<PAGE>
As filed with the Securities and Exchange Commission on March 2, 1999
1933 Act File No. 2-63825
1940 Act File No. 811-2913
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. 30 [x]
--
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [x]
Amendment No. 30 [x]
--
(Check appropriate box or boxes.)
DRESDNER RCM CAPITAL 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)
George A. Rio, President, Treasurer and Chief Financial Officer
DRESDNER RCM CAPITAL FUNDS, INC.
Four Embarcadero Center
San Francisco, California 94111
(800) 726-7240
(Name and Address of Agent for Service)
Copies to:
Robert J. Goldstein Michael Glazer
Associate General Counsel Paul, Hastings, Janofsky & Walker LLP
Dresdner RCM Global Investors LLC 555 South Flower Street
Four Embarcadero Center Los Angeles, California 90071
San Francisco, California 94111
<PAGE>
It is proposed that this filing will become effective:
[ ] Immediately upon filing pursuant to paragraph (b)
[ ] On _________________ pursuant to paragraph (b)
[x] 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 CAPITAL FUNDS, INC.
DRESDNER RCM INTERNATIONAL GROWTH EQUITY FUND
CROSS REFERENCE SHEET
BETWEEN ITEMS OF PART A AND B OF FORM N-1A AND THE
PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION
ITEM NUMBER OF PART A OF FORM N-1A INFORMATION REQUIRED IN A PROSPECTUS
1. Front and Back Cover Pages Front and Back Cover Pages
2. Risk/Return Summary: Investments, Risk/Return Summary
Risks, and Performance
3. Risk/Return Summary: Fee Table Fees and Expenses
4. Investment Objectives, Principal Investment Objectives and Policies;
Investment Strategies, and Related Other Investment Practices;
Risks Investment Risks
5. Management's Discussion of Fund *
Performance
6. Management, Organization, and Organization and Management
Capital Structure
7. Shareholder Information Stockholder Information
8. Distribution Arrangements Organization and Management::
The Distributor
9. Financial Highlights Information Financial Highlights
*Not Applicable
<PAGE>
DRESDNER RCM CAPITAL FUNDS, INC.
DRESDNER RCM INTERNATIONAL GROWTH EQUITY FUND
CROSS REFERENCE SHEET
BETWEEN ITEMS OF PART A AND B OF FORM N-1A AND THE
PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION
(CONTINUED)
ITEM NUMBER OF PART B OF FORM N-1A INFORMATION REQUIRED IN A
STATEMENT OF ADDITIONAL INFORMATION
10. Cover Page and Table of Contents Cover Page and Table of Contents
11. Fund History General Information
12. Description of the Fund and Its Investment Objective and Policies;
Investments and Risks Risk Considerations; Investment
Restrictions
13. Management of the Fund The Investment Manager
14. Control Persons and Principal Directors and Officers; Description
Holders of Securities of Capital Shares
15. Investment Advisory and Other The Investment Manager; The
Services Distributor; Additional Information
16. Brokerage Allocation and Other Execution of Portfolio Transactions
Practices
17. Capital Stock and Other Securities Description of Capital Shares
18. Purchase, Redemption and Pricing 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
*Not Applicable
<PAGE>
DRESDNER RCM CAPITAL FUNDS, INC.
DRESDNER RCM GROWTH EQUITY FUND
DRESDNER RCM SMALL CAP FUND
CROSS REFERENCE SHEET
BETWEEN ITEMS OF PART A AND B OF FORM N-1A AND THE
PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION
ITEM NUMBER OF PART A OF FORM N-1A INFORMATION REQUIRED IN A PROSPECTUS
1. Front and Back Cover Pages Front and Back Cover Pages
2. Risk/Return Summary: Investments, Risk/Return Summary
Risks, and Performance
3. Risk/Return Summary: Fee Table Fees and Expenses
4. Investment Objectives, Principal Investment Objectives and Policies;
Investment Strategies, and Related Other Investment Practices;
Risks Investment Risks
5. Management's Discussion of Fund *
Performance
6. Management, Organization, and Organization and Management
Capital Structure
7. Shareholder Information Stockholder Information
8. Distribution Arrangements Organization and Management:
The Distributor
9. Financial Highlights Information Financial Highlights
*Not Applicable
<PAGE>
DRESDNER RCM CAPITAL FUNDS, INC.
DRESDNER RCM GROWTH EQUITY FUND
DRESDNER RCM SMALL CAP FUND
CROSS REFERENCE SHEET
BETWEEN ITEMS OF PART A AND B OF FORM N-1A AND THE
PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION
(CONTINUED)
ITEM NUMBER OF PART B OF FORM N-1A INFORMATION REQUIRED IN A
STATEMENT OF ADDITIONAL INFORMATION
10. Cover Page and Table of Contents Cover Page and Table of Contents
11. Fund History General Information
12. Description of the Fund and Its Investment Objective and Policies;
Investments and Risks Risk Considerations; Investment
Restrictions
13. Management of the Fund The Investment Manager
14. Control Persons and Principal Directors and Officers; Description
Holders of Securities of Capital Shares
15. Investment Advisory and Other The Investment Manager; The
Services Distributor; Additional Information
16. Brokerage Allocation and Other Execution of Portfolio Transactions
Practices
17. Capital Stock and Other Securities Description of Capital Shares
18. Purchase, Redemption and Pricing 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
<PAGE>
DRESDNER RCM CAPITAL FUNDS, INC.
------------------------------------------------------------
DRESDNER RCM GROWTH EQUITY FUND
DRESDNER RCM SMALL CAP FUND
------------------------------------------------------------
, 1999
-------------
This prospectus contains essential information for anyone
considering an investment in these funds. Please read this document
carefully and keep it for future reference.
As with all mutual funds, the Securities and Exchange Commission
does not guarantee that the information in this Prospectus is accurate
or complete, and has not judged these funds for investment merit. It
is a criminal offense to state otherwise.
<PAGE>
DRESDNER RCM CAPITAL FUNDS, INC.
TABLE OF CONTENTS
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RISK/RETURN SUMMARY AND FUND EXPENSES
- ------------------------------------------------------------------------------
This section summarizes the 3 Dresdner RCM Growth Equity Fund
Funds' investments, risks, past 6 Dresdner RCM Small Cap Fund
performance, and fees.
INVESTMENT OBJECTIVES, POLICIES AND RISKS
- ------------------------------------------------------------------------------
This section provides details 9 Investment Objectives and Policies
about the Funds' investment 11 Other Investment Practices
objectives, policies and risks. 13 Changing the Funds' Investment
Objectives and Policies
13 Investment Risks
ORGANIZATION AND MANAGEMENT
- ------------------------------------------------------------------------------
This section provides details 16 The Funds and the Investment Manager
about the people and 16 The Portfolio Managers
organizations who oversee the 16 Management Fees and Other Expenses
funds. 16 The Distributor
STOCKHOLDER INFORMATION
- ------------------------------------------------------------------------------
This section tells you how to 17 Buying Shares
buy, sell and exchange shares, 19 Selling Shares
how we value shares, and how we 20 Other Stockholder Services
pay dividends and distributions. 23 Dividends, Distributions and Taxes
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------
This section provides details on 25 Growth Equity Fund
selected financial highlights of 26 Small Cap Fund
the Funds.
2
<PAGE>
RISK/RETURN SUMMARY AND FUND EXPENSES
DRESDNER RCM GROWTH EQUITY FUND
RISK/RETURN SUMMARY
Goal: The Fund's goal is to seek long term capital
appreciation by investing 65% of its assets and
80% of its investments in equity and equity-
related securities of small- to medium-sized
domestic companies.
Principal Investment The Fund invests in Small- to medium-sized
Strategies: companies with total market capitalization (market
price of common stock and securities convertible
into common stock) not exceeding those of the
largest companies included in the Standard &
Poor's Midcap 400 Index, which currently includes
companies with capitalizations ranging between
$200 million to $12 billion. The Fund may also
invest up to 10% of its total assets in foreign
issuers.
The Fund is designed as an investment for employee
benefit plans and other tax-exempt investors.
Although taxable individuals and institutions are
permitted to invest in the Fund, prospective
taxable investors need to be aware that the
Investment Manager will not consider the tax
effect of capital gain or loss recognition or any
difference in the treatment of long- and short-
term capital gains when making investment
decisions for the Fund's portfolio.
The Fund focuses its investment on companies that
it expects will have higher than average rates of
growth and strong potential for capital
appreciation.
Principal Investment Because the values of the Fund's investments will
Risks: 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 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.
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>
RETURNS
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 MidCap 400 Index.
Both charts assume reinvestment of dividends and distributions. Of course,
past performance does not indicate how the Fund will perform in the future.
Year-by-Year Total Returns for Shares
[CHART]
For the period covered by this year by year total return chart, the Fund's
highest quarterly return was % (for the quarter ended ) and the lowest
-- ----
quarterly return was % (for the quarter ended ).
-- ----
Average Annual Total Returns
(through December 31, 1998)*
<TABLE>
<CAPTION>
PERFORMANCE PAST PAST FIVE PAST TEN
INCEPTION YEAR YEARS YEARS
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------
FUND SHARES % % %
- ------------------------------------------------------------------------------
S&P 400 INDEX % % %
- ------------------------------------------------------------------------------
</TABLE>
* For the period from inception through March 31,1999, the total returns of
Fund shares were % versus % for the S&P 400 Index.
-- --
4
<PAGE>
FEES AND EXPENSES
As an investor in the Fund, you will pay the following fees and expenses.
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
The Fund does not have any front-end or contingent sales
loads, or redemption or exchange fees, and does not charge
you for reinvesting dividends.
ANNUAL FUND OPERATING EXPENSES
(FEES PAID FROM FUND ASSETS)
<TABLE>
<S> <C>
Management Fees .75%
- ------------------------------------------------------------------------------
Rule 12b-1 Fee None
- ------------------------------------------------------------------------------
Other expenses 0.01%
- ------------------------------------------------------------------------------
Total annual Fund operating expenses 0.76%
- ------------------------------------------------------------------------------
</TABLE>
EXPENSE 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
Because this example is hypothetical and for comparison only, your actual costs
will be different.
<TABLE>
<CAPTION>
1 3 5 10
<S> <C> <C> <C>
Year Years Years Years
$80 $240 $420 $940
</TABLE>
5
<PAGE>
DRESDNER RCM SMALL CAP FUND
The Fund is currently closed to investors. However, this restriction does not
apply to reinvestments of dividends and capital gains distributions.
RISK/RETURN SUMMARY
Goal: The Fund's goal is to seek long term capital
appreciation by investing 65% of its total assets
and 80% of its investments in equity and equity-
related securities of small domestic companies.
Principal Investment Small companies have market capitalizations
Strategies: (market price of common stock and securities
convertible into common stock) of up to $1 billion
at the time of acquisition.
Under normal market conditions, the Fund invests
at least 90% of its investments in companies with
market capitalizations below $1.5 billion at the
time of purchase. The Fund may also invest up to
10% of its total assets in foreign issuers.
The Fund anticipates that the average market
capitalization of its portfolio will range between
50% and 150% of the average market capitalization
of the securities that comprise the Russell 2000
Index.
The Fund is designed as an investment for employee
benefit plans and other tax-exempt investors.
Although taxable individuals and institutions are
permitted to invest in the Fund, prospective
taxable investors need to be aware that the
Investment Manager will not consider the tax
effect of capital gains or loss recognition or any
difference in the treatment of long- and short-
term capital gains when making investment
decisions for the Fund's portfolio.
The Fund focuses its investments on companies that
it expects will have higher than average rates of
growth and strong potential for capital
appreciation.
Principal Investment Because the values of the Fund's investments will
Risks: 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 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.
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>
RETURNS
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 Russell 2000 Index.
Both charts assume reinvestment of dividends and distributions. Of course,
past performance does not indicate how the Fund will perform in the future.
Year-by-Year Total Returns for Fund Shares
[CHART]
For the period covered by this year by year total return chart, the Fund's
highest quarterly return was % (for the quarter ended ) and the lowest
-- ----
quarterly return was % (for the quarter ended ).
-- ----
Average Annual Total Returns
(through December 31, 1998)*
<TABLE>
<CAPTION>
PERFORMANCE PAST PAST FIVE LIFE OF
INCEPTION YEAR YEARS FUND
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------
FUND SHARES % % %
- ------------------------------------------------------------------------------
RUSSELL 2000 INDEX % % %
- ------------------------------------------------------------------------------
</TABLE>
* For the period from inception through March 31,1999, the total returns of
Fund shares were % versus % for the Russell 2000 Index.
-- --
7
<PAGE>
FEES AND EXPENSES
As an investor in the Fund, you will pay the following fees and expenses.
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
The Fund does not have any front-end or contingent sales
loads, or redemption or exchange fees, and does not charge
you for reinvesting dividends.
ANNUAL FUND OPERATING EXPENSES
(FEES PAID FROM FUND ASSETS)
<TABLE>
<S> <C>
Management Fees 1.00%
- ------------------------------------------------------------------------------
Rule 12b-1 fee None
- ------------------------------------------------------------------------------
Other expenses 0.01%
- ------------------------------------------------------------------------------
Total annual Fund operating expenses 1.01%
- ------------------------------------------------------------------------------
</TABLE>
EXPENSE 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
Because this example is hypothetical and for comparison only, your actual costs
will be different.
1 3 5 10
Year Years Years Years
$100 $320 $550 $1,250
8
<PAGE>
INVESTMENT OBJECTIVES, POLICIES AND RISKS
INVESTMENT OBJECTIVES AND 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.
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 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
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.
WHAT KINDS OF EQUITY SECURITIES DO THE FUNDS INVEST IN?
The Funds invest primarily in common stocks. Subject to the restrictions
described above, the Funds may invest in companies of any size. Common stocks
represent the basic equity ownership interests in a company.
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.
OTHER INVESTMENT PRACTICES
FOREIGN SECURITIES
The Funds 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
9
<PAGE>
- - American Depositary receipts
- - Securities of other investment companies investing primarily in such
equity and equity-related foreign securities
The Investment Manager expects that the Funds' foreign investments will
primarily be 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.
HEDGING
Each Fund may purchase and sell stock index futures contracts and options
on those futures contracts as a hedge against changes in market conditions that
may result in changes in the value of the Fund's portfolio securities and not
for speculation.
DEPOSITARY RECEIPTS
Each Fund may invest in securities of foreign companies in the form of
American Depositary Receipts ("ADRs"). Depositary receipts are receipts for
ordinary shares of foreign companies. ADRs are typically issued by U.S. banks,
and are usually dollar-denominated and do not involve the currency exchange risk
of investing in the underlying securities. Depositary receipts entitle their
holder to all dividends and all capital gains associated with the underlying
ordinary shares, and thus have risks similar to foreign equity securities.
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.
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. Such investment is subject to the
restrictions referred to above regarding investments in companies organized or
headquartered in foreign countries. Each Fund may invest up to 5% of the value
of its total assets in other investment companies. 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.
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, each 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 a
remaining maturity of less than one year. During these periods, a Fund may
not achieve its investment objective.
ADDITIONAL INFORMATION ABOUT INVESTMENT PRACTICES
The Statement of Additional Information has more detailed information about
the investment practices described in this Prospectus as well as information
about other investment practices used by the Investment Manager.
CHANGING THE FUNDS' INVESTMENT OBJECTIVES AND POLICIES
10
<PAGE>
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 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.
SMALL COMPANIES
Investments in small concerns may involve greater risks than investments in
larger companies, and may be speculative. The securities of small companies, as
a class, have had periods of more favorable results, and periods of less
favorable results, than securities of larger companies as a class. In addition,
small companies in which 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 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.
11
<PAGE>
FUTURES TRANSACTIONS
The use of stock index futures and options on futures 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 and other
factors. Although hedging operations could reduce the risk of loss due to a
decline in the value of the hedged portfolio, they could also limit the
potential gain from an increase in the value of the portfolio.
YEAR 2000
Many computer programs employed throughout the world use two digits rather
than four to identify the year. These programs, if not adapted, will not
correctly handle the change from "99" to "00" on January 1, 2000, and will not
be able to perform necessary functions critical to the Funds' operations. The
"Year 2000 issue" affects all companies and organizations.
The Year 2000 issue may also adversely affect the companies in which the
Funds invest. For example, companies may incur substantial costs to address the
problem. They may also suffer losses caused by corporate and governmental data
processing errors. To the extent the impact of a portfolio holding is negative,
the Funds' investment return could be adversely affected.
The Investment Manager has advised the Fund that it is implementing a plan
intended to ensure that its computer systems are not adversely affected by the
Year 2000 issue. The Fund understands that their key service providers are
taking steps to address the issue as well. The Fund and the Investment Manager
will continue to monitor developments relating to this issue but do not
anticipate that the Year 2000 issue will have an adverse effect on the
Investment Manager's ability to provide services to the Funds.
EURO INTRODUCTION
The European Union's introduction on January 1, 1999 of a single European
currency, the Euro, creates various uncertainties, including whether the payment
and operational systems of banks and other financial institutions will be
prepared for the change, the legal treatment of certain outstanding financial
contracts that refer to existing currencies, and the creation of suitable
clearing and settlement payment systems for the new currency. These or other
related factors could cause market disruptions. The Funds understand that the
Investment Manager and other key service providers are taking steps to address
Euro-related issues.
12
<PAGE>
ORGANIZATION AND MANAGEMENT
THE FUNDS AND THE INVESTMENT MANAGER
The Funds are series of Dresdner RCM Capital Funds, Inc. (the "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
GROWTH FUND
John A. Kriewall and Gary B. Sokol are primary portfolio managers of the
Growth Equity Fund. Mr. Kriewall has managed one or more of the Growth Equity
Fund's portfolios since 1987 and was one of the primary portfolio managers of
the Small Cap Fund from 1992-1997. He is a Managing Director of the Investment
Manager, with which he has been associated since 1973. Mr. Sokol was a primary
portfolio manager of the Small Cap Fund from 1992-1997. He is a Managing
Director of the Investment Manager, with which he has been associated since
1988.
SMALL CAP FUND
G. Nicholas Farwell and Matthew L. Blazei are primarily portfolio managers
of the Small Cap Fund. Mr. Farwell was a primary portfolio manager of the
Growth Equity Fund from 1984-1997. He is a Managing Director of the Investment
Manager, with which he has been associated since 1980. Mr. Blazei has research
and management responsibilities for small cap securities and is a Director of
the Investment Manager, with which he has been associated since 1992.
MANAGEMENT FEES AND OTHER EXPENSES
Each Fund pays the Investment Manager a fee pursuant to an investment
management agreement. The Growth Fund and the Small Cap Fund each pay a
monthly fee to the Investment Manager at the annual rate of 0.75% and 1.00%
of their average daily net assets, respectively.
Each Fund pays its own brokerage and commission expenses, taxes, interest
charges on any borrowings, custodial charges and expenses, and investment
management fees. The Investment Manager pays all other ordinary operating
expenses (e.g., legal and audit fees, securities registration expenses, and
compensation of directors who are not affiliated with the Investment Manager).
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 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.
STOCKHOLDER INFORMATION
BUYING SHARES
The Company currently offers shares of the Funds solely to institutions and
individuals who have entered into an investment management agreement or
investment advisory agreement with the Funds'
13
<PAGE>
Investment Manager. The Company expects to continue this policy in the
future. The Investment Manager may for discretionary account clients be
authorized to determine the amount and timing of purchases and redemption of
shares of the Funds held by such clients, subject only to general
authorizations and guidelines of those clients (See, "Investment by Employee
Benefit Plans" in the SAI).
For your convenience, we offer several ways to start and add to investments
in any of the Funds.
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 help you establish your Fund account, execute transactions, and monitor your
investment. If your Fund investment is not held in the name of your financial
professional and you prefer to place a transaction order yourself, please use
the instructions below for investing directly.
Shares may also be purchased through certain brokers which have entered
into selling group agreements with the Distributor. Brokers may charge a fee
for their services at the time of purchase or redemption. Subscription forms
can be obtained from the Funds.
ESTABLISHING YOUR ACCOUNT
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 amount for initial
investments in each Fund is $10,000 for ($1,000 for additional
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. Please apply at this time for any
account privileges you may want to use in the future to avoid the delays
associated with adding them later on.
- - Mail your completed application to the appropriate Fund at:
Boston Financial Data Services
P.O. Box 419927
Boston, MA 02266-8025
For answers to any questions, please speak with a Fund representative at
1-800-726-7240.
We reserve the right to reject any purchase of shares at our sole
discretion. We also reserve the right to cancel any purchase order for which
payment has not been received by the third business day following the order.
We will issue share certificates only for full shares and only upon the
specific request of the stockholder. Confirmation statements showing
transactions in the stockholder's account and a summary of the status of the
account serve as evidence of ownership of shares in a Fund. We will forward
this 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 place a purchase
order. Funds that are wired
14
<PAGE>
without a purchase order will be returned uninvested.
- - After placing your purchase order, instruct your bank to wire the amount
of your investment to:
------------------------------
Routing number:
--------------
Credit:
----------------------
Account number:
--------------
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].
- - Mail the check with your completed application to the appropriate Fund
at:
Boston Financial Data Services
P.O. Box 419927
Boston, MA 02266-8025
ADDING TO YOUR ACCOUNT
BY WIRE
- - Call the Fund to place a purchase order. Funds that are 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].
- - Mail the check with a completed investment slip to the Fund at:
Boston Financial Data Services
P.O. Box 419927
Boston, MA 02266-8025
If you do not have an investment slip, attach a note indicating your
account number.
WITH SECURITIES
In its discretion, the Company may accept securities of equal value instead
of cash in payment of all or part of the subscription price for Fund shares.
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 shares;
- - Will have a tax basis to the Fund equal to such value;
- - Must not be restricted securities; and
- - Must be permitted to be purchased in accordance with the Fund's
investment objective and policies and must be securities that the Fund
would be willing to purchase at that time.
15
<PAGE>
SELLING SHARES
BY PHONE - WIRE PAYMENT
- - Call the Fund to verify that the wire redemption privilege is in place
on your account. If it is not, a representative can help you add it.
- - Place your wire request.
BY PHONE - CHECK PAYMENT
- - Call the Fund and place your request. Once your request has been
verified, a check for the net cash amount, payable to the registered
owner(s), will be mailed to the address of record. For checks payable
to any other party or mailed to any other address, please make your
request in writing (see below).
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
- Any stock certificates you may hold or other additional documents we
may request
- - Indicate whether you want any cash proceeds sent by check or by wire.
- - Make sure all registered owners or their authorized parties sign the
letter. The Fund may require additional information, such as a signature
guarantee.
- - Mail the letter to the Fund at:
Boston Financial Data Services
P.O. Box 419927
Boston, MA 02266-8025
OTHER STOCKHOLDER SERVICES
TELEPHONE ORDERS
We 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). 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 using the Fund's fair valuation
procedures.
16
<PAGE>
TIMING OF ORDERS
We accept orders until the close of trading on the NYSE every business
day. Orders received before 4:00 p.m. Eastern time are executed the same day
at that day's NAV. Orders received after 4:00 p.m. Eastern time are executed
the following day at that day's NAV. Each Fund has the right to suspend
redemption of shares 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 practical,
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. Upon execution of the
redemption order, a confirmation statement will be forwarded to you indicating
the number of shares sold and the proceeds thereof.
ACCOUNTS WITH BELOW-MINIMUM BALANCES
If your account balance in a Fund falls below the minimum required by a
Fund as a result of selling shares (and not because of performance), we reserve
the right to ask you to buy more shares of the Fund or close your account. If
your account balance is still below the minimum 90 days after notification, we
reserve the right to close out your account and send the proceeds to the address
of record.
AUTOMATIC REINVESTMENT
We will reinvest each income dividend and capital gain distribution
declared by a Fund in full and fractional shares of the same Fund, unless you
or your duly authorized agent elects to receive all such payments, or only
the dividend or distribution portions, in cash. We will base such
reinvestment on the Fund's NAV as determined on the payment date. You or
your authorized agent may request changes in the manner in which dividend and
distribution payments are made through written notice to the Fund's Transfer
and Dividend Disbursing Agent, Boston Financial Data Services ("BFDS"). This
request will be effective as to any subsequent payment if it is received
prior to the record date used for determining your payment. Any dividend and
distribution election will remain in effect until you notify BFDS in writing
to the contrary at the address given on page __.
EXCHANGE PRIVILEGE
You may exchange shares of either Fund into Class I shares of any other
Fund offered by Dresdner RCM, without a sales charge or other fee, by
contacting BFDS in writing. Exchange purchases are subject to the minimum
investment requirements of the class purchased. An exchange will be treated
as a redemption and purchase for tax purposes.
Shares will be exchanged at net asset value per share next determined after
receipt by BFDS of:
- - 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
17
<PAGE>
registered, the account number and the number of shares or the dollar
amount to be exchanged
- - stock certificates for any shares to be exchanged which are held by the
stockholder.
Exchanges will not become effective until all documents in the form
required have been received by BFDS. If you have any questions, please
contact BFDS. Please be sure to obtain and read carefully the prospectus of
any other Fund into which you wish to exchange shares if that Fund is not
included in this Prospectus. To obtain any such prospectus, call
1-800-726-7240.
ACCOUNT STATEMENTS
Stockholder accounts are opened in accordance with your registration
instructions. Transactions in the account, such as additional investments and
dividend reinvestments, will be reflected on regular confirmation statements.
REPORTS TO STOCKHOLDERS
Each Fund's fiscal year ends on December 31. Each Fund will issue to its
stockholders semi-annual and annual reports. In addition, stockholders will
receive quarterly statements of the status of their accounts reflecting all
transactions having taken place within that quarter. In order to reduce
duplicate mailings and printing costs, each Fund will provide one annual and
semi-annual report and annual prospectus per household. Information regarding
the tax status of income dividends and capital gains distributions will be
mailed to stockholders on or before January 31st of each year. Account tax
information will also be sent to the IRS.
REDEMPTION
Redemption payments will be made wholly in cash unless the Board of
Directors believes that unusual conditions exist which would make such payment
detrimental to the best interests of the pertinent Fund. Under such
circumstances, payment of the redemption price could be made in whole or in part
in portfolio securities. You would incur brokerage costs to sell such
securities.
18
<PAGE>
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. They are typically paid once
per 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.
The Funds are designed as investments for employee benefit plans and other
tax-exempt investors. Although taxable individuals and institutions are
permitted to invest in each Fund, prospective taxable investors need to be aware
that the Investment Manager will not consider the tax effect of capital gain or
loss recognition or any difference in the treatment of long- and short-term
capital gains when making investment decisions for the Funds' portfolios.
If you are an individual (or certain other non-corporate) stockholder, we
have to withhold 31% of all dividends, capital gain distributions and redemption
proceeds we pay to you if: (a) you have not given us a certified correct
taxpayer identification number and (b) except with respect to redemption
proceeds, have not certified that backup withholding does not apply. Amounts we
withhold are applied to your federal tax liability, and a refund may be obtained
from the Internal Revenue Service if withholding results in an overpayment of
taxes. Distributions of our taxable income and net capital gain to non-resident
alien individuals, non-resident alien fiduciaries of trusts of estate, foreign
corporations, or foreign partnerships may also be subject to U.S. withholding
tax, although distributions of net capital gain to such stockholders generally
will not be subject to withholding.
We may be required to pay income, withholding and other taxes imposed by
foreign countries, generally at rates from 10% to 40%, which would reduce our
investment income. Tax conventions between certain countries and the U.S. may
reduce or eliminate such taxes. We may "pass through" to you the amount of
foreign income taxes we pay, if it is in the best interests of stockholders. If
we do so, you will be required to include in your gross income your pro-rata
share of foreign taxes we paid, and you will be able to treat such taxes as
either an itemized deduction or a foreign credit against U.S. income taxes on
your tax returns. If we do not do so, you will not be able to deduct your share
of such taxes in computing your taxable income and will not be able to take your
share of such taxes as a credit against your U.S. income taxes.
In general, selling shares for cash, exchanging shares, and receiving
distributions (whether reinvested or taken in cash) are all taxable events.
These transactions typically create the following tax liabilities for taxable
accounts:
<TABLE>
<S> <C>
TRANSACTION TAX STATUS
----------------------------------------------------------------------------
Income dividends Ordinary income
----------------------------------------------------------------------------
Short-term capital gains distributions Ordinary income rates
----------------------------------------------------------------------------
Long-term capital gains distributions Capital gains
----------------------------------------------------------------------------
Sales or exchanges of shares owned Capital gains or losses
for more than one year
----------------------------------------------------------------------------
Sales or exchange of shares owned Gains are taxed at ordinary income
for one year or less rates; 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 the Funds and made payable to you in such a month are treated as
paid and are thereby taxable as of December 31, provided that the Funds pay 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
19
<PAGE>
thereon, you will pay full price for the shares (known as buying a
distribution). Then you will receive some portion of your purchase price
back as a taxable distribution even though, because the amount of the
dividend or other distribution reduces the shares' net asset value, it
actually represents a return of invested capital.
You will receive, after the end of each year, full information on
dividends, capital gain distributions and other reportable amounts with respect
to your 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 from 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.
20
<PAGE>
FINANCIAL HIGHLIGHTS [TO COME]
NET ASSET VALUE,
BEGINNING OF PERIOD
- -------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss)
Net realized and unrealized gain (loss)
from investments
- -------------------------------------------------
Total from Investment Activities
- -------------------------------------------------
DISTRIBUTIONS:
Net investment income
In excess of net investment income
Net realized gains
In excess of net realized gains
- -------------------------------------------------
Total Distributions
NET ASSET VALUE,
END OF PERIOD
- -------------------------------------------------
Total Return (excludes sales charge)
ANNUALIZED RATIOS/
SUPPLEMENTARY DATA:
Net Assets at end of period (000)
Ratio of expenses to average net assets
Ratio of net investment income to
average net assets
Ratio of expenses to average net
Assets
Ratio of net investment income to
Average net assets
Portfolio Turnover (e)
Ratio of expenses to average net
Assets
Ratio of net investment income to
Average net assets
Portfolio Turnover (e)
21
<PAGE>
[Back Page]
For more information about 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, Suite 2900
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.
- Free from the Commission's Website at http://www.sec.gov.
------------------
Investment Company Act file no. 811-2913.
22
<PAGE>
Dresdner RCM Capital Funds, Inc.
Four Embarcadero Center
San Francisco, California 94111-4189
(800) 726-7240
DRESDNER RCM GROWTH EQUITY FUND
DRESDNER RCM SMALL CAP FUND
STATEMENT OF ADDITIONAL INFORMATION
____________ __, 1999
Dresdner RCM Growth Equity Fund (the "Growth Equity Fund") and Dresdner RCM
Small Cap Fund (the "Small Cap Fund") are series of Dresdner RCM Capital
Funds, Inc. (the "Company"), an open-end management investment company. The
Company presently consists of three series, two of which are discussed in
this SAI. The Funds' investment manager is Dresdner RCM Global Investors LLC
(the "Investment Manager"). Both the Growth Equity Fund and the Small Cap
Fund (together, "the Funds") are diversified.
