<Page>
As filed with the Securities and Exchange Commission on
August 13, 2001
Registration No. _______
- - - - - - - - - - - - - - - - -
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
- - - -
FORM N-14
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
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Pre-Effective Amendment No. / /
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Post-Effective Amendment No. / /
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(Check appropriate box or boxes)
- - - - - - - - - - - -
RCM STRATEGIC GLOBAL GOVERNMENT FUND, INC.
(Exact Name of Registrant as Specified in Charter)
Four Embarcadero Center, San Francisco, California 94111-4189
(Address of Principal Executive Offices)
(800) 237-4218
(Area Code and Telephone Number)
- - - - - - - - - - -
ROBERT J. GOLDSTEIN
RCM STRATEGIC GLOBAL GOVERNMENT FUND, INC.
Four Embarcadero Center
San Francisco, California 94111-4189
(Name and address of Agent for Service)
- - - - - - - - - -
Copies to:
JOSEPH B. KITTREDGE, JR., ESQUIRE EARL D. WEINER, ESQUIRE
ROPES & GRAY SULLIVAN & CROMWELL
One International Place 125 Broad Street
Boston, Massachusetts 02110-2624 New York, New York 10004-2498
- - - - - - - - - -
<Page>
Approximate Date of Proposed Offering: As soon as practicable after this
Registration Statement becomes effective.
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------------------------------
TITLE OF SECURITIES BEING AMOUNT BEING PROPOSED MAXIMUM OFFERING PROPOSED MAXIMUM AMOUNT OF
REGISTERED REGISTERED PRICE PER UNIT* AGGREGATE OFFERING PRICE REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------------------
Common Stock 4,567,416 $11.04 $50,446,268 $12,612
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
* Calculated pursuant to Rule 457(d) under the Securities Act of 1933, as
amended.
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 specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<Page>
TABLE OF CONTENTS
Message from the President of the Funds
Notice of Annual Meeting of Stockholders of Dresdner RCM Global Strategic Income
Fund, Inc.
Notice of Annual Meeting of Stockholders of RCM Strategic Global Government
Fund, Inc.
Combined Prospectus/Proxy Statement
PROXY CARD ENCLOSED
<Page>
PRESIDENT'S LETTER
DRESDNER RCM GLOBAL STRATEGIC INCOME FUND, INC.
RCM STRATEGIC GLOBAL GOVERNMENT FUND, INC.
Four Embarcadero Center
San Francisco, California 94111-4189
(800) 237-4218
[____________], 2001
To the stockholders of Dresdner RCM Global Strategic Income Fund, Inc. ("DSF
Fund") and RCM Strategic Global Government Fund, Inc. ("RCS Fund"):
At the annual Meetings of Stockholders of DSF Fund and RCS Fund (each,
a "Fund," and collectively, the "Funds") to be held on October 12, 2001,
stockholders of each Fund will be asked to consider and approve, among other
things, the proposed merger of DSF Fund with and into RCS Fund (the "Merger")
pursuant to the Agreement and Plan of Merger and Contingent Liquidation between
the Funds dated as of August 2, 2001 (the "Merger Agreement"). As more fully
described in the enclosed Prospectus/Proxy Statement, the Funds generally have
similar investment objectives and policies, and both are managed by Dresdner RCM
Global Investors LLC ("Dresdner RCM"). At July 13, 2001, the net assets of DSF
Fund were $83,019,743, and the net assets of RCS Fund were $333,262,750.
The Merger is to be preceded by a tender offer by DSF Fund for up to
50% of its shares of common stock outstanding at the date of the Merger
Agreement at a price per share equal to 99-1/2% of net asset value at the
expiration of the tender offer (the "Tender Offer"). If the Merger Agreement is
approved, shares of each DSF Fund stockholder that are not purchased by DSF Fund
in the Tender Offer will be converted into shares of RCS Fund having the same
aggregate net asset value as his or her DSF Fund shares on the date of the
Merger.
If more than 75% of DSF Fund's outstanding shares are tendered in the
Tender Offer, or if the discount from net asset value at which shares of RCS
Fund are trading at the expiration of the Tender Offer is more than 15
percentage points greater than the discount at which DSF Fund's shares are
trading, the Tender Offer and the Merger will be abandoned and DSF Fund will
instead be liquidated.
In November 2000, a non-binding stockholder proposal urging the Board
of Directors of DSF Fund to take the steps necessary to open-end DSF Fund was
approved by stockholders. In response, the Board of Directors of DSF Fund
considered ways for stockholders to realize the net asset value of their shares,
but also examined options to provide continuity to those stockholders who wanted
to earn high current income through investment in a vehicle like DSF Fund. The
Board of Directors of DSF Fund determined to allow stockholders to receive
approximate net asset value through the proposed tender offer while providing
continuity to remaining stockholders by merging DSF Fund into a similar fund in
a tax-free exchange. Because RCS
<Page>
Fund has investment objectives and strategies similar to DSF Fund and is also
managed by Dresdner RCM, the Board of Directors of DSF Fund felt it would be a
particularly attractive merger partner. The Board of Directors of DSF Fund, in
approving the Merger, determined that the stockholders of DSF Fund whose shares
were not acquired in the Tender Offer would benefit from the reduction in the
per share expense ratio resulting from the merger into a substantially larger
fund.
The Board of Directors of RCS Fund, in approving the Merger, considered
the possibility that the resulting increase in RCS Fund's assets could be
marginally accretive to RCS Fund's earnings. In addition, the Board considered
that the increase in the number of outstanding shares of RCS Fund as a result of
the Merger might create a more liquid market for shares of the Fund. The Merger
is otherwise expected to have no impact on RCS Fund, as the surviving Fund,
which will continue its current operations without change.
We encourage you to read carefully the Prospectus/Proxy Statement,
which compares the objectives, policies and performance of the Funds and
describes the estimated reductions in the expense ratios of each Fund resulting
from the Merger.
The Board of Directors of each Fund has given careful consideration to
the Merger and has concluded that the Merger is in the best interests of the
stockholders of its respective Fund. The Boards of Directors recommend that you
vote in favor of the Merger.
If you have any questions about the Merger or the other proposals to be
considered at your Fund's annual meeting, please contact your Fund at
(800) 237-4218.
We welcome your attendance at the Meetings of Stockholders. If you are
unable to attend, please sign, date and return the enclosed proxy card promptly
to avoid additional proxy solicitation expenses.
Sincerely,
/s/ Luke D. Knecht
President of the Funds
<Page>
DRESDNER RCM GLOBAL STRATEGIC INCOME FUND, INC.
FOUR EMBARCADERO CENTER
SAN FRANCISCO, CALIFORNIA 94111
(800) 237-4218
NOTICE OF THE ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders:
Notice is hereby given that the Annual Meeting of Stockholders (the
"Meeting") of Dresdner RCM Global Strategic Income Fund, Inc., a Maryland
corporation ("DSF Fund"), will be held on October 12, 2001, at 10:00 a.m.
(Pacific Time) at the offices of Dresdner RCM Global Investors LLC ("Dresdner
RCM"), located at Four Embarcadero Center, San Francisco, California 94111. At
the Meeting, you and the other stockholders of DSF Fund will be asked to
consider and vote on the following matters, as more fully described in the
accompanying Prospectus/Proxy Statement:
1. To approve the Merger and related transactions contemplated by an
Agreement and Plan of Merger and Contingent Liquidation, pursuant to which
DSF Fund would be merged with and into RCM Strategic Global Government
Fund, Inc. ("RCS Fund") and all outstanding shares of common stock of DSF
Fund would automatically be converted into shares of common stock of RCS
Fund, but if certain contingencies occur, the Merger would be abandoned and
DSF Fund would be liquidated and dissolved. See page ___.
2. To approve a new investment advisory agreement between DSF Fund and
Dresdner RCM in connection with a change in control of Dresdner RCM.
See page ___.
3. To elect two directors to the Board of Directors of DSF Fund. See
page ___.
4. To transact such other business as may properly come before the Meeting
or any adjournment(s) or postponement(s) thereof.
Stockholders of record at the close of business on July 16, 2001 are
entitled to notice of, and to vote at, the Meeting. Regardless of whether you
plan to attend the Meeting, PLEASE COMPLETE, SIGN AND RETURN PROMPTLY THE
ENCLOSED PROXY CARD so that a quorum will be present and the maximum number of
shares may be voted. You may change your vote by written notice to DSF Fund, by
submission of a subsequent proxy, or by voting in person at the Meeting.
By Order of the Board of Directors,
Robert J. Goldstein
Secretary
San Francisco, California
____________, 2001
<Page>
RCM STRATEGIC GLOBAL GOVERNMENT FUND, INC.
FOUR EMBARCADERO CENTER
SAN FRANCISCO, CALIFORNIA 94111
(800) 237-4218
NOTICE OF THE ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders:
Notice is hereby given that the Annual Meeting of Stockholders (the
"Meeting") of RCM Strategic Global Government Fund, Inc., a Maryland corporation
("RCS Fund"), will be held on October 12, 2001, at 10:00 a.m. (Pacific Time) at
the offices of Dresdner RCM Global Investors LLC ("Dresdner RCM"), located at
Four Embarcadero Center, San Francisco, California 94111. At the Meeting, you
and the other stockholders of RCS Fund will be asked to consider and vote on the
following matters, as more fully described in the accompanying Prospectus/Proxy
Statement:
1. To approve the Merger and related transactions contemplated by an
Agreement and Plan of Merger and Contingent Liquidation, pursuant to which
Dresdner RCM Global Strategic Income Fund, Inc. ("DSF Fund") would be
merged with and into RCS Fund and all outstanding shares of common stock of
DSF Fund would automatically be converted into shares of common stock of
RCS Fund, but if certain contingencies occur, the Merger would be abandoned
and DSF Fund would be liquidated and dissolved. See page ___.
2. To approve a new investment management agreement between RCS Fund and
Dresdner RCM in connection with a change in control of Dresdner RCM. See
page ___.
3. To elect two directors to the Board of Directors of RCS Fund. See
page ___.
4. To transact such other business as may properly come before the Meeting
or any adjournment(s) or postponement(s) thereof.
Stockholders of record at the close of business on July 16, 2001 are
entitled to notice of, and to vote at, the Meeting. Regardless of whether you
plan to attend the Meeting, PLEASE COMPLETE, SIGN AND RETURN PROMPTLY THE
ENCLOSED PROXY CARD so that a quorum will be present and the maximum number of
shares may be voted. You may change your vote by written notice to RCS Fund, by
submission of a subsequent proxy, or by voting in person at the Meeting.
By Order of the Board of Directors,
Robert J. Goldstein
Secretary
San Francisco, California
____________, 2001
<Page>
PROSPECTUS/PROXY STATEMENT
[________], 2001
DRESDNER RCM GLOBAL STRATEGIC RCM STRATEGIC GLOBAL
INCOME FUND, INC. GOVERNMENT FUND, INC.
Four Embarcadero Center Four Embarcadero Center
San Francisco, California 94111 San Francisco, California 94111
(800) 237-4218 (800) 237-4218
TABLE OF CONTENTS
I. Merger Proposal to be Voted on by Stockholders of DSF Fund and RCS Fund...1
Synopsis..................................................................1
Principal Risks of Investing in RCS Fund..................................8
Information about the Merger.............................................12
II. Additional Proposals to be Voted on by Stockholders of DSF Fund Only.....29
DSF Fund Proposal 2: Approval of a New Investment Advisory Agreement
Between DSF Fund and Dresdner RCM..................29
DSF Fund Proposal 3: Election of Class I Directors of DSF Fund..........33
III. Additional Proposals to be Voted on by Stockholders of RCS Fund Only.....40
RCS Fund Proposal 2: Approval of a New Investment Management Agreement
Between RCS Fund and Dresdner RCM..................40
RCS Fund Proposal 3: Election of Class I Directors of RCS Fund..........45
IV. Further Information about the Funds......................................48
V. Further Information about Voting and Each Fund's Meeting.................67
Agreement and Plan of Merger and Contingent Liquidation......................A-1
DSF Fund Investment Advisory Agreement.......................................B-1
RCS Fund Investment Management Agreement.....................................C-1
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Charter for the Audit Committee of DSF Fund..................................D-1
Report of the Audit Committee of DSF Fund....................................E-1
Charter for the Audit Oversight Committee of RCS Fund........................F-1
ii
<Page>
This Prospectus/Proxy Statement relates to certain matters to be considered at
the stockholder meetings of Dresdner RCM Global Strategic Income Fund, Inc.
("DSF Fund") and RCM Strategic Global Government Fund, Inc. ("RCS Fund"),
including the proposed merger (the "Merger") of DSF Fund into RCS Fund pursuant
to the Agreement and Plan of Merger and Contingent Liquidation, dated as of
August 2, 2001 (the "Merger Agreement"). As a result of the Merger, each share
of DSF Fund common stock outstanding on the date that the Merger becomes
effective (the "Merger Date") will be converted, without any action on the part
of DSF Fund stockholders, into a number of full and fractional shares of common
stock of RCS Fund having a net asset value equal at the Merger Date to the net
asset value of such DSF Fund share. DSF Fund and RCS Fund are collectively
referred to herein as the "Funds," and each is referred to individually as a
"Fund."
This document will give you the information you need to vote on the Merger and
other proposals at your Fund's Annual Meeting of Stockholders (each a
"Meeting"). Much of the information is required under rules of the Securities
and Exchange Commission ("SEC"); some of it is technical. If there is anything
you don't understand, please contact DSF Fund or RCS Fund at (800) 237-4218, or
call your financial advisor. Like RCS Fund, DSF Fund is a closed-end fund
managed by Dresdner RCM Global Investors LLC ("Dresdner RCM"). The principal
executive office of each Fund is located at Four Embarcadero Center, San
Francisco, California 94111-4189.
This Prospectus/Proxy Statement is being mailed on or about [INSERT DATE]. It
explains concisely what you should know before voting on the matters described
herein and what DSF Fund stockholders should know before investing in RCS Fund,
a non-diversified, closed-end management investment company. Please read it and
keep it for future reference.
A Statement of Additional Information (the "SAI"), dated [INSERT DATE], relating
to the Merger has been filed with the SEC and is incorporated by reference into
this Prospectus/Proxy Statement. For a free copy of the SAI, please contact
Dresdner RCM at (800) 237-4218.
THE SECURITIES OFFERED BY THIS PROSPECTUS/PROXY STATEMENT HAVE NOT BEEN APPROVED
OR DISAPPROVED BY THE SEC NOR HAS THE SEC PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS/PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
SHARES OF COMMON STOCK OF RCS FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY FINANCIAL INSTITUTION, ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
AGENCY, AND INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
The shares of common stock of DSF Fund and RCS Fund are listed on the New York
Stock Exchange (the "NYSE") under the symbols "DSF" and "RCS," respectively. You
may inspect reports, proxy material and other information concerning either Fund
at the NYSE.
DSF Fund and RCS Fund are registered under the Investment Company Act of 1940
(the "1940 Act"). Further, the Funds are subject to the informational
requirements of the Securities Exchange Act of 1934 (the "1934 Act") and, as a
result, file reports and other information with the SEC. You may review and copy
information about either DSF Fund or RCS Fund, including the SAI, at the SEC's
public reference room in Washington, D.C. You may call the SEC at (202) 942-8090
for information about the operation of the public reference room. You may obtain
copies of this
iii
<Page>
information, with payment of a duplication fee, by electronic request at the
following e-mail address: publicinfo@sec.gov, or by writing the SEC's Public
Reference Section, Washington, D.C. 20549-0102. You may also access reports and
other information about the Funds on the EDGAR database on the SEC's Internet
site at http://www.sec.gov.
SUMMARY OF PROPOSALS. The following table summarizes the proposals to be
considered and voted on by each Fund's common stockholders:
<Table>
<Caption>
- --------------------------------------------------------------------------------------------------------
PROPOSAL: TO BE VOTED ON BY STOCKHOLDERS OF:
- --------- ---------------------------------
- --------------------------------------------------------------------------------------------------------
DSF FUND AND RCS FUND PROPOSAL 1: DSF Fund and RCS Fund
Approval of the Merger and related transactions
contemplated by the Merger Agreement, pursuant
to which DSF Fund would be merged with and into
RCS Fund and all outstanding shares of common
stock of DSF Fund would automatically be
converted into shares of common stock of RCS
Fund, but if certain contingencies occur, the
Merger would be abandoned and DSF Fund would be
liquidated and dissolved. See page 1.
- --------------------------------------------------------------------------------------------------------
DSF FUND PROPOSAL 2: Approval of a new DSF Fund
investment advisory agreement between DSF Fund
and Dresdner RCM in connection with a change
in control of Dresdner RCM. See page 29.
- --------------------------------------------------------------------------------------------------------
DSF FUND PROPOSAL 3: Election of two directors DSF Fund
to the Board of Directors of DSF Fund. See
page 33.
- --------------------------------------------------------------------------------------------------------
RCS FUND PROPOSAL 2: Approval of a new RCS Fund
investment management agreement
between RCS Fund and Dresdner RCM in
connection with a change in control of
Dresdner RCM. See page 40.
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RCS FUND PROPOSAL 3: Election of two RCS Fund
directors to the Board of Directors
of RCS Fund. See page 45.
- --------------------------------------------------------------------------------------------------------
</Table>
iv
<Page>
I. MERGER PROPOSAL TO BE VOTED ON BY STOCKHOLDERS OF DSF FUND AND RCS FUND
DSF FUND AND RCS FUND PROPOSAL 1:
APPROVAL OF THE MERGER AND RELATED TRANSACTIONS
SYNOPSIS
THE INFORMATION BELOW PROVIDES AN OVERVIEW OF KEY POINTS TYPICALLY OF CONCERN TO
STOCKHOLDERS CONSIDERING A MERGER BETWEEN CLOSED-END FUNDS. THIS INFORMATION IS
QUALIFIED IN ITS ENTIRETY BY THE REMAINDER OF THE PROSPECTUS/PROXY STATEMENT,
WHICH CONTAINS ADDITIONAL INFORMATION AND FURTHER DETAILS REGARDING THE MERGER
AND THE MERGER AGREEMENT.
1. THE PROPOSAL
The Board of Directors of each Fund is recommending that stockholders approve
the Merger and related transactions. If the Merger and related transactions are
approved by stockholders and the Merger is consummated, all shares of DSF Fund
common stock outstanding on the Merger Date will be converted, without any
action on the part of the DSF Fund stockholders, into a number of full and
fractional shares of common stock of RCS Fund (the "Merger Shares") having an
aggregate net asset value equal to the aggregate net asset value of such DSF
Fund shares immediately prior to the Merger Date.
The consummation of the Merger is subject to a number of conditions set forth in
the Merger Agreement, including (i) that no more than 75% of the outstanding
shares of DSF Fund are tendered in the pre-Merger Tender Offer (as defined in
Item 3 below), and (ii) that the average daily closing price of a share of RCS
Fund common stock during the five trading days immediately preceding and
including the expiration date of the Tender Offer does not represent a
percentage discount from its net asset value that is more than fifteen
percentage points greater than the percentage discount from net asset value
represented by the average daily closing price of a share of DSF Fund common
stock during that same period (for these purposes, a premium to net asset value
for a share of common stock, as a percentage of such share's net asset value,
will be treated as a negative discount from net asset value for such share of
common stock, as a percentage of its net asset value). If either of these
conditions is not fulfilled, the Merger Agreement will terminate, DSF Fund will
be liquidated in an orderly fashion and dissolved and the liquidation proceeds
distributed pro rata to DSF Fund stockholders.
2. THE EFFECT OF THE MERGER ON THE SHARES OF COMMON STOCK OF THE FUNDS
If you are a stockholder of DSF Fund, your shares of DSF Fund common stock will
be converted in the Merger on a tax-free basis into shares of RCS Fund common
stock having an equal aggregate net asset value. It is probable, however, that
the discounts from or premiums to net asset value at which shares of DSF Fund
and RCS Fund are trading will differ. See Item 10 below. If you are a
stockholder of RCS Fund, your shares of RCS Fund common stock will not be
affected by the Merger, but will represent interests in a larger fund pursuing
the same investment objectives and policies.
<Page>
3. REASONS THE DIRECTORS ARE PROPOSING THE MERGER
DSF FUND
The Board of Directors of DSF Fund, in approving the Merger, determined that the
Merger would be in the best interests of stockholders of DSF Fund and that the
value of their investment in DSF Fund would not be diluted as a result of the
Merger. The Merger is part of the response of the DSF Fund Board of Directors to
the approval by stockholders in November 2000 of a non-binding proposal urging
the Board of Directors to take the steps necessary to open-end DSF Fund. In
reaction to this vote of stockholders, the Board of Directors of DSF Fund
considered various ways for stockholders to realize the net asset value of their
shares, but also examined options to provide continuity to those stockholders
who wished to earn high current income through investment in a vehicle like DSF
Fund. The Board of Directors of DSF Fund determined to provide stockholders who
wished to receive net asset value for their shares the opportunity to do so
through a tender offer for up to 50% of DSF Fund's outstanding shares at a
purchase price per share equal to 99 1/2% of net asset value at the expiration
of the tender offer (the "Tender Offer"), subject to the prior approval of the
Merger by stockholders of DSF Fund and RCS Fund.
The Merger is intended to provide stockholders of DSF Fund who do not tender
their shares in the Tender Offer the opportunity to earn high current income
through a tax-free merger with a fund similar to DSF Fund. The Board of
Directors of DSF Fund determined that RCS Fund was a particularly attractive
merger partner because it had investment objectives and policies similar to
those of the Fund and its common investment management would provide continuity
in the quality of service, with which the Board of Directors was familiar and
satisfied. In addition, the Board of Directors of DSF Fund considered the
substantial reduction in per share expenses that would result from the merger of
DSF Fund into a substantially larger fund, which over time would more than
offset the estimated expenses of the merger. The Board of Directors believed,
however, that it would not be in the best interests of the Fund to consummate
the Tender Offer or the Merger if a substantial majority of the shares of DSF
Fund were tendered in the Tender Offer or there were a major unfavorable
disparity to DSF Fund stockholders between the discounts from the net asset
values at which shares of DSF Fund and RCS Fund were trading at the expiration
date of the Tender Offer. For that reason, the plan of merger approved by the
DSF Fund Board of Directors and presented to stockholders is a unitary plan of
merger and contingent liquidation, as more fully described below.
In approving the Tender Offer and the Merger, the Board of Directors of DSF Fund
considered various data and a number of other factors, including: (1) the terms
of the Merger; (2) a comparison of each Fund's historical and projected expense
ratios; (3) the comparative investment performance of DSF Fund and RCS Fund; (4)
the Board's knowledge of and satisfaction with the performance of Dresdner RCM
as an investment adviser; (5) the federal income tax consequences of the Merger;
(6) the similarities and differences in the investment objectives and policies
of each Fund; (7) historical and pro forma financial information, including
realized and unrealized gains and losses of each Fund; (8) the fact that shares
of the Funds trade at discounts from their net asset values and that
stockholders of DSF Fund may receive shares trading at a different discount from
net asset value than their shares of DSF Fund; (9) the costs of the Merger; and
(10) the fact that the Tender Offer and the Merger would be abandoned and DSF
Fund would be liquidated and dissolved if (i) more than 75% of DSF Fund's
outstanding shares were tendered in the Tender Offer or (ii) the average daily
closing price of a share of common stock of RCS Fund during the five trading
days immediately
2
<Page>
preceding and including the expiration date of the Tender Offer represented a
discount from its net asset value that, as a percentage of its net asset value,
was more than 15 percentage points greater than the discount from net asset
value, as a percentage of its net asset value, represented by the average daily
closing price of a share of common stock of DSF Fund during that same period
(for these purposes, a premium to net asset value for a share of common stock,
as a percentage of such share's net asset value, will be treated as a negative
discount from net asset value for such share of common stock, as a percentage of
its net asset value).
RCS FUND
In unanimously approving the Merger and recommending it to stockholders of RCS
Fund, the Board of Directors (the "Directors") of RCS Fund determined that the
Merger would be in the best interests of RCS Fund's stockholders and that the
interests of existing stockholders of RCS Fund would not be diluted as a result
of the Merger. The Directors of RCS Fund considered that the Merger would, at a
minimum, result in approximately a 10% increase in the aggregate value of RCS
Fund's assets and a corresponding percentage increase in the number of
outstanding shares of common stock of RCS Fund. Further, the Directors of RCS
Fund considered that, under the terms of the Merger Agreement, the assets of DSF
Fund acquired by RCS Fund would consist either of cash or of securities approved
by RCS Fund. The Directors of RCS Fund, therefore, anticipated that the overall
credit quality of RCS Fund's portfolio of investments would not change
significantly as a result of the Merger. The Directors of RCS Fund also
considered the possibility that this increase in the size, as well as the number
of outstanding shares, of RCS Fund after the Merger might attract greater
investor interest, and might create a more liquid market for shares of RCS Fund
after the Merger.
In approving the Merger Agreement, the Directors of RCS Fund took into account
that if the Merger were consummated, there would be a cap on the Merger-related
expenses borne by RCS Fund stockholders, with DSF Fund stockholders bearing the
remainder. In addition, the Directors of RCS Fund considered that Dresdner RCM,
the investment manager of both Funds, has agreed to waive its management fee in
excess of a rate of 0.75% per annum on net assets of the combined funds after
the Merger (the "Combined Fund") in excess of RCS Fund's pre-Merger net asset
level, and to waive such portion of the Combined Fund's management fee during
the first year following the Merger as may be necessary to ensure that the total
operating expenses actually incurred by the Combined Fund during that period,
plus non-recurring Merger-related expenses, will be at least $75,000 less than
the projected operating expenses for the Combined Fund using an estimated
expense ratio for RCS Fund computed on the assumption that the Merger had not
taken place. The Directors of RCS Fund determined that these fee waivers,
combined with the increase in RCS Fund's net assets as a result of the Merger,
should result in a marginal decrease in RCS Fund's overall expenses as a
percentage of its net assets.
The Directors of RCS Fund also considered a number of other factors concerning
the Merger, including: (1) the terms of the Merger Agreement; (2) whether the
Merger would result in the dilution of an existing stockholder's investment in
RCS Fund; (3) the expense ratios of each Fund before the Merger; (4) the
projected expense ratio of RCS Fund after the Merger; (5) the anticipated effect
of the Merger on RCS Fund's stockholders; (6) the performance of Dresdner RCM as
investment adviser to RCS Fund; (7) the federal income tax consequences of the
Merger; and (8) the historical and pro forma financial information of the Funds,
including realized and unrealized gains and losses of both Funds.
3
<Page>
For additional information about the factors considered by the Board of
Directors of each Fund in approving the Merger, see page [_] - "Information
about the Merger - Background and Reasons for the Merger."
4. COMPARISON OF THE INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS OF THE
FUNDS
The investment objectives and policies of the Funds are generally similar. The
investment objectives and the following policies of DSF Fund are "fundamental"
(that is, may only be changed by stockholder vote as described on page [_]),
while those of RCS Fund are not.
The primary objective of both Funds is to generate a high level of income. RCS
Fund intends to achieve this objective by generating a level of income that is
higher than that generated by high quality, intermediate term U.S. debt
securities, which are defined as three- to ten-year instruments that are rated
at least AA by Standard & Poor's Rating Group ("S&P") or Aa by Moody's Investors
Service, Inc. ("Moody's"). DSF Fund, on the other hand, intends to achieve this
objective through investment in global debt securities. As a secondary
objective, RCS Fund seeks to maintain volatility in the net asset value of the
Fund's common stock comparable to that of high quality, intermediate term U.S.
debt securities. For DSF Fund, long-term capital appreciation through investment
in global debt securities is its secondary objective. RCS Fund will also seek
capital appreciation to the extent consistent with its other investment
objectives.
RCS Fund seeks to maintain a minimum average dollar-weighted credit quality
rating of securities in its portfolio of AA by S&P, or Aa by Moody's, or their
equivalent; whereas, DSF Fund seeks to maintain a dollar-weighted average
portfolio quality of investment grade, which is generally considered to be those
securities rated BBB or higher by S&P or Baa or higher by Moody's. RCS Fund may
borrow up to 33-1/3% of its total assets, less all liabilities and indebtedness
other than bank or other borrowings, and may engage without limitation in
reverse repurchase agreements and dollar rolls. DSF Fund may borrow up to 30% of
its total assets, less all liabilities and indebtedness other than bank or other
borrowings.
In addition, RCS Fund must invest a minimum of 33% of its net assets in U.S.
debt securities and may not invest more than 67% of its total assets in foreign
debt instruments, including a maximum of 20% of its total assets in emerging
market debt instruments. Under normal market conditions, RCS Fund currently
invests at least 65% of its assets in U.S. and foreign government-issued
securities. Pursuant to a recently adopted SEC regulation, this may change to
80% of RCS Fund's net assets plus borrowings for investment purposes by July 31,
2002. Further, RCS Fund may invest up to 45% of its total assets in the
securities of governmental or corporate issuers located in a single foreign
country, subject to the 67% of total assets limitation on foreign securities
holdings. DSF Fund may invest in fixed-income investment sectors in the U.S.,
developed foreign markets and emerging markets, but is not required to maintain
a minimum or maximum allocation of investments in any one of these investment
sectors. For a more detailed discussion of each Fund's investment objectives and
policies, see page [_] - "Information about the Merger - Comparison of Funds'
Investment Objectives, Policies and Restrictions."
4
<Page>
5. COMPARISON OF THE MANAGEMENT FEES AND OTHER EXPENSES OF THE FUNDS
The following tables show the expenses of each Fund for its most recent fiscal
year as well as the pro forma expenses of RCS Fund assuming consummation of the
Merger and the Tender Offer and Dresdner RCM's agreement to waive its management
fee in excess of a rate of 0.75% per annum on net assets of the Combined Fund in
excess of RCS Fund's pre-Merger net asset level. As shown below, the Merger is
expected to result in decreased total expenses for stockholders of both Funds.
However, there can be no assurance that the Merger will result in expense
savings for the Funds.
<Table>
<Caption>
DSF FUND RCS FUND
STOCKHOLDER TRANSACTION EXPENSES
Maximum sales charge imposed on purchases (as a percentage None(a) None(a)
of offering price)
Dividend Reinvestment Plan None(b)(c) None(b)
</Table>
(a) Shares of each Fund purchased on the secondary market are not subject to
sales charges but may be subject to brokerage commissions or other charges. The
table does not include an underwriting commission paid by stockholders in the
initial offering of each Fund. As closed-end funds, the Funds do not redeem
outstanding shares or continuously offer shares. Each Fund's shares currently
may be bought and sold at prevailing market prices on the NYSE.
(b) Each participant in a Fund's dividend reinvestment plan pays a proportionate
share of the brokerage commissions incurred with respect to open market
purchases in connection with such plan.
(c) Voluntary cash purchases under DSF Fund's dividend reinvestment plan are
subject to a proportionate share of the brokerage commissions incurred with
respect to open market purchases in connection with such plan. In addition,
sales of shares held by a stockholder in DSF Fund's dividend reinvestment plan
are subject to a $2.50 service charge and a charge of $0.15 per share.
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<Table>
<Caption>
DSF FUND+ RCS FUND+ RCS FUND (PRO
FORMA COMBINED
AFTER GIVING EFFECT TO
THE TENDER OFFER)
MANAGEMENT FEES 0.70% 0.95% 0.95%
OTHER EXPENSES* 0.75% 0.24% 0.24%
TOTAL ANNUAL FUND 1.45% 1.19% 1.19%
</Table>
5
<Page>
<Table>
OPERATING EXPENSES*
WAIVER/EXPENSE REIMBURSEMENT** - - 0.02%
NET EXPENSES*,** 1.45% 1.19% 1.17%
</Table>
+ For the fiscal year ended October 31, 2000 for DSF Fund and January 31, 2001
for RCS Fund.
* Excludes non-recurring Merger-related expenses.
** Takes into account Dresdner RCM's agreement, dated as of August 2, 2001, to
waive its management fee in excess of a rate of 0.75% per annum on net assets of
the Combined Fund in excess of RCS Fund's pre-Merger net asset level (see
page [ ], "RCS Fund and Dresdner RCM Letter Agreement"), and assumes that 50%
of outstanding shares of DSF Fund common stock are tendered in the Tender Offer.
It is a condition of RCS Fund's obligation to close the Merger that DSF Fund
shall not have repurchased in the Tender Offer or otherwise more than 50% of its
shares outstanding on the date of the Merger Agreement. If less than 50% of DSF
Fund's outstanding shares are tendered, the actual assets acquired by RCS Fund
in the Merger may be greater than projected. If none of DSF Fund's outstanding
shares were tendered in the Tender Offer, the Pro Forma Management Fees, Other
Expenses, Total Annual Fund Operating Expenses, Waiver/Expense Reimbursement and
Net Expenses would be 0.87%, 0.34%, 1.21%, 0% and 1.21%, respectively.
These tables are provided to help you understand the expenses of investing in
the Funds and the share of the operating expenses that each Fund incurs and that
Dresdner RCM expects the Combined Fund to incur in the first year following the
Merger.
EXAMPLES
The following examples translate the "Total Annual Fund Operating Expenses"
shown in the preceding table into dollar amounts to help you more easily compare
the cost of investing in the Funds. As required by SEC regulations, the examples
make certain assumptions. They assume that you invest $1,000 in common stock of
a Fund for the time periods shown. They also assume a 5% return on your
investment each year and that each Fund's operating expenses remain the same.
However, the pro forma expense estimates for the Combined Fund after giving
effect to DSF Fund's Tender Offer reflect Dresdner RCM's agreement to waive its
management fee in excess of a rate of 0.75% per annum on net assets of the
Combined Fund in excess of RCS Fund's pre-Merger net asset level. The examples
are hypothetical; your actual costs and returns may be higher or lower.
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
DSF FUND $15 $46 $79 $174
RCS FUND $12 $38 $65 $144
</Table>
6
<Page>
<Table>
RCS FUND (PRO FORMA $12 $37 $64 $142
COMBINED AFTER GIVING
EFFECT TO THE TENDER
OFFER)*
</Table>
* Excludes non-recurring Merger-related expenses, takes into account Dresdner
RCM's agreement, dated as of August 2, 2001, to waive its management fee in
excess of a rate of 0.75% per annum on net assets of the Combined Fund in excess
of RCS Fund's pre-Merger net asset level (see page [ ], "RCS Fund and Dresdner
RCM Letter Agreement"), and assumes that 50% of outstanding shares of DSF Fund
common stock are tendered in the Tender Offer. It is a condition of RCS Fund's
obligation to close the Merger that DSF Fund shall not have repurchased in the
Tender Offer or otherwise more than 50% of its shares outstanding on the date of
the Merger Agreement. If less than 50% of DSF Fund's outstanding shares are
tendered, the actual assets acquired by RCS Fund in the Merger may be greater
than projected.
6. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
For federal income tax purposes, no gain or loss will be recognized by the Funds
or by the stockholders of the Funds as a result of the Merger.
For a more detailed discussion of the federal income tax consequences, see page
[_], "Information about the Merger - Federal Income Tax Consequences."
7. PROCEDURES FOR PURCHASING AND SELLING SHARES OF THE FUNDS
The procedures for purchasing and selling shares of each Fund are identical and
will not change as a result of the Merger. As closed-end funds, the Funds do not
redeem outstanding shares or continuously offer shares. Each Fund's shares
currently may be bought and sold at prevailing market prices on the NYSE. RCS
Fund will apply to list the Merger Shares on the NYSE. It is a condition to the
closing of the Merger that the Merger Shares be accepted for listing.
8. NOTIFICATION OF THE OUTCOME OF THE MERGER
If the Merger and related transactions are approved and you are a stockholder of
DSF Fund, you will receive confirmation after the Merger is completed,
indicating your new account number with RCS Fund, the number of Merger Shares
you are receiving and the procedures for surrendering your certificates for DSF
Fund shares, if you have any. In the event that one of the events requiring the
liquidation and dissolution of DSF Fund in lieu of the Merger should occur,
prompt public announcement of the abandonment of the Merger and the Tender Offer
will be made. In all other circumstances, you will be notified by your Fund in
its next annual report to stockholders.
9. STOCK OWNERSHIP
If you are a stockholder of DSF Fund, the number of shares of common stock you
own will change but the total net asset value of the shares of RCS Fund you
receive will equal the total net asset value of the shares of DSF Fund that you
hold at the time of the Merger. If you are a stockholder of RCS Fund, the number
of RCS Fund shares you own will not change. Of course, the Merger Shares may
trade at a discount from or premium to net asset value, which might be
significantly greater or less than the trading discount or premium of DSF Fund
or RCS Fund shares at the time of the Merger.
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<Page>
10. MARKET VALUE OF THE FUNDS' COMMON STOCK
Shares of common stock of each Fund will continue to be traded on the NYSE until
the time of the Merger, and may at times trade at a market price greater or less
than net asset value. In recent years, shares of both Funds have traded at a
discount from net asset value. Depending on market conditions immediately prior
to the Merger, shares of RCS Fund may trade at a greater or smaller discount
from net asset value than shares of DSF Fund. This could result in the Merger
Shares having a discount from net asset value that is significantly greater or
less than the discount from net asset value of DSF Fund shares at the time of
the Merger.
11. PERCENTAGE OF STOCKHOLDERS' VOTES REQUIRED TO APPROVE THE MERGER
The presence in person or by proxy of the stockholders of record of one-third of
the shares of common stock of DSF Fund issued and outstanding and entitled to
vote at the Meeting shall constitute a quorum for the transaction of any
business at the Meeting of DSF Fund. Approval of the Merger and related
transactions by DSF Fund's stockholders will require the affirmative vote of the
holders of a majority of the total number of shares of common stock of DSF Fund
outstanding and entitled to vote.
The presence in person or by proxy of the stockholders of record of a majority
of the shares of common stock of RCS Fund issued and outstanding and entitled to
vote at the Meeting shall constitute a quorum for the transaction of any
business at the Meeting of RCS Fund. Approval of the Merger will require the
affirmative vote of a majority of the outstanding shares of common stock of RCS
Fund entitled to vote.
EACH FUND'S BOARD OF DIRECTORS BELIEVES THAT THE MERGER AND THE RELATED
TRANSACTIONS ARE ADVISABLE AND IN THE BEST INTERESTS OF THAT FUND'S
STOCKHOLDERS. ACCORDINGLY, EACH FUND'S BOARD RECOMMENDS THAT ITS FUND'S
STOCKHOLDERS VOTE FOR APPROVAL OF THE MERGER AND THE RELATED TRANSACTIONS.
PRINCIPAL RISKS OF INVESTING IN RCS FUND
Both Funds are closed-end management investment companies and are designed
primarily for long-term investors and not as trading vehicles. Because the Funds
will invest primarily in fixed income securities, the net asset value of each
Fund's shares can be expected to change as interest rates fluctuate. In
addition, the net asset value of each Fund's shares will change with changes in
foreign currency exchange rates and in the value of the securities held by the
Funds. The various investment management techniques employed by Dresdner RCM in
managing the Funds and the different characteristics of particular investments
in which the Funds may invest make it very difficult to predict the impact of
interest rate and credit quality changes on either the net asset value of the
Funds or the market price of their shares. A summary of principal risks
associated with investing in RCS Fund and a comparison of these risks with those
associated with an investment in DSF Fund is presented below.
CREDIT RISK. Credit risk is the risk that an issuer will be unable to make
principal and interest payments when due because the issuer experiences a
decline in its financial status. Under normal market conditions, RCS Fund
invests mainly in investment-grade debt investments. DSF Fund has no comparable
investment policy. Investment grade securities are generally considered to be
those
8
<Page>
securities that are rated BBB or higher by S&P or Baa or higher by Moody's or
are equivalently rated by another nationally recognized rating service, or are
unrated investments that Dresdner RCM believes are of comparable quality.
Although considered investment grade, securities rated BBB by S&P or Baa by
Moody's may have speculative characteristics, and changes in economic conditions
or other circumstances are more likely to lead to a weakened capacity of their
issuers to make principal and interest payments than is the case with higher
grade securities. Credit risk is generally greater for investments that are
issued at less than their face value and that require payments of interest only
at maturity rather than at intervals during the life of the investment. Although
investment-grade investments generally have lower credit risk, they may share
some of the risks of non-investment-grade investments.
Securities rated below investment grade (or comparable unrated securities) are
the equivalent of high yield, high risk bonds, commonly known as "junk bonds."
Non-investment grade securities are regarded as predominantly speculative with
respect to the issuer's capacity to pay interest and repay principal in
accordance with the terms of the obligations, involve major risk exposure to
adverse business, financial, economic or political conditions, and may result in
a default by the issuer. If this happens, or is perceived as likely to happen,
the values of those investments are likely to fall. A default or expected
default could also make it difficult for Dresdner RCM to sell the investments at
prices approximating the values it had placed on them. Although both Funds may
invest in non-investment grade debt instruments, DSF Fund currently invests a
significantly greater percentage of its total assets in securities rated below
investment grade than does RCS Fund, and DSF Fund's exposure to credit risk may
therefore be greater than RCS Fund's.
FOREIGN SECURITIES AND FOREIGN CURRENCY. Both Funds may invest in foreign debt
securities, some of which may be denominated in a foreign currency or in a
multi-national currency unit. RCS Fund may invest up to 67% of its total asset
in foreign debt securities. DSF Fund has no comparable limitation on investments
in foreign instruments, but DSF Fund may not invest more than 25% of its total
assets in non-U.S. dollar denominated securities. Accordingly, RCS Fund may be
subject to greater risk of adverse changes in the value of foreign currencies
relative to the U.S. dollar. Investments in foreign debt securities entail
special risks. Generally, there is less information available about foreign
issuers and there are less stringent regulatory practices and requirements than
those applicable to U.S. issuers. The possibility also exists of political
instability, expropriation or nationalization of assets, revaluation of
currencies, confiscatory taxation, limitations on foreign investment and the use
or removal of funds (including the withholding of dividends and limitations on
the repatriation of currencies). 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 decline in the exchange rate of one or more
foreign currencies could reduce the value of certain portfolio securities. As a
result, the net asset value of the Funds' shares may also be affected by
fluctuations in foreign currency exchange rates. The value of the foreign debt
securities held by the Funds, and thus the Funds' net asset value, may also be
affected by other economic, market, political and credit factors. These risks
may be greater with respect to foreign debt securities than with respect to U.S.
debt securities.
EMERGING MARKET DEBT INSTRUMENTS. The risks associated with investments in
foreign securities may be more pronounced in emerging markets. The securities
markets of emerging market countries are substantially smaller, less developed,
less liquid, less regulated, and more volatile than the securities markets of
the U.S. and developed foreign markets. Emerging market debt is typically
9
<Page>
rated below investment grade. In addition, many emerging market countries have
experienced high rates of inflation and are highly dependent on international
trade. Governments of emerging market countries exercise significant control
over the economies of such countries, which could adversely affect issuers in
those countries or limit the amount of foreign currency reserves available for
external debt payments. Because RCS Fund may invest up to 20% of its total
assets in emerging market debt securities (compared to DSF Fund, which may
invest no more than 10% of its total assets in securities denominated in the
currencies of emerging market countries), these risks may be greater for RCS
Fund than DSF Fund.
MORTGAGE-RELATED SECURITIES. Both Funds may invest in mortgage-related
securities. The investment characteristics of mortgage-related securities differ
from traditional debt securities. These differences can result in significantly
greater price and yield volatility than is the case with traditional fixed
income securities. The major differences typically include more frequent
interest and principal payments, usually monthly, and the possibility that
prepayments of principal may be made at any time. Prepayment rates are
influenced by changes in current interest rates and a variety of economic,
geographic, social, and other factors. In general, changes in the rate of
prepayments on a mortgage-related security will change that security's market
value and its yield to maturity, and could force the Funds to reinvest principal
at a time when investment opportunities are not attractive.
Commercial mortgage loans have special characteristics, and investments in
commercial mortgage-related securities may involve special risks that are
different than the risks associated with investments in residential
mortgage-related securities. Mortgage-related securities are often backed by a
pool of assets representing the obligations of a number of different parties. To
lessen the effect of failures by obligors on underlying mortgages to make
payments, such securities may contain elements of credit support. There can be
no assurance that any such credit support will be sufficient to ensure the
timely return of principal and/or interest. Delinquencies or losses in excess of
those anticipated could adversely affect the return on investment in such
securities. The Funds will not pay any separately stated fees for such credit
support, although the existence of credit support may increase the price of a
security. RCS Fund may invest up to 20% of its total assets in commercial
mortgage securities. DSF Fund is not subject to any restriction on investment in
these securities.
SOVEREIGN DEBT. Under normal market conditions, RCS Fund currently invests at
least 65% of its total assets in government securities of the United States and
foreign countries. Pursuant to a recently adopted SEC regulation, this minimum
investment in government-issued debt securities may change to 80% of net assets
plus borrowings for investment purposes, beginning on July 31, 2002. As of June
30, 2001, DSF Fund had invested 23.8% of its total assets in sovereign debt
instruments. Investments in debt securities of foreign governments present
special risks. For example, the issuer of such debt securities may be unwilling
to repay principal and/or interest when due in accordance with the terms of such
debt, or may be unable to make such repayments when due in the currency required
under the terms of the debt. Political and social events also may have a greater
impact on the price of debt securities issued by foreign governments than on the
price of U.S. securities. In the event that required payments on debt securities
issued by foreign governments are not made on a timely basis, the Funds may have
limited legal recourse.
USE OF BORROWING AND OTHER LEVERAGE. Both Funds may use leverage in various
forms with the goal of enhancing current yield. The Funds are authorized to
borrow money from banks, other financial institutions or other lenders. The
Funds also may utilize leverage through the purchase and
10
<Page>
sale of futures, options, swaps, forward contracts, financed mortgage-backed
securities and when-issued and delayed delivery securities.
To the extent that income derived from securities purchased with borrowed funds
exceeds the interest the Funds will have to pay, each Fund's net income will be
greater than if leveraging had not been used. Conversely, if the income from
securities purchased with borrowed funds is not sufficient to cover the costs of
the borrowing, the net income of the Funds will be less than if borrowing had
not been used, and therefore the amount available for distribution to
stockholders as dividends will be reduced. Leveraging may also result in higher
volatility of net asset value and market value of each Fund's shares. The use of
leverage by the Funds creates an opportunity for increased net income and/or
capital gain, but, at the same time, creates special risks including greater
risk of capital loss.
The risks for RCS Fund and DSF Fund are greater than those of similar funds that
are not permitted to leverage their portfolios. The Funds will only use leverage
when Dresdner RCM believes that such leveraging will benefit the Funds, after
taking into account considerations such as interest income and possible gains or
losses upon liquidation. There can be no assurance, however, that the use of
leverage will not reduce the Funds' investment return.
NON-DIVERSIFICATION AND RELATED RISKS. Because the Funds are "non-diversified"
investment companies under the 1940 Act, they may invest a higher percentage of
their assets in securities of a single issuer or of a limited group of issuers
than a diversified company. As a result of non-diversification, the Funds may be
more susceptible than more widely diversified Funds to the risks of adverse
developments in the securities markets, changes in exchange rates and economic,
political or regulatory events related to such issuers, or to default by a
single issuer or group of issuers.
INTEREST RATE RISK. The values of bonds and other debt securities usually rise
and fall in response to changes in interest rates. Declining interest rates
generally increase the values of existing debt instruments, and rising interest
rates generally decrease them. Changes in a debt instrument's value usually will
not affect the amount of income the Fund receives from it, but will affect the
value of the Fund's shares. Interest rate risk is generally greater for
investments with longer maturities.
Some debt securities and, in particular, many mortgage-backed securities, give
the issuer the option to call or redeem them from their maturity date. If an
issuer calls its securities during a time of declining interest rates, the Fund
might have to reinvest the proceeds in an investment offering a lower yield, and
therefore might not benefit from any increase in value as a result of declining
interest rates.
"Premium" investments offer interest rates higher than prevailing market rates.
However, they involve a greater risk of loss, because their values tend to
decline over time and there might be a greater risk of prepayment occurring at
an inopportune time.
CERTAIN INVESTMENT TECHNIQUES. Both Funds may engage in a variety of
transactions involving derivatives, such as futures, options, warrants, swap
contracts and inverse floaters. Derivatives are financial instruments whose
value depends upon, or is derived from, the value of something else, such as one
or more underlying investments, pools of investments or indexes. The Funds may
use derivatives both for hedging and non-hedging purposes such as to adjust each
Fund's exposure to changes in a particular interest rate. For example, the Funds
may use derivatives to increase or decrease their exposure to long- or
short-term interest rates. However, the Funds may also choose not
11
<Page>
to use derivatives, based on Dresdner RCM's evaluation of market conditions or
the availability of suitable derivatives.
Derivatives involve special risks and may result in losses. Gains and losses on
derivative transactions depend on Dresdner RCM's ability to predict correctly
the direction of interest rates, securities prices, currency exchange rates or
other factors. Risks in the use of derivatives include:
- - imperfect correlation between the prices of derivatives and the
movements of the securities prices, interest rates or currency exchange
rates being hedged (especially in unusual market conditions);
- - the potential loss if the counterparty to the transaction does not perform
as promised;
- - the possible need to defer closing out certain positions to avoid adverse
tax consequences; and
- - the possible absence of a liquid secondary market, especially for
over-the-counter instruments (those investments not traded on an
exchange).
In addition, some derivatives are "leveraged" and therefore may magnify or
otherwise increase investment losses. The Funds' use of derivatives may also
cause the Funds to receive taxable income, which could increase the amount of
taxes payable by stockholders.
ILLIQUID SECURITIES. The Funds may invest, without limitation, in securities
that may, from time to time, have limited marketability ("illiquid securities").
Illiquid securities may trade at a discount from comparable, more liquid
investments, and may be subject to wide fluctuations in market value. The Funds'
investments in illiquid securities are subject to the risk that, should the
Funds desire to sell any of these securities at a time when a buyer is not
available at a price that the Funds deem representative of their value, the
value of the Funds' net assets could be adversely affected.
ANTI-TAKEOVER PROVISIONS. Each Fund's Charter and Bylaws include provisions that
could limit the ability of other persons or entities to acquire control of the
Fund or to cause it to engage in certain transactions or to modify its
structure. See page [_], "Further Information about the Funds - Charters and
Bylaws." Such provisions may have the effect of depriving stockholders of an
opportunity to sell their common stock at a premium over prevailing market
prices.
SPECIAL FACTORS RELATING TO CLOSED-END FUNDS. Shares of closed-end management
investment companies have in the past frequently traded at discounts from their
net asset values or initial offering prices, and each Fund's shares may likewise
trade at a discount. The market price of each Fund's shares may be determined by
such factors as relative demand for and supply of such shares in the market,
each Fund's net asset value, general market and economic conditions and other
factors beyond the control of the Funds. In recent years, shares of both Funds
have traded at a discount to their respective net asset values.
INFORMATION ABOUT THE MERGER
The stockholders of each Fund are being asked to approve the Merger between DSF
Fund and RCS Fund and related transactions pursuant to the Merger Agreement, a
copy of which is attached to this Prospectus/Proxy Statement as Appendix A.
12
<Page>
The Merger is structured as a statutory merger of DSF Fund with and into RCS
Fund, as permitted by Maryland law. On the Merger Date, RCS Fund will acquire
all of the assets and assume all of the liabilities of DSF Fund, and shares of
each stockholder of DSF Fund on the Merger Date will automatically be converted
into RCS Fund Merger Shares equal in aggregate net asset value to his or her
shares in DSF Fund immediately prior to the Merger. After the Merger is
completed, all stockholders of DSF Fund on the Merger Date will be stockholders
of RCS Fund with the rights and obligations of stockholders as set forth in RCS
Fund's Charter and Bylaws, as amended, and DSF Fund will cease to exist as a
separate corporation under Maryland law.
The DSF Fund assets that RCS Fund will acquire in the Merger will not include
any securities which RCS Fund, by reason of its investment policies and
restrictions, may not properly acquire or any securities which the Board of
Directors of RCS Fund determines would be unsuitable or undesirable for
acquisition by RCS Fund. These assets, if any, will be liquidated by DSF Fund in
an orderly fashion prior to the Merger, and the cash proceeds will either be
acquired by RCS Fund in lieu of securities or reinvested by DSF Fund in
portfolio securities which RCS Fund deems suitable for acquisition in the
Merger.
Prior to the Merger Date, DSF Fund will conduct the Tender Offer, whereby it
will offer to repurchase up to 50% of the shares of its common stock outstanding
as of the date of the Merger Agreement at a purchase price per share equal to
99-1/2% of its per share net asset value on the expiration of the Tender Offer.
It is a condition to RCS Fund's obligation to consummate the Merger that during
the period between the date of the Merger Agreement and the Merger Date, DSF
Fund shall not have repurchased in the Tender Offer or otherwise more than 50%
of its shares of common stock issued and outstanding as of the date of the
Merger Agreement. However, if more than 75% of the outstanding shares of common
stock of DSF Fund are tendered, or if the average daily closing price of a share
of common stock of RCS Fund during the five trading days immediately preceding
and including the expiration date of the Tender Offer represents a discount from
its net asset value that, as a percentage of its net asset value, is more than
15 percentage points greater than the discount from net asset value, as a
percentage of its net asset value, represented by the average daily closing
price of a share of common stock of DSF Fund during that same period, then DSF
Fund will abandon both the Tender Offer and the Merger, and DSF Fund will be
liquidated in an orderly manner and dissolved and the proceeds distributed to
stockholders in proportion to the value of their respective investments in DSF
Fund (for these purposes, a premium to net asset value for a share of common
stock, as a percentage of such share's net asset value, will be treated as a
negative discount from net asset value for such share of common stock, as a
percentage of its net asset value). The liquidation of DSF Fund would be a
taxable event to DSF Fund stockholders. See "Information about the Merger -
Federal Income Tax Consequences" on page [_].
Pursuant to the terms of the Merger Agreement, as described more fully below, if
the Merger is completed, RCS Fund will bear up to $25,000 of the legal expenses
and other costs of preparing the Merger Agreement, the Registration Statement on
Form N-14 (the "Registration Statement") and other documents required for the
Merger, and DSF Fund will bear all such expenses and costs in excess of that
amount. Each Fund's portion of these Merger-related expenses will be included as
a liability of such Fund on the date set for valuing each Fund's net asset value
for the Merger and the number of Merger Shares that RCS Fund will issue in
connection with the Merger. The Merger Agreement provides that, if the Merger
does not receive the approval of RCS Fund stockholders but does receive the
approval of DSF Fund stockholders, or if neither Fund's stockholders vote to
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approve the Merger, then DSF Fund and RCS Fund will each bear one-half of the
legal expenses and other costs of preparing this Prospectus/Proxy Statement and
the SAI, as well as the Merger Agreement and other documents necessary to
effectuate the Merger. If the Merger does not receive the approval of DSF Fund
stockholders but does receive the approval of RCS Fund stockholders, then DSF
Fund will bear all legal expenses and other costs of preparing such documents in
excess of $40,000, as well as all legal expenses and other costs incurred by RCS
Fund to hold meetings of its stockholders and Board of Directors to consider the
Merger. See page [_], "Information About the Merger - Expenses of the Merger."
Because of this allocation of expenses and the relative sizes of the Funds, each
DSF Fund stockholder will receive fewer Merger Shares than he or she would have
received had DSF Fund not been liable for such expenses.
Each Fund's Board of Directors has voted to approve the Merger Agreement and to
recommend that its respective stockholders also approve the Merger proposal. The
Merger and the related transactions described in the Merger Agreement will be
consummated only if approved by the affirmative vote of holders of a majority of
the outstanding shares of common stock of DSF Fund entitled to vote and holders
of a majority of the outstanding shares of common stock of RCS Fund entitled to
vote. It is also a condition to the closing of the Merger that the Merger Shares
will have been accepted for listing on the NYSE.
In the event that the Merger proposal does not receive the required approvals,
DSF Fund and RCS Fund will continue to be managed as separate funds in
accordance with their respective investment objectives and policies. The Board
of Directors of DSF Fund would give further consideration to whether other
actions were in the best interest of DSF Fund.
BACKGROUND AND REASONS FOR THE MERGER.
DELIBERATIONS OF THE DSF FUND DIRECTORS
At the Annual Meeting of DSF Fund stockholders held on October 26, 2000 as
adjourned and reconvened on November 7, 2000, holders of 65.5% of the shares
voted, or 44.4% of the outstanding shares, approved a non-binding stockholder
proposal urging the DSF Fund Board of Directors to take the steps necessary to
make DSF Fund an open-end investment company (i.e., a company that is required
to redeem its shares at their net asset value). The Board of Directors of DSF
Fund, at its meeting on November 30, 2000, appointed a committee of the Board
(the "Committee"), consisting solely of Directors who were not "interested
persons" of DSF Fund, as defined in the 1940 Act ("Disinterested Directors"), to
consider and make recommendations to the Board of Directors of DSF Fund as to
what, if any, action should be taken by the Board in response to this
stockholder proposal.
The Committee met with DSF Fund's counsel and management on December 18, 2000,
January 8, 2001, January 23, 2001, February 8, 2001, and March 1, 2001. Special
Maryland counsel also attended certain of these meetings. In view of the vote of
stockholders urging open-ending, the Committee considered ways, including
combining with an open-end fund and liquidation, to permit stockholders to
realize net asset value for their shares. The Committee also considered options
to provide stockholders an opportunity to continue to earn high current income
through investment in a fund similar to DSF Fund through a non-taxable
transaction. To assist it in such consideration, the Committee retained an
outside consultant, Lipper, Inc., to advise and provide data with respect to the
consequences of various possible actions and as to other funds with investment
objectives and policies similar to those of DSF Fund into which DSF Fund could
merge. Pursuant to instructions
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from the Committee, management of DSF Fund was authorized to explore the
possibility of a merger of DSF Fund into RCS Fund. At the March 1, 2001 meeting
of the Committee, management reported that the Board of Directors of RCS Fund
was favorably disposed to exploring a merger with DSF Fund provided that DSF
Fund was of an agreed minimum size at the time of the merger and that most of
the expenses of the merger were assumed by DSF Fund.
On the basis of its deliberations, the Committee recommended to the Board of
Directors of DSF Fund at a meeting held on March 15, 2001 that DSF Fund make a
tender offer for 55% of its outstanding shares, at a purchase price equal to
99-1/2% of net asset value at the expiration of the tender offer, subject to
prior approval by stockholders of DSF Fund and RCS Fund of the merger of DSF
Fund into RCS Fund at the completion of the tender offer. It was reported that
the Board of Directors of RCS Fund had not yet approved the merger.
The Committee and management reported to the Board of Directors of DSF Fund that
the recommendation was intended to provide an opportunity for stockholders
wishing to achieve immediate net asset value for their shares to do so, while
providing continuity to those stockholders wishing to achieve high current
income from an investment vehicle similar to DSF Fund, without, in the latter
case, triggering the recognition of any gains on DSF Fund shares. It was
explained that the 1/2% discount from net asset value at which the tender offer
was priced was a means to ensure that tendering stockholders shared a portion of
the costs of the tender offer and merger with stockholders who did not tender.
The Board of Directors of DSF Fund was presented with comparative information
with respect to the investment objectives and policies, performance, fees and
expense ratios of DSF Fund and RCS Fund as well as estimates of pro forma
expense ratios after the merger. The Board was also presented with information
provided by Lipper, Inc. with respect to other potential merger partners. The
Board also considered the fact that under certain circumstances, such as a major
widening of the discounts from net asset value at which shares of DSF Fund and
RCS Fund were trading or a tender of a large majority of DSF Fund's shares in
the tender offer, the proposed merger with RCS Fund would not be in the best
interests of DSF Fund stockholders and that it would be preferable for DSF Fund
to be liquidated.
The Board of Directors of DSF Fund approved the proposed tender offer and merger
in principle and authorized the Committee to negotiate and approve other terms
of the merger. The Committee met again on May 1, 2001 and May 10, 2001 to
consider the terms on which the Board of Directors of RCS Fund had approved in
principle the merger of DSF Fund into RCS Fund, including a reduction in the
tender offer to 50% of DSF Fund's outstanding shares and specific proposals as
to sharing of merger expenses. The Committee then approved the Tender Offer and
the Merger as being in the best interests of DSF Fund and determined that the
interests of existing stockholders would not be diluted as a result of the
Merger. At a meeting on June 1, 2001, the Board of Directors of DSF Fund,
including a majority of the Disinterested Directors, determined that the Tender
Offer and the Merger would be in the best interests of DSF Fund and that the
interests of existing stockholders of DSF Fund would not be diluted as a result
of the Merger. In determining that there would be no dilution of the interest of
DSF Fund's stockholders, the Board of Directors of DSF Fund considered estimates
provided by Dresdner RCM of DSF Fund's Merger expenses and of post-Merger
pro-forma per share annual expense ratios. These estimates were based on May 4,
2001 net assets and assumed that various percentages of shares of DSF Fund
(ranging from 0% to 50%) were purchased in the Tender Offer. Estimated dilution
as a percentage of DSF Fund's net assets ranged from about 38 to 76 basis
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points. This minimal dilution was offset by estimated post-Merger reductions in
expense ratios to DSF Fund stockholders ranging from about 21 basis points to 64
basis points per annum. The estimates showed that the costs of the Merger to DSF
Fund stockholders would be recovered in about 1.2 to 1.8 years through the
estimated savings in expense ratios.
In reaching the conclusion that the Merger is in the best interest of DSF Fund,
the DSF Fund Board of Directors considered a number of additional factors,
including: (1) their knowledge of and satisfaction with the performance of
Dresdner RCM as an investment adviser; (2) historical and pro forma financial
information, including realized and unrealized gains and losses of each Fund;
(3) the fact that shares of the Funds trade at discounts from their net asset
values and that stockholders of DSF Fund may receive shares trading at a
different discount from net asset value than the shares of DSF Fund; and (4) the
fact that the Tender Offer and the Merger would be abandoned and DSF Fund would
be liquidated and dissolved if (i) more than 75% of DSF Fund's outstanding
shares were tendered in the Tender Offer or (ii) the average daily closing price
of a share of common stock of RCS Fund during the five trading days immediately
preceding and including the expiration date of the Tender Offer represented a
discount from its net asset value that, as a percentage of its net asset value,
was more than 15 percentage points greater than the discount from net asset
value, as a percentage of its net asset value, represented by the average daily
closing price of a share of common stock of DSF Fund during that same period
(for these purposes, a premium to net asset value for a share of common stock,
as a percentage of such share's net asset value, will be treated as a negative
discount from net asset value for such share of common stock, as a percentage of
its net asset value).
DELIBERATIONS OF THE RCS FUND DIRECTORS
The Board of Directors of RCS Fund considered a merger of the two Funds as an
opportunity to benefit existing RCS Fund stockholders by acquiring additional
portfolio assets of a similar nature, credit quality and duration as the Fund's
existing assets, thereby potentially increasing RCS Fund's ability to realize
economies of scale, and by increasing the number of outstanding shares of the
Fund, thereby potentially creating a more liquid trading market for shares of
RCS Fund. In exploring the merger of DSF Fund into RCS Fund, the Board of
Directors of RCS Fund made its approval of such a transaction subject to two
principal conditions: there would be no impairment of the overall credit quality
of RCS Fund's existing portfolio of investments as a result of the acquisition
of DSF Fund's assets and any merger expenses incurred by RCS Fund, as well as
the overall expenses of the combined funds after the merger, would not result in
a higher rate of operating costs for RCS Fund.
In approving the Merger, the Board of Directors of RCS Fund considered: (1) the
credit quality of the DSF Fund assets that would be acquired by RCS Fund in a
merger; (2) transaction costs that might be incurred by RCS Fund to reinvest
cash acquired in lieu of DSF Fund portfolio securities; (3) the allocation of
Merger-related expenses between the two Funds; (4) the effect of Merger-related
expenses on the Combined Fund's expense ratio, and whether the Merger would be
accretive or dilutive of existing stockholders' interests in RCS Fund; (5) the
adoption of appropriate accounting procedures to ensure proper calculation of
shares to be issued by RCS Fund in connection with the Merger; (6) the
circumstances in which DSF Fund could terminate the Merger prior to its
consummation; and (7) the agreement by Dresdner RCM to indemnify RCS Fund
against certain potential liabilities of DSF Fund.
RCS Fund has also entered into an agreement with Dresdner RCM (the "Letter
Agreement") pursuant to which Dresdner RCM will waive such portion of its
management fee during the first year
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following the Merger as may be necessary to ensure that the total expenses
actually incurred by RCS Fund during that period, plus non-recurring
Merger-related expenses, will be at least $75,000 less than the projected
operating expenses for the Combined Fund using an estimated expense ratio for
RCS Fund computed on the assumption that the Merger had not taken place. In
addition, Dresdner RCM will waive its management fee in excess of a rate of
0.75% per annum on net assets of the Combined Fund in excess of RCS Fund's
pre-Merger net assets. See page [__], "Information about the Merger - RCS Fund
and Dresdner RCM Letter Agreement."
On June 15, 2001, at a Special Meeting of the Board of Directors of RCS Fund,
the Board, including the Disinterested Directors, determined that the terms of
the Merger, as set forth in the Merger Agreement and the Letter Agreement, are
fair and reasonable and would be in the best interests of RCS Fund's
stockholders. The Board of Directors of RCS Fund, therefore, voted unanimously
to approve the Merger and the Merger Agreement substantially in the form
attached as Appendix A to this Prospectus/Proxy Statement and to recommend
approval by the stockholders of RCS Fund.
AGREEMENT AND PLAN OF MERGER. The following discussion of the Merger Agreement
is qualified in its entirety by the full text of the Merger Agreement, a copy of
which is attached as Appendix A to this Prospectus/Proxy Statement.
The terms of the Merger, which is structured as a statutory merger under
Maryland law, are set forth in the Merger Agreement. The Merger Agreement
provides that, on the Merger Date (10:00 a.m. San Francisco time, on the next
full business day following the Valuation Time, as defined below), RCS Fund will
acquire all of DSF Fund's assets and assume all of DSF Fund's liabilities, and
all outstanding shares of common stock of DSF Fund will be converted into full
and fractional Merger Shares having an aggregate net asset value equal to the
aggregate net asset value of the DSF Fund shares. The time (the "Valuation
Time") as of which the Funds' assets and liabilities will be valued for purposes
of determining the net asset value of their respective shares for the Merger
will be 2:00 p.m. San Francisco time on the fourth full business day following
the expiration of the Tender Offer, or such other date and time as may be agreed
upon by the parties.
As a result of the Merger, each holder of shares of common stock of DSF Fund on
the Merger Date will, without taking any further action, receive a number of
Merger Shares equal in net asset value to the net asset value of his or her
shares of DSF Fund, such values being determined at the Valuation Time. This
share conversion will be accomplished by establishing accounts on the share
records of RCS Fund in the name of each DSF Fund stockholder on the Merger Date,
with each account representing the respective number of Merger Shares due to
such stockholder. Certificates representing Merger Shares will be issued only
upon written request by a stockholder receiving such shares.
As a result of the Merger and the conversion of shares of DSF Fund into shares
of RCS Fund, as described above, stockholders of DSF Fund will become
stockholders of RCS Fund, with the rights and obligations of such stockholders
as set forth in RCS Fund's Charter and Bylaws. DSF Fund will, by operation of
law, cease to exist as a separate corporation upon the consummation of the
Merger, and RCS Fund will thereafter continue as the surviving corporation under
Maryland law.
The consummation of the Merger is subject to the conditions set forth in the
Merger Agreement, including the condition that the Merger and related
transactions be approved by the stockholders of each Fund. See "Synopsis -
Percentage of Stockholders' Votes Required to Approve the Merger" at
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page [ _ ]. The Merger Agreement may be terminated and the Merger abandoned at
any time, before or after approval by the stockholders, prior to the Merger Date
by mutual consent of the Boards of Directors of RCS Fund and DSF Fund or if any
condition set forth in the Merger Agreement has not been fulfilled and has not
been waived by the party entitled to its benefits.
The Merger Agreement will terminate, and DSF Fund will be liquidated in an
orderly fashion and dissolved and the liquidation proceeds distributed pro rata
to DSF Fund stockholders, in either of two situations: (1) if stockholders of
DSF Fund tender more than 75% of the outstanding shares of DSF Fund in the
Tender Offer; or (2) if the average daily closing price of a share of common
stock of RCS Fund during the five trading days immediately preceding and
including the expiration date of the Tender Offer represents a discount from its
net asset value that, as a percentage of its net asset value, is more than 15
percentage points greater than the discount from net asset value, as a
percentage of its net asset value, represented by the average daily closing
price of a share of common stock of DSF Fund during that same period (for these
purposes, a premium to net asset value for a share of common stock, as a
percentage of such share's net asset value, will be treated as a negative
discount from net asset value for such share of common stock, as a percentage of
its net asset value).
EXPENSES OF THE MERGER. The following summary of the expenses of the Merger and
their allocation between the Funds is qualified in its entirety by the full text
of the Merger Agreement, a copy of which is attached as Appendix A to this
Prospectus/Proxy Statement.
COMPLETED MERGER EXPENSES. The legal, printing and other fees and expenses
incurred by RCS Fund and DSF Fund to prepare, print and distribute the documents
necessary to effect the Merger, including this Prospectus/Proxy Statement, the
SAI and the Merger Agreement, are estimated to be $325,000. Pursuant to the
Merger Agreement, RCS Fund will be responsible for the first $25,000 of these
expenses, which may be higher than estimated, and DSF Fund will be liable for
the remainder if the Merger is consummated. In addition, each Fund will
separately be responsible for its own legal and other costs and expenses to
prepare those portions of this Prospectus/Proxy Statement that relate to
proposals other than the Merger to be voted on by that Fund's stockholders and
to hold meetings of its stockholders and Directors to consider the Merger and
the Merger Agreement. The expenses described in this paragraph that each Fund
will bear will be included as a liability of such Fund at the Valuation Time,
causing such Fund's aggregate net asset value and net asset value per share to
be lower than what it would have been in the absence of these expenses.
In connection with the Merger, DSF Fund may liquidate certain of its portfolio
securities which RCS Fund decides are unsuitable or undesirable for it to
acquire. Cash proceeds from the sale of such DSF Fund assets which are not
reinvested prior to the Merger in portfolio securities acceptable to RCS Fund
would be acquired by RCS Fund in the Merger in lieu of securities, and may be
reinvested by RCS Fund in accordance with its investment policies and
restrictions. RCS Fund may incur transaction costs when reinvesting any such
cash acquired in the Merger.
As discussed above, prior to the Merger, DSF Fund will conduct a Tender Offer
for outstanding shares of DSF Fund. The liquidation of DSF Fund's portfolio
assets to finance the repurchase of tendered shares will entail transaction
costs, which will be borne by DSF Fund. In addition, these liquidation
transactions, as well as any pre-Merger liquidation of DSF Fund assets discussed
in the preceding paragraph, may cause DSF Fund to realize capital gains or
losses prior to the Merger Date. Any gains realized by DSF Fund prior to the
Merger Date will be distributed to stockholders of DSF Fund prior to the Merger
Date and, therefore, the tax costs associated with such gains will be borne
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solely by DSF Fund stockholders. See page [ ], "Information About the Merger -
Federal Income Tax Consequences."
"BROKEN DEAL" EXPENSES. In addition to the expense provisions discussed above,
the Merger Agreement requires DSF Fund to reimburse RCS Fund for certain
Merger-related expenses incurred by RCS Fund in the event that the Merger is not
consummated. The following discussion of these "broken deal" reimbursement
provisions is intended only as a summary, and you should refer to the full text
of the Merger Agreement in Appendix A of this Prospectus/Proxy Statement for a
more complete description of DSF Fund's expense reimbursement obligations:
- DSF Fund will reimburse one-half of the reasonable expenses incurred
by RCS Fund to prepare and distribute this Prospectus/Proxy Statement
(other than incremental costs associated with preparing the portions
of this Prospectus/Proxy Statement captioned "Additional Proposals to
be Voted on by Stockholders of RCS Fund Only" and expenses incurred in
connection with the accountant's letter referred to in Section 8(g) of
the Merger Agreement), the Merger Agreement and other documents
necessary to effect the Merger if the Merger is not consummated
because: (1) the holders of a majority of outstanding shares of DSF
Fund vote to approve the Merger but the holders of a majority of the
outstanding shares of RCS Fund do not vote to approve the Merger: (2)
the Directors of RCS Fund and DSF Fund mutually agree to terminate the
Merger Agreement; (3) the Merger Agreement terminates automatically
upon the failure to consummate the Merger by December 31, 2001, unless
the Directors of both Funds agree to extend this date; (4) the holders
of a majority of outstanding shares of each of DSF Fund and RCS Fund
do not vote to approve the Merger; (5) any condition to DSF Fund's
obligation to complete the Merger set forth in Section 9 of the Merger
Agreement (other than the Tender Offer and required approvals of the
RCS Fund and DSF Fund stockholders) is not fulfilled; (6) RCS Fund has
not received prior to the effective date of this Registration
Statement the accountant's letter referred to in Section 8(g) of the
Merger Agreement; or (7) both a condition to DSF Fund's obligation to
complete the Merger set forth in Section 9 of the Merger Agreement
(other than the Tender Offer and the approvals of the RCS Fund and DSF
Fund stockholders) and a condition to RCS Fund's obligation to
complete the Merger set forth in Section 8 of the Merger Agreement
(other than the accountant's letter referred to in Section 8(g) and
the approvals of the RCS Fund and DSF Fund stockholders) are not
fulfilled.
- DSF Fund will reimburse RCS Fund for all reasonable expenses in excess
of $40,000 incurred by RCS Fund to prepare and distribute this
Prospectus/Proxy Statement, the Merger Agreement and other documents
necessary to effect the Merger, as well as all reasonable expenses
incurred by RCS Fund to hold meetings of its Board of Directors and
stockholders to consider the Merger proposal, if (1) the holders of a
majority of outstanding shares of RCS Fund vote to approve the Merger
but the holders of a majority of outstanding shares of DSF Fund do not
vote to approve the Merger, or (2) by December 31, 2001, or such other
date as the Directors of both Funds shall mutually agree on, the
holders of a majority of outstanding shares of RCS Fund have voted to
approve the Merger but the DSF Fund stockholders have not yet voted on
the Merger proposal.
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- DSF Fund will reimburse RCS Fund for all reasonable expenses in excess
of $25,000 incurred by RCS Fund to prepare and distribute this
Prospectus/Proxy Statement, the Merger Agreement and other documents
necessary to effect the Merger, as well as all reasonable expenses in
excess of $40,000 incurred by RCS Fund to hold meetings of its Board
of Directors and stockholders to consider the Merger, if the Merger is
terminated pursuant to the Merger Agreement because (1) 75% or more of
the outstanding shares of DSF Fund are tendered in the Tender Offer;
or (2) the average daily closing price of a share of common stock of
RCS Fund during the five trading days immediately preceding and
including the expiration date of the Tender Offer represents a
discount from its net asset value that, as a percentage of its net
asset value, is more than 15 percentage points greater than the
discount from net asset value, as a percentage of its net asset value,
represented by the average daily closing price of a share of common
stock of DSF Fund during that same period (for these purposes, a
premium to net asset value for a share of common stock, as a
percentage of such share's net asset value, will be treated as a
negative discount from net asset value for such share of common stock,
as a percentage of its net asset value).
- DSF Fund will reimburse RCS Fund for all reasonable expenses incurred
by RCS Fund in connection with the Merger (other than incremental
costs associated with preparing the portions of this Prospectus/Proxy
Statement captioned "Additional Proposals to be Voted on by
Stockholders of RCS Fund Only" and expenses incurred in connection
with the accountant's letter referred to in Section 8(g) of the Merger
Agreement) if the Merger is not consummated by reason of the
non-fulfillment of any condition to RCS Fund's obligations set forth
in Section 8 of the Merger Agreement, other than the required
approvals of the RCS Fund and DSF Fund stockholders and the
accountant's letter referred to in Section 8(g) of the Merger
Agreement.
In addition, pursuant to the Letter Agreement, Dresdner RCM will reimburse RCS
Fund for certain "broken deal" expenses not reimbursed by DSF Fund under the
terms of the Merger Agreement. See page [__], "Information about the Merger -
RCS Fund and Dresdner RCM Letter Agreement." Notwithstanding any of the expense
reimbursement provisions contained in the Merger Agreement or the Letter
Agreement and described in this Prospectus/Proxy Statement, RCS Fund shall
directly bear such expenses to the extent that their reimbursement by DSF Fund
or Dresdner RCM would, in the opinion of legal counsel to RCS Fund, result in
the disqualification of RCS Fund as a "regulated investment company" under
Section 851 of the Internal Revenue Code of 1986, as amended (the "Code").
RCS FUND AND DRESDNER RCM LETTER AGREEMENT. In connection with the Merger, RCS
Fund has entered into the Letter Agreement with Dresdner RCM, dated as of
August 2, 2001. The following summary of the terms of the Letter Agreement is
qualified in its entirety by the full text of the Letter Agreement, a copy of
which has been filed with the SEC as an exhibit to this Registration Statement.
Pursuant to the Letter Agreement, Dresdner RCM has agreed, to the extent not
reimbursed by DSF Fund pursuant to the Merger Agreement, to:
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- Reimburse all expenses up to a maximum of $40,000 incurred by RCS Fund
to hold meetings of its Board of Directors and stockholders to
consider the Merger in the event that (1) the Merger is not
consummated due to the nonfulfillment of any condition to DSF Fund's
obligation to consummate the Merger, including a failure to obtain the
required approval of the RCS Fund stockholders but excluding a failure
to obtain the required approval of the DSF Fund stockholders, or (2)
the Merger is terminated pursuant to the Merger Agreement because (i)
75% or more of the outstanding shares of DSF Fund are tendered in the
Tender Offer or (ii) the average daily closing price of a share of
common stock of RCS Fund during the five trading days immediately
preceding and including the expiration date of the Tender Offer
represents a discount from its net asset value that, as a percentage
of its net asset value, is more than 15 percentage points greater than
the discount from net asset value, as a percentage of its net asset
value, represented by the average daily closing price of a share of
common stock of DSF Fund during that same period (for these purposes,
a premium to net asset value for a share of common stock, as a
percentage of such share's net asset value, will be treated as a
negative discount from net asset value for such share of common stock,
as a percentage of its net asset value).
- Reimburse all expenses up to a maximum of $40,000 incurred by RCS Fund
to prepare and distribute this Prospectus/Proxy Statement, the Merger
Agreement and other documents necessary to effect the Merger in the
event that the holders of a majority of the shares of DSF Fund do not
vote to approve the Merger.
- Waive a portion of its management fee payable by RCS Fund during the
twelve months immediately following the Merger as may be necessary to
ensure that the total operating expenses for the Combined Fund for
that period, plus non-recurring Merger-related expenses, will be at
least $75,000 less than the projected operating expenses for the
Combined Fund using an estimated expense ratio for RCS Fund computed
on the assumption that the Merger had not taken place.
- Waive its management fee in excess of a rate of 0.75% per annum on net
assets of the Combined Fund in excess of the net assets of RCS Fund
immediately prior to the Merger.
DESCRIPTION OF THE MERGER SHARES. Each of the Merger Shares will be fully paid
and nonassessable when issued and will have no preemptive, conversion or
exchange rights. The Merger Shares will have equal non-cumulative voting rights
and equal rights with respect to dividends, assets and liquidation. The Merger
Shares will be transferable without restriction.
COMPARISON OF THE FUNDS' INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS. The
following discussion summarizes the investment objectives, policies and
restrictions of RCS Fund. Except as noted below, DSF Fund generally has similar
investment policies to those of RCS Fund. Further, except as noted below, the
investment objectives and policies of RCS Fund discussed below are not
fundamental and may be changed without a vote of the holders of RCS Fund common
stock, but the investment restrictions of RCS Fund are fundamental. The
investment objectives, limitations on investment and restrictions of DSF Fund
are all fundamental, and may not be changed without the affirmative vote of a
"majority of the outstanding voting securities" of DSF Fund. A "majority of the
outstanding voting securities" is defined in the 1940 Act to mean the
affirmative vote of the lesser of (1) more than 50% of the outstanding voting
securities, or (2) 67% or more of the voting securities
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present at a meeting if more than 50% of the outstanding shares are represented
at the meeting in person or by proxy. This section is qualified in its entirety
by the discussion in the SAI, which is incorporated herein by reference.
INVESTMENT OBJECTIVES. The primary investment objective of RCS Fund is to
generate a level of income that is higher than that generated by high quality,
intermediate term U.S. debt securities, which are defined as three-to ten-year
instruments that are rated at least AA by S&P or Aa by Moody's. As a secondary
objective, RCS Fund will seek to maintain volatility in the net asset value of
the common stock comparable to that of high quality, intermediate term U.S. debt
securities. RCS Fund will also seek capital appreciation to the extent
consistent with its other investment objectives. THE PRIMARY INVESTMENT
OBJECTIVE OF DSF FUND IS HIGH INCOME THROUGH GLOBAL INVESTMENT IN DEBT
SECURITIES. LONG-TERM CAPITAL APPRECIATION THROUGH SUCH INVESTMENT IS A
SECONDARY OBJECTIVE OF DSF FUND.
INVESTMENT POLICIES. RCS Fund invests in a portfolio of U.S. and foreign debt
securities.
Under current market conditions, RCS Fund expects to invest principally in a
portfolio of high quality, intermediate term U.S. mortgage-related securities
and foreign debt instruments. Under normal market conditions, RCS Fund will
invest at least 65% of its total assets in government securities, including
bonds issued or guaranteed by the U.S. or foreign governments. DSF FUND DOES NOT
HAVE A COMPARABLE INVESTMENT POLICY.
RCS Fund will allocate its assets among securities of countries and in currency
denominations where opportunities for meeting its investment objectives are
expected to be the most attractive. RCS Fund's investments will be allocated
among debt securities of issuers in three separate investment sectors: the
United States, developed foreign markets and emerging markets. RCS Fund will
invest a minimum of 33% of its net assets in U.S. debt securities. A maximum of
67% of RCS Fund's total assets may be invested in foreign debt instruments,
including emerging market debt instruments, and a maximum of 20% of RCS Fund's
total assets may be invested in emerging market debt instruments. RCS Fund may
also invest up to 45% of its total assets in the securities of governmental or
corporate issuers located in a single foreign country, subject to RCS Fund's
overall limitation on foreign securities holdings. AS A MATTER OF FUNDAMENTAL
POLICY, DSF FUND IS NOT REQUIRED TO MAINTAIN A MINIMUM OR MAXIMUM ALLOCATION OF
INVESTMENTS IN THE UNITED STATES, DEVELOPED FOREIGN MARKETS OR EMERGING MARKETS.
FURTHER, AS A MATTER OF FUNDAMENTAL POLICY, DSF FUND'S INVESTMENTS ARE
DENOMINATED IN THE U.S. DOLLAR, EXCEPT THAT DSF FUND MAY INVEST UP TO 25% OF ITS
TOTAL ASSETS AT THE TIME OF INVESTMENT IN NON-U.S. DOLLAR DENOMINATED
SECURITIES, WITH NO MORE THAN 10% OF ITS TOTAL ASSETS AT THE TIME OF INVESTMENT
IN SECURITIES DENOMINATED IN THE CURRENCIES OF EMERGING MARKET COUNTRIES AND NO
MORE THAN 5% OF ITS TOTAL ASSETS AT THE TIME OF INVESTMENT IN SECURITIES
DENOMINATED IN ANY ONE EMERGING MARKET COUNTRY CURRENCY.
Except with respect to emerging market instruments, RCS Fund will invest, under
normal market conditions, only in securities that are rated investment grade or,
if unrated, are of comparable quality in the determination of Dresdner RCM.
Investment grade securities are generally considered to be those securities
rated BBB or higher by S&P or Baa or higher by Moody's. DSF FUND DOES NOT HAVE A
COMPARABLE INVESTMENT POLICY.
RCS Fund will seek to maintain a minimum average dollar-weighted credit quality
of securities in its portfolio of AA by S&P or Aa by Moody's or their
equivalent. As discussed above, RCS Fund also
22
<Page>
may invest up to 20% of its total assets in emerging market debt instruments,
which may be rated below investment grade and may involve a higher degree of
risk. AS A MATTER OF FUNDAMENTAL POLICY, DSF FUND SEEKS TO MAINTAIN A
DOLLAR-WEIGHTED AVERAGE PORTFOLIO QUALITY OF INVESTMENT GRADE BASED ON RATINGS
BY MOODY'S OR S&P, MEASURED AT THE TIME OF INVESTMENT; PROVIDED, HOWEVER, THAT
NO MORE THAN 10% OF DSF FUND'S TOTAL ASSETS AT THE TIME OF INVESTMENT WILL BE
INVESTED IN ANY ONE SOVEREIGN ISSUER RATED BELOW AA BY S&P OR AA BY MOODY'S. DSF
FUND'S INVESTMENTS IN SECURITIES DENOMINATED IN EMERGING MARKET COUNTRY
CURRENCIES MAY INCLUDE NON-INVESTMENT GRADE SECURITIES.
The weighted average life of RCS Fund's investments, under normal market
conditions, is expected to be less than 10 years. DSF FUND HAS A COMPARABLE
INVESTMENT POLICY.
RCS Fund may not invest more than 10% of its total assets in Brady Bonds. DSF
FUND DOES NOT HAVE A COMPARABLE LIMITATION.
RCS Fund may invest up to 20% of its total assets in commercial mortgage-related
securities. DSF FUND DOES NOT HAVE A COMPARABLE LIMITATION.
Under normal market conditions, RCS Fund will invest at least 65% of its total
assets in issuers located in not less than three different countries, including
the United States. Further, securities of issuers in any one foreign country
(other than the United States) will represent no more than 45% of RCS Fund's
total assets. DSF FUND DOES NOT HAVE A COMPARABLE LIMITATION.
RCS Fund may hold cash and/or invest any portion or all of its assets in high
quality money market instruments if Dresdner RCM believes that a temporary
defensive posture in the market is warranted. DSF FUND MAY INVEST UNLIMITED
AMOUNTS IN U.S. TREASURY SECURITIES.
