<PAGE>
As filed with the Securities and Exchange Commission on March 17, 2000
1933 Act File No. 33-97572
1940 Act File No. 811-9100
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [x]
Pre-Effective Amendment No. [ ]
---
Post-Effective Amendment No. 16 [x]
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and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [x]
Amendment No. 17 [x]
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(Check appropriate box or boxes.)
DRESDNER RCM GLOBAL FUNDS, INC.
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(Exact Name of Registrant as Specified in Charter)
FOUR EMBARCADERO CENTER SAN FRANCISCO, CALIFORNIA 94111
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(Address of Principal Executive Offices) (Zip Code)
(415) 954-5400
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(Registrant's Telephone Number, including Area Code)
Anthony Ain, President
DRESDNER RCM GLOBAL FUNDS, INC.
Four Embarcadero Center
San Francisco, California 94111
(800) 726-7240
(Name and Address of Agent for Service)
Shares of Capital Stock Offered: Par Value $.0001 per share
Copies to:
Robert J. Goldstein Michael Glazer
Associate General Counsel Paul, Hastings, Janofsky &
Dresdner RCM Global Investors LLC Walker LLP
Four Embarcadero Center 555 South Flower Street
San Francisco, California 94111 Los Angeles, California 90071
<PAGE>
It is proposed that this filing will become effective:
[ ] Immediately upon filing pursuant to paragraph (b)
[ ] On pursuant to paragraph (b)
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[ ] 60 days after filing pursuant to paragraph (a)(1)
[X ] On May 1, 2000 pursuant to paragraph (a)(1)
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[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] On pursuant to paragraph (a)(2) of rule 485
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<PAGE>
DRESDNER RCM GLOBAL FUNDS, INC.
DRESDNER RCM BALANCED FUND
CROSS REFERENCE SHEET
BETWEEN ITEMS OF PART A AND B OF FORM N-1A AND THE
PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
ITEM NUMBER OF PART A OF FORM N-1A INFORMATION REQUIRED IN A PROSPECTUS
<S> <C>
1. Front and Back Cover Pages Front and Back Cover Pages
2. Risk/Return Summary: Investments, Risk/Return Summary
Risks, and Performance
3. Risk/Return Summary: Fee Table Fees and Expenses
4. Investment Objectives, Principal Investment Objectives and Policies;
Investment Strategies, and Other Investment Practices;
Related Risks Investment Risks
5. Management's Discussion of Fund *
Performance
6. Management, Organization, and Organization and Management
Capital Structure
7. Shareholder Information Stockholder Information
8. Distribution Arrangements Organization and Management: The
Distributor
9. Financial Highlights Information *
</TABLE>
*NOT APPLICABLE.
<PAGE>
DRESDNER RCM GLOBAL FUNDS, INC.
DRESDNER RCM BALANCED FUND
CROSS REFERENCE SHEET
BETWEEN ITEMS OF PART A AND B OF FORM N-1A AND THE
PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION
(CONTINUED)
<TABLE>
<CAPTION>
ITEM NUMBER OF PART B OF FORM N-1A CAPTIONS IN PROSPECTUS AND STATEMENT
OF ADDITIONAL INFORMATION
<S> <C>
10. Cover Page and Table of Contents Cover Page and Table of Contents
11. Fund History General Information
12. Description of the Fund and Its Investment Objectives and Policies;
Investments and Risks Investment and Risk Considerations;
Investment Restrictions
13. Management of the Fund The Investment Manager
14. Control Persons and Principal Directors and Officers; Description
Holders of Securities of Capital Shares
15. Investment Advisory and Other The Investment Manager; The
Services Distributor; Additional Information
16. Brokerage Allocation and Other Execution of Portfolio Transactions
Practices
17. Capital Stock and Other Securities Description of Capital Shares
18. Purchase, Redemption and Pricing Purchase and Redemption of Shares
of Shares
19. Taxation of the Fund Dividends, Distributions and Tax
Status
20. Underwriters The Distributor
21. Calculation of Performance Data Investment Results
22. Financial Statements Financial Statements
</TABLE>
*NOT APPLICABLE.
<PAGE>
DRESDNER RCM GLOBAL FUNDS, INC.
_________________________________________________________________________
Dresdner RCM Balanced Fund
_________________________________________________________________________
May 1, 2000
This prospectus contains essential information for anyone considering
an investment in the Dresdner RCM Balanced Fund. Please read this document
carefully and retain it for future reference.
As with all mutual funds, the Securities and Exchange Commission has
not approved or disapproved these securities or passed upon the adequacy or
accuracy of this Prospectus. It is a criminal offense to state or suggest
otherwise.
1
<PAGE>
TABLE OF CONTENTS
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RISK/RETURN SUMMARY AND FUND EXPENSES
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This section summarizes the Fund's 3 Risk/Return Summary
investments, risks, past 5 Fees and Expenses
performance, and fees.
INVESTMENT OBJECTIVES, POLICIES AND RISKS
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This section provides details about 6 Investment Objectives and Policies
the Fund's investment objectives, 10 Other Investment Practices
policies and risks. 10 Changing the Fund's Investment
Objectives and Policies
11 Investment Risks
ORGANIZATION AND MANAGEMENT
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This section provides details about 14 The Fund and the Investment
the people and organizations who Manager
oversee the Fund. 14 The Portfolio Managers
15 Management Fees and other Expenses
15 The Distributor
STOCKHOLDER INFORMATION
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This section tells you how to buy, 16 Buying Shares
sell and exchange shares, how we 19 Selling Shares
value shares, and how we pay 20 Other Stockholder Services and
dividends and distributions. Account Policies
22 Dividends, Distributions and Taxes
2
<PAGE>
DRESDNER RCM BALANCED FUND
RISK/RETURN SUMMARY
The Fund's goal is to seek long term capital
Goal: appreciation and current income by investing in
a diversified portfolio of equity and fixed
income securities.
Under normal market conditions, the Fund will
Principal Investment invest at least 75% of its total assets in
Strategies: equity securities and at least 25% of its
total assets in investment grade fixed income
securities. Up to 30% of the Fund's total assets
may be invested in securities of foreign issuers.
The Fund will allocate its assets among various
types of equity and fixed income securities. The
allocation of the Fund's assets will fluctuate
according to factors affecting the relative
attractiveness of such equity and fixed income
securities. These factors include, among others:
general market and economic conditions and
trends, interest and inflation rates, fiscal and
monetary developments, long-term corporate
earnings growth, and expected total return and
risk of each asset class.
The Fund focuses its equity securities on
companies that it expects will have higher than
average rates of growth and strong potential for
capital appreciation. Foreign stocks are chosen
using a similar process, while also considering
country allocation and currency exposure. The
Fund's equity securities may be of any
capitalization. However, the Fund will generally
not invest in securities with market
capitalizations below $1 billion.
The Fund uses fundamental and original research
to select fixed income securities and manage the
mix between U.S. and foreign bonds. The Fund's
debt securities may be of any maturity. A
bond's maturity and duration, among other
factors, are important components to the Fund's
fixed income investment process.
Because the Fund's investments will fluctuate
Principal Investment Risks: with market conditions, so will the value of
your investment in the Fund. You could lose
money on your investment in the Fund, or the
Fund could underperform other investments.
The values of the Fund's investments fluctuate
in response to the activities of individual
companies and general stock and bond market and
economic conditions. The yields and values of
its fixed income securities also fluctuate with
changes in interest rates; if rates rise, the
values of fixed income securities may fall.
The performance of foreign securities also
depends on the political and economic
environments and other overall economic
conditions in the countries where the Fund
invests. Stock prices of smaller and newer
companies often fluctuate more than those of
larger more established companies. An
investment in the Fund is not a bank deposit
and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any
other government agency.
3
<PAGE>
FEES AND EXPENSES
This section would normally show how the Fund has performed over time.
Because this Fund was new when this prospectus was printed, its performance
is not included.
As an investor in the Fund, you will pay the following fees and expenses.
FEES AND EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER FEES Class of Shares
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) Class I
<S> <C>
Maximum sales charge (load) imposed on purchases None
Maximum sales charge (load) imposed on reinvested dividends None
Maximum deferred sales charge None
Redemption or exchange fees None
ANNUAL FUND OPERATING EXPENSES (FEES PAID FROM FUND ASSETS)
MANAGEMENT FEES 0.65%
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RULE 12B-1 FEE NONE
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OTHER EXPENSES 0.25%
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TOTAL ANNUAL FUND OPERATING EXPENSES (1) 0.90%
- -------------------------------------------------------------------------------------------
</TABLE>
(1) The Investment Manager has contractually agreed until at least December 31,
2000, to pay each quarter the amount, if any, by which the ordinary
operating expenses for the quarter (except interest, taxes and
extraordinary expenses) exceed the annualized rate of 0.90% for Class I.
The Fund may reimburse the Investment Manager in the future.
Example
Use this table to compare fees and expenses of the Fund with those of other
funds. It illustrates the amount of fees and expenses you would pay assuming:
- $10,000 investment in the Fund
- 5% annual return
- redemption at the end of each period
- no changes in the Fund's operating expenses
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
1 3
Year Years
Class I $ 92 $ 287
4
<PAGE>
INVESTMENT OBJECTIVES, POLICIES AND RISKS
INVESTMENT OBJECTIVES AND POLICIES
HOW DOES THE FUND SELECT EQUITY INVESTMENTS?
While the Fund emphasizes investments in growth companies, the Fund also
may invest in other companies that are not traditionally considered to be growth
companies, such as cyclical and semi-cyclical companies in developing economies,
if the Investment Manager believes that such companies have above-average growth
potential.
When the Investment Manager analyzes a specific company it 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 expanding market share
- Strong commitment to research and development
- A steady stream of new products or services.
When evaluating foreign companies, the Investment Manager may also consider
the anticipated economic growth rate, political outlook, inflation rate,
currency outlook, and interest rate environment for the country and the region
in which the company is located, as well as other factors it deems relevant.
In addition to traditional research activities, the Investment Manager uses
research produced by its Grassroots-SM- Research operating group a division
of Dresdner RCM Global Investors LLC, the Fund's Investment Manager.
Grassroots-SM- 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-SM-Research can be a valuable adjunct to its traditional research
efforts by providing a "second look" at companies in which the Fund might
invest and by checking marketplace assumptions about market demand for
particular products and services.
HOW DOES THE FUND SELECT FIXED INCOME INVESTMENTS?
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 underlie the analysis of the fixed income
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.
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 KINDS OF EQUITY SECURITIES DOES THE FUND INVEST IN?
The Fund invests in common stocks and depositary receipts. The Fund may
invest in companies of any size. Common stocks represent the basic equity
ownership interests in a company. Depositary receipts are issued by banks or
other financial institutions and represent, or may be converted into, underlying
ordinary shares of a foreign company. They may be sponsored by the foreign
company or organized independently.
5
<PAGE>
The Fund may also invest in other equity and equity related securities.
These include preferred stock, convertible preferred stock, convertible debt
obligations, warrants or other rights to acquire stock, and options on stock and
stock indices.
The Fund invests in the following types of foreign equity and equity-linked
securities, among its foreign investments:
- Securities of companies that are organized or headquartered outside
the United States, or that derive at least 50% of their total revenue
outside the U.S.
- Securities that are principally traded outside the U.S., regardless of
where the issuer of such securities is organized or headquartered or
where its operations principally are conducted
- Depositary receipts
- Securities of other investment companies investing primarily in such
equity and equity-related foreign securities.
The Investment Manager expects that the Fund's foreign investments will
primarily be traded on recognized foreign securities exchanges. However, the
Fund also may invest in securities that are traded only over-the-counter, either
in the United States or in foreign markets, when the Investment Manager believes
that such securities meet the Fund's investment criteria. The Fund also may
invest in securities that are not publicly traded either in the United States or
in foreign markets.
WHAT KINDS OF DEBT SECURITIES DOES THE FUND INVEST IN?
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; and
corporate 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 the 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.
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 instrumentalities 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 insturmentality'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.
MORGAGE-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
instumentalities 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 instumentalities; and (iii)
those issued by private issuers which represent an interest in or are
collateralized by whole mortgage loans or morgage-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 ARE DEPOSITARY RECEIPTS?
The Fund may invest in securities of foreign companies in the form of
American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs"),
Global Depositary Receipts ("GDRs"), or other similar depositary instruments
representing securities of foreign companies. Depositary receipts are receipts
for ordinary shares of foreign companies that typically are issued by U.S. banks
in the case of ADRs, and by foreign financial institutions in the case of EDRs
and GDRs. Depositary receipts entitle their holders to all dividends and all
capital gains associated with the underlying ordinary shares. ADRs are usually
dollar-denominated and do not involve the currency exchange risk of investing in
the underlying securities. Depositary receipts have risks that are similar to
those of foreign equity securities. Therefore, for purposes of the Fund's
investment policies and restrictions, they are treated as foreign equity
securities, based on the country in which the underlying issuer is organized or
headquartered.
DOES THE FUND BUY AND SELL FOREIGN CURRENCIES?
6
<PAGE>
The Investment Manager expects to purchase or sell foreign currencies
primarily to settle foreign securities transactions. However, the Fund may also
engage in currency management transactions to hedge currency exposure related to
securities it owns or expects to purchase. The Fund may also hold foreign
currency received in connection with investments in foreign securities when the
Investment Manager believes the relevant exchange rates will change favorably
and it would be better to convert the currency into U.S. dollars later.
For purposes of the percentage limitations on the Fund's investments in
foreign securities, the term "securities" does not include foreign currencies.
This means that the Fund's exposure to foreign currencies or multinational
currencies such as the "Euro" may be greater than its percentage limitation on
investments in foreign securities. The Fund will have the costs of conversions
between various currencies, and gains in a particular securities market may be
affected (either positively or negatively) by changes in exchange rates.
DOES THE FUND HEDGE ITS INVESTMENTS?
For hedging purposes, the Fund may purchase options on financial indices
and on securities it is authorized to purchase. If the Fund purchases a "put"
option on a security, the Fund acquires the right to sell the security at a
specified price at any time during the term of the option (for
"American-style" options) or on the option expiration date (for
"European-style" options). If the Fund purchases a "call" option on a
security, it acquires the right to purchase the 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 the Fund the right to receive a cash
payment equal to the difference between the closing price of the index and
the exercise price of the option. The Fund may "close out" an option before
it is exercised or expires by selling an option of the same series as the
option previously purchased.
The Fund may employ certain currency management techniques to hedge against
currency exchange rate fluctuations. These techniques include forward currency
exchange contracts, currency options, futures contracts (and related options),
and currency swaps. A forward currency exchange contract is an obligation to
purchase or sell a specific currency at a future date at a price set at the time
of the contract. Currency options are rights to purchase or sell a specific
currency at a future date at a specified price. Futures contracts are agreements
to take or make delivery of an amount of cash equal to the difference between
the value of the currency at the close of the last trading day of the contract
and the contract price. Currency swaps involve the exchange of rights to make or
receive payments in specified currencies.
The Fund may cross-hedge currencies, which involves writing or purchasing
options or entering into foreign exchange contracts on one currency to hedge
against changes in exchange rates for a different currency, if the Investment
Manager believes changes between the two currencies are correlated.
WHAT IS THE FUND'S PORTFOLIO TURNOVER RATE?
