<PAGE>
As filed with the Securities and Exchange Commission on May1, 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.18 [x]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [x]
Amendment No. 19 [x]
(Check appropriate box or boxes.)
DRESDNER RCM GLOBAL FUNDS, INC.
----------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Four Embarcadero Center San Francisco, California 94111
----------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(415) 954-5400
----------------------------------------------------------------------
(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 & Walker LLP
Dresdner RCM Global Investors LLC 555 South Flower Street
Four Embarcadero Center Los Angeles, California 90071
San Francisco, California 94111
<PAGE>
It is proposed that this filing will become effective:
[ x ] Immediately upon filing pursuant to paragraph (b)
[ ] On _________________ pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] On _________________ pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] On _________________ pursuant to paragraph (a)(2) of rule 485
<PAGE>
DRESDNER RCM GLOBAL FUNDS, INC.
DRESDNER RCM GLOBAL EQUITY FUND
DRESDNER RCM STRATEGIC INCOME 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, Risks, and Performance Risk/Return Summary
3. Risk/Return Summary: Fee Table Fees and Expenses
4. Investment Objectives, Principal Investment Strategies, Investment Strategies and Policies; Other
and Related Risks Investment Practices; Investment Risks
5. Management's Discussion of Fund *
Performance
6. Management, Organization, and Capital Structure Organization and Management
7. Shareholder Information Stockholder Information
8. Distribution Arrangements Organization and Management:; The Distributor
10. Financial Highlights Information Financial Highlights
</TABLE>
*Not applicable.
C-3
<PAGE>
DRESDNER RCM GLOBAL FUNDS, INC.
DRESDNER RCM GLOBAL EQUITY FUND
DRESDNER RCM STRATEGIC INCOME 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>
(CONTINUED)
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 Investments Investment Strategies and Policies; Risk
and Risks Considerations; Investment Restrictions
13. Management of the Fund The Investment Manager
14. Control Persons and Principal Holders of Directors and Officers; Description of Capital
Securities Shares
15. Investment Advisory and Other Services The Investment Manager; The Distributor; Additional
Information
16. Brokerage Allocation and Other Practices Execution of Portfolio Transactions
17. Capital Stock and Other Securities Description of Capital Shares
18. Purchase, Redemption and Pricing of Purchase and Redemption of Shares
Shares
19. Taxation of the Fund Dividends, Distributions and Tax Status
20. Underwriters The Distributor
21. Calculation of Performance Data Investment Results
23. Financial Statements Financial Statements
</TABLE>
C-4
<PAGE>
DRESDNER RCM GLOBAL FUNDS, INC.
-------------------------------------------------------------------------
DRESDNER RCM GLOBAL EQUITY FUND
DRESDNER RCM STRATEGIC INCOME FUND
-------------------------------------------------------------------------
May 1, 2000
This prospectus contains essential information for anyone
considering an investment in these Funds. Please read this document carefully
and keep it for future reference.
The Securities and Exchange Commission has not approved or
disapproved these securities or passed upon the accuracy or adequacy of this
Prospectus. It is a criminal offense to state or suggest otherwise.
1
<PAGE>
DRESDNER RCM GLOBAL FUNDS, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
RISK/RETURN SUMMARY AND FUND EXPENSES
- ---------------------------------------------------- -----------------------------------------------------------------
<S> <C>
This section summarizes the Funds' investments, 3 Dresdner RCM Global Equity Fund
risks, past performance, and fees. 6 Dresdner RCM Strategic Income Fund
INVESTMENT STRATEGIES, POLICIES AND RISKS
- ---------------------------------------------------- -----------------------------------------------------------------
This section provides details about the Funds' 9 Investment Strategies and Policies
investment strategies, policies and risks. 11 Other Investment Practices
12 Changing the Funds' Investment Objectives and Policies
12 Investment Risks
ORGANIZATION AND MANAGEMENT
- ---------------------------------------------------- -----------------------------------------------------------------
This section provides details about the people and 16 The Funds and the Investment Manager
organizations who oversee the Funds. 16 The Portfolio Managers
16 Management Fees and Other Expenses
16 The Distributor
STOCKHOLDER INFORMATION
- ---------------------------------------------------- -----------------------------------------------------------------
This section tells you how to buy, sell and 17 Buying Shares
exchange shares, how we value shares, and how we 20 Selling Shares
pay dividends and distributions. 21 Other Stockholder Services and Account Policies
23 Dividends, Distributions and Taxes
FINANCIAL HIGHLIGHTS
- ---------------------------------------------------- -----------------------------------------------------------------
This section provides details on selected 25 Dresdner RCM Global Equity Fund
financial highlights of the Funds. 25 Dresdner RCM Strategic Income Fund
APPENDIX
- ---------------------------------------------------- -----------------------------------------------------------------
This section provides a description of credit 26 Standard and Poor's Ratings Services
ratings issued by two of the major credit rating 27 Moody's Investors Service, Inc.
agencies.
</TABLE>
2
<PAGE>
RISK/RETURN SUMMARY AND FUND EXPENSES
DRESDNER RCM GLOBAL EQUITY FUND
Goal: The Fund's goal is to seek long-term
capital appreciation by investing in a
diversified portfolio of equity and
equity-related securities of domestic
and foreign companies of all sizes.
Principal Investment Strategies: The Fund invests at least 65% of its
total assets in the equity securities of
issuers located in at least three
different countries, including the
United States.
The Fund may invest up to 30% of its
total assets in securities of companies
organized or headquartered in emerging
market countries; however, the Fund will
not invest more than 10% of its total
assets in securities of issuers
organized or headquartered in any one
emerging market country. The Fund may
also invest up to 10% of its total
assets in U.S. and foreign debt
securities, including securities rated
below investment grade.
The Investment Manager evaluates the
fundamental value and prospects for
growth of individual companies that it
expects will have higher than average
rates of growth and strong potential for
capital appreciation. The S&P 500 Index
and the MSCI-ACWI Free Index are the
Fund's performance benchmarks. The
Investment Manager bases its security
selection on the relative investment
merits of each company and industry
around the world and will not seek to
duplicate the country or sector
allocations of the benchmarks.
Principal Investment Risks: Because the values of the Fund's
investments will fluctuate 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
will fluctuate in response to the
activities of individual companies and
general stock market and economic
conditions. Stock prices of smaller and
newer companies often fluctuate more
than those of larger, more established,
companies. 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. The
Fund's value will also be exposed to
currency risk.
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>
PERFORMANCE
The charts on this page provide some indication of the risks of
investing in the Fund. The bar chart shows the Fund's performance for its first
full year of operation. The chart below it compares the performance of the Fund
over time to its benchmarks.
Both charts assume reinvestment of dividends and distributions. Of
course, past performance does necessarily indicate how the Fund will perform in
the future.
Year-by-Year Total Return for Class I Shares
- --------------------------------------------------------------------------------
1999
62.20%
For the period covered by this year by year total return chart, the
Fund's highest quarterly return was 42.53% (for the fourth quarter ended 1999)
and the lowest quarterly return was 3.45% (for the third quarter ended 1999).
Average Annual Total Returns
(through December 31, 1999)
<TABLE>
<CAPTION>
-------------------- ------------ -----------------
FUND INCEPTION PAST SINCE
YEAR INCEPTION
- ------------------------------- -------------------- ------------ -----------------
<S> <C> <C> <C>
GLOBAL EQUITY FUND 12/31/98 62.20% 62.20%
CLASS I SHARES
- ------------------------------- -------------------- ------------ -----------------
GLOBAL EQUITY FUND 12/31/98 61.82% 61.82%
CLASS N SHARES*
- ------------------------------- -------------------- ------------ -----------------
MSCI-ACWI FREE INDEX __ 26.82% 26.82%
- ------------------------------- -------------------- ------------ -----------------
S&P 500 INDEX __ 21.04% 21.04%
- ------------------------------- -------------------- ------------ -----------------
</TABLE>
*There were no Class N shares outstanding as of December 31, 1999. Returns
through December 31, 1999 are based on Class I returns and reflect the deduction
of Rule 12b-1 fees applicable to Class N shares.
4
<PAGE>
FEES AND EXPENSES
As an investor in the Fund, you will pay the following fees and
expenses.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Class I Class N
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
None
ANNUAL FUND OPERATING EXPENSES
(FEES PAID FROM FUND ASSETS)
<S> <C> <C>
Management fees 0.75% 0.75%
- ------------------------------------------------------ ------------------------------- -------------------------------
Rule 12b-1 fee None 0.25%
- ------------------------------------------------------ ------------------------------- -------------------------------
Other expenses 13.84% 13.84%(1)
- ------------------------------------------------------ ------------------------------- -------------------------------
Total annual Fund operating expenses 14.59% 14.84%
- ------------------------------------------------------ ------------------------------- -------------------------------
Less: Fees waived and reimbursed(2) -13.34% -13.34%
- ------------------------------------------------------ ------------------------------- -------------------------------
Net operating expenses(2) 1.25% 1.50%
- ------------------------------------------------------ ------------------------------- -------------------------------
</TABLE>
(1) Estimated based on Class I expenses.
(2) 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 1.25% for Class I and 1.50% for Class N. 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 for the first year
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
<TABLE>
<CAPTION>
1 3 5 10
Year Years Years Years
<S> <C> <C> <C> <C>
Class I $127 $2,871 $5,114 $9,090
Class N $153 $2,930 $5,187 $9,151
</TABLE>
Assuming that the Investment Manager continues to reimburse the ordinary
operating expenses which exceed the annualized rate of 1.25% for Class I and
1.50% for Class N, your expenses for the periods indicated would be, $127,
$397, $686 and $1,511 for Class I and $153, $474, $818 and $1,791 for Class
N. However, there is no guarantee that the Investment Manager will continue
such reimbursement policy.
5
<PAGE>
DRESDNER RCM STRATEGIC INCOME FUND
RISK/RETURN SUMMARY
Goal: The Fund's goal is to seek current
income, with capital appreciation as a
secondary objective, by investing in a
diversified portfolio of U.S. and
foreign debt securities, including
securities rated below investment grade.
Principal Investment Strategies: The Fund seeks to diversify its
portfolio by allocating its assets
across the following categories: (i)
investment grade U.S. and foreign
government debt securities; (ii)
investment grade U.S. and foreign
corporate debt securities; (iii)
emerging market debt securities; and
(iv) U.S. and foreign debt securities
rated below investment grade.
The Fund's allocation of investments
among these categories is based on the
Investment Manager's evaluation of
expected performance of each type of
investment. The Fund may invest all of
its assets in any one category if, in
the opinion of the Investment Manager,
an opportunity exists to generate higher
income without undue risk to principal.
Principal Investment Risks: Because the values of the Fund's
investments will fluctuate 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 bond
market and economic conditions. Bond
prices of smaller and lower rated
companies often fluctuate more than
those of larger, higher rated or more
established companies. The performance
of foreign securities depends on the
political and economic environments and
other overall economic conditions in the
countries where the Fund invests. Debt
securities rated below investment grade
involve greater risk of default of price
declines than investment grade debt
securities.
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.
6
<PAGE>
PERFORMANCE
The charts on the following page provide some indication of the risks
of investing in the Fund. The bar chart shows the Fund's performance for its
first full year of operation. The chart below it compares the performance of the
Fund over time to its benchmark.
Both charts assume reinvestment of dividends and distributions. Of
course, past performance does not necessarily indicate how the Fund will perform
in the future.
Year-by-Year Total Returns for Class I Shares
- --------------------------------------------------------------------------------
1999
- -------------
2.67%
For the period covered by this year by year total return chart, the
Fund's highest quarterly return was 2.62% (for the fourth quarter ended 1999)
and the lowest quarterly return was (0.55%) (for the third quarter ended 1999).
Average Annual Total Returns
(through December 31, 1999)
<TABLE>
<CAPTION>
------------------- ------------- ---------------
FUND PAST SINCE
INCEPTION YEAR INCEPTION
- ---------------------------------- ------------------- ------------- ---------------
<S> <C> <C> <C>
STRATEGIC INCOME FUND 12/31/98 2.67% 2.67%
CLASS I SHARES
- ---------------------------------- ------------------- ------------- ---------------
STRATEGIC INCOME FUND 12/31/98 2.41% 2.41%
CLASS N SHARES*
- ---------------------------------- ------------------- ------------- ---------------
LEHMAN BROTHERS U.S. __ 0.18% 0.18%
UNIVERSAL INDEX
- ---------------------------------- ------------------- ------------- ---------------
</TABLE>
*There were no Class N shares outstanding as of December 31, 1999. Returns
through December 31, 1999 are based on Class I returns and reflect the deduction
of Rule 12b-1 fees applicable to Class N shares.
7
<PAGE>
FEES AND EXPENSES
As an investor in the Fund, you will pay the following fees and
expenses.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Class I Class N
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
None
ANNUAL FUND OPERATING EXPENSES
(FEES PAID FROM FUND ASSETS)
<S> <C> <C>
Management fees 0.75% 0.75%
- ------------------------------------------------------- -------------------------------- ---------------------------
Rule 12b-1 fee None 0.25%
- ------------------------------------------------------- -------------------------------- ---------------------------
Other expenses 4.56% 4.56%(1)
- ------------------------------------------------------- -------------------------------- ---------------------------
Total annual Fund operating expenses 5.31% 5.56%
- ------------------------------------------------------- -------------------------------- ---------------------------
Less: Fees waived and reimbursed(2) -4.06% -4.06%
- ------------------------------------------------------- -------------------------------- ---------------------------
Net Operating Expenses(2) 1.25% 1.50%
- ------------------------------------------------------- -------------------------------- ---------------------------
</TABLE>
(1) Estimated based on Class I expenses.
(2) 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 1.25% for Class I and 1.50% for Class N. 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 for the first year
Because this example is hypothetical and for comparison only, your actual costs
will be different.
<TABLE>
<CAPTION>
1 3 5 10
Year Years Years Years
<S> <C> <C> <C> <C>
Class I $127 $1,226 $2,317 $5,017
Class N $153 $1,297 $2,429 $5,203
</TABLE>
Assuming the Investment Manager continues to reimburse the ordinary operating
expenses which exceed the annualized rate of 1.25% for Class I and 1.50% for
Class N, your expenses for the periods indicated would be $127, $397, $686 and
$1511 for Class I and $153, $474, $818 and $1,791 for Class N. However, there is
no guarantee that the Investment Manager will continue such reimbursement
policy.
8
<PAGE>
INVESTMENT STRATEGIES, POLICIES AND RISKS
The following pages provide additional information about the Funds'
principal investment strategies and risks, as well as certain other important
investment policies
INVESTMENT STRATEGIES AND POLICIES
HOW DOES THE GLOBAL EQUITY FUND SELECT EQUITY INVESTMENTS?
While the Fund emphasizes investment in growth companies, the Fund also
may invest in other companies that are not traditionally considered to be growth
companies, such as emerging growth companies and cyclical and semi-cyclical
companies in developing economies, if the Investment Manager believes that such
companies have above-average growth potential.
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
- A strong commitment to research and development
- A steady stream of new products or services
The Fund does not seek current income, and does not restrict its
investments to companies with a record of dividend payments.
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 Research operating group. 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 STRATEGIC INCOME 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 uses a variety of proprietary and vendor supplied systems that provide
information in support of its investment selection process.
WHAT KINDS OF EQUITY SECURITIES DOES THE GLOBAL EQUITY FUND INVEST IN?
The Fund invests primarily 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
9
<PAGE>
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.
The Funds 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.
WHAT KINDS OF FOREIGN SECURITIES DOES THE GLOBAL EQUITY FUND INVEST IN?
The Fund may invest in the following types of foreign equity and equity-related
securities:
- - 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 United States,
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 Fund expects that its investments in foreign securities will be
comprised primarily of securities that are traded on recognized foreign
securities exchanges. However, the Fund also may invest in securities that are
traded only over-the-counter, either in the United States or in foreign markets,
when the Investment Manager believes that such securities meet the Fund's
investment criteria. 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 STRATEGIC INCOME FUND INVEST IT?
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 value.
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.
Below investment grade securities which may be held by the Fund will
be rated at least B by Standard & Poor's, an equivalent rating by another
recognized rating agency or, if unrated, judged by the Investment Manager to be
of comparable quality. Such securities are predominately speculative with
respect to the issuer's capacity to meet required principal and interest
payments. These are commonly known as "junk bonds".
Further information regarding investment ratings is located in Appendix A.
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
10
<PAGE>
and credit of the United States. For example, securities such as those issued by
the Federal National Mortgage Association ("FNMA") are supported by the
instrumentality's right to borrow money from the U.S. Treasury under certain
circumstances. Securities such as those issued by the Federal Farm Credit Banks
Funding Corporation are supported only by the credit of the entity that issued
them.
MORTGAGE-RELATED SECURITIES
Mortgage-related securities are securities that directly or indirectly
represent a participation in, or are secured or payable from, mortgage loans
secured by real or commercial property, and include pass-through securities,
collateralized mortgage obligations ("CMOs"), real estate mortgage conduits
("REMICs"), and adjustable rate mortgage securities ("ARMs"). There are
currently three basic types of mortgage-related securities: (i) those issued or
guaranteed by the U.S. Government or one of its agencies or instrumentalities
such as the Government National Mortgage Association ("GNMA"); (ii) those issued
by private issuers which represent an interest in or are collateralized by
mortgage-related securities issued or guaranteed by the U.S. Government or one
of its agencies of instrumentalities; and (iii) those issued by private issuers
which represent an interest in or are collateralized by whole mortgage loans or
mortgage-related securities without a government guarantee.
ASSET-BACKED SECURITIES
Asset-backed securities represent undivided fractional interests in a
trust with assets consisting of a pool of domestic loans such as motor vehicle
retail installment sales contracts or credit card receivables. Payments are
typically made monthly, consisting of both principal and interest payments.
Although generally rated AAA, it is possible that the securities could become
illiquid or experience losses if guarantors or insurers default.
OTHER INVESTMENT PRACTICES
DO THE FUNDS BUY AND SELL FOREIGN CURRENCIES?
The Investment Manager expects to purchase or sell foreign currencies
primarily to settle foreign securities transactions. However, each Fund may also
engage in currency management transactions to hedge currency exposure to
securities it owns or expects to purchase. A 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 each Fund's investment in
emerging market countries, the term "securities" does not include foreign
currencies. This means that the Fund's exposure to foreign currencies of
emerging market countries may be greater than its percentage limitations on
investments in such companies. Each 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.
DO THE FUNDS HEDGE THEIR INVESTMENTS?
For hedging purposes, each Fund may purchase options on financial
indices and on securities it is authorized to purchase. If a 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 a 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 a Fund the right to receive a cash payment equal to the difference between
the closing price of the index and the exercise price of the option. A Fund may
"close out" an option before it is exercised or expires by selling an option of
the same series as the option previously purchased.
Each Fund may employ certain management techniques to hedge against
currency exchange rate fluctuations, changes in interest rates and general
fluctuations in the value of its portfolio securities. These techniques include
forward currency exchange contracts, currency options, futures contracts (and
related options), and 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
11
<PAGE>
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. Swaps
involve the exchange of rights to make or receive payments in specified
currencies.
Each 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.
DO THE FUNDS INVEST IN OTHER INVESTMENT COMPANIES?
The laws of some foreign countries may make it difficult or impossible
for a Fund to invest directly in issuers organized or headquartered in those
countries, or may 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, and subject to the restrictions
referred to above regarding investments in companies organized or headquartered
in foreign countries, each 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. However, no Fund may acquire more than 3% of the
outstanding voting securities of any other investment company.
If a Fund invests in other investment companies, it will bear its
proportionate share of any management or administration fees and other expenses
in addition to the Fund's own expenses.
WHAT ARE THE FUNDS' INVESTMENT POLICIES IN UNCERTAIN MARKETS?
When the Investment Manager believes a 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
cash or cash equivalent investments, U.S. Government obligations,
non-convertible preferred stocks, and non-convertible corporate bonds with
remaining maturities of less than one year. During these periods, the Fund may
not achieve its investment objective.
WHERE CAN I FIND ADDITIONAL INFORMATION ABOUT INVESTMENT PRACTICES?
The Statement of Additional Information ("SAI") 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 FUNDS' INVESTMENT OBJECTIVES AND POLICIES
Each Fund's investment objective is a fundamental policy that may not
be changed without stockholder approval. However, except as otherwise indicated
in this Prospectus or the SAI, each Fund's other investment policies and
restrictions are not fundamental and may be changed without stockholder
approval.
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, a Fund is not required to sell any
security in its portfolio as a result of a change in any applicable percentage
resulting from market fluctuations.
INVESTMENT RISKS
Your investment in the Funds is subject to a variety of 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 and on overall market and economic conditions.
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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 risk when interest rates fall, and fall when interest rates
rise. Longer-term bonds, lower quality bonds and zero coupon bonds are generally
more sensitive to interest rate changes.
CREDIT RISK. The chance that any of a Fund's holdings will
have its credit rating downgraded or will default (fail to make scheduled
interest rate 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 that 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 a Fund to reinvest the proceeds at a lower interest rate.
Securities subject to prepayment risk generally offer less potential for gains
during a declining interest rate environment, and similar or greater potential
for loss in a rising interest rate environment.
BELOW INVESTMENT GRADE DEBT SECURITIES
Below investment grade debt securities, sometimes called high-yield
securities or "junk bonds", are considered to have speculative characteristics,
and involve greater risk of default or price changes due to changes in the
issuer's creditworthiness. The market prices of these securities may fluctuate
more than higher-quality securities and may decline significantly in periods of
general or regional economic difficulty. In addition, the secondary market may
be less liquid for debt securities rated below investment grade. This lack of
liquidity at certain times may make the valuation and sale of these securities
more difficult. If an issuer of such securities defaults, a Fund may incur
additional expenses to enforce its right or to participate in a restructuring of
the obligation.
SMALL COMPANIES
Investments in small companies 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 a 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 a Fund invests in small companies, its net asset
value may be more volatile than would otherwise be the case.
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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 a Fund
(including the withholding of dividends and limitations on the repatriation of
currencies). A 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.
EMERGING MARKETS
Investments in emerging markets involve additional risks. The
securities markets of emerging market countries are substantially smaller, less
developed, less liquid, and more volatile than U.S. and other developed foreign
markets. Disclosure and regulatory standards are less stringent. There also may
be a lower level of monitoring and regulation of securities markets in emerging
market countries and of the activities of investors in such markets, and
enforcement of existing regulations has been limited.
Economies in emerging market countries generally depend heavily on
international trade. They may be affected adversely by the economic conditions
of the countries with which they trade, as well as by trade barriers, exchange
controls, managed adjustments in relative currency values, and other
protectionist measures imposed or negotiated by these countries. In many cases,
governments of emerging market countries continue to exercise significant
control over the economies of these countries. In addition, some of these
countries have in the past failed to recognize private property rights and have
at times nationalized or expropriated the assets of private companies. There is
a greater possibility of confiscatory taxation, imposition of withholding taxes
on interest payments, or other similar developments that could affect
investments in those countries. Unanticipated political or social developments
may also affect the value of a Fund's investments in those countries.
OPTIONS, CURRENCY HEDGING AND CURRENCY MANAGEMENT
Stock options involve a number of risks. Options may be more volatile
than the underlying instruments. Differences between the options and securities
markets could result in an imperfect correlation between these markets, causing
a given transaction not to achieve its objective. In addition, a liquid
secondary market for particular options may be absent for a variety of reasons.
When trading options on foreign exchanges, many of the protections afforded to
participants in the United States are not available. The purchaser of an option
cannot lose more than the amount of the premium plus transaction costs.
A Fund's currency management techniques involve risks different from
investments in U.S. dollar-denominated securities. If a 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, options on currency futures contracts and index futures
contracts involve risks similar to those of options on securities; in addition,
the Fund's potential loss in such transactions is unlimited.
The use of hedging and currency management techniques is a highly
specialized activity, and the success of any such operations by a Fund is not
assured. Gains and losses in such transactions depend upon the Investment
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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.
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ORGANIZATION AND MANAGEMENT
THE FUNDS AND THE INVESTMENT MANAGER
The Funds are series of Dresdner RCM Global Funds, Inc. (the
"Company"). The 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 Funds. The Investment Manager manages each Fund's investments, provides
various administrative services, and supervises each Fund's business.
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
GLOBAL EQUITY FUND
William S. Stack and Steven C. Laughton are primarily responsible for
the day-to-day management of the Global Equity Fund. Mr. Stack is a Senior
Managing Director of the Investment Manager, with which he has been associated
since 1994, and is a member of its Board of Managers. Mr. Laughton is a Director
of the Investment Manager, with which he has been associated since 1995.
STRATEGIC INCOME FUND
Eammon F. Dolan and Stephen Kim are primarily responsible for the
day-to-day management of the Strategic Income Fund. Mr. Dolan is a Managing
Director of the Investment Manager, with which he has been associated since
1989. Mr. Kim is a Managing Director of the Investment Manager, with which he
has been associated since 1989.
MANAGEMENT FEES AND OTHER EXPENSES
Each Fund pays the Investment Manager a fee pursuant to an investment
management agreement. The Global Equity Fund and the Strategic Income Fund each
pay a monthly fee to the Investment Manager at the annual rate of 0.75% of their
average daily net assets.
Each Fund is responsible for its own expenses. These include brokerage
commission expenses, taxes, interest charges on any borrowings (if any),
custodial charges and expenses, and 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). These expenses are allocated to each class of shares based
on the assets of each class. In addition, each class also bears certain
class-specific expenses, such as Rule 12b-1 expenses payable by each Fund's
Class N shares.
To limit the expenses of each Fund, the Investment Manager has
contractually agreed, until at least December 31, 2000, to pay each 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 1.25% for Class I and 1.50% for Class N. A Fund may reimburse the
Investment Manager for such payments for a period of up to five years after they
are made, to the extent that the Fund's ordinary operating expenses are less
than the expense limit.
THE DISTRIBUTOR
Funds Distributor, Inc. ("FDI" or the "Distributor"), with principal
offices at 60 State Street, Suite 1300, Boston, Massachusetts 02109, acts as
distributor of shares of the Funds. The Distributor provides mutual fund
distribution
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services to registered investment companies, and is an indirect wholly owned
subsidiary of Boston Institutional Group, Inc., which is not affiliated with the
Investment Manager or Dresdner.
The Company has adopted a distribution and service plan (the "Plan")
for its Class N shares pursuant to Rule 12b-1 under the 1940 Act. Under the
Plan, each Fund pays the Distributor an annual fee of up to 0.25% of the average
daily net assets of its Class N shares as reimbursement for certain expenses
actually incurred by the Distributor in providing distribution and shareholder
support services. These expenses include advertising and marketing expenses,
payments to broker-dealers and other who have entered into agreements with the
Distributor, the expenses of preparing, printing and distributing the Prospectus
to persons who are not already stockholders, and indirect overhead costs
associated with the sale of Class N shares. If in any month the Distributor is
due more for such services than is immediately payable because of the expense
limitation under the Plan, the unpaid amount is carried forward from month to
month while the Plan is in effect until it can be paid. Because these fees are
paid out of the Funds' assets on an ongoing basis, over time these fees will
increase the cost of your investment and may cost you more than paying other
types of sales charges.
STOCKHOLDER INFORMATION
BUYING SHARES
For your convenience, we offer several ways to start and add to Fund
investments.
OPENING YOUR ACCOUNT BY INVESTING 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.
You may also purchase shares 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.
OPENING YOUR ACCOUNT DIRECTLY
You may establish accounts without the help of an intermediary as follows:
- - Choose the Fund in which you wish to invest. Determine the amount you are
investing. The minimum initial and subsequent investment requirements for
each class of each Fund are as follows:
<TABLE>
<CAPTION>
------------- ------------------ ---------------------- ---------------------- -------------------------
Minimum IRA Account IRA Account Minimum
Minimum Initial Subsequent Minimum Initial Subsequent
Fund Investment Investment Investment Investment
------------- ------------------ ---------------------- ---------------------- -------------------------
<S> <C> <C> <C> <C>
Class N $5,000 $250 $2,000 $250
------------- ------------------ ---------------------- ---------------------- -------------------------
Class I $250,000 $50,000 $250,000* $2,000
------------- ------------------ ---------------------- ---------------------- -------------------------
</TABLE>
*Rollovers only
- - The Funds reserve 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 Funds' 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.
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- - 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. To add or change
account privileges or to re-register an existing account, please speak with
a Fund representative at 1-800-726-7240 to determine the additional
documentation that will be required.
- -
- - Mail your completed application to:
Dresdner RCM Global Funds
P.O. Box 8025
Boston, MA 02266-8025
For overnight delivery, mail your completed application to:
Dresdner RCM Global Funds
66 Brooks Drive
Braintree, MA 02184
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 your 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.
- - 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 [insert the name of the Fund]. Please note:
No third party checks will be accepted.
- - Mail the check with your completed application to the Fund at:
Dresdner RCM Global Funds
P.O. Box 8025
Boston, MA 02266-8025
For overnight delivery, mail your completed application to:
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Dresdner RCM Global Funds
66 Brooks Drive
Braintree, MA 02184
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 [insert
the name of the Fund]. Please note: No third party checks will be accepted.
- - Mail the check with a completed investment slip to the Fund at:
Dresdner RCM Global Funds
P.O. Box 8025
Boston, MA 02266-8025
For overnight delivery, mail the check with a completed investment slip to:
Dresdner RCM Global Funds
66 Brooks Drive
Braintree, MA 02184
If you do not have an investment slip, attach a note indicating your
account number.
WITH SECURITIES
In its discretion, each Fund 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.
By Electronic Transfer (ACH)
This service allows for regular investments once an account is established by
simply authorizing the automatic withdrawal of funds from a bank account into
a specified Fund. The minimum investment pursuant to this plan is $250 for
Class N and $50,000 for Class I. Complete the appropriate section of the
account application indicating the amount of the automatic monthly
investment. The bank must be a member of the Automated Clearing House.
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<PAGE>
SELLING SHARES
BY PHONE - WIRE PAYMENT
- - Call the Fund at 1-800-726-7240 to verify that the wire redemption
privilege via telephone is in place on your account. If it is not, a
representative can help you add it. You will be required to provide a
signature guaranteed letter of instruction signed by all registered owners,
accompanied by a voided check.
- - 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 cash amount (net of any redemption fee, if
applicable), 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)
- A signature guarantee
- - 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 (ACH)
- - 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. Transfers of $50,000 or more will require a
signature guarantee. 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 Funds from fraudulent activities. Your request must be
made in writing and include a signature guarantee if any of the following
situations apply:
- - You 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 of record).
- - The check is being made payable to someone other than the account owner.
- - You are instructing us to change your bank account information.
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<PAGE>
- - You wish to add or change your account privileges.
- - You wish to change the registration information on your account.
OTHER STOCKHOLDER SERVICES AND ACCOUNT POLICIES
TELEPHONE ORDERS
We may accept telephone orders to buy or sell shares of the Funds. 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
Each Fund's regular business days and hours are the same as those of
the New York Stock Exchange (NYSE). The price of each Fund's shares is based on
its net asset value per share (NAV). Each Fund calculates its NAV every business
day as of the close of trading on the NYSE (normally 4:00 p.m. eastern time).
Shares of the Funds will not be priced on days on which the NYSE is closed for
trading. A 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 valued in accordance with the
Fund's fair valuation procedures.
TIMING OF ORDERS
Each Fund accepts orders until the close of trading on the NYSE every
business day (normally 4:00 pm eastern time). Orders 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. The Funds have the right to
suspend redemption of shares of the Funds and to postpone payment of proceeds
for up to seven days or as permitted by law.
We may suspend the right of redemption or postpone 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; or
- - The SEC, by order, permits such suspension for the protection of
stockholders.
TIMING OF SETTLEMENTS
When you buy shares of a 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.
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<PAGE>
ACCOUNTS WITH BELOW-MINIMUM BALANCES
If your account balance in a Fund falls below the minimum ($5,000 for
Class N shares and $250,000 for Class I shares) as a result of selling shares
(and not because of Fund performance), the Fund reserves the right to ask you to
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 on a class of shares of a 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
ex-dividend date. You or your authorized agent may request changes in the manner
in which dividend and distribution payments are made by written notice to the
Fund or by calling the Fund at 1-800-726-7240. This request will be effective as
to any payment if it is received before the record date used for determining
your payment. Any dividend and distribution election will remain in effect until
you notify the Fund in writing to the contrary.
EXCHANGE PRIVILEGE
You may exchange shares of either class of a Fund into shares of the
same class of any other Fund offered by Dresdner RCM, without a sales charge or
other fee (except redemption fees, if any), by contacting the Fund. You may also
exchange Class N shares of a Fund into Class I shares of the same Fund or any
other Fund offered by Dresdner RCM. Exchange purchases are subject to the
minimum investment requirements of the class purchased. To keep Fund expenses
low for all shareholders, the Funds will not allow frequent exchanges,
purchases, or sales of Fund shares. If a shareholder exhibits a pattern of
frequent trading, each Fund reserves the right to refuse to accept further
purchase or exchange orders from that shareholder. 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:
- - 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.
Please note: exchanges in excess of $50,000 will require a signature
guarantee. 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
Each Fund's fiscal year ends on December 31. Each Fund will issue to
its stockholders semi-annual and annual reports. Stockholders will also receive
quarterly statements of the status of their accounts reflecting all transactions
having taken place within that quarter. In order to reduce duplicate mailings
and printing costs, the Company will provide one annual and semi-annual report
and annual prospectus per household. Information regarding the tax status of
income dividends and capital gains distributions will be mailed to stockholders
on or before January 31st of each year. Account tax information will also be
sent to the IRS.
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REDEMPTION
Redemption payments will be made wholly in cash unless the Funds' Board
of Directors believes that unusual conditions exist which would make such
payment detrimental to the best interests of a Fund. Under these 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
Each Fund's dividends and distributions consist of most or all of
its net investment income and net realized capital gains. The Strategic
Income Fund pays income dividends monthly. Capital gains are typically paid
by each Fund once a year 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 you: (a) 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 you may obtain a refund
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 or estates, 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.
A Fund may be required to pay income, withholding and other taxes
imposed by foreign countries, generally at rates from 10% to 40%, which would
reduce its investment income. Tax conventions between certain countries and the
U.S. may reduce or eliminate such taxes. A Fund may "pass through" to its
stockholders the amount of foreign income taxes it pays, if it is in the best
interests of stockholders. If a Fund does so, you will be required to include in
your gross income your pro-rata share of foreign taxes it 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 the Fund does 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:
<TABLE>
<CAPTION>
- ----------------------------------- -----------------------------
TRANSACTION TAX STATUS
- ----------------------------------- -----------------------------
<S> <C>
Income dividends Ordinary income
- ----------------------------------- -----------------------------
Short-term capital gains Ordinary income
distributions
- ----------------------------------- -----------------------------
Long-term capital gain Capital gain
distributions
- ----------------------------------- -----------------------------
Sales or exchanges of shares Capital gain or loss
owned for more than one year
- ----------------------------------- -----------------------------
Sales or exchanges of shares Gains are treated as
owned for one year or less ordinary income; losses are
subject to special rules
- ----------------------------------- -----------------------------
</TABLE>
Dividends and other distributions generally are taxable to you at the
time they are received. However, dividends declared in October, November and
December by a Fund and made payable to you in that month are treated as paid and
are thereby taxable as of December 31, provided that the Fund pays the dividend
no later than
23
<PAGE>
January 31 of the following year.
If you purchase a Fund's shares shortly before the record date for a
dividend or other distribution on those shares, you will pay full price for the
shares. This is known as "buying a distribution" because you will receive some
portion of your purchase price back as a 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. Depending on your taxpayer
status, that distribution may be taxable.
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 a 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 you tax professional about your
investment in a Fund.
24
<PAGE>
FINANCIAL HIGHLIGHTS
The following financial highlights tables show the Funds' financial
performance. This information has been audited by PricewaterhouseCoopers LLP,
whose report, along with the Funds' financial statements, are included in the
Funds' Annual Report, which is available upon request and incorporated by
reference into the SAI.
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT
EACH FISCAL YEAR OR PERIOD ENDED DECEMBER 31
<TABLE>
<CAPTION>
GLOBAL EQUITY STRATEGIC INCOME
CLASS I 1999 1998 (2) 1999 1998 (2)
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE: (1)
Net asset value, beginning of period $10.00 $10.00 $10.00 $10.00
Income from Investment operations:
Net investment income (loss) (0.03) -- 0.53 --
Net realized and unrealized gain on 6.22 -- (0.27) --
Investments
Total from investment operations 6.19 -- 0.26 --
Less distributions:
In excess of net investment income (0.06) -- (0.53) --
From net realized gain on investments (0.29) -- (0.18) --
Total distributions (0.35) -- (0.71) --
NET ASSET VALUE, END OF PERIOD $15.84 $10.00 $9.55 $10.00
TOTAL RETURN (3) 62.20% 0.00% 2.67% 0.00%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $1,584 $1,000 $2,866 $3,000
Ratio of expenses to average net assets:
With waiver and reimbursement (5) 1.25% 0.00%(4) 1.25% 0.00%(4)
Without waiver and reimbursement (5) 14.59% -- 5.31% --
Ratio of net investment income to average net assets:
With waiver and reimbursement (5) (0.27)% 0.00%(4) 5.38% 0.00%(4)
Without waiver and reimbursement (5) (13.61)% -- 1.32% --
Portfolio turnover 149.96% 0.00% 346.34% 0.00%
</TABLE>
(1) Calculated using the average share method.
(2) Commencement of operations was December 31, 1998.
(3) Total return measures the change in value of an investment over the period
indicated. For periods less than one year, the total return is not
annualized.
(4) Not annualized. Fund was in operation for less than five days.
(5) Annualized for periods of less than one year.
25
<PAGE>
APPENDIX
The following is a description of credit ratings issued by two of the
major credit rating agencies. Credit ratings evaluate only the safety of
principal and interest payments, not market value risk. Credit rating agencies
may fail to change ratings to reflect subsequent events on a timely basis.
Although Dresdner RCM considers security ratings when making its investment
decisions, it also performs its own investment analysis and does not rely solely
on the ratings assigned by credit agencies.
STANDARD & POOR'S RATINGS SERVICES
Bond Rating Explanation
- --------------------------------------------------------------------------------
INVESTMENT GRADE
AAA Highest rating; extremely strong capacity to pay
principal and interest.
AA High quality; very strong capacity to pay principal
and interest.
A Strong capacity to pay principal and interest;
somewhat more susceptible to the adverse effects of
changing circumstances and economic conditions.
BBB Adequate capacity to pay principal and interest;
normally exhibit adequate protection parameters, but
adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay
principal and interest than for higher rated bonds.
NON-INVESTMENT GRADE
BB, B, Predominately speculative with respect to the
CCC, CC, C issuer's capacity to meet required interest and
principal payments.
BB - lowest degree of speculation; C - the highest
degree of speculation. Quality and protective
characteristics outweighed by large uncertainties or
major risk exposure to adverse conditions.
D In default
Standard & Poor's letter ratings may be modified by the addition of a
plus or minus sign, which is used to show relative standing within the major
rating categories, except in the AAA category.
26
<PAGE>
MOODY'S INVESTORS SERVICE, INC.
Bond Rating Explanation
- --------------------------------------------------------------------------------
INVESTMENT GRADE
Aaa Highest quality; smallest degree of investment risk.
Aa High quality; together with Aaa bonds, they compose
the high-grade bond group.
A Upper-medium grade obligations; many favorable
investment attributes.
Baa Medium-grade obligations; neither highly protected
nor poorly secured. Interest and principal appear
adequate for the present but certain protective
elements may be lacking or may be unreliable over any
great length of time.
NON-INVESTMENT GRADE
Ba More uncertain, with speculative elements. Protection
of interest and principal payments not well
safeguarded during good and bad times.
B Lack characteristics of desirable investment;
potentially low assurance of timely interest and
principal payments or maintenance of other contract
terms over time.
Caa Poor standing, may be in default; elements of danger
with respect to principal or interest payments.
Ca Speculative or high degree; could be in default or
have other marked shortcomings.
C Lowest-rated; extremely poor prospects of ever
attaining investment standing.
Moody's applies the numerical modifiers 1, 2 and 3 in each generic
rating classification from Aa through B. The modifier 1 indicates that the
security ranks in the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking; and the number 3 indicates that the issuer ranks
in the lower end of its generic rating category.
Unrated securities will not be treated as investment grade securities
unless a portfolio manager determines that such securities are the equivalent of
investment grade securities. Securities that have received different ratings
from more than one agency are considered investment grade if at least one agency
has rated the securities investment grade.
27
<PAGE>
[Back Page]
For more information about the Dresdner RCM Global Funds, the following
documents are available free upon request:
ANNUAL/SEMI-ANNUAL REPORTS:
The Funds' annual and semi-annual reports to shareholders contain
detailed information on each Fund's investments. The annual report includes a
discussion of the market conditions and investment strategies that significantly
affected the Funds' performance during their last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI):
The SAI provides more detailed information about the Funds, 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 reports and the SAI, or request other
information and discuss your questions about the Funds, by contacting us at:
Dresdner RCM Global Funds
Four Embarcadero Center
San Francisco, CA 94111
Telephone 1-800-726-7240
You can review the Funds' Reports and 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 or by email at [email protected].
- Free from the Commission's Website at http://www.sec.gov.
Investment Company Act file no. 811-9100.
28
<PAGE>
[LETTERHEAD]
DRESDNER RCM GLOBAL EQUITY FUND
DRESDNER RCM STRATEGIC INCOME FUND
STATEMENT OF ADDITIONAL INFORMATION
May 1, 2000
Dresdner RCM Global Equity Fund (the "Global Equity Fund") and Dresdner RCM
Strategic Income Fund (the "Strategic Income Fund"), are series (each a "Fund"
and together the "Funds") of Dresdner RCM Global Funds, Inc. (the "Company"), an
open-end management investment company. The Funds' investment manager is
Dresdner RCM Global Investors LLC (the "Investment Manager"). Each Fund is
diversified.
This Statement of Additional Information ("SAI") is not a prospectus, and should
be read in conjunction with the Prospectus of the Funds dated May 1, 2000. This
SAI relates to the Funds' Non-Institutional Class ("N Class") and Institutional
Class ("I Class") of shares. The Prospectus may be obtained without charge by
writing or calling the Company at the address and phone number above.
Incorporated by reference herein are the financial statements of the Funds
contained in the Funds' Annual Report to Shareholders for the year ended
December 31, 1999, including the Reports of Independent Accountants, dated
February 18, 2000, the Statement of Assets and Liabilities, including the
Portfolio of Investments and the related Statement of Operations, Statement of
Changes in Net Assets, and the Financial Highlights. Copies of the Funds' Annual
and Semi-Annual Reports to Shareholders will be available, upon request, by
calling (800) 726-7240, or by writing to Four Embarcadero Center, San Francisco,
California 94111.
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C>
Investment Objectives and Policies.......................................1
Risk Considerations.....................................................18
Investment Restrictions.................................................24
Execution of Portfolio Transactions.....................................26
Directors and Officers..................................................28
Control Persons and Principal Holders of Securities.....................30
The Investment Manager..................................................31
The Distributor.........................................................32
The Administrator.......................................................34
Other Service Providers.................................................34
Net Asset Value.........................................................35
Purchase and Redemption of Shares.......................................36
Dividends, Distributions and Tax Status.................................36
Investment Results......................................................39
General Information.....................................................41
Description of Capital Shares...........................................41
Additional Information..................................................42
Financial Statements....................................................42
</TABLE>
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
INVESTMENT CRITERIA
In evaluating particular investment opportunities, the Investment
Manager may consider such other factors, in addition to those described in the
Prospectus, as the anticipated economic growth rate, the political outlook, the
anticipated inflation rate, the currency outlook, and the interest rate
environment for the country and the region in which a particular issuer is
located. When the Investment Manager believes it would be appropriate and
useful, the Investment Manager's personnel may visit the issuer's headquarters
and plant sites to assess an issuer's operations and to meet and evaluate its
key executives. The Investment Manager also will consider whether other risks
may be associated with particular securities.
INVESTMENT IN FOREIGN SECURITIES
The securities markets of many countries have at times in the past
moved relatively independently of one another due to different economic,
financial, political, and social factors. In seeking to achieve the investment
objectives of the Funds, the Investment Manager allocates the Funds' assets
among securities of countries and in currency denominations where it expects
opportunities for meeting the Funds' investment objectives to be the most
attractive, subject to the percentage limitations set forth in the Prospectus.
In addition, from time to time a Fund may strategically adjust its investments
among issuers based in various countries and among the various equity markets of
the world in order to take advantage of diverse global opportunities, based on
the Investment Manager's evaluation of prevailing trends and developments, as
well as on the Investment Manager's assessment of the potential for capital
appreciation (as compared to the risks) of particular companies, industries,
countries, and regions.
INVESTMENT IN DEVELOPED FOREIGN COUNTRIES. The Global Equity Fund will
invest in securities of foreign governments and companies that are organized or
headquartered in developed foreign countries. A Fund may not be invested in all
developed foreign countries at one time, and may not invest in particular
developed foreign countries at any time, depending on the Investment Manager's
view of the investment opportunities available.
Although these countries have developed economies, even developed
countries may be subject to periods of economic or political instability. For
example, efforts by the member countries of the European Union to eliminate
internal barriers to the free movement of goods, persons, services and capital
have encountered opposition arising from the conflicting economic, political and
cultural interests and traditions of the member countries and their citizens.
The reunification of the former German Democratic Republic (East Germany) with
the Federal Republic of Germany (West Germany) and other political and social
events in Europe have caused considerable economic and social dislocations. Such
events can materially affect securities markets and have also disrupted the
relationship of such currencies with each other and with the U.S. dollar.
Similarly, events in the Japanese economy and social developments may affect
Japanese securities and currency markets, as well as the relationship of the
Japanese yen to the U.S. dollar. Future political, economic and social
developments can be expected to produce continuing effects on securities and
currency markets in these and other developed foreign countries.
INVESTMENT IN EMERGING MARKETS. The Global Equity Fund may invest in
securities of developing countries with emerging markets and companies organized
or headquartered in such countries. As a general matter, countries that are not
considered to be developed foreign countries by the Investment Manager will be
deemed to be emerging market countries. Emerging market countries include any
country generally considered to be an emerging market or developing country by
the World Bank, the International Finance Corporation, the United Nations or its
authorities, or other recognized financial institutions. As of the date of this
SAI, emerging market countries are deemed to include for purposes of this SAI,
all foreign countries other than Australia, Austria, Belgium, Canada, Denmark,
Finland, France, Germany, Ireland, Italy, Japan, Luxembourg, The Netherlands,
New Zealand, Norway, Singapore, Spain, Sweden, Switzerland, and the United
Kingdom. (See INVESTMENT IN DEVELOPED FOREIGN COUNTRIES.) As their economies
Page 1
<PAGE>
grow and their markets grow and mature, some countries that currently may be
characterized by the Investment Manager as emerging market countries may be
deemed by the Investment Manager to be developed foreign countries. In the event
that the Investment Manager deems a particular country to be a developed foreign
country, any investment in securities issued by that country's government or by
an issuer located in that country would not be subject to a Fund's overall
limitations on investments in emerging market countries.
Securities of issuers organized or headquartered in emerging market
countries may, at times, offer excellent opportunities for current income and
capital appreciation. However, prospective investors should be aware that the
markets of emerging market countries historically have been more volatile than
the markets of the United States and developed foreign countries, and thus the
risks of investing in securities of issuers organized or headquartered in
emerging market countries may be far greater than the risks of investing in
developed foreign markets. (See INVESTMENT AND RISK CONSIDERATIONS--EMERGING
MARKET SECURITIES for a more detailed discussion of the risk factors associated
with investments in emerging market securities.) In addition, movements of
emerging market currencies historically have had little correlation with
movements of developed foreign market currencies. Prospective investors should
consider these risk factors carefully before investing in a Fund. Some emerging
market countries have currencies whose value is closely linked to the U.S.
dollar. Emerging market countries also may issue debt denominated in U.S.
dollars and other currencies.
It is unlikely that a Fund will be invested in securities in all
emerging market countries at any time. Moreover, investing in some emerging
markets currently may not be desirable or feasible, due to lack of adequate
custody arrangements for Fund assets, overly burdensome repatriation or similar
restrictions, the lack of organized and liquid securities markets, unacceptable
political risks, poor values of investments in those markets relative to
investments in other emerging markets, in developed foreign markets, or in the
United States, or for other reasons.
CURRENCY MANAGEMENT
Securities purchased by the Funds may be denominated in U.S. dollars,
foreign currencies, or multinational currencies such as the Euro, and the Funds
will incur costs in connection with conversions between various currencies.
Movements in the various securities markets may be offset by changes in foreign
currency exchange rates. Exchange rates frequently move independently of
securities markets in a particular country. As a result, gains in a particular
securities market may be affected, either positively or negatively, by changes
in exchange rates, and a Fund's net currency positions may expose it to risks
independent of its securities positions.
From time to time, the Funds may employ currency management techniques
to enhance their total returns, although there is no current intention to do so.
A Fund may not employ more than 30% of the value of its total assets in currency
management techniques for the purpose of enhancing returns. To the extent that
such techniques are used to enhance return, they are considered speculative.
A Fund's ability and decision to purchase or sell portfolio securities
may be affected by the laws or regulations in particular countries relating to
convertibility and repatriation of assets. Because the shares of the Funds are
redeemable in U.S. dollars each day the Funds determine their net asset value,
the Funds must have the ability at all times to obtain U.S. dollars to the
extent necessary to meet redemptions. Under present conditions, the Investment
Manager does not believe that these considerations will have any significant
adverse effect on its portfolio strategies, although there can be no assurances
in this regard.
GENERAL CURRENCY CONSIDERATIONS. Currency exchange rates may fluctuate
significantly over short periods of time causing, along with other factors, a
Fund's net asset value to fluctuate as well. Currency exchange rates generally
are determined by the forces of supply and demand in the foreign exchange
markets and the relative merits of investments in different countries, actual or
anticipated changes in interest rates and other complex factors, as seen from an
international perspective. Currency exchange rates also can be affected
unpredictably by intervention, or failure to do so, by U.S. or foreign
governments or central banks or by currency controls or political developments
in the United States or abroad. The markets in forward foreign currency exchange
contracts, currency swaps and other privately negotiated currency instruments
offer less protection against defaults by the other party to such instruments
than is available for currency instruments traded on an exchange. To the extent
that a substantial portion of a Fund's
Page 2
<PAGE>
total assets, adjusted to reflect the Fund's net position after giving effect to
currency transactions, is denominated or quoted in the currencies of foreign
countries, the Fund will be more susceptible to the risk of adverse economic and
political developments within those countries.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. Each Fund may purchase or
sell forward foreign currency exchange contracts ("forward contracts") for
hedging purposes or to seek to increase total return when the Investment Manager
anticipates that a foreign currency will appreciate or depreciate in value, but
securities denominated or quoted in that currency do not present attractive
investment opportunities and are not held in the Fund's portfolio. When
purchased or sold to increase total return, forward contracts are considered
speculative. In addition, a Fund may enter into forward contracts in order to
protect against anticipated changes in future foreign currency exchange rates.
Each Fund may engage in cross-hedging by using forward contracts in a
currency different from that in which the hedged security is denominated or
quoted if the Investment Manager determines that there is a pattern of
correlation between the two currencies. Each such Fund may also engage in proxy
hedging, by using forward contracts in a series of foreign currencies for
similar purposes.
Each Fund may enter into forward contracts to purchase foreign
currencies to protect against an anticipated rise in the U.S. dollar price of
securities it intends to purchase. Each such Fund may enter into forward
contracts to sell foreign currencies to protect against the decline in value of
its foreign currency denominated or quoted portfolio securities, or a decline in
the value of anticipated income or dividends from such securities, due to a
decline in the value of foreign currencies against the U.S. dollar. Forward
contracts to sell foreign currency could limit any potential gain which might be
realized by a Fund if the value of the hedged currency increased.
If a Fund enters into a forward contract to sell foreign currency to
increase total return or to buy foreign currency for any purpose, the Fund will
segregate cash, U.S. Government securities, or other liquid debt or equity
securities with the Fund's custodian in an amount equal to the value of the
Fund's total assets committed to the consummation of the forward contract. If
the value of the segregated securities declines, additional assets will be
segregated so that the value of the segregated assets will equal the amount of
the Fund's commitment with respect to the contract.
A forward contract is subject to the risk that the counterparty to such
contract will default on its obligations. Since a forward contract is not
guaranteed by an exchange or clearinghouse, a default on the contract would
deprive a Fund of unrealized profits, transaction costs or the benefits of a
currency hedge or force the Fund to cover its purchase or sale commitments, if
any, at the current market price.
