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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No. 1 /X/
Post-Effective Amendment No. / /
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 1 /X/
(Check appropriate box or boxes.)
DRESDNER RCM INVESTMENT FUNDS INC.
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(Exact Name of Registrant as Specified in Charter)
FOUR EMBARCADERO CENTER SAN FRANCISCO, CALIFORNIA 94111
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(Address of Principal Executive Offices) (Zip Code)
(415) 954-5400
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(Registrant's Telephone Number, including Area Code)
Robert J. Goldstein
DRESDNER RCM INVESTMENT 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
Approximate Date of Proposed Public Offering: May 3, 1999
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which
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specifically states that this Registration Statement shall thereafter become
effective in accordance with Section 8(a) of the Securities Act of 1933 or until
this Registration Statement shall become effective on such date as the
Commission acting pursuant to said Section 8(a) may determine.
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DRESDNER RCM INVESTMENT FUNDS INC.
DRESDNER RCM EUROPE 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 Objective 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 Buying Shares; Selling Shares; Other
Stockholders Services and Account
Policies; Dividends, Distributions
and Taxes
8. Distribution Arrangements Organization and Management; The
Distributor
9. Financial Highlights Information Financial Highlights
*NOT APPLICABLE
C-1
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DRESDNER RCM INVESTMENT FUNDS INC.
DRESDNER RCM EUROPE 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 Investment Objectives and Policies;
Its Investments and Risks Investment and Risk Considerations;
Investment Restrictions
13. Management of the Fund The Investment Manager
14. Control Persons and Directors and Officers; Description
Principal Holders of Securities of Capital Shares
15. Investment Advisory The Investment Manager; The
and Other 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
9. Financial Statements Financial Statements
*NOT APPLICABLE.
C-2
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DRESDNER RCM INVESTMENT FUNDS INC.
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Dresdner RCM Europe Fund
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____________, 1999
This prospectus contains essential information for anyone
considering an investment in this fund. Please read this document
carefully and retain it for future reference.
The Securities and Exchange Commission has not approved or
disapproved these securities or passed upon the adequacy or accuracy
of this Prospectus. It is a criminal offense to state or suggest
otherwise.
1
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DRESDNER RCM INVESTMENT FUNDS INC.
TABLE OF CONTENTS
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RISK/RETURN SUMMARY AND FUND EXPENSES
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THIS SECTION SUMMARIZES THE 3 Risk/Return Summary
FUND'S INVESTMENTS, RISKS, 5 Fees and Expenses
PAST PERFORMANCE, AND FEES.
INVESTMENT OBJECTIVES, POLICIES AND RISKS
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THIS SECTION PROVIDES DETAILS 7 Investment Objective and Policies
ABOUT THE FUND'S INVESTMENT 9 Other Investment Practices
OBJECTIVE, POLICIES AND RISKS. 10 Changing the Investment Objectives and
Policies
10 Investment Risks
ORGANIZATION AND MANAGEMENT
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THIS SECTION PROVIDES DETAILS 14 The Fund and the Investment Manager
ABOUT THE PEOPLE AND 14 The Portfolio Managers
ORGANIZATIONS WHO OVERSEE THE 14 Management Fees and Other Expenses
FUND. 15 The Distributor
15 Pending Litigation
STOCKHOLDER INFORMATION
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THIS SECTION TELLS YOU HOW TO 16 Buying Shares
BUY, SELL AND EXCHANGE SHARES, 19 Selling Shares
HOW WE VALUE SHARES, AND HOW WE 19 Other Stockholder Services
PAY DIVIDENDS AND DISTRIBUTIONS. 22 Dividends, Distributions and Taxes
OTHER INFORMATION ABOUT THE FUND
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THIS SECTION PROVIDES DETAILS ON 24 Financial Highlights
SELECTED FINANCIAL HIGHLIGHTS OF
THE FUND
2
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RISK RETURN SUMMARY AND FUND EXPENSES
RISK/RETURN SUMMARY
Goal: The Fund's goal is to seek long term growth of
capital by investing in equity securities of
European companies.
Principal Investment The Fund invests primarily in common stocks of
Strategies: companies located in Europe, from both European
Economic and Monetary Union ("EMU") and non-EMU
countries. Under normal market conditions, the Fund
invests at least 75% of its total assets in these
companies. The Fund expects to invest most of its
assets in equity securities of issuers located in
Western European countries. The Fund may invest
in companies of any size.
The Investment Manager evaluates the fundamental
value and prospects for growth of individual
companies and focuses on companies that it expects
will have higher than average rates of growth and
strong potential for capital appreciation. The
Morgan Stanley Capital International (MSCI) Europe
Index is the Fund's performance benchmark. The Fund
bases its security selection on the relative
investment merits of different industries and
companies throughout Europe and will not seek to
duplicate the country and sector allocations of the
MSCI Europe Index.
Principal Investment Because the value 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.
The performance of foreign securities depends in
part on the political and economic environments
and other overall economic conditions in the
countries where the Fund invests. Because the
Fund focuses on certain developed European
countries, it will be more susceptible than other
funds to market and other conditions affecting
those countries. The Fund's value will also be
exposed to currency risk. The stock prices of
smaller and newer companies in which the Fund may
invest fluctuate more than those of larger, more
established companies.
An investment in the Fund is not a bank deposit
and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other
government agency.
3
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On [May 3], 1999, the Fund converted from a closed-end fund
to an open-end fund. Closed-end fund shares are not redeemed by or purchased
from the fund. Instead, they are normally listed and traded on an exchange.
Unlike open-end funds, the price of a closed-end fund share is not based on
the fund's net asset value, but upon its value in the market. Closed-end funds
usually generate fewer expenses than open-end funds because the fund is not
responsible for the distribution of its shares. Upon conversion, all
outstanding shares of the previously closed-end fund were redesignated as Class
N shares and a new class of shares, Class I, was created.
The bar chart and table shown below provide some indication of the risks
of investing in the Fund by showing changes in the Fund's performance from year
to year and by showing how the Fund's average annual returns for one and five
years and for the life of the Fund compared to broad based securities market
indices.
Both the chart and table below 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*
[GRAPH]
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
(3.3%) (14.7%) 33.2% (4.9%) 0.0% 16.2% 26.3% 38.1%
1991 1992 1993 1994 1995 1996 1997 1998
</TABLE>
For the period covered by this year-by-year total return chart, the Fund's
highest quarterly return was 23.9% (for the quarter ended March 31, 1998) and
the lowest quarterly return was (14.7%) (for the quarter ended September 30,
1998).
Average Annual Total Returns*
(through December 31, 1998)
<TABLE>
<CAPTION>
Date of Past Five Life of
Inception Year Years*** Fund
<S> <C> <C> <C> <C>
Class N Shares** April 5,1990 38.1% 14.1% 6.3%
DAX100 Index**** N/A 25.2% 16.9% 10.4%
MDAX Index**** N/A 15.2% 10.5% 5.5%
</TABLE>
*The bar chart and table reflect the performance of the Fund as a
closed-end investment company that invested primarily in equity securities of
German companies. Beginning on February 9, 1999, the Fund expanded its
investment mandate and invests primarily in equity securities of companies
based in Europe, and on [May 3], 1999, the Fund converted from a closed-end to
an open-end investment company. The expenses of the Fund as an open-end
investment company may be higher than as a closed-end investment company
due to additional fees, such as Rule 12b-1 fees.
**The returns for Class I Shares of the Fund, which commenced operations on
[May 3], 1999 will differ from those for Class N because of differences in
each class's expenses. Class I Shares are not subject to Rule 12b-1 fees.
*** During this period, the Fund's investment mandate changed. On April 30,
1996, following shareholder approval, the Fund was permitted to invest a
larger percentage of its assets both in equity securities of non-German
companies and in equity securities of German companies with large market
capitalizations. Before the expansion of the Fund's investment mandate, from
December 31, 1993 through April 30, 1996, the Fund returned 11.68% compared
to 7.14% and 10.13% for the MDAX and DAX100, respectively. After the
expansion of the Fund's investment mandate, from April 30, 1996 through
December 31, 1998, the Fund returned 29.76% compared to 13.52% and 23.18% for
the MDAX and DAX100, respectively.
****The DAX 100 Index measures the total return of the 100 most highly
capitalized stocks traded on the Frankfurt Stock Exchange. The MDAX Index is
a total rate of return index of 70 medium sized German Companies. For periods
after 1998, the Fund will compare its performance to the MSCI Europe Index.
4
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FEES AND EXPENSES
As an investor in the Fund, you will pay the following fees and
expenses. The Fund does not have any front-end or contingent sales loads
and does not charge you for reinvesting dividends.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Class of Shares
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) ---------------
Class N Class I
------- -------
<S> <C> <C>
Redemption or exchange fees (1) 1% 1%
ANNUAL FUND OPERATING EXPENSES
(FEES PAID FROM FUND ASSETS)
Management Fees 1.00% 1.00%
Rule 12b-1 fee 0.25% NONE
Other expenses(2) 0.55% 0.55%
Total annual Fund operating expenses (3) 1.80% 1.55%
Fee waiver and/or expense reimbursement(4) 0.20% 0.20%
Net expenses(4) 1.60% 1.35%
</TABLE>
1 The fund charges a 1.00% redemption fee if you redeem shares before
[November 3], 1999. This redemption fee will not apply if you present proof,
satisfactory to the Fund, that you have held the Fund shares for more than
twelve months consecutively prior to their redemption.
2 These expenses are based on estimated expenses for the current fiscal year.
3 The expenses of the Fund as an open-end investment company may be higher
than as a closed-end investment company due to additional fees, such as Rule
12b-1 fees.
4 Dresdner RCM Global Investors LLC (the "Investment Manager") has
entered into a contract with the Fund which will remain in effect until at
least December 31, 2002, 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 1.60% for Class N and
1.35% for Class I. Such amounts are subject to possible future reimbursement.
5
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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
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
<TABLE>
<CAPTION>
1 3 5 10
Year Years Years Years
<S> <C> <C> <C> <C>
Class N $160 $500 $870 $1,900
Class I $140 $430 $740 $1,620
</TABLE>
6
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INVESTMENT OBJECTIVES, POLICIES AND RISKS
INVESTMENT OBJECTIVE AND POLICIES
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund's investment objective is to seek long term growth of capital
by investing in equity securities of European companies. Under normal market
conditions, the Fund invests at least 75% of its total assets in companies
located in Europe, in both EMU and non-EMU countries.
HOW DOES THE FUND SELECT EQUITY INVESTMENTS?
While the Fund emphasizes investments in growth companies, the Fund also may
invest in other companies that are not traditionally considered to be growth
companies, such as emerging growth companies and cyclical and semi-cyclical
companies in developing economies, if the Investment Manager believes that
such companies have above-average growth potential. The Fund may invest in
companies of any size.
When the Investment Manager analyzes a specific company, it evaluates the
fundamental value of each enterprise as well as its prospects for growth. In
most cases, these companies have one or more of the following characteristics:
- - Superior management
- - Strong balance sheets
- - Differentiated or superior products or services
- - Substantial capacity for growth in revenue through either an expanding
market or expanding market share
- - Strong commitment to research and development
- - Steady stream of new products or services
The Fund does not seek current income, and does not restrict its
investments to companies with a record of dividend payments.
When evaluating foreign companies, the Investment Manager may also consider
the anticipated economic growth rate, political outlook, inflation rate,
currency outlook, and interest rate environment for the country and the region
in which the company is located, as well as other factors it deems relevant.
In addition to traditional research activities, the Investment Manager uses
research produced by its Grassroots Research operating group. Grassroots
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 Fund might invest and by checking marketplace
assumptions concerning market demand for particular products and services.
WHAT KINDS OF EQUITY SECURITIES DOES THE FUND INVEST IN?
The Fund invests primarily in common stocks and depositary receipts,
including American Depositary Receipts, European Depositary Receipts, Global
Depositary Receipts, or other similar depositary instruments representing
securities of foreign companies. 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 Fund may also invest in other equity and equity related securities.
These include preferred stock, convertible preferred stock, convertible debt
obligations, warrants or other rights to acquire stock, and options on stock and
stock indices.
The Fund expects that its foreign investments will primarily be traded on
recognized foreign securities exchanges. However, the Fund also may invest in
securities that are traded only over-the-counter, either in the United States or
in foreign markets, when the Investment Manager believes that such securities
meet the Fund's investment criteria. The Fund also may invest in securities
that are not publicly traded either in the United States or in foreign markets.
7
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WHEN IS A COMPANY CONSIDERED TO BE LOCATED IN A PARTICULAR COUNTRY?
A company will be considered to be located in a particular country if the
company is organized or headquartered, or derives at least 50% of its total
revenue from operations, in such country.
OTHER INVESTMENT PRACTICES
The Fund may also employ the following investment techniques in pursuit
of its investment objective, long term growth of capital.
DOES THE FUND BUY AND SELL FOREIGN CURRENCIES?
The Investment Manager expects to purchase and sell foreign currencies
primarily to settle foreign securities transactions. However, the Fund may
also engage in currency management transactions (other than currency futures
contracts) to hedge currency exposure related to securities it owns or
securities it expects to purchase. The Fund may also hold foreign currency
received in connection with investments in foreign securities when the
Investment Manager believes the relevant exchange rates will change favorably
and it would be better to convert the currency into U.S. dollars later.
DOES THE FUND HEDGE ITS INVESTMENTS?
For hedging purposes, the Fund may purchase options on stock indices and on
securities it is authorized to purchase. If the Fund purchases a "put" option on
a security, the Fund acquires the right to sell the security at a specified
price at any time during the term of the option (for "American-style" options)
or on the option expiration date (for "European-style" options). If the Fund
purchases a "call" option on a security, it acquires the right to purchase the
security at a specified price at any time during the term of the option (or on
the option expiration date). An option on a stock index gives the Fund the
right to receive a cash payment equal to the difference between the closing
price of the index and the exercise price of the option. The Fund may "close
out" an option before it is exercised or expires by selling an option of the
same series as the option previously purchased.
The Fund may employ certain techniques to hedge against currency
exchange rate fluctuations, changes in interest rates or general fluctuations
in the value of its portfolio securities. The Fund may hedge up to 100% of
its total assets. These techniques include forward currency exchange
contracts, currency options, index futures contracts,
8
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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. Index futures
contracts are agreements 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. Currency swaps involve the exchange of rights to make or
receive payments in specified currencies.
The Fund may also cross-hedge currencies, which involves writing or
purchasing options or entering into foreign exchange contracts on one currency
to hedge against changes in exchange rates for a different currency, if the
Investment Manager believes changes in the two currencies are correlated.
DOES THE FUND INVEST IN EMERGING MARKETS?
The Fund may invest up to 30% of its total assets in equity securities
of companies located in emerging market countries, including Eastern European
countries (but no more than 10% in any one emerging markets country). Such
investments are not a principal investment technique of the Fund. However,
if emerging markets present attractive investment opportunities, the Fund may
increase the percentage of its total assets invested in emerging markets,
subject to the limits described above.
WHAT IS THE FUND'S PORTFOLIO TURNOVER RATE?
The Fund may invest in securities on either a long-term or short-term
basis. The Investment Manager expects the annual portfolio turnover rate for
the Fund in 1999 will exceed 100% due to the repositioning of the portfolio
as a result of the recent investment mandate change approved by stockholders.
The Fund's portfolio turnover rate is not a limiting factor. The
Investment Manager will sell the Fund's portfolio securities whenever it deems
appropriate, regardless of the length of time the Fund has held the securities
and may purchase or sell securities for short-term profits. Turnover will be
influenced by sound investment practices, the Fund's investment objective and
the need for funds for the redemption of the Fund's shares.
A high portfolio turnover rate would increase the Fund's brokerage
commission expenses and other transaction costs, and may increase taxable
capital gains. Such expenses may adversely affect the Fund's performance.
DOES THE FUND INVEST IN OTHER INVESTMENT COMPANIES?
The laws of some foreign countries may make it difficult or impossible for
the Fund to invest directly in companies organized or headquartered in those
countries, or may limit such investments. The only practical means of investing
in such companies may be through other investment companies that in turn are
authorized to invest in the securities of such issuers. In these cases and in
other appropriate circumstances, the Fund may invest up to 10% of the value of
its total assets in other investment companies. Such investment is subject to
the restrictions referred to above regarding investments in companies located in
foreign countries. The Fund may not acquire more than 3% of the voting
securities of any other investment company.
If the Fund invests in other investment companies, it will bear its
proportionate share of the other investment companies' management or
administration fees and other expenses in addition to the Fund's own expenses.
At the same time, the Fund would continue to pay its own management fees and
other expenses.
WHAT ARE THE FUND'S INVESTMENT POLICIES IN UNCERTAIN MARKETS?
When the Investment Manager believes the Fund should adopt a temporary
defensive posture, including periods of international, political or economic
uncertainty, the Fund may hold all or a substantial portion of its assets in
investment grade debt securities. These securities may be debt obligations
9
<PAGE>
issued or guaranteed by the U.S. Government or foreign governments (including
their agencies, instrumentalities, authorities and political subdivisions), debt
obligations issued or guaranteed by international or supranational government
entities, or debt obligations of corporate issuers. During these periods, the
Fund may not be achieving its investment objective.
ADDITIONAL INFORMATION ABOUT INVESTMENT PRACTICES
The STATEMENT OF ADDITIONAL INFORMATION (the SAI) has more detailed
information about the investment practices described in this Prospectus as well
as information about other investment practices used by the Investment Manager.
CHANGING THE INVESTMENT OBJECTIVES AND POLICIES
The Fund's investment objective is a fundamental policy that may not be
changed without stockholder approval. However, except as otherwise indicated in
this Prospectus or the SAI, the Fund's other investment policies and
restrictions are not fundamental and may be changed without stockholder
approval.
The various percentage limitations referred to in this Prospectus and the
SAI apply immediately after a purchase or initial investment. Unless indicated
to the contrary, the Fund is not required to sell any security in its portfolio
as a result of a change resulting from market fluctuations.
INVESTMENT RISKS
Your investment in the Fund 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 companies may involve greater risks than 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 may have limited or unprofitable operating histories, limited
financial resources and inexperienced management. They often face competition
from larger and more established firms that have greater resources. Small
companies may have less ability to raise additional capital, and may have a less
diversified product line (making them susceptible to market pressure), than
larger companies. Securities of small and unseasoned companies are often less
liquid than securities of larger companies and are frequently traded in the
over-the-counter market or on regional exchanges where low trading volumes may
result in erratic or abrupt price movements. Selling these securities may take
an extended period of time. As a result, to the extent the Fund invests in small
companies, its net asset value may be more volatile than would otherwise be the
case.
10
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FOREIGN SECURITIES
Investing in foreign securities involves significant risks, some of which
are not typically associated with investing in securities of U.S. issuers. For
example, the value of investments in such securities may fluctuate based on
changes in the value of one or more foreign currencies relative to the U.S.
dollar. In addition, information about foreign issuers may be less readily
available than information about domestic issuers. Foreign issuers generally are
not subject to accounting, auditing and financial reporting standards, or to
other regulatory practices and requirements, comparable to U.S. issuers.
Furthermore, certain foreign countries may be politically unstable, expropriate
or nationalize assets, revalue currencies, impose confiscatory taxes, and limit
foreign investment and use or removal of funds or other assets of the Fund
(including the withholding of dividends and limitations on the repatriation of
currencies). The Fund may also face difficulties or delays in obtaining or
enforcing judgments.
Most foreign securities markets have substantially less volume than U.S.
markets, and the securities of many foreign issuers may be less liquid and more
volatile than securities of comparable U.S. issuers. There is generally less
government regulation of securities markets, securities exchanges, securities
dealers, and listed and unlisted companies in foreign countries than in the
United States. Foreign markets also have different clearance and settlement
procedures, and at times in certain markets settlements have not been able to
keep pace with the volume of securities transactions, making it difficult to
conduct and complete transactions. In addition, the costs associated with
transactions in securities of foreign companies and securities traded on foreign
markets, and the expense of maintaining custody of these securities with foreign
custodians, generally are higher than in the U.S.
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 in the 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 the Fund's investments in those countries.
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 may not be precisely
correlated, so that a given transaction may not achieve its objective. In
addition, the secondary market for particular options may not be liquid for a
variety of reasons. When trading options on foreign exchanges, many of the
protections afforded to participants
11
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in the United States will not be available. The Fund could lose the amount of
the option premium plus transaction costs.
The Fund's use of hedging and currency management techniques involve
risks different from investments in U.S. dollar-denominated securities. If
the Fund invests in foreign securities and also maintains currency positions,
it may be exposed to greater combined risk than would otherwise be the case.
Transactions in index futures contracts involve risks similar to those of
options on securities; in addition, the potential loss incurred by the Fund
in such transactions is unlimited.
The use of hedging and currency management techniques is a highly
specialized activity, and the success of any such operations by the Fund is
not assured. Gains and losses in such transactions depend upon the Investment
Manager's ability to predict correctly the direction of stock prices,
currency exchange rates, and other factors. Although hedging 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 Fund is non-diversified within the meaning of the 1940 Act. As a
non-diversified fund, it may invest a greater percentage of its assets in the
securities of any single issuer than 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, the Fund must diversify
its holdings so that, at the end of each quarter of its taxable year, (i) at
least 50% of the market value of its assets is represented by cash, U.S.
Government securities, the securities of other regulated investment companies
and other securities, with such other securities of any one issuer limited
for purposes of this calculation to an amount not greater than 5% of the
value of the Fund's total assets and 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).
GEOGRAPHIC CONCENTRATION
The Fund will invest in companies located in both EMU and non-EMU
European countries. Investments in EMU countries involves certain risks.
The EMU's objective is to create a single, unified market through which
people, goods, and money can move freely. Participation in the EMU is based
on countries meeting certain financial criteria outlined in the treaty
creating the EMU. The transition to the EMU may be troubled as eleven
separate nations adjust to the reduction in flexibility, independence, and
sovereignty that the EMU requires. High unemployment and a sense of
"deculturalization" within the general public of the participating countries
could lead to political unrest and continuing labor disturbances.
YEAR 2000
Many computer programs employed throughout the world use two digits
rather than four to identify the year. These programs, if not adapted, will
not correctly handle the change from "99" to "00" on January 1, 2000, and
will not be able to perform necessary functions critical to the Fund's
operations. The "Year 2000 issue" affects all companies and organizations.
The Year 2000 problem may also adversely affect the companies in which
the Fund invests. For example, companies may incur substantial costs to
address the problem. They may also suffer losses caused by corporate and
governmental data processing errors. This could adversely affect the Fund's
investment return.
The Investment Manager has advised the Fund that it is implementing a
plan intended to ensure that its computer systems are not adversely affected
by the Year 2000 issue. The Fund understands that its key service providers
are taking steps to address the issue as well. The Fund and the Investment
Manager will continue to monitor developments relating to this issue but do
not anticipate that the Year 2000 issue will have an adverse effect on the
Investment Manager's or other service providers' ability to provide services
to the Fund.
EURO INTRODUCTION
On January 1, 1999, the European Union introduced a single European
currency, the Euro. The Investment Manager and other key service providers
have taken steps to address Euro-related issues and their impact on the
Fund's operations. These included upgrading their computer and bookkeeping
systems to deal with the conversion. The Fund has not experienced any adverse
operational effects resulting from the Euro conversion nor has the conversion
caused any apparent market disruptions. The Fund and its Investment Manager
will continue to monitor the effects of the conversion on the markets and
issuers in which the Fund invests.
12
<PAGE>
ORGANIZATION AND MANAGEMENT
THE FUND AND THE INVESTMENT MANAGER
The Fund is a series of Dresdner RCM Investment 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 Fund. The Investment Manager manages the Fund's investments, provides
various administrative services, and supervises the 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
David S. Plants and Barbel Lenz are primarily responsible for the
day-to-day management of the Dresdner RCM Europe Fund. Mr. Plants is a
Director of the Investment Manager, with which he has been associated since
1993. Ms. Lenz is a Director of the Investment Manager, with which she has
been associated since 1997. She joined the Investment Manager as a Senior
Research Specialist for European Equities and as a portfolio manager. From
1995 to 1997 she served as an Assistant Vice President at Dresdner Kleinwort
Benson North America LLC.
MANAGEMENT FEES AND OTHER EXPENSES
The Fund pays the Investment Manager a monthly fee pursuant to an
investment management agreement at the annual rate of 1.00% of its average daily
net assets up to and including $100 million and 0.80% of its average daily net
assets in excess of $100 million.
The Fund pays for its own expenses. These include brokerage and commission
expenses, taxes, interest charges on any borrowings, 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. Each class
also bears certain class-specific expenses, such as Rule 12b-1 expenses payable
by the Fund's Class N shares.