The Fund may invest in securities on either a long-term or short-term
basis. The Investment Manager anticipates that the annual portfolio turnover
rate will not exceed 150%, during its first full year or operation. The
Fund's expected portfolio turnover rate is not a limiting factor. The
Investment Manager will sell the Fund's portfolio securities whenever it
deems appropriate, regardless of the length of time the Fund has held the
securities, and may purchase or sell securities for short-term profits.
Turnover will be influenced by sound investment practices, the Fund's
investment objective and the need for funds for the redemption of the Fund's
shares.
Because the Investment Manager will purchase and sell securities for the
Fund's portfolio without regard to the length of the holding period for the
securities, the Fund's portfolio could have a higher turnover rate than most
funds that invest substantially all of their assets for long-term capital
appreciation. A high portfolio turnover rate would increase the Fund's
brokerage commission expenses and other transaction costs, and may increase its
taxable capital gains.
OTHER INVESTMENT PRACTICES
7
<PAGE>
OTHER INVESTMENT COMPANIES
The laws of some foreign countries may make it difficult or impossible
for the Fund to invest directly in issuers organized or headquartered in
those countries, or may limit such investments. The only practical means of
investing in such companies may be through investment in other investment
companies that in turn are authorized to invest in the securities of such
issuers. In these cases and in other appropriate circumstances the Fund may
invest up to 10% of the value of its total assets in other investment
companies but no more than 5% of its total assets in any one investment
company. Furthermore, the Fund may not acquire more than 3% of the
outstanding voting securities of any other investment company.
If the Fund invests in other investment companies, it will bear its
proportionate share of the other investment companies' management or
administration fees and other expenses. At the same time, the Fund would
continue to pay its own management fees and other expenses.
INVESTMENT POLICIES IN UNCERTAIN MARKETS
When the Investment Manager believes the Fund should adopt a temporary
defensive posture, including periods of international, political or economic
uncertainty, the Fund may hold all or a substantial portion of its assets in
investment grade debt securities. The securities may be debt obligations issued
or guaranteed by the U.S. Government or foreign governments (including their
agencies, instrumentalities, authorities and political subdivisions), by
international or supranational government entities, and by corporate issuers.
During these periods, the Fund may not achieve its investment objective.
ADDITIONAL INFORMATION ABOUT INVESTMENT PRACTICES
The Statement of Additional Information has more detailed information about
the investment practices described in this Prospectus as well as information
about other investment practices used by the Investment Manager.
CHANGING THE FUND'S INVESTMENT OBJECTIVES AND POLICIES
The Fund's investment objective of long term capital appreciation and
current income is a fundamental policy that may not be changed without
stockholder approval. However, except as otherwise indicated in this
Prospectus or the SAI, the Fund's other investment policies and restrictions
are not fundamental and may be changed without stockholder approval.
The various percentage limitations referred to in this Prospectus and the
SAI apply immediately after a purchase or initial investment. Except as
specifically indicated to the contrary, the Fund is not required to sell any
security in its portfolio as a result of change in any applicable percentage
resulting from market fluctuations.
8
<PAGE>
INVESTMENT RISKS
Your investment in the Fund is subject to a variety of principal risks,
including those described below. See the SAI for further information about these
and other risks.
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 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 the 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.
GEOGRAPHIC RISK. The chance of price declines resulting from developments
in a single foreign country.
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 Fund would otherwise choose to eliminate it from its portfolio
holdings. A call may also reduce an obligation's yield to maturity.
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 the
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.
SMALL COMPANIES
Investments in small concerns may involve greater risks than investments in
larger companies, and may be speculative. The securities of small companies, as
a class, have had periods of more favorable results, and periods of less
favorable results, than securities of larger companies as a class. In addition,
small companies in which the Fund may invest may have limited or unprofitable
operating histories, limited financial resources and inexperienced management.
They often face competition from larger or more established firms that have
greater resources. Small companies may have less ability to raise additional
capital, and may have a less diversified product line (making them susceptible
to market pressure), 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. Selling
these securities may take an extended period of time. As a result, to the
extent the Fund invests in small companies, its net asset value may be more
volatile than would otherwise be the case.
9
<PAGE>
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 U.S. issuers.
Furthermore, certain foreign countries may be politically unstable, expropriate
or nationalize assets, revalue currencies, impose confiscatory taxes, and limit
foreign investment and use or removal of funds or other assets of the Fund
(including the withholding of dividends and limitations on the repatriation of
currencies). The Fund may also face difficulties or delays in obtaining or
enforcing judgments.
Most foreign securities markets have substantially less volume than U.S.
markets, and the securities of many foreign issuers may be less liquid and more
volatile than securities of comparable U.S. issuers. 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 at times in certain markets settlements have not been able to
keep pace with the volume of securities transactions, making it difficult to
conduct and complete transactions. In addition, the costs associated with
transactions in securities of foreign companies and securities traded on foreign
markets, and the expense of maintaining custody of these securities with foreign
custodians, generally are higher than in the U.S.
10
<PAGE>
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, the secondary market for particular
options may not be liquid 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, the entire
amount could be lost.
The Fund's currency management techniques involve risks different from
those that arise from investments in U.S. dollar-denominated securities. If
the Fund invests 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 Fund's potential loss 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 the success of any such operations by the Fund is not
assured. 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.
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 Year 2000 problem may also adversely affect the companies in which the
Fund invests. For example companies may incur substantial costs to address the
problem. They may also suffer losses caused by corporate and governmental data
processing errors. To the extent the impact on a portfolio holding is negative,
the Fund's investment returns could be adversely affected.
The Investment Manager has advised the Fund that it is implementing a plan
intended to ensure that its computer systems are not adversely affected by the
Year 2000 issue. The Fund understands that its key service providers are taking
steps to address the issue as well. The Fund and the Investment Manager will
continue to monitor developments relating to this issue but do not anticipate
that the Year 2000 issue will have any adverse effect on the Investment
Manager's ability to provide services to the Fund.
EURO INTRODUCTION
The European Union's introduction on January 1, 1999 of a single European
currency, the Euro, creates various uncertainties. The conversion to a new
currency will affect the Fund's operations and contains some special risks.
These include 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. If there is not adequate preparation, there could be delays in
settlement and additional costs to the Fund.
The conversion will also affect issuers in which the Fund invests due to
changes in the competitive market from a consolidated currency market and
greater operations costs from converting to the Euro. These or other related
factors could cause market disruptions and may adversely affect the value of
some of the Fund's holdings and increase the Fund's operational costs. The
adoption of a common currency is expected to produce some benefits, such as
consolidating the government debt market for those countries and reducing some
currency risks and costs. The overall effect of these factors on the Fund's
investments cannot be determined with certainty.
11
<PAGE>
The Fund understands that the Investment Manager and other key service
providers are taking steps to address Euro-related issues. This includes
upgrading their computer and bookkeeping systems to deal with the conversion.
The Fund and its Investment Manager will continue to monitor the effects of the
conversion on the issuers in which the Fund invests.
ORGANIZATION AND MANAGEMENT
THE FUND AND THE INVESTMENT MANAGER
The Balanced Fund is a series of Dresdner RCM Global Funds, Inc. (the
"Global Company"). The Global Company is incorporated in Maryland as an
open-end management investment company.
Dresdner RCM Global Investors LLC, with principal offices at Four
Embarcadero Center, San Francisco, California 94111, is the investment manager
of the Fund. The Investment Manager manages the Fund's investments, provides
various administrative services, and supervises the Fund's daily business
affairs.
The Investment Manager provides investment supervisory services to
institutional and individual clients. It was established in December of 1998 and
is the successor to the business of its holding company, Dresdner RCM Global
Investors US Holdings LLC. The Investment Manager was originally formed as
Rosenberg Capital Management in 1970, and it and its successors have been
consistently in business since then. The Investment Manager is an indirect
wholly owned subsidiary of Dresdner Bank AG ("Dresdner"), an international
banking organization with principal executive offices in Frankfurt, Germany.
THE PORTFOLIO MANAGERS
David Hays and Mary M. Bersot, CFA, are primarily responsible for the
day-to-day management of the Dresdner RCM Balanced Fund. Mr. Hays, who
manages the fixed income portion of the Fund's portfolio, is a Director
of the Investment Manager, with which he has been associated since 1995. Prior
to that time, he served as a Vice President and Fixed Income Portfolio Manager
at CSI in Chicago, Illinois. Ms. Bersot, who manages the equity portion of
the Fund's portfolio, is a Director of the Investment Manager, with which she
has been associated since 1999. Prior to joining Desdner RCM, she worked for
McMorgan & Co. as a Senior Vice President managing the Taft Hartley Funds as
well as a balanced mutual fund.
12
<PAGE>
THE INVESTMENT MANAGER'S COMPOSITE PERFORMANCE
The following table sets forth the Investment Manager's composite performance
data relating to the historical performance of institutional private accounts
managed by the Investment Manager, since the dates indicated, that have
investment objectives, policies, strategies and risks substantially similar
to those of the Fund. The composite data is provided to illustrate the past
performance of the Investment Manager in managing substantially similar
accounts as measured against specified market indices and does not represent
the performance of the Fund. Investors should not consider this performance
data as an indication of future performance of the Fund or of the Investment
Manager.
All information set forth in the table below relies on data supplied
by the Investment Manager or from statistical services, reports or other
sources believed by the Investment Manager to be reliable.
All returns presented below are time weighted rates of return net of costs
and have been presented net of investment management fees. The Investment
Manager's composite includes all actual, fee-paying, discretionary
institutional private accounts managed by the Investment Manager that have
investment objectives, policies, strategies and risks substantially similar
to those of the Fund. The Investment Manager values all eligible
institutional private client accounts each month on a trade date basis. To
calculate the monthly composite rate of return, the market values, investment
income, and additions and withdrawals of capital are summed for all eligible
private client accounts. The summed data is used to calculate the total
composite return weighted by each private client account's asset size. The
annualized composite rates of return are calculated by linking the monthly
composite rates of return. Since January 1, 1989, additions and withdrawals
are day weighted. Prior to this date, additions and withdrawals were assumed
to occur on the last day of the month.
The institutional private accounts that are included in the Investment
Manager's composite are not subject to the same types of expenses to which
the Fund is subject nor to the diversification requirements, specific tax
restrictions and investment limitations imposed on the Fund by the Investment
Company Act or Subchapter M of the Internal Revenue Code. Consequently, the
performance results for the Investment Manager's composite could have been
adversely affected if the institutional private accounts included in the
composite had been subject to the same expenses as the Fund or had been
regulated as investment companies under the federal securities laws. In
addition, the SEC uses a different methodology from that described above to
calculate performance, which could result in different performance data.
The results presented below may not necessarily equate with the return
experienced by any particular account as a result of the timing of
investments and redemptions. In addition, the effect of taxes on any account
will depend on the client's tax status, and the results have not been reduced
to reflect any income tax which may have been payable.
The investment results presented below are not intended to predict or suggest
the returns that might be experienced by the Fund or an individual investing
in the Fund.
Page 1
<PAGE>
<TABLE>
<CAPTION>
ONE YEAR ANNUALIZED ANNUALIZED ANNUALIZED ANNUALIZED
THROUGH THREE YEARS FIVE YEARS TEN YEARS RETURN SINCE
12/31/99 THROUGH THROUGH THROUGH INCEPTION
12/31/99 12/31/99 12/31/99 (12/31/72)
THROUGH 12/31/99
<S> <C> <C> <C> <C> <C>
BALANCED COMPOSITE 29.10% 27.32% 24.86% 16.56% 13.06%
(NET OF FEES)
BALANCED BENCHMARK(1) 11.40% 18.68% 20.03% 14.08% 12.06%
</TABLE>
(1) The Balanced Benchmark is composed of 60% of the S&P 500 Index and 40% of
the Lehman Brothers Government Corporate Bond Index.
The S&P 500 Index is an unmanaged index containing common stocks of 500
industrial transportation, utility and financial companies, regarded as
generally representative of the U.S. stock market. The Index reflects
the reinvestment of income dividends and capital gain distributions, if
any, but does not reflect fee, brokerage commissions, or other expenses
of investing.
The Lehman Brothers Government Corporate Bond Index is an unmanaged
market-weighted index consisting of all public obligations of the U.S.
Government, its agencies and instrumentalities, and all corporate issuers
of fixed rate, non-convertible, investment grade U.S. dollar denominated
bonds having maturities of greater than one year. It is generally
regarded as representative of the market for domestic bonds. The Index
reflects the reinvestment of income dividends and capital gains
distributions, if any, but does not reflect fees, brokerage commissions
or markups, or other expenses of investing.
Page 2
<PAGE>
MANAGEMENT FEES AND OTHER EXPENSES
The Fund pays the Investment Manager a fee pursuant to an investment
management agreement based on its average daily net assets at the following
annual rate:
- ---------------------------------------------------------
AVERAGE DAILY NET ASSETS BALANCED FUND
- ---------------------------------------------------------
The first $500 million 0.65%
Above $500 million and below $1 0.60%
Above $1 billion 0.55%
The Fund is responsible for its own expenses. These include brokerage and
commission expenses, taxes, interest charges on borrowings (if any), custodial
charges and expenses, investment management fees, and other operating expenses
(e.g., legal and audit fees, securities registration expenses, and compensation
of directors who are not affiliated with the Investment Manager).
To limit the expenses of the Fund, the Investment Manager has agreed to
pay the Fund on a quarterly basis the amount, if any, by which the Fund's
ordinary operating expenses for the quarter (except interest, taxes and
extraordinary expenses) exceed 0.90% on an annual basis through December 31,
2000.
The 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 cap.
THE DISTRIBUTOR
Funds Distributor, Inc. (the "Distributor"), with principal offices at
60 State Street, Suite 1300, Boston, Massachusetts 02109, acts as distributor of
the shares of the Fund. The Distributor provides 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.
13
<PAGE>
STOCKHOLDER INFORMATION
BUYING SHARES
For your convenience, we offer several ways to start and add to Fund
investments.
OPENING YOUR ACCOUNT THROUGH A FINANCIAL PROFESSIONAL
If you work with a financial professional, he or she is prepared to handle
your planning and transaction needs. Your financial professional will be able
to assist you in establishing your fund account, executing transactions, and
monitoring your investment. If you do not hold your Fund investment in the name
of your financial professional and you prefer to place a transaction order
yourself, please use the instructions below for investing directly.
Shares may also purchase 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. Please call 1-800-726-7240.
OPENING YOUR ACCOUNT DIRECTLY
You may establish accounts without the help of an intermediary as follows:
Determine the amount you are investing. The minimum amount for initial
investments is $50,000. The Fund reserves the right at any time to waive,
increase or decrease the minimum requirements applicable to initial or
subsequent investments. Minimum subsequent investment requirements do not
apply to investors purchasing shares through the 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 the Fund.
For more information on minimum investments, call 1-800-726-7240.
- - Complete the account application accompanying this Prospectus. Please
apply at this time for any account privileges you may want to use in the
future, to avoid the delays associated with adding them later on.
- - Mail your completed application to the Fund at:
Dresdner RCM Global Funds
P.O. Box 8025
Boston, MA 02266-8025
For answers to any questions, please speak with a Fund Representative
at 1-800-726-7240.
We reserve the right to reject any purchase of shares at our sole discretion.
We also reserve the right to cancel any purchase order for which payment has not
been received by the third business day following the order.
Confirmation statements showing transactions in the stockholder's account and
a summary of the status of the account serve as evidence of ownership of shares
of the Fund. We will forward a confirmation statement to you on receipt of a
proper order.
INVESTING IN YOUR ACCOUNT
BY WIRE
- - Make sure you have established an account by mailing an application as
explained above.
