-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QSSM/Vrpd+q5b7077dwVQ9Qy6PqYBF1fLZph3O8HUJWSES+yQgNZS3A2XWGfz74C VwCZUtx/OKg8wofTeaAUWg== 0001047469-99-017697.txt : 19990504 0001047469-99-017697.hdr.sgml : 19990504 ACCESSION NUMBER: 0001047469-99-017697 CONFORMED SUBMISSION TYPE: N-1A/A PUBLIC DOCUMENT COUNT: 12 FILED AS OF DATE: 19990503 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EMERGING GERMANY FUND INC CENTRAL INDEX KEY: 0000860127 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 133560296 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-1A/A SEC ACT: SEC FILE NUMBER: 333-72679 FILM NUMBER: 99608761 FILING VALUES: FORM TYPE: N-1A/A SEC ACT: SEC FILE NUMBER: 811-06038 FILM NUMBER: 99608762 BUSINESS ADDRESS: STREET 1: FOUR EMBARCADERO CENTER CITY: SAN FRANCISCO STATE: CA ZIP: 94111 MAIL ADDRESS: STREET 1: FOUR EMBARCADERO CENTER STREET 2: SUITE 3000 CITY: SAN FRANCISCO STATE: CA ZIP: 94111 FORMER COMPANY: FORMER CONFORMED NAME: DRESDNER EMERGING GERMANY FUND INC DATE OF NAME CHANGE: 19900306 N-1A/A 1 N-1A/A SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/ Pre-Effective Amendment No. 2 /X/ Post-Effective Amendment No. / / and REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/ Amendment No. 2 /X/ (Check appropriate box or boxes.) DRESDNER RCM INVESTMENT FUNDS INC. ----------------------------------------------------------------------- (Exact Name of Registrant as Specified in Charter) FOUR EMBARCADERO CENTER SAN FRANCISCO, CALIFORNIA 94111 ------------------------------------------------------------------------ (Address of Principal Executive Offices) (Zip Code) (415) 954-5400 ------------------------------------------------------------------------ (Registrant's Telephone Number, including Area Code) Robert J. Goldstein DRESDNER RCM INVESTMENT FUNDS INC. Four Embarcadero Center San Francisco, California 94111 (800) 726-7240 (Name and Address of Agent for Service) Copies to: Robert J. Goldstein Michael Glazer Associate General Counsel Paul, Hastings, Janofsky & Walker LLP Dresdner RCM Global Investors LLC 555 South Flower Street Four Embarcadero Center Los Angeles, California 90071 San Francisco, California 94111 Approximate Date of Proposed Public Offering: May 3, 1999 The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Commission acting pursuant to said Section 8(a) may determine. DRESDNER RCM INVESTMENT FUNDS INC. DRESDNER RCM EUROPE FUND CROSS REFERENCE SHEET BETWEEN ITEMS OF PART A AND B OF FORM N-1A AND THE PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION ITEM NUMBER OF PART A OF FORM N-1A INFORMATION REQUIRED IN A PROSPECTUS 1. Front and Back Cover Pages Front and Back Cover Pages 2. Risk/Return Summary: Investments, Risk/Return Summary Risks, and Performance 3. Risk/Return Summary: Fee Table Fees and Expenses 4. Investment Objectives, Principal Investment Objective and Policies; Investment Strategies, and Related Other Investment Practices; Risks Investment Risks 5. Management's Discussion of Fund * Performance 6. Management, Organization, and Organization and Management Capital Structure 7. Shareholder Information Buying Shares; Selling Shares; Other Stockholders Services and Account Policies; Dividends, Distributions and Taxes 8. Distribution Arrangements Organization and Management; The Distributor 9. Financial Highlights Information Financial Highlights *NOT APPLICABLE DRESDNER RCM INVESTMENT FUNDS INC. DRESDNER RCM EUROPE FUND CROSS REFERENCE SHEET BETWEEN ITEMS OF PART A AND B OF FORM N-1A AND THE PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION (CONTINUED) ITEM NUMBER OF PART B OF FORM N-1A INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION 10. Cover Page and Table of Contents Cover Page and Table of Contents 11. Fund History General Information 12. Description of the Fund and Investment Objectives and Policies; Its Investments and Risks Investment and Risk Considerations; Investment Restrictions 13. Management of the Fund The Investment Manager 14. Control Persons and Directors and Officers; Description Principal Holders of Securities of Capital Shares 15. Investment Advisory The Investment Manager; The and Other Services Distributor; Additional Information 16. Brokerage Allocation and Other Execution of Portfolio Transactions Practices 17. Capital Stock and Other Securities Description of Capital Shares 18. Purchase, Redemption and Pricing of Purchase and Redemption of Shares Shares 19. Taxation of the Fund Dividends, Distributions and Tax Status 20. Underwriters The Distributor 21. Calculation of Performance Data Investment Results 9. Financial Statements Financial Statements *NOT APPLICABLE. DRESDNER RCM INVESTMENT FUNDS INC. ------------------------------------------------------------------------- Dresdner RCM Europe Fund ------------------------------------------------------------------------- May 3, 1999 This prospectus contains essential information for anyone considering an investment in this fund. Please read this document carefully and retain it for future reference. The Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy or accuracy of this Prospectus. It is a criminal offense to state or suggest otherwise. 1 DRESDNER RCM INVESTMENT FUNDS INC. TABLE OF CONTENTS - -------------------------------------------------------------------------------- RISK/RETURN SUMMARY AND FUND EXPENSES - -------------------------------------------------------------------------------- THIS SECTION SUMMARIZES THE 3 Risk/Return Summary FUND'S INVESTMENTS, RISKS, 5 Fees and Expenses PAST PERFORMANCE, AND FEES. INVESTMENT OBJECTIVES, POLICIES AND RISKS - -------------------------------------------------------------------------------- THIS SECTION PROVIDES DETAILS 7 Investment Objective and Policies ABOUT THE FUND'S INVESTMENT 9 Other Investment Practices OBJECTIVE, POLICIES AND RISKS. 10 Changing the Investment Objectives and Policies 10 Investment Risks ORGANIZATION AND MANAGEMENT - -------------------------------------------------------------------------------- THIS SECTION PROVIDES DETAILS 14 The Fund and the Investment Manager ABOUT THE PEOPLE AND 14 The Portfolio Managers ORGANIZATIONS WHO OVERSEE THE 14 Management Fees and Other Expenses FUND. 15 The Distributor 15 Pending Litigation STOCKHOLDER INFORMATION - -------------------------------------------------------------------------------- THIS SECTION TELLS YOU HOW TO 16 Buying Shares BUY, SELL AND EXCHANGE SHARES, 19 Selling Shares HOW WE VALUE SHARES, AND HOW WE 19 Other Stockholder Services and Account Policies PAY DIVIDENDS AND DISTRIBUTIONS. 22 Dividends, Distributions and Taxes OTHER INFORMATION ABOUT THE FUND - -------------------------------------------------------------------------------- THIS SECTION PROVIDES DETAILS ON 24 Financial Highlights SELECTED FINANCIAL HIGHLIGHTS OF THE FUND 2 RISK RETURN SUMMARY AND FUND EXPENSES RISK/RETURN SUMMARY Goal: The Fund's goal is to seek long term growth of capital by investing in equity securities of European companies. Principal Investment The Fund invests primarily in common stocks of Strategies: companies located in Europe, from both European Economic and Monetary Union ("EMU") and non-EMU countries. Under normal market conditions, the Fund invests at least 75% of its total assets in these companies. The Fund expects to invest most of its assets in equity securities of issuers located in Western European countries. The Investment Manager evaluates the fundamental value and prospects for growth of individual companies and focuses on companies that it expects will have higher than average rates of growth and strong potential for capital appreciation. In addition, the Investment Manager develops forecasts of economic growth, inflation, and interest rates that it uses to help identify those regions and individual countries that are likely to offer the best investment opportunities. The Morgan Stanley Capital International (MSCI) Europe Index is the Fund's performance benchmark. The Investment Manager bases its security selection on the relative investment merits of different industries and companies throughout Europe and will not seek to duplicate the country and sector allocations of the MSCI Europe Index. Principal Investment Because the value of the Fund's investments will Risks: fluctuate with market conditions, so will the value of your investment in the Fund. You could lose money on your investment in the Fund, or the Fund could underperform other investments. The value of the Fund's investments fluctuate in response to the activities of individual companies and general stock market and economic conditions. The performance of foreign securities depends in part on the political and economic environments and other overall economic conditions in the countries where the Fund invests. Because the Fund focuses on certain developed European countries, it will be more susceptible than other funds to market and other conditions affecting those countries. The Fund's value will also be exposed to currency risk. The stock prices of smaller and newer companies in which the Fund may invest fluctuate more than those of larger, more established companies. An investment in the Fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. 3 On May 3, 1999, the Fund converted from a closed-end fund to an open-end fund. Closed-end fund shares are not redeemed by or purchased from the fund. Instead, they are normally listed and traded on an exchange. Unlike open-end funds, the price of a closed-end fund share is not based on the fund's net asset value, but upon its value in the market. Closed-end funds usually generate fewer expenses than open-end funds because the fund is not responsible for the distribution of its shares. Upon conversion, all outstanding shares of the previously closed-end Fund were redesignated as Class N shares and a new class of shares, Class I, was created. The bar chart and table shown below provide some indication of the risks of investing in the Fund by showing changes in the Fund's performance from year to year and by showing how the Fund's average annual returns for one and five years and for the life of the Fund compared to broad based securities market indices. Both the chart and table below assume reinvestment of dividends and distributions. Of course, past performance does not necessarily indicate how the Fund will perform in the future. Year-by-Year Total Returns for Class N Shares* [GRAPH] (5.74%) (12.44%) 31.54% (4.98%) 1.33% 15.87% 25.70% 37.23% 1991 1992 1993 1994 1995 1996 1997 1998
For the period covered by this year-by-year total return chart, the Fund's highest quarterly return was 21.05% (for the first quarter ended 1998) and the lowest quarterly return was (15.52%) (for the third quarter ended 1998). Average Annual Total Returns* (through December 31, 1998)
Fund Past Five Since Inception Year Years Inception Class N Shares** April 5,1990 37.23% 13.99% 6.11% Class I Shares*** April 5,1990 37.23% 13.99% 6.11% DAX100 Index**** -- 25.23% 16.91% 10.39% MDAX Index**** -- 15.22% 10.50% 5.51%
*The bar chart and table reflect the performance of the Fund as a closed-end investment company that invested primarily in equity securities of German companies. Beginning on February 9, 1999, the Fund expanded its investment mandate and invests primarily in equity securities of companies based in Europe, and on May 3, 1999, the Fund converted from a closed-end to an open-end investment company. The expenses of the Fund as an open-end investment company may be higher than as a closed-end investment company due to additional fees, such as Rule 12b-1 fees. **Returns through December 31, 1998 do not reflect Rule 12b-1 fees. Class N returns through December 31, 1998 would be lower if Rule 12b-1 fees had been paid. ***Class I Shares were first issued on May 3, 1999, which do not pay Rule 12b-1 fees. Class I returns through December 31, 1998 are based on Class N returns. ****Beginning on February 9, 1999, the Fund began comparing its performance to the MSCI Europe Index. 4 FEES AND EXPENSES As an investor in the Fund, you will pay the following fees and expenses.
SHAREHOLDER FEES Class of Shares (FEES PAID DIRECTLY FROM YOUR INVESTMENT) --------------- Class N Class I ------- ------- Redemption or exchange fees (1) 1.00% 1.00% ANNUAL FUND OPERATING EXPENSES (FEES PAID FROM FUND ASSETS) Management Fees 1.00% 1.00% Rule 12b-1 fee 0.25% NONE Other expenses(2) 0.51% 0.51% Total annual Fund operating expenses(3) 1.76% 1.51% Less: Fee waiver and reimbursement(4) -0.16% -0.16% Net operating expenses(4) 1.60% 1.35%
1 The fund charges a 1.00% redemption fee for shares redeemed before November 1, 1999. This redemption fee will not apply if you have held the shares for more than twelve months consecutively prior to their redemption. 2 This percentage amount does not include non-recurring expenses of approximately 0.46% which are associated with the conversion of the Fund to an open-end investment company. 3 The expenses of the Fund as an open-end investment company may be higher than as a closed-end investment company due to additional fees, such as Rule 12b-1 fees. 4 Dresdner RCM Global Investors LLC (the "Investment Manager") has contractually agreed until at least December 31, 2002, to pay each quarter the amount, if any, by which the ordinary operating expenses for the quarter (except interest, taxes and extraordinary expenses) exceed the annualized rate of 1.60% for Class N and 1.35% for Class I. The Fund may reimburse the Investment Manager in the future. 5 EXAMPLE Use this table to compare fees and expenses of the Fund with those of other funds. It illustrates the amount of fees and expenses you would pay assuming: - $10,000 investment in the Fund - 5% annual return - redemption at the end of each period - no changes in the Fund's operating expenses Although your actual costs may be higher or lower, based on these assumptions your costs would be:
1 3 5 10 Year Years Years Years Class N $163 $539 $939 $2,060 Class I $137 $428 $758 $1,742
6 INVESTMENT OBJECTIVES, POLICIES AND RISKS INVESTMENT OBJECTIVE AND POLICIES WHAT IS THE FUND'S INVESTMENT OBJECTIVE? The Fund's investment objective is to seek long term growth of capital by investing in equity securities of European companies. Under normal market conditions, the Fund invests at least 75% of its total assets in companies located in Europe, in both EMU and non-EMU countries. HOW DOES THE FUND SELECT EQUITY INVESTMENTS? While the Fund emphasizes investments in growth companies, the Fund also may invest in other companies that are not traditionally considered to be growth companies, such as emerging growth companies and cyclical and semi-cyclical companies in developing economies, if the Investment Manager believes that such companies have above-average growth potential. The Fund may invest in companies of any size. When the Investment Manager analyzes a specific company, it evaluates the fundamental value of each enterprise as well as its prospects for growth. In most cases, these companies have one or more of the following characteristics: - - Superior management - - Strong balance sheets - - Differentiated or superior products or services - - Substantial capacity for growth in revenue through either an expanding market or expanding market share - - Strong commitment to research and development - - Steady stream of new products or services The Fund does not seek current income, and does not restrict its investments to companies with a record of dividend payments. When evaluating foreign companies, the Investment Manager may also consider the anticipated economic growth rate, political outlook, inflation rate, currency outlook, and interest rate environment for the country and the region in which the company is located, as well as other factors it deems relevant. In addition to traditional research activities, the Investment Manager uses research produced by its Grassroots Research operating group. Grassroots Research prepares research reports based on field interviews with customers, distributors, and competitors of the companies that the Investment Manager follows. The Investment Manager believes that Grassroots Research can be a valuable adjunct to its traditional research efforts by providing a "second look" at companies in which the Fund might invest and by checking marketplace assumptions concerning market demand for particular products and services. WHAT KINDS OF EQUITY SECURITIES DOES THE FUND INVEST IN? The Fund invests primarily in common stocks and depositary receipts, including American Depositary Receipts, European Depositary Receipts, Global Depositary Receipts, or other similar depositary instruments representing securities of foreign companies. Common stocks represent the basic equity ownership interests in a company. Depositary receipts are issued by banks or other financial institutions and represent, or may be converted into, underlying ordinary shares of a foreign company. They may be sponsored by the foreign company or organized independently. The Fund may also invest in other equity and equity related securities. These include preferred stock, convertible preferred stock, convertible debt obligations, warrants or other rights to acquire stock, and options on stock and stock indices. The Fund expects that its foreign investments will primarily be traded on recognized foreign securities exchanges. However, the Fund also may invest in securities that are traded only over-the-counter, either in the United States or in foreign markets, when the Investment Manager believes that such securities meet the Fund's investment criteria. The Fund also may invest in securities that are not publicly traded either in the United States or in foreign markets. 7 WHEN IS A COMPANY CONSIDERED TO BE LOCATED IN A PARTICULAR COUNTRY? A company will be considered to be located in a particular country if the company is organized or headquartered, or derives at least 50% of its total revenue from operations, in such country. OTHER INVESTMENT PRACTICES The Fund may also employ the following investment techniques in pursuit of its investment objective, long term growth of capital. DOES THE FUND BUY AND SELL FOREIGN CURRENCIES? The Investment Manager expects to purchase and sell foreign currencies primarily to settle foreign securities transactions. However, the Fund may also engage in currency management transactions (other than currency futures contracts) to hedge currency exposure related to securities it owns or securities it expects to purchase. The Fund may also hold foreign currency received in connection with investments in foreign securities when the Investment Manager believes the relevant exchange rates will change favorably and it would be better to convert the currency into U.S. dollars later. DOES THE FUND HEDGE ITS INVESTMENTS? For hedging purposes, the Fund may purchase options on stock indices and on securities it is authorized to purchase. If the Fund purchases a "put" option on a security, the Fund acquires the right to sell the security at a specified price at any time during the term of the option (for "American-style" options) or on the option expiration date (for "European-style" options). If the Fund purchases a "call" option on a security, it acquires the right to purchase the security at a specified price at any time during the term of the option (or on the option expiration date). An option on a stock index gives the Fund the right to receive a cash payment equal to the difference between the closing price of the index and the exercise price of the option. The Fund may "close out" an option before it is exercised or expires by selling an option of the same series as the option previously purchased. The Fund may employ certain techniques to hedge against currency exchange rate fluctuations, changes in interest rates or general fluctuations in the value of its portfolio securities. These techniques include forward currency exchange contracts, currency options, index futures contracts, 8 and currency swaps. A forward currency exchange contract is an obligation to purchase or sell a specific currency at a future date at a price set at the time of the contract. Currency options are rights to purchase or sell a specific currency at a future date at a specified price. Index futures contracts are agreements to take or make delivery of an amount of cash equal to the difference between the value of the index at the close of the last trading day of the contract and the price at which the index contract was originally written. Currency swaps involve the exchange of rights to make or receive payments in specified currencies. The Fund may also cross-hedge currencies, which involves writing or purchasing options or entering into foreign exchange contracts on one currency to hedge against changes in exchange rates for a different currency, if the Investment Manager believes changes in the two currencies are correlated. DOES THE FUND INVEST IN EMERGING MARKETS? The Fund may invest up to 25% of its total assets in equity securities of companies located in emerging market countries, including Eastern European countries (but no more than 10% in any one emerging markets country). Such investments are not currently a principal investment technique of the Fund. However, if emerging markets present attractive investment opportunities, the Fund may increase the percentage of its total assets invested in emerging markets, subject to the limits described above. WHAT IS THE FUND'S PORTFOLIO TURNOVER RATE? The Fund may invest in securities on either a long-term or short-term basis. The Investment Manager expects the annual portfolio turnover rate for the Fund in 1999 will exceed 100% due to the repositioning of the portfolio as a result of the recent investment mandate change approved by stockholders. The Fund's portfolio turnover rate is not a limiting factor. The Investment Manager will sell the Fund's portfolio securities whenever it deems appropriate, regardless of the length of time the Fund has held the securities and may purchase or sell securities for short-term profits. Turnover will be influenced by sound investment practices, the Fund's investment objective and the need for funds for the redemption of the Fund's shares. A high portfolio turnover rate would increase the Fund's brokerage commission expenses and other transaction costs, and may increase taxable capital gains. Such expenses may adversely affect the Fund's performance. DOES THE FUND INVEST IN OTHER INVESTMENT COMPANIES? The laws of some foreign countries may make it difficult or impossible for the Fund to invest directly in companies organized or headquartered in those countries, or may limit such investments. The only practical means of investing in such companies may be through other investment companies that in turn are authorized to invest in the securities of such issuers. In these cases and in other appropriate circumstances, the Fund may invest up to 10% of the value of its total assets in other investment companies. Such investment is subject to the restrictions referred to above regarding investments in companies located in foreign countries. The Fund may not acquire more than 3% of the voting securities of any other investment company. If the Fund invests in other investment companies, it will bear its proportionate share of the other investment companies' management or administration fees and other expenses in addition to the Fund's own expenses. At the same time, the Fund would continue to pay its own management fees and other expenses. WHAT ARE THE FUND'S INVESTMENT POLICIES IN UNCERTAIN MARKETS? When the Investment Manager believes the Fund should adopt a temporary defensive posture, including periods of international, political or economic uncertainty, the Fund may hold all or a substantial portion of its assets in investment grade debt securities. These securities may be debt obligations 9 issued or guaranteed by the U.S. Government or foreign governments (including their agencies, instrumentalities, authorities and political subdivisions), debt obligations issued or guaranteed by international or supranational government entities, or debt obligations of corporate issuers. During these periods, the Fund may not be achieving its investment objective. WHERE CAN I FIND ADDITIONAL INFORMATION ABOUT INVESTMENT PRACTICES? The STATEMENT OF ADDITIONAL INFORMATION (the SAI) has more detailed information about the investment practices described in this Prospectus as well as information about other investment practices used by the Investment Manager. CHANGING THE INVESTMENT OBJECTIVES AND POLICIES The Fund's investment objective is a fundamental policy that may not be changed without stockholder approval. However, except as otherwise indicated in this Prospectus or the SAI, the Fund's other investment policies and restrictions are not fundamental and may be changed without stockholder approval. The various percentage limitations referred to in this Prospectus and the SAI apply immediately after a purchase or initial investment. Unless indicated to the contrary, the Fund is not required to sell any security in its portfolio as a result of a change in any applicable percentage resulting from market fluctuations. INVESTMENT RISKS Your investment in the Fund is subject to a variety of risks, including those described below. See the SAI for further information about these and other risks. EQUITY INVESTMENTS The prices of equity securities fluctuate based on changes in the issuer's financial condition and prospects and on overall market and economic conditions. SMALL COMPANIES Investments in small companies may involve greater risks than larger companies, and may be speculative. The securities of small companies, as a class, have had periods of more favorable results, and periods of less favorable results, than securities of larger companies as a class. In addition, small companies may have limited or unprofitable operating histories, limited financial resources and inexperienced management. They often face competition from larger and more established firms that have greater resources. Small companies may have less ability to raise additional capital, and may have a less diversified product line (making them susceptible to market pressure), than larger companies. Securities of small and unseasoned companies are often less liquid than securities of larger companies and are frequently traded in the over-the-counter market or on regional exchanges where low trading volumes may result in erratic or abrupt price movements. Selling these securities may take an extended period of time. As a result, to the extent the Fund invests in small companies, its net asset value may be more volatile than would otherwise be the case. 10 FOREIGN SECURITIES Investing in foreign securities involves significant risks, some of which are not typically associated with investing in securities of U.S. issuers. For example, the value of investments in such securities may fluctuate based on changes in the value of one or more foreign currencies relative to the U.S. dollar. In addition, information about foreign issuers may be less readily available than information about domestic issuers. Foreign issuers generally are not subject to accounting, auditing and financial reporting standards, or to other regulatory practices and requirements, comparable to U.S. issuers. Furthermore, certain foreign countries may be politically unstable, expropriate or nationalize assets, revalue currencies, impose confiscatory taxes, and limit foreign investment and use or removal of funds or other assets of the Fund (including the withholding of dividends and limitations on the repatriation of currencies). The Fund may also face difficulties or delays in obtaining or enforcing judgments. Most foreign securities markets have substantially less volume than U.S. markets, and the securities of many foreign issuers may be less liquid and more volatile than securities of comparable U.S. issuers. There is generally less government regulation of securities markets, securities exchanges, securities dealers, and listed and unlisted companies in foreign countries than in the United States. Foreign markets also have different clearance and settlement procedures, and at times in certain markets settlements have not been able to keep pace with the volume of securities transactions, making it difficult to conduct and complete transactions. In addition, the costs associated with transactions in securities of foreign companies and securities traded on foreign markets, and the expense of maintaining custody of these securities with foreign custodians, generally are higher than in the U.S. EMERGING MARKETS Investments in emerging markets involve additional risks. The securities markets of emerging market countries are substantially smaller, less developed, less liquid, and more volatile than in the U.S. and other developed foreign markets. Disclosure and regulatory standards are less stringent. There also may be a lower level of monitoring and regulation of securities markets in emerging market countries and of the activities of investors in such markets, and enforcement of existing regulations has been limited. Economies in emerging market countries generally depend heavily on international trade. They may be affected adversely by the economic conditions of the countries with which they trade, as well as by trade barriers, exchange controls, managed adjustments in relative currency values, and other protectionist measures imposed or negotiated by these countries. In many cases, governments of emerging market countries continue to exercise significant control over the economies of these countries. In addition, some of these countries have in the past failed to recognize private property rights and have at times nationalized or expropriated the assets of private companies. There is a greater possibility of confiscatory taxation, imposition of withholding taxes on interest payments, or other similar developments that could affect investments in those countries. Unanticipated political or social developments may also affect the value of the Fund's investments in those countries. OPTIONS, CURRENCY HEDGING AND CURRENCY MANAGEMENT Stock options involve a number of risks. They may be more volatile than the underlying stock. Options and securities markets may not be precisely correlated, so that a given transaction may not achieve its objective. In addition, the secondary market for particular options may not be liquid for a variety of reasons. When trading options on foreign exchanges, many of the protections afforded to participants 11 in the United States will not be available. The Fund could lose the amount of the option premium plus transaction costs. The Fund's use of hedging and currency management techniques involve risks different from investments in U.S. dollar-denominated securities. If the Fund invests in foreign securities and also maintains currency positions, it may be exposed to greater combined risk than would otherwise be the case. Transactions in index futures contracts involve risks similar to those of options on securities; in addition, the potential loss incurred by the Fund in such transactions is unlimited. The use of hedging and currency management techniques is a highly specialized activity, and the success of any such operations by the Fund is not assured. Gains and losses in such transactions depend upon the Investment Manager's ability to predict correctly the direction of stock prices, currency exchange rates, and other factors. Although hedging operations could reduce the risk of loss due to a decline in the value of the hedged security or currency, they could also limit the potential gain from an increase in the value of the security or currency. NON-DIVERSIFICATION The Fund is non-diversified within the meaning of the 1940 Act. As a non-diversified fund, it may invest a greater percentage of its assets in the securities of any single issuer than diversified funds, and may be more susceptible to risks associated with a single economic, political or regulatory occurrence than diversified funds. However, in order to meet the requirements of the Internal Revenue Code of 1986, as amended (the "Code"), for qualification as a regulated investment company, the Fund must diversify its holdings so that, at the end of each quarter of its taxable year, (i) at least 50% of the market value of its assets is represented by cash, U.S. Government securities, the securities of other regulated investment companies and other securities, with such other securities of any one issuer limited for purposes of this calculation to an amount not greater than 5% of the value of the Fund's total assets and representing not more than 10% of the issuer's outstanding voting securities, and (ii) not more than 25% of the value of the Fund's total assets may be invested in the securities of any one issuer (other than the U.S. Government or other regulated investment companies). GEOGRAPHIC CONCENTRATION The Fund will invest in companies located in both EMU and non-EMU European countries. Investments in EMU countries involves certain risks. The EMU's objective is to create a single, unified market through which people, goods, and money can move freely. Participation in the EMU is based on countries meeting certain financial criteria outlined in the treaty creating the EMU. The transition to the EMU may be troubled as eleven separate nations adjust to the reduction in flexibility, independence, and sovereignty that the EMU requires. High unemployment and a sense of "deculturalization" within the general public of the participating countries could lead to political unrest and continuing labor disturbances. YEAR 2000 Many computer programs employed throughout the world use two digits rather than four to identify the year. These programs, if not adapted, will not correctly handle the change from "99" to "00" on January 1, 2000, and will not be able to perform necessary functions critical to the Fund's operations. The "Year 2000 issue" affects all companies and organizations. The Year 2000 problem may also adversely affect the companies in which the Fund invests. For example, companies may incur substantial costs to address the problem. They may also suffer losses caused by corporate and governmental data processing errors. To the extent the impact on a portfolio holding is negative, the Fund's investment returns could be adversely affected. The Investment Manager has advised the Fund that it is implementing a plan intended to ensure that its computer systems are not adversely affected by the Year 2000 issue. The Fund understands that its key service providers are taking steps to address the issue as well. The Fund and the Investment Manager will continue to monitor developments relating to this issue but do not anticipate that the Year 2000 issue will have an adverse effect on the Investment Manager's or other service providers' ability to provide services to the Fund. EURO INTRODUCTION On January 1, 1999, the European Union introduced a single European currency, the Euro. The Investment Manager and other key service providers have taken steps to address Euro-related issues and their impact on the Fund's operations. These included upgrading their computer and bookkeeping systems to deal with the conversion. The Fund has not experienced any adverse operational effects resulting from the Euro conversion nor has the conversion caused any apparent market disruptions. The Fund and its Investment Manager will continue to monitor the effects of the conversion on the markets and issuers in which the Fund invests. As a multinational currency, the value of the Euro may fluctuate relative to the U.S. dollar; such fluctuation, as with any other currency, may cause the Fund's net asset value to fluctuate as well. Because the Euro will be implemented over the next three years, its overall effect cannot be determined with certainty. 12 ORGANIZATION AND MANAGEMENT THE FUND AND THE INVESTMENT MANAGER The Fund is a series of Dresdner RCM Investment Funds Inc. (the "Company"). Dresdner RCM Global Investors LLC, with principal offices at Four Embarcadero Center, San Francisco, California 94111, is the investment manager of the Fund. The Investment Manager manages the Fund's investments, provides various administrative services, and supervises the Fund's business. The Investment Manager provides investment supervisory services to institutional and individual clients. It was established in December of 1998 and is the successor to the business of its holding company, Dresdner RCM Global Investors US Holdings LLC. The Investment Manager was originally formed as Rosenberg Capital Management in 1970, and it and its successors have been consistently in business since then. The Investment Manager is an indirect wholly owned subsidiary of Dresdner Bank AG ("Dresdner"), an international banking organization with principal executive offices in Frankfurt, Germany. THE PORTFOLIO MANAGERS Barbel Lenz and David S. Plants are primarily responsible for the day-to-day management of the Dresdner RCM Europe Fund. Ms. Lenz is a Director of the Investment Manager, with which she has been associated since 1997. She joined the Investment Manager as a Senior Research Specialist for European Equities and as a portfolio manager. From 1995 to 1997 she served as an Assistant Vice President at Dresdner Kleinwort Benson North America LLC. Mr. Plants is a Director of the Investment Manager, with which he has been associated since 1993. MANAGEMENT FEES AND OTHER EXPENSES The Fund pays the Investment Manager a monthly fee pursuant to an investment management agreement at the annual rate of 1.00% of its average daily net assets up to and including $100 million and 0.80% of its average daily net assets in excess of $100 million. The Fund pays for its own expenses. These include brokerage and commission expenses, taxes, interest charges on any borrowings, custodial charges and expenses, investment management fees, and other operating expenses (e.g., legal and audit fees, securities registration expenses, and compensation of directors who are not affiliated with the Investment Manager). These expenses are allocated to each class of shares based on the assets of each class. Each class also bears certain class-specific expenses, such as Rule 12b-1 expenses payable by the Fund's Class N shares. 13 The Investment Manager has agreed to limit the Fund's expenses through December 31, 2002. During this period, the Investment Manager will pay the Fund on a quarterly basis the amount, if any, by which the Fund's ordinary operating expenses for the quarter (except interest, taxes and extraordinary expenses) exceed the following expense ratios on an annual basis:
--------------------------------------------------------- EUROPE FUND EXPENSE RATIOS THROUGH December 31, 2002 --------------------------------------------------------- Class N shares 1.60% Class I shares 1.35%
The Fund will reimburse the Investment Manager for such payments for a period of up to five years after they are made, so long as the Fund's ordinary operating expenses after reimbursement are less than the expense limit. THE DISTRIBUTOR Funds Distributor, Inc. (the "Distributor"), with principal offices at 60 State Street, Suite 1300, Boston, Massachusetts 02109, acts as distributor of each class of shares of the Fund. The Distributor provides mutual fund distribution services to registered investment companies, and is an indirect wholly owned subsidiary of Boston Institutional Group, Inc., which is not affiliated with the Investment Manager or Dresdner. The Company has adopted a distribution plan (the "Plan") for its Class N shares pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, the Fund pays the Distributor an annual fee of up to 0.25% of the average daily net assets of its Class N shares as reimbursement for certain expenses incurred by the Distributor in providing distribution and shareholder support services to such shares. These expenses include advertising and marketing expenses, payments to broker-dealers and others who have entered into agreements with the Distributor, the expenses of preparing, printing and distributing the Prospectus to persons who are not already stockholders, and indirect and overhead costs associated with the sale of Class N shares. If in any month the Distributor is due more for such services than is immediately payable because of the Plan's expense limitation, the unpaid amount is carried forward from month to month while the Plan is in effect until it can be paid. Because these fees are paid out of the Fund's assets on an ongoing basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges. PENDING LITIGATION On April 8, 1998, the Fund filed a lawsuit in the United States District Court for the Southern District of New York against Philip Goldstein and others. The Fund alleged violations of certain provisions of the federal securities laws in connection with the Fund's 1998 annual meeting. With respect to that meeting, a Goldstein affiliate filed an action in the same court against the Fund and its directors on April 24, 1998 alleging violations of the proxy antifraud rule of the federal securities laws and breach of fiduciary duty. The Fund, as nominal defendant, and each member of the Fund's Board of Directors have been named as defendants in a derivative and purported class action suit captioned STEINER V. FUGELSANG filed on May 28, 1998 in the same court. The class action allegations assert that the defendants violated the federal securities laws and Maryland corporate law and the derivative claims assert breach of fiduciary duty regarding the meeting. All issues in the actions have been resolved except as to entitlement to legal fees by the Goldstein and Steiner litigants. 14 The Fund believes that substantially all of any fees payable to these litigants should be reimbursed under a contract of insurance which insures the Fund and its directors. STOCKHOLDER INFORMATION BUYING SHARES For your convenience, we offer several ways to start and add to Fund investments. OPENING YOUR ACCOUNT THROUGH A FINANCIAL PROFESSIONAL If you work with a financial professional, he or she is prepared to handle your planning and transaction needs. Your financial professional will be able to assist you in establishing your fund account, executing transactions, and monitoring your investment. If you do not hold your Fund investment in the name of your financial professional and you prefer to place a transaction order yourself, please use the instructions below for investing directly. You may also purchase shares through certain brokers which have entered into selling group agreements with the Distributor. Brokers may charge a fee for their services at the time of purchase or redemption. Subscription forms can be obtained from the Fund. OPENING YOUR ACCOUNT DIRECTLY You may establish accounts without the help of an intermediary as follows: - - Determine the amount you are investing. The minimum amount for initial investments is $5,000 for the Class N shares ($250 for additional investments) and $250,000 for the Class I shares ($50,000 for additional investments). The Fund reserves the right at any time to waive, increase or decrease the minimum requirements applicable to initial or subsequent investments. Stockholders whose shares were redesignated as Class I shares will be subject to the $250 subsequent investment requirements applicable to holders of Class N Shares. Minimum subsequent investment requirements do not apply to investors purchasing shares through the Fund's automatic dividend reinvestment plan. In addition, minimum initial investments may vary for investors purchasing shares through a broker-dealer or other intermediary having a service agreement with the Investment Manager and maintaining an omnibus account with the Fund. For more information on minimum investments, call 1-800-726-7240. - - Complete the account application accompanying this Prospectus. Please apply at this time for any account privileges you may want to use in the future, to avoid the delays associated with adding them later on. - - Mail your completed application to the Fund at: Dresdner RCM Global Funds P.O. Box 8500 Boston, MA 02266-8500 For answers to any questions, please speak with a Fund Representative at 1-800-726-7240. 15 The Fund reserves the right to reject any purchase of shares at its sole discretion. The Fund also reserves the right to cancel any purchase order for which payment has not been received by the third business day following the order. Confirmation statements showing transactions in your account and a summary of the status of the account serve as evidence of ownership of shares of the Fund. We will forward a confirmation statement to you on receipt of a proper order. INVESTING IN YOUR ACCOUNT BY WIRE - - Make sure you have established an account by mailing an application as explained above. - - Call 1-800-726-7240 to obtain your account number and to place a purchase order. FUNDS THAT ARE WIRED WITHOUT A PURCHASE ORDER WILL BE RETURNED UNINVESTED. - - After placing your purchase order, instruct your bank to wire the amount of your investment to: State Street Bank and Trust Company Routing number: 011000028 Account number: 9905-268-0 FCC: your account number, name of registered owner(s) and Fund name BY CHECK - - Make out a check (bank or certified) or money order for the investment amount payable to Dresdner RCM Europe Fund. Please note: No third party checks will be accepted. - - Mail the check with your completed application to the Fund at: Dresdner RCM Global Funds P.O. Box 8500 Boston, MA 02266-8500 ADDING TO YOUR ACCOUNT BY WIRE - - Call the Fund at 1-800-726-7240 to place a purchase order. FUNDS THAT ARE WIRED WITHOUT A PURCHASE ORDER WILL BE RETURNED UNINVESTED. - - Once you have placed your purchase order, instruct your bank to wire the amount of your investment as described above. BY CHECK - - Make out a check for the investment amount payable to Dresdner RCM Europe Fund. Please note: No third party checks will be accepted. - - Mail the check with a completed investment slip to the Fund at: 16 Dresdner RCM Global Funds P.O. Box 8500 Boston, MA 02266-8500 If you do not have an investment slip, attach a note indicating your account number. WITH SECURITIES In its discretion, the Fund may accept securities of equal value instead of cash in payment of all or part of the subscription price for Fund shares. Contact the Fund in advance to discuss the securities in question and the documentation necessary to complete the transaction. Any such securities: - - Will be valued at the close of regular trading on the New York Stock Exchange on the day of acceptance of the subscription in accordance with the Fund's method of valuing its securities; - - Will have a tax basis to the Fund equal to such value; - - Must not be restricted securities; and - - Must be permitted to be purchased in accordance with the Fund's investment objective and policies and must be securities that the Fund would be willing to purchase at that time 17 SELLING SHARES BY PHONE - WIRE PAYMENT - - Call the Fund to verify that the wire redemption privilege via telephone is in place on your account. If it is not, a representative can help you add it. - - Place your wire request. BY PHONE - CHECK PAYMENT - - Call the Fund at 1-800-726-7240 to verify that you have telephone redemption privileges and place your request. Once your request has been verified, a check for the net cash amount (net of any redemption fee), payable to the registered owner(s), will be mailed to the address of record. For checks payable to any other party or mailed to any other address, please make your request in writing (see below). IN WRITING - - Write a letter of instruction, signed by each registered owner or their duly authorized agent, that includes the following information: - The name of the registered owner(s) of the account - The account number - The number of shares or the dollar amount you want to sell - The recipient's name and address or wire information, if different from those of the account registration - Any stock certificates you may hold or additional documents we may request - - Indicate whether you want any cash proceeds sent by check or by wire. - - Make sure the letter is signed by all registered owners or their authorized parties. The Fund may require additional information, such as a signature guarantee. - - Mail the letter to the Fund. BY ELECTRONIC TRANSFER - - Fill out the appropriate areas of the account application for this feature. To request an electronic transfer (not less than $50; nor more than $100,000), call 1-800-726-7240. The Fund will transfer your sales proceeds electronically to your bank. The bank must be a member of the Automated Clearing House. SIGNATURE GUARANTEES Certain requests must include a signature guarantee, which is designed to protect you and the Fund from fraudulent activities. Your request must be made in writing and include a signature guarantee if any of the following situations applies: - - You wish to redeem more than $50,000 worth of shares. - - The check is being mailed to an address different from the one on your account (address of record). - - The check is being made payable to someone other than the account owner. - - You are instructing us to change your bank account information. OTHER STOCKHOLDER SERVICES AND ACCOUNT POLICIES TELEPHONE ORDERS We accept telephone orders to buy or sell shares of the Fund. To order call 1-800-726-7240. To guard against fraud, we may record telephone orders or take other reasonable precautions. However, if we do not take such steps to ensure the authenticity of an order, we may bear any loss if the order later proves fraudulent. At times of peak activity, such as during periods of volatile economic or market conditions, it may be difficult to place buy or sell orders by phone. During these times, consider sending your request in writing. BUSINESS HOURS AND NAV CALCULATIONS The Fund's regular business days and hours are the same as those of the New York Stock Exchange (NYSE). The Fund calculates its net asset value per share (NAV) every business day as of the close of trading on the NYSE (normally 4:00 p.m. eastern time). Shares of the Fund will not be priced on days on which the NYSE is closed for trading. The NYSE is closed for trading on national holidays and weekends. The Fund's securities are typically priced using market quotes or pricing services. When these methods are not available or do not represent a security's value at the time of pricing, the security is valued in accordance with the Fund's fair valuation procedures. 18 TIMING OF ORDERS The Fund accepts orders until the close of trading on the NYSE every business day. Orders received before 4:00 p.m. Eastern Time are executed the same day at that day's NAV. Orders received after 4:00 p.m. Eastern time are executed the following day at that day's NAV. The Fund has the right to suspend redemption of shares and to postpone payment of proceeds for up to seven days or as permitted by law. The Fund may suspend the right of redemption or the date of payment for more than seven days after shares are tendered for redemption for any period during which - - The New York Stock Exchange is closed (other than a customary weekend or holiday closing) or the SEC determines that trading thereon is restricted - - An emergency (as determined by the SEC) exists as a result of which disposal by the Fund of securities it owns is not reasonably practicable, or as a result of which it is not reasonably practical for the Fund fairly to determine the value of its net assets - - The SEC by order permits such suspension for the protection of stockholders. TIMING OF SETTLEMENTS When you buy shares, you will become the owner of record when the Fund receives your payment, generally the day following execution. When you sell shares, cash proceeds are generally available the day following execution and will be forwarded according to your instructions. When you sell shares that you recently purchased by check, your order will be executed at the next NAV but the proceeds will not be available until your check clears. This may take up to 15 days from the purchase date. Upon execution of the redemption order, a confirmation statement will be forwarded to you indicating the number of shares sold and the proceeds thereof. ACCOUNTS WITH BELOW-MINIMUM BALANCES If your account balance falls below the minimum ($5,000 for Class N and $250,000 for Class I shares) as a result of selling shares (and not because of performance), the Fund reserves the right to request that you buy more shares or close your account. If your account balance is still below the minimum 90 days after notification, the Fund reserves the right to close out your account and send the proceeds to the address of record. AUTOMATIC REINVESTMENT We will reinvest each income dividend and capital gain distribution declared by the Fund in full and fractional shares of the same class, unless you or your duly authorized agent elect to receive all such payments, or only the dividend or distribution portions in cash. We will base such reinvestment on the Fund's NAV as determined on the ex-dividend date. You or your authorized agent may request changes in the manner in which dividend and distribution payments are made through written notice to the Fund. This request will be effective as to any subsequent payment if it is received prior to the record date used for determining your payment. Any dividend and distribution election will remain in effect until you notify the Fund in writing to the contrary. 19 EXCHANGE PRIVILEGE You may exchange shares of either class of the Fund into shares of the same class of any other Fund offered by Dresdner RCM, without a sales charge or other fee (except redemption fees, if any), by contacting the Fund. You may also exchange Class N shares of the Fund into Class I shares of Fund or any other Fund offered by Dresdner RCM. Exchange purchases are subject to the minimum investment requirements of the class purchased. In order to keep Fund expenses low for all shareholders, the Fund will not allow frequent exchanges, purchases or sales of Fund shares. If a shareholder exhibits a pattern of frequent trading, the Fund reserves the right to refuse to accept further purchase or exchange orders from that shareholder. An exchange will be treated as a redemption and purchase for tax purposes. Shares will be exchanged at net asset value per share next determined after receipt by BFDS of: - - A written request for exchange, signed by each registered owner or his or her duly authorized agency exactly as the shares are registered, which clearly identifies the exact names in which the account is registered, the account number and the number of shares or the dollar amount to be exchanged - - Stock certificates for any shares to be exchanged which are held by the stockholder Exchanges will not become effective until all documents in the form required have been received by BFDS. If you have any questions, please contact BFDS. Please be sure to obtain and read carefully the prospectus of any other Fund in which you wish to exchange shares. ACCOUNT STATEMENTS Stockholder accounts are opened in accordance with your registration instructions. Transactions is the account, such as additional investments and dividend reinvestments, will be reflected on regular confirmation statements. REPORTS TO STOCKHOLDERS The Fund's fiscal year ends on December 31. The Fund will issue to its stockholders semi-annual and annual reports. In addition, stockholders will receive quarterly statements of the status of their accounts reflecting all transactions having taken place within that quarter. In order to reduce duplicate mailings and printing costs, the Fund will provide one annual and semi-annual report and annual prospectus per household. Information regarding the tax status of income dividends and capital gains distributions will be mailed to stockholders on or before January 31st of each year. Account tax information will also be sent to the IRS. REDEMPTION Redemption payments will be made wholly in cash unless the Board of Directors believes that unusual conditions exist which would make such payment detrimental to the best interests of the Fund. Under such circumstances, payment of the redemption price could be made in whole or in part in portfolio securities. You would incur brokerage costs to sell such securities. Upon the redemption of the Fund shares held for less than twelve consecutive months, including for this purpose exchanges of Fund shares for shares of other Dresdner RCM Funds as provided in the Section "Exchange Privilege," a fee of 1.00% of the redemption proceeds will be charged and retained by the Fund. This redemption fee will remain in effect until November 3, 1999, approximately six months after the conversion of the Fund. Redeeming stockholders must present the Fund with satisfactory proof of ownership of the redeemed shares for twelve consecutive months in order to avoid the fee. A determination by the Fund of the redemption fee's applicability to a stockholder's redemption is final. This fee is intended to compensate the Fund for transaction and other expenses caused by redemptions and to facilitate efficient portfolio management. The fee is not a deferred sales charge or a commission paid to the Distributor or the Investment Manager. The Fund reserves the right to modify the terms of or terminate the redemption fee at any time. 20 DIVIDENDS, DISTRIBUTIONS AND TAXES The Fund's dividends and distributions consist of most or all of its net investment income and net realized capital gains. They are typically paid once a year in December. The amount depends on the Fund's investment results and its tax compliance situation. Dividends and distributions normally are reinvested in additional Fund shares. You may instruct your financial professional or the Fund to have them sent to you by check or credited to a separate account. If you are an individual (or certain other non-corporate stockholders), we have to withhold 31% of all dividends, capital gains distributions and redemption proceeds we pay to you if: (a) you have not given us a certified correct taxpayer identification number and (b) except with respect to redemption proceeds, have not certified that backup withholding does not apply. Amounts we withhold are applied to your federal tax liability, and a refund may be obtained from the Internal Revenue Service if withholding results in an overpayment of taxes. Distributions of our taxable income and net capital gain to non-resident alien individuals, non-resident alien fiduciaries of trusts of estate, foreign corporations, or foreign partnerships may also be subject to U.S. withholding tax, although distributions of net capital gain to such stockholders generally will not be subject to withholding. We may be required to pay income, withholding and other taxes imposed by foreign countries, generally at rates from 10% to 40%, which would reduce our investment income. Tax conventions between certain countries and the U.S. may reduce or eliminate such taxes. We may "pass through" to you the amount of foreign income taxes we pay, if it is in the best interests of stockholders. If we do so, you will be required to include in your gross income your pro-rata share of foreign taxes we paid, and you will be able to treat such taxes as either an itemized deduction or a foreign credit against U.S. income taxes on your tax returns. If we do not do so, you will not be able to deduct your share of such taxes in computing your taxable income and will not be able to take your share of such taxes as a credit against your U.S. income taxes. In general, selling shares for cash, exchanging shares, and receiving distributions (whether reinvested or taken in cash) are all taxable events. These transactions typically create the following tax liabilities for taxable accounts: TRANSACTION TAX STATUS - ------------------------------------------------------------------------------- Income dividends Ordinary income - ------------------------------------------------------------------------------- Short-term capital gains distributions Ordinary income - ------------------------------------------------------------------------------- Long-term capital gains distributions Capital gains - ------------------------------------------------------------------------------- Sales or exchanges of shares Capital gains or losses owned for more than one year - ------------------------------------------------------------------------------- Sales of exchanges of shares owned Gains are treated for one year or less as ordinary income; losses are subject to special rules - ------------------------------------------------------------------------------- Dividends and other distributions generally are taxable to you at the time they are 21 received. However, dividends declared in October, November and December by the Fund and made payable to you in such months are treated as paid and are thereby taxable as of December 31, provided that the Fund pays the dividend no later than January 31 of the following year. If you purchase the Fund's shares shortly before the record date for a dividend or other distribution thereon, you will pay full price for the shares. This is known as "buying a distribution" because you will receive some portion of your purchase price back as a distribution even though, because the amount of the dividend or other distribution reduces the shares' net asset value, it actually represents a return of invested capital. Depending on your taxpayer status, that distribution may be taxable. You will receive, after the end of each year, full information on dividends, capital gains distributions and other reportable amounts with respect to shares of the Fund for tax purposes. This includes information such as the portion taxable as capital gains and the amount of dividends, if any, eligible for the federal dividends-received deduction for corporate taxpayers. Foreign stockholders may be subject to special withholding requirements. A penalty is charged on certain pre-retirement distributions form retirement accounts. Consult your tax adviser about the federal, state and local tax consequences in your particular circumstances. The tax considerations described in this section do not apply to tax-deferred accounts or other non-taxable entities. Because each investor's tax circumstances are unique, please consult you tax professional about your investment in the Fund. 22 FINANCIAL HIGHLIGHTS The following financial highlights table shows the Fund's financial performance for the past 5 fiscal years as a closed-end investment company. This information has been audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's financial statements, are included in the Fund's Annual Report, which is available upon request and incorporated by reference into the SAI. SELECTED DATA FOR A SHARE OF COMMON STOCK OUTSTANDING FOR EACH OF THE FIVE YEARS ENDED DECEMBER 31, 1998
