<PAGE>
As filed with the Securities and Exchange Commission on June 30, 1997
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 [X]
Post-Effective Amendment No. 4
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 5
- --------------------------------------------------------------------------------
RCM EQUITY FUNDS, INC.
Four Embarcadero Center
San Francisco, California 94111
(415) 954-5400
- --------------------------------------------------------------------------------
John E. Pelletier, Vice President and Secretary
RCM EQUITY FUNDS, INC.
Four Embarcadero Center
San Francisco, California 94111
(800) 726-7240
(Name and Address of Agent for Service)
Copies to:
Timothy B. Parker, Deputy General Counsel Michael Glazer
RCM Capital Management, L.L.C. Paul, Hastings, Janofsky & Walker LLP
Four Embarcadero Center 555 South Flower Street
San Francisco, California 94111 Los Angeles, California 90071
The Registrant has filed a declaration pursuant to Rule 24f-2 registering an
indefinite number of shares under the Securities Act of 1933. On February 28,
1997 the Registrant filed its 24f-2 Notice for its fiscal year ended
December 31, 1996.
It is proposed that this filing will become effective:
[X] Immediately upon filing pursuant to paragraph (b)
[ ] On _________________ pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] On _________________ pursuant to paragraph (a)(1) of rule 485
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] On _________________ pursuant to paragraph (a)(2) of rule 485
<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>
<CAPTION>
<S> <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 Financial Highlights
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 *
Performance
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 *
</TABLE>
- ------------------
*Not applicable
<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
(CONTINUED)
<TABLE>
<CAPTION>
<S> <C>
ITEM NUMBER OF PART B OF FORM N-1A CAPTIONS IN PROSPECTUS AND 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 and
Securities 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 Stock
19. Purchase, Redemption and Pricing of How to Purchase Shares
Securities Being Offered
20. Tax Status Dividends, Distributions and Taxes
21. Underwriters The Distributor
22. Calculation of Performance Data Investment Results
23. Financial Statements Additional Information
</TABLE>
<PAGE>
RCM EQUITY FUNDS, INC.
RCM GLOBAL HEALTH CARE FUND
CROSS REFERENCE SHEET
BETWEEN ITEMS OF PART A AND B OF FORM N-1A AND THE
PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
<S> <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 Financial Highlights
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 Performance *
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 *
</TABLE>
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*Not applicable
<PAGE>
RCM EQUITY FUNDS, INC.
RCM GLOBAL HEALTH CARE FUND
CROSS REFERENCE SHEET
BETWEEN ITEMS OF PART A AND B OF FORM N-1A AND THE
PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION
(CONTINUED)
<TABLE>
<CAPTION>
<S> <C>
ITEM NUMBER OF PART B OF FORM N-1A CAPTIONS IN PROSPECTUS AND 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 and
Securities 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 Stock
19. Purchase, Redemption and Pricing of How to Purchase Shares
Securities Being Offered
20. Tax Status Dividends, Distributions and Taxes
21. Underwriters The Distributor
22. Calculation of Performance Data Investment Results
23. Financial Statements Additional Information
</TABLE>
<PAGE>
RCM EQUITY FUNDS, INC.
RCM GLOBAL SMALL CAP FUND
CROSS REFERENCE SHEET
BETWEEN ITEMS OF PART A AND B OF FORM N-1A AND THE
PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
<S> <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 Financial Highlights
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 *
Performance
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 *
</TABLE>
- -------------------
*Not applicable
<PAGE>
RCM EQUITY FUNDS, INC.
RCM GLOBAL SMALL CAP FUND
CROSS REFERENCE SHEET
BETWEEN ITEMS OF PART A AND B OF FORM N-1A AND THE
PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION
(CONTINUED)
<TABLE>
<CAPTION>
<S> <C>
ITEM NUMBER OF PART B OF FORM N-1A CAPTIONS IN PROSPECTUS AND 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 and
Securities 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 Stock
19. Purchase, Redemption and Pricing of How to Purchase Shares
Securities Being Offered
20. Tax Status Dividends, Distributions and Taxes
21. Underwriters The Distributor
22. Calculation of Performance Data Investment Results
23. Financial Statements Additional Information
</TABLE>
- ------------------
*Not applicable
<PAGE>
RCM EQUITY FUNDS, INC.
RCM LARGE CAP GROWTH FUND
CROSS REFERENCE SHEET
BETWEEN ITEMS OF PART A AND B OF FORM N-1A AND THE
PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
<S> <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 Financial Highlights
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 *
Performance
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 *
</TABLE>
- ------------------
*Not applicle
<PAGE>
RCM EQUITY FUNDS, INC.
RCM LARGE CAP GROWTH FUND
CROSS REFERENCE SHEET
BETWEEN ITEMS OF PART A AND B OF FORM N-1A AND THE
PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION
(CONTINUED)
<TABLE>
<CAPTION>
<S> <C>
ITEM NUMBER OF PART B OF FORM N-1A CAPTIONS IN PROSPECTUS AND 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 and
Securities 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 Stock
19. Purchase, Redemption and Pricing of How to Purchase Shares
Securities Being Offered
20. Tax Status Dividends, Distributions and Taxes
21. Underwriters The Distributor
22. Calculation of Performance Data Investment Results
23. Financial Statements Additional Information
</TABLE>
<PAGE>
RCM GLOBAL TECHNOLOGY FUND
OFFERED BY:
RCM EQUITY FUNDS, INC.
FOUR EMBARCADERO CENTER
SAN FRANCISCO, CALIFORNIA 94111
(800) 726-7240
THIS PROSPECTUS RELATES TO RCM GLOBAL TECHNOLOGY FUND,
WHICH SPECIALIZES IN EQUITY AND EQUITY-RELATED SECURITIES OF
DOMESTIC AND FOREIGN TECHNOLOGY COMPANIES
---------------
RCM GLOBAL TECHNOLOGY FUND (THE "FUND") is a non-diversified 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 per share next
calculated after an order is received in proper form, plus a sales charge if
applicable. (See HOW TO PURCHASE SHARES.)
The Fund's investment objective is to seek long-term 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 or issuers engaged
in other types of business. There can be no assurance that 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 June 30, 1997 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 June 30, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
Prospectus Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Summary of Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . 4
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Investment Objective and Policies. . . . . . . . . . . . . . . . . . . . . 7
Investment and Risk Considerations . . . . . . . . . . . . . . . . . . . . 13
Organization and Management. . . . . . . . . . . . . . . . . . . . . . . . 16
How to Purchase Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Stockholder Services . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Redemption of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Investment Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Dividends, Distributions and Taxes . . . . . . . . . . . . . . . . . . . . 26
General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
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>
RCM GLOBAL TECHNOLOGY FUND
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. There can be no assurance that the Fund will achieve its
investment objective. (See INVESTMENT OBJECTIVE AND POLICIES.)
WHAT DOES THE FUND INVEST IN?
Under normal market conditions, the Fund will invest at least 65% of the
value of its total assets 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 equity and
equity-related securities of foreign issuers, including emerging market
issuers. 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 Japan. The Fund may invest up to 20% of the
value of its total assets in securities of companies 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. 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 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 exchange 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.
-3-
<PAGE>
WHO OPERATES THE FUND?
The Fund's investment manager is RCM Capital Management, L.L.C. ("RCM" or the
"Investment Manager"), a registered investment adviser with principal offices
in San Francisco, California. RCM and its predecessors have over 25 years of
experience in investing in equity securities. RCM currently provides
investment management 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 State Street Bank and Trust Company.
WHAT ARE SOME OF THE POTENTIAL INVESTMENT RISKS?
Investment in equity and equity-related securities of technology companies
involves significant risks, some of which are not typically associated with
investment in securities of other issuers. These include substantial
competitive and pricing pressures, rapid product obsolescence, dependence on
extensive research and development, and sensitivity to changes in
governmental regulations and policies.
The Fund's investments will be focused in the technology sector of the United
States and foreign economies. As a result of the Fund's focus on a single
sector, the Fund's net asset value may be more volatile in price than the net
asset value of a fund 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
United States 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 generally are higher than in the United States.
DOES THE FUND HEDGE ITS INVESTMENTS?
The Fund may use a variety of techniques to hedge its investment and other
risks. These include currency management techniques; options on securities,
indices and currencies; financial and foreign currency futures contracts and
options; and currency swaps. Each of these hedging techniques also involves
certain risks. (See INVESTMENT OBJECTIVE AND POLICIES and INVESTMENT AND RISK
CONSIDERATIONS.)
IS THERE A MINIMUM INVESTMENT?
There is no minimum initial investment for investors purchasing shares
through a broker-dealer or other financial institution having a service
agreement with the Investment Manager and maintaining an omnibus account with
the Fund. For other investors, the minimum initial investment is $5,000, and
the minimum subsequent investment is $250 (other than investments through the
Fund's automatic dividend reinvestment plan). Shares of the Fund may be
purchased at their net asset value per share next calculated after an order
is received in proper form, plus a sales charge if applicable. (See HOW TO
PURCHASE SHARES.)
CAN I REDEEM SHARES AT ANY TIME?
You may redeem your shares at any time at their net asset
value, without a redemption charge. (See REDEMPTION OF
SHARES.)
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.
-4-
<PAGE>
STOCKHOLDER TRANSACTION EXPENSES
Maximum sales load imposed on purchases (as a
percentage of offering price)* 5.00%
Sales load imposed on reinvested dividends None
Deferred sales loads None
Redemption fees None
Annual Fund Operating Expenses
- ------------------------------
Investment management fees 1.00%
Rule 12b-1 expenses None
Other expenses
(after expense reduction**) 0.75%
Total Fund operating expenses
(after expense reduction**) 1.75%
Example of Portfolio Expenses 1 Year 3 Years
- ----------------------------- ------ -------
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 $67 $102
* Sales charges are reduced on a sliding scale for increasing amounts of
purchase at the public offering price, and are waived for certain persons.
(See HOW TO PURCHASE SHARES.)
** The Investment Manager has voluntarily agreed, until at least December
31, 1997, to pay the Fund on a quarterly basis the amount, if any, by which
ordinary operating expenses of the Company attributable to the Fund for the
quarter (except interest, taxes and extraordinary expenses) exceed the
annualized rate of 1.75% of the value of the average daily net assets of
the Fund. In subsequent years, the Fund will reimburse the Investment
Manager for any such payments to the extent that the Fund's operating
expenses are otherwise below this expense cap. (See ORGANIZATION AND
MANAGEMENT.) Other expenses and total Fund operating expenses for the year
ended December 31, 1996, without expense reduction, would have been 6.75%
and 7.75%, respectively, of the Fund's average daily net assets.
In accordance with applicable regulations of the Securities and Exchange
Commission (the "SEC"), the Example of Portfolio Expenses assumes that (1)
the percentage amounts listed under Annual Fund Operating Expenses will
remain the same in each of the one and three year periods; and (2) all
dividends and distributions will be 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 is higher. (See HOW TO
PURCHASE SHARES.)
For more information concerning fees and expenses of the Fund, see
ORGANIZATION AND MANAGEMENT and DIVIDENDS, DISTRIBUTIONS AND TAXES.
-5-
<PAGE>
FINANCIAL HIGHLIGHTS
The following information has been audited by Coopers & Lybrand L.L.P.,
independent accountants, as stated in their opinion appearing in the Fund's
1996 Annual Report to Shareholders (which has been incorporated herein by
reference). This information should be read in conjunction with the
financial statements and related notes, which are included in the Annual
Report to Shareholders. A copy of the Fund's Annual Report to Shareholders
is available, upon request, by calling the Fund at (800) 726-7240 or by
writing the Fund at Four Embarcadero Center, San Francisco, California 94111.
Selected data for each share of capital stock outstanding are as follows:
December 27, 1995
(commencement of
Year ended operations) to
December 31, 1996+ December 31, 1995
----------------- -----------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period 10.04 $ 10.00
------------ ------------
Net investment loss* (0.15)++ -
Net realized and unrealized gain
on investments* 2.80 0.04
------------ ------------
Net increase in net asset value
resulting from investment
operations* 2.65 0.04
------------ ------------
Distributions from net realized
gains on investments (0.90) -
------------ ------------
NET ASSET VALUE, END OF PERIOD $ 12.60 $ 10.04
------------ ------------
------------ ------------
TOTAL RETURN** 26.41% 0.40%
------------ ------------
------------ ------------
RATIOS AND SUPPLEMENTAL DATA:
Average commission rate paid
per share(a) $ 0.0599 $ -
------------ ------------
------------ ------------
Net assets, end of period (in 000's) $ 5,117 $ 954
------------ ------------
------------ ------------
Ratio of expenses to average
net assets 1.73%++ $ 0.00%(b)
------------ ------------
------------ ------------
Ratio of net investment loss to
average net assets (1.34%)++ (0.02%)(b)
------------ ------------
------------ ------------
Portfolio turnover 155.58% 0.00%(b)
------------ ------------
------------ ------------
- --------------------
-6-
<PAGE>
+ On June 14, 1996, RCM Capital Management, L.L.C. became the
Investment Manager.
++ Includes reimbursement by the Investment Manager of certain
ordinary operating expenses equal to $0.70* per share.
Without such reimbursement, the ratio of expenses to average
net assets would have been 7.75% and the ratio of net
investment loss to average net assets would have been
(7.36%).
* Calculated using the average share method.
** Total return measures the change in value of an investment
over the period indicated.
(a) For fiscal years beginning on or after September 1, 1995, a
fund is required to disclose its average commission rate per
share for security trades on which commissions are charged.
This amount may vary from period to period and fund to fund
depending on the mix of trades executed in various markets
where trading practices and commission structures may
differ.
(b) Not annualized. Fund was in operation for five days, ratios
are not meaningful.
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 will be considered only as part of
total return and will not be emphasized. There can be no assurance that the
Fund will achieve its investment objective.
HOW DOES THE FUND SELECT SECURITIES FOR ITS PORTFOLIO?
The Fund intends to invest primarily in 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 or 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 and equity-related securities to those
issuers with a record of dividend payments.
-7-
<PAGE>
There is no limitation on the market capitalization of the companies in which
the Fund will invest. However, as of the date of this Prospectus, the
Investment Manager intends to invest primarily in equity and equity-related
securities of companies with market capitalizations in excess of $500
million, and does not intend to invest more than 15% of the value of the
Fund's total assets in securities of companies with market capitalizations
below $100 million at the time of purchase.
WHAT ARE TECHNOLOGY COMPANIES?
Technology companies are issuers whose revenues are primarily generated by
technology products, including but not limited to computers and peripheral
products, software, electronic components and systems, communications
equipment and services, media and information services, pharmaceuticals,
hospital supply and medical devices, biotechnology, environmental services,
chemicals and synthetic materials, and defense and aerospace products and
services. Investments may also include companies that should significantly
benefit from the commercialization of technological advances even if they are
not directly involved in research and development. The types of companies
that the Fund may invest in will be broadly interpreted by the Investment
Manager so that the Fund will be positioned to benefit from holdings in all
companies that may benefit from technological advances.
WHAT ARE EQUITY AND EQUITY-RELATED SECURITIES?
Equity and equity-related securities in which the Fund has the authority to
invest include common stock, preferred stock, convertible preferred stock,
convertible debt obligations, warrants or other rights to acquire stock, and
options on stock and stock indexes. In addition, equity and equity-related
securities may include securities sold in the form of depository receipts and
securities issued by 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 may 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.
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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
foreign 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 United States or in foreign markets.
WILL THE FUND INVEST IN EMERGING MARKETS?
The Fund may invest up to 20% of the value of its total assets in securities
of companies that are organized or headquartered in developing countries with
emerging markets, but 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 recognized financial institutions. As
of the date of this Prospectus, the term "emerging market countries" is
deemed to include, for purposes of this Prospectus, all foreign countries
other than Australia, Austria, Belgium, Canada, Denmark, Finland, France,
Germany, Hong Kong, Ireland, Italy, Japan, Luxembourg, The Netherlands, New
Zealand, Norway, 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
Union). As a result, gains in a particular securities market may be affected,
either positively or negatively, by changes in exchange rates.
DOES THE FUND HEDGE ITS INVESTMENTS?
For hedging purposes, the Fund may purchase options on stock indices and on
securities that are authorized for purchase by the Fund. If the Fund
purchases a "put" option on a security, 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 on a
security, 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). An option on a stock index gives the Fund the right to
receive a cash payment equal to the difference between the closing price of
the index and the exercise price of the option. The Fund may "close out" an
option prior to its exercise or expiration by selling an option of the same
series as the option previously purchased.
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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 related options), 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 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. The Fund is also authorized to employ currency management
techniques to enhance its total return, although it presently does not intend
to do so.
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
for shares that typically are issued by U.S. banks and entitle the holder to
all dividends and all capital gains associated with the ordinary shares.
These securities may not be denominated in the same currency as the
underlying securities that they represent. EDRs and GDRs are receipts issued
by a non U.S. financial institution evidencing a similar arrangement. When
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 does not involve the currency exchange risk that
is present when investing 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. The only practical means of investing in such issuers 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.
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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
may also 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 of 1986, as amended (the "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 generally does not intend to
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 debt
or equity 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) issued or guaranteed by the U.S. Government
and foreign governments (including their respective agencies,
instrumentalities and authorities and political subdivisions), 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,
investment grade by Standard & Poor's Corporation, Moody's Investor Services,
Inc., or another recognized rating organization, or if unrated will be
determined by the Investment Manager to be of comparable investment quality.
Investment grade means that the issuer of the security is believed to have
adequate capacity to pay interest and repay principal, although certain of
such securities in the lower grades have speculative characteristics, and
changes in economic conditions or other circumstances may be more likely to
lead to a weakened capacity to pay interest and principal than would be the
case with higher-rated securities.
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Under normal market conditions, no more than 10% of the value of the Fund's
total assets will be invested in debt 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. In order to meet such redemption requests the Fund may
borrow from banks or enter into 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, 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 broker dealer deemed creditworthy pursuant to
standards adopted by the Company's Board of Directors) and simultaneously
agrees to repurchase the security at an agreed-upon price on an agreed-upon
date within a number of days (usually not more than seven) from the date of
purchase.
LENDING PORTFOLIO SECURITIES. The Fund is authorized to make loans of
portfolio securities, for the purpose of realizing additional income, to
broker-dealers or other institutional investors deemed creditworthy pursuant
to standards adopted by the Company's Board of Directors. The borrower must
maintain with the Fund's custodian collateral consisting of cash, U.S.
Government securities or other liquid debt or equity securities equal to at
least 100% of the value of the borrowed securities, plus any accrued
interest. The Fund will receive any interest paid on the loaned securities,
and a fee and/or a portion of the interest earned on the collateral, less any
fees or administrative expenses associated with the loan.
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 pursuant to standards adopted 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.
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The fact that there are contractual or legal restrictions on resale of
certain securities to the general public or to certain institutions may not
be indicative of the liquidity of such investments. If such securities are
subject to purchase by institutional buyers in accordance with Rule 144A
under the Securities Act, the Investment Manager may determine in particular
cases, pursuant to standards adopted by the Company's Board of Directors,
that such securities are not illiquid securities notwithstanding the legal or
contractual restrictions on their resale. Investing in Rule 144A securities
could have the effect of increasing the Fund's illiquidity to the extent that
qualified institutional buyers become, for a time, uninterested in purchasing
such securities.
CAN THE FUND'S OBJECTIVE AND POLICIES BE CHANGED?
The Fund's investment objective is a fundamental policy that may not be
changed without a vote of its stockholders. However, except as otherwise
indicated in this Prospectus or the Statement of Additional Information, the
Fund's other investment policies and restrictions are not fundamental and may
be changed without a vote of the stockholders. If there is a change in the
Fund's investment objective or policies, stockholders should consider whether
the Fund remains an appropriate investment in light of their then current
financial position and needs.
The various percentage limitations referred to in this Prospectus apply
immediately after a purchase or initial investment. Except as specifically
indicated to the contrary, the Fund is not required to sell any security in
its portfolio as a result of any change in any applicable percentage
resulting from market fluctuations.
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 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 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 EQUITY INVESTMENTS.
Although equity securities have a history of long term growth in value, their
prices fluctuate based on changes in the issuer's financial condition and
prospects and on overall market and economic conditions. The value of the
Fund's net assets can be expected to fluctuate.
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RISKS OF INVESTING IN TECHNOLOGY STOCKS.
Because the Fund will focus its investments in technology companies, the Fund
will be more susceptible than other investment companies to market and other
conditions affecting technology companies. Such conditions include
competitive pressures affecting the financial condition of technology
companies, rapid product obsolescence, dependence on extensive research and
development, aggressive pricing and greater sensitivity to changes in
governmental regulation and policies. As a result of the Fund's
concentration on a single sector, the Fund's net assets 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
political instability, expropriation or nationalization of assets,
revaluation of currencies, confiscatory taxation, and limitations on foreign
investment and use or removal of funds or other assets of the Fund (including
the withholding of dividends and limitations on the repatriation of
currencies). The Fund may also 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 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 MARKETS.
There are special additional risks associated with investments in emerging
markets. 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.
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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 may 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 from 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 market price has increased significantly. Under adverse market
conditions, the Fund might have difficulty in 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.
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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 of borrowings may fluctuate with changing market rates of interest and
may partially offset or exceed the return earned on the borrowed funds (or on
the assets that were retained rather than sold to meet the needs for which
funds were borrowed). Under adverse market conditions, the Fund might have
to sell portfolio securities to meet interest or principal payments at a time
when fundamental investment considerations would not favor such sales. To
the extent the Fund enters into reverse repurchase agreements, the Fund is
subject to risks that are similar to those of the borrowing.
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.
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The Company, on behalf of the Fund, has retained as the Fund's investment
manager RCM Capital Management, L.L.C., a Delaware limited liability company
with principal offices at Four Embarcadero Center, San Francisco, California
94111. 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 June 14, 1996. 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.
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 April 1996, as the successor to the business and
operations of RCM Capital Management, a California Limited Partnership,
which, with its predecessors, has been in operation since 1970. The
Investment Manager is a wholly owned subsidiary of Dresdner Bank AG
("Dresdner"), an international banking organization with principal executive
offices located in Frankfurt, Germany.
Pursuant to an agreement among RCM Limited L.P. ("RCM Limited"), the
Investment Manager, and Dresdner, RCM Limited manages, operates and makes all
decisions regarding the day-to-day business and affairs of the Investment
Manager, subject to the oversight of the Board of Managers. RCM Limited is a
California limited partnership consisting of 38 limited partners and one
general partner, RCM General Corporation, a California corporation ("RCM
General"). Twenty-five of the limited partners of RCM Limited are also
principals of the Investment Manager, and the shareholders of RCM General.
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 primarily responsible for the day-to-day management of the Fund.
They have managed equity portfolios on behalf of the Investment Manager
since 1985.
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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.
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 voluntarily
agreed, until at least December 31, 1997, 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 annualized rate of 1.75% of the value of
the average daily net assets of the Fund. The Fund will reimburse the
Investment Manager for fees deferred or other expenses paid by the Investment
Manager pursuant to this agreement in later years in which operating expenses
for the Fund are otherwise less than such expense limitation. Accordingly,
until all such amounts are reimbursed, the Fund's expenses will be higher,
and its total return will be lower, than would otherwise have been the case.
No interest, carrying or finance charge will be paid by the Fund with respect
to any amounts representing fees deferred or other expenses paid by the
Investment Manager. In addition, the Fund will not be required to repay any
unreimbursed amounts to the Investment Manager upon termination of the
Management Agreement.
HOW DOES THE FUND DECIDE WHICH BROKERS TO USE?
The Investment Manager, subject to the overall supervision of the Company's
Board of Directors, makes the Fund's investment decisions and selects the
broker or dealer to be used in each specific transaction using its judgment
to choose the broker or dealer most capable of providing the services
necessary to obtain the best execution of that transaction. In seeking the
best execution of each transaction, the Investment Manager evaluates a wide
range of criteria. Subject to the requirement of seeking best execution, the
Investment Manager may, in circumstances in which two or more brokers are in
a position to offer comparable execution, give preference to a broker 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 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 execution, whether
or not that counterparty is the primary market maker for that security.
When appropriate and to the extent consistent with applicable laws and
regulations, the Fund may execute brokerage transactions through Dresdner
Kleinwort Benson North America LLC, a wholly owned subsidiary of Dresdner, or
other Dresdner subsidiaries or affiliates which are broker dealers.
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WHO IS THE FUND'S DISTRIBUTOR?
Funds Distributor, Inc. (the "Distributor"), whose principal place of
business is 60 State Street, Suite 1300, Boston, Massachusetts 02109, acts as
distributor of shares of the Fund. The Distributor is engaged in the
business of providing mutual fund distribution services to registered
investment companies, and is an indirect wholly owned subsidiary of Boston
Institutional Group, Inc., which is not affiliated with the Investment
Manager or Dresdner. The Distributor retains a portion of any initial sales
charge upon the purchase of shares of the Fund.
WHO IS THE FUND'S CUSTODIAN AND TRANSFER AGENT?
State Street Bank and Trust Company acts as the Fund's custodian, transfer
agent, redemption agent and dividend paying agent (the "Custodian"). The
Custodian's principal business address is 1776 Heritage Drive, North Quincy,
Massachusetts 02171.
HOW TO PURCHASE SHARES
WHAT IS THE OFFERING PRICE FOR SHARES OF THE FUND?
Shares of the Fund are offered on a continuous basis at the offering price
next determined after receipt of an order in proper form. The offering price
is the net asset value per share plus a sales charge, if applicable. There
is no minimum initial investment for investors purchasing shares through a
broker-dealer or other financial institution having a service agreement with
the Investment Manager and maintaining an omnibus account with the Fund. For
other investors, the initial investment must be at least $5,000, and there is
a $250 minimum for additional investments other than through the Fund's
automatic dividend reinvestment plan. (See STOCKHOLDER SERVICES.)
IS THERE A SALES CHARGE?
The sales charges you pay when purchasing shares of the Fund are set forth
below:
Sales Charges as Percentage of the:
-----------------------------------
Dealer Commission
Amount of Purchase at the Offering Net Amount as Percentage of
Public Offering Price Price Invested the Offering Price
- --------------------- -------------------------------------------
Less than $50,000 5.00% 5.26% 4.50%
$50,000 but less than $100,000 4.50% 4.71% 4.00%
$100,000 but less than $250,000 3.50% 3.63% 3.25%
$250,000 but less than $500,000 2.50% 2.56% 2.25%
$500,000 but less than $1,000,000 2.00% 2.04% 1.75%
$1,000,000 or more 0.00% 0.00% 0.00%
Commissions will be paid by the Distributor to dealers who initiate and are
responsible for purchases of $1 million or more and for purchases made at net
asset value by certain retirement plans of organizations with 50 or more
eligible employees as set forth in the Statement of Additional Information.
WHEN IS THE SALES CHARGE WAIVED OR REDUCED?
NET ASSET VALUE PURCHASES. The Fund may sell shares at net asset value to:
(1) persons who were stockholders of the Fund as of December 31, 1996;
(2) current or retired directors, officers and employees of the Fund, the
Distributor, the Investment Manager, certain family members of the above
persons, and trusts or plans primarily for such persons;
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<PAGE>
(3) current or retired registered representatives or full-time employees and
their spouses and minor children of dealers having selling group agreements
with the Distributor and plans for such persons;
(4) stockholders and former stockholders of another mutual fund which has a
sales charge and is not a series of the Company, so long as shares of the
Fund are purchased with the proceeds of a redemption, made within 60 days of
the purchase, of shares of such other mutual fund (to obtain this benefit,
the redemption check, endorsed to the Company, or a copy of the confirmation
showing the redemption, must be forwarded to National Financial Data Services
- -- see HOW CAN I PURCHASE SHARES OF THE FUND?);
(5) companies or other entities exchanging securities with the Fund through
a merger, acquisition or exchange offer;
(6) trustees or other fiduciaries purchasing shares for certain retirement
plans of organizations with 50 or more eligible employees;
(7) participants in certain pension, profit-sharing or employee benefit
plans that are sponsored by the Distributor and its affiliates;
(8) investment advisers and financial planners who place trades for their
own accounts or the accounts of their clients and who charge a management,
consulting or other fee for their services;
(9) clients of investment advisers and financial planners referred to in
item (7) who place trades for their own accounts if the accounts are linked
to the master account of the investment adviser or financial planner on the
books and records of a broker, agent, investment adviser or financial
institution;
(10) employee-sponsored benefit plans in connection with purchases of shares
of the Fund made as a result of participant-directed exchanges between
options in such a plan;
(11) "Wrap accounts" for the benefit of clients of brother-dealers,
financial institutions or financial planners having sales of service
agreements with the Distributor or another broker-dealer or financial
institution with respect to sales of shares of the Ford; and
(12) such other persons as are determined by the Company's Board of
Directors (or by the Distributor pursuant to standards adopted by the Board)
to have acquired shares under circumstances not involving any sales expenses
to the Fund or the Distributor.
Shares are offered at net asset value to these persons and organizations due
to anticipated economies in sales effort and expense. No sales charges are
imposed on Fund shares purchased upon the reinvestment of dividends and
distributions, or upon an exchange of shares from other series of the Company.
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<PAGE>
AGGREGATION. Sales charge discounts on purchases of shares of the Fund are
available for certain aggregated investments. Investments which may be
aggregated include those by you, your spouse and your children under the age
of 21, if all parties are purchasing shares for their own accounts, which may
include purchases through employee benefit plans such as an IRA,
individual-type 403(b) plan or single-participant Keogh-type plan or by a
business solely controlled by these individuals (for example, the individuals
own the entire business) or by a trust (or other fiduciary arrangement)
solely for the benefit of these individuals. Individual purchases by
trustees or other fiduciaries may also be aggregated if the investments are
(1) for a single trust estate or fiduciary account, including an employee
benefit plan other than those described above, (2) made for two or more
employee benefit plans of a single employer or affiliated employers as
defined in the 1940 Act, again excluding employee benefit plans described
above, or (3) for a common trust fund or other pooled account not
specifically formed for the purpose of accumulating Fund shares. Purchases
made for nominee or street name accounts (securities held in the name of a
dealer or another nominee such as a bank trust department instead of the
customer) may not be aggregated with those made for other accounts and may
not be aggregated with other nominee or street name accounts unless otherwise
qualified as described above.
CONCURRENT PURCHASES. To qualify for a reduced sales charge, you may combine
concurrent purchases of shares of two or more series of the Company. For
example, if you concurrently invest $500,000 in the Fund and $500,000 in
another series of the Company, the sales charge would be reduced to reflect a
$1,000,000 purchase.
RIGHT OF ACCUMULATION. The sales charge for your investment may also be
reduced by taking into account your existing holdings in the Fund and the
other series of the Company. See the account application and Statement of
Additional Information for further details.
LETTER OF INTENT. You may reduce sales charges on all investments by meeting
the terms of a letter of intent, a non-binding commitment to invest a certain
amount within a 13-month period. Your existing holdings in the Fund and the
other series of the Company may also be combined with the investment
commitment set forth in the letter of intent to further reduce your sales
charge. Up to 5% of the letter amount will be held in escrow to cover
additional sales charges which may be due if your total investments over the
letter period are not sufficient to qualify for a sales charge reduction.
See the account application and Statement of Additional Information for
further details.
HOW CAN I PURCHASE SHARES OF THE FUND?
Investors or their duly authorized agents may purchase shares of the Fund by
sending a signed, completed subscription form to National Financial Data
Services ("NFDS"), an affiliate of the Custodian, at P.O. Box 419927, Kansas
City, Missouri 64141-6927, and paying for the shares as described below.
Shares may also be purchased through certain brokers which have entered into
a selling group agreement with the Distributor. Brokers may charge a fee for
their services at the time of purchase or redemption. Subscription forms can
be obtained from the Company.
Orders for shares received by NFDS 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 HOW ARE SHARES PRICED?)
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.
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<PAGE>
Upon receipt of the order in proper form, NFDS will open a stockholder
account in accordance with the investor's registration instructions. A
confirmation statement reflecting the current transaction will be forwarded
to the investor.
WHERE SHOULD I SEND MY SUBSCRIPTION PAYMENT?
Payment for shares purchased should be made by check or money order, made
payable to RCM Technology Fund. Checks should be bank or certified checks.
The Company, at its option, may accept a check that is not a bank or
certified check; however, third party checks will not be accepted. Payments
should be sent to:
RCM Equity Funds, Inc.
P.O. Box 419927
Kansas City, MO 64141-6927
Attn: RCM Global Technology Fund
Account 680
Investors may also make initial or subsequent investments by electronic
transfer of funds or wire transfer of federal funds to the Company. Before
transferring or wiring funds, an investor must first telephone the Company at
(800) 726-7240 for instructions. On the telephone, the following information
will be requested: name of authorized person; stockholder account number (if
such account number is in existence); name of Fund; amount being transferred
or wired; and transferring or wiring bank name.
Investors may be charged a fee if they effect transactions through a broker
or agent. Your dealer is responsible for forwarding payment promptly to
NFDS. 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 "HOW ARE SHARES PRICED?" below; (ii) will
have a tax basis to the Fund equal to such value; (iii) must not be
"restricted securities"; and (iv) must be permitted to be purchased in
accordance with the Fund's investment objective and policies set forth in
this Prospectus and must be securities that the Fund would be willing to
purchase at that time. Prospective stockholders considering this method of
payment should contact the Company in advance to discuss the securities in
question and the documentation necessary to complete the transaction.