OPTIONS ON FOREIGN CURRENCIES. Each Fund may purchase and sell (write)
put and call options on foreign currencies for the purpose of protecting against
declines in the U.S. dollar value of foreign portfolio securities and
anticipated income or dividends on such securities and against increases in the
U.S. dollar cost of foreign securities to be acquired. Each such Fund may also
use options on currency to cross-hedge, which involves writing or purchasing
options on one currency to hedge against changes in exchange rates for a
different currency, if the Investment Manager believes there is a pattern of
correlation between the two currencies. Options on foreign currencies to be
written or purchased by the Funds will be traded on U.S. and foreign exchanges.
The writer of a put or call option receives a premium and gives the
purchaser the right to sell (or buy) the currency underlying the option at the
exercise price. The writer has the obligation upon exercise of the option to
purchase (or deliver) the currency during the option period. A writer of an
option who wishes to terminate the obligation may effect a "closing transaction"
by buying an option of the same series as the option previously written. A
writer may not effect a closing purchase transaction after being notified of the
exercise of an option. The writing of an option on foreign currency will
constitute only a partial hedge, up to the amount of the premium received; a
Fund could be required to purchase or sell additional foreign currencies at
disadvantageous exchange rates, thereby incurring losses. The purchase of an
option on foreign currency may constitute an effective hedge against exchange
rate fluctuations; however, in the event of exchange rate movements adverse to a
Fund's position, the Fund may forfeit the entire amount of the premium plus
related transaction costs.
Page 3
<PAGE>
Each Fund may purchase call or put options on a currency to seek to
increase total return when the Investment Manager anticipates that the currency
will appreciate or depreciate in value, but the securities quoted or denominated
in that currency do not present attractive investment opportunities and are not
held in the Fund's portfolio.
When a Fund writes a put or call option on a foreign currency, an
amount of cash, U.S. Government securities, or other liquid debt or equity
securities equal to the market value of its obligations under the option will be
segregated by the Fund's custodian to collateralize the position.
CURRENCY FUTURES CONTRACTS. Each Fund may enter into currency futures
contracts, as described under "Futures Transactions" below.
CURRENCY SWAPS. Each 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 Funds expect to achieve an
acceptable degree of correlation between their portfolio investments and their
currency swap positions entered into for hedging purposes. Currency swaps may
involve the delivery of the entire principal value of one designated currency in
exchange for the other designated currency, or the delivery of the net amount of
a party's obligations over its entitlements. Therefore, the entire principal
value of a currency swap may be subject to the risk that the other party to the
swap will default on its contractual delivery obligations. Each Fund will
maintain in a segregated account with the Fund's custodian cash, U.S. Government
securities, or other liquid debt or equity securities equal to the amount of the
Fund's obligations, or the net amount (if any) of the excess of the Fund's
obligations over its entitlements, with respect to swap transactions. To the
extent that such amount of a swap is segregated, the Company and the Investment
Manager believe that swaps do not constitute senior securities under the
Investment Company Act of 1940 (the "1940 Act") and, accordingly, will not treat
them as being subject to a Fund's borrowing restriction.
The use of currency swaps is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. If the Investment Manager is
incorrect in its forecasts of market values and currency exchange rates, the
investment performance of a Fund entering into a currency swap would be less
favorable than it would have been if this investment technique were not used.
INTEREST RATE SWAPS
Each Fund may enter into interest rate swaps, caps and floors and will
usually enter into interest rate swaps on a net basis (i.e. the two payment
streams are netted out, with the Fund receiving or paying, as the case may be,
only the net amount of the two payments). The net amount of the excess, if any,
of a Fund's obligation over its entitlement with respect to each interest rate
swap will be calculated on a daily basis and an amount of cash or other liquid
assets having an aggregate net asset value at least equal to the accrued excess
will be maintained in a segregated account by the Funds' custodian. If a Fund
enters into an interest rate swap on other than a net basis it will maintain a
segregated account in the full amount accrued on a daily basis of its
obligations with respect to the swap. A Fund will not enter into any interest
rate swap, cap or floor transaction unless the unsecured senior debt or the
claims-paying ability of the other party thereto is rated in one of the three
highest rating categories of at least one Nationally Recognized Rating
Organization at the time of entering into such transaction. The Investment
Manager will monitor the creditworthiness of all counterparties on an ongoing
basis. If there is a default by the other party to such a transaction, a Fund
will have contractual remedies pursuant to the agreements related to the
transaction.
The swap market has grown substantially in recent years with a large
number of banks and investment banking firms acting as principals and as agents
using standardized swap documentation. The Investment Manager has determined
that, as a result, the swap market has become relatively liquid. Caps and floors
are more recent innovations for which standardized documentation has not been
developed and, accordingly, they are less liquid than swaps. To the extent a
Fund sells (i.e. writes) caps and floors, it will segregate cash or other liquid
assets having an aggregate net asset value at least equal to the full amount,
accrued on a daily basis, of its obligations with respect to any caps or floors.
Page 4
<PAGE>
There is no limit on the amount of interest rate swap transactions that
may be entered into by a Fund. These transactions may in some instances involve
the delivery of securities or other underlying assets by a Fund or its
counterparty to collateralize obligations under the swap. Under the
documentation currently used in those markets, the risk of loss with respect to
interest rate swaps is limited to the net amount of the payments that a Fund is
contractually obligated to make. If the other party to an interest rate swap
that is not collateralized defaults, a Fund would risk the loss of the net
amount of the payments that it contractually is entitled to receive. A Fund may
buy and sell (i.e., write) caps and floors without limitation, subject to the
segregation requirement described above.
OPTIONS TRANSACTIONS
Each Fund may purchase listed put and call options on any securities
which it is eligible to purchase as a hedge against changes in market conditions
that may result in changes in the value of the Fund's portfolio securities. The
aggregate premiums on put options and call options purchased by a Fund may not
in each case exceed 5% of the value of the net assets of the Fund as of the date
of purchase. In addition, a Fund will not purchase options if more than 25% of
the value of its net assets would be hedged.
A put gives the holder the right, in return for the premium paid, to
require the writer of the put to purchase from the holder a security at a
specified price. A call gives the holder the right, in return for the premium
paid, to require the writer of the call to sell a security to the holder at a
specified price. Put and call options on various stocks and financial indices
are traded on U.S. and foreign exchanges. A put option is covered if the writer
segregates cash, U.S. Government securities or other liquid debt or equity
securities equal to the exercise price. A call option is covered if the writer
owns the security underlying the call or has an absolute and immediate right to
acquire the security without additional cash consideration upon conversion or
exchange of other securities held by it.
A Fund may effectively terminate its right or obligation under an
option by entering into a closing transaction. For example, a Fund may terminate
its obligation under a put or call option that it had written by purchasing an
identical put or call option; this is known as a closing purchase transaction.
Conversely, a Fund may terminate a position in a put or call option that it had
purchased by writing an identical put or call option; this is known as a closing
sale transaction. A Fund realizes a gain from a closing transaction if the cost
of the closing transaction is less than the premium received from writing the
option or if the proceeds from the closing transaction are more than the premium
paid to purchase the option.
PURCHASING PUT AND CALL OPTIONS
PUT OPTIONS. If a Fund purchases a put option, the Fund acquires the
right to sell the underlying security at a specified price at any time during
the term of the option (for "American-style" options) or on the option
expiration date (for "European-style" options). Purchasing put options may be
used as a portfolio investment strategy when the Investment Manager perceives
significant short-term risk but substantial long-term appreciation for the
underlying security. The put option acts as an "insurance policy", as it
protects against significant downward price movement while it allows full
participation in any upward movement. If a Fund is holding a security which the
Investment Manager feels has strong fundamentals, but for some reason may be
weak in the near term, the Fund may purchase a put option on such security,
thereby giving itself the right to sell such security at a certain strike price
throughout the term of the option. Consequently, the Fund will exercise the put
only if the price of such security falls below the strike price of the put. The
difference between the strike price of the put and the market price of the
underlying security on the date the Fund exercises the put, less transaction
costs, will be the amount by which the Fund will be able to hedge against a
decline in the underlying security. If during the period of the option the
market price for the underlying security remains at or above the put's strike
price, the put will expire worthless, representing a loss of the price the Fund
paid for the put, plus transaction costs. If the price of the underlying
security increases, the profit the Fund realizes on the sale of the security
will be reduced by the premium paid for the put option less any amount for which
the put may be sold.
CALL OPTIONS. If a Fund purchases a call option, it acquires the right
to purchase the underlying security at a specified price at any time during the
term of the option. The purchase of a call option is a type of "insurance
policy" to hedge against losses that could incur if a Fund intends to purchase
the underlying security and the security thereafter increases in price. The Fund
will exercise a call option only if the price of the underlying security is
above the strike price
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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.
WRITING PUT AND CALL OPTIONS. Writing covered put or call options can
enable a Fund to enhance income by reason of the premiums paid by the purchasers
of such options. When a Fund writes a put option, the purchaser acquires the
right to sell to the Fund the underlying security at a specified price at any
time during the term of the option or on the option expiration date. When a Fund
writes a call option, the purchaser acquires the right to purchase from the Fund
the underlying security at a specified price at any time during the term of the
option. In return for the premium received for a call option, a Fund foregoes
the opportunity for profit from a price increase in the underlying security
above the exercise price so long as the option remains open, but retains the
risk of loss should the price of the security decline. In return for the premium
received for a put option, a Fund assumes the risk that the price of the
underlying security will decline below the exercise price, in which case the put
would be exercised and the Fund would suffer a loss.
STOCK INDEX OPTIONS. Each Fund may purchase put and call options with
respect to stock indices such as the S&P 500 Price Index and other stock
indices. Such options may be purchased as a hedge against changes resulting from
market conditions in the values of securities which are held in a Fund's
portfolio or which it intends to purchase or sell, or when they are economically
appropriate for the reduction of risks inherent in the ongoing management of the
Fund.
The distinctive characteristics of options on stock indices create
certain risks that are not present with stock options generally. Because the
value of an index option depends upon movements in the level of the index rather
than the price of a particular stock, whether a Fund will realize a gain or loss
on the purchase or sale of an index option depends upon movements in the level
of stock prices in the stock market generally rather than movements in the price
of a particular stock. Accordingly, successful use by a Fund of options on a
stock index will be subject to the Investment Manager's ability to predict
correctly movements in the direction of the stock market generally. This
requires different skills and techniques than predicting changes in the prices
of individual stocks.
Index prices may be distorted if trading of certain stocks included in
an index is interrupted. Trading of index options also may be interrupted in
certain circumstances, such as if trading were halted in a substantial number of
stocks included in the index. If this were to occur, a Fund would not be able to
close out options which it had purchased, and if restrictions on exercise were
imposed, the Fund might be unable to exercise an option it holds, which could
result in substantial losses to the Fund. It is the policy of the Funds to
purchase put or call options only with respect to an index which the Investment
Manager believes includes a sufficient number of stocks to minimize the
likelihood of a trading halt in the index.
DEALER OPTIONS. Each Fund may engage in transactions involving dealer
options as well as exchange-traded options. Options not traded on an exchange
generally lack the liquidity of an exchange-traded option, and may be subject to
a Fund's restriction on investment in illiquid securities. In addition, dealer
options may involve the risk that the securities dealers participating in such
transactions will fail to meet their obligations under the terms of the options.
SHORT SALES
Each Fund may engage in short sales transactions. A short sale that is
not made "against the box" is a transaction in which a Fund sells a security it
does not own in anticipation of a decline in market price. When a Fund makes a
short sale, the proceeds it receives are retained by the broker until the Fund
replaces the borrowed security. In order to deliver the security to the buyer,
the Fund must arrange through a broker to borrow the security and, in so doing,
the Fund becomes obligated to replace the security borrowed at its market price
at the time of replacement, whatever that price may be.
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The value of securities of any issuer in which a Fund maintains a short
position that is not "against the box" may not exceed the lesser of 5% of the
value of the Fund's net assets or 5% of the securities of such class of the
issuer. A Fund's ability to enter into short sales transactions is limited by
the requirements of the 1940 Act.
Short sales by a Fund that are not made "against the box" create
opportunities to increase the Fund's return but, at the same time, involve
special risk considerations and may be considered a speculative technique. Since
a Fund in effect profits from a decline in the price of the securities sold
short without the need to invest the full purchase price of the securities on
the date of the short sale, the Fund's net asset value per share will tend to
increase more when the securities it has sold short decrease in value, and to
decrease more when the securities it has sold short increase in value, than
would otherwise be the case if it had not engaged in such short sales. Short
sales theoretically involve unlimited loss potential, as the market price of
securities sold short may continuously increase, although a Fund may mitigate
such losses by replacing the securities sold short before the market price has
increased significantly. Under adverse market conditions, a Fund might have
difficulty purchasing securities to meet its short sale delivery obligations,
and might have to sell portfolio securities to raise the capital necessary to
meet its short sale obligations at a time when fundamental investment
considerations would not favor such sales.
If a Fund makes a short sale "against the box," the Fund would not
immediately deliver the securities sold and would not receive the proceeds from
the sale. The seller is said to have a short position in the securities sold
until it delivers the securities sold, at which time it receives the proceeds of
the sale. A Fund's decision to make a short sale "against the box" may be a
technique to hedge against market risks when the Investment Manager believes
that the price of a security may decline, causing a decline in the value of a
security owned by the Fund or a security convertible into or exchangeable for
such security. In such case, any future losses in the Fund's long position would
be reduced by a gain in the short position.
In the view of the Securities and Exchange Commission ("SEC"), a short
sale involves the creation of a "senior security" as such term is defined in the
1940 Act, unless the sale is "against the box" and the securities sold are
placed in a segregated account (not with the broker), or unless the Fund's
obligation to deliver the securities sold short is "covered" by segregating (not
with the broker) cash, U.S. Government securities or other liquid debt or equity
securities in an amount equal to the difference between the market value of the
securities sold short at the time of the short sale and any cash or securities
required to be deposited as collateral with a broker in connection with the sale
(not including the proceeds from the short sale), which difference is adjusted
daily for changes in the value of the securities sold short. The total value of
the cash and securities deposited with the broker and otherwise segregated may
not at any time be less than the market value of the securities sold short at
the time of the short sale.
To avoid limitations under the 1940 Act on borrowing by investment
companies, short sales by each Fund will be "against the box", or the Fund's
obligation to deliver the securities sold short will be "covered" by segregating
cash, U.S. Government securities or other liquid debt or equity securities in an
amount equal to the market value of its delivery obligation. A Fund will not
make short sales of securities or maintain a short position if doing so could
create liabilities or require collateral deposits and segregation of assets
aggregating more than 25% of the value of the Fund's total assets.
DELAYED DELIVERY TRANSACTIONS
Each Fund may purchase securities on a delayed or "when issued" basis
and may enter into firm commitment agreements (transactions in which the payment
obligation and interest rate are fixed at the time of the transaction but the
settlement is delayed). Delivery and payment for these securities typically
occur 15 to 45 days after the commitment to purchase, but delivery and payment
can be scheduled for shorter or longer periods, based upon the agreement of the
buyer and the seller. No interest accrues to the purchaser during the period
before delivery. The Funds generally do not intend to enter into these
transactions for the purpose of leverage, but may sell the right to receive
delivery of the securities before the settlement date. The value of the
securities may be more or less than the agreed upon price.
The Funds 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. The extent that assets are
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segregated for this purpose, a Fund's liquidity and the ability of the
Investment Manager to manage its portfolio may be adversely affected.
FUTURES TRANSACTIONS
The Funds may enter into futures contracts for the purchase or sale of
fixed-income securities, foreign currencies or contracts based on financial
indices, including indices of U.S. government securities, foreign government
securities, equity securities or fixed-income securities. For example, if a Fund
owns Treasury bonds and the portfolio manager expects interest rates to
increase, that Fund may take a short position in interest rate futures
contracts. Taking such a position would have much the same effect as that Fund
selling Treasury bonds in its portfolio. If interest rates increase as
anticipated, the value of the Treasury bonds would decline, but the value of
that Fund's interest rate futures contract will increase, thereby keeping the
net asset value of that Fund from declining as much as it may have otherwise.
If, on the other hand, a portfolio manager expects interest rates to decline,
the Fund may take a long position in interest rate futures contracts in
anticipation of later closing out the futures position and purchasing the bonds.
Although a Fund can accomplish similar results by buying securities with long
maturities and selling securities with short maturities, given the greater
liquidity of the futures market than the cash market, it may be possible to
accomplish the same result more easily and more quickly by using futures
contracts as an investment tool to reduce risk.
FUTURES CHARACTERISTICS. A futures contract is an agreement between two
parties (buyer and seller) to take or make delivery of an amount of cash equal
to the difference between the value of the currency, security or index at the
close of the last trading day of the contract and the price at which the
currency, security or index contract was originally written. In the case of
futures contracts traded on U.S. exchanges, the exchange itself or an affiliated
clearing corporation assumes the opposite side of each transaction (i.e., as
buyer or seller). A futures contract may be satisfied or closed out by payment
of the change in the cash value of the currency, security or index. No physical
delivery of the underlying currency, securities, or securities in the index is
made.
Unlike when a Fund purchases or sells a security, no price is paid or
received by a Fund upon the purchase or sale of a futures contract. Initially,
the Fund will be required to deposit with the Fund's custodian or such other
parties as may be authorized by the SEC (in the name of the futures commission
merchant (the "FCM")) an amount of cash or U.S. Treasury bills which is referred
to as an "initial margin" payment. The nature of initial margin in futures
transactions is different from that of margin in security transactions in that a
futures contract margin does not involve the borrowing of funds by a Fund to
finance the transactions. Rather, the initial margin is in the nature of a
performance bond or good faith deposit on the contract which is returned to the
Fund upon termination of the futures contract, assuming all contractual
obligations have been satisfied. Futures contracts customarily are purchased and
sold with initial margins that may range upwards from less than 5% of the value
of the futures contract being traded. Subsequent payments, called "variation
margin", to and from the FCM, will be made on a daily basis as the price of the
underlying currency or stock index varies, making the long and short positions
in the futures contract more or less valuable. This process is known as "marking
to the market." For example, when a Fund has purchased a currency futures
contract and the price of the underlying currency has risen, the Fund's position
will have increased in value and the Fund will receive from the FCM a variation
margin payment equal to that increased value. Conversely, when a Fund has
purchased a currency futures contract and the price of the underlying currency
has declined, the position would be less valuable and the Fund would be required
to make a variation margin payment to the FCM. At any time prior to expiration
of a futures contract, a Fund may elect to close the position by taking an
identical opposite position which will operate to terminate the Fund's position
in the futures contract. A final determination of variation margin is then made,
additional cash is required to be paid by or released to the Fund, and the Fund
realizes a loss or a gain.
CHARACTERISTICS OF FUTURES OPTIONS. Each Fund may also purchase call
options and put options on securities or index futures contracts ("futures
options"), and each Fund 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.
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PURCHASE OF FUTURES. Each Fund may purchase a currency futures contract
when it anticipates the subsequent purchase of particular securities and has the
necessary cash, but expects the currency exchange rates then available in the
applicable market to be less favorable than rates that are currently available,
or to attempt to enhance return when it anticipates that future currency
exchange rates will be more favorable than current rates. Similarly, when the
Investment Manager anticipates a significant stock market or stock market sector
advance, a Fund may purchase a stock index futures contract which affords a
hedge against not participating in such advance at a time when the Fund is not
fully invested in equity securities. Such purchase of a futures contract would
serve as a temporary substitute for the purchase of individual stocks which may
later be purchased (with attendant costs) in an orderly fashion. As such
purchase of individual stocks are made, an approximately equivalent amount of
stock index futures would be terminated by offsetting sales.
SALE OF FUTURES. Each Fund may sell a currency futures contract to
hedge against an anticipated decline in foreign currency rates that would
adversely affect the dollar value of a Fund's portfolio securities denominated
in such currency, or may sell a currency futures contract in one currency to
hedge against fluctuations in the value of securities denominated in a different
currency if there is an established historical pattern or correlation between
the two currencies. Similarly, a Fund may sell stock index futures contracts in
anticipation of or during a general stock market or market sector decline that
may adversely affect the market values of the Fund's portfolio of equity
securities. To the extent that the Fund's portfolio of equity securities changes
in value in correlation with a given stock index, the sale of futures contracts
on that index would reduce the risk to the portfolio of a market decline and, by
doing so, would provide an alternative to the liquidation of securities
positions in the portfolio with resultant transaction costs.
PURCHASE OF PUT OPTIONS ON FUTURES. The purchase of a put option on a
currency, financial or index futures contract is analogous to the purchase of a
put on individual stocks, where an absolute level of protection from price
fluctuation is sought below which no additional economic loss would be incurred
by a Fund. For example, put options on futures may be purchased to hedge a
portfolio of stocks or a position in the futures contract upon which the put
option is based against a possible decline in market value. The purchase of a
put option on a currency futures contract can be used to hedge against
unfavorable movements in currency exchange rates, or to attempt to enhance
returns in contemplation of movements in such rates.
PURCHASE OF CALL OPTIONS ON FUTURES. The purchase of a call option on a
currency, financial or index futures contract represents a means of obtaining
temporary exposure to favorable currency exchange rate or interest rate
movements or temporary exposure to market appreciation with risk limited to the
premium paid for the call option. It is analogous to the purchase of a call
option on an individual security or index, which can be used as a substitute for
a position in the security or index itself. Depending on the pricing of the
option compared to either the futures contract upon which it is based, or to the
price of the underlying currency, security or index itself, the call option may
be less risky, because losses are limited to the premium paid for the call
option, when compared to the ownership of the underlying currency, security or
index futures contract. Like the purchase of a currency, financial or index
futures contract, a Fund would purchase a call option on a currency, financial
or index futures contract to hedge against an unfavorable movement in exchange
rates, interest rates or securities prices.
LIMITATIONS ON PURCHASE AND SALE OF FUTURES AND FUTURES OPTIONS. A Fund
may not purchase or sell futures contracts or purchase futures options if,
immediately thereafter, more than 30% of the value of its net assets would be
hedged. In addition, a Fund may not purchase or sell futures or purchase futures
options if, immediately thereafter, the sum of the amount of margin deposits on
the Fund's existing futures positions and premiums paid for futures options
would exceed 5% of the market value of the Fund's total assets. In Fund
transactions involving futures contracts, to the extent required by applicable
SEC guidelines, an amount of cash, U.S. Government securities, or other liquid
debt or equity securities equal to the market value of the futures contracts
will be segregated with the Fund's Custodian, or in other segregated accounts as
regulations may allow, to collateralize the position and thereby to insure that
the use of such futures is unleveraged.
REGULATORY MATTERS. The Company has filed a claim of exemption from
registration of the Funds as commodity pools with the Commodity Futures Trading
Commission (the "CFTC"). Each 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.
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DEBT SECURITIES
The Global Equity Fund may, and the Strategic Income Fund will,
purchase debt obligations. Such debt obligations may include short-term debt
obligations (with maturities of one year or less) 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 government entities, and
debt obligations of corporate issuers. The timing of purchase and sale
transactions in debt obligations may result in capital appreciation or
depreciation because the value of a debt obligation generally varies inversely
with prevailing interest rates.
RATINGS. Credit ratings evaluate the safety of principal and interest
payments of securities, not their market value. The rating of an issuer is also
heavily weighted by past developments and does not necessarily reflect probable
future conditions. There is frequently a lag between the time a rating is
assigned and the time it is updated. As credit rating agencies may fail to
timely change credit ratings of securities to reflect subsequent events, the
Investment Manager will also monitor issuers of such securities to determine if
such issuers will have sufficient cash flow and profits to meet required
principal and interest payments and to assure their liquidity. In general, debt
securities held by a Fund will be treated as investment grade if they are rated
by at least one major rating agency in one of its top four rating categories at
the time of purchase or, if unrated, are determined by the Investment Manager to
be of comparable quality. Investment grade means the issuer of the security is
believed to have adequate capacity to pay interest and repay principal, although
certain of such securities in the lower grades have speculative characteristics,
and changes in economic conditions or other circumstances may be more likely to
lead to a weakened capacity to pay interest and principal than would be the case
with higher rated securities. If the rating of an investment grade security held
by a Fund is downgraded, the Investment Manager will determine whether it is in
the best interests of the Fund to continue to hold the security in its
investment portfolio. The Global Equity Fund and Strategic Income Fund may
invest in debt securities rated, at the time of purchase, below investment
grade. Refer to the section entitled "Investment and Risk Considerations" for
the risks associated with below investment grade debt securities.
GOVERNMENT OBLIGATIONS. U.S. Government obligations include
obligations issued or guaranteed as to principal and interest by the U.S.
Government and its agencies and instrumentalities, by the right of the issuer to
borrow from the U.S. Treasury, by the discretionary authority of the U.S.
Government to purchase certain obligations of the agency or instrumentality, or
only by the credit of the agency or instrumentality. No assurance can be given
that the U.S. Government will provide financial support to U.S.
Government-sponsored instrumentalities if it is not obligated to do so by law.
Each Fund 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. Emerging market governments could default on their sovereign
debt. Such sovereign debtors also may be dependent on expected disbursements
from foreign governments, multilateral agencies and other entities abroad to
reduce principal and interest arrearages on their debt. The commitments on the
part of these governments, agencies and others to make such disbursements may be
conditioned on a sovereign debtor's implementation of economic reforms and/or
economic performance and the timely service of such debtor's obligations.
Failure to meet such conditions could result in the cancellation of such third
parties' commitments to lend funds to the sovereign debtor, which may further
impair such debtor's ability or willingness to service its debt in a timely
manner.
ZERO COUPON, PAY-IN-KIND AND STEP COUPON SECURITIES. Each Fund may
invest in zero coupon, pay-in-kind and step coupon securities. Zero coupon bonds
are issued and traded at a discount from their face value. They do not entitle
the holder to any periodic payment of interest prior to maturity. Step coupon
bonds trade at a discount from their face value and pay coupon interest. The
coupon rate is low for an initial period and then increases to a higher coupon
rate. The discount from the face amount or par value depends on the time
remaining until cash payments begin, prevailing interest rates, liquidity of the
security and the perceived credit quality of the issuer. Pay-in-kind bonds
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normally give the issuer an option to pay cash at a coupon payment date or with
a face value equal to the amount of the coupon payment that would have been
made.
Current federal income tax law requires holders of zero coupon
securities and step coupon securities to report the portion of the original
issue discount on such securities that accrues during a given year as interest
income, even though the holders receive no cash payments of interest during the
year. In order to qualify as a "regulated investment company" under the Internal
Revenue Code of 1986 and the regulations thereunder (the "Code"), a Fund must
distribute its investment company taxable income, including the original issue
discount accrued on zero coupon bonds or step coupon bonds. Because a Fund will
not receive cash payments on a current basis in respect of accrued
original-issue discount on zero coupon bonds or step coupon bonds during the
period before interest payments begin, in some years a Fund may have to
distribute cash obtained from other sources in order to satisfy the distribution
requirements under the Code. A Fund might obtain such cash from selling other
portfolio holdings, which might cause the Fund to incur capital gains or losses
on the sale. Additionally, these actions are likely to reduce the assets to
which Fund expenses could be allocated and to reduce the rate of return for the
Fund. In some circumstances, such sales might be necessary in order to satisfy
cash distribution requirements even though investment considerations might
otherwise make it undesirable for a Fund to sell the securities at the time.
Generally, the market prices of zero coupon, step coupon and
pay-in-kind securities are more volatile than the prices of securities that pay
interest periodically and in cash and are likely to respond to changes in
interest rates to a greater degree than other types of debt securities having
similar maturities and credit quality.
PASS THROUGH SECURITIES. Each Fund may invest in various types of
pass-through securities, such as mortgage-backed securities, asset-backed
securities and participation interests. A pass-through security is a share or
certificate of interest in a pool of debt obligations that have been repackaged
by an intermediary, such as a bank or broker-dealer. The purchaser of a
pass-through security receives an undivided interest in the underlying pool of
securities. The issuers of the underlying securities make interest and principal
payments to the intermediary which are passed through to purchasers, such as the
Funds. The most common type of pass-through securities are mortgage-backed
securities, including those issued by the Government National Mortgage
Association ("GNMA"), the Federal Home Loan Mortgage Corporation ("FHLMC"), and
the Federal National Mortgage Association ("FNMA").
GNMA Certificates are mortgage-related securities that evidence an
undivided interest in a pool of mortgage loans. GNMA Certificates differ from
bonds in that principal is paid back monthly by the borrowers over the term of
the loan rather than returned in a lump sum at maturity. A Fund will generally
purchase "modified pass-through" GNMA Certificates, which entitle the holder to
receive a share of all interest and principal payments paid on the mortgage
pool, net of fees paid to the intermediary and GNMA, regardless of whether or
not the mortgagor actually makes the payment. GNMA Certificates are backed as to
the timely payment of principal and interest by the full faith and credit of the
U.S. Government.
FHLMC issues two types of mortgage pass-through securities: mortgage
participation securities ("PCs") and guaranteed mortgage securities ("GMCs").
PCs resemble GNMA Certificates in that each PC represents a pro rata share of
all interest and principal payments made on the underlying pool. FHLMC
guarantees timely payments of interest on PCs and the full return of principal.
GMCs also represent a pro rata interest in a pool of mortgages. However, these
instruments pay interest semiannually and return principal once a year in
guaranteed minimum payments. This type of security is guaranteed by FHLMC as to
timely payment principal and interest but it is not guaranteed by the full faith
and credit of the U.S. Government.
FNMA issues guaranteed mortgage pass-through certificates ("FNMA
Certificates"). FNMA Certificates resemble GNMA Certificates in that each FNMA
Certificate represents a pro rata share of all interest and principal payments
made and owned on the underlying pool. This type of security is guaranteed by
FNMA as to timely payment of principal and interest, but it is not guaranteed by
the full faith and credit of the U.S. Government.
Except for GMCs, each of the mortgage-backed securities described above
is characterized by monthly payments to the holder, reflecting the monthly
payments made by the borrowers who received the underlying mortgage loans. The
payments to the security holders (such as the Funds), like the payments on the
underlying loans,
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represent both principal and interest. Pass-through securities are subject to
prepayment risk. Although the underlying mortgage loans are for specified
periods of time, such as 20 or 30 years, the borrowers can, and typically do,
pay them off sooner. Thus, the security holders frequently receive prepayments
of principal in addition to the principal that is part of the regular monthly
payments. A portfolio manager will consider estimated prepayment rates in
calculating the average weighted maturity of a Fund. A borrower is more likely
to prepay a mortgage that bears a relatively high rate of interest. This means
that in times of declining interest rates, higher yielding mortgage-backed
securities held by a Fund might be converted to cash and that Fund will be
forced to accept lower interest rates when that cash is used to purchase
additional securities in the mortgage-backed securities sector or in other
investment sectors. Additionally, prepayments during such periods will limit a
Fund's ability to participate in as large a market gain as may be experienced
with a comparable security not subject to prepayment.
MUNICIPAL SECURITIES. Each Fund may invest in municipal securities
issued by states, territories and possessions of the United States and the
District of Columbia. The value of municipal obligations can be affected by
changes in their actual or perceived credit quality. The credit quality of
municipal obligations can be affected by among other things, the financial
condition of the issuer or guarantor, the issuer's future borrowing plans and
sources of revenue, the economic feasibility of the revenue bond project or
general borrowing purpose, political or economic developments in the region,
where the security is issued, and the liquidity of the security. Because
municipal securities are generally traded over-the-counter, the liquidity of a
particular issue often depends on the willingness of dealers to make a market in
the security. The liquidity of some municipal obligations may be enhanced by
demand features, which would enable a Fund to demand payment on short notice
from the issuer or a financial intermediary. Such securities must be rated at
least "A" or higher by Standard & Poor's, a division of The McGraw-Hill
Companies, Inc. ("Standard & Poor's"), or Baa or higher by Moody's Investors
Service, Inc. ("Moody's").
Each Fund may purchase insured municipal debt in which scheduled
payments of interest and principal are guaranteed by a private, non-governmental
or governmental insurance company. The insurance does not guarantee the market
value of the municipal debt or the value of the shares of a Fund.
Securities of issuers of municipal obligations are subject to the
provisions of bankruptcy, insolvency and other laws affecting the rights and
remedies of creditors, such as the Bankruptcy Reform Act of 1978. In addition,
the obligations of such issuers may become subject to laws enacted in the future
by Congress, state legislatures or referenda extending the time for payment of
principal or interest, or imposing other constraints upon enforcement of such
obligations or upon the ability of municipalities to levy taxes. Furthermore, as
a result of legislation or other conditions, the power or ability of any issuer
to pay, when due, the principal of and interest on its municipal obligations may
be materially affected.
MORAL OBLIGATION SECURITIES. Municipal securities may include "moral
obligation" securities which are usually issued by special purpose public
authorities. If the issuer of moral obligation bonds cannot fulfill its
financial responsibilities from current revenues, it may draw upon a reserve
fund, the restoration of which is a moral commitment but not a legal obligation
of the state or municipality which created the issuer.
INDUSTRIAL DEVELOPMENT AND POLLUTION CONTROL BONDS. Each Fund may
invest in tax exempt industrial development bonds and pollution control bonds
which, in most cases, are revenue bonds and generally are not payable from the
unrestricted revenues of an issuer. They are issued by or on behalf of public
authorities to raise money to finance to finance privately operated facilities
for business, manufacturing, housing, sport complexes, and pollution control.
Consequently, the credit quality of these securities is dependent upon the
ability of the user of the facilities financed by the bonds and any guarantor to
meet its financial obligations.
MUNICIPAL LEASE OBLIGATIONS. Each Fund may invest in lease obligations
or installment purchase contract obligations of municipal authorities or
entities ("municipal lease obligations"). Although lease obligations do not
constitute general obligations of the municipality for which its taxing power is
pledged, a lease obligation is ordinarily backed by the municipality's covenant
to budget for, appropriate and make the payment due under the lease obligation.
A Fund may also purchase "certificates of participation," which are securities
issued by a particular municipality or municipal authority to evidence a
proportionate interest in base rental or lease payments relating to a specific
project to be made by the municipality, agency or authority. However, certain
lease obligations contain "non-
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appropriation" clauses which provide that the municipality has no obligation to
make lease or installment purchase payments in any year unless money is
appropriated for such purpose for such year. Although "non-appropriation" lease
obligations are secured by the leased property, disposition of the property in
the event of default and foreclosure might prove difficult. In addition, these
securities represent a relatively new type of financing and certain lease
obligations may therefore be considered to be illiquid securities.
SHORT-TERM OBLIGATIONS. Each Fund may invest in short-term municipal
obligations. These securities include the following:
Tax Anticipation Notes are used to finance working capital needs of
municipalities and are issued in anticipation of various seasonal tax revenues,
to be payable from these specific future taxes. They are usually general
obligations of the issuer, secured by the taxing power of the municipality for
the payment of principal and interest when due.
Revenue Anticipation Notes are issued in expectation of receipt of
other kinds of revenue, such as federal revenues available under the Federal
Revenue Sharing Program. They also are usually general obligations of the
issuer.
Bond Anticipation Notes normally are issued to provide interim
financing until long-term financing can be arranged. The long-term bonds then
provide the money for the repayment of the notes.
Construction Loan Notes are sold to provide construction financing for
specific projects. After successful completion and acceptance, many projects
receive permanent financing through FNMA or GNMA.
Short-term Discount Notes (tax-exempt commercial paper) are short-term
(365 days or less) promissory notes issued by municipalities to supplement their
cash flow.
MORTGAGE-BACKED SECURITIES. The Funds may purchase mortgage-backed
securities issued by government and non-government entities such as banks,
mortgage lenders, or other financial institutions. A mortgage-backed security
may be an obligation of the issuer backed by a mortgage or pool of mortgages or
a direct interest in an underlying pool of mortgages. Some mortgage-backed
securities, such as collateralized mortgage obligations or CMOs, make payments
of both principal and interest at a variety of intervals; others make semiannual
interest payments at a predetermined rate and repay principal at maturity (like
a typical bond). Mortgage-backed securities are based on various types of
mortgages, including those on commercial real estate or residential properties.
Other types of mortgage-backed securities will likely be developed in the
future, and the Funds may invest in them if the Investment Manager determines
they are consistent with the Funds' investment objectives and policies.
The value of a mortgage-backed security may change due to shifts in the
market's perceptions of the issuer. In addition, regulatory or tax changes may
adversely affect the mortgage securities market as a whole. Mortgage-backed
securities are subject to prepayment risk as described above under "Pass Through
Securities." Prepayment, which occurs when unscheduled or early payments are
made on the underlying mortgages, may shorten the effective maturities of these
securities and may lower their total returns. The Funds will invest in CMOs and
mortgage-backed securities only if the Investment Manager determines that they
are marketable.
FOREIGN MORTGAGE-RELATED SECURITIES. Foreign mortgage-related
securities are interests in pools of mortgage loans made to residential home
buyers domiciled in a foreign country. These include mortgage loans made by
trust and mortgage loan companies, credit unions, chartered banks, and others.
Pools of mortgage loans are assembled as securities for sale to investors by
various governmental, government-related and private organizations (e.g. Canada
Mortgage and Housing Corporation and First Australian National Mortgage
Acceptance Corporation Limited). The mechanics of these mortgage-related
securities are generally the same as those issued in the United States. However,
foreign mortgage markets may differ materially from the U.S. mortgage market
with respect to matters such as the sizes of loan pools, pre-payment experience,
and maturites of loans.
ASSET-BACKED SECURITIES. The Funds may purchase asset-backed
securities, which include undivided fractional interests in pools of consumer
loans (unrelated to mortgage loans) held in a trust. Payments of principal and
interest are passed through to certificate holders and are typically supported
by some form of credit enhancement,
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such as a letter of credit, surety bonds or limited guarantees. The degree of
credit enhancement varies, but generally amounts to only a fraction of the
asset-backed security's par value until exhausted. If the credit enhancement is
exhausted, certificate holders may experience losses or delays in payment if the
required payments of principal and interest are not made to the trust with
respect to the underlying loans. The value of these securities also may change
because of changes in the market's perception of the creditworthiness of the
servicing agent for the loan pool, the originator of the loans, or the financial
institution providing the credit enhancement. Asset-backed securities ultimately
depend upon payment of consumer loans by individuals, and the certificate holder
generally has no recourse to the entity that originated the loans. The
underlying loans are subject to prepayments which shorten the securities'
weighted average life and may lower their returns. (As prepayments flow through
at par, total returns would be affected by the prepayments; if a security were
trading at a premium, its total return would be lowered by prepayments, and if a
security were trading at a discount, its total return would be increased by
prepayments.) The Funds will invest in asset backed securities only if the
Investment Manager determines that they are marketable.
OTHER INCOME-PRODUCING SECURITIES
Other types of income producing securities that the Funds may purchase
include, but are not limited to, the following types of securities.
VARIABLE OR FLOATING RATE OBLIGATIONS. These types of securities bear
variable or floating interest rates and carry rights that permit holders to
demand payment of the unpaid principal balance plus accrued interest from the
issuers of certain financial intermediaries. Floating rate instruments have
interest rates that change whenever there is a change in a designated base rate
while variable rate instruments provide for a specified periodic adjustment in
the interest rate. These formulas are designed to result in a market value for
the instrument that approximates its par value.
STANDBY COMMITMENTS. These instruments, which are similar to a put,
give a Fund the option to obligate a broker, dealer or bank to repurchase a
security held by that Fund at a specified price.
TENDER OPTION BONDS. Tender option bonds are relatively long-term
bonds that are coupled with the agreement of a third party (such as a broker,
dealer, or bank) to grant the holders of such securities the option to tender
the securities to the institution at periodic intervals.
INVERSE FLOATERS. Inverse floaters are debt instruments whose interest
bears an inverse relationship to the interest rate on another security or an
index.
The Funds will purchase standby commitments, tender option bonds,
inverse floaters and instruments with demand features primarily for the purpose
of increasing the liquidity of their portfolios.
INDEX AND CURRENCY-LINKED SECURITIES. Each Fund may invest in
"index-linked" or "commodity-linked" notes, which are debt securities of
companies that call for interest payments and/or payment at maturity in
different terms than the typical note where the borrower agrees to make fixed
interest payments and to pay a fixed sum at maturity. Principal and/or interest
payments on an index-linked note depend on the performance of one or more market
indices, such as the S&P 500 Index or a weighted index of commodity futures such
as crude oil, gasoline and natural gas. The Funds may also invest in
"equity-linked" and "currency-linked" debt securities. At maturity, the
principal amount of an equity-linked debt security is exchanged for common stock
of the issuer or is payable in an amount based on the issuer's common stock
price at the time of maturity. Currency-linked debt securities are short-term or
intermediate term instruments having a value at maturity, and/or an interest
rate, determined by reference to one or more foreign currencies. Payment of
principal or periodic interest may be calculated as a multiple of the movement
of one currency against another currency, or against an index.
Index and currency-linked securities are derivative instruments which
may entail substantial risks. Such instruments may be subject to significant
price volatility. The company issuing the instrument may fail to pay the amount
due on maturity. The underlying investment or security may not perform as
expected by the Investment Manager. Markets, underlying securities, and indexes
may move in a direction that was not anticipated by the
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Investment Manager. Performance of the derivatives may be influenced by interest
rate and other market changes in the U.S and abroad. Certain derivative
instruments may be illiquid.
CONVERTIBLE SECURITIES AND WARRANTS
Each Fund may invest in convertible securities and warrants. The value
of a convertible security is a function of its "investment value" (determined by
its yield in comparison with the yields of other securities of comparable
maturity and quality that do not have conversion privilege) and its "conversion
value" (the security's worth, at market value, if converted into the underlying
common stock). The credit standing of the issuer and other factors may also
affect the investment value of a convertible security. The conversion value of a
convertible security is determined by the market price of the underlying common
stock. If the conversion value is low relative to the investment value, the
price of the convertible security is governed principally by its investment
value. To the extent the market price of the underlying common stock approaches
or exceeds the conversion price, the price of the convertible security will be
increasingly influenced by its conversion value.
As a matter of operating policy, no Fund will invest more than 5% of
its net assets in warrants. A warrant gives the holder a right to purchase at
any time during a specified period a predetermined number of shares of common
stock at a fixed price. Unlike convertible debt, securities or preferred stock,
warrants do not pay a fixed dividend. Investments in warrants involve certain
risks, including the possible lack of a liquid market for resale of the
warrants, potential price fluctuations as a result of speculation or other
factors, and failure of the price of the underlying security to reach or have
reasonable prospects of reaching a level at which the warrant can be prudently
exercised (in which event the warrant may expire without being exercised)
resulting in a loss of the Fund's entire investment therein.
SYNTHETIC CONVERTIBLE SECURITIES
Each Fund may invest in "synthetic" convertible securities, which are
derivative positions composed of two or more different securities whose
investment characteristics, taken together, resemble those of convertible
securities. For example, a Fund may purchase a non-convertible debt security and
a warrant or option, which enables a Fund to have a convertible-like position
with respect to a company, group of companies or stock index. Synthetic
convertible securities are typically offered by financial institutions and
investment banks in private placement transactions. Upon conversion, the Fund
generally receives an amount in cash equal to the difference between the
conversion price and the then current value of the underlying security. Unlike a
true convertible security, a synthetic convertible comprises two or more
separate securities, each with its own market value. Therefore, the market value
of a synthetic convertible is the sum of the values of its fixed-income
component and its convertible component. For this reason, the values of a
synthetic convertible and a true convertible security may respond differently to
market fluctuations. A Fund only invests in synthetic convertibles with respect
to companies whose corporate debt securities are rated "A" or higher by Moody's
or Standard & Poor's and will not invest more than 15% of its net assets in such
synthetic securities and other illiquid securities.
PREFERRED STOCK
Each Fund may purchase preferred stock. Preferred stock, unlike common
stock, offers a stated dividend rate payable from a corporation's earnings. Such
preferred stock dividends may be cumulative or non-cumulative, participating, or
auction rate. If interest rates rise, the fixed dividend on preferred stocks may
be less attractive, causing the price of preferred stocks to decline. Preferred
stock may have mandatory sinking fund provisions, as well as call/redemption
provisions prior to maturity, a negative feature when interest rates decline.
Dividends on some preferred stock may be "cumulative," requiring all or a
portion of prior unpaid dividends to be paid prior to payment of dividends on
the issuer's common stock. Preferred stock also generally has a preference over
common stock on the distribution of a corporation's assets in the event of
liquidation of the corporation, and may be "participating," which means that it
may be entitled to a dividend exceeding the stated dividend in certain cases.
The rights of the holders of preferred stock on the distribution of a
corporation's assets in the event of a liquidation are generally subordinate to
the rights associated with a corporation's debt securities.
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BORROWING MONEY
From time to time, it may be advantageous for a Fund to borrow money
rather than sell portfolio securities to raise the cash to meet redemption
requests. In order to meet such redemption requests, each Fund may borrow from
banks or enter into reverse repurchase agreements. Each Fund may also borrow up
to 5% of the value of its total assets for temporary or emergency purposes other
than to meet redemptions. However, the Fund will not borrow money for leveraging
purposes. A Fund may continue to purchase securities while borrowings are
outstanding. The 1940 Act permits a Fund to borrow only from banks and only to
the extent that the value of its total assets, less it liabilities other than
borrowings, is equal to at least 300% of all borrowings (including the proposed
borrowing), and requires the Fund to take prompt action to reduce its borrowings
if this limit is exceeded. For the purpose of the 300% borrowing limitation,
reverse repurchase transactions are considered to be borrowings.
A reverse repurchase agreement involves a transaction by which a
borrower (such as a Fund) sells a security to a purchaser (a member bank of the
Federal Reserve System or a broker-dealer deemed creditworthy pursuant to
standards adopted by the Board of Directors), and simultaneously agrees to
repurchase the security at an agreed-upon price on an agreed-upon date within a
number od days (usually not more than seven) from the date of purchase.
"ROLL" TRANSACTIONS
Each Fund may enter into "roll" transactions, which are the sale of
GNMA certificates and other securities together with a commitment to purchase
similar, but not identical, securities at a later date from the same party.
During the roll period, a Fund forgoes principal and interest paid on the
securities. The Fund is compensated by the difference between the current sales
price and the forward price for the future purchase, as well as by the interest
earned on the cash proceeds of the initial sale. Like when-issued securities or
firm commitments, roll transactions involve the risk that the market value of
the securities sold by the Fund may decline below the price at which the Fund is
committed to purchase similar securities. Additionally, in the event the buyer
of securities under a roll transaction files for bankruptcy or becomes
insolvent, the Fund's use of the proceeds of the transactions may be restricted
pending a determination by the other party, or its trustee or receiver, whether
to enforce the Fund's obligation to repurchase the securities.
A Fund will engage in roll transactions for the purpose of acquiring
securities for its portfolio consistent with its investment objective and
policies and not for investment leverage. Nonetheless, roll transactions are
speculative techniques and are considered to be the economic equivalent of
borrowings by the Fund. To avoid leverage, the Fund will establish a segregated
account with its Custodian in which it will maintain liquid assets in an amount
sufficient to meet its payment obligations with respect to these transactions. A
Fund will not enter into roll transactions if, as a result, more than 50% of the
Fund's net assets would be segregated to cover such contracts.
LENDING PORTFOLIO SECURITIES
Each Fund is authorized to make loans of portfolio securities, for the
purpose of realizing additional income, to broker-dealers or other institutional
investors deemed creditworthy pursuant to standards adopted by 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 portion of the interest earned on the collateral,
less any fees and administrative expenses associated with the loan.
INVESTMENT IN ILLIQUID SECURITIES
Each Fund may invest up to 15% of the value of its net assets in
illiquid securities. Securities may be considered illiquid if 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 a Fund are liquid and illiquid
pursuant to standards adopted by the Board of Directors.
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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 tracking 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 Funds' investments in illiquid securities may include securities
that are not registered for resale under the Securities Act of 1933 (the
"Securities Act"), and therefore are subject to restrictions on resale. When a
Fund purchases unregistered securities, it may, in appropriate circumstances,
obtain the right to register such securities at the expense of the issuer. In
such cases there may be a lapse of time between the Fund's decision to sell any
such security and the registration of the security permitting sale. During any
such period, the price of the security will be subject to market fluctuations.
The fact that there are contractual or legal restrictions on resale of
certain securities to the general public or to certain institutions may not be
indicative of the liquidity of such investments. If such securities are subject
to purchase by institutional buyers in accordance with Rule 144A under the
Securities Act, the Investment Manager may determine in particular cases,
pursuant to standards adopted by the Company's Board of Directors (the "Board of
Directors"), that such securities are not illiquid securities notwithstanding
the legal or contractual restrictions on their resale. Investing in Rule 144A
securities could have the effect of increasing a Fund's illiquidity to the
extent that qualified institutional buyers become, for a time, uninterested in
purchasing such securities.
CASH-EQUIVALENT INSTRUMENTS
Other than as described under INVESTMENT RESTRICTIONS below, the Funds
are not restricted with regard to the types of cash-equivalent investments they
may make. When the Investment Manager believes that such investments are an
appropriate part of a Fund's overall investment strategy, the Fund may hold or
invest, for investment purposes, a portion of its assets in any of the
following, denominated in U.S. dollars, foreign currencies, or multinational
currencies: cash; short-term U.S. or foreign government securities; commercial
paper rated at least A-2 by Standard & Poor's or P-2 by Moody's 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, a Fund may invest up to 100% of its assets in such cash-equivalent
investments.
A certificate of deposit is a short-term obligation of a commercial
bank. A bankers' acceptance is a time draft drawn on a commercial bank by a
borrower, usually in connection with international commercial transactions. A
repurchase agreement involves a transaction by which an investor (such as a
Fund) purchases a security and simultaneously obtains the commitment of the
seller (a member bank of the Federal Reserve System or a securities dealer
deemed creditworthy by the Investment Manager pursuant to standards adopted by
the Board of Directors) to repurchase the security at an agreed-upon price on an
agreed-upon date within a number of days (usually not more than seven) from the
date of purchase.
PORTFOLIO TURNOVER
Securities in a Fund's portfolio will be sold whenever the Investment
Manager believes it is appropriate to do so, regardless of the length of time
that securities have been held, and securities may be purchased or sold for
short-term profits whenever the Investment Manager believes it is appropriate or
desirable to do so. Turnover will be influenced by sound investment practices, a
Fund's investment objective, and the need for funds for the redemption of a
Fund's shares.
For example, a 150% portfolio turnover rate would occur if the value of
purchases or sales of portfolio securities (whichever is less) by a Fund for a
year (excluding purchases of U.S. Treasury issues and securities with a maturity
of one year or less) were equal to 150% of the average monthly value of the
securities held by the Fund during such year. As a result of the manner in which
turnover is measured, a high turnover rate could occur during periods when a
Fund's
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assets are growing or shrinking. A high portfolio tunrover rate would
increase a Funds' brokerage commission expenses and other transaction costs, and
may increase its taxable gains.
RISK CONSIDERATIONS
INVESTMENTS IN FOREIGN SECURITIES GENERALLY
Investments in foreign securities may offer investment opportunities
and potential benefits not available from investments solely in securities of
U.S. issuers. Such benefits may include higher rates of interest on debt
securities than are available from domestic issuers, the opportunity to invest
in foreign issuers that appear, in the opinion of the Investment Manager, to
offer better opportunity for long-term capital appreciation than investments in
securities of U.S. issuers, the opportunity to invest in foreign countries with
economic policies or business cycles different from those of the United States
and the opportunity to reduce fluctuations in portfolio value by taking
advantage of foreign markets that do not necessarily move in a manner parallel
to U.S. stock markets.
At the same time, however, investing in foreign securities involves
significant risks, some of which are not typically associated with investing in
securities of U.S. issuers. For example, the value of investments in such
securities may fluctuate based on changes in the value of one or more foreign
currencies relative to the U.S. dollar, and a change in the exchange rate of one
or more foreign currencies could reduce the value of certain portfolio
securities. Currency exchange rates may fluctuate significantly over short
periods of time, and are generally determined by the forces of supply and demand
and other factors beyond a Fund's control. Changes in currency exchange rates
may, in some circumstances, have a greater effect on the market value of a
security than changes in the market price of the security. To the extent that a
substantial portion of a Fund's total assets is denominated or quoted in the
currency of a foreign country, the Fund will be more susceptible to the risk of
adverse economic and political developments within that country. As discussed
above, each Fund may employ certain investment techniques to hedge its foreign
currency exposure; however, such techniques also entail certain risks.