13
<PAGE>
The Investment Manager has agreed to limit the Fund's expenses through
December 31, 2002. During this period, the Investment Manager will pay the
Fund on a quarterly basis the amount, if any, by which the Fund's ordinary
operating expenses for the quarter (except interest, taxes and extraordinary
expenses) exceed the following expense ratios on an annual basis:
<TABLE>
<CAPTION>
---------------------------------------------------------
EUROPE FUND EXPENSE RATIOS THROUGH
December 31, 2002
---------------------------------------------------------
<S> <C>
Class N shares 1.60%
Class I shares 1.35%
</TABLE>
The Fund will reimburse the Investment Manager for such payments for a
period of up to five years after they are made, so long as the Fund's
ordinary operating expenses after reimbursement 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 Fund. The Distributor provides mutual fund
distribution services to registered investment companies, and is an indirect
wholly owned subsidiary of Boston Institutional Group, Inc., which is not
affiliated with the Investment Manager or Dresdner.
The Company has adopted a distribution plan (the "Plan") for its Class N
shares pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, 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 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 than is immediately payable
because of the Plan's expense limitation, the unpaid amount is carried
forward from month to month while the Plan is in effect until it can be paid.
Because these fees are paid out of the Fund's assets on an ongoing basis,
over time these fees will increase the cost of your investment and may cost
you more than paying other types of sales charges.
PENDING LITIGATION
On April 8, 1998, the Fund filed a lawsuit in the United States District Court
for the Southern District of New York against Philip Goldstein, Ronald Olin and
three affiliated entities captioned THE EMERGING GERMANY FUND INC. V. GOLDSTEIN.
The Fund alleged violations by the defendants of the proxy solicitation and
beneficial ownership disclosure provisions of the federal securities laws in
connection with the Fund's annual meeting scheduled for April 1998. With
respect to that meeting, Opportunity Partners, L.P. filed an action in the same
court against the Fund and its directors on April 24, 1998 styled OPPORTUNITY
PARTNERS L.P. V. THE EMERGING GERMANY FUND INC. alleging violations of the proxy
antifraud rule of the federal securities laws and breach of fiduciary duty. The
Fund, as nominal defendant, and each member of the Fund's Board of Directors
have been named as defendants in a derivative and purported class action suit
captioned STEINER V. FUGELSANG filed on May 28, 1998 in the same court. The
class action allegations assert that the defendants violated the federal
securities laws and Maryland corporate law and the derivative claims assert
breach of fiduciary duty regarding the meeting. All issues in the actions have
been resolved except as to entitlement to legal fees by the Goldstein and
Steiner litigants, which issues
14
<PAGE>
are the subject of settlement discussions in part and further litigation in
part. The Fund believes that a substantial portion of any fees payable to these
litigants should be reimbursed under a contract of insurance which insures the
Fund and its directors.
STOCKHOLDER INFORMATION
BUYING SHARES
For your convenience, we offer several ways to start and add to Fund
investments.
OPENING YOUR ACCOUNT THROUGH A FINANCIAL PROFESSIONAL
If you work with a financial professional, he or she is prepared to handle
your planning and transaction needs. Your financial professional will be able
to assist you in establishing your fund account, executing transactions, and
monitoring your investment. If you do not hold your Fund investment in the name
of your financial professional and you prefer to place a transaction order
yourself, please use the instructions below for investing directly.
You 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 Fund.
OPENING YOUR ACCOUNT DIRECTLY
You may establish accounts without the help of an intermediary as follows:
- - Determine the amount you are investing.
The minimum amount for initial investments is $5,000 for the Class N shares
($250 for additional investments) and $250,000 for the Class I shares
($50,000 for additional investments). The Fund reserves the right at
any time to waive, increase or decrease the minimum requirements
applicable to initial or subsequent investments.
Stockholders whose shares were redesignated as Class I shares will be
subject to the $250 subsequent investment requirements applicable to
holders of Class N Shares. Minimum subsequent investment requirements do
not apply to investors purchasing shares through the Fund's automatic
dividend reinvestment plan. In addition, minimum initial investments may
vary for investors purchasing shares through a broker-dealer or other
intermediary having a service agreement with the Investment Manager and
maintaining an omnibus account with the Fund.
For more information on minimum investments, call 1-800-726-7240.
- - Complete the account application accompanying this Prospectus. Please
apply at this time for any account privileges you may want to use in the
future, to avoid the delays associated with adding them later on.
- - Mail your completed application to the Fund at:
Dresdner RCM Global Funds
P.O. Box 419927
Boston, MA 02266-8025
For answers to any questions, please speak with a Fund Representative at
1-800-726-7240.
15
<PAGE>
The Fund reserves the right to reject any purchase of shares at its sole
discretion. The Fund also reserves 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
- - 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 Europe Fund.
- - Mail the check with your completed application to the Fund at:
Dresdner RCM Global Funds
P.O. Box 419927
Boston, MA 02266-8025
ADDING TO YOUR ACCOUNT
BY WIRE
- - Call the Fund at 1-800-726-7240 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 Europe
Fund.
- - Mail the check with a completed investment slip to the Fund at:
16
<PAGE>
Dresdner RCM Global Funds
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 Fund may accept securities of equal value instead of
cash in payment of all or part of the subscription price for Fund shares.
Contact the Fund in advance to discuss the securities in question and the
documentation necessary to complete the transaction. Any such securities:
- - Will be valued at the close of regular trading on the New York Stock
Exchange on the day of acceptance of the subscription in accordance with
the Fund's method of valuing its securities;
- - Will have a tax basis to the Fund equal to such value;
- - Must not be restricted securities; and
- - Must be permitted to be purchased in accordance with the Fund's investment
objective and policies and must be securities that the Fund would be
willing to purchase at that time
17
<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 (net of any redemption fee), 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 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.
BY ELECTRONIC TRANSFER
- - Fill out the appropriate areas of the account application for this
feature. To request an electronic transfer (not less than $50; nor more
than $100,000), call 1-800-726-7240. The Fund will transfer your sales
proceeds electronically to your bank. The bank must be a member of the
Automated Clearing House.
SIGNATURE GUARANTEES
Certain requests must include a signature guarantee, which is
designed to protect you and the Fund from fraudulent activities. Your
request must be made in writing and include a signature guarantee if any of
the following situations applies:
- - You wish to redeem more than $50,000 worth of shares.
- - The check is being mailed to an address different from the one on your
account (address of record).
- - The check is being made payable to someone other than the account owner.
- - You are instructing us to change your bank account information.
OTHER STOCKHOLDER SERVICES AND ACCOUNT POLICIES
TELEPHONE ORDERS
We accept telephone orders to buy or sell shares of the Fund. To order
call 1-800-726-7240. To guard against fraud, we may record telephone orders or
take other reasonable precautions. However, if we do not take such steps to
ensure the authenticity of an order, we may bear any loss if the order later
proves fraudulent. At times of peak activity, such as during periods of
volatile economic or market conditions, it may be difficult to place buy or
sell orders by phone. During these times, consider sending your request in
writing.
BUSINESS HOURS AND NAV CALCULATIONS
The Fund's regular business days and hours are the same as those of the New
York Stock Exchange (NYSE). The Fund calculates its net asset value per share
(NAV) every business day as of the close of trading on the NYSE (normally 4:00
p.m. eastern time). Shares of the Fund will not be priced on days on which
the NYSE is closed for trading. The Fund's securities are typically priced
using market quotes or pricing services. When these methods are not available
or do not represent a security's value at the time of pricing, the security is
valued in accordance with the Fund's fair valuation procedures.
18
<PAGE>
TIMING OF ORDERS
The Fund accepts orders until the close of trading on the NYSE every
business day. Orders received before 1:00 p.m. Pacific Time are executed the
same day at that day's NAV. Orders received after 1:00 p.m. Pacific time are
executed the following day at that day's NAV. The 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.
The Fund 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, 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 next NAV but the proceeds will not be available until your
check clears. This may take up to 15 days from the purchase date. Upon
execution of the redemption order, a confirmation statement will be forwarded
to you indicating the number of shares sold and the proceeds thereof.
ACCOUNTS WITH BELOW-MINIMUM BALANCES
If your account balance falls below the minimum ($5,000 for Class N and
$250,000 for Class I shares) 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, the Fund reserves the right to close out
your account and send the proceeds to the address of record.
AUTOMATIC REINVESTMENT
We will reinvest each income dividend and capital gain distribution
declared by the Fund in full and fractional shares of the same class, unless you
or your duly authorized agent elect to receive all such payments, or only the
dividend or distribution portions in cash. We will base such reinvestment on
the Fund's NAV as determined on the ex-dividend date. You or your authorized
agent may request changes in the manner in which dividend and distribution
payments are made through written notice to the Fund. This request will be
effective as to any subsequent payment if it is received prior to the record
date used for determining your payment. Any dividend and distribution election
will remain in effect until you notify the Fund in writing to the contrary.
19
<PAGE>
EXCHANGE PRIVILEGE
You may exchange shares of either class of the Fund into shares of the
same class of any other Fund offered by Dresdner RCM, without a sales charge
or other fee, by contacting the Fund. You may also exchange Class N shares of
the Fund into Class I shares of Fund or any other Fund offered by Dresdner
RCM, without a sales charge or other fee. Exchange purchases are subject to
the minimum investment requirements of the class purchased. In order to keep
Fund expenses low for all shareholders, the Fund will not allow frequent
exchanges, purchases or sales of Fund shares. If a shareholder exhibits a
pattern of frequent trading, the Fund reserves the right to refuse to accept
further purchase or exchange orders from that shareholder. An exchange will
be treated as a redemption and purchase for tax purposes.
Shares will be exchanged at net asset value per share next determined after
receipt by BFDS of:
- - A written request for exchange, signed by each registered owner or his or
her duly authorized agency 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 obtain and 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
The Fund's fiscal year ends on December 31. The Fund will issue to its
stockholders semi-annual and annual reports. In addition, stockholders will
receive quarterly statements 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 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 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.
Upon the redemption of the Fund shares held for less than twelve
consecutive months, including for this purpose exchanges of Fund shares for
shares of other Dresdner RCM Funds as provided in the Section "Exchange
Privilege," a fee of 1.00% of the redemption proceeds will be charged and
retained by the Fund. This redemption fee will remain in effect until
[November 3], 1999, approximately six months after the conversion of the
Fund. Redeeming stockholders must present the Fund with satisfactory proof of
ownership of the redeemed shares for twelve consecutive months in order to
avoid the fee. A determination by the Fund of the redemption fee's
applicability to a stockholder's redemption is final. This fee is intended to
compensate the Fund for transaction and other expenses caused by redemptions
and to facilitate efficient portfolio management. The fee is not a deferred
sales charge or a commission paid to the Distributor or the Investment
Manager. The Fund reserves the right to modify the terms of or terminate the
redemption fee at any time.
20
<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund's dividends and distributions consist of most or all of its net
investment income and net realized capital gains. 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 required to include in your gross income your pro-rata
share of foreign taxes we paid, and you will be able to treat such taxes as
either an itemized deduction or a foreign credit against U.S. income taxes on
your tax returns. If we do not do so, you will not be able to deduct your share
of such taxes in computing your taxable income and will not be able to take your
share of such taxes as a credit against your U.S. income taxes.
In general, selling shares for cash, exchanging shares, and receiving
distributions (whether reinvested or taken in cash) are all taxable events.
These transactions typically create the following tax liabilities for taxable
accounts:
TRANSACTION TAX STATUS
- -------------------------------------------------------------------------------
Income dividends Ordinary income
- -------------------------------------------------------------------------------
Short-term capital gains distributions Ordinary income
- -------------------------------------------------------------------------------
Long-term capital gains distributors Capital gains
- -------------------------------------------------------------------------------
Sales or exchanges of shares Capital gains or losses
owned for more than one year
- -------------------------------------------------------------------------------
Sales of exchanges of shares owned Gains are treated
for one year or less as ordinary income;
losses are subject to
special rules
- -------------------------------------------------------------------------------
Dividends and other distributions generally are taxable to you at the time
they are
21
<PAGE>
received. However, dividends declared in October, November and December by the
Fund and made payable to you in such months are treated as paid and are thereby
taxable as of December 31, provided that the Fund pays the dividend no later
than January 31 of the following year.
If you purchase the Fund's shares shortly before the record date for a
dividend or other distribution thereon, you will pay full price for the shares
(know as buying a distribution). Then you will receive some portion of your
purchase price back as a taxable distribution even though, because the amount of
the dividend or other distribution 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 gains distributions and other reportable amounts with respect
to shares of the Fund for tax purposes. This includes information such as the
portion taxable as capital gains and the amount of dividends, if any, eligible
for the federal dividends-received deduction for corporate taxpayers.
Foreign stockholders may be subject to special withholding requirements. A
penalty is charged on certain pre-retirement distributions form retirement
accounts. Consult your tax adviser about the federal, state and local tax
consequences in your particular circumstances.
The tax considerations described in this section do not apply to
tax-deferred accounts or other non-taxable entities. Because each investor's
tax circumstances are unique, please consult you tax professional about your
investment in the Fund.
22
<PAGE>
FINANCIAL HIGHLIGHTS
The following financial highlights table shows the Fund's financial
performance for the past 5 fiscal years as a closed-end investment company.
This information has been audited by ______________, whose report, along with
the Fund's financial statements, are included in the Fund's Annual Report,
which is available upon request and incorporated by reference into the SAI.
SELECTED DATA FOR A SHARE OF COMMON STOCK OUTSTANDING FOR
EACH OF THE FIVE YEARS ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1998 (a) 1997 (a) 1996 (a) 1995 1994
---------- ---------- ---------- --------- -----------
<S> <C> <C> <C> <S> <S>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 12.59 $ 10.66 $ 9.20 $9.20 $ 9.80
---------- ---------- ---------- --------- -----------
Income from investment operations:
Net investment income (loss) (0.05) 0.01 0.03 0.07 0.03
Net realized and unrealized gain (loss) on investments 4.60 2.70 1.45 (0.07) (0.51)
---------- ---------- ---------- --------- -----------
Total from investment operations 4.55 2.71 1.48 0.00 (0.48)
---------- ---------- ---------- --------- -----------
Less: distributions:
From net investment income (0.17) (0.06) (0.02) (0.00) (0.00)
From net realized gain on investments (3.31) (0.72) (0.00) (0.00) (0.12)
---------- ---------- ---------- --------- -----------
Total distributions (3.48) (0.78) (0.02)(b) (0.00) (0.12)(b)
---------- ---------- ---------- --------- -----------
NET ASSET VALUE, END OF PERIOD $ 13.66 $ 12.59 $ 10.66 $9.20 $ 9.20
---------- ---------- ---------- --------- -----------
---------- ---------- ---------- --------- -----------
PER SHARE MARKET VALUE, END OF PERIOD (c) $ 12.69 $ 11.25 $ 8.13 $7.25 $ 7.38
---------- ---------- ---------- --------- -----------
---------- ---------- ---------- --------- -----------
TOTAL MARKET VALUE RETURN (d) 43.50% 48.04% 12.34% 1.69%) (20.07%)
---------- ---------- ---------- --------- -----------
---------- ---------- ---------- --------- -----------
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in millions) $ 191 $ 176 $ 149 $ 129 $ 129
---------- ---------- ---------- --------- -----------
---------- ---------- ---------- --------- -----------
Ratio of expenses to average net assets 1.97% 1.30% 1.42% 1.51% 1.40%
---------- ---------- ---------- --------- -----------
---------- ---------- ---------- --------- -----------
Ratio of net investment income (loss) to average net assets (0.31)% 0.06% 0.33% 0.76% 0.34%
---------- ---------- ---------- --------- -----------
---------- ---------- ---------- --------- -----------
Portfolio turnover rate 114% 85% 51% 40% 91%
---------- ---------- ---------- --------- -----------
---------- ---------- ---------- --------- -----------
</TABLE>
- ---------------------------------------------
(a) Calculated using the average share method.
(b) The ex-dividend date was after the end of the fiscal year.
(c) Closing price - New York Stock Exchange.
(d) The total market value return calculation includes reinvestment of dividends
in the year declared.
23
<PAGE>
[Back Page]
FOR MORE INFORMATION ABOUT DRESDNER RCM INVESTMENT FUNDS, THE FOLLOWING
DOCUMENTS ARE AVAILABLE FREE UPON REQUEST:
ANNUAL/SEMIANNUAL REPORTS:
The Fund's annual and semiannual reports to shareholders contain detailed
information on the Fund's investments. The annual report includes a discussion
of the market conditions and investment strategies that significantly affected
the Fund's performance during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI):
The SAI provides more detailed information about the Fund, including
operations and investment policies. It is incorporated by reference and is
legally considered as part of this Prospectus.
You can get free copies of the reports and the SAI, or request other
information and discuss your questions about the Fund, by contacting us at:
Dresdner RCM Investment Funds Inc.
Four Embarcadero Center, Suite 2900
San Francisco, CA 94111
Telephone 1-800-726-7240
You can review the Fund's reports and SAI at the Public Reference Room of
the Securities and Exchange Commission in Washington, D.C. 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. 811-06038.
24
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[LETTERHEAD]
DRESDNER RCM EUROPE FUND
STATEMENT OF ADDITIONAL INFORMATION
____________ __, 1999
Dresdner RCM Europe Fund (the "Europe Fund") is a non-diversified series of
Dresdner RCM Investment Funds Inc. (the " Company"), an open-end management
investment company. The Fund's investment manager is Dresdner RCM Global
Investors LLC (the "Investment Manager").
This Statement of Additional Information ("SAI") is not a prospectus, and should
be read in conjunction with the Prospectus of the Fund dated ________ __, 1999.
This SAI relates to the Fund's Non-Institutional Class ("Class N") and
Institutional Class ("Class I") of shares. The Prospectus may be obtained
without charge by writing or calling the Company at the address and phone number
above.
Incorporated by reference herein are the financial statements of the Fund
contained in the Fund's Annual Report 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 Fund's Annual and Semi-Annual Reports to
Shareholders will be available upon request, by calling (800) 726-7240, or by
writing to Four Embarcadero Center, San Francisco, California 94111.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Investment Objectives and Policies. . . . . . . . . . . . . . . . . . . 1
Risk Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . . 18
Execution of Portfolio Transactions . . . . . . . . . . . . . . . . . . 20
Directors and Officers. . . . . . . . . . . . . . . . . . . . . . . . . 22
The Investment Manager. . . . . . . . . . . . . . . . . . . . . . . . . 25
The Distributor . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Net Asset Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Purchase and Redemption of Shares . . . . . . . . . . . . . . . . . . . 30
Dividends, Distributions and Tax Status . . . . . . . . . . . . . . . . 30
Investment Results. . . . . . . . . . . . . . . . . . . . . . . . . . . 33
General Information . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Description of Capital Shares . . . . . . . . . . . . . . . . . . . . . 35
Additional Information. . . . . . . . . . . . . . . . . . . . . . . . . 35
Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . 36
</TABLE>
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INVESTMENT OBJECTIVES AND POLICIES
In pursuit of its investment objective of long term growth of capital,
the Fund will invest at least 75% of its total assets in companies located in
Europe, in both EMU and non-EMU countries. The Fund expects to invest the
majority of its total assets in equity securities of issuers located in
Western European countries. However, if emerging markets present attractive
investment opportunities the Fund will also invest in emerging market
countries, including Eastern European countries, subject to the percentage
limitations described in the prospectus.
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 Fund, the Investment Manager allocates the Fund's assets among securities
of countries and in currency denominations where it expects opportunities for
meeting the Fund's investment objectives to be the most attractive, subject to
the percentage limitations set forth in the Prospectus. In addition, from time
to time the Fund may strategically adjust its investments among issuers based in
various countries and among the various equity markets of the world in order to
take advantage of diverse global opportunities, based on the Investment
Manager's evaluation of prevailing trends and developments, as well as on the
Investment Manager's assessment of the potential for capital appreciation (as
compared to the risks) of particular companies, industries, countries, and
regions.
INVESTMENT IN DEVELOPED FOREIGN COUNTRIES. The Fund may invest in
securities of foreign governments and companies that are organized or
headquartered in developed foreign countries. The Fund may not be invested in
all developed foreign countries at one time, and may not invest in particular
developed foreign countries at any time, depending on the Investment Manager's
view of the investment opportunities available.
Although these countries have developed economies, even developed countries
may be subject to periods of economic or political instability. For example,
efforts by the member countries of the European Union to eliminate internal
barriers to the free movement of goods, persons, services and capital have
encountered opposition arising from the conflicting economic, political and
cultural interests and traditions of the member countries and their citizens.
The reunification of the former German Democratic Republic (East Germany) with
the Federal Republic of Germany (West Germany) and other political and social
events in Europe have caused considerable economic and social dislocations. Such
events can materially affect securities markets and have also disrupted the
relationship of such currencies with each other and with the U.S. dollar. Future
political, economic and social developments can be expected to produce
continuing effects on securities and currency markets in these and other
developed foreign countries.
INVESTMENT IN EMERGING MARKETS. The Fund may invest in securities of
developing countries with emerging markets and companies organized or
headquartered in such countries. As a general matter, countries that are not
considered to be developed foreign countries by the Investment Manager will be
deemed to be emerging market countries. Emerging market countries include any
country generally considered to be an emerging market or developing country by
the World Bank, the International Finance Corporation, the United Nations or its
authorities, or other recognized financial institutions. As of the date of this
SAI, emerging market countries are deemed to include for purposes of this SAI,
all foreign countries other than Australia, Austria, Belgium, Canada, Denmark,
Finland, France, Germany, Ireland, Italy, Japan, Luxembourg, The Netherlands,
New Zealand, Norway, Singapore, Spain, Sweden, Switzerland, and the United
Kingdom. (See INVESTMENT IN DEVELOPED FOREIGN COUNTRIES.) As their
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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 the
Fund's overall limitations on investments in emerging market countries.
Securities of issuers organized or headquartered in emerging market
countries may, at times, offer excellent opportunities for 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 the Fund. Some emerging market countries
have currencies whose value is closely linked to the U.S. dollar. Emerging
market countries also may issue debt denominated in U.S. dollars and other
currencies.
It is unlikely that the Fund will be invested in 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 Fund may be denominated in U.S. dollars,
foreign currencies, or multinational currencies such as the Euro, and the Fund
will incur costs in connection with conversions between various currencies.
Movements in the various securities markets may be offset by changes in foreign
currency exchange rates. Exchange rates frequently move independently of
securities markets in a particular country. As a result, gains in a particular
securities market may be affected, either positively or negatively, by changes
in exchange rates, and the Fund's net currency positions may expose it to risks
independent of its securities positions.
From time to time, the Fund may employ currency management techniques
(other than currency futures contracts) to enhance its total returns,
although there is no current intention to do so. The Fund may not employ more
than 30% of the value of its total assets in currency management techniques
for the purpose of enhancing returns. To the extent that such techniques are
used to enhance return, they are considered speculative.
The Fund's ability and decision to purchase or sell portfolio securities
may be affected by the laws or regulations in particular countries relating to
convertibility and repatriation of assets. Because the shares of the Fund are
redeemable in U.S. dollars each day the Fund determines their net asset value,
the Fund must have the ability at all times to obtain U.S. dollars to the extent
necessary to meet redemptions. Under present conditions, the Investment Manager
does not believe that these considerations will have any significant adverse
effect on its portfolio strategies, although there can be no assurances in this
regard.
GENERAL CURRENCY CONSIDERATIONS. Currency exchange rates may fluctuate
significantly over short periods of time causing, along with other factors, the
Fund's net asset value to fluctuate as well. Currency exchange rates generally
are determined by the forces of supply and demand in the foreign exchange
markets and the relative merits of investments in different countries, actual or
anticipated changes in interest rates and other complex factors, as seen from an
international perspective. Currency exchange rates also can be affected
unpredictably by intervention, or failure to do so, by U.S. or foreign
governments or central banks or by currency controls or political developments
in the United States or abroad. The markets in forward foreign currency exchange
contracts, currency swaps and other privately negotiated currency instruments
offer less protection against defaults by the other party to such
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instruments than is available for currency instruments traded on an exchange. To
the extent that a substantial portion of the Fund's total assets, adjusted to
reflect the Fund's net position after giving effect to currency transactions, is
denominated or quoted in the currencies of foreign countries, the Fund will be
more susceptible to the risk of adverse economic and political developments
within those countries.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. The Fund may purchase or sell
forward foreign currency exchange contracts ("forward contracts") for hedging
purposes or to seek to increase total return when the Investment Manager
anticipates that a foreign currency will appreciate or depreciate in value, but
securities denominated or quoted in that currency do not present attractive
investment opportunities and are not held in the Fund's portfolio. When
purchased or sold to increase total return, forward contracts are considered
speculative. In addition, the Fund may enter into forward contracts in order to
protect against anticipated changes in future foreign currency exchange rates.