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<PAGE>
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 pursuant to standards adopted by the Company's Board of Directors.
The net asset value of a share is the quotient obtained by dividing the net
assets of the Fund (i.e., the value of the assets of the Fund less its
liabilities, including expenses payable or accrued but excluding capital
stock and surplus) by the total number of shares of the Fund outstanding. The
net asset value of the Fund's shares will be calculated as of the close of
regular trading on the New York Stock Exchange, currently 4:00 p.m. Eastern
Time, on each day that the New York Stock Exchange is open for trading.
STOCKHOLDER SERVICES
WHAT SERVICES ARE PROVIDED TO STOCKHOLDERS?
AUTOMATIC REINVESTMENT. Each income dividend and capital gains distribution,
if any, declared by the Fund will be reinvested in full and fractional shares
based on the net asset value as determined on the payment date for such
distributions, unless the stockholder or his or her duly authorized agent has
elected to receive all such payments or the dividend or distribution portions
thereof in cash. Changes in the manner in which dividend and distribution
payments are made may be requested by the stockholder or his or her duly
authorized agent at any time through written notice to the Company and will
be effective as to any subsequent payment if such notice is received by the
Company prior to the record date used for determining the stockholders
entitled to such payment. Any dividend and distribution election will remain
in effect until the Company is notified by the stockholder in writing to the
contrary.
EXCHANGE PRIVILEGE. You may exchange shares of the Fund into shares of any
other series of the Company, without a sales charges or other fee, by
contacting NFDS. Before affecting an exchange, you should obtain the
currently effective prospectus of the series into which the exchange is to be
made. Exchange purchases are subject to the minimum investment requirements
of the series purchased. An exchange will be treated as a redemption and
purchase for tax purposes.
Shares will be exchanged at the net asset value per share of the Fund, and
the series into which the exchange is to be made, next determined after
receipt by NFDS of (i) a written request for exchange, 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 exchanged; and (ii) stock certificates for any shares to be
exchanged which are held by the stockholder. Exchanges will not become
effective until all documents in the form required have been received by
NFDS. A stockholder in doubt as to what documents are required should
contact NFDS.
ACCOUNT STATEMENTS. Your account is opened in accordance with your
registration instructions. 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.
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<PAGE>
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 in whole or in
part in portfolio securities.
Stockholders may 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 a 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.
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<PAGE>
WHAT ELSE SHOULD I KNOW ABOUT REDEMPTIONS?
REINSTATEMENT PRIVILEGE. You may reinvest proceeds from a redemption of
shares of the Fund, or proceeds of a dividend or capital gain distribution
paid to you with respect to shares of the Fund, without a sales charge, in
the Fund or any other series of the Company. Send a written request and a
check to the Company within 90 days after the date of the redemption,
dividend or distribution. Reinvestment will be at the next calculated net
asset value after receipt. The tax status of a gain realized on a redemption
will not be affected by exercise of the reinstatement privilege, but a loss
may be nullified if you reinvest in the same series within 30 days.
INVOLUNTARY REDEMPTION. In order to reduce expenses of the Fund, the Company
may redeem all of the shares of any investor whose account has a net asset
value of less than $5,000 due to redemptions (other than a stockholder who is
a participant in a qualified retirement plan). The Company will give such
stockholders 60 days' prior written notice in which to purchase sufficient
additional shares to avoid such redemption.
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), indices 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 (total return is the change in
value of an investment in the Fund over a given period, assuming reinvestment
of any dividends and capital gain distributions). Such indices and rankings
may include the following, among others:
1. The Standard & Poor's 500 Composite 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.
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<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES
WHAT DIVIDENDS DOES THE FUND PAY?
The Fund intends 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 non-resident alien
individual, non-resident 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 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.
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<PAGE>
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 the Fund, 50,000,000 shares have been designated as
shares of RCM Health Care Fund, 50,000,000 shares have been designated as
shares of RCM Global Small Cap Fund, 50,000,000 shares have been designated
as shares of RCM Large Cap Growth Fund, and 50,000,000 shares have been
designated as shares of Dresdner RCM Emerging Markets Fund (a newly created
series of the Company). The Company's Board of Directors may, in the future,
authorize the issuance of other classes of shares of the Fund (with, for
example, different sales loads, or other distribution or service fee
arrangements), or 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 March 31, 1997, there were 459,360.312 shares of the Fund
outstanding; on that date RCM Capital Management Profit Sharing Plan was the
only stockholder known to the Fund to own of record more than 25% of the
Fund's capital stock.
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 than 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 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 SEC. The registration statements 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.
-27-
<PAGE>
RCM GLOBAL HEALTH CARE FUND
OFFERED BY:
RCM EQUITY FUNDS, INC.
FOUR EMBARCADERO CENTER
SAN FRANCISCO, CALIFORNIA 94111
(800) 726-7240
THIS PROSPECTUS RELATES TO RCM GLOBAL HEALTH CARE FUND,
WHICH SPECIALIZES IN EQUITY AND EQUITY-RELATED SECURITIES OF
DOMESTIC AND FOREIGN HEALTH CARE COMPANIES
_______________
RCM GLOBAL HEALTH CARE FUND (THE "FUND") is a non-diversified 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 per share next
calculated after an order is received in proper form, plus a sales charge if
applicable. (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 companies in the health care sector and related industries. 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
companies in the health care and related industries involve significant risks,
some of which are not typically associated with investments in securities of
domestic issuers or issuers engaged in other types of business. There can be no
assurance that 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 June 30, 1997 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 June 30, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
Prospectus Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Summary of Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . 5
Financial Highlights. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Investment Objective and Policies . . . . . . . . . . . . . . . . . . . . 8
Investment and Risk Considerations . . . . . . . . . . . . . . . . . . . 14
Organization and Management . . . . . . . . . . . . . . . . . . . . . . 17
How to Purchase Shares . . . . . . . . . . . . . . . . . . . . . . . . . 20
Stockholder Services . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Redemption of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Investment Results . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Dividends, Distributions and Taxes . . . . . . . . . . . . . . . . . . . 26
General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
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>
RCM GLOBAL HEALTH CARE FUND
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 long-term appreciation of
capital, primarily through investment in equity and equity-related
securities of domestic and foreign companies in the health care sector and
related industries. Such 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. There
can be no assurance that the Fund will achieve its investment objective.
(See INVESTMENT OBJECTIVE AND POLICIES.)
WHAT DOES THE FUND INVEST IN?
Under normal market conditions, the Fund will invest at least 65% of the
value of its total assets in equity and equity-related securities of
domestic and foreign companies in the health care sector and related
industries. The Fund will seek investment opportunities in companies
engaged in the design, production or sale of health care and medical
products and related services. Such companies may be in a variety of
industries and may include pharmaceutical companies, biochemical and
biotechnology companies involved in research and development, companies
involved in ownership and/or operation of health care facilities,
franchises or practices, and companies that design, produce or sell
medical, dental and optical products or health care related services.
DOES THE FUND INVEST GLOBALLY?
The Fund may invest up to 100% of the value of its total assets in equity and
equity-related securities of foreign issuers, including emerging market
issuers. 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 may be the
United States). While there is no limitation on the countries in which the
Fund may invest, the Fund currently expects that the majority of its foreign
investments will be in securities of companies organized or headquartered in
Japan and the countries of Western Europe, and up to 15% of the value of the
Fund's total assets may be invested in securities of companies 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. 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
health care sector and related industries. In the last several years,
advances in medical treatment have addressed medical conditions that were
previously untreatable. The Fund's investment manager believes it is likely
that further developments in pharmaceutical, biotechnology and medical supply
companies will offer other effective medical treatments. In addition, in the
United States, as well as internationally, an aging population will require
more frequent and cost-efficient services. Yet the stocks of individual
health care companies can be volatile, and analyzing individual companies can
be time-intensive. A global health care fund offers experienced professional
management to investors who wish to invest in these industries.
The Fund is designed for investors who recognize and are prepared to accept
these risks in exchange 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.
-3-
<PAGE>
WHO OPERATES THE FUND?
The Fund's investment manager is RCM Capital Management, L.L.C. ("RCM" or
the "Investment Manager"), a registered investment adviser with principal
offices in San Francisco, California. RCM and its predecessors have over
25 years of experience in investing in equity securities. RCM currently
provides investment management 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 State Street Bank and Trust Company.
WHAT ARE SOME OF THE POTENTIAL INVESTMENT RISKS?
Investments in equity and equity-related securities of health care companies
may involve significant risks, some of which are not typically associated
with investment in securities of other issuers. These include substantial
competitive and pricing pressures, rapid product obsolescence, dependence on
extensive research and development, and sensitivity to changes in
governmental regulations and policies.
The Fund's investments will be focused in the health care sector of the
United States and foreign economies. As a result of the Fund's focus on a
single sector, the Fund's net asset value may be more volatile in price than the
net asset value of a 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
generally higher than in the United States. (See INVESTMENT AND RISK
CONSIDERATIONS.)
DOES THE FUND HEDGE ITS INVESTMENTS?
The Fund may use a variety of techniques to hedge investments. These
include currency management techniques; options on securities, indices and
currencies; financial and foreign currency futures contracts and options;
and currency swaps. Each of these hedging techniques also involves certain
risks. (See INVESTMENT OBJECTIVE AND POLICIES and INVESTMENT AND RISK
CONSIDERATIONS.)
IS THERE A MINIMUM INVESTMENT?
There is no minimum initial investment for investors purchasing shares
through a broker-dealer or other financial institution having a service
agreement with the Investment Manager and maintaining an omnibus account
with the Fund. For other investors, the minimum initial investment is
$5,000, and the minimum subsequent investment is $250 (other than
investments through the Fund's automatic dividend reinvestment plan).
Shares of the Fund may be purchased at their net asset value per share next
calculated after an order is received in proper form, plus a sales charge
if applicable. (See HOW TO PURCHASE SHARES.)
CAN I REDEEM SHARES AT ANY TIME?
You may redeem your shares at any time at their net asset value, without a
redemption charge. (See REDEMPTION OF SHARES.)
-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.
STOCKHOLDER TRANSACTION EXPENSES
--------------------------------
Maximum sales load imposed on 5.00%
purchases (as a percentage of
offering price)*
Sales load imposed on reinvested dividends None
Deferred sales loads None
Redemption fees None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
----------------------------------------------------------------------
Investment management fees 1.00%
Rule 12b-1 expenses 0.30%
Other expenses
(after expense reduction**) 0.80%
Total Fund operating expenses
(after expense reduction**) 2.10%
EXAMPLE OF PORTFOLIO EXPENSES 1 YEAR 3 YEARS
----------------------------- ------ -------
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 $ 70 $ 113
* Sales charges are reduced on a sliding scale for increasing amounts of
purchase at the public offering price, and are waived for certain persons.
The National Association of Securities Dealers, Inc. limits total annual
sales charges (including Rule 12b-1 expenses) to all purchasers of shares
of the Fund to 6.25% of new sales plus an interest factor. However,
long-term stockholders may pay more than the economic equivalent of the
maximum sales charge permitted by the NASD. (See HOW TO PURCHASE SHARES.)
-5-
<PAGE>
** The Investment Manager has voluntarily agreed, until at least December
31, 1997, to pay the Fund on a quarterly basis the amount, if any, by which
ordinary operating expenses of the Company attributable to the Fund for the
quarter (except interest, taxes and extraordinary expenses) exceed the
annualized rate of 2.10% of the value of the average daily net assets of
the Fund. In subsequent years, the Fund will reimburse the Investment
Manager for any such payments to the extent that the Fund's operating
expenses are otherwise below this expense cap. (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 2.57% and 3.57%, respectively, of the Fund's average daily net assets.
In accordance with applicable regulations of the Securities and Exchange
Commission (the "SEC"), the Example of Portfolio Expenses assumes that (1) the
percentage amounts listed under Annual Fund Operating Expenses will 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 is higher. (See HOW TO PURCHASE SHARES.)
For more information concerning fees and expenses of the Fund, see
ORGANIZATION AND MANAGEMENT and DIVIDENDS, DISTRIBUTIONS AND TAXES.
FINANCIAL HIGHLIGHTS
The following information for the four months ended April 30, 1997, has
been prepared by the Company and is unaudited. It should be read in
conjunction with the financial statements and related notes for such
period, which are included in the Statement of Additional Information.
The following information for December 31, 1996 has been audited by Coopers
& Lybrand L.L.P., independent accountants, as stated in their opinion
appearing in the Fund's 1996 Annual Report to Shareholders (which has been
incorporated herein by reference). This information should be read in
conjunction with the financial statements and related notes, which are
included in the Annual Report to Shareholders. A copy of the Annual Report
to Shareholders is available, upon request, by calling the Fund at (800)
726-7240, or by writing the Fund at Four Embarcadero Center, San Francisco, CA
94111.
Selected data for each share of capital stock outstanding are as follows:
<TABLE>
<CAPTION>
December 31, 1996
Four Months Ended (commencement of
April 30, 1997 operations) to
(Unaudited) December 31, 1996
----------------- -----------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.00 $ 10.00
----------------- -----------------
Net investment loss (a) (0.02) (b) -
Net realized and unrealized gain on
investments (a) 0.07 -
----------------- -----------------
Net increase in net asset value resulting
from investment operations (a) 0.05 -
----------------- -----------------
Net asset value, end of period $ 10.05 $ 10.00
----------------- -----------------
----------------- -----------------
</TABLE>
-6-
<PAGE>
<TABLE>
<S> <C> <C>
TOTAL RETURN (c) 0.50% 0.00%
----------------- -----------------
----------------- -----------------
RATIOS AND SUPPLEMENTAL DATA:
Average commission rate paid per share (d) $ 0.0478 $ 0.0324
----------------- -----------------
----------------- -----------------
Net assets, end of period (in 000's) $ 4,022 $ 4,000
----------------- -----------------
----------------- -----------------
Ratio of expenses to average net assets 2.10% (b) 0.00% (f)
----------------- -----------------
----------------- -----------------
Ratio of net investment loss to average
net assets (0.54%) (b) 0.00% (f)
----------------- -----------------
----------------- -----------------
Portfolio turnover 40.13% (e) 0.00% (f)
----------------- -----------------
----------------- -----------------
</TABLE>
_______________________________
(a) Calculated using the average share method.
(b) Includes reimbursement by the Fund's investment manager of certain
ordinary operating expenses equal to $0.05 per share (calculated using
the average share method). Without such reimbursement, the ratio of
expenses to average net assets would have been 3.57% and the ratio of
net investment loss to average net assets would have been (2.01%).
(c) Total return measures the change in value of an investment in the Fund
over the period indicated.
(d) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for security
trades on which commissions are charged. This amount may vary from
period to period and fund to fund depending on the mix of trades
executed in various markets where trading practices and commission
structures may differ.
(e) Not annualized.
(f) Not annualized. Fund was in operation for one day.
INVESTMENT OBJECTIVE AND POLICIES
WHAT IS THE FUND'S OBJECTIVE?
The Fund's investment objective is to seek long-term appreciation of
capital, primarily through investment in a portfolio of equity and
equity-related securities of domestic and foreign companies in the health
care sector and related industries. 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 will be considered
only as part of total return and will not be emphasized. There can be no
assurance that the Fund will achieve its investment objective.
HOW DOES THE FUND SELECT SECURITIES FOR ITS PORTFOLIO?
The Fund intends to invest primarily in equity and equity-related securities
of companies in the health care sector and related industries. 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 or 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 in developing economies,
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
and equity-related securities to those issuers with a record of dividend
payments.
-7-
<PAGE>
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 of at least $1 billion,
and does not intend to invest more than 15% of the value of the Fund's total
assets in securities of companies with market capitalizations below $100
million at the time of purchase.
WHAT ARE HEALTH CARE COMPANIES?
Health care companies are issuers which are principally engaged in the
health care business, including but not limited to pharmaceutical,
biotechnology and medical companies. A company will be deemed to be
principally engaged in the health care business if at least 50% of its
earnings or revenues is derived from health care activities, or at least 50%
of its assets is devoted to such activities, based upon the company's
financial statements as of the end of its most recent fiscal year. 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 the health care
business.
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 indices. In addition, equity and equity-related
securities may include securities sold in the form of depository receipts
and securities issued by 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 may 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, and may be 100% 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. While there is no limitation on
the countries in which the Fund may invest, the Fund currently expects that
the majority of its foreign investments will be in securities of companies
organized or headquartered in Japan and the countries of Western Europe. 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.
-8-
<PAGE>
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 foreign 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 United States or in foreign markets.
WILL THE FUND INVEST IN EMERGING MARKETS?
The Fund may invest up to 15% of the value of its total assets in securities
of companies that are organized or headquartered in developing countries
with emerging markets. 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 recognized
financial institutions. As of the date of this Prospectus, the term
"emerging market countries" is deemed to include for purposes of this
Prospectus all foreign countries other than Australia, Austria, Belgium,
Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Italy, Japan,
Luxembourg, The Netherlands, New Zealand, Norway, 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
Union). As a result, gains in a particular securities market may be
affected, either positively or negatively, by changes in exchange rates.
DOES THE FUND HEDGE ITS INVESTMENTS?
For hedging purposes, the Fund may purchase options on stock indices and on
securities that are authorized for purchase by the Fund. If the Fund
purchases a "put" option on a security, 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 on a
security, 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). An option on a stock index gives the Fund the right to
receive a cash payment equal to the difference between the closing price of
the index and the exercise price of the option. The Fund may "close out" an
option prior to its exercise or expiration 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 (and related
options), 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.
-9-
<PAGE>
The Fund may 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. The Fund is also authorized to employ currency management techniques to
enhance its total return, although it presently does not intend to do so.
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 U.S. banks and entitle the holder to all
dividends and all capital gains associated with the ordinary shares. These
securities may not be denominated in the same currency as the underlying
securities that they represent. EDRs and GDRs are receipts issued by a
non-U.S. financial institution evidencing a similar arrangement. When 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 does not involve the currency exchange risk that
is present when investing 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.
The only practical means of investing in such issuers 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.
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 may
also 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.
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The value of securities of any issuer in which the Fund maintains a
short position that is not "against the box" may not exceed the lesser of 5%
of the value of the Fund's net assets or 5% of the securities of such class
of the issuer. The Fund's ability to enter into short sales transactions is
limited by the requirements of the Investment Company Act of 1940 (the "1940
Act"), and by the Internal Revenue Code of 1986, as amended (the "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 generally does not intend to
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 debt
or equity 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) issued or guaranteed by the U.S. Government
and foreign governments (including their respective agencies,
instrumentalities, authorities and political subdivisions), 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, investment grade by
Standard & Poor's Corporation, Moody's Investor Services, Inc., or another
recognized rating organization, or if unrated will be determined by the
Investment Manager to be of comparable investment quality. Investment grade
means the issuer of the security is believed to have adequate capacity to pay
interest and repay principal, although certain of such securities in the
lower grades have speculative characteristics, and changes in economic
conditions or other circumstances may be more likely to lead to a weakened
capacity to pay interest and principal than would be the case with
higher-rated securities.
Under normal market conditions, no more than 10% of the value of the Fund's
total assets will be invested in debt 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
securities. When the Fund is so invested, it may not be achieving its
investment objective.
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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. In order to meet such redemption requests, the Fund may
borrow from banks or enter into 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, 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 broker-dealer deemed creditworthy pursuant to standards
adopted by the Company's Board of Directors) and simultaneously agrees to
repurchase the security at an agreed-upon price on an agreed-upon date within a
number of days (usually not more than seven) from the date of purchase.
LENDING PORTFOLIO SECURITIES. The Fund is authorized to make loans of
portfolio securities, for the purpose of realizing additional income, to
broker-dealers or other institutional investors deemed creditworthy pursuant to
standards adopted by the Company's Board of Directors. The borrower must
maintain with the Fund's custodian collateral consisting of cash, U.S.
Government securities or other liquid debt or equity securities equal to at
least 100% of the value of the borrowed securities, plus any accrued interest.
The Fund will receive any interest paid on the loaned securities, and a fee
and/or a portion of the interest earned on the collateral, less any fees and
administrative expenses associated with the loan.
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
pursuant to standards adopted 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 Investment Manager may determine in particular cases,
pursuant to standards adopted by the Company's Board of Directors, that such
securities are not illiquid securities notwithstanding the legal or contractual
restrictions on their resale. Investing in Rule 144A securities could have the
effect of increasing the Fund's illiquidity to the extent that qualified
institutional buyers become, for a time, uninterested in purchasing such
securities.
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CAN THE FUND'S OBJECTIVE AND POLICIES BE CHANGED?
The Fund's investment objective is a fundamental policy that may not be
changed without a vote of its stockholders. However, except as otherwise
indicated in this Prospectus or the Statement of Additional Information, the
Fund's other investment policies and restrictions are not fundamental and may
be changed without a vote of the stockholders. If there is a change in the
Fund's investment objective or policies, stockholders should consider whether
the Fund remains an appropriate investment in light of their then current
financial position and needs.
The various percentage limitations referred to in this Prospectus apply
immediately after a purchase or initial investment. Except as specifically
indicated to the contrary, the Fund is not required to sell any security in its
portfolio as a result of change in any applicable percentage resulting from
market fluctuations.
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 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 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 HEALTH CARE STOCKS.
Because the Fund will focus its investments in health care companies, the
Fund will be more susceptible than other investment companies to market and
other conditions affecting health care companies. Such conditions include
competitive pressures affecting the financial condition of health care
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 assets may be more volatile
in price than the net asset value of a company with a more broadly
diversified portfolio.
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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
political instability, expropriation or nationalization of assets,
revaluation of currencies, confiscatory taxation, and limitations on foreign
investment and use or removal of funds or other assets of the Fund (including
the withholding of dividends and limitations on the repatriation of
currencies). The Fund may also 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 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 MARKETS.
There are special additional risks associated with investments in emerging
markets. 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.
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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 may 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 from
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 market price has increased significantly. Under adverse market
conditions, the Fund might have difficulty in 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.
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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 of borrowings may fluctuate with changing market rates of interest and may
partially offset or exceed the return earned on the borrowed funds (or on the
assets that were retained rather than sold to meet the needs for which funds
were borrowed). Under adverse market conditions, the Fund might have to sell
portfolio securities to meet interest or principal payments at a time when
fundamental investment considerations would not favor such sales. To the extent
the Fund enters into reverse repurchase agreements, the Fund is subject to risks
that are similar to those of borrowing.
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.
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The Company, on behalf of the Fund, has retained as the Fund's investment
manager RCM Capital Management, L.L.C., a Delaware limited liability company
with principal offices at Four Embarcadero Center, San Francisco, California
94111. The Investment Manager provides the Fund with investment supervisory
services pursuant to an Investment Management Agreement, Power of Attorney
and Service Agreement (the "Management Agreement") dated December 27, 1996.
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.
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 April 1996, as the successor to the business and
operations of RCM Capital Management, a California Limited Partnership,
which, with its predecessors, has been in operation since 1970. The
Investment Manager is a wholly owned subsidiary of Dresdner Bank AG
("Dresdner"), an international banking organization with principal executive
offices located in Frankfurt, Germany.
Pursuant to an agreement among RCM Limited L.P. ("RCM Limited"), the
Investment Manager, and Dresdner, RCM Limited manages, operates and makes all
decisions regarding the day-to-day business and affairs of the Investment
Manager, subject to the oversight of RCM's Board of Managers. RCM Limited is a
California limited partnership consisting of 38 limited partners and one general
partner, RCM General Corporation, a California corporation ("RCM General").
Twenty-five of the limited partners of RCM Limited are also principals of the
Investment Manager, and the shareholders of RCM General.
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 health care
stocks. Its research analysts have been researching health care companies for
purchase in domestic equity portfolios for more than 20 years, and have been
managing health care portfolios for more than 10 years. The research team
consults regularly with the senior members of the Investment Manager's equity
portfolio management team concerning the prospects for the health care industry
generally as well as specific health care 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 health care area, Grassroots
Research can be a valuable adjunct to the Investment Manager's traditional
research efforts by providing a "second look" at health care companies in which
the Fund is considering investing and by checking marketplace assumptions
concerning market demand for particular products and services.
Jeffrey J. Wiggins and Selena A. Chaisson, M.D. are primarily responsible
for the day-to-day management of the Fund. Mr. Wiggins is a Principal of the
Investment Manager, with which he has been associated since 1992. He has
managed institutional portfolios for the Investment Manager since 1992. Dr.
Chaisson is a Senior Vice President of the Investment Manager, with which she
has been associated since 1994. She has participated in the management of
portfolios since 1996.
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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.
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; fees paid pursuant
to the Fund's Rule 12b-1 plan; 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, 1997, 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 2.10% of the value of the average daily net assets of the
Fund. The Fund will reimburse the Investment Manager for fees deferred or other
expenses paid by the Investment Manager pursuant to this agreement in later
years in which operating expenses for the Fund are otherwise less than such
expense limitation. Accordingly, until all such amounts are reimbursed, the
Fund's expenses will be higher, and its total return will be lower, than would
otherwise have been the case. No interest, carrying or finance charge will be
paid by the Fund with respect to any amounts representing fees deferred or other
expenses paid by the Investment Manager. In addition, the Fund will not be
required to repay any unreimbursed amounts to the Investment Manager upon
termination of the Management Agreement.
HOW DOES THE FUND DECIDE WHICH BROKERS TO USE?
The Investment Manager, subject to the overall supervision of the Company's
Board of Directors, makes the Fund's investment decisions and selects the
broker or dealer to be used in each specific transaction using its judgment
to choose the broker or dealer most capable of providing the services
necessary to obtain the best execution of that transaction. In seeking the
best execution of each transaction, the Investment Manager evaluates a wide
range of criteria. Subject to the requirement of seeking best execution, the
Investment Manager may, in circumstances in which two or more brokers are in
a position to offer comparable execution, give preference to a broker 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 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 execution, whether or not that counterparty is the
primary market maker for that security.
When appropriate and to the extent consistent with applicable laws and
regulations, the Fund may execute brokerage transactions through Dresdner
Kleinwort Benson North America LLC, a wholly owned subsidiary of Dresdner, or
other broker-dealer subsidiaries or affiliates of Dresdner.
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WHO IS THE FUND'S DISTRIBUTOR?
Funds Distributor, Inc. (the "Distributor"), whose principal place of
business is 60 State Street, Suite 1300, Boston, Massachusetts 02109, acts as
distributor of shares of the Fund. The Distributor is engaged in the
business of providing mutual fund distribution services to registered
investment companies, and is an indirect wholly owned subsidiary of Boston
Institutional Group, Inc., which is not affiliated with the Investment
Manager or Dresdner.
The Distributor retains a portion of any initial sales charge upon the
purchase of shares of the Fund. In addition, the Company has adopted a
distribution plan pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund. Under the distribution plan, which is a "reimbursement plan," the Fund
pays the Distributor an annual fee of up to 0.30% of the Fund's average daily
net assets as reimbursement for certain expenses actually incurred by the
Distributor in connection with distribution of shares of the Fund. These
expenses include advertising and marketing expenses, payments to broker-dealers
and others who have entered into agreements with the Distributor, the expenses
of preparing, printing and distributing the prospectuses of the Fund to persons
who are not already stockholders, and indirect and overhead costs associated
with the sale of shares of the Fund. If in any month the Distributor is due
more monies for such services than are immediately payable because of the
expense limitation under the plan, the unpaid amount is carried forward from
month to month while the plan is in effect until such time as it may be paid.
However, no amounts carried forward are payable beyond the fiscal year during
which they were incurred, and no interest, carrying or other finance charge is
borne by the Fund with respect to any amount carried forward.
WHO IS THE FUND'S CUSTODIAN AND TRANSFER AGENT?
State Street Bank and Trust Company acts as the Fund's custodian, transfer
agent, redemption agent and dividend paying agent (the "Custodian"). The
Custodian's principal business address is 1776 Heritage Drive, North Quincy,
Massachusetts 02171.
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HOW TO PURCHASE SHARES
WHAT IS THE OFFERING PRICE FOR SHARES OF THE FUND?
Shares of the Fund are offered on a continuous basis at the offering price
next determined after receipt of an order in proper form. The offering price
is the net asset value per share plus a sales charge, if applicable. There
is no minimum initial investment for investors purchasing shares through a
broker-dealer or other financial institution having a service agreement with
the Investment Manager and maintaining an omnibus account with the Fund. For
other investors, the initial investment must be at least $5,000, and the
minimum subsequent investment is $250 other than through the Fund's automatic
dividend reinvestment plan. (See STOCKHOLDER SERVICES.)
IS THERE A SALES CHARGE?
The sales charges you pay when purchasing shares of the Fund are set forth
below:
SALES CHARGE AS PERCENTAGE OF THE:
----------------------------------
DEALER COMMISSION
AMOUNT OF PURCHASE AT THE OFFERING NET AMOUNT AS PERCENTAGE OF
PUBLIC OFFERING PRICE PRICE INVESTED THE OFFERING PRICE
- --------------------- ----------------------------------------
Less than $50,000 5.00% 5.26% 4.50%
$50,000 but less than $100,000 4.50% 4.71% 4.00%
$100,000 but less than $250,000 3.50% 3.63% 3.25%
$250,000 but less than $500,000 2.50% 2.56% 2.25%
$500,000 but less than $1,000,000 2.00% 2.04% 1.75%
$1,000,000 or more 0.00% 0.00% 0.00%
Commissions will be paid by the Distributor to dealers who initiate and are
responsible for purchases of $1 million or more and purchases made at net
asset value by certain retirement plans of organizations with 50 or more
eligible employees as set forth in the Statement of Additional Information.
WHEN IS THE SALES CHARGE WAIVED OR REDUCED?
NET ASSET VALUE PURCHASES. The Fund may sell shares at net asset value to:
(1) current or retired directors, officers and employees of the Fund, the
Distributor, the Investment Manager, certain family members of such persons, and
trusts or plans primarily for such persons;
(2) current or retired registered representatives or full-time employees
(and their spouses and minor children) of dealers having selling group
agreements with the Distributor and plans for such persons;
(3) stockholders and former stockholders of another mutual fund which has
a sales charge and is not a series of the Company, so long as shares of the Fund
are purchased with the proceeds of a redemption, made within 60 days of the
purchase, of shares of such other mutual fund (to obtain this benefit, the
redemption check, endorsed to the Company, or a copy of the confirmation showing
the redemption, must be forwarded to National Financial Data Services -- see HOW
CAN I PURCHASE SHARES OF THE FUND?);
(4) companies or other entities exchanging securities with the Fund
through a merger, acquisition or exchange offer;
(5) trustees or other fiduciaries purchasing shares for certain retirement
plans of organizations with 50 or more eligible employees;
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(6) participants in certain pension, profit-sharing or employee benefit
plans that are sponsored by the Distributor and its affiliates;
(7) investment advisers and financial planners who place trades for their
own accounts or the accounts of their clients and who charge a management,
consulting or other fee for their services;
(8) clients of investment advisers and financial planners referred to in
item (7) who place trades for their own accounts if the accounts are linked to
the master account of the investment adviser or financial planner on the books
and records of a broker, agent, investment adviser or financial institution;
(9) employee-sponsored benefit plans in connection with purchases of
shares of the Fund made as a result of participant-directed exchanges between
options in such a plan;
(10) "wrap accounts" for the benefit of clients of broker-dealers,
financial institutions or financial planners having sales or service agreements
with the Distributor or another broker-dealer or financial institution with
respect to sales of shares of the Fund; and
(11) such other persons as are determined by the Company's Board of
Directors (or by the Distributor pursuant to standards adopted by the Board) to
have acquired shares under circumstances not involving any sales expenses to the
Fund or the Distributor.
Shares are offered at net asset value to these persons and organizations due
to anticipated economies in sales effort and expense. No sales charges are
imposed on Fund shares purchased upon the reinvestment of dividends and
distributions, or upon an exchange of shares from other series of the Company.
AGGREGATION. Sales charge discounts on purchases of shares of the Fund are
available for certain aggregated investments. Investments which may be
aggregated include those by you, your spouse and your children under the age of
21, if all parties are purchasing shares for their own accounts, which may
include purchases through employee benefit plans such as an IRA, individual-type
403(b) plan or single-participant Keogh-type plan or by a business solely
controlled by these individuals (for example, the individuals own the entire
business) or by a trust (or other fiduciary arrangement) solely for the benefit
of these individuals. Individual purchases by trustees or other fiduciaries may
also be aggregated if the investments are (1) for a single trust, estate or
fiduciary account, including an employee benefit plan other than those described
above, (2) made for two or more employee benefit plans of a single employer or
affiliated employers as defined in the 1940 Act, again excluding employee
benefit plans described above, or (3) for a common trust fund or other pooled
account not specifically formed for the purpose of accumulating Fund shares.
Purchases made for nominee or street name accounts (securities held in the name
of a dealer or another nominee such as a bank trust department instead of the
customer) may not be aggregated with those made for other accounts and may not
be aggregated with other nominee or street name accounts unless otherwise
qualified as described above.
CONCURRENT PURCHASES. To qualify for a reduced sales charge, you may
combine concurrent purchases of shares of two or more series of the Company.
