<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 26, 1995
1933 ACT FILE NO. 33-97572
1940 ACT FILE NO. 811-9100
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / /
POST-EFFECTIVE AMENDMENT NO. / /
PRE-EFFECTIVE AMENDMENT NO. 2 /X/
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / /
AMENDMENT NO. 1 /X/
------------------------
RCM EQUITY FUNDS, INC.
Four Embarcadero Center, Suite 3000
San Francisco, California 94111
(415) 954-5400
------------------------
Anthony Ain, Vice President, General Counsel & Secretary
RCM EQUITY FUNDS, INC.
Four Embarcadero Center, Suite 3000
San Francisco, California 94111
(415) 954-5400
(Name and Address of Agent for Service)
COPY TO:
Michael Glazer
Paul, Hastings, Janofsky & Walker
555 South Flower Street
Los Angeles, California 90071
------------------------
APPROXIMATE DATE OF PROPOSED OFFERING:
AS SOON AS PRACTICABLE FOLLOWING EFFECTIVE DATE.
------------------------
The Registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
------------------------
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, Registrant
is hereby registering under the Securities Act of 1933 an indefinite number of
shares of beneficial interest. Registrant's initial Rule 24f-2 Notice will be
filed no later than April 26, 1996.
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<PAGE>
RCM EQUITY FUNDS, INC.
RCM GLOBAL TECHNOLOGY FUND
CROSS REFERENCE SHEET
BETWEEN ITEMS OF PART A AND B OF FORM N-1A AND THE
PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<S> <C> <C>
ITEM NUMBER OF PART A OF FORM N-1A CAPTIONS IN PROSPECTUS
- ----------------------------------------------------- ------------------------------------------
1. Cover Page................................ Cover Page
2. Synopsis.................................. Prospectus Summary; Summary of Fees and
Expenses
3. Condensed Financial Information........... *
4. General Description of Registrant......... General Information; Investment Objective
and Policies; Investment and Risk
Considerations
5. Management of the Fund.................... Organization and Management
5A. Management's Description of Fund.......... *
6. Capital Stock and Other Securities........ General Information; Dividends,
Distributions and Taxes
7. Purchase of Securities Being Offered...... How to Purchase Shares; Organization and
Management
8. Redemption or Repurchase.................. Redemption of Shares
9. Pending Legal Proceedings................. *
ITEM NUMBER OF PART B OF FORM N-1A CAPTIONS IN STATEMENT OF ADDITIONAL
- ----------------------------------------------------- INFORMATION
------------------------------------------
10. Cover Page................................ Cover Page
11. Table Of Contents......................... Table of Contents
12. General Information and History........... *
13. Investment Objectives and Policies........ Investment Objective and Policies;
Investment and Risk Considerations;
Investment Restrictions
14. Management of the Fund.................... Directors and Officers
15. Control Persons and Principal Holders of Description of Capital Shares; Directors
Securities............................... and Officers
16. Investment Advisory and Other Services.... The Investment Manager; Additional
Information
17. Brokerage Allocation...................... Execution of Portfolio Transactions
18. Capital Stock and Other Securities........ Description of Capital Shares
19. Purchase, Redemption and Pricing of How to Purchase Shares
Securities Being Offered.................
20. Tax Status................................ Dividends, Distributions and Tax Status
21. Underwriters.............................. Distributor
22. Calculation of Performance Data........... Investment Results
23. Financial Statements...................... Additional Information
</TABLE>
- ------------------------
* Not applicable
<PAGE>
-------------------------------
PROSPECTUS
----------------------------
RCM GLOBAL TECHNOLOGY FUND
OFFERED BY:
RCM EQUITY FUNDS, INC.
Four Embarcadero Center, Suite 3000
San Francisco, California 94111
(800) 726-7240
THIS PROSPECTUS RELATES TO RCM GLOBAL TECHNOLOGY FUND
(A SERIES OF RCM EQUITY FUNDS, INC.), WHICH SPECIALIZES IN
EQUITY AND EQUITY-RELATED SECURITIES OF
DOMESTIC AND FOREIGN TECHNOLOGY COMPANIES
-------------------------------
RCM GLOBAL TECHNOLOGY FUND (THE "FUND") is a non-diversified, no-load series of
RCM Equity Funds, Inc. (the "Company"), an open-end management investment
company. Shares of the Fund may be purchased at their net asset value without a
sales charge. (See HOW TO PURCHASE SHARES.)
The Fund's investment objective is to seek appreciation of capital, primarily
through investment in equity and equity-related securities of domestic and
foreign technology companies. Such investments will be chosen primarily with
regard to their potential for capital appreciation. Current income will be
considered only as part of total investment return and will not be emphasized.
(See INVESTMENT OBJECTIVE AND POLICIES.)
Investments in equity and equity-related securities of domestic and foreign
technology companies involve significant risks, some of which are not typically
associated with investments in securities of domestic issuers and issuers
engaged in other types of business. There can be no assurance the Fund will
achieve its investment objective. (See INVESTMENT AND RISK CONSIDERATIONS.)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
This Prospectus sets forth concisely the information about the Fund that
prospective investors should know before investing. Investors should read this
document and retain it for future use. A Statement of Additional Information for
the Fund dated December , 1995 has been filed with the Securities and Exchange
Commission and is incorporated by reference into this Prospectus. The Statement
may be obtained, without charge, by writing or calling the Company at the
address or telephone number set forth above.
-------------------------------
The date of this Prospectus is December , 1995
-------------------------------
<PAGE>
-------------------------------
TABLE OF CONTENTS
----------------------------
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary................................................................... 3
Summary of Fees and Expenses......................................................... 5
Investment Objective and Policies.................................................... 6
Investment and Risk Considerations................................................... 11
Organization and Management.......................................................... 13
How to Purchase Shares............................................................... 16
Stockholder Services................................................................. 17
Redemption of Shares................................................................. 18
Investment Results................................................................... 19
Dividends, Distributions and Taxes................................................... 19
General Information.................................................................. 20
</TABLE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH
THE OFFER CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. THIS PROSPECTUS IS NOT AN OFFER TO SELL OR A SOLICITATION OF AN OFFER
TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION OR TO ANY PERSON
TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
<PAGE>
-------------------------------
PROSPECTUS SUMMARY
----------------------------
The following summary is qualified in its entirety by the detailed information
appearing elsewhere in this Prospectus:
WHAT IS THE FUND'S OBJECTIVE?
The Fund's investment objective is to seek appreciation of capital, primarily
through investment in equity and equity-related securities of domestic and
foreign technology companies. The Fund's investments will be chosen primarily
with regard to their potential for capital appreciation; current income will be
considered only as part of total return and will not be emphasized. (See
INVESTMENT OBJECTIVE AND POLICIES.)
WHAT DOES THE FUND INVEST IN?
Under normal market conditions, at least 65% of the value of the total assets of
the Fund will be invested in equity and equity-related securities of technology
companies. Technology companies are issuers whose revenues are primarily
generated by technology products, including, but not limited to, computers and
peripheral products, software, electronic components and systems, communications
equipment and services, media and information services, pharmaceuticals,
hospital supply and medical devices, biotechnology, environmental services,
chemicals and synthetic materials, and defense and aerospace products and
services. Investments may also include companies that should significantly
benefit from the commercialization of technological advances even if they are
not directly involved in research and development.
DOES THE FUND INVEST GLOBALLY?
The Fund may invest up to 50% of the value of its total assets in foreign equity
and equity-related securities. Under normal market conditions, the Fund's assets
will be invested in equity and equity-related securities of companies organized
or headquartered in at least three different countries (one of which will be the
United States). A substantial portion of the Fund's foreign investments may be
securities of companies organized or headquartered in Japan, and up to 20% of
the value of the Fund's total assets may be securities of companies organized or
headquartered in emerging market countries. Investment in foreign securities and
currencies involves special risks, including fluctuations in foreign exchange
rates, political or economic instability in the country of issue, and the
possible imposition of exchange controls or other laws or restrictions.
Investment in emerging markets may involve greater risks than investments in
other foreign markets, as a result of factors such as less-developed economic
and legal structures, less stable political systems, and less liquid securities
markets.
SHOULD I INVEST IN THE FUND?
The Fund believes that there are attractive investment opportunities in the
technology sector. In the United States, as well as internationally, technology
companies have grown faster than the general economy for decades. The Fund's
investment manager believes that this trend can continue. Yet, the stocks of
individual technology companies can be very volatile, and analyzing individual
companies can be very time-intensive. A global technology fund offers
experienced professional management to investors who wish to invest in a
diversified global portfolio of technology stocks.
The Fund is designed for investors who recognize and are prepared to accept
these risks in return for the possibility of higher returns. Consider your
investment goals, your time horizon for achieving them, and your tolerance for
risk. If you seek an aggressive approach to capital growth, and can accept the
above-average level of price fluctuations that the Fund may experience, the Fund
may be an appropriate part of your overall investment strategy.
WHO OPERATES THE FUND?
The Fund's investment manager is RCM Capital Management, a California Limited
Partnership (the "Investment Manager"), a registered investment adviser with
principal offices in San Francisco, California. RCM and its predecessor have a
25-year record of investments in equity securities. It currently provides
investment supervisory services to institutional and individual clients and
registered investment companies with aggregate assets in excess of $25 billion.
(See ORGANIZATION AND MANAGEMENT.) The Custodian of the Fund's assets is State
Street Bank and Trust Company.
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Page 3
<PAGE>
WHAT ARE SOME OF THE POTENTIAL INVESTMENT RISKS?
Investment in the Fund is subject to a variety of risks in addition to those
normally associated with investments in a portfolio of equity securities. (See
INVESTMENT AND RISK CONSIDERATIONS.) They include the following:
Investment in equity and equity-related securities of technology companies
involves significant risks, some of which are not typically associated with
investment in securities of other issuers. These include substantial competitive
and pricing pressures, rapid product obsolescence, dependence on extensive
research and development, and sensitivity to changes in governmental regulations
and policies.
The Fund's investments will be focused in the technology sector of the U.S. and
foreign economies. As a result of the Fund's focus on a single sector, the
Fund's net asset value may be more volatile in price than the net asset value of
a company with a more broadly diversified portfolio.
Investment in securities of foreign companies involves significant additional
risks, including fluctuations in foreign exchange rates, political or economic
instability in the country of issue, and the possible imposition of exchange
controls or other laws or restrictions. Foreign issuers generally are not
subject to accounting and financial reporting standards or to other regulatory
practices and requirements comparable to those applicable to U.S. issuers. There
is generally less government regulation of securities markets, exchanges and
dealers than in the United States, and the costs associated with transactions in
and custody of securities traded on foreign markets are higher than in the U.S.
DOES THE FUND HEDGE ITS RISKS?
The Fund may use a variety of techniques to hedge its investments. These include
currency management techniques; options on securities, indices and currencies;
financial and foreign currency futures contracts and options; and currency and
interest rate swaps. Each of these hedging techniques also involves certain
risks. (See INVESTMENT OBJECTIVE AND POLICIES AND INVESTMENT AND RISK
CONSIDERATIONS.)
IS THERE A MINIMUM INVESTMENT?
There is no minimum initial investment for investors purchasing shares through a
broker-dealer or other financial institution having a service agreement with the
Investment Manager and maintaining an omnibus account with the Fund, such as
Charles Schwab & Co., Inc. For other investors, the minimum initial investment
is $25,000, and the minimum subsequent investment is $1,000. There is no initial
sales charge. (See HOW TO PURCHASE SHARES.)
CAN I REDEEM SHARES AT ANY TIME?
You may redeem your shares at any time. If you have held your shares for at
least 12 months, you can redeem your shares at their net asset value, without a
redemption charge. However, to reduce costs to other stockholders of short-term
investments in the Fund , you will be charged a redemption fee of 1.5% of any
amounts you redeem within 12 months of your purchase. This redemption fee will
be payable to the Fund. (See REDEMPTION OF SHARES.)
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Page 4
<PAGE>
-------------------------------
SUMMARY OF FEES AND EXPENSES
----------------------------
WHAT EXPENSES WILL THE FUND INCUR?
The following information is designed to help you understand various costs and
expenses of the Fund that an investor may bear directly or indirectly. The
information is based on the Fund's expected expenses for its first year of
operation, and should not be considered a representation of future expenses or
returns. Actual expenses and returns may be greater or less than those shown
below.
<TABLE>
<S> <C> <C>
Stockholder Transaction Expenses
Sales load imposed on purchases None
Sales load imposed on reinvested dividends None
Deferred sales loads None
Redemption fees
For shares held more than 12 months None
For shares held 12 months or less* 1.5%
Annual Fund Operating Expenses
Investment management fees 1.00%
Other expenses (after expense reduction**) 0.75%
Total Fund operating expenses
(after expense reduction**) 1.75%
<CAPTION>
Example of Portfolio Expenses 1 Year 3 Years
<S> <C> <C>
You would pay the following total expenses on a $1,000
investment, assuming (1) a 5% annual return and (2)
redemption at the end of each time period
Assuming redemption at end of period $ 33.27 $ 55.11
Assuming no redemption $ 17.78 $ 55.11
</TABLE>
In accordance with applicable regulations of the Securities and Exchange
Commission ("SEC"), the Example of Portfolio Expenses assumes that (1) the
percentage amounts listed under Annual Fund Operating Expenses remain the same
in each of the one and three year periods; and (2) all dividends and
distributions are reinvested by the stockholder. SEC regulations require that
the example be based on a $1,000 investment, although the minimum initial
purchase of Fund shares may be different. (See HOW TO PURCHASE SHARES.)
For more information concerning fees and expenses of the Fund, see ORGANIZATION
AND MANAGEMENT AND DIVIDENDS, DISTRIBUTIONS AND TAXES.
- ------------------------
* Paid to the Fund, not the Investment Manager. See REDEMPTION OF SHARES.
** The Investment Manager has voluntarily agreed, until at least December 31,
1996, to pay the Fund on a quarterly basis the amount, if any, by which
certain ordinary operating expenses of the Fund exceed the annual rate of
1.75% of the average daily net assets of the Fund. In subsequent years, the
Fund will reimburse the Investment Manager for any such payments to the
extent that the Fund's operating expenses are otherwise below this expense
cap. (See ORGANIZATION AND MANAGEMENT.) Other expenses and total Fund
operating expenses for the first year of operation of the Fund, without
expense reduction, are estimated to be 2.36% and 3.36%, respectively, of the
Fund's average daily net assets.
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<PAGE>
-------------------------------
INVESTMENT OBJECTIVE AND POLICIES
----------------------------
WHAT IS THE FUND'S OBJECTIVE?
The Fund's investment objective is to seek appreciation of capital, primarily
through investment in equity and equity-related securities of domestic and
foreign "technology companies." Under normal market conditions, the Fund will
invest at least 65% of the value of its total assets in such securities. The
Fund's investments will be chosen primarily with regard to their potential for
capital appreciation; current income from the Fund's investment portfolio will
be considered only as a part of total investment return, and will not be
emphasized. There can be no assurance that the Fund's investment objective will
be met.
HOW DOES THE FUND SELECT SECURITIES FOR ITS PORTFOLIO?
The Fund intends to invest primarily in the equity and equity-related securities
of high quality growth companies. In most cases, these companies will 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 through expanding
market share; strong commitment to research and development; or a steady stream
of new products and services.
The Investment Manager will seek to identify companies throughout the world that
are expected to have higher-than-average rates of growth and strong potential
for capital appreciation relative to the potential downside risk of an
investment. While the Fund will emphasize investments in growth companies, the
Fund also expects to invest in other companies that are not traditionally
considered to be growth companies, such as emerging growth companies and
cyclical and semi-cyclical companies, if the Investment Manager believes that
such companies have above-average growth potential. In determining whether
securities of particular issuers are believed to have the potential for capital
appreciation, the Investment Manager will evaluate the fundamental value of each
enterprise, as well as its prospects for growth. Because current income is not
the Fund's investment objective, the Fund will not restrict its investments in
equity securities to those issuers with a record of dividend payments.
There is no limitation on the market capitalization of the companies in which
the Fund will invest. However, as of the date of this Prospectus, the Investment
Manager intends to invest primarily in equity and equity-related securities of
companies with market capitalizations in excess of $500 million, and does not
intend to invest more than 15% of the value of the Fund's total assets in
securities of companies with market capitalizations below $100 million at the
time of purchase.
WHAT ARE TECHNOLOGY COMPANIES?
Technology companies are issuers whose revenues are primarily generated by
technology products, including but not limited to computers and peripheral
products, software, electronic components and systems, communications equipment
and services, media and information services, pharmaceuticals, hospital supply
and medical devices, biotechnology, environmental services, chemicals and
synthetic materials, and defense and aerospace products and services.
Investments may also include companies that should significantly benefit from
the commercialization of technological advances even if they are not directly
involved in research and development. The types of companies that the Fund may
invest in will be broadly interpreted by the Investment Manager so that the Fund
will be positioned to benefit from holdings in all companies that may benefit
from technological advances.
WHAT ARE EQUITY AND EQUITY-RELATED SECURITIES?
"Equity and equity-related securities" in which the Fund has the authority to
invest include common stock, preferred stock, convertible preferred stock,
convertible debt obligations, warrants or other rights to acquire stock, and
options on stock and stock indexes. In addition, equity and equity-related
securities may include securities sold in the form of depository receipts and
securities issued by
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Page 6
<PAGE>
other investment companies. The Fund currently intends to invest primarily in
common stock and depository receipts.
WHAT KINDS OF FOREIGN SECURITIES WILL THE FUND INVEST IN?
Under normal market conditions, as a fundamental policy which cannot be changed
without stockholder approval, the Fund's assets will be invested in equity and
equity-related securities of companies organized or headquartered in at least
three different countries (one of which will be the United States).
The portion of the Fund's assets invested in foreign securities will vary from
time-to-time, depending on the Investment Manager's view of foreign investment
opportunities and risks, but will not exceed 50% of the value of the Fund's
total assets. For purposes of this restriction, "foreign securities" includes
(i) securities of companies that are organized or headquartered, or whose
operations principally are conducted, outside the United States; (ii) securities
that are principally traded outside the United States, regardless of where the
issuer of such securities is organized or headquartered or where its operations
principally are conducted; (iii) depository receipts; and (iv) securities of
other investment companies investing primarily in such equity and equity-related
securities.
Under normal market conditions, the Fund will not invest more than 25% of the
value of its total assets in securities of issuers that are organized or
headquartered in any one foreign country, other than Japan. In evaluating
particular investment opportunities, the Investment Manager may consider, in
addition to the factors described above, 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 company is located, as well as other factors it deems relevant.
The Fund expects that its investments in foreign securities will be comprised
primarily of securities that are 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. Subject to the Fund's restrictions on investment in funded securities
(see WHAT OTHER INVESTMENT PRACTICES SHOULD I KNOW ABOUT?), the Fund also may
invest in securities that are not publicly traded either in the U.S. or in
foreign markets.
WILL THE FUND INVEST IN EMERGING MARKET COUNTRIES?
The Fund may invest up to 20% of the value of its total assets in securities of
companies that are organized or headquartered in emerging market countries.
However, the Fund will not invest more than 10% of the value of its total assets
in securities of issuers that are organized or headquartered in any one emerging
market country. The term "emerging market countries" includes any country that
is generally considered to be an emerging or developing country by the World
Bank, the International Finance Corporation, the United Nations or its
authorities, or other reputable financial institutions. As of the date of this
Prospectus, the term "emerging market countries" is deemed for purposes of this
Prospectus to include all foreign countries other than Australia, Austria,
Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Italy,
Japan, Luxembourg, Malaysia, The Netherlands, New Zealand, Norway, Portugal,
Singapore, Spain, Sweden, Switzerland, and the United Kingdom.
DOES THE FUND BUY AND SELL FOREIGN CURRENCY?
The Fund presently expects to purchase or sell foreign currency primarily to
settle foreign securities transactions. However, the Fund may also engage in
currency management transactions to hedge currency exposure related to
securities it owns or that it anticipates purchasing. (See DOES THE FUND HEDGE
ITS INVESTMENTS?)
For purposes of the percentage limitations on the Fund's investments in foreign
securities, the term "securities" does not include foreign currencies. This
means that the Fund could have more than the percentages of its total assets
indicated above denominated in foreign currencies or multinational currency
units such as the European Currency Unit (a "basket" comprised of specified
amounts of currencies of certain of the members of the European Community). As a
result, gains in a particular securities market may be affected, either
positively or negatively, by changes in exchange rates.
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Page 7
<PAGE>
DOES THE FUND HEDGE ITS INVESTMENTS?
For hedging purposes, the Fund may purchase covered "put" and "call" options
with respect to securities which are eligible for purchase by the Fund. 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). 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 (or on the option expiration date). Prior to exercise or expiration, an
option may be sold by the Fund when it has remaining value through a "closing
sale transaction," which is accomplished by selling an option of the same series
as the option previously purchased.
The Fund may employ certain currency management techniques to hedge against
currency exchange rate fluctuations. These include forward currency exchange
contracts, currency options, futures contracts, options on futures contracts,
and currency swaps. A forward currency exchange contract is an obligation to
purchase or sell a specific currency at a future date at a price set at the time
of the contract. Currency options are rights to purchase or sell a specific
currency at a future date at a specified price. Futures contracts are agreements
to take or make delivery of an amount of cash equal to the difference between
the value of the currency at the close of the last trading day of the contract
and the contract price. 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 in the judgment
of the Investment Manager there is a pattern of correlation between the two
currencies. In addition, the Fund may hold foreign currency received in
connection with investments in foreign securities when, in the judgment of the
Investment Manager, it would be beneficial to convert such currency into U.S.
dollars at a later date, based on anticipated changes in the relevant exchange
rates.
WHAT OTHER INVESTMENT PRACTICES SHOULD I KNOW ABOUT?
DEPOSITORY RECEIPTS. The Fund may invest in securities of foreign companies in
the form of American Depository Receipts ("ADRs"), European Depository Receipts
("EDRs"), Global Depository Receipts ("GDRs"), or other similar instruments
representing securities of foreign companies. ADRs are receipts that typically
are issued by an American bank or trust company, and represent the right to
receive securities of foreign companies deposited in the domestic bank or a
correspondent bank. EDRs and GDRs are receipts issued by a non-U.S. financial
institution evidencing a similar arrangement. Where it is possible to invest
either in an ADR, EDR, or GDR, or to invest directly in the underlying security,
the Fund will evaluate which investment opportunity is preferable, based on
price differences, relative trading volume, anticipated liquidity, differences
in currency risk, and other factors.
Although investment in ADRs involves less currency risk than investment in the
underlying securities, depository receipts may have risks that are similar to
those of foreign equity securities. Therefore, for purposes of the Fund's
investment policies and restrictions, depository receipts will be treated as
foreign equity securities, based on the country in which the underlying issuer
is organized or headquartered. See WHAT KINDS OF FOREIGN SECURITIES WILL 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 issuers organized or
headquartered in those countries, or may place limitations on such investments.
In such cases, the only practical means of investment may be through investment
in other investment companies that in turn are authorized to invest in the
securities of such issuers. In such cases and in other appropriate
circumstances, and subject to the restrictions referred to above regarding
investments in companies organized or headquartered in foreign countries (see
WHAT KINDS OF FOREIGN SECURITIES WILL THE FUND INVEST IN?), the Fund may invest
up to 10% of the value of its total assets in other investment companies.
However, the Fund may not invest more than 5% of the value of its total assets
in the securities of any one investment company or acquire more than 3% of the
voting securities of any other investment company.
- --------------------------------------------------------------------------------
Page 8
<PAGE>
To the extent that the Fund invests in other investment companies, the Fund
would bear its proportionate share of any management or administration fees and
other expenses paid by investment companies in which it invests. At the same
time, the Fund would continue to pay its own management fees and other expenses.
SHORT SELLING. The Fund may make short sales of securities that it owns or has
the right to acquire at no added cost through conversion or exchange of other
securities it owns (referred to as short sales "against the box") and to make
short sales of securities which it does not own or have the right to acquire. In
order to deliver a security that is sold short to the buyer, the Fund must
arrange through a broker to borrow the security, and becomes obligated to
replace the security borrowed at its market price at the time of replacement,
whatever that price may be. When the Fund makes a short sale, the proceeds of
the sale are retained by the broker until the Fund replaces the borrowed
security.
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 2% of the
value of the Fund's net assets or 2% 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 Investment Company Act of 1940 (the "1940 Act"), and by
the Internal Revenue Code with respect to the Fund's qualification as a
regulated investment company. See DIVIDENDS, DISTRIBUTIONS AND TAXES.
WHEN ISSUED, FIRM COMMITMENT AND DELAYED SETTLEMENT TRANSACTIONS. The Fund may
purchase securities on a delayed delivery or "when issued" basis and may enter
into firm commitment agreements (transactions in which the payment obligation
and interest rate are fixed at the time of the transaction but the settlement is
delayed). Delivery and payment for these securities typically occur 15 to 45
days after the commitment to purchase, but delivery and payment can be scheduled
for shorter or longer periods, based upon the agreement of the buyer and the
seller. No interest accrues to the purchaser during the period before delivery.
The Fund normally will not enter into these transactions for the purpose of
leverage, but may sell the right to receive delivery of the securities before
the settlement date. The value of the securities at settlement may be more or
less than the agreed upon price.
The Fund will segregate cash, U.S. Government securities or other liquid, high
quality debt securities in an amount sufficient to meet its payment obligations
with respect to any such transactions. To the extent that assets are segregated
for this purpose, the Fund's liquidity and the ability of the Investment Manager
to manage its portfolio may be adversely affected.
DEBT SECURITIES. The Fund may invest in short-term debt obligations (with
maturities of less than one year) of the U.S. Government and foreign governments
and their respective agencies, instrumentalities and authorities, debt
obligations issued or guaranteed by international or supranational governmental
entities, and debt obligations of domestic and foreign corporate issuers. Such
debt obligations will be rated, at the time of purchase, BBB or higher by
Standard & Poor's Corporation ("Standard & Poor's"), Baa or higher by Moody's
Investor Services, 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. These securities are of investment grade,
which means that their issuers are 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.
Under normal market conditions, no more than 10% of the value of the Fund's
total assets will be invested in such obligations. However, during times when
the Investment Manager believes a temporary defensive posture is warranted,
including times involving international, political or economic uncertainty, the
Fund may hold all or a substantial portion of its assets in such debt
obligations. When the Fund is so invested, it may not be achieving its
investment objective.
BORROWING MONEY. From time-to-time, it may be advantageous for the Fund to
borrow money rather than sell portfolio positions to raise the cash to meet
redemption requests. Accordingly, to meet redemption requests the Fund may
borrow from banks or through reverse repurchase agreements. The Fund also may
borrow up to 5% of the value of its total assets for temporary or emergency
purposes other than to meet redemptions. However,
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the Fund will not borrow money for leveraging purposes. The Fund may continue to
purchase securities while borrowings are outstanding, but will not do so when
the Fund's borrowings (including reverse repurchase agreements) exceed 5% of the
value of its total assets. The 1940 Act permits 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 transactions are considered to be
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 recognized securities dealer) 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 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, high grade debt 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.
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 specific securities are liquid or illiquid
subject to policies established by the Company's Board of Directors.
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, the Fund 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 Company's Board of Directors may determine, in particular
cases, 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.
CAN THE FUND'S OBJECTIVE AND POLICIES BE CHANGED?
The Fund's investment objective is a fundamental policy that may not be changed
without a vote of its stockholders. However, except as otherwise indicated in
this Prospectus or the Statement of Additional Information, the Fund's other
investment policies and restrictions are not fundamental and may be changed
without a vote of the stockholders. If there is a change in the Fund's
investment objective or policies, stockholders should consider whether the Fund
remains an appropriate investment in light of their then current financial
position and needs.
The various percentage limitations referred to in this Prospectus apply
immediately after a purchase or initial investment, and except as specifically
indicated to the contrary, any subsequent change in any applicable percentage
resulting from market fluctuations will not require elimination of any security
from the Fund's portfolio.
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 anticipates that the Fund's annual portfolio turnover rate
should not exceed 150%, but the turnover
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rate will not be a limiting factor when the Investment Manager deems portfolio
changes appropriate. Securities in the Fund's portfolio will be sold whenever
the Investment Manager believes it is appropriate to do so, regardless of the
length of time that securities have been held, and securities may be purchased
or sold for short-term profits whenever the Investment Manager believes it is
appropriate or desirable to do so. Turnover will be influenced by sound
investment practices, the Fund's investment objective and the need for funds for
the redemption of the Fund's shares.
