<Page>
As filed with the Securities and Exchange Commission on
October 19, 2001
Registration No. 333-67374
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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-14
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
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Pre-Effective Amendment No. 2 /X/
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Post-Effective Amendment No. / /
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(Check appropriate box or boxes)
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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)
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ROBERT J. GOLDSTEIN
RCM STRATEGIC GLOBAL GOVERNMENT FUND, INC.
Four Embarcadero Center
San Francisco, California 94111-4189
(Name and address of Agent for Service)
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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
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<Page>
Approximate Date of Proposed Offering: As soon as practicable after this
Registration Statement becomes effective.
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>
DRESDNER RCM GLOBAL STRATEGIC INCOME FUND, INC.
RCM STRATEGIC GLOBAL GOVERNMENT FUND, INC.
Four Embarcadero Center
San Francisco, California 94111-4189
(800) 237-4218
October 22, 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 November 20, 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 September 25, 2001, the net assets of
DSF Fund were $82,774,109, and the net assets of RCS Fund were $344,996,148.
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 nonbinding 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 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.
<Page>
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
Luke D. Knecht
President of the Funds
<Page>
CONTENTS
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>
DRESDNER RCM GLOBAL STRATEGIC INCOME FUND, INC.
FOUR EMBARCADERO CENTER
SAN FRANCISCO, CALIFORNIA 94111
(800) 237-4218
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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 November 20, 2001, at 2:00 p.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 1.
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 24.
3. To elect two directors to the Board of Directors of DSF Fund. See
page 29.
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 October 1, 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,
/s/ ROBERT J. GOLDSTEIN
Robert J. Goldstein
Secretary
San Francisco, California
October 22, 2001
<Page>
RCM STRATEGIC GLOBAL GOVERNMENT FUND, INC.
FOUR EMBARCADERO CENTER
SAN FRANCISCO, CALIFORNIA 94111
(800) 237-4218
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NOTICE OF THE ANNUAL MEETING OF STOCKHOLDERS
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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 November 20, 2001, at 2:00 p.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 1.
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 33.
3. To elect two directors to the Board of Directors of RCS Fund. See
page 37.
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 October 1, 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,
/s/ ROBERT J. GOLDSTEIN
Robert J. Goldstein
Secretary
San Francisco, California
October 22, 2001
<Page>
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PROSPECTUS/PROXY STATEMENT
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OCTOBER 22, 2001
<Table>
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>
TABLE OF CONTENTS
<Table>
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.................... 7
Information about the Merger................................ 11
II. Additional Proposals to be Voted on by Stockholders of DSF
Fund Only................................................... 25
DSF Fund Proposal 2: Approval of New Investment Advisory
Agreement Between DSF Fund and
Dresdner RCM........................ 25
DSF Fund Proposal 3: Election of Class I Directors of DSF
Fund................................ 29
III. Additional Proposals to be Voted on by Stockholders of RCS
Fund Only................................................... 34
RCS Fund Proposal 2: Approval of New Investment
Management Agreement Between RCS
Fund and Dresdner RCM............... 34
RCS Fund Proposal 3: Election of Class I Directors of RCS
Fund................................ 38
IV. Further Information about the Funds......................... 41
V. Further Information about Voting and Each Fund's Meeting.... 54
Agreement and Plan of Merger and Contingent Liquidation............ A-1
DSF Fund Investment Advisory Agreement............................. B-1
RCS Fund Investment Management Agreement........................... C-1
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
</Table>
<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 October 22,
2001. 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 nondiversified, closed-end management investment company. Please
read it and keep it for future reference.
A Statement of Additional Information (the "SAI"), dated October 22, 2001,
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 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, DC 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.
ii
<Page>
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:
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DSF FUND AND RCS FUND PROPOSAL 1: Approval of the Merger and DSF Fund and RCS Fund
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 investment advisory DSF Fund
agreement between DSF Fund and Dresdner RCM in connection
with a change in control of Dresdner RCM. See page 24.
DSF FUND PROPOSAL 3: Election of two directors to the Board DSF Fund
of Directors of DSF Fund. See page 29.
RCS FUND PROPOSAL 2: Approval of a new investment management RCS Fund
agreement between RCS Fund and Dresdner RCM in connection
with a change in control of Dresdner RCM. See page 33.
RCS FUND PROPOSAL 3: Election of two directors to the Board RCS Fund
of Directors of RCS Fund. See page 37.
</Table>
iii
<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. If greater than 50% but
not more than 75% of the outstanding shares of DSF Fund are tendered in the
Tender Offer (as defined in Item 3), DSF Fund will purchase 50% of the
outstanding shares of the Fund on a pro rata basis from tendering stockholders
at a price per share equal to 99 1/2% of net asset value at the expiration of
the Tender Offer in accordance with the terms of the Tender Offer. In such
event, subject to other conditions set forth in the Merger Agreement, the Merger
will be consummated.
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.
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 nonbinding
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
<Page>
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 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
2
<Page>
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 limit its management fee for those assets of the combined fund after the
Merger (the "Combined Fund") that exceed RCS Fund's pre-Merger net asset level
to 0.75%, so that the overall management fee for the Combined Fund would be less
than the current 0.95%. (As shown in Item 5, below, "Comparison of the
Management Fees and Other Expenses of the Funds," the overall management fee for
the Combined Fund is expected to decline by approximately 0.02%, assuming that
50% of the outstanding shares of DSF Fund are tendered in the Tender Offer.) The
Directors of RCS Fund also considered that Dresdner RCM has agreed, in addition,
to waive part of the Combined Fund's management fee during the first year
following the Merger to ensure that the Combined Fund's total operating expenses
for that year, plus nonrecurring Merger-related expenses, will be at least
$75,000 less than what the Combined Fund's operating expenses are projected to
be on the basis of an estimated expense ratio for RCS Fund that assumes that the
Merger had not occurred. 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.
For additional information about the factors considered by the Board of
Directors of each Fund in approving the Merger, see page 12, "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
pages 18-19), 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 with an average maturity
less than 10 years. 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.
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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 18, "Information about the Merger -- Comparison of Funds'
Investment Objectives, Policies and Restrictions."
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 None(a) None(a)
(as a percentage 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.
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ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<Table>
<Caption>
RCS FUND (PRO
FORMA COMBINED
AFTER GIVING EFFECT TO
DSF FUND+ RCS FUND+ THE TENDER OFFER)
--------- --------- ----------------------
MANAGEMENT FEES 0.70% 0.95% 0.95%
OTHER EXPENSES* 0.75% 0.24% 0.24%
TOTAL ANNUAL FUND OPERATING EXPENSES* 1.45% 1.19% 1.19%
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 nonrecurring 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 18, "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 0.95%, 0.22%, 1.17%, (0.04)% and 1.13%, 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
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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
RCS FUND (PRO FORMA COMBINED AFTER GIVING EFFECT
TO THE TENDER OFFER)* $12 $37 $64 $142
</Table>
------------------------
* Excludes nonrecurring 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 18, "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 22, "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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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 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
7
<Page>
investment. Although investment-grade investments generally have lower credit
risk, they may share some of the risks of noninvestment-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." Noninvestment-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 noninvestment-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
multinational 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 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
8
<Page>
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 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.
NONDIVERSIFICATION AND RELATED RISKS. Because the Funds are
"nondiversified" 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
nondiversification, the Funds may be more susceptible than more widely
diversified Funds to the risks of adverse developments in the securities
9
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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 nonhedging 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 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 51, "Further Information About the Funds -- Comparison
10
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of Charters and Bylaws of the Funds." 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.
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.
If greater than 50% but not more than 75% of the outstanding shares of DSF Fund
are tendered in the Tender Offer, DSF Fund will purchase 50% of the outstanding
shares of the Fund on a pro rata basis from tendering stockholders at a price
per share equal to 99 1/2% of net asset value at the expiration of the Tender
Offer in accordance with the terms of the Tender Offer. In such event, subject
to other conditions set forth in the Merger Agreement, the Merger will be
consummated. 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
11
<Page>
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 22.
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 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 16, "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 nonbinding 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
12
<Page>
opportunity to continue to earn high current income through investment in a fund
similar to DSF Fund through a nontaxable 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 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
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.
13
<Page>
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 following the Merger as may be necessary to
ensure that the total expenses actually incurred by RCS Fund during that period,
plus nonrecurring 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 18, "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
14
<Page>
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 page 7. 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, if the Merger has
not been consummated by December 31, 2001, or such other date as the Boards of
Directors of both Funds shall mutually agree on, 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).
15
<Page>
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, without limitation, this
Prospectus/Proxy Statement, the SAI and the Merger Agreement, are currently
estimated to be $500,000. 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 solely by DSF Fund stockholders. See page 22, "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
16
<Page>
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 (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, 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.
- 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 (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, 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 nonfulfillment 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 below, "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
17
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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:
- 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 nonrecurring Merger-related expenses, will be at least
$75,000 less than the projected operating expenses for the Combined Fund
using an estimated expense ratio for RCS Fund computed on the assumption
that the Merger had not taken place.
- Waive its management fee in excess of a rate of 0.75% per annum on net
assets of the Combined Fund in excess of the net assets of RCS Fund
immediately prior to the Merger.