As a matter of fundamental policy, RCS Fund is authorized to borrow money from
banks, other financial institutions, or other lenders in an amount up to 33-1/3%
of RCS Fund's total assets (including the amount borrowed), less all liabilities
and indebtedness other than bank or other borrowings, and may engage without
limitation in reverse repurchase agreements and dollar rolls (which may be
deemed to be "borrowings" under current regulations). RCS Fund is authorized to
borrow an amount not exceeding 5% of its total assets for temporary or emergency
purposes, such as for the clearance and settlement of portfolio transactions,
provided that the total amount borrowed does not exceed 33-1/3 %. AS A MATTER OF
FUNDAMENTAL POLICY, DSF FUND MAY NOT BORROW MORE THAN 30% (INCLUDING THE AMOUNT
BORROWED) OF ITS TOTAL ASSETS, LESS ALL LIABILITIES AND INDEBTEDNESS OTHER THAN
BANK OR OTHER BORROWINGS FOR INVESTMENT PURPOSES. IN ADDITION, DSF FUND MAY
BORROW FOR TEMPORARY OR EMERGENCY PURPOSES AN AMOUNT UP TO 5% OF DSF FUND'S
TOTAL ASSETS (NOT INCLUDING THE AMOUNT BORROWED).
The Funds understand that the staff of the SEC deems certain transactions that
the Funds may enter into to involve the issuance of a senior security unless
liquid assets are segregated or their obligations under such transactions are
otherwise covered. Such transactions include: short sales, reverse repurchase
agreements, forward contracts, future contracts and options thereon, options on
securities and currencies, dollar rolls and swaps, caps, floors and collars. To
the extent that the Funds have segregated liquid assets, entered into a closing
transaction, or otherwise covered a transaction or position, such transaction or
position will not be deemed to be a senior security and will not be subject to
the Funds' restrictions on borrowing.
23
<Page>
RCS Fund may invest in corporate fixed income securities of both domestic and
foreign issuers.
DSF FUND MAY INVEST, AT THE TIME OF INVESTMENT, UP TO: (i) 5% OF ITS TOTAL
ASSETS IN ANY ONE NON-SOVEREIGN ISSUER; AND (ii) 10% OF ITS TOTAL ASSETS IN
ISSUERS OF ANY ONE EMERGING MARKET COUNTRY.
INVESTMENT RESTRICTIONS. RCS Fund and DSF Fund have adopted the fundamental
investment restrictions noted below, which may not be changed without the
affirmative vote of a "majority of the outstanding voting securities" of the
Fund. Where the Funds have fundamental restrictions or policies addressing
similar matters, the corresponding restrictions or policies have been set forth
opposite each other.
<Table>
<Caption>
RCS FUND DSF FUND
RCS Fund may not purchase securities on margin, except DSF Fund may not purchase securities on margin,
that RCS Fund may obtain any short-term credits except such short-term credits as may be necessary
necessary for the clearance of purchases and sales of for the clearance of transactions. For purposes
securities. For purposes of this restriction, the of this restriction, the deposit or payment by DSF
deposit or payment of initial or variation margin in Fund of securities and other assets in escrow or
connection with futures contracts or related options collateral agreements with respect to initial or
will not be deemed to be a purchase of securities on variation margin in connection with futures
margin. contracts or options will not be deemed to be a
purchase of securities on margin.
RCS Fund is subject to a similar NON-FUNDAMENTAL DSF Fund may not make short sales of securities or
restriction. maintain a short position if the market value of
all securities sold
short exceeds 25% of
the value of DSF Fund's
total assets.
</Table>
24
<Page>
<Table>
<Caption>
RCS FUND DSF FUND
RCS Fund may not borrow money, except that RCS Fund DSF Fund may not issue senior securities or borrow
may engage in reverse repurchase agreements and dollar money, except that DSF Fund may issue senior
roll transactions and may borrow in an amount not securities and borrow money, on a secured or
exceeding 33-1/3% of the value of RCS Fund's total unsecured basis, in an amount, at the time of
assets (including the amount borrowed) valued at borrowing or investing, up to 30% of DSF Fund's
market, less liabilities (not including the amount total assets (including the amount borrowed), less
borrowed) at the time the borrowing is made, and may all liabilities and indebtedness other than bank
use the proceeds of such borrowing for investment or other borrowings and may use the proceeds of
purposes. In addition, RCS Fund may borrow money for such senior securities or borrowings for
temporary or emergency purposes in an amount not investment purposes. In addition, DSF Fund may
exceeding 5% of the value of RCS Fund's total assets borrow for temporary or emergency purposes an
(not including the amount borrowed) provided that the amount up to 5% of DSF Fund's total assets (not
total amount borrowed by RCS Fund for any purpose does including the amount borrowed).
not exceed 33-1/3% of its total assets.
RCS Fund may not pledge, hypothecate, mortgage, or DSF Fund is not subject to a similar restriction.
otherwise encumber its assets except to secure
borrowings and as margin or collateral for financial
futures, swaps and other negotiable transactions in
the over-the-counter market.
RCS Fund may not underwrite the securities of other DSF Fund may not act as an underwriter (except to
issuers, except insofar as RCS Fund may be deemed an the extent DSF Fund may be deemed to be an
underwriter in the course of disposing of portfolio underwriter in connection with the sale of securities
securities. in DSF Fund's investment portfolio).
RCS Fund may not purchase or sell real estate or DSF Fund may not purchase or sell real estate or
interests in real estate, except that RCS Fund may interests in real estate (other than
purchase and sell securities that are secured by real mortgage-related securities), commodities or
estate or interests in real estate and may purchase commodity contracts, except that DSF Fund may
securities issued by companies that invest or deal in invest in futures contracts, options thereon and
real estate. options on currencies.
RCS Fund may not invest in commodities, except that DSF Fund is subject to the preceding restriction
RCS Fund may invest in futures contracts and options regarding commodities.
thereon, and options on currencies.
</Table>
25
<Page>
<Table>
<Caption>
RCS FUND DSF FUND
RCS Fund may not make loans to others, except through DSF Fund may not make loans. This restriction
the purchase of qualified debt obligations, the entry does not apply to: (a) the purchase of publicly
into repurchase agreements and loans of portfolio traded debt securities consistent with DSF Fund's
securities consistent with RCS Fund's investment investment objectives and policies (including
objectives and policies. participation interests in such securities); and
(b) loans of DSF Fund's portfolio securities.
RCS Fund may not invest in securities of other DSF Fund is not subject to a similar restriction.
investment companies registered or required to be
registered under the 1940 Act, except as they may be
acquired as part of a merger, consolidation,
reorganization, acquisition of assets or an offer of
exchange, or to the extent permitted by the 1940
Act.
RCS Fund is not subject to a similar fundamental DSF Fund may not make investments for the purpose
restriction. of exercising control or management.
RCS Fund may not purchase any securities which would DSF Fund may not invest more than 25% of its total
cause more than 25% of the value of RCS Fund's total assets at the time of investment in any one
assets at the time of purchase to be invested in the industry (including banking). U.S. Treasury securities
of issuers conducting their principal securities are excluded from this restriction.
business activities in the same industry; provided
that there shall be no limit on the purchase of U.S.
government securities, including securities issued by
any agency or instrumentality of the U.S. government,
and related repurchase agreements.
</Table>
FEDERAL INCOME TAX CONSEQUENCES. If the Merger is consummated as contemplated by
the Merger Agreement, it is the opinion of Sullivan & Cromwell (based upon
certain representations and subject to certain qualifications) that, for federal
income tax purposes:
(i) the acquisition by RCS Fund of DSF Fund solely in exchange for
Merger Shares and the assumption by RCS Fund of liabilities of
DSF Fund, all pursuant to the plan of reorganization, constitutes
a reorganization within the meaning of Section 368(a) of the Code
and DSF Fund and RCS Fund will each be a "party to a
reorganization" within the meaning of Section 368(b) of the Code;
26
<Page>
(ii) under Section 361 of the Code, no gain or loss will be recognized
by DSF Fund upon the transfer of DSF Fund's assets and the
assumption of its liabilities by RCS Fund in exchange for Merger
Shares;
(iii) under Section 354 of the Code, no gain or loss will be recognized
by stockholders of DSF Fund upon the conversion of their shares
of DSF Fund into Merger Shares;
(iv) under Section 358 of the Code, the aggregate basis of the Merger
Shares received by DSF Fund stockholders will be the same as the
aggregate basis of DSF Fund shares converted into Merger Shares;
(v) under Section 1223(1) of the Code, the holding periods of the
Merger Shares received by the stockholders of DSF Fund will
include the holding periods of DSF Fund shares converted into
such Merger Shares, provided that at the time of the
reorganization DSF Fund shares are held by such stockholders as
capital assets;
(vi) under Section 1032 of the Code, no gain or loss will be
recognized by RCS Fund upon the receipt of assets of DSF Fund in
exchange for Merger Shares and the assumption by RCS Fund of the
liabilities of DSF Fund;
(vii) under Section 362(b) of the Code, the basis in the hands of RCS
Fund of the assets of DSF Fund transferred to RCS Fund will be
the same as the basis of such assets in the hands of DSF Fund
immediately prior to the transfer; and
(viii) under Section 1223(2) of the Code, the holding periods of the
assets of DSF Fund in the hands of RCS Fund will include the
holding periods during which such assets were held by DSF Fund.
If DSF Fund were to liquidate, for federal income tax purposes:
(i) the amount distributed to each stockholder would be treated as
full payment in exchange for the stockholder's DSF Fund shares;
and
(ii) the stockholder would recognize capital gain or loss equal to the
difference between the amount received and the stockholder's tax
basis in the DSF Fund shares. The capital gain or loss would be
long-term capital gain or loss if the stockholder had a holding
period in DSF Fund shares in excess of 1 year, or short-term
capital gain or loss if such holding period is one year or less.
A portion of the assets of DSF Fund may be sold in connection with the Merger.
DSF Fund will recognize capital gain or loss on a sale of assets in connection
with the Merger equal to the difference between the amount realized on the sale
of assets and the tax basis in the assets. Prior to the Merger Date, DSF Fund
will declare a distribution to its stockholders which, together with all
previous distributions, will have the effect of distributing to its stockholders
all of its investment company taxable income and net realized capital gains
through the Merger Date.
Stockholders of DSF Fund should consult their tax advisors regarding the effect,
if any, of the Merger of the Funds or the contingent liquidation of DSF Fund in
light of their individual circumstances.
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<Page>
Because the foregoing only relates to the federal income tax consequences of the
Merger of the Funds and the contingent liquidation of DSF Fund, those
stockholders also should consult their tax advisors as to state, local or
foreign tax consequences, if any, of the Merger of the Funds or the contingent
liquidation of DSF Fund.
CAPITALIZATION. The following table shows the capitalization of (i) DSF Fund and
RCS Fund as of January 31, 2001, and (ii) on a pro forma combined basis, giving
effect to the Merger at net asset value of the Funds as of that date and after
giving effect to DSF Fund's repurchase of 50% of its shares outstanding as of
the date of the Merger Agreement in connection with the Tender Offer:
<Table>
<Caption>
- -----------------------------------------------------------------------------------------------------------------------
PRO FORMA COMBINED (AFTER
DSF FUND RCS FUND GIVING EFFECT TO THE TENDER
OFFER)*
- -----------------------------------------------------------------------------------------------------------------------
NET ASSETS $88,667,023 $339,871,808 $383,983,652
- -----------------------------------------------------------------------------------------------------------------------
SHARES OF COMMON STOCK OUTSTANDING 11,954,566 30,515,800 34,476,430
- -----------------------------------------------------------------------------------------------------------------------
NET ASSETS PER SHARE OF COMMON STOCK $7.42 $11.14 $11.14
- -----------------------------------------------------------------------------------------------------------------------
</Table>
* Assumes that 50% of outstanding shares of DSF Fund common stock are tendered
in the Tender Offer. It is a condition of RCS Fund's obligation to close the
Merger that DSF Fund shall not have repurchased in the Tender Offer or otherwise
more than 50% of its shares outstanding on the date of the Merger Agreement. If
less than 50% of DSF Fund's outstanding shares are tendered, the actual assets
acquired by RCS Fund in the Merger may be greater than projected. The combined
capitalization of the Funds as of the above date, without giving effect to the
Tender Offer, would be $428,538,831.
The table above assumes that the Merger was consummated on January 31, 2001 and
is for informational purposes only. No assurance can be given as to how many
Merger Shares DSF Fund stockholders will actually receive or the net asset value
per share of common stock of either Fund on the date the Merger takes place.
Unaudited pro forma combined financial statements of the Funds as of January 31,
2001 and for the 12-month period then ended are included in the SAI. Because the
Merger Agreement provides that RCS Fund will be the surviving fund following the
Merger and because RCS Fund's investment objectives and policies will remain
unchanged, the pro forma combined financial statements reflect the acquisition
of the assets and of the assumption liabilities of DSF Fund by RCS Fund as
contemplated by the Merger Agreement.
EACH FUND'S BOARD OF DIRECTORS BELIEVES THAT THE MERGER AND RELATED TRANSACTIONS
ARE ADVISABLE AND IN THE BEST INTERESTS OF ITS RESPECTIVE STOCKHOLDERS.
ACCORDINGLY, EACH FUND'S BOARD
28
<Page>
RECOMMENDS THAT ITS RESPECTIVE STOCKHOLDERS VOTE FOR APPROVAL OF THE MERGER AND
THE RELATED TRANSACTIONS.
II. ADDITIONAL PROPOSALS TO BE VOTED ON BY STOCKHOLDERS OF DSF FUND ONLY
DSF FUND PROPOSAL 2: APPROVAL OF A NEW INVESTMENT ADVISORY AGREEMENT
BETWEEN DSF FUND AND DRESDNER RCM
THE PROPOSAL. Stockholders of DSF Fund are being asked to approve a new
investment management agreement between DSF Fund and Dresdner RCM (the "Proposed
Advisory Agreement") which would take effect on the date of its approval by
stockholders, continuing in effect thereafter from year to year if its
continuance is approved at least annually, as described below. A new investment
management agreement is necessitated by the recent acquisition by Allianz AG
("Allianz") of Dresdner Bank AG ("Dresdner Bank"), the ultimate parent company
of Dresdner RCM, which acquisition, Dresdner RCM has determined, resulted in an
"assignment" and automatic termination of the investment management agreement
between Dresdner RCM and DSF Fund that was in effect immediately prior to
Allianz's acquisition of Dresdner Bank (the "Prior Advisory Agreement") pursuant
to the 1940 Act. Stockholder approval of this proposal would permit DSF Fund to
continue to operate following Allianz's acquisition of Dresdner Bank under an
investment advisory agreement substantially identical to the Prior Advisory
Agreement.
ALLIANZ BACKGROUND; THE TRANSACTION. Allianz is an international financial
services company organized under the laws of Germany. The company's principal
executive offices are located at Koeniginstrasse 28, D-80802, Munich,
Germany. The Allianz Group of companies is one of the world's leading
financial service providers, offering insurance and asset management products
and services through property-casualty insurance, life and health insurance
and financial services business segments. Allianz engages in financial
services operations through over 850 subsidiaries with approximately 120,000
employees in more than 70 countries around the world. Allianz had total
assets at December 31, 2000 of US $371.9 billion (440.0 billion Euros), net
income for the year ended December 31, 2000 of US $2.9 billion (3.5 billion
Euros) and total income for the year ended December 31, 2000 of US $65.0
billion (76.9 billion Euros). Allianz is a widely-held publicly traded
company in which Munich Reinsurance ("Munich Re"), a German re-insurance
company and holding company for the Munich Re Group, maintains a
shareholder interest, an investment they have held for many years. Because
Munich Re currently owns in excess of 25% of the outstanding voting
securities of Allianz, it is presumed to "control" Allianz within the meaning
of the 1940 Act. However, Dresdner RCM has infromed DSF Fund that, consistent
with past practice, Munich Re is not expected to be involved in the
management of Dresdner RCM. The principal executive offices of Munich Re are
located at 80791 Munich, Germany.
On July 23, 2001 (the "Closing Date"), Allianz acquired substantially all of the
outstanding shares of capital stock of Dresdner Bank to create an integrated
financial services firm (the "Transaction"). Under the terms of the Transaction,
which was originally announced on April 1, 2001, Allianz purchased shares from
the shareholders of Dresdner Bank for cash and stock valued at 53.13 Euros
(approximately US$46.32) per Dresdner Bank share. The Transaction makes Allianz
one of the world's largest asset managers, with over US $1 trillion in assets
under management.
The Transaction is being treated for purposes of the 1940 Act as a change in
control of Dresdner RCM. The 1940 Act provides that such a change in control
constitutes an "assignment" of the Prior Advisory Agreement under which Dresdner
RCM provided advisory services to DSF Fund, resulting
29
<Page>
in the automatic termination of the Prior Advisory Agreement at the Closing
Date. DSF Fund is currently operating under the Interim Advisory Agreement (as
defined below) with Dresdner RCM.
POST-TRANSACTION STRUCTURE AND OPERATION. Upon consummation of the Transaction,
Allianz acquired direct beneficial ownership of the voting securities of
Dresdner Bank and indirect beneficial ownership of Dresdner RCM. It is
anticipated that, upon receipt of certain specific regulatory approvals, Pacific
Investment Management Company LLC (PIMCO), a Newport Beach, California-based
investment manager, will provide management support to Dresdner RCM's
fixed-income team. In addition to PIMCO, Dresdner RCM's advisory affiliates now
include, among others, Nicholas-Applegate Capital Management and Oppenheimer
Capital. Dresdner RCM and its affiliates will continue to operate in the United
States as distinct asset managers under separate names.
ANTICIPATED IMPACT OF THE TRANSACTION ON MANAGEMENT OF DSF FUND. The Transaction
has not had and is not expected to have any immediate impact on Dresdner RCM's
management of DSF Fund or on Dresdner RCM's capacity to provide the type,
quality or quantity of services that it currently provides to DSF Fund. Dresdner
RCM believes that the Transaction offers the potential to enhance its future
ability to deliver quality investment advisory services. Specifically, Dresdner
RCM anticipates that its affiliation with the Allianz Group may result in
greater access of Dresdner RCM to European markets and business opportunities
and integration with Dresdner RCM of the global fixed income expertise of PIMCO
and other Allianz Group affiliates. In addition, Allianz has made the growth of
its asset management operations a central component of its business plans, which
may result in further expansion of Dresdner RCM's advisory business.
BOARD APPROVAL OF ADVISORY AGREEMENTS. On June 1, 2001, the Board of Directors
of DSF Fund, including a majority of its Disinterested Directors, approved,
pursuant to Rule 15a-4 under the 1940 Act, an interim investment advisory
agreement with Dresdner RCM (the "Interim Advisory Agreement"), the terms and
conditions of which are the same as the Prior Advisory Agreement, except for the
Interim Advisory Agreement's effective and termination dates and certain
provisions required by Rule 15a-4. The Interim Advisory Agreement became
effective on the Closing Date and will remain in effect until the earlier of (i)
150 days following the Closing Date, unless terminated sooner by DSF Fund on 10
calendar days' notice pursuant to Rule 15a-4 or (ii) the date that stockholders
of DSF Fund approve the Proposed Advisory Agreement.
While it is currently anticipated that the Merger will be consummated before the
end of the 150-day term of the Interim Advisory Agreement, it is possible that
it will not be, in which case no investment advisory agreement would then be in
effect. The Directors determined that the Interim Advisory Agreement was
necessary to ensure a continuity of investment advisory services for DSF Fund
following the Closing Date, pending stockholder consideration and approval of
the Proposed Advisory Agreement. In addition, pursuant to Rule 15a-4, all
advisory fees under the Interim Advisory Agreement must be placed into an
interest-bearing escrow account and may be fully paid
30
<Page>
out to Dresdner RCM if an investment advisory agreement with Dresdner RCM has
been approved by DSF Fund stockholders.
For these reasons, on June 1, 2001, the DSF Fund Board, including a majority of
the Disinterested Directors, approved the Proposed Advisory Agreement, which is
to become effective, and supersede the Interim Advisory Agreement, upon approval
by stockholders. The terms of the Prior Advisory Agreement and the Proposed
Advisory Agreement are identical, except for the effective and termination
dates. (Each of the Prior Advisory Agreement and the Proposed Advisory Agreement
may sometimes hereinafter be referred to as an "Advisory Agreement," and
collectively, the "Advisory Agreements.")
At its June 2001 meeting, the Board of Directors of DSF Fund approved the
proposed Advisory Agreement, which would take effect on the date of its approval
by the stockholders of DSF Fund and continue in effect thereafter from year to
year if its continuance is approved at least annually in accordance with
relevant provisions of the 1940 Act. In recommending approval of the Proposed
Advisory Agreement by the DSF Fund stockholders, the DSF Fund Board took into
account many of the same factors it considered on November 30, 2000, when the
Board, including the Disinterested Directors, last approved the Prior Advisory
Agreement with Dresdner RCM. The Board of Directors of DSF Fund considered the
most important factor under the circumstances to be the representations by
Dresdner RCM that the Transaction was not expected to have any current impact on
the nature or the quality of services provided by Dresdner RCM to DSF Fund or
the personnel providing these services. The Board of Directors was also
presented with and considered information as to comparative performance and fees
of other closed-end funds with investment objectives similar to those of DSF
Fund as well as the profitability of the Prior Advisory Agreement to Dresdner
RCM.
The Prior Advisory Agreement was most recently approved by the Board of
Directors, including a majority of the directors who are not "interested
persons," as defined in the 1940 Act, on November 30, 2000. The Prior Advisory
Agreement was last approved by an affirmative vote of the stockholders on
November 12, 1999.
TERMS OF BOTH ADVISORY AGREEMENTS. Subject to the supervision of DSF Fund's
Board of Directors, Dresdner RCM determines which securities and other
investments will be purchased, retained or sold by DSF Fund. Dresdner RCM also
selects brokers and dealers to execute portfolio transactions on behalf of DSF
Fund and determines the timing of portfolio transactions and other matters
related to securities execution.
The following description of the services performed pursuant to the Advisory
Agreements is subject to and qualified by the text of the form of agreement set
forth as Appendix B to this Proxy Statement.
Subject to the terms of the Advisory Agreement, Dresdner RCM is responsible for
furnishing continuously the investment program for DSF Fund in accordance with
its investment objectives, policies and limitations and also provides investment
research and advice to DSF Fund. Dresdner RCM advises regarding which securities
to purchase or sell and the proportion of DSF Fund's assets to be held
uninvested. Dresdner RCM also performs administrative services for DSF Fund
pursuant to the Advisory Agreement. Among its services as administrator,
Dresdner RCM arranges for calculating and publishing the net asset value of DSF
Fund; prepares or causes to be prepared and submits proxy statements and reports
to stockholders; periodically updates the Fund's Registration Statement and
prepares reports filed with the SEC and other regulatory authorities; prepares
and files
31
<Page>
DSF Fund's tax returns; maintains certain books and records required under the
1940 Act; responds to, or refers to DSF Fund's officers or transfer agent,
stockholder inquiries; and provides DSF Fund with adequate general office space
and facilities and with personnel competent to perform the foregoing services.
The Advisory Agreement authorizes Dresdner RCM to delegate any or all of its
duties under the agreement to a subadviser or a subadministrator.
DSF Fund pays an investment advisory fee at an annual rate of 0.70% of DSF
Fund's weekly net assets up to $100 million and at an annual rate of 0.65% of
DSF Fund's weekly net assets in excess of $100 million. The fee is computed
based upon the net asset value at the end of each week and payable at the end of
each calendar month. (For the fiscal year ended October 31, 2000, DSF Fund paid
Dresdner RCM fees of $620,689.)
Dresdner RCM pays all expenses of its employees and overhead incurred by them in
connection with their duties as directors and officers under the Advisory
Agreement. DSF Fund bears all of its own expenses, including, but not limited
to, fees under the Advisory Agreement; fees of directors who are not "interested
persons" (as defined in the 1940 Act) of DSF Fund or Dresdner RCM; out-of-pocket
travel expenses of DSF Fund's disinterested directors and other expenses
incurred by DSF Fund in connection with directors' meetings; interest expenses;
taxes and government fees; brokerage commissions and other expenses incurred in
acquiring or disposing of DSF Fund's portfolio securities; expenses of preparing
stock certificates; expenses of registering and qualifying DSF Fund's shares for
sale with the SEC and in various states and foreign jurisdictions; auditing,
accounting, legal and insurance costs; custodian, dividend disbursing and
transfer agent expenses; expenses of obtaining and maintaining stock exchange
listings of DSF Fund's shares; and expenses of stockholders' meetings.
The Advisory Agreement continues in effect from year to year, subject to
approval annually in accordance with the 1940 Act. The Advisory Agreement
terminates automatically in the event of its assignment (as defined in the 1940
Act) or may be terminated by DSF Fund, without the payment of any penalty, upon
a vote of a majority of the directors of DSF Fund who are not interested persons
or the affirmative vote of a "majority of outstanding voting securities" as
required by the 1940 Act, at any time upon not less than 60 days' prior written
notice to Dresdner RCM or by Dresdner RCM upon not less than 60 days' prior
written notice to DSF Fund. The Advisory Agreement provides that Dresdner RCM
will not be liable for any error of judgment or for any loss suffered by DSF
Fund in connection with the services provided to DSF Fund, except a loss
resulting from a breach of fiduciary duty with respect to receipt of
compensation for services (in which case any award of damages will be limited to
the period and the amount set forth in Section 36(b)(3) of the 1940 Act) or a
loss resulting from its willful misfeasance, bad faith, gross negligence or its
reckless disregard of its obligations and duties under the Advisory Agreement.
The services of Dresdner RCM under the Advisory Agreement are not deemed to be
exclusive. Dresdner RCM or any of its affiliates may provide similar services to
other investment companies and other clients (whether or not their investment
objectives and policies are similar to those of DSF Fund) and may engage in
other activities.
At its meeting in November 2000, the DSF Fund Board did not renew the
subadvisory agreement between Dresdner RCM and Kleinwort Benson Investment
Management Americas Inc. ("KBIMA") pursuant to which KBIMA was paid by Dresdner
RCM for its advice relating to investments in Australia and New Zealand. The
subadvisory agreement was not renewed in 2000 because
32
<Page>
substantially all of the Australian and New Zealand bonds previously held in DSF
Fund's portfolio were either sold or had matured.
SECTION 15(f) OF THE 1940 ACT. Dresdner RCM has informed DSF Fund that it and
its affiliates will use all commercially reasonable efforts to assure compliance
with the conditions of Section 15(f) of the 1940 Act. Section 15(f) provides a
non-exclusive safe harbor for an investment adviser or any affiliated persons to
receive any amount or benefit in connection with a change in control of the
investment adviser to an investment company as long as two conditions are met.
First, no "unfair burden" may be imposed on the investment company as a result
of the transaction relating to the change of control, or any express or implied
terms, conditions or understandings applicable thereto. As defined in the 1940
Act, the term "unfair burden" includes any arrangement during the two-year
period after the change in control whereby the investment adviser (or
predecessor or successor adviser), or any interested person of any such adviser,
receives or is entitled to receive any compensation, directly or indirectly,
from the investment company or its security holders (other than fees for bona
fide investment advisory or other services), or from any person in connection
with the purchase or sale of securities or other property to, from, or on behalf
of the investment company (other than bona fide ordinary compensation as
principal underwriter of the investment company). The second condition of
Section 15(f) is that, during the three-year period immediately following the
change of control, at least 75% of an investment company's board of directors
must not be "interested persons" of the investment adviser or the predecessor
investment adviser within the meaning of the 1940 Act.
The Board of Directors of DSF Fund has not been advised by Dresdner RCM of any
circumstances arising from the Transaction that might result in the imposition
of an "unfair burden" on DSF Fund. Further, the composition of the Board of
Directors currently complies with the provisions of Section 15(f).
EXPENSES. In connection with the approval of the Proposed Advisory Agreement,
Dresdner RCM has agreed to reimburse DSF Fund for all legal and other costs and
expenses in preparing this DSF Fund Proposal 2 and soliciting stockholder
approval.
REQUIRED VOTE. Approval of the Proposed Advisory Agreement will require approval
by a "majority of outstanding voting securities" as required by the 1940 Act.
"Majority of the outstanding voting securities" under the 1940 Act and for the
purposes of this Prospectus/Proxy Statement means the affirmative vote of the
lesser of (i) 67% or more of the voting securities present at the Meeting if
more than 50% of the outstanding shares are present in person or by proxy at the
Meeting, or (ii) more than 50% of the outstanding voting securities.
THE BOARD OF DIRECTORS OF DSF FUND RECOMMENDS THAT YOU VOTE FOR DSF FUND
PROPOSAL 2.
DSF FUND PROPOSAL 3: ELECTION OF CLASS I DIRECTORS OF DSF FUND
DSF Fund's Bylaws provide that the Board of Directors is divided into three
classes of Directors, as nearly equal in number as possible. Each Director
serves for a term of three years, with one class being elected each year. Each
year the term of office of one class expires.
33
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At the Meeting, two Class I Directors will be elected to hold office until their
three-year terms of office expire and until their successors are elected and
qualify. It is the intention of the persons named in the enclosed proxy to vote
in favor of the election of Messrs. Foley and Rudsten (the nominees). Each of
the nominees has consented to be named in this combined Prospectus/Proxy
Statement and to serve as a Director if elected. Each of the Class I nominees is
currently a Class I Director of DSF Fund. The Board of Directors has no reason
to believe that any of the nominees named above will become unavailable for
election as a Director, but if that should occur before the Meeting, proxies
will be voted for such persons as the Directors may recommend.
The following table sets forth certain information concerning each of the
nominees and each Director of DSF Fund.
INFORMATION ABOUT THE DIRECTORS.
<Table>
<Caption>
PRINCIPAL
OCCUPATIONS DURING SHARES PERCENT OF
PAST FIVE YEARS AND BENEFICIALLY SHARES OWNED
POSITION(S) WITH OTHER CURRENT OWNED AT JULY 9, AT JULY 9,
NAME AND ADDRESS AGE DSF FUND DIRECTORSHIPS 2001 2001(2) CLASS
- ------------------------- ------- --------------------- --------------------- ---------------- ------------ ---------
James J. Foley(1) 77 Director since 1986 Faculty Member, 1,538 0.01% I
60 Pond Street Harvard Graduate
Belmont, MA 02178 School of Business
(1952-1990).
Consultant to the
School's MBA
Admissions Board
(since January
1991); Consultant to
Courier Corp.
Jeffery S. Rudsten 52 Director since 2000 From 1978 to 1999 0 0% I
P.O. Box 963 Principal (1981),
Ross, CA 94957 Senior Managing
Director (1997-99),
and Head of Fixed
Income Department
(1997-99), Dresdner
RCM; Director, RCM
Strategic Global
Government Fund,
Inc. (1994 to
1996).
</Table>
- -----------------------------
(1) Member, Audit Committee.
(2) The Directors and officers of DSF Fund as a group owned beneficially
1,199,441 shares of DSF Fund common stock, constituting 9.6% of the shares
outstanding as of July 9, 2001.
34
<Page>
Class II Directors' terms will expire in 2002 and Class III Directors' terms
will expire in 2003. The following Directors of DSF Fund are entitled to hold
office until their terms of office expire and until their successors are elected
and qualify.
35
<Page>
<Table>
<Caption>
PRINCIPAL OCCUPATIONS SHARES PERCENT OF
DURING PAST FIVE YEARS BENEFICIALLY SHARES OWNED
POSITION(S) WITH AND OTHER CURRENT OWNED AT JULY AT JULY 9,
NAME AND ADDRESS AGE DSF FUND DIRECTORSHIPS 9, 2001 2001(2) CLASS
- ------------------------- ------- --------------------- --------------------- ---------------- ------------ ---------
Theodore J. Coburn(1) 48 Director and Partner, Brown, Coburn 0 0% II
116 East 68th Street Chairman of the & Co. (since 1991);
New York, NY 10021 Board since 2000 Director, Dresdner RCM
Global Funds, Inc.
(since 2000); Chairman
and Director, Dresdner
RCM Investment Funds
Inc. (1991-2001);
Education Associate,
Harvard University
Graduate School of
Education (since
1996); Director,
Nicholas-Applegate
Fund, Inc. (since
1987), Measurement
Specialties, Inc.
(designer and
manufacturer of sensor
and sensor-based
consumer products)
(since 1995), Video
Update, Inc. (retail
video sales) (since
1997), Belenos, Inc.
(network consulting)
(since 1998), and
Ariel Corporation
(technology network
communications
equipment) (since
1998); Trustee,
Nicholas-Applegate
Mutual Funds (since
1992).
</Table>
36
<Page>
<Table>
<Caption>
PRINCIPAL OCCUPATIONS SHARES PERCENT OF
DURING PAST FIVE YEARS BENEFICIALLY SHARES OWNED
POSITION(S) WITH AND OTHER CURRENT OWNED AT JULY AT JULY 9,
NAME AND ADDRESS AGE DSF FUND DIRECTORSHIPS 9, 2001 2001(2) CLASS
- ------------------------- ------- --------------------- --------------------- ---------------- ------------ ---------
Luke D. Knecht* 47 Director and Member of Board of 4,500 0.03% II
President since 1999 Managers and Managing
Director, Dresdner RCM
(since 1998); Chairman
and President, RCM
Strategic Global
Government Fund, Inc.
(since 1999);
Executive Director,
Russell Reynolds
Associates (global
executive recruiting
firm) (1995-1997);
Chairman, Caywood
Scholl Capital
Management
(institutional
fixed-income
investment adviser)
(since 1998).
Stephen K. West* 72 Director since 1997 Partner, Sullivan & 11,000 0.09% II
42 Old Wood Road Cromwell (1964-1996);
Bernardsville, NJ 07924 Of Counsel, Sullivan &
Cromwell (since 1997);
Director, AMVESCAP plc
(since 1997), Pioneer
Funds (since 1995),
and Swiss Helvetia
Fund, Inc. (since
1996).
</Table>
37
<Page>
<Table>
<Caption>
PRINCIPAL OCCUPATIONS SHARES PERCENT OF
DURING PAST FIVE YEARS BENEFICIALLY SHARES OWNED
POSITION(S) WITH AND OTHER CURRENT OWNED AT JULY AT JULY 9,
NAME AND ADDRESS AGE DSF FUND DIRECTORSHIPS 9, 2001 2001(2) CLASS
- ------------------------- ------- --------------------- --------------------- ---------------- ------------ ---------
Phillip Goldstein(1) 55 Director since 2000 Since 1992, has 701,353 5.87% III
60 Heritage Drive managed investments
Pleasantville, NY 10570 for a limited number
of clients and has
served as the
portfolio manager
and president of the
general partner of
Opportunity
Partners, a private
investment
partnership.
Director, Clemente
Strategic Value Fund
(1998-2000), The
Mexico Equity and
Income Fund (since
2000), The Italy
Fund (since 2000).
Glen Goodstein 37 Director since 2000 Since 1992 has managed 68,000 0.57% III
16830 Adlon Road Encino, investments for a
CA 91436 limited number of
clients; held
several executive
positions with
Automatic Data
Processing (1988 to
1996); Director, The
Italy Fund (Since
2000).
Andrew Dakos 34 Director since 2000 Private investor; Vice 363,050 3.04% III
14 Mill Street President - Sales,
Lodi, NJ 07644 UVitec Printing Ink,
Inc. (since 1997);
Sales Manager
(1992-1997).
- -----------------------------
</Table>
(1) Member, Audit Committee.
(2) The Directors and officers of DSF Fund as a group owned beneficially
1,199,441 shares of DSF Fund common stock, constituting 9.6% of the shares
outstanding as of July 9, 2001.
* Indicates "interested persons" of DSF Fund, as defined in the 1940 Act. Mr.
Knecht is an "interested person" of DSF Fund because of his affiliation with DSF
Fund's investment adviser. Mr. West is an "interested person" of DSF Fund
because of his affiliation with DSF Fund's counsel, Sullivan & Cromwell.
38
<Page>
COMPENSATION TABLE. DSF Fund reimburses all Directors who are not affiliated
with Dresdner RCM for their out-of-pocket and travel expenses incurred in
connection with board meetings, including any Committee meetings. This
compensation table sets forth information concerning each Director of DSF Fund
for the fiscal year ended October 31, 2000.
<Table>
<Caption>
PENSION OR TOTAL COMPENSATION
AGGREGATE RETIREMENT BENEFITS ESTIMATED ANNUAL FROM FUND AND FUND
COMPENSATION FROM ACCRUED AS PART OF BENEFITS UPON COMPLEX* PAID TO
NAME AND POSITION DSF FUND EXPENSES RETIREMENT DIRECTORS
- ----------------------------- ------------------- --------------------- ------------------ --------------------
Sir Robert Cotton, $14,742 None None $14,742(1)+
Director & Chairman of the
Board
Theodore J. Coburn, None None None $31,000 (3)+
Director
James J. Foley, $19,000 None None $19,000 (1)+
Director
Jeffery S. Rudsten, None None None None (1)+
Director
Luke D. Knecht, None None None None (2)+
Director and President
Stephen K. West, $15,000 None None $15,000 (1)+
Director
</Table>
- -----------------------------
* A Fund Complex consists of investment companies that hold themselves out to
investors as related companies for purposes of investment and investor services,
have a common investment adviser or have an investment adviser that is an
affiliated person of the investment adviser of any other investment companies.
Dresdner RCM and certain of its affiliates act as investment advisers to
investment companies other than DSF Fund and RCS Fund. Other than Luke D. Knecht
and Theodore J. Coburn, none of the DSF Fund Directors serves on the Board of
Directors of any other fund in the Fund Complex.
+ Indicates number of funds in the Fund Complex to which aggregate compensation
relates.
There were two regularly scheduled meetings and two special meetings of DSF
Fund's Board of Directors for the fiscal year ended October 31, 2000. The DSF
Fund Board of Directors has an Audit Committee, but does not have a nominating
or compensation committee.
The Audit Committee makes recommendations to the full Board of Directors 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 DSF Fund's financial operations. The members of
the Audit Committee are "independent" as such term is defined in the New York
Stock Exchange Listing Standards. The Audit Committee met twice during the
fiscal year ended October 31, 2000. During DSF Fund's 2000 fiscal year, each
Director attended at least 75% of the total number of meetings of the Board of
Directors and, as applicable, the Audit Committee.
39
<Page>
The Audit Committee charter is attached to this Prospectus/Proxy statement as
Appendix D, and the report of the Audit Committee, dated July 20, 2001, is
attached to this Prospectus/Proxy Statement as Appendix E.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE. Section 16(a) of the
1934 Act requires DSF Fund's officers and directors and certain other persons to
file timely certain reports regarding ownership of, and transactions in, DSF
Fund's securities with the SEC. Copies of the required filings must also be
furnished to DSF Fund. Based solely on its review of such forms received by it,
or written representations from certain reporting persons, DSF Fund believes
that during the fiscal year ended on October 31, 2000, all applicable Section
16(a) filing requirements were met.
Mr. Knecht is an employee of Dresdner RCM, DSF Fund's investment adviser. By
virtue of his position, Mr. Knecht may also have a material interest in the
other transactions described herein.
REQUIRED VOTE. The election of each Director requires the affirmative vote of a
majority of the votes cast in the election of Directors at the Meeting.
THE BOARD OF DIRECTORS OF DSF FUND RECOMMENDS THAT YOU VOTE FOR DSF FUND
PROPOSAL 3.
III. ADDITIONAL PROPOSALS TO BE VOTED ON BY STOCKHOLDERS OF RCS FUND ONLY
RCS FUND PROPOSAL 2: APPROVAL OF NEW INVESTMENT MANAGEMENT AGREEMENT
BETWEEN RCS FUND AND DRESDNER RCM
THE PROPOSAL. Stockholders of RCS Fund are being asked to approve a new
investment management agreement between the Fund and Dresdner RCM (the "New
Investment Management Agreement") which would take effect on the date of its
approval by stockholders and have an initial term expiring on December 31, 2001,
continuing in effect thereafter from year to year if its continuance is approved
at least annually, as described below. A new investment management agreement is
necessitated by the recent acquisition by Allianz AG ("Allianz") of Dresdner
Bank AG ("Dresdner Bank"), the ultimate parent company of Dresdner RCM, which
acquisition, Dresdner RCM has determined, resulted in an "assignment" and
automatic termination of the investment management agreement between Dresdner
RCM and RCS Fund that was in effect immediately prior to Allianz's acquisition
of Dresdner Bank (the "Prior Investment Management Agreement") pursuant to the
1940 Act. Stockholder approval of this proposal would permit RCS Fund and
Dresdner RCM to continue to operate under an investment management agreement
substantially identical to the Prior Investment Management Agreement.
ALLIANZ BACKGROUND; THE TRANSACTION. Allianz is an international financial
services company organized under the laws of Germany. The company's principal
executive offices are located at Koeniginstrasse 28, D-80802, Munich,
Germany. The Allianz Group of companies is one of the world's leading
financial service providers, offering insurance and asset management products
40
<Page>
and services through property-casualty insurance, life and health insurance
and financial services business segments. Allianz engages in financial
services operations through over 850 subsidiaries with approximately 120,000
employees in more than 70 countries around the world. Allianz had total
assets at December 31, 2000 of US $371.9 billion (440.0 billion Euros), net
income for the year ended December 31, 2000 of US $2.9 billion (3.5 billion
Euros) and total income for the year ended December 31, 2000 of US $65.0
billion (76.9 billion Euros). Allianz is a widely-held publicly traded
company in which Munich Reinsurance ("Munich Re"), a German re-insurance
company and holding company for the Munich Re Group, maintains a
shareholder interest, an investment they have held for many years. Because
Munich Re currently owns in excess of 25% of the outstanding voting
securities of Allianz, it is presumed to "control" Allianz within the meaning
of the 1940 Act. However, Dresdner RCM has infromed RCS Fund that, consistent
with past practice, Munich Re is not expected to be involved in the
management of Dresdner RCM. The principal executive offices of Munich Re are
located at 80791 Munich, Germany.
On July 23, 2001 (the "Closing Date"), Allianz acquired substantially all of the
outstanding shares of capital stock of Dresdner Bank to create an integrated
financial services firm (the "Transaction"). Under the terms of the Transaction,
which was originally announced on April 1, 2001, Allianz purchased shares from
the shareholders of Dresdner Bank for cash and stock valued at 53.13 Euros
(approximately US$46.32) per Dresdner Bank share. The Transaction makes Allianz
one of the world's largest asset managers, with over US $1 trillion in assets
under management.
The Transaction is being treated for purposes of the 1940 Act as a change in
control of Dresdner RCM. The 1940 Act provides that such a change in control
constitutes an "assignment" of the Prior Investment Management Agreement under
which Dresdner RCM provides advisory services to RCS Fund, resulting in the
automatic termination of the Prior Investment Management Agreement at the
Closing Date. RCS Fund is currently operating under the Interim Investment
Management Agreement (as defined below) with Dresdner RCM.
POST-TRANSACTION STRUCTURE AND OPERATION. Upon consummation of the Transaction,
Allianz acquired direct beneficial ownership of the voting securities of
Dresdner Bank and indirect beneficial ownership of Dresdner RCM. It is
anticipated that, upon receipt of certain specific regulatory approvals, Pacific
Investment Management Company LLC (PIMCO), a Newport Beach, California-based
investment manager, will provide management support to Dresdner RCM's
fixed-income team. In addition to PIMCO, Dresdner RCM's advisory affiliates now
include, among others, Nicholas-Applegate Capital Management and Oppenheimer
Capital. Dresdner RCM and its affiliates will continue to operate in the United
States as distinct asset managers under separate names.
ANTICIPATED IMPACT OF THE TRANSACTION ON MANAGEMENT OF RCS FUND. The Transaction
has not had and is not expected to have any immediate impact on Dresdner RCM's
management of RCS Fund or on Dresdner RCM's capacity to provide the type,
quality or quantity of services that it currently provides to RCS Fund. Dresdner
RCM believes that the Transaction offers the potential to enhance its future
ability to deliver quality investment advisory services. Specifically, Dresdner
RCM anticipates that its affiliation with the Allianz Group may result in
greater access of Dresdner RCM to European markets and business opportunities
and integration with Dresdner RCM of the global fixed income expertise of PIMCO
and other Allianz Group affiliates. In addition, Allianz has made the growth of
its asset management operations a central component of its business plans, which
may result in further expansion of Dresdner RCM's advisory business.
41
<Page>
DIRECTORS' CONSIDERATION AND APPROVAL OF THE INTERIM AND NEW INVESTMENT
MANAGEMENT AGREEMENTS. On May 16, 2001, the Board of Directors of RCS Fund,
including the Disinterested Directors, met in person and unanimously approved,
pursuant to Rule 15a-4 under the 1940 Act, an interim investment management
agreement between RCS Fund and Dresdner RCM (the "Interim Investment Management
Agreement"), which became effective on the Closing Date. Because the Transaction
between Dresdner Bank and Allianz was expected to close sometime before the
Meeting of stockholders of RCS Fund, the Directors determined that the Interim
Investment Management Agreement was necessary to ensure continuity of investment
advisory services for RCS Fund following the Closing Date, pending stockholder
consideration and approval of the New Investment Management Agreement. The
Interim Investment Management Agreement will remain in effect until the earliest
of (i) 150 days following the Closing Date, unless terminated sooner in
accordance with Rule 15a-4, (ii) the date that stockholders of RCS Fund approve
the New Investment Management Agreement, or (iii) December 31, 2001, the
scheduled expiration date of the Prior Investment Management Agreement.
In approving the Interim Investment Management Agreement, the Board determined
that, because the terms and conditions of the Interim and Prior Investment
Management Agreements are identical (other than their effective and expiration
dates and certain provisions required by Rule 15a-4), the scope and quality of
services that Dresdner RCM will provide for RCS Fund under the Interim
Investment Management Agreement will be equivalent to the scope and quality of
services that Dresdner RCM currently provides for the Fund. Pursuant to Rule
15a-4, any investment management fees that may be earned by Dresdner RCM under
the Interim Investment Management Agreement will be placed in an
interest-bearing escrow account with RCS Fund's custodian or a bank and will be
fully paid to Dresdner RCM upon stockholder approval of the New Investment
Management Agreement. If the New Investment Management Agreement is not approved
by stockholders, Dresdner RCM will be paid, out of the escrow account, the
lesser of any costs incurred in performing under the Interim Investment
Management Agreement (plus interest earned on that amount while in escrow) or
the total amount in the escrow account (plus interest earned). In addition, the
Interim Investment Management Agreement will be terminable, without the payment
of any penalty, by a vote of the Board of Directors or a majority of the
outstanding voting securities of RCS Fund upon 10 calendar days' written notice
to Dresdner RCM.
At its May 16, 2001 meeting, the Board of Directors also unanimously approved
the New Investment Management Agreement, which would take effect on the date of
its approval by the stockholders of RCS Fund and expire on December 31, 2001,
unless continued in accordance with relevant provisions of the 1940 Act. The
Board took into account many of the same factors it considered on December 13,
2000, when the Board, including the Disinterested Directors, last approved the
Prior Investment Management Agreement with Dresdner RCM. Those factors included,
but were not limited to, the nature and quality of the services expected to be
rendered to the Fund by Dresdner RCM, the terms of the New Investment Management
Agreement and the fees payable thereunder as compared to fees paid to investment
advisers of similar investment companies, the benefits accruing to Dresdner RCM
as a result of its affiliation with the Fund and the profitability of Dresdner
RCM.
In evaluating the New Investment Management Agreement, the Board of Directors
also reviewed materials furnished by Dresdner RCM regarding the Transaction and
interviewed a senior management representative of Allianz. Further, the Board
reviewed information concerning those
42
<Page>
employees of Dresdner RCM who manage the Fund's assets, and considered the
impact that the Transaction might have on the services provided to RCS Fund by
Dresdner RCM. Dresdner RCM indicated that it did not anticipate any change in
services to be provided to the Fund under the New Investment Management
Agreement as a result of the consummation of the Transaction.
As a result of its investigation and deliberations, the Board of Directors,
including the Disinterested Directors, voted unanimously to approve the New
Investment Management Agreement with Dresdner RCM and to recommend it to the
stockholders of RCS Fund for their approval.
DESCRIPTION OF THE PRIOR AND NEW INVESTMENT MANAGEMENT AGREEMENTS. The
provisions of the New Investment Management Agreement that is being submitted
for stockholder approval are identical to those of the Prior Investment
Management Agreement, except for its effective date and its term. In addition,
pursuant to the Letter Agreement executed in connection with the Merger,
Dresdner RCM would, if the Merger is consummated, waive its management fee in
excess of a rate of 0.75% per annum on assets of the Combined Fund in excess of
RCS Fund's pre-Merger net assets. The description of the Prior Investment
Management Agreement set forth below is qualified in its entirety by the
provisions of the Prior Investment Management Agreement, a form of which is
attached hereto as Appendix C to this Prospectus/Proxy Statement.
Under the Prior Investment Management Agreement, Dresdner RCM furnishes
investment management services to RCS Fund, subject to the provisions of the
1940 Act and the Fund's investment objectives, policies, procedures and
investment restrictions. Such services include: (a) managing the investment and
reinvestment of the Fund's assets, (b) providing investment research advice and
supervision for the Fund in accordance with the Fund's investment objectives,
policies and restrictions, (c) furnishing suitable office space for the Fund,
and (d) maintaining books and records with respect to the Fund's portfolio
transactions.
Pursuant to the Prior Investment Management Agreement, RCS Fund pays Dresdner
RCM a fee which is calculated daily and paid monthly, at an annual rate equal to
0.95% of the Fund's average daily net assets. (Fees recorded for services
provided by Dresdner RCM under the Prior Investment Management Agreement for the
fiscal year ended January 31, 2001 were $3,071,337. Neither Dresdner RCM nor any
person affiliated with Dresdner RCM received any other fees from the Fund for
services provided to the Fund during the fiscal year ended January 31, 2001.)
The Prior Investment Management Agreement, whose current term expires on
December 31, 2001, will continue in effect thereafter from year to year if its
continuance is approved at least annually (i) by the Board of RCS Fund or by the
vote of a majority of outstanding voting securities of the Fund and (ii) by vote
of a majority of the Disinterested Directors of the Fund, cast in person at a
meeting called for the purpose of voting on such approval. The Prior Investment
Management Agreement may be terminated at any time without the payment of any
penalty, either by the Board of Directors or by the vote of a "majority of the
outstanding voting securities" of the Fund, on 60 days written notice to
Dresdner RCM. The Prior Investment Management Agreement may also be terminated
by Dresdner RCM on 60 days advance written notice to the Fund, and also
terminates automatically in the event of its "assignment" (as defined in the
1940 Act).
The Prior Investment Management Agreement with Dresdner RCM is dated June 14,
1996 and was last approved by the stockholders of RCS Fund on November 12, 1998.
In connection with the Board
43
<Page>
of Directors' decision to recommend approval of the Prior Investment Management
Agreement by stockholders of the Fund in 1998, the Directors considered that
under Section 36(b)(2) of the 1940 Act, a court may give such weight as it deems
appropriate to the ratification or approval of the Prior Investment Management
Agreement by the stockholders of the Fund.
SECTION 15(f) OF THE 1940 ACT. Dresdner RCM has informed RCS Fund that it and
its affiliates will use all commercially reasonable efforts to assure compliance
with the conditions of Section 15(f) of the 1940 Act. Section 15(f) provides a
non-exclusive safe harbor for an investment adviser or any affiliated persons to
receive any amount or benefit in connection with a change in control of the
investment adviser to an investment company as long as two conditions are met.
First, no "unfair burden" may be imposed on the investment company as a result
of the transaction relating to the change of control, or any express or implied
terms, conditions or understandings applicable thereto. As defined in the 1940
Act, the term "unfair burden" includes any arrangement during the two-year
period after the change in control whereby the investment adviser (or
predecessor or successor adviser), or any interested person of any such adviser,
receives or is entitled to receive any compensation, directly or indirectly,
from the investment company or its security holders (other than fees for bona
fide investment advisory or other services), or from any person in connection
with the purchase or sale of securities or other property to, from, or on behalf
of the investment company (other than bona fide ordinary compensation as
principal underwriter of the investment company). The second condition of
Section 15(f) is that, during the three-year period immediately following the
change of control, at least 75% of an investment company's board of directors
must not be "interested persons" of the investment adviser or the predecessor
investment adviser within the meaning of the 1940 Act.
The Board of Directors of RCS Fund has not been advised by Dresdner RCM of any
circumstances arising from the Transaction that might result in the imposition
of an "unfair burden" on RCS Fund. Further, the composition of the Board of
Directors currently complies with the provisions of Section 15(f).
EXPENSES. In connection with the approval of the New Investment Management
Agreement, Dresdner RCM has agreed to reimburse RCS Fund for all legal and other
costs and expenses in preparing this proposal and soliciting stockholder
approval.
REQUIRED VOTE. The affirmative vote of the holders of a "majority of the
outstanding voting securities" of RCS Fund, as defined in the 1940 Act, is
required to approve the New Investment Management Agreement. "Majority of the
outstanding voting securities" under the 1940 Act and for this purpose means the
lesser of (i) 67% or more of the shares of common stock of RCS Fund represented
at the Meeting if more than 50% of the outstanding shares of common stock are
represented, or (ii) more than 50% of the outstanding shares of common stock of
RCS Fund.
THE BOARD OF DIRECTORS OF RCS FUND UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR
RCS FUND PROPOSAL 2.
44
<Page>
RCS FUND PROPOSAL 3: ELECTION OF CLASS I DIRECTORS OF RCS FUND
The Board of Directors of RCS Fund currently consists of three classes of
Directors. Directors hold office for staggered terms of three years (or less if
they are filling a vacancy) and until their successors are elected and
qualified, or until their earlier resignation or removal. One class is elected
each year to succeed the class whose term is expiring. The term of office for
the Directors in Class I expires at the Meeting, for the Director in Class II at
the Annual Meeting of Stockholders in 2002 and for the Director in Class III at
the Annual Meeting of Stockholders in 2003.
The Board of Directors has designated Francis E. Lundy and Gregory S. Young for
re-election as Class I Directors. Mr. Lundy was re-elected to the Board of
Directors by the stockholders on November 12, 1998. Mr. Young was elected to the
Board of Directors as a Class I Director on March 13, 2001 by the Board to serve
until the Meeting. If re-elected as Class I Directors, Mr. Lundy's and Mr.
Young's terms would expire at the Annual Meeting of Stockholders in 2004.
James M. Whitaker, a Class II Director re-elected to the Board by the
stockholders on August 26, 1999, has a remaining term of approximately one year.
Luke D. Knecht, a Class III Director re-elected to the Board by the stockholders
on August 25, 2000, has a remaining term of approximately two years.
Unless authority is withheld, it is the intention of the persons named in the
enclosed proxy to vote each proxy for Mr. Lundy and Mr. Young. Mr. Lundy and Mr.
Young have indicated that they would serve if elected, but if either should be
unable to serve, the proxy holders may vote in favor of such substitute nominee
as the Board of Directors may designate, or the Board of Directors may leave a
vacancy in the Board.
The following table provides information concerning the nominees and the other
members of the Board of Directors. The address of each RCS Fund Director is Four
Embarcadero Center, San Francisco, California 94111.
NOMINEES
<Table>
<Caption>
- -----------------------------------------------------------------------------------------------------------------------
NAME (AGE) POSITION, IF ANY, WITH RCS FUND AND DIRECTOR SINCE SHARES OF COMMON STOCK OF RCS
DRESDNER RCM. PRINCIPAL OCCUPATION AND FUND BENEFICIALLY OWNED AS OF
BUSINESS EXPERIENCE JULY 9, 2001
- -----------------------------------------------------------------------------------------------------------------------
Francis E. Lundy Director, RCS Fund. Chairman and 1994 34,103*
(63)+ - President, Technical Instrument - San
Francisco since 1976; Director,
Industrialex Manufacturing Corp. since
June, 2000 (coating and application
techniques for electronics industry);
Vice President, Zygo Corporation from
1996 to 1999 (technology manufacturing
and sales).
- -----------------------------------------------------------------------------------------------------------------------
Gregory S. Young Director, RCS Fund. Principal, Teton 2001 0
(44)+ - Capital Management since 1990 (private
equity venture capital)
- -----------------------------------------------------------------------------------------------------------------------
</Table>
45
<Page>
OTHER MEMBERS OF THE BOARD OF DIRECTORS
<Table>
<Caption>
- -----------------------------------------------------------------------------------------------------------------------
NAME (AGE) POSITION, IF ANY, WITH RCS FUND AND DIRECTOR SINCE SHARES OF COMMON STOCK OF RCS
DRESDNER RCM. PRINCIPAL OCCUPATION AND FUND BENEFICIALLY OWNED AS OF
BUSINESS EXPERIENCE JULY 9, 2001
- -----------------------------------------------------------------------------------------------------------------------
Luke D. Knecht (47) Chairman and President, RCS Fund. 1999** 3,000*
Member of the Board of Managers and
Managing Director of Dresdner RCM since
1998; Director of DSF Fund since 1999
(a closed-end mutual fund managed by
Dresdner RCM); Chairman, Caywood Scholl
Capital Management since 1998
(institutional fixed income investment
advisor); Executive Director, Russell
Reynolds Associates from 1995 to 1997
(global executive recruiting firm).
- -----------------------------------------------------------------------------------------------------------------------
James M. Whitaker Director and Vice Chairman of the 1994 0
(58)+ - Board, RCS Fund. Attorney at Law, sole
practitioner since 1972.
- -----------------------------------------------------------------------------------------------------------------------
</Table>
* Constituting, in the aggregate, less than 1% of the shares of common stock of
RCS Fund issued and outstanding. The share ownership total for Mr. Lundy
includes 750 shares which he has the power to vote as trustee.
** An "interested person" of the Fund, as defined in the 1940 Act, by reason of
being its President and a member of the Board of Managers and a Managing
Director of Dresdner RCM, the Fund's investment adviser.
+ Member of the Audit Oversight Committee
- -Member of the Nominating Committee
The Directors and officers of RCS Fund owned beneficially a total of 37,103
shares of the Fund as of July 9, 2001, comprising less than 1% of the
outstanding shares of the Fund.
COMPENSATION TABLE. The following compensation table sets forth information
concerning each Director of RCS Fund for the fiscal year ended January 31, 2001.
The Fund pays each of its Disinterested Directors $6,000 per year and $1,000 per
meeting attended, and reimburses each such Director for reasonable expenses
incurred in connection with such meetings. RCS Fund's Charter provides that RCS
Fund shall, to the extent permitted by law, indemnify each of its currently
acting and former Directors against any and all liabilities and expenses
incurred in connection with their service in such capacities.
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------------------------
NAME OF PERSON AND AGGREGATE PENSION OR RETIREMENT ESTIMATED ANNUAL TOTAL COMPENSATION
POSITION COMPENSATION FROM BENEFITS ACCRUED AS BENEFITS UPON FROM FUND AND FUND
FUND PART OF FUND EXPENSES RETIREMENT COMPLEX * PAID TO
DIRECTORS
- ----------------------------------------------------------------------------------------------------------------------
Luke D. Knecht None None None None**(2)+
Chairman and President
- ----------------------------------------------------------------------------------------------------------------------
James M. Whitaker $14,000 None None $14,000(1)+
Director and Vice
</Table>
46
<Page>
<Table>
<Caption>
Chairman of the Board
- ----------------------------------------------------------------------------------------------------------------------
Francis E. Lundy $14,000 None None $14,000(1)+
Director
- ----------------------------------------------------------------------------------------------------------------------
Gregory S. Young None None None None***(1)+
Director
- ----------------------------------------------------------------------------------------------------------------------
</Table>
* A Fund Complex consists of investment companies that hold themselves out to
investors as related companies for purposes of investment and investor services,
have a common investment adviser or have an investment adviser that is an
affiliated person of the investment adviser of any other investment companies.
Dresdner RCM and certain of its affiliates act as investment advisers to
investment companies other than RCS Fund and DSF Fund. Other than Luke D.
Knecht, none of the RCS Fund Directors serves on the Board of Directors of any
other fund in the Fund Complex.
**Mr. Knecht also serves as a Director of DSF Fund and, as an "interested
person" of Dresdner RCM, is not compensated by either Fund for his service as a
Director.
*** Mr. Young did not serve as a Director of RCS Fund during fiscal year ended
January 31, 2001.
+ Indicates number of funds in the Fund Complex to which aggregate compensation
relates.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE. Section 16(a) of the
1934 Act requires RCS Fund's officers and Directors and certain other persons to
file timely certain reports regarding ownership of, and transactions in, RCS
Fund's securities with the SEC. Copies of the required filings must also be
furnished to RCS Fund. Based solely on its review of forms received by it, or
written representations from certain reporting persons, RCS Fund believes that
for the fiscal year ended January 31, 2001 all applicable Section 16(a) filing
requirements have been met.
BOARD COMMITTEES AND MEETINGS. The Board has a standing Audit Oversight
Committee (the "Audit Committee"). The responsibilities of the Audit Committee
include reviewing and making recommendations to the Board concerning the Fund's
financial and accounting reporting procedures, and making recommendations to the
Board as to the selection of the Fund's auditors. The Audit Committee meets with
the Fund's independent auditors, reviews the Fund's financial statements, and
generally assists the Board in fulfilling its responsibilities relating to
corporate accounting and reporting practices.
The members of the Audit Committee of RCS Fund include only Directors who are
not "interested persons" of RCS Fund or Dresdner RCM. The Audit Committee
currently consists of Messrs. Lundy, Whitaker and Young (Chairman). Each member
of the Audit Committee is "independent" as defined in Sections 303.01(B)(2)(a)
and (3) of the listing standards of the NYSE. The Board of Directors has adopted
a written charter for the Audit Committee, a copy of which is attached to this
Prospectus/Proxy Statement as Appendix F. During the last fiscal year, the Audit
Committee of RCS Fund met two times.
The Audit Committee of RCS Fund has submitted the following report:
The Audit Committee has reviewed and discussed with management of RCS Fund
the audited financial statements for the last fiscal year. The Audit
Committee has discussed with PricewaterhouseCoopers LLP the matters
required to be discussed by Statements on Auditing Standard No. 61
(SAS 61). SAS 61 requires independent auditors to communicate to the Audit
Committee matters including, if applicable: (1) methods used to account for
significant unusual transactions; (2) the effect of significant accounting
policies in controversial or emerging areas
47
<Page>
for which there is a lack of authoritative guidance or consensus; (3) the
process used by management in formulating particularly sensitive accounting
estimates and the basis for the auditor's conclusions regarding the
reasonableness of those estimates; and (4) disagreements with management
over the application of accounting principles and certain other matters.
The Audit Committee has received the written disclosures and the letter
from PricewaterhouseCoopers LLP required by Independence Standards Board
Standard No. 1 (requiring auditors to make written disclosures to and
discuss with the Audit Committee various matters relating to the auditor's
independence), and has discussed with PricewaterhouseCoopers LLP their
independence. Based on the foregoing review and discussions, the Audit
Committee recommends to the Directors that the audited financial statements
for the last fiscal year be included in RCS Fund's annual report to
stockholders for the last fiscal year.
Gregory S. Young, Chairman
Francis E. Lundy
James M. Whitaker
RCS Fund has a Nominating Committee composed solely of Disinterested Directors.
The Nominating Committee is responsible for reviewing candidates to fill
vacancies on the Board. The Nominating Committee will review nominees
recommended by stockholders. Such recommendations should be submitted in writing
to Robert J. Goldstein, Secretary of RCS Fund, at the address of the principal
executive offices of the Fund, with a copy to J.B. Kittredge at Ropes & Gray,
One International Place, Boston, Massachusetts 02110-2624.
With respect to the fiscal year ended January 31, 2001, the Board held four
regular meetings and one special meeting and all Directors then serving attended
at least 75% of the meetings. The Audit Committee met one time in separate
session during the fiscal year ended January 31, 2001. The Nominating Committee
met three times in separate session during the fiscal year ended January 31,
2001. During the fiscal year ended January 31, 2001, both Messrs. Knecht and
Lundy were directors of companies with a class of securities registered pursuant
to Section 12 of the 1934 Act or subject to the requirements of Section 15(d) of
the 1934 Act or any company registered as an investment company under the 1940
Act (other than the Fund).
REQUIRED VOTE. The re-election of the nominees to the Board of Directors
requires the affirmative vote of a plurality of the votes cast in the election
of Directors the Meeting, in person or by proxy.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR RCS FUND
PROPOSAL 3.
IV. FURTHER INFORMATION ABOUT THE FUNDS
DSF Fund and RCS Fund are both non-diversified, closed-end management investment
companies and both are incorporated under the laws of the State of Maryland. DSF
Fund was incorporated on August 12, 1986, and RCS Fund was incorporated on
December 9, 1993.
FINANCIAL HIGHLIGHTS AND SENIOR SECURITIES. The following financial highlights
and senior securities tables are intended to help you understand each Fund's
recent financial performance and are required to be included in this
Prospectus/Proxy Statement by the Federal regulations governing the Merger.
48
<Page>
Certain financial highlights information reflects financial results for a single
Fund share. The total returns represent the rate that an investor would have
earned or lost on an investment in the relevant Fund, assuming reinvestment of
all dividends and distributions. The information contained in the financial
highlights and senior securities tables has been derived from each Fund's
financial statements, which, for the last ten fiscal years (excluding the
unaudited information for DSF Fund for the six months ended April 30, 2001) or,
in the case of RCS Fund, since its inception, have been audited by
PricewaterhouseCoopers LLP. Its reports and the Funds' financial statements are
included in the Funds' annual reports to stockholders, which are available upon
request.
49
<Page>
DSF FUND FINANCIAL HIGHLIGHTS
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------------------------------------
FISCAL YEARS ENDED OCTOBER 31,
- ----------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED APRIL
30, 2001
(UNAUDITED) 2000 1999 1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA: (1)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period $7.08 $ 7.68 $ 8.37 $ 9.51 $10.41 $10.08
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment Income 0.32 0.61 0.44 0.53 0.72 0.85
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on 0.07 (0.45) (0.49) (0.97) (0.82) 0.79
investments and foreign currencies
- ----------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) from operations 0.39 0.16 (0.05) (0.44) (0.10) 1.64
- ----------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders: (0.01) (0.43) (0.54) (0.78) (0.89)
From net Investment income
- ----------------------------------------------------------------------------------------------------------------------------------
From net realized gains on investment and - (0.15) (0.21) (0.16) (0.03) -
foreign currency transactions
- ----------------------------------------------------------------------------------------------------------------------------------
From return of capital (0.35) (0.61) - - - -
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders (0.36) (0.76) (0.64) (0.70) (0.81) (0.89)
- ----------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from capital stock - - - - - (0.39)
transactions
- ----------------------------------------------------------------------------------------------------------------------------------
Offering expenses charged to capital - - - - 0.01 (0.03)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net asset value 0.03 (0.60) (0.69) (1.14) (0.90) 0.33
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value at end of period $7.11 $ 7.08 $ 7.68 $ 8.37 $ 9.51 $10.41
- ----------------------------------------------------------------------------------------------------------------------------------
Per share market value at end of period $6.940 $ 6.688 $ 6.188 $ 6.625 $ 8.313 $ 9.125
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN (2) 9.17% 21.69% 2.56% (12.50)% (0.38)% 9.54%
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE RETURN (3) 5.56% 2.05% (0.72)% (4.45)% (0.95)% 16.90%
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (in 000's) $85,022 $ 84,591 $91,783 $100,047 $113,639 $124,501
- ----------------------------------------------------------------------------------------------------------------------------------
Number of shares outstanding at end of period 11,955 11,955 11,955 11,955 11,955 11,955
(in 000's)
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
- ----------------------------------------------------------------------------------------------------------------------------------
Operating expenses 1.75%+ 1.45% 1.36% 1.21% 1.14% 1.22%
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment income 8.94%+ 8.20% 5.38% 6.25% 7.21% 8.22%
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (4) 12.71% 142.64%* 46.08% 37.05% 26.67% 16.00%
- ----------------------------------------------------------------------------------------------------------------------------------
</Table>
50
<Page>
<Table>
<Caption>
- -----------------------------------------------------------------------------------------------------------------
FISCAL YEARS ENDED OCTOBER 31,
- -----------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------
PER SHARE DATA: (1)
- -----------------------------------------------------------------------------------------------------------------
Net asset value at beginning of period $9.99 $10.45 $9.97 $11.77 $10.29
- -----------------------------------------------------------------------------------------------------------------
Net investment Income 0.84 0.82 0.77 0.92 1.05
- -----------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on 0.82 (0.48) 0.47 (1.03) 1.44
investments and foreign currencies
- -----------------------------------------------------------------------------------------------------------------
Total increase (decrease) from operations 1.66 0.34 1.24 (0.11) 2.49
- -----------------------------------------------------------------------------------------------------------------
Distributions to shareholders: (0.89) (0.78) (0.74) (1.02) (1.01)
From net Investment income
- -----------------------------------------------------------------------------------------------------------------
From net realized gains on investment and - (0.02) - (0.56) -
foreign currency transactions
- -----------------------------------------------------------------------------------------------------------------
From return of capital - - - - -
- -----------------------------------------------------------------------------------------------------------------
Total distributions to shareholders (0.89) (0.80) (0.74) (1.58) (1.01)
- -----------------------------------------------------------------------------------------------------------------
Decrease in net assets from capital stock (0.65) - (0.01) (0.08) -
transactions
- -----------------------------------------------------------------------------------------------------------------
Offering expenses charged to capital (0.03) - (0.01) (0.03) -
- -----------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net asset value 0.09 (0.46) 0.48 (1.80) 1.48
- -----------------------------------------------------------------------------------------------------------------
Net asset value at end of year $10.08 $9.99 $10.45 $9.97 $11.77
- -----------------------------------------------------------------------------------------------------------------
Per share market value at end of year $ 9.250 $9.125 $9.750 $9.625 $11.00
- -----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN (2) 15.74% 1.77% 9.23% 2.00% 43.00%
- -----------------------------------------------------------------------------------------------------------------
NET ASSET VALUE RETURN (3) 17.93% 3.22% 12.65% (1.74)% 25.49%
- -----------------------------------------------------------------------------------------------------------------
Net assets at end of period (in 000's) $ 96,390 $71,685 $74,958 $69,564 $74,651
- -----------------------------------------------------------------------------------------------------------------
Number of shares outstanding at end of 9,564 7,173 7,173 6,979 6,345
period (in 000's)
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
- -----------------------------------------------------------------------------------------------------------------
Operating expenses 1.32% 1.40% 1.47% 1.48% 1.62%
- -----------------------------------------------------------------------------------------------------------------
Net investment income 8.51% 7.88% 7.45% 8.20% 9.62%
- -----------------------------------------------------------------------------------------------------------------
Portfolio turnover(4) 56.55% 13.71% 9.69% 53.66% 11.39%
- -----------------------------------------------------------------------------------------------------------------
</Table>
(1) Calculated on average shares outstanding.
(2) Based on market value per share, adjusted for reinvestment of distributions
at reinvestment plan prices, assuming full subscription by shareholder and is
not annualized for periods less than one year.
(3) Based on net asset value per share, adjusted for reinvestment of
distributions at ex-dividend date net asset value, assuming full subscription by
shareholder and is not annualized for periods less than one year.
(4) Portfolio turnover does not include investments traded on a forward
commitment basis and is not annualized for periods less than one year.
*Turnover rate higher than prior periods due to the change in investment
mandate.
+Annualized.
51
<Page>
RCS FUND FINANCIAL HIGHLIGHTS
<Table>
<Caption>
- --------------------------------------------------------------------------------------------------
FISCAL YEARS ENDED JANUARY 31,
- --------------------------------------------------------------------------------------------------
2001 2000 1999 1998
- --------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
- --------------------------------------------------------------------------------------------------
Net asset value, beginning of year $10.56 $11.46 $11.91 $11.87
- --------------------------------------------------------------------------------------------------
Net investment income (1) 0.95 0.95 0.92 0.98
- --------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 0.64 (0.83) (0.43) 0.05
- --------------------------------------------------------------------------------------------------
Net increase in net assets resulting from 1.59 0.12 0.49 1.03
operations
- --------------------------------------------------------------------------------------------------
Less Distributions: (1.01) (1.02) (0.94) (0.99)
Dividends from net investment income
- --------------------------------------------------------------------------------------------------
Offering Costs - - - -
- --------------------------------------------------------------------------------------------------
Net asset value, end of year $11.14 $10.56 $11.46 $11.91
- --------------------------------------------------------------------------------------------------
Per share market value, end of year $10.35 $ 9.13 $ 9.88 $11.16
- --------------------------------------------------------------------------------------------------
TOTAL RETURN BASED ON NET ASSET VALUE(2) 17.37% 2.70% 5.32% 9.66%
- --------------------------------------------------------------------------------------------------
TOTAL RETURN BASED ON MARKET PRICE(3) 26.13% 2.99% (3.11)% 14.76%
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA:
- --------------------------------------------------------------------------------------------------
Net assets, end of year in (000's) $339,872 $322,211 $349,597 $363,428
- --------------------------------------------------------------------------------------------------
Ratio of total expenses to average net assets 1.19% 1.73% 1.31% 1.25%
- --------------------------------------------------------------------------------------------------
Ratio of interest expense to average net - 0.57% 0.10% -
assets
- --------------------------------------------------------------------------------------------------
Ratio of net investment income to average 8.95% 8.50% 7.93% 8.29%
net assets
- --------------------------------------------------------------------------------------------------
Portfolio turnover (4) 81% 74% 133% 29%
- --------------------------------------------------------------------------------------------------
</Table>
52
<Page>
<Table>
<Caption>
- ---------------------------------------------------------------------------------------------------------------------
1997 1996 FEBRUARY 24, 1994* THROUGH
JANUARY 31, 1995
- ---------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year $11.64 $10.85 $12.50
- ---------------------------------------------------------------------------------------------------------------------
Net investment income (1) 0.94 0.96 0.83
- ---------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 0.21 0.72 (1.71)
- ---------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from 1.15 1.68 (0.88)
operations
- ---------------------------------------------------------------------------------------------------------------------
Less Distributions: (0.92) (0.89) (0.75)
Dividends from net investment income
- ---------------------------------------------------------------------------------------------------------------------
Offering Costs (0.02)
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $11.87 $11.64 $10.85
- ---------------------------------------------------------------------------------------------------------------------
Per share market value, end of year $10.63 $10.25 $ 9.63
- ---------------------------------------------------------------------------------------------------------------------
TOTAL RETURN BASED ON NET ASSET VALUE(2) 11.72% 17.07% (6.68)%+
- ---------------------------------------------------------------------------------------------------------------------
TOTAL RETURN BASED ON MARKET PRICE(3) 13.57% 16.21% (17.21)%+
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA:
- ---------------------------------------------------------------------------------------------------------------------
Net assets, end of year in (000's) $362,102 $355,287 $331,166
- ---------------------------------------------------------------------------------------------------------------------
Ratio of total expenses to average net assets 1.25% 1.20% 1.15%++,+++
- ---------------------------------------------------------------------------------------------------------------------
Ratio of interest expense to average net - - 0.02%++
assets
- ---------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average 8.21% 8.50% 7.79%++,+++
net assets
- ---------------------------------------------------------------------------------------------------------------------
Portfolio turnover (4) 59% 96% 158%+
- ---------------------------------------------------------------------------------------------------------------------
</Table>
(1) Calculated using the average share method.
(2) Based on net asset value per share, adjusted for reinvestment of
distributions at ex-dividend date net asset value, assuming full subscription by
shareholder and is not annualized for periods less than one year.
(3) Based on market value per share, adjusted for reinvestment of distributions
at reinvestment plan prices, assuming full subscription by shareholder and is
not annualized for periods less than one year.
(4) Does not include the effect of mortgage dollar roll transactions or forward
commitment transactions.
* Commencement of investment operations.
+ Not Annualized.
++ Annualized.
+++ Ratios include certain ordinary operating expense waivers. Without such
waivers, the ratio of expenses to average net assets would have been 1.24% and
the ratio of net investment income to average net assets would have been 7.71%.
53
<Page>
SENIOR SECURITIES
DSF FUND:
<Table>
<Caption>
TOTAL AMOUNT OF SENIOR ASSET COVERAGE AVERAGE MARKET VALUE
SECURITIES OUTSTANDING(1) PER $1,000 OF PER $1,000 OF
YEAR SENIOR SECURITIES SENIOR SECURITIES(2)
------------------------------------------------------------------------------------------------------------------
2000* $28,084,892 $4,010 $28,084,892
<Caption>
RCS FUND:
------------------------------------------------------------------------------------------------------------------
1995** $70,741,743 $5,680 $70,741,743
1996 N/A N/A N/A
1997 N/A N/A N/A
1998 $13,593,633 27,740 $13,593,633
1999 $123,549,995 3,830 $123,549,995
2000 $103,673,424 4,110 $103,673,424
2001 $107,607,823 4,160 $107,607,823
</Table>
(1) Includes obligations of the Fund under various portfolio transactions
against which the Fund did not segregate liquid assets.
(2) Because no market exists or has existed for the obligations of the Fund
under various portfolio transactions against which the Fund did not segregate
liquid assets, and because the Fund has at all times maintained assets
sufficient to meet those obligations, the "market value" of these obligations
shown in this table is their value as reflected on the Funds' books and records.
*The fiscal year ended October 31, 2000 was the first year in which DSF Fund
utilized financial leverage.
** RCS Fund commenced investment operations on February 24, 1994.
MANAGEMENT OF THE FUNDS; INFORMATION ABOUT DRESDNER RCM. The Board of Directors
of each Fund has overall responsibility for each Fund's operations. The Funds
have different Boards of Directors. Dresdner RCM manages the investments of both
Funds, provides various administrative services for the Funds, and supervises
the Funds' daily business affairs, subject to the authority of each Fund's Board
of Directors.
54
<Page>
Dresdner RCM is a Delaware limited liability company with principal offices at
Four Embarcadero Center, San Francisco, California 94111. Dresdner RCM is
actively engaged in providing investment supervisory services to institutional
and individual clients, and is registered under the Investment Advisers Act of
1940. Dresdner RCM was established in December of 1998 and is the successor to
the business of its holding company, Dresdner RCM Global Investors US Holdings
LLC ("US Holdings"). Dresdner RCM was originally formed as Rosenberg Capital
Management in 1970, and it and its successors have been consistently in business
since then.
Dresdner RCM is wholly owned by Dresdner RCM Global Investors US Holdings LLC
("US Holdings"). US Holdings, a registered investment adviser, is wholly owned
by Dresdner Bank, which, as of July 23, 2001, is a subsidiary of Allianz.
Allianz's principal executive offices are located at Koeniginstrasse 28,
D-80802, Munich, Germany. The Allianz Group of companies is one of the world's
leading financial service providers, offering insurance and asset management
products and services through property-casualty insurance, life and health
insurance, and financial services business segments. Allianz engages in
financial services operations through over 850 subsidiaries with approximately
120,000 employees in more than 70 countries around the world. Allianz had total
assets at December 31, 2000 of US$371.9 billion (440.0 billion Euros), net
income for the year ended December 31, 2000 of US$2.9 billion (3.5 billion
Euros) and total income for the year ended December 31, 2000 of US$65.0 billion
(76.9 billion Euros).
Munich Reinsurance, a German re-insurance company and holding company for the
Munich Reinsurance Group, currently owns in excess of 25% of the outstanding
voting securities of Allianz and, therefore, is presumed to "control" Allianz
within the meaning of the 1940 Act. The principal executive offices of Munich
Reinsurance are located at 80791 Munich, Germany. Dresdner RCM has informed the
Funds that it does not expect Munich Reinsurance to be involved in the
management of Dresdner RCM.
Dresdner RCM currently provides investment advisory services to the following
funds that have investment objectives similar to those of DSF Fund and RCS Fund:
<Table>
<Caption>
CLOSED-END MANAGEMENT INVESTMENT NET ASSETS AS OF ANNUAL MANAGEMENT FEE
COMPANIES JULY 13, 2001 (AS A % OF NET ASSETS)
- --------------------------------------------------------------------------------------------------------
Dresdner RCM Global Strategic Income $ 83,019,743 0.70% on the first $100 million
Fund, Inc. 0.65% in excess of $100 million
RCM Strategic Global Government Fund, $333,262,750 0.95%
Inc.
</Table>
55
<Page>
<Table>
<Caption>
OPEN-END MANAGEMENT NET ASSETS AS OF ANNUAL MANAGEMENT FEE
INVESTMENT COMPANIES JULY 13, 2001 (AS A % OF NET ASSETS)
- -------------------------------------------------------------------------------------------------------------------
0.75% on the first $500 million
Dresdner RCM Strategic Income Fund (a $869,096 0.70% on the next $500 million
series of Dresdner RCM Global Funds, 0.65% in excess of $1 billion
Inc.) With a 1.50% expense cap on Class N shares
and a 1.25% expense cap on Class I shares
until at least December 31, 2001
</Table>
Certain information regarding the Board of Managers and principal executive
officers of Dresdner RCM is set forth below:
<Table>
<Caption>
POSITION WITH
NAME AND ADDRESS DRESDNER RCM PRINCIPAL OCCUPATION
Gerhard Eberstadt Member of Board of Member of Board of
Jurgen-Ponto-Platz 1 Managers Managers, Dresdner Bank
D-60301 Frankfurt-am-Main AG
Germany
George N. Fugelsang Member of Board of President/Chief Executive
75 Wall Street Managers Officer/Chairman, Dresdner
New York, NY Kleinwort Wasserstein
Securities LLC
Susan C. Gause* Member of Board of Same
Managers; Chief
Executive Officer; and
Senior Managing Director
Luke D. Knecht* Member of Board of Same
Managers and Managing
Director
Joachim Madler Member of Board of Same
Jurgen-Ponto-Platz 1 Managers and Managing
D-60301 Frankfurt-am-Main Director
Germany
</Table>
56
<Page>
<Table>
<Caption>
POSITION WITH
NAME AND ADDRESS DRESDNER RCM PRINCIPAL OCCUPATION
William L. Price* Chairman of Board of Same
Managers; Senior
Managing Director; and
Global Chief Investment
Officer
</Table>
- ---------------------
* The address for these members of the Board of Managers is Four Embarcadero
Center, San Francisco, California 94111.
The following directors and officers of DSF Fund are directors, officers or
employees of Dresdner RCM: Luke D. Knecht, Robert J. Goldstein, Jennie Klein,
Karin Brotman, Steven L. Wong and Glen M. Wong.
The following directors and officers of RCS Fund are directors, officers or
employees of Dresdner RCM: Luke D. Knecht, Robert J. Goldstein, Steven L. Wong,
Glen M. Wong.
EXECUTIVE OFFICERS OF DSF FUND. The executive officers of DSF Fund, other than
as shown in the table "Information about the Directors" on page [_], are: Robert
J. Goldstein, Secretary since April, 1998, and Jennie M. Klein, Treasurer since
April, 1998. Mr. Goldstein is 38 years old and has been a Director and General
Counsel of Dresdner RCM since July 2001. Prior to joining Dresdner RCM in
January 1997, Mr. Goldstein was an associate in the New York office of Weil,
Gotshal & Manges from 1990 through 1996. Ms. Klein is 36 years old and has been
the Director of Fund Administration at Dresdner RCM since July 1998. Ms. Klein
joined Dresdner RCM in 1994 as Manager of Commingled Fund Services.
EXECUTIVE OFFICERS AND OTHER OFFICERS OF RCS FUND. The table below provides
certain information concerning executive officers of RCS Fund, other than as
shown in the table of information concerning RCS Fund's Directors on page [_],
and certain other officers who perform similar duties. Officers hold office at
the pleasure of RCS Fund's Board of Directors and until their successors are
appointed and qualified or until their earlier resignation or removal. Officers
and employees of RCS Fund who are principals, officers or employees of Dresdner
RCM are not compensated by the Fund.
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------------------------
NAME AND AGE POSITION WITH FUND PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE
- ----------------------------------------------------------------------------------------------------------------------
George A. Rio* Chief Financial Officer Executive Vice President and Client Service Director of
(46) (since 1998) FDI (since April 1998); Senior Vice President and
Senior Key Account Manager for Putnam Mutual Funds
(June 1995 to March 1998).
- ----------------------------------------------------------------------------------------------------------------------
Robert J. Goldstein** Secretary Director and General Counsel, Dresdner RCM (since July
(38) (since 2000) 2001); Associate General Counsel, Dresdner RCM (January
1997 to June 2001); associate with the law firm of Weil,
Gotshal &
- ----------------------------------------------------------------------------------------------------------------------
</Table>
57
<Page>
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------------------------
NAME AND AGE POSITION WITH FUND PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE
- ----------------------------------------------------------------------------------------------------------------------
Manges (September 1990 to December 1996).
- ----------------------------------------------------------------------------------------------------------------------
Steven L. Wong** Treasurer Manager of Fund Administration, Dresdner RCM (since
(34) (since 2000) December 1994).
- ----------------------------------------------------------------------------------------------------------------------
Margaret W. Chambers* Vice President and Senior Vice President and General Counsel of Funds
(41) Assistant Secretary Distributor, Inc. ("FDI") (since April 1998); Vice
(since 1998) President and Assistant General Counsel for Loomis,
Sayles & Company, L.P. (August 1996 to March 1998);
associate with the law firm of Ropes & Gray (January
1986 to July 1996).
- ----------------------------------------------------------------------------------------------------------------------
Karen Jacoppo-Wood* Vice President and Vice President and Senior Counsel of FDI and an officer
(34) Assistant Secretary of certain investment companies distributed by FDI
(since 1998) (since February 1996); Manager of SEC Registration,
Scudder, Stevens & Clark, Inc. (June 1994 to January
1996).
- ----------------------------------------------------------------------------------------------------------------------
Douglas C. Conroy* Vice President and Vice President and Senior Client Service Manager of FDI
(32) Assistant Treasurer and an officer of certain investment companies
(since 1998) distributed by FDI (since May 1998); Assistant
Department Manager of Treasury Services and
Administration of FDI (April 1997 to April 1998);
Supervisor of Treasury Services and Administration of
FDI (February 1995 to March 1997).
- ----------------------------------------------------------------------------------------------------------------------
Mary A. Nelson* Vice President and Senior Vice President and Manager of Financial Services
(37) Assistant Treasurer of FDI (since May 2000); Vice President and Manager of
(since 1998) Operations and Treasury Services of FDI and an officer
of certain investment companies distributed by FDI
(August 1994 to April 2000).
- ----------------------------------------------------------------------------------------------------------------------
Glen M. Wong** Assistant Treasurer Manager of Fund Administration, Dresdner RCM (since
(39) (since 2000) July 1999); Financial Reporting Supervisor at Fremont
Mutual Funds, Inc. (July 1996 to June 1999);
Accountant, The Permanente Medical Group, Inc. (July
1995 to July 1996).