For example, if you concurrently invest $500,000 in the Fund and $500,000 in
another series of the Company, the sales charge would be reduced to reflect a
$1,000,000 purchase.
RIGHT OF ACCUMULATION. The sales charge for your investment may also be
reduced by taking into account your existing holdings in the Fund and the other
series of the Company. See the account application and Statement of Additional
Information for further details.
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<PAGE>
LETTER OF INTENT. You may reduce sales charges on all investments by meeting
the terms of a letter of intent, a non-binding commitment to invest a certain
amount within a 13-month period. Your existing holdings in the Fund and the
other series of the Company may also be combined with the investment
commitment set forth in the letter of intent to further reduce your sales
charge. Up to 5% of the letter amount will be held in escrow to cover
additional sales charges which may be due if your total investments over the
letter period are not sufficient to qualify for a sales charge reduction.
See the account application and Statement of Additional Information for
further details.
HOW CAN I PURCHASE SHARES OF THE FUND?
Investors or their duly authorized agents may purchase shares of the Fund by
sending a signed, completed subscription form to National Financial Data
Services ("NFDS"), an affiliate of the Custodian, at P.O. Box 419927, Kansas
City, Missouri 64141-6927, and paying for the shares as described below.
Shares may also be purchased through certain brokers which have entered into
a selling group agreement with the Distributor. Brokers may charge a fee for
their services at the time of purchase or redemption. Subscription forms can
be obtained from the Company.
Orders for shares received by NFDS 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 HOW ARE SHARES PRICED?)
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 order in proper form, NFDS will open a stockholder
account in accordance with the investor's registration instructions. A
confirmation statement reflecting the current transaction will be forwarded
to the investor.
WHERE SHOULD I SEND MY SUBSCRIPTION PAYMENT?
Payment for shares purchased should be made by check or money order,
made payable to RCM Global Health Care Fund. Checks should be bank or certified
checks. The Company, at its option, may accept a check that is not a bank or
certified check; however, third party checks will not be accepted. Payments
should be sent to:
RCM Equity Funds, Inc.
P.O. Box 419927
Kansas City, MO 64141-6927
Attn: RCM Global Health Care Fund
Account 683
Investors may also make initial or subsequent investments by electronic
transfer of funds or wire transfer of federal funds to the Company. Before
transferring or wiring funds, an investor must first telephone the Company at
(800) 726-7240 for instructions. On the telephone, the following information
will be requested: name of authorized person; stockholder account number (if
such account number is in existence); name of Fund; amount being transferred or
wired; and transferring or wiring bank name.
Investors may be charged a fee if they effect transactions through a broker
or agent. Your dealer is responsible for forwarding payment promptly to NFDS.
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.
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<PAGE>
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 HOW ARE SHARES PRICED? below; (ii) will have
a tax basis to the Fund equal to such value; (iii) must not be "restricted
securities"; and (iv) must be permitted to be purchased in accordance with
the Fund's investment objective and policies set forth in this Prospectus and
must be securities that the Fund would be willing to purchase at that time.
Prospective stockholders considering this method of payment should contact
the Company in advance to discuss the securities in question and the
documentation necessary to complete the transaction.
HOW ARE SHARES PRICED?
The net asset value of each share of the Fund on which the subscription and
redemption prices are based is determined by the sum of the market value of
the securities and other assets owned by the Fund less its liabilities,
computed pursuant to standards adopted by the Company's Board of Directors.
The net asset value of a share is the quotient obtained by dividing the net
assets of the Fund (i.e., the value of the assets of the Fund less its
liabilities, including expenses payable or accrued but excluding capital
stock and surplus) by the total number of shares of the Fund outstanding. The
net asset value of the Fund's shares will be calculated as of the close of
regular trading on the New York Stock Exchange, currently 4:00 p.m. Eastern
Time, on each day that the New York Stock Exchange is open for trading.
STOCKHOLDER SERVICES
WHAT SERVICES ARE PROVIDED TO STOCKHOLDERS?
AUTOMATIC REINVESTMENT. Each income dividend and capital gains distribution,
if any, declared by the Fund will be reinvested in full and fractional shares
based on the net asset value as determined on the payment date for such
distributions, unless the stockholder or his or her duly authorized agent has
elected to receive all such payments or the dividend or distribution portions
thereof in cash. Changes in the manner in which dividend and distribution
payments are made may be requested by the stockholder or his or her duly
authorized agent at any time through written notice to the Company and will
be effective as to any subsequent payment if such notice is received by the
Company prior to the record date used for determining the stockholders
entitled to such payment. Any dividend and distribution election will remain
in effect until the Company is notified by the stockholder in writing to the
contrary.
EXCHANGE PRIVILEGE. You may exchange shares of the Fund into shares of any
other series of the Company, without a sales charge or other fee, by
contacting NFDS. Before effecting an exchange, you should obtain the
currently effective prospectus of the series into which the exchange is to be
made. Exchange purchases are subject to the minimum investment requirements
of the series purchased. An exchange will be treated as a redemption and
purchase for tax purposes.
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<PAGE>
Shares will be exchanged at the net asset value per share of the Fund and
the series into which the exchange is to be made, next determined after receipt
by NFDS of (i) a written request for exchange, 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 exchanged;
and (ii) stock certificates for any shares to be exchanged which are held by the
stockholder. Exchanges will not become effective until all documents in the
form required have been received by NFDS. A stockholder in doubt as to what
documents are required should contact NFDS.
ACCOUNT STATEMENTS. Your account is opened in accordance with your
registration instructions. 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 in whole or in part
in portfolio securities.
Stockholders may 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.
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<PAGE>
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 a 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.
WHAT ELSE SHOULD I KNOW ABOUT REDEMPTIONS?
REINSTATEMENT PRIVILEGE. You may reinvest proceeds from a redemption of
shares of the Fund, or proceeds of a dividend or capital gain distribution
paid to you with respect to shares of the Fund, without a sales charge, in
the Fund or any other series of the Company. Send a written request and a
check to the Company within 90 days after the date of the redemption,
dividend or distribution. Reinvestment will be at the next calculated net
asset value after receipt. The tax status of a gain realized on a redemption
will not be affected by exercise of the reinstatement privilege, but a loss
may be nullified if you reinvest in the same series within 30 days.
INVOLUNTARY REDEMPTION. In order to reduce expenses of the Fund, the
Company may redeem all of the shares of any investor whose account has a net
asset value of less than $5,000 due to redemptions (other than a stockholder who
is a participant in a qualified retirement plan). The Company will give such
stockholders 60 days' prior written notice in which to purchase sufficient
additional shares to avoid such redemption.
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), indices 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 (total return is the change in
value of an investment in the Fund over a given period, assuming reinvestment
of any dividends and capital gain distributions). Such indices and rankings
may include the following, among others:
1. The S&P 500 Composite Index.
2. The Russell Midcap Index.
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3. 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?
The Fund intends 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 non-resident alien
individual, non-resident 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 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.
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<PAGE>
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 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 the Fund. In addition, 50,000,000 shares have
been designated as shares of RCM Global Technology Fund, 50,000,000 shares
have been designated as shares of RCM Global Small Cap Fund, 50,000,000
shares have been designated as shares of RCM Large Cap Growth Fund, and
50,000,000 shares have been designated as shares of Dresdner RCM Emerging
Markets Fund (a newly created series of the Company). The Company's Board of
Directors may, in the future, authorize the issuance of other classes of
shares of the Fund (with, for example, different sales loads, or other
distribution or service fee arrangements), or of other series of capital
stock of the Company 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 April 30, 1997, there were 400,010 shares of the Fund
outstanding, of which 400,000 shares were beneficially owned by clients of
Dresdner Bank AG/Investment Management/Institutional Asset Management
Division.
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 than 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 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 SEC. The registration statements 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.
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RCM GLOBAL SMALL CAP FUND
OFFERED BY:
RCM EQUITY FUNDS, INC.
FOUR EMBARCADERO CENTER
SAN FRANCISCO, CALIFORNIA 94111
(800) 726-7240
THIS PROSPECTUS RELATES TO RCM GLOBAL SMALL CAP FUND,
WHICH SPECIALIZES IN EQUITY AND EQUITY-RELATED
SECURITIES OF SMALL-SIZED DOMESTIC AND FOREIGN COMPANIES
_______________
RCM GLOBAL SMALL CAP FUND (THE "FUND") is a diversified 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 per share next
calculated after an order is received in proper form, plus a sales charge if
applicable. (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 small-sized
domestic and foreign 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. "Small-sized companies" is defined as companies whose common
stock, or securities convertible into common stock, have a total market
capitalization of up to $1 billion at the time of purchase. (See INVESTMENT
OBJECTIVE AND POLICIES.)
Investments in equity and equity-related securities of small-sized domestic
and foreign companies involve significant risks, some of which are not
typically associated with investments in securities of larger domestic and
foreign companies. There can be no assurance that 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 June 30, 1997 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 June 30, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary ...................................................... 3
Summary of Fees and Expenses ............................................ 5
Financial Highlights .................................................... 7
Investment Objective and Policies ....................................... 8
Investment and Risk Considerations ...................................... 14
Organization and Management ............................................. 17
How to Purchase Shares .................................................. 20
Stockholder Services .................................................... 24
Redemption of Shares .................................................... 25
Investment Results ...................................................... 26
Dividends, Distributions and Taxes ...................................... 27
General Information ..................................................... 28
</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>
RCM GLOBAL SMALL CAP FUND
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 small-sized
domestic and foreign 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 return and will not be emphasized. There
can be no assurance that the Fund will achieve its investment objective.
(See INVESTMENT OBJECTIVE AND POLICIES.)
WHAT DOES THE FUND INVEST IN?
Under normal market conditions, the Fund will invest at least 65% of the
value of its total assets in equity and equity-related securities of
small-sized domestic and foreign companies. "Small-sized companies" is
defined as companies whose common stock, or securities convertible into
common stock, have a total market capitalization of up to $1 billion at the
time of purchase.
DOES THE FUND INVEST GLOBALLY?
The Fund may invest up to 100% of the value of its total assets in equity and
equity-related securities of foreign issuers, including emerging market
issuers. 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 France,
Germany, Japan and the United Kingdom, and up to 30% of the value of the
Fund's total assets may be invested in securities of companies 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. 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 small-sized companies can offer attractive investment
opportunities. Small-sized companies can respond more quickly to marketplace
changes than large companies. In addition, such companies have, from
time-to-time, offered greater potential investment returns than those
associated with larger capitalization companies. However, the stocks of
small-sized companies can be very volatile, and analyzing individual
companies can be time-intensive. A global small cap fund offers experienced
professional management to investors who wish to invest in a diversified
global portfolio of small-sized companies.
The Fund is designed for investors who recognize and are prepared to accept
these risks in exchange 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, L.L.C. ("RCM" or the
"Investment Manager"), a registered investment adviser with principal offices
in San Francisco, California. RCM and its predecessors have over 25 years of
experience in investing in equity securities. RCM currently provides
investment management 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 State Street Bank and Trust Company.
3
<PAGE>
WHAT ARE SOME OF THE POTENTIAL INVESTMENT RISKS?
Investments in equity and equity-related securities of small-sized companies
may involve significant risks, some of which are not typically associated
with investment in securities of larger or more established firms. These
firms may have limited or unprofitable operating histories, limited financial
resources and inexperienced management, and they may face competition from
larger or more established firms that have greater resources. Their
securities are frequently traded in the over-the-counter market or on
regional exchanges where low trading volumes may result in erratic or abrupt
price movements. The value of the Fund's shares will fluctuate because of
the fluctuations in the value of securities in the Fund's 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 generally are higher than in the United States. (See INVESTMENT AND
RISK CONSIDERATIONS.)
DOES THE FUND HEDGE ITS INVESTMENTS?
The Fund may use a variety of techniques to hedge investments. These include
currency management techniques; options on securities, indices and
currencies; financial and foreign currency futures contracts and options; and
currency swaps. Each of these hedging techniques also involves certain
risks. (See INVESTMENT OBJECTIVE AND POLICIES and INVESTMENT AND RISK
CONSIDERATIONS.)
IS THERE A MINIMUM INVESTMENT?
There is no minimum initial investment for investors purchasing shares
through a broker-dealer or other financial institution having a service
agreement with the Investment Manager and maintaining an omnibus account with
the Fund. For other investors, the minimum initial investment is $5,000, and
the minimum subsequent investment is $250 (other than investments through the
Fund's automatic dividend reinvestment plan). Shares of the Fund may be
purchased at their net asset value per share next calculated after an order
is received in proper form, plus a sales charge if applicable. (See HOW TO
PURCHASE SHARES.)
CAN I REDEEM SHARES AT ANY TIME?
You may redeem your shares at any time at their net asset value, without a
redemption charge. (See REDEMPTION OF SHARES.)
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.
STOCKHOLDER TRANSACTION EXPENSES
Maximum sales load imposed on purchases 5.00%
(as a percentage of offering price)*
Sales load imposed on reinvested dividends None
Deferred sales loads None
Redemption fees None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Investment management fees 1.25%
Rule 12b-1 expenses 0.30%
Other expenses (after expense reduction**) 0.95%
Total Fund operating expenses (after expense reduction**) 2.50%
EXAMPLE OF PORTFOLIO EXPENSES 1 Year 3 Years
------ -------
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 $74 $124
* Sales charges are reduced on a sliding scale for increasing amounts
of purchase at the public offering price, and are waived for certain persons.
The National Association of Securities Dealers, Inc. limits total annual
sales charges (including Rule 12b-1 expenses) to all purchasers of shares of
the Fund to 6.25% of new sales plus an interest factor. However, long-term
stockholders may pay more than the economic equivalent of the maximum sales
charge permitted by the NASD. (See HOW TO PURCHASE SHARES.)
** The Investment Manager has voluntarily agreed, until at least
December 31, 1997, to pay the Fund on a quarterly basis the amount, if any,
by which ordinary operating expenses of the Company attributable to the Fund
for the quarter (except interest, taxes and extraordinary expenses) exceed
the annualized rate of 2.50% of the value of the average daily net assets of
the Fund. In subsequent years, the Fund will reimburse the Investment Manager
for any such payments to the extent that the Fund's operating expenses are
otherwise below this expense cap. (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 2.78% and 4.01%,
respectively, of the Fund's average daily net assets.
5
<PAGE>
In accordance with applicable regulations of the Securities and Exchange
Commission (the "SEC"), the Example of Portfolio Expenses assumes that (1)
the percentage amounts listed under Annual Fund Operating Expenses will
remain the same in each of the one and three year periods; and (2) all
dividends and distributions will be 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 is higher. (See HOW TO
PURCHASE SHARES.)
For more information concerning fees and expenses of the Fund, see
ORGANIZATION AND MANAGEMENT and DIVIDENDS, DISTRIBUTIONS AND TAXES.
FINANCIAL HIGHLIGHTS
The following information for the four months ended April 30,1997, has been
prepared by the Company and is unaudited. It should be read in conjunction
with the financial statements and related notes for such period, which are
included in the Statement of Additional Information.
The following information for December 31, 1996 has been audited by Coopers &
Lybrand L.L.P., independent accountants, as stated in their opinion appearing
in the Fund's 1996 Annual Report to Shareholders (which has been incorporated
herein by reference). This information should be read in conjunction with the
financial statements and related notes, which are included in the Annual
Report to Shareholders. A copy of the Fund's Annual Report to Shareholders
is available, upon request, by calling the Fund at (800) 726-7240, or by
writing the Fund at Four Embarcadero Center, San Francisco, CA 94111.
Selected data for each share of capital stock outstanding are as follows:
<TABLE>
<CAPTION>
December 31, 1996
Four Months Ended (commencement of
April 30, 1997 operations) to
(Unaudited) December 31, 1996
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.00 $ 10.00
---------- ----------
Net investment loss (a) (0.06)(b) -
Net realized and unrealized loss on
investments (a) (0.59) -
---------- ----------
Net decrease in net asset value
resulting from investment operations (a) (0.65) -
---------- ----------
NET ASSET VALUE, END OF PERIOD $ 9.35 $ 10.00
---------- ----------
---------- ----------
TOTAL RETURN (c) (6.60%) 0.00%
---------- ----------
---------- ----------
RATIOS AND SUPPLEMENTAL DATA:
Average commission rate paid per share (d) $ 0.0390 $ 0.0465
---------- ----------
---------- ----------
Net assets, end of period (in 000's) $ 3,740 $ 4,000
---------- ----------
---------- ----------
Ratio of expenses to average net assets 2.50% (b) 0.00% (f)
---------- ----------
6
<PAGE>
Ratio of net investment loss to average net assets (1.78%)(b) 0.00% (f)
---------- ----------
Portfolio turnover 44.80% (e) 0.00% (f)
---------- ----------
</TABLE>
____________________________________
(a)Calculated using the average share method.
(b)Includes reimbursement by the Fund's investment manager of certain
ordinary operating expenses equal to $0.05 per share (calculated using the
average share method). Without such reimbursement, the ratio of expenses to
average net assets would have been 4.01% and the ratio of net investment loss
to average net assets would have been (3.29%).
(c)Total return measures the change in value of an investment in the Fund
over the period indicated.
(d)For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for security
trades on which commissions are charged. This amount may vary from period to
period and fund to fund depending on the mix of trades executed in various
markets where trading practices and commission structures may differ.
(e)Not annualized.
(f)Not annualized. Fund was in operation for one day.
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 small-sized
domestic and foreign 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 will be considered only
as part of total return and will not be emphasized. There can be no assurance
that the Fund will achieve its investment objective.
HOW DOES THE FUND SELECT SECURITIES FOR ITS PORTFOLIO?
The Fund intends to invest primarily in equity and equity-related securities
of small-sized domestic and foreign 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 or 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. There are no limitations on the types of businesses in which
the Fund may invest, although no more than 25% of the value of the Fund's
total assets may be invested in the securities of companies primarily engaged
in any one industry (other than securities of the U.S. Government, its
agencies and instrumentalities). 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 in developing
economies, 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.
7
<PAGE>
WHAT ARE SMALL-SIZED COMPANIES?
"Small-sized companies" is defined as companies whose common stock, or
securities convertible into common stock, have a total market capitalization
of up to $1 billion at time of purchase. There is no minimum market
capitalization for an issuer's equity securities to be considered an
appropriate investment for the Fund. However, as of this date, the Company
does not intend to invest more than 15% of the value of the Fund's total
assets in securities of companies with market capitalizations below $100
million at the time of purchase.
The market capitalization of each issuer's equity securities will be
evaluated quarterly. The Fund will not be required to sell portfolio
securities solely because the market capitalization of the issuer's equity
securities has exceeded $1 billion, or be prevented from purchasing or be
required to sell other portfolio securities as a result of such change. The
average market capitalization of the Fund's portfolio at market value is
expected to approximate $500 million and will not exceed $1 billion.
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 indices. In addition, equity and equity-related
securities may include securities sold in the form of depository receipts and
securities issued by 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 may 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, and may be up to 100% 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 principally are 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 France, Germany, Japan
and the United Kingdom. While there is no limitation on the countries in
which the Fund may invest, the Fund currently expects that the majority of
its foreign investments will be in securities of companies organized or
headquartered in Japan and the countries of Western Europe. 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.
8
<PAGE>
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
foreign 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 United States or in foreign markets.
WILL THE FUND INVEST IN EMERGING MARKETS?
The Fund may invest up to 30% of the value of its total assets in securities
of companies that are organized or headquartered in developing countries with
emerging markets, and 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 recognized financial institutions. As
of the date of this Prospectus, "emerging market countries" is deemed to
include, for purposes of this Prospectus, all foreign countries other than
Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong
Kong, Ireland, Italy, Japan, Luxembourg, The Netherlands, New Zealand,
Norway, 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
Union). As a result, gains in a particular securities market may be
affected, either positively or negatively, by changes in exchange rates.
DOES THE FUND HEDGE ITS INVESTMENTS?
For hedging purposes, the Fund may purchase options on stock indices and on
securities that are authorized for purchase by the Fund. If the Fund
purchases a "put" option on a security, 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 on a
security, 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). An option on a stock index gives the Fund the right to
receive a cash payment equal to the difference between the closing price of
the index and the exercise price of the option. The Fund may "close out" an
option prior to its exercise or expiration by selling an option of the same
series as the option previously purchased.
9
<PAGE>
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 (and related options), 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 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. The Fund is also authorized to employ currency management
techniques to enhance its total return, although it presently does not intend
to do so.
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 U.S. banks and entitle the holder to all
dividends and all capital gains associated with the ordinary shares. These
securities may not be denominated in the same currency as the underlying
securities that they represent. EDRs and GDRs are receipts issued by a
non-U.S. financial institution evidencing a similar arrangement. When 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 does not involve the currency exchange risk that
is present when investing 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. The only practical means of investing in such issuers 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.
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
may also 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 5% of the
value of the Fund's net assets or 5% of the securities of such class of the
issuer. The Fund's ability to enter into short sales transactions is limited
by the requirements of the Investment Company Act of 1940 (the "1940 Act"),
and by the Internal Revenue Code of 1986, as amended (the "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 generally does not intend to
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 debt
or equity 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) issued or guaranteed by the U.S. Government
and foreign governments (including their respective agencies,
instrumentalities, authorities and political subdivisions), 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, investment grade by
Standard & Poor's Corporation, Moody's Investor Services, Inc., or another
recognized rating organization, or if unrated will be determined by the
Investment Manager to be of comparable investment quality. Investment grade
means that the issuer of the security is believed to have adequate capacity
to pay interest and repay principal, although certain of such securities in
the lower grades have speculative characteristics, and changes in economic
conditions or other circumstances may be more likely to lead to a weakened
capacity to pay interest and principal than would be the case with
higher-rated securities.
11
<PAGE>
Under normal market conditions, no more than 10% of the value of the Fund's
total assets will be invested in debt 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 securities. 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. In order to meet such redemption requests, the Fund may
borrow from banks or enter into 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, 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 broker-dealer deemed creditworthy pursuant to
standards adopted by the Company's Board of Directors) and simultaneously
agrees to repurchase the security at an agreed-upon price on an agreed-upon
date within a number of days (usually not more than seven) from the date of
purchase.
LENDING PORTFOLIO SECURITIES. The Fund is authorized to make loans of
portfolio securities, for the purpose of realizing additional income, to
broker-dealers or other institutional investors deemed creditworthy pursuant
to standards adopted by the Company's Board of Directors. The borrower must
maintain with the Fund's custodian collateral consisting of cash, U.S.
Government securities or other liquid debt or equity securities equal to at
least 100% of the value of the borrowed securities, plus any accrued
interest. The Fund will receive any interest paid on the loaned securities,
and a fee and/or a portion of the interest earned on the collateral, less any
fees and administrative expenses associated with the loan.
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 pursuant to standards adopted 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.
12
<PAGE>
The fact that there are contractual or legal restrictions on resale of
certain securities to the general public or to certain institutions may not
be indicative of the liquidity of such investments. If such securities are
subject to purchase by institutional buyers in accordance with Rule 144A
under the Securities Act, the Investment Manager may determine in particular
cases, pursuant to standards adopted by the Company's Board of Directors,
that such securities are not illiquid securities notwithstanding the legal or
contractual restrictions on their resale. Investing in Rule 144A securities
could have the effect of increasing the Fund's illiquidity to the extent that
qualified institutional buyers become, for a time, uninterested in purchasing
such securities.
CAN THE FUND'S OBJECTIVE AND POLICIES BE CHANGED?
The Fund's investment objective is a fundamental policy that may not be
changed without a vote of its stockholders. However, except as otherwise
indicated in this Prospectus or the Statement of Additional Information, the
Fund's other investment policies and restrictions are not fundamental and may
be changed without a vote of the stockholders. If there is a change in the
Fund's investment objective or policies, stockholders should consider whether
the Fund remains an appropriate investment in light of their then current
financial position and needs.
The various percentage limitations referred to in this Prospectus apply
immediately after a purchase or initial investment. Except as specifically
indicated to the contrary, the Fund is not required to sell any security in
its portfolio as a result of any change in any applicable percentage
resulting from market fluctuations.
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 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 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 EQUITY INVESTMENTS.
Although equity securities have a history of long term growth in value, their
prices fluctuate based on changes in the issuer's financial condition and
prospects and on overall market and economic conditions. The value of the
Fund's net assets can be expected to fluctuate.
13
<PAGE>
RISKS OF INVESTING IN SMALL-SIZED COMPANIES.
Investments in small-sized concerns may involve greater risks than
investments in larger companies. The securities of small-sized companies, as
a class, have shown market behavior which has had periods of more favorable
results, and periods of less favorable results, than securities of larger
companies as a class. In addition, small-sized companies in which the Fund
will invest may be unseasoned; that is, these companies may have limited or
unprofitable operating histories, limited financial resources and
inexperienced management. Small-sized companies often face competition from
larger or more established firms that have greater resources. Small-sized
companies may not have as great an ability to raise additional capital, may
have a less diversified product line (making them susceptible to market
pressure), and may have a smaller public market for their shares than larger
companies. Securities of small and unseasoned companies are often less liquid
than securities of larger companies and are frequently traded in the
over-the-counter market or on regional exchanges where low trading volumes
may result in erratic or abrupt price movements. To dispose of these
securities, the Fund may have to sell them over an extended period of time or
below the original purchase price. Investment by the Fund in these small or
unseasoned companies may be regarded as speculative. The Fund has investment
restrictions that limit the amount of its assets that can be invested in
companies that have a record of less than three years of continuous
operations and prohibit investment of more than 15% of the value of its net
assets in securities that are illiquid. However, as a result of these
factors, the Fund's net assets may be more volatile in price than the net
asset value of a fund investing principally in larger companies.
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
political instability, expropriation or nationalization of assets,
revaluation of currencies, confiscatory taxation, and limitations on foreign
investment and use or removal of funds or other assets of the Fund (including
the withholding of dividends and limitations on the repatriation of
currencies). The Fund may also 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.
14
<PAGE>
RISKS OF INVESTING IN EMERGING MARKETS.
There are special additional risks associated with investments in emerging
markets. 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 may 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 from 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.
15
<PAGE>
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 market price has increased significantly. Under adverse market
conditions, the Fund might have difficulty in 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 of borrowings may fluctuate with changing market rates of interest and
may partially offset or exceed the return earned on the borrowed funds (or on
the assets that were retained rather than sold to meet the needs for which
funds were borrowed). Under adverse market conditions, the Fund might have
to sell portfolio securities to meet interest or principal payments at a time
when fundamental investment considerations would not favor such sales. To
the extent the Fund enters into reverse repurchase agreements, the Fund is
subject to risks that are similar to those of borrowing.
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.
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<PAGE>
The Company, on behalf of the Fund, has retained as the Fund's investment
manager RCM Capital Management, L.L.C., a Delaware limited liability company
with principal offices at Four Embarcadero Center, San Francisco, California
94111. The Investment Manager provides the Fund with investment supervisory
services pursuant to an Investment Management Agreement, Power of Attorney
and Service Agreement (the "Management Agreement") dated December 27, 1996.
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.
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 April 1996, as the successor to the business and
operations of RCM Capital Management, a California Limited Partnership,
which, with its predecessors, has been in operation since 1970. The
Investment Manager is a wholly owned subsidiary of Dresdner Bank AG
("Dresdner"), an international banking organization with principal executive
offices located in Frankfurt, Germany.
Pursuant to an agreement among RCM Limited L.P. ("RCM Limited"), the
Investment Manager, and Dresdner, RCM Limited manages, operates and makes all
decisions regarding the day-to-day business and affairs of the Investment
Manager, subject to the oversight of RCM's Board of Managers. RCM Limited is
a California limited partnership consisting of 38 limited partners and one
general partner, RCM General Corporation, a California corporation ("RCM
General"). Twenty-five of the limited partners of RCM Limited are also
principals of the Investment Manager, and the shareholders of RCM General.
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 stocks of
small-sized companies. Its portfolio managers and research analysts have
been researching small-sized companies for purchase in domestic equity
portfolios and have been managing small cap portfolios for more than 20
years. The research team consults regularly with the senior members of the
Investment Manager's equity portfolio management team concerning economic
conditions and the relative merits and investment opportunities in various
industry sectors generally as well as concerning specific 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 small cap area,
Grassroots Research can be a valuable adjunct to the Investment Manager's
traditional research efforts by providing a "second look" at companies in
which the Fund is considering investing and by checking marketplace
assumptions concerning market demand for particular products and services.
17
<PAGE>
David S. Plants and Michael F. Malouf are primarily responsible for the
day-to-day management of the Fund. Mr. Plants is a Senior Vice President of
the Investment Manager, with which he has been associated since 1993. From
April 1991 to April 1993, he was a member of the Board of Directors of
Ebenezer Oil Company. Mr. Malouf is a Senior Vice President of the
Investment Manager, with which he has been associated since 1991. They have
participated in the management of portfolios since 1993 and 1992,
respectively.
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 1.25% of
the value of the Fund's average daily net assets.
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; fees paid pursuant
to the Fund's Rule 12b-1 plan; 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, 1997, 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 2.50% of the value of the average daily
net assets of the Fund. The Fund will reimburse the Investment Manager for
fees deferred or other expenses paid by the Investment Manager pursuant to
this agreement in later years in which operating expenses for the Fund are
otherwise less than such expense limitation. Accordingly, until all such
amounts are reimbursed, the Fund's expenses will be higher, and its total
return will be lower, than would otherwise have been the case. No interest,
carrying or finance charge will be paid by the Fund with respect to any
amounts representing fees deferred or other expenses paid by the Investment
Manager. In addition, the Fund will not be required to repay any
unreimbursed amounts to the Investment Manager upon termination of the
Management Agreement.
HOW DOES THE FUND DECIDE WHICH BROKERS TO USE?
The Investment Manager, subject to the overall supervision of the Company's
Board of Directors, makes the Fund's investment decisions and selects the
broker or dealer to be used in each specific transaction using its judgment
to choose the broker or dealer most capable of providing the services
necessary to obtain the best execution of that transaction. In seeking the
best execution of each transaction, the Investment Manager evaluates a wide
range of criteria. Subject to the requirement of seeking best execution, the
Investment Manager may, in circumstances in which two or more brokers are in
a position to offer comparable execution, give preference to a broker 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 execution, the Investment Manager may also place orders with
brokerage firms that have sold shares of the Fund.
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<PAGE>
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 execution, whether
or not that counterparty is the primary market maker for that security.
When appropriate and to the extent consistent with applicable laws and
regulations, the Fund may execute brokerage transactions through Dresdner
Kleinwort Benson North America LLC, a wholly owned subsidiary of Dresdner, or
other broker-dealer subsidiaries or affiliates of Dresdner.
WHO IS THE FUND'S DISTRIBUTOR?
Funds Distributor, Inc. (the "Distributor"), whose principal place of
business is 60 State Street, Suite 1300, Boston, Massachusetts 02109, acts as
distributor of shares of the Fund. The Distributor is engaged in the
business of providing mutual fund distribution services to registered
investment companies, and is an indirect wholly owned subsidiary of Boston
Institutional Group, Inc., which is not affiliated with the Investment
Manager or Dresdner.
The Distributor retains a portion of any initial sales charge upon the
purchase of shares of the Fund. In addition, the Company has adopted a
distribution plan pursuant to Rule 12b-1 under the 1940 Act with respect to
the Fund. Under the distribution plan, which is a "reimbursement plan," the
Fund pays the Distributor an annual fee of up to 0.30% of the Fund's average
daily net assets as reimbursement for certain expenses actually incurred by
the Distributor in connection with distribution of shares of the Fund. These
expenses include advertising and marketing expenses, payments to
broker-dealers and others who have entered into agreements with the
Distributor, the expenses of preparing, printing and distributing the
prospectuses of the Fund to persons who are not already stockholders, and
indirect and overhead costs associated with the sale of shares of the Fund.
If in any month the Distributor is due more monies for such services than are
immediately payable because of the expense limitation under the plan, the
unpaid amount is carried forward from month to month while the plan is in
effect until such time as it may be paid. However, no amounts carried forward
are payable beyond the fiscal year during which they were incurred, and no
interest, carrying or other finance charge is borne by the Fund with respect
to any amount carried forward.
WHO IS THE FUND'S CUSTODIAN AND TRANSFER AGENT?
State Street Bank and Trust Company acts as the Fund's custodian, transfer
agent, redemption agent and dividend paying agent (the "Custodian"). The
Custodian's principal business address is 1776 Heritage Drive, North Quincy,
Massachusetts 02171.
HOW TO PURCHASE SHARES
WHAT IS THE OFFERING PRICE FOR SHARES OF THE FUND?
Shares of the Fund are offered on a continuous basis at the offering price
next determined after receipt of an order in proper form. The offering price
is the net asset value per share plus a sales charge, if applicable. There is
no minimum initial investment for investors purchasing shares through a
broker-dealer or other financial institution having a service agreement with
the Investment Manager and maintaining an omnibus account with the Fund. For
other investors, the initial investment must be at least $5,000, and the
minimum subsequent investment is $250 other than investment through the
Fund's automatic dividend reinvestment plan. (See STOCKHOLDER SERVICES.)
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<PAGE>
IS THERE A SALES CHARGE?