The Fund may engage in cross-hedging by using forward contracts in a
currency different from that in which the hedged security is denominated or
quoted if the Investment Manager determines that there is a pattern of
correlation between the two currencies. The Fund may also engage in proxy
hedging, by using forward contracts in a series of foreign currencies for
similar purposes.
The Fund may enter into forward contracts to purchase foreign currencies to
protect against an anticipated rise in the U.S. dollar price of securities it
intends to purchase. The Fund may enter into forward contracts to sell foreign
currencies to protect against the decline in value of its foreign currency
denominated or quoted portfolio securities, or a decline in the value of
anticipated income or dividends from such securities, due to a decline in the
value of foreign currencies against the U.S. dollar. Forward contracts to sell
foreign currency could limit any potential gain which might be realized by the
Fund if the value of the hedged currency increased.
If the Fund enters into a forward contract to sell foreign currency to
increase total return or to buy foreign currency for any purpose, the Fund will
segregate cash, U.S. Government securities, or other liquid debt or equity
securities with the Fund's custodian in an amount equal to the value of the
Fund's total assets committed to the consummation of the forward contract. If
the value of the segregated securities declines, additional assets will be
segregated so that the value of the segregated assets will equal the amount of
the Fund's commitment with respect to the contract.
A forward contract is subject to the risk that the counterparty to such
contract will default on its obligations. Since a forward contract is not
guaranteed by an exchange or clearinghouse, a default on the contract would
deprive the Fund of unrealized profits, transaction costs or the benefits of a
currency hedge or force the Fund to cover its purchase or sale commitments, if
any, at the current market price.
OPTIONS ON FOREIGN CURRENCIES. The Fund may purchase and sell (write) put
and call options on foreign currencies for the purpose of protecting against
declines in the U.S. dollar value of foreign portfolio securities and
anticipated income or dividends on such securities and against increases in the
U.S. dollar cost of foreign securities to be acquired. The Fund may also use
options on currency to cross-hedge, which involves writing or purchasing options
on one currency to hedge against changes in exchange rates for a different
currency, if the Investment Manager believes there is a pattern of correlation
between the two currencies. Options on foreign currencies to be written or
purchased by the Fund will be traded on U.S. and foreign exchanges.
The writer of a put or call option receives a premium and gives the
purchaser the right to sell (or buy) the currency underlying the option at the
exercise price. The writer has the obligation upon exercise of the option to
purchase (or deliver) the currency during the option period. A writer of an
option who wishes to terminate the obligation may effect a "closing transaction"
by buying an option of the same series as the option previously written. A
writer may not effect a closing purchase transaction after being notified of the
exercise of an option. The writing of an option on foreign currency will
constitute only a partial hedge, up to the amount of the premium received; the
Fund could be required to purchase or sell additional foreign currencies at
disadvantageous exchange rates, thereby incurring losses. The purchase of an
option on foreign currency may constitute an effective hedge against exchange
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rate fluctuations; however, in the event of exchange rate movements adverse to
the Fund's position, the Fund may forfeit the entire amount of the premium plus
related transaction costs.
The Fund may purchase call or put options on a currency to seek to increase
total return when the Investment Manager anticipates that the currency will
appreciate or depreciate in value, but the securities quoted or denominated in
that currency do not present attractive investment opportunities and are not
held in the Fund's portfolio.
When the Fund writes a put or call option on a foreign currency, an amount
of cash, U.S. Government securities, or other liquid debt or equity securities
equal to the market value of its obligations under the option will be segregated
by the Fund's custodian to collateralize the position.
CURRENCY SWAPS. The Fund may enter into currency swaps for both hedging and
to seek to increase total return. Currency swaps involve the exchange of rights
to make or receive payments in specified currencies. Since currency swaps are
individually negotiated, the Fund expects to achieve an acceptable degree of
correlation between its portfolio investments and its currency swap positions
entered into for hedging purposes. Currency swaps may involve the delivery of
the entire principal value of one designated currency in exchange for the other
designated currency, or the delivery of the net amount of a party's obligations
over its entitlements. Therefore, the entire principal value of a currency swap
may be subject to the risk that the other party to the swap will default on its
contractual delivery obligations. The Fund will maintain in a segregated account
with the Fund's custodian cash, U.S. Government securities, or other liquid debt
or equity securities equal to the amount of the Fund's obligations, or the net
amount (if any) of the excess of the Fund's obligations over its entitlements,
with respect to swap transactions. To the extent that such amount of a swap is
segregated, the Company and the Investment Manager believe that swaps do not
constitute senior securities under the Investment Company Act of 1940 (the "1940
Act") and, accordingly, will not treat them as being subject to the Fund's
borrowing restriction.
The use of currency swaps is a highly specialized activity which involves
investment techniques and risks different from those associated with ordinary
portfolio securities transactions. If the Investment Manager is incorrect in its
forecasts of market values and currency exchange rates, the investment
performance of the Fund entering into a currency swap would be less favorable
than it would have been if this investment technique were not used.
OPTIONS TRANSACTIONS
The Fund may purchase listed put and call options on any securities which
it is eligible to purchase as a hedge against changes in market conditions that
may result in changes in the value of the Fund's portfolio securities. The
aggregate premiums on put options and call options purchased by the Fund may not
in each case exceed 5% of the value of the net assets of the Fund as of the date
of purchase. In addition, the Fund will not purchase options if more than 25% of
the value of its net assets would be hedged.
A put gives the holder the right, in return for the premium paid, to
require the writer of the put to purchase from the holder a security at a
specified price. A call gives the holder the right, in return for the premium
paid, to require the writer of the call to sell a security to the holder at a
specified price. Put and call options on various stocks and financial indices
are traded on U.S. and foreign exchanges. A put option is covered if the writer
segregates cash, U.S. Government securities or other liquid debt or equity
securities equal to the exercise price. A call option is covered if the writer
owns the security underlying the call or has an absolute and immediate right to
acquire the security without additional cash consideration upon conversion or
exchange of other securities held by it.
PUT OPTIONS. If the Fund purchases a put option, the Fund acquires the
right to sell the underlying security at a specified price at any time during
the term of the option (for "American-style" options) or on the option
expiration date (for "European-style" options). Purchasing put options may be
used as a portfolio investment strategy when the
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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 the Fund is
holding a security which the Investment Manager feels has strong fundamentals,
but for some reason may be weak in the near term, the Fund may purchase a put
option on such security, thereby giving itself the right to sell such security
at a certain strike price throughout the term of the option. Consequently, the
Fund will exercise the put only if the price of such security falls below the
strike price of the put. The difference between the strike price of the put and
the market price of the underlying security on the date the Fund exercises the
put, less transaction costs, will be the amount by which the Fund will be able
to hedge against a decline in the underlying security. If during the period of
the option the market price for the underlying security remains at or above the
put's strike price, the put will expire worthless, representing a loss of the
price the Fund paid for the put, plus transaction costs. If the price of the
underlying security increases, the profit the Fund realizes on the sale of the
security will be reduced by the premium paid for the put option less any amount
for which the put may be sold.
CALL OPTIONS. If the Fund purchases a call option, it acquires the right to
purchase the underlying security at a specified price at any time during the
term of the option. The purchase of a call option is a type of "insurance
policy" to hedge against losses that could incur if the Fund intends to purchase
the underlying security and the security thereafter increases in price. The Fund
will exercise a call option only if the price of the underlying security is
above the strike price at the time of exercise. If during the option period the
market price for the underlying security remains at or below the strike price of
the call option, the option will expire worthless, representing a loss of the
price paid for the option, plus transaction costs. If the price of the
underlying security increases, the price the Fund pays for the security will in
effect be increased by the premium paid for the call.
STOCK INDEX OPTIONS. The Fund may purchase put and call options with
respect to stock indices such as Standard & Poor's 500 Stock Index and other
stock indices. Such options may be purchased as a hedge against changes
resulting from market conditions in the values of securities which are held in
the Fund's portfolio or which it intends to purchase or sell, or when they are
economically appropriate for the reduction of risks inherent in the ongoing
management of the Fund.
The distinctive characteristics of options on stock indices create certain
risks that are not present with stock options generally. Because the value of an
index option depends upon movements in the level of the index rather than the
price of a particular stock, whether the Fund will realize a gain or loss on the
purchase or sale of an index option depends upon movements in the level of stock
prices in the stock market generally rather than movements in the price of a
particular stock. Accordingly, successful use by the Fund of options on a stock
index will be subject to the Investment Manager's ability to predict correctly
movements in the direction of the stock market generally. This requires
different skills and techniques than predicting changes in the prices of
individual stocks.
Index prices may be distorted if trading of certain stocks included in an
index is interrupted. Trading of index options also may be interrupted in
certain circumstances, such as if trading were halted in a substantial number of
stocks included in the index. If this were to occur, the Fund would not be able
to close out options which it had purchased, and if restrictions on exercise
were imposed, the Fund might be unable to exercise an option it holds, which
could result in substantial losses to the Fund. It is the policy of the Fund to
purchase put or call options only with respect to an index which the Investment
Manager believes includes a sufficient number of stocks to minimize the
likelihood of a trading halt in the index.
DEALER OPTIONS. The Fund may engage in transactions involving dealer
options as well as exchange-traded options. Options not traded on an exchange
generally lack the liquidity of an exchange-traded option, and may be subject to
the Fund's restriction on investment in illiquid securities. In addition, dealer
options may involve the risk that the securities dealers participating in such
transactions will fail to meet their obligations under the terms of the options.
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SHORT SALES
The Fund may engage in short sales transactions. A short sale that is not
made "against the box" is a transaction in which the Fund sells a security it
does not own in anticipation of a decline in market price. When the Fund makes a
short sale, the proceeds it receives are retained by the broker until the Fund
replaces the borrowed security. In order to deliver the security to the buyer,
the Fund must arrange through a broker to borrow the security and, in so doing,
the Fund becomes obligated to replace the security borrowed at its market price
at the time of replacement, whatever that price may be.
The value of securities of any issuer in which the Fund maintains a short
position that is not "against the box" may not exceed the lesser of 5% of the
value of the Fund's net assets or 5% of the securities of such class of the
issuer. The Fund's ability to enter into short sales transactions is limited by
the requirements of the 1940 Act.
Short sales by the Fund that are not made "against the box" create
opportunities to increase the Fund's return but, at the same time, involve
special risk considerations and may be considered a speculative technique. Since
the Fund in effect profits from a decline in the price of the securities sold
short without the need to invest the full purchase price of the securities on
the date of the short sale, the Fund's net asset value per share will tend to
increase more when the securities it has sold short decrease in value, and to
decrease more when the securities it has sold short increase in value, than
would otherwise be the case if it had not engaged in such short sales. Short
sales theoretically involve unlimited loss potential, as the market price of
securities sold short may continuously increase, although the Fund may mitigate
such losses by replacing the securities sold short before the market price has
increased significantly. Under adverse market conditions, the Fund might have
difficulty purchasing securities to meet its short sale delivery obligations,
and might have to sell portfolio securities to raise the capital necessary to
meet its short sale obligations at a time when fundamental investment
considerations would not favor such sales.
If the Fund makes a short sale "against the box," the Fund would not
immediately deliver the securities sold and would not receive the proceeds from
the sale. The seller is said to have a short position in the securities sold
until it delivers the securities sold, at which time it receives the proceeds of
the sale. The Fund's decision to make a short sale "against the box" may be a
technique to hedge against market risks when the Investment Manager believes
that the price of a security may decline, causing a decline in the value of a
security owned by the Fund or a security convertible into or exchangeable for
such security. In such case, any future losses in the Fund's long position would
be reduced by a gain in the short position.
In the view of the Securities and Exchange Commission ("SEC"), a short sale
involves the creation of a "senior security" as such term is defined in the 1940
Act, unless the sale is "against the box" and the securities sold are placed in
a segregated account (not with the broker), or unless the Fund's obligation to
deliver the securities sold short is "covered" by segregating (not with the
broker) cash, U.S. Government securities or other liquid debt or equity
securities in an amount equal to the difference between the market value of the
securities sold short at the time of the short sale and any cash or securities
required to be deposited as collateral with a broker in connection with the sale
(not including the proceeds from the short sale), which difference is adjusted
daily for changes in the value of the securities sold short. The total value of
the cash and securities deposited with the broker and otherwise segregated may
not at any time be less than the market value of the securities sold short at
the time of the short sale.
To avoid limitations under the 1940 Act on borrowing by investment
companies, short sales by the Fund will be "against the box", or the Fund's
obligation to deliver the securities sold short will be "covered" by segregating
cash, U.S. Government securities or other liquid debt or equity securities in an
amount equal to the market value of its delivery obligation. The Fund will not
make short sales of securities or maintain a short position if doing so could
create liabilities or require collateral deposits and segregation of assets
aggregating more than 25% of the value of the Fund's total assets.
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FUTURES TRANSACTIONS
The Fund may enter into contracts for the purchase or sale for future
delivery ("futures contracts") of foreign stock or bond indices or other
financial indices that the Investment Manager determines are appropriate to
hedge the risks associated with changes in interest rates or general
fluctuations in the value of its portfolio securities. Pursuant to the
regulations of the Commodity Futures Trading Commission ("CFTC"), and subject
to certain restrictions, the Fund may purchase or sell futures contracts that
are traded on U.S. exchanges that have been designated as contract markets by
the CFTC. The Fund may also generally purchase or sell futures contracts that
are subject to the rules of any foreign board of trade ("foreign futures
contracts"). The Fund may not, however, trade a foreign futures contract
based on a foreign stock index unless the contract has been approved by the
CFTC for trading by U.S. persons. The Investment Manager may comply with such
different standards as may be established by the CFTC with respect to the
purchase or sale of futures contracts and foreign futures contracts.
FUTURES CHARACTERISTICS. A futures contract on an index 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 the index. No physical delivery of the instruments
underlying the index is made.
Unlike when the Fund purchases or sells a security, no price is paid or
received by the Fund upon the purchase or sale of a futures contract.
Initially, the Fund will be required to deposit with the Fund's custodian or
such other parties as may be authorized by the SEC (in the name of the
futures commission merchant (the "FCM")) an amount of cash or U.S. Treasury
bills which is referred to as an "initial margin" payment. The nature of
initial margin in futures transactions is different from that of margin in
security transactions in that a futures contract margin does not involve the
borrowing of funds by the Fund to finance the transactions. Rather, the
initial margin is in the nature of a performance bond or good faith deposit
on the contract which is returned to the Fund upon termination of the futures
contract, assuming all contractual obligations have been satisfied. Futures
contracts customarily are purchased and sold with initial margins that may
range upwards from less than 5% of the value of the futures contract being
traded. Subsequent payments, called "variation margin", to and from the FCM,
will be made on a daily basis as the value of the underlying index varies,
making the long and short positions in the futures contract more or less
valuable. This process is known as "marking to the market." For example, when
the Fund has purchased a stock index futures contract and the value 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 the Fund has purchased a stock index
futures contract and the value 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, the Fund may elect to close the position by taking an
identical opposite position which will operate to terminate the Fund's
position in the futures contract. A final determination of variation margin
is then made, additional cash is required to be paid by or released to the
Fund, and the Fund realizes a loss or a gain.
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PURCHASE AND SALE OF FUTURES. When the Investment Manager anticipates a
significant stock market or stock market sector advance, the Fund may
purchase a stock index futures contract which affords a hedge against not
participating in such advance at a time when the Fund is not fully invested
in equity securities. Such purchase of a futures contract would serve as a
temporary substitute for the purchase of individual stocks which may later be
purchased (with attendant costs) in an orderly fashion. As such purchase of
individual stocks are made, an approximately equivalent amount of stock index
futures would be terminated by offsetting sales.
The Fund may sell stock index futures contracts in anticipation of or
during a general stock market or market sector decline that may adversely
affect the market values of the Fund's portfolio of equity securities. To the
extent that the Fund's portfolio of equity securities changes in value in
correlation with a given stock index, the sale of futures contracts on that
index would reduce the risk to the portfolio of a market decline and, by
doing so, would provide an alternative to the liquidation of securities
positions in the portfolio with resultant transaction costs.
LIMITATIONS ON PURCHASE AND SALE OF FUTURES. The Fund may not purchase
or sell futures contracts if, immediately thereafter, more than 30% of the
value of its net assets would be hedged. In addition, the Fund may not
purchase or sell futures or purchase futures options if, immediately
thereafter, the sum of the amount of margin deposits on the Fund's existing
futures positions would exceed 5% of the market value of the Fund's total
assets. In Fund transactions involving futures contracts, to the extent
required by applicable SEC guidelines, an amount of cash, U.S. Government
securities, or other liquid debt or equity securities equal to the market
value of the futures contracts will be segregated with the Fund's Custodian,
or in other segregated accounts as regulations may allow, to collateralize
the position and thereby to insure that the use of such futures is
unleveraged.
REGULATORY MATTERS. The Company has filed a claim of exemption from
registration of the Fund as a commodity pool with the CFTC. The Fund intends
to conduct its
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futures trading activity in a manner consistent with that exemption. The
Investment Manager is registered with the CFTC as both a commodity pool operator
and as a commodity trading advisor.
DEBT SECURITIES
The Fund may purchase debt obligations. The timing of purchase and sale
transactions in debt obligations may result in capital appreciation or
depreciation because the value of debt obligations varies inversely with
prevailing interest rates. The debt obligations in which the Fund will invest
will be rated, at the time of purchase, BBB or higher by Standard & Poor's, 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 the Fund is downgraded, the Investment Manager will
determine whether it is in the best interests of the Fund to continue to hold
the security in its investment portfolio.
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 the Fund will be treated as investment grade if they are
rated by at least one major rating agency in one of its top four rating
categories at the time of purchase or, if unrated, are determined by the
Investment Manager to be of comparable quality. Investment grade means the
issuer of the security is believed to have adequate capacity to pay interest and
repay principal, although certain of such securities in the lower grades have
speculative characteristics, and changes in economic conditions or other
circumstances may be more likely to lead to a weakened capacity to pay interest
and principal than would be the case with higher rated securities.
GOVERNMENT OBLIGATIONS. U.S. Government obligations include obligations
issued or guaranteed as to principal and interest by the U.S. Government and its
agencies and instrumentalities, by the right of the issuer to borrow from the
U.S. Treasury, by the discretionary authority of the U.S. Government to purchase
certain obligations of the agency or instrumentality, or only by the credit of
the agency or instrumentality. No assurance can be given that the U.S.
Government will provide financial support to U.S. Government-sponsored
instrumentalities if it is not obligated to do so by law.
The Fund may invest in sovereign debt obligations of foreign countries. A
number of factors affect a sovereign debtor's willingness or ability to repay
principal and interest in a timely manner, including its cash flow situation,
the extent of its foreign reserves, the availability of sufficient foreign
exchange on the date a payment is due, the relative size of the debt service
burden to the economy as a whole, the sovereign debtor's policy toward principal
international lenders and the political constraints to which it may be subject.
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
The Fund may invest in convertible securities and warrants. The value of a
convertible security is a function of its "investment value" (determined by its
yield in comparison with the yields of other securities of comparable maturity
and quality that do not have conversion privilege) and its "conversion value"
(the security's worth, at market value, if converted into the underlying common
stock). The credit standing of the issuer and other factors may also
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affect the investment value of a convertible security. The conversion value of a
convertible security is determined by the market price of the underlying common
stock. If the conversion value is low relative to the investment value, the
price of the convertible security is governed principally by its investment
value. To the extent the market price of the underlying common stock approaches
or exceeds the conversion price, the price of the convertible security will be
increasingly influenced by its conversion value.
As a matter of operating policy, the Fund will not invest more than 5% of
its net assets in warrants. A warrant gives the holder a right to purchase at
any time during a specified period a predetermined number of shares of common
stock at a fixed price. Unlike convertible debt, securities or preferred stock,
warrants do not pay a fixed dividend. Investments in warrants involve certain
risks, including the possible lack of a liquid market for resale of the
warrants, potential price fluctuations as a result of speculation or other
factors, and failure of the price of the underlying security to reach or have
reasonable prospects of reaching a level at which the warrant can be prudently
exercised (in which event the warrant may expire without being exercised)
resulting in a loss of the Fund's entire investment.
SYNTHETIC CONVERTIBLE SECURITIES
The Fund may invest in "synthetic" convertible securities, which are
derivative positions composed of two or more different securities whose
investment characteristics, taken together, resemble those of convertible
securities. For example, the Fund may purchase a non-convertible debt security
and a warrant or option, which enables the Fund to have a convertible-like
position with respect to a company, group of companies or stock index. Synthetic
convertible securities are typically offered by financial institutions and
investment banks in private placement transactions. Upon conversion, the Fund
generally receives an amount in cash equal to the difference between the
conversion price and the then current value of the underlying security. Unlike a
true convertible security, a synthetic convertible comprises two or more
separate securities, each with its own market value. Therefore, the market value
of a synthetic convertible is the sum of the values of its fixed-income
component and its convertible component. For this reason, the values of a
synthetic convertible and a true convertible security may respond differently to
market fluctuations. The Fund only invests in synthetic convertibles with
respect to companies whose corporate debt securities are rated "A" or higher by
Moody's or Standard & Poor's and will not invest more than 15% of its net assets
in such synthetic securities and other illiquid securities.
PREFERRED STOCK
The Fund may purchase preferred stock. Preferred stock, unlike common
stock, offers a stated dividend rate payable from a corporation's earnings. Such
preferred stock dividends may be cumulative or non-cumulative, participating, or
auction rate. If interest rates rise, the fixed dividend on preferred stocks may
be less attractive, causing the price of preferred stocks to decline. Preferred
stock may have mandatory sinking fund provisions, as well as call/redemption
provisions prior to maturity, a negative feature when interest rates decline.
Dividends on some preferred stock may be "cumulative," requiring all or a
portion of prior unpaid dividends to be paid prior to payment of dividends on
the issuer's common stock. Preferred stock also generally has a preference over
common stock on the distribution of a corporation's assets in the event of
liquidation of the corporation, and may be "participating," which means that it
may be entitled to a dividend exceeding the stated dividend in certain cases.
The rights of the holders of preferred stock on the distribution of a
corporation's assets in the event of a liquidation are generally subordinate to
the rights associated with a corporation's debt securities.
BORROWING MONEY
From time to time, it may be advantageous for the Fund to borrow money
rather than sell portfolio securities to raise the cash to meet redemption
requests. In order to meet such redemption requests, the Fund may borrow from
banks or enter into reverse repurchase agreements. The Fund may also borrow up
to 5% of the value of its total assets for temporary or emergency purposes other
than to meet redemptions. However, the Fund will not borrow money for leveraging
purposes. The Fund may continue to purchase securities while borrowings are
outstanding, but
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will not do so when the Fund's borrowings (including reverse repurchase
agreements) exceed 5% of the value of its total assets. The 1940 Act permits
the Fund to borrow only from banks and only to the extent that the value of
its total assets, less its liabilities other than borrowings, is equal to at
least 300% of all borrowings (including the proposed borrowing), and requires
the Fund to take prompt action to reduce its borrowings if this limit is
exceeded. For the purpose of the 300% borrowing limitation, reverse repurchase
agreements and other borrowing transactions covered by segregated assets are
not considered borrowings.
A reverse repurchase agreement involves a transaction by which a borrower
(such as the Fund) sells a security to a purchaser (a member bank of the Federal
Reserve System or a broker-dealer deemed creditworthy pursuant to standards
adopted by the Board of Directors 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.
LENDING PORTFOLIO SECURITIES
The Fund is authorized to make loans of portfolio securities, for the
purpose of realizing additional income, to broker-dealers or other institutional
investors deemed creditworthy pursuant to standards adopted by the Board of
Directors. The borrower must maintain with the Fund's custodian collateral
consisting of cash, U.S. Government securities or other liquid debt or equity
securities equal to at least 100% of the value of the borrowed securities, plus
any accrued interest. The Fund will receive any interest paid on the loaned
securities, and a fee and/or a portion of the interest earned on the collateral,
less any fees and administrative expenses associated with the loan.
INVESTMENT IN ILLIQUID SECURITIES
The Fund may invest up to 15% of the value of its net assets in illiquid
securities. Securities may be considered illiquid if the Fund cannot reasonably
expect to receive approximately the amount at which the Fund values such
securities within seven days. The Investment Manager has the authority to
determine whether certain securities held by the Fund are liquid or illiquid
pursuant to standards adopted by the 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 Fund's investments in illiquid securities may include securities that
are not registered for resale under the Securities Act of 1933 (the "Securities
Act"), and therefore are subject to restrictions on resale. When the Fund
purchases unregistered securities, it may, in appropriate circumstances, obtain
the right to register such securities at the expense of the issuer. In such
cases there may be a lapse of time between the Fund's decision to sell any such
security and the registration of the security permitting sale. During any such
period, the price of the security will be subject to market fluctuations.