YEAR ENDED DECEMBER 31, -------------------------------------------------------------- 1998 (a) 1997 (a) 1996 (a) 1995 1994 ---------- ---------- ---------- --------- ----------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 12.59 $ 10.66 $ 9.20 $9.20 $ 9.80 ---------- ---------- ---------- --------- ----------- Income from investment operations: Net investment income (loss) (0.05) 0.01 0.03 0.07 0.03 Net realized and unrealized gain (loss) on investments 4.60 2.70 1.45 (0.07) (0.51) ---------- ---------- ---------- --------- ----------- Total from investment operations 4.55 2.71 1.48 0.00 (0.48) ---------- ---------- ---------- --------- ----------- Less: distributions: From net investment income (0.17) (0.06) (0.02) (0.00) (0.00) From net realized gain on investments (3.31) (0.72) (0.00) (0.00) (0.12) ---------- ---------- ---------- --------- ----------- Total distributions (3.48) (0.78) (0.02)(b) (0.00) (0.12)(b) ---------- ---------- ---------- --------- ----------- NET ASSET VALUE, END OF PERIOD $ 13.66 $ 12.59 $ 10.66 $9.20 $ 9.20 ---------- ---------- ---------- --------- ----------- ---------- ---------- ---------- --------- ----------- PER SHARE MARKET VALUE, END OF PERIOD (c) $ 12.69 $ 11.25 $ 8.13 $7.25 $ 7.38 ---------- ---------- ---------- --------- ----------- ---------- ---------- ---------- --------- ----------- TOTAL NET ASSET VALUE RETURN (d) 37.23% 25.70% 15.87% 1.33% ( 4.98%) ---------- ---------- ---------- --------- ----------- ---------- ---------- ---------- --------- ----------- RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in millions) $ 191 $ 176 $ 149 $ 129 $ 129 ---------- ---------- ---------- --------- ----------- ---------- ---------- ---------- --------- ----------- Ratio of expenses to average net assets 1.97% 1.30% 1.42% 1.51% 1.40% ---------- ---------- ---------- --------- ----------- ---------- ---------- ---------- --------- ----------- Ratio of net investment income (loss) to average net assets (0.31)% 0.06% 0.33% 0.76% 0.34% ---------- ---------- ---------- --------- ----------- ---------- ---------- ---------- --------- ----------- Portfolio turnover rate 114% 85% 51% 40% 91% ---------- ---------- ---------- --------- ----------- ---------- ---------- ---------- --------- -----------
- --------------------------------------------- (a) Calculated using the average share method. (b) The ex-dividend date was after the end of the fiscal year. (c) Closing price - New York Stock Exchange. (d) On May 3, 1999, the Fund converted from a closed-end investment company to an open-end investment company; therefore, previously reported total market value returns calculated using the closing price on the New York Stock Exchange have been replaced by the total net asset value returns for each of the years shown here. The total net asset value return calculation includes the reinvestment of dividends at net asset value on the ex-dividend dates in the year declared. 23 [Back Page] FOR MORE INFORMATION ABOUT DRESDNER RCM INVESTMENT FUNDS, THE FOLLOWING DOCUMENTS ARE AVAILABLE FREE UPON REQUEST: ANNUAL/SEMIANNUAL REPORTS: The Fund's annual and semiannual reports to shareholders contain detailed information on the Fund's investments. The annual report includes a discussion of the market conditions and investment strategies that significantly affected the Fund's performance during its last fiscal year. STATEMENT OF ADDITIONAL INFORMATION (SAI): The SAI provides more detailed information about the Fund, including operations and investment policies. It is incorporated by reference and is legally considered as part of this Prospectus. You can get free copies of the reports and the SAI, or request other information and discuss your questions about the Fund, by contacting us at: Dresdner RCM Investment Funds Inc. Four Embarcadero Center San Francisco, CA 94111 Telephone 1-800-726-7240 You can review the Fund's reports and SAI at the Public Reference Room of the Securities and Exchange Commission in Washington, D.C. You can also get copies: - For a fee, by writing the Public Reference Section of the Commission, Washington, D.C. 20549-6009 or calling 1-800-SEC-0330. - Free from the Commission's Website at http://www.sec.gov. Investment Company Act file no. 811-06038. 24 [LETTERHEAD] DRESDNER RCM EUROPE FUND STATEMENT OF ADDITIONAL INFORMATION May 3, 1999 Dresdner RCM Europe Fund (the "Europe Fund") is a non-diversified series of Dresdner RCM Investment Funds Inc. (the " Company"), an open-end management investment company. The Fund's investment manager is Dresdner RCM Global Investors LLC (the "Investment Manager"). This Statement of Additional Information ("SAI") is not a prospectus, and should be read in conjunction with the Prospectus of the Fund dated May 3, 1999. This SAI relates to the Fund's Non-Institutional Class ("Class N") and Institutional Class ("Class I") of shares. The Prospectus may be obtained without charge by writing or calling the Company at the address and phone number above. Incorporated by reference herein are the financial statements of the Fund contained in the Fund's Annual Report to Shareholders for the year ended December 31, 1998, including the Report of Independent Accountants dated February 22, 1999, the Statement of Assets and Liabilities, including the Portfolio of Investments and the related Statement of Operations, Statement of Changes in Net Assets, and the Financial Highlights. Copies of the Fund's Annual and Semi-Annual Reports to Shareholders will be available upon request, by calling (800) 726-7240, or by writing to Four Embarcadero Center, San Francisco, California 94111. TABLE OF CONTENTS
Page Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Investment Objectives and Policies. . . . . . . . . . . . . . . . . . . 1 Risk Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . . 18 Execution of Portfolio Transactions . . . . . . . . . . . . . . . . . . 20 Directors and Officers. . . . . . . . . . . . . . . . . . . . . . . . . 22 The Investment Manager. . . . . . . . . . . . . . . . . . . . . . . . . 25 The Distributor . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Net Asset Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Purchase and Redemption of Shares . . . . . . . . . . . . . . . . . . . 30 Dividends, Distributions and Tax Status . . . . . . . . . . . . . . . . 30 Investment Results. . . . . . . . . . . . . . . . . . . . . . . . . . . 33 General Information . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Description of Capital Shares . . . . . . . . . . . . . . . . . . . . . 35 Additional Information. . . . . . . . . . . . . . . . . . . . . . . . . 35 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . 36
INVESTMENT OBJECTIVES AND POLICIES In pursuit of its investment objective of long term growth of capital, the Fund will invest at least 75% of its total assets in companies located in Europe, in both EMU and non-EMU countries. The Fund expects to invest the majority of its total assets in equity securities of issuers located in Western European countries. However, if emerging markets present attractive investment opportunities the Fund will also invest in emerging market countries, including Eastern European countries, subject to the percentage limitations described in the prospectus. INVESTMENT CRITERIA In evaluating particular investment opportunities, the Investment Manager may consider such other factors, in addition to those described in the Prospectus, as the anticipated economic growth rate, the political outlook, the anticipated inflation rate, the currency outlook, and the interest rate environment for the country and the region in which a particular issuer is located. When the Investment Manager believes it would be appropriate and useful, the Investment Manager's personnel may visit the issuer's headquarters and plant sites to assess an issuer's operations and to meet and evaluate its key executives. The Investment Manager also will consider whether other risks may be associated with particular securities. INVESTMENT IN FOREIGN SECURITIES The securities markets of many countries have at times in the past moved relatively independently of one another due to different economic, financial, political, and social factors. In seeking to achieve the investment objectives of the Fund, the Investment Manager allocates the Fund's assets among securities of countries and in currency denominations where it expects opportunities for meeting the Fund's investment objectives to be the most attractive, subject to the percentage limitations set forth in the Prospectus. In addition, from time to time the Fund may strategically adjust its investments among issuers based in various countries and among the various equity markets of the world in order to take advantage of diverse global opportunities, based on the Investment Manager's evaluation of prevailing trends and developments, as well as on the Investment Manager's assessment of the potential for capital appreciation (as compared to the risks) of particular companies, industries, countries, and regions. INVESTMENT IN DEVELOPED FOREIGN COUNTRIES. The Fund may invest in securities of foreign governments and companies that are organized or headquartered in developed foreign countries. The Fund may not be invested in all developed foreign countries at one time, and may not invest in particular developed foreign countries at any time, depending on the Investment Manager's view of the investment opportunities available. Although these countries have developed economies, even developed countries may be subject to periods of economic or political instability. For example, efforts by the member countries of the European Union to eliminate internal barriers to the free movement of goods, persons, services and capital have encountered opposition arising from the conflicting economic, political and cultural interests and traditions of the member countries and their citizens. The reunification of the former German Democratic Republic (East Germany) with the Federal Republic of Germany (West Germany) and other political and social events in Europe have caused considerable economic and social dislocations. Such events can materially affect securities markets and have also disrupted the relationship of such currencies with each other and with the U.S. dollar. Future political, economic and social developments can be expected to produce continuing effects on securities and currency markets in these and other developed foreign countries. INVESTMENT IN EMERGING MARKETS. The Fund may invest in securities of developing countries with emerging markets and companies organized or headquartered in such countries. As a general matter, countries that are not considered to be developed foreign countries by the Investment Manager will be deemed to be emerging market countries. Emerging market countries include any country generally considered to be an emerging market or developing country by the World Bank, the International Finance Corporation, the United Nations or its authorities, or other recognized financial institutions. As of the date of this SAI, emerging market countries are deemed to include for purposes of this SAI, all foreign countries other than Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Japan, Luxembourg, The Netherlands, New Zealand, Norway, Singapore, Spain, Sweden, Switzerland, and the United Kingdom. (See INVESTMENT IN DEVELOPED FOREIGN COUNTRIES.) As their Page 1 economies grow and their markets grow and mature, some countries that currently may be characterized by the Investment Manager as emerging market countries may be deemed by the Investment Manager to be developed foreign countries. In the event that the Investment Manager deems a particular country to be a developed foreign country, any investment in securities issued by that country's government or by an issuer located in that country would not be subject to the Fund's overall limitations on investments in emerging market countries. Securities of issuers organized or headquartered in emerging market countries may, at times, offer excellent opportunities for current income and capital appreciation. However, prospective investors should be aware that the markets of emerging market countries historically have been more volatile than the markets of the United States and developed foreign countries, and thus the risks of investing in securities of issuers organized or headquartered in emerging market countries may be far greater than the risks of investing in developed foreign markets. (See RISK CONSIDERATIONS--EMERGING MARKET SECURITIES for a more detailed discussion of the risk factors associated with investments in emerging market securities.) In addition, movements of emerging market currencies historically have had little correlation with movements of developed foreign market currencies. Prospective investors should consider these risk factors carefully before investing in the Fund. Some emerging market countries have currencies whose value is closely linked to the U.S. dollar. Emerging market countries also may issue debt denominated in U.S. dollars and other currencies. It is unlikely that the Fund will be invested in securities in all emerging market countries at any time. Moreover, investing in some emerging markets currently may not be desirable or feasible, due to lack of adequate custody arrangements for Fund assets, overly burdensome repatriation or similar restrictions, the lack of organized and liquid securities markets, unacceptable political risks, poor values of investments in those markets relative to investments in other emerging markets, in developed foreign markets, or in the United States, or for other reasons. CURRENCY MANAGEMENT Securities purchased by the Fund may be denominated in U.S. dollars, foreign currencies, or multinational currencies such as the Euro, and the Fund will incur costs in connection with conversions between various currencies. Movements in the various securities markets may be offset by changes in foreign currency exchange rates. Exchange rates frequently move independently of securities markets in a particular country. As a result, gains in a particular securities market may be affected, either positively or negatively, by changes in exchange rates, and the Fund's net currency positions may expose it to risks independent of its securities positions. From time to time, the Fund may employ currency management techniques (other than currency futures contracts) to enhance its total returns, although there is no current intention to do so. The Fund may not employ more than 30% of the value of its total assets in currency management techniques for the purpose of enhancing returns. To the extent that such techniques are used to enhance return, they are considered speculative. The Fund's ability and decision to purchase or sell portfolio securities may be affected by the laws or regulations in particular countries relating to convertibility and repatriation of assets. Because the shares of the Fund are redeemable in U.S. dollars each day the Fund determines their net asset value, the Fund must have the ability at all times to obtain U.S. dollars to the extent necessary to meet redemptions. Under present conditions, the Investment Manager does not believe that these considerations will have any significant adverse effect on its portfolio strategies, although there can be no assurances in this regard. GENERAL CURRENCY CONSIDERATIONS. Currency exchange rates may fluctuate significantly over short periods of time causing, along with other factors, the Fund's net asset value to fluctuate as well. Currency exchange rates generally are determined by the forces of supply and demand in the foreign exchange markets and the relative merits of investments in different countries, actual or anticipated changes in interest rates and other complex factors, as seen from an international perspective. Currency exchange rates also can be affected unpredictably by intervention, or failure to do so, by U.S. or foreign governments or central banks or by currency controls or political developments in the United States or abroad. The markets in forward foreign currency exchange contracts, currency swaps and other privately negotiated currency instruments offer less protection against defaults by the other party to such Page 2 instruments than is available for currency instruments traded on an exchange. To the extent that a substantial portion of the Fund's total assets, adjusted to reflect the Fund's net position after giving effect to currency transactions, is denominated or quoted in the currencies of foreign countries, the Fund will be more susceptible to the risk of adverse economic and political developments within those countries. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. The Fund may purchase or sell forward foreign currency exchange contracts ("forward contracts") for hedging purposes or to seek to increase total return when the Investment Manager anticipates that a foreign currency will appreciate or depreciate in value, but securities denominated or quoted in that currency do not present attractive investment opportunities and are not held in the Fund's portfolio. When purchased or sold to increase total return, forward contracts are considered speculative. In addition, the Fund may enter into forward contracts in order to protect against anticipated changes in future foreign currency exchange rates. The Fund may engage in cross-hedging by using forward contracts in a currency different from that in which the hedged security is denominated or quoted if the Investment Manager determines that there is a pattern of correlation between the two currencies. The Fund may also engage in proxy hedging, by using forward contracts in a series of foreign currencies for similar purposes. The Fund may enter into forward contracts to purchase foreign currencies to protect against an anticipated rise in the U.S. dollar price of securities it intends to purchase. The Fund may enter into forward contracts to sell foreign currencies to protect against the decline in value of its foreign currency denominated or quoted portfolio securities, or a decline in the value of anticipated income or dividends from such securities, due to a decline in the value of foreign currencies against the U.S. dollar. Forward contracts to sell foreign currency could limit any potential gain which might be realized by the Fund if the value of the hedged currency increased. If the Fund enters into a forward contract to sell foreign currency to increase total return or to buy foreign currency for any purpose, the Fund will segregate cash, U.S. Government securities, or other liquid debt or equity securities with the Fund's custodian in an amount equal to the value of the Fund's total assets committed to the consummation of the forward contract. If the value of the segregated securities declines, additional assets will be segregated so that the value of the segregated assets will equal the amount of the Fund's commitment with respect to the contract. A forward contract is subject to the risk that the counterparty to such contract will default on its obligations. Since a forward contract is not guaranteed by an exchange or clearinghouse, a default on the contract would deprive the Fund of unrealized profits, transaction costs or the benefits of a currency hedge or force the Fund to cover its purchase or sale commitments, if any, at the current market price. OPTIONS ON FOREIGN CURRENCIES. The Fund may purchase and sell (write) put and call options on foreign currencies for the purpose of protecting against declines in the U.S. dollar value of foreign portfolio securities and anticipated income or dividends on such securities and against increases in the U.S. dollar cost of foreign securities to be acquired. The Fund may also use options on currency to cross-hedge, which involves writing or purchasing options on one currency to hedge against changes in exchange rates for a different currency, if the Investment Manager believes there is a pattern of correlation between the two currencies. Options on foreign currencies to be written or purchased by the Fund will be traded on U.S. and foreign exchanges. The writer of a put or call option receives a premium and gives the purchaser the right to sell (or buy) the currency underlying the option at the exercise price. The writer has the obligation upon exercise of the option to purchase (or deliver) the currency during the option period. A writer of an option who wishes to terminate the obligation may effect a "closing transaction" by buying an option of the same series as the option previously written. A writer may not effect a closing purchase transaction after being notified of the exercise of an option. The writing of an option on foreign currency will constitute only a partial hedge, up to the amount of the premium received; the Fund could be required to purchase or sell additional foreign currencies at disadvantageous exchange rates, thereby incurring losses. The purchase of an option on foreign currency may constitute an effective hedge against exchange Page 3 rate fluctuations; however, in the event of exchange rate movements adverse to the Fund's position, the Fund may forfeit the entire amount of the premium plus related transaction costs. The Fund may purchase call or put options on a currency to seek to increase total return when the Investment Manager anticipates that the currency will appreciate or depreciate in value, but the securities quoted or denominated in that currency do not present attractive investment opportunities and are not held in the Fund's portfolio. When the Fund writes a put or call option on a foreign currency, an amount of cash, U.S. Government securities, or other liquid debt or equity securities equal to the market value of its obligations under the option will be segregated by the Fund's custodian to collateralize the position. CURRENCY SWAPS. The Fund may enter into currency swaps for both hedging and to seek to increase total return. Currency swaps involve the exchange of rights to make or receive payments in specified currencies. Since currency swaps are individually negotiated, the Fund expects to achieve an acceptable degree of correlation between its portfolio investments and its currency swap positions entered into for hedging purposes. Currency swaps may involve the delivery of the entire principal value of one designated currency in exchange for the other designated currency, or the delivery of the net amount of a party's obligations over its entitlements. Therefore, the entire principal value of a currency swap may be subject to the risk that the other party to the swap will default on its contractual delivery obligations. The Fund will maintain in a segregated account with the Fund's custodian cash, U.S. Government securities, or other liquid debt or equity securities equal to the amount of the Fund's obligations, or the net amount (if any) of the excess of the Fund's obligations over its entitlements, with respect to swap transactions. To the extent that such amount of a swap is segregated, the Company and the Investment Manager believe that swaps do not constitute senior securities under the Investment Company Act of 1940 (the "1940 Act") and, accordingly, will not treat them as being subject to the Fund's borrowing restriction. The use of currency swaps is a highly specialized activity which involves investment techniques and risks different from those associated with ordinary portfolio securities transactions. If the Investment Manager is incorrect in its forecasts of market values and currency exchange rates, the investment performance of the Fund entering into a currency swap would be less favorable than it would have been if this investment technique were not used. OPTIONS TRANSACTIONS The Fund may purchase listed put and call options on any securities which it is eligible to purchase as a hedge against changes in market conditions that may result in changes in the value of the Fund's portfolio securities. The aggregate premiums on put options and call options purchased by the Fund may not in each case exceed 5% of the value of the net assets of the Fund as of the date of purchase. In addition, the Fund will not purchase options if more than 25% of the value of its net assets would be hedged. A put gives the holder the right, in return for the premium paid, to require the writer of the put to purchase from the holder a security at a specified price. A call gives the holder the right, in return for the premium paid, to require the writer of the call to sell a security to the holder at a specified price. Put and call options on various stocks and financial indices are traded on U.S. and foreign exchanges. A put option is covered if the writer segregates cash, U.S. Government securities or other liquid debt or equity securities equal to the exercise price. A call option is covered if the writer owns the security underlying the call or has an absolute and immediate right to acquire the security without additional cash consideration upon conversion or exchange of other securities held by it. PUT OPTIONS. If the Fund purchases a put option, the Fund acquires the right to sell the underlying security at a specified price at any time during the term of the option (for "American-style" options) or on the option expiration date (for "European-style" options). Purchasing put options may be used as a portfolio investment strategy when the Page 4 Investment Manager perceives significant short-term risk but substantial long-term appreciation for the underlying security. The put option acts as an "insurance policy", as it protects against significant downward price movement while it allows full participation in any upward movement. If the Fund is holding a security which the Investment Manager feels has strong fundamentals, but for some reason may be weak in the near term, the Fund may purchase a put option on such security, thereby giving itself the right to sell such security at a certain strike price throughout the term of the option. Consequently, the Fund will exercise the put only if the price of such security falls below the strike price of the put. The difference between the strike price of the put and the market price of the underlying security on the date the Fund exercises the put, less transaction costs, will be the amount by which the Fund will be able to hedge against a decline in the underlying security. If during the period of the option the market price for the underlying security remains at or above the put's strike price, the put will expire worthless, representing a loss of the price the Fund paid for the put, plus transaction costs. If the price of the underlying security increases, the profit the Fund realizes on the sale of the security will be reduced by the premium paid for the put option less any amount for which the put may be sold. CALL OPTIONS. If the Fund purchases a call option, it acquires the right to purchase the underlying security at a specified price at any time during the term of the option. The purchase of a call option is a type of "insurance policy" to hedge against losses that could incur if the Fund intends to purchase the underlying security and the security thereafter increases in price. The Fund will exercise a call option only if the price of the underlying security is above the strike price at the time of exercise. If during the option period the market price for the underlying security remains at or below the strike price of the call option, the option will expire worthless, representing a loss of the price paid for the option, plus transaction costs. If the price of the underlying security increases, the price the Fund pays for the security will in effect be increased by the premium paid for the call. STOCK INDEX OPTIONS. The Fund may purchase put and call options with respect to stock indices such as Standard & Poor's 500 Stock Index and other stock indices. Such options may be purchased as a hedge against changes resulting from market conditions in the values of securities which are held in the Fund's portfolio or which it intends to purchase or sell, or when they are economically appropriate for the reduction of risks inherent in the ongoing management of the Fund. The distinctive characteristics of options on stock indices create certain risks that are not present with stock options generally. Because the value of an index option depends upon movements in the level of the index rather than the price of a particular stock, whether the Fund will realize a gain or loss on the purchase or sale of an index option depends upon movements in the level of stock prices in the stock market generally rather than movements in the price of a particular stock. Accordingly, successful use by the Fund of options on a stock index will be subject to the Investment Manager's ability to predict correctly movements in the direction of the stock market generally. This requires different skills and techniques than predicting changes in the prices of individual stocks. Index prices may be distorted if trading of certain stocks included in an index is interrupted. Trading of index options also may be interrupted in certain circumstances, such as if trading were halted in a substantial number of stocks included in the index. If this were to occur, the Fund would not be able to close out options which it had purchased, and if restrictions on exercise were imposed, the Fund might be unable to exercise an option it holds, which could result in substantial losses to the Fund. It is the policy of the Fund to purchase put or call options only with respect to an index which the Investment Manager believes includes a sufficient number of stocks to minimize the likelihood of a trading halt in the index. DEALER OPTIONS. The Fund may engage in transactions involving dealer options as well as exchange-traded options. Options not traded on an exchange generally lack the liquidity of an exchange-traded option, and may be subject to the Fund's restriction on investment in illiquid securities. In addition, dealer options may involve the risk that the securities dealers participating in such transactions will fail to meet their obligations under the terms of the options. Page 5 SHORT SALES The Fund may engage in short sales transactions. A short sale that is not made "against the box" is a transaction in which the Fund sells a security it does not own in anticipation of a decline in market price. When the Fund makes a short sale, the proceeds it receives are retained by the broker until the Fund replaces the borrowed security. In order to deliver the security to the buyer, the Fund must arrange through a broker to borrow the security and, in so doing, the Fund becomes obligated to replace the security borrowed at its market price at the time of replacement, whatever that price may be. The value of securities of any issuer in which the Fund maintains a short position that is not "against the box" may not exceed the lesser of 5% of the value of the Fund's net assets or 5% of the securities of such class of the issuer. The Fund's ability to enter into short sales transactions is limited by the requirements of the 1940 Act. Short sales by the Fund that are not made "against the box" create opportunities to increase the Fund's return but, at the same time, involve special risk considerations and may be considered a speculative technique. Since the Fund in effect profits from a decline in the price of the securities sold short without the need to invest the full purchase price of the securities on the date of the short sale, the Fund's net asset value per share will tend to increase more when the securities it has sold short decrease in value, and to decrease more when the securities it has sold short increase in value, than would otherwise be the case if it had not engaged in such short sales. Short sales theoretically involve unlimited loss potential, as the market price of securities sold short may continuously increase, although the Fund may mitigate such losses by replacing the securities sold short before the market price has increased significantly. Under adverse market conditions, the Fund might have difficulty purchasing securities to meet its short sale delivery obligations, and might have to sell portfolio securities to raise the capital necessary to meet its short sale obligations at a time when fundamental investment considerations would not favor such sales. If the Fund makes a short sale "against the box," the Fund would not immediately deliver the securities sold and would not receive the proceeds from the sale. The seller is said to have a short position in the securities sold until it delivers the securities sold, at which time it receives the proceeds of the sale. The Fund's decision to make a short sale "against the box" may be a technique to hedge against market risks when the Investment Manager believes that the price of a security may decline, causing a decline in the value of a security owned by the Fund or a security convertible into or exchangeable for such security. In such case, any future losses in the Fund's long position would be reduced by a gain in the short position. In the view of the Securities and Exchange Commission ("SEC"), a short sale involves the creation of a "senior security" as such term is defined in the 1940 Act, unless the sale is "against the box" and the securities sold are placed in a segregated account (not with the broker), or unless the Fund's obligation to deliver the securities sold short is "covered" by segregating (not with the broker) cash, U.S. Government securities or other liquid debt or equity securities in an amount equal to the difference between the market value of the securities sold short at the time of the short sale and any cash or securities required to be deposited as collateral with a broker in connection with the sale (not including the proceeds from the short sale), which difference is adjusted daily for changes in the value of the securities sold short. The total value of the cash and securities deposited with the broker and otherwise segregated may not at any time be less than the market value of the securities sold short at the time of the short sale. To avoid limitations under the 1940 Act on borrowing by investment companies, short sales by the Fund will be "against the box", or the Fund's obligation to deliver the securities sold short will be "covered" by segregating cash, U.S. Government securities or other liquid debt or equity securities in an amount equal to the market value of its delivery obligation. The Fund will not make short sales of securities or maintain a short position if doing so could create liabilities or require collateral deposits and segregation of assets aggregating more than 25% of the value of the Fund's total assets. Page 6 FUTURES TRANSACTIONS The Fund may enter into contracts for the purchase or sale for future delivery ("futures contracts") of foreign stock or bond indices or other financial indices that the Investment Manager determines are appropriate to hedge the risks associated with changes in interest rates or general fluctuations in the value of its portfolio securities. Pursuant to the regulations of the Commodity Futures Trading Commission ("CFTC"), and subject to certain restrictions, the Fund may purchase or sell futures contracts that are traded on U.S. exchanges that have been designated as contract markets by the CFTC. The Fund may also generally purchase or sell futures contracts that are subject to the rules of any foreign board of trade ("foreign futures contracts"). The Fund may not, however, trade a foreign futures contract based on a foreign stock index unless the contract has been approved by the CFTC for trading by U.S. persons. The Investment Manager may comply with such different standards as may be established by the CFTC with respect to the purchase or sale of futures contracts and foreign futures contracts. FUTURES CHARACTERISTICS. A futures contract on an index is an agreement between two parties (buyer and seller) to take or make delivery of an amount of cash equal to the difference between the value of the index at the close of the last trading day of the contract and the price at which the index contract was originally written. In the case of futures contracts traded on U.S. exchanges, the exchange itself or an affiliated clearing corporation assumes the opposite side of each transaction (i.e., as buyer or seller). A futures contract may be satisfied or closed out by payment of the change in the cash value of the index. No physical delivery of the instruments underlying the index is made. Unlike when the Fund purchases or sells a security, no price is paid or received by the Fund upon the purchase or sale of a futures contract. Initially, the Fund will be required to deposit with the Fund's custodian or such other parties as may be authorized by the SEC (in the name of the futures commission merchant (the "FCM")) an amount of cash or U.S. Treasury bills which is referred to as an "initial margin" payment. The nature of initial margin in futures transactions is different from that of margin in security transactions in that a futures contract margin does not involve the borrowing of funds by the Fund to finance the transactions. Rather, the initial margin is in the nature of a performance bond or good faith deposit on the contract which is returned to the Fund upon termination of the futures contract, assuming all contractual obligations have been satisfied. Futures contracts customarily are purchased and sold with initial margins that may range upwards from less than 5% of the value of the futures contract being traded. Subsequent payments, called "variation margin", to and from the FCM, will be made on a daily basis as the value of the underlying index varies, making the long and short positions in the futures contract more or less valuable. This process is known as "marking to the market." For example, when the Fund has purchased a stock index futures contract and the value of the underlying index has risen, the Fund's position will have increased in value and the Fund will receive from the FCM a variation margin payment equal to that increased value. Conversely, when the Fund has purchased a stock index futures contract and the value of the underlying index has declined, the position would be less valuable and the Fund would be required to make a variation margin payment to the FCM. At any time prior to expiration of a futures contract, the Fund may elect to close the position by taking an identical opposite position which will operate to terminate the Fund's position in the futures contract. A final determination of variation margin is then made, additional cash is required to be paid by or released to the Fund, and the Fund realizes a loss or a gain. Page 7 PURCHASE AND SALE OF FUTURES. When the Investment Manager anticipates a significant stock market or stock market sector advance, the Fund may purchase a stock index futures contract which affords a hedge against not participating in such advance at a time when the Fund is not fully invested in equity securities. Such purchase of a futures contract would serve as a temporary substitute for the purchase of individual stocks which may later be purchased (with attendant costs) in an orderly fashion. As such purchase of individual stocks are made, an approximately equivalent amount of stock index futures would be terminated by offsetting sales. The Fund may sell stock index futures contracts in anticipation of or during a general stock market or market sector decline that may adversely affect the market values of the Fund's portfolio of equity securities. To the extent that the Fund's portfolio of equity securities changes in value in correlation with a given stock index, the sale of futures contracts on that index would reduce the risk to the portfolio of a market decline and, by doing so, would provide an alternative to the liquidation of securities positions in the portfolio with resultant transaction costs. LIMITATIONS ON PURCHASE AND SALE OF FUTURES. The Fund may not purchase or sell futures contracts if, immediately thereafter, more than 30% of the value of its net assets would be hedged. In addition, the Fund may not purchase or sell futures or purchase futures options if, immediately thereafter, the sum of the amount of margin deposits on the Fund's existing futures positions would exceed 5% of the market value of the Fund's total assets. In Fund transactions involving futures contracts, to the extent required by applicable SEC guidelines, an amount of cash, U.S. Government securities, or other liquid debt or equity securities equal to the market value of the futures contracts will be segregated with the Fund's Custodian, or in other segregated accounts as regulations may allow, to collateralize the position and thereby to insure that the use of such futures is unleveraged. REGULATORY MATTERS. The Company has filed a claim of exemption from registration of the Fund as a commodity pool with the CFTC. The Fund intends to conduct its Page 8 futures trading activity in a manner consistent with that exemption. The Investment Manager is registered with the CFTC as both a commodity pool operator and as a commodity trading advisor. SWAPS The Fund may engage in securities index total return swaps with approved counterparties. Securities index total return swaps involve an agreement between two parties to exchange payments that are based on a specified securities index and that are calculated on the basis of a set amount (the "notional amount") for a specified period of time. The Fund may enter into securities index total return swaps only to the extent that the notional amount of all current swaps does not exceed 30% of the Fund's net assets. Generally, the Fund will base its securities index total return swaps on its benchmark index, MSCI Europe, or a separate market index such as the DAX100 or CAC100. The Fund may, among other purposes, use securities index total return swaps to provide the Fund with sufficient liquidity to meet cash redemptions of shares while maintaining its investments in securities and foreign currencies or to provide the Fund with sufficient exposure to the equity markets when it is holding cash that is being held to meet redemptions or when incoming cash is not yet invested. Swaps are subject to risks comparable to the risks involved with respect to hedging transactions. The Fund may enter into securities index total return swaps on either an asset basis or a liability basis, depending on whether it is hedging its assets or its liabilities, and will usually enter into securities index total return swaps on a net basis, i.e., the two payment streams are netted out, with the Fund receiving or paying, as the case may be, only the net amount of the two payments. Inasmuch as segregated accounts will be established with respect to such transactions, the Investment Manager believes such obligations do not constitute senior securities and, accordingly, will not treat them as being subject to the Fund's borrowing restrictions. The net amount of the excess, if any, of the Fund's obligations over its entitlements with respect to each securities index total return swap will be accrued on a daily basis, and appropriate Fund assets having an aggregate net asset value at least equal to the accrued excess will be maintained in a segregated account. The Fund also will establish and maintain such segregated accounts with respect to its total obligations under any swaps that are not entered into on a net basis. The Fund will enter into swaps only with banks and recognized securities dealers believed by the Investment Manager to present minimal credit risk in accordance with guidelines established by the Fund's Board. If there is a default by the approved counterparty to such a transaction, the Fund will have to rely on its contractual remedies (which may be limited by bankruptcy, insolvency or similar laws) pursuant to the agreements related to the swap." DEBT SECURITIES The Fund may purchase debt obligations. The timing of purchase and sale transactions in debt obligations may result in capital appreciation or depreciation because the value of debt obligations varies inversely with prevailing interest rates. The debt obligations in which the Fund will invest will be rated, at the time of purchase, BBB or higher by Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("Standard & Poor's"), or Baa or higher by Moody's Investors Service, Inc. ("Moody's") or equivalent ratings by other rating organizations, or, if unrated, will be determined by the Investment Manager to be of comparable investment quality. If the rating of an investment grade security held by the Fund is downgraded, the Investment Manager will determine whether it is in the best interests of the Fund to continue to hold the security in its investment portfolio. RATINGS. Credit ratings evaluate the safety of principal and interest payments of securities, not their market value. The rating of an issuer is also heavily weighted by past developments and does not necessarily reflect probable future conditions. There is frequently a lag between the time a rating is assigned and the time it is updated. As credit rating agencies may fail to timely change credit ratings of securities to reflect subsequent events, the Investment Manager will also monitor issuers of such securities to determine if such issuers will have sufficient cash flow and profits to meet required principal and interest payments and to assure their liquidity. In general, debt securities held by the Fund will be treated as investment grade if they are rated by at least one major rating agency in one of its top four rating categories at the time of purchase or, if unrated, are determined by the Investment Manager to be of comparable quality. Investment grade means the issuer of the security is believed to have adequate capacity to pay interest and repay principal, although certain of such securities in the lower grades have speculative characteristics, and changes in economic conditions or other circumstances may be more likely to lead to a weakened capacity to pay interest and principal than would be the case with higher rated securities. GOVERNMENT OBLIGATIONS. U.S. Government obligations include obligations issued or guaranteed as to principal and interest by the U.S. Government and its agencies and instrumentalities, by the right of the issuer to borrow from the U.S. Treasury, by the discretionary authority of the U.S. Government to purchase certain obligations of the agency or instrumentality, or only by the credit of the agency or instrumentality. No assurance can be given that the U.S. Government will provide financial support to U.S. Government-sponsored instrumentalities if it is not obligated to do so by law. The Fund may invest in sovereign debt obligations of foreign countries. A number of factors affect a sovereign debtor's willingness or ability to repay principal and interest in a timely manner, including its cash flow situation, the extent of its foreign reserves, the availability of sufficient foreign exchange on the date a payment is due, the relative size of the debt service burden to the economy as a whole, the sovereign debtor's policy toward principal international lenders and the political constraints to which it may be subject. Emerging market governments could default on their sovereign debt. Such sovereign debtors also may be dependent on expected disbursements from foreign governments, multilateral agencies and other entities abroad to reduce principal and interest arrearages on their debt. The commitments on the part of these governments, agencies and others to make such disbursements may be conditioned on a sovereign debtor's implementation of economic reforms and/or economic performance and the timely service of such debtor's obligations. Failure to meet such conditions could result in the cancellation of such third parties' commitments to lend funds to the sovereign debtor, which may further impair such debtor's ability or willingness to service its debt in a timely manner. CONVERTIBLE SECURITIES AND WARRANTS The Fund may invest in convertible securities and warrants. The value of a convertible security is a function of its "investment value" (determined by its yield in comparison with the yields of other securities of comparable maturity and quality that do not have conversion privilege) and its "conversion value" (the security's worth, at market value, if converted into the underlying common stock). The credit standing of the issuer and other factors may also Page 9 affect the investment value of a convertible security. The conversion value of a convertible security is determined by the market price of the underlying common stock. If the conversion value is low relative to the investment value, the price of the convertible security is governed principally by its investment value. To the extent the market price of the underlying common stock approaches or exceeds the conversion price, the price of the convertible security will be increasingly influenced by its conversion value. As a matter of operating policy, the Fund will not invest more than 5% of its net assets in warrants. A warrant gives the holder a right to purchase at any time during a specified period a predetermined number of shares of common stock at a fixed price. Unlike convertible debt, securities or preferred stock, warrants do not pay a fixed dividend. Investments in warrants involve certain risks, including the possible lack of a liquid market for resale of the warrants, potential price fluctuations as a result of speculation or other factors, and failure of the price of the underlying security to reach or have reasonable prospects of reaching a level at which the warrant can be prudently exercised (in which event the warrant may expire without being exercised) resulting in a loss of the Fund's entire investment. SYNTHETIC CONVERTIBLE SECURITIES The Fund may invest in "synthetic" convertible securities, which are derivative positions composed of two or more different securities whose investment characteristics, taken together, resemble those of convertible securities. For example, the Fund may purchase a non-convertible debt security and a warrant or option, which enables the Fund to have a convertible-like position with respect to a company, group of companies or stock index. Synthetic convertible securities are typically offered by financial institutions and investment banks in private placement transactions. Upon conversion, the Fund generally receives an amount in cash equal to the difference between the conversion price and the then current value of the underlying security. Unlike a true convertible security, a synthetic convertible comprises two or more separate securities, each with its own market value. Therefore, the market value of a synthetic convertible is the sum of the values of its fixed-income component and its convertible component. For this reason, the values of a synthetic convertible and a true convertible security may respond differently to market fluctuations. The Fund only invests in synthetic convertibles with respect to companies whose corporate debt securities are rated "A" or higher by Moody's or Standard & Poor's and will not invest more than 15% of its net assets in such synthetic securities and other illiquid securities. PREFERRED STOCK The Fund may purchase preferred stock. Preferred stock, unlike common stock, offers a stated dividend rate payable from a corporation's earnings. Such preferred stock dividends may be cumulative or non-cumulative, participating, or auction rate. If interest rates rise, the fixed dividend on preferred stocks may be less attractive, causing the price of preferred stocks to decline. Preferred stock may have mandatory sinking fund provisions, as well as call/redemption provisions prior to maturity, a negative feature when interest rates decline. Dividends on some preferred stock may be "cumulative," requiring all or a portion of prior unpaid dividends to be paid prior to payment of dividends on the issuer's common stock. Preferred stock also generally has a preference over common stock on the distribution of a corporation's assets in the event of liquidation of the corporation, and may be "participating," which means that it may be entitled to a dividend exceeding the stated dividend in certain cases. The rights of the holders of preferred stock on the distribution of a corporation's assets in the event of a liquidation are generally subordinate to the rights associated with a corporation's debt securities. BORROWING MONEY From time to time, it may be advantageous for the Fund to borrow money rather than sell portfolio securities to raise the cash to meet redemption requests. In order to meet such redemption requests, the Fund may borrow from banks or enter into reverse repurchase agreements. The Fund may also borrow up to 5% of the value of its total assets for temporary or emergency purposes other than to meet redemptions. However, the Fund will not borrow money for leveraging purposes. The Fund may continue to purchase securities while borrowings are outstanding. Page 10 The 1940 Act permits the Fund to borrow only from banks and only to the extent that the value of its total assets, less its liabilities other than borrowings, is equal to at least 300% of all borrowings (including the proposed borrowing), and requires the Fund to take prompt action to reduce its borrowings if this limit is exceeded. For the purpose of the 300% borrowing limitation, reverse repurchase agreements and other borrowing transactions covered by segregated assets are not considered borrowings. A reverse repurchase agreement involves a transaction by which a borrower (such as the Fund) sells a security to a purchaser (a member bank of the Federal Reserve System or a broker-dealer deemed creditworthy pursuant to standards adopted by the Board of Directors of the Company (the "Board of Directors" ), and simultaneously agrees to repurchase the security at an agreed-upon price on an agreed-upon date within a number of days (usually not more than seven) from the date of purchase. LENDING PORTFOLIO SECURITIES The Fund is authorized to make loans of portfolio securities, for the purpose of realizing additional income, to broker-dealers or other institutional investors deemed creditworthy pursuant to standards adopted by the Board of Directors. The borrower must maintain with the Fund's custodian collateral consisting of cash, U.S. Government securities or other liquid debt or equity securities equal to at least 100% of the value of the borrowed securities, plus any accrued interest. The Fund will receive any interest paid on the loaned securities, and a fee and/or a portion of the interest earned on the collateral, less any fees and administrative expenses associated with the loan. INVESTMENT IN ILLIQUID SECURITIES The Fund may invest up to 15% of the value of its net assets in illiquid securities. Securities may be considered illiquid if the Fund cannot reasonably expect to receive approximately the amount at which the Fund values such securities within seven days. The Investment Manager has the authority to determine whether certain securities held by the Fund are liquid or illiquid pursuant to standards adopted by the Boards of Directors. The Investment Manager takes into account a number of factors in reaching liquidity decisions, including, but not limited to: the listing of the security on an exchange or national market system; the frequency of trading in the security; the number of dealers who publish quotes for the security; the number of dealers who serve as market makers for the security; the apparent number of other potential purchasers; and the nature of the security and how trading is effected (e.g., the time needed to sell the security, how offers are solicited, and the mechanics of transfer). The Fund's investments in illiquid securities may include securities that are not registered for resale under the Securities Act of 1933 (the "Securities Act"), and therefore are subject to restrictions on resale. When the Fund purchases unregistered securities, it may, in appropriate circumstances, obtain the right to register such securities at the expense of the issuer. In such cases there may be a lapse of time between the Fund's decision to sell any such security and the registration of the security permitting sale. During any such period, the price of the security will be subject to market fluctuations. The fact that there are contractual or legal restrictions on resale of certain securities to the general public or to certain institutions may not be indicative of the liquidity of such investments. If such securities are subject to purchase by institutional buyers in accordance with Rule 144A under the Securities Act, the Investment Manager may determine in particular cases, pursuant to standards adopted by the Boards of Directors, that such securities are not illiquid securities notwithstanding the legal or contractual restrictions on their resale. Investing in Rule 144A securities could have the effect of increasing the Fund's illiquidity to the extent that qualified institutional buyers become, for a time, uninterested in purchasing such securities. Page 11 CASH-EQUIVALENT INSTRUMENTS Other than as