The sales charges you pay when purchasing shares of the Fund are set forth
below:
<TABLE>
<CAPTION>
Sales Charge as a Percentage of the:
------------------------------------
Dealer Commission
Amount of Purchase at the Offering Net Amount as Percentage of
Public Offering Price Price Invested the Offering Price
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 5.00% 5.26% 4.50%
$50,000 but less than $100,000 4.50% 4.71% 4.00%
$100,000 but less than $250,000 3.50% 3.63% 3.25%
$250,000 but less than $500,000 2.50% 2.56% 2.25%
$500,000 but less than $1,000,000 2.00% 2.04% 1.75%
$1,000,000 or more 0.00% 0.00% 0.00%
</TABLE>
Commissions will be paid by the Distributor to dealers who initiate and are
responsible for purchases of $1 million or more and purchases made at net
asset value by certain retirement plans of organizations with 50 or more
eligible employees as set forth in the Statement of Additional Information.
WHEN IS THE SALES CHARGE WAIVED OR REDUCED?
NET ASSET VALUE PURCHASES. The Fund may sell shares at net asset value to:
(1) current or retired directors, officers and employees of the Fund, the
Distributor, the Investment Manager, certain family members of such persons,
and trusts or plans primarily for such persons;
(2) current or retired registered representatives or full-time employees
(and their spouses and minor children) of dealers having selling group
agreements with the Distributor and plans for such persons;
(3) stockholders and former stockholders of another mutual fund which has a
sales charge and is not a series of the Company, so long as shares of the
Fund are purchased with the proceeds of a redemption, made within 60 days of
the purchase, of shares of such other mutual fund (to obtain this benefit,
the redemption check, endorsed to the Company, or a copy of the confirmation
showing the redemption, must be forwarded to National Financial Data
Services -- see HOW CAN I PURCHASE SHARES OF THE FUND?);
(4) companies or other entities exchanging securities with the Fund through
a merger, acquisition or exchange offer;
(5) trustees or other fiduciaries purchasing shares for certain retirement
plans of organizations with 50 or more eligible employees;
(6) participants in certain pension, profit-sharing or employee benefit
plans that are sponsored by the Distributor and its affiliates;
(7) investment advisers and financial planners who place trades for their
own accounts or the accounts of their clients and who charge a management,
consulting or other fee for their services;
20
<PAGE>
(8) clients of investment advisers and financial planners referred to in
item (7) who place trades for their own accounts if the accounts are linked
to the master account of the investment adviser or financial planner on the
books and records of a broker, agent, investment adviser or financial
institution;
(9) employee-sponsored benefit plans in connection with purchases of shares
of the Fund made as a result of participant-directed exchanges between
options in such a plan;
(10) "wrap accounts" for the benefit of clients of broker-dealers,
financial institutions or financial planners having sales or service agreements
with the Distributor or another broker-dealer or financial institution with
respect to sales of shares of the Fund; and
(11) such other persons as are determined by the Company's Board of
Directors (or by the Distributor pursuant to standards adopted by the Board)
to have acquired shares under circumstances not involving any sales expenses
to the Fund or the Distributor.
Shares are offered at net asset value to these persons and organizations due
to anticipated economies in sales effort and expense. No sales charges are
imposed on Fund shares purchased upon the reinvestment of dividends and
distributions, or upon an exchange of shares from other series of the Company.
AGGREGATION. Sales charge discounts on purchases of shares of the Fund are
available for certain aggregated investments. Investments which may be
aggregated include those by you, your spouse and your children under the age
of 21, if all parties are purchasing shares for their own accounts, which may
include purchases through employee benefit plans such as an IRA,
individual-type 403(b) plan or single-participant Keogh-type plan or by a
business solely controlled by these individuals (for example, the individuals
own the entire business) or by a trust (or other fiduciary arrangement)
solely for the benefit of these individuals. Individual purchases by
trustees or other fiduciaries may also be aggregated if the investments are
(1) for a single trust, estate or fiduciary account, including an employee
benefit plan other than those described above, (2) made for two or more
employee benefit plans of a single employer or affiliated employers as
defined in the 1940 Act, again excluding employee benefit plans described
above, or (3) for a common trust fund or other pooled account not
specifically formed for the purpose of accumulating Fund shares. Purchases
made for nominee or street name accounts (securities held in the name of a
dealer or another nominee such as a bank trust department instead of the
customer) may not be aggregated with those made for other accounts and may
not be aggregated with other nominee or street name accounts unless otherwise
qualified as described above.
CONCURRENT PURCHASES. To qualify for a reduced sales charge, you may combine
concurrent purchases of shares of two or more series of the Company. For
example, if you concurrently invest $500,000 in the Fund and $500,000 in
another series of the Company, the sales charge would be reduced to reflect a
$1,000,000 purchase.
RIGHT OF ACCUMULATION. The sales charge for your investment may also be
reduced by taking into account your existing holdings in the Fund and the
other series of the Company. See the account application and Statement of
Additional Information for further details.
21
<PAGE>
LETTER OF INTENT. You may reduce sales charges on all investments by meeting
the terms of a letter of intent, a non-binding commitment to invest a certain
amount within a 13-month period. Your existing holdings in the Fund and the
other series of the Company may also be combined with the investment
commitment set forth in the letter of intent to further reduce your sales
charge. Up to 5% of the letter amount will be held in escrow to cover
additional sales charges which may be due if your total investments over the
letter period are not sufficient to qualify for a sales charge reduction.
See the account application and Statement of Additional Information for
further details.
HOW CAN I PURCHASE SHARES OF THE FUND?
Investors or their duly authorized agents may purchase shares of the Fund by
sending a signed, completed subscription form to National Financial Data
Services ("NFDS"), an affiliate of the Custodian, at P.O. Box 419927, Kansas
City, Missouri 64141-6927, and paying for the shares as described below.
Shares may also be purchased through certain brokers which have entered into
a selling group agreement with the Distributor. Brokers may charge a fee for
their services at the time of purchase or redemption. Subscription forms can
be obtained from the Company.
Orders for shares received by NFDS 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 HOW ARE SHARES PRICED?)
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 order in proper form, NFDS will open a stockholder
account in accordance with the investor's registration instructions. A
confirmation statement reflecting the current transaction will be forwarded
to the investor.
WHERE SHOULD I SEND MY SUBSCRIPTION PAYMENT?
Payment for shares purchased should be made by check or money order, made
payable to RCM Global Small Cap Fund. Checks should be bank or certified
checks. The Company, at its option, may accept a check that is not a bank or
certified check; however, third party checks will not be accepted. Payments
should be sent to:
RCM Equity Funds, Inc.
P.O. Box 419927
Kansas City, MO 64141-6927
Attn: RCM Global Small Cap Fund
Account 681
Investors may also make initial or subsequent investments by electronic
transfer of funds or wire transfer of federal funds to the Company. Before
transferring or wiring funds, an investor must first telephone the Company at
(800) 726-7240 for instructions. On the telephone, the following information
will be requested: name of authorized person; stockholder account number (if
such account number is in existence); name of Fund; amount being transferred
or wired; and transferring or wiring bank name.
22
<PAGE>
Investors may be charged a fee if they effect transactions through a broker
or agent. Your dealer is responsible for forwarding payment promptly to
NFDS. 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 HOW ARE SHARES PRICED? below; (ii) will have
a tax basis to the Fund equal to such value; (iii) must not be "restricted
securities"; and (iv) must be permitted to be purchased in accordance with
the Fund's investment objective and policies set forth in this Prospectus and
must be securities that the Fund would be willing to purchase at that time.
Prospective stockholders considering this method of payment should contact
the Company in advance to discuss the securities in question and the
documentation necessary to complete the transaction.
HOW ARE SHARES PRICED?
The net asset value of each share of the Fund on which the subscription and
redemption prices are based is determined by the sum of the market value of
the securities and other assets owned by the Fund less its liabilities,
computed pursuant to standards adopted by the Company's Board of Directors.
The net asset value of a share is the quotient obtained by dividing the net
assets of the Fund (i.e., the value of the assets of the Fund less its
liabilities, including expenses payable or accrued but excluding capital
stock and surplus) by the total number of shares of the Fund outstanding. The
net asset value of the Fund's shares will be calculated as of the close of
regular trading on the New York Stock Exchange, currently 4:00 p.m. Eastern
Time, on each day that the New York Stock Exchange is open for trading.
STOCKHOLDER SERVICES
WHAT SERVICES ARE PROVIDED TO STOCKHOLDERS?
AUTOMATIC REINVESTMENT. Each income dividend and capital gains distribution,
if any, declared by the Fund will be reinvested in full and fractional shares
based on the net asset value as determined on the payment date for such
distributions, unless the stockholder or his or her duly authorized agent has
elected to receive all such payments or the dividend or distribution portions
thereof in cash. Changes in the manner in which dividend and distribution
payments are made may be requested by the stockholder or his or her duly
authorized agent at any time through written notice to the Company and will
be effective as to any subsequent payment if such notice is received by the
Company prior to the record date used for determining the stockholders
entitled to such payment. Any dividend and distribution election will remain
in effect until the Company is notified by the stockholder in writing to the
contrary.
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<PAGE>
EXCHANGE PRIVILEGE. You may exchange shares of the Fund into shares of any
other series of the Company, without a sales charge or other fee, by
contacting NFDS. Before effecting an exchange, you should obtain the
currently effective prospectus of the series into which the exchange is to be
made. Exchange purchases are subject to the minimum investment requirements
of the series purchased. An exchange will be treated as a redemption and
purchase for tax purposes.
Shares will be exchanged at the net asset value per share of the Fund, and
the series into which the exchange is to be made, next determined after
receipt by NFDS of (i) a written request for exchange, 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 exchanged; and (ii) stock certificates for any shares to be
exchanged which are held by the stockholder. Exchanges will not become
effective until all documents in the form required have been received by
NFDS. A stockholder in doubt as to what documents are required should
contact NFDS.
ACCOUNT STATEMENTS. Your account is opened in accordance with your
registration instructions. 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 in whole or in
part in portfolio securities.
Stockholders may be charged a fee if they effect transactions through a
broker or agent.
24
<PAGE>
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 after 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 a 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.
WHAT ELSE SHOULD I KNOW ABOUT REDEMPTIONS?
REINSTATEMENT PRIVILEGE. You may reinvest proceeds from a redemption of
shares of the Fund, or proceeds of a dividend or capital gain distribution
paid to you with respect to shares of the Fund, without a sales charge, in
the Fund or any other series of the Company. Send a written request and a
check to the Company within 90 days after the date of the redemption,
dividend or distribution. Reinvestment will be at the next calculated net
asset value after receipt. The tax status of a gain realized on a redemption
will not be affected by exercise of the reinstatement privilege, but a loss
may be nullified if you reinvest in the same series within 30 days.
INVOLUNTARY REDEMPTION. In order to reduce expenses of the Fund, the Company
may redeem all of the shares of any investor whose account has a net asset
value of less than $5,000 due to redemptions (other than a stockholder who is
a participant in a qualified retirement plan). The Company will give such
stockholders 60 days' prior written notice in which to purchase sufficient
additional shares to avoid such redemption.
25
<PAGE>
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), indices 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 (total return is the change in
value of an investment in the Fund over a given period, assuming reinvestment
of any dividends and capital gain distributions). Such indices and rankings
may include the following, among others:
1. The S&P 500 Composite Index.
2. The Russell Midcap Index.
3. 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?
The Fund intends 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 non-resident alien
individual, non-resident 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 be subject to federal income taxes with
respect to net investment income and net realized capital gains distributed
to its stockholders.
26
<PAGE>
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 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 the Fund. In addition, 50,000,000 shares have
been designated as shares of RCM Global Technology Fund, 50,000,000 shares
have been designated as shares of RCM Global Health Care Fund, 50,000,000
shares have been designated as shares of RCM Large Cap Growth Fund, and
50,000,000 shares have been designated as shares of Dresdner RCM Emerging
Markets Fund (a newly created series of the Company). The Company's Board of
Directors may, in the future, authorize the issuance of other classes of
shares of the Fund (with, for example, different sales loads, or other
distribution or service fee arrangements), or of other series of capital
stock of the Company, 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 April 30, 1997, there were
400,010 shares of the Fund outstanding, of which 400,000 shares were
beneficially owned by clients of Dresdner Bank AG/Investment
Management/Institutional Asset Management Division.
27
<PAGE>
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 than 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 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 SEC. The registration statements 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.
28
<PAGE>
RCM LARGE CAP GROWTH FUND
OFFERED BY:
RCM EQUITY FUNDS, INC.
FOUR EMBARCADERO CENTER
SAN FRANCISCO, CALIFORNIA 94111
(800) 726-7240
THIS PROSPECTUS RELATES TO RCM LARGE CAP GROWTH FUND,
WHICH SPECIALIZES IN EQUITY AND EQUITY-RELATED SECURITIES OF
COMPANIES WITH LARGE MARKET CAPITALIZATIONS
--------------------
RCM LARGE CAP GROWTH FUND (THE "FUND") is a diversified 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 per share next calculated
after an order is received in proper form, plus a sales charge if applicable.
(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 companies with
large market capitalizations. Companies with "large market capitalizations" is
defined as companies whose common stock, and securities convertible into common
stock, have a total market capitalization of at least $1 billion at the time of
purchase. 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. There can be no
assurance that the Fund will achieve its investment objective. (See INVESTMENT
OBJECTIVE AND POLICIES.)
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 June 30, 1997 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 June 30, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
Prospectus Summary . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Summary of Fees and Expenses . . . . . . . . . . . . . . . . . . . . . 5
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . 7
Investment Objective and Policies. . . . . . . . . . . . . . . . . . . 8
Investment and Risk Considerations . . . . . . . . . . . . . . . . . . 14
Organization and Management. . . . . . . . . . . . . . . . . . . . . . 16
How to Purchase Shares . . . . . . . . . . . . . . . . . . . . . . . . 19
Stockholder Services . . . . . . . . . . . . . . . . . . . . . . . . . 23
Redemption of Shares . . . . . . . . . . . . . . . . . . . . . . . . . 24
Investment Results . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Dividends, Distributions and Taxes . . . . . . . . . . . . . . . . . . 25
General Information. . . . . . . . . . . . . . . . . . . . . . . . . . 27
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>
RCM LARGE CAP GROWTH FUND
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 companies with
large market capitalizations. 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. There can be no assurance that the Fund will achieve its
investment objective. (See INVESTMENT OBJECTIVE AND POLICIES.)
WHAT DOES THE FUND INVEST IN?
Under normal market conditions, the Fund will invest at least 65% of the
value of its total assets in equity and equity-related securities of
companies with large market capitalizations that the Investment Manager
believes have the potential to experience above average and predictable
earnings growth. Companies with "large market capitalizations" is defined as
companies whose common stock, and securities convertible into common stock,
have a total market capitalization of at least $1 billion at the time of
purchase.
DOES THE FUND INVEST GLOBALLY?
The Fund may invest up to 20% of the value of its total assets in equity and
equity-related securities of foreign issuers, including emerging market
issuers.
SHOULD I INVEST IN THE FUND?
The Fund believes that large capitalization companies can offer attractive
investment opportunities. Such companies can offer potential investors
reasonable valuations and the opportunity to invest in larger,
well-established growth companies with less price volatility than that
associated with medium and smaller capitalization companies. However, the
market prices of stocks of large companies, like those of all other equity
securities, can fluctuate, and analyzing individual companies can be
time-intensive. A large cap fund offers experienced professional management
to investors who wish to invest in a diversified portfolio of large companies.
The Fund is designed for investors who recognize and are prepared to accept
these risks in exchange 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 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, L.L.C. ("RCM" or the
"Investment Manager"), a registered investment adviser with principal offices
in San Francisco, California. RCM and its predecessors have over 25 years of
experience in investing in equity securities. RCM currently provides
investment management 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 State Street Bank and Trust Company.
3
<PAGE>
WHAT ARE SOME OF THE POTENTIAL INVESTMENT RISKS?
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 generally higher than in the United States. (See INVESTMENT AND
RISK CONSIDERATIONS.)
DOES THE FUND HEDGE ITS INVESTMENTS?
The Fund may use a variety of techniques to hedge investments. These include
currency management techniques; options on securities, indices and
currencies; financial and foreign currency futures contracts and options; and
currency swaps. Each of these hedging techniques also involves certain
risks. (See INVESTMENT OBJECTIVE AND POLICIES and INVESTMENT AND RISK
CONSIDERATIONS.)
IS THERE A MINIMUM INVESTMENT?
There is no minimum initial investment for investors purchasing shares
through a broker-dealer or other financial institution having a service
agreement with the Investment Manager and maintaining an omnibus account with
the Fund. For other investors, the minimum initial investment is $5,000, and
the minimum subsequent investment is $250 (other than investments through the
Fund's automatic dividend reinvestment plan). Shares of the Fund may be
purchased at their net asset value per share next calculated after an order
is received in proper form, plus a sales charge if applicable. (See HOW TO
PURCHASE SHARES.)
CAN I REDEEM SHARES AT ANY TIME?
You may redeem your shares at any time at their net asset value, without a
redemption charge. (See REDEMPTION OF SHARES.)
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.
STOCKHOLDER TRANSACTION EXPENSES
---------------------------------
Maximum sales load imposed on purchases 5.00%
(as a percentage of offering price)*
Sales load imposed on reinvested dividends None
Deferred sales loads None
Redemption fees None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
----------------------------------------------------------------------
Investment management fees 0.75%
Rule 12b-1 expenses 0.35%
Other expenses (after expense reduction**) 0.75%
4
<PAGE>
Total Fund operating expenses (after expense reduction**) 1.85%
EXAMPLE OF PORTFOLIO EXPENSES 1 YEAR 3 YEARS
----------------------------- ------ -------
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 $68 $105
* Sales charges are reduced on a sliding scale for increasing amounts of
purchase at the public offering price and are waived for certain persons. The
National Association of Securities Dealers, Inc. limits total annual sales
charges (including Rule 12b-1 expenses) to all purchasers of shares of the Fund
to 6.25% of new sales plus an interest factor. However, long-term stockholders
may pay more than the economic equivalent of the maximum sales charge permitted
by the NASD. (See HOW TO PURCHASE SHARES.)
** The Investment Manager has voluntarily agreed, until at least December 31,
1997, to pay the Fund on a quarterly basis the amount, if any, by which ordinary
operating expenses of the Company attributable to the Fund for the quarter
(except interest, taxes and extraordinary expenses) exceed the annualized rate
of 1.85% of the value of the average daily net assets of the Fund. In subsequent
years, the Fund will reimburse the Investment Manager for any such payments to
the extent that the Fund's operating expenses are otherwise below this expense
cap. (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 2.69% and 3.44%, respectively, of the Fund's average daily
net assets.
In accordance with applicable regulations of the Securities and Exchange
Commission (the "SEC"), the Example of Portfolio Expenses assumes that (1) the
percentage amounts listed under Annual Fund Operating Expenses will remain the
same in each of the one and three year periods; and (2) all dividends and
distributions will be 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 is higher. (See HOW TO PURCHASE SHARES.)
For more information concerning fees and expenses of the Fund, see
ORGANIZATION AND MANAGEMENT and DIVIDENDS, DISTRIBUTIONS AND TAXES.
5
<PAGE>
FINANCIAL HIGHLIGHTS
The following information for the four months ended April 30, 1997, has
been prepared by the Company and is unaudited. It should be read in conjunction
with the financial statements and related notes, which are included in the
Statement of Additional Information.
The following information for December 31, 1996 has been audited by Coopers
& Lybrand L.L.P., independent accountants, as stated in their opinion appearing
in the Fund's 1996 Annual Report to Shareholders (which has been incorporated
herein by reference). This information should be read in conjunction with the
financial statements and related notes, which are included in the Annual Report
to Shareholders. A copy of the Fund's Annual Report to Shareholders is
available, upon request, by calling the Fund at (800) 726-7240, or by writing
the Fund at Four Embarcadero Center, San Francisco 94111.
Selected data for each share of capital stock outstanding are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
FOUR MONTHS ENDED (COMMENCEMENT OF
APRIL 30, 1997 OPERATIONS) TO
(UNAUDITED) DECEMBER 31, 1996
----------------- -------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.00 $ 10.00
---------- ----------
Net investment loss (a) (0.01)(b) -
Net realized and unrealized gain on
investments (a) 0.51 -
Net increase in net asset value
resulting from investment operations (a) 0.50 -
---------- ----------
Net asset value, end of period $ 10.50 $ 10.00
---------- ----------
---------- ----------
Total Return (c) 4.90% 0.00%
---------- ----------
---------- ----------
RATIOS AND SUPPLEMENTAL DATA:
Average commission rate paid per share (d) $ 0.0727 $ 0.0326
---------- ----------
---------- ----------
Net assets, end of period (in 000's) $ 4,198 $ 4,000
---------- ----------
---------- ----------
Ratio of expenses to average net assets 1.85%(b) 0.00%(f)
---------- ----------
---------- ----------
Ratio of net investment loss to average
net assets (0.35%)(b) 0.00%(f)
---------- ----------
---------- ----------
Portfolio turnover 49.59%(e) 0.00%(f)
---------- ----------
---------- ----------
</TABLE>
6
<PAGE>
- -----------------------------
(a) Calculated using the average share method.
(b) Includes reimbursement by the Fund's investment manager of certain ordinary
operating expenses equal to $0.05 per share (calculated using the average
share method). Without such reimbursement, the ratio of expenses to average
net assets would have been 3.44% and the ratio of net investment loss to
average net assets would have been (1.93%).
(c) Total return measures the change in value of an investment in the Fund over
the period indicated.
(d) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for security
trades on which commissions are charged. This amount may vary from period
to period and fund to fund depending on the mix of trades executed in
various markets where trading practices and commission structures may
differ.
(e) Not annualized.
(f) Not annualized. Fund was in operation for one day.
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 companies with
large market capitalizations. 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 will be considered only as part of
total return and will not be emphasized. There can be no assurance that the
Fund will achieve its investment objective.
HOW DOES THE FUND SELECT SECURITIES FOR ITS PORTFOLIO?
The Fund intends to invest primarily in equity and equity-related securities
of large capitalization 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 or 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. There are no limitations on the types of businesses in which the
Fund may invest, although no more than 25% of the value of the Fund's total
assets may be invested in the securities of companies primarily engaged in any
one industry (other than securities of the U.S. Government, its agencies and
instrumentalities). 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.
WHAT ARE LARGE CAP COMPANIES?
Large cap companies are issuers whose common stock, and securities
convertible into common stock, have a total market capitalization of at least
$1 billion at time of purchase. There is no maximum market capitalization
for an issuer's equity securities to be considered an appropriate investment
for the Fund. The market capitalization of each issuer's equity securities
will be evaluated quarterly. The Fund will not be required to sell portfolio
securities solely because the market capitalization of the issuer's equity
securities has declined below $1 billion, or be prevented from purchasing or
be required to sell other portfolio securities as a result of such change.
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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 indices. In addition, equity and equity-related
securities may include securities sold in the form of depository receipts and
securities issued by other investment companies. The Fund currently intends
to invest primarily in common stock.
WILL THE FUND INVEST IN FOREIGN SECURITIES?
The Fund may invest up to 20% of the value of its total assets in equity and
equity-related securities of foreign issuers. 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. 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 10% of the
value of its total assets in securities of issuers that are organized or
headquartered in any one foreign country. 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
foreign 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 United States or in foreign markets.
WILL THE FUND INVEST IN EMERGING MARKETS?
The Fund may invest up to 10% of the value of its total assets in securities
of companies that are organized or headquartered in developing countries with
emerging markets, and 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
to include, for purposes of this Prospectus, all foreign countries other than
Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong
Kong, Ireland, Italy, Japan, Luxembourg, The Netherlands, New Zealand,
Norway, 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?)
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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
Union). As a result, gains in a particular securities market may be
affected, either positively or negatively, by changes in exchange rates.
DOES THE FUND HEDGE ITS INVESTMENTS?
For hedging purposes, the Fund may purchase options on stock indices and on
securities that are authorized for purchase by the Fund. If the Fund
purchases a "put" option on a security, 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 on a
security, 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). An option on a stock index gives the Fund the right to
receive a cash payment equal to the difference between the closing price of
the index and the exercise price of the option. The Fund may "close out" an
option prior to its exercise or expiration 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 (and related options), 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 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. The Fund is also authorized to employ currency management techniques to
enhance its total return, although it presently does not intend to do so.
WHAT OTHER INVESTMENT PRACTICES SHOULD I KNOW ABOUT?
DEPOSITORY RECEIPTS. The Fund may invest up to 20% of the value of its total
assets 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 U.S. banks
and entitle the holder to all dividends and all capital gains associated with
the ordinary shares. These securities may not be denominated in the same
currency as the underlying securities that they represent. EDRs and GDRs are
receipts issued by a non-U.S. financial institution evidencing a similar
arrangement. When 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.
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Although investment in ADRs does not involve the currency exchange risk that
is present when investing 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. The only practical means of investing in such issuers 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.
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 may
also 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 5% of the
value of the Fund's net assets or 5% of the securities of such class of the
issuer. The Fund's ability to enter into short sales transactions is limited by
the requirements of the Investment Company Act of 1940 (the "1940 Act"), and by
the Internal Revenue Code of 1986, as amended (the "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 generally does not intend to enter into these
transactions for the purposes 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.
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The Fund will segregate cash, U.S. Government securities or other liquid
debt or equity 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 debt obligations (with maturities of
less than one year) issued or guaranteed by the U.S. Government and foreign
governments (including their respective agencies, instrumentalities,
authorities, and political subdivisions), 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, investment grade by Standard & Poor's
Corporation, Moody's Investor Services, Inc., or another recognized rating
organization, or if unrated will be determined by the Investment Manager to
be of comparable investment quality. Investment grade means that the issuer
of the security is believed to have adequate capacity to pay interest and
repay principal, although certain of such securities in the lower grades have
speculative characteristics, and changes in economic conditions or other
circumstances may be more likely to lead to a weakened capacity to pay
interest and principal than would be the case with higher-rated securities.
Under normal market conditions, no more than 10% of the value of the Fund's
total assets will be invested in debt 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 securities. 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. In order to meet such redemption requests, the Fund may
borrow from banks or enter into 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, 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 broker-dealer deemed creditworthy pursuant to
standards adopted by the Company's Board of Directors) and simultaneously
agrees to repurchase the security at an agreed-upon price on an agreed-upon
date within a number of days (usually not more than seven) from the date of
purchase.
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LENDING PORTFOLIO SECURITIES. The Fund is authorized to make loans of
portfolio securities, for the purpose of realizing additional income, to
broker-dealers or other institutional investors deemed creditworthy pursuant
to standards adopted by the Company's Board of Directors. The borrower must
maintain with the Fund's custodian collateral consisting of cash, U.S.
Government securities or other liquid debt or equity securities equal to at
least 100% of the value of the borrowed securities, plus any accrued
interest. The Fund will receive any interest paid on the loaned securities,
and a fee and/or a portion of the interest earned on the collateral, less any
fees and administrative expenses associated with the loan.
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 pursuant to standards adopted 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 Investment Manager may determine in particular
cases, pursuant to standards adopted by the Company's Board of Directors,
that such securities are not illiquid securities notwithstanding the legal or
contractual restrictions on their resale. Investing in Rule 144A securities
could have the effect of increasing the Fund's illiquidity to the extent that
qualified institutional buyers become, for a time, uninterested in purchasing
such securities.
CAN THE FUND'S OBJECTIVE AND POLICIES BE CHANGED?
The Fund's investment objective is a fundamental policy that may not be
changed without a vote of its stockholders. However, except as otherwise
indicated in this Prospectus or the Statement of Additional Information, the
Fund's other investment policies and restrictions are not fundamental and may
be changed without a vote of the stockholders. If there is a change in the
Fund's investment objective or policies, stockholders should consider whether
the Fund remains an appropriate investment in light of their then current
financial position and needs.
The various percentage limitations referred to in this Prospectus apply
immediately after a purchase or initial investment. Except as specifically
indicated to the contrary, the Fund is not required to sell any security in
its portfolio as a result of any change in any applicable percentage
resulting from market fluctuations.
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 50%, but the turnover 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.
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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 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 EQUITY INVESTMENTS.
Although equity securities have a history of long-term growth in value, their
prices fluctuate based on changes in the issuer's financial condition and
prospects and on overall market and economic conditions. The value of the
Fund's net assets can be expected to fluctuate.
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
political instability, expropriation, or nationalization of assets,
revaluation of currencies, confiscatory taxation, and limitations on foreign
investment and use or removal of funds or other assets of the Fund (including
the withholding of dividends and limitations on the repatriation of
currencies). The Fund may also 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.
RISK OF INVESTING IN EMERGING MARKET SECURITIES.
There are special additional risks associated with investments in emerging
markets. 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.
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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 may 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 from 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 market price has increased significantly. Under adverse market
conditions, the Fund might have difficulty in 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.
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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 of borrowings may fluctuate with changing market rates of interest and
may partially offset or exceed the return earned on the borrowed funds (or on
the assets that were retained rather than sold to meet the needs for which
funds were borrowed). Under adverse market conditions, the Fund might have
to sell portfolio securities to meet interest or principal payments at a time
when fundamental investment considerations would not favor such sales. To
the extent the Fund enters into reverse repurchase agreements, the Fund is
subject to risks that are similar to those of borrowing.
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 Management, L.L.C., a Delaware limited liability company
with principal offices at Four Embarcadero Center, San Francisco, California
94111. The Investment Manager provides the Fund with investment supervisory
services pursuant to an Investment Management Agreement, Power of Attorney
and Service Agreement (the "Management Agreement") dated December 27, 1996.
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.
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 April 1996, as the successor to the business and
operations of RCM Capital Management, a California Limited Partnership,
which, with its predecessors, has been in operation since 1970. The
Investment Manager is a wholly owned subsidiary of Dresdner Bank AG
("Dresdner"), an international banking organization with principal executive
offices located in Frankfurt, Germany.
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Pursuant to an agreement among RCM Limited L.P. ("RCM Limited"), the
Investment Manager, and Dresdner, RCM Limited manages, operates and makes all
decisions regarding the day-to-day business and affairs of the Investment
Manager, subject to the oversight of RCM's Board of Managers. RCM Limited is
a California limited partnership consisting of 38 limited partners and one
general partner, RCM General Corporation, a California corporation ("RCM
General"). Twenty-five of the limited partners of RCM Limited are also
principals of the Investment Manager, and the shareholders of RCM General.
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 large
capitalization stocks. Its portfolio managers and research analysts have
been researching large companies for purchase in domestic equity portfolios,
and have been managing large cap portfolios, for more than 20 years. The
research team consults regularly with the senior members of the Investment
Manager's equity portfolio management team concerning economic conditions and
the relative merits and investment opportunities in various industry sectors
generally as well as concerning specific 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 large cap area,
Grassroots Research can be a valuable adjunct to the Investment Manager's
traditional research efforts by providing a "second look" at companies in
which the Fund is considering investing and by checking marketplace
assumptions concerning market demand for particular products and services.
John D. Leland, Jr. and Carson V. Levit are primarily responsible for the
day-to-day management of the Fund. Mr. Leland is a Principal of the Investment
Manager, with which he has been associated since 1972. He has managed equity
portfolios on behalf of the Investment Manager since 1972. Mr. Levit is a
Senior Vice President of the Investment Manager, with which he has been
associated since 1993. From September 1991 to May 1993 he attended the Wharton
School at the University of Pennsylvania where he obtained his M.B.A. During
that period he was a research analyst at Fidelity Investments. Mr. Levit has
been participating in the management of equity portfolios since 1994.
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 0.75% of
the value of the Fund's average daily net assets.
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; fees paid pursuant
to the Fund's Rule 12b-1 plan; 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).
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To limit the expenses of the Fund, the Investment Manager has agreed, until
at least December 31, 1997, 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 1.85% of the value of the average daily
net assets of the Fund. The Fund will reimburse the Investment Manager for
fees deferred or other expenses paid by the Investment Manager pursuant to
this agreement in later years in which operating expenses for the Fund are
otherwise less than such expense limitation. Accordingly, until all such
amounts are reimbursed, the Fund's expenses will be higher, and its total
return will be lower, than would otherwise have been the case. No interest,
carrying or finance charge will be paid by the Fund with respect to any
amounts representing fees deferred or other expenses paid by the Investment
Manager. In addition, the Fund will not be required to repay any
unreimbursed amounts to the Investment Manager upon termination of the
Management Agreement.
HOW DOES THE FUND DECIDE WHICH BROKERS TO USE?
The Investment Manager, subject to the overall supervision of the Company's
Board of Directors, makes the Fund's investment decisions and selects the
broker or dealer to be used in each specific transaction using its judgment
to choose the broker or dealer most capable of providing the services
necessary to obtain the best execution of that transaction. In seeking the
best execution of each transaction, the Investment Manager evaluates a wide
range of criteria. Subject to the requirement of seeking best execution, the
Investment Manager may, in circumstances in which two or more brokers are in
a position to offer comparable execution, give preference to a broker 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 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 execution, whether
or not that counterparty is the primary market maker for that security.
When appropriate and to the extent consistent with applicable laws and
regulations, the Fund may execute brokerage transactions through Dresdner
Kleinwort Benson North America LLC, a wholly owned subsidiary of Dresdner, or
other broker-dealer subsidiaries or affiliates of Dresdner.
WHO IS THE FUND'S DISTRIBUTOR?