- ----------------------------------------------------------------------------------------------------------------------
</Table>
* The officer's address is 60 State Street, Suite 1300, Boston, Massachusetts
02109.
** The officer's address is Four Embarcadero Center, San Francisco, California
94111.
Luke D. Knecht, Robert J. Goldstein, Steven L. Wong and Glen M. Wong, as
employees of Dresdner RCM, may have a material interest in the Merger and the
New Investment Management Agreement which are being submitted for the approval
of stockholders.
58
<Page>
PORTFOLIO MANAGEMENT OF THE FUNDS. The Fixed-Income Team of Dresdner RCM is
primarily responsible for the day-to-day management of DSF Fund's and RCS Fund's
portfolios. This team manages each of the Fund's portfolios on a joint basis,
and no individual is separately responsible for the management of each Fund.
ADMINISTRATORS AND CUSTODIANS. Dresdner RCM is DSF Fund's administrator pursuant
to the Fund's Investment Advisory Agreement. Brown Brothers Harriman & Co., 40
Water Street, Boston, Massachusetts 02109 is DSF Fund's custodian. EquiServe,
150 Royall Street, Canton, Massachusetts 02021, is DSF Fund's transfer agent.
Among its services as administrator for DSF Fund, Dresdner RCM arranges for
calculating and publishing the net asset value of DSF Fund; prepares and submits
proxy statements and reports to stockholders; periodically updates DSF Fund's
Registration Statement and prepares reports filed with the SEC and other
regulatory authorities; prepares and files DSF Fund's tax returns; maintains
certain books and records required under the 1940 Act; responds to, or refers to
DSF Fund's officers or transfer agent, stockholder inquiries; and provides DSF
Fund with adequate general office space and facilities and with personnel
competent to perform the foregoing services. The Investment Advisory Agreement
authorizes Dresdner RCM to delegate any or all of its duties under the agreement
to a subadviser or a subadministrator. The fee paid to Dresdner RCM pursuant to
the Investment Advisory Agreement includes compensation for Dresdner RCM's
services as administrator of DSF Fund.
State Street Bank and Trust Company ("State Street"), 1776 Heritage Drive, North
Quincy, Massachusetts 02109, is the administrator and custodian for RCS Fund.
EquiServe, 150 Royall Street, Canton, Massachusetts 02021, is RCS Fund's
transfer agent.
Pursuant to an Administration Agreement with RCS Fund, State Street provides
reporting and accounting services to the Fund, including: overseeing the
determination and publication of the Fund's net asset value in accordance with
the Fund's policy, and the maintenance of certain books and records of the Fund
required by Rule 31a-1(b) of the 1940 Act; preparing the Fund's federal, state
and local income tax returns for review by the independent accountants and
filing by the treasurer; reviewing the appropriateness, and arranging for
payment, of Fund expenses, and overseeing the calculation of fees paid to the
Fund's investment manager, custodian and transfer agent; preparing for review
and approval by the Fund's officers financial information for the Fund's
semi-annual and annual reports, proxy statements and other communications with
stockholders; consulting with the Fund's officers, independent accountants,
legal counsel, custodian and transfer agent to establish accounting policies for
the Fund; and responding to, or referring to the Fund's officers or transfer
agent, any stockholder inquiries relating to the Fund. For its services as
administrator, State Street is compensated by RCS Fund at the following rates:
for fund administration, 0.06% per annum of the first $250 million in net
assets, 0.03% per annum of the next $250 million in net assets, and 0.01% per
annum of net assets in excess of $500 million, with a minimum annual
compensation of $65,000; for accounting services, $90,000 annually; for state
securities administrative services, $5,000 for each portfolio, plus $50 per
state per portfolio registered; reimbursement for out-of-pocket expenses; and
special fees for non-recurring services, as negotiated.
SERVICE OF PROCESS; ENFORCEMENT OF JUDGMENTS. One of DSF Fund's directors is a
resident of Australia and substantially all of this person's assets may be
located outside the United States. As a result, it may be difficult for
stockholders to effect service of process within the United States upon this
person. In addition, DSF Fund has been advised that it may be difficult for
stockholders to obtain
59
<Page>
from the courts of Australia either the enforcement of judgments of United
States courts against this director predicated upon civil liability provisions
of the Federal securities laws or enforcement, in original actions, of
liabilities against this director predicated upon the Federal securities laws.
DESCRIPTION OF FUND SHARES. RCS Fund's Charter authorizes issuance of up to
500,000,000 shares of common stock, par value $0.00001 per share. DSF Fund's
Charter authorizes the issuance of 100,000,000 shares of common stock, par value
$0.001 per share. All outstanding shares of each Fund have, and the Merger
Shares will have, equal non-cumulative voting rights and equal rights with
respect to dividends, assets and liquidation. Each share of common stock of each
Fund has one vote, with fractional shares voting proportionately, and is freely
transferable. Each share of common stock of each Fund is fully paid and
non-assessable and has no preemptive, conversion or exchange rights.
Shares of common stock of DSF Fund and RCS Fund are traded on the NYSE, with an
average weekly trading volume for the year ended December 31, 2000 of 122,504
shares for DSF Fund and 265,648 shares for RCS Fund.
Set forth below is information about each Fund's common stock as of June 30,
2001 (except where otherwise noted):
<Table>
<Caption>
DSF FUND
TITLE OF CLASS AMOUNT AUTHORIZED AMOUNT HELD BY FUND AMOUNT OUTSTANDING
-------------- ----------------- ------------------- ------------------
Common Stock 100,000,000 0 11,954,566
<Caption>
RCS FUND
TITLE OF CLASS AMOUNT AUTHORIZED AMOUNT HELD BY FUND AMOUNT OUTSTANDING
-------------- ----------------- ------------------- ------------------
Common Stock 500,000,000 0 30,515,800
</Table>
REPURCHASE OF SHARES. Because each Fund is a closed-end investment company,
stockholders of each Fund do not, and will not, have the right to redeem their
shares.
Shares of the Funds trade in the open market at a price which will be a function
of several factors, including yield and net asset value of the shares and the
extent of market activity. Shares of closed-end investment companies frequently
trade at a discount from net asset value, but in some cases trade at a premium.
When a Fund repurchases its shares at a price below their net asset value, the
net asset value of those shares that remain outstanding will be increased, but
this does not necessarily mean that the market price of those outstanding shares
will be affected either positively or negatively.
DETERMINATION OF NET ASSET VALUE. Each Fund calculates the net asset value of a
share by dividing the total value of its assets, less liabilities, by the number
of its shares outstanding. Each Fund's shares are valued as of the close of
regular trading on the NYSE each day the exchange is open.
Investment securities for which market quotations are readily available are
valued at market value. Short-term investment securities that have remaining
maturities of 60 days or less are valued at
60
<Page>
amortized cost, which approximates market value. All other securities and assets
are valued at their fair value following procedures approved by each Fund's
Board of Directors.
DIVIDEND REINVESTMENT PLAN. Each Fund has established a dividend reinvestment
plan (each a "Plan") under which distributions from the Fund may be reinvested
in shares of the Fund's common stock by the plan agent (the "Plan Agent"). Under
each Fund's Plan, stockholders may elect either to have all distributions
automatically reinvested by the Fund's Plan Agent, EquiServe, or to receive all
distributions in cash paid by check mailed directly to the stockholder of record
by EquiServe. Distributions with respect to shares registered in the name of a
broker-dealer or other nominee will be reinvested by the broker or nominee in
additional shares under the Plan, unless that service is not provided by the
broker or nominee, or the stockholder elects to receive distributions in cash.
Investors who own common stock of a Fund registered in street name should
consult their broker-dealers for details regarding reinvestment.
Under each Fund's Plan, if a Fund declares a dividend or capital gains
distribution payable either in shares of its common stock or in cash,
stockholders who are not Plan participants will receive cash, and Plan
participants will receive the equivalent amount in shares of common stock of
their Fund. When the market price of the common stock of a Fund is equal to or
exceeds the net asset value per share of the common stock on the distribution
payment date, Plan participants will be issued shares of common stock valued at
the net asset value on the distribution payment date or, if such net asset value
is less than 95% of the market price of the common stock on the distribution
payment date, then at 95% of the market value.
If the market price of the common stock of a Fund is less than the net asset
value of the common stock on the distribution payment date, or if the Fund
declares a dividend or capital gains distribution payable only in cash, a
purchasing agent for Plan participants (the "Purchasing Agent"), will buy common
stock in the open market, on the NYSE or elsewhere, for the participant's
accounts. Under RCS Fund's Plan, if, following the commencement of the purchases
and before the Purchasing Agent has completed its purchases, the market price
exceeds the net asset value of the common stock, the average per share purchase
price paid by the Purchasing Agent may exceed the net asset value per share of
the common stock, resulting in the acquisition of fewer shares than if the
dividend or capital gains distribution had been paid in common stock issued by
the Fund at net asset value. Additionally, under RCS Fund's Plan, if the market
price exceeds the net asset value of shares before the Purchasing Agent has
completed its purchases, the Purchasing Agent is permitted to cease purchasing
shares and the Fund may issue the remaining shares at a price equal to the
greater of (a) net asset value or (b) 95% of the then current market price.
Under each Fund's Plan, in a case where the Purchasing Agent has terminated open
market purchases and the Fund has issued the remaining shares, the number of
shares received by the participant in respect of the cash dividend or
distribution will be based on the weighted average of prices paid for shares
purchased in the open market and the price at which the Fund issues the
remaining shares. State Street Brokerage, a broker-dealer, currently acts as
Purchasing Agent for both of the Funds.
Under DSF Fund's Plan, Plan participants have the option of making additional
voluntary cash payments to the Plan Agent on a quarterly basis in any amount
from $100 to $3,000 for investment in that Fund's common stock. The Plan Agent
will use all Funds received from participants to purchase DSF Fund shares in the
open market on or about the 15th of February, May, August and November of each
year. Voluntary cash purchases should be sent so as to be received by the Plan
Agent no later
61
<Page>
than five business days before these dates. Voluntary cash payments received
after the five business day deadline may be held by the Plan Agent bearing no
interest, and invested at the next scheduled date. Voluntary cash payments may
be withdrawn in their entirety by written notice received by the Plan Agent not
less than two business days before such payment is to be invested.
The Plan Agent for each Fund will maintain all stockholder accounts in the Plan
and will furnish written confirmations of all transactions in each account,
including information needed by a stockholder for personal and tax records. The
automatic reinvestment of dividends and capital gains will not relieve Plan
participants of any income tax that may be payable on the dividends or capital
gains distributions. Common stock in the account of each Plan participant will
be held by the Fund's Plan Agent on behalf of the Plan participant, and each
stockholder's proxy will include those shares purchased pursuant to the Plan.
Plan participants are subject to no charge for reinvesting dividends and capital
gains distributions. The Plan Agent's fees for handling the reinvestment of
dividends and capital gains distributions will be paid by the Fund. No brokerage
charges apply with respect to shares of common stock issued directly by the Fund
as a result of dividends or capital gains distributions payable either in common
stock or in cash. Each Plan participant will, however, bear a proportionate
share of brokerage commissions incurred with respect to open market purchases
made in connection with the reinvestment of dividends or capital gains
distributions. Voluntary cash purchases under DSF Fund's Plan will be subject to
a service charge in addition to a pro rata share of brokerage commissions.
Plan participants may terminate their participation in the Plan by giving
written notice to the Plan Agent, provided that any such notice received by the
Plan Agent less than 10 days before the record date for any dividend may not be
effective with respect to such dividend or distribution. Each Fund reserves the
right to amend or terminate its Plan as applied to any dividend or capital gains
distributions paid subsequent to written notice of the change sent to
participants at least 90 days for DSF Fund, and 30 days for RCS Fund, before the
record date for the dividend or capital gains distribution. The Plan also may be
amended or terminated by the Plan Agent, with the Fund's prior written consent,
on at least 90 days' written notice for DSF Fund, and 30 days' written notice
for RCS Fund, to Plan participants. All inquiries concerning a Fund's Plan
should be directed to EquiServe, P.O. Box 43010, Providence, RI 02940-3010
(800-730-6001) for DSF Fund, or P.O. Box 43011, Providence, RI 02940-3011
(800-426-5523) for RCS Fund.
DIVIDENDS AND DISTRIBUTIONS. It is the policy of each Fund to distribute to its
holders of common stock monthly dividends of net investment income (other than
net realized gains). Under this policy, which may be changed at any time by each
Fund's Board of Directors, monthly dividends will be made at a level that
reflects the past and projected performance of the respective Fund. This policy
is expected over time to result in the distribution of all net investment income
of each Fund. Net realized capital gains, in excess of capital loss carryovers,
if any, will be distributed to the stockholders at least annually. The Funds
record all distributions to stockholders on the ex-dividend date. Income and
capital gain distributions are determined in accordance with federal income tax
regulations, which may differ from generally accepted accounting principles in
the United States. Any such differences are due primarily to differing
treatments of foreign currency gains and losses, paydown gains and losses,
original issue discount accretion, excise tax regulations and treatment of
foreign currency gains and losses.
62
<Page>
For information concerning the tax treatment of distributions to stockholders,
see the discussion under "Taxation" at page [__] and in the SAI. Both Funds
intend, however, to make such distributions as are necessary to maintain
qualification as a regulated investment company.
COMPARISON OF CHARTERS AND BYLAWS OF THE FUNDS. The following discussion
summarizes the Charters and Bylaws of RCS Fund and DSF Fund. Except as noted
below, RCS Fund and DSF Fund generally have similar Charters and Bylaws.
Both RCS Fund and DSF Fund are non-diversified, closed-end investment companies
registered under the 1940 Act that were incorporated as Maryland corporations in
1993 and 1986, respectively.
The Charters and Bylaws of each Fund include provisions that could have the
effect of limiting the ability of other entities or persons to acquire control
of either Fund or to change the composition of the Fund's Board of Directors, or
depriving stockholders of an opportunity to sell their common stock at a premium
over prevailing market prices by discouraging a third party from seeking to
obtain control of the Fund. The Board of Directors of each Fund is divided into
three classes with approximately an equal number of directors in each class. At
each annual meeting of stockholders of each Fund, the term of one class will
expire and each Director elected to the class will hold office for a term of
three years. This provision could delay for up to two years the replacement of a
majority of the Board of Directors. An RCS Fund Director may only be removed for
cause, and only by the vote by holders of 75% of the shares of capital stock
entitled to vote in an election of directors. The maximum number of directors
that may constitute RCS Fund's Board of Directors is twelve (12). This number
may be increased only by vote of the holders of at least 75% of the shares of
capital stock entitled to vote in an election of directors. Any vacancy on RCS
Fund's Board of Directors resulting from death, resignation, removal or any
cause other than an increase in the number of Directors shall be filled by a
vote of a majority of the remaining Directors, whether or not sufficient to
constitute a quorum, if the new Director so elected is also approved by a
majority of the Continuing Directors (hereafter defined) then in office. Any
vacancy on the Board of Directors by reason of an increase in the number of
Directors may be filled by a vote of a majority of the entire Board of
Directors, if the Director so elected is also approved by a majority of the
Continuing Directors (hereafter defined). "Continuing Director" is defined as a
member of the Board of Directors (1) who has been a director of RCS Fund for a
period of at least twelve months prior to the transaction which is being
submitted for approval and who is not a person or an affiliate, as defined in
the 1940 Act, of a person proposing to enter into the transaction with RCS Fund,
or (2) a director who is not an affiliate, as defined in the 1940 Act, of a
person proposing to enter into the transaction with RCS Fund and who was
recommended to succeed a Continuing Director by a majority of the Continuing
Directors then serving on the Board of Directors. A DSF FUND DIRECTOR MAY ONLY
BE REMOVED FOR CAUSE BY THE AFFIRMATIVE VOTE OF AT LEAST TWO-THIRDS OF ALL THE
VOTES ENTITLED TO BE CAST BY THE STOCKHOLDERS GENERALLY IN THE ELECTION OF
DIRECTORS. THE MAXIMUM NUMBER OF DSF FUND DIRECTORS MAY BE INCREASED AND
VACANCIES FILLED ONLY BY THE VOTE OF A MAJORITY OF THE ENTIRE BOARD OF
DIRECTORS.
The affirmative votes of at least 75% of RCS Fund's Directors and of the holders
of at least 75% of the outstanding shares of capital stock of RCS Fund are
required to approve the following extraordinary corporate transactions: (1) a
merger, consolidation or share exchange of RCS Fund with or into any other
person or company; (2) the issuance or transfer by RCS Fund (in one or a series
of transactions in any 12-month period) of any securities of RCS Fund to any
other person or entity for cash, securities or other property (or combination
thereof) having an aggregate fair market value of
63
<Page>
$1,000,000 or more, excluding sales of securities of RCS Fund in connection with
a public offering, issuances of securities of RCS Fund pursuant to a dividend
reinvestment plan adopted by RCS Fund and issuances of securities of RCS Fund
upon the exercise of any stock subscription rights distributed by RCS Fund; (3)
a sale, lease, exchange, mortgage, pledge, transfer or other disposition by RCS
Fund (in one or a series of transactions in any 12-month period) to or with any
person of any assets of RCS Fund having an aggregate fair market value of
$1,000,000 or more, except for transactions in securities effected by RCS Fund
in the ordinary course of its business; (4) any proposal as to the voluntary
liquidation or dissolution of RCS Fund or any amendment to the Articles of
Incorporation; and (5) any shareholder proposal as to specific investment
decisions made or to be made with respect to RCS Fund's assets. However, if the
proposed transaction is approved by both a majority of the entire Board of
Directors and at least 75% of the Continuing Directors of RCS Fund, a
transaction described in item 1 or item 3 above that involves substantially all
of RCS Fund's assets, or any transaction described in item 4 above, will require
the approval of the holders of a simple majority of the outstanding shares of
capital stock of RCS Fund entitled to vote on the proposal, and a transaction
described in item 2 or item 5 will not require any stockholder approval. DSF
FUND DOES NOT HAVE SIMILAR PROVISIONS REQUIRING A SUPERMAJORITY VOTE BY EITHER
CONTINUING DIRECTORS OR STOCKHOLDERS IN ORDER TO APPROVE THESE TYPES OF
TRANSACTIONS.
The affirmative votes either of the holders of at least 75% of the shares of
capital stock of RCS Fund entitled to vote on the matter or of a majority of RCS
Fund's Board of Directors, 75% of its Continuing Directors and the holders of a
majority of its shares of capital stock entitled to vote on the matter are
required to authorize an amendment to RCS Fund's charter that would make any
class of capital stock a "redeemable security," as defined in the 1940 Act. DSF
FUND DOES NOT HAVE A SIMILAR PROVISION TO AUTHORIZE AN AMENDMENT TO DSF FUND'S
CHARTER THAT WOULD MAKE ANY CLASS OF CAPITAL STOCK A "REDEEMABLE SECURITY."
The presence in person or by proxy of the stockholders of record of a majority
of the shares of RCS Fund issued and outstanding and entitled to vote at a
meeting of stockholders of RCS Fund will constitute a quorum for the transaction
of any business at such meeting. THE PRESENCE IN PERSON OR BY PROXY OF THE
STOCKHOLDERS OF RECORD OF ONE-THIRD OF THE SHARES OF DSF FUND ISSUED AND
OUTSTANDING AND ENTITLED TO VOTE AT A MEETING OF STOCKHOLDERS OF DSF FUND WILL
CONSTITUTE A QUORUM FOR THE TRANSACTION OF ANY BUSINESS AT SUCH MEETING.
Shareholder proposals for consideration at an annual meeting, including the
nomination and election of directors, must be delivered to the principal
executive officers of RCS Fund not less than 45 nor more than 60 days prior to
the date RCS Fund first mailed its proxy material for the prior year's annual
meeting; provided however, if and only if the annual meeting is not scheduled to
be held within a period that commences 30 days before the first anniversary date
of the annual meeting for the preceding year and ends 30 days after such
anniversary date (an annual meeting date outside such period being referred to
herein as an "Other Annual Meeting Date"), such Stockholder Notice shall be
given in the manner provided herein by the later of the close of business on (i)
the date 45 days prior to such Other Annual Meeting Date or (ii) the 10th
business day following the date such Other Annual Meeting Date is first publicly
announced or disclosed. DSF FUND SHAREHOLDER PROPOSALS MUST BE DELIVERED TO THE
PRINCIPAL EXECUTIVE OFFICE OF DSF FUND NOT LESS THAN 90 NOR MORE THAN 120 DAYS
PRIOR TO THE FIRST ANNIVERSARY DATE OF DSF FUND'S ANNUAL MEETING FOR THE
PRECEDING YEAR.
64
<Page>
TAXATION. Each Fund intends to qualify for treatment as a "regulated investment
company" pursuant to Subchapter M of the Code. Each Fund will distribute at
least annually all of its net investment income and gains to its stockholders,
and these distributions will be taxable as ordinary income or capital gains.
Stockholders may be proportionately liable for taxes on income and gains of each
Fund, but stockholders not subject to tax on their income will not be required
to pay tax on amounts distributed to them by each Fund. Each Fund will inform
stockholders of the amount and nature of income or gains distributed by it. Each
Fund does not expect that ownership of its shares will cause any stockholder to
become subject to, or liable for an increased amount of, alternative minimum
tax.
TRADING INFORMATION. Shares of common stock of each Fund are traded on the NYSE.
The following chart shows quarterly trading information per common share for the
past two fiscal years and the current fiscal year of the Funds, as reported by
the NYSE:
DSF FUND
(Unaudited)
<Table>
<Caption>
Discount or
Closing (Premium) to
Closing Market Net Asset Net Asset
Quarter Ended High Price ($) Low Price ($) Price ($) Value ($) Value (%)
1/31/99 7.125 6.438 6.750 8.230 17.98
4/30/99 6.875 6.563 6.875 8.490 19.02
7/31/99 6.938 6.625 6.625 8.070 17.91
10/31/99 6.563 6.188 6.188 7.680 19.43
1/31/00 6.313 5.750 6.00 7.360 21.88
4/30/00 6.063 5.813 5.875 7.280 19.30
7/31/00 6.500 5.625 6.438 7.350 12.41
10/31/00 6.875 6.375 6.688 7.080 5.54
1/31/01 7.130 6.563 7.000 7.430 5.79
4/30/01 7.350 6.910 6.940 7.110 2.39
</Table>
RCS FUND
(Unaudited)
<Table>
<Caption>
Discount or
Closing (Premium) to
Closing Market Net Asset Net Asset
Quarter Ended High Price ($) Low Price ($) Price ($) Value ($) Value (%)
4/30/99 9.875 9.438 9.625 11.760 18.16
7/31/99 9.875 9.563 9.625 10.850 11.29
</Table>
65
<Page>
<Table>
<Caption>
Discount or
Closing (Premium) to
Closing Market Net Asset Net Asset
Quarter Ended High Price ($) Low Price ($) Price ($) Value ($) Value (%)
10/31/99 9.688 8.625 9.000 10.950 17.81
1/31/00 9.125 8.688 9.125 10.560 13.67
4/30/00 8.938 8.688 8.750 10.420 16.03
7/31/00 9.313 8.313 9.188 10.630 13.57
10/31/00 9.750 9.188 9.750 10.730 9.13
1/31/01 10.400 9.250 10.350 11.140 6.76
4/30/01 10.530 10.040 10.330 10.960 5.75
</Table>
On June 29, 2001 the market price, net asset value per share and discount to net
asset value were $7.08, $7.12, and 0.56%, respectively for DSF Fund and $10.68,
$11.06, and 3.44%, respectively, for RCS Fund.
INDEPENDENT AUDITORS OF THE FUNDS. PricewaterhouseCoopers LLP ("PwC"), 160
Federal Street, Boston, Massachusetts 02110, independent accountants, has been
selected by the Boards of Directors of both DSF Fund and RCS Fund as the
independent auditors of each Fund for the current fiscal year. The Audit
Committee of the Board of Directors of DSF Fund unanimously recommended the
selection of PwC, and the Board unanimously approved such selection, on November
30, 2000. The Audit Committee of the Board of Directors of RCS Fund unanimously
recommended the selection of PwC, and the Board unanimously approved such
selection, on May 16, 2001. This firm also serves as the auditor for various
other funds for which Dresdner RCM serves as investment adviser. It was selected
primarily on the basis of its expertise as auditors of investment companies.
A representative of PwC will attend the Funds' respective Meetings to make a
statement and to answer appropriate questions if requested by a stockholder of
the Fund at least 14 days in advance of the Meeting.
The following table sets forth the aggregate fees billed for professional
services rendered by PwC to each Fund during that Fund's last fiscal year:
<Table>
<Caption>
- -----------------------------------------------------------------------------------------------
FINANCIAL INFORMATION
SYSTEMS DESIGN AND
IMPLEMENTATION
AUDIT FEES FEES ALL OTHER FEES
- -----------------------------------------------------------------------------------------------
DSF FUND $35,000 N/A $451,950
- -----------------------------------------------------------------------------------------------
RCS FUND $29,000 N/A $462,290
- -----------------------------------------------------------------------------------------------
</Table>
The fees disclosed in the table above under the caption "Audit Fees" are the
aggregate fees billed for professional services rendered for the audit of each
of DSF Fund's and RCS Fund's annual financial statements and the review of
financial statements included in each Fund's reports to stockholders for the
Fund's most recent fiscal year. The fees disclosed under the captions "Financial
Information Systems Design and Implementation Fees" and "All Other Fees" include
fees billed for services, if
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any, rendered during each Fund's most recent fiscal year to the Fund, to
Dresdner RCM and to any entity controlling, controlled by or under common
control with Dresdner RCM that provides services to the Fund.
In approving the selection of PwC, the Audit Committee of each Fund considered,
in addition to other practices and requirements relating to the selection of the
Fund's auditors, whether the non-audit services covered in the table above under
"Financial Information Systems Design and Implementation Fees" and "All Other
Fees" performed by PwC for the Fund, for Dresdner RCM and for certain related
parties are compatible with maintaining the independence of PwC as the Fund's
principal accountants.
V. FURTHER INFORMATION ABOUT VOTING AND EACH FUND'S MEETING
GENERAL. This Prospectus/Proxy Statement is furnished in connection with the
Merger, the approval of a new investment advisory agreement between DSF Fund and
Dresdner RCM, the election of two directors to the DSF Fund Board of Directors,
the approval of a new investment management agreement between RCS Fund and
Dresdner RCM, the election of directors to the Board of Directors of RCS Fund,
and the solicitation of proxies by and on behalf of the Boards of Directors of
DSF Fund and RCS Fund for use at each Fund's Meeting. Each Fund's Meeting is to
be held on October 12, 2001, at 10:00 a.m. (Pacific Time) at the offices of
Dresdner RCM located at Four Embarcadero Center, San Francisco, California
94111, or at such later time as is made necessary by adjournment.
As of June 30, 2001, there were 11,954,566 outstanding shares of common stock of
DSF Fund, and 30,515,800 outstanding shares of common stock of RCS Fund. Only
stockholders of record of each Fund on July 16, 2001 (the "Record Date"), will
be entitled to notice of and to vote at their Fund's Meeting. Each share of
common stock is entitled to one vote, with fractional shares voting
proportionally.
The Board of Directors of each Fund knows of no matters other than those set
forth herein to be brought before their respective Meeting. If, however, any
other matters properly come before a Meeting, it is each Board's intention that
proxies will be voted on such matters in accordance with the discretion of the
persons named in the enclosed form of proxy.
MATTERS FOR CONSIDERATION AND REQUIRED VOTES. Proxies are being solicited from
each Fund's stockholders by its Board of Directors for the Meetings. Unless
revoked, all valid proxies will be voted in accordance with the specification
thereon or, in the absence of specifications, FOR the following:
- - Approval of the Merger and related transactions (for both DSF Fund and
RCS Fund stockholders).
- - Approval of a new investment advisory agreement between DSF Fund and
Dresdner RCM (for DSF Fund stockholders only).
- - Election of two directors nominated by the Board of Directors of DSF
Fund (for DSF Fund stockholders only).
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- - Approval of a new investment management agreement between RCS Fund and
Dresdner RCM (for RCS Fund stockholders only).
- - Election of two directors nominated by the Board of Directors of RCS
Fund (for RCS Fund stockholders only).
The Merger and related transactions contemplated by the Merger Agreement (DSF
Fund and RCS Fund Proposal 1) will be consummated only if approved by the
affirmative vote of the holders of a majority of the outstanding shares of
common stock of DSF Fund outstanding and entitled to vote and the holders of a
majority of the outstanding shares of common stock of RCS Fund outstanding and
entitled to vote. For DSF Fund, the approval of the new investment advisory
agreement between DSF Fund and Dresdner RCM (DSF Fund Proposal 2) requires the
affirmative votes of a "majority of the outstanding voting securities" of DSF
Fund, as defined in the 1940 Act, and the election of the nominees for Director
(DSF Fund Proposal 3) requires the affirmative vote of a majority of the votes
cast in the election of Directors at the Meeting. For RCS Fund, approval of a
new investment management agreement between RCS Fund and Dresdner RCM (RCS Fund
Proposal 2) requires the affirmative vote of a "majority of the outstanding
voting securities" of RCS Fund, as defined in the 1940 Act, and the election of
the nominees for Director (RCS Fund Proposal 3) requires the affirmative vote of
a plurality of the votes cast in the election of Directors at the Meeting.
QUORUM AND METHOD OF TABULATION. The presence in person or by proxy of the
stockholders of record of one-third of the shares of DSF Fund issued and
outstanding and entitled to vote at the Meeting will constitute a quorum for the
transaction of any business at its Meeting. The holders of a majority of the
shares of RCS Fund outstanding at the close of business on the Record Date
present in person or represented by proxy will constitute a quorum for its
Meeting.
Votes cast by proxy or in person at the Meeting will be counted by persons
appointed by the relevant Fund as tellers for its Meeting. The tellers will
count the total number of votes cast "for" approval of a nominee for director or
a proposal for purposes of determining whether sufficient affirmative votes have
been cast. Shares represented by proxies that reflect abstentions and "broker
non-votes" (i.e., shares held by brokers or nominees as to which (i)
instructions have not been received from the beneficial owners or the persons
entitled to vote and (ii) the broker or nominee does not have the discretionary
voting power on a particular matter) will be treated as shares that are present
and entitled to vote on the matter for purposes of determining the presence of a
quorum. For both Funds, abstentions and broker non-votes have the effect of a
negative vote on the proposal for approving the Merger Agreement. For DSF Fund
stockholders, abstentions and broker non-votes have the effect of a negative
vote on the proposal for approval of a new investment advisory agreement (DSF
Fund Proposal 2), but are not counted in favor or against, and will have no
other effect on, the election of Directors (DSF Fund Proposal 3). DSF Fund does
not anticipate receiving any broker non-votes with respect to the election of
Directors. For RCS Fund stockholders, assuming a quorum is present, abstentions
and broker non-votes have the effect of a negative vote on the proposal for
approving the new investment management agreement (RCS Fund Proposal 2), but are
not counted in favor or against, and will have no other effect on, the election
of the nominees for the Board of Directors (RCS Fund Proposal 3).
SHARE OWNERSHIP. As of July 9, 2001, the officers and directors of DSF Fund, as
a group, beneficially owned 1,199,441 shares, representing 9.6% of the
outstanding shares, of DSF Fund. To
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the knowledge of DSF Fund, other than Depository Trust Company ("DTC"), only the
following persons owned of record or beneficially 5% or more of the outstanding
shares of DSF Fund: Invesco Funds Group, Inc. (6.4%); Phillip Goldstein (5.87%).
As of July 9, 2001, the directors and officers of RCS Fund, as a group, owned
beneficially less than 1% of the outstanding shares of RCS Fund. To the
knowledge of RCS Fund, other than DTC, only the following person owned of record
or beneficially 5% or more of the outstanding shares of RCS Fund: Wachovia Corp.
(8.13%).
Upon consummation of the Merger, to the knowledge of each Fund, no person (other
than DTC) is expected to own of record or beneficially 5% or more of the
outstanding shares of the Combined Fund. However, the Funds note that First
Union Corp. ("First Union") and Wachovia Corp. ("Wachovia") have entered into an
agreement that contemplates the acquisition by First Union of shares of
Wachovia. If the First Union acquisition of Wachovia were to close prior to the
consummation of the Merger, and if First Union and Wachovia were to maintain
their current levels of share ownership in each of the Funds, that combined
entity would have the power to vote 5% or more of the voting securities of each
Fund.
SOLICITATION OF PROXIES. The cost of solicitation, including postage, printing
and handling, will be borne by the Funds in accordance with the terms of the
Merger Agreement. See page [__], "Information about the Merger - Expenses of the
Merger." The solicitation will be made primarily by mail, but may be
supplemented by telephone calls, telegrams and personal interviews by officers,
employees and agents of each Fund.
REVOCATION OF PROXIES. A proxy may be revoked by a stockholder at any time prior
to its exercise by written notice to the Fund, by submission of a subsequent
proxy, or by voting in person at the relevant Meeting.
DATE FOR RECEIPT OF STOCKHOLDERS' PROPOSALS FOR EACH FUND'S NEXT ANNUAL MEETING.
Stockholders submitting proposals intended to be included in each Fund's proxy
statement for its Annual Meeting of Stockholders in 2002 must ensure that such
proposals are received by the Funds, in good order and complying with all
applicable legal requirements, no later than [INSERT DATE AFTER MAILING DATE
DETERMINED] for DSF Fund and [INSERT DATE AFTER MAILING DATE DETERMINED] for RCS
Fund. Stockholders submitting any other proposals intended to be presented at
each Fund's next annual meeting must ensure that such proposals are received by
each Fund, in good order and complying with all applicable legal requirements,
between [May 9, 2002 and June 8, 2002] for DSF Fund and between [INSERT DATE
AFTER MAILING DATE DETERMINED] and [INSERT DATE AFTER MAILING DATE DETERMINED]
for RCS Fund. Stockholder proposals for each Fund should be addressed to Robert
J. Goldstein, Secretary, at the address of the Fund's principal executive
offices. In addition, a copy of any stockholder proposal for DSF Fund should be
sent to Earl D. Weiner at Sullivan & Cromwell, 125 Broad Street, New York, New
York, 10004-2498, and a copy of any stockholder proposal for RCS Fund should be
sent to J.B. Kittredge at Ropes & Gray, One International Place, Boston,
Massachusetts 02110-2624.
ADJOURNMENT. In the event that sufficient votes in favor of the proposals set
forth in a Fund's notice of its Meeting are not received by the time scheduled
for its Meeting, the persons named as proxies may propose one or more
adjournments of the Fund's Meeting after the date set for the original
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<Page>
meeting to permit further solicitation of proxies with respect to any of such
proposals. In addition, if, in the discretion of the persons named as proxies,
it is advisable to defer action on one or more of the proposals, the persons
named as proxies may propose one or more adjournments of the Fund's Meeting for
a reasonable time. Any such adjournments will require the affirmative vote of a
majority of the votes cast on the question in person or by proxy at the session
of the Meeting to be adjourned, as required by the Fund's Charter and ByLaws.
The persons named as proxies will vote in favor of such adjournment those
proxies which they are entitled to vote in favor of such proposals. They will
vote against any such adjournment those proxies required to be voted against any
of such proposals. The costs of any additional solicitation and of any adjourned
session will be borne by the Funds, subject to the expense reimbursements
described in "Information about the Merger - Expenses of the Merger, on page
[__]." Any proposals for which a sufficient number of affirmative votes to
approve the proposal have been received by the time of the Fund's Meeting will
be acted upon and such action will be final regardless of whether either Meeting
is adjourned to permit additional solicitation with respect to any other
proposal.
PLEASE EXECUTE AND RETURN THE ENCLOSED PROXY PROMPTLY TO ENSURE THAT A QUORUM IS
PRESENT AT YOUR FUND'S MEETING. A SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS
ENCLOSED FOR YOUR CONVENIENCE.
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APPENDIX A
AGREEMENT AND PLAN OF MERGER AND CONTINGENT LIQUIDATION
This Agreement and Plan of Merger and Contingent Liquidation (the
"Agreement") is made as of August 2, 2001, in San Francisco, California, by and
between RCM Strategic Global Government Fund, Inc., a Maryland corporation ("RCS
Fund"), and Dresdner RCM Global Strategic Income Fund, Inc., a Maryland
corporation ("DSF Fund").
PLAN OF MERGER AND CONTINGENT LIQUIDATION
(a) Prior to the Valuation Time (as defined in Section 4 of this Agreement), DSF
Fund shall conduct a tender offer for 50% of the shares of common stock of DSF
Fund issued and outstanding as of the date of this Agreement for a purchase
price per share equal to 99-1/2% of DSF Fund's per share net asset value at the
expiration of such tender offer (the "Tender Offer").
(b) In accordance with provisions of the Maryland General Corporation Law (the
"MGCL") and the charters of each of DSF Fund and RCS Fund, respectively, upon
the terms and subject to the conditions set forth in this Agreement, and subject
to the approval of the holders of a majority of the outstanding shares of common
stock of DSF Fund and of RCS Fund, respectively, at the meetings referred to in
Section 7 of this Agreement, DSF Fund shall on the Merger Date (as defined in
Section 5 of this Agreement) be merged with and into RCS Fund (the "Merger").
Pursuant to provisions of the MGCL, upon consummation of the Merger, DSF Fund
shall cease to exist as a separate corporation and RCS Fund shall survive and
continue to exist as a corporation duly incorporated under the laws of the State
of Maryland. The charter and Bylaws, as amended, of RCS Fund, as in effect
immediately prior to the Merger Date, shall be the charter and Bylaws of RCS
Fund, as the surviving corporation, after the Merger, until thereafter changed
or amended as provided therein or by applicable law.
(c) On the Merger Date, upon the terms and conditions set forth in this
Agreement, all shares of common stock of DSF Fund issued and outstanding as of
such date shall, by virtue of the Merger and without any action on the part of
the holders thereof (each, a "DSF Stockholder," and collectively, the "DSF
Stockholders"), be converted into a number of full and fractional shares of
common stock of RCS Fund (the "Merger Shares") determined by dividing the
aggregate net asset value of such DSF Fund shares by the net asset value of one
share of common stock of RCS Fund, such values being determined at the Valuation
Time as provided in Section 4 of this Agreement.
(d) At and after the Merger Date, the Merger will have the effects set forth in
relevant provisions of the MGCL. Without limiting the generality of the
foregoing, and subject thereto, at the Merger Date all the assets, rights,
privileges and powers of DSF Fund shall be vested in RCS Fund, and RCS Fund
shall assume all of the debts, liabilities and duties of DSF Fund.
(e) On or prior to the Merger Date, RCS Fund and DSF Fund shall file for record
with the State Department of Assessments and Taxation of Maryland Articles of
Merger (the "Articles of Merger"), the contents of which shall conform in all
material respects to the requirements of the MGCL.
<Page>
(f) It is intended that the Merger described in this Agreement shall be a
reorganization within the meaning of Section 368(a)(1)(A) of the Internal
Revenue Code of 1986, as amended (the "Code").
(g) Notwithstanding the foregoing provisions of this Plan of Merger and
Contingent Liquidation (the "Plan of Merger"), if an event described in Section
13(b) or Section 13(c) of this Agreement occurs, then (i) this Agreement shall
terminate, (ii) the Merger and the Tender Offer shall be abandoned, and (iii)
the assets of DSF Fund shall be liquidated in an orderly fashion and DSF Fund
shall be dissolved pursuant to the MGCL.
AGREEMENT
RCS Fund and DSF Fund agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF RCS FUND. RCS Fund represents and warrants
to and agrees with DSF Fund that:
(a) RCS Fund is a corporation duly incorporated and validly existing under
the laws of the State of Maryland, and has power to own all of its properties
and assets and to carry out its obligations under this Agreement. RCS Fund has
all necessary federal, state and local authorizations to carry on its business
as now being conducted and to carry out this Agreement.
(b) RCS Fund is registered under the Investment Company Act of 1940, as
amended (the "1940 Act"), as a closed-end management investment company, and
such registration has not been revoked or rescinded and is in full force and
effect.
(c) A statement of assets and liabilities, statement of operations,
statement of changes in net assets and schedule of investments (indicating their
market values) of RCS Fund for the fiscal year ended January 31, 2001, such
statements and schedule having been audited by PricewaterhouseCoopers LLP,
independent accountants, have been furnished to DSF Fund. Such statement of
assets and liabilities and schedule of investments fairly present the financial
position of RCS Fund as of the date thereof and such statements of operations
and changes in net assets fairly reflect the results of its operations and
changes in net assets for the period covered thereby in conformity with
generally accepted accounting principles.
(d) There are no material legal, administrative or other proceedings
pending or, to the knowledge of RCS Fund, threatened against RCS Fund which
assert liability or may, if successfully prosecuted to their conclusion, result
in liability on the part of RCS Fund, other than as have been disclosed in the
Registration Statement (as defined below).
(e) RCS Fund has no known liabilities of a material nature, contingent or
otherwise, other than those shown on its statement of assets and liabilities as
of January 31, 2001 and those incurred in the ordinary course of RCS Fund's
business as an investment company since such date.
(f) No consent, approval, authorization or order of, or filing with, any
court or governmental authority is required for the consummation by RCS Fund of
the transactions contemplated by this Agreement, except such as have been or
will be obtained under the Securities Act of 1933, as amended (the "1933 Act"),
the Securities Exchange Act of 1934, as amended (the "1934 Act"), the
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1940 Act or state securities or blue sky laws (which term as used herein
shall include the laws of the District of Columbia and of Puerto Rico).
(g) The registration statement and any amendments thereto (including any
post-effective amendments) filed with the Securities and Exchange Commission
(the "Commission") by RCS Fund on Form N-14 relating to the Merger Shares (the
"Registration Statement"), the section captioned "Additional Proposals to be
Voted on by DSF Fund Stockholders Only" included therein (the "DSF Fund
Additional Proposals") and the section captioned "Additional Proposals to be
Voted on by RCS Fund Stockholders Only" included therein (the "RCS Fund
Additional Proposals" and, together with the DSF Fund Additional Proposals, the
"Additional Proposals"), on the effective date of the Registration Statement (i)
will comply in all material respects with the provisions of the 1933 Act, the
1934 Act and the 1940 Act and the rules and regulations thereunder and (ii) will
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading; and at the time of the stockholders' meeting referred to in
Section 7(a) of this Agreement and at the Merger Date, the prospectus contained
in the Registration Statement (the "Prospectus"), as amended or supplemented by
any amendments or supplements filed or requested to be filed with the Commission
by DSF Fund or RCS Fund, will not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading; provided,
however, that none of the representations and warranties in this subsection
shall apply to statements in or omissions from the Registration Statement, the
Prospectus or the Additional Proposals made or omitted in reliance upon and in
conformity with information furnished by DSF Fund for use in the Registration
Statement, the Prospectus or the Additional Proposals.
(h) There are no material contracts made outside the ordinary course of
business to which RCS Fund is a party, other than as disclosed in the
Registration Statement, the Prospectus, or the Additional Proposals.
(i) All of the issued and outstanding shares of common stock of RCS Fund
have been offered for sale and sold in conformity with all applicable federal
securities laws.
(j) RCS Fund is and will at all times through the Merger Date qualify for
taxation as a "regulated investment company" under Sections 851 and 852 of the
Code.
(k) The issuance of the Merger Shares will be in compliance with all
applicable federal securities laws.
(l) The Merger Shares have been duly authorized and, when issued and
delivered pursuant to this Agreement, will be legally and validly issued and
will be fully paid and nonassessable, and no stockholder of RCS Fund will have
any preemptive right of subscription or purchase in respect thereof.
2. REPRESENTATIONS AND WARRANTIES OF DSF FUND. DSF Fund represents and
warrants to and agrees with RCS Fund that:
(a) DSF Fund is a corporation duly incorporated and validly existing under
the laws of the State of Maryland, and has power to own all of its properties
and assets and to carry out its
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obligations under this Agreement. DSF Fund has all necessary federal, state and
local authorizations to carry on its business as now being conducted and to
carry out this Agreement.
(b) DSF Fund is registered under the 1940 Act as a closed-end management
investment company, and such registration has not been revoked or rescinded and
is in full force and effect.
(c) A statement of assets and liabilities, statement of operations,
statement of changes in net assets and schedule of investments (indicating their
market values) of DSF Fund for the fiscal year ended October 31, 2000, such
statements and schedule having been audited by PricewaterhouseCoopers LLP,
independent accountants, and an unaudited statement of assets and liabilities,
statement of operations, statement of changes in net assets and schedule of
investments (indicating their market values) of DSF Fund for the six months
ended April 30, 2001, have been furnished to RCS Fund. Such statements of assets
and liabilities and schedules of investments fairly present the financial
position of DSF Fund as of the dates thereof, and such statements of operations
and changes in net assets fairly reflect the results of its operations and
changes in net assets for the periods covered thereby in conformity with
generally accepted accounting principles.
(d) There are no material legal, administrative or other proceedings
pending or, to the knowledge of DSF Fund, threatened against DSF Fund which
assert liability or may, if successfully prosecuted to their conclusion, result
in liability on the part of DSF Fund, other than as have been disclosed in the
Registration Statement.
(e) DSF Fund has no known liabilities of a material nature, contingent or
otherwise, other than those shown on its statement of assets and liabilities as
of April 30, 2001 and those incurred in the ordinary course of DSF Fund's
business as an investment company since such date.
(f) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by DSF Fund of the
transactions contemplated by this Agreement, except such as have been or will be
obtained under the 1933 Act, the 1934 Act, the 1940 Act or state securities or
blue sky laws.
(g) The Registration Statement, the Prospectus and the Additional
Proposals, on the Effective Date of the Registration Statement, (i) will comply
in all material respects with the provisions of the 1933 Act, the 1934 Act and
the 1940 Act and the rules and regulations thereunder and (ii) will not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading; and at the time of the stockholders' meeting referred to in Section
7(a) of this Agreement and on the Merger Date, the Prospectus, as amended or
supplemented by any amendments or supplements filed or requested to be filed
with the Commission by DSF Fund or RCS Fund, will not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances in which they were
made, not misleading; provided, however, that the representations and warranties
in this subsection shall apply only to statements of fact relating to DSF Fund
contained in the Registration Statement, the Prospectus or the Additional
Proposals, or omissions to state in any thereof a material fact relating to DSF
Fund, made or omitted in reliance upon and in conformity with information
furnished or approved by DSF Fund for use in the Registration Statement, the
Prospectus or the Additional Proposals.
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(h) There are no material contracts to which DSF Fund is a party, other
than those identified on Schedule 2(h) to this Agreement.
(i) All of the issued and outstanding shares of common stock of DSF Fund
have been offered for sale and sold in conformity with all applicable federal
securities laws.
(j) DSF Fund is and will at all times through the Merger Date qualify for
taxation as a "regulated investment company" under Sections 851 and 852 of the
Code.
(k) DSF Fund has filed or will file all federal and state tax returns
which, to the knowledge of DSF Fund's officers, are required to be filed by DSF
Fund on or before the Merger Date and has paid or will pay all federal and state
taxes shown to be due on said returns or on any assessments received by DSF
Fund. All tax liabilities of DSF Fund have been adequately provided for on its
books, and to the knowledge of DSF Fund, no tax deficiency or liability of DSF
Fund has been asserted, and no question with respect thereto has been raised, by
the Internal Revenue Service or by any state or local tax authority for taxes in
excess of those already paid.
(l) At the Merger Date, RCS Fund will acquire the assets of DSF Fund
subject to no encumbrances, liens or security interests whatsoever and without
any restrictions upon the transfer thereof (except for such restrictions
previously disclosed to RCS Fund by DSF Fund).
(m) No registration under the 1933 Act of any of the portfolio securities
of DSF Fund would be required if they were, as of the time of such transfer, the
subject of a public distribution by either of RCS Fund or DSF Fund, except as
previously disclosed to RCS Fund by DSF Fund.
3. TENDER OFFER; MERGER. Prior to the Valuation Time (as defined in Section 4 of
this Agreement), DSF Fund shall conduct the Tender Offer. DSF Fund and RCS Fund
agree that, on or prior to the Merger Date, Articles of Merger shall be filed
with the State Department of Assessments and Taxation of Maryland, the contents
of which shall conform in all material respects to the requirements of the MGCL.
Subject to the requisite approval of the holders of outstanding shares of common
stock of DSF Fund and of RCS Fund, respectively, and to the other terms and
conditions contained herein, DSF Fund shall, on the Merger Date, merge with and
into RCS Fund, and RCS Fund shall thereby acquire all of the assets and assume
all of the liabilities of DSF Fund, whether accrued or contingent, in exchange
for the conversion of all outstanding shares of common stock of DSF Fund into
that number of Merger Shares provided for in Section 4 of this Agreement. Upon
the consummation of the Merger, DSF Fund shall cease to exist as a separate
corporation and RCS Fund shall survive and continue as a corporation duly
incorporated under the laws of the State of Maryland.
4. EFFECT OF MERGER ON DSF FUND SHARES; VALUATION TIME.
(a) On the Merger Date, as a result of the Merger and without any action on
the part of the holders thereof, all shares of common stock of DSF Fund issued
and outstanding at such date, together with the associated rights, terms and
conditions of such shares, shall be converted into Merger Shares, with the
associated rights, terms and conditions of shares of common stock of RCS Fund.
(b) As a result of the Merger and without any action on the part of the
holders thereof, on the Merger Date each share of common stock of DSF Fund,
together with the associated rights of such
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shares, shall cease to be outstanding and shall be converted into full and
fractional shares of common stock of RCS Fund pro rata based on the total number
of shares of DSF Fund being converted and the total number of Merger Shares
being issued by RCS Fund pursuant to Section (c) of the Plan of Merger. Each
certificate which immediately prior to the Merger Date represented any such
shares of DSF Fund shall thereafter represent the number of shares of common
stock of RCS Fund into which the shares of common stock of DSF Fund represented
by such certificate have been converted, and holders of certificates
representing shares of common stock of DSF Fund shall cease to have any rights
with respect to such shares of DSF Fund, except as provided herein or by law.
(c) The Valuation Time shall be 2:00 p.m., San Francisco time, on the
fourth business day following the expiration of the Tender Offer or such earlier
or later day as may be mutually agreed upon in writing by the parties hereto
(the "Valuation Time").
(d) The net asset value of the Merger Shares and the net asset value of DSF
Fund shall in each case be determined as of the Valuation Time, in each case
pursuant to procedures customarily used by RCS Fund in determining its net asset
value. The liabilities of DSF Fund and RCS Fund as of the Valuation Time shall
each include the Joint Expenses, DSF Fund Expenses and RCS Fund Expenses (each
as defined in Section 6 of this Agreement) payable by such fund pursuant to
Section 6 of this Agreement.
(e) No adjustment shall be made in the net asset value of either DSF Fund
or RCS Fund to take into account tax differences in realized and unrealized
gains and losses.
(f) Certificates representing Merger Shares will be issued to individual
DSF Stockholders only if such stockholder so requests.
5. MERGER DATE. Delivery of such documents as are necessary to effect the Merger
shall be made at the offices of Dresdner RCM Global Investors LLC (the
"Adviser") at 10:00 A.M. San Francisco time on the next full business day
following the Valuation Time, or at such other time and date agreed to by RCS
Fund and DSF Fund, the date and time upon which such Merger is to become
effective being referred to herein as the "Merger Date."
6. EXPENSES, FEES, ETC. As used in this Section 6, the following terms shall
have the following meanings: "Joint Expenses" shall mean all legal and other
costs and expenses, including without limitation the fees and expenses of Ropes
& Gray, incurred by RCS Fund to prepare, print and mail this Agreement, the
Articles of Merger, the Registration Statement and other documents or agreements
necessary to effect the Merger, but excluding all costs and expenses incurred by
RCS Fund in connection with the preparation by PricewaterhouseCoopers LLP
("PwC") of the letter referred to in Section 8(g) of this Agreement (the "PwC
Expenses") and incremental costs associated with preparing such portions of the
RCS Fund Additional Proposals as do not relate to the Merger proposal; "DSF Fund
Expenses" shall mean all legal and other costs and expenses, including without
limitation the fees and expenses of Sullivan & Cromwell, incurred by DSF Fund to
conduct the Tender Offer, to hold the stockholders' meeting referred to in
Section 7(a) of this Agreement, to hold all special meetings of the DSF Fund
Board of Directors to consider the Merger, and to prepare, print and mail the
DSF Fund Additional Proposals and the Registration Statement; "RCS Fund
Expenses" shall mean all legal and other costs and expenses other than Joint
Expenses, including without limitation the fees and expenses of Ropes & Gray,
incurred by RCS Fund to hold the stockholders' meeting referred to in Section
7(b) of this Agreement and to hold all special meetings of the RCS
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Fund Board of Directors to consider the Merger, but excluding the PwC
Expenses; and "Termination With Cause" shall mean termination of the Merger
pursuant to Section 13(b) or Section 13(c) of this Agreement.
(a) If the Merger is consummated, DSF Fund shall be liable for all
reasonable Joint Expenses in excess of twenty-five thousand dollars (US
$25,000). RCS Fund and DSF Fund each shall provide the other in writing at least
two business days prior to the Valuation Time and in reasonable detail the
amount of Joint Expenses for which it is liable, and such amounts will be the
basis on which the liability of DSF Fund pursuant to this paragraph (a) shall be
calculated as of the Valuation Time.
(b) In the event that the holders of a majority of the outstanding shares
of DSF Fund do not vote to approve the Merger but the holders of a majority of
the outstanding shares of RCS Fund vote to approve the Merger, DSF Fund shall
reimburse RCS Fund for all reasonable Joint Expenses in excess of forty thousand
dollars (US $40,000) and all reasonable RCS Fund Expenses.
(c) In the event that the holders of a majority of the outstanding shares
of RCS Fund do not vote to approve the Merger but the holders of a majority of
the outstanding shares of DSF Fund vote to approve the Merger, DSF Fund shall
reimburse RCS Fund for one-half of all reasonable Joint Expenses.
(d) In the event of a Termination With Cause, DSF Fund shall reimburse RCS
Fund for all reasonable Joint Expenses in excess of twenty-five thousand dollars
(US $25,000) and all reasonable RCS Fund Expenses in excess of forty thousand
dollars (US $40,000).
(e) In the event that (i) holders of a majority of the outstanding shares
of each of DSF Fund and RCS Fund do not vote to approve the Merger, (ii) the
Merger is not consummated by reason of the non-fulfillment of any condition to
DSF Fund's obligations set forth in Section 9 of this Agreement (other than in
Section 9(a) or Section 9(b)), (iii) the Merger is not consummated by reason of
the non-fulfillment of the condition to RCS Fund's obligations set forth in
Section 8(g) of this Agreement, or (iv) the Merger is terminated pursuant to
Section 13(a) or Section 13(d) of this Agreement, DSF Fund shall reimburse RCS
Fund for one-half of all reasonable Joint Expenses; PROVIDED, HOWEVER, that if,
as of the date provided for in Section 13(d) of this Agreement, the stockholders
of RCS Fund shall have voted to approve the Merger and the holders of a majority
of the outstanding shares of DSF Fund shall not have voted to approve the Merger
and all other conditions of DSF Fund's obligations set forth in Section 9 of
this Agreement (other than in Section 9(a) or Section 9(b)) shall have been
fulfilled as of such date, then paragraph (b) of this Section 6 shall apply.
(f) In the event that the Merger is not consummated by reason of the
non-fulfillment of any condition to RCS Fund's obligations set forth in Section
8 of this Agreement (other than in Section 8(a) or Section 8(g)), DSF Fund shall
reimburse RCS Fund for all reasonable Joint Expenses and all reasonable RCS Fund
Expenses; PROVIDED, HOWEVER, that in the event that the Merger is not
consummated by reason both of the non-fulfillment of any condition to RCS Fund's
obligations set forth in Section 8 of this Agreement (other than in Section 8(a)
or Section 8(g)) and of the non-fulfillment of any condition to DSF Fund's
obligations set forth in Section 9 of this Agreement (other than in Section 9(a)
or Section 9(b)), then paragraph (e) of this Section 6 shall apply.
(g) Subject to Section 11(c) of this Agreement, RCS Fund shall be solely
liable for the PwC Expenses.
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(h) Subject to Section 11(c) of this Agreement and to DSF Fund's
reimbursement obligations pursuant to paragraphs (b), (d) and (f) of this
Section 6, DSF Fund shall be solely liable for the DSF Fund Expenses and RCS
Fund shall be solely liable for the RCS Fund Expenses.
(i) Notwithstanding the reimbursement obligations of DSF Fund pursuant to
paragraphs (b) through (f) of this Section 6, any expenses incurred by RCS Fund
shall be paid directly by RCS Fund if and to the extent that the reimbursement
of such expenses by DSF Fund would, in the opinion of counsel to RCS Fund,
result in the disqualification of RCS Fund as a "regulated investment company"
within the meaning of Section 851 of the Code.
7. MEETINGS OF STOCKHOLDERS; LISTING OF MERGER SHARES.
(a) DSF Fund shall call a meeting of its stockholders as soon as is
practicable after the effective date of the Registration Statement for the
purpose of considering the Merger and shall use its best efforts to obtain
stockholder approval thereof.
(b) RCS Fund shall call a meeting of its stockholders as soon as is
practicable after the effective date of the Registration Statement for the
purpose of considering the Merger and shall use its best efforts to obtain
stockholder approval thereof.
(c) RCS Fund shall, after the preparation and delivery to RCS Fund by DSF
Fund of a preliminary version of the DSF Fund Additional Proposals that was
reasonably satisfactory to RCS Fund and to Ropes & Gray for inclusion in the
Registration Statement, file the Registration Statement with the Commission.
Each of DSF Fund and RCS Fund will cooperate with the other, and each will
furnish to the other the information relating to itself required by the 1933
Act, the 1934 Act and the 1940 Act and the rules and regulations thereunder to
be set forth in the Registration Statement, including the Prospectus and the
Additional Proposals.
(d) RCS Fund will use its best efforts to effect the listing of the Merger
Shares on the New York Stock Exchange on or before the Merger Date.
8. CONDITIONS TO RCS FUND'S OBLIGATIONS. The obligations of RCS Fund hereunder
shall be subject to the following conditions:
(a) That the Merger shall have been approved by the affirmative vote of
holders of a majority of the outstanding shares of common stock of DSF Fund
entitled to vote on the matter and holders of a majority of the outstanding
shares of common stock of RCS Fund entitled to vote on the matter.
(b) That DSF Fund shall, prior to the Valuation Time, have made the Tender
Offer and during the period between the date of this Agreement and the Merger
Date shall not have repurchased in the Tender Offer or otherwise more than 50%
of the total number of shares of common stock of DSF Fund issued and outstanding
as of the date of this Agreement.
(c) That seven business days prior to the Valuation Time, DSF Fund shall
have furnished to RCS Fund a list of all of DSF Fund's portfolio securities as
of such date certified on DSF Fund's behalf by DSF Fund's President (or any Vice
President) and Treasurer (or any Assistant Treasurer) and (i) if DSF Fund shall
have received within two business days of having furnished such list, reasonable
written instructions from RCS Fund to sell any securities listed thereon, DSF
Fund shall
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have sold such securities prior to the Valuation Time and (ii) DSF Fund shall
not, subsequent to furnishing such list, have purchased additional portfolio
securities without the approval of RCS Fund.
(d) That DSF Fund shall have furnished to RCS Fund a statement of DSF
Fund's assets and liabilities, with values determined as provided in Section 4
of this Agreement, together with a list of all of DSF Fund's portfolio
securities, all as of the Valuation Time, certified on DSF Fund's behalf by DSF
Fund's President (or any Vice President) and Treasurer (or any Assistant
Treasurer), and a certificate of both such officers, dated the Merger Date, to
the effect that as of the Valuation Time and as of the Merger Date there has
been no material adverse change in the financial position of DSF Fund since
April 30, 2001, other than changes in its portfolio securities or their market
value since that date, changes due to dividends declared or paid and identified
to RCS Fund, changes due to losses from operations or changes due to share
repurchases.
(e) That DSF Fund shall have furnished to RCS Fund a statement, dated the
Merger Date, signed on behalf of DSF Fund by DSF Fund's President (or any Vice
President) and Treasurer (or any Assistant Treasurer) certifying that as of the
Valuation Time and as of the Merger Date all representations and warranties of
DSF Fund made in this Agreement are true and correct in all material respects as
if made at and as of such dates, and that DSF Fund has complied with all of the
agreements and satisfied all of the conditions on its part to be performed or
satisfied at or prior to each of such dates.
(f) That RCS Fund shall have received an agreed upon procedures letter from
PwC dated the Merger Date reasonably satisfactory in form and substance to RCS
Fund and DSF Fund setting forth findings of PwC pursuant to its performance of
the agreed upon procedures set forth therein, stating that, based upon these
findings, management's assertions that for the fiscal period from November 1,
2000 to the Merger Date DSF Fund (i) qualified as a regulated investment company
under the Code, (ii) as of the Merger Date, has no liability other than
liabilities stated for federal or state income taxes and (iii) as of the Merger
Date, has no liability for federal excise tax purposes under section 4982 of the
Code, are fairly stated; and setting forth, based upon an examination conducted
pursuant to those agreed upon procedures, the value of the portfolio securities
to be acquired by RCS Fund in the Merger and the net asset value of DSF Fund and
RCS Fund, respectively.
(g) That RCS Fund shall have received, prior to the effective date of the
Registration Statement, a letter from PwC stating that PwC has carried out
certain specified procedures, not constituting an audit, reasonably satisfactory
to RCS Fund and DSF Fund with respect to certain amounts, percentages and
financial information which are derived from the general accounting records of
DSF Fund and RCS Fund and which appear or are incorporated by reference in the
Registration Statement, the Prospectus or the Additional Proposals, and has
compared such amounts and financial information with the accounting records of
DSF Fund and RCS Fund and has found them to be in agreement and has proved the
mathematical accuracy of certain percentages.
(h) That there shall not be any material litigation pending with respect to
the matters contemplated by this Agreement.
(i) That RCS Fund shall have received an opinion of Sullivan & Cromwell, in
form reasonably satisfactory to RCS Fund and dated the Merger Date, to the
effect that (i) DSF Fund has been duly incorporated and is an existing
corporation in good standing under the laws of the State of Maryland; (ii) this
Agreement has been duly authorized, executed, and delivered by DSF Fund and,
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assuming that the Registration Statement, the Prospectus and the Additional
Proposals do not contain any misstatement or omission of material fact and
assuming further the due authorization, execution and delivery of this Agreement
by RCS Fund, is a valid and binding obligation of DSF Fund; (iii) the execution
and delivery of this Agreement did not, and the consummation of the Merger
contemplated hereby will not, violate DSF Fund's charter or Bylaws or any
provision of any agreement listed on Schedule 2(h) to this Agreement; and (iv)
all regulatory consents, approvals, authorizations and filings required to be
obtained or made by DSF Fund under the 1933 Act, the 1934 Act, the 1940 Act or
MGCL for the consummation of the Merger by DSF Fund have been obtained or made.
(j) That RCS Fund shall have received an opinion of Sullivan & Cromwell
dated the Merger Date (which opinion would be based upon certain representations
and subject to certain qualifications), to the effect that, on the basis of the
existing provisions of the Code, current administrative rules and court
decisions, for federal income tax purposes: (i) the Merger constitutes a
reorganization within the meaning of Section 368(a) of the Code and DSF Fund and
RCS Fund will each be a "party to a reorganization" within the meaning of
Section 368(b) of the Code, (ii) no gain or loss will be recognized by RCS Fund
or its stockholders upon consummation of the Merger, (iii) the basis to RCS Fund
of the DSF Fund assets acquired in the Merger will be the same as the basis of
such assets in the hands of DSF Fund immediately prior to the Merger, and (iv)
RCS Fund's holding periods with respect to the DSF Fund assets acquired in the
Merger will include the respective periods for which such assets were held by
DSF Fund.
(k) That the Registration Statement shall have become effective under the
1933 Act, and no stop order suspending such effectiveness shall have been
instituted or, to the knowledge of RCS Fund or DSF Fund, threatened by the
Commission.
(l) That RCS Fund shall have received from the Commission and any relevant
state securities administrator such order or orders as Ropes & Gray reasonably
deems necessary or desirable under the 1933 Act, the 1934 Act, the 1940 Act, or
any applicable state securities or blue sky laws in connection with the Merger
contemplated hereby, and that all such orders shall be in full force and effect.
(m) That, on or prior to the Merger Date, DSF Fund shall have declared a
dividend or dividends which, together with all previous such dividends, shall
have the effect of distributing to the stockholders of DSF Fund (i) all of the
excess of (X) DSF Fund's investment income excludable from gross income under
Section 103 of the Code over (Y) DSF Fund's deductions disallowed under Sections
265 and 171 of the Code, (ii) all of DSF Fund's investment company taxable
income (as defined in Section 852 of the Code) for its taxable years ending on
or after October 31, 2000, and on or prior to the Merger Date (computed in each
case without regard to any deduction for dividends paid), and (iii) all of its
net realized capital gain after reduction by any capital loss carryover in each
of its taxable years ending on or after October 31, 2000, and on or prior to the
Merger Date.
(n) That DSF Fund's custodian shall have delivered to RCS Fund a
certificate identifying all of the assets of DSF Fund held by such custodian as
of the Valuation Time.
(o) That DSF Fund's transfer agent shall have provided to RCS Fund as of
the Valuation Time (i) the originals or true copies of all of the records of DSF
Fund in the possession of such transfer agent as of the Valuation Time, (ii) a
certificate setting forth the number of shares of DSF Fund outstanding as of the
Valuation Time, (iii) the name and address of each holder of record of any
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such shares and the number of shares held of record by each such stockholder
and (iv) the name and address of each holder of record of any such shares in a
certificated form.
(p) That all of the issued shares of common stock of DSF Fund that were
outstanding immediately prior to the Tender Offer or are outstanding as of the
Valuation Time shall have been offered for sale and sold in conformity with all
applicable state securities or blue sky laws and, to the extent that any audit
of the records of DSF Fund or its transfer agent by RCS Fund or its agents shall
have revealed otherwise, either (i) DSF Fund shall have taken all actions that
in the reasonable opinion of RCS Fund or its counsel are necessary to remedy any
prior failure on the part of DSF Fund to have offered for sale and sold such
shares in conformity with such laws or (ii) DSF Fund shall have furnished (or
caused to be furnished) surety, or shall have made other arrangements that are
satisfactory, in the reasonable opinion of RCS Fund or its counsel, to indemnify
RCS Fund against any expense, loss, claim, damage or liability whatsoever that
may be asserted or threatened by reason of such failure on the part of DSF Fund
to have offered and sold such shares in conformity with such laws.
(q) That the Merger Shares shall have been accepted for listing by the New
York Stock Exchange.
9. CONDITIONS TO DSF FUND'S OBLIGATIONS. The obligations of DSF Fund
hereunder, other than its obligations pursuant to paragraphs (b) through (f) of
Section 6 of this Agreement, shall be subject to the following conditions:
(a) That the Merger shall have been approved by the affirmative vote of the
holders of a majority of the outstanding shares of common stock of DSF Fund
entitled to vote on the matter and the holders of a majority of the outstanding
shares of common stock of RCS Fund entitled to vote on the matter.
(b) That, prior to the Valuation Time, DSF Fund shall have conducted the
Tender Offer.
(c) That RCS Fund shall have furnished to DSF Fund a statement of RCS
Fund's net assets, together with a list of portfolio holdings with values
determined as provided in Section 4 of this Agreement, all as of the Valuation
Time, certified on behalf of RCS Fund by RCS Fund's President (or any Vice
President) and Treasurer (or any Assistant Treasurer), and a certificate of both
such officers, dated the Merger Date, to the effect that as of the Valuation
Time and as of the Merger Date there has been no material adverse change in the
financial position of RCS Fund since January 31, 2001, other than changes in its
portfolio securities or their market value since that date or changes due to
dividends declared or paid or losses from operations.
(d) That RCS Fund shall have furnished to DSF Fund a statement, dated the
Merger Date, signed on behalf of RCS Fund by RCS Fund's President (or any Vice
President) and Treasurer (or any Assistant Treasurer) certifying that as of the
Valuation Time and as of the Merger Date all representations and warranties of
RCS Fund made in this Agreement are true and correct in all material respects as
if made at and as of such dates, and that RCS Fund has complied with all of the
agreements and satisfied all of the conditions on its part to be performed or
satisfied at or prior to each of such dates.
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(e) That there shall not be any material litigation pending or threatened
with respect to the matters contemplated by this Agreement.
(f) That DSF Fund shall have received an opinion of Ropes & Gray, in form
reasonably satisfactory to DSF Fund and dated the Merger Date, to the effect
that (i) RCS Fund is duly incorporated and an existing corporation in good
standing under the laws of the State of Maryland; (ii) this Agreement has been
duly authorized, executed and delivered by RCS Fund and, assuming that the
Registration Statement, the Prospectus and the Additional Proposals do not
contain any misstatement or omission of material fact and assuming further the
due authorization, execution and delivery of this Agreement by DSF Fund, is a
valid and binding obligation of RCS Fund; (iii) the Merger Shares are duly
authorized and upon their delivery will be validly issued and will be fully paid
and nonassessable and no stockholder of RCS Fund has any preemptive right to
subscription or purchase in respect thereof; (iv) the execution and delivery of
this Agreement did not, and the consummation of the Merger contemplated hereby
will not, violate RCS Fund's charter or By-laws, or any provision of any
agreement listed as an Exhibit to the Registration Statement to which RCS Fund
is a party or by which it is bound; (v) all regulatory consents, approvals,
authorizations and filings required to be obtained or made by RCS Fund under the
1933 Act, the 1934 Act, the 1940 Act or MGCL for the consummation of the Merger
by RCS Fund have been obtained or made; and (vi) the Registration Statement has
become effective under the 1933 Act, and to the best of the knowledge of such
counsel, no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are pending or contemplated under the 1933 Act.
(g) That DSF Fund shall have received an opinion of Sullivan & Cromwell
dated the Merger Date (which opinion would be based upon certain representations
and subject to certain qualifications), to the effect that, on the basis of the
existing provisions of the Code, current administrative rules and court
decisions, for federal income tax purposes: (i) the Merger constitutes a
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
and DSF Fund and RCS Fund will each be a "party to a reorganization" within the
meaning of Section 368(b) of the Code, (ii) no gain or loss will be recognized
by DSF Fund upon the consummation of the Merger, (iii) no gain or loss will be
recognized by DSF Stockholders on the conversion of shares of DSF Fund into
Merger Shares; (iv) the aggregate basis of the Merger Shares a DSF Stockholder
receives in connection with the transaction will be the same as the aggregate
basis of his or her shares of DSF Fund converted therefor, and (v) a DSF
Stockholder's holding period for his or her Merger Shares will be determined by
including the period for which he or she held the shares of DSF Fund converted
therefor, provided that at the Merger Date, DSF Fund shares are held by such
stockholder as a capital asset.
(h) That the Registration Statement shall have become effective under the
1933 Act, and no stop order suspending such effectiveness shall have been
instituted or, to the knowledge of RCS Fund or DSF Fund, threatened by the
Commission.
(i) That DSF Fund shall have received from the Commission and any relevant
state securities administrator such order or orders as may be necessary in
connection with the transactions contemplated by this Agreement, and that all
such orders shall be in full force and effect.
(j) That the Merger Shares shall have been accepted for listing by the New
York Stock Exchange.
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10. COVENANTS.
(a) DSF Fund shall use its reasonable best efforts to cause the conditions
to RCS Fund's obligations set forth in Section 8 of this Agreement to be
fulfilled.
(b) RCS Fund shall use its reasonable best efforts to cause the conditions
to DSF Fund's obligations set forth in Section 9 of this Agreement to be
fulfilled.
11. INDEMNIFICATION.
(a) DSF Fund will indemnify and hold harmless RCS Fund and each of its
directors and officers (for purposes of this subparagraph, the "RCS Indemnified
Parties") against any and all expenses, losses, claims, damages and liabilities
at any time imposed upon or reasonably incurred by any one or more of the RCS
Indemnified Parties (i) in connection with, arising out of, or resulting from
any untrue statement or alleged untrue statement of a material fact relating to
DSF Fund contained in the Registration Statement, the Prospectus, the Additional
Proposals or any amendment or supplement to any of the foregoing, (ii) arising
out of or based upon the omission or alleged omission to state in any of the
foregoing a material fact relating to DSF Fund required to be stated therein or
necessary to make the statements relating to DSF Fund therein not misleading,
including, without limitation, any amounts paid by any one or more of the RCS
Indemnified Parties in a reasonable compromise or settlement of any such claim,
action, suit or proceeding made with the consent of DSF Fund; provided, however,
that the indemnity in clauses (i) and (ii) of this paragraph (a) shall apply
only to statements or omissions described in the proviso of Section 2(g) of this
Agreement, or (iii) arising out of or based upon a breach of any representation,
warranty or covenant of DSF Fund contained in this Agreement. The RCS
Indemnified Parties will notify DSF Fund in writing within ten days after the
receipt by any one or more of the RCS Indemnified Parties of any notice of legal
process or any suit brought against or claim made against such RCS Indemnified
Party as to any matters covered by this Section 11(a) or within ten days of
having discovered any loss or expense arising out of or based upon a breach of a
representation, warranty or covenant of DSF Fund contained in this Agreement.
DSF Fund shall be entitled to participate at its own expense in the defense of
any claim, action, suit or proceeding covered by this Section 11(a), or, if it
so elects, to assume at its expense by counsel reasonably satisfactory to the
RCS Indemnified Parties the defense of any such claim, action, suit or
proceeding, and if DSF Fund elects to assume such defense, the RCS Indemnified
Parties shall be entitled to participate in the defense of any such claim,
action, suit or proceeding at their expense. DSF Fund's obligation under this
Section 11(a) to indemnify and hold harmless the RCS Indemnified Parties shall
constitute a guarantee of payment so that DSF Fund will pay in the first
instance any expenses, losses, claims, damages and liabilities required to be
paid by it under this Section 11(a) without the necessity of the RCS Indemnified
Parties' first paying the same.
(b) RCS Fund will indemnify and hold harmless DSF Fund and each of its
directors and officers (for purposes of this subparagraph, the "DSF Indemnified
Parties") against any and all expenses, losses, claims, damages and liabilities
at any time imposed upon or reasonably incurred by any one or more of the DSF
Indemnified Parties (i) in connection with, arising out of, or resulting from
any untrue statement or alleged untrue statement of a material fact relating to
RCS Fund contained in the Registration Statement, the Prospectus, the Additional
Proposals, or any amendment or supplement to any of the foregoing, (ii) arising
out of, or based upon, the omission or alleged omission to state in any of the
foregoing a material fact relating to RCS Fund required to be stated therein or
necessary to make the statements relating to RCS Fund therein not misleading,
including
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without limitation any amounts paid by any one or more of the DSF Indemnified
Parties in a reasonable compromise or settlement of any such claim, action, suit
or proceeding made with the consent of RCS Fund, or (iii) arising out of or
based upon a breach of any representation, warranty or covenant of RCS Fund
contained in this Agreement. The DSF Indemnified Parties will notify RCS Fund in
writing within ten days after the receipt by any one or more of the DSF
Indemnified Parties of any notice of legal process or any suit brought against
or claim made against such DSF Indemnified Party as to any matters covered by
this Section 11(b) or within ten days of having discovered any loss or expense
arising out of or based upon a breach of a representation, warranty or covenant
of RCS Fund contained in this Agreement. RCS Fund shall be entitled to
participate at its own expense in the defense of any claim, action, suit or
proceeding covered by this Section 11(b), or, if it so elects, to assume at its
expense by counsel reasonably satisfactory to the DSF Indemnified Parties the
defense of any such claim, action, suit or proceeding, and, if RCS Fund elects
to assume such defense, the DSF Indemnified Parties shall be entitled to
participate in the defense of any such claim, action, suit or proceeding at
their own expense. RCS Fund's obligation under this Section 11(b) to indemnify
and hold harmless the DSF Indemnified Parties shall constitute a guarantee of
payment so that RCS Fund will pay in the first instance any expenses, losses,
claims, damages and liabilities required to be paid by it under this Section
11(b) without the necessity of the DSF Indemnified Parties' first paying the
same.
(c) In the event that the Merger is not consummated by reason of the breach
by either DSF Fund or RCS Fund of any of its representations, warranties or
covenants contained in this Agreement, the exclusive remedy of the non-breaching
party, whether pursuant to this Section 11 or otherwise, shall be to be
reimbursed for all reasonable expenses incurred by it in connection with the
Tender Offer and the Merger, including, without limitation, the PwC Expenses and
reasonable legal fees incurred in connection with obtaining such reimbursement.
The limitations in this paragraph 11(c) shall not apply to the indemnities set
forth in Sections 11(a)(i), 11(a)(ii), 11(b)(i) or 11(b)(ii) of this Agreement.
12. NO BROKER, ETC. Each of DSF Fund and RCS Fund represents that there is no
person who has dealt with it who by reason of such dealings is entitled to any
broker's or finder's or other similar fee or commission arising out of the
Merger contemplated by this Agreement.
13. WAIVER AND TERMINATION. DSF Fund and RCS Fund may waive any condition
to their respective obligations under this Agreement. In addition, this
Agreement shall terminate:
(a) if agreed by mutual consent of the boards of directors of DSF Fund and
RCS Fund;
(b) if more than 75% of the shares of common stock of DSF Fund outstanding
as of the date of this Agreement are tendered in the Tender Offer;
(c) if the average daily closing price of a share of common stock of RCS
Fund during the five trading days immediately preceding and including the
expiration date of the Tender Offer represents a percentage discount from its
net asset value that is more than 15 percentage points greater than the
percentage discount from net asset value represented by the average daily
closing price of a share of common stock of DSF Fund during that same period
(for the purposes of this Section 13(c), a premium to net asset value for a
share of common stock, as a percentage of such share's net asset value, will be
treated as a negative discount from net asset value for such share of common
stock, as a percentage of its net asset value); or
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(d) if the Merger has not been consummated by December 31, 2001, unless the
boards of directors of DSF Fund and RCS Fund otherwise agree.
DSF Fund's obligations pursuant to Section 6 of this Agreement to reimburse RCS
Fund for expenses incurred in connection with the Merger shall survive any
termination of this Agreement.
14. COVENANTS, ETC. DEEMED MATERIAL. All covenants, agreements, representations
and warranties made under this Agreement and any certificates delivered pursuant
to this Agreement shall be deemed to have been material and relied upon by each
of the parties, notwithstanding any investigation made by them or on their
behalf.
15. SOLE AGREEMENT; AMENDMENTS. This Agreement supersedes all previous
correspondence and oral communications between the parties regarding the subject
matter hereof, constitutes the only understanding with respect to such subject
matter, may not be changed except by a letter of agreement signed by each party
hereto, and shall be construed in accordance with and governed by the laws of
the State of Maryland.
This Agreement may be executed in any number of counterparts, each of
which, when executed and delivered, shall be deemed to be an original.
[The remainder of this page has intentionally been left blank.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
RCM STRATEGIC GLOBAL GOVERNMENT
FUND, INC.
By:
/s/ Luke D. Knecht
------------------
PRESIDENT
DRESDNER RCM GLOBAL STRATEGIC
INCOME FUND, INC.
By:
/s/ Luke D. Knecht
------------------
PRESIDENT
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SCHEDULE 2(h)
DSF FUND MATERIAL AGREEMENTS
Investment Advisory Agreement with Dresdner RCM Global Investors LLC dated
November 1, 1999
Custody Agreement with Brown Brothers Harriman & Co. dated December 30, 1988
Foreign Custody Delegation Agreement with Brown Brothers Harriman & Co. dated
December 22, 1998
Amendment to Custody Agreement dated July 2, 2001
Transfer Agency Agreement with Equiserve dated June 1, 1996
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APPENDIX B
_____________, 2001
Dresdner RCM Global Investors LLC
Four Embarcadero Center
San Francisco, California 94111
Dear Sirs:
INVESTMENT ADVISORY AGREEMENT
On the authority of the Board of Directors of Dresdner RCM Global
Strategic Income Fund, Inc., I write to confirm the agreed terms of your
appointment as Investment Advisor to the Dresdner RCM Global Strategic Income
Fund, Inc. (the "Fund") and send you herewith copies of the following documents:
(a) the Fund's Articles of Incorporation
(b) the By-Laws of the Fund as in effect at the date hereof
(c) the Fund's most recent Registration Statement
(d) resolutions of the Board of Directors of the Fund selecting you as
Investment Advisor for the Fund and approving the terms of your appointment as
set out in this letter.
Any amendment to any of these instruments will be notified to you
forthwith.
Will you kindly confirm your agreement with these terms by having the
acknowledgement at the foot of the enclosed duplicate copy of this letter signed
by an appropriate officer of Dresdner RCM Global Investors LLC under authority
of its Board of Directors, and return to us together with a certified copy of
the Board resolution authorizing such signature.
TERMS OF APPOINTMENT
(A) Your duties will be to provide the Fund with investment research, advice and
supervision and to furnish continuously an investment program for the Fund in
accordance with the Fund's then current investment objectives, policies and
limitations, and the Investment Company Act of 1940 (the "1940 Act"). You will
also be required to advise at all times what securities shall be purchased for
the portfolio and what securities shall be sold from its portfolio and what
proportion of the Fund's assets shall be held uninvested, subject always to the
provisions of the Articles of Incorporation and By-laws as each may from time to
time be amended. You will also advise and assist the officers of the Fund in
taking such steps as may be necessary or appropriate for carrying out the
decisions of its Board of Directors and the appropriate committees of such
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Board regarding the foregoing matters and the general conduct of the investment
business of the Fund.
(B) In addition, you shall, subject to the general supervision of the Board of
Directors of the Fund, provide for the administration of all other affairs of
the Fund. In this regard, you shall act as an independent contractor of the
Fund:
(i) to the extent not provided by the Fund's custodian and financial agent and
the Fund's transfer agent and registrar, provide the Fund with personnel to
perform such executive, administrative and clerical services as are reasonably
necessary to provide effective administration of the Fund.
(ii) to the extent not arranged by the Fund's custodian and financial agent and
the Fund's transfer agent and registrar, arrange for (A) the preparation and
submission of proxy statements and quarterly and annual reports to stockholders
and (B) the periodic updating of the Fund's Registration Statement and the
preparation of reports filed with the Securities and Exchange Commission ("SEC")
and other regulatory authorities:
(iii) to the extent not provided by the Fund's custodian and financial agent and
the Fund's transfer agent and registrar, provide the Fund with adequate office
space and all necessary office equipment and services, including telephone
service, heat, utilities, stationery supplies and similar items. The Investment
Advisor shall bear all expenses of its employees and overhead incurred by them
in connection with their duties as officers and directors under this Agreement.
The Fund will bear its own expenses, including fees of the Fund's directors who
are not interested persons (as defined in the 1940 Act) of any party or any
sub-advisor to the Fund; out-of-pocket travel expenses for all directors and
other expenses incurred by the Fund in connection with meetings of directors;
interest expenses; tax and governmental fees; brokerage commissions and other
expenses incurred in acquiring or disposing of the Fund's portfolio securities;
expenses of preparing stock certificates; expenses of registering and qualifying
the Fund's shares for sale with the Securities and Exchange Commission and in
various states and foreign jurisdictions; auditing, accounting, legal and
insurance costs; custodian, dividend disbursing and transfer agent expenses;
expense of obtaining and maintaining stock exchange listings of the Fund's
shares; and the expenses of stockholder meetings.
(iv) to maintain and preserve all records which the Fund is required to maintain
and preserve by the 1940 Act and the rules and regulations thereunder, other
than records maintained and preserved by the Fund's custodian and financial
agent and the Fund's transfer agent and registrar, all such records maintained
and preserved, nevertheless being the property of the Fund.
(v) to prepare the Fund's U.S. federal, state and local income tax returns.
(vi) to respond to or refer to the Fund's officers or transfer agent stockholder
inquiries relating to the Fund.
(vii) to arrange, at the Fund's expense, for the determining and publishing of
the Fund's net asset value in accordance with the Fund's policy as adopted from
time to time by the Board of Directors.
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(C) You shall not be liable for any error of judgment or for any loss suffered
by the Fund in connection with the matters to which this Agreement relates,
except a loss resulting from a breach of fiduciary duty with respect to receipt
of compensation for services (in which case any award of damages shall be
limited to the period and the amount set forth in Section 36(b)(3) of the 1940
Act) or a loss resulting from willful misfeasance, bad faith, gross negligence
or reckless disregard by you of your obligations and duties under this
Agreement.
(D) In consideration of your services under paragraphs (A) and (B) above you
shall be entitled by way of remuneration to a fee at the annual rate of 0.70% of
the Fund's weekly net assets up to $100 million; and 0.65% of the Fund's weekly
net assets in excess of $100 million, computed based upon net asset value at the
end of each week and payable at the end of each calendar month.
(E) Payments of the fees referred to in paragraph (D) above shall be made within
14 days from the last day of the month. Such fees shall be deemed to cover and
include all your staff and office expenses and all other expenses of providing
services and fulfilling your duties hereunder.
(F) The Investment Advisor shall determine the securities to be purchased or
sold by the Fund and will place orders from or through and sell securities to or
through such persons, brokers or dealers as it shall deem appropriate
(including, in case of brokerage transactions, affiliated persons (as defined in
the 1940 Act) of the Investment Advisor or any subadviser to the Fund in
accordance with Section 17(e) of the 1940 Act and Rule 17e-1 thereunder). Where
the Investment Advisor places orders for the execution of portfolio transactions
for the Fund, the Investment Advisor may allocate such transactions to such
brokers and dealers for execution in such markets, at such prices and at such
commission rates as in the good faith judgment of the Investment Advisor will be
in the best interest of the Fund, taking into consideration in the selection of
such brokers and dealers not only the available prices and rates of brokerage
commissions, but also other relevant factors (such as, without limitation,
execution capabilities, research and other services provided by such brokers or
dealers which are expected to enhance the general portfolio management
capabilities of the Investment Advisor) without having to demonstrate that such
factors are of a direct benefit to the Fund.
(G) If the Investment Advisor resigns or is otherwise terminated from its
position with respect to the Fund, the Investment Advisor, at its option, may
require the Fund to change its name to reflect an entity that does not include
the use of the words "Dresdner" and/or "RCM" in its name as registered with SEC,
as specified in its charter or as marketed to the public. The party initiating
the change will bear the expense for any such name change. This provision shall
survive the termination of this Agreement and shall remain in full force and
effect for so long as the Fund is in existence.