Because the Investment Manager will purchase and sell securities for the Fund's
portfolio without regard to the length of the holding period for such
securities, it is possible that the Fund's portfolio will have a higher turnover
rate than might be expected for investment companies that invest substantially
all of their funds for long-term capital appreciation or generation of current
income. A high portfolio turnover rate would increase aggregate brokerage
commission expenses and other transaction costs, which must be borne directly by
the Fund and ultimately by the Fund's stockholders, and may under certain
circumstances make it more difficult for the Fund to qualify as a regulated
investment company under the Internal Revenue Code. See Dividends, Distributions
and Taxes.
-------------------------------
INVESTMENT AND RISK CONSIDERATIONS
----------------------------
Investment in the Fund is subject to a variety of risks, including the
following:
RISKS OF INVESTING IN TECHNOLOGY STOCKS.
Because the Fund will focus its investments in technology companies, the Fund
will be more susceptible than other investment companies to market and other
conditions affecting technology companies. Such conditions include competitive
pressures affecting the financial condition of technology companies, rapid
product obsolescence, dependence on extensive research and development,
aggressive pricing and greater sensitivity to changes in governmental regulation
and policies. As a result of the Fund's concentration on a single sector, the
Fund's net asset value may be more volatile in price than the net asset value of
a company with a more broadly diversified portfolio.
RISKS OF INVESTING IN FOREIGN MARKETS GENERALLY.
Investing in foreign equity 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 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
dividends and limitations of the repatriation of currencies). The Fund may also
experience difficulties or delays in obtaining or enforcing judgments.
Most foreign securities 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. 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.
RISKS OF INVESTING IN SMALLER CAPITALIZATION COMPANIES.
Investing in securities of issuers with market capitalizations below $100
million at or near the time of
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purchase ("smaller capitalization companies") involves greater risk and the
possibility of greater portfolio price volatility than investing in larger
capitalization companies. For example, smaller capitalization companies may have
less certain growth prospects, may be more sensitive to changing economic
conditions, may have more limited financial and management resources, and may
have less liquid markets for their securities, than larger, more established
firms.
RISKS OF INVESTING IN EMERGING MARKET SECURITIES.
There are special additional risks associated with investments in emerging
market securities. 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.
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.
Economies in emerging markets generally are heavily dependent upon international
trade, and may be affected adversely by the economic conditions of the countries
in 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 the countries with which they trade. In many cases,
governments of emerging market countries continue to exercise a significant
degree of control over the economies of such countries. In addition, certain of
such 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 heightened 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 many also affect the value of the Fund's investments in those
countries.
RISKS OF HEDGING TECHNIQUES.
There are a number of risks associated with transactions in options on
securities. Options may be more volatile than the underlying instruments.
Differences between the options and securities markets 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 a variety of reasons. When trading options on foreign
exchanges, many of the protections afforded to participants in the United States
will not be available. Although the purchaser of an option cannot lose more than
the amount of the premium plus transaction costs, this entire amount could be
lost.
The Fund's currency management techniques involve risks different than those
that arise in connection with investments in dollar-denominated securities. To
the extent that the Fund is invested in foreign securities while also
maintaining currency positions, it may be exposed to greater combined risk than
would otherwise be the case. Transactions in futures contracts and options on
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 techniques is a highly specialized activity, and there can be
no assurance as to the success of any hedging operations which the Fund may
implement. Gains and losses in such transactions depend upon the Investment
Manager's ability to predict correctly the direction of stock prices, interest
rates, currency exchange rates, and other economic factors. Although such
operations could reduce the risk of loss due to a decline in the value of the
hedged security or currency, they could also limit the potential gain from an
increase in the value of the security or currency.
RISKS OF SHORT SELLING.
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. The Fund's net
asset value per share will tend to be more volatile than would be the case if it
did not engage in short sales. Short sales that are not "against the box" also
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
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<PAGE>
market price has increased significantly. Under adverse market conditions, the
Fund might have difficulty purchasing securities to meet its short sale delivery
obligations, might have to purchase such securities at higher prices than would
otherwise be the case, 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.
WHAT OTHER RISK FACTORS SHOULD I BE AWARE OF?
CONVERTIBLE SECURITIES AND WARRANTS. The value of a convertible security is a
function of both its yield in comparison with the yields of similar non-
convertible securities and the value of the underlying stock. A convertible
security held by the Fund may be subject to redemption at the option of the
issuer at a fixed price, 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. Investment in warrants also involves certain risks,
including the possible lack of a liquid market for resale, potential price
fluctuations as a result of speculation or other factors, and the failure of the
price of the underlying security to reach or have reasonable prospects of
reaching the exercise price, in which event the warrant may expire without being
exercised, resulting in a loss of the Fund's entire investment in the warrant.
CREDIT OF COUNTERPARTIES. A number of transactions in which the Fund may engage
are subject to the risks of default by the other party to the transaction. When
the Fund engages in repurchase, reverse repurchase, when-issued, forward
commitment, delayed settlement and securities lending transactions, it relies on
the other party to consummate the transaction. Failure of the other party to do
so may result in the Fund's incurring a loss or missing an opportunity to obtain
a price believed to be advantageous.
BORROWING. Borrowing also involves special risk considerations. Interest costs
on 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 the borrowings.
NON-DIVERSIFICATION. The Fund will be non-diversified within the meaning of the
1940 Act. As a non-diversified fund, the Fund 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 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
(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).
-------------------------------
ORGANIZATION AND MANAGEMENT
----------------------------
WHO MANAGES THE FUND?
The Company was incorporated in Maryland in September 1995, and is an open-end
management investment company or mutual fund. The Company's Board of Directors
has overall responsibility for the operation of the Fund. Pursuant to such
responsibility, the Board has approved contracts for various financial
organizations to provide, among other things, day-to-day management services
required by the Fund.
The Company, on behalf of the Fund, has retained as the Fund's Investment
Manager RCM Capital
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Management, A California Limited Partnership (the "Investment Manager") with
principal offices at Four Embarcadero Center, Suite 3000, San Francisco,
California 94111. Pursuant to an Investment Management Agreement, Power of
Attorney and Service Agreement with the Company (the "Management Agreement"),
the Investment Manager manages the Fund's investments, provides various
administrative services, and supervises the Fund's daily business affairs,
subject to the authority of the Company's Board of Directors.
WHO IS RCM CAPITAL MANAGEMENT?
The Investment Manager is actively engaged in providing investment supervisory
services to institutional and individual clients and registered investment
companies, and is registered under the Investment Advisers Act of 1940. The
Investment Manager was established in July 1986, as the successor to the
business and operations of Rosenberg Capital Management (established in 1970).
The general partner of the Investment Manager, RCM Limited L.P., a California
limited partnership, is controlled by the 19 principals of the Investment
Manager. The sole limited partner of the Investment Manager is a wholly owned
indirect subsidiary of Travelers Group Inc.
The Investment Manager's equity philosophy is to invest in growth stocks --
stocks of companies that are expected to have superior and predictable growth.
Through fundamental research and a series of valuation screens, the Investment
Manager seeks to purchase securities of those companies whose expected growth in
earnings and dividends will provide a risk-adjusted return in excess of the
market.
The Investment Manager has a long history of investing in technology stocks. Its
technology analysts have been researching technology companies for purchase in
domestic equity portfolios for more than 20 years, and have been managing
technology portfolios for more than 10 years. The technology team consults
regularly with the senior members of the Investment Manager's equity portfolio
management team concerning the prospects for the technology industry generally
as well as specific technology companies. The equity investment process also
incorporates the Investment Manager's own macroeconomic views of the economy.
In addition to traditional research activities, the Investment Manager utilizes
research produced by Grassroots Research, an operating group within the
Investment Manager. Grassroots Research prepares research reports based on field
interviews with customers, distributors, and competitors of the companies that
the Investment Manager follows. In the technology area, Grassroots Research can
be a valuable adjunct to the Investment Manager's traditional research efforts
by providing a "second look" at technology companies in which the Fund is
considering investing and by checking marketplace assumptions concerning market
demand for particular technology products.
Walter C. Price, Jr. and Huachen Chen, each a Principal of the Investment
Manager, are the primary portfolio managers for the Fund. They have managed
equity portfolios on behalf of the Investment Manager since 1985.
In December 1995, the Investment Manager entered into an Agreement of Purchase
and Sale pursuant to which it will become an indirect wholly owned subsidiary of
Dresdner Bank A.G., a German bank. It is expected that the day-to-day operations
of the Investment Manager will not be affected and that the individuals who are
primarily responsible for the management of the Fund's portfolio will remain the
same. The closing of the transaction is subject to a number of contingencies,
including the receipt of certain regulatory approvals. The transaction is
currently expected to close in mid-1996. Because the transaction will constitute
an "assignment" of the Fund's Management Agreement with the Investment Manager
under the 1940 Act, and thus a termination of such Management Agreement, the
Fund will seek approval of a new management agreement from the Board of
Directors and stockholders of the Fund prior to the closing of the transaction.
The terms of the new management agreement will be substantially the same as
those of the current Management Agreement, and the transaction will be described
in more detail in the proxy statement sent to stockholders.
WHAT ARE THE FUND'S MANAGEMENT FEES?
For the services rendered by the Investment Manager under the Management
Agreement, the Fund will pay a monthly fee to the Investment Manager based on
the average daily net assets of the Fund, at the annualized rate of 1.00% of the
value of the Fund's average daily net assets. This is higher than the fee paid
by most other registered investment companies. However, the Company believes
that
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the Fund's total annual expenses will be comparable to those currently paid by
other international technology funds.
WHAT OTHER EXPENSES DOES THE FUND PAY?
The Fund is responsible for the payment of its operating expenses, including
brokerage and commission expenses; taxes levied on the Fund; interest charges on
borrowings (if any); charges and expenses of the Fund's custodian; investment
management fees due to the Investment Manager; and all of the Fund's other
ordinary operating expenses (e.g., legal and audit fees, securities registration
expenses, and compensation of non-interested directors of the Company).
To limit the expenses of the Fund, the Investment Manager has agreed, until at
least December 31, 1996, to pay the Fund on a quarterly basis the amount, if
any, by which the ordinary operating expenses of the Company attributable to the
Fund for the quarter (except interest, taxes and extraordinary expenses) exceed
the annual rate of 1.75% of the value of the average daily net assets of the
Fund. The Fund will reimburse the Investment Manager for fees deferred or other
expenses paid by the Investment Manager pursuant to this agreement in later
years in which operating expenses for the Fund are otherwise 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 fees deferred 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.
HOW DOES THE FUND DECIDE WHICH BROKERS TO USE?
The Investment Manager, subject to the overall supervision of the Company's
Board of Directors, makes the Fund's investment decisions and selects the broker
or dealer to be used in each specific transaction using its judgment to choose
the broker or dealer most capable of providing the services necessary to obtain
the best execution of that transaction. In seeking the best execution of each
transaction, the Investment Manager evaluates a wide range of criteria. Subject
to the requirement of seeking best available prices and execution, the
Investment Manager may, in circumstances in which two or more brokers are in a
position to offer comparable prices and execution, give preference to a broker
that has provided investment information to the Investment Manager. In so doing,
the Investment Manager may effect securities transactions which cause the Fund
to pay an amount of commission in excess of the amount of commission another
broker would have charged. Subject to the requirement of seeking the best
available prices and execution, the Investment Manager may also place orders
with brokerage firms that have sold shares of the Fund.
The Fund may in some instances invest in foreign and/or U.S. securities that are
not listed on a national securities exchange but are traded in the
over-the-counter market. The Fund may also purchase listed securities through
the third market (over-the-counter trades of exchange-listed securities) or
fourth market (direct trades of securities between institutional investors
without the intermediation of a broker-dealer). 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 price and execution, whether or not that
counterparty is the primary market maker for that security. In all cases, the
Investment Manager will attempt to negotiate the best market price and
execution.
When appropriate and to the extent consistent with applicable laws and
regulations, the Fund may execute brokerage transactions through Smith Barney
Inc. and The Robinson-Humphrey Company, Inc., affiliates of the limited partner
of the Investment Manager.
WHO ARE THE FUND'S CUSTODIAN AND TRANSFER AGENT?
State Street Bank and Trust Company (the "Custodian"), P.O. Box 1713, Boston,
Massachusetts 02105, serves as custodian of all securities and funds owned by
the Fund in accordance with the terms of the Custodian Contract between the
Company and the Custodian. The Custodian also provides dividend paying services
to the Fund. The Company acts as its own transfer and redemption agent for its
capital stock.
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-------------------------------
HOW TO PURCHASE SHARES
----------------------------
HOW CAN I PURCHASE SHARES OF THE FUND?
Shares of the Fund are offered on a continuous basis at the net asset value per
share (next determined after receipt of subscriptions), without any sales or
other charge. There is no minimum initial investment for investors purchasing
shares through a broker-dealer or other financial institution having a service
agreement with the Investment Manager and maintaining an omnibus account with
the Fund, such as Charles Schwab & Co., Inc. For other investors, the initial
investment must be at least $25,000, and there is a $1,000 minimum for
additional investments other than through the Fund's automatic dividend
reinvestment plan. (See STOCKHOLDER SERVICES.)
Investors or their duly authorized agents may purchase shares from the Company
by sending a signed, completed subscription form to the Company at Four
Embarcadero Center, Suite 3000, San Francisco, California 94111 (telephone (415)
954-5400), and paying for the shares as described below. Shares may also be
purchased through certain broker which has entered into a selling group
agreement with the Distributor. Although the Fund does not impose a sales
charge, brokers may charge a fee for their services at the time of purchase or
redemption. Subscription forms can be obtained from the Company.
Orders for shares received by the Company prior to the close of the New York
Stock Exchange composite tape on each day the New York Stock Exchange is open
for trading, will be priced at the net asset value (see SHARE PRICE) computed as
of the close of the New York Stock Exchange composite tape on that day. The
Company reserves the right to reject any subscription at its sole discretion.
Orders received after the close of the New York Stock Exchange composite tape,
or on any day on which the New York Stock Exchange is not open for trading, will
be priced at the close of the New York Stock Exchange composite tape on the next
succeeding day on which the New York Stock Exchange is open for trading.
Upon receipt of the subscription form in good order, the Company will open a
stockholder account in accordance with the investor's registration instructions.
A confirmation statement reflecting the current transaction will be forwarded to
the investor.
WHERE SHOULD I SEND MY SUBSCRIPTION PAYMENT?
Payment for shares purchased should be made by check or money order, made
payable to:
RCM Global Technology Fund
Investors may also wire funds in payment of subscriptions to the following
address. Wired funds should include the following: the stockholder's
registration name and account number with the Company and the name of the Fund.
WIRE TRANSFERS TO:
State Street Bank and Trust Co., Boston, MA
ABA #011-000028
BFN=RCM Global Technology Fund
AC-#5627-594-4
FBO="Name of Stockholder"
Investors may be charged a fee if they effect transactions through a broker or
agent. Your dealer is responsible for forwarding payment promptly to State
Street Bank and Trust Company. The Company reserves the right to cancel any
purchase order for which payment has not been received by the third business day
following the investment.
The Company will issue share certificates of the Fund only for full shares and
only upon the specific request of the stockholder. Confirmation statements
showing transactions in the stockholder's account and a summary of the status of
the account serve as evidence of ownership of shares of the Fund.
CAN I PAY FOR SHARES WITH INVESTMENT SECURITIES?
In its discretion, the Company may accept securities of equal value instead of
cash in payment of all or part of the subscription price for the Fund's shares
offered by this Prospectus. Any such securities (i) will be valued at the close
of the New York
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Stock Exchange composite tape on the day of acceptance of the subscription in
accordance with the method of valuing the Fund's portfolio described under HOW
ARE SHARES PRICED? below; (ii) will have a tax basis to the Fund equal to such
value; (iii) must not be "restricted securities"; and (iv) must be permitted to
be purchased in accordance with the Fund's investment objective and policies set
forth in this Prospectus and must be securities that the Fund would be willing
to purchase at that time. Prospective stockholders considering this method of
payment should contact the Company in advance to discuss the securities in
question and the documentation necessary to complete the transaction.
HOW ARE SHARES PRICED?
The net asset value of each share of the Fund on which the subscription and
redemption prices are based is determined by the sum of the market value of the
securities and other assets owned by the Fund less its liabilities, computed in
accordance with the Company's Articles of Incorporation and Bylaws. The net
asset value of a share is the quotient obtained by dividing the net assets of
the Fund (i.e., the value of the assets of the Fund less its liabilities,
including expenses payable or accrued but excluding capital stock and surplus)
by the total number of shares of the Fund outstanding. The net asset value of
the Fund's shares will be calculated as of the close of regular trading on the
New York Stock Exchange, currently 4:00 p.m. Eastern Time on each day that the
New York Stock Exchange is open for trading.
-------------------------------
STOCKHOLDER SERVICES
----------------------------
WHAT SERVICES ARE PROVIDED TO STOCKHOLDERS?
AUTOMATIC REINVESTMENT. Each income dividend and capital gains distribution, if
any, declared by the Fund will be reinvested in full and fractional shares based
on the net asset value as determined on the payment date for such distributions,
unless the stockholder or his or her duly authorized agent has elected to
receive all such payments or the dividend or distribution portions thereof in
cash. Changes in the manner in which dividend and distribution payments are made
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
dividend and distribution election will remain in effect until the Company is
notified by the stockholder in writing to the contrary.
ACCOUNT STATEMENTS. Your account is opened in accordance with your registration
instruction. Transactions in the account, such as additional investments and
dividend reinvestments, will be reflected on regular confirmation statements
from the Company.
REPORTS TO STOCKHOLDERS. The fiscal year of the Fund ends on December 31 of
each year. The Fund will issue to its stockholders semi-annual and annual
reports; each annual report will contain a schedule of the Fund's portfolio
securities, audited annual financial statements, and information regarding
purchases and sales of securities during the period covered by the report as
well as information concerning the Fund's performance in accordance with rules
promulgated by the SEC. In addition, stockholders will receive quarterly
statements of the status of their accounts reflecting all transactions having
taken place within that quarter. The federal income tax status of stockholders'
distributions will also be reported to stockholders after the end of each fiscal
year.
STOCKHOLDER INQUIRIES. Stockholder inquiries should be addressed to the Company
at the address or telephone number on the front page of this Prospectus.
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<PAGE>
-------------------------------
REDEMPTION OF SHARES
----------------------------
HOW DO I REDEEM MY SHARES?
Subject only to the limitations described below, the Company will redeem the
shares of the Fund tendered to it, as described below, at a redemption price
equal to the net asset value per share as next computed following the receipt of
all necessary redemption documents. Because the net asset value of the Fund's
shares will fluctuate as a result of changes in the market value of securities
owned, the amount a stockholder receives upon redemption may be more or less
than the amount paid for those shares.
Redemption payments will be made wholly in cash unless the Company's Board of
Directors believes that unusual 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 whole or in part in
portfolio securities.
WHAT IS THE REDEMPTION FEE?
The Fund assesses a 1.5% redemption fee on redemptions of shares made within 12
months of their purchase (other than shares acquired by reinvestment of income
dividends and capital gain distributions). The fee is deducted from the
redemption proceeds and is paid directly to the Fund, not to the Investment
Manager. It is not a contingent deferred sale charge. For purposes of
determining whether the fee is payable, redemptions are deemed to be made first
from shares acquired by reinvestment of dividends and distributions, and then in
the order the shares were purchased by the stockholder.
The purpose of the redemption fee is to allocate transaction costs associated
with redemptions to the stockholders making those redemptions, thus insulating
other stockholders from such costs. The fees represent the Company's estimate of
these costs, which include brokerage costs, the decrease in market prices which
may result when the Fund sells thinly traded stocks in its portfolio, and the
effect of the "bid-ask" spread (which may be wide on many foreign stocks).
Without the redemption fee, the Fund would not be reimbursed for these costs,
which it incurs directly, resulting in reduced investment performance for all
stockholders. With the fee, the transaction costs of selling stocks are borne
not by all existing stockholders, but by those short-term stockholders making
the redemption.
Stockholders may also be charged a fee if they effect transactions through a
broker or agent.
WHEN WILL I RECEIVE MY REDEMPTION PAYMENT?
PAYMENT FOR SHARES. Payment for shares redeemed will be made within seven days
after receipt by the Company of: (i) a written request for redemption, signed by
each registered owner or his or her duly authorized agent exactly as the shares
are registered, which clearly identifies the exact names in which the account is
registered, the account number and the number of shares or the dollar amount to
be redeemed; (ii) stock certificates for any shares to be redeemed which are
held by the stockholder; and (iii) the additional documents required for
redemptions by corporations, executors, administrators, trustees and guardians.
Redemptions will not become effective until all documents in the form required
have been received by the Company. A stockholder in doubt as to what documents
are required should contact the Company.
If the Company is requested to redeem shares for which it has not yet received
payment, the Company will delay or cause to be delayed the mailing of a
redemption check until such time as it has assured itself that payment has been
collected, which may take up to 15 days. Delays in the receipt of redemption
proceeds may be avoided if shares are purchased through the use of
wire-transferred funds or other methods which do not entail a clearing delay in
the Fund receiving "good funds" for its use.
Upon execution of the redemption order, a confirmation statement will be
forwarded to the stockholder indicating the number of shares sold and the
proceeds thereof. Proceeds of all redemptions will be paid by check or federal
funds wire no later than seven days subsequent to execution of the redemption
order except as may be provided below.
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<PAGE>
SUSPENSION OF REDEMPTIONS. The right of redemption may not be suspended or the
date of payment upon redemption postponed for more than seven days after shares
are tendered for redemption, except for any period during which the New York
Stock Exchange is closed (other than customary weekend or holiday closing) or
during which the SEC determines that trading thereon is restricted, or for any
period during which 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, or for such other periods as
the SEC may by order permit for the protection of stockholders.
-------------------------------
INVESTMENT RESULTS
----------------------------
WILL THE FUND REPORT ITS PERFORMANCE?
The Fund may, from time-to-time, include information on its investment results
and/or comparisons of its investment results to various unmanaged indices (which
generally do not reflect deductions for administrative and management costs and
expenses) indexes prepared by consultants, mutual fund ranking entities, and
financial publications, or results of other mutual funds or groups of mutual
funds, in advertisements or in reports furnished to present or prospective
investors. Investment results will include information calculated on a total
return basis. Such indexes and rankings may include the following, among others:
1. The Standard & Poor's 500 Index.
2. The Russell Midcap Index.
3. The Lipper Science & Technology Fund Index.
4. The Hambrecht & Quist Technology Index.
5. Data and mutual fund rankings published or prepared by Lipper Analytical
Services, Inc. and Morningstar, which rank mutual funds by overall
performance, investment objectives, and assets.
-------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES
----------------------------
WHAT DIVIDENDS DOES THE FUND PAY?
It is the intention of the Fund to distribute to its stockholders all of each
fiscal year's net investment income and net realized capital gains, if any, on
the Fund's investment portfolio. The amount and time of any such distribution
must necessarily depend upon the realization by the Fund of income and capital
gains from investments. Any dividend or distribution received by a stockholder
on shares of the Fund shortly after the purchase of such shares by the
stockholder will have the effect of reducing the net asset value of such shares
by the amount of such dividend or distribution.
WHAT TAXES WILL I PAY ON FUND DIVIDENDS?
Dividends generally are taxable to stockholders at the time they are paid.
However, dividends declared in October, November and December by the Fund and
made payable to stockholders of record in such a month are treated as paid and
are thereby taxable as of December 31, provided that the Fund pays the dividend
no later than January 31 of the following year.
Federal law requires the Company to withhold 31% of income from dividends,
capital gains distributions and/or redemptions that occur in certain stockholder
accounts if the stockholder has not properly furnished a certified correct
Taxpayer Identification Number and has not certified that withholding does not
apply. Amounts withheld are applied to the stockholder's federal tax liability,
and a refund may be obtained from the Internal Revenue Service if withholding
results in an overpayment of taxes. Under the Code, distributions of net
investment income and net long-term capital gains by the Fund to a stockholder
who, as to the United States, is a nonresident alien individual, nonresident
alien fiduciary of a trust or estate, foreign corporation, or foreign
partnership may also be subject to U.S. withholding tax.
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<PAGE>
WILL THE FUND ALSO PAY TAXES?
The Company intends to qualify the Fund as a "regulated investment company"
under Subchapter M of the Code. By complying with the applicable provisions of
the Code, the Fund will not be subject to federal income taxes with respect to
net investment income and net realized capital gains distributed to its
stockholders.
The Fund may be required to pay withholding and other taxes imposed by foreign
countries, generally at rates from 10% to 40%, which would reduce the Fund's
investment income. Tax conventions between certain countries and the United
States may reduce or eliminate such taxes. The Fund may elect to "pass through"
to its stockholders the amount of foreign income taxes paid by the Fund, if such
election is deemed to be in the best interests of stockholders. If this election
is made, stockholders will be required to include in their gross income their
pro rata share of foreign taxes paid by the Fund, and will be able to treat such
taxes as either an itemized deduction or a foreign credit against U.S. income
taxes (but not both) on their tax returns. If the Fund does not make that
election, stockholders will not be able to deduct their pro rata share of such
taxes in computing their taxable income and will not be able to take their share
of such taxes as a credit against their U.S. income taxes.
WHEN WILL I RECEIVE TAX INFORMATION?
Each stockholder will receive, at the end of each fiscal year of the Company,
full information on dividends, capital gains distributions and other reportable
amounts with respect to shares of the Fund for tax purposes, including
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.
The foregoing is a general abbreviated summary of present U.S. federal income
tax laws and regulations applicable to dividends and distributions by the Fund.
Investors 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 distributions received.
-------------------------------
GENERAL INFORMATION
----------------------------
WHAT OTHER INFORMATION SHOULD I KNOW ABOUT
THE FUND?
The Company was incorporated in Maryland on September 7, 1995. The authorized
capital stock of the Company is 1,000,000,000 shares of capital stock (par value
$.0001 per share) of which 50,000,000 shares have been designated as shares of
RCM Global Technology Fund. The Company's Board of Directors may, in the future,
authorize the issuance of other series of capital stock representing shares of
additional investment portfolios or funds.
All shares of the Company have equal voting rights and will be voted in the
aggregate, and not by series, except where voting by series is required by law
or where the matter involved affects only one series. There are no conversion or
preemptive rights in connection with any shares of the Company. All shares of
the Fund when duly issued will be fully paid and non-assessable. The rights of
the holders of shares of the Fund may not be modified except by vote of the
majority of the outstanding shares of the Fund. Certificates are not issued
unless requested and are never issued for fractional shares. Fractional shares
are liquidated when an account is closed. As of December 19, 1995, there were
10,000 shares of the Fund outstanding, which were beneficially owned by Walter
C. Price, Jr. and Huachen Chen, principals of the Investment Manager, who are
the primary portfolio managers of the Fund.
Shares of the Company have non-cumulative voting rights, which means that the
holders of more than 50% of all series of the Company's shares voting for the
election of directors can elect 100% of the directors if they wish to do so. In
such event, the holders of the remaining less that 50% of the shares voting for
the election of directors will not be able to elect any person to the Board of
Directors.
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<PAGE>
The Company is not required to hold a meeting of stockholders in any year in
which the 1940 Act does not require a stockholder vote on a particular matter,
such as election of directors. The Company will hold a meeting of its
stockholders for the purpose of voting on the question of removal of one or more
directors if requested in writing by the holders of at least 10% of the
Company's outstanding voting securities, and will assist in communicating with
its stockholders as required by Section 16(c) of the 1940 Act.
This Prospectus does 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 Commission. The registration statements and related forms may be
inspected at the Public Reference Room of the Securities and Exchange Commission
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.
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<PAGE>
RCM EQUITY FUNDS, INC.
RCM GLOBAL TECHNOLOGY FUND
Four Embarcadero Center, Suite 3000
San Francisco, California 94111
(800) 726-7240
-------------------------------
STATEMENT OF ADDITIONAL INFORMATION
----------------------------
December , 1995
RCM Global Technology Fund (the "Fund") is a non-diversified, no-load series of
RCM Equity Funds, Inc. (the "Company"), an open-end management investment
company. The Fund's investment manager is RCM Capital Management, a California
Limited Partnership (the "Investment Manager").