14
<PAGE>
- - Call 1-800-726-7240 to obtain your account number and to place a purchase
order. Money that is wired without a purchase order will be returned
uninvested.
- - After placing your purchase order, instruct your bank to wire the amount
of your investment to:
State Street Bank and Trust Company
Routing number: 011000028
Account number: 9905-268-0
FCC: your account number, name of registered owner(s) and Fund name
BY CHECK
- - Make out a check (bank or certified) or money order for the investment
amount payable to Dresdner RCM Balanced Fund. Please note: No third
party checks will be accepted.
- - Mail the check with your completed application to the Fund at:
Desdner RCM Global Funds
P.O. Box 8025
Boston, MA 02266-8025
ADDING TO YOUR ACCOUNT
BY WIRE
- - Call the Fund at 1-800-726-7240 to place a purchase order. Money that is
wired without a purchase order will be returned uninvested.
- - Once you have placed your purchase order, instruct your bank to wire the
amount of your investment as described above.
BY CHECK
- - Make out a check for the investment amount payable to Dresdner
RCM Balanced Fund. Please note: No third party checks will be accepted.
- - Mail the check with a completed investment slip to the Fund at:
Desdner RCM Global Funds
P.O. Box 8025
Boston, MA 02266-8025
If you do not have an investment slip, attach a note indicating your
account number on the check.
WITH SECURITIES
At 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.
Contact the Fund in advance to discuss the securities in question and the
documentation necessary to complete the transaction. Any such securities:
- - 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 Fund's method of valuing its securities;
- - Will have a tax basis to the Fund equal to such value;
- - Must not be restricted securities; and
- - 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.
15
<PAGE>
SELLING SHARES
BY PHONE - WIRE PAYMENT
- - Call the Fund at 1-800-726-7240 to verify that the wire redemption
privilege is in place on your account. If it is not, a representative can
help you add it.
- - Place your wire request.
BY PHONE - CHECK PAYMENT
- - Call the Fund at 1-800-726-7240 to verify that you have telephone
redemption privileges and place your request. Once your request has been
verified, a check for the net cash amount, payable to the registered
owner(s), will be mailed to the address of record. For checks payable to
any other party or mailed to any other address, please make your request in
writing.
IN WRITING
- - Write a letter of instruction, signed by each registered owner or their
duly authorized agent, that includes the following information:
- The name of the registered owner(s) of the account
- The name of the Fund
- The account number
- The number of shares or the dollar amount you want to sell
- The recipient's name and address or wire information, if
different from those of the account registration
- - Indicate whether you want any cash proceeds sent by check or by wire.
- - Make sure the letter is signed by all registered owners or their
authorized parties.
- - Mail the letter to the Fund.
BY ELECTRONIC TRANSFER
- Fill out the appropriate areas of the account application for this
feature. To request an electronic transfer (not less than $50 nor more
than $100,000), call 1-800-726-7240. The Fund will transfer your sales
proceeds electronically to your bank account. The bank must be a
member of the Automated Clearing House.
SIGNATURE GUARANTEES
Certain requests must include a signature guarantee, which is
designed to protect you and the Fund from fraudulent activities. Your
request must be made in writing and include a signature guarantee if any of
the following situations applies:
- Your wish to redeem more than $50,000 worth of shares.
- The check is being mailed to an address different from the one on
your account (address or record).
- The check is being made payable to someone other than the account
owner.
- You are instructing us to change your bank account information.
OTHER STOCKHOLDER SERVICES AND ACCOUNT POLICIES
TELEPHONE ORDERS
We accept telephone orders to buy or sell shares of the Fund. To order
call 1-800-726-7240. To guard against fraud, we may record telephone orders or
take other reasonable precautions. However, if we do not take such steps to
ensure the authenticity of an order, we may bear any loss if the order later
proves fraudulent. At times of peak activity, such as during periods of
volatile economic or market conditions, it may be difficult to place buy or sell
orders by phone. During these times, consider sending your request in writing.
BUSINESS HOURS AND NAV CALCULATIONS
The Fund's regular business days and hours are the same as those of the New
York Stock Exchange (NYSE). The price of the Fund's shares is based on its net
asset value per share (NAV). The Fund calculates its net asset value per share
(NAV) every business day as of the close of trading on the NYSE (normally 4:00
p.m. eastern time). Shares of the Fund will not be priced on days in which the
NYSE is closed for trading. The Fund's securities are typically priced using
market quotes or pricing services. When these methods are not available or do
not represent a security's value at the time of pricing, the security is priced
at fair value in accordance with the Fund's fair valuation procedures.
TIMING OF ORDERS
The Fund accepts orders until the close of trading on the NYSE every
business day (normally 4 p.m. eastern time). Orders
16
<PAGE>
received before the close of trading on the NYSE are executed the same day at
the respective Fund's NAV for that day. Orders received after the close of
trading on the NYSE are executed the following day at that day's NAV. We have
the right to suspend redemption of shares of the Fund and to postpone payment
of proceeds for up to seven days or as permitted by law.
We may suspend the right of redemption or the date of payment for more than
seven days after shares are tendered for redemption for any period during which
- - The New York Stock Exchange is closed (other than a customary weekend or
holiday closing) or the SEC determines that trading thereon is restricted
- - An emergency (as determined by the SEC) exists as a result of which
disposal by the Fund of securities it owns is not reasonably practicable,
or as a result of which it is not reasonably practical for the Fund fairly
to determine the value of its net assets
- - The SEC by order permits such suspension for the protection of
stockholders.
TIMING OF SETTLEMENTS
When you buy shares of the Fund, you will become the owner of record when
the Fund receives your payment, generally the day following execution. When you
sell shares, cash proceeds are generally available the day following execution
and will be forwarded according to your instructions.
When you sell shares that you recently purchased by check, your order will
be executed at the Fund's next NAV but the proceeds will not be available until
your check clears. This may take up to 15 days from the purchase date. Upon
execution of the redemption order, a confirmation statement will be forwarded to
you indicating the number of shares sold and the proceeds thereof.
ACCOUNTS WITH BELOW-MINIMUM BALANCES
If your account balance falls below the minimum required by the Fund
($50,000) as a result of selling shares (and not because of performance), the
Fund reserves the right to request that you buy more shares or close your
account. If your account balance is still below the minimum 90 days after
notification, we reserve the right to close out your account and send the
proceeds to the address of record.
AUTOMATIC REINVESTMENT
We will reinvest each income dividend and capital gain distribution
declared by the Fund in full and fractional shares of the Fund of the same
class, unless you or your duly authorized agent elect to receive all such
payments, or only the dividend or distribution portions in cash. We will base
such reinvestment on the Fund's NAV as determined on the payment date. You or
your authorized agent may request changes in the manner in which dividend and
distribution payments are made through written notice to the Fund. This request
will be effective as to any subsequent payment if it is received prior to the
record date used for determining your 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 the Fund into shares of the same class of any
other Fund offered by Dresdner RCM, without a sales charge or other fee (except
redemption fee, if any), by contacting the Fund. 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 the Fund of:
17
<PAGE>
- - 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
Exchanges will not become effective until all documents in the form
required have been received by the Fund. If you have any questions, please
contact the Fund.
Please be sure to read carefully the prospectus of any other Fund in which
you wish to exchange shares.
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
The Fund's fiscal year ends on December 31. The Fund will issue to its
stockholders semi-annual and annual reports. In addition, stockholders will
receive quarterly statements on 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.
REDEMPTION
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 the 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.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund's dividends and distributions consist of most or all of its net
investment income and net realized capital gains. The Fund typically pays
income dividends four times a year (usually in April, July, October and
December) and makes capital gains distributions once a year (usually in
December). The amount depends on the Fund's investment results and its
tax compliance situation.
Dividends and distributions normally are reinvested in additional Fund
shares. You may instruct your financial professional or the Fund to have them
sent to you by check or credited to a separate account.
If you are an individual (or certain other non-corporate stockholders), we
have to withhold 31% of all dividends, capital gains distributions and
redemption proceeds we pay to you if: (a) you have not given us a certified
correct taxpayer identification number and (b) except with respect to redemption
proceeds, have not certified that backup withholding does not apply. Amounts we
withhold are applied to your federal tax liability, and a refund may be obtained
from the Internal Revenue Service if withholding results in an overpayment of
taxes. Distributions of our taxable income and net capital gain to non-resident
alien individuals, non-resident alien fiduciaries of trusts of estate, foreign
corporations, or foreign partnerships may also be subject to U.S. withholding
tax, although distributions of net capital gain to such stockholders generally
will not be subject to withholding.
We may be required to pay income, withholding and other taxes imposed by
foreign countries, generally at rates from 10% to 40%, which would reduce our
investment income. Tax conventions between certain countries and the U.S. may
reduce or eliminate such taxes. We may "pass through" to you the amount of
foreign income taxes we pay, if it is in the best interests of stockholders. If
we do so, you will be
18
<PAGE>
required to include in your gross income your pro-rata share of foreign taxes
we paid, and you will be able to treat such taxes as either an itemized
deduction or a foreign credit against U.S. income taxes on your tax returns.
If we do not do so, you will not be able to deduct your share of such taxes
in computing your taxable income and will not be able to take your share of
such taxes as a credit against your U.S. income taxes.
In general, selling shares for cash, exchanging shares, and receiving
distributions (whether reinvested or taken in cash) are all taxable events.
These transactions typically create the following tax liabilities for taxable
accounts:
-----------------------------------------------------------------
TRANSACTION TAX STATUS
-----------------------------------------------------------------
Income dividends Ordinary income
-----------------------------------------------------------------
Short-term capital gains Ordinary income
distributions
-----------------------------------------------------------------
Long-term capital gains
distributors Capital gains
-----------------------------------------------------------------
Sales or exchanges of shares Capital gains or losses
owned for more than one year
-----------------------------------------------------------------
Sales of exchanges of shares Gains are treated as ordinary
owned for one year or less income; losses are subject to
special rules
-----------------------------------------------------------------
Dividends and other distributions generally are taxable to you at the
time they are received. However, dividends declared in October, November and
December by the Fund and made payable to your in such 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.
If you purchase the Fund's shares shortly before the record date for a
dividend or other distribution thereon, you will pay full price for the
shares (know as buying a distribution). Then you will receive some portion
of your purchase price back as a taxable distribution even though, because
the amount of the dividend or other distribution reduce the shares' net asset
value, it actually represents a return of invested capital.
You 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. This includes 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.
Foreign stockholders may be subject to special withholding requirements.
A penalty is charged on certain pre-retirement distributions form retirement
accounts. Consult your tax adviser about the federal, state and local tax
consequences in your particular circumstances.
The tax considerations described in this section do not apply to
tax-deferred accounts or other non-taxable entities. Because each investor's
tax circumstances are unique, please consult your tax professional about your
investment in the Fund.
19
<PAGE>
[Back Page]
FOR MORE INFORMATION ABOUT DRESDNER RCM BALANCED FUND, THE FOLLOWING DOCUMENT
IS AVAILABLE FREE UPON REQUEST:
STATEMENT OF ADDITIONAL INFORMATION (SAI):
The SAI provides more detailed information about the Fund, including
operations and investment policies. It is incorporated by reference and is
legally considered as part of this Prospectus.
You can get free copies of the SAI, or request other information and
discuss your questions about the Fund, by contacting us at:
Dresdner RCM Global Funds
Four Embarcadero Center
San Francisco, CA 94111
Telephone 1-800-726-7240
You can review the Fund's SAI at the Public Reference Room of the
Securities and Exchange Commission. You can also get copies:
- For a fee, by writing the Public Reference Section of the
Commission, Washington, D.C. 20549-6009 or calling
1-800-SEC-0330.
- Free from the Commission's Website at http://www.sec.gov.
Investment Company Act file nos. 33-97572 and 811-9100.
20
<PAGE>
DRESDNER RCM GLOBAL FUNDS, INC.
Four Embarcadero Center
San Francisco, California
94111-4189
(800) 726-7240
DRESDNER RCM BALANCED FUND
STATEMENT OF ADDITIONAL INFORMATION
May 1, 2000
Dresdner RCM Balanced Fund (the "Balanced Fund") is a diversified series of
Dresdner RCM Global Funds, Inc. (the "Company"), an open-end management
investment company.
This Statement of Additional Information ("SAI") is not a prospectus, and
should be read in conjunction with the Prospectus of the Fund dated
December 15, 1999. The Prospectus may be obtained without charge by writing or
calling the Company at the address and phone number above.
<PAGE>
TABLE OF CONTENTS
Page
Table of Contents. . . . . . . . . . . . . . . . . . . . . . . . . .2
Investment Objectives and Policies . . . . . . . . . . . . . . . . . 3
Investment and Risk Considerations. . . . . . . . . . . . . . . . . 19
Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . 25
Execution of Portfolio Transactions . . . . . . . . . . . . . . . . 27
Directors and Officers. . . . . . . . . . . . . . . . . . . . . . . 29
The Investment Manager. . . . . . . . . . . . . . . . . . . . . . . 31
The Distributor . . . . . . . . . . . . . . . . . . . . . . . . . . 33
The Administrator . . . . . . . . . . . . . . . . . . . . . . . . . 33
Other Service Providers . . . . . . . . . . . . . . . . . . . . . . 34
Net Asset Value . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Purchase and Redemption of Shares . . . . . . . . . . . . . . . . . 35
Dividends, Distributions and Tax Status . . . . . . . . . . . . . . 36
Investment Results. . . . . . . . . . . . . . . . . . . . . . . . . 39
General Information . . . . . . . . . . . . . . . . . . . . . . . . 40
Description of Capital Shares . . . . . . . . . . . . . . . . . . . 40
Additional Information. . . . . . . . . . . . . . . . . . . . . . . 41
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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 objective
of the Fund, the Investment Manager allocates the Fund's assets among
securities of countries and in currency denominations where it expects
opportunities for meeting the Fund's investment objectives to be the most
attractive, subject to the percentage limitations set forth in the
Prospectus. In addition, from time to time the Fund may strategically adjust
its investments among issuers based in various countries and among the
various equity markets of the world in order to take advantage of diverse
global opportunities, based on the Investment Manager's evaluation of
prevailing trends and developments, as well as on the Investment Manager's
assessment of the potential for capital appreciation (as compared to the
risks) of particular companies, industries, countries, and regions.
INVESTMENT IN DEVELOPED FOREIGN COUNTRIES. The Fund may invest in
securities of foreign governments and companies that are organized or
headquartered in developed foreign countries. The Fund may not be invested in
all developed foreign countries at one time, and may not invest in particular
developed foreign countries at any time, depending on the Investment
Manager's view of the investment opportunities available.
Although these countries have developed economies, even developed
countries 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.
CURRENCY MANAGEMENT
Securities purchased by the Fund may be denominated in U.S. dollars,
foreign currencies, or multinational currencies such as the Euro, and the
Fund will incur costs in connection with conversions between various
currencies. Movements in the various securities markets may be offset by
changes in foreign currency exchange rates. Exchange rates frequently move
independently of securities markets in a particular country. As a result,
gains in a particular securities market may be affected, either positively or
negatively, by changes in exchange rates, and the Fund's net currency
positions may expose it to risks independent of its securities positions.
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From time to time, the Fund may employ currency management techniques to
enhance its total return, although there is no current intention to do so.
The Fund may not employ more than 30% of the value of its total assets in
currency management techniques for the purpose of enhancing returns. To the
extent that such techniques are used to enhance return, they are considered
speculative.