described under INVESTMENT RESTRICTIONS below, the Fund is not restricted with regard to the types of cash-equivalent investments it may make. When the Investment Manager believes that such investments are an appropriate part of the Fund's overall investment strategy, the Fund may hold or invest, for investment purposes, a portion of its assets in any of the following, denominated in U.S. dollars, foreign currencies, or multinational currencies: cash; short-term U.S. or foreign government securities; commercial paper rated at least A-2 by Standard & Poor's or P-2 by Moody's; certificates of deposit or other deposits of banks deemed creditworthy by the Investment Manager pursuant to standards adopted by the Board of Directors; time deposits; bankers' acceptances; and repurchase agreements related to any of the foregoing. In addition, for temporary defensive purposes under abnormal market or economic conditions, the Fund may invest up to 100% of its assets in such cash-equivalent investments. A certificate of deposit is a short-term obligation of a commercial bank. A bankers' acceptance is a time draft drawn on a commercial bank by a borrower, usually in connection with international commercial transactions. A repurchase agreement involves a transaction by which an investor (such as the Fund) purchases a security and simultaneously obtains the commitment of the seller (a member bank of the Federal Reserve System or a securities dealer deemed creditworthy by the Investment Manager pursuant to standards adopted by the Board of Directors) to repurchase the security at an agreed-upon price on an agreed-upon date within a number of days (usually not more than seven) from the date of purchase. RISK CONSIDERATIONS INVESTMENTS IN FOREIGN SECURITIES GENERALLY Investments in foreign securities may offer investment opportunities and potential benefits not available from investments solely in securities of U.S. issuers. Such benefits may include higher rates of interest on debt securities than are available from domestic issuers, the opportunity to invest in foreign issuers that appear, in the opinion of the Investment Manager, to offer better opportunity for long-term capital appreciation than investments in securities of U.S. issuers, the opportunity to invest in foreign countries with economic policies or business cycles different from those of the United States and the opportunity to reduce fluctuations in portfolio value by taking advantage of foreign markets that do not necessarily move in a manner parallel to U.S. stock markets. At the same time, however, investing in foreign securities involves significant risks, some of which are not typically associated with investing in securities of U.S. issuers. For example, the value of investments in such securities may fluctuate based on changes in the value of one or more foreign currencies relative to the U.S. dollar, and a change in the exchange rate of one or more foreign currencies could reduce the value of certain portfolio securities. Currency exchange rates may fluctuate significantly over short periods of time, and are generally Page 12 determined by the forces of supply and demand and other factors beyond the Fund's control. Changes in currency exchange rates may, in some circumstances, have a greater effect on the market value of a security than changes in the market price of the security. To the extent that a substantial portion of the Fund's total assets is denominated or quoted in the currency of a foreign country, the Fund will be more susceptible to the risk of adverse economic and political developments within that country. As discussed above, the Fund may employ certain investment techniques to hedge its foreign currency exposure; however, such techniques also entail certain risks. In addition, information about foreign issuers may be less readily available than information about domestic issuers. Foreign issuers generally are not subject to accounting, auditing, and financial reporting standards or to other regulatory practices and requirements comparable to those applicable to U.S. issuers. Furthermore, with respect to certain foreign countries, the possibility exists of expropriation, nationalization, revaluation of currencies, confiscatory taxation, and limitations on foreign investment and the use or removal of funds or other assets of the Fund, including the withholding of tax on interest, dividends and other distributions and limitations on the repatriation of currencies. In addition, the Fund may experience difficulties or delays in obtaining or enforcing judgments. Foreign securities may be subject to foreign government taxes that could reduce the yield and total return on such securities. Foreign equity securities may be traded on an exchange in the issuer's country, an exchange in another country, or over-the-counter in one or more countries. Most foreign securities markets, including over-the-counter markets, have substantially less volume than U.S. securities markets, and the securities of many foreign issuers may be less liquid and more volatile than securities of comparable U.S. issuers. In addition, there is generally less government regulation of securities markets, securities exchanges, securities dealers, and listed and unlisted companies in foreign countries than in the United States. Foreign markets also have different clearance and settlement procedures, and in certain markets there have been times when settlements have been unable to keep pace with the volume of securities transactions, making it difficult to conduct and complete such transactions. Inability to dispose of a portfolio security caused by settlement problems could result either in losses to the Fund due to subsequent declines in the value of the portfolio security or, if the Fund has entered into a contract to sell that security, could result in possible liability of the Fund to the purchaser. Delays in settlement could adversely affect the Fund's ability to implement its investment strategies and to achieve its investment objectives. In addition, the costs associated with transactions in securities traded on foreign markets or of foreign issuers, and the expense of maintaining custody of such securities with foreign custodians, generally are higher than the costs associated with transactions in U.S. securities on U.S. markets. Investments in foreign securities may result in higher expenses due to the cost of converting foreign currency to U.S. dollars, the payment of fixed brokerage commissions on foreign exchanges, the expense of maintaining securities with foreign custodians and the imposition of transfer taxes or transaction charges associated with foreign exchanges. Investment in debt securities of supranational organizations involves additional risks. Such organizations' debt securities generally are not guaranteed by their member governments, and payment depends on their financial solvency and/or the willingness and ability of their member governments to support their obligations. Continued support of a supranational organization by its government members is subject to a variety of political, economic and other factors, as well as the financial performance of the organization. DEPOSITARY RECEIPTS In many respects, the risks associated with investing in depositary receipts are similar to the risks associated with investing in foreign equity securities directly. In addition, to the extent that the Fund acquires depositary receipts through banks that do not have a contractual relationship with the foreign issuer of the security underlying the depositary receipts to issue and service depositary receipts, there may be an increased possibility that the Fund would not become aware of and be able to respond to corporate actions, such as stock splits or rights offerings, involving the foreign issuer in a timely manner. Page 13 The information available for American Depositary Receipts ("ADRs") sponsored by the issuers of the underlying securities is subject to the accounting, auditing, and financial reporting standards of the domestic market or exchange on which they are traded, which standards generally are more uniform and more exacting than those to which many non-domestic issuers may be subject. However, some ADRs are sponsored by persons other than the issuers of the underlying securities. Issuers of the stock on which such ADRs are based are not obligated to disclose material information in the United States. The information that is available concerning the issuers of the securities underlying European Depositary Receipts ("EDRs") and Global Depositary Receipts ("GDRs") may be less than the information that is available about domestic issuers, and EDRs and GDRs may be traded in markets or on exchanges that have lesser standards than those applicable to the markets for ADRs. A depositary receipt will be treated as an illiquid security for purposes of the Fund's restriction on the purchases of such securities unless the depositary receipt is convertible into cash by the Fund within seven days. EMERGING MARKET SECURITIES There are special risks associated with investments in securities of companies organized or headquartered in developing countries with emerging markets that are in addition to the usual risks of investing in securities of issuers located in developed foreign markets around the world, and investors in the Fund are strongly advised to consider those risks carefully. The securities markets of emerging market countries are substantially smaller, less developed, less liquid, and more volatile than the securities markets of the United States and developed foreign markets. As a result, the prices of emerging market securities may increase or decrease much more rapidly and much more dramatically than the prices of securities of issuers located in developed foreign markets. Disclosure and regulatory standards in many respects are less stringent than in the United States and developed foreign markets. There also may be a lower level of monitoring and regulation of securities markets in emerging market countries and the activities of investors in such markets, and enforcement of existing regulations has been extremely limited. Many emerging market countries have experienced substantial, and in some periods extremely high, rates of inflation for many years. Inflation and rapid fluctuations in inflation rates have had and may continue to have very negative effects on the economies and securities markets of certain emerging market countries. Economies in emerging markets generally are heavily dependent upon international trade and, accordingly, have been and may continue to be affected adversely by trade barriers, exchange controls, managed adjustments in relative currency values, and other protectionist measures imposed or negotiated by the countries with which they trade. These economies also have been and may continue to be adversely affected by economic conditions in the countries with which they trade. In addition, custodial services and other costs related to investment in foreign markets may be more expensive in emerging markets than in many developed foreign markets, which could reduce the Fund's investment returns from such securities. In many cases, governments of emerging market countries continue to exercise a significant degree of control over the economies of such countries, and government actions relative to the economy, as well as economic developments generally, also may have a major effect on an issuer's prospects. In addition, certain of such governments have in the past failed to recognize private property rights and have at times naturalized or expropriated the assets of private companies. There is also a heightened possibility of confiscatory taxation, imposition of withholding taxes on dividend and interest payments, or other similar developments that could affect investments in those countries. As a result, there can be no assurance that adverse political changes will not cause the Fund to suffer a loss with respect to any of its holdings. In addition, political and economic structures in many of such countries may be undergoing significant evolution and rapid development, and such countries may lack the social, political and economic stability characteristics of more developed countries. Unanticipated political or social developments may affect the values of the Fund's investments in those countries and the availability of additional investments in those countries. Page 14 INVESTMENTS IN SMALLER COMPANIES Investment in the securities of companies with market capitalizations below $1 billion involves greater risk and the possibility of greater portfolio price volatility than investing in larger capitalization companies. The securities of small-sized concerns, as a class, have shown market behavior which has had periods of more favorable results, and periods of less favorable results, relative to securities of larger companies as a class. For example, smaller capitalization companies may have less certain growth prospects, and may be more sensitive to changing economic conditions, than large, more established companies. Moreover, smaller capitalization companies often face competition from larger or more established companies that have greater resources. In addition, the smaller capitalization companies in which the Fund may invest may have limited or unprofitable operating histories, limited financial resources, and inexperienced management. Furthermore, securities of such companies are often less liquid than securities of larger companies, and may be subject to erratic or abrupt price movements. To dispose of these securities, the Fund may have to sell them over an extended period of time below the original purchase price. Investments in smaller capitalization companies may be regarded as speculative. Securities issued by companies (including predecessors) that have operated for less than three years may have limited liquidity, which can result in their prices being lower than might otherwise be the case. In addition, investments in such companies are more speculative and entail greater risk than do investments in companies with established operating records. CONVERTIBLE SECURITIES Investment in convertible securities involves certain risks. If the conversion value is low relative to the investment value, the price of the convertible security will be governed principally by its yield, and thus may not decline in price to the same extent as the underlying stock; to the extent the market price of the underlying common stock approaches or exceeds the conversion price, the price of the convertible security will be influenced increasingly by its conversion value. A convertible security held by the Fund may be subject to redemption at the option of the issuer at a price established in the instrument governing the convertible security, in which event the Fund will be required to permit the issuer to redeem the security, convert it into the underlying common stock, or sell it to a third party. OTHER DEBT OBLIGATIONS Although securities rated BBB by Standard & Poor's or Baa by Moody's are considered to be of "investment grade," and are considered to have adequate capacity to pay interest and repay principal, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and principal than higher-rated securities. Credit ratings evaluate the safety of principal and interest payments of securities, not their market value. The rating of an issuer is also heavily weighted by past developments and does not necessarily reflect probable future conditions. There is frequently a lag between the time a rating is assigned and the time it is updated. OPTIONS There are several risks associated with transactions in options on securities, currencies and financial indices. Options may be more volatile than the underlying instruments, and therefore, on a percentage basis, an investment in options may be subject to greater fluctuation than an investment in the underlying instruments themselves. There are also significant differences between the securities and options markets that could result in an imperfect correlation between these markets, causing a given transaction not to achieve its objective. In addition, a liquid secondary market for particular options may be absent for reasons which include the following: there may be insufficient trading interest in certain options; restrictions may be imposed by an exchange on opening transactions or closing transactions or both; trading halts, suspensions or other restrictions may be imposed with respect to particular classes or series of options or underlying instruments; unusual or unforeseen circumstances may interrupt normal Page 15 operations on an exchange; the facilities of an exchange or clearing corporation may not at all times be adequate to handle current trading volume; or one or more exchanges could, for economic or other reasons, decide, or be compelled at some future date, to discontinue the trading of options (or a particular class or series of options), in which event the secondary market on that exchange (or in that class or series of options) would cease to exist, although outstanding options that had been issued by a clearing corporation as a result of trades on that exchange would continue to be exercisable in accordance with their terms. A decision as to whether, when and how to use options involves the exercise of skill and judgment, and even a well-conceived transaction may be unsuccessful to some degree because of market behavior or unexpected events. In addition, when trading options on foreign exchanges, many of the protections afforded to participants in U.S. option exchanges will not be available. For example, there may be no daily price fluctuation limits in such exchanges or markets, and adverse market movements could therefore continue to an unlimited extent over a period of time. Although the purchaser of an option cannot lose more than the amount of the premium plus related transaction costs, this entire amount could be lost. Potential losses to the writer of an option are not limited to the loss of the option premium received by the writer, and thus may be greater than the losses incurred in connection with the purchasing of an option. FUTURES TRANSACTIONS There are several risks in connection with the use of futures contracts in the Fund. One risk arises because the correlation between movements in the price of an index futures contract and movements in the value of the portfolio of securities which is the subject of the hedge is not always perfect. The price of the futures contract acquired by the Fund may move more than, or less than, the value of the portfolio of securities being hedged. If the price of the future moves less than the value of the portfolio of securities which is the subject of the hedge, the hedge will not be fully effective but, if the value of the portfolio of securities being hedged has moved in an unfavorable direction, the Fund would be in a better position than if it had not hedged at all. If the value of the portfolio of securities being hedged has moved in a favorable direction, this advantage will be partially offset by movement in the value of the future. If the price of the futures contract moves more than the value of the portfolio of securities, the Fund will experience either a loss or a gain on the futures contract which will not be completely offset by movements in the value of the portfolio of securities which is the subject of the hedge. To compensate for the imperfect correlation of movements in the value of the portfolio of securities being hedged and movements in the price of the futures, the Fund may buy or sell futures contracts in a greater dollar amount than the value of the portfolio of securities being hedged, if the historical volatility of the value of the portfolio of securities has been greater than the historical volatility of the futures contract being used. Conversely, the Fund may buy or sell fewer futures contracts if the historical volatility of the price of the security or currency being hedged is less than the historical volatility of the security or currency. Because of the low margins required, futures trading involves a high degree of leverage. As a result, a relatively small investment in a futures contract by the Fund may result in immediate and substantial loss, or gain, to the Fund. A purchase or sale of a futures contract may result in losses in excess of the initial margin for the futures contract. However, the Fund would have sustained comparable losses if, instead of the futures contract, it had invested in the underlying financial instrument and sold the instrument after the decline. When futures are purchased by the Fund to hedge against a possible unfavorable movement in a currency exchange rate before the Fund is able to invest its cash (or cash equivalents) in stock or debt instruments in an orderly fashion, it is possible that the currency exchange rate may move in a favorable manner instead. If the Fund then decides not to invest in stock or debt instruments at that time because of concern as to possible further market decline or for other reasons, the Fund will realize a loss on the futures contract that is not offset by a reduction in the price of securities purchased. Page 16 In addition, the price of futures contracts may not correlate perfectly with movements in the index due to certain market distortions. First, all participants in the futures market are subject to margin deposit and maintenance requirements. Rather than meeting additional margin deposit requirements, investors may close futures contracts through offsetting transactions. This practice could distort the normal relationship between the index and futures markets. Second, from the point of view of speculators, the deposit requirements in the futures market may be less onerous than margin requirements in the securities market. Therefore, increased participation by speculators in the futures market also may cause temporary price distortions. Due to the possibility of price distortion in the futures market and because of the imperfect correlation between movements in the index and movements in the price of index futures, a correct forecast of general market trends by the Investment Manager still may not result in a successful hedging transaction over a short time frame. Futures exchanges may limit the amount of fluctuation permitted in certain futures contract prices during a single trading day. Once the daily limit has been reached, no more trades may be made on that day at a price beyond the limit. The daily limit governs only price movements during a particular trading day and therefore does not limit potential losses, because the limit may prevent the liquidation of unfavorable positions. The Fund will only enter into futures contracts that are standardized and traded on a U.S. or foreign exchange or board of trade, or similar entity, or quoted on an automated quotation system. However, there is no assurance that a liquid secondary market on an exchange or board of trade will exist for any particular futures contract or at any particular time. In such event, it may not be possible to close a futures position, and, in the event of adverse price movements, the Fund would continue to be required to make daily cash payments of variation margin. In the event futures contracts have been used to hedge a portfolio security, an increase in the price of the security, if any, may partially or completely offset losses on the futures contract. However, as described above, there is no guarantee that the price of the security will, in fact, correlate with the movements in the futures contract and thus provide an offset to losses on a futures contract. Successful use of futures by the Fund is subject to the Investment Manager's ability to predict correctly movements in the direction of the securities markets and interest rates. For example, if the Fund hedged against the possibility of a decline in the market adversely affecting the value of its portfolio and its value increased instead, the Fund would lose part or all of the benefit of the increased value of its portfolio because it would have offsetting losses in its futures positions. In addition, in such situations, if the Fund had insufficient cash, it might have to sell securities to meet daily variation margin requirements. Such sales of securities might, but would not necessarily be at increased prices which would reflect the rising market. The Investment Manager and its predecessor have been actively engaged in the provision of investment supervisory services for institutional and individual accounts since 1970, but the skills required for the successful use of futures are different from those needed to select portfolio securities, and the Investment Manager has limited prior experience in the use of futures techniques in the management of assets under its supervision. Page 17 OTHER RISK CONSIDERATIONS Investment in illiquid securities involves potential delays on resale as well as uncertainty in valuation. Limitations on resale may have an adverse effect on the marketability of portfolio securities, and the Fund might not be able to dispose of such securities promptly or at reasonable prices. A number of transactions in which the Fund may engage are subject to the risks of default by the other party to the transaction. If the seller of securities pursuant to a repurchase agreement entered into by the Fund defaults and the value of the collateral securing the repurchase agreement declines, the Fund may incur a loss. If bankruptcy proceedings are commenced with respect to the seller, realization of the collateral by the Fund may be delayed or limited. Similarly, when the Fund engages in when-issued, reverse repurchase, forward commitment and related settlement transactions, it relies on the other party to consummate the trade; failure of the other party to do so may result in the Fund incurring a loss or missing an opportunity to obtain a price the Investment Manager believed to be advantageous. The risks in lending portfolio securities, as with other extensions of secured credit, consist of a possible delay in receiving additional collateral or in recovery of the securities or possible loss of rights in the collateral should the borrower fail financially. Borrowing also involves special risk considerations. Interest costs of borrowings may fluctuate with changing market rates of interest and may partially offset or exceed the return earned on the borrowed funds (or on the assets that were retained rather than sold to meet the needs for which funds were borrowed). Under adverse market conditions, the Fund might have to sell portfolio securities to meet interest or principal payments at a time when fundamental investment considerations would not favor such sales. To the extent the Fund enters into reverse repurchase agreements, the Fund is subject to risks that are similar to those of borrowing. INVESTMENT RESTRICTIONS FUNDAMENTAL POLICIES The Fund has adopted certain investment restrictions that are fundamental policies and that may not be changed without approval by the vote of a majority of the Fund's outstanding voting securities, as defined in the 1940 Act. The "vote of a majority of the outstanding voting securities" of the Fund, as defined in Section 2(a)(42) of the 1940 Act, means the vote of (i) 67% or more of the voting securities of the Fund present at any meeting, if the holders of more than 50% of the outstanding voting securities of the Fund are present or represented by proxy, or (ii) more than 50% of the outstanding voting securities of the Fund, whichever is less. These restrictions provide that the Fund may not: 1. Purchase any security (other than obligations of the FRG, the German Federal Railways and the German Federal Post Office, which in the aggregate shall not represent 25% or more of the Fund's total assets, or obligations of the U.S. government, its agencies or instrumentalities) if as a result more than 10% of the Fund's total assets would then be invested in securities of any single issuer. 2. Invest 25% or more of the value of its total assets in a particular industry. This restriction does not apply to securities issued or guaranteed by the U.S. government, its agencies or instrumentalities, but will apply to foreign government obligations until such time as the Securities and Exchange Commission permits their exclusion. 3.Purchase more than 10% of the outstanding voting securities of any issuer. 4. Borrow money, except from banks to meet redemption requests or for temporary or emergency purposes; provided that borrowings for temporary or emergency purposes other than to meet redemption requests shall not exceed 5% of the value of its total assets; and provided further that total borrowings shall be made only to the extent that the value of the Fund's total assets, less its liabilities other than borrowings, is equal to at least 300% of all borrowings (including the proposed borrowing). For purposes of the foregoing limitations, reverse repurchase agreements and other borrowing transactions covered by segregated assets are not considered to be borrowings. This investment restriction shall not prohibit the Fund from engaging in futures contracts, options on futures, forward foreign currency exchange transactions, and currency options. Page 18 5. Purchase or sell real estate or real estate mortgage loans, except that the Fund may purchase and sell securities of companies that deal in real estate or interests therein. 6. Purchase securities on margin, except short-term credits as may be necessary or routine for the clearance or settlement of transactions, and except for margin posted in connection with hedging transactions consistent with its investment policies. 7. Underwrite securities of other issuers, except insofar as the Fund may be deemed an underwriter under the U.S. Securities Act of 1933 in selling portfolio securities. 8. Buy or sell commodities, commodity contracts or futures contracts (other than futures contracts with respect to foreign stock or bond indices or other financial indices that the Investment Manager determines are appropriate to hedge the risks associated with interest rates or general fluctuations in the value of its portfolio securities). OPERATING POLICIES The Fund has adopted certain investment restrictions that are not fundamental policies and may be changed by the Board of Directors without approval of the Fund's outstanding voting securities. These restrictions provide that the Fund may not: 1. Invest in interests in oil, gas, or other mineral exploration or development programs; Page 19 2. Participate on a joint or a joint-and-several basis in any trading account in securities (the aggregation of orders for the sale or purchase of marketable portfolio securities with other accounts under the management of the Investment Manager to save brokerage costs, or to average prices among them, is not deemed to result in a securities trading account). 3. Purchase or sell futures if, immediately thereafter, the sum of the amount of "margin" deposits on the Fund's existing futures positions would exceed 5% of the value of the Fund's total assets. 4. Invest more than 15% of the value of its net assets in securities that are illiquid. The Fund is also subject to other restrictions under the 1940 Act; however, the registration of the Company under the 1940 Act does not involve any supervision by any federal or other agency of the Company's management or investment practices or policies, other than incident to occasional or periodic compliance examinations conducted by the SEC staff. EXECUTION OF PORTFOLIO TRANSACTIONS The Investment Manager, subject to the overall supervision of the Board of Directors, makes the Fund's investment decisions and selects the broker or dealer to be used in each specific transaction using its best judgment to choose the broker or dealer most capable of providing the services necessary to obtain the best execution of that transaction. In seeking the best execution of a transaction, the Investment Manager evaluates a wide range of criteria, including any or all of the following: the broker's commission rate, promptness, reliability and quality of executions, trading expertise, positioning and distribution capabilities, back-office efficiency, ability to handle difficult trades, knowledge of other buyers and sellers, confidentiality, capital strength and financial stability, prior performance in serving the Investment Manager and its clients, and other factors affecting the overall benefit to be received in the transaction. When circumstances relating to a proposed transaction indicate to the Investment Manager that a particular broker is in a position to obtain the best execution, the order is placed with that broker. This may or may not be a broker that has provided investment information and research services to the Investment Manager. Such investment information may include, among other things: a wide variety of written reports or other data on individual companies and industries; data and reports on general market or economic conditions; information concerning pertinent federal and state legislative and regulatory developments and other developments that could affect the value of actual or potential investments; information about companies in which the Investment Manager has invested or may consider investing; attendance at meetings with corporate management personnel, industry experts, economists, government personnel, and other financial analysts; comparative issuer performance and evaluation and technical measurement services; subscription to publications that provide investment-related information; accounting and tax law interpretations; availability of economic advice; quotation equipment and services; execution measurement services; market-related and survey data concerning the products and services of an issuer and its competitors or concerning a particular industry that are used in reports prepared by the Investment Manager to enhance its ability to analyze an issuer's financial condition and prospects; and other services provided by recognized experts on investment matters of particular interest to the Investment Manager. In addition, the foregoing services may include the use of, or be delivered by, computer systems whose hardware and/or software components may be provided to the Investment Manager as part of the services. In any case in which information and other services can be used for both research and non-research purposes, the Investment Manager makes an appropriate allocation of those uses and pays directly for that portion of the services to be used for non-research purposes. Subject to the requirement of seeking the best execution, the Investment Manager may, in circumstances in which two or more brokers are in a position to offer comparable execution, give preference to a broker or dealer that has provided investment information to the Investment Manager. In so doing, the Investment Manager may effect Page 20 securities transactions which cause the Fund to pay an amount of commission in excess of the amount of commission another broker would have charged. In electing such broker or dealer, the Investment Manager will make a good faith determination that the amount of commission is reasonable in relation to the value of the brokerage services and research and investment information received, viewed in terms of either the specific transaction or the Investment Manager's overall responsibility to the accounts for which the Investment Manager exercises investment discretion. The Investment Manager evaluates all commissions paid in order to ensure that the commissions represent reasonable compensation for the brokerage and research services provided by such brokers. Such investment information as is received from brokers or dealers may be used by the Investment Manager in servicing all of its clients (including the Fund), and the Fund's commissions may be paid to a broker or dealer who supplied research services not used by the Fund. However, the Investment Manager expects that the Fund will benefit overall by such practice because it is receiving the benefit of research services and the execution of such transactions not otherwise available to it without the allocation of transactions based on the recognition of such research services. Subject to the requirement of seeking the best execution, the Investment Manager may also place orders with brokerage firms that have sold shares of the Fund. The Investment Manager has made and will make no commitments to place orders with any particular broker or group of brokers. The Company anticipates that a substantial portion of all brokerage commissions will be paid to brokers who supply investment information to the Investment Manager. The Investment Manager has no obligation to purchase or sell for the Fund any security that it, or its officers of employees, may purchase or sell for the Investment Manager's or their own accounts or the account of any other client, if in the opinion of the Investment Manager such transaction appears unsuitable, impractical or undesirable for the Fund. Additionally, the Investment Manager does not prohibit any of its officers or employees from purchasing or selling for their own accounts securities that may be recommended to or held by the Investment Manager's client's, subject to the Investment Manager's and the Fund's Code of Ethics. The Fund also invests frequently in foreign and/or U.S. securities that are not listed on a national securities exchange but are traded in the over-the-counter market. The Fund may also purchase listed securities through the third market or fourth market. When transactions are executed in the over-the-counter market or the third or fourth market, the Investment Manager will seek to deal with the counterparty that the Investment Manager believes can provide the best execution, whether or not that counterparty is the primary market maker for that security. During the Fiscal Year ended December 31, 1998, the Fund acquired securities of one of its regular brokers or dealers (as defined in Rule 10b-1 under the 1940 Act). At December 31, 1998, the Fund's holdings in Julius Bar Holding Ltd. was valued at $2,326,538. For the Fiscal Years ended December 31, 1996, 1997 and 1998, the Fund paid total brokerage commissions of $330,226, $761,708 and $1,282,143, respectively. Of the total commissions paid during the fiscal year ended December 31, 1998, $1,282,143 (100%) were paid to firms which provided research, statistical or other services to the Investment Manager. The Investment Manager has not separately identified a portion of such commissions as applicable to the provision of such research, statistical or otherwise. During fiscal 1998, the Fund paid its affiliated broker, Dresdner Kleinwort Benson North America LLC, total brokerage commissions of $430,089, which represents 34% of the Funds aggregate brokerage commissions paid and 33% of the Fund's aggregate dollar amount of transactions effected during its most recent fiscal year. As noted below, the Investment Manager is an indirect wholly owned subsidiary of Dresdner Bank AG ("Dresdner"). Dresdner Kleinwort Benson North America LLC ("Dresdner Kleinwort Benson") and other Dresdner subsidiaries may be broker-dealers (collectively, the "Dresdner Affiliates"). The Investment Manager believes that it is in the best interests of the Fund to have the ability to execute brokerage transactions, when appropriate, through the Dresdner Affiliates. Accordingly, the Investment Manager intends to execute brokerage transactions on behalf of the Fund through the Dresdner Affiliates, when appropriate and to the extent consistent with applicable laws and regulations, including federal banking laws. In all such cases, the Dresdner Affiliates will act as agent for the Fund, and the Investment Manager will not enter into any transaction on behalf of the Fund in which a Dresdner Affiliate is acting as principal for its own account. In connection with such agency transactions, the Dresdner Affiliates will receive compensation in the form of brokerage commissions separate from the Investment Manager's management fee. The Investment Manager's policy is that such commissions must be reasonable and fair when compared to the commissions received by other brokers Page 21 in connection with comparable transactions involving similar securities and that the commissions paid to a Dresdner Affiliate must be no higher than the commissions paid to that broker by any other similar customer of that broker who receives brokerage and research services that are similar in scope and quality to those received by the Fund. The Investment Manager performs investment management and advisory services for various clients, including other registered investment companies, and pension, profit-sharing and other employee benefit plans, as well as individuals. In many cases, portfolio transactions for the Fund may be executed in an aggregated transaction as part of concurrent authorizations to purchase or sell the same security for numerous accounts served by the Investment Manager, some of which accounts may have investment objectives similar to those of the Fund. The objective of aggregated transactions is to obtain favorable execution and/or lower brokerage commissions, although there is no certainty that such objective will be achieved. Although executing portfolio transactions in an aggregated transaction potentially could be either advantageous or disadvantageous to any one or more particular accounts, aggregated transactions in which the Fund participates will be effected only when the Investment Manager believes that to do so will be in the best interest of the Fund, and the Investment Manager is not obligated to aggregate orders into larger transactions. These orders generally will be averaged as to price. When such aggregated transactions occur, the objective will be to allocate the executions in a manner which is deemed fair and equitable to each of the accounts involved over time. In making such allocation decisions, the Investment Manager will use its business judgment and will consider, among other things, any or all of the following: each client's investment objectives, guidelines, and restrictions, the size of each client's order, the amount of investment funds available in each client's account, the amount already committed by each client to that or similar investments, and the structure of each client's portfolio. DIRECTORS AND OFFICERS The names and addresses of the Directors and officers of the Companies and their principal occupations and certain other affiliations during the past five years are given below. Unless otherwise specified, the address of each of the following persons is Four Embarcadero Center, San Francisco, California 94111. ROBERT J. BIRNBAUM (71), DIRECTOR. Director, Chicago Board Options Exchange (since 1998); Director, Chicago Mercantile Exchange (1990 to 1998); Trustee, Liberty All-Star Growth Fund, Inc. (since 1995); Trustee, Colonial Funds (since 1995); Trustee, Liberty All-Star Equity Fund, Inc. (since 1994); Special Counsel, Dechert Price & Rhoads (law firm) (1988 to 1993); President and Chief Operating Officer, New York Stock Exchange, Inc. (1985 to 1988); President and Chief Operating Officer, American Stock Exchange, Inc. (1977 to 1985). CARROLL BROWN (70), DIRECTOR. President, The American Council on Germany (since 1988); Executive Director, John J. McCloy Fund (since 1988); Foreign Service Officer, United States Department of State with service in Yugoslavia, Poland, Austria, and Germany (1957 to 1988); U.S. Consul General, Dusseldorf and Munich; Deputy Assistant Secretary of State, U.S. State Department (1986 and 1987). THEODORE J. COBURN (44), DIRECTOR. Partner, Brown, Coburn & Co., a consulting firm (since 1991); education associate at Harvard University Graduate School of Education (since 1996); Director, Nicholas-Applegate Fund, Inc. (since 1987); Trustee, Nicholas-Applegate Mutual Funds (since 1992); Director, Measurement Specialties, Inc. (since 1995); Director, Moovies, Inc. (since 1995); Senior Vice President, Prudential Securities Inc. (1986 to 1991); Managing Director of the Global Equity Transactions Group and a member of the Board of Directors, Prudential Securities (1986 to 1991); Managing Director, Merrill Lynch Capital Markets (1983 to 1986). JAMES E. DOWD (75), DIRECTOR. Attorney/Consultant (since 1982); Director, Trustee or Managing General Partner of various registered investment companies managed Page 22 by Federated Investors (since 1982); President, Boston Stock Exchange (1969 to 1982); Member of Panel of Arbitrators, New York Stock Exchange, Inc. (since 1986); Member of Panel of Arbitrators, National Association of Securities Dealers, Inc. (since 1984). SIEGFRIED A. KESSLER (80), DIRECTOR. Retired; Chairman. Carl Zeiss Inc. (New York) (1981 to 1982) and President (1965 to 1981) (sale, distribution and service of scientific instruments and optical products) (1965 to 1985). ALFRED FIORE (61), DIRECTOR. General Manager, Hirschfeld, Stern, Moyer & Ross, Inc. (employee benefit consulting firm) (since 1988); Consultant, Lois/U.S.A. (creative advertising agency) (1987 to 1988); Executive Vice President and Chief Financial Officer, Parlux Fragrances, Inc. (1987); Executive Vice President and Chief Financial Officer, Concord Assets Group, Inc. (real estate manager) (1986); President and Chief Operating Officer, Amerigroup Financial Services, Inc. (financial services) (1984 to 1986); Partner, KPMG Peat Marwick, LLP (1973 to 1984). GOTTFRIED W. PERBIX (68), DIRECTOR. President, Perbix International, Inc. (management consulting) (1980 to 1994); Director, American Profol Inc. (plastic film manufacturers) (since 1993); Sole Proprietor, Perbix Associates (executive search) (since 1978) JACOB SALIBA (84), DIRECTOR. Director (since 1994), Chairman (1988 to 1994) and Chief Executive Officer (1988 to 1993), Katy Industries, Inc. (diversified manufacturing and oil and related services); President and Chief Operating Officer, Katy Industries, Inc. (1968 to 1987); Director, CEGF Compagnie des Entrepots et Gares Frigorifques (cold storage warehouses) (since 1989); Director, Schon & Cie AG (manufacturer of machinery) (since 1990); Director, Sahlman Seafoods (shrimp fishing and shrimp aquaculture) (since 1998); Director, Syratech Corp. (manufacturer of household furnishings) (1992 to 1998). GEORGE A. RIO (44), President, Treasurer and Chief Financial Officer. Mr. Rio is Executive Vice President of Funds Distributor, Inc. ("FDI") with which he has been associated since March 1998. From June 1995 to March 1998, Mr. Rio was Senior Vice President and Senior Key Account Manager for Putnam Mutual Funds. From May 1994 to June 1995, he was Director of Business Development for First Data Corporation. From September 1983 to May 1994, he was Senior Vice President and Manager of Client Services and Director of Internal Audit at The Boston Company, Inc. He is an officer of certain other investment companies distributed or administered by FDI. His address is 60 State Street, Suite 1300, Boston, Massachusetts. MARGARET W. CHAMBERS (39), Vice President and Secretary. Ms. Chambers is Senior Vice President and General Counsel of FDI, with which she has been associated since March 1998. From August 1996 to March 1998, Ms. Chambers was Vice President and Assistant General Counsel for Loomis, Sayles & Company, L.P. From January 1996 to July 1996, she was an associate at Ropes & Gray. She is also an officer of certain other investment companies distributed or administered by FDI. Her address is 60 State Street, Suite 1300, Boston, Massachusetts 02109. MARY MICHEL (37), Vice President. Ms. Michel is a Vice President of FDI, with which she has been associated since September 1998. From 1996 to September 1998, Ms. Michel was an Assistant Vice President at Warburg Pincus Asset Management. From 1993 to 1996 she was a Senior Associate and Investor Relations Intelligence Executive at the Financial Relations Board. Prior to 1993, Ms. Michel held various positions with Bear Stearns & Company, Morgan Stanley Group Inc., and Citibank Focus N.A. Her address is 60 State Street, Suite 1300, Boston, Massachusetts. KAREN JACOPPO-WOOD (32), Vice President and Assistant Secretary. Ms. Jacoppo-Wood is Vice President and Counsel of FDI, with which she has been associated since January 1996. From June 1994 to January 1996, she was a Manager of SEC Registration for Scudder, Stevens & Clark, Inc. From 1988 to May 1994, she was a Senior Paralegal at The Boston Company Advisors, Inc. She is also an officer of certain other investment companies distributed or administered by FDI. Her address is 60 State Street, Suite 1300, Boston, Massachusetts. DOUGLAS C. CONROY (30), Vice President and Assistant Treasurer. Mr. Conroy is an Assistant Vice President and Assistant Department Manager of Treasury Services and Administration at FDI, with which he has been associated since April 1997. Prior to April 1997, Mr. Conroy was Supervisor of Treasury Services and Administration at FDI. From April 1993 to January 1995, Mr. Conroy was a Senior Fund Accountant for Investors Bank & Trust Company. From December 1991 to March 1993, Mr. Conroy was a Fund Accountant at The Boston Company, Inc. He is also an officer of certain other investment companies distributed or administered by FDI. His address is 60 State Street, Suite 1300, Boston, Massachusetts. MARY A. NELSON (35), Vice President and Assistant Treasurer. Ms. Nelson is Vice President of Treasury Administration and Operations of FDI, with which she has been associated since 1994. From 1989 to 1994, she was an Assistant Vice President and Client Manager for The Boston Company. She is also an officer of certain investment companies distributed or administered by FDI. Her address is 60 State Street, Suite 1300, Boston, Massachusetts. The Fund pays each of its Directors who is not an interested person of the Fund, as defined in the 1940 Act, an annual fee of $7,500, plus $750 for each Board of Directors meeting attended. During the fiscal year ended December 31, 1998, all such Directors as a group earned from the Fund aggregate fees amounting to $187,500. In addition, the Fund reimburses Directors not affiliated with Dresdner RCM for travel and out-of-pocket expenses incurred in connection with meetings of the Board. Commencing January 1, 1999, the Fund pays each of its Directors who is not an interested person of the Fund, as defined in the 1940 Act, an annual fee of $9,000, plus $1,500 for each Board of Directors meeting attended. The following table sets forth for each Director the amount of such compensation earned during the fiscal year ended December 31, 1998. Page 23
NAME OF PERSON, AGGREGATE PENSION OR RETIREMENT ESTIMATED ANNUAL TOTAL COMPENSATION FROM POSITION COMPENSATION FROM BENEFITS ACCRUED AS BENEFITS UPON FUND AND FUND COMPLEX FUND PART OF FUND EXPENSES RETIREMENT PAID TO DIRECTORS Robert J. Birnbaum $ 36,750 N/A __ $ 36,750 Carroll Brown 15,750 N/A __ 15,750 Theodore J. Coburn 35,250 N/A __ 35,250 James E. Dowd 15,750 N/A __ 15,750 Alfred W. Fiore 36,750 N/A __ 36,750 Siegfried A. Kessler 15,750 N/A __ 15,750 Gottfried W. Perbix 15,750 N/A __ 15,750 Jacob Saliba 15,750 N/A __ 15,750 TOTAL $187,500 $187,500
During the fiscal year ended December 31, 1997, the Board of Directors met five times and during the fiscal year ending December 31, 1998, the Board of Directors met eleven times. Each Director attended at least 75% of the total number of meetings of the Board and each Committee of the Board of which he was a member held during the period in which he served. The Board of Directors has an Audit Committee presently composed of Messrs. Perbix, Dowd, and Kessler, none of whom is an interested person of the Fund (as defined in the 1940 Act). The Audit Committee makes recommendations to the full Board with respect to the engagement of independent accountants and reviews with the independent accountants the plan and results of the audit engagement and matters having a material effect upon the Fund's financial operations. The Audit Committee held two meetings during the fiscal year ended December 31, 1997 and two meetings during the fiscal year ending December 31, 1998. Members of the Audit Committee do not receive any additional compensation from the Fund. In 1998, the Board of Directors established an ad hoc Strategic Planning and Communications Committee, composed of Messrs. Birnbaum, Coburn, and Fiore, none of whom is an interested person of the Fund (as defined in the 1940 Act), to communicate with stockholders on behalf of the full Board of Directors and to consider various strategic options for the future of the Fund, including, whether the Fund should convert from a closed-end investment company to an open-end investment company. Strategic Planning and Communications Committee members received $1,500 per meeting in 1998. There were 12 such meetings in 1998. Page 24 The Board of Directors has no compensation committee, or other committee performing similar a function. Uopn conversion of the Fund to an open-end structure, a Nominating Committee was established, which will consist of the Directors who are not interested persons of the Fund (as defined in the 1940 Act). CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES As of March 31, 1999, the Directors and Officers of the Company, as a group, owned beneficially and of record less than 1% of the outstanding shares of the Fund. As of March 31, 1999, there were 14,008,334 shares of the Fund outstanding. On that date the following were known to the Company to own of record more than 5% of the Fund's capital stock:
Name and Address of % of Shares Beneficial Owner Shares Held Outstanding Lazard Freres & Co. LLC 1,286,600 9.18% 30 Rockefeller Plaza New York, NY 10020 Deep Discount Advisors, Inc. 1,240,800 8.8% One West Park Square Ste. 77 Asheville, NC 28801 Ron Olin Investment Management Company 890,350 6.4% One West Park Square Ste. 77 Asheville, NC 28801 Bankgesellschaft Berlin AG 2,932,600 20.9% Alexanderplatz 2 Berlin Germany 10178