This Statement of Additional Information is not a prospectus, but contains
information in addition to and more detailed than that set forth in the Fund's
Prospectus (the "Prospectus") and should be read in conjunction with such
Prospectus. The Prospectus may be obtained without charge by calling or writing
the Company at the address and phone number above.
-------------------------------
TABLE OF CONTENTS
----------------------------
<TABLE>
<CAPTION>
PAGE
<S> <C>
Investment Objective and Policies.................................................... B-2
Investment and Risk Considerations................................................... B-10
Investment Restrictions.............................................................. B-15
Execution of Portfolio Transactions.................................................. B-17
Directors and Officers............................................................... B-19
The Investment Manager............................................................... B-21
How to Purchase Shares............................................................... B-23
Net Asset Value...................................................................... B-23
Redemption of Shares................................................................. B-24
Dividends, Distributions and Tax Status.............................................. B-24
Investment Results................................................................... B-27
Description of Capital Stock......................................................... B-28
Additional Information............................................................... B-28
Statement of Assets and Liabilities.................................................. B-30
</TABLE>
<PAGE>
-------------------------------
INVESTMENT OBJECTIVE AND POLICIES
----------------------------
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 Fund's investment
objective, the Investment Manager will allocate the Fund's assets among
securities of countries and in currency denominations where opportunities for
meeting the Fund's investment objective are expected 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 for capital
appreciation, 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 a substantial
portion of its assets in securities of companies that are organized or
headquartered in developed foreign countries, including the developed foreign
countries listed in the Prospectus. At the discretion of the Investment Manager,
the Fund may also invest in securities of companies that are organized or
headquartered in other 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 are
subject to periods of economic or political instability. For example, efforts by
the member countries of the European Community to eliminate internal barriers to
the free movement of goods, persons, services and capital have encountered
opposition arising from the conflicting economic, political and cultural
interests and traditions of the member countries and their citizens. The
reunification of the former German Democratic Republic (East Germany) with the
Federal Republic of Germany (West Germany) and other political and social events
in Europe have caused considerable economic and social dislocations. Such events
can materially affect securities markets and have also disrupted the
relationship of such currencies with each other and with the U.S. dollar.
Similarly, events in the Japanese economy and social developments may affect
Japanese securities and currency markets, as well as the relationship of the
Japanese Yen to the U.S. dollar. Future political, economic and social
developments can be expected to produce continuing effects on securities and
currency markets.
The Japanese currency is the Yen (as of September 30, 1995: Y99.72 = $1 U.S.).
Gross domestic product ("GDP") was Y471 trillion ($4,651 billion) in 1994. The
current account balance in 1994 was a surplus of Y13.2 trillion ($129 billion),
which was 2.8% of the GDP. The annual rate of inflation in 1994 was 0.7%. The
average rate of inflation for the three years ending 1994 was 1.2%. Japan is a
highly industrialized nation with a population in excess of 120 million people.
At the end of 1993 and 1994, total market value of shares listed on the Tokyo
stock exchange was $2,881 billion and $3,553 billion, respectively, which was an
increase of 23.3%. The Nikkei stock average, which is calculated on a formula
similar to that used for the Dow Jones average in the United States, was
16,924.95, 17,417.24 and 19,723 at year-end 1992, 1993 and 1994, respectively.
INVESTMENT IN EMERGING MARKET 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. (See INVESTMENT IN DEVELOPED
FOREIGN COUNTRIES above.) As their economies grow and their markets grow and
mature, some countries that currently may be characterized by the Investment
Manager as emerging market countries may be deemed by the Investment Manager to
be developed foreign countries. In the event that the Investment Manager deems a
particular country to be a developed foreign country, any investment in
securities issued by that country's government or by an issuer located in that
country would not be subject to the Fund's overall limitation on investments in
emerging market countries.
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B-2
<PAGE>
Securities of issuers organized or headquartered in emerging market countries
may, at times, offer excellent opportunities for 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
INVESTMENT AND 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 equity 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 the Fund's 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.
INVESTMENT CRITERIA
In evaluating particular investment opportunities, the Investment Manager may
consider, in addition to the factors described in the Prospectus, 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.
CURRENCY MANAGEMENT
Securities purchased by the Fund may be denominated in U.S. dollars, foreign
currencies, or multinational currency units such as the European Currency Unit,
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 to enhance
its total return, although it presently does not intend 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 to engage in currency transactions may be limited by the
requirements of the Internal Revenue Code of 1986 for qualification as a
regulated investment company and the Fund's intention to continue to qualify as
such. (See DIVIDENDS, DISTRIBUTIONS AND TAX STATUS.) The Fund's ability and
decisions to purchase or sell portfolio securities also may be affected by the
laws or regulations in particular countries relating to convertability and
repatriation of assets. Because the shares of the Fund are redeemable in U.S.
dollars each day the Fund determines its 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 strategy, 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,
- --------------------------------------------------------------------------------
B-3
<PAGE>
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 market in forward foreign currency exchange
contracts, currency swaps and other privately negotiated currency instruments
offers less protection against defaults by the other party to such instruments
than is available for currency instruments traded on an exchange. To the extent
that a substantial portion of 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 for hedging purposes or to seek to
increase total return when the Investment Manager anticipates that the 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 foreign currency exchange contracts are considered speculative.
In addition, the Fund may enter into forward foreign currency exchange 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 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 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 dividends
from such securities, due to a decline in the value of foreign currencies
against the U.S. dollar. 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 foreign currency exchange contract to sell
foreign currency to increase total return, the Fund will place cash, U.S.
Government securities, or other liquid high grade debt obligations in a
segregated account 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 securities placed in the segregated account declines,
additional assets will be placed in the account so that the value of the account
will equal the amount of the Fund's commitment with respect to the contract.
Forward contracts are subject to the risk that the counterparty to such contract
will default on its obligations. Since a forward foreign currency exchange
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. The Fund will enter into such
transactions only with primary dealers or others deemed creditworthy by the
Investment Manager.
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 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
- --------------------------------------------------------------------------------
B-4
<PAGE>
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
foreign currencies at disadvantageous exchange rates, thereby incurring losses.
The purchase of an option on foreign currency may constitute an effective hedge
against exchange rate fluctuations; 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 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 purchased or sold to increase total return, options
on currencies are considered speculative.
When the Fund writes a call option on a foreign currency, an amount of cash,
U.S. Government securities, or other liquid high-grade debt obligations equal to
the market value of its obligations under the option will be deposited by the
Fund in a segregated account with 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 and liquid, high grade debt 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 held in a segregated
account consisting of cash or liquid, high grade debt securities, the Fund 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 currency swap market has grown substantially in recent years, with a large
number of banks and investment banking firms acting both as principals and
agents utilizing standard swap documentation, and the Investment Manager has
determined that the currency swap market has become relatively liquid. However,
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 would be less favorable than it would have been if this
investment technique were not used.
OPTIONS TRANSACTIONS
The Fund may purchase listed covered put and call options on stocks 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. In addition, the Fund will not purchase or sell 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 are traded on U.S. and foreign exchanges. A put option is
covered if the writer maintains cash or cash equivalents equal to the exercise
price in a segregated account. 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.
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<PAGE>
PUT OPTIONS. Purchasing put options may be used as a portfolio investment
strategy when the 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 stock 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 put's strike price 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. The purchase of a call option is a type of insurance policy to
hedge against losses that could occur 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 thereafter falls, the price the Fund pays for the security
will in effect be increased by the premium paid for the call option less any
amount for which such option may be sold.
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 option.
SHORT SALES
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.
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
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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 placing in a segregated
account (not with the broker) cash or U.S. Government 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 U.S. Government 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 U.S. Government 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.
The Fund's ability to enter into short sales transactions is limited by the
requirements of the Internal Revenue Code with respect to the Fund's
qualifications as a regulated investment company. (See DIVIDENDS, DISTRIBUTIONS
AND TAX STATUS.)
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 placing in a segregated
account cash or U.S. Government 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 would create liabilities or
require collateral deposits and segregation of assets aggregating more than 25%
of the value of the Fund's total assets.
FUTURES TRANSACTIONS
The Fund may purchase and sell currency futures contracts and futures options,
in accordance with the strategies more specifically described below, to hedge
against currency exchange rate fluctuations or to enhance returns.
FUTURES CHARACTERISTICS. A futures contract is an agreement between two parties
(buyer and seller) to take or make delivery of an amount of cash equal to the
difference between the value of currency at the close of the last trading day of
the contract and the price at which the currency contract was originally
written. In the case of futures contracts traded on U.S. exchanges, the exchange
itself or an affiliated clearing corporation assumes the opposite side of each
transaction (i.e., as buyer or seller). A futures contract may be satisfied or
closed out by payment of the change in the cash value of the currency. No
physical delivery of the underlying currency 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 price of the underlying
currency 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 currency futures contract and the price
of the underlying currency has risen, that 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 currency futures
contract and the price of the underlying currency has declined, the position
would be less valuable and the Fund would be required to make a variation margin
payment to the FCM. At any time prior to expiration of the futures contract, the
Fund may elect to close the position by taking an identical opposite position
which will operate to
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terminate the Fund's position in the futures contract. A final determination of
variation margin is then made, additional cash is required to be paid by or
released to the Fund, and the Fund realizes a loss or a gain.
CHARACTERISTICS OF FUTURES OPTIONS. The Fund may also purchase call options and
put options on currency futures contracts ("futures options"). A futures option
gives the holder the right, in return for the premium paid, to assume a long
position (in the case of a call) or short position (in the case of a put) in a
futures contract at a specified exercise price prior to the expiration of the
option. Upon exercise of a call option, the holder acquires a long position in
the futures contract and the writer is assigned the opposite short position. In
the case of a put option, the opposite is true. A futures option may be closed
out (before exercise or expiration) by an offsetting purchase or sale of a
futures option of the same series.
PURCHASE OF FUTURES. The Investment Manager may purchase a currency futures
contract when it anticipates the subsequent purchase of particular securities
and has the necessary cash, but expects the currency exchange rates then
available in the applicable market to be less favorable than rates that are
currently available, or to attempt to enhance return when it anticipates that
future currency exchange rates will be more favorable than current rates.
SALE OF FUTURES. The Investment Manager may sell a currency futures contract to
hedge against an anticipated decline in foreign currency rates that would
adversely affect the dollar value of the Fund's portfolio securities denominated
in such currency, or may sell a currency futures contract in one currency to
hedge against fluctuations in the value of securities denominated in a different
currency if there is an established historical pattern or correlation between
the two currencies.
PURCHASE OF PUT OPTIONS ON FUTURES. The purchase of a put option on a currency
futures contract is analogous to the purchase of a put on an individual stock,
where an absolute level of protection from price fluctuation is sought below
which no additional economic loss would be incurred by the Fund. The purchase of
a put option on a currency futures contract can be used to hedge against
unfavorable movements in currency exchange rates, or to attempt to enhance
returns in contemplation of movements in such rates.
PURCHASE OF CALL OPTIONS ON FUTURES. The purchase of a call option on a
currency futures contract represents a means of obtaining temporary exposure to
favorable currency exchange rate movements with risk limited to the premium paid
for the call option. It is analogous to the purchase of a call option on an
individual stock, which can be used as a substitute for a position in the stock
itself. Depending on the pricing of the option compared to either the futures
contract upon which it is based, or to the price of the underlying currency
itself, it may be less risky, because losses are limited to the premium paid for
the call option, when compared to the ownership of the underlying currency. Like
the purchase of a currency futures contract, the Fund would purchase a call
option on a currency futures contract to hedge against an unfavorable movement
in exchange rates.
LIMITATIONS ON PURCHASE AND SALE OF FUTURES AND FUTURES OPTIONS. The Fund may
not purchase or sell futures contracts or purchase futures options if,
immediately thereafter, more than 30% of the value of its net assets would be
hedged. In addition, 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 and premiums paid for futures
options would exceed 5% of the market value of the Fund's total assets. In Fund
transactions involving futures contracts, to the extent required by applicable
SEC guidelines, an amount of cash and cash equivalents equal to the market value
of the futures contracts will be deposited by the Fund in a segregated account
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.
TAX TREATMENT. The extent to which the Fund may engage in futures and futures
option transactions may be limited by the requirements of the Internal Revenue
Code of 1986 for qualification as a regulated investment company and the Fund's
intention to continue to qualify as such. See DIVIDENDS, DISTRIBUTIONS AND
TAXES.
REGULATORY MATTERS. The Fund has filed a claim of exemption from registration
as a commodity pool with the Commodity Futures Trading Commission (the "CFTC").
The Fund intends to conduct its futures trading activity in a manner consistent
with that exemption. The Investment
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Manager is registered with the CFTC as both a Commodity Pool Operator and as a
Commodity Trading Advisor.
DEBT SECURITIES
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 Corporation ("Standard & Poor's")
or Baa or higher by Moody's Investor Services, 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.
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.
INVESTMENT IN ILLIQUID SECURITIES
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).
CASH-EQUIVALENT INVESTMENTS
Other than as described below under INVESTMENT RESTRICTIONS, 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 currency
units: 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 Company's 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
Company's 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.
PORTFOLIO TURNOVER
The Fund may invest in securities on either a long-term or short-term basis. The
Fund may invest with the expectation of short-term capital appreciation if the
Investment Manager believes that such action will benefit the Fund's
stockholders. The Fund also may sell securities that have been held on a
short-term basis if the Investment Manager believes that circumstances make the
sale of such securities advisable. This may result in a taxable stockholder
paying higher income taxes than would be the case with investment companies
emphasizing the realization of long-term capital gains. Because the Investment
Manager will purchase and sell securities for the Fund's portfolio without
regard to the length of the holding period for such securities, it is possible
that the Fund's portfolio will have a higher turnover rate than might be
expected for investment companies that invest substantially all of their funds
for long-term capital
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appreciation or generation of current income. Securities in the Fund's portfolio
will be sold whenever the Investment Manager believes it is appropriate to do
so, regardless of the length of time that securities have been held, and
securities may be purchased or sold for short-term profits whenever the
Investment Manager believes it is appropriate or desirable to do so. Turnover
will be influenced by sound investment practices, the Fund's investment
objective, and the need for funds for the redemption of the Fund's shares.
A 150% portfolio turnover rate would occur if the value of purchases or sales of
portfolio securities (whichever is less) for a year (excluding purchases of U.S.
Treasury issues and securities with a maturity of one year or less) were equal
to 150% of the average monthly value of the securities held by the Fund during
such year. As a result of the manner in which turnover is measured, a high
turnover rate could also occur during the first year of Fund operations, and
during periods when the Fund's assets are growing or shrinking.
INVESTMENT RESTRICTIONS
In making purchases within the foregoing policies, the Fund and the Investment
Manager will be subject to all of the restrictions referred to under INVESTMENT
RESTRICTIONS. If a percentage restriction on an investment or utilization of
assets set forth above or under INVESTMENT RESTRICTIONS is adhered to at the
time the investment is made, a later change in percentage resulting from
changing value or a similar type of event will not be considered a violation of
the Fund's investment policies or restrictions. The Fund may exchange
securities, exercise conversions or subscription rights, warrants or other
rights to purchase common stock or other equity securities and may hold, except
to the extent limited by the 1940 Act, any such securities so acquired without
regard to the Fund's investment policies and restrictions.
-------------------------------
INVESTMENT AND RISK CONSIDERATIONS
----------------------------
INVESTMENTS IN FOREIGN SECURITIES
GENERALLY
Investments in foreign equity securities may offer investment opportunities and
potential benefits not available from investments solely in securities of U.S.
issuers. Such benefits may include 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 stock markets that do not necessarily move in a manner parallel to U.S.
stock markets.
At the same time, however, investing in foreign equity securities involves
significant risks, some of which are not typically associated with investing in
securities of U.S. issuers. For example, the value of investments in such
securities may fluctuate based on changes in the value of one or more foreign
currencies relative to the U.S. dollar, and a change in the exchange rate of one
or more foreign currencies could reduce the value of certain portfolio
securities. Currency exchange rates may fluctuate significantly over short
periods of time, and are generally determined by the forces of supply and demand
and other factors beyond 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
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withholding of dividends 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 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 objective.
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 obligations of supranational organizations involves
additional risks. Such organizations' debt obligations 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.
DEPOSITORY RECEIPTS
In many respects, the risks associated with investing in depository receipts are
similar to the risks associated with investing in foreign equity securities. In
addition, to the extent that the Fund acquires depository receipts through banks
that do not have a contractual relationship with the foreign issuer of the
security underlying the depository receipts to issue and service depository
receipts, there may be an increased possibility that the Fund would not become
aware of and be able to respond to corporate actions, such as stock splits or
rights offerings, involving the foreign issuer in a timely manner.
The information available for American Depository 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 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 Depository Receipts
("EDRs") and Global Depository 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 depository receipt will be treated as an illiquid security for purposes of the
Fund's restriction on the purchases of such securities unless the depository
receipt is convertible into cash by the Fund within seven days.
EMERGING MARKET SECURITIES
There are special risks associated with investments in emerging market
securities that are in addition to the usual risks of investing in securities of
issuers
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located in developed foreign markets around the world, and investors are
strongly advised to consider those risks carefully. The securities markets of
emerging market countries are substantially smaller, less developed, less
liquid, and more volatile than the securities markets of the 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 in 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 return 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 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 characteristic of more developed countries.
Unanticipated political or social developments may affect the value of the
Fund's investments in those countries and the availability of additional
investments in those countries.
INVESTMENTS IN SMALLER COMPANIES
Investing 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. 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 by the Fund in smaller capitalization companies may be
regarded as speculative.
The Fund will not invest more than 5% of the value of its total assets in
securities issued by companies (including predecessors) that have operated for
less than three years. The securities of such companies 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.
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CONVERTIBLE SECURITIES
Investment in convertible securities involves certain risks. The value of a
convertible security is a function of its "investment value" (determined by its
yield in comparison with the yields of other securities of comparable maturity
and quality that do not have a conversion privilege) and its "conversion value"
(the security's worth, at market value, if converted into the underlying stock).
If the conversion value is low relative to the investment value, the price of
the convertible security will be governed principally by its yield, and thus may
not decline in price to the same extent as the underlying stock; to the extent
the market price of the underlying common stock approaches or exceeds the
conversion price, the price of the convertible security will be influenced
increasingly by its conversion value. A convertible security held by 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.
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
and 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
securities; unusual or unforeseen circumstances may interrupt normal operations
on an exchange; the facilities of an exchange or clearing corporation may not at
all times be adequate to handle current trading volume; or one or more exchanges
could, for economic or other reasons, decide, or be compelled at some future
date, to discontinue the trading of options (or a particular class or series of
options), in which event the secondary market on that exchange (or in that class
or series of options) would cease to exist, although outstanding options that
had been issued by a clearing corporation as a result of trades on that exchange
would continue to be exercisable in accordance with their terms.
A decision as to whether, when and how to use options involves the exercise of
skill and judgment, and even a well-conceived transaction may be unsuccessful to
some degree because of market behavior or unexpected events. The extent to which
the Fund may enter into options transactions may be limited by the Internal
Revenue Code requirements for qualification as a regulated investment company.
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 in the Fund as a
hedging device. One risk
- --------------------------------------------------------------------------------
B-13
<PAGE>
arises because the correlation between movements in the price of the future and
movements in the price of the currencies which are the subject of the hedge is
not always perfect. The price of the future may move more than, or less than,
the price of the currencies being hedged. If the price of the future moves less
than the price of the currencies which are the subject of the hedge, the hedge
will not be fully effective but, if the price of the currencies being hedged has
moved in an unfavorable direction, the Fund would be in a better position than
if it had not hedged at all. If the price of the currencies 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 future moves more than
the price of the currencies, the Fund will experience either a loss or a gain on
the future which will not be completely offset by movements in the price of the
currencies which are the subject of the hedge.
To compensate for the imperfect correlation of movements in the price of
currencies 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 dollar amount
of currencies being hedged, if the historical volatility of the price of such
currencies has been greater than the historical volatility of the currencies.
Conversely, the Fund may buy or sell fewer futures contracts if the historical
volatility of the price of the currencies being hedged is less than the
historical volatility of the currencies.
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 may
result in immediate and substantial loss, as well as 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 currencies and sold the instrument after the decline.
When futures are purchased 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 in an orderly fashion, it is possible that the currency
exchange rate may move in a favorable manner instead; if the Fund then concludes
not to invest in stock at that time because of concern as to possible further
market decline or for other reasons, the Fund will realize a loss on the futures
contract that is not offset by a reduction in the price of securities purchased.
In addition to the possibility that there may be an imperfect correlation, or no
correlation at all, between movements in the futures and the currencies which
are the subject of the hedge, the price of futures contracts may not correlate
perfectly with movement in the currency due to certain market distortions.
First, all participants in the futures market are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin deposit
requirements, investors may close futures contracts through offsetting
transactions. This practice could distort the normal relationship between the
currency and futures markets. Second, from the point of view of speculators, the
deposit requirements in the futures market may be less onerous than margin
requirements in the currency market. Therefore, increased participation by
speculators in the futures market also may cause temporary price distortions.
Due to the possibility of price distortion in the futures market and because of
the imperfect correlation between movements in the currency and movements in the
price of currency futures, a correct forecast of general currency trends by the
Investment Manager still may not result in a successful hedging transaction over
a very short time frame.
Futures exchanges may limit the amount of fluctuation permitted in certain
futures contract prices during a single trading day. Once the daily limit has
been reached, no more trades may be made on that day at a price beyond the
limit. The daily limit governs only price movements during a particular trading
day and therefore does not limit potential losses, because the limit may prevent
the liquidation of unfavorable positions.
Compared to the use of futures contracts, the purchase of options on futures
contracts involves less potential risk to the Fund because the maximum amount at
risk is the premium paid for the options (plus transaction costs). However,
there may be circumstances when the use of an option on a futures contract would
result in a loss to the Fund when the use of a futures contract would not, such
as when there is no movement in the level of an index. In addition, daily
changes in the value of the option due to changes in the value of the underlying
futures contract are reflected in the net asset value of the Fund.
- --------------------------------------------------------------------------------
B-14
<PAGE>
The Fund will only enter into futures contracts or purchase futures options that
are standardized and traded on a U.S. or foreign exchange or board of trade, or
similar entity, or quoted on an automated quotation system. However, there is no
assurance that a liquid secondary market on an exchange or board of trade will
exist for any particular futures contract or futures option or at any particular
time. In such event, it may not be possible to close a futures position, and, in
the event of adverse price movements, the Fund would continue to be required to
make daily cash payments of variation margin. In the event futures contracts
have been used to hedge currencies, an increase in the price of the currencies,
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
currency will, in fact, correlate with the movements in the futures contract and
thus provide an offset to losses on a futures contract.
Successful use of futures by the Fund for hedging purposes or to enhance returns
is subject to the Investment Manager's ability to predict correctly movements in
the direction of the currency markets. For example, if the Fund purchased
currency futures contracts with the intention of profiting from a favorable
change in currency exchange rates, and the change was unfavorable, the Fund
would incur a loss, and might have to sell securities to meet daily variation
margin requirements at a time when it might be disadvantageous to do so. The
Investment Manager and its predecessor have been actively engaged in the
provision of investment supervisory services for institutional and individual
accounts since 1970, but the skills required for the successful use of futures
and options on futures are different from those needed to select portfolio
securities, and the Investment Manager has limited prior experience in the use
of futures or options techniques in the management of assets under its
supervision.
OTHER RISK CONSIDERATIONS
Investment in illiquid securities involves potential delays on resale as well as
uncertainty in valuation. Limitations on resale may have an adverse effect on
the marketability of portfolio securities, and 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 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 on
the collateral by the Fund may be delayed or limited. Similarly, when the Fund
engages in when-issued, reverse repurchase, forward commitment and delayed
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.
-------------------------------
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. Invest more than 25% the value of its total assets in the securities of
companies primarily engaged in any one industry (other than the United
States of America, its agencies and instrumentalities);
2. Acquire more than 10% of the outstanding voting securities, or 10% of all of
the securities, of any one issuer;
3. Invest in companies for the purpose of exercising control or management;
- --------------------------------------------------------------------------------
B-15
<PAGE>
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 accounts are considered to be borrowings. The Fund
will not mortgage, pledge, hypothecate, or in any other manner transfer as
security for an indebtedness any of its assets. This investment restriction
shall not prohibit the Fund from engaging in futures contracts, futures
options, forward foreign currency exchange transactions, and currency
options;
5. Purchase securities on margin, but it may obtain such short-term credit from
banks as may be necessary for the clearance of purchases and sales of
securities;
6. Make loans of its funds or assets to any other person, which shall not be
considered as including: (i) the purchase of a portion of an issue of
publicly distributed debt securities, (ii) the purchase of bank obligations
such as certificates of deposit, bankers' acceptances and other short-term
debt obligations, (iii) entering into repurchase agreements with respect to
commercial paper, certificates of deposit and obligations issued or
guaranteed by the U. S. Government, its agencies or instrumentalities, and
(iv) the loan of portfolio securities to brokers, dealers and other
financial institutions where such loan is callable by the Fund at any time
on reasonable notice and is fully secured by collateral in the form of cash
or cash equivalents. The Fund will not enter into repurchase agreements with
maturities in excess of seven days if immediately after and as a result of
such transaction the value of the Fund's holdings of such repurchase
agreements exceeds 10% of the value of the Fund's total assets;
7. Act as an underwriter of securities issued by other persons, except insofar
as it may be deemed an underwriter under the Securities Act of 1933 in
selling portfolio securities, or invest more than 15% of the value of its
net assets in securities that are illiquid;
8. Purchase the securities of any other investment company or investment trust,
except by purchase in the open market where, to the best information of the
Company, no commission or profit to a sponsor or dealer (other than the
customary broker's commission) results from such purchase and such purchase
does not result in such securities exceeding 10% of the value of the Fund's
total assets, or except when such purchase is part of a merger,
consolidation, acquisition of assets, or other reorganization approved by
the Fund's stockholders;
9. Purchase portfolio securities from or sell portfolio securities to the
officers, directors, or other "interested persons" (as defined in the 1940
Act) of the Company, other than otherwise unaffiliated broker-dealers;
10. Purchase commodities or commodity contracts, except that the Fund may
purchase securities of an issuer which invests or deals in commodities or
commodity contracts, and except that the Fund may enter into futures and
options contracts in accordance with the applicable rules of the CFTC. The
Fund has no current intention of entering into commodities contracts except
for currency futures and futures options;
11. Issue senior securities, except that the Fund may borrow money as permitted
by restriction 4 above. This restriction shall not prohibit the Fund from
engaging in short sales, options, futures and foreign currency transactions;
and
12. Purchase or sell real estate; provided that the Fund may invest in readily
marketable securities secured by real estate or interests therein or issued
by companies which invest in real estate or interests therein.
OPERATING POLICIES
The Fund has adopted certain investment restrictions that are not fundamental
policies and may be changed by the Company's 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;
- --------------------------------------------------------------------------------
B-16
<PAGE>
2. Invest more than 5% of the value of its total assets in the securities of
any issuer which has a record of less than three years of continuous
operation (including the operation of any predecessor);
3. Participate on a joint or a joint-and-several basis in any trading account
in securities (the aggregation of orders for the sale or purchase of
marketable portfolio securities with other accounts under the management of
the Investment Manager to save brokerage costs, or to average prices among
them, is not deemed to result in a securities trading account); and
4. Purchase or sell futures or purchase related options if, immediately
thereafter, the sum of the amount of "margin" deposits on the Fund's
existing futures positions and premiums paid for related options entered
into for the purpose of seeking to increase total return would exceed 5% of
the value of the Fund's net assets.
The Fund also is subject to other restrictions under the 1940 Act; however, the
registration of the Company under the 1940 Act does not involve any supervision
by any federal or other agency of the Company's management or investment
practices or policies, other than incident to occasional or periodic compliance
examinations conducted by the SEC staff.