In addition, information about foreign issuers may be less readily
available than information about domestic issuers. Foreign issuers generally are
not subject to accounting, auditing, and financial reporting standards or to
other regulatory practices and requirements comparable to those applicable to
U.S. issuers. Furthermore, with respect to certain foreign countries, the
possibility exists of expropriation, nationalization, revaluation of currencies,
confiscatory taxation, and limitations on foreign investment and the use or
removal of funds or other assets of a Fund, including the withholding of tax on
interest, dividends and other distributions and limitations on the repatriation
of currencies. In addition, a Fund may experience difficulties or delays in
obtaining or enforcing judgments. Foreign securities may be subject to foreign
government taxes that could reduce the yield and total return on such
securities.
Foreign equity securities may be traded on an exchange in the issuer's
country, an exchange in another country, or over-the-counter in one or more
countries. Most foreign securities markets, including over-the-counter markets,
have substantially less volume than U.S. securities markets, and the securities
of many foreign issuers may be less liquid and more volatile than securities of
comparable U.S. issuers. In addition, there is generally less government
regulation of securities markets, securities exchanges, securities dealers, and
listed and unlisted companies in foreign countries than in the United States.
Foreign markets also have different clearance and settlement
procedures, and in certain markets there have been times when settlements have
been unable to keep pace with the volume of securities transactions, making it
difficult to conduct and complete such transactions. Inability to dispose of a
portfolio security caused by settlement problems could result either in losses
to a Fund due to subsequent declines in the value of the portfolio security or,
if a Fund has entered into a contract to sell that security, could result in
possible liability of the Fund to the purchaser. Delays in settlement could
adversely affect a Fund's ability to implement its investment strategies and to
achieve its investment objectives.
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In addition, the costs associated with transactions in securities
traded on foreign markets or of foreign issuers, and the expense of maintaining
custody of such securities with foreign custodians, generally are higher than
the costs associated with transactions in U.S. securities on U.S. markets.
Investments in foreign securities may result in higher expenses due to the cost
of converting foreign currency to U.S. dollars, the payment of fixed brokerage
commissions on foreign exchanges, the expense of maintaining securities with
foreign custodians and the imposition of transfer taxes or transaction charges
associated with foreign exchanges.
Investment in debt securities of supranational organizations involves
additional risks. Such organizations' debt securities generally are not
guaranteed by their member governments, and payment depends on their financial
solvency and/or the willingness and ability of their member governments to
support their obligations. Continued support of a supranational organization by
its government members is subject to a variety of political, economic and other
factors, as well as the financial performance of the organization.
DEPOSITARY RECEIPTS
In many respects, the risks associated with investing in depositary
receipts are similar to the risks associated with investing in foreign equity
securities directly. In addition, to the extent that a Fund acquires depositary
receipts through banks that do not have a contractual relationship with the
foreign issuer of the security underlying the depositary receipts to issue and
service depositary receipts, there may be an increased possibility that the Fund
would not become aware of and be able to respond to corporate actions, such as
stock splits or rights offerings, involving the foreign issuer in a timely
manner.
The information available for American Depositary Receipts ("ADRs")
sponsored by the issuers of the underlying securities is subject to the
accounting, auditing, and financial reporting standards of the domestic market
or exchange on which they are traded, which standards generally are more uniform
and more exacting than those to which many non-domestic issuers may be subject.
However, some ADRs are sponsored by persons other than the issuers of the
underlying securities. Issuers of the stock on which such ADRs are based are not
obligated to disclose material information in the United States. The information
that is available concerning the issuers of the securities underlying European
Depositary Receipts ("EDRs") and Global Depositary Receipts ("GDRs") may be less
than the information that is available about domestic issuers, and EDRs and GDRs
may be traded in markets or on exchanges that have lesser standards than those
applicable to the markets for ADRs.
A depositary receipt will be treated as an illiquid security for
purposes of a Fund's restriction on the purchases of such securities unless the
depositary receipt is convertible into cash by the Fund within seven days.
EMERGING MARKET SECURITIES
There are special risks associated with investments in securities of
companies organized or headquartered in developing countries with emerging
markets that are in addition to the usual risks of investing in securities of
issuers located in developed foreign markets around the world, and investors in
the Funds are strongly advised to consider those risks carefully. The securities
markets of emerging market countries are substantially smaller, less developed,
less liquid, and more volatile than the securities markets of the United States
and developed foreign markets. As a result, the prices of emerging market
securities may increase or decrease much more rapidly and much more dramatically
than the prices of securities of issuers located in developed foreign markets.
Disclosure and regulatory standards in many respects are less stringent than in
the United States and developed foreign markets. There also may be a lower level
of monitoring and regulation of securities markets in emerging market countries
and the activities of investors in such markets, and enforcement of existing
regulations has been extremely limited.
Many emerging market countries have experienced substantial, and in
some periods extremely high, rates of inflation for many years. Inflation and
rapid fluctuations in inflation rates have had and may continue to have very
negative effects on the economies and securities markets of certain emerging
market countries. Economies in emerging markets generally are heavily dependent
upon international trade and, accordingly, have been and may continue to be
affected adversely by trade barriers, exchange controls, managed adjustments in
relative currency
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values, and other protectionist measures imposed or negotiated by the countries
with which they trade. These economies also have been and may continue to be
adversely affected by economic conditions in the countries with which they
trade. In addition, custodial services and other costs related to investment in
foreign markets may be more expensive in emerging markets than in many developed
foreign markets, which could reduce the Funds' investment returns from such
securities.
In many cases, governments of emerging market countries continue to
exercise a significant degree of control over the economies of such countries,
and government actions relative to the economy, as well as economic developments
generally, also may have a major effect on an issuer's prospects. In addition,
certain of such governments have in the past failed to recognize private
property rights and have at times naturalized or expropriated the assets of
private companies. There is also a heightened possibility of confiscatory
taxation, imposition of withholding taxes on dividend and interest payments, or
other similar developments that could affect investments in those countries. As
a result, there can be no assurance that adverse political changes will not
cause a Fund to suffer a loss with respect to any of its holdings. In addition,
political and economic structures in many of such countries may be undergoing
significant evolution and rapid development, and such countries may lack the
social, political and economic stability characteristics of more developed
countries. Unanticipated political or social developments may affect the values
of a Fund's investments in those countries and the availability of additional
investments in those countries.
INVESTMENTS IN SMALLER COMPANIES
Investment in the securities of companies with smaller market
capitalizations 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
a Fund may invest may have limited or unprofitable operating histories,
limited financial resources, and inexperienced management. Furthermore,
securities of such companies are often less liquid than securities of larger
companies, and may be subject to erratic or abrupt price movements. To
dispose of these securities, a Fund may have to sell them over an extended
period of time below the original purchase price. Investments in smaller
capitalization companies may be regarded as speculative.
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.
CONVERTIBLE SECURITIES
Investment in convertible securities involves certain risks. The value
of a convertible security is a function of its "investment value" (determined by
its yield in comparison with the yields of other securities of comparable
maturity and quality that do not have a conversion privilege) and its
"conversion value" (the security's worth, at market value, if converted into the
underlying stock). If the conversion value is low relative to the investment
value, the price of the convertible security will be governed principally by its
yield, and thus may not decline in price to the same extent as the underlying
stock; to the extent the market price of the underlying common stock approaches
or exceeds the conversion price, the price of the convertible security will be
influenced increasingly by its conversion value. A convertible security held by
a Fund may be subject to redemption at the option of the issuer at a price
established in the instrument governing the convertible security, in which event
the Fund will be required to permit the issuer to redeem the security, convert
it into the underlying common stock, or sell it to a third party.
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BELOW INVESTMENT GRADE DEBT SECURITIES
The Funds may invest in debt securities rated below investment grade.
Lower quality debt securities held by the Funds will be rated at least B by
Standard & Poor's, an equivalent rating by another recognized rating agency or,
if unrated, judged by the Investment Manager to be of comparable quality, if the
Investment Manager believes that the financial condition of the issuer or the
protection afforded to the particular securities is stronger than would
otherwise be indicated by such low ratings or the lack thereof. Debt securities
rated below investment grade or equivalent ratings, commonly referred to as
"junk bonds," are subject to greater risk of loss of income and principal than
higher-rated bonds and are considered to be predominantly speculative with
respect to the issuer's capacity to pay interest and repay principal, which may
in any case decline during sustained periods of deteriorating economic
conditions or rising interest rates. Junk bonds are generally considered to be
subject to greater market risk in times of deteriorating economic conditions,
and to wider market and yield fluctuations, than higher-rated securities. Junk
bonds may also be more susceptible to real or perceived adverse economic and
competitive industry conditions than investment grade securities. The market for
such securities may be thinner and less active than that for higher-rated
securities, which can adversely affect the prices at which these securities can
be sold. To the extent that there is no established secondary market for
lower-rated securities, a Fund may experience difficulty in valuing such
securities and, in turn, its assets. In addition, adverse publicity and investor
perceptions about junk bonds, whether or not based on fundamental analysis, may
tend to decrease the market value and liquidity of such securities. The
Investment Manager will try to reduce the risk inherent in the Funds'
investments in such securities 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 Funds' 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
Each of the Funds may buy and sell securities on a delayed-delivery or
when-issued basis. These transactions involve a commitment by a Fund to purchase
or sell specific securities at a predetermined price and/or yield, with payment
and delivery taking place after the customary settlement period for that type of
security (and more than seven days in the future). Typically, no interest
accrues to the purchaser until the security is delivered. A Fund may receive
fees for entering into delayed-delivery transactions. When purchasing securities
on a delayed-delivery basis, a Fund assumes the rights and risks of ownership,
including the risk of price and yield fluctuations. Because a Fund is not
required to pay for securities until the delivery date, these risks are in
addition to the risks associated with the Fund's other investments. If a Fund
remains substantially fully invested at a time when delayed-delivery purchases
are outstanding, the delayed-delivery purchases may result in a form of
leverage. When delayed-delivery purchases are outstanding, a Fund will set aside
appropriate liquid assets in a segregated custodial account to cover its
purchase obligations. When a Fund has sold a security on a delayed-delivery
basis, the Fund does not participate in further gains or losses with respect to
the security. If the other party to a delayed-delivery transaction fails to
deliver or pay for the securities, the Fund could miss a favorable price or
yield opportunity, or could suffer a loss. A Fund may dispose of or renegotiate
delayed-delivery transactions after they are entered into, and may sell
underlying securities before they are delivered, which may result in capital
gains or losses.
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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 Funds. One risk arises because the correlation between movements in the
price of a futures contract and movements in the price of the security or
currency which is the subject of the hedge is not always perfect. The price of
the futures contract acquired by a Fund may move more than, or less than, the
price of the security or currency being hedged. If the price of the future moves
less than the price of the security or currency which is the subject of the
hedge, the hedge will not be fully effective but, if the price of the security
or currency being hedged has moved in an unfavorable direction, the Fund would
be in a better position than if it had not hedged at all. If the price of the
security or currency being hedged has moved in a favorable direction, this
advantage will be partially offset by movement in the value of the future. If
the price of the futures contract moves more than the price of the security or
currency, the Fund will experience either a loss or a gain on the futures
contract which will not be completely offset by movements in the price of the
security or currency which is the subject of the hedge.
To compensate for the imperfect correlation of movements in the price
of a security or currency being hedged and movements in the price of the
futures, a Fund may buy or sell futures contracts in a greater dollar amount
than the dollar amount of the security or currency being hedged, if the
historical volatility of the price of such security or currency has been greater
than the historical volatility of the security or currency. Conversely, a Fund
may buy or sell fewer futures contracts if the historical volatility of the
price of the security or currency being hedged is less than the historical
volatility of the security or currency.
Because of the low margins required, futures trading involves a high
degree of leverage. As a result, a relatively small investment in a futures
contract by a Fund may result in immediate and substantial loss, or gain, to the
Fund. A purchase or sale of a futures contract may result in losses in excess of
the initial margin for the futures contract.
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However, the Fund would have sustained comparable losses if, instead of the
futures contract, it had invested in the underlying financial instrument and
sold the instrument after the decline.
When futures are purchased by a Fund to hedge against a possible
unfavorable movement in a currency exchange rate before the Fund is able to
invest its cash (or cash equivalents) in stock or debt instruments in an orderly
fashion, it is possible that the currency exchange rate may move in a favorable
manner instead. If the Fund then decides not to invest in stock or debt
instruments at that time because of concern as to possible further market
decline or for other reasons, the Fund will realize a loss on the futures
contract that is not offset by a reduction in the price of securities purchased.
In addition to the possibility that there may be an imperfect
correlation, or no correlation at all, between movements in the futures and the
security or currency which is the subject of a hedge, the price of futures
contracts may not correlate perfectly with movements in the index or currency
due to certain market distortions. First, all participants in the futures market
are subject to margin deposit and maintenance requirements. Rather than meeting
additional margin deposit requirements, investors may close futures contracts
through offsetting transactions. This practice could distort the normal
relationship between the index or currency and futures markets. Second, from the
point of view of speculators, the deposit requirements in the futures market may
be less onerous than margin requirements in the security or currency market.
Therefore, increased participation by speculators in the futures market also may
cause temporary price distortions. Due to the possibility of price distortion in
the futures market and because of the imperfect correlation between movements in
the index or currency and movements in the price of index or currency futures, a
correct forecast of general market or currency trends by the Investment Manager
still may not result in a successful hedging transaction over a short time
frame.
Futures exchanges may limit the amount of fluctuation permitted in
certain futures contract prices during a single trading day. Once the daily
limit has been reached, no more trades may be made on that day at a price beyond
the limit. The daily limit governs only price movements during a particular
trading day and therefore does not limit potential losses, because the limit may
prevent the liquidation of unfavorable positions.
Compared to the use of a futures contract, the purchase of an option on
a futures contract involves less potential risk to a Fund because the maximum
amount at risk is the premium paid for the option (plus transaction costs).
However, there may be circumstances when the use of an option on a futures
contract would result in loss to a Fund when the use of a futures contract would
not, such as when there is no movement in the level of an index. In addition,
daily changes in the value of the option due to changes in the value of the
underlying futures contract are reflected in the net asset value of the Fund.
A Fund will only enter into futures contracts or purchase futures
options that are standardized and traded on a U.S. or foreign exchange or board
of trade, or similar entity, or quoted on an automated quotation system.
However, there is no assurance that a liquid secondary market on an exchange or
board of trade will exist for any particular futures contract or futures option
or at any particular time. In such event, it may not be possible to close a
futures position, and, in the event of adverse price movements, the Fund would
continue to be required to make daily cash payments of variation margin. In the
event futures contracts have been used to hedge a portfolio security or
currency, an increase in the price of the security or currency, if any, may
partially or completely offset losses on the futures contract. However, as
described above, there is no guarantee that the price of the security or
currency will, in fact, correlate with the movements in the futures contract and
thus provide an offset to losses on a futures contract.
Successful use of futures by the Funds is subject to the Investment
Manager's ability to predict correctly movements in the direction of the
security and currency markets. For example, if a Fund hedged against the
possibility of a decline in the market adversely affecting stocks held in its
portfolio and stock prices increased instead, the Fund would lose part or all of
the benefit of the increased value of its stocks which it hedged because it
would have offsetting losses in its futures positions. In addition, in such
situations, if a Fund had insufficient cash, it might have to sell securities to
meet daily variation margin requirements. Such sales of securities might, but
would not necessarily be at increased prices which would reflect the rising
market. Similarly, if a Fund purchased currency futures contracts with the
intention of profiting from a favorable change in currency exchange rates, and
the change was unfavorable, the Fund would incur a loss, and might have to sell
securities to meet daily variation margin requirements at a time when it
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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 a Fund might not be
able to dispose of such securities promptly or at reasonable prices.
A number of transactions in which the Funds may engage are subject to
the risks of default by the other party to the transaction. If the seller of
securities pursuant to a repurchase agreement entered into by a Fund defaults
and the value of the collateral securing the repurchase agreement declines, the
Fund may incur a loss. If bankruptcy proceedings are commenced with respect to
the seller, realization of the collateral by the Fund may be delayed or limited.
Similarly, when a Fund engages in when-issued, reverse repurchase, forward
commitment and related settlement transactions, it relies on the other party to
consummate the trade; failure of the other party to do so may result in the Fund
incurring a loss or missing an opportunity to obtain a price the Investment
Manager believed to be advantageous. The risks in lending portfolio securities,
as with other extensions of secured credit, consist of a possible delay in
receiving additional collateral or in recovery of the securities or possible
loss of rights in the collateral should the borrower fail financially.
Borrowing also involves special risk considerations. Interest costs on
borrowings may fluctuate with changing market rates of interest and may
partially offset or exceed the return earned on the borrowed funds (or on the
assets that were retained rather than sold to meet the needs for which funds
were borrowed). Under adverse market conditions, a Fund might have to sell
portfolio securities to meet interest or principal payments at a time when
fundamental investment considerations would not favor such sales. To the extent
a Fund enters into reverse repurchase agreements, the Fund is subject to risks
that are similar to those of borrowing.
Investment Restrictions
FUNDAMENTAL POLICIES
Each Fund has adopted certain investment restrictions that are
fundamental policies that may not be changed without approval by the vote of a
majority of the Fund's outstanding voting securities, as defined in the 1940
Act. The "vote of a majority of the outstanding voting securities" of the Fund,
as defined in Section 2(a)(42) of the 1940 Act, means the vote of (i) 67% or
more of the voting securities of the Fund present at any meeting, if the holders
of more than 50% of the outstanding voting securities of the Fund are present or
represented by proxy, or (ii) more than 50% of the outstanding voting securities
of the Fund, whichever is less. These restrictions provide that a Fund may not:
1. Invest more than 25% of the value of its total assets in the securities
of companies primarily engaged in any one industry (other than the
United States of America, its agencies and instrumentalities).
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
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not exceed 5% of the value of its total assets; and provided further
that total borrowings shall be made only to the extent that the value
of the Fund's total assets, less its liabilities other than borrowings,
is equal to at least 300% of all borrowings (including the proposed
borrowing). For purposes of the foregoing limitations, reverse
repurchase agreements and other borrowing transactions covered by
segregated assets are considered to be borrowings. A Fund will not
mortgage, pledge, hypothecate, or in any other manner transfer as
security for an indebtedness any of its assets. This investment
restriction shall not prohibit a Fund from engaging in futures
contracts, options on futures contracts, forward foreign currency
exchange transactions, and currency options.
5. Purchase securities on margin, but it may obtain such short-term credit
from banks as may be necessary for the clearance of purchases and sales
of securities.
6. Make loans of its funds or assets to any other person, which shall not
be considered as including: (i) the purchase of a portion of an issue
of publicly distributed debt securities, (ii) the purchase of bank
obligations such as certificates of deposit, bankers' acceptances and
other short-term debt obligations, (iii) entering into repurchase
agreements with respect to commercial paper, certificates of deposit
and obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities, and (iv) the loan of portfolio
securities to brokers, dealers and other financial institutions where
such loan is callable by the Fund at any time on reasonable notice and
is fully secured by collateral in the form of cash or cash equivalents.
A Fund will not enter into repurchase agreements with maturities in
excess of seven days if immediately after and as a result of such
transaction the value of the Fund's holdings of such repurchase
agreements exceeds 15% of the value of the Fund's total assets.
7. Act as an underwriter of securities issued by other persons, except
insofar as it may be deemed an underwriter under the Securities Act of
1933 in selling portfolio securities.
8. Purchase the securities of any other investment company or investment
trust, except by purchase in the open market where, to the best
information of the Company, no commission or profit to a sponsor or
dealer (other than the customary broker's commission) results from such
purchase and such purchase does not result in such securities exceeding
10% of the value of the Fund's total assets, or except when such
purchase is part of a merger, consolidation, acquisition of assets, or
other reorganization approved by the Fund's stockholders.
9. Purchase portfolio securities from or sell portfolio securities to the
officers, directors, or other "interested persons" (as defined in the
1940 Act) of the Company, other than unaffiliated broker-dealers.
10. Purchase commodities or commodity contracts, except that the Fund may
purchase securities of an issuer which invests or deals in commodities
or commodity contracts, and except that the Fund may enter into futures
and options contracts in accordance with the applicable rules of the
CFTC.
11. Issue senior securities, except that the Fund may borrow money as
permitted by restriction 4 above. This restriction shall not prohibit
the Fund from engaging in short sales, options, futures and foreign
currency transactions.
12. Purchase or sell real estate; provided that the Fund may invest in
readily marketable securities secured by real estate or interests
therein or issued by companies which invest in real estate or interests
therein.
13. Invest more than 15% of the value of its net assets in securities that
are illiquid.
OPERATING POLICIES
Each Fund has adopted certain investment restrictions that are not
fundamental policies and may be changed by the Board of Directors without
approval of the Fund's outstanding voting securities. These restrictions provide
that a Fund may not:
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1. Invest in interests in oil, gas, or other mineral exploration or
development programs.
2. 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).
3. Purchase or sell futures or purchase related options if, immediately
thereafter, the sum of the amount of "margin" deposits on the Fund's
existing futures positions and premiums paid for related options
entered into for the purpose of seeking to increase total return would
exceed 5% of the value of the Fund's net assets.
The Funds are also subject to other restrictions under the 1940 Act;
however, the registration of the Company under the 1940 Act does not involve any
supervision by any federal or other agency of the Company's management or
investment practices or policies, other than incident to occasional or periodic
compliance examinations conducted by the SEC staff.
Execution of Portfolio Transactions
The Investment Manager, subject to the overall supervision of the Board
of Directors, makes each Fund's investment decisions and selects the broker or
dealer to be used in each specific transaction using its best judgment to choose
the broker or dealer most capable of providing the services necessary to obtain
the best execution of that transaction. In seeking the best execution of a
transaction, the Investment Manager evaluates a wide range of criteria,
including any or all of the following: the broker's commission rate, promptness,
reliability and quality of executions, trading expertise, positioning and
distribution capabilities, back-office efficiency, ability to handle difficult
trades, knowledge of other buyers and sellers, confidentiality, capital strength
and financial stability, prior performance in serving the Investment Manager and
its clients, and other factors affecting the overall benefit to be received in
the transaction. When circumstances relating to a proposed transaction indicate
to the Investment Manager that a particular broker is in a position to obtain
the best execution, the order is placed with that broker. This may or may not be
a broker that has provided investment information and research services to the
Investment Manager.
Such investment information may include, among other things: a wide
variety of written reports or other data on individual companies and industries;
data and reports on general market or economic conditions; information
concerning pertinent federal and state legislative and regulatory developments
and other developments that could affect the value of actual or potential
investments; information about companies in which the Investment Manager has
invested or may consider investing; attendance at meetings with corporate
management personnel, industry experts, economists, government personnel, and
other financial analysts; comparative issuer performance and evaluation and
technical measurement services; subscription to publications that provide
investment-related information; accounting and tax law interpretations;
availability of economic advice; quotation equipment and services; execution
measurement services; market-related and survey data concerning the products and
services of an issuer and its competitors or concerning a particular industry
that are used in reports prepared by the Investment Manager to enhance its
ability to analyze an issuer's financial condition and prospects; and other
services provided by recognized experts on investment matters of particular
interest to the Investment Manager. In addition, the foregoing services may
include the use of, or be delivered by, computer systems whose hardware and/or
software components may be provided to the Investment Manager as part of the
services. In any case in which information and other services can be used for
both research and non-research purposes, the Investment Manager makes an
appropriate allocation of those uses and pays directly for that portion of the
services to be used for non-research purposes.
Subject to the requirement of seeking the best execution, the
Investment Manager may, in circumstances in which two or more brokers are in a
position to offer comparable execution, give preference to a broker or dealer
that has provided investment information to the Investment Manager. In so doing,
the Investment Manager may effect securities transactions which cause a Fund to
pay an amount of commission in excess of the amount of commission
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another broker would have charged. In electing such broker or dealer, the
Investment Manager will make a good faith determination that the amount of
commission is reasonable in relation to the value of the brokerage services and
research and investment information received, viewed in terms of either the
specific transaction or the Investment Manager's overall responsibility to the
accounts for which the Investment Manager exercises investment discretion. The
Investment Manager evaluates all commissions paid in order to ensure that the
commissions represent reasonable compensation for the brokerage and research
services provided by such brokers. Such investment information as is received
from brokers or dealers may be used by the Investment Manager in servicing all
of its clients (including the Funds), and a Fund'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 each Fund will benefit overall by such
practice because it is receiving the benefit of research services and the
execution of such transactions not otherwise available to it without the
allocation of transactions based on the recognition of such research services.
Subject to the requirement of seeking the best execution, the
Investment Manager may also place orders with brokerage firms that have sold
shares of the Funds. The Investment Manager has made and will make no
commitments to place orders with any particular broker or group of brokers. The
Company anticipates that a substantial portion of all brokerage commissions will
be paid to brokers who supply investment information to the Investment Manager.
The Investment Manager has no obligation to purchase or sell for a Fund
any security that it, or its officers or employees, may purchase or sell for the
Investment Manager's or their own accounts or the account of any other client,
if in the opinion of the Investment Manager such transaction appears unsuitable,
impractical or undesirable for the Fund. Additionally, the Investment Manager
does not prohibit any of its officers or employees from purchasing or selling
for their own accounts securities that may be recommended to or held by the
Investment Manager's clients, subject to the Investment Manager's and the Funds'
Code of Ethics.
The Funds also invest in foreign and/or U.S. securities that are not listed on a
national securities exchange but are traded in the over-the-counter market. The
Funds may also purchase listed securities through the third market or fourth
market. When transactions are executed in the over-the-counter market or the
third or fourth market, the Investment Manager will seek to deal with the
counterparty that the Investment Manager believes can provide the best
execution, whether or not that counterparty is the primary market maker for that
security. For the fiscal year ended December 31, 1999, the Global Equity Fund
paid total brokerage commissions of $979,000.
Of the total commissions paid during the fiscal year ended December 31,
1999, (100%) were paid to firms which provided research, statistical or other
services to the Investment Manager. The Investment Manager has not separately
identified a portion of such commissions as applicable to the provision of such
research, statistical or otherwise.
During fiscal year ended1999 the Global Equity Fund acquired the
securities of one of its regular broker-dealers (as defined in Rule 10b-1 under
the 1940 Act) and the Strategic Income Fund acquired the securities of three of
its regular broker-dealers. At December 31, 1999, the Global Eqiuity Fund's
holdings in State Street Bank and Trust Company were valued at $979,000. At
December 31, 1999, the Strategic Income Fund's holdings in State Street Bank and
Trust Company, Citicorp and Citigroup were valued at $257,888, $124,469 and
$26,353, respectively.
As noted below, the Investment Manager is a wholly owned subsidiary of
Dresdner Bank AG ("Dresdner"). Dresdner Kleinwort Benson North America LLC
("Dresdner Kleinwort Benson") and other Dresdner subsidiaries may be
broker-dealers (collectively, the "Dresdner Affiliates"). The Investment Manager
believes that it is in the best interests of the Funds to have the ability to
execute brokerage transactions, when appropriate, through the Dresdner
Affiliates. Accordingly, the Investment Manager intends to execute brokerage
transactions on behalf of the Funds through the Dresdner Affiliates, when
appropriate and to the extent consistent with applicable laws and regulations,
including federal banking laws.
In all such cases, the Dresdner Affiliates will act as agent for the
Funds, and the Investment Manager will not enter into any transaction on behalf
of the Funds in which a Dresdner Affiliate is acting as principal for its own
account. In connection with such agency transactions, the Dresdner Affiliates
will receive compensation in the form of brokerage commissions separate from the
Investment Manager's management fee. The Investment Manager's policy is that
such
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commissions must be reasonable and fair when compared to the commissions
received by other brokers in connection with comparable transactions involving
similar securities and that the commissions paid to a Dresdner Affiliate must be
no higher than the commissions paid to that broker by any other similar customer
of that broker who receives brokerage and research services that are similar in
scope and quality to those received by the Funds.
The Investment Manager performs investment management and advisory
services for various clients, including other registered investment companies,
and pension, profit-sharing and other employee benefit plans, as well as
individuals. In many cases, portfolio transactions for a Fund may be executed in
an aggregated transaction as part of concurrent authorizations to purchase or
sell the same security for numerous accounts served by the Investment Manager,
some of which accounts may have investment objectives similar to those of the
Fund. The objective of aggregated transactions is to obtain favorable execution
and/or lower brokerage commissions, although there is no certainty that such
objective will be achieved. Although executing portfolio transactions in an
aggregated transaction potentially could be either advantageous or
disadvantageous to any one or more particular accounts, aggregated transactions
in which a Fund participates will be effected only when the Investment Manager
believes that to do so will be in the best interest of the Fund, and the
Investment Manager is not obligated to aggregate orders into larger
transactions. These orders generally will be averaged as to price. When such
aggregated transactions occur, the objective will be to allocate the executions
in a manner which is deemed fair and equitable to each of the accounts involved
over time. In making such allocation decisions, the Investment Manager will use
its business judgment and will consider, among other things, any or all of the
following: each client's investment objectives, guidelines, and restrictions,
the size of each client's order, the amount of investment funds available in
each client's account, the amount already committed by each client to that or
similar investments, and the structure of each client's portfolio.
Directors and Officers
The names and addresses of the Directors and officers of the Company
and their principal occupations and certain other affiliations during the past
five years are given below. Unless otherwise specified, the address of each of
the following persons is Four Embarcadero Center, San Francisco, California
94111.
DEWITT F. BOWMAN, (69), 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, (54), 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, (62), Director. Mr. James serves as a director of
Basic Vegetable Products, California Sun Dry Foods, 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. From
1985 to 1999 Mr. James was a Senior Vice President and Chief Financial Officer
of Levi Strauss & Co.
Mr. James, previously, was Chair of the Advisory Committee to the California
Public Employees Retirement System.
GEORGE G.C. PARKER, (60), 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.
From 1988 to 1992, 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. From 1984 to
1988, he was an associate in the Washington, D.C. office of Fried, Frank,
Harris, Shriver & Jacobson, where he practiced securities and banking law.
ROBERT J. GOLDSTEIN, (37), Vice President and Secretary. Mr. Goldstein
is a Director and Associate General Counsel of Dresdner RCM, with which he has
been associated since 1997. From 1990 to 1996, Mr. Goldstein 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.
KARIN L. BROTMAN, (33), Assistant Secretary. Ms. Brotman is Assistant
Fund Counsel of Dresdner RCM, with which she has been associated since 1997.
From 1995 to 1997, Ms. Brotman was a Product Manager at Fidelity Investments in
their Legal Department, where she was involved in providing legal and compliance
for 1940 Act registered management investment companies. From 1993 to 1995, 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.
JENNIE W. KLEIN, (35), Vice President and Treasurer. Ms. Klein is
Director of Commingled Fund Services and an Assistant Director of Dresdner RCM,
with which she has been associated since 1994. She is responsible for fund
administration and shareholder record keeping for the Dresdner RCM products.
From 1991 to 1994, Ms. Klein was employed at G.T. Capital Management as the
Manager of Financial Reporting and Compliance for their mutual funds. From 1988
to 1991, she was an auditor at KPMG Peat Marwick.
STEVEN L. WONG, (33), Assistant Treasurer. Mr. Wong is a Manager in
Commingled Fund Services and has been associated with Dresdner RCM since 1994.
He is responsible for overseeing Dresdner RCM's mutual fund administration which
includes financial reporting, compliance, tax reporting, fund accounting,
budgeting and shareholder servicing. From 1992 to 1994, Mr. Wong was a senior
auditor at KPMG Peat Marwick specializing in the audit of investment companies.
From 1991 to 1992, he was a fund accountant with Franklin Funds.
Regular meetings of the Company's Board of Directors are held on a
quarterly basis. The Company's Audit Committee, whose present members are DeWitt
F. Bowman and George B. James, meets with its independent accountants to
exchange views and information 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.
The following table sets forth the aggregate compensation paid by the
Company for the fiscal year ended December 31, 1999, 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):
Page 29
<PAGE>
<TABLE>
<CAPTION>
Pension or
Retirement
Aggregate Benefits Accrued Estimate Total Compensation
Compensation as Part of Annual from the Company
from the the Company's Benefits Upon and Company Complex
Name Company Expenses Retirement Paid to Director (1)
---- ------------ ---------------- ------------- --------------------
<S> <C> <C> <C> <C>
DeWitt F. Bowman $21,250 $10,625 N/A $48,250
- -------------------------
Pamela A. Farr $19,000 $19,000 N/A $46,000
- -------------------------
George B. James $21,250 - N/A $48,250
- -------------------------
George G.C. Parker $19,000 $19,000 N/A $47,500
- -------------------------
Total $80,500 $48,625 $190,000
</TABLE>
- ---------------------
(1) During the fiscal year ended December 31, 1999, there were thirteen
funds in the complex.
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 in either 90-day U.S.
Treasury bills or in shares of the Common Stock of the Company, or a combination
of these options, and the amount of deferred fees payable to such director under
the Directors' Plan will be determined by reference to the return on such deemed
investments. Generally, the deferred fees (reflecting any earnings, gains or
losses thereon) become payable upon the Director's retirement or disability. The
obligation to makes these payments to the Directors of the Company pursuant to
the Directors' Plan is a general obligation of the Company. Each Fund may, to
the extent permitted by the 1940 Act, invest in 90-day U.S. Treasury bills or
the Common Stock of the Company to match its share of the deferred compensation
obligation under the Directors' Plan.
Control Persons and Principal Holders of Securities
As of March 31, 2000, 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.
As of March 31, 2000, there were 100,000 shares of the Global Equity
Fund and 89,252 shares of the Strategic Income Fund outstanding. On that date,
the following were known to the Company to own of record more than 5% of the
Funds' outstanding capital stock:
<TABLE>
<CAPTION>
Name and Address of % of Shares
Beneficial Owner Shares Held Outstanding
<S> <C> <C>
GLOBAL EQUITY FUND
Clients of Dresdner Bank AG 100,000 100%
Investment Management Institutional
Asset Management Division
Jurgen-Ponto-Platz
60301 Frankfurt
Germany
STRATEGIC INCOME FUND
Clients of Dresdner Bank AG 89,252 100%
Investment Management Institutional
</TABLE>
Page 30
<PAGE>
<TABLE>
<S> <C> <C>
Asset Management Division
Jurgen-Ponto-Platz
60301 Frankfurt
Germany
</TABLE>
The Investment Manager
The Board of Directors of the Company has overall responsibility for
the operation of the Funds. Pursuant to such responsibility, the Board of
Directors has approved various contracts for designated financial organizations
to provide, among other things, day to day management services required by the
Funds. The Company has retained as the Funds' Investment Manager, Dresdner RCM
Global Investors LLC, a Delaware limited liability company with principal
offices at Four Embarcadero Center, San Francisco, California 94111. The
Investment Manager is actively engaged in providing investment supervisory
services to institutional and individual clients, and is registered under the
Investment Advisers Act of 1940. The Investment Manager was established in April
1996, as the successor to the business and operations of RCM Capital Management,
a California Limited Partnership, which, with its predecessors, has been in
operation since 1970.
The Investment Manager is 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, 1999, of EUR 397 billion (USD 463
billion), and approximately 1,500 offices and 51,000 employees in over 60
countries around the world, Dresdner is one of Germany's largest banks. Dresdner
provides a full range of banking services including, traditional lending
activities, mortgages, securities, project finance and leasing, to private
customers and financial and institutional clients. In the United States,
Dresdner maintains branches in New York and Chicago and an agency in Los
Angeles. As of the date of this SAI, the nine members of the Board of Managers
of the Investment Manager are William L. Price (Chairman), Gerhard Eberstadt,
George N. Fugelsang, Joachim Madler, Leonhard Fischer, Susan C. Gause, Luke D.
Knecht, William S. Stack, and Kenneth B. Weeman, Jr.
Dresdner and the Investment Manager, by virtue of Dresdner's banking
operations in the United States, are subject to U.S. banking laws and
regulations. U.S. banking organizations generally may act as advisers to
investment companies and may buy and sell investment company shares for their
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. In addition, effective March 11,
2000, banking organizations that qualify as and elect to become financial
holding companies are permitted to sponsor and distribute the shares of
investment companies. Thus, the extent to which Dresdner qualifies and elects to
engage in these activities, as well as future changes in legal requirements or
regulatory interpretations relating to permissible activities of banking
organizations and their affiliates, could affect the nature and scope of
services provided to the Company by the Investment Manager or its affiliates.
The Investment Manager provides the Funds with investment supervisory
services pursuant to Investment Management Agreements, Powers of Attorney and
Service Agreements (the "Management Agreements") dated as of December 30, 1998.
The Investment Manager manages the Funds' investments, provides various
administrative services, and supervises the Funds' daily business affairs,
subject to the authority of the Board of Directors. The Investment Manager is
also the investment manager for Dresdner RCM Large Cap Growth Fund, Dresdner RCM
Global Small Cap Fund, Dresdner RCM Global Technology Fund, Dresdner RCM Global
Health Care Fund, Dresdner RCM Biotechnology Fund, Dresdner RCM Emerging Markets
Fund, Dresdner RCM Tax Managed Growth Fund and Dresdner RCM Balanced Fund, each
a series of Dresdner RCM Global Funds, Inc.; Dresdner RCM International Growth
Equity Fund, Dresdner RCM Growth Equity Fund and Dresdner RCM Small Cap Fund,
each a series of Dresdner RCM Capital Funds, Inc.; Dresdner RCM Europe Fund, a
series of Dresdner RCM Investment Funds Inc.; and RCM Strategic Global
Government Fund, Inc., Bergstrom Capital Corporation and Dresdner RCM Global
Strategic Income Fund, Inc., each closed-end management investment companies. A
Fund's Management Agreement may be renewed from year-to-
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<PAGE>
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.
Each Fund has, under its respective Management Agreement, assumed the
obligation for payment of all of its ordinary operating expenses, including: (a)
brokerage and commission expenses, (b) federal, state, or local taxes incurred
by, or levied on, the Fund, (c) interest charges on borrowings, (d) charges and
expenses of the Fund's custodian, (e) investment advisory fees (including fees
payable to the Investment Manager under the Management Agreement), (f) fees
pursuant to the Fund's Rule 12b-1 plan, (g) legal and audit fees, (h) SEC and
"Blue Sky" registration expenses, and (i) compensation, if any, paid to officers
and employees of the Company who are not employees of the Investment Manager
(see DIRECTORS AND OFFICERS). The Investment Manager is responsible for all of
its own expenses in providing services to the Funds. Expenses attributable to a
Fund are charged against the assets of the Fund.
For the services rendered by the Investment Manager under each Fund's
Investment Management Agreement, each Fund pays management fees at an annualized
rate of its average daily net assets, as described in the Prospectus. For the
fiscal year ended December 31, 1999, the Global Equity Fund incurred fees of
$8,450 and the Strategic Income Fund incurred fees of $22,098.
The Investment Manager has contractually agreed to limit each Fund's
expenses as described in the Prospectus. Each Fund has agreed to reimburse the
Investment Manager, for a period of up to five years, for any such payments to
the extent that the Fund's operating expenses are otherwise below this expense
cap. This obligation will not be recorded on the books of a Fund to the extent
that the total operating expenses of the Fund are at or above the expense cap.
However, if the total operating expenses of a Fund fall below the expense cap,
the reimbursement to the Investment Manager will be accrued by the Fund as a
liability.
Each Fund's Management Agreement provides that the Investment Manager
will not be liable for any error of judgment or for any loss suffered by a Fund
in connection with the matters to which the Management Agreement relates, except
for liability resulting from willful misfeasance, bad faith or gross negligence
in the performance of its duties or by reason of the Investment Manager's
reckless disregard of its duties and obligations under the Management Agreement.
The Company has agreed to indemnify the Investment Manager out of the assets of
each Fund, against liabilities, costs and expenses that the Investment Manager
may incur in connection with any action, suit, investigation or other proceeding
arising out of or otherwise based on any action actually or allegedly taken or
omitted to be taken by the Investment Manager in connection with the performance
of its duties or obligations under the Management Agreement with respect to the
Fund or otherwise as investment manager of the Fund. The Investment Manager is
not entitled to indemnification with respect to any liability to a Fund or its
stockholders by reason of willful misfeasance, bad faith or gross negligence in
the performance of its duties, or of its reckless disregard of its duties and
obligations under the Management Agreement.
Each Management Agreement is terminable without penalty on 60 days'
written notice by a vote of the majority of the outstanding voting securities of
the Fund which is the subject of the Management Agreement, by a vote of the
majority the Board of Directors, or by the Investment Manager on 60 days'
written notice and will automatically terminate in the event of its assignment
(as defined in the 1940 Act).
The Distributor
Funds Distributor, Inc., 60 State Street, Suite 1300, Boston,
Massachusetts 02109 (the "Distributor") serves as Distributor to each Fund. The
Distributor has provided mutual fund distribution services since 1976, and is a
subsidiary
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<PAGE>
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 Funds, 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 each Fund's Management Agreement discussed above. Pursuant to the
Distribution Agreement, the Company has agreed to indemnify the Distributor out
of the assets of each Fund to the extent permitted by applicable law against
certain liabilities under the Securities Act of 1933 arising in connection with
the Distributor's activities on behalf of Fund.
The Company also has an Agreement with the Investment Manager and the
Distributor pursuant to which the Distributor has agreed to provide: regulatory,
compliance and related technical services to the Company; services with regard
to advertising, marketing and promotional activities; and officers to the
Company. The Investment Manager is required to reimburse the Company for any
fees and expenses of the Distributor pursuant to the Agreements.
DISTRIBUTION AND SERVICE PLAN
Under the distribution and service plan (the "Plan") for the Company
with respect to the Class N shares of each Fund pursuant to Rule 12b-1 under the
1940 Act, the Distributor incurs the expense of distributing such shares. The
Plan provides for reimbursement to the Distributor for the services it provides,
and the costs and expenses it incurs, related to marketing the Class N shares of
each Fund. The Distributor is reimbursed for: (a) expenses incurred in
connection with advertising and marketing the Class N shares of each Fund,
including but not limited to any advertising by radio, television, newspapers,
magazines, brochures, sales literature, telemarketing or direct mail
solicitations; (b) periodic payments of fees or commissions for distribution
assistance made to one or more securities brokers, dealers or other industry
professionals such as investment advisers, accountants, estate planning firms
and the Distributor itself in respect of the average daily value of shares owned
by clients of such service organizations, and (c) expenses incurred in
preparing, printing and distributing the Fund's prospectus and statement of
additional information.
The Plan continues in effect from year to year with respect to each
Fund, provided that each such continuance is approved at least annually by a
vote of the Board of Directors of the Company, including a majority vote of the
Directors who are not "interested persons" of the Company within the meaning of
the 1940 Act and have no direct or indirect financial interest in the Plan or in
any agreement related to the Plan, cast in person at a meeting called for the
purpose of voting on such continuance. The Plan may be terminated with respect
to a Fund at any time, without penalty, by the vote of a majority of the
outstanding shares of the Fund. The Plan may not be amended to increase
materially the amounts to be paid by a Fund for the services described therein
without approval by the shareholders of the Fund, and all material amendments
are required to be approved by the Board of Directors of the Company in the
manner described above. The Plan will automatically terminate in the event of
its assignment.
If in any year Funds Distributor is due more from the Fund for such
services than is immediately payable because of the expense limitation under the
Plan, the unpaid amount is carried forward while the Plan is in effect until
such later year as it may be paid. There is not limit on the periods during
which unreimbursed expenses may be carried forward, although the Funds are not
obligated to repay any outstanding unreimbursed expenses that may exist if the
Plan is terminated or not continued. No interest, carrying, or finance charge
will be imposed on any amounts carried forward.
The Distributor may pay broker-dealers and others, out of the fees
it receives under the Distribution Plan, quarterly trail commissions of up to
0.25%, on an annual basis, of the average daily net assets attributable to the N
class of shares of each Fund held in the accounts of their customers.
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<PAGE>
Pursuant to the Plan, the Board of Directors will review at least
quarterly a written report of the distribution expenses incurred on behalf of
shares of the N Class shares of the Funds by the Distributor. The report will
include an itemization of the distribution expenses and the purposes of such
expenditures. In addition, as long as the Plan remains in effect, the selection
and nomination of Directors of the Company who are not "interested persons" of
the Company within the meaning of the 1940 Act will be committed to Directors
who are not interested persons of the Company.
The Administrator
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, supervisons 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 Funds. 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 books and records of the Company; preparing the
Company's federal,state and local 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:
<TABLE>
<CAPTION>
ANNUAL FEE
Average Assets Expressed in Basis Points: 1/100 of 1%
<S> <C>
First $250 Million/Fund 2.50
Next $250 Million/Fund 1.75
Thereafter 1.00
Minimum/Fund $57,500
</TABLE>
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 a Fund will
be used to calculate the fee by multiplying the net assets of the Fund 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.
Other Service Providers
State Street acts as the transfer agent, redemption agent and dividend
paying agent for the Funds. State Street also acts as custodian for the Fund.
The custodian is responsible for the safekeeping of the Funds' 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.
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<PAGE>
PricewaterhouseCoopers LLP ("PwC") acts as the independent public
accountants for the Funds. The accountant examines financial statements for the
Fund and provides other audit, tax, and related services. PwC's principal
business address is 160 Federal Street, Boston, Massachusetts 02110.
Net Asset Value
For purposes of the computation of the net asset value of each share of
each Fund, equity securities traded on stock exchanges are valued at the last
sale price on the exchange or in the principal over-the-counter market in which
such securities are traded as of the close of regular trading on the day the
securities are being valued, unless the Board of Directors or a duly constituted
committee of the Board determines that such price does not reflect the fair
value of the security. In cases where securities are traded on more than one
exchange, the securities are valued on the exchange determined by the Investment
Manager to be the primary market for the securities. If there has been no sale
on such day, the security will be valued at the closing bid price on such day.
If no bid price is quoted on such day, then the security will be valued by such
method as a duly constituted committee of the Board of Directors determines in
good faith to reflect its fair value. Readily marketable securities traded only
in the over-the-counter market that are not listed on the NASDAQ Stock Market or
a similar foreign reporting service will be valued at the mean bid price, or
such other comparable sources as the Board of Directors deems appropriate to
reflect their fair value. Other portfolio securities held by the Funds will be
valued at current market value, if current market quotations are readily
available for such securities. To the extent that market quotations are not
readily available such securities will be valued by whatever means a duly
constituted committee of the Board of Directors deems appropriate to reflect
their fair value.
Futures contracts and related options are valued at their last sale or
settlement price as of the close of the exchange on which they are traded or, if
no sales are reported, at the mean between the last reported bid and asked
prices. All other assets of the Funds will be valued in such manner as a duly
constituted committee of the Board of Directors in good faith deems appropriate
to reflect their fair value.
Trading in securities on foreign exchanges and over-the-counter markets
is normally completed at times other than the close of regular trading on the
New York Stock Exchange. In addition, foreign securities and commodities trading
may not take place on all business days in New York, and may occur in various
foreign markets on days which are not business days in New York and on which net
asset value is not calculated. The calculation of net asset value may not take
place contemporaneously with the determination of the prices of portfolio
securities used in such calculation. Events affecting the values of portfolio
securities that occur between the time their prices are determined and the close
of the New York Stock Exchange will not be reflected in the calculation of net
asset value unless the Board of Directors determines that a particular event
would materially affect net asset value, in which case an adjustment will be
made.
Assets or liabilities initially expressed in terms of foreign
currencies are translated prior to the next determination of net asset value
into U.S. dollars at the spot exchange rates at 12:00 p.m. Eastern time or at
such other rates as the Investment Manager may determine to be appropriate in
computing net asset value.
Debt obligations with maturities of 60 days or less are valued at
amortized cost. The Company may use a pricing service approved by the Board of
Directors to value other debt obligations. Prices provided by such a service
represent evaluations of the mean between current bid and asked market prices,
may be determined without exclusive reliance on quoted prices, and may reflect
appropriate factors such as institution-size trading in similar groups of
securities, yield, quality, coupon rate, maturity, type of issue, individual
rating characteristics, indications of value 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.
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<PAGE>
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 Funds is
based on the net asset value per share, which is normally calculated once daily
at the close of regular trading (normally 4:00 P.M. 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 one or more of its Funds' shares and to reject purchase orders in
whole or in part when such rejection is in the best interests of the Fund and
its respective shareholders.
REDEMPTION OF SHARES
Payments will be made wholly in cash unless the Board of Directors
believes that economic conditions exist which would make such a practice
detrimental to the best interests of a Fund. Under such circumstances, payment
of the redemption price could be made either in cash or in portfolio securities
taken at their value used in determining the redemption price (and, to the
extent practicable, representing a pro rata portion of each of the portfolio
securities held by the Fund), or partly in cash and partly in portfolio
securities. Payment for shares redeemed also may be made wholly or partly in the
form of a pro rata portion of each of the portfolio securities held by a Fund at
the request of the redeeming stockholder, if the Company believes that honoring
such request is in the best interests of such series. If payment for shares
redeemed were to be made wholly or partly in portfolio securities, brokerage
costs would be incurred by the stockholder in converting the securities to cash.
Each Fund has authorized one or more brokers to accept on its behalf
purchase and redemption orders. Such brokers are authorized to designate other
intermediaries to accept purchase and redemption orders on the Fund's behalf.
Each Fund will be deemed to have received a purchase or redemption order when an
authorized broker or, if applicable, a broker's authorized designee, accepts the
order. Customer orders will be priced at the Fund's Net Asset Value next
computed after they are accepted by an authorized broker or the broker's
authorized designee provided they are transmitted to the Fund's transfer agent
on the same day.
Dividends, Distributions and Tax Status
Each income dividend and capital gain distribution, if any, declared by
a Fund will be paid in full and fractional shares based on the net asset value
as determined on the ex-dividend date for such distribution, unless the
stockholder or his or her duly authorized agent has elected to receive all such
payments or the dividend or other distribution portion thereof in cash. Changes
in the manner in which dividend and other distribution payments are paid may be
requested by the stockholder or his or her duly authorized agent at any time
through written notice to the Company and will be effective as to any subsequent
payment if such notice is received by the Company prior to the record date used
for determining the stockholders entitled to such payment. Any distribution
election will remain in effect until the Company is notified by the stockholder
in writing to the contrary.
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<PAGE>
REGULATED INVESTMENT COMPANY
Each Fund has qualified and intends to continue to qualify for
treatment as a "regulated investment company" under Subchapter M of the Code.
Each 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 Funds. In addition, net capital gains (the excess
of net long-term capital gain over net short-term capital loss), net investment
income, and operating expenses are determined separately for each Fund. By
complying with the applicable provisions of the Code, a Fund will not be subject
to federal income tax with respect to net investment income and net realized
capital gains distributed to its stockholders.
To qualify as a regulated investment company under Subchapter M,
generally a Fund must: (i) derive at least 90% of its gross income each taxable
year from dividends, interest, payments with respect to securities loans, and
gains from the sale or other disposition of stock, securities or foreign
currencies and certain other income (including gains from certain options,
futures and forward contracts), ("Income Requirement"); and (ii) diversify its
holdings so that, at the end of each fiscal quarter, (a) at least 50% of the
value of the Fund's total assets is represented by cash, cash items, U.S.
Government securities, securities of other regulated investment companies and
other securities, limited, in respect of any one issuer, to an amount not
greater than 5% of the Fund's total assets and 10% of the outstanding voting
securities of such issuer, and (b) not more than 25% of the value of its total
assets is invested in the securities of any one issuer (other than U.S.
Government securities or the securities of other regulated investment
companies), or in two or more issuers which the Fund controls and which are
engaged in the same or similar trades or businesses.
In any taxable year in which a Fund so qualifies and distributes at
least 90% of the sum of its investment company taxable income (consisting of net
investment income, the excess of net short-term capital gains over net long-term
capital losses and net gains from certain foreign currency transactions) and its
net tax-exempt interest income (if any) ("Distribution Requirement"), it will be
taxed only on that portion, if any, of such investment company taxable income
and any net capital gain that it retains. The Funds expect to so distribute all
of such income and gains on an annual basis and thus will generally avoid any
such taxation.
Even if a Fund qualifies as a "regulated investment company," it may be
subject to a federal excise tax unless it meets certain additional distribution
requirements. Under the Code, a nondeductible excise tax of 4% ("Excise Tax") is
imposed on the excess of a regulated investment company's "required
distribution" for a calendar year ending within the regulated investment
company's taxable year over the "distributed amount" for that calendar year. The
term "required distribution" means the sum of (i) 98% of ordinary income
(generally net investment income and net gains from certain foreign currency
transactions) for the calendar year, (ii) 98% of capital gain net income
(generally both long-term and short-term capital gain) for the one-year period
ending on October 31 (as though that period were the regulated investment
company's taxable year), and (iii) the sum of any untaxed, undistributed net
investment income and net capital gains of the regulated investment company for
prior periods. The term "distributed amount" generally means the sum of (i)
amounts actually distributed by a Fund from its current year's ordinary income
and capital gain net income and (ii) any amount on which a Fund pays income tax
for the year. The Funds intend to meet these distribution requirements to avoid
Excise Tax liability.
