and whether paid in cash or reinvested additional shares. If
you are not subject to tax on your income, you generally will not be required to
pay tax on dividends or distributions. Dividends and other distributions
generally are taxable to you at the time they are received. However, dividends
declared in October, November and December by a 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 a Fund to withhold 31% of the amount of dividends,
capital gain distributions and/or redemption proceeds payable to individual and
certain other non-corporate stockholders if the stockholder has not properly
furnished a certified correct taxpayer identification number and (except with
respect to redemption proceeds) has not certified that backup 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
investment company taxable income and net capital gain by a 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, although
distributions of net capital gain to such a stockholder generally will not be
subject to withholding.

WILL THE FUNDS ALSO PAY TAXES?

Each Fund intends to qualify for treatment as a "regulated investment
company" under Subchapter M of the Code. By doing so, it will not be subject to
federal income tax with respect to investment company taxable income and net
capital gain distributed to its stockholders.

37
<PAGE>

Each Fund may be required to pay income, 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. If it is eligible to
do so, a 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 a 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 of a Fund will receive, after the end of each year, full
information on dividends, capital gain 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 the present U.S. federal
income tax law applicable to dividends and distributions by the Funds; see the
SAI for further information. You should consult your own tax adviser 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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<PAGE>

GENERAL INFORMATION

WHAT OTHER INFORMATION SHOULD I KNOW ABOUT THE FUNDS?

The authorized capital stock of the Company is 1,000,000,000 shares of
capital stock (par value $.0001 per share), of which 25,000,000 shares have been
designated as shares of each class of each Fund. The Board of Directors of the
Company may, in the future, authorize the issuance of other classes of shares of
such Funds, or of other series of capital stock 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 or class, except where voting by series or class is
required by law or where the matter involved affects only one series or class.
There are no conversion or preemptive rights in connection with any shares. All
shares of the Funds when duly issued will be fully paid and non-assessable. The
rights of the holders of shares of each Fund may not be modified except by vote
of the majority of the outstanding shares of such Fund. Certificates are not
issued unless requested and are never issued for fractional shares. Fractional
shares are liquidated when an account is closed.

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 the directors can elect 100% of the directors of the Company if
they wish to do so. In such event, the holders of the remaining less than 50% of
the shares of the Company voting for the election of directors will not be able
to elect any person to the Board of Directors of the Company.

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. They are also available on the SEC's Internet Web
Site at http: //www.sec.gov.

39
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APPENDIX

The following is a description of credit ratings issued by two of the major
credit ratings agencies. Credit ratings evaluate only the safety of principal
and interest payments, not the market value risk. Credit rating agencies may
fail to change credit ratings to reflect subsequent events on a timely basis.
Although Dresdner RCM Global Investors LLC considers security ratings when
making its investment decisions, it also performs its own investment analysis
and does not rely solely on the ratings assigned by credit agencies.

STANDARD & POOR'S RATINGS SERVICES

Bond Rating Explanation

INVESTMENT GRADE
AAA Highest rating; extremely strong capacity to pay
principal and interest.

AA High quality; very strong capacity to pay principal and
interest.

A Strong capacity to pay principal and interest; somewhat
more susceptible to the adverse effects of changing
circumstances and economic conditions.

BBB Adequate capacity to pay principal and interest;
normally exhibit adequate protection parameters, but
adverse economic conditions or changing circumstances
more likely to lead to a weakened capacity to pay
principal and interest than for higher rated bonds.

NON-INVESTMENT GRADE

BB, B, Predominantly speculative with respect to the issuer's
CCC, CC, C capacity to meet required interest and principal
payments.

BB - lowest degree of speculation; C - the highest
degree of speculation. Quality and protective
characteristics outweighed by large uncertainties or
major risk exposure to adverse conditions.

D In default

Standard & Poor's letter ratings may be modified by the addition of a plus or
minus sign, which is used to show relative standing within the major rating
categories, except in the AAA category.

MOODY'S INVESTORS SERVICE, INC.

Bond Rating Explanation

INVESTMENT GRADE

Aaa Highest quality; smallest degree of investment risk.

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Aa High quality; together with Aaa bonds, they compose the
high-grade bond group.

A Upper-medium grade obligations; many favorable
investment attributes.

Baa Medium-grade obligations; neither highly protected nor
poorly secured. Interest and principal appear adequate
for the present but certain protective elements may be
lacking or may be unreliable over any great length of
time.

NON-INVESTMENT GRADE
Ba More uncertain, with speculative elements. Protection
of interest and principal payments not well safeguarded
during good and bad times.

B Lack characteristics of desirable investment;
potentially low assurance of timely interest and
principal payments or maintenance of other contract
terms over time.

Caa Poor standing, may be in default; elements of danger
with respect to principal or interest payments.

Ca Speculative or high degree; could be in default or have
other marked shortcomings.

C Lowest-rated; extremely poor prospects of ever
attaining investment standing.

Moody's applies the numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through B. The modifier 1 indicates that the security
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the number 3 indicates that the issuer ranks in the
lower end of its generic rating category.

Unrated securities will not be treated as investment grade securities unless a
portfolio manager determines that such securities are the equivalent of
investment grade securities. Securities that have received different ratings
from more than one agency are considered investment grade if at least one agency
has rated the securities investment grade.

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DRESDNER RCM GLOBAL FUNDS, INC.

DRESDNER RCM TAX MANAGED GROWTH FUND
DRESDNER RCM GLOBAL EQUITY FUND
DRESDNER RCM CALIFORNIA TAX EXEMPT BOND FUND
DRESDNER RCM STRATEGIC INCOME FUND
DRESDNER RCM GLOBAL BOND FUND
DRESDNER RCM INTERMEDIATE INVESTMENT GRADE BOND FUND

FOUR EMBARCADERO CENTER
SAN FRANCISCO, CALIFORNIA 94111
(800) 726-7240

STATEMENT OF ADDITIONAL INFORMATION

December __, 1998

Dresdner RCM Tax Managed Growth Fund (the "Tax Managed Fund"), Dresdner RCM
Global Equity Fund (the "Global Equity Fund"), Dresdner RCM California Tax
Exempt Bond Fund (the "California Tax Exempt Bond Fund"), Dresdner RCM Strategic
Income Fund (the "Strategic Income Fund"), Dresdner RCM Global Bond Fund (the
"Global Bond Fund"), and Dresdner RCM Intermediate Investment Grade Bond Fund
(the "Intermediate Investment Grade Bond Fund") are series (each a "Fund" and
together the "Funds") of Dresdner RCM Global Funds, Inc. (the "Company"), an
open-end management investment company. The Funds' investment manager is
Dresdner RCM Global Investors LLC (the "Investment Manager").

This Statement of Additional Information ("SAI") is not a prospectus, and should
be read in conjunction with a Prospectus of the Funds dated December __, 1998.
This SAI relates to the Funds' Non-Institutional Class ("N Class") and
Institutional Class ("I Class") of shares. The Prospectus may be obtained
without charge by writing or calling the Company at the address and phone number
above.

TABLE OF CONTENTS

PAGE

Investment Objectives and Policies
Investment and Risk Considerations
Investment Restrictions
Execution of Portfolio Transactions
Directors and Officers
The Investment Manager
The Distributor
Net Asset Value
Purchase and Redemption of Shares
Dividends, Distributions and Tax Status
Investment Results
Description of Capital Shares
Additional Information

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INVESTMENT OBJECTIVES AND POLICIES

INVESTMENT CRITERIA

In evaluating particular investment opportunities, the Investment Manager
may consider such other factors, in addition to those described in the
Prospectus, as 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 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 investment objectives
of the Funds (other than the California Tax Exempt Bond Fund), the Investment
Manager allocates the Funds' assets among securities of countries and in
currency denominations where it expects opportunities for meeting the Funds'
investment objectives to be the most attractive, subject to the percentage
limitations set forth in the Prospectus. In addition, from time to time a 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, 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 Global Equity Fund and
Global Bond Fund will, and each of the other Funds (except the California Tax
Exempt Bond Fund) may, invest in securities of foreign governments and companies
that are organized or headquartered in developed foreign countries. A 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
may be 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 in these and other developed foreign countries.

INVESTMENT IN EMERGING MARKETS. Each Fund (except the California Tax
Exempt Bond Fund and the Intermediate Investment Grade Bond Fund) may invest in
securities of developing countries with emerging markets and companies organized
or headquartered in such countries. As

<PAGE>

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. Emerging market countries include any country generally considered to
be an emerging market 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 SAI, emerging market countries
are deemed to include for purposes of this SAI, 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. (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 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 a 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 current income and
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 a 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 a Fund will be invested in 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 Fund 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 Funds (other than the California Tax Exempt
Bond Fund) may be denominated in U.S. dollars, foreign currencies, or
multinational currencies such as the Euro, and the Funds 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 a
Fund's net currency positions may expose it to risks independent of its
securities positions.

From time to time, the Funds (other than the California Tax Exempt Bond
Fund and the Intermediate Investment Grade Bond Fund) may employ currency
management techniques to enhance their total returns, although there is no
current intention to do so. A Fund may not employ more than 30% of the value of
its total assets in currency management techniques for the purpose

<PAGE>

of enhancing returns. To the extent that such techniques are used to enhance
return, they are considered speculative.

A Fund's ability and decision to purchase or sell portfolio securities may
be affected by the laws or regulations in particular countries relating to
convertibility and repatriation of assets. Because the shares of the Funds are
redeemable in U.S. dollars each day the Funds determine their net asset value,
the Funds 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, a
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 markets in forward foreign currency exchange
contracts, currency swaps and other privately negotiated currency instruments
offer 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 a 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. Each Fund (other than the
California Tax Exempt Bond Fund) may purchase or sell forward foreign
currency exchange contracts ("forward contracts") for hedging purposes or to
seek to increase total return when the Investment Manager anticipates that a
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 contracts are considered speculative.
In addition, a Fund may enter into forward contracts in order to protect
against anticipated changes in future foreign currency exchange rates. The
Intermediate Investment Grade Bond Fund will not purchase or sell forward
currency exchange contracts to increase total return.

Each Fund (other than the California Tax Exempt Bond 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.
Each such Fund may also engage in proxy hedging, by using forward contracts
in a series of foreign currencies for similar purposes.

Each Fund (other than the California Tax Exempt Bond Fund) may enter into
forward contracts to purchase foreign currencies to protect against an
anticipated rise in the U.S. dollar price of securities it intends to purchase.
Each such Fund may enter into forward 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 income or
dividends from such securities, due to a decline in the value of foreign
currencies against the U.S. dollar. Forward contracts to sell foreign currency
could limit any potential gain which might be realized by a Fund if the value of
the hedged currency increased.

<PAGE>

If a Fund enters into a forward contract to sell foreign currency to
increase total return or to buy foreign currency for any purpose, the Fund will
segregate cash, U.S. Government securities, or other liquid debt or equity
securities 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 segregated securities declines, additional assets will be
segregated so that the value of the segregated assets will equal the amount of
the Fund's commitment with respect to the contract.

A forward contract is subject to the risk that the counterparty to such
contract will default on its obligations. Since a forward 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.

OPTIONS ON FOREIGN CURRENCIES. Each Fund (except the California Tax
Exempt Bond 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 income or
dividends on such securities and against increases in the U.S. dollar cost of
foreign securities to be acquired. Each such 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 Funds 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; a
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 a
Fund's position, the Fund may forfeit the entire amount of the premium plus
related transaction costs.

Each such Fund (except the California Tax Exempt Bond Fund and the
Intermediate Investment Grade Bond Fund) may purchase call or put options on a
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 a Fund writes a put or 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 segregated
by the Fund's custodian to collateralize the position.

CURRENCY FUTURES CONTRACTS. Each Fund (other than the California Tax Exempt
Bond Fund) may enter into currency futures contracts, as described under
"Futures Transactions" below.

CURRENCY SWAPS. Each Fund (other than the California Tax Exempt Bond
Fund) may enter into currency swaps for both hedging and to seek to increase
total return. The Intermediate Investment Grade Bond Fund will not enter into
currency swaps to increase total return. Currency swaps involve the exchange of
rights to make or receive payments in specified currencies. Since

5
<PAGE>

currency swaps are individually negotiated, the Funds expect to achieve an
acceptable degree of correlation between their portfolio investments and their
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. Each 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 segregated, 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 a Fund's borrowing restriction.

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 a Fund entering into a currency swap would be less favorable than
it would have been if this investment technique were not used.

INTEREST RATE SWAPS

Each Fund may enter into interest rate swaps, caps and floors on either an
asset-based or liability-based basis, depending upon whether it is hedging its
assets, and will usually enter into interest rate swaps on a net basis (i.e. the
two payment streams are netted out, with the Fund receiving or paying, as the
case may be, only the net amount of the two payments). The net amount of the
excess, if any, of a Fund's obligation over its entitlement with respect to each
interest rate swap will be calculated on a daily basis and an amount of cash or
other liquid assets having an aggregate net asset value at least equal to the
accrued excess will be maintained in a segregated account by the Funds'
custodian. If a Fund enters into an interest rate swap on other than a net basis
it will maintain a segregated account in the full amount accrued on a daily
basis of its obligations with respect to the swap. A Fund will not enter into
any interest rate swap, cap or floor transaction unless the unsecured senior
debt or the claims-paying ability of the other party thereto is rated in one of
the three highest rating categories of at least one NRSRO at the time of
entering into such transaction. The Investment Manager will monitor the
creditworthiness of all counterparties on an ongoing basis. If there is a
default by the other party to such a transaction, a Fund will have contractual
remedies pursuant to the agreements related to the transaction.

The swap market has grown substantially in recent years with a large number
of banks and investment banking firms acting as principals and as agents using
standardized swap documentation. The Investment Manager has determined that, as
a result, the swap market has become relatively liquid. Caps and floors are more
recent innovations for which standardized documentation has not been developed
and, accordingly, they are less liquid than swaps. To the extent a Fund sells
(i.e. writes) caps and floors, it will segregate cash or other liquid assets
having an aggregate net asset value at least equal to the full amount, accrued
on a daily basis, of its obligations with respect to any caps or floors.

There is no limit on the amount of interest rate swap transactions that may
be entered into by a Fund. These transactions may in some instances involve the
delivery of securities or other underlying assets by a Fund or its counterparty
to collateralize obligations under the swap. Under the documentation currently
used in those markets, the risk of loss with respect to interest rate swaps is
limited to the net amount of the payments that a Fund is contractually obligated
to make. If the other party to an interest rate swap that is not collateralized
defaults, a Fund would risk the loss

6
<PAGE>

of the net amount of the payments that it contractually is entitled to receive.
A Fund may buy and sell (i.e., write) caps and floors without limitation,
subject to the segregation requirement described above.

OPTIONS TRANSACTIONS

Each Fund may purchase listed put and call options on any securities which
it is eligible to purchase 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 a Fund may not
in each case exceed 5% of the value of the net assets of the Fund as of the date
of purchase. In addition, a Fund will not purchase 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 on various stocks and financial indices
are traded on U.S. and foreign exchanges. A put option is covered if the
writer segregates cash, U.S. Government securities or other liquid debt or
equity securities equal to the exercise price. 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. If a Fund purchases a put option, 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). 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 a Fund is holding a security 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 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 strike price of the put 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. If a Fund purchases a call option, it acquires the right to
purchase the underlying security at a specified price at any time during the
term of the option. The purchase of a call option is a type of "insurance
policy" to hedge against losses that could incur if a 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 increases, the price the Fund pays for the security will in
effect be increased by the premium paid for the call.

7
<PAGE>

STOCK INDEX OPTIONS. Each Fund (other than the California Tax Exempt Bond
Fund and the Intermediate Investment Grade Bond Fund) may purchase put and call
options with respect to stock indices such as the S&P Composite 500 Stock Price
Index and other stock indices. Such options may be purchased as a hedge against
changes resulting from market conditions in the values of securities which are
held in a 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 a 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 a 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, a 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 Funds 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. Each 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
a 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 options.

SHORT SALES

Each Fund may engage in short sales transactions. A short sale that is not
made "against the box" is a transaction in which a Fund sells a security it does
not own in anticipation of a decline in market price. When a 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.