The fact that there are contractual or legal restrictions on resale of
certain securities to the general public or to certain institutions may not be
indicative of the liquidity of such investments. If such securities are subject
to purchase by institutional buyers in accordance with Rule 144A under the
Securities Act, the Investment Manager may determine in particular cases,
pursuant to standards adopted by the 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 the Fund's illiquidity to the extent that qualified
institutional buyers become, for a time, uninterested in purchasing such
securities.
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CASH-EQUIVALENT INSTRUMENTS
Other than as described under INVESTMENT RESTRICTIONS below, the Fund is
not restricted with regard to the types of cash-equivalent investments it may
make. When the Investment Manager believes that such investments are an
appropriate part of the Fund's overall investment strategy, the Fund may hold or
invest, for investment purposes, a portion of its assets in any of the
following, denominated in U.S. dollars, foreign currencies, or multinational
currencies: cash; short-term U.S. or foreign government securities; commercial
paper rated at least A-2 by Standard & Poor's or P-2 by Moody's; certificates of
deposit or other deposits of banks deemed creditworthy by the Investment Manager
pursuant to standards adopted by the Board of Directors; time deposits; bankers'
acceptances; and repurchase agreements related to any of the foregoing. In
addition, for temporary defensive purposes under abnormal market or economic
conditions, the Fund may invest up to 100% of its assets in such cash-equivalent
investments.
A certificate of deposit is a short-term obligation of a commercial bank. A
bankers' acceptance is a time draft drawn on a commercial bank by a borrower,
usually in connection with international commercial transactions. A repurchase
agreement involves a transaction by which an investor (such as the Fund)
purchases a security and simultaneously obtains the commitment of the seller (a
member bank of the Federal Reserve System or a securities dealer deemed
creditworthy by the Investment Manager pursuant to standards adopted by the
Board of Directors) to repurchase the security at an agreed-upon price on an
agreed-upon date within a number of days (usually not more than seven) from the
date of purchase.
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
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determined by the forces of supply and demand and other factors beyond the
Fund's control. Changes in currency exchange rates may, in some circumstances,
have a greater effect on the market value of a security than changes in the
market price of the security. To the extent that a substantial portion of the
Fund's total assets is denominated or quoted in the currency of a foreign
country, the Fund will be more susceptible to the risk of adverse economic and
political developments within that country. As discussed above, the Fund may
employ certain investment techniques to hedge its foreign currency exposure;
however, such techniques also entail certain risks.
In addition, information about foreign issuers may be less readily
available than information about domestic issuers. Foreign issuers generally are
not subject to accounting, auditing, and financial reporting standards or to
other regulatory practices and requirements comparable to those applicable to
U.S. issuers. Furthermore, with respect to certain foreign countries, the
possibility exists of expropriation, nationalization, revaluation of currencies,
confiscatory taxation, and limitations on foreign investment and the use or
removal of funds or other assets of the Fund, including the withholding of tax
on interest, dividends and other distributions and limitations on the
repatriation of currencies. In addition, the Fund may experience difficulties or
delays in obtaining or enforcing judgments. Foreign securities may be subject to
foreign government taxes that could reduce the yield and total return on such
securities.
Foreign equity securities may be traded on an exchange in the issuer's
country, an exchange in another country, or over-the-counter in one or more
countries. Most foreign securities markets, including over-the-counter markets,
have substantially less volume than U.S. securities markets, and the securities
of many foreign issuers may be less liquid and more volatile than securities of
comparable U.S. issuers. In addition, there is generally less government
regulation of securities markets, securities exchanges, securities dealers, and
listed and unlisted companies in foreign countries than in the United States.
Foreign markets also have different clearance and settlement procedures,
and in certain markets there have been times when settlements have been unable
to keep pace with the volume of securities transactions, making it difficult to
conduct and complete such transactions. Inability to dispose of a portfolio
security caused by settlement problems could result either in losses to the Fund
due to subsequent declines in the value of the portfolio security or, if the
Fund has entered into a contract to sell that security, could result in possible
liability of the Fund to the purchaser. Delays in settlement could adversely
affect the Fund's ability to implement its investment strategies and to achieve
its investment objectives.
In addition, the costs associated with transactions in securities traded on
foreign markets or of foreign issuers, and the expense of maintaining custody of
such securities with foreign custodians, generally are higher than the costs
associated with transactions in U.S. securities on U.S. markets. Investments in
foreign securities may result in higher expenses due to the cost of converting
foreign currency to U.S. dollars, the payment of fixed brokerage commissions on
foreign exchanges, the expense of maintaining securities with foreign custodians
and the imposition of transfer taxes or transaction charges associated with
foreign exchanges.
Investment in debt securities of supranational organizations involves
additional risks. Such organizations' debt securities generally are not
guaranteed by their member governments, and payment depends on their financial
solvency and/or the willingness and ability of their member governments to
support their obligations. Continued support of a supranational organization by
its government members is subject to a variety of political, economic and other
factors, as well as the financial performance of the organization.
DEPOSITARY RECEIPTS
In many respects, the risks associated with investing in depositary
receipts are similar to the risks associated with investing in foreign equity
securities directly. In addition, to the extent that the Fund acquires
depositary receipts through banks that do not have a contractual relationship
with the foreign issuer of the security underlying the depositary receipts to
issue and service depositary receipts, there may be an increased possibility
that the Fund would not become aware of and be able to respond to corporate
actions, such as stock splits or rights offerings, involving the foreign issuer
in a timely manner.
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The information available for American Depositary Receipts ("ADRs")
sponsored by the issuers of the underlying securities is subject to the
accounting, auditing, and financial reporting standards of the domestic market
or exchange on which they are traded, which standards generally are more uniform
and more exacting than those to which many non-domestic issuers may be subject.
However, some ADRs are sponsored by persons other than the issuers of the
underlying securities. Issuers of the stock on which such ADRs are based are not
obligated to disclose material information in the United States. The information
that is available concerning the issuers of the securities underlying European
Depositary Receipts ("EDRs") and Global Depositary Receipts ("GDRs") may be less
than the information that is available about domestic issuers, and EDRs and GDRs
may be traded in markets or on exchanges that have lesser standards than those
applicable to the markets for ADRs.
A depositary receipt will be treated as an illiquid security for purposes
of the Fund's restriction on the purchases of such securities unless the
depositary receipt is convertible into cash by the Fund within seven days.
EMERGING MARKET SECURITIES
There are special risks associated with investments in securities of
companies organized or headquartered in developing countries with emerging
markets that are in addition to the usual risks of investing in securities of
issuers located in developed foreign markets around the world, and investors in
the Fund are strongly advised to consider those risks carefully. The securities
markets of emerging market countries are substantially smaller, less developed,
less liquid, and more volatile than the securities markets of the United States
and developed foreign markets. As a result, the prices of emerging market
securities may increase or decrease much more rapidly and much more dramatically
than the prices of securities of issuers located in developed foreign markets.
Disclosure and regulatory standards in many respects are less stringent than in
the United States and developed foreign markets. There also may be a lower level
of monitoring and regulation of securities markets in emerging market countries
and the activities of investors in such markets, and enforcement of existing
regulations has been extremely limited.
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 Fund's investment returns from such
securities.
In many cases, governments of emerging market countries continue to
exercise a significant degree of control over the economies of such countries,
and government actions relative to the economy, as well as economic developments
generally, also may have a major effect on an issuer's prospects. In addition,
certain of such governments have in the past failed to recognize private
property rights and have at times naturalized or expropriated the assets of
private companies. There is also a heightened possibility of confiscatory
taxation, imposition of withholding taxes on 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 the Fund to suffer a loss with respect to any of its holdings. In
addition, political and economic structures in many of such countries may be
undergoing significant evolution and rapid development, and such countries may
lack the social, political and economic stability characteristics of more
developed countries. Unanticipated political or social developments may affect
the values of the Fund's investments in those countries and the availability of
additional investments in those countries.
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INVESTMENTS IN SMALLER COMPANIES
Investment in the securities of companies with market capitalizations below
$1 billion involves greater risk and the possibility of greater portfolio price
volatility than investing in larger capitalization companies. The securities of
small-sized concerns, as a class, have shown market behavior which has had
periods of more favorable results, and periods of less favorable results,
relative to securities of larger companies as a class. For example, smaller
capitalization companies may have less certain growth prospects, and may be more
sensitive to changing economic conditions, than large, more established
companies. Moreover, smaller capitalization companies often face competition
from larger or more established companies that have greater resources. In
addition, the smaller capitalization companies in which the Fund may invest may
have limited or unprofitable operating histories, limited financial resources,
and inexperienced management. Furthermore, securities of such companies are
often less liquid than securities of larger companies, and may be subject to
erratic or abrupt price movements. To dispose of these securities, the Fund may
have to sell them over an extended period of time below the original purchase
price. Investments in smaller capitalization companies may be regarded as
speculative.
Securities issued by companies (including predecessors) that have operated
for less than three years may have limited liquidity, which can result in their
prices being lower than might otherwise be the case. In addition, investments in
such companies are more speculative and entail greater risk than do investments
in companies with established operating records.
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 the Fund may be subject to
redemption at the option of the issuer at a price established in the instrument
governing the convertible security, in which event the Fund will be required to
permit the issuer to redeem the security, convert it into the underlying common
stock, or sell it to a third party.
OTHER DEBT OBLIGATIONS
Although securities rated BBB by Standard & Poor's or Baa by Moody's are
considered to be of "investment grade," and are considered to have adequate
capacity to pay interest and repay principal, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to pay
interest and principal than higher-rated securities. Credit ratings evaluate the
safety of principal and interest payments of securities, not their market value.
The rating of an issuer is also heavily weighted by past developments and does
not necessarily reflect probable future conditions. There is frequently a lag
between the time a rating is assigned and the time it is updated.
OPTIONS
There are several risks associated with transactions in options on
securities, 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
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operations on an exchange; the facilities of an exchange or clearing corporation
may not at all times be adequate to handle current trading volume; or one or
more exchanges could, for economic or other reasons, decide, or be compelled at
some future date, to discontinue the trading of options (or a particular class
or series of options), in which event the secondary market on that exchange (or
in that class or series of options) would cease to exist, although outstanding
options that had been issued by a clearing corporation as a result of trades on
that exchange would continue to be exercisable in accordance with their terms.
A decision as to whether, when and how to use options involves the exercise
of skill and judgment, and even a well-conceived transaction may be unsuccessful
to some degree because of market behavior or unexpected events.
In addition, when trading options on foreign exchanges, many of the
protections afforded to participants in U.S. option exchanges will not be
available. For example, there may be no daily price fluctuation limits in such
exchanges or markets, and adverse market movements could therefore continue to
an unlimited extent over a period of time. Although the purchaser of an option
cannot lose more than the amount of the premium plus related transaction costs,
this entire amount could be lost.
Potential losses to the writer of an option are not limited to the loss of
the option premium received by the writer, and thus may be greater than the
losses incurred in connection with the purchasing of an option.
FUTURES TRANSACTIONS
There are several risks in connection with the use of futures contracts
in the Fund. One risk arises because the correlation between movements in the
price of an index futures contract and movements in the value of the
portfolio of securities which is the subject of the hedge is not always
perfect. The price of the futures contract acquired by the Fund may move more
than, or less than, the value of the portfolio of securities being hedged. If
the price of the future moves less than the value of the portfolio of
securities which is the subject of the hedge, the hedge will not be fully
effective but, if the value of the portfolio of 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 value of the portfolio of 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 value of the portfolio of 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 value of the
portfolio of securities which is the subject of the hedge.
To compensate for the imperfect correlation of movements in the value of
the portfolio of securities being hedged and movements in the price of the
futures, the Fund may buy or sell futures contracts in a greater dollar
amount than the value of the portfolio of securities being hedged, if the
historical volatility of the value of the portfolio of securities has been
greater than the historical volatility of the futures contract being used.
Conversely, the Fund may buy or sell fewer futures contracts if the
historical volatility of the price of the security or currency being hedged
is less than the historical volatility of the security or currency.
Because of the low margins required, futures trading involves a high degree
of leverage. As a result, a relatively small investment in a futures contract by
the Fund may result in immediate and substantial loss, or gain, to the Fund. A
purchase or sale of a futures contract may result in losses in excess of the
initial margin for the futures contract. However, the Fund would have sustained
comparable losses if, instead of the futures contract, it had invested in the
underlying financial instrument and sold the instrument after the decline.
When futures are purchased by the Fund to hedge against a possible
unfavorable movement in a currency exchange rate before the Fund is able to
invest its cash (or cash equivalents) in stock or debt instruments in an orderly
fashion, it is possible that the currency exchange rate may move in a favorable
manner instead. If the Fund then decides not to invest in stock or debt
instruments at that time because of concern as to possible further market
decline or for other reasons, the Fund will realize a loss on the futures
contract that is not offset by a reduction in the price of securities purchased.
Page 16
<PAGE>
In addition, the price of futures contracts may not correlate perfectly
with movements in the 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 index and movements in
the price of index futures, a correct forecast of general market 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.
The Fund will only enter into futures contracts 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 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, an increase in the price of the
security, 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 will, in fact, correlate with the movements in the futures
contract and thus provide an offset to losses on a futures contract.
Successful use of futures by the Fund is subject to the Investment
Manager's ability to predict correctly movements in the direction of the
securities markets and interest rates. For example, if the Fund hedged
against the possibility of a decline in the market adversely affecting the
value of its portfolio and its value increased instead, the Fund would lose
part or all of the benefit of the increased value of its portfolio because it
would have offsetting losses in its futures positions. In addition, in such
situations, if the Fund had insufficient cash, it might have to sell
securities to meet daily variation margin requirements. Such sales of
securities might, but would not necessarily be at increased prices which
would reflect the rising market. 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 are different from those needed to
select portfolio securities, and the Investment Manager has limited prior
experience in the use of futures techniques in the management of assets under
its supervision.
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<PAGE>
OTHER RISK CONSIDERATIONS
Investment in illiquid securities involves potential delays on resale as
well as uncertainty in valuation. Limitations on resale may have an adverse
effect on the marketability of portfolio securities, and the Fund might not be
able to dispose of such securities promptly or at reasonable prices.
A number of transactions in which the Fund may engage are subject to the
risks of default by the other party to the transaction. If the seller of
securities pursuant to a repurchase agreement entered into by the Fund defaults
and the value of the collateral securing the repurchase agreement declines, the
Fund may incur a loss. If bankruptcy proceedings are commenced with respect to
the seller, realization of the collateral by the Fund may be delayed or limited.
Similarly, when the Fund engages in when-issued, reverse repurchase, forward
commitment and related settlement transactions, it relies on the other party to
consummate the trade; failure of the other party to do so may result in the Fund
incurring a loss or missing an opportunity to obtain a price the Investment
Manager believed to be advantageous. The risks in lending portfolio securities,
as with other extensions of secured credit, consist of a possible delay in
receiving additional collateral or in recovery of the securities or possible
loss of rights in the collateral should the borrower fail financially.
Borrowing also involves special risk considerations. Interest costs of
borrowings may fluctuate with changing market rates of interest and may
partially offset or exceed the return earned on the borrowed funds (or on the
assets that were retained rather than sold to meet the needs for which funds
were borrowed). Under adverse market conditions, the Fund might have to sell
portfolio securities to meet interest or principal payments at a time when
fundamental investment considerations would not favor such sales. To the extent
the Fund enters into reverse repurchase agreements, the Fund is subject to risks
that are similar to those of borrowing.
INVESTMENT RESTRICTIONS
FUNDAMENTAL POLICIES
The Fund has adopted certain investment restrictions that are fundamental
policies and that may not be changed without approval by the vote of a majority
of the Fund's outstanding voting securities, as defined in the 1940 Act. The
"vote of a majority of the outstanding voting securities" of the Fund, as
defined in Section 2(a)(42) of the 1940 Act, means the vote of (i) 67% or more
of the voting securities of the Fund present at any meeting, if the holders of
more than 50% of the outstanding voting securities of the Fund are present or
represented by proxy, or (ii) more than 50% of the outstanding voting securities
of the Fund, whichever is less. These restrictions provide that the Fund may
not:
1. Purchase any security (other than obligations of the FRG, the German
Federal Railways and the German Federal Post Office, which in the aggregate
shall not represent 25% or more of the Fund's total assets, or obligations of
the U.S. government, its agencies or instrumentalities) if as a result more
than 10% of the Fund's total assets would then be invested in securities of
any single issuer.
2. Invest 25% or more of the value of its total assets in a particular
industry. This restriction does not apply to securities issued or guaranteed
by the U.S. government, its agencies or instrumentalities, but will apply to
foreign government obligations until such time as the Securities and Exchange
Commission permits their exclusion.
3.Purchase more than 10% of the outstanding voting securities of any issuer.
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 not considered to be borrowings. This
investment restriction shall not prohibit the Fund from engaging in futures
contracts, options on futures, forward foreign currency exchange
transactions, and currency options.
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<PAGE>
5. Purchase or sell real estate or real estate mortgage loans, except that
the Fund may purchase and sell securities of companies that deal in real
estate or interests therein.
6. Purchase securities on margin, except short-term credits as may be
necessary or routine for the clearance or settlement of transactions, and
except for margin posted in connection with hedging transactions consistent
with its investment policies.
7. Underwrite securities of other issuers, except insofar as the Fund may be
deemed an underwriter under the U.S. Securities Act of 1933 in selling
portfolio securities.
8. Buy or sell commodities, commodity contracts or futures contracts (other
than futures contracts with respect to foreign stock or bond indices or other
financial indices that the Investment Manager determines are appropriate to
hedge the risks associated with interest rates or general fluctuations in the
value of its portfolio securities).
OPERATING POLICIES
The Fund has adopted certain investment restrictions that are not
fundamental policies and may be changed by the Board of Directors without
approval of the Fund's outstanding voting securities. These restrictions provide
that the Fund may not:
1. Invest in interests in oil, gas, or other mineral exploration or
development programs;
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<PAGE>
2. Participate on a joint or a joint-and-several basis in any trading account
in securities (the aggregation of orders for the sale or purchase of
marketable portfolio securities with other accounts under the management of
the Investment Manager to save brokerage costs, or to average prices among
them, is not deemed to result in a securities trading account).
3. Purchase or sell futures if, immediately thereafter, the sum of the
amount of "margin" deposits on the Fund's existing futures positions
would exceed 5% of the value of the Fund's total assets.
4. Invest more than 15% of the value of its net assets in securities that are
illiquid.
The Fund is also subject to other restrictions under the 1940 Act;
however, the registration of the Company under the 1940 Act does not involve any
supervision by any federal or other agency of the Company's management or
investment practices or policies, other than incident to occasional or periodic
compliance examinations conducted by the SEC staff.
EXECUTION OF PORTFOLIO TRANSACTIONS
The Investment Manager, subject to the overall supervision of the Board of
Directors, makes the Fund's investment decisions and selects the broker or
dealer to be used in each specific transaction using its best judgment to choose
the broker or dealer most capable of providing the services necessary to obtain
the best execution of that transaction. In seeking the best execution of a
transaction, the Investment Manager evaluates a wide range of criteria,
including any or all of the following: the broker's commission rate, promptness,
reliability and quality of executions, trading expertise, positioning and
distribution capabilities, back-office efficiency, ability to handle difficult
trades, knowledge of other buyers and sellers, confidentiality, capital strength
and financial stability, prior performance in serving the Investment Manager and
its clients, and other factors affecting the overall benefit to be received in
the transaction. When circumstances relating to a proposed transaction indicate
to the Investment Manager that a particular broker is in a position to obtain
the best execution, the order is placed with that broker. This may or may not be
a broker that has provided investment information and research services to the
Investment Manager.
Such investment information may include, among other things: a wide variety
of written reports or other data on individual companies and industries; data
and reports on general market or economic conditions; information concerning
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
Page 20
<PAGE>
securities transactions which cause the Fund to pay an amount of commission in
excess of the amount of commission another broker would have charged. In
electing such broker or dealer, the Investment Manager will make a good faith
determination that the amount of commission is reasonable in relation to the
value of the brokerage services and research and investment information
received, viewed in terms of either the specific transaction or the Investment
Manager's overall responsibility to the accounts for which the Investment
Manager exercises investment discretion. The Investment Manager evaluates all
commissions paid in order to ensure that the commissions represent reasonable
compensation for the brokerage and research services provided by such brokers.
Such investment information as is received from brokers or dealers may be used
by the Investment Manager in servicing all of its clients (including the Fund),
and the Fund's commissions may be paid to a broker or dealer who supplied
research services not used by the Fund. However, the Investment Manager expects
that the Fund will benefit overall by such practice because it is receiving the
benefit of research services and the execution of such transactions not
otherwise available to it without the allocation of transactions based on the
recognition of such research services.
Subject to the requirement of seeking the best execution, the Investment
Manager may also place orders with brokerage firms that have sold shares of the
Fund. The Investment Manager has made and will make no commitments to place
orders with any particular broker or group of brokers. The Company anticipates
that a substantial portion of all brokerage commissions will be paid to brokers
who supply investment information to the Investment Manager.
The Investment Manager has no obligation to purchase or sell for the Fund
any security that it, or its officers of employees, may purchase or sell for the
Investment Manager's or their own accounts or the account of any other client,
if in the opinion of the Investment Manager such transaction appears unsuitable,
impractical or undesirable for the Fund. Additionally, the Investment Manager
does not prohibit any of its officers or employees from purchasing or selling
for their own accounts securities that may be recommended to or held by the
Investment Manager's client's, subject to the Investment Manager's and the
Fund's Code of Ethics.
The Fund also invests frequently in foreign and/or U.S. securities that are
not listed on a national securities exchange but are traded in the
over-the-counter market. The Fund may also purchase listed securities through
the third market or fourth market. When transactions are executed in the
over-the-counter market or the third or fourth market, the Investment Manager
will seek to deal with the counterparty that the Investment Manager believes can
provide the best execution, whether or not that counterparty is the primary
market maker for that security.
During the Fiscal Year ended December 31, 1998, the Fund acquired
securities of its regular brokers or dealers (as defined in Rule 10b-1 under the
1940 Act) or their parents as follows: ________.
For the Fiscal Years ended December 31, 1996, 1997 and 1998, the Fund
paid total brokerage commissions of $330,226, $761,708 and $1,282,143,
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. [Payments to affiliated brokers]
As noted below, the Investment Manager is an indirect wholly owned
subsidiary of Dresdner Bank AG ("Dresdner"). Dresdner Kleinwort Benson North
America LLC ("Dresdner Kleinwort Benson") and other Dresdner subsidiaries may
be broker-dealers (collectively, the "Dresdner Affiliates"). The Investment
Manager believes that it is in the best interests of the Fund to have the
ability to execute brokerage transactions, when appropriate, through the
Dresdner Affiliates. Accordingly, the Investment Manager intends to execute
brokerage transactions on behalf of the Fund through the Dresdner Affiliates,
when appropriate and to the extent consistent with applicable laws and
regulations, including federal banking laws.
In all such cases, the Dresdner Affiliates will act as agent for the Fund,
and the Investment Manager will not enter into any transaction on behalf of the
Fund in which a Dresdner Affiliate is acting as principal for its own account.
In connection with such agency transactions, the Dresdner Affiliates will
receive compensation in the form of brokerage commissions separate from the
Investment Manager's management fee. The Investment Manager's policy is that
such commissions must be reasonable and fair when compared to the commissions
received by other brokers
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<PAGE>
in connection with comparable transactions involving similar securities and that
the commissions paid to a Dresdner Affiliate must be no higher than the
commissions paid to that broker by any other similar customer of that broker who
receives brokerage and research services that are similar in scope and quality
to those received by the Fund.
The Investment Manager performs investment management and advisory services
for various clients, including other registered investment companies, and
pension, profit-sharing and other employee benefit plans, as well as
individuals. In many cases, portfolio transactions for the Fund may be executed
in an aggregated transaction as part of concurrent authorizations to purchase or
sell the same security for numerous accounts served by the Investment Manager,
some of which accounts may have investment objectives similar to those of the
Fund. The objective of aggregated transactions is to obtain favorable execution
and/or lower brokerage commissions, although there is no certainty that such
objective will be achieved. Although executing portfolio transactions in an
aggregated transaction potentially could be either advantageous or
disadvantageous to any one or more particular accounts, aggregated transactions
in which the Fund participates will be effected only when the Investment Manager
believes that to do so will be in the best interest of the Fund, and the
Investment Manager is not obligated to aggregate orders into larger
transactions. These orders generally will be averaged as to price. When such
aggregated transactions occur, the objective will be to allocate the executions
in a manner which is deemed fair and equitable to each of the accounts involved
over time. In making such allocation decisions, the Investment Manager will use
its business judgment and will consider, among other things, any or all of the
following: each client's investment objectives, guidelines, and restrictions,
the size of each client's order, the amount of investment funds available in
each client's account, the amount already committed by each client to that or
similar investments, and the structure of each client's portfolio.