THE INVESTMENT MANAGER The Board of Directors the Company has overall responsibility for the operation of the Fund. Pursuant to such responsibility, the Board of Directors has approved various contracts for designated financial organizations to provide, among other things, day to day management services required by the Fund. The Company has retained as the Fund's Investment Manager, Dresdner RCM Global Investors LLC, a Delaware limited liability company with principal offices at Four Embarcadero Center, San Francisco, California 94111. The Investment Manager is actively engaged in providing investment supervisory services to institutional and individual clients. The Investment Manager was established in December of 1998 and is the successor to the business of its holding company, Dresdner RCM Global Investors US Holdings LLC. The Investment Manager was originally formed as Rosenberg Capital Management in 1970, and it and its successors have been consistently in business since then. The Investment Manager is an indirect wholly owned subsidiary of Dresdner Bank, an international banking organization with principal executive offices located at Gallunsanlage 7, 60041 Frankfurt, Germany. With total Page 25 consolidated assets as of December 31, 1997, of DM 677 billion ($382 billion), and approximately 1,600 offices and 45,000 employees in over 60 countries around the world, Dresdner is one of Germany's largest banks. Dresdner provides a full range of banking services including, traditional lending activities, mortgages, securities, project finance and leasing, to private customers and financial and institutional clients. In the United States, Dresdner maintains branches in New York and Chicago and an agency in Los Angeles. As of the date of this SAI, the nine members of the Board of Managers of the Investment Manager are William L. Price (Chairman), Gerhard Eberstadt, George N. Fugelsang, Joachim Madler, Susan C. Gause, Luke D. Knecht, Jeffrey S. Rudsten, William S. Stack, and Kenneth B. Weeman, Jr. Banking laws and regulations, including the Glass-Steagall Act as presently interpreted by the Board of Governors of the Federal Reserve System, prohibit certain banking entities, such as Dresdner, from sponsoring, organizing, controlling or distributing the shares of a registered investment company continuously engaged in the issuance of its shares, and prohibit banks generally from underwriting securities. However, banks and their affiliates generally can act as advisers to investment companies and can purchase shares of investment companies as agent for and upon the order of customers. The Investment Manager believes that it may perform the services contemplated by its investment management agreements with the Company without violating these banking laws or regulations. However, future changes in legal requirements relating to the permissible activities of banks and their affiliates, as well as future interpretations of current requirements, could prevent the Investment Manager from continuing to perform investment management services for the Company. The Investment Manager is also the investment manager for Dresdner RCM International Growth Equity Fund, Dresdner RCM Growth Equity Fund and Dresdner RCM Small Cap Fund, each a series of Dresdner RCM Capital Funds, Inc.; Dresdner RCM Large Cap Growth Fund, Dresdner RCM Global Small Cap Fund, Dresdner RCM Global Technology Fund, Dresdner RCM Global Health Care Fund, Dresdner RCM Biotechnology Fund, Dresdner RCM Emerging Markets Fund, Dresdner RCM Tax Managed Growth Fund; Dresdner RCM Global Equity Fund and Dresdner RCM Strategic Income Fund, each a series of Dresdner RCM Global Funds, Inc.; RCM Strategic Global Government Fund, Inc., and Bergstrom Capital Corporation, each a closed-end management investment company. The Fund's Management Agreement may be renewed from year-to-year after its initial term, provided that any such renewals have been specifically approved at least annually by (i) the vote of a majority of the Company's Board of Directors, including a majority of the Directors who are not parties to the Management Agreement or interested persons (as defined in the 1940 Act) of any such person, cast in person at a meeting called for the purpose of voting on such approval, or (ii) the vote of a majority (as defined in the 1940 Act) of the outstanding voting securities of the Fund and the vote of a majority of the Directors who are not parties to the contract or interested persons of any such party. The Fund has, under its Management Agreement, assumed the obligation for payment of all of its ordinary operating expenses, including: (a) brokerage and commission expenses, (b) federal, state, or local taxes incurred by, or levied on, the Fund, (c) interest charges on borrowings, (d) charges and expenses of the Fund's custodian, (e) Page 26 investment advisory fees (including fees payable to the Investment Manager under the Management Agreement), (f) fees pursuant to the Fund's Rule 12b-1 plan, (g) legal and audit fees, (h) SEC and "Blue Sky" registration expenses, and (i) compensation, if any, paid to officers and employees of the Company who are not employees of the Investment Manager (see DIRECTORS AND OFFICERS). The Investment Manager is responsible for all of its own expenses in providing services to the Fund. Expenses attributable to the Fund are charged against the assets of the Fund. For the services rendered by the Investment Manager under the Management Agreement, the Fund pays management fees at an annualized rate of its average daily net assets. These fees are computed daily and paid monthly. The Fund pays investment management fees monthly at an annualized rate of 1.00% of its average daily net assets up to and including $100 million and 0.80% of its average daily net assets in excess of $100 million. For the years ended December 31, 1998, 1997, and 1996, the Fund incurred investment management fees aggregating $1,915,266, $1,555,539 and $1,297,639, respectively. To limit the total expenses of the Fund, the Investment Manager has agreed to waive its fees and to pay the Fund on a quarterly basis the amount, if any, by which the ordinary operating expenses of the Fund attributable to the Fund for the quarter (except taxes, interest, and extraordinary expenses) exceed an expense ratio of 1.60% for Class N and 1.35% for Class I on an annual basis for at least the first three years of operation following the conversion of the Fund to open-end status. The Fund will reimburse the Investment Manager for deferred fees or other expenses paid by the Investment Manager pursuant to the Investment Management Agreement in later years in which operating expenses are otherwise, and as a result of such reimbursement would be, less than such expense limitation. Accordingly, until all such amounts are reimbursed, the fund's expenses will be higher, and its total return will be lower, than would otherwise have been the case. No interest, carrying, or finance charge will be paid by the Fund with respect to any amounts representing deferred fees or other expenses paid by the Investment Manager. In addition, the fund will not be required to repay any unreimbursed amounts to the Investment Manager upon termination of the Management Agreement. The Fund's Management Agreement provides that the Investment Manager will not be liable for any error of judgment or for any loss suffered by the Fund in connection with the matters to which the Management Agreement relates, except for liability resulting from willful misfeasance, bad faith or gross negligence in the performance of its duties or by reason of the Investment Manager's reckless disregard of its duties and obligations under the Management Agreement. The Company has agreed to indemnify the Investment Manager out of the assets of the Fund, against liabilities, costs and expenses that the Investment Manager may incur in connection with any action, suit, investigation or other proceeding arising out of or otherwise based on any action actually or allegedly taken or omitted to be taken by the Investment Manager in connection with the performance of its duties or obligations under the Management Agreement with respect to the Fund or otherwise as investment manager of the Fund. The Investment Manager is not entitled to indemnification with respect to any liability to the Fund or its stockholders by reason of willful misfeasance, bad faith or gross negligence in the performance of its duties, or of its reckless disregard of its duties and obligations under the Management Agreement. The Management Agreement is terminable without penalty on 60 days' written notice by a vote of the majority of the outstanding voting securities of the Fund by a vote of the majority of the Company's Board of Directors, or by the Investment Manager on 60 days' written notice and will automatically terminate in the event of its assignment (as defined in the 1940 Act). THE DISTRIBUTOR Funds Distributor, Inc., 60 State Street, Suite 1300, Boston, Massachusetts 02109 (the "Distributor") serves as Distributor to the Fund. The Distributor has provided mutual fund distribution services since 1976, and is a subsidiary of Boston Institutional Group, Inc., which provides distribution and other related services with respect to investment products. DISTRIBUTION AGREEMENT Pursuant to a Distribution Agreement with the Company, the Distributor has agreed to use its best efforts to effect sales of shares of the Fund, but is not obligated to sell any specified number of shares. The Distribution Agreement contains provisions with respect to renewal and termination similar to those in the Fund's Management Page 27 Agreement discussed above. Pursuant to the Distribution Agreement, the Company has agreed to indemnify the Distributor out of the assets of the Fund to the extent permitted by applicable law against certain liabilities under the Securities Act of 1933 arising in connection with the Distributor's activities on behalf of the Company. The Company also has an agreement with the Investment Manager and the Distributor pursuant to which the Distributor has agreed to provide: regulatory, compliance and related technical services to the Company; services with regard to advertising, marketing and promotional activities; and officers to the Company. The Investment Manager is required to reimburse the Company for any fees and expenses of the Distributor pursuant to the Agreement. DISTRIBUTION PLAN The Company, on behalf of its Dresdner RCM Europe Fund Class N shares, has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, the Fund pays the Distributor an annual fee of up to 0.25% of the average daily net assets of its Class N shares as reimbursement for certain expenses actually incurred by the Distributor in connection with providing distribution and shareholder support services to such shares. Class I shares are not subject to 12b-1 fees. The Distributor is reimbursed for: (a) expenses incurred in connection with advertising and marketing the N Class of shares of the Fund, including but not limited to any advertising by radio, television, newspapers, magazines, brochures, sales literature, telemarketing or direct mail solicitations; (b) periodic payments of fees or commissions for distribution assistance made to one or more securities brokers, dealers or other industry professionals such as investment advisers, accountants, estate planning firms and the Distributor itself in respect of the average daily value of Class N shares owned by clients of such service organizations, and (c) expenses incurred in preparing, printing and distributing the Fund's prospectus and statement of additional information. If in any year Funds Distributor is due more from the Fund for such services than is immediately payable because of the expense limitation under the Plan, the unpaid amount is carried forward from while the Plan is in effect until such later year as it may be paid. There is no limit on the periods during which unreimbursed expenses may be carried forward, although the Fund is not obligated to repay any outstanding unreimbursed expenses that may exist if the Plan is terminated or not continued. No interest, carrying, or finance charge will be imposed on any amounts carried forward. The Plan continues in effect from year to year with respect to the Fund, provided that each such continuance is approved at least annually by a vote of the Board of Directors of the Company, including a majority vote of the Directors who are not "interested persons" of the Company within the meaning of the 1940 Act and have no direct or indirect financial interest in the Plan or in any agreement related to the Plan, cast in person at a meeting called for the purpose of voting on such continuance. The Plan may be terminated with respect to the Fund at any time, without penalty, by the vote of a majority of the outstanding Class N shares of the Fund or of the Board of Directors in the manner described above. The Plan may not be amended to increase materially the amounts to be paid by the Fund for the services described therein without approval by the shareholders of the Fund, and all material amendments are required to be approved by the Board of Directors of the respective Company in the manner described above. The Plan will automatically terminate in the event of its assignment. The Distributor may pay broker-dealers and others, out of the fees it receives under the Plan, quarterly trail commissions of up to 0.25%, on an annual basis, of the average daily net assets attributable to the N class of shares of the Fund held in the accounts of their customers. Pursuant to the Plan, the Board of Directors of each Company will review at least quarterly a written report of the distribution expenses incurred on behalf of shares of the N Class of shares of the Fund by the Distributor. The report will include an itemization of the distribution expenses and the purposes of such expenditures. In addition, as long as the Plans remain in effect, the selection and nomination of Directors of each Company who are not "interested persons" of the Company within the meaning of the 1940 Act will be committed to the Directors who are not interested persons of the Company. Page 28 THE ADMINISTRATOR The administrator of the Company is State Street Bank and Trust Company ("State Street"), 1776 Heritage Drive, North Quincy, Massachusetts 02109. Pursuant to an Administration Agreement with the Company, State Street is responsible for performing various administrative services required for the daily operation of the Company, subject to the control, supervision and direction of the Company and the review and comment by the Company's auditors and legal counsel. State Street has no supervisory responsibility over the investment operations of the Funds. Administrative services performed by State Street include, but are not limited to, the following: overseeing the determination and publication of the Company's net asset value; overseeing the maintenance by the Company's custodian of certain book and records of the Company; preparing the Company's federal, state and local income tax returns; arrange for payment of the Company's expenses; and preparing the financial information for the Company's semi-annual and annual reports, proxy statements and other communications. For its services, State Street receives annual fees pursuant to the following schedule:
ANNUAL FEE Average Assets Expressed in Basis Points: 1/100 of 1% First $250 Million/Fund 2.50 Next $250 Million/Fund 1.75 Thereafter 1.00 Minimum/Fund $57,500
Fees are calculated by multiplying each Average Asset Break Point in the above schedule by the number of Funds in the Dresdner RCM complex to determine the breakpoints used in the schedule. Total net assets of all the Funds will be used to calculate the fee by multiplying the net assets of the Funds by the basis point fees in the above schedule. The minimum fee will be calculated by multiplying the minimum fee by the number of Funds in the complex to arrive at the total minimum fee. The greater of the basis point fee or the minimum fee will be allocated equally to each Fund in the complex. OTHER SERVICE PROVIDERS State Street acts as the transfer agent, redemption agent and dividend paying agent for the Funds. State Street also acts as custodian for the Fund. The custodian is responsible for the safekeeping of a fund's assets and the appointment of any subcustodian banks and clearing agencies. State Street's principal business address is 1776 Heritage Drive, North Quincy, Massachusetts 02171. PricewaterhouseCoopers LLP ("PWC") acts as the independent public accountants for the Fund. The accountant examines financial statements for the Fund and provides other audit, tax, and related services. PWC's principal business address is 160 Federal Street, Boston, Massachusetts 02110. NET ASSET VALUE For purposes of the computation of the net asset value of each share of the Fund, equity securities traded on stock exchanges are valued at the last sale price on the exchange or in the principal over-the-counter market in which such securities are traded as of the close of regular trading on the day the securities are being valued, unless the Board of Directors or a duly constituted committee of the Board determines that such price does not reflect the fair value of the security. In cases where securities are traded on more than one exchange, the securities are valued on the exchange determined by the Investment Manager to be the primary market for the securities. If there has been no sale on such day, the security will be valued at the closing bid price on such day. If no bid price is quoted on such day, then the security will be valued by such method as a duly constituted committee of the Board of Directors determines in good faith to reflect its fair value. Readily marketable securities traded only in the over-the-counter market that are not listed on the NASDAQ Stock Market or a similar foreign reporting service will be valued at the mean bid price, or such other comparable sources as the Board of Directors deems appropriate to reflect their fair value. Other portfolio securities held by the Fund will be valued at current market value, if current market quotations are readily available for such securities. To the extent that market quotations are not readily available such securities will be valued by whatever means a duly constituted committee of the Board of Directors deems appropriate to reflect their fair value. Futures contracts and related options are valued at their last sale or settlement price as of the close of the exchange on which they are traded or, if no sales are reported, at the mean between the last reported bid and asked prices. All other assets of the Fund will be valued in such manner as a duly constituted committee of the Board of Directors in good faith deems appropriate to reflect their fair value. Trading in securities on foreign exchanges and over-the-counter markets is normally completed at times other than the close of regular trading on the New York Stock Exchange. In addition, foreign securities and commodities trading may not take place on all business days in New York, and may occur in various foreign markets on days which are not business days in New York and on which net asset value is not calculated. The calculation of net asset value may not take place contemporaneously with the determination of the prices of portfolio securities used in such calculation. Events affecting the values of portfolio securities that occur between the time their prices are determined and the close of the New York Stock Exchange will not be reflected in the calculation of net asset value unless the Board of Directors determines that a particular event would materially affect net asset value, in which case an adjustment will be made. Assets or liabilities initially expressed in terms of foreign currencies are translated prior to the next determination of net asset value into U.S. dollars at the spot exchange rates at 12:00 p.m. Eastern time or at such other rates as the Investment Manager may determine to be appropriate in computing net asset value. Debt obligations with maturities of 60 days or less are valued at amortized cost. The Company may use a pricing service approved by the Board of Directors to value other debt obligations. Prices provided by such a service represent evaluations of the mean between current bid and asked market prices, may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, individual rating characteristics, indications of value from dealers, and other market data. Such services may use electronic data processing techniques and/or a matrix system to determine valuations. The procedures of such services are reviewed periodically by the officers of the Investment Manager under the general supervision of the Board of Directors. Short-term investments are amortized to maturity based on their cost, adjusted for foreign exchange translation, provided such valuations equal fair market value. Page 29 PURCHASE AND REDEMPTION OF SHARES The price paid for purchase and redemption of shares of the Fund is based on the net asset value per share, which is normally calculated once daily at the close of regular trading (normally 4:00 P.M. Eastern time) on the New York Stock Exchange on each day that the New York Stock Exchange is open. The New York Stock Exchange is currently closed on weekends and on the following holidays: New Year's Day, President's Day, Martin Luther King Jr. Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas Day. The offering price is effective for orders received by Boston Financial Data Services ("BFDS") prior to the time of determination of net asset value. Dealers are responsible for promptly transmitting purchase orders to BFDS. The Company reserves the right in its sole discretion to suspend the continued offering of its Fund's shares and to reject purchase orders in whole or in part when such rejection is in the best interests of the Fund and its respective stockholders. REDEMPTION OF SHARES Payments will be made wholly in cash unless the Board of Directors believes that economic conditions exist which would make such a practice detrimental to the best interests of the Fund. Under such circumstances, payment of the redemption price could be made either in cash or in portfolio securities taken at their value used in determining the redemption price (and, to the extent practicable, representing a pro rata portion of each of the portfolio securities held by the Fund), or partly in cash and partly in portfolio securities. Payment for shares redeemed also may be made wholly or partly in the form of a pro rata portion of each of the portfolio securities held by the Fund at the request of the redeeming stockholder, if the Company believes that honoring such request is in the best interests of such series. If payment for shares redeemed were to be made wholly or partly in portfolio securities, brokerage costs would be incurred by the stockholder in converting the securities to cash. DIVIDENDS, DISTRIBUTIONS AND TAX STATUS Each income dividend and capital gain distribution, if any, declared by the Fund will be paid in full and fractional shares based on the net asset value as determined on the payment date for such distribution, unless the stockholder or his or her duly authorized agent has elected to receive all such payments or the dividend or other distribution portion thereof in cash. Changes in the manner in which dividend and other distribution payments are paid may be requested by the stockholder or his or her duly authorized agent at any time through written notice to the Company and will be effective as to any subsequent payment if such notice is received by the Company prior to the record date used for determining the stockholders entitled to such payment. Any distribution election will remain in effect until the Company is notified by the stockholder in writing to the contrary. REGULATED INVESTMENT COMPANY The Fund has qualified and intends to continue to qualify for treatment as a "regulated investment company" under Subchapter M of the Code. The Fund is treated as a separate corporation for tax purposes and thus the provisions of the Code generally applicable to regulated investment companies are applied separately to the Fund. In addition, net capital gains (the excess of net long-term capital gain over net short-term capital loss), net investment income, and operating expenses are determined separately for the Fund. By complying with the applicable provisions of the Code, the Fund will not be subject to federal income tax with respect to net investment income and net realized capital gains distributed to its stockholders. Page 30 To qualify as a regulated investment company under Subchapter M, generally the Fund must: (i) derive at least 90% of its gross income each taxable year from dividends, interest, payments with respect to securities loans, and gains from the sale or other disposition of stock, securities or foreign currencies and certain other income (including gains from certain options, futures and forward contracts), ("Income Requirement"); and (ii) diversify its holdings so that, at the end of each fiscal quarter, (a) at least 50% of the value of the Fund's total assets is represented by cash, cash items, U.S. Government securities, securities of other regulated investment companies and other securities, limited, in respect of any one issuer, to an amount not greater than 5% of the Fund's total assets and 10% of the outstanding voting securities of such issuer, and (b) not more than 25% of the value of its total assets is invested in the securities of any one issuer (other than U.S. Government securities or the securities of other regulated investment companies), or in two or more issuers which the Fund controls and which are engaged in the same or similar trades or businesses. In any taxable year in which the Fund so qualifies and distributes at least 90% of the sum of its investment company taxable income (consisting of net investment income, the excess of net short-term capital gains over net long-term capital losses and net gains from certain foreign currency transactions) and its net tax-exempt interest income (if any) ("Distribution Requirement"), it will be taxed only on that portion, if any, of such investment company taxable income and any net capital gain that it retains. The Fund expects to so distribute all of such income and gains on an annual basis and thus will generally avoid any such taxation. Even if the Fund qualifies as a "regulated investment company," it may be subject to a federal excise tax unless it meets certain additional distribution requirements. Under the Code, a nondeductible excise tax of 4% ("Excise Tax") is imposed on the excess of a regulated investment company's "required distribution" for a calendar year ending within the regulated investment company's taxable year over the "distributed amount" for that calendar year. The term "required distribution" means the sum of (i) 98% of ordinary income (generally net investment income and net gains from certain foreign currency transactions) for the calendar year, (ii) 98% of capital gain net income (generally both long-term and short-term capital gain) for the one-year period ending on October 31 (as though that period were the regulated investment company's taxable year), and (iii) the sum of any untaxed, undistributed net investment income and net capital gains of the regulated investment company for prior periods. The term "distributed amount" generally means the sum of (i) amounts actually distributed by the Fund from its current year's ordinary income and capital gain net income and (ii) any amount on which the Fund pays income tax for the year. The Fund intends to meet these distribution requirements to avoid Excise Tax liability. Stockholders who are subject to federal or state income or franchise taxes will be required to pay taxes on dividend and capital gain distributions they receive from the Fund whether paid in additional shares of the Fund or in cash. To the extent that dividends received by the Fund would qualify for the 70% dividends-received deduction available to corporations, the Fund must designate in a written notice to stockholders, within 60 days after the close of the Fund's taxable year, the amount of the Fund's dividends that would be eligible for this treatment. In order to qualify for the dividends-received deduction with respect to a dividend paid on Fund shares, a corporate stockholder must hold the Fund shares for at least 45 days during the 90 day period that begins 45 days before the shares become ex-dividend with respect to the dividend. Stockholders, such as qualified employee benefit plans, which are exempt from federal and state taxation generally would not have to pay income tax on dividend or capital gain distributions. Prospective tax-exempt investors should consult their own tax advisers with respect to the tax consequences of an investment in the Fund under federal, state, and local tax laws. WITHHOLDING Dividends paid by the Fund to a stockholder who, as to the U.S., is a nonresident alien individual, nonresident alien fiduciary of a trust or estate, foreign corporation, or foreign partnership (a "foreign stockholder") generally will be subject to U.S. withholding tax (at a rate of 30% or a lower treaty rate, if applicable). Withholding will not apply, however, if a dividend paid by the Fund to a foreign stockholder is "effectively connected" with the conduct of a U.S. trade or business, in which case the reporting and withholding requirements applicable to U.S. citizens or domestic corporations will apply. Distributions of net capital gain to foreign stockholders who are neither U.S. resident aliens nor engaged in a U.S. trade or business generally are not subject to withholding or U.S. federal income tax. Page 31 FOREIGN CURRENCY, OPTIONS, FUTURES AND FORWARD CONTRACTS Gains from the sale or other disposition of foreign currencies (except certain gains therefrom that may be excluded by future regulations), and gains from options, futures, and forward contracts derived by the Fund with respect to its business of investing in securities of foreign currencies, will qualify as permissible income under the Income Requirement. SECTION 1256 CONTRACTS Many of the options, futures contracts and forward contracts entered into by the Fund are "Section 1256 contracts." Any gains or losses realized on Section 1256 contracts are generally considered 60% long-term and 40% short-term capital gains or losses, although certain foreign currency gains and losses from such contracts may be treated as ordinary income in character. Section 1256 contracts held by the Fund at the end of each taxable year (and, for purposes of the Excise Tax, on October 31 or such other dates as prescribed under the Code), other than Section 1256 contracts that are part of a "mixed straddle" with respect to which the Fund has made an election not to have the following rules apply, must be "marked-to-market" (that is, treated as sold for their fair market value) for federal income tax purposes, with the result that unrealized gains or losses are treated as though they were realized. The 60% portion of gains on Section 1256 contracts that is treated as long-term capital gain will qualify for the reduced maximum tax rates on net capital gain -- 20% (10% for taxpayers in the 15% marginal tax bracket) for gain recognized on capital assets held for more than 12 months. STRADDLE RULES Generally, the hedging transactions and other transactions in options, futures and forward contracts undertaken by the Fund may result in "straddles" for U.S. federal income tax purposes. The straddle rules may affect the amount, character and timing of recognition of gains or losses realized by the Fund. In addition, losses realized by the Fund on positions that are part of a straddle position may be deferred under the straddle rules, rather than being taken into account for the taxable year in which these losses are realized. Because limited regulations implementing the straddle rules have been promulgated, the tax consequences of hedging transactions and options, futures and forward contracts to the Fund are not entirely clear. Hedging transactions may increase the amount of short-term capital gain realized by the Fund, which is taxed as ordinary income when distributed to stockholders. The Fund may make one or more elections available under the Code which are applicable to straddle positions. If the Fund makes any of the elections, the amount, character and timing of the recognition of gains or losses from the affected straddle positions will be determined under rules that vary according to elections made. The rules applicable under certain elections operate to accelerate the recognition of gains or losses from the affected straddle positions. Because the application of the straddle rules may affect the character of gains or losses, defer losses and/or accelerate the recognition of gains or losses from the affected straddle positions, the amount which must be distributed to stockholders, and which will be taxed to stockholders as ordinary income or long-term capital gain, may be increased or decreased substantially as compared to the Fund that did not engage in such hedging transactions. SECTION 988 GAINS AND LOSSES Under the Code, gains or losses attributable to fluctuations in exchange rates which occur between the time the Fund accrues interest or other receivables, or accrues expenses or other liabilities, denominated in a foreign currency and the time the Fund actually collects such receivables or pays such liabilities, generally are treated as ordinary income or loss. Similarly, on the disposition of debt securities denominated in foreign currency and on the disposition of certain futures contracts, forward contracts and options, gains or losses attributable to fluctuation in the value of foreign currency between the date of acquisition of the debt security, contract or option and the date of disposition thereof are also treated as ordinary gain or loss. These gains or losses, referred to under the Code as Page 32 "Section 988" gains or losses, may increase or decrease the amount of the Fund's investment company taxable income to be distributed to stockholders as ordinary income. FOREIGN TAXES The Fund may be required to pay withholding and other taxes imposed by foreign countries which would reduce the Fund's investment income, generally at rates from 10% to 40%. Tax conventions between certain countries and the United States may reduce or eliminate such taxes. If more than 50% of the value of the Fund's total assets at the close of its taxable year consists of securities of foreign corporations, the Fund will be eligible to elect to "pass-through" to the Fund's stockholders the amount of foreign income and similar taxes paid by the Fund. If this election is made, stockholders generally subject to tax will be required to include in gross income (in addition to taxable dividends actually received) their pro rata shares of the foreign income taxes paid by the Fund, and may be entitled either to deduct (as an itemized deduction) their pro rata shares of foreign taxes in computing their taxable income or to use such amount (subject to limitations) as a foreign tax credit against their U.S. federal income tax liability. No deduction for foreign taxes may be claimed by a stockholder who does not itemize deductions. Each stockholder will be notified within 60 days after the close of the Fund's taxable year whether the foreign taxes paid by the Fund will be "passed-through" for that year. The foregoing is a general abbreviated summary of present U.S. federal income tax laws applicable to the Fund, their stockholders and dividend and capital gain distributions by the Fund. Stockholders are urged to consult their own tax advisers for more detailed information and for information regarding any foreign, state, and local tax laws and regulations applicable to dividends and other distributions received from the Fund. INVESTMENT RESULTS Average annual total return ("T") of the Fund is calculated as follows: an initial hypothetical investment of $1,000 ("P") is divided by the net asset value of shares of the Fund as of the first day of the period in order to determine the initial number of shares purchased. Subsequent dividend and capital gain distributions by the Fund are paid at net asset value on the payment date determined by the Board of Directors. The sum of the initial shares purchased and shares acquired through distributions is multiplied by the net asset value per share of the Fund as of the end of the period ("n") to determine ending redeemable value ("ERV"). The ending value divided by the initial investment converted to a percentage equals total return. The formula thus used, as required by the SEC, is: n P(1+T) = ERV The resulting percentage indicates the positive or negative investment results that an investor would have experienced from reinvested dividend and capital gain distributions and changes in share price during the period. This formula reflects the following assumptions: (i) all share sales at net asset value, without a sales load reduction from the $1,000 initial investment; (ii) reinvestment of dividends and distributions at net asset value on the reinvestment date determined by the Board of Directors; and (iii) complete redemption at the end of any period illustrated. Total return may be calculated for one year, five years, ten years, and for other periods, and will typically be updated on a quarterly basis. The average annual compound rate of return over various periods may also be computed by using ending values as determined above. Page 33 In addition, in order to more completely represent the Fund's performance or more accurately compare such performance to other measures of investment return, the Fund also may include in advertisements and stockholder reports other total return performance data based on time-weighted, monthly-linked total returns computed on the percentage change of the month end net asset value of the Fund after allowing for the effect of any cash additions and withdrawals recorded during the month. Returns may be quoted for the same or different periods as those for which average total return is quoted. The Fund's investment results will vary from time to time depending upon market conditions, the composition of the Fund's portfolio, and operating expenses, so that any investment results reported should not be considered representative of what an investment in the Fund may earn in any future period. These factors and possible differences in calculation methods should be considered when comparing the Fund's investment results with those published for other investment companies, other investment vehicles and unmanaged indices. Results also should be considered relative to the risks associated with the Fund's investment objective and policies. The Fund may from time to time compare its investment results with the following: 1. The DAX 100 Index, an unmanaged index which is commonly used as a performance comparison for funds that invest primarily in Germany and which measures the total rate of return of the 100 most highly capitalized stocks traded on the Frankfurt Stock Exchange. 2. The MDAX Index, a total rate of return index of 70 medium sized German companies. 3. The Morgan Stanley Capital International Europe Index which measures the total rate of return of nearly 600 stocks from 15 developed European countries. 4. Data and mutual fund rankings published or prepared by Lipper Analytical Services, Inc. and Morningstar, which rank mutual funds by overall performance, investment objectives, and assets. GENERAL INFORMATION The Company was organized as a closed-end management investment company incorporated under the laws of the State of Maryland on February 2, 1990. On December 4, 1998, the Board of Directors, including the Directors who are not interested persons of the Fund (as defined in the 1940 Act), approved the final plan for the conversion of the Fund to an open-end investment company. At the Company's Annual Meeting on January 26, 1999, the Company's stockholders approved, among other things, (a) changing the Fund's investment strategy from a predominately German investment portfolio to a broader European investment portfolio, (b) changing the Fund's name to Dresdner RCM Europe Fund, (c) changing the Fund from a closed-end investment company to an open-end investment company, (d) modifying and eliminating certain fundamental investment restrictions of the Fund, (e) the Investment Management Agreement between the Fund and the Investment Manager, and (f) the Rule 12b-1 Distribution Plan of the Fund. The Fund converted to an open-end investment company on May 3, 1999. The Board of Directors has authority to issue an unlimited number of shares of separate series and classes. The Fund is currently the only series of the Company. Upon conversion to an open-end fund, the Fund commenced offering two classes of stock: Class N and Class I, as described in the Prospectus. Outstanding shares of the Fund on the date of conversion were automatically redesignated Class N shares. Page 34 DESCRIPTION OF CAPITAL SHARES Stockholders are entitled to one vote for each full share held and fractional votes for fractional shares held. Unless otherwise provided by law or its Articles of Incorporation or Bylaws, each Company generally may take or authorize any extraordinary action upon the favorable vote of the holders of more than 50% of the outstanding shares of the Company or may take or authorize any routine action upon approval of a majority of the votes cast. Rule 18f-2 under the 1940 Act provides that any matter required to be submitted to the holders of the outstanding voting securities of an investment company such as the Company shall not be deemed to have been effectively acted upon unless approved by a majority of the outstanding voting securities, as defined in the 1940 Act, of the series or class of the Company affected by the matter. Under Rule 18f-2, a series or class is presumed to be affected by a matter, unless the interests of each series or class in the matter are identical or the matter does not affect any interest of such series or class. Under Rule 18f-2 the approval of an investment advisory agreement or any change in a fundamental investment policy would be effectively acted upon with respect to the Fund only if approved by a majority of its outstanding voting securities, as defined in the 1940 Act. However, the rule also provides that the ratification of independent public accountants, the approval of principal underwriting contracts and the election of directors may be effectively acted upon by the stockholders of the Company voting without regard to Fund. Each share of each Class of the Fund represents an equal proportional interest in the Fund with each other share of the same Class and is entitled to such dividends and distributions out of the income earned on the assets allocable to the Class as are declared in the discretion of the Board of Directors. In the event of the liquidation or dissolution of either Company, stockholders of the Fund are entitled to receive the assets attributable to the Fund that are available for distribution, and a distribution of any general assets not attributable to a particular Fund that are available for distribution, in such manner and on such general basis as the Board of Directors may determine. Stockholders are not entitled to any preemptive rights. All shares, when issued, will be fully paid and nonassessable by the Company. ADDITIONAL INFORMATION COUNSEL Certain legal matters in connection with the capital shares offered by the Prospectus have been passed upon for the Fund by Kirkpatrick & Lockhart LLP. Paul, Hastings, Janofsky & Walker LLP has acted and will continue to act as counsel to the Investment Manager in various matters. Page 35 FINANCIAL STATEMENTS Incorporated by reference herein are the financial statements of the Fund contained in the Fund's Annual Report to Shareholders for the year ended December 31, 1998, including the Report of Independent Accountants, dated February 22, 1999, the Statement of Assets and Liabilities including the portfolio of investments and the related Statement of Operations, Statement of Changes in Net Assets, and the Financial Highlights. Copies of the Fund's Annual and Semi-Annual Reports to Shareholders will be available, upon request, by calling (800) 726-7240, or by writing to Four Embarcadero Center, San Francisco, California 94111. REGISTRATION STATEMENT The Fund's Prospectus and this SAI do not contain all of the information set forth in the Company's registration statement and related forms as filed with the SEC, certain portions of which are omitted in accordance with rules and regulations of the SEC. The registration statement and related forms may be inspected at the Public Reference Room of the SEC at Room 1024, 450 5th Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and copies thereof may be obtained from the SEC at prescribed rates. It is also available on the SEC's Internet Web site at http://www.sec.gov. Statements contained in the Prospectus or this SAI as to the contents of any contract or other document referred to herein or in the Prospectus are not necessarily complete, and, in each instance, reference is made to the copy of such contract or other document filed as an exhibit to each Company's registration statement, each such statement being qualified in all respects by such reference. Page 36 PART C OTHER INFORMATION ITEM 23. EXHIBITS. (a) Amended and Restated Articles of Incorporation of Registrant are filed herein as Exhibit 23(a). (b) Amended and Restated By-laws of Registrant are filed herein as Exhibit 23(b). (c) (1) Form of certificate for Class N shares of capital stock ($0.001 par value) of Registrant is incorporated herein by reference to Exhibit 23(c)(1) of the Registration Statement previously filed on February 19, 1999. (2) Form of certificate for Class I shares of capital stock ($0.001 par value) of Registrant is incorporated herein by reference to Exhibit 23(c)(2) of the Registration Statement previously filed on February 19, 1999. (d) Form of Investment Management Agreement between Dresdner RCM Global Investors LLC and Registrant on behalf of the Dresdner RCM Europe Fund is incorporated herein by reference to Exhibit 23(d) of the Registration Statement previously filed on February 19, 1999. (e) Form of Distribution Agreement between Registrant and Funds Distributor Inc. is incorporated herein by reference to Exhibit 23(e) of the Registration Statement previously filed on February 19, 1999. (f) None (g) (1) Custodian Contract between Registrant and State Street Bank and Trust Company is filed herein as Exhibit 23(g)(1). (g) (2) Amendment dated January 13, 1994 to the Custodian Contract between Registrant and State Street Bank and Trust Company is filed herein as Exhibit 23(g)(2). (g) (3) Amendment dated April 15, 1996 to the Custodian Contract between Registrant and State Street Bank and Trust Company is filed herein as Exhibit 23(g)(3). (g) (4) Amendment dated July 14, 1998 to the Custodian Contract between Registrant and State Street Bank and Trust Company is filed herein as Exhibit 23(g)(4). (g) (5) Amendment dated May 3, 1999 to the Custodian Contract between Registrant and State Street Bank and Trust Company is filed herein as Exhibit 23(g)(5). (h) (1) Form of Service Agreement among Dresdner RCM Global Investors LLC, Registrant, and Funds Distributor, Inc. is incorporated herein by reference to Exhibit 23(h)(1) of the Registration Statement previously filed on February 19, 1999. (2) Form of Transfer Agency Agreement between Registrant and State Street Bank and Trust Company is incorporated herein by reference to Exhibit 23(h)(2) of the Registration Statement previously filed on February 19, 1999. (3) Form of Administration Agreement between Registrant and State Street Bank and Trust Company is filed herein as Exhibit 23(h)(3). (i) Opinion and Consent of Kirkpatrick & Lockhart LLP as to the legality of securities being registered is filed herein as Exhibit 23(i). C-3 (j) (1) Power of Attorney dated February 12, 1999 is incorporated herein by reference to Exhibit 23(j) of the Registration Statement previously filed on February 19, 1999. (2) Consent of PricewaterhouseCoopers LLP is filed herein as Exhibit 23(i)(2). (k) Not applicable. (l) Not applicable. (m) Form of Distribution Plan pursuant to Rule 12b-1 of Registrant on behalf of the Class N shares of Dresdner RCM Europe Fund, is filed herein as Exhibit 23(m). (n) Financial Data Schedules for the fiscal year ended December 31, 1998 are incorporated herein by reference to Exhibit 23(n) of Pre-Effective Amendment No. 1 previously filed on April 9, 1999. (o) Form of Multiple Class of Shares Plan of Registrant pursuant to Rule 18f-3, on behalf of Dresdner RCM Europe Fund Inc. is incorporated herein by reference to Exhibit 23(o) of Pre-Effective Amendment No. 1 previously filed on April 9, 1999. ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND. None ITEM 25. INDEMNIFICATION. Section 2-418 of the General Corporation Law of Maryland empowers a corporation to indemnify directors and officers of the corporation under various circumstances as provided in such statute. A director or officer who has been successful on the merits or otherwise, in the defense of any proceeding, must be indemnified against reasonable expenses incurred by such person in connection with the proceeding. Reasonable expenses may be paid or reimbursed by the corporation in advance of the final disposition of the proceeding, after a determination that the facts then known to those making the determination would not preclude indemnification under the statute, and following receipt by the corporation of a written affirmation by the person that his or her standard of conduct necessary for indemnification has been met and upon delivery of a written undertaking by or on behalf of the person to repay the amount advanced if it is ultimately determined that the standard of conduct has not been met. Article VI of the Bylaws of Registrant contains indemnification provisions conforming to the above statute and to the provisions of Section 17 of the Investment Company Act of 1940, as amended. The Registrant and the directors and officers of Registrant obtained coverage under an Errors and Omissions insurance policy. The terms and conditions of the policy coverage conforms generally to the standard coverage available throughout the investment company industry. The coverage also applies to Registrant's investment manager and its members and employees. C-4 Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of Registrant pursuant to the provisions of Maryland law and Registrant's Articles of Incorporation and Bylaws, or otherwise, Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in said Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by Registrant of expenses incurred or paid by a director, officer or controlling person of Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. ITEM 26. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER Registrant's investment manager, Dresdner RCM Global Investors LLC, is a Delaware limited liability company, whose two members are Dresdner Bank AG ("Dresdner") and Dresdner Kleinwort Benson North America, Inc. ("Dresdner Kleinwort Benson"). Dresdner is an international banking organization whose principal executive offices are located at Gallunsanlage 7, 60041 Frankfurt am Main, Frankfurt, Germany. Dresdner Kleinwort Benson is an indirect wholly owned subsidiary of Dresdner whose principal executive offices are located at 75 Wall Street, New York, New York 10005. The individuals who sit on the Board of Managers of Dresdner RCM have held the following director or officer positions within the past two fiscal years:
NAME OF THE OFFICER BUSINESS AFFILIATIONS ADDRESS OR MEMBER OF THE BOARD OF MANAGERS Gerhard Eberstadt Dresdner Bank AG Jurgen-Ponto-Platz 1 (May 1998 - present) D-60301 Frankfurt am Main Germany Chairman, Dresdner Kleinwort 75 Wall Street Benson North America, Inc. New York, NY 10005 (September 1996 - present) Director, KBIMA (December 75 Wall Street 1997 - present) New York, NY 10005
C-5
NAME OF THE OFFICER BUSINESS AFFILIATIONS ADDRESS OR MEMBER OF THE BOARD OF MANAGERS George N. Fugelsang President, Chief Executive 75 Wall Street Officer, Chairman, Dresdner New York NY 10005 Kleinwort Benson North America LLC (February 1994 - present) Director, Dresdner Kleinwort 75 Wall Street Benson North America Services New York, NY 10005 LLC (September 1996 - present); Director, KBIMA (December 1997 - present) Director, KBIMA (December 75 Wall Street 1997 - present) New York, NY 10005
C-6
NAME OF THE OFFICER BUSINESS AFFILIATIONS ADDRESS OR MEMBER OF THE BOARD OF MANAGERS Susan C. Gause Dresdner RCM (July 1994 - Four Embarcadero Center present) San Francisco, CA 94111 Chief Operating Officer, Senior Four Embarcadero Center Managing Director, and San Francisco, CA 94111 Member of the Board of Managers (July 1998-present) Luke D. Knecht Managing Director (July 1998 Four Embarcadero Center -present), Member of the Board San Francisco, CA 94111 of Managers, Dresdner RCM (November 1997 - present) Joachim Madler Director, Dresdner Bank AG Mainzer Lanstrass 15-17 (September 1997 - present) 60301 Frankfurt Germany Director, KBIMA (December 75 Wall Street 1997 - present); New York, NY 10005 Director, Dresdner (South East Singapore Asia) (October 1997 - present) Managing Director, Dresdner Farberstrasse 6, Bank (Schweiz) AG (November Zurich, Switzerland 1997 - present) Chairman, DFV Deutsche Fonds Mainzer Lanstrasse 11-13 und Vorsorgeberatungs (July 60301 Frankfurt 1996 - June 1997) Germany Deutscher Investment-Trust Mainzer Lanstrasse 11-13 (June 1996 - June 1997) 60301 Frankfurt Germany Managing Director, GKS Windmuhlweg 12 Gesellschaft fur Kontenservice 95030 Hof GmbH (June 1994 - June 1997) Germany
C-7
NAME OF THE OFFICER BUSINESS AFFILIATIONS ADDRESS OR MEMBER OF THE BOARD OF MANAGERS William L. Price Chief Executive Officer and Four Embarcadero Center Global Chief Investment Officer, San Francisco, CA 94111 Dresdner RCM (July 1998 - present) Chairman and Member of the Four Embarcadero Center Board of Managers, Senior San Francisco, CA 94111 Managing Director, Dresdner RCM (December 1997 - present) Director, KBIMA (December 75 Wall Street 1997- present) New York, NY 10005 Director, Dresdner RCM (UK) 10 Fenchurch Street (January 1998 - present) London, UK EC3M3LB Jeffrey S. Rudsten Senior Managing Director (July Four Embarcadero Center 1998 - present); Member of the San Francisco, CA 94111 Board of Managers, Dresdner RCM (June 1978 - present) Director, KBIMA (December 75 Wall Street 1997- present) New York, NY 10005 William S. Stack Senior Managing Director, Four Embarcadero Center Global Equity Chief Investment San Francisco, CA 94111 Officer (July 1998 - present); Member of the Board of Managers, Dresdner RCM (August 1994 - present) Director, KBIMA (December 75 Wall Street 1997- present) New York, NY 10005 Director, Dresdner RCM (UK) 10 Fenchurch Street (January 1998 - present) London, UK EC3M3LB Kenneth B. Weeman, Jr. Dresdner RCM (October 1979 - Four Embarcadero Center present) San Francisco, CA 94111
C-8
NAME OF THE OFFICER BUSINESS AFFILIATIONS ADDRESS OR MEMBER OF THE BOARD OF MANAGERS Vice Chairman, Senior Four Embarcadero Center Managing Director (July 1998 - San Francisco, CA 94111 present) Director, KBIMA (December 75 Wall Street 1997- present) New York, NY 10005 Director, Dresdner RCM (UK) 10 Fenchurch Street (January 1998 - present) London, UK EC3M3LB
ITEM 27. PRINCIPAL UNDERWRITERS. (a) Funds Distributor, Inc. ("FDI"), whose principal offices are located at 60 State Street, Suite 1300, Boston Massachusetts 02109, is the principal underwriter of Registrant. FDI is an indirect, wholly owned subsidiary of Boston Institutional Group, Inc., a holding company, all of whose outstanding shares are owned by key employees. FDI is a broker-dealer registered under the Securities Exchange Act of 1934, as amended, and is a member of the National Association of Securities Dealers, Inc. FDI also serves as principal underwriter of the following investment companies: American Century California Tax-Free and Municipal Funds American Century Capital Portfolios, Inc. American Century Government Income Trust American Century International Bond Funds American Century Investment Trust American Century Municipal Trust American Century Mutual Funds, Inc. American Century Premium Reserves, Inc. American Century Quantitative Equity Funds American Century Strategic Asset Allocations, Inc. American Century Target Maturities Trust American Century Variable Portfolios, Inc. American Century World Mutual Funds, Inc. The Brinson Funds Dresdner RCM Capital Funds, Inc. Dresdner RCM Investment Funds Inc. Founders Funds, Inc. Harris Insight Funds Trust HT Insight Funds, Inc. d/b/a Harris Insight Funds C-9 J.P. Morgan Institutional Funds J.P. Morgan Funds JPM Series Trust JPM Series Trust II LaSalle Partners Funds, Inc. Kobrick-Cendant Investment Trust Merrimac Series Monetta Fund, Inc. Monetta Trust The Montgomery Funds I The Montgomery Funds II The Munder Framlington Funds Trust The Munder Funds Trust The Munder Funds, Inc. National Investors Cash Management Fund, Inc. Orbitex Group of Funds SG Cowen Funds, Inc. SG Cowen Income + Growth Fund, Inc. SG Cowen Standby Reserve Fund, Inc. SG Cowen Standby Tax-Exempt Reserve Fund, Inc. SG Cowen Series Funds, Inc. St. Clair Funds, Inc. The Skyline Funds Waterhouse Investors Family of Funds, Inc. WEBS Index Fund, Inc. FDI does not act as a depositor or investment adviser of any investment company. C-10 (b) The directors and executive officers of FDI are set forth below: NAME AND PRINCIPAL POSITIONS AND OFFICES WITH POSITIONS AND OFFICES BUSINESS ADDRESS FUNDS DISTRIBUTOR, INC. WITH REGISTRANT - ------------------------------------------------------------------------------- Marie E. Connolly Director, President and None Chief Executive Officer George A. Rio Executive Vice President None Donald R. Roberson Executive Vice President None William S. Nichols Executive Vice President None Michael S. Petrucelli Senior Vice President None Margaret W. Chambers Senior Vice President, None General Counsel and Chief Compliance Officer Joseph F. Tower III Director, Senior Vice None President, Treasurer and Chief Financial Officer Paula R. David Senior Vice President None Gary S. MacDonald Senior Vice President None Judith K. Benson Senior Vice President None Bernard A. Whalen Senior Vice President None William J. Nutt Chairman and Director None (c) Not Applicable. ITEM 28. LOCATION OF ACCOUNTS AND RECORDS. Accounts, books and other records required by Rules 31a-1 and 31a-2 under the Investment Company Act of 1940, as amended, are maintained and held in the offices of Registrant's investment manager, Dresdner RCM Global Investors LLC, Four Embarcadero Center, San Francisco, California 94111; and/or Registrant's distributor, Funds Distributor, Inc., 60 State Street, Suite 1300, Boston, Massachusetts 02109. Records covering portfolio transactions are also maintained and kept by Registrant's custodian and transfer agent, State Street Bank and Trust Company, U.S. Mutual Funds Services Division, P.O. Box 1713, Boston, Massachusetts 02105. C-11 ITEM 29. MANAGEMENT SERVICES. None ITEM 30. UNDERTAKINGS. Registrant undertakes to furnish each person to whom a prospectus is delivered with a copy of Registrant's latest annual report to shareholders, upon request and without charge. C-12 SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant has duly caused this Pre-Effective Amendment No. 2 to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in San Francisco, California on April 30, 1999. DRESDNER RCM INVESTMENT FUNDS INC. By: /s/William S. Stack, President --------------------- By: /s/Caroline M. Hirst, Treasurer, Chief --------------------- Financial Officer Pursuant to the requirements of the Securities Act of 1933, this Pre-Effective Amendment No. 2 to the Registration Statement has been signed below by the following persons in the capacities and on the date indicated. SIGNATURE TITLE DATE (1) Principal Executive Officer President April 30, 1999 /s/William S. Stack ------------------- William S. Stack (2) Chief Financial and Treasurer April 30, 1999 Accounting Officer /s/Caroline M. Hirst -------------------- Caroline M. Hirst SIGNATURE TITLE DATE (3) Directors /s/ Rolf Passow* ----------------------- April 30, 1999 Rolf Passow /s/ Theodore J. Coburn* ----------------------- April 30, 1999 Theodore J. Coburn /s/ Robert J. Birnbaum* ----------------------- April 30, 1999 Robert J. Birnbaum /s/ Carroll Brown * ----------------------- April 30, 1999 Carroll Brown /s/James E. Dowd* ----------------------- April 30, 1999 James E. Dowd /s/Siegfried Kessler* ----------------------- April 30, 1999 Siegfried Kessler /s/Gottfried W. Perbix* ----------------------- April 30, 1999 Gottfried W. Perbix /s/Jacob Saliba* ----------------------- April 30, 1999 Jacob Saliba /s/Alfred W. Fiore* ----------------------- April 30, 1999 Alfred W. Fiore /s/George N. Fugelsang* ----------------------- April 30, 1999 George N. Fugelsang By: /s/Robert J. Goldstein ----------------------- April 30, 1999 Robert J. Goldstein as Attorney-in-Fact * By Robert J. Goldstein, pursuant to a Power of Attorney dated February 12, 1999. EXHIBIT LIST NUMBER DESCRIPTION 99.23(a) Amended and Restated Articles of Incorporation 99.23(b) Amended and Restated By-laws 99.23(g)(1) Custody Contract dated March 26, 1990 99.23(g)(2) Amendment dated January 13, 1994 to Custody Contract 99.23(g)(3) Amendment dated April 15, 1996 to Custody Contract 99.23(g)(4) Amendment dated July 14, 1998 to Custody Contract 99.23(g)(5) Amendment dated May 3, 1999 to Custodian Contract 99.23(h)(3) Form of Administration Agreement 99.23(i) Legal Opinion - Kirkpatrick & Lockhart LLP 99.23(j)(2) Consent of PricewaterhouseCoopers LLP 99.23(m) Form of Rule 12b-1 Plan EX-99.23A 2 EXHIBIT 99.23A EXHIBIT 99.23(a) FORM OF AMENDED AND RESTATED ARTICLES OF INCORPORATION ARTICLE I NAME (1) The name of the Corporation is Dresdner RCM Investment Funds Inc. (2) The Board of the Directors reserves the right to change its corporate name or any series or class name thereunder by a majority vote without action by stockholders in accordance with Section 2-605 of the General Corporation Law of the State of Maryland. ARTICLE II PURPOSES AND POWERS The purposes for which the Corporation is formed are to act as an open-end investment company under the Investment Company Act of 1940, as amended, and the rules and regulations promulgated thereunder (the "1940 Act"), and to exercise and enjoy all of the general powers, rights, and privileges granted to, or conferred upon, corporations by the Maryland General Corporation Law (the "Maryland Law") now or hereafter in force. ARTICLE III PRINCIPAL OFFICE AND RESIDENT AGENT The post office address of the principal office of the Corporation in the State of Maryland is c/o The Corporation Trust Incorporated, 32 South Street, Baltimore, Maryland 21202. The name and address of the resident agent of the Corporation in the State of Maryland are The Corporation Trust Incorporated, 32 South Street, Baltimore, Maryland 21202. Such resident agent is a Maryland corporation. ARTICLE IV CAPITAL STOCK (1)(a) As increased from 100,000,000 with a par value of $.001 per share, the total number of shares of all classes of capital stock which the Corporation shall have the authority to issue is 1,000,000,000 shares of capital stock, of the par value of $.001 per share. There shall initially be one series of shares, designated as the "Dresdner RCM Europe Fund" consisting initially of 200,000,000 shares (such series and any further series of shares from time-to-time created by the Board of Directors being referred to individually herein as a "series") and 800,000,000 unclassified shares of capital stock. The Board of Directors of the Corporation is hereby empowered to increase or decrease, from time-to-time, the total number of shares of capital stock or the number of shares of capital stock of any series that the Corporation shall A-1 have authority to issue without any action by the stockholders but to not less than the number of shares of capital stock or of such series, as the case may be, then outstanding. (b) The aggregate par value of all shares having a par value is $100,000 before the increase and $1,000,000 as increased. (2) The Corporation may issue fractional shares, which shall carry proportionally all the rights of a whole share, excepting any right to receive a certificate evidencing such fractional shares, but including the right to vote and the right to receive dividends. (3) All persons who shall acquire capital stock in the Corporation shall acquire the same subject to the provisions of these Amended and Restated Articles of Incorporation and the By-Laws of the Corporation (the "By-Laws"). (4) As used in these Amended and Restated Articles of Incorporation, a "series" of shares represents interests in the same assets, liabilities, income, earnings, and profits of the Corporation. The Board of Directors shall have authority to classify and reclassify any authorized but unissued shares of capital stock from time-to-time by setting or changing in any one or more respects the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications, or terms or conditions of redemption of the capital stock. Subject to the provisions of ARTICLE IV and applicable law, the power of the Board of Directors to classify or reclassify any of the shares of capital stock shall include, without limitation, authority to classify or reclassify any such stock into one or more series of capital stock, by determining, fixing, or altering one or more of the following: (a) The distinctive designation of such series and the number of shares to constitute such series; provided that, unless otherwise prohibited by the terms of such series, the number of shares of any series may be decreased by the Board of Directors in connection