-------------------------------
EXECUTION OF PORTFOLIO TRANSACTIONS
----------------------------
The Investment Manager, subject to the overall supervision of the Company's
Board of Directors, makes 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, and prior performance in serving the Investment Manager
and its clients and other factors affecting the overall benefit to be received
in the transaction. When circumstances relating to a proposed transaction
indicate that a particular broker 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 the individual companies and industries; data
and reports on general market or economic conditions; information concerning
pertinent federal and state legislative and regulatory developments and other
developments that could affect the value of actual or potential investments;
companies in which the Investment Manager has invested or may consider
investing; attendance at meetings with corporate management personnel, industry
experts, 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 available prices and execution,
the Investment Manager may, in circumstances in which two or more brokers are in
a position to offer comparable prices and execution, give preference to a broker
or dealer that has provided investment information to
- --------------------------------------------------------------------------------
B-17
<PAGE>
the Investment Manager. In so doing, the Investment Manager may effect
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
selecting such broker or dealer, the Investment Manager will make a good faith
determination that the amount of commission is reasonable in relation to the
value of the brokerage services and research and investment information
received, viewed in terms of either the specific transaction or the Investment
Manager's overall responsibility to the accounts for which the Investment
Manager exercises investment discretion. The Investment Manager continually
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 it is recognized that the Fund may be charged a commission paid to a
broker or dealer who supplied research services not utilized 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 available prices and 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. It is
anticipated that a substantial portion of all brokerage commissions will be paid
to brokers who supply investment information to the Investment Manager.
The Fund may in some instances invest in foreign and/or U.S. securities that are
not listed on a national securities exchange but are traded in the
over-the-counter market. The 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 price and execution, whether or not that counterparty is the
primary market maker for that security. In all cases, the Investment Manager
will attempt to negotiate the best market price and execution.
As noted below, the limited partner of the Investment Manger is RCM Acquisition,
Inc., a wholly owned, indirect subsidiary of Travelers Group Inc. ("Travelers").
Smith Barney Inc. ("Smith Barney") is a wholly owned subsidiary of Travelers,
and The Robinson-Humphrey Company Inc. ("Robinson-Humphrey") is a wholly owned
subsidiary of Smith Barney. Smith Barney and Robinson-Humphrey are registered
broker-dealers. 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 Smith Barney and Robinson-Humphrey. Accordingly, the
Investment Manager intends to execute brokerage transactions on behalf of the
Fund through Smith Barney and Robinson-Humphrey, when appropriate and to the
extent consistent with applicable laws and regulations.
In all such cases, Smith Barney or Robinson-Humphrey will act as agent for the
Fund, and the Investment Manager will not enter into any transaction on behalf
of the Fund in which Smith Barney or Robinson-Humphrey is acting as principal
for its own account. In connection with such agency transactions, Smith Barney
or Robinson-Humphrey will receive compensation in the form of a brokerage
commission separate from the Investment Manager's management fee. It is the
Investment Manager's policy that such commissions be reasonable and fair when
compared to the commissions received by other brokers in connection with
comparable transactions involving similar securities and that the commissions
paid to Smith Barney or Robinson-Humphrey, as the case may be, 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 trusts, as well as individuals. In
many cases, portfolio transactions 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
- --------------------------------------------------------------------------------
B-18
<PAGE>
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
will be effected only when the Investment Manager believes that to do so will be
in the best interest of the Fund, and the Investment Manager is not obligated to
aggregate orders into larger transactions. These orders generally will be
averaged as to price. When such aggregated transactions occur, the objective
will be to allocate the executions in a manner which is deemed fair and
equitable to each of the accounts involved over time. In making such allocation
decisions, the Investment Manager will use its business judgment and will
consider, among other things, any or all of the following: each client's
investment objectives, guidelines, and restrictions, the size of each client's
order, the amount of investment funds available in each client's account, the
amount already committed by each client to that or similar investments, and the
structure of each client's portfolio. Although the Investment Manager will use
its best efforts to be fair and equitable to all clients, including the Fund,
there can be no assurance that any investment will be proportionately allocated
among clients according to any particular or predetermined standard or criteria.
The Investment Manager will not include orders on behalf of any affiliated or
related entity in any aggregated transaction that includes orders placed on
behalf of the Fund.
-------------------------------
DIRECTORS AND OFFICERS
----------------------------
The names and addresses of the directors and officers of the Company and their
principal occupations and certain other affiliations during the past five years
are given below. Unless otherwise specified, the address of each of the
following persons is Four Embarcadero Center, Suite 3000, San Francisco,
California 94111.
WILLIAM L. PRICE,+ Director, Chairman of the Board, President and Chief
Executive Officer. Mr. Price is a Principal of RCM Capital Management, a
California Limited Partnership ("RCM"), with which he has been associated since
1977.(1) (See THE INVESTMENT MANAGER.) He is also a Principal and Limited
Partner of RCM Limited L.P., a California limited partnership ("RCM Limited"),
the sole general partner of RCM; a Director, Executive Vice President and a
stockholder of RCM General Corporation ("RCM General"), the sole General Partner
of RCM Limited; Director and Executive Vice President of RCM Capital Trust
Company ("RCM Trust"); Director, Chairman of the Board and President of RCM
Capital Funds, Inc. ("Capital Funds"), an open-end management investment company
for which RCM acts as investment manager; a General Partner of RREEF Partners, a
California general partnership comprised of certain limited partners of RCM
Limited (RREEF Partners owns an interest in RREEF America Partners, a real
estate investment manager); and a stockholder of The RREEF Corporation, a real
estate investment manager.
MICHAEL J. APATOFF,+ Director and Chief Operating Officer. Mr. Apatoff is a
Principal and Chief Operating Officer of RCM, with which he has been associated
since 1991. He is also a Principal and Limited Partner of RCM Limited; Director,
Executive Vice President and a stockholder of RCM General; Director, Vice
President and Chief Operating Officer of Capital Funds; Vice President of RCM
Strategic Global Government Fund, Inc. ("RCS"), a closed-end management
investment company for which RCM acts as investment manager; and Director and
Vice President of RCM Trust. From 1986 to 1991 he was an Executive Vice
President and Chief Operating Officer of the Chicago Mercantile Exchange.
WILLIAM S. STACK,+ Director and Vice President. Mr. Stack is a Senior Vice
President, member of the Equity Portfolio Management Team and the Chief
Investment Officer of International Equities of RCM, with which he has been
associated since 1994. He is also a Senior Vice President of RCM Limited;
Director and Senior Vice President of RCM General; and Vice President of Capital
Funds. From October 1985 to August 1994, he was employed by Lexington Management
Corporation,
- --------------------------------------------------------------------------------
B-19
<PAGE>
where he was a Managing Director and Chief Investment Officer and managed mutual
funds and investments in global, international and domestic securities.
DEWITT F. BOWMAN,* Director. Mr. Bowman is Principal of Pension Investment
Consulting, where he has been since February 1994. From February 1989 to January
1994 he was Chief Investment Officer for California Public Employees Retirement
System, a public pension fund. He is also a director of RREEF America REIT,
Inc., a Trustee of Brandes International Fund and a Trustee of the Pacific Gas
and Electric Nuclear Decommissioning Trust.
FRANK P. GREENE,* Director. Mr. Greene is a partner and portfolio manager of
Wood Island Associates, Inc., a registered investment adviser, with which he has
been associated since August 1991. From November 1987 to August 1991 he was a
Senior Vice President and Portfolio Manager of Siebel Capital Management, Inc.,
a registered investment adviser.
WALTER C. PRICE, JR., Vice President. Mr. Price is a Principal of RCM, with
which he has been associated since 1974. He is also a Limited Partner of RCM
Limited; a stockholder of RCM General; a Vice President of Capital Funds; and a
General Partner of RREEF Partners.
HUACHEN CHEN, Vice President. Mr. Chen is a Principal of RCM, with which he has
been associated since 1984. He is also a Limited Partner of RCM Limited, and a
stockholder of RCM General.
SUSAN C. GAUSE, Treasurer and Chief Financial Officer. Ms. Gause is the Director
of Finance at RCM, with which she has been associated since 1994. She is also
Director of Finance of RCM Limited; Treasurer of RCM General; Treasurer and
Chief Financial Officer of Capital Funds and RCS; and Chief Financial Officer,
Treasurer and Trust Officer of RCM Trust. From December 1990 to June 1994, she
was employed by Citicorp Bankers Leasing, where she was Chief Financial Officer
and Controller. From December 1988 to December 1990, she was Assistant
Controller and Accounting Manager at Sierra Capital Realty Advisers.
ANTHONY AIN, Vice President, Secretary and General Counsel. Mr. Ain is a Senior
Vice President, Secretary and General Counsel of RCM, with which he has been
associated since 1992. He is also a Senior Vice President, Secretary and General
Counsel of RCM Limited; Vice President, Secretary and General Counsel of RCM
General; Vice President, Secretary and General Counsel of Capital Funds and RCS;
and Vice President, Secretary and General Counsel of RCM Trust. From September
1988 to April 1992 he was employed by the United States Securities and Exchange
Commission, where he was senior special counsel and counsel to a Commissioner.
CAROLINE M. HIRST, Vice President and Principal Accounting Officer. Ms. Hirst is
Director of Investment Operations of RCM, with which she has been associated
since 1994. She is also Vice President and Principal Accounting Officer of
Capital Funds and RCS and Vice President of RCM Trust. From February 1980 to
April 1994 she was employed by Morgan Grenfell Asset Management, Ltd., where she
served as Head of International Administration.
It is presently anticipated that regular meetings of the Company's Board of
Directors will be held on a quarterly basis. The Company's Audit Committee,
whose present members are DeWitt F. Bowman and Frank P. Greene, meets with the
Company's independent accountants to exchange views and information and to
assist the full Board in fulfilling its responsibilities relating to corporate
accounting and reporting practices. Each director of the Company who is not a
director, officer, principal or employee of the Investment Manager or any
company affiliated with the Investment Manager (an "Outside Director") receives
a fee of $6,000 per year plus $1,000 for each Board meeting attended, and is
reimbursed for travel and other expenses incurred in connection with attending
Board meetings.
- ------------------------
* Member, Audit Committee of the Company.
+ Director who is an "interested person" of the
Company, as defined in Section 2(a)(19) of the 1940 Act.
(1) RCM was established in July, 1986 as the
successor to Rosenberg Capital Management (which was established in 1970). Any
historical references herein to RCM prior to July, 1986 refer to the
operations of Rosenberg Capital Management.
- --------------------------------------------------------------------------------
B-20
<PAGE>
The following table sets forth the aggregate compensation expected to be paid by
the Company for the fiscal year ending December 31, 1996, to the Outside
Directors and the aggregate compensation paid to the Outside Directors for
service on the Company's Board and that of all other funds in the Company
complex (as defined in Schedule 14A under the Securities Exchange Act of 1934):
<TABLE>
<CAPTION>
PENSION OR
RETIREMENT TOTAL COMPENSATION
BENEFITS ACCRUED FROM COMPANY AND
AGGREGATE AS PART OF ESTIMATED ANNUAL COMPANY COMPLEX
COMPENSATION COMPANY BENEFITS UPON PAID TO
NAME FROM COMPANY EXPENSES RETIREMENT DIRECTOR(5*)
- --------------------- ------------- ------------------- --------------------- -------------------
<S> <C> <C> <C> <C>
DeWitt F. Bowman $ 10,000 None N/A $ 10,000
Frank P. Greene $ 10,000 None N/A $ 10,000
</TABLE>
- -------------------------------
* Indicates total number of funds in Company Complex, including the Fund.
-------------------------------
THE INVESTMENT MANAGER
----------------------------
The Company's Board of Directors has overall responsibility for the operation of
the Fund. Pursuant to such responsibility, the Board has approved various
contracts for various financial organizations to provide, among other things,
day to day management services required by the Fund. The Company, on behalf of
the Fund, has retained as the Fund's Investment Manager RCM Capital Management,
a California Limited Partnership, with principal offices at Four Embarcadero
Center, Suite 3000, San Francisco, California 94111. The Investment Manager is
actively engaged in providing investment supervisory services to institutional
and individual clients, and is registered under the Investment Advisers Act of
1940. The Investment Manager was established in July, 1986, as the successor to
the business and operations of Rosenberg Capital Management (established in
1970). The general partner and controlling person of the Investment Manager is
RCM Limited L.P., a California limited partnership, which is the successor in
interest to RCM General, the former general partner. RCM Limited is managed by
its general partner, RCM General Corporation, a California corporation. RCM
Limited has 19 limited partners, all of whom are principals of RCM: Claude N.
Rosenberg, Jr., Michael J. Apatoff, Huachen Chen, Ellen M. Courtien, Edward C.
Derkum, Eamonn F. Dolan, G. Nicholas Farwell, Joanne L. Howard, Stephen Kim,
John A. Kriewall, John D. Leland, Jr., Melody L. McDonald, Lee N. Price, Walter
C. Price, Jr., William L. Price, Jeffrey S. Rudsten, Gary W. Schreyer, Kenneth
B. Weeman, Jr., and Andrew C. Whitelaw.
The sole limited partner of the Investment Manager is RCM Acquisition, Inc., a
wholly owned subsidiary of Travelers Group Inc. ("Travelers"). Travelers, whose
principal executive offices are located at 388 Greenwich Street, New York, New
York 10013, is a financial services holding company engaged, through its
subsidiaries, principally in the business of consumer financing, insurance
services, and investment services. The common stock of Travelers is listed on
the New York Stock Exchange. The limited partner does not have the power to
control the management or operations of the Investment Manager. Pursuant to the
agreement between Primerica Corporation, the predecessor of Travelers, and RCM
Limited, Travelers has an option to acquire the remaining interest of the
Investment Manager from RCM Limited in the year 2000.
See ORGANIZATION AND MANAGEMENT in the Prospectus for a description of the
proposed relationship of the Investment Manager to Dresdner Bank A.G.
The Investment Manager provides the Fund with investment supervisory services
pursuant to an Investment Management Agreement, Power of Attorney and Service
Agreement (the "Management Agreement") dated December 19, 1995. The Investment
Manager manages the Fund's investments, provides various administrative
services, and supervises the Fund's daily business affairs, subject to the
authority of the Board of Directors. In addition, the Investment Manager
provides persons satisfactory to the Company's Board of Directors to act as
officers and employees of the Company. Such officers and employees, as well as
- --------------------------------------------------------------------------------
B-21
<PAGE>
certain directors of the Company, may be principals or employees of the
Investment Manager. The Investment Manager is also the investment manager for
each series of RCM Capital Funds, Inc., an open-end management investment
company consisting of three series, and RCM Strategic Global Government Fund,
Inc., a closed-end management investment company. The Investment Manager also
acts as sub-adviser to Bergstrom Capital Corporation, a closed-end management
investment company.
The Management Agreement was approved by the Fund's initial stockholders on
December 19, 1995, and by the unanimous vote of the Company's Board of Directors
on December 19, 1995. The Management Agreement will continue in effect until
December 19, 1997. It may be renewed from year-to-year thereafter, provided that
any such renewals have been specifically approved at least annually by (i) a
majority of the Company's Board of Directors, including a majority of the
Outside Directors who are not parties to the Management Agreement or interested
persons 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 Outside Directors who are not parties to the contract or
interested persons of any such party.
The Fund has, under the Management Agreement, assumed the obligation for payment
of all of its ordinary operating expenses, including: (a) brokerage and
commission expenses, (b) federal, state, or local taxes incurred by, or levied
on, the Fund, (c) interest charges on borrowings, (d) charges and expenses of
the Fund's custodian, (e) investment advisory fees (including fees payable to
the Investment Manager under the Management Agreement), (f) legal and audit
fees, (g) SEC and "Blue Sky" registration expenses, and (h) 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.
The Investment Manager has voluntarily agreed to limit Fund expenses until at
least December 31, 1996, as described in the Prospectus. In subsequent years,
the Fund has agreed to reimburse the Investment Manager for any such payments to
the extent that the Fund's operating expenses are otherwise below this expense
cap. This obligation will not be recorded on the books of the Fund to the extent
that the total operating expenses of the Fund are at or above 1.75% of the
average daily net assets of the Fund. However, if the total operating expenses
of the Fund fall below 1.75% of average daily net assets, the reimbursement to
the Investment Manager will be accrued by the Fund as a liability. In addition,
the Fund is subject to certain limitations on expenses imposed by state
securities laws. At present, the only expense limitation known to the Company to
be in effect is in California. Under California law, the Fund will be subject to
an annual expense limitation equal to the sum of 2.5% of the first $30 million
of the Fund's average net assets, 2.0% of the next $70 million of average net
assets, and 1.5% of the remaining average net assets. If the Fund's expenses
(excluding interest, brokerage commissions litigation expenses and certain other
items), were to exceed such limit in any fiscal year, the Investment Manager has
agreed to bear the amount of such excess to the extent required by such
limitations.
The 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 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 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.
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<PAGE>
The Management Agreement is terminable without penalty on 60 days' written
notice by a vote of the majority of the Fund's outstanding voting securities, by
a vote of the majority of the Company's Board of Directors, or by the Investment
Manager on 60 days' written notice and will automatically terminate in the event
of its assignment (as defined in the 1940 Act).
-------------------------------
HOW TO PURCHASE SHARES
----------------------------
Shares of the Fund are offered on a continuous basis at the net asset value per
share (next determined after receipt of subscriptions), without any sales or
other charge. The Company has delegated to the Investment Manager the right at
any time to waive, increase, or decrease the minimum requirements applicable to
initial or subsequent investments.
The Company will issue share certificates of the Fund only for full shares and
only upon the specific request of the stockholder. Confirmation statements
reflecting current transactions in stockholder accounts serve as evidence of
ownership of shares of the Fund.
In its discretion, the Company may accept securities of equal value instead of
cash in payment of all or part of the subscription price for the Fund's shares
offered by the Prospectus. Any such securities (a) will be valued at the close
of the New York Stock Exchange composite tape on the day of receipt of the
subscription in accordance with the method of valuing the Fund's portfolio
described under NET ASSET VALUE; (b) will have a tax basis to the Fund equal to
such value; (c) must not be "restricted securities;" and (d) 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.
Prospective stockholders considering this method of payment should contact the
Company in advance to discuss the securities in question and the documentation
necessary to complete the transaction.
-------------------------------
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 business on the day the securities are
being valued. 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 Company's Board of Directors shall determine
in good faith to reflect its fair market value. Readily marketable securities
traded only in the over-the-counter market that are not listed on NASDAQ or
similar foreign reporting service will be valued at the mean bid price, or such
other comparable sources as the Company's Board of Directors deems appropriate
to reflect their fair market 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 Company's Board of Directors deems appropriate to
reflect their fair market 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 Company's Board of Directors in good faith deems
appropriate to reflect their fair market value.
- --------------------------------------------------------------------------------
B-23
<PAGE>
Trading in securities on foreign exchanges and over-the counter markets is
normally completed at times other than the close of the business day in New
York. 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 Fund may use a pricing service approved by the Company's 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
trading 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 Company under the general
supervision of the Company's 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.
-------------------------------
REDEMPTION OF SHARES
----------------------------
Payments will be made wholly in cash unless the Company's 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 the Fund. 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 gains distribution, if any, declared by the
Fund will be reinvested in full and fractional shares based on the net asset
value as determined on the payment date for such distributions, unless the
stockholder or his or her duly authorized agent has elected to receive all such
payments or the dividend or distribution portions thereof in cash. Changes in
the manner in which dividend and distribution payments are made 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 dividend and
distribution election will remain in effect until the Company is notified by the
stockholder in writing to the contrary.
- --------------------------------------------------------------------------------
B-24
<PAGE>
REGULATED INVESTMENT COMPANY. The Company intends to qualify the Fund as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"). The Fund will be treated as a separate fund
for tax purposes and thus the provisions of the Code generally applicable to
regulated investment companies will be applied to the Fund. In addition, net
capital gains, net investment income, and operating expenses will be determined
separately for the Fund. By complying with the applicable provisions of the
Code, the Fund will not be subject to federal income taxes with respect to net
investment income and net realized capital gains distributed to its
stockholders.
To qualify under Subchapter M, the Fund must (i) derive at least 90% of its
gross income from dividends, interest, payments with respect to securities
loans, and gains from the sale or other disposition of stock, securities or
currencies and certain options, futures, forward contracts and foreign
currencies; (ii) derive less than 30% of its gross income from the sale or other
disposition of stock or securities held less than three months; and (iii)
diversify its holdings so that, at the end of each fiscal quarter, (a) at least
50% of the market value of the Fund's assets is represented by cash, cash items,
U.S. Government securities and other securities, limited, in respect of any one
issuer, to an amount not greater than 5% of the Fund's 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 fiscal 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 and the excess of net short-term capital gains over net
long-term capital losses) and its tax-exempt interest income (if any), 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 though the Fund qualifies as a "regulated investment company," it may be
subject to certain federal excise taxes unless the Fund meets certain additional
distribution requirements. Under the Code, a nondeductible excise tax of 4% is
imposed on the excess of a regulated investment company's "required
distribution" for the calendar year ending within the regulated investment
company's taxable year over the "distributed amount" for such calendar year. The
term "required distribution" means the sum of (i) 98% of ordinary income
(generally net investment income) for the calendar year, (ii) 98% of capital
gain net income (both long-term and short-term) for the one-year period ending
on October 31 (as though the one year period ending on October 31 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 the excise tax liability.
Stockholders who are subject to federal or state income or franchise taxes will
be required to pay taxes on dividends and capital gains 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 the amount of the Fund's dividends that
would be eligible for this treatment. In order to qualify for the dividends
received deduction, a corporate stockholder must hold the Fund shares paying the
dividends upon which a dividend received deduction is based for at least 46
days. Stockholders, such as qualified employee benefit plans, who 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.
Investors who purchase shares of the Fund shortly before the record date of a
dividend or capital gain distribution will pay full price for those shares
("buying a dividend") and then receive some portion of the price back as a
taxable dividend or capital gain distribution.
- --------------------------------------------------------------------------------
B-25
<PAGE>
WITHHOLDING. Under the Code, distributions of net investment income 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") will be subject to U.S.
withholding tax (at a rate of 30% or a lower treaty rate, whichever is less).
Withholding will not apply if a dividend paid by the Fund to a foreign
stockholder is "effectively connected" with 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 long-term capital gains
to foreign stockholders who are neither U.S. resident aliens nor engaged in a
U.S. trade or business are not subject to tax withholding, but in the case of a
foreign stockholder who is a nonresident alien individual, such distributions
ordinarily will be subject to U.S. income tax at a rate of 30% if the individual
is physically present in the U.S. for more than 182 days during the taxable
year.
SECTION 1256 CONTRACTS. Many of the options, future contracts and forward
contracts entered into by the Fund are "Section 1256 contracts." Any gains or
losses 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 4% nondeductible excise tax on October 31 or such other dates as
prescribed under the Code) are "marked to market," with the result that
unrealized gains or losses are treated as though they were realized.
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 character 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 only a few 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 of the 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 the rules that vary
according to elections made. The rules applicable under certain of the elections
operate to accelerate the recognition of gains or losses from the affected
straddle positions. Because the application of the straddle rules may affect the
character of gains or losses, defer losses and/or accelerate the recognition of
gains or losses from the affected straddle positions, the amount which must be
distributed to stockholders, and which will be taxed to stockholders as ordinary
income or long-term capital gain, may be increased or decreased substantially as
compared to a fund that did not engage in such hedging transactions. The
qualification rules of Subchapter M may limit the extent to which the Fund will
be able to engage in hedging transactions and other transactions involving
options, futures contracts or forward contracts.
SECTION 988 GAINS AND LOSSES. Under the Code, gains or losses attributable to
fluctuations and 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 future 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 or contract and
the date of disposition are also treated as ordinary gain or loss. These gains
or losses, referred to under the Code as "Section 988" gain 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.
- --------------------------------------------------------------------------------
B-26
<PAGE>
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 share
of the foreign income taxes paid by the Fund, and may be entitled either to
deduct (as an itemized deduction) their pro rata share of foreign taxes in
computing their taxable income or to use it (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
"pass-through" for that year.
Generally, a credit for foreign taxes is subject to the limitation that it may
not exceed the stockholder's U.S. tax attributable to his or her total foreign
source taxable income. For this purpose, if the pass-through election is made,
the source of the Fund's income will flow through to stockholders of the Fund.
With respect to such election, gains from the sale of securities will be treated
as derived from U.S. sources and certain currency fluctuation gains, including
fluctuation gains from foreign currency denominated debt securities, receivables
and payables will be treated as ordinary income derived from U.S. sources. The
limitation on the foreign tax credit is applied separately to foreign source
passive income, and to certain other types of income. Stockholders may be unable
to claim a credit for the full amount of their proportionate share of the
foreign taxes paid by the Fund. The foreign tax credit is modified for purposes
of the federal alternative minimum tax and can be used to offset only 90% of the
alternative minimum tax imposed on corporations and individuals and foreign
taxes generally are not deductible in computing alternative minimum taxable
income.
The foregoing is a general abbreviated summary of present U.S. federal income
tax laws and regulations applicable to dividends and 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 distributions received.
-------------------------------
INVESTMENT RESULTS
----------------------------
Average total return ("T") will be calculated as follows: an initial
hypothetical investment of $1000 ("P") is divided by the net asset value as of
the first day of the period in order to determine the initial number of shares
purchased. Subsequent dividends and capital gain distributions are reinvested at
net asset value on the reinvestment date determined by the Board of Directors.
The sum of the initial shares purchased and shares acquired through reinvestment
is multiplied by the net asset value per share as of the end of the period ("n")
to determine ending redeemable value ("ERV"). The ending value divided by the
initial investment converted to a percentage equals total return. The formula
thus used, as required by the SEC, is:
P(1+T)(N) = ERV
The resulting percentage indicates the positive or negative investment results
that an investor would have experienced from reinvested dividends 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 deduction from the $1,000 initial investment;
(ii) reinvestment of dividends and distributions at net asset value on the
reinvestment date determined by the Board; 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 utilizing ending values as determined above.
In addition, in order more completely to represent the Fund's performance or
more accurately to 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
- --------------------------------------------------------------------------------
B-27
<PAGE>
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.
-------------------------------
DESCRIPTION OF CAPITAL SHARES
----------------------------
All shares of the Company have equal voting rights and will be voted in the
aggregate, and not by series, except where voting by series is required by law
or where the matter involved affects only one series. There are no conversion or
preemptive rights in connection with any shares of the Company. All shares of
the Fund when duly issued will be fully paid and non-assessable. The rights of
the holders of shares of the Fund may not be modified except by vote of the
majority of the outstanding shares of the Fund. As of December 19, 1995, there
were 10,000 shares of the Fund outstanding.
Shares of the Company have non-cumulative voting rights, which means that the
holders of more than 50% of all series of the Company's shares voting for the
election of directors can elect 100% of the directors if they wish to do so. In
such event, the holders of the remaining less that 50% of the shares voting for
the election of directors will not be able to elect any person or persons to the
Company's Board of Directors. Stockholders are entitled to one vote for each
full share held and fractional votes for fractional shares held. Unless
otherwise provided by law or Articles of Incorporation or Bylaws, the Company
may take or authorize any action upon the favorable vote of the holders of more
than 50% of the outstanding shares of the Company.
The Company is not required to hold a meeting of stockholders in any year in
which the 1940 Act does not require a stockholder vote on a particular matter,
such as election of directors. The Company will hold a meeting of its
stockholders for the purpose of voting on the question of removal of one or more
directors if requested in writing by the holders of at least 10% of the
Company's outstanding voting securities, or to assist in communicating with its
stockholders as required by Section 16(c) of the 1940 Act.
-------------------------------
ADDITIONAL INFORMATION
----------------------------
STOCKHOLDER REPORTS
The fiscal year of the Fund ends on December 31 of each year. The Fund will
issue to its stockholders semi-annual and annual reports; each annual report
will contain a schedule of the Fund's portfolio securities, audited annual
financial statements, and information regarding purchases and sales of
securities during the period covered by the report as well as information
concerning the Fund's performance in accordance with rules promulgated by the
Securities and Exchange Commission. In addition, stockholders will receive
quarterly statements of the status of their accounts reflecting all transactions
having taken place within that quarter. The federal income tax status of
stockholders' distributions will also be reported to stockholders after the end
of each fiscal year.
COUNSEL
Certain legal matters in connection with the capital shares offered by this
Prospectus have been passed upon for the Fund by Paul, Hastings, Janofsky &
Walker, 555 South Flower Street, Los Angeles, California 90071. The validity of
the capital stock offered by the Prospectus has been passed upon by
- --------------------------------------------------------------------------------
B-28
<PAGE>
Venable, Baetjer and Howard, LLP, 1800 Mercantile Bank & Trust Building, 2
Hopkins Plaza, Baltimore, Maryland 21201. Paul, Hastings, Janofsky & Walker has
acted and will continue to act as counsel to the Investment Manager in various
matters.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., 333 Market Street, San Francisco, California 94105,
have been appointed as independent auditors for the Company. Coopers & Lybrand
L.L.P. will conduct an annual audit of the Fund, assist in the preparation of
the Fund's federal and state income tax returns, and consult with the Company as
to matters of accounting, regulatory filings, and federal and state income
taxation.