Funds Distributor, Inc. (the "Distributor"), whose principal place of
business is 60 State Street, Suite 1300, Boston, Massachusetts 02109, acts as
distributor of shares of the Fund. The Distributor is engaged in the
business of providing mutual fund distribution services to registered
investment companies, and is an indirect wholly owned subsidiary of Boston
Institutional Group, Inc., which is not affiliated with the Investment
Manager or Dresdner.
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The Distributor retains a portion of any initial sales charge upon the
purchase of shares of the Fund. In addition, the Company has adopted a
distribution plan pursuant to Rule 12b-1 under the 1940 Act with respect to
the Fund. Under the distribution plan, which is a "reimbursement plan," the
Fund pays the Distributor an annual fee of up to 0.35% of the Fund's average
daily net assets as reimbursement for certain expenses actually incurred by
the Distributor in connection with distribution of shares of the Fund. These
expenses include advertising and marketing expenses, payments to
broker-dealers and others who have entered into agreements with the
Distributor, the expenses of preparing, printing and distributing the
prospectuses of the Fund to persons who are not already stockholders, and
indirect and overhead costs associated with the sale of shares of the Fund.
If in any month the Distributor is due more monies for such services than are
immediately payable because of the expense limitation under the plan, the
unpaid amount is carried forward from month-to-month while the plan is in
effect until such time as it may be paid. However, no amounts carried forward
are payable beyond the fiscal year during which they were incurred, and no
interest, carrying or other finance charge is borne by the Fund with respect
to any amount carried forward.
WHO IS THE FUND'S CUSTODIAN AND TRANSFER AGENT?
State Street Bank and Trust Company acts as the Fund's custodian, transfer
agent, redemption agent and dividend paying agent (the "Custodian"). The
Custodian's principal business address is 1776 Heritage Drive, North Quincy,
Massachusetts 02171.
HOW TO PURCHASE SHARES
WHAT IS THE OFFERING PRICE FOR SHARES OF THE FUND?
Shares of the Fund are offered on a continuous basis at the offering price
next determined after receipt of an order in proper form. The offering price
is the net asset value per share plus a sales charge, if applicable. There
is no minimum initial investment for investors purchasing shares through a
broker-dealer or other financial institution having a service agreement with
the Investment Manager and maintaining an omnibus account with the Fund. For
other investors, the initial investment must be at least $5,000, and the
minimum subsequent investment is $250 other than through the Fund's automatic
dividend reinvestment plan. (See STOCKHOLDER SERVICES.)
IS THERE A SALES CHARGE?
The sales charges you pay when purchasing shares of the Fund are set forth
below:
SALES CHARGES AS PERCENTAGE OF THE:
-----------------------------------
DEALER COMMISSION
AMOUNT OF PURCHASE AT OFFERING NET AMOUNT AS PERCENTAGE OF
THE PUBLIC OFFERING PRICE PRICE INVESTED THE OFFERING PRICE
- ------------------------- ---------------------------------------
Less than $50,000 5.00% 5.26% 4.50%
$50,000 but less than $100,000 4.50% 4.71% 4.00%
$100,000 but less than $250,000 3.50% 3.63% 3.25%
$250,000 but less than $500,000 2.50% 2.56% 2.25%
$500,000 but less than $1,000,000 2.00% 2.04% 1.75%
$1,000,000 or more 0.00% 0.00% 0.00%
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<PAGE>
Commissions will be paid by the Distributor to dealers who initiate and are
responsible for purchases of $1 million or more and purchases made at net
asset value by certain retirement plans of organizations with 50 or more
eligible employees as set forth in the Statement of Additional Information.
WHEN IS THE SALES CHARGE WAIVED OR REDUCED?
NET ASSET VALUE PURCHASES. The Fund may sell shares at net asset value to:
(1) current or retired directors, officers and employees of the Fund, the
Distributor, the Investment Manager, certain family members of such persons,
and trusts or plans primarily for such persons;
(2) current or retired registered representatives or full-time employees
(and their spouses and minor children) of dealers having selling group
agreements with the Distributor and plans for such persons;
(3) stockholders and former stockholders of another mutual fund which has a
sales charge and is not a series of the Company, so long as shares of the
Fund are purchased with the proceeds of a redemption, made within 60 days of
the purchase, of shares of such other mutual fund (to obtain this benefit,
the redemption check, endorsed to the Company, or a copy of the confirmation
showing the redemption, must be forwarded to National Financial Data Services
- -- see HOW CAN I PURCHASE SHARES OF THE FUND?);
(4) companies or other entities exchanging securities with the Fund through a
merger, acquisition or exchange offer;
(5) trustees or other fiduciaries purchasing shares for certain retirement
plans of organizations with 50 or more eligible employees;
(6) participants in certain pension, profit-sharing or employee benefit plans
that are sponsored by the Distributor and its affiliates;
(7) investment advisers and financial planners who place trades for their own
accounts or the accounts of their clients and who charge a management,
consulting or other fee for their services;
(8) clients of investment advisers and financial planners referred to in
item (7) who place trades for their own accounts if the accounts are linked to
the master account of the investment adviser or financial planner on the books
and records of a broker, agent, investment adviser or financial institution;
(9) employee-sponsored benefit plans in connection with purchases of shares of
the Fund made as a result of participant-directed exchanges between options in
such a plan;
(10) "wrap accounts" for the benefit of clients of broker-dealers, financial
institutions or financial planners having sales or service agreements with the
Distributor or another broker-dealer or financial institution with respect to
sales of shares of the Fund; and
(11) such other persons as are determined by the Company's Board of Directors
(or by the Distributor pursuant to standards adopted by the Board) to have
acquired shares under circumstances not involving any sales expenses to the Fund
or the Distributor.
Shares are offered at net asset value to these persons and organizations due
to anticipated economies in sales effort and expense. No sales charges are
imposed on Fund shares purchased upon the reinvestment of dividends and
distributions, or upon an exchange of shares from other series of the Company.
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<PAGE>
AGGREGATION. Sales charge discounts on purchases of shares of the Fund are
available for certain aggregated investments. Investments which may be
aggregated include those by you, your spouse and your children under the age
of 21, if all parties are purchasing shares for their own accounts, which may
include purchases through employee benefit plans such as an IRA,
individual-type 403(b) plan or single-participant Keogh-type plan or by a
business solely controlled by these individuals (for example, the individuals
own the entire business) or by a trust (or other fiduciary arrangement)
solely for the benefit of these individuals. Individual purchases by
trustees or other fiduciaries may also be aggregated if the investments are
(1) for a single trust estate or fiduciary account, including an employee
benefit plan other than those described above, (2) made for two or more
employee benefit plans of a single employer or affiliated employers as
defined in the 1940 Act, again excluding employee benefit plans described
above, or (3) for a common trust fund or other pooled account not
specifically formed for the purpose of accumulating Fund shares. Purchases
made for nominee or street name accounts (securities held in the name of a
dealer or another nominee such as a bank trust department instead of the
customer) may not be aggregated with those made for other accounts and may
not be aggregated with other nominee or street name accounts unless otherwise
qualified as described above.
CONCURRENT PURCHASES. To qualify for a reduced sales charge, you may combine
concurrent purchases of shares of two or more series of the Company. For
example, if you concurrently invest $500,000 in the Fund and $500,000 in
another series of the Company, the sales charge would be reduced to reflect a
$1,000,000 purchase.
RIGHT OF ACCUMULATION. The sales charge for your investment may also be
reduced by taking into account your existing holdings in the Fund and the
other series of the Company. See the account application and Statement of
Additional Information for further details.
LETTER OF INTENT. You may reduce sales charges on all investments by meeting
the terms of a letter of intent, a non-binding commitment to invest a certain
amount within a 13-month period. Your existing holdings in the Fund and the
other series of the Company may also be combined with the investment
commitment set forth in the letter of intent to further reduce your sales
charge. Up to 5% of the letter amount will be held in escrow to cover
additional sales charges which may be due if your total investments over the
letter period are not sufficient to qualify for a sales charge reduction.
See the account application and Statement of Additional Information for
further details.
HOW CAN I PURCHASE SHARES OF THE FUND?
Investors or their duly authorized agents may purchase shares of the Fund by
sending a signed, completed subscription form to National Financial Data
Services ("NFDS"), an affiliate of the Custodian, at P.O. Box 419927, Kansas
City, Missouri 64141-6927, and paying for the shares as described below.
Shares may also be purchased through certain brokers which have entered into
a selling group agreement with the Distributor. Brokers may charge a fee for
their services at the time of purchase or redemption. Subscription forms can
be obtained from the Company.
Orders for shares received by NFDS 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 HOW ARE SHARES PRICED?)
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.
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<PAGE>
Upon receipt of the order in proper form, NFDS will open a stockholder
account in accordance with the investor's registration instructions. A
confirmation statement reflecting the current transaction will be forwarded
to the investor.
WHERE SHOULD I SEND MY SUBSCRIPTION PAYMENT?
Payment for shares purchased should be made by check or money order, made
payable to RCM Large Cap Growth Fund. Checks should be bank or certified
checks. The Company, at its option, may accept a check that is not a bank or
certified check; however, third party checks will not be accepted. Payment
should be sent to:
RCM Equity Funds, Inc.
P.O. Box 419927
Kansas City, MO 64141-6927
Attn: RCM Large Cap Growth Fund
Account 682
Investors may also make initial or subsequent investments by electronic
transfer of funds or wire transfer of federal funds to the Company. Before
transferring or wiring funds, an investor must first telephone the Company at
(800) 726-7240 for instructions. On the telephone the following information
will be requested: name of authorized person; stockholder account number (if
such account number is in existence); name of Fund; amount being transferred
or wired; and transferring or wiring bank name.
Investors may be charged a fee if they effect transactions through a broker
or agent. Your dealer is responsible for forwarding payment promptly to
NFDS. 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 HOW ARE SHARES PRICED? below; (ii) will have
a tax basis to the Fund equal to such value; (iii) must not be "restricted
securities"; and (iv) must be permitted to be purchased in accordance with
the Fund's investment objective and policies set forth in this Prospectus and
must be securities that the Fund would be willing to purchase at that time.
Prospective stockholders considering this method of payment should contact
the Company in advance to discuss the securities in question and the
documentation necessary to complete the transaction.
21
<PAGE>
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 pursuant to standards adopted by the Company's Board of Directors.
The net asset value of a share is the quotient obtained by dividing the net
assets of the Fund (i.e., the value of the assets of the Fund less its
liabilities, including expenses payable or accrued but excluding capital
stock and surplus) by the total number of shares of the Fund outstanding. The
net asset value of the Fund's shares will be calculated as of the close of
regular trading on the New York Stock Exchange, currently 4:00 p.m. Eastern
Time, on each day that the New York Stock Exchange is open for trading.
STOCKHOLDER SERVICES
WHAT SERVICES ARE PROVIDED TO STOCKHOLDERS?
AUTOMATIC REINVESTMENT. Each income dividend and capital gains distribution,
if any, declared by the Fund will be reinvested in full and fractional shares
based on the net asset value as determined on the payment date for such
distributions, unless the stockholder or his or her duly authorized agent has
elected to receive all such payments or the dividend or distribution portions
thereof in cash. Changes in the manner in which dividend and distribution
payments are made may be requested by the stockholder or his or her duly
authorized agent at any time through written notice to the Company and will
be effective as to any subsequent payment if such notice is received by the
Company prior to the record date used for determining the stockholders
entitled to such payment. Any dividend and distribution election will remain
in effect until the Company is notified by the stockholder in writing to the
contrary.
EXCHANGE PRIVILEGE. You may exchange shares of the Fund into shares of any
other series of the Company, without a sales charge or other fee, by
contacting NFDS. Before effecting an exchange, you should obtain the
currently effective prospectus of the series into which the exchange is to be
made. Exchange purchases are subject to the minimum investment requirements
of the series purchased. An exchange will be treated as a redemption and
purchase for tax purposes.
Shares will be exchanged at the net asset value per share of the Fund, and
the series into which the exchange is to be made, next determined after
receipt by NFDS of (i) a written request for exchange, 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 exchanged; and (ii) stock certificates for any shares to be
exchanged which are held by the stockholder. Exchanges will not become
effective until all documents in the form required have been received by
NFDS. A stockholder in doubt as to what documents are required should
contact NFDS.
ACCOUNT STATEMENTS. Your account is opened in accordance with your
registration instructions. Transactions in the account, such as additional
investments and dividend reinvestments, will be reflected on regular
confirmation statements from the Company.
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<PAGE>
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 in whole or in
part in portfolio securities.
Stockholders may 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 after execution of the redemption
order except as may be provided below.
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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 a 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.
WHAT ELSE SHOULD I KNOW ABOUT REDEMPTIONS?
REINSTATEMENT PRIVILEGE. You may reinvest proceeds from a redemption of
shares of the Fund, or proceeds of a dividend or capital gain distribution
paid to you with respect to shares of the Fund, without a sales charge, in
the Fund or any other series of the Company. Send a written request and a
check to the Company within 90 days after the date of the redemption,
dividend or distribution. Reinvestment will be at the next calculated net
asset value after receipt. The tax status of a gain realized on a redemption
will not be affected by exercise of the reinstatement privilege, but a loss
may be nullified if you reinvest in the same series within 30 days.
INVOLUNTARY REDEMPTION. In order to reduce expenses of the Fund, the Company
may redeem all of the shares of any investor whose account has a net asset
value of less than $5,000 due to redemptions (other than a stockholder who is
a participant in a qualified retirement plan). The Company will give such
stockholders 60 days' prior written notice in which to purchase sufficient
additional shares to avoid such a redemption.
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), indices 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 (total return is the change in value of an
investment in the Fund over a given period, assuming reinvestment of any
dividends and capital gain distributions). Such indices and rankings may
include the following, among others:
1. The S&P 500 Composite Index.
2. 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?
The Fund intends 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.
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<PAGE>
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 non-resident alien
individual, non-resident 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 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.
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GENERAL INFORMATION
WHAT OTHER INFORMATION SHOULD I KNOW ABOUT THE FUND?
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 the Fund. In addition, 50,000,000 shares have
been designated as shares of RCM Global Technology Fund, 50,000,000 shares
have been designated as shares of RCM Global Health Care Fund, 50,000,000
shares have been designated as shares of RCM Global Small Cap Fund, and
50,000,000 shares have been designated as shares of Dresdner RCM Emerging
Markets Fund (a newly created series of the Company). The Company's Board of
Directors may, in the future, authorize the issuance of other classes of
shares of the Fund (with, for example, different sales loads, or other
distribution or service fee arrangements), or of other series of capital
stock of the Company 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 April 30, 1997, there were 400,009 shares of the Fund
outstanding, of which 400,000 shares were beneficially owned by clients of
Dresdner Bank AG/Investment Management/Institutional Asset Management
Division.
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 than 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 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 SEC. The registration statements 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.
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RCM EQUITY FUNDS, INC.
RCM GLOBAL TECHNOLOGY FUND
RCM GLOBAL HEALTH CARE FUND
RCM GLOBAL SMALL CAP FUND
RCM LARGE CAP GROWTH FUND
FOUR EMBARCADERO CENTER
SAN FRANCISCO, CALIFORNIA 94111
(800) 726-7240
STATEMENT OF ADDITIONAL INFORMATION
June 30, 1997
RCM Global Technology Fund (the "Technology Fund"), RCM Global Health Care Fund
(the "Health Care Fund"), RCM Global Small Cap Fund (the "Small Cap Fund"), and
RCM Large Cap Growth Fund ("the Large Cap Fund") are no-load series (each a
"Fund" and collectively the "Funds") of RCM Equity Funds, Inc. (the "Company"),
an open-end management investment company. The Funds' investment manager is RCM
Capital Management, L.L.C. (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 Funds'
Prospectuses (each a "Prospectus" and collectively the "Prospectuses") and
should be read in conjunction with such Prospectuses. The Prospectuses may be
obtained without charge by calling or writing the Company at the address and
phone number above.
TABLE OF CONTENTS
PAGE
Investment Objectives and Policies . . . . . . . . . . . . . . . . . 2
Investment and Risk Considerations . . . . . . . . . . . . . . . . . 13
Investment Restrictions. . . . . . . . . . . . . . . . . . . . . . . 20
Execution of Portfolio Transactions. . . . . . . . . . . . . . . . . 22
Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . 24
The Investment Manager . . . . . . . . . . . . . . . . . . . . . . . 27
The Distributor . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Net Asset Value . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Purchase and Redemption of Shares. . . . . . . . . . . . . . . . . . 32
Dividends, Distributions and Tax Status. . . . . . . . . . . . . . 34
Investment Results . . . . . . . . . . . . . . . . . . . . . . . . . 38
Description of Capital Shares. . . . . . . . . . . . . . . . . . . . 39
Additional Information . . . . . . . . . . . . . . . . . . . . . . . 40
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__________________________________
INVESTMENT OBJECTIVES AND POLICIES
__________________________________
INVESTMENT CRITERIA
In evaluating particular investment opportunities, the Investment Manager may
consider, in addition to the factors described in the Prospectuses, the
anticipated economic growth rate, the political outlook, the anticipated
inflation rate, the currency outlook, and the interest rate environment for the
country and the region in which a particular issuer is located. When the
Investment Manager believes it would be appropriate and useful, the Investment
Manager's personnel may visit the issuer's headquarters and plant sites to
assess an issuer's operations and to meet and evaluate its key executives. The
Investment Manager also will consider whether other risks may be associated with
particular securities.
INVESTMENT IN FOREIGN SECURITIES
Each of the Funds may invest 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 a 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, a 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 or 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. Each Fund may invest in securities
of companies that are organized or headquartered in developed foreign countries.
A 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 Union to eliminate internal barriers to
the free movement of goods, persons, services and capital have encountered
opposition arising from the conflicting economic, political and cultural
interests and traditions of the member countries and their citizens. The
reunification of the former German Democratic Republic (East Germany) with the
Federal Republic of Germany (West Germany) and other political and social events
in Europe have caused considerable economic and social dislocations. Such
events can materially affect securities markets and have also disrupted the
relationship of such currencies with each other and with the U.S. dollar.
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.
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INVESTMENT IN EMERGING MARKETS. Each Fund may invest in securities of companies
organized or headquartered in developing countries with emerging markets. 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.) 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
Funds' overall limitations on investments in emerging market countries.
Securities of issuers organized or headquartered in emerging market countries
may, at times, offer excellent opportunities for 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 a 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 Funds' assets, overly burdensome repatriation or similar
restrictions, the lack of organized and liquid securities markets, unacceptable
political risks, poor values of investments in those markets relative to
investments in other emerging markets, in developed foreign markets, or in the
United States, or for other reasons.
CURRENCY MANAGEMENT
Securities purchased by the Funds may be denominated in U.S. dollars, foreign
currencies, or multinational currency units such as the European Currency Unit,
and the Funds 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 a Fund's net currency positions
may expose it to risks independent of its securities positions.
From time-to-time, the Funds may employ currency management techniques to
enhance their total returns, although they presently do not intend to do so. A
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.
A Fund's ability to engage in currency transactions may be limited by the
requirements of the Internal Revenue Code of 1986, as amended (the "Code") for
qualification as a regulated investment company and the Fund's intention to
continue to qualify as such. (See DIVIDENDS, DISTRIBUTIONS AND TAX STATUS.)
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A 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
convertibility and repatriation of assets. Because the shares of the Funds are
redeemable in U.S. dollars each day the Funds determine their net asset value,
the Funds must have the ability at all times to obtain U.S. dollars to the
extent necessary to meet redemptions. Under present conditions, the Investment
Manager does not believe that these considerations will have any significant
adverse effect on its portfolio strategies, although there can be no assurances
in this regard.
GENERAL CURRENCY CONSIDERATIONS. Currency exchange rates may fluctuate
significantly over short periods of time causing, along with other factors, each
Fund's net asset value to fluctuate as well. Currency exchange rates generally
are determined by the forces of supply and demand in the foreign exchange
markets and the relative merits of investments in different countries, actual or
anticipated changes in interest rates and other complex factors, as seen from an
international perspective. Currency exchange rates also can be affected
unpredictably by intervention, or failure to do so, by U.S. or foreign
governments or central banks or by currency controls or political developments
in the United States or abroad. The 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 a
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. Each 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, a Fund may enter into forward foreign currency exchange contracts
in order to protect against anticipated changes in future foreign currency
exchange rates. Each 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. Each Fund may also engage in
proxy hedging, by using forward contracts in a series of foreign currencies for
similar purposes.
Each 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. Each 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 a Fund if the value of the hedged
currency increased.
If a 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 debt or equity securities 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
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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 a 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 Funds will enter into
such transactions only with primary dealers or others deemed creditworthy by the
Investment Manager.
OPTIONS ON FOREIGN CURRENCIES. Each 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. Each 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 Funds will be traded on U.S. and foreign exchanges.
The writer of a put or call option receives a premium and gives the purchaser
the right to sell (or buy) the currency underlying the option at the exercise
price. The writer has the obligation upon exercise of the option to purchase
(or deliver) the currency during the option period. A writer of an option who
wishes to terminate the obligation may effect a "closing transaction" by buying
an option of the same series as the option previously written. A writer may not
effect a closing purchase transaction after being notified of the exercise of an
option. The writing of an option on foreign currency will constitute only a
partial hedge, up to the amount of the premium received; a Fund could be
required to purchase or sell additional foreign currencies at disadvantageous
exchange rates, thereby incurring losses. The purchase of an option on foreign
currency may constitute an effective hedge against exchange rate fluctuations;
however, in the event of exchange rate movements adverse to a Fund's position, a
Fund may forfeit the entire amount of the premium plus related transaction
costs.
Each 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 a Fund writes a call option on a foreign currency, an amount of cash, U.S.
Government securities, or other liquid debt or equity securities equal to the
market value of its obligations under the option will be deposited by the Fund
in a segregated account with the Fund's custodian to collateralize the position.
CURRENCY SWAPS. Each 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 Funds expect to achieve an acceptable degree of
correlation between their portfolio investments and their 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
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currency swap may be subject to the risk that the other party to the swap will
default on its contractual delivery obligations. Each Fund will maintain in a
segregated account with the Fund's custodian cash, U.S. Government securities,
or other liquid debt or equity securities equal to the amount of the Fund's
obligations, or the net amount (if any) of the excess of the Fund's obligations
over its entitlements, with respect to swap transactions. To the extent that
such amount of a swap is held in such a segregated account the Company and the
Investment Manager believe that swaps do not constitute senior securities under
the Investment Company Act of 1940 (the "1940 Act") and, accordingly, will not
treat them as being subject to a 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 a Fund entering into a currency swap would be less favorable than
it would have been if this investment technique were not used.
OPTIONS TRANSACTIONS
Each Fund may purchase listed put and call options on stocks and stock indices
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 a Fund may not in each case exceed 5% of
the value of the net assets of the Fund. In addition, a 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, U.S. Government securities or other liquid
debt or equity securities equal to the exercise price in a segregated account.
A call option is covered if the writer owns the security underlying the call or
has an absolute and immediate right to acquire the security without additional
cash consideration upon conversion or exchange of other securities held by it.
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 a 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
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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 incur if a 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.
STOCK INDEX OPTIONS. Each Fund may purchase put and call options with respect
to the stock indices such as the S&P 500 Composite Index. Such options may be
purchased as a hedge against changes resulting from market conditions in the
values of securities which are held in a Fund's portfolio or which it intends to
purchase or sell, or when they are economically appropriate for the reduction of
risks inherent in the ongoing management of the Fund.
The distinctive characteristics of options on stock indices create certain risks
that are not present with stock options generally. Because the value of an
index option depends upon movements in the level of the index rather than the
price of a particular stock, whether a Fund will realize a gain or loss on the
purchase or sale of an index option depends upon movements in the level of stock
prices in the stock market generally rather than movements in the price of a
particular stock. Accordingly, successful use by a Fund of options on a stock
index will be subject to the Investment Manager's ability to predict correctly
movements in the direction of the stock market generally. This requires
different skills and techniques than predicting changes in the prices of
individual stocks.
Index prices may be distorted if trading of certain stocks included in an index
is interrupted. Trading of index options also may be interrupted in certain
circumstances, such as if trading were halted in a substantial number of stocks
included in the index. If this were to occur, a Fund would not be able to close
out options which it had purchased, and if restrictions on exercise were
imposed, the Fund might be unable to exercise an option it holds, which could
result in substantial losses to the Fund. It is the policy of the Funds to
purchase put or call options only with respect to an index which the Investment
Manager believes includes a sufficient number of stocks to minimize the
likelihood of a trading halt in the index.
DEALER OPTIONS. Each 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
a Fund's restriction on investment in illiquid securities. In addition, dealer
options may evolve the risk that the securities dealers participating in such
transactions will fail to meet their obligations under the terms of the option.
SHORT SALES
Each Fund may engage in short sales transactions. A short sale that is not made
"against the box" is a transaction in which a Fund sells a security it does not
own in anticipation of a decline in market price. When a Fund makes a short
sale, the proceeds it receives are retained by the broker until the Fund
replaces the borrowed security. In order to deliver the security to the buyer,
the Fund must arrange
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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 a 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 a Fund in
effect profits from a decline in the price of the securities sold short without
the need to invest the full purchase price of the securities on the date of the
short sale, the Fund's net asset value per share will tend to increase more when
the securities it has sold short decrease in value, and to decrease more when
the securities it has sold short increase in value, than would otherwise be the
case if it had not engaged in such short sales. Short sales theoretically
involve unlimited loss potential, as the market price of securities sold short
may continuously increase, although a Fund may mitigate such losses by replacing
the securities sold short before the market price has increased significantly.
Under adverse market conditions, a 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 a Fund makes a short sale "against the box," the Fund would not immediately
deliver the securities sold and would not receive the proceeds from the sale.
The seller is said to have a short position in the securities sold until it
delivers the securities sold, at which time it receives the proceeds of the
sale. A 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, U.S. Government securities or other liquid
debt or equity securities in an amount equal to the difference between the
market value of the securities sold short at the time of the short sale and any
cash or securities required to be deposited as collateral with a broker in
connection with the sale (not including the proceeds from the short sale), which
difference is adjusted daily for changes in the value of the securities sold
short. The total value of the cash and securities deposited with the broker and
otherwise segregated may not at any time be less than the market value of the
securities sold short at the time of the short sale.
A 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 each Fund will be against the box, or the Fund's obligation to
deliver the securities sold short will be "covered" by placing in segregated
account cash, U.S. Government securities or other liquid debt or equity
securities in an amount equal to the market value of its delivery obligation. A
Fund will not make short sales of securities or maintain a short position if
doing so could create liabilities or require collateral deposits and segregation
of assets aggregating more than 25% of the value of the Fund's total assets.
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FUTURES TRANSACTIONS
Each 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 resumes 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 a Fund purchases or sells a security, no price is paid or received
by a 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 a 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 a 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 a Fund has purchased a currency futures contract and the price of
the underlying currency has risen, that position will have increased in value
and a Fund will receive from the FCM a variation margin payment equal to that
increased value. Conversely, when a 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, a
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. Each 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
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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 a 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 a 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, the call option 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, a 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. A 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, a 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, U.S. Government securities, or other liquid debt
or equity securities 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 a Fund may engage in futures and futures
option transactions may be limited by the requirements of the Code for
qualification as a regulated investment company and the Fund's intention to
continue to qualify as such. See DIVIDENDS, DISTRIBUTIONS AND TAXES.
REGULATORY MATTERS. The Company has filed a claim of exemption from
registration of the Funds as commodity pools with the Commodity Futures Trading
Commission (the "CFTC"). Each 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.
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DEBT SECURITIES
Each Fund may purchase debt obligations. The timing of purchase and sale
transactions in debt obligations may result in capital appreciation or
depreciation because the value of debt obligations varies inversely with
prevailing interest rates.
The debt obligations in which the Funds 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 a 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.
PREFERRED STOCKS
Each Fund may purchase preferred stocks. Preferred stock, unlike common stock,
offers a stated dividend rate payable from a corporation's earnings. Such
preferred stock dividends may be cumulative or non-cumulative, participating, or
auction rate. If interest rates rise, the fixed dividend on preferred stocks may
be less attractive, causing the price of preferred stocks to decline. Preferred
stock may have mandatory sinking fund provisions, as well as call/redemption
provisions prior to maturity, a negative feature when interest rates decline.
Dividends on some preferred stock may be "cumulative," requiring all or a
portion of prior unpaid dividends to be paid prior to payment of dividends on
the issuer's common stock. Preferred stock also generally has a preference over
common stock on the distribution of a corporation's assets in the event of
liquidation of the corporation, and may be "participating," which means that it
may be entitled to a dividend exceeding the stated dividend in certain cases.
The rights of preferred stocks on the distribution of a corporation's assets in
the event of a liquidation are generally subordinate to the rights associated
with a corporation's debt securities.
INVESTMENT IN ILLIQUID SECURITIES
Each Fund may purchase 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, no Fund is
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 a 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.
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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, a 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 a 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.
DIVERSIFICATION
The Small Cap Fund and Large Cap Fund are "diversified" within the meaning of
the 1940 Act. In order to qualify as diversified, a Fund must diversify its
holdings so that at all times at least 75% of the value of its total assets is
represented by cash and cash items (including receivables), securities issued or
guaranteed as to principal or interest by the United States or its agencies or
instrumentalities, securities of other investment companies, and other
securities (for this purpose other securities of any one issuer are limited to
an amount not greater than 5% of the value of the total assets of the Fund and
to not more than 10% of the outstanding voting securities of the issuer).
PORTFOLIO TURNOVER
Each Fund may invest in securities on either a long-term or short-term basis. A
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. A Fund also may sell securities that have been held on a
short-term basis if the Investment Manager believes that circumstances make the
sale of such securities advisable. This may result in a taxable stockholder
paying higher income taxes than would be the case with investment companies
emphasizing the realization of long-term capital gains. Because the Investment
Manager will purchase and sell securities for each Fund's portfolio without
regard to the length of the holding period for such securities, it is possible
that a 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 a
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, a Fund's investment
objective, and the need for funds for the redemption of a Fund's shares.
For example, a 150% portfolio turnover rate would occur if the value of
purchases or sales of portfolio securities (whichever is less) by a Fund 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
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measured, a high turnover rate could also occur during the first year of a
Fund's operations, and during periods when a Fund's assets are growing or
shrinking. The annual portfolio turnover rate of the Technology Fund for the
year ended December 31, 1996 was 155.58%. For the period from January 1 to
April 30, 1997, the portfolio turnover rate of the Health Care Fund was 40%, of
the Small Cap Fund was 45%, and of the Large Cap Fund was 50%.
INVESTMENT RESTRICTIONS
In making purchases within the foregoing policies, each Fund and the Investment
Manager will be subject to all of the restrictions referred to under "INVESTMENT
RESTRICTIONS". If a percentage restriction on a Fund's 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. A 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 Funds' 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 a 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, each Fund may employ certain investment techniques to hedge its foreign
currency exposure; however, such techniques also entail certain risks.
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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 Funds, including the withholding of
dividends and limitations on the repatriation of currencies. In addition, the
Funds may experience difficulties or delays in obtaining or enforcing judgments.
Foreign securities may be subject to foreign government taxes that could reduce
the yield on such securities.
Foreign 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 a Fund due to
subsequent declines in the value of the portfolio security or, if a 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 a 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 a 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
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increased possibility that the Fund would not become aware of and be able to
respond to corporate actions, such as stock splits or rights offerings,
involving the foreign issuer in a timely manner.
The information available for American Depository Receipts ("ADRs") sponsored by
the issuers of the underlying securities is subject to the accounting, auditing,
and financial reporting standards of the domestic market or exchange on which
they are traded, which standards are more uniform and more exacting than those
to which many non-domestic issuers may be subject. However, some ADRs are
sponsored by persons other than the issuers of the underlying securities.
Issuers of the stock on which such ADRs are based are not obligated to disclose
material information in the United States. The information that is available
concerning the issuers of the securities underlying European Depository Receipts
("EDRs") and Global Depository Receipts ("GDRs") may be less than the
information that is available about domestic issuers, and EDRs and GDRs may be
traded in markets or on exchanges that have lesser standards than those
applicable to the markets for ADRs.
A depository receipt will be treated as an illiquid security for purposes of a
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 securities of companies
organized or headquartered in developing countries with emerging markets that
are in addition to the usual risks of investing in securities of issuers located
in developed foreign markets around the world, and investors in the Funds 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 Funds' investment returns
from such securities.
In many cases, governments of emerging market countries continue to exercise a
significant degree of control over the economies of such countries, and
government actions relative to the economy, as well as economic developments
generally, also may have a major effect on an issuer's prospects. In addition,
certain of such governments have in the past failed to recognize private
property rights and
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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 a Fund to suffer a loss with
respect to any of its holdings. In addition, political and economic structures
in many of such countries may be undergoing significant evolution and rapid
development, and such countries may lack the social, political and economic
stability characteristics of more developed countries. Unanticipated political
or social developments may affect the value of the Funds' investments in those
countries and the availability of additional investments in those countries.
INVESTMENTS IN SMALLER COMPANIES
Investment by the Technology, Health Care and Small Cap Funds 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 Funds 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, a Fund may have to sell them over an extended
period of time below the original purchase price. Investments by the
Technology, Health Care and Small Cap Funds in smaller capitalization companies
may be regarded as speculative.