Short sales by a 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
a 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 a Fund may mitigate
such losses by replacing the securities sold short before the market price has
increased significantly. Under adverse market conditions, a Fund

<PAGE>

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 a 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. A 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 segregating (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 each Fund will be "against the box", or the Fund's
obligation to deliver the securities sold short will be "covered" by segregating
cash, U.S. Government securities or other liquid debt or equity securities in an
amount equal to the market value of its delivery obligation. A 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 Funds may enter into futures contracts for the purchase or sale of
fixed-income securities, foreign currencies or contracts based on financial
indices, including indices of U.S. government securities, foreign government
securities, equity securities or fixed-income securities. For example, if a
Fund owns Treasury bonds and the portfolio manager expects interest rates to
increase, that Fund may take a short position in interest rate futures
contracts. Taking such a position would have much the same effect as that Fund
selling Treasury bonds in its portfolio. If interest rates increase as
anticipated, the value of the Treasury bonds would decline, but the value of
that Fund's interest rate futures contract will increase, thereby keeping the
net asset value of that Fund from declining as much as it may have otherwise.
If, on the other hand, a portfolio manager expects interest rates to decline,
the Fund may take a long position in interest rate futures contracts in
anticipation of later closing out the futures position and purchasing the bonds.
Although a Fund can accomplish similar results by buying securities with long
maturities and selling securities with short maturities, given the greater
liquidity of the futures market than the cash market, it may be possible to
accomplish the same result more easily and more quickly by using futures
contracts as an investment tool to reduce risk.

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

<PAGE>

of the currency, security or index at the close of the last trading day of the
contract and the price at which the currency, security or index 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, security or index. No physical delivery of the underlying currency,
securities, or securities in the index is made.

Unlike when a Fund purchases or sells a security, no price is paid or
received by a 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 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 a 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 or stock index 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 a Fund has purchased a currency futures
contract and the price of the underlying currency has risen, the Fund's 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 a 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 a futures contract, a 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. Each Fund may also purchase call
options and put options on securities or index futures contracts ("futures
options"), and each Fund other than the California Tax Exempt Bond Fund may
purchase futures options on currencies. 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. Each Fund (except the California Tax Exempt Bond
Fund) 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. Similarly, when the Investment
Manager anticipates a significant stock market or stock market sector
advance, a Fund may purchase a stock index futures contract which affords a
hedge against not participating in such advance at a time when the Fund is
not fully invested in equity securities. Such purchase of a futures contract
would serve as a temporary substitute for the purchase of individual stocks
which may later be purchased (with attendant costs) in an orderly fashion.
As such purchase of individual stocks are made, an approximately equivalent

<PAGE>

amount of stock index futures would be terminated by offsetting sales. The
Intermediate Investment Grade Bond Fund will not purchase currency futures
contracts to enhance total return.

SALE OF FUTURES. Each Fund (except the California Tax Exempt Bond Fund)
may sell a currency futures contract to hedge against an anticipated decline in
foreign currency rates that would adversely affect the dollar value of a 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. Similarly, a Fund
may sell stock index futures contracts in anticipation of or during a general
stock market or market sector decline that may adversely affect the market
values of the Fund's portfolio of equity securities. To the extent that the
Fund's portfolio of equity securities changes in value in correlation with a
given stock index, the sale of futures contracts on that index would reduce the
risk to the portfolio of a market decline and, by doing so, would provide an
alternative to the liquidation of securities positions in the portfolio with
resultant transaction costs.

PURCHASE OF PUT OPTIONS ON FUTURES. The purchase of a put option on a
currency, financial or index futures contract is analogous to the purchase of a
put on individual stocks, where an absolute level of protection from price
fluctuation is sought below which no additional economic loss would be incurred
by a Fund. For example, put options on futures may be purchased to hedge a
portfolio of stocks or a position in the futures contract upon which the put
option is based against a possible decline in market value. 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. The Intermediate Investment
grade Bond Fund will not purchase a put option on a futures contract to enhance
total return.

PURCHASE OF CALL OPTIONS ON FUTURES. The purchase of a call option on a
currency, financial or index futures contract represents a means of obtaining
temporary exposure to favorable currency exchange rate or interest rate
movements or temporary exposure to market appreciation with risk limited to the
premium paid for the call option. It is analogous to the purchase of a call
option on an individual security or index, which can be used as a substitute for
a position in the security or index 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, security or index 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, security or
index futures contract. Like the purchase of a currency, financial or index
futures contract, a Fund would purchase a call option on a currency, financial
or index futures contract to hedge against an unfavorable movement in exchange
rates, interest rates or securities prices.

LIMITATIONS ON PURCHASE AND SALE OF FUTURES AND FUTURES OPTIONS. A 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, a 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 segregated 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 Funds as commodity pools with the Commodity Futures Trading
Commission (the "CFTC"). Each

<PAGE>

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 Tax Managed Growth and Global Equity Funds may, and the California Tax
Exempt Bond, Strategic Income, Global Bond, and Intermediate Investment Grade
Bond Funds will, purchase debt obligations. The timing of purchase and sale
transactions in debt obligations may result in capital appreciation or
depreciation because the value of a debt obligation generally varies inversely
with prevailing interest rates.

RATINGS. 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. In general, debt
securities held by a Fund will be treated as investment grade if they are rated
by at least one major rating agency in one of its top four rating categories at
the time of purchase or, if unrated, are determined by the Investment Manager to
be of comparable 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. If the rating of an investment grade security held
by a 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. The Global Equity Fund, California Tax Exempt Bond Fund,
Strategic Income Fund, and Global Bond Fund, may invest in debt securities
rated, at the time of purchase, below investment grade. Refer to the section
entitled "Investment and Risk Considerations" for the risks associated with
below investment grade debt securities.

AVERAGE MATURITY. The average portfolio maturity will be computed by
weighting the maturity of each security in such Fund's portfolio by the market
value of that security. For securities which have put dates, reset dates, or
trade based on average maturity, the put date, reset date or average maturity
will be used instead of the final maturity date for the average maturity
calculation.

GOVERNMENT OBLIGATIONS. 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. No assurance can be given that the U.S.
Government will provide financial support to U.S. Government-sponsored
instrumentalities if it is not obligated to do so by law.

Each Fund (except the California Tax Exempt Bond Fund) may invest in
sovereign debt obligations of foreign countries. The Intermediate Investment
Grade Bond Fund will not invest in sovereign debt of emerging market countries.
A number of factors affect a sovereign debtor's willingness or ability to repay
principal and interest in a timely manner, including its cash flow situation,
the extent of its foreign reserves, the availability of sufficient foreign
exchange on the date a payment is due, the relative size of the debt service
burden to the economy as a whole, the sovereign debtor's policy toward principal
international lenders and the political constraints to

12
<PAGE>

which it may be subject. Emerging market governments could default on their
sovereign debt. Such sovereign debtors also may be dependent on expected
disbursements from foreign governments, multilateral agencies and other entities
abroad to reduce principal and interest arrearages on their debt. The
commitments on the part of these governments, agencies and others to make such
disbursements may be conditioned on a sovereign debtor's implementation of
economic reforms and/or economic performance and the timely service of such
debtor's obligations. Failure to meet such conditions could result in the
cancellation of such third parties' commitments to lend funds to the sovereign
debtor, which may further impair such debtor's ability or willingness to service
its debt in a timely manner.

ZERO COUPON, PAY-IN-KIND AND STEP COUPON SECURITIES. Each Fund may invest
in zero coupon, pay-in-kind and step coupon securities. Zero coupon bonds are
issued and traded at a discount from their face value. They do not entitle the
holder to any periodic payment of interest prior to maturity. Step coupon bonds
trade at a discount from their face value and pay coupon interest. The coupon
rate is low for an initial period and then increases to a higher coupon rate.
The discount from the face amount or par value depends on the time remaining
until cash payments begin, prevailing interest rates, liquidity of the security
and the perceived credit quality of the issuer. Pay-in-kind bonds normally give
the issuer an option to pay cash at a coupon payment date or with a face value
equal to the amount of the coupon payment that would have been made.

Current federal income tax law requires holders of zero coupon securities
and step coupon securities to report the portion of the original issue discount
on such securities that accrues during a given year as interest income, even
though the holders receive no cash payments of interest during the year. In
order to qualify as a "regulated investment company" under the Internal Revenue
Code of 1986 and the regulations thereunder (the "Code"), a Fund must distribute
its investment company taxable income, including the original issue discount
accrued on zero coupon bonds or step coupon bonds. Because a Fund will not
receive cash payments on a current basis in respect of accrued original-issue
discount on zero coupon bonds or step coupon bonds during the period before
interest payments begin, in some years a Fund may have to distribute cash
obtained from other sources in order to satisfy the distribution requirements
under the Code. A Fund might obtain such cash from selling other portfolio
holdings, which might cause the Fund to incur capital gains or losses on the
sale. Additionally, these actions are likely to reduce the assets to which Fund
expenses could be allocated and to reduce the rate of return for the Fund. In
some circumstances, such sales might be necessary in order to satisfy cash
distribution requirements even though investment considerations might otherwise
make it undesirable for a Fund to sell the securities at the time.

Generally, the market prices of zero coupon, step coupon and pay-in-kind
securities are more volatile than the prices of securities that pay interest
periodically and in cash and are likely to respond to changes in interest rates
to a greater degree than other types of debt securities having similar
maturities and credit quality.

PASS THROUGH SECURITIES. Each Fund may invest in various types of
pass-through securities, such as mortgage-backed securities, asset-backed
securities and participation interests. A pass-through security is a share or
certificate of interest in a pool of debt obligations that have been repackaged
by an intermediary, such as a bank or broker-dealer. The purchaser of a
pass-through security receives an undivided interest in the underlying pool of
securities. The issuers of the underlying securities make interest and principal
payments to the intermediary which are passed through to purchasers, such as the
Funds. The most common type of pass-through securities are mortgage-backed
securities, including those issued by the Government National Mortgage
Association ("GNMA"), the Federal Home Loan Mortgage Corporation ("FHLMC"), and
the Federal National Mortgage Association ("FNMA").

13
<PAGE>

GNMA Certificates are mortgage-related securities that evidence an
undivided interest in a pool of mortgage loans. GNMA Certificates differ from
bonds in that principal is paid back monthly by the borrowers over the term of
the loan rather than returned in a lump sum at maturity. A Fund will generally
purchase "modified pass-through" GNMA Certificates, which entitle the holder to
receive a share of all interest and principal payments paid on the mortgage
pool, net of fees paid to the intermediary and GNMA, regardless of whether or
not the mortgagor actually makes the payment. GNMA Certificates are backed as to
the timely payment of principal and interest by the full faith and credit of the
U.S. Government.

FHLMC issues two types of mortgage pass-through securities: mortgage
participation securities ("PCs") and guaranteed mortgage securities ("GMCs").
PCs resemble GNMA Certificates in that each PC represents a pro rata share of
all interest and principal payments made on the underlying pool. FHLMC
guarantees timely payments of interest on PCs and the full return of principal.
GMCs also represent a pro rata interest in a pool of mortgages. However, these
instruments pay interest semiannually and return principal once a year in
guaranteed minimum payments. This type of security is guaranteed by FHLMC as to
timely payment principal and interest but it is not guaranteed by the full faith
and credit of the U.S. Government.

FNMA issues guaranteed mortgage pass-through certificates ("FNMA
Certificates"). FNMA Certificates resemble GNMA Certificates in that each FNMA
Certificate represents a pro rata share of all interest and principal payments
made and owned on the underlying pool. This type of security is guaranteed by
FNMA as to timely payment of principal and interest, but it is not guaranteed by
the full faith and credit of the U.S. Government.

Except for GMCs, each of the mortgage-backed securities described above is
characterized by monthly payments to the holder, reflecting the monthly payments
made by the borrowers who received the underlying mortgage loans. The payments
to the security holders (such as the Funds), like the payments on the underlying
loans, represent both principal and interest. Pass-through securities are
subject to prepayment risk. Although the underlying mortgage loans are for
specified periods of time, such as 20 or 30 years, the borrowers can, and
typically do, pay them off sooner. Thus, the security holders frequently receive
prepayments of principal in addition to the principal that is part of the
regular monthly payments. A portfolio manager will consider estimated prepayment
rates in calculating the average weighted maturity of a Fund. A borrower is more
likely to prepay a mortgage that bears a relatively high rate of interest. This
means that in times of declining interest rates, higher yielding mortgage-backed
securities held by a Fund might be converted to cash and that Fund will be
forced to accept lower interest rates when that cash is used to purchase
additional securities in the mortgage-backed securities sector or in other
investment sectors. Additionally, prepayments during such periods will limit a
Fund's ability to participate in as large a market gain as may be experienced
with a comparable security not subject to prepayment.

Asset-backed securities represent interests in pools of consumer loans and
are backed by paper or accounts receivables originated by banks, credit card
companies or other providers of credit. Generally, the originating bank or
credit provider is neither the obligor nor guarantor of the security and
interest and principal payments ultimately depend upon payment of the underlying
loans by individuals. Tax-exempt asset-backed securities include units of
beneficial interest in pools of purchase contracts, financing leases, and sales
agreements that may be created when a municipality enters into an installment
purchase contract or lease with a vendor. Such securities may be secured by the
assets purchased or leased by the municipality; however, if the municipality
stops making payments, there generally will be no recourse against the vendor.
The market for tax-exempt asset-backed securities is still relatively new. These
obligations are likely to involve unscheduled prepayments of principal.

<PAGE>

MUNICIPAL SECURITIES. Each Fund may invest in municipal securities
issued by states, territories and possessions of the United States and the
District of Columbia. The value of municipal obligations can be affected by
changes in their actual or perceived credit quality. The credit quality of
municipal obligations can be affected by among other things, the financial
condition of the issuer or guarantor, the issuer's future borrowing plans and
sources of revenue, the economic feasibility of the revenue bond project or
general borrowing purpose, political or economic developments in the region,
where the security is issued, and the liquidity of the security. Because
municipal securities are generally traded over-the-counter, the liquidity of
a particular issue often depends on the willingness of dealers to make a
market in the security. The liquidity of some municipal obligations may be
enhanced by demand features, which would enable a Fund to demand payment on
short notice from the issuer or a financial intermediary. The Intermediate
Investment Grade Bond Fund may invest up to 20% of its total assets in
municipal securities. Such securities must be rated at least A by Standard &
Poor's or Moody's.

Each Fund may purchase insured municipal debt in which scheduled payments
of interest and principal are guaranteed by a private, non-governmental or
governmental insurance company. The insurance does not guarantee the market
value of the municipal debt or the value of the shares of a Fund.

Securities of issuers of municipal obligations are subject to the
provisions of bankruptcy, insolvency and other laws affecting the rights and
remedies of creditors, such as the Bankruptcy Reform Act of 1978. In addition,
the obligations of such issuers may become subject to laws enacted in the future
by Congress, state legislatures or referenda extending the time for payment of
principal or interest, or imposing other constraints upon enforcement of such
obligations or upon the ability of municipalities to levy taxes. Furthermore, as
a result of legislation or other conditions, the power or ability of any issuer
to pay, when due, the principal of and interest on its municipal obligations may
be materially affected.

MORAL OBLIGATION SECURITIES. Municipal securities may include "moral
obligation" securities which are usually issued by special purpose public
authorities. If the issuer of moral obligation bonds cannot fulfill its
financial responsibilities from current revenues, it may draw upon a reserve
fund, the restoration of which is a moral commitment but not a legal obligation
of the state or municipality which created the issuer.

INDUSTRIAL DEVELOPMENT AND POLLUTION CONTROL BONDS. Each Fund may invest in
tax exempt industrial development bonds and pollution control bonds which, in
most cases, are revenue bonds and generally are not payable from the
unrestricted revenues of an issuer. They are issued by or on behalf of public
authorities to raise money to finance to finance privately operated facilities
for business, manufacturing, housing, sport complexes, and pollution control.
Consequently, the credit quality of these securities is dependent upon the
ability of the user of the facilities financed by the bonds and any guarantor to
meet its financial obligations.