DESCRIPTION OF THE MERGER SHARES. Each of the Merger Shares will be fully
paid and nonassessable when issued and will have no preemptive, conversion or
exchange rights. The Merger Shares will have equal noncumulative voting rights
and equal rights with respect to dividends, assets and liquidation. The Merger
Shares will be transferable without restriction.
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TRADING INFORMATION. Shares of common stock of each Fund are traded on the
NYSE. The following chart shows quarterly trading information per common share
for the past two fiscal years and the current fiscal year of the Funds, as
reported by the NYSE:
DSF FUND
(Unaudited)
<Table>
<Caption>
DISCOUNT OR
CLOSING (PREMIUM) TO
CLOSING MARKET NET ASSET NET ASSET
QUARTER ENDED HIGH PRICE ($) LOW PRICE ($) PRICE ($) VALUE ($) VALUE (%)
------------- -------------- ------------- -------------- --------- ------------
1/31/99 7.125 6.438 6.750 8.230 17.98
4/30/99 6.875 6.563 6.875 8.490 19.02
7/31/99 6.938 6.625 6.625 8.070 17.91
10/31/99 6.563 6.188 6.188 7.680 19.43
1/31/00 6.313 5.750 6.00 7.360 21.88
4/30/00 6.063 5.813 5.875 7.280 19.30
7/31/00 6.500 5.625 6.438 7.350 12.41
10/31/00 6.875 6.375 6.688 7.080 5.54
1/31/01 7.130 6.563 7.000 7.430 5.79
4/30/01 7.350 6.910 6.940 7.110 2.39
7/31/01 7.120 6.730 6.760 6.990 3.29
</Table>
RCS FUND
(Unaudited)
<Table>
<Caption>
DISCOUNT OR
CLOSING (PREMIUM) TO
CLOSING MARKET NET ASSET NET ASSET
QUARTER ENDED HIGH PRICE ($) 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
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
7/31/01 10.950 10.050 10.870 11.110 2.16
</Table>
On August 31, 2001 the market price, net asset value per share and discount
to net asset value were $6.91, $7.08, and 2.40%, respectively, for DSF Fund and
$10.85, $11.24, and 3.47%, respectively, for RCS Fund.
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
19
<Page>
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 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 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
NONINVESTMENT-GRADE SECURITIES.
20
<Page>
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.
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 NONSOVEREIGN ISSUER; AND (ii) 10% OF ITS TOTAL ASSETS IN
ISSUERS OF ANY ONE EMERGING MARKET COUNTRY.
21
<Page>
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 DSF Fund may not purchase securities on
margin, except that RCS Fund may obtain any margin, except such short-term credits as
short-term credits necessary for the may be necessary for the clearance of
clearance of purchases and sales of transactions. For purposes of this
securities. For purposes of this restriction, the deposit or payment by DSF
restriction, the deposit or payment of Fund of securities and other assets in
initial or variation margin in connection escrow or collateral agreements with respect
with futures contracts or related options to initial or variation margin in connection
will not be deemed to be a purchase of with futures contracts or options will not
securities on margin. be deemed to be a purchase of securities on
margin.
RCS Fund is subject to a similar NON- DSF Fund may not make short sales of
FUNDAMENTAL restriction. securities or maintain a short position if
the market value of all securities sold
short exceeds 25% of the value of DSF Fund's
total assets.
RCS Fund may not borrow money, except that DSF Fund may not issue senior securities or
RCS Fund may engage in reverse repurchase borrow money, except that DSF Fund may issue
agreements and dollar roll transactions and senior securities and borrow money, on a
may borrow in an amount not exceeding secured or unsecured basis, in an amount, at
33 1/3% of the value of RCS Fund's total the time of borrowing or investing, up to
assets (including the amount borrowed) 30% of DSF Fund's total assets (including
valued at market, less liabilities (not the amount borrowed), less all liabilities
including the amount borrowed) at the time and indebtedness other than bank or other
the borrowing is made, and may use the borrowings and may use the proceeds of such
proceeds of such borrowing for investment senior securities or borrowings for
purposes. In addition, RCS Fund may borrow investment purposes. In addition, DSF Fund
money for temporary or emergency purposes in may borrow for temporary or emergency
an amount not exceeding 5% of the value of purposes an amount up to 5% of DSF Fund's
RCS Fund's total assets (not including the total assets (not including the amount
amount borrowed) provided that the total borrowed).
amount borrowed by RCS Fund for any purpose
does not exceed 33 1/3% of its total assets.
RCS Fund may not pledge, hypothecate, DSF Fund is not subject to a similar
mortgage, or otherwise encumber its assets restriction.
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 DSF Fund may not act as an underwriter
of other issuers, except insofar as RCS Fund (except to the extent DSF Fund may be deemed
may be deemed an underwriter in the course to be an underwriter in connection with the
of disposing of portfolio securities. sale of securities in DSF Fund's investment
portfolio).
</Table>
22
<Page>
<Table>
<Caption>
RCS FUND DSF FUND
-------------------------------------------- --------------------------------------------
RCS Fund may not purchase or sell real DSF Fund may not purchase or sell real
estate or interests in real estate, except estate or interests in real estate (other
that RCS Fund may purchase and sell than mortgage- related securities),
securities that are secured by real estate commodities or commodity contracts, except
or interests in real estate and may purchase that DSF Fund may invest in futures
securities issued by companies that invest contracts, options thereon and options on
or deal in real estate. currencies.
RCS Fund may not invest in commodities, DSF Fund is subject to the preceding
except that RCS Fund may invest in futures restriction regarding commodities.
contracts and options thereon, and options
on currencies.
RCS Fund may not make loans to others, DSF Fund may not make loans. This
except through the purchase of qualified restriction does not apply to: (a) the
debt obligations, the entry into repurchase purchase of publicly traded debt securities
agreements and loans of portfolio securities consistent with DSF Fund's investment
consistent with RCS Fund's 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 DSF Fund is not subject to a similar
other investment companies registered or restriction.
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 DSF Fund may not make investments for the
fundamental restriction. purpose of exercising control or management.
RCS Fund may not purchase any securities DSF Fund may not invest more than 25% of its
which would cause more than 25% of the value total assets at the time of investment in
of RCS Fund's total assets at the time of any one industry (including banking). U.S.
purchase to be invested in the of issuers Treasury securities are excluded from this
conducting their principal securities 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;
23
<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 one 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.
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 July 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
24
<Page>
of the date of the Merger Agreement in connection with the Tender Offer. The
data shown in this table do not reflect the nonrecurring Merger-related expenses
of the Funds.
<Table>
<Caption>
PRO FORMA COMBINED
(AFTER GIVING EFFECT TO
DSF FUND RCS FUND THE TENDER OFFER)*
----------- ------------ -----------------------
NET ASSETS $83,590,552 $338,976,899 $380,563,198
SHARES OF COMMON STOCK OUTSTANDING 11,954,566 30,515,800 34,259,664
NET ASSETS PER SHARE OF COMMON STOCK $ 6.99 $ 11.11 $ 11.11
</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 $422,567,451.
The table above assumes that the Merger was consummated on July 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
July 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 the assumption of the 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 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.
25
<Page>
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 reinsurance company and holding company for the Munich
Re Group, maintains a shareholder interest, an investment it has 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 as of the Closing Date.
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 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.
Dresdner RCM's advisory affiliates now include, among others, Pacific Investment
Management Company LLC ("PIMCO"), Nicholas-Applegate Capital Management and
Oppenheimer Capital. Subsequent to the Closing Date, Dresdner RCM and its
affiliates have continued 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 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. To date, there has been no
change in the team of investment professionals at Dresdner RCM responsible for
the management of DSF Fund (the "DSF Fund Team"). Dresdner RCM has notified DSF
Fund that, in light of its recent affiliation with PIMCO, it is considering the
creation of a joint venture among Dresdner RCM, PIMCO and Blaylock & Partners
("Blaylock"), a privately owned investment banking firm, to provide management
services to Dresdner RCM's existing fixed income clients. Dresdner RCM has
indicated that, although no definitive agreement has been reached, Dresdner RCM,
PIMCO and Blaylock have agreed to a nonbinding term sheet for the joint venture.
Employment agreements with the DSF Fund Team have not yet been negotiated. It is
expected that if such a joint venture were finalized, it would not come into
effect prior to December 31, 2001. Such an arrangement likely would, itself,
constitute the "assignment" of any investment advisory agreement with Dresdner
RCM pursuant to the 1940 Act, terminating such agreement and requiring any
subsequent investment advisory agreement to be approved by the Board of
Directors and, within 150 days, stockholders of DSF Fund.
26
<Page>
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.
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 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 immediate 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.
At a special meeting of the Board of Directors on October 11, 2001, the
Board again evaluated the operations of Dresdner RCM subsequent to the
Transaction and considered the status of negotiations regarding the possible
restructuring of the DSF Fund Team. The Board concluded that it would be
imprudent to postpone the process of seeking stockholder approval of the
Proposed Advisory Agreement because DSF Fund would otherwise have no investment
adviser beginning on December 20, 2001, the date which is 150 days after the
Closing Date. The Board did not reach any decision with respect to its course of
action should the reorganization of the DSF Fund Team occur at a later date.
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
27
<Page>
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 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
28
<Page>
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 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 nonexclusive 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.