No Fund will 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 a 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.
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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
instruments; 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 a Fund may enter into options transactions may be limited by the Internal
Revenue Code requirements for qualification as a regulated investment company.
In addition, when trading options on foreign exchanges, many of the protections
afforded to participants in U.S. option exchanges will not be available. For
example, there may be no daily price fluctuation limits in such exchanges or
markets, and adverse market movements could therefore continue to an unlimited
extent over a period of time. Although the purchaser of an option cannot lose
more than the amount of the premium plus related transaction costs, this entire
amount could be lost.
Potential losses to the writer of an option are not limited to the loss of the
option premium received by the writer, and thus may be greater than the losses
incurred in connection with the purchasing of an option.
FUTURES TRANSACTIONS
There are several risks in connection with the use of futures in the Funds 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
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acquired by a Fund 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, a 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, a 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 by a
Fund 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 by a Fund to hedge against a possible unfavorable
movement in a currency exchange rate before the Fund is able to invest its cash
(or cash equivalents) in stock in an orderly fashion, it is possible that the
currency exchange rate may move in a favorable manner instead. If the Fund then
decides not to invest in stock 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 a 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.
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Compared to the use of futures contracts, the purchase of options on futures
contracts involves less potential risk to a 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 loss to a 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.
A Fund will only enter into futures contracts or purchase futures options that
are standardized and traded in 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 Funds 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 a 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 a Fund might not be able to
dispose of such securities promptly or at reasonable prices.
A number of transactions in which the Funds may engage are subject to the risks
of default by the other party of the transaction. If the seller of securities
pursuant to a repurchase agreement entered into by a Fund defaults and the value
of the collateral securing the repurchase agreement declines, the Fund may incur
a loss. If bankruptcy proceedings are commenced with respect to the seller,
realization of the collateral by the Fund may be delayed or limited. Similarly,
when a Fund engages in when-issued, reverse repurchase, forward commitment and
relayed 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.
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__________________________________
INVESTMENT RESTRICTIONS
__________________________________
FUNDAMENTAL POLICIES
Each 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 a Fund, as defined
in Section 2(a)(42) of the 1940 Act, means the vote of (i) 67% or more of the
voting securities of the Fund present at any meeting, if the holders of more
than 50% of the outstanding voting securities of the Fund are present or
represented by proxy, or (ii) more than 50% of the outstanding voting securities
of the Fund, whichever is less. These restrictions provide that a Fund may not:
1. Invest more than 25% of 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) (this
restriction does not apply to the Health Care Fund);
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. A 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 a 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. A Fund will not
enter into repurchase agreements with maturities in excess of
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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 Funds have no current intention of entering into commodities
contracts except for currency futures and futures options;
11. Issue senior securities, except that the Fund may borrow money as
permitted by restriction 4 above. This restriction shall not prohibit a
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
Each 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 a
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
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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 Funds are also subject to other restrictions under the 1940 Act; however,
the registration of the Company under the 1940 Act does not involve any
supervision by any federal or other agency of the Company's management or
investment practices or policies, other than incident to occasional or periodic
compliance examinations conducted by the SEC staff.
__________________________________
EXECUTION OF PORTFOLIO TRANSACTIONS
__________________________________
The Investment Manager, subject to the overall supervision of the Company's
Board of Directors, makes the Funds' investment decisions and selects the broker
or dealer to be used in each specific transaction using its best judgment to
choose the broker or dealer most capable of providing the services necessary to
obtain the best execution of that transaction. In seeking the best execution of
a transaction, the Investment Manager evaluates a wide range of criteria
including any or all of the following: the broker's commission rate,
promptness, reliability and quality of executions, trading expertise,
positioning and distribution capabilities, back-office efficiency, ability to
handle difficult trades, knowledge of other buyers and sellers, confidentiality,
capital strength and financial stability, and prior performance in serving the
Investment Manager and its clients and other factors affecting the overall
benefit to be received in the transaction. When circumstances relating to a
proposed transaction indicate that a particular broker is in a position to
obtain the best execution, the order is placed with that broker. This may or
may not be a broker that has provided investment information and research
services to the Investment Manager. Such investment information may include,
among other things, a wide variety of written reports or other data on the
individual companies and industries; data and reports on general market or
economic conditions; information concerning pertinent federal and state
legislative and regulatory developments and other developments that could affect
the value of actual or potential investments; companies in which the Investment
Manager has invested or may consider investing; attendance at meetings with
corporate management personnel, industry experts, economists, government
personnel, and other financial analysts; comparative issuer performance and
evaluation and technical measurement services; subscription to publications that
provide investment-related information; accounting and tax law interpretations;
availability of economic advice; quotation equipment and services; execution
measurement services; market-related and survey data concerning the products and
services of an issuer and its competitors or concerning a particular industry
that are used in reports prepared by the Investment Manager to enhance its
ability to analyze an issuer's financial condition and prospects; and other
services provided by recognized experts on investment matters of particular
interest to the Investment Manager. In addition, the foregoing services may
include the use of, or be delivered by, computer systems whose hardware and/or
software components may be provided to the Investment Manager as part of the
services. In any case in which information and other services can be used for
both research and non-research purposes, the Investment Manager makes an
appropriate allocation of those uses and pays directly for that portion of the
services to be used for non-research purposes.
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<PAGE>
Subject to the requirement of seeking the best execution, the Investment Manager
may, in circumstances in which two or more brokers are in a position to offer
comparable execution, give preference to a broker or dealer that has provided
investment information to the Investment Manager. In so doing, the Investment
Manager may effect securities transactions which cause a Fund to pay an amount
of commission in excess of the amount of commission another broker would have
charged. In electing such broker or dealer, the Investment Manager will make a
good faith determination that the amount of commission is reasonable in relation
to the value of the brokerage services and research and investment information
received, viewed in terms of either the specific transaction or the Investment
Manager's overall responsibility to the accounts for which the Investment
Manager exercises investment discretion. The Investment Manager 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
Funds) and it is recognized that a Fund may be charged commission paid to a
broker or dealer who supplied research services not utilized by the Fund.
However, the Investment Manager expects that each Fund will benefit overall by
such practice because it is receiving the benefit of research services and the
execution of such transactions not otherwise available to it without the
allocation of transactions based on the recognition of such research services.
Subject to the requirement of seeking the best execution, the Investment Manager
may also place orders with brokerage firms that have sold shares of the Funds.
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 Funds 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 Funds may also purchase listed securities through the third
market or fourth market. When transactions are executed in the over-the-counter
market or the third or fourth market, the Investment Manager will seek to deal
with the counterparty that the Investment Manager believes can provide the best
execution, whether or not that counterparty is the primary market maker for that
security.
As noted below, the Investment Manager is a wholly owned subsidiary of Dresdner
Bank AG ("Dresdner"). Dresdner Kleinwort Benson North America LLC ("Dresdner
Kleinwort Benson") and other Dresdner subsidiaries may be broker-dealers
(collectively, the "Dresdner Affiliates"). The Investment Manager believes that
it is in the best interests of the Funds to have the ability to execute
brokerage transactions, when appropriate, through the Dresdner Affiliates.
Accordingly, the Investment Manager intends to execute brokerage transactions on
behalf of the Funds through the Dresdner Affiliates, when appropriate and to the
extent consistent with applicable laws and regulations, including federal
banking laws.
In all such cases, the Dresdner Affiliates will act as agent for the Funds, and
the Investment Manager will not enter into any transaction on behalf of the Fund
in which a Dresdner Affiliate is acting as principal for its own account. In
connection with such agency transactions, the Dresdner Affiliates will receive
compensation in the form of a brokerage commission separate from the Investment
Manager's management fee. It is the Investment Manager's policy that such
commissions be reasonable and fair when compared to the commissions received by
other brokers in connection with comparable transactions involving similar
securities and that the commissions paid to a Dresdner Affiliate be no higher
than the commissions paid to that broker by any other similar customer of that
broker who
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receives brokerage and research services that are similar in scope and quality
to those received by the Funds.
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 for a Fund may be executed in an aggregated
transaction as part of concurrent authorizations to purchase or sell the same
security for numerous accounts served by the Investment Manager, some of which
accounts may have investment objectives similar to those of the Fund. The
objective of aggregated transactions is to obtain favorable execution and/or
lower brokerage commissions, although there is no certainty that such objective
will be achieved. Although executing portfolio transactions in an aggregated
transaction potentially could be either advantageous or disadvantageous to any
one or more particular accounts, aggregated transactions in which a Fund
participates will be effected only when the Investment Manager believes that to
do so will be in the best interest of the Fund, and the Investment Manager is
not obligated to aggregate orders into larger transactions. These orders
generally will be averaged as to price. When such aggregated transactions
occur, the objective will be to allocate the executions in a manner which is
deemed fair and equitable to each of the accounts involved over time. In making
such allocation decisions, the Investment Manager will use its business judgment
and will consider, among other things, any or all of the following: each
client's investment objectives, guidelines, and restrictions, the size of each
client's order, the amount of investment funds available in each client's
account, the amount already committed by each client to that or similar
investments, and the structure of each client's portfolio. Although the
Investment Manager will use its best efforts to be fair and equitable to all
clients, including the Funds, there can be no assurance that any investment will
be proportionately allocated among clients according to any particular or
predetermined standard or criteria.
The aggregate amount of brokerage commissions paid by the Technology Fund during
the year ended December 31, 1996 was $11,875, of which 83% was paid to firms
which provided research information to 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.
DEWITT F. BOWMAN, Chairman and Director. Mr. Bowman is a Principal of Pension
Investment Consulting, with which he has been associated since February 1994.
From February 1989 to January 1994 he was Chief Investment Officer for
California Public Employees Retirement System, a public pension fund. He serves
as a director of RREEF America REIT, Inc., and a trustee of Brandes Investment
Trust and Pacific Gas and Electric Nuclear Decommissioning Trust. He also
serves as a director of RCM Capital Funds, Inc. ("Capital Funds").
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<PAGE>
PAMELA A. FARR, Director. Ms. Farr is an independent management consultant.
From 1991 to 1994, she was President of Banyan Homes, Inc., a real estate
development and construction firm; for eight years she was a management
consultant for McKinsey & Company, where she served a variety of Fortune 500
companies in all aspects of strategic management and organizational structure.
She also serves as a director of Capital Funds.
THOMAS S. FOLEY, Director. Mr. Foley has been a partner in the law firm of
Akin, Gump, Strauss, Hauer & Feld, L.L.P. since January 1995. Prior to that he
served as the 49th Speaker of the House of Representatives and was the
representative of the 15th Congressional District of the State of Washington
from 1965 to 1994. Mr. Foley serves on the Board of Directors of the H.J. Heinz
Company, on the Global Advisory Board of Coopers & Lybrand L.L.P. and on the
Board of Overseers of Whitman College. He also serves as a director of Capital
Funds.
FRANK P. GREENE, Director. Mr. Greene is a partner and portfolio manager of
Wood Island Associates, Inc., a registered investment adviser, with which he has
been associated since August 1991. From November 1987 to August 1991, he was a
Senior Vice President and Portfolio Manager of Siebel Capital Management, Inc.,
a registered investment adviser. He also serves as a director of Capital Funds.
GEORGE G.C. PARKER, Director. Mr. Parker is Associate Dean for Academic
Affairs, and Director of the MBA Program and Dean Witter Professor of Finance at
the Graduate School of Business at Stanford University, with which he has been
associated since 1973. Mr. Parker has served on the Board of Directors of the
California Casualty Group of Insurance Companies since 1977; BB&K Holdings,
Inc., a holding company for financial services companies, since 1980; H. Warshow
& Sons, Inc., a manufacturer of specialty textiles, since 1982; Zurich
Reinsurance Centre, Inc., a large reinsurance underwriter, since 1994; and
Continental Airlines, since 1996. Mr. Parker served on the Board of Directors
of the University National Bank & Trust Company from 1986 to 1995. He also
serves as a director of Capital Funds.
RICHARD W. INGRAM, President, Treasurer and Chief Financial Officer. Mr. Ingram
is Executive Vice President and Director of Client Services and Treasury
Administration of Funds Distributor, Inc., ("FDI"), the ultimate parent of which
is Boston Institutional Group, Inc. From March 1994 to November 1995, Mr.
Ingram was Vice President and Division Manager of First Data Investor Services
Group. From 1989 to 1994, Mr. Ingram was Vice President, Assistant Treasurer
and Tax Director - Mutual Funds of The Boston Company. He is also President,
Treasurer and Chief Financial Officer of Capital Funds; President, Chief
Financial Officer and Assistant Treasurer of RCM Strategic Global Government
Fund, Inc. ("RCS"); and an officer of certain investment companies distributed
or administered by FDI. His address is 60 State Street, Suite 1300, Boston,
Massachusetts 02109.
JOHN E. PELLETIER, Vice President and Secretary. Mr. Pelletier is Senior Vice
President and General Counsel of FDI. From February 1992 to April 1994, he
served as Counsel for The Boston Company Advisors, Inc. From August 1990 to
February 1992, Mr. Pelletier was employed as an Associate at Ropes & Gray. He
is also a Vice President and Secretary of Capital Funds; a Vice President and
Assistant Secretary of RCS; and an officer of certain investment companies
distributed or administered by FDI. His address is 60 State Street, Suite 1300,
Boston, Massachusetts 02109.
ELIZABETH A. KEELEY, Vice President and Assistant Secretary. Ms. Keeley is Vice
President and Senior Counsel of FDI, with which she has been associated since
September 1994. Since September 1995 she has also served as Counsel to Premier
Mutual Fund Services, Inc. Prior to September 1995, she was enrolled at Fordham
University School of Law and received her J.D. in May 1995. Prior to September
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1992, Ms. Keeley was an Assistant at the National Association for Public
Interest Law. She is also Vice President and Assistant Secretary of Capital
Funds and RCS, and an officer of certain investment companies distributed or
administered by FDI. Her address is 600 Park Avenue, Sixth Floor, New York, New
York 10166.
GARY S. MACDONALD, Vice President and Assistant Treasurer. Mr. MacDonald is
Vice President of FDI, with which he has been associated since November 1996.
From September 1992 to November 1996, he was Vice President of BayBanks
Investment Management/BayBanks Financial Services; and from April 1989 to
September 1992 he was an analyst at Wellington Management Company. He is also
Vice President and Assistant Treasurer of Capital Funds and RCS.
KAREN JACOPPO-WOOD, Assistant Secretary. Ms. Jacoppo-Wood is a Senior Paralegal
for FDI, with which she has been associated since January 1996. From June 1994
to January 1996, she was a Manager of SEC Registration for Scudder, Stevens &
Clark, Inc. From 1988 to May 1994, she was Senior Paralegal at The Boston
Company Advisors, Inc. She is also an Assistant Secretary of Capital Funds, and
an officer of certain investment companies distributed or administered by FDI.
Her address is 60 State Street, Suite 1300, Boston, Massachusetts 02109.
MARY A. NELSON, Assistant Treasurer. Ms. Nelson is the Manager of Treasury,
Services and Administration for FDI, with which she has been associated since
1994. From 1989 to 1994, she was an Assistant Vice President and Client Manager
for The Boston Company. She is also Assistant Treasurer of Capital Funds. Her
address is 60 State Street, Suite 1300, Boston, Massachusetts 02109.
It is presently anticipated that regular meetings of the Company's Board of
Directors will be held on a quarterly basis. The Company's Audit Committee,
whose present members are DeWitt F. Bowman and Frank P. Greene, meets with the
Company's independent accountants to exchange views and information and to
assist the full Board in fulfilling its responsibilities relating to corporate
accounting and reporting practices. Each director of the Company 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.
The following table sets forth the aggregate compensation paid by the Company
for the fiscal year ending December 31, 1996, to the Directors and the aggregate
compensation paid to the 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):
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Total
Pension or Compensation
Retirement from Company
Benefits Estimate and
Accrued Annual Company
Aggregate as Part of Benefits Complex
Compensation Company Upon Paid to
Name from Company Expenses Retirement Director (1)
------------------ ------------ ------------ ----------- ------------
DeWitt F. Bowman $15,000 None N/A $33,000
Pamela A. Farr(2) $ 9,000 None N/A $27,000
Thomas S. Foley(2) $ 8,000 None N/A $23,000
Frank P. Greene $14,000 None N/A $32,000
George G.C. Parker(2) $ 9,000 None N/A $27,000
_____________________
(1) There are seven funds in the Company complex, including the Funds.
(2) Elected as a Director on May 28, 1996.
As of December 31, 1996, no Director or officer of the Company was a beneficial
owner of any shares of the outstanding Common Stock of any series of the
Company.
__________________________________
THE INVESTMENT MANAGER
__________________________________
The Company's Board of Directors has overall responsibility for the operation
of the Funds. 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 Funds. The Company,
on behalf of each Fund, has retained as the Funds' Investment Manager RCM
Capital Management, L.L.C., a Delaware limited liability company with
principal offices at Four Embarcadero Center, San Francisco, California
94111. The Investment Manager is actively engaged in providing investment
supervisory services to institutional and individual clients, and is
registered under the Investment Advisers Act of 1940. The Investment Manager
was established in April 1996, as the successor to the business and
operations of RCM Capital Management, a California Limited Partnership,
which, with its predecessors, has been in operation since 1970.
The Investment Manager is a wholly owned subsidiary of Dresdner, an
international banking organization with principal executive offices located at
Gallunsanlage 7, 60041 Frankfurt, Germany. With total consolidated assets as of
December 31, 1995, of DM 484 billion ($337 billion), and approximately 1,600
offices and 45,000 employees in over 60 countries around the world, Dresdner is
Germany's second largest bank. Dresdner provides a full range of banking
services, including traditional lending activities, mortgages, securities,
project finance and leasing, to private customers and financial and
institutional clients. In the United States, Dresdner maintains branches in New
York and Chicago and an agency in Los Angeles. As of the date of this
Prospectus, the nine members of the
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Board of Managers of the Investment Manager are William L. Price (Chairman),
Gerhard Eberstadt, Michael J. Apatoff, Hans-Dieter Bauernfeind, George N.
Fugelsang, [_________], Jeffrey S. Rudsten, William S. Stack, and Kenneth B.
Weeman, Jr.
Banking laws and regulations, including the Glass-Steagall Act as presently
interpreted by the Board of Governors of the Federal Reserve System, prohibit
certain banking entities, such as Dresdner, from sponsoring, organizing,
controlling or distributing the shares of a registered investment company
continuously engaged in the issuance of its shares, and prohibit banks generally
from underwriting securities. However, banks and their affiliates generally can
act as adviser to an investment company and can purchase shares of an investment
company as agent for and upon the order of customers. The Investment Manager
believes that it may perform the services contemplated by the investment
management agreement without violating these banking laws or regulations.
However, future changes in legal requirements relating to the permissible
activities of banks and their affiliates, as well as future interpretations of
current requirements, could prevent the Investment Manager from continuing to
perform investment management services for the Company.
Pursuant to an agreement among RCM Limited L.P. ("RCM Limited"), the Investment
Manager, and Dresdner, RCM Limited manages, operates and makes all decisions
regarding the day-to-day business and affairs of the Investment Manager, subject
to the oversight of the Board of Managers. RCM Limited is a California limited
partnership consisting of 38 limited partners and one general partner, RCM
General Corporation, a California corporation ("RCM General"). Twenty-five of
the limited partners of RCM Limited are also principals of the Investment
Manager, and the shareholders of RCM General. As of the date of this
Prospectus, the following persons are limited partners of RCM Limited and
shareholders of RCM General: William L. Price, Michael J. Apatoff, Eamonn F.
Dolan, John D. Leland, Jr., Jeffrey S. Rudsten, William S. Stack, Kenneth B.
Weeman, Jr., Anthony Ain, Donna L. Avedisian, John L. Bernard, Huachen Chen,
Jacqueline M. Cormier, Ellen M. Courtien, G. Nicholas Farwell, Joanne L. Howard,
Stephen Kim, John A. Kriewall, Allan C. Martin, Andrew H. Massie, Jr., Melody L.
McDonald, Lee N. Price, Walter C. Price, Jr., Gary B. Sokol, Andrew C. Whitelaw,
and Jeffrey J. Wiggins.
The Investment Manager provides the Funds with investment supervisory services
pursuant to an Investment Management Agreement, Power of Attorney and Service
Agreement dated June 14, 1996 with respect to the Technology Fund and Investment
Management Agreement, Power of Attorney and Service Agreements dated December
27, 1996 with respect to each of the other Funds (each a "Management
Agreement"). The Investment Manager manages each Fund's investments, provides
various administrative services, and supervises the Funds' daily business
affairs, subject to the authority of the Board of Directors. The Investment
Manager is also the investment manager for each series of RCM Capital Funds,
Inc., an open-end management investment company consisting of three series, and
RCM Strategic Global Government Fund, Inc. and The Emerging Germany Fund Inc.,
closed-end management investment companies. The Investment Manager also acts as
sub-adviser to Bergstrom Capital Corporation, a closed-end management investment
company.
The Management Agreement with respect to the Technology Fund was approved by the
stockholders of the Fund on May 28, 1996, and by the unanimous vote of the
Company's Board of Directors on May 20, 1996, and will continue in effect until
June 14, 1998. The Management Agreement with respect to each of the other Funds
was approved by the initial stockholders of the Funds on December 30, 1996 and
by the unanimous vote of the Company's Board of Directors on December 27, 1996,
and will continue in effect until December 27, 1998. Each Management Agreement
may be renewed from year-to-year after its initial term, provided that any such
renewals have been specifically approved at
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<PAGE>
least annually by (i) the vote of a majority of the Company's Board of
Directors, including a majority of the Directors who are not parties to the
Management Agreement or interested persons of any such person, cast in person at
a meeting called for the purpose of voting on such approval, or (ii) the vote of
a majority (as defined in the 1940 Act) of the outstanding voting securities of
the Fund and the vote of a majority of the Directors who are not parties to the
contract or interested persons of any such party.
Each 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) fees pursuant to the
Fund's Rule 12b-1 plan, (g) legal and audit fees, (h) SEC and "Blue Sky"
registration expenses, and (i) compensation, if any, paid to officers and
employees of the Company who are not employees of the Investment Manager (see
DIRECTORS AND OFFICERS). The Investment Manager is responsible for all of its
own expenses in providing services to the Fund. Expenses attributable to the
Fund are charged against the assets of the Fund.
The Investment Manager has voluntarily agreed to limit each Fund's expenses as
described in its Prospectus. In subsequent years, each 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 a Fund to the extent that the total
operating expenses of the Fund are at or above the expense cap. However, if the
total operating expenses of the Fund fall below the expense cap, the
reimbursement to the Investment Manager will be accrued by the Fund as a
liability. For the year ended December 31, 1996 and the period from inception
of operations through December 31, 1995, the Technology Fund incurred investment
management fees of $30,827 and $113, respectively. However, as a result of the
expense limitation, the Investment Manager absorbed all such fees.
Each Management Agreement provides that the Investment Manager will not be
liable for any error of judgment or for any loss suffered by a 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 each Management Agreement or otherwise as investment manager
of a Fund. The Investment Manager is not entitled to indemnification with
respect to any liability to a Fund or its stockholders by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties, or
of its reckless disregard of its duties and obligations under a Management
Agreement.
Each Management Agreement is terminable without penalty on 60 days' written
notice by a vote of the majority of the outstanding voting securities of the
Fund which is the subject of the Management Agreement, 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).
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<PAGE>
__________________________________
THE DISTRIBUTOR
__________________________________
Funds Distributor, Inc., 60 State Street, Suite 1300, Boston, Massachusetts
02109, serves as distributor to the Funds. The Distributor has provided mutual
fund distribution services since 1976, and is a subsidiary of Boston
Institutional Group, Inc., which provides distribution and other related
services with respect to investment products.
DISTRIBUTION AGREEMENT
Pursuant to a Distribution Agreement with the Company, the Distributor has
agreed to use its best efforts to effect sales of shares of the Funds, but is
not obligated to sell any specified number of shares. During the fiscal year
ended December 31, 1996, the Distributor received no commissions pursuant to the
Distribution Agreement. The Distribution Agreement contains provisions with
respect to renewal and termination similar to those in the Funds' Management
Agreements discussed above. 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 of 1933.
Pursuant to an Agreement among the Manager, the Company, Capital Funds and the
Distributor, the Distributor has also agreed to provide regulatory, compliance
and related technical services to the Funds; to provide services with regard to
advertising, marketing and promotional activities; and to provide officers to
the Company. The Manager is required to reimburse the Company for any fees and
expenses of the Distributor pursuant to the Agreement.
DISTRIBUTION PLAN
Under a plan of distribution for the Company with respect to the Health Care,
Small Cap and Large Cap Funds (the "Distribution Plan") adopted pursuant to Rule
12b-1 under the 1940 Act, the Distributor incurs the expense of distributing
shares of such Funds. The Distribution Plan provides for reimbursement to the
Distributor for the services it provides, and the costs and expenses it incurs,
related to marketing shares of such Funds. The Distributor is reimbursed for:
(a) expenses incurred in connection with advertising and marketing shares of the
Funds, including but not limited to any advertising by radio, television,
newspapers, magazines, brochures, sales literature, telemarketing or direct mail
solicitations; (b) periodic payments of fees or commissions for distribution
assistance made to one or more securities brokers, dealers or other industry
professionals such as investment advisers, accountants, estate planning firms
and the Distributor itself in respect of the average daily value of shares owned
by clients of such service organizations, and (c) expenses incurred in
preparing, printing and distributing the Portfolios' prospectuses and statements
of additional information.
The Distribution Plan continues in effect from year to year with respect to each
such Fund, provided that each such continuance is approved at least annually by
a vote of the Board of Directors of the Company, including a majority vote of
the Directors who are not "interested persons" of the Company within the meaning
of the 1940 Act and have no direct or indirect financial interest in the Plan or
in any agreement related to the Plan, cast in person at a meeting called for the
purpose of voting on such continuance. The Distribution Plan may be terminated
with respect to any Fund at any time, without penalty, by the vote of a majority
of the outstanding shares of the Fund. The Distribution Plan may
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<PAGE>
not be amended to increase materially the amounts to be paid by a Fund for the
services described therein without approval by the shareholders of the Fund, and
all material amendments are required to be approved by the Board of Directors in
the manner described above. The Distribution Plan will automatically terminate
in the event of its assignment.
The Distributor pays broker-dealers and others out of its distribution fees
quarterly trail commissions of up to the following respective percentages of the
average daily net assets attributable to shares of the Funds held in the
accounts of their customers: Large Cap Fund - 0.35%; Health Care Fund - 0.30%;
Small Cap Fund - 0.30%. During the fiscal year ended December 31, 1996, no fees
were paid to the Distributor pursuant to the Distribution Plan.
Pursuant to the Distribution Plan, the Board of Directors will review at least
quarterly a written report of the distribution expenses incurred on behalf of
shares of the Funds by the Distributor. The report will include an itemization
of the distribution and service expenses and the purposes of such expenditures.
In addition, as long as the Plan remains in effect, the selection and nomination
of Directors who are not "interested persons" of the Company within the meaning
of the 1940 Act will be committed to the Directors who are not interested
persons of the Company.
__________________________________
NET ASSET VALUE
__________________________________
For purposes of the computation of the net asset value of each share of each
Fund, equity securities traded on stock exchanges are valued at the last sale
price on the exchange or in the principal over-the-counter market in which such
securities are traded as of the close of business on the day the securities are
being valued. In cases where securities are traded on more than one exchange,
the securities are valued on the exchange determined by the Investment Manager
to be the primary market for the securities. If there has been no sale on such
day, the security will be valued at the closing bid price on such day. If no
bid price is quoted on such day, then the security will be valued by such method
as a duly constituted committee of the Company's Board of Directors shall
determine in good faith to reflect its fair market value. Readily marketable
securities traded only in the over-the-counter market that are not listed on
NASDAQ or similar foreign reporting service will be valued at the mean bid
price, or such other comparable sources as the Company's Board of Directors
deems appropriate to reflect their fair market value. Other portfolio
securities held by the Funds 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 Funds 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.
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<PAGE>
Trading in securities on foreign exchanges and over-the-counter markets is
normally completed at times other than the close of the business day in New
York. In addition, foreign securities and commodities trading may not take
place on all business days in New York, and may occur in various foreign markets
on days which are not business days in New York and on which net asset value is
not calculated. The calculation of net asset value may not take place
contemporaneously with the determination of the prices of portfolio securities
used in such calculation. Events affecting the values of portfolio securities
that occur between the time their prices are determined and the close of the New
York Stock Exchange will not be reflected in the calculation of net asset value
unless the Board of Directors determines that a particular event would
materially affect net asset value, in which case an adjustment will be made.
Assets or liabilities initially expressed in terms of foreign currencies are
translated prior to the next determination of net asset value into U.S. dollars
at the spot exchange rates at 12:00 p.m. Eastern time or at such other rates as
the Investment Manager may determine to be appropriate in computing net asset
value.
Debt obligations with maturities of 60 days or less are valued at amortized
cost. The Funds 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
rating characteristics, indications of value from dealers, and other market
data. Such services may use electronic data processing techniques and/or a
matrix system to determine valuations. The procedures of such services are
reviewed periodically by the officers of the Investment Manager under the
general supervision of the 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.
__________________________________
PURCHASE AND REDEMPTION OF SHARES
__________________________________
The price paid for purchase and redemption of shares of the Funds is based on
the net asset value per share, which is calculated once daily at the close of
trading (currently 4:00 P.M. New York time) each day the New York Stock Exchange
is open. The New York Stock Exchange is currently closed on weekends and on the
following holidays: New Year's Day, Washington's Birthday, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving and Christmas Day. The offering
price is effective for orders received by National Financial Data Services
("NFDS") prior to the time of determination of net asset value. Dealers are
responsible for promptly transmitting purchase orders to NFDS. The Company
reserves the right in its sole discretion to suspend the continued offering of
the Fund's shares and to reject purchase orders in whole or in part when such
rejection is in the best interests of the Company and the affected Funds.
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<PAGE>
REDUCED SALES CHARGES
Sales charges on purchases of shares are subject to reduction in certain
circumstances, as indicated in the Prospectuses.
RIGHTS OF ACCUMULATION. Each Fund makes available to its shareholders the
ability to aggregate the value (at the current maximum offering price on the
date of the purchase) of their existing holdings of shares of all of the Funds
to determine the reduced sales charge, provided the shares are held in a single
account. The value of existing holdings for purposes of determining the reduced
sales charge is calculated using the maximum offering price (net asset value
plus sales charge) as of the previous business day. NFDS must be notified at
the time of purchase that the shareholder is entitled to a reduced sales charge.
The reduced sales charges will be granted subject to confirmation of the
investor's holdings.
CONCURRENT PURCHASES. Purchasers may combine concurrent purchases of shares of
two or more Funds to qualify for a reduced sales charge. If the shares of the
Funds purchased concurrently are subject to different sales charges, the
concurrent purchases are aggregated to determine the reduced sales charge
applicable to shares of each Fund purchased, and each separate reduced sales
charge is imposed on the amount of shares purchased for that Fund.
To illustrate, if an investor concurrently purchases $500,000 of the Technology
Fund and $500,000 of the Health Care Fund, for an aggregate concurrent purchase
of $1,000,000, because the sales charges are waived for purchases of $1,000,000
or more, and because concurrent purchases can be combined, the applicable sales
charge imposed on the $500,000 purchase of shares of each Fund would be reduced
to 0.00% (from 1.75%).
LETTER OF INTENT. Reduced sales charges are available to purchasers of shares
of the Funds who enter into a written Letter of Intent providing for the
purchase, within a 13-month period, of shares of the Funds, provided the shares
are held in a single account. All shares of the Funds which were previously
purchased and are still owned are also included in determining the applicable
reduction. The Letter of Intent privilege may be withdrawn by the Company for
future purchases upon receipt of information that any shares subject to the
Letter of Intent have been transferred or redeemed during the 13-month period.
A Letter of Intent permits a purchaser to establish a total investment goal to
be achieved by any number of investments over a 13-month period. Each
investment made during the period will receive the reduced sales charge
applicable to the amount represented by the goal, as if it were a single
investment. Investors should refer to their Letter of Intent when placing
orders for shares of a Fund. During the 13-month period, an investor may
increase his or her Letter of Intent goal and all subsequent purchases will be
treated as a new Letter of Intent except as to the 13-month period, which does
not change. The sales charge paid on purchases made before the increase to the
Letter of Intent goal will be retroactively reduced at the end of the period.
Shares of the Funds totaling 5% of the dollar amount of the Letter of Intent
will be held in escrow by the Transfer Agent in the name of the purchaser. Any
dividends and capital gains distributions on the escrowed shares will be paid to
the investor or as otherwise directed by the investor. The effective date of a
Letter of Intent may be back-dated up to 90 days, in order than any investments
made during this 90-day period, valued at the purchaser's cost, can be applied
to the fulfillment of the Letter of
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<PAGE>
Intent goal. Upon completion of the Letter of Intent goal within the 13-month
period, the escrowed shares will be promptly delivered to the investor or as
otherwise directed by the investor.