This Statement of Additional Information ("SAI") is not a prospectus, and
should be read in conjunction with the Prospectus of the Funds dated ________
__, 1999. The Prospectus may be obtained without charge by writing or calling
the Company at the address and phone number above.
<PAGE>
TABLE OF CONTENTS
Page
Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Investment Objectives and Policies. . . . . . . . . . . . . . . . . . . . 1
Risk Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . . .13
Execution of Portfolio Transactions . . . . . . . . . . . . . . . . . . .16
Directors and Officers. . . . . . . . . . . . . . . . . . . . . . . . . .19
Control Persons and Principal Holders of Securities . . . . . . . . . . .22
Investment by Employee Benefit Plans. . . . . . . . . . . . . . . . . . .22
The Investment Manager. . . . . . . . . . . . . . . . . . . . . . . . . .24
The Distributor . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
Net Asset Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
Purchase and Redemption of Shares . . . . . . . . . . . . . . . . . . . .28
Dividends, Distributions and Tax Status . . . . . . . . . . . . . . . . .28
Investment Results. . . . . . . . . . . . . . . . . . . . . . . . . . . .31
General Information . . . . . . . . . . . . . . . . . . . . . . . . . . .33
Additional Information. . . . . . . . . . . . . . . . . . . . . . . . . .34
Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . .35
<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
Each Fund may invest up to 10% of its total assets in foreign
securities, including securities of issuers that are organized or
headquartered in emerging market countries. 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 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 may invest in securities of
companies organized or headquartered in developing countries with emerging
markets. As a general matter, countries that are not considered to be
developed foreign countries by the Investment Manager will be deemed to be
emerging market countries. 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,
Page 1
<PAGE>
Switzerland, and the United Kingdom. (See INVESTMENT IN DEVELOPED FOREIGN
COUNTRIES.) As their economies grow and their markets grow and mature, some
countries that currently may be characterized by the Investment Manager as
emerging market countries may be deemed by the Investment Manager to be
developed foreign countries. In the event that the Investment Manager deems a
particular country to be a developed foreign country, any investment in
securities issued by that country's government or by an issuer located in
that country would not be subject to a Fund's overall limitations on
investments in emerging market countries.
Securities of issuers organized or headquartered in emerging market
countries may, at times, offer excellent opportunities for current income and
capital appreciation. However, prospective investors should be aware that the
markets of emerging market countries historically have been more volatile
than the markets of the United States and developed foreign countries. 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.
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 abroadTo 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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FUTURES TRANSACTIONS
Each Fund may purchase and sell stock index futures contracts and options
on such futures contracts as a hedge against changes in market conditions that
may result in changes in the value of the Fund's portfolio securities and not
for speculation. A stock index (such as the Standard & Poor's 500 Stock Price
Index) assigns relative values to the common stocks included in the index, and
the index fluctuates with changes in the market values of the common stocks so
included.
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 index at the close of the last
trading day of the contract and the price at which the 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 index. No
physical delivery of the underlying stocks 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 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 stock index futures contract
and the price of the underlying index 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
stock index futures contract and the price of the underlying index 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
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 stock index futures contracts ("futures options"). A
futures option gives the holder the right, in return for the premium paid, to
assume a long position (in the case of a call) or short position (in the case of
a put) in a futures contract at a specified exercise price prior to the
expiration of the option. Upon exercise of a call option, the holder acquires a
long position in the futures contract and the writer is assigned the opposite
short position. In the case of a put option, the opposite is true. A futures
option may be closed out (before exercise or expiration) by an offsetting
purchase or sale of a futures option of the same series.
PURCHASE OF FUTURES. 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 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
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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 put options on stock
index futures contracts 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.
PURCHASE OF CALL OPTIONS ON FUTURES. The purchase of call option on stock
index futures contracts represents a means of obtaining 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 stock, which
can be used as a substitute for a position in the stock itself. Depending on the
pricing of the option compared to either the futures contract upon which it is
based, or to the price of the underlying stock 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 stock index futures
contract or the underlying stock. Like the purchase of a stock index futures
contract, a Fund would purchase a call option on a stock index futures contract
to hedge against a market advance when the Fund is not fully invested.
LIMITATIONS ON PURCHASE AND SALE OF FUTURES AND FUTURES OPTIONS. The Funds
will not engage in transactions in stock index futures contracts or futures
options for speculation, but only as a hedge against changes in the value of
securities held in each 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 in the reduction of risks inherent in the ongoing management of a
Fund's investment portfolio.
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. Such segregated accounts
will be marked to market daily.
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.
DEBT SECURITIES
Each Fund may invest up to 20% of its total assets in U.S. Government
debt obligations. The timing of purchase and sale transactions in debt
obligations may result in capital appreciation or depreciation because the
value of debt obligations varies inversely with prevailing interest rates.
The debt obligations in which the Funds will 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 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.
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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.
GOVERNMENT OBLIGATIONS. U.S. Government obligations include obligations
issued or guaranteed as to principal and interest by the U.S. Government and its
agencies and instrumentalities, by the right of the issuer to borrow from the
U.S. Treasury, by the discretionary authority of the U.S. Government to purchase
certain obligations of the agency or instrumentality, or only by the credit of
the agency or instrumentality. No assurance can be given that the U.S.
Government will provide financial support to U.S. Government-sponsored
instrumentalities if it is not obligated to do so by law.
The Investment Manager does not intend to purchase U.S. debt securities
(other than cash-equivalent instruments with a maturity of one year or less),
except on an occasional basis when the Investment Manager believes that
unusually attractive investments are available.
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 10% 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.
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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.
BORROWING MONEY
From time to time, it may be advantageous for a Fund to borrow money rather
than sell portfolio securities to raise the cash to meet redemption requests. In
order to meet such redemption requests, each Fund may borrow from banks or enter
into reverse repurchase agreements. Each Fund may also borrow up to 5% of the
value of its total assets for temporary or emergency purposes other than to meet
redemptions. However, the Funds will not borrow money for leveraging purposes. A
Fund may continue to purchase securities while borrowings are outstanding, but
will not do so when the Fund's borrowings (including reverse repurchase
agreements) exceed 5% of the value of its total assets. The 1940 Act permits a
Fund to borrow only from banks and only to the extent that the value of its
total assets, less its liabilities other than borrowings, is equal to at least
300% of all borrowings (including the proposed borrowing), and requires the Fund
to take prompt action to reduce its borrowings if this limit is exceeded. For
the purpose of the 300% borrowing limitation, reverse repurchase transactions
are considered to be borrowings.
A reverse repurchase agreement involves a transaction by which a borrower
(such as a Fund) sells a security to a purchaser (a member bank of the Federal
Reserve System or a broker-dealer deemed creditworthy pursuant to standards
adopted by the Board of Directors of the Company (the "Board of Directors"), and
simultaneously agrees to repurchase the security at an agreed-upon price on an
agreed-upon date within a number of days (usually not more than seven) from the
date of purchase.
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LENDING PORTFOLIO SECURITIES
Each Fund is authorized to make loans of portfolio securities, for the
purpose of realizing additional income, to broker-dealers or other institutional
investors deemed creditworthy pursuant to standards adopted by its Board of
Directors. The borrower must maintain with the Fund's custodian collateral
consisting of cash, U.S. Government securities or other liquid debt or equity
securities equal to at least 100% of the value of the borrowed securities, plus
any accrued interest. The Fund will receive any interest paid on the loaned
securities, and a fee and/or a portion of the interest earned on the collateral,
less any fees and administrative expenses associated with the loan.
ILLIQUID SECURITIES
Each Fund may invest up to 5% of the value of its net assets in illiquid
securities. Securities may be considered illiquid if a Fund cannot reasonably
expect to receive approximately the amount at which the Fund values such
securities within seven days. The Investment Manager has the authority to
determine whether certain securities held by a Fund are liquid or illiquid
pursuant to standards adopted by the Board of Directors.
The 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 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
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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.
RISK CONSIDERATIONS
FOREIGN SECURITIES
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.
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.
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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.
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.
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
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negative effects on the economies and securities markets of certain emerging
market countries. Economies in emerging markets generally are heavily
dependent upon international trade and, accordingly, have been and may
continue to be affected adversely by trade barriers, exchange controls,
managed adjustments in relative currency values, and other protectionist
measures imposed or negotiated by the countries with which they trade. These
economies also have been and may continue to be adversely affected by
economic conditions in the countries with which they trade. In addition,
custodial services and other costs related to investment in foreign markets
may be more expensive in emerging markets than in many developed foreign
markets, which could reduce the Funds' investment returns from such
securities.
In many cases, governments of emerging market countries continue to
exercise a significant degree of control over the economies of such countries,
and government actions relative to the economy, as well as economic developments
generally, also may have a major effect on an issuer's prospects. In addition,
certain of such governments have in the past failed to recognize private
property rights and have at times naturalized or expropriated the assets of
private companies. There is also a heightened possibility of confiscatory
taxation, imposition of withholding taxes on dividend and interest payments, or
other similar developments that could affect investments in those countries. As
a result, there can be no assurance that adverse political changes will not
cause a Fund to suffer a loss with respect to any of its holdings. In addition,
political and economic structures in many of such countries may be undergoing
significant evolution and rapid development, and such countries may lack the
social, political and economic stability characteristics of more developed
countries. Unanticipated political or social developments may affect the values
of a Fund's investments in those countries and the availability of additional
investments in those countries.
INVESTMENTS IN SMALLER COMPANIES
Investment in the securities of companies with market capitalizations below
$1 billion involves greater risk and the possibility of greater portfolio price
volatility than investing in larger capitalization companies. The securities of
small-sized concerns, as a class, have shown market behavior which has had
periods of more favorable results, and periods of less favorable results,
relative to securities of larger companies as a class. For example, smaller
capitalization companies may have less certain growth prospects, and may be more
sensitive to changing economic conditions, than large, more established
companies. Moreover, smaller capitalization companies often face competition
from larger or more established companies that have greater resources. In
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. 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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OTHER DEBT OBLIGATIONS
Although securities rated below 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.
FUTURES TRANSACTIONS
There are several risks in connection with the use of stock index
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 securities which are 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 securities or currency being hedged. If
the price of the future moves less than the price of the securities which are
the subject of the hedge, the hedge will not be fully effective but, if the
price of the securities 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 securities 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
securities, 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
securities which are the subject of the hedge.
To compensate for the imperfect correlation of movements in the price of
securities 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 securities being hedged, if the historical volatility of the
price of such securities has been greater than the historical volatility of
the securities. Conversely, a Fund may buy or sell fewer futures contracts if
the historical volatility of the price of the securities being hedged is less
than the historical volatility of the securities.
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 securities underlying the index and sold the
securities after the decline.
When futures are purchased by a Fund to hedge against a possible
unfavorable movement in the price of stock before the Fund is able to invest its
cash (or cash equivalents) in stock in an orderly fashion, it is possible that
the market may decline instead. If the Fund then decides not to invest in stock
at that time because of concern as to possible further market decline or for
other reasons, the Fund will realize a loss on the futures contract that is not
offset by a reduction in the price of securities purchased.
In addition to the possibility that there may be an imperfect
correlation, or no correlation at all, between movements in the futures and
the securities which are the subject of a hedge, the price of futures
contracts may not correlate perfectly with movements in the stock index 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 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 securities 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 stock index and movements in the price
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of stock index 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
securities 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. 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
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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 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 for each Fund are as follows.
THE GROWTH EQUITY FUND MAY NOT:
1. Invest in securities of any one issuer (other than the United States of
America, its agencies and instrumentalities), if immediately after and as a
result of such investment the value of the holdings of the Fund in the
securities of such issuer exceeds 5% of the value of the Fund's total
assets;
2. 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);
3. Invest in foreign securities if immediately after and as a result of such
investment the value of the holdings of the Fund in foreign securities
exceeds 10% of the value of the Fund's total assets;
4. Acquire more than 10% of the outstanding voting securities, or 10% of all
of the securities, of any one issuer;
5. Invest in companies for the purpose of exercising control or management;
6. 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;
7. Invest in interests in oil, gas, or other mineral exploration or
development programs;
8. Borrow amounts in excess of 5% of the total assets taken at cost or at
market value, whichever is lower, and only from banks as a temporary
measure for extraordinary or emergency purposes. The Fund will not
mortgage, pledge, hypothecate or in any other manner transfer as security
for an indebtedness any of its assets;
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9. Issue senior securities as defined in the 1940 Act, except that the Fund
may borrow money as permitted by restriction 8 above. For this purpose,
futures and other transactions covered by segregated accounts are not
considered to be senior securities.
10. 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;
11. Make loans of its funds or assets to any other person, which shall not be
considered as including: (i) the purchase of a portion of an issue of
publicly distributed debt securities, (ii) the purchase of bank obligations
such as certificates of deposit, bankers' acceptances and other short-term
debt obligations (iii) entering into repurchase agreements with respect to
commercial paper, certificates of deposit and obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities, and
(iv) the loan of portfolio securities to brokers, dealers and other
financial institutions where such loan is callable by the Fund at any time
on reasonable notice and is fully secured by collateral in the form of cash
or cash equivalents. The Fund will not enter into repurchase agreements
with maturities in excess of seven days if immediately after and as a
result of such transaction the value of the Fund's holdings of such
repurchase agreements exceeds 10% of the value of the Fund's total assets.
The Fund will not lend portfolio securities which, when valued at the time
of loan, have a value in excess of 10% of the value of the Fund's total
assets;
12. Make short sales of securities;
13. Act as an underwriter of securities issued by other persons, or invest more
than 5% of the value of its net assets in securities that are illiquid;
14. Invest more than 5% of the value of its net assets in the securities of any
issuer which shall have a record of less than three years of continuous
operation (including the operation of any predecessor);
15. 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 5% 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;
16. 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 average prices among
them, is not deemed to result in a securities trading account);
17. Purchase from or sell portfolio securities to its officers, directors, or
other "interested persons" (as defined in the 1940 Act) of the Company,
other than otherwise unaffiliated broker-dealers;
18. Purchase or retain the securities of an issuer if, to the Company's
knowledge, one or more of the directors, officers, partners or employees of
the Company or the Investment Manager individually own beneficially more
than 1/2 of 1% of the securities of such issuer and together own
beneficially more than 5% of such securities;
19. Purchase or sell stock index futures or purchase related options if,
immediately thereafter, more than 30% of the value of its net assets would
be hedged, or the sum of the amount of "margin" deposits on the Fund's
existing futures positions and premium paid for related options would
exceed 5% of the market value of the Fund's total assets; or
20. 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
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futures and options contracts only for hedging purposes. The Fund has
no current intention of entering into commodities contract except for
stock index futures and related options.
The Small Cap Fund may not:
1. Invest in securities of any one issuer (other than the United States of
America, its agencies and instrumentalities), if immediately after and as a
result of such investment the value of the holdings of the Fund in the
securities of such issuer exceeds 5% of the value of the Fund's total
assets;
2. 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);
3. Invest in foreign securities if immediately after and as a result of such
investment the value of the holdings of the Fund in foreign securities
exceeds 10% of the value of the Fund's total assets;
4. Acquire more than 10% of the outstanding voting securities, or 10% of all
of the securities, of any one issuer;
5. Invest in companies for the purpose of exercising control or management;
6. 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;
7. Invest in interests in oil, gas, or other mineral exploration or
development programs;
8. Issue senior securities, except that the Fund may borrow amounts, up to 5%
of the total assets taken at cost or at market value, whichever is lower,
and only from banks as a temporary measure for extraordinary or emergency
purposes. For this purpose, futures and other transactions covered by
segregated accounts are not considered to be senior securities. The Fund
may engage in activities listed in Investment Restriction 10, but will not
mortgage, pledge, hypothecate or in any other manner transfer as security
for an indebtedness any of its assets;
9. 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;
10. 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; and (ii) the purchase of bank
obligations such as certificates of deposit, bankers' acceptances and other
short-term debt obligations. Notwithstanding the foregoing, the Fund may:
(i) enter 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 (ii) loan portfolio
securities to brokers, dealers and other financial institutions where such
loan is callable by the Fund at any time on reasonable notice and is fully
secured by collateral in the form of cash or cash equivalents. The Fund
will not enter into repurchase agreements with maturities in excess of
seven days if immediately after and as a result of such transaction the
value of the Fund's holdings of such repurchase agreements and other
illiquid securities exceeds 5% of the value of the Fund's total assets.
The Fund will not lend portfolio securities which, when valued at the time
of loan, have a value in excess of 10% of the Fund's net assets;
11. Make short sales of securities;
12. Act as an underwriter of securities issued by other persons, or invest more
than 5% of the value of its net assets in securities that are illiquid;
13. Invest more than 5% of the value of its net assets in the securities of any
issuer which shall have a record of less than three years of continuous
operation (including the operation of any predecessor);
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14. 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 5% 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;
15. Participate on 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 average prices among
them, is not deemed to result in a securities trading account);
16. Purchase from or sell portfolio securities to its officers, directors, or
other "interested persons" (as defined in the 1940 Act) of the Company,
other than otherwise unaffiliated broker-dealers;
17 Purchase or retain the securities of an issuer if, to the Company's
knowledge, one or more of the directors, officers, partners or employees of
the Company or the Investment Manager individually own beneficially more
than 1/2 of 1% of the securities of such issuer and together own
beneficially more than 5% of such securities;
18 Purchase or sell stock index futures or purchase related options if,
immediately thereafter, more than 30% of the value of its net assets would
be hedged, or the sum of the amount of "margin" deposits on the Fund's
existing futures positions and premium paid for related options would
exceed 5% of the market value of the Fund's total assets; or
19. 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 only for hedging purposes. The Fund has no current
intention of entering into commodities contracts except for stock index
futures and related options.
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
Company's Board of Directors, makes each Fund's investment decisions and
selects the broker or dealer for 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 each 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 that a particular
broker or dealer is in a position to obtain the best execution, the order is
placed with that broker or dealer. This may or may not be a broker or dealer
that has provided investment information and research services to the
Investment Manager. Such investment information and research services may
include, among other things, a wide variety of written reports or other data
on the individual companies and industries; data and reports on general
market or economic conditions; information concerning pertinent federal and
state legislative and regulatory developments and other developments that
could affect the value of actual or potential investments; companies in which
the Investment Manager has invested or may consider investing; attendance at
meetings with corporate management personnel, industry experts,
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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 best available price and execution,
the Investment Manager may, in circumstances in which two or more brokers are in
a position to offer comparable prices and 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 selecting 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 Manager exercises investment discretion. The Investment
Manager continually evaluates all commissions paid in order to ensure that the
commission represents 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 it is recognized that a Fund may be
charged a commission paid to a broker or dealer who supplied research services
not utilized by such Fund. However, the Investment Manager expects that the
Funds will benefit overall by such practice because they are receiving the
benefit of research services and the execution of such transactions not
otherwise available to them without the allocation of transactions based on the
recognition of such research services.
Subject to the requirement of seeking the best available prices and
execution, the Investment Manager may also place orders with brokerage firms
that have sold shares of the Funds. However, to date the Funds have not marketed
any of their shares through brokers and the Investment Manager has thus not
utilized the above authority. The Investment Manager has not made and will not
make any commitments to place orders with any particular broker or group of
brokers. It is anticipated that a substantial portion of all brokerage
commissions will be paid to brokers who supply investment information to the
Investment Manager. During 1998, all brokerage commissions paid by the Funds
were paid to such brokers.
Each Fund may, in some instances, invest in U.S. and/or foreign securities
that are not listed on a national securities exchange but are traded in the
over-the-counter market. Each Fund may also purchase listed securities through
the third market or fourth market. When transactions are executed in the
over-the-counter market or the third or fourth market, the Investment Manager
will seek to deal with the primary market-makers for each security; however,
when necessary in order to obtain the best price and execution, it will
utilize the services of others. In all cases, the Investment Manager will
attempt to negotiate the best market price and execution.
During the Fiscal Year ended December 31, 1998, the Growth Equity Fund
acquired securities of its regular brokers or dealers (as defined in Rule
10b-1 under the 1940 Act) or their parents as follows: ________. During the
Fiscal Year ended December 31, 1998, the Small Cap Fund acquired securities
of its regular brokers or dealers (as defined in Rule 10b-1 under the 1940
Act) or their parents as follows: ________. The holdings of securities of
such brokers and dealers were as follows as of December 31, 1998: ________.
For the Fiscal Years ended December 31, 1996, 1997 and 1998, the Growth
Equity Fund paid total brokerage commissions of $2,740,069, $2,415,659 and
$__________, respectively. Of the total commissions paid during the fiscal year
ended December 31, 1998, $__________ (__%) were paid to firms which provided
research, statistical or other services to the Investment Manager. The
Investment Manager has not separately identified a
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portion of such commissions as applicable to the provision of such research,
statistical or otherwise. [Payments to affiliated brokers]
For the Fiscal Years ended December 31, 1996, 1997 and 1998, the Small Cap
Fund paid total brokerage commissions of $843,368, $889,316 and $__________,
respectively. Of the total commissions paid during the fiscal year ended
December 31, 1998, $__________ (__%) 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.
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 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. Although
the Investment Manager will use its best efforts to be fair and equitable to
all clients, including the Funds, there can be no assurance that any
investment will be proportionately allocated among clients according to any
particular or predetermined standard or criteria. The Investment Manager
will not include orders on behalf of any affiliated or related entity in any
aggregated transaction that includes orders placed on behalf of a Fund.
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.
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DEWITT F. BOWMAN, (68), Chairman and Director. Mr. Bowman is a Principal of
Pension Investment Consulting, with which he has been associated since February
1994. From February 1989 to January 1994, he was Chief Investment Officer for
California Public Employees Retirement System, a public pension fund. He serves
as a director of RREEF America REIT, Inc. and the Wilshire Target Funds Inc.;
and as a trustee of Brandes Institutional International Investment Trust, the
Pacific Gas and Electric Nuclear Decommissioning Trust, and the PCG Private
Equity Fund.
PAMELA A. FARR, (53), Director. Ms. Farr is a partner in Best & Co. LLC, a
manufacturer and retailer of children's clothing and accessories. From 1991 to
1994, she was President of Banyan Homes, Inc., a real estate development and
construction firm; and for eight years she was a management consultant for
McKinsey & Company, where she served a variety of Fortune 500 companies in all
aspects of strategic management and organizational structure.
GEORGE B. JAMES, (61), Director. Mr. James is a Senior Vice President and
Chief Financial Officer of Levi Strauss & Co., with which he has been associated
since 1985. 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. Previously, Mr. James was Chair of
the Advisory Committee to the California Public Employees Retirement System.
GEORGE G.C. PARKER, (59), Director. Mr. Parker is Associate Dean for
Academic Affairs, and Director of the MBA Program and Dean Witter Professor of
Finance at the Graduate School of Business at Stanford University, with which he
has been associated since 1973. Mr. Parker has served on the Board of Directors
of: the California Casualty Group of Insurance Companies since 1977; BB&K
Holdings, Inc., a holding company for financial services companies, 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, (69), Director. 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.
GEORGE A. RIO, (43), President, Treasurer, and Chief Financial Officer.
Mr. Rio is Executive Vice President and Client Service Director of Funds
Distributor, Inc. ("FDI") with which he has been associated since March 1998.
From June 1995 to March 1998, Mr. Rio was Senior Vice President and Senior Key
Account Manager for Putnam Mutual Funds. From May 1994 to June 1995, he was
Director of Business Development for First Data Corporation. From September 1983
to May 1994, he was Senior Vice President and Manager of Client Services and
Director of Internal Audit at The Boston Company, Inc. He is also an officer of
certain other investment companies distributed or administered by FDI. His
address is 60 State Street, Suite 1300, Boston, Massachusetts 02109.
MARGARET W. CHAMBERS, (39), Vice President and Secretary. Ms. Chambers is
Senior Vice President and General Counsel of FDI, with which she has been
associated since March 1998. From August 1996 to March 1998, Ms. Chambers was
Vice President and Assistant General Counsel for Loomis, Sayles & Company, L.P.
From January 1986 to July 1996, she was an associate at Ropes & Gray. She is
also an officer of certain other investment companies distributed or
administered by FDI. Her address is 60 State Street, Suite 1300, Boston,
Massachusetts 02109.
JEANNE GIBSON SULLIVAN, (41), Vice President. Ms. Sullivan is a Vice
President of Funds Distributor, Inc., with which she has been associated since
May 1997. From August 1995 to May 1997, Ms. Sullivan was an Associate at U.S.
Financial Advisors. From April 1994 to August 1995, she was an independent
marketing consultant for clients in the banking and mutual fund industries.
Prior to 1994, Ms. Sullivan held marketing positions at BayBank Investment
Management, The Boston Company, Fidelity Investments and American Express. Her
address is 60 State Street, Suite 1300, Boston, Massachusetts 02109.
Page 19
<PAGE>
DOUGLAS C. CONROY, (29), Vice President and Assistant Treasurer. Mr. Conroy
is an Assistant Vice President and Assistant Department Manager of Treasury
Services and Administration of FDI, with which he has been associated since
April 1997. Prior to April 1997, Mr. Conroy was Supervisor of Treasury Services
and Administration of FDI. From April 1993 to January 1995, Mr. Conroy was a
Senior Fund Accountant for Investors Bank & Trust Company. From December 1991 to
March 1993, Mr. Conroy was a Fund Accountant at The Boston Company, Inc. He is
also an officer of certain other investment companies distributed or
administered by FDI. His address is 60 State Street, Suite 1300, Boston,
Massachusetts 02109.
KAREN JACOPPO-WOOD, (32), Vice President and Assistant Secretary.
Ms. Jacoppo-Wood is a Vice President and Counsel of FDI, with which she has been
associated since January 1996. From June 1994 to January 1996, she was a Manager
of SEC Registration for Scudder, Stevens & Clark, Inc. From 1988 to May 1994,
she was a Senior Paralegal at The Boston Company Advisors, Inc. She is also an
officer of certain other investment companies distributed or administered by
FDI. Her address is 60 State Street, Suite 1300, Boston, Massachusetts 02109.
MARY A. NELSON, (34), Vice President and Assistant Treasurer. Ms. Nelson is
Vice President of Treasury Administration and Operations for FDI, with which she
has been associated since 1994. From 1989 to 1994, she was an Assistant Vice
President and Client Manager for The Boston Company. She is also an officer of
certain other investment companies distributed or administered by FDI. Her
address is 60 State Street, Suite 1300, Boston, Massachusetts 02109.
Regular meetings of the Board of Directors are held on a quarterly basis.
The Company's Audit Committee, whose present members are Messrs. Parker and
Scott, meet with its independent accountants to exchange views and information
and to assist the full Board in fulfilling its responsibilities relating to
corporate accounting and reporting practices. Each Director of the Company
receives a fee of $9,000 per year plus $1,500 per series for each Board meeting
attended and $500 for each Audit Committee meeting attended. Each Director is
reimbursed for travel and other expenses incurred in connection with attending
Board meetings. The Investment Manager bears two-thirds of this expense on
behalf of of the Growth equity Fund and the small cap Fund.
The following table sets forth the aggregate compensation paid by the
Company for the fiscal year ended December 31, 1998, to the Directors and the
aggregate compensation paid to the Directors for service on the Company's 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
Pension or Compensation
Retirement from the
Benefits Estimate Company and
Aggregate Accrued Annual Company
Compensation as Part of Benefits Complex
Director from the the Company's Upon Paid to
Name Company(1) Expenses Retirement Director (2)
- ------------------ ------------ ------------- ---------- -------------
<S> <C> <C> <C> <C>
DeWitt F. Bowman $______ None N/A $______
Pamela A. Farr $______ None N/A $______
Frank P. Greene(3) $______ None N/A $______
George B.James(4) $______ None N/A $______
George G.C. Parker $______ None N/A $______
Kenneth E. Scott $______ None N/A $______
</TABLE>
- --------------------
(1) Includes the Dresdner RCM International Growth Equity Fund, a series of the
Company offered through a separate prospectus.
(2) During the fiscal year ended December 31, 1998, there were [ ] funds in
the complex.
(3) Mr. Greene served on the Company's Board of Directors from ____ through
____.
Page 20
<PAGE>
(4) Mr. James was elected to the Company's Board of Directors on _____
Each Director of the Company who is not an "interested person" as that
term is defined in the 1940 Act, of the Investment Manager may elect to
defer receipt of all or a portion of his or her fees for service as a
Director in accordance with the terms of a Deferred Compensation Plan for
Non-Interested Directors ("Directors' Plan"). Under the Directors' Plan, an
eligible Director may elect to have his or her deferred fees deemed invested
either in 90-day U.S. Treasury bills, shares of the Common Stock of the
Company, or a combination of these options, and the amount of deferred fees
payable to such director under the Directors' Plan will be determined by
reference to the return on such deemed investments. Generally, the deferred
fees (reflecting any earnings, gains or losses thereon) become payable upon
the Director's retirement or disability. The obligation to make these
payments to the Directors of the Company pursuant to the Directors' Plan is a
general obligation of the Company. Each Fund may, to the extent permitted by
the 1940 Act, invest in 90-day U.S. Treasury bills or the Common Stock of the
Company, to match its share of the deferred compensation obligation under the
Directors' Plan.
As of December 31, 1998, no Director or officer of the Company was a
beneficial owner of any shares of the outstanding Common Stock of any series of
the Company.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of _________, there were _________ shares of the Growth Equity Fund
outstanding and _________ shares of the Small Cap Fund outstanding; on that
date the following were known to the Company to own of record more than 5% of
the Funds' capital stock:
% of Shares
Name and Address of Beneficial Owner Shares Held Outstanding as of
- ------------------------------------ ----------- -----------------
Except as described above, the Funds have no information regarding the
beneficial owners of such shares. All beneficial owners of the Funds are also
clients of the Investment Manager. (See INVESTMENT BY EMPLOYEE BENEFIT PLANS.)
As investment manager for discretionary account clients, the Investment Manager
may be authorized to determine the amount and timing of purchases and
redemptions of each Fund's shares held by such clients, subject only to general
restrictions and approvals of such clients. As a result, the Investment Manager
under law may also be deemed the beneficial owner of all of the outstanding
shares of each Fund and in "control" of the Fund on account of such beneficial
ownership. Nevertheless, each stockholder of each Fund that is a client of the
Investment Manager retains the general authority to restrict or instruct the
Investment manager with respect to investments in shares of a Fund.
INVESTMENT BY EMPLOYEE BENEFIT PLANS
All stockholders of each Fund are (and are expected in the future
to be) organizations and individuals to whom the Funds' investment manager
also provides discretionary investment supervisory or
Page 21
<PAGE>
investment advisory services. For discretionary account clients that are
employee benefit plans subject to the Employee Retirement Income Security Act
of 1974 ("ERISA"), investment in shares of a Fund requires a special form of
approval procedure by the plans' independent "fiduciaries," as described
below.
ERISA provides that, when an employee benefit plan invests in any security
issued by an investment company registered under the 1940 Act (such as the
Company), the assets of such plan will be deemed to include that security, but
will not, solely by reason of such investment, be deemed to include any assets
of the investment company. ERISA also provides that the investment by an
employee benefit plan in securities issued by an investment company registered
under the 1940 Act will not cause the investment company or the investment
company's advisor to be deemed a "fiduciary" or a "party in interest" with
respect to such employee benefit plan, as those terms are defined in Title I of
ERISA, or a "disqualified person" with respect to such plan for purposes of the
Internal Revenue Code of 1986, as amended.