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
29
<Page>
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>
SHARES PERCENT OF
BENEFICIALLY SHARES
PRINCIPAL OCCUPATIONS DURING OWNED AT OWNED AT
POSITION(S) WITH PAST FIVE YEARS AND OTHER SEPTEMBER 30, SEPTEMBER 30,
NAME AND ADDRESS AGE DSF FUND CURRENT DIRECTORSHIPS 2001 2001(2) CLASS
---------------- -------- ------------------- ------------------------------ ------------- ------------- --------
James J. Foley(1) 77 Director since 1986 Faculty Member, Harvard 1,538 0.01% I
60 Pond Street Graduate School of Business
Belmont, MA 02178 (1952-1990). Consultant to the
School's MBA Admissions Board
(since January 1991);
Consultant to Courier Corp.
(publishing) (since 1995).
Jeffrey S. Rudsten 52 Director since 2000 From 1978 to 1999 Principal 0 0% I
P.O. Box 963 (1981), Senior Managing
Ross, CA 94957 Director (1997-99), and Head
of Fixed Income Department
(1997-99), Dresdner RCM;
Director, RCM Strategic Global
Government Fund, Inc.
(1994-1996).
</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 September 30, 2001.
30
<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.
<Table>
<Caption>
SHARES PERCENT OF
BENEFICIALLY SHARES
PRINCIPAL OCCUPATIONS DURING OWNED AT OWNED AT
POSITION(S) WITH PAST FIVE YEARS AND OTHER SEPTEMBER 30, SEPTEMBER 30,
NAME AND ADDRESS AGE DSF FUND CURRENT DIRECTORSHIPS 2001 2001(2) CLASS
---------------- -------- ------------------- ------------------------------ ------------- ------------- --------
Theodore J. Coburn(1) 48 Director and Partner, Brown, Coburn & Co. 0 0% II
116 East 68th Street Chairman of the (since 1991); Director,
New York, NY 10021 Board since 2000 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).
Luke D. Knecht* 47 Director and Member of Board of Managers 4,500 0.03% II
President since and Managing Director,
1999 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 & Cromwell 11,000 0.09% II
42 Old Wood Road (1964-1996); Of Counsel,
Bernardsville, NJ 07924 Sullivan & Cromwell (since
1997); Director, AMVESCAP plc
(since 1997), Pioneer Funds
(since 1995), and Swiss
Helvetia Fund, Inc. (since
1996).
</Table>
31
<Page>
<Table>
<Caption>
SHARES PERCENT OF
BENEFICIALLY SHARES
PRINCIPAL OCCUPATIONS DURING OWNED AT OWNED AT
POSITION(S) WITH PAST FIVE YEARS AND OTHER SEPTEMBER 30, SEPTEMBER 30,
NAME AND ADDRESS AGE DSF FUND CURRENT DIRECTORSHIPS 2001 2001(2) CLASS
---------------- -------- ------------------- ------------------------------ ------------- ------------- --------
Phillip Goldstein(1) 55 Director since 2000 Since 1992, has managed 701,353 5.87% III
60 Heritage Drive investments for a limited
Pleasantville, NY 10570 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 investments for a limited
Encino, CA 91436 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, UVitec
Lodi, NJ 07644 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 September 30, 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.
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
</Table>
32
<Page>
<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
----------------- ----------------- ------------------- ---------------- ------------------
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.
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.
33
<Page>
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 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 reinsurance company and holding company for the Munich
Re Group, maintains a shareholder interest, an investment it has 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 as of the Closing Date.
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 provided 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.
Dresdner RCM's advisory affiliates now include, among others, Pacific Investment
Management Company LLC ("PIMCO"), Nicholas-Applegate Capital Management and
Oppenheimer
34
<Page>
Capital. Subsequent to the Closing Date, Dresdner RCM and its affiliates have
continued 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 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. To date, there has been no
change in the team of investment professionals at Dresdner RCM responsible for
the management of RCS Fund (the "RCS Fund Team"). Dresdner RCM has notified RCS
Fund that, in light of its recent affiliation with PIMCO, it is considering the
creation of a joint venture among Dresdner RCM, PIMCO and Blaylock & Partners
("Blaylock"), a privately owned investment banking firm, to provide management
services to Dresdner RCM's existing fixed income clients. Dresdner RCM has
indicated that, although no definitive agreement has been reached, Dresdner RCM,
PIMCO and Blaylock have agreed to a nonbinding term sheet for the joint venture.
Employment agreements with the RCS Fund Team have not yet been negotiated. It is
expected that if such a joint venture were finalized, it would not come into
effect prior to December 31, 2001. Such an arrangement likely would, itself,
constitute the "assignment" of any investment management agreement with Dresdner
RCM pursuant to the 1940 Act, terminating such agreement and requiring any
subsequent investment management agreement to be approved by the Board of
Directors and, within 150 days, stockholders of RCS Fund.
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 earlier
of (i) 150 days following the Closing Date, unless terminated sooner in
accordance with Rule 15a-4, or (ii) the date that stockholders of RCS Fund
approve the New 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 at least 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
35
<Page>
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 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.
At a regularly scheduled meeting of the Board of Directors on October 9,
2001, the Board evaluated the operations of Dresdner RCM subsequent to the
Transaction and considered the status of negotiations regarding the possible
restructuring of the RCS Fund Team. The Board concluded that it would be
imprudent to postpone the process of seeking stockholder approval of the New
Investment Management Agreement because RCS Fund would otherwise have no
investment adviser beginning on December 20, 2001, the date which is 150 days
after the Closing Date. The Board did not reach any decision with respect to its
course of action should the reorganization of the RCS Fund Team occur at a later
date.
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 furnished
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 included: (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 paid
Dresdner RCM a fee 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 would
otherwise have expired on December 31, 2001, would have continued in effect
thereafter from year to year if its continuance were approved at least annually
(i) by the Board of RCS Fund or by the vote of a majority of outstanding voting
36
<Page>
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 could have
been 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 could also have been terminated by Dresdner RCM
on 60 days' advance written notice to the Fund, and would have terminated
automatically in the event of its "assignment" (as defined in the 1940 Act).
The Prior Investment Management Agreement with Dresdner RCM was dated
June 14, 1996 and was last approved by the stockholders of RCS Fund on
November 12, 1998. In connection with the Board 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 nonexclusive 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.
37
<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 reelection as Class I Directors. Mr. Lundy was reelected 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 reelected 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 reelected 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 reelected 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>
SHARES OF
COMMON STOCK
OF RCS FUND
BENEFICIALLY
POSITION, IF ANY, WITH RCS FUND AND DRESDNER RCM. OWNED AS OF
NAME (AGE) PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE DIRECTOR SINCE SEPTEMBER 30, 2001
---------- ------------------------------------------------- -------------- ------------------
Francis E. Lundy Director, RCS Fund. Chairman and President, 1994 34,103*
(63)+ - Technical Instrument -- San Francisco (since
1976); Director, Industrialex Manufacturing Corp.
(since June, 2000) (coating and application
techniques for electronics industry); Vice
President, Zygo Corporation (1996-1999)
(technology manufacturing and sales).
Gregory S. Young Director, RCS Fund. Principal, Teton Capital 2001 0
(44)+ - Management (since 1990) (private equity venture
capital).
</Table>
38
<Page>
OTHER MEMBERS OF THE BOARD OF DIRECTORS
<Table>
<Caption>
SHARES OF
COMMON STOCK
OF RCS FUND
BENEFICIALLY
POSITION, IF ANY, WITH RCS FUND AND DRESDNER RCM. OWNED AS OF
NAME (AGE) PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE DIRECTOR SINCE SEPTEMBER 30, 2001
---------- ------------------------------------------------- -------------- ------------------
Luke D. Knecht Chairman and President, RCS Fund. Member of the 1999** 3,000*
(47) 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 (1995-1997) (global
executive recruiting firm).
James M. Whitaker Director and Vice Chairman of the Board, RCS 1994 0
(58)+ - 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 September 30, 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>
TOTAL COMPENSATION
AGGREGATE PENSION OR RETIREMENT ESTIMATED ANNUAL FROM FUND AND FUND
COMPENSATION BENEFITS ACCRUED AS BENEFITS UPON COMPLEX* PAID TO
NAME OF PERSON AND POSITION FROM FUND PART OF FUND EXPENSES RETIREMENT 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
</Table>
39
<Page>
<Table>
<Caption>
TOTAL COMPENSATION
AGGREGATE PENSION OR RETIREMENT ESTIMATED ANNUAL FROM FUND AND FUND
COMPENSATION BENEFITS ACCRUED AS BENEFITS UPON COMPLEX* PAID TO
NAME OF PERSON AND POSITION FROM FUND PART OF FUND EXPENSES RETIREMENT DIRECTORS
--------------------------- ------------ --------------------- ---------------- ------------------
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 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
40
<Page>
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 reelection of the nominees to the Board of Directors
requires the affirmative vote of a plurality of the votes cast in the election
of Directors at 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 nondiversified, 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.
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 or, in the case of
RCS Fund, since its inception (excluding the unaudited information for DSF Fund
for the six months ended April 30, 2001 and the unaudited information for RCS
Fund for the six months ended July 31, 2001), 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.