Stockholders who are subject to federal or state income or franchise
taxes will be required to pay taxes on dividend and capital gain distributions
they receive from a Fund whether paid in additional shares of the Fund or in
cash. To the extent that dividends received by a Fund would qualify for the 70%
dividends-received deduction available to corporations, the Fund must designate
in a written notice to stockholders, within 60 days after the close of the
Fund's taxable year, the amount of the Fund's dividends that would be eligible
for this treatment. In order to qualify for the dividends-received deduction
with respect to a dividend paid on Fund shares, a corporate stockholder must
hold the Fund shares for at least 45 days during the 90 day period that begins
45 days before the shares become ex-dividend with respect to the dividend.
Stockholders, such as qualified employee benefit plans, which are exempt from
federal and state taxation generally would not have to pay income tax on
dividend or capital gain distributions. Prospective tax-exempt investors should
consult their own tax advisers with respect to the tax consequences of an
investment in the Funds under federal, state, and local tax laws.
Page 37
<PAGE>
WITHHOLDING
Dividends paid by a Fund to a stockholder who, as to the U.S., is a
nonresident alien individual, nonresident alien fiduciary of a trust or estate,
foreign corporation, or foreign partnership (a "foreign stockholder") generally
will be subject to U.S. withholding tax (at a rate of 30% or a lower treaty
rate, if applicable). Withholding will not apply, however, if a dividend paid by
a Fund to a foreign stockholder is "effectively connected" with the conduct of a
U.S. trade or business, in which case the reporting and withholding requirements
applicable to U.S. citizens or domestic corporations will apply. Distributions
of net capital gain to foreign stockholders who are neither U.S. resident aliens
nor engaged in a U.S. trade or business generally are not subject to withholding
or U.S. federal income tax.
FOREIGN CURRENCY, OPTIONS, FUTURES AND FORWARD CONTRACTS
Gains from the sale or other disposition of foreign currencies (except
certain gains therefrom that may be excluded by future regulations), and gains
from options, futures, and forward contracts derived by a Fund with respect to
its business of investing in securities of foreign currencies, will qualify as
permissible income under the Income Requirement.
SECTION 1256 CONTRACTS
Many of the options, futures contracts and forward contracts entered
into by the Funds are "Section 1256 contracts." Any gains or losses realized on
Section 1256 contracts are generally considered 60% long-term and 40% short-term
capital gains or losses, although certain foreign currency gains and losses from
such contracts may be treated as ordinary income in character. Section 1256
contracts held by a Fund at the end of each taxable year (and, for purposes of
the Excise Tax, on October 31 or such other dates as prescribed under the Code),
other than Section 1256 contracts that are part of a "mixed straddle" with
respect to which a Fund has made an election not to have the following rules
apply, must be "marked-to-market" (that is, treated as sold for their fair
market value) for federal income tax purposes, with the result that unrealized
gains or losses are treated as though they were realized. The 60% portion of
gains on Section 1256 contracts that is treated as long-term capital gain will
qualify for the reduced maximum tax rates on net capital gain -- 20% (10% for
taxpayers in the 15% marginal tax bracket) for gain recognized on capital assets
held for more than 12 months.
STRADDLE RULES
Generally, the hedging transactions and other transactions in options,
futures and forward contracts undertaken by the Funds may result in "straddles"
for U.S. federal income tax purposes. The straddle rules may affect the amount,
character and timing of recognition of gains or losses realized by a Fund. In
addition, losses realized by a Fund on positions that are part of a straddle
position may be deferred under the straddle rules, rather than being taken into
account for the taxable year in which these losses are realized. Because limited
regulations implementing the straddle rules have been promulgated, the tax
consequences of hedging transactions and options, futures and forward contracts
to the Funds are not entirely clear.
Hedging transactions may increase the amount of short-term capital gain
realized by a Fund, which is taxed as ordinary income when distributed to
stockholders. A Fund may make one or more elections available under the Code
which are applicable to straddle positions. If a Fund makes any of the
elections, the amount, character and timing of the recognition of gains or
losses from the affected straddle positions will be determined under rules that
vary according to elections made. The rules applicable under certain elections
operate to accelerate the recognition of gains or losses from the affected
straddle positions. Because the application of the straddle rules may affect the
character of gains or losses, defer losses and/or accelerate the recognition of
gains or losses from the affected straddle positions, the amount which must be
distributed to stockholders, and which will be taxed to stockholders as ordinary
income or long-term capital gain, may be increased or decreased substantially as
compared to a fund that did not engage in such hedging transactions.
Page 38
<PAGE>
SECTION 988 GAINS AND LOSSES
Under the Code, gains or losses attributable to fluctuations in
exchange rates which occur between the time a Fund accrues interest or other
receivables, or accrues expenses or other liabilities, denominated in a foreign
currency and the time the Fund actually collects such receivables or pays such
liabilities, generally are treated as ordinary income or loss. Similarly, on the
disposition of debt securities denominated in foreign currency and on the
disposition of certain futures contracts, forward contracts and options, gains
or losses attributable to fluctuation in the value of foreign currency between
the date of acquisition of the debt security, contract or option and the date of
disposition thereof are also treated as ordinary gain or loss. These gains or
losses, referred to under the Code as "Section 988" gains or losses, may
increase or decrease the amount of a Fund's investment company taxable income to
be distributed to stockholders as ordinary income.
FOREIGN TAXES
A Fund may be required to pay withholding and other taxes imposed by
foreign countries which would reduce the Fund's investment income, generally at
rates from 10% to 40%. Tax conventions between certain countries and the United
States may reduce or eliminate such taxes. If more than 50% of the value of a
Fund's total assets at the close of its taxable year consists of securities of
foreign corporations, the Fund will be eligible to elect to "pass-through" to
the Fund's stockholders the amount of foreign income and similar taxes paid by
the Fund. If this election is made, stockholders generally subject to tax will
be required to include in gross income (in addition to taxable dividends
actually received) their pro rata shares of the foreign income taxes paid by the
Fund, and may be entitled either to deduct (as an itemized deduction) their pro
rata shares of foreign taxes in computing their taxable income or to use such
amount (subject to limitations) as a foreign tax credit against their U.S.
federal income tax liability. No deduction for foreign taxes may be claimed by a
stockholder who does not itemize deductions. Each stockholder will be notified
within 60 days after the close of a Fund's taxable year whether the foreign
taxes paid by the Fund will be "passed-through" for that year.
The foregoing is a general abbreviated summary of present U.S. federal
income tax laws applicable to the Funds, their stockholders and dividend and
capital gain distributions by the Funds. Stockholders are urged to consult their
own tax advisers for more detailed information and for information regarding any
foreign, state, and local tax laws and regulations applicable to dividends and
other distributions received from the Funds.
Investment Results
Average annual total return ("T") of a Fund is calculated as follows:
an initial hypothetical investment of $1,000 ("P") is divided by the net asset
value of shares of the Fund as of the first day of the period in order to
determine the initial number of shares purchased. Subsequent dividend and
capital gain distributions by a Fund are paid at net asset value on the payment
date determined by the Board of Directors. The sum of the initial shares
purchased and shares acquired through distributions is multiplied by the net
asset value per share of the Fund as of the end of the period ("n") to determine
ending redeemable value ("ERV"). The ending value divided by the initial
investment converted to a percentage equals total return. The formula thus used,
as required by the SEC, is:
P(1+T)(n) = 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
Page 39
<PAGE>
illustrated. Total return may be calculated for one year, five years, ten years,
and for other periods, and will typically be updated on a quarterly basis. The
average annual compound rate of return over various periods may also be computed
by using ending values as determined above.
Quotations of a Fund's yield are based on the investment income per
share earned during a particular 30-day period (including dividends, if any, and
interest), less expenses accrued during the period ("net investment income"),
and are computed by dividing net investment income by the net asset value per
share on the last day of the period, according to the following SEC formula:
YIELD = 2[(a - b + 1)(6) - 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 a Fund's performance
or more accurately compare such performance to other measures of investment
return, a Fund also may include in advertisements and stockholder reports other
total return performance data based on time-weighted, monthly-linked total
returns computed on the percentage change of the month end net asset value of
the Fund after allowing for the effect of any cash additions and withdrawals
recorded during the month. Returns may be quoted for the same or different
periods as those for which average total return is quoted. A Fund's investment
results will vary from time to time depending upon market conditions, the
composition of the Fund's portfolio, and operating expenses, so that any
investment results reported should not be considered representative of what an
investment in the Fund may earn in any future period. These factors and possible
differences in calculation methods should be considered when comparing a Fund's
investment results with those published for other investment companies, other
investment vehicles and unmanaged indices. Results also should be considered
relative to the risks associated with a Fund's investment objective and
policies.
Each of the Funds may from time to time compare its investment
results with data and mutual fund rankings published or prepared by Lipper Inc.
and Morningstar, Inc., which rank mutual funds by overall performance,
investment objectives, and assets.
The Global Equity Fund may from time to time compare its investment
results with the following:
1. The S&P 500 Stock Price 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 MSCI All-Country World Free Index, which is a market
capitalization-weighted index composed of companies
representative of the market structure of 47 developed and
emerging market countries in the Americas, Europe/Middle East,
and Asia/Pacific regions. The Index is calculated without
dividends or with gross dividends reinvested, in both U.S.
Dollars and local currencies. The Index excludes closed
markets and those shares in otherwise free markets which are
not purchasable by foreigners.
The Strategic Income Fund may from time to time compare its investment
results with the following:
1. 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 least
one year.
Page 40
<PAGE>
General Information
The Global Company was incorporated in Maryland as an open-end
management investment company on September 17, 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 50,000,000 shares
have been designated as shares of the Strategic Income Fund and the Global
Equity 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 not
conversion or preemptive rights in connection with any shares. All shares of the
Funds when duly issued will be fully paid and non-assessable. The rights of the
holders of shares of each Fund may not be modified except by vote of the
majority of the outstanding shares of such Fund. Certificates are not issued
unless requested and are never issued for fractional shares. Fractional shares
are liquidated when an account is closed.
Shares of the Company have non-cumulative voting rights, which means
that the holders of more than 50% of all series of the Company's shares voting
for the election of the directors can elect 100% of the directors of the Company
if they wish to do so. In such event, the holders of the remaining less than 50%
of the shares of the Company voting for the election of directors will not be
able to elect any person to the Board of Directors of the Company.
The Company is not required to hold a meeting of stockholders in any
year in which the 1940 Act does not require a stockholder vote on a particular
matter, such as election of directors. The Company will hold a meeting of its
stockholders for the purpose of voting on the question of removal of one or more
directors if requested in writing by the holders of at least 10% of the
Company's outstanding voting securities, and will assist in communicating with
its stockholders as required by Section 16(c) of the 1940 Act.
Stockholders are entitled to one vote for each full share held and
fractional votes for fractional shares held. Unless otherwise provided by law or
its Articles of Incorporation or Bylaws, the Company generally may take or
authorize any extraordinary action upon the favorable vote of the holders of
more than 50% of the outstanding shares of the Company or may take or authorize
any routine action upon approval of a majority of the votes cast.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted to the holders of the outstanding voting securities of an investment
company such as the Company shall not be deemed to have been effectively acted
upon unless approved by a majority of the outstanding voting securities, as
defined in the 1940 Act, of the series or class of the Company affected by the
matter. Under Rule 18f-2, a series or class is presumed to be affected by a
matter, unless the interests of each series or class in the matter are identical
or the matter does not affect any interest of such series or class. Under Rule
18f-2 the approval of an investment advisory agreement or any change in a
fundamental investment policy would be effectively acted upon with respect to a
Fund only if approved by a majority of its outstanding voting securities, as
defined in the 1940 Act. However, the rule also provides that the ratification
of independent public accountants, the approval of principal underwriting
contracts and the election of directors may be effectively acted upon by the
stockholders of the Company voting without regard to Fund.
Page 41
<PAGE>
Each share of each Class of a Fund (Class N - Retail and Class I -
Institutional) represents an equal proportional interest in the Fund with each
other share of the same Class and is entitled to such dividends and
distributions out of the income earned on the assets allocable to the Class as
are declared in the discretion of the Board of Directors. In the event of the
liquidation or dissolution of the Company, stockholders of a Fund are entitled
to receive the assets attributable to the Fund that are available for
distribution, and a distribution of any general assets not attributable to a
particular Fund that are available for distribution, in such manner and on such
general basis as the Board of Directors may determine.
Additional Information
COUNSEL
Certain legal matters in connection with the capital shares offered by
the Prospectus have been passed upon for the Fund by Paul, Hastings, Janofsky &
Walker LLP, 555 South Flower Street, Los Angeles, California 90071. The validity
of the capital stock offered by the Funds has been passed upon by Venable,
Baetjer and Howard, LLP, 1800 Mercantile Bank & Trust Building, 2 Hopkins Plaza,
Baltimore, Maryland 21201. Paul, Hastings, Janofsky & Walker LLP has acted and
will continue to act as counsel to the Investment Manager in various matters.
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.
Financial Statements
Incorporated by reference herein are the financial statements of the
Funds contained in the Funds' Annual Report to Stockholders for the year ended
December 31, 1999, including the Report of Independent Accountants, dated
February 18, 2000, the Statement of Assets and Liabilities, including the
Portfolio of Investments and related Statement of Operations, Change in Net
Assets, and the Financial Highlights. Copies of the Funds' Annual and
Semi-Annual Reports to Stockholders will be available, upon request, by calling
(800) 726-7240, or by writing to P.O. Box 8025, Boston, MA 02266-8025.
REGISTRATION STATEMENT
The Funds' Prospectus and this SAI do not contain all of the
information set forth in the Company's registration statement and related forms
as filed with the SEC, certain portions of which are omitted in accordance with
rules and regulations of the SEC. The registration statement and related forms
may be inspected at the Public Reference Room of the SEC at Room 1024, 450 5th
Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and copies thereof may be
obtained from the SEC at prescribed rates. It is also available on the SEC's
Internet Web site at http://www.sec.gov. Statements contained in the Prospectus
or this SAI as to the contents of any contract or other document referred to
herein or in the Prospectus are not necessarily complete, and, in each instance,
reference is made to the copy of such contract or other document filed as an
exhibit to the Company's registration statement, each such statement being
qualified in all respects by such reference.
Page 42
<PAGE>
DRESDNER RCM GLOBAL FUNDS, INC.
CROSS REFERENCE SHEET
BETWEEN ITEMS OF PART A AND B OF FORM N-1A AND THE
PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION
<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, Risks, and Performance Risk/Return Summary
3. Risk/Return Summary: Fee Table Fees and Expenses
4. Investment Objectives, Principal Investment Strategies, Investment Strategies and Policies; Other
and Related Risks Investment Practices; Investment Risks
5. Management's Discussion of Fund *
Performance
6. Management, Organization, and Capital Structure Organization and Management
7. Shareholder Information Stockholder Information
8. Distribution Arrangements Organization and Management:; The Distributor
9. Financial Highlights Information Financial Highlights
</TABLE>
*Not applicable.
C-1
<PAGE>
DRESDNER RCM GLOBAL FUNDS, INC.
CROSS REFERENCE SHEET
BETWEEN ITEMS OF PART A AND B OF FORM N-1A AND THE
PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION
(CONTINUED)
<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 Investments Investment Strategies and Policies; Risk
and Risks Considerations; Investment Restrictions
13. Management of the Fund The Investment Manager
14. Control Persons and Principal Holders of Directors and Officers; Description of Capital
Securities Shares
15. Investment Advisory and Other Services The Investment Manager; The Distributor; Additional
Information
16. Brokerage Allocation and Other Practices Execution of Portfolio Transactions
17. Capital Stock and Other Securities Description of Capital Shares
18. Purchase, Redemption and Pricing of Purchase and Redemption of Shares
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>
C-2
<PAGE>
Dresdner RCM Large Cap Growth Fund
Dresdner RCM International Growth Equity Fund
Dresdner RCM Emerging Markets Fund
Dresdner RCM Global Small Cap Fund
Dresdner RCM Global Technology Fund
Dresdner RCM Global Health Care Fund
Dresdner RCM Biotechnology Fund
Dresdner RCM Tax Managed Growth Fund
Dresdner RCM Balanced Fund
-------------------------------------------------------------------------
May 1, 2000
This prospectus contains essential information for anyone considering
an investment in these Funds. Please read this document carefully and retain it
for future reference.
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>
DRESDNER RCM GLOBAL FUNDS, INC.
DRESDNER RCM CAPITAL FUNDS, INC.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
- ---------------------------------------------------------------------------------------------------
RISK/RETURN SUMMARY AND FUND EXPENSES
- ----------------------------------------------------------------------------------------------------
<S> <C>
This section summarizes the Funds' 4 Dresdner RCM Large Cap Growth Fund
investments, risks, past performance, and 8 Dresdner RCM International Growth Equity Fund
fees. 13 Dresdner RCM Emerging Markets Fund
18 Dresdner RCM Global Small Cap Fund
23 Dresdner RCM Global Technology Fund
28 Dresdner RCM Global Health Care Fund
32 Dresdner RCM Biotechnology Fund
36 Dresdner RCM Tax Managed Growth Fund
Dresdner RCM Balanced Fund
INVESTMENT STRATEGIES, POLICIES AND RISKS
- ----------------------------------------------------------------------------------------------------
This section provides details about the Funds' 42 Investment Strategies and Policies
investment strategies, policies and risks. 44 Other Investment Practices
46 Changing the Funds' Investment Objectives and
Policies
47 Investment Risks
ORGANIZATION AND MANAGEMENT
- ----------------------------------------------------------------------------------------------------
This section provides details about the people 51 The Funds and the Investment Manager
and organizations who oversee the Funds. 51 The Portfolio Managers
The Investment Manager's Composite Performance
52 Management Fees and other Expenses
53 The Distributor
STOCKHOLDER INFORMATION
- ----------------------------------------------------------------------------------------------------
This section tells you how to buy, sell and 55 Buying Shares
exchange shares, how we value shares, and 56 Selling Shares
how we pay dividends and distributions. 57 Other Stockholder Services and Account Policies
61 Dividends, Distributions and Taxes
FINANCIAL HIGHLIGHTS
- ----------------------------------------------------------------------------------------------------
This section provides details on selected 63 Financial Highlights
financial highlights of the Funds
</TABLE>
2
<PAGE>
DRESDNER RCM LARGE CAP GROWTH FUND
Goal: The Fund's goal is to seek long-term capital
appreciation by investing in equity
securities of U.S. companies with at least
$3 billion in market capitalization.
Principal Investment Strategies: The Fund will invest at least 65% of its
total assets in companies with large market
capitalizations, which are companies with a
total market capitalization of at least $3
billion at the time of purchase.
The Investment Manager evaluates the
fundamental value and prospects for growth
of individual companies and focuses on
companies that it expects will have higher
than average rates of growth and strong
potential for capital appreciation. The
Standard & Poor's 500 Index is the Fund's
performance benchmark. The Investment
Manager bases its security selection on the
relative security selection on the relative
investment merits of each company and
industry throughout the United States and
will not seek to duplicate the sector or
stock allocations of the benchmark.
Principal Investment Risks: Because the value of the Fund's investments
will fluctuate 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 value of the Fund's investments will
fluctuate in response to the activities of
individual companies and general stock
market and economic conditions.
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>
PERFORMANCE
The charts on this page show how the Fund has performed and provide
some indication of the risks of investing in the Fund by showing how its
performance has varied from year to year. The bar chart shows changes in the
yearly performance of the Fund since its inception. The chart below it compares
the performance of the Fund over time to the Standard & Poor's 500 Index.
Both charts assume reinvestment of dividends and distributions. Of
course, past performance does not necessarily indicate how the Fund will perform
in the future.
<TABLE>
<CAPTION>
Year-by-Year Total Returns for Class I Shares
1997 1998 1999
<S> <C> <C> <C>
31.99% 44.11% 44.84%
</TABLE>
For the periods covered by the year-by-year total return chart, the Fund's
highest quarterly return was 29.25% (for the fourth quarter ended 1998) and the
lowest quarterly return was -9.11% (for the third quarter ended 1998).
<TABLE>
<CAPTION>
Average Annual Total Returns
(through December 31, 1999)
Fund One Year Since
Inception Inception
---------------------------------------------------
<S> <C> <C> <C>
Large Cap Growth Fund Class I 12/31/96 44.84% 40.18%
(DRLCX)*
---------------------------------------------------
Large Cap Growth Fund Class N 12/31/96 44.46% 40.06%
(DLCNX)**
---------------------------------------------------
S&P 500 Index 21.04% 27.56%
- -----------------------------------------------------------------------------------------------
</TABLE>
* Returns through December 31, 1998 reflect Rule 12b-1 fees. On that date, all
Fund shares were redesignated Class I shares, which do not pay Rule 12b-1 fees.
Performance results for periods after December 31, 1998 do not reflect Rule
12b-1 fees.
** Class N shares were first issued on March 2, 1999 and pay Rule 12b-1 fees.
Class N returns through December 31, 1998 are based on Class I returns and
reflect Rule 12b-1 fees.
FEES AND EXPENSES
As an investor in the Fund, you will pay the following fees and
expenses.
<TABLE>
<CAPTION>
SHAREHOLDER FEES CLASS OF SHARES
---------------
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) CLASS I CLASS N
------- -------
None
ANNUAL FUND OPERATING EXPENSES (FEES PAID FROM FUND ASSETS)
<S> <C> <C>
Management fees 0.70% 0.70%
- ------------------------------------------------------------------------------------------------
Rule 12b-1 fee None 0.25%
- ------------------------------------------------------------------------------------------------
4
<PAGE>
Other expenses 1.75% 59.09%
- ------------------------------------------------------------------------------------------------
Total annual Fund operating expenses 2.45% 60.04%
- ------------------------------------------------------------------------------------------------
Less: Fees Waived and Reimbursed(1) -1.50% -58.84%
- ------------------------------------------------------------------------------------------------
Net operating expenses(1) 0.95% 1.20%
- ------------------------------------------------------------------------------------------------
</TABLE>
(1) Dresdner RCM Global Investors LLC (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 0.95% for Class I and 1.20% for Class N. 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 costs may be higher or lower, based on these assumptions your
costs would be:
<TABLE>
<CAPTION>
One Three Five Ten
Year Years Years Years
<S> <C> <C> <C> <C>
Class I* $97 $620 $1,170 $2,672
Class N* $122 $6,670 $7,994 $8,323
</TABLE>
*Assuming the Investment Manager continues to reimburse the ordinary operating
expenses which exceed the annualized rate of 0.95% for Class I and 1.20% for
Class N, your expenses for the periods indicated would be $97, $303, $525 and
$1,166 for Class I and $122, $381, $660 and $1,455 for Class N. However, there
is no guarantee that the Investment Manager will continue such reimbursement
policy.
5
<PAGE>
DRESDNER RCM INTERNATIONAL GROWTH EQUITY FUND
Goal: The Fund's goal is to seek long-term capital
appreciation by investing in equity
securities of foreign companies.
Principal Investment Strategies: The Fund will invest at least 65% of its
total assets in foreign companies. The Fund
currently intends to invest primarily in
companies with market capitalizations in
excess of $1 billion at the time of
purchase, with no more than 15% of the
Fund's total assets in companies with market
capitalizations below $100 million at the
time of purchase.
The Fund invests in issuers located in at
least ten different countries. The Fund may
invest up to 65% of its total assets in
issuers organized or headquartered in Japan,
the United Kingdom or Germany, and up to 25%
of its total assets in issuers organized or
headquartered in any other foreign country.
The Fund may also invest up to 10% of its
total assets in U.S. issuers.
The Investment Manager evaluates the
fundamental value and prospects for growth
of individual companies and focuses on
companies that it expects will have higher
than average rates of growth and strong
potential for capital appreciation. In
addition, the Investment Manager develops
forecasts of economic growth, inflation, and
interest rates that it uses to help identify
those regions and individual countries that
are likely to offer the best investment
opportunities. The Morgan Stanley Capital
International Europe, Australia, Far East
(MSCI-EAFE) Index and the Morgan Stanley
Capital International All Country World Free
(MSCI-ACWI) Ex-U.S. Index are the Fund's
performance benchmarks. The Investment
Manager bases its security selection on the
relative investment merits of each company
and industry throughout the world and will
not seek to duplicate the country and sector
allocations of either benchmark.
Principal Investment Risks: Because the value of the Fund's investments
will fluctuate 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 value of the Fund's investments will
fluctuate in response to the activities of
individual companies and general stock
market and economic conditions. 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. The Fund's value will also be
exposed to currency risk. The stock prices
of smaller and newer companies in which the
Fund may invest 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
6
<PAGE>
Corporation or any other government agency.
7
<PAGE>
PERFORMANCE
The charts on the following page provide some indication of the risks
of investing in the Fund by showing how its performance has varied from year to
year. The bar chart shows changes in the yearly performance of the Fund since
its inception. The chart below it compares the performance of the Fund over time
to its benchmarks.
Both charts assume reinvestment of dividends and distributions. Of
course, past performance does not necessarily indicate how the Fund will perform
in the future.
<TABLE>
<CAPTION>
Year-by-Year Total Returns for Class I Shares
1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C>
17.98% 19.31% 17.93% 13.81% 60.66%
</TABLE>
For the periods covered by this year-by-year total return chart, the Fund's
highest quarterly return was 41.32% (for the fourth quarter ended 1999) and the
lowest quarterly return was -16.16% (for the third quarter ended 1998).
<TABLE>
<CAPTION>
Average Annual Total Returns
(through December 31, 1999)
Fund One Five Since
Inception Year Years Inception
-----------------------------------------------------------
<S> <C> <C> <C> <C>
International Growth Equity Fund 12/28/94 60.66% 24.87% 24.82%
Class I (DRIEX)*
-----------------------------------------------------------
International Growth Equity Fund 12/28/94 60.27% 24.56% 24.51%
Class N (DIENX)**
-----------------------------------------------------------
MSCI-EAFE Index ---- 27.31% 13.15% 12.56%
-----------------------------------------------------------
MSCI-ACWI Ex-U.S.Index ---- 30.92% 12.39% 13.12%
----------------------------------------------------------------------------------------------------
</TABLE>
* On December 31, 1998, all Fund shares were redesignated as Class I shares.
Neither the Class I shares nor their predecessors paid Rule 12b-1 fees.
** Class N shares were first issued on March 10, 1999, and pay Rule 12b-1 fees.
Class N returns through March 10, 1999 are based on Class I returns, and reflect
the deduction of Rule 12b-1 fees applicable to Class N shares.
8
<PAGE>
FEES AND EXPENSES
As an investor in the Fund, you will pay the following fees and
expenses.
<TABLE>
<CAPTION>
SHAREHOLDER FEES CLASS OF SHARES
---------------
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) CLASS I CLASS N
------- -------
None
ANNUAL FUND OPERATING EXPENSES (FEES PAID FROM FUND ASSETS)
<S> <C> <C>
Management fees 0.75% 0.75%
- ------------------------------------------------------------------------------------------------------------
Rule 12b-1 fee None 0.25%
- ------------------------------------------------------------------------------------------------------------
Other expenses 0.31% 9.89%
- ------------------------------------------------------------------------------------------------------------
Total annual Fund operating expenses 1.06% 10.89%
- ------------------------------------------------------------------------------------------------------------
Less: Fees waived and Reimbursed(1) -0.06% -9.64%
- ------------------------------------------------------------------------------------------------------------
Net operating expenses(1) 1.00% 1.25%
- ------------------------------------------------------------------------------------------------------------
</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 1.00% for Class I and 1.25% for Class N. 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:
<TABLE>
<CAPTION>
One Three Five Ten
Year Years Years Years
<S> <C> <C> <C> <C>
Class I* $102 $331 $579 $1,289
Class N* $127 $2,256 $4,141 $7,964
</TABLE>
* Assuming the Investment Manager continues to reimburse the ordinary operating
expenses which exceed the annualized rate of 1.00% for Class I and 1.25% for
Class N, your expenses for the periods indicated would be $102, $318, $552 and
$1,225 for Class I and $127, $397, $686 and $1,511 for Class N. However, there
is no guarantee that the Investment Manager will continue such reimbursement
policy.
9
<PAGE>
DRESDNER RCM EMERGING MARKETS FUND
Goal: The Fund's goal is to seek long-term capital
appreciation by investing in equity
securities of emerging market companies.
Principal Investment Strategies: The Fund will normally invest at least 80%
of its total assets in emerging market
companies. The Fund currently intends to
invest primarily in companies with market
capitalizations in excess of $100 million at
the time of purchase.
The Fund may invest up to 15% of its total
assets in issuers that are organized or
headquartered in any one emerging market
country. The Fund may also invest up to 20%
of total assets in issuers that are
organized or headquartered in developed
countries.
Emerging market companies are organized or
headquartered in any country considered an
emerging or developing country by the World
Bank, the International Finance Corporation,
the United Nations, or other recognized
international financial institutions. This
designation currently includes most
countries in the world except Australia,
Canada, Japan, New Zealand, Singapore,
United Kingdom, the U.S. and most of the
countries of western Europe.
The Investment Manager evaluates the
fundamental value and prospectus for growth
of individual companies and focuses on
companies that it expects will have higher
than average rates of growth and strong
potential for capital appreciation. In
addition, the Investment Manager develops
forecasts of economic growth, inflation, and
interest rates that is uses to help identify
those regions and individual countries that
are likely to offer the best investment
opportunities. The Morgan Stanley Capital
International Emerging Markets Free
(MSCI-EMF) Index and the IFC Emerging
Markets Index are the Fund's performance
benchmarks. The Fund bases its security
selection on the relative investment merits
of each company and industry throughout
emerging market countries and will not seek
to duplicate the country and sector
allocations of either benchmark.
Principal Investment Risks: Because the value of the Fund's investments
will fluctuate 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 value of the Fund's investments will
fluctuate in response to the activities of
individual companies and general stock
market and economic conditions. The
performance of
10
<PAGE>
foreign securities also depends on the
political and economic environments and
other overall economic conditions in the
countries where the Fund invests. The Fund's
value will also be exposed to currency risk.
The stock prices of smaller and newer
companies often fluctuate more than those of
larger more established companies. Emerging
country markets involve greater risk and
volatility than more developed markets.
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.
11
<PAGE>
PERFORMANCE
The charts on the following page provide some indication of the risks
of investing in the Fund by showing how its performance has varied from year to
year. The bar chart shows changes in the yearly performance of the Fund since
its inception. The chart below it compares the performance of the Fund over time
to its benchmarks.
Both charts assume reinvestment of dividends and distributions. Of
course, past performance does not necessarily indicate how the Fund will perform
in the future.
<TABLE>
<CAPTION>
Year-by-Year Total Returns for Class I Shares
1998 1999
<S> <C> <C>
-8.39% 92.12%
</TABLE>
For the periods covered by this year-by-year total return chart, the Fund's
highest quarterly return was 52.95% (for the fourth quarter ended 1999) and the
lowest quarterly return was -16.26% (for the second quarter ended 1998).
<TABLE>
<CAPTION>
Average Annual Total Returns
(through December 31, 1999)
Fund One Since
Inception Year Inception
-------------------------------------------
<S> <C> <C> <C>
Emerging Markets Fund Class I (DRMIX)* 12/30/97 92.12% 32.47%
-------------------------------------------
Emerging Markets Fund Class N (DRMNX)** 12/30/97 91.69% 32.16%
-------------------------------------------
MSCI-EMF __ 66.42% 11.59%
-------------------------------------------
IFC Emerging Markets Index __ 67.15% 14.24%
---------------------------------------------------------------------------------------
</TABLE>
* On December 31, 1998, all Fund shares were redesignated as Class I shares.
Neither the Class I shares nor their predecessors paid Rule 12b-1 fees.
** Class N shares were first issued on March 10, 1999, and pay Rule 12b-1 fees.
Class N returns through March 10, 1999 are based on Class I returns, and reflect
the deduction of Rule 12b-1 fees applicable to Class N shares.
12
<PAGE>
FEES AND EXPENSES
As an investor in the Fund, you will pay the following fees and
expenses.
<TABLE>
<CAPTION>
SHAREHOLDER FEES CLASS OF SHARES
---------------
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) CLASS I CLASS N
------- -------
None
ANNUAL FUND OPERATING EXPENSES (FEES PAID FROM FUND ASSETS)
<S> <C> <C>
Management fees 1.00% 1.00%
- ------------------------------------------------------------------------------------------------------------
Rule 12b-1 fee None 0.25%
- ------------------------------------------------------------------------------------------------------------
Other expenses 8.33% 77.93%
- ------------------------------------------------------------------------------------------------------------
Total annual Fund operating expenses 9.33% 79.18%
- ------------------------------------------------------------------------------------------------------------
Less: Fees waiver and reimbursed(1) -7.83% -77.43%
- ------------------------------------------------------------------------------------------------------------
Net operating expenses(1) 1.50% 1.75%
- ------------------------------------------------------------------------------------------------------------
</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 1.50% for Class I and 1.75% for Class N. 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:
<TABLE>
<CAPTION>
One Three Five Ten
Year Years Years Years
<S> <C> <C> <C> <C>
Class I* $153 $2,001 $3,693 $7,322
Class N* $178 $6,649 $7,080 $7,111
</TABLE>
*Assuming the Investment Manager continues to reimburse the ordinary operating
expenses which exceed the annualized rate of 1.50% for Class I and 1.75% for
Class N, your expenses for the periods indicated would be $153, $474, $818 and
$1,791 for Class I and $178, $551, $949 and $2,062 for Class N. However, there
is no guarantee that the Investment Manager will continue such reimbursement
policy.
13
<PAGE>
DRESDNER RCM GLOBAL SMALL CAP FUND
Goal: The Fund's goal is to seek long-term capital
appreciation by investing in equity
securities of companies with small market
capitalizations.
Principal Investment Strategies: Under normal market conditions, the Fund
invests at least 65% of its investments in
companies with market capitalizations, at
the time of purchase, within the range of
market capitalizations of companies included
in the MSCI World Small Cap Index, which
currently ranges between $14.3 million to
$3.2 billion. The Fund will maintain a
weighted-average market capitalization
between 50% and 200% of the weighted-average
market capitalization of the securities that
comprise the MSCI World Small Cap Index;this
currently would permit the Fund to maintain
a weighted-average market capitalization
ranging from $288.5 million to $1.2 billion.
As a fundamental policy which cannot be
changed without stockholder approval, the
Fund invests in companies organized or
headquartered in at least three different
countries (one of which may be the United
States). However, the Fund currently expects
the majority of its foreign investments will
be in companies organized or headquartered
in Japan and the countries of Western
Europe.
Under normal market conditions, the Fund
invests no more than 25% of its total assets
in issuers that are organized or
headquartered in any one foreign country,
other than France, Germany, Japan and the
United Kingdom.
The Investment Manager evaluates the
fundamental value and prospects for growth
of individual companies that it expects will
have higher than average rates of growth and
strong potential for capital appreciation.
In addition, the Investment Manager develops
forecasts of economic growth, inflation, and
interest rates that its uses to help
identify those regions and individual
countries offering the best investment
opportunities. The MSCI World Small Cap
Index is the Fund's performance benchmark.
The Investment Manager bases its security
selection on the relative investment merits
of each country and industry around the
world and will not seek to duplicate the
country and sector allocations of the
benchmark.
Principal Investment Risks: Because the value of the Fund's investments
will fluctuate 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 value of the Fund's investments
fluctuate in response to the activities of
individual companies and general stock
market and economic conditions. The
performance of foreign securities also
depends on the political and economic
14
<PAGE>
environments and other overall economic
conditions in the countries where the Fund
invests. The Fund's value will also be
exposed to currency risk. The stock prices
of smaller and newer companies in which the
Fund may invest 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.
15
<PAGE>
PERFORMANCE
The charts on the following page show how the Fund has performed and
provide some indication of the risks of investing in the Fund by showing how its
performance has varied from year to year. The bar chart shows changes in the
yearly performance of the Fund since its inception. The chart below it compares
the performance of the Fund over time to its benchmark.
Both charts assume reinvestment of dividends and distributions. Of
course, past performance does not necessarily indicate how the Fund will perform
in the future.
<TABLE>
<CAPTION>
Year-by-Year Total Returns for Class I Shares
1997 1998 1999
<S> <C> <C> <C>
25.48% 19.29% 104.63%
</TABLE>
For the periods covered by the year-by-year total return chart, the Fund's
highest quarterly return was 64.80% (for the fourth quarter ended 1999) and the
lowest return was -23.37% (for the third quarter ended 1998).
<TABLE>
<CAPTION>
Average Annual Total Returns
(through December 31, 1999)
Fund 1 Year Since
Inception Inception
--------------------------------------------------
<S> <C> <C> <C>
Global Small Cap Fund Class I 12/31/96 104.63% 45.23%
(DGSCX)*
--------------------------------------------------
Global Small Cap Fund Class N 12/31/96 104.06% 45.09%
(DGSNX)**
--------------------------------------------------
Salomon EMI Index __ 17.27% 9.14%%
--------------------------------------------------
MSCI World Small Cap Index*** __ 25.38% 5.53%
-------------------------------------------------------------------------------------------
</TABLE>
* Returns through December 31, 1998 reflect Rule 12b-1 fees. On that date,
all Fund shares were redesignated as Class I shares, which do not pay Rule 12b-1
fees. Performance results for periods after December 31, 1998 do not reflect
Rule 12b-1 fees.
** Class N shares were first issued on March 10, 1999 and pay Rule 12b-1
fees. Class N returns through December 31, 1998 are based on Class I returns and
reflect Rule 12b-1 fees.
*** Effective May 1, 2000 the Fund's performance benchmark was changed from
the Salomon EMI Index to the MSCI World Small Cap Index. The Fund's Board of
Directors believes that the composition of the MSCI World Small Cap Index most
accurately reflects the global small cap focus of the Fund and the market
capitalization ranges of the securities in which the Fund is most likely to
invest.
16
<PAGE>
FEES AND EXPENSES
As an investor in the Fund, you will pay the following fees and
expenses.
<TABLE>
<CAPTION>
SHAREHOLDER FEES CLASS OF SHARES
---------------
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) CLASS I CLASS N
------- -------
None
ANNUAL FUND OPERATING EXPENSES (FEES PAID FROM FUND ASSETS)
<S> <C> <C>
Management fees 1.00% 1.00%
- ------------------------------------------------------------------------------------------------------------
Rule 12b-1 fee None 0.25%
- ------------------------------------------------------------------------------------------------------------
Other expenses 3.10% 15.46%
- ------------------------------------------------------------------------------------------------------------
Total annual Fund operating expenses 4.10% 16.71%
- ------------------------------------------------------------------------------------------------------------
Less: Fees waived and reimbursed(1) -2.60% -14.96%
- ------------------------------------------------------------------------------------------------------------
Net operating expenses(1) 1.50% 1.75%
- ------------------------------------------------------------------------------------------------------------
</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 1.50% for Class I and 1.75% for Class N. The Fund
may reimburse the Investment Manager in the future.
Example
Use this table to compare 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 costs may be higher or lower, based on these assumptions
your costs would be:
<TABLE>
<CAPTION>
One Three Five Ten
Year Years Years Years
<S> <C> <C> <C> <C>
Class I* $153 $1,009 $1,881 $4,130
Class N* $178 $3,236 $5,620 $9,527
</TABLE>
*Assuming the Investment Manager continues to reimburse the ordinary operating
expenses which exceed the annualized rate of 1.50% for Class I and 1.75% for
Class N, your expenses for the periods indicated would be $153, $474, $818 and
$1,791 for Class I and $178, $551, $949 and $2,062 for Class N. However, there
is no guarantee that the Investment Manager will continue such reimbursement
policy.
17
<PAGE>
DRESDNER RCM GLOBAL TECHNOLOGY FUND
Goal: The Fund's goal is to seek long-term capital
appreciation by investing in equity
securities of technology companies.
Principal Investment Strategies: The Fund will invest at least 65% of its
total assets in technology companies. The
Fund currently intends to invest primarily
in companies with market capitalizations
greater than $500 million at the time of
purchase, with no more than 15% of its total
assets in technology companies with market
capitalizations below $100 million at the
time of purchase.
Technology companies are companies with
revenues primarily generated by technology
products and services. These include the
internet, computers and computer
peripherals, software, electronic components
and systems, communications equipment and
services, semiconductors, media and
information services, pharmaceuticals,
hospital supply and medical devices,
biotechnology products, environmental
services, chemical products and synthetic
materials, and defense and aerospace
products and services.
As a fundamental policy which cannot be
changed without stockholder approval, the
Fund invests in technology companies
organized or headquartered in at least three
different countries (one of which may be the
United States). The Fund may invest up to
50% of its total assets in foreign issuers
(but under normal market conditions no more
than 25% of its total assets in issuers
organized or headquartered in any one
foreign country, other than Japan).
The Investment Manager evaluates the
fundamental value and prospects for growth
of individual companies and focuses on
technology companies that it expects will
have higher than average rates of growth and
strong potential for capital appreciation.
In addition, the Investment Manager develops
forecasts of economic growth, inflation, and
interest rates that it uses to help identify
those regions and individual countries that
are likely to offer the best investment
opportunities. The Standard & Poor's 500
Index and the Lipper Science & Technology
Fund Index are the Fund's performance
benchmarks. The Investment Manager bases
its security selection of the relative
investment merits of each company and
industry around the world and will not seek
to duplicate either benchmark.
Principal Investment Risks: Because the value of the Fund's investments
will fluctuate 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.
Because the Fund will focus its investments
in technology companies it will be more
susceptible than more diversified
18
<PAGE>
funds to market and other conditions
affecting technology companies. As a result,
its share price may be more volatile than a
fund with a more broadly diversified
portfolio.
The value of the Fund's investments will
fluctuate in response to the activities of
individual companies and general stock
market and economic conditions. 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. The Fund's value will also be
exposed to currency risk. The stock prices
of smaller and newer companies in which the
Fund may invest 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.
19
<PAGE>
PERFORMANCE
The charts on the following page show how the Fund has performed and
provide some indication of the risks of investing in the Fund by showing how its
performance has varied from year to year. The bar chart shows changes in the
yearly performance of the Fund since its inception. The chart below it compares
the performance of the Fund over time to its benchmarks.
Both charts assume reinvestment of dividends and distributions. Of
course, past performance does not necessarily indicate how the Fund will perform
in the future.
<TABLE>
<CAPTION>
Year-by-Year Total Returns for Class I Shares
1996 1997 1998 1999
<S> <C> <C> <C> <C>
26.41% 27.08% 61.05% 182.95%
</TABLE>
For the periods covered by this year-by-year total return chart, the Fund's
highest quarterly return was 82.82% (for the fourth quarter ended 1999) and the
lowest quarterly return was -15.60% (for the third quarter ended 1998).
<TABLE>
<CAPTION>
Average Annual Total Returns
(through December 31, 1999)
Fund One Year Since
Inception Inception
--------------------------------------------------------
<S> <C> <C> <C>
Global Technology Fund Class I 12/27/95 182.95% 64.43%
(DRGTX)*
--------------------------------------------------------
Global Technology Fund Class N 12/27/95 182.55% 64.07%
(DRGTNX)**
--------------------------------------------------------
S&P 500 Index __ 21.04% 26.39%
--------------------------------------------------------
Lipper Science & Technology Fund __ 113.90% 40.88%
Index
--------------------------------------------------------------------------------------------------
</TABLE>
* On December 31, 1998, all Fund shares were redesignated as Class I shares.
Neither the Class I shares nor their predecessors paid Rule 12b-1 fees.
** Class N shares were first issued on January 30, 1999, and pay Rule 12b-1
fees. Class N returns through January 30, 1999 are based on Class I returns, and
reflect the deduction of Rule 12b-1 fees applicable to Class N shares.
20
<PAGE>
FEES AND EXPENSES
As an investor in the Fund, you will pay the following fees and expenses.
<TABLE>
<CAPTION>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) Class of Shares
Class I Class N
------- -------
<S> <C> <C>
None
ANNUAL FUND OPERATING EXPENSES (FEES PAID FROM FUND ASSETS)
Management fees 1.00% 1.00%
- -----------------------------------------------------------------------------------------------------------
Rule 12b-1 fee None 0.25%
- -----------------------------------------------------------------------------------------------------------
Other expenses 0.50% 0.74%
- -----------------------------------------------------------------------------------------------------------
Total annual Fund operating expenses 1.50% 1.99%
- -----------------------------------------------------------------------------------------------------------
Less: Fees waived and reimbursed(1) 0 -0.24%
- -----------------------------------------------------------------------------------------------------------
Net operating expenses(1) 1.50% 1.75%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
1The 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 1.50% for Class I and 1.75% for Class N. 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:
<TABLE>
<CAPTION>
1 3 5 10
Year Years Years Years
<S> <C> <C> <C> <C>
Class I $153 $474 $818 $1,791
Class N* $178 $601 $1,051 $2,297
</TABLE>
*Assuming the Investment Manager continues to reimburse the ordinary operating
expenses which exceed the annualized rate of 1.75% for Class N, your expenses
for the periods indicated would be $178, $551, $949 and $2,062 for Class N.
However, there is no guarantee that the Investment Manager will continue such
reimbursement policy.
21
<PAGE>
DRESDNER RCM GLOBAL HEALTH CARE FUND
Goal: The Fund's goal is to seek long-term capital
appreciation by investing in equity
securities of health care companies.
Principal Investment Strategies: The Fund will invest at least 65% of its
total assets in health care companies.
Although there is no limitation on the
market capitalizations of companies in
which the Fund will invest, the Fund does
not intend to invest more than 15% of its
total assets in health care companies with
market capitalizations below $100 million
at the time of purchase.
Health care companies include
pharmaceutical, biochemical, biotechnology
health care service and medical device
companies. These companies are typically
involved in research and development or
ownership and/or operation of health care
facilities, franchises or practices, and the
design, production or selling of medical,
dental and optical products. A company will
be deemed to be principally engaged in the
health care business if:
(1) at least 50% of its earnings or revenues
are derived from health care activities;
or
(2) at least 50% of its assets are devoted
to such activities, based upon the
company's financial statements as of the
end of its most recent fiscal year.
As a fundamental policy which cannot be
changed without stockholder approval, the
Fund invests in health care companies
organized or headquartered in at least three
different countries (one of which may be the
United States). However, the Fund currently
expects the majority of its foreign
investments will be in companies organized
or headquartered in Japan and the countries
of Western Europe.
The Investment Manager evaluates the
fundamental value and prospects for growth
of individual companies and focuses on
health care companies that is expects will
have higher than average rates of growth and
strong potential for capital appreciation.
In addition, the Investment Manager develops
forecasts of economic growth, inflation, and
interest rates that it uses to help identify
those regions and individual countries that
are likely to offer the best investment
opportunities. The Standard & Poor's 500
Index and the Russell Midcap Health Care
Index are the Fund's performance benchmarks.
The Investment Manager bases its security
selection on the relative investment merits
of each company and industry around the
world and will not seek to duplicate either
benchmark.
Principal Investment Risks: Because the value of the Fund's investments
will fluctuate with market conditions, so
will the value of your investment in the
Fund. You could lose money on your
investment in the
22
<PAGE>
Fund, or the Fund could underperform other
investments.
Because the Fund will focus its investments
in health care companies it will be more
susceptible than more diversified funds to
market and other conditions affecting health
care companies. As a result, its share price
may be more volatile than a fund with a more
broadly diversified portfolio.
The value of the Fund's investments
fluctuate in response to the activities of
individual companies and general stock
market and economic conditions. The
performance of foreign securities depends on
the political and economic environments and
other overall economic conditions in the
countries where the Fund invests. The Fund's
value will also be exposed to currency risk.
The stock prices of smaller and newer
companies in which the Fund may invest 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.
23
<PAGE>
PERFORMANCE
The charts on the following page show how the Fund has performed and
provide some indication of the risks of investing in the Fund by showing how its
performance has varied from year to year. The bar chart shows changes in the
yearly performance of the Fund since its inception. The table below it compares
the performance of the Fund over time to its benchmarks.
Both charts assume reinvestment of dividends and distributions. Of
course, past performance does not necessarily indicate how the Fund will perform
in the future.
<TABLE>
<CAPTION>
Year-by-Year Total Returns for Class N Shares
1997 1998 1999
<S> <C> <C> <C>
30.00% 25.57% 28.74%
</TABLE>
For the periods covered by this year-by-year total return chart, the Fund's
highest quarterly return was 39.43% (for the fourth quarter ended 1999) and the
lowest quarterly return was -5.05% (for the third quarter ended 1999).
<TABLE>
<CAPTION>
Average Annual Total Returns
(through December 31, 1999)
Fund One Since
Inception Year Inception
---------------------------------------------------
<S> <C> <C> <C>
Global Health Care Fund Class N 12/31/96 28.74% 28.09%
(DGHCX)
---------------------------------------------------
S&P 500 Index 21.04% 27.56%
---------------------------------------------------
Russell Midcap Health Care Index __ -13.48% 11.22%
- -----------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
FEES AND EXPENSES
As an investor in the Fund, you will pay the following fees and
expenses.
<TABLE>
<CAPTION>
SHAREHOLDER FEES CLASS N
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) SHARES
------
<S> <C>
None
ANNUAL FUND OPERATING EXPENSES (FEES PAID FROM FUND ASSETS)
Management fees 1.00%
- ----------------------------------------------------------------------------------------------------
Rule 12b-1 fee 0.25%
- ----------------------------------------------------------------------------------------------------
Other expenses 3.60%
- ----------------------------------------------------------------------------------------------------
Total annual Fund operating expenses 4.85%
- ----------------------------------------------------------------------------------------------------
Less: Fees waived and reimbursed(1) -3.35%
- ----------------------------------------------------------------------------------------------------
Net expenses(1) 1.50%
- ----------------------------------------------------------------------------------------------------
</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 1.50%. 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:
<TABLE>
<CAPTION>
One Three Five Ten
Year Years Years Years
<S> <C> <C> <C> <C>
Class N Shares* $153 $1,158 $2,167 $4,701
</TABLE>
*Assuming the Investment Manager continues to reimburse the ordinary operating
expenses which exceed the annualized rate of 1.50% for Class N, your expenses
for the periods indicated would be $153, $474, $818 and $1,791. However, there
is no guarantee that the Investment Manager will continue such reimbursement
policy.
25
<PAGE>
DRESDNER RCM BIOTECHNOLOGY FUND
Goal: The Fund's goal is to seek long-term capital
appreciation by investing in equity
securities of biotechnology companies.
Principal Investment Strategies: The Fund will invest at least 65% of its
total assets in biotechnology companies.
Although there is no limitation on the
market capitalization of companies in which
the Fund will invest, the Fund does not
intend to invest more than 15% of its total
assets in biotechnology companies with
market capitalizations below $100 million at
the time of purchase. The Fund currently
expects that the majority of its assets will
be in companies organized or headquartered
in the United States. However, the Fund may
invest up to 25% of its total assets in
foreign issuers organized or headquartered
in any one foreign country.
Biotechnology companies are companies that
engage in the research, development,
provision and/or manufacture of
biotechnological products, services and
processes. Such companies generally employ
genetic engineering to develop new drugs and
apply new and innovative processes to
discover and develop diagnostic and
therapeutic products and services. The
biotechnology industry currently includes
pharmaceutical, biochemical,
medical/surgical, human health care, and
agricultural and industrial oriented
companies. Because of the rapid developments
in the biotechnology industry, over time,
companies with new and different products
and focuses likely will be included in the
industry.
The Investment Manager evaluates the
fundamental prospects for growth of
individual companies and focuses on
biotechnology companies that it expects will
have higher than average rates of growth and
strong potential for capital appreciation.
The American Stock Exchange Biotechnology
Index, NASDAQ Biotechnology Index, and the
Russell 2000 Index are the Fund's
performance benchmarks. The Investment
Manager bases its security selection on the
relative investment merits of each company
and will not seek to duplicate its
benchmarks.
Principal Investment Risks: Because the value of the Fund's investments
will fluctuate 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.
Because the Fund will focus its investments
in biotechnology companies, it will be more
susceptible than more diversified funds to
market and other conditions affecting
biotechnology companies. As a result, its
share price may be more volatile than a fund
with a more broadly diversified portfolio.
