RCM EQUITY FUNDS INC
N-1A/A, 1995-12-14
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<PAGE>
   
   AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER   , 1995
    
   
                                                      1933 ACT FILE NO. 33-97572
    
   
                                                      1940 ACT FILE NO. 811-9100
    
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
                       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. 1                       /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 Taxes
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
                                 (415) 954-5400

   
             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            , 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            , 1995
                        -------------------------------
<PAGE>
                        -------------------------------
                               TABLE OF CONTENTS
                          ----------------------------

   
<TABLE>
<CAPTION>
                                                                                          PAGE

<S>                                                                                    <C>
Prospectus Summary...................................................................           3
Summary of Fees and Expenses.........................................................           5
Prior Performance....................................................................           6
Investment Objective and Policies....................................................           8
Investment and Risk Considerations...................................................          13
Organization and Management..........................................................          15
How to Purchase Shares...............................................................          17
Stockholder Services.................................................................          19
Redemption of Shares.................................................................          19
Investment Results...................................................................          21
Dividends, Distributions and Taxes...................................................          21
General Information..................................................................          22
</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 $26  billion.
(See  ORGANIZATION  AND  MANAGEMENT.)  The Custodian  of  the  Fund's  assets is
                  .
    

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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 concentrated in the technology sector of the U.S.
and  foreign economies.  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.
    

   
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,  such as  Charles Schwab  & Co.,
Inc., having a service agreement with the Investment Manager and maintaining  an
omnibus  account  with  the  Fund.  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  2% 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*                           2%

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                   $   38.43    $   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 5
<PAGE>
                        -------------------------------
                               PRIOR PERFORMANCE
                          ----------------------------

WHAT IS THE INVESTMENT MANAGER'S PERFORMANCE
RECORD?

   
PRIOR  PERFORMANCE.  The following table  sets forth historical performance data
for the technology sector portfolio of RCM  Growth Equity Fund, a series of  RCM
Capital  Funds,  Inc. (the  "Portfolio"), as  measured against  specified market
indices. The Portfolio is a  separately-managed segment of the total  investment
portfolio  of a mutual fund that is  available only to clients of the Investment
Manager. The table is provided as  an indication of the general capabilities  of
the Investment Manager with respect to investment in technology companies in the
past, but should not be considered as an indication of the future performance of
the Fund. RCM Growth Equity Fund was subject to certain limitations that are not
applicable  to  the Fund,  including prohibitions  against  the use  of options,
currency hedging and short selling, and its investment in foreign securities was
limited to 10% of the value of its total assets. However, the Portfolio has been
managed at all times by the persons who will be acting as the primary  portfolio
managers of the Fund, and the Investment Manager believes that the Portfolio was
managed  in substantially the same manner as it proposes to manage the Fund. The
table does not include historical performance data for certain other  technology
portfolios managed by the same persons during the same periods, which portfolios
were  subject to various investment management  restrictions that did not permit
them to be managed in substantially the same manner as the Fund.
    

   
The Investment Manager has indicated that the historical performance data of the
Portfolio are  net  of investment  advisory  fees actually  charged  during  the
indicated  periods, and give effect to transaction costs as well as reinvestment
of income and gains. As all other operating expenses of the Portfolio are  borne
by  the Investment Manager, the historical performance data has been restated to
reflect the Fund's  current expense  limitation of  1.75% of  average daily  net
assets (see SUMMARY OF FEES AND EXPENSES). The performance results have not been
reduced  to reflect any income tax which  may have been payable on dividends and
distributions. See  Performance  Information  in  the  Statement  of  Additional
Information for further information about calculation of total return.
    

   
The information set forth in the table relies on data supplied by the Investment
Manager  or from statistical services, reports  or other sources believed by the
Investment  Manager  to  be  reliable.  Information  regarding  the   historical
performance   of  the  Portfolio  has  been  prepared  in  accordance  with  the
Performance Presentation Standards of the Association for Investment  Management
and  Research and has been examined  by Deloitte & Touche. Information regarding
the specified market indices has not been examined and is unaudited.
    