41
<Page>
DSF FUND FINANCIAL HIGHLIGHTS
<Table>
<Caption>
SIX MONTHS
ENDED FISCAL YEARS ENDED OCTOBER 31,
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 investments and foreign
currencies 0.07 (0.45) (0.49) (0.97) (0.82) 0.79
------- ------- ------- -------- -------- --------
Total increase (decrease) from
operations 0.39 0.16 (0.05) (0.44) (0.10) 1.64
======= ======= ======= ======== ======== ========
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.01) -- (0.43) (0.54) (0.78) (0.89)
From net realized gains on
investment and foreign currency
transactions -- (0.15) (0.21) (0.16) (0.03) --
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 transactions -- -- -- -- -- (0.39)
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 (in 000's) 11,955 11,955 11,955 11,955 11,955 11,955
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>
--------------------------
(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.
42
<Page>
DSF FUND FINANCIAL HIGHLIGHTS (CONTINUED)
<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 investments
and foreign currencies 0.82 (0.48) 0.47 (1.03) 1.44
------- ------- ------- ------- -------
Total increase (decrease) from operations 1.66 0.34 1.24 (0.11) 2.49
======= ======= ======= ======= =======
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.89) (0.78) (0.74) (1.02) (1.01)
From net realized gains on investment and foreign
currency transactions -- (0.02) -- (0.56) --
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 transactions (0.65) -- (0.01) (0.08) --
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 period $ 10.08 $ 9.99 $ 10.45 $ 9.97 $ 11.77
Per share market value at end of period $ 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 period (in
000's) 9,564 7,173 7,173 6,979 6,345
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.
43
<Page>
RCS FUND FINANCIAL HIGHLIGHTS
<Table>
<Caption>
SIX MONTHS
ENDED FISCAL YEARS ENDED JANUARY 31,
JULY 31, 2001 --------------------------------------------------
(UNAUDITED) 2001 2000 1999 1998
------------- -------- -------- -------- --------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 11.14 $ 10.56 $ 11.46 $ 11.91 $ 11.87
-------- -------- -------- -------- --------
Net investment income(1) 0.48 0.95 0.95 0.92 0.98
Net realized and unrealized gain (loss) (0.07) 0.64 (0.83) (0.43) 0.05
-------- -------- -------- -------- --------
Net increase in net assets resulting from
operations 0.41 1.59 0.12 0.49 1.03
======== ======== ======== ======== ========
LESS DISTRIBUTIONS:
Dividends from net investment income (0.44) (1.01) (1.02) (0.94) (0.99)
Offering Costs -- -- -- -- --
Net asset value, end of period $ 11.11 $ 11.14 $ 10.56 $ 11.46 $ 11.91
Per share market value, end of period $ 10.87 $ 10.35 $ 9.13 $ 9.88 $ 11.16
-------- -------- -------- -------- --------
TOTAL RETURN BASED ON NET ASSET VALUE(2) 3.97%+ 17.37% 2.70% 5.32% 9.66%
======== ======== ======== ======== ========
TOTAL RETURN BASED ON MARKET PRICE(3) 9.49%+ 26.13% 2.99% (3.11)% 14.76%
======== ======== ======== ======== ========
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $338,977 $339,872 $322,211 $349,597 $363,428
Ratio of total expenses to average net assets 1.23%++** 1.19% 1.73% 1.31% 1.25%
Ratio of interest expense to average net assets -- -- 0.57% 0.10% --
Ratio of net investment income to average net
assets 8.85%++ 8.95% 8.50% 7.93% 8.29%
Portfolio turnover(4) 56%+ 81% 74% 133% 29%
</Table>
<Table>
<Caption>
FISCAL YEARS ENDED
JANUARY 31, FEBRUARY 24, 1994*
---------------------- THROUGH
1997 1996 JANUARY 31, 1995
-------- -------- ------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 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 operations 1.15 1.68 (0.88)
======== ======== ========
LESS DISTRIBUTIONS:
Dividends from net investment income (0.92) (0.89) (0.75)
Offering Costs -- -- (0.02)
Net asset value, end of period $ 11.87 $ 11.64 $ 10.85
Per share market value, end of period $ 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 period (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 assets -- -- 0.02%++
Ratio of net investment income to average net assets 8.21% 8.50% 7.79%++,+++
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.
** Excluding Merger-related expenses, the ratio of total expenses to average
net assets is 1.19%.
+ 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%.
44
<Page>
SENIOR SECURITIES
<Table>
<Caption>
DSF FUND: ASSET COVERAGE AVERAGE MARKET VALUE
TOTAL AMOUNT OF SENIOR PER $1,000 OF PER $1,000 OF
YEAR SECURITIES OUTSTANDING(1) 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.
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
45
<Page>
(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.
The following sets forth the net assets and annual management fee of each of
the Funds.
<Table>
<Caption>
NET ASSETS AS OF ANNUAL MANAGEMENT FEE
SEPTEMBER 25, 2001 (AS A % OF NET ASSETS)
------------------ -------------------------------------
Dresdner RCM Global Strategic Income $ 82,774,109 0.70% on the first $100 million
Fund, Inc. 0.65% in excess of $100 million
RCM Strategic Global Government $344,996,148 0.95%
Fund, Inc.
</Table>
Certain information regarding the Board of Managers and principal executive
officers of Dresdner RCM is set forth below:
<Table>
<Caption>
NAME AND ADDRESS POSITION WITH DRESDNER RCM PRINCIPAL OCCUPATION
---------------- ----------------------------- -----------------------------
Gerhard Eberstadt Member of Board of Managers Member of Board of Managers,
Jurgen-Ponto-Platz 1 Dresdner Bank AG
D-60301 Frankfurt-am-Main
Germany
George N. Fugelsang Member of Board of Managers President/Chief Executive
75 Wall Street Officer/Chairman, Dresdner
New York, NY Kleinwort Wasserstein
Securities LLC
Susan C. Gause* Member of Board of Managers; Same
Chief Executive Officer; and
Senior Managing Director
Luke D. Knecht* Member of Board of Managers Same
and Managing Director
Joachim Madler Member of Board of Managers Deputy Chief Executive
Jurgen-Ponto-Platz 1 and Managing Director Officer, Allianz Dresdner
D-60301 Frankfurt-am-Main Asset Management
Germany
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.
46
<Page>
The following directors and officers of DSF Fund are directors, officers or
employees of Dresdner RCM: Luke D. Knecht, Robert J. Goldstein, Jennie W. Klein,
Karin L. 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 pages 29-31,
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
pages 37-38, 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 Senior Vice President, Business Development
(46) (since 1998) at BISYS Fund Services, an affiliate of Funds
Distributors, Inc. ("FDI") (since April
2001); Executive Vice President and Client
Service Director of FDI (April 1998 to April
2001); Senior Vice President and Senior Key
Account Manager for Putnam Mutual Funds
(June 1995 to March 1998).
Robert J. Goldstein** Secretary (since 2000) Director and General Counsel, Dresdner RCM
(38) (since July 2001); Associate General Counsel,
Dresdner RCM (January 1997 to June 2001);
associate with the law firm of Weil,
Gotshal & Manges (September 1990 to
December 1996).
Steven L. Wong** Treasurer (since 2000) Assistant Director and Manager of Fund
(34) Administration, Dresdner RCM (since
December 1994).
Karen Jacoppo-Wood* Vice President and Assistant Counsel and an officer of certain investment
(34) Secretary (since 1998) companies distributed or administered by
BISYS Fund Services, an affiliate of FDI
(since April 2001); Vice President and Senior
Counsel of FDI and an officer of certain
investment companies distributed by FDI
(February 1996 to April 2001); Manager of SEC
Registration, Scudder, Stevens &
Clark, Inc. (June 1994 to January 1996).
</Table>
47
<Page>
<Table>
<Caption>
NAME AND AGE POSITION WITH FUND PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE
------------ ---------------------------------- ---------------------------------------------
Mary A. Nelson* Vice President and Assistant Senior Vice President and an officer of
(37) Treasurer (since 1998) certain investment companies distributed or
administered by BISYS Fund Services, an
affiliate of FDI (since April 2001); Senior
Vice President and Manager of Financial
Services of FDI (May 2000 to April 2001);
Vice President and Manager of 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 (since 2000) Manager of Fund Administration, Dresdner RCM
(39) (since 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.
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.
48
<Page>
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
semiannual 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 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
September 30, 2001 (except where otherwise noted):
DSF FUND
<Table>
<Caption>
TITLE OF CLASS AMOUNT AUTHORIZED AMOUNT HELD BY FUND AMOUNT OUTSTANDING
-------------- ----------------- ------------------- ------------------
Common Stock 100,000,000 0 11,954,566
</Table>
RCS FUND
<Table>
<Caption>
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.
49
<Page>
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 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
50
<Page>
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 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.
For information concerning the tax treatment of distributions to
stockholders, see the discussion under "Taxation" at page 52 and in the SAI.
Both Funds intend, however, to make such distributions as are necessary to
maintain qualification as a regulated investment company.
51
<Page>
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 $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
52
<Page>
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.
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.
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.
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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
AUDIT FEES IMPLEMENTATION 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 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 November 20, 2001, at 2:00 p.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 September 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 October 1, 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.
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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).
- 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).
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SHARE OWNERSHIP. As of September 30, 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 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 October 1, 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, other than DTC, only the following person
is expected to own of record or beneficially 5% or more of the outstanding
shares of the Combined Fund: Wachovia Corp.
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 16, "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 June 24, 2002
for each of DSF Fund and 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 July 23, 2002 and August 22, 2002 for DSF
Fund and between August 23, 2002 and September 7, 2002 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 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 16. 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.