MUNICIPAL LEASE OBLIGATIONS. Each Fund may invest in lease obligations or
installment purchase contract obligations of municipal authorities or entities
("municipal lease obligations"). Although lease obligations do not constitute
general obligations of the municipality for which its taxing power is pledged, a
lease obligation is ordinarily backed by the municipality's covenant to budget
for, appropriate and make the payment due under the lease obligation. A Fund may
also purchase "certificates of participation," which are securities issued by a
particular municipality or municipal authority to evidence a proportionate
interest in base rental or lease payments relating to a specific project to be
made by the municipality, agency or authority. However, certain lease
obligations contain "non-appropriation" clauses which provide that the
municipality has no obligation to make lease or installment purchase payments in
any year unless money is appropriated for such purpose for such year. Although
"non-appropriation" lease obligations are secured by the leased property,
disposition of the property in the event of default and foreclosure might prove
difficult. In addition,

15
<PAGE>

these securities represent a relatively new type of financing and certain lease
obligations may therefore be considered to be illiquid securities.

SHORT-TERM OBLIGATIONS. Each Fund may invest in short-term municipal
obligations. These securities include the following:

TAX ANTICIPATION NOTES are used to finance working capital needs of
municipalities and are issued in anticipation of various seasonal tax revenues,
to be payable from these specific future taxes. They are usually general
obligations of the issuer, secured by the taxing power of the municipality for
the payment of principal and interest when due.

REVENUE ANTICIPATION NOTES are issued in expectation of receipt of other
kinds of revenue, such as federal revenues available under the Federal Revenue
Sharing Program. They also are usually general obligations of the issuer.

BOND ANTICIPATION NOTES normally are issued to provide interim financing
until long-term financing can be arranged. The long-term bonds then provide the
money for the repayment of the notes.

CONSTRUCTION LOAN NOTES are sold to provide construction financing for
specific projects. After successful completion and acceptance, many projects
receive permanent financing through FNMA or GNMA.

SHORT-TERM DISCOUNT NOTES (tax-exempt commercial paper) are short-term (365
days or less) promissory notes issued by municipalities to supplement their cash
flow.

MORTGAGE-BACKED SECURITIES The Funds may purchase mortgage-backed
securities issued by government and non-government entities such as banks,
mortgage lenders, or other financial institutions. A mortgage-backed security
may be an obligation of the issuer backed by a mortgage or pool of mortgages or
a direct interest in an underlying pool of mortgages. Some mortgage-backed
securities, such as collateralized mortgage obligations or CMOs, make payments
of both principal and interest at a variety of intervals; others make semiannual
interest payments at a predetermined rate and repay principal at maturity (like
a typical bond). Mortgage-backed securities are based on various types of
mortgages, including those on commercial real estate or residential properties.
Other types of mortgage-backed securities will likely be developed in the
future, and the Funds may invest in them if the Investment Manager determines
they are consistent with the Funds' investment objectives and policies.

The value of a mortgage-backed security may change due to shifts in the
market's perceptions of the issuer. In addition, regulatory or tax changes may
adversely affect the mortgage securities market as a whole. Mortgage-backed
securities are subject to prepayment risk as described above under "Pass Through
Securities." Prepayment, which occurs when unscheduled or early payments are
made on the underlying mortgages, may shorten the effective maturities of these
securities and may lower their total returns. The Funds will invest in CMOs and
mortgage-backed securities only if the Investment Manager determines that they
are marketable.

FOREIGN MORTGAGE-RELATED SECURITIES. Foreign mortgage-related securities
are interests in pools of mortgage loans made to residential home buyers
domiciled in a foreign country. These include mortgage loans made by trust and
mortgage loan companies, credit unions, chartered banks, and others. Pools of
mortgage loans are assembled as securities for sale to investors by various
governmental, government-related and private organizations (e.g. Canada Mortgage
and Housing Corporation and First Australian National Mortgage Acceptance
Corporation Limited). The mechanics of these mortgage-related securities are
generally the same as those issued in the

<PAGE>

United States. However, foreign mortgage markets may differ materially from the
U.S. mortgage market with respect to matters such as the sizes of loan pools,
pre-payment experience, and maturites of loans.

ASSET-BACKED SECURITIES The Funds may purchase asset-backed securities,
which include undivided fractional interests in pools of consumer loans
(unrelated to mortgage loans) held in a trust. Payments of principal and
interest are passed through to certificate holders and are typically supported
by some form of credit enhancement, such as a letter of credit, surety bonds or
limited guarantees. The degree of credit enhancement varies, but generally
amounts to only a fraction of the asset-backed security's par value until
exhausted. If the credit enhancement is exhausted, certificate holders may
experience losses or delays in payment if the required payments of principal and
interest are not made to the trust with respect to the underlying loans. The
value of these securities also may change because of changes in the market's
perception of the creditworthiness of the servicing agent for the loan pool, the
originator of the loans, or the financial institution providing the credit
enhancement. Asset-backed securities ultimately depend upon payment of consumer
loans by individuals, and the certificate holder generally has no recourse to
the entity that originated the loans. The underlying loans are subject to
prepayments which shorten the securities' weighted average life and may lower
their returns. (As prepayments flow through at par, total returns would be
affected by the prepayments; if a security were trading at a premium, its total
return would be lowered by prepayments, and if a security were trading at a
discount, its total return would be increased by prepayments.) The Funds will
invest in asset backed securities only if the Investment Manager determines that
they are marketable.

OTHER INCOME-PRODUCING SECURITIES

Other types of income producing securities that the Funds may purchase include,
but are not limited to, the following types of securities:

VARIABLE OR FLOATING RATE OBLIGATIONS. These types of securities bear
variable or floating interest rates and carry rights that permit holders to
demand payment of the unpaid principal balance plus accrued interest from the
issuers of certain financial intermediaries. Floating rate instruments have
interest rates that change whenever there is a change in a designated base rate
while variable rate instruments provide for a specified periodic adjustment in
the interest rate. These formulas are designed to result in a market value for
the instrument that approximates its par value.

STANDBY COMMITMENTS. These instruments, which are similar to a put, give a
Fund the option to obligate a broker, dealer or bank to repurchase a security
held by that Fund at a specified price.

TENDER OPTION BONDS. Tender option bonds are relatively long-term bonds
that are coupled with the agreement of a third party (such as a broker, dealer,
or bank) to grant the holders of such securities the option to tender the
securities to the institution at periodic intervals.

INVERSE FLOATERS. Inverse floaters are debt instruments whose interest
bears an inverse relationship to the interest rate on another security or an
index.

The Funds will purchase standby commitments, tender option bonds, inverse
floaters and instruments with demand features primarily for the purpose of
increasing the liquidity of their portfolios.

INDEX AND CURRENCY-LINKED SECURITIES. Each Fund may invest in "index-linked" or
"commodity-linked" notes, which are debt securities of companies that call for
interest payments and/or payment at maturity in different terms than the typical
note where the borrower agrees to

<PAGE>

make fixed interest payments and to pay a fixed sum at maturity. Principal
and/or interest payments on an index-linked note depend on the performance of
one or more market indices, such as the S&P 500 Index or a weighted index of
commodity futures such as crude oil, gasoline and natural gas. The Funds may
also invest in "equity linked" and "currency-linked" debt securities. At
maturity, the principal amount of an equity-linked debt security is exchanged
for common stock of the issuer or is payable in an amount based on the issuer's
common stock price at the time of maturity. Currency-linked debt securities are
short-term or intermediate term instruments having a value at maturity, and/or
an interest rate, determined by reference to one or more foreign currencies.
Payment of principal or periodic interest may be calculated as a multiple of the
movement of one currency against another currency, or against an index.

Index and currency-linked securities are derivative instruments which may
entail substantial risks. Such instruments may be subject to significant price
volatility. The company issuing the instrument may fail to pay the amount due on
maturity. The underlying investment or security may not perform as expected by
the Investment Manager. Markets, underlying securities and indexes may move in a
direction that was not anticipated by the Investment Manager. Performance of the
derivatives may be influenced by interest rate and other market changes in the
U.S and abroad. Certain derivative instruments may be illiquid.

CONVERTIBLE SECURITIES AND WARRANTS

Each Fund (other than the California Tax Exempt Bond Fund and the
Intermediate Investment Grade Bond Fund) may invest in convertible securities
and warrants. 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 conversion
privilege) and its "conversion value" (the security's worth, at market value, if
converted into the underlying common stock). The credit standing of the issuer
and other factors may also affect the investment value of a convertible
security. The conversion value of a convertible security is determined by the
market price of the underlying common stock. If the conversion value is low
relative to the investment value, the price of the convertible security is
governed principally by its investment value. 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 increasingly influenced by its
conversion value.

As a matter of operating policy, no Fund will invest more than 5% of its
net assets in warrants. A warrant gives the holder a right to purchase at any
time during a specified period a predetermined number of shares of common stock
at a fixed price. Unlike convertible debt, securities or preferred stock,
warrants do not pay a fixed dividend. Investments in warrants involve certain
risks, including the possible lack of a liquid market for resale of the
warrants, potential price fluctuations as a result of speculation or other
factors, and failure of the price of the underlying security to reach or have
reasonable prospects of reaching a level at which the warrant can be prudently
exercised (in which event the warrant may expire without being exercised,
resulting in a loss of the Fund's entire investment therein.

SYNTHETIC CONVERTIBLE SECURITIES

Each Fund (other than the California Tax Exempt Bond Fund and the
Intermediate Investment Grade Bond Fund) may invest in "synthetic" convertible
securities, which are derivative positions composed of two or more different
securities whose investment characteristics, taken together, resemble those of
convertible securities. For example, a Fund may purchase a non-convertible debt
security and a warrant or option, which enables a Fund to have a
convertible-like position with respect to a company, group of companies or stock
index. Synthetic convertible securities are typically offered by financial
institutions and investment banks in private placement transactions. Upon
conversion, the Fund generally receives an amount in cash equal to the

18
<PAGE>

difference between the conversion price and the then current value of the
underlying security. Unlike a true convertible security, a synthetic convertible
comprises two or more separate securities, each with its own market value.
Therefore, the market value of a synthetic convertible is the sum of the values
of its fixed-income component and its convertible component. For this reason,
the values of a synthetic convertible and a true convertible security may
respond differently to market fluctuations. A Fund only invests in synthetic
convertibles with respect to companies whose corporate debt securities are rated
"A" or higher by Moody's or "A" or higher by Standard & Poor's and will not
invest more than 15% of its net assets in such synthetic securities and other
illiquid securities.

PREFERRED STOCK

Each Fund (except for the California Tax Exempt Bond Fund and the
Intermediate Investment Grade Bond Fund) may purchase preferred stock.
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 the holders of preferred stock 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.

"ROLL" TRANSACTIONS

Each Fund may enter into "roll" transactions, which are the sale of GNMA
certificates and other securities together with a commitment to purchase
similar, but not identical, securities at a later date from the same party.
During the roll period, a Fund forgoes principal and interest paid on the
securities. The Fund is compensated by the difference between the current sales
price and the forward price for the future purchase, as well as by the interest
earned on the cash proceeds of the initial sale. Like when-issued securities or
firm commitments, roll transactions involve the risk that the market value of
the securities sold by the Fund may decline below the price at which the Fund is
committed to purchase similar securities. Additionally, in the event the buyer
of securities under a roll transaction files for bankruptcy or becomes
insolvent, the Fund's use of the proceeds of the transactions may be restricted
pending a determination by the other party, or its trustee or receiver, whether
to enforce the Fund's obligation to repurchase the securities.

A Fund will engage in roll transactions for the purpose of acquiring
securities for its portfolio consistent with its investment objective and
policies and not for investment leverage. Nonetheless, roll transactions are
speculative techniques and are considered to be the economic equivalent of
borrowings by the Fund. To avoid leverage, the Fund will establish a segregated
account with its Custodian in which it will maintain liquid assets in an amount
sufficient to meet its payment obligations with respect to these transactions. A
Fund will not enter into roll transactions if, as a result, more than 15% of the
Fund's net assets would be segregated to cover such contracts.

INVESTMENT IN ILLIQUID SECURITIES

Each 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

19
<PAGE>

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 INSTRUMENTS

Other than as described under INVESTMENT RESTRICTIONS below, the Funds are
not restricted with regard to the types of cash-equivalent investments they may
make. When the Investment Manager believes that such investments are an
appropriate part of a 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
currencies: 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 except for
the Intermediate Investment Grade Bond Fund which may invest in commercial
paper rated at least A1 by Standard & Poor's or P1 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 (herein after
collectively referred to as the "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, a 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 a 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 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

Securities in a 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, a
Fund's investment objective, and the need for funds for the redemption of a
Fund's shares, although the Tax Managed Growth Fund will also be influenced by
its strategy of holding securities long enough to avoid higher, short-term
capital gains taxes, selling shares with a higher cost basis first, and
offsetting gains realized in one security by selling another security at a
capital loss.

For example, a 150% portfolio turnover rate would occur if the value of
purchases or sales of portfolio securities (whichever is less) by a 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 a Fund's operations, and during periods when a Fund's assets are growing
or shrinking.

INVESTMENT RESTRICTIONS

In making purchases within the foregoing policies, each Fund and the
Investment Manager will be subject to the restrictions referred to under
INVESTMENT RESTRICTIONS below. If a percentage restriction on a Fund's
investment or utilization of assets set forth above or under

20
<PAGE>

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. A Fund may exchange securities, exercise conversion 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 securities may offer investment opportunities and
potential benefits not available from investments solely in securities of U.S.
issuers. Such benefits may include higher rates of interest on debt securities
than are available from domestic issuers, 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 markets that do not necessarily move in a manner parallel to U.S. stock
markets.

At the same time, however, investing in foreign 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 a 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 a 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, each 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 a Fund, including the withholding of tax on
interest, dividends and other distributions and limitations on the repatriation
of currencies. In addition, a 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 and total return 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

21
<PAGE>

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 a Fund
due to subsequent declines in the value of the portfolio security or, if a 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 a Fund's ability to implement its investment strategies and to achieve
its investment objectives.

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 securities of supranational organizations involves
additional risks. Such organizations' debt securities 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 a 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 a Fund's restriction on the purchases of such securities unless the
depositary receipt is convertible into cash by the Fund within seven days.

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<PAGE>

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 Funds 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 with 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 Funds' 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 dividend and 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 a 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 values
of a Fund's investments in those countries and the availability of additional
investments in those countries.

INVESTMENTS IN SMALLER COMPANIES

Investment 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. The securities of
small-sized concerns, as a class, have shown market behavior which has had
periods of more favorable results, and periods of less favorable results,
relative to securities of larger companies as a class. 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

23
<PAGE>

addition, the smaller capitalization companies in which a 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, a Fund may
have to sell them over an extended period of time below the original purchase
price. Investments in smaller capitalization companies may be regarded as
speculative.

No Fund will invest 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 a 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.

BELOW INVESTMENT GRADE SECURITIES

The Global Equity Fund, California Tax Exempt Bond Fund, Strategic
Income Fund and Global Bond Fund may invest in debt securities rated below
investment grade. Lower quality debt securities held by the Global Equity
Fund, California Tax Exempt Bond Fund, Strategic Income Fund and Global Bond
Fund will be rated at least B by Standard & Poor's, an equivalent rating by
another recognized rating agency or, if unrated, judged 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. Debt securities rated below investment
grade 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 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, a 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. The Investment Manager will try to reduce the risk inherent in
the Funds' investments in such securities

24
<PAGE>

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 Strategic
Income, Global Bond, Intermediate Investment Grade Bond, and California Tax
Exempt Bond Fund's investments in such debt securities. The Investment Manager
will attempt to identify those issuers of high-yielding securities whose
financial conditions are adequate to meet future obligations, or have improved
or are expected to improve in the future.