The value of the Fund's investments
fluctuate in response to the activities of
individual companies and general stock
market and economic conditions. The
performance of
26
<PAGE>
foreign securities depends on the political
and economic environments and other overall
economic conditions in the countries where
the Fund invests. The Fund's value will also
be exposed to currency risk. The stock
prices of smaller and newer companies in
which the Fund may invest often fluctuate
more than those of larger more established
companies.
An investment in the Fund is not a bank
deposit and is not insured by the Federal
Deposit Insurance Corporation or any other
government agency.
27
<PAGE>
PERFORMANCE
The charts on the following page show how the Fund has performed and
provide some indication of the risks of investing in the Fund by showing how its
performance has varied from year to year. The bar chart shows changes in the
yearly performance of the Fund since its inception. The chart below it compares
the performance of the Fund over time to its benchmarks.
Both charts assume reinvestment of dividends and distributions. Of
course, past performance does not necessarily indicate how the Fund will perform
in the future.
<TABLE>
<CAPTION>
Year-by-Year Total Returns for Class N Shares
1998 1999
<S> <C> <C>
17.76% 111.39%
</TABLE>
For the periods covered by this year-by-year total return chart, the Fund's
highest quarterly return was 65.41% (for the fourth quarter ended 1999) and the
lowest quarterly return was -9.17% (for the third quarter 1998).
<TABLE>
<CAPTION>
Average Annual Total Returns
(through December 31, 1999)
Fund One Since
Inception Year Inception
----------------------------------------------------
<S> <C> <C> <C>
Biotechnology Fund Class N 12/30/97 111.39% 57.68%
(DRBNX)
----------------------------------------------------
AMEX Biotech Index __ 111.44% 55.46%
----------------------------------------------------
NASDAQ Biotech Index __ 101.67% 71.95%
----------------------------------------------------
Russell 2000 Index __ 21.26% 9.07%
- ------------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE>
FEES AND EXPENSES
As an investor in the Fund, you will pay the following fees and
expenses.
<TABLE>
<CAPTION>
SHAREHOLDER FEES CLASS N
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) SHARES
------
<S> <C>
None
ANNUAL FUND OPERATING EXPENSES (FEES PAID FROM FUND ASSETS)
Management fees 1.00%
- --------------------------------------------------------------------------------------------------
Rule 12b-1 fee 0.25%
- --------------------------------------------------------------------------------------------------
Other expenses 3.28%
- --------------------------------------------------------------------------------------------------
Total annual Fund operating expenses 4.53%
- --------------------------------------------------------------------------------------------------
Less: Fees waived and reimbursed(1) -3.03%
- --------------------------------------------------------------------------------------------------
Net operating expenses(1) 1.50%
- --------------------------------------------------------------------------------------------------
</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 Class N for the quarter (except interest, taxes and extraordinary
expenses) exceed the annualized rate of 1.50%. 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:
<TABLE>
<CAPTION>
One Three Five Ten
Year Years Years Years
<S> <C> <C> <C> <C>
Class N Shares* $153 $1,095 $2,046 $4,463
</TABLE>
*Assuming the Investment Manager continues to reimburse the ordinary operating
expenses which exceed the annualized rate of 1.50% for Class N, your expenses
for the periods indicated would be $153, $474, $818 and $1,791. However, there
is no guarantee that the Investment Manager will continue such reimbursement
policy.
29
<PAGE>
DRESDNER RCM TAX MANAGED GROWTH FUND
Goal: The Fund's goal is to enhance the after-tax
returns of its shareholders by investing in
a broadly diversified portfolio of common
stocks of U.S. companies for long-term
capital appreciation.
Principal Investment Strategies: The Fund currently intends to invest in
companies of any size, ranging from larger
well-established issuers to smaller
emerging growth companies. However, no more
than 20% of the Fund's total assets will be
invested in companies with market
capitalizations below $500 million at the
time of purchase.
To maximize after-tax total return, the Fund
may use certain investment techniques
designed to reduce capital gains
distributions to shareholders. These
techniques may include, among others,
holding securities long enough to avoid
higher, short-term capital gains taxes,
selling shares with a higher cost basis
first, and selling securities that have
declined in value to offset past or future
gains realized on the sale of other
securities. These techniques will not
completely eliminate taxable distributions
by the Fund.
The Investment Manager evaluates the
fundamental value and prospects for growth
of individual companies and focuses on
companies that it expects will have higher
than average rates of growth and strong
potential for capital appreciation. The
Standard & Poor's 500 Index is the Fund's
performance benchmark. The Investment
Manager bases its security selection on the
relative investment merits of each company
and industry throughout the United States
and will not seek to duplicate the sector or
stock allocations of the benchmark.
Principal Investment Risks: Because the value of the Fund's investments
will fluctuate 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 value of the Fund's investments will
fluctuate in response to the activities of
individual companies and general stock
market and economic conditions. The stock
prices of smaller and newer companies in
which the Fund may invest often fluctuate
more than those of larger more established
companies.
Efforts to minimize the realization of
capital gains is not entirely within the
Fund's control and will be affected by
shareholder purchase and redemption
activity. In addition, efforts to maximize
after-tax total returns may require
trade-offs that reduce pre-tax returns.
An investment in the Fund is not a bank
deposit and is not insured of guaranteed by
the Federal Deposit Insurance Corporation or
any other government agency.
30
<PAGE>
PERFORMANCE
The charts on the following page provide some indication of the risks
of investing in the Fund. The bar chart shows the Fund's performance for its
first full year of operation. The chart below it compares the performance of the
Fund over time to its benchmark.
Both charts assume reinvestment of dividends and distributions. Of
course, past performance does not necessarily indicate how the Fund will perform
in the future.
<TABLE>
<CAPTION>
Year-by-Year Total Returns for Class I Shares
1999
<S> <C>
52.44%
</TABLE>
For the periods covered by this year-by-year total return chart, the Fund's
highest quarterly return was 31.98% (for the fourth quarter ended 1999) and the
lowest quarterly return was -4.78% (for the third quarter ended 1999).
<TABLE>
<CAPTION>
Average Annual Total Returns
(through December 31, 1999)
Fund One Since
Inception Year Inception
----------------------------------------------------
<S> <C> <C> <C>
Tax Managed Growth Class I (DRTIX) 12/30/98 52.44% 52.44%
----------------------------------------------------
Tax Managed Growth Class N Shares* 12/30/98 52.00% 51.82%
----------------------------------------------------
S&P 500 Index __ 21.04% 21.04%
----------------------------------------------------
</TABLE>
* Class N shares were first issued on February 12, 1999, and pay Rule 12b-1
fees. Class N returns through February 12, 1999 are based on Class I returns,
and reflect the deduction of Rule 12b-1 fees applicable to Class N shares.
31
<PAGE>
FEES AND EXPENSES
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 CLASS N
<S> <C> <C>
Redemption fee(1) 1.00% 1.00%
ANNUAL FUND OPERATING EXPENSES (FEES PAID FROM FUND ASSETS)
Management fees 0.75% 0.75%
- ------------------------------------------------------------------------------------------------------------
Rule 12b-1 fee None 0.25%
- ------------------------------------------------------------------------------------------------------------
Other expenses 13.61% 34.08%
- ------------------------------------------------------------------------------------------------------------
Total annual Fund operating expenses 14.36% 35.08%
- ------------------------------------------------------------------------------------------------------------
Less: fees waived and reimbursed(2) -13.11% -33.58%
- ------------------------------------------------------------------------------------------------------------
Net operating expenses(2) 1.25% 1.50%
</TABLE>
(1) The Fund charges you a 1.00% redemption fee if you redeem shares within the
first year of purchase.
(2) 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 1.25% for Class I and 1.50% for Class N. 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:
<TABLE>
<CAPTION>
1 3 5 10
Year Years Years Years
<S> <C> <C> <C> <C>
Class I* $231 $2,835 $5,059 $9,035
Class N* $256 $5,394 $7,957 $9,998
</TABLE>
*Assuming the Investment Manager continues to reimburse the ordinary operating
expenses which exceed the annualized rate of 1.25% for Class I and 1.50% for
Class N, your expenses for the periods indicated would be $231, $397, $686 and
$1,511 for Class I and $256, $474, $818 and $1,791 for Class N. However, there
is no guarantee that the Investment Manager will continue such reimbursement
policy.
-32-
<PAGE>
DRESDNER RCM BALANCED FUND
Goal: The Fund's goal is to seek long-term
capital appreciation and current income
by investing in a diversified portfolio
of equity and fixed-income securities.
Principal Investment Strategies: Under normal market conditions, the Fund
will invest up to 75% of its total
assets in 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 Investment Manager will allocate the
Fund's assets among various types of
equity and fixed-income securities. The
allocation of the Fund's assets will
fluctuate with 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 Investment Manager will focus the
equity portion of the portfolio
investment 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
fixed-income securities may be of any
maturity. A bond's maturity and
duration, among other factors, are
important components of the Fund's
fixed-income process. The Standard &
Poor's 500 Index, the Lehman Brothers
Aggregate Bond Index and a composite
comprised of 60% Standard & Poor's 500
Index/40% Lehman Brothers Aggregate Bond
Index are the Fund's performance
benchmarks. The Investment Manager bases
its equity and fixed income security
selections on their relative investment
merits and will not seek to duplicate
either benchmark.
Principal Investment Risks: Because the Fund's investments will
fluctuate 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 value 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
interest rates rise, the value of fixed
income securities may fall.
33
<PAGE>
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 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.
34
<PAGE>
PERFORMANCE
This section would normally show how the Fund has performed over time.
Because this Fund was in operation for less than one year when this Prospectus
was printed, its performance is not included. In the future, the Fund will
compare its performance to the Standard & Poor's 500 Index, the Lehman Brothers
Aggregate Bond Index and a composite comprised of 60% Standard & Poor's 500
Index/40% Lehman Brothers Aggregate Bond Index.
Please refer to the section entitled "The Investment Manager's Composite
Performance" on page 46 for historical performance information of institutional
private accounts managed by the Investment Manager, that have investment
objectives, policies, strategies and risks substantially similar to those of the
Balanced Fund.
Year-by-Year Total Returns for Class I Shares
Performance data is not included as the Fund is less than one year old.
------------------------------------------------
35
<PAGE>
FEES AND EXPENSES
As an investor in the Fund, you will pay the following fees and expenses.
<TABLE>
<CAPTION>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) Class of Shares
Class I
-------
<S> <C>
None
ANNUAL FUND OPERATING EXPENSES (FEES PAID FROM FUND ASSETS)
Management fees 0.65%
- -----------------------------------------------------------------------------------
Rule 12b-1 fee None
- -----------------------------------------------------------------------------------
Other expenses 40.64%
- -----------------------------------------------------------------------------------
Total annual Fund operating expenses 41.29%
- -----------------------------------------------------------------------------------
Less: Fees waived and reimbursed(1) -40.39%
- -----------------------------------------------------------------------------------
Net 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:
<TABLE>
<CAPTION>
One Three
Year Years
<S> <C> <C>
Class I* $92 $5,852
</TABLE>
*Assuming the Investment Manager continues to reimburse the ordinary operating
expenses which exceed the annualized rate of 0.90% for Class I, your expenses
for the periods indicated would be $92 and $287. However, there is no guarantee
that the Investment Manager will continue such reimbursement policy.
36
<PAGE>
INVESTMENT STRATEGIES, POLICIES AND RISKS
INVESTMENT STRATEGIES AND POLICIES
The following pages provide additional information about the Funds'
principal investment strategies and risks, as well as certain other important
investment policies
HOW DO THE FUNDS SELECT EQUITY INVESTMENTS?
While the Funds emphasize investments in growth companies, the Funds also
may invest in other companies that are not traditionally considered to be growth
companies, such as emerging growth companies and cyclical and semi-cyclical
companies in developing economies, if the Investment Manager believes that such
companies have above-average growth potential. The Funds may invest in companies
of any size.
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.
In evaluating potential equity investments, the Funds do not seek
current income and do not restrict their investments to companies with a
record of dividend payments.
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 Research operating group. 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 Research can be a
valuable adjunct to its traditional research efforts by providing a "second
look" at companies in which the Funds might invest and by checking marketplace
assumptions about market demand for particular products and services.
HOW DOES THE BALANCED 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 fixed-income investment opportunities, the
Investment Manager uses a variety of proprietary and vendor supplied systems
that provide information in support of its investment selection process.
WHAT KINDS OF EQUITY SECURITIES DO THE FUNDS INVEST IN?
The Funds invest primarily in common stocks and depositary receipts,
including American Depositary Receipts, European Depositary Receipts, Global
Depositary Receipts, or other depositary instruments representing securities of
foreign companies. The Funds may invest in companies of any size. Common stocks
represent the basic equity ownership interests in a company. Depositary receipts
are issued by banks
37
<PAGE>
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.
The Funds 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.
WHAT KINDS OF FOREIGN SECURITIES DO THE FUNDS INVEST IN?
The Funds invest 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 United States.
- Securities that are principally traded outside the United States,
regardless of where the issuer of such securities is organized or
headquartered or where its operations principally are conducted.
- Depositary receipts.
- Securities of other investment companies investing primarily in such
equity and equity-related foreign securities.
The Fund expects that the its foreign investments in foreign securities
will be comprised primarily of securities that are traded on recognized foreign
securities exchanges. However, each Fund also may invest in securities that are
traded only over-the-counter, either in the United States or in foreign markets,
when the Investment Manager believes that such securities meet the Fund's
investment criteria. The Funds 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 BALANCED 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, most debt securities held by the Fund will be investment grade
(i.e., rated by at least one major rating agency in one of its top four rating
categories at the time of purchase or, if unrated, 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 investment 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
instrumentality's right to borrow money from the U.S. Treasury under certain
circumstances. Securities such as those issued by the Federal Farm Credit Banks
Funding Corporation are supported only by the credit of the entity that issued
them.
MORTGAGE-RELATED SECURITIES
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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 basis types of mortgage-related securities: (i) those issued or
guaranteed by the U.S. Government or one of its agencies or instrumentalities
such as the Government National Mortgage Association ("GNMA"); (ii) those issued
by private issuers which represent an interest in or are collateralized by
mortgage-related securities issued or guaranteed by the U.S. Government or one
of its agencies or instrumentalities; and (iii) those issued by private issuers
which represent an interest in or are collateralized by whole mortgage loans or
mortgage-related securities without a government guarantee.
ASSET-BACKED SECURITIES
Asset-backed securities represent undivided fractional interests in a trust
with assets consisting of a pool of domestic loans such as motor vehicle retail
installment sales contracts or credit card receivables. Payments are typically
made monthly, consisting of both principal and interest payments. Although
generally rated AAA, it is possible that the securities could become illiquid or
experience losses if guarantors or insurers default.
OTHER INVESTMENT PRACTICES
The Funds may also employ the following investment techniques in pursuit of
their investment objectives.
DO THE FUNDS BUY AND SELL FOREIGN CURRENCIES?
The Investment Manager expects to purchase or sell foreign currencies
primarily to settle foreign securities transactions. However, each Fund may also
engage in currency management transactions to hedge currency exposure related to
securities it owns expects to purchase. A 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 at a later
date.
For purposes of the percentage limitations on each Fund's investments in
foreign securities, the term "securities" does not include foreign currencies.
This means that a Fund's exposure to foreign currencies or multinational
currencies such as the "Euro" may be greater than its percentage limitation on
investments in foreign securities. Each 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.
DO THE FUNDS HEDGE THEIR INVESTMENTS?
For hedging purposes, each Fund may purchase options on stock indices and
on securities it is authorized to purchase. If a 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 a 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 stock index gives a Fund the right
to receive a cash payment equal to the difference between the closing price of
the index and the exercise price of the option. A Fund may "close out" an option
before it is exercised or expires by selling an option of the same series as the
option previously purchased.
Each Fund may employ certain currency management techniques to hedge
against currency exchange rate fluctuations. The International Fund may hedge up
to 100% of its total assets. These techniques include forward currency exchange
contracts, currency options, futures contracts (and related options), and
currency swaps.
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A forward currency exchange contract is an obligation to purchase or sell a
specific currency at a future date at a price set at the time of the contract.
Currency options are rights to purchase or sell a specific currency at a future
date at a specified price. Futures contracts are agreements to take or make
delivery of an amount of cash equal to the difference between the value of the
currency at the close of the last trading day of the contract and the contract
price. Currency swaps involve the exchange of rights to make or receive payments
in specified currencies.
Each Fund 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.
DO THE LARGE CAP GROWTH FUND, BIOTECHNOLOGY FUND, TAX MANAGED GROWTH FUND,
AND BALANCED FUND INVEST IN FOREIGN SECURITIES?
The Large Cap Growth Fund may invest up to 20% of its total assets, the Tax
Managed Growth Fund and the Biotechnology Fund may invest up to 25% of their
total assets, and the Balanced Fund may invest up to 30% of its total assets, in
foreign securities (but no more than 10% in any one foreign country). Such
investments are not currently a principal investment technique for these Funds.
However, if foreign securities present attractive investment opportunities,
any of these Funds may increase the percentage of its total assets in foreign
securities, subject to the limits described above.
DO THE FUNDS, OTHER THAN THE EMERGING MARKETS FUND, INVEST IN EMERGING
MARKETS?
The International Growth Equity Fund and the Global Small Cap Fund may each
invest 30%, the Global Technology Fund 20%, the Global Health Care Fund and
Biotechnology Fund 15% and the Large Cap Growth Fund 10%, of their total assets
in companies organized or headquartered in emerging market countries (but no
more than 10% in any one emerging market country). The Tax Managed Growth Fund
may invest up to 5% of its total assets in companies located in emerging market
countries. Such investments are not currently a principal investment technique
for these Funds. However, if emerging markets present attractive investment
opportunities, any one of these Funds may increase the percentage of its total
assets in emerging markets, subject to the limits described above.
WHAT ARE THE FUNDS' PORTFOLIO TURNOVER RATES?
Each Fund may invest in securities on either a long-term or short-term
basis. The Investment Manager will sell a 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, each Fund's investment
objective and the need for funds for the redemption of a Fund's shares.
The Investment Manager anticipates that the annual portfolio turnover rate
for the Balanced Fund will not exceed 150% during its first full year of
operation. The portfolio turnover rate for the Tax Managed Growth Fund will
reflect the Investment Manager's efforts to minimize the Fund's capital gains
distributions and to enhance the after-tax returns of its shareholders; the
Investment Manager may sell securities to realize capital losses to offset
accumulated or future capital gains. See, "Financial Highlights" for the
portfolio turnover rates of the other Funds.
A high portfolio turnover rate would increase a Fund's brokerage commission
expenses and other transaction costs, and may increase its taxable capital
gains.
DO THE FUNDS INVEST IN OTHER INVESTMENT COMPANIES?
The laws of some foreign countries may make it difficult or impossible for
a Fund to invest directly in issuers organized or headquartered in those
countries, or may 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, and subject to the restrictions
referred to above regarding investments in companies organized or headquartered
in foreign countries, each Fund may invest up to 10% of the value of its total
assets in other
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investment companies but, no more than 5% of its total assets in any one
investment company. Furthermore, no Fund may acquire more than 3% of the
outstanding voting securities of any other investment company.
If a 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.
WHAT ARE THE FUND'S INVESTMENT POLICIES IN UNCERTAIN MARKETS?
When the Investment Manager believes a Fund should adopt a temporary
defensive posture, including periods of international, political or economic
uncertainty, a 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, a Fund may not achieve its investment objective.
WHERE CAN I FIND ADDITIONAL INFORMATION ABOUT INVESTMENT PRACTICES?
The Statement of Additional Information ("SAI") 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 FUNDS' INVESTMENT OBJECTIVES AND POLICIES
Each Fund's investment objective of long-term capital appreciation is a
fundamental policy that may not be changed without stockholder approval.
However, except as otherwise indicated in this Prospectus or the SAI, each
Fund's other investment policies and restrictions are not fundamental and may be
changed without stockholder approval.
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, a Fund is not required to sell any
security in its portfolio as a result of a change in any applicable percentage
resulting from market fluctuations.
INVESTMENT RISKS
Your investment in the Funds is subject to a variety of risks, including
those described below. See the SAI for further information about these and other
risks.
EQUITY INVESTMENTS
The prices of equity securities fluctuate based on changes in the issuer's
financial condition and prospects and on overall market and economic conditions.
DEBT SECURITIES
The yield and price of a debt security changes daily based on changes in
interest rates and market conditions, and in response to other economic,
political or financial events. The following are some of the more common risk
factors associated with investments in debt securities:
INTEREST RATE RISK. The change in the prices of debt securities that
accompany changes in the overall level of interest rates. Debt securities
have varying levels of sensitivity to changes in interest rates. In
general, bond prices rise when interest rates fall, and fall when interest
rates rise. Longer-term bonds, lower quality bonds and zero coupon bonds
are generally more sensitive to interest rate changes.
CREDIT RISK. The chance that a Fund's holdings will have its credit
rating downgraded or will default (fail to make scheduled interest
and principal payments), potentially reducing a Fund's income level and
share price. By definition, lower-rated securities carry a higher credit
risk.
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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
SPECIFIC INDUSTRIES
Because the Global Technology Fund, Global Health Care Fund and
Biotechnology Fund each focus on a single industry, each will be more
susceptible than other diversified funds to market and other conditions
affecting that industry. These conditions include competitive pressures
affecting the companies' financial condition , rapid product obsolescence,
dependence on extensive research and development, aggressive pricing and greater
sensitivity to changes in governmental regulation and policies. As a result, the
net assets of these Funds may be more volatile than an investment company with a
more broadly diversified portfolio.
SMALL COMPANIES
Investments in small companies 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 a 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
a Fund invests in small companies, its net asset value may be more volatile than
would otherwise be the case.
FOREIGN SECURITIES
Investing in foreign securities involves significant risks, some of which
are not typically associated with investing in securities of U.S. issuers. For
example, the value of investments in such securities may fluctuate based on
changes in the value of one or more foreign currencies relative to the U.S.
dollar. In addition, information about foreign issuers may be less readily
available than information about domestic issuers. Foreign issuers generally are
not subject to accounting, auditing and financial reporting standards, or to
other regulatory practices and requirements, comparable to 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 a Fund
(including the withholding of dividends and limitations on the repatriation of
currencies). A 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 in certain markets there have been times when settlements have
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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.
Because certain of the Funds may invest more than 25% of their total assets
in the securities of companies organized or headquartered in France, Germany,
Japan or the United Kingdom, these Funds may be subject to increased risks due
to political, economic, social or regulatory events in those countries.
EMERGING MARKETS
Investments in emerging markets involve additional risks. The securities
markets of emerging market countries are substantially smaller, less developed,
less liquid, and more volatile than U.S. and other developed foreign markets.
Disclosure and regulatory standards are less stringent. There also may be a
lower level of monitoring and regulation of securities markets in emerging
market countries and of the activities of investors in such markets, and
enforcement of existing regulations has been limited.
Economies in emerging market countries generally depend heavily on
international trade. They may be affected adversely by the economic conditions
of the countries with which they trade, as well as by trade barriers, exchange
controls, managed adjustments in relative currency values, and other
protectionist measures imposed or negotiated by these countries. In many cases,
governments of emerging market countries continue to exercise significant
control over the economies of these countries. In addition, some of these
countries have in the past failed to recognize private property rights and have
at times nationalized or expropriated the assets of private companies. There is
a greater possibility of confiscatory taxation, imposition of withholding taxes
on interest payments, or other similar developments that could affect
investments in those countries. Unanticipated political or social developments
may also affect the value of a Fund's investments in those countries.
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OPTIONS, CURRENCY HEDGING AND CURRENCY MANAGEMENT
Stock options involve a number of risks. They may be more volatile than the
underlying stock. Options and securities markets could not be precisely
correlated, so that a given transaction may not 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 will not be available.
A Fund could lose the amount of the option premium plus transaction costs.
A Fund's use of hedging and currency management techniques involve risks
different from investments in U.S. dollar-denominated securities. If a 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.
The use of hedging and currency management techniques is a highly
specialized activity, and the success of any such operations by a 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.
NON-DIVERSIFICATION
The Global Technology Fund, Global Health Care Fund, Biotechnology Fund and
International Growth Equity Fund are non-diversified within the meaning of the
Investment Company Act of 1940. Each may invest a greater percentage of its
assets in the securities of any single issuer than diversified funds, and may be
more susceptible to risks associated with a single economic, political or
regulatory occurrence than diversified funds. However, in order to meet the
requirements of the Internal Revenue Code of 1986, as amended (the "Code"), for
qualification as a regulated investment company, a Fund must diversify its
holdings so that, at the end of each quarter of its taxable year, (i) at least
50% of the market value of its assets is represented by cash, U.S. Government
securities, the securities of other regulated investment companies and other
securities, with such other securities of any one issuer limited for purposes of
this calculation to an amount not greater than 5% of the value of the Fund's
total assets and representing not more than 10% of the issuer's outstanding
voting securities, and (ii) not more than 25% of the value of the Fund's total
assets may be invested in the securities of any one issuer (other than the U.S.
Government or other regulated investment companies).
ORGANIZATION AND MANAGEMENT
THE FUNDS AND THE INVESTMENT MANAGER
The International Growth Equity Fund is a series of Dresdner RCM Capital
Funds, Inc. (the "Capital Company"). The other Funds are series of Dresdner RCM
Global Funds, Inc. (the "Global Company"). The Global Company and the Capital
Company are incorporated in Maryland as open-end management investment
companies.
Dresdner RCM Global Investors LLC, with principal offices at Four
Embarcadero Center, San Francisco, California 94111, is the investment manager
of the Funds. The Investment Manager manages each Fund's investments, provides
various administrative services, and supervises each 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.
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THE PORTFOLIO MANAGERS
LARGE CAP GROWTH FUND
Seth A. Reicher, CFA and Mary M. Bersot, CFA, are primarily responsible for
the day-to-day management of the Large Cap Growth Fund. Mr. Reicher is a
Managing Director of the Investment Manager, with which he has been associated
since 1993. He has participated in the management of equity portfolios on behalf
of the Investment Manager since 1993. Ms. Bersot is a Managing Director of the
Investment Manager, with which she has been associated since 1999. From 1990 to
1999, prior to joining Dresdner RCM, she worked for McMorgan & Co. as a Senior
Vice President managing the Taft Hartley Funds as well as a balanced mutual
fund. Mr. Reicher and Ms. Bersot are Co-Chief Investment Officers of U.S. large
cap growth equities at Dresdner RCM.
GLOBAL SMALL CAP FUND
David S. Plants and Timothy M. Kelly, CFA are primarily responsible for the
day-to-day management of the Global Small Cap Fund. Mr. Plants is a Director of
the Investment Manager, with which he has been associated since 1993. He has
participated in the management of portfolios on behalf of the Investment Manager
since 1993. Mr. Kelly is an Managing Director of the Investment Manager, with
which he has been associated since 1995. Before joining Dresdner RCM, he
received an MBA from The University of Chicago Graduate School of Business with
concentrations in accounting and finance. He has participated in the management
of portfolios on behalf of the Investment Manager since 1995.
GLOBAL TECHNOLOGY FUND
Walter C. Price and Huachen Chen are primarily responsible for the
day-to-day management of the Technology Fund. They are both Managing Directors
of the Investment Manager, with which they have been associated since 1974 and
1985, respectively. They have participated in the management of equity
portfolios on behalf of the Investment Manager since 1985.
GLOBAL HEALTH CARE FUND AND BIOTECHNOLOGY FUND
Faraz Naqvi M.D. and Michael Dauchot M.D. are primarily responsible for the
day-to-day management of the Global Health Care Fund and Biotechnology Fund. Dr.
Naqvi is a Director of the Investment Manager, with which he has been associated
since 1998. From 1996-1998 he served as an analyst at Montgomery Securities
focusing on biotechnology and pharmaceutical companies. From 1994-1996 he served
as a healthcare consultant for McKinsey & Company. Dr. Dauchot is a Director of
the Investment Manager, with which he has been associated since 1999. From
1996-1999, he served as an equity junior analyst in the field of medical
technology for Robertson Stephens & Co. From 1991-1995 he served as a physician
in the Immediate Care Facility at Hammond Clinic in Munster, Indiana.
INTERNATIONAL GROWTH EQUITY FUND AND EMERGING MARKETS FUND
William S. Stack and Steven C. Laughton are primarily responsible for the
day-to-day management of the International Fund. Mr. Stack and Ana
Wiechers-Marshall are primarily responsible for the day-to-day management of the
Emerging Markets Fund. Mr. Stack is a Senior Managing Director of the Investment
Manager, with which he has been associated since 1994, and is a member of its
Board of Managers. Mr. Laughton is a Director of the Investment Manager, with
which he has been associated since 1995. He has participated in the management
of equity portfolios on behalf of the Investment Manager since 1995. Prior to
joining Dresdner RCM, he served as the Director of Equities Research at Koeneman
Capital Management in Singapore. Ms. Wiechers-Marshall is a Director of the
Investment Manager, with which she has been associated since 1995. From 1993 to
1995 she was employed by Bank of America where she served as Latin America
Regional Manager. She has participated in the management of portfolios on behalf
of the Investment Manager since 1995.
TAX MANAGED GROWTH FUND
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M. Brad Branson, CFA and Joanne L. Howard, CFA are primarily responsible
for the day-to-day management of the Tax Managed Growth Fund. Mr. Branson is a
Director of the Investment Manager, with which he has been associated since
1993. He has participated in the management of portfolios on behalf of the
Investment Manager since 1993. Ms. Howard is a Managing Director of the
Investment Manager, with which she has been associated since 1992. She has
participated in the management of portfolios on behalf of the Investment Manager
since 1993.
BALANCED FUND
David W. Hays, CFA 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. Mr. Hayes has participated in the management of portfolios
on behalf of the Investment Manager since 1995. Ms. Bersot, who manages the
equity portion of the Fund's portfolio, is a Managing Director of the Investment
Manager, with which she has been associated since 1999. From 1990 to 1999,
prior to joining Dresdner RCM, she worked for McMorgan & Co. as a Senior Vice
President managing Taft Hartley Funds as well as a balanced mutual fund.
THE INVESTMENT MANAGER'S COMPOSITE PERFORMANCE
The following table sets forth the Investment Manager's balanced
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 Balanced 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 Balanced Fund.
Investors should not consider this performance data as an indication of
future performance of the Balanced 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 Balanced 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 Balanced 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
Balanced 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
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might be experienced by the Fund or an individual investing in the Balanced
Fund.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
ONE YEAR ANNUALIZED THREE ANNUALIZED ANNUALIZED TEN ANNUALIZED RETURN
THROUGH 12/31/99 YEARS THROUGH FIVE YEARS YEARS THROUGH SINCE INCEPTION
12/31/99 THROUGH 12/31/99 (12/31/72)
12/31/99 THROUGH 12/31/99
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCED COMPOSITE 29.23% 27.36% 24.89% 16.57% 13.07%
(NET OF FEES)
- --------------------------------------------------------------------------------------------------------------------------------
BALANCED BENCHMARK (1) 11.40 18.68 20.03 14.08 12.06
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Balanced Benchmark is composed 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.
MANAGEMENT FEES AND OTHER EXPENSES
Each Fund pays the Investment Manager a fee pursuant to an investment
management agreement. The Global Technology Fund and the Emerging Markets Fund
each pay a monthly fee to the Investment Manager at the annual rate of 1.00% of
its average daily net assets. The International Growth Equity Fund pays a
monthly fee to the Investment Manager at the annual rate of 0.75% based on its
average daily net assets.
Each of the other Funds pays a monthly fee to the Investment Manager based
on its average daily net assets, as described below:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
GLOBAL SMALL CAP FUND,
GLOBAL HEALTH CARE FUND
AND LARGE CAP TAX MANAGED BALANCED
AVERAGE DAILY NET ASSETS BIOTECHNOLOGY FUND GROWTH FUND GROWTH FUND FUND
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
The first $500 million 1.00% 0.70% 0.75% 0.65%
Above $500 million and below $1 billion 0.95% 0.65% 0.70% 0.60%
Above $1 billion 0.90% 0.60% 0.65% 0.55%
</TABLE>
Each 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). These expenses
are allocated to each class of shares based on the assets of each class. In
addition, each class also bears certain class-specific expenses, such as Rule
12b-1 expenses payable by each Fund's Class N shares.
47
<PAGE>
To limit the expenses of each Fund, the Investment Manager has agreed to
pay each Fund on a quarterly basis the amount, if any, by which the Fund's
ordinary operating expenses for the quarter (except interest, taxes and
extraordinary expenses) exceed the following expense ratios on an annual basis
through December 31, 2000:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
FUND EXPENSE LIMITS THROUGH 12/31/00
------------------------------------------------------------------------------
<S> <C>
Large Cap Growth Fund
Class N shares 1.20%
Class I shares 0.95%
Global Small Cap Fund
Class N shares 1.75%
Class I shares 1.50%
Global Technology Fund
Class N shares 1.75%
Class I shares 1.50%
Global Health Care Fund 1.50%
Biotechnology Fund 1.50%
International Growth Equity Fund
Class N shares 1.25%
Class I shares 1.00%
Emerging Markets Fund
Class N shares 1.75%
Class I shares 1.50%
Tax Managed Growth Fund
Class N shares 1.50%
Class I shares 1.25%
Balanced Fund
Class I shares 0.90%
</TABLE>
A Fund will reimburse the Investment Manager for such payments for a period of
up to five years after they are made, to the extent that the Fund's ordinary
operating expenses are less than the expense limit.
THE DISTRIBUTOR
Funds Distributor, Inc. (the "Distributor"), with principal offices at 60
State Street, Suite 1300, Boston, Massachusetts 02109, acts as distributor of
each class of shares of the Funds. 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.
The Capital Company and the Global Company (the "Capital Plan" and the
"Global Plan") have adopted distribution and service plans and the Investment
Company has adopted a distribution plan (with the Capital Plan and the Global
Plan, the "Plans") for their Class N shares pursuant to Rule 12b-1 under the
1940 Act. Under the Plans, each Fund pays the Distributor an annual fee of up to
0.25% of the average daily net assets of its Class N shares as reimbursement for
certain expenses actually incurred by the Distributor in providing distribution
and, in the case of the Capital Plan and Global Plan, also providing shareholder
support services to such shares. These expenses include advertising and
marketing expenses, payments to broker-dealers and others who have entered into
agreements with the Distributor, the expenses of preparing, printing and
distributing the Prospectus to persons who are not already stockholders, and
indirect and overhead costs associated with the sale of Class N shares. If in
any month the Distributor is due more for such services is immediately payable
because of the expense limitation under the Plans, the unpaid amount is carried
forward from month to month while the Plan is in effect until it can be paid.
Because these fees are paid out of the Funds' assets on an ongoing basis, over
time these fees will increase the cost of your investment and may cost you more
than paying other types of sales charges.
48
<PAGE>
49
<PAGE>
STOCKHOLDER INFORMATION
BUYING SHARES
For your convenience, we offer several ways to start and add to Fund
investments.
OPENING YOUR ACCOUNT BY INVESTING 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.
You may also purchase shares 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.
OPENING YOUR ACCOUNT DIRECTLY
You may establish accounts without the help of an intermediary as follows:
- - Choose the Fund in which you wish to invest. Determine the amount you are
investing. The minimum initial and subsequent investment requirements for
each class of each Fund are as follows:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
Minimum Initial Minimum Subsequent IRA Account Minimum IRA Account Minimum
Fund Investment Investment Initial Investment Subsequent Investment
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class N $5,000 $250 $2,000 $250
-----------------------------------------------------------------------------------------------------
Class I $250,000 $50,000 $250,000* $2,000
-----------------------------------------------------------------------------------------------------
* rollovers only
</TABLE>
- - The Funds reserve 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 Funds' 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.
- - 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. To add or change
account privileges or to re-register an existing account, please speak with
a Fund representative at 1-800-726-7240 to determine the additional
documentation that will be required.
- - Mail your completed application to:
Dresdner RCM Global Funds
P.O. Box 8025
Boston, MA 02266-8025
For overnight delivery, mail your completed application to:
Attn: Boston Financial Data Services
Dresdner RCM Global Funds
66 Brooks Drive
Braintree, MA 02184
50
<PAGE>
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. The Funds 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 your 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.
- - Call 1-800-726-7240 to obtain your account number and to place a purchase
order. Funds that are 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 [insert the name of the Fund]. Please note:
No third party checks will be accepted.
- - Mail the check with your completed application to the Fund at:
Dresdner RCM Global Funds
P.O. Box 8025
Boston, MA 02266-8025
For overnight delivery, mail your completed application to:
Attn: Boston Financial Data Services
Dresdner RCM Global Funds
66 Brooks Drive
Braintree, MA 02184
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
51
<PAGE>
- - Make out a check for the investment amount payable to Dresdner RCM [insert
the name of the Fund]. Please note: No third party checks will be accepted.
- - Mail the check with a completed investment slip to the Fund at:
Dresdner RCM Global Funds
P.O. Box 8025
Boston, MA 02266-8025
For overnight delivery, mail the check with a investment slip to:
Attn: Boston Financial Data Services
Dresdner RCM Global Funds
66 Brooks Drive
Braintree, MA 02184
If you do not have an investment slip, attach a note indicating your
account number.
WITH SECURITIES
In its discretion, each Fund 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.
BY ELECTRONIC TRANSFER (ACH)
This service allows for regular investments once an account is established
by simply authorizing the automatic withdrawal of funds from a bank account into
a specified Fund. The minimum investment pursuant to this plan is $250 for Class
N and $50,000 for Class I. Complete the appropriate section of the account
application indicating the amount of the automatic monthly investment.
52
<PAGE>
SELLING SHARES
BY PHONE - WIRE PAYMENT
- - Call the Fund at 1-800-726-7240 to verify that the wire redemption
privilege via telephone is in place on your account. If it is not, a
representative can help you add it. You will be required to provide a
signature guaranteed letter of instruction signed by all registered owners,
accompanied by a voided check.
- - 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 cash amount (net of any redemption fee, if
applicable), 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 and include a signature
guarantee.
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).
- A signature guarantee.
- - 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. The Fund requires a signature guarantee.
- - Mail the letter to the Fund.
BY ELECTRONIC TRANSFER (ACH)
- - 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. Transfers of $50,000 or more will require a
signature guarantee. 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 Funds from fraudulent activities. Your request must be
made in writing and include a signature guarantee if any of the following
situations apply:
- - You 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 of record).
- - The check is being made payable to someone other than the account owner.
53
<PAGE>
- - You are instructing us to change your bank account information.
- - You wish to add or change your account privileges.
- - You wish to change the registration information on your account.
OTHER STOCKHOLDER SERVICES AND ACCOUNT POLICIES
TELEPHONE ORDERS
We may accept telephone orders to buy or sell shares of the Funds. 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
Each Fund's regular business days and hours are the same as those of the
New York Stock Exchange (NYSE). The price of each Fund's shares is based on its
net asset value per share (NAV). Each 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 Funds will not be priced on days on which
the NYSE is closed for trading. The NYSE is closed for trading on national
holidays and weekends. A 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 valued in
accordance with the Fund's fair valuation procedures.
TIMING OF ORDERS
Each Fund accepts orders until the close of trading on the NYSE every
business day. Orders received before the close of trading on the NYSE are
executed the same day at the 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 Funds 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; or
- - The SEC by order permits such suspension for the protection of
stockholders.
TIMING OF SETTLEMENTS
When you buy shares of a 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
54
<PAGE>
forwarded to you indicating the number of shares sold and the proceeds thereof.
ACCOUNTS WITH BELOW-MINIMUM BALANCES
If your account balance in a Fund falls below the minimum ($5,000 for Class
N shares and $250,000 for Class I shares) as a result of selling shares (and not
because of Fund performance), the Fund reserves the right to ask you to 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 on a class of shares of a 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 by written notice to the Fund
or by calling the Fund at 1-800-726-7240. This request will be effective as to
any subsequent payment if it is received before the record date used for
determining your payment. Any dividend and distribution election will remain in
effect until you notify the Fund in writing to the contrary.
EXCHANGE PRIVILEGE
You may exchange shares of either class of a Fund into shares of the same
class of any other Fund offered by Dresdner RCM, without a sales charge or other
fee (except redemption fees, if any), by contacting the Fund. You may also
exchange Class N shares of a Fund into Class I shares of the same Fund or any
other Fund offered by Dresdner RCM. Exchange purchases are subject to the
minimum investment requirements of the class purchased. To keep Fund expenses
low for all shareholders, the Funds will not allow frequent exchanges,
purchases, or sales of Fund shares. If a shareholder exhibits a pattern or
frequent trading, each Fund reserves the right to refuse to accept further
purchase or exchange orders from that shareholder. 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:
- - 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
Please note: exchanges in excess of $50,000 will require a signature
guarantee. 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.
Stockholders will also receive quarterly statements of the status of their
accounts reflecting all transactions having taken place within that quarter.
REPORTS TO STOCKHOLDERS
Each Fund's fiscal year ends on December 31. Each Fund will issue to its
stockholders semi-annual and annual reports. In order to reduce duplicate
mailings and printing costs, the Companies will provide one annual and
semi-annual report and annual prospectus per
55
<PAGE>
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 appropriate
Board of Directors believes that unusual conditions exist which would make such
payment detrimental to the best interests of a Fund. Under these 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.
Upon redemption of Tax Managed Growth Fund shares held for less than twelve
consecutive months, a fee of 1.00% of the redemption proceeds will be charged
and retained by the Fund. Redeeming stockholders may avoid this fee by
presenting satisfactory proof of ownership of the redeemed shares for twelve
consecutive months along with the redemption request. A determination by the
Fund of the redemption fee's applicability is final. This fee is intended to
compensate the Fund for transaction and other expenses caused by redemptions and
to facilitate efficient portfolio management. The fee is not a deferred sales
charge or a commission paid to the Distributor or the Investment Manager. The
Fund reserves the right to modify the terms of or terminate the redemption fee
at any time.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each Fund's dividends and distributions consist of most or all of its net
investment income and net realized capital gains. The Balanced Fund typically
pays income dividends four times a year (usually in April, July, October and
December) and makes capital gains distribution once a year (usually in
December). The remaining Funds typically pay dividends and distributions once a
year in December. The amount depends on a 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 you: (a) 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 you may obtain a refund
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 or estates, 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.
A Fund may be required to pay income, withholding and other taxes imposed
by foreign countries, generally at rates from 10% to 40%, which would reduce its
investment income. Tax conventions between certain countries and the U.S. may
reduce or eliminate such taxes. A Fund may "pass through" to its stockholders
the amount of foreign income taxes its pays, if it is in the best interests of
stockholders. If a Fund does so, you will be required to include in your gross
income your pro-rata share of foreign taxes it 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 the Fund does 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:
56
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------
TRANSACTION TAX STATUS
------------------------------------------------------------
<S> <C>
Income dividends Ordinary income
------------------------------------------------------------
Short-term capital gains Ordinary income
distributions
------------------------------------------------------------
Long-term capital gains Capital gains
distributions
------------------------------------------------------------
Sales or exchanges of shares Capital gains or losses
owned for more than one year
------------------------------------------------------------
Sales or exchanges of shares Gains are treated as
owned for one year or less ordinary income; losses are
subject to special rules
------------------------------------------------------------
</TABLE>
Dividends and other distributions generally are taxable to you at the time
they are received. However, dividends declared in October, November and December
by a Fund and made payable to your in that 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 a Fund's shares shortly before the record date for a
dividend or other distribution on those shares, you will pay full price for the
shares. This is known as "buying a distribution" because you will receive some
portion of your purchase price back as a 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. Depending on your taxpayer
status, that distribution may be taxable.
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 a 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 a Fund.
57
<PAGE>
FINANCIAL HIGHLIGHTS
The following financial highlights tables show the Funds' financial
performance. This information has been audited by PricewaterhouseCoopers LLP,
whose report, along with the Funds' financial statements, are included in the
Funds' Annual Report, which are available upon request and incorporated by
reference into the SAI.