The Fund's ability and 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 Fund
are redeemable in U.S. dollars each day the Fund determines its net asset
value, the Fund must have the ability at all times to obtain U.S. dollars to
the extent necessary to meet redemptions. Under present conditions, the
Investment Manager does not believe that these considerations will have any
significant adverse effect on its portfolio strategies, although there can be
no assurances in this regard.
GENERAL CURRENCY CONSIDERATIONS. Currency exchange rates may fluctuate
significantly over short periods of time causing, along with other factors,
the Fund's net asset value to fluctuate as well. Currency exchange rates
generally are determined by the forces of supply and demand in the foreign
exchange markets and the relative merits of investments in different
countries, actual or anticipated changes in interest rates and other complex
factors, as seen from an international perspective. Currency exchange rates
also can be affected unpredictably by intervention, or failure to do so, by
U.S. or foreign governments or central banks or by currency controls or
political developments in the United States or abroad. The 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 the Fund's
total assets, adjusted to reflect the Fund's net position after giving effect
to currency transactions, is denominated or quoted in the currencies of
foreign countries, the Fund will be more susceptible to the risk of adverse
economic and political developments within those countries.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. The Fund may purchase or
sell forward foreign currency exchange contracts ("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, the Fund may enter into forward
contracts in order to protect against anticipated changes in future foreign
currency exchange rates.
The Fund may engage in cross-hedging by using forward contracts in a
currency different from that in which the hedged security is denominated or
quoted if the Investment Manager determines that there is a pattern of
correlation between the two currencies. The Fund may also engage in proxy
hedging, by using forward contracts in a series of foreign currencies for
similar purposes.
The Fund may enter into forward contracts to purchase foreign currencies
to protect against an anticipated rise in the U.S. dollar price of securities
it intends to purchase. The Fund may enter into 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 the Fund if the value of the hedged currency increased.
If the 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
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the Fund of unrealized profits, transaction costs or the benefits of a
currency hedge or force the Fund to cover its purchase or sale commitments,
if any, at the current market price.
OPTIONS ON FOREIGN CURRENCIES. The Fund may purchase and sell (write)
put and call options on foreign currencies for the purpose of protecting
against declines in the U.S. dollar value of foreign portfolio securities and
anticipated income or dividends on such securities and against increases in
the U.S. dollar cost of foreign securities to be acquired. The Fund may also
use options on currency to cross-hedge, which involves writing or purchasing
options on one currency to hedge against changes in exchange rates for a
different currency, if the Investment Manager believes there is a pattern of
correlation between the two currencies. Options on foreign currencies to be
written or purchased by the Fund will be traded on U.S. and foreign exchanges.
The writer of a put or call option receives a premium and gives the
purchaser the right to sell (or buy) the currency underlying the option at
the exercise price. The writer has the obligation upon exercise of the option
to purchase (or deliver) the currency during the option period. A writer of
an option who wishes to terminate the obligation may effect a "closing
transaction" by buying an option of the same series as the option previously
written. A writer may not effect a closing purchase transaction after being
notified of the exercise of an option. The writing of an option on foreign
currency will constitute only a partial hedge, up to the amount of the
premium received; the Fund could be required to purchase or sell additional
foreign currencies at disadvantageous exchange rates, thereby incurring
losses. The purchase of an option on foreign currency may constitute an
effective hedge against exchange rate fluctuations; however, in the event of
exchange rate movements adverse to the Fund's position, the Fund may forfeit
the entire amount of the premium plus related transaction costs.
The 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 the 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. The Fund may enter into currency futures
contracts, as described under "Futures Transactions" below.
CURRENCY SWAPS. The Fund may enter into currency swaps for both hedging
and to seek to increase total return. Currency swaps involve the exchange of
rights to make or receive payments in specified currencies. Since currency
swaps are individually negotiated, the Fund expects to achieve an acceptable
degree of correlation between 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. The
Fund will maintain in a segregated account with the Fund's custodian cash,
U.S. Government securities, or other liquid debt or equity securities equal
to the amount of the Fund's obligations, or the net amount (if any) of the
excess of the Fund's obligations over its entitlements, with respect to swap
transactions. To the extent that such amount of a swap is 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 the 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 the 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
The 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 the 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 Fund's custodian. If the 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.
The 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, the 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 standarized 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 the 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 the Fund. These transactions may in some instances
involve the delivery of securities or other underlying assets by the 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 the
Fund is contractually obligated to make. If the other party to an interest
rate swap that is not collateralized defaults, the Fund would risk the loss of
the net amount of the payments that it contractually is entitled to receive.
The Fund may buy and sell (i.e., write) caps and floors without limitation,
subject to the segregation requirement described above.
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OPTIONS TRANSACTIONS
The 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 the 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, the 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 the 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 the 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 the 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 the Fund intends to
purchase the underlying security and the security thereafter increases in
price. The Fund will exercise a call option only if the price of the
underlying security is above the strike price at the time of exercise. If
during the option period the market price for the underlying security remains
at or below the strike price of the call option, the option will expire
worthless, representing a loss of the price paid for the option, plus
transaction costs. If the price of the underlying security increases, the
price the Fund pays for the security will in effect be increased by the
premium paid for the call.
STOCK INDEX OPTIONS. The 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 the Fund's portfolio or which it intends to purchase or sell, or when they
are economically appropriate for the reduction of risks inherent in the
ongoing management of the Fund.
The distinctive characteristics of options on stock indices create
certain risks that are not present with stock options generally. Because the
value of an index option depends upon movements in the level of the index
rather than the price of a particular stock, whether the Fund will realize a
gain or loss on the purchase or sale of an index option depends upon
movements in the level of stock prices in the stock market generally rather
than movements in the price of a particular stock. Accordingly, successful
use by the Fund of options on a stock index will be subject to the Investment
Manager's ability to predict correctly movements in the direction of the
stock market generally. This requires different skills and techniques than
predicting changes in the prices of individual stocks.
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Index prices may be distorted if trading of certain stocks included in
an index is interrupted. Trading of index options also may be interrupted in
certain circumstances, such as if trading were halted in a substantial number
of stocks included in the index. If this were to occur, the Fund would not be
able to close out options which it had purchased, and if restrictions on
exercise were imposed, the Fund might be unable to exercise an option it
holds, which could result in substantial losses to the Fund. It is the policy
of the Fund to purchase put or call options only with respect to an index
which the Investment Manager believes includes a sufficient number of stocks
to minimize the likelihood of a trading halt in the index.
DEALER OPTIONS. The Fund may engage in transactions involving dealer
options as well as exchange-traded options. Options not traded on an exchange
generally lack the liquidity of an exchange-traded option, and may be subject
to the Fund's restriction on investment in illiquid securities. In addition,
dealer options may involve the risk that the securities dealers participating
in such transactions will fail to meet their obligations under the terms of
the options.
SHORT SALES
The Fund, may engage in short sales transactions. A short sale that is
not made "against the box" is a transaction in which the Fund sells a
security it does not own in anticipation of a decline in market price. When
the Fund makes a short sale, the proceeds it receives are retained by the
broker until the Fund replaces the borrowed security. In order to deliver the
security to the buyer, the Fund must arrange through a broker to borrow the
security and, in so doing, the Fund becomes obligated to replace the security
borrowed at its market price at the time of replacement, whatever that price
may be.
The value of securities of any issuer in which the Fund maintains a
short position that is not "against the box" may not exceed the lesser of 5%
of the value of the Fund's net assets or 5% of the securities of such class
of the issuer. The Fund's ability to enter into short sales transactions is
limited by the requirements of the Investment Company Act of 1940 (the "1940
Act").
Short sales by the Fund that are not made "against the box" create
opportunities to increase the Fund's return but, at the same time, involve
special risk considerations and may be considered a speculative technique.
Since the Fund in effect profits from a decline in the price of the
securities sold short without the need to invest the full purchase price of
the securities on the date of the short sale, the Fund's net asset value per
share will tend to increase more when the securities it has sold short
decrease in value, and to decrease more when the securities it has sold short
increase in value, than would otherwise be the case if it had not engaged in
such short sales. Short sales theoretically involve unlimited loss potential,
as the market price of securities sold short may continuously increase,
although the Fund may mitigate such losses by replacing the securities sold
short before the market price has increased significantly. Under adverse
market conditions, the Fund might have difficulty purchasing securities to
meet its short sale delivery obligations, and might have to sell portfolio
securities to raise the capital necessary to meet its short sale obligations
at a time when fundamental investment considerations would not favor such
sales.
If the Fund makes a short sale "against the box," the Fund would not
immediately deliver the securities sold and would not receive the proceeds
from the sale. The seller is said to have a short position in the securities
sold until it delivers the securities sold, at which time it receives the
proceeds of the sale. The Fund's decision to make a short sale "against the
box" may be a technique to hedge against market risks when the Investment
Manager believes that the price of a security may decline, causing a decline
in the value of a security owned by the Fund or a security convertible into
or exchangeable for such security. In such case, any future losses in the
Fund's long position would be reduced by a gain in the short position.
In the view of the Securities and Exchange Commission ("SEC"), a short
sale involves the creation of a "senior security" as such term is defined in
the 1940 Act, unless the sale is "against the box" and the securities sold
are placed in a segregated account (not with the broker), or unless the
Fund's obligation to deliver the securities sold short is "covered" by
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
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the proceeds from the short sale), which difference is adjusted daily for
changes in the value of the securities sold short. The total value of the
cash and securities deposited with the broker and otherwise segregated may
not at any time be less than the market value of the securities sold short at
the time of the short sale.
To avoid limitations under the 1940 Act on borrowing by investment
companies, short sales by the Fund will be "against the box", or the Fund's
obligation to deliver the securities sold short will be "covered" by
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.
The Fund will not make short sales of securities or maintain a short position
if doing so could create liabilities or require collateral deposits and
segregation of assets aggregating more than 25% of the value of the Fund's
total assets.
DELAYED-DELIVERY TRANSACTIONS
The Fund may purchase securities on a delayed delivery or "when issued"
basis and may enter into firm commitment agreements (transactions in which
the payment obligation and interest rate are fixed at the time of the
transaction but the settlement is delayed). Delivery and payment for these
securities typically occur 15 to 45 days after the commitment to purchase,
but delivery and payment can be scheduled for shorter or longer periods,
based upon the agreement of the buyer and the seller. No interest accrues to
the purchaser during the period before delivery. The Fund generally does not
intend to enter into these transactions for the purpose of leverage, but may
sell the right to receive delivery of the securities before the settlement
date. The value of the securities at settlement may be more or less than the
agreed upon price.
The Fund will segregate cash, U.S. Government securities or other liquid
debt or equity securities in an amount sufficient to meet its payment
obligations with respect to any such transactions. To the extent that assets
are segregated for this purpose, the Fund's liquidity and the ability of the
Investment Manager to manage its portfolio may be adversely affected.
FUTURES TRANSACTIONS
The Fund 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 the
Fund owns Treasury bonds and the portfolio manager expects interest rates to
increase, the Fund may take a short position in interest rate futures
contracts. Taking such a position would have much the same effect as the 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
the Fund's interest rate futures contract will increase, thereby keeping the
net asset value of the 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 the 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 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 the Fund purchases or sells a security, no price is paid or
received by the Fund upon the purchase or sale of a futures contract.
Initially, the Fund will be required to deposit with the Fund's custodian or
such other parties as may be authorized by the SEC (in the name of the
futures commission merchant (the "FCM")) an amount of cash or
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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 the 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
the Fund has purchased a currency futures contract and the price of the
underlying currency has declined, the position would be less valuable and the
Fund would be required to make a variation margin payment to the FCM. At any
time prior to expiration of a futures contract, the Fund may elect to close
the position by taking an identical opposite position which will operate to
terminate the Fund's position in the futures contract. A final determination
of variation margin is then made, additional cash is required to be paid by
or released to the Fund, and the Fund realizes a loss or a gain.
CHARACTERISTICS OF FUTURES OPTIONS. The Fund may also purchase call
options and put options on securities or index futures contracts ("futures
options"), and the 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. The 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, the 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 amount of stock index futures would be terminated by
offsetting sales.
SALE OF FUTURES. The 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 the Fund's portfolio securities denominated in
such currency, or may sell a currency futures contract in one currency to
hedge against fluctuations in the value of securities denominated in a
different currency if there is an established historical pattern or
correlation between the two currencies. Similarly, the 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 the 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.
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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, the 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. The
Fund may not purchase or sell futures contracts or purchase futures options
if, immediately thereafter, more than 30% of the value of its net assets
would be hedged. In addition, the Fund may not purchase or sell futures or
purchase futures options if, immediately thereafter, the sum of the amount of
margin deposits on the Fund's existing futures positions and premiums paid
for futures options would exceed 5% of the market value of the Fund's total
assets. In Fund transactions involving futures contracts, to the extent
required by applicable SEC guidelines, an amount of cash, U.S. Government
securities, or other liquid debt or equity securities equal to the market
value of the futures contracts will be 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 Fund as a commodity pool with the Commodity Futures
Trading Commission (the "CFTC"). The Fund intends to conduct its futures
trading activity in a manner consistent with that exemption. The Investment
Manager is registered with the CFTC as both a commodity pool operator and as
a commodity trading advisor.
DEBT SECURITIES
Under normal market conditions, the Fund will invest at least 25% of its
total assets in debt obligations issued or guaranteed by the U.S. Government
or foreign governments (including their respective agencies,
instrumentalities, authorities and political subdivisions), debt obligations
issued or guaranteed by international or supranational governmental entities,
and debt obligations of corporate issuers. Such debt obligations will be
rated, at the time of purchase, investment grade by Standard & Poor's, a
division of The McGraw-Hill Companies, Inc. ("Standard & Poor's"), Moody's
Investors Service ("Moody's"), or another recognized rating organization, or
if unrated will be determined by the Investment Manager to be of comparable
investment quality. Investment grade means the issuer of the security is
believed to have adequate capacity to pay interest and repay principal,
although certain of such securities in the lower grades have speculative
characteristics, and changes in economic conditions or other circumstances
may be more likely to lead to a weakened capacity to pay interest and
principal than would be the case with higher-rated securities.
The Fund may invest up to 5% of its total assets in debt securities
rated, at the time of purchase, below investment grade by Standard & Poor's,
Moody's or another recognized international rating organization. Bonds rated
below investment grade are often referred to as "junk bonds," and involve
greater risk of default or price declines than investment grade securities.
The Fund will not invest in securites rated lower than B.
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
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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 the 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 the Fund is downgraded,
the Investment Manager will determine whether it is in the best interests of
the Fund to continue to hold the security in its investment portfolio. Refer
to the section entitled "Risk Considerations" for the risks associated with
below investment grade debt securities.
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.
The Fund may invest in sovereign debt obligations of foreign 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 which
it may be subject. 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. The 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"), the Fund must distribute its investment company taxable income,
including the original issue discount accrued on zero coupon bonds or step
coupon bonds. Because the 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 the Fund may have to distribute cash obtained from other sources in
order to satisfy the distribution requirements under the Code. The 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,
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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 the 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. The 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 Fund. 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").
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. The 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 Fund), 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 the 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
the 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 the Fund's ability
to participate in as large a market gain as may be experienced with a
comparable security not subject to prepayment.
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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.
MUNICIPAL SECURITIES. The 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 the Fund to demand payment on
short notice from the issuer or a financial intermediary. Such securities
must be rated at least A by Standard & Poor's or Moody's.