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                                     Page 6
<PAGE>

   
<TABLE>
<CAPTION>
                                                             LIPPER
                  RCM GROWTH                   RUSSELL     SCIENCE &      HAMBRECHT &
                  EQUITY FUND    S&P 500       MIDCAP      TECH. FUND   QUIST TECHNOLOGY
      YR.          PORTFOLIO    INDEX (1)     INDEX (2)    INDEX (3)       INDEX (4)
- ----------------  -----------  ------------  -----------  ------------  ----------------
<S>               <C>          <C>           <C>          <C>           <C>
1985 (5)               11.27%       22.20%        20.57%                       (6.20%)
1986                    1.71        18.67         18.20                         2.91
1987                   13.69         5.24          0.23         5.43%          15.32
1988                    6.87        16.55         19.80         8.19           (6.88)
1989                   30.91        31.63         26.27        27.82            7.26
1990                    1.80        (3.11)       (11.50)       (7.21)          (9.57)
1991                   60.40        30.42         41.54        44.97           46.49
1992                   14.43         7.61         16.34         9.70           13.81
1993                   29.86        10.06         14.30        21.87            8.64
1994                   23.83         1.31         (2.09)        9.34           15.74
1995 (6)               58.16        29.73         30.26        46.64           53.50
Last 5 Years (6)       40.16        17.21         21.59        28.23           29.31
Last 10 Years
 (6)                   25.46        16.01         16.08          N/A           15.05
</TABLE>
    

- ------------------------
(1) The Standard & Poor's 500 Index is a widely recognized index composed of the
    capitalization-weighted average of the price of 500 of the largest  publicly
    traded stocks in the United States.

(2) The  Russell  Midcap  Index  is  composed  of  all  medium  and medium/small
    companies in the Russell  1000 Index. The market  capitalization of the  800
    securities  included  in  the  Midcap Index  range  from  approximately $475
    million to $3.8 billion.

(3) The Lipper Science & Technology Fund  Index is an equally weighted index  of
    the 10 largest U.S. science and technology mutual funds.

   
(4) The  Hambrecht & Quist  Technology Index is composed  of 200 broadly defined
    technology companies.
    

   
(5) Eleven months.
    

   
(6) Through September 30, 1995.
    

- --------------------------------------------------------------------------------
                                     Page 7
<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 or
about 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

- --------------------------------------------------------------------------------
                                     Page 8
<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 9
<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 10
<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     %  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,

- --------------------------------------------------------------------------------
                                    Page 11
<PAGE>
   
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 objectives 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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                                    Page 12
<PAGE>
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 concentrate 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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                                    Page 13
<PAGE>
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 14
<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

- --------------------------------------------------------------------------------
                                    Page 15
<PAGE>
   
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.
    

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 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
    

- --------------------------------------------------------------------------------
                                    Page 16
<PAGE>
   
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 IS THE FUND'S DISTRIBUTOR?

   
                                      (the "Distributor") serves as  distributor
of shares of the Fund.
    

WHO ARE THE FUND'S CUSTODIAN AND TRANSFER AGENT?

   
                                      (the  "Custodian") 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.
    

                        -------------------------------
                             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. The initial investment must be  at least $       , and there is a
$         minimum  for  additional investments  other  than through  the  Fund's
automatic dividend reinvestment plan. (See STOCKHOLDER SERVICES.)
    

- --------------------------------------------------------------------------------
                                    Page 17
<PAGE>
   
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 the Distributor or a  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 Distributor  or 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 along with a summary
of the status of the account as of the transaction date 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:
- -------------------------------------------

Investors  may also wire funds in payment of subscriptions to the above address.
Wired funds should  include the following:  the stockholder's registration  name
and account number with the Company and the name of the Fund.

Investors  may be charged a fee if  they effect transactions through a broker or
agent. Your dealer is responsible for forwarding payment promptly to
         . 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 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 Share Price;  (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.
    

- --------------------------------------------------------------------------------
                                    Page 18
<PAGE>
                        -------------------------------
   
                              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.
    

                        -------------------------------
                              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 2%  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

- --------------------------------------------------------------------------------
                                    Page 19
<PAGE>
   
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.
    