DIRECTORS AND OFFICERS
The names and addresses of the Directors and officers of the 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.
ROBERT J. BIRNBAUM (71), DIRECTOR. Director, Chicago Board Options
Exchange (since 1998); Director, Chicago Mercantile Exchange (1990 to 1998);
Trustee, Liberty All-Star Growth Fund, Inc. (since 1995); Trustee, Colonial
Funds (since 1995); Trustee, Liberty All-Star Equity Fund, Inc. (since 1994);
Special Counsel, Dechert Price & Rhoads (law firm) (1988 to 1993); President
and Chief Operating Officer, New York Stock Exchange, Inc. (1985 to 1988);
President and Chief Operating Officer, American Stock Exchange, Inc. (1977 to
1985).
CARROLL BROWN (70), DIRECTOR. President, The American Council on Germany
(since 1988); Executive Director, John J. McCloy Fund (since 1988); Foreign
Service Officer, United States Department of State with service in Yugoslavia,
Poland, Austria, and Germany (1957 to 1988); U.S. Consul General, Dusseldorf and
Munich; Deputy Assistant Secretary of State, U.S. State Department (1986 and
1987).
THEODORE J. COBURN (44), DIRECTOR. Partner, Brown, Coburn & Co., a
consulting firm (since 1991); education associate at Harvard University Graduate
School of Education (since 1996); Director, Nicholas-Applegate Fund, Inc. (since
1987); Trustee, Nicholas-Applegate Mutual Funds (since 1992); Director,
Measurement Specialties, Inc. (since 1995); Director, Moovies, Inc. (since
1995); Senior Vice President, Prudential Securities Inc. (1986 to 1991);
Managing Director of the Global Equity Transactions Group and a member of the
Board of Directors, Prudential Securities (1986 to 1991); Managing Director,
Merrill Lynch Capital Markets (1983 to 1986).
JAMES E. DOWD (75), DIRECTOR. Attorney/Consultant (since 1982);
Director, Trustee or Managing General Partner of various registered
investment companies managed
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<PAGE>
by Federated Investors (since 1982); President, Boston Stock Exchange (1969t to
1982); Member of Panel of Arbitrators, New York Stock Exchange, Inc. (since
1986); Member of Panel of Arbitrators, National Association of Securities
Dealers, Inc. (since 1984).
SIEGFRIED A. KESSLER (80), DIRECTOR. Retired; Chairman. Carl Zeiss Inc.
(New York) (1981 to 1982) and President (1965 to 1981) (sale, distribution
and service of scientific instruments and optical products) (1965 to 1985).
ALFRED FIORE (60), DIRECTOR. General Manager, Hirschfeld, Stern, Moyer
& Ross, Inc. (employee benefit consulting firm) (since 1988); Consultant,
Lois/U.S.A. (creative advertising agency) (1987 to 1988); Executive Vice
President and Chief Financial Officer, Parlux Fragrances, Inc. (1987);
Executive Vice President and Chief Financial Officer, Concord Assets Group,
Inc. (real estate manager) (1986); President and Chief Operating Officer,
Amerigroup Financial Services, Inc. (financial services) (1984 to 1986);
Partner, KPMG Peat Marwick, LLP (1973 to 1984).
GOTTFRIED W. PERBIX (68), DIRECTOR. President, Perbix International,
Inc. (management consulting) (1980 to 1994); Director, American Profol Inc.
(plastic film manufacturers) (since 1993); Sole Proprietor, Perbix Associates
(executive search) (since 1978)
JACOB SALIBA (84), DIRECTOR. Director (since 1994), Chairman (1988 to
1994) and Chief Executive Officer (1988 to 1993), Katy Industries, Inc.
(diversified manufacturing and oil and related services); President and Chief
Operating Officer, Katy Industries, Inc. (1968 to 1987); Director, CEGF
Compagnie des Entrepots et Gares Frigorifques (cold storage warehouses)
(since 1989); Director, Schon & Cie AG (manufacturer of machinery) (since
1990); Director, Sahlman Seafoods (shrimp fishing and shrimp aquaculture)
(since 1998); Director, Syratech Corp. (manufacturer of household
furnishings) (1992 to 1998).
Fund Officers - To be elected
The Fund pays each of its Directors who is not an interested person of
the Fund, as defined in the 1940 Act, an annual fee of $7,500, plus $750 for
each Board of Directors meeting attended. During the fiscal year ended
December 31, 1998, all such Directors as a group received from the Fund
aggregate fees amounting to $199,875. In addition, the Fund reimburses
Directors not affiliated with Dresdner RCM for travel and out-of-pocket
expenses incurred in connection with meetings of the Board. Commencing
January 1, 1999, the Fund pays each of its Directors who is not an interested
person of the Fund, as defined in the 1940 Act, an annual fee of $9,000, plus
$1,500 for each Board of Directors meeting attended.
The following table sets forth for each Director receiving
compensation from the Fund the amount of such compensation paid by the Fund
during the fiscal year ended December 31, 1998.
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<PAGE>
<TABLE>
<CAPTION>
NAME OF PERSON, AGGREGATE PENSION OR RETIREMENT ESTIMATED ANNUAL TOTAL COMPENSATION FROM
POSITION COMPENSATION FROM BENEFITS ACCRUED AS BENEFITS UPON FUND AND FUND COMPLEX
FUND PART OF FUND EXPENSES RETIREMENT PAID TO DIRECTORS
<S> <C> <C> <C> <C>
Robert J. Birnbaum $ 39,000 N/A __ $ 39,000
Carroll Brown 16,875 N/A __ 16,875
Theodore J. Coburn 39,000 N/A __ 39,000
James E. Dowd 21,000 N/A __ 21,000
Alfred W. Fiore 21,000 N/A __ 21,000
Siegfried A. Kessler 21,000 N/A __ 21,000
Gottfried W. Perbix 21,000 N/A __ 21,000
Jacob Saliba 21,000 N/A __ 21,000
TOTAL $199,875 $199,875
</TABLE>
During the fiscal year ended December 31, 1997, the Board of Directors met
five times and during the fiscal year ending December 31, 1998, the Board of
Directors met eleven times. Each Director attended at least 75% of the total
number of meetings of the Board and each Committee of the Board of which he was
a member held during the period in which he served.
The Board of Directors has an Audit Committee presently composed of
Messrs. Perbix, Dowd, and Kessler, none of whom is an interested person of the
Fund (as defined in the 1940 Act). The Audit Committee makes recommendations to
the full Board with respect to the engagement of independent accountants and
reviews with the independent accountants the plan and results of the audit
engagement and matters having a material effect upon the Fund's financial
operations. The Audit Committee held two meetings during the fiscal year ended
December 31, 1997 and two meetings during the fiscal year ending December 31,
1998. Members of the Audit Committee do not receive any additional
compensation from the Fund.
In 1998, the Board of Directors established an ad hoc Strategic Planning
and Communications Committee, composed of Messrs. Birnbaum, Coburn, and Fiore,
none of whom is an interested person of the Fund (as defined in the 1940 Act),
to communicate with stockholders on behalf of the full Board of Directors and to
consider various strategic options for the future of the Fund, including,
whether the Fund should convert from a closed-end investment company to an
open-end investment company. Strategic Planning and Communications Committee
members received $1,500 per meeting in 1998. There were 14 such meetings in
1998.
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<PAGE>
The Board of Directors has no compensation committee, or other committee
performing similar a function. Uopn conversion of the Fund to an open-end
structure, a Nominating Committee was established, which will consist of the
Directors who are not interested persons of the Fund (as defined in the 1940
Act).
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of March 31, 1999, the Directors and Officers of the Company, as a
group, owned beneficially and of record less than 1% of the outstanding shares
of the Fund.
As of March 31, 1999, there were 14,008,334 shares of the Fund
outstanding. On that date the following were known to the Company to own of
record more than 5% of the Fund's capital stock:
<TABLE>
<CAPTION>
Name and Address of % of Shares
Beneficial Owner Shares Held Outstanding
<S> <C> <C>
Lazard Freres & Co. LLC 1,286,600 9.18%
30 Rockefeller Plaza
New York, NY 10020
Deep Discount Advisors, Inc. 1,240,800 8.8%
One West Park Square
Ste. 77
Asheville, NC 28801
Ron Olin Investment Management Company 890,350 6.4%
One West Park Square
Ste. 77
Asheville, NC 28801
Bankgesellschaft Berlin AG 2,932,600 20.9%
Alexanderplatz 2
Berlin Germany 10178
</TABLE>
THE INVESTMENT MANAGER
The Board of Directors the Company has overall responsibility for the
operation of the Fund. Pursuant to such responsibility, the Board of
Directors has approved various contracts for designated financial
organizations to provide, among other things, day to day management services
required by the Fund. The Company has retained as the Fund's Investment
Manager, Dresdner RCM Global Investors LLC, a Delaware limited liability
company with principal offices at Four Embarcadero Center, San Francisco,
California 94111. The Investment Manager is actively engaged in providing
investment supervisory services to institutional and individual clients. The
Investment Manager was established in December of 1998 and is the successor
to the business of its holding company, Dresdner RCM Global Investors US
Holdings LLC. The Investment Manager was originally formed as Rosenberg
Capital Management in 1970, and it and its successors have been consistently
in business since then.
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
Page 25
<PAGE>
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 is also the investment manager for Dresdner RCM
International Growth Equity Fund, Dresdner RCM Growth Equity Fund and
Dresdner RCM Small Cap Fund, each a series of Dresdner RCM Capital Funds,
Inc.; Dresdner RCM 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,
each a closed-end management investment company. The Fund's Management
Agreement may be renewed from year-to-year after its initial term, provided
that any such renewals have been specifically approved at least annually by
(i) the vote of a majority of the Company's Board of Directors, including a
majority of the Directors who are not parties to the Management Agreement or
interested persons (as defined in the 1940 Act) of any such person, cast in
person at a meeting called for the purpose of voting on such approval, or
(ii) the vote of a majority (as defined in the 1940 Act) of the outstanding
voting securities of the Fund and the vote of a majority of the Directors who
are not parties to the contract or interested persons of any such party.
The Fund has, under its Management Agreement, assumed the obligation for
payment of all of its ordinary operating expenses, including: (a) brokerage and
commission expenses, (b) federal, state, or local taxes incurred by, or levied
on, the Fund, (c) interest charges on borrowings, (d) charges and expenses of
the Fund's custodian, (e)
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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
Fund. Expenses attributable to the Fund are charged against the assets of the
Fund.
To limit the total expenses of the Fund, the Investment Manager has agreed
to waive its fees and to pay the Fund on a quarterly basis the amount, if any,
by which the ordinary operating expenses of the Fund attributable to the Fund
for the quarter (except taxes, interest, and extraordinary expenses) exceed an
expense ratio of 1.60% on an annual basis for at least the first three years of
operation following the conversion of the Fund to open-end status. The Fund
will reimburse the Investment Manager for deferred fees or other expenses paid
by the Investment Manager pursuant to the Investment Management Agreement in
later years in which operating expenses are otherwise, and as a result of such
reimbursement would be, less than such expense limitation. Accordingly, until
all such amounts are reimbursed, the fund's expenses will be higher, and its
total return will be lower, than would otherwise have been the case. No
interest, carrying, or finance charge will be paid by the Fund with respect to
any amounts representing deferred fees or other expenses paid by the Investment
Manager. In addition, the fund will not be required to repay any unreimbursed
amounts to the Investment Manager upon termination of the Management Agreement.
The Fund's Management Agreement provides that the Investment Manager will
not be liable for any error of judgment or for any loss suffered by the Fund in
connection with the matters to which the Management Agreement relates, except
for liability resulting from willful misfeasance, bad faith or gross negligence
in the performance of its duties or by reason of the Investment Manager's
reckless disregard of its duties and obligations under the Management Agreement.
The Company has agreed to indemnify the Investment Manager out of the assets of
the Fund, against liabilities, costs and expenses that the Investment Manager
may incur in connection with any action, suit, investigation or other proceeding
arising out of or otherwise based on any action actually or allegedly taken or
omitted to be taken by the Investment Manager in connection with the performance
of its duties or obligations under the Management Agreement with respect to the
Fund or otherwise as investment manager of the Fund. The Investment Manager is
not entitled to indemnification with respect to any liability to the Fund or its
stockholders by reason of willful misfeasance, bad faith or gross negligence in
the performance of its duties, or of its reckless disregard of its duties and
obligations under the Management Agreement.
The Management Agreement is terminable without penalty on 60 days' written
notice by a vote of the majority of the outstanding voting securities of the
Fund by a vote of the majority of the Company's Board of Directors, or by the
Investment Manager on 60 days' written notice and will automatically terminate
in the event of its assignment (as defined in the 1940 Act).
THE DISTRIBUTOR
Funds Distributor, Inc., 60 State Street, Suite 1300, Boston, Massachusetts
02109 (the "Distributor") serves as Distributor to the Fund. The Distributor has
provided mutual fund distribution services since 1976, and is a subsidiary of
Boston Institutional Group, Inc., which provides distribution and other related
services with respect to investment products.
DISTRIBUTION AGREEMENT
Pursuant to a Distribution Agreement with the Company, the Distributor has
agreed to use its best efforts to effect sales of shares of the Fund, but is not
obligated to sell any specified number of shares. The Distribution Agreement
contains provisions with respect to renewal and termination similar to those in
the Fund's Management
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Agreement discussed above. Pursuant to the Distribution Agreement, the Company
has agreed to indemnify the Distributor out of the assets of the Fund to the
extent permitted by applicable law against certain liabilities under the
Securities Act of 1933 arising in connection with the Distributor's activities
on behalf of the Company.
The Company also has an agreement with the Investment Manager and the
Distributor pursuant to which the Distributor has agreed to provide: regulatory,
compliance and related technical services to the Company; services with regard
to advertising, marketing and promotional activities; and officers to the
Company. The Investment Manager is required to reimburse the Company for any
fees and expenses of the Distributor pursuant to the Agreement.
DISTRIBUTION PLAN
The Company, on behalf of its Dresdner RCM Europe Fund Class N shares, has
adopted a distribution plan (the "Plan") pursuant to Rule 12b-1 under the 1940
Act. Under the Plan, 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 Class
N 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.
If in any year Funds Distributor is due more from the Fund for such
services than is immediately payable because of the expense limitation under the
Plan, the unpaid amount is carried forward from while the Plan is 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 Fund is
not obligated to repay any outstanding unreimbursed expenses that may exist if
the Plan is terminated or not continued. No interest, carrying, or finance
charge will be imposed on any amounts carried forward.
The Plan continues in effect from year to year with respect to the Fund,
provided that each such continuance is approved at least annually by a vote of
the Board of Directors of the Company, including a majority vote of the
Directors who are not "interested persons" of the Company within the meaning of
the 1940 Act and have no direct or indirect financial interest in the Plan or in
any agreement related to the Plan, cast in person at a meeting called for the
purpose of voting on such continuance. The Plan may be terminated with respect
to the Fund at any time, without penalty, by the vote of a majority of the
outstanding Class N shares of the Fund or of the Board of Directors in the
manner described above. The Plan may not be amended to increase materially the
amounts to be paid by the Fund for the services described therein without
approval by the shareholders of the Fund, and all material amendments are
required to be approved by the Board of Directors of the respective Company in
the manner described above. The Plan will automatically terminate in the event
of its assignment.
The Distributor may pay broker-dealers and others, out of the fees it
receives under the Plan, quarterly trail commissions of up to 0.25%, on an
annual basis, of the average daily net assets attributable to the N class of
shares of the Fund held in the accounts of their customers.
Pursuant to the Plan, 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 Fund 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.
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NET ASSET VALUE
For purposes of the computation of the net asset value of each share of the
Fund, equity securities traded on stock exchanges are valued at the last sale
price on the exchange or in the principal over-the-counter market in which such
securities are traded as of the close of regular trading on the day the
securities are being valued, unless the Board of Directors or a duly constituted
committee of the Board determines that such price does not reflect the fair
value of the security. In cases where securities are traded on more than one
exchange, the securities are valued on the exchange determined by the Investment
Manager to be the primary market for the securities. If there has been no sale
on such day, the security will be valued at the closing bid price on such day.
If no bid price is quoted on such day, then the security will be valued by such
method as a duly constituted committee of the Board of Directors determines in
good faith to reflect its fair value. Readily marketable securities traded only
in the over-the-counter market that are not listed on the NASDAQ Stock Market or
a similar foreign reporting service will be valued at the mean bid price, or
such other comparable sources as the Board of Directors deems appropriate to
reflect their fair value. Other portfolio securities held by the Fund will be
valued at current market value, if current market quotations are readily
available for such securities. To the extent that market quotations are not
readily available such securities will be valued by whatever means a duly
constituted committee of the Board of Directors deems appropriate to reflect
their fair value.
Futures contracts and related options are valued at their last sale or
settlement price as of the close of the exchange on which they are traded or, if
no sales are reported, at the mean between the last reported bid and asked
prices. All other assets of the Fund will be valued in such manner as a duly
constituted committee of the Board of Directors in good faith deems appropriate
to reflect their fair value.
Trading in securities on foreign exchanges and over-the-counter markets is
normally completed at times other than the close of regular trading on the New
York Stock Exchange. In addition, foreign securities and commodities trading may
not take place on all business days in New York, and may occur in various
foreign markets on days which are not business days in New York and on which net
asset value is not calculated. The calculation of net asset value may not take
place contemporaneously with the determination of the prices of portfolio
securities used in such calculation. Events affecting the values of portfolio
securities that occur between the time their prices are determined and the close
of the New York Stock Exchange will not be reflected in the calculation of net
asset value unless the Board of Directors determines that a particular event
would materially affect net asset value, in which case an adjustment will be
made.
Assets or liabilities initially expressed in terms of foreign currencies
are translated prior to the next determination of net asset value into U.S.
dollars at the spot exchange rates at 12:00 p.m. Eastern time or at such other
rates as the Investment Manager may determine to be appropriate in computing net
asset value.
Debt obligations with maturities of 60 days or less are valued at amortized
cost. The Company may use a pricing service approved by the Board of Directors
to value other debt obligations. Prices provided by such a service represent
evaluations of the mean between current bid and asked market prices, may be
determined without exclusive reliance on quoted prices, and may reflect
appropriate factors such as institution-size trading in similar groups of
securities, yield, quality, coupon rate, maturity, type of issue, individual
rating characteristics, indications of value from dealers, and other market
data. Such services may use electronic data processing techniques and/or a
matrix system to determine valuations. The procedures of such services are
reviewed periodically by the officers of the Investment Manager under the
general supervision of the Board of Directors. Short-term investments are
amortized to maturity based on their cost, adjusted for foreign exchange
translation, provided such valuations equal fair market value.
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PURCHASE AND REDEMPTION OF SHARES
The price paid for purchase and redemption of shares of the Fund is based
on the net asset value per share, which is normally calculated once daily at the
close of regular trading (normally 4:00 P.M. Eastern time) on the New York Stock
Exchange on each day that the New York Stock Exchange is open. The New York
Stock Exchange is currently closed on weekends and on the following holidays:
New Year's Day, President's Day, Martin Luther King Jr. Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas Day. The
offering price is effective for orders received by Boston Financial Data
Services ("BFDS") prior to the time of determination of net asset value. Dealers
are responsible for promptly transmitting purchase orders to BFDS. The Company
reserves the right in its sole discretion to suspend the continued offering of
its Fund's shares and to reject purchase orders in whole or in part when such
rejection is in the best interests of the Fund and its respective 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 the Fund. Under such circumstances, payment of the
redemption price could be made either in cash or in portfolio securities taken
at their value used in determining the redemption price (and, to the extent
practicable, representing a pro rata portion of each of the portfolio securities
held by the Fund), or partly in cash and partly in portfolio securities. Payment
for shares redeemed also may be made wholly or partly in the form of a pro rata
portion of each of the portfolio securities held by the Fund at the request of
the redeeming stockholder, if the Company believes that honoring such request is
in the best interests of such series. If payment for shares redeemed were to be
made wholly or partly in portfolio securities, brokerage costs would be incurred
by the stockholder in converting the securities to cash.
DIVIDENDS, DISTRIBUTIONS AND TAX STATUS
Each income dividend and capital gain distribution, if any, declared by the
Fund will be paid in full and fractional shares based on the net asset value as
determined on the payment date for such distribution, unless the stockholder or
his or her duly authorized agent has elected to receive all such payments or the
dividend or other distribution portion thereof in cash. Changes in the manner
in which dividend and other distribution payments are paid may be requested by
the stockholder or his or her duly authorized agent at any time through written
notice to the Company and will be effective as to any subsequent payment if such
notice is received by the Company prior to the record date used for determining
the stockholders entitled to such payment. Any distribution election will remain
in effect until the Company is notified by the stockholder in writing to the
contrary.
REGULATED INVESTMENT COMPANY
The Fund has qualified and intends to continue to qualify for treatment as
a "regulated investment company" under Subchapter M of the Code. The Fund is
treated as a separate corporation for tax purposes and thus the provisions of
the Code generally applicable to regulated investment companies are applied
separately to the Fund. In addition, net capital gains (the excess of net
long-term capital gain over net short-term capital loss), net investment income,
and operating expenses are determined separately for the Fund. By complying with
the applicable provisions of the Code, the Fund will not be subject to federal
income tax with respect to net investment income and net realized capital gains
distributed to its stockholders.
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To qualify as a regulated investment company under Subchapter M, generally
the Fund must: (i) derive at least 90% of its gross income each taxable year
from dividends, interest, payments with respect to securities loans, and gains
from the sale or other disposition of stock, securities or foreign currencies
and certain other income (including gains from certain options, futures and
forward contracts), ("Income Requirement"); and (ii) diversify its holdings so
that, at the end of each fiscal quarter, (a) at least 50% of the value of the
Fund's total assets is represented by cash, cash items, U.S. Government
securities, securities of other regulated investment companies and other
securities, limited, in respect of any one issuer, to an amount not greater than
5% of the Fund's total assets and 10% of the outstanding voting securities of
such issuer, and (b) not more than 25% of the value of its total assets is
invested in the securities of any one issuer (other than U.S. Government
securities or the securities of other regulated investment companies), or in two
or more issuers which the Fund controls and which are engaged in the same or
similar trades or businesses.
In any taxable year in which the Fund so qualifies and distributes at least
90% of the sum of its investment company taxable income (consisting of net
investment income, the excess of net short-term capital gains over net long-term
capital losses and net gains from certain foreign currency transactions) and its
net tax-exempt interest income (if any) ("Distribution Requirement"), it will be
taxed only on that portion, if any, of such investment company taxable income
and any net capital gain that it retains. The Fund expects to so distribute all
of such income and gains on an annual basis and thus will generally avoid any
such taxation.
Even if the Fund qualifies as a "regulated investment company," it may be
subject to a federal excise tax unless it meets certain additional distribution
requirements. Under the Code, a nondeductible excise tax of 4% ("Excise Tax") is
imposed on the excess of a regulated investment company's "required
distribution" for a calendar year ending within the regulated investment
company's taxable year over the "distributed amount" for that calendar year. The
term "required distribution" means the sum of (i) 98% of ordinary income
(generally net investment income and net gains from certain foreign currency
transactions) for the calendar year, (ii) 98% of capital gain net income
(generally both long-term and short-term capital gain) for the one-year period
ending on October 31 (as though that period were the regulated investment
company's taxable year), and (iii) the sum of any untaxed, undistributed net
investment income and net capital gains of the regulated investment company for
prior periods. The term "distributed amount" generally means the sum of (i)
amounts actually distributed by the Fund from its current year's ordinary income
and capital gain net income and (ii) any amount on which the Fund pays income
tax for the year. The Fund intends to meet these distribution requirements to
avoid Excise Tax liability.
Stockholders who are subject to federal or state income or franchise taxes
will be required to pay taxes on dividend and capital gain distributions they
receive from the Fund whether paid in additional shares of the Fund or in cash.
To the extent that dividends received by the Fund would qualify for the 70%
dividends-received deduction available to corporations, the Fund must designate
in a written notice to stockholders, within 60 days after the close of the
Fund's taxable year, the amount of the Fund's dividends that would be eligible
for this treatment. In order to qualify for the dividends-received deduction
with respect to a dividend paid on Fund shares, a corporate stockholder must
hold the Fund shares for at least 45 days during the 90 day period that begins
45 days before the shares become ex-dividend with respect to the dividend.