with any classification or reclassification of unissued shares and the number of shares of such series may be increased by the Board of Directors in connection with any such classification or reclassification, and any such shares of any series which have been redeemed, purchased, or otherwise acquired by the Corporation shall remain part of the authorized capital stock and be subject to classification and reclassification as provided herein; and (b) Whether or not dividends shall be payable on shares of such series and, if so, the rates, amounts, and times at which, and the conditions under which, such dividends shall be paid; and (c) Whether or not shares of such series shall have voting rights in addition to any general voting rights provided by law and these Amended and Restated Articles of Incorporation of the Corporation and, if so, the terms of such additional voting rights; and (d) The rights of holders of shares of such series (including any classes thereof) upon the liquidation, dissolution, or winding up of the affairs of, or upon distribution of the assets of, the Corporation. A-2 (5) Shares of capital stock of the Corporation shall have the following preferences, and other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of redemption. (a) ASSETS BELONGING TO A SERIES. All consideration received by the Corporation for the issue or sale of stock of any series of capital stock, together with all assets in which such consideration is invested and reinvested, income, earnings, profits and proceeds thereof, including any proceeds derived from the sale, exchange, or liquidation thereof, and any funds or payments derived from any reinvestment of such proceeds in whatever form the same may be, shall irrevocably belong to the series of shares of capital stock with respect to which assets, payments, or funds were received by the Corporation for all purposes, subject only to the rights of creditors, and shall be handled upon the books of account of the Corporation. Such consideration, assets, income, earnings, profits, and proceeds thereof, and any assets derived from the sale, exchange, or liquidation thereof, and any assets derived from any reinvestment of such proceeds in whatever form, are herein referred to as "assets belonging to" such series. Any assets, income, earnings, profits, and proceeds thereof, and any funds or payments which are not readily attributable to any particular series shall be allocable among any one or more of the series in such a manner and on such a basis as the Board of Directors, in its sole discretion, shall deem fair and equitable. (b) LIABILITIES BELONGING TO A SERIES. The assets belonging to any series of capital stock shall be charged with the liabilities in respect of such series and shall also be charged with such series' share of the general liabilities of the Corporation determined as hereinafter provided. The determination of the Board of Directors shall be conclusive as to the amount of such liabilities, including the amount of accrued expenses and reserves; as to any allocation of the same to a given series; and as to whether the same are allocable to one or more series. The liabilities so allocated to a series are herein referred to as "liabilities belonging to" such series. Any liabilities which are not readily attributable to any particular series shall be allocable among any one or more of the series in such manner and on such basis as the Board of Directors, in its sole discretion, shall deem fair and equitable. (c) DIVIDENDS AND DISTRIBUTIONS. Shares of each series of capital stock shall be entitled to such dividends and distributions, in stock or in cash or both, as may be declared from time-to-time by the Board of Directors, acting in its sole discretion, with respect to such series, provided, however, that dividends and distributions on shares of a series of capital stock shall be paid only out of the lawfully available "assets belonging to" such series as such phrase is defined in ARTICLE IV (5)(a). (d) LIQUIDATING DIVIDENDS AND DISTRIBUTIONS. In the event of the liquidation or dissolution of the Corporation, stockholders of each series of capital stock shall be entitled to receive, as a series, out of the assets of the Corporation available for distribution to stockholders, but other than general assets not belonging to any particular series of capital stock, the assets belonging to such series; and the assets so distributable to the stockholders of any series of capital stock shall be distributed among such stockholders in proportion to the number of shares of such series held by them and recorded on the books of the Corporation. In the event that there are any general assets not belonging to any particular series of capital stock and available for distribution, such distribution shall be made to the holders of stock of all series of capital stock in proportion to the asset value of the respective series of capital stock determined as hereinafter provided. (e) CLASSES OF SHARES. There shall initially be two classes of the "Dresdner RCM Europe Fund" series, Class N and Class I. Of the 200,000,000 shares designated as "Dresdner A-3 RCM Europe Fund" shares, 100,000,000 shall be designated Class N shares thereof and 100,000,000 shall be designated Class I shares thereof. All shares of the Corporation that are outstanding when the Corporation converts from a closed-end to an open-end investment company will be automatically designated Class N shares of "Dresdner RCM Europe Fund." A class of shares may be invested with one or more other classes in a common investment portfolio comprising a series. Notwithstanding the other provisions of ARTICLE IV (5), if two or more classes are invested in a common investment portfolio as a series, the shares of each such class of capital stock of the Corporation shall be subject to the following preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of redemption, and if there are other classes of capital stock invested together in a different series, shall also be subject to the provisions of this ARTICLE IV (5) at the series level as if the classes comprising the series were one class. (i) The income and expenses of the series shall be allocated among the classes comprising the series in accordance with the relative net asset value of each such class or as otherwise determined by the Board of Directors in accordance with the law and the Corporation's current registration statement as filed with the Securities and Exchange Commission (the "Registration Statement"). The allocation of investment income, capital gains, expenses, and liabilities of the Corporation or any series, among the series and any classes thereof shall be determined by the Board of Directors in a manner that is consistent with applicable law and the Registration Statement. (ii) As more fully set forth in this ARTICLE IV (5), the liabilities and expenses of the classes comprising the series shall be determined separately from those of each other and, accordingly, the net asset value, the dividends and distributions payable to holders, and the amounts distributable in the event of the liquidation of the Corporation or a series to holders of shares of the Corporation's capital stock may vary from class to class within a series. Except for these differences and certain other differences set forth in this ARTICLE IV (5) or elsewhere in the Amended and Restated Articles of Incorporation, the classes comprising a series shall have the same preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of redemption. (iii) The dividends and distributions of investment income and capital gains with respect to the classes comprising a series shall be in such amounts as may be declared from time-to-time by the Board of Directors, and such dividends and distributions may vary among the classes comprising the series to reflect differing allocations of the expenses of the Corporation among the classes and any resultant differences among the net asset values per share of the classes, to such extent and for such purposes as the Board of Directors may deem appropriate. (iv) At such times (which may vary within a class) as may be determined by the Board of Directors (or with the authorization of the Board of Directors, by the officers of the Corporation) in accordance with the 1940 Act and applicable rules and regulations of the National Association of Securities Dealers, Inc. ("NASD") and the Registration Statement, shares of a particular class of capital stock of the Corporation may be automatically converted into shares of another class of capital stock of the Corporation based on the relative net asset values of such classes at the time of conversion, subject, however, to any conditions of conversion that A-4 may be imposed by the Board of Directors (or with the authorization of the Board of Directors, by the officers of the Corporation) and the Registration Statement. (f) VOTING. Each stockholder of each series of capital stock shall be entitled to one vote for each share of capital stock then standing in his or her name on the books of the Corporation, and on any matter submitted to a vote of stockholders, all shares of capital stock then issued and outstanding and entitled to vote shall be voted in the aggregate and not by series except that: (i) when expressly required by law, shares of capital stock shall be voted by individual series and (ii) only shares of capital stock of the respective series affected by a matter shall be entitled to vote on such matter. At all meetings of stockholders, the holders of one-third of the shares of capital stock of the Corporation entitled to vote at the meeting, present in person or by proxy, shall constitute a quorum for the transaction of any business, except as otherwise provided by statute or by these Amended and Restated Articles of Incorporation. In the absence of a quorum no business may be transacted, except that the holders of a majority of the shares of capital stock present in person or by proxy and entitled to vote may adjourn the meeting from time-to-time, without notice other than announcement at the meeting except as otherwise required by these Amended and Restated Articles of Incorporation or the By-Laws, until the holders of the requisite amount of shares of capital stock shall be present. At any such adjourned meeting at which a quorum may be present any business may be transacted which might have been transacted at the meeting originally called. The absence from any meeting, in person or by proxy, of holders of the quorum which may be required by the laws of the State of Maryland, the 1940 Act, or other applicable statute, these Amended and Restated Articles of Incorporation, or the By-Laws, for action upon any given matter shall not prevent action at such meeting upon any other matter or matters which may properly come before the meeting, if there shall be present at the meeting, in person or by proxy, holders of the number of shares of capital stock of the Corporation required for action in respect of such other matter or matters. (g) REDEMPTION. To the extent the Corporation has funds or other property legally available therefor, each holder of shares of capital stock of the Corporation shall be entitled to require the Corporation to redeem all or any part of the shares standing in the name of such holder on the books of the Corporation, at the redemption price of such shares as in effect from time-to-time as may be determined by the Board of Directors of the Corporation in accordance with the provisions hereof, subject to the right of the Board of Directors of the Corporation to suspend the right of redemption of shares of capital stock or postpone the date of payment of such redemption price in accordance with provisions of applicable law. The Corporation may at any time purchase or redeem shares of capital stock of the Corporation in the open market or at private sale, or otherwise, out of funds legally available therefor, at a price not exceeding the net asset value thereof determined in accordance with the 1940 Act and the Corporation's current Registration Statement. Without limiting the generality of the foregoing, the Corporation shall, to the extent permitted by applicable law, have the right at any time to redeem the shares owned by any holder of capital stock of the Corporation if the value of such shares in the account of such holder is less than the minimum initial investment amount applicable to that account as set forth in the Corporation's current Registration Statement, and subject to such further terms and conditions as the Board of Directors of the Corporation may from time-to-time adopt. The price of any shares of capital stock redeemed by the Corporation shall, except as otherwise provided in ARTICLE IV (5)(e), be the net asset value thereof as determined by, or pursuant to methods approved by, the Board of Directors of the Corporation from time-to-time in accordance with the provisions of applicable law, less such redemption fee or other charge, if any, as may be specified in the Corporation's current Registration Statement for that series. Payment of the A-5 redemption price shall be made in cash by the Corporation unless, in the opinion of the Board of Directors, which shall be conclusive, conditions exist which make payment wholly in cash unwise or undesirable; in such event the Corporation may make payment wholly or partly by securities or other property included in the assets belonging or allocable to the series of the shares redemption of which is being sought, the value of which shall be determined as provided herein. (h) OTHER SALES CHARGES. The proceeds of the redemption of the shares of any class of capital stock of the Corporation may be reduced by the amount of any contingent deferred sales charge or other charge (which charges may vary within and among the classes) payable on such redemption pursuant to the terms of issuance of such shares, all in accordance with the 1940 Act, and applicable rules and regulations of the NASD. ARTICLE V BOARD OF DIRECTORS The number of Directors of the Corporation shall be fixed from time-to-time by the By-Laws of the Corporation, but shall not be less than three (3). The Board of Directors can vote to increase or decrease the number of Directors within the limit set by the By-Laws. The number constituting the Board of Directors is eight (8), and the names of the persons who are to serve as Directors are: Robert J. Birnbaum Carroll Brown Theodore J. Coburn James E. Dowd Alfred W. Fiore Siegfried A. Kessler Gottfried W. Perbix Jacob Saliba ARTICLE VI MANAGEMENT OF THE AFFAIRS OF THE CORPORATION (1) POWERS OF THE CORPORATION. All corporate powers and authority of the Corporation (except as at the time otherwise provided by statute or applicable rules and regulations of any governmental or quasi-governmental agency or instrumentality, by these Amended and Restated Articles of Incorporation or by the By-Laws) shall be vested in and exercised by the Board of Directors. (2) ISSUANCE OF STOCK. The Board of Directors may from time-to-time authorize the issuance of and may issue and sell or cause to be issued and sold shares of the Corporation's capital stock of any series or class, whether now or hereafter authorized, including any shares redeemed or repurchased by the Corporation, and securities convertible into shares of the Corporation's capital stock, whether now or hereafter authorized, for such consideration as may be deemed advisable by the Board of Directors and without any action by the stockholders. A-6 (3) COMPENSATION OF DIRECTORS. The Board of Directors shall have power from time-to-time to authorize payment of compensation to the Directors for services to the Corporation, including fees for attendance at meetings of the Board of Directors and of committees. (4) INSPECTION OF CORPORATION'S BOOKS. The Board of Directors shall have power from time-to-time to determine whether and to what extent, and at what times and places and under what conditions and regulations, the accounts and books of the Corporation (other than the stock ledger) or any of them shall be open to the inspection of stockholders; and no stockholder shall have the right of inspecting any account, book, or document of the Corporation except as at the time conferred by statute, unless authorized by a resolution of the stockholders or the Board of Directors. (5) CONTRACTS OF THE CORPORATION AFFECTING THE FINANCIAL INTEREST OF DIRECTOR(S). A contract or other transaction between the Corporation and any of its Directors or between the Corporation and any other corporation, firm, or other entity in which any of its Directors is a director or has a material financial interest is not void or voidable solely because of any one or more of the following: the common Directorship or interest; the presence of the Director at the meeting of the Board of Directors which authorizes, approves, or ratifies the contract or transaction; or the counting of the vote of a Director for the authorization or ratification of the contract or transaction. This ARTICLE VI (5) applies if: (a) the fact of common Directorship of interest is disclosed or known to: (i) the Board of Directors and the Board authorizes, approves, or ratifies the contract or transaction by the affirmative vote of a majority of disinterested directors, even if the disinterested directors constitute less than a quorum; or (ii) the stockholders entitled to vote, and the contract or transaction is authorized, approved, or ratified by a majority of the votes cast by the stockholders entitled to vote other than the votes of shares owned of record or beneficially by the interested director or corporation, firm, or other entity; or (b) the contract or transaction is fair and reasonable to the Corporation. Common or interested Directors or the stock owned by them or by an interested corporation, firm, or other entity may be counted in determining the presence of a quorum at a meeting of the Board of Directors or at a meeting of the stockholders, as the case may be, at which the contract or transaction is authorized, approved, or ratified. If a contract or transaction is not authorized, approved, or ratified in one of the ways provided for in clause (a) of the second sentence of this ARTICLE VI (5), the person asserting the validity of the contract or transaction shall bear the burden of proving that the contract or transaction was fair and reasonable to the Corporation at the time it was authorized, approved, or ratified. This ARTICLE VI (5) does not apply to the fixing by the Board of Directors of reasonable compensation for a Director, whether as a Director or in any other capacity. (6) RATIFICATION BY STOCKHOLDERS. Except as provided in Article VI (5), any contract, transaction, or act of the Corporation or of the Board of Directors which shall be ratified by a majority of a quorum of the stockholders having voting power at any annual meeting, or at any special meeting called for such purpose, shall so far as permitted by law be as valid and as binding as though ratified by every stockholder of the Corporation. A-7 (7) REMOVAL OF OFFICERS. Unless the By-Laws of the Corporation otherwise provide, any officer or employee of the Corporation (other than a Director) may be removed at any time with or without cause by the Board of Directors or by any committee or superior officer upon whom such power of removal may be conferred by the By-Laws or by authority of the Board of Directors. (8) INDEMNIFICATION OF OFFICERS AND DIRECTORS. To the maximum extent permitted by Maryland Law, as from time-to-time amended, the Corporation: (a) shall indemnify and advance expenses to 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; (b) shall indemnify and advance expenses to its currently acting and its former officers to the full extent that indemnification shall be provided to Directors; and (c) may indemnify and advance expenses to 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 imposed by the 1940 Act, the Corporation may, by By-Laws, 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 any limitations imposed by the 1940 Act, no Director or officer in the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages. No amendment of these Amended and Restated Articles of Incorporation or repeal of their 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 VII DURATION The duration of the Corporation shall be perpetual. ARTICLE VIII MAJORITY VOTE Notwithstanding any provision of the laws of the State of Maryland requiring a greater proportion than a majority of the votes of all classes or of any class of stock entitled to be cast, to take or authorize any action, the Corporation may, subject to other applicable provisions of law, these Amended and Restated Articles of Incorporation and the By-Laws, take or authorize such action upon the concurrence of a majority of the aggregate number of the votes entitled to be cast thereon; provided, that this provision shall not affect any requirement of the 1940 Act or the Rules and Regulations of the Securities and Exchange Commission thereunder, for any vote to be taken by the concurrence of a greater proportion of the votes entitled to be cast or for any matter to be authorized by the separate vote of a particular class or series of shares. ARTICLE IX PRE-EMPTIVE RIGHTS No holder of the capital stock of the Corporation or of any other class of stock or securities of the Corporation, whether now or hereafter authorized, shall be entitled as such, as a matter of pre-emptive right, to subscribe for or purchase any part of any new or additional issue A-8 of stock of any class, or of rights or options to purchase any stock, or of securities convertible into, or carrying rights or options to purchase, stock of any class, whether now of hereafter authorized or whether issued for money, for a consideration other than money, or by way of a dividend or otherwise, and all such rights are hereby waived by each holder of capital stock and of any other class of stock or securities of the Corporation, whether now or hereafter authorized. ARTICLE X RESERVATION OF RIGHT TO AMEND The Corporation reserves the right from time-to-time to make any amendment of its charter, now or hereafter authorized by law, including any amendment which alters the terms or contract rights, as expressly set forth in its charter, of any outstanding stock by classification, reclassification, or otherwise, and all rights herein conferred upon stockholders are granted subject to such reservation. A-9 EX-99.23B 3 EXHIBIT 99.23B EXHIBIT 99.23(b) AMENDED AND RESTATED BY-LAWS OF DRESDNER RCM INVESTMENT FUNDS INC. FORM OF BY-LAWS OF DRESDNER RCM INVESTMENT FUNDS INC. TABLE OF CONTENTS
Page ---- ARTICLE I. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 Section 1. PRINCIPAL OFFICE . . . . . . . . . . . . . . . . . . . .1 Section 2. OTHER OFFICES. . . . . . . . . . . . . . . . . . . . . .1 ARTICLE II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 Meetings of Stockholders. . . . . . . . . . . . . . . . . . . . . . . . .1 Section 1. ANNUAL MEETING . . . . . . . . . . . . . . . . . . . . .1 Section 2. SPECIAL MEETINGS . . . . . . . . . . . . . . . . . . . .1 Section 3. PLACE OF MEETING . . . . . . . . . . . . . . . . . . . .2 Section 4. NOTICE OF MEETINGS: WAIVER OF NOTICE . . . . . . . . . .2 Section 5. QUORUM . . . . . . . . . . . . . . . . . . . . . . . . .2 Section 6. ORGANIZATION . . . . . . . . . . . . . . . . . . . . . .2 Section 7. ORDER OF BUSINESS. . . . . . . . . . . . . . . . . . . .2 Section 8. FIXING OF RECORD DATE. . . . . . . . . . . . . . . . . .3 Section 9. VOTING . . . . . . . . . . . . . . . . . . . . . . . . .3 Section 10. PROXIES. . . . . . . . . . . . . . . . . . . . . . . . .3 Section 11. VOTING BY BALLOT . . . . . . . . . . . . . . . . . . . .4 Section 12. VOTING OF SHARES BY CERTAIN HOLDERS. . . . . . . . . . .4 Section 13. INSPECTORS . . . . . . . . . . . . . . . . . . . . . . .4 Section 14. CONSENT OF STOCKHOLDERS IN LIEU OF MEETING . . . . . . .5 ARTICLE III. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 Board of Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . .5 Section 1. GENERAL POWERS . . . . . . . . . . . . . . . . . . . . .5 Section 2. NUMBER OF DIRECTORS. . . . . . . . . . . . . . . . . . .5 Section 3. TERM OF DIRECTORS. . . . . . . . . . . . . . . . . . . .5 Section 4. RESIGNATIONS . . . . . . . . . . . . . . . . . . . . . .5 Section 5. VACANCIES. . . . . . . . . . . . . . . . . . . . . . . .5 Section 6. PLACE OF MEETINGS. . . . . . . . . . . . . . . . . . . .6 Section 7. REGULAR MEETINGS . . . . . . . . . . . . . . . . . . . .6 Section 8. SPECIAL MEETINGS . . . . . . . . . . . . . . . . . . . .6 Section 9. TELEPHONE MEETINGS . . . . . . . . . . . . . . . . . . .6 Section 10. NOTICE OF MEETINGS . . . . . . . . . . . . . . . . . . .6 Section 11. WAIVER OF NOTICE OF MEETINGS . . . . . . . . . . . . . .6 Section 12. QUORUM AND VOTING. . . . . . . . . . . . . . . . . . . .7 Section 13. ORGANIZATION . . . . . . . . . . . . . . . . . . . . . .7 Section 14. WRITTEN CONSENT OF DIRECTORS IN LIEU OF A MEETING. . . .7 Section 15. COMPENSATION . . . . . . . . . . . . . . . . . . . . . .7 Section 16. NET ASSET VALUE. . . . . . . . . . . . . . . . . . . . .7 ARTICLE IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8 Committees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8 Section 1. COMMITTEES OF THE BOARD OF DIRECTORS . . . . . . . . . .8 Section 2. MEETINGS; QUORUM . . . . . . . . . . . . . . . . . . . .8 ARTICLE V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8 Officers, Agents, and Employees . . . . . . . . . . . . . . . . . . . . .8 Section 1. ELECTION OR APPOINTMENT OF OFFICERS. . . . . . . . . . .8 Section 2. EFFECT OF ELECTION OR APPOINTMENT OF OFFICERS, AGENTS, AND EMPLOYEES . . . . . . . . . . . . . . . .9 Section 3. RESIGNATIONS . . . . . . . . . . . . . . . . . . . . . .9 Section 4. REMOVAL OF OFFICER, AGENT, OR EMPLOYEE . . . . . . . . .9 Section 5. VACANCIES. . . . . . . . . . . . . . . . . . . . . . . .9 Section 6. COMPENSATION . . . . . . . . . . . . . . . . . . . . . .9 Section 7. BONDS OR OTHER SECURITY. . . . . . . . . . . . . . . . 10 Section 8. PRESIDENT. . . . . . . . . . . . . . . . . . . . . . . 10 Section 9. VICE PRESIDENT . . . . . . . . . . . . . . . . . . . . 10 Section 10. TREASURER. . . . . . . . . . . . . . . . . . . . . . . 10 Section 11. SECRETARY. . . . . . . . . . . . . . . . . . . . . . . 11 Section 12. DELEGATION OF DUTIES . . . . . . . . . . . . . . . . . 11 ARTICLE VI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Indemnification and Insurance . . . . . . . . . . . . . . . . . . . . . 12 Section 1. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . 12 Section 2. INSURANCE OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS . . . . . . . . . . . . . . . . . . . . . . . 12 ARTICLE VII. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 ARTICLE VIII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 1. STOCK CERTIFICATES . . . . . . . . . . . . . . . . . . 13 Section 2. BOOKS OF ACCOUNTS AND RECORD OF STOCKHOLDERS . . . . . 13 Section 3. TRANSFERS OF SHARES. . . . . . . . . . . . . . . . . . 13 Section 4. REGULATIONS. . . . . . . . . . . . . . . . . . . . . . 14 Section 5. LOST, DESTROYED, OR MUTILATED CERTIFICATES . . . . . . 14 Section 6. FIXING OF A RECORD DATE FOR DIVIDENDS AND DISTRIBUTIONS. . . . . . . . . . . . . . . . . . . . 14 Section 7. INFORMATION TO STOCKHOLDERS AND OTHERS . . . . . . . . 15 ARTICLE IX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Depositories and Custodians . . . . . . . . . . . . . . . . . . . . . . 15 Section 3. OTHER ARRANGEMENTS . . . . . . . . . . . . . . . . . . 15 ARTICLE X. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Contracts; Safekeeping and Transfer of Funds and Securities . . . . . . 15 Section 1. CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . 15 Section 2. CHECKS, NOTES DRAFTS, ETC. . . . . . . . . . . . . . . 15 Section 3. SALE OR TRANSFER OF SECURITIES . . . . . . . . . . . . 16 ARTICLE XI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Independent Public Accountants. . . . . . . . . . . . . . . . . . . . . 16 ii ARTICLE XII. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Annual Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 ARTICLE XIII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
iii AMENDED AND RESTATED BY-LAWS OF DRESDNER RCM INVESTMENT FUNDS INC. ARTICLE I OFFICES Section 1. PRINCIPAL OFFICE. The principal office of Dresdner RCM Investment Funds Inc ("Corporation") shall be in the City of Baltimore, State of Maryland, or at any other place or places, whether or not within the State of Maryland, as the Board of Directors may designate. Section 2. OTHER OFFICES. The Corporation may have such other offices in such places as the Board of Directors may from time-to-time determine or as the business of the Corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS Section 1. ANNUAL MEETING. No annual meeting of the stockholders of the Corporation shall be held in any year in which the election of Directors is not required to be acted upon under the Investment Company Act of 1940, as amended (the "1940 Act"), unless otherwise determined by the Board of Directors. An annual meeting may be held at any place within the United States as may be determined by the Board of Directors and as shall be designated in the notice of the meeting, at the time specified by the Board of Directors. Any business of the Corporation may be transacted at an annual meeting without being specifically designated in the notice unless otherwise provided by statute, the Corporation's charter, or these By-Laws. Section 2. SPECIAL MEETINGS. Special meetings of the stockholders, unless otherwise provided by law or by the Articles of Incorporation, may be called for any purpose or purposes by the Chairman of the Board, by a majority of the Board of Directors, by the President, or on the written request of the holders of at least 25% of the outstanding stock of the Corporation entitled to vote at such meeting. Such request shall state the purpose of such meeting and the matters proposed to be acted on at such meeting. The Secretary shall inform the stockholders who make the request of the reasonably estimated cost of preparing and mailing notice of the meeting and, upon payment to the Corporation of such costs, the Secretary shall give notice to each stockholder entitled to notice of the meeting. Unless requested by stockholders entitled to cast a majority of all the votes entitled to be cast at such a meeting, a special meeting need not be called to consider any matter that is substantially the same as a matter voted on at any special meeting of the stockholders held during the preceding 12 months. No business shall be transacted at any special meeting except as provided in the notice of meeting. Section 3. PLACE OF MEETING. Annual and special meetings of the stockholders shall be held at the principal executive office of the Corporation in the City of San Francisco, California, or at such other place within the United States as the Board of Directors may from time-to-time determine and as shall be stated in the notice of the meeting. Section 4. NOTICE OF MEETINGS: WAIVER OF NOTICE. Notice of the place, date and time of the holding of each annual and special meeting of the stockholders and the purpose or purposes of each special meeting shall be given personally or by mail, not less than ten (10) nor more than ninety (90) days before the date of such meeting, to each stockholder entitled to vote at such meeting and to each other stockholder entitled to notice of the meeting. Notice by mail shall be deemed to be duly given when deposited in the United States mail addressed to the stockholder at his or her address as it appears on the records of the Corporation, with postage thereon prepaid. Notice of any meeting of stockholders shall be deemed waived by any stockholder who shall attend such meeting in person or by proxy, or who shall, either before or after the meeting, submit a signed waiver of notice which is filed with the records of the meeting. If any meeting of the stockholders shall be adjourned to another time and place not more than 120 days after the original record date, and if the time and place to which the meeting shall be adjourned were announced at the meeting at which the adjournment is taken, no further notice of such meeting need be given. Section 5. QUORUM. Except as otherwise provided by statute, the Articles of Incorporation, or these By-Laws, the presence at any stockholders' meeting, in person or by proxy, of stockholders entitled to cast a majority of the votes entitled to be cast at such meeting shall constitute a quorum for the transaction of business. A majority of the votes cast at a meeting of stockholders, duly called and at which a quorum is present, shall be sufficient to take or authorize action upon any matter which may properly come before the meeting, unless the matter is one upon which, by express provisions of applicable statutes, of the Articles of Incorporation or of these By-Laws, a different vote is required, in which case such express provisions shall govern and control the decision of such matter. Section 6. ORGANIZATION. At each meeting of the stockholders, the Chairman of the Board (if one has been designated by the Board of Directors), or in the Chairman of the Board's absence or inability to act, the President, or in the absence or inability of the Chairman of the Board and the President, a Vice President, shall act as chairman of the meeting. The Secretary or the Assistant Secretary, or in the Secretary's or the Assistant Secretary's absence or inability to act, any person appointed by the chairman of the meeting, shall act as secretary of the meeting and keep the minutes thereof. Section 7. ORDER OF BUSINESS. The order of business at all meetings of the stockholders shall be as determined by the chairman of the meeting. Section 8. FIXING OF RECORD DATE. The Board of Directors may set a record date for the purpose of determining stockholders entitled to notice of or to vote at any meeting of the stockholders, or in order to make a determination of stockholders for any other proper purpose. For purposes of determining the record date for any meeting of stockholders, the record date may not be prior to the close of business on the day the record date is fixed, and shall be not more than ninety (90) nor less than ten (10) days before the date of the meeting of the stockholders. Only those persons who were holders of record of shares at such time shall be entitled to vote at such meeting and any adjournment thereof. In lieu of fixing a record date, the Board of Directors may provide that the stock transfer books shall be closed for a stated period not to exceed twenty (20) days, except that if the stock transfer books are closed for the 2 purpose of determining stockholders entitled to notice of, or to vote at, a meeting of stockholders, such books shall be closed for at least ten (10) days before the date of such meeting. If no record date is fixed and the stock transfer books are not closed for the determination of stockholders, the record date for the determination of stockholders entitled to notice of, or to vote at, a meeting of stockholders shall be the later of the close of business on the day on which notice of the meeting of stockholders is mailed or the thirtieth (30th) day before the meeting, or, if notice is waived by all stockholders, at the close of business on the tenth (10th) day next preceding the day on which the meeting is held. Section 9. VOTING. Except as otherwise provided by Maryland Law, the 1940 Act, or the Articles of Incorporation, each holder of record of shares of stock of the Corporation having voting power shall be entitled at each meeting of the stockholders to one vote for every share and a fractional vote for each fraction of a share of capital stock of the Corporation (regardless of class) standing in such stockholder's name on the record of stockholders of the Corporation as of the record date determined pursuant to Section 8 of this Article or, if such record date shall not have been so fixed, then at the later of (a) the close of business on the day on which notice of the meeting is mailed or (b) the thirtieth (30th) day before the meeting. With respect to the election of directors, each share of stock may be voted for as many individuals as there are directors to be elected and for whose election the share is entitled to be voted, and directors shall be elected by plurality vote. Except as otherwise provided by Maryland Law, the 1940 Act, the Articles of Incorporation, or these By-Laws, any corporate action to be taken by vote of the stockholders shall be authorized by a majority of the total votes cast at a meeting of stockholders by the holders of shares present in person or represented by proxy and entitled to vote on such action, provided that a quorum is present. Section 10. PROXIES. A stockholder entitled to vote may vote in person or by proxy as provided by statute. No proxy shall be valid after the expiration of 11 months from the date thereof, unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the stockholder executing it, except in those cases where such proxy states that it is irrevocable and where an irrevocable proxy is permitted by law. Section 11. VOTING BY BALLOT. On a vote by ballot, each ballot shall be signed by the stockholder voting or by his or her proxy, if there be such proxy, and shall state the number of shares voted. Section 12. VOTING OF SHARES BY CERTAIN HOLDERS. Shares of its own stock directly or indirectly owned by the Corporation shall not be voted at any meeting and shall not be counted in determining the total number of outstanding shares entitled to be voted at any given time, unless they are held by it in a fiduciary capacity, in which case they may be voted and shall be counted in determining the total number of shares outstanding at any given time. The Board of Directors may adopt by resolution a procedure whereby a stockholder may certify in writing to the Corporation that any shares of stock registered in the name of the stockholder are held for the account of a specified person other than the stockholder. The resolution shall set forth the class of stockholders who may make the certification, the purpose for which the certification may be made, the form of certification, and the information to be contained in it; if the certification is with respect to a record date or closing of the stock transfer books, the time after the record date or closing of the stock transfer books 3 within which the certification must be received by the Corporation; and any other provisions with respect to the procedure that the Board of Directors considers necessary or desirable. On receipt of such certification, the person specified in the certification shall be regarded as, for the purposes set forth in the certification, the stockholder of record of the specified stock in place of the stockholder who makes the certification Section 13. INSPECTORS. The Board of Directors may, in advance of any meeting of stockholders, appoint one or more inspectors to act at such meeting or any adjournment thereof. If the inspectors shall not be so appointed or if any of them shall fail to appear or act, the chairman of the meeting may, and on the request of any stockholder entitled to vote thereat shall, appoint inspectors. The inspectors shall determine the number of shares outstanding and the voting powers of each, the number of shares represented at the meeting, the existence of a quorum, and the validity and effect of proxies, and shall receive votes, ballots, or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the result, and perform such acts as are proper to conduct the election or vote with fairness to all stockholders. On request of the chairman of the meeting or any stockholder entitled to vote thereat, the inspectors shall make a report in writing of any challenge, request, or matter determined by them and shall execute a certificate of any fact found by them. Any such report shall be signed by the inspector, if there is a single inspector, or by a majority of the inspectors, if there is more than one inspector. The report of the inspector or inspectors on the number of shares represented at the meeting and the results of the voting shall be prima facie evidence thereof. No Director or candidate for the office of Director shall act as inspector of an election of Directors. Inspectors need not be stockholders. Section 14. CONSENT OF STOCKHOLDERS IN LIEU OF MEETING. Except as otherwise provided by Maryland Law, the 1940 Act, or the Articles of Incorporation, any action required or permitted to be taken at any annual or special meeting of stockholders may be taken without a meeting, without prior notice, and without a vote, if the following are filed with the records of stockholders meetings: (a) an unanimous written consent which sets forth the action and is signed by each stockholder entitled to vote on the matter and (b) a written waiver of any right to dissent signed by each stockholder entitled to notice of the meeting but not entitled to vote thereat. ARTICLE III BOARD OF DIRECTORS Section 1. GENERAL POWERS. Except as otherwise provided in the Articles of Incorporation, the business and affairs of the Corporation shall be managed under the direction of the Board of Directors. All powers of the Corporation may be exercised by or under authority of the Board of Directors except as conferred on or reserved to the stockholders by Maryland Law, the 1940 Act, the Articles of Incorporation, or these By-Laws. Section 2. NUMBER OF DIRECTORS. Except as otherwise provided in the Articles of Incorporation, the number of Directors shall be fixed, and may be increased or decreased from time-to-time, by resolution of the entire Board of Directors then in office, provided, however, that the number of Directors shall in no event be less than the minimum number required by Maryland law nor more than 15. Any vacancy created by an increase in number of Directors may be filled in 4 accordance with Section 5 of this Article. No reduction in the number of Directors shall have the effect of removing any Director from office prior to the expiration of his term unless such Director is specifically removed pursuant to Maryland law. Directors need not be stockholders. Section 3. TERM OF DIRECTORS. The term of office of each Director shall be from the time of his or her election and qualification until his or her successor shall have been elected and shall have been qualified unless sooner terminated by his or her death, resignation or removal. Section 4. RESIGNATIONS. A Director may resign at any time by giving written notice of his resignation to the Board of Directors, the Chairman of the Board, the President, or the Secretary. Any such resignation shall take effect at the time specified therein or, if the time when it shall become effective shall not be specified therein, immediately upon its receipt; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 5. VACANCIES. Subject to the provisions of Maryland Law and the 1940 Act, any vacancies in the Board of Directors arising from death, resignation, removal, or any other cause other than an increase in the number of Directors, shall be filled by a vote of a majority of the remaining members of the Board of Directors, whether or not sufficient to constitute a quorum. Any vacancy on the Board of Directors by reason of an increase in the number of Directors may be filled by a majority vote of the entire Board of Directors in office prior to the increase. Section 6. PLACE OF MEETINGS. Meetings of the Board of Directors may be held at such place as the Board of Directors may from time-to-time determine or as shall be specified in the notice of such meeting. Section 7. REGULAR MEETINGS. Regular meetings of the Board of Directors may be held without notice at such time and place as may be determined by the Board of Directors. Section 8. SPECIAL MEETINGS. Special meetings of the Board of Directors may be called by or at the request of two or more Directors or by the Chairman of the Board, the President, or the Secretary. Section 9. TELEPHONE MEETINGS. Members of the Board of Directors or of any committee thereof may participate in a meeting by means of a conference telephone or similar communications equipment if all persons participating in the meeting can hear each other at the same time. Subject to the provisions of the 1940 Act, participation in a meeting by these means constitutes presence in person at the meeting. Section 10. NOTICE OF MEETINGS. To the extent required by Maryland Law or the 1940 Act, notice of each meeting of the Board of Directors shall be given by the Secretary as hereinafter provided, in which notice shall be stated the time and place of the meeting. Notice of each such meeting shall be delivered to each Director, either personally or by telephone or facsimile or by any other standard form of telecommunication, at least 24 hours before the time at which such meeting is to be held, or mailed by first-class mail, postage prepaid, addressed to the Director at his or her residence or usual place of business, at least three days before the day on which such meeting is to be held. If mailed, such notice shall be deemed to be given when deposited in the United States mail properly addressed, with postage thereon prepaid. Neither 5 the business to be transacted at, nor the purpose of, any annual, regular, or special meeting of the Board of Directors need be stated in the notice, unless specifically required by Maryland Law, the 1940 Act, the Articles of Incorporation, or these By-Laws. Section 11. WAIVER OF NOTICE OF MEETINGS. Notice of any meeting need not be given to any Director who shall, either before or after the meeting, sign a written waiver of notice which is filed with the records of the meeting or who shall attend such meeting. Section 12. QUORUM AND VOTING. One-third, but not less than two, of the members of the entire Board of Directors shall be present in person at any meeting of the Board of Directors in order to constitute a quorum for the transaction of business at such meeting. Except as otherwise expressly required by Maryland Law, the 1940 Act, the Articles of Incorporation or these By-Laws, the act of a majority of the Directors present at any meeting at which a quorum is present shall be the act of the Board of Directors. In the absence of a quorum at any meeting of the Board of Directors, a majority of the Directors present thereat may adjourn such meeting to another time and place until a quorum shall be present thereat. Notice of the time and place of any such adjourned meeting shall be given to the Directors who were not present at the time of the adjournment and, unless such time and place were announced at the meeting at which the adjournment was taken, to the other Directors. At any adjourned meeting at which a quorum is present, any business may be transacted which might have been transacted at the meeting as originally called. Section 13. ORGANIZATION. The Board of Directors may, by resolution adopted by a majority of the entire Board of Directors, designate a Chairman of the Board, who shall preside at each meeting of the Board of Directors. In the absence or inability of the Chairman of the Board to preside at a meeting, the President or, in the President's absence or inability to act another Director chosen by a majority of the Directors present, shall act as chairman of the meeting and preside thereat. The Secretary or the Assistant Secretary (or, in their absence or inability to act, any person appointed by the Chairman) shall act as secretary of the meeting and keep the minutes thereof. Section 14. WRITTEN CONSENT OF DIRECTORS IN LIEU OF A MEETING. Subject to the provisions of Maryland Law and the 1940 Act, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if all members of the Board of Directors or committee, as the case may be, consent thereto in writing, and such written consent or consents are filed with the minutes of the proceedings of the Board of Directors or the committee. Section 15. COMPENSATION. Directors shall be entitled to receive, in accordance with a resolution passed by the Board of Directors, compensation for their services and for the cost of attendance at each annual, regular, or special meeting of the Board of Directors or any committee thereof. Nothing herein shall be construed as precluding any Director from serving the Corporation in any other capacity and receiving compensation therefor. Section 16. NET ASSET VALUE. The Board of Directors shall determine the times and method of calculation of the net asset value per share of the Corporation subject to the requirements of the 1940 Act. The Board of Directors may delegate its duties with respect to calculation of the net asset value per share of the Corporation to one or more individuals or corporate management companies and/or investment advisers pursuant to a written contract or 6 contracts which have obtained the requisite approvals, including any requisite approvals of renewals thereof, of the Board of Directors and/or the stockholders in accordance with the provisions of the 1940 Act. ARTICLE IV COMMITTEES Section 1. COMMITTEES OF THE BOARD OF DIRECTORS. The Board of Directors may from time-to-time, by resolution adopted by a majority of the members of the entire Board of Directors, designate one or more committees of the Board of Directors, each such committee to consist of two or more Directors and to have such powers and duties, to the extent permitted by Maryland Law and the 1940 Act, as the Board of Directors may, by resolution, prescribe. The Board of Directors shall have the power to determine the size of each committee, to name (or to change, from time-to-time) the members of each committee, to designate alternate members to replace any absent or disqualified member, or to dissolve any such committee. Each member of any committee of the Board of Directors shall serve at the pleasure of the Board of Directors, and may be removed from such committee at any time by the vote of a majority of the members present at any meeting of the Board of Directors. Nothing herein shall be deemed to prevent the Board of Directors from appointing one or more committees consisting in whole or in part of persons who are not Directors; provided, however, that no such committee shall have or may exercise any authority or power of the Board of Directors in the management of the business or affairs of the Corporation. Section 2. MEETINGS; QUORUM. Not less than two of the members of any committee shall be present in person at any meeting of such committee in order to constitute a quorum for the transaction of business at such meeting, and the act of a majority present shall be the act of such committee. The Board of Directors may designate a chairman of any committee and such chairman, or the Chairman of the Board or the President, may fix the time and place of the committee's meetings unless the Board of Directors shall otherwise provide. In the absence or disqualification of any member of any committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he, she, or they constitute a quorum, may (a) unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member, (b) determine that, for purposes of that meeting, the member so appointed shall replace any other member of the committee, and (c) determine that such member may serve in such capacity until the next meeting of the Board of Directors. For purposes of determining whether a quorum of the committee exists, any such member of the Board of Directors appointed by the member or members of the committee present shall be treated as a member of the committee, and any member so replaced shall not be treated as a member of the committee. ARTICLE V OFFICERS, AGENTS, AND EMPLOYEES Section 1. ELECTION OR APPOINTMENT OF OFFICERS. The officers of the Corporation shall include a President, a Secretary and a Treasurer, each of whom shall be elected or appointed by the Board of Directors. The Board of Directors may elect or appoint one or more Vice Presidents and may also elect or appoint such other officers, agents, and employees, and 7 may give any officers so elected any title or titles, as it may deem necessary or proper. Any two or more offices may be held by the same person, except the offices of President and Vice President, but no officer shall execute, acknowledge, or verify any instrument as an officer in more than one capacity. Such officers shall be elected or appointed by the Board of Directors. Officers serve at the pleasure of the Board of Directors. Each officer shall hold office until his successor shall have been duly elected or appointed and shall have qualified, or until his death, or until he shall have resigned or have been removed, as hereinafter provided in these By-Laws. In its discretion, the Board of Directors may leave unfilled any office except those of President, Treasurer, and Secretary. The Board of Directors may from time-to-time elect or appoint, or delegate to the President the power to appoint, such officers (including one or more Assistant Vice Presidents, Assistant Treasurers and Assistant Secretaries) and such agents, as may be necessary or desirable for the business of the Corporation. Such officers and agents shall have such duties and shall hold their offices for such terms as may be prescribed by the Board of Directors or by the appointing authority. Section 2. EFFECT OF ELECTION OR APPOINTMENT OF OFFICERS, AGENTS, AND EMPLOYEES. The election or appointment of any officer or agent of the Corporation shall not, of itself, create any contract rights between the Corporation and such officer, agent, or employee. Section 3. RESIGNATIONS. Any officer of the Corporation may resign at any time by giving written notice of resignation to the Board of Directors, the Chairman of the Board, the President, or the Secretary. Any such resignation shall take effect at the time specified therein or, if the time when it shall become effective shall not be specified therein, immediately upon its receipt; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 4. REMOVAL OF OFFICER, AGENT, OR EMPLOYEE. Any officer, agent, or employee of the Corporation may be removed by the Board of Directors with or without cause at any time in the sole discretion of the Board of Directors, and the Board of Directors may delegate such power of removal to any officer in respect of officers, agents, or employees under his control. Such removal shall be without prejudice to such person's contract rights, if any, but the appointment of any person as an officer, agent, or employee of the Corporation shall not itself create contract rights. Section 5. VACANCIES. A vacancy in any office, either arising from death, resignation, removal, creation of a new office, or any other cause, may be filled by the Board of Directors for the unexpired portion of the term of the office which shall be vacant. Section 6. COMPENSATION. The compensation of the officers of the Corporation shall be fixed by the Board of Directors, but this power may be delegated to any officer in respect of other officers under his control. Section 7. BONDS OR OTHER SECURITY. If required by the Board of Directors, any officer, agent, or employee of the Corporation shall give a bond or other security for the faithful performance of his or her duties, in such amount and with such surety or sureties as the Board of Directors may require. Section 8. PRESIDENT. The President shall be the chief executive officer. In the absence of the Chairman of the Board (or if there be none), he or she shall preside at all meetings of the 8 stockholders and of the Board of Directors. To the extent permitted by Maryland Law and the 1940 Act, the President shall be a member ex officio of each committee of the Board of Directors of which he or she is not officially a member. The President shall have, subject to the control of the Board of Directors, general supervision and control of the business and affairs of the Corporation. The President may, to the extent permitted by Maryland Law and the 1940 Act, execute any deed, mortgage, bond, contract, or other instrument to which the Corporation is a party except in cases where the execution thereof shall be expressly delegated by the Board of Directors or by these By-Laws to some other officer or agent of the Corporation or shall be required by law to be otherwise executed. The President may employ and discharge employees and agents of the Corporation, and in general shall perform all duties incident to the Office of President, as well as such other duties as may be prescribed by the Board of Directors from time-to-time. To the extent consistent with Maryland Law and the 1940 Act, the President may delegate any or all of the powers listed in this Section 8 of Article V to any other officer of the Corporation. Section 9. VICE PRESIDENT. Each Vice President shall have such powers and perform such duties as the Board of Directors or the President may from time-to-time prescribe. The Board of Directors may designate one or more Vice Presidents as Senior-Vice President or as Vice President for a particular area of responsibility. Unless and until the Board of Directors determines otherwise, in the absence of the President or in the event of a vacancy in such office, the most senior Senior-Vice President, or, if none such exists, the most senior Vice President (based on the order of election of all Vice Presidents currently in office) shall perform the duties of the President and when so acting shall have all the powers of, and shall be subject to the same restrictions as, the President. Section 10. TREASURER. The Treasurer shall: (a) have charge and custody of, and be responsible for, all the funds and securities of the Corporation, except those which the Corporation has placed in the custody of a bank or other entity permitted to act as custodian for the Corporation under the 1940 Act pursuant to a written agreement designating such bank or other entity as a custodian or sub-custodian of the property of the Corporation; (b) keep, or cause to be kept, full and accurate accounts of receipts and disbursements in books belonging to the Corporation; (c) cause all moneys and other valuables to be deposited to the credit of the Corporation in such depositories as may be designated, from time-to-time, by the Board of Directors; (d) receive, and give receipts for, or cause to receive and give receipts for, moneys due and payable, to the Corporation from any source whatsoever; (e) disburse, or cause to be disbursed, the funds of the Corporation and supervise the investment of its funds as ordered or authorized by the Board of Directors, taking proper vouchers therefor; 9 (f) render to the President and the Board of Directors, at the regular meetings of the Board of Directors or whenever they may require it, an account of all of his or her transactions as Treasurer and of the financial condition of the Corporation; and (g) in general, perform all the duties incident to the office of Treasurer and such other duties as from time-to-time may be assigned to him or her by the Board of Directors or the President. Section 11. SECRETARY. The Secretary shall: (a) keep or cause to be kept in one or more books provided for the purpose, the minutes of all meetings of the Board of Directors, the committees of the Board of Directors, and the stockholders; (b) see that all notices are duly given in accordance with the provisions of these By-Laws and as required by law; (c) be custodian of the corporate records and the seal of the Corporation and affix and attest the seal to all other documents to be executed on behalf of the Corporation under its seal; (d) see that the books, reports, statements, certificates, and other documents and records required by law to be kept and filed are properly kept and filed; and (e) in general, perform all the duties incident to the office of Secretary and such other duties as from time-to-time may be assigned to him or her by the Board of Directors or the President. Section 12. DELEGATION OF DUTIES. In case of the absence of any officer of the Corporation, or for any other reason that the Board of Directors may deem sufficient, the Board of Directors may confer for the time being the powers or duties, or any of them, of such officer upon any other officer or upon any Director. ARTICLE VI INDEMNIFICATION AND INSURANCE Section 1. INDEMNIFICATION. The Corporation shall indemnify to the fullest extent permitted by law, (including the 1940 Act) as currently in effect or as the same may hereafter be amended, any person made or threatened to be made a party of any action, suit or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that such person or such person's testator or intestate is or was a Director or officer of the Corporation or serves or served at the request of the Corporation any other enterprise as a director or officer. To the fullest extent permitted by law (including the 1940 Act) as currently in effect or as the same may hereafter be amended, expenses incurred by any person in defending any such action, suit or proceeding shall be paid or reimbursed by the Corporation promptly upon receipt by it of an undertaking by such person to repay such expenses even if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation. The rights provided to any person by this Article VI 10 shall be enforceable against the Corporation by such person who shall be presumed to have relied upon it in serving or continuing to serve as a Director or officer as provided above. No amendment of this Article VI shall impair the rights of any person arising at any time with respect to events occurring prior to such amendment. For purposes of this Article VI, the term "Corporation" shall include any predecessor of the Corporation and any constituent Corporation (including any constituent of a constituent) absorbed by the Corporation in a consolidation or merger; the term "other enterprise" shall include any Corporation, partnership, joint venture, trust or employee benefit plan; service "at the request of the Corporation" shall include service as a Director or officer of the Corporation which imposes duties on, or involves services by, such Director or officer with respect to any employee benefit plan, its participants or beneficiaries; any excise taxes assessed on a person with respect to an employee benefit plan shall be deemed to be indemnifiable expenses; and action by a person with respect to any employee benefit plan which such person reasonably believes to be in the interest of the participants and beneficiaries of such plan shall be deemed to be action not opposed to the best interests of the Corporation. Section 2. INSURANCE OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS. Except as otherwise provided by statute, the Corporation may purchase and maintain insurance on behalf of any person who is or was a Director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee, partner, trustee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him or her and incurred by him or her in or arising out of his status as such, whether or not the Corporation would have the power to indemnify him or her against such liability. ARTICLE VII EXEMPTION FROM LIABILITY Section 1. EXEMPTION. A Director or officer of the Corporation shall not be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a Director or officer, except to the extent such exemption from liability or limitation thereof is not permitted by law (including the 1940 Act) as currently in effect or as the same may hereafter be amended. No amendment, modification or repeal of this Article VII shall adversely affect any right or protection of a Director or officer that exists at the time of such amendment, modification or repeal. ARTICLE VIII CAPITAL STOCK Section 1. STOCK CERTIFICATES. Each holder of stock of the Corporation shall be entitled upon request to have a certificate or certificates, in such form as shall be approved by the Board of Directors, representing the number of shares of the Corporation owned by him or her, provided, however, that certificates for fractional shares will not be delivered in any case. The certificates representing shares of stock shall be signed by or in the name of the Corporation by the Chairman of the Board, the President or a Vice President, and by the Secretary, an Assistant Secretary, the Treasurer, or an Assistant Treasurer and sealed with the seal of the Corporation. 