The Investment Manager does not intend to cause any of the Funds to invest
in the securities of a company that is a sponsor of an employee benefit plan
owning shares of the Fund. However, should such an investment occur, either by
portfolio decisions of the Investment Manager or by the purchase of shares by an
employee benefit plan, the shares held by such Fund would not be considered
"employer securities" within the meaning of ERISA Section 407 (which limits the
amount of employer securities which may be held by certain employee benefit
plans) for an employee benefit plan owning shares of a Fund.
Although only the shares of a Fund and not its underlying investments will
be considered assets of an employee benefit plan purchasing the Fund's shares,
the ERISA Conference Report of the U. S. Congress indicates that, for purposes
of determining whether the investments of an employee benefit plan meet the
diversification requirements of ERISA Section 404, it is appropriate to apply
the diversification rule by examining the diversification of investments by the
Fund. The Department of Labor has indicated its concurrence in this position in
Advisory Opinion 75-93 (November 4, 1975).
The Investment Manager presently anticipates that shares of the Funds will
be purchased by employee benefit plans that have appointed or may appoint the
Investment Manager as "investment manager" (within the meaning of ERISA Section
3(38)) of some or all of their assets. The Department of the Treasury and the
Department of Labor have promulgated a "Prohibited Transaction Class Exemption"
(Prohibited Transaction Exemption 77-4, 42 Fed. Reg. 18732 (April 8, 1977))
exempting from the prohibited transaction restrictions of ERISA the purchase and
sale by an employee benefit plan of shares of a registered, open-end investment
company when a fiduciary with respect to the plan (e.g., an investment manager)
is also the investment adviser for the investment company, provided certain
conditions are met. It is the intention of each Fund and the Investment Manager
to take all necessary steps to satisfy these conditions when the transaction so
requires. The applicable conditions are:
1. The employee benefit plan (the "plan") does not pay a sales commission in
connection with such purchase or sale. (The Funds do not charge a sales
commission in connection with the sale of their capital stock.)
2. The plan does not pay a redemption fee in connection with the sale by the
plan to the investment company of its shares unless:
(a) the redemption fee is paid to the investment company, and
(b) the fee is disclosed in the investment company prospectus in effect
both at the time of the purchase of such shares and at the time of
such sale. (The Funds do not charge a redemption fee.)
3. The plan does not pay an investment management fee with respect to plan
assets invested in such shares for the entire period of the investment.
This does not preclude payment of fees by the investment company under the
terms of the Management Agreements adopted in accordance with Section 15 of
the 1940 Act. (The Investment Manager does not charge a separate management
fee on plan assets invested in shares of the Funds.)
Page 22
<PAGE>
4. A second fiduciary with respect to the plan, who is independent of and
unrelated to the fiduciary/investment adviser or any affiliate of the
adviser, must receive a prospectus issued by the investment company, and a
full and detailed written disclosure of the investment advisory and other
fees charged to or paid by the plan and the investment company, including
the nature and extent of any differential between the rates of such fees,
the reasons why the fiduciary/investment adviser may consider purchases of
investment company stock to be appropriate, and whether there are any
limitations on the fiduciary/investment adviser with respect to which plan
assets may be invested in shares of the investment company and, if so, the
nature of such limitations.
5. On the basis of the prospectus and the additional disclosure materials
described above, the second fiduciary approves the purchases and sales. The
approval may be limited solely to the investment advisory and other fees
paid by the investment company in relation to the fees paid by the plan and
need not relate to any other aspect of the investment. The approval must be
either:
(a) set forth in the plan document or investment management agreement, or
(b) indicated in writing prior to each purchase or sale, or
(c) indicated in writing prior to the commencement or continuation of a
specified purchase or sale program in the shares of such investment
company.
6. The second fiduciary or any successor thereto is notified in writing of any
change in any of the rates of fees referred to in Paragraph 5 and approves
in writing the continuation of the purchases and sales and the continued
holding of shares acquired prior to the change. Such approval may be
limited solely to the investment advisory and other fees.
As noted above, the Funds and the Investment Manager intend to comply with
the above provisions in connection with investments in the Funds by employee
benefit plans managed by the Investment Manager. The Funds and the Investment
Manager solicit approval of specified purchase programs as described in
Paragraph 5(c) above. Such a program will establish a purchase limitation, if
any, based either on a specific dollar amount or on a percentage of the total
assets of a plan which are committed to investment in equity and equity-related
securities supervised by the Investment Manager.
THE INVESTMENT MANAGER
The Board of Directors has overall responsibility for the operation of the
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. 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. 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, 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 DM ___ billion ($___ billion), and
approximately 1,600 offices and 45,000 employees in over 60 countries around the
world, Dresdner is one of Germany's largest banks. Dresdner provides a full
range of banking services including, traditional lending activities, mortgages,
securities, project finance and leasing, to private customers and financial and
institutional clients. In the United States, Dresdner maintains
Page 23
<PAGE>
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 Midler, Susan C. Gause, Luke D. Knecht, Jeffrey S.
Rudsten, William S. Stack, and Kenneth B. Weeman, Jr.
Banking laws and regulations, including the Glass-Steagall Act as presently
interpreted by the Board of Governors of the Federal Reserve System, prohibit
certain banking entities, such as Dresdner, from sponsoring, organizing,
controlling or distributing the shares of a registered investment company
continuously engaged in the issuance of its shares, and prohibit banks generally
from underwriting securities. However, banks and their affiliates generally can
act as advisers to investment companies and can purchase shares of investment
companies as agent for and upon the order of customers. The Investment Manager
believes that it may perform the services contemplated by its investment
management agreements with the Company without violating these banking laws or
regulations. However, future changes in legal requirements relating to the
permissible activities of banks and their affiliates, as well as future
interpretations of current requirements, could prevent the Investment Manager
from continuing to perform investment management services for the Company.
The Investment Manager provides the Funds with investment supervisory
services pursuant to Investment Management Agreements, Powers of Attorney and
Service Agreements (the "Management Agreements") dated as of June 14, 1996. 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
International Growth Equity Fund, a series of the Company; Dresdner RCM Europe
Fund, a series of Dresdner RCM Investments, Inc.; Dresdner RCM Large Cap Growth
Fund, Dresdner RCM Global Small Cap Fund, Dresdner RCM Global Technology Fund,
Dresdner RCM Global Health Care Fund, Dresdner RCM Biotechnology Fund, Dresdner
RCM Emerging Markets Fund, Dresdner RCM Tax Managed Growth Fund, Dresdner RCM
Global Equity Fund and Dresdner RCM Strategic Income Fund, each a series of
Dresdner RCM Global Funds, Inc.; RCM Strategic Global Government Fund, Inc. and
Bergstrom Capital Corporation, a closed-end management investment company, each
a closed-end management investment company.
Each Fund's Management Agreement was approved by its stockholders at a
special meeting on May 28, 1996, and most recently approved by the Board of
Directors on March __, 1999. The Management Agreements will continue in effect
until _______, 2000. They may be renewed from year-to-year thereafter, 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, pursuant to its Management Agreement, has assumed the obligation
for payment of the following ordinary operating expenses: (a) brokerage and
commission expenses, (b) federal, state, or local taxes incurred by, or levied
on, each Fund, (c) interest charges on borrowings, (d) charges and expenses of
the Fund's custodian, and (e) payment of all investment advisory fees (including
fees payable to the Investment Manager under the Management Agreement). Each
Fund is also responsible for expenses of an extraordinary nature subject to good
faith determination of the Company's Board of Directors. Each Fund's expenses
are charged against its assets. General expenses of the Company are allocated
among its three series in a manner proportionate to the net assets of each
series, on a transactional basis, or on such other basis as the Board of
Directors deems equitable.
The Investment Manager is, under the Management Agreements of the Growth
Equity Fund and the Small Cap Fund, responsible for all of the other ordinary
operating expenses of those Funds (e.g., legal and audit fees, and SEC and "Blue
Sky" registration expenses), including the compensation of the directors of the
Company. (See DIRECTORS AND OFFICERS.) The Investment Manager is also
responsible for all of its own expenses in providing services to the Funds.
Page 24
<PAGE>
For the services rendered by the Investment Manager under the Management
Agreements, each Fund pays management fees at an annualized rate of its average
daily net assets. These fees are computed daily and paid monthly. The Growth
Equity Fund pays investment management fees monthly at an annualized rate of
0.75% of the Fund's average daily net assets. For the years ended December 31,
1998, 1997, and 1996, the Fund incurred investment management fees aggregating
$________, $_______ and $________, respectively. The Small Cap Fund pays
investment management fees monthly at an annualized rate of 1.00% of the Fund's
average daily net assets. For the years ended December 31, 1998, 1997, and 1996,
the Fund incurred investment management fees aggregating $________, $________
and $________, respectively.
CLIENTS OF THE INVESTMENT MANAGER WHO ARE STOCKHOLDERS OF EITHER OF THE
FUNDS WILL PAY A FEE AT THIS RATE ONLY ON THE PORTION OF THEIR ASSETS INVESTED
IN SHARES OF A FUND. HOWEVER, SUCH CLIENTS WILL NOT PAY ADDITIONAL FEES TO THE
INVESTMENT MANAGER ON THE PORTIONS OF THEIR ASSETS INVESTED IN SUCH FUND. ASSETS
NOT INVESTED IN SHARES OF THE FUNDS WILL BE SUBJECT TO FEES IN ACCORDANCE WITH
ANY INVESTMENT MANAGEMENT AGREEMENT OR THE INVESTMENT ADVISORY AGREEMENT BETWEEN
THE CLIENT AND THE INVESTMENT MANAGER. CLIENTS WHO INVEST IN SHARES OF THE FUNDS
WILL GENERALLY PAY AN AGGREGATE FEE WHICH IS HIGHER THAN THAT PAID BY OTHER
CLIENTS NOT INVESTED IN THE FUNDS.
The Investment Manager has voluntarily undertaken (which undertaking it may
terminate at any time, on at least 30 days advance notice, in its sole
discretion) to limit each Fund's expenses as follows: on the first business day
of February, the Investment Manager will pay the Growth Equity Fund and the
Small Cap Fund the amount, if any, by which ordinary operating expenses of the
Company attributable to each Fund for the preceding fiscal year (except
interest, taxes and extraordinary expenses) exceed 1.00% and 1.25%,
respectively, of the average daily net assets of the Fund for that year.
However, in paying the monthly investment management fee to the Investment
Manager, the Fund will reduce the amount of such fee by the amount, if any, by
which its ordinary operating expenses for the previous month (except interest,
taxes and extraordinary expenses) exceeded on an annualized basis the
above-referenced percentage of the Fund's average daily net assets, determined
monthly; provided, however, that each Fund will pay to the Investment Manager on
the first day of June the amount, if any, by which any such reductions exceeded
the amount to which such Fund would be entitled in the preceding February under
the immediately preceding sentence if such a reduction had not occurred. For the
calendar years ended December 31, 1987 through December 31, 1998, no payment was
due under these provisions from either the Funds or the Investment Manager.
Each Management Agreement is terminable as to Fund without penalty on
60 days' written notice by a vote of the majority of the Fund's outstanding
voting securities, by a vote of the majority of the Company's Board of
Directors, or by the Investment Manager on 60 days' written notice and will
automatically terminate in the event of its assignment.
The Fund's Management Agreement provides that the Investment Manager will
not be liable for any error of judgment or for any loss suffered by 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.
Page 25
<PAGE>
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.
Pursuant to the 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 the Company.
The Company also has an Agreement with the Investment Manager and the
Distributor pursuant to which the Distributor has agreed to provide: regulatory,
compliance and related technical services to the Company; services with regard
to advertising, marketing and promotional activities; and officers to the
Company. The Investment Manager is required to reimburse the Company for any
fees and expenses of the Distributor pursuant to the Agreements.
THE ADMINISTRATOR
Effective January 1, 1999, the administrator of the Company is State
Street Bank and Trust Company ("State Street"), 1776 Heritage Drive, North
Quincy, Massachusetts 02109.
Pursuant to an Administration Agreement with the Company, State Street is
responsible for performing all administrative services required for the daily
operation of the Company, subject to the control, supervision and direction
of the Company and the review and comment by the Company's auditors and legal
counsel. State Street has no supervisory responsibility over the investment
operations of the 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 book and records of the Company;
preparing the Company's federal, state and local income tax returns;
arranging 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 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.
OTHER SERVICE PROVIDERS
State Street acts as the transfer agent, redemption agent, dividend
paying agent and custodian for the Funds. The custodian is responsible for
the safekeeping of a fund's assets and the appointment of any subcustodian
banks and clearing agencies.
State Street's principal business address is 1776 Heritage Drive, North
Quincy, Massachusetts 02171.
PricewaterhouseCoopers LLP ("PWC") acts as the independent public
accountants for the Funds. The accountant examines financial statements for
the Funds and provides other audit, tax and related services. PWC's principal
business address is One Post Office Square, Boston, Massachusetts 02109.
NET ASSET VALUE
For purposes of the computation of the net asset value of each share of
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
Page 26
<PAGE>
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.
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 stockholders.
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.
Page 27
<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAX STATUS
Each income dividend and capital gain distribution, if any, declared by
a Fund will be paid in full and fractional shares based on the net asset
value as determined on the payment date for such distribution, unless the
stockholder or his or her duly authorized agent has elected to receive all
such payments or the dividend or other distribution portion thereof in cash.
Changes in the manner in which dividend and other distribution payments are
paid may be requested by the stockholder or his or her duly authorized agent
at any time through written notice to the Company and will be effective as to
any subsequent payment if such notice is received by the Company prior to the
record date used for determining the stockholders entitled to such payment.
Any distribution election will remain in effect until the Company is notified
by the stockholder in writing to the contrary.
REGULATED INVESTMENT COMPANY
Each Fund has qualified and intends to continue to qualify for treatment
as a "regulated investment company" under Subchapter M of the Internal
revenue Code of 1986 (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
Page 28
<PAGE>
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.
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.
SECTION 1256 CONTRACTS
Many of the futures contracts and related options 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, transactions in futures contracts and related options 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.
Transactions in futures contracts and related options 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
Page 29
<PAGE>
elections, the amount, character and timing of the recognition of gains or
losses from the affected straddle positions will be determined under rules
that vary according to elections made. The rules applicable under certain
elections operate to accelerate the recognition of gains or losses from the
affected straddle positions. Because the application of the straddle rules
may affect the character of gains or losses, defer losses and/or accelerate
the recognition of gains or losses from the affected straddle positions, the
amount which must be distributed to stockholders, and which will be taxed to
stockholders as ordinary income or long-term capital gain, may be increased
or decreased substantially as compared to a fund that did not engage in such
hedging transactions.
SECTION 988 GAINS AND LOSSES
Under the Code, gains or losses attributable to fluctuations in exchange
rates which occur between the time a Fund accrues interest or other receivables,
or accrues expenses or other liabilities, denominated in a foreign currency and
the time the Fund actually collects such receivables or pays such liabilities,
generally are treated as ordinary income or loss. Similarly, on the disposition
of debt securities denominated in foreign currency and on the disposition of
certain futures contracts, forward contracts and options, gains or losses
attributable to fluctuation in the value of foreign currency between the date of
acquisition of the debt security, contract or option and the date of disposition
thereof are also treated as ordinary gain or loss. These gains or losses,
referred to under the Code as "Section 988" gains or losses, may increase or
decrease the amount of a Fund's investment company taxable income to be
distributed to stockholders as ordinary income.
FOREIGN TAXES
A Fund may be required to pay withholding and other taxes imposed by
foreign countries which would reduce the Fund's investment income, generally at
rates from 10% to 40%. Tax conventions between certain countries and the United
States may reduce or eliminate such taxes. If more than 50% of the value of a
Fund's total assets at the close of its taxable year consists of securities of
foreign corporations, the Fund will be eligible to elect to "pass-through" to
the Fund's stockholders the amount of foreign income and similar taxes paid by
the Fund. If this election is made, stockholders generally subject to tax will
be required to include in gross income (in addition to taxable dividends
actually received) their pro rata shares of the foreign income taxes paid by the
Fund, and may be entitled either to deduct (as an itemized deduction) their pro
rata shares of foreign taxes in computing their taxable income or to use such
amount (subject to limitations) as a foreign tax credit against their U.S.
federal income tax liability. No deduction for foreign taxes may be claimed by a
stockholder who does not itemize deductions. Each stockholder will be notified
within 60 days after the close of a Fund's taxable year whether the foreign
taxes paid by the Fund will be "passed-through" for that year.
The foregoing is a general abbreviated summary of present U.S. federal
income tax laws applicable to the Funds, their stockholders and dividend and
capital gain distributions by the Funds. Stockholders are urged to consult their
own tax advisers for more detailed information and for information regarding any
foreign, state, and local tax laws and regulations applicable to dividends and
other distributions received from the Funds.
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:
Page 30
<PAGE>
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.
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 will vary
from time to time depending upon market conditions, the composition of the
Fund's portfolio, and operating expenses, so that any investment results
reported should not be considered representative of what an investment in the
Fund may earn in any future period. These factors and possible differences in
calculation methods should be considered when comparing a Fund's investment
results with those published for other investment companies, other investment
vehicles and unmanaged indices. Results also should be considered relative to
the risks associated with a Fund's investment objective and policies.
Each of the Funds may from time to time compare its investment results with
data and mutual fund rankings published or prepared by Lipper Analytical
Services, Inc. and Morningstar, Inc., which rank mutual funds by overall
performance, investment objectives, and assets.
The Growth Equity Fund may from time to time compare its investment results
with:
1. 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.
2. The S&P 400 Index, which is comprised of the smallest 400 companies
in the S&P 500 Index. The S&P 500 Index 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.
3. The S&P 500 Index.
4. The Dow Jones Industrial Average, which is a price-weighted average
of the price of 500 of the largest publicly traded stocks in the
United States.
5. 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.
6. The Value Line Composite Index, which consists of approximately
1,700 common equity securities.
7. The NASDAQ Over-the-Counter Index, which is a value-weighted index
compose of 4,500 stocks traded over the counter.
Page 31
<PAGE>
8. Data and mutual fund rankings published by Lipper Analytical
Services, Inc. and Morningstar, which rank mutual funds by overall
performance, investment objectives, and assets.
The Small Cap Fund may from time to time compare its investment results
with:
1. The Russell 2000 Index.
2. The S&P 500 Index.
3. The Value Line Composite Index
4. The NASDAQ Over-the-Counter Index.
5. Data and mutual fund rankings published or prepared by Lipper
Analytical Services, Inc. and Morningstar, which rank mutual funds
by overall performance, investment objectives, and assets.
GENERAL INFORMATION
The Company was incorporated in Maryland on March 16, 1979. The Company is
authorized to issue 1,000,000,000 shares of Capital Stock (par value $0.0001 per
share) of which 300,000,000 shares have been designated as shares of the Growth
Equity Fund, 100,000,000 shares have been designated as shares of the Small Cap
Fund, and 100,000,000 shares have been designated as shares of the International
Growth Equity Fund. (The shares of the International Growth Equity Fund are
offered through a separate prospectus.) The Company's Board of Directors may,
in the future, authorize the issuance of other series of capital stock
representing shares of additional investment portfolios or funds. All shares of
the Company have equal voting rights and will be voted in the aggregate, and not
by series, except where voting by series is required by law or where the matter
involved affects only one series. There are no conversion or preemptive rights
in connection with any shares of the Company. All shares of each Fund when duly
issued will be fully paid and non-assessable. The rights of the holders of
shares of a Fund may not be modified except by vote of the majority of the
outstanding shares of the Fund. Certificates are not issued unless requested
and are never issued for fractional shares. Fractional shares are liquidated
when an account is closed.
DESCRIPTION OF CAPITAL SHARES
Stockholders are entitled to one vote for each full share held and
fractional votes for fractional shares held. Unless otherwise provided by law or
its Articles of Incorporation or Bylaws, 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.
Shares of the Funds have non-cumulative voting rights, which means that the
holders of more than 50% of all series of the Company's shares voting for the
election of directors can elect 100% of the directors if they wish to do so. In
such event, the holders of the remaining less than 50% of the shares voting for
the election of directors will not be able to elect any person or persons to the
Board of Directors.
The Company is not required to hold a meeting of stockholders in any year
in which the 1940 Act does not require a stockholder vote on a particular
matter, such as election of directors. The Company will hold a meeting of its
stockholders for the purpose of voting on the question of removal of one or more
directors if requested in writing by the holders of at least 10% of the
Company's outstanding voting securities, or to assist in communicating with its
stockholders as required by Section 16(c) of the 1940 Act.
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<PAGE>
In the event of the liquidation or dissolution of the Company,
stockholders of a Fund are entitled to receive the assets attributable to the
Fund that are available for distribution, and a distribution of any general
assets not attributable to a particular Fund that are available for
distribution, in such manner and on such general basis as the Board of
Directors may determine.
Stockholders are not entitled to any preemptive rights. All shares, when
issued, will be fully paid and nonassessable by the Company.
ADDITIONAL INFORMATION
COUNSEL
Certain legal matters in connection with the capital shares offered by the
Prospectus have been passed upon for the Fund by Paul, Hastings, Janofsky &
Walker LLP, 555 South Flower Street, Los Angeles, California 90071. The validity
of the capital stock offered by the Funds has been passed 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 a License Agreement dated as of December 11, 1997, the Investment
Manager has granted the Company the right to use the "Dresdner RCM" name and has
reserved the right to withdraw its consent to the use of such name by the
Company at any time, or to grant the use of such name to any other company. In
addition, the Company has granted the Investment Manager, under certain
conditions, the right to use any other name it might assume in the future, with
respect to any other investment company sponsored by the Investment Manager.
Page 33
<PAGE>
FINANCIAL STATEMENTS
Incorporated by reference herein are the financial statements of the
Funds contained in the Funds' Annual Reports to Shareholders for the year
ended December 31, 1998, including the Report of Independent Accountants,
dated ____________, the Statement of Investments in Securities and Net
Assets, the Statement of Assets and Liabilities, the Statement of Operations,
the Statement of Changes in Net Assets, and the related Notes to Financial
Statements. 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.
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, such statement being qualified
in all respects by such reference.
Page 34
<PAGE>
DRESDNER RCM GLOBAL FUNDS, INC.
DRESDNER RCM CAPITAL FUNDS, INC.
-------------------------------------------------------------------------
Dresdner RCM Large Cap Growth Fund
Dresdner RCM Global Small Cap Fund
Dresdner RCM Global Technology Fund
Dresdner RCM Global Health Care Fund
Dresdner RCM Biotechnology Fund
Dresdner RCM International Growth Equity Fund
Dresdner RCM Emerging Markets Fund
Dresdner RCM Tax Managed Growth Fund
-------------------------------------------------------------------------
____________, 1999
This prospectus contains essential information for anyone considering
an investment in these Funds. Please read this document carefully and
retain it for future reference.
As with all mutual funds, the Securities and Exchange Commission does
not guarantee that the information in this Prospectus is accurate or
complete, nor has it judged these funds for investment merit. It is a
criminal offense to state otherwise.
1
<PAGE>
DRESDNER RCM GLOBAL FUNDS, INC.
DRESDNER RCM CAPITAL FUNDS, INC.
TABLE OF CONTENTS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RISK/RETURN SUMMARY AND FUND EXPENSES
- ------------------------------------------------------------------------------------
<S> <C> <C>
This section summarizes the 4 Dresdner RCM Large Cap Growth Fund
Funds' investments, risks, 8 Dresdner RCM Global Small Cap Fund
past performance, and fees. 13 Dresdner RCM Global Technology Fund
18 Dresdner RCM Global Health Care Fund
23 Dresdner RCM Biotechnology Fund
28 Dresdner RCM International Growth Equity Fund
32 Dresdner RCM Emerging Markets Fund
36 Dresdner RCM Tax Managed Growth Fund
INVESTMENT OBJECTIVES, POLICIES AND RISKS
- ------------------------------------------------------------------------------------
This section provides details 42 Investment Objectives and Policies
about the Funds' investment 44 Other Investment Practices
objectives, policies and risks. 46 Changing the Funds' Investment
Objectives and Policies
47 Investment Risks
ORGANIZATION AND MANAGEMENT
- ------------------------------------------------------------------------------------
This section provides details 51 The Funds and the Investment Manager
about the people and 51 The Portfolio Managers
organizations who oversee the 52 Management Fees and other Expenses
Funds. 53 The Distributor
STOCKHOLDER INFORMATION
- ------------------------------------------------------------------------------------
This section tells you how to 55 Buying Shares
buy, sell and exchange shares, 56 Selling Shares
how we value shares, and how we 57 Other Stockholder Services
pay dividends and distributions. 61 Dividends, Distributions and Taxes
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
OTHER INFORMATION ABOUT THE FUNDS
- ------------------------------------------------------------------------------------
<S> <C> <C>
This section provides details on 63 Financial Highlights
selected financial highlights of
the Funds
</TABLE>
3
<PAGE>
DRESDNER RCM LARGE CAP GROWTH FUND
RISK/RETURN SUMMARY
Goal: The Fund's goal is to seek long term capital
appreciation by investing at least 65% of its
total assets in equity securities of domestic
companies with large market capitalizations.
Principal Investment Strategies: The Fund will invest in companies with large
market capitalizations, which are companies
with a total market capitalization (market
price of common stock and securities
convertible into common stock) of at
least $1 billion at the time of purchase.
The Fund may invest up to 20% of its
total assets in foreign issuers however,
no more than 10% in any one foreign country.
The Fund's benchmark is the Standard & Poor's
500 Stock Index. The Fund may overweight or
underweight industries relative to its
benchmark.
The Fund focuses its investments on companies
that it expects will have higher than average
rates of growth and strong potential for
capital appreciation.
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
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 values of the Fund's investments
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.
4
<PAGE>
FEES AND EXPENSES
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 Stock Index.
Both charts assume reinvestment of dividends and distributions. Of course,
past performance does not indicate how the Fund will perform in the future.
Year-by-Year Total Returns for Class I Shares
<TABLE>
<CAPTION>
1997 1998
<S> <C> <C>
</TABLE>
The returns for Class N shares differ because Class N Shares have different
expenses.
For the periods covered by the year-by-year total return chart, the Fund's
highest quarterly return was __% (for the quarter ended _____) and the lowest
quarterly return was __% (for the quarter ended _____).
Average Annual Total Returns
(through December 31, 1998)**
<TABLE>
<CAPTION>
Performance Past Since
Inception Year Inception
---------------------------------------
<S> <C> <C> <C>
Class N Shares* 12/31/96 % %
---------------------------------------
Class I Shares 12/31/96 % %
---------------------------------------
S&P 500 Stock Index 12/31/96 % %
- ------------------------------------------------------------------------------
</TABLE>
*/ Class N Shares of the Fund began operation on __________.
**/ For the period from inception through March 31, 1999, the total returns of
Class N and I shares were _____% and _____%, versus _____% for the S&P 500
Stock Index.
5
<PAGE>
As an investor in the Fund, you will pay the following fees and expenses.
FEES AND EXPENSES
<TABLE>
<CAPTION>
Class of Shares
------------------
SHAREHOLDER FEES Class N Class I
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) ------- -------
<S> <C> <C>
Maximum sales charge (load) imposed on purchases None None
Maximum sales charge (load) imposed on reinvested dividends None None
Maximum deferred sales charge None None
Redemption or exchange fees None None
ANNUAL FUND OPERATING EXPENSES (FEES PAID FROM FUND ASSETS)
MANAGEMENT FEES 0.70% 0.70%
- --------------------------------------------------------------------------------
RULE 12B-1 FEE 0.25% None
- --------------------------------------------------------------------------------
OTHER EXPENSES 0.25% 0.25%
- --------------------------------------------------------------------------------
TOTAL ANNUAL FUND OPERATING EXPENSES 1.20% 0.95%
- --------------------------------------------------------------------------------
</TABLE>
Expense 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
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 N $120 $380 $660 $1450
CLASS I $100 $300 $530 $1170
</TABLE>
6
<PAGE>
DRESDNER RCM GLOBAL SMALL CAP FUND
RISK/RETURN SUMMARY
Goal: The Fund's goal is to seek long term capital
appreciation by investing at least 65% of its
total assets in equity securities of small-
sized domestic and foreign companies.
Principal Investment Strategies: Under normal market conditions, 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
will not invest 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 Fund may also invest up
to 30% of total assets in companies
organized or headquartered in emerging
market countries (but no more than 10% in
any one country).
Small-sized companies are defined as
companies with a total market capitalization
(market price of common stock and securities
convertible into common stock) of up to $1
billion at the time of purchase. The Fund
may invest up to 15% of its total
assets in companies with market
capitalizations below $100 million at the
time of purchase. The Fund expects the
average market capitalization of its
portfolio will range between $500 million and
$1 billion.
The Fund focuses its investments on companies
that it expects will have higher than average
rates of growth and strong potential for
capital appreciation.
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 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. Stock prices of
smaller and newer companies 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.
7
<PAGE>
8
<PAGE>
FEES AND EXPENSES
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 Salomon Brothers Extended Market Index.
Both charts assume reinvestment of dividends and distributions. Of course,
past performance does not indicate how the Fund will perform in the future.
Year-by-Year Total Returns for Class I Shares
<TABLE>
<CAPTION>
1997 1998
<S> <C> <C>
</TABLE>
The returns for Class N shares differ because Class N shares have different
expenses.
For the periods covered by the year-by-year total return chart, the Fund's
highest quarterly return was __% (for the quarter ended _________) and the
lowest return was __% (for the quarter ended _____).
Average Annual Total Returns
(through December 31, 1998)**
<TABLE>
<CAPTION>
Performance Past Since
Inception Year Inception
--------------------------------
<S> <C> <C> <C>
Class N Shares* 12/31/96 % %
--------------------------------
Class I Shares 12/31/96 % %
--------------------------------
Salomon EMI Index 12/31/96 % %
--------------------------------
</TABLE>
*/ Class N Shares of the Fund began operation on __________.
**/ For the period from inception through March 31, 1999, the total returns of
Class N and I Shares were _____% and _____%, versus _____% for the Salomon EMI
Index.
9
<PAGE>
As an investor in the Fund, you will pay the following fees and expenses.
FEES AND EXPENSES
<TABLE>
<CAPTION>
Class of Shares
------------------
SHAREHOLDER FEES Class N Class I
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) ------- -------
<S> <C> <C>
Maximum sales charge (load) imposed on purchases None None
Maximum sales charge (load) imposed on reinvested dividends None None
Maximum contingent deferred sales charge None None
Redemption or exchange fees None None
ANNUAL FUND OPERATING EXPENSES (FEES PAID FROM FUND ASSETS)
Management fees 1.00% 1.00%
- --------------------------------------------------------------------------------
Rule 12b-1 fee 0.25% None
- --------------------------------------------------------------------------------
Other expenses 0.46% 0.46%
- --------------------------------------------------------------------------------
Total annual Fund operating expenses 1.71% 1.46%
- --------------------------------------------------------------------------------
</TABLE>
Expense 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
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 N $170 $540 $930 $2020
Class I $150 $460 $800 $1750
</TABLE>
10
<PAGE>
DRESDNER RCM GLOBAL TECHNOLOGY FUND
RISK/RETURN SUMMARY
Goal: The Fund's goal is to seek long term capital
appreciation by investing at least 65% of its
total assets in equity securities of domestic
and foreign technology companies.