The 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 the 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. The 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. The 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. The 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-
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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, these securities represent a relatively new
type of financing and certain lease obligations may therefore be considered
to be illiquid securities.
SHORT-TERM OBLIGATIONS. The 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 Fund 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 Fund may invest in them if the Investment
Manager determines they are consistent with the Fund's 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 Fund 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
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 Fund 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
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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 Fund 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 Fund 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
the Fund the option to obligate a broker, dealer or bank to repurchase a
security held by the 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 Fund 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. The 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 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 Fund 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
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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
The 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, the Fund will not 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
The 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, the Fund may purchase a non-convertible debt
security and a warrant or option, which enables the 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 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. The Fund
only invests in synthetic convertibles with respect to companies whose
corporate debt securities are rated "A" or higher by Moody's or Standard &
Poor's and will not invest more than 15% of its net assets in such synthetic
securities and other illiquid securities.
PREFERRED STOCK
The 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
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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.
BORROWING MONEY
From time to time, it may be advantageous for the Fund to borrow money
rather than sell portfolio securities to raise the cash to meet redemption
requests. In order to meet such redemption requests, The Fund may borrow from
banks or enter into reverse repurchase agreements. The Fund 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 Fund will not borrow money for
leveraging purposes. The Fund may continue to purchase securities while
borrowings are outstanding, but will not do so when the Fund's borrowings
(including reverse repurchase agreements) exceed 5% of the value of its total
assets. The 1940 Act permits the Fund to borrow only from banks and only to
the extent that the value of its total assets, less its liabilities other
than borrowings, is equal to at least 300% of all borrowings (including the
proposed borrowing), and requires the Fund to take prompt action to reduce
its borrowings if this limit is exceeded. For the purpose of the 300%
borrowing limitation, reverse repurchase transactions are considered to be
borrowings.
A reverse repurchase agreement involves a transaction by which a
borrower (such as the Fund) sells a security to a purchaser (a member bank of
the Federal Reserve System or a broker-dealer deemed creditworthy pursuant to
standards adopted by the Board of Directors and simultaneously agrees to
repurchase the security at an agreed-upon price on an agreed-upon date within
a number of days (usually not more than seven) from the date of purchase.
LENDING PORTFOLIO SECURITIES
The Fund is authorized to make loans of portfolio securities, for the
purpose of realizing additional income, to broker-dealers or other
institutional investors deemed creditworthy pursuant to standards adopted by
the 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.
"ROLL" TRANSACTIONS
The 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, the 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.
The 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. The 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.
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INVESTMENT IN ILLIQUID SECURITIES
The Fund may invest up to 15% of the value of its net assets in illiquid
securities. Securities may be considered illiquid if the Fund cannot
reasonably expect to receive approximately the amount at which the Fund
values such securities within seven days. The Investment Manager has the
authority to determine whether certain securities held by the Fund are liquid
or illiquid pursuant to standards adopted by the Board of Directors.
The Investment Manager takes into account a number of factors in
reaching liquidity decisions, including, but not limited to: the listing of
the security on an exchange or national market system; the frequency of
trading in the security; the number of dealers who publish quotes for the
security; the number of dealers who serve as market makers for the security;
the apparent number of other potential purchasers; and the nature of the
security and how trading is effected (e.g., the time needed to sell the
security, how offers are solicited, and the mechanics of transfer).
The Fund's investments in illiquid securities may include securities
that are not registered for resale under the Securities Act of 1933 (the
"Securities Act"), and therefore are subject to restrictions on resale. When
the Fund purchases unregistered securities, 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
be indicative of the liquidity of such investments. If such securities are
subject to purchase by institutional buyers in accordance with Rule 144A
under the Securities Act, the Investment Manager may determine in particular
cases, pursuant to standards adopted by the Board of Directors, that such
securities are not illiquid securities notwithstanding the legal or
contractual restrictions on their resale. Investing in Rule 144A securities
could have the effect of increasing the Fund's illiquidity to the extent that
qualified institutional buyers become, for a time, uninterested in purchasing
such securities.
CASH-EQUIVALENT INSTRUMENTS
Other than as described under INVESTMENT RESTRICTIONS below, the Fund is
not restricted with regard to the types of cash-equivalent investments it
may make. When the Investment Manager believes that such investments are an
appropriate part of the Fund's overall investment strategy, the Fund may hold
or invest, for investment purposes, a portion of its assets in any of the
following, denominated in U.S. dollars, foreign currencies, or multinational
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
certificates of deposit or other deposits of banks deemed creditworthy by the
Investment Manager pursuant to standards adopted by 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, the Fund may invest up to 100% of its
assets in such cash-equivalent investments.
A certificate of deposit is a short-term obligation of a commercial
bank. A bankers' acceptance is a time draft drawn on a commercial bank by a
borrower, usually in connection with international commercial transactions. A
repurchase agreement involves a transaction by which an investor (such as the
Fund) purchases a security and simultaneously obtains the commitment of the
seller (a member bank of the Federal Reserve System or a securities dealer
deemed creditworthy by the Investment Manager pursuant to standards adopted
by the 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.
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PORTFOLIO TURNOVER
Securities in the Fund's portfolio will be sold whenever the Investment
Manager believes it is appropriate to do so, regardless of the length of time
that securities have been held, and securities may be purchased or sold for
short-term profits whenever the Investment Manager believes it is appropriate
or desirable to do so. Turnover will be influenced by sound investment
practices, the Fund's investment objective, and the need for funds for the
redemption of the Fund's shares.
For example, a 100% portfolio turnover rate would occur if the value of
purchases or sales of portfolio securities (whichever is less) by the Fund
for a year (excluding purchases of U.S. Treasury issues and securities with a
maturity of one year or less) were equal to 100% of the average monthly value
of the securities held by the Fund during such year. As a result of the
manner in which turnover is measured, a high turnover rate could also occur
during the first year of the Fund's operations, and during periods when the
Fund's assets are growing or shrinking. A high portfolio turnover rate would
increase the Fund's brokerage commission expenses and other transaction
costs, and may increase its taxable capital gains.
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 the Fund's control. Changes in currency
exchange rates may, in some circumstances, have a greater effect on the
market value of a security than changes in the market price of the security.
To the extent that a substantial portion of the Fund's total assets is
denominated or quoted in the currency of a foreign country, the Fund will be
more susceptible to the risk of adverse economic and political developments
within that country. As discussed above, the Fund may employ certain
investment techniques to hedge its foreign currency exposure; however, such
techniques also entail certain risks.
In addition, information about foreign issuers may be less readily
available than information about domestic issuers. Foreign issuers generally
are not subject to accounting, auditing, and financial reporting standards or
to other regulatory practices and requirements comparable to those applicable
to U.S. issuers. Furthermore, with respect to certain foreign countries, the
possibility exists of expropriation, nationalization, revaluation of
currencies, confiscatory taxation, and limitations on foreign investment and
the use or removal of funds or other assets of the Fund, including the
withholding of tax on interest, dividends and other distributions and
limitations on the repatriation of currencies. In addition, the Fund may
experience difficulties or delays in obtaining or enforcing judgments.
Foreign securities may be subject to foreign government taxes that could
reduce the yield 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
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less liquid and more volatile than securities of comparable U.S. Issuers. In
addition, there is generally less government regulation of securities
markets, securities exchanges, securities dealers, and listed and unlisted
companies in foreign countries than in the United States.
Foreign markets also have different clearance and settlement procedures,
and in certain markets there have been times when settlements have been
unable to keep pace with the volume of securities transactions, making it
difficult to conduct and complete such transactions. Inability to dispose of
a portfolio security caused by settlement problems could result either in
losses to the Fund due to subsequent declines in the value of the portfolio
security or, if the Fund has entered into a contract to sell that security,
could result in possible liability of the Fund to the purchaser. Delays in
settlement could adversely affect the Fund's ability to implement its
investment strategies and to achieve its investment 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 the Fund acquires
depositary receipts through banks that do not have a contractual relationship
with the foreign issuer of the security underlying the depositary receipts to
issue and service depositary receipts, there may be an increased possibility
that the Fund would not become aware of and be able to respond to corporate
actions, such as stock splits or rights offerings, involving the foreign
issuer in a timely manner.
The information available for American Depositary Receipts ("ADRs")
sponsored by the issuers of the underlying securities is subject to the
accounting, auditing, and financial reporting standards of the domestic
market or exchange on which they are traded, which standards generally are
more uniform and more exacting than those to which many non-domestic issuers
may be subject. However, some ADRs are sponsored by persons other than the
issuers of the underlying securities. Issuers of the stock on which such ADRs
are based are not obligated to disclose material information in the United
States. The information that is available concerning the issuers of the
securities underlying European Depositary Receipts ("EDRs") and Global
Depositary Receipts ("GDRs") may be less than the information that is
available about domestic issuers, and EDRs and GDRs may be traded in markets
or on exchanges that have lesser standards than those applicable to the
markets for ADRs.
A depositary receipt will be treated as an illiquid security for
purposes of the Fund's restriction on the purchases of such securities unless
the depositary receipt is convertible into cash by the Fund within seven days.
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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 addition, the smaller capitalization companies in which
the Fund may invest may have limited or unprofitable operating histories,
limited financial resources, and inexperienced management. Furthermore,
securities of such companies are often less liquid than securities of larger
companies, and may be subject to erratic or abrupt price movements. To
dispose of these securities, the Fund may have to sell them over an extended
period of time below the original purchase price. Investments in smaller
capitalization companies may be regarded as speculative.
Securities issued by companies (including predecessors) that have
operated for less than three years 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.
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CONVERTIBLE SECURITIES
Investment in convertible securities involves certain risks. The value
of a convertible security is a function of its "investment value" (determined
by its yield in comparison with the yields of other securities of comparable
maturity and quality that do not have a conversion privilege) and its
"conversion value" (the security's worth, at market value, if converted into
the underlying stock). If the conversion value is low relative to the
investment value, the price of the convertible security will be governed
principally by its yield, and thus may not decline in price to the same
extent as the underlying stock; to the extent the market price of the
underlying common stock approaches or exceeds the conversion price, the price
of the convertible security will be influenced increasingly by its conversion
value. A convertible security held by the Fund may be subject to redemption
at the option of the issuer at a price 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 DEBT SECURITIES
The Fund may invest up to 5% of its total assets in debt securities
rated below "Baa" by Moody's, below "BBB" by Standard & Poor's, or below
investment grade by another recognized rating agency or, if unrated, judged
by the Investment Manager to be of comparable quality. The Fund will not
invest in debt securities rated below B. 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, the Fund may experience difficulty in valuing such
securities and, in turn, its assets. In addition, adverse publicity and
investor perceptions about junk bonds, whether or not based on fundamental
analysis, may tend to decrease the market value and liquidity of such
securities. The Investment Manager will try to reduce the risk inherent in
the Fund's investments in such securities through credit analysis,
diversification and attention to current developments and trends in interest
rates and economic conditions. However, there can be no assurance that losses
will not occur. Since the risk of default is higher for lower-rated bonds,
the Investment Manager's research and credit analysis are a correspondingly
more important aspect of its program for managing the Fund's investments in
such debt securities. The Investment Manager will attempt to identify those
issuers of high-yielding securities whose financial conditions are adequate
to meet future obligations, or have improved or are expected to improve in
the future.
Credit ratings evaluate the safety of principal and interest payments of
securities, not their market value. The rating of an issuer is also heavily
weighted by past developments and does not necessarily reflect probable
future conditions. There is frequently a lag between the time a rating is
assigned and the time it is updated. As credit rating agencies may fail to
timely change credit ratings of securities to reflect subsequent events, the
Investment Manager will also monitor issuers of such securities to determine
if such issuers will have sufficient cash flow and profits to meet required
principal and interest payments and to assure their liquidity.
DELAYED-DELIVERY TRANSACTIONS
The Fund may buy and sell securities on a delayed-delivery or
when-issued basis. These transactions involve a commitment by the 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. The Fund may receive fees for
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entering into delayed-delivery transactions. When purchasing securities on a
delayed-delivery basis, the Fund assumes the rights and risks of ownership,
including the risk of price and yield fluctuations. Because the 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 the
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, the Fund
will set aside appropriate liquid assets in a segregated custodial account to
cover its purchase obligations. When the 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. The 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.
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 Fund. 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 the 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
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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, the 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, the 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 the 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 the Fund to hedge against a possible
unfavorable movement in a currency exchange rate before the Fund is able to
invest its cash (or cash equivalents) in stock 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.
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 the 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 the Fund when the use of a futures
contract would not, such as when there is no movement in the level of an
index. In addition, daily changes in the value of the option due to changes
in the value of the underlying futures contract are reflected in the net
asset value of the Fund.
The Fund will only enter into futures contracts or purchase futures
options that are standardized and traded 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,
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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 Fund is subject to the Investment
Manager's ability to predict correctly movements in the direction of the
security and currency markets. For example, if the 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 the 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 the Fund purchased currency
futures contracts with the intention of profiting from a favorable change in
currency exchange rates, and the change was unfavorable, the Fund would incur
a loss, and might have to sell securities to meet daily variation margin
requirements at a time when it might be disadvantageous to do so. The
Investment Manager and its predecessor have been actively engaged in the
provision of investment supervisory services for institutional and individual
accounts since 1970, but the skills required for the successful use of
futures and options on futures are different from those needed to select
portfolio securities, and the Investment Manager has limited prior experience
in the use of futures or options techniques in the management of assets under
its supervision.
OTHER RISK CONSIDERATIONS
Investment in illiquid securities involves potential delays on resale as
well as uncertainty in valuation. Limitations on resale may have an adverse
effect on the marketability of portfolio securities, and the Fund might not
be able to dispose of such securities promptly or at reasonable prices.
A number of transactions in which the Fund may engage are subject to the
risks of default by the other party to the transaction. If the seller of
securities pursuant to a repurchase agreement entered into by the Fund
defaults and the value of the collateral securing the repurchase agreement
declines, the Fund may incur a loss. If bankruptcy proceedings are commenced
with respect to the seller, realization of the collateral by the Fund may be
delayed or limited. Similarly, when the Fund engages in when-issued, reverse
repurchase, forward commitment and 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.
Borrowing also involves special risk considerations. Interest costs of
borrowings may fluctuate with changing market rates of interest and may
partially offset or exceed the return earned on the borrowed funds (or on the
assets that were retained rather than sold to meet the needs for which funds
were borrowed). Under adverse market conditions, the Fund might have to sell
portfolio securities to meet interest or principal payments at a time when
fundamental investment considerations would not favor such sales. To the
extent the Fund enters into reverse repurchase agreements, the Fund is
subject to risks that are similar to those of borrowing.
INVESTMENT RESTRICTIONS
FUNDAMENTAL POLICIES
The Fund has adopted certain investment restrictions that are fundamental
policies and that may not be changed without approval by the vote of a majority
of the Fund's outstanding voting securities, as defined in the 1940
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Act. The "vote of a majority of the outstanding voting securities" of the
Fund, as defined in Section 2(a)(42) of the 1940 Act, means the vote of (i)
67% or more of the voting securities of the Fund present at any meeting, if
the holders of more than 50% of the outstanding voting securities of the Fund
are present or represented by proxy, or (ii) more than 50% of the outstanding
voting securities of the Fund, whichever is less. These restrictions provide
that the Fund may not:
1. Invest more than 25% 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)
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. The Fund will not mortgage, pledge, hypothecate, or in
any other manner transfer as security for an indebtedness any of its
assets. This investment restriction shall not prohibit the Fund from
engaging in futures contracts, 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.