11 Any or all of the signatures or the seal on the certificate may be a facsimile. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate shall be issued, it may be issued by the Corporation with the same effect as if such officer, transfer agent, or registrar were still in office at the date of issue. Certificates shall be consecutively numbered; and if the Corporation shall, from time-to-time, issue several classes of stock, each class may have its own number series. Each certificate representing stock which is restricted as to its transferability or voting powers, which is preferred or limited as to its dividends or as to its share of the assets upon liquidation or which is redeemable at the option of the Corporation, shall have a statement of such restriction, limitation, preference, or redemption provision, or a summary thereof, plainly stated on the certificate. In lieu of such a statement or summary, the Corporation may set forth upon the face or back of the certificate a statement that the Corporation will furnish to any stockholder, upon request and without charge, a full statement of such information. Section 2. BOOKS OF ACCOUNTS AND RECORD OF STOCKHOLDERS. There shall be kept at the principal executive office of the Corporation or at the office of its transfer agent correct and complete books and records containing the name and address of each stockholder and the number of shares of stock of each class held by such stockholder. Section 3. TRANSFERS OF SHARES. Transfers of shares of stock of the Corporation shall be made on the stock records of the Corporation only by the registered holder thereof, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary or with a transfer agent or transfer clerk, and on surrender of the certificate or certificates, if issued, for such shares properly endorsed or accompanied by a duly executed stock transfer power and the payment of all taxes thereon. When such requirements are satisfied and the transfer has been recorded on the books of the Corporation, the Corporation shall cancel the old certificate and issue a new certificate to the person entitled thereto. Except as otherwise provided by law or these By-Laws, the Corporation shall be entitled to recognize the exclusive rights of a person in whose name any share or shares stand on the record of stockholders as the owner of such share or shares for all purposes, including, without limitation, the rights to receive dividends or other distributions, and to vote as such owner; and the Corporation shall not be bound to recognize any equitable or legal claim to or interest in any such share or shares on the part of any other person, whether or not it shall have express or other notice thereof. Section 4. REGULATIONS. The Board of Directors may make such additional rules and regulations, not inconsistent with these By-Laws, as it may deem expedient concerning the issue, transfer, and registration of certificates for shares of stock of the Corporation. It may appoint, or authorize any officer or officers to appoint, one or more transfer agents or one or more transfer clerks and one or more registrars and may require all certificates for shares of stock to bear the signature or signatures of any of them. Section 5. LOST, DESTROYED, OR MUTILATED CERTIFICATES. The holder of any certificates representing shares of stock of the Corporation shall immediately notify the Corporation of any loss, theft, destruction, or mutilation of such certificate, and, upon request, shall provide to the Corporation an affidavit of the rightful holder of such certificate stating that such certificate has been lost, stolen, destroyed, or mutilated, as the case may be. The Corporation may issue a new certificate of stock in the place of any certificate theretofore issued 12 by it which the owner thereof shall allege to have been lost or destroyed or which shall have been mutilated. Prior to issuing a new certificate to replace any certificate alleged to have been lost, stolen, destroyed, or mutilated, the Board of Directors may, in its discretion, require such owner or his legal representatives to give to the Corporation a bond in such sum, limited or unlimited, and in such form and with such surety or sureties, as the Board of Directors in its absolute discretion shall determine, to indemnify the Corporation against any claim that may be made against it on account of the alleged loss, theft, or destruction of any such certificate, or issuance of a new certificate. Anything herein to the contrary notwithstanding, the Board of Directors, in its absolute discretion, may refuse to issue any such new certificate, except pursuant to legal proceedings under Maryland Law. Section 6. FIXING OF A RECORD DATE FOR DIVIDENDS AND DISTRIBUTIONS. The Board of Directors may fix, in advance, as a record date, a date not more than ninety (90) days preceding the date fixed for the payment of any dividend or the making of any distribution or the allotting of any other rights (except with respect to voting which is provided for in Article II(8)). Once the Board of Directors fixes such record date as the record date for the determination of the stockholders entitled to receive any such dividend or distribution or the allotment of such other rights, only the stockholders of record at the time so fixed shall be entitled to receive such dividend or distribution or such other rights. Section 7. INFORMATION TO STOCKHOLDERS AND OTHERS. Any stockholder or his agent may inspect and copy during usual business hours the Corporation's By-Laws, minutes of the proceedings of its stockholders, annual statements of its affairs, and voting trust agreements on file at its principal office. ARTICLE IX DEPOSITORIES AND CUSTODIANS Section 1. EMPLOYMENT OF A CUSTODIAN. The Corporation shall place and at all times maintain in the custody of a custodian (including any sub-custodian for the custodian) all funds, securities and similar investments owned by the Corporation to the extent required by the 1940 Act. The custodian (and any sub-custodian) shall be an institution conforming to the requirements of Section 17(f) of the 1940 Act, and the rules of the Securities and Exchange Commission thereunder. The custodian shall be appointed from time to time by the Board of Directors, which shall fix its remuneration. Section 2. TERMINATION OF CUSTODIAN AGREEMENT. Upon termination of the custodian agreement or inability of the custodian to continue to serve, the Board of Directors shall promptly appoint a successor custodian, but in the event that no successor custodian can be found who has the required qualifications and is willing to serve, the Board of Directors shall call as promptly as possible a special meeting of the stockholders to determine whether the Corporation shall function without a custodian or shall be liquidated. If so directed by vote of the holders of a majority of the outstanding shares of stock of the Corporation, the custodian shall deliver and pay over all property of the Corporation held by it as specified in such vote. 13 Section 3. OTHER ARRANGEMENTS. The Corporation may make such other arrangements for the custody of its assets (including deposit arrangements) as may be required by any applicable law, rule or regulation. ARTICLE X CONTRACTS; SAFEKEEPING AND TRANSFER OF FUNDS AND SECURITIES Section 1. CONTRACTS. Subject to the requirements of the 1940 Act, the Board of Directors may authorize any officer or agent to enter into any contract or to execute and deliver any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances. Section 2. CHECKS, NOTES DRAFTS, ETC. Checks, notes, drafts, acceptances, bills of exchange, and other orders or obligations for the payment of money shall be signed by such officer or officers or person or persons as the Board of Directors by resolution shall from time-to-time designate, and such authority may be general or confined to specific instances. Section 3. SALE OR TRANSFER OF SECURITIES. Stock certificates, bonds, or other securities at any time owned by the Corporation may be held on behalf of the Corporation or sold, transferred, or otherwise disposed of subject to any limits imposed by these By-Laws and pursuant to authorization by the Board of Directors and, when so authorized to be held, sold, transferred, or otherwise disposed of, may be transferred from the name of the Corporation by the signature of the President, a Vice President, or the Treasurer or pursuant to any procedure approved by the Board of Directors, subject to applicable law. ARTICLE XI INDEPENDENT PUBLIC ACCOUNTANTS Section 1. INDEPENDENT PUBLIC ACCOUNTANTS The Corporation shall employ a firm of independent public accountants as its accountants to examine the accounts of the Corporation and to sign and certify financial statements filed by the Corporation. The accountant's certificates and reports shall be addressed both to the Directors and to the stockholders. The employment of the accountant shall be conditioned upon the right of the Corporation to terminate the employment forthwith without any penalty by vote of a majority of the outstanding voting securities at any stockholders' meeting called for that purpose. A majority of the Directors who are not interested persons (as such term is defined in the 1940 Act) of the Corporation shall select the accountant at any meeting held (i) within thirty (30) days before or after the beginning of the fiscal year of the Corporation or (ii) before the annual stockholders' meeting in that year. Such selection shall be submitted for ratification or rejection at the next succeeding annual stockholders' meeting. If such meeting shall reject such selection, the accountant shall be selected by majority vote of the Corporation's outstanding voting securities, either at the meeting at which the rejection occurred or at a subsequent meeting of stockholders called for the purpose of selecting an accountant. 14 Any vacancy occurring between annual meetings, due to the resignation of the accountant, may be filled by a majority vote of the members of the Board of Directors who are not such interested persons. ARTICLE XII ANNUAL STATEMENT The books of account of the Corporation shall be examined by an independent firm of public accountants at the close of each annual period of the Corporation and at such other times as may be directed by the Board of Directors. A report to the stockholders based upon each such examination shall be mailed to each stockholder of record on such date with respect to each report as may be determined by the Board of Directors, at his address as the same appears on the books of the Corporation. Such annual statement shall be placed on file at the Corporation's principal office within one hundred-twenty (120) days after the end of the Corporation's fiscal year. Each such report shall show the assets and liabilities of the Corporation as of the close of the annual or other period covered by the report. Such report shall also show the Corporation's income and expenses for the period from the end of the Corporation's preceding fiscal year to the close of the annual or other period covered by the report and any other information required by the 1940 Act, and shall set forth such other matters as the Board of Directors or such firm of independent public accountants shall determine. ARTICLE XIII AMENDMENTS These By-Laws may be amended or repealed by the affirmative vote of a majority of the Board of Directors at any regular or special meeting of the Board of Directors, subject to the requirements of the 1940 Act. 15 EX-99.23G1 4 EXHIBIT 99.23G1 Exhibit 99.23(g)(1) CUSTODIAN CONTRACT Between THE EMERGING GERMANY FUND INC. and STATE STREET BANK AND TRUST COMPANY
TABLE OF CONTENTS Page 1. Employment of Custodian and Property to be Held By It . . . . . . . . . .1 2. Duties of the Custodian with Respect to Property of the Fund Held by the Custodian in the United States. . . . . . . . . . . . . . . .2 2.1 Holding Securities. . . . . . . . . . . . . . . . . . . . . . . .2 2.2 Delivery of Securities. . . . . . . . . . . . . . . . . . . . . .3 2.3 Registration of Securities. . . . . . . . . . . . . . . . . . . .7 2.4 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . .8 2.5 Availability of Federal Funds . . . . . . . . . . . . . . . . . .9 2.6 Collection of Income. . . . . . . . . . . . . . . . . . . . . . .9 2.7 Payment of Fund Monies. . . . . . . . . . . . . . . . . . . . . .10 2.8 Liability for Payment in Advance of Receipt of Securities Purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 2.9 Appointment of Agents . . . . . . . . . . . . . . . . . . . . . .13 2.10 Deposit of Securities in Securities System. . . . . . . . . . . .13 2.10A Fund Assets Held in the Custodians' Direct Paper System . . . . .16 2.11 Segregated Account. . . . . . . . . . . . . . . . . . . . . . . .18 2.12 Ownership Certificates for Tax Purposes . . . . . . . . . . . . .19 2.13 Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19 2.14 Communications Relating to Fund Portfolio Securities. . . . . . .20 2.15 Reports to Fund by Independent Public Accountants . . . . . . . .21 3. Duties of the Custodian with Respect to Property of the Fund Held Outside of the United States . . . . . . . . . . . . . . . . . . . .21 3.1 Appointment of Foreign Sub-Custodians . . . . . . . . . . . . . .21 3.2 Assets to be Held . . . . . . . . . . . . . . . . . . . . . . . .22 3.3 Foreign Securities Depositories . . . . . . . . . . . . . . . . .22 3.4 Segregation of Securities . . . . . . . . . . . . . . . . . . . .22 3.5 Agreements with Foreign Banking Institutions. . . . . . . . . . .23 3.6 Access of Independent Accountants of the Fund . . . . . . . . . .24 3.7 Reports by Custodian. . . . . . . . . . . . . . . . . . . . . . .24 3.8 Transactions in Foreign Custody Account . . . . . . . . . . . . .24 3.9 Liability of Foreign Sub-Custodians . . . . . . . . . . . . . . .25 3.10 Liability of Custodian. . . . . . . . . . . . . . . . . . . . . .26 3.11 Reimbursement of Advances . . . . . . . . . . . . . . . . . . . .27 3.12 Monitoring Responsibilities . . . . . . . . . . . . . . . . . . .27 3.13 Branches of U.S. Banks. . . . . . . . . . . . . . . . . . . . . .28 4. Proper Instructions . . . . . . . . . . . . . . . . . . . . . . . . . . .29 5. Actions Permitted Without Express Authority . . . . . . . . . . . . . . .30 6. Evidence of Authority . . . . . . . . . . . . . . . . . . . . . . . . . .30 7. Duties of Custodian with Respect to the Books of Account and Calculations of Net Asset Value and Net Income. . . . . . . . . . . .31 8. Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31 9. Opinion of Fund's Independent Accountant. . . . . . . . . . . . . . . . .32 10. Compensation of Custodian . . . . . . . . . . . . . . . . . . . . . . . .32 11. Responsibility of Custodian . . . . . . . . . . . . . . . . . . . . . . .32 12. Effective Period, Termination and Amendment . . . . . . . . . . . . . . .34 13. Successor Custodian . . . . . . . . . . . . . . . . . . . . . . . . . . .36 14. Interpretive and Additional Provisions. . . . . . . . . . . . . . . . . .37 15. Massachusetts Law to Apply. . . . . . . . . . . . . . . . . . . . . . . .38 16. Prior Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38
CUSTODIAN CONTRACT This Contract between The Emerging Germany Fund Inc., a corporation organized and existing under the laws of Maryland, having its principal place of business at One Battery Park Plaza, New York, New York, 10004, hereinafter called the "Fund", and State Street Bank and Trust Company, a Massachusetts trust company, having its principal place of business at 225 Franklin Street, Boston, Massachusetts, 02110, hereinafter called the "Custodian", WITNESSETH: That in consideration of the mutual covenants and agreements hereinafter contained, the parties hereto agree as follows: 1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT The Fund hereby employs the Custodian as the custodian of its assets, including securities it desires to be held in places within the United States ("domestic securities") and securities it desires to be held outside the United States ("foreign securities") pursuant to the provisions of the Articles of Incorporation. The Fund agrees to deliver to the Custodian all securities and cash owned by it, and all payments of income, payments of principal or capital distributions received by it with respect to all securities owned by the Fund from time to time, and the cash consideration received by it for such new or treasury shares of capital stock, $ par value, ("Shares") of the Fund as may be issued or sold from time to time. The Custodian shall not be responsible for any property of the Fund held or received by the Fund and not delivered to the Custodian. Upon receipt of "Proper Instructions" (within the meaning of Article 4), the Custodian shall from time to time employ one or more sub-custodians located in the United States, but only in accordance with an applicable vote by the Board of Directors of the Fund, and provided that the Custodian shall have no more or less responsibility or liability to the Fund on account of any actions or omissions of any sub-custodian so employed than any such sub-custodian has to the Custodian. The Custodian may employ as sub-custodians for the Fund's securities and other assets the foreign banking institutions and foreign securities depositories designated in Schedule "A" hereto but only in accordance with the provisions of Article 3. 2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD BY THE CUSTODIAN IN THE UNITED STATES 2.1 HOLDING SECURITIES. The Custodian shall hold and physically segregate for the account of the Fund all non-cash property, to be held by it in the United States, including all domestic securities owned by the Fund, other than securities which are maintained pursuant to Section 2.10 in a clearing agency which acts as a securities depository or in a book-entry system authorized by the U.S. Department of the Treasury, collectively referred to herein as "Securities System" and (b) commercial paper of an issuer for which State Street Bank and Trust Company acts as issuing and paying agent ("Direct Paper") which is deposited and/or maintained in the Direct Paper System of the Custodian pursuant to Section 2.10A. 2.2 DELIVERY OF SECURITIES. The Custodian shall release and deliver domestic securities owned by the Fund held by the Custodian or in a Securities System account of the Custodian or in the Custodian's Direct Paper book entry system account ("Direct Paper Account") only upon receipt of Proper Instructions, which may be continuing instructions when deemed appropriate by the parties, and only in the following cases: 1) Upon sale of such securities for the account of the Fund and receipt of payment therefor; 2) Upon the receipt of payment in connection with any repurchase agreement related to such securities entered into by the Fund; 3) In the case of a sale effected through a Securities System, in accordance with the provisions of Section 2.10 hereof; 4) To the depository agent in connection with tender or other similar offers for portfolio securities of the Fund; 5) To the issuer thereof or its agent when such securities are called, redeemed, retired or otherwise become payable; provided that, in any such case, the cash or other consideration is to be delivered to the Custodian; 6) To the issuer thereof, or its agent, for transfer into the name of the Fund or into the name of any nominee or nominees of the Custodian or into the name or nominee name of any agent appointed pursuant to Section 2.9 or into the name or nominee name of any sub-custodian appointed pursuant to Article 1; or for exchange for a different number of bonds, certificates or other evidence representing the same aggregate face amount or number of units; PROVIDED that, in any such case, the new securities are to be delivered to the Custodian; 7) Upon the sale of such securities for the account of the Fund, to the broker or its clearing agent, against a receipt, for examination in accordance with "street delivery" custom; provided that in any such case, the Custodian shall have no responsibility or liability for any loss arising from the delivery of such securities prior to receiving payment for such securities except as may arise from the Custodian's own negligence or willful misconduct; 8) For exchange or conversion pursuant to any plan of merger, consolidation, recapitalization, reorganization or readjustment of the securities of the issuer of such securities, or pursuant to provisions for conversion contained in such securities, or pursuant to any deposit agreement; provided that, in any such case, the new securities and cash, if any, are to be delivered to the Custodian; 9) In the case of warrants, rights or similar securities, the surrender thereof in the exercise of such warrants, rights or similar securities or the surrender of interim receipts or temporary securities for definitive securities; provided that, in any such case, the new securities and cash, if any, are to be delivered to the Custodian; 10) For delivery in connection with any loans of securities made by the Fund, BUT ONLY against receipt of adequate collateral as agreed upon from time to time by the Custodian and the Fund, which may be in the form of cash or obligations issued by the United States government, its agencies or instrumentalities, except that in connection with any loans for which collateral is to be in the credited to the Custodian's account book-entry system authorized by the U.S. Department of the Treasury, the Custodian will not be held liable or responsible for the delivery of securities owned by the Fund prior to the receipt of such collateral; 11) For delivery as security in connection with any borrowings by the Fund requiring a pledge of assets by the Fund, BUT ONLY against receipt of amounts borrowed; 12) For delivery in accordance with the provisions of any agreement among the Fund, the Custodian and a broker-dealer registered under the Securities Exchange Act of 1934 (the "Exchange Act") and a member of The National Association of Securities Dealers, Inc. ("NASD"), relating to compliance with the rules of The Options Clearing Corporation and of any registered national securities exchange, or of any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by the Fund; 13) For delivery in accordance with the provisions of any agreement among the Fund, the Custodian, and a Futures Commission Merchant registered under the Commodity Exchange Act, relating to compliance with the rules of the Commodity Futures Trading Commission and/or any Contract Market, or any similar organization or organizations, regarding account deposits in connection with transactions by the Fund; 14) For any other proper corporate purpose, BUT ONLY upon receipt of, in addition to Proper Instructions, a certified copy of a resolution of the Board of Directors or of the Executive Committee signed by an officer of the Fund and certified by the Secretary or an Assistant Secretary, specifying the securities to be delivered, setting forth the purpose for which such delivery is to be made, declaring such purpose to be a proper corporate purpose, and naming the person or persons to whom delivery of such securities shall be made. 2.3 REGISTRATION OF SECURITIES. Domestic securities held by the Custodian (other than bearer securities) shall be registered in the name of the Fund or in the name of any nominee of the Fund or of any nominee of the Custodian which nominee shall be assigned exclusively to the Fund, UNLESS the Fund has authorized in writing the appointment of a nominee to be used in common with other registered investment companies having the same investment adviser as the Fund, or in the name or nominee name of any agent appointed pursuant to Section 2.9 or in the name or nominee name of any sub-custodian appointed pursuant to Article 1. All securities accepted by the Custodian on behalf of the Fund under the terms of this Contract shall be in "street name" or other good delivery form. If, however, the Fund directs the Custodian to maintain securities in "street name", the Custodian shall utilize its best efforts only to timely collect income due the Fund on such securities and to notify the Fund on a best efforts basis only of relevant corporate actions including, without limitation, pendency of calls, maturities, tender or exchange offers. 2.4 BANK ACCOUNTS. The Custodian shall open and maintain a separate bank account or accounts in the United States in the name of the Fund, subject only to draft or order by the Custodian acting pursuant to the terms of this Contract, and shall hold in such account or accounts, subject to the provisions hereof, all cash received by it from or for the account of the Fund, other than cash maintained by the Fund in a bank account established and used in accordance with Rule 17f-3 under the Investment Company Act of 1940. Funds held by the Custodian for the Fund may be deposited by it to its credit as Custodian in the Banking Department of the Custodian or in such other banks or trust companies as it may in its discretion deem necessary or desirable; provided, however, that every such bank or trust company shall be qualified to act as a custodian under the Investment Company Act of 1940 and that each such bank or trust company and the funds to be deposited with each such bank or trust company shall be approved by vote of a majority of the Board of Directors of the Fund. Such funds shall be deposited by the Custodian in its capacity as Custodian and shall be withdrawable by the Custodian only in that capacity. 2.5 AVAILABILITY OF FEDERAL FUNDS. Upon mutual agreement between the Fund and the Custodian, the Custodian shall, upon the receipt of Proper Instructions, make federal funds available to the Fund as of specified times agreed upon from time to time by the Fund and the Custodian in the amount of checks received in payment for Shares of the Fund which are deposited into the Fund's account. 2.6 COLLECTION OF INCOME. Subject to the provisions of Section 2.3, the Custodian shall collect on a timely basis all income and other payments with respect to United States registered securities held hereunder to which the Fund shall be entitled either by law or pursuant to custom in the securities business, and shall collect on a timely basis all income and other payments with respect to United States bearer securities if, on the date of payment by the issuer, such securities are held by the Custodian or its agent thereof and shall credit such income, as collected, to the Fund's custodian account. Without limiting the generality of the foregoing, the Custodian shall detach and present for payment all coupons and other income items requiring presentation as and when they become due and shall collect interest when due on securities held hereunder. Income due the Fund on United States securities loaned pursuant to the provisions of Section 2.2 (10) shall be the responsibility of the Fund. The Custodian will have no duty or responsibility in connection therewith, other than to provide the Fund with such information or data as may be necessary to assist the Fund in arranging for the timely delivery to the Custodian of the income to which the Fund is properly entitled. 2.7 PAYMENT OF FUND MONIES. Upon receipt of Proper Instructions, which may be continuing instructions when deemed appropriate by the parties, the Custodian shall pay out monies of the Fund in the following cases only: 1) Upon the purchase of domestic securities, options, futures contracts or options on futures contracts for the account of the Fund but only (a) against the delivery of such securities or evidence of title to such options, futures contracts or options on futures contracts to the Custodian (or any bank, banking firm or trust company doing business in the United States or abroad which is qualified under the Investment Company Act of 1940, as amended, to act as a custodian and has been designated by the Custodian as its agent for this purpose) registered in the name of the Fund or in the name of a nominee of the custodian referred to in Section 2.3 hereof or in proper form for transfer; (b) in the case of a purchase effected through a Securities System, in accordance with the conditions set forth in Section 2.10 hereof; (c) in the case of a purchase involving the Direct Paper System, in accordance with the conditions set forth in Section 2.10A; (d) in the case of repurchase agreements entered into between the Fund and the Custodian, or another bank, or a broker-dealer which is a member of NASD, (i) against delivery of the securities either in certificate form or through an entry crediting the Custodian's account at the Federal Reserve Bank with such securities or (ii) against delivery of the receipt evidencing purchase by the Fund of securities owned by the Custodian along with written evidence of the agreement by the Custodian to repurchase such securities from the Fund or (e) for transfer to a time deposit account of the Fund in any bank, whether domestic or foreign; such transfer may be effected prior to receipt of a confirmation from a broker and/or the applicable bank pursuant to Proper Instructions from the Fund as defined in Article 4; 2) In connection with conversion, exchange or surrender of securities owned by the Fund as set forth in Section 2.2 hereof; 3) For the payment of any expense or liability incurred by the Fund, including but not limited to the following payments for the account of the Fund: interest, taxes, management, accounting, transfer agent and legal fees, and operating expenses of the Fund whether or not such expenses are to be in whole or part capitalized or treated as deferred expenses; 4) For the payment of any dividends declared pursuant to the governing documents of the Fund; 5) For payment of the amount of dividends received in respect of securities sold short; 6) For any other proper purpose, BUT only upon receipt of, in addition to Proper Instructions, a certified copy of a resolution of the Board of Directors or of the Executive Committee of the Fund signed by an officer of the Fund and certified by its Secretary or an Assistant Secretary, specifying the amount of such payment, setting forth the purpose for which such payment is to be made, declaring such purpose to be a proper purpose, and naming the person or persons to whom such payment is to be made. 2.8 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES PURCHASED. Except as specifically stated otherwise in this Contract, in any and every case where payment for purchase of domestic securities for the account of the Fund is made by the Custodian in advance of receipt of the securities purchased in the absence of specific written instructions from the Fund to so pay in advance, the Custodian shall be absolutely liable to the Fund for such securities to the same extent as if the securities had been received by the Custodian. 2.9 APPOINTMENT OF AGENTS. The Custodian may at any time or times in its discretion appoint (and may at any time remove) any other bank or trust company which is itself qualified under the Investment Company Act of 1940, as amended, to act as a custodian, as its agent to carry out such of the provisions of this Article 2 as the Custodian may from time to time direct; PROVIDED, however, that the appointment of any agent shall not relieve the Custodian of its responsibilities or liabilities hereunder. 2.10 DEPOSIT OF SECURITIES IN SECURITIES SYSTEMS. The Custodian may deposit and/or maintain domestic securities owned by the Fund in a clearing agency registered with the Securities and Exchange Commission under Section 17A of the Securities Exchange Act of 1934, which acts as a securities depository, or in the book-entry system authorized by the U.S. Department of the Treasury and certain federal agencies, collectively referred to herein as "Securities System" in accordance with applicable Federal Reserve Board and Securities and Exchange Commission rules and regulations, if any, and subject to the following provisions: 1) The Custodian may keep domestic securities of the Fund in a Securities System provided that such securities are represented in an account ("Account") of the Custodian in the Securities System which shall not include any assets of the Custodian other than assets held as a fiduciary, custodian or otherwise for customers; 2) The records of the Custodian with respect to domestic securities of the Fund which are maintained in a Securities System shall identify by book-entry those securities belonging to the Fund; 3) The Custodian shall pay for domestic securities purchased for the account of the Fund upon (i) receipt of advice from the Securities System that such securities have been transferred to the Account, and (ii) the making of an entry on the records of the Custodian to reflect such payment and transfer for the account of the Fund. The Custodian shall transfer domestic securities sold for the account of the Fund upon (i) receipt of advice from the Securities System that payment for such securities has been transferred to the Account, and (ii) the making of an entry on the records of the Custodian to reflect such transfer and payment for the account of the Fund. Copies of all advices from the Securities System of transfers of domestic securities for the account of the Fund shall identify the Fund, be maintained for the Fund by the Custodian and be provided to the Fund at its request. Upon request, the Custodian shall furnish the Fund confirmation of each transfer to or from the account of the Fund in the form of a written advice or notice and shall furnish to the Fund copies of daily transaction sheets reflecting each day's transactions in the Securities System for the account of the Fund. 4) The Custodian shall provide the Fund with any report obtained by the Custodian on the Securities System's accounting system, internal accounting control and procedures for safeguarding domestic securities deposited in the Securities System; 5) The Custodian shall have received the initial or annual certificate, as the case may be, required by Article 12 hereof; 6) Anything to the contrary in this Contract notwithstanding, the Custodian shall be liable to the Fund for any loss or damage to the Fund resulting from use of the Securities System by reason of any negligence, misfeasance or misconduct of the Custodian or any of its agents or of any of its or their employees or from failure of the Custodian or any such agent to enforce effectively such rights as it may have against the Securities System; at the election of the Fund, it shall be entitled to be subrogated to the rights of the Custodian with respect to any claim against the Securities System or any other person which the Custodian may have as a consequence of any such loss or damage if and to the extent that the Fund has not been made whole for any such loss or damage. 2.10A FUND ASSETS HELD IN THE CUSTODIAN'S DIRECT PAPER SYSTEM The Custodian may deposit and/or maintain securities owned by the Fund in the Direct Paper System of the Custodian subject to the following provisions: 1) No transaction relating to securities in the Direct Paper System will be effected in the absence of Proper Instructions; 2) The custodian may keep securities of the Fund in the Direct Paper System only if such securities are represented in an account ("Account") of the Custodian in the Direct Paper System which shall not include any assets of the Custodian other than assets held as a fiduciary, custodian or otherwise for customers; 3) The records of the Custodian with respect to securities of the Fund which are maintained in the Direct Paper System shall identify by book entry those securities belonging to the Fund; 4) The Custodian shall pay for securities purchased for the account of the Fund upon the making of an entry on the records of the Custodian to reflect such payment and transfer of securities to the account of the Fund. The Custodian shall transfer securities sold for the account of the Fund upon the making of an entry on the records of the Custodian to reflect such transfer and receipt of payment for the account of the Fund; 5) The Custodian shall furnish the Fund confirmation of each transfer to or from the account of the Fund, in the form of a written advice or notice, of Direct Paper on the next business day following such transfer and shall furnish to the Fund copies of daily transaction sheets reflecting each day's transaction in the Securities System for the account of the Fund; 6) The Custodian shall provide the Fund with any report on its system of internal accounting control as the Fund may reasonably request from time to time. 2.11 SEGREGATED ACCOUNT. The Custodian shall upon receipt of Proper Instructions establish and maintain a segregated account or accounts for and on behalf of the Fund' into which account or accounts may be-transferred cash and/or securities, including securities maintained in an account by the Custodian pursuant to Section 2.10 hereof, (i;) in accordance with the provisions of any agreement among the Fund, the Custodian and as broker-dealer registered under the Exchange Act and a member of the NASD (or any futures commission merchant registered under the Commodity Exchange Act), relating to compliance with the rules of The Options Clearing Corporation and of any registered national securities exchange (or the Commodity Futures Trading Commission or any registered contract market), or of any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by the Fund, (ii) for purposes of segregating cash or government securities in connection with options purchased, sold or written by the Fund or commodity futures contracts or options thereon purchased or sold by the Fund, (iii) for the purposes of compliance by the Fund with the procedures required by Investment Company Act Release No. 10666, or any subsequent release or releases of the Securities and Exchange Commission relating to the maintenance of segregated accounts by registered investment companies and (iv) for other proper corporate purposes, BUT ONLY, in the case of clause (iv), upon receipt of, in addition to Proper Instructions, a certified copy of a resolution of the Board of Directors or of the Executive Committee signed by an officer of the Fund and certified by the Secretary or an Assistant Secretary, setting forth the purpose or purposes of such segregated account and declaring such purposes to be proper corporate purposes. 2.12 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian shall execute ownership and other certificates and affidavits for all federal and state tax purposes in connection with receipt of income or other payments with respect to domestic securities of the Fund held by it and in connection with transfers of such securities. 2.13 PROXIES. The Custodian shall, with respect to the domestic securities held hereunder, cause to be promptly executed by the registered holder of such securities, if the securities are registered otherwise than in the name of the Fund or a nominee of the Fund, all proxies, without indication of the manner in which such proxies are to be voted, and shall promptly deliver to the Fund such proxies, all proxy soliciting materials and all notices relating to such securities. 2.14 COMMUNICATIONS RELATING TO FUND PORTFOLIO SECURITIES. Subject to the provisions of Section 2.3, the Custodian shall transmit promptly to the Fund all written information (including, without limitation, pendency of calls and maturities of domestic securities and expirations of rights in connection therewith and notices of exercise of call and put options written by the Fund and the maturity of futures contracts purchased or sold by the Fund) received by the Custodian from issuers of the domestic securities being held for the Fund. With respect to tender or exchange offers, the Custodian shall transmit promptly to the Fund all written information received by the Custodian from issuers of the domestic securities whose tender or exchange is sought and from the party (or his agents) making the tender or exchange offer. If the Fund desires to take action with respect to any tender offer, exchange offer or any other similar transaction, the Fund shall notify the Custodian at least three business days prior to the date on which the Custodian is to take such action. 2.15 REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS The Custodian shall provide the Fund, at such times as the Fund may reasonably require, with reports by independent public accountants on the accounting system, internal accounting control and procedures for safeguarding securities, futures contracts and options on futures contracts, including domestic securities deposited and/or maintained in a Securities System, relating to the services provided by the Custodian under this Contract; such reports shall be of sufficient scope and in sufficient detail, as may reasonably be required by the Fund, to provide reasonable assurance that any material inadequacies would be disclosed by such examination, and, if there are no such inadequacies, the reports shall so state. 3. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD OUTSIDE OF THE UNITED STATES 3.1 APPOINTMENT OF FOREIGN SUB-CUSTODIANS The Fund hereby authorizes and instructs the Custodian to employ as sub-custodians for the Fund's securities and other assets maintained outside the United States the foreign banking institutions and foreign securities depositories designated on Schedule A hereto ("foreign sub-custodians"). Upon receipt of "Proper Instructions", as defined in Section 4 of this Contract, together with a certified resolution of the Fund's Board of Directors, the Custodian and the Fund may agree to amend Schedule A hereto from time to time to designate additional foreign banking institutions and foreign securities depositories to act as sub-custodian. Upon receipt of Proper Instructions, the Fund may instruct the Custodian to cease the employment of any one or more such sub-custodians for maintaining custody of the Fund's assets. 3.2 ASSETS TO BE HELD. The Custodian shall limit the securities and other assets maintained in the custody of the foreign sub-custodians to: (a) "foreign securities", as defined in paragraph (c)(l) of Rule 17f-5 under the Investment Company Act of 1940, and (b) cash and cash equivalents in such amounts as the Custodian or the Fund may determine to be reasonably necessary to effect the Fund's foreign securities transactions. 3.3 FOREIGN SECURITIES DEPOSITORIES. Except as may otherwise be agreed upon in writing by the Custodian and the Fund, assets of the Fund shall be maintained in foreign securities depositories only through arrangements implemented by the foreign banking institutions serving as sub-custodians pursuant to the terms hereof. Where possible, such arrangements shall include entry into agreements containing the provisions set forth in Section 3.5 hereof. 3.4 SEGREGATION OF SECURITIES. The Custodian shall identify on its books as belonging to the Fund, the foreign securities of the Fund held by each foreign sub-custodian. Each agreement pursuant to which the Custodian employs a foreign banking institution shall require that such institution establish a custody account for the Custodian on behalf of the Fund and physically segregate in that account, securities and other assets of the Fund, and, in the event that such institution deposits the Fund's securities in a foreign securities depository, that it shall identify on its books as belonging to the Custodian, as agent for the Fund, the securities so deposited. 3.5 AGREEMENTS WITH FOREIGN BANKING INSTITUTIONS. Each agreement with a foreign banking institution shall be substantially in the form set forth in Exhibit 1 hereto and shall provide that: (a) the Fund's assets will not be subject to any right, charge, security interest, lien or claim of any kind in favor of the foreign banking institution or its creditors or agent, except a claim of payment for their safe custody or administration; (b) beneficial ownership of the Fund's assets will be freely transferable without the payment of money or value other than for custody or administration; (c) adequate records will be maintained identifying the assets as belonging to the Fund; (d) officers of or auditors employed by, or other representatives of the Custodian, including to the extent permitted under applicable law the independent public accountants for the Fund, will be given access to the books and records of the foreign banking institution relating to its actions under its agreement with the Custodian; and (e) assets of the Fund held by the foreign sub-custodian will be subject only to the instructions of the Custodian or its agents. 3.6 ACCESS OF INDEPENDENT ACCOUNTANTS OF THE FUND. Upon request of the Fund, the Custodian will use its best efforts to arrange for the independent accountants of the Fund to be afforded access to the books and records of any foreign banking institution employed as a foreign sub-custodian insofar as such books and records relate to the performance of such foreign banking institution under its agreement with the Custodian. 3.7 REPORTS BY CUSTODIAN. The Custodian will supply to the Fund from time to time, as mutually agreed upon, statements in respect of the securities and other assets of the Fund held by foreign sub-custodians, including but not limited to an identification of entities having possession of the Fund's securities and other assets and advices or notifications of any transfers of securities to or from each custodial account maintained by a foreign banking institution for the Custodian on behalf of the Fund indicating, as to securities acquired for the Fund, the identity of the entity having physical possession of such securities. 3.8 TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT (a) Except as otherwise provided in paragraph (b) of this Section 3.8, the provision of Sections 2.2 and 2.7 of this Contract shall apply, MUTATIS MUTANDIS to the foreign securities of the Fund held outside the United States by foreign sub-custodians. (b) Notwithstanding any provision of this Contract to the contrary, settlement and payment for securities received for the account of the Fund and delivery of securities maintained for the account of the Fund may be effected in accordance with the customary established securities trading or securities processing practices and procedures in the jurisdiction or market in which the transaction occurs, including, without limitation, delivering securities to the purchaser thereof or to a dealer therefor (or an agent for such purchaser or dealer) against a receipt with the expectation of receiving later payment for such securities from such purchaser or dealer. (c) Securities maintained in the custody of a foreign sub-custodian may be maintained in the name of such entity's nominee to the same extent as set forth in Section 2.3 of this Contract, and the Fund agrees to hold any such nominee harmless from any liability as a holder of record of such securities. 3.9 LIABILITY OF FOREIGN SUB-CUSTODIANS. Each agreement pursuant to which the Custodian employs a foreign banking institution as a foreign sub-custodian shall require the institution to exercise reasonable care in the performance of its duties and to indemnify, and hold harmless, the Custodian and each Fund from and against any loss, damage, cost, expense, liability or claim arising out of or in connection with the institution's performance of such obligations. At the election of the Fund, it shall be entitled to be subrogated to the rights of the Custodian with respect to any claims against a foreign banking institution as a consequence of any such loss, damage, cost, expense, liability or claim if and to the extent that the Fund has not been made whole for any such loss, damage, cost, expense, liability or claim. 3.10 LIABILITY OF CUSTODIAN. The Custodian shall be liable for the acts or omissions of a foreign banking institution to the same extent as set forth with respect to sub-custodians generally in this Contract and, regardless of whether assets are maintained in the custody of a foreign banking institution, a foreign securities depository or a branch of a U.S. bank as contemplated by paragraph 3.13 hereof, the Custodian shall not be liable for any loss, damage, cost, expense, liability or claim resulting from nationalization, expropriation, currency restrictions, or acts of war or terrorism or any loss where the sub-custodian has otherwise exercised reasonable care. Notwithstanding the foregoing provisions of this paragraph 3.10, in delegating custody duties to State Street London Ltd., the Custodian shall not be relieved of any responsibility to the Fund for any loss due to such delegation, except such loss as may result from (a) political risk (including, but not limited to, exchange control restrictions, confiscation, expropriation, nationalization, insurrection, civil strife or armed hostilities) or (b) other losses (excluding a bankruptcy or insolvency of State Street London Ltd. not caused by political risk) due to Acts of God, nuclear incident or other losses under circumstances where the Custodian and State Street London Ltd. have exercised reasonable care. 3.11 REIMBURSEMENT FOR ADVANCES. If the Fund requires the Custodian to advance cash or securities for any purpose including the purchase or sale of foreign exchange or of contracts for foreign exchange, or in the event that the Custodian or its nominee shall incur or be assessed any taxes, charges, expenses, assessments, claims or liabilities in connection with the performance of this Contract, except such as may arise from its or its nominee's own negligent action, negligent failure to act or willful misconduct, any property at any time held for the account of the Fund shall be security therefor and should the Fund fail to repay the Custodian promptly, the Custodian shall be entitled to utilize available cash and to dispose of the Fund assets to the extent necessary to obtain reimbursement. 3.12 MONITORING RESPONSIBILITIES. The Custodian shall furnish annually to the Fund, during the month of June, information concerning the foreign sub-custodians employed by the Custodian. Such information shall he similar in kind and scope to that furnished to the Fund in connection with the initial approval of this Contract. In addition, the Custodian will promptly inform the Fund in the event that the Custodian learns of a material adverse change in the financial condition of a foreign sub-custodian or any material loss of the assets of the Fund or in the case of any foreign sub-custodian not the subject of an exemptive order from the Securities and Exchange Commission is notified by such foreign sub-custodian that there appears to be a substantial likelihood that its shareholders' equity will decline below $200 million (U.S. dollars or the equivalent thereof) or that its shareholders' equity has declined below $200 million (in each case computed in accordance with generally accepted U.S. accounting principles). 3.13 BRANCHES OF U.S. BANKS (a) Except as otherwise set forth in this Contract, the provisions hereof shall not apply where the custody of the Fund assets are maintained in a foreign branch of a banking institution which is a "bank" as defined by Section 2(a)(5) of the Investment Company Act of 1940 meeting the qualification set forth in Section 26(a) of said Act. The appointment of any such branch as a sub-custodian shall be governed by paragraph 1 of this Contract. (b) Cash held for the Fund in the United Kingdom shall be maintained in an interest bearing account established for the Fund with the Custodian's London branch, which account shall be subject to the direction of the Custodian, State Street London Ltd. or both. 4. PROPER INSTRUCTIONS Proper Instructions as used herein means a writing signed or initialed by one or more person or persons as the Board of Directors shall have from time to time authorized. Each such writing shall set forth the specific transaction or type of transaction involved, including a specific statement of the purpose for which such action is requested. Oral instructions will be considered Proper Instructions if the Custodian reasonably believes them to have been given by a person authorized to give such instructions with respect to the transaction involved. The Fund shall cause all oral instructions to be confirmed in writing. Upon receipt of a certificate of the Secretary or an Assistant Secretary as to the authorization by the Board of Directors of the Fund accompanied by a detailed description of procedures approved by the Board of Directors, Proper Instructions may include communications effected directly between electro-mechanical or electronic devices provided that the Board of Directors and the Custodian are satisfied that such procedures afford adequate safeguards for the Fund's assets. For purposes of this Section, Proper Instructions shall include instructions received by the Custodian pursuant to any three-party agreement which requires a segregated asset account in accordance with Section 2.11. 5. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY The Custodian may in its discretion, without express authority from the Fund: 1) make payments to itself or others for minor expenses of handling securities or other similar items relating to its duties under this Contract, PROVIDED that all such payments shall be accounted for to the Fund; 2) surrender securities in temporary form for securities in definitive form; 3) endorse for collection, in the name of the Fund, checks, drafts and other negotiable instruments; and 4) in general, attend to all non-discretionary details in connection with the sale, exchange, substitution, purchase, transfer and other dealings with the securities and property of the Fund except as otherwise directed by the Board of Directors of the Fund. 6. EVIDENCE OF AUTHORITY The Custodian shall be protected in acting upon any instructions, notice, request, consent, certificate or other instrument or paper believed by it to be genuine and to have been properly executed by or on behalf of the Fund. The Custodian may receive and accept a certified copy of a vote of the Board of Directors of the Fund as conclusive evidence (a) of the authority of any person to act in accordance with such vote or (b) of any determination or of any action by the Board of Directors pursuant to the Articles of Incorporation as described in such vote, and such vote may be considered as in full force and effect until receipt by the Custodian of written notice to the contrary. 7. DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT AND CALCULATION OF NET ASSET VALUE AND NET INCOME The Custodian shall cooperate with and supply necessary information to the entity or entities appointed by the Board of Directors of the Fund to keep the books of account of the Fund and/or compute the net asset value per share of the outstanding shares of the Fund or, if directed in writing to do so by the Fund, shall itself keep such books of account and/or compute such net asset value per share. If so directed, the Custodian shall also calculate weekly the net income of the Fund as described in the Fund's currently effective prospectus and shall advise the Fund and the Transfer Agent weekly of the total amounts of such net income and, if instructed in writing by an officer of the Fund to do so, shall advise the Transfer Agent periodically of the division of such net income among its various components. The calculations of the net asset value per share and the weekly income of the Fund shall be made at the time or times described from time to time in the Fund's currently effective prospectus. 