(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.
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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
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
A-2
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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 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.
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(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.
(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
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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 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,
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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
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 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
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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, 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
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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 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.
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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.
(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
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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.
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
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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 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
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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
(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.
<Table>
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
</Table>
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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 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.
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(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.
(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
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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 the
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 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.
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(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.
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").
WITNESSETH
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:
(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;
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(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 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.
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(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 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
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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 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.
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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 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).
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
D-1
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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
(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;
D-2
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- 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:
- 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
D-3
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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;
(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-4
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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.
SUBMITTED BY THE AUDIT COMMITTEE OF DSF
FUND'S BOARD OF DIRECTORS
JAMES J. FOLEY
THEODORE J. COBURN
PHILLIP GOLDSTEIN
JULY 20, 2001.
E-1
<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;
(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-1
<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, DC 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, CA 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, MA 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 Jennie W. Klein, 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 October 1, 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 November 20, 2001 at 2:00 p.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
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:
(01) JAMES J. FOLEY
(02) JEFFREY S. RUDSTEN
FOR ALL WITHHELD FOR
NOMINEES |_| |_| ALL NOMINEES
|_|_______________________________________________
FOR ALL NOMINEES EXCEPT AS NOTED ABOVE.
Mark the box at right if an address change or comment has been noted on the
reverse side of this card. |_|
Please be sure to sign and date this proxy card:
Signature: ___________ Date: _________ Signature: __________ 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
October 1, 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 November 20, 2001 at 2:00 p.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. |_|
CONTROL NUMBER:
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:
(01) FRANCIS E. LUNDY
(02) GREGORY S. YOUNG
FOR ALL WITHHOLD FOR ALL
NOMINEES EXCEPT
|_| |_| |_|
NOTE: If you do not wish your shares voted "For" a particular nominee, mark the
"For All Except" box and strike a line through the name of the nominee. Your
shares will be voted for the remaining nominee.
RECORD DATE SHARES:
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
October 22, 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 October 22, 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
<Table>
General Information and History .................................................. 3
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) ................................................. 3
Management ....................................................................... 38
Management Compensation Table .................................................... 42
Control Persons .................................................................. 44
The Investment Manager ........................................................... 44
Other Service Providers (see also "Further Information About the Funds -
Administrators and Custodians" in the Prospectus) ................................ 47
Brokerage Allocation and Other Practices ......................................... 48
Repurchase of Shares and Conversion to Open-End Fund ............................. 49
Taxation (see also "Information About the Merger - Federal Income Tax
Consequences" in the Prospectus) ................................................. 51
Financial Statements ............................................................. 54
Appendix A: Securities Ratings ................................................... A-1
</Table>
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
32
<Page>
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 Senior Vice President, Business Development
at BISYS Fund Services, an affiliate of
Funds Distributors, Inc. ("FDI") (since
April 2001); Executive Vice President and
Client Service Director of FDI (April 1998
to April 2001); 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 Assistant Director and Manager of Fund
Administration, Dresdner RCM
(since December 1994).
----------------------------------------------------------------------------------------------------------------------
41
<Page>
----------------------------------------------------------------------------------------------------------------------
Ropes & Gray (January 1986 - July
1996).
----------------------------------------------------------------------------------------------------------------------
Karen Jacoppo-Wood (34)+ Vice President and Assistant Counsel and an officer of certain
Secretary since 1998 investment companies distributed or
administered by BISYS Fund Services, an
affiliate of FDI (since April 2001);
Vice President and Senior Counsel of
FDI and an officer of certain investment
companies distributed by FDI (February
1996 to April 2001); Manager of SEC
Registration, Scudder, Stevens &
Clark, Inc. (June 1994 - January 1996).
----------------------------------------------------------------------------------------------------------------------
Mary A. Nelson (37)+ Vice President and Assistant Senior Vice President and an officer of
Treasurer since 1998 certain investment companies distributed
or administered by BISYS Fund Services,
an affiliate of FDI (since April 2001);
Senior Vice President and Manager of
Financial Services of FDI (May 2000 to
April 2001); 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
As of September 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.
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, respectively, are
included in each Fund's annual report 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. In addition, unaudited financial statements for each Fund
(dated as of April 30, 2001 for DSF Fund and July 31, 2001 for RCS Fund) are
included in each Fund's semi-annual report filed with the SEC and are
incorporated by reference to this SAI.
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
July 31, 2001, and the unaudited pro forma combining statement of operations
for the twelve months ended July 31, 2001 presents the results of operations
of RCS Fund as if the combination with DSF Fund had been consummated at
August 1, 2000. 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 August 1, 2000. 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 July 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 and
for the semi-annual periods ended April 30, 2001 and July 31, 2001,
respectively, which are included in each Fund's Semi-Annual Report to
stockholders filed with the SEC. Copies of the Funds' Annual and Semi-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 CONDENSED STATEMENT OF ASSETS AND LIABILITIES AS OF
JULY 31, 2001 (UNAUDITED) (1)
<Table>
<Caption>
PRO FORMA PRO FORMA
RCS FUND DSF FUND ADJUSTMENTS COMBINED
------------- ------------- ------------- -------------
Investments, at value $ 669,390,629 $ 59,820,448 $ 729,211,077
Cash 9,232,570 3,956,127 13,188,697
Payable for Investments Purchased * (347,853,589) (23,324,930) (371,178,519)
Other assets less liabilities 8,339,789 1,270,398 9,610,187
------------- ------------- ------------- -------------
Total Net Assets $ 339,109,399 $ 41,722,043 $ 380,831,442
------------- ------------- ------------- -------------
Shares Outstanding 30,515,800 5,977,283 (2,222,797) 34,270,286
============= ============= ============= =============
Net Assets Per Share $ 11.11 $ 6.98 $ 11.11
</Table>
* Includes investments purchased on a delayed delivery basis.
56
<Page>
PRO FORMA COMBINING CONDENSED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTH PERIOD ENDED JULY 31, 2001 (UNAUDITED) (1)
<Table>
<Caption>
PRO FORMA PRO FORMA
RCS FUND DSF FUND * ADJUSTMENTS COMBINED
Investment Income:
Interest income $ 34,177,640 $ 4,522,057 $ 38,699,697
-----------------------------------------------------------------------
Total Investment Income 34,177,640 4,522,057 38,699,697
-----------------------------------------------------------------------
Expenses
Management fees 3,142,413 309,115 87,245 (2) 3,538,773
Director fees 46,447 82,409 (856) (3) 128,000
All other expenses 774,572 317,185 (298,647) (4) 793,110
-----------------------------------------------------------------------
Total expenses 3,963,432 708,709 (212,258) 4,459,883
Less: Expenses waived by Investment Manager - - (83,445) (5) (83,445)
-----------------------------------------------------------------------
Total net expenses 3,963,432 708,709 (295,703) 4,376,438
-----------------------------------------------------------------------
Net investment income 30,214,208 3,813,348 295,703 34,323,259
-----------------------------------------------------------------------
Net Realized and Unrealized Gain (Loss)
on Investments:
</Table>
57
<Page>
<Table>
<Caption>
Net realized gain (loss) from investments (1,681,256) (3,116,974) (4,798,230)
Net unrealized appreciation (depreciation) 17,200,457 1,561,740 18,762,197
of investments
--------------- -------------- ---------------- ----------------
Net increase/(decrease) in net assets from operations $ 45,733,409 $ 2,258,114 $ 295,703 $ 48,287,226
=============== ============== ================ ================
</Table>
* Assuming the repurchase by DSF Fund of 50% of its outstanding shares at
99 1/2% of net asset value in the Tender Offer.
(1) These financial statements set forth the unaudited pro forma condensed
Statement of Assets and Liabilities as of July 31, 2001, and the unaudited pro
forma condensed Statement of Operations for the twelve month period ended
July 31, 2001 for RCS Fund and DSF Fund as adjusted giving 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 the daily net
asset value for each Fund.
(2) Increase in management fees based on proposed post-Merger management fee
structure.
(3) Decrease in RCS Fund Director expenses based on new Director fee structure
implemented in fiscal year ended January 31, 2002.
(4) Decrease in other expenses based on pro forma combined expense projection
after giving effect to the Merger.
(5) Waiver of expenses based on post-Merger contractual management fee
agreement between RCS Fund and Dresdner RCM.