6. Make loans of its funds or assets to any other person, which shall not be
considered as including: (i) the purchase of a portion of an issue of
publicly distributed debt securities, (ii) the purchase of bank obligations
such as certificates of deposit, bankers' acceptances and other short-term
debt obligations, (iii) entering into repurchase agreements with respect to
commercial paper, certificates of deposit and obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities, and
(iv) the loan of portfolio securities to brokers, dealers and other
financial institutions where such loan is callable by the Fund at any time
on reasonable notice and is fully secured by collateral in the form of cash
or cash equivalents. The Fund will not enter into repurchase agreements
with maturities in excess of seven days if immediately after and as a
result of such transaction the value of the Fund's holdings of such
repurchase agreements exceeds 10% of the value of the Fund's total assets.
7. Act as an underwriter of securities issued by other persons, except insofar
as it may be deemed an underwriter under the Securities Act of 1933 in
selling portfolio securities.
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.
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<PAGE>
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
The 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 the Fund may not:
1. Invest in interests in oil, gas, or other mineral exploration or
development programs.
2. Invest more than 5% of the value of its total assets in the securities of
any issuer which has a record of less than three years of continuous
operation.
3. Participate on a joint or a joint-and-several basis in any trading account
in securities (the aggregation of orders for the sale or purchase of
marketable portfolio securities with other accounts under the management
of the Investment Manager to save brokerage costs, or to average prices
among them, is not deemed to result in a securities trading account).
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 15% of the value of its net assets in securities that are
illiquid.
The Fund is also subject to other restrictions under the 1940 Act;
however, the registration of the Company under the 1940 Act does not involve
any supervision by any federal or other agency of the Company's management or
investment practices or policies, other than incident to occasional or
periodic compliance examinations conducted by the SEC staff.
EXECUTION OF PORTFOLIO TRANSACTIONS
The Investment Manager, subject to the overall supervision of the Board of
Directors, makes the Fund's investment decisions and selects the broker or
dealer to be used in each specific transaction using its best judgment to choose
the broker or dealer most capable of providing the services necessary to obtain
the best execution of that transaction. In seeking the best execution of a
transaction, the Investment Manager evaluates a wide range of criteria,
including any or all of the following: the broker's commission rate, promptness,
reliability and quality of executions, trading expertise, positioning and
distribution capabilities, back-office efficiency, ability to handle difficult
trades, knowledge of other buyers and sellers, confidentiality, capital strength
and financial stability, 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
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<PAGE>
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.
Subject to the requirement of seeking the best execution, the Investment
Manager may, in circumstances in which two or more brokers are in a position
to offer comparable execution, give preference to a broker or dealer that has
provided investment information to the Investment Manager. In so doing, the
Investment Manager may effect securities transactions which cause the Fund to
pay an amount of commission in excess of the amount of commission another
broker would have charged. In electing such broker or dealer, the Investment
Manager will make a good faith determination that the amount of commission is
reasonable in relation to the value of the brokerage services and research
and investment information received, viewed in terms of either the specific
transaction or the Investment Manager's overall responsibility to the
accounts for which the Investment Manager exercises investment discretion.
The Investment Manager evaluates all commissions paid in order to ensure that
the commissions represent reasonable compensation for the brokerage and
research services provided by such brokers. Such investment information as is
received from brokers or dealers may be used by the Investment Manager in
servicing all of its clients (including the Fund), and the Fund's commissions
may be paid to a broker or dealer who supplied research services not used by
the Fund. However, the Investment Manager expects that the Fund will benefit
overall by such practice because it is receiving the benefit of research
services and the execution of such transactions not otherwise available to it
without the allocation of transactions based on the recognition of such
research services.
Subject to the requirement of seeking the best execution, the Investment
Manager may also place orders with brokerage firms that have sold shares of
the Fund. The Investment Manager has made and will make no commitments to
place orders with any particular broker or group of brokers. 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 Fund also invests in foreign and/or U.S. securities that are not
listed on a national securities exchange but are traded in the
over-the-counter market. The Fund may also purchase listed securities through
the third market or fourth market. When transactions are executed in the
over-the-counter market or the third or fourth market, the Investment Manager
will seek to deal with the counterparty that the Investment Manager believes
can provide the best execution, whether or not that counterparty is the
primary market maker for that security.
As noted below, the Investment Manager is an indirect wholly owned
subsidiary of Dresdner Bank AG ("Dresdner"). Dresdner Kleinwort Benson North
America LLC ("Dresdner Kleinwort Benson") and other Dresdner subsidiaries may
be broker-dealers (collectively, the "Dresdner Affiliates"). The Investment
Manager believes that it is in the best interests of the Fund to have the
ability to execute brokerage transactions, when appropriate, through the
Dresdner Affiliates. Accordingly, the Investment Manager intends to execute
brokerage transactions on behalf of the Fund through the Dresdner Affiliates,
when appropriate and to the extent consistent with applicable laws and
regulations, including federal banking laws.
In all such cases, the Dresdner Affiliates will act as agent for the
Fund, and the Investment Manager will not enter into any transaction on
behalf of the Fund in which a Dresdner Affiliate is acting as principal for
its own account. In connection with such agency transactions, the Dresdner
Affiliates will receive compensation in the form of brokerage commissions
separate from the Investment Manager's management fee. The Investment
Manager's policy is that such
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<PAGE>
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 Fund.
The Investment Manager performs investment management and advisory
services for various clients, including other registered investment
companies, and pension, profit-sharing and other employee benefit plans, as
well as individuals. In many cases, portfolio transactions for the Fund may
be executed in an aggregated transaction as part of concurrent authorizations
to purchase or sell the same security for numerous accounts served by the
Investment Manager, some of which accounts may have investment objectives
similar to those of the Fund. The objective of aggregated transactions is to
obtain favorable execution and/or lower brokerage commissions, although there
is no certainty that such objective will be achieved. Although executing
portfolio transactions in an aggregated transaction potentially could be
either advantageous or disadvantageous to any one or more particular
accounts, aggregated transactions in which the Fund participates will be
effected only when the Investment Manager believes that to do so will be in
the best interest of the Fund, and the Investment Manager is not obligated to
aggregate orders into larger transactions. These orders generally will be
averaged as to price. When such aggregated transactions occur, the objective
will be to allocate the executions in a manner which is deemed fair and
equitable to each of the accounts involved over time. In making such
allocation decisions, the Investment Manager will use its business judgment
and will consider, among other things, any or all of the following: each
client's investment objectives, guidelines, and restrictions, the size of
each client's order, the amount of investment funds available in each
client's account, the amount already committed by each client to that or
similar investments, and the structure of each client's portfolio.
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, (68), 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 the Wilshire
Target Funds Inc.; and as a trustee of Brandes Institutional International
Investment Trust, the Pacific Gas and Electric Nuclear Decommissioning Trust,
and the PCG Private Equity Fund.
PAMELA A. FARR, (53), 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.
GEORGE B. JAMES, (61), Director. Mr. James is a Senior Vice President
and Chief Financial Officer, retiired, of Levi Strauss & Co., with which he
was associated since 1985. Mr. James serves as a director of Basic Vegetable
Products, Clayton Group, Inc., and Crown Vantage, Inc. Mr. James also serves
as a trustee of the Committee for Economic Development and the California
Pacific Medical Center Foundation. Previously, Mr. James was Chair of the
Advisory Committee to the California Public Employees Retirement System.
GEORGE G.C. PARKER, (59), 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,
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<PAGE>
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.
ANTHONY AIN, (40), President. Mr. Ain is a Managing Director and General Counsel
of Dresdner RCM, with which he has been associated since 1992. Prior to joining
Dresdner RCM, he worked for the United States Securities and Exchange
Commission, first as Counsel to Commissioner Joseph A. Grundfest, then as a
Senior Special Counsel in the SEC's Division of Market Regulation. Before
joining the SEC, he was an associate in the Washington, D.C. office of Fried,
Frank, Harris, Shriver & Jacobson, where he practiced securities and banking
law. He received his undergraduate degree from Cornell University in 1980 and
graduated cum laude in 1984 from the University of Pennsylvania Law School,
where he served on the Law Review and was a member of the Order of the Coif. He
is a Director of the National Society of Compliance Professionals.
JUDITH W. O'CONNELL (35), Vice President. Ms. O'Connell is a Director and joined
Dresdner RCM Global Investors in 1994. She is the Director of Mutual Fund
Services and is primarily responsible for the overseeing distribution and
marketing efforts for investment companies managed by Dresdner RCM. Ms.
O'Connell was with G.T. Capital Management, where she was employed as Director
of Mutual Fund Operations. Prior to joining G.T. she worked for five years at
The Boston Company Advisors Inc., where she was a Vice President in the Mutual
Funds Division responsible for accounting and administration of over fifty
international mutual funds. She studied International Business at the University
of Copenhagen and completed her BS degree in finance at the University of
Massachusetts.
ROBERT J. GOLDSTEIN (36), Vice President and Secretary. Mr. Goldstein is a
Director and Associate General Counsel of Dresdner RCM, which he joined in
1997. Prior to joining Dresdner RCM, he was an associate in the New York,
London and Prague offices of Weil, Gotshal & Manges where his practice
primarily focused on private investment and hedge funds, and international
transactional and general corporate matters. Mr. Goldstein holds a B.A. from
Hobart College, and graduated from Brooklyn Law School where he was a member
of the Brooklyn Law Review and recipient of the Mead Data Central Award for
excellence in research and writing and the American Jurisprudence Award for
excellence in Secured Transactions and Civil Procedure.
JENNIE KLEIN, (35) Vice President and Treasurer. Ms. Klein, CPA, Director of
Commingled Fund Services, joined Dresdner RCM in 1994. She is responsible for
fund administration and shareholder record keeping for the Dresdner RCM fund
products. Prior to joining Dresdner RCM, she was at G.T. Capital Management
where she was the Manager of Financial Reporting and Compliance for their mutual
funds. Before joining G.T., Ms. Klein was an auditor at KPMG Peat Marwick. She
received a Bachelor of Science degree in Business Administration from San
Francisco State University.
KARIN BROTMAN (33), Assistant Secretary. Ms. Brotman joined Dresdner RCM
in 1997 and is Assistant Fund Counsel working with investment companies.
Prior to joining Dresdner RCM, she was a Product Manager at Fidelity
Investments in their Legal Department, where she was involved in providing
`40 Act regulatory compliance for mutual funds. Previously she was employed
as an Account Officer with Fleet Financial Group where she was responsible
for negotiating the legal recovery of a distressed asset portfolio. Ms.
Brotman holds a B.S. in Business from the University of Connecticut and
graduated cum laude from The New England School of Law.
STEVEN WONG, (33), Assistant Treasurer. Mr. Wong, CPA, joined Dresdner RCM in
1994 and is the Manager of Commingled Fund Services. He is responsible for
overseeing Dresdner RCM's mutual fund administration which includes financial
reporting, compliance, tax reporting, fund accounting, budgeting and shareholder
servicing. Prior to joining Dresdner RCM, he was a senior auditor at KPMG Peat
Marwick specializing in the audit of investment companies. Before that, he was a
fund accountant with Franklin Funds. Mr. Wong received his Bachelor of Science
degree in Managerial Economics from the University of California, Davis.
Regular meetings of the Company's Board of Directors are held on a
quarterly basis. The Company's Audit Committee, whose sole present member is
DeWitt F. Bowman, 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 receives 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.
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The following table sets forth the aggregate compensation paid by the
Company for the fiscal year ended December 31, 1998, 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 Securities Exchange Act of 1934):
<TABLE>
<CAPTION>
Pension or
Retirement Total Compensation
Aggregate Benefits Accrued Estimated Annual from the Company
Director Compensation as Part of Benefits Upon and Company Complex
Name from the Company the Company's Expenses Retirement Paid to Director (1)
- ------------------------- ----------------- ---------------------- ----------------- --------------------
<S> <C> <C> <C> <C>
DeWitt F. Bowman $14,500 $22,785 N/A $14,500
Pamela A. Farr $13,000 $40,823 N/A $13,000
Frank P. Greene(2) $11,250 $32,556 N/A $11,250
George B.James(3) $ 3,250 None N/A $ 3,250
George G.C. Parker $13,000 $42,613 N/A $13,000
Total $55,000 $55,000
</TABLE>
_____________________
(1) During the fiscal year ended December 31, 1998, there were twelve funds in
the complex.
(2) Mr. Greene served as a Director of the Company from December, 1995 through
November 1998.
(3) Mr. James was appointed as a Director of the Global Company on December 14,
1998.
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 a Deferred Compensation Plan for
Non-Interested Directors ("Directors' Plan"). Under the Directors' Plan, an
eligible Director may elect to have his or her deferred fees deemed invested
either in 90-day U.S. Treasury bills, shares of the Common Stock of the
Company of which he or she is a Director, 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 a Company pursuant
to the Directors' Plan is a general obligation of such Company. The 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 deferred
compensation obligation under the Directors' Plan. As of December 31, 1998,
no Director or officer of the Company was a beneficial owner of any shares
of the outstanding Common Stock of any series of the Company.
THE INVESTMENT MANAGER
The Board of Directors of the Company has overall responsibility for the
operation of the Fund. 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 Fund. The Company has retained as the Fund's Investment
Manager, Dresdner RCM Global Investors LLC, a Delaware limited liability
company with principal offices at Four Embarcadero Center, San Francisco,
California 94111. The Investment Manager is actively engaged in providing
investment supervisory services to institutional and individual clients. The
Investment Manager was established in December of 1998 and is the successor
to the business of its holding company, Dresdner RCM Global Investors US
Holdings LLC. The Investment Manager was originally formed as Rosenberg
Capital Management in 1970, and it and its successors have been consistently
in business since then.
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The Investment Manager is an indirect wholly owned subsidiary of
Dresdner Bank, an international banking organization with principal executive
offices located at Gallunsanlage 7, 60041 Frankfurt, Germany. With total
consolidated assets as of December 31, 1998, of DM714 billion ($426 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, Leonard Fischer, George N. Fugelsang, Joachim Madler,
Susan C. Gause, Luke D. Knecht, 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 Fund with investment supervisory
services pursuant to an Investment Management Agreement, Power of Attorney and
Service Agreement (the "Management Agreement") dated as of December 15, 1999.
The Investment Manager manages the Fund's investments, provides various
administrative services, and supervises the Fund's daily business affairs,
subject to the authority of the Board of Directors. The Investment Manager
is also the investment manager for Dresdner RCM Growth Equity Fund and
Dresdner RCM Small Cap Fund, Dresdner RCM International Growth Equity Fund,
each a series of Dresdner RCM Capital Funds, Inc.; 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, Dresdner RCM Emerging Markets Fund, Dresdner RCM Tax
Managed Growth Fund, Dresdner RCM Global Equity Fund and Dresdner RCM
Strategic Income Fund, each a series of Dresdner RCM Global Funds, Inc.;
Dresdner RCM Europe Fund, a series of Dresdner RCM Investment Funds Inc.; RCM
Strategic Global Government Fund, Inc., Bergstrom Capital Corporation and
Dresdner RCM Global Strategic Income Fund, Inc., each closed-end management
investment companies. The 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
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.