(H) This appointment shall take effect as from ________, 2001 and shall continue
in effect annually if approved by the Board of Directors of the Fund or by vote
of "a majority of the outstanding voting securities" (as defined in the 1940
Act) of the Fund, and in either case by a majority of the directors of the Fund
who are not interested persons of either party to this Agreement. This contract
may be terminated by the Fund or by you at any time upon sixty days' written
notice on either side without the payment of any penalty, provided always that
either party may at any time terminate this Agreement by notice in writing to
the other party in the
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event of (i) the other party entering into liquidation or (ii) a receiver being
appointed over the whole or any part of its undertaking or assets or (iii) its
shares or its undertaking being nationalized or expropriated by a government
authority or (iv) its committing any breach of its obligation under this
Agreement and failing within thirty days of receipt of notice requiring it do
so, to make good such breach.
(I) Nothing in this Agreement shall limit or restrict the right of any director,
officer or employee of the Investment Advisor who may also be a director,
officer or employee of the Fund to engage in any other business or to devote his
time and attention in part to the management or other aspects of any business,
whether of a similar or a dissimilar nature, nor limit or restrict the right of
the Investment Advisor to engage in any other business or to render services of
any kind to any other corporation, firm, individual or association.
(J) During the term of the Agreement, the Fund agrees to furnish the Investment
Advisor at its principal office, prior to use thereof, any and all prospectuses,
proxy statements, reports to stockholders, sales literature, or other material
prepared for distribution to stockholders of the Fund or the public that refer
in any way to the Investment Advisor and not to use such material if the
Investment Advisor reasonably objects in writing within five business days (or
such other time as may be mutually agreed) after receipt thereof. In the event
of termination of this Agreement, the Fund will continue to furnish to the
Investment Advisor copies of any of the above mentioned materials that refer in
any way to the Investment Advisor. The Fund shall furnish or otherwise make
available to the Investment Advisor such other information relating to the
business affairs of the Fund as the Investment Advisor at any time, or from time
to time, reasonably requests in order to discharge its obligations hereunder.
(K) Any notice or other communication required to be given pursuant to this
Agreement shall be deemed duly given if delivered or mailed by registered mail,
postage prepaid, (1) to the Investment Advisor at Four Embarcadero Center, San
Francisco, California, 94111, Attention: Legal Services Department; or (2) to
the Fund at Four Embarcadero Center, San Francisco, California, 94111,
Attention: Secretary.
(L) This appointment shall be automatically terminated in the event of its
assignment. The term "assignment" shall have the meaning specified in the 1940
Act as now in effect or as hereafter amended.
(M) The Investment Advisor may enter into one or more contracts (each a
"Subadvisory Contract" or "Subadministration Contract") with a subadviser or
subadministrator in which the Investment Advisor delegates to such subadviser or
subadministrator any or all duties specified in this Agreement, provided that
each Subadvisory Contract or Subadministration Contract imposes on the
subadviser or subadministrator bound thereby all applicable duties and
conditions to which the Investment Advisor is subject under this Agreement, and
further provided that each Subadvisory Contract meets all requirements of the
1940 Act and any rules, regulations, or orders of the Securities and Exchange
Commission thereunder.
(N) This Agreement shall be governed by and construed in accordance with the
laws of the State of New York, without giving effect to the conflict of laws
provisions thereof.
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
Yours faithfully,
DRESDNER RCM GLOBAL STRATEGIC
INCOME FUND, INC.
By:
We hereby confirm our agreement with the terms set out in the letter,
of which the above is a duplicate, and accept the same as a binding contract as
at the date thereof.
For
DRESDNER RCM GLOBAL INVESTORS LLC
By:
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APPENDIX C
RCM STRATEGIC GLOBAL GOVERNMENT FUND, INC.
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT, made as of this ____ day of ______ , 2001 between RCM
Strategic Global Government Fund, Inc., a Maryland corporation (the "Fund"), and
RCM Capital Management, L.L.C., a Delaware limited liability company (the
"Manager").
W I T N E S S E T H
WHEREAS, the Fund is a non-diversified closed-end management investment
company registered under the Investment Company Act of 1940, as amended, and the
rules and regulations thereunder (the "1940 Act"); and
WHEREAS, the Fund has been organized for the purpose of investing its
funds and desires to avail itself of the experience, sources of information,
advice, assistance and facilities available to the Manager and to have the
Manager perform for it various investment management services; and the Manager
is willing to furnish the investment management services sought by the Fund on
the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed as follows:
1. The Fund hereby appoints the Manager to act as Investment Manager to
the Fund on the terms set forth in this Agreement. The Manager accepts such
appointment and agrees to render the services herein described, for the
compensation herein provided.
2. Subject to the supervision of the Board of Directors of the Fund
(the "Board") and to the express provisions and limitations set forth in the
Fund's Articles of Incorporation, By-Laws, and Form N-2 Registration Statement
under the 1940 Act and the 1933 Act (the "Registration Statement"), each as it
may be amended from time to time, the Manager shall have full discretionary
authority to manage the investment and reinvestment of the Fund's assets and to
provide investment research advice and supervision of the Fund's portfolio in
accordance with the Fund's investment objectives, policies and restrictions as
stated in the Fund's Registration Statement, as such Registration Statement may
be amended from time to time. The services to be provided under this paragraph 2
shall be subject to the following understandings:
(a) The Manager shall provide supervision of the Fund's investments and shall
determine from time to time the investments or securities that will be
purchased, retained, sold or loaned by the Fund, and the portion of the assets
that will be invested in securities or otherwise. Subject to the limitations in
this Section 2, the Manager is empowered hereby, through any of its principals
or employees, to take any of the following actions for the benefit of the Fund:
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(i) to invest and reinvest in stocks, bonds, notes, trade acceptances,
commercial paper, structured instruments, and other obligations of every
description issued or incurred by governmental or quasi-governmental bodies or
their agencies, authorities or instrumentalities, or by corporations, trusts,
associations, partnerships, or other firms or entities;
(ii) to invest and reinvest in loans and deposits at interest on call
or on time, whether or not secured by collateral;
(iii) to purchase and sell put and call options, financial futures and
put and call options on such financial futures, and to enter into transactions
with respect to swaps, caps, floors, collars, and other similar instruments;
(iv) to purchase and sell foreign currency and forward contracts on
such foreign currency;
(v) to lend the Fund's portfolio securities to brokers, dealers, other
financial institutions, or other parties, and to engage in repurchase and
reverse repurchase transactions with such entities;
(vi) to buy, sell, or exercise rights and warrants to subscribe for
stock or other securities;
(vii) to execute agreements with broker-dealers, banks futures
commission merchants, and other financial institutions on behalf of the Fund for
the purpose of entering into any of the foregoing transactions;
(viii) to purchase, sell, and otherwise enter into transactions with
respect to any instrument not described above that may be considered a
"derivative" instrument;
(ix) to engage in transactions with respect to any other instruments,
or to take any other actions with respect to the Fund's investments, that the
Fund is authorized to invest in or to take pursuant to the Registration
Statement; and
(x) to take such other actions, or to direct the Custodian to take such
other actions, as may be necessary or desirable to carry out the purpose and
intent of this subparagraph (a) of this paragraph (2).
In determining the investments or securities to be purchased or sold by
the Fund, the Manager shall place orders with respect to such instruments either
directly with the issuer or in such markets and through such underwriters,
dealers, brokers, or futures commission merchants (collectively, "brokers") as
in the Manager's best judgment offer the most favorable price and market for the
execution of each transaction; provided, however, that, to the extent permitted
under the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder (the "Exchange Act") and the 1940 Act, the Manager may
cause the Fund to place orders for transactions with brokers that furnish
brokerage and research services, as defined in the 1934 Act, to the Manager or
any affiliated person of the Manager, subject to such policies as the Board may
adopt from time to time with respect to the extent and continuation of this
practice. The Fund understands and agrees that the Manager may effect
transactions in portfolio securities
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through brokers who may charge an amount in excess of the amount of commission
another broker would have charged, provided that the Manager determines in good
faith that such amount of commission is reasonable in relation to the value of
the brokerage and research services provided by such broker, viewed in terms of
either the specific transaction or the Manager's overall responsibilities to the
Fund and other clients as to which the Manager or any affiliated person of the
Manager exercises discretionary investment authority. Receipt by the Manager or
any affiliated person of the Manager of any such brokerage research services
shall not give rise to any requirement for abatement or reduction of the
advisory fee payable by the Fund to the Manager under this Agreement. It is
understood that the services provided by such brokerage firms may be useful to
the Manager or its affiliated persons in connection with their services to other
clients. The Fund agrees that any entity or person associated with the Manager
or any affiliated person of the Manager which is a member of a national
securities exchange is authorized to effect any transaction on such exchange for
the account of the Fund which is permitted by Section 11(a) of the 1934 Act, and
Rule 11a2-2(T) thereunder, and the Fund hereby consents to the retention of
compensation for such transactions in accordance with Rule 11a2-2(T)(2)(iv).
(b) The Manager agrees to furnish suitable office space for the Fund.
(c) The Manager shall use its best judgment in the performance of its duties
under this Agreement.
(d) The Manager undertakes to perform its duties and obligations under this
Agreement in conformity with the Registration Statement, with the requirements
of the 1940 Act and all other applicable Federal and state laws and regulations
and with the instructions and directions of the Fund's Board of Directors, all
as may be amended or modified from time to time.
(e) The Manager shall maintain books and records with respect to the Fund's
portfolio transactions and the Manager shall render to the Fund's Board such
periodic and special reports as the Board of Directors may reasonably request
from time to time. The Manager agrees that all records that it maintains for the
Fund are the property of the Fund and it will surrender promptly to the Fund any
of such records upon the Fund's request.
(f) The Fund understands and agrees:
(i) that the Manager performs investment management services for various
clients and that the Manager may take action with respect to any of its other
clients which may differ from action taken or from the timing or nature of
action taken with respect to the Fund, so long as it is the Manager's policy, to
the extent reasonably practical, to allocate investment opportunities to the
Fund over time on a fair and equitable basis relative to other clients;
(ii) that the Manager shall have no obligation to purchase or sell for the
Fund any security that the Manager, or its principals or employees, may purchase
or sell for their own accounts or for the account of any other client, if, in
the opinion of the Manager, such transaction or investment appears unsuitable,
impractical or undesirable for the Fund; and
(iii) that, to the extent permitted by applicable laws and regulations, on
occasions when the Manager deems the purchase or sale of a security or other
instrument to be in the best
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interests of the Fund as well as of the other clients of the Manager, the
Manager may aggregate the securities to be so sold or purchased when the Manager
believes that to do so would be in the best interests of the Fund. In such
event, allocation of the securities or other instruments so purchased or sold,
as well as the expenses incurred in that transaction, shall be made by the
Manager in the manner the Manager considers to be the most equitable and
consistent with its fiduciary obligations to the Fund and such other clients.
3. The Manager will bear all of expenses related to salaries of its
employees and to the Manager's overhead in connection with its duties under this
Agreement. The Manager also will pay all directors' fees and salaries of the
Fund's directors and officers who are affiliated persons (as such term is
defined in the 1940 Act) of the Manager.
Except for the expenses specifically assumed by the Manager, the Fund will
pay all of its expenses, including, without limitation, fees of the directors
not affiliated with the Manager and board meeting expenses; fees of the Manager;
fees of the Fund's Administrator; interest charges; taxes; charges and expenses
of the Fund's legal counsel and independent accountants, and of the transfer
agent, registrar and dividend reinvestment and disbursing agent of the Fund;
expenses of repurchasing shares of the Fund; expenses of printing and mailing
share certificates, stockholder reports, notices, proxy statements and reports
to governmental offices; brokerage and other expenses connected with the
execution, recording and settlement of portfolio security transactions; expenses
connected with negotiating, effecting purchases or sales or registering
privately issued portfolio securities; fees and expenses of the Fund's custodian
and sub-custodians for all services to the Fund, including safekeeping of funds
and securities and maintaining required books and accounts; expenses of
calculating and publishing the net asset value of the Fund's shares; expenses of
membership in investment company associations; premiums and other costs
associated with the acquisition of a mutual fund directors and officers errors
and omissions liability insurance policy; expenses of fidelity bonding and other
insurance premiums; expenses of stockholder's meetings; SEC and state blue sky
registration fees; New York Stock Exchange listing fees; any fees payable by the
Fund to the National Association of Securities Dealers, Inc. in connection with
this offering and its other business and operating expenses.
4. For the services provided and the expenses assumed pursuant to this
Agreement, the Fund will pay to the Manager a monthly fee in arrears equal to
0.95% per annum of the Fund's average daily net assets during the month. The
Fund authorizes the Manager to charge the Fund for the full amount of fees as
they become due and payable pursuant to this paragraph 4; provided, however,
that copies of the fee statement relating to said payment shall be sent to the
Custodian and to the Fund.
In the event that expenses of the Fund for any fiscal year should exceed the
expense limitation on investment company expenses imposed by any statute or
regulatory authority of any jurisdiction in which shares of the Fund are
qualified for offer and sale, the compensation due the Manager for such fiscal
year shall be reduced by the amount of such excess by a reduction or refund
thereof. In the event that the expenses of the Fund exceed any expense
limitation which the Manager may, by written notice to the Fund, voluntarily
declare to be effective with respect to the Fund, subject to such terms and
conditions as the Manager may
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prescribe in such notice, the compensation due the Manager shall be reduced,
and, if necessary, the Manager shall bear the Fund's expenses to the extent
required by such expense limitation.
If the Manager shall serve for less than the whole of a month, the foregoing
compensation shall be prorated.
5. The Manager shall authorize and permit any of its directors, officers and
employees who may be elected as directors or officers of the Fund to serve in
the capacities in which they are elected.
6. The Manager shall not be liable to the Fund or any of its stockholders
for any error of judgment, mistake of law, or any loss suffered by the Fund or
any of its stockholders in connection with any act or omission in the
performance of its obligations to the Fund or to which this Agreement relates,
except a loss resulting from willful misfeasance, bad faith or gross negligence
on its part in the performance of its duties or from reckless disregard by it or
its obligations and duties under this Agreement.
7. This Agreement shall continue in effect for a period of two years from
its effective date, and if not sooner terminated, will continue in effect for
successive periods of 12 months thereafter, provided that each continuance is
specifically approved at least annually in conformity with the requirements of
the 1940 Act. This Agreement may be terminated as a whole at any time by the
Fund, without the payment of any penalty, upon the vote of a majority of the
Fund's Board of Directors or the vote of a majority of the outstanding voting
securities (as defined in the 1940 Act or the rules and regulations thereunder)
of the Fund, or by the Manager, on 60 days' written notice by either party to
the other. This Agreement shall terminate automatically in the event of its
assignment (as such term is defined in the 1940 Act and the rules thereunder).
8. Nothing in this Agreement shall limit or restrict the right of any of the
Manager's principals, officers or employees who may also be a director, officer
or employee of the Fund to engage in any other business or to devote his time
and attention in part to management or other aspects of any business, whether of
a similar or a dissimilar nature, nor limit or restrict the Manager's right to
engage in any other business or to render services of any kind to any other
corporation, investment company, firm, individual or association. The investment
management services provided by the Manager hereunder are not to be deemed
exclusive, and the Manager shall be free to render similar services to others.
9. Any notice or other communication required to be given pursuant to this
Agreement shall be deemed duly given if delivered or mailed by registered mail,
postage prepaid, (i) to the Manager at Four Embarcadero Center, Suite 3000, San
Francisco, CA 94111 or (ii) to the Fund at Four Embarcadero Center, Suite 2800,
San Francisco, CA 94111.
10. This Agreement shall be governed by and construed in accordance with the
laws of the State of California.
11. Under a License Agreement dated as of the date hereof, the Fund was
granted a royalty-free, non-exclusive license to use the name "RCM" as part of
its name only in connection with the operation of an investment company. It is
further provided in the License Agreement
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that the term "RCM" may be used or licensed in connection with other
investment companies, subject to the requirements of the 1940 Act, or any other
business enterprise during the term of such License Agreement or thereafter. The
License Agreement is terminable on sixty days' notice to the Fund or as soon as
practicable thereafter. Upon such termination, the Fund is required to change
its name to one which does not include the term "RCM."
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
RCM STRATEGIC GLOBAL GOVERNMENT FUND, INC.
By
------------------------------
DRESDNER RCM GLOBAL INVESTORS LLC
By
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APPENDIX D
DRESDNER RCM GLOBAL STRATEGIC INCOME FUND, INC.
AUDIT COMMITTEE CHARTER
I. COMPOSITION OF THE AUDIT COMMITTEE: The Audit Committee shall be comprised of
at least three directors, each of whom shall have no relationship to the Company
or its investment adviser, administrator, or custodian that may interfere with
the exercise of his or her independence from management and the Company and, as
to his or her relationship to the Company, shall otherwise satisfy the
applicable membership requirements under the rules of the New York Stock
Exchange, Inc., as such requirements are interpreted by the Board of Directors
in its business judgment.
II. PURPOSES OF THE AUDIT COMMITTEE: The purposes of the Audit Committee are to
assist the Board of Directors:
1. in its oversight of the Company's accounting and financial reporting
principles and policies and related controls and procedures maintained by or on
behalf of the Company;
2. in its oversight of the Company's financial statements and the independent
audit thereof;
3. in selecting (or nominating the independent accountants to be proposed for
shareholder approval in any proxy statement), evaluating and, where deemed
appropriate, replacing the independent accountants; and
4. in evaluating the independence of the independent accountants.
The function of the Audit Committee is oversight. The management of the Company,
including contractually obligated service providers, are responsible for the
preparation, presentation and integrity of the Company's financial statements.
Management and applicable service providers are responsible for maintaining
appropriate accounting and financial reporting principles and policies and
related controls and procedures designed to assure compliance with accounting
standards and applicable laws and regulations. The independent accountants are
responsible for planning and carrying out a proper audit. In fulfilling their
responsibilities hereunder, it is recognized that the members of the Audit
Committee are not full-time employees of the Company and are not, nor do they
represent themselves to be, accountants or auditors by profession or experts in
the fields of accounting or auditing. As such, in fulfilling their oversight
duties under this Charter it is neither the duty nor the responsibility of the
Audit Committee or its members to conduct "field work" or other types of
auditing or accounting reviews or procedures, and each member of the Audit
Committee shall be entitled to rely on (i) the integrity of those persons and
organizations within and outside the Company that provide information to the
Audit Committee and (ii) the accuracy of the financial and other information
provided to the Audit Committee by such persons or organizations absent actual
knowledge to the contrary (which shall be promptly reported to the Board of
Directors).
D-1
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The independent accountants for the Company are ultimately accountable to the
Board of Directors (and the Audit Committee). The Board of Directors, with the
assistance of the Audit Committee, has the ultimate authority and responsibility
to select, evaluate and, where appropriate, replace the independent accountants
(or to nominate the independent accountants to be proposed for shareholder
approval).
The independent accountants shall submit to the Company annually a formal
written statement delineating all relationships between the independent
accountants and the Company ("Statement as to Independence"), addressing at
least the matters set forth in Independence Standards Board Standard No. 1. The
Statement as to Independence shall also identify any audit, tax or consulting
services to the Company's investment adviser, administrator, custodian, or other
service providers, and to other investment companies advised by the Company's
investment adviser or administered by the Company's administrator, as the Audit
Committee may specify.
III. MEETINGS OF THE AUDIT COMMITTEE: The Audit Committee shall meet as often as
may be required to discuss the matters set forth in Article IV. In addition, the
Audit Committee should meet separately at least annually with management and the
independent accountants, respectively, to discuss any matters that the Audit
Committee or any of these persons or firms believe should be discussed privately
with them. The Audit Committee may request any officer or employee of the
Company or any service provider, outside counsel to the Company or to the
independent directors or the Company's independent accountants to attend a
meeting of the Audit Committee or to meet with any members of, or consultants
to, the Audit Committee. Members of the Audit Committee may participate in a
meeting of the Audit Committee by means of conference call or similar
communications equipment by means of which all persons participating in the
meeting can hear each other.
IV. DUTIES AND POWERS OF THE AUDIT COMMITTEE: To carry out its purposes, the
Audit Committee shall have the following duties and powers:
1. with respect to the independent accountants,
(i) to provide advice to the Board of Directors in selecting, evaluating or
replacing independent accountants;
(ii) to review the fees charged the Company by the independent accountants for
performance of audit and non-audit services;
(iii) to ensure that the independent accountants prepare and deliver annually a
Statement as to Independence (it being understood that the independent
accountants are responsible for the accuracy and completeness of this
Statement), to discuss with the independent accountants any relationships or
services disclosed in this Statement that may impact the objectivity and
independence of the Company's independent accountants and to recommend that the
Board of Directors take appropriate action in response to this Statement to
satisfy itself of the independent accountants' independence; and
D-2
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(iv) to instruct the independent accountants that the independent accountants
are ultimately accountable to the Board of Directors and Audit Committee;
2. with respect to financial reporting principles and policies and related
controls and procedures,
(i) to advise management and the independent accountants that they are expected
to provide or cause to be provided to the Audit Committee a timely analysis of
significant financial reporting issues and practices;
(ii) to consider any reports or communications (and management's responses
thereto) submitted to the Audit Committee by the independent accountants
required by or referred to in Statement of Auditing Standards No. 61 (as
codified by AU Section 380), as it may be modified or supplemented, including
reports and communications related to:
- - deficiencies noted in the audit in the design or operation of related
controls;
- - consideration of fraud in a financial statement audit;
- - detection of illegal acts;
- - the independent accountants' responsibility under generally accepted auditing
standards;
- - significant accounting policies;
- - management judgments and accounting estimates;
- - adjustments recorded and unadjusted differences arising from the audit;
- - the responsibility of the independent accountants for other information in
documents containing audited financial statements;
- - disagreements with management;
- - consultation by management with other accountants;
- - major issues discussed with management prior to retention of the independent
accountants;
- - difficulties encountered with management in performing the audit; and
- - the independent accountants' judgments about the quality of the Company's
accounting principles;
(iii) to meet with management and/or the independent accountants:
D-3
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- - to discuss the scope of the annual audit or any audit or review of interim
financial statements;
- - to discuss the audited financial statements;
- - to discuss any significant matters arising from any audit or report or
communication referred to in item 2(ii) above, whether raised by management or
the independent accountants, relating to the Company's financial statements;
- - to review the opinion rendered, or the form of opinion the independent
accountants propose to render, to the Board of Directors and shareholders;
- - to discuss allocations of expenses between the Company and other entities;
- - to discuss the Company's compliance with Subchapter M of the Internal Revenue
Code of 1986, as amended;
- - to discuss with management and the independent accountants their respective
procedures to assess the representativeness of securities prices provided by
external pricing services;
- - to discuss with independent accountants their conclusions as to the
reasonableness of procedures employed to determine the fair value of securities
for which market quotations are not readily available, management's adherence to
such procedures and the adequacy of supporting documentation;
- - to discuss the report of the independent accountants on the Company's system
of internal accounting controls required to be filed with the Company's Form
N-SAR;
- - to discuss significant changes to the Company's accounting principles,
policies, controls, procedures and practices proposed or contemplated by
management;
- - to discuss significant changes to auditing principles and to auditing
policies, controls, procedures and practices contemplated by the independent
accountants; and
- - to inquire about significant risks and exposures, if any, and the steps taken
to monitor and minimize such risks; and
(iv) to discuss with the Company's legal advisors any significant legal matters
that may have a material effect on the financial statements; and
3. with respect to reporting, recommendations and other matters,
(i) to provide advice to the Board of Directors in selecting the principal
accounting officer of the Company;
D-4
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(ii) to cause to be prepared any report, including any recommendation of the
Audit Committee, required by the rules of the Securities and Exchange Commission
to be included in the Company's annual proxy statement;
(iii) to review this Charter at least annually and recommend any changes to the
full Board of Directors; and
(iv) to report its activities to the full Board of Directors on a regular basis
and to make such recommendations with respect to the above and other matters as
the Audit Committee may deem necessary or appropriate.
V. RESOURCES AND AUTHORITY OF THE AUDIT COMMITTEE: The Audit Committee shall
have the resources and authority appropriate to discharge its responsibilities,
including the authority to engage independent accountants for special audits,
reviews and other procedures and to retain special counsel and other experts or
consultants.
D-5
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APPENDIX E
DRESDNER RCM GLOBAL STRATEGIC INCOME FUND, INC.
("DSF FUND")
AUDIT COMMITTEE REPORT
The role of the Audit Committee is to assist the DSF Fund Board of Directors in
its oversight of DSF Fund's accounting and financial reporting process and the
selection of DSF Fund's independent accountants. The Committee operates pursuant
to a charter that was adopted by the Board on June 8, 2000, a copy of which is
attached to this Prospectus/Proxy Statement as Appendix D. As set forth in the
charter, management of DSF Fund is responsible for the preparation, presentation
and integrity of DSF Fund's financial statements, and for the procedures
designed to assure compliance with accounting standards and applicable laws and
regulations. The independent accountants are responsible for auditing DSF Fund's
financial statements and expressing an opinion as to their conformity with
generally accepted accounting principles.
In performing its oversight function, the Committee has considered and discussed
with management and the independent accountants DSF Fund's audited financial
statements for its fiscal year ended October 31, 2000. The Committee has
discussed with the independent accountants the matters required to be discussed
by Statement on Auditing Standards No. 61, COMMUNICATION WITH AUDIT COMMITTEES,
as modified or supplemented. The Committee has also received the written
disclosures from the independent accountants required by Independence Standards
Board Standard No. 1, INDEPENDENCE DISCUSSIONS WITH AUDIT COMMITTEES, as
currently in effect, delineating relationships between the independent
accountants and DSF Fund, and discussed the impact that any such relationships
may have on the objectivity and independence of the independent accountants.
The members of the Audit Committee are not professionally engaged in the
practice of auditing or accounting and are not experts in the fields of
accounting or auditing, including the issue of auditor independence. Members of
the Committee rely without independent verification on the information provided
to them and on the representations made by management and the independent
accountants. Accordingly, the Audit Committee's oversight does not provide an
independent basis to determine that management has maintained appropriate
accounting and financial reporting principles or appropriate internal controls
and procedures designed to assure compliance with accounting standards and
applicable laws and regulations. Furthermore, the Audit Committee's
considerations and discussions referred to above do not assure that the audit of
DSF Fund's financial statements has been carried out in accordance with
generally accepted auditing standards, that the financial statements are
presented in accordance with generally accepted accounting principles or that
DSF Fund's independent accountants are in fact "independent."
Based upon the reports and discussions described in this report, and subject to
the limitations on the role and responsibilities of the Committee referred to
above and in the charter, the Committee recommended to the Board that the
audited financial statements be included in DSF Fund's Annual Report for its
fiscal year ended October 31, 2000.
E-1
<Page>
SUBMITTED BY THE AUDIT COMMITTEE OF DSF
FUND'S BOARD OF DIRECTORS
JAMES J. FOLEY
THEODORE J. COBURN
PHILLIP GOLDSTEIN
JULY 20, 2001.
E-2
<Page>
APPENDIX F
RCM STRATEGIC GLOBAL GOVERNMENT FUND, INC.
AUDIT OVERSIGHT COMMITTEE CHARTER
1. The Audit Oversight Committee shall be composed entirely of directors who are
not "interested persons" of the Fund and who are "independent directors," as
defined in the New York Stock Exchange's Listed Company Manual.
2. The purposes of the Audit Committee are:
(a) to oversee the Fund's accounting and financial reporting policies and
practices, its internal controls and, as appropriate, the internal controls of
certain service providers;
(b) to oversee the quality and objectivity of the Fund's financial statements
and the independent audit thereof; and
(c) to act as a liaison between the Fund's independent auditors and the full
Board of Directors.
The function of the Audit Oversight Committee is oversight; it is management's
responsibility to maintain appropriate systems for accounting and internal
control, and the auditor's responsibility to plan and carry out a proper audit.
3. To carry out its purposes, the Audit Oversight Committee shall have the
following duties and powers:
(a) to recommend the selection, retention or termination of auditors and, in
connection therewith, to evaluate the independence of the auditors, including
whether the auditors provide any consulting services to the manager, and to
receive annually the auditors' specific written representations as to their
independence.
(b) to meet with the Fund's independent auditors, including private meetings, as
necessary (i) to review the arrangements for and scope of the annual audit and
any special audits; (ii) to discuss any matters of concern relating to the
Fund's financial statements, including any adjustments to such statements
recommended by the auditors, or other results of said audit(s); (iii) to
consider the auditors' comments with respect to the Fund's financial policies,
procedures and internal accounting controls and management's responses thereto;
and (iv) to review the form of opinion the auditors propose to render to the
Board and shareholders;
(c) to consider the effect upon the Fund of any changes in accounting principles
or practices proposed by the management or the auditors;
(d) to review the fees charged by the auditors for audit and non-audit services;
F-1
<Page>
(e) to investigate improprieties or suspected improprieties in Fund operations;
and
(f) to report its activities to the full Board on a regular basis and to make
such recommendations with respect to the above and other matters as the
Committee may deem necessary or appropriate.
4. The Committee shall meet on a regular basis and is empowered to hold special
meetings as circumstances require.
5. The Committee shall meet as appropriate with the Treasurer of the Fund and
with internal auditors, if any, for Dresdner RCM Global Investors LLC.
6. The Committee shall have the resources and authority appropriate to discharge
its responsibilities, including the authority to retain special counsel and
other experts or consultants at the expense of the Fund.
7. The Committee shall review this Charter periodically and recommend any
changes to the full Board of Directors.
F-2
<Page>
TO LEARN MORE
For more information about the Funds, the following documents are available free
upon request.
STOCKHOLDER REPORTS
Each Fund's annual and semi-annual reports to stockholders contain detailed
information on each Fund's investments. Each Fund's annual report includes a
discussion of the market conditions and investment strategies that significantly
affected the Fund's performance during its fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI provides more detailed information about the Funds, including their
operations and investment policies. It is incorporated by reference and is
legally considered as part of this Prospectus/Proxy Statement.
HOW TO OBTAIN COPIES
You can obtain copies of these documents by contacting either Fund or the SEC.
All materials from the Funds are free; the SEC charges a duplicating fee. You
can also review these materials in person at the SEC's Public Reference Room or
by computer using the SEC's EDGAR database at www.sec.gov.
SEC FILE NUMBERS
RCS Fund: 811-08216
DSF Fund: 811-04800
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-0102
800-SEC-0330 (Public Reference Section)
(202) 942-8090
www.sec.gov publicinfo@sec.gov
DRESDNER RCM GLOBAL STRATEGIC INCOME FUND, INC.
RCM STRATEGIC GLOBAL GOVERNMENT FUND, INC.
You can obtain free copies of the reports and the SAI, or request other
information and discuss your questions about the Funds, by contacting Dresdner
RCM Global Strategic Income Fund, Inc., Four Embarcadero Center, San Francisco,
CA 94111, (800) 237 4218 or RCM Strategic Global Government Fund, Inc., Four
Embarcadero Center, San Francisco, California 94111, (800) 237-4218. Copies of
RCS Fund's annual report may also be obtained without charge from Boston
EquiServe by calling (800) 426-5523 or by writing to P.O. Box 8200, Boston,
Massachusetts 02266-8200.
<Page>
DRESDNER RCM GLOBAL STRATEGIC INCOME FUND, INC.
Four Embarcadero Center
San Francisco, California 94111
(800) 237-4218
The undersigned hereby appoints Robert J. Goldstein and Karin Brotman, and
each of them, as proxies of the undersigned (the "Proxies"), each with full
power to appoint his substitute, and hereby authorizes each of them to
represent and vote all the shares of common stock of Dresdner RCM Global
Strategic Income Fund, Inc. ("DSF Fund") held of record by the undersigned as
of July 16, 2001 at the Annual Meeting of Stockholders to be held at the
offices of Dresdner RCM Global Investors LLC located at Four Embarcadero
Center, San Francisco, California 94111, on October 12, 2001 at 10:00 a.m.
(Pacific Time), and at any and all of the adjournment(s) or postponement(s)
thereof.
THIS PROXY IS BEING SOLICITED BY THE BOARD OF DIRECTORS OF DSF FUND. WHEN
PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE
UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED
FOR DSF FUND PROPOSALS 1, 2 AND 3. IN THEIR DISCRETION, THE PROXIES ARE EACH
AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
MEETING AND ANY ADJOURNMENTS OR POSTPONEMENTS OF THE MEETING. A STOCKHOLDER
WISHING TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATION NEED
ONLY SIGN AND DATE THIS PROXY CARD AND RETURN IT IN THE ENVELOPE PROVIDED.
The undersigned hereby acknowledge(s) receipt of a copy of the accompanying
Notice of the Annual Meeting of Stockholders and the Prospectus/Proxy Statement
with respect thereto and hereby revoke(s) any proxy or proxies heretofore given.
This proxy may be revoked at any time before it is exercised.
PLEASE VOTE, DATE AND SIGN ON REVERSE AND PROMPTLY RETURN THIS
PROXY CARD IN THE ENCLOSED ENVELOPE.
Note: Please sign exactly as the name(s) appear(s) on this proxy card. When
shares are held by joint tenants, both should sign. When signing as executor,
administrator, trustee or guardian, please give the appropriate and complete
title. When signing as an officer of a corporation, please indicate the
corporation name and the office held by the signing officer. When signing on
behalf of a partnership, please sign the partnership name and the name of the
person signing.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- ----------------------------------- -----------------------------------
- ----------------------------------- -----------------------------------
- ----------------------------------- -----------------------------------
<Page>
|X| PLEASE MARK VOTES AS IN THIS EXAMPLE
Mark the box at right if an address change or comment has been noted on the
reverse side of this card. |_|
THE BOARD OF DIRECTORS OF DSF FUND RECOMMENDS THAT YOU VOTE "FOR" PROPOSALS 1, 2
AND 3.
1. To approve the Merger and related transactions contemplated by the Agreement
and Plan of Merger and Contingent Liquidation, pursuant to which DSF Fund would
be merged with and into RCM Strategic Global Government Fund, Inc. ("RCS Fund")
and all outstanding shares of common stock of DSF Fund would automatically be
converted into shares of common stock of RCS Fund, but if certain contingencies
occur, the Merger would be abandoned and DSF Fund would be liquidated and
dissolved.
FOR AGAINST ABSTAIN
|_| |_| |_|
2. To approve a new investment advisory agreement between DSF Fund and Dresdner
RCM Global Investors LLC.
FOR AGAINST ABSTAIN
|_| |_| |_|
3. To elect as Directors of DSF Fund the nominees listed below:
JAMES J. FOLEY
JEFFREY S. RUDSTEN
FOR AGAINST ABSTAIN
|_| |_| |_|
Please be sure to sign and date this proxy card:
- --------------------------------------------------------------------------------
- ---------------------------- ------------------------------ ------------------
Stockholder sign here Co-owner sign here Date
- --------------------------------------------------------------------------------
<Page>
RCM STRATEGIC GLOBAL GOVERNMENT FUND, INC.
Four Embarcadero Center
San Francisco, California 94111
(800) 237-4218
The undersigned hereby appoints Robert J. Goldstein and Steven L. Wong, and
each of them, as proxies of the undersigned (the "Proxies"), each with full
power to appoint his substitute, and hereby authorizes each of them to
represent and vote all the shares of common stock of RCM Strategic Global
Government Fund, Inc. ("RCS Fund") held of record by the undersigned as of
July 16, 2001 at the Annual Meeting of Stockholders to be held at the offices
of Dresdner RCM Global Investors LLC located at Four Embarcadero Center, San
Francisco, California 94111, on October 12, 2001 at 10:00 a.m. (Pacific
Time), and at any and all of the adjournment(s) or postponement(s) thereof.
THIS PROXY IS BEING SOLICITED BY THE BOARD OF DIRECTORS OF RCS FUND. WHEN
PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE
UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED
FOR RCS FUND PROPOSALS 1, 2 AND 3. IN THEIR DISCRETION, THE PROXIES ARE EACH
AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
MEETING AND ANY ADJOURNMENTS OR POSTPONEMENTS OF THE MEETING. A STOCKHOLDER
WISHING TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATION NEED
ONLY SIGN AND DATE THIS PROXY CARD AND RETURN IT IN THE ENVELOPE PROVIDED.
The undersigned hereby acknowledge(s) receipt of a copy of the accompanying
Notice of the Annual Meeting of Stockholders and the Prospectus/Proxy Statement
with respect thereto and hereby revoke(s) any proxy or proxies heretofore given.
This proxy may be revoked at any time before it is exercised.
PLEASE VOTE, DATE AND SIGN ON REVERSE AND PROMPTLY RETURN THIS
PROXY CARD IN THE ENCLOSED ENVELOPE.
Note: Please sign exactly as the name(s) appear(s) on this proxy card. When
shares are held by joint tenants, both should sign. When signing as executor,
administrator, trustee or guardian, please give the appropriate and complete
title. When signing as an officer of a corporation, please indicate the
corporation name and the office held by the signing officer. When signing on
behalf of a partnership, please sign the partnership name and the name of the
person signing.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- ----------------------------------- ----------------------------------
- ----------------------------------- ----------------------------------
- ----------------------------------- ----------------------------------
<Page>
|X| PLEASE MARK VOTES AS IN THIS EXAMPLE
Mark the box at right if an address change or comment has been noted on the
reverse side of this card. |_|
THE BOARD OF DIRECTORS OF RCS FUND RECOMMENDS THAT YOU VOTE "FOR" PROPOSALS 1, 2
AND 3.
1. To approve the Merger and related transactions contemplated by the Agreement
and Plan of Merger and Contingent Liquidation, pursuant to which Dresdner RCM
Global Strategic Income Fund, Inc. ("DSF Fund") would be merged with and into
RCS Fund and all outstanding shares of common stock of DSF Fund would
automatically be converted into shares of common stock of RCS Fund, but if
certain contingencies occur, the Merger would be abandoned and DSF Fund would be
liquidated and dissolved.
FOR AGAINST ABSTAIN
|_| |_| |_|
2. To approve a new investment management agreement between RCS Fund and
Dresdner RCM Global Investors LLC.
FOR AGAINST ABSTAIN
|_| |_| |_|
3. To elect as Directors of RCS Fund the nominees listed below:
FRANCIS E. LUNDY
GREGORY S. YOUNG
FOR AGAINST ABSTAIN
|_| |_| |_|
Please be sure to sign and date this proxy card:
- --------------------------------------------------------------------------------
- ---------------------------- ----------------------- --------------
Stockholder sign here Co-owner sign here Date
- --------------------------------------------------------------------------------
<Page>
DRESDNER RCM GLOBAL STRATEGIC RCM STRATEGIC GLOBAL GOVERNMENT
INCOME FUND, INC. FUND, INC.
Four Embarcadero Center Four Embarcadero Center
San Francisco, California 94111 San Francisco, California 94111
FORM N-14
PART B
STATEMENT OF ADDITIONAL INFORMATION
[_______,] 2001
This Statement of Additional Information ("SAI") contains material that may be
of interest to investors but that is not included in the Prospectus/Proxy
Statement dated [ ], 2001 (the "Prospectus") of RCM Strategic Global Government
Fund, Inc. ("RCS Fund") and Dresdner RCM Global Strategic Income Fund, Inc.
("DSF Fund") relating to the merger of DSF Fund into RCS Fund. This SAI is not a
Prospectus and is authorized for distribution only when it accompanies or
follows delivery of the Prospectus. This SAI should be read in conjunction with
the Prospectus. Investors may obtain a free copy of the Prospectus by writing
Dresdner RCM Global Investors LLC ("Dresdner RCM"), Four Embarcadero Center,
San Francisco, California 94111 or by calling (800) 237-4218.
<Page>
TABLE OF CONTENTS
General Information and History
Investment Objectives and Policies of the Funds (see also "Information About the
Merger - Comparison of the Funds' Investment Objectives, Policies and
Restrictions" in the Prospectus)
Management Compensation Table
Control Persons and Principal Holders of Securities
The Investment Manager
Other Service Providers (see also "Further Information About the Funds -
Administrators and Custodians" in the Prospectus)
Brokerage Allocation and Other Practices
Repurchase of Shares and Conversion to Open-End Fund
Taxation (see also "Information About the Merger - Federal Income Tax
Consequences" in the Prospectus)
Financial Statements
Appendix A: Securities Ratings
2
<Page>
GENERAL INFORMATION AND HISTORY
DSF Fund and RCS Fund (each a "Fund" and together, the "Funds") are both
non-diversified, closed-end management investment companies and both are
incorporated under the laws of the State of Maryland. DSF Fund was incorporated
on August 12, 1986 and RCS Fund was incorporated on December 9, 1993.
Until on or about November 9, 1999, the name of DSF Fund was Kleinwort Benson
Australian Income Fund, Inc.
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS
DSF FUND
DSF Fund's principal investment objective is high income through global
investment in debt securities. Long-term capital appreciation through such
investment is a secondary objective of the Fund. These objectives are
fundamental policies of the Fund that may not be changed without approval of the
holders of a majority of the Fund's outstanding voting securities. The vote of a
"majority of the Fund's outstanding voting securities" means the vote, at the
annual or a special meeting of the stockholders duly called, (A) of 67% or more
of the voting shares present at such meeting, if the holders of more than 50% of
the outstanding shares are present or represented by proxy or (B) of more than
50% of the outstanding voting shares, whichever is less. The Fund's policies
that are not fundamental may be modified by the Board of Directors if, in the
reasonable exercise of its business judgment, modification is determined to be
necessary or appropriate to carry out the Fund's investment objectives.
RCS FUND
RCS Fund's primary investment objective is to generate a level of income that is
higher than that generated by high quality, intermediate term U.S. debt
securities. High quality, intermediate term U.S. debt securities are defined as
three- to ten-year instruments that are rated at least AA by Standard & Poor's
Rating Group ("S&P") or Aa by Moody's Investors Service, Inc. ("Moody's"). As a
secondary objective, RCS Fund will seek to maintain volatility in the net asset
value of the shares of the Fund comparable to that of high quality, intermediate
term U.S. debt securities, although the Fund's investment in foreign securities
and its use of leveraging and hedging techniques could impair its ability to
achieve this investment objective. In addition, the Fund will seek capital
appreciation to the extent consistent with its other investment objectives.
These objectives are non-fundamental policies of the Fund and may be changed by
the Board of Directors of RCS Fund without stockholder approval. There is no
guarantee that RCS Fund's investment objectives will be achieved.
Dresdner RCM, the Fund's investment manager, will seek to meet RCS Fund's
investment objectives by investing in and actively managing a portfolio of U.S.
and foreign debt securities. Under normal market conditions, RCS Fund will
invest at least 65% of its total assets in government securities. For purposes
of this investment policy, the term "government securities" shall include
securities issued or guaranteed by the U.S. or foreign governments (including
securities issued or guaranteed by the Government National Mortgage Association
("GNMA"),
3
<Page>
the Federal National Mortgage Association ("FNMA") and the Federal Home Loan
Mortgage Corporation ("FHLMC"), or by supranational entities). These securities
may be denominated in U.S. dollars or foreign currencies.
SELECTION OF PORTFOLIO INVESTMENTS
DSF FUND
To achieve its investment objectives, DSF Fund may invest in debt securities
across a broad range of fixed-income investment sectors in the U.S., developed
foreign markets and emerging markets. The Fund is not required to maintain a
minimum or maximum allocation of investments in any one of these investment
sectors. The Fund's investment will be denominated in the U.S. dollar, except
that the Fund may invest up to 25% of its total assets at the time of investment
in non-U.S. dollar denominated securities, with no more than 10% of its total
assets at the time of investment in securities denominated in the currencies of
emerging market countries and no more than 5% of its total assets at the time of
investment in securities denominated in any one emerging market country
currency. "Emerging market countries" are defined as those countries included in
the J.P. Morgan Emerging Market Bond Index Plus from time to time or, if this
index is no longer available, any other recognized listing of emerging market
countries selected by the Board of Directors of the Fund.
As a non-diversified company, there is no investment restriction on the
percentage of the Fund's total assets that may be invested at any time in the
securities of any issuer other than the diversification requirements applicable
to regulated investment companies under the U.S. Internal Revenue Code (the
"Code"). As a matter of fundamental policy, however, the Fund may invest, at the
time of investment, up to: (i) 5% of its total assets in any one non-sovereign
issuer; and (ii) 10% of its total assets in issuers of any one emerging market
country. The Fund invests in a variety of debt securities, with differing
issuers, maturities and interest rates, to comply with the diversification and
other requirements of the Code applicable to regulated investment companies so
that the Fund will not be subject to U.S. taxes on its net investment income and
net capital gains that it distributes to its stockholders. The average
dollar-weighted maturity of the Fund's portfolio has not exceeded, and is not
expected to exceed, 10 years.
RCS FUND
In seeking to achieve its investment objectives, RCS Fund will allocate its
assets among securities of countries and in currency denominations where
opportunities for meeting the Fund's investment objectives are expected to be
the most attractive. The Fund's investments will be allocated among debt
securities of issuers in three separate sectors: the U.S., developed foreign
markets and emerging markets. For purposes of RCS Fund's operations, "developed
foreign markets" currently include the industrialized nations of Australia,
Austria, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy,
Japan, Luxembourg, The Netherlands, New Zealand, Norway, Portugal, Spain,
Sweden, Switzerland and the United Kingdom; "emerging markets" are defined as
markets in any country that is generally considered to be an emerging or
developing country by the World Bank, the International Financial Corporation or
the United Nations or its authorities. The countries that are considered to
"emerging markets" may change over time. See "Investments in Foreign Debt
Instruments."
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Dresdner RCM will strategically adjust RCS Fund's relative allocations among
these sectors to attempt to take advantage of diverse global opportunities for
income and capital appreciation, based on the Fund's evaluation of the different
yield, risk and return characteristics that investment in the fixed income
markets of different countries may provide for U.S. investors. A minimum of 33%
of the Fund's net assets will be invested in U.S. debt securities, as defined
below. A maximum of 67% of the Fund's total assets may be invested in foreign
debt instruments, including emerging market debt instruments, and a maximum of
20% of the Fund's total assets may be invested in emerging market debt
instruments. For purposes of the Fund's operations, an "emerging market debt
instrument" will be deemed to include (i) any instrument issued by an emerging
market government or one of its agencies, authorities or instrumentalities, and
(ii) any instrument issued by a company whose headquarters are located in an
emerging market country and whose business activities and operations are
conducted principally in emerging market countries.
Within each investment sector, the Fund will select securities of particular
issuers based on Dresdner RCM's evaluation of the relative investment merits of
different securities and Dresdner RCM's views as to the best values then
currently available in the marketplace. Such values are a function of, among
other things, yield, maturity, issue classification, liquidity, variability of
weighted average life, credit quality and opportunity for capital appreciation
coupled with expectations regarding local and world economies, movements in the
general level and term of interest rates, currency values, prepayment rates,
political developments and variations in the supply of funds available for
investment in the world bond market relative to the demands placed upon it.
CREDIT QUALITY AND WEIGHTED AVERAGE LIFE OF PORTFOLIO INVESTMENTS
DSF FUND
It is a fundamental policy of DSF Fund to maintain a dollar-weighted average
portfolio quality of investment grade based on ratings of Moody's or S&P (or, in
the case of securities or issuers not rated by Moody's or S&P, judged by
Dresdner RCM to be of equivalent quality), measured at the time of investment;
provided, however, that no more than 10% of the Fund's total assets at the time
of investment will be invested in any one sovereign issuer rated below AA by S&P
or Aa by Moody's (or, in the case of securities or issuers not rated by Moody's
or S&P, judged by the investment adviser to be of equivalent quality).
RCS FUND
Except with respect to emerging market debt instruments, the Fund will invest,
under normal market conditions, only in securities that are rated investment
grade or, if unrated, are of comparable quality in the determination of Dresdner
RCM. Investment grade securities are generally considered to be those securities
rated BBB or higher by S&P or Baa or higher by Moody's, or are equivalently
rated by another nationally recognized rating service. Securities rated Baa or
BBB may have speculative characteristics and changes in economic conditions or
other circumstances are more likely to lead to a weakened capacity of their
issuers to make principal and interest payments than is the case with higher
grade securities. The Fund always will seek to maintain a minimum average
dollar-weighted credit quality of securities in its
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portfolio of AA by S&P, or Aa by Moody's or their equivalent. For a description
of each of the ratings given by S&P and Moody's, see Appendix A, "Securities
Ratings."
RCS Fund may also invest up to 20% of its total assets in emerging market debt
instruments. Such instruments may be rated below investment grade, and may
involve a higher degree of risk. See "Lower Rated and Unrated Instruments."
The weighted average life of the Fund's investments, under normal market
conditions, is expected to be less than 10 years, although there is no
restriction on the maturity or duration of individual securities. The "weighted
average life" of each security in the Fund's portfolio is the dollar-weighted
average time until principal payments with respect to that security are expected
to be received, without discounting for the present value of those payments. The
weighted average life of the Fund's investments is the dollar-weighted average
of the weighted average lives of the securities held by the Fund.
CHARACTERISTICS OF PORTFOLIO INVESTMENTS
INVESTMENTS IN U.S. DEBT SECURITIES. Under normal market conditions, a minimum
of 33% of RCS Fund's net assets will be invested in U.S. debt securities. For
these purposes, the term "U.S. debt securities" does not include any emerging
market debt instrument, and otherwise is deemed to include all of the following
debt instruments, to the extent that they are denominated in U.S. dollars:
government securities, corporate debt instruments, bank deposits, short-term
debt instruments, asset-backed and non-government mortgage-related securities,
structured instruments, Eurodollar bonds, Eurodollar certificates of deposit,
Yankee bonds and convertible securities. As a matter of fundamental policy, DSF
Fund is not required to maintain a minimum or maximum allocation of investments
in U.S. debt securities.
GUARANTEED MORTGAGE PASS-THROUGH SECURITIES. The Funds expect to invest in
mortgage pass-through securities representing participation interests in pools
of residential mortgage loans originated by the U.S. government, or its agencies
or instrumentalities or private lenders, and guaranteed, to the extent provided
in such securities, by the U.S. government or one of its agencies or
instrumentalities. Such securities, which represent ownership interests in the
underlying mortgage loans, differ from conventional debt securities, which
provide for periodic payment of interest in fixed amounts (usually
semi-annually) and principal payments at maturity or on specified call dates.
Mortgage pass-through securities provide for periodic payments that are a
"pass-through" of the interest and principal payments (including any
prepayments) made by the individual borrowers on the pooled mortgage loans, net
of any fees paid to the guarantor of such securities and the servicer of the
underlying mortgage loans.
The guaranteed mortgage pass-through securities in which the Funds will invest
include those issued or guaranteed by GNMA, FNMA and FHLMC. GNMA certificates
are direct obligations of the U.S. government and as such are backed by the
"full faith and credit" of the U.S government. FNMA is a federally chartered,
privately owned corporation and FHLMC is a corporate instrumentality of the U.S.
FNMA and FHLMC certificates are not backed by the full faith and credit of the
U.S. government, but the issuing agency or instrumentality has the right to
borrow from an existing line of credit with the U.S. Treasury in order to meet
its obligations.
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The U.S. Treasury has no legal obligation to provide such a line of credit and
may choose not to do so.
MORTGAGE-RELATED SECURITIES. The Funds may invest in mortgage-related
securities. Mortgage-related securities are securities that directly or
indirectly represent a participation in, or are secured by or payable from,
mortgage loans secured by real property, and include pass-through securities ,
collateralized mortgage obligations ("CMOs"), real estate mortgage investment
conduits ("REMICs") and adjustable rate mortgage securities ("ARMs"). There are
currently three basic types of mortgage-related securities: (i) those issued or
guaranteed by the U.S. government or one of its agencies or instrumentalities,
such as GNMA, FNMA and FHLMC; (ii) those issued by private issuers that
represent an interest in or are collateralized by mortgage-related securities
issued or guaranteed by the U.S. government or one of its agencies or
instrumentalities; and (iii) those issued by private issuers that represent an
interest in or are collateralized by whole mortgage loans or mortgage-related
securities without a government guarantee (although such securities will usually
have some form of credit enhancement - see "Credit Enhancement").
Mortgage-related securities provide periodic payments consisting of interest
and/or principal that are derived from or related to payments of interest and/or
principal on the underlying mortgages. Additional payments on mortgage-related
securities may be made out of unscheduled prepayments of principal resulting
from the sale of the underlying property, refinancing or foreclosure, net of
fees or costs that may be incurred. Generally, mortgage pools created by private
organizations offer a higher rate of interest than government and
government-related pools because no direct or indirect government guarantees of
payments are applicable with respect to the former pools. Timely payment of
interest and principal in these private pools, however, may be supported by
various forms of private insurance or guarantees, including individual loan,
title, pool and hazard insurance. See "Credit Enhancement." There can be no
assurance that private insurers can meet their obligations under these policies.
Prepayments of principal on mortgage-related securities are influenced by a
variety of economic, geographic, social and other factors, including changes in
mortgagors' housing needs, job transfers, unemployment, mortgagors' net equity
in the mortgaged properties and servicing decisions. In general, however,
prepayments tend to increase due to refinancing of mortgages as interest rates
decline, and to decrease during periods of rising interest rates. To the extent
that the Fund purchases mortgage-related securities at a premium, mortgage
foreclosures and prepayments of principal by mortgagors (which may be made at
any time without penalty) may result in some loss of the Fund's principal
investment to the extent of the premium paid. Each Fund's yield and the weighted
average life of its portfolio may be affected by reinvestment of prepayments at
higher or lower rates than the original investment. In addition, like other debt
securities, the values of mortgage-related securities, including government and
government-related mortgage pools, generally will fluctuate in response to
changes in interest rates.
ZERO COUPON, PAY-IN-KIND AND DELAYED INTEREST SECURITIES. The Funds may invest
in zero coupon, pay-in-kind and delayed interest securities as well as custodial
receipts or certificates underwritten by securities dealers or banks that
evidence ownership of future interest payments, principal payments or both on
certain U.S. government securities. Zero coupon securities pay no cash income to
their holders until they mature, and are issued at substantial discounts from
their
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value at maturity. When held to maturity, their entire return comes from the
difference between their purchase price and their maturity value. Pay-in-kind
securities pay interest through the issuance to the holders of additional
securities, and delayed interest securities are securities that do not pay
interest for a specified period. Because interest on zero coupon, pay-in-kind
and delayed interest securities is not paid on a current basis, the values of
securities of this type are subject to greater fluctuations than are the values
of securities that distribute income regularly, and may be more speculative than
such securities. Accordingly, the values of these securities may be highly
volatile as interest rates rise or fall. In addition, a Fund's investments in
zero coupon, pay-in-kind and delayed interest securities will result in special
tax consequences. Although zero coupon securities do not make interest payments,
for tax purposes a portion of the difference between a zero coupon security's
maturity value and its purchase price is taxable income of the Fund each year.
Custodial receipts evidencing specific coupon or principal payments have the
same general attributes as zero coupon U.S. government securities but are not
considered to be U.S. government securities. Generally, the terms of a custodial
receipt provide that a fund is authorized to assert its rights directly against
the issuer of the underlying obligation. However, with respect to some custodial
receipts, the Funds may be required to assert any such rights through the
custodian bank. Thus, in the event the underlying issuer fails to pay principal
and/or interest when due, the Funds may be subject to delays, expenses and risks
that are greater than those that would have been involved if the Funds had
purchased a direct obligation of the issuer. In addition, in the event that the
trust or custodial account in which the underlying security has been deposited
is determined to be an association taxable as a corporation, instead of a
non-taxable entity, the yield on the underlying security would be reduced in
respect of any taxes paid.
FLOATING AND VARIABLE RATE INCOME SECURITIES. Income securities may provide for
floating or variable rate interest or dividend payments. The floating or
variable rate may be determined by reference to a known lending rate, such as a
bank's prime rate, a certificate of deposit rate or the London-Inter Bank
Offered Rate ("LIBOR"). Alternatively, the rate may be determined through an
auction or remarketing process. The rate also may be indexed to changes in the
values of interest rate or securities indexes, currency exchange rates or other
commodities. The amount by which the rate paid on an income security may
increase or decrease may be subject to periodic or lifetime caps. Floating and
variable rate income securities include securities whose rates vary inversely
with changes in market rates of interest. Such securities may also pay a rate of
interest determined by applying a multiple to the variable rate. The extent of
increases and decreases in the value of securities whose rates vary inversely
with changes in market rates of interest generally will be larger than
comparable changes in the value of an equal principal amount of a fixed rate
security having similar credit quality, redemption provisions and maturity.
LOAN PARTICIPATIONS AND ASSIGNMENTS. The Funds may invest in fixed and floating
rate loans ("Loans") arranged through private negotiations between a borrower
(including foreign governments) and one or more financial institutions
("Lenders"). Each Fund's investments in Loans in emerging markets are expected
in most instances to be in the form of participations in Loans
("Participations") and assignments of all or a portion of Loans ("Assignments")
from third parties. Participations typically will result in each Fund having a
contractual relationship only with the Lender, not with the borrower. The Fund
will have the right to receive payments of principal, interest and any fees to
which it is entitled only from the Lender selling the
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Participation and only upon receipt by the Lender of the payments from the
borrower. In connection with purchasing Participations, the Funds generally have
no direct right to enforce compliance by the borrower with the terms of the loan
agreement relating to the Loan ("Loan Agreement"), nor any rights of set-off
against the borrower, and the Funds may not directly benefit from any collateral
supporting the Loan in which it has purchased the Participation. As a result,
the Funds will assume the credit risk of both the borrower and the Lender that
is selling the Participation. In the event of the insolvency of the Lender
selling a Participation, the Funds may be treated as a general creditor of the
Lender and may not benefit from any set-off between the Lender and the borrower.
The Funds will acquire Participations only if the Lender interpositioned between
the Fund and the borrower is determined by Dresdner RCM to be creditworthy. When
a Fund purchases Assignments from Lenders, it will acquire direct rights against
the borrower on the Loan. However, since Assignments are arranged through
private negotiations between potential assignees and assignors, the rights and
obligations acquired by the Funds as the purchaser of an Assignment may differ
from, and be more limited than, those held by the assigning Lender.
The Funds may have difficulty disposing of Assignments and Participations.
Because there is no liquid market for such securities, the Funds anticipate that
such securities could be sold only to a limited number of institutional
investors. The lack of a liquid secondary market will have an adverse impact on
the value of such securities and on each Fund's ability to dispose of particular
Assignments or Participations when necessary to meet its liquidity needs or in
response to a specific economic event, such as a deterioration in the
creditworthiness of the borrower. The lack of a liquid secondary market for
Assignments and Participations also may make it more difficult for the Funds to
assign a value to those securities for purposes of valuing its portfolio and
calculating its net asset value.
PREMIUM SECURITIES. The Funds may invest in income securities bearing coupon
rates higher than prevailing market rates. Such "premium" securities are
typically purchased at prices greater than the principal amounts payable on
maturity. The Funds will not amortize the premium paid for such securities in
calculating their net investment income. As a result, in such cases the purchase
of such securities provides the Funds with a higher level of investment income
distributable to stockholders on a current basis than if the Funds purchase
securities bearing current market rates of interest. If securities purchased by
the Funds at a premium are called or sold prior to maturity, the Funds will
recognize a capital loss to the extent the call or sale price is less than the
purchase price. Additionally, the Funds will recognize a capital loss if it
holds such securities to maturity.
CONVERTIBLE SECURITIES AND SYNTHETIC CONVERTIBLE SECURITIES. Convertible
securities are fixed income securities that may be converted at either a stated
price or a stated rate into underlying shares of common stock. Convertible
securities have general characteristics similar to both fixed income and equity
securities. Although to a lesser extent than with fixed income securities
generally, the market value of convertible securities tends to decline as
interest rates increase and, conversely, tends to increase as interest rates
decline. In addition, because of the conversion feature, the market value of
convertible securities tends to vary with fluctuations in the market value of
the underlying common stock and, therefore, also will react to variations in the
general market for equity securities.
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Like fixed income securities, convertible securities are investments that
provide for a stable stream of income with generally higher yields than common
stocks. Of course, like all fixed income securities, there can be no assurance
of current income because the issuers of the convertible securities may default
on their obligations. Convertible securities, however, generally offer lower
interest or dividend yields than non-convertible securities of similar quality
because of the potential for capital appreciation. A convertible security, in
addition to providing fixed income, offers the potential for capital
appreciation through the conversion feature, which enables the holder to benefit
from increases in the market price of the underlying common stock. However,
there can be no assurance of capital appreciation because securities prices
fluctuate.
Convertible securities generally are subordinated to other similar but
non-convertible securities of the same issuer, although convertible bonds enjoy
seniority in right of payment to all equity securities, and convertible
preferred stock is senior to common stock of the same issuer. Because of the
subordination feature, however, convertible securities typically have lower
ratings than similar non-convertible securities.
Unlike a convertible security, which is a single security, a synthetic
convertible security is comprised of distinct securities that together resemble
convertible securities in certain respects. Synthetic convertible securities are
typically created by combining non-convertible bonds or preferred stocks with
warrants or stock call options. The options that will form elements of synthetic
convertible securities may be listed on a securities exchange or on the National
Association of Securities Dealers Automated Quotation System (the "NASDAQ") or
may be privately traded. The components of a synthetic convertible security
generally are not offered as a unit and may be purchased and sold by the Fund at
different times. Synthetic convertible securities differ from convertible
securities in certain respects, including that each component of a synthetic
convertible security has a separate market value and responds differently to
market fluctuations. Investing in synthetic convertible securities involves the
risk normally involved in holding the securities comprising the synthetic
convertible security.
NON-GUARANTEED MORTGAGE PASS-THROUGH SECURITIES. Non-guaranteed mortgage
pass-through securities are structured similarly to GNMA, FNMA and FHLMC
mortgage pass-through securities and are issued by private issuers such as
originators of and investors in mortgage loans, including savings and loan
associations, mortgage banks, commercial banks, investment banks and special
purpose subsidiaries of the foregoing. These securities usually are backed by a
pool of conventional fixed rate or adjustable rate mortgage loans. Since private
mortgage pass-through securities typically are not guaranteed by an entity
having the credit status of GNMA, FNMA or FHLMC, such securities generally are
structured with one or more types of private credit enhancement. See "Credit
Enhancement."
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOs"). CMOs are a type of bond secured by
an underlying pool of mortgages or mortgage pass-through certificates that are
structured to direct payments on underlying collateral to different series or
classes of the obligations. CMOs may be issued by agencies or instrumentalities
of the U.S. government, or by private originators of, or investors in, mortgage
loans, including savings and loan associations, mortgage banks, commercial
banks, investment banks and special purpose subsidiaries of the foregoing. CMOs
separate mortgage pools into different components, usually short-, medium- and
long-term components. These components may enable investors, such as the Funds,
more accurately to
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predict the pace at which principal will be returned. Each such component, often
referred to as a "tranche," is issued at a specific fixed or floating coupon
rate and has a stated maturity or final distribution date. Typically, CMOs are
collateralized by GNMA, FNMA or FHLMC certificates, but they also may be
collateralized by whole loans or private mortgage pass-through securities
(collectively referred to herein as "underlying mortgage assets"). Interest is
paid or accrues on all CMOs on a monthly, quarterly or semi-annual basis.
Principal prepayments on the underlying mortgage assets may cause the CMOs to be
retired substantially earlier than their stated maturities or final distribution
dates. Certain CMOs may have variable or floating interest rates and others may
be stripped (securities that provide only the principal or interest feature of
the underlying security, or some portion thereof). The Funds may invest in
various CMO tranches, but will not invest in interest-only obligations (commonly
known as "IOs") or inverse floating rate obligations.
REAL ESTATE MORTGAGE INVESTMENT CONDUITS ("REMICS"). REMICs are entities that
qualify and elect treatment as such under provisions of the Code. They issue
multiple-class real estate mortgage-related securities. REMICs may take several
forms, such as trusts, partnerships, corporations, associations or segregated
pools of assets. Once REMIC status is elected and obtained, the entity is
generally not subject to federal income taxation. Instead, income is passed
through the entity and is taxed to the person or persons who hold interests in
the REMIC. A REMIC interest must consist of one or more classes of "regular
interests," some which may offer adjustable rates, and a single class of
"residual interests." To qualify as a REMIC, substantially all of the assets of
the entity must be invested in assets directly or indirectly secured principally
by an interest in real property and certain other permitted investments. The
Funds may invest in "regular interests," but will not invest in "residual
interests."
ADJUSTABLE RATE MORTGAGE SECURITIES ("ARMS"). ARMs are mortgage-related
securities that represent a right to receive interest payments at a rate that is
adjusted to reflect the interest earned on a pool of mortgage loans bearing
variable or adjustable rates of interest. Because the interest rates on ARMs are
reset in response to changes in a specified market index, the values of such
securities tend to be less sensitive to interest rate fluctuations than the
values of fixed-rate securities. ARMs typically contain maximum and minimum
rates beyond which the mortgage interest rate may not vary over the lifetime of
the security. If interest rates change more than the permitted maximum or
minimum level, the value of an ARM could increase or decrease substantially. In
addition, certain ARMs provide for additional limitations on the maximum amount
by which the mortgage interest rate may adjust for any single adjustment period.
Alternatively, certain ARMs may contain limitations on changes in the required
monthly payment. In the event that a monthly payment is not sufficient to pay
the interest accruing on such an adjustable rate mortgage, any such excess
interest is added to the principal balance of the mortgage loan, which is repaid
through future monthly payments. If the monthly payment for such an adjustable
rate mortgage exceeds the sum of the interest accrued at the applicable mortgage
interest rate and the principal payment required at such point to amortize the
outstanding principal balance over the remaining term of the loan, the excess is
utilized to reduce the then outstanding principal balance of the adjustable rate
mortgage.
COMMERCIAL MORTGAGE-RELATED SECURITIES. RCS Fund may invest up to 20% of its
total assets in commercial mortgage-related securities. DSF Fund may invest in
commercial mortgage-related securities, but as a matter of fundamental policy,
does not have a similar investment restriction.
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Commercial mortgage-related securities are securities that represent an interest
in, or are secured by, mortgage loans secured by commercial property such as
industrial and warehouse properties, office buildings, retail space and shopping
malls, multifamily properties and cooperative apartments, hotels and motels,
nursing homes, hospitals and senior living centers. The commercial based-related
securities market is relatively new and in terms of total outstanding principal
amount of issues is relatively small compared to the total size of the market
for residential mortgage-related securities.
Commercial mortgage-related securities are generally structured similarly to
pass-through securities or to CMOs, although other structures are possible. They
may pay fixed or adjustable rates of interest. Commercial mortgage-related
securities have been issued in public or private transactions by a variety of
public and private issuers.
The commercial mortgage loans that underlie commercial mortgage-related
securities have certain distinct risk characteristics. Commercial mortgage loans
generally lack standardized terms, which may complicate their structure.
Commercial properties themselves tend to be unique and are more difficult to
value than single family residential properties. Commercial mortgage loans also
tend to have shorter maturities than residential mortgage loans, and may not be
fully amortizing, meaning that they have a significant principal balance, or
"balloon" payment, due on maturity. Assets underlying commercial
mortgage-related securities may relate only to a few properties or a single
property. The risk involved in single property financings is highly
concentrated. In addition, commercial properties, particularly industrial and
warehouse properties, are subject to environmental risks and the burdens and
costs of compliance with environmental laws and regulations. At the same time,
commercial mortgage-related securities may have a lower prepayment risk than
residential mortgage-related securities, because commercial mortgage loans
generally prohibit or impose penalties on prepayments of principal. In addition,
commercial mortgage-related securities often are structured with some form of
credit enhancement to protect against potential losses on the underlying
mortgage loans. See "Credit Enhancement," below.
CREDIT ENHANCEMENT. Mortgage-related securities that are not issued or
guaranteed by the U.S. government or one of its agencies or instrumentalities
are often backed by a pool of assets representing the obligations of a number of
different parties. To lessen the effect of failures by obligors on underlying
mortgages to make payments, such securities may contain elements of credit
support. Such credit support falls in two categories: (i) liquidity protection
and (ii) protection against losses resulting from ultimate default by an obligor
on the underlying assets. Liquidity protection refers to the provision of
advances, generally by the entity administering the pool of assets, designed to
ensure that the receipt of payments on the underlying pool occurs in a timely
fashion. Protection against losses resulting from ultimate default is designed
to ensure ultimate payment of the obligations on at least a portion of the
assets in the pool. Such protection may be provided through subordination of
other debt, guarantees, insurance policies or letters of credit obtained by the
issuer or sponsor from third parties, through various means of structuring the
transaction or through a combination of such approaches. The degree of credit
support provided for each issue is generally based on historical information
with respect to the level of credit risk associated with the underlying assets.
There can be no assurance that credit support will be sufficient to ensure the
timely payment of principal and/or interest. Delinquencies or losses in excess
of those anticipated could adversely affect the return on
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investment in such a security. The Funds will not pay any separately stated fees
for such credit support, although the existence of credit support may increase
the price of a security.
INVESTMENTS IN FOREIGN DEBT INSTRUMENTS
When it believes that appropriate opportunities for investment are available,
RCS Fund may invest up to 67% of its total assets in foreign debt instruments.
Foreign debt instruments are defined as debt instruments of all sorts (including
bank deposits) that are (i) denominated in the currencies of foreign countries
or in multinational currency units, and (ii) emerging market debt instruments.
Eurodollar bonds, Eurodollar certificates of deposit, Yankee bonds and other
obligations denominated in U.S. dollars (other than emerging market debt
instruments) will not be treated as foreign securities for purposes of the
overall limitation on the Fund's investment in foreign securities. A bank
deposit will be deemed a foreign investment if the deposit is denominated in a
currency other than U.S. dollars. Under normal market conditions, RCS Fund will
invest at least 65% of its total assets in issuers located in not less than
three different countries, including the U.S.; securities of issuers in any one
foreign country (other than the U.S.) will represent no more than 45% of the
Fund's total assets.
As a matter of fundamental policy, DSF Fund is not required to maintain a
minimum or maximum allocation of investments in foreign debt instruments.
Further, as a matter of fundamental policy, DSF Fund's investments are
denominated in the U.S. dollar, except that DSF Fund may invest up to 25% of its
total assets at the time of investment in non-U.S. dollar denominated
securities, with no more than 10% of its total assets at the time of investment
in securities denominated in the currencies of emerging market countries and no
more than 5% of its total assets at the time of investment in securities
denominated in any one emerging market country currency.
SOVEREIGN DEBT. The Funds may invest in debt securities of foreign governments
and governmental entities ("Sovereign Debt"). Investments in such securities
involve special risks. The issuer of the debt or the governmental authorities
that control the repayment of the debt may be unable or unwilling to repay
principal or interest when due in accordance with the terms of such debt.
Periods of economic uncertainty may result in the volatility of market prices of
sovereign debt, and in turn the Funds' net asset values, to a greater extent
than the volatility inherent in domestic fixed income securities.
A sovereign debtor's willingness or ability to repay principal and pay interest
in a timely manner may be affected by, among other factors, 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 a
sovereign debtor may be subject. These risks may be comparatively greater in
emerging market countries than in developed foreign market countries. Political
changes or a deterioration of a country's domestic economy or balance of trade
may also affect the willingness of countries to service their Sovereign Debt.
Governments debtors 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 commitment on the part of these
governments, agencies and others to make such
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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 implement such reforms, achieve such levels of
economic performance or repay principal or interest when due may 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 timely
service its debts.
The occurrence of political, social or diplomatic changes in one or more of the
countries issuing Sovereign Debt could adversely affect each Fund's investments.
Emerging markets in particular are faced with social and political issues, and
some of them have experienced high rates of inflation in recent years and have
extensive internal debt. Among other effects, high inflation and internal debt
service requirements may adversely affect the cost and availability of future
domestic sovereign borrowing to finance governmental programs, and may have
other adverse social, political and economic consequences. Political changes or
a deterioration of a country's domestic economy or balance of trade may affect
the willingness of countries to service their Sovereign Debt. Although Dresdner
RCM intends to manage each Fund in a manner that is intended to reduce the
exposure to such risks, there can be no assurance that adverse political changes
will not cause the Fund to suffer a loss of interest or principal on any of its
holdings.
In recent years, some of the emerging market countries in which the Funds expect
to invest have encountered difficulties in servicing their Sovereign Debt
obligations. Some of these countries have withheld payments of interest and/or
principal of Sovereign Debt securities. These difficulties have also led to
agreements to restructure external debt obligations - in particular, commercial
bank loans - typically by rescheduling principal payments, reducing interest
rates and extending new credits to finance interest payments on existing debt.
In the future, holders of emerging market Sovereign Debt securities may be
requested to participate in similar rescheduling of such debt. Certain emerging
market countries are among the largest debtors to commercial banks and foreign
governments. At times, certain emerging market countries have declared moratoria
on the payment of principal and interest on external debt; such moratoria
currently are in effect in certain emerging market countries. There is no
bankruptcy proceeding by which Sovereign Debt on which an emerging market
government has defaulted may be collected in whole or in part. Furthermore,
there can be no assurance that the holders of commercial bank debt would not
contest payments to the holders of debt securities issued by foreign governments
in the event of default by those governments under commercial bank loan
agreements.
The ability of emerging market governments to make timely payments on their
Sovereign Debt is likely to be influenced strongly by a country's balance of
trade and its access to trade and other international credits. A country whose
exports are concentrated in a few commodities could be vulnerable to a decline
in the international prices of one or more of such commodities. Increased
protectionism on the part of a country's trading partners could also adversely
affect its exports. Such events could diminish a country's trade account
surplus, if any. To the extent that a country receives payment for its exports
in currencies other than hard currencies, its ability to make hard currency
payments could be affected.
Investors should also be aware that certain Sovereign Debt instruments in which
the Funds may invest involve great risk. As noted above, Sovereign Debt issued
by emerging market
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governments generally is deemed to be the equivalent in terms of quality to
securities rated below investment grade by Moody's and S&P. Such securities are
regarded as predominantly speculative with respect to the issuer's capacity to
pay interest and repay principal in accordance with the terms of the obligations
and involve major risk exposure to adverse conditions. Some of such securities,
with respect to which the issuer currently may not be paying interest or may be
in payment default, may be comparable to securities rated D by S&P or C by
Moody's. The Funds may have difficulty disposing of and valuing certain
Sovereign Debt obligations because there may be a limited trading market for
such securities. To the extent that there is no liquid secondary market for any
of these securities, the Funds anticipate that such securities could be sold
only to a limited number of dealers or institutional investors, who may not be
willing to purchase such securities at prices that the Funds believe reflects
their fair value.
BRADY BONDS. As part of its investment in foreign securities, RCS Fund may
invest up to 20% of its total assets in emerging market debt instruments. DSF
Fund may invest no more than 10% of its total assets at the time of investment
in securities denominated in the currencies of emerging market countries and no
more than 5% of its total assets at the time of investment in securities
denominated in any one emerging market country currency. The Funds' investments
in emerging market debt instruments also may include Brady Bonds. "Brady Bonds"
are debt securities issued under the framework of the Brady Plan, an initiative
announced by former U.S. Treasury Secretary Nicholas F. Brady in 1989 as a
mechanism for debtor nations to restructure their outstanding external
commercial bank indebtedness. In restructuring its external debt under the Brady
Plan framework, a debtor nation negotiates with its existing bank lenders as
well as multilateral institutions such as the World Bank and the International
Monetary Fund ("IMF"). The Brady Plan framework, as it has developed,
contemplates the exchange of commercial bank debt for newly issued Brady Bonds.
Brady Bonds may also be issued in respect of new money being advanced by
existing lenders in connection with the debt restructuring. The World Bank
and/or the IMF may support the restructuring by providing funds pursuant to loan
agreements or other arrangements which enable the debtor nation to collateralize
the new Brady Bonds or to repurchase outstanding bank debt at a discount.
Agreements implemented under the Brady Plan are designed to achieve debt and
debt service reduction through specific options negotiated by a debtor nation
with its creditors. As a result, the financial packages offered by each country
differ. The types of options have included the exchange of outstanding
commercial bank debt for bonds issued at 100% of face value of such debt, which
carry a below-market stated rate of interest (generally known as par bonds),
bonds issued at a discount from the face value of such debt (generally known as
discount bonds), bonds bearing an interest rate which increases over time and
bonds issued in exchange for the advancement of new money by existing lenders.
Regardless of the stated face amount and stated interest rate of the various
types of Brady Bonds, the Funds will purchase Brady Bonds in secondary markets,
as described below, in which the price and yield to the investor reflect market
conditions at the time of purchase.
Certain Brady Bonds have been collateralized as to principal due at maturity by
U.S. Treasury zero coupon bonds with a maturity equal to the final maturity of
such Brady Bonds. Collateral purchases are financed by the IMF, the World Bank
and the debtor nations' reserves. In the event of a default with respect to
collateralized Brady Bonds as a result of which the payment obligations of the
issuer are accelerated, the U.S. Treasury zero coupon obligations held as
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collateral for the payment of principal will not be distributed to investors,
nor will such obligations be sold and the proceeds distributed. The collateral
will be held by the collateral agent to the scheduled maturity of the defaulted
Brady Bonds, which will continue to be outstanding, at which time the face
amount of the collateral will equal the principal payments which would have then
been due on the Brady Bonds in the normal course. In addition, interest payments
on certain types of Brady Bonds may be collateralized by cash or high grade
securities in amounts that typically represent between 12 and 18 months of
interest accruals on these instruments with the balance of the interest accruals
being uncollateralized. Brady Bonds are often viewed as having the following
valuation components: (i) the collateralized repayment of principal, if any, at
final maturity, (ii) the collateralized interest payments, if any, (iii) the
uncollateralized interest payments and (iv) any uncollateralized repayment of
principal at maturity (these uncollateralized amounts constitute the "residual
risk"). In light of the residual risk of Brady Bonds and, among other factors,
the history of defaults with respect to commercial bank loans by public and
private entities of countries issuing Brady Bonds, investments in Brady Bonds
are to be viewed as speculative. The Funds may purchase Brady Bonds with no, or
limited, collateralization, and will be relying for payment of interest and
(except in the case of principal collateralized Brady Bonds) principal primarily
on the willingness and ability of the foreign government to make payment in
accordance with the terms of the Brady Bonds. Brady Bonds issued to date are
purchased and sold in secondary markets through U.S. securities dealers and
other financial institutions and are generally maintained through European
transnational securities depositories. Many of the Brady Bonds and other
Sovereign Debt in which the Funds invest are likely to be acquired at a
discount. See "Taxation."
EMERGING MARKET DEBT INSTRUMENTS. The Funds may invest in emerging market debt
instruments that Dresdner RCM determines to be suitable investments for the Fund
without regard to ratings, subject to the requirement that, for RCS Fund, the
average dollar-weighted quality of all securities held must be AA or Aa (or
their equivalent) or better by Moody's or S&P and, for DSF Fund, the
dollar-weighted average portfolio quality must be investment grade, based on
ratings by Moody's or S&P. Currently, the substantial majority of emerging
market debt instruments are of below investment grade quality. Such securities
are regarded as predominantly speculative with respect to the issuer's capacity
to pay interest and repay principal in accordance with the terms of the
obligations and involve major risk exposure to adverse conditions. See "Lower
Rated and Unrated Instruments."
Historically, the markets of emerging market countries have been more volatile
than the markets of the U.S. and developed foreign countries; however, such
markets often have provided higher rates of return to investors. In addition,
movements of emerging market currencies historically have had little correlation
with movements of developed foreign market currencies. Some emerging market
nations have currencies whose values are closely linked to the U.S. dollar.
Emerging market nations may also issue debt denominated in U.S. dollars.
It is unlikely that the Funds will invest in debt instruments 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 the Fund's assets, overly burdensome repatriation and similar
restrictions, the lack of organized and liquid securities markets, unacceptable
political risks, poor value of investments in those markets relative to
investments in other emerging markets, in developed foreign markets or in the
U.S., or for other reasons.
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As their economies and their markets grow and mature, some countries that
currently may be characterized by the Fund as emerging markets may be deemed by
Dresdner RCM to be developed foreign markets. In the event that Dresdner RCM
deems a particular country a developed foreign market, 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 limitation on investments in
emerging market debt instruments.
OTHER SOVEREIGN-RELATED DEBT. In addition to Brady Bonds, the Funds may invest
in other sovereign-related fixed income securities. Such obligations may
include, but are not limited to, participations and assignments in sovereign
bank loans, restructured external debt that has not undergone a Brady Bond-style
debt exchange, and internal government debt such as Mexican Treasury Bills known
as Certificados de la Tesoreira ("CETES"), Argentinian Bonos del Tescro
("BOTE"), Bonos de Inversion y Crocimiento-Quinta Seris ("BIC V") and Venezuelan
zero coupon notes.
The sovereign-related income securities in which the Funds may invest generally
consist of obligations issued or backed by foreign governments (including
states, provinces, cantons and municipalities), or central banks in foreign
countries. Sovereign-related income securities also include debt obligations of
supranational entities, which include international organizations designated or
backed by governmental entities to promote economic reconstruction or
development, international banking institutions and related government agencies.
Examples include the International Bank for Reconstruction and Development (the
World Bank), the European Coal and Steel Community, the Asian Development Bank
and the InterAmerican Development Bank.
Sovereign-related income securities also include income securities of
"quasi-governmental agencies" and income securities denominated in multinational
currency units of an issuer (including supranational issuers). Income securities
of quasi-governmental agencies are issued by entities owned by either a
national, state or equivalent government or are obligations of a political unit
that is not backed by the national government's full faith and credit and
general taxing powers.
RESTRUCTURING INVESTMENTS. The Funds may invest a portion of their assets in
interests in entities organized and operated solely for the purpose of
restructuring the investment characteristics of Sovereign Debt. This type of
restructuring involves the deposit with or purchase by an entity, such as a
corporation or trust, of specified instruments (such as commercial bank loans or
Brady Bonds) and the issuance by that entity of one or more classes of
securities ("Restructuring Investments") backed by, or representing interests
in, the underlying instruments. The cash flow on the underlying instruments may
be apportioned among the newly issued Restructuring Investments to create
securities with different investment characteristics such as varying maturities,
payment priorities and interest rate provisions, and the extent of the payments
made with respect to Restructuring Investments is dependent on the extent of the
cash flow on the underlying instruments. Because Restructuring Investments of
the type in which the Funds anticipate they will invest typically involve no
credit enhancement, their credit risk generally will be equivalent to that of
the underlying instruments.
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The Funds are permitted to invest in a class of Restructuring Investments that
is either subordinated or not subordinated to the right of payment of another
class. Subordinated Restructuring Investments typically have higher yields and
present greater risks than unsubordinated Restructuring Investments.
Certain issuers of Restructuring Investments may be deemed to be "investment
companies" as defined in the Investment Company Act of 1940 (the "1940 Act"). As
a result, the Funds' investment in these Restructuring Investments may be
limited by the restrictions contained in the 1940 Act or the Code. Restructuring
Investments are typically sold in private placement transactions, and there
currently is no active trading market for Restructuring Investments.
YANKEE BONDS. The Funds may invest in U.S. dollar denominated bonds sold in the
United States by non-U.S. issuers ("Yankee bonds"). As compared with bonds
issued in the United States, such bond issues normally carry a higher interest
rate but are less actively traded.
COMMERCIAL BANK OBLIGATIONS. Obligation of foreign branches of U.S. banks and
foreign banks are obligations of the issuing bank and may be general obligations
of the parent bank. Such obligations, however, may be limited by the terms of a
specific obligation or by government regulation. As with investment in non-U.S.
securities in general, investment in the obligations of foreign branches of U.S.
banks and of foreign banks may subject the Fund to investment risks that are
different in some respects from those of investments in obligations of domestic
issuers, including domestic commercial bank obligations.
CURRENCY EXCHANGE TRANSACTIONS. In order to take or hedge foreign currency risk
associated with its portfolio securities, or for other risk management or
investment purposes, the Funds may engage in a variety of currency transactions.
The Funds will conduct currency exchange transactions either on a spot (that is,
cash) basis at the rate prevailing in the currency exchange market or by
entering into forward contracts to purchase or sell currency. In addition, the
Funds may purchase and sell futures on foreign currency and put and call options
on such futures, exchange-traded put and call options on foreign currency,
over-the-counter put and call options on foreign currency, swaps, caps, floors
and collars based on one or more currencies or on currency exchange rates, and
structured instruments whose return or payments are based, in whole or in part,
on the value of one or more foreign currencies.
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 intervene
by U.S. or foreign governments or central banks or by currency controls or
political developments in the U.S. or abroad. The Funds will evaluate currencies
on the basis of fundamental economic criteria (e.g., relative inflation and
interest rate levels and trends, growth rate expectations, balance of payments
status and economic policies) as well as technical and political data.
A forward currency contract involves an obligation to purchase or sell a
specific currency for an agreed-upon price at an agreed-upon date, which may be
any fixed number of days from the date of the contract agreed upon by the
parties. At or before the maturity of a forward contract, a
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Fund either may sell a portfolio security and make delivery of the currency, or
retain the security and offset its contractual obligation to deliver the
currency by purchasing a second contract pursuant to which the Fund will obtain,
on the same maturity date, the same amount of the currency which it is obligated
to deliver. If a Fund retains the portfolio security and engages in an
offsetting transaction, the Fund, at the time of execution of the offsetting
transaction, will incur a gain or loss to the extent that movement has occurred
in forward contract prices. Should forward prices decline during the period
between a Fund's entering into a forward contract for the sale of a currency and
the date that it enters into an offsetting contract for the purchase of the
currency, the Fund will gain to the extent that the price of the currency that
it has agreed to sell exceeds the price of the currency that it has agreed to
purchase. Should forward prices increase, the Fund will suffer a loss to the
extent that the price of the currency that it has agreed to purchase exceeds the
price of the currency that it has agreed to sell. Each Fund will segregate cash
or liquid securities to cover its obligations under forward currency
transactions, except to the extent the Fund owns the foreign currency or has
otherwise covered the obligation.
The cost to the Funds of engaging in currency transactions varies with such
factors as the currency involved, the length of the contract period and the
market conditions then prevailing. Because transactions in currency exchange are
usually conducted on a principal basis, no fees or commissions are involved.
However, dealers in foreign currency earn a profit (or loss) based on the
difference between the prices at which they buy and sell currency. The use of
forward currency contracts does not eliminate fluctuations in the underlying
prices of the securities, but it does establish a rate of exchange that can be
achieved in the future.