58
<PAGE>
<TABLE>
<CAPTION>
LARGE CAP GROWTH FUND
----------------------------------------------------------
CLASS I CLASS N
---------------------------------------------- -------
DECEMBER 31,
----------------------------------------------------------
1999 1998 1997 1996(3) 1999(9)
------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE: (1)
Net asset value, beginning of period $ 16.14 $12.53 $ 10.00 $10.00 $ 16.60
------- ------ ------- ------ -------
Income from investment operations:
Net investment income (loss) (0.05) (0.02) 0.01 -- (0.08)
Net realized and unrealized gain on
investments 6.95 5.51 3.17 -- 6.45
------- ------ ------- ------ -------
Total from investment operations 6.90 5.49 3.18 -- 6.37
Less distributions:
From net investment income -- (0.01) (0.01) -- --
From net realized gain on investments (3.97) (1.87) (0.64) -- (3.97)
------- ------ ------- ------ -------
Total distributions (3.97) (1.88) (0.65) -- (3.97)
------- ------ ------- ------ -------
NET ASSET VALUE, END OF PERIOD $ 19.07 $16.14 $ 12.53 $10.00 $ 19.00
------- ------ ------- ------ -------
------- ------ ------- ------ -------
TOTAL RETURN (7) 44.84% 44.11% 31.99% 0.00% 40.48%
------- ------ ------- ------ -------
------- ------ ------- ------ -------
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $14,898 $7,935 $ 5,025 $4,000 $ 926
------- ------ ------- ------ -------
------- ------ ------- ------ -------
Ratio of expenses to average net assets:
With waiver and reimbursement (14) 0.95% 0.95% 0.95% 0.00%(8) 1.20%
------- ------ ------- ------ -------
------- ------ ------- ------ -------
Without waiver and reimbursement (14) 2.45% 3.04% 2.63% -- 60.04%
------- ------ ------- ------ -------
------- ------ ------- ------ -------
Ratio of net investment income to average net
assets:
With waiver and reimbursement (14) (0.26)% (0.11)% 0.10% 0.00%(8) (0.55)%
------- ------ ------- ------ -------
------- ------ ------- ------ -------
Without waiver and reimbursement (14) (1.76)% (2.20)% (1.58)% -- (59.39)%
------- ------ ------- ------ -------
------- ------ ------- ------ -------
Portfolio turnover 109.29% 99.58% 119.87% 0.00% 109.29%
------- ------ ------- ------ -------
------- ------ ------- ------ -------
</TABLE>
- ------------------------------------
For Footnote References, see page 68
59
<PAGE>
<TABLE>
<CAPTION>
BIOTECHNOLOGY FUND
---------------------------------
CLASS N
---------------------------------
DECEMBER 31,
---------------------------------
1999 1998 1997(4)
------- -------- --------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE: (1)
Net asset value, beginning of period $ 11.44 $ 10.00 $10.00
------- ------- ------
Income from investment operations:
Net investment loss (0.15) (0.10) --
Net realized and unrealized gain on investments 12.03 1.86 --
------- ------- ------
Total from investment operations 11.88 1.76 --
Less distributions:
From net realized gain on investments (3.30) (0.32) --
------- ------- ------
NET ASSET VALUE, END OF PERIOD $ 20.02 $ 11.44 $10.00
------- ------- ------
------- ------- ------
TOTAL RETURN (7) 111.39% 17.76% 0.00%
------- ------- ------
------- ------- ------
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $14,870 $ 3,911 $3,000
------- ------- ------
------- ------- ------
Ratio of expenses to average net assets:
With waiver and reimbursement (14) 1.50% 1.50% 0.01%(8)
------- ------- ------
------- ------- ------
Without waiver and reimbursement (14) 4.53% 4.87% --
------- ------- ------
------- ------- ------
Ratio of net investment income to average net assets:
With waiver and reimbursement (14) (1.09)% (0.95)% 0.01%(8)
------- ------- ------
------- ------- ------
Without waiver and reimbursement (14) (4.12)% (4.32)% --
------- ------- ------
------- ------- ------
Portfolio turnover 431.27% 127.21% 0.00%
------- ------- ------
------- ------- ------
</TABLE>
For Footnote References, see page 68
60
<PAGE>
<TABLE>
<CAPTION>
TAX MANAGED GROWTH FUND
---------------------------------
CLASS I CLASS N
-------------------- --------
DECEMBER 31,
---------------------------------
1999 1998(5) 1999(10)
------- -------- --------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE: (1)
Net asset value, beginning of period $ 10.00 $10.00 $ 10.34
------- ------ -------
Income from investment operations:
Net investment loss (0.06) -- (0.29)
Net realized and unrealized gain on
investments 5.28 -- 5.13
------- ------ -------
Total from investment operations 5.22 -- 4.84
Less distributions:
From net realized gain on investments (0.21) -- (0.21)
In excess of net realized gain on investments (0.02) -- (0.02)
------- ------ -------
Total distributions (0.23) -- (0.23)
------- ------ -------
NET ASSET VALUE, END OF PERIOD $ 14.99 $10.00 $ 14.95
------- ------ -------
------- ------ -------
TOTAL RETURN (7) 52.44% 0.00% 47.07%
------- ------ -------
------- ------ -------
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 1,499 $1,000 $ 759
------- ------ -------
------- ------ -------
Ratio of expenses to average net assets:
With waiver and reimbursement (14) 1.25% 0.00%(8) 1.50%
------- ------ -------
------- ------ -------
Without waiver and reimbursement (14) 14.36% -- 35.08%
------- ------ -------
------- ------ -------
Ratio of net investment income to average net
assets:
With waiver and reimbursement (14) (0.47)% 0.00%(8) (2.66)%
------- ------ -------
------- ------ -------
Without waiver and reimbursement (14) (13.58)% -- (36.24)%
------- ------ -------
------- ------ -------
Portfolio turnover 43.35% 0.00% 43.35%
------- ------ -------
------- ------ -------
</TABLE>
For Footnote References, see page 68
61
<PAGE>
<TABLE>
<CAPTION>
GLOBAL SMALL CAP FUND
-----------------------------------------------------------
CLASS I CLASS N
---------------------------------------------- --------
DECEMBER 31,
-----------------------------------------------------------
1999 1998 1997 1996(3) 1999(11)
------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE: (1)
Net asset value, beginning of period $ 12.37 $ 11.09 $ 10.00 $10.00 $ 11.63
------- ------- ------- ------ -------
Income from investment operations:
Net investment loss (0.17) (0.13) (0.13) -- (0.21)
Net realized and unrealized gain on investments 12.96 2.23 2.64 -- 13.67
------- ------- ------- ------ -------
Total from investment operations 12.79 2.10 2.51 -- 13.46
Less distributions:
From net realized gain on investments (1.78) (0.82) (1.42) -- (1.78)
------- ------- ------- ------ -------
NET ASSET VALUE, END OF PERIOD $ 23.38 $ 12.37 $ 11.09 $10.00 $ 23.31
------- ------- ------- ------ -------
------- ------- ------- ------ -------
TOTAL RETURN (7) 104.63% 19.29% 25.48% 0.00% 116.97%
------- ------- ------- ------ -------
------- ------- ------- ------ -------
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $24,073 $ 5,479 $ 4,456 $4,000 $ 1,430
------- ------- ------- ------ -------
------- ------- ------- ------ -------
Ratio of expenses to average net assets:
With waiver and reimbursement (14) 1.50% 1.75% 1.75% 0.00%(8) 1.75%
------- ------- ------- ------ -------
------- ------- ------- ------ -------
Without waiver and reimbursement (14) 4.10% 3.86% 3.09% -- 16.71%
------- ------- ------- ------ -------
------- ------- ------- ------ -------
Ratio of net investment income to average net
assets:
With waiver and reimbursement (14) (1.13)% (1.03)% (1.14)% 0.00%(8) (1.49)%
------- ------- ------- ------ -------
------- ------- ------- ------ -------
Without waiver and reimbursement (14) (3.73)% (3.14)% (2.49)% -- (16.44)%
------- ------- ------- ------ -------
------- ------- ------- ------ -------
Portfolio turnover 161.61% 184.38% 153.49% 0.00% 161.61%
------- ------- ------- ------ -------
------- ------- ------- ------ -------
</TABLE>
For Footnote References, see page 68
62
<PAGE>
<TABLE>
<CAPTION>
GLOBAL TECHNOLOGY FUND
-------------------------------------------------------------------------
CLASS I CLASS N
------------------------------------------------------------ -----------
DECEMBER 31,
------------------------------------------------------------------------
1999 1998 1997 1996 1995(2) 1999(12)
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE: (1)
Net asset value, beginning of period $ 21.40 $ 13.69 $ 12.60 $ 10.04 $10.00 $ 24.01
-------- ------- ------- ------- ------ -------
Income from investment operations:
Net investment loss (0.35) (0.16) (0.16) (0.15) -- (0.49)
Net realized and unrealized gain on
investments 39.54 8.44 3.46 2.80 0.04 36.99
-------- ------- ------- ------- ------ -------
Total from investment operations 39.19 8.28 3.30 2.65 0.04 36.50
Less distributions:
From net realized gain on investments (1.38) (0.57) (2.21) (0.09) -- (1.38)
-------- ------- ------- ------- ------ -------
NET ASSET VALUE, END OF PERIOD $ 59.21 $ 21.40 $ 13.69 $ 12.60 $10.04 $59.13
-------- ------- ------- ------- ------ -------
-------- ------- ------- ------- ------ -------
TOTAL RETURN (7) 182.95% 60.53% 27.08% 26.41% 0.40% 152.69%
-------- ------- ------- ------- ------ -------
-------- ------- ------- ------- ------ -------
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $197,897 $18,558 $ 6,950 $ 5,117 $ 954 $82,330
-------- ------- ------- ------- ------ -------
-------- ------- ------- ------- ------ -------
Ratio of expenses to average net assets:
With waiver and reimbursement (14) 1.50% 1.75% 1.75% 1.73% 0.00%(8) 1.75%
-------- ------- ------- ------- ------ -------
-------- ------- ------- ------- ------ -------
Without waiver and reimbursement (14) 1.50% 2.49% 2.45% 7.75% -- 1.99%
-------- ------- ------- ------- ------ -------
-------- ------- ------- ------- ------ -------
Ratio of net investment income to average net assets:
With waiver and reimbursement (14) (1.02)% (0.99)% (1.15)% (1.34)% (0.02)%(8) (1.32)%
-------- ------- ------- ------- ------ -------
-------- ------- ------- ------- ------ -------
Without waiver and reimbursement (14) (1.02)% (1.73)% (1.86)% 7.36% -- (1.56)%
-------- ------- ------- ------- ------ -------
-------- ------- ------- ------- ------ -------
Portfolio turnover 119.32% 265.99% 189.41% 155.58% 0.00% 119.32%
-------- ------- ------- ------- ------ -------
-------- ------- ------- ------- ------ -------
</TABLE>
For Footnote References, see page 68
63
<PAGE>
<TABLE>
<CAPTION>
GLOBAL HEALTH CARE FUND
----------------------------------------------
CLASS N
----------------------------------------------
DECEMBER 31,
----------------------------------------------
1999 1998 1997 1996(3)
------- -------- -------- --------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE: (1)
Net asset value, beginning of period $ 13.42 $ 11.65 $ 10.00 $10.00
------- ------- ------- ------
Income from investment operations:
Net investment loss (0.11) (0.09) (0.06) --
Net realized and unrealized gain on investments 3.53 3.02 3.03 --
------- ------- ------- ------
Total from investment operations 3.42 2.93 2.97 --
Less distributions:
From net realized gain on investments (2.59) (1.16) (1.32) --
------- ------- ------- ------
NET ASSET VALUE, END OF PERIOD $ 14.25 $ 13.42 $ 11.65 $10.00
------- ------- ------- ------
------- ------- ------- ------
TOTAL RETURN (7) 28.74% 25.57% 30.00% 0.00%
------- ------- ------- ------
------- ------- ------- ------
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 6,284 $ 5,487 $ 4,671 $4,000
------- ------- ------- ------
------- ------- ------- ------
Ratio of expenses to average net assets:
With waiver and reimbursement (14) 1.50% 1.50% 1.50% 0.00%(8)
------- ------- ------- ------
------- ------- ------- ------
Without waiver and reimbursement (14) 4.85% 3.65% 2.93% --
------- ------- ------- ------
------- ------- ------- ------
Ratio of net investment income to average net assets:
With waiver and reimbursement (14) (0.81)% (0.69)% (0.55)% 0.00%(8)
------- ------- ------- ------
------- ------- ------- ------
Without waiver and reimbursement (14) (4.16)% (2.84)% (1.98)% --
------- ------- ------- ------
------- ------- ------- ------
Portfolio turnover 393.83% 153.92% 157.65% 0.00%
------- ------- ------- ------
------- ------- ------- ------
</TABLE>
For Footnote References, see page 68
64
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL GROWTH EQUITY FUND
--------------------------------------------------------------------------
CLASS I CLASS N
------------------------------------------------------------- --------
DECEMBER 31,
--------------------------------------------------------------------------
1999 1998 1997 1996(6) 1995 1999(11)
-------- --------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE: (1)
Net asset value, beginning of period $ 14.98 $ 13.70 $ 12.72 $ 11.56 $ 10.00 $14.78
-------- -------- ------- ------- ------- -------
Income from investment operations:
Net investment income 0.02 0.06 0.06 0.04 0.12 0.01
Net realized and unrealized gain on
investments 8.91 1.80 2.22 2.16 1.68 9.08
-------- -------- ------- ------- ------- -------
Total from investment operations 8.93 1.86 2.28 2.20 1.80 9.09
Less distributions:
From net investment income (0.07) (0.23) (0.14) (0.16) (0.11) (0.07)
In excess of net investment income (0.10) -- -- -- -- (0.09)
From net realized gain on investments (1.40) (0.35) (1.16) (0.88) (0.13) (1.40)
-------- -------- ------- ------- ------- -------
Total distributions (1.57) (0.58) (1.30) (1.04) (0.24) (1.56)
-------- -------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 22.34 $ 14.98 $ 13.70 $ 12.72 $ 11.56 22.31
-------- -------- ------- ------- ------- -------
-------- -------- ------- ------- ------- -------
TOTAL RETURN (7) 60.66% 13.81% 17.93% 19.31% 17.98% 62.48%
-------- -------- ------- ------- ------- -------
-------- -------- ------- ------- ------- -------
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $285,561 $121,975 $98,443 $52,605 $34,347 $1,738
-------- -------- ------- ------- ------- -------
-------- -------- ------- ------- ------- -------
Ratio of expenses to average net assets:
With waiver and reimbursement (14) 1.00% 1.00% 1.00% 0.99% 0.75% 1.25%
-------- -------- ------- ------- ------- -------
-------- -------- ------- ------- ------- -------
Without waiver and reimbursement (14) 1.06% 1.06% 1.06% 1.25% 1.11% 10.89%
-------- -------- ------- ------- ------- -------
-------- -------- ------- ------- ------- -------
Ratio of net investment income to average net assets:
With waiver and reimbursement (14) 0.12% 0.37% 0.41% 0.32% 1.19% 0.07%
-------- -------- ------- ------- ------- -------
-------- -------- ------- ------- ------- -------
Without waiver and reimbursement (14) 0.06% 0.31% 0.35% 0.06% 0.83% (9.56)%
-------- -------- ------- ------- ------- -------
-------- -------- ------- ------- ------- -------
Portfolio turnover 139.69% 84.49% 122.43% 119.09% 87.40% 139.69%
-------- -------- ------- ------- ------- -------
-------- -------- ------- ------- ------- -------
</TABLE>
For Footnote References, see page 68
65
<PAGE>
<TABLE>
<CAPTION>
EMERGING MARKETS FUND
----------------------------------------------
CLASS I CLASS N
--------------------------------- --------
DECEMBER 31,
----------------------------------------------
1999 1998 1997(4) 1999(11)
------- -------- -------- --------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE: (1)
Net asset value, beginning of period $ 9.06 $ 9.99 $10.00 $ 9.13
------- ------- ------ -------
Income from investment operations:
Net investment income (loss) (0.01) 0.12 -- (0.06)
Net realized and unrealized gain (loss) on
investments 8.29 (0.97) (0.01) 8.24
------- ------- ------ -------
Total from investment operations 8.28 (0.85) (0.01) 8.18
Less distributions:
From net investment income -- (0.08) -- --
From net realized gain on investments (0.47) -- -- (0.47)
------- ------- ------ -------
Total distributions (0.47) (0.08) -- (0.47)
------- ------- ------ -------
NET ASSET VALUE, END OF PERIOD $ 16.87 $ 9.06 $ 9.99 $ 16.84
------- ------- ------ -------
------- ------- ------ -------
TOTAL RETURN (7) 92.12% (8.50)% -- 90.31%
------- ------- ------ -------
------- ------- ------ -------
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 5,154 $ 2,734 $2,996 $ 299
------- ------- ------ -------
------- ------- ------ -------
Ratio of expenses to average net
assets:
With waiver and reimbursement (14) 1.50% 1.50% 0.01%(8) 1.75%
------- ------- ------ -------
------- ------- ------ -------
Without waiver and reimbursement (14) 9.33% 8.29% -- 79.18%
------- ------- ------ -------
------- ------- ------ -------
Ratio of net investment income to average net assets:
With waiver and reimbursement (14) (0.13)% 1.23% -- (0.68)%
------- ------- ------ -------
------- ------- ------ -------
Without waiver and reimbursement (14) (7.96)% (5.56)% -- (78.11)%
------- ------- ------ -------
------- ------- ------ -------
Portfolio turnover 215.64% 279.25% --(8) 215.64%
------- ------- ------ -------
------- ------- ------ -------
</TABLE>
For Footnote References, see page 68
66
<PAGE>
<TABLE>
<CAPTION>
BALANCED FUND
-------------
CLASS I
-------------
DECEMBER 31,
-------------
1999(13)
-------------
<S> <C>
PER SHARE OPERATING PERFORMANCE: (1)
Net asset value, beginning of period $ 10.00
-------
Income from investment operations:
Net investment income 0.01
Net realized and unrealized gain on investments 0.64
-------
Total from investment operations 0.65
-------
NET ASSET VALUE, END OF PERIOD $ 10.65
-------
-------
TOTAL RETURN (7) 6.50%
-------
-------
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 1,009
-------
-------
Ratio of expenses to average net assets:
With waiver and reimbursement (15) 0.90%
-------
-------
Without waiver and reimbursement (15) 41.29%
-------
-------
Ratio of net investment income to average net assets:
With waiver and reimbursement (15) 1.41%
-------
-------
Without waiver and reimbursement (15) (38.97)%
-------
-------
Portfolio turnover 59.94%
-------
-------
</TABLE>
- ------------------------------------
For Footnote References, see page 68
67
<PAGE>
Dresdner RCM Global Funds
Notes to Financial Highlights
For the Fiscal Year or Period Ended December 31, 1999
The following notes are being used as reference items in the Financial
Highlights of the Funds.
(1) Calculated using the average share method.
(2) Commencement of operations was December 27, 1995.
(3) Commencement of operations was December 31, 1996.
(4) Commencement of operations was December 30, 1997.
(5) Commencement of operations was December 31, 1998.
(6) Stock split 10:1 at close of business on June 17, 1996. All prior period
per share amounts were restated to reflect the stock split.
(7) Total return measures the change in value of an investment over the period
indicated. For periods less than one year, the total return is not
annualized.
(8) Not annualized. Fund was in operation for less than five days.
(9) Commencement of operations was March 2, 1999.
(10) Commencement of operations was February 12, 1999.
(11) Commencement of operations was March 9, 1999.
(12) Commencement of operations was January 20, 1999.
(13) Commencement of operations was December 15, 1999.
(14) Annualized for periods of less than one year.
68
<PAGE>
[Back Page]
For more information about Dresdner RCM Global Funds and Dresdner RCM Capital
Funds, the following documents are available free upon request:
ANNUAL/SEMIANNUAL REPORTS:
The Funds' annual and semiannual reports to shareholders contain
detailed information on each Fund's investments. The annual report includes a
discussion of the market conditions and investment strategies that significantly
affected the Funds' performance during their last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI):
The SAI provides more detailed information about the Funds, 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 reports and the SAI, or request other
information and discuss your questions about the Funds, by contacting us at:
Dresdner RCM Funds
Four Embarcadero Center
San Francisco, CA 94111
Telephone 1-800-726-7240
You can review the Funds' Reports and 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 or by email ([email protected]).
- Free from the Commission's Website at http://www.sec.gov/.
Investment Company Act file nos. 811-2913 and 811-9100.
1
<PAGE>
[Letterhead]
DRESDNER RCM LARGE CAP GROWTH FUND
DRESDNER RCM TAX MANAGED GROWTH FUND
DRESDNER RCM BIOTECHNOLOGY FUND
DRESDNER RCM BALANCED FUND
DRESDNER RCM GLOBAL SMALL CAP FUND
DRESDNER RCM GLOBAL TECHNOLOGY FUND
DRESDNER RCM GLOBAL HEALTH CARE FUND
DRESDNER RCM INTERNATIONAL GROWTH EQUITY FUND
DRESDNER RCM EMERGING MARKETS FUND
STATEMENT OF ADDITIONAL INFORMATION
May 1, 2000
Dresdner RCM International Growth Equity Fund (the "International Fund") is a
series of Dresdner RCM Capital Funds, Inc. (the "Capital Company"), an open-end
management investment company. Dresdner RCM Large Cap Growth Fund (the "Large
Cap Fund"), Dresdner RCM Tax Managed Growth Fund (the "Tax Managed Growth
Fund"), Dresdner RCM Biotechnology Fund (the "Biotechnology Fund"), Dresdner RCM
Balanced Fund (the "Balanced Fund"), Dresdner RCM Global Small Cap Fund (the
"Global Small Cap Fund"), Dresdner RCM Global Technology Fund (the "Global
Technology Fund"), Dresdner RCM Global Health Care Fund (the "Health Care
Fund"), and Dresdner RCM Emerging Markets Fund (the "Emerging Markets Fund"),
are series (each, together with the International Fund, a "Fund" and, together,
the "Funds") of Dresdner RCM Global Funds, Inc. (the "Global Company" and the
Capital Company, together the "Companies"), an open-end management investment
company. The Funds' investment manager is Dresdner RCM Global Investors LLC (the
"Investment Manager"). All the Funds are diversified except the Global
Technology Fund, the Health Care Fund, the Biotechnology Fund, and the
International Fund.
This Statement of Additional Information ("SAI") is not a prospectus, and should
be read in conjunction with the Prospectus of the Funds dated May 1, 2000. This
SAI relates to the Funds' Non-Institutional Class ("Class N") and Institutional
Class ("Class I") of shares. The Prospectus may be obtained without charge by
writing or calling the Companies at the address and phone number above.
Incorporated by reference herein are the financial statements of the Funds
contained in the Funds' Annual Report to Shareholders for the year ended
December 31, 1999, including the Report of Independent Accountants, dated
February 18, 2000, the Statements of Assets and Liabilities, including the
Portfolio of Investments and the related Statements of Operations, Statements of
Changes in Net Assets, and the Financial Highlights. Copies of the Funds' Annual
and Semi-Annual Reports to Shareholders are available, upon request, by calling
(800) 726-7240, or by writing to Four Embarcadero Center, San Francisco,
California 94111.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Investment Objectives and Policies...............................................................................3
Risk Considerations.............................................................................................20
Investment Restrictions.........................................................................................26
Execution of Portfolio Transactions.............................................................................28
Directors and Officers..........................................................................................31
Control Persons and Principal Holders of Securities.............................................................33
The Investment Manager..........................................................................................37
The Distributor.................................................................................................39
The Administrator...............................................................................................40
Other Services Providers........................................................................................41
Net Asset Value.................................................................................................42
Purchase and Redemption of Shares...............................................................................43
Dividends, Distributions and Tax Status.........................................................................43
Investment Results..............................................................................................46
General Information.............................................................................................49
Description of Capital Shares...................................................................................49
Additional Information..........................................................................................50
Financial Statements............................................................................................50
</TABLE>
Page 2
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
INVESTMENT CRITERIA
In evaluating particular investment opportunities, the Investment
Manager may consider such other factors, in addition to those described in the
Prospectus, as the anticipated economic growth rate, the political outlook, the
anticipated inflation rate, the currency outlook, and the interest rate
environment for the country and the region in which a particular issuer is
located. When the Investment Manager believes it would be appropriate and
useful, the Investment Manager's personnel may visit the issuer's headquarters
and plant sites to assess an issuer's operations and to meet and evaluate its
key executives. The Investment Manager also will consider whether other risks
may be associated with particular securities.
INVESTMENT IN FOREIGN SECURITIES
The securities markets of many countries have at times in the past
moved relatively independently of one another due to different economic,
financial, political, and social factors. In seeking to achieve the investment
objectives of the Funds, the Investment Manager allocates the Funds' assets
among securities of countries and in currency denominations where it expects
opportunities for meeting the Funds' investment objectives to be the most
attractive, subject to the percentage limitations set forth in the Prospectus.
In addition, from time to time a Fund may strategically adjust its investments
among issuers based in various countries and among the various equity markets of
the world in order to take advantage of diverse global opportunities, based on
the Investment Manager's evaluation of prevailing trends and developments, as
well as on the Investment Manager's assessment of the potential for capital
appreciation (as compared to the risks) of particular companies, industries,
countries, and regions.
INVESTMENT IN DEVELOPED FOREIGN COUNTRIES. Each of the Funds may invest
in securities of foreign governments and companies that are organized or
headquartered in developed foreign countries. A Fund may not be invested in all
developed foreign countries at one time, and may not invest in particular
developed foreign countries at any time, depending on the Investment Manager's
view of the investment opportunities available.
Although these countries have developed economies, even developed
countries may be subject to periods of economic or political instability. For
example, efforts by the member countries of the European Union to eliminate
internal barriers to the free movement of goods, persons, services and capital
have encountered opposition arising from the conflicting economic, political and
cultural interests and traditions of the member countries and their citizens.
The reunification of the former German Democratic Republic (East Germany) with
the Federal Republic of Germany (West Germany) and other political and social
events in Europe have caused considerable economic and social dislocations. Such
events can materially affect securities markets and have also disrupted the
relationship of such currencies with each other and with the U.S. dollar.
Similarly, events in the Japanese economy and social developments may affect
Japanese securities and currency markets, as well as the relationship of the
Japanese yen to the U.S. dollar. Future political, economic and social
developments can be expected to produce continuing effects on securities and
currency markets in these and other developed foreign countries.
INVESTMENT IN EMERGING MARKETS. Each Fund (except the Balanced Fund)
may, and the Emerging Markets Fund will, invest in securities of developing
countries with emerging markets and companies organized or headquartered in such
countries. As a general matter, countries that are not considered to be
developed foreign countries by the Investment Manager will be deemed to be
emerging market countries. Emerging market countries include any country
generally considered to be an emerging market or developing country by the World
Bank, the International Finance Corporation, the United Nations or its
authorities, or other recognized financial institutions. As of the date of this
SAI, emerging market countries are deemed to include for purposes of this SAI,
all foreign countries other than Australia, Austria, Belgium, Canada, Denmark,
Finland, France, Germany, Ireland, Italy, Japan, Luxembourg, The Netherlands,
New Zealand, Norway, Singapore, Spain, Sweden, Switzerland, and the United
Kingdom. (See INVESTMENT IN DEVELOPED FOREIGN COUNTRIES.) As their economies
grow and their markets grow and mature, some countries that currently may be
characterized by the Investment Manager as emerging
Page 3
<PAGE>
market countries may be deemed by the Investment Manager to be developed foreign
countries. In the event that the Investment Manager deems a particular country
to be a developed foreign country, any investment in securities issued by that
country's government or by an issuer located in that country would not be
subject to a Fund's overall limitations on investments in emerging market
countries.
Securities of issuers organized or headquartered in emerging market
countries may, at times, offer excellent opportunities for current income and
capital appreciation. However, prospective investors should be aware that the
markets of emerging market countries historically have been more volatile than
the markets of the United States and developed foreign countries, and thus the
risks of investing in securities of issuers organized or headquartered in
emerging market countries may be far greater than the risks of investing in
developed foreign markets. (See RISK CONSIDERATIONS--EMERGING MARKET SECURITIES
for a more detailed discussion of the risk factors associated with investments
in emerging market securities.) In addition, movements of emerging market
currencies historically have had little correlation with movements of developed
foreign market currencies. Prospective investors should consider these risk
factors carefully before investing in a Fund. Some emerging market countries
have currencies whose value is closely linked to the U.S. dollar. Emerging
market countries also may issue debt denominated in U.S. dollars and other
currencies.
It is unlikely that a Fund will be invested in securities in all
emerging market countries at any time. Moreover, investing in some emerging
markets currently may not be desirable or feasible, due to lack of adequate
custody arrangements for Fund assets, overly burdensome repatriation or similar
restrictions, the lack of organized and liquid securities markets, unacceptable
political risks, poor values of investments in those markets relative to
investments in other emerging markets, in developed foreign markets, or in the
United States, or for other reasons.
CURRENCY MANAGEMENT
Securities purchased by the Funds may be denominated in U.S. dollars,
foreign currencies, or multinational currencies such as the Euro, and the Funds
will incur costs in connection with conversions between various currencies.
Movements in the various securities markets may be offset by changes in foreign
currency exchange rates. Exchange rates frequently move independently of
securities markets in a particular country. As a result, gains in a particular
securities market may be affected, either positively or negatively, by changes
in exchange rates, and a Fund's net currency positions may expose it to risks
independent of its securities positions.
From time to time, the Funds may employ currency management techniques
to enhance their total returns, although there is no current intention to do so.
A Fund may not employ more than 30% of the value of its total assets in currency
management techniques for the purpose of enhancing returns. To the extent that
such techniques are used to enhance return, they are considered speculative.
A Fund's ability and decision to purchase or sell portfolio securities
may be affected by the laws or regulations in particular countries relating to
convertibility and repatriation of assets. Because the shares of the Funds are
redeemable in U.S. dollars each day the Funds determine their net asset value,
the Funds must have the ability at all times to obtain U.S. dollars to the
extent necessary to meet redemptions. Under present conditions, the Investment
Manager does not believe that these considerations will have any significant
adverse effect on its portfolio strategies, although there can be no assurances
in this regard.
GENERAL CURRENCY CONSIDERATIONS. Currency exchange rates may fluctuate
significantly over short periods of time causing, along with other factors, a
Fund's net asset value to fluctuate as well. Currency exchange rates generally
are determined by the forces of supply and demand in the foreign exchange
markets and the relative merits of investments in different countries, actual or
anticipated changes in interest rates and other complex factors, as seen from an
international perspective. Currency exchange rates also can be affected
unpredictably by intervention, or failure to do so, by U.S. or foreign
governments or central banks or by currency controls or political developments
in the United States or abroad. The markets in forward foreign currency exchange
contracts, currency swaps and other privately negotiated currency instruments
offer less protection against defaults by the other party to such instruments
than is available for currency instruments traded on an exchange. To the extent
that a substantial portion of a Fund's total assets, adjusted to reflect the
Fund's net position after giving effect to currency transactions, is denominated
or quoted in the currencies of foreign countries, the Fund will be more
susceptible to the risk of adverse economic and political developments within
those countries.
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FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. Each Fund may purchase or
sell forward foreign currency exchange contracts ("forward contracts") for
hedging purposes or to seek to increase total return when the Investment Manager
anticipates that a foreign currency will appreciate or depreciate in value, but
securities denominated or quoted in that currency do not present attractive
investment opportunities and are not held in the Fund's portfolio. When
purchased or sold to increase total return, forward contracts are considered
speculative. In addition, a Fund may enter into forward contracts in order to
protect against anticipated changes in future foreign currency exchange rates.
Each Fund may engage in cross-hedging by using forward contracts in a
currency different from that in which the hedged security is denominated or
quoted if the Investment Manager determines that there is a pattern of
correlation between the two currencies. Each such Fund may also engage in proxy
hedging, by using forward contracts in a series of foreign currencies for
similar purposes.
Each Fund may enter into forward contracts to purchase foreign
currencies to protect against an anticipated rise in the U.S. dollar price of
securities it intends to purchase. Each such Fund may enter into forward
contracts to sell foreign currencies to protect against the decline in value of
its foreign currency denominated or quoted portfolio securities, or a decline in
the value of anticipated income or dividends from such securities, due to a
decline in the value of foreign currencies against the U.S. dollar. Forward
contracts to sell foreign currency could limit any potential gain which might be
realized by a Fund if the value of the hedged currency increased.
If a Fund enters into a forward contract to sell foreign currency to
increase total return or to buy foreign currency for any purpose, the Fund will
segregate cash, U.S. Government securities, or other liquid debt or equity
securities with the Fund's custodian in an amount equal to the value of the
Fund's total assets committed to the consummation of the forward contract. If
the value of the segregated securities declines, additional assets will be
segregated so that the value of the segregated assets will equal the amount of
the Fund's commitment with respect to the contract.
A forward contract is subject to the risk that the counterparty to such
contract will default on its obligations. Since a forward contract is not
guaranteed by an exchange or clearinghouse, a default on the contract would
deprive a Fund of unrealized profits, transaction costs or the benefits of a
currency hedge or force the Fund to cover its purchase or sale commitments, if
any, at the current market price.
OPTIONS ON FOREIGN CURRENCIES. Each Fund may purchase and sell (write)
put and call options on foreign currencies for the purpose of protecting against
declines in the U.S. dollar value of foreign portfolio securities and
anticipated income or dividends on such securities and against increases in the
U.S. dollar cost of foreign securities to be acquired. Each such Fund may also
use options on currency to cross-hedge, which involves writing or purchasing
options on one currency to hedge against changes in exchange rates for a
different currency, if the Investment Manager believes there is a pattern of
correlation between the two currencies. Options on foreign currencies to be
written or purchased by the Funds will be traded on U.S. and foreign exchanges.
The writer of a put or call option receives a premium and gives the
purchaser the right to sell (or buy) the currency underlying the option at the
exercise price. The writer has the obligation upon exercise of the option to
purchase (or deliver) the currency during the option period. A writer of an
option who wishes to terminate the obligation may effect a "closing transaction"
by buying an option of the same series as the option previously written. A
writer may not effect a closing purchase transaction after being notified of the
exercise of an option. The writing of an option on foreign currency will
constitute only a partial hedge, up to the amount of the premium received; a
Fund could be required to purchase or sell additional foreign currencies at
disadvantageous exchange rates, thereby incurring losses. The purchase of an
option on foreign currency may constitute an effective hedge against exchange
rate fluctuations; however, in the event of exchange rate movements adverse to a
Fund's position, the Fund may forfeit the entire amount of the premium plus
related transaction costs.
Each 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.
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When a Fund writes a put or call option on a foreign currency, an
amount of cash, U.S. Government securities, or other liquid debt or equity
securities equal to the market value of its obligations under the option will be
segregated by the Fund's custodian to collateralize the position.
CURRENCY FUTURES CONTRACTS. Each Fund may enter into currency futures
contracts, as described under "Futures Transactions" below.
CURRENCY SWAPS. Each 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 Funds expect to achieve an
acceptable degree of correlation between their portfolio investments and their
currency swap positions entered into for hedging purposes. Currency swaps may
involve the delivery of the entire principal value of one designated currency in
exchange for the other designated currency, or the delivery of the net amount of
a party's obligations over its entitlements. Therefore, the entire principal
value of a currency swap may be subject to the risk that the other party to the
swap will default on its contractual delivery obligations. Each Fund will
maintain in a segregated account with the Fund's custodian cash, U.S. Government
securities, or other liquid debt or equity securities equal to the amount of the
Fund's obligations, or the net amount (if any) of the excess of the Fund's
obligations over its entitlements, with respect to swap transactions. To the
extent that such amount of a swap is segregated, the Company and the Investment
Manager believe that swaps do not constitute senior securities under the
Investment Company Act of 1940 (the "1940 Act") and, accordingly, will not treat
them as being subject to a Fund's borrowing restriction.
The use of currency swaps is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. If the Investment Manager is
incorrect in its forecasts of market values and currency exchange rates, the
investment performance of a Fund entering into a currency swap would be less
favorable than it would have been if this investment technique were not used.
INTEREST RATE SWAPS. The Balanced Fund may enter into interest rate
swaps, caps and floors 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 obligations 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 Nationally
Recognized Rating Organization 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 standardized swap documentation. The Investment Manager has determined
that, as a result, the swap market has become relatively liquid. Cap 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 the swap 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
Each Fund may purchase listed put and call options on any securities
which it is eligible to purchase as a hedge against changes in market conditions
that may result in changes in the value of the Fund's portfolio securities. The
aggregate premiums on put options and call options purchased by a Fund may not
in each case exceed 5% of the value of the net assets of the Fund as of the date
of purchase. In addition, a Fund will not purchase options if more than 25% of
the value of its net assets would be hedged.
A put gives the holder the right, in return for the premium paid, to
require the writer of the put to purchase from the holder a security at a
specified price. A call gives the holder the right, in return for the premium
paid, to require the writer of the call to sell a security to the holder at a
specified price. Put and call options on various stocks and financial indices
are traded on U.S. and foreign exchanges. A put option is covered if the writer
segregates cash, U.S. Government securities or other liquid debt or equity
securities equal to the exercise price. A call option is covered if the writer
owns the security underlying the call or has an absolute and immediate right to
acquire the security without additional cash consideration upon conversion or
exchange of other securities held by it.
A Fund may effectively terminate its right or obligation under an
option by entering into a closing transaction. For example, a Fund may terminate
its obligation under a put or call option that it had written by purchasing an
identical put or call option; this is known as a closing purchase transaction.
Conversely, a Fund may terminate a position in a put or call option that it had
purchased by writing an identical put or call option; this is known as a closing
sale transaction. A Fund realizes a gain from a closing transaction if the cost
of the closing transaction is less than the premium received from writing the
option or if the proceeds from the closing transaction are more than the premium
paid to purchase the option.
PURCHASING PUT AND CALL OPTIONS
PUT OPTIONS. If a Fund purchases a put option, the Fund acquires the
right to sell the underlying security at a specified price at any time during
the term of the option (for "American-style" options) or on the option
expiration date (for "European-style" options). Purchasing put options may be
used as a portfolio investment strategy when the Investment Manager perceives
significant short-term risk but substantial long-term appreciation for the
underlying security. The put option acts as an "insurance policy", as it
protects against significant downward price movement while it allows full
participation in any upward movement. If a Fund is holding a security which the
Investment Manager feels has strong fundamentals, but for some reason may be
weak in the near term, the Fund may purchase a put option on such security,
thereby giving itself the right to sell such security at a certain strike price
throughout the term of the option. Consequently, the Fund will exercise the put
only if the price of such security falls below the strike price of the put. The
difference between the strike price of the put and the market price of the
underlying security on the date the Fund exercises the put, less transaction
costs, will be the amount by which the Fund will be able to hedge against a
decline in the underlying security. If during the period of the option the
market price for the underlying security remains at or above the put's strike
price, the put will expire worthless, representing a loss of the price the Fund
paid for the put, plus transaction costs. If the price of the underlying
security increases, the profit the Fund realizes on the sale of the security
will be reduced by the premium paid for the put option less any amount for which
the put may be sold.
CALL OPTIONS. If a Fund purchases a call option, it acquires the right
to purchase the underlying security at a specified price at any time during the
term of the option. The purchase of a call option is a type of "insurance
policy" to hedge against losses that could incur if a Fund intends to purchase
the underlying security and the security thereafter increases in price. The Fund
will exercise a call option only if the price of the underlying security is
above the strike price at the time of exercise. If during the option period the
market price for the underlying security remains at or below the strike price of
the call option, the option will expire worthless, representing a loss of the
price paid for the option, plus transaction costs. If the price of the
underlying security increases, the price the Fund pays for the security will in
effect be increased by the premium paid for the call.
WRITING PUT AND CALL OPTIONS. Writing covered put or call options can
enable a Fund to enhance income by reason of the premiums paid by the purchasers
of such options. When a Fund writes a put option, the purchaser acquire the
right to sell to the Fund the underlying security at a specified price at any
time during the term of the option or on the option expiration date. When a Fund
writes a call option, the purchaser acquires the right to purchase from
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the Fund the underlying security at a specified price at any time during the
term of the option. In return for the premium received for a call option, a Fund
foregoes the opportunity for profit from a price increase in the underlying
security above the exercise price so long as the option remains open, but
retains the risk of loss should the price of the security decline. In return for
the premium received for a put option, a Fund assumes the risk that the price of
the underlying security will decline below the exercise price, in which case the
put would be exercised and the Fund would suffer a loss.
STOCK INDEX OPTIONS. Each Fund may purchase put and call options with
respect to stock indices such as the S&P 500 Index and other stock indices. Such
options may be purchased as a hedge against changes resulting from market
conditions in the values of securities which are held in a Fund's portfolio or
which it intends to purchase or sell, or when they are economically appropriate
for the reduction of risks inherent in the ongoing management of the Fund.
The distinctive characteristics of options on stock indices create
certain risks that are not present with stock options generally. Because the
value of an index option depends upon movements in the level of the index rather
than the price of a particular stock, whether a Fund will realize a gain or loss
on the purchase or sale of an index option depends upon movements in the level
of stock prices in the stock market generally rather than movements in the price
of a particular stock. Accordingly, successful use by a Fund of options on a
stock index will be subject to the Investment Manager's ability to predict
correctly movements in the direction of the stock market generally. This
requires different skills and techniques than predicting changes in the prices
of individual stocks.
Index prices may be distorted if trading of certain stocks included in
an index is interrupted. Trading of index options also may be interrupted in
certain circumstances, such as if trading were halted in a substantial number of
stocks included in the index. If this were to occur, a Fund would not be able to
close out options which it had purchased, and if restrictions on exercise were
imposed, the Fund might be unable to exercise an option it holds, which could
result in substantial losses to the Fund. It is the policy of the Funds to
purchase put or call options only with respect to an index which the Investment
Manager believes includes a sufficient number of stocks to minimize the
likelihood of a trading halt in the index.
DEALER OPTIONS. Each Fund may engage in transactions involving dealer
options as well as exchange-traded options. Options not traded on an exchange
generally lack the liquidity of an exchange-traded option, and may be subject to
a Fund's restriction on investment in illiquid securities. In addition, dealer
options may involve the risk that the securities dealers participating in such
transactions will fail to meet their obligations under the terms of the options.
SHORT SALES
Each Fund, except the International Fund, may engage in short sales
transactions. Although the International Fund may not make short sales of
securities, it may maintain short positions in connection with its use of
options, futures contracts, options on futures contracts, forward foreign
currency exchange transactions, and currency options. A short sale that is not
made "against the box" is a transaction in which a Fund sells a security it does
not own in anticipation of a decline in market price. When a Fund makes a short
sale, the proceeds it receives are retained by the broker until the Fund
replaces the borrowed security. In order to deliver the security to the buyer,
the Fund must arrange through a broker to borrow the security and, in so doing,
the Fund becomes obligated to replace the security borrowed at its market price
at the time of replacement, whatever that price may be.
The value of securities of any issuer in which a Fund maintains a short
position that is not "against the box" may not exceed the lesser of 5% of the
value of the Fund's net assets or 5% of the securities of such class of the
issuer. A Fund's ability to enter into short sales transactions is limited by
the requirements of the Investment Company Act of 1940 (the "1940 Act").
Short sales by a Fund that are not made "against the box" create
opportunities to increase the Fund's return but, at the same time, involve
special risk considerations and may be considered a speculative technique. Since
a Fund in effect profits from a decline in the price of the securities sold
short without the need to invest the full purchase price of the securities on
the date of the short sale, the Fund's net asset value per share will tend to
increase more when the securities it has sold short decrease in value, and to
decrease more when the securities it has sold short increase in value, than
would otherwise be the case if it had not engaged in such short sales. Short
sales theoretically
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involve unlimited loss potential, as the market price of securities sold short
may continuously increase, although a Fund may mitigate such losses by replacing
the securities sold short before the market price has increased significantly.
Under adverse market conditions, a Fund might have difficulty purchasing
securities to meet its short sale delivery obligations, and might have to sell
portfolio securities to raise the capital necessary to meet its short sale
obligations at a time when fundamental investment considerations would not favor
such sales.
If a Fund makes a short sale "against the box," the Fund would not
immediately deliver the securities sold and would not receive the proceeds from
the sale. The seller is said to have a short position in the securities sold
until it delivers the securities sold, at which time it receives the proceeds of
the sale. A Fund's decision to make a short sale "against the box" may be a
technique to hedge against market risks when the Investment Manager believes
that the price of a security may decline, causing a decline in the value of a
security owned by the Fund or a security convertible into or exchangeable for
such security. In such case, any future losses in the Fund's long position would
be reduced by a gain in the short position.
In the view of the Securities and Exchange Commission ("SEC"), a short
sale involves the creation of a "senior security" as such term is defined in the
1940 Act, unless the sale is "against the box" and the securities sold are
placed in a segregated account (not with the broker), or unless the Fund's
obligation to deliver the securities sold short is "covered" by segregating (not
with the broker) cash, U.S. Government securities or other liquid debt or equity
securities in an amount equal to the difference between the market value of the
securities sold short at the time of the short sale and any cash or securities
required to be deposited as collateral with a broker in connection with the sale
(not including the proceeds from the short sale), which difference is adjusted
daily for changes in the value of the securities sold short. The total value of
the cash and securities deposited with the broker and otherwise segregated may
not at any time be less than the market value of the securities sold short at
the time of the short sale.
To avoid limitations under the 1940 Act on borrowing by investment
companies, short sales by each Fund will be "against the box", or the Fund's
obligation to deliver the securities sold short will be "covered" by segregating
cash, U.S. Government securities or other liquid debt or equity securities in an
amount equal to the market value of its delivery obligation. A Fund will not
make short sales of securities or maintain a short position if doing so could
create liabilities or require collateral deposits and segregation of assets
aggregating more than 25% of the value of the Fund's total assets.
DELAYED-DELIVERY TRANSACTIONS
Each Fund may purchase securities on a delayed delivery or "when
issued" basis and may enter into firm commitment agreements (transactions in
which the payment obligation and interest rate are fixed at the time of the
transaction but the settlement is delayed). Delivery and payment for these
securities typically occur 15 to 45 days after the commitment to purchase, but
delivery and payment can be scheduled for shorter or longer periods, based upon
the agreement of the buyer and the seller. No interest accrues to the purchaser
during the period before delivery. The Funds generally do not intend to enter
into these transactions for the purpose of leverage, but may sell the right to
receive delivery of the securities before the settlement date. The value of the
securities at settlement may be more or less than the agreed upon price.
A Fund will segregate cash, U.S. Government securities or other liquid
debt or equity securities in an amount sufficient to meet its payment
obligations with respect to any such transactions. To the extent that assets are
segregated for this purpose, a Fund's liquidity and the ability of the
Investment Manager to manage its portfolio may be adversely affected.
FUTURES TRANSACTIONS
The Funds may enter into futures contracts for the purchase or sale of
fixed-income securities, foreign currencies or contracts based on financial
indices, including indices of U.S. government securities, foreign government
securities, equity securities or fixed-income securities. For example, if a Fund
owns Treasury bonds and the portfolio manager expects interest rates to
increase, that Fund may take a short position in interest rate futures
contracts. Taking such a position would have much the same effect as that Fund
selling Treasury bonds in its portfolio. If interest rates increase as
anticipated, the value of the Treasury bonds would decline, but the value of
that
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Fund's interest rate futures contract will increase, thereby keeping the net
asset value of that Fund from declining as much as it may have otherwise. If, on
the other hand, a portfolio manager expects interest rates to decline, the Fund
may take a long position in interest rate futures contracts in anticipation of
later closing out the futures position and purchasing the bonds. Although a Fund
can accomplish similar results by buying securities with long maturities and
selling securities with short maturities, given the greater liquidity of the
futures market than the cash market, it may be possible to accomplish the same
result more easily and more quickly by using futures contracts as an investment
tool to reduce risk.
FUTURES CHARACTERISTICS. A futures contract is an agreement between two
parties (buyer and seller) to take or make delivery of an amount of cash equal
to the difference between the value of the currency, security or index at the
close of the last trading day of the contract and the price at which the
currency, security or index contract was originally written. In the case of
futures contracts traded on U.S. exchanges, the exchange itself or an affiliated
clearing corporation assumes the opposite side of each transaction (i.e., as
buyer or seller). A futures contract may be satisfied or closed out by payment
of the change in the cash value of the currency, security or index. No physical
delivery of the underlying currency, securities, or securities in the index is
made.
Unlike when a Fund purchases or sells a security, no price is paid or
received by a Fund upon the purchase or sale of a futures contract. Initially,
the Fund will be required to deposit with the Fund's custodian or such other
parties as may be authorized by the SEC (in the name of the futures commission
merchant (the "FCM")) an amount of cash or U.S. Treasury bills which is referred
to as an "initial margin" payment. The nature of initial margin in futures
transactions is different from that of margin in security transactions in that a
futures contract margin does not involve the borrowing of funds by a Fund to
finance the transactions. Rather, the initial margin is in the nature of a
performance bond or good faith deposit on the contract which is returned to the
Fund upon termination of the futures contract, assuming all contractual
obligations have been satisfied. Futures contracts customarily are purchased and
sold with initial margins that may range upwards from less than 5% of the value
of the futures contract being traded. Subsequent payments, called "variation
margin", to and from the FCM, will be made on a daily basis as the price of the
underlying currency or stock index varies, making the long and short positions
in the futures contract more or less valuable. This process is known as "marking
to the market." For example, when a Fund has purchased a currency futures
contract and the price of the underlying currency has risen, the Fund's position
will have increased in value and the Fund will receive from the FCM a variation
margin payment equal to that increased value. Conversely, when a Fund has
purchased a currency futures contract and the price of the underlying currency
has declined, the position would be less valuable and the Fund would be required
to make a variation margin payment to the FCM. At any time prior to expiration
of a futures contract, a Fund may elect to close the position by taking an
identical opposite position which will operate to terminate the Fund's position
in the futures contract. A final determination of variation margin is then made,
additional cash is required to be paid by or released to the Fund, and the Fund
realizes a loss or a gain.
CHARACTERISTICS OF FUTURES OPTIONS. Each Fund may also purchase call
options and put options on securities or index futures contracts ("futures
options"), and each Fund may purchase futures options on currencies. A futures
option gives the holder the right, in return for the premium paid, to assume a
long position (in the case of a call) or short position (in the case of a put)
in a futures contract at a specified exercise price prior to the expiration of
the option. Upon exercise of a call option, the holder acquires a long position
in the futures contract and the writer is assigned the opposite short position.
In the case of a put option, the opposite is true. A futures option may be
closed out (before exercise or expiration) by an offsetting purchase or sale of
a futures option of the same series.
PURCHASE OF FUTURES. Each Fund may purchase a currency futures contract
when it anticipates the subsequent purchase of particular securities and has the
necessary cash, but expects the currency exchange rates then available in the
applicable market to be less favorable than rates that are currently available,
or to attempt to enhance return when it anticipates that future currency
exchange rates will be more favorable than current rates. Similarly, when the
Investment Manager anticipates a significant stock market or stock market sector
advance, a Fund may purchase a stock index futures contract which affords a
hedge against not participating in such advance at a time when the Fund is not
fully invested in equity securities. Such purchase of a futures contract would
serve as a temporary substitute for the purchase of individual stocks which may
later be purchased (with attendant costs) in an orderly fashion. As such
purchase of individual stocks are made, an approximately equivalent amount of
stock index futures would be terminated by offsetting sales.
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SALE OF FUTURES. Each Fund may sell a currency futures contract to
hedge against an anticipated decline in foreign currency rates that would
adversely affect the dollar value of a Fund's portfolio securities denominated
in such currency, or may sell a currency futures contract in one currency to
hedge against fluctuations in the value of securities denominated in a different
currency if there is an established historical pattern or correlation between
the two currencies. Similarly, a Fund may sell stock index futures contracts in
anticipation of or during a general stock market or market sector decline that
may adversely affect the market values of the Fund's portfolio of equity
securities. To the extent that the Fund's portfolio of equity securities changes
in value in correlation with a given stock index, the sale of futures contracts
on that index would reduce the risk to the portfolio of a market decline and, by
doing so, would provide an alternative to the liquidation of securities
positions in the portfolio with resultant transaction costs.
PURCHASE OF PUT OPTIONS ON FUTURES. The purchase of a put option on a
currency, financial or index futures contract is analogous to the purchase of a
put on individual stocks, where an absolute level of protection from price
fluctuation is sought below which no additional economic loss would be incurred
by a Fund. For example, put options on futures may be purchased to hedge a
portfolio of stocks or a position in the futures contract upon which the put
option is based against a possible decline in market value. The purchase of a
put option on a currency futures contract can be used to hedge against
unfavorable movements in currency exchange rates, or to attempt to enhance
returns in contemplation of movements in such rates.
PURCHASE OF CALL OPTIONS ON FUTURES. The purchase of a call option on a
currency, financial or index futures contract represents a means of obtaining
temporary exposure to favorable currency exchange rate or interest rate
movements or temporary exposure to market appreciation with risk limited to the
premium paid for the call option. It is analogous to the purchase of a call
option on an individual security or index, which can be used as a substitute for
a position in the security or index itself. Depending on the pricing of the
option compared to either the futures contract upon which it is based, or to the
price of the underlying currency, security or index itself, the call option may
be less risky, because losses are limited to the premium paid for the call
option, when compared to the ownership of the underlying currency, security or
index futures contract. Like the purchase of a currency, financial or index
futures contract, a Fund would purchase a call option on a currency, financial
or index futures contract to hedge against an unfavorable movement in exchange
rates, interest rates or securities prices.
LIMITATIONS ON PURCHASE AND SALE OF FUTURES AND FUTURES OPTIONS. A Fund
may not purchase or sell futures contracts or purchase futures options if,
immediately thereafter, more than 30% of the value of its net assets would be
hedged. In addition, a Fund may not purchase or sell futures or purchase futures
options if, immediately thereafter, the sum of the amount of margin deposits on
the Fund's existing futures positions and premiums paid for futures options
would exceed 5% of the market value of the Fund's total assets. In Fund
transactions involving futures contracts, to the extent required by applicable
SEC guidelines, an amount of cash, U.S. Government securities, or other liquid
debt or equity securities equal to the market value of the futures contracts
will be segregated with the Fund's Custodian, or in other segregated accounts as
regulations may allow, to collateralize the position and thereby to insure that
the use of such futures is unleveraged.
The International Fund will not engage in transactions in stock index
futures contracts and futures options for speculation, but only as a hedge
against changes in the value of securities held in the Fund's portfolio, or
securities which the Investment Manager intends to purchase for the portfolio,
resulting from actual or anticipated changes in general market conditions. Such
transactions will only be effected when, in the view of the Investment Manager,
they are economically appropriate to the reduction of risks inherent in the
ongoing management of the Fund's portfolio.
REGULATORY MATTERS. The Companies have filed claims of exemption from
registration of the Funds as commodity pools with the Commodity Futures Trading
Commission (the "CFTC"). Each 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 Balanced Fund will invest at least
25%, the International Fund may invest up to 20%, and each other Fund except the
Emerging Markets Fund may invest up to 10%, of its total assets in short-term
debt obligations (with maturities of one year or less) issued or guaranteed by
the U.S. government or
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foreign governments (including their respective agencies, instrumentalities,
authorities and political subdivisions), debt obligations issued or guaranteed
by international or supranational government entities, and debt obligations of
corporate issuers. The timing of purchase and sale transactions in debt
obligations may result in capital appreciation or depreciation because the value
of debt obligations varies inversely with prevailing interest rates. The debt
obligations in which each Fund may invest will be rated, at the time of
purchase, BBB or higher by Standard & Poor's, a division of The McGraw-Hill
Companies, Inc. ("Standard & Poor's"), or Baa or higher by Moody's Investors
Service, Inc. ("Moody's") or equivalent ratings by other rating organizations,
or, if unrated, will be determined by the Investment Manager to be of comparable
investment quality. If the rating of an investment grade security held by any
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. 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 Investment Manager does not currently intend to
purchase U.S. or foreign debt securities on behalf of the International Fund
except on an occasional basis when the Investment Manager believes that
unusually attractive investments are available.Although securities rated BBB by
Standard & Poor's or Baa by Moody's are considered to be of "investment grade,"
and are considered to have adequate capacity to pay interest and repay
principal, adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity to pay interest and principal than higher-rated
securities. Credit ratings evaluate the safety of principal and interest
payments of securities, not their market value. The rating of an issuer is also
heavily weighted by past developments and does not necessarily reflect probable
future conditions. There is frequently a lag between the time a rating is
assigned and the time it is updated.
The Emerging Markets Fund may invest up to 5% of its total assets in
debt securities issued or guaranteed by an emerging market company or government
(including such government's agencies, instrumentalities, authorities and
political subdivisions), or denominated in the currencies of emerging market
countries that the Investment Manager believes present attractive investment
opportunities for capital growth. There is no limit on the average maturity of
the debt securities in the Emerging Markets Fund's portfolio. Such debt
obligations may be unrated or rated, at the time of purchase, below investment
grade by Standard & Poor's, Moody's or another recognized international rating
organization. The Balanced Fund may invest up to 5% of its total assets in debt
securities rated, at the time of purchase, below investment grade by Standard
and 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 Balanced Fund will not invest in securities rated lower than B.
RATINGS. Credit ratings evaluate the safety of principal and interest
payments of securities, not their market value. The rating of an issuer is also
heavily weighted by past developments and does not necessarily reflect probable
future conditions. There is frequently a lag between the time a rating is
assigned and the time it is updated. As credit rating agencies may fail to
timely change credit ratings of securities to reflect subsequent events, the
Investment Manager will also monitor issuers of such securities to determine if
such issuers will have sufficient cash flow and profits to meet required
principal and interest payments and to assure their liquidity. In general, debt
securities held by a Fund will be treated as investment grade if they are rated
by at least one major rating agency in one of its top four rating categories at
the time of purchase or, if unrated, are determined by the Investment Manager to
be of comparable quality. Investment grade means the issuer of the security is
believed to have adequate capacity to pay interest and repay principal, although
certain of such securities in the lower grades have speculative characteristics,
and changes in economic conditions or other circumstances may be more likely to
lead to a weakened capacity to pay interest and principal than would be the case
with higher rated securities. If the rating of an investment grade security held
by a Fund is downgraded, the Investment Manager will determine whether it is in
the best interests of the Fund to continue to hold the security in its
investment portfolio. The Emerging Markets Fund and the Balanced Fund may invest
in debt securities rated, at the time of purchase, below investment grade. 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
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the U.S. Government will provide financial support to U.S. Government-sponsored
instrumentalities if it is not obligated to do so by law.
Each Fund 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. Emerging market governments could default on their sovereign
debt. Such sovereign debtors also may be dependent on expected disbursements
from foreign governments, multilateral agencies and other entities abroad to
reduce principal and interest arrearages on their debt. The commitments on the
part of these governments, agencies and others to make such disbursements may be
conditioned on a sovereign debtor's implementation of economic reforms and/or
economic performance and the timely service of such debtor's obligations.
Failure to meet such conditions could result in the cancellation of such third
parties' commitments to lend funds to the sovereign debtor, which may further
impair such debtor's ability or willingness to service its debt in a timely
manner.
ZERO COUPON, PAY-IN-KIND AND STEP COUPON SECURITIES. The Balanced 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
securities 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, 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 Balanced 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
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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.
MUNICIPAL SECURITIES. The Balanced 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.
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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 Balanced 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 privately operated facilities for
business, manufacturing, housing, sport complexes, and pollution control.
Consequently, the credit quality of these securities depends 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 Balanced 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-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 Balanced 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 such
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 Balanced 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.
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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 Balanced 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 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 Balanced 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 arrangements 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.
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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.
Inverse floaters and index and currency-linked securities are
derivative instruments which may entail substantial risks. Such instruments may
be subject to significant price volatility. The company issuing the instrument
may fail to pay the amount due on maturity. The underlying investment or
security may not perform as expected by the Investment Manager. Markets,
underlying securities and indexes may move in a direction that was not
anticipated by the Investment Manager. Performance of the derivatives may be
influenced by interest rate and other market changes in the U.S and abroad.
Certain derivative instruments may be illiquid.
CONVERTIBLE SECURITIES AND WARRANTS
Each Fund may invest in convertible securities and warrants. The value
of a convertible security is a function of its "investment value" (determined by
its yield in comparison with the yields of other securities of comparable
maturity and quality that do not have conversion privilege) and its "conversion
value" (the security's worth, at market value, if converted into the underlying
common stock). The credit standing of the issuer and other factors may also
affect the investment value of a convertible security. The conversion value of a
convertible security is determined by the market price of the underlying common
stock. If the conversion value is low relative to the investment value, the
price of the convertible security is governed principally by its investment
value. To the extent the market price of the underlying common stock approaches
or exceeds the conversion price, the price of the convertible security will be
increasingly influenced by its conversion value.