Principal Investment Strategies: The Fund currently intends to invest
primarily in technology companies with market
capitalizations (market price of common stock
and securities convertible into common stock)
of more 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, semi-
conductors, 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 Fund may
invest up to 20% of total assets in emerging
market issuers (but no more than 10% in any
one emerging market country).
The Fund focuses its investments on
technology companies that it expects will
have higher than average rates of growth and
strong potential for capital appreciation.
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.
Because the Fund will focus its investments
in technology companies it will be more
susceptible than more diversified 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 values 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
11
<PAGE>
securities also depends on the political and
economic environments and other overall
economic conditions in the countries where
the Fund invests. Stock prices of smaller
and newer companies often fluctuate more
than those of larger more established
companies. 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.
12
<PAGE>
FEES AND EXPENSES
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 Stock Index and
the Lipper Science and Technology Fund Index (an index of funds with similar
investment objectives).
Both charts assume reinvestment of dividends and distributions. Of course,
past performance does not indicate how the Fund will perform in the future.
Year-by-Year Total Returns for Class I Shares
<TABLE>
<CAPTION>
1997 1998
<S> <C> <C>
</TABLE>
The returns for Class N shares differ because Class N shares have different
expenses.
For the periods covered by this year-by-year total return chart, the Fund's
highest quarterly return was __% (for the quarter ended ______) and the lowest
quarterly return was __% (for the quarter ended ____).
Average Annual Total Returns
(through December 31, 1998)**
<TABLE>
<CAPTION>
Performance Past Since
Inception Year Inception
-----------------------------------
<S> <C> <C> <C>
Class N Shares* 12/27/95 % %
-----------------------------------
Class I Shares 12/27/95 % %
-----------------------------------
S&P 500 Stock Index 12/27/95 % %
-----------------------------------
Lipper Science & Technology Fund Index 12/27/95 % %
- ----------------------------------------------------------------------------
</TABLE>
*/ Class N Shares of the Fund began operation on __________.
**/ For the period from inception through March 31, 1999, the total returns of
Class N and I Shares were _____% and _____%, respectively, versus ____% for the
S&P 500 Stock Index and _____% for the Lipper Science and Technology Fund
Index.
13
<PAGE>
As an investor in the Fund, you will pay the following fees and expenses.
FEES AND EXPENSES
<TABLE>
<CAPTION>
Class of Shares
------------------
SHAREHOLDER FEES Class N Class I
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) ------- -------
<S> <C> <C>
Maximum sales charge (load) imposed on purchases None None
Maximum sales charge (load) imposed on reinvested dividends None None
Maximum contingent deferred sales charge None None
Redemption or exchange fees None None
ANNUAL FUND OPERATING EXPENSES (FEES PAID FROM FUND ASSETS)
Management Fees 1.00% 1.00%
- -------------------------------------------------------------------------------
Rule 12B-1 Fee 0.25% None
- -------------------------------------------------------------------------------
Other Expenses 0.36% 0.36%
- -------------------------------------------------------------------------------
Total annual Fund operating expenses 1.61% 1.36%
- -------------------------------------------------------------------------------
</TABLE>
EXPENSE 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
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 N $160 $510 $880 $1910
CLASS I $140 $430 $740 $1640
</TABLE>
14
<PAGE>
DRESDNER RCM GLOBAL HEALTH CARE FUND
RISK/RETURN SUMMARY
Goal: The Fund's goal is to seek long term capital
appreciation by investing at least 65% of its
total assets in equity securities of domestic
and foreign health care companies.
Principal Investment Strategies: The Fund currently intends to invest
primarily in health care companies with
market capitalizations (market price of
common stock and securities convertible into
common stock) of at least $1 billion at the
time of purchase with no 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 are companies which
principally engage in the health care
business including, but not limited to,
pharmaceutical, biochemical, biotechnology
and medical 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 shareholder approval, the
Fund invests in securities of 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 Fund may invest up to
15% of total assets in companies organized or
headquartered in emerging market countries
(but no more than 10% in any one emerging
market country).
The Fund focuses its investments on health
care companies that it expects will have
higher than average rates of growth and
strong potential for capital appreciation.
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.
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
15
<PAGE>
companies. As a result, its share price may
be more volatile than a fund with a more
broadly diversified portfolio.
The values 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. 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.
16
<PAGE>
FEES AND EXPENSES
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 table below it
compares the performance of the Fund over time to the Standard & Poor's 500
Stock Index and the Russell Midcap Health Care Index.
Both charts assume reinvestment of dividends and distributions. Of
course, past performance does not indicate how the Fund will perform in the
future.
Year-by-Year Total Returns for Class N Shares
<TABLE>
<CAPTION>
1997 1998
<S> <C> <C>
</TABLE>
For the periods covered by this year-by-year total return chart, the Fund's
highest quarterly return was __% (for the quarter ended ____) and the lowest
quarterly return was __% (for the quarter ended ______).
Average Annual Total Returns
(through December 31, 1998)**
<TABLE>
<CAPTION>
Performance Past Since
Inception Year Inception
-----------------------------------
<S> <C> <C> <C>
Class N Shares 12/31/96 % %
-----------------------------------
S&P 500 Stock Index 12/31/96 % %
-----------------------------------
Russell Midcap Health Care Index 12/31/96 % %
- ----------------------------------------------------------------------------
</TABLE>
* For the period from inception through March 31, 1999, the Fund's total
return was ____%, versus ____% for the S&P 500 Stock Index and ____% for the
Russell Midcap Health Care Index.
17
<PAGE>
As an investor in the Fund, you will pay the following fees and expenses.
FEES AND EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER FEES CLASS N
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) SHARES
-------
<S> <C>
Maximum sales charge (load) imposed on purchases None
Maximum sales charge (load) imposed on reinvested dividends None
Maximum contingent deferred sales charge None
Redemption or exchange fees None
ANNUAL FUND OPERATING EXPENSES (FEES PAID FROM FUND ASSETS)
Management Fees %
- ------------------------------------------------------------------------
Rule 12B-1 Fee %
- ------------------------------------------------------------------------
Other Expenses %
- ------------------------------------------------------------------------
Total annual Fund operating expenses %
- ------------------------------------------------------------------------
Fee waiver and/or expense reimbursement (1) %
- ------------------------------------------------------------------------
Net expenses (1) %
- ------------------------------------------------------------------------
</TABLE>
1 The Investment Manager has agreed, until at least December 31, 1999, 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 ___%. the Fund may reimburse the investment
Manager in the future.
Expense 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
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 N Shares $___ $___ $___ $___
</TABLE>
18
<PAGE>
DRESDNER RCM BIOTECHNOLOGY FUND
RISK/RETURN SUMMARY
Goal: The Fund's goal is to seek long term capital
appreciation by investing at least 65% of its
total assets in equity securities of domestic
and foreign biotechnology companies.
Principal Investment Strategies: The Fund currently expects that the majority
of its investments will be in biotechnology
companies organized or headquartered in the
United States with market capitalizations
(market price of common stock and securities
convertible into common stock) below
$1 billion. However, the Fund currently
intends to invest no more than 15% of its
total assets in biotechnology companies with
market capitalizations below $100 million at
the time of purchase.
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, it can be
expected that over time companies with new
and different products and focuses will be
included in the industry.
Under normal market conditions the Fund may
invest up to 25% of its total assets in
issuers organized or headquartered in any one
foreign country. The Fund may also invest
up to 15% of its total assets in companies
organized or headquartered in emerging market
countries (but not more than 10% in any one
emerging market country).
The Fund focuses its investments on
biotechnology companies that it expects will
have higher than average rates of growth and
strong potential for capital appreciation.
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.
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 values 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
19
<PAGE>
environments and other overall economic
conditions in the countries where the Fund
invests. Stock prices of smaller and newer
companies often fluctuate more than those of
larger, more established companies. 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 by the Federal
Deposit Insurance Corporation or any other
government agency.
20
<PAGE>
FEES AND EXPENSES
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 table below it compares the
performance of the Fund over time to the American Stock Exchange Biotechnology
Index, the NASDAQ Biotechnology Index, and the Russell 2000 Index.
Both charts assume reinvestment of dividends and distributions. Of
course, past performance does not indicate how the Fund will perform in the
future.
Year-by-Year Total Returns for Class N Shares
<TABLE>
<CAPTION>
1998
<S> <C>
</TABLE>
For the periods covered by this year-by-year total return chart, the Fund's
highest quarterly return was __% (for the quarter ended _____) and the lowest
quarterly return was __% (for the period ended ____).
Average Annual Total Returns
(through December 31, 1998)*
<TABLE>
<CAPTION>
Performance Past Since
Inception Year Inception
----------------------------------
<S> <C> <C> <C>
Class N Shares 12/30/97 % %
----------------------------------
AMEX Biotech Index 12/30/97 % %
----------------------------------
NASDAQ Biotech Index 12/30/97 % %
----------------------------------
Russell 2000 Index 12/30/97 % %
- --------------------------------------------------------------------------
</TABLE>
* For the period from inception through March 31, 1999, the Fund's total
return was ___%, versus ___% for the AMEX Biotech Index, ___% for the NASDAQ
Biotech Index, and ___% for the Russell 2000 Index.
21
<PAGE>
As an investor in the Fund, you will pay the following fees and expenses.
FEES AND EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER FEES CLASS N
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) SHARES
-------
<S> <C>
Maximum sales charge (load) imposed on purchases None
Maximum sales charge (load) imposed on reinvested dividends None
Maximum contingent deferred sales charge None
Redemption or exchange fees None
ANNUAL FUND OPERATING EXPENSES (FEES PAID FROM FUND ASSETS)
Management fees %
- ------------------------------------------------------------------------
Rule 12B-1 fee %
- ------------------------------------------------------------------------
Other expenses %
- ------------------------------------------------------------------------
Total annual Fund operating expenses %
- ------------------------------------------------------------------------
Fee waiver and/or expense reimbursement(1) %
- ------------------------------------------------------------------------
Net expenses(1) %
- ------------------------------------------------------------------------
</TABLE>
1 The Investment Manager has agreed, until at least December 31, 1999, 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 ___%. The Fund may reimburse the Investment
Manager in the future.
Expense 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
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 N Shares $___ $___ $___ $___
</TABLE>
22
<PAGE>
DRESDNER RCM INTERNATIONAL GROWTH EQUITY FUND
RISK/RETURN SUMMARY
Goal: The Fund's goal is to seek long term capital
appreciation by investing at least 65% of its
total assets in equity securities of foreign
companies.
Principal Investment Strategies: The Fund currently intends to invest
primarily in companies with market
capitalizations (market price of common stock
and securities convertible into common stock)
in excess of $1 billion at the time of
purchase, with no more than 10% 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 and 30% of its
total assets in companies organized or
headquartered in emerging market countries
(but no more than 10% in any one emerging
market country).
The Fund focuses its investments on companies
that it expects will have higher than average
rates of growth and strong potential for
capital appreciation.
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 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. 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.
23
<PAGE>
FEES AND EXPENSES
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 table below it
compares the performance of the Fund over time to the Morgan Stanley Capital
International Europe, Australia, Far East Index and the Morgan Stanley
Capital International All Country World Free Ex-US Index.
Both charts assume reinvestment of dividends and distributions. Of
course, past performance does not indicate how the Fund will perform in the
future.
Year-by-Year Total Returns for Class I Shares
<TABLE>
<CAPTION>
1995 1996 1997 1998
<S> <C> <C> <C> <C>
</TABLE>
The returns for Class N shares differ because Class N shares have different
expenses.
For the periods covered by this year-by-year total return chart, the Fund's
highest quarterly return was __% (for the quarter ended _____) and the lowest
quarterly return was __% (for the quarter ended _____).
Average Annual Total Returns
(through December 31, 1998)**
<TABLE>
<CAPTION>
Performance Past Since
Inception Year Inception
-------------------------------------
<S> <C> <C> <C>
Class N Shares* 12/28/94 % %
-------------------------------------
Class I Shares 12/28/94 % %
-------------------------------------
MSCI-EAFE Index 12/28/94 % %
-------------------------------------
MSCI-ACWI Index 12/28/94 % %
- ------------------------------------------------------------------------------
</TABLE>
* Class N Shares of the Fund began operation on ________________.
** For the period from inception through March 31, 1999, the total returns of
Class N and I Shares were _____% and _____%, versus _____% for the MSCI-EAFE
Index and _____% for the MSCI-ACWI Index.
24
<PAGE>
As an investor in the Fund, you will pay the following fees and expenses.
FEES AND EXPENSES
<TABLE>
<CAPTION>
Class of Shares
------------------
Class N Class I
SHAREHOLDER FEES ------- -------
<S> <C> <C>
Maximum sales charge (load) imposed on purchases None None
Maximum sales charge (load) imposed on reinvested dividends None None
Maximum contingent deferred sales charge None None
Redemption or exchange fees None None
ANNUAL FUND OPERATING EXPENSES (FEES PAID FROM FUND ASSETS)
Management Fees 0.75% 0.75%
- -------------------------------------------------------------------------------
Rule 12B-1 Fee 0.25% --%
- -------------------------------------------------------------------------------
Other expenses 0.27% 0.27%
- -------------------------------------------------------------------------------
Total annual Fund operating expenses 1.27% 1.02%
- -------------------------------------------------------------------------------
Fee waiver and/or expense reimbursement(1) 0.02% 0.02%
- -------------------------------------------------------------------------------
Net expenses(1) 1.25% 1.00%
- -------------------------------------------------------------------------------
</TABLE>
1 The Investment Manager has agreed, until at least December 31, 1999, 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 N and 1.00% for Class I. The Fund may
reimburse the Investment Manager in the future.
Expense 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
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 N $130 $400 $690 $1510
CLASS I $100 $320 $550 $1220
</TABLE>
25
<PAGE>
DRESDNER RCM EMERGING MARKETS FUND
Risk/Return Summary
Goal: The Fund's goal is to seek long term capital
appreciation by investing at least 80% of its
total assets in equity securities of emerging
market companies.
Principal Investment Strategies: The Fund currently intends to invest
primarily in companies with market
capitalizations (market price of common stock
and securities convertible into common stock)
of at least $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 15%
of total assets in issuers that are organized
or headquartered in developed countries, that
either
(1) have or will have substantial assets in
developing countries, or
(2) derive or will derive a substantial
portion of their total revenues from
goods and services produced in, or sales
made in, developing countries.
Emerging markets companies are companies
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 Fund focuses its investments on emerging
market companies that it expects will have
higher than average rates of growth and
strong potential for capital appreciation.
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 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. 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.
26
<PAGE>
FEES AND EXPENSES
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 table below it
compares the performance of the Fund over time to the Morgan Stanley Capital
International Emerging Markets Free Index and the IFC Index of Investable
Emerging Markets.
Both charts assume reinvestment of dividends and distributions. Of
course, past performance does not indicate how the Fund will perform in the
future.
Year-by-Year Total Returns for Class I Shares
<TABLE>
<CAPTION>
1998
<S> <C>
</TABLE>
The returns for Class N shares differ because Class N shares have different
expenses.
For the periods covered by this year-by-year total return chart, the Fund's
highest quarterly return was __% (for the quarter ended _____) and the lowest
quarterly return was __% (for the quarter ended ______).
Average Annual Total Returns
(through December 31, 1998)**
<TABLE>
<CAPTION>
Performance Past Since
Inception Year Inception
-----------------------------------
<S> <C> <C> <C>
Class N Shares* 12/30/97 % %
-----------------------------------
Class I Shares 12/30/97 % %
-----------------------------------
MSCI Emerging Markets Free Index 12/30/97 % %
-----------------------------------
IFC Emerging Markets Index 12/30/97 % %
- ----------------------------------------------------------------------------
</TABLE>
*Class N Shares of the Fund began operation on ________________.
** For the period from inception through March 31, 1999, the total returns of
Class N and I Shares were _____% and _____%, versus _____% for the MSCI Emerging
Markets Free Index and _____% for the IFC Emerging Markets Index.
27
<PAGE>
As an investor in the Fund, you will pay the following fees and expenses.
FEES AND EXPENSES
<TABLE>
<CAPTION>
Class of Shares
------------------
Class N Class I
SHAREHOLDER FEES ------- -------
<S> <C> <C>
Maximum sales charge (load) imposed on purchases None None
Maximum sales charge (load) imposed on reinvested dividends None None
Maximum contingent deferred sales charge None None
Redemption or exchange fees None None
ANNUAL FUND OPERATING EXPENSES (FEES PAID FROM FUND ASSETS)
Management Fees 1.00% 1.00%
- ----------------------------------------------------------------------------------
Rule 12B-1 Fee 0.25% NONE
- ----------------------------------------------------------------------------------
Other expenses 0.83% 0.83%
- ----------------------------------------------------------------------------------
Total annual Fund operating expenses 2.08% 1.83%
- ----------------------------------------------------------------------------------
Fee waiver and/or expense reimbursement(1) 0.33% 0.33%
- ----------------------------------------------------------------------------------
Net expenses(1) 1.75% 1.50%
- ----------------------------------------------------------------------------------
</TABLE>
1 The Investment Manager has agreed, until at least December 31, 1999, 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 1.75% for Class N and 1.50% for Class I. The Fund may
reimburse the Investment Manager in the future.
Expense 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
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 N $180 $550 $950 $2060
Class I $150 $470 $820 $1790
</TABLE>
28
<PAGE>
DRESDNER RCM TAX MANAGED GROWTH FUND
RISK/RETURN SUMMARY
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 no more
than 20% of its total assets in companies
with market capitalizations (market price of
common stock and securities convertible into
common stock) below $500 million at the time
of purchase.
The Fund may invest up to 25% of its total
assets in foreign companies (under normal
market conditions no more than 10% of total
assets in issuers organized or headquartered
in any one foreign country).
To maximize after-tax total return, the Fund
may use certain investment techniques
designed to reduce capital gains
distributions to shareholders in an effort to
maximize after-tax total return. 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 Fund focuses its investments on companies
that it expects will have higher than average
rates of growth and strong potential for
capital appreciation. To this investment
focus, the Fund adds the element of tax aware
investing as described above.
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 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. 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 of guaranteed by
the Federal Deposit Insurance Corporation or
any other government agency.
29
<PAGE>
FEES AND EXPENSES
This section would normally show how the Fund has performed over time.
Because this Fund was in operation less than a 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 Stock Index and the
Wilshire 5000 Index.
As an investor in the Fund, you will pay the following fees and expenses.
FEES AND EXPENSES
<TABLE>
<CAPTION>
Class of Shares
------------------
SHAREHOLDER FEES Class N Class I
(FEES PAID DIRECTION FROM YOUR INVESTMENT) ------- -------
<S> <C> <C>
Maximum sales charge (load) imposed on purchases None None
Maximum sales charge (load) imposed on reinvested dividends None None
Maximum contingent deferred sales charge None None
Redemption or exchange fees(1) 1.00% 1.00%
ANNUAL FUND OPERATING EXPENSES (FEES PAID FROM FUND ASSETS)
Management fees 0.75% 0.75%
- -----------------------------------------------------------------------------------
Rule 12B-1 fee 0.25% None
- -----------------------------------------------------------------------------------
Other expenses 1.15% 0.90%
- -----------------------------------------------------------------------------------
Total annual Fund operating expenses 1.90% 1.65%
- -----------------------------------------------------------------------------------
Fee waiver and/or expense reimbursement(2) 0.40% 0.40%
- -----------------------------------------------------------------------------------
Net expenses(2) 1.50% 1.25%
- -----------------------------------------------------------------------------------
</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 agreed, until at least December 31, 1999, 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 N and 1.25% for Class I. The Fund may
reimburse the Investment Manager in the future.
Expense 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
Because this example is hypothetical and for comparison only, your actual
costs will be different.
<TABLE>
<CAPTION>
1 3
Year Years
<S> <C> <C>
</TABLE>
30
<PAGE>
<TABLE>
<S> <C> <C>
CLASS N $150 $470
CLASS I $130 $400
</TABLE>
31
<PAGE>
INVESTMENT OBJECTIVES, POLICIES AND RISKS
INVESTMENT OBJECTIVES AND 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.
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.
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 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.
WHAT KINDS OF EQUITY SECURITIES DO THE FUNDS INVEST IN?
The Funds invest primarily in common stocks and depositary receipts. 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 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 U.S.
- Securities that are principally traded outside the U.S., regardless of
where the issuer of such securities is organized or headquartered or
where its operations principally are conducted
32
<PAGE>
- Depositary receipts
- Securities of other investment companies investing primarily in such equity
and equity-related foreign securities.
The Investment Manager expects that the Funds' foreign investments will
primarily be 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 are Depositary receipts?
Each Fund may invest in securities of foreign companies in the form of
American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs"),
Global Depositary Receipts ("GDRs"), or other similar depositary instruments
representing securities of foreign companies. Depositary receipts are
receipts for ordinary shares of foreign companies that typically are issued
by U.S. banks in the case of ADRs, and by foreign financial institutions in
the case of EDRs and GDRs. Depositary receipts entitle their holders to all
dividends and all capital gains associated with the underlying ordinary
shares. ADRs are usually dollar-denominated and do not involve the currency
exchange risk of investing in the underlying securities. Depositary receipts
have risks that are similar to those of foreign equity securities. Therefore,
for purposes of 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.
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 later.
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. 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
33
<PAGE>
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.
WHAT ARE THE FUNDS' PORTFOLIO TURNOVER RATES?
Each Fund may invest in securities on either a long-term or short-term
basis. The Investment Manager anticipates that the annual portfolio turnover
rate for the Tax Managed Growth Fund will not exceed 100%, during its first
full year or operation. See, "Financial Highlights" for the portfolio
turnover rates of the other Funds.
A Fund's expected portfolio turnover rate is not a limiting factor. 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 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.
Because the Investment Manager will purchase and sell securities for
each Fund's portfolio without regard to the length of the holding period for
the securities, a Fund's portfolio could have a higher turnover rate than
most funds that invest substantially all of their assets for long-term
capital appreciation. A high portfolio turnover rate would increase a Fund's
brokerage commission expenses and other transaction costs, and may increase
its taxable capital gains.
OTHER INVESTMENT PRACTICES
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. 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.
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.
ADDITIONAL INFORMATION ABOUT INVESTMENT PRACTICES
34
<PAGE>
The Statement of Additional Information has more detailed information
about the investment practices described in this Prospectus as well as
information about other investment practices used by the Investment Manager.
CHANGING THE 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 change in any applicable percentage
resulting from market fluctuations.
35
<PAGE>
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.
SPECIFIC INDUSTRIES
Because the Technology Fund, Health Care Fund and Biotechnology Fund
each focuses 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 concerns may involve greater risks than investments
in larger companies, and may be speculative. The securities of small
companies, as a class, have had periods of more favorable results, and
periods of less favorable results, than securities of larger companies as a
class. In addition, small companies in which 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 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.
36
<PAGE>
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.
37
<PAGE>
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 in the United States will not be available. A Fund could lose the
amount of the option 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 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 Technology Fund, Health Care Fund, Biotechnology Fund and
International 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).
YEAR 2000
Many computer programs employed throughout the world use two digits
rather than four to identify the year. These programs, if not adapted, will
not correctly handle the change from "99" to "00" on January 1, 2000, and
will not be able to perform necessary functions critical to the Funds'
operations. The "Year 2000 issue" affects all companies and organizations.
The Year 2000 problem may also adversely affect the companies in which
the Funds invest. For example companies may incur substantial costs to
address the problem. They may also suffer losses caused by corporate and
governmental data processing errors. To the extent the impact on a portfolio
holding is negative, a Funds' investment returns could be adversely affected.
The Investment Manager had advised the Funds that it is implementing a
plan intended to ensure that its computer systems are not adversely affected
by the Year 2000 issue. The Funds understand that their key service
providers are taking steps to address the issue as well. The Funds and the
Investment Manager will continue to monitor developments relating to this
issue but do not anticipate that the Year 2000 issue will have and adverse
effect on the Investment Manger's ability to provide services to the Funds.
EURO INTRODUCTION
The European Union's introduction on January 1, 1999 of a single
European currency, the Euro, creates various uncertainties. The conversion
to a new currency will affect the Funds' operations and contains
38
<PAGE>
some special risks. These include whether the payment and operational systems
of banks and other financial institutions will be prepared for the change,
the legal treatment of certain outstanding financial contracts that refer to
existing currencies, and the creation of suitable clearing and settlement
payment systems for the new currency. If there is not adequate preparation,
there could be delays in settlement and additional costs to the Funds.
The conversion will also affect issuers in which the Funds invest due to
changes in the competitive market from a consolidated currency market and
greater operations costs from converting to the Euro. These or other related
factors could cause market disruptions and may adversely affect the value of
some of the Funds' holdings and increase the Funds' operational costs. The
adoption of a common currency is expected to produce some benefits, such as
consolidating the government debt market for those countries and reducing
some currency risks and costs. The overall effect of these factors on the
Funds' investments cannot be determined with certainty.
The Funds understand that the Investment Manager and other key service
providers are taking steps to address Euro-related issues. This includes
upgrading their computer and bookkeeping systems to deal with the conversion.
The Funds and their Investment Manager will continue to monitor the effects
of the conversion on the issuers in which the Funds invest.
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.
THE PORTFOLIO MANAGERS
LARGE CAP FUND
John D. Leland, Jr. and Carson V. Levit are primarily responsible for
the day-to-day management of the Large Cap Fund. Mr. Leland is a Managing
Director of the Investment Manager, with which he has been associated since
1972. He has managed equity portfolios on behalf of the Investment Manager
since 1972. Mr. Levit has been associated with the Investment Manager since
1993. He has participated in the management of equity portfolios on behalf of
the Investment Manager since 1994.
GLOBAL SMALL CAP FUND
David S. Plants and Timothy M. Kelly 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 Assistant 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
39
<PAGE>
Business with concentrations in accounting and finance. He has participated
in the management of portfolios on behalf of the Investment Manager since
1995.
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 managed equity portfolios on behalf of the
Investment Manager since 1985.
HEALTH CARE FUND AND BIOTECHNOLOGY FUND
Selena A. Chaisson, M.D. and ________________ are primarily responsible
for the day-to-day management of the Health Care Fund and the Biotechnology
Fund. Dr. Chaisson is a Director of the Investment Manager, with which she has
been associated since 1994. In 1994 she was employed by Regeneron
Pharmaceuticals where she served as Manager of Corporate Finance. She has
participated in the management of portfolios on behalf of the Investment
Manager since 1996.
INTERNATIONAL FUND AND EMERGING MARKETS FUND
William S. Stack is primarily responsible for the day-to-day management
of the International Fund and together with Ana Wiechers-Marshall is
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. From 1985-1994 he was employed by Lexington Management Corporation
where he served as Managing Director and Chief Investment Officer. Mr. Stack
has more than 24 years of experience managing both domestic and international
equities. Ms. Wiechers-Marshall is a Director of the Investment Manager, with
which she has been associated since 1995. From 1993-1995 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 1997.
TAX MANAGED GROWTH FUND
M. Brad Branson and Joanne L. Howard 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.
40
<PAGE>
MANAGEMENT FEES AND OTHER EXPENSES
Each Fund pays the Investment Manager a fee pursuant to an investment
management agreement. The 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, at the following annual rate:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
SMALL CAP FUND
HEALTH CARE FUND
BIOTECHNOLOGY FUND LARGE CAP GROWTH TAX MANAGED
AVERAGE DAILY NET ASSETS FUND GROWTH FUND
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
The first $500 million 1.00% 0.70% 0.75%
Above $500 million and below $1 billion 0.95% 0.65% 0.70%
Above $1 billion 0.90% 0.60% 0.65%
</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 N Class shares.
To limit the expenses of each Fund, the Investment Manager has agreed to
pay each Fund on a quarterly basis the amount, if any, by which the 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, 1999:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
FUND EXPENSE LIMITS THROUGH
12/31/99
- -------------------------------------------------------------------------
<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%
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<PAGE>
Class I shares 1.25%
</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 Companies have adopted distribution and service plans (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
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.
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<PAGE>
STOCKHOLDER INFORMATION
BUYING SHARES
For your convenience, we offer several ways to start and add to Fund
investments.
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.
Shares may also purchase through certain brokers which have entered into
selling group agreements with the Distributor. Brokers may charge a fee for
their services at the time of purchase or redemption. Subscription forms can
be obtained from the Companies. Call 1-800-726-7240.
ESTABLISHING YOUR ACCOUNT
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 amount for initial
investments is $5,000 for the Class N shares ($250 for additional
investments) and $1,000,000 for the Class I shares ($50,000 for additional
investments). Minimum subsequent investment requirements do not apply to
investors purchasing shares through the Fund's automatic dividend
reinvestment plan. In addition, minimum initial investments may vary for
investors purchasing shares through a broker-dealer or other intermediary
having a service agreement with the Investment Manager and maintaining an
omnibus account with the Fund.
For more information on minimum investments, call 1-800-726-7240.
- - Complete the account application. Please apply at this time for any
account privileges you may want to use in the future, to avoid the delays
associated with adding them later on.
- - Mail your completed application to the Fund at:
Boston Financial Data Services
P.O. Box 419927
Boston, MA 02266-8025
For answers to any questions, please speak with a Fund Representative
at 1-800-726-7240.
We reserve the right to reject any purchase of shares at our sole
discretion. We also reserve the right to cancel any purchase order for which
payment has not been received by the third business day following the order.
We will issue share certificates only for full shares and only upon
request. Confirmation statements showing transactions in the stockholder's
account and a summary of the status of the account serve as evidence of
ownership of shares of the Fund. We will forward a confirmation statement to
you on receipt of a proper order.
INVESTING IN YOUR ACCOUNT
BY WIRE
43
<PAGE>
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:
_____________________________
Routing number: ______________
Credit: _______________________
Account number: ______________
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].
Mail the check with your completed application to the Fund at:
Boston Financial Data Services
P.O. Box 419927
Boston, MA 02266-8025
ADDING TO YOUR ACCOUNT
BY WIRE
Call the Fund to place a purchase order. Funds that are 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].
- - Mail the check with a completed investment slip to the Fund at:
Boston Financial Data Services
P.O. Box 419927
Boston, MA 02266-8025
- - If you do not have an investment slip, attach a note indicating your
account number.
WITH SECURITIES
In its discretion, the Company may accept securities of equal value instead
of cash in payment of all or part of the subscription price for Fund shares.
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
44
<PAGE>
- - 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.
45
<PAGE>
SELLING SHARES
BY PHONE - WIRE PAYMENT
- - Call the Fund to verify that the wire redemption privilege is in place
on your account. If it is not, a representative can help you add it.
- - Place your wire request.