The Funds may use foreign currency options under the same circumstances that
they could use forward currency exchange transactions. A decline in the dollar
value of a foreign currency in which a Fund's securities are denominated, for
example, will reduce the dollar value of the securities, even if their value in
the foreign currency remains constant. In order to protect against such
diminution in the value of securities that it holds, the Funds may purchase put
options on the foreign currency. If the value of the currency does decline, the
Funds will have the right to sell the currency for a fixed amount in dollars and
will thereby offset, in whole or in part, the adverse effect on its securities
that otherwise would have resulted. Conversely, if a rise in the dollar value of
a currency in which securities to be acquired are denominated is projected,
thereby potentially increasing the cost of the securities, the Funds may
purchase call options on the particular currency. The purchase of these options
could offset, at least partially, the effects of the adverse movements in
exchange rates. The benefit to the Funds derived from the purchase of foreign
currency options, like the benefit derived from other types of options, will be
reduced by the amount of the premium and related transaction costs. In addition,
if currency rates do not move in the direction or to the extent anticipated, the
Funds could sustain losses on transactions in foreign currency options that
would require them to forego a portion or all of the benefits of advantageous
changes in exchange rates.
Although the foreign currency market may not necessarily be more volatile than
the markets in other commodities, the foreign currency market offers less
protection against defaults in the forward trading of currencies than is
available when trading in currencies occurs on an exchange. Because a forward
currency contract is not guaranteed by an exchange or clearing-house, default on
the contract by the counterparty would deprive the Funds of unrealized profits
or force the Funds to cover their commitments for the purchase or resale, if
any, at the current market price.
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In addition, if a devaluation is generally anticipated, the Funds may not be
able to contract to sell the currency at a price above the anticipated
devaluation level.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. The Funds may purchase and
sell futures contracts and put and call options on such futures contracts with
respect to currencies, interest rates and financial indexes. The Funds will
enter into such transactions for hedging, risk management and other investment
purposes permitted under the rules and regulations of the Commodity Futures
Trading Commission (the "CFTC") and the SEC.
Except for cash-settled futures contracts, which are discussed below, a futures
contract purchase creates an obligation by the purchaser to take delivery of the
underlying commodity or financial instrument in a specified delivery month at a
stated price. A futures contract sale creates an obligation by the seller to
deliver the type of commodity or financial instrument called for in the contract
in a specified delivery month for a stated price. The specific instruments
delivered or taken, respectively, at settlement date may not be determined until
at or near that date. The determination is made in accordance with the rules of
the exchange on which the futures contract sale or purchase was made. An index
futures contract is similar, except that the parties agree to take or make
delivery of an amount of cash equal to a specified dollar amount times the
difference between the index value at the close of the last trading day of the
contract and the price at which the futures contract is originally struck.
Although some futures contracts by their terms call for actual delivery or
acceptance of commodities or securities, in most cases the contracts are closed
out before the settlement date without the making or taking of delivery. Closing
out a futures contract sale is effected by purchasing a futures contract for the
same aggregate amount of the specific type of financial instrument or commodity
and the same delivery date. If the price of the initial sale of the futures
contract exceeds the price of the offsetting purchase, the seller is paid the
difference and experiences a gain. Conversely, if the price of the offsetting
purchase exceeds the price of the initial sale, the seller realizes a loss.
Similarly, the closing out of a futures contract purchase is effected by the
purchaser entering into a futures contract sale. If the offsetting sale price
exceeds the purchase price, the purchaser realizes a gain, and if the purchase
price exceeds the offsetting sale price, the purchaser realizes a loss. Closing
transactions with respect to futures contracts are effected on the exchange on
which the contract was entered into (or a linked exchange).
The purchase (that is, assuming a long position) or sale (that is, assuming a
short position) of a futures contract differs from the purchase or sale of a
security, in that no price or premium is paid or received. Instead, an amount of
cash or U.S. Treasury bills generally not exceeding 5% of the contract amount
must be deposited with the broker. This amount is known as initial margin.
Subsequent payments to and from the broker, known as variation margin, are made
on a daily basis as the price of the underlying futures contract fluctuates
making the long and short positions in the futures contract more or less
valuable, a process known as "marking to market." At any time prior to the
settlement date of the futures contract, the position may be closed out by
taking an opposite position, which will operate to terminate the position in the
futures contract. A final determination of variation margin is then made,
additional cash is required to be paid or released by the broker, and the
purchaser realizes a loss or gain. In addition, a commission is paid on each
completed purchase and sale transaction.
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Futures contracts are traded only on commodity exchanges - known as "contract
markets" - approved for trading by the CFTC, and must be executed through a
futures commission merchant or brokerage firm that is a member of the relevant
contract market. In addition, futures contracts that are traded on a foreign
futures exchange may be purchased or sold on that exchange.
The Funds may purchase and write put and call options on futures contracts in
order to hedge all or a portion of its investments and may enter into closing
purchase transactions with respect to options written by the Fund in order to
terminate existing positions. There is no guarantee that such closing
transactions can be effected at any particular time or at all. In addition,
daily limits on price fluctuations on exchanges on which a Fund conducts its
futures and options transactions may prevent the prompt liquidation of positions
at the optimal time, thus subjecting the Fund to the potential of greater
losses.
An option on a futures contract, as contrasted with the direct investment in
such a contract, gives the purchaser of the option the right, in return for the
premium paid, to assume a position in a futures contract at a specified exercise
price at any time on or before the expiration date of the option. Upon exercise
of an option, the delivery of the futures position by the writer of the option
to the holder of the option will be accomplished by delivery of the accumulated
balance in the writer's futures margin account, which represents the amount by
which the market price of the futures contract exceeds, in the case of a call,
or is less than, in the case of a put, the exercise price of the option on the
futures contract. The potential loss related to the purchase of an option on a
futures contract is limited to the premium paid for the option (plus transaction
costs). With respect to options purchased by a Fund, there are no daily cash
payments made by the Fund to reflect changes in the value of the underlying
contract; however, the value of the option does change daily and that change
would be reflected in the net asset value of the Fund.
The use of futures contracts for risk management purposes is limited by the fact
that the 1940 Act treats long futures positions as if they involved a borrowing
by the Fund in the amount of the contract unless the Fund has segregated on a
mark-to-market basis with respect to its obligation under the futures contract.
Consequently, these non-segregated futures contracts will be subject to each
Fund's limitation on borrowings, which limit the aggregate of such transactions
(including dollar rolls, reverse repurchase agreements and certain swap
contracts as well as more traditional borrowings) to 33-1/3% of RCS Fund's total
assets and 30% of DSF Fund's total assets. Likewise, unless short positions are
covered or the Fund has segregated assets with respect to such positions, such
positions would be treated as borrowings and would be similarly limited. In
addition, under CFTC regulations, each Fund may not purchase or sell futures
contracts or purchase or sell options on futures contracts for risk management
purposes, except for closing purchase and sale transactions, if immediately
thereafter the sum of the amount of margin deposits on a Fund's outstanding risk
management positions in futures and options on futures contracts and the amount
of premiums paid for outstanding options on futures would exceed 5% of the
market value of the Fund's net assets. Transactions entered into solely for bona
fide hedging purposes do not count toward this 5%.
INVESTMENTS IN SECURITIES OF SUPRANATIONAL ENTITIES
The Funds may also invest in securities issued by supranational entitles.
Supranational entities are international organizations that are organized or
supported by one or more government
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entities to promote economic reconstruction or development and by international
banking institutions and related government agencies. Supranational entities in
which the Funds invest include the World Bank, The Asian Development Bank, the
European Economic Community, the European Investment Bank, the European Coal and
Steel Community, Eurofima, Euratom, Council of Europe, the European Bank for
Reconstruction and Development, the International Finance Corporation and the
Nordic Investment Bank. Investments in securities issued by supranational
entities will be deemed to be government securities for purposes of each Fund's
investment limitations, but will be subject to the Fund's overall limitation on
investment in foreign securities only if such securities are denominated in a
foreign currency or in a multinational currency unit.
DEVELOPMENT AND SHORT-TERM INVESTMENTS
The Funds retain the flexibility to respond promptly to changes in market
conditions. During times when Dresdner RCM believes a temporary defensive
posture in the market is warranted, including times involving international,
political or economic uncertainty, the Funds may hold cash (U.S. dollars and
foreign currencies) and/or invest any portion or all of its assets in high
quality money market instruments. It is impossible to predict when or for how
long the Funds will employ defensive strategies, and to the extent it is so
invested, the Funds may not achieve their investment objectives. Where Dresdner
RCM believes that such investments are an appropriate part of a Fund's overall
investment strategy, the Fund also may hold or invest, for investment purposes,
all or a portion of its assets in any of the following: cash (U.S. dollars,
foreign currencies or multinational currency units), short-term government
securities, commercial paper, bank certificates of deposit and other bank
deposits, time deposits, bankers' acceptances and repurchase agreements related
to any of the foregoing.
Money market instruments that a Fund may acquire will be securities rated in the
two highest short-term rating categories by Moody's or S&P (or the equivalent
from another major rating service) or will be of comparable quality as
determined by Dresdner RCM. Money market instruments in which the Funds
typically expect to invest include: U.S. government securities; bank obligations
(including certificates of deposit, time deposits and bankers' acceptances of
U.S. or foreign banks); commercial paper; and repurchase agreements.
The Funds may enter into repurchase agreement transactions with certain member
banks of the Federal Reserve System or with certain dealers listed on the
Federal Reserve Bank of New York's list of reporting dealers. A repurchase
agreement is a contract under which the buyer of a security simultaneously
commits to resell the security to the seller at an agreed-upon price on an
agreed-upon date. Under the terms of a typical repurchase agreement, a Fund
would acquire an underlying obligation for a relatively short period (usually
not more than seven days) subject to an obligation of the seller to repurchase,
and the Fund to resell, the obligation at an agreed-upon price and time, thereby
determining the yield during the Fund's holding period. This arrangement results
in a fixed rate of return that is not subject to market fluctuations during the
Fund's holding period. Under each repurchase agreement, the selling institution
will be required to maintain the value of the securities subject to the
repurchase agreement at not less than their repurchase price. Repurchase
agreements could involve certain risks in the event of a default or insolvency
of the seller, including possible delays or restrictions on a Fund's ability to
dispose of the underlying securities. In evaluating these potential risks,
Dresdner RCM, acting under the
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supervision of the Fund's Board of Directors, and on an ongoing basis, monitors
(1) the value of the collateral underlying each repurchase agreement to ensure
that the value is at least equal to the total amount of the repurchase
obligation, including interest, and (2) the creditworthiness of the banks and
dealers with which a Fund enters into repurchase agreements.
RISKS AND SPECIAL INVESTMENT METHODS
In addition to investment in U.S. and foreign securities, the Funds may, but are
not required to, utilize various investment techniques for hedging, risk
management and other investment purposes. These investment techniques may
include investment in securities that bear risks that are different from or
greater than the risks of investment in high quality U.S. debt instruments.
These investment techniques may include, but are not limited to, any or all of
the following: currency exchange transactions; forward contracts on foreign
currency; purchase of when-issued and delayed delivery securities; borrowing and
leverage; dollar rolls; repurchase and reverse repurchase agreements; purchase
and sale of futures contracts on currencies, interest rates, securities and
financial indexes, including options of any such futures contracts; purchase and
writing of options contracts on currencies, interest rates, repayment rates,
individual securities and financial indexes (including indexes of securities),
whether exchange-traded or over-the-counter; entering into swaps, caps, floors
and collars on currencies, interest rates, repayment rates, individual
securities, and financial indexes (including indexes of securities); purchase
and sale of structured instruments and other indexed financial instruments;
lending securities; short sales of any instrument that may be purchased by a
Fund; purchase and sale of asset-backed securities; purchase and sale of lower
rated and unrated instruments; purchase and sale of non-publicly traded and
illiquid securities; and purchase and sale of convertible securities and
synthetic convertible securities. Although these investment practices entail
risks and could result in losses to the Funds, such techniques are generally
accepted by modern portfolio managers and are regularly utilized by many
investment companies and other institutional investors in order to facilitate
achievement of their investment objectives. Although Dresdner RCM believes that
these investment techniques may assist the Funds in achieving their investment
objectives, no assurance can be given that the Funds will achieve their
investment objectives or that the use of such techniques will be successful. Any
or all of the investment techniques available to Dresdner RCM described below
may be used at any time and there is no particular strategy that dictates the
use of one technique rather than another, since the use of any investment
technique is a function of numerous variables, including market conditions.
The following describes in greater detail certain types of investment practices
in which Dresdner RCM proposes to engage from time to time, and the risks
associated with each of those practices. It should be noted that new types of
mortgage-related securities, asset-backed securities, derivative instruments and
other investment and hedging practices are developed from time to time and that,
consistent with each Fund's investment objectives, policies and restrictions, a
Fund expects to invest in those new types of securities and to engage in those
new types of investment practices if Dresdner RCM believes that these
investments and investment techniques may assist the Fund in achieving its
investment objectives.
NON-DIVERSIFICATION
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Because the Funds are "non-diversified" investment companies, they may invest a
higher percentage of their assets in securities of a single issuer or of a
limited group of issuers than a diversified company. By potentially investing
their assets in the obligations of a smaller number of issuers, the Funds may be
more susceptible than a more widely diversified Fund to economic, political or
regulatory events related to such issuers.
FOREIGN SECURITIES AND TRANSACTIONS
FOREIGN SECURITIES GENERALLY. Investments in securities of companies and
governments of foreign nations offer potential benefits, but also involve
certain significant risks that are in addition to the usual risks associated
with domestic debt instruments. 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. As discussed below under "Foreign Currency Transactions," each Fund
may employ certain investment techniques to hedge its foreign currency exposure;
however, such techniques also entail certain risks.
In addition, there may be less publicly available information about a foreign
issuer than a domestic issuer. 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 domestic issuers.
Moreover, securities of many foreign issuers and their markets may be less
liquid and their prices more volatile than those of securities of comparable
domestic issuers. In addition, with respect to certain foreign countries, the
possibility exists of expropriation, nationalization, revaluation of currencies,
confiscatory taxation and limitations on foreign investment, and the use or
removal of funds or other assets of a Fund, including the withholding of
dividends and limitations on the repatriation of currencies. In addition, the
Funds may experience difficulties or delays in obtaining or enforcing judgments.
Foreign securities may be subject to foreign government taxes that could reduce
the yield on such securities. Foreign securities may be traded on an exchange in
the home 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 and may be subject to less government
supervision than U.S. securities markets, and securities of many foreign issuers
may be less liquid and more volatile than securities of comparable domestic
issuers. In addition, there is generally less government regulation of
securities exchanges, securities dealers and listed and unlisted companies in
foreign countries than in the U.S.
Foreign markets also have different clearance and settlement procedures, and in
certain markets there have been times when settlements have been unable to keep
pace with the volume of securities transactions, making it difficult to conduct
and complete such transactions. Inability to dispose of a portfolio security
caused by settlement problems could result either in losses to a Fund due to
subsequent declines in the value of the portfolio security or, if the Fund has
entered into a contract to sell that security, could result in possible
liability to the purchaser. Delays in settlement could adversely affect a Fund's
ability to implement its investment strategies and to achieve its investment
objectives. Furthermore, 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.
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Investment in debt securities of foreign governments may also present special
risks. For example, the issuer of such debt securities may be unwilling to repay
principal and/or interest when due in accordance with the terms of such debt, or
may be unable to make such repayments when due in the currency required under
the terms of the debt. Political and social events also may have a greater
impact on the price of debt securities issued by foreign governments than on the
price of U.S. securities. In the event that required payments on debt securities
issued by foreign governments are not made on a timely basis, the Funds may have
limited legal recourse.
EMERGING MARKET DEBT INSTRUMENTS. There are special risks associated with
investments in emerging market debt instruments that are in addition to the
usual risks of investing in debt securities of developed foreign markets around
the world, and investors 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
U.S. and developed foreign markets. Disclosure and regulatory standards in many
respects are less stringent than in the U.S. 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 may be 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 in which they
trade. In addition, custodial services and other costs relating to investment in
foreign markets may be more expensive in emerging markets than in many developed
foreign markets, which could reduce the Fund's income from such securities.
Finally, because publicly traded debt instruments of emerging markets represent
a relatively recent innovation in the world debt markets, there is little
historical data or related market experience concerning the attributes of such
instruments under all economic, market and political conditions.
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 concerning the economy may adversely affect issuers within
those countries. Government actions relative to the economy, as well as economic
developments generally, may also affect a given country's international foreign
currency reserves. Fluctuations in the level of these reserves affect the amount
of foreign exchange readily available for external debt payments and thus could
have a bearing on the capacity of issuers of emerging market debt instruments to
make payments on their debt obligations, regardless of their financial
condition. In addition, there is a heightened possibility of expropriation or
confiscatory taxation, imposition of withholding taxes on interest payments, or
other similar developments that could affect investments in those countries.
While Dresdner RCM intends to manage the Funds in a manner that will attempt to
reduce the exposure to such risks, there can be no assurance that adverse
political changes will not cause the Funds to suffer a loss of interest or
principal on any of its holdings.
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The Funds may invest in emerging market debt securities that are rated below
investment grade. Such securities are regarded as predominantly speculative with
respect to the issuer's capacity to pay interest and repay principal in
accordance with the terms of the obligations, and investment in these securities
could expose the Funds to additional risks. See "Lower Rated and Unrated
Securities."
INVESTMENTS IN A PARTICULAR FOREIGN COUNTRY. RCS Fund may invest up to 45% of
its total assets in the securities of governmental and corporate issuers located
in a single foreign country, subject to the Fund's overall limitation on
holdings of foreign securities. Investments in such issuers will subject RCS
Fund, to a greater extent than if investment in any one country were more
limited, to the risks of adverse developments in the securities markets, in
exchange rates, and in social, political or economic events that may occur in
those countries. Because RCS Fund's overall investment in emerging market debt
instruments is limited to 20% of its total assets, no more than 20% of the
Fund's total assets may be invested in securities of issuers in any single
emerging market country. In addition, for purposes of these percentage
limitations, the term "securities" does not include foreign currencies, which
means that the Fund could have more than 45% of its total assets denominated in
any particular currency.
As a fundamental investment policy, DSF Fund may invest no more than 5% of its
total assets at the time of investment in securities denominated in any one
emerging market country currency.
FOREIGN CURRENCY TRANSACTIONS. Because investment in foreign issuers usually
will involve currencies of foreign countries, the value of the assets of a Fund
as measured in U.S. dollars will be affected by changes in foreign currency
exchange rates. If the currency in which a security is denominated appreciates
against the U.S. dollar, the dollar value of the security will increase, and
conversely, a decline in the exchange rate of the currency normally would
adversely affect the value of the security expressed in dollars. Similarly, a
decline in interest rates on debt obligations generally increases the value of
debt obligations, and conversely, an increase in interest rates generally
decreases the value of such obligations.
In most cases, the issuer of debt securities in which a Fund will invest will be
domiciled in the country in whose currency those debt securities are
denominated. In some cases, however, an issuer of fixed income securities
purchased by a Fund may be domiciled in a country other than the country in
whose currency the instrument is denominated. In addition, the Funds may invest
in securities denominated in multi-currency units.
The Funds may hold foreign currency received in connection with investments in
foreign securities when, in the judgment of Dresdner RCM, it would be beneficial
to convert such currency into U.S. dollars at a later date, based on anticipated
changes in the relative exchange rate. The Funds also may engage in spot (i.e.,
cash) transactions in foreign currency. If a Fund decides to hold foreign
currencies, the interest rate that the Fund will be able to earn on such foreign
currencies may be greater or less than the interest rate then available on U.S.
dollars and the Fund will incur costs in connection with conversions between
various currencies.
In addition, in order to take or hedge foreign currency risk associated with its
portfolio securities, or for other risk management or investment purposes, the
Funds may engage in a variety of currency transactions. These investment
techniques include forward transactions in foreign
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currency; purchase and sale of futures on foreign currency and options on such
futures; purchase and sale of exchange-traded options on foreign currency;
purchase and sale of over-the-counter options on foreign currency; purchase and
sale of swaps, caps, floors and collars based on one or more currencies or on
currency exchange rates; and purchase and sale of structured instruments whose
return or payments are based, in whole or in part, on the value of one or more
foreign currencies. The risks associated with forward transactions in foreign
currency are discussed below. For a discussion of the risks of other types of
transactions used to increase or reduce foreign currency risk, see "Futures
Contracts and Options on Futures Contracts," "Options Transactions;" "Swaps,
Caps, Floors, and Collars;" and "Structured Instruments."
A forward currency contract involves an obligation to purchase or sell a
specific currency for an agreed-upon price at an agreed-upon date, which may be
any fixed number of days from the date of the contract agreed upon by the
parties. If a Fund has entered into a forward currency contract obligating the
Fund to sell a foreign currency, at or before the maturity of that forward
contract, the Fund either may sell a portfolio security and make delivery of the
currency, or retain the security and offset its contractual obligation to
deliver the currency by purchasing a second contract pursuant to which the Fund
will obtain, on the same maturity date, the same amount of the currency that it
is obligated to deliver. If a Fund retains the portfolio security and engages in
an offsetting transaction, the Fund, at the time of execution of the offsetting
transaction, will incur a gain or loss to the extent that movement has occurred
in the relative value of a foreign currency. Should the relative value of a
foreign currency decline during the period between a Fund's entering into a
forward contract for the sale of that currency and the date that it enters into
an offsetting contract for the purchase of the currency, the Fund will realize a
gain to the extent that the price of the currency that it has agreed to sell
exceeds the price of the currency that it has agreed to purchase. Should the
relative value of that currency increase, the Fund will suffer a loss to the
extent that the price of the currency that it has agreed to purchase exceeds the
price of the currency that it has agreed to sell. The Funds will maintain a
segregated custodial account of cash or liquid, high grade debt securities to
cover their obligations under forward currency transactions except to the extent
that the Fund owns the currency underlying the contract or has otherwise covered
its obligations.
The cost to the Funds of engaging in currency transactions varies with factors
such as the currency involved, the length of the contract period and the market
conditions then prevailing. Because spot and forward transactions in currency
exchange are usually conducted on a principal basis, no fees or commissions are
involved. The use of forward currency contracts does not eliminate fluctuations
in the underlying prices of the securities, but it does establish a rate of
exchange that can be achieved in the future. In addition, although forward
currency contracts limit the risk of loss due to a decline in the value of the
hedged currency, at the same time, they limit any potential gain that might
result should the value of the currency increase. Further, forward currency
contracts are not traded on exchanges, and thus they may only be cancelled
through an arrangement with the original counterparty, although they may be
offset with a corresponding transaction with another counterparty, if such an
arrangement is available.
The value of the assets of each Fund as measured in U.S. dollars will be
affected by changes in foreign currency exchange rates. Currency exchange rates
may fluctuate significantly over short periods of time causing, together with
other factors, the value of the Fund's assets to fluctuate as well. To the
extent that a substantial portion of a Fund's total assets, adjusted to reflect
the
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Fund's net position after giving effect to currency transactions, is denominated
in the currencies of foreign countries, the Fund will be more susceptible to the
risk of adverse economic and political developments within those countries. In
addition, to the extent that RCS Fund is fully invested up to its 67% limit in
foreign securities while also maintaining currency positions, it may be exposed
to greater combined risk. This combined risk is not as great for DSF Fund,
which, as a fundamental investment policy, may invest up to 25% of its total
assets in non-U.S. dollar denominated securities. Changes in currency exchange
rates also may affect the value of dividends and interest earned by the Funds
and gains and losses realized by the Funds.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
The Funds may purchase securities on a when-issued basis, or may purchase or
sell securities for delayed delivery. In when-issued or delayed delivery
transactions, delivery of the securities and the corresponding payments occurs
beyond normal settlement periods. No payment or delivery will be made by a Fund
prior to the actual delivery or payment by the other party to the transaction. A
Fund will not accrue income with respect to a when-issued or delayed delivery
security prior to its stated delivery date. To the extent that a Fund does not
establish with its custodian a segregated account consisting of cash, U.S.
government securities or other liquid high grade debt obligations, in an amount
equal to the amount of the Fund's when-issued and delayed delivery purchase
commitments, such commitments will be treated as "senior securities" for
purposes of the Asset Coverage Test under the 1940 Act. See "Prospectus - Risk
Factors - Use of Borrowing and Leverage." Placing securities rather than cash in
the segregated account may have a leveraging effect on a Fund's net asset value
per share; that is, to the extent that the Fund remains substantially fully
invested in securities at the same time that it has committed to purchase
securities on a when-issued or delayed delivery basis, greater fluctuations in
its net asset value per share may occur than if it had set aside cash to satisfy
its purchase commitments. Securities purchased on a when-issued or delayed
delivery basis may expose the Funds to risk because the securities may
experience fluctuations in value prior to their delivery. Purchasing securities
on a when-issued or delayed delivery basis can involve the additional risk that
the yield available in the market when the delivery takes place may be higher
than that obtained in the transaction itself.
BORROWING AND LEVERAGE
Each Fund is authorized to borrow money from banks, other financial institutions
or other lenders in an amount up to 33-1/3% for RCS Fund and 30% for DSF Fund of
its total assets (including the amount borrowed), less all liabilities and
indebtedness other than bank or other borrowings, and may engage without
limitation in reverse repurchase agreements and dollar rolls (which are deemed
to be "borrowings" under current regulations). RCS Fund also is authorized to
borrow an amount not exceeding 5% of its total assets for temporary or emergency
purposes, such as for the clearance and settlement of portfolio transactions,
provided that the total amount borrowed does not exceed the 33-1/3 % limit. DSF
Fund may borrow for temporary or emergency purposes an amount up to an
additional 5% of DSF Fund's total assets (not including the amount borrowed). A
Fund will only exercise its borrowing authority when Dresdner RCM believes that
such borrowings will benefit the Fund, after taking into account considerations
such as interest income and possible gains or losses upon liquidation.
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Borrowing by a Fund creates an opportunity for increased net income. To the
extent the income from securities purchased with borrowings exceeds the interest
a Fund will have to pay, the Fund's net income will be greater than if
borrowings were not used.
At the same time, borrowing creates special risk considerations. For example,
borrowing that enables a Fund to purchase additional portfolio securities may
exaggerate changes in the value of the Fund's net assets and in the yield on the
Fund's portfolio. Although the principal of such borrowings will be fixed, the
Fund's assets may change in value during the time the borrowing is outstanding.
Borrowing will create interest expenses for the Fund that could, at times,
exceed the income from the assets retained, and the net income of the Fund will
be less than if borrowings were not used. In such cases, the amount available
for distribution to stockholders as dividends would be reduced. In addition,
borrowing may result in higher volatility of the net asset value and market
value of each Fund's common stock.
Each Fund expects that some of its borrowings may be made on a secured basis, if
the Fund believes that the terms of such borrowings, taken as a whole, would
benefit the Fund. In such situations, either the custodian will segregate the
pledged assets for the benefit of the lender, or arrangements will be made with
either (i) the lender to act as a subcustodian if the lender is a bank or
otherwise qualifies as a custodian of investment company assets or (ii) a
suitable custodian.
DOLLAR ROLLS AND REVERSE REPURCHASE AGREEMENTS
As part of its strategy to enhance returns, the Funds are authorized to enter
into dollar rolls and reverse repurchase agreements.
Each Fund may enter into dollar rolls, in which the Fund sells securities for
delivery in the current month and simultaneously contracts to repurchase
substantially similar securities on a specified future date. In the case of
dollar rolls involving mortgage-related securities, the mortgage-related
securities that are purchased typically will be of the same type and will have
the same or similar interest rate and maturity as those sold, but will be
supported by different pools of mortgages. The Fund forgoes principal and
interest paid during the roll period on the securities sold in a dollar roll,
but it is compensated by the difference between the current sales price and the
price for the future purchase as well as by any interest earned on the proceeds
of the securities sold. The Fund could also be compensated through the receipt
of fee income.
Each Fund may also enter into reverse repurchase agreements in which the Fund
sells securities to a bank or dealer and agrees to repurchase them at a mutually
agreed date and price. Generally, the effect of such a transaction is that the
Fund can recover all or most of the cash invested in the portfolio securities
involved during the term of the reverse repurchase agreement, while it will be
able to keep the interest income associated with those portfolio securities.
Such transactions are advantageous if the interest cost to the Fund of the
reverse repurchase transaction is less than the cost of otherwise obtaining the
cash.
Each Fund may establish a segregated account with its custodian in which it will
maintain cash and/or liquid high grade debt securities equal in value to its
obligations in respect to dollar rolls and reverse repurchase agreements.
Placing securities rather than cash in the segregated account
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may have a leveraging effect on the Fund's net asset value per share. See
"When-Issued and Delayed Delivery Securities." Also, to the extent that a Fund
does not establish such a segregated account with respect to any reverse
repurchase agreement or dollar roll, that reverse repurchase agreement or dollar
roll will involve leverage and therefore will be considered a "senior security"
for purposes of the Asset Coverage Test under the 1940 Act. Dollar rolls and
reverse repurchase agreements involve the risk that the market value of the
securities that the Fund is obligated to repurchase under the agreement may
decline below the repurchase price. In the event the buyer of securities under a
dollar roll or reverse repurchase agreement files for bankruptcy or becomes
insolvent, the Fund's use of the proceeds of the agreement may be restricted
pending a determination by the other party, or its trustee or receiver, whether
to enforce the Fund's obligation to repurchase the securities.
REPURCHASE AGREEMENTS
Each Fund is authorized to enter into repurchase agreements, wherein the seller
sells a security to the Fund and agrees to repurchase that security from the
Fund at an agreed-upon future date, normally the next business day. These
agreements may be made with respect to any of the portfolio securities in which
the Fund is authorized to invest. The resale price reflects the agreed-upon rate
of return for the period the Fund holds the security and is not related to the
coupon rate on the purchased security. The Fund requires maintenance of the
market value of the collateral in amounts at least equal to the resale price;
thus, risk is limited to the ability of the seller to pay the agreed-upon amount
on the delivery date. However, if the seller defaults, realization upon the
collateral by the Fund may be delayed or limited or the Fund might incur a loss
if the value of the collateral securing the repurchase agreement declines, and
the Fund might incur disposition costs in connection with liquidating the
collateral.
Repurchase agreements facilitate portfolio management and allow a Fund to earn
additional revenue. The Fund will enter into repurchase agreements in order to
increase liquidity or as a temporary investment while the Fund is evaluating the
acquisition of suitable long-term investments.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
The Funds may purchase and sell various kinds of futures contracts, and may
purchase and write call and put options on any of such futures contracts. The
futures contracts may be based on various securities (such as U.S. government
securities), securities indexes, interest rates, prepayment rates, foreign
currencies or other financial instruments or indexes.
The Funds will engage in transactions in futures and options on futures for
hedging, risk management and other investment purposes. When futures and options
on futures are used for risk management purposes, the Funds will generally take
long or short positions in futures contracts (or purchase options thereon) in
order to increase their exposure to a particular market, market segment or
foreign currency. For example, if Dresdner RCM wants to increase the Fund's
exposure to long-term U.S. government securities, Dresdner RCM may cause the
Fund to take long positions in futures contracts on U.S. Treasury bonds.
Sometimes this will be done in connection with the segregation of cash, U.S.
government and other high quality securities in an amount, marked-to-market
daily, equal to the Fund's obligation under the future contracts,
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thereby producing a synthetic security (e.g., a U.S. Treasury bond). In other
cases, the Fund will only deposit initial and variation margin as required by
relevant CFTC regulations and the rules of the contract markets (in which case
they will be considered senior securities for purposes of the Asset Coverage
Test under the 1940 Act). Because the Fund will then be obligated to purchase
U.S. Treasury bonds at a set price on a future date, the Fund's net asset value
will fluctuate with the value of the U.S. Treasury bonds in a manner similar to
the effects of securities purchased on a then-issued or delayed delivery basis.
See "When-Issued and Delayed Delivery Securities." A Fund can also increase its
exposure to foreign currencies and other markets through risk management
policies involving futures on foreign currencies and futures on securities or
interest rate indexes, respectively. Risk management transactions may have the
effect of providing a degree of investment leverage, particularly when a Fund
does not segregate assets equal to its obligation under the contract since the
futures contracts (or options on futures contracts) will increase or decrease in
value at a rate which is a multiple of the rate of increase or decrease in the
value of the initial and variation margin that a Fund is required to deposit. As
a result, the value of the Fund's portfolio may at times be more volatile than
the value of comparable portfolios that do not engage in risk management
transactions. See "Borrowing and Leverage."
The purchase and sale of futures contracts and options on futures contracts
involve risk. Thus, while the Funds may benefit from the use of futures and
options on futures, unanticipated changes in interest rates, securities prices
or currency exchange rates may result in less favorable overall performance for
the Funds than if they had not entered into any futures contracts or options
transactions. Losses incurred in transactions in futures contracts and options
on futures contracts and the costs of these transactions will affect a Fund's
performance, and losses from investing in futures transactions are potentially
unlimited. In addition, positions in futures contracts and options on futures
contracts may be closed out only on the exchange or board of trade on which they
were entered into, and no assurance can be given that an active market will
exist for a particular contract or option at any particular time. To the extent
a Fund engages in futures and related options transactions for hedging purposes,
there is a risk of imperfect correlation between movements in the price of the
futures contract or option and movements in the price of the security, currency
or instrument that is the subject of the hedge.
OPTIONS TRANSACTIONS
The Funds may purchase and sell put and call options on currencies, interest
rates, prepayment rates, individual securities, indexes of securities, or other
financial instruments or indexes. The Funds may purchase or write both
exchange-traded and over-the-counter options. The Funds expect to use options
for hedging, risk management and other investment purposes.
An option is created when the writer grants to the purchaser an option to
purchase or sell a particular currency, security, index of securities, or other
index at a specified price (the "exercise price") in return for payment of a
specified amount (the "option premium"). A call option gives the holder the
right, but not the obligation, to purchase at or until a specified time (the
"expiration date") the underlying currency or instrument (or, in the case of an
index, to receive payments linked to changes in the price of the index) by
paying the exercise price. A put option generally conveys to the holder the
right to sell at or until the option expiration date the underlying currency or
instrument (or, in the case of an index, to receive payments linked to a
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decrease in the price of the index below a certain level) at the exercise price.
American-style options may be exercised at any point prior and including the
expiration date; European-style options may be exercised only on the expiration
date. The Funds may purchase and sell both American-style and European-style
options.
Successful use by the Funds of options will depend on the accuracy of Dresdner
RCM assumptions concerning movements in the direction of the security, currency
or index underlying the option used as a hedge. For example, when a Fund writes
an option, the Fund receives a premium, but could be required to purchase or
sell the underlying currency, security or index at a disadvantageous price,
thereby incurring losses. The purchase of an option may constitute an effective
hedge against price fluctuations in the underlying currency, security or index;
however, in the event of price movements adverse to the Fund's position, the
Fund may forfeit the entire amount of the premium plus related transaction
costs. The benefit to the Fund derived from purchase of an option will be
reduced by the amount of the premium and related transaction costs.
With respect to exchange-traded options, the ability of a Fund to engage in
closing transactions with respect to options that the Fund has purchased or
written depends on the existence of a liquid secondary market. In a closing
purchase or sale transaction, the Fund acquires a position that offsets and
cancels an options position then held by the Fund. There is no assurance that a
liquid secondary market on a domestic or foreign options exchange will exist for
any particular exchange-traded option or at any particular time. If the Fund is
unable to effect a closing transaction with respect to an option it has written,
the Fund may not be able to offset the risk associated with such option, or may
be able to do so only at a disadvantageous price. Similarly, if the Fund is
unable to effect a closing sale transaction with respect to any option that it
has purchased, the Fund would have to exercise the option in order to realize
any profit on the options position, and would incur transaction costs.
In addition, the Funds may purchase and sell options over-the-counter with
broker-dealers or other financial institutions that make markets in these
options. The ability to terminate over-the-counter options is more limited than
with exchange-traded options and may involve the risk that broker-dealers or
others acting as counterparty in such transactions will not, or may not be able
to, fulfill their obligations. If a Fund purchases an over-the-counter option
and the counterparty defaults, it may be unable to exercise the option and may
suffer a loss.
The writing and purchase of options is a highly specialized activity that
involves investment techniques and risks different from and potentially greater
than those associated with ordinary portfolio securities transactions. The
successful use of options for hedging purposes depends in part on the accuracy
of Dresdner RCM's assumptions concerning future price fluctuations and the
degree of correlation between the options and the securities markets. If
Dresdner RCM is incorrect in its determination of the direction or the extent of
the movement of the yield differential, the investment performance of the Fund
may be less favorable than it would have been in the absence of such options
transactions.
SWAPS, CAPS, FLOORS AND COLLARS
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The Funds may enter into swaps, caps, floors and collars on various securities
(such as U.S. government securities), securities indexes, interest rates,
prepayment rates, foreign currencies or other financial instruments or indexes,
for both hedging and non-hedging purposes. While swaps, caps, floors and collars
(sometimes hereinafter collectively referred to as "swap contracts") are
different from futures contracts (and options on futures contracts) in that swap
contracts are individually negotiated with specific counterparties, the Funds
will use swap contracts for purposes similar to the purposes for which it uses
options, futures and options on futures. Those uses of swap contracts (i.e.,
risk management and hedging) present the Funds with risks and opportunities
similar to those associated with options contracts, futures contracts and
options on futures. See "Futures Contracts and Options on Futures Contracts,"
"Options Transactions."
Swap contracts typically involve an exchange of obligations by two sophisticated
parties. For example, in an interest rate swap, a Fund may exchange with another
party their respective rights to receive interest, such as an exchange of fixed
rate payments for floating rate payments. Currency swaps involve the exchange of
respective rights to make or receive payments in specified currencies.
Caps, floors and collars are variations on swaps. The purchase of a cap entitles
the purchaser to receive a principal amount from the party selling the cap to
the extent that a specified index exceeds a predetermined interest rate or
amount. The purchase of an interest rate floor entitles the purchaser to receive
payments on a notional principal amount from the party selling the floor to the
extent that a specified index falls below a predetermined interest rate or
amount. A collar is a combination of a cap and a floor that preserves a certain
return within a predetermined range of interests or values. Caps, floors and
collars are similar in many respects to over-the-counter options transactions,
and may involve investment risks that are similar to those associated with
options transactions and options on futures contracts.
Because swap contracts are individually negotiated, they remain the obligation
of the respective counterparties, and there is a risk that a counterparty will
be unable to meet its obligations under a particular swap contract. If a
counterparty defaults on a swap contract with a Fund, the Fund may suffer a
loss. To address this risk, the Fund will usually enter into interest rate swaps
on a net basis, which means that the two payment streams (one from the Fund to
the counterparty, one to the Fund from the counterparty) are netted out, with
the Fund receiving or paying, as the case may be, only the net amount of the two
payments. Interest rate swaps do not involve the delivery of securities, other
underlying assets or principal. Accordingly, the risk of loss with respect to
interest rate swaps entered into on a net basis would be limited to the net
amount of the interest payments that the Fund is contractually obligated to
make. If the other party to an interest rate swap defaults, a Fund's risk of
loss consists of the net amount of interest payments that the Fund is
contractually entitled to receive. In contrast, currency swaps and other types
of swaps may involve the delivery of the entire principal value of one
designated currency or financial instrument in exchange for the other designated
currency or financial instrument. Therefore, the entire principal value of such
swaps may be subject to the risk that the other party will default on its
contractual delivery obligations.
In addition, because swap contracts are individually negotiated and ordinarily
non-transferable, there also may be circumstances in which it would be
impossible for a Fund to close out its
33
<Page>
obligations under the swap contract. Under such circumstances, the Fund might be
able to negotiate another swap contract with a different counterparty to offset
the risk associated with the first swap contract. Unless the Fund is able to
negotiate such an offsetting swap contract, the Fund could be subject to
continued adverse developments, even after Dresdner RCM has determined that it
would be prudent to close out or offset the first swap contract.
As with futures contracts, when the Funds use swap contracts for risk management
purposes, they are not necessarily required to segregate assets (on a
marked-to-market basis) to cover its contractual obligations under a swap
contract. In those cases, the swap contract will have the effect of providing a
degree of investment leverage similar to the leverage associated with
non-segregated futures contracts. See "Futures Contracts and Options on Futures
Contracts." Also, when a Fund does not segregate to cover its contractual
obligations under a swap contract, the amount of each Fund's contractual
obligation (calculated daily on a marked-to-market basis) generally will be
treated as a senior security for purposes of the Asset Coverage Test under the
1940 Act.
The use of swaps involves investment techniques and risks different from and
potentially greater than those associated with ordinary portfolio securities
transactions. If Dresdner RCM is incorrect in its expectations of market values,
interest rate or currency exchange rates, the investment performance of the
Funds would be less favorable than it would have been if this investment
technique were not used.
STRUCTURED INSTRUMENTS
The Fund may invest, from time to time, in one or more structured instruments.
Structured instruments are debt securities issued by agencies of the U.S.
government (such as GNMA, FNMA, and FHLMC), banks, corporations and other
business entities whose interest and/or principal payments are indexed to
certain specific foreign currency exchange rates, interest rates or one or more
other reference rates (the "embedded index"). Structured instruments frequently
are assembled in the form of medium-term notes, but a variety of forms are
available and may be used in particular circumstances.
The terms of such structured instruments provide that their principal and/or
interest payments are adjusted upwards or downwards (but ordinarily not below
zero) to reflect changes in the embedded index while the structured instruments
are outstanding. As a result, the interest and/or principal payments that may be
made on a structured product may vary widely, depending on a variety of factors,
including the volatility of the embedded index and the effect of changes in the
embedded index on principal and/or interest payments.
While structured instruments may offer the potential for a favorable rate of
return from time to time, they also entail certain risks. Structured instruments
may be less liquid than other debt securities, and the price on structured
instruments may be more volatile. If the value of the embedded index changes in
a manner other than that expected by Dresdner RCM, principal and/or interest
payments on the structured instrument may be substantially less than expected.
In some cases, depending on the terms of the embedded index, a structured
instrument may provide that the principal and/or interest payments may be
adjusted below zero; however, each Fund will not invest in structured
instruments if the terms of the structured instrument provide that the
34
<Page>
Fund may be obligated to pay more than its initial investment in the structured
instrument, or to repay any interest or principal that has already been
collected or paid back. In addition, many structured instruments may not be
registered under the federal securities laws. In that event, a Fund's ability to
resell such a structured instrument may be more limited than its ability to
resell other portfolio securities. See "Non-Publicly Traded and Illiquid
Securities." In addition, although structured instruments may be sold in the
form of a corporate debt obligation, they may not have some of the protections
against counterparty default that may be available with respect to publicly
traded debt securities (i.e., the existence of a trust indenture). In that
respect, the risks of default associated with structured instruments may be
similar to those associated with swap contracts. See "Swaps, Caps, Floors and
Collars." There can be no assurance that a Fund's investments in structured
instruments will be consistent with the Fund's investment objective of
maintaining volatility of the Fund's net asset value comparable to that of high
quality, intermediate term U.S. debt securities.
LENDING SECURITIES
The Funds may also seek to increase their income by lending portfolio
securities. Any such securities loans will be secured by collateral in cash,
cash equivalents, U.S. government securities or such other collateral as may be
permitted under each Fund's investment program and by regulatory agencies. While
the securities loan is outstanding, the Funds will continue to receive the
equivalent of the interest or dividends paid by the issuer on the securities, as
well as interest on the investment of the collateral or a fee from the borrower.
Alternatively, a loan of a particular security may be structured as a sale of
that security with a corresponding agreement to repurchase it at a later date;
in that case, the Funds would not receive the equivalent of the interest or
dividends paid by the issuer on the securities. A Fund may experience loss or
delay in the recovery of its securities if the institution with which it has
engaged in a portfolio loan transaction breaches its agreement with that Fund.
The Funds are authorized to lend securities they hold to brokers, dealers and
other financial organizations deemed creditworthy by Dresdner RCM, but it will
not lend securities to any affiliate of Dresdner RCM, unless the Fund applies
for and receives specific authority to do so from the SEC.
SHORT SALES
The Funds may make short sales of instruments that it may purchase for its
portfolio. A short sale is a transaction in which a Fund sells an instrument
that it does not own in anticipation that the market price will decline. The
Funds expect to make short sales both as a form of hedging to offset potential
declines in long positions and in order to maintain portfolio flexibility.
When a Fund makes a short sale, it must borrow the security sold short and
deliver it to the counterparty. The Fund may have to pay a fee to borrow
particular securities and is often obligated to pay over any payments received
on such borrowed securities. Short sales expose the Fund to the risk that it
will be required to cover its short position at a time when the securities have
appreciated in value, thus resulting in a loss.
Each Fund's obligation to replace the borrowed security will be secured by
collateral deposited with the lender of the security, who is usually a
broker-dealer, and/or with the Fund's custodian. Depending on arrangements made
with the broker-dealer from whom it borrowed the security
35
<Page>
regarding payment of any payments received by the Fund on such security, the
Fund may not receive any payments (including interest) on its collateral.
A Fund will not make a short sale if, after giving effect to such sale, the
market value of all securities sold short exceeds 25% of the value of its total
assets. The Funds also may make short sales "against the box" without respect to
such limitations. In this type of short sale, at the time of the sale, a Fund
owns or has the immediate and unconditional right to acquire at no additional
cost the identical security.
ASSET-BACKED SECURITIES
The Funds may invest in asset-backed securities. Asset-backed securities involve
securitization techniques similar to those used to develop mortgaged-related
securities, as applied to a broad range of other assets. Various types of
assets, primarily automobile and credit card receivables and home equity loans,
can be securitized in pass-through structures similar to mortgage pass-throughs
or in a pay-through structure similar to the CMO structure.
In general, the collateral supporting asset-backed securities is of shorter
maturity than mortgage loans, and in some cases may be less likely to experience
substantial prepayments. As with mortgage-related securities, asset-backed
securities are often backed by a pool of assets representing obligations of a
number of different parties and use similar credit enhancement techniques. See
"Credit Enhancement."
Certain asset-backed securities may expose the Funds to risks that are not
present in mortgage-related securities, resulting mainly from the fact that
asset-backed securities do not usually contain the complete benefit of a
security interest in the underlying assets (e.g., credit card receivables). For
example, credit card receivables generally are unsecured, and the debtors are
entitled to the protection of a number of state and federal consumer credit
laws, including the bankruptcy laws, some of which may reduce the ability to
obtain full payment. In the case of automobile receivables, due to various legal
and economic factors, proceeds from repossessed collateral may not always be
sufficient to support payments on these securities.
New instruments and variations of asset-backed securities continue to be
developed. The Funds may invest in any such instruments or variations, to the
extent consistent with its investment objectives, policies and restrictions and
applicable regulatory requirements.
LOWER RATED AND UNRATED INSTRUMENTS
Each Fund's investments, including its investments in emerging market debt
instruments, may consist of securities that are unrated or that are rated below
investment grade (securities rated BB+ or lower by S&P or Ba1 or lower by
Moody's, or equivalently rated by another nationally recognized rating service).
Securities rated below investment grade (and comparable unrated securities) are
the equivalent of high yield, high risk bonds, commonly known as "junk bonds."
Non-investment grade securities are regarded as predominantly speculative with
respect to the issuer's capacity to pay interest and repay principal in
accordance with the terms of the obligations and involve major risk exposure to
adverse business, financial, economic or political conditions.
36
<Page>
The market values of lower quality debt securities tend to reflect individual
developments of the issuer to a greater extent than do higher quality
securities, which react primarily to fluctuations in the general level of
interest rates. In addition, lower quality debt securities tend to be more
sensitive to economic conditions and generally have more volatile prices than
higher quality securities. Certain emerging markets governments that issue lower
quality debt securities are among the largest debtors to commercial banks,
foreign governments and supranational organizations such as the World Bank, and
may not be able or willing to make principal and/or interest payments as they
come due. See "Foreign Securities Generally."
The rating of a debt security may change over time. S&P and Moody's monitor and
evaluate the ratings assigned to debt securities on an ongoing basis. As a
result, debt securities held by a Fund could receive a higher rating (which
would tend to increase their value) or a lower rating (which would tend to
decrease their value) during the time they are held by the Fund. If a security
owned by a Fund is downgraded below either BBB- by S&P, or below Baa3 by
Moody's, Dresdner RCM will monitor such security and will determine whether to
sell it, based on factors it considers relevant, potentially including, but not
limited to, the size of the investment, the relative risk to the Fund, the depth
of the trading market, whether a loss or a gain will result or any other
relevant factors.
When a Fund invests in low-rated and unrated instruments, achievement of the
Fund's investment objectives is more dependent upon Dresdner RCM analysis than
would be the case if the Fund were investing in higher-rated instruments.
NON-PUBLICLY TRADED AND ILLIQUID SECURITIES
The Funds may invest, without limitation, in both U.S. and foreign securities
that are not registered under the federal securities laws and are not publicly
traded in the U.S. ("non-publicly traded securities"). Some of these securities
may be traded on foreign securities exchanges or in foreign over-the-counter
markets and some may be eligible for resale only to "qualified institutional
buyers" under Rule 144A of the Securities Action of 1933, as amended ("144A
Securities"). Although certain 144A Securities may have an active trading
market, it is not possible to predict with assurance exactly how the market for
securities eligible for resale under Rule 144A will develop. As a result, a
Fund's ability to sell non-publicly traded securities may vary from time to
time, and the Fund may be forced to sell these securities at less than fair
market value or may not be able to sell them when Dresdner RCM believes it
desirable to do so. In addition, a Fund may invest in other types of securities
that may, from time to time, have limited marketability. Illiquid securities may
be subject to wide fluctuations in the market value. The Fund's investments in
illiquid securities are subject to the risk that, should the Fund desire to sell
any of these securities at a time when a buyer is not available at a price that
the Fund deems representative of their value, the value of the Fund's net assets
could be adversely affected.
CONVERTIBLE SECURITIES AND SYNTHETIC CONVERTIBLE SECURITIES
Each Fund has authority to invest in convertible securities and synthetic
convertible securities.
Convertible securities are fixed income securities that may be converted at
either a stated price or stated rate into underlying shares of common stock.
Convertible securities have general
37
<Page>
characteristics similar to both fixed income and equity securities. Although to
a lesser extent than with fixed income securities, the market value of
convertible securities tends to vary with fluctuations in the market value of
the underlying common stocks and, therefore, also will react to variations in
the general market for equity securities.
Convertible securities are investments that provide for a stable stream of
income with generally higher yields than common stocks. There can be no
assurance of current income because the issuers of the convertible securities
may default on their obligations. Convertible securities, however, generally
offer lower interest or dividend yields than non-convertible securities of
similar quality because of the potential for capital appreciation. A convertible
security, in addition to providing current income, offers the potential for
capital appreciation through the conversion feature, which enables the holder to
benefit from increases in the market price of the underlying common stock.
However, there can be no assurance of capital appreciation because securities
prices fluctuate.
Synthetic convertible securities differ from convertible securities in certain
respects. Unlike a true convertible security, which is a single security having
a unitary market value, 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 convertibility component. For this reason, the values of a synthetic
convertible and a true convertible security may respond differently to market
fluctuations. Investing in synthetic convertible securities involves the risks
normally involved in holding the securities comprising the synthetic convertible
security.
MANAGEMENT
The officers and directors of the Funds and their principal occupations for at
least the last five years are set forth below, with those directors of each Fund
who are "interested persons" of the Fund (as defined in the 1940 Act) indicated
by asterisk. Unless otherwise indicated, the address of each such person is Four
Embarcadero Center, San Francisco, California 94111.
38
<Page>
DSF FUND
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------------------------
NAME (AGE) POSITION HELD WITH THE FUND PRINCIPAL OCCUPATION(S) DURING THE
PAST 5 YEARS
- ----------------------------------------------------------------------------------------------------------------------
James J. Foley (77) Director since 1986 Faculty Member, Harvard Graduate
60 Pond Street School of Business (1952-1990).
Belmont, MA 02178 Consultant to the School's MBA
Admissions Board (since January
1991); Consultant to Courier Corp.
(publishing) (since 1995).
- ----------------------------------------------------------------------------------------------------------------------
Jeffery S. Rudsten (52) Director since 2000 From 1978 to 1999 Principal (1981),
P.O. Box 963 Senior Managing Director (1997-99),
Ross, CA 94957 and Head of Fixed Income Department
(1997-99), Dresdner RCM; Director,
RCM Strategic Global Government
Fund, Inc. (1994 to 1996).
- ----------------------------------------------------------------------------------------------------------------------
Theodore J. Coburn (48) Director and Chairman of the Board Partner, Brown, Coburn & Co. (since
116 East 68th Street since 2000 1991); Director, Dresdner RCM Global
New York, NY 10021 Funds, Inc. (since 2000); Chairman
and Director, Dresdner RCM
Investment Funds Inc. (since 1991);
Education Associate, Harvard
University Graduate School of
Education (since 1996); Director,
Nicholas-Applegate Fund, Inc. (since
1987), Measurement Specialties, Inc.
(designer and manufacturer of sensor
and sensor-based consumer products)
(since 1995), Video Update, Inc.
(retail video sales) (since 1997),
Belenos, Inc. (network consulting)
(since 1998), and Ariel Corporation
(technology network communications
equipment) (since 1998); Trustee,
Nicholas-Applegate Mutual Funds
(since 1992).
- ----------------------------------------------------------------------------------------------------------------------
Luke D. Knecht* (47) Director and President since 1999 Member of Board of Managers and
Managing Director, Dresdner RCM
(since 1998); Chairman and
President, RCM Strategic Global
Government Fund, Inc. (since 1999);
Executive Director, Russell Reynolds
Associates (global executive
recruiting firm) (1995-1997);
Chairman, Caywood Scholl Capital
Management (institutional
fixed-income investment adviser)
(since 1998).
- ----------------------------------------------------------------------------------------------------------------------
39
<Page>
- ----------------------------------------------------------------------------------------------------------------------
Stephen K. West* (72) Director since 1997 Partner, Sullivan & Cromwell
42 Old Wood Road (1964-1996); Of Counsel, Sullivan &
Bernardsville, NJ 07924 Cromwell (since 1997); Director,
AMVESCAP plc, First ING Life
Insurance Company of New York (since
1997), Swiss Helvetia Fund, Inc.
(since 1996) and Pioneer Funds
(since 1995).
- ----------------------------------------------------------------------------------------------------------------------
Phillip Goldstein (55) Director since 2000 Since 1992, has managed investments
60 Heritage Drive for a limited number of clients and
Pleasantville, NY 10570 has served as the portfolio manager
and president of the general partner
of Opportunity Partners, a private
investment partnership. Director,
Clemente Strategic Value Fund
(1998-2000), The Mexico Equity and
Income Fund (since 2000), and The
Italy Fund (since 2000).
- ----------------------------------------------------------------------------------------------------------------------
Glen Goodstein (37) Director since 2000 Since 1992 has managed investments
16830 Adlon Road for a limited number of clients;
Encino, CA 91436 held several executive positions
with Automatic Data Processing (1988
- 1996); Director, The Italy Fund
(since 2000).
- ----------------------------------------------------------------------------------------------------------------------
Andrew Dakos (34) Director since 2000 Private investor; Vice President -
14 Mill Street Sales, UVitec Printing Ink, Inc.
Lodi, NJ07644 (since 1997); Sales Manager
(1992-1997).
- ----------------------------------------------------------------------------------------------------------------------
Robert J. Goldstein (38) Secretary since April, 1998 Director and General Counsel,
Dresdner RCM (since July 2001);
Director and Associate General
Counsel, Dresdner RCM (January 1997
- June 2001); Associate, Weil,
Gotshal & Manges (1990 - 1996).
- ----------------------------------------------------------------------------------------------------------------------
Jennie M. Klein (36) Treasurer since April, 1998 Fund Administrator of Dresdner RCM
(since July 1998); Manager,
Commingled Fund Services (1994 -
June 1998).
- ----------------------------------------------------------------------------------------------------------------------
</Table>
* Indicates "interested persons" of DSF Fund, as defined in the 1940 Act. Mr.
Knecht is an "interested person" of DSF Fund because of his affiliation with DSF
Fund's investment adviser. Mr. West is an "interested person" of DSF Fund
because of his affiliation with DSF Fund's counsel, Sullivan & Cromwell.
RCS FUND
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------------------------
NAME (AGE) POSITIONS HELD WITH THE FUND PRINCIPAL OCCUPATION(S) DURING THE
PAST 5 YEARS
- ----------------------------------------------------------------------------------------------------------------------
Luke D. Knecht* (47) Chairman and President since Member of Board of Managers and
- ----------------------------------------------------------------------------------------------------------------------
40
<Page>
- ----------------------------------------------------------------------------------------------------------------------
1999 Managing Director, Dresdner RCM (since
1998); Chairman and President, RCM
Strategic Global Government Fund, Inc.
(since 1999); Executive Director,
Russell Reynolds Associates (1995 -
1997) (global executive recruiting
firm); Chairman, Caywood Scholl
Capital Management (since 1998)
(institutional fixed-income investment
adviser).
- ----------------------------------------------------------------------------------------------------------------------
James M. Whitaker (58) Director and Vice Chairman of the Attorney at Law, sole practitioner
Board since 1994 (since 1972).
- ----------------------------------------------------------------------------------------------------------------------
Francis E. Lundy (63) Director since 1994 Chairman and President, Technical
Instrument - San Francisco (since
1976); Vice President, Zygo
Corporation (1996 - 1999)(technology
manufacturing and sales); Director,
Industrialex Manufacturing Corp.
(since June 2000) (coating and
application techniques for electronics
industry).
- ----------------------------------------------------------------------------------------------------------------------
Gregory S. Young (44) Director since 2001 Principal, Teton Capital Management
(since 1990) (private equity venture
capital).
- ----------------------------------------------------------------------------------------------------------------------
George A. Rio (46)+ Chief Financial Officer since 1998 Executive Vice President and Client
Service Director of FDI (since April
1998); Senior Vice President and
Senior Key Account Manager for Putnam
Mutual Funds (June 1995 - March 1998).
- ----------------------------------------------------------------------------------------------------------------------
Robert J. Goldstein (38) Secretary since 2000 Director and General Counsel, Dresdner
RCM (since July 2001); Director and
Associate General Counsel, Dresdner
RCM (January 1997 to June 2001);
Associate with the law firm of Weil,
Gotshal & Manges (September 1990 -
December 1996).
- ----------------------------------------------------------------------------------------------------------------------
Steven L. Wong (34) Treasurer since 2000 Manager of Fund Administration,
Dresdner RCM (since December 1994).
- ----------------------------------------------------------------------------------------------------------------------
Margaret W. Chambers (41)+ Vice President and Assistant Senior Vice President and General
Secretary since 1998 Counsel of Funds Distributor, Inc.
("FDI") (since April 1998); Vice
President and Assistant General Counsel
for Loomis, Sayles & Company, L.P.
(August 1996 - March 1998); associate
with the law firm of
- ----------------------------------------------------------------------------------------------------------------------
41
<Page>
- ----------------------------------------------------------------------------------------------------------------------
Ropes & Gray (January 1986 - July
1996).
- ----------------------------------------------------------------------------------------------------------------------
Karen Jacoppo-Wood (34)+ Vice President and Assistant Vice President and Senior Counsel of
Secretary since 1998 FDI and an officer of certain
investment companies distributed by FDI
(since February 1996); Manager of SEC
Registration, Scudder, Stevens & Clark,
Inc. (June 1994 - January 1996).
- ----------------------------------------------------------------------------------------------------------------------
Douglas C. Conroy (32)+ Vice President and Assistant Vice President and Senior Client
Treasurer since 1998 Service Manager of FDI and an officer
of certain investment companies
distributed by FDI (since May 1998);
Assistant Department Manager of
Treasury Services and Administration of
FDI (April 1997 - April 1998);
Supervisor of Treasury Services and
Administration of FDI (February 1995 -
March 1997).
- ----------------------------------------------------------------------------------------------------------------------
Mary A. Nelson (37)+ Vice President and Assistant Senior Vice President and Manager of
Treasurer since 1998 Financial Services of FDI (since May
2000); Vice President and Manager of
Operations and Treasury Services of FDI
and an officer of certain investment
companies distributed by FDI (August
1994 - April 2000).
- ----------------------------------------------------------------------------------------------------------------------
Glen M. Wong (39) Assistant Treasurer since 2000 Manager of Fund Administration,
Dresdner RCM (since July 1999);
Financial Reporting Supervisor at
Fremont Mutual Funds, Inc. (July 1996
- June 1999); Accountant, The
Permanente Medical Group, Inc. (July
1995 - July 1996).
- ----------------------------------------------------------------------------------------------------------------------
</Table>
* Indicates "interested persons" of RCS Fund, as defined in the 1940 Act. Mr.
Knecht is an "interested person" of RCS Fund because of his affiliation with RCS
Fund's investment adviser. + The officer's address is 60 State Street, Suite
1300, Boston, Massachusetts 02109.
COMPENSATION TABLE
The following tables set forth the aggregate compensation paid by each Fund for
the most recent fiscal year to the directors for service on the Board of
Directors and that of all other funds in the "Fund Complex" (as defined in Item
22(a) of Schedule 14A under the Securities Exchange Act of 1934, as amended):
DSF FUND (for the fiscal year ended October 31, 2000)
42
<Page>
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------------------------
NAME OF PERSON AND AGGREGATE PENSION OR RETIREMENT ESTIMATED ANNUAL TOTAL COMPENSATION
POSITION COMPENSATION FROM BENEFITS ACCRUED AS BENEFITS UPON FROM FUND AND FUND
FUND PART OF FUND EXPENSES RETIREMENT COMPLEX * PAID TO
DIRECTORS
- ----------------------------------------------------------------------------------------------------------------------
Sir Robert Cotton, $14,742 None None $14,742(1)+
Director & Chairman of
the Board
- ----------------------------------------------------------------------------------------------------------------------
Theodore J. Coburn, None None None $31,000 (3)+
Director
- ----------------------------------------------------------------------------------------------------------------------
James J. Foley, $19,000 None None $19,000 (1)+
Director
- ----------------------------------------------------------------------------------------------------------------------
Jeffery S. Rudsten, None None None None (1)+
Director
- ----------------------------------------------------------------------------------------------------------------------
Luke D. Knecht, None None None None (2)+
Director and President
- ----------------------------------------------------------------------------------------------------------------------
Stephen K. West, $15,000 None None $15,000 (1)+
Director
- ----------------------------------------------------------------------------------------------------------------------
</Table>
* A Fund Complex consists of investment companies that hold themselves out to
investors as related companies for purposes of investment and investor services,
have a common investment adviser or have an investment adviser that is an
affiliated person of the investment adviser of any other investment companies.
Dresdner RCM and certain of its affiliates act as investment advisers to
investment companies other than DSF Fund and RCS Fund. Other than Luke D. Knecht
and Theodore J. Coburn, none of the DSF Fund Directors serves on the Board of
Directors of any other fund in the Fund Complex.
+ Indicates number of funds in the Fund Complex to which aggregate compensation
relates.
RCS FUND (for the fiscal year ended January 31, 2001)
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------------------------
NAME OF PERSON AND AGGREGATE PENSION OR RETIREMENT ESTIMATED ANNUAL TOTAL COMPENSATION
POSITION COMPENSATION FROM BENEFITS ACCRUED AS BENEFITS UPON FROM FUND AND FUND
FUND PART OF FUND EXPENSES RETIREMENT COMPLEX * PAID TO
DIRECTORS
- ----------------------------------------------------------------------------------------------------------------------
Luke D. Knecht None None None None(2)+
Chairman and President
- ----------------------------------------------------------------------------------------------------------------------
James M. Whitaker $14,000 None None $14,000(1)+
Director and Vice
Chairman of the Board
- ----------------------------------------------------------------------------------------------------------------------
Francis E. Lundy $14,000 None None $14,000(1)+
Director
- ----------------------------------------------------------------------------------------------------------------------
Gregory S. Young** None None None None(1)+
Director
- ----------------------------------------------------------------------------------------------------------------------
</Table>
43
<Page>
* A Fund Complex consists of investment companies that hold themselves out to
investors as related companies for purposes of investment and investor services,
have a common investment adviser or have an investment adviser that is an
affiliated person of the investment adviser of any other investment companies.
Dresdner RCM and certain of its affiliates act as investment advisers to
investment companies other than RCS Fund and DSF Fund. Other than Luke D.
Knecht, none of the RCS Fund Directors serves on the Board of Directors of any
other fund in the Fund Complex.
** Mr. Young did not serve as a Director of RCS Fund during fiscal year 2001.
+ Indicates number of funds in the Fund Complex to which aggregate compensation
relates.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of June 30, 2001, there were 11,954,566 shares of the DSF Fund outstanding
and 30,515,800 shares of the RCS Fund outstanding. On that date, to the
knowledge of DSF Fund and RCS Fund, no person "controlled" either of the Funds.
For the purposes of this disclosure, "control" means (1) the beneficial
ownership, either directly or through one or more controlled companies, of more
than 25 percent of the voting securities of a company; (2) the acknowledgment or
assertion of either the controlled or controlling party of the existence of
control; or (3) an adjudication under Section 2(a)(9) of the 1940 Act, which has
become final, that control exists.
As of July 9, 2001, the directors and officers and of DSF Fund, as a group,
beneficially owned 1,199,441 shares, representing 9.6% of the outstanding
shares, of DSF Fund. To the knowledge of DSF Fund, other than Depository Trust
Company ("DTC"), only the following persons owned of record or beneficially 5%
or more of the outstanding shares of DSF Fund: Invesco Funds Group, Inc. (6.4%);
Phillip Goldstein (5.99%).
As of July 9, 2001, the directors and officers of RCS Fund, as a group, owned
beneficially less than 1% of the outstanding shares of RCS Fund. To the
knowledge of RCS Fund, other than DTC, only the following person owned of record
or beneficially 5% or more of the outstanding shares of RCS Fund: Wachovia Corp.
(8.13%).
Upon consummation of the Merger, to the knowledge of each Fund, no person (other
than DTC) is expected to own of record or beneficially 5% or more of the
outstanding shares of the Combined Fund. However, the Funds note that First
Union Corp. ("First Union") and Wachovia Corp. ("Wachovia") have entered into an
agreement that contemplates the acquisition by First Union of shares of
Wachovia. If the First Union acquisition of Wachovia were to close prior to the
consummation of the Merger, and if First Union and Wachovia were to maintain
their current levels of share ownership in each of the Funds, that combined
entity would have the power to vote 5% or more of the voting securities of each
Fund.
THE INVESTMENT MANAGER
The Board of Directors of each Fund has overall responsibility for the operation
of such Fund. Pursuant to such responsibility, the Boards have approved various
contracts for designated financial organizations to provide, among other things,
day to day management services required by the Funds. Each Fund has retained as
its investment manager Dresdner RCM, a Delaware limited liability company with
principal offices at Four Embarcadero Center, San Francisco, California 94111.
Dresdner RCM is actively engaged in providing investment advisory services
44
<Page>
to institutional and individual clients. Dresdner RCM was established in
December of 1998 and is the successor to the business of its holding company,
Dresdner RCM Global Investors US Holdings LLC ("US Holdings"). Dresdner RCM was
originally formed as Rosenberg Capital Management in 1970, and it and its
successors have been consistently in business since then. As of the date of this
SAI, the six members of the Board of Managers of Dresdner RCM are William L.
Price (Chairman), Gerhard Eberstadt, George N. Fugelsang, Joachim Madler, Susan
C. Gause and Luke D. Knecht.
Dresdner RCM is wholly-owned by US Holdings. US Holdings is a registered
investment adviser and is a subsidiary of Dresdner Bank AG ("Dresdner Bank"), an
international banking organization headquartered in Frankfurt, Germany, whose
principal executive offices are located at Jurgen-Ponto-Platz, 60301
Frankfurt/Main. As of July 23, 2001, Dresdner Bank is a subsidiary of Allianz AG
("Allianz"), whose principal executive offices are located at Koeniginstrasse
28, D-80802, Munich, Germany. The Allianz Group of companies is one of the
world's leading financial service providers, offering insurance and asset
management products and services through property-casualty insurance, life and
health insurance, and financial services business segments. Allianz engages in
financial services operations through over 850 subsidiaries with approximately
120,000 employees in more than 70 countries around the world. Allianz had total
assets at December 31, 2000 of US$371.9 billion (440.0 billion Euros), net
income for the year ended December 31, 2000 of US$2.9 billion (3.5 billion
Euros) and total income for the year ended December 31, 2000 of US$65.0 billion
(76.9 billion Euros).
Munich Reinsurance, a German re-insurance company and holding company for the
Munich Reinsurance Group, currently owns in excess of 25% of the outstanding
voting securities of Allianz and, therefore, is presumed to "control" Allianz
within the meaning of the 1940 Act. The principal executive offices of Munich
Reinsurance are located at 80791 Munich, Germany. Dresdner RCM has informed the
Funds that it does not expect Munich Reinsurance to be involved in the
management of Dresdner RCM.
Dresdner Bank and Dresdner RCM, by virtue of Dresdner Bank's banking operations
in the United States, are subject to U.S. banking laws and regulations. U.S.
banking organizations generally may act as advisers to investment companies and
may buy and sell investment company shares for their customers. Dresdner RCM
believes that it may perform the services contemplated by its investment
management agreements with the Funds without violating these banking laws or
regulations. In addition, effective March 11, 2000, banking organizations that
qualify as and elect to become financial holding companies are permitted to
sponsor and distribute the shares of investment companies. Thus, the extent to
which Dresdner Bank qualifies and elects to engage in these activities, as well
as future changes in legal requirements or regulatory interpretations relating
to permissible activities of banking organizations and their affiliates, could
affect the nature and scope of services provided to the Funds by Dresdner RCM or
its affiliates.
Dresdner RCM provides DSF Fund with investment supervisory services pursuant to
investment management agreements, powers of attorney and service agreements
dated as of November 1, 1999. Dresdner RCM provides RCS Fund with investment
supervisory services pursuant to an investment management agreement dated June
14, 1996.
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Dresdner RCM manages each Fund's investments, provides various administrative
services and supervises each Fund's daily business affairs, subject to the
authority of each Fund's Board of Directors. Dresdner RCM is also the investment
manager for Dresdner RCM Large Cap Growth Fund, Dresdner RCM Tax Managed Growth
Fund, Dresdner RCM MidCap Fund, Dresdner RCM Small Cap Fund, Dresdner RCM
Biotechnology Fund, Dresdner RCM Balanced Fund, Dresdner RCM Global Small Cap
Fund, Dresdner RCM Global Technology Fund, Dresdner RCM Global Health Care Fund,
Dresdner RCM International Growth Equity Fund, Dresdner RCM Emerging Markets
Fund, Dresdner RCM Europe Fund, Dresdner RCM Global Equity Fund and Dresdner RCM
Strategic Income Fund, each a series of Dresdner RCM Global Funds, Inc., an
open-end management investment company, and Bergstrom Capital Corporation, a
closed-end management investment company.
Each Fund's investment 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 Board of
Directors, including a majority of the directors who are not parties to the
investment 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.
Dresdner RCM bears all expenses related to salaries of its employees and to
Dresdner RCM's overhead in connection with its duties under the investment
management agreement. Dresdner RCM also pays all directors' fees and salaries of
the Fund's directors and officers who are affiliated persons (as such term is
defined in the 1940 Act) of Dresdner RCM.
Except for the expenses specifically assumed by Dresdner RCM, each Fund has,
under its respective investment management agreement, assumed the obligation for
payment of all of its expenses, including, without limitation, fees of the
directors not affiliated with Dresdner RCM and board meeting expenses; fees of
Dresdner RCM; fees of the Fund's administrator; interest charges; taxes; charges
and expenses of the Fund's legal counsel and independent accountants, and of the
transfer agent, registrar and dividend reinvestment and disbursing agent of the
Fund; expenses of repurchasing shares of the Fund; expenses of printing and
mailing share certificates, stockholder reports, notices, proxy statements and
reports to governmental offices; brokerage and other expenses connected with the
execution, recording and settlement of portfolio security transactions; expenses
connected with negotiating, effecting purchases or sales or registering
privately issued portfolio securities; fees and expenses of the Fund's custodian
and sub-custodians for all services to the Fund, including safekeeping of Funds
and securities and maintaining required books and accounts; expenses of
calculating and publishing the net asset value of the Fund's shares; expenses of
membership in investment company associations, premiums and other costs
associated with the acquisition of a mutual fund directors and officers errors
and omissions liability insurance policy, expenses of fidelity bonding and other
insurance premiums; expenses of stockholders' meetings; SEC and state blue sky
registration fees; New York Stock Exchange listing fees; and its other business
and operating expenses.
For the services rendered by Dresdner RCM under DSF Fund's investment management
agreement, DSF Fund pays to Dresdner RCM a monthly fee equal to the annualized
rate of
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0.70% of the Fund's average daily net assets up to $100 million and at an annual
rate of 0.65% of the Fund's average daily net assets in excess of $100 million
during the month. RCS Fund pays to Dresdner RCM a monthly fee equal to the
annualized rate of 0.95% of the Fund's average daily net assets during the
month.
The total amounts paid to Dresdner RCM by DSF Fund under the Investment Advisory
Contract for the last three fiscal years were $706,840, $684,186 and $620,689
for the fiscal years ending October 31, 1998, 1999 and 2000, respectively. The
total amounts paid to Dresdner RCM by RCS Fund under the Investment Management
Agreement for the fiscal years ending January 31, 1999, 2000 and 2001 were
$3,365,871, $3,222,796 and $3,071,337, respectively.
Dresdner RCM has agreed to limit each Fund's expenses as described in the
Prospectus. In the event that expenses of a Fund for any fiscal year should
exceed the expense limitation on investment company expenses imposed by any
statute or regulatory authority of any jurisdiction in which shares of the Fund
are qualified for offer and sale, the compensation due Dresdner RCM shall be
reduced, and, if necessary, Dresdner RCM shall bear the Fund's expenses to the
extent required by such expense limitation.
If Dresdner RCM shall serve for less than the whole of a month, the foregoing
compensation shall be prorated.
Each Fund's investment management agreement provides that Dresdner RCM 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 investment 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 Dresdner RCM's
reckless disregard of its duties and obligations under the investment management
agreement.
Each investment 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 that is the subject of the investment management agreement, by a vote
of the majority of the Board of Directors, or by Dresdner RCM on 60 days'
written notice and will automatically terminate in the event of its assignment
(as defined in the 1940 Act).
OTHER SERVICE PROVIDERS
DSF FUND
Brown Brothers Harriman & Co., 40 Water Street, Boston, Massachusetts 02109,
acts as DSF Fund's custodian for assets of DSF Fund held in the United States.
DSF Fund's portfolio of securities and cash, when invested in foreign
securities, is held by subcustodians who have been approved by the Directors of
DSF Fund. Selection of the subcustodians has been made by the Directors of DSF
Fund following a consideration of a number of factors, including, but not
limited to, the reliability and financial stability of the institution; the
ability of the institution to perform capable custodial services for DSF Fund;
the reputation of the institution in its national market; the political and
economic stability of the countries involved; and risks of potential
nationalization or expropriation of DSF Fund assets.
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PricewaterhouseCoopers LLP ("PwC"), 160 Federal Street, Boston, Massachusetts
02110, acts as independent accountants for DSF Fund and in such capacity audits
DSF Fund's annual financial statements.
RCS FUND
State Street Bank and Trust Company ("State Street") acts as the administrator
and custodian for RCS Fund. State Street's principal business address is 1776
Heritage Drive, North Quincy, Massachusetts 02171. EquiServe, 150 Royall Street,
Canton, Massachusetts 02021, is RCS Fund's transfer agent.
The custodian is responsible for the safekeeping of RCS Fund's assets and the
appointment of any subcustodian banks and clearing agencies. The transfer agent
is responsible for, among other things, establishing and maintaining stockholder
accounts, issuing certificates for shares of common stock of the Fund (if any),
monitoring the number of shares of common stock issued and outstanding from time
to time, and effecting payments of dividends and other distributions declared
from time to time by the Board with respect to the shares of common stock.
PwC acts as the independent public accountants for RCS Fund. PwC audits
financial statements and financial highlights for the Fund and provides other
audit, tax and related services. PwC's principal business address is 160 Federal
Street, Boston, Massachusetts 02110.
BROKERAGE ALLOCATION AND OTHER PRACTICES
DSF FUND
The primary objective in placing orders for the purchase and sale of securities
for DSF Fund's portfolio is to obtain best execution, taking into account such
factors as price, commission, size of order, difficulty of execution and skill
required of the broker. Purchases and sales of debt securities are usually
principal transactions. Such portfolio securities normally are purchased from or
sold to issuers directly or dealers serving as market makers for the securities
at a net price. Generally, transactions involving debt securities do not involve
brokerage commissions. The cost of executing DSF Fund's portfolio securities
transactions consists primarily of dealer spreads and underwriting commissions.
The DSF Fund will not and has not engaged in transactions with any affiliated
person in which such person acts as principal.
For the fiscal years ended October 31, 1998, 1999 and 2000, DSF Fund paid no
brokerage commissions.
Brokers that act as agents and dealers that act as principal are subject to
regulation by governmental authorities, including the SEC, if they carry on a
business dealing in securities.
TURNOVER. DSF Fund's turnover rate is calculated by dividing the lesser of the
Fund's sales or purchases of securities during a year (excluding any security
the maturity of which at the time of acquisition is one year or less) by the
average monthly value of the Fund's securities for the year. Higher turnover
rates can result in corresponding increases in the Fund's transaction costs and
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may result in capital gain. The Fund will not consider turnover rate a limiting
factor in making investment decisions consistent with its investment objectives
and policies.
RCS FUND
GENERAL. Portfolio transactions on behalf of the Fund are allocated to various
brokers and dealers by Dresdner RCM in its best judgment. The primary
consideration is prompt and effective execution of orders at the most favorable
price. RCS Fund's portfolio securities ordinarily are purchased from and sold to
parties acting as either principal or agent. Newly issued securities ordinarily
are purchased directly from the issuer or from an underwriter; other purchases
and sales usually are placed with those brokers or dealers from which Dresdner
RCM determines that the best price or execution will be obtained. In most cases
no brokerage commissions, as such, are paid by the Fund for purchases and sales
undertaken through principal transactions, although the price paid usually
includes an undisclosed compensation to the dealer. The prices paid to
underwriters of newly issued securities typically include a concession paid by
the issuer to the underwriter, and purchasers of after-market securities from
dealers ordinarily are executed at a price between the bid and asked price.
Subject to the considerations above, brokers or dealers may be selected for
research, statistical or other services to enable Dresdner RCM to supplement its
own research and analysis with the views and information of other securities
firms.
Research services furnished by broker-dealers through which RCS Fund effects
securities transactions may be used by Dresdner RCM in managing other investment
funds and, conversely, research services furnished to Dresdner RCM by
broker-dealers in connection with other funds Dresdner RCM advises may be used
by Dresdner RCM in advising the Fund. Although it is not possible to place a
dollar value on these services, Dresdner RCM is of the view that the receipt of
the services should not reduce the overall costs of its research services.
Investment decisions for the Fund are made independently from those of other
investment companies managed by Dresdner RCM. If those investment companies or
other clients of Dresdner RCM are prepared to invest in, or desire to dispose
of, investments at the same time as the Fund, however, available investments or
opportunities for sales will be allocated equitably to each client of Dresdner
RCM. In some cases, this procedure may adversely affect the size of the position
obtained for or disposed of by the Fund or the price paid or received by the
Fund.
For the fiscal years ended January 31, 1999, 2000 and 2001, RCS Fund paid no
brokerage commissions. At the end of fiscal year 2001, RCS Fund held securities
valued at $5,858,000 of Donaldson, Lufkin & Jenrette Securities Corp., one of
RCS Fund's regular broker-dealers.
TURNOVER. RCS Fund's turnover rate is calculated by dividing the lesser of the
Fund's sales or purchases of securities during a year (excluding any security
the maturity of which at the time of acquisition is one year or less) by the
average monthly value of the Fund's securities for the year. Higher turnover
rates can result in corresponding increases in the Fund's transaction costs and
may result in capital gain. The Fund will not consider turnover rate a limiting
factor in making investment decisions consistent with its investment objectives
and policies.
REPURCHASE OF SHARES
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Each Fund's Board of Directors may consider from time to time repurchases of
common stock on the open market or in private transactions or the making of
tender offers for common stock. Each Fund may repurchase shares of its common
stock in the open market or in privately negotiated transactions when the Fund
can do so at prices below their then current net asset value per share on terms
that the Board of Directors believes represent a favorable investment
opportunity.
No assurance can be given that repurchases and/or tenders will result in each
Fund's common stock's trading at a price that is close or equal to net asset
value. The market price of the common stock will, among other things, be
determined by the relative demand for, and supply of, the common stock in the
market, the Fund's investment performance, the Fund's dividends and investor
perception of the Fund's overall attractiveness as an investment as compared
with other investment alternatives. Each Fund's acquisition of common stock will
decrease the total assets of that Fund and therefore have the effect of
increasing that Fund's expense ratio. Each Fund may borrow money to finance the
repurchase of shares subject to certain limitations. See "Investment
Restrictions." Any interest on the borrowings will reduce the Fund's net income.
Because of the nature of each Fund's investment objectives, policies and
securities holdings, Dresdner RCM consummates common stock repurchases and
tenders.
When a tender offer is authorized to be made by a Fund's Board of Directors, it
will be an offer to purchase at a price equal to the net asset value of all (but
not less than all) of the shares owned by a holder of common stock (or
attributed to the stockholder for federal income tax purposes under the Code). A
stockholder who tenders all common stock shares owned or considered owned by
him, as required, will realize a taxable gain or loss depending upon his basis
in his shares. See "Taxation."
The policy of each Fund's Board of Directors with respect to tender offers and
to repurchases, which may be changed by the Board of Directors, is that the Fund
will not accept tenders or effect repurchases if (1) those transactions, if
consummated, would (a) result in the delisting of the common stock from the NYSE
or (b) impair the Fund's status as a regulated investment company under the
Code; (2) the Fund would not be able to liquidate securities to repurchase
common stock in an orderly manner that is consistent with the Fund's investment
objectives and policies; or (3) there is, in the Board's judgment, any (a)
material legal action or proceeding instituted or threatened challenging the
transactions or otherwise materially adversely affecting the Fund, (b)
suspension of or limitation on prices for trading securities generally on the
NYSE or any exchange on which securities held by the Fund are traded, (c)
declaration of a banking moratorium by federal or state authorities or any
suspension of payment by banks in the United States, (d) limitation affecting
the Fund or issuers of securities held by the Fund imposed by federal, state or
local authorities on the extension of credit by lending institutions, (e)
commencement of war, armed hostilities or other international or national
calamity directly or indirectly involving the United States or (f) other event
or condition that would have a material adverse effect on the Fund or its
stockholders if shares of common stock were repurchased.
If a Fund liquidates securities in order to repurchase shares of common stock,
the Fund may realize gains and losses. See "Taxation." A Fund's turnover rate
may or may not be affected by the Fund's repurchases of shares of common stock
pursuant to a tender offer.
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TAXATION
GENERAL
Each Fund intends for each taxable year to qualify as a "regulated investment
company" under the Internal Revenue Code (the "Code"). To so qualify, a Fund
must, among other things, (i) derive at least 90% of its gross income in each
taxable year from dividends, interest, payments with respect to securities
loans, gains from the sale or other disposition of stock or securities or
foreign currency, or certain other income (including but not limited to, gains
from options, futures and forward contracts) derived with respect to its
business of investing in stock, securities or currency; and (ii) diversify its
holdings so that, at the end of each quarter of its taxable year, the following
two conditions are met: (a) at least 50% of the value of the Fund's assets is
represented by cash, U.S. government securities, securities of other regulated
investment companies and other securities with respect to which the Fund's
investment is 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 the Fund's assets is
invested in securities of any one issuer (other than U.S. government securities
or securities of other regulated investment companies). The Treasury Department
is authorized to issue regulations to provide that foreign currency gains that
are not "directly related" to a Fund's principal business of investing in stock
or securities may be excluded from the income that qualifies for purposes of the
90% gross income requirement described above with respect to the Fund's
qualification as a "regulated investment company." No such regulations have yet
been issued.
If a Fund qualifies as a regulated investment company for any taxable year and
makes timely distributions to its stockholders of 90% or more of its net
investment income for that year (calculated without regard to its net capital
gain, i.e., the excess of its net long-term capital gain over its net short-term
capital loss), it will not be subject to federal income tax on the portion of
its taxable income for the year (including any net capital gain) that it
distributes to shareholders. Investors should consult their own counsel for a
complete understanding of the requirements a Fund must meet to qualify to be
taxed as a "regulated investment company."
The following discussion assumes a Fund qualifies to be taxed as a regulated
investment company. The information set forth below under the headings
"Dividends and Distributions," "Sales" and "Backup Withholding" relates solely
to the material United States federal tax consequences of owning Fund shares.
DIVIDENDS AND DISTRIBUTIONS
Each Fund intends to make timely distributions of its taxable income (including
any net capital gain) so that the Fund will not be subject to federal income
taxes. Each Fund also intends to declare and distribute dividends in the amounts
and at the times necessary to avoid the application of the 4% federal excise tax
imposed on certain undistributed income of regulated investment companies. A
Fund will be required to pay the 4% excise tax to the extent it does not
distribute to its shareholders during any calendar year an amount equal to the
sum of (i) 98% of its ordinary taxable income (excluding foreign currency gains)
for the calendar year, (ii) 98% of
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its capital gain net income and foreign currency gains for the twelve months
ending October 31 of such year (or November 30 or December 31 if elected by the
Fund) and (iii) any ordinary income or capital gain net income from the
preceding calendar year that was not distributed during such year. For this
purpose, income or gain retained by a Fund that is subject to corporate income
tax will be considered to have been distributed by the Fund by year-end. For
federal income and excise tax purposes, dividends declared and payable to
stockholders of record as of a date in October, November or December but
actually paid during the following January will be taxable to these stockholders
for the year declared, and not for the subsequent calendar year in which the
stockholders actually received the dividend.
Dividends of a Fund's net ordinary income and distributions of any net realized
short-term capital gain are taxable to stockholders as ordinary income. Since
each Fund expects to derive substantially all of its gross income from sources
other than dividends, it is expected that none of the Fund's dividends or
distributions will qualify for the dividends-received deduction for
corporations.
Distributions of net capital gain by a Fund to its stockholders will be taxable
to the stockholders as long-term capital gains, irrespective of the length of
time a stockholder may have held his Fund shares. Any dividend or distribution
received by a stockholder on shares of a Fund will have the effect of reducing
the net asset value of such shares by the amount of such dividend or
distribution. Furthermore, a dividend or distribution made shortly after the
purchase of such shares by a stockholder, although in effect a return of capital
to that particular stockholder, would be taxable to him as described above.