CUSTODIAN
State Street Bank and Trust Company (the "Custodian"), P.O. Box 1713, Boston,
Massachusetts 02105, serves as custodian of all securities and funds owned by
the Fund in accordance with the terms of the Custodian Contract. The Custodian
also provides dividend paying services to the Fund.
LICENSE AGREEMENT
Under the License Agreement dated December 19, 1995, the Investment Manager has
granted the Company the right to use the "RCM" name and has reserved the right
to withdraw its consent to the use of such name by the Company at any time, or
to grant the use of such name to any other company. In addition, the Company has
granted the Investment Manager, under certain conditions, the use of any other
name it might assume in the future, with respect to any other investment company
sponsored by the Investment Manager.
FINANCIAL STATEMENTS
The Company's Statement of Assets as of December 22, 1995 and the report of
Coopers & Lybrand L.L.P. thereon, appear at the end of this Statement of
Additional Information. Such financial statement has been included herein in
reliance upon such report given upon their authority as experts in accounting
and auditing.
REGISTRATION STATEMENT
The Fund's Prospectus and this Statement of Additional Information 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.
Statements contained in the Prospectus or this Statement of Additional
Information as to the contents of any contract or other document referred to
herein or in the Prospectus are not necessarily complete, and, in each instance,
reference is made to the copy of such contract or other document filed as an
exhibit to the Company's Registration Statement, each such statement being
qualified in all respects by such reference.
- --------------------------------------------------------------------------------
B-29
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
RCM Equity Funds, Inc.:
RCM Global Technology Fund
We have audited the accompanying statement of assets and liabilities of RCM
Equity Funds, Inc. (RCM Global Technology Fund) as of December 22, 1995. This
financial statement is the responsibility of the Fund's management. Our
responsibility is to express an opinion on this financial statement based on our
audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. Our procedures included
confirmation of cash held by the custodian as of December 22, 1995. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the statement of assets and liabilities referred to above
present fairly, in all material respects, the financial position of RCM Equity
Funds, Inc. (RCM Global Technology Fund) as of December 22, 1995, in conformity
with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
December 22, 1995
- --------------------------------------------------------------------------------
B-30
<PAGE>
RCM GLOBAL TECHNOLOGY FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 22, 1995
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Cash............................................................................ $ 100,000
Deferred Organizational Cost.................................................... 75,000
---------
Total Assets.................................................................. 175,000
---------
LIABILITIES:
Payable for Deferred Organization Cost.......................................... 75,000
---------
Total Liabilities............................................................. 75,000
---------
NET ASSETS........................................................................ $ 100,000
---------
---------
NET ASSET VALUE PER SHARE
(10,000 shares outstanding; 50,000,000 shares authorized)....................... $ 10.00
---------
---------
NET ASSETS CONSIST OF:
Paid in Capital................................................................. $ 100,000
---------
---------
</TABLE>
NOTES TO STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 22, 1995
NOTE 1
RCM Global Technology Fund (the "Fund") is a non-diversified, no-load series of
RCM Equity Funds, Inc. (the "Company"). The Company is organized as a Maryland
corporation and is registered under the Investment Company Act of 1940, as
amended.
NOTE 2
Cost incurred by the Fund in connection with its organization, estimated at
$75,000, will be deferred and amortized on a straight-line basis for a five-year
period beginning at the commencement of the Fund's operations. In the event that
any of the initial shares of the Fund are redeemed during the amortization
period, the redemption proceeds will be reduced by any unamortized
organizational expense allocable to the shares redeemed.
NOTE 3
The Company, on behalf of the Fund, has retained as the Fund's Investment
Manager RCM Capital Management, a California Limited Partnership (the
"Investment Manager"). The Investment Manager manages the Fund's investments,
provides various administrative services, and supervises the Fund's daily
business affairs. The Fund pays the Investment Manager an annualized fee of
1.00% of the value of the Fund's average daily net assets.
To limit the expenses of the Fund, the Investment Manager has agreed, until at
least December 31, 1996, to pay the Fund on a quarterly basis the amount, if
any, by which the ordinary operating expenses of the Company attributable to the
Fund for the quarter (except interest, taxes, and extraordinary expenses) exceed
the annual rate of 1.75% of the value of the average daily net assets of the
Fund. In subsequent years, the Fund will reimburse the Investment Manager for
any such payments to the extent that the Fund's operating expenses are otherwise
below this expense cap.
- --------------------------------------------------------------------------------
B-31
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(A) FINANCIAL STATEMENTS
Registrant's Statement of Assets and Liabilities as of December 22, 1995 is
included in Part B.
(B) EXHIBITS
<TABLE>
<C> <S>
1. Articles of Incorporation of Registrant -- filed as Exhibit 1 to the
Registration Statement on September 29, 1995 and incorporated herein by
reference.
2. Bylaws of Registrant.
3. None.
4. Specimen of certificate for capital stock ($0.0001 par value) of Registrant
and excerpts from Articles of Incorporation and Bylaws.
5. Form of Investment Management Agreement, Power of Attorney and Services
Agreement between Registrant and RCM Capital Management, a California Limited
Partnership (the "Investment Manager").
6. None.
7. None.
8. Form of Custodian Contract and remuneration schedule between Registrant and
State Street Bank and Trust Company.
9. License Agreement between the Investment Manager and Registrant related to the
use by Registrant of the name "RCM."
10.1 Opinion and Consent of Venable, Baetjer and Howard, LLP as to legality of
securities being registered.
10.2 Consent of Paul, Hastings, Janofsky & Walker.
11. Consent of Coopers & Lybrand L.L.P.
12. None.
13. Investment letter of initial investors in Registrant.
14. None.
15. None.
16. None.
</TABLE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
The Investment Manager of RCM Global Technology Fund (the "Fund"), a series
of Registrant, RCM Equity Funds, Inc. (the "Company"), is RCM Capital
Management, a California Limited Partnership (the "Investment Manager"). The
general partner and controlling person of the Investment Manager is RCM Limited
L.P., a California limited partnership ("RCM Limited"). RCM Limited is managed
by its general partner, RCM General Corporation, a California corporation ("RCM
General"). The limited partners of RCM Limited are set forth in Part B under
"The Investment Manager." In addition, certain of the directors and officers of
the Company are officers or employees of the Investment Manager. Accordingly,
the Investment Manager, RCM Limited and RCM General may be deemed to be under
common control with the Company.
The Investment Manager also serves as investment manager of each series of
RCM Capital Funds, Inc., an open-end management investment company ("Capital
Funds") and RCM Strategic Global Government
C-1
<PAGE>
Fund, Inc., a closed-end management investment company ("RCS"). Certain of the
directors and officers of Capital Funds and RCS are also directors, officers or
employees of the Investment Manager. Accordingly, Capital Funds and RCS may be
deemed to be under common control with the Company.
The sole limited partner of the Investment Manager is RCM Acquisition, Inc.
("RCM Acquisition"), a wholly owned subsidiary of Travelers Group Inc.
("Travelers"). Travelers does not have the power to control the management or
operation of the Investment Manager. Pursuant to an agreement between Travelers
and RCM Limited, Travelers has an option to acquire RCM Limited's interest in
the Investment Manager, as discussed in more detail in Part B under "The
Investment Manager." Accordingly, Travelers may be deemed to be under common
control with the Company.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
As of December 19, 1995
<TABLE>
<S> <C>
TITLE OF CLASS NUMBER OF RECORD HOLDERS
- --------------------------- ------------------------
RCM Global Technology Fund 2
Capital Stock
($0.0001 par value)
</TABLE>
ITEM 27. INDEMNIFICATION.
Section 2-418 of the General Corporation of Maryland empowers the Company to
indemnify directors and officers of the Company 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 Company 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 Company 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 the Company 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 "1940 Act").
The Company and its directors and officers have obtained coverage under an
errors and omissions insurance policy. The terms and conditions of policy
coverage conform generally to the standard coverage available throughout the
investment company industry. The coverage also applies to the Investment Manager
and its partners and employees.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "1933 Act") may be permitted to directors, officers and controlling
persons of the Company pursuant to the provisions of Maryland law and the
Company's Articles of Incorporation and Bylaws, or otherwise, the Company has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the 1933 Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Company of expenses incurred or
paid by a director, officer or controlling person of the Company 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, the Company 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 1933 Act and will be governed by the final
adjudication of such issue.
C-2
<PAGE>
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Certain directors, officers, employees or shareholders of RCM General
Corporation, the general partner of RCM Limited L.P., which is the general
partner of the Company's Investment Manager, formerly were directors, officers,
employees or shareholders of The RREEF Corporation. The RREEF Corporation is a
registered investment adviser specializing in the management of equity real
estate investments for institutional, tax-exempt clients. Currently, no officer
or employee of RCM is a director, officer, employee or shareholder of The RREEF
Corporation. However, certain of such persons are former directors, officers,
employees or shareholders of The RREEF Corporation and in that capacity receive
certain retirement benefits. Claude N. Rosenberg Jr., John D. Leland, Jr., Lee
N. Price, Gary W. Schreyer, John A. Kriewall, Walter C. Price, Jr., William L.
Price, Edward C. Derkum, Jeffrey S. Rudsten, Kenneth B. Weeman, Jr., Andrew C.
Whitelaw, and G. Nicholas Farwell are General Partners of RREEF Partners (a
California general partnership). RREEF Partners is the holder of 24.85% interest
in RREEF America Partners, a general partnership which is registered as an
investment adviser to group trusts (the RREEF MidAmerica Funds, the RREEF USA
Funds and the RREEF West Funds) designed to afford pension and profit sharing
plans and other investors exempt from federal income tax the opportunity to make
equity investments in real properties.
The sole limited partner of the Investment Manager is RCM Acquisition, a
wholly owned indirect subsidiary of Travelers. Travelers, whose principal
executive offices are located at 338 Greenwich Street, New York, New York 10013,
is a financial services holding company engaged, through its subsidiaries,
principally in the business of consumer financial, insurance services and
investment services. Securities of Travelers are listed for trading on the New
York Stock Exchange. RCM Acquisition and its predecessors have been the sole
limited partner of the Investment Manager since July 1986.
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) None.
(b) None.
(c) None.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
Accounts, books and other records required by Rules 31a-1 and 31a-2 under
the 1940 Act are maintained and held in the offices of the Company's Custodian
at Mutual Funds Services Division, P.O. Box 1713, Boston, Massachusetts 02105,
and in the offices of the Company and its investment manager, RCM Capital
Management, Four Embarcadero Center, Suite 3000, San Francisco, California
94111.
Records covering portfolio transactions are also maintained and kept by the
Company's custodian, .
ITEM 31. MANAGEMENT SERVICES.
None.
ITEM 32. UNDERTAKINGS.
Registrant undertakes to file a post-effective amendment, containing
reasonably current financial statements with respect to the RCM Global
Technology Fund, which need not be certified, within four to six months from the
effective date of Registrant's 1933 Act Registration Statement with respect to
such series.
Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of Registrant's latest annual report to stockholders, upon
request and without charge.
C-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, RCM Equity Funds, Inc. has duly caused this
Amendment No. 2 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Francisco, State of
California, on December 19, 1995.
RCM EQUITY FUNDS, INC.
By: /s/ WILLIAM L. PRICE
--------------------------------------
CHAIRMAN OF THE BOARD, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
Each person whose signature appears below hereby authorizes William L.
Price, Michael J. Apatoff, Susan C. Gause and Anthony Ain, or any of them, as
attorney-in-fact, to sign on his/her behalf, individually and in each capacity
stated below, any amendment to the Registration Statement (including
post-effective amendments) and to file the same, with all exhibits thereto, with
the Securities and Exchange Commission.
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed below by the following
persons in the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ --------------------------------- ----------------------
<S> <C> <C>
(1) Principal Executive Officer
/s/ WILLIAM L. PRICE Chairman of the Board, President,
------------------------------------------- Chief Executive Officer and December 19, 1995
William L. Price Director
(2) Principal Financial Officer
/s/ SUSAN C. GAUSE*
------------------------------------------- Treasurer December 19, 1995
Susan C. Gause
(3) Principal Accounting Officer
/s/ CAROLINE M. HIRST*
------------------------------------------- Principal Accounting Officer December 19, 1995
Caroline M. Hirst
(4) Directors
/s/ MICHAEL J. APATOFF*
------------------------------------------- December 19, 1995
Michael J. Apatoff
/s/ WILLIAM S. STACK*
------------------------------------------- December 19, 1995
William S. Stack
/s/ DEWITT F. BOWMAN
------------------------------------------- December 19, 1995
DeWitt F. Bowman
/s/ FRANK P. GREENE
------------------------------------------- December 19, 1995
Frank P. Greene
*By /s/ WILLIAM L. PRICE
------------------------------------------- December 19, 1995
William L. Price
AS ATTORNEY-IN-FACT
</TABLE>
* By William L. Price, pursuant to Power of Attorney filed with the Securities
and Exchange Commission with Registrant's Registration Statement on September
29, 1995.
<PAGE>
EXHIBIT INDEX
RCM EQUITY FUNDS, INC.
FORM N-1A REGISTRATION STATEMENT
<TABLE>
<C> <S>
1. Articles of Incorporation of Registrant -- filed as Exhibit 1 to the Registration
Statement on September 29, 1995 and incorporated herein by reference.
2. Bylaws of Registrant.
3. None.
4. Specimen of certificate for capital stock ($0.0001 par value) of Registrant and
excerpts from Articles of Incorporation and Bylaws.
5. Form of Investment Management Agreement, Power of Attorney and Services Agreement
between Registrant and RCM Capital Management, a California Limited Partnership (the
"Investment Manager").
6. None.
7. None.
8. Form of Custodian Contract and remuneration schedule between Registrant and State
Street Bank and Trust Company.
9. License Agreement between the Investment Manager and Registrant related to the use by
Registrant of the name "RCM."
10.1 Opinion and Consent of Venable, Baetjer and Howard, LLP as to legality of securities
being registered.
10.2 Consent of Paul, Hastings, Janofsky & Walker.
11. Consent of Coopers & Lybrand L.L.P.
12. None.
13. Investment letter of initial investors in Registrant.
14. None.
15. None.
16. None.
</TABLE>
<PAGE>
ARTICLES OF INCORPORATION
OF
RCM EQUITY FUNDS, INC.
THE UNDERSIGNED, Timothy B. Parker, whose address is Four Embarcadero
Center, Suite 3000, San Francisco, California 94111, being at least 18 years of
age and acting as incorporator, hereby forms a corporation under and by virtue
of the Maryland General Corporation Law.
ARTICLE I
NAME
The name of the Corporation is RCM Equity Funds, Inc. (the "Corporation").
ARTICLE II
PURPOSES AND POWERS
The purposes for which the Corporation is formed are to act as an
investment company under the Federal Investment Company Act of 1940, as amended,
and the rules and regulations 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 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) 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 $0.0001 per share. There shall
initially be one series of shares, designated as the "RCM Global Technology
Fund," consisting initially of 50,000,000 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
950,000,000 unclassified shares of capital stock. The Board of Directors of
the Corporation is hereby empowered to increase or decrease, from
1
<PAGE>
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 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.
(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 share, 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 Articles of Incorporation
and the Bylaws of the Corporation (the "Bylaws").
(4) 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. As used in these
Articles of Incorporation and subject to the prior sentence of this
Article IV(4), a "series" of shares represents interests in the same assets,
liabilities, income, earnings and profits of the Corporation. Subject to
applicable law, the power of the Board of Directors to classify or reclassify
any of the unissued shares of capital stock shall include, without limitation,
authority to classify or reclassify any such capital 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 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;
(b) Whether or not and, if so, the rates, amounts and times at which,
and the conditions under which, dividends shall be payable on shares of
such series;
(c) Whether or not shares of such series shall have voting rights in
addition to any general voting rights provided by law and these Articles of
Incorporation of the Corporation and, if so, the terms of such additional
voting rights; and
2
<PAGE>
(d) The rights of the holders of shares of such series (including any
classes thereof) upon the liquidation, dissolution or winding up of the
affairs of, or upon a distribution of the assets of, the Corporation.
(5) (a) Subject to the Board of Directors classification power under
Article IV(4), shares of capital stock of the Corporation shall have the
following preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of
redemption:
(i) 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 such assets, payments or funds were received by the
Corporation for all purposes, subject only to the rights of creditors, and
shall be so handled upon the books of account of the Corporation. Such
consideration, assets, income, earnings, profits and proceeds thereof,
including any proceeds 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 manner and
on such basis as the Board of Directors, in its sole discretion, shall deem
fair and equitable.
(ii) 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.
(iii) Shares of each series of capital stock shall be entitled
to such dividends and distributions, in capital 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).
3
<PAGE>
(iv) 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, subject to Article IV(5)(b), among
such stockholders in proportion to the number of shares of such series held
by them and recorded on the books of the Corporation or in such other
manner as the Board of Directors may determine in accordance with law. 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 as determined by the Board of Directors,
in its sole discretion.
(b) A class of shares may be invested with one or more other classes
in a common investment portfolio comprising a series. Notwithstanding the
provisions of paragraph 5(a) of this Article IV, 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 paragraph (5)(a) of this Article IV 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 values of each such class or as otherwise determined by the Board of
Directors in accordance with 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)(b), 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
these Articles of Incorporation, the classes comprising a series shall have
the
4
<PAGE>
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 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.
(c) Each shareholder of each series or class of capital stock shall
be entitled to one vote for each share of capital stock then standing in
his 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 or class except that: (i) when expressly required by law, shares of
capital stock shall be voted by individual series or class and (ii) only
shares of capital stock of the respective series or class affected by a
matter shall be entitled to vote on such matter. At all meetings of the
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 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 Articles of Incorporation, the
Bylaws or law, 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 as originally called. The absence from any
meeting, in person or by proxy, of holders of the number of shares of
capital stock of the Corporation in excess of the quorum which may be
5
<PAGE>
required by the Maryland Law, the 1940 Act, other applicable statute, these
Articles of Incorporation or the Bylaws, 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.
(d) 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 of the Corporation 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 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 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)(d), 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 Registration Statement for that series. Payment of the
redemption price shall be made in cash by the Corporation at such time and
in such manner as may be determined from time-to-time by the Board of
Directors of 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.
(e) 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
6
<PAGE>
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
pursuant to the Bylaws, but shall never be less than permitted under the
Maryland Law and the 1940 Act. The number initially constituting the Board of
Directors is three (3), and the names of the persons who are to serve as
directors are:
William L. Price
William S. Stack
Michael J. Apatoff
In no case shall a decrease in the number of directors shorten the term of
any incumbent director.
ARTICLE VI
MANAGEMENT OF THE AFFAIRS OF THE CORPORATION
(1) 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
Articles of Incorporation or by the Bylaws) shall be vested in and exercised by
the Board of Directors.
(2) 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.
(3) 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 thereof.
(4) 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 any 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.
7
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(5) 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 or a committee of the Board which
authorizes, approves or ratifies the contract or transaction; or the counting of
the vote of a director for the authorization, approval 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 or the committee and the Board or the
committee 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 capital 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 a committee of
the Board 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) 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.
(7) To the maximum extent permitted by the 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
8
<PAGE>
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
Bylaw, 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
or the Corporation shall be personally liable to the Corporation or its
stockholders for monetary damages. No amendment of these Articles of
Incorporation or repeal of any of its provisions shall limit or eliminate any of
the benefits provided to any person who at any time is or was a director or
officer of the Corporation under this Section in respect of any act or omission
that occurred prior to such amendment or repeal.
(8) The Board of Directors of the Corporation shall have the authority to
make, alter or repeal from time-to-time any of the Bylaws except any particular
Bylaw which is specified as not subject to alteration or repeal by the Board of
Directors, subject to the requirements of the 1940 Act.
ARTICLE VII
DURATION
The duration of the Corporation shall be perpetual.
ARTICLE VIII
MAJORITY VOTE
Notwithstanding any provision of the Maryland Law requiring a greater
proportion than a majority of the votes of all classes or of any class of
capital stock entitled to be cast, to take or authorize any action, the
Corporation may, subject to other applicable provisions of law, these Articles
of Incorporation and the Bylaws, 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 series or class of shares.
ARTICLE IX
PRE-EMPTIVE RIGHTS
No holder of the capital stock of the Corporation or of any other class of
capital 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
9
<PAGE>
any new or additional issue of capital stock of any class, or of rights or
options to purchase any capital stock, or of securities convertible into, or
carrying rights or options to purchase, capital stock of any class, whether now
or 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 capital 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 capital stock by classification, reclassification or
otherwise, and all rights conferred upon stockholders of the Corporation by its
charter are granted subject to the provisions of this Article and the
reservation of the right to amend its charter herein contained.
10
<PAGE>
IN WITNESS WHEREOF, the undersigned incorporator of RCM EQUITY FUNDS, INC.
hereby executes these Articles of Incorporation and acknowledges the same to be
his act and deed.
Date: August 7, 1995 /s/ Timothy B. Parker
------------------------------ ----------------------------------
Timothy B. Parker, Incorporator
<PAGE>
BYLAWS
OF
RCM EQUITY FUNDS, INC.
TABLE OF CONTENTS
PAGE
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ARTICLE I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Section 1. Principal Office. . . . . . . . . . . . . . . . . . . . .1
Section 2. Principal Executive Office. . . . . . . . . . . . . . . .1
Section 3. Other Offices . . . . . . . . . . . . . . . . . . . . . .1
ARTICLE II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Meeting of Stockholders . . . . . . . . . . . . . . . . . . . . . . . . .1
Section 1. Annual Meeting. . . . . . . . . . . . . . . . . . . . . .1
Section 2. Special Meetings. . . . . . . . . . . . . . . . . . . . .1
Section 3. Place of Meetings . . . . . . . . . . . . . . . . . . . .2
Section 4. Notice of Meetings: Waiver of Notice. . . . . . . . . . .2
Section 5. Quorum. . . . . . . . . . . . . . . . . . . . . . . . . .2
Section 6. Organization. . . . . . . . . . . . . . . . . . . . . . .3
Section 7. Order of Business . . . . . . . . . . . . . . . . . . . .3
Section 8. Fixing of Record Date . . . . . . . . . . . . . . . . . .3
Section 9. Voting. . . . . . . . . . . . . . . . . . . . . . . . . .3
Section 10. Proxies. . . . . . . . . . . . . . . . . . . . . . . . .3
Section 11. Voting By Ballot . . . . . . . . . . . . . . . . . . . .3
Section 12. Voting Of Shares By Certain Holders. . . . . . . . . . .4
Section 13. Inspectors . . . . . . . . . . . . . . . . . . . . . . .4
Section 14. Consent of Stockholders in Lieu of Meeting . . . . . . .4
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. Resignation . . . . . . . . . . . . . . . . . . . . . . .5
Section 5. Vacancies . . . . . . . . . . . . . . . . . . . . . . . .5
Section 6. Place of Meetings . . . . . . . . . . . . . . . . . . . .5
Section 7. Regular Meeting . . . . . . . . . . . . . . . . . . . . .5
- i -
<PAGE>
PAGE
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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. . . . . . . . . . . . . . . . . . . .6
Section 13. Organization . . . . . . . . . . . . . . . . . . . . . .6
Section 14. Written Consent of Directors in Lieu of a Meeting. . . .7
Section 15. Compensation . . . . . . . . . . . . . . . . . . . . . .7
Section 16. Net Asset Value. . . . . . . . . . . . . . . . . . . . .7
ARTICLE IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Committees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Section 1. Committees of the Board of Directors. . . . . . . . . . .7
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 . . . . . . . . . . . . . . . . .9
Section 8. President . . . . . . . . . . . . . . . . . . . . . . . .9
Section 9. Vice President. . . . . . . . . . . . . . . . . . . . . 10
Section 10. Treasurer. . . . . . . . . . . . . . . . . . . . . . . 10
Section 11. Secretary. . . . . . . . . . . . . . . . . . . . . . . 10
Section 12. Delegation of Duties . . . . . . . . . . . . . . . . . 11
ARTICLE VI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE VII. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 1. Stock Certificates. . . . . . . . . . . . . . . . . . . 12
Section 2. Books of Accounts and Record of Stockholders. . . . . . 12
Section 3. Transfers of Shares . . . . . . . . . . . . . . . . . . 12
Section 4. Regulations . . . . . . . . . . . . . . . . . . . . . . 13
ii
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PAGE
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Section 5. Lost, Destroyed or Mutilated Certificates . . . . . . . 13
Section 6. Fixing of a Record Date for Dividends and
Distributions . . . . . . . . . . . . . . . . . . . 13
Section 7. Information to Stockholders and Others. . . . . . . . . 14
ARTICLE VIII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Depositories and Custodians . . . . . . . . . . . . . . . . . . . . . . 14
Section 1. Depositories. . . . . . . . . . . . . . . . . . . . . . 14
Section 2. Custodians. . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE IX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Contracts: Safekeeping and Transfer of Funds and Securities . . . . . . 14
Section 1. Contracts . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2. Checks, Notes, Drafts, etc. . . . . . . . . . . . . . . 14
Section 3. Sale or Transfer of Securities. . . . . . . . . . . . . 14
ARTICLE X . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Independent Public Accountants. . . . . . . . . . . . . . . . . . . . . 15
ARTICLE XI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Annual Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE XII. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
iii
<PAGE>
BYLAWS
OF
RCM EQUITY FUNDS, INC.
ARTICLE I
OFFICES
Section 1. PRINCIPAL OFFICE. The principal office of the Corporation
shall be in the City of Baltimore, State of Maryland, or at any other place or
places, whether or not within the State of Maryland, as the Board of Directors
may designate.
Section 2. PRINCIPAL EXECUTIVE OFFICE. The principal executive
offices of the Corporation shall be in the State of California, or at any other
place or places, whether or not within the State of California, as the Board of
Directors may designate.
Section 3. OTHER OFFICES. The Corporation may have such other offices
in such places as the Board of Directors may from time-to-time determine or as
the business of the Corporation may require.
ARTICLE II
MEETING OF STOCKHOLDERS
Section 1. ANNUAL MEETING. 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 Bylaws.
Section 2. SPECIAL MEETINGS. Special meetings of the stockholders,
unless otherwise provided by law or by the Articles of Incorporation, may be
called for any purpose or purposes by a majority of the Board of Directors, by
the President, or on the written request of the holders of at least 25% of the
outstanding stock of the Corporation entitled to vote at such meeting. In
addition, special meetings of stockholders may be called on the written request
of the holders of at least 10% of the outstanding stock of the Corporation
entitled to vote at such meeting for the purposes of removing directors or to
assist in communicating with stockholders as required by the 1940 Act. 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
<PAGE>
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 MEETINGS. Annual and special meetings of the
stockholders shall be held at the principal executive office of the Corporation
or at such other place within the United States as the Board of Directors may
from time-to-time determine and as shall be stated in the notice of the meeting.
Section 4. NOTICE OF MEETINGS: WAIVER OF NOTICE. Notice of the place,
date and time of the holding of each annual and special meeting of the
stockholders and the purpose or purposes of each special meeting shall be given
personally or by mail, not less than ten nor more than 90 days before the date
of such meeting, to each stockholder entitled to vote at such meeting and to
each other stockholder entitled to notice of the meeting. Notice by mail shall
be deemed to be duly given when deposited in the United States mail addressed to
the stockholder at his address as it appears on the records of the Corporation,
with postage thereon prepaid. Notice of any meeting of stockholders shall be
deemed waived by any stockholder who shall attend such meeting in person or by
proxy, or who shall, either before or after the meeting, submit a signed waiver
of notice which is filed with the records of the meeting.
If any meeting of the stockholders shall be adjourned to another time
and place not more than 120 days after the original record date, and if the time
and place to which the meeting shall be adjourned were announced at the meeting
at which the adjournment is taken, no further notice of such meeting need be
given.