Stockholders, such as qualified employee benefit plans, which are exempt from
federal and state taxation generally would not have to pay income tax on
dividend or capital gain distributions. Prospective tax-exempt investors should
consult their own tax advisers with respect to the tax consequences of an
investment in the Fund under federal, state, and local tax laws.
WITHHOLDING
Dividends paid by the Fund to a stockholder who, as to the U.S., is a
nonresident alien individual, nonresident alien fiduciary of a trust or estate,
foreign corporation, or foreign partnership (a "foreign stockholder") generally
will be subject to U.S. withholding tax (at a rate of 30% or a lower treaty
rate, if applicable). Withholding will not apply, however, if a dividend paid by
the Fund to a foreign stockholder is "effectively connected" with the conduct of
a U.S. trade or business, in which case the reporting and withholding
requirements applicable to U.S. citizens or domestic corporations will apply.
Distributions of net capital gain to foreign stockholders who are neither U.S.
resident aliens nor engaged in a U.S. trade or business generally are not
subject to withholding or U.S. federal income tax.
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FOREIGN CURRENCY, OPTIONS, FUTURES AND FORWARD CONTRACTS
Gains from the sale or other disposition of foreign currencies (except
certain gains therefrom that may be excluded by future regulations), and gains
from options, futures, and forward contracts derived by the Fund with respect to
its business of investing in securities of foreign currencies, will qualify as
permissible income under the Income Requirement.
SECTION 1256 CONTRACTS
Many of the options, futures contracts and forward contracts entered into
by the Fund are "Section 1256 contracts." Any gains or losses realized on
Section 1256 contracts are generally considered 60% long-term and 40% short-term
capital gains or losses, although certain foreign currency gains and losses from
such contracts may be treated as ordinary income in character. Section 1256
contracts held by the Fund at the end of each taxable year (and, for purposes of
the Excise Tax, on October 31 or such other dates as prescribed under the Code),
other than Section 1256 contracts that are part of a "mixed straddle" with
respect to which the Fund has made an election not to have the following rules
apply, must be "marked-to-market" (that is, treated as sold for their fair
market value) for federal income tax purposes, with the result that unrealized
gains or losses are treated as though they were realized. The 60% portion of
gains on Section 1256 contracts that is treated as long-term capital gain will
qualify for the reduced maximum tax rates on net capital gain -- 20% (10% for
taxpayers in the 15% marginal tax bracket) for gain recognized on capital assets
held for more than 12 months.
STRADDLE RULES
Generally, the hedging transactions and other transactions in options,
futures and forward contracts undertaken by the Fund may result in "straddles"
for U.S. federal income tax purposes. The straddle rules may affect the amount,
character and timing of recognition of gains or losses realized by the Fund. In
addition, losses realized by the Fund on positions that are part of a straddle
position may be deferred under the straddle rules, rather than being taken into
account for the taxable year in which these losses are realized. Because limited
regulations implementing the straddle rules have been promulgated, the tax
consequences of hedging transactions and options, futures and forward contracts
to the Fund are not entirely clear.
Hedging transactions may increase the amount of short-term capital gain
realized by the Fund, which is taxed as ordinary income when distributed to
stockholders. The Fund may make one or more elections available under the Code
which are applicable to straddle positions. If the Fund makes any of the
elections, the amount, character and timing of the recognition of gains or
losses from the affected straddle positions will be determined under rules that
vary according to elections made. The rules applicable under certain elections
operate to accelerate the recognition of gains or losses from the affected
straddle positions. Because the application of the straddle rules may affect the
character of gains or losses, defer losses and/or accelerate the recognition of
gains or losses from the affected straddle positions, the amount which must be
distributed to stockholders, and which will be taxed to stockholders as ordinary
income or long-term capital gain, may be increased or decreased substantially as
compared to the Fund that did not engage in such hedging transactions.
SECTION 988 GAINS AND LOSSES
Under the Code, gains or losses attributable to fluctuations in exchange
rates which occur between the time the Fund accrues interest or other
receivables, or accrues expenses or other liabilities, denominated in a foreign
currency and the time the Fund actually collects such receivables or pays such
liabilities, generally are treated as ordinary income or loss. Similarly, on the
disposition of debt securities denominated in foreign currency and on the
disposition of certain futures contracts, forward contracts and options, gains
or losses attributable to fluctuation in the value of foreign currency between
the date of acquisition of the debt security, contract or option and the date of
disposition thereof are also treated as ordinary gain or loss. These gains or
losses, referred to under the Code as
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"Section 988" gains or losses, may increase or decrease the amount of the Fund's
investment company taxable income to be distributed to stockholders as ordinary
income.
FOREIGN TAXES
The Fund may be required to pay withholding and other taxes imposed by
foreign countries which would reduce the Fund's investment income, generally at
rates from 10% to 40%. Tax conventions between certain countries and the United
States may reduce or eliminate such taxes. If more than 50% of the value of the
Fund's total assets at the close of its taxable year consists of securities of
foreign corporations, the Fund will be eligible to elect to "pass-through" to
the Fund's stockholders the amount of foreign income and similar taxes paid by
the Fund. If this election is made, stockholders generally subject to tax will
be required to include in gross income (in addition to taxable dividends
actually received) their pro rata shares of the foreign income taxes paid by the
Fund, and may be entitled either to deduct (as an itemized deduction) their pro
rata shares of foreign taxes in computing their taxable income or to use such
amount (subject to limitations) as a foreign tax credit against their U.S.
federal income tax liability. No deduction for foreign taxes may be claimed by a
stockholder who does not itemize deductions. Each stockholder will be notified
within 60 days after the close of the Fund's taxable year whether the foreign
taxes paid by the Fund will be "passed-through" for that year.
The foregoing is a general abbreviated summary of present U.S. federal
income tax laws applicable to the Fund, their stockholders and dividend and
capital gain distributions by the Fund. Stockholders are urged to consult their
own tax advisers for more detailed information and for information regarding any
foreign, state, and local tax laws and regulations applicable to dividends and
other distributions received from the Fund.
INVESTMENT RESULTS
Average annual total return ("T") of the Fund is calculated as follows: an
initial hypothetical investment of $1,000 ("P") is divided by the net asset
value of shares of the Fund as of the first day of the period in order to
determine the initial number of shares purchased. Subsequent dividend and
capital gain distributions by the Fund are paid at net asset value on the
payment date determined by the Board of Directors. The sum of the initial shares
purchased and shares acquired through distributions is multiplied by the net
asset value per share of the Fund as of the end of the period ("n") to determine
ending redeemable value ("ERV"). The ending value divided by the initial
investment converted to a percentage equals total return. The formula thus used,
as required by the SEC, is:
n
P(1+T) = ERV
The resulting percentage indicates the positive or negative investment
results that an investor would have experienced from reinvested dividend and
capital gain distributions and changes in share price during the period.
This formula reflects the following assumptions: (i) all share sales at
net asset value, without a sales load reduction from the $1,000 initial
investment; (ii) reinvestment of dividends and distributions at net asset
value on the reinvestment date determined by the Board of Directors; and
(iii) complete redemption at the end of any period illustrated. Total return
may be calculated for one year, five years, ten years, and for other periods,
and will typically be updated on a quarterly basis. The average annual
compound rate of return over various periods may also be computed by using
ending values as determined above.
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In addition, in order to more completely represent the Fund's performance
or more accurately compare such performance to other measures of investment
return, the Fund also may include in advertisements and stockholder reports
other total return performance data based on time-weighted, monthly-linked total
returns computed on the percentage change of the month end net asset value of
the Fund after allowing for the effect of any cash additions and withdrawals
recorded during the month. Returns may be quoted for the same or different
periods as those for which average total return is quoted. The Fund's investment
results will vary from time to time depending upon market conditions, the
composition of the Fund's portfolio, and operating expenses, so that any
investment results reported should not be considered representative of what an
investment in the Fund may earn in any future period. These factors and possible
differences in calculation methods should be considered when comparing the
Fund's investment results with those published for other investment companies,
other investment vehicles and unmanaged indices. Results also should be
considered relative to the risks associated with the Fund's investment objective
and policies.
The Fund may from time to time compare its investment results with the
following:
1. The DAX 100 Index, an unmanaged index which is commonly used as a
performance comparison for funds that invest primarily in Germany and
which measures the total rate of return of the 100 most highly
capitalized stocks traded on the Frankfurt Stock Exchange.
2. The MDAX Index, a total rate of return index of 70 medium sized
German companies.
3. The Morgan Stanley Capital International Europe Index which measures
the total rate of return of nearly 600 stocks from 15 developed
European countries.
4. Data and mutual fund rankings published or prepared by Lipper
Analytical Services, Inc. and Morningstar, which rank mutual funds by
overall performance, investment objectives, and assets.
GENERAL INFORMATION
The Company was organized as a closed-end management investment company
incorporated under the laws of the State of Maryland on February 2, 1990. On
December 4, 1998, the Board of Directors, including the Directors who are not
interested persons of the Fund (as defined in the 1940 Act), approved the final
plan for the conversion of the Fund to an open-end investment company. At the
Company's Annual Meeting on January 26, 1999, the Company's stockholders
approved, among other things, (a) changing the Fund's investment strategy from a
predominately German investment portfolio to a broader European investment
portfolio, (b) changing the Fund's name to Dresdner RCM Europe Fund, (c)
changing the Fund from a closed-end investment company to an open-end investment
company, (d) modifying and eliminating certain fundamental investment
restrictions of the Fund, (e) the Investment Management Agreement between the
Fund and the Investment Manager, and (f) the Rule 12b-1 Distribution Plan of the
Fund. The Fund converted to an open-end investment company on [May 3], 1999.
The Board of Directors has authority to issue an unlimited number of shares
of separate series and classes. The Fund is currently the only series of the
Company. Upon conversion to an open-end fund, the Fund commenced offering two
classes of stock: Class N and Class I, as described in the Prospectus.
Outstanding shares of the Fund on the date of conversion were automatically
redesignated Class N shares.
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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.
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
the 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 the 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 the Fund are entitled to receive the assets attributable to the
Fund that are available for distribution, and a distribution of any general
assets not attributable to a particular Fund that are available for
distribution, in such manner and on such general basis as the Board of Directors
may determine.
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 _____________________.
The validity of the capital stock offered by the Fund has been passed upon by
______________. Paul, Hastings, Janofsky & Walker LLP has acted and will
continue to act as counsel to the Investment Manager in various matters.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, One Post Office Square, Boston, Massachusetts
02109, have been appointed as independent auditors for the Company.
Page 35
<PAGE>
FINANCIAL STATEMENTS
Incorporated by reference herein are the financial statements of the Fund
contained in the Fund's 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 Fund's 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 Fund's Prospectus and this SAI do not contain all of the information
set forth in the Company's registration statement and related forms as filed
with the SEC, certain portions of which are omitted in accordance with rules and
regulations of the SEC. The registration statement and related forms may be
inspected at the Public Reference Room of the SEC at Room 1024, 450 5th Street,
N.W., Judiciary Plaza, Washington, D.C. 20549, and copies thereof may be
obtained from the SEC at prescribed rates. It is also available on the SEC's
Internet Web site at http://www.sec.gov. Statements contained in the Prospectus
or this SAI as to the contents of any contract or other document referred to
herein or in the Prospectus are not necessarily complete, and, in each instance,
reference is made to the copy of such contract or other document filed as an
exhibit to each Company's registration statement, each such statement being
qualified in all respects by such reference.
Page 36
<PAGE>
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS.
(a) Form of Amended and Restated Articles of Incorporation of Registrant
is incorporated herein by reference to Exhibit 23(a) of the
Registration Statement previously filed on February 19, 1999.
(b) Form of By-laws of Registrant is filed herein as Exhibit 23(b).
(c) (1) Form of certificate for Class N shares of capital stock ($0.001
par value) of Registrant is incorporated herein by reference to
Exhibit 23(c)(1) of the Registration Statement previously filed on
February 19, 1999.
(2) Form of certificate for Class I shares of capital stock ($0.001
par value) of Registrant is incorporated herein by reference to
Exhibit 23(c)(2) of the Registration Statement previously filed on
February 19, 1999.
(d) Form of Investment Management Agreement between Dresdner RCM Global
Investors LLC and Registrant on behalf of the Dresdner RCM Europe Fund
is incorporated herein by reference to Exhibit 23(d) of the
Registration Statement previously filed on February 19, 1999.
(e) Form of Distribution Agreement between Registrant and Funds
Distributor Inc. is incorporated herein by reference to Exhibit 23(e)
of the Registration Statement previously filed on February 19, 1999.
(f) None
(g) To be filed by subsequent amendment.
(h) (1) Form of Service Agreement among Dresdner RCM Global Investors
LLC, Registrant, and Funds Distributor, Inc. is incorporated
herein by reference to Exhibit 23(h)(1) of the Registration
Statement previously filed on February 19, 1999.
(2) Form of Transfer Agency Agreement between Registrant and State
Street Bank and Trust Company is incorporated herein by reference
to Exhibit 23(h)(2) of the Registration Statement previously
filed on February 19, 1999.
(i) To be filed by subsequent amendment.
C-3
<PAGE>
(j) (1) Power of Attorney dated February 12, 1999 is incorporated herein
by reference to Exhibit 23(j) of the Registration Statement previously
filed on February 19, 1999.
(2) Consent of PricewaterhouseCoopers LLP to be filed by
subsequent amendment.
(k) Not applicable.
(l) Not applicable.
(m) To be filed by subsequent amendment.
(n) Financial Data Schedules for the fiscal year ended December 31, 1998
are filed herein as Exhibit 23(n).
(o) Form of Multiple Class of Shares Plan of Registrant pursuant to Rule
18f-3, on behalf of Dresdner RCM Europe Fund Inc. is filed herein as
Exhibit 23(o).
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.
The Registrant and the directors and officers of Registrant obtained
coverage under an Errors and Omissions insurance policy. The terms and
conditions of the policy coverage conforms generally to the standard coverage
available throughout the investment company industry. The coverage also applies
to Registrant's investment manager and its members and employees.
C-4
<PAGE>
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of Registrant pursuant to the provisions of Maryland law and
Registrant's Articles of Incorporation and Bylaws, or otherwise, Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in said Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by Registrant of expenses incurred or
paid by a director, officer or controlling person of Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER
Registrant's investment manager, Dresdner RCM Global Investors LLC, is
a Delaware limited liability company, whose two members are Dresdner Bank AG
("Dresdner") and Dresdner Kleinwort Benson North America, Inc. ("Dresdner
Kleinwort Benson"). Dresdner is an international banking organization whose
principal executive offices are located at Gallunsanlage 7, 60041 Frankfurt am
Main, Frankfurt, Germany. Dresdner Kleinwort Benson is an indirect wholly owned
subsidiary of Dresdner whose principal executive offices are located at 75 Wall
Street, New York, New York 10005.
The individuals who sit on the Board of Managers of Dresdner RCM have held
the following director or officer positions within the past two fiscal years:
<TABLE>
<CAPTION>
NAME OF THE OFFICER BUSINESS AFFILIATIONS ADDRESS
OR MEMBER OF THE BOARD OF
MANAGERS
<S> <C> <C>
Gerhard Eberstadt Dresdner Bank AG Jurgen-Ponto-Platz 1
(May 1998 - present) D-60301
Frankfurt am Main
Germany
Chairman, Dresdner Kleinwort 75 Wall Street
Benson North America, Inc. New York, NY 10005
(September 1996 - present)
Director, KBIMA (December 75 Wall Street
1997 - present) New York, NY 10005
</TABLE>
C-5
<PAGE>
<TABLE>
<CAPTION>
NAME OF THE OFFICER BUSINESS AFFILIATIONS ADDRESS
OR MEMBER OF THE BOARD OF
MANAGERS
<S> <C> <C>
George N. Fugelsang President, Chief Executive 75 Wall Street
Officer, Chairman, Dresdner New York NY 10005
Kleinwort Benson North
America LLC (February 1994 -
present)
Director, Dresdner Kleinwort 75 Wall Street
Benson North America Services New York, NY 10005
LLC (September 1996 -
present); Director, KBIMA
(December 1997 - present)
Director, KBIMA (December 75 Wall Street
1997 - present) New York, NY 10005
</TABLE>
C-6
<PAGE>
<TABLE>
<CAPTION>
NAME OF THE OFFICER BUSINESS AFFILIATIONS ADDRESS
OR MEMBER OF THE BOARD OF
MANAGERS
<S> <C> <C>
Susan C. Gause Dresdner RCM (July 1994 - Four Embarcadero Center
present) San Francisco, CA 94111
Chief Operating Officer, Senior Four Embarcadero Center
Managing Director, and San Francisco, CA 94111
Member of the Board
of Managers (July 1998-present)
Luke D. Knecht Managing Director (July 1998 Four Embarcadero Center
-present), Member of the Board San Francisco, CA 94111
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 East Singapore
Asia) (October 1997 - present)
Managing Director, Dresdner Farberstrasse 6,
Bank (Schweiz) AG (November Zurich, Switzerland
1997 - present)
Chairman, DFV Deutsche Fonds Mainzer Lanstrasse 11-13
und Vorsorgeberatungs (July 60301 Frankfurt
1996 - June 1997) Germany
Deutscher Investment-Trust Mainzer Lanstrasse 11-13
(June 1996 - June 1997) 60301 Frankfurt
Germany
Managing Director, GKS Windmuhlweg 12
Gesellschaft fur Kontenservice 95030 Hof
GmbH (June 1994 - June 1997) Germany
</TABLE>
C-7
<PAGE>
<TABLE>
<CAPTION>
NAME OF THE OFFICER BUSINESS AFFILIATIONS ADDRESS
OR MEMBER OF THE BOARD OF
MANAGERS
<S> <C> <C>
William L. Price Chief Executive Officer and Four Embarcadero Center
Global Chief Investment Officer, San Francisco, CA 94111
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 (UK) 10 Fenchurch Street
(January 1998 - present) London, UK EC3M3LB
Jeffrey S. Rudsten Senior Managing Director (July Four Embarcadero Center
1998 - present); Member of the San Francisco, CA 94111
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 Investment San Francisco, CA 94111
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 (UK) 10 Fenchurch Street
(January 1998 - present) London, UK EC3M3LB
Kenneth B. Weeman, Jr. Dresdner RCM (October 1979 - Four Embarcadero Center
present) San Francisco, CA 94111
</TABLE>
C-8
<PAGE>
<TABLE>
<CAPTION>
NAME OF THE OFFICER BUSINESS AFFILIATIONS ADDRESS
OR MEMBER OF THE BOARD OF
MANAGERS
<S> <C> <C>
Vice Chairman, Senior Four Embarcadero Center
Managing Director (July 1998 - San Francisco, CA 94111
present)
Director, KBIMA (December 75 Wall Street
1997- present) New York, NY 10005
Director, Dresdner RCM (UK) 10 Fenchurch Street
(January 1998 - present) London, UK EC3M3LB
</TABLE>
ITEM 27. PRINCIPAL UNDERWRITERS.
(a) Funds Distributor, Inc. ("FDI"), whose principal offices are
located at 60 State Street, Suite 1300, Boston Massachusetts
02109, is the principal underwriter of Registrant. FDI is an
indirect, wholly owned subsidiary of Boston Institutional Group,
Inc., a holding company, all of whose outstanding shares are
owned by key employees. FDI is a broker-dealer registered under
the Securities Exchange Act of 1934, as amended, and is a member
of the National Association of Securities Dealers, Inc. FDI also
serves as principal underwriter of the following investment
companies:
American Century California Tax-Free and Municipal Funds
American Century Capital Portfolios, Inc.
American Century Government Income Trust
American Century International Bond Funds
American Century Investment Trust
American Century Municipal Trust
American Century Mutual Funds, Inc.
American Century Premium Reserves, Inc.
American Century Quantitative Equity Funds
American Century Strategic Asset Allocations, Inc.
American Century Target Maturities Trust
American Century Variable Portfolios, Inc.
American Century World Mutual Funds, Inc.
The Brinson Funds
Dresdner RCM Capital Funds, Inc.
Dresdner RCM Investment Funds Inc.
Founders Funds, Inc.
Harris Insight Funds Trust
HT Insight Funds, Inc. d/b/a Harris Insight Funds
C-9
<PAGE>
J.P. Morgan Institutional Funds
J.P. Morgan Funds
JPM Series Trust
JPM Series Trust II
LaSalle Partners Funds, Inc.
Kobrick-Cendant Investment Trust
Merrimac Series
Monetta Fund, Inc.
Monetta Trust
The Montgomery Funds I
The Montgomery Funds II
The Munder Framlington Funds Trust
The Munder Funds Trust
The Munder Funds, Inc.
National Investors Cash Management Fund, Inc.
Orbitex Group of Funds
SG Cowen Funds, Inc.
SG Cowen Income + Growth Fund, Inc.
SG Cowen Standby Reserve Fund, Inc.
SG Cowen Standby Tax-Exempt Reserve Fund, Inc.
SG Cowen Series Funds, Inc.
St. Clair Funds, Inc.
The Skyline Funds
Waterhouse Investors Family of Funds, Inc.
WEBS Index Fund, Inc.
FDI does not act as a depositor or investment adviser of any
investment company.
C-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 None
Donald R. Roberson Executive Vice President None
William S. Nichols Executive Vice President None
Michael S. Petrucelli Senior Vice President None
Margaret W. Chambers Senior Vice President, None
General Counsel and Chief
Compliance Officer
Joseph F. Tower III Director, Senior Vice None
President, Treasurer and
Chief Financial Officer
Paula R. David Senior Vice President None
Gary S. MacDonald Senior Vice President None
Judith K. Benson Senior Vice President None
Bernard A. Whalen Senior Vice President None
William J. Nutt Chairman and Director None
(c) Not Applicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
Accounts, books and other records required by Rules 31a-1 and 31a-2
under the Investment Company Act of 1940, as amended, are maintained and held in
the offices of Registrant's investment manager, Dresdner RCM Global Investors
LLC, Four Embarcadero Center, San Francisco, California 94111; and/or
Registrant's distributor, Funds Distributor, Inc., 60 State Street, Suite 1300,
Boston, Massachusetts 02109.
Records covering portfolio transactions are also maintained and kept
by Registrant's custodian and transfer agent, State Street Bank and Trust
Company, U.S. Mutual Funds Services Division, P.O. Box 1713, Boston,
Massachusetts 02105.
C-11
<PAGE>
ITEM 29. MANAGEMENT SERVICES.
None
ITEM 30. UNDERTAKINGS.
Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of Registrant's latest annual report to shareholders, upon
request and without charge.
C-12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Pre-Effective Amendment No. 1 to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in San Francisco,
California on April 7, 1999.
DRESDNER RCM INVESTMENT FUNDS INC.
By: /s/William S. Stack, President
---------------------
By: /s/Caroline M. Hirst, Treasurer, Chief
---------------------
Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
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 April 7, 1999
/s/William S. Stack
-------------------
William S. Stack
(2) Chief Financial and Treasurer April 7, 1999
Accounting Officer
/s/Caroline M. Hirst
--------------------
Caroline M. Hirst
<PAGE>
SIGNATURE TITLE DATE
(3) Directors
/s/ Rolf Passow*
----------------------- April 7, 1999
Rolf Passow
/s/ Theodore J. Coburn*
----------------------- April 7, 1999
Theodore J. Coburn
/s/ Robert J. Birnbaum*
----------------------- April 7, 1999
Robert J. Birnbaum
/s/ Carroll Brown *
----------------------- April 7, 1999
Carroll Brown
/s/James E. Dowd*
----------------------- April 7, 1999
James E. Dowd
/s/Siegfried Kessler*
----------------------- April 7, 1999
Siegfried Kessler
/s/Gottfried W. Perbix*
----------------------- April 7, 1999
Gottfried W. Perbix
/s/Jacob Saliba*
----------------------- April 7, 1999
Jacob Saliba
/s/Alfred W. Fiore*
----------------------- April 7, 1999
Alfred W. Fiore
/s/George N. Fugelsang*
----------------------- April 7, 1999
George N. Fugelsang
By: /s/Robert J. Goldstein
----------------------- April 7, 1999
Robert J. Goldstein
as Attorney-in-Fact
* By Robert J. Goldstein, pursuant to a Power of
Attorney dated February 12, 1999.
<PAGE>
EXHIBIT LIST
NUMBER DESCRIPTION
99.23(b) Form of By-laws
99.23(n) Financial Data Schedules
99.23(o) Form of Multiple Class of Shares Plan
<PAGE>
EXHIBIT 99.23(b)
FORM OF
BY-LAWS
OF
DRESDNER RCM INVESTMENT FUNDS INC.