Dividends are taxable in the manner discussed regardless of whether they are
paid to the stockholder in cash or are reinvested in additional shares of a
Fund.
After the end of the taxable year, a Fund will notify stockholders of the
federal income tax status of any distributions made by the Fund to stockholders
during such year.
SALES
Any gain or loss arising from a sale of Fund shares generally will be capital
gain or loss (except, in certain cases, with respect to a sale by a dealer) and
will be long-term capital gain or loss if such stockholder has held such shares
for more than one year at the time of the sale; otherwise it will be short-term
capital gain or loss. However, if a stockholder has held shares in a Fund for
six months or less and during that period has received a distribution of net
capital gain, any loss recognized by the stockholder on the sale of those shares
during the six-month period will be treated as a long-term capital loss to the
extent of such distribution. In determining the holding period of such shares
for this purpose, any period during which a stockholder's risk of loss is offset
by means of options, short sales or similar transactions is not counted.
Any loss realized by a stockholder on a sale or exchange of shares of a Fund
will be disallowed to the extent the shares disposed of are replaced within a
period of 61 days beginning 30 days before and ending 30 days after the shares
are sold or exchanged. For this purpose, acquisitions pursuant to a Fund's
dividend reinvestment plan would constitute a replacement if made within
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such period. If disallowed, the loss will be reflected in an upward adjustment
to the basis of the shares acquired.
BACKUP WITHHOLDING
A Fund generally will be required to withhold tax on payments made to a
noncorporate stockholder who fails to furnish the Fund with a correct taxpayer
identification number, who has been notified by the Internal Revenue Service
that such stockholder underreported dividends or interest income, or who fails
to certify to the Fund that the stockholder is not subject to such withholding.
UNITED STATES FEDERAL INCOME TAXATION OF A FUND
The following discussion relates to certain material United States federal
income tax consequences to a Fund with respect to the determination of its
"investment company taxable income" each year.
CURRENCY FLUCTUATIONS. A Fund's transactions in foreign currencies, foreign
currency-denominated debt securities and certain foreign currency options,
futures contracts and forward contracts (and similar instruments) may give rise
to ordinary income or loss to the extent such income or loss results from
fluctuations in the value of the foreign currency concerned. Such fluctuations
could therefore affect the amount, timing and character of distributions to
stockholders.
OPTIONS, FUTURES, FORWARD CONTRACTS AND SWAP AGREEMENTS. A Fund's transactions
in options, futures contracts, hedging transactions, forward contracts,
straddles and foreign currencies will be subject to special tax rules (including
mark-to-market, constructive sale, straddle, wash sale and short sale rules),
the effect of which may be to accelerate income to the Fund, defer losses to the
Fund, cause adjustments in the holding periods of the Fund's securities, convert
long-term capital gains into short-term capital gains and convert short-term
capital losses into long term capital losses. These rules could therefore affect
the amount, timing and character of distributions to stockholders.
OTHER TAXATION. Payments of interest, principal and prepayments of principal
made on mortgage pass-through securities such as GNMA, FNMA, and FHLMC
Certificates are taxed directly to certificate holders such as a Fund, and
therefore generally maintain their character as interest, principal, or
prepayments of principal when received by a Fund.
A Fund's investments in certain debt obligations may cause it to recognize
taxable income in excess of the cash generated by such obligations. Thus, a Fund
could be required at times to liquidate other investments in order to satisfy
its distribution requirements.
FOREIGN TAXES
Investment income received by a Fund from foreign government securities may be
subject to foreign income taxes, including taxes withheld at the source. The
United States has entered into
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tax treaties with many foreign countries which may entitle a Fund to a reduced
rate of such taxes or exemption from taxes on such income. It is impossible to
determine the effective rate of foreign tax in advance since the amount of a
Fund's assets to be invested within various countries is not known. If more than
50% of the value of a Fund's total assets at the close of its taxable year
consists of securities of foreign corporations, such Fund will be eligible to
elect to "pass through" to the Fund's stockholders the amount of eligible
foreign income and similar taxes paid by the Fund, provided that the Fund holds
such securities (without protection from risk of loss) on the ex-dividend date
and for at least 15 additional days during the 30-day period surrounding the
ex-dividend date. If this election is made, a stockholder generally subject to
tax will be required to include in gross income (in addition to taxable
dividends actually received) his or her pro rata share of the foreign taxes paid
by the Fund, and may be entitled either to deduct (as an itemized deduction) his
or her pro rata share of foreign taxes in computing his taxable income or to use
it as a foreign tax credit against his or her U.S. federal income tax liability,
subject to certain limitations.
CONCLUSION
The foregoing is a brief summary of the U.S. federal tax laws applicable to
stockholders in the Funds. Stockholders may also be subject to state and local
taxes, although distributions of a Fund that are derived from interest on
certain obligations of the U.S. Government and agencies thereof may be exempt
from state and local taxes in certain states. Stockholders should consult their
tax advisors regarding the U.S. federal tax consequences in light of their
individual circumstances as well as any tax consequences that may arise under
any state, local or foreign taxing jurisdiction.
FINANCIAL STATEMENTS
The audited financial statements for RCS Fund and DSF Fund are included in each
Fund's annual reports filed with the SEC and are incorporated by reference in
this SAI in reliance upon the reports of PwC, independent accountants for each
Fund, given on their authority as experts in auditing and accounting.
RCS FUND AND DSF FUND PRO FORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED)
The accompanying unaudited pro forma combining statement of assets and
liabilities and investment portfolio assume that the Merger occurred as of
January 31, 2001, and the unaudited pro forma combining statement of operations
for the twelve months ended January 31, 2001 presents the results of operations
of RCS Fund as if the combination with DSF Fund had been consummated at February
1, 2001. The pro forma results of operations are not necessarily indicative of
future operations or the actual results that would have occurred had the
combination been consummated at February 1, 2001. These historical statements
have been derived from RCS Fund's and DSF Fund's books and records utilized in
calculating daily net asset value at January 31, 2001 and for the twelve-month
period then ended.
The pro forma statements give effect to (i) the proposed acquisition by RCS Fund
of the net assets of DSF Fund and (ii) the pre-Merger Tender Offer (assuming
that 50% of outstanding
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shares of DSF Fund common stock are tendered at a price equal to 99 1/2% of net
asset value at the expiration of the Tender Offer). Under generally accepted
accounting principles, the historical cost of investment securities will be
carried forward to the surviving entity and the results of operations of RCS
Fund for pre-combination periods will not be restated. The pro forma statement
of operations does not reflect the non-recurring expenses of either Fund in
carrying out its obligations under the Merger Agreement.
The unaudited pro forma combining statements should be read in conjunction with
the separate financial statements of RCS Fund and DSF Fund for fiscal year ended
January 31, 2001 and October 31, 2000, respectively, which are included in each
Fund's Annual Report to stockholders filed with the SEC. Copies of the Funds'
Annual Reports will be provided free of charge to any stockholder of DSF Fund or
RCS Fund who requests a copy of this SAI.
55
<Page>
PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES AND STATEMENT OF
OPERATIONS(1)
PRO FORMA COMBINING CONDENSED STATEMENT OF ASSETS AND LIABILITIES AS OF
JANUARY 31, 2001 (UNAUDITED)
<Table>
<Caption>
RCS FUND DSF FUND PRO FORMA PRO FORMA
-------- -------- ADJUSTMENTS COMBINED
----------- --------
Investments, at value $ 637,358,447 $ 65,620,251 $ $702,978,698
Cash 1,536,596 1,536,596
-
Payable for Investments Purchased *
(317,959,996) (23,414,653) (341,374,649)
Other assets less liabilities 20,843,007
20,473,357 369,650
------------------ --------------------- --------------- ---------------------
Total Net Assets $ 339,871,808 $ 44,111,844 $ $383,983,652
------------------ --------------------- --------------- ---------------------
Shares Outstanding
30,515,800 5,977,283 (2,016,653) 34,476,430
------------------ --------------------- --------------- ---------------------
Net Assets Per Share $ 11.14 $ 7.38 $ $11.14
</Table>
* Includes investments purchased on a delayed delivery basis.
56
<Page>
PRO FORMA COMBINING CONDENSED STATEMENT OF OPERATIONS FOR THE TWELVE MONTH
PERIOD ENDED JANUARY 31, 2001
(UNAUDITED)
<Table>
<Caption>
RCS FUND DSF FUND PRO FORMA PRO FORMA
-------- -------- ADJUSTMENTS COMBINED
----------- --------
INVESTMENT INCOME:
Interest income $ 32,961,518 $ 4,643,297 $ 37,604,815
Total Investment $ 37,604,815
Income 32,961,518 4,643,297 -
EXPENSES
Management fees 3,071,337 311,554 19,285(2) $ 3,402,176
Director fees 32,101 79,665 16,234(3) 128,000
All other expenses 755,911 283,729 (273,760)(4) 765,880
Total expenses 3,859,349 674,948 (238,241) 4,296,056
NET INVESTMENT INCOME 29,102,169 3,968,349 33,308,759
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
</Table>
57
<Page>
<Table>
Net realized gain (loss)
from investments (29,747,152) (1,830,710) (31,577,862)
Net unrealized
appreciation 49,248,565 2,254,894 51,503,459
(depreciation)
of investments
Net increase in net assets
from operations $ 48,603,582 $ 4,392,533 $ (238,241) $ 53,234,356
================== ================== ================= ==============
</Table>
(1) These financial statements set forth the unaudited pro forma condensed
Statement of Assets and Liabilities as of January 31, 2001, and the
unaudited pro forma condensed Statement of Operations for the twelve-month
period ended January 31, 2001 for RCS Fund and DSF Fund as adjusted to give
effect to the Merger as if it had occurred as of the beginning of the
period. These statements have been derived from the books and records
utilized in calculating daily net asset value for each Fund.
(2) Reflects proposed post-Merger management fee structure.
(3) Increase in Director expenses based on new director fee structure
implemented in fiscal year 2002.
(4) Decrease in other expenses based on pro forma combined expense projection
after giving effect to the Merger.
58
<Page>
<Table>
<Caption>
- -------------------------------------------------------------------------------------------------------------------------
PRO FORMA COMBINING PORTFOLIO OF INVESTMENTS AS OF JANUARY 31, 2001 (UNAUDITED)
- -------------------------------------------------------------------------------------------------------------------------
ISSUER RATE MATURITY DSF FUND PAR RCS FUND PAR DSF FUND PAR
AMOUNT(000'S) AMOUNT(000'S) AMOUNT TO BE
LIQUIDATED
(000'S)
- -------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS (USD) 0.0%
- -------------------------------------------------------------------------------------------------------------------------
Malaysia 8.75% 06/01/09 1,500
- (1,500)
- -------------------------------------------------------------------------------------------------------------------------
Waste Management Inc 6.88% 05/15/09 1,000
- (1,000)
- -------------------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS (USD) 2,500
- (2,500)
- -------------------------------------------------------------------------------------------------------------------------
EMERGING MARKETS BONDS (USD) 12.6%
- -------------------------------------------------------------------------------------------------------------------------
Republic of Argentina 11.75% 04/07/09 7,116 11,354 (7,116)
- -------------------------------------------------------------------------------------------------------------------------
Federal Republic of Brazil 7.69% 04/15/12 4,425 10,196 (4,425)
DCB
- -------------------------------------------------------------------------------------------------------------------------
Federal Republic of Brazil, C 8.00% 04/15/14 4,051 10,314 (4,051)
Bond
- -------------------------------------------------------------------------------------------------------------------------
Russia Federation, 144A 12.75% 06/24/28 650 9,967 (650)
- -------------------------------------------------------------------------------------------------------------------------
Russia Federation, Series REGS 11.00% 07/24/18 4,290 4,135 (4,290)
- -------------------------------------------------------------------------------------------------------------------------
United Mexican States * 7.38% 07/06/06 6,440
-
- -------------------------------------------------------------------------------------------------------------------------
Bulgaria FLIRB, Series A 3.00% 07/28/12 2,427 3,839 (2,427)
- -------------------------------------------------------------------------------------------------------------------------
Republic of Argentina Series FRB 7.63% 03/31/05 958 4,428
- -------------------------------------------------------------------------------------------------------------------------
Republic of Venezuela FLIRB, Series A 7.44% 03/31/07 1,393 3,869
- -------------------------------------------------------------------------------------------------------------------------
Telefonica Argentina, 144A 9.13% 05/07/08 5,000
-
- -------------------------------------------------------------------------------------------------------------------------
Russia Federation, 144A 10.00% 06/26/07 4,430
- (4,430)
- -------------------------------------------------------------------------------------------------------------------------
CIA Petrolifera Marlim, 144A 12.25% 09/26/08 1,410 2,740
- -------------------------------------------------------------------------------------------------------------------------
United Mexican States 8.63% 03/12/08 3,905
-
- -------------------------------------------------------------------------------------------------------------------------
Hanvit Bank, 144A 12.75% 03/01/10 1,210 2,359
- -------------------------------------------------------------------------------------------------------------------------
<Caption>
- ----------------------------------------------------------------------------------------------------------------------------------
ISSUER PRO FORMA DSF FUND MARKET RCS FUND MARKET DSF FUND PRO FORMA
COMBINED PAR VALUE AMOUNT($) VALUE AMOUNT($) SECURITIES TO COMBINED MARKET
AMOUNT BE LIQUIDATED VALUE AMOUNT
(000'S) ($) ($)
- ----------------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS (USD) 0.0%
- ----------------------------------------------------------------------------------------------------------------------------------
Malaysia 0 $1,646,234 ($1,646,234) $0
-
- ----------------------------------------------------------------------------------------------------------------------------------
Waste Management Inc 0 0
968,422 - (968,422)
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS (USD) 0 2,614,656 ($2,614,656) 0
-
- ----------------------------------------------------------------------------------------------------------------------------------
EMERGING MARKETS BONDS (USD) 12.6%
- ----------------------------------------------------------------------------------------------------------------------------------
Republic of Argentina 11,354 11,149,628 (7,012,818) 11,149,628
7,012,818
- ----------------------------------------------------------------------------------------------------------------------------------
Federal Republic of Brazil 10,196 7,825,430 (3,419,290) 7,825,430
DCB 3,419,290
- ----------------------------------------------------------------------------------------------------------------------------------
Federal Republic of Brazil, C 10,314 8,393,769 (3,316,296) 8,393,769
Bond 3,316,296
- ----------------------------------------------------------------------------------------------------------------------------------
Russia Federation, 144A 9,967 587,438 8,945,383 (587,438) 8,945,383
- ----------------------------------------------------------------------------------------------------------------------------------
Russia Federation, Series REGS 4,135 3,142,600 (3,233,206) 3,142,600
3,233,206
- ----------------------------------------------------------------------------------------------------------------------------------
United Mexican States * 6,440 6,198,331 6,198,331
-
- ----------------------------------------------------------------------------------------------------------------------------------
Bulgaria FLIRB, Series A 3,839 2,936,835 (1,871,702) 2,936,835
1,871,702
- ----------------------------------------------------------------------------------------------------------------------------------
Republic of Argentina Series FRB 5,386 4,140,180 5,037,430
897,250
- ----------------------------------------------------------------------------------------------------------------------------------
Republic of Venezuela FLIRB, Series A 5,262 3,288,655 4,481,601
1,192,946
- ----------------------------------------------------------------------------------------------------------------------------------
Telefonica Argentina, 144A 5,000 4,575,000 4,575,000
-
- ----------------------------------------------------------------------------------------------------------------------------------
Russia Federation, 144A 0 (3,544,000) 0
3,544,000 -
- ----------------------------------------------------------------------------------------------------------------------------------
CIA Petrolifera Marlim, 144A 4,150 2,842,750 4,309,150
1,466,400
- ----------------------------------------------------------------------------------------------------------------------------------
United Mexican States 3,905 3,983,100 3,983,100
-
- ----------------------------------------------------------------------------------------------------------------------------------
Hanvit Bank, 144A 3,569 2,429,770 3,677,241
1,247,471
- ----------------------------------------------------------------------------------------------------------------------------------
</Table>
59
<Page>
<Table>
<Caption>
- -------------------------------------------------------------------------------------------------------------------------
ISSUER RATE MATURITY DSF FUND PAR RCS FUND PAR DSF FUND PAR
AMOUNT(000'S) AMOUNT(000'S) AMOUNT TO BE
LIQUIDATED
(000'S)
- -------------------------------------------------------------------------------------------------------------------------
APP China Group Ltd 14.00% 03/15/10 1,048 2,452
- -------------------------------------------------------------------------------------------------------------------------
Republic of Venezuela DCB, Series DL 7.38% 12/18/07 2,500 833 (2,500)
- -------------------------------------------------------------------------------------------------------------------------
Mexican United 11.50% 05/15/26 2,500 (2,500)
States -
- -------------------------------------------------------------------------------------------------------------------------
Grupo Iusacell SA de CV 14.25% 12/01/06 1,060 1,285
- -------------------------------------------------------------------------------------------------------------------------
GH Water Suppy Holdings Ltd, 144A 7.00% 06/22/08 823 1,282
- -------------------------------------------------------------------------------------------------------------------------
Globe Telecom, 144A 13.00% 08/01/09 555 1,254
- -------------------------------------------------------------------------------------------------------------------------
Bulgaria FLIRB 7.75% 07/28/11 452 1,335
- -------------------------------------------------------------------------------------------------------------------------
Partner Communications 13.00% 08/15/10 463 1,010
- -------------------------------------------------------------------------------------------------------------------------
Mexican United 9.88% 02/01/10 455 1,015
States
- -------------------------------------------------------------------------------------------------------------------------
Federal Republic of Brazil, Floating Rate 6.00% 04/15/24 450 1,000
Bond, Par Z
- -------------------------------------------------------------------------------------------------------------------------
Mexican United 10.38% 02/17/09 1,230
States - (1,230)
- -------------------------------------------------------------------------------------------------------------------------
Republic of Philippines 7.50% 06/01/08 716
-
- -------------------------------------------------------------------------------------------------------------------------
Grupo Elektra, 144A 12.00% 04/01/08 530
- (530)
- -------------------------------------------------------------------------------------------------------------------------
Indah Kiat Finance 10.00% 07/01/07 470
- (470)
- -------------------------------------------------------------------------------------------------------------------------
Korea Exchange Bank, 144A 13.75% 06/30/10 256
- (256)
- -------------------------------------------------------------------------------------------------------------------------
Satelites Mexicanos SA, Series B 10.13% 11/01/04 250
- (250)
- -------------------------------------------------------------------------------------------------------------------------
TOTAL EMERGING MARKETS BONDS (USD) 45,402 90,728 (35,125)
- -------------------------------------------------------------------------------------------------------------------------
HIGH YIELD BONDS (USD) 0.0%
- -------------------------------------------------------------------------------------------------------------------------
Azurix Corp, 144A 10.38% 02/15/07 750
- (750)
- -------------------------------------------------------------------------------------------------------------------------
Calpine Corp 7.75% 04/15/09 750
- (750)
- -------------------------------------------------------------------------------------------------------------------------
Cogentrix Energy Inc 8.75% 10/15/08 750
- (750)
- -------------------------------------------------------------------------------------------------------------------------
HMH Properties, Series B 7.88% 08/01/08 750
- (750)
- -------------------------------------------------------------------------------------------------------------------------
Pioneer Natural Resource 9.63% 04/01/10 750
- (750)
- -------------------------------------------------------------------------------------------------------------------------
Nextel Communications Corp 9.38% 11/15/09 675
- (675)
- -------------------------------------------------------------------------------------------------------------------------
American Standard Inc 7.38% 02/01/08 650
- (650)
- -------------------------------------------------------------------------------------------------------------------------
<Caption>
- ----------------------------------------------------------------------------------------------------------------------------------
ISSUER PRO FORMA DSF FUND MARKET RCS FUND MARKET DSF FUND PRO FORMA
COMBINED PAR VALUE AMOUNT($) VALUE AMOUNT($) SECURITIES TO COMBINED MARKET
AMOUNT BE LIQUIDATED VALUE AMOUNT
(000'S) ($) ($)
- ----------------------------------------------------------------------------------------------------------------------------------
APP China Group Ltd 3,500 662,040 939,760
277,720
- ----------------------------------------------------------------------------------------------------------------------------------
Republic of Venezuela DCB, Series DL 833 707,286 (2,126,439) 707,286
2,126,439
- ----------------------------------------------------------------------------------------------------------------------------------
Mexican United 0 (3,080,000) 0
States 3,080,000 -
- ----------------------------------------------------------------------------------------------------------------------------------
Grupo Iusacell SA de CV 2,345 1,400,650 2,558,700
1,158,050
- ----------------------------------------------------------------------------------------------------------------------------------
GH Water Suppy Holdings Ltd, 144A 2,105 942,270 1,625,278
683,008
- ----------------------------------------------------------------------------------------------------------------------------------
Globe Telecom, 144A 1,809 579,975 1,319,208 1,899,183
- ----------------------------------------------------------------------------------------------------------------------------------
Bulgaria FLIRB 1,787 354,944 1,041,300 1,396,244
- ----------------------------------------------------------------------------------------------------------------------------------
Partner Communications 1,473 443,323 959,500 1,402,823
- ----------------------------------------------------------------------------------------------------------------------------------
Mexican United 1,470 492,538 1,098,230 1,590,768
States
- ----------------------------------------------------------------------------------------------------------------------------------
Federal Republic of Brazil, Floating Rate 1,450 322,286 707,500 1,029,786
Bond, Par Z
- ----------------------------------------------------------------------------------------------------------------------------------
Mexican United 0 (1,360,995) 0
States 1,360,995 -
- ----------------------------------------------------------------------------------------------------------------------------------
Republic of Philippines 716 631,723 631,723
-
- ----------------------------------------------------------------------------------------------------------------------------------
Grupo Elektra, 144A 0 502,175 (502,175) 0
-
- ----------------------------------------------------------------------------------------------------------------------------------
Indah Kiat Finance 0 123,375 (123,375) 0
-
- ----------------------------------------------------------------------------------------------------------------------------------
Korea Exchange Bank, 144A 0 264,579 (264,579) 0
-
- ----------------------------------------------------------------------------------------------------------------------------------
Satelites Mexicanos SA, Series B 0 170,625 (170,625) 0
-
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL EMERGING MARKETS BONDS (USD) 101,004 39,728,849 79,321,138 (30,612,938) 88,437,049
- ----------------------------------------------------------------------------------------------------------------------------------
HIGH YIELD BONDS (USD) 0.0%
- ----------------------------------------------------------------------------------------------------------------------------------
Azurix Corp, 144A 0 682,500 0
- (682,500)
- ----------------------------------------------------------------------------------------------------------------------------------
Calpine Corp 0 732,616 0
- (732,616)
- ----------------------------------------------------------------------------------------------------------------------------------
Cogentrix Energy Inc 0 781,890 0
- (781,890)
- ----------------------------------------------------------------------------------------------------------------------------------
HMH Properties, Series B 0 738,750 0
- (738,750)
- ----------------------------------------------------------------------------------------------------------------------------------
Pioneer Natural Resource 0 822,343 0
- (822,343)
- ----------------------------------------------------------------------------------------------------------------------------------
Nextel Communications Corp 0 663,563 0
- (663,563)
- ----------------------------------------------------------------------------------------------------------------------------------
American Standard Inc 0 630,500 0
- (630,500)
- ----------------------------------------------------------------------------------------------------------------------------------
</Table>
60
<Page>
<Table>
<Caption>
- -------------------------------------------------------------------------------------------------------------------------
ISSUER RATE MATURITY DSF FUND PAR RCS FUND PAR DSF FUND PAR
AMOUNT(000'S) AMOUNT(000'S) AMOUNT TO BE
LIQUIDATED
(000'S)
- -------------------------------------------------------------------------------------------------------------------------
Adelphia Communications 9.38% 11/15/09 600
- (600)
- -------------------------------------------------------------------------------------------------------------------------
Echostar DBS Corp 9.38% 02/01/09 550
- (550)
- -------------------------------------------------------------------------------------------------------------------------
AES Corp 9.50% 06/01/09 500
- (500)
- -------------------------------------------------------------------------------------------------------------------------
Avis Group Holdings Inc 11.00% 05/01/09 500
- (500)
- -------------------------------------------------------------------------------------------------------------------------
CMS Energy Corp 7.50% 01/15/09 500
- (500)
- -------------------------------------------------------------------------------------------------------------------------
Fisher Scientific International 7.13% 12/15/05 500
- (500)
- -------------------------------------------------------------------------------------------------------------------------
Fox/Liberty Networks LLC 0.01% 08/15/07 500
- (500)
- -------------------------------------------------------------------------------------------------------------------------
International Game Technology 7.88% 05/15/04 500
- (500)
- -------------------------------------------------------------------------------------------------------------------------
Metromedia Fiber Network, Series B 10.00% 11/15/08 500
- (500)
- -------------------------------------------------------------------------------------------------------------------------
MGM Grand Inc 9.75% 06/01/07 500
- (500)
- -------------------------------------------------------------------------------------------------------------------------
Nuevo Energy Co 9.50% 06/01/08 500
- (500)
- -------------------------------------------------------------------------------------------------------------------------
Stater Brothers Holdings 10.75% 08/15/06 500
- (500)
- -------------------------------------------------------------------------------------------------------------------------
Williams Communication Group Inc 10.70% 10/01/07 500
- (500)
- -------------------------------------------------------------------------------------------------------------------------
IMAX Corp 7.88% 12/01/05 475
- (475)
- -------------------------------------------------------------------------------------------------------------------------
Charter Communications Holdings LLC 8.25% 04/01/07 450
- (450)
- -------------------------------------------------------------------------------------------------------------------------
Michaels Stores Inc 10.88% 06/15/06 450
- (450)
- -------------------------------------------------------------------------------------------------------------------------
Allied Waste Series B 7.63% 01/01/06 425
- (425)
- -------------------------------------------------------------------------------------------------------------------------
Canandaigua Brands, Series C 8.75% 12/15/03 400
- (400)
- -------------------------------------------------------------------------------------------------------------------------
Circus Circus/Mandalay Resort Group 9.25% 12/01/05 400
- (400)
- -------------------------------------------------------------------------------------------------------------------------
Fox Family Worldwide Inc 9.25% 11/01/07 400
- (400)
- -------------------------------------------------------------------------------------------------------------------------
Navistar International 8.00% 02/01/08 400
- (400)
- -------------------------------------------------------------------------------------------------------------------------
Owens Illinois Inc 7.35% 05/15/08 400
- (400)
- -------------------------------------------------------------------------------------------------------------------------
RCN Corp 10.13% 01/15/10 400
- (400)
- -------------------------------------------------------------------------------------------------------------------------
Scotts Co, 144A 8.63% 01/15/09 400
- (400)
- -------------------------------------------------------------------------------------------------------------------------
<Caption>
- ---------------------------------------------------------------------------------------------------------------------------------
ISSUER PRO FORMA DSF FUND MARKET RCS FUND MARKET DSF FUND PRO FORMA
OMBINED PAR VALUE AMOUNT($) VALUE AMOUNT($) SECURITIES TO COMBINED MARKET
AMOUNT BE LIQUIDATED VALUE AMOUNT
(000'S) ($) ($)
- ---------------------------------------------------------------------------------------------------------------------------------
Adelphia Communications 0 594,000 0
- (594,000)
- ---------------------------------------------------------------------------------------------------------------------------------
Echostar DBS Corp 0 569,250 0
- (569,250)
- ---------------------------------------------------------------------------------------------------------------------------------
AES Corp 0 531,250 0
- (531,250)
- ---------------------------------------------------------------------------------------------------------------------------------
Avis Group Holdings Inc 0 542,500 0
- (542,500)
- ---------------------------------------------------------------------------------------------------------------------------------
CMS Energy Corp 0 473,424 0
- (473,424)
- ---------------------------------------------------------------------------------------------------------------------------------
Fisher Scientific International 0 459,978 0
- (459,978)
- ---------------------------------------------------------------------------------------------------------------------------------
Fox/Liberty Networks LLC 0 452,500 0
- (452,500)
- ---------------------------------------------------------------------------------------------------------------------------------
International Game Technology 0 508,125 0
- (508,125)
- ---------------------------------------------------------------------------------------------------------------------------------
Metromedia Fiber Network, Series B 0 467,500 0
- (467,500)
- ---------------------------------------------------------------------------------------------------------------------------------
MGM Grand Inc 0 531,875 0
- (531,875)
- ---------------------------------------------------------------------------------------------------------------------------------
Nuevo Energy Co 0 497,750 0
- (497,750)
- ---------------------------------------------------------------------------------------------------------------------------------
Stater Brothers Holdings 0 447,500 0
- (447,500)
- ---------------------------------------------------------------------------------------------------------------------------------
Williams Communication Group Inc 0 460,000 0
- (460,000)
- ---------------------------------------------------------------------------------------------------------------------------------
IMAX Corp 0 292,125 0
- (292,125)
- ---------------------------------------------------------------------------------------------------------------------------------
Charter Communications Holdings LLC 0 435,938 0
- (435,938)
- ---------------------------------------------------------------------------------------------------------------------------------
Michaels Stores Inc 0 469,125 0
- (469,125)
- ---------------------------------------------------------------------------------------------------------------------------------
Allied Waste Series B 0 414,375 0
- (414,375)
- ---------------------------------------------------------------------------------------------------------------------------------
Canandaigua Brands, Series C 0 404,000 0
- (404,000)
- ---------------------------------------------------------------------------------------------------------------------------------
Circus Circus/Mandalay Resort Group 0 402,000 0
- (402,000)
- ---------------------------------------------------------------------------------------------------------------------------------
Fox Family Worldwide Inc 0 408,000 0
- (408,000)
- ---------------------------------------------------------------------------------------------------------------------------------
Navistar International 0 344,000 0
- (344,000)
- ---------------------------------------------------------------------------------------------------------------------------------
Owens Illinois Inc 0 302,000 0
- (302,000)
- ---------------------------------------------------------------------------------------------------------------------------------
RCN Corp 0 222,000 0
- (222,000)
- ---------------------------------------------------------------------------------------------------------------------------------
Scotts Co, 144A 0 398,000 0
- (398,000)
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
61
<Page>
<Table>
<Caption>
- -------------------------------------------------------------------------------------------------------------------------
ISSUER RATE MATURITY DSF FUND PAR RCS FUND PAR DSF FUND PAR
AMOUNT(000'S) AMOUNT(000'S) AMOUNT TO BE
LIQUIDATED
(000'S)
- -------------------------------------------------------------------------------------------------------------------------
Station Casinos 8.88% 12/01/08 400
- (400)
- -------------------------------------------------------------------------------------------------------------------------
Amkor Tech 9.25% 05/01/06 350
- (350)
- -------------------------------------------------------------------------------------------------------------------------
Foodmaker Inc 8.38% 04/15/08 350
- (350)
- -------------------------------------------------------------------------------------------------------------------------
Global Crossing 9.63% 05/15/08 350
- (350)
- -------------------------------------------------------------------------------------------------------------------------
Healthsouth Corp, 144A 10.75% 10/01/08 350
- (350)
- -------------------------------------------------------------------------------------------------------------------------
United Rentals Inc, Series B 8.80% 08/15/08 350
- (350)
- -------------------------------------------------------------------------------------------------------------------------
Flag Limited 8.25% 01/30/08 325
- (325)
- -------------------------------------------------------------------------------------------------------------------------
AK Steel Corp 7.88% 02/15/09 300
- (300)
- -------------------------------------------------------------------------------------------------------------------------
Level 3 Communications Inc 9.13% 05/01/08 300
- (300)
- -------------------------------------------------------------------------------------------------------------------------
Building Materials Corp, Series B 8.00% 10/15/07 250
- (250)
- -------------------------------------------------------------------------------------------------------------------------
Flextronics 144A 9.88% 07/01/10 250
- (250)
- -------------------------------------------------------------------------------------------------------------------------
Global Crossing Holding Ltd 9.13% 11/15/06 250
- (250)
- -------------------------------------------------------------------------------------------------------------------------
HCA - The Healthcare Co. 6.91% 06/15/05 250
- (250)
- -------------------------------------------------------------------------------------------------------------------------
Intermedia Communication, Series B 8.50% 01/15/08 250
- (250)
- -------------------------------------------------------------------------------------------------------------------------
Levi Strauss & Co 7.00% 11/01/06 250
- (250)
- -------------------------------------------------------------------------------------------------------------------------
Mediacom LLC / Capital, Series B 8.50% 04/15/08 250
- (250)
- -------------------------------------------------------------------------------------------------------------------------
Psinet Inc 10.50% 12/01/06 250
- (250)
- -------------------------------------------------------------------------------------------------------------------------
RBF Finance Co 11.00% 03/15/06 250
- (250)
- -------------------------------------------------------------------------------------------------------------------------
Sbarro Inc, 144A 11.00% 09/15/09 250
- (250)
- -------------------------------------------------------------------------------------------------------------------------
Sinclair Broadcast Group 8.75% 12/15/07 250
- (250)
- -------------------------------------------------------------------------------------------------------------------------
Voicestream Wireless Co, 144A 10.38% 11/15/09 250
- (250)
- -------------------------------------------------------------------------------------------------------------------------
Lear Corp, 144A 7.96% 05/15/05 200
- (200)
- -------------------------------------------------------------------------------------------------------------------------
Levi Strauss & Co 11.63% 01/15/08 200
- (200)
- -------------------------------------------------------------------------------------------------------------------------
Nortek Inc Series B 9.13% 09/01/07 200
- (200)
- -------------------------------------------------------------------------------------------------------------------------
<Caption>
- ---------------------------------------------------------------------------------------------------------------------------------
ISSUER PRO FORMA DSF FUND MARKET RCS FUND MARKET DSF FUND PRO FORMA
COMBINED PAR VALUE AMOUNT($) VALUE AMOUNT($) SECURITIES TO COMBINED MARKET
AMOUNT BE LIQUIDATED VALUE AMOUNT
(000'S) ($) ($)
- ---------------------------------------------------------------------------------------------------------------------------------
Station Casinos 0 402,000 0
- (402,000)
- ---------------------------------------------------------------------------------------------------------------------------------
Amkor Tech 0 354,375 0
- (354,375)
- ---------------------------------------------------------------------------------------------------------------------------------
Foodmaker Inc 0 330,750 0
- (330,750)
- ---------------------------------------------------------------------------------------------------------------------------------
Global Crossing 0 357,875 0
- (357,875)
- ---------------------------------------------------------------------------------------------------------------------------------
Healthsouth Corp, 144A 0 373,917 0
- (373,917)
- ---------------------------------------------------------------------------------------------------------------------------------
United Rentals Inc, Series B 0 308,000 0
- (308,000)
- ---------------------------------------------------------------------------------------------------------------------------------
Flag Limited 0 300,625 0
- (300,625)
- ---------------------------------------------------------------------------------------------------------------------------------
AK Steel Corp 0 265,500 0
- (265,500)
- ---------------------------------------------------------------------------------------------------------------------------------
Level 3 Communications Inc 0 269,250 0
- (269,250)
- ---------------------------------------------------------------------------------------------------------------------------------
Building Materials Corp, Series B 0 96,250 0
- (96,250)
- ---------------------------------------------------------------------------------------------------------------------------------
Flextronics 144A 0 266,875 0
- (266,875)
- ---------------------------------------------------------------------------------------------------------------------------------
Global Crossing Holding Ltd 0 255,000 0
- (255,000)
- ---------------------------------------------------------------------------------------------------------------------------------
HCA - The Healthcare Co. 0 246,398 0
- (246,398)
- ---------------------------------------------------------------------------------------------------------------------------------
Intermedia Communication, Series B 0 228,750 0
- (228,750)
- ---------------------------------------------------------------------------------------------------------------------------------
Levi Strauss & Co 0 218,750 0
- (218,750)
- ---------------------------------------------------------------------------------------------------------------------------------
Mediacom LLC / Capital, Series B 0 241,875 0
- (241,875)
- ---------------------------------------------------------------------------------------------------------------------------------
Psinet Inc 0 71,250 0
- (71,250)
- ---------------------------------------------------------------------------------------------------------------------------------
RBF Finance Co 0 300,625 0
- (300,625)
- ---------------------------------------------------------------------------------------------------------------------------------
Sbarro Inc, 144A 0 260,625 0
- (260,625)
- ---------------------------------------------------------------------------------------------------------------------------------
Sinclair Broadcast Group 0 237,500 0
- (237,500)
- ---------------------------------------------------------------------------------------------------------------------------------
Voicestream Wireless Co, 144A 0 286,875 0
- (286,875)
- ---------------------------------------------------------------------------------------------------------------------------------
Lear Corp, 144A 0 198,907 0
- (198,907)
- ---------------------------------------------------------------------------------------------------------------------------------
Levi Strauss & Co 0 208,500 0
- (208,500)
- ---------------------------------------------------------------------------------------------------------------------------------
Nortek Inc Series B 0 196,000 0
- (196,000)
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
62
<Page>
<Table>
<Caption>
- -------------------------------------------------------------------------------------------------------------------------
ISSUER RATE MATURITY DSF FUND PAR RCS FUND PAR DSF FUND PAR
AMOUNT(000'S) AMOUNT(000'S) AMOUNT TO BE
LIQUIDATED
(000'S)
- -------------------------------------------------------------------------------------------------------------------------
Trico Marine Services, Series G 8.50% 08/01/05 200
- (200)
- -------------------------------------------------------------------------------------------------------------------------
Elizabeth Arden Inc, 144A 11.75% 02/01/11 150
- (150)
- -------------------------------------------------------------------------------------------------------------------------
Flag Telecom Holding Ltd 11.63% 03/30/10 150
- (150)
- -------------------------------------------------------------------------------------------------------------------------
Kaiser Aluminum & Chemical, Series B 10.88% 10/15/06 150
- (150)
- -------------------------------------------------------------------------------------------------------------------------
Buckeye Technologies Inc 8.00% 10/15/10 100
- (100)
- -------------------------------------------------------------------------------------------------------------------------
Primedia Inc, Series B 8.50% 02/01/06 100
- (100)
- -------------------------------------------------------------------------------------------------------------------------
Westpoint Stevens Inc 7.88% 06/15/08 75
- (75)
- -------------------------------------------------------------------------------------------------------------------------
TOTAL HIGH YIELD BONDS (USD) 23,925 (23,925)
-
- -------------------------------------------------------------------------------------------------------------------------
MORTGAGE BACKED SECURITIES (USD) 86.1%
- -------------------------------------------------------------------------------------------------------------------------
FNMA 8.0% 30 Year TBA 8.00% 04/06/28 35,500
-
- -------------------------------------------------------------------------------------------------------------------------
FNMA 7.5% 30 Year TBA 7.50% 08/01/28 9,800
-
- -------------------------------------------------------------------------------------------------------------------------
FNMA Pool # 520655 7.50% 11/01/29 4,483
- (4,483)
- -------------------------------------------------------------------------------------------------------------------------
FHLM Pool # C43071 7.50% 10/01/30 2,237
-
- -------------------------------------------------------------------------------------------------------------------------
FNMA Pool # 512726 7.50% 09/01/29 1,200
-
- -------------------------------------------------------------------------------------------------------------------------
FHLM Pool # C44219 7.50% 11/01/30 1,045
-
- -------------------------------------------------------------------------------------------------------------------------
FHLM Pool # C44593 7.50% 11/01/30 998
-
- -------------------------------------------------------------------------------------------------------------------------
FHLM Pool # C43439 7.50% 10/01/30 868
-
- -------------------------------------------------------------------------------------------------------------------------
FNMA Pool # 517782 7.50% 11/01/29 557
-
- -------------------------------------------------------------------------------------------------------------------------
FHLM Pool # C36453 7.50% 02/01/30 434
-
- -------------------------------------------------------------------------------------------------------------------------
FHLM Pool # C38826 7.50% 06/01/30 392
-
- -------------------------------------------------------------------------------------------------------------------------
FNMA Pool # 517089 7.50% 10/01/29 385
-
- -------------------------------------------------------------------------------------------------------------------------
FHLM Pool # C37630 7.50% 04/01/30 330
-
- -------------------------------------------------------------------------------------------------------------------------
FHLM Pool # C01086 7.50% 11/01/30 248
-
- -------------------------------------------------------------------------------------------------------------------------
<Caption>
- ----------------------------------------------------------------------------------------------------------------------------------
ISSUER PRO FORMA DSF FUND MARKET RCS FUND MARKET DSF FUND PRO FORMA
COMBINED PAR VALUE AMOUNT($) VALUE AMOUNT($) SECURITIES TO COMBINED MARKET
AMOUNT BE LIQUIDATED VALUE AMOUNT
(000'S) ($) ($)
- ----------------------------------------------------------------------------------------------------------------------------------
Trico Marine Services, Series G 0 197,250 0
- (197,250)
- ----------------------------------------------------------------------------------------------------------------------------------
Elizabeth Arden Inc, 144A 0 156,750 0
- (156,750)
- ----------------------------------------------------------------------------------------------------------------------------------
Flag Telecom Holding Ltd 0 138,750 0
- (138,750)
- ----------------------------------------------------------------------------------------------------------------------------------
Kaiser Aluminum & Chemical, Series B 0 135,750 0
- (135,750)
- ----------------------------------------------------------------------------------------------------------------------------------
Buckeye Technologies Inc 0 94,000 0
- (94,000)
- ----------------------------------------------------------------------------------------------------------------------------------
Primedia Inc, Series B 0 99,500 0
- (99,500)
- ----------------------------------------------------------------------------------------------------------------------------------
Westpoint Stevens Inc 0 55,875 0
- (55,875)
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL HIGH YIELD BONDS (USD) 0 22,833,724 (22,833,724) 0
-
- ----------------------------------------------------------------------------------------------------------------------------------
MORTGAGE BACKED SECURITIES (USD) 86.1%
- ----------------------------------------------------------------------------------------------------------------------------------
FNMA 8.0% 30 Year TBA 35,500 36,698,125 36,698,125
-
- ----------------------------------------------------------------------------------------------------------------------------------
FNMA 7.5% 30 Year TBA 9,800 10,057,250 10,057,250
-
- ----------------------------------------------------------------------------------------------------------------------------------
FNMA Pool # 520655 0 4,589,543 0
- (4,589,543)
- ----------------------------------------------------------------------------------------------------------------------------------
FHLM Pool # C43071 2,237 2,290,220 2,290,220
-
- ----------------------------------------------------------------------------------------------------------------------------------
FNMA Pool # 512726 1,200 1,228,524 1,228,524
-
- ----------------------------------------------------------------------------------------------------------------------------------
FHLM Pool # C44219 1,045 1,069,341 1,069,341
-
- ----------------------------------------------------------------------------------------------------------------------------------
FHLM Pool # C44593 998 1,022,122 1,022,122
-
- ----------------------------------------------------------------------------------------------------------------------------------
FHLM Pool # C43439 868 888,191 888,191
-
- ----------------------------------------------------------------------------------------------------------------------------------
FNMA Pool # 517782 557 570,758 570,758
-
- ----------------------------------------------------------------------------------------------------------------------------------
FHLM Pool # C36453 434 443,965 443,965
-
- ----------------------------------------------------------------------------------------------------------------------------------
FHLM Pool # C38826 392 400,786 400,786
-
- ----------------------------------------------------------------------------------------------------------------------------------
FNMA Pool # 517089 385 393,841 393,841
-
- ----------------------------------------------------------------------------------------------------------------------------------
FHLM Pool # C37630 330 338,320 338,320
-
- ----------------------------------------------------------------------------------------------------------------------------------
FHLM Pool # C01086 248 254,278 254,278
-
- ----------------------------------------------------------------------------------------------------------------------------------
</Table>
63
<Page>
<Table>
<Caption>
- -------------------------------------------------------------------------------------------------------------------------
ISSUER RATE MATURITY DSF FUND PAR RCS FUND PAR DSF FUND PAR
AMOUNT(000'S) AMOUNT(000'S) AMOUNT TO BE
LIQUIDATED
(000'S)
- -------------------------------------------------------------------------------------------------------------------------
FHLM Pool # C39753 7.50% 06/01/30 219
-
- -------------------------------------------------------------------------------------------------------------------------
FHLM Pool # C44033 7.50% 10/01/30 141
-
- -------------------------------------------------------------------------------------------------------------------------
FHLM Pool # C37703 7.50% 04/01/30 121
-
- -------------------------------------------------------------------------------------------------------------------------
FHLM Pool # C36310 7.50% 02/01/30 72
-
- -------------------------------------------------------------------------------------------------------------------------
FHLM Pool # C43519 7.50% 10/01/30 58
-
- -------------------------------------------------------------------------------------------------------------------------
FHLM Pool # C37903 7.50% 04/01/30 24
-
- -------------------------------------------------------------------------------------------------------------------------
FHA Project Pool 56 7.43% 11/01/22 8,651
-
- -------------------------------------------------------------------------------------------------------------------------
FHA Project Pool 144S 7.43% 06/01/24 5,614
-
- -------------------------------------------------------------------------------------------------------------------------
FHLMC 7.50%, 2025 - 2026 7.50% 2025 - 2026 44,269
-
- -------------------------------------------------------------------------------------------------------------------------
FHLMC 8.00%, 2024 8.00% 2024 2,049
-
- -------------------------------------------------------------------------------------------------------------------------
FNMA 6.50%, 2024 - 2030 6.50% 2024 - 2030 56,690
-
- -------------------------------------------------------------------------------------------------------------------------
FNMA 7.00%, 2004 - 2030 7.00% 2004 - 2030 21,448
-
- -------------------------------------------------------------------------------------------------------------------------
FNMA 7.50%, 2026 - 2028 7.50% 2026 - 2028 11,397
-
- -------------------------------------------------------------------------------------------------------------------------
GNMA 7.00%, 2024 - 2029 7.00% 2024 - 2029 45,557
-
- -------------------------------------------------------------------------------------------------------------------------
GNMA 7.50%, 2006 - 2028 7.50% 2006 - 2028 29,167
-
- -------------------------------------------------------------------------------------------------------------------------
GNMA 8.00%, 2016 - 2022 8.00% 2016 -2022 1,975
-
- -------------------------------------------------------------------------------------------------------------------------
GNMA 8.50% 2016 -2023 214
-
- -------------------------------------------------------------------------------------------------------------------------
FNMA TBA 7.00% 2029 174,700
-
- -------------------------------------------------------------------------------------------------------------------------
FNMA TBA 7.50% 2029 24,300
-
- -------------------------------------------------------------------------------------------------------------------------
FNMA TBA 8.00% 2030 114,000
-
- -------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage 7.25% 05/15/30 4,500
Association - (4,301)
- -------------------------------------------------------------------------------------------------------------------------
TOTAL MORTGAGE BACKED SECURITIES (USD) 63,612 540,031 (8,784)
- -------------------------------------------------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS 1.3%
- -------------------------------------------------------------------------------------------------------------------------
<Caption>
- -----------------------------------------------------------------------------------------------------------------------------------
ISSUER PRO FORMA DSF FUND MARKET RCS FUND MARKET DSF FUND PRO FORMA
COMBINED PAR VALUE AMOUNT($) VALUE AMOUNT($) SECURITIES TO COMBINED MARKET
AMOUNT BE LIQUIDATED VALUE AMOUNT
(000'S) ($) ($)
- -----------------------------------------------------------------------------------------------------------------------------------
FHLM Pool # C39753 219 224,145 224,145
-
- -----------------------------------------------------------------------------------------------------------------------------------
FHLM Pool # C44033 141 144,725 144,725
-
- -----------------------------------------------------------------------------------------------------------------------------------
FHLM Pool # C37703 121 123,923 123,923
-
- -----------------------------------------------------------------------------------------------------------------------------------
FHLM Pool # C36310 72 73,624 73,624
-
- -----------------------------------------------------------------------------------------------------------------------------------
FHLM Pool # C43519 58 59,604 59,604
-
- -----------------------------------------------------------------------------------------------------------------------------------
FHLM Pool # C37903 24 24,062 24,062
-
- -----------------------------------------------------------------------------------------------------------------------------------
FHA Project Pool 56 8,651 8,649,539 8,649,539
-
- -----------------------------------------------------------------------------------------------------------------------------------
FHA Project Pool 144S 5,614 5,710,961 5,710,961
-
- -----------------------------------------------------------------------------------------------------------------------------------
FHLMC 7.50%, 2025 - 2026 44,269 45,298,991 45,298,991
-
- -----------------------------------------------------------------------------------------------------------------------------------
FHLMC 8.00%, 2024 2,049 2,113,715 2,113,715
-
- -----------------------------------------------------------------------------------------------------------------------------------
FNMA 6.50%, 2024 - 2030 56,690 56,449,097 56,449,097
-
- -----------------------------------------------------------------------------------------------------------------------------------
FNMA 7.00%, 2004 - 2030 21,448 21,685,272 21,685,272
-
- -----------------------------------------------------------------------------------------------------------------------------------
FNMA 7.50%, 2026 - 2028 11,397 11,660,391 11,660,391
-
- -----------------------------------------------------------------------------------------------------------------------------------
GNMA 7.00%, 2024 - 2029 45,557 46,280,978 46,280,978
-
- -----------------------------------------------------------------------------------------------------------------------------------
GNMA 7.50%, 2006 - 2028 29,167 29,950,002 29,950,002
-
- -----------------------------------------------------------------------------------------------------------------------------------
GNMA 8.00%, 2016 - 2022 1,975 2,043,743 2,043,743
-
- -----------------------------------------------------------------------------------------------------------------------------------
GNMA 214 223,549 223,549
-
- -----------------------------------------------------------------------------------------------------------------------------------
FNMA TBA 174,700 176,635,676 176,635,676
-
- -----------------------------------------------------------------------------------------------------------------------------------
FNMA TBA 24,300 24,857,685 24,857,685
-
- -----------------------------------------------------------------------------------------------------------------------------------
FNMA TBA 114,000 117,603,540 117,603,540
-
- -----------------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage 199 5,167,926 198,536
Association - (4,969,390)
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL MORTGAGE BACKED SECURITIES (USD) 594,859 66,063,273 549,163,139 (9,558,933) 605,667,479
- -----------------------------------------------------------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS 1.3%
- -----------------------------------------------------------------------------------------------------------------------------------
</Table>
64
<Page>
<Table>
<Caption>
- -------------------------------------------------------------------------------------------------------------------------
ISSUER RATE MATURITY DSF FUND PAR RCS FUND PAR DSF FUND PAR
AMOUNT(000'S) AMOUNT(000'S) AMOUNT TO BE
LIQUIDATED
(000'S)
- -------------------------------------------------------------------------------------------------------------------------
DLJ Mortgage Acceptance Corp.
- -------------------------------------------------------------------------------------------------------------------------
Series 1994-MF11, Class A2 8.10% 06/18/04 1,000
-
- -------------------------------------------------------------------------------------------------------------------------
Series 1994-MF11, Class A3 8.10% 06/18/04 4,850
-
- -------------------------------------------------------------------------------------------------------------------------
GE Capital Mortgage Services, Inc.
- - -
- -------------------------------------------------------------------------------------------------------------------------
Series 1994-12, Class B1 6.00% 03/25/09 3,065
-
- -------------------------------------------------------------------------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (USD) 0 8,915
-
- -------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO - 100% (COST OF
$68,921,149,
- -------------------------------------------------------------------------------------------------------------------------
$619,222,939 AND $688,144,088 RESPECTIVELY) 135,439 639,674 (70,334)
================ =========== ===============
- -------------------------------------------------------------------------------------------------------------------------
<Caption>
- --------------------------------------------------------------------------------------------------------------------------------
ISSUER PRO FORMA DSF FUND MARKET RCS FUND MARKET DSF FUND PRO FORMA
COMBINED PAR VALUE AMOUNT($) VALUE AMOUNT($) SECURITIES TO COMBINED MARKET
AMOUNT BE LIQUIDATED VALUE AMOUNT
(000'S) ($) ($)
- --------------------------------------------------------------------------------------------------------------------------------
DLJ Mortgage Acceptance Corp.
- --------------------------------------------------------------------------------------------------------------------------------
Series 1994-MF11, Class A2 1,000 1,001,900 1,001,900
-
- --------------------------------------------------------------------------------------------------------------------------------
Series 1994-MF11, Class A3 4,850 4,856,305 4,856,305
-
- --------------------------------------------------------------------------------------------------------------------------------
GE Capital Mortgage Services, Inc.
- - - - -
- --------------------------------------------------------------------------------------------------------------------------------
Series 1994-12, Class B1 3,065 3,015,965 3,015,965
-
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS (USD) 8,915 8,874,170 8,874,170
- -
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO - 100% (COST OF
$68,921,149,
- --------------------------------------------------------------------------------------------------------------------------------
$619,222,939 AND $688,144,088 RESPECTIVELY) 704,778 $131,240,502 $637,358,447 ($65,620,251) $702,978,698
========== ============== ============= ============= ==============
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
65
<Page>
APPENDIX A
SECURITIES RATINGS
The ratings of securities in which each Fund may invest will be measured at the
time of purchase and, to the extent a security is assigned a different rating by
one or more of the various rating agencies, Dresdner RCM will use the highest
rating assigned by any agency. Dresdner RCM will not necessarily sell an
investment if its rating is reduced. The following rating services describe
rated securities as follows:
MOODY'S INVESTORS SERVICE, INC.
BONDS
Aaa -- Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risk appear somewhat larger than the Aaa securities.
A -- Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper-medium-grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa -- Bonds which are rated Baa are considered as medium grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba -- Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa -- Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
A-1
<Page>
Ca -- Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C -- Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
NOTES
MIG 1/VMIG 1 -- This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing.
MIG 2/VMIG 2 -- This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
COMMERCIAL PAPER
Issuers rated PRIME-1 (or supporting institutions) have a superior ability for
repayment of senior short-term debt obligations. Prime-1 repayment ability will
often be evidenced by the following characteristics:
- -- Leading market positions in well established industries.
- -- High rates of return on funds employed.
- -- Conservative capitalization structure with moderate reliance on debt
and ample asset protection.
- -- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
- -- Well established access to a range of financial markets and assured
sources of alternate liquidity.
Issuers rated PRIME-2 (or supporting institutions) have a strong ability for
repayment of senior short-term debt obligations. This will normally be evidenced
by many of the characteristics cited above to a lesser degree. Earnings trends
and coverage ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
STANDARD & POOR'S
BONDS
AAA -- An obligation rated AAA has the highest rating assigned by Standard &
Poor's. The obligor's capacity to meet its financial commitment on the
obligation is extremely strong.
AA -- An obligation rated AA differs from the highest-rated obligations only in
small degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.
A -- An obligation rated A is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than obligations in
higher-rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.
A-2
<Page>
BBB -- An obligation rated BBB exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation.
Obligations rated BB, B, CCC, CC and C are regarded as having significant
speculative characteristics. BB indicates the lowest degree of speculation and C
the highest. While such obligations will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major exposures
to adverse conditions.
BB -- An obligation rated BB is less vulnerable to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to the
obligor's inadequate capacity to meet its financial commitment on the
obligation.
B -- An obligation rated B is more vulnerable to nonpayment than obligations
rated BB, but the obligor currently has the capacity to meet its financial
commitment on the obligations. Adverse business, financial, or economic
conditions will likely impair the obligor's capacity or willingness to meet its
financial commitment on the obligation.
CCC -- An obligation rated CCC is currently vulnerable to nonpayment, and is
dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation. In the event of
adverse business, financial, or economic conditions, the obligor is not likely
to have the capacity to meet its financial commitment on the obligation.
CC -- An obligation rated CC is currently highly vulnerable to nonpayment.
C -- The C rating may be used to cover a situation where a bankruptcy petition
has been filed, or similar action has been taken, but payments on this
obligation are being continued.
D -- An obligation rated D is in payment default. The D rating category is used
when interest payments or principal payments are not made on the date due even
if the applicable grace period has not expired, unless Standard & Poor's
believes that such payments will be made during such grace period. The D rating
also will be used upon the filing of a bankruptcy petition, or the taking of a
similar action if payments on an obligation are jeopardized.
NOTES
SP-1 -- Strong capacity to pay principal and interest. Those issues determined
to possess overwhelming safety characteristics are given a plus (+) designation.
SP-2 -- Satisfactory capacity to pay principal and interest.
SP-3 -- Speculative capacity to pay principal and interest.
COMMERCIAL PAPER
A-1 -- This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus sign (+) designation.
A-3
<Page>
A-2 -- Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated `A-1'.
A-3 -- Issues carrying this designation have adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations.
A-4
<Page>
RCM STRATEGIC GLOBAL GOVERNMENT FUND, INC.
FORM N-14
PART C: OTHER INFORMATION
ITEM 15. INDEMNIFICATION
Section 2-418 of the Maryland General Corporation Law, Article VI, Section 3 of
the Registrant's Articles of Incorporation, Article VI of the Registrant's
By-Laws, and the Letter Agreement dated August 2, 2001 provide for
indemnification.
Article VI, Section 3 of the Registrant's Articles of Incorporation provides as
follows:
To the maximum extent permitted by the Maryland General Corporation
Law, as from time to time amended, the Corporation: (i) shall indemnify
each of its currently acting and its former directors against any and
all liabilities and expenses incurred in connection with their services
in such capacities; (ii) shall indemnify its currently acting and its
former officers to the full extent that indemnification shall be
provided to directors; and (iii) may indemnify its employees and
agents, to the extent determined by the Board of Directors; in each
case, subject to any limitations imposed by the 1940 Act. The foregoing
rights of indemnification shall not be exclusive of any other rights to
indemnification to which those seeking indemnification may be entitled.
Subject to the same limitations, the Corporation also shall advance
expenses to all such persons in connection with litigation or
threatened litigation arising out of their services in such capacities.
Subject to the same limitations, the Corporation may, by By-Law,
resolution, or agreement, make further provision for indemnification of
directors, officers, employees, and agents. Furthermore, to the fullest
extent permitted by Maryland law, as it may be amended or interpreted
from time to time, subject to the limitations imposed by the 1940 Act,
no director or officer of the Corporation shall be personally liable to
the Corporation or its stockholders. No amendment of these Articles of
Incorporation or repeal of any of its provisions shall limit or
eliminate any of the benefits provided to any person who at any time is
or was a director or officer of the Corporation under this Section in
respect of any act or omission that occurred prior to such amendment or
repeal.
Article VI of the Registrant's By-Laws provides as follows:
To the maximum extent permitted by the Maryland General Corporation
Law, as from time to time amended, the Corporation: (i) shall indemnify
each of its currently acting and its former directors against any and
all liabilities and expenses incurred in connection with their services
in such capacities; (ii) shall indemnify its currently acting and its
former officers to the full extent that indemnification shall be
provided to directors; and (iii) may indemnify its employees and
agents, to the extent determined by the Board of Directors; in each
case, subject to any limitations imposed by the 1940 Act. The foregoing
rights of indemnification shall not be exclusive of any other rights to
<Page>
indemnification to which those seeking indemnification may be entitled.
Subject to the same limitations, the Corporation also shall advance
expenses to all such persons in connection with litigation or
threatened litigation arising out of their services in such capacities.
Subject to the same limitations, the Board of Directors may make
further provision for indemnification of directors, officers,
employees, and agents. Neither the amendment nor repeal of this Article
VI, nor the adoption or amendment of any other provision of these
By-Laws, inconsistent with this Article VI, shall apply to or affect in
any respect the applicability of the preceding paragraph with respect
to any act or failure to act which occurred prior to such amendment,
repeal, or adoption.
The Corporation may purchase insurance on behalf of an officer or
director protecting such person to the maximum extent permitted under
the laws of the State of Maryland, from liability arising from his
activities as officer or director of the Corporation. The Corporation
may not purchase insurance, however, on behalf of any officer or
director of the Corporation that protects or purports to protect such
person from liability to the Corporation or to its stockholders to
which such officer or director would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard
of the duties involved in the conduct of his office.
The Corporation may indemnify or purchase insurance to the extent
provided in this Article VI on behalf of an employee or agent who is
not an officer or director of the Corporation.
Section 5 of the Letter Agreement dated August 2, 2001 states:
Dresdner RCM will indemnify and hold harmless the RCS Indemnified
Parties against any and all expenses, losses, claims, damages and
liabilities at any time imposed upon or reasonably incurred by any one
or more of the RCS Indemnified Parties in connection with, arising out
of, resulting from or based upon a breach of any representation,
warranty or covenant of Dresdner RCM contained in this letter. The RCS
Indemnified Parties will notify Dresdner RCM in writing within ten days
after the receipt by any one or more of the RCS Indemnified Parties of
any notice of legal process or any suit brought against or claim made
against such RCS Indemnified Party as to any matters covered by this
indemnification or within ten days of having discovered any loss or
expense arising out of or based upon a breach of a representation,
warranty or covenant of Dresdner RCM contained in this letter. Dresdner
RCM shall be entitled to participate at its own expense in the defense
of any claim, action, suit or proceeding covered by this paragraph, or,
if it so elects, to assume at its expense by counsel satisfactory to
the RCS Indemnified Parties the defense of any such claim, action, suit
or proceeding, and if Dresdner RCM elects to assume such defense, the
RCS Indemnified Parties shall be entitled to participate in the defense
of any such claim, action, suit or proceeding at their expense.
Dresdner RCM's obligation under this paragraph to indemnify and hold
harmless the RCS Indemnified Parties shall constitute a guarantee of
payment so that Dresdner RCM will pay in the first instance any
expenses, losses, claims, damages and liabilities required to be paid
by it under this paragraph without the necessity of the RCS Indemnified
Parties' first paying the same.
2
<Page>
ITEM 16. EXHIBITS
1. Articles of Incorporation of RCM Strategic Global Government Fund,
Inc., dated December 9, 1993 - Exhibit 1.
2. By-Laws of RCM Strategic Global Government Fund, Inc. - Exhibit 2.
3. Not Applicable.
4. Agreement and Plan of Merger, dated August 2, 2001 - constitutes
Appendix A to Part A hereof.
5a. Portions of the Articles of Incorporation of RCM Strategic Global
Government Fund, Inc. Relating to Stockholders' Rights - Exhibit 3.
5b. Portions of the By-Laws of RCM Strategic Global Government Fund, Inc.
Relating to Stockholders' Rights - Exhibit 4.
6. Investment Management Agreement between RCM Strategic Global
Government Fund, Inc. and Dresdner RCM Global Investors LLC, dated
June 14, 1996 - constitutes Appendix C to Part A hereof.
7. Not Applicable.
8. Not Applicable.
9. Custodian Agreement between RCM Strategic Global Government Fund, Inc.
and State Street Bank and Trust Company, dated February 24, 1994, as
amended - Exhibit 5.
10. Not Applicable.
11. Opinion of Ballard, Spahr, Andrews & Ingersoll, LLP, including
consent - Exhibit 6.
12. Opinion of Sullivan & Cromwell, including consent, as to Tax
Matters - Exhibit 7.
13. Letter Agreement between RCM Strategic Global Government Fund, Inc.
and Dresdner RCM Global Investors LLC, dated August 2, 2001 -
Exhibit 8.
14 Consent of PricewaterhouseCoopers LLP, Independent Accountants
to Dresdner RCM Global Strategic Income Fund, Inc. and RCM Strategic
Global Government Fund, Inc. - Exhibit 9.
15. Not Applicable.
3
<Page>
16. Powers of Attorney - Exhibit 10.
ITEM 17. UNDERTAKINGS
(1) The undersigned registrant agrees that prior to any public reoffering
of the securities registered through the use of a prospectus which is a
part of this registration statement by any person or party who is
deemed to be an underwriter within the meaning of Rule 145(c) of the
Securities Act, the reoffering prospectus will contain the information
called for by the applicable registration form for the reoffering by
persons who may be deemed underwriters, in addition to the information
called for by the other items of the applicable form.
(2) The undersigned registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as a part of an amendment to
the registration statement and will not be used until the amendment is
effective, and that, in determining any liability under the 1933 Act,
each post-effective amendment shall be deemed to be a new registration
statement for the securities offered herein, and the offering of the
securities at that time shall be deemed to be the initial bona fide
offering of them.
4
<Page>
SIGNATURES
As required by the Securities Act of 1933, this registration statement
has been signed on behalf of the registrant, in the City of San Francisco and
State of California, on the 13th day of August, 2001.
RCM STRATEGIC GLOBAL
GOVERNMENT FUND, INC.
By: /s/ Luke D. Knecht
--------------------
Title: President
As required by the Securities Act of 1933, this registration statement
has been signed by the following persons in the capacities and on the dates
indicated.
<Table>
<Caption>
Name Title Date
/s/ Luke D. Knecht President, Director and Chairman of August 13, 2001
- ------------------ the Board; Principal Executive Officer
Luke D. Knecht
/s/ George A. Rio Chief Financial Officer; Principal Financial August 13, 2001
- ----------------- Officer
George A. Rio
/s/ Steven L. Wong Treasurer; Principal Accounting Officer August 13, 2001
- ------------------
Steven L. Wong
/s/ Francis E. Lundy Director August 13, 2001
- --------------------
Francis E. Lundy*
/s/ James M. Whitaker Director August 13, 2001
- ---------------------
James M. Whitaker*
/s/ Gregory S. Young Director August 13, 2001
- --------------------
Gregory S. Young
</Table>
* By Luke D. Knecht, pursuant to a duly executed Power of Attorney filed as an
exhibit hereto.
5
<Page>
EXHIBIT 1
ARTICLES OF INCORPORATION
OF
RCM STRATEGIC GLOBAL GOVERNMENT FUND, INC.
ARTICLE I
THE UNDERSIGNED, Anthony Ain, whose address is Four Embarcadero
Center, Suite 2900, San Francisco, CA 94111, being at least eighteen (18) years
of age and acting as incorporator, hereby forms a corporation under and by
virtue of the Maryland General Corporation Law.
ARTICLE II
NAME
The name of the Corporation is RCM Strategic Global Government Fund,
Inc. (the "Corporation").
ARTICLE III
PURPOSES AND POWERS
The purposes for which the Corporation is formed are to act as an
investment company under the Federal Investment Company Act of 1940, as amended,
and the rules and regulations thereunder (the "1940 Act"), and to exercise and
enjoy all of the general powers, rights and privileges granted to, or conferred
upon, corporations by the Maryland General Corporation Law now or hereafter in
force.
ARTICLE IV
PRINCIPAL OFFICE AND RESIDENT AGENT
The address of the principal office of the Corporation in the State
of Maryland is c/o The Corporation Trust Incorporated, 32 South Street,
Baltimore, Maryland 21202. The name of the resident agent of the Corporation in
the State of Maryland is The Corporation Trust Incorporated, a Maryland
corporation, and the address of the resident agent is 32 South Street,
Baltimore, Maryland 21202.
<Page>
ARTICLE V
CAPITAL STOCK
(1) The total number of shares of capital stock of all classes
which the Corporation shall have authority to issue is Five Hundred Million
(500,000,000) shares, all of which shall have a par value of one-thousandth of
one cent ($.00001) per share and of the aggregate par value of Five Thousand
Dollars ($5,000).
(2) (a) The Board of Directors of the Corporation is authorized
to classify or to reclassify, from time to time, any unissued shares of stock of
the Corporation, whether now or hereafter authorized, by setting, changing or
eliminating the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications, or terms or
conditions of redemption of the stock.
(b) Without limiting the generality of the foregoing, the
dividends and distributions or other payments with respect to the stock of the
Corporation, and with respect to each class that hereafter may be created, shall
be in such amount as may be declared from time to time by the Board of
Directors, and such dividends and distributions may vary from class to class to
such extent and for such purposes as the Board of Directors may deem
appropriate, including, but not limited to, the purpose of complying with any
applicable legislative or regulatory requirements or enabling the Corporation to
qualify as a regulated investment company and to avoid liability of the
Corporation for Federal income tax. However, nothing in the foregoing shall
limit the authority of the Board to make distributions greater or less than the
amount necessary to qualify as a regulated investment company and to avoid
liability of the Corporation for such tax.
(c) Until such time as the Board of Directors shall provide
otherwise pursuant to the authority granted in this Section (2) of this
Article V, all the authorized shares of the Corporation are designated as Common
Stock. Shares of the Common Stock and the holders thereof, and shares of any
class and the holders thereof, shall be subject to the following provisions,
provided, however, that if no shares of any class other than Common Stock are
outstanding, the shares of the Common Stock and the holders thereof shall
nevertheless be subject to the following provisions except to the extent that
such provisions are by their terms applicable only when shares of two or more
classes are outstanding.
(3) The net asset value of each share of the Corporation's capital
stock issued, sold or purchased at net asset value shall be the current net
asset value per share as determined in accordance with procedures adopted from
time to time by the Board of Directors which are not inconsistent with the 1940
Act.
(4) Shares of each class of stock shall be entitled to such
dividends or distributions, in stock or in cash or both, as may be declared from
time to time by the Board of Directors, acting in its sole discretion, with
respect to such class, or pursuant to any program that the Board of Directors
may have in effect at the time for the election by each stockholder of the mode
of making such dividend or distribution to that stockholder.
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(5) In the event of the liquidation or dissolution of the
Corporation, the holders of the Common Stock of the Corporation shall be
entitled to receive all the assets of the Corporation not attributable to other
classes of stock through any preference. The assets so distributable to such
stockholders shall be distributed among such stockholders in proportion to the
number of shares of that class held by them and recorded on the books of the
Corporation.
(6) Unless otherwise expressly provided in these Articles of
Incorporation, including any Articles Supplementary creating any class of
capital stock, on each matter submitted to a vote of stockholders, each holder
of a share of capital stock of the Corporation shall be entitled to one vote for
each share standing in such holder's name on the books of the Corporation,
irrespective of the class thereof, and all shares of all classes of capital
stock shall vote together as a single class; provided, however, that as to any
matter with respect to which a separate vote of any class is required by the
1940 Act or the Maryland General Corporation Law, such requirement as to a
separate vote by that class shall apply in lieu of a vote of all classes voting
together as a single class as described above.
(7) The Corporation shall be entitled to purchase shares of its
capital stock, to the extent that the Corporation may lawfully effect such
purchase under the laws of the State of Maryland, upon such terms and conditions
and for such consideration as the Board of Directors shall deem advisable.
(8) All shares purchased by the Corporation shall constitute
authorized but unissued shares and the number of the authorized shares of stock
of the Corporation shall not be reduced by the number of any shares purchased by
it. Unless and until their classification is changed in accordance with section
(2) of this Article V, all shares of capital stock so purchased shall continue
to belong to the same class to which they belonged at the time of their
purchase.
(9) The Corporation may issue shares of stock in fractional
denominations to the same extent as its whole shares, and shares in fractional
denominations shall be shares of capital stock having proportionately to the
respective fractions represented thereby all the rights of whole shares,
including, without limitation, the right to vote, the right to receive dividends
and distributions, and the right to participate upon liquidation of the
Corporation, but excluding the right to receive a stock certificate representing
fractional shares, and whenever the words "share" or "shares" are used in these
Articles of Incorporation, they shall be deemed to include fractions of shares,
unless the context clearly indicates that only full shares are intended to be
included.
(10) All persons who shall acquire capital stock or other securities
of the Corporation shall acquire the same subject to the provisions of these
Articles of Incorporation and the By-Laws of the Corporation, as each may be
amended from time to time.
(11) To the extent consistent with the 1940 Act and the Maryland
General Corporation Law, the Corporation reserves the right to make any
amendment to these Articles of Incorporation, now or hereafter authorized by
law, including any amendment which alters the contract rights, as expressly set
forth in these Articles of Incorporation, of any shares of outstanding stock.
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ARTICLE VI
PROVISIONS FOR DEFINING, LIMITING AND
REGULATING CERTAIN POWERS OF THE CORPORATION
AND OF THE DIRECTORS AND STOCKHOLDERS
(1) The number of directors of the Corporation shall initially be
two (2). The number of directors may be increased or decreased at any time by or
pursuant to the By-Laws of the Corporation but shall never be less than two (2);
provided, however, that during any time when the Corporation has three (3) or
more stockholders, the number of directors shall never be less than three (3);
and provided further, that the number of directors shall never be more or less
than permitted under the Maryland General Corporation Law and the 1940 Act. The
maximum number of directors that may constitute the Corporation's Board of
Directors is twelve (12). The maximum number of directors may be increased by
action taken by the holders of at least seventy-five percent (75%) of the shares
of capital stock then entitled to vote to increase the maximum number of
directors. The names of the persons who shall act as directors until the initial
annual meeting of stockholders and until their successors are duly elected and
qualify are:
Eamonn F. Dolan
Ellen M. Courtien
Beginning with the initial annual meeting of stockholders, the
directors shall be divided into three classes, designated Class I, Class II and
Class III. Each class shall consist, as nearly as may be possible, of one-third
of the total number of directors constituting the entire Board of Directors. At
the initial annual meeting of stockholders, Class I directors shall be elected
for a one-year term, Class II directors for a two-year term and Class III
directors for a three-year term. At each annual meeting of stockholders
beginning with the annual meeting of stockholders next succeeding the initial
annual meeting, successors to the class of directors whose term expires at that
annual meeting shall be elected for a three-year term. A director elected at an
annual meeting shall hold office until the annual meeting for the year in which
his term expires and until his successor shall be elected and shall qualify,
subject, however, to prior death, resignation, retirement, disqualification or
removal from office. If the number of directors is changed, any increase or
decrease shall be apportioned among the classes, as of the annual meeting of
stockholders next succeeding any such change, so as to maintain a number of
directors in each class as nearly equal as possible. In no case shall a decrease
in the number of directors shorten the term of any incumbent director. Subject
to any limitations imposed by the 1940 Act, any vacancy on the Board of
Directors that results from an increase in the number of directors may be filled
by a majority of the entire Board of Directors, and any other vacancy occurring
in the Board of Directors may be filled by a majority of the directors then in
office, whether or not sufficient to constitute a quorum, or by a sole remaining
director; provided, however, that if the stockholders of any class of the
Corporation's capital stock are entitled separately to elect one or more
directors, a majority of the remaining directors elected by that class or the
sole remaining directors elected by that class may fill any vacancy among the
number of directors elected by that class. A director elected by the Board of
Directors to fill any vacancy in the Board of Directors shall serve until the
next annual meeting of stockholders and until his successor shall be elected and
shall qualify, subject, however, to prior death, resignation, retirement,
disqualification or removal from office. At any annual meeting of stockholders,
any
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director elected to fill any vacancy in the Board of Directors that has arisen
since the preceding annual meeting of stockholders (whether or not any such
vacancy has been filled by election of a new director by the Board of Directors)
shall hold office for a term which coincides with the remaining term of the
class to which such directorship was previously assigned, if such vacancy arose
other than by an increase in the number of directors, and until his successor
shall be elected and shall qualify. In the event such vacancy arose due to an
increase in the number of directors, any director so elected to fill such
vacancy at an annual meeting shall hold office for a term which coincides with
that of the class to which such directorship has been apportioned as heretofore
provided, and until his successor shall be elected and shall qualify. A director
may be removed for cause only, and not without cause, and only by action taken
by the holders of at least seventy-five percent (75%) of the shares of capital
stock then entitled to vote in an election of such director.
(2) The Board of Directors of the Corporation is hereby empowered
to authorize the issuance from time to time of shares of capital stock, whether
now or hereafter authorized, for such consideration as the Board of Directors
may deem advisable, subject to such limitations as may be set forth in these
Articles of Incorporation or in the By-Laws of the Corporation or in the
Maryland General Corporation Law or the 1940 Act.
(3) To the maximum extent permitted by the Maryland General
Corporation Law, as from time to time amended, the Corporation: (i) shall
indemnify each of its currently acting and its former directors against any and
all liabilities and expenses incurred in connection with their services in such
capacities; (ii) shall indemnify its currently acting and its former officers to
the full extent that indemnification shall be provided to directors; and (iii)
may indemnify its employees and agents, to the extent determined by the Board of
Directors; in each case, subject to any limitations imposed by the 1940 Act. The
foregoing rights of indemnification shall not be exclusive of any other rights
to indemnification to which those seeking indemnification may be entitled.
Subject to the same limitations, the Corporation also shall advance expenses to
all such persons in connection with litigation or threatened litigation arising
out of their services in such capacities. Subject to the same limitations, the
Corporation may, by By-Law, resolution, or agreement, make further provision for
indemnification of directors, officers, employees, and agents. Furthermore, to
the fullest extent permitted by Maryland law, as it may be amended or
interpreted from time to time, subject to the limitations imposed by the 1940
Act, no director or officer of the Corporation shall be personally liable to the
Corporation or its stockholders. No amendment of these Articles of Incorporation
or repeal of any of its provisions shall limit or eliminate any of the benefits
provided to any person who at any time is or was a director or officer of the
Corporation under this Section in respect of any act or omission that occurred
prior to such amendment or repeal.
(4) The Board of Directors of the Corporation shall have the
exclusive authority to make, alter or repeal from time to time any of the
By-Laws of the Corporation except any particular By-Law which is specified as
not subject to alteration or repeal by the Board of Directors, subject to the
requirements of the 1940 Act.
(5) For purposes of these Articles of Incorporation and the
Corporation's By-Laws, the term "Continuing Director" shall mean any member of
the Board of Directors who:
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(a) Is not a person or an affiliated person (as that term is
defined in Section 2(3) of the Investment Company Act of 1940) of a person who
enters or proposes to enter into a transaction with the Corporation pursuant to
Section 2(a) of Article VIII of these Articles of Incorporation and has been a
member of the Board of Directors for a period of at least twelve months (or
since the commencement of the Corporation's operations, if less than twelve
months), or
(b) Is a successor to a Continuing Director who is
unaffiliated with a person who enters or proposes to enter into a transaction
with the Corporation pursuant to Section 2(a) of Article VIII of these Articles
of Incorporation and is recommended to succeed a Continuing Director by a
majority of the Continuing Directors then members of the Board of Directors.
ARTICLE VII
DENIAL OF PREEMPTIVE RIGHTS
No stockholder of the Corporation shall by reason of holding shares
of capital stock have any preemptive or preferential right to purchase or
subscribe to any shares of capital stock of the Corporation, now or hereafter
authorized, or any notes, debentures, bonds or other securities convertible into
shares of capital stock, now or hereafter to be authorized, whether or not the
issuance of any such shares of capital stock, or notes, debentures, bonds or
other securities would adversely affect the dividend or voting rights of such
stockholder; and the Board of Directors may issue shares of any class of capital
stock of the Corporation, or any notes, debentures, bonds, or other securities
convertible into shares of any class of capital stock of the Corporation, either
in whole or in part, to one or more of the existing stockholders.
ARTICLE VIII
CERTAIN VOTES OF STOCKHOLDERS
(1) Except as otherwise provided in Section (2) of this
Article VIII, Section (1) of Article VI, the first paragraph of Article XII and
the second sentence of Article XIII, any action otherwise required under the
laws of the State of Maryland to be taken or authorized by the affirmative vote
of the holders of a designated proportion greater than a majority of the votes
of all classes of capital stock of the Corporation (or of any class entitled to
vote thereon as a separate class) (a "Maryland statutory supermajority
requirement") shall be valid and effective if taken or authorized by the
affirmative vote of the holders of a majority of the aggregate number of shares
of capital stock of the Corporation outstanding and entitled to vote thereon
(or, if shares are voted by separate classes, by a majority of the aggregate
number of shares of each class entitled to vote thereon as a separate class),
notwithstanding any Maryland statutory supermajority requirement.
(2) (a) Except as otherwise provided in paragraph (b) of this
Section (2) of this Article VIII, the affirmative votes of at least seventy-five
percent (75%) of the directors of the Corporation and at least seventy-five
percent (75%) of the shares of the capital stock of the
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Corporation outstanding and entitled to vote thereon shall be necessary to
authorize any of the following actions:
(1) The merger or consolidation or share exchange of
the Corporation with or into any other person or company (including,
without limitation, a partnership, corporation, joint venture, business
trust, common law trust or any other business organization);
(2) the issuance or transfer by the Corporation (in one
or a series of transactions in any 12-month period) of any securities of
the Corporation to any other person or entity for cash, securities or
other property (or combination thereof) having an aggregate fair market
value of $1,000,000 or more, excluding (i) sales of any securities of the
Corporation in connection with a public offering thereof, (ii) issuances
of securities of the Corporation pursuant to a dividend reinvestment plan
adopted by the Corporation pursuant to Section (4) of Article V of these
Articles of Incorporation and (iii) issuances of securities of the
Corporation upon the exercise of any stock subscription rights distributed
by the Corporation;
(3) a sale, lease, exchange, mortgage, pledge, transfer
or other disposition by the Corporation (in one or a series of
transactions in any 12-month period) to or with any person of any assets
of the Corporation having an aggregate fair market value of $1,000,000 or
more, except for transactions in securities effected by the Corporation
in the ordinary course of its business;
(4) any proposal as to the voluntary liquidation or
dissolution of the Corporation or any amendment to these Articles of
Incorporation to terminate its existence; and
(5) any shareholder proposal as to specific investment
decisions made or to be made with respect to the Corporation's assets.
(b) Notwithstanding paragraph (a) of this Section (2) of this
Article VIII, so long as each action is approved by both a majority of the
entire Board of Directors and seventy-five percent (75%) of the Continuing
Directors (as that term is defined in Section (5) of Article VI of these
Articles of Incorporation), and so long as all other conditions and
requirements, if any, provided for in the By-Laws have been satisfied, then the
shareholder vote, if any, necessary to authorize the actions identified in
paragraph (a) of this Section (2) of Article VIII shall be as follows:
(1) Affirmative vote of only a majority of the shares
of capital stock of the Corporation outstanding and entitled to vote
thereupon shall be necessary to authorize any action that involves
substantially all of the Corporation's assets listed in paragraphs (a)(1)
and (a)(3) of this Section (2) of this Article VIII;
(2) affirmative vote of only a majority of the shares
of capital stock of the Corporation outstanding and entitled to vote
thereon shall be necessary to authorize the actions listed in
paragraph (a)(4) of this Section (2) of this Article VIII; and
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(3) no shareholder vote will be required to approve any
of the actions listed in paragraphs (a)(2) and (a)(5) of Section (2) of
this Article VIII.
ARTICLE IX
DETERMINATION BINDING
Any determination made in good faith, so far as accounting matters
are involved, in accordance with accepted accounting practice by or pursuant to
the authority or the direction of the Board of Directors, as to the amount of
assets, obligations or liabilities of the Corporation, as to the amount of net
income of the Corporation from dividends and interest for any period or amounts
at any time legally available for the payment of dividends, as to the amount of
any reserves or charges set up and the propriety thereof, as to the time of or
purpose for creating reserves or as to the use, alteration or cancellation of
any reserves or charges (whether or not any obligation or liability for which
such reserves or charges shall have been created, shall have been paid or
discharged or shall be then or thereafter required to be paid or discharged), as
to the price of any security owned by the Corporation or as to any other matters
relating to the issuance, sale, redemption or other acquisition or disposition
of securities or shares of capital stock of the Corporation, and any reasonable
determination made in good faith by the Board of Directors shall be final and
conclusive, and shall be binding upon the Corporation and all holders of its
capital stock, past, present and future, and shares of the capital stock of the
Corporation are issued and sold on the condition and understanding, evidenced by
the purchase of shares of capital stock or acceptance of share certificates,
that any and all such determinations shall be binding as aforesaid. No provision
of these Articles of Incorporation shall be effective to (a) require a waiver of
compliance with any provision of the Securities Act of 1933, as amended, or the
1940 Act, or of any valid rule, regulation or order of the Securities and
Exchange Commission thereunder or (b) protect or purport to protect any director
or officer of the Corporation against any liability to the Corporation or its
security holders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
ARTICLE X
PRIVATE PROPERTY OF STOCKHOLDERS
The private property of stockholders shall not be subject to the
payment of corporate debts to any extent whatsoever.
ARTICLE XI
PERPETUAL EXISTENCE
The duration of the Corporation shall be perpetual.
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ARTICLE XII
CONVERSION TO OPEN-END COMPANY
Notwithstanding any other provisions of these Articles of
Incorporation or the By-Laws of the Corporation, a favorable vote of the holders
of at least seventy-five percent (75%) of the shares of capital stock of the
Corporation entitled to be voted on the matter, shall be required to approve,
adopt or authorize an amendment to these Articles of Incorporation that makes
the Common Stock or any other class of capital stock a "redeemable security" as
that term is defined in the 1940 Act, unless a majority of the Board of
Directors and seventy-five percent (75%) of the Continuing Directors (as defined
in Section (5) of Article VI of these Articles of Incorporation) entitled to
vote on the matter approve of such action. In the event of such approval by the
Board of Directors and the Continuing Directors, the affirmative vote of a
majority of shares of capital stock of the Corporation entitled to be voted on
the matter shall be required to approve, adopt or authorize the foregoing
amendment to these Articles of Incorporation.
The Corporation shall notify the holders of all capital stock of the
approval, in accordance with the preceding paragraph of this Article XII, of any
amendment to these Articles of Incorporation that makes the Common Stock a
"redeemable security" (as that term is defined in the 1940 Act) no later than
thirty (30) days prior to the date of filing of such amendment with the
Department of Assessments and Taxation (or any successor agency) of the State of
Maryland; such amendment may not be so filed, however, until the later of (a)
ninety (90) days following the date of approval of such amendment by the holders
of capital stock in accordance with the preceding paragraph of this Article XII
and (b) the next January 1 or July 1, whichever is sooner, following the date of
such approval by holders of capital stock.
ARTICLE XIII
AMENDMENT
(1) The Corporation reserves the right to amend, alter, change or
repeal any provision contained in these Articles of Incorporation, in the manner
now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation. Notwithstanding any
other provisions of these Articles of Incorporation or the By-Laws of the
Corporation (and notwithstanding the fact that a lesser percentage may be
specified by law, these Articles of Incorporation or the By-Laws of the
Corporation), the amendment or repeal of Section (1), Section (3), or Section
(4) of Article VI, Sections (1) or (2) of Article VIII, Article X, Article XI,
Article XII or this Article XIII of these Articles of Incorporation shall
require the affirmative vote of the holders of at least seventy-five percent
(75%) of the shares then entitled to be voted on the matter.
(2) (a) The Board of Directors shall have the power to adopt,
alter, or repeal any By-Laws of the Corporation and to make new By-Laws, if the
resolution adopting, altering, repealing, or making any such By-Law is approved
by a majority of the Board of Directors and 75% of the Continuing Directors (as
that term is defined in Section (5) of Article VI of these Articles of
Incorporation); provided, however, that the Board of Directors shall not
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have the power to alter or repeal any By-Law adopted by the stockholders that
provides, by its terms, that it may not be amended or repealed by the Board of
Directors.