BY PHONE - CHECK PAYMENT
- - Call the Fund and place your request. Once your request has been
verified, a check for the net cash amount, payable to the registered
owner(s), will be mailed to the address of record. For checks payable
to any other party or mailed to any other address, please make your
request in writing (see below).
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
- Any stock certificates you may hold or additional documents we may
request
- - 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 may require additional information, such as a signature
guarantee.
- - Mail the letter to the Fund.
OTHER STOCKHOLDER SERVICES
TELEPHONE ORDERS
We 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). 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
The Fund accepts orders until the close of trading on the NYSE every
business day. Orders
46
<PAGE>
received before 4:00 p.m. Eastern Time are executed the same day at the
respective Fund's NAV for that day. Orders received after 4:00 p.m. Eastern
time 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
- - 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. Upon
execution of the redemption order, a confirmation statement will be forwarded
to you indicating the number of shares sold and the proceeds thereof.
ACCOUNTS WITH BELOW-MINIMUM BALANCES
If your account balance falls below the minimum required by a Fund as a
result of selling shares (and not because of performance), the Fund reserves
the right to request that you buy more shares or close your account. If your
account balance is still below the minimum 90 days after notification, we
reserve the right to close out your account and send the proceeds to the
address of record.
AUTOMATIC REINVESTMENT
We will reinvest each income dividend and capital gain distribution
declared by 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 through written notice to the
Fund's Transfer and Dividend Disbursing Agent, Boston Financial Data Services
("BFDS"). This request will be effective as to any subsequent payment if it
is received prior to the record date used for determining your payment. Any
dividend and distribution election will remain in effect until you notify
BFDS to the contrary in writing at the address given on page___ above.
EXCHANGE PRIVILEGE
You may exchange shares of either class of the Funds into shares of the
same class of any other Fund offered by Dresdner RCM, without a sales charge
or other fee, by contacting BFDS in writing. Exchange purchases are subject
to the minimum investment requirements of the class purchased. An exchange
will be treated as a redemption and purchase for tax purposes.
Shares will be exchanged at net asset value per share next determined
after receipt by BFDS of:
47
<PAGE>
- - A written request for exchange, signed by each registered owner or his or
her duly authorized agent exactly as the shares are registered, which
clearly identifies the exact names in which the account is registered,
the account number and the number of shares or the dollar amount to be
exchanged
- - Stock certificates for any shares to be exchanged which are held by the
stockholder
Exchanges will not become effective until all documents in the form
required have been received by BFDS. If you have any questions, please
contact BFDS.
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 is the account, such as additional investments
and dividend reinvestments, will be reflected on regular confirmation
statements.
REPORTS TO STOCKHOLDERS
Each Fund's fiscal year ends on December 31. Each Fund will issue to its
stockholders semi-annual and annual reports. In addition, stockholders will
receive quarterly statements of the status of their accounts reflecting all
transactions having taken place within that quarter. In order to reduce
duplicate mailings and printing costs, the Companies will provide one annual
and semi-annual report and annual prospectus per household. Information
regarding the tax status of income dividends and capital gains distributions
will be mailed to stockholders on or before January 31st of each year.
Account tax information will also be sent to the IRS.
REDEMPTION
Redemption payments will be made wholly in cash unless the appropriate
Board of Directors believes that unusual conditions exist which would make
such payment detrimental to the best interests of a Fund. Under such
circumstances, payment of the redemption price could be made in whole or in
part in portfolio securities. You would incur brokerage costs to sell such
securities.
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. They are typically
paid 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: (a) you have not given us a certified
correct taxpayer identification number and (b) except with respect to
redemption proceeds, have not certified that backup withholding does not
apply. Amounts we withhold are applied to your federal tax liability, and a
refund may be obtained from the Internal Revenue Service if withholding
results in an overpayment of taxes. Distributions of our taxable income and
net capital gain to non-resident alien individuals, non-resident alien
fiduciaries of trusts of estate, foreign corporations, or foreign
partnerships may also be subject to U.S. withholding tax, although
distributions of net capital gain to such stockholders generally will not be
subject to withholding.
We may be required to pay income, withholding and other taxes imposed by
foreign countries, generally at rates from 10% to 40%, which would reduce our
investment income. Tax conventions between certain countries and the U.S.
may reduce or eliminate such taxes. We may "pass through" to you the amount
of foreign income taxes we pay, if it is in the best interests of
stockholders. If we do so, you will be
48
<PAGE>
required to include in your gross income your pro-rata share of foreign taxes
we paid, and you will be able to treat such taxes as either an itemized
deduction or a foreign credit against U.S. income taxes on your tax returns.
If we do not do so, you will not be able to deduct your share of such taxes
in computing your taxable income and will not be able to take your share of
such taxes as a credit against your U.S. income taxes.
In general, selling shares for cash, exchanging shares, and receiving
distributions (whether reinvested or taken in cash) are all taxable events.
These transactions typically create the following tax liabilities for taxable
accounts:
<TABLE>
<CAPTION>
TRANSACTION TAX STATUS
------------------------ --------------------------
<S> <C>
Income dividends Ordinary income
Short-term capital gains Ordinary income
distributions
Long-term capital gains Capital gains
distributors
Sales or exchanges of Capital gains or losses
shares owned for more
than one year
Sales of exchanges of Gains are treated as
shares owned for one year ordinary income; losses are
or less 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 such month are treated as paid
and are thereby taxable as of December 31, provided that the Fund pays the
dividend no later than January 31 of the following year.
If you purchase a Fund's shares shortly before the record date for a
dividend or other distribution thereon, you will pay full price for the
shares (know as buying a distribution). Then you will receive some portion
of your purchase price back as a taxable distribution even though, because
the amount of the dividend or other distribution reduce the shares' net asset
value, it actually represents a return of invested capital.
You will receive, after the end of each year, full information on
dividends, capital gain distributions and other reportable amounts with
respect to shares of 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.
49
<PAGE>
FINANCIAL HIGHLIGHTS [TO COME]
NET ASSET VALUE,
BEGINNING OF PERIOD
------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income (loss)
Net realized and unrealized gain (loss)
From investments
------------------------------------------
Total from Investment Activities
------------------------------------------
DISTRIBUTIONS:
Net investment income
In excess of net investment income
Net realized gains
In excess of net realized gains
------------------------------------------
Total Distributions
NET ASSET VALUE,
END OF PERIOD
------------------------------------------
Total Return (excludes sales charge)
ANNUALIZED RATIOS/
SUPPLEMENTARY DATA:
Net Assets at end of period (000)
Ratio of expenses to average net assets
Ratio of net investment income to
Average net assets
Ratio of expenses to average net
Assets*
Ratio of net investment income to
Average net assets*
Portfolio Turnover (e)
*During the period certain fees were voluntarily reduced. In addition, the
investment adviser reimbursed expenses. If such voluntary fee reductions and
expense reimbursements had not occurred, the ratios would have been as
indicated.
50
<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.
- Free from the Commission's Website at http://www.sec.gov.
Investment Company Act file nos. 811-2913 and 811-9100.
51
<PAGE>
[LOGO] DRESDNER RCM GLOBAL FUNDS
Dresdner RCM Capital Funds, Inc.
Dresdner RCM Global Funds, Inc.
Four Embarcadero Center
San Francisco, California 94111-4189
(800) 726-7240
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 INTERNATIONAL GROWTH EQUITY FUND
DRESDNER RCM EMERGING MARKETS FUND
DRESDNER RCM TAX MANAGED GROWTH FUND
STATEMENT OF ADDITIONAL INFORMATION
______________, 1999
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 Global Small Cap Fund (the "Global Small
Cap Fund"), Dresdner RCM Global Technology Fund (the "Technology Fund"),
Dresdner RCM Global Health Care Fund (the "Health Care Fund"), Dresdner RCM
Biotechnology Fund (the "Biotechnology Fund"), Dresdner RCM Emerging Markets
Fund (the "Emerging Markets Fund"), and Dresdner RCM Tax Managed Growth Fund
(the "Tax Managed Growth 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, with the Capital Company, 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 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 ________
__, 1999. 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 either Company at the address and phone
number above.
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TABLE OF CONTENTS
PAGE
Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . .3
Investment Objectives and Policies. . . . . . . . . . . . . . . . . .1
Risk Considerations . . . . . . . . . . . . . . . . . . . . . . . . 13
Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . 20
Execution of Portfolio Transactions . . . . . . . . . . . . . . . . 22
Directors and Officers. . . . . . . . . . . . . . . . . . . . . . . 24
The Investment Manager. . . . . . . . . . . . . . . . . . . . . . . 27
The Distributor . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Net Asset Value . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Purchase and Redemption of Shares . . . . . . . . . . . . . . . . . 31
Dividends, Distributions and Tax Status . . . . . . . . . . . . . . 31
Investment Results. . . . . . . . . . . . . . . . . . . . . . . . . 34
Description of Capital Shares . . . . . . . . . . . . . . . . . . . 36
Additional Information. . . . . . . . . . . . . . . . . . . . . . . 37
Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . 38
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INVESTMENT OBJECTIVES AND POLICIES
INVESTMENT CRITERIA
In evaluating particular investment opportunities, the Investment
Manager may consider such other factors, in addition to those described in
the Prospectus, as the anticipated economic growth rate, the political
outlook, the anticipated inflation rate, the currency outlook, and the
interest rate environment for the country and the region in which a
particular issuer is located. When the Investment Manager believes it would
be appropriate and useful, the Investment Manager's personnel may visit the
issuer's headquarters and plant sites to assess an issuer's operations and to
meet and evaluate its key executives. The Investment Manager also will
consider whether other risks may be associated with particular securities.
INVESTMENT IN FOREIGN SECURITIES
The securities markets of many countries have at times in the past moved
relatively independently of one another due to different economic, financial,
political, and social factors. In seeking to achieve the investment
objectives of the Funds, 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 may (in the case of the Tax
Managed Fund, up to 5% of its total assets, and up to 10% of its total assets
fo the Large Cap Growth Fund), 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,
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Singapore, Spain, Sweden, Switzerland, and the United Kingdom. (See
INVESTMENT IN DEVELOPED FOREIGN COUNTRIES.) As their economies grow and their
markets grow and mature, some countries that currently may be characterized
by the Investment Manager as emerging market countries may be deemed by the
Investment Manager to be developed foreign countries. In the event that the
Investment Manager deems a particular country to be a developed foreign
country, any investment in securities issued by that country's government or
by an issuer located in that country would not be subject to a Fund's overall
limitations on investments in emerging market countries.
Securities of issuers organized or headquartered in emerging market
countries may, at times, offer excellent opportunities for current income and
capital appreciation. However, prospective investors should be aware that the
markets of emerging market countries historically have been more volatile
than the markets of the United States and developed foreign countries, and
thus the risks of investing in securities of issuers organized or
headquartered in emerging market countries may be far greater than the risks
of investing in developed foreign markets. (See 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
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privately negotiated currency instruments offer less protection against
defaults by the other party to such instruments than is available for
currency instruments traded on an exchange. To the extent that a substantial
portion of a Fund's total assets, adjusted to reflect the Fund's net position
after giving effect to currency transactions, is denominated or quoted in the
currencies of foreign countries, the Fund will be more susceptible to the
risk of adverse economic and political developments within those countries.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. Each Fund 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;
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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.
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.
OPTIONS TRANSACTIONS
Each Fund may purchase listed put and call options on any securities
which it is eligible to purchase as a hedge against changes in market
conditions that may result in changes in the value of the Fund's portfolio
securities. The aggregate premiums on put options and call options purchased
by a Fund may not in each case exceed 5% of the value of the net assets of
the Fund as of the date of purchase. In addition, a Fund will not purchase
options if more than 25% of the value of its net assets would be hedged.
A put gives the holder the right, in return for the premium paid, to
require the writer of the put to purchase from the holder a security at a
specified price. A call gives the holder the right, in return for the premium
paid, to require the writer of the call to sell a security to the holder at a
specified price. Put and call options on various stocks and financial indices
are traded on U.S. and foreign exchanges. A put option is covered if the
writer segregates cash, U.S. Government securities or other liquid debt or
equity securities equal to the exercise price. A call option is covered if
the writer owns the security underlying the call or has an absolute and
immediate right to acquire the security without additional cash consideration
upon conversion or exchange of other securities held by it.
PUT OPTIONS. If a Fund purchases a put option, the Fund acquires the
right to sell the underlying security at a specified price at any time during
the term of the option (for "American-style" options) or on the option
expiration date (for "European-style" options). Purchasing put options may be
used as a portfolio investment strategy when the
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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.
STOCK INDEX OPTIONS. Each Fund may purchase put and call options with
respect to stock indices such as the S&P Composite 500 Stock Price Index and
other stock indices. Such options may be purchased as a hedge against changes
resulting from market conditions in the values of securities which are held
in a Fund's portfolio or which it intends to purchase or sell, or when they
are economically appropriate for the reduction of risks inherent in the
ongoing management of the Fund.
The distinctive characteristics of options on stock indices create
certain risks that are not present with stock options generally. Because the
value of an index option depends upon movements in the level of the index
rather than the price of a particular stock, whether a Fund will realize a
gain or loss on the purchase or sale of an index option depends upon
movements in the level of stock prices in the stock market generally rather
than movements in the price of a particular stock. Accordingly, successful
use by a Fund of options on a stock index will be subject to the Investment
Manager's ability to predict correctly movements in the direction of the
stock market generally. This requires different skills and techniques than
predicting changes in the prices of individual stocks.
Index prices may be distorted if trading of certain stocks included in
an index is interrupted. Trading of index options also may be interrupted in
certain circumstances, such as if trading were halted in a substantial number
of stocks included in the index. If this were to occur, a Fund would not be
able to close out options which it had purchased, and if restrictions on
exercise were imposed, the Fund might be unable to exercise an option it
holds, which could result in substantial losses to the Fund. It is the policy
of the Funds to purchase put or call options only with respect to an index
which the Investment Manager believes includes a sufficient number of stocks
to minimize the likelihood of a trading halt in the index.
DEALER OPTIONS. Each Fund may engage in transactions involving dealer
options as well as exchange-traded options. Options not traded on an exchange
generally lack the liquidity of an exchange-traded option, and may be subject to
a Fund's restriction on investment in illiquid securities. In addition, dealer
options may involve the risk that the securities dealers participating in such
transactions will fail to meet their obligations under the terms of the options.
SHORT SALES
Each Fund, 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,
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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 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
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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 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.
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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.
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
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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 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
less than one year) issued or guaranteed by the U.S. Government or foreign
governments (including their respective agencies, instrumentalities,
authorities and political subdivisions), debt obligations issued or
guaranteed by international or supranational governmental entities, and debt
obligations of corporate issuers. Such debt obligations will be rated, at
the time of purchase, investment grade by Standard & Poor's, a division of
The McGraw-Hill Companies, Inc. ("Standard & Poor's"), Moody's Investors
Service ("Moody's"), or another recognized rating organization, or if unrated
will be determined by the Investment Manager to be of comparable investment
quality. Investment grade means the issuer of the security is believed to
have adequate capacity to pay interest and repay principal, although certain
of such securities in the lower grades have speculative characteristics, and
changes in economic conditions or other circumstances may be more likely to
lead to a weakened capacity to pay interest and principal than would be the
case with higher-rated securities. The Investment Manager does not currenty
intend to purchase U.S. or foreign debt securities on behalf of the
International Fund except on an occassional basis when the Investment Manager
believes that unusually attractive investments are available.
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. 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 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
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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 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 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.
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
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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.
BORROWING MONEY
From time to time, it may be advantageous for a Fund to borrow money
rather than sell portfolio securities to raise the cash to meet redemption
requests. In order to meet such redemption requests, each Fund may borrow
from banks or enter into reverse repurchase agreements. Each Fund may also
borrow up to 5% of the value of its total assets for temporary or emergency
purposes other than to meet redemptions. However, the Funds will not borrow
money for leveraging purposes. A Fund may continue to purchase securities
while borrowings are outstanding, but will not do so when the Fund's
borrowings (including reverse repurchase agreements) exceed 5% of the value
of its total assets. The 1940 Act permits a Fund to borrow only from banks
and only to the extent that the value of its total assets, less its
liabilities other than borrowings, is equal to at least 300% of all
borrowings (including the proposed borrowing), and requires the Fund to take
prompt action to reduce its borrowings if this limit is exceeded. For the
purpose of the 300% borrowing limitation, reverse repurchase transactions are
considered to be borrowings.
A reverse repurchase agreement involves a transaction by which a
borrower (such as a Fund) sells a security to a purchaser (a member bank of
the Federal Reserve System or a broker-dealer deemed creditworthy pursuant to
standards adopted by the Board of Directors of the 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.
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
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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 (hereinafter collectively referred to as the
"Board of Directors"); time deposits; bankers' acceptances; and repurchase
agreements related to any of the foregoing. In addition, for temporary
defensive purposes under abnormal market or economic conditions, a Fund may
invest up to 100% of its assets in such cash-equivalent investments.
A certificate of deposit is a short-term obligation of a commercial
bank. A bankers' acceptance is a time draft drawn on a commercial bank by a
borrower, usually in connection with international commercial transactions. A
repurchase agreement involves a transaction by which an investor (such as a
Fund) purchases a security and simultaneously obtains the commitment of the
seller (a member bank of the Federal Reserve System or a securities dealer
deemed creditworthy by the Investment Manager pursuant to standards adopted
by the Board of Directors) to repurchase the security at an agreed-upon price
on an agreed-upon date within a number of days (usually not more than seven)
from the date of purchase.
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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.
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.
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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. In addition, to the extent that a Fund acquires
depositary receipts through banks that do not have a contractual relationship
with the foreign issuer of the security underlying the depositary receipts to
issue and service depositary receipts, there may be an increased possibility
that the Fund would not become aware of and be able to respond to corporate
actions, such as stock splits or rights offerings, involving the foreign
issuer in a timely manner.
The information available for American Depositary Receipts ("ADRs")
sponsored by the issuers of the underlying securities is subject to the
accounting, auditing, and financial reporting standards of the domestic
market or exchange on which they are traded, which standards generally are
more uniform and more exacting than those to which many non-domestic issuers
may be subject. However, some ADRs are sponsored by persons other than the
issuers of the underlying securities. Issuers of the stock on which such ADRs
are based are not obligated to disclose material information in the United
States. The information that is available concerning the issuers of the
securities underlying European Depositary Receipts ("EDRs") and Global
Depositary Receipts ("GDRs") may be less than the information that is
available about domestic issuers, and EDRs and GDRs may be traded in markets
or on exchanges that have lesser standards than those applicable to the
markets for ADRs.
A depositary receipt will be treated as an illiquid security for
purposes of a Fund's restriction on the purchases of such securities unless
the depositary receipt is convertible into cash by the Fund within seven days.
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EMERGING MARKET SECURITIES
There are special risks associated with investments in securities of
companies organized or headquartered in developing countries with emerging
markets that are in addition to the usual risks of investing in securities of
issuers located in developed foreign markets around the world, and investors
in the Funds are strongly advised to consider those risks carefully. The
securities markets of emerging market countries are substantially smaller,
less developed, less liquid, and more volatile than the securities markets of
the United States and developed foreign markets. As a result, the prices of
emerging market securities may increase or decrease much more rapidly and
much more dramatically than the prices of securities of issuers located in
developed foreign markets. Disclosure and regulatory standards in many
respects are less stringent than in the United States and developed foreign
markets. There also may be a lower level of monitoring and regulation of
securities markets in emerging market countries and the activities of
investors in such markets, and enforcement of existing regulations has been
extremely limited.
Many emerging market countries have experienced substantial, and in some
periods extremely high, rates of inflation for many years. Inflation and
rapid fluctuations in inflation rates have had and may continue to have very
negative effects on the economies and securities markets of certain emerging
market countries. Economies in emerging markets generally are heavily
dependent upon international trade and, accordingly, have been and may
continue to be affected adversely by trade barriers, exchange controls,
managed adjustments in relative currency values, and other protectionist
measures imposed or negotiated by the countries with which they trade. These
economies also have been and may continue to be adversely affected by
economic conditions in the countries with which they trade. In addition,
custodial services and other costs related to investment in foreign markets
may be more expensive in emerging markets than in many developed foreign
markets, which could reduce the Funds' investment returns from such
securities.
In many cases, governments of emerging market countries continue to
exercise a significant degree of control over the economies of such
countries, and government actions relative to the economy, as well as
economic developments generally, also may have a major effect on an issuer's
prospects. In addition, certain of such governments have in the past failed
to recognize private property rights and have at times naturalized or
expropriated the assets of private companies. There is also a heightened
possibility of confiscatory taxation, imposition of withholding taxes on
dividend and interest payments, or other similar developments that could
affect investments in those countries. As a result, there can be no assurance
that adverse political changes will not cause a Fund to suffer a loss with
respect to any of its holdings. In addition, political and economic
structures in many of such countries may be undergoing significant evolution
and rapid development, and such countries may lack the social, political and
economic stability characteristics of more developed countries. Unanticipated
political or social developments may affect the values of a Fund's
investments in those countries and the availability of additional investments
in those countries.
INVESTMENTS IN SMALLER COMPANIES
Investment in the securities of companies with market capitalizations
below $1 billion involves greater risk and the possibility of greater
portfolio price volatility than investing in larger capitalization companies.
The securities of small-sized concerns, as a class, have shown market
behavior which has had periods of more favorable results, and periods of less
favorable results, relative to securities of larger companies as a class. For
example, smaller capitalization companies may have less certain growth
prospects, and may be more sensitive to changing economic conditions, than
large, more established companies. Moreover, smaller capitalization companies
often face competition from larger or more established companies that have
greater resources. In 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,
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<PAGE>
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 may invest up to 5% of its total assets in
debt securities rated below "Baa" by Moody's, below "BBB" by Standard &
Poor's, or 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, the Fund may experience difficulty in valuing such securities
and, in turn, its assets. In addition, adverse publicity and investor
perceptions about junk bonds, whether or not based on fundamental analysis,
may tend to decrease the market value and liquidity of such securities. The
Investment Manager will try to reduce the risk inherent in the Fund's
investments in such securities through credit analysis, diversification and
attention to current developments and trends in interest rates and economic
conditions. However, there can be no assurance that losses will not occur.
Since the risk of default is higher for lower-rated bonds, the Investment
Manager's research and credit analysis are a correspondingly more important
aspect of its program for managing the Fund's investments in such debt
securities. The Investment Manager will attempt to identify those issuers of
high-yielding securities whose financial conditions are adequate to meet
future obligations, or have improved or are expected to improve in the future.
Credit ratings evaluate the safety of principal and interest payments of
securities, not their market value. The rating of an issuer is also heavily
weighted by past developments and does not necessarily reflect probable
future conditions. There is frequently a lag between the time a rating is
assigned and the time it is updated. As credit rating agencies may fail to
timely change credit ratings of securities to reflect subsequent events, the
Investment Manager will also monitor issuers of such securities to determine
if such issuers will have sufficient cash flow and profits to meet required
principal and interest payments and to assure their liquidity.
DELAYED-DELIVERY TRANSACTIONS
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
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<PAGE>
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
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
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<PAGE>
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 futures contract or
futures option or at any particular time. In such event, it may not be
possible to close a futures
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<PAGE>
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.
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<PAGE>
INVESTMENT RESTRICTIONS
FUNDAMENTAL POLICIES
Each Fund has adopted certain investment restrictions that are
fundamental policies and that may not be changed without approval by the vote
of a majority of the Fund's outstanding voting securities, as defined in the
1940 Act. The "vote of a majority of the outstanding voting securities" of
the Fund, as defined in Section 2(a)(42) of the 1940 Act, means the vote of
(i) 67% or more of the voting securities of the Fund present at any meeting,
if the holders of more than 50% of the outstanding voting securities of the
Fund are present or represented by proxy, or (ii) more than 50% of the
outstanding voting securities of the Fund, whichever is less. These
restrictions provide that a Fund may not:
1. Invest more than 25% of the value of its total assets in the securities of
companies primarily engaged in any one industry (other than the United
States of America, its agencies and instrumentalities) (this
restriction does not apply to the 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. 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
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<PAGE>
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. 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);
12. 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.
13. 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.
14. Invest more than 15% of the value of its net assets in securities that are
illiquid. (this restriction applies only to the Tax Managed Growth Fund).
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% (10% for the International Fund) of the value of
its net assets in securities that are illiquid.
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
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<PAGE>
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 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
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<PAGE>
to place orders with any particular broker or group of brokers. The Company
anticipates that a substantial portion of all brokerage commissions will be
paid to brokers who supply investment information to the Investment Manager.
The Funds also invest in foreign and/or U.S. securities that are not
listed on a national securities exchange but are traded in the
over-the-counter market. The Funds may also purchase listed securities
through the third market or fourth market. When transactions are executed in
the over-the-counter market or the third or fourth market, the Investment
Manager will seek to deal with the counterparty that the Investment Manager
believes can provide the best execution, whether or not that counterparty is
the primary market maker for that security.
For the fiscal years ended December 31, 1996, 1997 and 1998, the Funds
paid total brokerage commissions as follows:
<TABLE>
<CAPTION>
Fund Name 1996 1997 1998
<S> <C> <C> <C>
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 International
Growth Equity Fund $ $ $
Dresdner RCM Emerging $ $ $
Markets Fund
Dresdner RCM Tax $ $ $
Managed Growth Fund
</TABLE>
Of the total commissions paid during the fiscal year ended December 31,
1998, $___________ (%_) 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 the fiscal year ended December 31, 1998, the following Funds
acquired securities of their regular brokers or dealers (as defined in Rule
10b-1 under the Investment Company Act) or their parents:
__________________. The holdings of securities of such brokers and dealers
were as follows as of December 31, 1998: __________________.
For the fiscal years ended December 31, 1996, 1997 and 1998, the Funds
paid total brokerage commissions to brokers that were affiliated persons of
such Funds as follows: ______________________________.
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
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<PAGE>
Dresdner Affiliates. Accordingly, the Investment Manager intends to execute
brokerage transactions on behalf of the Funds through the Dresdner
Affiliates, when appropriate and to the extent consistent with applicable
laws and regulations, including federal banking laws.
In all such cases, the Dresdner Affiliates will act as agent for the
Funds, and the Investment Manager will not enter into any transaction on
behalf of the Funds in which a Dresdner Affiliate is acting as principal for
its own account. In connection with such agency transactions, the Dresdner
Affiliates will receive compensation in the form of brokerage commissions
separate from the Investment Manager's management fee. The Investment
Manager's policy is that such commissions must be reasonable and fair when
compared to the commissions received by other brokers in connection with
comparable transactions involving similar securities and that the commissions
paid to a Dresdner Affiliate must be no higher than the commissions paid to
that broker by any other similar customer of that broker who receives
brokerage and research services that are similar in scope and quality to
those received by the Funds.
The Investment Manager performs investment management and advisory
services for various clients, including other registered investment
companies, and pension, profit-sharing and 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 Companies and
their principal occupations and certain other affiliations during the past
five years are given below. Unless otherwise specified, the address of each
of the following persons is Four Embarcadero Center, San Francisco,
California 94111.
DEWITT F. BOWMAN, (68), Chairman and Director. Mr. Bowman is a Principal
of Pension Investment Consulting, with which he has been associated since
February 1994. From February 1989 to January 1994, he was Chief Investment
Officer for California Public Employees Retirement System, a public pension
fund. He serves as a director of RREEF America REIT, Inc. and the Wilshire
Target Funds Inc.; and as a trustee of Brandes Institutional International
Investment Trust, the Pacific Gas and Electric Nuclear Decommissioning Trust,
and the PCG Private Equity Fund.
PAMELA A. FARR, (53), Director. Ms. Farr is a partner in Best & Co. LLC,
a manufacturer and retailer of children's clothing and accessories. From 1991
to 1994, she was President of Banyan Homes, Inc., a real estate development
and construction firm; and for eight years she was a management consultant
for McKinsey & Company, where she served a variety of Fortune 500 companies
in all aspects of strategic management and organizational structure.
GEORGE B. JAMES, (61), Director. Mr. James is a Senior Vice President
and Chief Financial Officer of Levi Strauss & Co., with which he has been
associated since 1985. Mr. James serves as a director of Basic Vegetable
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<PAGE>
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. Previously,
Mr. James was Chair of the Advisory Committee to the California Public
Employees Retirement System.
GEORGE G.C. PARKER, (59), Director. Mr. Parker is Associate Dean for
Academic Affairs, and Director of the MBA Program and Dean Witter Professor
of Finance at the Graduate School of Business at Stanford University, with
which he has been associated since 1973. Mr. Parker has served on the Board
of Directors of: the California Casualty Group of Insurance Companies since
1977; BB&K Holdings, Inc., a holding company for financial services
companies, 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.
GEORGE A. RIO, (43), President, Treasurer, and Chief Financial Officer.
Mr. Rio is Executive Vice President and Client Service Director of Funds
Distributor, Inc. ("FDI") with which he has been associated since March 1998.
From June 1995 to March 1998, Mr. Rio was Senior Vice President and Senior
Key Account Manager for Putnam Mutual Funds. From May 1994 to June 1995, he
was Director of Business Development for First Data Corporation. From
September 1983 to May 1994, he was Senior Vice President and Manager of
Client Services and Director of Internal Audit at The Boston Company, Inc. He
is also an officer of certain other investment companies distributed or
administered by FDI. His address is 60 State Street, Suite 1300, Boston,
Massachusetts 02109.
MARGARET W. CHAMBERS, (39), Vice President and Secretary. Ms. Chambers
is Senior Vice President and General Counsel of FDI, with which she has been
associated since March 1998. From August 1996 to March 1998, Ms. Chambers was
Vice President and Assistant General Counsel for Loomis, Sayles & Company,
L.P. From January 1986 to July 1996, she was an associate at Ropes & Gray.
She is also an officer of certain other investment companies distributed or
administered by FDI. Her address is 60 State Street, Suite 1300, Boston,
Massachusetts 02109.
JEANNE GIBSON SULLIVAN, (41), Vice President. Ms. Sullivan is a Vice
President of Funds Distributor, Inc., with which she has been associated
since May 1997. From August 1995 to May 1997, Ms. Sullivan was an Associate
at U.S. Financial Advisors. From April 1994 to August 1995, she was an
independent marketing consultant for clients in the banking and mutual fund
industries. Prior to 1994, Ms. Sullivan held marketing positions at BayBank
Investment Management, The Boston Company, Fidelity Investments and American
Express. Her address is 60 State Street, Suite 1300, Boston, Massachusetts
02109.
DOUGLAS C. CONROY, (29), Vice President and Assistant Treasurer.
Mr. Conroy is an Assistant Vice President and Assistant Department Manager of
Treasury Services and Administration of FDI, with which he has been
associated since April 1997. Prior to April 1997, Mr. Conroy was Supervisor
of Treasury Services and Administration of FDI. From April 1993 to January
1995, Mr. Conroy was a Senior Fund Accountant for Investors Bank & Trust
Company. From December 1991 to March 1993, Mr. Conroy was a Fund Accountant
at The Boston Company, Inc. He is also an officer of certain other investment
companies distributed or administered by FDI. His address is 60 State Street,
Suite 1300, Boston, Massachusetts 02109.