The Letter of Intent does not obligate the investor to purchase, or any Fund to
sell, the indicated amount. In the event the Letter of Intent goal is not
achieved within the 13-month period, the investor is required to pay the
difference between the sales charge otherwise applicable to the purchases made
during this period and sales charges actually paid. Such payment may be made
directly to the Distributor, or, if not paid within 20 days after written
request, the Company will liquidate sufficient escrowed shares to obtain such
difference. If the redemption or liquidation proceeds are inadequate to cover
the differences, investors will be liable for the extent of the inadequacy. By
executing the Letter of Intent, investors irrevocably appoint the Transfer Agent
as attorney in fact with full power of substitution in the premises to surrender
for redemption any or all escrowed shares. If the Letter of Intent goal is
exceeded in an amount which qualified for a lower sales charge, a price
adjustment is made by refunding to the purchaser the amount of excess sales
charge, if any, paid during the 13-month period.
DEALER COMMISSIONS
A commission of up to 1.0% may be paid by the Distributor to dealers who
initiate and are responsible for purchases of Portfolio shares of $1 million or
more and for purchases made at net asset value by certain retirement plans of
organizations with 50 or more eligible employees. For this purpose, exchanges
between Funds are not considered to be purchases. The Distributor reserves the
right to require reimbursement of any such commissions paid with respect to such
purchases if such shares are redeemed within twelve months after purchase.
Dealers requesting further information may call (800) 726-7240.
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 a 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 a
Fund at the request of the redeeming stockholder, if the Company believes that
honoring such request is in the best interests of the Fund. If payment for
shares redeemed were to be made wholly or partly in portfolio securities,
brokerage costs would be incurred by the stockholder in converting the
securities to cash.
__________________________________
DIVIDENDS, DISTRIBUTIONS AND TAX STATUS
__________________________________
Each income dividend and capital gains distribution, if any, declared by a 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
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<PAGE>
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 each Fund as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"). Each 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 each Fund. In addition, net
capital gains, net investment income, and operating expenses will be determined
separately for each Fund. By complying with the applicable provisions of the
Code, the Funds will not be subject to federal income taxes with respect to net
investment income and net realized capital gains distributed to their
stockholders.
To qualify under Subchapter M, a 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 a 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. Each 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 a 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 a 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. Each Fund intends to meet these
distribution requirements to avoid the excise tax liability.
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<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 a Fund whether paid in additional shares of the Fund or in cash.
To the extent that dividends received by a 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 a Fund under federal, state, and local tax laws.
Investors who purchase shares of a 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 a 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 a 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. federal 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, futures contracts and forward
contracts entered into by the Funds are "Section 1256 contracts." Any gains or
losses on Section 1256 contracts are generally considered 50% 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 a 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 Funds may result in
"straddles" for U.S. federal income tax purposes. The straddle rules may affect
the character of gains or losses realized by a Fund. In addition, losses
realized by a 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 Funds are
not entirely clear.
Hedging transactions may increase the amount of short-term capital gain realized
by a Fund which is taxed as ordinary income when distributed to stockholders. A
Fund may make one or more of the elections available under the Code which are
applicable to straddle positions. If a Fund makes any of the elections, the
amount, character and timing of the recognition of gains or losses from the
affected
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<PAGE>
straddle positions will be determined under the rules that vary according to
elections made. The rules applicable under certain of the elections operate to
accelerate the recognition of gains or losses from the affected straddle
positions. Because the application of the straddle rules may affect the
character of gains or losses, defer losses and/or accelerate the recognition of
gains or losses from the affected straddle positions, the amount which must be
distributed to stockholders, and which will be taxed to stockholders as ordinary
income or long-term capital gain, may be increased or decreased substantially as
compared to a fund that did not engage in such hedging transactions. The
qualification rules of Subchapter M may limit the extent to which a 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 in exchange rates which occur between the time a 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" gains or
losses, may increase or decrease the amount of a Fund's investment company
taxable income to be distributed to stockholders as ordinary income.
FOREIGN TAXES. Each 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 a 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 a 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 a 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.
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The foregoing is a general abbreviated summary of present U.S. federal income
tax laws and regulations applicable to dividends and distributions by the Funds.
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") of a Fund will be calculated as follows: an initial
hypothetical investment of $1000 ("P") is divided by the net asset value of
shares of the Fund as of the first day of the period in order to determine the
initial number of shares purchased. Subsequent dividends and capital gain
distributions by the Fund are reinvested at net asset value on the reinvestment
date determined by the Board of Directors. The sum of the initial shares
purchased and shares acquired through reinvestment is multiplied by the net
asset value per share of the Fund as of the end of the period ("n") to determine
ending redeemable value ("ERV"). The ending value divided by the initial
investment converted to a percentage equals total return. The formula thus
used, as required by the SEC, is:
n
P(1+T) = ERV
The resulting percentage indicates the positive or negative investment results
that an investor would have experienced from reinvested 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 reduction from the $1,000 initial investment;
(ii) reinvestment of dividends and distributions at net asset value on the
reinvestment date determined by the Board; 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.
Average total returns of the Technology Fund for the one-year period ended
December 31, 1996 and from inception on December 27, 1995 through April 30, 1997
were 26.41% and 12.47%, respectively. Total returns of the Health Care Fund,
Small Cap Fund, and Large Cap Fund from inception on December 31, 1996 through
April 30, 1997 were 0.50%, (6.60%), and 4.90%, respectively.
In addition, in order more completely to represent a Fund's performance or more
accurately to compare such performance to other measures of investment return, a
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. A 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
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<PAGE>
period. These factors and possible differences in calculation methods should be
considered when comparing a 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
__________________________________
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.
As of April 30, 1997, there were 383,982.161 outstanding shares of the
Technology Fund, 400,010 outstanding shares of the Health Care Fund, 400,010
outstanding shares of the Small Cap Fund, and 400,009 outstanding shares of the
Large Cap Fund. As of that date, the following were known to the Company to own
of record more than 5% of each Fund's capital stock:
NAME AND ADDRESS OF
BENEFICIAL OWNER SHARES HELD % OF SHARES OUTSTANDING
------------------- ----------- -----------------------
TECHNOLOGY FUND
RCM Capital Management 152,686.525 39.76%
Profit Sharing Plan
Four Embarcadero Center
Suite 3000
San Francisco, CA 94111
Walter C. Price 86,582.789 22.55%
RCM Capital Management,
L.L.C.
Four Embarcadero Center
Suite 3000
San Francisco, CA 94111
HEALTH CARE FUND
Clients of 400,000.000 99.998%
Dresdner Bank
AG/Investment Management
Institutional Asset
Management Division
Jurgen-Ponto-Platz
60301 Frankfurt
Germany
-39-
<PAGE>
SMALL CAP FUND
Clients of 400,000.000 99.998%
Dresdner Bank
AG/Investment Management
Institutional Asset
Management Division
Jurgen-Ponto-Platz
60301 Frankfurt
Germany
LARGE CAP FUND
Clients of 400,000.000 99.998%
Dresdner Bank
AG/Investment Management
Institutional Asset
Management Division
Jurgen-Ponto-Platz
60301 Frankfurt
Germany
__________________________________
ADDITIONAL INFORMATION
__________________________________
COUNSEL
Certain legal matters in connection with the capital shares offered by the
Prospectuses have been passed upon for the Funds by Paul, Hastings, Janofsky &
Walker LLP, 555 South Flower Street, Los Angeles, California 90071. The
validity of the capital stock offered by the Prospectuses 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 LLP
has acted and will continue to act as counsel to the Investment Manager in
various matters.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., One Post Office Square, Boston, Massachusetts 02109,
have been appointed as independent auditors for the Company. Coopers & Lybrand
L.L.P. will conduct an annual audit of each Fund, assist in the preparation of
each 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.
LICENSE AGREEMENT
Under a License Agreement dated June 14, 1996, 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
-40-
<PAGE>
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
Incorporated by reference herein are the financial statements of the Funds
contained in each Fund's Annual Report to Shareholders for the year ended
December 31, 1996, including the Report of Independent Accountants, dated
February 20, 1997, the Statement of Investments in Securities and Net Assets,
the Statement of Assets and Liabilities, the Statement of Operations, the
Statement of Changes in Net Assets, and the related Notes to Financial
Statements. Attached hereto are unaudited financial statements of the Health
Care Fund, the Small Cap Fund, and the Large Cap Fund for the period from
January 1 to April 30, 1997, including Statements of Investments in
Securities and Net Assets, Statements of Assets and Liabilities, Statements
of Operations, Statements of Changes in Net Assets, and the related Notes to
Financial Statements. Copies of the Funds' Annual Reports to Shareholders
are available, upon request, by calling the Company at (800) 726-7240, or by
writing the Company at Four Embarcadero Center, San Francisco, California
94111.
REGISTRATION STATEMENT
The Funds' Prospectuses 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 Prospectuses or this Statement of Additional
Information as to the contents of any contract or other document referred to
herein or in the Prospectuses 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.
-41-
<PAGE>
RCM GLOBAL HEALTH CARE FUND
FINANCIAL REPORT
APRIL 30, 1997
<PAGE>
RCM GLOBAL HEALTH CARE FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
APRIL 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
% OF
SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- --------- ------- ------------------------------------- ---------- ------------
<S> <C> <C> <C> <C>
DRUGS AND HOSPITAL SERVICES 64.2%
3,400 US Algos Pharmaceutical Corp. * $ 52,275
2,800 US Amgen Inc. 164,850
2,600 US Anesta Corp. * 36,400
3,900 US Biomet, Inc. * 59,231
4,200 US Centocor Inc. * 118,125
13,300 US CIMA Labs Inc. * 66,500
2,800 US Creative BioMolecules Inc. * 21,175
2,500 US Genzyme Corp. * 57,813
3,900 UK Glaxo Wellcome PLC Sponsored ADR 153,563
2,600 US Guidant Corp. 177,450
1,200 US Invacare Corp. 23,850
2,100 US Eli Lilly & Co 184,538
3,000 US Medimmune Inc. * 39,000
2,600 US Medtronic, Inc. 180,050
3,100 US Mentor Corp. 71,688
3,000 US NaPro BioTherapeutics Inc. * 23,250
2,200 US NeXstar Pharmaceuticals Inc. * 20,625
1,700 US PathoGenesis Corp. * 44,625
6,700 US Penederm Inc. * 72,025
1,900 US Pfizer Inc. 182,400
1,600 US Pharmacia & Upjohn Inc. 47,400
7,300 US Physio-Control International Corp. * 91,250
1,400 US SangStat Medical Corp. * 23,975
4,100 US Sepracor Inc. * 79,950
2,400 UK SmithKline Beecham PLC ADR 193,500
4,100 US Sofamor/Danek Group Inc. * 159,900
1,800 US VISX Inc. * 40,500
2,000 US Warner Lambert Co. 196,000
----------
2,581,908
----------
HEALTH CARE SERVICES 29.1%
2,800 US AmeriSource Health Corp. * 124,950
3,500 US Bergen Brunswig Corp. 119,438
1,200 US Columbia / HCA Healthcare Corp. 42,000
1,200 US CRA Managed Care, Inc. * 42,300
1,500 US Genesis Health Ventures Inc. * 44,813
1,500 US HBO & Co. 80,250
1,500 US McKesson Corp. 108,563
1,600 US PacifiCare Health Systems, Inc. * 128,400
4,500 US PhyCor Inc. * 119,808
500 US Quintiles Transnational Corp. * 25,438
4,800 US Renal Treatment Centers Inc. * 103,800
3,500 US Transition Systems Inc. * 42,000
7,300 US Vivra Inc. * 188,888
----------
1,170,648
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 1
<PAGE>
RCM GLOBAL HEALTH CARE FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
APRIL 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
% OF
SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- --------- ------- ------------------------------------- ---------- ------------
<S> <C> <C> <C> <C>
TOTAL EQUITY INVESTMENTS
(COST $3,746,979) 93.3% $ 3,752,556
-----------
SHORT-TERM INVESTMENTS
MONEY MARKET FUNDS
91,873 US SSgA Money Market Fund 91,873
135,423 US SSgA U.S. Government Money Market Fund 135,423
-----------
TOTAL SHORT-TERM INVESTMENTS 5.7%
(COST $227,296) 227,296
-----------
TOTAL INVESTMENTS (COST $3,974,275) 99.0% 3,979,852
OTHER ASSETS LESS LIABILITIES 1.0% 41,978
-----------
NET ASSETS 100.0% $ 4,021,830
-----------
-----------
</TABLE>
* Non-income producing security.
- --------------------------------------------------------------------------------
The Fund's investments in securities at April 30, 1997 categorized by country:
% of Net Assets
--------------------------------------
Short-Term
Country Equities and Other Total
------- -------- ---------- -----
United Kingdom 8.6% 8.6%
United States 84.7% 6.7% 91.4%
------- ------- -------
Total 93.3% 6.7% 100.0%
------- ------- -------
------- ------- -------
The accompanying notes are an integral part of the financial statements.
Page 2
<PAGE>
RCM GLOBAL HEALTH CARE FUND
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value (cost $3,974,275) (Note 1) $ 3,979,852
Receivable for investments sold 55,998
Deferred organizational costs (Note 5) 9,342
Dividends receivable 5,360
Interest receivable 569
------------
Total Assets 4,051,121
------------
LIABILITIES:
Payable for organizational costs (Note 5) 8,032
Payable for legal fees 4,932
Payable for Directors' fees (Note 6) 4,932
Payable for audit fees 4,932
Payable for transfer agent fees 3,031
Payable for investments purchased 1,313
Payable for investment management fees (Note 6) 1,144
Payable for custodian fees 533
Payable for insurance expenses 442
------------
Total Liabilities 29,291
------------
NET ASSETS $ 4,021,830
------------
------------
NET ASSETS CONSIST OF:
Paid-in capital $ 4,000,100
Net investment loss (7,352)
Accumulated net realized gain on investments 23,505
Net unrealized appreciation on investments 5,577
------------
NET ASSETS $ 4,021,830
------------
------------
NET ASSET VALUE PER SHARE
($4,021,830 divided by 400,010 shares outstanding) $ 10.05
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 3
<PAGE>
RCM GLOBAL HEALTH CARE FUND
STATEMENT OF OPERATIONS
FOR THE FOUR MONTHS ENDED APRIL 30, 1997
(UNAUDITED)
INVESTMENT INCOME:
Income:
Dividends (net of foreign withholding tax of $663) $ 11,496
Interest 9,762
-----------
Total income 21,258
-----------
Expenses:
Investment management fees (Note 6) 13,623
Directors' fees (Note 6) 9,932
Transfer agent fees 7,131
Legal fees 4,932
Audit fees 4,932
Registration and filing fees 2,829
Custodian fees 1,700
Amortization of organizational costs (Note 5) 658
Miscellaneous expenses 2,844
-----------
Total expenses before reimbursements 48,581
Expenses reimbursed by investment manager (Note 6) (19,971)
-----------
Total net expenses 28,610
-----------
Net investment loss (7,352)
-----------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain from investments 23,505
Net change in unrealized appreciation on investments 5,577
-----------
Net realized and unrealized gain during the period 29,082
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 21,730
-----------
-----------
The accompanying notes are an integral part of the financial statements.
Page 4
<PAGE>
RCM GLOBAL HEALTH CARE FUND
STATEMENTS OF CHANGES IN NET ASSETS
December 31, 1996
Four Months Ended (commencement
April 30, 1997 of operations) to
(Unaudited) December 31, 1996
----------------- -----------------
OPERATIONS:
Net investment loss $ (7,352) $ -
Net realized gain on investments 23,505 -
Net change in unrealized appreciation on
investments 5,577 -
------------ ------------
Net increase in net assets resulting from
operations 21,730 -
NET INCREASE FROM CAPITAL SHARES TRANSACTIONS
(Note 3) 100 4,000,000
------------ ------------
TOTAL INCREASE IN NET ASSETS 21,830 4,000,000
NET ASSETS:
Beginning of period 4,000,000 -
------------ ------------
End of period * $ 4,021,830 $ 4,000,000
------------ ------------
------------ ------------
______________________
* Includes accumulated net investment
loss of $ (7,352) $ -
------------ ------------
------------ ------------
The accompanying notes are an integral part of the financial statements.
Page 5
<PAGE>
RCM GLOBAL HEALTH CARE FUND
FINANCIAL HIGHLIGHTS
Selected data for each share of capital stock outstanding are as follows:
<TABLE>
<CAPTION>
December 31, 1996
Four Months Ended (commencement
April 30, 1997 of operations) to
(Unaudited) December 31, 1996
----------------- -----------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.00 $ 10.00
---------- ----------
Net investment loss (a) (0.02)(b) -
Net realized and unrealized gain
on investments (a) 0.07 -
---------- ----------
Net increase in net asset value
resulting from investment operations (a) 0.05 -
---------- ----------
NET ASSET VALUE, END OF PERIOD $ 10.05 $ 10.00
---------- ----------
---------- ----------
TOTAL RETURN (c) 0.50% 0.00%
---------- ----------
---------- ----------
RATIOS AND SUPPLEMENTAL DATA:
Average commission rate paid per share (d) $ 0.0478 $ 0.0324
---------- ----------
---------- ----------
Net assets, end of period (in 000's) $ 4,022 $ 4,000
---------- ----------
---------- ----------
Ratio of expenses to average net assets 2.10% (b) 0.00% (f)
---------- ----------
---------- ----------
Ratio of net investment loss to average
net assets (0.54%)(b) 0.00% (f)
---------- ----------
---------- ----------
Portfolio turnover 40.13% (e) 0.00% (f)
---------- ----------
---------- ----------
</TABLE>
__________________________
(a) Calculated using the average share method.
(b) Includes reimbursement by the Fund's investment manager of certain ordinary
operating expenses equal to $0.05 per share (calculated using the average
share method). Without such reimbursement, the ratio of expenses to average
net assets would have been 3.57% and the ratio of net investment loss to
average net assets would have been (2.01%) (see Note 6).
(c) Total return measures the change in value of an investment in the Fund over
the period indicated.
(d) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for security
trades on which commissions are charged. This amount may vary from period
to period and fund to fund depending on the mix of trades executed in
various markets where trading practices and commission structures may
differ.
(e) Not annualized.
(f) Not annualized. Fund was in operation for one day.
Page 6
<PAGE>
RCM GLOBAL HEALTH CARE FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1997
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
RCM Global Health Care Fund (the "Fund") is a non-diversified series of RCM
Equity Funds, Inc. (the "Company"). The Company is organized as a Maryland
corporation and is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company. The Fund commenced
operations on December 31, 1996.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles
which require management to make estimates and assumptions that affect the
reported amount of assets and liabilities. Actual results may differ from
these estimates.
a. SECURITIES VALUATIONS:
Investment securities are stated at fair market value. 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. If there has been no sale on such day, then the security will be
valued at the closing bid price on such day. If no bid price is quoted on
such day, then the security will be valued by such method as the Board of
Directors of the Company in good faith deems appropriate to reflect its
fair market value. Readily marketable securities traded only in the
over-the-counter market that are not listed on the National Association of
Securities Dealers, Inc. Automated Quotation System or similar foreign
reporting service will be valued at the mean bid price, or such other
comparable sources as the Board of Directors of the Company 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 the Board of Directors of the Company in good faith deems
appropriate to reflect their fair market value. Short-term investments
with a maturity of 60 days or less are valued at amortized cost, which
approximates market value.
b. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME:
Security transactions are recorded as of the date of purchase or sale.
Realized gains and losses on security transactions are determined on the
identified cost basis for both financial statement and federal income tax
purposes. Interest income, foreign taxes and expenses are accrued daily.
Dividends are recorded on the ex-dividend date.
c. FOREIGN CURRENCY TRANSACTIONS:
The records of the Fund are maintained in U.S. dollars. Foreign
currencies, investments and other assets and liabilities are translated
into U.S. dollars at current exchange rates. Purchases and sales of
foreign securities and income and withholding taxes are translated on the
respective dates of such transactions. Net realized currency gains and
losses include foreign currency gains and losses between trade date and
settlement date and foreign currency transactions. The Fund does not
isolate that portion of foreign currency exchange fluctuation on
investments from unrealized appreciation and depreciation which arises from
changes in market prices. Such fluctuations are included with the net
unrealized appreciation or depreciation on investments.
Page 7
<PAGE>
RCM GLOBAL HEALTH CARE FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1997
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
d. FEDERAL INCOME TAXES:
It is the policy of the Fund to comply with the requirements for
qualification as a "regulated investment company" under the Internal
Revenue Code of 1986, as amended (the "Code"). It is also the intention of
the Fund to make distributions sufficient to avoid imposition of any excise
tax under Section 4982 of the Code. Therefore, no provision has been made
for Federal or excise taxes on income and capital gains.
e. DISTRIBUTIONS:
Distributions to shareholders are recorded by the Fund on the ex-dividend
date. Income and capital gain distributions are determined in accordance
with Federal income tax regulations, which may differ from generally
accepted accounting principles. These differences are primarily due to
differing treatments of income and gains on various investment securities
held by the Fund and timing differences.
2. INVESTMENT IN FOREIGN SECURITIES
Investing in foreign equity securities and currency transactions involves
significant risks, some of which are not typically associated with
investments of domestic origin. The Fund's investments in foreign markets
will subject the Fund to the risk of foreign currency exchange rate
fluctuations, perceived credit risk and adverse economic and political
developments.
3. CAPITAL SHARES
At April 30, 1997, there were 1,000,000,000 shares of the Company's capital
stock authorized, at $0.0001 par value. Of this amount, 50,000,000 were
classified as shares of the Fund; 50,000,000 were classified as shares of
RCM Global Technology Fund; 50,000,000 were classified as shares of RCM
Global Small Cap Fund; 50,000,000 were classified as shares of RCM Large
Cap Growth Fund; 50,000,000 were classified as shares of Dresdner RCM
Emerging Markets Fund; and 750,000,000 shares remain unclassified. There
were 400,000 shares sold for a total of $4,000,000 on December 31, 1996
(commencement of operations) and 10 shares sold for a total of $100 during
the four-month period ended April 30, 1997. At April 30, 1997, 400,000
shares of the total 400,010 outstanding shares of the Fund were
beneficially owned by clients of Dresdner Bank AG/Investment
Management/Institutional Asset Management Division.
4. PURCHASES AND SALES OF SECURITIES
For the four-month period ended April 30, 1997, purchases and sales of
investment securities by the Fund, other than U.S. government obligations
and short-term securities, aggregated $4,237,663 and $1,273,371,
respectively. During the same period, short-term sales/maturities of U.S.
government obligations aggregated $5,999,530, and there were no purchases
of U.S. government obligations by the Fund. At April 30, 1997, the
aggregate cost of investments was the same for book and federal income tax
purposes.
Page 8
<PAGE>
RCM GLOBAL HEALTH CARE FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1997
(UNAUDITED)
5. DEFERRED ORGANIZATIONAL COSTS
Costs incurred by the Fund in connection with its organization aggregated
$10,000. These costs are being amortized on a straight-line basis over a
five-year period beginning at the commencement of the Fund's operations.
6. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
RCM Capital Management, L.L.C. ("RCM") manages the Fund's investments and
provides various administrative services, subject to the authority of the
Board of Directors. The Fund pays investment management fees monthly to
RCM at an annualized rate of 1.00% of the Fund's average daily net assets.
For the four-month period ended April 30, 1997, the Fund recorded
investment management fees of $13,623.
RCM has voluntarily agreed, until at least December 31, 1997, 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 annualized
rate of 2.10% of the value of the average daily net assets of the Fund. In
subsequent years, the Fund will reimburse RCM for any such payments to the
extent that the Fund's operating expenses are otherwise below this expense
cap. RCM recorded reimbursement of Fund operating expenses totaling
$19,971 for the four-month period ended April 30, 1997.
Funds Distributor, Inc. (the "Distributor"), acts as distributor of shares
of the Fund. The Distributor retains a portion of any initial sales charge
upon the purchase of shares of the Fund. The Company has adopted a
distribution plan pursuant to Rule 12b-1 under the 1940 Act with respect to
the Fund. Under the distribution plan, which is a "reimbursement plan,"
the Fund pays the Distributor an annual fee of up to 0.30% of the Fund's
average daily net assets as reimbursement for certain expenses actually
incurred by the Distributor in connection with distribution of shares of
the Fund. For the four-month period ended April 30, 1997, the Fund did
not record any 12b-1 fees.
Each Director who is not an interested person of the Company receives from
the Company an annual retainer of $1,000 (the retainer is evenly prorated
among each series of the Company), plus $500 for each meeting of the Board
attended and $250 for each committee meeting attended.
Page 9
<PAGE>
INVESTMENT MANAGER
RCM Capital Management, L.L.C.
Four Embarcadero Center
San Francisco, California 94111
TRANSFER AND REDEMPTION AGENT
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
DISTRIBUTOR
Funds Distributor, Inc.
60 State Street, Suite 1300
Boston, Massachusetts 02109
CUSTODIAN
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
LEGAL COUNSEL
Paul, Hastings, Janofsky & Walker LLP
555 South Flower Street
Los Angeles, California 90071
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
Page 10
<PAGE>
RCM GLOBAL SMALL CAP FUND
FINANCIAL REPORT
APRIL 30, 1997
<PAGE>
RCM GLOBAL SMALL CAP FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
APRIL 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
% OF
SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- --------------- ---------- --------------------------------- ---------- ------------
<C> <C> <S> <C> <C>
CONSUMER DURABLES SECTOR 5.1%
AUTOMOTIVE RELATED 0.7%
700 US Tower Automotive Inc. * $ 25,900
OTHER CONSUMER DURABLES 4.4%
1,500 NETH Koninklijke Ahrend Groep N.V. 90,848
3,000 US Sola International Inc. * 75,000
----------
165,848
----------
CONSUMER NON-DURABLES SECTOR 19.7%
FOOD AND FOOD PROCESSING 6.5%
2,340 JPN Hokuto Corp. 81,112
440 FR Lambert Dodard Chancereul S.A. 77,649
1,000 FIN Raision Tehtaat Oy 82,878
----------
241,639
----------
GENERAL RETAIL 2.7%
2,400 US Samsonite Corp. * 99,600
HOUSEHOLD/RELATED NON-DURABLES 3.9%
10,000 US Carson Inc. * 75,000
5,000 SWTZ Tag Heuer International S.A. Sponsored ADR * 70,000
----------
145,000
----------
LEISURE TIME PRODUCTS/SERVICES 6.6%
2,500 US CapStar Hotel Co. * 70,938
3,300 CAN Four Seasons Hotels Inc. * 73,425
265 FR Grand Optical-Photoservice 39,456
1,800 SPN Sol Melia S.A. * 61,681
----------
245,500
----------
CYCLICAL/CAPITAL GOODS SECTOR 15.0%
AEROSPACE AND DEFENSE 1.2%
2,000 UK Doncasters PLC * 45,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 1
<PAGE>
RCM GLOBAL SMALL CAP FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
APRIL 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
% OF
SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- ---------------- ----------- ----------------------------------- ------------ ------------
<C> <C> <S> <C> <C>
BUILDING AND CONSTRUCTION 2.8%
17,000 MEX Consorcio ARA S.A. * $ 57,761
10,000 IRE Green Property PLC 46,191
----------
103,952
----------
CHEMICALS AND TEXTILES 0.9%
320 AUS Wolford AG 32,992
INDUSTRIAL EQUIPMENT 4.6%
2,400 GER Pfeiffer Vacuum Technology AG - G * 55,434
600 GER Pfeiffer Vacuum Technology AG * 13,950
4,200 UK Powerscreen International PLC 41,387
3,100 NOR Tomra Systems A/S 60,074
----------
170,845
----------
TRANSPORTATION SERVICES 5.5%
5,000 US Kitty Hawk Inc. * 68,750
200 GER Sixt AG 138,584
----------
207,334
----------
ENERGY SECTOR 5.5%
ENERGY 5.5%
2,000 CAN Ballard Power Systems, Inc. * 54,402
2,000 UK British-Borneo Petroleum Syndicate PLC 41,653
3,000 US Houston Exploration Co. * 37,500
3,000 NOR Semdvig ASA 71,617
----------
205,172
----------
HEALTH CARE SECTOR 12.7%
DRUGS & HOSPITAL SERVICES 4.5%
15,000 INDO Darya Varya Laboratoria 18,210
3,200 CHLE Laboratorio Chile S.A. 70,400
2,000 US Sofamor/Danek Group Inc. * 78,000
----------
166,610
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 2
<PAGE>
RCM GLOBAL SMALL CAP FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
APRIL 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
% OF
SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- -------------- ---------- --------------------------------- ---------- ------------
<C> <C> <S> <C> <C>
HEALTH CARE SERVICES 8.2%
5,000 US Advanced Health Corp. * $ 86,250
2,000 US Curative Health Services, Inc. * 47,250
7,000 US Harborside Healthcare Corp. * 80,500
2,000 US Total Renal Care Holdings Inc. * 64,250
2,000 US Transition Systems Inc. * 30,000
----------
308,250
----------
INTEREST-SENSITIVE SECTOR 4.6%
BANKING 3.7%
1,800 US Community First Bankshares Inc. 57,825
19,600 HK Dah Sing Financial Holdings, Ltd. 81,472
----------
139,297
----------
GENERAL FINANCE 0.9%
1,900 CAN Newcourt Credit Group Inc. 35,089
TECHNOLOGY SECTOR 21.0%
ELECTRONICS AND NEW TECHNOLOGY 6.2%
5,000 US Computer Products, Inc. * 85,625
2,200 CAN Leitch Technology Corp. * 46,063
2,500 US Uniphase Corp. * 99,375
----------
231,063
----------
TECHNOLOGY SERVICES 14.8%
5,800 FR Business Objects SA Sponsored ADR * 52,200
150 FR Group Axime * 18,042
4,600 UK Dr. Solomons Group PLC Sponsored ADR * 106,375
1,500 SWDN Enator AB * 30,211
9,000 US International Telecommunication Systems Inc. * 108,000
11,000 CAN Open Text Corp. * 82,500
2,500 US Renaissance Solutions Inc. * 54,375
3,500 US The Indus Group Inc. * 52,938
1,500 US VERITAS Software Co. * 50,438
----------
555,079
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 3
<PAGE>
RCM GLOBAL SMALL CAP FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
APRIL 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
% OF
SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- ----------- --------- --------------------------------- ---------- ------------
<C> <C> <S> <C> <C>
TELEMEDIA/SERVICES SECTOR 14.4%
BUSINESS SERVICES 10.0%
1,500 US Caribiner International Inc. * $ 79,500
3,000 US F. Y. I. Inc. * 54,000
4,600 CAN Philip Environmental Inc. * 72,450
3,000 US Precision Response Corp. * 49,125
2,000 US The Registry Inc. * 84,750
2,000 US Wilmar Industries Inc. * 33,000
----------
372,825
----------
COMMUNICATION SERVICES 1.4%
5,000 US Smartalk Teleservices Inc. * 53,750
MEDIA SERVICES 3.0%
4,000 BMD Central European Media Entertainment Ltd. Class A * 113,501
----------
TOTAL EQUITY INVESTMENTS
(COST $3,847,469) 98.0% 3,664,246
----------
SHORT-TERM INVESTMENTS
MONEY MARKET FUNDS 1.0%
36,686 US SSgA U.S. Government Money Market Fund 36,686
----------
TOTAL SHORT-TERM INVESTMENTS 1.0%
(COST $36,686) 36,686
TOTAL INVESTMENTS (COST $3,884,155) 99.0% 3,700,932
OTHER ASSETS LESS LIABILITIES 1.0% 39,060
----------
NET ASSETS 100.0% $3,739,992
----------
----------
</TABLE>
* Non-income producing security.
The accompanying notes are an integral part of the financial statements.
Page 4
<PAGE>
RCM GLOBAL SMALL CAP FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
APRIL 30, 1997
(UNAUDITED)
The Fund's investments in securities at April 30, 1997 categorized by
country:
% of Net Assets
-------------------------------------------
Short-Term
Country Equities and Other Total
- ------- -------- --------- --------
Austria 0.9% 0.9%
Bermuda 3.0% 3.0%
Canada 9.7% 0.3% 10.0%
Chile 1.9% 1.9%
Finland 2.2% 2.2%
France 5.0% 5.0%
Germany 5.6% 5.6%
Hong Kong 2.2% 2.2%
Indonesia 0.5% 0.5%
Ireland 1.2% 1.2%
Japan 2.2% 2.2%
Mexico 1.5% 1.5%
Netherlands 2.4% 2.4%
Norway 3.5% 3.5%
Spain 1.6% 1.6%
Sweden 0.8% 0.8%
Switzerland 1.9% 1.9%
United Kingdom 6.3% 6.3%
United States 45.5% 1.8% 47.3%
---------- --------- --------
Total 97.9% 2.1% 100.0%
---------- --------- --------
---------- --------- --------
The accompanying notes are an integral part of the financial statements.