Section 5. QUORUM. At all meetings of the stockholders, the holders
of one-third of the shares of stock of the Corporation entitled to vote at the
meeting, present in person or by proxy, shall constitute a quorum for the
transaction of any business, but this Section 5 shall not affect any requirement
under the laws of the State of Maryland ("Maryland Law"), the 1940 Act, or the
Articles of Incorporation for the vote necessary for the adoption of any
measure. In the absence of a quorum, no business may be transacted, except that
the holders of a majority of the shares of stock present in person or by proxy
and entitled to vote may adjourn the meeting from time-to-time, without notice
other than announcement thereat except as otherwise required by these Bylaws,
until the holders of the requisite amount of shares of stock shall be so
present. At any such adjourned meeting at which a quorum may be present, any
business may be transacted which might have been transacted at the meeting as
originally called. The absence from any meeting, in person or by proxy, of
holders of the number of shares of stock of the Corporation in excess of the
quorum which may be required by Maryland Law, the 1940 Act, any other applicable
statute, the Articles of Incorporation or these Bylaws, for action upon any
given matter shall not prevent action at such meeting upon any other matter or
matters which may properly come before the meeting, if there shall be present
thereat, in person or by proxy, holders of the number of shares of stock of the
Corporation required for action in respect of such other matter or matters.
2
<PAGE>
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 90 nor less than ten days before the date of the meeting of the
stockholders. Only those persons who were holders of record of shares at such
time shall be entitled to vote at such meeting and any adjournment thereof.
Section 9. VOTING. Except as otherwise provided by 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 of such stock (regardless of
class) standing in such stockholder's name on the record of stockholders of the
Corporation as of the record date determined pursuant to Section 8 of this
Article or, if such record date shall not have been so fixed, then at the later
of (a) the close of business on the day on which notice of the meeting is mailed
or (b) the 30th day before the meeting. With respect to the election of
directors, each share of stock may be voted for as many individuals as there are
directors to be elected and for whose election the share is entitled to be
voted, and directors shall be elected by plurality vote. Except as otherwise
provided by Maryland Law, the 1940 Act, the Articles of Incorporation or these
Bylaws, any corporate action to be taken by vote of the stockholders shall be
authorized by a majority of the total votes cast at a meeting of stockholders by
the holders of shares present in person or represented by proxy and entitled to
vote on such action, provided that a quorum is present.
Section 10. PROXIES. Each stockholder entitled to vote at any meeting
of stockholders may authorize another person or persons to act for him by a
proxy signed by such stockholder or his duly authorized attorney-in-fact. No
proxy shall be valid after the expiration of 11 months from the date thereof,
unless otherwise provided in the proxy. Every proxy shall be revocable at the
pleasure of the stockholder executing it, except in those cases where such proxy
states that it is irrevocable and where an irrevocable proxy is permitted by
law.
Section 11. VOTING BY BALLOT. On a vote by ballot, each ballot shall
be signed by the stockholder voting or by his proxy, if there be such proxy, and
shall state the number of shares voted.
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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 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) a 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.
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ARTICLE III
BOARD OF DIRECTORS
Section 1. GENERAL POWERS. Except as otherwise provided in the
Articles of Incorporation, the business and affairs of the Corporation shall be
managed under the direction of the Board of Directors. All powers of the
Corporation may be exercised by or under authority of the Board of Directors
except as conferred on or reserved to the stockholders by Maryland Law, the 1940
Act, the Articles of Incorporation or these Bylaws.
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 12. Any vacancy created by an increase in number of directors may be filled
in accordance with Section 5 of this Article. No reduction in the number of
directors shall have the effect of removing any director from office prior to
the expiration of his term unless such director is specifically removed pursuant
to Maryland law. Directors need not be stockholders.
Section 3. TERM OF DIRECTORS. The term of office of each director
shall be from the time of his election and qualification until his successor
shall have been elected and shall have been qualified unless sooner terminated
by his death, resignation or removal.
Section 4. RESIGNATION. 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 MEETING. Regular meetings of the Board of
Directors may be held without notice at such time and place as may be determined
by the Board of Directors.
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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 or the President.
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 him at his residence or usual place of business, at least
three days before the day on which such meeting is to be held. If mailed, such
notice shall be deemed to be given when deposited in the United States mail
properly addressed, with postage thereon prepaid. Neither the business to be
transacted at, nor the purpose of, any annual, regular or special meeting of the
Board of Directors need be stated in the notice, unless specifically required by
Maryland Law, the 1940 Act, the Articles of Incorporation or these Bylaws.
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 Bylaws,
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
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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 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
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exercise any authority or power of the Board of Directors in the management of
the business or affairs of the Corporation.
Section 2. MEETINGS: QUORUM. One-third, but not less than two, of the
members of any committee shall be present in person at any meeting of such
committee in order to constitute a quorum for the transaction of business at
such meeting, and the act of a majority present shall be the act of such
committee. The Board of Directors may designate a chairman of any committee and
such chairman, or the Chairman of the Board or the President, may fix the time
and place of the committee's meetings unless the Board of Directors shall
otherwise provide. In the absence or disqualification of any member of any
committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
(a) unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member, (b) determine
that, for purposes of that meeting, the member so appointed shall replace any
other member of the committee, and (c) determine that such member may serve in
such capacity until the next meeting of the Board of Directors. For purposes of
determining whether a quorum of the committee exists, any such member of the
Board of Directors appointed by the member or members of the committee present
shall be treated as a member of the committee, and any member so replaced shall
not be treated as a member of the committee.
ARTICLE V
OFFICERS. AGENTS AND EMPLOYEES
Section 1. ELECTION OR APPOINTMENT OF OFFICERS. The officers of the
Corporation shall include a President, who shall be a director, a Secretary and
a Treasurer, each of whom shall be elected or appointed by the Board of
Directors. The Board of Directors may elect or appoint one or more Vice
Presidents and may also elect or appoint such other officers, agents and
employees, and may give any officers so elected any title or titles, as it may
deem necessary or proper. Any two or more offices may be held by the same
person, except the offices of President and Vice President, but no officer shall
execute, acknowledge or verify any instrument as an officer in more than one
capacity. Such officers shall be elected or appointed by the Board of Directors.
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 Bylaws. 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.
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Section 2. EFFECT OF ELECTION OR APPOINTMENT OF OFFICERS AGENTS AND
EMPLOYEES. The election or appointment of any officer or agent of the
Corporation shall not, of itself, create any contract rights between the
Corporation and such officer, agent or employee.
Section 3. RESIGNATIONS. Any officer of the Corporation may resign at
any time by giving written notice of resignation to the Board of Directors, the
Chairman of the Board, the President or the Secretary. Any such resignation
shall take effect at the time specified therein or, if the time when it shall
become effective shall not be specified therein, immediately upon its receipt;
and, unless otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective.
Section 4. REMOVAL OF OFFICER, AGENT OR EMPLOYEE. Any officer, agent
or employee of the Corporation may be removed by the Board of Directors with or
without cause at any time in the sole discretion of the Board of Directors, and
the Board of Directors may delegate such power of removal to any officer in
respect of officers, agents or employees under his control. Such removal shall
be without prejudice to such person's contract rights, if any, but the
appointment of any person as an officer, agent or employee of the Corporation
shall not itself create contract rights.
Section 5. VACANCIES. A vacancy in any office, either arising from
death, resignation, removal, creation of a new office, or any other cause, may
be filled by the Board of Directors for the unexpired portion of the term of the
office which shall be vacant.
Section 6. COMPENSATION. The compensation of the officers of the
Corporation shall be fixed by the Board of Directors, but this power may be
delegated to any officer in respect of other officers under his control.
Section 7. BONDS OR OTHER SECURITY. If required by the Board of
Directors, any officer, agent or employee of the Corporation shall give a bond
or other security for the faithful performance of his duties, in such amount and
with such surety or sureties as the Board of Directors may require.
Section 8. PRESIDENT. The President shall be the chief executive
officer. In the absence of the Chairman of the Board (or if there be none), he
shall preside at all meetings of the stockholders and of the Board of Directors.
To the extent permitted by Maryland Law and the 1940 Act, the President shall be
a member ex officio of each committee of the Board of Directors of which he is
not officially a member. The President shall have, subject to the control of the
Board of Directors, general supervision and control of the business and affairs
of the Corporation. The President may, to the extent permitted by Maryland Law
and the 1940 Act, execute any deed, mortgage, bond, contract or other instrument
to which the Corporation is a party except in cases where the execution thereof
shall be expressly delegated by the Board of Directors or by these Bylaws 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
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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;
(f) render to the President and the Board of Directors, at the
regular meetings of the Board of Directors or whenever they may require it, an
account of all his transactions as Treasurer and of the financial condition of
the Corporation; and
(g) in general, perform all the duties incident to the office of
Treasurer and such other duties as from time-to-time may be assigned to him by
the Board of Directors or the President.
Section 11. SECRETARY. The Secretary shall:
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(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 Bylaws and as required by law;
(c) be custodian of the corporate records and the seal of the
Corporation and affix and attest the seal to all other documents to be executed
on behalf of the Corporation under its seal;
(d) see that the books, reports, statements, certificates and
other documents and records required by law to be kept and filed are properly
kept and filed; and
(e) in general, perform all the duties incident to the office of
Secretary and such other duties as from time-to-time may be assigned to him by
the Board of Directors or the President.
Section 12. DELEGATION OF DUTIES. In case of the absence of any officer of
the Corporation, or for any other reason that the Board of Directors may deem
sufficient, the Board of Directors may confer for the time being the powers or
duties, or any of them, of such officer upon any other officer or upon any
director.
ARTICLE VI
INDEMNIFICATION
To the maximum extent permitted by Maryland Law, as from time-to-time amended,
the Corporation: (a) shall indemnify, and may 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 may 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 may 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, the Board of Directors may make further provision for
indemnification of directors, officers, employees and agents. Neither the
amendment nor repeal of this Article, nor the adoption or amendment of any other
provision of these Bylaws, inconsistent with this Article, shall apply to or
affect in any respect the applicability of the preceding paragraph with respect
to any act or failure to act which occurred prior to such amendment, repeal or
adoption. The indemnification and other rights provided by this Article shall
continue as to a person who has ceased to be a director or officer and shall
inure to the benefit of the heirs, executors and administrators of such person.
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The Corporation may purchase insurance on behalf of an officer or director
protecting such person to the maximum extent permitted under Maryland Law, from
liability arising from his activities as officer or director of the Corporation.
The Corporation may not purchase insurance, however, on behalf of any officer or
director of the Corporation that protects or purports to protect such person
from liability to the Corporation or to its stockholders to which such officer
or director would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office.
The Corporation may indemnify or purchase insurance to the extent provided
in this Article on behalf of an employee or agent who is not an officer or
director of the Corporation.
ARTICLE VII
CAPITAL STOCK
Section 1. STOCK CERTIFICATES. Each holder of stock of the Corporation
shall be entitled upon request to have a certificate or certificates, in such
form as shall be approved by the Board of Directors, representing the number of
shares of the Corporation owned by him, provided, however, that certificates for
fractional shares will not be delivered in any case. The certificates
representing shares of stock shall be signed by or in the name of the
Corporation by the 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. 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
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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 Bylaws, 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 Bylaws, as it may deem
expedient concerning the issue, transfer and registration of certificates for
shares of stock of the Corporation. It may appoint, or authorize any officer or
officers to appoint, one or more transfer agents or one or more transfer clerks
and one or more registrars and may require all certificates for shares of stock
to bear the signature or signatures of any of them.
Section 5. LOST, DESTROYED OR MUTILATED CERTIFICATES. The holder of any
certificates representing shares of stock of the Corporation shall immediately
notify the Corporation of any loss, theft, destruction or mutilation of such
certificate, and, upon request, shall provide to the Corporation an affidavit of
the rightful holder of such certificate stating that such certificate has been
lost, stolen, destroyed or mutilated, as the case may be. The Corporation may
issue a new certificate of stock in the place of any certificate theretofore
issued by it which the owner thereof shall allege to have been lost or destroyed
or which shall have been mutilated. Prior to issuing a new certificate to
replace any certificate alleged to have been lost, stolen, destroyed or
mutilated, the Board of Directors may, in its discretion, require such owner or
his legal representatives to give to the Corporation a bond in such sum, limited
or unlimited, and in such form and with such surety or sureties, as the Board of
Directors in its absolute discretion shall determine, to indemnify the
Corporation against any claim that may be made against it on account of the
alleged loss, theft or destruction of any such certificate, or issuance of a new
certificate. Anything herein to the contrary notwithstanding, the Board of
Directors, in its absolute discretion, may refuse to issue any such new
certificate, except pursuant to legal proceedings under Maryland Law.
Section 6. FIXING OF A RECORD DATE FOR DIVIDENDS AND DISTRIBUTIONS. The
Board of Directors may fix, in advance, as a record date, a date not more than
90 days preceding the date fixed for the payment of any dividend or the making
of any distribution or the allotting of any other rights (except with respect to
voting which is provided for in Article II(8)). Once the Board of Directors
fixes such record date as the record date for the determination of the
stockholders entitled to receive any such dividend or distribution or the
allotment of such other rights, in such case only the stockholders of record at
the time so fixed shall be entitled to receive such dividend or distribution or
such other rights.
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Section 7. INFORMATION TO STOCKHOLDERS AND OTHERS. Any stockholder or his
agent may inspect and copy during usual business hours the Corporation's Bylaws,
minutes of the proceedings of its stockholders, annual statements of its
affairs, and voting trust agreements on file at its principal office.
ARTICLE VIII
DEPOSITORIES AND CUSTODIANS
Section 1. DEPOSITORIES. The funds of the Corporation shall be deposited
with such banks or other depositories as the Board of Directors may from time-
to-time determine.
Section 2. CUSTODIANS. All securities and other investments may be
deposited in the safe keeping of such banks or other companies as the Board of
Directors may from time-to-time determine. Every arrangement entered into with
any bank or other company for the safe keeping of the securities and investments
of the Corporation shall contain provisions complying with the 1940 Act.
ARTICLE IX
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 Bylaws 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.
14
<PAGE>
ARTICLE X
INDEPENDENT PUBLIC ACCOUNTANTS
The firm of independent public accountants which shall sign or certify the
financial statements of the Corporation which are filed with the Securities and
Exchange Commission shall, to the extent required by the 1940 Act, be selected
annually by the Board of Directors and ratified by the stockholders at their
next meeting in accordance with the provisions of the 1940 Act.
ARTICLE XI
ANNUAL STATEMENT
The books of account of the Corporation shall be examined by an independent
firm of public accountants at the close of each annual period of the Corporation
and at such other times as may be directed by the Board of Directors. A report
to the stockholders based upon each such examination shall be mailed to each
stockholder of record on such date with respect to each report as may be
determined by the Board of Directors, at his address as the same appears on the
books of the Corporation. Such annual statement shall be placed on file at the
Corporation's principal office within 120 days after the end of the
Corporation's fiscal year. Each such report shall show the assets and
liabilities of the Corporation as of the close of the annual or other period
covered by the report. Such report shall also show the Corporation's income and
expenses for the period from the end of the Corporation's preceding fiscal year
to the close of the annual or other period covered by the report and any other
information required by the 1940 Act, and shall set forth such other matters as
the Board of Directors or such firm of independent public accountants shall
determine.
ARTICLE XII
AMENDMENTS
These Bylaws 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
<PAGE>
INCORPORATED UNDER THE LAWS OF THE
STATE OF MARYLAND
NUMBER SHARES
RCM EQUITY FUNDS, INC.
RCM Global Technology Fund Series
(Par Value $.0001)
THIS CERTIFIED THAT _________________________________________ IS THE
REGISTERED HOLDER OF ________________________________________ SHARES
of the RCM Global Technology Fund Series Common Stock of RCM EQUITY FUNDS, INC.
TRANSFERABLE ONLY ON THE BOOKS OF THE CORPORATION BY THE HOLDER HEREOF IN
PERSON OF BY ATTORNEY UPON SURRENDER OF THIS CERTIFICATE PROPERLY ENDORSED.
IN WITNESS WHEREOF, THE SAID CORPORATION HAS CAUSED THIS CERTIFICATE TO BE
SIGNED BY ITS DULY AUTHORIZED OFFICERS AND ITS CORPORATE SEAL TO BE
HEREUNTO AFFIXED
THIS_________________ DAY OF _________________ AD. ______
------------------------------- --------------------------
Secretary President
SHARES Par Value EACH
$.0001
<PAGE>
CERTIFICATE
FOR
SHARES
RCM Global Technology
Fund Series Common
Stock of RCM EQUITY
FUNDS, INC.
ISSUED TO
DATED
THE CORPORATION IS AUTHORIZED TO ISSUE MORE THAN
ONE CLASS OF CAPITAL STOCK AND THE BOARD OF
DIRECTORS MAY AUTHORIZE ADDITIONAL CLASSES OF
CAPITAL STOCK. THE CORPORATION WILL FURNISH A
FULL STATEMENT OF THE BOARD OF DIRECTORS'
AUTHORITY AND OF THE DESIGNATIONS AND ANY
PREFERENCES, CONVERSION AND OTHER RIGHTS, VOTING
POWERS, RESTRICTIONS, LIMITATIONS AS TO DIVIDENDS,
QUALIFICATIONS AND TERMS AND CONDITIONS OF
REDEMPTION OF THE STOCK OF EACH CLASS WHICH THE
CORPORATION IS AUTHORIZED TO ISSUE TO ANY
STOCKHOLDER UPON REQUEST WITHOUT CHARGE.
FOR VALUE RECEIVED, __________ HEREBY SELL, ASSIGN AND TRANSFER
UNTO _______________________________________________________________
______________________________________________________________ SHARES
REPRESENTED BY THE WITHIN CERTIFICATE, AND DO HEREBY IRREVOCABLY
CONSTITUTE AND APPOINT
_____________________________________________________________ ATTORNEY
TO TRANSFER THE SAID SHARES ON THE BOOKS OF THE WITHIN NAMED CORPORATION
WITH FULL POWER OF SUBSTITUTION IN THE PREMISES.
DATED ________________ ______
In presence of __________________________________________
__________________________
NOTICE THE SIGNATURE OF THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE
FACE OF THE CERTIFICATE, IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
<PAGE>
Ex-99.B4
EXCERPTS OF ARTICLES OF INCORPORATION
OF
RCM EQUITY FUNDS, INC.
ARTICLE IV
CAPITAL STOCK
(1)(a) 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 $0.0001 per share. There
shall initially be one series of shares, designated as the "RCM Global
Technology Fund," consisting initially of 50,000,000 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
950,000,000 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 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.
(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 share, 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 Articles of Incorporation
and the Bylaws of the Corporation (the "Bylaws").
(4) 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. As used in these Articles of Incorporation
and subject to the prior sentence of this Article IV(4), a "series" of shares
represents interests in the same assets, liabilities, income, earnings and
profits of the Corporation. Subject to applicable law, the
<PAGE>
power of the Board of Directors to classify or reclassify any of the unissued
shares of capital stock shall include, without limitation, authority to
classify or reclassify any such capital 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 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;
(b) Whether or not and, if so, the rates, amounts and times at
which, and the conditions under which, dividends shall be payable
on shares of such series;
(c) Whether or not shares of such series shall have voting
rights in addition to any general voting rights provided by law and
these Articles of Incorporation of the Corporation and, if so, the
terms of such additional voting rights; and
(d) The rights of the holders of shares of such series
(including any classes thereof) upon the liquidation, dissolution
or winding up of the affairs of, or upon a distribution of the
assets of, the Corporation.
(5) (a) Subject to the Board of Directors classification
power under Article IV(4), shares of capital stock of the
Corporation shall have the following preferences, conversion and
other rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms and conditions of redemption:
(i) 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 such assets, payments or funds were received
by the Corporation for all purposes, subject only to the rights of
creditors, and shall be so handled upon the books of account of the
Corporation. Such consideration, assets, income, earnings, profits
and proceeds thereof, including any proceeds derived from the sale,
exchange or liquidation
<PAGE>
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 manner and on such
basis as the Board of Directors, in its sole discretion, shall deem
fair and equitable.
(ii) 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.
(iii) Shares of each series of capital stock shall be entitled
to such dividends and distributions, in capital 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).
(iv) 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, subject to Article IV(5)(b), among such
stockholders in proportion to the number of shares of such series
held by them and recorded on the books of the Corporation or in
such other manner as the Board of Directors may determine in
accordance with law. 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 as determined by the Board of
Directors, in its sole discretion.
<PAGE>
(b) A class of shares may be invested with one or more other
classes in a common investment portfolio comprising a series.
Notwithstanding the provisions of paragraph 5(a) of this Article
IV, 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 paragraph (5)(a) of this Article IV
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 values of each such class or as otherwise
determined by the Board of Directors in accordance with 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)(b), 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 these
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.
<PAGE>
(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 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.
(c) Each shareholder of each series or class of capital stock
shall be entitled to one vote for each share of capital stock then
standing in his 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 or class except that: (i)
when expressly required by law, shares of capital stock shall be
voted by individual series or class and (ii) only shares of capital
stock of the respective series or class affected by a matter shall
be entitled to vote on such matter. At all meetings of the
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 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 Articles of Incorporation,
the Bylaws or law, 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 as
originally called. The absence from any meeting, in person or by
proxy, of holders of the number of shares of capital stock of the
Corporation in excess of the quorum which may be required by the
Maryland Law, the 1940 Act, other applicable statute, these
Articles of Incorporation or the Bylaws, 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.
<PAGE>
(d) 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 of the Corporation 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 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 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)(d), 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 Registration Statement for that series.
Payment of the redemption price shall be made in cash by the
Corporation at such time and in such manner as may be determined
from time-to-time by the Board of Directors of 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.
(e) 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.
<PAGE>
ARTICLE VIII
MAJORITY VOTE
Notwithstanding any provision of the Maryland Law requiring a greater
proportion than a majority of the votes of all classes or of any class of
capital stock entitled to be cast, to take or authorize any action, the
Corporation may, subject to other applicable provisions of law, these
Articles of Incorporation and the Bylaws, 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 series or
class of shares.
ARTICLE IX
PRE-EMPTIVE RIGHTS
No holder of the capital stock of the Corporation or of any other class of
capital 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 of capital
stock of any class, or of rights or options to purchase any capital stock, or
of securities convertible into, or carrying rights or options to purchase,
capital stock of any class, whether now or 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 capital stock or securities of the
Corporation, whether now or hereafter authorized.
<PAGE>
EXCERPTS FROM BYLAWS
OF
RCM EQUITY FUNDS, INC.
MEETING 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 Bylaws.
Section 2. SPECIAL MEETINGS. Special meetings of the stockholders, unless
otherwise provided by law or by the Articles of Incorporation, may be called
for any purpose or purposes by a majority of the Board of Directors, by the
President, or on the written request of the holders of at least 25% of the
outstanding stock of the Corporation entitled to vote at such meeting. In
addition, special meetings of stockholders may be called on the written
request of the holders of at least 10% of the outstanding stock of the
Corporation entitled to vote at such meeting for the purposes of removing
directors or to assist in communicating with stockholders as required by the
1940 Act. 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 MEETINGS. Annual and special meetings of the
stockholders shall be held at the principal executive office of the
Corporation or at such other place within the United States as the Board of
Directors may from time-to-time determine and as shall be stated in the
notice of the meeting.
Section 4. NOTICE OF MEETINGS: WAIVER OF NOTICE. Notice of the place, date
and time of the holding of each annual and special meeting of the
stockholders and the purpose or purposes of each special meeting shall be
given personally or by mail, not less than ten nor more than 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
<PAGE>
States mail addressed to the stockholder at his address as it appears on the
records of the Corporation, with postage thereon prepaid. Notice of any
meeting of stockholders shall be deemed waived by any stockholder who shall
attend such meeting in person or by proxy, or who shall, either before or
after the meeting, submit a signed waiver of notice which is filed with the
records of the meeting.
If any meeting of the stockholders shall be adjourned to another time and
place not more than 120 days after the original record date, and if the time
and place to which the meeting shall be adjourned were announced at the
meeting at which the adjournment is taken, no further notice of such meeting
need be given.
Section 5. QUORUM. At all meetings of the stockholders, the holders of
one-third of the shares of stock of the Corporation entitled to vote at the
meeting, present in person or by proxy, shall constitute a quorum for the
transaction of any business, but this Section 5 shall not affect any
requirement under the laws of the State of Maryland ("Maryland Law"), the
1940 Act, or the Articles of Incorporation for the vote necessary for the
adoption of any measure. In the absence of a quorum, no business may be
transacted, except that the holders of a majority of the shares of stock
present in person or by proxy and entitled to vote may adjourn the meeting
from time-to-time, without notice other than announcement thereat except as
otherwise required by these Bylaws, until the holders of the requisite amount
of shares of stock shall be so present. At any such adjourned meeting at
which a quorum may be present, any business may be transacted which might
have been transacted at the meeting as originally called. The absence from
any meeting, in person or by proxy, of holders of the number of shares of
stock of the Corporation in excess of the quorum which may be required by
Maryland Law, the 1940 Act, any other applicable statute, the Articles of
Incorporation or these Bylaws, for action upon any given matter shall not
prevent action at such meeting upon any other matter or matters which may
properly come before the meeting, if there shall be present thereat, in
person or by proxy, holders of the number of shares of stock of the
Corporation required for action in respect of such other matter or matters.
Section 6. ORGANIZATION. At each meeting of the stockholders, the Chairman
of the Board (if one has been designated by the Board of Directors), or in
the Chairman of the Board's absence or inability to act, the President, or in
the absence or inability of the Chairman of the Board and the President, a
Vice President, shall act as chairman of the meeting. The Secretary or 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
<PAGE>
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 90
nor less than ten days before the date of the meeting of the stockholders.
Only those persons who were holders of record of shares at such time shall be
entitled to vote at such meeting and any adjournment thereof.
Section 9. VOTING. Except as otherwise provided by 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 of such stock
(regardless of class) standing in such stockholder's name on the record of
stockholders of the Corporation as of the record date determined pursuant to
Section 8 of this Article or, if such record date shall not have been so
fixed, then at the later of (a) the close of business on the day on which
notice of the meeting is mailed or (b) the 30th day before the meeting. With
respect to the election of directors, each share of stock may be voted for as
many individuals as there are directors to be elected and for whose election
the share is entitled to be voted, and directors shall be elected by
plurality vote. Except as otherwise provided by Maryland Law, the 1940 Act,
the Articles of Incorporation or these Bylaws, any corporate action to be
taken by vote of the stockholders shall be authorized by a majority of the
total votes cast at a meeting of stockholders by the holders of shares
present in person or represented by proxy and entitled to vote on such
action, provided that a quorum is present.
Section 10. PROXIES. Each stockholder entitled to vote at any meeting of
stockholders may authorize another person or persons to act for him by a
proxy signed by such stockholder or his duly authorized attorney-in-fact. No
proxy shall be valid after the expiration of 11 months from the date thereof,
unless otherwise provided in the proxy. Every proxy shall be revocable at the
pleasure of the stockholder executing it, except in those cases where such
proxy states that it is irrevocable and where an irrevocable proxy is
permitted by law.
Section 11. VOTING BY BALLOT. On a vote by ballot, each ballot shall be
signed by the stockholder voting or by his proxy, if there be such proxy, and
shall state the number of shares voted.
Section 12. VOTING OF SHARES BY CERTAIN HOLDERS. Shares of its own stock
directly or indirectly owned by the Corporation shall not be voted at any
meeting and shall not be counted in determining the total number of
outstanding shares entitled to be voted at any given time, unless they are
held by it in a fiduciary capacity, in which case they may be voted and shall
be counted in determining the total number of shares outstanding at any given
time.
The Board of Directors may adopt by resolution a procedure whereby a
stockholder may certify in writing to the Corporation that any shares of
stock registered in the name of the stockholder are held for the account of a
specified person other than the stockholder. The resolution shall set forth
the class of stockholders who may make the
<PAGE>
certification, the purpose for which the certification may be made, the form
of certification, and the information to be contained in it; if the
certification is with respect to a record date or closing of the stock
transfer books, the time after the record date or closing of the stock
transfer books within which the certification must be received by the
Corporation; and any other provisions with respect to the procedure that the
Board of Directors considers necessary or desirable. On receipt of such
certification, the person specified in the certification shall be regarded
as, for the purposes set forth in the certification, the stockholder of
record of the specified stock in place of the stockholder who makes the
certification.