DELAYED-DELIVERY TRANSACTIONS

Each of the Funds may buy and sell securities on a delayed-delivery or
when-issued basis. These transactions involve a commitment by a Fund to purchase
or sell specific securities at a predetermined price and/or yield, with payment
and delivery taking place after the customary settlement period for that type of
security (and more than seven days in the future). Typically, no interest
accrues to the purchaser until the security is delivered. A Fund may receive
fees for entering into delayed-delivery transactions. When purchasing securities
on a delayed-delivery basis, a Fund assumes the rights and risks of ownership,
including the risk of price and yield fluctuations. Because a Fund is not
required to pay for securities until the delivery date, these risks are in
addition to the risks associated with the Fund's other investments. If a Fund
remains substantially fully invested at a time when delayed-delivery purchases
are outstanding, the delayed-delivery purchases may result in a form of
leverage. When delayed-delivery purchases are outstanding, a Fund will set aside
appropriate liquid assets in a segregated custodial account to cover its
purchase obligations. When a Fund has sold a security on a delayed-delivery
basis, the Fund does not participate in further gains or losses with respect to
the security. If the other party to a delayed-delivery transaction fails to
deliver or pay for the securities, the Fund could miss a favorable price or
yield opportunity, or could suffer a loss. A Fund may dispose of or renegotiate
delayed-delivery transactions after they are entered into, and may sell
underlying securities before they are delivered, which may result in capital
gains or losses.

OPTIONS

There are several risks associated with transactions in options on
securities, currencies and financial 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.

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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.

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 contracts in
the Funds. One risk arises because the correlation between movements in the
price of a futures contract and movements in the price of the security or
currency which is the subject of the hedge is not always perfect. The price of
the futures contract acquired by a Fund may move more than, or less than, the
price of the security or currency being hedged. If the price of the future moves
less than the price of the security or currency which is the subject of the
hedge, the hedge will not be fully effective but, if the price of the security
or currency 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
security or currency 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 futures contract moves more than the price of the security or
currency, the Fund will experience either a loss or a gain on the futures
contract which will not be completely offset by movements in the price of the
security or currency which is the subject of the hedge.

To compensate for the imperfect correlation of movements in the price of a
security or currency being hedged and movements in the price of the futures, a
Fund may buy or sell futures contracts in a greater dollar amount than the
dollar amount of the security or currency being hedged, if the historical
volatility of the price of such security or currency has been greater than the
historical volatility of the security or currency. Conversely, a Fund may buy or
sell fewer futures contracts if the historical volatility of the price of the
security or currency being hedged is less than the historical volatility of the
security or currency.

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
a Fund may result in immediate and substantial loss, or 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 financial instrument and sold the instrument after the decline.

When futures are purchased by a 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 or debt instruments 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 or debt
instruments 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.

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<PAGE>

In addition to the possibility that there may be an imperfect correlation,
or no correlation at all, between movements in the futures and the security or
currency which is the subject of a hedge, the price of futures contracts may not
correlate perfectly with movements in the index or 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 index or 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 security or 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
index or currency and movements in the price of index or currency futures, a
correct forecast of general market or currency trends by the Investment Manager
still may not result in a successful hedging transaction over a 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 a futures contract, the purchase of an option on a
futures contract involves less potential risk to a Fund because the maximum
amount at risk is the premium paid for the option (plus transaction costs).
However, there may be circumstances when the use of an option on a futures
contract would result in loss to a 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.

A Fund will only enter into futures contracts or purchase futures options
that are standardized and traded on 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 a portfolio security or currency, an
increase in the price of the security or currency, 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 security or 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 Funds is subject to the Investment
Manager's ability to predict correctly movements in the direction of the
security and currency markets. For example, if a Fund hedged against the
possibility of a decline in the market adversely affecting stocks held in its
portfolio and stock prices increased instead, the Fund would lose part or all of
the benefit of the increased value of its stocks which it hedged because it
would have offsetting losses in its futures positions. In addition, in such
situations, if a Fund had insufficient cash, it might have to sell securities to
meet daily variation margin requirements. Such sales of securities might, but
would not necessarily be at increased prices which would reflect the rising
market. Similarly, if a 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

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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.

SPECIAL RISKS OF INVESTING PRIMARILY IN CALIFORNIA MUNICIPAL SECURITIES

Because the California Tax Exempt Bond Fund focuses its investments
primarily on California municipal securities, the value of its portfolio
investments will be highly sensitive to events affecting the fiscal stability of
the State of California and its municipalities, authorities, and other
instrumentalities that issue securities. There have been a number of political
developments, voter initiatives, state constitutional amendments and legislation
in California in recent years that may affect the ability of the State
government and municipal governments to pay interest and repay principal on the
securities they have issued.

It is not possible to predict the future impact of the legislation and
economic considerations described below on the long-term ability of the State of
California or California municipal issuers to pay interest or repay principal on
their obligations. In part that is because of possible inconsistencies in the
terms of the various laws and Propositions and the applicability of other
statutes to these issues. The budgets of California counties and local
governments may be significantly affected by State budget decisions beyond their
control. The information below about these conditions is only a brief summary,
based upon information the Fund has drawn from sources that it believes are
reliable.

The Fund will be affected by any political, economic or regulatory
developments affecting the ability of California issuers to pay interest or
repay principal on their obligations. Various developments regarding the
California Constitution and State statutes which limit the taxing and spending
authority of California governmental entities may impair the ability of
California issuers to maintain debt service in their obligations. The following
information constitutes only a brief summary and is not intended as a complete
description.

In 1978, Proposition 13, an amendment to the California constitution, was
approved, limiting real property valuation for property tax purposes and the
power of local governments to increase real property tax revenues and revenues
from other sources. Legislation adopted after Proposition 13 provided for
assistance to local governments, including the distribution of the then-existing
surplus in the General Fund, reallocation of revenues to local governments, and
assumption by the State of certain local government obligations. However, more
recent legislation reduced such State assistance. There can be no assurance that
any particular level of State aid to local governments will be maintained in
future years.

In 1979, an amendment was passed adding Article XIIIB to the State
Constitution. As amended in 1996, Article XIIIB imposes an "appropriations
limit" on the spending authority of the State and local government entities. In
general, the appropriations limit is based on certain 1978-79 expenditures,
adjusted annually to reflect changes in the cost of living, population and
certain services provided by State and local government entities. The
"appropriations limit" does not include appropriations for qualified capital
outlay projects, certain increases in transportation-related taxes, and certain
emergency appropriations.

If a government entity raises revenues beyond its "appropriations limit" in
any year, a portion of the excess which cannot be appropriated within the
following year's limit must be returned to the entity's taxpayers within two
subsequent fiscal years, generally by a tax credit, refund or temporary
suspension of tax rates or fee schedules. "Debt service" is excluded from these
limitations, and is defined as "appropriations required to pay the cost of
interest and

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<PAGE>

redemption charges, including the funding of any reserve or sinking fund
required in connection therewith, or indebtedness existing or legally authorized
as of January 1, 1979 or on bonded indebtedness thereafter approved [by the
voters]." In addition, Article XIIIB requires the State Legislature to establish
a prudent State reserve, and to require the transfer of 50% of excess revenue to
the State School Fund; any amounts allocated to the State School Fund will
increase the appropriations limit.

In November 1988, California voters approved Proposition 98. This
initiative requires that revenues in excess of amounts permitted to be spent and
which would otherwise be returned by revisions of tax rates or fee schedules, be
transferred and allocated (up to a maximum of 40%) to the State School Fund and
be expended solely for purposes of instructional improvement and accountability.
No such transfer or allocation of funds will be required if certain designated
state officials determine that annual student expenditures and class size meet
certain criteria as set forth in Proposition 98. All funds allocated to the
State School Fund will cause the appropriation limits to be annually increased
for any such allocation made in the prior year. Proposition 98 also requires the
State of California to provide a minimum level of funding for public schools and
community colleges. The initiative permits the enactment of legislation, by a
two-thirds vote, to suspend the minimum funding requirement for one year.

In November 1996, California voters approved Proposition 218. This
initiative applied the provisions of Proposition 62 to all entities, including
charter cities. It requires that all taxes for general purposes obtain a simple
majority popular vote and that taxes for special purposes obtain a two-thirds
majority vote. Prior to the effectiveness of Proposition 218, charter cities
could levy certain taxes such as transient occupancy taxes and utility user's
fees without a popular vote. Proposition 218 will also limit the authority of
local governments to impose property-related assessments, fees and charges,
requiring that such assessments be limited to the specific benefit conferred and
prohibiting their use for general governmental services. Proposition 218 also
allows voters to use their initiative power to reduce or repeal previously
authorized taxes, assessments, fees and charges.

Proposition 9 on the November 1998 State ballot would overturn certain
aspects of legislation enacted in 1996 and 1997 to deregulate the electric
industry in California. As part of this deregulation, the three investor owned
utilities in California issued about $6 billion in aggregate of "rate reduction
bonds" to finance the stranded costs of certain uneconomic facilities. These
bonds are repaid through a surcharge placed on residential and small business
customers' bills. The legislation authorizing the issuance of these bonds
included a pledge that the State would not interfere with the levying of these
surcharges without providing other means to repay the bonds. One part of
Proposition 9 would cancel the utilities' authority to collect these surcharges.
If proposition 9 is approved by the voters, it is anticipated that litigation
will be filed to declare the initiative unconstitutional. Because of the
uncertainty of litigation, it is not possible to predict whether any State
General Fund monies eventually might be required to repay the rate reduction
bonds. It is also not possible to predict what effect, if any, passage of
Proposition 9 will have on the marketability of outstanding California State and
local obligations or on the availability of capital for, or cost of, future
State and local borrowing.

Certain tax-exempt securities in which the Fund may invest may be
obligations payable solely from the revenues of specific institutions, or may be
secured by specific properties, which are subject to provisions of California
law that could adversely affect the holders of such obligations. For example,
the revenues of California health care institutions may be subject to State
laws, and California law limits the remedies of a creditor secured by a mortgage
or deed of trust on real property.

From 1990 to 1993, California faced the worst economic, fiscal and budget
conditions since the 1930s. Construction, manufacturing (especially aerospace),
exports and financial

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<PAGE>

services, among others, were severely affected. Job losses were the worst of any
post-war recession and have been estimated to exceed 800,000. California's
economy has been recovering and growing steadily stronger since the start of
1994. The rate of economic growth in California in 1997, in terms of job gains,
exceeded that of the rest of the United States. The State added nearly 430,000
non-farm jobs during 1997. In 1996 California surpassed its pre-recession
employment peak of 12.7 million jobs. The unemployment rate, while still higher
than the national average, fell to 5.8% in June 1998, compared to over 10%
during the recession. Many of the new jobs were created in such industries as
computer services, software design, motion pictures and high technology
manufacturing. Business services, export trade and other manufacturing also
experienced growth. All major economic regions of the State grew. The rate of
employment growth for the Los Angeles region indicates that growth has almost
caught up with that in the San Francisco bay region on a population share basis.

Personal income grew by over 7% in 1996 and by nearly 7% again in 1997. The
residential construction sector of the State's economy remained weak in 1996,
with permits for new housing increasing modestly from the previous year, but
rebounded in 1997 with permits for new construction up by 18%. In addition, the
restructuring and consolidation occurring in California's aerospace and
financial services industries, while aimed at making the companies involved more
efficient and competitive in the longer term, has produced some negative
economic consequences in the shorter term, including an uncertain job outlook
for many workers. The unsettled financial situation occurring in certain Asian
economies, and its spillover effect elsewhere, may adversely affect the State's
export-related industries and, therefore, the State's rate of economic growth.

The recession affected State tax revenues, which mirror economic
conditions. It has also caused increased expenditures for health and welfare
programs. The State has also been facing a structural imbalance in its budget
with the largest programs supported by the General Fund (K-12 schools and
community colleges, health, welfare and corrections) growing at rates higher
than the growth rates for the principal revenue sources of the General Fund.
(The General Fund, the State's main operating fund, consists of revenues which
are not required to be credited to any other fund.) As a result, the State has
experienced recurring budget deficits. With the end of the recession, the
State's financial condition has improved in the 1995-96, 1996-97 and 1997-98
fiscal years, with a combination of better than expected revenues, slowdown in
growth of social welfare programs, and continued spending restraint. The
California Department of Finance estimates that the State's budget reserve in
the Special Fund for Economic Uncertainties (SFEU) totaled $639.8 million as of
June 30, 1997 and $1.782 billion at June 30, 1998. No deficit borrowing has
occurred at the end of the last three fiscal years and the State's cash flow
borrowing was limited to $3 billion in 1997-98.

In December 1994, Orange County, California, together with its pooled
investment funds, filed for protection under Chapter 9 of the federal Bankruptcy
Code. In June 1996, Orange County emerged from bankruptcy after the successful
sale of $880 million in municipal bonds allowed the county to pay off the last
of its creditors. In January 1997, Orange County returned to the municipal bond
market with a $136 million bond issue. In December 1997, Moody's raised its
ratings on $325 million of Orange County pension obligation bonds to Baa3 to Ba.
In February 1998, Fitch IBCA, Inc. ("Fitch") assigned outstanding Orange County
pension obligation bonds a BBB rating.

Los Angeles County, the nation's largest county, is also experiencing
financial difficulty. In August 1995 the credit rating of the County's long-term
bonds was downgraded for the third time since 1992 as a result of, among other
things, severe operating deficits for the County's health care system. In
addition, the County was affected by an ongoing loss of revenue caused by state
property tax shift initiatives in 1993 through 1995. In April 1998 the Los
Angeles County Chief Administrative Officer proposed an approximately $13.2
billion 1998-99 budget, which would be 5.3% larger than the 1997-98 budget, and
which would not require cuts in services and jobs to close a projected deficit.
In June 1998 the Los Angeles County Board of Supervisors approved an

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<PAGE>

approximately $13.6 billion 1998-99 budget, reserving the right to make further
changes to reflect revenue allocation decisions in the final State budget.

1998-99 FISCAL YEAR STATE BUDGET. The Governor signed the 1998-99 Budget
Act on August 21, 1998. The 1998-99 Budget Act is based on projected General
Fund revenues and transfers of $57.0 billion (after giving effect to various tax
reductions enacted in 1997 and 1998), a 4.2% increase from the revised 1997-98
figures. Special Fund revenues were estimated at $14.3 billion. The revenue
projections were based on the Governor's May Revision to the 1998-99 Budget and
may be overstated in light of the possible effect on California's economic
growth of worsening economic problems in various international markets.

The Budget Act provides authority for expenditures of $57.3 billion from
the General Fund (a 7.3% increase from 1997-98), $14.7 billion from Special
Funds, and $3.4 billion from bond funds. The Budget Act projects a balance in
the SFEU at June 30, 1999 of $1.255 billion, a little more than 2% of General
Fund revenues. The Budget Act assumes the State will carry out its normal intra-
year cash flow borrowing in the amount of $1.7 billion of revenue anticipation
notes issued in October, 1998.

The most significant feature of the 1998-99 budget was agreement on a total
of $1.4 billion of tax cuts. The central element is a bill which provides for a
phased-in reduction of the Vehicle License Fee (VLF). Since the VLF is currently
transferred to cities and counties, the bill provides for the General Fund to
replace the lost revenues. Starting on January 1, 1999, the VLF will be reduced
by 25%, at a cost to the General Fund of approximately $500 million in the
1998-99 Fiscal Year and about $1 billion annually thereafter.

In addition to the cut in the VLF, the 1998-99 budget includes both
temporary and permanent increases in the personal income tax dependent credit
($612 million General Fund cost in 1998-99, but less in future years), a
nonrefundable renters tax credit ($133 million), and various targeted business
tax credits ($106 million). About half of the business tax credits will only
become effective if Proposition 7, an initiative measure which includes various
tax credits, is rejected by the voters on the November 3, 1998 ballot.

The 1998-99 Budget Act includes increased funding for schools, higher
education, health, welfare and social service programs, and trial courts and
prisons. The Budget also includes new funding for natural resource projects,
dedication of $376 million of General Fund monies for capital fund outlay
projects, funding of a 3% State employee salary increase, funding of 2,000 new
Department of Transportation positions to accelerate transportation construction
projects, and funding of the California Infrastructure and Economic Development
Bank ($50 million).