<PAGE>
FORM OF
BY-LAWS
OF
DRESDNER RCM INVESTMENT FUNDS INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Section 1. PRINCIPAL OFFICE . . . . . . . . . . . . . . . . . . . .1
Section 2. OTHER OFFICES. . . . . . . . . . . . . . . . . . . . . .1
ARTICLE II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Meetings of Stockholders. . . . . . . . . . . . . . . . . . . . . . . . .1
Section 1. ANNUAL MEETING . . . . . . . . . . . . . . . . . . . . .1
Section 2. SPECIAL MEETINGS . . . . . . . . . . . . . . . . . . . .1
Section 3. PLACE OF MEETING . . . . . . . . . . . . . . . . . . . .2
Section 4. NOTICE OF MEETINGS: WAIVER OF NOTICE . . . . . . . . . .2
Section 5. QUORUM . . . . . . . . . . . . . . . . . . . . . . . . .2
Section 6. ORGANIZATION . . . . . . . . . . . . . . . . . . . . . .2
Section 7. ORDER OF BUSINESS. . . . . . . . . . . . . . . . . . . .2
Section 8. FIXING OF RECORD DATE. . . . . . . . . . . . . . . . . .3
Section 9. VOTING . . . . . . . . . . . . . . . . . . . . . . . . .3
Section 10. PROXIES. . . . . . . . . . . . . . . . . . . . . . . . .3
Section 11. VOTING BY BALLOT . . . . . . . . . . . . . . . . . . . .4
Section 12. VOTING OF SHARES BY CERTAIN HOLDERS. . . . . . . . . . .4
Section 13. INSPECTORS . . . . . . . . . . . . . . . . . . . . . . .4
Section 14. CONSENT OF STOCKHOLDERS IN LIEU OF MEETING . . . . . . .5
ARTICLE III. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Board of Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Section 1. GENERAL POWERS . . . . . . . . . . . . . . . . . . . . .5
Section 2. NUMBER OF DIRECTORS. . . . . . . . . . . . . . . . . . .5
Section 3. TERM OF DIRECTORS. . . . . . . . . . . . . . . . . . . .5
Section 4. RESIGNATIONS . . . . . . . . . . . . . . . . . . . . . .5
Section 5. VACANCIES. . . . . . . . . . . . . . . . . . . . . . . .5
Section 6. PLACE OF MEETINGS. . . . . . . . . . . . . . . . . . . .6
Section 7. REGULAR MEETINGS . . . . . . . . . . . . . . . . . . . .6
Section 8. SPECIAL MEETINGS . . . . . . . . . . . . . . . . . . . .6
Section 9. TELEPHONE MEETINGS . . . . . . . . . . . . . . . . . . .6
Section 10. NOTICE OF MEETINGS . . . . . . . . . . . . . . . . . . .6
Section 11. WAIVER OF NOTICE OF MEETINGS . . . . . . . . . . . . . .6
Section 12. QUORUM AND VOTING. . . . . . . . . . . . . . . . . . . .7
Section 13. ORGANIZATION . . . . . . . . . . . . . . . . . . . . . .7
Section 14. WRITTEN CONSENT OF DIRECTORS IN LIEU OF A MEETING. . . .7
Section 15. COMPENSATION . . . . . . . . . . . . . . . . . . . . . .7
Section 16. NET ASSET VALUE. . . . . . . . . . . . . . . . . . . . .7
<PAGE>
ARTICLE IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
Committees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
Section 1. COMMITTEES OF THE BOARD OF DIRECTORS . . . . . . . . . .8
Section 2. MEETINGS; QUORUM . . . . . . . . . . . . . . . . . . . .8
ARTICLE V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
Officers, Agents, and Employees . . . . . . . . . . . . . . . . . . . . .8
Section 1. ELECTION OR APPOINTMENT OF OFFICERS. . . . . . . . . . .8
Section 2. EFFECT OF ELECTION OR APPOINTMENT OF OFFICERS,
AGENTS, AND EMPLOYEES . . . . . . . . . . . . . . . .9
Section 3. RESIGNATIONS . . . . . . . . . . . . . . . . . . . . . .9
Section 4. REMOVAL OF OFFICER, AGENT, OR EMPLOYEE . . . . . . . . .9
Section 5. VACANCIES. . . . . . . . . . . . . . . . . . . . . . . .9
Section 6. COMPENSATION . . . . . . . . . . . . . . . . . . . . . .9
Section 7. BONDS OR OTHER SECURITY. . . . . . . . . . . . . . . . 10
Section 8. PRESIDENT. . . . . . . . . . . . . . . . . . . . . . . 10
Section 9. VICE PRESIDENT . . . . . . . . . . . . . . . . . . . . 10
Section 10. TREASURER. . . . . . . . . . . . . . . . . . . . . . . 10
Section 11. SECRETARY. . . . . . . . . . . . . . . . . . . . . . . 11
Section 12. DELEGATION OF DUTIES . . . . . . . . . . . . . . . . . 11
ARTICLE VI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Indemnification and Insurance . . . . . . . . . . . . . . . . . . . . . 12
Section 1. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . 12
Section 2. INSURANCE OF OFFICERS, DIRECTORS, EMPLOYEES AND
AGENTS . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE VII. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE VIII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 1. STOCK CERTIFICATES . . . . . . . . . . . . . . . . . . 13
Section 2. BOOKS OF ACCOUNTS AND RECORD OF STOCKHOLDERS . . . . . 13
Section 3. TRANSFERS OF SHARES. . . . . . . . . . . . . . . . . . 13
Section 4. REGULATIONS. . . . . . . . . . . . . . . . . . . . . . 14
Section 5. LOST, DESTROYED, OR MUTILATED CERTIFICATES . . . . . . 14
Section 6. FIXING OF A RECORD DATE FOR DIVIDENDS AND
DISTRIBUTIONS. . . . . . . . . . . . . . . . . . . . 14
Section 7. INFORMATION TO STOCKHOLDERS AND OTHERS . . . . . . . . 15
ARTICLE IX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Depositories and Custodians . . . . . . . . . . . . . . . . . . . . . . 15
Section 3. OTHER ARRANGEMENTS . . . . . . . . . . . . . . . . . . 15
ARTICLE X. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Contracts; Safekeeping and Transfer of Funds and Securities . . . . . . 15
Section 1. CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . 15
Section 2. CHECKS, NOTES DRAFTS, ETC. . . . . . . . . . . . . . . 15
Section 3. SALE OR TRANSFER OF SECURITIES . . . . . . . . . . . . 16
ARTICLE XI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Independent Public Accountants. . . . . . . . . . . . . . . . . . . . . 16
ii
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ARTICLE XII. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Annual Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE XIII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
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<PAGE>
FORM OF
BY-LAWS
OF
DRESDNER RCM INVESTMENT FUNDS INC.
ARTICLE I
OFFICES
Section 1. PRINCIPAL OFFICE. The principal office of the Corporation
shall be in the City of Baltimore, State of Maryland, or at any other place or
places, whether or not within the State of Maryland, as the Board of Directors
may designate.
Section 2. OTHER OFFICES. The Corporation may have such other offices
in such places as the Board of Directors may from time-to-time determine or as
the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. ANNUAL MEETING. No annual meeting of the stockholders of
the Corporation shall be held in any year in which the election of Directors is
not required to be acted upon under the Investment Company Act of 1940, as
amended (the "1940 Act"), unless otherwise determined by the Board of Directors.
An annual meeting may be held at any place within the United States as may be
determined by the Board of Directors and as shall be designated in the notice of
the meeting, at the time specified by the Board of Directors. Any business of
the Corporation may be transacted at an annual meeting without being
specifically designated in the notice unless otherwise provided by statute, the
Corporation's charter, or these By-Laws.
Section 2. SPECIAL MEETINGS. Special meetings of the stockholders,
unless otherwise provided by law or by the Articles of Incorporation, may be
called for any purpose or purposes by the Chairman of the Board, by a majority
of the Board of Directors, by the President, or on the written request of the
holders of at least 25% of the outstanding stock of the Corporation entitled to
vote at such meeting. Such request shall state the purpose of such meeting and
the matters proposed to be acted on at such meeting. The Secretary shall inform
the stockholders who make the request of the reasonably estimated cost of
preparing and mailing notice of the meeting and, upon payment to the Corporation
of such costs, the Secretary shall give notice to each stockholder entitled to
notice of the meeting. Unless requested by stockholders entitled to cast a
majority of all the votes entitled to be cast at such a meeting, a special
meeting need not be called to consider any matter that is substantially the same
as a matter voted on at any special meeting of the stockholders held during the
preceding 12 months. No business shall be transacted at any special meeting
except as provided in the notice of meeting.
Section 3. PLACE OF MEETING. Annual and special meetings of the
stockholders shall be held at the principal executive office of the Corporation
in the City of New York, New
<PAGE>
York, or at such other place within the United States as the Board of Directors
may from time-to-time determine and as shall be stated in the notice of the
meeting.
Section 4. NOTICE OF MEETINGS: WAIVER OF NOTICE. Notice of the place,
date and time of the holding of each annual and special meeting of the
stockholders and the purpose or purposes of each special meeting shall be given
personally or by mail, not less than ten (10) nor more than ninety (90) days
before the date of such meeting, to each stockholder entitled to vote at such
meeting and to each other stockholder entitled to notice of the meeting. Notice
by mail shall be deemed to be duly given when deposited in the United States
mail addressed to the stockholder at his address as it appears on the records of
the Corporation, with postage thereon prepaid. Notice of any meeting of
stockholders shall be deemed waived by any stockholder who shall attend such
meeting in person or by proxy, or who shall, either before or after the meeting,
submit a signed waiver of notice which is filed with the records of the meeting.
If any meeting of the stockholders shall be adjourned to another time and place
not more than 120 days after the original record date, and if the time and place
to which the meeting shall be adjourned were announced at the meeting at which
the adjournment is taken, no further notice of such meeting need be given.
Section 5. QUORUM. Except as otherwise provided by statute, the
Articles of Incorporation, or these By-Laws, the presence at any stockholders'
meeting, in person or by proxy, of stockholders entitled to cast a majority of
the votes entitled to be cast at such meeting shall constitute a quorum for the
transaction of business. A majority of the votes cast at a meeting of
stockholders, duly called and at which a quorum is present, shall be sufficient
to take or authorize action upon any matter which may properly come before the
meeting, unless the matter is one upon which, by express provisions of
applicable statutes, of the Articles of Incorporation or of these By-Laws, a
different vote is required, in which case such express provisions shall govern
and control the decision of such matter.
Section 6. ORGANIZATION. At each meeting of the stockholders, the
Chairman of the Board (if one has been designated by the Board of Directors), or
in the Chairman of the Board's absence or inability to act, the President, or in
the absence or inability of the Chairman of the Board and the President, a Vice
President, shall act as chairman of the meeting. The Secretary or the Assistant
Secretary, or in the Secretary's or the Assistant Secretary's absence or
inability to act, any person appointed by the chairman of the meeting, shall act
as secretary of the meeting and keep the minutes thereof.
Section 7. ORDER OF BUSINESS. The order of business at all meetings of
the stockholders shall be as determined by the chairman of the meeting.
Section 8. FIXING OF RECORD DATE. The Board of Directors may set a
record date for the purpose of determining stockholders entitled to notice of or
to vote at any meeting of the stockholders, or in order to make a determination
of stockholders for any other proper purpose. For purposes of determining the
record date for any meeting of stockholders, the record date may not be prior to
the close of business on the day the record date is fixed, and shall be not more
than ninety (90) nor less than ten (10) days before the date of the meeting of
the stockholders. Only those persons who were holders of record of shares at
such time shall be entitled to vote at such meeting and any adjournment thereof.
In lieu of fixing a record date, the Board of Directors may provide that the
stock transfer books shall be closed for a stated period not to exceed twenty
(20) days, except that if the stock transfer books are closed for the
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<PAGE>
purpose of determining stockholders entitled to notice of, or to vote at, a
meeting of stockholders, such books shall be closed for at least ten (10) days
before the date of such meeting. If no record date is fixed and the stock
transfer books are not closed for the determination of stockholders, the record
date for the determination of stockholders entitled to notice of, or to vote at,
a meeting of stockholders shall be the later of the close of business on the day
on which notice of the meeting of stockholders is mailed or the thirtieth (30th)
day before the meeting, or, if notice is waived by all stockholders, at the
close of business on the tenth (10th) day next preceding the day on which the
meeting is held.
Section 9. VOTING. Except as otherwise provided by Maryland Law, the
1940 Act, or the Articles of Incorporation, each holder of record of shares of
stock of the Corporation having voting power shall be entitled at each meeting
of the stockholders to one vote for every share and a fractional vote for each
fraction of a share of capital stock of the Corporation (regardless of class)
standing in such stockholder's name on the record of stockholders of the
Corporation as of the record date determined pursuant to Section 8 of this
Article or, if such record date shall not have been so fixed, then at the later
of (a) the close of business on the day on which notice of the meeting is mailed
or (b) the 30th day before the meeting. With respect to the election of
directors, each share of stock may be voted for as many individuals as there are
directors to be elected and for whose election the share is entitled to be
voted, and directors shall be elected by plurality vote. Except as otherwise
provided by Maryland Law, the 1940 Act, the Articles of Incorporation, or these
By-Laws, any corporate action to be taken by vote of the stockholders shall be
authorized by a majority of the total votes cast at a meeting of stockholders by
the holders of shares present in person or represented by proxy and entitled to
vote on such action, provided that a quorum is present.
Section 10. PROXIES. A stockholder entitled to vote may vote in
person or by proxy as provided by statute. No proxy shall be valid after the
expiration of 11 months from the date thereof, unless otherwise provided in the
proxy. Every proxy shall be revocable at the pleasure of the stockholder
executing it, except in those cases where such proxy states that it is
irrevocable and where an irrevocable proxy is permitted by law.
Section 11. VOTING BY BALLOT. On a vote by ballot, each ballot shall
be signed by the stockholder voting or by his proxy, if there be such proxy, and
shall state the number of shares voted.
Section 12. VOTING OF SHARES BY CERTAIN HOLDERS. Shares of its own
stock directly or indirectly owned by the Corporation shall not be voted at any
meeting and shall not be counted in determining the total number of outstanding
shares entitled to be voted at any given time, unless they are held by it in a
fiduciary capacity, in which case they may be voted and shall be counted in
determining the total number of shares outstanding at any given time.
The Board of Directors may adopt by resolution a procedure whereby a
stockholder may certify in writing to the Corporation that any shares of stock
registered in the name of the stockholder are held for the account of a
specified person other than the stockholder. The resolution shall set forth the
class of stockholders who may make the certification, the purpose for which the
certification may be made, the form of certification, and the information to be
contained in it; if the certification is with respect to a record date or
closing of the stock transfer books, the time after the record date or closing
of the stock transfer books
3
<PAGE>
within which the certification must be received by the Corporation; and any
other provisions with respect to the procedure that the Board of Directors
considers necessary or desirable. On receipt of such certification, the person
specified in the certification shall be regarded as, for the purposes set forth
in the certification, the stockholder of record of the specified stock in place
of the stockholder who makes the certification
Section 13. INSPECTORS. The Board of Directors may, in advance of any
meeting of stockholders, appoint one or more inspectors to act at such meeting
or any adjournment thereof. If the inspectors shall not be so appointed or if
any of them shall fail to appear or act, the chairman of the meeting may, and on
the request of any stockholder entitled to vote thereat shall, appoint
inspectors. The inspectors shall determine the number of shares outstanding and
the voting powers of each, the number of shares represented at the meeting, the
existence of a quorum, and the validity and effect of proxies, and shall receive
votes, ballots, or consents, hear and determine all challenges and questions
arising in connection with the right to vote, count and tabulate all votes,
ballots or consents, determine the result, and perform such acts as are proper
to conduct the election or vote with fairness to all stockholders. On request of
the chairman of the meeting or any stockholder entitled to vote thereat, the
inspectors shall make a report in writing of any challenge, request, or matter
determined by them and shall execute a certificate of any fact found by them.
Any such report shall be signed by the inspector, if there is a single
inspector, or by a majority of the inspectors, if there is more than one
inspector. The report of the inspector or inspectors on the number of shares
represented at the meeting and the results of the voting shall be prima facie
evidence thereof. No director or candidate for the office of director shall act
as inspector of an election of directors. Inspectors need not be stockholders.
Section 14. CONSENT OF STOCKHOLDERS IN LIEU OF MEETING. Except as
otherwise provided by Maryland Law, the 1940 Act, or the Articles of
Incorporation, any action required or permitted to be taken at any annual or
special meeting of stockholders may be taken without a meeting, without prior
notice, and without a vote, if the following are filed with the records of
stockholders meetings: (a) an unanimous written consent which sets forth the
action and is signed by each stockholder entitled to vote on the matter and (b)
a written waiver of any right to dissent signed by each stockholder entitled to
notice of the meeting but not entitled to vote thereat.
ARTICLE III
BOARD OF DIRECTORS
Section 1. GENERAL POWERS. Except as otherwise provided in the
Articles of Incorporation, the business and affairs of the Corporation shall be
managed under the direction of the Board of Directors. All powers of the
Corporation may be exercised by or under authority of the Board of Directors
except as conferred on or reserved to the stockholders by Maryland Law, the 1940
Act, the Articles of Incorporation, or these By-Laws.
Section 2. NUMBER OF DIRECTORS. Except as otherwise provided in the
Articles of Incorporation, the number of Directors shall be fixed, and may be
increased or decreased from time-to-time, by resolution of the entire Board of
Directors then in office, provided, however, that the number of Directors shall
in no event be less than the minimum number required by Maryland law nor more
than 15. Any vacancy created by an increase in number of Directors may be filled
in
4
<PAGE>
accordance with Section 5 of this Article. No reduction in the number of
Directors shall have the effect of removing any director from office prior to
the expiration of his term unless such Director is specifically removed pursuant
to Maryland law. Directors need not be stockholders.
Section 3. TERM OF DIRECTORS. The term of office of each Director
shall be from the time of his election and qualification until his successor
shall have been elected and shall have been qualified unless sooner terminated
by his death, resignation or removal.
Section 4. RESIGNATIONS. A Director may resign at any time by giving
written notice of his resignation to the Board of Directors, the Chairman of the
Board, the President, or the Secretary. Any such resignation shall take effect
at the time specified therein or, if the time when it shall become effective
shall not be specified therein, immediately upon its receipt; and, unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
Section 5. VACANCIES. Subject to the provisions of Maryland Law and
the 1940 Act, any vacancies in the Board of Directors arising from death,
resignation, removal, or any other cause other than an increase in the number of
Directors, shall be filled by a vote of a majority of the remaining members of
the Board of Directors, whether or not sufficient to constitute a quorum. Any
vacancy on the Board of Directors by reason of an increase in the number of
directors may be filled by a majority vote of the entire Board of Directors in
office prior to the increase.
Section 6. PLACE OF MEETINGS. Meetings of the Board of Directors may
be held at such place as the Board of Directors may from time-to-time determine
or as shall be specified in the notice of such meeting.
Section 7. REGULAR MEETINGS. Regular meetings of the Board of
Directors may be held without notice at such time and place as may be determined
by the Board of Directors.
Section 8. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by or at the request of two or more Directors or by the
Chairman of the Board, the President, or the Secretary.
Section 9. TELEPHONE MEETINGS. Members of the Board of Directors or of
any committee thereof may participate in a meeting by means of a conference
telephone or similar communications equipment if all persons participating in
the meeting can hear each other at the same time. Subject to the provisions of
the 1940 Act, participation in a meeting by these means constitutes presence in
person at the meeting.
Section 10. NOTICE OF MEETINGS. To the extent required by Maryland Law
or the 1940 Act, notice of each meeting of the Board of Directors shall be given
by the Secretary as hereinafter provided, in which notice shall be stated the
time and place of the meeting. Notice of each such meeting shall be delivered to
each Director, either personally or by telephone or facsimile or by any other
standard form of telecommunication, at least 24 hours before the time at which
such meeting is to be held, or mailed by first-class mail, postage prepaid,
addressed to the Director at his residence or usual place of business, at least
three days before the day on which such meeting is to be held. If mailed, such
notice shall be deemed to be given when deposited in the United States mail
properly addressed, with postage thereon prepaid. Neither
5
<PAGE>
the business to be transacted at, nor the purpose of, any annual, regular, or
special meeting of the Board of Directors need be stated in the notice, unless
specifically required by Maryland Law, the 1940 Act, the Articles of
Incorporation, or these By-Laws.
Section 11. WAIVER OF NOTICE OF MEETINGS. Notice of any meeting need
not be given to any Director who shall, either before or after the meeting, sign
a written waiver of notice which is filed with the records of the meeting or who
shall attend such meeting.
Section 12. QUORUM AND VOTING. One-third, but not less than two, of
the members of the entire Board of Directors shall be present in person at any
meeting of the Board of Directors in order to constitute a quorum for the
transaction of business at such meeting. Except as otherwise expressly required
by Maryland Law, the 1940 Act, the Articles of Incorporation or these By-Laws,
the act of a majority of the directors present at any meeting at which a quorum
is present shall be the act of the Board of Directors. In the absence of a
quorum at any meeting of the Board of Directors, a majority of the Directors
present thereat may adjourn such meeting to another time and place until a
quorum shall be present thereat. Notice of the time and place of any such
adjourned meeting shall be given to the Directors who were not present at the
time of the adjournment and, unless such time and place were announced at the
meeting at which the adjournment was taken, to the other Directors. At any
adjourned meeting at which a quorum is present, any business may be transacted
which might have been transacted at the meeting as originally called.
Section 13. ORGANIZATION. The Board of Directors may, by resolution
adopted by a majority of the entire Board of Directors, designate a Chairman of
the Board, who shall preside at each meeting of the Board of Directors. In the
absence or inability of the Chairman of the Board to preside at a meeting, the
President or, in the President's absence or inability to act another Director
chosen by a majority of the Directors present, shall act as chairman of the
meeting and preside thereat. The Secretary or the Assistant Secretary (or, in
their absence or inability to act, any person appointed by the Chairman) shall
act as secretary of the meeting and keep the minutes thereof.
Section 14. WRITTEN CONSENT OF DIRECTORS IN LIEU OF A MEETING.
Subject to the provisions of Maryland Law and the 1940 Act, any action required
or permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting if all members of the Board of
Directors or committee, as the case may be, consent thereto in writing, and such
written consent or consents are filed with the minutes of the proceedings of the
Board of Directors or the committee.
Section 15. COMPENSATION. Directors shall be entitled to receive, in
accordance with a resolution passed by the Board of Directors, compensation for
their services and for the cost of attendance at each annual, regular, or
special meeting of the Board of Directors or any committee thereof. Nothing
herein shall be construed as precluding any Director from serving the
Corporation in any other capacity and receiving compensation therefor.
Section 16. NET ASSET VALUE. The Board of Directors shall determine
the times and method of calculation of the net asset value per share of the
Corporation subject to the requirements of the 1940 Act. The Board of Directors
may delegate its duties with respect to calculation of the net asset value per
share of the Corporation to one or more individuals or corporate management
companies and/or investment advisers pursuant to a written contract or
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<PAGE>
contracts which have obtained the requisite approvals, including any requisite
approvals of renewals thereof, of the Board of Directors and/or the stockholders
in accordance with the provisions of the 1940 Act.
ARTICLE IV
COMMITTEES
Section 1. COMMITTEES OF THE BOARD OF DIRECTORS. The Board of
Directors may from time-to-time, by resolution adopted by a majority of the
members of the entire Board of Directors, designate one or more committees of
the Board of Directors, each such committee to consist of two or more Directors
and to have such powers and duties, to the extent permitted by Maryland Law and
the 1940 Act, as the Board of Directors may, by resolution, prescribe. The Board
of Directors shall have the power to determine the size of each committee, to
name (or to change, from time-to-time) the members of each committee, to
designate alternate members to replace any absent or disqualified member, or to
dissolve any such committee. Each member of any committee of the Board of
Directors shall serve at the pleasure of the Board of Directors, and may be
removed from such committee at any time by the vote of a majority of the members
present at any meeting of the Board of Directors. Nothing herein shall be deemed
to prevent the Board of Directors from appointing one or more committees
consisting in whole or in part of persons who are not Directors; provided,
however, that no such committee shall have or may exercise any authority or
power of the Board of Directors in the management of the business or affairs of
the Corporation.