As a matter of operating policy, no Fund will invest more than 5% of
its net assets in warrants. A warrant gives the holder a right to purchase at
any time during a specified period a predetermined number of shares of common
stock at a fixed price. Unlike convertible debt, securities or preferred stock,
warrants do not pay a fixed dividend. Investments in warrants involve certain
risks, including the possible lack of a liquid market for resale of the
warrants, potential price fluctuations as a result of speculation or other
factors, and failure of the price of the underlying security to reach or have
reasonable prospects of reaching a level at which the warrant can be prudently
exercised (in which event the warrant may expire without being exercised)
resulting in a loss of the Fund's entire investment therein.
SYNTHETIC CONVERTIBLE SECURITIES
Each Fund may invest in "synthetic" convertible securities, which are
derivative positions composed of two or more different securities whose
investment characteristics, taken together, resemble those of convertible
securities. For example, a Fund may purchase a non-convertible debt security and
a warrant or option, which enables a Fund to have a convertible-like position
with respect to a company, group of companies or stock index. Synthetic
convertible securities are typically offered by financial institutions and
investment banks in private placement transactions. Upon conversion, the Fund
generally receives an amount in cash equal to the difference between the
conversion price and the then current value of the underlying security. Unlike a
true convertible security, a synthetic convertible comprises two or more
separate securities, each with its own market value. Therefore, the market value
of a synthetic convertible is the sum of the values of its fixed-income
component and its convertible component. For this reason, the values of a
synthetic convertible and a true convertible security may respond differently to
market fluctuations. A Fund only invests in synthetic convertibles with respect
to companies whose corporate debt securities are rated "A" or higher by
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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
Each Fund may purchase preferred stock. Preferred stock, unlike common
stock, offers a stated dividend rate payable from a corporation's earnings. Such
preferred stock dividends may be cumulative or non-cumulative, participating, or
auction rate. If interest rates rise, the fixed dividend on preferred stocks may
be less attractive, causing the price of preferred stocks to decline. Preferred
stock may have mandatory sinking fund provisions, as well as call/redemption
provisions prior to maturity, a negative feature when interest rates decline.
Dividends on some preferred stock may be "cumulative," requiring all or a
portion of prior unpaid dividends to be paid prior to payment of dividends on
the issuer's common stock. Preferred stock also generally has a preference over
common stock on the distribution of a corporation's assets in the event of
liquidation of the corporation, and may be "participating," which means that it
may be entitled to a dividend exceeding the stated dividend in certain cases.
The rights of the holders of preferred stock on the distribution of a
corporation's assets in the event of a liquidation are generally subordinate to
the rights associated with a corporation's debt securities.
BORROWING MONEY
From time to time, it may be advantageous for a Fund to borrow money
rather than sell portfolio securities to raise the cash to meet redemption
requests. In order to meet such redemption requests, each Fund may borrow from
banks or enter into reverse repurchase agreements. Each Fund may also borrow up
to 5% of the value of its total assets for temporary or emergency purposes other
than to meet redemptions. However, the Funds will not borrow money for
leveraging purposes. A Fund may continue to purchase securities while borrowings
are outstanding. The 1940 Act permits a Fund to borrow only from banks and only
to the extent that the value of its total assets, less its liabilities other
than borrowings, is equal to at least 300% of all borrowings (including the
proposed borrowing), and requires the Fund to take prompt action to reduce its
borrowings if this limit is exceeded. For the purpose of the 300% borrowing
limitation, reverse repurchase transactions are considered to be borrowings.
A reverse repurchase agreement involves a transaction by which a
borrower (such as a Fund) sells a security to a purchaser (a member bank of the
Federal Reserve System or a broker-dealer deemed creditworthy pursuant to
standards adopted by the Board of Directors of the Capital Company or the Global
Company, as applicable (each, a "Board of Directors" or collectively, the
"Boards 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.
"ROLL" TRANSACTIONS
The Balanced 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
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roll transactions if, as a result, more than 50% of the Fund's net assets would
be segregated to cover such contracts.
LENDING PORTFOLIO SECURITIES
Each Fund is authorized to make loans of portfolio securities, for the
purpose of realizing additional income, to broker-dealers or other institutional
investors deemed creditworthy pursuant to standards adopted by its Board of
Directors. The borrower must maintain with the Fund's custodian collateral
consisting of cash, U.S. Government securities or other liquid debt or equity
securities equal to at least 100% of the value of the borrowed securities, plus
any accrued interest. The Fund will receive any interest paid on the loaned
securities, and a fee and/or a portion of the interest earned on the collateral,
less any fees and administrative expenses associated with the loan.
INVESTMENT IN ILLIQUID SECURITIES
Each Fund may invest up to 15% (10% for the International Fund) of the
value of its net assets in illiquid securities. Securities may be considered
illiquid if a Fund cannot reasonably expect to receive approximately the amount
at which the Fund values such securities within seven days. The Investment
Manager has the authority to determine whether certain securities held by a Fund
are liquid or illiquid pursuant to standards adopted by the Boards 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 Funds' investments in illiquid securities may include securities
that are not registered for resale under the Securities Act of 1933 (the
"Securities Act"), and therefore are subject to restrictions on resale. When a
Fund purchases unregistered securities, it may, in appropriate circumstances,
obtain the right to register such securities at the expense of the issuer. In
such cases there may be a lapse of time between the Fund's decision to sell any
such security and the registration of the security permitting sale. During any
such period, the price of the security will be subject to market fluctuations.
The fact that there are contractual or legal restrictions on resale of
certain securities to the general public or to certain institutions may not 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 Boards of Directors, that such securities
are not illiquid securities notwithstanding the legal or contractual
restrictions on their resale. Investing in Rule 144A securities could have the
effect of increasing a Fund's illiquidity to the extent that qualified
institutional buyers become, for a time, uninterested in purchasing such
securities.
CASH-EQUIVALENT INSTRUMENTS
Other than as described under INVESTMENT RESTRICTIONS below, the Funds
are not restricted with regard to the types of cash-equivalent investments they
may make. When the Investment Manager believes that such investments are an
appropriate part of a Fund's overall investment strategy, the Fund may hold or
invest, for investment purposes, a portion of its assets in any of the
following, denominated in U.S. dollars, foreign currencies, or multinational
currencies: cash; short-term U.S. or foreign government securities; commercial
paper rated at least A-2 by Standard & Poor's or P-2 by Moody's certificates of
deposit or other deposits of banks deemed creditworthy by the Investment Manager
pursuant to standards adopted by each Company's Board of Directors; time
deposits; bankers' acceptances; and repurchase agreements related to any of the
foregoing. In addition, for temporary defensive purposes under abnormal market
or economic conditions, a Fund may invest up to 100% of its assets in such
cash-equivalent investments.
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A certificate of deposit is a short-term obligation of a commercial
bank. A bankers' acceptance is a time draft drawn on a commercial bank by a
borrower, usually in connection with international commercial transactions. A
repurchase agreement involves a transaction by which an investor (such as a
Fund) purchases a security and simultaneously obtains the commitment of the
seller (a member bank of the Federal Reserve System or a securities dealer
deemed creditworthy by the Investment Manager pursuant to standards adopted by
the Board of Directors) to repurchase the security at an agreed-upon price on an
agreed-upon date within a number of days (usually not more than seven) from the
date of purchase.
PORTFOLIO TURNOVER
Securities in a Fund's portfolio will be sold whenever the Investment
Manager believes it is appropriate to do so, regardless of the length of time
that securities have been held, and securities may be purchased or sold for
short-term profits whenever the Investment Manager believes it is appropriate or
desirable to do so. Turnover will be influenced by sound investment practices, a
Fund's investment objective, and the need for funds for the redemption of a
Fund's shares, although the Tax Managed Growth Fund will also be influenced by
its strategy of holding securities long enough to avoid higher, short-term
capital gains taxes, selling shares with a higher cost basis first, and
offsetting gains realized in one security by selling another security at a
capital loss. In an attempt to minimize capital gains on other holdings, the Tax
Managed Growth Fund may also realize accrued losses on some stocks.
For example, a 150% portfolio turnover rate would occur if the value of
purchases or sales of portfolio securities (whichever is less) by a Fund for a
year (excluding purchases of U.S. Treasury issues and securities with a maturity
of one year or less) were equal to 150% of the average monthly value of the
securities held by the Fund during such year. As a result of the manner in which
turnover is measured, a high turnover rate could also occur during the first
year of a Fund's operations, and during periods when a Fund's assets are growing
or shrinking. A high portfolio turnover rate would increase a Fund's brokerage
commission expenses and other transaction costs, and may increase its taxable
capital gains.
RISK CONSIDERATIONS
INVESTMENTS IN FOREIGN SECURITIES GENERALLY
Investments in foreign securities may offer investment opportunities
and potential benefits not available from investments solely in securities of
U.S. issuers. Such benefits may include higher rates of interest on debt
securities than are available from domestic issuers, the opportunity to invest
in foreign issuers that appear, in the opinion of the Investment Manager, to
offer better opportunity for long-term capital appreciation than investments in
securities of U.S. issuers, the opportunity to invest in foreign countries with
economic policies or business cycles different from those of the United States
and the opportunity to reduce fluctuations in portfolio value by taking
advantage of foreign markets that do not necessarily move in a manner parallel
to U.S. stock markets.
At the same time, however, investing in foreign securities involves
significant risks, some of which are not typically associated with investing in
securities of U.S. issuers. For example, the value of investments in such
securities may fluctuate based on changes in the value of one or more foreign
currencies relative to the U.S. dollar, and a change in the exchange rate of one
or more foreign currencies could reduce the value of certain portfolio
securities. Currency exchange rates may fluctuate significantly over short
periods of time, and are generally determined by the forces of supply and demand
and other factors beyond a Fund's control. Changes in currency exchange rates
may, in some circumstances, have a greater effect on the market value of a
security than changes in the market price of the security. To the extent that a
substantial portion of a Fund's total assets is denominated or quoted in the
currency of a foreign country, the Fund will be more susceptible to the risk of
adverse economic and political developments within that country. As discussed
above, each Fund may employ certain investment techniques to hedge its foreign
currency exposure; however, such techniques also entail certain risks.
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In addition, information about foreign issuers may be less readily
available than information about domestic issuers. Foreign issuers generally are
not subject to accounting, auditing, and financial reporting standards or to
other regulatory practices and requirements comparable to those applicable to
U.S. issuers. Furthermore, with respect to certain foreign countries, the
possibility exists of expropriation, nationalization, revaluation of currencies,
confiscatory taxation, and limitations on foreign investment and the use or
removal of funds or other assets of a Fund, including the withholding of tax on
interest, dividends and other distributions and limitations on the repatriation
of currencies. In addition, a Fund may experience difficulties or delays in
obtaining or enforcing judgments. Foreign securities may be subject to foreign
government taxes that could reduce the yield and total return on such
securities.
Foreign equity securities may be traded on an exchange in the issuer's
country, an exchange in another country, or over-the-counter in one or more
countries. Most foreign securities markets, including over-the-counter markets,
have substantially less volume than U.S. securities markets, and the securities
of many foreign issuers may be less liquid and more volatile than securities of
comparable U.S. issuers. In addition, there is generally less government
regulation of securities markets, securities exchanges, securities dealers, and
listed and unlisted companies in foreign countries than in the United States.
Foreign markets also have different clearance and settlement
procedures, and in certain markets there have been times when settlements have
been unable to keep pace with the volume of securities transactions, making it
difficult to conduct and complete such transactions. Inability to dispose of a
portfolio security caused by settlement problems could result either in losses
to a Fund due to subsequent declines in the value of the portfolio security or,
if a Fund has entered into a contract to sell that security, could result in
possible liability of the Fund to the purchaser. Delays in settlement could
adversely affect a Fund's ability to implement its investment strategies and to
achieve its investment objectives.
In addition, the costs associated with transactions in securities
traded on foreign markets or of foreign issuers, and the expense of maintaining
custody of such securities with foreign custodians, generally are higher than
the costs associated with transactions in U.S. securities on U.S. markets.
Investments in foreign securities may result in higher expenses due to the cost
of converting foreign currency to U.S. dollars, the payment of fixed brokerage
commissions on foreign exchanges, the expense of maintaining securities with
foreign custodians and the imposition of transfer taxes or transaction charges
associated with foreign exchanges.
Investment in debt securities of supranational organizations involves
additional risks. Such organizations' debt securities generally are not
guaranteed by their member governments, and payment depends on their financial
solvency and/or the willingness and ability of their member governments to
support their obligations. Continued support of a supranational organization by
its government members is subject to a variety of political, economic and other
factors, as well as the financial performance of the organization.
DEPOSITARY RECEIPTS
In many respects, the risks associated with investing in depositary
receipts are similar to the risks associated with investing in foreign equity
securities directly. Therefore, for purposes of each 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. In
addition, to the extent that a Fund acquires depositary receipts through banks
that do not have a contractual relationship with the foreign issuer of the
security underlying the depositary receipts to issue and service depositary
receipts, there may be an increased possibility that the Fund would not become
aware of and be able to respond to corporate actions, such as stock splits or
rights offerings, involving the foreign issuer in a timely manner.
The information available for American Depositary Receipts ("ADRs")
sponsored by the issuers of the underlying securities is subject to the
accounting, auditing, and financial reporting standards of the domestic market
or exchange on which they are traded, which standards generally are more uniform
and more exacting than those to which many non-domestic issuers may be subject.
However, some ADRs are sponsored by persons other than the issuers of the
underlying securities. Issuers of the stock on which such ADRs are based are not
obligated to disclose material information in the United States. The information
that is available concerning the issuers of the securities underlying European
Depositary Receipts ("EDRs") and Global Depositary Receipts ("GDRs") may be less
than the
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information that is available about domestic issuers, and EDRs and GDRs may be
traded in markets or on exchanges that have lesser standards than those
applicable to the markets for ADRs.
A depositary receipt will be treated as an illiquid security for
purposes of a Fund's restriction on the purchases of such securities unless the
depositary receipt is convertible into cash by the Fund within seven days.
EMERGING MARKET SECURITIES
There are special risks associated with investments in securities of
companies organized or headquartered in developing countries with emerging
markets that are in addition to the usual risks of investing in securities of
issuers located in developed foreign markets around the world, and investors in
the Funds are strongly advised to consider those risks carefully. The securities
markets of emerging market countries are substantially smaller, less developed,
less liquid, and more volatile than the securities markets of the United States
and developed foreign markets. As a result, the prices of emerging market
securities may increase or decrease much more rapidly and much more dramatically
than the prices of securities of issuers located in developed foreign markets.
Disclosure and regulatory standards in many respects are less stringent than in
the United States and developed foreign markets. There also may be a lower level
of monitoring and regulation of securities markets in emerging market countries
and the activities of investors in such markets, and enforcement of existing
regulations has been extremely limited.
Many emerging market countries have experienced substantial, and in
some periods extremely high, rates of inflation for many years. Inflation and
rapid fluctuations in inflation rates have had and may continue to have very
negative effects on the economies and securities markets of certain emerging
market countries. Economies in emerging markets generally are heavily dependent
upon international trade and, accordingly, have been and may continue to be
affected adversely by trade barriers, exchange controls, managed adjustments in
relative currency values, and other protectionist measures imposed or negotiated
by the countries with which they trade. These economies also have been and may
continue to be adversely affected by economic conditions in the countries with
which they trade. In addition, custodial services and other costs related to
investment in foreign markets may be more expensive in emerging markets than in
many developed foreign markets, which could reduce the Funds' investment returns
from such securities.
In many cases, governments of emerging market countries continue to
exercise a significant degree of control over the economies of such countries,
and government actions relative to the economy, as well as economic developments
generally, also may have a major effect on an issuer's prospects. In addition,
certain of such governments have in the past failed to recognize private
property rights and have at times naturalized or expropriated the assets of
private companies. There is also a heightened possibility of confiscatory
taxation, imposition of withholding taxes on dividend and interest payments, or
other similar developments that could affect investments in those countries. As
a result, there can be no assurance that adverse political changes will not
cause a Fund to suffer a loss with respect to any of its holdings. In addition,
political and economic structures in many of such countries may be undergoing
significant evolution and rapid development, and such countries may lack the
social, political and economic stability characteristics of more developed
countries. Unanticipated political or social developments may affect the values
of a Fund's investments in those countries and the availability of additional
investments in those countries.
INVESTMENTS IN SMALLER COMPANIES
Investment in the securities of companies with small market
capitalizations 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
a Fund may invest may have limited or unprofitable operating histories,
limited financial resources, and inexperienced management. Furthermore,
securities of such companies are often less liquid than securities of larger
companies, and may be subject to erratic or abrupt price movements. To
dispose of these
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securities, a Fund may have to sell them over an extended period of time below
the original purchase price. Investments in smaller capitalization companies may
be regarded as speculative.
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.
CONVERTIBLE SECURITIES
Investment in convertible securities involves certain risks. The value
of a convertible security is a function of its "investment value" (determined by
its yield in comparison with the yields of other securities of comparable
maturity and quality that do not have a conversion privilege) and its
"conversion value" (the security's worth, at market value, if converted into the
underlying stock). If the conversion value is low relative to the investment
value, the price of the convertible security will be governed principally by its
yield, and thus may not decline in price to the same extent as the underlying
stock; to the extent the market price of the underlying common stock approaches
or exceeds the conversion price, the price of the convertible security will be
influenced increasingly by its conversion value. A convertible security held by
a Fund may be subject to redemption at the option of the issuer at a price
established in the instrument governing the convertible security, in which event
the Fund will be required to permit the issuer to redeem the security, convert
it into the underlying common stock, or sell it to a third party.
BELOW INVESTMENT GRADE DEBT SECURITIES
The Emerging Markets Fund and the Balanced Fund may invest up to 5% of
their total assets in debt securities rated below "Baa" by Moody's, below "BBB"
by Standard & Poor's, or investment grade by another recognized rating agency
or, if unrated, judged by the Investment Manager to be of comparable quality, if
the Investment Manager believes that the financial condition of the issuer or
the protection afforded to the particular securities is stronger than would
otherwise be indicated by such low ratings or the lack thereof. Debt securities
rated below investment grade or equivalent ratings, commonly referred to as
"junk bonds," are subject to greater risk of loss of income and principal than
higher-rated bonds and are considered to be predominantly speculative with
respect to the issuer's capacity to pay interest and repay principal, which may
in any case decline during sustained periods of deteriorating economic
conditions or rising interest rates. Junk bonds are generally considered to be
subject to greater market risk in times of deteriorating economic conditions,
and to wider market and yield fluctuations, than higher-rated securities. Junk
bonds may also be more susceptible to real or perceived adverse economic and
competitive industry conditions than investment grade securities. The market for
such securities may be thinner and less active than that for higher-rated
securities, which can adversely affect the prices at which these securities can
be sold. To the extent that there is no established secondary market for
lower-rated securities, a Fund may experience difficulty in valuing such
securities and, in turn, its assets. In addition, adverse publicity and investor
perceptions about junk bonds, whether or not based on fundamental analysis, may
tend to decrease the market value and liquidity of such securities. The
Investment Manager will try to reduce the risk inherent in a 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 a 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.
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DELAYED-DELIVERY TRANSACTIONS
Each of the Funds may buy and sell securities on a delayed-delivery or
when-issued basis. These transactions involve a commitment by a Fund to purchase
or sell specific securities at a predetermined price and/or yield, with payment
and delivery taking place after the customary settlement period for that type of
security (and more than seven days in the future). Typically, no interest
accrues to the purchaser until the security is delivered. A Fund may receive
fees for entering into delayed-delivery transactions. When purchasing securities
on a delayed-delivery basis, a Fund assumes the rights and risks of ownership,
including the risk of price and yield fluctuations. Because a Fund is not
required to pay for securities until the delivery date, these risks are in
addition to the risks associated with the Fund's other investments. If a Fund
remains substantially fully invested at a time when delayed-delivery purchases
are outstanding, the delayed-delivery purchases may result in a form of
leverage. When delayed-delivery purchases are outstanding, a Fund will set aside
appropriate liquid assets in a segregated custodial account to cover its
purchase obligations. When a Fund has sold a security on a delayed-delivery
basis, the Fund does not participate in further gains or losses with respect to
the security. If the other party to a delayed-delivery transaction fails to
deliver or pay for the securities, the Fund could miss a favorable price or
yield opportunity, or could suffer a loss. A Fund may dispose of or renegotiate
delayed-delivery transactions after they are entered into, and may sell
underlying securities before they are delivered, which may result in capital
gains or losses.
OPTIONS
There are several risks associated with transactions in options on
securities, currencies and financial indices. Options may be more volatile than
the underlying instruments, and therefore, on a percentage basis, an investment
in options may be subject to greater fluctuation than an investment in the
underlying instruments themselves. There are also significant differences
between the securities and options markets that could result in an imperfect
correlation between these markets, causing a given transaction not to achieve
its objective. In addition, a liquid secondary market for particular options may
be absent for reasons which include the following: there may be insufficient
trading interest in certain options; restrictions may be imposed by an exchange
on opening transactions or closing transactions or both; trading halts,
suspensions or other restrictions may be imposed with respect to particular
classes or series of options or underlying instruments; unusual or unforeseen
circumstances may interrupt normal operations on an exchange; the facilities of
an exchange or clearing corporation may not at all times be adequate to handle
current trading volume; or one or more exchanges could, for economic or other
reasons, decide, or be compelled at some future date, to discontinue the trading
of options (or a particular class or series of options), in which event the
secondary market on that exchange (or in that class or series of options) would
cease to exist, although outstanding options that had been issued by a clearing
corporation as a result of trades on that exchange would continue to be
exercisable in accordance with their terms.
A decision as to whether, when and how to use options involves the
exercise of skill and judgment, and even a well-conceived transaction may be
unsuccessful to some degree because of market behavior or unexpected events.
In addition, when trading options on foreign exchanges, many of the
protections afforded to participants in U.S. option exchanges will not be
available. For example, there may be no daily price fluctuation limits in such
exchanges or markets, and adverse market movements could therefore continue to
an unlimited extent over a period of time. Although the purchaser of an option
cannot lose more than the amount of the premium plus related transaction costs,
this entire amount could be lost.
Potential losses to the writer of an option are not limited to the loss
of the option premium received by the writer, and thus may be greater than the
losses incurred in connection with the purchasing of an option.
FUTURES TRANSACTIONS
There are several risks in connection with the use of futures contracts
in the Funds. One risk arises because the correlation between movements in the
price of a futures contract and movements in the price of the security or
currency which is the subject of the hedge is not always perfect. The price of
the futures contract acquired by a Fund may move more than, or less than, the
price of the security or currency being hedged. If the price of the future moves
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less than the price of the security or currency which is the subject of the
hedge, the hedge will not be fully effective but, if the price of the security
or currency being hedged has moved in an unfavorable direction, the Fund would
be in a better position than if it had not hedged at all. If the price of the
security or currency being hedged has moved in a favorable direction, this
advantage will be partially offset by movement in the value of the future. If
the price of the futures contract moves more than the price of the security or
currency, the Fund will experience either a loss or a gain on the futures
contract which will not be completely offset by movements in the price of the
security or currency which is the subject of the hedge.
To compensate for the imperfect correlation of movements in the price
of a security or currency being hedged and movements in the price of the
futures, a Fund may buy or sell futures contracts in a greater dollar amount
than the dollar amount of the security or currency being hedged, if the
historical volatility of the price of such security or currency has been greater
than the historical volatility of the security or currency. Conversely, a Fund
may buy or sell fewer futures contracts if the historical volatility of the
price of the security or currency being hedged is less than the historical
volatility of the security or currency.
Because of the low margins required, futures trading involves a high
degree of leverage. As a result, a relatively small investment in a futures
contract by a Fund may result in immediate and substantial loss, or gain, to the
Fund. A purchase or sale of a futures contract may result in losses in excess of
the initial margin for the futures contract. However, the Fund would have
sustained comparable losses if, instead of the futures contract, it had invested
in the underlying financial instrument and sold the instrument after the
decline.
When futures are purchased by a Fund to hedge against a possible
unfavorable movement in a currency exchange rate before the Fund is able to
invest its cash (or cash equivalents) in stock or debt instruments in an orderly
fashion, it is possible that the currency exchange rate may move in a favorable
manner instead. If the Fund then decides not to invest in stock or debt
instruments at that time because of concern as to possible further market
decline or for other reasons, the Fund will realize a loss on the futures
contract that is not offset by a reduction in the price of securities purchased.
In addition to the possibility that there may be an imperfect
correlation, or no correlation at all, between movements in the futures and the
security or currency which is the subject of a hedge, the price of futures
contracts may not correlate perfectly with movements in the index or currency
due to certain market distortions. First, all participants in the futures market
are subject to margin deposit and maintenance requirements. Rather than meeting
additional margin deposit requirements, investors may close futures contracts
through offsetting transactions. This practice could distort the normal
relationship between the index or currency and futures markets. Second, from the
point of view of speculators, the deposit requirements in the futures market may
be less onerous than margin requirements in the security or currency market.
Therefore, increased participation by speculators in the futures market also may
cause temporary price distortions. Due to the possibility of price distortion in
the futures market and because of the imperfect correlation between movements in
the index or currency and movements in the price of index or currency futures, a
correct forecast of general market or currency trends by the Investment Manager
still may not result in a successful hedging transaction over a short time
frame.
Futures exchanges may limit the amount of fluctuation permitted in
certain futures contract prices during a single trading day. Once the daily
limit has been reached, no more trades may be made on that day at a price beyond
the limit. The daily limit governs only price movements during a particular
trading day and therefore does not limit potential losses, because the limit may
prevent the liquidation of unfavorable positions.
Compared to the use of a futures contract, the purchase of an option on
a futures contract involves less potential risk to a Fund because the maximum
amount at risk is the premium paid for the option (plus transaction costs).
However, there may be circumstances when the use of an option on a futures
contract would result in loss to a Fund when the use of a futures contract would
not, such as when there is no movement in the level of an index. In addition,
daily changes in the value of the option due to changes in the value of the
underlying futures contract are reflected in the net asset value of the Fund.
A Fund will only enter into futures contracts or purchase futures
options that are standardized and traded on a U.S. or foreign exchange or board
of trade, or similar entity, or quoted on an automated quotation system.
However, there is no assurance that a liquid secondary market on an exchange or
board of trade will exist for any particular
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futures contract or futures option or at any particular time. In such event, it
may not be possible to close a futures position, and, in the event of adverse
price movements, the Fund would continue to be required to make daily cash
payments of variation margin. In the event futures contracts have been used to
hedge a portfolio security or currency, an increase in the price of the security
or currency, if any, may partially or completely offset losses on the futures
contract. However, as described above, there is no guarantee that the price of
the security or currency will, in fact, correlate with the movements in the
futures contract and thus provide an offset to losses on a futures contract.
Successful use of futures by the Funds is subject to the Investment
Manager's ability to predict correctly movements in the direction of the
security and currency markets. For example, if a Fund hedged against the
possibility of a decline in the market adversely affecting stocks held in its
portfolio and stock prices increased instead, the Fund would lose part or all of
the benefit of the increased value of its stocks which it hedged because it
would have offsetting losses in its futures positions. In addition, in such
situations, if a Fund had insufficient cash, it might have to sell securities to
meet daily variation margin requirements. Such sales of securities might, but
would not necessarily be at increased prices which would reflect the rising
market. Similarly, if a Fund purchased currency futures contracts with the
intention of profiting from a favorable change in currency exchange rates, and
the change was unfavorable, the Fund would incur a loss, and might have to sell
securities to meet daily variation margin requirements at a time when it might
be disadvantageous to do so. The Investment Manager and its predecessor have
been actively 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 a Fund might not be
able to dispose of such securities promptly or at reasonable prices.
A number of transactions in which the Funds may engage are subject to
the risks of default by the other party to the transaction. If the seller of
securities pursuant to a repurchase agreement entered into by a Fund defaults
and the value of the collateral securing the repurchase agreement declines, the
Fund may incur a loss. If bankruptcy proceedings are commenced with respect to
the seller, realization of the collateral by the Fund may be delayed or limited.
Similarly, when a Fund engages in when-issued, reverse repurchase, forward
commitment and related settlement transactions, it relies on the other party to
consummate the trade; failure of the other party to do so may result in the Fund
incurring a loss or missing an opportunity to obtain a price the Investment
Manager believed to be advantageous. The risks in lending portfolio securities,
as with other extensions of secured credit, consist of a possible delay in
receiving additional collateral or in recovery of the securities or possible
loss of rights in the collateral should the borrower fail financially.
Borrowing also involves special risk considerations. Interest costs of
borrowings may fluctuate with changing market rates of interest and may
partially offset or exceed the return earned on the borrowed funds (or on the
assets that were retained rather than sold to meet the needs for which funds
were borrowed). Under adverse market conditions, a Fund might have to sell
portfolio securities to meet interest or principal payments at a time when
fundamental investment considerations would not favor such sales. To the extent
a Fund enters into reverse repurchase agreements, the Fund is subject to risks
that are similar to those of borrowing.
INVESTMENT RESTRICTIONS
FUNDAMENTAL POLICIES
Each Fund has adopted certain investment restrictions that are
fundamental policies and that may not be changed without approval by the vote of
a majority of the Fund's outstanding voting securities, as defined in the 1940
Page 26
<PAGE>
Act. The "vote of a majority of the outstanding voting securities" of the Fund,
as defined in Section 2(a)(42) of the 1940 Act, means the vote of (i) 67% or
more of the voting securities of the Fund present at any meeting, if the holders
of more than 50% of the outstanding voting securities of the Fund are present or
represented by proxy, or (ii) more than 50% of the outstanding voting securities
of the Fund, whichever is less. These restrictions provide that a Fund may not:
1. Invest more than 25% of the value of its total assets in the securities
of companies primarily engaged in any one industry (other than the
United States of America, its agencies and instrumentalities) (this
restriction does not apply to the Global Technology Fund, Health Care
Fund, Biotechnology Fund or International Fund).
2. Acquire more than 10% of the outstanding voting securities of any one
issuer.
3. Invest in companies for the purpose of exercising control or
management.
4. Borrow money, except from banks to meet redemption requests or for
temporary or emergency purposes; provided that borrowings for temporary
or emergency purposes other than to meet redemption requests shall not
exceed 5% of the value of its total assets; and provided further that
total borrowings shall be made only to the extent that the value of the
Fund's total assets, less its liabilities other than borrowings, is
equal to at least 300% of all borrowings (including the proposed
borrowing). For purposes of the foregoing limitations, reverse
repurchase agreements and other borrowing transactions covered by
segregated assets are considered to be borrowings. A Fund will not
mortgage, pledge, hypothecate, or in any other manner transfer as
security for an indebtedness any of its assets. This investment
restriction shall not prohibit a Fund from engaging in futures
contracts, options on futures contracts, forward foreign currency
exchange transactions, and currency options.
5. Purchase securities on margin, but it may obtain such short-term credit
from banks as may be necessary for the clearance of purchases and sales
of securities.
6. Make loans of its funds or assets to any other person, which shall not
be considered as including: (i) the purchase of a portion of an issue
of publicly distributed debt securities, (ii) the purchase of bank
obligations such as certificates of deposit, bankers' acceptances and
other short-term debt obligations, (iii) entering into repurchase
agreements with respect to commercial paper, certificates of deposit
and obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities, and (iv) the loan of portfolio
securities to brokers, dealers and other financial institutions where
such loan is callable by the Fund at any time on reasonable notice and
is fully secured by collateral in the form of cash or cash equivalents.
A Fund will not enter into repurchase agreements with maturities in
excess of seven days if immediately after and as a result of such
transaction the value of the Fund's holdings of such repurchase
agreements exceeds 10% (15%, in the case of the Tax Managed Growth
Fund) 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. Invest more than 15% (10% for the International Fund) of the value of
its net assets in securities that are illiquid (this restriction does
not apply to the Balanced Fund, which is subject to a similar
non-fundamental restriction.);
9. 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.
10. 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.
Page 27
<PAGE>
11. 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.
12. 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 market value of the Fund's net assets (this
restriction applies to the International Fund only);
13. 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.
14. Purchase or sell real estate; provided that the Fund may invest in
readily marketable securities secured by real estate or interests
therein or issued by companies which invest in real estate or interests
therein.
OPERATING POLICIES
Each Fund has adopted certain investment restrictions that are not
fundamental policies and may be changed by the Board of Directors without
approval of the Fund's outstanding voting securities. These restrictions provide
that a Fund may not:
1. Invest in interests in oil, gas, or other mineral exploration or
development programs (this restriction does not apply to the Emerging
Markets Fund).
2. Invest more than 5% of the value of its total assets in the securities
of any issuer which has a record of less than three years of continuous
operation (including the operation of any predecessor) (this
restriction does not apply to the Emerging Markets Fund);
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 (this restriction does
not apply to the International Fund).
5. Invest more than 15% of the value of its net assets in securities that
are illiquid (this applies only to the Balanced Fund; the other Funds
are subject to a similar fundamental policy).
The Funds are also subject to other restrictions under the 1940 Act;
however, the registration of the Company under the 1940 Act does not involve any
supervision by any federal or other agency of the Company's management or
investment practices or policies, other than incident to occasional or periodic
compliance examinations conducted by the SEC staff.
EXECUTION OF PORTFOLIO TRANSACTIONS
The Investment Manager, subject to the overall supervision of the Board
of Directors, makes each Fund's investment decisions and selects the broker or
dealer to be used in each specific transaction using its best judgment to choose
the broker or dealer most capable of providing the services necessary to obtain
the best execution of that transaction. In seeking the best execution of a
transaction, the Investment Manager evaluates a wide range of criteria,
Page 28
<PAGE>
including any or all of the following: the broker's commission rate, promptness,
reliability and quality of executions, trading expertise, positioning and
distribution capabilities, back-office efficiency, ability to handle difficult
trades, knowledge of other buyers and sellers, confidentiality, capital strength
and financial stability, prior performance in serving the Investment Manager and
its clients, and other factors affecting the overall benefit to be received in
the transaction. When circumstances relating to a proposed transaction indicate
to the Investment Manager that a particular broker is in a position to obtain
the best execution, the order is placed with that broker. This may or may not be
a broker that has provided investment information and research services to the
Investment Manager.
Such investment information may include, among other things: a wide
variety of written reports or other data on individual companies and industries;
data and reports on general market or economic conditions; information
concerning pertinent federal and state legislative and regulatory developments
and other developments that could affect the value of actual or potential
investments; information about companies in which the Investment Manager has
invested or may consider investing; attendance at meetings with corporate
management personnel, industry experts, economists, government personnel, and
other financial analysts; comparative issuer performance and evaluation and
technical measurement services; subscription to publications that provide
investment-related information; accounting and tax law interpretations;
availability of economic advice; quotation equipment and services; execution
measurement services; market-related and survey data concerning the products and
services of an issuer and its competitors or concerning a particular industry
that are used in reports prepared by the Investment Manager to enhance its
ability to analyze an issuer's financial condition and prospects; and other
services provided by recognized experts on investment matters of particular
interest to the Investment Manager. In addition, the foregoing services may
include the use of, or be delivered by, computer systems whose hardware and/or
software components may be provided to the Investment Manager as part of the
services. In any case in which information and other services can be used for
both research and non-research purposes, the Investment Manager makes an
appropriate allocation of those uses and pays directly for that portion of the
services to be used for non-research purposes.
Subject to the requirement of seeking the best execution, the
Investment Manager may, in circumstances in which two or more brokers are in a
position to offer comparable execution, give preference to a broker or dealer
that has provided investment information to the Investment Manager. In so doing,
the Investment Manager may effect securities transactions which cause a Fund to
pay an amount of commission in excess of the amount of commission another broker
would have charged. In electing such broker or dealer, the Investment Manager
will make a good faith determination that the amount of commission is reasonable
in relation to the value of the brokerage services and research and investment
information received, viewed in terms of either the specific transaction or the
Investment Manager's overall responsibility to the accounts for which the
Investment Manager exercises investment discretion. The Investment Manager
evaluates all commissions paid in order to ensure that the commissions represent
reasonable compensation for the brokerage and research services provided by such
brokers. Such investment information as is received from brokers or dealers may
be used by the Investment Manager in servicing all of its clients (including the
Funds), and a Fund'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 each Fund will benefit overall by such practice because it is receiving the
benefit of research services and the execution of such transactions not
otherwise available to it without the allocation of transactions based on the
recognition of such research services.
Subject to the requirement of seeking the best execution, the
Investment Manager may also place orders with brokerage firms that have sold
shares of the Funds. The Investment Manager has made and will make no
commitments to place orders with any particular broker or group of brokers. The
Company anticipates that a substantial portion of all brokerage commissions will
be paid to brokers who supply investment information to the Investment Manager.
The Investment Manager has no obligation to purchase or sell for a Fund
any security that it, or its officers of employees, may purchase or sell for the
Investment Manager's or their own accounts or the account of any other client,
if in the opinion of the Investment Manager such transaction appears unsuitable,
impractical or undesirable for the Fund. Additionally, the Investment Manager
does not prohibit any of its officers or employees from purchasing or selling
for their own accounts securities that may be recommended to or held by the
Investment Manager's client's, subject to the Investment Manager's and the
Fund's Code of Ethics.
The Funds also invest in foreign and/or U.S. securities that are not
listed on a national securities exchange but are traded in the over-the-counter
market. The Funds may also purchase listed securities through the third market
or
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<PAGE>
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.
For the fiscal years ended December 31, 1997, 1998 and 1999, the Funds
paid total brokerage commissions as follows:
<TABLE>
<CAPTION>
- --------------------------------- ------------------------------ ------------------------------- ------------------------------
Fund Name 1997 1998 1999
- --------------------------------- ------------------------------ ------------------------------- ------------------------------
<S> <C> <C> <C>
Dresdner RCM Large Cap Growth $8,344 $8,963 $15,209
Fund
- --------------------------------- ------------------------------ ------------------------------- ------------------------------
Dresdner RCM Tax Managed Growth $0 $0 $1,221
Fund
- --------------------------------- ------------------------------ ------------------------------- ------------------------------
Dresdner RCM Biotechnology Fund $0 $6,028 $18,207
- --------------------------------- ------------------------------ ------------------------------- ------------------------------
Dresdner RCM Balanced Fund $287
- --------------------------------- ------------------------------ ------------------------------- ------------------------------
Dresdner RCM Global Small Cap $19,389 $23,322 $32,714
Fund
- --------------------------------- ------------------------------ ------------------------------- ------------------------------
Dresdner RCM Global Technology $12,641 $27,683 $150,279
Fund
- --------------------------------- ------------------------------ ------------------------------- ------------------------------
Dresdner RCM Global Health Care $12,833 $14,634 $27,897
Fund
- --------------------------------- ------------------------------ ------------------------------- ------------------------------
Dresdner RCM International $518,944 $438,519 $966,834
Growth Equity Fund
- --------------------------------- ------------------------------ ------------------------------- ------------------------------
Dresdner RCM Emerging Markets $3,913 $31,302 $50,468
Fund
- --------------------------------- ------------------------------ ------------------------------- ------------------------------
</TABLE>
All of the commissions paid during the fiscal year ended December 31,
1999, (100%) were paid to firms which provided research, statistical or other
services to the Investment Manager.
During the fiscal year ended1999 the Large Cap Growth Fund, the Tax
Managed Growth Fund, the Biotechnology Fund, the Global Small Cap Fund, the
Global Technology Fund and the Global Health Care Fund each acquired the
securities of one of its regular broker-dealers (as defined in Rule 10b-1 under
the 1940 Act) and the International Fund acquired the securities of five of its
regular broker-dealers. At December 31, 1999 the Large Cap Growth Fund, the Tax
Managed Growth Fund, the Biotechnology Fund, the Global Small Cap Fund, the
Global Technology Fund and the Global Health Care Fund each had holdings in
State Street Bank and Trust Company valued at $525,000, $22,000, $1,348,000,
$897,000, $19,390,000 and $187,000, respectively. At December 31, 1999 the
International Fund's holdings in State Street Bank and Trust Company, Nomura
Securities, Deutsche Bank, Daiwa Securities and HSBC Holdings were valued at
$7,359,000, $1,209,000, $3,564,000, $5,615,000 and $1,876,000, respectively.
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 Funds to have the ability to
execute brokerage transactions, when appropriate, through the Dresdner
Affiliates. Accordingly, the Investment Manager intends to execute brokerage
transactions on behalf of the Funds through the Dresdner Affiliates, when
appropriate and to the extent consistent with applicable laws and regulations,
including federal banking laws.
In all such cases, the Dresdner Affiliates will act as agent for the
Funds, and the Investment Manager will not enter into any transaction on behalf
of the Funds in which a Dresdner Affiliate is acting as principal for its own
account. In connection with such agency transactions, the Dresdner Affiliates
will receive compensation in the form of brokerage commissions separate from the
Investment Manager's management fee. The Investment Manager's policy
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<PAGE>
is that such commissions must be reasonable and fair when compared to the
commissions received by other brokers in connection with comparable transactions
involving similar securities and that the commissions paid to a Dresdner
Affiliate must be no higher than the commissions paid to that broker by any
other similar customer of that broker who receives brokerage and research
services that are similar in scope and quality to those received by the Funds.
The Investment Manager performs investment management and advisory
services for various clients, including other registered investment companies,
and pension, profit-sharing and other employee benefit plans, as well as
individuals. In many cases, portfolio transactions for a Fund may be executed in
an aggregated transaction as part of concurrent authorizations to purchase or
sell the same security for numerous accounts served by the Investment Manager,
some of which accounts may have investment objectives similar to those of the
Fund. The objective of aggregated transactions is to obtain favorable execution
and/or lower brokerage commissions, although there is no certainty that such
objective will be achieved. Although executing portfolio transactions in an
aggregated transaction potentially could be either advantageous or
disadvantageous to any one or more particular accounts, aggregated transactions
in which a Fund participates will be effected only when the Investment Manager
believes that to do so will be in the best interest of the Fund, and the
Investment Manager is not obligated to aggregate orders into larger
transactions. These orders generally will be averaged as to price. When such
aggregated transactions occur, the objective will be to allocate the executions
in a manner which is deemed fair and equitable to each of the accounts involved
over time. In making such allocation decisions, the Investment Manager will use
its business judgment and will consider, among other things, any or all of the
following: each client's investment objectives, guidelines, and restrictions,
the size of each client's order, the amount of investment funds available in
each client's account, the amount already committed by each client to that or
similar investments, and the structure of each client's portfolio.
DIRECTORS AND OFFICERS
The names and addresses of the Directors and officers of the Capital
Company and the Global 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, (69), 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, (54), 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, (62), Director. Mr. James serves as a director of
Basic Vegetable Products, California Sun Dry Foods, 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. From
1985 to 1999 Mr. James was a Senior Vice President and Chief Financial Officer
of Levi Strauss & Co. Mr. James, previously, was Chair of the Advisory Committee
to the California Public Employees Retirement System.
JOHN A. KRIEWALL (59) Director. (Capital Company only) Mr. Kriewall is
a Managing Director of Dresdner RCM, with which he has been associated since
1973. He is Co-Chief Investment Officer of the Mid Cap Team and is a member of
the Mid Cap Team Management Committee. He received his BS degree from Stanford
University and in 1971 received his MBA from Stanford University. Following
graduation, he joined the Trust Division of United California Bank and assisted
in the founding of its investment counseling subsidiary, Western Asset
Management. Mr. Kriewall is an "interested person" (as defined in the 1940 Act)
by virtue of his affiliation with the Investment Manager.
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<PAGE>
Mr. Kriewall is an "interested person" (as defined in the 1940 Act) by virtue of
his affiliation with the Investment Manager.
GEORGE G.C. PARKER, (61), Director. Mr. Parker is Associate Dean for
Academic Affairs, and Director of the MBA Program and Dean Witter Professor of
Finance at the Graduate School of Business at Stanford University, with which he
has been associated since 1973. Mr. Parker has served on the Board of Directors
of: the California Casualty Group of Insurance Companies since 1977; BB&K
Holdings, Inc., a holding company for financial services companies, since 1980;
H. Warshow & Sons, Inc., a manufacturer of specialty textiles, since 1982;
Zurich Reinsurance Centre, Inc., a large reinsurance underwriter, since 1994;
and Continental Airlines, since 1996. Mr. Parker served on the Board of
Directors of the University National Bank & Trust Company from 1986 to 1995.
KENNETH E. SCOTT, (71), Director (Capital Company only). Mr. Scott is
the Ralph M. Parsons Professor of Law and Business at Stanford Law School, with
which he has been associated since 1967. He is also a director of certain
registered investment companies managed by Benham Capital Management.
ANTHONY AIN, (40), President. Mr. Ain is a Managing Director and
General Counsel of Dresdner RCM, with which he has been associated since 1992.
From 1988 to 1992, 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. From 1984 to
1988, he was an associate in the Washington, D.C. office of Fried, Frank,
Harris, Shriver & Jacobson, where he practiced securities and banking law.
ROBERT J. GOLDSTEIN, (37), Vice President and Secretary. Mr. Goldstein
is a Director and Associate General Counsel of Dresdner RCM, with which he has
been associated since 1997. From 1990 to 1996, Mr. Goldstein 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.
KARIN L. BROTMAN, (33), Assistant Secretary. Ms. Brotman is Assistant
Fund Counsel of Dresdner RCM, with which she has been associated since 1997.
From 1995 to 1997, Ms. Brotman was a Product Manager at Fidelity Investments in
their Legal Department, where she was involved in providing legal and compliance
for 1940 Act registered management investment companies. From 1993 to 1995, 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.
JENNIE W. KLEIN, (35), Vice President and Treasurer. Ms. Klein is
Director of Commingled Fund Services and an Assistant Director of Dresdner RCM,
with which she has been associated since 1994. She is responsible for fund
administration and shareholder record keeping for the Dresdner RCM products.
From 1991 to 1994, Ms. Klein was employed at G.T. Capital Management as the
Manager of Financial Reporting and Compliance for their mutual funds. From 1988
to 1991, she was an auditor at KPMG Peat Marwick.
STEVEN L. WONG, (33), Assistant Treasurer. Mr. Wong is a Manager in
Commingled Fund Services and has been associated with Dresdner RCM since 1994.
He is responsible for overseeing Dresdner RCM's mutual fund administration which
includes financial reporting, compliance, tax reporting, fund accounting,
budgeting and shareholder servicing. From 1992 to 1994, Mr. Wong was a senior
auditor at KPMG Peat Marwick specializing in the audit of investment companies.
From 1991 to 1992, he was a fund accountant with Franklin Funds.
Regular meetings of each Company's Board of Directors are held on a
quarterly basis. Each Company's Audit Committee, whose present members are
George G.C. Parker and Kenneth E. Scott for the Capital Company and DeWitt F.
Bowman and George B. James, for the Global Company, 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 Capital Company receives a fee of $9,000 per
year plus $1,500 per series for each Board meeting attended and $500 for each
Audit Committee meeting attended and each Director of the Global 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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<PAGE>
The following table sets forth the aggregate compensation paid by the
Capital Company and the Global Company for the fiscal year ended December 31,
1999, 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>
Total Compensation
Pension or from the Capital
Aggregate Aggregate Retirement Company, Global
Compensation Compensation Benefits Accrued Estimate Annual Company and Company
Director from the Global from the as Part of Benefits Upon Complex
Name Company Capital Company the Companies' Expenses Retirement Paid to Director (1)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DeWitt F. Bowman $21,250 $27,000 $24,125 N/A $48,250
Pamela A. Farr $19,000 $27,000 $46,000 N/A $46,000
George B.James $21,250 $27,000 None N/A $48,250
John A. Kriewall N/A $0 None N/A $0
George G.C. Parker $19,000 $28,500 $47,500 N/A $47,500
Kenneth E. Scott N/A $28,500 $14,250 N/A $28,500
Total $80,500 $138,000 $131,875 $218,500
</TABLE>
- ---------------------
(1) During the fiscal year ended December 31, 1999, there were thirteen
funds in the complex.
Each Director of the Capital Company or the Global 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. Each Fund may, to the
extent permitted by the 1940 Act, invest in 90-day U.S. Treasury bills or the
Common Stock of the Capital Company and/or the Global Company, to match its
share of the deferred compensation obligation under the Directors' Plan. As of
December 31, 1998, no Director or officer of either Company was a beneficial
owner of any shares of the outstanding Common Stock of any series of the
Companies.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of March 31, 2000, there were 14,622,094 shares of the International
Growth Equity Fund outstanding, 9,846,845 shares of the Global Technology Fund
outstanding, 1,954,227 shares of the Global Small Cap Fund outstanding,
1,931,779 shares of the Global Health Care Fund outstanding, 1,278,662 shares of
the Large Cap Growth Fund outstanding, 10,073,071 shares of the Biotechnology
Fund outstanding, 572,368 shares of the Emerging Markets Fund outstanding,
697,423 shares of the Tax Managed Growth Fund outstanding and 311,228 shares of
the Balanced Fund outstanding. On that date the following were known to the
Companies to own of record more than 5% of the Funds' outstanding capital stock:
Page 33
<PAGE>
<TABLE>
<CAPTION>
Name and Address of % of Shares
Beneficial Owner Shares Held Outstanding
<S> <C> <C>
LARGE CAP GROWTH FUND
Pacific Maritime Association 415,233 32.47%
P.O. Box 7861
San Francisco, California 94120-786
Congoleum Corp Master Trust 280,445 21.93%
3705 Quakerbridge Road
Mercerville, New Jersey 08619-0127
AAA Washington 176,968 13.84%
1745 114th Avenue SE
Bellevue, Washington 98004-6968
Charles Schwab & Co., Inc. 88,097 6.89%
FBO Customers
101 Montgomery Street
San Francisco, California 94104
INTERNATIONAL GROWTH EQUITY FUND
Citigroup Inc. Pension Plan 3,397,203 23.23%
1 Court Square 15th Floor
Long Island City, New York 111120-0001
JM Family Enterprises, Inc. 1,615,782 11.05%
100 NW 12th Avenue
Deerfield Beach, Florida 33442
Boston Safe Deposit and Trust Company 1,170,340 8.00%
FBO Blue Cross and Blue Shield of
Massachusetts Retirement Income Trust
100 Summer Street
Boston, Massachusetts 02110
EMERGING MARKETS FUND
Clients of Dresdner Bank AG/ 300,000 52.41%
Investment Management
Institutional Asset Management Division
Jorgen-Ponto-Platz
60301 Frankfurt
Germany
National Financial Services Corp. 101,298 17.70%
FBO Customers
200 Liberty Street
One World Financial Center
New York, New York 10281-1003
Charles Schwab & Co., Inc.
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<PAGE>
FBO Customers 89,686 15.67%
101 Montgomery Street
San Francisco, California 94104
Madre Lode 51,943 9.00%
731 Madre Street
Pasadena, California 91107-5662
GLOBAL SMALL CAP FUND
Dean Witter Discover & Co. 528,360 27.04%
333 Market Street 25th Floor
San Francisco, California 94105-2102
Charles Schwab & Co., Inc. 452,604 23.16%
FBO Customers
101 Montgomery Street
San Francisco, California 94104
National Financial Services Corp. 372,835 19.08%
FBO Customers
200 Liberty Street
One World Financial Center
New York, New York 10281-1003
Clients of Dresdner Bank AG/ 320,064 16.38%
Investment Management
Institutional Asset Management Division
Jorgen-Ponto-Platz
60301 Frankfurt
Germany
National Investors Service Corp. 106,547 5.45%
FBO Customers
55 Water Street
New York, New York 10041-0098
GLOBAL TECHNOLOGY FUND
Charles Schwab & Co., Inc. 3,504,522 35.59%
FBO Customers
101 Montgomery Street
San Francisco, California 94104
National Financial Services Corp. 2,400,394 24.38%
FBO Customers
200 Liberty Street
One World Financial Center
New York, New York 10281-1003
National Investors Service Corp. 572,185 5.81%
FBO Customers
55 Water Street
Page 35
<PAGE>
New York, New York 10041-0098
GLOBAL HEALTH CARE FUND
Charles Schwab & Co., Inc. 758,042 39.24%
FBO Customers
101 Montgomery Street
San Francisco, California 94104
Clients of Dresdner Bank AG/ 400,000 20.71%
Investment Management
Institutional Asset Management Division
Jorgen-Ponto-Platz
60301 Frankfurt
Germany
National Financial Services Corp. 346,398 17.93%
FBO Customers
200 Liberty Street
One World Financial Center
New York, New York 10281-1003
National Investors Service Corp. 119,017 6.16%
FBO Customers
55 Water Street
New York, New York 10041-0098
BIOTECHNOLOGY FUND
Charles Schwab & Co., Inc. 4,724,992 46.91%
FBO Customers
101 Montgomery Street
San Francisco, California 94104
National Financial Services Corp. 2,254,639 22.38%
FBO Customers
200 Liberty Street
One World Financial Center
New York, New York 10281-1003
National Investors Service Corp. 692,026 6.87%
FBO Customers
55 Water Street
New York, New York 10041-0098
TAX MANAGED GROWTH FUND
Boston & Company 370,514 53.13%
Mutual Fund Operations
P.O. Box 3198
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<PAGE>
Pittsburgh, PA
Clients of Dresdner Bank AG/ 100,000 14.34%
Investment Management
Institutional Asset Management Division
Jorgen-Ponto-Platz
60301 Frankfurt
Germany
Madre Lode 66,094 9.48%
731 Madre Street
Pasadena, California 91107-5662
Charles Schwab & Co., Inc. 39,023 5.60%
FBO Customers
101 Montgomery Street
San Francisco, California 94104
BALANCED FUND
Pacific Maritime Association Deferred 206,889 66.48%
Compensation Plan
P.O. Box 7861
San Francisco, California 94120-7861
Bank of New York 104,339 33.52%
FBO Joseph W. Saunders IRA
1 Wall Street 23rd Floor
New York, New York 10286-0001
</TABLE>
THE INVESTMENT MANAGER
The Board of Directors of each Company has overall responsibility for
the operation of such Company's Funds. Pursuant to such responsibility, the
Board of Directors has approved various contracts for designated financial
organizations to provide, among other things, day to day management services
required by the Funds. Each Company has retained as the Funds' Investment
Manager, Dresdner RCM Global Investors LLC, a Delaware limited liability company
with principal offices at Four Embarcadero Center, San Francisco, California
94111. The Investment Manager is actively engaged in providing investment
supervisory services to institutional and individual clients. 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.