The foregoing discussion of the 1997-98 fiscal year budget and the proposed
1998-99 fiscal year budget is based in large part on statements made in a recent
"Preliminary Official Statement" distributed by the State of California. In that
document, the State indicated that its discussion of the fiscal year budget is
based on estimates and projections of revenues and expenditures for the current
fiscal year and must not be construed as statements of fact. The State noted
further that the estimates and projections are based upon various assumptions
which may be affected by numerous factors, including future economic conditions
in the state and the nation, and there can be no assurance that the estimates
will be achieved.

STATE INDEBTEDNESS . As of September 1, 1998, the State had over $18.5
billion aggregate amount of its general obligation bonds outstanding. General
obligation bond authorizations in an aggregate amount of approximately $6.3
billion remained unissued as of September 1, 1998. The State also builds and
acquires capital facilities through the use of lease

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<PAGE>

purchase borrowing. As of September 1, 1998, the State had approximately $6.6
billion of outstanding lease-purchase debt.

In addition to the general obligation bonds, State agencies and authorities
had approximately $24.5 billion aggregate principal amount of revenue bonds and
notes outstanding as of June 30, 1998. Revenue bonds represent both obligations
payable from State revenue-producing enterprises and projects, which are not
payable from the General Fund, and conduit obligations payable only from
revenues paid by private users of facilities financed by such revenue bonds.
Such enterprises and projects include transportation projects, various public
works and exposition projects, educational facilities (including the California
State University and University of California systems), housing, health
facilities, and pollution control facilities.

LITIGATION. The State is a party to numerous legal proceedings, many of
which normally occur in governmental operations. In addition, the State is
involved in certain other legal proceedings that, if decided against the State,
might require the State to make significant expenditures or impair future
revenue sources.

RATINGS. Because of the State's continuing budget problems, the State's
General Obligation bonds were downgraded in July 1994 to A1 from AA by Fitch.
All three rating agencies expressed uncertainty about the State's ability to
balance the budget by 1996. However, in 1996, citing California's improving
economy and budget situation, both Fitch and Standard & Poor's raised their
ratings from A to A+. In October 1997, Fitch raised its rating from A+ to AA-
referring to California's fundamental strengths, the extent of economic recovery
and the return of financial stability. In October 1998, Moody's raised its
rating from A1 to Aa3 citing the State's continuing economic recovery and a
number of actions taken to improve the State's credit condition, including the
rebuilding of cash and budget reserves.

YEAR 2000. The State's reliance on information technology in every aspect
of its operations has made Year 2000-related ("Y2K") information technology
issues a high priority for the State. The Department of Information Technology
("DOIT"), an independent office reporting directly to the Governor, is
responsible for ensuring the State's information technology processes are fully
functional before the year 2000. The DOIT has created a Year 2000 Task Force and
a California 2000 Office to establish statewide policy requirements, to gather,
coordinate, and share information, and to monitor statewide progress.

Although the DOIT reports that State departments are making substantial
progress overall toward the goal of Y2K compliance, the task is very large and
will likely encounter unexpected difficulties. The State has not predicted
whether all mission critical systems will be ready and tested by late 1999 or
what impact failure of any particular systems(s) or of outside interfaces with
State systems might have. There can be no assurance that steps taken by
California state or local government agencies with respect to the Year 2000
problem will be sufficient to avoid any adverse impact upon the budgets or
operations of those agencies or upon the California Tax Exempt Bond Fund.

The information summarized above describes some of the more significant
aspects relating to the California Tax Exempt Bond Fund. The sources of such
information are Preliminary Official Statements relating to the State's general
obligation bonds and the State's revenue anticipation notes, or obligations of
other issuers located in the State of California, or other publicly available
documents. The California Tax Exempt Bond Fund has not independently verified
this information.

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

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<PAGE>

securities, and a Fund might not be able to dispose of such securities promptly
or at reasonable prices.

A number of transactions in which the Funds may engage are subject to the
risks of default by the other party to the transaction. If the seller of
securities pursuant to a repurchase agreement entered into by a 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 a Fund engages in when-issued, reverse repurchase, forward
commitment and related 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

Each 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 a Fund may not:

1. Invest more than 25% of 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). (this restriction
does not apply to the California Tax Exempt Bond Fund)

2. Acquire more than 10% of the outstanding voting 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 assets are considered to
be borrowings. A 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 a Fund from engaging in
futures contracts, options on futures contracts, 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.

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<PAGE>

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. A 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 15% 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 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.

11. Issue senior securities, except that the Fund may borrow money as permitted
by restriction 4 above. This restriction shall not prohibit the Fund from
engaging in short sales, options, futures and foreign currency
transactions.

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

Each Fund has adopted certain investment restrictions that are not fundamental
policies and may be changed by the Board of Directors without approval of the
Fund's outstanding voting securities. These restrictions provide that a 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

34
<PAGE>

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);

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;

5. Invest more than 5% of the value of the Fund's total assets in any one
issuer (other than U.S. Government or its agencies, or those backed by the
"full faith and credit" of the U.S. Government). (this restriction applies
to the Intermediate Investment Grade Bond Fund only); and

6. Invest more than 20% of the value of the Fund's total assets in Rule
144A securities. (This restriction applies to the Intermediate Investment
Grade Bond Fund only.)

The Funds are 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 Board of
Directors, makes each 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, 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
to the Investment Manager 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 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; information about 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.

<PAGE>

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 a 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
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
Funds), and a Fund may be charged commission paid to a broker or dealer who
supplied research services not used by the Fund. However, the Investment Manager
expects that each 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
Funds. The Investment Manager has made and will make no commitments to place
orders with any particular broker or group of brokers. The Company anticipates
that a substantial portion of all brokerage commissions will be paid to brokers
who supply investment information to the Investment Manager.

The Funds also 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 Funds 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 Funds 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 Funds 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 Funds,
and the Investment Manager will not enter into any transaction on behalf of the
Funds 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 brokerage commissions separate from the
Investment Manager's management fee. The Investment Manager's policy is that
such commissions must 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 must 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 Funds.

The Investment Manager performs investment management and advisory services
for various clients, including other registered investment companies, and
pension, profit-sharing and

36
<PAGE>

other employee benefit plans, as well as individuals. In many cases, portfolio
transactions for a 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 a 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.

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. and Wilshire Target Funds Inc., and as
a trustee of Brandes Investment Trust and Pacific Gas and Electric Nuclear
Decommissioning Trust.

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; and 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.

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.

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 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.

37
<PAGE>

GEORGE A. RIO, (__), President, Treasurer, and Chief Financial Officer. Mr. Rio
is Executive Vice President and Client Service Director of Funds Distributor,
Inc. ("FDI") with which he has been associated since March 1998. From June 1995
to March 1998, Mr. Rio was Senior Vice President and Senior Key Account Manager
for Putnam Mutual Funds. From May 1994 to June 1995, he was Director of Business
Development for First Data Corporation. From September 1983 to May 1994, he was
Senior Vice President and Manager of Client Services and Director of Internal
Audit at The Boston Company, Inc. He is also an officer of certain other
investment companies distributed or administered by FDI. His address is 60 State
Street, Suite 1300, Boston, Massachusetts 02109.

MARGARET W. CHAMBERS, (__), Vice President and Secretary. Ms. Chambers is Senior
Vice President and General Counsel of FDI, with which she has been associated
since March 1998. From August 1996 to March 1998, Ms. Chambers was Vice
President and Assistant General Counsel for Loomis, Sayles & Company, L.P. From
January 1986 to July 1996, she was an associate at Ropes & Gray. She is also an
officer of certain other investment companies distributed or administered by
FDI. Her address is 60 State Street, Suite 1300, Boston, Massachusetts 02109.

JEANNE GIBSON SULLIVAN, (__), Vice President. Ms. Sullivan is a Vice President
of Funds Distributor, Inc., with which she has been associated since May 1997.
From August 1995 to May 1997, Ms. Sullivan was an Associate at U.S. Financial
Advisors. From April 1994 to August 1995, she was an independent marketing
consultant for clients in the banking and mutual fund industries. Prior to 1994,
Ms. Sullivan held marketing positions at BayBank Investment Management, The
Boston Company, Fidelity Investments and American Express. Her address is 60
State Street, Suite 1300, Boston, Massachusetts 02109.

DOUGLAS C. CONROY, (__), Vice President and Assistant Treasurer. Mr. Conroy is
an Assistant Vice President and Assistant Department Manager of Treasury
Services and Administration of FDI, with which he has been associated 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 a Fund Accountant at The Boston Company, Inc. He
is also an officer of certain other investment companies distributed or
administered by FDI. His address is 60 State Street, Suite 1300, Boston,
Massachusetts 02109.

KAREN JACOPPO-WOOD, (__), Vice President and 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 a
Senior Paralegal at The Boston Company Advisors, Inc. She is also an officer of
certain other investment companies distributed or administered by FDI. Her
address is 60 State Street, Suite 1300, Boston, Massachusetts 02109.

MARY A. NELSON, (__), Vice President and 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 an officer of
certain other investment companies distributed or administered by FDI. Her
address is 60 State Street, Suite 1300, Boston, Massachusetts 02109.

Regular meetings of the Company's Board of Directors are held on a quarterly
basis. The Company's Audit Committee, whose present members DeWitt F. Bowman and
Frank P. Greene, meets with its 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
Company receive a fee of $1,000 per year plus $500 for each Board meeting
attended and $250 for each Audit Committee meeting attended. Each Director 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 ended Decemver 31, 1997, to the Directors and the
aggregate compensation paid to the Directors for service on the Board of
Directors and that of all other funds in the "Company complex" (as defined
in Schedule 14A under the Securites Exchange Act of 1934):

<TABLE>
<CAPTION>
Pension or Total
Retirement Compensation
Aggregate Benefits Accrued Estimate from
Compensation as Part of Annual Company and
from Company Benefits Upon Company Complex
Name Company Expenses Retirement Paid to Director(1)
- ---------------- ------------ ------------ ------------ -------------------
<S> <C> <C> <C> <C>
DeWitt F. Bowman $49,500 None N/A $75,500

Pamela A. Farr $38,250 None N/A $54,000

Thomas S. Foley (2) $35,250 None N/A $50,000

Frank P. Greene $31,500 None N/A $47,500

George G. C. Parker $23,250 None N/A $35,000
</TABLE>

- ----------------------
(1) During the fiscal year ended December 31, 1997 there were nine funds in
the complex.

(2) Mr. Foley served on the Company's Board of Directors from May 1996
through November 1997.

Each Director of the Company who is not an "interested person" as that
term is defined in the 1940 Act, of the Investment Manager may elect to defer
receipt of all or a portion of his or her fees for service as a Director in
accordance with the terms of Deferred Compensation Plan for Non-Interested
Directors ("Directors' Plan"). Under the Director's Plan, an eligible
Director may elect to have his or her deferred fees deemed invested either in
90-day U.S. Treasury bills or in shares of the Common Stock of the Company,
or a combination of these options, and the amount of deferred fees payable to
such director under the Directors' Plan will be determined by reference to
the return on such deemed investments. Generally, the deferred fees
(reflecting any earnings, gains or losses thereon) become payable upon the
Director's retirement or disability. The obligation to make these payments
to the Directors of the Company pursuant to the Directors' Plan is a general
obligation of the Company. Each Fund may, to the extent permitted by the
1940 Act, invest in 90-day U.S. Treasury bills or the Common Stock of the
Company to match its share of the deffered compensatoin obligation under the
Directors' Plan.

As of December 31, 1997, 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.

38
<PAGE>

THE INVESTMENT MANAGER

The Board of Directors of the Company has overall responsibility for the
operation of the Funds. Pursuant to such responsibility, the Board of Directors
has approved various contracts for designated financial organizations to
provide, among other things, day to day management services required by the
Funds. The Company has retained as the Funds' 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 AG, an
international banking organization with principal executive offices located at
Gallunsanlage 7, 60041 Frankfurt, Germany. With total consolidated assets as of
December 31, 1997, of DM 677 billion ($382 billion), and approximately 1,600
offices and 45,000 employees in over 60 countries around the world, Dresdner is
one of Germany's largest banks. 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 SAI, the
nine members of the Board of Managers of the Investment Manager are William L.
Price (Chairman), Gerhard Eberstadt, George N. Fugelsang, Joachim Madler, Luke
D. Knecht, 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 advisers to investment companies and can purchase shares of investment
companies as agent for and upon the order of customers. The Investment Manager
believes that it may perform the services contemplated by its investment
management agreements with the Company 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.

The Investment Manager provides the Funds with investment supervisory
services pursuant to Investment Management Agreements, Powers of Attorney and
Service Agreements (the "Management Agreements") dated as of December ___ ,
1998. The Investment Manager manages the Funds' investments, provides various
administrative services, and supervises the Funds' daily business affairs,
subject to the authority of the Board of Directors. The Investment Manager is
also the investment manager for Dresdner RCM Large Cap Growth Fund, Dresdner RCM
Global Small Cap Fund, Dresdner RCM Global Technology Fund, Dresdner RCM Global
Health Care Fund, Dresdner RCM Biotechnology Fund, and Dresdner RCM Emerging
Markets Fund, each a series of Dresdner RCM Global Funds, Inc.; Dresdner RCM
International Growth Equity Fund A, Dresdner RCM Growth Equity Fund and Dresdner
RCM Small Cap Fund, each a series of Dresdner RCM Capital Funds, Inc.; RCM
Strategic Global Government Fund, Inc. and The Emerging Germany Fund Inc.,
closed-end management investment companies; and is sub-adviser to Bergstrom
Capital Corporation, a closed-end management investment company. A Fund's
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

39
<PAGE>

Company's Board of Directors, including a majority of the Directors who are not
parties to the Management Agreement or interested persons (as defined in the
1940 Act) 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.

Each Fund has, under its respective 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 Investment Manager
(see DIRECTORS AND OFFICERS). The Investment Manager is responsible for all of
its own expenses in providing services to the Funds. Expenses attributable to a
Fund are charged against the assets of the Fund.

The Investment Manager has voluntarily agreed to limit each Fund's
expenses as described in the Prospectus. Each Fund has agreed to reimburse
the Investment Manager, for a period of up to five years, 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 a 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 a Fund fall
below the expense cap, the reimbursement to the Investment Manager will be
accrued by the Fund as a liability.

Each Fund's Management Agreement provides that the Investment Manager will
not be liable for any error of judgment or for any loss suffered by a 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 out of the assets of
each Fund, 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 with respect to the
Fund or otherwise as investment manager of the Fund. The Investment Manager is
not entitled to indemnification with respect to any liability to a 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.

Each 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
the 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 (the "Distributor") serves as Distributor to each 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.

40
<PAGE>

DISTRIBUTION AGREEMENT

Pursuant to Distribution Agreements with the Company, the Distributor
has agreed to use its best efforts to effect sales of shares of the Funds,
but is not obligated to sell any specified number of shares. Each
Distribution Agreement contains provisions with respect to renewal and
termination similar to those in each Fund's Management Agreement discussed
above. Pursuant to the Distribution Agreements, the Company has agreed to
indemnify the Distributor out of the assets of each Fund to the extent
permitted by applicable law against certain liabilities under the Securities
Act of 1933 arising in connection with the Distributor's activities on behalf
of Fund.

The Company also has an Agreement with the Investment Manager and the
Distributor pursuant to which the Distributor has agreed to provide: regulatory,
compliance and related technical services to the Company; services with regard
to advertising, marketing and promotional activities; and officers to the
Company. The Investment Manager is required to reimburse the Company for any
fees and expenses of the Distributor pursuant to the Agreements.

DISTRIBUTION PLAN

Under a plan of distribution for the Company with respect to the N Class of
shares of each Fund (the "Distribution Plan") pursuant to Rule 12b-1 under the
1940 Act, the Distributor incurs the expense of distributing such shares. The
Distribution Plan provides for reimbursement to the Distributor for the services
it provides, and the costs and expenses it incurs, related to marketing the N
Class of shares of each Fund. The Distributor is reimbursed for: (a) expenses
incurred in connection with advertising and marketing the N Class of 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
each 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 a 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 a 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 of the
Company in the manner described above. The Distribution Plan will automatically
terminate in the event of its assignment.