Section 2. MEETINGS; QUORUM. Not less than two of the members of any
committee shall be present in person at any meeting of such committee in order
to constitute a quorum for the transaction of business at such meeting, and the
act of a majority present shall be the act of such committee. The Board of
Directors may designate a chairman of any committee and such chairman, or the
Chairman of the Board or the President, may fix the time and place of the
committee's meetings unless the Board of Directors shall otherwise provide. In
the absence or disqualification of any member of any committee, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not he or they constitute a quorum, may (a) unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such
absent or disqualified member, (b) determine that, for purposes of that meeting,
the member so appointed shall replace any other member of the committee, and (c)
determine that such member may serve in such capacity until the next meeting of
the Board of Directors. For purposes of determining whether a quorum of the
committee exists, any such member of the Board of Directors appointed by the
member or members of the committee present shall be treated as a member of the
committee, and any member so replaced shall not be treated as a member of the
committee.
ARTICLE V
OFFICERS, AGENTS, AND EMPLOYEES
Section 1. ELECTION OR APPOINTMENT OF OFFICERS. The officers of the
Corporation shall include a President, a Secretary and a Treasurer, each of whom
shall be elected or appointed by the Board of Directors. The Board of Directors
may elect or appoint one or more Vice Presidents and may also elect or appoint
such other officers, agents, and employees, and
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may give any officers so elected any title or titles, as it may deem necessary
or proper. Any two or more offices may be held by the same person, except the
offices of President and Vice President, but no officer shall execute,
acknowledge, or verify any instrument as an officer in more than one capacity.
Such officers shall be elected or appointed by the Board of Directors. Officers
serve at the pleasure of the Board of Directors. Each officer shall hold office
until his successor shall have been duly elected or appointed and shall have
qualified, or until his death, or until he shall have resigned or have been
removed, as hereinafter provided in these By-Laws. In its discretion, the Board
of Directors may leave unfilled any office except those of President, Treasurer,
and Secretary. The Board of Directors may from time-to-time elect or appoint, or
delegate to the President the power to appoint, such officers (including one or
more Assistant Vice Presidents, Assistant Treasurers and Assistant Secretaries)
and such agents, as may be necessary or desirable for the business of the
Corporation. Such officers and agents shall have such duties and shall hold
their offices for such terms as may be prescribed by the Board of Directors or
by the appointing authority.
Section 2. EFFECT OF ELECTION OR APPOINTMENT OF OFFICERS, AGENTS, AND
EMPLOYEES. The election or appointment of any officer or agent of the
Corporation shall not, of itself, create any contract rights between the
Corporation and such officer, agent, or employee.
Section 3. RESIGNATIONS. Any officer of the Corporation may resign at
any time by giving written notice of resignation to the Board of Directors, the
Chairman of the Board, the President, or the Secretary. Any such resignation
shall take effect at the time specified therein or, if the time when it shall
become effective shall not be specified therein, immediately upon its receipt;
and, unless otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective.
Section 4. REMOVAL OF OFFICER, AGENT, OR EMPLOYEE. Any officer,
agent, or employee of the Corporation may be removed by the Board of Directors
with or without cause at any time in the sole discretion of the Board of
Directors, and the Board of Directors may delegate such power of removal to any
officer in respect of officers, agents, or employees under his control. Such
removal shall be without prejudice to such person's contract rights, if any, but
the appointment of any person as an officer, agent, or employee of the
Corporation shall not itself create contract rights.
Section 5. VACANCIES. A vacancy in any office, either arising from
death, resignation, removal, creation of a new office, or any other cause, may
be filled by the Board of Directors for the unexpired portion of the term of the
office which shall be vacant.
Section 6. COMPENSATION. The compensation of the officers of the
Corporation shall be fixed by the Board of Directors, but this power may be
delegated to any officer in respect of other officers under his control.
Section 7. BONDS OR OTHER SECURITY. If required by the Board of
Directors, any officer, agent, or employee of the Corporation shall give a bond
or other security for the faithful performance of his duties, in such amount and
with such surety or sureties as the Board of Directors may require.
Section 8. PRESIDENT. The President shall be the chief executive
officer. In the absence of the Chairman of the Board (or if there be none), he
shall preside at all meetings of the
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stockholders and of the Board of Directors. To the extent permitted by Maryland
Law and the 1940 Act, the President shall be a member ex officio of each
committee of the Board of Directors of which he is not officially a member. The
President shall have, subject to the control of the Board of Directors, general
supervision and control of the business and affairs of the Corporation. The
President may, to the extent permitted by Maryland Law and the 1940 Act, execute
any deed, mortgage, bond, contract, or other instrument to which the Corporation
is a party except in cases where the execution thereof shall be expressly
delegated by the Board of Directors or by these By-Laws to some other officer or
agent of the Corporation or shall be required by law to be otherwise executed.
The President may employ and discharge employees and agents of the Corporation,
and in general shall perform all duties incident to the Office of President, as
well as such other duties as may be prescribed by the Board of Directors from
time-to-time. To the extent consistent with Maryland Law and the 1940 Act, the
President may delegate any or all of the powers listed in this Section 8 of
Article V to any other officer of the Corporation.
Section 9. VICE PRESIDENT. Each Vice President shall have such powers
and perform such duties as the Board of Directors or the President may from
time-to-time prescribe. The Board of Directors may designate one or more Vice
Presidents as Senior-Vice President or as Vice President for a particular area
of responsibility. Unless and until the Board of Directors determines otherwise,
in the absence of the President or in the event of a vacancy in such office, the
most senior Senior-Vice President, or, if none such exists, the most senior Vice
President (based on the order of election of all Vice Presidents currently in
office) shall perform the duties of the President and when so acting shall have
all the powers of, and shall be subject to the same restrictions as, the
President.
Section 10. TREASURER. The Treasurer shall:
(a) have charge and custody of, and be responsible for, all the
funds and securities of the Corporation, except those which the Corporation has
placed in the custody of a bank or other entity permitted to act as custodian
for the Corporation under the 1940 Act pursuant to a written agreement
designating such bank or other entity as a custodian or sub-custodian of the
property of the Corporation;
(b) keep, or cause to be kept, full and accurate accounts of
receipts and disbursements in books belonging to the Corporation;
(c) cause all moneys and other valuables to be deposited to the
credit of the Corporation in such depositories as may be designated, from
time-to-time, by the Board of Directors;
(d) receive, and give receipts for, or cause to receive and give
receipts for, moneys due and payable, to the Corporation from any source
whatsoever;
(e) disburse, or cause to be disbursed, the funds of the
Corporation and supervise the investment of its funds as ordered or authorized
by the Board of Directors, taking proper vouchers therefor;
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(f) render to the President and the Board of Directors, at the
regular meetings of the Board of Directors or whenever they may require it, an
account of all his transactions as Treasurer and of the financial condition of
the Corporation; and
(g) in general, perform all the duties incident to the office of
Treasurer and such other duties as from time-to-time may be assigned to him by
the Board of Directors or the President.
Section 11. SECRETARY. The Secretary shall:
(a) keep or cause to be kept in one or more books provided for
the purpose, the minutes of all meetings of the Board of Directors, the
committees of the Board of Directors, and the stockholders;
(b) see that all notices are duly given in accordance with the
provisions of these By-Laws and as required by law;
(c) be custodian of the corporate records and the seal of the
Corporation and affix and attest the seal to all other documents to be executed
on behalf of the Corporation under its seal;
(d) see that the books, reports, statements, certificates, and
other documents and records required by law to be kept and filed are properly
kept and filed; and
(e) in general, perform all the duties incident to the office of
Secretary and such other duties as from time-to-time may be assigned to him by
the Board of Directors or the President.
Section 12. DELEGATION OF DUTIES. In case of the absence of any
officer of the Corporation, or for any other reason that the Board of Directors
may deem sufficient, the Board of Directors may confer for the time being the
powers or duties, or any of them, of such officer upon any other officer or upon
any Director.
ARTICLE VI
INDEMNIFICATION AND INSURANCE
Section 1. INDEMNIFICATION. The Corporation shall indemnify to the
fullest extent permitted by law, (including the Investment Company Act of 1940,
as amended) as currently in effect or as the same may hereafter be amended, any
person made or threatened to be made a party of any action, suit or proceeding,
whether criminal, civil, administrative or investigative, by reason of the fact
that such person or such person's testator or intestate is or was a director or
officer of the Corporation or serves or served at the request of the Corporation
any other enterprise as a director or officer. To the fullest extent permitted
by law (including the Investment Company Act of 1940, as amended) as currently
in effect or as the same may hereafter be amended, expenses incurred by any
person in defending any such action, suit or proceeding shall be paid or
reimbursed by the Corporation promptly upon receipt by it of an undertaking by
such person to repay such expenses even if it shall ultimately be determined
that such person is not entitled to be indemnified by the Corporation. The
rights provided to any person by this Article VI
10
<PAGE>
shall be enforceable against the Corporation by such person who shall be
presumed to have relied upon it in serving or continuing to serve as a director
or officer as provided above. No amendment of this Article VI shall impair the
rights of any person arising at any time with respect to events occurring prior
to such amendment. For purposes of this Article VI, the term "Corporation"
shall include any predecessor of the Corporation and any constituent Corporation
(including any constituent of a constituent) absorbed by the Corporation in a
consolidation or merger; the term "other enterprise" shall include any
Corporation, partnership, joint venture, trust or employee benefit plan; service
"at the request of the Corporation" shall include service as a director or
officer of the Corporation which imposes duties on, or involves services by,
such director or officer with respect to any employee benefit plan, its
participants or beneficiaries; any excise taxes assessed on a person with
respect to an employee benefit plan shall be deemed to be indemnifiable
expenses; and action by a person with respect to any employee benefit plan which
such person reasonably believes to be in the interest of the participants and
beneficiaries of such plan shall be deemed to be action not opposed to the best
interests of the Corporation.
Section 2. INSURANCE OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS.
Except as otherwise provided by statute, the Corporation may purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee, partner, trustee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in or arising out
of his status as such, whether or not the Corporation would have the power to
indemnify him against such liability.
ARTICLE VII
EXEMPTION FROM LIABILITY
Section 1. EXEMPTION. A director or officer of the Corporation shall
not be liable to the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director or officer, except to the extent such
exemption from liability or limitation thereof is not permitted by law
(including the Investment Company Act of 1940, as amended) as currently in
effect or as the same may hereafter be amended. No amendment, modification or
repeal of this Article VII shall adversely affect any right or protection of a
director or officer that exists at the time of such amendment, modification or
repeal.
ARTICLE VIII
CAPITAL STOCK
Section 1. STOCK CERTIFICATES. Each holder of stock of the
Corporation shall be entitled upon request to have a certificate or
certificates, in such form as shall be approved by the Board of Directors,
representing the number of shares of the Corporation owned by him, provided,
however, that certificates for fractional shares will not be delivered in any
case. The certificates representing shares of stock shall be signed by or in the
name of the Corporation by the Chairman of the Board, the President or a Vice
President, and by the Secretary, an Assistant Secretary, the Treasurer, or an
Assistant Treasurer and sealed with the seal of the Corporation.
11
<PAGE>
Any or all of the signatures or the seal on the certificate may be a facsimile.
In case any officer, transfer agent, or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent, or registrar before such certificate shall be
issued, it may be issued by the Corporation with the same effect as if such
officer, transfer agent, or registrar were still in office at the date of issue.
Certificates shall be consecutively numbered; and if the Corporation shall, from
time-to-time, issue several classes of stock, each class may have its own number
series. Each certificate representing stock which is restricted as to its
transferability or voting powers, which is preferred or limited as to its
dividends or as to its share of the assets upon liquidation or which is
redeemable at the option of the Corporation, shall have a statement of such
restriction, limitation, preference, or redemption provision, or a summary
thereof, plainly stated on the certificate. In lieu of such a statement or
summary, the Corporation may set forth upon the face or back of the certificate
a statement that the Corporation will furnish to any stockholder, upon request
and without charge, a full statement of such information.
Section 2. BOOKS OF ACCOUNTS AND RECORD OF STOCKHOLDERS. There shall
be kept at the principal executive office of the Corporation or at the office of
its transfer agent correct and complete books and records containing the name
and address of each stockholder and the number of shares of stock of each class
held by such stockholder.
Section 3. TRANSFERS OF SHARES. Transfers of shares of stock of the
Corporation shall be made on the stock records of the Corporation only by the
registered holder thereof, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary or with a transfer agent or
transfer clerk, and on surrender of the certificate or certificates, if issued,
for such shares properly endorsed or accompanied by a duly executed stock
transfer power and the payment of all taxes thereon. When such requirements are
satisfied and the transfer has been recorded on the books of the Corporation,
the Corporation shall cancel the old certificate and issue a new certificate to
the person entitled thereto. Except as otherwise provided by law or these
By-Laws, the Corporation shall be entitled to recognize the exclusive rights of
a person in whose name any share or shares stand on the record of stockholders
as the owner of such share or shares for all purposes, including, without
limitation, the rights to receive dividends or other distributions, and to vote
as such owner; and the Corporation shall not be bound to recognize any equitable
or legal claim to or interest in any such share or shares on the part of any
other person, whether or not it shall have express or other notice thereof.
Section 4. REGULATIONS. The Board of Directors may make such
additional rules and regulations, not inconsistent with these By-Laws, as it may
deem expedient concerning the issue, transfer, and registration of certificates
for shares of stock of the Corporation. It may appoint, or authorize any officer
or officers to appoint, one or more transfer agents or one or more transfer
clerks and one or more registrars and may require all certificates for shares of
stock to bear the signature or signatures of any of them.
Section 5. LOST, DESTROYED, OR MUTILATED CERTIFICATES. The holder of
any certificates representing shares of stock of the Corporation shall
immediately notify the Corporation of any loss, theft, destruction, or
mutilation of such certificate, and, upon request, shall provide to the
Corporation an affidavit of the rightful holder of such certificate stating that
such certificate has been lost, stolen, destroyed, or mutilated, as the case may
be. The Corporation may issue a new certificate of stock in the place of any
certificate theretofore issued
12
<PAGE>
by it which the owner thereof shall allege to have been lost or destroyed or
which shall have been mutilated. Prior to issuing a new certificate to replace
any certificate alleged to have been lost, stolen, destroyed, or mutilated, the
Board of Directors may, in its discretion, require such owner or his legal
representatives to give to the Corporation a bond in such sum, limited or
unlimited, and in such form and with such surety or sureties, as the Board of
Directors in its absolute discretion shall determine, to indemnify the
Corporation against any claim that may be made against it on account of the
alleged loss, theft, or destruction of any such certificate, or issuance of a
new certificate. Anything herein to the contrary notwithstanding, the Board of
Directors, in its absolute discretion, may refuse to issue any such new
certificate, except pursuant to legal proceedings under Maryland Law.
Section 6. FIXING OF A RECORD DATE FOR DIVIDENDS AND DISTRIBUTIONS.
The Board of Directors may fix, in advance, as a record date, a date not more
than 90 days preceding the date fixed for the payment of any dividend or the
making of any distribution or the allotting of any other rights (except with
respect to voting which is provided for in Article II(8)). Once the Board of
Directors fixes such record date as the record date for the determination of the
stockholders entitled to receive any such dividend or distribution or the
allotment of such other rights, only the stockholders of record at the time so
fixed shall be entitled to receive such dividend or distribution or such other
rights.
Section 7. INFORMATION TO STOCKHOLDERS AND OTHERS. Any stockholder or
his agent may inspect and copy during usual business hours the Corporation's
By-Laws, minutes of the proceedings of its stockholders, annual statements of
its affairs, and voting trust agreements on file at its principal office.
ARTICLE IX
DEPOSITORIES AND CUSTODIANS
Section 1. EMPLOYMENT OF A CUSTODIAN. The Corporation shall place
and at all times maintain in the custody of a custodian (including any
sub-custodian for the custodian) all funds, securities and similar investments
owned by the Corporation to the extent required by the Investment Company Act of
1940, as amended. The custodian (and any sub-custodian) shall be an institution
conforming to the requirements of Section 17(f) of the Investment Company Act of
1940, as amended, and the rules of the Securities and Exchange Commission
thereunder. The custodian shall be appointed from time to time by the Board of
Directors, which shall fix its remuneration.
Section 2. TERMINATION OF CUSTODIAN AGREEMENT. Upon termination of
the custodian agreement or inability of the custodian to continue to serve, the
Board of Directors shall promptly appoint a successor custodian, but in the
event that no successor custodian can be found who has the required
qualifications and is willing to serve, the Board of Directors shall call as
promptly as possible a special meeting of the stockholders to determine whether
the Corporation shall function without a custodian or shall be liquidated. If
so directed by vote of the holders of a majority of the outstanding shares of
stock of the Corporation, the custodian shall deliver and pay over all property
of the Corporation held by it as specified in such vote.
13
<PAGE>
Section 3. OTHER ARRANGEMENTS. The Corporation may make such other
arrangements for the custody of its assets (including deposit arrangements) as
may be required by any applicable law, rule or regulation.
ARTICLE X
CONTRACTS; SAFEKEEPING AND
TRANSFER OF FUNDS AND SECURITIES
Section 1. CONTRACTS. Subject to the requirements of the 1940 Act,
the Board of Directors may authorize any officer or agent to enter into any
contract or to execute and deliver any instrument in the name of and on behalf
of the Corporation, and such authority may be general or confined to specific
instances.
Section 2. CHECKS, NOTES DRAFTS, ETC. Checks, notes, drafts,
acceptances, bills of exchange, and other orders or obligations for the payment
of money shall be signed by such officer or officers or person or persons as the
Board of Directors by resolution shall from time-to-time designate, and such
authority may be general or confined to specific instances.
Section 3. SALE OR TRANSFER OF SECURITIES. Stock certificates, bonds,
or other securities at any time owned by the Corporation may be held on behalf
of the Corporation or sold, transferred, or otherwise disposed of subject to any
limits imposed by these By-Laws and pursuant to authorization by the Board of
Directors and, when so authorized to be held, sold, transferred, or otherwise
disposed of, may be transferred from the name of the Corporation by the
signature of the President, a Vice President, or the Treasurer or pursuant to
any procedure approved by the Board of Directors, subject to applicable law.
ARTICLE XI
INDEPENDENT PUBLIC ACCOUNTANTS
Section 1. INDEPENDENT PUBLIC ACCOUNTANTS The Corporation shall
employ a firm of independent public accountants as its accountants as its
accountant to examine the accounts of the Corporation and to sign and certify
financial statements filed by the Corporation. The accountant's certificates
and reports shall be addressed both to the Directors and to the stockholders.
The employment of the accountant shall be conditioned upon the right of the
Corporation to terminate the employment forthwith without any penalty by vote of
a majority of the outstanding voting securities at any stockholders' meeting
called for that purpose.
A majority of the Directors who are not interested persons (as such term is
defined in the Investment Company Act of 1940, as amended) of the Corporation
shall select the accountant at any meeting held (i) within 30 days before or
after the beginning of the fiscal year of the Corporation or (ii) before the
annual stockholders' meeting in that year. Such selection shall be submitted
for ratification or rejection at the next succeeding annual stockholders'
meeting. If such meeting shall reject such selection, the accountant shall be
selected by majority vote of the Corporation's outstanding voting securities,
either at the meeting at which the rejection occurred or at a subsequent meeting
of stockholders called for the purpose of selecting an accountant.
14
<PAGE>
Any vacancy occurring between annual meetings, due to the resignation of
the accountant, may be filled by a majority vote of the members of the Board of
Directors who are not such interested persons.
ARTICLE XII
ANNUAL STATEMENT
The books of account of the Corporation shall be examined by an
independent firm of public accountants at the close of each annual period of the
Corporation and at such other times as may be directed by the Board of
Directors. A report to the stockholders based upon each such examination shall
be mailed to each stockholder of record on such date with respect to each report
as may be determined by the Board of Directors, at his address as the same
appears on the books of the Corporation. Such annual statement shall be placed
on file at the Corporation's principal office within 120 days after the end of
the Corporation's fiscal year. Each such report shall show the assets and
liabilities of the Corporation as of the close of the annual or other period
covered by the report. Such report shall also show the Corporation's income and
expenses for the period from the end of the Corporation's preceding fiscal year
to the close of the annual or other period covered by the report and any other
information required by the 1940 Act, and shall set forth such other matters as
the Board of Directors or such firm of independent public accountants shall
determine.
ARTICLE XIII
AMENDMENTS
These By-Laws may be amended or repealed by the affirmative vote of a
majority of the Board of Directors at any regular or special meeting of the
Board of Directors, subject to the requirements of the 1940 Act.
15
<TABLE> <S> <C>
<PAGE>
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<NAME> THE EMERGING GERMANY FUND, INC.
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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 16964632
<INVESTMENTS-AT-VALUE> 215104597
<RECEIVABLES> 1188296
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<PAID-IN-CAPITAL-COMMON> 142013476
<SHARES-COMMON-STOCK> 14008334
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<DIVIDEND-INCOME> 3357500
<INTEREST-INCOME> 191120
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<EXPENSES-NET> 4214671
<NET-INVESTMENT-INCOME> (666051)
<REALIZED-GAINS-CURRENT> 50944544
<APPREC-INCREASE-CURRENT> 13394579
<NET-CHANGE-FROM-OPS> 63673072
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2381417
<DISTRIBUTIONS-OF-GAINS> 46367585
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<PAGE>
FORM OF MULTIPLE CLASS OF SHARES PLAN
FOR DRESDNER RCM INVESTMENT FUNDS INC.
This Multiple Class of shares Plan (the "Plan"), shall be the written plan
contemplated by Rule 18f-3 under the Investment Company Act of 1940 (the "1940
Act") for the portfolios (each a "Fund" and collectively, the "Funds"), of
Dresdner RCM Investment Funds, Inc. (the "Company") as listed on Schedule A to
this Plan.
1. CLASSES OFFERED. Each Fund offers up to two classes of its shares which are
sold without a sales charge: Class N and Class I.
2. DISTRIBUTION FEES. Distribution fees shall be calculated and paid in
accordance with the terms of the plan pursuant to Rule 12b-1 under the 1940
Act for the applicable class. Distribution fees currently authorized are as
set forth in Schedule A to this Plan.
3. EXCHANGE PRIVILEGES. Holders of Class N and Class I shares shall have such
exchange privileges as are set forth in the Funds' current prospectus.
4. CONVERSION PRIVILEGES. Shares of one Class do not convert into shares of
another Class.
5. EXPENSE ALLOCATIONS. Expenses shall be allocated under this Plan as
follows:
6. CLASS EXPENSES: The following expenses shall be allocated exclusively to
the applicable specific class of shares: (i) distribution and shareholder
service fees; (ii) transfer agent fees; and (iii) Blue Sky state
registration fees.
A. FUND EXPENSES: Expenses not allocated to specific classes as specified
above shall be charged to the Fund and allocated daily to each class
on the basis of the net asset value of that class in relation to the
net asset value of the Fund.
B. VOTING RIGHTS. Each class of shares governed by this Plan (i) shall
have exclusive voting rights on any matter submitted to shareholders
that relates solely to its arrangement; and (ii) shall have separate
voting rights on any matter submitted to shareholders in which the
interests of one class differ from the interests of any other class.
7. AMENDMENT OF PLAN. Any material amendment to this Plan shall become
effective following approval by a vote of at least a majority of the Board,
and a majority of the Board who are not "interested persons" of the
Company, which vote shall have found that this Plan as proposed to be
amended, including expense allocations, is in the best interests of each
class individually and of each Fund as a whole; or upon such other date as
the Board shall determine.
8. SEVERABILITY. If any provision of this Plan shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Plan
shall not be affected thereby.
9. LIMITATION OF LIABILITY. Consistent with the limitation of shareholder
liability as set forth in the Company's Articles of Incorporation or other
organizational document, any obligations assumed by any Fund or class
thereof, and any agreements related to this Plan shall be limited in all
cases to the relevant Fund and its assets, or class and its assets, as the
case may be, and shall not constitute obligations of any other Fund or
class of shares. All persons having any claim against the Fund, or
<PAGE>
any class thereof, arising in connection with this Plan, are expressly put on
notice of such limitation of shareholder liability, and agree that any such
claim shall be limited in all cases to the relevant Fund and its assets, or
class and its assets, as the case may be, and such person shall not seek
satisfaction of any such obligation from the shareholders or any shareholder of
the Company, class or Fund; nor shall such person seek satisfaction of any such
obligation from the Board or any individual member of the Board.
The Board of Directors has adopted this Plan as of ____________________.
<PAGE>
SCHEDULE A DATED _______________ TO MULTIPLE CLASS OF SHARES PLAN FOR
DRESDNER RCM INVESTMENT FUNDS, INC.
FUND/CLASS DISTRIBUTION FEE
(as a percentage of
average net assets)
Dresdner RCM Europe Fund
Class N 0.25%
Class I None