8. RECORDS The Custodian shall create and maintain all records relating to its activities and obligations under this Contract in such manner as will meet the obligations of the Fund under the Investment Company Act of 1940, with particular attention to Section 31 thereof and Rules 31a-1 and 31a-2 thereunder. All such records shall be the property of the Fund and shall at all times during the regular business hours of the Custodian be open for inspection by duly authorized officers, employees or agents of the Fund and employees and agents of the Securities and Exchange Commission. The Custodian shall, at the Fund's request, supply the Fund with a tabulation of securities owned by the Fund and held by the Custodian and shall, when requested to do so by the Fund and for such compensation as shall be agreed upon between the Fund and the Custodian, include certificate numbers in such tabulations. 9. OPINION OF FUND'S INDEPENDENT ACCOUNTANT The Custodian shall take all reasonable action, as the Fund may from time to time request, to obtain from year to year favorable opinions from the Fund's independent accountants with respect to its activities hereunder in connection with the preparation of the Fund's Form N-2, and Form N-SAR or other annual reports to the Securities and Exchange Commission and with respect to any other requirements of such Commission. 10. COMPENSATION OF CUSTODIAN The Custodian shall be entitled to reasonable compensation for its services and expenses as Custodian, as agreed upon from time to time between the Fund and the Custodian. 11. RESPONSIBILITY OF CUSTODIAN So long as and to the extent that it is in the exercise of reasonable care, the Custodian shall not be responsible for the title, validity or genuineness of any property or evidence of title thereto received by it or delivered by it pursuant to this Contract and shall be held harmless in acting upon any notice) request, consent, certificate or other instrument reasonably believed by it to be genuine and to be signed by the proper party or parties, including any futures commission merchant acting pursuant to the terms of a three-party futures or options agreement. The Custodian shall be held to the exercise of reasonable care in carrying out the provisions of this Contract, but shall be kept indemnified by and shall be without liability to the Fund for any action taken or omitted by it in good faith without negligence. It shall be entitled to rely on and may act upon advice of counsel (who may be counsel for the Fund) on all matters, and shall be without liability for any action reasonably taken or omitted pursuant to such advice. The Custodian shall be liable for the acts or omissions of a foreign banking institution appointed pursuant to the provisions of Article 3 to the same extent as set forth in Article 1 hereof with respect to sub-custodians located in the United States and, regardless of whether assets are maintained in the custody of a foreign banking institution, a foreign securities depository or a branch of a U.S. bank as contemplated by paragraph 3.11 hereof, the Custodian shall not be liable for any loss, damage, cost, expense, liability or claim resulting from, or caused by, the direction of or authorization by the Fund to maintain custody or any securities or cash of the Fund in a foreign country including, but not limited to, losses resulting from nationalization, expropriation, currency restrictions, or acts of war or terrorism. If the Fund requires the Custodian to take any action with respect to securities, which action involves the payment of money or which action may, in the opinion of the Custodian, result in the Custodian or its nominee assigned to the Fund being liable for the payment of money or incurring liability of some other form, the Fund, as a prerequisite to requiring the Custodian to take such action, shall provide indemnity to the Custodian in an amount and form satisfactory to it. If the Fund requires the Custodian to advance cash or securities for any purpose or in the event that the Custodian or its nominee shall incur or be assessed any taxes, charges, expenses, assessments, claims or liabilities in connection with the performance of this Contract, except such as may arise from its or its nominee's own negligent action, negligent failure to act or willful misconduct, any property at any time held for the account of the Fund shall be security therefor and should the Fund fail to repay the Custodian promptly, the Custodian shall be entitled to utilize available cash and to dispose of the Fund assets to the extent necessary to obtain reimbursement. 12. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT This Contract shall become effective as of its execution, shall continue in full force and effect until terminated as hereinafter provided, may be amended at any time by mutual agreement of the parties hereto and may be terminated by either party by an instrument in writing delivered or mailed, postage prepaid to the other party, such termination to take effect not sooner than thirty (30) days after the date of such delivery or mailing; PROVIDED, however that the Custodian shall not act under Section 2.10 hereof in the absence of receipt of an initial certificate of the Secretary or an Assistant Secretary that the Board of Directors of the Fund has approved the initial use of a particular Securities System and the receipt of an annual certificate of the Secretary or an Assistant Secretary that the Board of Directors has reviewed the use by the Fund of such Securities System, as required in each case by Rule 17f-4 under the Investment Company Act of 1940, as amended and that the Custodian shall not act under Section 2.10A hereof in the absence of receipt of an initial certificate of the Secretary or an Assistant Secretary that the Board of Directors has approved the initial use of the Direct Paper System and the receipt of an annual certificate of the Secretary or an Assistant Secretary that the Board of Directors has reviewed the use by the Fund of the Direct Paper System; PROVIDED FURTHER, however, that the Fund shall not amend or terminate this Contract in contravention of any applicable federal or state regulations, or any provision of the Articles of Incorporation, and further provided, that the Fund may at any time by action of its Board of Directors (i) substitute another bank or trust company for the Custodian by giving notice as described above to the Custodian, or (ii) immediately terminate this Contract in the event of the appointment of a conservator or receiver for the Custodian by the Comptroller of the Currency or upon the happening of a like event at the direction of an appropriate regulatory agency or court of competent jurisdiction. Upon termination of the Contract, the Fund shall pay to the Custodian such compensation as may be due as of the date of such termination and shall likewise reimburse the Custodian for its costs, expenses and disbursements. 13. SUCCESSOR CUSTODIAN If a successor custodian shall be appointed by the Board of Directors of the Fund, the Custodian shall, upon termination, deliver to such successor custodian at the office of the Custodian, duly endorsed and in the form for transfer, all securities then held by it hereunder and shall transfer to an account of the successor custodian all of the Fund's securities held in a Securities System. If no such successor custodian shall be appointed, the Custodian shall, in like manner, upon receipt of a certified copy of a vote of the Board of Directors of the Fund, deliver at the office of the Custodian and transfer such securities, funds and other properties in accordance with such vote. In the event that no written order designating a successor custodian or certified copy of a vote of the Board of Directors shall have been delivered to the Custodian on or before the date when such termination shall become effective, then the Custodian shall have the right to deliver to a bank or trust company, which is a "bank" as defined in the Investment Company Act of 1940, doing business in Boston, Massachusetts, of its own selection, having an aggregate capital, surplus, and undivided profits, as shown by its last published report, of not less than $25,000,000, all securities, funds and other properties held by the Custodian and all instruments held by the Custodian relative thereto and all other property held by it under this Contract and to transfer to an account of such successor custodian all of the Fund's securities held in any Securities System. Thereafter, such bank or trust company shall be the successor of the Custodian under this Contract. In the event that securities, funds and other properties remain in the possession of the Custodian after the date of termination hereof owing to failure of the Fund to procure the certified copy of the vote referred to or of the Board of Directors to appoint a successor custodian, the Custodian shall be entitled to fair compensation for its services during such period as the Custodian retains possession of such securities, funds and other properties and the provisions of this Contract relating to the duties and obligations of the Custodian shall remain in full force and effect. 14. INTERPRETIVE AND ADDITIONAL PROVISIONS In connection with the operation of this Contract, the Custodian and the Fund may from time to time agree on such provisions interpretive of or in addition to the provisions of this Contract as may in their joint opinion be consistent with the general tenor of this Contract. Any such interpretive or additional provisions shall be in a writing signed by both parties and shall be annexed hereto, PROVIDED that no such interpretive or additional provisions shall contravene any applicable federal or state regulations or any provision of the Articles of Incorporation of the Fund. No interpretive or additional provisions made as provided in the preceding sentence shall be deemed to be an amendment of this Contract. 15. MASSACHUSETTS LAW TO APPLY This Contract shall be construed and the provisions thereof interpreted under and in accordance with laws of The Commonwealth of Massachusetts. 16. PRIOR CONTRACTS This Contract supersedes and terminates, as of the date hereof, all prior contracts between the Fund and the Custodian relating to the custody of the Fund's assets. IN WITNESS WHEREOF, each of the parties has caused this instrument to be executed in its name and behalf by its duly authorized representative and its seal to be hereunder affixed as of the 26th day of March, 1990. ATTEST THE EMERGING GERMANY FUND, INC. /s/Secretary By /s/President ATTEST STATE STREET BANK AND TRUST COMPANY /s/ Assistant Secretary By: /s/Vice President Schedule A The following foreign banking institutions and foreign securities depositories have been approved by the Board of Directors of The Emerging Germany Fund Inc. for use as sub-custodians for the Fund's securities and other assets: (Insert banks and securities depositories) Certified: /s/President Fund's Authorized Officer Date: March 26, 1990 EXHIBIT 1 CUSTODIAN AGREEMENT TO: Gentlemen: The undersigned ("State Street") hereby requests that you (the "Bank") establish a custody account and a cash account for each State Street client whose account is identified to this Agreement. Each such custody or cash account as applicable will be referred to herein as the "Account" and will be subject to the following terms and conditions. 1. The Bank shall hold as agent for State Street and shall physically segregate in the Account such cash, bullion, coin, stocks, shares, bonds, debentures, notes and other securities and other property which is delivered to the Bank for that State Street Account (the "Property"). 2. (a) Without the prior approval of State Street it will not deposit securities in any securities depository or utilize a clearing agency, incorporated or organized under the laws of a country other than the United States, unless such depository or clearing house operates the central system for handling of securities or equivalent book-entries in that country or operates a transnational system for the central handling of securities or equivalent book-entries (b) When Securities held for an Account are deposited in a securities depository or clearing agency by the Bank, the Bank shall identify on its books as belonging to State Street as agent for such Account, the Securities so deposited. The Bank represents that either: 3. (a) It currently has stockholders' equity in excess of S200 million (US dollars or the equivalent of US dollars computed in accordance with generally accepted US accounting principles) and will promptly inform State Street in the event that there appears to be a substantial likelihood that its stockholders' equity will decline below S200 million, or in any event, at such time as its stockholders' equity in fact declines below S200 million; or (b) It is the subject of an exemptive order issued by the United States Securities and Exchange Commission, which such order permits State Street to employ the Bank as a subcustodian, notwithstanding the fact that the Bank's stockholders' equity is currently below $200 million or may in the future decline below S200 million due to currency fluctuation. 4. Upon the written instructions of State Street as permitted by Section 8, the Bank is authorized to pay out cash from the Account and to sell, assign, transfer, deliver or exchange, or to purchase for the Account, any and all stocks, shares, bonds, debentures, notes and other securities ("Securities"), bullion, coin and other property, but only as provided in such written instructions. The Bank shall not be held liable for any act or omission to act on instructions given or purported to be given should there be any error in such instructions. 5. Unless the Bank receives written instructions of State Street to the contrary, the Bank is authorized: a. To promptly receive and collect all income and principal with respect to the Property and to credit cash receipts to the Account: b. To promptly exchange Securities where the exchange is purely ministerial (including, without limitation, the exchange of temporary Securities for those in definitive form and the exchange of warrants, or other documents of entitlement to Securities. for the Securities themselves): c. To promptly surrender Securities at maturity or when called for redemption upon receiving payment therefor; d. Whenever notification of a rights entitlement or a fractional interest resulting from a rights issue, stock dividend or stock split is received for the Account and such rights entitlement or fractional interest bears an expiration date, the Bank will endeavor to obtain State Street's instructions, but should these not be received in time for the Bank to take timely action, the Bank is authorized to sell such rights entitlement or fractional interest and to credit the Account; e. To hold registered in the name of the nominee of the Bank or its agents such Securities as are ordinarily held in registered form; f. To execute in State Street's name for the Account, whenever the Bank deems it appropriate, such ownership and other certificates as may be required to obtain the payment of income from the Property; and g. To pay or cause to be paid from the Account any and all taxes and levies in the nature of taxes imposed on such assets by any governmental authority, and shall use reasonable efforts to promptly reclaim any foreign withholding tax relating to the Account. 6. If the Bank shall receive any proxies, notices, reports, or other communications relative to any of the Securities of the Account in connection with tender offers; reorganizations, mergers, consolidations, or similar events which may have an impact upon the issuer thereof, the Bank shall promptly transmit any such communication to State Street by means as will permit State Street to take timely action with respect thereto. 7. The Bank is authorized in its discretion to appoint brokers and agents in connection with the Bank's handling of transactions relating to the Property provided that any such appointment shall not relieve the Bank of any of its responsibilities or liabilities hereunder. 8. Written instructions shall include (i) instructions in writing signed by such persons as are designated in writing by State Street (ii) telex or tested telex instructions of State Street, (iii) other forms of instruction in computer readable form as shall be customarily utilized for the transmission of like information and (iv) such other forms of communication as from time to time shall be agreed upon by State Street and the Bank. 9. The Bank shall supply periodic reports with respect to the safekeeping of assets held by it under this Agreement. The content of such reports shall include but not be limited to any transfer to or from any Account held by the Bank hereunder and such other information as State Street may reasonably request. 10. In addition to its obligations under Section 2 hereof, the Bank shall maintain such other records as may be necessary to identify the assets hereunder as belonging to each State Street client identified to this Agreement from time to time. 11. The Bank agrees that its books and records relating to its actions under this Agreement shall be opened to the physical, on-premises inspection and audit at reasonable times by officers of, auditors employed by or other representatives of State Street (including to the extent permitted under _______________ law the independent public accountants for any entity whose Property is being held hereunder) and shall be retained for such period as shall be agreed by State Street and the Bank. 12. The Bank shall be entitled to reasonable compensation for its services and expenses as custodian under this Agreement, as agreed upon from time to time by the Bank and State Street. 13. The Bank shall exercise reasonable care in the performance of its duties as are set forth or contemplated herein or contained in instructions given to the Bank which are not contrary to this Agreement, and shall maintain adequate insurance and agrees to indemnify and hold State Street and each Account from and against any loss, damage, cost, expense, liability or claim arising out of or in connection with the Bank's performance of its obligations hereunder. 14. The Bank agrees that (i) the Property is not subject to any right, charge, security interest, lien or claim of any kind in favor of the Bank or any of its agents or its creditors except a claim of payment for their safe custody and administration and (ii) the beneficial ownership of the Property shall be freely transferable without the payment of money or other value other than for safe custody or administration. 15. This Agreement may be terminated by the Bank or State Street by at least 60 days' written notice to the other, sent by registered mail or express courier. The Bank, upon the date this Agreement terminates pursuant to notice which has been given in a timely fashion, shall deliver the Property in accordance with written instructions of State Street specifying the name(s) of the person(s) to whom the Property shall be delivered. 16. The Bank and State Street shall each use its best efforts to maintain the confidentiality of the Property in each Account, subject, however, to the provisions of any laws requiring the disclosure of the Property. 17. The Bank agrees to follow such Operating Requirements as State Street may require from time to time. A copy of the current State Street Operating Requirements is attached as an exhibit to this Agreement. 18. Unless otherwise specified in this Agreement, all notices with respect to matters contemplated by this Agreement shall be deemed duly given when received in writing or by tested telex by the Bank or State Street at their respective addresses set forth below, or at such other address as specified in each case in a notice similarly given: To State Street: STATE STREET BANK AND TRUST COMPANY P. O. Box 470 Boston, Massachusetts 02102 To the Bank: 19. This Agreement shall be governed by and construed in accordance with the laws of __________________. Please acknowledge your agreement to the foregoing by executing a copy of this letter. Very truly yours, STATE STREET BANK AND TRUST COMPANY By /s/Vice President reed to by: By /s/President Date March 26, 1990 scust/ EX-99.23G2 5 EXHIBIT 99.23G2 Exhibit 99.23(g)(2) AMENDMENT TO THE CUSTODIAN CONTRACT AGREEMENT made by and between State Street Bank and Trust Company (the "Custodian") and Emerging Germany Fund Inc. (the "Fund"). WHEREAS, the Custodian and the Fund are parties to a custodian contract dated March 26, 1990, (the "Custodian Contract") governing the terms and conditions under which the Custodian maintains custody of the securities and other assets of the Fund: and WHEREAS, the Custodian and the Fund desire to amend the Custodian Contract; NOW THEREFORE, in consideration of the premises and covenants contained herein, the Custodian and the Fund hereby amend the first sentence of Section 4 of the Custodian Contract to read as follows: "Proper Instructions as used herein means a writing signed or initialed by two persons as the Board of Directors shall have from time to time authorized." Except as specifically superseded or modified herein, the terms and provisions of the Custodian Contract shall continue to apply with full force and effect. IN WITNESS WHEREOF, each of the parties has caused this instrument to be executed in its name and behalf by its duly authorized representative and its seal to be hereunder affixed as of the13th day of January, 1994. ATTEST EMERGING GERMANY FUND INC. /s/Assistant Secretary By /s/Vice President and Assistant Secretary ATTEST STATE STREET BANK AND TRUST COMPANY /s/Secretary By /s/Executive Vice President EX-99.23G3 6 EXHIBIT 99.23G3 Exhibit 99.23(g)(3) AMENDMENT TO CUSTODIAN CONTRACT Agreement made by and between State Street Bank and Trust Company (the "Custodian") and The Emerging Germany Fund Inc. ("the Fund"). WHEREAS, the Custodian and the Fund are parties to a custodian contract dated March 26, 1990 and amended on January 13, 1994 (the "Custodian Contract") governing the terms and conditions under which the Custodian maintains custody of the securities and other assets of the Fund; and WHEREAS, the Custodian and the Fund desire to amend the terms and conditions under which the Custodian maintains the Fund's securities and other non-cash property in the custody of certain foreign sub-custodians in conformity with the requirements of Rule 17f-5 under the Investment Company Act of 1940, as amended; NOW THEREFORE, in consideration of the premises and covenants contained herein, the Custodian and the Fund hereby amend the Custodian Contract by the addition of the following terms and provisions; 1. Notwithstanding any provisions to the contrary set forth in the Custodian Contract, the Custodian may hold securities and other non-cash property for all of its customers, including the Fund, with a foreign sub-custodian in a single account that is identified as belonging to the Custodian for the benefit of its customers, PROVIDED HOWEVER, that (i) the records of the Custodian with respect to securities and other non-cash property of the Fund which are maintained in such account shall identify by book-entry those securities and other non-cash property belonging to the Fund and (ii) the Custodian shall require that securities and other non-cash property so held by the foreign sub-custodian be held separately from any assets of the foreign sub-custodian or of others. 2. Except as specifically superseded or modified herein, the terms and provisions of the Custodian Contract shall continue to apply with full force and effect. IN WITNESS WHEREOF, each of the parties has caused this instrument to be executed as a sealed instrument in its name and behalf by its duly authorized representative this 15th day of April, 1996 THE EMERGING GERMANY FUND INC. By: /s/Treasurer STATE STREET BANK AND TRUST COMPANY By: /s/Vice President EX-99.23G4 7 EXHIBIT 99.23G4 Exhibit 99.23(g)(4) AMENDMENT TO CUSTODIAN CONTRACT This Amendment to the Custodian Contract is made as of July 14, 1998 by and between The Emerging Germany Fund, Inc. (the "Fund") and State Street Bank and Trust Company (the "Custodian"). Capitalized terms used in this Amendment without definition shall have the respective meanings given to such terms in the Custodian Contract referred to below. WHEREAS, the Fund and the Custodian entered into a Custodian Contract dated as of March 26, 1990 (as amended and in effect from time to time, the "Contract"); and WHEREAS, the Fund and the Custodian desire to amend certain provisions of the Contract to reflect revisions to Rule 1 7f-5 ("Rule 1 7f-5") promulgated under the Investment Company Act of 1940, as amended (the "1940 Act"); and WHEREAS, the Fund and the Custodian desire to amend and restate certain other provisions of the Contract relating to the custody of assets of the Fund held outside of the United States. NOW THEREFORE, in consideration of the foregoing and the mutual covenants and agreements hereinafter contained, the parties hereby agree to amend the Contract, pursuant to the terms thereof, as follows: I. Article 3 of the Contract is hereby deleted, and Articles 4 through 16 of the Contract are hereby renumbered, as of the effective date of this Amendment, as Articles 5 through 17, respectively. II. New Articles 3 and 4 of the Contract are hereby added, as of the effective date of this Amendment. as set forth below. 3. THE CUSTODIAN AS FOREIGN CUSTODY MANAGER 3.1. DEFINITIONS. Capitalized terms in this Article 3 shall have the following meanings: "Country Risk" means all factors reasonably related to the systemic risk of holding Foreign Assets in a particular country including, but not limited to, such country's political environment; economic and financial infrastructure (including any Mandatory Securities Depositories operating in the country); prevailing or developing custody and settlement practices; and laws and regulations applicable to the safekeeping and recovery of Foreign Assets held in custody in that country. "Eligible Foreign Custodian" has the meaning set forth in section (a)(1) of Rule 17f-5, including a majority-owned or indirect subsidiary of a U.S. Bank (as defined in Rule 17f5), a bank holding company meeting the requirements of an Eligible Foreign Custodian (as 1 set forth in Rule 1 7f-5 or by other appropriate action of the U.S. Securities and Exchange Commission (the "SEC")), or a foreign branch of a Bank (as defined in Section 2(a)(5) of the 1940 Act) meeting the requirements of a custodian under Section 1 7(f) of the 1940 Act, except that the term does not include Mandatory Securities Depositories. "Foreign Assets" means any of the Fund's investments (including foreign currencies) for which the primary market is outside the United States and such cash and cash equivalents as are reasonably necessary to effect the Fund's transactions in such investments. "Foreign Custody Manager" has the meaning set forth in section (a)(2) of Rule 1 7f-5. "Mandatory Securities Depository" means a foreign securities depository or clearing agency that, either as a legal or practical matter, must be used if the Fund determines to place Foreign Assets in a country outside the United States (i) because required by law or regulation; (ii) because securities cannot be withdrawn from such foreign securities depository or clearing agency; or (iii) because maintaining or effecting trades in securities outside the foreign securities depository or clearing agency (as defined in Section (a)(1 )(ii) of Rule 1 7f-5) is not consistent with prevailing or developing custodial or market practices. 3.2. DELEGATION TO THE CUSTODIAN AS FOREIGN CUSTODY MANAGER The Fund, by resolution adopted by its Board of Directors (the "Board"), hereby delegates to the Custodian, subject to Section (b) of Rule 1 7f-5, the responsibilities set forth in this Article 3 with respect to Foreign Assets held outside the United States, and the Custodian hereby accepts such delegation, as Foreign Custody Manager of the Fund. 3.3. COUNTRIES COVERED. The Foreign Custody Manager shall be responsible for performing the delegated responsibilities defined below only with respect to the countries and custody arrangements for each such country listed on Schedule A to this Contract, which list of countries may be amended from time to time by the Fund with the agreement of the Foreign Custody Manager. The Foreign Custody Manager shall list on Schedule A the Eligible Foreign Custodians selected by the Foreign Custody Manager to maintain the Fund's assets, which list of Eligible Foreign Custodians may be amended from time to time in the sole discretion of the Foreign Custody Manager. Mandatory Securities Depositories are listed on Schedule B to this Contract, which Schedule B may be amended from time to time by the Foreign Custody Manager. The Foreign Custody Manager will provide amended versions of Schedules A and B in accordance with Section 3.7 of this Article 3. Upon the receipt by the Foreign Custody Manager of Proper Instructions to open an account, or to place or maintain Foreign Assets, in a country listed on Schedule A, and the fulfillment by the Fund of the applicable account opening requirements for such country, the Foreign Custody Manager shall be deemed to have been delegated by the 2 Board responsibility as Foreign Custody Manager with respect to that country and to have accepted such delegation. Execution of this Amendment by the Fund shall be deemed to be a Proper Instruction to open an account, or to place or maintain Foreign Assets, in each country listed on Schedule A in which the Custodian has previously placed or currently maintains Foreign Assets pursuant to the terms of the Contract. Following the receipt of Proper Instructions directing the Foreign Custody Manager to close the account of the Fund with the Eligible Foreign Custodian selected by the Foreign Custody Manager in a designated country, the delegation by the Board to the Custodian as Foreign Custody Manager for that country shall be deemed to have been withdrawn and the Custodian shall immediately cease to be the Foreign Custody Manager of the Fund with respect to that country. The Foreign Custody Manager may withdraw its acceptance of delegated responsibilities with respect to a designated country upon written notice to the Fund. Thirty days (or such longer period as to which the parties agree in writing) after receipt of any such notice by the Fund, the Custodian shall have no further responsibility as Foreign Custody Manager to the Fund with respect to the country as to which the Custodian's acceptance of delegation is withdrawn. 3.4. SCOPE OF DELEGATED RESPONSIBILITIES. 3.4.1. SELECTION OF ELIGIBLE FOREIGN CUSTODIANS. Subject to the provisions of this Article 3, the Foreign Custody Manager may place and maintain the Foreign Assets in the care of the Eligible Foreign Custodian selected by the Foreign Custody Manager in each country listed on Schedule A, as amended from time to time. In performing its delegated responsibilities as Foreign Custody Manager to place or maintain Foreign Assets with an Eligible Foreign Custodian, the Foreign Custody Manager shall determine that the Foreign Assets will be subject to reasonable care, based on the standards applicable to custodians in the country in which the Foreign Assets will be held by that Eligible Foreign Custodian, after considering all factors relevant to the safekeeping of such assets, including, without limitation the factors specified in Rule 17f-5(c)(1). 3.4.2. CONTRACTS WITH ELIGIBLE FOREIGN CUSTODIANS. The Foreign Custody Manager shall determine that the contract (or the rules or established practices or procedures in the case of an Eligible Foreign Custodian that is a foreign securities depository or clearing agency) governing the foreign custody arrangements with each Eligible Foreign Custodian selected by the Foreign Custody Manager will satisfy the requirements of Rule 17f-5(c)(2). 3.4.3. MONITORING. In each case in which the Foreign Custody Manager maintains Foreign Assets with an Eligible Foreign Custodian selected by the Foreign Custody Manager, the Foreign 3 Custody Manager shall establish a system to monitor (i) the appropriateness of maintaining the Foreign Assets with such Eligible Foreign Custodian and (ii) the contract governing the custody arrangements established by the Foreign Custody Manager with the Eligible Foreign Custodian (or the rules or established practices and procedures in the case of an Eligible Foreign Custodian selected by the Foreign Custody Manager which is a foreign securities depository or clearing agency that is not a Mandatory Securities Depository). In the event the Foreign Custody Manager determines that the custody arrangements with an Eligible Foreign Custodian it has selected are no longer appropriate, the Foreign Custody Manager shall notify the Board in accordance with Section 3.7 hereunder. 3.5. GUIDELINES FOR THE EXERCISE OF DELEGATED AUTHORITY. For purposes of this Article 3, the Board shall be deemed to have considered and determined to accept such Country Risk as is incurred by placing and maintaining the Foreign Assets in each country for which the Custodian is serving as Foreign Custody Manager of the Fund, and the Board shall be deemed to be monitoring on a continuing basis such Country Risk to the extent that the Board considers necessary or appropriate. The Fund and the Custodian each expressly acknowledge that the Foreign Custody Manager shall not be delegated any responsibilities under this Article 3 with respect to Mandatory Securities Depositories. 3.6. STANDARD OF CARE AS FOREIGN CUSTODY MANAGER OF THE FUND. In performing the responsibilities delegated to it, the Foreign Custody Manager agrees to exercise reasonable care, prudence and diligence such as a person having responsibility for the safekeeping of assets of management investment companies registered under the 1940 Act would exercise. 3.7. REPORTING REQUIREMENTS. The Foreign Custody Manager shall report the withdrawal of the Foreign Assets from an Eligible Foreign Custodian and the placement of such Foreign Assets with another Eligible Foreign Custodian by providing to the Board amended Schedules A or B at the end of the calendar quarter in which an amendment to either Schedule has occurred. The Foreign Custody Manager shall make written reports notifying the Board of any other material change in the foreign custody arrangements of the Fund described in this Article 3 after the occurrence of the material change. 3.8. REPRESENTATIONS WITH RESPECT TO RULE 17F-5. The Foreign Custody Manager represents to the Fund that it is a U.S. Bank as defined in section (a)(7) of Rule 1 7f-5. The Fund represents to the Custodian that the Board has determined that it is reasonable for the Board to rely on the Custodian to perform the responsibilities delegated pursuant to this Contract to the Custodian as the Foreign Custody Manager of the Fund. 4 3.9. EFFECTIVE DATE AND TERMINATION OF THE CUSTODIAN AS FOREIGN CUSTODY MANAGER. The Board's delegation to the Custodian as Foreign Custody Manager of the Fund shall be effective as of the date hereof and shall remain in effect until terminated at any time, without penalty, by written notice from the terminating party to the non-terminating party. Termination will become effective thirty days after receipt by the non-terminating party of such notice. The provisions of Section 3.3 hereof shall govern the delegation to and termination of the Custodian as Foreign Custody Manager of the Fund with respect to designated countries. 4. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD OUTSIDE THE UNITED STATES. 4.1 DEFINITIONS. Capitalized terms in this Article 4 shall have the following meanings: "Foreign Securities System" means either a clearing agency or a securities depository listed on Schedule A hereto or a Mandatory Securities Depository listed on Schedule B hereto. "Foreign Sub-Custodian" means a foreign banking institution serving as an Eligible Foreign Custodian. 4.2. HOLDING SECURITIES. The Custodian shall identify on its books as belonging to the Fund the foreign securities held by each Foreign Sub-Custodian or Foreign Securities System. The Custodian may hold foreign securities for all of its customers, including the Fund, with any Foreign Sub-Custodian in an account that is identified as belonging to the Custodian for the benefit of its customers, PROVIDED HOWEVER, that (i) the records of the Custodian with respect to foreign securities of the Fund which are maintained in such account shall identify those securities as belonging to the Fund and (ii), to the extent permitted and customary in the market in which the account is maintained. the Custodian shall require that securities so held by the Foreign Sub-Custodian be held separately from any assets of such Foreign Sub-Custodian or of other customers of such Foreign Sub-Custodian. 4.3. FOREIGN SECURITIES SYSTEMS. Foreign securities shall be maintained in a Foreign Securities System in a designated country only through arrangements implemented by the Foreign Sub-Custodian in such country pursuant to the terms of this Contract. 5 4.4. TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT. 4.4.1. DELIVERY OF FOREIGN ASSETS. The Custodian or a Foreign Sub-Custodian shall release and deliver foreign securities of the Fund held by such Foreign Sub-Custodian, or in a Foreign Securities System account, only upon receipt of Proper Instructions, which may be continuing instructions when deemed appropriate by the parties, and only in the following cases: (i) upon the sale of such foreign securities for the Fund in accordance with commercially reasonable market practice in the country where such Assets are held or traded, including, without limitation: (A) delivery against expectation of receiving later payment; or (B) in the case of a sale effected through a Foreign Securities System, in accordance with the rules governing the operation of the Foreign Securities System; (ii) in connection with any repurchase agreement related to foreign securities; (iii) to the depository agent in connection with tender or other similar offers for foreign securities of the Fund; (iv) to the issuer thereof or its agent when such foreign securities are called, redeemed, retired or otherwise become payable; (v) to the issuer thereof, or its agent, for transfer into the name of the Custodian (or the name of the respective Foreign Sub-Custodian or of any nominee of the Custodian or such Foreign Sub-Custodian) or for exchange for a different number of bonds, certificates or other evidence representing the same aggregate face amount or number of units; (vi) to brokers, clearing banks or other clearing agents for examination or trade execution in accordance with market custom; PROVIDED that in any such case the Foreign Sub-Custodian shall have no responsibility or liability for any loss arising from the delivery of such securities prior to receiving payment for such securities except as may arise from the Foreign Sub-Custodian's own negligence or willful misconduct; (vii) for exchange or conversion pursuant to any plan of merger, consolidation, recapitalization, reorganization or readjustment of the securities of the issuer of such securities, or pursuant to provisions for conversion contained in such securities, or pursuant to any deposit agreement; (viii) in the case of warrants, rights or similar foreign securities, the surrender thereof in the exercise of such warrants, rights or similar securities or the surrender of interim receipts or temporary securities for definitive securities: 6 (ix) for delivery as security in connection with any borrowing by the Fund requiring a pledge of assets by the Fund; (x) in connection with trading in options and futures contracts, including delivery as original margin and variation margin; (xi) in connection with the lending of foreign securities; and (xii) for any other proper purpose, but only upon receipt of Proper Instructions specifying the Foreign Assets to be delivered, setting forth the purpose for which such delivery is to be made, declaring such purpose to be a proper corporate purpose, and naming the person or persons to whom delivery of such Assets shall he made. 4.4.2. PAYMENT OF FUND MONIES. Upon receipt of Proper Instructions, which may be continuing instructions when deemed appropriate by the parties, the Custodian shall pay out, or direct the respective Foreign Sub-Custodian or the respective Foreign Securities System to pay out, monies of the Fund in the following cases only: (i) upon the purchase of foreign securities for the Fund, unless otherwise directed by Proper Instructions, by (A) delivering money to the seller thereof or to a dealer therefor (or an agent for such seller or dealer) against expectation of receiving later delivery of such foreign securities; or (B) in the case of a purchase effected through a Foreign Securities System, in accordance with the rules governing the operation of such Foreign Securities System; (ii) in connection with the conversion, exchange or surrender of foreign securities of the Fund: (iii) for the payment of any expense or liability of the Fund including but not limited to the following payments: interest, taxes, investment advisory fees, transfer agency fees, fees under this Contract, legal fees, accounting fees, and other operating expenses; (iv) for the purchase or sale of foreign exchange or foreign exchange contracts for the Fund, including transactions executed with or through the Custodian or its Foreign Sub-Custodians; (v) in connection with trading in options and futures contracts, including delivery as original margin and variation margin; (vi) for payment of part or all of the dividends received in respect of securities sold short: 7 (vii) in connection with the borrowing or lending of foreign securities; and (viii) for any other proper purpose, but only upon receipt of Proper Instructions specifying the amount of such payment, setting forth the purpose for which such payment is to be made, declaring such purpose to be a proper corporate purpose, and naming the person or persons to whom such payment is to be made. 4.4.3. MARKET CONDITIONS: MARKET INFORMATION. Notwithstanding any provision of this Contract to the contrary, settlement and payment for Foreign Assets received for the account of the Fund and delivery of Foreign Assets maintained for the account of the Fund may be effected in accordance with the customary established securities trading or processing practices and procedures in the country or market in which the transaction occurs, including, without limitation, delivering Foreign Assets to the purchaser thereof or to a dealer therefor (or an agent for such purchaser or dealer) with the expectation of receiving later payment for such Foreign Assets from such purchaser or dealer. The Custodian shall provide to the Board the information with respect to custody and settlement practices in countries in which the Custodian employs a Foreign Sub-Custodian, including without limitation information relating to Foreign Securities Systems, described on Schedule C hereto at the time or times set forth on such Schedule. The Custodian may revise Schedule C from time to time, provided that no such revision shall result in the Board being provided with substantively less information than had been previously provided hereunder. 4.5. REGISTRATION OF FOREIGN SECURITIES. The foreign securities maintained in the custody of a Foreign Custodian (other than bearer securities) shall be registered in the name of the Fund or in the name of the Custodian or in the name of any Foreign Sub-Custodian or in the name of any nominee of the foregoing, and the Fund agrees to hold any such nominee harmless from any liability arising solely from such nominee's status as a holder of record of such foreign securities. The Custodian or a Foreign Sub-Custodian shall not be obligated to accept securities on behalf of the Fund under the terms of this Contract unless the form of such securities and the manner in which they are delivered are in accordance with reasonable market practice. 4.6. BANK ACCOUNTS. The Custodian shall identify on its books as belonging to the Fund cash (including cash denominated in foreign currencies) deposited with the Custodian. Where the Custodian is unable to maintain, or market practice does not facilitate the maintenance of, cash on the books of the Custodian, a bank account or bank accounts opened and maintained outside the United States on behalf of the Fund with a Foreign Sub-Custodian shall be subject only to draft or order by the Custodian or such Foreign Sub-Custodian, acting 8 pursuant to the terms of this Contract to hold cash received by or from or for the account of the Fund. 4.7. COLLECTION OF INCOME. The Custodian shall use reasonable commercial efforts to collect all income and other payments with respect to the Foreign Assets held hereunder to which the Fund shall be entitled and shall credit such income, as collected, to the Fund. In the event that extraordinary measures are required to collect such income, the Fund and the Custodian shall consult as to such measures and as to the compensation and expenses of the Custodian relating to such measures. 4.8. SHAREHOLDER RIGHTS. With respect to the foreign securities held under this Article 4, the Custodian shall use reasonable commercial efforts to facilitate the exercise of voting and other shareholder rights, subject always to the laws, regulations and practical constraints that may exist in the country where such securities are issued. The Fund acknowledges that local conditions, including lack of regulation, onerous procedural obligations, lack of notice and other factors may have the effect of severely limiting the ability of the Fund to exercise shareholder rights. 4.9. COMMUNICATIONS RELATING TO FOREIGN SECURITIES. The Custodian shall transmit promptly to the Fund written information (including, without limitation, pendency of calls and maturities of foreign securities and expirations of rights in connection therewith) received by the Custodian via the Foreign Sub-Custodians from issuers of the foreign securities being held for the account of the Fund. With respect to tender or exchange offers, the Custodian shall transmit promptly to the Fund written information so received by the Custodian from issuers of the foreign securities whose tender or exchange is sought or from the party (or its agents) making the tender or exchange offer. The Custodian shall not be liable for any untimely exercise of any tender, exchange or other right or power in connection with foreign securities or other property of the Fund at any time held by it unless (i) the Custodian or the respective Foreign Sub-Custodian is in actual possession of such foreign securities or property and (ii) the Custodian receives Proper Instructions with regard to the exercise of any such right or power, and both (i) and (ii) occur at least three business days prior to the date on which the Custodian is to take action to exercise such right or power. 4.10. LIABILITY OF FOREIGN SUB-CUSTODIANS AND FOREIGN SECURITIES SYSTEMS. Each agreement pursuant to which the Custodian employs a Foreign Sub-Custodian shall, to the extent possible, require the Foreign Sub-Custodian to exercise reasonable care in the performance of its duties and, to the extent possible, to indemnify, and hold harmless, the Custodian from and against any loss, damage, cost, expense, liability or claim arising out of or in connection with such Foreign Sub-Custodian's performance of such obligations. At the election of the Fund, the Fund shall be entitled to be subrogated 9 to the rights of the Custodian with respect to any claims against a Foreign Sub-Custodian as a consequence of any such loss, damage, cost, expense, liability or claim if and to the extent that the Fund has not been made whole for any such loss, damage, cost, expense, liability or claim. 4.11. TAX LAW. The Custodian shall have no responsibility or liability for any obligations now or hereafter imposed on the Fund or the Custodian as custodian of the Fund by the tax law of the United States or of any state or political subdivision thereof. It shall be the responsibility of the Fund to notify the Custodian of the obligations imposed on the Fund with respect to the Fund or the Custodian as custodian of the Fund by the tax law of countries other than those mentioned in the above sentence, including responsibility for withholding and other taxes, assessments or other governmental charges, certifications and governmental reporting. The sole responsibility of the Custodian with regard to such tax law shall be to use reasonable efforts to assist the Fund with respect to any claim for exemption or refund under the tax law of countries for which the Fund has provided such information. 4.12. LIABILITY OF CUSTODIAN. Except as may arise from the Custodian's own negligence or willful misconduct or the negligence or willful misconduct of a Sub-Custodian, the Custodian shall be without liability to the Fund for any loss, liability, claim or expense resulting from or caused by anything which is (A) part of Country Risk or (B) part of the "prevailing country risk" of the Fund, as such term is used in SEC Release Nos. IC-22658; IS-1080 (May 12, 1997) or as such term or other similar terms are now or in the future interpreted by the SEC or by the staff of the Division of Investment Management of the SEC. The Custodian shall be liable for the acts or omissions of a Foreign Sub-Custodian to the same extent as set forth with respect to sub-custodians generally in the Contract and, regardless of whether assets are maintained in the custody of a Foreign Sub-Custodian or a Foreign Securities Depository, the Custodian shall not be liable for any loss, damage, cost, expense, liability or claim resulting from nationalization, expropriation, currency restrictions, or acts of war or terrorism, or any other loss where the Sub-Custodian has otherwise acted with reasonable care. III. Except as specifically superseded or modified herein, the terms and provisions of the Contract shall continue to apply with full force and effect. In the event of any conflict between the terms of the Contract prior to this Amendment and this Amendment, the terms of this Amendment shall prevail. If the Custodian is delegated the responsibilities of Foreign Custody Manager pursuant to the terms of Article 3 hereof, in the event of any conflict between the provisions of Articles 3 and 4 hereof, the provisions of Article 3 shall prevail. 10 IN WITNESS WHEREOF, each of the parties has caused this Amendment to be executed in its name and behalf by its duly authorized representative as of the date first above written. WITNESSED BY: STATE STREET BANK AND TRUST COMPANY /s/MARC PARSONS By: /s/Ronald E. Logue Marc L. Parsons Name: Ronald E. Logue Associate Counsel Title: Executive Vice President WITNESSED BY: THE EMERGING GERMANY FUND, INC. /s/Lieschen Hartman By: /s/William Stack Name:Lieshen Hartman Name: William Stack Title: Portfolio Assistant Title: President 11
STATE STREET SCHEDULE A GLOBAL CUSTODY NETWORK SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES COUNTRY SUBCUSTODIAN NON-MANDATORY DEPOSITORIES Argentina Citibank, N.A. -- Australia Westpac Banking Corporation -- Austria Erste Bank der Oesterreichischen -- SDarkassen AG Bahrain British Bank of the Middle East -- (as delegate of The Hongkong and Shanghai Banking Corporation Limited) Bangladesh Standard Chartered Bank -- Belgium Generale de Banque -- Bermuda The Bank of Bermuda Limited -- Bolivia Banco Boliviano Americano S.A. -- Botswana Barclays Bank of Botswana Limited -- Brazil Citibank, N.A -- Bulgaria ING Bank N.V. -- Canada Canada Trustco Mortgage Company -- Chile Citibank, N.A -- People's Republic The Hongkong and Shanghai -- of China Banking Corporation Limited, Shanghai and Shenzhen branches Colombia Cititrust Colombia S.A. -- Sociedad Fiduciaria Croatia Privredna Banka Zagreb d.d -- Cyprus Barclays Bank Plc. -- Cyprus Offshore Banking Unit Czech Republic Ceskoslovenska Obchodni -- Banka, A.S. 12 Denmark Den Danske Bank -- Ecuador Citibank. N.A. -- Egypt National Bank of Egypt -- Estonia Hansabank -- Finland Merita Bank Limited -- France Banque Paribas -- Germany Dresdner Bank AG -- Ghana Barclays Bank of Ghana Limited -- Greece National Bank of Greece S.A. The Bank of Greece, System for Monitoring Transactions in Securities in Book-Entry Form Hong Kong Standard Chartered Bank -- Hungary Citibank Budapest Rt. -- Iceland Icebank Ltd. -- India Deutsche Bank AG -- The Hongkong and Shanghai Banking Corporation Limited Indonesia Standard Chartered Bank -- Ireland Bank of Ireland -- Israel Bank Hapoalim B.M. -- Italy Banque Paribas -- Ivory Coast Societe Generale de Banques -- en Cote d'lvoire Jamaica Scotiabank Jamaica Trust and Merchant -- Bank Ltd. 13 Japan The Daiwa Bank, Limited Japan Securities Depositiory Center The Fuji Bank, Limited Jordan British Bank of the Middle East -- (as delegate of The Hongkong and Shanghai Banking Corporation Limited) Kenya Barclays Bank of Kenya Limited -- Republic of Korea The Hongkong and Shanghai Banking -- Corporation Limited Latvia JSC Hansabank-Latvija -- Lebanon British Bank of the Middle East (as delegate of The Hongkong and Shanghai Banking Corporation Limited) -- Lithuania Vilniaus Bankas AB -- Malaysia Standard Chartered Bank -- Malaysia Berhad Mauritius The Hongkong and Shanghai -- Banking Corporation Limited Mexico Citibank Mexico, S.A. -- Morocco Banque Commerciale du Maroc -- Namibia (via) Standard Bank of South Africa -- The Netherlands MeesPierson N.V. -- New Zealand ANZ Banking Group -- (New Zealand) Limited Norway Christiania Bank AG -- Kreditkasse Oman British Bank of the Middle East -- (as delegate of The Hongkong and Shanghai Banking Corporation Limited) 14 Pakistan Deutsche Bank AG -- Peru Citibank, N.A. -- Philippines Standard Chartered Bank -- Poland Citibank (Poland) S.A. -- Bank Polska Kasa Opieki S.A. Portugal Banco Comercial Portugues -- Romania ING Bank N.V. -- Russia Credit Suisse First Boston AO, Moscow -- (as delegate of Credit Suisse First Boston, Zurich) Singapore The Development Bank -- of Singapore Limited Slovak Republic Ceskoslovenska Obchodna Banka, A.S. -- Slovenia Banka Creditanstalt d.d. -- South Africa Standard Bank of South Africa Limited -- Spain Banco Santander, S.A. -- Sri Lanka The Hongkong and Shanghai -- Banking Corporation Limited Swaziland Standard Bank Swaziland Limited -- Sweden Skandinaviska Enskilda Banken -- Switzerland UBS AG -- Taiwan - R.O.C. Central Trust of China -- Thailand Standard Chartered Bank Trinidad & Tobago Republic Bank Limited -- 15 Tunisia Banque Internationale Arabe de Tunisie -- Turkey Citibank, N.A. -- Ottoman Bank United Kingdom State Street Bank and Trust Company, -- London Branch Uruguay Citibank. N.A. -- Venezuela Citibank. N A -- Zambia Barclays Bank of Zambia Limited -- Zimbabwe Barclays Bank of Zimbabwe Limited -- Euroclear (The Euroclear System)/State Street London Limited Cedel, S.A. (Cedel Bank, societe anonyme)/State Street London Limited INTERSETTLE (for EASDAQ Securities)
16
STATE STREET SCHEDULE B GLOBAL CUSTODY NETWORK MANDATORY* DEPOSITORIES COUNTRY MANDATORY DEPOSITORIES Argentina Caja de Valores S.A. Australia Austraclear Limited Reserve Bank Information and Transfer System Austria Oesterreichische Kontrollbank AG (Wertpapiersammelbank Division) Belgium Caisse Interprofessionelle de Depot et de Virement de Titres S.A. Banque Nationale de Belgique Brazil Caixa de Liquidacao de Sao Paulo, (Calispa) Bolsa de Valores de Rio de Janeiro ALL SSB Clients presently use Calispa Central de Custodia e de Liquidacao de Custodia Bulgaria Central Depository AD Bulgarian National Bank Canada The Canadian Depository for Securities Limited People's Republic of China Shanghai Securities Central Clearing and Registration Corporation Shenzhen Securities Central Clearing Co., Ltd. Croatia Ministry of Finance National Bank of Croatia Czech Republic Stredisko cennych papiru * Mandatory depositories include entities for which use is mandatory as a matter of law or effectively mandatory as a matter of market practice. 17 Czech National Bank Denmark Vaerdipapircentralen (the Danish Securities Center) Egypt Misr Company for Clearing, Settlement, and Central Depository Estonia Eesti Vaartpaberite Keskdepositoorium Finland The Finnish Central Securities Depository France Societe Interprofessionnelle pour la Compensation des Valeurs Mobilieres (SICOVAM) Germany Deutsche Borse Clearing AG Greece The Central Securities Depository (Apothetirion Titlon AE) Hong Kong The Central Clearing and Settlement System Central Money Markets Unit Hungary The Central Depository and Clearing House (Budapest) Ltd. (KELER) [MANDATORY FOR GOV'T BONDS ONLY; SSB SSB does not use for other securities] India The National Securities Depository Limited Indonesia Bank Indonesia Ireland Central Bank of Ireland Securities Settlement Office Israel The Tel Aviv Stock Exchange Clearing House Ltd. * Mandatory depositories include entities for which use is mandatory as a matter of law or effectively mandatory as a matter of market practice. 18 Bank of Israel Italy Monte Titoli S.p.A. Banca d'Italia Jamaica The Jamaican Central Securities Depository Japan Bank of Japan Net System Kenya Central Bank of Kenya Republic of Korea Korea Securities Depository Corporation Latvia The Latvian Central Depository Lebanon The Custodian and Clearing Center of Financial Instruments for Lebanon and the Middle East (MIDCLEAR) S.A.L. The Central Bank of Lebanon Lithuania The Central Securities Depository of Lithuania Malaysia The Malaysian Central Depository Sdn. Bhd. Bank Negara Malaysia, Scripless Securities Trading and Safekeeping System Mauritius The Central Depository & Settlement Co. Ltd. Mexico S.D. INDEVAL, S.A. de C.V. (Instituto para el Deposito de Valores) Morocco Maroclear (pending publication of enabling legislation in the Moroccan government Gazette) * Mandatory depositories include entities for which use is mandatory as a matter of law or effectively mandatory as a matter of market practice. 19 The Netherlands Nederlands Centraal Instituut voor Giraal Effectenverkeer B.V. (NECIGEF) New Zealand New Zealand Central Securities Depositoriy Limited Norway Verdipapirsentralen (the Norwegian Registry of Securities) Oman Muscat Securities Market Pakistan Central Depository Company of Pakistan Limited Peru Caja de Valores y Liquidaciones S.A. (CAVALI) Philippines The Phillippines Central Depository, Inc. The Registry of Scripless Securities (ROSS) of the Bureau of the Treasury Poland The National Depository of Securities (Krajowy Deposyt Papierow Wartosciowych) Portugal Central de Valores Mobiliarios (Central) Romania National Securities Clearing, Settlement and Depository Co. Bucharest Stock Exchange Registry Division Singapore The Central Depository (Pte) Limited Monetary Authority of Singapore Slovak Republic Stredisko Cennych Papierov Slovenia Klirinsko Depotna Druzba d.d. South Africa The Central Depository Limited * Mandatory depositories include entities for which use is mandatory as a matter of law or effectively mandatory as a matter of market practice. 20 Spain Servicio de Compensacion y Liquidacion de Valores, S.A. Banco de Espana, Central de Anotaciones en Cuenta Sri Lanka Central Depository System (Pvt) Limited Sweden Vardepapperscentralen AB (the Swedish Central Securities Depository) Switzerland Schweizerishce Effekten - Giro AG Taiwan - R.O.C. The Taiwan Securities Central Depository Co., Ltd. Thailand Thailand Securities Depository Company Limited Tunisia Societe Tunisienne Interprofessionelle de Compensation et de Depot de Valeurs Mobilieres Central Bank of Tunisia Tunisian Treasury Turkey Takas ve Saklama Bankasi A.S. (TAKASBANK) Central Bank of Turkey United Kingdom The Bank of England, The Central Gilts Office and The Central Moneymarkets Office Uruguay Central Bank of Uruguay Venezuela Central Bank of Venezuela * Mandatory depositories include entities for which use is mandatory as a matter of law or effectively mandatory as a matter of market practice. 21 Zambia Lusaka Central Depository Limited Bank of Zambia * Mandatory depositories include entities for which use is mandatory as a matter of law or effectively mandatory as a matter of market practice.