The Distributor may pay broker-dealers and others, out of the fees it
receives under the Distribution Plan, quarterly trail commissions of up to
0.25%, on an annual basis, of the average daily net assets attributable to the N
class of shares of each Fund held in the accounts of their customers.

Pursuant to the Distribution Plan, the Board of Directors of the Company
will review at least quarterly a written report of the distribution expenses
incurred on behalf of shares of the N Class of shares Funds by the Distributor.
The report will include an itemization of the distribution expenses

41
<PAGE>

and the purposes of such expenditures. In addition, as long as the Plan remains
in effect, the selection and nomination of Directors of the Company 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
each 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 regular trading on the day the
securities are being valued, unless the Board of Directors or a duly constituted
committee of the Board determines that such price does not reflect the fair
value of the security. 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 Board of Directors determines in
good faith to reflect its fair value. Readily marketable securities traded only
in the over-the-counter market that are not listed on the NASDAQ Stock Market or
a similar foreign reporting service will be valued at the mean bid price, or
such other comparable sources as the Board of Directors deems appropriate to
reflect their fair value. Other portfolio securities held by the Funds will be
valued at current market value, if current market quotations are readily
available for such securities. To the extent that market quotations are not
readily available such securities will be valued by whatever means a duly
constituted committee of the Board of Directors deems appropriate to reflect
their fair 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 Funds will be valued in such manner as a duly
constituted committee of the Board of Directors in good faith deems appropriate
to reflect their fair value.

Trading in securities on foreign exchanges and over-the-counter markets is
normally completed at times other than the close of regular trading on the New
York Stock Exchange. 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 Company may use a pricing service approved by the 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

42
<PAGE>

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 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 Funds is based
on the net asset value per share, which is normally calculated once daily at the
close of regular trading (normally 4:00 P.M. New York time) on the New York
Stock Exchange on each day that 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 Jr. Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas Day. The offering price is effective for orders received by Boston
Financial Data Services ("BFDS") prior to the time of determination of net asset
value. Dealers are responsible for promptly transmitting purchase orders to
BFDS. The Company reserves the right in its sole discretion to suspend the
continued offering of one or more of its Funds' shares and to reject purchase
orders in whole or in part when such rejection is in the best interests of the
Fund and its respective shareholders.

REDEMPTION OF SHARES

Payments will be made wholly in cash unless the Board of Directors believes
that economic conditions exist which would make such a practice detrimental to
the best interests of a 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 a Fund at the request of the
redeeming stockholder, if the Company believes that honoring such request is in
the best interests of such series. 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 gain distribution, if any, declared by a
Fund will be paid in full and fractional shares based on the net asset value as
determined on the payment date for such distribution, unless the stockholder or
his or her duly authorized agent has elected to receive all such payments or the
dividend or other distribution portion thereof in cash. Changes in the manner in
which dividend and other distribution payments are paid 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 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 each Fund for treatment as a "regulated
investment company" under Subchapter M of the Code. Each Fund is treated as a
separate corporation for tax

43
<PAGE>

purposes and thus the provisions of the Code generally applicable to regulated
investment companies are applied separately to the Funds. In addition, net
capital gains (the excess of net long-term capital gain over net short-term
capital loss), net investment income, and operating expenses are determined
separately for each Fund. By complying with the applicable provisions of the
Code, a Fund will not be subject to federal income tax with respect to net
investment income and net realized capital gains distributed to its
stockholders.

To qualify as a regulated investment company under Subchapter M, generally
a Fund must: (i) derive at least 90% of its gross income each taxable year from
dividends, interest, payments with respect to securities loans, and gains from
the sale or other disposition of stock, securities or foreign currencies and
certain other income (including gains from certain options, futures and forward
contracts), ("Income Requirement"); and (ii) diversify its holdings so that, at
the end of each fiscal quarter, (a) at least 50% of the value of the Fund's
total assets is represented by cash, cash items, U.S. Government securities,
securities of other regulated investment companies and other securities,
limited, in respect of any one issuer, to an amount not greater than 5% of the
Fund's total 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 taxable year in which a Fund so qualifies and distributes at least
90% of the sum of its investment company taxable income (consisting of net
investment income, the excess of net short-term capital gains over net long-term
capital losses and net gains from certain foreign currency transactions) and its
net tax-exempt interest income (if any) ("Distribution Requirement"), 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 Funds expect to so distribute all
of such income and gains on an annual basis and thus will generally avoid any
such taxation.

Even if a Fund qualifies as a "regulated investment company," it may be
subject to a federal excise tax unless it meets certain additional distribution
requirements. Under the Code, a nondeductible excise tax of 4% ("Excise Tax") is
imposed on the excess of a regulated investment company's "required
distribution" for a calendar year ending within the regulated investment
company's taxable year over the "distributed amount" for that calendar year. The
term "required distribution" means the sum of (i) 98% of ordinary income
(generally net investment income and net gains from certain foreign currency
transactions) for the calendar year, (ii) 98% of capital gain net income
(generally both long-term and short-term capital gain) for the one-year period
ending on October 31 (as though that period 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 a Fund from its current year's ordinary income
and capital gain net income and (ii) any amount on which a Fund pays income tax
for the year. The Funds intend to meet these distribution requirements to avoid
Excise Tax liability.

Stockholders who are subject to federal or state income or franchise taxes
will be required to pay taxes on dividend and capital gain distributions they
receive from a Fund whether paid in additional shares of the Fund or in cash. To
the extent that dividends received by a 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 a dividend paid on Fund shares, a corporate stockholder must
hold the Fund shares for at least 45 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, which are exempt from
federal and state taxation generally would

44
<PAGE>

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 Funds under federal,
state, and local tax laws.

WITHHOLDING

Dividends paid by a 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") generally
will be subject to U.S. withholding tax (at a rate of 30% or a lower treaty
rate, if applicable). Withholding will not apply, however, if a dividend paid by
a Fund to a foreign stockholder is "effectively connected" with the conduct of 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 capital gain to foreign stockholders who are neither U.S. resident aliens
nor engaged in a U.S. trade or business generally are not subject to withholding
or U.S. federal income tax.

FOREIGN CURRENCY, OPTIONS, FUTURES AND FORWARD CONTRACTS

Gains from the sale or other disposition of foreign currencies (except
certain gains therefrom that may be excluded by future regulations), and gains
from options, futures, and forward contracts derived by a Fund with respect to
its business of investing in securities of foreign currencies, will qualify as
permissible income under the Income Requirement.

SECTION 1256 CONTRACTS

Many of the options, futures contracts and forward contracts entered into
by the Funds are "Section 1256 contracts." Any gains or losses realized 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 a Fund at the end of each taxable year (and, for purposes of
the Excise Tax, on October 31 or such other dates as prescribed under the Code),
other than Section 1256 contracts that are part of a "mixed straddle" with
respect to which a Fund has made an election not to have the following rules
apply, must be "marked-to-market" (that is, treated as sold for their fair
market value) for federal income tax purposes, with the result that unrealized
gains or losses are treated as though they were realized. As of the date of
this Statement of Additional Information, it is not entirely clear whether the
60% portion of gains on Section 1256 contracts that is treated as long-term
capital gain will qualify for the reduced maximum tax rates on net capital gain
- -- 20% (10% for taxpayers in the 15% marginal tax bracket) for gain recognized
on capital assets held for more than 12 months.

STRADDLE RULES

Generally, the hedging transactions and other transactions in options,
futures and forward contracts undertaken by the Funds may result in "straddles"
for U.S. federal income tax purposes. The straddle rules may affect the amount,
character and timing of recognition of gains or losses realized by a Fund. In
addition, losses realized by a 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
limited regulations implementing the straddle rules have been promulgated, the
tax consequences of hedging transactions and options, futures and forward
contracts to the Funds are not entirely clear.

Hedging transactions may increase the amount of short-term capital gain
realized by a Fund, which is taxed as ordinary income when distributed to
stockholders. A Fund may make one

45
<PAGE>

or more elections available under the Code which are applicable to straddle
positions. If a 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 rules that vary according to elections
made. The rules applicable under certain 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 a 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 futures 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, contract or option and the date of disposition
thereof 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 a Fund's investment company taxable income to be
distributed to stockholders as ordinary income.

FOREIGN TAXES

A 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 a
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 shares of the foreign income taxes paid by the
Fund, and may be entitled either to deduct (as an itemized deduction) their pro
rata shares 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 a Fund's taxable year whether the foreign
taxes paid by the Fund will be "passed-through" for that year.

The foregoing is a general abbreviated summary of present U.S. federal
income tax laws applicable to the Funds, their stockholders and dividend and
capital gain distributions by the Funds. 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
other distributions received from the Funds.

CALIFORNIA TAXATION

In any year in which the California Tax Exempt Bond Fund qualifies as a
regulated investment company under the Code (as in effect January 1, 1997) and
is exempt from federal income tax under such rules, (i) the Fund will also be
exempt from the California corporate income

46
<PAGE>

and franchise taxes to the extent it distributes its income and (ii) provided
50% or more of the value of the total assets of the Fund at the close of each
quarter of its taxable year consists of obligations the interest on which (when
held by an individual) is exempt from personal income taxation under California
law, the Fund will be qualified under California law to pay "exempt-interest"
dividends which will be exempt from the California personal income tax.

Individual stockholders of the Fund who reside in California will not be
subject to California personal income tax on distributions received from the
Fund to the extent such distributions are attributable to interest received by
the Fund during its taxable year on obligations which (when held by an
individual) pay interest that is exempt from taxation under California law.
Distributions from the Fund which are attributable to sources other than those
described in the preceding sentence will generally be taxable to such
stockholders. In addition, distributions other than exempt-interest dividends to
such stockholders are includable in income subject to the California alternative
minimum tax.

The portion of dividends constituting exempt-interest dividends is that
portion derived from interest on obligations which (when held by an individual)
pay interest excludable from California personal income under California law.
The total amount of California exempt-interest dividends paid by the Fund to all
of its stockholders with respect to any taxable year cannot exceed the amount of
the interest received by the Fund during such year on such obligations less any
expenses and expenditures (including dividends paid to corporate shareholders)
deemed to have been paid from such interest. Any dividends paid to corporate
stockholders subject to the California franchise tax will be taxed as ordinary
dividends to such stockholders.

Distributions of investment income and long-term and short-term capital
gains will not be excluded from taxable income in determining the California
franchise tax for corporate stockholders. In addition, such distributions may be
includable in income subject to the alternative minimum tax.

Interest on indebtedness incurred or continued by stockholders to purchase
or carry shares of the Fund will not be deductible for California personal
income tax purposes. In addition, as a result of California's incorporation of
certain provisions of the Code, any loss realized by a stockholder upon the sale
of shares held for six months or less may be disallowed to the extent of any
exempt-interest dividends received with respect to such shares. Moreover, any
loss realized upon the redemption of shares within 6 months from the date of
purchase of such shares and following receipt of a long-term capital gains
distribution will be treated as long-term capital loss to the extent of such
long-term capital gains distribution. Finally, any loss realized upon the
redemption of shares within 30 days before or after the acquisition of other
shares of the same series may be disallowed under the "wash sale" rules.

Shares of the Fund will not be subject to the California property tax.

Persons holding certain municipal obligations who also are "substantial
users" (or persons related thereto) of facilities financed by such obligations
may not exclude interest on such obligations from their gross income. No
investigation as to the users of the facilities financed by bonds in the
portfolio of the Fund has been made by the Fund. Potential investors should
consult their tax advisers with respect to this matter before purchasing shares
of the California Tax Exempt Bond Fund.

From time to time, proposals have been introduced before Congress for the
purpose of restricting or eliminating the federal income tax exemption for
interest on state and municipal obligations. It can be expected that similar
proposals may be introduced in the future. Such proposals, if enacted, may
further limit the availability of state or municipal obligations for

47
<PAGE>

investment by the Fund and the value of portfolio securities held by the Fund
may be adversely affected. In such case, the Fund would reevaluate its
investment objective and policies.

The foregoing is only a summary of some of the important California income
tax considerations generally affecting the California Tax Exempt Bond Fund and
its stockholders. No attempt is made to present a detailed explanation of the
California personal income tax treatment of the Fund or its stockholders, and
this discussion is not intended as a substitute for careful planning.
Stockholders of the Fund should consult their tax advisers about other state and
local tax consequences of their investments in the Fund and their own California
tax situation.

INVESTMENT RESULTS

Average annual total return ("T") of a Fund is 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 dividend and
capital gain distributions by a Fund are paid at net asset value on the
payment date determined by the Board of Directors. The sum of the initial
shares purchased and shares acquired through distributions 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:

n
P(1+T) = ERV

The resulting percentage indicates the positive or negative investment
results that an investor would have experienced from reinvested dividend 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 of Directors; 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 using ending values as determined above.

Quotations of a Fund's yield are based on the investment income per share
earned during a particular 30-day period (including dividends, if any, and
interest), less expenses accrued during the period ("net investment income"),
and are computed by dividing net investment income by the net asset value per
share on the last day of the period, according to the following SEC formula:

6
YIELD = 2[(a - b + 1) - 1]
_____
cd

Where a = dividend and interest income during the period
b = expenses accrued during the period (net of reimbursements)
c = average daily number of shares outstanding during the period that
were entitled to receive dividends
d = maximum net offering price per share on the last day of the period

48
<PAGE>

The tax-equivalent yield used for California Tax Exempt Bond Fund is the
rate that an investor would have to earn from a fully taxable investment after
taxes to equal the Fund's tax-free yield. Tax-equivalent yields are calculated
by dividing a Fund's yield by the result of one minus a stated federal or
combined federal and state tax rate. If only a portion of a Funds' yield is tax-
exempt, only that portion is adjusted in the calculation. The California Tax
Exempt Bond Fund may invest a portion of its assets in obligations that are
subject to federal income tax. When the Fund invests in these obligations, its
tax-equivalent yield will be lower.

In addition, in order to more completely represent a Fund's performance or
more accurately compare such performance to other measures of investment return,
a 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. A 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 a 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 a Fund's investment objective and policies.

Each of the Funds may from time to time compare its investment results with data
and mutual fund rankings published or prepared by Lipper Analytical Services,
Inc. and Morningstar, Inc., which rank mutual funds by overall performance,
investment objectives, and assets.

The Tax Managed Growth Fund may from time to time compare its investment results
with the following:

1. The S&P 500 Composite Index.

2. The Wilshire 5000 Index.

The Global Equity Fund may from time to time compare its investment results with
the following:

1. The S&P 500 Composite Index.

2. The MSCI All-Country World Free Index.

The California Tax Exempt Bond Fund may from time to time compare its investment
results with the following:

1. The Lehman Brothers California Tax Exempt Bond Index

2. The Lehman Brothers 3-10 Years Blended Municipal Bond Index

The Strategic Income Fund may from time to time compare its investment results
with the following:

1. The Lehman Brothers Aggregate Index

The Global Bond Fund may from time to time compare its investment results with
The following:

49
<PAGE>

1. The S&P 500 Composite Index.

2. The Salomon Brothers World Government Bond Index (unhedged)

The Intermediate Investment Grade Bond Fund may from time to time compare its
investment results with the following:

1. The Lehman Brothers Government/Corporate Bond Index

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
its Articles of Incorporation or Bylaws, the Company generally may take or
authorize any extraordinary action upon the favorable vote of the holders of
more than 50% of the outstanding shares of the Company or may take or authorize
any routine action upon approval of a majority of the votes cast.

Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted to the holders of the outstanding voting securities of an investment
company such as the Company shall not be deemed to have been effectively acted
upon unless approved by a majority of the outstanding voting securities of the
series or class of the Company affected by the matter. Under Rule 18f-2, a
series or class is presumed to be affected by a matter, unless the interests of
each series or class in the matter are identical or the matter does not affect
any interest of such series or class. Under Rule 18f-2 the approval of an
investment advisory agreement or any change in a fundamental investment policy
would be effectively acted upon with respect to a Fund only if approved by a
majority of its outstanding voting securities. However, the rule also provides
that the ratification of independent public accountants, the approval of
principal underwriting contracts and the election of directors may be
effectively acted upon by the stockholders of the Company voting without regard
to Fund.