Section 13. INSPECTORS. The Board of Directors may, in advance of any
meeting of stockholders, appoint one or more inspectors to act at such
meeting or any adjournment thereof. If the inspectors shall not be so
appointed or if any of them shall fail to appear or act, the chairman of the
meeting may, and on the request of any stockholder entitled to vote thereat
shall, appoint inspectors. The inspectors shall determine the number of
shares outstanding and the voting powers of each, the number of shares
represented at the meeting, the existence of a quorum, and the validity and
effect of proxies, and shall receive votes, ballots or consents, hear and
determine all challenges and questions arising in connection with the right
to vote, count and tabulate all votes, ballots or consents, determine the
result, and 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) a 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.
<PAGE>
ARTICLE VII
CAPITAL STOCK
Section 1. STOCK CERTIFICATES. Each holder of stock of the Corporation
shall be entitled upon request to have a certificate or certificates, in such
form as shall be approved by the Board of Directors, representing the number
of shares of the Corporation owned by him, provided, however, that
certificates for fractional shares will not be delivered in any case. The
certificates representing shares of stock shall be signed by or in the name
of the Corporation by the 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. 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 Bylaws, 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
<PAGE>
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 Bylaws, as it may deem
expedient concerning the issue, transfer and registration of certificates for
shares of stock of the Corporation. It may appoint, or authorize any officer
or officers to appoint, one or more transfer agents or one or more transfer
clerks and one or more registrars and may require all certificates for shares
of stock to bear the signature or signatures of any of them.
Section 5. LOST, DESTROYED OR MUTILATED CERTIFICATES. The holder of any
certificates representing shares of stock of the Corporation shall
immediately notify the Corporation of any loss, theft, destruction or
mutilation of such certificate, and, upon request, shall provide to the
Corporation an affidavit of the rightful holder of such certificate stating
that such certificate has been lost, stolen, destroyed or mutilated, as the
case may be. The Corporation may issue a new certificate of stock in the
place of any certificate theretofore issued by it which the owner thereof
shall allege to have been lost or destroyed or which shall have been
mutilated. Prior to issuing a new certificate to replace any certificate
alleged to have been lost, stolen, destroyed or mutilated, the Board of
Directors may, in its discretion, require such owner or his legal
representatives to give to the Corporation a bond in such sum, limited or
unlimited, and in such form and with such surety or sureties, as the Board of
Directors in its absolute discretion shall determine, to indemnify the
Corporation against any claim that may be made against it on account of the
alleged loss, theft or destruction of any such certificate, or issuance of a
new certificate. Anything herein to the contrary notwithstanding, the Board
of Directors, in its absolute discretion, may refuse to issue any such new
certificate, except pursuant to legal proceedings under Maryland Law.
Section 6. FIXING OF A RECORD DATE FOR DIVIDENDS AND DISTRIBUTIONS. The
Board of Directors may fix, in advance, as a record date, a date not more
than 90 days preceding the date fixed for the payment of any dividend or the
making of any distribution or the allotting of any other rights (except with
respect to voting which is provided for in Article II(8)). Once the Board of
Directors fixes such record date as the record date for the determination of
the stockholders entitled to receive any such dividend or distribution or the
allotment of such other rights, in such case 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
Bylaws, minutes of the proceedings of its stockholders, annual statements of
its affairs, and voting trust agreements on file at its principal office.
<PAGE>
INVESTMENT MANAGEMENT AGREEMENT, POWER OF ATTORNEY
AND SERVICE AGREEMENT
THIS AGREEMENT is entered into this 19th day of December, 1995 by and
between RCM Capital Management, a California Limited Partnership (the
"Investment Manager"), and RCM Equity Funds, Inc. (the "Company"), on behalf of
RCM Global Technology Fund, a series of the Company (the "Fund").
1. APPOINTMENT AND ACCEPTANCE OF APPOINTMENT OF THE INVESTMENT MANAGER
(a) Subject to express provisions and limitations set forth in the
Company's Articles of Incorporation, Bylaws, Form N-lA Registration
Statement under the Investment Company Act of 1940, as amended (the "1940
Act") and under the Securities Act of 1933, as amended (the "1933 Act"),
and the Fund's prospectus as in use from time to time, as well as to the
factors affecting the Company's status as a regulated investment company
under the Internal Revenue Code of 1986, as amended, the Company hereby
grants to the Investment Manager and the Investment Manager hereby accepts
full discretionary authority to manage the investment and reinvestment of
the cash, securities, and other assets of the Fund (the "Portfolio")
presently held by State Street Bank & Trust Company (the "Custodian"), any
proceeds thereof, and any additions thereto, in the Investment Manager's
discretion. In the performance of its duties hereunder, the Investment
Manager shall further be bound by any and all determinations by the Board
of Directors of the Company relating to the investment objectives policies
or restrictions of the Fund, which determinations shall be communicated in
writing to the Investment Manager. For all purposes herein, the Investment
Manager shall be deemed an independent contractor of the Company.
2. POWERS OF THE INVESTMENT MANAGER
Subject to the limitations provided in Section 1 hereof, the
Investment Manager is empowered hereby, through any of its partners,
principals, or appropriate employees, for the benefit of the Fund:
(a) to invest and reinvest in shares, stocks, bonds, notes and other
obligations of every description issued or incurred by governmental bodies,
corporations, mutual funds, trusts, associations or firms, in trade
acceptances and other commercial paper, and in loans and deposits at
interest on call or on time, whether or not secured by collateral;
(b) to purchase and sell commodities or commodities contracts and
investments in put, call, straddle, or spread options;
(c) to enter into forward, future, or swap contracts with respect to
the purchase and sale of securities, currencies, commodities, and
commodities contracts;
<PAGE>
(d) to lend its portfolio securities to brokers, dealers and other
financial institutions;
(e) to buy, sell, or exercise options, rights and warrants to
subscribe for stock or securities;
(f) to engage in any other types of investment transactions described
in the Fund's Prospectus and Statement of Additional Information; and
(g) to take such other action, or to direct the Custodian to take
such other action, as may be necessary or desirable to carry out the
purpose and intent of the foregoing.
3. EXECUTION OF PORTFOLIO TRANSACTIONS
(a) The Investment Manager shall provide adequate facilities and
qualified personnel for the placement of, and shall place, orders for the
purchase, or other acquisition, and sale, or other disposition, of
portfolio securities or other portfolio assets for the Fund.
(b) Unless otherwise specified in writing to the Investment Manager
by the Fund, all orders for the purchase and sale of securities for the
Portfolio shall be placed in such markets and through such brokers as in
the Investment Manager's best judgment shall offer the most favorable price
and market for the execution of each transaction; provided, however, that,
subject to the above, the Investment Manager may place orders with
brokerage firms that have sold shares of the Fund or that furnish
statistical and other information to the Investment Manager, taking into
account the value and quality of the brokerage services of such firms,
including the availability and quality of such statistical and other
information. Receipt by the Investment Manager of any such statistical and
other information and services shall not be deemed to give rise to any
requirement for abatement of the advisory fee payable to the Investment
Manager pursuant to Section 5 hereof and Appendix A hereto.
(c) the Fund understands and agrees that the Investment Manager may
effect securities transactions which cause the Fund to pay an amount of
commission in excess of the amount of commission another broker would have
charged, provided, however, that the Investment Manager determines in good
faith that such amount of commission is reasonable in relation to the value
of Fund share sales, statistical, brokerage and other services provided by
such broker, viewed in terms of either the specific transaction or the
Investment Manager's overall responsibilities to the Fund and other clients
for which the Investment Manager exercises investment discretion. The Fund
also understands that the receipt and use of such services will not reduce
the Investment Manager's customary and normal research activities.
(d) The Fund understands and agrees that:
(i) the Investment Manager performs investment management
services for various clients and that the Investment Manager may take
action with respect to any of its other clients which may differ from
action taken or from the timing or nature of action taken
<PAGE>
with respect to the Portfolio, so long as it is the Investment Manager's
policy, to the extent practical, to allocate investment opportunities to
the Portfolio over a period of time on a fair and equitable basis
relative to other clients;
(ii) the Investment Manager shall have no obligation to purchase
or sell for the Portfolio any security which the Investment Manager, or its
principals or employees, may purchase or sell for its or their own accounts
or the account of any other client, if in the opinion of the Investment
Manager such transaction or investment appears unsuitable, impractical or
undesirable for the Portfolio;
(iii) on occasions when the Investment Manager deems the
purchase or sale of a security to be in the best interests of the Fund as
well as other clients of the Investment Manager, the Investment Manager, to
the extent permitted by applicable laws and regulations, may aggregate the
securities to be so sold or purchased when the Investment Manager believes
that to do so will be in the best interests of the Fund. In such event,
allocation of the securities so purchased or sold, as well as the expenses
incurred in the transaction, shall be made by the Investment Manager in the
manner the Investment Manager considers to be the most equitable and
consistent with its fiduciary obligations to the Fund and to such other
clients; and
(iv) the Investment Manager does not prohibit any of its
principals or employees from purchasing or selling for their own accounts
securities that may be recommended to or held by the Investment Manager's
clients, subject to the provisions of the Investment Manager's Code of
Ethics and that of the Company.
4. ALLOCATION OF EXPENSES OF THE COMPANY AND THE FUND
(a) The Investment Manager will bear all expenses related to salaries
of its employees and to the Investment Manager's overhead in connection
with its duties under this Agreement. The Investment Manager also will pay
all fees and salaries of the Company's directors and officers who are
affiliated persons (as such term is defined in the 1940 Act) of the
Investment Manager.
(b) Except for the expenses specifically assumed by the Investment
Manager, the Fund will pay all of its expenses, including, without
limitation, fees and expenses of the directors not affiliated with the
Investment Manager attributable to the Fund; fees of the Investment
Manager; fees of the Fund's administrator, custodian and subcustodians for
all services to the Fund (including safekeeping of funds and securities and
maintaining required books and accounts); transfer agent, registrar and
dividend reinvestment and disbursing agent interest charges; taxes;
charges and expenses of the Fund's legal counsel and independent
accountants; charges and expenses of legal counsel provided to the non-
interested directors of the Company; expenses of repurchasing shares of the
Fund; expenses of printing and mailing share certificates, stockholder
reports, notices, proxy statements and reports to governmental agencies;
brokerage and other expenses connected with the execution,
<PAGE>
recording and settlement of portfolio security transactions; expenses
connected with negotiating, or effecting purchases or sales of portfolio
securities or registering privately issued portfolio securities; expenses
of calculating and publishing the net asset value of the Fund's shares;
expenses of membership in investment company associations; premiums and
other costs associated with the acquisition of a mutual fund directors and
officers errors and omissions liability insurance policy; expenses of
fidelity bonding and other insurance premiums; expenses of stockholders'
meetings; and SEC and state blue sky registration fees.
(c) The expenses borne by the Fund pursuant to Section 4(b) shall
include the Fund's proportionate share of any such expenses of the Company,
which shall be allocated among the Fund and the other series of the Company
on such basis as the Company shall deem appropriate.
5. COMPENSATION OF THE INVESTMENT MANAGER
(a) In consideration of the services performed by the Investment
Manager hereunder, the Fund will pay or cause to be paid to the Investment
Manager, as they become due and payable, management fees determined in
accordance with the attached Schedule of Fees (Appendix A). In the event of
termination, any management fees paid in advance pursuant to such fee
schedule will be prorated as of the date of termination and the unearned
portion thereof will be returned to the Fund.
(b) The net asset value of the Fund's portfolio used in fee
calculations shall be determined in the manner set forth in the Articles of
Incorporation and Bylaws of the Company and the Fund's prospectus as of the
close of regular trading on the New York Stock Exchange on each business
day the New York Stock Exchange is open.
(c) The Fund hereby authorizes the Investment Manager to charge the
Portfolio, subject to the provisions in Section 6 hereof, for the full
amount of fees as they become due and payable pursuant to the attached
schedule of fees; provided, however, that a copy of a fee statement
covering said payment shall be sent to the Custodian and to the Company.
(d) The Investment Manager may from time to time voluntarily agree to
limit the aggregate operating expenses of the Fund for one or more fiscal
years of the Company, as set forth in Appendix A hereto or in any other
written agreement with the Company. If in any such fiscal year the
aggregate operating expenses of the Fund (as defined in Appendix A or such
other written agreement) exceed the applicable percentage of the average
daily net assets of the Fund for such fiscal year, the Investment Manager
shall reimburse the Fund for such excess operating expenses. Such
operating expense reimbursement, if any, shall be estimated, reconciled and
paid on a quarterly basis, or such more frequent basis as the Investment
Manager may agree in writing. Any such reimbursement of the Fund shall be
repaid to the Investment Manager by the Fund, without interest, at such
later time or times as it may be repaid without causing the aggregating
operating expenses of the Fund to exceed the applicable percentage of the
average daily net assets of the Fund for the period in
<PAGE>
which it is repaid; provided, however, that upon termination of this
Agreement, the Fund shall have no further obligation to repay any such
reimbursements.
6. SERVICE TO OTHER CLIENTS
Nothing contained in this Agreement shall be construed to prohibit the
Investment Manager from performing investment advisory, management,
distribution or other services for other investment companies and other
persons, trusts or companies, or to prohibit affiliates of the Investment
Manager from engaging in such businesses or in other related or unrelated
businesses.
7. STANDARD OF CARE
The Investment Manager shall have no liability to the Fund, or its
stockholders, for any error of judgment, mistake of law, loss arising out
of any investment, or other act or omission in the performance of its
obligations to the Fund not involving willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations and duties hereunder.
The federal securities laws impose liabilities under certain circumstances
on persons who act in good faith, and therefore nothing herein shall in any
way constitute a waiver or limitation of any rights which the undersigned
may have under any federal securities laws.
8. DURATION OF AGREEMENT
This Agreement shall continue in effect until the close of business on
December 19, 1997. This Agreement may thereafter be renewed from year to
year by mutual consent, provided that such renewal shall be specifically
approved at least annually by (i) the Board of Directors of the Company, or
by the vote of a majority (as defined in the 1940 Act) of the outstanding
voting securities of the Company, and (ii) a majority of those directors
who are not parties to this Agreement or interested persons (as defined in
the 1940 Act) of any such party cast in person at a meeting called for the
purpose of voting on such approval.
<PAGE>
9. TERMINATION
This Agreement may be terminated at any time, without payment of any
penalty, by the Board of Directors of the Company or by the vote of a
majority (as defined in the 1940 Act) of the outstanding voting securities
of the Company on sixty (60) days' written notice to the Investment
Manager, or by the Investment Manager on like notice to the Company. This
Agreement shall automatically terminate in the event of its assignment (as
defined in the 1940 Act).
10. REPORTS, BOOKS AND RECORDS
The Investment Manager shall render to the Board of Directors of the
Company such periodic and other reports as the Board may from time to time
reasonably request. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Investment Manager hereby agrees that all records
which it maintains for the Company are property of the Company. The
Investment Manager shall surrender promptly to the Company any of such
records upon the Company's request, and shall preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act the records required to be
maintained by Rule 31a-1 under the 1940 Act.
11. REPRESENTATIONS AND WARRANTIES
The Investment Manager represents and warrants to the Company that the
Investment Manager is registered as an investment adviser under the
Investment Advisers Act of 1940. During the term of this Agreement, the
Investment Manager shall notify the Company of any change in the membership
of the Investment Manager's partnership within a reasonable time after such
change. The Company represents and warrants to the Investment Manager that
the company is registered as an open-end management investment company
under the 1940 Act. Each party further represents and warrants to the
other that this Agreement has been duly authorized by such party and
constitutes the legal, valid and binding obligation of such party in
accordance with its terms.
12. AMENDMENT OF THIS AGREEMENT
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination
is sought.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate originals by their officers thereunto duly authorized as
of the date first above written.
RCM CAPITAL MANAGEMENT, RCM EQUITY FUNDS, INC. ON
A CALIFORNIA LIMITED PARTNERSHIP BEHALF OF RCM GLOBAL
TECHNOLOGY FUND
By: _______________________________ By: _____________________________
Claude N. Rosenberg, Jr. William L. Price
Chief Executive Officer of President
RCM General Corporation, in its
Capacity as General Partner of
RCM Limited, L.P., in its
capacity as the General Partner
of RCM Capital Management
ATTEST: ATTEST:
By: _______________________________ By: _____________________________
Michael J. Apatoff Anthony Ain
Chief Operating Officer of Secretary
RCM General Corporation, in its
Capacity as General Partner of
RCM Limited, L.P., in its
capacity as the General Partner
of RCM Capital Management
<PAGE>
APPENDIX A
INVESTMENT MANAGEMENT AGREEMENT, POWER OF ATTORNEY,
AND SERVICE AGREEMENT
BETWEEN RCM CAPITAL MANAGEMENT AND RCM EQUITY FUNDS, INC.
SCHEDULE OF FEES
FOR RCM GLOBAL TECHNOLOGY FUND
AVERAGED MONTH-END NET ASSET VALUE
ARREARS
Effective Date: December 19, 1995
The Fund will pay a monthly fee to the Investment Manager based on the average
daily net assets of the Fund, at the annualized rate of 1.00% of the value of
the Fund's average daily net assets.
VALUE OF SECURITIES AND CASH OF FUND FEE
------------------------------------ --------------
On all sums 1.00% annually
For the fiscal year ended December 31, 1996, the Investment Manager shall
reimburse the Fund to the extent that the operating expenses of the Fund (as
hereinafter defined) exceed 1.75% of the average daily net assets of the Fund.
For this purpose, the "operating expenses" of the Fund shall be deemed to
include all ordinary operating expenses other than interest, taxes and
extraordinary expenses.
Dated: December 19, 1995
RCM CAPITAL MANAGEMENT, RCM EQUITY FUNDS, INC.
A CALIFORNIA LIMITED PARTNERSHIP ON BEHALF OF RCM GLOBAL
TECHNOLOGY FUND
By: _______________________________ By: _____________________________
Claude N. Rosenberg, Jr. William L. Price
Chief Executive Officer of President
RCM General Corporation, in its
Capacity as General Partner of
RCM Limited, L.P., in its
capacity as the General Partner
of RCM Capital Management
<PAGE>
ATTEST: ATTEST:
By: _______________________________ By: _____________________________
Michael J. Apatoff Anthony Ain
Chief Operating Officer of Secretary
RCM General Corporation, in its
Capacity as General Partner of
RCM Limited, L.P., in its
capacity as the General Partner
of RCM Capital Management
<PAGE>
CUSTODIAN CONTRACT
Between
RCM EQUITY FUNDS, INC.
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
<PAGE>
CUSTODIAN CONTRACT
This Contract between RCM Equity Funds, Inc., a corporation organized and
existing under the laws of Maryland and having its principal place of business
at Four Embarcadero Center, Suite 3000, San Francisco, California 94111 (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 (the "Custodian"),
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate series, with
each such series representing interests in a separate portfolio of securities
and other assets; and
WHEREAS, the Fund intends to initially offer shares in one series, RCM
Global Technology Fund (such series together with all other series subsequently
established by the Fund and made subject to this Contract in accordance with
Article 17, being herein referred to as the "Portfolio(s)");
NOW THEREFORE, 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 the assets of the
Portfolios of the Fund, including securities which the Fund, on behalf of the
applicable Portfolio 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 Fund's Articles
of Incorporation (the "Articles of Incorporation"). The Fund on behalf of the
Portfolio(s) agrees to deliver to the Custodian all securities and cash of the
Portfolios, and all payments of income, payments of principal or capital
distributions received by it with respect to all securities owned by the
Portfolio(s) from time to time, and the cash consideration received by it for
such new or treasury shares of capital stock of the Fund representing interests
in the Portfolios, ("Shares") as may be issued or sold from time to time. The
Custodian shall not be responsible for any property of a Portfolio held or
received by the Portfolio and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (as such term is defined in Article
5), the Custodian shall on behalf of the applicable Portfolio(s) from time to
time employ one or more sub-custodians, located in the United States, provided
that the Custodian shall have no more or less responsibility or liability to the
Fund on account of any actions or omissions of any sub-custodian so employed
than any such sub-custodian has to the Custodian. The Custodian may employ as
sub-custodian for the Fund's foreign securities on behalf of the applicable
Portfolio(s) the foreign banking institutions and foreign securities
depositories designated in Schedule A hereto but only in accordance with the
provisions of Article 3.
<PAGE>
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 each Portfolio all non-cash property, to be held by
it in the United States including all domestic securities owned by
such Portfolio, other than (a) securities which are maintained
pursuant to Section 2.10 in a clearing agency which acts as a
securities depository or in a book-entry system authorized by the U.S.
Department of the Treasury (each, a "U.S. 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 (the "Direct Paper System") pursuant to Section 2.11.
2.2 DELIVERY OF SECURITIES. The Custodian shall release and deliver
domestic securities owned by a Portfolio held by the Custodian or in a
U.S. Securities System account of the Custodian or in the Custodian's
Direct Paper System account ("Direct Paper System Account") only upon
receipt of Proper Instructions from the Fund on behalf of the
applicable Portfolio, 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 Portfolio 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
Portfolio;
3) In the case of a sale effected through a U.S. Securities System,
in accordance with the provisions of Section 2.10 hereof;
4) To the depository agent in connection with tender or other
similar offers for securities of the Portfolio;
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 Portfolio or into the name of any nominee or nominees of
the Custodian or into the name or nominee
2
<PAGE>
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
Portfolio, 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 Portfolio, BUT ONLY against receipt of adequate collateral as
agreed upon from time to time by the Custodian and the Fund on
behalf of the Portfolio, 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 credited to the Custodian's account
in the book-entry system authorized by the U.S. Department of the
Treasury, the Custodian will not be held liable or responsible
for the delivery of securities owned by the Portfolio prior to
the receipt of such collateral;
11) For delivery as security in connection with any borrowings by the
Fund on behalf of the Portfolio requiring a pledge of assets by
the Fund on behalf of the Portfolio, BUT ONLY against receipt of
amounts borrowed;
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12) For delivery in accordance with the provisions of any agreement
among the Fund on behalf of the Portfolio, 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 Portfolio of
the Fund;
13) For delivery in accordance with the provisions of any agreement
among the Fund on behalf of the Portfolio, 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 Portfolio of the
Fund;
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 currently effective
prospectus and statement of additional information of the Fund,
related to the Portfolio (the "Prospectus"), in satisfaction of
requests by holders of Shares for repurchase or redemption; and
15) For any other proper corporate purpose, BUT ONLY upon receipt of,
in addition to Proper Instructions from the Fund on behalf of the
applicable Portfolio, a certified copy of a resolution of the
Board of Directors of the Fund or of the Executive Committee
signed by an officer of the Fund and certified by the Secretary
or an Assistant Secretary (a "Certified Resolution"), specifying
the securities of the Portfolio 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
Portfolio or in the name of any nominee of the Fund on behalf of the
Portfolio or of any nominee of the Custodian which nominee shall be
assigned exclusively to the Portfolio, 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
Portfolio, or in the name or nominee name of any agent appointed pursuant
to Section 2.9 or in the name or nominee name of
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any sub-custodian appointed pursuant to Article 1. All securities accepted
by the Custodian on behalf of the Portfolio 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 each Portfolio 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 Portfolio, other than cash maintained by the Portfolio in a
bank account established and used in accordance with Rule 17f-3 under the
Investment Company Act of 1940, as amended (the "1940 Act"). Funds held by
the Custodian for a Portfolio 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 1940 Act and that each such bank or trust
company and the funds to be deposited with each such bank or trust company
shall on behalf of each applicable Portfolio be approved by vote of a
majority of the Board of Directors of the Fund (the "Board"). 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 on
behalf of each applicable Portfolio and the Custodian, the Custodian shall,
upon the receipt of Proper Instructions from the Fund on behalf of a
Portfolio, make federal funds available to such Portfolio 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 such Portfolio which are
deposited into the Portfolio'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 registered domestic securities held hereunder to which each
Portfolio shall be entitled either by law or pursuant to custom in the
securities business, and shall collect on a timely basis all income and
other payments with respect to bearer domestic securities if, on the date
of payment by the issuer, such securities are held by the Custodian or its
agent thereof and shall credit such income, as collected, to such
Portfolio's custodian account. Without limiting the generality of the
foregoing, the Custodian shall detach and present for payment all coupons
and other income
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items requiring presentation as and when they become due and shall collect
interest when due on securities held hereunder. Income due each Portfolio
on securities loaned pursuant to the provisions of Section 2.2 (10) shall
be the responsibility of the Fund. The Custodian will have no duty or
responsibility in 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 Portfolio is properly entitled.
2.7 PAYMENT OF FUND MONIES. Upon receipt of Proper Instructions from the Fund
on behalf of the applicable Portfolio, which may be continuing instructions
when deemed appropriate by the parties, the Custodian shall pay out monies
of a Portfolio 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 Portfolio 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
1940 Act to act as a custodian and has been designated by the
Custodian as its agent for this purpose) registered in the name of the
Portfolio 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 U.S. 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 2.11; (d) in the case of
repurchase agreements entered into between the Fund on behalf of the
Portfolio 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 Portfolio of
securities owned by the Custodian along with written evidence of the
agreement by the Custodian to repurchase such securities from the
Portfolio 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 5;
2) In connection with conversion, exchange or surrender of securities
owned by the Portfolio as set forth in Section 2.2 hereof;
3) For the redemption or repurchase of Shares as set forth in Article 4
hereof;
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4) For the payment of any expense or liability incurred by the Portfolio,
including but not limited to the following payments for the account of
the Portfolio: 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;
5) For the payment of any dividends on Shares declared pursuant to the
governing documents of the Fund;
6) For payment of the amount of dividends received in respect of
securities sold short;
7) For any other proper purpose, BUT ONLY upon receipt of, in addition to
Proper Instructions from the Fund on behalf of the Portfolio, a
Certified Resolution 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 a
Portfolio is made by the Custodian in advance of receipt of the securities
purchased in the absence of specific written instructions from the Fund on
behalf of such Portfolio 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 1940 Act 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 FUND ASSETS IN U.S. SECURITIES SYSTEMS. The Custodian may
deposit and/or maintain securities owned by a Portfolio in a clearing
agency registered with the Securities and Exchange Commission (the "SEC")
under Section 17A of the Exchange Act, 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 "U.S. Securities System" in accordance with applicable Federal
Reserve Board and SEC rules and regulations, if any, and subject to the
following provisions:
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1) The Custodian may keep securities of the Portfolio in a U.S.
Securities System provided that such securities are represented in an
account ("Account") of the Custodian in the U.S. 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 securities of the
Portfolio which are maintained in a U.S. Securities System shall
identify by book-entry those securities belonging to the Portfolio;
3) The Custodian shall pay for securities purchased for the account of
the Portfolio upon (i) receipt of advice from the U.S. 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 Portfolio. The
Custodian shall transfer securities sold for the account of the
Portfolio upon (i) receipt of advice from the U.S. 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 Portfolio.
Copies of all advices from the U.S. Securities System of transfers of
securities for the account of the Portfolio shall identify the
Portfolio, be maintained for the Portfolio by the Custodian and be
provided to the Fund at its request. Upon request, the Custodian
shall furnish the Fund on behalf of the Portfolio confirmation of each
transfer to or from the account of the Portfolio in the form of a
written advice or notice and shall furnish to the Fund on behalf of
the Portfolio copies of daily transaction sheets reflecting each day's
transactions in the U.S. Securities System for the account of the
Portfolio.
4) The Custodian shall provide the Fund for the Portfolio with any report
obtained by the Custodian on the U.S. Securities System's accounting
system, internal accounting control and procedures for safeguarding
securities deposited in the U.S. Securities System;
5) The Custodian shall have received from the Fund on behalf of the
Portfolio the initial or annual certificate, as the case may be,
required by Article 14 hereof;
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for the benefit of the Portfolio
for any loss or damage to the Portfolio resulting from use of the U.S.
Securities System by reason of any
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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 U.S. 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 U.S. 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 Portfolio has
not been made whole for any such loss or damage.
2.11 FUND ASSETS HELD IN THE CUSTODIAN'S DIRECT PAPER SYSTEM. The Custodian may
deposit and/or maintain securities owned by a Portfolio 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 from the Fund on
behalf of the Portfolio;
2) The Custodian may keep securities of the Portfolio in the Direct Paper
System only if such securities are represented in the Direct Paper
System Account, which account 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
Portfolio which are maintained in the Direct Paper System shall
identify by book-entry those securities belonging to the Portfolio;
4) The Custodian shall pay for securities purchased for the account of
the Portfolio 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 Portfolio. The Custodian shall transfer securities
sold for the account of the Portfolio 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 Portfolio;
5) The Custodian shall furnish the Fund on behalf of the Portfolio
confirmation of each transfer to or from the account of the Portfolio,
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 on
behalf of the Portfolio copies of daily transaction sheets reflecting
each day's transaction in the U.S. Securities System for the account
of the Portfolio;
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6) The Custodian shall provide the Fund on behalf of the Portfolio with
any report on its system of internal accounting control as the Fund
may reasonably request from time to time.