58
<Page>
PRO FORMA COMBINING PORTFOLIO OF INVESTMENTS AS OF JULY 31, 2001 (UNAUDITED)
<Table>
<Caption>
DSF FUND
PAR AMOUNT
DSF FUND RCS FUND TO BE
PAR AMOUNT PAR AMOUNT LIQUIDATED
ISSUER RATE MATURITY (000'S) (000'S) (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) 10.8%
Federal Republic of Brazil 12.25% 03/06/30 4,785 7,660 2,479
Russia Federation, 144A 10.00% 06/26/07 4,430 -- 4,430
Republic of Venezuela DCB, Series DL 4.75% 12/18/07 3,714 4,333 1,924
Republic of Ecuador, 144A 4.00% 08/15/30 3,513 6,212 1,820
Bulgaria FLIRB, Series A 4.56% 07/28/12 2,427 3,839 1,257
Russia Federation 11.00% 07/24/18 2,210 1,870 1,145
Mexican United States 11.50% 05/15/26 2,065 -- 2,065
Federal Republic of Brazil, C Bond 8.00% 04/15/14 2,056 5,062 1,065
Hanvit Bank, 144A 12.75% 03/01/10 1,472 2,929 762
Mexican United States 10.38% 02/17/09 1,230 -- 1,230
Innova S DE R.L 12.88% 04/01/07 1,188 1,364 615
Reliance Industries, 144A 10.50% 08/06/46 1,170 2,180 606
GH Water Supply Holdings Ltd., 144A 7.00% 06/22/08 1,152 1,538 597
Government of Jamaica, 144A 11.75% 05/15/11 1,065 2,230 552
Road King Infrastructure 9.50% 07/15/07 1,000 1,700 518
Republic of Peru 4.50% 03/07/17 813 1,447 421
National Power Corp. 9.63% 05/15/28 810 1,395 420
CIA Petrolifera Marlim, 144A 12.25% 09/26/08 780 1,830 404
Republic of Argentina 11.75% 04/07/09 716 2,254 371
KIA Motors Corp., 144A 9.38% 07/11/06 655 1,165 339
Russia Federation, 144A 12.75% 06/24/28 650 9,967 337
Vicap SA 11.38% 05/15/07 600 1,218 311
Grupo Elektra, 144A 12.00% 04/01/08 530 1,115 275
Petroleos Mexicanos 9.25% 03/30/18 480 -- --
Partner Communications 13.00% 08/15/10 463 1,010 240
Mexican United States 9.88% 02/01/10 455 1,015 236
Philippine Long Distance Telephone 7.85% 03/06/07 447 815 232
Korea Exchange Bank, 144A 13.75% 06/30/10 256 -- 256
Satelites Mexicanos SA, Series B 10.13% 11/01/04 250 -- 250
National Republic of Bulgaria 4.56% 07/28/11 -- 445 --
Petrobas International Finance 9.88% 05/09/08 -- 2,230 --
Malaysia 7.50% 07/15/11 -- 2,000 --
Globe Telecom 13.00% 08/01/09 -- 1,254 --
United Mexican States* 7.38% 07/06/06 -- 6,440 --
United Mexican States* 8.63% 03/12/08 -- 1,845 --
------- ------- ------
TOTAL EMERGING MARKETS BONDS (USD) 41,382 78,362 25,157
------- ------- ------
HIGH YIELD BONDS (USD) 0.0%
Nextel Communications Corp. 9.38% 11/15/09 975 -- 975
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
Adelphia Communications 9.38% 11/15/09 600 -- 600
Echostar DBS Corp. 9.38% 02/01/09 600 -- 600
AES Corp. 9.50% 06/01/09 500 -- 500
Avis Group Holdings Inc. 11.00% 05/01/09 500 -- 500
Azurix Corp., 144A 10.38% 02/15/07 500 -- 500
CMS Energy Corp. 7.50% 01/15/09 500 -- 500
Crown Castle Intl Corp., 144A 9.38% 08/01/11 500 -- 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
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
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
<Caption>
PRO FORMA DSF FUND PRO FORMA
COMBINED DSF FUND RCS FUND SECURITIES COMBINED
PAR AMOUNT MARKET VALUE MARKET VALUE TO BE MARKET VALUE
ISSUER (000'S) AMOUNT ($)+ AMOUNT ($)+ LIQUIDATED ($)++ AMOUNT ($)
CORPORATE BONDS (USD) 0.0%
Malaysia 0 $ 1,633,800 -- $ 1,633,800 $ 0
Waste Management Inc 0 1,004,582 -- 1,004,582 0
------- ------------ ------------ ---------- ------------
TOTAL CORPORATE BONDS (USD) 0 2,638,382 -- 2,638,382 0
------- ------------ ------------ ---------- ------------
EMERGING MARKETS BONDS (USD) 10.8%
Federal Republic of Brazil 9,966 3,732,300 6,013,100 1,933,331 7,812,069
Russia Federation, 144A 0 3,826,413 -- 3,826,413 0
Republic of Venezuela DCB, Series DL 6,123 3,039,127 3,526,430 1,574,268 4,991,289
Republic of Ecuador, 144A 7,905 1,405,200 2,469,270 727,894 3,146,576
Bulgaria FLIRB, Series A 5,009 1,923,398 3,047,398 996,320 3,974,476
Russia Federation 2,935 1,846,455 1,561,450 956,464 2,451,441
Mexican United States 0 2,554,405 -- 2,554,405 0
Federal Republic of Brazil, C Bond 6,053 1,462,653 3,588,177 757,654 4,293,176
Hanvit Bank, 144A 3,639 1,600,145 3,177,965 828,875 3,949,235
Mexican United States 0 1,371,450 -- 1,371,450 0
Innova S DE R.L 1,937 1,057,320 1,213,960 547,692 1,723,588
Reliance Industries, 144A 2,744 1,072,671 1,983,800 555,644 2,500,827
GH Water Supply Holdings Ltd., 144A 2,093 996,480 1,330,370 516,177 1,810,673
Government of Jamaica, 144A 2,743 1,115,588 2,335,925 577,875 2,873,638
Road King Infrastructure 2,182 970,000 1,649,000 502,460 2,116,540
Republic of Peru 1,839 554,873 987,578 287,424 1,255,027
National Power Corp. 1,785 607,500 1,046,250 314,685 1,339,065
CIA Petrolifera Marlim, 144A 2,206 783,900 1,862,025 406,060 2,239,865
Republic of Argentina 2,599 408,120 1,293,345 211,406 1,490,059
KIA Motors Corp., 144A 1,481 659,048 1,188,300 341,387 1,505,961
Russia Federation, 144A 10,280 626,438 9,568,320 324,495 9,870,263
Vicap SA 1,507 493,500 992,670 255,633 1,230,537
Grupo Elektra, 144A 1,370 514,100 1,087,125 266,304 1,334,921
Petroleos Mexicanos 480 495,600 -- 256,721 238,879
Partner Communications 1,233 425,960 939,300 220,647 1,144,613
Mexican United States 1,234 495,950 1,106,350 256,902 1,345,398
Philippine Long Distance Telephone 1,030 377,715 693,891 195,656 875,950
Korea Exchange Bank, 144A 0 278,400 -- 278,400 0
Satelites Mexicanos SA, Series B 0 163,750 -- 163,750 0
National Republic of Bulgaria 445 -- 344,341 -- 344,341
Petrobas International Finance 2,230 -- 2,235,575 -- 2,235,575
Malaysia 2,000 -- 2,008,580 -- 2,008,580
Globe Telecom 1,254 -- 1,354,320 -- 1,354,320
United Mexican States* 6,440 -- 5,775,522 -- 5,775,522
United Mexican States* 1,845 -- 1,900,350 -- 1,900,350
------- ------------ ------------ ---------- ------------
TOTAL EMERGING MARKETS BONDS (USD) 94,587 34,858,459 66,280,687 22,006,391 79,132,755
------- ------------ ------------ ---------- ------------
HIGH YIELD BONDS (USD) 0.0%
Nextel Communications Corp. 0 803,156 -- 803,156 0
Calpine Corp. 0 739,267 -- 739,267 0
Cogentrix Energy Inc. 0 794,300 -- 794,300 0
HMH Properties, Series B 0 720,000 -- 720,000 0
Pioneer Natural Resource 0 836,045 -- 836,045 0
Adelphia Communications 0 571,500 -- 571,500 0
Echostar DBS Corp. 0 612,750 -- 612,750 0
AES Corp. 0 510,000 -- 510,000 0
Avis Group Holdings Inc. 0 556,250 -- 556,250 0
Azurix Corp., 144A 0 500,000 -- 500,000 0
CMS Energy Corp. 0 481,270 -- 481,270 0
Crown Castle Intl Corp., 144A 0 446,250 -- 446,250 0
Fisher Scientific International 0 482,758 -- 482,758 0
Fox/Liberty Networks LLC 0 470,000 -- 470,000 0
International Game Technology 0 510,000 -- 510,000 0
MGM Grand Inc. 0 540,000 -- 540,000 0
Nuevo Energy Co. 0 488,750 -- 488,750 0
Stater Brothers Holdings 0 491,250 -- 491,250 0
IMAX Corp. 0 213,750 -- 213,750 0
Charter Communications Holdings LLC 0 428,625 -- 428,625 0
Michaels Stores Inc. 0 474,471 -- 474,471 0
Allied Waste, Series B 0 421,813 -- 421,813 0
</Table>
59
<Page>
PRO FORMA COMBINING PORTFOLIO OF INVESTMENTS AS OF JULY 31, 2001 (UNAUDITED)
<Table>
<Caption>
DSF FUND
PAR AMOUNT
DSF FUND RCS FUND TO BE
PAR AMOUNT PAR AMOUNT LIQUIDATED
ISSUER RATE MATURITY (000'S) (000'S) (000'S)++
American Standard Inc. 7.38% 02/01/08 400 -- 400
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