   
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.
    

CAN I REDEEM SHARES BY PHONE?

   
You  may redeem shares by telephone if  you have elected the telephone privilege
on your account application. You should  realize that by electing the  telephone
privilege  you may be giving up  a measure of security that  you may have if you
were to request an exchange or redemption of shares in writing. Furthermore,  in
periods  of severe market  or economic conditions,  telephone redemptions may be
difficult to  implement, in  which case  you should  mail or  send by  overnight
delivery  a written exchange  or redemption request to  the Company. The Company
will  employ   procedures  designed   to  provide   reasonable  assurance   that
instructions communicated by telephone are genuine and, if it does not do so, it
may be liable for any losses due to unauthorized or fraudulent instructions. The
procedures  employed by the Company include requiring personal identification by
account  number  and  social  security  number,  tape  recording  of   telephone
instructions,  and providing  written confirmation of  transactions. The Company
reserves the right to  refuse a telephone exchange  or redemption request if  it
believes,  for example, that the person making the request is neither the record
owner of
    

- --------------------------------------------------------------------------------
                                    Page 20
<PAGE>
   
the  shares  being  exchanged  or  redeemed  nor  otherwise  authorized  by  the
stockholder to request the exchange or redemption. Stockholders will be promptly
notified  of any  refused request  for a  telephone exchange  or redemption. The
Company will not be liable  for any loss, liability  or cost which results  from
acting  upon instructions  of a person  reasonably believed to  be a stockholder
with respect to the telephone privilege.
    

                        -------------------------------
                               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.
    

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

- --------------------------------------------------------------------------------
                                    Page 21
<PAGE>
   
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             , 1995, there  were
        shares  of  the  Fund  outstanding,  all of  which  were  owned  by [the
Investment Manager].

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.

   
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
    

- --------------------------------------------------------------------------------
                                    Page 22
<PAGE>
   
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.
    

- --------------------------------------------------------------------------------
                                    Page 23
<PAGE>
                             RCM EQUITY FUNDS, INC.

                           RCM GLOBAL TECHNOLOGY FUND

                      Four Embarcadero Center, Suite 3000
                        San Francisco, California 94111
                                 (415)    -
                        -------------------------------
                      STATEMENT OF ADDITIONAL INFORMATION
                          ----------------------------

                                         , 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
Distributor..........................................................................       B-23
How to Purchase Shares...............................................................       B-23
Net Asset Value......................................................................       B-23
Redemption of Shares.................................................................       B-24
Dividends, Distributions and Tax Status..............................................       B-25
Investment Results...................................................................       B-27
Description of Capital Stock.........................................................       B-28
Additional Information...............................................................       B-29
</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             ,  1995: Y      = $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.

- --------------------------------------------------------------------------------
                                      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
    

- --------------------------------------------------------------------------------
                                      B-4
<PAGE>
   
option who wishes to terminate the obligation may effect a "closing transaction"
by buying an  option of  the same  series as  the option  previously written.  A
writer may not effect a closing purchase transaction after being notified of the
exercise  of  an option.  The  writing of  an  option on  foreign  currency will
constitute only a partial hedge, up to  the amount of the premium received;  the
Fund could be required to purchase or sell 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

- --------------------------------------------------------------------------------
                                      B-5
<PAGE>
right  to  acquire  the  security  without  additional  cash  consideration upon
conversion or exchange of other securities held by it.

   
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 its 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 decrease 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
    

- --------------------------------------------------------------------------------
                                      B-6
<PAGE>
   
the sale. The seller  is said to  have a short position  in the securities  sold
until it delivers the securities sold, at which time it receives the proceeds of
the  sale. The Fund's decision to  make a short sale "against  the box" may be a
technique to hedge  against market  risks when the  Investment Manager  believes
that  the price of a security  may decline, causing a decline  in the value of a
security owned by the  Fund or a security  convertible into or exchangeable  for
such security. In such case, any future losses in the Fund's long position would
be reduced by a gain in the short position.
    