Each share of each Class of a Fund represents an equal proportional
interest in the Fund with each other share of the same Class and is entitled to
such dividends and distributions out of the income earned on the assets
allocable to the Class as are declared in the discretion of the Board of
Directors. In the event of the liquidation or dissolution of the Company,
stockholders of a Fund are entitled to receive the assets attributable to the
Fund that are available for distribution, and a distribution of any general
assets not attributable to a particular Fund that are available for
distribution, in such manner and on such general basis as the Board of Directors
may determine.

Stockholders are not entitled to any preemptive rights. All shares, when
issued, will be fully paid and nonassessable by the Company.

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 Funds has been passed 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.

50
<PAGE>

INDEPENDENT ACCOUNTANTS

PricewaterhouseCoopers, One Post Office Square, Boston, Massachusetts
02109, have been appointed as independent auditors for the Company.

LICENSE AGREEMENT

Under License Agreements 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 right to use any other name it might assume in the future, with
respect to any other investment company sponsored by the Investment Manager.

YEAR 2000

The services provided by the Funds' Investment Manager, Distributor,
Custodians and other service providers depend on the proper functioning of their
computer systems. Certain of these systems will require updating or replacement
prior to the Year 2000 to avoid errors when storing dates and making date-
related calculations. The Funds understand that these firms (and their
important vendors and business partners) are taking steps reasonably designed to
prepare their computer systems for the 21st century. However, there can be no
assurance that these steps will be sufficient to avoid any adverse impact on any
of the Funds.

EURO INTRODUCTION

On January 1, 1999, the European Union will introduce a single European
currency, the Euro. The first group of countries that will begin to convert
their currencies to the Euro include Austria, Belgium, Finland, France,
Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain.
The expected introduction of the Euro presents unique uncertainties,
including: whether the payment and operational systems of banks and other
financial institutions will be ready by the scheduled launch date; the legal
treatment of certain outstanding financial contracts after January 1, 1999
that refer to existing currencies rather than the Euro; and the creation of
suitable clearing and settlement payment systems for the new currency. These
or other factors, including political and economic risks, could cause market
disruptions before or after the introduction of the Euro. The Company
understands that the Investment Manager and other key service providers are
taking steps to address Euro-related issues.

REGISTRATION STATEMENT

The Funds' Prospectus and this SAI 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. It is also available on the SEC's
Internet Web site at http://www.sec.gov. Statements contained in the Prospectus
or this SAI 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.

<PAGE>

PART C

OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.

(a) FINANCIAL STATEMENTS

Not applicable

(b) EXHIBITS

1. (a) Articles of Incorporation of Registrant is 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 incorporated
hereby by reference to Exhibit 1(d) of Post-Effective Amendment
No. 6.

(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 incorporated herein by
reference to Exhibit 1(e) of Post-Effective Amendment No. 6.

(f) Form of Articles Supplementary to Articles of Incorporation of
Registrant with respect to Dresdner RCM Tax Managed Growth Fund,
Dresdner RCM Global Equity Fund, Dresdner RCM California Tax
Exempt Bond Fund, Dresdner RCM Strategic Income Fund, Dresdner
RCM Global Bond Fund and Dresdner RCM Intermediate Investment
Grade Bond Fund, is filed herein as Exhibit 1(f).

(g) Form of Supplement to Articles of Incorporation of Registrant
with respect to changing the corporate name of Dresdner RCM
Equity Funds, Inc. to Dresdner RCM Global Funds, Inc. is filed
herein as Exhibit 1(g).

C-3
<PAGE>

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 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.

(g) Form of certificate for N Class shares of capital stock ($0.0001
par value) of Registrant is filed herein as Exhibit 4(g).

(h) Form of certificate for I Class shares of capital stock ($0.0001)
of Registrant is filed herein as Exhibit 4(h).

C-4
<PAGE>

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
incorporated herein by reference to Exhibit 5(b) of Post-
Effective Amendment No. 6.

(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), 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 incorporated herein by reference to Exhibit 5(c) of Post-
Effective Amendment No. 6.

(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
incorporated herein by reference to Exhibit 5(d) of Post-
Effective Amendment No. 6.

(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, are incorporated
herein by reference to Exhibit 5(e) of Post-Effective Amendment
No. 6.

(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, are
incorporated herein by reference to Exhibit 5(f) of Post-
Effective Amendment No. 6.

(g) Form of Investment Management Agreement, Power of Attorney and
Service Agreement and Appendix A (Schedule of Fees) between

C-5
<PAGE>

Registrant, on behalf of Dresdner RCM Tax Managed Growth Fund,
Dresdner RCM Global Equity Fund, Dresdner RCM California Tax
Exempt Bond Fund, Dresdner RCM Strategic Income Fund, Dresdner
RCM Global Bond Fund, Dresdner RCM Intermediate Investment Grade
Bond Fund and Dresdner RCM Global Investors LLC dated as of
December __, 1998, are filed herein as Exhibit 5(g).

6. (a) 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.

(b) Service 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.

(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.

(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 (currently 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 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 RCM Global Small Cap Fund (currently known as Dresdner
RCM Global

C-6
<PAGE>

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 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
incorporated herein, by reference to Exhibit 8(e) of
Post-Effective Amendment No. 6.

(f) Amendment to Custodian Agreement between Registrant on behalf of
Dresdner Emerging Markets Fund and Brown Brothers Harriman & Co.
is incorporated herein by reference to Exhibit 8(f) of
Post-Effective Amendment No. 7.

(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.

(h) Form of Amendment to Custodian Contract between Registrant, on
behalf of Dresdner RCM Tax Managed Growth Fund, Dresdner RCM
Global Equity Fund, Dresdner RCM California Tax Exempt Bond Fund,
Dresdner RCM Strategic Income Fund, Dresdner RCM Global Bond Fund
and Dresdner RCM Intermediate Investment Grade Bond Fund, is
filed herein as Exhibit 8(h).

9. (a) License Agreement between Dresdner RCM Global Investors LLC and
Registrant relating to the use by Registrant of the mark
"Dresdner RCM", is incorporated herein by reference to Exhibit
9(a) of Post-Effective Amendment No. 6.

10. (a) To be filed

(b) To be filed

11. None

12. None

13. None

14. None

C-7
<PAGE>

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 incorporated
herein as Exhibit 15(a) of Post-Effective Amendment No. 6.

(b) Rule 12b-1 Plan of Registrant, on behalf of Dresdner RCM
Biotechnology Fund is incorporated herein by reference to Exhibit
15(b) of Post-Effective Amendment No. 6.

(c) Form of Rule 12b-1 Plan of Registrant, on behalf of Dresdner RCM
Tax Managed Growth Fund, Dresdner RCM Global Equity Fund,
Dresdner RCM California Tax Exempt Bond Fund, Dresdner RCM
Strategic Income Fund, Dresdner RCM Global Bond Fund and Dresdner
RCM Intermediate Investment Grade Bond Fund is filed herein as
Exhibit 15 (c).

16. (a) Schedule for computation of total returns is incorporated herein
by reference to Exhibit 16(a) of Post-Effective Amendment No. 7.

17. None

18. Form of Multiple Class of Shares Plan of Registrant pursuant to Rule
18f-3 on behalf of Dresdner RCM Tax Managed Growth Fund, Dresdner RCM
Global Equity Fund, Dresdner RCM California Tax Exempt Bond Fund,
Dresdner RCM Strategic Income Fund, Dresdner RCM Global Bond Fund and
Dresdner RCM Intermediate Investment Grade Bond Fund is filed herein
as Exhbit 18.

19. Power of Attorney is filed herein as Exhibit 19.

ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.

None

ITEM 26. NUMBER OF HOLDERS OF SECURITIES.

As of August 31, 1998
<TABLE>
<CAPTION>

TITLE OF CLASS NUMBER OF RECORD-HOLDERS
<S> <C>
Dresdner RCM Global Technology Fund 80
Capital Stock
($0.0001 par value)

Dresdner RCM Global Health Care Fund 7
Capital Stock
($0.0001 par value)

C-8
<PAGE>

Dresdner RCM Large Cap Growth Fund 5
Capital Stock
($0.0001 par value)

Dresdner RCM Global Small Cap Fund 10
Capital Stock
($0.0001 par value)

Dresdner RCM Emerging Markets Fund 7
Capital Stock
($0.0001 par value)

Dresdner RCM Biotechnology Fund 8
Capital Stock
($0.0001 par value)

Dresdner RCM Tax Managed Growth Fund 0
Capital Stock
($0.0001 par value)

Dresdner RCM Global Equity Fund 0
Capital Stock
($0.0001 par value)

Dresdner RCM California Tax Exempt Bond Fund 0
Capital Stock
($0.0001 par value)

Dresdner RCM Strategic Income Fund 0
Capital Stock
($0.0001 par value)

Dresdner RCM Global Bond Fund 0
Capital Stock
($0.0001 par value)

Dresdner RCM Intermediate Investment Grade Bond Fund 0
Capital Stock
($0.0001 par value)

</TABLE>

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

C-9
<PAGE>

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.

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 the policy coverage conforms 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.

C-10
<PAGE>

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 investment
companies:

American Century California Tax-Free and Municipal Funds
American Century Capital Portfolios, Inc.
American Century Government Income Trust
American Century International Bond Funds
American Century Investment Trust
American Century Municipal Trust
American Century Mutual Funds, Inc.
American Century Premium Reserves, Inc.
American Century Quantitative Equity Funds
American Century Strategic Asset Allocations, Inc.
American Century Target Maturities Trust
American Century Variable Portfolios, Inc.
American Century World Mutual Funds, Inc.
BJB Investment Funds
The Brinson Funds
Dresdner RCM Capital Funds, Inc.
Founders Funds, Inc.
Harris Insight Funds Trust
HT Insight Funds, Inc. d/b/a Harris Insight Funds
J.P. Morgan Institutional Funds
J.P. Morgan Funds
JPM Series Trust
JPM Series Trust II
LaSalee Partners Funds, Inc.
Kobrick-Cedant Investment Trust
Merrimac Series
Monetta Fund, Inc.
Monetta Trust
The Montgomery Funds I
The Montgomery Funds II
The Munder Framlington Funds Trust
The Munder Funds Trust
The Munder Funds, Inc.

C-11
<PAGE>

National Investors Cash Management Fund, Inc.
Orbitex Group of Funds
SG Cowen Funds, Inc.
SG Cowen Income + Growth Fund, Inc.
SG Cowen Standby Reserve Fund, Inc.
SG Cowen Standby Tax-Exempt Reserve Fund, Inc.
SG Cowen Series 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.

C-12
<PAGE>

(b) The directors and executive officers of FDI are set forth below:
<TABLE>
<CAPTION>

POSITIONS AND OFFICES
NAME AND PRINCIPAL WITH FUNDS DISTRIBUTOR, POSITIONS AND OFFICES
BUSINESS ADDRESS INC. WITH REGISTRANT
- --------------------------------------------------------------------------------
<S> <C> <C>
Marie E. Connolly Director, President and None
Chief Executive Officer

George A. Rio Executive Vice President President, Treasurer and
Chief Financial Officer

Donald R. Roberson Executive Vice President None

William S. Nichols Executive Vice President None

Michael S. Petrucelli Senior Vice President None

Margaret W. Chambers Senior Vice President, None
General Counsel and Chief
Compliance Officer

Joseph F. Tower III Director, Senior Vice None
President, Treasurer and
Chief Financial Officer

Paula R. David Senior Vice President None

Allen B. Closser Senior Vice President None

Bernard A. Whalen
Senior Vice President None

William J. Nutt Chairman and Director None

</TABLE>
(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 Registrant's custodian and transfer agent, State Street Bank and Trust
Company, U.S. Mutual Funds Services Division, P.O. Box 1713, Boston,
Massachusetts 02105 and Brown Brothers

C-13
<PAGE>

Harriman & Co., 40 Water Street, Boston, Massachusetts 02109, with respect to
Dresdner RCM Emerging Markets Fund.

ITEM 31. MANAGEMENT SERVICES.

None

ITEM 32. UNDERTAKINGS.

(a) Not applicable

(b) 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.

C-14
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, Dresdner RCM Equity Funds, Inc. has duly caused
this Post-Effective Amendment No. 8 to the Registration Statement pursuant to
Rule 485(a) under the Securities Act of 1933 and has duly caused this Post-
Effective Amendment No. 8 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 October 16, 1998.

DRESDNER RCM EQUITY FUNDS, INC.

By: /s/George A Rio, President
---------------
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment No. 8 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 October 16, 1998

/s/George A. Rio
----------------
George A. Rio

(2) Chief Financial and Accounting Officer Treasurer October 16, 1998

/s/George A. Rio
----------------
George A. Rio

<PAGE>

SIGNATURE TITLE DATE

(4) Directors

/s/ Dewitt F. Bowman* October 16, 1998
---------------------
DeWitt F. Bowman

/s/ Pamela A. Farr* October 16, 1998
--------------------
Pamela A. Farr

/s/ Frank P. Greene * October 16, 1998
---------------------
Frank P. Greene

/s/ George G.C. Parker * October 16, 1998
------------------------
George G.C. Parker

By: /s/George A. Rio October 16, 1998
----------------
George A. Rio
as Attorney-in-Fact

<PAGE>

EXHIBIT LIST

EXHIBIT NUMBER DESCRIPTION
- -------------- -----------

1(f) Form of Articles Supplementary to Articles of Incorporation

1(g) Form of Amendment to Articles of Incorporation

4(g) Proof of specimen of certificate for capital stock
(N Class shares of capital stock)

4(h) Proof of specimen of certificate for capital stock
(I Class shares of capital stock)

5(g) Form of Investment Management Agreement
(Dresdner RCM Tax Managed Growth Fund, Dresdner RCM Global
Equity Fund, Dresdner RCM California Tax Exempt Bond Fund,
Dresdner RCM Strategic Income Fund, Dresdner RCM Global Bond
Fund and Dresdner RCM Intermediate Investment Grade Bond
Fund)

8(h) Form of Amendment to Custodian Contract

15(c) Form of Rule 12b-1 Plan

18 Form of Rule 18f-3 Plan

19 Power of Attorney

<PAGE>

Exhibit 1(f)

DRESDNER RCM GLOBAL FUNDS, INC.

FORM OF
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION

- --------------------------------------------------------------------------------

Dresdner RCM Global 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 a total of 300,000,000
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 six new series of
capital stock, each series having two classes with the following designations
(each a "Class"):

DESIGNATION NUMBER OF SHARES
<S> <C>
Dresdner RCM Tax Managed Growth Fund Class N 25,000,000
Dresdner RCM Tax Managed Growth Fund Class I 25,000,000
Dresdner RCM Global Equity Fund Class N 25,000,000
Dresdner RCM Global Equity Fund Class I 25,000,000
Dresdner RCM California Tax Exempt Bond Fund Class N 25,000,000
Dresdner RCM California Tax Exempt Bond Fund Class I 25,000,000
Dresdner RCM Strategic Income Fund Class N 25,000,000
Dresdner RCM Strategic Income Fund Class I 25,000,000
Dresdner RCM Global Bond Fund Class N 25,000,000
Dresdner RCM Global Bond Fund Class I 25,000,000
Dresdner RCM Intermediate Investment Grade 25,000,000
Bond Fund Class N
Dresdner RCM Intermediate Investment Grade 25,000,000
Bond Fund Class I
</TABLE>

SECOND: Classes having a common fund name will be invested in a common
investment portfolio comprising a series and the series and Classes will have
the preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of
redemption set forth is 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: Each Class as designated above has been classified by the Board of
Directors pursuant to authority contained in the Charter of the Corporation.

IN WITNESS WHEREOF, Dresdner RCM Global Funds, Inc. has caused these
Articles Supplementary to be executed by its President and witnessed by its
Assistant Secretary on this ____ day of ___________, 1998. 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.

Page 1
<PAGE>

Exhibit 1(f)

WITNESS: DRESDNER RCM GLOBAL FUNDS, INC.

By: By:
--------------------------- ----------------------------------
Karen Jacoppo-Wood George A. Rio
Assistant Secretary President

Page 2

<PAGE>

Exhibit 1(g)

DRESDNER RCM EQUITY FUNDS, INC.