2.12 SEGREGATED ACCOUNT. The Custodian shall upon receipt of Proper
Instructions from the Fund on behalf of each applicable Portfolio establish
and maintain a segregated account or accounts for and on behalf of each
such Portfolio, 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 on behalf of the Portfolio, the
Custodian and a broker-dealer registered under the Exchange Act and a
member of the NASD (or any futures commission merchant registered under the
Commodity Exchange Act), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national securities
exchange (or the Commodity Futures Trading Commission or any registered
contract market), or of any similar organization or organizations,
regarding escrow or other arrangements in connection with transactions by
the Portfolio, (ii) for purposes of segregating cash or government
securities in connection with options purchased, sold or written by the
Portfolio or commodity futures contracts or options thereon purchased or
sold by the Portfolio, (iii) for the purposes of compliance by the
Portfolio with the procedures required by Investment Company Act Release
No. 10666, or any subsequent release or releases of the SEC 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 from the Fund on
behalf of the applicable Portfolio, a Certified Resolution setting forth
the purpose or purposes of such segregated account and declaring such
purposes to be proper corporate purposes.
2.13 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian shall execute
ownership and other certificates and affidavits for all federal and state
tax purposes in connection with receipt of income or other payments with
respect to domestic securities of each Portfolio held by it and in
connection with transfers of securities.
2.14 PROXIES. The Custodian shall, with respect to the domestic securities held
hereunder, cause to be promptly executed by the registered holder of such
securities, if the securities are registered otherwise than in the name of
the Portfolio or a nominee of the Portfolio, all proxies, without
indication of the manner in which such proxies are to be voted, and shall
promptly deliver to the Portfolio such proxies, all proxy soliciting
materials and all notices relating to such securities.
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2.15 COMMUNICATIONS RELATING TO PORTFOLIO SECURITIES. Subject to the provisions
of Section 2.3, the Custodian shall transmit promptly to the Fund for each
Portfolio 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 on behalf of the Portfolio and the maturity of futures
contracts purchased or sold by the Portfolio) received by the Custodian
from issuers of the securities being held for the Portfolio. With respect
to tender or exchange offers, the Custodian shall transmit promptly to the
Portfolio all written information received by the Custodian from issuers of
the securities whose tender or exchange is sought and from the party (or
his agents) making the tender or exchange offer. If the Portfolio desires
to take action with respect to any tender offer, exchange offer or any
other similar transaction, the Portfolio shall notify the Custodian at
least three business days prior to the date on which the Custodian is to
take such action.
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 Portfolio'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 Article 5 hereof, together with a Certified
Resolution, 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 Portfolio'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)(1) of Rule 17f-5 under
the 1940 Act, and (b) cash and cash equivalents in such amounts as the
Custodian or the Fund may determine to be reasonably necessary to effect
the Portfolio's foreign securities transactions. The Custodian shall
identify on its books as belonging to the Fund, the foreign securities of
the Fund held by each foreign sub-custodian.
3.3 FOREIGN SECURITIES SYSTEMS. Except as may otherwise be agreed upon in
writing by the Custodian and the Fund, assets of the Portfolios shall be
maintained in a clearing agency
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which acts as a securities depository or in a book-entry system for the
central handling of securities located outside of the United States (each a
"Foreign Securities System") only through arrangements implemented by the
foreign banking institutions serving as sub-custodians pursuant to the
terms hereof (Foreign Securities Systems and U.S. Securities Systems are
collectively referred to herein as the "Securities Systems"). Where
possible, such arrangements shall include entry into agreements containing
the provisions set forth in Section 3.5 hereof.
3.4 HOLDING SECURITIES. 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.
3.5 AGREEMENTS WITH FOREIGN BANKING INSTITUTIONS. Each agreement with a
foreign banking institution shall provide that: (a) the assets of each
Portfolio 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 for the assets of each Portfolio
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 each applicable Portfolio; (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
Portfolios 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
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Portfolio(s) held by foreign sub-custodians, including but not limited to
an identification of entities having possession of the Portfolio(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 each applicable
Portfolio indicating, as to securities acquired for a Portfolio, the
identity of the entity having physical possession of such securities.
3.8 TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT. (a) Except as otherwise provided
in subsection (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
each applicable Portfolio and delivery of securities maintained for the
account of each applicable Portfolio 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 the 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 Section 3.13 hereof, the Custodian shall not be liable for
any loss, damage,
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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 Section 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 for the benefit of a Portfolio 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 applicable Portfolio shall be security therefor and should
the Fund fail to repay the Custodian promptly, the Custodian shall be
entitled to utilize available cash and to dispose of such Portfolio's
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 be
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
SEC 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
Portfolios assets are maintained in a foreign branch of a banking
institution which is a "bank" as defined by Section 2(a)(5) of the 1940
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Act meeting the qualification set forth in Section 26(a) of said Act. The
appointment of any such branch as a sub-custodian shall be governed by
Article 1 hereof.
(b) Cash held for each Portfolio of 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.
3.14 TAX LAW. The Custodian shall have no responsibility or liability for any
obligations now or hereafter imposed on the Fund or the Custodian as
custodian of the Fund by the tax law of the United States of America or any
state or political subdivision thereof. It shall be the responsibility of
the Fund to notify the Custodian of the obligations imposed on the Fund or
the Custodian as custodian of the Fund by the tax law of jurisdictions
other than those mentioned in the above sentence, including responsibility
for withholding and other taxes, assessments or other governmental charges,
certifications and governmental reporting. The sole responsibility of the
Custodian with regard to such tax law shall be to use reasonable efforts to
assist the Fund with respect to any claim for exemption or refund under the
tax law of jurisdictions for which the Fund has provided such information.
4. PAYMENTS FOR SALES OR REPURCHASES OR REDEMPTIONS OF SHARES OF THE FUND
The Custodian shall receive from the distributor for the Shares or from the
Transfer Agent and deposit into the account of the appropriate Portfolio such
payments as are received for Shares of that Portfolio issued or sold from time
to time by the Fund. The Custodian will provide timely notification to the Fund
on behalf of each such Portfolio and the Transfer Agent of any receipt by it of
payments for Shares of such Portfolio.
From such funds as may be available for the purpose but subject to the
limitations of the Articles of Incorporation and any applicable votes of the
Board pursuant thereto, 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.
15
<PAGE>
5. PROPER INSTRUCTIONS
Proper Instructions as used throughout this Contract means a writing signed
or initialed by one or more person or persons as the Board 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 accompanied by a detailed
description of procedures approved by the Board, Proper Instructions may include
communications effected directly between electro-mechanical or electronic
devices provided that the Board and the Custodian are satisfied that such
procedures afford adequate safeguards for the Portfolios' assets. For purposes
of this Section, Proper Instructions shall include instructions received by the
Custodian pursuant to any three-party agreement which requires a segregated
asset account in accordance with Section 2.12.
6. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY
The Custodian may in its discretion, without express authority from the
Fund on behalf of each applicable Portfolio:
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 on behalf of the Portfolio;
2) surrender securities in temporary form for securities in definitive
form;
3) endorse for collection, in the name of the Portfolio, 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 Portfolio except as
otherwise directed by the Board.
16
<PAGE>
7. 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 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 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.
8. 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 to keep the books of account of each
Portfolio and/or compute the net asset value per share of the outstanding Shares
or, if directed in writing to do so by the Fund on behalf of the Portfolio,
shall itself keep such books of account and/or compute such net asset value per
share. If so directed, the Custodian shall also calculate daily the net income
of the Portfolio as described in the Prospectus and shall advise the Fund and
the Transfer Agent daily 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 daily
income of each Portfolio shall be made at the time or times described from time
to time in the Prospectus.
9. RECORDS
The Custodian shall with respect to each Portfolio 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 1940 Act, 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 SEC. The Custodian shall, at the Fund's request, supply the Fund with a
tabulation of securities owned by each Portfolio 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.
17
<PAGE>
10. OPINION OF FUND'S INDEPENDENT ACCOUNTANT
The Custodian shall take all reasonable action, as the Fund on behalf of
each applicable Portfolio 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-1A, and Form N-SAR or other annual reports to the SEC and with respect to any
other requirements of the SEC.
11. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS
The Custodian shall provide the Fund, on behalf of each of the Portfolios
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 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.
12. 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 on
behalf of each applicable Portfolio and the Custodian.
13. 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
19
<PAGE>
(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.
Except as may arise from the Custodian's own negligence or willful
misconduct or the negligence or willful misconduct of a sub-custodian or agent,
the Custodian shall be without liability to the Fund for any loss, liability,
claim or expense resulting from or caused by; (i) events or circumstances beyond
the reasonable control of the Custodian or any sub-custodian or Securities
System or any agent or nominee of any of the foregoing, including, without
limitation, the interruption, suspension or restriction of trading on or the
closure of any securities market, power or other mechanical or technological
failures or interruptions, or computer viruses or communications disruptions;
(ii) errors by the Fund or the Investment Advisor in their instructions to the
Custodian provided such instructions have been in accordance with this Contract;
(iii) the insolvency of or acts or omissions by a Securities System; (iv) any
delay or failure of any broker, agent or intermediary, central bank or other
commercially prevalent payment or clearing system to deliver to the Custodian's
sub-custodian or agent securities purchased or in the remittance or payment made
in connection with securities sold; (v) any delay or failure of any company,
corporation, or other body in charge or registering or transferring securities
in the name of the Custodian, the Fund, the Custodian's sub-custodians, nominees
or agents or agents or any consequential losses arising out of such delay or
failure to transfer such securities including non-receipt of bonus, dividends
and rights and other accretions or benefits; (vi) delays or inability to perform
its duties due to any disorder in market infrastructure with respect to any
particular security or Securities System; and (vii) any provision of any present
or future law or regulation or order of the United States of America, or any
state thereof, or any other country, or political subdivision thereof or of any
court of competent jurisdiction. Regardless of whether assets are maintained in
the custody of a foreign banking institution or a foreign securities depository,
the Custodian shall not be liable for "country risk", i.e. any loss, damage,
cost, expense, liability or claim resulting from, or caused by, the direction of
or authorization by the Fund to maintain custody of any securities or cash of
the Fund or of a Portfolio in a foreign country including, but not limited to,
losses resulting from nationalization, expropriation, imposition of currency
controls or restrictions, acts of war or terrorism, riots, revolutions, work
stoppages, natural disasters or other similar events or acts.
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, its affiliates, subsidiaries or agents,
to advance cash or securities for any purpose (including but not limited to
securities settlements, foreign exchange
19
<PAGE>
contracts and assumed settlement) 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.
In no event shall the Custodian be liable for indirect, special or
consequential damages.
14. 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 with respect to a Portfolio 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 has approved the initial use of a particular
Securities System by such Portfolio, as required by Rule 17f-4 under the 1940
Act and that the Custodian shall not with respect to a Portfolio act under
Section 2.11 hereof in the absence of receipt of an initial certificate of the
Secretary or an Assistant Secretary that the Board has approved the initial use
of the Direct Paper System by such Portfolio; 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 on behalf of one or more of
the Portfolios may at any time by action of the Board (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 on behalf of each applicable
Portfolio 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.
15. SUCCESSOR CUSTODIAN
20
<PAGE>
If a successor custodian for the Fund, of one or more of the Portfolios
shall be appointed by the Board, the Custodian shall, upon termination, deliver
to such successor custodian at the office of the Custodian, duly endorsed and in
the form for transfer, all securities of each applicable Portfolio then held by
it hereunder and shall transfer to an account of the successor custodian all of
the securities of each such Portfolio 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, 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 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 the 1940 Act, 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 on behalf of each
applicable Portfolio and all instruments held by the Custodian relative thereto
and all other property held by it under this Contract on behalf of each
applicable Portfolio and to transfer to an account of such successor custodian
all of the securities of each such Portfolio 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 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.
16. INTERPRETIVE AND ADDITIONAL PROVISIONS
In connection with the operation of this Contract, the Custodian and the
Fund on behalf of each of the Portfolios, 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
21
<PAGE>
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.
17. ADDITIONAL FUNDS
In the event that the Fund establishes one or more series of Shares in
addition to RCM Global Technology 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.
18. 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.
19. PRIOR CONTRACTS
This Contract supersedes and terminates, as of the date hereof, all prior
contracts between the Fund on behalf of each of the Portfolios and the Custodian
relating to the custody of the Fund's assets.
20. SHAREHOLDER COMMUNICATIONS ELECTION
SEC Rule 14b-2 requires banks which hold securities for the account of
customers to respond to requests by issuers of securities for the names,
addresses and holdings of beneficial owners of securities of that issuer held by
the bank unless the beneficial owner has expressly objected to disclosure of
this information. In order to comply with the rule, the Custodian needs the
Fund to indicate whether it authorizes the Custodian to provide the Fund's name,
address, and share position to requesting companies whose securities the Fund
owns. If the Fund tells the Custodian "no", the Custodian will not provide this
information to requesting companies. If the Fund tells the Custodian "yes" or
does not check either "yes" or "no" below, the Custodian is required by the rule
to treat the Fund as consenting to disclosure of this information for all
securities owned by the Fund or any funds or accounts established by the Fund.
For the Fund's protection, the Rule prohibits the requesting company from using
the Fund's name and address for any purpose other than corporate
22
<PAGE>
communications. Please indicate below whether the Fund consents or objects by
checking one of the alternatives below.
YES [ ] The Custodian is authorized to release the Fund's name, address,
and share positions.
NO [ ] The Custodian is not authorized to release the Fund's name,
address, and share positions.
THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK
23
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of
*[ DATE ].
STATE STREET BANK AND TRUST COMPANY
By:
-----------------------------------------
Name: RONALD E. LOGUE
-----------------------------------------
Title: EXECUTIVE VICE PRESIDENT
----------------------------------------
RCM EQUITY FUNDS, INC.
By:
-----------------------------------------
Name:
-----------------------------------------
Title:
---------------------------------------
24
<PAGE>
STATE STREET BANK AND TRUST COMPANY
CUSTODY & ACCOUNTING FEE PROPOSAL
RCM EQUITY FUNDS, INC.
RCM GLOBAL TECHNOLOGY FUND
- -------------------------------------------------------------------------------
I. Accounting
- -------------------------------------------------------------------------------
Annual Fee
Expressed in Basis Points: 1/100 of 1%
--------------------------------------
**Year 1 Year 2
-------- -------
First $50 million/fund 7 7
*Next $50 million/fund 1 3
Thereafter 1 1
Minimum/fund 36,000 48,000
- -------------------------------------------------------------------------------
II. Custody
- -------------------------------------------------------------------------------
Annual Fee
Expressed in Basis Points: 1/100 of 1%
--------------------------------------
Year 1 Year 2
-------- -------
A. Holdings
U.S. 1 1
*Foreign 9 11
B. Trades
U.S. $12.00 $12.00
Foreign $35.00 $35.00
- -------------------------------------------------------------------------------
III. Out-of-Pocket Expenses
- -------------------------------------------------------------------------------
Billing for the recovery of applicable out-of-pocket expenses will be
made as of the end of each quarter. These are pass through expenses and
include such items as postage, duplicating, telephone, courier service,
Price Waterhouse Audit Letters, 17F-5 materials, foreign registrations
and stamp duties.
* First year waivers.
- -------------------------------------------------------------------------------
RCM Capital Funds, Inc. State Street Bank & Trust Company
- -------------------------------------------------------------------------------
By: _______________________ By: _______________________
Title: _______________________ Title: _______________________
Date: _______________________ Date: _______________________
** Account fees will be waived for up to one year if assets remain under 50
million. If assets exceed 50 million then the year one fees will apply
thereafter until year two.
<PAGE>
LICENSE AGREEMENT
AGREEMENT made as of the 19th day of December, 1995 by and between RCM
Capital Management, a California Limited Partnership ("RCM"), and RCM Equity
Funds, Inc., a Maryland corporation (the "Company").
RECITALS:
A. Rosenberg Capital Management, the predecessor of RCM, was established
in 1970 and has used the phrase "Rosenberg" in its name and its business since
that time.
B. RCM was established in 1986 under the laws of the State of California,
as the successor to the business and operations of Rosenberg Capital Management,
and has used the name RCM Capital Management at all times thereafter.
C. The Company, which is registered with the Securities and Exchange
Commission as an open-end management investment company, desires to use "RCM" in
its name and business operations (including in the name of each of its series).
D. On the terms set forth herein, RCM is willing to grant the Company a
license to use "RCM" in its name and operations as an investment company
(including in the name of each of its series).
E. RCM Capital Funds, Inc. formerly RCM Growth Equity Fund ("RCM Capital
Funds"), a registered investment company, has entered into a license agreement
with RCM pursuant to which RCM has granted it a non-exclusive license (including
in the name of each of its series) to use "RCM" in its name and business. In
addition, RCM Strategic Global Government Fund, Inc., a registered investment
company, has entered into a license agreement with RCM pursuant to which RCM has
granted it a non-exclusive license to use "RCM" in its name and business.
NOW, THEREFORE, in consideration of the premises and of the covenants
hereinafter contained, RCM and the Company do hereby agree as follows:
AGREEMENT:
1. RCM hereby grants the Company a revocable, non-exclusive and non-
transferable license to use the phrase "RCM" in its corporate name and in its
operations as an investment company (including in the name of each of its
series), subject to the terms and conditions set forth herein (the "License").
The Company shall at all times use such phrase in a manner which is designed to
enhance the reputation and goodwill associated with the phrase, and shall
comply with all laws, rules, regulations, ordinances and orders of all local,
state and national authorities. The Company agrees that it shall do nothing
- 1 -
<PAGE>
inconsistent with RCM's ownership of such phrase, and shall not apply for
registration or seek to obtain ownership of the phrase, or any similar mark, in
any state or nation. The provisions of the forgoing sentence of this Section 1
shall survive the termination of this Agreement, irrespective of the reason
therefor.
2. The Company acknowledges that the phrase "RCM" has incalculable value
to RCM and that RCM may, therefore, revoke its License at any time upon 60 days'
notice to the Company. As soon as practicable after any revocation, the Company
shall (i) change its corporate name so that such name will not thereafter
include the phrase "RCM," "Rosenberg Capital Management" or any variation or
derivative of such names, (ii) discontinue all use by it of the phrase "RCM" or
any variation or derivative thereof as part of its trade name or otherwise, and
(iii) cease using, and shall cause its agents to cease using, all letterhead
advertising materials and other materials (printed or otherwise) that include
the phrase "RCM" or any variation or derivative thereof. Without limiting the
foregoing, if the Investment Management Agreement between the Company and RCM
should be terminated for any reason, RCM may, without notice, revoke the
License.
3. The Company acknowledges that RCM has previously granted a license to
use the phrase "RCM" to RCM Capital Funds in its name and its operations and
that RCM Capital Funds may establish additional series in the future using the
RCM name. The Company further acknowledges that RCM has previously granted a
license to use the phrase "RCM" to RCM Strategic Global Government Fund, Inc. in
its name and its operations.
4. RCM reserves and shall have the right to grant to any other company,
including without limitation, any other investment company, the right to use
"RCM" or Rosenberg Capital Management or any variations or derivatives of such
names in its name and no consent or permission of the Company shall be necessary
in connection with such grant; but, if required by any applicable laws of any
state or other jurisdiction, the Company will forthwith grant any consent, give
any permission and execute any certificate or instrument as may be requested by
RCM.
5. The Company shall not, without the express written permission of RCM,
grant consent or give permission to any other company or entity the right, to
use "RCM," "Rosenberg Capital Management" or any name similar to that of the
Company.
6. In the event that the Company should hereafter change its name and
eliminate the phrase RCM or any variation thereof from its name, the Company
hereby grants to RCM the right to cause the incorporation of other corporations
or the organization of other voluntary associations that may operate as
investment companies and that may have names similar to that to which the
Company may change its name and to own all or any portion of the shares of such
other corporations or associations and to enter into contractual relationships
with such other corporations or associations.
7. This Agreement may be amended at any time by written agreement
executed by each of the parties.
- 2 -
<PAGE>
8. This Agreement shall be governed by and shall be construed in
accordance with the internal, substantive laws of the State of California.
9. If any term or provision of this Agreement is held to be void or
unenforceable by any court of competent jurisdiction, only that objectionable
term or provision shall be deleted herefrom while the remainder of the term,
provision and agreement shall be enforceable.
10. No party's failure to enforce any provision or provisions of this
Agreement shall be deemed or in any way construed as a waiver of any such
provision or provisions, nor prevent that party thereafter from enforcing each
and every provision of this Agreement. The rights granted the parties herein
are cumulative and shall not constitute a waiver of any party's right to assert
all other legal remedies available to it under the circumstances.
11. The Company acknowledges that money damages alone are not adequate
remedy for any breach by the Company of any provision of this Agreement.
Therefore, in the event of a breach or threatened breach of any provision of
this Agreement by the Company, the Company agrees and consents that RCM, in
addition to all other remedies, shall have the right to immediately seek, obtain
and enforce injunctive relief prohibiting the breach or compelling specific
performance, without the need to post any bond. Unless expressly set forth
herein to the contrary, all remedies set forth herein are cumulative and are in
addition to any and all remedies provided either party at law or in equity.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
RCM EQUITY FUNDS, INC.
By: /s/ William L. Price
---------------------------
William L. Price, President
RCM CAPITAL MANAGEMENT
By: RCM LIMITED L.P.
General Partner
By: RCM GENERAL CORP.
General Partner
By: /s/ Michael J. Apatoff
---------------------------
Michael J. Apatoff
Executive Vice President
- 3 -
<PAGE>
EXHIBIT 99.B10.1
[VENABLE, BAETJER AND HOWARD LETTERHEAD]
December 22, 1995
RCM Equity Funds, Inc.
Four Embarcadero Center
San Francisco, California 94111-4189
Re: RCM Equity Funds, Inc.
-----------------------
Ladies and Gentlemen:
We have acted as special Maryland counsel for RCM Equity Funds, Inc., a
Maryland corporation (the "Company") in connection with the organization of
the Company and the issuance of shares of its RCM Global Technology Fund
series capital stock, par value $.0001 per share (the "Shares").
As special Maryland counsel for the Company, we are familiar with its
Charter and Bylaws. We have examined the prospectus and statement of
additional information included in its Registration Statement on Form N-1A,
Securities Act File No. 33-97572 and Investment Company Act File No. 811-9100
(the "Registration Statement"), substantially in the form in which they are
to become effective (collectively, the "Prospectus"). We have further
examined and relied upon a certificate of the Maryland State Department of
Assessments and Taxation to the effect that the Company is duly incorporated
and existing under the laws of the State of Maryland and is in good standing
and duly authorized to transact business in the State of Maryland.
We have also examined and relied upon such corporate records of the
Company and other documents and certificates with respect to factual matters
as we have deemed necessary to render the opinion expressed herein. We have
assumed, without independent verification, the genuineness of all signatures,
the authenticity of all documents submitted to us as originals, and the
conformity with originals of all documents submitted to us as copies.
Based on such examination, we are of the opinion and so advise you that:
1. The Company is duly organized and validly existing as a
corporation in good standing under the laws of the State of Maryland.
<PAGE>
RCM Equity Funds, Inc.
December 22, 1995
Page 2
2. The 10,000 presently issued and outstanding Shares have been
validly and legally issued and are fully paid and nonassessable.
3. The Shares to be offered for sale pursuant to the Prospectus are,
to the extent of the number of Shares authorized to be issued by the Company
in its Charter, duly authorized and, when sold, issued and paid for as
contemplated by the Prospectus, will have been validly and legally issued
and will be fully paid and nonassessable.
This letter expresses our opinion with respect to the Maryland General
Corporation Law governing matters such as due organization and the
authorization and issuance of stock. It does not extend to the securities or
"blue sky" laws of Maryland, to federal securities laws or to other laws.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us in the statement of
additional information supplementing the Prospectus under the caption
"Counsel." We do not thereby admit that we are experts" within the meaning of
the Securities Act of 1933 and the regulations thereunder.
Very truly yours,
<PAGE>
[PAUL, HASTINGS, JANOFSKY & WALKER LETTERHEAD]
December 22, 1995
RCM Equity Funds, Inc.
Four Embarcadero Center
San Francisco, California 94111
Ladies and Gentlemen:
We have acted as counsel to RCM Equity Funds, Inc., a Maryland corporation
(the "Company") in connection with the organization of the Company and the
preparation of its Registration Statement on Form N-1A under the Securities Act
of 1933 and the Investment Company Act of 1940 (File Nos. 33-97572, 811-9100)
(the "Registration Statement"). We hereby consent to the reference to us under
the heading "Additional Information -- Counsel" in the statement of additional
information comprising Part B of the Registration Statement.
Very truly yours,
PAUL, HASTINGS, JANOFSKY & WALKER
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
RCM Equity Funds, Inc.:
RCM Global Technology Fund
We consent to the inclusion in the Registration Statement on Form N-1A (File No.
33-97572) of our report dated December 22, 1995 on our audit of the statement of
assets and liabilities of RCM Equity Funds, Inc. (RCM Global Technology Fund).
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
December 22, 1995
<PAGE>
EXHIBIT 99.B13
SUBSCRIPTION AGREEMENT
FOR
INITIAL STOCKHOLDER
This agreement (the "Subscription Agreement"), dated as of ________________,
is between RCM Equity Funds, Inc. (the "Company") and the ____________________
(the "Stockholder").
WHEREAS, Stockholder is a _________________________________________________;
WHEREAS, the Company is an open-end management investment company registered
under the Investment Company Act of 1940, as amended, and the rules and
regulations promulgated thereunder (the "1940 Act");
WHEREAS, Article IV(1)(a) of the Articles of Incorporation provides that
there shall initially be one series of shares, designated as the "RCM Global
Technology Fund" (the "Fund") consisting initially of 50,000,000 shares of
capital stock ("Fund Shares");
WHEREAS, the Fund is duly authorized to sell its shares;
WHEREAS, the Stockholder has agreed to purchase from the Fund, ___________
shares of capital stock of the Fund (the "Shares") at a price of $10.00 per
share;
WHEREAS, the Board of Directors has received and reviewed the form of the
Subscription Agreement with respect to the proposed sale of capital stock of
the Fund to the Stockholder;
NOW, THEREFORE, the parties to this Agreement hereby agree as follows:
1. The Fund hereby agrees to issue and sell to the Stockholder, and
the Stockholder has agreed to purchase from the Fund, __________ Shares of
the Fund (the "Shares") at a price of $_____ per share.
2. The Stockholder represents and warrants that it is acquiring the
Shares for investment for its own account as the sole beneficial owner
thereof, and that the Shares are not being acquired with a view to or in
connection with any resale, distribution, subdivision, or fractionalization
of any or all of the Shares or any interest therein. The Stockholder further
represents and warrants that it has not entered into any contract,
undertaking, agreement, or arrangement with any person to sell, assign,
transfer, pledge, hypothecate, or exchange all or any part of the Shares to
any other person.
3. The Stockholder hereby agrees that it will not sell, assign,
transfer, pledge, hypothecate, or exchange all or any part of the Shares or
any interest therein except upon repurchase or redemption by the Fund, unless
and until (i) the Stockholder reasonably
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<PAGE>
believes that such sale, assignment, transfer, pledge, hypothecation or
exchange will not violate the provisions of the Securities act of 1933 (the
"1933 Act") or any of the rules or regulation thereunder, and the Fund receives
adequate notice of the Stockholder's intentions and does not object to such
sale, assignment, transfer, pledge, hypothecation or exchange, or (ii) the
Stockholder receives an opinion of counsel that such sale, assignment,
transfer, pledge, hypothecation or exchange will not violated the provisions
of the 1933 Act or any of the rules or regulations thereunder.
4. The undersigned represents and warrants that he is __________ of the
Stockholder and that he has all necessary owner and authority to execute this
Subscription Agreement on behalf of the Stockholder and thereby to bind the
Stockholder.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
___ day of ___________________.
RCM EQUITY FUNDS, INC.
By: _____________________________
Name:________________________
Title:_______________________
[name of stockholder]
By: _____________________________
Name:________________________
Title:_______________________
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