   
In  the view  of the  Securities and Exchange  Commission ("SEC"),  a short sale
involves the creation of a "senior security" as such term is defined in the 1940
Act, unless the sale is "against the box" and the securities sold are placed  in
a  segregated account (not with the broker),  or unless the Fund's obligation to
deliver the  securities sold  short  is "covered"  by  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.
    

- --------------------------------------------------------------------------------
                                      B-7
<PAGE>
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  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

- --------------------------------------------------------------------------------
                                      B-8
<PAGE>
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 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
    

- --------------------------------------------------------------------------------
                                      B-9
<PAGE>
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  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.
    

- --------------------------------------------------------------------------------
                                      B-10
<PAGE>
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 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
    

- --------------------------------------------------------------------------------
                                      B-11
<PAGE>
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 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.
    

- --------------------------------------------------------------------------------
                                      B-12
<PAGE>
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.

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
    

- --------------------------------------------------------------------------------
                                      B-13
<PAGE>
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 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.

- --------------------------------------------------------------------------------
                                      B-14
<PAGE>
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.

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
    

- --------------------------------------------------------------------------------
                                      B-15
<PAGE>
   
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;

   
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
    

- --------------------------------------------------------------------------------
                                      B-16
<PAGE>
   
    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;
    

   
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

- --------------------------------------------------------------------------------
                                      B-17
<PAGE>
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 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 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

- --------------------------------------------------------------------------------
                                      B-18
<PAGE>
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  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 and Chairman of the Board 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.
    

- --------------------------------------------------------------------------------
                                      B-19
<PAGE>
   
("RCS"),  a  closed-end  management investment  company  for which  RCM  acts as
adviser; 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, where he was a Managing  Director and Chief Investment Officer  and
managed  mutual  funds and  investments  in global,  international  and domestic
securities.
    

   
[INSERT NAMES OF TWO DISINTERESTED DIRECTORS HERE*]
    

   
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                , 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 FROM         COMPANY            BENEFITS UPON            PAID TO
      NAME              COMPANY             EXPENSES             RETIREMENT           DIRECTOR(5*)
- ----------------  -------------------  -------------------  ---------------------  -------------------
<S>               <C>                  <C>                  <C>                    <C>
                       $  10,000                 None                   N/A
                       $  10,000                 None                   N/A
</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.

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             , 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.

- --------------------------------------------------------------------------------
                                      B-21
<PAGE>
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 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,  and  RCM Strategic  Global  Government
Fund,  Inc., a closed-end  management investment company,  and is sub-adviser to
Bergstrom Capital Corporation, a closed-end management investment company.

   
The Management  Agreement was  approved  by the  Fund's initial  stockholder  on
           , 1995, and by the unanimous vote of the Company's Board of Directors
on               , 1995. The Management  Agreement will continue in effect until
           , 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
    

- --------------------------------------------------------------------------------
                                      B-22
<PAGE>
performance of  its duties,  or of  its  reckless disregard  of its  duties  and
obligations under the Management Agreement.

   
The  Management  Agreement is  terminable without  penalty  on 60  days' written
notice by a vote of the majority of the 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).
    

                        -------------------------------
                                  DISTRIBUTOR
                          ----------------------------

                               (the "Distributor"), is the principal underwriter
and distributor  for the  Company  and, in  such  capacity, is  responsible  for
distributing  shares of the Fund. The Distributor is a              organized in
            to distribute shares of registered investment companies.

   
Pursuant to  its  Distribution Agreement  with  the Company  (the  "Distribution
Agreement"),  the Distributor has agreed to use its best efforts to effect sales
of shares of  the Fund, but  is not obligated  to sell any  specified number  of
shares.  The Distribution Agreement contains  provisions with respect to renewal
and  termination  similar  to  those  in  the  Management  Agreement  previously
discussed.  Pursuant to  the Distribution Agreement,  the Company  has agreed to
indemnify the  Distributor to  the extent  permitted by  applicable law  against
certain liabilities under the Securities 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
showing  transactions in stockholder accounts and a summary of the status of the
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

- --------------------------------------------------------------------------------
                                      B-23
<PAGE>
   
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.
    