KAREN JACOPPO-WOOD, (32), Vice President and Assistant Secretary.
Ms. Jacoppo-Wood is a Vice President and Counsel of FDI, with which she has
been associated since January 1996. From June 1994 to January 1996, she was a
Manager of SEC Registration for Scudder, Stevens & Clark, Inc. From 1988 to
May 1994, she was a Senior Paralegal at The Boston Company Advisors, Inc. She
is also an officer of certain other investment companies distributed or
administered by FDI. Her address is 60 State Street, Suite 1300, Boston,
Massachusetts 02109.
MARY A. NELSON, (34), Vice President and Assistant Treasurer. Ms. Nelson
is Vice President of Treasury Administration and Operations for FDI, with
which she has been associated since 1994. From 1989 to 1994, she was an
Assistant Vice President and Client Manager for The Boston Company. She is
also an officer of certain other investment companies distributed or
administered by FDI. Her address is 60 State Street, Suite 1300, Boston,
Massachusetts 02109.
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<PAGE>
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, as sole present member, 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.
The following table sets forth the aggregate compensation paid by the
Company for the fiscal year ended December 31, 1998, to the Directors and the
aggregate compensation paid to the Directors for service on the Board of
Directors and that of all other funds in the "Company complex" (as defined in
Schedule 14A under the Securities Exchange Act of 1934):
<TABLE>
<CAPTION>
Pension or Total Compensation
Retirement from the Company
Aggregate Aggregate Benefits Accrued and Company
Compensation Compensation as Part of Estimate Annual Complex
Director from the Global from the the Companies(1) Benefits Upon Paid to Director
Name Company Capital Company Expenses Retirement (1)
- ---------------------- ----------------- --------------- --------------- ---------------- ------------------
<S> <C> <C> <C> <C> <C>
DeWitt F. Bowman $ $ $ N/A $
Pamela A. Farr $ $ $ N/A $
Frank P. Greene(2) $ $ $ N/A $
George B.James(3) $ $ N/A $
George G.C. Parker $ $ $ N/A $
Kenneth E. Scott $0 $ $ N/A $
</TABLE>
_____________________
(1) During the fiscal year ended December 31, 1998, there were twelve funds
in the complex.
(2) Mr. Greene served as a Director of the Capital and Global Company from
_________ through April __, 1998.
(3) Mr. James was appointed as a Director of the Capital and Global Company
on December 14, 1998.
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 or 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.
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<PAGE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of ________________, 1999, there were ___________ shares of the
International Fund outstanding, _________ shares of the Global Technology
Fund outstanding, _______ shares of the Global Small Cap Fund outstanding,
_______ shares of the Global Health Care Fund outstanding, _______ shares of
the Large Cap Growth Fund outstanding, _______ shares of the Biotechnology
Fund outstanding, _______ shares of the Emerging Markets Fund outstanding and
_______ shares of the Tax Managed Growth 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:
<TABLE>
Name and Address of % of Shares
Beneficial Owner Shares Held Outstanding
<S> <C> <C>
</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. 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. 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 DM ___ billion ($___
billion), and approximately 1,600 offices and 45,000 employees in over 60
countries around the world, Dresdner is one of Germany's largest banks.
Dresdner provides a full range of banking services including, traditional
lending activities, mortgages, securities, project finance and leasing, to
private customers and financial and institutional clients. In the United
States, Dresdner maintains branches in New York and Chicago and an agency in
Los Angeles. As of the date of this SAI, the nine members of the Board of
Managers of the Investment Manager are William L. Price (Chairman), Gerhard
Eberstadt, George N. Fugelsang, Joachim Madler, Susan C. Gause, Luke D.
Knecht, Jeffrey S. Rudsten, William S. Stack, and Kenneth B. Weeman, Jr.
Banking laws and regulations, including the Glass-Steagall Act as
presently interpreted by the Board of Governors of the Federal Reserve
System, prohibit certain banking entities, such as Dresdner, from sponsoring,
organizing, controlling or distributing the shares of a registered investment
company continuously engaged in the issuance of its shares, and prohibit
banks generally from underwriting securities. However, banks and their
affiliates generally can act as advisers to investment companies and can
purchase shares of investment companies as agent for and upon the order of
customers. The Investment Manager believes that it may perform the services
contemplated by its investment management agreements with the Company without
violating these banking laws or regulations. However, future changes in legal
requirements relating to the permissible activities of banks and their
affiliates, as well as future interpretations of current requirements, could
prevent the Investment Manager from continuing to perform investment
management services for the Company.
The Investment Manager provides the Funds with investment supervisory
services pursuant to Investment Management Agreements, Powers of Attorney and
Service Agreements (the "Management Agreements") dated as of June 14, 1996 for
the 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, and December 30, 1998 for the Tax
Managed Growth Fund. The Investment Manager manages the Funds' investments,
provides various administrative services, and supervises the Funds' daily
business affairs, subject to the
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<PAGE>
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.; Dresdner RCM
Global Equity Fund and Dresdner RCM Strategic Income Fund, each a series of
Dresdner RCM Global Funds, Inc.; Dresdner RCM Europe Fund, a series of
Dresdner RCM Investment Funds Inc.; RCM Strategic Global Government Fund,
Inc. and Bergstrom Capital Corporation, 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.
The Investment Manager has voluntarily agreed to limit each Fund's
expenses as described in the Prospectus. Each Fund has agreed to reimburse
the Investment Manager, for a period of up to five years, for any such
payments to the extent that the Fund's operating expenses are otherwise below
this expense cap. This obligation will not be recorded on the books of a Fund
to the extent that the total operating expenses of the Fund are at or above
the expense cap. However, if the total operating expenses of a Fund fall
below the expense cap, the reimbursement to the Investment Manager will be
accrued by the Fund as a liability.
Each Fund's Management Agreement provides that the Investment Manager
will not be liable for any error of judgment or for any loss suffered by 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
Page 28
<PAGE>
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 (the "Plans") pursuant to Rule 12b-1 under the 1940 Act. 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 N Class of
shares of the Fund, including but not limited to any advertising by radio,
television, newspapers, magazines, brochures, sales literature, telemarketing
or direct mail solicitations; (b) periodic payments of fees or commissions
for distribution assistance made to one or more securities brokers, dealers
or other industry professionals such as investment advisers, accountants,
estate planning firms and the Distributor itself in respect of the average
daily value of shares owned by clients of such service organizations, and (c)
expenses incurred in preparing, printing and distributing the Fund's
prospectus and statement of additional information.
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.
Page 29
<PAGE>
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 the Directors who are not interested
persons of the Company.
THE ADMINISTRATOR
Effective January 1, 1999, the administrator of the Company is State
Street Bank and Trust Company ("State Street"), 1776 Heritage Drive, North
Quincy, Massachusetts 02109.
Pursuant to an Administration Agreement with the Company, State Street is
responsible for performing all administrative services required for the daily
operation of the Company, subject to the control, supervision and direction
of the Company and the review and comment by the Company's auditors and legal
counsel. State Street has no supervisory responsibility over the investment
operations of the 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 book and records of the Company;
preparing the Company's federal, state and local income tax returns;
arranging 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 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.
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 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.
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 One Post Office Square, Boston, Massachusetts
02109.
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
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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.
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.
DIVIDENDS, DISTRIBUTIONS AND TAX STATUS
Each income dividend and capital gain distribution, if any, declared by a
Fund will be paid in full and fractional shares based on the net asset value
as determined on the payment date for such distribution, unless the
stockholder or his or her duly authorized agent has elected to receive all
such payments or the dividend or other distribution portion thereof in cash.
Changes in the manner in which dividend and other distribution payments are
paid may be requested by the stockholder or his or her duly authorized agent
at any time through written notice to the appropriate Company and will be
effective as to any subsequent payment if such notice is received by the
Company prior to the record date used for determining the stockholders
entitled to such payment. Any distribution election will remain in effect
until the Company is notified by the stockholder in writing to the contrary.
REGULATED INVESTMENT COMPANY
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
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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.
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,
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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.
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
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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 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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In addition, in order to more completely represent a Fund's performance
or more accurately compare such performance to other measures of investment
return, a Fund also may include in advertisements and stockholder reports
other total return performance data based on time-weighted, monthly-linked
total returns computed on the percentage change of the month end net asset
value of the Fund after allowing for the effect of any cash additions and
withdrawals recorded during the month. Returns may be quoted for the same or
different periods as those for which average total return is quoted. A Fund's
investment results will vary from time to time depending upon market
conditions, the composition of the Fund's portfolio, and operating expenses,
so that any investment results reported should not be considered
representative of what an investment in the Fund may earn in any future
period. These factors and possible differences in calculation methods should
be considered when comparing a Fund's investment results with those published
for other investment companies, other investment vehicles and unmanaged
indices. Results also should be considered relative to the risks associated
with a Fund's investment objective and policies.
Each of the Funds may from time to time compare its investment results
with data and mutual fund rankings published or prepared by Lipper Analytical
Services, Inc. and Morningstar, Inc., which rank mutual funds by overall
performance, investment objectives, and assets.
In addition, the Funds may from time to time compare their performance
with one or more of the following:
1. THE S&P 500 COMPOSITE INDEX which is a capitalization-weighted index of
500 stocks that attempts to measure performance of the broad domestic
economy through changes in the aggregate market value of 500 stocks
representing major industries.
2. THE SALOMON BROTHERS EXTENDED 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. THE LIPPER SCIENCE & TECHNOLOGY FUND INDEX, which is an equally weighted
index of the 10 largest U.S. science and technology mutual funds.
5. 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.
6. 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.
7. 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.
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8. 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.
9. 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.
10. 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.
11. 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.
12. THE MSCI-ACWI 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.
GENERAL INFORMATION
The Global Company and the Capital Company were incorporated in Maryland
as open-end management investment companies in September 1995 and March 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 Technology Fund, Global Small Cap
Fund, Health Care Fund, Large Cap Fund, Biotechnology Fund, Emerging Markets
Fund, and Tax Managed Growth 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.
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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.
Neither Company is 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 the 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 either Company may be liable for
any misstatements, inaccuracies or incomplete disclosures in such documents
concerning the 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 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.
Each share of each Class of a Fund represents an equal proportional
interest in the Fund with each other share of the same Class and is entitled
to such dividends and distributions out of the income earned on the assets
allocable to the Class as are declared in the discretion of the Board of
Directors. In the event of the liquidation or dissolution of 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 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.
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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 Reports to Shareholders for the year
ended December 31, 1998, including the Report of Independent Accountants,
dated ___________________, the Statement of Investments in Securities and Net
Assets, the Statement of Assets and Liabilities, the Statement of Operations,
the Statement of Changes in Net Assets, and the related Notes to Financial
Statements. 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.
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.
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PART C
OTHER INFORMATION
ITEM 23. EXHIBITS.
1. (a) Restated Articles of Incorporation of Registrant, previously
filed with Post-Effective Amendment No. 20 on April 28, 1995,
and incorporated herein by reference.
(b) Form of Articles of Amendment to Restated Articles of
Incorporation of Registrant, previously filed with
Post-Effective Amendment No. 25 on June 7, 1996, and
incorporated herein by reference.
(c) Form of Articles Supplementary to Restated Articles of
Incorporation of Registrant, previously filed with
Post-Effective Amendment No. 25 on June 7, 1996, and
incorporated herein by reference.
(d) Articles of Amendment to Restated Articles of Incorporation
previously filed with Post-Effective Amendment No. 29 on
December 31, 1998, and incorporated herein by reference.
(e) Articles Supplementary to Restated Articles of Incorporation
of Registrant previously filed with Post-Effective Amendment
No. 29 on December 31, 1998, and incorporated herein by
reference.
2. (a) Bylaws of Registrant, as amended, previously filed with
Post-Effective Amendment No. 18 on April 28, 1994, and
incorporated herein by reference.
(b) Form of Amendments to Bylaws of Registrant, previously filed
with Post-Effective Amendment No. 25 on June 7, 1996, and
incorporated herein by reference.
3. (a) Proof of specimen of certificate for capital stock ($0.0001
par value) of Registrant, on behalf of RCM Growth Equity Fund
(currently known as Dresdner RCM Growth Equity Fund),
previously filed with Post-Effective Amendment No. 25 on
June 7, 1996, and incorporated herein by reference.
(b) Proof of specimen of certificate for capital stock ($0.0001
par value) of Registrant, on behalf of RCM Small Cap Fund
(currently known as Dresdner RCM Small Cap Fund), previously
filed with Post-Effective Amendment No. 25 on June 7, 1996,
and incorporated herein by reference.
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(c) Proof of specimen of certificate for capital stock ($0.0001
par value) of Registrant, on behalf of RCM International
Growth Equity Fund A (currently known as Dresdner RCM
International Growth Equity Fund), previously filed with
Post-Effective Amendment No. 25 on June 7, 1996, and
incorporated herein by reference.
(d) Portions of Registrant's Restated Articles of Incorporation
defining the rights of the holders of the securities being
registered, previously filed with Post-Effective Amendment
No. 20 on April 28, 1995, and incorporated herein by
reference.
(e) Proof of specimen of certificate for capital stock ($0.0001
par value) of Registrant, on behalf of Dresdner RCM
International Growth Equity Fund Class N previously filed
with Post-Effective Amendment No. 29 on December 31, 1998, is
incorporated herein by reference.
4. (a) Form of Investment Management Agreement, Power of Attorney
and Service Agreement between Registrant, on behalf of RCM
Growth Equity Fund (currently known as Dresdner RCM Growth
Equity Fund), and RCM Capital Management, L.L.C., (currently
known as Dresdner RCM Global Investors LLC), previously filed
with Post-Effective Amendment No. 25 on June 7, 1996, and
incorporated herein by reference.
(b) Form of Investment Management Agreement, Power of Attorney
and Service Agreement between Registrant, on behalf of RCM
Small Cap Fund (currently known as Dresdner RCM Small Cap
Fund) and RCM Capital Management, L.L.C., (currently known as
Dresdner RCM Global Investors LLC), previously filed with
Post-Effective Amendment No. 25 on June 7, 1996, and
incorporated herein by reference.
(c) Form of Investment Management Agreement, Power of Attorney
and Service Agreement between Registrant, on behalf of RCM
International Growth Equity Fund A (currently known as
Dresdner RCM International Growth Equity Fund), and RCM
Capital Management, L.L.C., (currently known as Dresdner RCM
Global Investors LLC), previously filed with Post-Effective
Amendment No. 25 on June 7, 1996, and incorporated herein by
reference.
5. (a) Form of Distribution Agreement between Registrant and Funds
Distributor Inc. ("FDI"), previously filed with
Post-Effective Amendment No. 25 on June 7, 1996, and
incorporated herein by reference.
(b) Form of 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,
C-2
<PAGE>
Inc., respectively) and FDI, previously filed with
Post-Effective Amendment No. 25 on June 7, 1996, and
incorporated herein by reference.
(c) Form of Fee Letter Agreement between Registrant, RCM Capital
Management, a California Limited Partnership, (currently
known as Dresdner RCM Global Investors LLC), RCM Equity
Funds, Inc., RCM Capital Funds, Inc. (currently known as
Dresdner RCM Global Funds, Inc. and Dresdner RCM Capital
Funds, Inc., respectively) and FDI, previously filed with
Post-Effective Amendment No. 25 on June 7, 1996, and
incorporated herein by reference.
(d) Form of Selling Agreement, previously filed with
Post-Effective Amendment No. 25 on June 7, 1996, and
incorporated herein by reference.
6. None
7. (a) Custodian Contract and remuneration schedule between
Registrant and State Street Bank and Trust Company,
previously filed with Post-Effective Amendment No. 18 on
April 18, 1994, and incorporated herein by reference.
(b) Amendment to Custodian Contract between Registrant and State
Street Bank and Trust Company, previously filed with
Post-Effective Amendment No. 18 on April 18, 1994, and
incorporated herein by reference.
8. (a) Form of Transfer Agency Agreement between Registrant and
State Street Bank and Trust Company is filed herein as
Exhibit 8(a).
(b) License Agreement between Dresdner RCM Global Investors LLC
and Registrant relating to the use by Registrant of the mark
"Dresdner RCM", previously filed with Post-Effective
Amendment No. 27, and incorporated herein by reference.
(c) Form of Administration Agreement between Registrant and State
Street Bank and Trust Company is filed herein as Exhibit
8(c).
9. (a) Opinion of Morrison & Foerster as to legality of securities
being registered, previously filed with Post-Effective
Amendment No. 1 on May 9, 1979, and incorporated herein by
reference.
(b) Opinion and consent of Venable, Baetjer and Howard LLP in
connection with the issuance of Dresdner RCM International
Growth Equity Fund Class N shares, previously filed with
Post-Effective Amendment No. 29 and incorporated herein by
reference.
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<PAGE>
10. (a) Power of Attorney for DeWitt F. Bowman, Pamela A. Farr, and
George G.C. Parker and Kenneth E. Scott, previously filed
with Post-Effective Amendment No. 26 on May 6, 1997, and
incorporated herein by reference.
(b) Power of Attorney for George B. James, previously filed with
Post-Effective Amendment No. 29, is incorporated herein by
reference.
(c) Consent of PricewaterhouseCoopers LLP to be filed by
subsequent amendment.
11. To be filed.
12. None
13. Distribution and Service Plan pursuant to Rule 12b-1 of Registrant,
on behalf of Dresdner RCM International Growth Equity Fund,
previously filed with Post-Effective Amendment No. 29, is
incorporated herein by reference.
14. Financial Data Schedules to be filed by subsequent amendment.
15. Form of Multiple Class of Shares Plan of Registrant, pursuant to
Rule 18f-3 on behalf of Dresdner RCM International Growth Equity
Fund, previously filed with Post-Effective Amendment No. 29. is
incorporated herein by reference.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND.
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.
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<PAGE>
The Registrant and the directors and officers of Registrant obtained
coverage under an Errors and Omissions insurance policy. The terms and
conditions of policy coverage conform generally to the standard coverage
available throughout the investment company industry. The coverage also applies
to Registrant's investment manager and its members and employees.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of Registrant pursuant to the provisions of Maryland law and
Registrant's Articles of Incorporation and Bylaws, or otherwise, Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in said Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by Registrant of expenses incurred or
paid by a director, officer or controlling person of Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER
Registrant's investment manager, Dresdner RCM Global Investors LLC
("Dresdner RCM"), is a Delaware limited liability company, whose two members are
Dresdner Bank AG ("Dresdner") and Dresdner Kleinwort Benson North America, Inc.
("Dresdner Kleinwort Benson"). Dresdner is an international banking
organization whose principal executive offices are located at Gallunsanlage 7,
60041 Frankfurt am Main, Frankfurt, Germany. Dresdner Kleinwort Benson is a
wholly owned subsidiary of Dresdner whose principal executive offices are
located at 75 Wall Street, New York, New York 10005.
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:
C-5
<PAGE>
NAME OF THE OFFICER OR BUSINESS AFFILIATIONS ADDRESS
MEMBER OF THE BOARD OF
MANAGERS
Gerhard Eberstadt Dresdner Bank AG Jurgen-Ponto-Platz 1
(May 1998 - present) D-60301
Frankfurt am Main
Germany
Chairman, Dresdner 75 Wall Street
Kleinwort Benson North New York, NY 10005
America, Inc. (September
1996 - present)
Director, KBIMA (December 75 Wall Street
1997 - present) New York, NY 10005
George N. Fugelsang President, Chief Executive 75 Wall Street
Officer, Chairman, New York NY 10005
Dresdner Kleinwort Benson
North America LLC
(February 1994 - present)
Director, Dresdner 75 Wall Street
Kleinwort Benson North New York, NY 10005
America Services LLC
(September 1996 -
present); Director, KBIMA
(December 1997 - present)
Director, KBIMA (December 75 Wall Street
1997 - present) New York, NY 10005
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<PAGE>
NAME OF THE OFFICER OR BUSINESS AFFILIATIONS ADDRESS
MEMBER OF THE BOARD OF
MANAGERS
Susan C. Gause Dresdner RCM (July 1994 - Four Embarcadero Center
present) San Francisco, CA 94111
Chief Operating Officer, Four Embarcadero Center
Senior Managing Director, San Francisco, CA 94111
and Member of the Board of
Managers (July 1998-
present)
Luke D. Knecht Managing Director (July Four Embarcadero Center
1998-present), Member of San Francisco, CA 94111
the Board of Managers,
Dresdner RCM (November
1997 - present)
Joachim Madler Director, Dresdner Bank AG Mainzer Lanstrass 15-17
(September 1997 - present) 60301 Frankfurt
Germany
Director, KBIMA (December 75 Wall Street
1997 - present) New York, NY 10005
Director, Dresdner (South Singapore
East Asia) (October 1997 -
present)
Managing Director, Farberstrasse 6,
Dresdner Bank (Schweiz) AG Zurich, Switzerland
(November 1997 - present)
Chairman, DFV Deutsche Mainzer Lanstrasse 11-13
Fonds und 60301 Frankfurt
Vorsorgeberatungs (July Germany
1996 - June 1997)
Deutscher Investment-Trust Mainzer Lanstrasse 11-13
(June 1996 - June 1997) 60301 Frankfurt
Germany
Managing Director, GKS Windmuhlweg 12
Gesellschaft fur 95030 Hof
Kontenservice GmbH (June Germany
1994 - June 1997)
C-7
<PAGE>
NAME OF THE OFFICER OR BUSINESS AFFILIATIONS ADDRESS
MEMBER OF THE BOARD OF
MANAGERS
William L. Price Chief Executive Officer Four Embarcadero Center
and Global Chief San Francisco, CA 94111
Investment Officer,
Dresdner RCM (July 1998 -
present)
Chairman and Member of the Four Embarcadero Center
Board of Managers, Senior San Francisco, CA 94111
Managing Director,
Dresdner RCM (December
1997 - present)
Director, KBIMA (December 75 Wall Street
1997- present) New York, NY 10005
Director, Dresdner RCM 10 Fenchurch Street
(UK) (January 1998 - London, UK EC3M3LB
present)
Jeffrey S. Rudsten Senior Managing Director Four Embarcadero Center
(July 1998 - present); San Francisco, CA 94111
Member of the Board of
Managers, Dresdner RCM
(June 1978 - present)
Director, KBIMA (December 75 Wall Street
1997- present) New York, NY 10005
William S. Stack Senior Managing Director, Four Embarcadero Center
Global Equity Chief San Francisco, CA 94111
Investment Officer (July
1998 - present); Member of
the Board of Managers,
Dresdner RCM (August 1994
- present)
Director, KBIMA (December 75 Wall Street
1997- present) New York, NY 10005
Director, Dresdner RCM 10 Fenchurch Street
(UK) (January 1998 - London, UK EC3M3LB
present)
Kenneth B. Weeman, Jr. Dresdner RCM (October 1979 Four Embarcadero Center
- present) San Francisco, CA 94111
C-8
<PAGE>
NAME OF THE OFFICER OR BUSINESS AFFILIATIONS ADDRESS
MEMBER OF THE BOARD OF
MANAGERS
Vice Chairman, Senior Four Embarcadero Center
Managing Director (July San Francisco, CA 94111
1998 - present)
Director, KBIMA (December 75 Wall Street
1997- present) New York, NY 10005
Director, Dresdner RCM 10 Fenchurch Street
(UK) (January 1998 - London, UK EC3M3LB
present)
ITEM 27. PRINCIPAL UNDERWRITERS.
(a) Funds Distributor, Inc. ("FDI"), whose principal offices are
located at 60 State Street, Suite 1300, Boston Massachusetts
02109, is the principal underwriter of Registrant. FDI is an
indirect, wholly owned subsidiary of Boston Institutional
Group, Inc., a holding company, all of whose outstanding
shares are owned by key employees. FDI is a broker-dealer
registered under the Securities Exchange Act of 1934, as
amended, and is a member of the National Association of
Securities Dealers, Inc. FDI also serves as principal
underwriter of the following investment companies:
American Century California Tax-Free Municipal Funds
American Century Capital Portfolios, Inc.
American Century Government Income Fund
American Century International Bond Funds
American Century Investment Trust
American Century Municipal Trust
American Century Mutual Funds, Inc.
American Century Premium Reserves, Inc.
American Century Quantitative Equity Funds
American Century Strategic Asset Allocations, Inc.
American Century Target Maturities Trust
American Century Variable Portfolios, Inc.
American Century World Mutual Funds, Inc.
The Brinson Funds
Dresdner RCM Equity Funds, Inc.
Dresdner RCM Investment Fund Inc.
Founders Fund
Harris Insight Funds Trust
HT Insight Funds, Inc. d/b/a Harris Insight Funds
C-9
<PAGE>
J.P. Morgan Institutional Funds
J.P. Morgan Funds
The JPM Series Trust
The JPM Series Trust II
LaSalle Partners Funds, Inc.
Kobrick-Cendant Investment Trust
Merrimac Series
Monetta Fund, Inc.
Monetta Trust
The Montgomery Funds I
The Montgomery Funds II
The Munder Framlington Funds Trust
The Munder Funds, Inc.
The Munder Funds Trust
National Investors Cash Management Fund, Inc.
Orbitex Group of Funds
SG Cowen Funds, Inc.
SG Cowen Income + Growth Fund, Inc.
SG Cowen Standby Reserve Fund, Inc.
SG Cowen Standby Tax-Exempt Reserve Fund, Inc.
SG Cowen Series Funds, Inc.
St. Clair Funds, Inc.
The Skyline Funds
Waterhouse Investors Family of Funds Inc.
WEBS Index Fund, Inc.
FDI does not act as a depositor or investment adviser of any
investment company.
C-10
<PAGE>
(b) The directors and executive officers of FDI are set forth
below:
NAME AND PRINCIPAL POSITIONS AND OFFICES WITH POSITIONS AND OFFICES
BUSINESS ADDRESS FUNDS DISTRIBUTOR, INC. WITH REGISTRANT
- --------------------------------------------------------------------------------
Marie E. Connolly Director, President and None
Chief Executive Officer
George A. Rio Executive Vice President President, Treasurer and
Chief Financial Officer
Donald R. Roberson Executive Vice President None
William S. Nichols Executive Vice President None
Margaret W. Chambers Senior Vice President, Vice President and
General Counsel, Chief Secretary
Compliance Officer,
Michael S. Petrucelli Senior Vice President None
Joseph F. Tower III Director, Senior Vice None
President, Treasurer and
Chief Financial Officer
Paula R. David Senior Vice President None
Gary S. MacDonald Senior Vice President None
Bernard A. Whalen Senior Vice President None
Judith K. Benson Senior Vice President None
William J. Nutt Chairman and Director None
(c) Not Applicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
Accounts, books and other records required by Rules 31a-1 and 31a-2
under the Investment Company Act of 1940, as amended, are maintained and held in
the offices of Registrant's investment manager, Dresdner RCM Global Investors
LLC, Four Embarcadero Center, San Francisco, California 94111; and/or
Registrant's distributor, Funds Distributor, Inc., 60 State Street, Suite 1300,
Boston, Massachusetts 02109.
C-11
<PAGE>
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.
ITEM 29. MANAGEMENT SERVICES.
None
ITEM 30. UNDERTAKINGS.
Registrant undertakes to furnish each person to whom a Prospectus
for one or more of the series of the Registrant is delivered with a copy of the
relevant latest annual report to shareholders, upon request and without charge.
C-12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, Dresdner RCM Capital Funds, Inc. has duly caused
this Post-Effective Amendment No. 30 to the Registration Statement pursuant to
Rule 485(a) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment No. 30 to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Boston,
Commonwealth of Massachusetts, on March 2, 1999.
DRESDNER RCM CAPITAL FUNDS, INC.
By: /s/ George A. Rio, President, Treasurer
------------------
and Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 30 to the Registration Statement has been signed
below by the following persons in the capacities and on the date indicated.
SIGNATURE TITLE DATE
(1) Principal Executive Officer President March 2, 1999
/s/George A. Rio
----------------
/s/ George A. Rio
(2) Chief Financial and Accounting Officer Treasurer March 2, 1999
/s/George A. Rio
----------------
/s/ George A. Rio
C-13
<PAGE>
SIGNATURE TITLE DATE
(3) Directors
/s/ DeWitt F. Bowman* March 2, 1999
------------------------------
DeWitt F. Bowman
/s/ Pamela A. Farr* March 2, 1999
------------------------------
Pamela A. Farr
/s/ George B. James ** March 2, 1999
------------------------------
George B. James
/s/ George G.C. Parker * March 2, 1999
------------------------------
George G.C. Parker
/s/ Kenneth E. Scott * March 2, 1999
------------------------------
Kenneth E. Scott
By: /s/George A. Rio* March 2, 1999
-----------------
George A. Rio
as Attorney-in-Fact
- -------------------------
(*) By George A. Rio, pursuant to Power of Attorney dated October 30, 1998 .
** By George A. Rio, pursuant to Power of Attorney dated December 31, 1998.
C-14
<PAGE>
EXHIBIT INDEX
FORM N1-A EDGAR
EXHIBIT NO. EXHIBIT NO.
8(a) Form of Transfer Agency Agreement 99.23(8)(a)
8(c) Form of Administration Agreement 99.23(8)(c)
Page 1
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
between
DRESDNER RCM CAPITAL FUNDS, INC.