The Fund has, under its Management Agreement, assumed the obligation for
payment of all of its ordinary operating expenses, including: (a) brokerage
and commission expenses, (b) federal, state, or local taxes incurred by, or
levied on, the Fund, (c) interest charges on borrowings, (d) charges and
expenses of the Fund's custodian, (e) investment advisory fees (including
fees payable to the Investment Manager under the Management Agreement), (f)
legal and audit fees, (g) SEC and "Blue Sky" registration expenses, and (h)
compensation, if any, paid to officers and employees of the Company who are
not employees of the Investment Manager (see DIRECTORS AND OFFICERS). The
Investment Manager is responsible for all of its own expenses in providing
services to the Fund. Expenses attributable to the Fund are charged against
the assets of the Fund.
The Investment Manager has voluntarily agreed to limit the Fund's
expenses as described in the Prospectus. The 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 the Fund to
the extent that the total operating expenses of the Fund are at or above the
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<PAGE>
expense cap. However, if the total operating expenses of the Fund fall below
the expense cap, the reimbursement to the Investment Manager will be accrued
by the Fund as a liability.
The Fund's Management Agreement provides that the Investment Manager
will not be liable for any error of judgment or for any loss suffered by the
Fund in connection with the matters to which the Management Agreement
relates, except for liability resulting from willful misfeasance, bad faith
or gross negligence in the performance of its duties or by reason of the
Investment Manager's reckless disregard of its duties and obligations under
the Management Agreement. The Company has agreed to indemnify the Investment
Manager out of the assets of The 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 the Fund or its
stockholders by reason of willful misfeasance, bad faith or gross negligence
in the performance of its duties, or of its reckless disregard of its duties
and obligations under the Management Agreement.
The Management Agreement is terminable without penalty on 60 days'
written notice by a vote of the majority of the outstanding voting securities
of the Fund which is the subject of the Management Agreement, by a vote of
the majority of the Company's Board of Directors, or by the Investment
Manager on 60 days' written notice and will automatically terminate in the
event of its assignment (as defined in the 1940 Act).
THE DISTRIBUTOR
Funds Distributor, Inc., 60 State Street, Suite 1300, Boston,
Massachusetts 02109 (the "Distributor") serves as Distributor to the Fund.
The Distributor has provided mutual fund distribution services since 1976,
and is a subsidiary of Boston Institutional Group, Inc., which provides
distribution and other related services with respect to investment products.
DISTRIBUTION AGREEMENT
Pursuant to a Distribution Agreement with the Company, the Distributor
has agreed to use its best efforts to effect sales of shares of the Fund, but
is not obligated to sell any specified number of shares. The Distribution
Agreement contains provisions with respect to renewal and termination similar
to those in the Fund's Management Agreement discussed above. Pursuant to the
Distribution Agreement, the Company has agreed to indemnify the Distributor
out of the assets of the 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 the Company.
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
Agreement.
THE ADMINISTRATOR
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Effective January 1, 1999, the administrator of the Company is State
Street Bank and Trust Company ("State Street"), 1776 Heritage Drive, North
Quincy, Massachusetts 02109.
Pursuant to an Administration Agreement with the Company, State Street
is responsible for performing all administrative services required for the
daily operation of the Company, subject to the control, supervision and
direction of the Company and the review and comment by the Company's auditors
and legal counsel. State Street has no supervisory responsibility over the
investment operations of the Fund. Administrative services performed by
State Street include, but are not limited to, the following: overseeing the
determination and publication of the Company's net asset value; overseeing
the maintenance by the Company's custodian of certain book and records of the
Company; preparing the Company's federal, state and local income tax returns;
arrange for payment of the Company's expenses; and preparing the financial
information for the Company's semi-annual and annual reports, proxy
statements and other communications.
For its services, State Street receives annual fees pursuant to the
following schedule:
ANNUAL FEE
Average Assets Expressed in Basis Points: 1/100 of 1%
First $250 Million/Fund 2.50
Next $250 Million/Fund 1.75
Thereafter 1.00
Minimum/Fund $57,500
Fees are calculated by multiplying each Average Asset Break Point in the
above schedule by the number of Funds in the Dresdner RCM complex to
determine the breakpoints used in the schedule. Total net assets of the Fund
will be used to calculate the fee by multiplying the net assets of the Funds
by the basis point fees in the above schedule. The minimum fee will be
calculated by multiplying the minimum fee by the number of Funds in the
complex to arrive at the total minimum fee. The greater of the basis point
fee or the minimum fee will be allocated equally to each Fund in the complex.
SERVICE PROVIDERS
State Street acts as the transfer agent, redemption agent and dividend
paying agent for the Fund. State Street also acts as custodian for the Fund.
The custodian is responsible for the safekeeping of the Fund's assets and the
appointment of any subcustodian banks and clearing agencies.
State Street's principal business address is 1776 Heritage Drive, North
Quincy, Massachusetts 02171.
PricewaterhouseCoopers LLP ("PWC") acts as the independent public
accountants for the Fund. The accountant examines financial statements for
the Fund and provides other audit, tax, and related services. PWC's
principal business address is One Post Office Square, Boston, Massachusetts
02109.
NET ASSET VALUE
For purposes of the computation of the net asset value of each share of
the Fund, equity securities traded on stock exchanges are valued at the last
sale price on the exchange or in the principal over-the-counter market in
which such securities are traded as of the close of 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
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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 Fund will be valued at current market value, if current market quotations
are readily available for such securities. To the extent that market
quotations are not readily available such securities will be valued by
whatever means a duly constituted committee of the 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 Fund 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 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.
The Board of Directors of the Company has adopted guidelines and
procedures for valuing portfolio securities for which market quotations are
not readily available and has delegated to a Pricing Committee the
responsibility for determining the basis for pricing such securities. Such
pricing may be used only when no reliable external price is available from a
pricing service, from a dealer quotation, or from a recent sale.
PURCHASE AND REDEMPTION OF SHARES
The price paid for purchase and redemption of shares of the Fund is
based on the net asset value per share, which is normally calculated once
daily at the close of regular trading (normally 4:00 P.M. Eastern 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,President's Day, 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 its Fund's 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.
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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 the Fund. Under such circumstances,
payment of the redemption price could be made either in cash or in portfolio
securities taken at their value used in determining the redemption price
(and, to the extent practicable, representing a pro rata portion of each of
the portfolio securities held by the Fund), or partly in cash and partly in
portfolio securities. Payment for shares redeemed also may be made wholly or
partly in the form of a pro rata portion of each of the portfolio securities
held by the Fund at the request of the redeeming stockholder, if the Company
believes that honoring such request is in the best interests of 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
the 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 appropriate 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 the Fund for treatment as a "regulated
investment company" under Subchapter M of the Code. The Fund is treated as a
separate corporation for tax purposes and thus the provisions of the Code
generally applicable to regulated investment companies are applied separately
to the Fund. 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 the Fund. By complying with
the applicable provisions of the Code, the 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 the 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 the 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 Fund expect to so distribute all of such income and gains on an annual
basis and thus will generally avoid any such taxation.
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Even if the 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 the Fund from
its current year's ordinary income and capital gain net income and (ii) any
amount on which the Fund pays income tax for the year. The Fund intends to
meet these distribution requirements to avoid 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 the Fund whether paid in additional shares of
the Fund or in cash. To the extent that dividends received by the Fund would
qualify for the 70% dividends-received deduction available to corporations,
the Fund must designate in a written notice to stockholders, within 60 days
after the close of the Fund's taxable year, the amount of the Fund's
dividends that would be eligible for this treatment. In order to qualify for
the dividends-received deduction with respect to 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 not have to pay income tax on dividend or capital gain
distributions. Prospective tax-exempt investors should consult their own tax
advisers with respect to the tax consequences of an investment in the Fund
under federal, state, and local tax laws.
WITHHOLDING
Dividends paid by the Fund to a stockholder who, as to the U.S., is a
nonresident alien individual, nonresident alien fiduciary of a trust or
estate, foreign corporation, or foreign partnership (a "foreign stockholder")
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 the 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 the 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 Fund 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 the 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 the 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. The 60% portion
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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 Fund 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 the Fund. In addition, losses realized by the Fund on positions
that are part of a straddle position may be deferred under the straddle
rules, rather than being taken into account for the taxable year in which
these losses are realized. Because limited regulations implementing the
straddle rules have been promulgated, the tax consequences of hedging
transactions and options, futures and forward contracts to the Fund are not
entirely clear.
Hedging transactions may increase the amount of short-term capital gain
realized by the Fund, which is taxed as ordinary income when distributed to
stockholders. The Fund may make one or more elections available under the
Code which are applicable to straddle positions. If the Fund makes any of the
elections, the amount, character and timing of the recognition of gains or
losses from the affected straddle positions will be determined under 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 the Fund accrues interest or other
receivables, or accrues expenses or other liabilities, denominated in a
foreign currency and the time the Fund actually collects such receivables or
pays such liabilities, generally are treated as ordinary income or loss.
Similarly, on the disposition of debt securities denominated in foreign
currency and on the disposition of certain 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 the Fund's investment company taxable income to be distributed to
stockholders as ordinary income.
FOREIGN TAXES
The Fund may be required to pay withholding and other taxes imposed by
foreign countries which would reduce the Fund's investment income, generally
at rates from 10% to 40%. Tax conventions between certain countries and the
United States may reduce or eliminate such taxes. If more than 50% of the
value of the Fund's total assets at the close of its taxable year consists of
securities of foreign corporations, the Fund will be eligible to elect to
"pass-through" to the Fund's stockholders the amount of foreign income and
similar taxes paid by the Fund. If this election is made, stockholders
generally subject to tax will be required to include in gross income (in
addition to taxable dividends actually received) their pro rata 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 the Fund's taxable year whether the foreign taxes paid by the
Fund will be "passed-through" for that year.
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The foregoing is a general abbreviated summary of present U.S. federal
income tax laws applicable to the Fund, their stockholders and dividend and
capital gain distributions by the Fund. Stockholders are urged to consult
their own tax advisers for more detailed information and for information
regarding any foreign, state, and local tax laws and regulations applicable
to dividends and other distributions received from the Fund.
INVESTMENT RESULTS
Average annual total return ("T") of the 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 the 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 the 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
In addition, in order to more completely represent the Fund's
performance or more accurately compare such performance to other measures of
investment return, the Fund also may include in advertisements and
stockholder reports other total return performance data based on
time-weighted, monthly-linked total returns computed on the percentage change
of the month end net asset value of the Fund after allowing for the effect of
any cash additions and withdrawals recorded during the month. Returns may be
quoted for the same or different periods as those for which average total
return is quoted. The Fund's investment results will vary from time to time
depending upon market conditions, the composition of the Fund's portfolio,
and operating expenses, so that any investment results reported should not be
considered representative of what an investment in the Fund may earn in any
future period. These
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factors and possible differences in calculation methods should be considered
when comparing the Fund's investment results with those published for other
investment companies, other investment vehicles and unmanaged indices.
Results also should be considered relative to the risks associated with the
Fund's investment objective and policies.
The Fund 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.
In addition, the Fund may from time to time compare their performance
with one or more of the following:
1. THE S&P 500 COMPOSITE INDEX which is a capitalization-weighted index
of 500 stocks that attempts to measure performance of the broad
domestic economy through changes in the aggregate market value of 500
stocks representing major industries.
2. THE LEHMAN BROTHERS AGGREGATE INDEX which is a market value weighted
performance benchmark for investment-grade fixed-rate debt issues,
including government, corporate, asset-backed, and mortgage-backed
securities, with maturities of at leat one year.
3. THE LIPPER BALANCED FUND INDEX
GENERAL INFORMATION
The Global Company was incorporated in Maryland as open-end management
investment company in September 1995.
The authorized capital stock of the Global 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 the Balanced Fund. The Board of
Directors of the Company may, in the future, authorize the issuance of other
classes of shares of the Fund, or of other series of capital stock
representing shares of additional investment portfolios or funds.
DESCRIPTION OF CAPITAL SHARES
All shares of the Company have equal voting rights and will be voted in
the aggregate, and not by series, except where voting by series is required
by law or where the matter involved affects only one series. There are no
conversion or preemptive rights in connection with any shares. All shares of
the Fund when duly issued will be fully paid and non-assessable. The rights
of the holders of shares of the Fund may not be modified except by vote of
the majority of the outstanding shares of the Fund. Certificates are not
issued unless requested and are never issued for fractional shares.
Fractional shares are liquidated when an account is closed.
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
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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.
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.
Each share of the Fund represents an equal proportional interest in the
Fund and is entitled to such dividends and distributions out of the income
earned on the assets as are declared in the discretion of the Board of
Directors. In the event of the liquidation or dissolution of either Company,
stockholders of the 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.
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. The validity of the capital stock offered by the Fund has been
passed upon by Venable, Baetjer and Howard, LLP. Paul, Hastings, Janofsky &
Walker LLP has acted and will continue to act as counsel to the Investment
Manager in various matters.
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.
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REGISTRATION STATEMENT
The Fund's 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, such
statement being qualified in all respects by such reference.
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PART C
OTHER INFORMATION
ITEM 23. EXHIBITS.
1. (a) Articles of Incorporation of Registrant are incorporated
herein by reference to Exhibit 1 of Pre-Effective Amendment
No.1.
(b) Articles Supplementary to Articles of Incorporation of
Registrant with respect to RCM Global Health Care Fund, RCM
Global Small Cap Fund and RCM Large Cap Growth Fund,
(currently known as Dresdner RCM Global Health Care Fund,
Dresdner RCM Global Small Cap Fund and Dresdner RCM Large
Cap Growth Fund, respectively), are incorporated herein by
reference to Exhibit 1(b) of Post-Effective Amendment No. 2.
(c) Articles Supplementary to Articles of Incorporation of
Registrant with respect to Dresdner RCM Emerging Markets
Fund are 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
are incorporated herein 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, are incorporated herein by reference to Exhibit 1(e)
of Post-Effective Amendment No. 6.
(f) Articles of Amendment 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. are incorporated herein by reference to Exhibit
1(f) of Post-Effective Amendment No. 10.
(g) Articles of Amendment to Articles of Incorporation of
Registrant, with respect to changing the name of the
existing shares of capital stock of its Dresdner RCM Large
Cap Growth Fund, Dresdner RCM Global Small Cap Fund,
Dresdner RCM Global Technology Fund, and Dresdner RCM
Emerging Markets Fund are incorporated herein by reference
to Exhibit 1(g) of Post-Effective Amendment No. 10.
(h) Articles Supplementary to Articles of Incorporation of
Registrant with respect to establishing a new class of
capital stock for its Dresdner RCM Large Cap Growth Fund,
Dresdner RCM Global Small Cap Fund, Dresdner RCM Global
Technology Fund and Dresdner RCM Emerging Markets Fund
C-1
<PAGE>
and establishing three new series of capital stock,
Dresdner RCM Tax Managed Growth Fund, Dresdner RCM Global
Equity Fund and Dresdner RCM Strategic Income Fund are
incorporated herein by reference to Exhibit 1(h) of
Post-Effective Amendment No. 10.
(i) Articles Supplementary to Articles of Incorporation of
Registrant with respect to Dresdner RCM Balanced Fund is
incorporated herein by reference to Exhibit 1(i) of
Post-Effective Amendment No. 14.
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. (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.
C-2
<PAGE>
(g) Proof of specimen of certificate for capital stock ($0.0001
par value) of Registrant, on behalf of its Dresdner RCM
Large Cap Growth Fund Class N shares, is incorporated herein
by reference to Exhibit 4(g) of Post-Effective Amendment No.
10.
(h) Proof of specimen of certificate for capital stock ($0.0001
par value) of Registrant, on behalf of its Dresdner RCM
Global Small Fund Class N shares, is incorporated herein by
reference to Exhibit 4(h) of Post-Effective Amendment No.