(b) The stockholders shall have the power to adopt, alter, or
repeal any By-Laws of the Corporation and to make new By-Laws.
IN WITNESS WHEREOF, the undersigned incorporator of RCM Strategic
Global Government Fund, Inc. hereby executes the foregoing Articles of
Incorporation and acknowledges the same to be his act and further acknowledges
that, to the best of his knowledge, the matters and facts set forth therein are
true in all material respects under the penalties of perjury.
Dated the 9th day of December, 1993.
/s/ Anthony Ain
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Anthony Ain
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EXHIBIT 2
BYLAWS
OF
RCM STRATEGIC GLOBAL GOVERNMENT FUND, 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. PRINCIPAL EXECUTIVE OFFICE. The principal executive offices of
the Corporation shall be at Four Embarcadero Center, Suite 2800, San Francisco,
CA 94111.
Section 3. 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
MEETING OF STOCKHOLDERS
Section 1. ANNUAL MEETING. An annual meeting of the stockholders of the
Corporation for the election of directors and for the transaction of such other
business as may properly be brought before the meeting shall be held (i) in the
year 1994, at such time as the Board of Directors may specify, and (ii)
beginning with the year 1995, on the day in March of each year as shall be
designated annually by the Board of Directors.
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 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 capital 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 twelve
months. No business shall be transacted at any special meeting except as
provided in the notice of meeting.
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Section 3. PLACE OF MEETINGS. Annual and special meetings of the
stockholders shall be held at the principal executive office of the Corporation
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 nor more than ninety 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 shareholders 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. At all meetings of the stockholders, the holders of a
majority of the shares of stock of the Corporation entitled to vote at the
meeting, present in person or by proxy, shall constitute a quorum for the
transaction of any business, but this Section 5 shall not affect any requirement
under the laws of the State of Maryland, the Investment Company Act of 1940,
including the rules and regulations thereunder (the "1940 Act"), or the Articles
of Incorporation for the vote necessary for the adoption of any measure. In the
absence of a quorum, no business may be transacted, except that the holders of a
majority of the shares of stock present in person or by proxy and entitled to
vote may adjourn the meeting from time to time, without notice other than
announcement thereat except as otherwise required by these By-Laws, until the
holders of the requisite amount of shares of stock shall be so present. At any
such adjourned meeting at which a quorum may be present, any business may be
transacted which might have been transacted at the meeting as originally called.
The absence from any meeting, in person or by proxy, of holders of the number of
shares of stock of the Corporation in excess of a majority thereof which may be
required by the laws of the State of Maryland, the 1940 Act, any other
applicable statute, the Articles of Incorporation, or these By-Laws, for action
upon any given matter shall not prevent action at such meeting upon any other
matter or matters which may properly come before the meeting, if there shall be
present thereat, in person or by proxy, holders of the number of shares of stock
of the Corporation required for action in respect of such other matter or
matters.
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 in the
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.
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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 shareholders, 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 nor less than ten 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.
Section 9. VOTING. Except as otherwise provided by the laws of the State
of Maryland, 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 of such
stock (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 (i) the close of business on the day on which notice of the
meeting is mailed or (ii) the thirtieth 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 the laws of the State of Maryland, 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. Each stockholder entitled to vote at any meeting of
stockholders may authorize another person or persons to act for him by a proxy
signed by such stockholder or his duly authorized attorney-in-fact. No proxy
shall be valid after the expiration of eleven 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 registered in the
name of another corporation, if entitled to be voted, may be voted by the
President, a Vice President, or a proxy appointed by the President or a Vice
President of such other corporation, unless some other person who has been
appointed to vote such shares pursuant to a by-law or a resolution of the board
of directors of such other corporation presents a certified copy of such by-law
or resolution, in which case such person may vote such shares. Any fiduciary may
vote shares registered in his name as such fiduciary, either in person or by
proxy.
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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 hold 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 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 do 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 the laws of the State of Maryland, 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: (i) a unanimous written consent which sets
forth the action and is signed by each stockholder entitled to vote on the
matter and (ii) a written waiver of any right to dissent signed by each
stockholder entitled to notice of the meeting but not entitled to vote thereat.
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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 the laws of the State of Maryland, 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 Board of
Directors adopted by a majority of the Continuing Directors (as that term is
defined in Section (5) of Article VI of the Articles of Incorporation) then in
office; provided, however, that the number of directors shall in no event be
less than two nor more than twelve. Any vacancy created by an increase in
Directors may be filled in accordance with Section 6 of this Article III. 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 Section 5 of this Article III at the time of
such decrease. 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 the earlier of the
following events: (i) if elected by the shareholders, the expiration of the term
of his class, or (ii) if elected by the Board of Directors, until the annual
election of directors next succeeding his election and until his successor shall
have been elected and shall have qualified, or (iii) his death, or (iv) if he
has resigned, the date on which his resignation is effective, or (v) if he is
removed as a director as hereinafter provided in these By-Laws, or as otherwise
provided by the laws of the State of Maryland, the 1940 Act, or the Articles of
Incorporation, the date on which his removal is effective.
Section 4. RESIGNATION. A director of the Corporation may resign at any
time by giving written notice of his resignation to the Board of Directors or
the Chairman of the Board or 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. REMOVAL OF DIRECTORS. Any director of the Corporation may be
removed for cause (but not without cause) by the stockholders by a vote of
seventy-five percent (75%) of the votes entitled to be cast for the election of
directors, and the stockholders may elect a successor to fill any resulting
vacancy for the remainder of the term of the removed director.
Section 6. VACANCIES. Subject to the provisions of the laws of the State
of Maryland 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, if the new director so elected is also approved by a
majority of the
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Continuing Directors then in office. 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, and if the new director so elected is
also approved by a majority vote of the Continuing Directors. A director elected
to serve by the Board of Directors to fill a vacancy shall serve until the next
annual meeting of stockholders and until his successor is elected and qualifies,
subject, however, to prior death, resignation, retirement, disqualification, or
removal from office, as provided herein.
Section 7. 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 8. REGULAR MEETING. 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 9. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by or at the request of two or more directors of the Corporation
or by the Chairman of the Board or the President.
Section 10. 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 11. ANNUAL MEETING. The annual meeting of each newly elected Board
of Directors (including a Board of Directors to which only one class of
directors has been newly elected) shall be held immediately after the meeting of
stockholders at which directors were elected, if practicable and convenient, and
otherwise within a reasonable time period thereafter. No notice of such annual
meeting shall be necessary if held immediately after the adjournment, and at the
site, of the meeting of stockholders. If not so held, notice shall be given as
hereinafter provided for special meetings of the Board of Directors.
Section 12. NOTICE OF MEETINGS. To the extent required by the laws of the
State of Maryland 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
twenty-four hours before the time at which such meeting is to be held, or mailed
by first-class mail, postage prepaid, addressed to him 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
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 the laws of the State of Maryland, the 1940 Act, the
Articles of Incorporation, or these By-Laws.
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Section 13. WAIVER OF NOTICE OF MEETINGS. Notice of any special 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 14. 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 the laws of the State of Maryland, 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; provided, however, that (i) the approval of any contract with an
investment adviser or principal underwriter, as such terms are defined in the
1940 Act, which the Corporation enters into or any renewal or amendment thereof,
(ii) the approval of the fidelity bond required by the 1940 Act, and (iii) the
selection of the Corporation's independent public accountants, shall each
require the affirmative vote of a majority of the directors who are not
interested persons, as defined in the 1940 Act, of the Corporation. 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 15. 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 his 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, in his absence or inability to act, any
person appointed by the Chairman) shall act as secretary of the meeting and keep
the minutes thereof.
Section 16. WRITTEN CONSENT OF DIRECTORS IN LIEU OF A MEETING. Subject to
the provisions of the laws of the State of Maryland 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 17. 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 18. INVESTMENT POLICIES. It shall be the duty of the Board of
Directors to ensure that the purchase, sale, retention and disposal of portfolio
securities and the other investment practices of the Corporation are at all
times consistent with the investment policies
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and restrictions with respect to securities investments and otherwise of the
Corporation, as recited in the Prospectus included in the registration statement
of the Corporation relating to the initial public offering of shares of its
capital stock, as filed with the Securities and Exchange Commission (or as such
investment policies and restrictions may be modified by the Board of Directors
or, if required, by majority vote of the stockholders of the Corporation in
accordance with the 1940 Act) and as required by the 1940 Act. The Board of
Directors may delegate the duty of management of the assets and the
administration of its day to day operations to one or more individuals or
corporate management companies and/or investment advisers pursuant to a written
contract or contracts which have obtained the requisite approvals, including any
requisite approvals of renewals thereof, of the Board of Directors and/or the
stockholders of the Corporation in accordance with the provisions of the 1940
Act.
Section 19. 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 conditions with 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 contracts which have obtained the requisite approvals, including any
requisite approvals of renewals thereof, of the Board of Directors and/or the
stockholders of the Corporation in accordance with the provisions of the 1940
Act.
Section 20. DEFINITION OF "CONTINUING" DIRECTORS. For purposes of the
Articles of Incorporation and these By-Laws, the term "Continuing Director"
shall have the same meaning as that term is given in Section (5) of Article VI
of the Articles of Incorporation.
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 the laws of the State of
Maryland 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 of
the Corporation; 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. One-third, but 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
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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 of Directors 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 (i) unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such
absent or disqualified member, (ii) determine that, for purposes of that
meeting, the member so appointed shall replace any other member of the
committee, and (iii) 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, who shall be a director of the
Corporation, 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 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 each year at its first meeting held after the annual meeting of
stockholders, or at any other time. Officers serve at the pleasure of the Board
of Directors. Each officer shall hold office until the next annual meeting of
the stockholders and 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, one or more Assistant
Treasurers and one or more 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,
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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 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.
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
of the Corporation. In the absence of the Chairman of the Board (or if there be
none), he shall preside at all meetings of the stockholders and of the Board of
Directors. To the extent permitted by the laws of the State of Maryland 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 the laws of the State of Maryland 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 the laws of the State
of Maryland 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 Executive 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 Executive 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
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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 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, moneys due and payable, to the
Corporation from any source whatsoever;
(e) disburse 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;
(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
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(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
To the maximum extent permitted by the Maryland General Corporation Law, as from
time to time amended, the Corporation: (i) shall indemnify each of its currently
acting and its former directors against any and all liabilities and expenses
incurred in connection with their services in such capacities; (ii) shall
indemnify its currently acting and its former officers to the full extent that
indemnification shall be provided to directors; and (iii) may indemnify its
employees and agents, to the extent determined by the Board of Directors; in
each case, subject to any limitations imposed by the 1940 Act. The foregoing
rights of indemnification shall not be exclusive of any other rights to
indemnification to which those seeking indemnification may be entitled. Subject
to the same limitations, the Corporation also shall advance expenses to all such
persons in connection with litigation or threatened litigation arising out of
their services in such capacities. Subject to the same limitations, the Board of
Directors may make further provision for indemnification of directors, officers,
employees, and agents. Neither the amendment nor repeal of this Article VI, nor
the adoption or amendment of any other provision of these By-Laws, inconsistent
with this Article VI, shall apply to or affect in any respect the applicability
of the preceding paragraph with respect to any act or failure to act which
occurred prior to such amendment, repeal, or adoption.
The Corporation may purchase insurance on behalf of an officer or
director protecting such person to the maximum extent permitted under the laws
of the State of Maryland, from liability arising from his activities as officer
or director of the Corporation. The Corporation may not purchase insurance,
however, on behalf of any officer or director of the Corporation that protects
or purports to protect such person from liability to the Corporation or to its
stockholders to which such officer or director would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office.
The Corporation may indemnify or purchase insurance to the extent
provided in this Article VI on behalf of an employee or agent who is not an
officer or director of the Corporation.
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ARTICLE VII
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 President or a Vice President and by the Secretary or an
Assistant Secretary or the Treasurer or an Assistant Treasurer and sealed with
the seal of the Corporation. 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.
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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 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 the laws of the State of
Maryland.
Section 6. FIXING OF A RECORD DATE FOR DIVIDENDS AND DISTRIBUTIONS. The
Board of Directors may fix, in advance, a date not more than ninety days
preceding the date fixed for the payment of any dividend or the making of any
distribution. Once the Board of Directors fixes a record date as the record date
for the determination of the stockholders entitled to receive any such dividend
or distribution, in such case only the stockholders of record at the time so
fixed shall be entitled to receive such dividend or distribution.
Section 7. INFORMATION TO STOCKHOLDERS AND OTHERS. Any stockholder of the
Corporation 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
executive office.
ARTICLE VIII
SEAL
The seal of the Corporation shall be circular in form and shall bear,
in addition to any other emblem or device approved by the Board of Directors,
the name of the Corporation, the year of its incorporation and the words
"Corporate Seal" and "Maryland." The Board of Directors may authorize one or
more duplicate seals and provide for the custody thereof. Said seal may be used
by causing it or a facsimile thereof to be impressed or affixed or in any other
manner reproduced.
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ARTICLE IX
FISCAL YEAR
Unless otherwise determined by the Board of Directors, the fiscal
year of the Corporation shall end on the 31st of December.
ARTICLE X
DEPOSITORIES AND CUSTODIANS
Section 1. DEPOSITORIES. The funds of the Corporation shall may be
deposited with such banks or other depositories as the Board of Directors of the
Corporation may from time to time determine.
Section 2. CUSTODIANS. All securities and other investments may be
deposited in the safe keeping of such banks or other companies as the Board of
Directors of the Corporation may from time to time determine. Every arrangement
entered into with any bank or other company for the safe keeping of the
securities and investments of the Corporation shall contain provisions complying
with the 1940 Act.
ARTICLE XI
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 on behalf of the Corporation or
sold, transferred or otherwise disposed of, may be transferred from the name of
the Corporation by the signature of the President or a Vice President or the
Treasurer or pursuant to any procedure approved by the Board of Directors,
subject to applicable law.
Section 4. DEPOSITS. All funds of the Corporation not otherwise employed
shall be deposited from time to time to the credit of the Corporation in such
banks, trust companies, or other depositories as the Board of Directors may
designate, to the extent not inconsistent with the 1940 Act.
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ARTICLE XII
INDEPENDENT PUBLIC ACCOUNTANTS
The firm of independent public accountants which shall sign or
certify the financial statements of the Corporation which are filed with the
Securities and Exchange Commission shall, to the extent required by the 1940
Act, be selected annually by the Board of Directors and ratified by the
stockholders in accordance with the provisions of the 1940 Act.
ARTICLE XIII
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 the Corporation 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 also be available at the annual meeting of stockholders and be
placed on file at the Corporation's principal office in the State of Maryland.
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 and the other
assets, including securities, in which the funds of the Corporation were then
invested. 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 XIV
AMENDMENTS
These By-Laws shall not be amended, altered, or repealed, and no new
By-Law shall be adopted, except in accordance with the requirements of
Section (2) of Article XIII of the Articles of Incorporation.
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RCM STRATEGIC GLOBAL GOVERNMENT FUND, INC.
Regular Meeting of Directors
December 8, 1998
BY-LAW AMENDMENTS
RESOLVED: That the Fund's By-laws are hereby amended as follows:
1. The following sentence is added at the end of Article II, Section 1:
"Any business of the Corporation may be transacted at the annual meeting
without being specifically designated in the notice, except as otherwise
provided by statute, by the Articles of Incorporation or by these By-laws."
2. That the final sentence in Article II, Section 2 be amended to
provide as follows:
"No business shall be transacted at any special meeting except as provided
in the notice of meeting or as otherwise provided in Section 15 of these
By-laws."
3. That the following Section 15 shall be added to Article II of the
By-laws:
Section 15. Advance Notice of Stockholder Nominees for Director and Other
Stockholder Proposals.
(a) The matters to be considered and brought before any annual or special
meeting of stockholders of the Corporation shall be limited to only such
matters, including the nomination and election of directors, as shall be brought
properly before such meeting in compliance with the procedures set forth in this
Section 15.
(b) For any matter to be properly before any annual meeting of
stockholders, the matter must be (i) specified in the notice of annual meeting
given by or at the direction of the Board of Directors, (ii) otherwise brought
before the annual meeting by or at the direction of the Board of Directors or
(iii) brought before the annual meeting in the manner specified in this Section
15(b) by a stockholder of record or a stockholder (a "Nominee Holder") that
holds voting securities entitled to vote at meetings of stockholders through a
nominee or "street name" holder of record and that can demonstrate to the
Corporation such indirect ownership and such Nominee Holder's entitlement to
vote such securities.
In addition to any other requirements under applicable law and the Articles
of Incorporation and By-laws of the Corporation, persons nominated by
stockholders for election as directors of the Corporation and any other
proposals by stockholders may be properly brought before a stockholder meeting
only pursuant to timely notice (the "Stockholder Notice") in writing to the
Secretary of the Corporation. To be timely, the Stockholder Notice must be
delivered to or mailed and received at the principal executive offices of the
Corporation not less
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than 45 nor more than 60 days prior to the date the Corporation first mailed its
proxy materials for the prior year's annual meeting; provided however, if and
only if the annual meeting is not scheduled to be held within a period that
commences 30 days before the first anniversary date of the annual meeting for
the preceding year and ends 30 days after such anniversary date (an annual
meeting date outside such period being referred to herein as an "Other Annual
Meeting Date"), such Stockholder Notice shall be given in the manner provided
herein by the later of the close of business on (i) the date 45 days prior to
such Other Annual Meeting Date or (ii) the 10th business day following the date
such Other Annual Meeting Date is first publicly announced or disclosed.
Any stockholder desiring to nominate any person or persons (as the case may
be) for election as a director or directors of the Corporation shall deliver, as
part of such Stockholder Notice: (i) a statement in writing setting forth (A)
the name of the person or persons to be nominated, (B) the number and class of
all shares of each class of stock of the Corporation owned of record and
beneficially by each such person, as reported to such stockholder by such
nominee(s), (C) the information regarding each such person required by
paragraphs (a), (e) and (f) of Item 401 of Regulation S-K or paragraph (b) of
Item 22 of Rule 14a-101 (Schedule 14A) under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), adopted by the Securities and Exchange
Commission (or the corresponding provisions of any regulation or rule
subsequently adopted by the Securities and Exchange Commission applicable to the
Corporation), (D) whether such stockholder believes any nominee will be an
"interested person" of the Corporation (as defined in the Investment Company Act
of 1940, as amended) and, if not an "interested person," information regarding
each nominee that will be sufficient for the Corporation to make such
determination, and (E) the number and class of all shares of each class of stock
of the Corporation owned of record and beneficially by such stockholder; (ii)
each nominated person's signed consent to serve as a director of the Corporation
if elected; (iii) such stockholder's name and address; and (iv) in the case of a
Nominee Holder, evidence establishing such Nominee Holder's indirect ownership
of, and entitlement to vote, securities at the meeting of stockholders.
Any stockholder who gives a Stockholder Notice of any matter proposed to be
brought before the meeting (not involving nominees for director) shall deliver,
as part of such Stockholder Notice, the text of the proposal to be presented, a
brief written statement of the reasons why such stockholder favors the proposal,
such stockholder's name and address, the number and class of all shares of each
class of stock of the Corporation owned of record and beneficially by such
stockholder, any material interest of such stockholder in the matter proposed
(other than as a stockholder) and, in the case of a Nominee Holder, evidence
establishing such Nominee Holder's indirect ownership of, and entitlement to
vote, securities at the meeting of stockholders. As used in this Section 15,
shares "beneficially owned" shall mean all shares which such person is deemed to
beneficially own pursuant to Rules 13d-3 and 13d-5 under the Exchange Act.
Notwithstanding anything in this Section 15(b) to the contrary, in the
event that the number of directors to be elected to the Board of Directors of
the Corporation at a meeting of stockholders is increased and either all of the
nominees for director or the size of the increased Board of Directors are not
publicly announced or disclosed by the Corporation at least 70 days prior to the
first anniversary of the preceding year's annual meeting, a Stockholder Notice
shall
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also be considered timely hereunder, but only with respect to nominees for any
new positions created by such increase, if it shall be delivered to the
Secretary of the Corporation at the principal executive office of the
Corporation not later than the close of business on the 10th business day
following the first date all of such nominees or the size of the increased Board
of Directors shall have been publicly announced or disclosed.
(c) Only such matters shall be properly brought before a special meeting
of stockholders as shall have been brought before the meeting pursuant to the
Corporation's notice of meeting. In the event the Corporation calls a special
meeting of stockholders for the purpose of electing one or more directors to the
Board of Directors, any stockholder may nominate a person or persons (as the
case may be), for election to such position(s) as specified in the Corporation's
notice of meeting, if the Stockholder Notice to the Secretary of the Corporation
required by Section 15(b) hereof shall be delivered to or mailed and received by
the principal executive office of the Corporation not later than the close of
business on the 10th day following the day on which the date of the special
meeting and of the nominees proposed by the Board of Directors to be elected at
such meeting are publicly announced or disclosed.
(d) For purposes of this Section 15, a matter shall be deemed to have
been "publicly announced or disclosed" if such matter is disclosed in a press
release reported by the Dow Jones News Service, Associated Press or comparable
national news service or in a document publicly filed by the Corporation with
the Securities and Exchange Commission.
(e) In no event shall the adjournment of an annual meeting, or any
announcement thereof, commence a new period for the giving of notice as provided
in this Section 15.
(f) The person presiding at any meeting of stockholders, in addition to
making any other determinations that may be appropriate to the conduct of the
meeting, shall have the power and duty to determine whether notice of nominees
and other matters proposed to be brought before a meeting has been duly given in
the manner provided in this Section 15 and, if not so given, shall direct and
declare at the meeting that such nominees and other matters shall not be
considered.
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EXHIBIT 3
RCM Strategic Global Government Fund Inc.
Provisions in Articles of Incorporation Defining Rights of Stockholders
Article V
CAPITAL STOCK
. . .
(4) Shares of each class of stock shall be entitled to such dividends or
distributions, in stock or in cash or both, as may be declared from time to time
by the Board of Directors, acting in its sole discretion, with respect to such
class, or pursuant to any program that the Board of Directors may have in effect
at the time for the election by each stockholder of the mode of making such
dividend or distribution to that stockholder.
(5) In the event of the liquidation or dissolution of the Corporation, the
holders of the Common Stock of the Corporation shall be entitled to receive all
the assets of the Corporation not attributable to other classes of stock through
any preference. The assets so distributable to such stockholders shall be
distributed among such stockholders in proportion to the number of shares of
that class held by them and recorded on the books of the Corporation.
(6) Unless otherwise expressly provided in these Articles of Incorporation,
including any Articles Supplementary creating any class of capital stock, on
each matter submitted to a vote of stockholders, each holder of a share of
capital stock of the Corporation shall be entitled to one vote for each share
standing in such holder's name on the books of the Corporation, irrespective of
the class thereof, and all shares of all classes of capital stock shall vote
together as a single class; provided, however, that as to any matter with
respect to which a separate vote of any class is required by the 1940 Act or the
Maryland General Corporation Law, such requirement as to a separate vote by that
class shall apply in lieu of a vote of all classes voting together as a single
class as described above.
. . .
Article VII
DENIAL OF PREEMPTIVE RIGHTS
No stockholder of the Corporation shall by reason of holding shares of
capital stock have any preemptive or preferential right to purchase or subscribe
to any shares of capital stock of the Corporation, now or hereafter authorized,
or any notes, debentures, bonds or other securities convertible into shares of
capital stock, now or hereafter to be authorized, whether or not the issuance of
any such shares of capital stock, or notes, debentures, bonds or other
securities would adversely affect the dividend or voting rights of such
stockholder; and the Board of Directors may issue shares of any class of capital
stock of the Corporation, or any notes, debentures, bonds, or other securities
convertible into shares of any class of capital stock of the Corporation, either
in whole or in part, to one or more of the existing stockholders.
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Article VIII
CERTAIN VOTES OF STOCKHOLDERS
(1) Except as otherwise provided in Section (2) of this Article VIII,
Section (1) of Article VI, the first paragraph of Article XII and the second
sentence of Article XIII, any action otherwise required under the laws of the
State of Maryland to be taken or authorized by the affirmative vote of the
holders of a designated proportion greater than a majority of the votes of all
classes of capital stock of the Corporation (or of any class entitled to vote
thereon as a separate class) (a "Maryland statutory supermajority requirement")
shall be valid and effective if taken or authorized by the affirmative vote of
the holders of a majority of the aggregate number of shares of capital stock of
the Corporation outstanding and entitled to vote thereon (or, if shares are
voted by separate classes, by a majority of the aggregate number of shares of
each class entitled to vote thereon as a separate class), notwithstanding any
Maryland statutory supermajority requirement.
(2) (a) Except as otherwise provided in paragraph (b) of this Section (2) of
this Article VIII, the affirmative votes of at least seventy-five percent (75%)
of the directors of the Corporation and at least seventy-five percent (75%) of
the shares of the capital stock of the Corporation outstanding and entitled to
vote thereon shall be necessary to authorize any of the following actions:
(1) The merger or consolidation or share exchange of the Corporation
with or into any other person or company (including, without limitation,
a partnership, corporation, joint venture, business trust, common law
trust or any other business organization);
(2) the issuance or transfer by the Corporation (in one or a series of
transactions in any 12-month period) of any securities of the Corporation
to any other person or entity for cash, securities or other property (or
combination thereof) having an aggregate fair market value of $1,000,000
or more, excluding (i) sales of any securities of the Corporation in
connection with a public offering thereof, (ii) issuances of securities of
the Corporation pursuant to a dividend reinvestment plan adopted by the
Corporation pursuant to Section (4) of Article V of these Articles of
Incorporation and (iii) issuances of securities of the Corporation upon
the exercise of any stock subscription rights distributed by the
Corporation;
(3) a sale, lease, exchange, mortgage, pledge, transfer or other
disposition by the Corporation (in one or a series of transactions in any
12-month period) to or with any person of any assets of the Corporation
having an aggregate fair market value of $1,000,000 or more, except for
transactions in securities effected by the Corporation in the ordinary
course of its business;
(4) any proposal as to the voluntary liquidation or dissolution of the
Corporation or any amendment to these Articles of Incorporation to
terminate its existence; and
(5) any shareholder proposal as to specific investment decisions made or
to be made with respect to the Corporation's assets.
2
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(b) Notwithstanding paragraph (a) of this Section (2) of this
Article VIII, so long as each action is approved by both a majority of the
entire Board of Directors and seventy-five percent (75%) of the Continuing
Directors (as that term is defined in Section (5) of Article VI of these
Articles of Incorporation), and so long as all other conditions and
requirements, if any, provided for in the By-Laws have been satisfied, then the
shareholder vote, if any, necessary to authorize the actions identified in
paragraph (a) of this Section (2) of Article VIII shall be as follows:
(1) Affirmative vote of only a majority of the shares of capital stock
of the Corporation outstanding and entitled to vote thereupon shall be
necessary to authorize any action that involves substantially all of the
Corporation's assets listed in paragraphs (a)(1) and (a)(3) of this
Section (2) of this Article VIII;
(2) affirmative vote of only a majority of the shares of capital stock
of the Corporation outstanding and entitled to vote thereon shall be
necessary to authorize the actions listed in paragraph (a)(4) of this
Section (2) of this Article VIII; and
(3) no shareholder vote will be required to approve any of the actions
listed in paragraphs (a)(2) and (a)(5) of Section (2) of this
Article VIII.
. . .
Article X
PRIVATE PROPERTY OF STOCKHOLDERS
The private property of stockholders shall not be subject to the payment
of corporate debts to any extent whatsoever.
. . .
Article XII
CONVERSION TO OPEN-END COMPANY
Notwithstanding any other provisions of these Articles of Incorporation or
the By-Laws of the Corporation, a favorable vote of the holders of at least
seventy-five percent (75%) of the shares of capital stock of the Corporation
entitled to be voted on the matter, shall be required to approve, adopt or
authorize an amendment to these Articles of Incorporation that makes the Common
Stock or any other class of capital stock a "redeemable security" as that term
is defined in the 1940 Act, unless a majority of the Board of Directors and
seventy-five percent (75%) of the Continuing Directors (as defined in Section
(5) of Article VI of these Articles of Incorporation) entitled to vote on the
matter approve of such action. In the event of such approval by the Board of
Directors and the Continuing Directors, the affirmative vote of a majority of
shares of capital stock of the Corporation entitled to be voted on the matter
shall be required to approve, adopt or authorize the foregoing amendment to
these Articles of Incorporation.
The Corporation shall notify the holders of all capital stock of the
approval, in accordance with the preceding paragraph of this Article XII, of any
amendment to these Articles of Incorporation that makes the Common Stock a
"redeemable security" (as that term is defined
3
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in the 1940 Act) no later than thirty (30) days prior to the date of filing of
such amendment with the Department of Assessments and Taxation (or any successor
agency) of the State of Maryland; such amendment may not be so filed, however,
until the later of (a) ninety (90) days following the date of approval of such
amendment by the holders of capital stock in accordance with the preceding
paragraph of this Article XII and (b) the next January 1 or July 1, whichever is
sooner, following the date of such approval by holders of capital stock.
. . . .
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EXHIBIT 4
RCM Strategic Global Government Fund, Inc.
By-law Provisions Defining Rights of Stockholders
Article II
MEETING OF STOCKHOLDERS
. . .
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 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 capital 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 twelve
months. No business shall be transacted at any special meeting except as
provided in the notice of 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 nor more than ninety 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 shareholders 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. At all meetings of the stockholders, the holders of a
majority of the shares of stock of the Corporation entitled to vote at the
meeting, present in person or by proxy, shall constitute a quorum for the
transaction of any business, but this Section 5 shall not affect any requirement
under the laws of the State of Maryland, the Investment Company Act of 1940,
including the rules and regulations thereunder (the "1940 Act"), or the Articles
of Incorporation
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for the vote necessary for the adoption of any measure. In the absence of a
quorum, no business may be transacted, except that the holders of a majority of
the shares of stock present in person or by proxy and entitled to vote may
adjourn the meeting from time to time, without notice other than announcement
thereat except as otherwise required by these By-Laws, until the holders of the
requisite amount of shares of stock shall be so present. At any such adjourned
meeting at which a quorum may be present, any business may be transacted which
might have been transacted at the meeting as originally called. The absence from
any meeting, in person or by proxy, of holders of the number of shares of stock
of the Corporation in excess of a majority thereof which may be required by the
laws of the State of Maryland, the 1940 Act, any other applicable statute, the
Articles of Incorporation, or these By-Laws, for action upon any given matter
shall not prevent action at such meeting upon any other matter or matters which
may properly come before the meeting, if there shall be present thereat, in
person or by proxy, holders of the number of shares of stock of the Corporation
required for action in respect of such other matter or matters.
. . .
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 shareholders, 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 nor less than ten 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.
Section 9. VOTING. Except as otherwise provided by the laws of the State of
Maryland, 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 of such stock
(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 (i) the close of business on the day on which notice of the
meeting is mailed or (ii) the thirtieth 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 the laws of the State of Maryland, 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. Each stockholder entitled to vote at any meeting of
stockholders may authorize another person or persons to act for him by a proxy
signed by such stockholder or his duly authorized attorney-in-fact. No proxy
shall be valid after the expiration of eleven months from the date thereof,
unless otherwise provided in the proxy. Every proxy shall be revocable at
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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 registered in the name
of another corporation, if entitled to be voted, may be voted by the President,
a Vice President, or a proxy appointed by the President or a Vice President of
such other corporation, unless some other person who has been appointed to vote
such shares pursuant to a by-law or a resolution of the board of directors of
such other corporation presents a certified copy of such by-law or resolution,
in which case such person may vote such shares. Any fiduciary may vote shares
registered in his name as such fiduciary, either in person or by proxy. . .
. . .
Section 14. CONSENT OF STOCKHOLDERS IN LIEU OF MEETING. Except as otherwise
provided by the laws of the State of Maryland, 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: (i) a unanimous written consent which sets forth the
action and is signed by each stockholder entitled to vote on the matter and (ii)
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 5. REMOVAL OF DIRECTORS. Any director of the Corporation may be
removed for cause (but not without cause) by the stockholders by a vote of
seventy-five percent (75%) of the votes entitled to be cast for the election of
directors, and the stockholders may elect a successor to fill any resulting
vacancy for the remainder of the term of the removed director.
. . .
Article VII
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 President or a Vice President and by the Secretary or an
Assistant Secretary or the Treasurer or an
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Assistant Treasurer and sealed with the seal of the Corporation. 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 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 by it which the owner thereof
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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
the laws of the State of Maryland.
Section 6. FIXING OF A RECORD DATE FOR DIVIDENDS AND DISTRIBUTIONS. The Board
of Directors may fix, in advance, a date not more than ninety days preceding the
date fixed for the payment of any dividend or the making of any distribution.
Once the Board of Directors fixes a record date as the record date for the
determination of the stockholders entitled to receive any such dividend or
distribution, in such case only the stockholders of record at the time so fixed
shall be entitled to receive such dividend or distribution.
Section 7. INFORMATION TO STOCKHOLDERS AND OTHERS. Any stockholder of the
Corporation 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
executive office.
By-law Amendment Adopted by the Board of Directors
December 8, 1998
RESOLVED: That the Fund's By-laws are hereby amended as follows:
. . .
2. That the final sentence in Article II, Section 2 be amended to provide as
follows:
"No business shall be transacted at any special meeting except as provided
in the notice of meeting or as otherwise provided in Section 15 of these
By-laws."
3. That the following Section 15 shall be added to Article II of the By-laws:
Section 15. Advance Notice of Stockholder Nominees for Director
and Other Stockholder Proposals.
(a) The matters to be considered and brought before any annual or
special meeting of stockholders of the Corporation shall be limited to
only such matters, including the nomination and election of directors, as
shall be brought properly before such meeting in compliance with the
procedures set forth in this Section 15.
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(b) For any matter to be properly before any annual meeting of
stockholders, the matter must be (i) specified in the notice of annual
meeting given by or at the direction of the Board of Directors, (ii)
otherwise brought before the annual meeting by or at the direction of the
Board of Directors or (iii) brought before the annual meeting in the
manner specified in this Section 15(b) by a stockholder of record or a
stockholder (a "Nominee Holder") that holds voting securities entitled to
vote at meetings of stockholders through a nominee or "street name" holder
of record and that can demonstrate to the Corporation such indirect
ownership and such Nominee Holder's entitlement to vote such securities.
In addition to any other requirements under applicable law and the
Articles of Incorporation and By-laws of the Corporation, persons
nominated by stockholders for election as directors of the Corporation and
any other proposals by stockholders may be properly brought before a
stockholder meeting only pursuant to timely notice (the "Stockholder
Notice") in writing to the Secretary of the Corporation. To be timely, the
Stockholder Notice must be delivered to or mailed and received at the
principal executive offices of the Corporation not less than 45 nor more
than 60 days prior to the date the Corporation first mailed its proxy
materials for the prior year's annual meeting; provided however, if and
only if the annual meeting is not scheduled to be held within a period
that commences 30 days before the first anniversary date of the annual
meeting for the preceding year and ends 30 days after such anniversary
date (an annual meeting date outside such period being referred to herein
as an "Other Annual Meeting Date"), such Stockholder Notice shall be given
in the manner provided herein by the later of the close of business on (i)
the date 45 days prior to such Other Annual Meeting Date or (ii) the 10th
business day following the date such Other Annual Meeting Date is first
publicly announced or disclosed.
Any stockholder desiring to nominate any person or persons (as the
case may be) for election as a director or directors of the Corporation
shall deliver, as part of such Stockholder Notice: (i) a statement in
writing setting forth (A) the name of the person or persons to be
nominated, (B) the number and class of all shares of each class of stock
of the Corporation owned of record and beneficially by each such person,
as reported to such stockholder by such nominee(s), (C) the information
regarding each such person required by paragraphs (a), (e) and (f) of Item
401 of Regulation S-K or paragraph (b) of Item 22 of Rule 14a-101
(Schedule 14A) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), adopted by the Securities and Exchange Commission (or the
corresponding provisions of any regulation or rule subsequently adopted by
the Securities and Exchange Commission applicable to the Corporation), (D)
whether such stockholder believes any nominee will be an "interested
person" of the Corporation (as defined in the Investment Company Act of
1940, as amended) and, if not an "interested person," information
regarding each nominee that will be sufficient for the Corporation to make
such determination, and (E) the number and class of all shares of each
class of stock of the Corporation owned of record and beneficially by such
stockholder; (ii) each nominated person's signed consent to serve as a
director of the Corporation if elected; (iii) such stockholder's name and
address; and (iv) in the case of a Nominee Holder, evidence establishing
such Nominee Holder's indirect ownership of, and entitlement to vote,
securities at the meeting of stockholders.
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Any stockholder who gives a Stockholder Notice of any matter
proposed to be brought before the meeting (not involving nominees for
director) shall deliver, as part of such Stockholder Notice, the text of
the proposal to be presented, a brief written statement of the reasons why
such stockholder favors the proposal, such stockholder's name and address,
the number and class of all shares of each class of stock of the
Corporation owned of record and beneficially by such stockholder, any
material interest of such stockholder in the matter proposed (other than
as a stockholder) and, in the case of a Nominee Holder, evidence
establishing such Nominee Holder's indirect ownership of, and entitlement
to vote, securities at the meeting of stockholders. As used in this
Section 15, shares "beneficially owned" shall mean all shares which such
person is deemed to beneficially own pursuant to Rules 13d-3 and 13d-5
under the Exchange Act.
Notwithstanding anything in this Section 15(b) to the contrary, in
the event that the number of directors to be elected to the Board of
Directors of the Corporation at a meeting of stockholders is increased and
either all of the nominees for director or the size of the increased Board
of Directors are not publicly announced or disclosed by the Corporation at
least 70 days prior to the first anniversary of the preceding year's
annual meeting, a Stockholder Notice shall also be considered timely
hereunder, but only with respect to nominees for any new positions created
by such increase, if it shall be delivered to the Secretary of the
Corporation at the principal executive office of the Corporation not later
than the close of business on the 10th business day following the first
date all of such nominees or the size of the increased Board of Directors
shall have been publicly announced or disclosed.
(c) Only such matters shall be properly brought before a special
meeting of stockholders as shall have been brought before the meeting
pursuant to the Corporation's notice of meeting. In the event the
Corporation calls a special meeting of stockholders for the purpose of
electing one or more directors to the Board of Directors, any stockholder
may nominate a person or persons (as the case may be), for election to
such position(s) as specified in the Corporation's notice of meeting, if
the Stockholder Notice to the Secretary of the Corporation required by
Section 15(b) hereof shall be delivered to or mailed and received by the
principal executive office of the Corporation not later than the close of
business on the 10th day following the day on which the date of the
special meeting and of the nominees proposed by the Board of Directors to
be elected at such meeting are publicly announced or disclosed.
(d) For purposes of this Section 15, a matter shall be deemed to
have been "publicly announced or disclosed" if such matter is disclosed in
a press release reported by the Dow Jones News Service, Associated Press
or comparable national news service or in a document publicly filed by the
Corporation with the Securities and Exchange Commission.
(e) In no event shall the adjournment of an annual meeting, or any
announcement thereof, commence a new period for the giving of notice as
provided in this Section 15.
(f) The person presiding at any meeting of stockholders, in addition to
making any other determinations that may be appropriate to the conduct of
the meeting, shall have the
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power and duty to determine whether notice of nominees and other matters
proposed to be brought before a meeting has been duly given in the manner
provided in this Section 15 and, if not so given, shall direct and declare
at the meeting that such nominees and other matters shall not be
considered.
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EXHIBIT 5
CUSTODIAN CONTRACT
Between
RCM STRATEGIC GLOBAL GOVERNMENT FUND, INC.
and
STATE STREET BANK AND TRUST COMPANY
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TABLE OF CONTENTS
PAGE
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1. Employment of Custodian and Property to be Held by It 3
2. Duties of the Custodian with Respect to Property of the Fund Held
$v the custodian in the United States 3
2.1. Holding Securities 3
2.2. Delivery of Securities 4
2.3. Registration of Securities 5
2.4. Bank Accounts 6
2.5. Availability of Federal Funds 6
2.6. Collection of Income 6
2.7. Payment of Fund Monies 7
2.8. Liability for Payment in Advance of Receipt of Securities
Purchased 8
2.9. Appointment of Agents 8
2.10. Deposit of Fund Assets in Securities Systems 8
2.11. Fund Assets Held in the Custodian's Direct Paper System 9
2.12. Segregated Account 10
2.13. Ownership Certificates for Tax Purposes 11
2.14. Proxies 11
2.15. Communications Relating to Fund Securities 11
2.16. Reports to Fund by Independent Public Accountants 11
3. Duties of the Custodian with Respect to Property of the Fund
Held Outside of the United States 12
3.1. Appointment of Foreign Sub-Custodians 12
3.2. Assets to be Held 12
3.3. Foreign Securities Depositories 12
3.4. Agreements with Foreign Banking Institutions 12
3.5. Access of Independent Accountants of the Fund 13
3.6. Reports by Custodian 13
3.7. Transactions in Foreign Custody Account 13
3.8. Liability of Foreign Sub-Custodians 13
3.9. Liability of Custodian 14
3.10. Reimbursement for Advances 14
3.11. Monitoring Responsibilities 14
3.12. Branches of U.S. Banks 15
3.13. Tax Law 15
4. Proper Instructions 15
5. Actions Permitted without Express Authority 16
6. Evidence of Authority 16
7. Duties of Custodian with Respect to the Books of Account
and Calculation of Net Asset Value and Net Income 16
8. Records 17
9. Settlement Provisions 17
10. Opinion of Funds Independent Accountant 20
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TABLE OF CONTENTS
(continued)
PAGE
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11. Compensation of Custodian 21
12. Responsibility of Custodian 21
13. Effective Period Termination and Amendment 22
14. Successor Custodian 23
15. Interpretive and Additional Provisions 23
16. New York Law to Apply 24
17. Prior Contracts 24
18. Assignment 24
19. Representation and Warranties of the Custodian 24
20. Shareholder Communications Election 24
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CUSTODIAN CONTRACT
This Contract between RCM Strategic Global Government Fund, Inc., a
corporation organized and existing under the laws of Maryland, having its
principal place of business at Four Embarcadero Center, Suite 2800, San
Francisco, CA 94111, hereinafter called the "Fund", and State Street Bank and
Trust Company, a Massachusetts trust company, having its principal place of
business at 225 Franklin Street, Boston, Massachusetts, 02110, hereinafter
called the "Custodian",
WITNESSETH: That in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT
The Fund hereby employs the Custodian as the custodian of its assets,
including securities which it desires to be held in places within the United
States ("domestic securities") and securities it desires to be held outside the
United States ("foreign securities") pursuant to the provisions of the Articles
of Incorporation. The fund agrees to deliver to the Custodian all securities and
cash owned by it, and all payments of income, payments of principal or capital
distributions received by it with respect to all securities owned by the Fund
from time to time, and the cash consideration received by it for such new or
treasury shares of capital stock, $ par value, ("shares") of the Fund as may be
issued or sold from time to time. The Custodian shall not be responsible for any
property of the Fund held or received by the Fund and not delivered to the
Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Article 4),
the Custodian shall on behalf of the fund from time to time employ one or more
sub-custodians located in the United States, but only in accordance with an
applicable vote by the Board of Directors of the Fund, and provided that the
Custodian shall have no more or less responsibility or liability to the Fund on
account of any actions or omissions of any sub-custodian so employed than any
such sub-custodian has to the Custodian. The Custodian may employ as
sub-custodian for the Fund's foreign securities and other assets the foreign
banking institutions and foreign securities depositories designated in Schedule
A hereto but only in accordance with the provisions of Article 3.
2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD $V THE
CUSTODIAN IN THE UNITED STATES
2.1. HOLDING SECURITIES. The Custodian shall hold and physically segregate for
the account of the Fund all non-cash property, to be held by it in the
United States including all domestic securities owned by the Fund, other
than (a) securities which are maintained pursuant to Section 2.10 in a
clearing agency which acts as a securities depository or in a book--entry
system authorized by the U.S. Department of the Treasury, collectively
referred to herein as "Securities System" and (b) commercial paper of an
issuer for which State Street Hank and Trust Company acts as issuing and
paying agent ("Direct Paper") which is deposited and/or maintained in the
Direct Paper System of the Custodian
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pursuant to Section 2.7.1. The Custodian shall maintain records of all
receipts, deliveries and locations of such securities, together with a
current inventory thereof.
2.2. DELIVERY OF SECURITIES. The Custodian shall release and deliver domestic
securities owned by the fund held by the Custodian or in a Securities
System account of the Custodian ox in the Custodian's Direct Paper book
entry system account ("Direct Paper System Account") only upon receipt of
Proper Instructions from the Fund, which may be continuing instructions
when deemed appropriate by the parties, and only in the following cases:
1) Upon sale of such securities for the account of the Fund and
receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Fund;
3) In the case of a sale effected through a Securities System, in
accordance with the provisions of section 2.10 hereof;
4) To the depository agent in connection with tender or other similar
offers for securities of the Fund;
5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable; provided
that, in any such case, the cash or other consideration is to be
delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the name of
the Fund or into the name of any nominee or nominees of the
Custodian or into the name or nominee name of any agent appointed
pursuant to Section 2.9 or into the name or nominee name of any
sub-custodian appointed pursuant to Article 1; or for exchange for
a different number of bonds, certificates or other evidence
representing the same aggregate face amount or number of units;
provided that, in any such case, the new securities are to be
delivered to the Custodian;
7) Upon the sale of such securities for the account of the Fund, to
the broker or its clearing agent, against a receipt, for
examination in accordance with "street delivery" custom; provided
that in any such case, the Custodian shall have no responsibility
or liability for any loss arising from the delivery of such
securities prior to receiving payment for such securities except
as may arise from the Custodian's own negligence or willful
misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of
the securities of the issuer of such securities, or pursuant to
provisions for conversion contained in such securities, or
pursuant to any deposit agreement; provided that, in any such
case, the new securities and cash, if any, are to be delivered to
the Custodian;
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9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that, in
any such case, the new securities and cash, if any, are to be
delivered to the Custodian;
10) For delivery in connection with any loans of securities made by
the Fund, but only against receipt of adequate collateral as
agreed upon from time to time by the Custodian and the Fund, which
may be in the form of cash or obligations issued by the United
States government, its agencies, authorities or instrumentalities,
except that in connection with any loans for which collateral is
to be credited to the Custodian's account in the book-entry system
authorized by the U.S. Department of the Treasury, the Custodian
will not be held liable or responsible for the delivery of
securities owned by the Fund prior to the receipt of such
collateral except as may arise from the Custodian's own negligence
or willful misconduct;
11) For delivery as security in connection with any borrowings by the
Fund requiring a pledge of assets by the Fund, BUT ONLY against
receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any agreement
among the Fund, the Custodian and a broker-dealer registered under
the Securities Exchange Act of 1934 (the "Exchange Act") and a
member of The National Association of Securities Dealers, Inc.
("NASD"), relating to compliance with the rules of The Options
Clearing Corporation and of any registered national securities
exchange, or of any similar organization or organizations,
regarding escrow or other arrangements in connection with
transactions by the Fund;
13) For delivery in accordance with the provisions of any agreement
among the Fund, the Custodian, and a Futures Commission merchant
registered under the Commodity Exchange Act, relating to
compliance with the rules of the Commodity Futures Trading
Commission and/or any contract market, or any similar organization
or organizations, regarding account deposits in connection with
transactions by the Fund;
14) For any other proper corporate purpose, but only upon receipt of,
in addition to Proper Instructions from the Fund, a certified copy
of a resolution of the Board of Directors or of the Executive
Committee of the fund signed by an officer and certified by the
Secretary or an Assistant Secretary, specifying the securities of
the Fund to be delivered, setting forth the purpose for which such
delivery is to be made, declaring such purpose to be a proper
corporate purpose, and naming the person or persons to whom
delivery of such securities shall be made.
2.3. REGISTRATION OF SECURITIES. Except as otherwise directed pursuant to
Proper Instructions, domestic securities held by the Custodian (other
than bearer securities) shall be registered in the name of the Fund or in
the name of any nominee of the Fund or of any nominee of the Custodian
which nominee shall be assigned exclusively to the Fund, UNLESS the Fund
has authorized in writing the appointment of a nominee to be used in
common with other
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registered investment companies having the same investment adviser as the
Fund, or in the name or nominee name of any agent appointed pursuant to
Section 2.9 or in the name or nominee name of any sub-custodian appointed
pursuant to Article 1. All securities accepted by the Custodian on behalf
of the Fund under the terms of this Contract shall be in "street name" or
other good delivery form, If, however, the Fund directs the Custodian to
maintain securities in "street name", the Custodian shall utilize its
best efforts only to timely collect income due the Fund on such
securities and to notify the Fund on a best efforts basis only of
relevant corporate actions including, without limitation, pendency of
calls, maturities, tender or exchange offers. Securities held by the
Custodian hereunder shall at all times be identifiable on its records.
2.4. BANK ACCOUNTS. The Custodian shall open and maintain a separate bank
account or accounts in the United States in the name of the Fund, subject
only to draft or order by the Custodian acting pursuant to the terms of
this Contract, and shall hold in such account or accounts, subject to the
provisions hereof, all cash received by it from or for the account of the
Fund, other than cash maintained by the Fund in a bank account
established and used in accordance with Rule 17f-3 under the Investment
Company Act of 1940. The Custodian permit any officer, director, to
withdraw cash from this except as authorized by the Fund's Board of
Directors. Funds held by the Custodian for the Fund may be deposited by
it to its credit as Custodian in the Banking Department of the Custodian
or in such other banks or trust companies as it may in its discretion
deem necessary or desirable; PROVIDED, however, that every such bank or
trust company shall be qualified to act as a custodian under the
Investment Company Act of 1940 and that each such bank or trust company
and the funds to be deposited with each such bank ox trust company shall
be approved by vote of a majority of the Hoard of Directors of the Fund.
Such funds shall be deposited by the Custodian in its capacity as
Custodian and shall be withdrawable by the Custodian only in that
capacity.
2.5. AVAILABILITY OF FEDERAL FUNDS. Upon mutual agreement between the Fund and
the Custodian, the Custodian shall, upon the receipt of Proper
instructions, make federal funds available to the Fund as of specified
times agreed upon from time to time by the Fund and the Custodian in the
amount of checks received in payment for Shares of the Fund which are
deposited into the Fund's account.
2.6. COLLECTION OF INCOME. Subject to the provisions of Section 2.3, the
Custodian shall collect and deposit to the account referenced in Section
2.4 hereof on a timely basis all income and other payments with respect
to United States registered employee or agent of account or accounts,
securities held hereunder to which the Fund shall be entitled either by
law or pursuant to custom in the securities business, and shall collect
on a timely basis all income and other payments with respect to bearer
domestic securities if, on the date of payment by the issuer, such
securities are held by the Custodian or its agent thereof and shall
credit such income, as collected, to the Fund's custodian account.
without limiting the generality of the foregoing, the Custodian shall
detach and present for payment all coupons and other income items
requiring presentation as and when they become due and shall collect
interest and other payments when due on securities held hereunder. Income
due the Fund on securities loaned pursuant to the provisions of Section
2.2 (10) shall be the responsibility of the Fund. The Custodian will have
no duty or responsibility in
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connection therewith, other than to provide the Fund with such
information or data as may be necessary to assist the Fund in arranging
for the timely delivery to the Custodian of the income to which the Fund
is properly entitled.
2.7. PAYMENT OF FUND MONIES. Upon receipt of Proper Instructions from the
Fund, which may be continuing instructions when deemed appropriate by the
parties, the Custodian shall pay out monies of the Fund in the following
cases only;
1) Upon the purchase of domestic securities, options, futures
contracts or options on futures contracts for the account of the
Fund but only (a) against the delivery of such securities or
evidence of title to such options, futures contracts or options on
futures contracts to the Custodian (or any lank, banking firm or
trust company doing business in the United States or abroad which
is qualified under the Investment Company Act of 1940, as amended,
to act as a custodian and has been designated by the Custodian as
its agent for this purpose) registered in the name of the Fund ox
in the name of a nominee of the Custodian referred to in Section
2.3 hereof or in proper form for transfer; (b) in the case of a
purchase effected through a Securities System, in accordance with
the conditions set forth in Section 2.1.0 hereof; (c) in the case
of a purchase involving the Direct Paper System, in accordance
with the conditions set forth in Section 2.11; (d) in the case of
repurchase agreements entered into between the Fund and the
Custodian, or another bank, or a broker-dealer which is a member
of NASD, (i) against delivery of the securities either in
certificate form or through an entry crediting the Custodian's
account at the Federal Reserve Bank with such securities ox' (ii)
against delivery of the receipt evidencing purchase by the Fund of
securities owned by the Custodian along with written evidence of
the agreement by the custodian to repurchase such securities from
the Fund or (e) for transfer to a time deposit account of the Fund
in any bank, whether domestic or foreign; such transfer may be
effected prior to receipt of a confirmation from a broker and/or
the applicable bank pursuant to Proper Instructions as defined in
Article 4;
2) In connection with conversion, exchange or surrender of securities
owned or subscribed to by the Fund as set forth in Section 2.2
hereof:
3) For the payment of any expense or liability incurred by the fund,
including but not limited to the following payments for the
account of the Fund; interest, taxes, management, accounting,
transfer agent and legal fees, and operating expenses of the Fund
whether or not such expenses are to be in whole or part
capitalized or treated as deferred expenses;
4) For the payment of any dividends declared pursuant to the
governing documents of the Fund;
5) For payment of the amount of dividends received in respect of
securities sold short;
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6) For any other proper purpose, but only upon receipt of, in
addition to Proper Instructions, a certified copy of a resolution
of the Board of Directors or of the Executive Committee of the
Fund signed by an officer of the Fund and certified by its
Secretary or an Assistant Secretary, specifying the amount of such
payment, setting forth the purpose for which such payment is to be
made, declaring such purpose to be a proper purpose, and naming
the person or persons to whom such payment is to be made; or
7) For payments in connection with the return of securities loaned by
the Fund or the reduction of cash collateral held by the Custodian
upon the receipt of such securities or proper notification of the
reduction of cash collateral held by the Custodian.
2.8. LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES PURCHASED.
Except as specifically stated otherwise in this Contract, in any and
every case where payment for purchase of domestic securities for the
account of the Fund is made by the custodian in advance of receipt of the
securities purchased in the absence of specific written instructions from
the Fund to so pay in advance, the Custodian shall be absolutely liable
to the Fund for such securities to the same extent as if the securities
had been received by the Custodian.
2.9. APPOINTMENT OF AGENTS. The Custodian may at any time or times, with the
consent of the Board of Directors of the Fund, appoint (and may at any
time remove) any other bank or trust company which is itself qualified
under the Investment Company Act of 1940, as amended, to act as a
sub-custodian, as its agent to carry out such of the provisions of this
Article 2 as the Custodian may from time to time direct; provided,
however, that the appointment of any agent shall not relieve the
Custodian of its responsibilities or liabilities hereunder.
2.10. DEPOSIT OF FUND ASSETS IN SECURITIES SYSTEMS. The Custodian may deposit
and/or maintain domestic securities owned by the Fund in a clearing
agency registered with the Securities and Exchange Commission under
Section 17A of the Securities Exchange Act of 1934, which acts as a
securities depository, or in the book-entry system authorized by the U.S.
Department of the Treasury and certain federal agencies, collectively
referred to herein as "Securities System" in accordance with applicable
Federal Reserve Board arid Securities and Exchange Commission rules and
regulations, if any. For purposes of this Contract, a "securities
depository" is a system for the central handling of securities where all
securities of any particular class or series of any issuer deposited
within the system are treated as fungible and may be transferred or
pledged by bookkeeping entry without physical delivery of the securities.
Any deposits made by the Custodian of the Fund's securities in a
securities depository or the book-entry system shall be subject to the
following provisions;
1) The Custodian may keep domestic securities of the Fund in a
Securities System provided that such securities are represented in
an account ("Account") of the Custodian in the Securities System
which shall not include any assets of the
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Custodian other than assets held as a fiduciary, custodian ox
otherwise for customers;
2) The records of the Custodian with respect to domestic securities
of the Fund which are maintained in a Securities System shall
identify by book-entry those securities belonging to the Fund;
3) The Custodian shall pay for domestic securities purchased for the
account of the Fund upon (i) receipt of advice from the Securities
System that such securities have been transferred to the Account,
and (ii) the making of an entry on the records of the Custodian to
reflect such payment and transfer for the account of the Fund. The
Custodian shall transfer domestic securities sold for the account
of the Fund upon (i) receipt of advice from the Securities System
that payment for such securities has been transferred to the
Account, and (ii) the making of an entry on the records of the
Custodian to reflect such transfer and payment for the account of
the Fund. Copies of all advices from the Securities System of
transfers of domestic securities for the account of the Fund shall
identify the Fund, be maintained for the Fund by the Custodian and
be provided to the Fund at its request. Upon request, the
Custodian shall furnish the fund confirmation of each transfer to
or from the account of the Fund in the form of a written advice or
notice and shall furnish to the Fund copies of daily transaction
sheets reflecting each day's transactions in the Securities System
for the account of the Fund;
4) The Custodian shall provide the Fund with any report obtained by
the Custodian on the Securities System's accounting system,
internal accounting control and procedures for safeguarding
domestic securities deposited in the Securities System;
5) The Custodian shall have received the initial certificate required
by Article 12 hereof;
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for any loss or damage to
the Fund resulting from use of the Securities System by reason of
any negligence, misfeasance or misconduct of the Custodian or any
of its agents or of any of its or their employees or from failure
of the Custodian or any such agent to enforce effectively such
rights as it may have against the Securities System; at the
election of the Fund, it shall be entitled to be subrogated to the
rights of the Custodian with respect to any claim against the
Securities System or any other person which the Custodian may have
as a consequence of any such loss or damage if and to the extent
that the Fund has not been made whole for any such loss or damage.
2.11. FUND ASSETS HELD IN THE CUSTODIAN'S DIRECT PAPER SYSTEM. The Custodian
may deposit and/or maintain securities owned by the Fund in the Direct
Paper System of the Custodian subject to the following provisions:
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1) No transaction relating to securities in the Direct Paper System
will be effected in the absence of Proper Instructions from the
Fund;
2) The Custodian may keep securities of the Fund in the Direct Paper
System only if such securities are represented in an account
("Account") of the Custodian in the Direct Paper System which
shall not include any assets of the Custodian other than assets
held as a fiduciary, custodian or otherwise for customers;
3) The records of the Custodian with, respect to securities of the
Fund which are maintained in the Direct Paper System shall
identify by book-entry those securities belonging to the Fund;
4) The Custodian shall pay for securities purchased for the account
of the Fund upon the making of an entry on the records of the
Custodian to reflect such payment and transfer of securities to
the account of the Fund. The Custodian shall transfer securities
sold for the account of the Fund upon the making of an entry on
the records of the Custodian to reflect such transfer and receipt
of payment for the account of the Fund;
5) The Custodian shall furnish the Fund confirmation of each transfer
to or from the account of the Fund, in the form of a written
advice or notice, of Direct Paper on the next business day
following such transfer and shall furnish to the Fund copies of
daily transaction sheets reflecting each day's transaction in the
Direct Paper System for the account of the Fund;
6) The Custodian shall provide the Fund with any report created by
the Custodian or received by the Custodian from any other person
on its system of internal accounting control and procedures for
safeguarding securities deposited in the Direct Paper System as
the Fund may reasonably request from time to time.
2.12. SEGREGATED ACCOUNT. The Custodian shall upon receipt of Proper
instructions from the Fund establish and maintain a segregated
account or accounts fox and on behalf of the Fund, into which account or
accounts may be transferred cash and/or securities, including securities
maintained in an account by the Custodian pursuant to Section 2.10
hereof, (i) in accordance with the provisions of any agreement among
the Fund, the Custodian and a broker-dealer registered under the Exchange
Act and a member of the NASD (or any futures commission merchant
registered under the Commodity Exchange Act), relating to compliance with
the rules of The options Clearing Corporation and of any registered
national securities exchange (or the Commodity Futures Trading Commission
or any registered contract market), or of any similar organization or
organizations, regarding escrow, account deposits or other arrangements
in connection with transactions by the Fund, (ii) for purposes of
segregating cash or government securities in connection with options
purchased, sold or written by the Fund or commodity futures contracts or
options thereon purchased or sold by the Fund, (iii) for the purposes of
compliance by the fund with the procedures required by Investment Company
Act Release No. 10666, or any subsequent release or releases of the
Securities and Exchange Commission relating to the maintenance of
segregated accounts by registered investment companies and (iv) for
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other proper corporate purposes, but only, in the case of clause (iv),
upon receipt of, in addition to Proper Instructions from the Fund, a
certified copy of a resolution of the Board of Directors or of the
Executive Committee signed by an officer of the Fund and certified by the
Secretary or an Assistant Secretary, setting forth the purpose or
purposes of such segregated account and declaring such purposes to be
proper corporate purposes.
2.13. OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian shall execute
ownership and other certificates and affidavits for all federal and state
tax purposes in connection with receipt of income or other payments with
respect to domestic securities of the Fund held by it and in connection
with transfers of such securities.
2.14. PROXIES. The Custodian shall, with respect to the domestic securities
held hereunder, cause to be promptly executed by the registered holder of
such securities, if the securities are registered otherwise than in the
name of the Fund or a nominee of the Fund, all proxies, without
indication of the manner in which such proxies are to be voted, and shall
promptly deliver to the Fund such proxies, all proxy soliciting materials
and all notices relating to such securities. Neither the Custodian nor
any nominee of the Custodian shall vote any such securities held
hereunder by or for the account of the Fund, except upon receipt of
Proper Instructions from the Fund.
2.15. COMMUNICATIONS RELATING TO FUND SECURITIES. Subject to the provisions of
section 2.3, the Custodian shall transmit promptly to the Fund all
written information (including, without limitation, pendency of calls and
maturities of domestic securities and expirations of rights in connection
therewith and notices of exercise of call and put options written by the
Fund and the maturity of futures contracts purchased or sold by the Fund)
received by the Custodian from issuers of the domestic securities being
held for the Fund. With respect to tender or exchange offers, capital
changes or other reorganizations, the Custodian shall transmit promptly
to the Fund all written information received by the Custodian from
issuers of the domestic securities whose tender or exchange is sought and
from industry sources, depositories, issuers of the securities or their
agents the party for his agents) making the tender ox exchange offer. If
the Fund desires to take action with respect to any tender offer,
exchange offer, capital change, reorganization or any other similar
transaction, the Fund shall notify the Custodian at least three business
days prior to the date on which the Custodian is to take such action.
2.16. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS
The Custodian shall provide the Fund, at such times as the fund may
reasonably require, with reports by independent public accountants on
the accounting system, internal accounting control and procedures for
safeguarding securities, futures contracts and options on futures
contracts, including domestic securities deposited and/or maintained in
a Securities System, relating to the services provided by the Custodian
under this Contract; such reports, shall be of sufficient scope and in
sufficient detail, as may reasonably be required by the Fund, to
provide reasonable assurance that any material inadequacies would be
disclosed by such examination, and, if there are no such inadequacies,
the reports shall so state.
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3. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD OUTSIDE
OF THE UNITED STATES
3.1. APPOINTMENT OF FOREIGN SUB-CUSTODIANS. The Fund hereby authorizes and
instructs the Custodian to employ as sub-custodians for the Fund's
securities and other assets maintained outside the United states the
foreign banking institutions and foreign securities depositories
designated on Schedule A hereto ("foreign sub-custodians"). Upon receipt
of "Proper Instructions", as defined in Section 4 of this Contract,
together with a certified resolution of the Fund's Board of Directors,
the Custodian and the Fund may agree to amend Schedule A hereto from time
to time to designate additional foreign banking institutions and foreign
securities depositories to act as sub-custodian,. The Fund may at any
time instruct the Custodian by delivery of Proper Instructions to the
Custodian to cease the employment of any one or more such sub-custodians
for maintaining custody of the Fund's assets. The Custodian represents
that each of the foreign sub-custodians listed on Schedule A is an
"Eligible Foreign Custodian" as defined in Rule 17f-5 of the Investment
Company Act of 1940.
3.2. ASSETS TO BE HELD. The Custodian shall limit the securities and other
assets maintained in the custody of the foreign sub-custodians to: (a)
"foreign securities", as defined in paragraph (c) (1) of Rule 17f-5 under
the Investment Company Act of 1940, and (b) cash and cash equivalents in
such amounts as the Custodian or the Fund may determine to be reasonably
necessary to effect the Fund's foreign securities transactions. The
Custodian shall identify on its books as belonging to the Fund, the
foreign securities of the Fund held by each foreign sub-custodian. Each
agreement pursuant to which the Custodian employs a foreign banking
institution shall require that such institution establish a custody
account for the custodian on behalf of the Fund and physically segregate
in each account securities and other assets of the Fund, and, in the
event that such institution deposits the securities of the Fund in a
foreign securities depository, that it shall identify on its books as
belonging to the Custodian, as agent for the Fund the securities so
deposited.
3.3. FOREIGN SECURITIES DEPOSITORIES. Except as may otherwise be agreed upon
in writing by the Custodian and the Fund, assets of the Funds shall be
maintained in foreign securities depositories only through arrangements
implemented by the foreign banking institutions serving as sub-custodians
pursuant to the terms hereof. Such arrangements shall include entry into
agreements containing the provisions set forth in Section 3.4 hereof.
3.4. AGREEMENTS WITH FOREIGN BANKING INSTITUTIONS. Each agreement with a
foreign banking institution shall be substantially in the form set forth
in Exhibit 1 hereto and shall provide that: (a) the Fund's assets will
not be subject to any right, charge, security interest, lien or claim of
any kind in favor of the foreign banking institution or its creditors or
agent, except a claim of payment for their sate custody or
administration; (b) beneficial ownership of the Fund's assets will be
freely transferable without the payment of money or value other than for
safe custody or administration; (c) adequate records will be maintained
identifying the assets as belonging to the fund; (d) officers of or
auditors employed by, or other representatives of the Custodian, and to
the extent permitted under applicable law the independent public
accountants for the Fund, will be given access to
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the books and records of the foreign banking institution relating to its
actions under its agreement with the Custodian; (e) assets of the fund
held by the foreign sub-custodian will be subject only to the
instructions of the Custodian or its agents (f) the Fund will be
adequately indemnified and/or its assets adequately insured in the event
of loss; and (g) the Fund will be provided periodic reports with respect
to the safekeeping of the Fund's assets, including, but not necessarily
limited to, notification of any transfer to or from the Fund's account.
3.5. ACCESS OF INDEPENDENT ACCOUNTANTS OF THE FUND. Upon request of the Fund,
the Custodian will use its best efforts to arrange fox the independent
accountants of the Fund to be afforded access to the books and records of
any foreign banking institution employed as a foreign sub-custodian
insofar as such books and records relate to the performance of such
foreign banking institution under its agreement with the Custodian or
securities or assets held by such foreign sub-custodian for the Fund.
3.6. REPORTS BY CUSTODIAN. The Custodian will supply to the Fund from time to
time, as mutually agreed upon, periodic reports in respect of the
securities and other assets of the Fund held by foreign sub-custodians,
including but not limited to an identification of entities having
possession of the Fund's securities and other assets and advices or
notifications of any transfers of securities to or from each custodial
account maintained by a sub-custodian for the Custodian on behalf of the
Fund indicating, as to securities acquired for the Fund, the identity of
the entity having physical possession of such securities.
3.7. TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT. (a) Except as otherwise provided
in paragraph (b) of this Section 3.7, the provision of Sections 2.2 and
2.7 of this Contract shall apply, mutatis mutandis to the foreign
securities of the Fund held outside the United States by foreign
sub-custodians.
(b) Notwithstanding any provision of this Contract to the contrary,
settlement and payment for securities received for the account of the
Fund and delivery of securities maintained for the account of the Fund
may be effected in accordance with the customary established securities
trading or securities processing practices and procedures in the
jurisdiction or market in which the transaction occurs, including,
without limitation, delivering securities to the purchaser thereof or to
a dealer therefor (or an agent for such purchaser or dealer) against a
receipt with the expectation of receiving later payment fox' such
securities from such purchaser or dealer.
(c) Securities maintained in the custody of a foreign sub-custodian may
be maintained in the name of such entity's nominee to the same extent as
set forth in Section 2.3 of this Contract, and the Fund agrees to hold
any such nominee harmless from any liability as a holder of record of
such securities absent such nominee's negligence, bad faith or breach of
obligation.
3.8. LIABILITY OF FOREIGN SUB-CUSTODIANS. Each agreement pursuant to which the
Custodian employs a foreign banking institution as a foreign
sub-custodian shall require the institution to exercise reasonable care
in the performance of its duties and to indemnify,
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and hold harmless, the Custodian and the Fund from and against any loss,
damage, reasonable cost, reasonable expense, liability or claim arising
out of or in connection with the institution's performance of such
obligations. At the election of the Fund, it shall be entitled to be
subrogated to the rights of the Custodian with respect to any claims
against a foreign banking institution as a consequence of any such loss,
damage, reasonable cost, reasonable expense, liability or claim if and to
the extent that the Fund has not been made whole for any such loss,
damage, reasonable cost, reasonable expense, liability or claim.
3.9. LIABILITY OF CUSTODIAN. The Custodian shall be liable for the acts or
omissions of a foreign banking institution to the same extent as set
forth with respect to sub-custodians generally in this Contract and,
regardless of whether assets are maintained in the custody of a foreign
banking institution, a foreign securities depository or a branch of a
U.S. bank as contemplated by paragraph 3.12 hereof, the Custodian shall
not be liable for any loss, damage, reasonable cost, reasonable expense,
liability or claim resulting from nationalization, expropriation,
currency restrictions, or acts of war or terrorism or any loss where the
sub-custodian at the time of such event was an "Eligible Foreign
Custodian" as defined in Rule 17f-5 of the Investment Company Act of 1940
and both the Custodian and the sub-custodian have otherwise exercised
reasonable care and acted without negligence. Notwithstanding the
foregoing provisions of this paragraph 3.9, in delegating custody duties
to State Street London Ltd., the Custodian shall not be relieved of any
responsibility to the fund for any loss due to such delegation, except
such loss as may result from (a) political risk (including, but not
limited to, exchange control restrictions, confiscation, expropriation,
nationalization, insurrection, civil strife or armed hostilities) or (b)
other losses (excluding a bankruptcy or insolvency of State Street London
Ltd. not caused by political risk) due to Acts of God, nuclear incident
or other losses under circumstances where the Custodian and State Street
London Ltd. have exercised reasonable care in good faith and without
negligence.
3.10. REIMBURSEMENT FOR ADVANCES. If the Fund requires the Custodian to advance
cash or securities for any purpose including the purchase or sale of
foreign exchange or of contracts for foreign exchange, or in the event
that the Custodian or its nominee shall incur or be assessed any taxes,
charges, expenses, assessments, claims or liabilities in connection with
the performance of this Contract, which are properly chargeable to the
Fund and except such as may arise from its or its nominee's own negligent
action, negligent failure to act or willful misconduct, any property at
any time held for the account of the Fund shall be security therefor and
should the Fund fail to repay the Custodian promptly, the Custodian shall
be entitled to utilize available cash and to dispose of such Funds assets
to the extent necessary to obtain reimbursement.
3.11. MONITORING RESPONSIBILITIES. The Custodian shall furnish annually to the
Fund, during the month of June, information concerning the foreign
sub-custodians employed by the Custodian. Such information shall be
similar in kind and scope to that furnished to the Fund in connection
with the initial approval of this Contract and shall specifically state
that each foreign sub-custodian listed on Schedule A is an "Eligible
Foreign Custodian" as defined in Rule 17f-5 of the Investment Company Act
of 1940. In addition, the Custodian will promptly inform the Fund in the
event that the Custodian learns of a material adverse change in the
financial condition of a foreign sub-custodian or any loss
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of the assets of the Fund or in the case of 'any foreign sub-custodian
not the subject of an exemptive order from the Securities and Exchange
commission is notified by such foreign sub-custodian that there appears
to be a substantial likelihood that its shareholders' equity will decline
below $200 million (U.S. dollars or the equivalent thereof) or that its
shareholders' equity has declined below $200 million (in each case
computed in accordance with generally accepted U.S. accounting
principles) or that a foreign sub-custodian is no longer, for any reason,
an "Eligible Foreign custodian" as defined in Rule 17f-5 of the
Investment Company Act of 1940.
3.12. BRANCHES OF U.S. BANKS. (a) Except as otherwise set forth in this
Contract, the provisions hereof shall not apply where the custody of the
Funds assets are maintained in a foreign branch of a banking institution
which is a "bank" as defined by Section 2(a)(5) of the Investment Company
Act of 1940 meeting the qualification set forth in Section 26 (a) of said
Act. The appointment of any such branch as a sub-custodian shall be
governed by Article 1 of this Contract. Notwithstanding the foregoing, no
such branch shall maintain custody of a Fund's assets in any foreign
country that is not listed on Schedule A hereto.
(b) Cash held for the Fund in the United Kingdom shall be maintained in
an interest bearing account established for the Fund with the
Custodian's London branch, which account shall be subject to the
direction of the Custodian, the Fund's Board of Directors, State Street
London Ltd. or both.
3.13. TAX LAW. The Custodian shall have no responsibility or liability for any
obligations now or hereafter imposed on the Fund or the Custodian as
custodian of the Fund by the tax law of the United States of America or
any state or political subdivision thereof. It shall be the
responsibility of the Fund to notify the Custodian of the obligations
imposed on the Fund or the Custodian as custodian of the Fund by the tax
law of jurisdictions other than those mentioned in the above sentence,
including responsibility for withholding and other taxes, assessments or
other governmental charges, certifications and governmental reporting.
The sole responsibility of the Custodian with regard to such tax law
shall be to use reasonable efforts to assist the Fund with respect to any
claim for exemption or refund under the tax law of jurisdictions for
which the Fund has provided such information.
4. PROPER INSTRUCTIONS
Proper Instructions as used in this Contract means a writing signed or
initialled by one or more person or persons as the Board of Directors shall have
from time to time authorized. Each such writing shall set forth the specific
transaction or type of transaction involved, including a specific statement of
the purpose for which such action is requested. oral instructions will be
considered Proper Instructions if the Custodian reasonably believes them to have
been given by a person who the Custodian has been notified is authorized to give
such instructions with respect to the transaction involved. The Fund shall cause
all oral instructions to be confirmed in writing. Upon receipt of a certificate
of the Secretary or an Assistant Secretary as to the authorization by the Board
of Directors of the Fund accompanied by a detailed description of procedures
approved by the Board of Directors, Proper instructions may include
communications effected directly between electro-mechanical or electronic
devices provided that the Board of Directors
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and the Custodian are satisfied that such procedures afford adequate safeguards
for the Fund's assets. For purposes of this Section, Proper Instructions shall
include instructions received by the Custodian pursuant to any three-party
agreement which requires a segregated asset account in accordance with
Section 2.12.
5. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY
The Custodian may in its discretion, without express authority from the
Fund:
1) make payments to itself or others for minor expenses not in excess
of $5,000 per transaction of handling securities or other similar
items relating to its duties under this Contract, provided that
all such payments shall be accounted for to the fund;
2) surrender securities in temporary form fox securities in
definitive form;
3) endorse for collection, in the name of the Fund, checks, drafts
and other negotiable instruments received by the Custodian for the
account of the Fund;
4) in general, attend to all non-discretionary details in connection
with the sale, exchange, substitution, purchase, transfer and
other dealings with the securities and property of the Fund except
as otherwise directed by the Board of Directors of the fund; and
5) collect on a timely basis all other income and payments with
respect to securities held hereunder to which the Fund would be
entitled by law or by custom in the securities business.
6. EVIDENCE OF AUTHORITY
The Custodian shall be protected in acting upon any instructions,
notice, request, consent, certificate or other instrument or paper believed by
it to be genuine and to have been properly executed by or on behalf of the Fund.
The Custodian may receive and accept a certified copy of a vote of the Board of
Directors of the Fund as conclusive evidence (a) of the authority of any person
to act in accordance with such vote or (b) of any determination or of any action
by the Hoard of Directors pursuant to the Articles of Incorporation as described
in such vote, and such vote may be considered as in full force and effect until
receipt by the Custodian of written notice to the contrary.
7. DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT AND CALCULATION
OF NET ASSET VALUE AND NET INCOME
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Hoard of Directors of the Fund to keep
the books of account of the Fund and/or compute the net asset value per share of
the outstanding shares of the Fund or, if directed in writing to do so by the
Fund, shall itself keep such books of account arid/or compute such net asset
value per share. If so directed, the Custodian shall also calculate daily the
net income of the Fund as described in the Fund's currently effective prospectus
and shall advise the Fund and the Transfer Agent daily of the total amounts of
such net income and, if instructed in
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writing by an officer of the Fund to do so, shall advise the Transfer Agent
periodically of the division of such net income among its various components.
The calculations of the net asset value per share and the weekly income of the
Fund shall be made at the time or times described from time to time in the
Fund's currently effective prospectus.
8. RECORDS
The Custodian shall create and maintain all records relating to its
activities and obligations under this Contract in such manner as will meet the
obligations of the Fund under the Investment Company Act of 1940, with
particular attention to Section 37. thereof and Rules 31a-1 and 31a-2
thereunder, as well as under other applicable federal and state tax laws and any
other law or administrative rules or procedures that may be applicable to the
Fund. All such records shall be the property of the Fund and shall at all times
during the regular business hours of the Custodian be open for inspection by
duly authorized officers, employees or agents of the Fund and employees and
agents of the Securities and Exchange Commission. The Custodian shall supply the
Fund at the end of each month with a tabulation of securities owned by the Fund
and held by the Custodian and shall, when requested to do so by the Fund,
include certificate numbers in such tabulations. If this Contract is terminated
pursuant to Section 13 hereof, the Custodian shall make available to the Fund
for examination and copying all records maintained by the Custodian in
connection with the performance of its duties under this Contract for a
reasonable period of time, which reasonable period of time shall not be less
than six months.
9. SETTLEMENT PROVISIONS
9.1. Except as otherwise provided in this Section 9, the Custodian shall
credit or debit the appropriate cash account of the Fund in connection
with the purchase, sale, maturity, redemption, or other disposition of
securities and other assets held for the time being in such Fund on an
actual settlement basis.
9.2. Unless the Fund instructs the Custodian in writing that transactions in a
specified market shall be settled on an actual settlement basis, the
purchase, sale, maturity, redemption or other disposition of securities
by the Fund in the markets listed on Schedule A hereto shall be settled
in the manner and subject to the terms arid limitations described in
Sections 9.3 through 9,10 below. A transaction to which these contractual
settlement provisions applies shall be called a "Covered Transaction".
9.3. With respect to a Covered Transaction that represents a purchase, the
Custodian shall debit the Fund's cash account in accordance with Proper
Instructions as of the time and date that monies would ordinarily be
required to settle such a transaction in the applicable market as set
forth on Schedule B hereto. Such amounts shall be recredited to the
Fund's appropriate cash account upon the Funds notice to the Custodian
that it has canceled the Covered Transaction.
9.4. With regard to the settlement of a Covered Transaction which is a sale,
maturity, redemption or other disposition, provisional credit of an
amount equal to the net sale, maturity, redemption or other disposition
proceeds of the transaction (hereinafter called the "Settlement Amount"5
shall be made to the Fund as if the Settlement Amount is
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received as of the time and date that monies would ordinarily be required
to settle such transaction in the applicable market as set forth on
Schedule B. The provisional credit will be made if the Custodian has
received Proper Instructions or reasonable notice of the Covered
Transaction, as applicable, and if the Custodian or its agents are in
possession of the asset associated with the Covered Transaction in good
deliverable form and are not aware of any facts which would lead them to
reasonably believe that the Covered Transaction will not settle in the
time period ordinarily applicable to transactions in the applicable
market as set forth on Schedule B. In the event that the Custodian
determines not to provide a provisional credit in respect of a particular
transaction, the Custodian will promptly notify the fund of this
determination. The provisional credit shall not be more than the
Settlement Amount.
9.5. With respect to each Covered Transaction for which the Custodian shall
procure that the Settlement Amount be credited to the Fund, the following
provisions shall apply-
1) Simultaneously with the making of the provisional credit, all
right and title to any asset purchased or sold, as applicable in
the Covered Transaction together with the Fund's contractual
rights against the Fund's counterparty in the Covered Transaction
shall vest in the Custodian.
2) Subject to the general terms of this Agreement, the Custodian
shall perform the Fund's obligations to a counterparty under any
contract that is associated with the Covered Transaction.
3) Notwithstanding Section 9.5(2), the Custodian shall remain the
beneficial owner of the assets concerned under a Covered
Transaction and the beneficiary of any contract associated
therewith and shall not be bound to complete such Covered
Transaction until (i) actual receipt of the Settlement Amount for
which provisional credit shall have been given in accordance with
Subsection 9.4 or, (ii) where such provisional credit is reversed
in accordance with Subsection 9.6 or 9.7, the Fund's liability to
the Custodian in respect of such reversal shall have been
satisfied in full. In relation to any such securities located in
Germany, the ownership held by the Custodian shall be governed by
the German law and shall be agreed to be " Sicherungseiggentum".
4) Upon the satisfaction of Subsection 9.5(3)(i) the legal and
beneficial ownership in the securities concerned shall pass from
the Custodian in accordance with the terms of the contract
associated with the Covered Transaction and the Settlement Amount
received in accordance with the contract shall inure to the
benefit of the Custodian. In such event, the benefit of all
dividends, interest and other distributions which are declared, or
which are paid or payable on the securities under the terms of the
contract associated with the Covered Transaction shall pass in
accordance with the terms of such contract.
9.6. The Custodian shall have the right, upon sending notice to the Fund, to
reverse any provisional credit given in accordance with Subsection 9.4
above in the event that the actual proceeds of such transaction have not
been received by the Custodian, its agents or
18
<Page>
its sub-custodians within thirty days of having made the provisional
credit or at any time when the Custodian believes for reasonable cause
that such Covered Transaction will not settle in accordance with its
terms (in which case the notice required here will contain a description
of such cause), whereupon a sum equal to the settlement Amount shall
become payable by the Fund to the Custodian and, if not paid by the Fund
within five (5) days after receipt of the notice required hereunder, may
be debited from any cash account held fox benefit of the Fund in
accordance with the terms of any notice given hereunder. In the case that
the Custodian shall make the debit allowed by this subsection or that the
Fund shall otherwise return the Settlement Amount, in consideration for
such debit or other return, Custodian shall transfer to the account of
the Fund assets of the same type, nominal value, description, issue and
amount as the assets transferred to the Custodian under subsection 9.5(1)
above ("Equivalent Assets"), which assets shall be described in the
notice given to the Fund as provided above in this Section 9.&. Further
in such event, the Custodian shall subrogate to the Fund the rights
involved in any contract associated with the Covered Transaction that
were assigned to it under Subsection 9.5(1). The amount of any dividends,
interest and other distributions with respect to assets associated with
the Covered Transactions that have accrued to the benefit of the
Custodian shall be set off against the Settlement Amount.
9.7. In the event that the Custodian is unable to debit the fund and the Fund
fails to pay any sums due to the Custodian at the time the same becomes
payable in accordance with Section 9.5 and such failure is not cured upon
notice of such failure to the Fund or if any of the following conditions
occurs, the Custodian may charge the Fund for reasonable costs and
expenses associated with the provisional credit and the provisions of
Section 9.8 will apply:
1) If a final judgment for the payment of money shall be rendered
against the Fund and such judgment shall not have been discharged
or its execution stayed pending appeal within sixty days of entry
or such judgment shall not have been discharged within sixty days
of expiration of any such stay;
2) the Fund passing a resolution for its voluntary winding-up
(otherwise than for the purpose of corporate reconstruction or
amalgamation);
3) the presentation of a petition for the winding-up of or the making
of an administration order in relation to the Fund;
4) the appointment of a receiver or administrator over any of the
assets of the Fund;
5) the Fund ceasing or threatening to cease to carry on its business;
6) the Fund calling a meeting of its creditors pursuant to Section 98
of the Insolvency Act 1986 (or any statutory modification or
re-enactment thereof for the time being in force) or any similar
law affecting the Fund in its own jurisdiction.
9.8. In event outlined in Subsection 9.7 occurs:
19
<Page>
1) The obligation of the Custodian to deliver Equivalent Assets in
accordance with Section 9.6 shall cease;
2) the value of the Equivalent Assets shall be established by
reference to the last available bid price thereof on the most
appropriate market at the date and time of such event ("Value
Date");
3) the value of the Fund's obligations in respect of payment such
have become repayable in accordance 9.5 and 9.6 shall be
established as of the Value Date), such value to be increased by
any cost of funds expense allowable to the custodian under
Subsection 9.7 and x-educed by the amount of any dividends,
interest or other distributions in connection with the assets
associated with the Covered Transaction that have accrued to the
Custodian under these settlement provisions, any amount in
non-U.S. currency shall be converted into US dollars at the
Custodian's prevailing exchange rate for the currencies concerned
on Value Date;
4) the values established under Subsection 9.8(2) shall be offset
against the value established under 9.8(3) as of the Value Date;
5) the amount by which the greater of the amounts calculated pursuant
to Subsection 9.8(2) and (3) exceeds the lower amount so
calculated shall be payable as of Value Date by the party having
the claim valued at the lower amount pursuant to the foregoing.
9.9. The Custodian shall not be obliged to transfer any sums credited to the
Fund in accordance with Subsection 9.4 to or to the order or benefit of
the Fund while any amount which is payable to the Custodian under the
terms of Sections 9.5 through 9.8.
9.10. The operation of the set-off provisions in accordance with Subsection 9.6
or 9.7 shall lie without prejudice to any other remedies provided herein
or under any applicable law. The Fund agrees that the Custodian shall
have a right of set-cuff against cash held for the Fund in any currency
for any amount provided to the Fund by the Custodian hereunder or from
time to time arising out of or in connection with thi3 Contract and/or
the operation of any account hereunder and the Custodian shall have the
right to debit the Fund with all or part of such sums and apply or
appropriate the cash in or towards the discharge of such amounts in such
manner and order as the Custodian reasonably sees fit. For the purposes
of this right of set-off, the Custodian may make such currency
conversions or effect any transactions in such currencies at then
prevailing rates as it thinks fit at such times as it reasonably thinks
proper and may effect any transfers between, or entries on, any account
comprised in the Account as the Custodian considers proper.