Scotts Co., 144A 8.63% 01/15/09 400 -- 400
Station Casinos 8.88% 12/01/08 400 -- 400
Amkor Tech 9.25% 05/01/06 350 -- 350
BRL Universal Equipment, 144A 8.88% 02/15/08 350 -- 350
Chesapeake Energy Corp. 8.13% 04/01/11 350 -- 350
Foodmaker Inc. 8.38% 04/15/08 350 -- 350
Global Crossing Holding Ltd. 9.63% 05/15/08 350 -- 350
Healthsouth Corp., 144A 10.75% 10/01/08 350 -- 350
AK Steel Corp. 7.88% 02/15/09 300 -- 300
McLeodUSA Inc. 10.50% 03/01/07 300 -- 300
Owens Illinois Inc. 7.35% 05/15/08 300 -- 300
RCN Corp. 10.13% 01/15/10 286 -- 286
Building Materials Corp., Series B 8.00% 10/15/07 250 -- 250
CSC Holdings Inc. 7.63% 04/01/11 250 -- 250
Global Crossing Holding Ltd. 9.13% 11/15/06 250 -- 250
Levi Strauss & Co. 7.00% 11/01/06 250 -- 250
Lin Television Corp., 144A 8.00% 01/15/08 250 -- 250
Mediacom LLC / Capital, Series B 8.50% 04/15/08 250 -- 250
Michaels Stores Inc., 144A 9.25% 07/01/09 250 -- 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
Williams Communication Group Inc. 10.70% 10/01/07 250 -- 250
Flag Limited 8.25% 01/30/08 200 -- 200
Forest Oil Corp., 144A 8.00% 06/15/08 200 -- 200
Levi Strauss & Co. 11.63% 01/15/08 200 -- 200
Nortek Inc., Series B 9.13% 09/01/07 200 -- 200
Trico Marine Services, Series G 8.50% 08/01/05 200 -- 200
United Rentals Inc., Series B 8.80% 08/15/08 200 -- 200
Advance PCS, 144A 8.50% 04/01/08 150 -- 150
Elizabeth Arden Inc., 144A 11.75% 02/01/11 150 -- 150
Flag Telecom Holding Ltd. 11.63% 03/30/10 150 -- 150
Level 3 Communications 6.00% 03/15/10 150 -- 150
Navistar International 8.00% 02/01/08 150 -- 150
Buckeye Technologies Inc. 8.00% 10/15/10 100 -- 100
Metromedia Fiber Network, Series B 10.00% 11/15/08 100 -- 100
Primedia Inc., Series B 8.50% 02/01/06 100 -- 100
XO Communication Inc., 144A 5.75% 01/15/09 100 -- 100
------- ------- ------
TOTAL HIGH YIELD BONDS (USD) 23,261 -- 23,261
------- ------- ------
MORTGAGE BACKED SECURITIES (USD) 88.0%
FNMA TBA 8.00% 04/06/28 35,500 -- --
FNMA TBA 7.50% 08/01/28 9,800 -- --
FNMA Pool # 520655 7.50% 11/01/29 3,349 -- 3,349
FHLMC Pool # C43071 7.50% 10/01/30 1,545 -- 1,545
FNMA Pool # 512726 7.50% 09/01/29 888 -- 888
FHLMC Pool # C44593 7.50% 11/01/30 817 -- 817
FHLMC Pool # C43439 7.50% 10/01/30 484 -- 484
FHLMC Pool # C44219 7.50% 11/01/30 437 -- 437
FNMA Pool # 517782 7.50% 11/01/29 427 -- 427
FHLMC Pool # C36453 7.50% 02/01/30 325 -- 325
FNMA Pool # 517089 7.50% 10/01/29 281 -- 281
FHLMC Pool # C38826 7.50% 06/01/30 269 -- 269
FHLMC Pool # C37630 7.50% 04/01/30 221 -- 221
FHLMC Pool # C01086 7.50% 11/01/30 198 -- 198
FHLMC Pool # C39753 7.50% 06/01/30 140 -- 140
FHLMC Pool # C37703 7.50% 04/01/30 86 -- 86
FHLMC Pool # C44033 7.50% 10/01/30 76 -- 76
FHLMC Pool # C36310 7.50% 02/01/30 55 -- 55
FHLMC Pool # C43519 7.50% 10/01/30 48 -- 48
FHLMC Pool # C37903 7.50% 04/01/30 18 -- 18
Federal National Mortgage Association 7.25% 05/15/30 3,000 -- 3,000
FHLMC, Series RB 0.00% 11/08/01 2,225 -- 2,225
FHA Project Pool 56 7.43% 11/01/22 -- 8,422 --
<Caption>
PRO FORMA DSF FUND PRO FORMA
COMBINED DSF FUND RCS FUND SECURITIES COMBINED
PAR AMOUNT MARKET VALUE MARKET VALUE TO BE MARKET VALUE
ISSUER (000'S) AMOUNT ($)+ AMOUNT ($)+ LIQUIDATED ($)++ AMOUNT ($)
American Standard Inc. 0 397,000 -- 397,000 0
Canandaigua Brands, Series C 0 401,000 -- 401,000 0
Circus Circus/Mandalay Resort Group 0 410,500 -- 410,500 0
Fox Family Worldwide Inc. 0 432,000 -- 432,000 0
Scotts Co., 144A 0 406,000 -- 406,000 0
Station Casinos 0 398,000 -- 398,000 0
Amkor Tech 0 318,500 -- 318,500 0
BRL Universal Equipment, 144A 0 353,500 -- 353,500 0
Chesapeake Energy Corp. 0 335,125 -- 335,125 0
Foodmaker Inc. 0 345,625 -- 345,625 0
Global Crossing Holding Ltd. 0 270,375 -- 270,375 0
Healthsouth Corp., 144A 0 384,937 -- 384,937 0
AK Steel Corp. 0 292,500 -- 292,500 0
McLeodUSA Inc. 0 144,000 -- 144,000 0
Owens Illinois Inc. 0 244,500 -- 244,500 0
RCN Corp. 0 114,400 -- 114,400 0
Building Materials Corp., Series B 0 142,500 -- 142,500 0
CSC Holdings Inc. 0 250,450 -- 250,450 0
Global Crossing Holding Ltd. 0 192,500 -- 192,500 0
Levi Strauss & Co. 0 198,125 -- 198,125 0
Lin Television Corp., 144A 0 241,250 -- 241,250 0
Mediacom LLC / Capital, Series B 0 243,125 -- 243,125 0
Michaels Stores Inc., 144A 0 251,250 -- 251,250 0
Sbarro Inc., 144A 0 255,938 -- 255,938 0
Sinclair Broadcast Group 0 244,375 -- 244,375 0
Voicestream Wireless Co., 144A 0 285,313 -- 285,313 0
Williams Communication Group Inc. 0 107,500 -- 107,500 0
Flag Limited 0 140,500 -- 140,500 0
Forest Oil Corp., 144A 0 196,000 -- 196,000 0
Levi Strauss & Co. 0 191,500 -- 191,500 0
Nortek Inc., Series B 0 197,000 -- 197,000 0
Trico Marine Services, Series G 0 192,250 -- 192,250 0
United Rentals Inc., Series B 0 191,000 -- 191,000 0
Advance PCS, 144A 0 154,500 -- 154,500 0
Elizabeth Arden Inc., 144A 0 159,750 -- 159,750 0
Flag Telecom Holding Ltd. 0 78,375 -- 78,375 0
Level 3 Communications 0 46,313 -- 46,313 0
Navistar International 0 142,875 -- 142,875 0
Buckeye Technologies Inc. 0 94,000 -- 94,000 0
Metromedia Fiber Network, Series B 0 27,500 -- 27,500 0
Primedia Inc., Series B 0 95,500 -- 95,500 0
XO Communication Inc., 144A 0 17,875 -- 17,875 0
------- ------------ ------------ ---------- ------------
TOTAL HIGH YIELD BONDS (USD) 0 21,677,431 -- 21,677,431 0
------- ------------ ------------ ---------- ------------
MORTGAGE BACKED SECURITIES (USD) 88.0%
FNMA TBA 35,500 36,886,630 -- -- 36,886,630
FNMA TBA 9,800 10,081,750 -- -- 10,081,750
FNMA Pool # 520655 0 3,450,795 -- 3,450,795 0
FHLMC Pool # C43071 0 1,592,726 -- 1,592,726 0
FNMA Pool # 512726 0 914,872 -- 914,872 0
FHLMC Pool # C44593 0 842,109 -- 842,109 0
FHLMC Pool # C43439 0 499,147 -- 499,147 0
FHLMC Pool # C44219 0 450,573 -- 450,573 0
FNMA Pool # 517782 0 439,459 -- 439,459 0
FHLMC Pool # C36453 0 334,828 -- 334,828 0
FNMA Pool # 517089 0 288,994 -- 288,994 0
FHLMC Pool # C38826 0 277,289 -- 277,289 0
FHLMC Pool # C37630 0 227,379 -- 227,379 0
FHLMC Pool # C01086 0 204,105 -- 204,105 0
FHLMC Pool # C39753 0 144,169 -- 144,169 0
FHLMC Pool # C37703 0 88,178 -- 88,178 0
FHLMC Pool # C44033 0 78,186 -- 78,186 0
FHLMC Pool # C36310 0 56,492 -- 56,492 0
FHLMC Pool # C43519 0 49,240 -- 49,240 0
FHLMC Pool # C37903 0 18,179 -- 18,179 0
Federal National Mortgage Association 0 3,371,724 -- 3,371,724 0
FHLMC, Series RB 0 2,203,402 -- 2,203,402 0
FHA Project Pool 56 8,422 -- 8,391,496 -- 8,391,496
</Table>
60
<Page>
PRO FORMA COMBINING PORTFOLIO OF INVESTMENTS AS OF JULY 31, 2001 (UNAUDITED)
<Table>
<Caption>
DSF FUND
PAR AMOUNT
DSF FUND RCS FUND TO BE
PAR AMOUNT PAR AMOUNT LIQUIDATED
ISSUER RATE MATURITY (000'S) (000'S) (000'S)++
FHA Project Pool 144S 7.43% 06/01/24 -- 5,596 --
FHLMC 7.50% 2025 - 2026 -- 37,811 --
FHLMC 8.00% 2024 -- 1,705 --
FNMA 6.50% 2024 - 2031 -- 54,918 --
FNMA 7.00% 2004 - 2030 -- 20,211 --
FNMA 7.50% 2026 - 2031 -- 25,087 --
GNMA 7.00% 2024 - 2029 -- 43,343 --
GNMA 7.50% 2006 - 2028 -- 28,029 --
GNMA 8.00% 2016 -2022 -- 1,909 --
GNMA 8.50% 2016 -2023 -- 183 --
FNMA TBA 7.00% 2029 -- 174,700 --
FNMA TBA 7.50% 2029 -- 24,300 --
FNMA TBA 7.50% 2030 -- 142,000 --
------- ------- ------
TOTAL MORTGAGE BACKED SECURITIES (USD) 60,189 568,214 14,889