10.
(i) Proof of specimen of certificate for capital stock ($0.0001
par value) of Registrant, on behalf of its Dresdner RCM
Global Technology Fund Class N shares, is incorporated
herein by reference to Exhibit 4(i) of Post-Effective
Amendment No. 10.
(j) Proof of specimen of certificate for capital stock ($0.0001
par value) of Registrant, on behalf of its Dresdner RCM
Emerging Markets Fund Class N shares, is incorporated herein
by reference to Exhibit 4(j) of Post-Effective Amendment No.
10.
(k) Proof of specimen of certificates for capital stock ($0.0001
par value) of Registrant, on behalf of its Dresdner RCM Tax
Managed Growth Fund Class N and I shares, are incorporated
herein by reference to Exhibit 4(k) of Post-Effective
Amendment No. 10.
(l) Proof of specimen of certificates for capital stock ($0.0001
par value) of Registrant, on behalf of its Dresdner RCM
Global Equity Fund Class N and I shares, are incorporated
herein by reference to Exhibit 4(l) of Post-Effective
Amendment No.10.
(m) Proof of specimen of certificates for capital stock ($0.0001
par value) of Registrant, on behalf of its Dresdner RCM
Strategic Income Fund Class N and I shares, are incorporated
herein by reference to Exhibit 4(m) of Post-Effective
Amendment No. 10.
(n) Proof of specimen of certificate for capital stock ($.0001
par value) of Registrant, on behalf of its Dresdner RCM
Balanced Fund, is incorporated herein by reference to
Exhibit 3(n) of Post-Effective Amendment No. 12.
4. (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.
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<PAGE>
(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) Investment Management Agreement, Power of Attorney and
Service Agreement and Appendix A (Schedule of Fees) between
Registrant, on behalf of Dresdner RCM Tax Managed Growth
Fund and Dresdner RCM Global Investors LLC dated as of
December 30, 1998, are incorporated herein by reference to
Exhibit 5(g) of Post-Effective Amendment No. 10.
(h) Investment Management Agreement, Power of Attorney and
Service Agreement and Appendix A (Schedule of Fees) between
Registrant, on behalf of Dresdner RCM Global Equity Fund and
Dresdner RCM Global
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<PAGE>
Investors LLC dated as of December 30, 1998, are
incorporated herein by reference to Exhibit 5(h) of Post-
Effective Amendment No. 10.
(i) Investment Management Agreement, Power of Attorney and
Service Agreement and Appendix A (Schedule of Fees) between
Registrant, on behalf of Dresdner RCM Strategic Income Fund
and Dresdner RCM Global Investors LLC dated as of December
30, 1998, are incorporated herein by reference to Exhibit
5(i) of Post-Effective Amendment No. 10.
(j) Investment Management Agreement, Power of Attorney
and Service Agreement and Appendix A (Schedule of Fees)
between Registrant, on behalf of its Dresdner RCM Balanced
Fund and Dresdner RCM Global Investors LLC dated as of
December 15, 1999 are incorporated herein by reference to
Exhibit 4(j) of Post-Effective Amendment No. 14.
5. (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 Global 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 Global 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.
6. None
7. (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.
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<PAGE>
(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 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 as Exhibit 8(e) of
Post-Effective Amendment No. 6.
(f) Amendment to 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(f) of Post-Effective Amendment No. 6.
(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, and Dresdner RCM Strategic Income
Fund is incorporated herein by reference to Exhibit 8(h) of
Post-Effective Amendment No. 8.
(i) Form of Amendment to Custodian Contract between Registrant,
on behalf of Dresdner RCM Balanced Fund and State Street
Bank and Trust Company is incorporated herein by
reference to Exhibit 7(i) of Post-Effective Amendment
No. 14.
8. (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.
(b) Form of Transfer Agency Agreement between Registrant and
State Street Bank and Trust Company is incorporated herein
by reference to Exhibit 9(b) of Post-Effective Amendment No.
10.
C-6
<PAGE>
(c) Form of Administration Agreement between Registrant and
State Street Bank and Trust Company is incorporated herein
by referenced to Exhibit 8(c) of Post-Effective Amendment
No. 11.
9. (a) Opinion and consent of Venable, Baetjer and Howard LLP in
connection with the establishment of the Dresdner RCM Tax
Managed Growth Fund, Dresdner RCM Strategic Income Fund and
Dresdner RCM Strategic Income Fund, is incorporated herein
by reference to Exhibit 10(b) of Post-Effective Amendment
No. 10.
(b) Opinion and consent of Venable, Baetjer and Howard LLP in
connection with the issuance of Class N shares of the
Dresdner RCM Large Cap Growth Fund, Dresdner RCM Global
Small Cap Fund, Dresdner RCM Global Technology Fund and
Dresdner RCM Emerging Markets Fund, is incorporated herein
by reference to Exhibit 10(c) of Post-Effective Amendment
No. 10.
(c) Opinion and consent of Venable, Baetjer and Howard LLP in
connection with the issuance of Class I shares of the
Dresdner RCM Balanced Fund is incorporated herein by
reference to Exhibit 9(c) of Post-Effective Amendment
No. 14.
10. (a) Power of Attorney for DeWitt F. Bowman, Pamela A. Farr,
George G.C. Parker and George B. James is incorporated
herein by reference to Exhibit 10(a) of Post-Effective
Amendment No. 14.
11. None
12. (a) Investment Letter of initial investors in the Technology
Fund is incorporated herein by reference to Exhibit 13 of
Pre-Effective Amendment No. 1.
(b) Investment Letter of initial investors in the Large Cap
Fund, Global Small Cap Fund and Health Care Fund is
incorporated herein by reference to Exhibit 13(b) of
Post-Effective Amendment No. 7.
(c) Subscription Agreement for initial Stockholder of the
Dresdner RCM Biotechnology Fund is incorporated herein by
reference to Exhibit 13(c) of Post-Effective Amendment
No. 7
(d) Subscription Agreement for initial Stockholder of the
Dresdner RCM Emerging Markets Fund is incorporated herein
by reference to Exhibit 13(d) of Post-Effective Amendment
No. 7.
(e) Investment Letter of initial investor in the Balanced
Fund is incorporated herein by reference to Exhibit 12(c)
of Post-Effective Amendment No. 14.
13. (a) Form of Rule 12b-1 Plan of Registrant, on behalf of Dresdner
RCM Global Health Care Fund is incorporated herein by
reference to Exhibit 15(a) of Post-Effective Amendment No.
9.
(b) Form of 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) Rule 12b-1 Plan of Registrant, on behalf of the Class N
shares of the series listed on Appendix A (dated December
14, 1998) is incorporated herein by reference to Post-
Effective Amendment No. 10.
14. Not applicable
15. Multiple Class of Shares Plan of Registrant, on behalf of the
series listed on Appendix A (dated December 14, 1998) pursuant to
Rule 18f-3, is incorporated herein by reference to Post-Effective
Amendment No. 10.
C-7
<PAGE>
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None
ITEM 25. INDEMNIFICATION.
Section 2-418 of the General Corporation Law of Maryland empowers
a corporation to indemnify directors and officers of the corporation under
various circumstances as provided in such statute. A director or officer who
has been successful on the merits or otherwise, in the defense of any
proceeding, must be indemnified against reasonable expenses incurred by such
person in connection with the proceeding. Reasonable expenses may be paid or
reimbursed by the corporation in advance of the final disposition of the
proceeding, after a determination that the facts then known to those making
the determination would not preclude indemnification under the statute, and
following receipt by the corporation of a written affirmation by the person
that his or her standard of conduct necessary for indemnification has been
met and upon delivery of a written undertaking by or on behalf of the person
to repay the amount advanced if it is ultimately determined that the standard
of conduct has not been met.
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 26. BUSINESS AND OTHER CONNECTIONS OF THE 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
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<PAGE>
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 an indirect wholly owned subsidiary of
Dresdner whose principal executive offices are located at 75 Wall Street, New
York, New York 10005.
The individuals who sit on the Board of Managers of Dresdner RCM have
held the following director or officer positions within the past two fiscal
years:
<TABLE>
<CAPTION>
NAME OF THE OFFICER OR BUSINESS AFFILIATIONS ADDRESS
MEMBER OF THE BOARD OF
MANAGERS
<S> <C> <C>
Gerhard Eberstadt Dresdner Bank AG Jurgen-Ponto-Platz 1
(May 1998 - present) D-60301
Frankfurt am Main
Germany
Chairman, Dresdner 75 Wall Street
Kleinwort Benson North New York, NY 10005
America, Inc. (September
1996 - present)
Director, KBIMA (December 75 Wall Street
1997 - present) New York, NY 10005
Leonard H. Fischer Dresdner Bank AG Jurgen-Ponto-Platz 1
Institutional Asset D-60301
Management (January 1998- Frankfurt am Main
present) Germany
George N. Fugelsang President, Chief Executive 75 Wall Street
Officer, Chairman, New York NY 10005
Dresdner Kleinwort Benson
North America LLC
(February 1994 - present)
Director, Dresdner 75 Wall Street
Kleinwort Benson North New York, NY 10005
America Services LLC
(September 1996 -
present); Director, KBIMA
(December 1997 - present)
Director, KBIMA (December 75 Wall Street
1997 - present) New York, NY 10005
</TABLE>
C-9
<PAGE>
<TABLE>
<CAPTION>
NAME OF THE OFFICER OR BUSINESS AFFILIATIONS ADDRESS
MEMBER OF THE BOARD OF
MANAGERS
<S> <C> <C>
Susan C. Gause Dresdner RCM (July 1994 - Four Embarcadero
present) Center
San Francisco, CA
94111
Chief Operating Officer, Four Embarcadero
Senior Managing Director, Center
and Member of the Board of San Francisco, CA
Managers (July 1998- 94111
present)
Luke D. Knecht Managing Director (July Four Embarcadero
1998-present), Member of Center
the Board of Managers, San Francisco, CA
Dresdner RCM (November 94111
1997 - present)
Joachim Madler Director, Dresdner Bank AG Mainzer Lanstrass 15-17
(September 1997 - present) 60301 Frankfurt
Germany
Director, KBIMA (December 75 Wall Street
1997 - present); New York, NY 10005
Director, Dresdner (South Singapore
East Asia) (October 1997 -
present)
Managing Director, Farberstrasse 6,
Dresdner Bank (Schweiz) AG Zurich, Switzerland
(November 1997 - present)
Chairman, DFV Deutsche Mainzer Lanstrasse 11-
Fonds und 13
Vorsorgeberatungs (July 60301 Frankfurt
1996 - June 1997) Germany
Deutscher Investment-Trust Mainzer Lanstrasse 11-
(June 1996 - June 1997) 13
60301 Frankfurt
Germany
Managing Director, GKS Windmuhlweg 12
Gesellschaft fur 95030 Hof
Kontenservice GmbH (June Germany
1994 - June 1997)
</TABLE>
C-10
<PAGE>
<TABLE>
<CAPTION>
NAME OF THE OFFICER OR BUSINESS AFFILIATIONS ADDRESS
MEMBER OF THE BOARD OF
MANAGERS
<S> <C> <C>
William L. Price Chief Executive Officer Four Embarcadero
and Global Chief Center
Investment Officer, San Francisco, CA
Dresdner RCM (July 1998 - 94111
present)
Chairman and Member of the Four Embarcadero
Board of Managers, Senior Center
Managing Director, San Francisco, CA
Dresdner RCM (December 94111
1997 - present)
Director, KBIMA (December 75 Wall Street
1997- present) New York, NY 10005
Director, Dresdner RCM 10 Fenchurch Street
(UK) (January 1998 - London, UK EC3M3LB
present)
William S. Stack Senior Managing Director, Four Embarcadero
Global Equity Chief Center
Investment Officer (July San Francisco, CA
1998 - present); Member of 94111
the Board of Managers,
Dresdner RCM (August 1994
- present)
Director, KBIMA (December 75 Wall Street
1997- present) New York, NY 10005
Director, Dresdner RCM 10 Fenchurch Street
(UK) (January 1998 - London, UK EC3M3LB
present)
Kenneth B. Weeman, Jr. Dresdner RCM (October 1979 Four Embarcadero
- present) Center
San Francisco, CA
94111
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
NAME OF THE OFFICER OR BUSINESS AFFILIATIONS ADDRESS
MEMBER OF THE BOARD OF
MANAGERS
<S> <C> <C>
Vice Chairman, Senior Four Embarcadero
Managing Director (July Center
1998 - present) San Francisco, CA
94111
Director, KBIMA (December 75 Wall Street
1997- present) New York, NY 10005
Director, Dresdner RCM 10 Fenchurch Street
(UK) (January 1998 - London, UK EC3M3LB
present)
</TABLE>
ITEM 27. 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.
The Brinson Funds
Dresdner RCM Capital Funds, Inc.
Dresdner RCM Investment Funds Inc.
Founders Funds, Inc.
Harris Insight Funds Trust
HT Insight Funds, Inc. d/b/a Harris Insight Funds
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<PAGE>
J.P. Morgan Institutional Funds
J.P. Morgan Funds
JPM Series Trust
JPM Series Trust II
LaSalle Partners Funds, Inc.
Kobrick-Cendant 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.
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-13
<PAGE>
(b) The directors and executive officers of FDI are set forth
below:
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS WITH FUNDS DISTRIBUTOR, INC. WITH REGISTRANT
- -------------------------------------------------------------------------------
<S> <C> <C>
Marie E. Connolly Director, President and None
Chief Executive Officer
George A. Rio Executive Vice President None
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
Gary S. MacDonald Senior Vice President None
Judith K. Benson Senior Vice President None
Bernard A. Whalen Senior Vice President None
William J. Nutt Chairman and Director None
</TABLE>
(c) Not Applicable.
ITEM 28. 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
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<PAGE>
Funds Services Division, P.O. Box 1713, Boston,
Massachusetts 02105 and Brown Brothers Harriman & Co., 40 Water Street, Boston,
Massachusetts 02109, with respect to Dresdner RCM Emerging Markets Fund.
ITEM 29. MANAGEMENT SERVICES.
None
ITEM 30. UNDERTAKINGS.
Registrant undertakes to furnish each person to whom a prospectus
is delivered with a copy of Registrant's latest annual report to shareholders,
upon request and without charge.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, Dresdner RCM Global Funds, Inc. has duly
caused this Post-Effective Amendment No. 16 to the Registration Statement
pursuant to Rule 485(a) under the Securities Act of 1933 and has duly caused
this Post-Effective Amendment No. 16 to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in San
Francisco, California on March 17, 2000.
DRESDNER RCM GLOBAL FUNDS, INC.
By: /S/ ANTHONY AIN
-------------------------
President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 16 to the Registration Statement has been signed
below by the following persons in the capacities and on the date indicated.
SIGNATURE TITLE DATE
(3) Directors
/S/ DEWITT F. BOWMAN* March 17, 2000
----------------------
DeWitt F. Bowman
/S/ PAMELA A. FARR* March 17, 2000
----------------------
Pamela A. Farr
/S/ GEORGE B. JAMES* March 17, 2000
----------------------
George B. James
/S/ GEORGE G.C. PARKER* March 17, 2000
----------------------
George G.C. Parker
By: /S/ ANTHONY AIN* March 17, 2000
-----------------
Anthony Ain
as Attorney-in-Fact
* By Anthony Ain, pursuant to Power of Attorney dated December 8, 1999.