10. OPINION OF FUNDS INDEPENDENT ACCOUNTANT
The Custodian shall take all reasonable action, as the Fund may from
time to time request, to obtain from year to year favorable opinions from the
Fund's independent accountants with respect to its activities hereunder in
connection with the preparation of the Fund's Form N-
20
<Page>
2, and Form N-SAR or other annual reports to the Securities and Exchange
Commission and with respect to any other requirements of such Commission.
11. COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time between the
Fund and the Custodian; provided, however, that in the event that the parties
cannot agree upon any change in compensation, the Custodian may modify its fee
schedule if the Custodian provides the Fund with 90 days' written notice of its
intention to modify the fee schedule The fee schedule at inception, is as
favorable as the fee schedules currently in place for comparable daily priced
fund complexes with similar asset size, product mix and transaction activity.
The fee schedule will be reviewed annually against a representative sample of
similar type complexes to ensure that the fees are not less favorable than those
of comparable complexes.
12. RESPONSIBILITY OF CUSTODIAN
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Contract and shall be held harmless in acting
upon any notice, request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party or parties,
including any futures commission merchant acting pursuant to the terms of a
three-party futures or options agreement. The Custodian shall be held to the
exercise of reasonable care in carrying out the provisions of this contract, but
shall be kept indemnified by and shall be without liability to the Fund for any
action taken or omitted by it in good faith and without negligence. In any case
in which the Custodian believes that the indemnification provided for under this
paragraph 12 shall be required, the Custodian shall advise the Fund fully and
promptly in writing of all pertinent facts concerning the situation in question,
and the Custodian shall use reasonable care to identify and notify the Fund in
writing promptly concerning any situation which reasonably appears likely to
present the possibility of such a claim for indemnification. If any person makes
a claim against the Custodian which the Custodian believes is subject to
indemnification, the Fund shall have the option to defend the Custodian against
such claim. The Custodian shall in no case confess any claim or make any
compromise in any case in which the Fund will be asked to indemnify the
Custodian except with the Fund's prior written consent. It shall be entitled to
rely on and may act upon advice of outside counsel (who may be counsel for the
Fund) on all matters, and shall be without liability for any action reasonably
taken or omitted pursuant to such advice; provided that, if the Custodian seeks
advice of counsel and intends to rely on that advice in any particular
circumstance, the Custodian will notify the Fund that it intends to act or has
acted in reliance on advice of counsel. Notwithstanding any other provision of
this Contract to the contrary and provided that the Custodian is in actual
possession of the securities involved and has requested in a timely manner any
necessary instructions as provided in paragraph 2.15 and has received such
instructions, the Custodian shall be liable to the Fund for any failure to
present securities in exchange for or upon conversion into other securities, or
to the issuer thereof, in a timely manner.
21
<Page>
The Custodian shall be liable for the acts ox omissions of a foreign
banking institution appointed pursuant to the provisions of Article 3 to the
same extent as set forth in Article 1 hereof with respect to sub-custodians
located in the United States and, regardless of whether assets are maintained in
the custody of a foreign banking institution, a foreign securities depository or
a branch of a U.S. bank as contemplated by paragraph 3.12 hereof, the custodian
shall not be liable for any loss, damage, reasonable cost, reasonable expense,
liability or claim resulting from, or caused by, the direction of or
authorization by the Fund to maintain custody or any securities or cash of the
Fund in a foreign country including, but not limited to, losses resulting from
nationalization, expropriation, currency restrictions, or acts of war or
terrorism where the Custodian has exercised reasonable care and is not the
result of its negligence or misfeasance.
If the Fund requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action may, in
the opinion of the Custodian, result in the Custodian or its nominee assigned to
the Fund being liable for the payment of money or incurring liability of some
other form, the Fund, as a prerequisite to requiring the Custodian to take such
action, shall provide indemnity to the Custodian in an amount and form
reasonably satisfactory to it.
If the Fund requires the Custodian, its affiliates, subsidiaries or
agents, to advance cash or securities for any purpose (including but not limited
to securities settlements, foreign exchange contracts and assumed settlement)
for the benefit of the Fund or in the event that the Custodian or its nominee
shall incur or be assessed any taxes, charges, expenses, assessments, claims or
liabilities in connection with the performance of this Contract, except such as
may arise from its or its nominee's own negligent action, negligent failure to
act or willful misconduct, any property at any time held for the account of the
Fund shall be security therefor and should the Fund fail to repay the Custodian
promptly, the Custodian shall be entitled to utilize available cash and to
dispose of the Fund's assets to the extent necessary to obtain reimbursement.
13. EFFECTIVE PERIOD TERMINATION AND AMENDMENT
This Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter provided, may
be amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an. instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than thirty (30) days after the date of such delivery or mailing; provided,
however that the Custodian shall not act under Section 2.10 hereof in the
absence of receipt of axe initial certificate of the Secretary or an Assistant
secretary that the Board of Directors of the Fund has approved the initial use
of a particular Securities System, as required by Rule 17f-4 under the
Investment Company Act of 1940, as amended and that the Custodian shall not act
under Section 2.11 hereof In the absence of receipt of an initial certificate of
the Secretary or an Assistant Secretary that the Hoard of Directors has approved
the initial use of the Direct Paper System; provided further, however, that
neither the Fund nor the Custodian shall amend or terminate this Contract in
contravention of any applicable federal or state regulations, or any provision
of the Fund's Articles of incorporation, and further provided, that the Fund may
at any time by action of its Board of Directors (i) substitute another bank or
trust company for the Custodian by giving notice as described above to the
Custodian, or (ii) immediately terminate this Contract in the
22
<Page>
event of the appointment of a conservator or receiver for the Custodian by the
Comptroller of the Currency or upon the happening of a like event at the
direction of an appropriate regulatory agency or court of competent
jurisdiction.
Upon termination of the Contract, the Fund shall pay to the Custodian
such compensation as may be due as of the date of such termination and shall
likewise reimburse the Custodian for any costs, expenses and disbursements for
which the Custodian would be entitled to reimbursement under the terms of this
Contract.
14. SUCCESSOR CUSTODIAN
If a successor custodian for the Fund shall be appointed by the Board
of Directors of the Fund, the Custodian shall, upon termination, deliver to such
successor custodian at the office of the Custodian, duly endorsed and in the
form for transfer, all securities of the Fund then held by it hereunder and
shall transfer to an account of the successor custodian all of the Fund's
securities held in a Securities System.
If no such successor custodian shall be appointed, the Custodian shall,
in like manner, upon receipt of a certified copy of a vote of the Board of
Directors of the Fund, deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Directors shall have been delivered to
the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the Investment Company Act of 1940,
doing business in Boston, Massachusetts, of its own selection, having an
aggregate capital, surplus, and undivided profits, as shown by its last
published report, of not less than $25,000,000, all securities, funds and other
properties held by the Custodian and all instruments held by the custodian
relative thereto arid all other property held by it under this Contract and to
transfer to an account of such successor custodian all of the Fund's securities
held in any Securities System. Thereafter, such bank or trust company shall be
the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred td or of
the Board of Directors to appoint a successor custodian, the Custodian shall be
entitled to fair compensation (based on the Custodian's compensation under this
Contract) for its services during such period as the Custodian retains
possession of such securities, funds and other properties and the provisions of
this Contract relating to the duties and obligations of the Custodian shall
remain in full force and effect.
15. INTERPRETIVE AND ADDITIONAL PROVISIONS.
In connection with the operation of this Contract, the Custodian and the
fund, may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Contract as may in their joint opinion be
consistent with the general tenor of this Contract. Any
23
<Page>
such interpretive or additional provisions shall be in a writing signed by both
parties and shall be annexed hereto, provided that no such interpretive or
additional provisions shall contravene any applicable federal or state
regulations ox any provision of the Articles of Incorporation of the Fund. No
interpretive or additional provisions made as provided in the preceding sentence
shall be deemed to be an amendment of this Contract.
16. NEW YORK LAW TO APPLY
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of The State of New York.
17. PRIOR CONTRACTS
This Contract supersedes and terminates, as of the date hereof, all prior
contracts between the Fund and the Custodian relating to the custody of the
Funds assets.
18. ASSIGNMENT
This Contract shall not be assigned by the Custodian except with the
written consent of the Fund authorized or approved by a resolution of its Board
of Directors.
19. REPRESENTATION AND WARRANTIES OF THE CUSTODIAN
Custodian represents and warrants to the Fund that:
1) it is a Massachusetts trust company duly organized and existing
and in good standing under the laws of the Commonwealth of
Massachusetts;
2) it is empowered under applicable laws and by its charter and
by-laws to enter into and perform the services Bet forth in this
Contract, and all requisite corporate proceedings have been taken
to authorize it to enter into and perform this Contract;
3) it is duly authorized to act as a Custodian under the Investment
Company Act of 1940; and
4) it will annually provide the Fund with a copy of its third party
letter from its independent auditors concerning reconciling items
of the fund.
20. SHAREHOLDER COMMUNICATIONS ELECTION
Securities and Exchange Commission Rule 14b-2 requires banks which hold
securities for the account of customers to respond to requests by issuers of
securities for the names, addresses and holdings of beneficial owners of
securities of that issuer held by the bank unless the beneficial owner has
expressly objected to disclosure of this information. In order to comply with
the Rule, the Custodian needs the Fund to indicate whether it authorizes the
Custodian to provide the Funds name, address, and share position to requesting
companies whose securities the Fund owns. If the Fund tells the Custodian "no",
the Custodian will not provide this
24
<Page>
information to requesting companies. If the Fund tells the Custodian "yes" or
does not check either "yes" or "no" below, the Custodian is required by the Rule
to treat the Fund as consenting to disclosure of this information for all
securities owned by the Fund or any funds or accounts established by the Fund.
For the Fund's protection, the Rule prohibits the requesting company from using
the Fund's name and address for any purpose other than corporate communications.
Please indicate below whether the Fund consents or objects by checking one of
the alternatives below.
YES [ ] The Custodian is authorized to release the Fund's name,
address, and share positions.
NO [ ] The Custodian is not authorized to release the Fund's name,
address, and share positions.
25
<Page>
IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the 24th day of February, 1994.
ATTEST RCM STRATEGIC GLOBAL GOVERNMENT FUND, INC.
/s/ Timothy B. Parker By /s/ Gary Schreyer
- ------------------------ -----------------------------------------
ATTEST STATE STREET BANK AND TRUST COMPANY
/s/ Janice M. Duffy By
- ------------------------ -----------------------------------------
Executive Vice President
26
<Page>
SCHEDULE A
The following foreign banking institutions and foreign securities depositories
have been approved by the Board of Directors of for use as sub-custodians for
the fund's securities and other assets:
(insert banks and securities depositories)
Certified:
- ---------------------------------
Funds Authorized Officer
- ---------------------
Date:
27
<Page>
SCHEDULE B
The standard settlement periods for securities transactions in foreign markets
for purposes of Section 9 of the Custodian Contract between RCM Strategic Global
Government Fund, Inc. shall be as follows:
Country Settlement Period
(TD = Trade Date)
<Page>
SCHEDULE A
17f-5 Approval
The Board of Directors of RCM Strategic Global Government Fund, Inc.
has approved certain foreign banking institutions and foreign securities
depositories within State Street's Global Custody Network for use as
subcustodians for the Fund's securities, cash anal cash equivalents held outside
of the United States. Board approval is as indicated by the Fund's Authorized
Officer:
<Table>
<Caption>
FUND OFFICER COUNTRY SUBCUSTODIAN CENTRAL DEPOSITORY
INITIALS
____ Argentina Citibank, N.A. Caja de Valores S.A.
____ Australia Westpac Banking Austraclear Limited
Corporation
____ Austria GiroCredit Bank Oesterreichische
Aktiengesellschaft der Kontrollbank AG
Sparkassen
____ Bangladesh Standard Chartered Bank None
____ Belgium Generale Bank Caisse Interprofessionnelle
de Depots et de Virements
de Titres S.A. (CIK);
Banque Nationale de
Belgique
___ Brazil Citibank, N.A. Bolsa de Valores de
Sao Paulo (Bovespa);
Banco Central do Brasil,
Systema Especial de
Liquidacao e Custodia
(SELIC)
____ Canada Canada Trustco Mortgage The Canadian Depository
Company for Securities Limited
(CDS)
____ Chile Citibank, N.A. None
____ China The Hong Kong and Shanghai Securities
Shanghai Banking Central Clearing and
Corporation Limited Registration Corporation
(SSCCRC);
Shenzhen Securities
Registrars Co., Ltd. and its
</Table>
<Page>
<Table>
<Caption>
designated agent banks
____ Colombia Cititrust Colombia S.A. None
Sociedad Fiduciaria
____ Cyprus Barclays Bank PLC None
____ Czech Republic Ceskoslovenska Stredisko Cennych Papiru
Obchodni Banka, A.S. (SCP)
___ Denmark Den Danske Bank Vaerdipapircentralen -
The Danish Securities
Center (VP)
____ Egypt National Bank of Egypt None
____ Finland Kansallis-Osake-Pankki The Central Share Register
of Finland
____ France Banque Paribas Societe
Interprofessionnelle pour
la Compensation des
Valeurs Mobilieres
(SICOVAM);
Banque de France, Saturne
System
____ Germany Berliner Handelsund The Deutscher
Frankfurter Bank Kassenverein AG
____ Greece National Bank of Greece The Central Depository
S.A. (Apothetirio Titlon A.E.)
____ Hong Kong Standard Chartered Bank The Central Clearing and
Settlement System
(CCASS)
____ Hungary Citibank Budapest Rt. None
____ India The Hong Kong and None
Shanghai Banking
Corporation Limited
____ Indonesia Standard Chartered Bank None
____ Ireland Bank of Ireland None;
The Central Bank of
Ireland, The Gift
Settlement Office (GSO)
____ Israel Bank Hapoalim B.M. The Clearing House of the
Tel Aviv Stock Exchange
</Table>
<Page>
<Table>
<Caption>
____ Italy Morgan Guaranty Trust Monte Titoli S.p.A.;
Company
Banca d'Italia
____ Japan Sumitomo Trust & None;
Banking Co., Ltd.
Bank of Japan Net System
____ Korea Bank of Seoul None
____ Malaysia Standard Chartered Bank None
____ Mexico Citibank,N.A. S.D. INDEVAL, S.A. de
C.V. (Instituto para el
Deposito de Valores);
Banco de Mexico
____ Morocco Banque Commerciale du None
Maroc
____ Netherlands MeesPierson N.V. Nederlands Centraal
Instituut voor Giraal
Effectenverkeer B.V.
(NECIGEF)
____ New Zealand ANZ Banking Group (New None;
Zealand) Limited
Reserve Bank of New
Zealand, Austraclear NZ
____ Norway Christiania Bauk og Verdipapirsentralen - The
Kreditkasse Norwegian Registry of
Securities (VPS)
____ Pakistan Deutsche Bank AG None
____ Peru Citibank, N.A. Caja de Valores (CAVAL)
____ Philippines Standard Chartered Bank None
____ Poland Citibank Poland S.A. The National Depository
of Securities (Centrum
Krajowego Depozytu
Papierow Wartosciowych)
____ Portugal Banco Comercial Central de Valores
Portugues Mobiliarios (Central)
____ Singapore The Development Bank of The Central Depository
Singapore Ltd. (Pte) Limited (CDP)
</Table>
<Page>
<Table>
<Caption>
____ South Africa Standard Bank of South None
Africa Limited
____ Spain Banco Santander, S.A. Servicio de Compensacion
y Liquidacion de Valores
(SCLV);
Banco de Espano,
Anotaciones en Cuenta
____ Sri Lanka The Hong Kong and The Central Depository
Shanghai Banking System (Pvt) Limited
Corporation Limited
____ Sweden Skandinaviska Enskilda Vardepapperscentralen
Banken - The Swedish Securities
Register Center (VPC)
____ Switzerland Union Bank of Schweizerische Effekten -
Switzerland Giro AG (SEGA)
____ Taiwan Central Trust of China The Taiwan Securities
Central Depository
Company, Ltd. (TSCD)
____ Thailand Standard Chartered Bank The Share Depository
Center (SDC)
____ Turkey Citibank, N.A. None
____ United Kingdom State Street Bank and None;
Trust Company
The Bank of England
The Central Gilts Office
(CGO)
The Central Moneymarkets
Office (CMO)
____ Uruguay Citibank, N.A. None
____ Venezuela Citibank, N.A. None
____ Euroclear/State Street London Limited
____ Cedel/State Street London Limited
</Table>
<Page>
Certified by:
------------------------------ ------
Fund's Authorized Officer Date
<Page>
EXHIBIT I
SUBCUSTODIAN AGREEMENT
AGREEMENT made this day of , 2001, between State Street Bank
and Trust company, A Massachusetts Trust Company (hereinafter referred to as the
"Custodian"), having its principal place of business at 225 Franklin Street,
Boston, MA, and (hereinafter referred to as the "Subcustodian"), a organized
under the laws of and having an office at
WHEREAS, Custodian has been appointed to act as Trustee, Custodian or
Subcustodian of securities and monies on behalf of certain of its customers
including, without limitation, collective investment undertakings, investment
companies subject to the U.S. Investment Company Act of 1940, as amended, and
employee benefit plans subject to the U.S. Employee Retirement Income Security
Act of 1974, as amended;
WHEREAS, custodian wishes to establish Account (the "Account") with the
subcustodian to hold and maintain certain property for which Custodian is
responsible as custodian: and
WHEREAS, Subcustodian agrees to establish the account and to hold and
maintain all Property in the Account in accordance with the terms and conditions
herein sot forth.
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the Custodian and the Subcustodian agree as follows:
I. THE ACCOUNT
A. Establishment of the Account. Custodian hereby requests that
subcustodian establish for each client of the Custodian an Account which shall
be composed of:
1. A Custody Account for any and all Securities (as hereinafter
defined) from time to time received by Subcustodian therefor, and
2. A Deposit Account for any and all Cash (as hereinafter defined)
from time to time received by Subcustodian therefor.
B. USE OF THE ACCOUNT. The Account shall be used exclusively to hold,
acquire, transfer or otherwise care for, on behalf of Custodian as custodian and
the customers of custodian and not for Custodian's own interest, Securities and
such Cash or cash equivalents as are transferred to Subcustodian or as are
received in payment of any transfer of, or as payment on, or interest on, or
dividend from, any such Securities (herein collectively called "Cash").
C. TRANSFER OF PROPERTY IN THE ACCOUNT. Beneficial ownership of the
Securities and Cash in the Account shall be freely transferable without payment
of money or value other than for sate custody and administration.
34
<Page>
D. OWNERSHIP AND SEGREGATION OF PROPERTY IN THE ACCOUNT. The ownership
of the property in the Account, whether Securities, Cash or both, and whether
any such property is held by Subcustodian in an Eligible Depository, shall be
clearly recorded on Subcustodian's books as belonging to Custodian on behalf of
custodian's customers, and not for custodian's own interest and, to the extent
that Securities are physically held in the Account, such Securities shall also
be physically segregated from the general assets of Subcustodian, the assets of
custodian in its individual capacity and the assets of subcustodian's other
customers. In addition, Subcustodian shall maintain such other records as may be
necessary to identify the property hereunder as belonging to each Account.
E. Registration of Securities in the Account- Securities which are
eligible for deposit in a depository as provided for in Paragraph III may be
maintained with the depository in an account for Subcustodian's customers,
securities which are not held in a depository and that are ordinarily held in
registered form will be registered in the name of Subcustodian or in the name of
Subcustodian's nominee, unless alternate instructions are furnished by
Custodian.
II. SERVICES TO BE PROVIDED BY THE SUBCUSTODIAN
The services Subcustodian will provide to Custodian and the manner in
which such service will be performed will be as set forth below in this
Agreement.
A. SERVICES PERFORMED PURSUANT TO INSTRUCTIONS. All transactions
involving the Securities and Cash in the Account shall be executed solely in
accordance with Custodian's Instructions as that term is defined in Paragraph IV
hereof, except those described in paragraph B below.
B. SERVICES TO HE PERFORMED WITHOUT INSTRUCTIONS. Subcustodian will,
unless it receives Instructions from Custodian to the contrary:
1. COLLECT CASH. Promptly collect and receive all dividends,
income, principal, proceeds from transfer and other payments with respect to
property held in the Account, and present for payment all securities held in the
Account which are called, redeemed or retired or otherwise become payable and
all coupons and outer income items which call for payment upon presentation, and
credit Cash receipts therefrom to the Deposit Account.
2. EXCHANGE SECURITIES. Promptly exchange Securities where the
exchange is purely ministerial including, without limitation, the exchange of
temporary securities for those in definitive form and the exchange of warrants,
or other documents of entitlement to Securities, for the Securities themselves.
3. SALE OF RIGHTS AND FRACTIONAL INTERESTS. Whenever notification
of a rights entitlement or a fractional interest resulting from a rights issue,
stock dividend or stock split is received for the Account and such rights
entitlement or fractional interest bears an expiration date, Subcustodian will
promptly endeavor to obtain Custodian's Instructions, but should these not be
received in time for Subcustodian to take timely action, Subcustodian is
authorized to sell such rights entitlement ox fractional interest and to credit
the Account.
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4. EXECUTE CERTIFICATES. Execute in Custodian's name for the
Account, whenever Subcustodian deems it appropriate, such ownership and other
certificates as may be required to obtain the payment of income from the
securities held in the account.
5. PAY TAXES AND RECEIVE REFUNDS. To pay or cause to be paid from
the Account any and all taxes and levies in the nature of taxes imposed on the
property in the Account by any governmental authority, and to take all steps
necessary to obtain all tax exemptions, privileges or other benefits, including
reclaiming and recovering any foreign withholding tax, relating to the Account
and to execute any declaration, affidavits, or certificates of ownership which
may be necessary in connection therewith.
6. PREVENT LOSSES. Take such steps as may be reasonably necessary
to secure or otherwise prevent the loss of, entitlements attached to or
otherwise relating to property held in the Account.
C. ADDITIONAL SERVICES.
1. TRANSMISSION OF NOTICES OF CORPORATE ACTION. By such means as
will permit Custodian to take timely action with respect thereto, Subcustodian
will promptly notify Custodian upon receiving notices or reports, or otherwise
becoming aware, of corporate action affecting securities held in the Account
(including, but not limited to, calls for redemption, mergers, consolidations,
reorganizations, recapitalizations, tender offers, rights offerings, exchanges,
subscriptions and other offerings) and dividend, interest and other income
payments relating to such Securities.
2. COMMUNICATIONS REGARDING THE EXERCISE OF ENTITLEMENTS. Upon
request by Custodian, Subcustodian will promptly deliver, or cause any Eligible
Depository authorized and Porting hereunder to deliver, to Custodian all
notices, proxies, proxy soliciting materials and other communications that call
or voting or the exercise of rights or other specific action (including material
relative to legal proceedings intended to be transmitted to security holders)
relating to Securities held in the Account to the extent received by
Subcustodian or said Eligible Depository, such proxies or any voting instruments
to be executed by the registered holder of the Securities, but without
indicating the manner in which such Securities are to be voted.
3. Monitor Financial Service. In furtherance of its obligations
under this Agreement, Subcustodian will monitor a leading financial service with
respect to announcements and other information respecting property held in the
Account, including announcements and other information with respect to corporate
action and dividend, interest and other income payments.
III. USE OF SECURITIES DEPOSITORY
Subcustodian may, with the prior written approval of Custodian, maintain all or
any part of the Securities in the Account with a securities depository or
clearing agency which is incorporated or organized under the laws of a country
other than the united states of America and is supervised or regulated by a
government agency or regulatory authority in the foreign jurisdiction having
authority over such depositories or agencies, and which operates (a) the central
system for handling of designated securities or equivalent book entries in or
(b) a transnational system for
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the central handling of securities or equivalent book entries (herein called
"Eligible Depository"), provided however, that, while so maintained, such
Securities shall he subject only to the directions of Subcustodian, and that
Subcustodian duties, obligations and responsibilities with regard to such
Securities shall be the same as if such Securities were held by Subcustodian on
its premises.
IV. CLAIMS AGAINST PROPERTY IN THE ACCOUNT
The property in the account shall not be subject to any right, charge, security
interest, lien or claim of any kind (collectively "Charges") in favor of
Subcustodian or any Eligible Depository or any creditor of Subcustodian or of
any Eligible Depository except a claim for payment for such property's safe
custody or administration in accordance with the terms of this Agreement.
Subcustodian will immediately notify Custodian of any attempt by any party to
assert any Charge against the property held in the Account and shall take all
lawful actions to protect such property from such Charges until Custodian has
had a reasonable time to respond to such notice.
V. SUBCUSTODIAN'S WARRANT
Subcustodian represents and warrants that:
(A) It is a branch of a "qualified U.S. bank" or an "eligible foreign
custodian" as those terms are defined in Rule 17f-5 of the Investment Company
Act of 1940, a copy of which is attached hereto as Attachment A (the "Rule"),
and subcustodian shall immediately notify Custodian, in writing or by other
authorized means, in the event that there appears to be a substantial likelihood
that Subcustodian will cease to qualify under the Rule am currently in effect or
as hereafter amended, or
(B) it is the subject of an exemptive order issued by the United States
securities and Exchange Commission which order permits Custodian to employ
Subcustodian notwithstanding the fact that Subcustodian fails to qualify under
the terms of the Rule, and Subcustodian shall immediately notify Custodian, in
writing or by other authorized means, if for any reason it is no longer covered
by such exemptive order.
Upon receipt of any such notification required (A) or (B) of this section,
custodian may terminate this Agreement immediately without prior notice to
Subcustodian.
VI. Definitions
A. INSTRUCTIONS. The term "Instructions" means:
1. instructions in writing signed by authorized individuals
designated as such by Custodian)
2. telex or tested telex instructions of custodian;
3. other forms of instructions in computer readable form as
shall customarily be used for the transmission of like information, and
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4. such other forms of communication as from time to time may be
agreed upon by Custodian and Subcustodian, which Subcustodian believes in good
faith to have been given by Custodian or which are transmitted with proper
testing or authentication pursuant to terms and conditions which Custodian may
specify.
Unless otherwise expressly provided, all instructions shall continue in full
force and affect until canceled or superseded. Subcustodian shall act in
accordance with Instructions and shall not be liable for any act or omission in
respect of any Instruction except in the case of willful default, negligence,
fraud, bad faith, willful. misconduct, or reckless disregard of duties on the
part of Subcustodian. Subcustodian in executing all Instructions will take
relevant action in accordance with accepted industry practice and local
settlement practice.
B. ACCOUNT. The term "Account" means collectively the Custody Account,
and the Deposit Account.
C. SECURITIES. The term "Securities" includes, without limitation,
stocks, shares, bonds, debentures, debt securities (convertible or
non-convertible), notes, or other obligations or securities and any
certificates, receipts, futures contracts, foreign exchange contracts, options,
warrants, scrip or other instruments representing rights to receive, purchase or
subscribe for the same, or evidencing or representing any other rights or
interests therein, or in any property or assets.
VII. MISCELLANEOUS PROVISIONS
A. STATEMENTS REGARDING THE ACCOUNT. Subcustodian will supply Custodian
with such statements regarding the Account as Custodian may request, including
the identity and location of any Eligible Depository authorized and acting
hereunder. In addition, Subcustodian will supply Custodian an advice or
notification of any transfers of Securities to or from the Account indicating,
as to Securities acquired for the Account, if applicable, the Eligible
Depository having physical possession of such Securities.
B. EXAMINATION OF BOOKS AND RECORDS. Subcustodian agrees that its books
and records relating to the Account and subcustodian's actions under this
Agreement shall be open to the physical, on-premises inspection and audit at
reasonable times by officers of, auditors employed by or other representatives
of custodian including (to the extent permitted under the law of the independent
public accountants for any customer of Custodian whose property is being held
hereunder and such books and records shall be retained for such period as shall
be agreed upon by Custodian and Subcustodian.
As Custodian may reasonably request from time to time, Subcustodian will furnish
its auditor's reports on its system of internal controls. and subcustodian will
use its best efforts to obtain and furnish similar reports of any Eligible
Depository authorized and acting hereunder.
C. STANDARD OF CARE. In holding, maintaining, servicing and disposing
of Property under this Agreement, and in fulfilling any other obligations
hereunder, Subcustodian shall exercise the same standard of care that it
exercises over its own assets, provided that Subcustodian shall exercise at
least the degree of care and maintain adequate insurance as
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expected of a prudent professional subcustodian for hire and shall assume the
burden of proving that it has exercised such care in its maintenance of Property
held by Subcustodian in its Account. The maintenance of the Property in an
Eligible Depository shall not affect Subcustodian's standard of care, and
Subcustodian will remain as fully responsible for any loss or damage to such
securities as if it had itself retained physical possession of them.
Subcustodian shall also indemnify and hold harmless custodian and each of
Custodian's customers from and against any loss, damage, cost, expense,
liability or claim (including reasonable attorney's fees) arising out of or in
connection with the improper or negligent performance or the nonperformance of
the duties of Subcustodian.
Subcustodian shall be responsible for complying with ail provisions of the law
of , or any other law, applicable to Subcustodian in connection with its duties
hereunder, including (but not limited to) the payment of all transfer taxes or
other taxes and compliance with any currency restrictions and securities laws in
connection with its duties as Subeustodian.
D. LOSS OF CASH OR SECURITIES. Subcustodian agrees that, in the even of
any loss of Securities or Cash in the Account, Subcustodian will use its best
efforts to ascertain the circumstances relating to such lose and will promptly
report the same to Custodian and shall use every legal means available to it to
effect the quickest possible recovery.
E. COMPENSATION OF SUBCUSTODIAN. Custodian agrees to pay to
Subcustodian from time to time such compensation for its services and such
out-of-pocket or incidental expenses of Subcustodian pursuant to this Agreement
as may be mutually agreed upon in writing from time to time.
F. OPERATING REQUIREMENTS. The Subcustodian agrees to follow such
operating Requirements as the Custodian may establish from time to time. A copy
of the current Operating Requirements is attached as Attachment B to this
Agreement.
G. TERMINATION. This Agreement may be terminated by Subcustodian or
Custodian on 60 days I written notice to the other party, sent by registered
mail, provided that any such notice, whether given by Subcustodian or Custodian,
shall be followed within 60 days by Instructions specifying the names of the
persons to whom Subcustodian shall deliver the securities in the Account and to
whom the Cash in the account shall be paid. If within 60 days following the
giving of such notice of termination, Subcustodian does not receive such
instructions, subcustodian shall continue to hold such securities and Cash
subject to this Agreement until such Instructions are given. The obligations of
the parties under this Agreement shall. survive the termination of this
Agreement.
H. NOTICES. Unless otherwise specified in this Agreement, all notices
and communications with respect to matters contemplated by this Agreement shall
be in writing, and delivered by mail, postage prepaid, telex, SWIFT, or other
mutually agreed telecommunication methods to the following addresses (or to such
other address as either party hereto may from time to time designate by notice
duly given in accordance with this paragraph):
To Subcustodian:
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To Custodian: State Street Bank and Trust Company
Securities Operations
Network Administration
P.O. Box 1631
Boston, MA 02105
I. CONFIDENTIALITY. Subcustodian and Custodian shall each use its bast
efforts to maintain the confidentiality of the property in the Account and the
beneficial owners thereof, subject, however, to the provisions of any laws,
requiring disclosure. In addition, Subcustodian shall safeguard any test keys,
identification codes or other security devices which Custodian shall make
available to it. The Subcustodian further agrees it will not disclose the
existence of this Agreement or any current business relationship unless
compelled by applicable law or regulation or unless it has secured the
Custodian's written consent.
J. ASSIGNMENT. This Agreement shall not be assignable by either party
but shall bind any successor in interest of Custodian and subcustodian
respectively.
K. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of To the extent inconsistent with this Agreement or
Custodian's operating Requirements as attached hereto, Subcustodian's rules and
conditions regarding accounts generally or custody accounts specifically shall
not apply.
CUSTODIAN: STATE STREET BANK AND TRUST COMPANY
By:
----------------------------
Date:
--------------------------
AGREED TO BY SUBCUSTODIAN
By:
----------------------------
Date:
--------------------------
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AMENDMENT TO CUSTODIAN CONTRACT
This Amendment to the Custodian Contract is made as of July 2, 2001 by
and between RCM Strategic Global Government Fund, Inc. (the "Fund") and State
Street Bank and Trust Company (the "Custodian"). Capitalized terms used in this
Amendment without definition shall have the respective meanings given to such
terms in the Custodian Contract referred to below.
WHEREAS, the Fund and the Custodian entered into a Custodian Contract
dated as of February 24, 1994 (as amended and in effect from time to time, the
"Contract");
WHEREAS, the Fund and the Custodian desire to amend certain provisions of
the Contract to reflect the revisions to Rule 17f-5 ("Rule 17f-5") and the
adoption of Rule 17f-7 ("Rule 17f-7") promulgated under the Investment Company
Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Fund and the Custodian desire to amend and restate certain
other provisions of the Contract relating to the custody of assets of the Fund
held outside of the United States.
NOW THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements hereinafter contained, the parties hereby agree to amend the
Contract, pursuant to the terms thereof, as follows:
I. The amendment to the Contract relating to the 1997 revisions to
Rule 17f-5 promulgated under the Investment Company Act of 1940 and dated
July 15, 1998 is hereby deleted, and the parties hereto agree that it
shall be and is replaced in its entirety by the provisions set forth
below.
3. PROVISIONS RELATING TO RULES 17f-5 AND 17f-7
3.1. DEFINITIONS. Capitalized terms in this Amendment shall have the
following meanings:
"Country Risk" means all factors reasonably related to the systemic risk of
holding Foreign Assets in a particular country including, but not limited to,
such country's political environment, economic and financial infrastructure
(including any Eligible Securities Depository operating in the country),
prevailing or developing custody and settlement practices, and laws and
regulations applicable to the safekeeping and recovery of Foreign Assets held in
custody in that country.
"Eligible Foreign Custodian" has the meaning set forth in section (a)(1) of Rule
17f-5, including a majority-owned or indirect subsidiary of a U.S. Bank (as
defined in Rule 17f-5), a bank holding company meeting the requirements of an
Eligible Foreign Custodian (as set forth in Rule 17f-5 or by other appropriate
action of the U.S. Securities and Exchange Commission (the "SEC")), or a foreign
branch of a Bank (as defined in Section 2(a)(5) of the 1940 Act) meeting
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the requirements of a custodian under Section 17(f) of the 1940 Act, except that
the term does not include any Eligible Securities Depository.
"Eligible Securities Depository" has the meaning set forth in section (b)(1) of
Rule 17f-7.
"Foreign Assets" means any of the Fund's investments (including foreign
currencies) for which the primary market is outside the United States and such
cash and cash equivalents as are reasonably necessary to effect the Fund's
transactions in such investments.
"Foreign Custody Manager" has the meaning set forth in section (a)(3) of
Rule 17f-5.
3.2. THE CUSTODIAN AS FOREIGN CUSTODY MANAGER.
3.2.1 DELEGATION TO THE CUSTODIAN AS FOREIGN CUSTODY MANAGER. The Fund,
by resolution adopted by its Board of Directors (the "Board"), hereby delegates
to the Custodian, subject to Section (b) of Rule 17f-5, the responsibilities set
forth in this Section 3.2 with respect to Foreign Assets held outside the United
States, and the Custodian hereby accepts such delegation as Foreign Custody
Manager of the Fund.
3.2.2 COUNTRIES COVERED. The Foreign Custody Manager shall be
responsible for performing the delegated responsibilities defined below only
with respect to the countries and custody arrangements for each such country
listed on Schedule A to this Contract, which list of countries may be amended
from time to time by the Fund with the agreement of the Foreign Custody Manager.
The Foreign Custody Manager shall list on Schedule A the Eligible Foreign
Custodians selected by the Foreign Custody Manager to maintain the Fund's
assets, which list of Eligible Foreign Custodians may be amended from time to
time in the sole discretion of the Foreign Custody Manager. The Foreign Custody
Manager will provide amended versions of Schedule A in accordance with
Section 3.2.5 hereof.
Upon the receipt by the Foreign Custody Manager of Proper Instructions to open
an account or to place or maintain Foreign Assets in a country listed on
Schedule A, and the fulfillment by the Fund of the applicable account opening
requirements for such country, the Foreign Custody Manager shall be deemed to
have been delegated by the Board responsibility as Foreign Custody Manager with
respect to that country and to have accepted such delegation. Execution of this
Amendment by the Fund shall be deemed to be a Proper Instruction to open an
account, or to place or maintain Foreign Assets, in each country listed on
Schedule A in which the Custodian has previously placed or currently maintains
Foreign Assets pursuant to the terms of the Contract. Following the receipt of
Proper Instructions directing the Foreign Custody Manager to close the account
of the Fund with the Eligible Foreign Custodian selected by the Foreign Custody
Manager in a designated country, the delegation by the Board to the Custodian as
Foreign Custody Manager for that country shall be deemed to have been withdrawn
and the Custodian shall immediately cease to be the Foreign Custody Manager of
the Fund with respect to that country.
The Foreign Custody Manager may withdraw its acceptance of delegated
responsibilities with respect to a designated country upon written notice to the
Fund. Thirty days (or such longer
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period to which the parties agree in writing) after receipt of any such notice
by the Fund, the Custodian shall have no further responsibility in its capacity
as Foreign Custody Manager to the Fund with respect to the country as to which
the Custodian's acceptance of delegation is withdrawn.
3.2.3 SCOPE OF DELEGATED RESPONSIBILITIES:
(a) SELECTION OF ELIGIBLE FOREIGN CUSTODIANS. Subject to the
provisions of this Section 3.2, the Foreign Custody Manager may place and
maintain the Foreign Assets in the care of the Eligible Foreign Custodian
selected by the Foreign Custody Manager in each country listed on Schedule A, as
amended from time to time.
In performing its delegated responsibilities as Foreign Custody Manager to place
or maintain Foreign Assets with an Eligible Foreign Custodian, the Foreign
Custody Manager shall determine that the Foreign Assets will be subject to
reasonable care, based on the standards applicable to custodians in the country
in which the Foreign Assets will be held by that Eligible Foreign Custodian,
after considering all factors relevant to the safekeeping of such assets,
including, without limitation the factors specified in Rule 17f-5(c)(1), as may
be amended from time to time.
(b) CONTRACTS WITH ELIGIBLE FOREIGN CUSTODIANS. The Foreign
Custody Manager shall ensure that a written contract governing the foreign
custody arrangements with each Eligible Foreign Custodian selected by the
Foreign Custody Manager is in place and shall determine that such contract
satisfies the requirements of Rule 17f-5(c)(2), as may be amended from time to
time.
(c) MONITORING. In each case in which the Foreign Custody
Manager maintains Foreign Assets with an Eligible Foreign Custodian selected by
the Foreign Custody Manager, the Foreign Custody Manager shall establish a
system to monitor (i) the appropriateness of maintaining the Foreign Assets with
such Eligible Foreign Custodian under Rule 17f-5(c)(1) and (ii) the performance
of the contract governing the custody arrangements established by the Foreign
Custody Manager with the Eligible Foreign Custodian. In the event the Foreign
Custody Manager determines that the custody arrangements with an Eligible
Foreign Custodian it has selected are no longer appropriate, the Foreign Custody
Manager shall notify the Board in accordance with Section 3.2.5 hereunder.
3.2.4 GUIDELINES FOR THE EXERCISE OF DELEGATED AUTHORITY. For purposes
of this Section 3.2, the Board, or at its delegation, the Fund's investment
adviser, shall be deemed to have considered and determined to accept such
Country Risk as is incurred by placing and maintaining the Foreign Assets in
each country for which the Custodian is serving as Foreign Custody Manager of
the Fund.
3.2.5 REPORTING REQUIREMENTS. The Foreign Custody Manager shall report
the withdrawal of the Foreign Assets from an Eligible Foreign Custodian and the
placement of such Foreign Assets with another Eligible Foreign Custodian by
providing to the Board an amended Schedule A at the end of the calendar quarter
in which an amendment to such Schedule has
3
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occurred or at such times as the Board may reasonably request. The Foreign
Custody Manager shall make written reports notifying the Board of any other
material change in the foreign custody arrangements of the Fund described in
this Section 3.2 promptly after the occurrence of the material change.
3.2.6 STANDARD OF CARE AS FOREIGN CUSTODY MANAGER OF THE FUND. In
performing the responsibilities delegated to it hereunder, the Foreign Custody
Manager agrees to exercise reasonable care, prudence and diligence such as a
person having responsibility for the safekeeping of assets of management
investment companies registered under the 1940 Act would exercise.
3.2.7 REPRESENTATIONS WITH RESPECT TO RULE 17f-5. The Foreign Custody
Manager represents to the Fund that it is a U.S. Bank as defined in
section (a)(7) of Rule 17f-5. The Fund represents to the Custodian that the
Board has determined that it is reasonable for the Board to rely on the
Custodian to perform the responsibilities delegated pursuant to this Contract to
the Custodian as the Foreign Custody Manager of the Fund.
3.2.8 EFFECTIVE DATE AND TERMINATION OF THE CUSTODIAN AS FOREIGN CUSTODY
MANAGER. The Board's delegation to the Custodian as Foreign Custody Manager of
the Fund shall be effective as of the date hereof and shall remain in effect
until terminated at any time, without penalty, by written notice from the
terminating party to the non-terminating party. Termination will become
effective thirty (30) days after receipt by the non-terminating party of such
notice. The provisions of Section 3.2.2 hereof shall govern the delegation to
and termination of the Custodian as Foreign Custody Manager of the Fund with
respect to designated countries.
3.3 ELIGIBLE SECURITIES DEPOSITORIES.
3.3.1 ANALYSIS AND MONITORING. The Custodian shall (a) provide the Fund
(or its duly-authorized investment manager or investment adviser) with an
analysis of the custody risks associated with maintaining assets with the
Eligible Securities Depositories set forth on Schedule B hereto, as amended from
time to time, in accordance with section (a)(1)(i)(A) of Rule 17f-7, as amended
from time to time, and (b) monitor such risks on a continuing basis, and
promptly notify the Fund (or its duly-authorized investment manager or
investment adviser) of any material change in such risks, in accordance with
section (a)(1)(i)(B) of Rule 17f-7.
3.3.2 STANDARD OF CARE. The Custodian agrees to exercise reasonable
care, prudence and diligence in performing the duties set forth in
Section 3.3.1.
4. DUTIES OF THE CUSTODIAN WITH RESPECT TO FUND PROPERTY HELD OUTSIDE THE
UNITED STATES.
4.1 DEFINITIONS. Capitalized terms in this Article 4 shall have the
following meanings:
4
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"Foreign Securities System" means an entity that is an Eligible Securities
Depository and is listed on Schedule B hereto.
"Foreign Sub-Custodian" means a foreign banking institution serving as an
Eligible Foreign Custodian.
4.2. HOLDING SECURITIES. The Custodian shall identify on its books as
belonging to the Fund the foreign securities held by each Foreign Sub-Custodian
or Foreign Securities System. The Custodian may hold foreign securities for all
of its customers, including the Fund, with any Foreign Sub-Custodian in an
account that is identified as belonging to the Custodian for the benefit of its
customers, provided however, that (i) the records of the Custodian with respect
to foreign securities of the Fund which are maintained in such account shall
identify those securities as belonging to the Fund and (ii), to the extent
permitted by law in the market in which the account is maintained, the Custodian
shall require that securities so held by the Foreign Sub-Custodian be held
separately from any assets of such Foreign Sub-Custodian or of other customers
of such Foreign Sub-Custodian.
4.3. FOREIGN SECURITIES SYSTEMS. Foreign securities shall be maintained in a
Foreign Securities System in a designated country through arrangements
implemented by the Custodian or a Foreign Sub-Custodian, as applicable, in such
country; provided that such foreign securities shall be withdrawn from a Foreign
Securities System as soon as reasonably practicable if such Foreign Securities
System no longer meets the requirements of Rule 17f-7..
4.4. TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT.
4.4.1. DELIVERY OF FOREIGN ASSETS. The Custodian or a Foreign
Sub-Custodian shall release and deliver foreign securities of the Fund held by
the Custodian or such Foreign Sub-Custodian, or in a Foreign Securities System
account, only upon receipt of Proper Instructions, which may be continuing
instructions when deemed appropriate by the parties, and only in the following
cases:
(i) upon the sale of such foreign securities for the Fund in
accordance with commercially reasonable market practice in the
country where such foreign securities are held or traded,
including, without limitation: (A) delivery against expectation
of receiving later payment; or (B) in the case of a sale effected
through a Foreign Securities System, in accordance with the rules
governing the operation of the Foreign Securities System;
(ii) in connection with any repurchase agreement related to foreign
securities;
(iii) to the depository agent in connection with tender or other
similar offers for foreign securities of the Fund;
(iv) to the issuer thereof or its agent when such foreign securities
are called, redeemed, retired or otherwise become payable;
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(v) to the issuer thereof, or its agent, for transfer into the name
of the Custodian (or the name of the respective Foreign
Sub-Custodian or of any nominee of the Custodian or such Foreign
Sub-Custodian) or for exchange for a different number of bonds,
certificates or other evidence representing the same aggregate
face amount or number of units;
(vi) to brokers, clearing banks or other clearing agents for
examination or trade execution in accordance with market custom;
provided that in any such case the Foreign Sub-Custodian shall
have no responsibility or liability for any loss arising from the
delivery of such securities prior to receiving payment for such
securities except as may arise from the Foreign Sub-Custodian's
own negligence or willful misconduct;
(vii) for exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment
of the securities of the issuer of such securities, or pursuant
to provisions for conversion contained in such securities, or
pursuant to any deposit agreement;
(viii) in the case of warrants, rights or similar foreign securities,
the surrender thereof in the exercise of such warrants, rights
or similar securities or the surrender of interim receipts or
temporary securities for definitive securities;
(ix) for delivery as security in connection with any borrowing by the
Fund requiring a pledge of assets by the Fund;
(x) in connection with trading in options and futures contracts,
including delivery as original margin and variation margin;
(xi) in connection with the lending of foreign securities; and
(xii) for any other purpose, but only upon receipt of Proper
Instructions specifying the foreign securities to be delivered
and naming the person or persons to whom delivery of such
securities shall be made.
4.4.2. PAYMENT OF FUND MONIES. Upon receipt of Proper Instructions,
which may be continuing instructions when deemed appropriate by the parties, the
Custodian shall pay out, or direct the respective Foreign Sub-Custodian or the
respective Foreign Securities System to pay out, monies of the Fund in the
following cases only:
(i) upon the purchase of foreign securities for the Fund, unless
otherwise directed by Proper Instructions, by (A) delivering
money to the seller thereof or to a dealer therefor (or an agent
for such seller or dealer) against expectation of receiving later
delivery of such foreign securities; or (B) in the case of a
purchase effected through a Foreign Securities System, in
accordance with the rules governing the operation of such Foreign
Securities System;
6
<Page>
(ii) in connection with the conversion, exchange or surrender of
foreign securities of the Fund;
(iii) for the payment of any expense or liability of the Fund,
including but not limited to the following payments: interest,
taxes, investment advisory fees, transfer agency fees, fees
under this Contract, legal fees, accounting fees, and other
operating expenses;
(iv) for the purchase or sale of foreign exchange or foreign exchange
contracts for the Fund, including transactions executed with or
through the Custodian or its Foreign Sub-Custodians;
(v) in connection with trading in options and futures contracts,
including delivery as original margin and variation margin;
(vi) for payment of part or all of the dividends received in respect
of securities sold short;
(vii) in connection with the borrowing or lending of foreign
securities; and
(viii) for any other purpose, but only upon receipt of Proper
Instructions specifying the amount of such payment and naming the
person or persons to whom such payment is to be made.
4.4.3. MARKET CONDITIONS. Notwithstanding any provision of this
Contract to the contrary, settlement and payment for Foreign Assets received for
the account of the Fund and delivery of Foreign Assets maintained for the
account of the Fund may be effected in accordance with the customary established
securities trading or processing practices and procedures in the country or
market in which the transaction occurs, including, without limitation,
delivering Foreign Assets to the purchaser thereof or to a dealer therefor (or
an agent for such purchaser or dealer) with the expectation of receiving later
payment for such Foreign Assets from such purchaser or dealer.
The Custodian shall provide to the Board the information with respect to custody
and settlement practices in countries in which the Custodian employs a Foreign
Sub-Custodian described on Schedule C hereto at the time or times set forth on
such Schedule. The Custodian may revise Schedule C from time to time, provided
that no such revision shall result in the Board being provided with
substantively less information than had been previously provided hereunder.
4.5. REGISTRATION OF FOREIGN SECURITIES. The foreign securities maintained in
the custody of a Foreign Sub-Custodian (other than bearer securities) shall be
registered in the name of the Fund or in the name of the Custodian or in the
name of any Foreign Sub-Custodian or in the name of any nominee of the
foregoing, and the Fund agrees to hold any such nominee harmless from any
liability as a holder of record of such foreign securities, absent the
Custodian's, such Foreign Sub-Custodian's or such nominee's negligence or wilful
misconduct. The Custodian or a Foreign Sub-Custodian shall not be obligated to
accept securities on behalf of the Fund under the
7
<Page>
terms of this Contract unless the form of such securities and the manner in
which they are delivered are in accordance with reasonable market practice.
4.6 BANK ACCOUNTS. The Custodian shall identify on its books as belonging to
the Fund cash (including cash denominated in foreign currencies) deposited with
the Custodian. Where the Custodian is unable to maintain, or market practice
does not facilitate the maintenance of, cash on the books of the Custodian, a
bank account or bank accounts shall be opened and maintained outside the United
States on behalf of the Fund with a Foreign Sub-Custodian. All accounts referred
to in this Section shall be subject only to draft or order by the Custodian (or,
if applicable, such Foreign Sub-Custodian) acting pursuant to the terms of this
Amendment to hold cash received by or from or for the account of the Fund. Cash
maintained on the books of the Custodian (including its branches, subsidiaries
and affiliates), regardless of currency denomination, is maintained in bank
accounts established under, and subject to the laws of, The Commonwealth of
Massachusetts.
4.7. COLLECTION OF INCOME. The Custodian shall use reasonable commercial
efforts to collect all income and other payments with respect to the Foreign
Assets held hereunder to which the Fund shall be entitled and shall credit such
income, as collected, to the Fund. In the event that extraordinary measures are
required to collect such income, the Fund and the Custodian shall consult as to
such measures and as to the compensation and expenses of the Custodian relating
to such measures.
4.8 SHAREHOLDER RIGHTS. With respect to the foreign securities held pursuant
to this Article 4, the Custodian will use reasonable commercial efforts to
facilitate the exercise of voting and other shareholder rights, subject always
to the laws, regulations and practical constraints that may exist in the country
where such securities are issued. The Fund acknowledges that local conditions,
including lack of regulation, onerous procedural obligations, lack of notice and
other factors may have the effect of severely limiting the ability of the Fund
to exercise shareholder rights.
4.9. COMMUNICATIONS RELATING TO FOREIGN SECURITIES. The Custodian shall
transmit promptly to the Fund written information with respect to materials
received by the Custodian via the Foreign Sub-Custodians from issuers of the
foreign securities being held for the account of the Fund (including, without
limitation, pendency of calls and maturities of foreign securities and
expirations of rights in connection therewith). With respect to tender or
exchange offers, the Custodian shall transmit promptly to the Fund written
information with respect to materials so received by the Custodian from issuers
of the foreign securities whose tender or exchange is sought or from the party
(or its agents) making the tender or exchange offer. Absent the negligence or
wilful misconduct of the Custodian or a Foreign Sub-Custodian, the Custodian
shall not be liable for any untimely exercise of any tender, exchange or other
right or power in connection with foreign securities or other property of the
Fund at any time held by it unless (i) the Custodian or the respective Foreign
Sub-Custodian is in actual possession of such foreign securities or property and
(ii) the Custodian receives Proper Instructions with regard to the exercise of
any such right or power, and both (i) and (ii) occur at least three business
days prior to the date on which the Custodian is to take action to exercise such
right or power.
8
<Page>
4.10. LIABILITY OF FOREIGN SUB-CUSTODIANS. Each agreement pursuant to which the
Custodian employs a Foreign Sub-Custodian shall, to the extent possible, require
the Foreign Sub-Custodian to exercise reasonable care in the performance of its
duties, and to indemnify, and hold harmless, the Custodian from and against any
loss, damage, cost, expense, liability or claim arising out of or in connection
with the Foreign Sub-Custodian's performance of such obligations. At the
election of the Fund, the Fund shall be entitled to be subrogated to the rights
of the Custodian with respect to any claims against a Foreign Sub-Custodian as a
consequence of any such loss, damage, cost, expense, liability or claim if and
to the extent that the Fund has not been made whole for any such loss, damage,
cost, expense, liability or claim.
4.11 TAX LAW. The Custodian shall have no responsibility or liability for any
obligations now or hereafter imposed on the Fund, or the Custodian as custodian
of the Fund, by the tax law of the United States or of any state or political
subdivision thereof. It shall be the responsibility of the Fund to notify the
Custodian of the obligations imposed on the Fund, or the Custodian as custodian
of the Fund, by the tax law of countries other than the United States, including
responsibility for withholding and other taxes, assessments or other
governmental charges, certifications and governmental reporting. The sole
responsibility of the Custodian with regard to such tax law shall be to use
reasonable efforts to assist the Fund with respect to any claim for exemption or
refund under the tax law of countries for which the Fund has provided such
information.
4.12. LIABILITY OF CUSTODIAN. Except as may arise from the Custodian's own
negligence or willful misconduct, or the negligence or willful misconduct of a
Sub-Custodian, the Custodian shall be without liability to the Fund for any
loss, liability, claim or expense resulting from or caused by anything which is
part of Country Risk.
The Custodian shall be liable for the acts or omissions of a Foreign
Sub-Custodian to the same extent as set forth with respect to sub-custodians
generally in the Contract and, regardless of whether assets are maintained in
the custody of a Foreign Sub-Custodian or a Foreign Securities System, the
Custodian shall not be liable for any loss, damage, cost, expense, liability or
claim resulting from nationalization, expropriation, currency restrictions, or
acts of war or terrorism, or any other loss where the Foreign Sub-Custodian has
otherwise acted with reasonable care.
II. Except as specifically superseded or modified herein, the terms and
provisions of the Contract shall continue to apply with full force and
effect. In the event of any conflict between the terms of the Contract
prior to this Amendment and this Amendment, the terms of this Amendment
shall prevail. If the Custodian is delegated the responsibilities of
Foreign Custody Manager pursuant to the terms of Article 3 hereof, in
the event of any conflict between the provisions of Articles 3 and 4
hereof, the provisions of Article 3 shall prevail.
[Remainder of page intentionally left blank.]
9
<Page>
IN WITNESS WHEREOF, each of the parties has caused this Amendment to be
executed in its name and behalf by its duly authorized representative as of the
date first above written.
WITNESSED BY: STATE STREET BANK and TRUST COMPANY
/s/ Raelene S. LaPlante By: /s/ Ronald E. Logue
- ----------------------- -----------------------------------------
Raelene S. LaPlante Name: Ronald E. Logue
V.P. & Assoc. Counsel Title: Vice Chairman and Chief Operating Officer
WITNESSED BY: RCM STRATEGIC GLOBAL GOVERNMENT FUND, INC.
/s/ Karin L. Brotman By: /s/ Robert J. Goldstein
- -------------------- -----------------------------------------
*[name] Name: Robert J. Goldstein
[title] Title: Secretary
<Page>
SCHEDULE A
STATE STREET
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
COUNTRY SUBCUSTODIAN NON-MANDATORY DEPOSITORIES
Argentina Citibank, N.A.
Australia Westpac Banking Corporation
Austria Erste Bank der
Oesterreichischen Sparkasen
AG
Bahrain British Bank of the Middle
East (as delegate of The
Hongkong and Shanghai
Banking Corporation Limited)
Bangladesh Standard Chartered Bank
Belgium Gencrale Bank
Bermuda The Bank of Bermuda Limited
Bolivia Banco Boliviano Americano S.A.
Botswana Barclays Bank of Botswana
Limited
Brazil Citibank, N.A.
Bulgaria ING Bank N.V.
Canada Canada Trustco Mortgage
Company
Chile Citibank, N.A.
People's Republic The Hongkong and Shanghai
of China Banking Corporation
Limited, Shanghai and
Shenzhen branches
Columbia Cititrust Colombia S.A.
Sociedad Fiduciaria
Croatia Privredana banka Zagreb
d.d
Cyprus Barclays Bank Plc., Cyprus
Offshore
<Page>
COUNTRY SUBCUSTODIAN NON-MANDATORY DEPOSITORIES
Banking Unit
Czech Republic Ceskoslovenska Obchondni
Banka, A.S.
Denmark Den Danske Bank
Ecuador Citibank, N.A.
Egypt National Bank of Egypt
Estonia Hansabank
Finland Merita Bank Ltd.
France Banque Paribas
Germany Dresdner Bank AG
Ghana Barclays Bank of Ghana
Limited
Greece National Bank of Greece
S.A.
Hong Kong Standard Chartered Bank
Hungary Citibank Budapest Rt.
Iceland Icebank Limited
India Deutsche Bank AG; The
Hongkong and Shanghai
Banking Corporation
Limited
Indonesia Standard Chartered Bank
Ireland Bank of Ireland
Israel Bank Hapoalim B.M.
Italy Banque Paribas
Ivory Coast Societe Generale de
Banques en Cote d'Ivoire
<Page>
COUNTRY SUBCUSTODIAN NON-MANDATORY DEPOSITORIES
Jamaica Scotiabank Jamaica Trust
and Merchant Bank Limited
Japan The Daiwa Bank Limited; Japan Securities
The Fuji Bank, Limited Depository Center
Jordan British Bank of the Middle
East (as delegate of The
Hongkong and Shanghai
Banking Corporation
Limited)
Kenya Barclays Bank of Kenya
Limited
Republic of Korea The Hongkong and Shanghai
Banking Corporation Limited
Latvia JSC Hansabank-Latvija
Lebanon British Bank of the Middle
East (as delegate of The
Hongkong and Shanghai
Banking Corporation
Limited)
Lithuania Vilniaus Bankas AB
Malaysia Standard Chartered Bank
Malaysia Berhad
Mauritius The Hongkong and Shanghai
Banking Corporation Limited
Mexico Citibank Mexico, S.A.
Morocco Banque Commerciale du Maroc
Namibia (via) Standard Bank of
South Africa
The Netherlands MeesPierson N.V.
New Zealand ANZ Banking Group
(New Zealand) Limited
<Page>
COUNTRY SUBCUSTODIAN NON-MANDATORY DEPOSITORIES
Norway Christiania Bank og
Kreditkasse
Oman British Bank of the Middle
East (as delegate of The
Hongkong and Shanghai
Banking Corporation Limited)
Pakistan Deutsche Bank AG
Peru Citibank, N.A.
Philippines Standard Chartered Bank
Poland Citibank (Poland) S.A. Bank
Polska Kasa Opiekl S.A.
Portugal Banco Comercial Portugues
Romania ING Bank, N.V.
Russia Credit Suisse First Boston
AO, Moscow (as delegate of
Credit Suisse First Boston,
Zurich)
Singapore The Development Bank of
Singapore Limited
Slovak Republic Ceskoslovenska Obchodna
Banka, A.S.
Slovenia Banka Creditanstalt d.d.
South Africa Standard Bank of South
Africa Limited
Spain Banco Santander
Sri Lanka The Hongkong and Shanghai
Banking Corporation Limited
Swaziland Standard Bank Swaziland
Limited
<Page>
COUNTRY SUBCUSTODIAN NON-MANDATORY DEPOSITORIES
Sweden Skandinaviska Enskilda
Banken
Switzerland UBS AG
Taiwan - R.O.C. Central Trust of China
Thailand Standard Chartered Bank
Trinidad & Tobago Republic Bank Limited
Tunisia Banque Internationale Arabe
de Tunisle
Turkey Citibank, N.A.
Ottoman Bank
United Kingdom State Street Bank and Trust
Company London Branch
Uruguay Citibank, N.A.
Venezuela Citibank, N.A.
Zambia Barclays Bank of Zambia
Limited
Zimbabwe Barclays Bank of Zimbabwe
Limited
Euroclear (the Euroclear System)
Cedel (Cedel Bank, societe anonyme)
INTERSETTLE (for EASDAQ Securities)
<Page>
SCHEDULE B
STATE STREET
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
COUNTRY MANDATORY DEPOSITORIES
Argentina Caja de Valores S.A.
Australia Austraclear Limited
Reserve Bank Information and
Transfer System
Austria Oesterreichische Kontrollbank AG
(Wertpapiersammelbank Division)
Belgium Caisse Interprofessionnelle de
Depots et de Virements de Titres
S.A.
Banque Nationale de Belgique
Brazil Caixa de Liquidacao de Sao Paulo,
(Calispa)
Bolsa de Valores de Rio de Janeiro
All SSB CLIENTS PRESENTLY USE
CALISPA
Central de Custodia e de Liquidacao
Financeira de Titulos
Banco Central do Brasil, Systema
Especial de Liquidacao e Custodia
Bulgaria Central Depository AD
Bulgarian National Bank
Canada The Canadian Depository for
Securities Limited
People's Republic of China Shanghai Securities Central Clearing
and Registration Corporation
Shenzhen Securities Central Clearing
Co., Ltd.
Croatia Ministry of Finance
* Mandatory depositories include entities for which use is mandatory as a matter
of law or effectively mandatory as a matter of market practice.
6/28/98
<Page>
National Bank of Croatia
Czech Republic Stredisko cennych papiru
Denmark Vaerdipapircentralen - The Danish
Securities Center (VP)
Egypt Misr Company for Clearing,
Settlement, and Central Depository
Estonia Eesti Vaartpabcrite
Keskdepositoorium
Finland The Finnish Central Securities
Depository
France Societe Interprofessionnelle pour la
Compensation des Valeurs Mobilieres
Germany Deutsche Borse Clearing AG
Greece The Central Securities Depository
S.A. (Apothetirion Titlon A.E.)
Hong Kong The Central Clearing and Settlement
System
Central Money Markets Unit
Hungary The Central Depository and Clearing
House (Budapest) Ltd. (KELER)
[MANDATORY FOR GOV'T BONDS ONLY;
SSB DOES NOT USE FOR OTHER
SECURITIES]
India The National Securities Depository
Limited
Indonesia Bank of Indonesia
Ireland The Central Bank of Ireland
Securities Settlement Office
* Mandatory depositories include entities for which use is mandatory as a matter
of law or effectively mandatory as a matter of market practice.
6/28/98
<Page>
Israel The Clearing House of the Tel Aviv
Stock Exchange
Bank of Israel
Italy Monte Titoli S.p.A.
Banca d'Italia
Jamaica The Jamaican Central Securities
Depository
Japan Bank of Japan Net System
Kenya Central Bank of Kenya
Republic of Korea Korea Securities Depository
Corporation
Latvia The Latvian Central Depository
Lebanon Custodian and Clearing Center of
Financial Instruments for Lebanon
and the Middle East (MIDCLEAR)
S.A.L.
The Central Bank of Lebanon
Lithuania The Central Securities Depository of
Lithuania
Malaysia The Malaysian Central Depository
Sdn. Bhd.
Bank Negara Malaysia
Scripless Securities Trading and
Safekeeping System
Mauritius The Central Depository & Settlement
Co. Ltd.
Mexico S.D. INDEVAL, S.A. de C.V.
(Instituto para el Deposito de
Valores)
Morocco Maroclear
* Mandatory depositories include entities for which use is mandatory as a matter
of law or effectively mandatory as a matter of market practice.
6/28/98
<Page>
(pending publication of enabling
legislation in the Moroccan
government Gazette)
The Netherlands Nederlands Centraal Instituut voor
Giraal Effectenverkeer B.V.
(NECIGEF)
De Nederlandsche Bank N.V.
New Zealand New Zealand Central Securities
Depository Limited
Norway Verdipapirsentralen (The Norwegian
Registry of Securities)
Oman Muscat Securities Market
Pakistan Central Depository Company of
Pakistan
Peru Caja de Valores y Liquidaciones S.A.
(CAVALI)
Philippines The Phillippines Central Depository
Inc.
The Book-Entry-System of Bangko
Sentral og Pilipinas (the central
bank)
The Registry of Scripless Securities
of the Bureau of the Treasury
Poland The National Depository of
Securities (Krajowy Depozyt Papierow
Wartosciowych)
Central Treasury Bills Registrar
Portugal Central de Valores Mobiliarios
(Central)
* Mandatory depositories include entities for which use is mandatory as a matter
of law or effectively mandatory as a matter of market practice.
6/28/98
<Page>
Romania National Securities Clearing,
Settlement and Depository Co.
Bucharest Stock Exchange
Singapore The Central Depository (Pte) Limited
Monetary Authority of Singapore
Slovak Republic Stredisko Cennych Papierov
National Bank of Slovakia
Slovenia Klirinsko Depotna Druzba d.d.
South Africa The Central Depository Limited
Spain Servicio de Compensacion y
Liquidacion de Valores, S.A.
Banco de Espana, Anotaciones en
Cuenta
Sri Lanka Central Depository System (Pvt)
Limited
Sweden Vardepapperscentralen (the Swedish
Central Securities Depository)
Switzerland Schweizerische Effekten - Giro AG
Taiwan - R.O.C. The Taiwan Securities Central
Depository Company, Ltd.
Thailand Thailand Securities Depository
Company Limited
* Mandatory depositories include entities for which use is mandatory as a matter
of law or effectively mandatory as a matter of market practice.
6/28/98
<Page>
Tunisia STICODEVAM
Central Bank of Tunisia
Tunisian Treasury
Turkey Takas ve Saklama Bankasi A.S.
(TAKASBANK)
United Kingdom The Bank of England
The Central Gilts Office (CGO)
The Central Moneymarkets Office
Uruguay Central Bank of Uruguay
Venezuela The Central Bank of Venezuela
Zambia Lusaka Central Depository Bank of
Zambia
* Mandatory depositories include entities for which use is mandatory as a matter
of law or effectively mandatory as a matter of market practice.
6/28/98
<Page>
SCHEDULE C
MARKET INFORMATION
PUBLICATION/TYPE OF INFORMATION BRIEF DESCRIPTION
- ------------------------------- -----------------
(FREQUENCY)
THE GUIDE TO CUSTODY IN WORLD MARKETS An overview of safekeeping and
- ------------------------------------- settlement practices and
(annually): procedures in each market in which
State Street Bank and Trust
Company offers custodial services.
THE DEPOSITORY REVIEW (annually): Information relating to the
operating history and structure of
depositories located in the
markets in which State Street Bank
and Trust Company offers custodial
services, including transnational
depositories.
Legal Opinions (annually): With respect to each market in
which State Street Bank and Trust
Company offers custodial services,
opinions relating to whether local
law restricts (I) access of a
fund's independent public
accountants to books and records
of a Foreign Sub-Custodian or
Foreign Securities System, (ii)
the Fund's ability to recover in
the event of bankruptcy or
insolvency of a Foreign
Sub-Custodial or Foreign
Securities System, (iii) the
Fund's ability to recover in the
event of a loss by a Foreign
Sub-Custodian or Foreign
Securities System, and (iv) the
ability of a foreign investor to
convert cash and cash equivalents
to U.S. dollars.
Network Bulletins (weekly): Developments of interest to
investors in the markets in which
State Street Bank and Trust
Company offers custodial services.
Foreign Custody Advisories (as necessary): With respect to markets in which
State Street Bank and Trust
Company offers custodial services
which exhibit special custody
risks, developments which may
impact State Street's ability to
deliver expected levels of
service.
<Page>
EXHIBIT 6
[LETTERHEAD OF BALLARD SPAHR ANDREWS & INGERSOLL, LLP]
File Number
882043
August 13, 2001
RCM Strategic Global Government Fund, Inc.
Four Embarcadero Center
San Francisco, California 94111
Re: Registration Statement on Form N-14
-----------------------------------
Ladies and Gentlemen:
We have served as Maryland counsel to RCM Strategic Global Government
Fund, Inc., a Maryland corporation ("RCS Fund"), in connection with certain
matters of Maryland law arising out of the issuance by RCS Fund of up to
4,567,416 shares (the "Shares") of common stock, par value $0.00001 per share,
of RCS Fund (the "Common Stock") to holders of shares of common stock of
Dresdner RCM Global Strategic Income Fund, Inc., a Maryland corporation ("DSF
Fund"), in connection with the merger (the "Merger") of DSF Fund with and into
RCS Fund, pursuant to the Agreement and Plan of Merger and Contingent
Liquidation, dated as of August 2, 2001 (the "Merger Agreement"), as described
in the above-referenced Registration Statement (the "Registration Statement"),
filed with the United States Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "1933 Act").
Capitalized terms used but not defined herein shall have the meanings given to
them in the Registration Statement.
In connection with our representation of RCS Fund, and as a basis for
the opinion hereinafter set forth, we have examined originals, or copies
certified or otherwise identified to our satisfaction, of the following
documents (hereinafter collectively referred to as the "Documents"):
1. The charter of RCS Fund (the "Charter"), certified as of a recent
date by the State Department of Assessments and Taxation of Maryland (the
"SDAT");
<Page>
RCM Strategic Global Government Fund, Inc.
August 13, 2001
Page 2
2. The Bylaws of RCS Fund, certified as of the date hereof by an
officer of RCS Fund;
3. A certificate of the SDAT as of a recent date as to the good
standing of RCS Fund;
4. Resolutions adopted by the Board of Directors of RCS Fund relating
to the approval of the Merger, the Merger Agreement and the issuance of the
Shares, certified as of the date hereof by an officer of RCS Fund;
5. The Merger Agreement, certified as of the date hereof by an officer
of RCS Fund;
6. A certificate executed by an officer of RCS Fund, dated the date
hereof; and
7. Such other documents and matters as we have deemed necessary or
appropriate to express the opinion set forth below, subject to the assumptions,
limitations and qualifications stated herein.
In expressing the opinion set forth below, we have assumed the
following:
1. Each individual executing any of the Documents, whether on behalf
of such individual or another person, is legally competent to do so.
2. Each individual executing any of the Documents on behalf of a party
(other than RCS Fund) is duly authorized to do so.
3. Each of the parties (other than RCS Fund) executing any of the
Documents has duly and validly executed and delivered each of the Documents to
which such party is a signatory, and such party's obligations set forth therein
are legal, valid and binding and are enforceable in accordance with all stated
terms.
4. Any Documents submitted to us as originals are authentic. Any
Documents submitted to us as certified or photostatic copies conform to the
original documents. All signatures on all such Documents are genuine. All public
records reviewed or relied upon by us or on our behalf are true and complete.
All representations, warranties, statements and information contained in the
Documents are true and complete. There has been no oral or written modification
of or amendment to any of the Documents, and there has been no waiver of any
provision of any of the Documents, by action or omission of the parties or
otherwise.
5. The Board of Directors and the stockholders of DSF Fund will take
all action necessary to validly approve the Merger under Maryland law. Articles
of Merger relating to the Merger will be filed by RCS Fund and DSF Fund with,
and accepted for record by, the SDAT prior to the issuance of the Shares.
<Page>
RCM Strategic Global Government Fund, Inc.
August 13, 2001
Page 3
Based upon the foregoing, and subject to the assumptions, limitations
and qualifications stated herein, it is our opinion that:
1. RCS Fund is a corporation duly incorporated and existing under and
by virtue of the laws of the State of Maryland and is in good standing with the
SDAT.
2. The Shares have been duly authorized and, when and if issued in
accordance with the resolutions of the Board of Directors of RCS Fund
authorizing their issuance and the Merger Agreement, the Shares will be
(assuming that, upon issuance, the total number of shares of Common Stock issued
and outstanding will not exceed the total number of shares of Common Stock that
RCS Fund is then authorized to issue under the Charter) validly issued, fully
paid and nonassessable.
The foregoing opinion is limited to the substantive laws of the State
of Maryland and we do not express any opinion herein concerning any other law.
We express no opinion as to the applicability of or compliance with the
Investment Company Act of 1940, as amended, or any federal or state securities
laws, including the securities laws of the State of Maryland.
The opinion expressed herein is limited to the matters specifically
set forth herein and no other opinion shall be inferred beyond the matters
expressly stated. We assume no obligation to supplement this opinion if any
applicable law changes after the date hereof or if we become aware of any fact
that might change the opinion expressed herein after the date hereof.
This opinion is being furnished to you for submission to the
Commission as an exhibit to the Registration Statement. Accordingly, it may not
be relied upon by, quoted in any manner to, or delivered to any other person or
entity without, in each instance, our prior written consent. We hereby consent
to the filing of this opinion as an exhibit to the Registration Statement.
In giving this consent, we do not admit that we are within the category of
persons whose consent is required by Section 7 of the 1933 Act.
Very truly yours,
/s/ Ballard, Spahr Andrews
& Ingersoll, LLP
<Page>
EXHIBIT 7
[letterhead of Sullivan & Cromwell]
August 13, 2001
Dresdner RCM Global Strategic Income Fund, Inc.,
Four Embarcadero Center,
San Francisco, California 94111.
Ladies and Gentlemen:
We have acted as counsel to Dresdner RCM Global Strategic
Income Fund, Inc., a Maryland corporation ("DSF Fund"), in connection with the
planned merger of DSF Fund with and into RCM Strategic Global Government Fund,
Inc., a Maryland corporation ("RCS Fund"), pursuant to the Agreement and Plan of
Merger and Contingent Liquidation, dated as of August 2, 2001, by and between
RCS Fund and DSF Fund (the "Agreement"). We render this opinion to you in
connection with the registration of the common stock of RCS Fund to be issued in
connection with the Merger. All capitalized terms used and not otherwise defined
herein shall have the meanings provided in the Agreement.
For purposes of this opinion, we have reviewed the Agreement
and such other documents and matters of law and fact as we have considered
necessary or appropriate, and we have assumed, with your consent, the following:
(i) The Merger will be completed in the manner set forth in
the Agreement and the Proxy Statement/Prospectus of DSF Fund and RCS
Fund (the "Proxy/Prospectus").
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(ii) The representations contained in the letters of
representation from DSF Fund and RCS Fund to us both dated August 13,
2001, will be true and complete on the Merger Date.
On the basis of the foregoing, and our consideration of such
other matters of fact and law as we have deemed necessary or appropriate, it is
our opinion, under presently applicable U.S. federal income tax law, that:
(i) the acquisition by RCS Fund of DSF Fund solely in exchange
for Merger Shares and the assumption by RCS Fund of liabilities of DSF
Fund, all pursuant to the plan of reorganization, constitutes a
reorganization within the meaning of Section 368(a) of the Code and DSF
Fund and RCS Fund will each be a "party to a reorganization" within the
meaning of Section 368(b) of the Code;
(ii) under Section 361 of the Code, no gain or loss will be
recognized by DSF Fund upon the transfer of DSF Fund's assets and the
assumption of its liabilities by RCS Fund in exchange for Merger
Shares;
(iii) under Section 354 of the Code, no gain or loss will be
recognized by stockholders of DSF Fund upon the conversion of their
shares of DSF Fund into Merger Shares;
(iv) under Section 358 of the Code, the aggregate basis of the
Merger Shares received by DSF Fund stockholders will be the same as the
aggregate basis of DSF Fund shares converted into such Merger Shares;
(v) under Section 1223(1) of the Code, the holding periods of
the Merger Shares received by the stockholders of DSF Fund will include
the holding periods of DSF Fund shares converted into such Merger
Shares, provided that at the time of the reorganization DSF Fund shares
are held by such stockholders as capital assets;
(vi) under Section 1032 of the Code, no gain or loss will be
recognized by RCS Fund upon the receipt
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of assets of DSF Fund in exchange for Merger Shares and the assumption
by RCS Fund of the liabilities of DSF Fund;
(vii) under Section 362(b) of the Code, the basis in the hands
of RCS Fund of the assets of DSF Fund transferred to RCS Fund will be
the same as the basis of such assets in the hands of DSF Fund
immediately prior to the transfer; and
(viii) under Section 1223(2) of the Code, the holding periods
of the assets of DSF Fund in the hands of RCS Fund will include the
holding periods during which such assets were held by DSF Fund.
The tax consequences described above may not be applicable to financial
institutions, dealers in securities, traders in securities that elect to use a
mark-to-market method of accounting, persons that are otherwise required to use
a mark-to-market method of accounting, persons who hold DSF Fund common stock as
part of a "straddle," "hedge" or "conversion" transaction, or persons who
acquired or acquire shares of DSF Fund common stock pursuant to the exercise of
employee stock options or otherwise as compensation.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement and to the reference to us under the heading
"Information about the Merger - Federal Income Tax Consequences" in the
Prospectus/Proxy Statement. In giving such consent, we do not thereby admit that
we are in the category of persons whose consent is required under Section 7 of
the Securities Act of 1933.
Very truly yours,
/s/ Sullivan & Cromwell
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EXHIBIT 8
Dresdner RCM Global Investors LLC
Four Embarcadero Center
San Francisco, CA 94111-4189
Phone: 415-954-5400
Fax:415-954-8200
August 2, 2001
Board of Directors
RCM Strategic Global Government Fund, Inc.
Dear Sirs:
Reference is made to the Agreement and Plan of Merger dated as of
August 2, 2001 (the "Merger Agreement") between RCM Strategic Global Government
Fund, Inc. ("RCS Fund") and Dresdner RCM Global Strategic Income Fund, Inc.
("DSF Fund"). This letter is being delivered to RCS Fund by Dresdner RCM Global
Investors LLC ("Dresdner RCM"), on its own behalf, in order to facilitate the
consummation of the merger transaction provided for in the Merger Agreement (the
"Merger") and in consideration of the benefits to Dresdner RCM from the Merger.
Capitalized terms used but not defined in this letter are used herein as defined
in the Merger Agreement.
1. In addition to the expense reimbursement obligations of DSF Fund
pursuant to the Merger Agreement, Dresdner RCM hereby agrees:
(a) to reimburse RCS Fund for all RCS Fund Expenses up to a maximum
amount of forty thousand dollars (US $40,000) in the event that the Merger is
not consummated by reason of (i) DSF Fund's being relieved of its obligation to
consummate the Merger by reason of the nonfulfillment of any condition to such
obligation referred to in Section 9 of the Merger Agreement, including a failure
to obtain the requisite majority vote of the RCS Fund stockholders but excluding
a failure to obtain the requisite majority vote of the DSF Fund stockholders to
approve the Merger; and/or (ii) a Termination With Cause; and
(b) to reimburse RCS Fund for all Joint Expenses up to a maximum amount
of forty thousand dollars (US $ 40,000) in the event that the Merger is not
consummated by reason of the failure to obtain the requisite majority vote of
the DSF Fund stockholders to approve the Merger.
2. Dresdner RCM hereby agrees to waive during the twelve months
immediately following the consummation of the Merger such portion of the
investment management fee payable to Dresdner RCM by RCS Fund pursuant to an
investment management agreement dated as of June 14, 1996, as may be necessary
to ensure that the Projected Total Expenses of RCS
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Fund shall be at least seventy-five thousand dollars ($75,000) more than the
Pro Forma Total Expenses of RCS Fund. For purposes of this paragraph,
"Projected Total Expenses" shall mean the product of (x) the expense ratio of
RCS Fund's estimated fixed expense items (including, without limitation, legal,
audit, accounting and regulatory compliance expenses) and estimated variable
expense items (including, without limitation, management, administrative,
custody and transfer agency fees) for fiscal year 2002, assuming that the
Merger had not been consummated, as shown in Column A of Exhibit A hereto, and
(y) the aggregate value of RCS Fund's assets immediately following consummation
of the Merger; and "Pro Forma Total Expenses" shall mean RCS Fund's estimated
fixed expense items (including, without limitation, legal, audit, accounting
and regulatory compliance expenses) and estimated variable expense items
(including, without limitation, management, administrative, custody and
transfer agency fees) calculated based on the total value of RCS Fund's assets
immediately following the consummation of the Merger (in each case using the
same assumptions as used to calculate the Projected Total Expenses and covering
the twelve month period immediately following the consummation of the Merger),
together with incremental Merger-related legal and other costs and expenses
actually incurred by RCS Fund.
3. Dresdner RCM hereby agrees that, following the consummation of the
Merger, it will receive from RCS Fund an investment management fee at a rate of
0.75% (rather than 0.95%) per annum with respect to the value of all assets in
excess of the value of RCS Fund's assets at the Valuation Time.
4. Dresdner RCM hereby represents and warrants to RCS Fund that the
information furnished or approved by Dresdner RCM for use in the Registration
Statement, the Prospectus or the Proxy Statements, including, without
limitation, information with respect to the investment policies and restrictions
of RCS Fund contained therein, will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
5. Dresdner RCM hereby agrees to provide RCS Fund within 30 days
following the Merger Date a list setting forth the respective federal income tax
bases of the DSF Fund portfolio securities acquired by RCS Fund in the Merger.
6. Dresdner RCM hereby represents and warrants to RCS Fund that (i) for
the period from November 1, 1999 to the Merger Date, DSF Fund at all times has
qualified for taxation as a regulated investment company under Sections 851 and
852 of the Internal Revenue Code of 1986, as amended; (ii) DSF Fund has no known
liabilities of a material nature, contingent or otherwise, other than those
shown as belonging to it on its statement of assets and liabilities as of April
30, 2001 and those that DSF Fund shall have advised RCS Fund at or prior to the
Valuation Time were incurred by DSF Fund subsequent to April 30, 2001, whether
or not incurred in the ordinary course of business; and (iii) the list of
portfolio securities and their respective tax costs provided to RCS Fund
pursuant to paragraph 5 hereof fairly presents the federal income tax basis of
such assets.
7. Dresdner RCM will indemnify and hold harmless the RCS Indemnified
Parties against any and all expenses, losses, claims, damages and liabilities at
any time imposed upon or
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reasonably incurred by any one or more of the RCS Indemnified Parties in
connection with, arising out of, resulting from or based upon a breach of any
representation, warranty or covenant of Dresdner RCM contained in this letter.
The RCS Indemnified Parties will notify Dresdner RCM in writing within ten days
after the receipt by any one or more of the RCS Indemnified Parties of any
notice of legal process or any suit brought against or claim made against such
RCS Indemnified Party as to any matters covered by this indemnification or
within ten days of having discovered any loss or expense arising out of or based
upon a breach of a representation, warranty or covenant of Dresdner RCM
contained in this letter. Dresdner RCM shall be entitled to participate at its
own expense in the defense of any claim, action, suit or proceeding covered by
this paragraph, or, if it so elects, to assume at its expense by counsel
satisfactory to the RCS Indemnified Parties the defense of any such claim,
action, suit or proceeding, and if Dresdner RCM elects to assume such defense,
the RCS Indemnified Parties shall be entitled to participate in the defense of
any such claim, action, suit or proceeding at their expense. Dresdner RCM 's
obligation under this paragraph to indemnify and hold harmless the RCS
Indemnified Parties shall constitute a guarantee of payment so that Dresdner RCM
will pay in the first instance any expenses, losses, claims, damages and
liabilities required to be paid by it under this paragraph without the necessity
of the RCS Indemnified Parties' first paying the same.
8. Dresdner RCM hereby agrees that the representations, warranties and
covenants set forth in this letter shall survive the consummation of the Merger.
9. Dresdner RCM hereby agrees that the terms of this letter, including
the indemnification provided for in paragraph 7 hereof, shall be governed by the
internal laws of the State of Maryland, without regard to conflict-of-laws
principles.
Sincerely,
Dresdner RCM Global Investors LLC
/s/ Luke D. Knecht
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Luke D. Knecht
Managing Director
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EXHIBIT 9
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Proxy
Statement/Prospectus and Statement of Additional Information constituting parts
of this Registration Statement on Form N-14 (the "Registration Statement") of
our reports dated December 11, 2000 and March 16, 2001, relating to the
financial statements and financial highlights which respectively appear in the
October 31, 2000 Annual Report to Shareholders of Dresdner RCM Global Strategic
Income Fund, Inc. and the January 31, 2001 Annual Report to Shareholders of RCM
Strategic Global Government Fund, which are also incorporated by reference into
the Registration Statement. We also consent to the references to us under the
headings "Financial Highlights and Senior Securities," "Independent Auditors of
the Funds," and "Other Service Providers" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
August 10, 2001
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EXHIBIT 10
POWER OF ATTORNEY
We, the undersigned Directors of RCM Strategic Global Government Fund,
Inc. (the "Fund"), hereby severally constitute and appoint Luke D. Knecht and
Joseph B. Kittredge, Jr., and each of them singly, our true and lawful
attorneys, with full power to them and each of them, to sign for us, and in our
names and in the capacity indicated below, the Registration Statement on Form
N-14 relating to the proposed merger of Dresdner RCM Global Strategic Income
Fund, Inc. with and into the Fund and any and all amendments (including
post-effective amendments) to said Registration Statement and to file the same
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto our said attorneys, and each
of them acting alone, full power and authority to do and perform each and every
act and thing requisite or necessary to be done in the premises, as fully to all
intents and purposes as he might or could do in person, and hereby ratify and
confirm all that said attorneys or any of them may lawfully do or cause to be
done by virtue thereof.
WITNESS my hand and seal on the date set forth below.
SIGNATURE TITLE DATE
______________________ Director June __, 2001
Francis E. Lundy
/s/ James M. Whitaker Director June 22, 2001
- --------------------- --
James M. Whitaker
______________________ Director June __, 2001
Gregory S. Young
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POWER OF ATTORNEY
We, the undersigned Directors of RCM Strategic Global Government Fund,
Inc. (the "Fund"), hereby severally constitute and appoint Luke D. Knecht and
Joseph B. Kittredge, Jr., and each of them singly, our true and lawful
attorneys, with full power to them and each of them, to sign for us, and in our
names and in the capacity indicated below, the Registration Statement on Form
N-14 relating to the proposed merger of Dresdner RCM Global Strategic Income
Fund, Inc. with and into the Fund and any and all amendments (including
post-effective amendments) to said Registration Statement and to file the same
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto our said attorneys, and each
of them acting alone, full power and authority to do and perform each and every
act and thing requisite or necessary to be done in the premises, as fully to all
intents and purposes as he might or could do in person, and hereby ratify and
confirm all that said attorneys or any of them may lawfully do or cause to be
done by virtue thereof.
WITNESS my hand and seal on the date set forth below.
SIGNATURE TITLE DATE
/s/ Francis E. Lundy Director June 17, 2001
- -------------------- --
Francis E. Lundy
______________________ Director June __, 2001
James M. Whitaker
______________________ Director June __, 2001
Gregory S. Young