22 SCHEDULE C MARKET INFORMATION PUBLICATION/TYPE OF INFORMATION BRIEF DESCRIPTION (FREQUENCY) THE GUIDE TO CUSTODY IN WORLD MARKETS (annually): An overview of safekeeping and settlement practices and procedures in each market in which State Street Bank and Trust Company offers custodial services. THE DEPOSITORY REVIEW (annually): Information relating to the operating history and structure of depositories located in the markets in which State Street Bank and Trust Company offers custodial services, including transnational depositories. legal opinions (annually): With respect to each market in which State Street Bank and Trust Company offers custodial services, opinions relating to whether local law restricts (i) access of a fund's independent public accountants to books and records of a Foreign Sub-Custodian or Foreign Securities System, (ii) the Fund's ability to recover in the event of bankruptcy or insolvency of a Foreign Sub-Custodian or Foreign Securities System, (iii) the Fund's ability to recover in the event of a loss by a Foreign Sub-Custodian or Foreign Securities System, and (iv) the ability of a foreign investor to convert cash and cash equivalents to U.S. dollars. Network Bulletins (weekly): Developments of interest to investors in the markets in which State Street Bank and Trust Company offers custodial services. Foreign Custody Advisories (as necessary): With respect to markets in which State Street Bank and Trust Company offers custodial services which exhibit special custody risks. developments which may impact State Street's ability to deliver expected levels of service. EX-99.23G5 8 EXHIBIT 99.23G5 AMENDMENT TO CUSTODIAN CONTRACT This Amendment to the Custodian Contract is made as of May 3, 1999 by and between Dresdner RCM Investment Funds Inc. (formerly known as The Emerging Germany Fund, Inc.) (the "Fund") and State Street Bank and Trust Company (the "Custodian"). Capitalized terms used in this Amendment without definition shall have the respective meanings given to such terms in the Custodian Contract referred to below. WHEREAS, the Fund and the Custodian entered into a Custodian Contract dated as of March 26, 1990 (as amended and in effect from time to time, the "Contract"); and WHEREAS, on December 4, 1998, the Board of Directors of the Fund approved the conversion of the Fund from a closed-end investment company to an open-end investment company; and WHEREAS, on January 26, 1999, the shareholders of the Fund approved the conversion of the Fund from a closed-end investment company to an open-end investment company; and WHEREAS, the Fund is authorized to issue shares in separate series, with each such series representing interests in a separate portfolio of securities and other assets; and WHEREAS, the Fund and the Custodian desire to amend certain provisions of the Contract to reflect such conversion of the Fund from a closed-end investment company to an open-end investment company on the date first above written and to reflect the authorization to issue shares in separate series; NOW THEREFORE, in consideration of the foregoing and the mutual covenants and agreements hereinafter contained, the parties hereby agree to amend the Contract, pursuant to the terms thereof, as follows: I. The recitals to the Contract are hereby amended by the addition of the following: WHEREAS, the Fund intends to initially offer shares in one series, Dresdner RCM Europe Fund (such series together with all other series subsequently established by the Fund and made subject to the Contract in accordance with Article 19, being herein referred to as the "Portfolio(s)"); II. Paragraph 14 of Article 2.2 of the Contract is hereby renumbered as Paragraph 15 of Article 2.2, all internal cross-references are hereby renumbered accordingly, and new Paragraph 14 of Article 2.2 is hereby added as follows: 14) Upon receipt of instructions from the transfer agent for the Fund (the "Transfer Agent") for delivery to such Transfer Agent or to the holders of Shares in connection with distributions in kind, as may be described from time to time in the Fund's currently effective prospectus and statement of additional information (the "Prospectus"), in satisfaction of requests by holders of Shares for repurchase or redemption; and III. Paragraph 6 of Article 2.7 of the Contract is hereby renumbered as Paragraph 7 of Article 2.7, all internal cross-references are hereby renumbered accordingly, and new Paragraph 6 of Article 2.7 is hereby added as follows: (6) For the redemption or repurchase of Shares issued as set forth in Article 5 hereof; IV. Articles 5 through 17 of the Contract are hereby renumbered as Articles 6 through 18, respectively; all internal cross-references are hereby renumbered accordingly; and new Article 5 is hereby added as follows: 5. PAYMENTS FOR SALES OR REPURCHASES OR REDEMPTIONS OF SHARES The Custodian shall receive from the distributor for the Shares or from the Transfer Agent and deposit into the Fund's account such payments as are received for Shares issued or sold from time to time by the Fund. The Custodian will provide timely notification to the Fund and the Transfer Agent of any receipt by it of payments for Shares of the Fund. From such funds as may be available for the purpose, the Custodian shall, upon receipt of instructions from the Transfer Agent, make funds available for payment to holders of Shares who have delivered to the Transfer Agent a request for redemption or repurchase of their Shares. In connection with the redemption or repurchase of Shares, the Custodian is authorized upon receipt of instructions from the Transfer Agent to wire funds to or through a commercial bank designated by the redeeming shareholders. In connection with the redemption or repurchase of Shares, the Custodian shall honor checks drawn on the Custodian by a holder of Shares, which checks have been furnished by the Fund to the holder of Shares, when presented to the Custodian in accordance with such procedures and controls as are mutually agreed upon from time to time between the Fund and the Custodian. V. New Article 19 is hereby added as follows: 19. ADDITIONAL PORTFOLIOS In the event that the Fund establishes one or more series of Shares in addition to Dresdner RCM Europe Fund with respect to which it desires to have the Custodian render services as custodian under the terms hereof, it shall so notify the Custodian in writing, and if the Custodian agrees-in writing to provide such services, such series of Shares shall become a Portfolio hereunder. All references in this Contract to "Fund" shall mean the Fund, or a Portfolio of the Fund, as the context requires or as applicable. VI. Except as specifically superseded or modified herein, the terms and provisions of the Contract shall continue to apply with full force and effect. In the event of any conflict between the terms of the Contract prior to this Amendment and this Amendment, the terms of this Amendment shall prevail. [The remainder of this page is intentionally left blank.] IN WITNESS WHEREOF, each of the parties has caused this Amendment to be executed in its name and behalf by its duly authorized representative as of the date first above written. Witnessed By: STATE STREET BANK AND TRUST COMPANY /s/ Marc L. Parsons By: /s/ Ronald E. Logue - ------------------------------ ------------------------------------ Marc L. Parsons Ronald E. Logue Associate Counsel Vice Chairman Witnessed By: DRESDNER RCM INVESTMENT FUNDS INC. /s/ Karen Jacoppo-Wood By: /s/ George A. Rio Name: George A. Rio Title: President EX-99.23(H)(3) 9 EXHIBIT 99.23H3 Exhibit 23(h)(3) FORM OF ADMINISTRATION AGREEMENT Agreement dated as of___________, 1998 by and between State Street Bank and Trust Company, a Massachusetts trust company (the "Administrator"), and Dresdner RCM Investment Funds, Inc. (the "Company"). WHEREAS, the Company is registered as an open-end, management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"); and WHEREAS, the Company desires to retain the Administrator to furnish certain administrative services to the Company, and the Administrator is willing to furnish such services, on the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the parties hereto agree as follows: 1. APPOINTMENT OF ADMINISTRATOR The Company hereby appoints the Administrator to act as administrator with respect to the Company for purposes of providing certain administrative services for the period and on the terms set forth in this Agreement. The Administrator accepts such appointment and agrees to render the services stated herein. The Company will initially consist of the portfolio(s) and/or class(es) of shares (each an "Investment Fund") listed in Schedule A to this Agreement. In the event that the Company establishes one or more additional Investment Funds with respect to which it wishes to retain the Administrator to act as administrator hereunder, the Company shall notify the Administrator in writing. Upon written acceptance by the Administrator, such Investment Fund shall become subject to the provisions of this Agreement to the same extent as the existing Investment Funds, except to the extent that such provisions (including those relating to the compensation and expenses payable by the Company and its Investment Funds) may be modified with respect to each additional Investment Fund in writing by the Company and the Administrator at the time of the addition of the Investment Fund. 2. DELIVERY OF DOCUMENTS The Company will promptly deliver to the Administrator copies of each of the following documents and all future amendments and supplements, if any: a. The Company's Articles of Incorporation and by-laws; b. The Company's currently effective registration statement under the Securities Act of 1933, as amended (the "1933 Act"), and the 1940 Act and the Company's Prospectus(es) and Statement(s) of Additional Information relating to all Investment Funds and all amendments and supplements thereto as in effect from time to time; c. Certified copies of the resolutions of the Board of Directors of the Company (the "Board") authorizing (1) the Company to enter into this Agreement and (2) certain individuals on Page 1 behalf of the Company to (a) give instructions to the Administrator pursuant to this Agreement and (b) sign checks and pay expenses; d. A copy of the investment advisory agreement between the Company and its investment adviser; and e. Such other certificates, documents or opinions which the Administrator may, in its reasonable discretion, deem necessary or appropriate in the proper performance of its duties. 3. REPRESENTATIONS AND WARRANTIES OF THE ADMINISTRATOR The Administrator represents and warrants to the Company that: a. It is a Massachusetts trust company, duly organized and existing under the laws of The Commonwealth of Massachusetts; b. It has the corporate power and authority to carry on its business in The Commonwealth of Massachusetts; c. All requisite corporate proceedings have been taken to authorize it to enter into and perform this Agreement; d. No legal or administrative proceedings have been instituted or threatened which would impair the Administrator's ability to perform its duties and obligations under this Agreement; and e. Its entrance into this Agreement shall not cause a material breach or be in material conflict with any other agreement or obligation of the Administrator or any law or regulation applicable to it. 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company represents and warrants to the Administrator that: a. It is a corporation, duly organized, existing and in good standing under the laws of Maryland; b. It has the corporate power and authority under applicable laws and by its charter and by-laws to enter into and perform this Agreement; c. All requisite proceedings have been taken to authorize it to enter into and perform this Agreement; d. It is an investment company properly registered under the 1940 Act; e. A registration statement under the 1933 Act and the 1940 Act has been filed and will be effective and remain effective during the term of this Agreement. The Company also warrants to the Administrator that as of the effective date of this Agreement, all necessary Page 2 filings under the securities laws of the states in which the Company offers or sells its shares have been made; f. No legal or administrative proceedings have been instituted or threatened which would impair the Company's ability to perform its duties and obligations under this Agreement; g. Its entrance into this Agreement will not cause a material breach or be in material conflict with any other agreement or obligation of the Company or any law or regulation applicable to it; and h. As of the close of business on the date of this Agreement, the Company is authorized to issue shares of beneficial interest, and it will initially offer shares, in the authorized amounts as set forth in Schedule A to this Agreement. 5. ADMINISTRATION SERVICES The Administrator shall provide the following services, in each case, subject to the control, supervision and direction of the Company and the review and comment by the Company's auditors and legal counsel and in accordance with procedures which may be established from time to time between the Company and the Administrator: a. Oversee the determination and publication of the Company's net asset value in accordance with the Company's policy as adopted from time to time by the Board; b. Oversee the maintenance by the Company's custodian of certain books and records of the Company as required under Rule 31a-l(b) of the 1940 Act; c. Prepare the Company's federal, state and local income tax returns for review by the Company's independent accountants and filing by the Company's treasurer; d. Review calculation, submit for approval by officers of the Company and arrange for payment of the Company's expenses; e. Prepare for review and approval by officers of the Company financial information for the Company's semi-annual and annual reports, proxy statements and other communications required or otherwise to be sent to Company shareholders, and arrange for the printing and dissemination of such reports and communications to shareholders; f. Prepare for review by an officer of and legal counsel for the Company the Company's periodic financial reports required to be filed with the Securities and Exchange Commission ("SEC") on Form N-SAR and financial information required by Form N-1A and such other reports, forms or filings as may be mutually agreed upon; g. Prepare reports relating to the business and affairs of the Company as may be mutually agreed upon and not otherwise prepared by the Company's investment adviser, custodian, legal counsel or independent accountants; h. Make such reports and recommendations to the Board concerning the performance of the independent accountants as the Board may reasonably request; Page 3 i. Make such reports and recommendations to the Board concerning the performance and fees of the Company's custodian and transfer and dividend disbursing agent ("Transfer Agent") as the Board may reasonably request or deems appropriate; j. Oversee and review calculations of fees paid to the Company's investment adviser, custodian and Transfer Agent; k. Consult with the Company's officers, independent accountants, legal counsel, custodian and Transfer Agent in establishing the accounting policies of the Company; l. Provide periodic testing of portfolios to assist the Company's investment adviser in complying with Internal Revenue Code mandatory qualification requirements, the requirements of the 1940 Act and Company prospectus limitations as may be mutually agreed upon; m. Coordinate printing of annual and semi-annual shareholder reports and coordinate the filing with appropriate regulatory agencies; review text of "President's letters" to shareholders and "Management's Discussion of Company Performance" (which shall also be subject to review by the Company's legal counsel); and n. Prepare SEC Rule 24f-2 notices. The Administrator shall provide the office facilities and the personnel required by it to perform the services contemplated herein. 6. FEES; EXPENSES; EXPENSE REIMBURSEMENT The Administrator shall receive from the Company such compensation for the Administrator's services provided pursuant to this Agreement as may be agreed to from time to time in a written fee schedule approved by the parties and initially set forth in the Fee Schedule to this Agreement. The fees are accrued daily and billed monthly and shall be due and payable upon receipt of the invoice. Upon the termination of this Agreement before the end of any month, the fee for the part of the month before such termination shall be prorated according to the proportion which such part bears to the full monthly period and shall be payable upon the date of termination of this Agreement. In addition, the Company shall reimburse the Administrator for its out-of-pocket costs incurred in connection with this Agreement. The Company agrees promptly to reimburse the Administrator for any equipment and supplies specially ordered by or for the Company through the Administrator and for any other expenses not contemplated by this Agreement that the Administrator may incur on the Company's behalf at the Company's request or with the Company's consent. The Company will bear all expenses that are incurred in its operation and not specifically assumed by the Administrator. Expenses to be borne by the Company, include, but are not limited to: organizational expenses; cost of services of independent accountants and outside legal and tax counsel (including such counsel's review of the Company's federal and state tax qualification as a regulated investment company and other reports and materials prepared by the Administrator under this Agreement); cost of any services contracted for by the Company directly from parties other than the Administrator; cost of trading operations and brokerage fees, commissions and transfer taxes in connection with the purchase and sale of securities for the Company; investment advisory fees; taxes, Page 4 insurance premiums and other fees and expenses applicable to its operation; costs incidental to any meetings of shareholders including, but not limited to, legal and accounting fees, proxy filing fees and the costs of preparation, printing and mailing of any proxy materials; costs incidental to Board meetings, including fees and expenses of Board members; the salary and expenses of any officer, director\trustee or employee of the Company; costs incidental to the preparation, printing and distribution of the Company's registration statements and any amendments thereto and shareholder reports; cost of typesetting and printing of prospectuses; cost of preparation and filing of the Company's tax returns, Form N-1A and Form N-SAR, and all notices, registrations and amendments associated with applicable federal and state tax and securities laws; all applicable registration fees and filing fees required under federal and state securities laws; fidelity bond and directors' and officers' liability insurance; and cost of independent pricing services used in computing the Company's net asset value. The Administrator is authorized to and may employ or associate with such person or persons as the Administrator may deem desirable to assist it in performing its duties under this Agreement; provided, however, that the compensation of such person or persons shall be paid by the Administrator and that the Administrator shall be as fully responsible to the Company for the acts and omissions of any such person or persons as it is for its own acts and omissions. 7. INSTRUCTIONS AND ADVICE At any time, the Administrator may apply to any officer of the Company for instructions and may consult with its own legal counsel or outside counsel for the Company or the independent accountants for the Company at the expense of the Company, with respect to any matter arising in connection with the services to be performed by the Administrator under this Agreement. The Administrator shall not be liable, and shall be indemnified by the Company, for any action taken or omitted by it in good faith in reliance upon any such instructions or advice or upon any paper or document believed by it to be genuine and to have been signed by the proper person or persons. The Administrator shall not be held to have notice of any change of authority of any person until receipt of written notice thereof from the Company. Nothing in this paragraph shall be construed as imposing upon the Administrator any obligation to seek such instructions or advice, or to act in accordance with such advice when received. 8. LIMITATION OF LIABILITY AND INDEMNIFICATION The Administrator shall be responsible for the performance of only such duties as are set forth in this Agreement and, except as otherwise provided under Section 6, shall have no responsibility for the actions or activities of any other party, including other service providers. The Administrator shall have no liability for any error of judgment or mistake of law or for any loss or damage resulting from the performance or nonperformance of its duties hereunder unless solely caused by or resulting from the negligence or willful misconduct of the Administrator, its officers or employees. The Administrator shall not be liable for any special, indirect, incidental, or consequential damages of any kind whatsoever (including, without limitation, attorneys' fees) under any provision of this Agreement or for any such damages arising out of any act or failure to act hereunder. In any event, the Administrator's liability under this Agreement shall be limited to one times its total annual compensation earned and fees paid hereunder during the preceding twelve months for all services provided to the Company under this Agreement for any liability or loss suffered by the Company including, but not limited to, any liability relating to qualification of the Company as a regulated investment company or any liability relating to the Company's compliance with any federal or state tax or securities statute, regulation or ruling. Page 5 The Administrator shall not be responsible or liable for any failure or delay in performance of its obligations under this Agreement arising out of or caused, directly or indirectly, by circumstances beyond its control, including without limitation, work stoppage, power or other mechanical failure, computer virus, natural disaster, governmental action or communication disruption. The Company shall indemnify and hold the Administrator harmless from all loss, cost, damage and expense, including reasonable fees and expenses for counsel, incurred by the Administrator resulting from any claim, demand, action or suit in connection with the Administrator's acceptance of this Agreement, any action or omission by it in the performance of its duties hereunder, or as a result of acting upon any instructions reasonably believed by it to have been duly authorized by the Company, provided that this indemnification shall not apply to actions or omissions of the Administrator, its officers or employees in cases of its or their own negligence or willful misconduct. The indemnification contained herein shall survive the termination of this Agreement. 9. CONFIDENTIALITY The Administrator agrees that, except as otherwise required by law or in connection with any required disclosure to a banking or other regulatory authority, it will keep confidential all records and information in its possession relating to the Company or its shareholders or shareholder accounts and will not disclose the same to any person except at the request or with the written consent of the Company. 10. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS; RECORDS The Company assumes full responsibility for complying with all securities, tax, commodities and other laws, rules and regulations applicable to it. In compliance with the requirements of Rule 31a-3 under the 1940 Act, the Administrator agrees that all records which it maintains for the Company shall at all times remain the property of the Company, shall be readily accessible during normal business hours, and shall be promptly surrendered upon the termination of the Agreement or otherwise on written request. The Administrator further agrees that all records which it maintains for the Company pursuant to Rule 31a-1 under the 1940 Act will be preserved for the periods prescribed by Rule 31a-2 under the 1940 Act unless any such records are earlier surrendered as provided above. Records shall be surrendered in usable machine-readable form. 11. SERVICES NOT EXCLUSIVE The services of the Administrator to the Company are not to be deemed exclusive, and the Administrator shall be free to render similar services to others. The Administrator shall be deemed to be an independent contractor and shall, unless otherwise expressly provided herein or authorized by the Company from time to time, have no authority to act or represent the Company in any way or otherwise be deemed an agent of the Company. 12. TERM, TERMINATION AND AMENDMENT This Agreement shall become effective on the date of its execution and shall remain in full force and effect for a period of two years from the effective date and shall automatically continue in full force and effect after such initial term unless either party terminates this Agreement by written notice to the other party at least sixty (60) days prior to the expiration of the initial term. Either party may terminate this Page 6 Agreement at any time after the initial term upon at least sixty (60) days' prior written notice to the other party. Termination of this Agreement with respect to any given Investment Fund shall in no way affect the continued validity of this Agreement with respect to any other Investment Fund. Upon termination of this Agreement, the Company shall pay to the Administrator such compensation and any reimbursable expenses as may be due under the terms hereof as of the date of such termination, including reasonable out-of-pocket expenses associated with such termination. This Agreement may be modified or amended from time to time by mutual written agreement of the parties hereto. 13. NOTICES Any notice or other communication authorized or required by this Agreement to be given to either party shall be in writing and deemed to have been given when delivered in person or by confirmed facsimile, or posted by certified mail, return receipt requested, to the following address (or such other address as a party may specify by written notice to the other): if to the Company:_________________, Attn:_____________, fax:______________; if to the Administrator: State Street Bank and Trust Company, 1776 Heritage Drive, AFB-4, North Quincy, Massachusetts 02171, Attn: Fund Administration Legal Department, fax: 617-537-2578. 14. NON-ASSIGNABILITY This Agreement shall not be assigned by either party hereto without the prior consent in writing of the other party, except that the Administrator may assign this Agreement to a successor of all or a substantial portion of its business, or to a party controlling, controlled by or under common control with the Administrator. 15. SUCCESSORS This Agreement shall be binding on and shall inure to the benefit of the Company and the Administrator and their respective successors and permitted assigns. 16. ENTIRE AGREEMENT This Agreement contains the entire understanding between the parties hereto with respect to the subject matter hereof and supersedes all previous representations, warranties or commitments regarding the services to be performed hereunder whether oral or in writing. 17. WAIVER The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver nor shall it deprive such party of the right thereafter to insist upon strict adherence to that term or any term of this Agreement. Any waiver must be in writing signed by the waiving party. 18. SEVERABILITY Page 7 If any provision of this Agreement is invalid or unenforceable, the balance of the Agreement shall remain in effect, and if any provision is inapplicable to any person or circumstance it shall nevertheless remain applicable to all other persons and circumstances. 19. GOVERNING LAW This Agreement shall be construed and the provisions thereof interpreted under and in accordance with the laws of The Commonwealth of Massachusetts. 20. REPRODUCTION OF DOCUMENTS This Agreement and all schedules, exhibits, attachments and amendments hereto may be reproduced by any photographic, photostatic, microfilm, micro-card, miniature photographic or other similar process. The parties hereto all/each agree that any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding, whether or not the original is in existence and whether or not such reproduction was made by a party in the regular course of business, and that any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their officers designated below as of the date first written above. DRESDNER RCM INVESTMENT FUNDS, INC. By: --------------------------------- Name: --------------------------------- Title: --------------------------------- STATE STREET BANK AND TRUST COMPANY By: --------------------------------- Name: Kathleen C. Cuocolo --------------------------------- Title: Senior Vice President --------------------------------- Page 8 ADMINISTRATION AGREEMENT SCHEDULE A LISTING OF INVESTMENT FUNDS AND AUTHORIZED SHARES Investment Fund Authorized Shares Dresdner RCM Europe Fund Page 9 STATE STREET BANK AND TRUST COMPANY DRESDNER RCM INVESTMENT FUNDS INC. SUB-ADMINISTRATION FEE SCHEDULE I. SUB-ADMINISTRATION SERVICES Services to be performed by State Street Fund Administration include Treasurer's Office Support, Tax Reporting, IRS/SEC/Prospectus Compliance, Financial Reporting and Audit Coordination, N-SAR Preparation and Filing, 24f-2 Notice Preparation.
ANNUAL FEE Average Assets Expressed in Basis Points: 1/100 of 1% -------------- -------------------------------------- First $250 Million/Fund 2.50 Next $250 Million/Fund 1.75 Thereafter 1.00 Minimum/Fund $57,500
FUND FEES: Fees will be calculated by multiplying each Average Asset Break Point in the above schedule by the number of Funds in the complexes (Dresdner RCM Global Funds, Inc., Dresdner RCM Capital Funds, Inc. and Dresdner RCM Investment Funds Inc.) to determine the break points used in the schedule. Total net assets of all Funds will be used to calculate the fee by multiplying the net assets of the Funds by the basis point fees in the above schedule. The minimum will be calculated by multiplying the minimum fee by the number of Funds in the complex to arrive at the total minimum fee. The greater of the basis point fee or the minimum fee will be allocated equally to each Fund in the complex. The minimum monthly fee per Fund will be applied at the rate of 1/12th in month one ($399 per Fund), 2/12th in month two increasing incrementally per month until the full minimum monthly fee per Fund is in effect in month twelve ($4,792 per Fund). II. MULTIPLE CLASSES OF SHARES An additional $10,000 fee will be applied to each class of shares, excluding the first two classes of shares, if more than two classes of shares is operational in a Fund. III. LEVERAGE CALCULATIONS An additional $10,000 annual fee will be applied to each Fund for performance of daily calculations and Statement of Cash Flow reporting to the extent a Fund engages in leveraging activities, other than temporary borrowings. Page 10 STATE STREET BANK AND TRUST COMPANY DRESDNER RCM INVESTMENT FUNDS INC. SUB-ADMINISTRATION FEE SCHEDULE IV. OUT OF POCKET EXPENSES - INCLUDE, BUT MAY NOT BE LIMITED TO: - Printing for shareholder reports and SEC filings - Legal fees, audit fees and other professional fees - Supplies related to Fund records - Travel and lodging for Board and Operations meetings - Preparation of financials other than Annual, Semi-Annual and Quarterly Board Reporting, $3,000 per financial report. V. SPECIAL ARRANGEMENTS Fees for activities of a non-recurring nature such as fund consolidations or reorganizations, and/or preparation of special reports will be subject to negotiation. VI. PAYMENT The above fees will be charged against each Fund's account fifteen (15) business days after the date invoices are mailed. VII. TERM OF THE CONTRACT The parties agree that this fee schedule shall remain in effect through December 31, 2000, and from year to year thereafter until it is revised as a result of negotiations initiated by either party. STATE STREET BANK AND TRUST DRESDNER RCM INVESTMENT FUNDS INC. COMPANY By: By: ------------------------- ------------------------- Title: Title: ------------------------- ------------------------- Date: Date: ------------------------- ------------------------- Page 11 EX-99.23I 10 EXHIBIT 99.23I EXHIBIT 99.23(I) Kirkpatrick & Lockhart LLP 2nd Floor 1800 Massachusetts Avenue, N.W. Washington, D.C. 200036-1800 Telephone (202) 778-9000 Facsimile (202) 778-9100 April 30, 1999 Dresdner RCM Investment Funds Inc. Four Embarcadero Center San Francisco, California 94111 Ladies and Gentlemen: We have acted as counsel to Dresdner RCM Investment Funds Inc., a Maryland corporation (the "Company"), in connection with Pre-Effective Amendment No. 2 (the "PEA") to the Company's Registration Statement on Form N-1A (File No. 333-72679), relating to the issuance and sale of Shares of the Company. You have requested our opinion with respect to the matters set forth below. In this opinion letter, the term "Shares" refers to the Class N and Class I shares of common stock of the Dresdner RCM Europe Fund, which is a series ("Series") of the Company, that may be issued during the time that the Registration Statement is effective and has not been superseded by a post-effective amendment and is limited to an aggregate (including shares that are issued and outstanding as of the effective date of the PEA but excluding shares that, as of the date a Share is issued, have been redeemed) of 100,000,000 shares of each Class of the Series. In connection with rendering the opinions set forth below, we have examined copies of the Company's Amended and Restated Articles of Incorporation and By-Laws, and resolutions and minutes of meetings of the Company's Board of Directors relating to the PEA and the issuance and sale of the Shares. In addition, we examined the resolutions and minutes of the Company's Annual Stockholder Meeting whereby Company stockholders approved the issuance and sale of the Shares. We have not independently established the facts so relied on. The opinions expressed in this opinion letter are limited to the laws (other than the laws Dresdner RCM Investment Funds Inc. April 30, 1999 Page 2 relating to choice of law) of the State of Maryland that in our experience are normally applicable to the issuance of shares by corporations and to the Securities Act of 1933 ("1933 Act"), the Investment Company Act of 1940 ("1940 Act") and the regulations of the Securities and Exchange Commission thereunder. Based on and subject to the foregoing, it is our opinion that: 1. The issuance of the Shares has been duly authorized by the Company. 2. When sold in accordance with the terms contemplated by the PEA, including receipt by the Company of full payment for the Shares and compliance with the 1933 Act and the 1940 Act, the Shares will have been validly issued and will be fully paid and non-assessable. We hereby consent to the filing of this opinion letter as an exhibit to the PEA and to the reference to our firm in the statement of additional information that is being filed as part of the PEA. Very truly yours, /s/ Kirkpatrick & Lockhart LLP KIRKPATRICK & LOCKHART LLP EX-99.23J2 11 EXHIBIT 99.23J2 Exhibit 99.23(j)(2) CONSENT OF INDEPENDENT ACCOUNTANTS To the Board of Trustees of Dresdner RCM Europe Fund Inc.: We consent to the incorporation by reference in Pre-Effective Amendment No. 2 (filing number 811-06038) to the Registration Statement of Dresdner RCM Europe Fund Inc. on Form N-1A of our report dated February 22, 1999, on our audits of the financial statements and financial highlights of Dresdner RCM Europe Fund (formerly known as "The Emerging Germany Fund Inc."), which report is included in the Annual Report to Shareholders for the year ended December 31, 1998, which is incorporated by reference in the Pre-Effective Amendment to the Registration Statement. We also consent to the references to our Firm under the captions "Financial Highlights" in the Prospectus and "Other Service Providers" in the Statement of Additional Information. Boston, Massachusetts /s/PricewaterhouseCoopers LLP April 29, 1999 EX-99.23M 12 EXHIBIT 99.23M EXHIBIT 99.23(m) DRESDNER RCM INVESTMENT FUNDS INC. FORM OF DISTRIBUTION PLAN INTRODUCTION The Board of Directors (the "Board") of Dresdner RCM Investment Funds Inc., a Maryland Corporation (the "Company"), has approved the adoption of the Distribution Plan (the "Plan") set forth below with respect to the distribution of Class N shares of capital stock (the "Shares") of its Dresdner RCM Europe Fund (the "Fund"). This Plan is designed to conform to the requirements of Rule 12b-1 promulgated under the Investment Company Act of 1940, as amended (the "1940 Act"). The Company on behalf of the Fund has entered into a distribution agreement pursuant to which the Company will employ Funds Distributor Inc. (the "Distributor") to distribute Shares of the Fund. Under this Plan, the Company, on behalf of the Fund, intends to compensate the Distributor for expenses incurred, and services and facilities provided, by the Distributor in distributing Shares of the Fund. THE PLAN The material aspects of the Plan are as follows: SECTION 1. The Fund will pay the Distributor for: (a) expenses incurred in connection with advertising and marketing Shares of the Fund including, but not limited to, any advertising or marketing via radio, television, newspapers, magazines, telemarketing, or direct dial mail solicitations; (b) periodic payments of fees for distribution assistance made to one or more securities dealers, or other industry professionals, such as investment advisers, accountants, estate planning firms, and the Distributor itself (collectively the "Service Organizations") in respect of the average daily value of the Fund's Shares beneficially owned by persons ("Clients") for whom the Service Organization is the dealer of record or holder of record or with whom the Service Organization has a servicing relationship; and (c) expenses incurred in preparing, printing, and distributing the Fund's prospectus and statement of additional information (except those used for regulatory purposes or for distribution to existing stockholders of the Fund). SECTION 2. While this Plan is in effect the Distributor will be compensated by the Fund for such distribution expenses that are incurred, and services and facilities that are provided, in connection with Shares of the Fund on a monthly basis, at the following annual rate of up to 0.25% of the Fund's average daily net assets during such month. These monthly payments to the Distributor will be made in accordance with and subject to the conditions set forth below. For the purposes of determining the amounts payable under the Plan, the value of the Fund's net assets shall be computed in the manner specified in the Fund's prospectus and statement of additional information as then in effect for the computation of the value of the Fund's net assets. C-1 The distribution fees payable to the Distributor are designed to reimburse the Distributor for the expenses it incurs and services it renders in distributing the Shares of the Fund. If in any year the Distributor's expenses incurred in connection with the distribution of Shares of the Fund exceed the distribution fees paid by the Fund, the Distributor will recover such excess only if this Plan continues to be in effect with respect to the Fund in some later year when the distribution fees exceed the Distributor's expenses. There is no limit on the periods during which unreimbursed expenses may be carried forward, although the Company is not obligated to repay any unreimbursed expenses for the Fund that may exist at such time, if any, as this Plan terminates or is not continued with respect to the Fund. No interest, carrying, or finance charge will be imposed on any amounts carried forward. Payment made out of or charged against the assets of the Fund must be in payment for distribution expenses incurred on behalf of the Fund and which are described herein. SECTION 3. Payments by the Distributor to a Service Organization described in this Plan shall be subject to compliance by the Service Organization with the terms of a written agreement between the Service Organization and the Distributor. If an investor in a Fund ceases to be a Client of a Service Organization that has entered into a selling group agreement with the Distributor, but continues to hold Shares of the Fund, the Distributor will be entitled to receive similar payments in respect of the distribution assistance provided with respect to such investor. SECTION 4. The Distributor shall provide the Board, at least quarterly, with a written report of all amounts expended pursuant to this Plan. The report shall state the purposes for which the amounts were expended. SECTION 5. This Plan shall become effective with respect to the Fund upon its adoption by the Board and, unless earlier terminated with respect to the Fund in accordance with its terms, the Plan shall continue automatically with respect to the Fund for successive annual periods provided such continuance is approved by a majority of the Board, including a majority of the Directors who are not "interested" persons (as defined in the 1940 Act) of the Company and who have no direct or indirect financial interest in the operation of this Plan or in any agreements entered into in connection with this Plan (the "Independent Directors"), pursuant to a vote cast in person at a meeting called for the purpose of voting on the continuance of the Plan. SECTION 6. This Plan may be amended at any time by the Board provided that (i) any amendment to increase materially the costs which the Fund may bear for distribution pursuant to this Plan shall be effective only upon approval by a vote of a majority of the outstanding voting securities of the Fund, and (ii) any material amendments of the terms of this Plan shall become effective only upon approval by a majority of the Board and a majority of the Independent Directors pursuant to a vote cast in person at a meeting called for the purpose of voting on the Plan. SECTION 7. This Plan is terminable without penalty at any time by (i) the vote of a majority of the Independent Directors, or (ii) the vote of a majority of the outstanding voting securities of the Fund. SECTION 8. The Board has adopted this Plan as of [_________], 1999. C-2 SCHEDULE A DATED [___________], 1999 TO DRESDNER RCM INVESTMENT FUNDS INC. DISTRIBUTION PLAN FUND (CLASS) SALES CHARGE Dresdner RCM Europe Fund (Class N) 0.25% C-3 -----END PRIVACY-ENHANCED MESSAGE-----