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 EUR 397 billion (USD 463
billion), and approximately 1,500 offices and 51,000 employees in over 60
countries around the world, Dresdner is one of Germany's largest banks. Dresdner
provides a full range of banking services including, traditional lending
activities, mortgages, securities, project finance and leasing to private
customers and financial and institutional clients. In the United States,
Dresdner maintains branches in New York and Chicago and an agency in Los
Angeles. As of the date of this SAI, the nine members of the Board of Managers
of the Investment Manager are William L. Price (Chairman), Gerhard Eberstadt,
George N.
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<PAGE>
Fugelsang, Joachim Madler, Leonhard Fischer, Susan C. Gause, Luke D.
Knecht, William S. Stack, and Kenneth B. Weeman, Jr.
Dresdner and the Investment Manager, by virtue of Dresdner's banking
operations in the United States, are subject to U.S. banking laws and
regulations. U.S. banking organizations generally may act as advisers to
investment companies and may buy and sell investment company shares for their
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. In addition, effective March 11,
2000, banking organizations that qualify as and elect to become financial
holding companies are permitted to sponsor and distribute the shares of
investment companies. Thus, the extent to which Dresdner qualifies and elects to
engage in these activities, as well as future changes in legal requirements or
regulatory interpretations relating to permissible activities of banking
organizations and their affiliates, could affect the nature and scope of
services provided to the Company by the Investment Manager or its affiliates.
The Investment Manager provides the Funds with investment supervisory
services pursuant to Investment Management Agreements, Powers of Attorney and
Service Agreements (the "Management Agreements") dated as of June 14, 1996 for
the Global Technology Fund and International Fund, December 27, 1996 for the
Global Small Cap Fund, Health Care Fund and Large Cap Fund, December 30, 1997
for the Biotechnology Fund and Emerging Markets Fund, December 30, 1998 for the
Tax Managed Growth Fund, and December 15, 2000 for the Balanced Fund. The
Investment Manager manages the Funds' investments, provides various
administrative services, and supervises the Funds' daily business affairs,
subject to the authority of the Boards of Directors. The Investment Manager is
also the investment manager for Dresdner RCM Growth Equity Fund and Dresdner RCM
Small Cap Fund, each a series of Dresdner RCM Capital Funds, Inc.; the Dresdner
RCM Europe Fund, a series of Dresdner RCM Investment Funds Inc.; Dresdner RCM
Global Equity Fund and Dresdner RCM Strategic Income Fund, each a series of
Dresdner RCM Global Funds, Inc.; and RCM Strategic Global Government Fund, Inc.,
Bergstrom Capital Corporation, and Dresdner RCM Global Strategic Income Fund,
Inc., each closed-end management investment companies. A Fund's Management
Agreement may be renewed from year-to-year after its initial term, provided that
any such renewals have been specifically approved at least annually by (i) the
vote of a majority of the Company's Board of Directors, including a majority of
the Directors who are not parties to the Management Agreement or interested
persons (as defined in the 1940 Act) of any such person, cast in person at a
meeting called for the purpose of voting on such approval, or (ii) the vote of a
majority (as defined in the 1940 Act) of the outstanding voting securities of
the Fund and the vote of a majority of the Directors who are not parties to the
contract or interested persons of any such party.
Each Fund has, under its respective Management Agreement, assumed the
obligation for payment of all of its ordinary operating expenses, including: (a)
brokerage and commission expenses, (b) federal, state, or local taxes incurred
by, or levied on, the Fund, (c) interest charges on borrowings, (d) charges and
expenses of the Fund's custodian, (e) investment advisory fees (including fees
payable to the Investment Manager under the Management Agreement), (f) fees
pursuant to the Fund's Rule 12b-1 plan, (g) legal and audit fees, (h) SEC and
"Blue Sky" registration expenses, and (i) compensation, if any, paid to officers
and employees of the Company who are not employees of the Investment Manager
(see DIRECTORS AND OFFICERS). The Investment Manager is responsible for all of
its own expenses in providing services to the Funds. Expenses attributable to a
Fund are charged against the assets of the Fund.
For the services rendered by the Investment Manager under each Fund's
Investment Management Agreement, each Fund pays management fees at an annualized
rate of its average daily net assets, as described in the Prospectus. For the
fiscal years ended December 31, 1999, 1998 and 1997, the International Fund
incurred fees of $1,233,869, $878,692 and $611,884 and the Global Technology
Fund incurred fees of $683,211, $104,008 and $61,204, the Global Small Cap Fund
incurred fees of $72,416, $52,418, and $45,183 the Global Health Care Fund
incurred fees of $54,854, $50,736 and $46,238, the Large Cap Growth Fund
incurred fees of $85,913, $40,991 and $33,041, the Biotechnology Fund incurred
fees of $58,217, $31,260 and $165 , and the Emerging Markets Fund incurred fees
of $34,657, $28,446 and $164. For fiscal 1999 and 1998, the Tax Managed Growth
Fund incurred fees of $10,058 and $21. For fiscal 1999 the Balanced Fund
incurred fees of $279.
The Investment Manager has contractually agreed to limit each Fund's
expenses as described in the Prospectus. Each Fund has agreed to reimburse the
Investment Manager, for a period of up to five years, for any such payments to
the extent that the Fund's operating expenses are otherwise below this expense
cap. This obligation will
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<PAGE>
not be recorded on the books of a Fund to the extent that the total operating
expenses of the Fund are at or above the expense cap. However, if the total
operating expenses of a Fund fall below the expense cap, the reimbursement to
the Investment Manager will be accrued by the Fund as a liability.
Each Fund's Management Agreement provides that the Investment Manager
will not be liable for any error of judgment or for any loss suffered by 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 each Fund, against liabilities, costs and expenses that the Investment
Manager may incur in connection with any action, suit, investigation or other
proceeding arising out of or otherwise based on any action actually or allegedly
taken or omitted to be taken by the Investment Manager in connection with the
performance of its duties or obligations under the Management Agreement with
respect to the Fund or otherwise as investment manager of the Fund. The
Investment Manager is not entitled to indemnification with respect to any
liability to a Fund or its stockholders by reason of willful misfeasance, bad
faith or gross negligence in the performance of its duties, or of its reckless
disregard of its duties and obligations under the Management Agreement.
Each Management Agreement is terminable without penalty on 60 days'
written notice by a vote of the majority of the outstanding voting securities of
the Fund which is the subject of the Management Agreement, by a vote of the
majority of the respective 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 each Fund. The
Distributor has provided mutual fund distribution services since 1976, and is a
subsidiary of Boston Institutional Group, Inc., which provides distribution and
other related services with respect to investment products.
DISTRIBUTION AGREEMENT
Pursuant to Distribution Agreements with the Capital Company and the
Global Company, the Distributor has agreed to use its best efforts to effect
sales of shares of the Funds, but is not obligated to sell any specified number
of shares. Each Distribution Agreement contains provisions with respect to
renewal and termination similar to those in each Fund's Management Agreement
discussed above. Pursuant to the Distribution Agreements, the Companies have
agreed to indemnify the Distributor out of the assets of each Fund to the extent
permitted by applicable law against certain liabilities under the Securities Act
of 1933 arising in connection with the Distributor's activities on behalf of the
Companies.
Each 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
Companies. The Investment Manager is required to reimburse the Company for any
fees and expenses of the Distributor pursuant to the Agreements.
DISTRIBUTION AND SERVICE PLAN
The Global Company, on behalf of its Dresdner RCM Large Cap Growth
Fund, Dresdner RCM Global Small Cap Fund, Dresdner RCM Emerging Markets Fund,
Dresdner RCM Biotechnology Fund, Dresdner RCM Global Health Care Fund, Dresdner
RCM Global Technology and Dresdner RCM Tax Managed Growth Fund Class N shares
and the Capital Company, on behalf of its Dresdner RCM International Growth
Equity Fund Class N shares, have adopted distribution and service plans (each, a
"Plan" and collectively, the "Plans") pursuant to Rule 12b-1 under the 1940 Act.
Page 39
<PAGE>
Under the Plans, the Fund pays the Distributor an annual fee of up to 0.25% of
the average daily net assets of its Class N shares as reimbursement for certain
expenses actually incurred by the Distributor in connection with providing
distribution and shareholder support services to such shares. Class I shares are
not subject to 12b-1 fees. The Distributor is reimbursed for: (a) expenses
incurred in connection with advertising and marketing the Class N shares of the
Fund, including but not limited to any advertising by radio, television,
newspapers, magazines, brochures, sales literature, telemarketing or direct mail
solicitations; (b) periodic payments of fees or commissions for distribution
assistance made to one or more securities brokers, dealers or other industry
professionals such as investment advisers, accountants, estate planning firms
and the Distributor itself in respect of the average daily value of shares owned
by clients of such service organizations, and (c) expenses incurred in
preparing, printing and distributing the Fund's prospectus and statement of
additional information.
Each Plan continues in effect from year to year with respect to each
Fund, provided that each such continuance is approved at least annually by a
vote of the Board of Directors of the respective Company, including a majority
vote of the Directors who are not "interested persons" of the Company within the
meaning of the 1940 Act and have no direct or indirect financial interest in the
Plan or in any agreement related to the Plan, cast in person at a meeting called
for the purpose of voting on such continuance. The Plan may be terminated with
respect to a Fund at any time, without penalty, by the vote of a majority of the
outstanding shares of the Fund. The Plans may not be amended to increase
materially the amounts to be paid by a Fund for the services described therein
without approval by the shareholders of the Fund, and all material amendments
are required to be approved by the Board of Directors of the respective Company
in the manner described above. Each Plan will automatically terminate in the
event of its assignment.
If in any year Funds Distributor is due more from the Fund for such
services than is immediately payable because of the expense limitation under the
Plans, the unpaid amount is carried forward while the Plans are in effect until
such later year as it may be paid. There is no limit on the periods during which
unreimbursed expenses may be carried forward, although the Funds are not
obligated to repay any outstanding unreimbursed expenses that may exist if the
Plans are terminated or not continued. No interest, carrying, or finance charge
will be imposed on any amounts carried forward.
During fiscal 1999, the International Growth Equity Fund, Global
Technology Fund, Global Small Cap Fund, Global Health Care Fund, Large Cap
Growth Fund, Biotechnology Fund, Emerging Markets Fund, and Tax Managed Growth
Fund reimbursed the Distributor $1,011, $34,870, $541, $13,714, $151, $14,438,
$146, and $423, respectively, for certain expenses actually incurred by the
Distributor. These fees reimbursed the Distributor for expenses actually
incurred in connection with the Funds' participation in fund supermarket
platforms. Unreimbursed expenses on behalf of each of theabove referenced funds
for fiscal 1999 amounted to $130,215.91, $184,884.78, $117,925.96, $103,457.88,
$120,519.72, $111,164.32, $129,279.79, and $132,742.31 representing 0.04%,
0.07%, 0.46%, 1.69%, 0.76%, 0.75%, 2.37%, and 5.88% , respectively, of each
Fund's net assets.
The Distributor may pay broker-dealers and others, out of the fees it
receives under the Plans, quarterly trail commissions of up to 0.25%, on an
annual basis, of the average daily net assets attributable to the N class of
shares of each Fund held in the accounts of their customers.
Pursuant to the Plans, the Board of Directors of each Company will
review at least quarterly a written report of the distribution expenses incurred
on behalf of shares of the N Class of shares of the Funds by the Distributor.
The report will include an itemization of the distribution expenses and the
purposes of such expenditures. In addition, as long as the Plans remain in
effect, the selection and nomination of Directors of each Company who are not
"interested persons" of the Company within the meaning of the 1940 Act will be
committed to Directors who are not interested persons of the Company.
THE ADMINISTRATOR
The administrator of the Capital Company (except for the Emerging
Markets Fund) and the Global Company is State Street Bank and Trust Company
("State Street"), 1776 Heritage Drive, North Quincy, Massachusetts 02109.
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<PAGE>
Pursuant to an Administration Agreement with each Company, State Street
is responsible for performing all administrative services required for the daily
operation of the Companies, subject to the control, supervision and direction of
the Companies and the review and comment by each Company's auditors and legal
counsel. State Street has no supervisory responsibility over the investment
operations of the Funds. Administrative services performed by State Street
include, but are not limited to, the following: overseeing the determination and
publication of each Company's net asset value; overseeing the maintenance by
each Company's custodian of certain book and records of the Company; preparing
each Company's federal, state and local income tax returns; arrange for payment
of each Company's expenses; and preparing each financial information for each
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:
<TABLE>
<CAPTION>
ANNUAL FEE
Average Assets Expressed in Basis Points: 1/100 of 1%
<S> <C>
First $250 Million/Fund 2.50
Next $250 Million/Fund 1.75
Thereafter 1.00
Minimum/Fund $57,500
</TABLE>
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 all the
Funds 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.
Brown Brothers Harriman & Co. ("BBH") serves as administrator of the
Emerging Markets Fund. BBH provides administrative services similar to those
provided by State Street, as described above. For its services, which include
fund accounting services, BBH receives annual fees pursuant to the following
schedule:
<TABLE>
<CAPTION>
Average Assets ANNUAL FEE
Expressed in Basis Points: 1/100 of 1%
<S> <C>
First $100 Million 2.50
Next $400 Million 3.75
Thereafter 2.50
Minimum $70,000
</TABLE>
$1,500 per month for first additional class
Total net assets of the Fund will be used to calculate the fee by
multiplying the net assets of the Fund by the basis point fees in the above
schedule. The greater of the basis point fee or the minimum fee will be
allocated to the Fund.
OTHER SERVICES PROVIDERS
State Street acts as the transfer agent, redemption agent and dividend
paying agent for the Funds. State Street also acts as custodian for all the
Funds, except the Emerging Markets Fund. Brown Brothers Harriman & Co. ("Brown
Brothers") acts as custodian for the Emerging Markets Fund. Each custodian is
responsible for the safekeeping of a Fund's assets and the appointment of any
subcustodian banks and clearing agencies.
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<PAGE>
State Street's principal business address is 1776 Heritage Drive, North
Quincy, Massachusetts 02171. Brown Brothers' principal business address is 40
Water Street, Boston, Massachusetts 02109.
PricewaterhouseCoopers LLP ("PwC") acts as the independent public
accountants for the Funds. The accountant examines financial statements for the
Funds and provides other audit, tax, and related services. PwC's principal
business address is 160 Federal Street, Boston, Massachusetts 02110.
NET ASSET VALUE
For purposes of the computation of the net asset value of each share of
each Fund, equity securities traded on stock exchanges are valued at the last
sale price on the exchange or in the principal over-the-counter market in which
such securities are traded as of the close of regular trading on the day the
securities are being valued, unless the Board of Directors or a duly constituted
committee of the Board determines that such price does not reflect the fair
value of the security. In cases where securities are traded on more than one
exchange, the securities are valued on the exchange determined by the Investment
Manager to be the primary market for the securities. If there has been no sale
on such day, the security will be valued at the closing bid price on such day.
If no bid price is quoted on such day, then the security will be valued by such
method as a duly constituted committee of the Board of Directors determines in
good faith to reflect its fair value. Readily marketable securities traded only
in the over-the-counter market that are not listed on the NASDAQ Stock Market or
a similar foreign reporting service will be valued at the mean bid price, or
such other comparable sources as the Board of Directors deems appropriate to
reflect their fair value. Other portfolio securities held by the Funds will be
valued at current market value, if current market quotations are readily
available for such securities. To the extent that market quotations are not
readily available such securities will be valued by whatever means a duly
constituted committee of the Board of Directors deems appropriate to reflect
their fair value.
Futures contracts and related options are valued at their last sale or
settlement price as of the close of the exchange on which they are traded or, if
no sales are reported, at the mean between the last reported bid and asked
prices. All other assets of the Funds will be valued in such manner as a duly
constituted committee of the Board of Directors in good faith deems appropriate
to reflect their fair value.
Trading in securities on foreign exchanges and over-the-counter markets
is normally completed at times other than the close of regular trading on the
New York Stock Exchange. In addition, foreign securities and commodities trading
may not take place on all business days in New York, and may occur in various
foreign markets on days which are not business days in New York and on which net
asset value is not calculated. The calculation of net asset value may not take
place contemporaneously with the determination of the prices of portfolio
securities used in such calculation. Events affecting the values of portfolio
securities that occur between the time their prices are determined and the close
of the New York Stock Exchange will not be reflected in the calculation of net
asset value unless the Board of Directors determines that a particular event
would materially affect net asset value, in which case an adjustment will be
made.
Assets or liabilities initially expressed in terms of foreign
currencies are translated prior to the next determination of net asset value
into U.S. dollars at the spot exchange rates at 12:00 p.m. Eastern time or at
such other rates as the Investment Manager may determine to be appropriate in
computing net asset value.
Debt obligations with maturities of 60 days or less are valued at
amortized cost. The Companies 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
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<PAGE>
maturity based on their cost, adjusted for foreign exchange translation,
provided such valuations equal fair market value.
The Board of Directors of each 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 Funds is
based on the net asset value per share, which is normally calculated once daily
at the close of regular trading (normally 4:00 P.M. 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. Each
Company reserves the right in its sole discretion to suspend the continued
offering of one or more of its Funds' shares and to reject purchase orders in
whole or in part when such rejection is in the best interests of the Fund and
its respective shareholders.
REDEMPTION OF SHARES
Payments will be made wholly in cash unless the Board of Directors
believes that economic conditions exist which would make such a practice
detrimental to the best interests of a Fund. Under such circumstances, payment
of the redemption price could be made either in cash or in portfolio securities
taken at their value used in determining the redemption price (and, to the
extent practicable, representing a pro rata portion of each of the portfolio
securities held by the Fund), or partly in cash and partly in portfolio
securities. Payment for shares redeemed also may be made wholly or partly in the
form of a pro rata portion of each of the portfolio securities held by a Fund at
the request of the redeeming stockholder, if the Company believes that honoring
such request is in the best interests of such series. If payment for shares
redeemed were to be made wholly or partly in portfolio securities, brokerage
costs would be incurred by the stockholder in converting the securities to cash.
Each Fund has authorized one or more brokers to accept on its behalf
purchase and redemption orders. Such brokers are authorized to designate other
intermediaries to accept purchase and redemption orders on the Fund's behalf.
The Fund will be deemed to have received a purchase or redemption order when an
authorized broker or, if applicable, a broker's authorized designee, accepts the
order. Customer orders will be priced at the Fund's Net Asset Value next
computed after they are accepted by an authorized broker or the broker's
authorized designee provided they are transmitted to the Fund's transfer agent
on the same day.
DIVIDENDS, DISTRIBUTIONS AND TAX STATUS
Each income dividend and capital gain distribution, if any, declared
by a Fund will be paid in full and fractional shares based on the net asset
value as determined on the ex-dividend 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.
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<PAGE>
REGULATED INVESTMENT COMPANY
Each Fund has qualified and intends to continue to qualify for
treatment as a "regulated investment company" under Subchapter M of the Code.
Each 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 Funds. In addition, net capital gains (the excess
of net long-term capital gain over net short-term capital loss), net investment
income, and operating expenses are determined separately for each Fund. By
complying with the applicable provisions of the Code, a Fund will not be subject
to federal income tax with respect to net investment income and net realized
capital gains distributed to its stockholders.
To qualify as a regulated investment company under Subchapter M,
generally a Fund must: (i) derive at least 90% of its gross income each taxable
year from dividends, interest, payments with respect to securities loans, and
gains from the sale or other disposition of stock, securities or foreign
currencies and certain other income (including gains from certain options,
futures and forward contracts), ("Income Requirement"); and (ii) diversify its
holdings so that, at the end of each fiscal quarter, (a) at least 50% of the
value of the Fund's total assets is represented by cash, cash items, U.S.
Government securities, securities of other regulated investment companies and
other securities, limited, in respect of any one issuer, to an amount not
greater than 5% of the Fund's total assets and 10% of the outstanding voting
securities of such issuer, and (b) not more than 25% of the value of its total
assets is invested in the securities of any one issuer (other than U.S.
Government securities or the securities of other regulated investment
companies), or in two or more issuers which the Fund controls and which are
engaged in the same or similar trades or businesses.
In any taxable year in which a Fund so qualifies and distributes at
least 90% of the sum of its investment company taxable income (consisting of net
investment income, the excess of net short-term capital gains over net long-term
capital losses and net gains from certain foreign currency transactions) and its
net tax-exempt interest income (if any) ("Distribution Requirement"), it will be
taxed only on that portion, if any, of such investment company taxable income
and any net capital gain that it retains. The Funds expect to so distribute all
of such income and gains on an annual basis and thus will generally avoid any
such taxation.
Even if a Fund qualifies as a "regulated investment company," it may be
subject to a federal excise tax unless it meets certain additional distribution
requirements. Under the Code, a nondeductible excise tax of 4% ("Excise Tax") is
imposed on the excess of a regulated investment company's "required
distribution" for a calendar year ending within the regulated investment
company's taxable year over the "distributed amount" for that calendar year. The
term "required distribution" means the sum of (i) 98% of ordinary income
(generally net investment income and net gains from certain foreign currency
transactions) for the calendar year, (ii) 98% of capital gain net income
(generally both long-term and short-term capital gain) for the one-year period
ending on October 31 (as though that period were the regulated investment
company's taxable year), and (iii) the sum of any untaxed, undistributed net
investment income and net capital gains of the regulated investment company for
prior periods. The term "distributed amount" generally means the sum of (i)
amounts actually distributed by a Fund from its current year's ordinary income
and capital gain net income and (ii) any amount on which a Fund pays income tax
for the year. The Funds intend to meet these distribution requirements to avoid
Excise Tax liability.
Stockholders who are subject to federal or state income or franchise
taxes will be required to pay taxes on dividend and capital gain distributions
they receive from a Fund whether paid in additional shares of the Fund or in
cash. To the extent that dividends received by a Fund would qualify for the 70%
dividends-received deduction available to corporations, the Fund must designate
in a written notice to stockholders, within 60 days after the close of the
Fund's taxable year, the amount of the Fund's dividends that would be eligible
for this treatment. In order to qualify for the dividends-received deduction
with respect to a dividend paid on Fund shares, a corporate stockholder must
hold the Fund shares for at least 45 days during the 90 day period that begins
45 days before the shares become ex-dividend with respect to the dividend.
Stockholders, such as qualified employee benefit plans, which are exempt from
federal and state taxation generally would not have to pay income tax on
dividend or capital gain distributions. Prospective tax-exempt investors should
consult their own tax advisers with respect to the tax consequences of an
investment in the Funds under federal, state, and local tax laws.
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WITHHOLDING
Dividends paid by a Fund to a stockholder who, as to the U.S., is a
nonresident alien individual, nonresident alien fiduciary of a trust or estate,
foreign corporation, or foreign partnership (a "foreign stockholder") generally
will be subject to U.S. withholding tax (at a rate of 30% or a lower treaty
rate, if applicable). Withholding will not apply, however, if a dividend paid by
a Fund to a foreign stockholder is "effectively connected" with the conduct of a
U.S. trade or business, in which case the reporting and withholding requirements
applicable to U.S. citizens or domestic corporations will apply. Distributions
of net capital gain to foreign stockholders who are neither U.S. resident aliens
nor engaged in a U.S. trade or business generally are not subject to withholding
or U.S. federal income tax.
FOREIGN CURRENCY, OPTIONS, FUTURES AND FORWARD CONTRACTS
Gains from the sale or other disposition of foreign currencies (except
certain gains therefrom that may be excluded by future regulations), and gains
from options, futures, and forward contracts derived by a Fund with respect to
its business of investing in securities of foreign currencies, will qualify as
permissible income under the Income Requirement.
SECTION 1256 CONTRACTS
Many of the options, futures contracts and forward contracts entered
into by the Funds are "Section 1256 contracts." Any gains or losses realized on
Section 1256 contracts are generally considered 60% long-term and 40% short-term
capital gains or losses, although certain foreign currency gains and losses from
such contracts may be treated as ordinary income in character. Section 1256
contracts held by a Fund at the end of each taxable year (and, for purposes of
the Excise Tax, on October 31 or such other dates as prescribed under the Code),
other than Section 1256 contracts that are part of a "mixed straddle" with
respect to which a Fund has made an election not to have the following rules
apply, must be "marked-to-market" (that is, treated as sold for their fair
market value) for federal income tax purposes, with the result that unrealized
gains or losses are treated as though they were realized. The 60% portion of
gains on Section 1256 contracts that is treated as long-term capital gain will
qualify for the reduced maximum tax rates on net capital gain -- 20% (10% for
taxpayers in the 15% marginal tax bracket) for gain recognized on capital assets
held for more than 12 months.
STRADDLE RULES
Generally, the hedging transactions and other transactions in options,
futures and forward contracts undertaken by the Funds may result in "straddles"
for U.S. federal income tax purposes. The straddle rules may affect the amount,
character and timing of recognition of gains or losses realized by a Fund. In
addition, losses realized by a Fund on positions that are part of a straddle
position may be deferred under the straddle rules, rather than being taken into
account for the taxable year in which these losses are realized. Because limited
regulations implementing the straddle rules have been promulgated, the tax
consequences of hedging transactions and options, futures and forward contracts
to the Funds are not entirely clear.
Hedging transactions may increase the amount of short-term capital gain
realized by a Fund, which is taxed as ordinary income when distributed to
stockholders. A Fund may make one or more elections available under the Code
which are applicable to straddle positions. If a Fund makes any of the
elections, the amount, character and timing of the recognition of gains or
losses from the affected straddle positions will be determined under rules that
vary according to elections made. The rules applicable under certain elections
operate to accelerate the recognition of gains or losses from the affected
straddle positions. Because the application of the straddle rules may affect the
character of gains or losses, defer losses and/or accelerate the recognition of
gains or losses from the affected straddle positions, the amount which must be
distributed to stockholders, and which will be taxed to stockholders as ordinary
income or long-term capital gain, may be increased or decreased substantially as
compared to a fund that did not engage in such hedging transactions.
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SECTION 988 GAINS AND LOSSES
Under the Code, gains or losses attributable to fluctuations in
exchange rates which occur between the time a Fund accrues interest or other
receivables, or accrues expenses or other liabilities, denominated in a foreign
currency and the time the Fund actually collects such receivables or pays such
liabilities, generally are treated as ordinary income or loss. Similarly, on the
disposition of debt securities denominated in foreign currency and on the
disposition of certain futures contracts, forward contracts and options, gains
or losses attributable to fluctuation in the value of foreign currency between
the date of acquisition of the debt security, contract or option and the date of
disposition thereof are also treated as ordinary gain or loss. These gains or
losses, referred to under the Code as "Section 988" gains or losses, may
increase or decrease the amount of a Fund's investment company taxable income to
be distributed to stockholders as ordinary income.
FOREIGN TAXES
A Fund may be required to pay withholding and other taxes imposed by
foreign countries which would reduce the Fund's investment income, generally at
rates from 10% to 40%. Tax conventions between certain countries and the United
States may reduce or eliminate such taxes. If more than 50% of the value of a
Fund's total assets at the close of its taxable year consists of securities of
foreign corporations, the Fund will be eligible to elect to "pass-through" to
the Fund's stockholders the amount of foreign income and similar taxes paid by
the Fund. If this election is made, stockholders generally subject to tax will
be required to include in gross income (in addition to taxable dividends
actually received) their pro rata shares of the foreign income taxes paid by the
Fund, and may be entitled either to deduct (as an itemized deduction) their pro
rata shares of foreign taxes in computing their taxable income or to use such
amount (subject to limitations) as a foreign tax credit against their U.S.
federal income tax liability. No deduction for foreign taxes may be claimed by a
stockholder who does not itemize deductions. Each stockholder will be notified
within 60 days after the close of a Fund's taxable year whether the foreign
taxes paid by the Fund will be "passed-through" for that year.
The foregoing is a general abbreviated summary of present U.S. federal
income tax laws applicable to the Funds, their stockholders and dividend and
capital gain distributions by the Funds. Stockholders are urged to consult their
own tax advisers for more detailed information and for information regarding any
foreign, state, and local tax laws and regulations applicable to dividends and
other distributions received from the Funds.
INVESTMENT RESULTS
Average annual total return ("T") of a Fund is calculated as follows:
an initial hypothetical investment of $1,000 ("P") is divided by the net asset
value of shares of the Fund as of the first day of the period in order to
determine the initial number of shares purchased. Subsequent dividend and
capital gain distributions by a Fund are paid at net asset value on the payment
date determined by the Board of Directors. The sum of the initial shares
purchased and shares acquired through distributions is multiplied by the net
asset value per share of the Fund as of the end of the period ("n") to determine
ending redeemable value ("ERV"). The ending value divided by the initial
investment converted to a percentage equals total return. The formula thus used,
as required by the SEC, is:
n
P(1+T) = ERV
The resulting percentage indicates the positive or negative investment
results that an investor would have experienced from reinvested dividend and
capital gain distributions and changes in share price during the period.
This formula reflects the following assumptions: (i) all share sales at
net asset value, without a sales load reduction from the $1,000 initial
investment; (ii) reinvestment of dividends and distributions at net asset value
on the reinvestment date determined by the Board of Directors; and (iii)
complete redemption at the end of any period illustrated. Total return may be
calculated for one year, five years, ten years, and for other periods, and will
typically be updated on a quarterly basis. The average annual compound rate of
return over various periods may also be computed by using ending values as
determined above.
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Quotations of the Balanced 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 a Fund's performance
or more accurately compare such performance to other measures of investment
return, a Fund also may include in advertisements and stockholder reports other
total return performance data based on time-weighted, monthly-linked total
returns computed on the percentage change of the month end net asset value of
the Fund after allowing for the effect of any cash additions and withdrawals
recorded during the month. Returns may be quoted for the same or different
periods as those for which average total return is quoted. A Fund's investment
results will vary from time to time depending upon market conditions, the
composition of the Fund's portfolio, and operating expenses, so that any
investment results reported should not be considered representative of what an
investment in the Fund may earn in any future period. These factors and possible
differences in calculation methods should be considered when comparing a Fund's
investment results with those published for other investment companies, other
investment vehicles and unmanaged indices. Results also should be considered
relative to the risks associated with a Fund's investment objective and
policies.
Each of the Funds may from time to time compare its investment
results with data and mutual fund rankings published or prepared by Lipper
Inc. and Morningstar, Inc., which rank mutual funds by overall performance,
investment objectives, and assets.
In addition, the Funds may from time to time compare their performance
with one or more of the following:
1. The S&P 500 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 Salomon Brothers Extended Market Index ("EMI"), which is a component of
the Salomon Brothers Broad Market Index ("BMI") which includes listed
shares of 5,409 companies with a total available market capitalization of
at least the local equivalent of US$100 million on the last business day of
May each year. The BMI consists of two components: the Primary Market Index
("PMI") is the large capitalization stock component and the EMI is the
small capitalization stock component. The PMI universe is defined as those
stock falling within the top 80% of the cumulative available capital level
in each country. The EMI includes includes the bottom 20% of the cumulative
available capital level in each country.
3. The Russell Midcap Index , which is composed of the smallest 800 companies
in the Russell 1000 Index. The Russell 1000 Index is made up of the 1,000
largest companies in the Russell 3000 Index, which is composed of the 3,000
largest U.S. companies by market capitalization and represents
approximately 98% of the investable U.S. equity market.
4. Russell Midcap Growth Index, which measures the performance of those
Russell Midcap companies with higher price-to-book ratios and higher
forecasted growth values. The stocks are also members of the Russell 1000
Growth index.
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5. The Lipper Science & Technology Fund Index, which is an equally weighted
index of the 10 largest U.S. science and technology mutual funds.
6. The Russell Midcap Health Care Index, which is composed of all medium and
medium/small health care companies in the Russell 1000 Index. The Russell
1000 Index measures the performance of the 1,000 largest companies in the
Russell 3000 Index, which represents approximately 90% of the total market
capitalization of the Russell 3000 Index.
7. The American Stock Exchange Biotechnology Index, which is an equal-dollar
weighted index that attempts to measure the performance of a cross section
of companies in the biotechnology industry that are primarily involved in
the use of biological processes to develop products or provide services.
This index was developed with a base level of 200 stocks as of October 18,
1991.
8. The NASDAQ Biotechnology Index, which is a capitalization-weighted index
that attempts to measure the performance of all NASDAQ stocks in the
biotechnology sector. This index was developed with a base value of 200
stocks as of November 1, 1993.
9. The Russell 2000 Index, which is composed of the 2,000 smallest securities
in the Russell 3000 Index, which is composed of the 3,000 largest U.S.
companies based on market capitalization and represents approximately 98%
of the investable U.S. equity market.
10. The MSCI Emerging Markets Free Index, which is a market
capitalization-weighted index composed of 981 companies in 26 emerging
market countries. The average market capitalization size of the listed
companies is US$800 million.
11. The IFC Index of Investable Emerging Markets, which represents the IFC
investable regional total return composite. The term "investable" indicates
that the stocks and the weights in the IFCI index represent the amount that
the foreign institutional investors might buy by the virtue of the foreign
institutional restrictions (either at the national level or by the
individual company's corporate statute) plus factoring in minimum market
capitalization and liquidity screens.
12. The MSCI-EAFE Index, which is an arithmetic, market value-weighted average
of the performance of over 900 securities listed on the stock exchanges of
the countries in Europe, Australia, and the Far East. The index is
calculated on a total return basis, which includes reinvestment of gross
dividends before deduction of withholding taxes.
13. The MSCI-ACWI Ex-U.S. Index, which is a market capitalization-weighted
index composed of companies representative of the market structure of 47
developed and emerging market countries excluding the United States. Stock
selection excludes securities which are not purchasable by foreigners. The
index is calculated on a total return basis, which includes reinvestment of
gross dividends before deduction of withholding taxes.
14. The Morgan Stanley Capital International Europe Index, which measures the
total rate of return of nearly 600 stocks from 15 developed European
countries.
15. The Lehman Brothers Aggregate Bond 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 least one year.
16. The Lipper Balanced Index, which is a composite prepared by Lipper Inc.
of mutual funds with the same objective as the Balanced Fund.
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17. The Blended S&P 500 Stock/Lehman Brothers Aggregate Bond Index, which is a
blended index comprised of the performace af the two indexes weighted 60%
Standard & Poor's 500 Stock Index and 40% Lehman Brothers Aggregate Bond
Index.
GENERAL INFORMATION
The Global Company and the Capital Company were incorporated in
Maryland as open-end management investment companies on September 17, 1995 and
March 16, 1979, respectively.
The authorized capital stock of the Capital Company is 1,000,000,000
shares of capital stock (par value $.0001 per share), of which 100,000,000
shares have been designated as shares of the International Fund. The authorized
capital stock of the Global Company is 1,000,000,000 shares of capital stock
(par value $.0001 per share), of which 50,000,000 shares have been designated as
shares of each of the Global Technology Fund, Global Small Cap Fund, Health Care
Fund, Large Cap Fund, Biotechnology Fund, Emerging Markets Fund and the Tax
Managed Growth Fund and 25,000,000 shares of capital stock (par value $.0001 per
share) have been designated as shares of the Balanced Fund. The Board of
Directors of each Company may, in the future, authorize the issuance of other
classes of shares of such Funds, or of other series of capital stock
representing shares of additional investment portfolios or funds.
DESCRIPTION OF CAPITAL SHARES
All shares of each 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
Funds when duly issued will be fully paid and non-assessable. The rights of the
holders of shares of each Fund may not be modified except by vote of the
majority of the outstanding shares of such Fund. Certificates are not issued
unless requested and are never issued for fractional shares. Fractional shares
are liquidated when an account is closed.
Shares of each Company have non-cumulative voting rights, which means
that the holders of more than 50% of all series of a 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.
None of the Companies are 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. A Company will hold a meeting
of its stockholders for the purpose of voting on the question of removal of one
or more directors if requested in writing by the holders of at least 10% of the
Company's outstanding voting securities, and will assist in communicating with
its stockholders as required by Section 16(c) of the 1940 Act.
Because the Capital Company and Global Company are registered
separately under the 1940 Act but are using a combined Prospectus and SAI there
is a possibility that the series of any Company may be liable for any
misstatements, inaccuracies or incomplete disclosures in such documents
concerning any other Company.
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, each Company generally may take or
authorize any extraordinary action upon the favorable vote of the holders of
more than 50% of the outstanding shares of the Company or may take or authorize
any routine action upon approval of a majority of the votes cast.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted to the holders of the outstanding voting securities of an investment
company such as the Companies shall not be deemed to have been
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effectively acted upon unless approved by a majority of the outstanding voting
securities, as defined in the 1940 Act, of the series or class of the Company
affected by the matter. Under Rule 18f-2, a series or class is presumed to be
affected by a matter, unless the interests of each series or class in the matter
are identical or the matter does not affect any interest of such series or
class. Under Rule 18f-2 the approval of an investment advisory agreement or any
change in a fundamental investment policy would be effectively acted upon with
respect to a Fund only if approved by a majority of its outstanding voting
securities, as defined in the 1940 Act. However, the rule also provides that the
ratification of independent public accountants, the approval of principal
underwriting contracts and the election of directors may be effectively acted
upon by the stockholders of the Company voting without regard to Fund.
Each share of each Class of a Fund (Class N - Retail and Class I
Institutional) represents an equal proportional interest in the Fund with each
other share of the same Class and is entitled to such dividends and
distributions out of the income earned on the assets allocable to the Class as
are declared in the discretion of the Board of Directors. In the event of the
liquidation or dissolution of either Company, stockholders of a Fund are
entitled to receive the assets attributable to the Fund that are available for
distribution, and a distribution of any general assets not attributable to a
particular Fund that are available for distribution, in such manner and on such
general basis as the Board of Directors may determine.
ADDITIONAL INFORMATION
COUNSEL
Certain legal matters in connection with the capital shares offered by
the Prospectus have been passed upon for the Fund by Paul, Hastings, Janofsky &
Walker LLP, 555 South Flower Street, Los Angeles, California 90071. The validity
of the capital stock offered by the Global Company and the Capital Company has
been passed upon by Venable, Baetjer and Howard, LLP, 1800 Mercantile Bank &
Trust Building, 2 Hopkins Plaza, Baltimore, Maryland 21201. Paul, Hastings,
Janofsky & Walker LLP has acted and will continue to act as counsel to the
Investment Manager in various matters.
LICENSE AGREEMENT
Under License Agreements dated as of December 11, 1997, the Investment
Manager has granted each 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, each 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.
FINANCIAL STATEMENTS
Incorporated by reference herein are the financial statements of the
Funds contained in the Funds' Annual Report to Shareholders for the year ended
December 31, 1999, including the Report of Independent Accountants, dated
February 18, 2000, the Statements of Assets and Liabilities, including the
Portfolio of Investments and the related Statements of Operations and Changes in
Net Assets, and the Financial Highlights. Copies of the Funds' Annual and
Semi-Annual Reports to Shareholders will be available, upon request, by calling
(800) 726-7240, or by writing to Four Embarcadero Center, San Francisco,
California 94111.
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REGISTRATION STATEMENT
The Funds' Prospectus and this SAI do not contain all of the
information set forth in each 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 each Company's registration statement, each such statement being
qualified in all respects by such reference.
<PAGE>
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
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Large Cap Growth Fund, Dresdner RCM Global Small Cap
Fund, Dresdner RCM Global Technology Fund and
Dresdner RCM Emerging Markets Fund 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.
(j) Form of Articles Supplementary to Articles of
Incorporation of Registrant with respect to the
Dresdner RCM Internet Fund is incorporated herein by
reference to Exhibit 1(j) of Post-Effective Amendment
No. 17.
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.
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(f) Proof of specimen of certificate for capital stock
($0.0001 par value) of Registrant, on behalf of
Dresdner RCM Biotechnology Fund, is incorporated
herein by reference to Exhibit 4(f) of Post-Effective
Amendment No. 5.
(g) 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.
(o) Proof of specimen of certificate for capital stock
($.0001 par value) of Registrant, on behalf of its
Dresdner RCM Internet Fund Class N shares, is
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incorporated herein by reference to Exhibit 3(o) of
Post-Effective Amendment No. 17.
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.
(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.
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<PAGE>
(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 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) Form of 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.
(k) Form of Investment Management Agreement, Power of
Attorney and Service Agreement and Appendix A
(Schedule of Fees) between Registrant, on behalf of
its Dresdner RCM Internet Fund and Dresdner RCM
Global Investors LLC dated as of
_____________________ are filed herein as Exhibit
4(k) of Post-Effective Amendment No. 17.
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
C-9
<PAGE>
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.
(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
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<PAGE>
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.
(j) Form of Amendment to Custodian Contract between
Registrant, on behalf of Dresdner RCM Internet Fund
and State Street Bank and Trust Company is
incorporated herein by reference to Exhibit 7(j) of
Post-Effective Amendment No. 17.
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) 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
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<PAGE>
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.
(b) Consent of PriceWaterhouseCoopers with respect to the
Dresdner RCM Large Cap Growth Fund, Dresdner RCM Tax
Managed Growth Fund, Dresdner RCM Biotechnology Fund,
Dresdner RCM Balanced Fund, Dresdner RCM Global Small
Cap Fund, Dresdner RCM Global Technology Fund,
Dresdner RCM Global Health Care Fund and Dresdner RCM
Emerging Markets Fund is filed herein as Exhibit
10(b).
(c) Consent of PriceWaterhouseCoopers LLP with respect to
the Dresdner RCM Global Equity Fund and Dresdner RCM
Strategic Income Fund is filed herein as Exhibit
10(c).
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 Dresdner
RCM 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.
C-12
<PAGE>
(b) Form of Rule 12b-1 Plan of Registrant, on behalf of
Dresdner RCM Biotechnology Fund is incorporated
herein by reference to Exhibit 15(b) of
Post-Effective Amendment No. 6.
(c) 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.
(d) Form of Amended Appendix A to Rule 12b-1 Plan of
Registrant, dated as of __________________ is
incorporated herein by reference to Exhibit 13(e) of
Post-Effective Amendment No. 17.
14. None
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.
16. To be filed by subsequent amendment.
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.
C-13
<PAGE>
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 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 MEMBER OF THE BUSINESS AFFILIATIONS ADDRESS
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 Kleinwort Benson 75 Wall Street
North America, Inc. (September 1996 - New York, NY 10005
present)
Director, KBIMA (December 1997 - 75 Wall Street
present) New York, NY 10005
</TABLE>
C-14
<PAGE>
<TABLE>
<CAPTION>
NAME OF THE OFFICER OR MEMBER OF THE BUSINESS AFFILIATIONS ADDRESS
BOARD OF MANAGERS
<S> <C> <C>
Leonard H. Fisher Dresdner Bank AG Jurgen-Ponto-Platz 1
Institutional Asset Management D-60301
(January 1998-present) Frankfurt am Main
Germany
George N. Fugelsang President, Chief Executive Officer, 75 Wall Street
Chairman, Dresdner Kleinwort Benson New York NY 10005
North America LLC (February 1994 -
present)
Director, Dresdner Kleinwort Benson 75 Wall Street
North America Services LLC (September New York, NY 10005
1996 - present); Director, KBIMA
(December 1997 - present)
Director, KBIMA (December 1997 - 75 Wall Street
present) New York, NY 10005
</TABLE>
C-15
<PAGE>
<TABLE>
<CAPTION>
NAME OF THE OFFICER OR MEMBER OF THE BUSINESS AFFILIATIONS ADDRESS
BOARD OF MANAGERS
<S> <C> <C>
Susan C. Gause Dresdner RCM (July 1994 - present) Four Embarcadero Center
San Francisco, CA 94111
Chief Operating Officer, Senior Four Embarcadero Center
Managing Director, and Member of the San Francisco, CA 94111
Board of Managers (July 1998-present)
Luke D. Knecht Managing Director (July 1998-present), Four Embarcadero Center
Member of the Board of Managers, San Francisco, CA 94111
Dresdner RCM (November 1997 - present)
Joachim Madler Director, Dresdner Bank AG (September Mainzer Lanstrass 15-17
1997 - present) 60301 Frankfurt
Germany
Director, KBIMA (December 1997 - 75 Wall Street
present); New York, NY 10005
Director, Dresdner (South East Asia) Singapore
(October 1997 - present)
Managing Director, Dresdner Farberstrasse 6,
Bank (Schweiz) AG
(November 1997 - present) Zurich, Switzerland
Chairman, DFV Deutsche Mainzer Lanstrasse
Fonds und Vorsorgeberatungs 11-13
(July 1996 - June 1997) 60301 Frankfurt Germany
Deutscher Investment-Trust (June 1996 Mainzer Lanstrasse
- June 1997) 11-13
60301 Frankfurt Germany
Managing Director, GKS Gesellschaft Windmuhlweg 12
fur Kontenservice GmbH (June 1994 - 95030 Hof
June 1997) Germany
</TABLE>
C-16
<PAGE>
<TABLE>
<CAPTION>
NAME OF THE OFFICER OR MEMBER OF THE BUSINESS AFFILIATIONS ADDRESS
BOARD OF MANAGERS
<S> <C> <C>
William L. Price Chief Executive Officer and Global Four Embarcadero Center
Chief Investment Officer, Dresdner San Francisco, CA 94111
RCM (July 1998 - present)
Chairman and Member of the Board of Four Embarcadero Center
Managers, Senior Managing Director, San Francisco, CA 94111
Dresdner RCM (December 1997 - present)
Director, KBIMA (December 1997 - 75 Wall Street
present) New York, NY 10005
Director, Dresdner RCM (UK) 10 Fenchurch Street
(January 1998 - present) London, UK EC3M3LB
William S. Stack Senior Managing Director, Global Four Embarcadero Center
Equity Chief Investment Officer (July San Francisco, CA 94111
1998 - present); Member of the Board
of Managers, Dresdner RCM (August 1994
- present)
Director, KBIMA (December 1997 - 75 Wall Street
present) New York, NY 10005
Director, Dresdner RCM (UK) (January 10 Fenchurch Street
1998 - present) London, UK EC3M3LB
Kenneth B. Weeman, Jr. Dresdner RCM (October 1979 - present) Four Embarcadero Center
San Francisco, CA 94111
Vice Chairman, Senior Managing Four Embarcadero Center
Director (July 1998 - present) San Francisco, CA 94111
Director, Dresdner RCM (UK) (January 10 Fenchurch Street
1998 - present) London, UK EC3M3LB
</TABLE>
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<PAGE>
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 registered with the
Securities and Exchange Commission as a broker-dealer and is a
member of the National Association of Securities Dealers. FDI
also serves as principal underwriter for 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
CDC MPT+Funds
Dresdner RCM Capital Funds, Inc.
Dresdner RCM Investment Funds Inc.
J.P. Morgan Institutional Funds
J.P. Morgan Funds
JPM Series Trust
JPM Series Trust II
LaSalle Partners Funds, Inc.
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.
Nomura Pacific Basin Fund, Inc.
Orbitex Group of Funds
The Saratoga Advantage Trust
C-18
<PAGE>
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
TD Waterhouse Family of Funds, Inc.
TD Waterhouse Trust
FDI does not act as a depositor or investment adviser
of any investment company.
(b) The following is a list of the executive officers, directors
and partners of FDI:
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES WITH FUNDS POSITIONS AND OFFICES WITH REGISTRANT
BUSINESS ADDRESS DISTRIBUTOR, INC.
- ---------------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
Marie E. Connolly Director, President and Chief None
Executive Officer
George A. Rio Executive Vice President None
Donald R. Roberson Executive Vice President None
William S. Nichols Executive Vice President None
Margaret W. Chambers Senior Vice President, General None
Counsel, Chief Compliance Officer,
Secretary and Clerk
Joseph F. Tower III Director, Senior Vice President and None
Treasurer
Gary S. MacDonald Senior Vice President None
Judith K. Benson Senior Vice President None
William J. Nutt Chairman and Directorresident None
William J. Nutt Chairman and Director None
William J. Stetter Vice President and Chief Financial None
Officer
</TABLE>
(c) Not Applicable.
C-19
<PAGE>
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 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.
C-20
<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. 18 to the Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 to be signed on its
behalf by the undersigned, thereunto duly authorized, in San Francisco, on May
1, 2000.
DRESDNER RCM GLOBAL FUNDS, INC.
By: /S/ANTHONY AIN, President
--------------------------------
/S/JENNIE W. KLEIN, Treasurer
and Vice President
--------------------------------
Pursuant to the requirements of the Securities Act of 1933,
this Post-Effective Amendment No. 18 to the Registration Statement has been
signed below by the following persons in the capacities and on the date
indicated.
<TABLE>
SIGNATURE TITLE DATE
<S> <C> <C> <C>
(1) Principal Executive Officer President May 1, 2000
/S/ANTHONY AIN
---------------------------------
Anthony Ain
(2) Chief Financial and Treasurer and Vice President May 1, 2000
Accouting Officer
/S/JENNIE W. KLEIN
---------------------------------
Jennie W. Klein
(3) Directors May 1, 2000
/S/DEWITT F. BOWMAN*
---------------------------------
DeWitt F. Bowman
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/S/ PAMELA A. FARR* May 1, 2000
-----------------------------------
Pamela A. Farr
/S/ GEORGE B. JAMES* May 1, 2000
-----------------------------------
George B. James
/S/ GEORGE G.C. PARKER* May 1, 2000
-----------------------------------
George B. James
By: /S/ANTHONY AIN May 1, 2000
-----------------------------------
George A. Rio
as Attorney-in-Fact
</TABLE>
- - By Anthony Ain, pursuant to Power of Attorney dated December 8, 1999.
<PAGE>
EXHIBIT LIST
<TABLE>
EXHIBIT NUMBER DESCRIPTION
<S> <C>
10(b) PriceWaterhouseCoopers LLP Consent
10(c) PriceWaterhouseCoopers LLP Consent
</TABLE>
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form N-1A of our report dated February 18, 2000, relating to the
financial statements and financial highlights which appear in the December
31, 1999 Annual Report to Shareholders of the Dresdner RCM Global Funds, Inc.
(consisting of the Dresdner RCM Large Cap Growth Fund, Dresdner RCM Emerging
Markets Fund, Dresdner RCM Global Small Cap Fund, Dresdner RCM Global
Technology Fund, Dresdner RCM Global Health Care Fund, Dresdner RCM
Biotechnology Fund, Dresdner RCM Tax Managed Fund, and the Dresdner RCM
Balanced Fund) and the Dresdner RCM Capital Funds, Inc., (consisting of the
Dresdner RCM International Growth Equity Fund), which are also incorporated
by reference into the Registration Statement. We also consent to the
references to us under the headings "Financial Highlights" and "Other Service
Providers" in such Registration Statement.
PricewaterhouseCoopers LLP
Boston, Massachusetts
April 28, 2000
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form N-1A of our report dated February 18, 2000, relating to the
financial statements and financial highlights which appear in the December
31, 1999 Annual Report to Shareholders of the Dresdner RCM Global Funds, Inc.
(consisting of the Dresdner RCM Global Equity Fund, and the Dresdner RCM
Strategic Income Fund), which are also incorporated by reference into the
Registration Statement. We also consent to the references to us under the
headings "Financial Highlights" and "Other Service Providers" in such
Registration Statement.
PricewaterhouseCoopers LLP
Boston, Massachusetts
April 28, 2000