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.
    

- --------------------------------------------------------------------------------
                                      B-24
<PAGE>
                        -------------------------------
                    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.
    

   
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.

- --------------------------------------------------------------------------------
                                      B-25
<PAGE>
   
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.
    

   
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
    

- --------------------------------------------------------------------------------
                                      B-26
<PAGE>
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.  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

- --------------------------------------------------------------------------------
                                      B-27
<PAGE>
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  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         , 1995, there were
      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.
    

- --------------------------------------------------------------------------------
                                      B-28
<PAGE>
                        -------------------------------
                             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 Venable,
Baetjer and Howard, LLP, 1800 Mercantile Bank & Trust Building, 2 Hopkins Plaza,
Baltimore, Maryland 21201. Paul, Hastings, Janofsky & Walker have 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

   
            (the "Custodian") 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           ,  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         , 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>
                                     PART C
                               OTHER INFORMATION

ITEM 24.  FINANCIAL STATEMENTS AND EXHIBITS.

(A)  FINANCIAL STATEMENTS

    Registrant's  Statement of Assets and Liabilities as of            , 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 -- to be filed.
       3.  None.
       4.  Proof of specimen of certificate for capital stock ($0.0001 par value) of
            Registrant -- to be filed.
       5.  Investment Management Agreement, Power of Attorney and Services Agreement
            between Registrant and RCM Capital Management, a California Limited
            Partnership (the "Investment Manager") -- to be filed.
       6.  Distribution Agreement between Registrant and its distributor -- to be filed.
       7.  None.
       8.  Custodian Contract and remuneration schedule between Registrant and its
            custodian bank -- to be filed.
       9.  License Agreement between the Investment Manager and Registrant related to the
            use by Registrant of the name "RCM" -- to be filed.
     10.1  Opinion of Venable, Baetjer and Howard, LLP as to legality of securities being
            registered, and consent of Venable, Baetjer & Howard -- to be filed.
     10.2  Consent of Paul, Hastings, Janofsky & Walker -- to be filed.
      11.  Consent of independent accountants -- to be filed.
      12.  None.
      13.  Investment letter of initial investor in Registrant -- to be filed.
      14.  None.
      15.  None.
      16.  None.
      17.  Limited Powers of Attorney of Directors.
</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 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            , 1995

   
<TABLE>
<S>                          <C>
      TITLE OF CLASS         NUMBER OF RECORD HOLDERS
- ---------------------------  ------------------------

RCM Global Technology Fund              1
 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

   
    Claude N. Rosenberg, Jr., Chairman of the Board, Chief Executive Officer and
President of RCM General Corporation, the  general partner of RCM Limited  L.P.,
which is the general partner of the Company's Investment Manager, owns less than
20%  of  the  shares  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. John  D. Leland, Jr.
owns less  than 5%  of The  RREEF Corporation's  outstanding shares.  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 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. 1 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 13, 1995.
    
                                          RCM EQUITY FUNDS, INC.

   
                                          By:       /s/ WILLIAM L. PRICE
    

                                          --------------------------------------
   
                                           CHAIRMAN OF THE BOARD, PRESIDENT AND
                                                 CHIEF EXECUTIVE OFFICER
    

   
    Pursuant  to the requirements of the  Securities Act of 1933, this Amendment
No. 1  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 13, 1995
                   William L. Price                      Director

(2) Principal Financial Officer

                 /s/ SUSAN C. GAUSE*
     -------------------------------------------        Treasurer                               December 13, 1995
                    Susan C. Gause

(3) Principal Accounting Officer

                /s/ CAROLINE M. HIRST*
     -------------------------------------------        Principal Accounting Officer            December 13, 1995
                  Caroline M. Hirst

(4) Directors

               /s/ MICHAEL J. APATOFF*
     -------------------------------------------                                                December 13, 1995
                  Michael J. Apatoff

                /s/ WILLIAM S. STACK*
     -------------------------------------------                                                December 13, 1995
                   William S. Stack

          *By          /s/ WILLIAM L. PRICE
     -------------------------------------------
                   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.
</TABLE>
    


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