FORM OF
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION

- --------------------------------------------------------------------------------

Dresdner 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: Article I of the Corporation's Articles of Incorporation are
hereby amended to read as follows:

(a) The name of the Corporation is Dresdner RCM Global Funds,
Inc. (the "Corporation").

SECOND: The Corporation is registered as an open-end investment
company under the Investment Company Act of 1940.

THIRD: The amendment to the Charter of the Corporation as set forth
above has been approved by at least a majority of the Board of Directors of
the Corporation and is 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.

IT WITNESS WHEREOF, Dresdner RCM Equity Funds, Inc. has caused these
Articles of Amendment to be executed by its President and witnessed by its
Assistant Secretary on this __ day of ________, 1998. 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: DRESDNER RCM EQUITY FUNDS, INC.

By: By:
----------------------- -------------------------------
Karen Jacoppo-Wood George A. Rio
Assistant Secretary President

<PAGE>

Exhibit 4(g)

INCORPORATED UNDER THE LAWS OF
THE STATE OF MARYLAND
DRESDNER RCM GLOBAL FUNDS, INC.

-------------------------------
N CLASS
(Par Value $0.0001)

THIS CERTIFIES THAT ________________________________ IS THE REGISTERED HOLDER OF
____________________________ SHARES OF THE ________________________ N CLASS of
Common Stock of DRESDNER RCM GLOBAL FUNDS, INC. TRANSFERABLE ONLY ON THE BOOKS
OF THE CORPORATION BY THE HOLDER HEREOF IN PERSON OR BY ATTORNEY UPON SURRENDER
OF THIS CERTIFICATE PROPERLY ENDORSED.

IN WITNESS WHEREOF, THE SAID CORPORATION HAS CAUSED THIS CERTIFICATE
TO BE SIGNED BY ITS DULY AUTHORIZED OFFICERS AND ITS CORPORATE SEAL TO
BE HEREUNTO AFFIXED

THIS ____________ DAY OF ___________________________ AD. __________

------------------------- -------------------------
Secretary President

SHARES Par Value Each
$0.0001

<PAGE>

CERTIFICATE
FOR
SHARES

-------------------------------
N CLASS
Series Common Stock of
DRESDNER RCM GLOBAL FUNDS, INC.

ISSUED TO:
-----------------------------------

DATED:
-----------------------------------

THE CORPORATION IS AUTHORIZED TO ISSUE MORE THAN ONE CLASS OF CAPITAL
STOCK AND THE BOARD OF DIRECTORS MAY AUTHORIZE ADDITIONAL CLASSES OF
CAPITAL STOCK. THE CORPORATION WILL FURNISH A FULL STATEMENT OF THE
BOARD OF DIRECTORS' AUTHORITY AND OF THE DESIGNATIONS AND ANY
PREFERENCES, CONVERSION AND OTHER RIGHTS, VOTING POWERS, RESTRICTIONS,
LIMITATIONS AS TO DIVIDENDS, QUALIFICATIONS AND TERMS AND CONDITIONS
OF REDEMPTION OF THE STOCK OF EACH CLASS WHICH THE CORPORATION IS
AUTHORIZED TO ISSUE TO ANY STOCKHOLDER UPON REQUEST WITHOUT CHARGE.

FOR VALUE RECEIVED, ____________________ HEREBY SELL, ASSIGN AND TRANSFER UNTO
________________________________________________________________________________
___________________________________________________________SHARES REPRESENTED BY
THE WITHIN CERTIFICATE, AND DO HEREBY IRREVOCABLY CONSTITUTE AND
APPOINT_________________________________________ ATTORNEY TO TRANSFER THE SAID
SHARES ON THE BOOKS OF THE WITHIN NAMED CORPORATION WITH FULL POWER OF
SUBSTITUTION IN THE PREMISES.

DATED
---------------------
In presence of
-----------------------------------------

<PAGE>

INCORPORATED UNDER THE LAWS OF
THE STATE OF MARYLAND
DRESDNER RCM GLOBAL FUNDS, INC.

-------------------------------
I CLASS
(Par Value $0.0001)

THIS CERTIFIES THAT ________________________________ IS THE REGISTERED HOLDER OF
____________________________ SHARES OF THE ________________________ I CLASS of
Common Stock of DRESDNER RCM GLOBAL FUNDS, INC. TRANSFERABLE ONLY ON THE BOOKS
OF THE CORPORATION BY THE HOLDER HEREOF IN PERSON OR BY ATTORNEY UPON SURRENDER
OF THIS CERTIFICATE PROPERLY ENDORSED.

IN WITNESS WHEREOF, THE SAID CORPORATION HAS CAUSED THIS CERTIFICATE
TO BE SIGNED BY ITS DULY AUTHORIZED OFFICERS AND ITS CORPORATE SEAL TO
BE HEREUNTO AFFIXED

THIS ____________ DAY OF ___________________________ AD. __________

------------------------- -------------------------
Secretary President

SHARES Par Value Each
$0.0001
<PAGE>

CERTIFICATE
FOR
SHARES

-------------------------------
I CLASS
of Common Stock of
DRESDNER RCM GLOBAL FUNDS, INC.

ISSUED TO:
-----------------------------------

DATED:
-----------------------------------

FOR VALUE RECEIVED, ____________________ HEREBY SELL, ASSIGN AND TRANSFER UNTO
_____________________________________________________________

______________________________________________________________________________
SHARES REPRESENTED BY THE WITHIN CERTIFICATE, AND DO HEREBY IRREVOCABLY
CONSTITUTE AND APPOINT_________________________________________ ATTORNEY TO
TRANSFER THE SAID SHARES ON THE BOOKS OF THE WITHIN NAMED CORPORATION WITH FULL
POWER OF SUBSTITUTION IN THE PREMISES.

DATED
---------------------

In presence of
-----------------------------------------

<PAGE>

Exhibit 5(g)

FORM OF

INVESTMENT MANAGEMENT AGREEMENT, POWER OF ATTORNEY
AND SERVICE AGREEMENT

THIS AGREEMENT is entered into this ____ day of December, 1998 by and
between Dresdner RCM Global Funds, Inc. (the "Company"), on behalf of
_______________________, 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-1A 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
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:

2
<PAGE>

(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 Portfolios 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.

(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;

3
<PAGE>

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 Funds 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 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.

4
<PAGE>

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

This Agreement shall continue in effect until the close of business on
December __, 2000. 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.

5
<PAGE>

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

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 GLOBAL FUNDS, INC.
ON BEHALF OF
-----------------------

By: By:
------------------------- -------------------------

ATTEST: ATTEST:

By: By:
------------------------- -------------------------

6
<PAGE>

APPENDIX A

INVESTMENT MANAGEMENT AGREEMENT, POWER OF ATTORNEY,
AND SERVICE AGREEMENT
BETWEEN DRESDNER RCM GLOBAL INVESTORS LLC (the "INVESTMENT MANAGER")
AND DRESDNER RCM GLOBAL FUNDS, INC.
SCHEDULE OF FEES
FOR
------------------------------

Effective Date:
---------------

The Fund will pay a monthly fee to the Investment Manager based on the average
daily net assets of the Fund, at the following annual rate:

<TABLE>
<CAPTION>
Value of Securities and Cash of Fund Fee
------------------------------------ ---
<S> <C>
The first $500 million ____% annually
Above $500 million and below $1 billion ____% annually
Above $1 billion ____% annually
</TABLE>

For the fiscal year ended December 31, 1999, the Investment Manager shall
reimburse the Fund, on behalf of its N Class and I Class of shares, to the
extent that the operating expenses of each such class exceed ____% and ____%,
respectively, of average daily net assets. For this purpose, the "operating
expenses" of the Fund's N Class and I Class of shares shall be deemed to include
all ordinary operating expenses other than interest, taxes and extraordinary
expenses.

Dated:
------------------

DRESDNER RCM GLOBAL INVESTORS LLC DRESDNER RCM GLOBAL FUNDS, INC.
ON BEHALF OF
-----------------------

By: By:
------------------------- -------------------------

ATTEST: ATTEST:

By: By:
------------------------- -------------------------

<PAGE>

Exhibit 8(h)

[Letterhead]

State Street Bank & Trust Company
225 Franklin Street
Boston, Massachusetts 02110

Dear Sirs:

In accordance with Section 17 of the Custodian Contract, dated January 3,
1996 (the "Agreement"), between Dresdner RCM Equity Funds, Inc. (the "Fund") and
State Street Bank & Trust Company (the "Bank"), the Fund hereby notifies the
Bank of the Fund's desire to have the Bank render services as Custodian under
the terms of the Agreement with respect to Dresdner RCM Tax Managed Growth Fund,
Dresdner RCM Global Equity Fund, Dresdner RCM California Tax Exempt Bond Fund,
Dresdner RCM Strategic Income Fund, Dresdner RCM Global Bond Fund and Dresdner
RCM Intermediate Investment Grade Bond Fund.

Please indicate you acceptance of the foregoing by executing two copies of
this Letter Agreement, returning one to the Fund and retaining one copy for your
records.

Very truly yours,
Dresdner RCM Global Funds, Inc.

By:
-------------------------
Name:
Title

Accepted:
State Street Bank & Trust Company

By:
-----------------------
Name:
Title:

Page 1

<PAGE>

FORM OF

DRESDNER RCM GLOBAL FUNDS, INC.
DISTRIBUTION PLAN

INTRODUCTION

The Board of Directors (the "Board") of Dresdner RCM Global 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 the N Class shares of capital stock (the "Shares") for the portfolios listed
on the attached Schedule A (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 Funds. Under this Plan, the Company,
on behalf of the Funds, intends to reimburse 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. Each Fund will pay the Distributor for: (a) expenses
incurred in connection with advertising and marketing of the Fund's Shares,
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 prospectuses 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
reimbursed by each Fund, on behalf of its applicable class, 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, in an
amount up to the annual rate of such class's average daily net assets during
such month as described in Schedule A. 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 and its respective class'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 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 respectto 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.

<PAGE>

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
annually 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 shares of 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 shares 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 shares of the Fund.

SECTION 8. The Board has adopted this Plan as of December __, 1998.

<PAGE>

SCHEDULE A
DATED DECEMBER __, 1998 TO
DRESDNER RCM GLOBAL FUNDS, INC. DISTRIBUTION PLAN

Fund/Class Distribution Fee
- ---------- ----------------
<S> <C>
Dresdner RCM Tax Managed Growth Fund
N Class 0.25%

Dresdner RCM Global Equity Fund
N Class 0.25%

Dresdner RCM California Tax Exempt Bond Fund
N Class 0.25%

Dresdner RCM Strategic Income Fund
N Class 0.25%

Dresdner RCM Global Bond Fund
N Class 0.25%

Dresdner RCM Intermediate Investment Grade Bond Fund
N Class 0.25%
</TABLE>

<PAGE>

FORM OF
MULTIPLE CLASS OF SHARES PLAN
FOR DRESDNER RCM GLOBAL FUNDS, INC.

This Multiple Class of Shares Plan (the "Plan") shall be the written plan
contemplated by Rule 18f-3 under the Investment Company Act of 1940 (the "1940
Act") for the portfolios (each a "Fund" and collectively, the "Funds"), of
Dresdner RCM Global Funds, Inc. (the "Company") as listed on Schedule A to this
Plan.

1. CLASSES OFFERED. Each Fund offers two classes of its shares which are sold
without a sales charge: N Class and I Class.

2. DISTRIBUTION FEES. Distribution fees shall be calculated and paid in
accordance with the terms of a plan adopted pursuant to Rule 12b-1 under
the 1940 Act for the applicable class. Distribution fees currently
authorized are as set forth in Schedule A to this Plan.

3. EXCHANGE PRIVILEGES. Holders of N Class and I Class shares shall have such
exchange privileges as are set forth in the Funds' current prospectus.

4. CONVERSION PRIVILEGES. Shares of one class do not convert into shares of
another class.

5. EXPENSE ALLOCATIONS. Expenses of a Fund may be allocated under this Plan as
follows:

A. CLASS EXPENSES: The following expenses shall be allocated exclusively
to the applicable specific class of shares: (i) distribution fees;
(ii) transfer agent fees; and (iii) Blue Sky state registration fees.

B. FUND EXPENSES: Expenses not allocated to specific classes as specified
above shall be charged to the Fund and allocated daily to each class
on the basis of the net asset value of that class in relation to the
net asset value of the shares of the Fund.

6. VOTING RIGHTS. Each class of shares governed by this Plan (i) shall have
exclusive voting rights on any matter submitted to shareholders that
relates solely to its arrangement; (ii) shall have separate voting rights
on any matter submitted to shareholders in which the interests of one class
differ from the interests of any other class; and (iii) shall have in all
other respects the same rights and obligations as each other class.

7. AMENDMENT OF PLAN. Any material amendment to this Plan shall become
effective following approval by a vote of at least a majority of the Board,
and a majority of the Board who are not "interested persons" of the
Company, which vote shall have found that this Plan as proposed to be
amended, including expense allocations, is in the best interests of each
class individually and of each Fund as a whole; or upon such other date as
the Board shall determine

8. SEVERABILITY. If any provision of this Plan shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Plan
shall not be affected thereby.

9. LIMITATION OF LIABILITY. Consistent with the limitation of shareholder
liability as set forth in the Company's Articles of Incorporation, any
obligations assumed by any Fund or class thereof, and any agreements
related to this Plan, shall be limited in all cases to the relevant Fund
and its assets, or class and its assets, as the case may be, and shall not
constitute obligations of any other Fund or class of shares. All persons
having any claim against a Fund, or any class thereof, arising in

<PAGE>

connection with this Plan, are expressly put on notice of such limitation
of shareholder liability, and agree that any such claim shall be limited in
all cases to the relevant Fund and its assets, or class and its assets, as
the case may be, and such person shall not seek satisfaction of any such
obligation from any shareholder of the Company, class or Fund; nor shall
such person seek satisfaction of any such obligation from the Board or any
individual member of the Board.

The Board of Directors has adopted this Plan as of December __, 1998.

<PAGE>

SCHEDULE A
DATED DECEMBER __, 1998 TO MULTIPLE CLASS OF SHARES PLAN FOR
DRESDNER RCM GLOBAL FUNDS, INC.

FUND/CLASS DISTRIBUTION FEE
- ---------- ----------------
(as a percentage of
average net assets)
<S> <C>
Dresdner RCM Tax Managed Growth Fund
Class N 0.25%
Class I none

Dresdner RCM Global Equity Fund
Class N 0.25%
Class I none

Dresdner RCM California Tax Exempt Bond Fund
Class N 0.25%
Class I none

Dresdner RCM Strategic Income Fund
Class N 0.25%
Class I none

Dresdner RCM Global Bond Fund
Class N 0.25%
Class I none

Dresdner RCM Intermediate Investment Grade Bond Fund

Class N 0.25%
Class I none
</TABLE>

<PAGE>

Exhibit 19

DRESDNER RCM GLOBAL FUNDS, INC.
POWER OF ATTORNEY

Each person whose signature appears below hereby authorizes George A. Rio,
Margaret Chambers, Karen Jacoppo-Wood and Douglas C. Conroy, or any of them, as
attorney-in-fact, with full power and authority, in his or her discretion, to
execute, deliver, on his or her behalf individually, and in the capacity stated
below, any registration statement or amendment to a registration statement
(including post-effective amendments) and to file the same, with all exhibits
thereto, with the Securities and Exchange Commission and any other regulatory
agency.

The Power of Attorney granted hereby is effective immediately and will continue
until it is revoked. By accepting or acting under the appointment, the agent
assumes the fiduciary and other legal responsibilities of an agent.

IN WITNESS WHEREOF, this Power of Attorney is executed on October 13, 1998.

/s/DeWitt F. Bowman /s/Frank P. Greene
- ------------------- ------------------
DeWitt F. Bowman Frank P. Greene
Director Director

/s/Pamela A. Farr /s/George G.C. Parker
- ----------------- ---------------------
Pamela A. Farr George G.C. Parker
Director Director