------- ------- ------
COLLATERALIZED MORTGAGE OBLIGATIONS 1.2%
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 -- 2,784 --
------- ------- ------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (USD) -- 8,634 --
------- ------- ------
------- ------- ------
TOTAL INVESTMENT PORTFOLIO - 100% (Cost of $59,091,976,
$660,327,919 and $719,419,895 respectively) 127,332 655,210 65,807
======= ======= ======
<Caption>
PRO FORMA DSF FUND PRO FORMA
COMBINED DSF FUND RCS FUND SECURITIES COMBINED
PAR AMOUNT MARKET VALUE MARKET VALUE TO BE MARKET VALUE
ISSUER (000'S) AMOUNT ($)+ AMOUNT ($)+ LIQUIDATED ($)++ AMOUNT ($)
FHA Project Pool 144S 5,596 -- 5,654,284 -- 5,654,284
FHLMC 37,811 -- 38,979,052 -- 38,979,052
FHLMC 1,705 -- 1,772,012 -- 1,772,012
FNMA 54,918 -- 66,327,751 -- 66,327,751
FNMA 20,211 -- 32,214,430 -- 32,214,430
FNMA 25,087 -- 21,827,857 -- 21,827,857
GNMA 43,343 -- 41,693,046 -- 41,693,046
GNMA 28,029 -- 26,538,639 -- 26,538,639
GNMA 1,909 -- 1,795,952 -- 1,795,952
GNMA 183 -- 181,232 -- 181,232
FNMA TBA 174,700 -- 177,931,950 -- 177,931,950
FNMA TBA 24,300 -- 25,027,785 -- 25,027,785
FNMA TBA 142,000 -- 146,126,520 -- 146,126,520
------- ------------ ------------ ---------- ------------
TOTAL MORTGAGE BACKED SECURITIES (USD) 613,514 62,500,226 594,462,006 15,531,846 641,430,386
------- ------------ ------------ ---------- ------------
COLLATERALIZED MORTGAGE OBLIGATIONS 1.2%
DLJ Mortgage Acceptance Corp.
Series 1994-MF11, Class A2 1,000 -- 1,000,000 -- 1,000,000
Series 1994-MF11, Class A3 4,850 -- 4,850,000 -- 4,850,000
GE Capital Mortgage Services, Inc. 0 -- -- -- 0
Series 1994-12, Class B1 2,784 -- 2,797,936 -- 2,797,936
------- ------------ ------------ ---------- ------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (USD) 8,634 -- 8,647,936 -- 8,647,936
------- ------------ ------------ ---------- ------------
------- ------------ ------------ ---------- ------------
TOTAL INVESTMENT PORTFOLIO - 100% (Cost of $59,091,976,
$660,327,919 and $719,419,895 respectively) 716,735 $121,674,498 $669,390,629 61,854,050 $729,211,077
======= ============ ============ ========== ============
</Table>
* SECURITY DENOMINATED IN EURO DOLLAR
+ INVESTMENT SECURITIES OF EACH FUND ARE STATED AT MARKET VALUE OR, IN THE
ABSENCE OF MARKET VALUE, AT FAIR VALUE AS DETERMINED BY OR UNDER THE DIRECTION
OF EACH FUND'S BOARD OF DIRECTORS.
++ The DSF Fund securities to be liquidated prior to the Merger have been
selected by the portfolio manager based on investment market conditions at
the time of the preparation of this Registration Statement, assuming a
maximum tender of 50% of the outstanding shares of DSF Fund in the Tender
Offer. Actual securities to be liquidated will be dependent upon the total
number of shares tendered and investment market conditions at the expiration
of the Tender Offer.
61
<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 - Incorporated by reference to
Exhibit 1 to Pre-Effective Amendment No. 1 to the Registrant's
Registration Statement on Form N-14 (333-67374) filed with the
Securities and Exchange Commission on October 16, 2001.
2. By-Laws of RCM Strategic Global Government Fund, Inc. -
Incorporated by reference to Exhibit 2 to Pre-Effective Amendment
No. 1 to the Registrant's Registration Statement on Form N-14
(333-67374) filed with the Securities and Exchange Commission on
October 16, 2001.
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 -
Incorporated by reference to Exhibit 3 to Pre-Effective Amendment
No. 1 to the Registrant's Registration Statement on Form N-14
(333-67374) filed with the Securities and Exchange Commission on
October 16, 2001.
5b. Portions of the By-Laws of RCM Strategic Global Government
Fund, Inc. Relating to Stockholders' Rights - Incorporated by
reference to Exhibit 4 to Pre-Effective Amendment No. 1 to the
Registrant's Registration Statement on Form N-14 (333-67374) filed
with the Securities and Exchange Commission on October 16, 2001.
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 - Incorporated by reference to
Exhibit 5 to Pre-Effective Amendment No. 1 to the Registrant's
Registration Statement on Form N-14 (333-67374) filed with the
Securities and Exchange Commission on October 16, 2001.
10. Not Applicable.
11. Opinion of Ballard, Spahr, Andrews & Ingersoll, LLP, including
consent - Incorporated by reference to Exhibit 6 to
Pre-Effective Amendment No. 1 to the Registrant's Registration
Statement on Form N-14 (333-67374) filed with the Securities and
Exchange Commission on October 16, 2001.
12. Opinion of Sullivan & Cromwell, including consent, as to Tax
Matters - Incorporated by reference to Exhibit 7 to Pre-Effective
Amendment No. 1 to the Registrant's Registration Statement on
Form N-14 (333-67374) filed with the Securities and Exchange
Commission on October 16, 2001.
13. Letter Agreement between RCM Strategic Global Government
Fund, Inc. and Dresdner RCM Global Investors LLC, dated
August 2, 2001 - Incorporated by reference to Exhibit 8 to
Pre-Effective Amendment No. 1 to the Registrant's Registration
Statement on Form N-14 (333-67374) filed with the Securities and
Exchange Commission on October 16, 2001.
14(a) Consent of PricewaterhouseCoopers LLP, Independent Accountants
to Dresdner RCM Global Strategic Income Fund, Inc. and RCM
Strategic Global Government Fund, Inc. - Incorporated by reference
to Exhibit 9 to Pre-Effective Amendment No. 1 to the Registrant's
Registration Statement on Form N-14 (333-67374) filed with the
Securities and Exchange Commission on October 16, 2001.
14(b) Report of PricewaterhouseCoopers LLP Independent Accountants to
Dresdner RCM Global Strategic Income Fund, Inc. and RCM Strategic
Global Government Fund, Inc. - Incorporated by reference to
Exhibit 10 to Pre-Effective Amendment No. 1 to the Registrant's
Registration Statement on Form N-14 (333-67374) filed with the
Securities and Exchange Commission on October 16, 2001.
15. Not Applicable.
3
<Page>
16. Powers of Attorney - Incorporated by reference to Exhibit 11 to
Pre-Effective Amendment No. 1 to the Registrant's Registration
Statement on Form N-14 (333-67374) filed with the Securities and
Exchange Commission on October 16, 2001.
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 Pre-Effective
Amendment No. 2 has been signed on behalf of the registrant, in the City of
San Francisco and State of California, on the 19th day of October, 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 October 19, 2001
------------------ the Board; Principal Executive Officer
Luke D. Knecht
/s/ George A. Rio Chief Financial Officer; Principal Financial October 19, 2001
----------------- Officer
George A. Rio
/s/ Steven L. Wong Treasurer; Principal Accounting Officer October 19, 2001
------------------
Steven L. Wong
/s/ Francis E. Lundy Director October 19, 2001
--------------------
Francis E. Lundy*
/s/ James M. Whitaker Director October 19, 2001
---------------------
James M. Whitaker*
/s/ Gregory S. Young Director October 19, 2001
--------------------
Gregory S. Young
</Table>
* By Luke D. Knecht, pursuant to a duly executed Power of Attorney filed as an
exhibit hereto.
5