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
1. Terms of Appointment and Duties . . . . . . . . . . . . . . . . . . . . 1
2. Third Party Administrators for Defined Contribution Plans . . . . . . . 3
3. Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4. Representations and Warranties of the Transfer Agent . . . . . . . . . 5
5. Representations and Warranties of the Fund . . . . . . . . . . . . . . 5
6. Wire Transfer Operating Guidelines. . . . . . . . . . . . . . . . . . . 6
7. Data Access and Proprietary Information . . . . . . . . . . . . . . . . 7
8. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
9. Standard of Care . . . . . . . . . . . . . . . . . . . . . . . . . . .10
10. Year 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
11. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
12. Covenants of the Fund and the Transfer Agent . . . . . . . . . . . . .11
13. Termination of Agreement. . . . . . . . . . . . . . . . . . . . . . . .11
14 Assignment and Third Party Beneficiaries . . . . . . . . . . . . . . .12
15. Subcontractors. . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
16. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
17. Additional Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . .14
</TABLE>
i
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the ______ day of ______________, 1998, by and between
DRESDNER RCM CAPITAL FUNDS, INC., a Maryland corporation, having its principal
office and place of business at 4 Embarcadero, Suite 3100, San Francisco,
California 94111 (the "Fund"), and STATE STREET BANK AND TRUST COMPANY, a
Massachusetts trust company having its principal office and place of business at
225 Franklin Street, Boston, Massachusetts 02110 (the "Transfer Agent").
WHEREAS, the Fund is authorized to issue shares in separate series, with each
such series representing interests in a separate portfolio of securities and
other assets; and
WHEREAS, the Fund intends to initially offer shares in three (3) series, such
series shall be named in the attached Schedule A which may be amended by the
parties from time to time (each such series, together with all other series
subsequently established by the Fund and made subject to this Agreement in
accordance with Article 13, being herein referred to as a "Portfolio", and
collectively as the "Portfolios");
WHEREAS, the Fund on behalf of the Portfolios desires to appoint the Transfer
Agent as its transfer agent, dividend disbursing agent, custodian of certain
retirement plans and agent in connection with certain other activities, and the
Transfer Agent desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
parties hereto agree as follows:
1. TERMS OF APPOINTMENT AND DUTIES
1.1 TRANSFER AGENCY SERVICES. Subject to the terms and conditions set
forth in this Agreement, the Fund, on behalf of the Portfolios,
hereby employs and appoints the Transfer Agent to act as, and the
Transfer Agent agrees to act as its transfer agent for the Fund's
authorized and issued shares of its common stock, $_____ par value,
("Shares"), dividend disbursing agent, custodian of certain
retirement plans and agent in connection with any accumulation,
open-account or similar plan provided to the shareholders of each
of the respective Portfolios of the Fund ("Shareholders") and set
out in the currently effective prospectus and statement of
additional information ("prospectus") of the Fund on behalf of the
applicable Portfolio, including without limitation any periodic
investment plan or periodic withdrawal program. In accordance with
procedures established from time to time by agreement between the
Fund on behalf of each of the Portfolios, as applicable and the
Transfer Agent, the Transfer Agent agrees that it will perform the
following services:
(a) Receive for acceptance, orders for the purchase of Shares,
and promptly deliver payment and appropriate documentation
thereof to the Custodian of the Fund authorized pursuant to
the Articles of Incorporation of the Fund (the "Custodian");
(b) Pursuant to purchase orders, issue the appropriate number of
Shares and hold such Shares in the appropriate Shareholder
account;
(c) Receive for acceptance redemption requests and redemption
directions and deliver the appropriate documentation thereof
to the Custodian;
Page 1
<PAGE>
(d) In respect to the transactions in items (i), (ii) and
(iii) above, the Transfer Agent shall execute transactions
directly with broker-dealers authorized by the Fund;
(e) At the appropriate time as and when it receives monies paid
to it by the Custodian with respect to any redemption, pay
over or cause to be paid over in the appropriate manner such
monies as instructed by the redeeming Shareholders;
(f) Effect transfers of Shares by the registered owners thereof
upon receipt of appropriate instructions;
(g) Prepare and transmit payments for dividends and
distributions declared by the Fund on behalf of the
applicable Portfolio;
(h) Issue replacement certificates for those certificates
alleged to have been lost, stolen or destroyed upon receipt
by the Transfer Agent of indemnification satisfactory to the
Transfer Agent and protecting the Transfer Agent and the
Fund, and the Transfer Agent at its option, may issue
replacement certificates in place of mutilated stock
certificates upon presentation thereof and without such
indemnity;
(i) Maintain records of account for and advise the Fund and its
Shareholders as to the foregoing; and
(j) Record the issuance of Shares of the Fund and maintain
pursuant to SEC Rule 17Ad-10(e) a record of the total number
of Shares of the Fund which are authorized, based upon data
provided to it by the Fund, and issued and outstanding. The
Transfer Agent shall also provide the Fund on a regular
basis with the total number of Shares which are authorized
and issued and outstanding and shall have no obligation,
when recording the issuance of Shares, to monitor the
issuance of such Shares or to take cognizance of any laws
relating to the issue or sale of such Shares, which
functions shall be the sole responsibility of the Fund.
1.2 ADDITIONAL SERVICES. In addition to, and neither in lieu nor in
contravention of, the services set forth in the above paragraph,
the Transfer Agent shall perform the following services:
(a) OTHER CUSTOMARY SERVICES. Perform the customary services of
a transfer agent, dividend disbursing agent, custodian of
certain retirement plans and, as relevant, agent in
connection with accumulation, open-account or similar plan
(including without limitation any periodic investment plan
or periodic withdrawal program), including but not limited
to: maintaining all Shareholder accounts, preparing
Shareholder meeting lists, mailing Shareholder proxies,
Shareholder reports and prospectuses to current
Shareholders, withholding taxes on U.S. resident and
non-resident alien accounts, preparing and filing U.S.
Treasury Department Forms 1099 and other appropriate forms
required with respect to dividends and distributions by
federal authorities for all Shareholders, preparing and
mailing confirmation forms and statements of account to
Shareholders for all purchases and redemptions of Shares and
other confirmable transactions in Shareholder accounts,
preparing and mailing activity statements for Shareholders,
and providing Shareholder account information.
Page 2
<PAGE>
(b) CONTROL BOOK (ALSO KNOWN AS "SUPER SHEET"). Maintain a daily
record and produce a daily report for the Fund of all
transactions and receipts and disbursements of money and
securities and deliver a copy of such report for the Fund
for each business day to the Fund no later than 9:00 AM
Eastern Time, or such earlier time as the Fund may
reasonably require, on the next business day;
(c) "BLUE SKY" REPORTING. The Fund shall (i) identify to the
Transfer Agent in writing those transactions and assets to
be treated as exempt from blue sky reporting for each State;
and (ii) verify the establishment of transactions for each
State on the system prior to activation and thereafter
monitor the daily activity for each State. The
responsibility of the Transfer Agent for the Fund's blue sky
State registration status is solely limited to the initial
establishment of transactions subject to blue sky compliance
by the Fund and providing a system which will enable the
Fund to monitor the total number of Shares sold in each
State;
(d) NATIONAL SECURITIES CLEARING CORPORATION (THE "NSCC").
(i) accept and effectuate the registration and maintenance
of accounts through Networking and the purchase, redemption,
transfer and exchange of shares in such accounts through
Fund/SERV (networking and Fund/SERV being programs operated
by the NSCC on behalf of NSCC's participants, including the
Fund), in accordance with, instructions transmitted to and
received by the Transfer Agent by transmission from NSCC on
behalf of broker-dealers and banks which have been
established by, or in accordance with the instructions of
authorized persons, as hereinafter defined on the dealer
file maintained by the Transfer Agent; (ii) issue
instructions to Fund's banks for the settlement of
transactions between the Fund and NSCC (acting on behalf of
its broker-dealer and bank participants); (iii) provide
account and transaction information from the affected Fund's
records on DST Systems, Inc. computer system TA2000 ("TA2000
System") in accordance with NSCC's Networking and Fund/SERV
rules for those broker-dealers; and (iv) maintain
Shareholder accounts on TA2000 System through Networking.
(e) NEW PROCEDURES. New procedures as to who shall provide
certain of these services in Section 1 may be established in
writing from time to time by agreement between the Fund and
the Transfer Agent. The Transfer Agent may at times perform
only a portion of these services and the Fund or its agent
may perform these services on the Fund's behalf.
(f) ADDITIONAL TELEPHONE SUPPORT SERVICES. If the parties elect
to have the Transfer Agent provide ADDITIONAL telephone
support services under this Agreement, the parties will
agree to such services, fees and sub-contracting as stated
in Schedule 1.2(f) entitled "Telephone Support Services"
attached hereto.
2. THIRD PARTY ADMINISTRATORS FOR DEFINED CONTRIBUTION PLANS
2.1 The Fund may decide to make available to certain of its customers,
a qualified plan program (the "Program") pursuant to which the
customers ("Employers") may adopt certain plans of deferred
compensation ("Plan or Plans") for the benefit of the individual
Plan participant (the "Plan Participant"), such Plan(s) being
qualified under Section 401(a)
Page 3
<PAGE>
of the Internal Revenue Code of 1986, as amended ("Code") and
administered by third party administrators which may be plan
administrators as defined in the Employee Retirement Income
Security Act of 1974, as amended)(the "TPA(s)").
2.2 In accordance with the procedures established in the initial
Schedule 2.1 entitled "Third Party Administrator Procedures", as
may be amended by the Transfer Agent and the Fund from time to time
("Schedule 2.1"), the Transfer Agent shall:
(a) Treat Shareholder accounts established by the Plans in the
name of the Trustees, Plans or TPAs as the case may be as
omnibus accounts;
(b) Maintain omnibus accounts on its records in the name of the
TPA or its designee as the Trustee for the benefit of the
Plan: and
(c) Perform all services under SECTION 1 as transfer agent of
the Funds and not as a record-keeper for the Plans.
2.3 Transactions identified under SECTION 2 of this Agreement shall be
deemed exception services ("Exception Services") when such
transactions:
(a) Require the Transfer Agent to use methods and procedures
other than those usually employed by the Transfer Agent to
perform services under SECTION 1 of this Agreement;
(b) Involve the provision of information to the Transfer Agent
after the commencement of the nightly processing cycle of
the TA2000 System; or
(c) Require more manual intervention by the Transfer Agent,
either in the entry of data or in the modification or
amendment of reports generated by the TA2000 System than is
usually required by non-retirement plan and pre-nightly
transactions.
3. FEES AND EXPENSES
3.1 FEE SCHEDULE. For the performance by the Transfer Agent pursuant to
this Agreement, the Fund agrees to pay the Transfer Agent an annual
maintenance fee for each Shareholder account as set forth in the
attached fee Schedule ("Schedule 3.1"). Such fees and out-of-pocket
expenses and advances identified under SECTION 3.2 below may be
changed from time to time subject to mutual written agreement
between the Fund and the Transfer Agent.
3.2 OUT-OF-POCKET EXPENSES. In addition to the fee paid under
SECTION 3.1 above, the Fund agrees to reimburse the Transfer Agent
for out-of-pocket expenses, including but not limited to
confirmation production, postage, forms, telephone, microfilm,
microfiche, mailing and tabulating proxies, records storage, or
advances incurred by the Transfer Agent for the items set out in
Schedule 3.1 attached hereto. In addition, any other expenses
incurred by the Transfer Agent at the request or with the consent
of the Fund, will be reimbursed by the Fund.
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3.3 POSTAGE. Postage for mailing of dividends, proxies, Fund reports
and other mailings to all shareholder accounts shall be advanced to
the Transfer Agent by the Fund at least seven (7) days prior to the
mailing date of such materials.
3.4 INVOICES. The Fund agrees to pay all fees and reimbursable expenses
within thirty (30) days following the receipt of the respective
billing notice, except for any fees or expenses which are subject
to good faith dispute. In the event of such a dispute, the Fund may
only withhold that portion of the fee or expense subject to the
good faith dispute. The Fund shall notify the Transfer Agent in
writing within twenty-one (21) calendar days following the receipt
of each billing notice if the Fund is disputing any amounts in good
faith. If the Fund does not provide such notice of dispute within
the required time, the billing notice will be deemed accepted by
the Fund.
4. REPRESENTATIONS AND WARRANTIES OF THE TRANSFER AGENT
The Transfer Agent represents and warrants to the Fund that:
4.1 It is a trust company duly organized and existing and in good
standing under the laws of The Commonwealth of Massachusetts.
4.2 It is duly qualified to carry on its business in The Commonwealth
of Massachusetts.
4.3 It is empowered under applicable laws and by its Charter and
By-Laws to enter into and perform this Agreement.
4.4 All requisite corporate proceedings have been taken to authorize it
to enter into and perform this Agreement.
4.5 It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement.
5. REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to the Transfer Agent that:
5.1 it is a corporation duly organized and existing and in good
standing under the laws of the State of Maryland.
5.2 It is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into and perform this Agreement.
5.3 All corporate proceedings required by said Articles of
Incorporation and By-Laws have been taken to authorize it to enter
into and perform this Agreement.
5.4 It is an open-end and diversified management investment company
registered under the Investment Company Act of 1940, as amended.
5.5 A registration statement under the Securities Act of 1933, as
amended is currently effective and will remain effective, and
appropriate state securities law filings have been
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<PAGE>
made and will continue to be made, with respect to all Shares of
the Fund being offered for sale.
6. WIRE TRANSFER OPERATING GUIDELINES/ARTICLES 4A OF THE UNIFORM COMMERCIAL
CODE
6.1 The Transfer Agent is authorized to promptly debit the appropriate
Fund account(s) upon the receipt of a payment order in compliance
with the selected security procedure (the "Security Procedure")
chosen for funds transfer and in the amount of money that the
Transfer Agent has been instructed to transfer. The Transfer Agent
shall execute payment orders in compliance with the Security
Procedure and with the Fund instructions on the execution date
provided that such payment order is received by the customary
deadline for processing such a request, unless the payment order
specifies a later time. All payment orders and communications
received after this the customary deadline will be deemed to have
been received the next business day.
6.2 The Fund acknowledges that the Security Procedure it has designated
on the Fund Selection Form was selected by the Fund from security
procedures offered by the Transfer Agent. The Fund shall restrict
access to confidential information relating to the Security
Procedure to authorized persons as communicated to the Transfer
Agent in writing. The Fund must notify the Transfer Agent
immediately if it has reason to believe unauthorized persons may
have obtained access to such information or of any change in the
Fund's authorized personnel. The Transfer Agent shall verify the
authenticity of all Fund instructions according to the Security
Procedure.
6.3 The Transfer Agent shall process all payment orders on the basis of
the account number contained in the payment order. In the event of
a discrepancy between any name indicated on the payment order and
the account number, the account number shall take precedence and
govern.
6.4 The Transfer Agent reserves the right to decline to process or
delay the processing of a payment order which (a) is in excess of
the collected balance in the account to be charged at the time of
the Transfer Agent's receipt of such payment order; (b) if
initiating such payment order would cause the Transfer Agent, in
the Transfer Agent's sole judgement, to exceed any volume,
aggregate dollar, network, time, credit or similar limits which are
applicable to the Transfer Agent; or (c) if the Transfer Agent, in
good faith, is unable to satisfy itself that the transaction has
been properly authorized.
6.5 The Transfer Agent shall use reasonable efforts to act on all
authorized requests to cancel or amend payment orders received in
compliance with the Security Procedure provided that such requests
are received in a timely manner affording the Transfer Agent
reasonable opportunity to act. However, the Transfer Agent assumes
no liability if the request for amendment or cancellation cannot be
satisfied.
6.6 The Transfer Agent shall assume no responsibility for failure to
detect any erroneous payment order provided that the Transfer Agent
complies with the payment order instructions as received and the
Transfer Agent complies with the Security Procedure. The Security
Procedure is established for the purpose of authenticating payment
orders only and not for the detection of errors in payment orders.
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<PAGE>
6.7 The Transfer Agent shall assume no responsibility for lost interest
with respect to the refundable amount of any unauthorized payment
order, unless the Transfer Agent is notified of the unauthorized
payment order within thirty (30) days of notification by the
Transfer Agent of the acceptance of such payment order. In no event
(including failure to execute a payment order) shall the Transfer
Agent be liable for special, indirect or consequential damages,
even if advised of the possibility of such damages.
6.8 When the Fund initiates or receives Automated Clearing House credit
and debit entries pursuant to these guidelines and the rules of the
National Automated Clearing House Association and the New England
Clearing House Association, the Transfer Agent will act as an
Originating Depository Financial Institution and/or receiving
depository Financial Institution, as the case may be, with respect
to such entries. Credits given by the Transfer Agent with respect
to an ACH credit entry are provisional until the Transfer Agent
receives final settlement for such entry from the Federal Reserve
Bank. If the Transfer Agent does not receive such final settlement,
the Fund agrees that the Transfer Agent shall receive a refund of
the amount credited to the Fund in connection with such entry, and
the party making payment to the Fund via such entry shall not be
deemed to have paid the amount of the entry.
6.9 Confirmation of Transfer Agent's execution of payment orders shall
ordinarily be provided within twenty-four (24) hours notice of
which may be delivered through the Transfer Agent's proprietary
information systems, or by facsimile or call-back. Fund must report
any objections to the execution of an order within thirty (30)
days.
7. DATA ACCESS AND PROPRIETARY INFORMATION
7.1 The Fund acknowledges that the databases, computer programs, screen
formats, report formats, interactive design techniques, and
documentation manuals furnished to the Fund by the Transfer Agent
as part of the Fund's ability to access certain Fund-related data
("Customer Data") maintained by the Transfer Agent on data bases
under the control and ownership of the Transfer Agent or other
third party ("Data Access Services") constitute copyrighted, trade
secret, or other proprietary information (collectively,
"Proprietary Information") of substantial value to the Transfer
Agent or other third party. In no event shall Proprietary
Information be deemed Customer Data. The Fund agrees to treat all
Proprietary Information as proprietary to the Transfer Agent and
further agrees that it shall not divulge any Proprietary
Information to any person or organization except as may be provided
hereunder. Without limiting the foregoing, the Fund agrees for
itself and its employees and agents to:
(a) Use such programs and databases (i) solely on the Fund's
computers, or (ii) solely from equipment at the location
agreed to between the Fund and the Transfer Agent and
(iii) solely in accordance with the Transfer Agent's
applicable user documentation;
(b) Refrain from copying or duplicating in any way (other than
in the normal course or performing processing on the Fund's
computer(s)), the Proprietary Information;
(c) Refrain from obtaining unauthorized access to any portion of
the Proprietary Information, and if such access is
inadvertently obtained, to inform in a timely
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<PAGE>
manner of such fact and dispose of such information in
accordance with the Transfer Agent's instructions;
(d) Refrain from causing or allowing information transmitted
from the Transfer Agent's computer to the Fund's terminal to
be retransmitted to any other computer terminal or other
device except as expressly permitted by the Transfer Agent
(such permission not to be unreasonably withheld);
(e) Allow the Fund to have access only to those authorized
transactions as agreed to between the Fund and the Transfer
Agent; and
(f) Honor all reasonable written requests made by the Transfer
Agent to protect at the Transfer Agent's expense the rights
of the Transfer Agent in Proprietary Information at common
law, under federal copyright law and under other federal or
state law.
7.2 Proprietary Information shall not include all or any portion of any
of the foregoing items that: (i) are or become publicly available
without breach of this Agreement; (ii) are released for general
disclosure by a written release by the Transfer Agent; or (iii) are
already in the possession of the receiving party at the time or
receipt without obligation of confidentiality or breach of this
Agreement.
7.3 The Fund acknowledges that its obligation to protect the Transfer
Agent's Proprietary Information is essential to the business
interest of the Transfer Agent and that the disclosure of such
Proprietary Information in breach of this Agreement would cause the
Transfer Agent immediate, substantial and irreparable harm, the
value of which would be extremely difficult to determine.
Accordingly, the parties agree that, in addition to any other
remedies that may be available in law, equity, or otherwise for the
disclosure or use of the Proprietary Information in breach of this
Agreement, the Transfer Agent shall be entitled to seek and obtain
a temporary restraining order, injunctive relief, or other
equitable relief against the continuance of such breach
7.4 If the Fund notifies the Transfer Agent that any of the Data Access
Services do not operate in material compliance with the most
recently issued user documentation for such services, the Transfer
Agent shall endeavor in a timely manner to correct such failure.
Organizations from which the Transfer Agent may obtain certain data
included in the Data Access Services are solely responsible for the
contents of such data and the Fund agrees to make no claim against
the Transfer Agent arising out of the contents of such third-party
data, including, but not limited to, the accuracy thereof. DATA
ACCESS SERVICES AND ALL COMPUTER PROGRAMS AND SOFTWARE
SPECIFICATIONS USED IN CONNECTION THEREWITH ARE PROVIDED ON AN AS
IS, AS AVAILABLE BASIS. THE TRANSFER AGENT EXPRESSLY DISCLAIMS ALL
WARRANTIES EXCEPT THOSE EXPRESSLY STATED HEREIN INCLUDING, BUT NOT
LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS
FOR A PARTICULAR PURPOSE.
7.5 If the transactions available to the Fund include the ability to
originate electronic instructions to the Transfer Agent in order
to: (i) effect the transfer or movement of cash or Shares; or
(ii) transmit Shareholder information or other information, then in
such event the Transfer Agent shall be entitled to rely on the
validity and authenticity of such instruction
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<PAGE>
without undertaking any further inquiry as long as such instruction
is undertaken in conformity with security procedures established by
the Transfer Agent from time to time.
7.6 Each party shall take reasonable efforts to advise its employees of
their obligations pursuant to this SECTION 7. The obligations of
this Section shall survive any earlier termination of this
Agreement.
8. INDEMNIFICATION
8.1 The Transfer Agent shall not be responsible for, and the Fund shall
indemnify and hold the Transfer Agent harmless from and against,
any and all losses, damages, costs, charges, counsel fees,
payments, expenses and liability arising out of or attributable to:
(a) All actions of the Transfer Agent or its agents or
subcontractors required to be taken pursuant to this
Agreement, provided that such actions are taken in good
faith and without negligence or willful misconduct;
(b) The Fund's lack of good faith, negligence or willful
misconduct which arise out of the breach of any
representation or warranty of the Fund hereunder:
(c) The reliance upon, and any subsequent use of or action taken
or omitted, by the Transfer Agent, or its agents or
subcontractors on: (i) any information, records, documents,
data, stock certificates or services, which are received by
the Transfer Agent or its agents or subcontractors by
machine readable input, facsimile, CRT data entry,
electronic instructions or other similar means authorized by
the Fund, and which have been prepared, maintained or
performed by the Fund or any other person or firm on behalf
of the Fund including but not limited to any previous
transfer agent or registrar; (ii) any instructions or
requests of the Fund or any of its officers; (iii) any
instructions or opinions of legal counsel with respect to
any matter arising in connection with the services to be
performed by the Transfer Agent under this Agreement which
are provided to the Transfer Agent after consultation with
such legal counsel; or (iv) any paper or document,
reasonably believed to be genuine, authentic, or signed by
the proper person or persons;
(d) The offer or sale of Shares in violation of federal or state
securities laws or regulations requiring that such Shares be
registered or in violation of any stop order or other
determination or ruling by any federal or any state agency
with respect to the offer or sale of such Shares;
(e) The negotiation and processing of any checks including
without limitation for deposit into the Fund's demand
deposit account maintained by the Transfer Agent; or
(f) Upon the Fund's request entering into any agreements
required by the National Securities Clearing Corporation
(the "NSCC") required by the NSCC for the transmission of
Fund or Shareholder data through the NSCC clearing systems.
8.2 In order that the indemnification provisions contained in this
SECTION 8 shall apply, upon the assertion of a claim for which the
Fund may be required to indemnify the Transfer
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Agent, the Transfer Agent shall promptly notify the Fund of such
assertion, and shall keep the Fund advised with respect to all
developments concerning such claim. The Fund shall have the option
to participate with the Transfer Agent in the defense of such claim
or to defend against said claim in its own name or in the name of
the Transfer Agent. The Transfer Agent shall in no case confess any
claim or make any compromise in any case in which the Fund may be
required to indemnify the Transfer Agent except with the Fund's
prior written consent.
9. STANDARD OF CARE
9.1 The Transfer Agent shall at all times act in good faith and agrees
to use its best efforts within reasonable limits to insure the
accuracy of all services performed under this Agreement, but
assumes no responsibility and shall not be liable for loss or
damage due to errors unless said errors are caused by its
negligence, bad faith, or willful misconduct or that of its
employees, except as provided in SECTION 9.2 below.
9.2 In the case of Exception Services as defined in SECTION 2.3 herein,
the Transfer Agent shall be held to a standard of gross negligence
and encoding and payment processing errors shall not be deemed
negligence.
10. YEAR 2000
The Transfer Agent will take reasonable steps to ensure that its products
(and those of its third-party suppliers) reflect the available technology
to offer products that are Year 2000 ready, including, but not limited to,
century recognition of dates, calculations that correctly compute same
century and multi century formulas and date values, and interface values
that reflect the date issues arising between now and the next one-hundred
years, and if any changes are required, the Transfer Agent will make the
changes to its products at a price to be agreed upon by the parties and in
a commercially reasonable time frame and will require third-party suppliers
to do likewise.
11. CONFIDENTIALITY
11.1 The Transfer Agent and the Fund agree that they will not, at any
time during the term of this Agreement or after its termination,
reveal, divulge, or make known to any person, firm, corporation or
other business organization, any customers' lists, trade secrets,
cost figures and projections, profit figures and projections, or
any other secret or confidential information whatsoever, whether of
the Transfer Agent or of the Fund, used or gained by the Transfer
Agent or the Fund during performance under this Agreement. The Fund
and the Transfer Agent further covenant and agree to retain all
such knowledge and information acquired during and after the term
of this Agreement respecting such lists, trade secrets, or any
secret or confidential information whatsoever in trust for the sole
benefit of the Transfer Agent or the Fund and their successors and
assigns. In the event of breach of the foregoing by either party,
the remedies provided by SECTION 7.3 shall be available to the
party whose confidential information is disclosed. The above
prohibition of disclosure shall not apply to the extent that the
Transfer Agent must disclose such data to its sub-contractor or
Fund agent for purposes of providing services under this Agreement.
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<PAGE>
11.2 In the event that any requests or demands are made for the
inspection of the Shareholder records of the Fund, other than
request for records of Shareholders pursuant to standard subpoenas
from state or federal government authorities (i.e., divorce and
criminal actions), the Transfer Agent will endeavor to notify the
Fund and to secure instructions from an authorized officer of the
Fund as to such inspection. The Transfer Agent expressly reserves
the right, however, to exhibit the Shareholder records to any
person whenever it is advised by counsel that it may be held liable
for the failure to exhibit the Shareholder records to such person
or if required by law or court order.
12. COVENANTS OF THE FUND AND THE TRANSFER AGENT
12.1 The Fund shall promptly furnish to the Transfer Agent the
following:
(a) A certified copy of the resolution of the Board of Directors
of the Fund authorizing the appointment of the Transfer
Agent and the execution and delivery of this Agreement; and
(b) A copy of the Articles of Incorporation and By-Laws of the
Fund and all amendments thereto.
12.2 The Transfer Agent hereby agrees to establish and maintain
facilities and procedures reasonably acceptable to the Fund for
safekeeping of stock certificates, check forms and facsimile
signature imprinting devices, if any; and for the preparation or
use, and for keeping account of, such certificates, forms and
devices.
12.3 The Transfer Agent shall keep records relating to the services to
be performed hereunder, in the form and manner as it may deem
advisable. To the extent required by Section 31 of the Investment
Company Act of 1940, as amended, and the Rules thereunder, the
Transfer Agent agrees that all such records prepared or maintained
by the Transfer Agent relating to the services to be performed by
the Transfer Agent hereunder are the property of the Fund and will
be preserved, maintained and made available in accordance with such
Section and Rules, and will be surrendered promptly to the Fund on
and in accordance with its request.
13. TERMINATION OF AGREEMENT
13.1 This Agreement may be terminated by either party upon one hundred
twenty (120) days written notice to the other.
13.2 Should the Fund exercise its right to terminate, all out-of-pocket
expenses or costs associated with the movement of records and
material will be borne by the Fund. Additionally, the Transfer
Agent reserves the right to charge for any other reasonable
expenses associated with such termination and a charge equivalent
to the average of three (3) months' fees. Payment of such expenses
or costs shall be in accordance with SECTION 3.4 of this Agreement.
13.3 Upon termination of this Agreement, each party shall return to the
other party all copies of confidential or proprietary materials or
information received from such other party
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hereunder, other than materials or information required to be
retained by such party under applicable laws or regulations.
14. ASSIGNMENT AND THIRD PARTY BENEFICIARIES
14.1 Except as provided in SECTION 15.1 below and the Additional
Telephone Support Services Schedule 1.2(f) attached, neither this
Agreement nor any rights or obligations hereunder may be assigned
by either party without the written consent of the other party. Any
attempt to do so in violation of this Section shall be void. Unless
specifically stated to the contrary in any written consent to an
assignment, no assignment will release or discharge the assignor
from any duty or responsibility under this Agreement.
14.2 Except as explicitly stated elsewhere in this Agreement, nothing
under this Agreement shall be construed to give any rights or
benefits in this Agreement to anyone other than the Transfer Agent
and the Fund, and the duties and responsibilities undertaken
pursuant to this Agreement shall be for the sole and exclusive
benefit of the Transfer Agent and the Fund. This Agreement shall
inure to the benefit of and be binding upon the parties and their
respective permitted successors and assigns.
14.3 This Agreement does not constitute an agreement for a partnership
or joint venture between the Transfer Agent and the Fund. Other
than as provided in SECTION 15.1 and Schedule 1.2(f), neither party
shall make any commitments with third parties hat are binding on
the other party without the other party's prior written consent.
15. SUBCONTRACTORS
15.1 The Transfer Agent may, without further consent on the part of the
Fund, subcontract for the performance hereof with (i) Boston
Financial Data Services, Inc., a Massachusetts corporation ("BFDS")
which is duly registered as a transfer agent pursuant to
Section 17A(c)(2) of the Securities Exchange Act of 1934, as
amended, (ii) a BFDS subsidiary duly registered as a transfer agent
or (iii) a BFDS affiliate duly registered as a transfer agent;
provided, however, that the Transfer Agent shall be fully
responsible to the Fund for the acts and omissions of BFDS or its
subsidiary or affiliate as it is for its own acts and omissions.
15.2 Nothing herein shall impose any duty upon the Transfer Agent in
connection with or make the Transfer Agent liable for the actions
or omissions to act of unaffiliated third parties such as by way of
example and not limitation, Airborne Services, Federal Express,
United Parcel Service, the U.S. Mails, the NSCC and
telecommunication companies, provided, if the Transfer Agent
selected such company, the Transfer Agent shall have exercised due
care in selecting the same.
16. MISCELLANEOUS
16.1 AMENDMENT. This Agreement may be amended or modified by a written
agreement executed by both parties and authorized or approved by a
resolution of the Board of Directors of the Fund.
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<PAGE>
16.2 MASSACHUSETTS LAW TO APPLY. This Agreement shall be construed and
the provisions thereof interpreted under and in accordance with the
laws of The Commonwealth of Massachusetts.
16.3 FORCE MAJEURE. In the event either party is unable to perform its
obligations under the terms of this Agreement because of acts of
God, strikes, equipment or transmission failure or damage
reasonably beyond its control, or other causes reasonably beyond
its control, such party shall not be liable for damages to the
other for any damages resulting from such failure to perform or
otherwise from such causes.
16.4 CONSEQUENTIAL DAMAGES. Neither party to this Agreement shall be
liable to the other party for consequential damages under any
provision of this Agreement or for any consequential damages
arising out of any act or failure to act hereunder.
16.5 SURVIVAL. All provisions regarding indemnification, warranty,
liability, and limits thereon, and confidentiality and/or
protections of proprietary rights and trade secrets shall survive
the termination of this Agreement.
16.6 SEVERABILITY. If any provision or provisions of this Agreement
shall be held invalid, unlawful, or unenforceable, the validity,
legality, and enforceability of the remaining provisions shall not
in any way be affected or impaired.
16.7 PRIORITIES CLAUSE. In the event of any conflict, discrepancy or
ambiguity between the terms and conditions contained in this
Agreement and any Schedules or attachments hereto, the terms and
conditions contained in this Agreement shall take precedence.
16.8 WAIVER. No waiver by either party or any breach or default of any
of the covenants or conditions herein contained and performed by
the other party shall be construed as a waiver of any succeeding
breach of the same or of any other covenant or condition.
16.9 MERGER OF AGREEMENT. This Agreement constitutes the entire
agreement between the parties hereto and supersedes any prior
agreement with respect to the subject matter hereof whether oral or
written.
16.10 COUNTERPARTS. This Agreement may be executed by the parties hereto
on any number of counterparts, and all of said counterparts taken
together shall be deemed to constitute one and the same instrument.
16.11 REPRODUCTION OF DOCUMENTS. This Agreement and all schedules,
exhibits, attachments and amendments hereto may be reproduced by
any photographic, photostatic, microfilm, micro-card, miniature
photographic or other similar process. The parties hereto each
agree that any such reproduction shall be admissible in evidence as
the original itself in any judicial or administrative proceeding,
whether or not the original is in existence and whether or not such
reproduction was made by a party in the regular course of business,
and that any enlargement, facsimile or further reproduction shall
likewise be admissible in evidence.
16.12 NOTICES. All notices and other communications as required or
permitted hereunder shall be in writing and sent by first class
mail, postage prepaid, addressed as follows or to
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<PAGE>
such other address or addresses of which the respective party shall
have notified the other.
(a) If to State Street Bank and Trust Company, to:
State Street Bank and Trust Company
c/o Boston Financial Data Services, Inc.
Two Heritage Drive
Quincy, Massachusetts 02171
Attention: Legal Department
Facsimile: (617) 774-2287
(b) If to the Fund, to:
Attention:
17. ADDITIONAL FUNDS
In the event that the Fund establishes one or more series of Shares in
addition to the attached Schedule A with respect to which it desires to
have the Transfer Agent render services as transfer agent under the terms
hereof, it shall so notify the Transfer Agent in writing, and if the
Transfer Agent agrees in writing to provide such services, such series of
Shares shall become a Portfolio hereunder.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
DRESDNER RCM CAPITAL FUNDS. INC.
BY:
-----------------------------------
ATTEST:
- -----------------------------------
STATE STREET BANK AND TRUST COMPANY
BY:
-----------------------------------
Executive Vice President
ATTEST:
- -----------------------------------
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<PAGE>
SCHEDULE A
International Growth Equity Fund
Growth Equity Fund
Small Cap Fund
DRESDNER RCM CAPITAL FUNDS. INC. STATE STREET BANK AND TRUST COMPANY
BY: BY:
-------------------------------- ----------------------------------
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<PAGE>
SCHEDULE 1.2(f)
ADDITIONAL TELEPHONE SUPPORT FEES AND SERVICES
Dated
----------------------
I. SERVICES
1. Transfer Agent and Telephone Support Functions
a. Answer telephone inquiries from [XXX 8 a.m. to 8 p.m. Boston time
Monday through Friday XXX] from [XXX existing customers and
prospective customers XXX] of the Fund [XXX for sales literature
XXX] in accordance with the telephone script provided by the
Fund.
b. Answer questions pertaining thereto the extent that such
questions are answerable based upon the information supplied to
the Transfer Agent by the Fund.
c. [XXX As the Fund and the Transfer Agent may agree in writing, the
Transfer Agent will receive calls and take written transaction
requests from shareholders of the Fund. Transfer Agent
transactions include: [XXX telephone redemptions, account
maintenance, exchanges, transfers, confirmed purchases, account
balances and general inquiries XXX]. Some transactions may result
in research which will be done by the Fund. Other calls may be
referred directly to the Fund. Fax any referrals to [XXX name of
company XXX] on the same day the telephone call is received.XXX];
2. Incorporate new information into the above referenced script upon
written instructions from the Fund;
3. Maintain prospect detail information for six (6) months thereafter,
provide such information to the Fund in the form that the Fund may
reasonably request;
4. Send all literature orders for information from BFDS/DST [XXX [how?]
[to whom?] XXX] a minimum of [XXX one XXX] transmission per day;
5. Provide the Fund with a [XXX daily/weekly/monthly XXX] telephone
report detailing the calls received during the [XXX day/week/month
XXX].
6. [XXX Provide the Fund with monthly conversion reports as selected by
the Fund from DST's standard report package. XXX]
II. SUBCONTRACTORS
1. The Transfer Agent may, without further consent on the part of the
Fund, subcontract ministerial telephone support services for the
performance hereof.
<PAGE>
III. FEES
DRESDNER RCM CAPITAL FUNDS. INC. STATE STREET BANK AND TRUST COMPANY
BY: BY:
-------------------------------- -----------------------------------
<PAGE>
SCHEDULE 2.1
THIRD PARTY ADMINISTRATOR(S) PROCEDURES
Dated
----------------------
1. On each Business Day, the TPA(s) shall receive, on behalf of and as agent
of the Fund(s), Instructions (as hereinafter defined) from the Plan.
Instructions shall mean as to each Fund (i) orders by the Plan for the
purchases of Shares, and (ii) requests by the Plan for the redemption of
Shares; in each case based on the Plan's receipt of purchase orders and
redemption requests by Participants in proper form by the time required by
the term of the Plan, but not later than the time of day at which the net
asset value of a Fund is calculated, as described from time to time in that
Fund's prospectus. Each Business Day on which the TPA receives Instructions
shall be a "Trade Date".
2. The TPA(s) shall communicate the TPA(s)'s acceptance of such Instructions,
to the applicable Plan.
3. On the next succeeding Business Day following the Trade Date on which it
accepted Instructions for the purchase and redemption of Shares, (TD+1),
the TPA(s) shall notify the Transfer Agent of the net amount of such
purchases or redemptions, as the case may be, for each of the Plans. In the
case of net purchases by any Plan, the TPA(s) shall instruct the Trustees
of such Plan to transmit the aggregate purchase price for Shares by wire
transfer to the Transfer Agent on (TD+1). In the case of net redemptions by
any Plan, the TPA(s) shall instruct the Fund's custodian to transmit the
aggregate redemption proceeds for Shares by wire transfer to the Trustees
of such Plan on (TD+1). The times at which such notification and
transmission shall occur on (TD+1) shall be as mutually agreed upon by each
Fund, the TPA(s), and the Transfer Agent.
4. The TPA(s) shall maintain separate records for each Plan, which record
shall reflect Shares purchased and redeemed, including the date and price
for all transactions, and Share balances. The TPA(s) shall maintain on
behalf of each of the Plans a single master account with the Transfer Agent
and such account shall be in the name of that Plan, the TPA(s), or the
nominee of either thereof as the record owner of Shares owned by such Plan.
5. The TPA(s) shall maintain records of all proceeds of redemptions of Shares
and all other distributions not reinvested in Shares.
6. The TPA(s) shall prepare, and transmit to each of the Plans, periodic
account statements showing the total number of Shares owned by that Plan as
of the statement closing date, purchases and redemptions of Shares by the
Plan during the period covered by the statement, and the dividends and
other distributions paid to the Plan on Shares during the statement period
(whether paid in cash or reinvested in Shares).
7. The TPA(s) shall, at the request and expense of each Fund, transmit to the
Plans prospectuses, proxy materials, reports, and other information
provided by each Fund for delivery to its shareholders.
8. The TPA(s) shall, at the request of each Fund, prepare and transmit to each
Fund or any agent designated by it such periodic reports covering Shares of
each Plan as each Fund shall reasonably conclude are necessary to enable
the Fund to comply with state Blue Sky requirements.
<PAGE>
9. The TPA(s) shall transmit to the Plans confirmation of purchase orders and
redemption requests placed by the Plans; and
10. The TPA(s) shall, with respect to Shares, maintain account balance
information for the Plan(s) and daily and monthly purchase summaries
expressed in Shares and dollar amounts.
11. Plan sponsors may request, or the law may require, that prospectuses, proxy
materials, periodic reports and other materials relating to each Fund be
furnished to Participants in which event the Transfer Agent or each Fund
shall mail or cause to be mailed such materials to Participants. With
respect to any such mailing, the TPA(s) shall, at the request of the
Transfer Agent or each Fund, provide at the TPA(s)'s expense complete and
accurate set of mailing labels with the name and address of each
Participant having an interest through the Plans in Shares.
DRESDNER RCM CAPITAL FUNDS. INC. STATE STREET BANK AND TRUST COMPANY
BY: BY:
-------------------------------- ------------------------------------
<PAGE>
SCHEDULE 3.1
FEES
Dated
-------------------------
DRESDNER RCM CAPITAL FUNDS. INC. STATE STREET BANK AND TRUST COMPANY
BY: BY:
-------------------------------- -------------------------------------
<PAGE>
Dresdner RCM
Fee Information for Services as
Plan, Transfer and Dividend Disbursing Agent
<TABLE>
<CAPTION>
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------
ANNUAL ACCOUNT SERVICE FEES
- ---------------------------------------------------------------------------------------------------
Monthly Dividend Funds (per open account within a fund) $ 14.00/year*
Quarterly Dividend Funds (per open account within a fund) $ 13.00/year*
Semi-Annual/Annual Dividend Funds (per open account within a fund) $ 12.00/year*
Closed Account Fee (per closed account within a fund) $ 1.80/year*
Minimum Per Cusip
1st Class within a Non-Institutional Portfolio $18,000/year*
Subsequent Classes within a Non-Institutional Portfolio $15,000/year*
Institutional Classes $12,000/year*
* Fees are billable on a monthly basis at the rate of 1/12 of the annual fee.
A charge is made for an account in the month that an account opens or
closes. Account service fees are the higher of: open account charges plus
closed account charges or the fund minimum.
These fees will be subject to an annual Cost of Living Adjustment based on
regional consumer price index.
- ---------------------------------------------------------------------------------------------------
ACTIVITY BASED FEES
- ---------------------------------------------------------------------------------------------------
New Account Set-up $ 4.00/each
Manual Transactions $ 1.50/each
Manual Non-Financial Transactions $ .75/each
Telephone Calls $ 2.00/each
Correspondence $ 3.00/each
- ---------------------------------------------------------------------------------------------------
BANKING SERVICES
- ---------------------------------------------------------------------------------------------------
Checkwriting Drafts Presented for Payment $ 1.00/each
Checkwriting Set-up $ 5.00/each
- ---------------------------------------------------------------------------------------------------
CONVERSION FEES
- ---------------------------------------------------------------------------------------------------
Per Class within a Portfolio $ 2,500/each
- ---------------------------------------------------------------------------------------------------
FUND IMPLEMENTATION FEES
- ---------------------------------------------------------------------------------------------------
First Class within a Portfolio $ 1,000/each
Subsequent Classes within a Portfolio $ 500/each
Institutional Class $ 1,000/each
- ---------------------------------------------------------------------------------------------------
OUT-OF-POCKET EXPENSES BILLED AS INCURRED
- ---------------------------------------------------------------------------------------------------
</TABLE>
Out-of-Pocket expenses include but are not limited to: mailing expenses (i.e.,
statements, stationery, checks, certificates, sales literature, printing,
postage, etc.), telecommunication expenses, equipment and software expenses
(client-site only), programming expenses (i.e., charges necessary to establish
consolidated statement), microfiche, freight, ACH bank charges, and all other
expenses incurred on the fund's behalf.
DRESDNER RCM FUNDS STATE STREET BANK AND TRUST COMPANY
By: By:
------------------------------- ------------------------------------
Title: Title:
---------------------------- ---------------------------------
Date: Date:
----------------------------- ----------------------------------
<PAGE>
FORM OF EXHIBIT 99.23(8)(c)
ADMINISTRATION AGREEMENT
Agreement dated as of___________, 1998 by and between State Street Bank and
Trust Company, a Massachusetts trust company (the "Administrator"), and Dresdner
RCM Capital Funds, Inc. (the "Company").
WHEREAS, the Company is registered as an open-end, management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Company desires to retain the Administrator to furnish certain
administrative services to the Company, and the Administrator is willing to
furnish such services, on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto agree as follows:
1. APPOINTMENT OF ADMINISTRATOR
The Company hereby appoints the Administrator to act as administrator with
respect to the Company for purposes of providing certain administrative services
for the period and on the terms set forth in this Agreement. The Administrator
accepts such appointment and agrees to render the services stated herein.
The Company will initially consist of the portfolio(s) and/or class(es) of
shares (each an "Investment Fund") listed in Schedule A to this Agreement. In
the event that the Company establishes one or more additional Investment Funds
with respect to which it wishes to retain the Administrator to act as
administrator hereunder, the Company shall notify the Administrator in writing.
Upon written acceptance by the Administrator, such Investment Fund shall become
subject to the provisions of this Agreement to the same extent as the existing
Investment Funds, except to the extent that such provisions (including those
relating to the compensation and expenses payable by the Company and its
Investment Funds) may be modified with respect to each additional Investment
Fund in writing by the Company and the Administrator at the time of the addition
of the Investment Fund.
2. DELIVERY OF DOCUMENTS
The Company will promptly deliver to the Administrator copies of each of
the following documents and all future amendments and supplements, if any:
a. The Company's Articles of Incorporation and by-laws;
b. The Company's currently effective registration statement under the
Securities Act of 1933, as amended (the "1933 Act"), and the 1940 Act
and the Company's Prospectus(es) and Statement(s) of Additional
Information relating to all Investment Funds and all amendments and
supplements thereto as in effect from time to time;
c. Certified copies of the resolutions of the Board of Directors of the
Company (the "Board") authorizing (1) the Company to enter into this
Agreement and (2) certain individuals on behalf of the Company to (a)
give instructions to the Administrator pursuant to this Agreement and
(b) sign checks and pay expenses;
Page 1
<PAGE>
d. A copy of the investment advisory agreement between the Company and
its investment adviser; and
e. Such other certificates, documents or opinions which the Administrator
may, in its reasonable discretion, deem necessary or appropriate in
the proper performance of its duties.
3. REPRESENTATIONS AND WARRANTIES OF THE ADMINISTRATOR
The Administrator represents and warrants to the Company that:
a. It is a Massachusetts trust company, duly organized and existing under
the laws of The Commonwealth of Massachusetts;
b. It has the corporate power and authority to carry on its business in
The Commonwealth of Massachusetts;
c. All requisite corporate proceedings have been taken to authorize it to
enter into and perform this Agreement;
d. No legal or administrative proceedings have been instituted or
threatened which would impair the Administrator's ability to perform
its duties and obligations under this Agreement; and
e. Its entrance into this Agreement shall not cause a material breach or
be in material conflict with any other agreement or obligation of the
Administrator or any law or regulation applicable to it.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Administrator that:
a. It is a corporation, duly organized, existing and in good standing
under the laws of Maryland;
b. It has the corporate power and authority under applicable laws and by
its charter and by-laws to enter into and perform this Agreement;
c. All requisite proceedings have been taken to authorize it to enter
into and perform this Agreement;
d. It is an investment company properly registered under the 1940 Act;
e. A registration statement under the 1933 Act and the 1940 Act has been
filed and will be effective and remain effective during the term of
this Agreement. The Company also warrants to the Administrator that as
of the effective date of this Agreement, all necessary filings under
the securities laws of the states in which the Company offers or sells
its shares have been made;
f. No legal or administrative proceedings have been instituted or
threatened which would impair the Company's ability to perform its
duties and obligations under this Agreement;
Page 2
<PAGE>
g. Its entrance into this Agreement will not cause a material breach or
be in material conflict with any other agreement or obligation of the
Company or any law or regulation applicable to it; and
h. As of the close of business on the date of this Agreement, the Company
is authorized to issue shares of beneficial interest, and it will
initially offer shares, in the authorized amounts as set forth in
Schedule A to this Agreement.
5. ADMINISTRATION SERVICES
The Administrator shall provide the following services, in each case,
subject to the control, supervision and direction of the Company and the review
and comment by the Company's auditors and legal counsel and in accordance with
procedures which may be established from time to time between the Company and
the Administrator:
a. Oversee the determination and publication of the Company's net asset
value in accordance with the Company's policy as adopted from time to
time by the Board;
b. Oversee the maintenance by the Company's custodian of certain books
and records of the Company as required under Rule 31a-l(b) of the 1940
Act;
c. Prepare the Company's federal, state and local income tax returns for
review by the Company's independent accountants and filing by the
Company's treasurer;
d. Review calculation, submit for approval by officers of the Company and
arrange for payment of the Company's expenses;
e. Prepare for review and approval by officers of the Company financial
information for the Company's semi-annual and annual reports, proxy
statements and other communications required or otherwise to be sent
to Company shareholders, and arrange for the printing and
dissemination of such reports and communications to shareholders;
f. Prepare for review by an officer of and legal counsel for the Company
the Company's periodic financial reports required to be filed with the
Securities and Exchange Commission ("SEC") on Form N-SAR and
financial information required by Form N-1A and such other reports,
forms or filings as may be mutually agreed upon;
g. Prepare reports relating to the business and affairs of the Company as
may be mutually agreed upon and not otherwise prepared by the
Company's investment adviser, custodian, legal counsel or independent
accountants;
h. Make such reports and recommendations to the Board concerning the
performance of the independent accountants as the Board may reasonably
request;
i. Make such reports and recommendations to the Board concerning the
performance and fees of the Company's custodian and transfer and
dividend disbursing agent ("Transfer Agent") as the Board may
reasonably request or deems appropriate;
j. Oversee and review calculations of fees paid to the Company's
investment adviser, custodian and Transfer Agent;
Page 3
<PAGE>
k. Consult with the Company's officers, independent accountants, legal
counsel, custodian and Transfer Agent in establishing the accounting
policies of the Company;
l. Provide periodic testing of portfolios to assist the Company's
investment adviser in complying with Internal Revenue Code mandatory
qualification requirements, the requirements of the 1940 Act and
Company prospectus limitations as may be mutually agreed upon;
m. Coordinate printing of annual and semi-annual shareholder reports and
coordinate the filing with appropriate regulatory agencies; review
text of "President's letters" to shareholders and "Management's
Discussion of Company Performance" (which shall also be subject to
review by the Company's legal counsel); and
n. Prepare SEC Rule 24f-2 notices.
The Administrator shall provide the office facilities and the personnel required
by it to perform the services contemplated herein.
6. FEES; EXPENSES; EXPENSE REIMBURSEMENT
The Administrator shall receive from the Company such compensation for the
Administrator's services provided pursuant to this Agreement as may be agreed to
from time to time in a written fee schedule approved by the parties and
initially set forth in the Fee Schedule to this Agreement. The fees are accrued
daily and billed monthly and shall be due and payable upon receipt of the
invoice. Upon the termination of this Agreement before the end of any month, the
fee for the part of the month before such termination shall be prorated
according to the proportion which such part bears to the full monthly period and
shall be payable upon the date of termination of this Agreement. In addition,
the Company shall reimburse the Administrator for its out-of-pocket costs
incurred in connection with this Agreement.
The Company agrees promptly to reimburse the Administrator for any
equipment and supplies specially ordered by or for the Company through the
Administrator and for any other expenses not contemplated by this Agreement that
the Administrator may incur on the Company's behalf at the Company's request or
with the Company's consent.
The Company will bear all expenses that are incurred in its operation and
not specifically assumed by the Administrator. Expenses to be borne by the
Company, include, but are not limited to: organizational expenses; cost of
services of independent accountants and outside legal and tax counsel (including
such counsel's review of the Company's federal and state tax qualification as a
regulated investment company and other reports and materials prepared by the
Administrator under this Agreement); cost of any services contracted for by the
Company directly from parties other than the Administrator; cost of trading
operations and brokerage fees, commissions and transfer taxes in connection with
the purchase and sale of securities for the Company; investment advisory fees;
taxes, insurance premiums and other fees and expenses applicable to its
operation; costs incidental to any meetings of shareholders including, but not
limited to, legal and accounting fees, proxy filing fees and the costs of
preparation, printing and mailing of any proxy materials; costs incidental to
Board meetings, including fees and expenses of Board members; the salary and
expenses of any officer, director\trustee or employee of the Company; costs
incidental to the preparation, printing and distribution of the Company's
registration statements and any amendments thereto and shareholder reports; cost
of typesetting and printing of prospectuses; cost of preparation and filing of
the Company's tax returns, Form N-1A and Form N-SAR, and all notices,
registrations and amendments associated with applicable federal and state tax
and securities laws; all applicable registration fees and filing fees required
under
Page 4
<PAGE>
federal and state securities laws; fidelity bond and directors' and officers'
liability insurance; and cost of independent pricing services used in computing
the Company's net asset value.
The Administrator is authorized to and may employ or associate with such
person or persons as the Administrator may deem desirable to assist it in
performing its duties under this Agreement; provided, however, that the
compensation of such person or persons shall be paid by the Administrator and
that the Administrator shall be as fully responsible to the Company for the acts
and omissions of any such person or persons as it is for its own acts and
omissions.
7. INSTRUCTIONS AND ADVICE
At any time, the Administrator may apply to any officer of the Company for
instructions and may consult with its own legal counsel or outside counsel for
the Company or the independent accountants for the Company at the expense of the
Company, with respect to any matter arising in connection with the services to
be performed by the Administrator under this Agreement. The Administrator shall
not be liable, and shall be indemnified by the Company, for any action taken or
omitted by it in good faith in reliance upon any such instructions or advice or
upon any paper or document believed by it to be genuine and to have been signed
by the proper person or persons. The Administrator shall not be held to have
notice of any change of authority of any person until receipt of written notice
thereof from the Company. Nothing in this paragraph shall be construed as
imposing upon the Administrator any obligation to seek such instructions or
advice, or to act in accordance with such advice when received.
8. LIMITATION OF LIABILITY AND INDEMNIFICATION
The Administrator shall be responsible for the performance of only such
duties as are set forth in this Agreement and, except as otherwise provided
under Section 6, shall have no responsibility for the actions or activities of
any other party, including other service providers. The Administrator shall have
no liability for any error of judgment or mistake of law or for any loss or
damage resulting from the performance or nonperformance of its duties hereunder
unless solely caused by or resulting from the negligence or willful misconduct
of the Administrator, its officers or employees. The Administrator shall not be
liable for any special, indirect, incidental, or consequential damages of any
kind whatsoever (including, without limitation, attorneys' fees) under any
provision of this Agreement or for any such damages arising out of any act or
failure to act hereunder. In any event, the Administrator's liability under this
Agreement shall be limited to one times its total annual compensation earned and
fees paid hereunder during the preceding twelve months for all services provided
to the Company under this Agreement for any liability or loss suffered by the
Company including, but not limited to, any liability relating to qualification
of the Company as a regulated investment company or any liability relating to
the Company's compliance with any federal or state tax or securities statute,
regulation or ruling.
The Administrator shall not be responsible or liable for any failure or
delay in performance of its obligations under this Agreement arising out of or
caused, directly or indirectly, by circumstances beyond its control, including
without limitation, work stoppage, power or other mechanical failure, computer
virus, natural disaster, governmental action or communication disruption.
The Company shall indemnify and hold the Administrator harmless from all
loss, cost, damage and expense, including reasonable fees and expenses for
counsel, incurred by the Administrator resulting from any claim, demand, action
or suit in connection with the Administrator's acceptance of this Agreement, any
action or omission by it in the performance of its duties hereunder, or as a
result of acting upon any instructions reasonably believed by it to have been
duly authorized by the Company, provided that this indemnification shall not
apply to actions or omissions of the Administrator, its officers or employees in
cases of its or their own negligence or willful misconduct.
Page 5
<PAGE>
The indemnification contained herein shall survive the termination of this
Agreement.
9. CONFIDENTIALITY
The Administrator agrees that, except as otherwise required by law or in
connection with any required disclosure to a banking or other regulatory
authority, it will keep confidential all records and information in its
possession relating to the Company or its shareholders or shareholder accounts
and will not disclose the same to any person except at the request or with the
written consent of the Company.
10. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS; RECORDS
The Company assumes full responsibility for complying with all securities,
tax, commodities and other laws, rules and regulations applicable to it.
In compliance with the requirements of Rule 31a-3 under the 1940 Act, the
Administrator agrees that all records which it maintains for the Company shall
at all times remain the property of the Company, shall be readily accessible
during normal business hours, and shall be promptly surrendered upon the
termination of the Agreement or otherwise on written request. The Administrator
further agrees that all records which it maintains for the Company pursuant to
Rule 31a-1 under the 1940 Act will be preserved for the periods prescribed by
Rule 31a-2 under the 1940 Act unless any such records are earlier surrendered as
provided above. Records shall be surrendered in usable machine-readable form.
11. SERVICES NOT EXCLUSIVE
The services of the Administrator to the Company are not to be deemed
exclusive, and the Administrator shall be free to render similar services to
others. The Administrator shall be deemed to be an independent contractor and
shall, unless otherwise expressly provided herein or authorized by the Company
from time to time, have no authority to act or represent the Company in any way
or otherwise be deemed an agent of the Company.
12. TERM, TERMINATION AND AMENDMENT
This Agreement shall become effective on the date of its execution and
shall remain in full force and effect for a period of two years from the
effective date and shall automatically continue in full force and effect after
such initial term unless either party terminates this Agreement by written
notice to the other party at least sixty (60) days prior to the expiration of
the initial term. Either party may terminate this Agreement at any time after
the initial term upon at least sixty (60) days' prior written notice to the
other party. Termination of this Agreement with respect to any given Investment
Fund shall in no way affect the continued validity of this Agreement with
respect to any other Investment Fund.
Upon termination of this Agreement, the Company shall pay to the
Administrator such compensation and any reimbursable expenses as may be due
under the terms hereof as of the date of such termination, including reasonable
out-of-pocket expenses associated with such termination. This Agreement may be
modified or amended from time to time by mutual written agreement of the parties
hereto.
13. NOTICES
Any notice or other communication authorized or required by this Agreement
to be given to either party shall be in writing and deemed to have been given
when delivered in person or by confirmed facsimile, or posted by certified mail,
return receipt requested, to the following address (or such other address as a
party may specify by written notice to the other): if to the
Company:_________________,
Page 6
<PAGE>
Attn:_____________, fax:______________; if to the Administrator: State Street
Bank and Trust Company, 1776 Heritage Drive, AFB-4, North Quincy, Massachusetts
02171, Attn: Fund Administration Legal Department, fax: 617-537-2578.
14. NON-ASSIGNABILITY
This Agreement shall not be assigned by either party hereto without the
prior consent in writing of the other party, except that the Administrator may
assign this Agreement to a successor of all or a substantial portion of its
business, or to a party controlling, controlled by or under common control with
the Administrator.
15. SUCCESSORS
This Agreement shall be binding on and shall inure to the benefit of the
Company and the Administrator and their respective successors and permitted
assigns.
16. ENTIRE AGREEMENT
This Agreement contains the entire understanding between the parties hereto
with respect to the subject matter hereof and supersedes all previous
representations, warranties or commitments regarding the services to be
performed hereunder whether oral or in writing.
17. WAIVER
The failure of a party to insist upon strict adherence to any term of this
Agreement on any occasion shall not be considered a waiver nor shall it deprive
such party of the right thereafter to insist upon strict adherence to that term
or any term of this Agreement. Any waiver must be in writing signed by the
waiving party.
18. SEVERABILITY
If any provision of this Agreement is invalid or unenforceable, the balance
of the Agreement shall remain in effect, and if any provision is inapplicable to
any person or circumstance it shall nevertheless remain applicable to all other
persons and circumstances.
19. GOVERNING LAW
This Agreement shall be construed and the provisions thereof interpreted
under and in accordance with the laws of The Commonwealth of Massachusetts.
20. REPRODUCTION OF DOCUMENTS
This Agreement and all schedules, exhibits, attachments and amendments
hereto may be reproduced by any photographic, photostatic, microfilm,
micro-card, miniature photographic or other similar process. The parties hereto
all/each agree that any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding, whether or not the
original is in existence and whether or not such reproduction was made by a
party in the regular course of business, and that any enlargement, facsimile or
further reproduction of such reproduction shall likewise be admissible in
evidence.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the date first written above.
Page 7
<PAGE>
DRESDNER RCM CAPITAL FUNDS, INC.
By:
---------------------------------------------
Name:
---------------------------------------------
Title:
---------------------------------------------
STATE STREET BANK AND TRUST COMPANY
By:
---------------------------------------------
Name: Kathleen C. Cuocolo
---------------------------------------------
Title: Senior Vice President
---------------------------------------------
Page 8
<PAGE>
ADMINISTRATION AGREEMENT
SCHEDULE A
LISTING OF INVESTMENT FUNDS AND AUTHORIZED SHARES
Investment Fund Authorized Shares
Dresdner RCM Growth Equity Fund
Dresdner RCM Small Cap Fund
Dresdner RCM International Growth Equity Fund
Page 9
<PAGE>
STATE STREET BANK AND TRUST COMPANY
DRESDNER RCM CAPITAL FUNDS, INC.
SUB-ADMINISTRATION FEE SCHEDULE
- --------------------------------------------------------------------------------
I. SUB-ADMINISTRATION SERVICES
Services to be performed by State Street Fund Administration include
Treasurer's Office Support, Tax Reporting, IRS/SEC/Prospectus Compliance,
Financial Reporting and Audit Coordination, N-SAR Preparation and
Filing, 24f-2 Notice Preparation.
<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>
FUND FEES:
Fees will be calculated by multiplying each Average Asset Break Point in
the above schedule by the number of Funds in the complexes (Dresdner RCM
Global Funds, Inc. and Dresdner RCM Capital Funds, Inc.) to determine the
break points used in the schedule. Total net assets of all 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 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.
The minimum monthly fee per Fund will be applied at the rate of 1/12th in
month one ($399 per Fund), 2/12th in month two increasing incrementally
per month until the full minimum monthly fee per Fund is in effect in
month twelve ($4,792 per Fund).
II. MULTIPLE CLASSES OF SHARES
An additional $10,000 fee will be applied to each class of shares,
excluding the first two classes of shares, if more than two classes of
shares is operational in a Fund.
III. LEVERAGE CALCULATIONS
An additional $10,000 annual fee will be applied to each Fund for
performance of daily calculations and Statement of Cash Flow reporting to
the extent a Fund engages in leveraging activities, other than temporary
borrowings.
Page 10
<PAGE>
STATE STREET BANK AND TRUST COMPANY
DRESDNER RCM CAPITAL FUNDS, INC.
SUB-ADMINISTRATION FEE SCHEDULE
- --------------------------------------------------------------------------------
IV. OUT OF POCKET EXPENSES - INCLUDE, BUT MAY NOT BE LIMITED TO:
- Printing for shareholder reports and SEC filings
- Legal fees, audit fees and other professional fees
- Supplies related to Fund records
- Travel and lodging for Board and Operations meetings
- Preparation of financials other than Annual, Semi-Annual and
Quarterly Board Reporting, $3,000 per financial report.
V. SPECIAL ARRANGEMENTS
Fees for activities of a non-recurring nature such as fund consolidations
or reorganizations, and/or preparation of special reports will be subject
to negotiation.
VI. PAYMENT
The above fees will be charged against each Fund's account fifteen (15)
business days after the date invoices are mailed.
VII. TERM OF THE CONTRACT
The parties agree that this fee schedule shall remain in effect through
December 31, 2000, and from year to year thereafter until it is revised
as a result of negotiations initiated by either party.
DRESDNER RCM CAPITAL FUNDS, INC. STATE STREET BANK AND TRUST COMPANY
By: By:
------------------------------ -----------------------------------
Title: Title:
------------------------------ -----------------------------------
Date: Date:
------------------------------ -----------------------------------
Page 11