Page 5
<PAGE>
RCM GLOBAL SMALL CAP FUND
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1997
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value (cost $3,884,155) (Note 1) $ 3,700,932
Foreign currency, at value (cost $13,244) (Note 1) 13,243
Receivable for investments sold 265,148
Deferred organizational costs (Note 5) 9,342
Dividends receivable 1,488
Other assets 574
-------------
Total Assets 3,990,727
-------------
LIABILITIES:
Payable for investments purchased 220,252
Payable for organizational costs (Note 5) 8,032
Payable for Directors' fees (Note 6) 4,933
Payable for legal fees 4,932
Payable for audit fees 4,932
Payable for transfer agent fees 3,006
Payable for investment management fees (Note 6) 2,618
Payable for custodian fees 1,587
Payable for insurance expenses 443
-------------
Total Liabilities 250,735
-------------
NET ASSETS $ 3,739,992
-------------
-------------
NET ASSETS CONSIST OF:
Paid-in capital 4,000,100
Net investment loss (23,418)
Accumulated net realized loss on investments and foreign
currency transactions (53,473)
Net unrealized depreciation on investments and translation of
other assets and liabilities on foreign currencies (183,217)
-------------
NET ASSETS $ 3,739,992
-------------
-------------
Net asset value per share
($3,739,992 + 400,010 shares outstanding) $ 9.35
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 6
<PAGE>
RCM GLOBAL SMALL CAP FUND
STATEMENT OF OPERATIONS
FOR THE FOUR MONTHS ENDED APRIL 30, 1997
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Dividends (net of foreign withholding tax of $248) 5,529
Interest 3,854
--------------
Total income 9,383
--------------
Expenses:
Investment management fees (Note 6) 16,196
Directors' fees (Note 6) 9,932
Transfer agent fees 7,052
Legal fees 4,932
Audit fees 4,932
Registration and filing fees 2,829
Custodian fees 2,781
Amortization of organizational costs (Note 5) 658
Miscellaneous expenses 3,298
--------------
Total expenses before reimbursements 52,610
Expenses reimbursed by investment manager (Note 6) (19,809)
--------------
Total net expenses 32,801
--------------
Net investment loss (23,418)
--------------
NET REALIZED AND UNREALIZED LOSS:
Net realized loss from investments (50,951)
Net realized loss from foreign currency transactions (2,522)
--------------
Net realized loss (53,473)
--------------
Net change in unrealized depreciation on investments and
translation of other assets and liabilities on foreign currencies (183,217)
--------------
Net realized and unrealized loss during the period (236,690)
--------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (260,108)
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 7
<PAGE>
RCM GLOBAL SMALL CAP FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
December 31, 1996
Four Months Ended (commencement
April 30, 1997 of operations) to
(Unaudited) December 31, 1996
--------------------- -------------------
<S> <C> <C>
OPERATIONS:
Net investment loss $ (23,418) $ -
Net realized loss on investments and foreign
currency transactions (53,473) -
Net change in unrealized depreciation on
investments and translation of other assets
and liabilities on foreign currencies (183,217) -
--------------------- -------------------
Net decrease in net assets resulting from
operations (260,108) -
NET INCREASE FROM CAPITAL SHARES TRANSACTIONS
(Note 3) 100 4,000,000
--------------------- -------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (260,008) 4,000,000
NET ASSETS:
Beginning of period 4,000,000 -
--------------------- -------------------
End of period * $ 3,739,992 $ 4,000,000
--------------------- -------------------
--------------------- -------------------
* Includes accumulated net investment loss of $(23,418) $ -
--------------------- -------------------
--------------------- -------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 8
<PAGE>
RCM GLOBAL SMALL CAP FUND
FINANCIAL HIGHLIGHTS
Selected data for each share of capital stock outstanding are as follows:
<TABLE>
<CAPTION>
December 31, 1996
Four Months Ended (commencement
April 30, 1997 of operations) to
(Unaudited) December 31, 1996
------------------ ---------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.00 $ 10.00
----------- -----------
Net investment loss (a) (0.06) (b) -
Net realized and unrealized loss
on investments (a) (0.59) -
----------- ----------
Net decrease in net asset value
resulting from investment operations (a) (0.65) -
----------- ----------
NET ASSET VALUE, END OF PERIOD $ 9.35 $ 10.00
----------- ----------
----------- ----------
TOTAL RETURN (c) (6.60%) 0.00%
----------- ----------
----------- ----------
RATIOS AND SUPPLEMENTAL DATA:
Average commission rate paid per share (d) $ 0.0390 $ 0.0465
----------- ----------
----------- ----------
Net assets, end of period (in 000's) $ 3,740 $ 4,000
----------- ----------
----------- ----------
Ratio of expenses to average net assets 2.50% (b) 0.00% (f)
----------- ----------
----------- ----------
Ratio of net investment loss to average
net assets (1.78%) (b) 0.00% (f)
----------- ----------
----------- ----------
Portfolio turnover 44.80% (e) 0.00% (f)
------------ ----------
------------ ----------
</TABLE>
- -------------------------------------
(a) Calculated using the average share method.
(b) Includes reimbursement by the Fund's investment manager of certain ordinary
operating expenses equal to $0.05 per share (calculated using the average
share method). Without such reimbursement, the ratio of expenses to
average net assets would have been 4.01% and the ratio of net investment
loss to average net assets would have been (3.29%) (see Note 6).
(c) Total return measures the change in value of an investment in the Fund over
the period indicated.
(d) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for security
trades on which commissions are charged. This amount may
vary from period to period and fund to fund depending on the mix of trades
executed in various markets where trading practices and commission
structures may differ.
(e) Not annualized.
(f) Not annualized. Fund was in operation for one day.
Page 9
<PAGE>
RCM GLOBAL SMALL CAP FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1997
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
RCM Global Small Cap Fund (the "Fund") is a diversified series of RCM
Equity Funds, Inc. (the "Company"). The Company is organized as a Maryland
corporation and is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company. The Fund commenced
operations on December 31, 1996.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles
which require management to make estimates and assumptions that affect the
reported amount of assets and liabilities. Actual results may differ from
these estimates.
a. SECURITIES VALUATIONS:
Investment securities are stated at fair market value. 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. If there has been no sale on such day, then the security will be
valued at the closing bid price on such day. If no bid price is quoted on
such day, then the security will be valued by such method as the Board of
Directors of the Company in good faith deems appropriate to reflect its
fair market value. Readily marketable securities traded only in the
over-the-counter market that are not listed on the National Association of
Securities Dealers, Inc. Automated Quotation System or similar foreign
reporting service will be valued at the mean bid price, or such other
comparable sources as the Board of Directors of the Company 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 the Board of Directors of the Company in good faith deems
appropriate to reflect their fair market value. Short-term investments
with a maturity of 60 days or less are valued at amortized cost, which
approximates market value.
b. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME:
Security transactions are recorded as of the date of purchase or sale.
Realized gains and losses on security transactions are determined on the
identified cost basis for both financial statement and federal income tax
purposes. Interest income, foreign taxes and expenses are accrued daily.
Dividends are recorded on the ex-dividend date.
c. FOREIGN CURRENCY TRANSACTIONS:
The records of the Fund are maintained in U.S. dollars. Foreign
currencies, investments and other assets and liabilities are translated
into U.S. dollars at current exchange rates. Purchases and sales of
foreign securities and income and withholding taxes are translated on the
respective dates of such transactions. Net realized currency gains and
losses include foreign currency gains and losses between trade date and
settlement date and foreign currency transactions. The Fund does not
isolate that portion of foreign currency exchange fluctuation on
investments from unrealized appreciation and depreciation which arises from
changes in market prices. Such fluctuations are included with the net
unrealized appreciation or depreciation on investments.
Page 10
<PAGE>
RCM GLOBAL SMALL CAP FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1997
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
d. FEDERAL INCOME TAXES:
It is the policy of the Fund to comply with the requirements for
qualification as a "regulated investment company" under the Internal
Revenue Code of 1986, as amended (the "Code"). It is also the intention of
the Fund to make distributions sufficient to avoid imposition of any excise
tax under Section 4982 of the Code. Therefore, no provision has been made
for Federal or excise taxes on income and capital gains.
e. DISTRIBUTIONS:
Distributions to shareholders are recorded by the Fund on the ex-dividend
date. Income and capital gain distributions are determined in accordance
with Federal income tax regulations, which may differ from generally
accepted accounting principles. These differences are primarily due to
differing treatments of income and gains on various investment securities
held by the Fund and timing differences.
2. INVESTMENT IN FOREIGN SECURITIES
Investing in foreign equity securities and currency transactions involves
significant risks, some of which are not typically associated with
investments of domestic origin. The Fund's investments in foreign markets
will subject the Fund to the risk of foreign currency exchange rate
fluctuations, perceived credit risk and adverse economic and political
developments.
3. CAPITAL SHARES
At April 30, 1997, there were 1,000,000,000 shares of the Company's capital
stock authorized, at $0.0001 par value. Of this amount, 50,000,000 were
classified as shares of the Fund; 50,000,000 were classified as shares of
RCM Global Technology Fund; 50,000,000 were classified as shares of RCM
Global Health Care Fund; 50,000,000 were classified as shares of RCM Large
Cap Growth Fund; 50,000,000 were classified as shares of Dresdner RCM
Emerging Markets Fund; and 750,000,000 shares remain unclassified. There
were 400,000 shares sold for a total of $4,000,000 on December 31, 1996
(commencement of operations) and 10 shares sold for a total of $100 during
the four-month period ended April 30, 1997. At April 30, 1997, 400,000
shares of the total 400,010 outstanding shares of the Fund were
beneficially owned by clients of Dresdner Bank AG/Investment
Management/Institutional Asset Management Division.
4. PURCHASES AND SALES OF SECURITIES
For the four-month period ended April 30, 1997, purchases and sales of
investment securities by the Fund, other than U.S. government obligations
and short-term securities, aggregated $3,015,657 and $1,565,894,
respectively. During the same period, short-term sales/maturities of U.S.
government obligations aggregated $3,998,761, and there were no purchases
of U.S. government obligations by the Fund. At April 30, 1997, the
aggregate cost of investments was the same for book and federal income tax
purposes.
Page 11
<PAGE>
RCM GLOBAL SMALL CAP FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1997
(UNAUDITED)
5. DEFERRED ORGANIZATIONAL COSTS
Costs incurred by the Fund in connection with its organization aggregated
$10,000. These costs are being amortized on a straight-line basis over a
five-year period beginning at the commencement of the Fund's operations.
6. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
RCM Capital Management, L.L.C. ("RCM") manages the Fund's investments and
provides various administrative services, subject to the authority of the
Board of Directors. The Fund pays investment management fees monthly to
RCM at an annualized rate of 1.25% of the Fund's average daily net assets.
For the four-month period ended April 30, 1997, the Fund recorded
investment management fees of $16,196.
RCM has voluntarily agreed, until at least December 31, 1997, 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 annualized
rate of 2.50% of the value of the average daily net assets of the Fund. In
subsequent years, the Fund will reimburse RCM for any such payments to the
extent that the Fund's operating expenses are otherwise below this expense
cap. RCM recorded reimbursement of Fund operating expenses totaling
$19,809 for the four-month period ended April 30, 1997.
Funds Distributor, Inc. (the "Distributor"), acts as distributor of shares
of the Fund. The Distributor retains a portion of any initial sales charge
upon the purchase of shares of the Fund. The Company has adopted a
distribution plan pursuant to Rule 12b-1 under the 1940 Act with respect to
the Fund. Under the distribution plan, which is a "reimbursement plan,"
the Fund pays the Distributor an annual fee of up to 0.30% of the Fund's
average daily net assets as reimbursement for certain expenses actually
incurred by the Distributor in connection with distribution of shares of
the Fund. For the four-month period ended April 30, 1997, the Fund did not
record any 12b-1 fees.
Each Director who is not an interested person of the Company receives from
the Company an annual retainer of $1,000 (the retainer is evenly prorated
among each series of the Company), plus $500 for each meeting of the Board
attended and $250 for each committee meeting attended.
Page 12
<PAGE>
INVESTMENT MANAGER
RCM Capital Management, L.L.C.
Four Embarcadero Center
San Francisco, California 94111
TRANSFER AND REDEMPTION AGENT
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
DISTRIBUTOR
Funds Distributor, Inc.
60 State Street, Suite 1300
Boston, Massachusetts 02109
CUSTODIAN
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
LEGAL COUNSEL
Paul, Hastings, Janofsky & Walker LLP
555 South Flower Street
Los Angeles, California 90071
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
Page 13
<PAGE>
RCM LARGE CAP GROWTH FUND
FINANCIAL REPORT
APRIL 30, 1997
<PAGE>
RCM LARGE CAP GROWTH FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
APRIL 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
% OF
SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- ------ ------- ----------------- ---------- ------------
<S> <C> <C> <C> <C>
CONSUMER DURABLES SECTOR 0.5%
OTHER CONSUMER DURABLES 0.5%
500 US Harman International Industries Inc. $ 19,125
CONSUMER NON-DURABLES SECTOR 20.8%
BEVERAGE AND TOBACCO 3.6%
1,100 US The Coca-Cola Company 69,988
800 MEX Pan American Beverages Inc. Class A 23,200
1,500 US Philip Morris Companies Inc. 59,063
------------
152,251
------------
FOOD AND FOOD PROCESSING 0.5%
300 US Pioneer Hi Bred International Inc. 21,188
GENERAL RETAIL 3.2%
400 US CVS Corp. 19,850
350 US Home Depot, Inc. 20,300
1,300 US Liz Claiborne, Inc. 58,825
1,200 US PETsMART, Inc. * 20,175
700 US Saks Holdings Inc. 13,388
------------
132,538
------------
HOUSEHOLD/RELATED NON-DURABLES 8.3%
1,300 US Colgate-Palmolive Company 144,300
900 US Gillette Company 76,500
1,100 US Kimberly-Clark Corporation 56,375
400 US The Procter & Gamble Company 50,300
600 US Revlon Inc. Class A * 22,050
------------
349,525
------------
LEISURE TIME PRODUCTS/SERVICES 5.2%
1,000 US Doubletree Corp. * 42,000
2,100 US Hasbro Inc. 52,500
7,000 US Host Marriott Corp. * 121,625
------------
216,125
------------
The accompanying notes are an intergral part of the financial statements.
Page 1
<PAGE>
RCM LARGE CAP GROWTH FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
APRIL 30, 1997
(UNAUDITED)
<CAPTION>
% OF
SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- ------ ------- ----------------- ---------- ------------
<S> <C> <C> <C> <C>
CYCLICAL/CAPITAL GOODS SECTOR 9.8%
AEROSPACE AND DEFENSE 3.8%
200 US The Boeing Company $ 19,725
700 US Rockwell International Corp. 46,550
1,900 US Sundstrand Corp. 92,625
------------
158,900
------------
ELECTRICAL EQUIPMENT 4.4%
900 US General Electric Company 99,788
1,200 US Honeywell Inc. 84,750
------------
184,538
------------
INDUSTRIAL EQUIPMENT 1.6%
1,100 US Tyco International Ltd. 67,100
ENERGY SECTOR 4.2%
ENERGY 4.2%
1,100 US Baker Hughes, Inc. 37,950
150 UK British Petroleum Co., PLC ADR 20,644
600 US Camco International Inc. 26,625
700 US Chevron Corporation 47,950
400 NETH Schlumberger Ltd. 44,300
------------
177,469
------------
HEALTH CARE SECTOR 26.0%
DRUGS & HOSPITAL SERVICES 24.8%
1,600 US Amgen Inc. 94,200
2,200 US Centocor Inc. * 61,875
1,600 US Guidant Corp. 109,200
1,900 US Eli Lilly & Co 166,963
1,200 US Medtronic Inc. 83,100
600 US Merck & Co., Inc. 54,300
1,400 US Pfizer Inc. 134,400
500 US Pharmacia & Upjohn Inc. 14,813
1,000 US SangStat Medical Corp. * 17,125
2,300 UK SmithKline Beecham PLC ADR 185,438
1,200 US Warner-Lambert Company 117,600
------------
1,039,014
------------
The accompanying notes are an integral part of the financial statements.
Page 2
<PAGE>
RCM LARGE CAP GROWTH FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
APRIL 30, 1997
(UNAUDITED)
<CAPTION>
% OF
SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- ------ ------- ----------------- ---------- ------------
<S> <C> <C> <C> <C>
HEALTH CARE SERVICES 1.2%
400 US HBO & Co. $ 21,400
1,100 US PhyCor Inc. * 29,288
------------
50,688
------------
INTEREST-SENSITIVE SECTOR 8.9%
BANKING 2.7%
1,000 US Citicorp 112,625
GENERAL FINANCE 3.3%
1,500 US AMRESCO Inc. * 21,844
1,300 US Federal National Mortgage Association 53,463
2,200 US Glendale Federal Bank FSB (California) * 54,725
500 CAN Newcourt Credit Group Inc. 9,234
------------
139,266
------------
INSURANCE 2.9%
800 US American International Group Inc. 102,800
400 US PMI Group Inc. 20,450
------------
123,250
------------
TECHNOLOGY SECTOR 17.1%
COMPUTERS AND OFFICE EQUIPMENT 2.4%
1,000 US E M C Corp. * 36,375
300 US International Business Machines Corp. 48,225
600 US Sun Microsystems Inc. * 17,288
------------
101,888
------------
ELECTRONICS AND NEW TECHNOLOGY 6.8%
1,000 US Ascend Communications Inc. * 45,750
1,200 SWDN Ericsson LM Telephone Co. Sponsored ADR 40,350
600 US Intel Corp. 91,875
700 CAN Newbridge Networks Corp. * 22,225
1,300 FIN Nokia Corp. Sponsored ADR A 84,013
------------
284,213
------------
The accompanying notes are an integral part of the financial statements.
Page 3
<PAGE>
RCM LARGE CAP GROWTH FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
APRIL 30, 1997
(UNAUDITED)
<CAPTION>
% OF
SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- ------ ------- ----------------- ---------- ------------
<S> <C> <C> <C> <C>
TECHNOLOGY SERVICES 7.9%
500 US America Online Inc. * $ 22,563
300 US Computer Sciences Corp. * 18,750
900 US Electronics Arts Inc. * 21,713
600 US First Data Corp. 20,700
500 US McAfee Associates Inc. * 27,875
1,500 US Microsoft Corp. * 182,250
1,400 US Sterling Commerce Inc. * 36,225
------------
330,076
------------
TELEMEDIA/SERVICES SECTOR 7.4%
BUSINESS SERVICES 3.7%
1,400 UK Danka Business Systems PLC Sponsored ADR 42,788
1,100 US Manpower Inc. * 44,138
1,200 US Olsten Corp. 21,150
1,400 US Reynolds & Reynolds Co. Class A 29,050
600 US USA Waste Services, Inc. * 19,650
------------
156,776
------------
COMMUNICATION SERVICES 3.7%
450 US GTE Corporation 20,644
2,200 US Nextel Communications Inc. * 29,003
4,400 US WorldCom Inc. * 105,600
------------
155,247
------------
TOTAL EQUITY INVESTMENTS
(COST $3,739,791) 94.7% 3,971,802
------------
SHORT-TERM INVESTMENTS
MONEY MARKET FUNDS 3.1%
130,918 US SSgA U.S. Government Money Market Fund 130,918
------------
TOTAL SHORT-TERM INVESTMENTS 3.1%
(COST $130,918) 130,918
------------
TOTAL INVESTMENTS (COST $3,870,709) 97.8% 4,102,720
OTHER ASSETS LESS LIABILITIES 2.2% 95,645
------------
NET ASSETS 100.0% $ 4,198,365
------------
------------
</TABLE>
* Non-income producing security.
The accompanying notes are an integral part of the financial statements.
Page 4
<PAGE>
RCM LARGE CAP GROWTH FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
APRIL 30, 1997
(UNAUDITED)
The Fund's investments in securities at April 30, 1997 categorized by country:
% of Net Assets
----------------------------------------------
Short-Term
Country Equities and Other Total
------- -------- ---------- -----
Canada 0.7% 0.1% 0.8%
Finland 2.0% 2.0%
Netherlands 1.1% 1.1%
Panama/Mexico 0.6% 0.6%
Sweden 1.0% 1.0%
United Kingdom 5.9% 5.9%
United States 83.4% 5.2% 88.6%
-------- ---------- ------
Total 94.7% 5.3% 100.0%
-------- ---------- ------
-------- ---------- ------
Page 5
<PAGE>
RCM LARGE CAP GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1997
(UNAUDITED)
ASSETS:
Investments in securities, at value (cost $3,870,709) (Note 1) $ 4,102,720
Foreign currency, at value (cost $3,694) (Note 1) 3,694
Receivable for investments sold 123,498
Deferred organizational costs (Note 5) 9,342
Dividends receivable 4,692
Receivable from investment manager (Note 6) 1,006
-----------
Total Assets 4,244,952
-----------
LIABILITIES:
Payable for investments purchased 18,440
Payable for organizational costs (Note 5) 8,032
Payable for legal fees 4,932
Payable for Directors' fees (Note 6) 4,932
Payable for audit fees 4,932
Payable for transfer agent fees 3,032
Payable for custodian fees 1,393
Payable for insurance expenses 443
Payable for miscellaneous expenses 451
-----------
Total Liabilities 46,587
-----------
NET ASSETS $ 4,198,365
-----------
-----------
NET ASSETS CONSIST OF:
Paid-in capital $ 4,000,100
Net investment loss (4,725)
Accumulated net realized loss on investments and foreign
currency transactions (29,024)
Net unrealized appreciation on investments and translation of
other assets and liabilities on foreign currencies 232,014
-----------
NET ASSETS $ 4,198,365
-----------
-----------
NET ASSET VALUE PER SHARE
($4,198,365 divided by 400,009 shares outstanding) $ 10.50
-----------
-----------
The accompanying notes are an integral part of the financial statements.
Page 6
<PAGE>
RCM LARGE CAP GROWTH FUND
STATEMENT OF OPERATIONS
FOR THE FOUR MONTHS ENDED APRIL 30, 1997
(UNAUDITED)
INVESTMENT INCOME:
Income:
Dividends (net of foreign withholding tax of $432) $ 20,555
Expenses:
Investment management fees (Note 6) 10,250
Directors' fees (Note 6) 9,932
Transfer agent fees 7,132
Legal fees 4,932
Audit fees 4,932
Custodian fees 3,438
Registration and filing fees 2,829
Amortization of organizational costs (Note 5) 658
Insurance expenses 444
Miscellaneous expenses 2,400
----------
Total expenses before reimbursements 46,947
Expenses reimbursed by investment manager (Note 6) (21,667)
----------
Total net expenses 25,280
----------
Net investment loss (4,725)
----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss from investments (27,285)
Net realized loss from foreign currency transactions (1,739)
----------
Net realized loss (29,024)
----------
Net change in unrealized appreciation on investments
and translation of other assets and liabilities on
foreign currencies 232,014
----------
Net realized and unrealized gain during the period 202,990
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 198,265
----------
----------
The accompanying notes are an integral part of the financial statements.
Page 7
<PAGE>
RCM LARGE CAP GROWTH FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
December 31, 1996
Four Months Ended (commencement
April 30, 1997 of operations) to
(Unaudited) December 31, 1996
----------------- -----------------
<S> <C> <C>
OPERATIONS:
Net investment loss $ (4,725) $ -
Net realized loss on investments and foreign
currency transactions (29,024) -
Net change in unrealized appreciation on
investments and translation of other assets
and liabilities on foreign currencies 232,014 -
------------- ---------------
Net increase in net assets resulting from
operations 198,265 -
NET INCREASE FROM CAPITAL SHARES TRANSACTIONS
(Note 3) 100 4,000,000
------------- ---------------
TOTAL INCREASE IN NET ASSETS 198,365 4,000,000
NET ASSETS:
Beginning of period 4,000,000 -
------------- ---------------
End of period * $ 4,198,365 $ 4,000,000
------------- ---------------
------------- ---------------
- ----------------------
* Includes accumulated net investment loss of $ (4,725) $ -
------------- ---------------
------------- ---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 8
<PAGE>
RCM LARGE CAP GROWTH FUND
FINANCIAL HIGHLIGHTS
Selected data for each share of capital stock outstanding are as follows:
<TABLE>
<CAPTION>
December 31, 1996
Four Months Ended (commencement
April 30, 1997 of operations) to
(Unaudited) December 31, 1996
----------------- -----------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.00 $ 10.00
---------- ----------
Net investment loss (a) (0.01)(b) -
Net realized and unrealized gain
on investments (a) 0.51 -
---------- ----------
Net increase in net asset value
resulting from investment operations (a) 0.50 -
---------- ----------
NET ASSET VALUE, END OF PERIOD $ 10.50 $ 10.00
---------- ----------
---------- ----------
TOTAL RETURN (c) 4.90% 0.00%
---------- ----------
---------- ----------
RATIOS AND SUPPLEMENTAL DATA:
Average commission rate paid per share (d) $ 0.0727 $ 0.0326
---------- ----------
---------- ----------
Net assets, end of period (in 000's) $ 4,198 $ 4,000
---------- ----------
---------- ----------
Ratio of expenses to average net assets 1.85%(b) 0.00%(f)
---------- ----------
---------- ----------
Ratio of net investment loss to average
net assets (0.35%)(b) 0.00%(f)
---------- ----------
---------- ----------
Portfolio turnover 49.59%(e) 0.00%(f)
---------- ----------
---------- ----------
</TABLE>
- -------------------------
(a) Calculated using the average share method.
(b) Includes reimbursement by the Fund's investment manager of certain ordinary
operating expenses equal to $0.05 per share (calculated using the average
share method). Without such reimbursement, the ratio of expenses to
average net assets would have been 3.44% and the ratio of net investment
loss to average net assets would have been (1.93%) (see Note 6).
(c) Total return measures the change in value of an investment in the Fund over
the period indicated.
(d) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for security
trades on which commissions are charged. This amount may vary from period
to period and fund to fund depending on the mix of trades executed in
various markets where trading practices and commission structures may
differ.
(e) Not annualized.
(f) Not annualized. Fund was in operation for one day.
Page 9
<PAGE>
RCM LARGE CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1997
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
RCM Large Cap Growth Fund (the "Fund") is a diversified series of RCM
Equity Funds, Inc. (the "Company"). The Company is organized as a Maryland
corporation and is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company. The Fund commenced
operations on December 31, 1996.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles
which require management to make estimates and assumptions that affect the
reported amount of assets and liabilities. Actual results may differ from
these estimates.
a. SECURITIES VALUATIONS:
Investment securities are stated at fair market value. 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. If there has been no sale on such day, then the security will be
valued at the closing bid price on such day. If no bid price is quoted on
such day, then the security will be valued by such method as the Board of
Directors of the Company in good faith deems appropriate to reflect its
fair market value. Readily marketable securities traded only in the over-
the-counter market that are not listed on the National Association of
Securities Dealers, Inc. Automated Quotation System or similar foreign
reporting service will be valued at the mean bid price, or such other
comparable sources as the Board of Directors of the Company 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 the Board of Directors of the Company in good faith deems
appropriate to reflect their fair market value. Short-term investments
with a maturity of 60 days or less are valued at amortized cost, which
approximates market value.
b. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME:
Security transactions are recorded as of the date of purchase or sale.
Realized gains and losses on security transactions are determined on the
identified cost basis for both financial statement and federal income tax
purposes. Interest income, foreign taxes and expenses are accrued daily.
Dividends are recorded on the ex-dividend date.
c. FOREIGN CURRENCY TRANSACTIONS:
The records of the Fund are maintained in U.S. dollars. Foreign
currencies, investments and other assets and liabilities are translated
into U.S. dollars at current exchange rates. Purchases and sales of
foreign securities and income and withholding taxes are translated on the
respective dates of such transactions. Net realized currency gains and
losses include foreign currency gains and losses between trade date and
settlement date and foreign currency transactions. The Fund does not
isolate that portion of foreign currency exchange fluctuation on
investments from unrealized appreciation and depreciation which arises from
changes in market prices. Such fluctuations are included with the net
unrealized appreciation or depreciation on investments.
Page 10
<PAGE>
RCM LARGE CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1997
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
d. FEDERAL INCOME TAXES:
It is the policy of the Fund to comply with the requirements for
qualification as a "regulated investment company" under the Internal
Revenue Code of 1986, as amended (the "Code"). It is also the intention of
the Fund to make distributions sufficient to avoid imposition of any excise
tax under Section 4982 of the Code. Therefore, no provision has been made
for Federal or excise taxes on income and capital gains.
e. DISTRIBUTIONS:
Distributions to shareholders are recorded by the Fund on the ex-dividend
date. Income and capital gain distributions are determined in accordance
with Federal income tax regulations, which may differ from generally
accepted accounting principles. These differences are primarily due to
differing treatments of income and gains on various investment securities
held by the Fund and timing differences.
2. INVESTMENT IN FOREIGN SECURITIES
Investing in foreign equity securities and currency transactions involves
significant risks, some of which are not typically associated with
investments of domestic origin. The Fund's investments in foreign markets
will subject the Fund to the risk of foreign currency exchange rate
fluctuations, perceived credit risk and adverse economic and political
developments.
3. CAPITAL SHARES
At April 30, 1997, there were 1,000,000,000 shares of the Company's capital
stock authorized, at $0.0001 par value. Of this amount, 50,000,000 were
classified as shares of the Fund; 50,000,000 were classified as shares of
RCM Global Health Care Fund; 50,000,000 were classified as shares of RCM
Global Small Cap Fund; 50,000,000 were classified as shares of RCM Global
Technology Fund; 50,000,000 were classified as shares of Dresdner RCM
Emerging Markets Fund; and 750,000,000 shares remain unclassified. There
were 400,000 shares sold for a total of $4,000,000 on December 31, 1996
(commencement of operations) and 9 shares sold for a total of $100 during
the four-month period ended April 30, 1997. At April 30, 1997, 400,000
shares of the total 400,009 outstanding shares of the Fund were
beneficially owned by clients of Dresdner Bank AG/Investment
Management/Institutional Asset Management Division.
4. PURCHASES AND SALES OF SECURITIES
For the four-months ended April 30, 1997, purchases and sales of investment
securities by the Fund, other than U.S. government obligations and short-
term securities, aggregated $4,412,671 and $1,709,344, respectively. During
the same period, short-term sales/maturities of U.S. government obligations
aggregated $3,999,077, and there were no purchases of U.S. government
obligations by the Fund. At April 30, 1997, the aggregate cost of
investments was the same for book and federal income tax purposes.
Page 11
<PAGE>
RCM LARGE CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1997
(UNAUDITED)
5. DEFERRED ORGANIZATIONAL COSTS
Costs incurred by the Fund in connection with its organization aggregated
$10,000. These costs are being amortized on a straight-line basis over a
five-year period beginning at the commencement of the Fund's operations.
6. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
RCM Capital Management, L.L.C. ("RCM") manages the Fund's investments and
provides various administrative services, subject to the authority of the
Board of Directors. The Fund pays investment management fees monthly to
RCM at an annualized rate of 0.75% of the Fund's average daily net assets.
For the four-month period ended April 30, 1997, the Fund recorded
investment management fees of $10,250.
RCM has voluntarily agreed, until at least December 31, 1997, 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 annualized
rate of 1.85% of the value of the average daily net assets of the Fund. In
subsequent years, the Fund will reimburse RCM for any such payments to the
extent that the Fund's operating expenses are otherwise below this expense
cap. RCM recorded reimbursement of Fund operating expenses totaling
$21,667 for the four-month period ended April 30, 1997.
Funds Distributor, Inc. (the "Distributor"), acts as distributor of shares
of the Fund. The Distributor retains a portion of any initial sales charge
upon the purchase of shares of the Fund. The Company has adopted a
distribution plan pursuant to Rule 12b-1 under the 1940 Act with respect to
the Fund. Under the distribution plan, which is a "reimbursement plan,"
the Fund pays the Distributor an annual fee of up to 0.30% of the Fund's
average daily net assets as reimbursement for certain expenses actually
incurred by the Distributor in connection with distribution of shares of
the Fund. For the four- month period ended April 30, 1997, the Fund did not
record any 12b-1 fees.
Each Director who is not an interested person of the Company receives from
the Company an annual retainer of $1,000 (the retainer is evenly prorated
among each series of the Company), plus $500 for each meeting of the Board
attended and $250 for each committee meeting attended.
Page 12
<PAGE>
INVESTMENT MANAGER
RCM Capital Management, L.L.C.
Four Embarcadero Center
San Francisco, California 94111
TRANSFER AND REDEMPTION AGENT
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
DISTRIBUTOR
Funds Distributor, Inc.
60 State Street, Suite 1300
Boston, Massachusetts 02109
CUSTODIAN
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
LEGAL COUNSEL
Paul, Hastings, Janofsky & Walker LLP
555 South Flower Street
Los Angeles, California 90071
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
Page 13
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS
1. Statement of Investments in Securities and Net Assets, Statement of
Assets and Liabilities, Statement of Operations and Statements of
Changes in Net Assets for RCM Equity Funds, Inc., with regard to RCM
Global Technology Fund, RCM Global Small Cap Fund, RCM Large Cap
Growth Fund and RCM Global Health Care Fund, as of December 31, 1996
(previously filed with the Annual Reports to Shareholders, March 3,
1997, and with Post-Effective Amendment No. 3, May 1, 1997, and
incorporated herein by reference).
2. Unaudited financial statements as of April 30, 1997 with regard to RCM
Global Health Care Fund, RCM Global Small Cap Fund and RCM Large Cap
Growth Fund, including Statements of Investments in Securities and Net
Assets, Statements of Assets and Liabilities, Statements of
Operations, Statements of Changes in Net Assets, and the related notes
to Financial Statements (filed as an attachment to Part B and as
Exhibit 20(b)).
(b) EXHIBITS
1. (a) Articles of Incorporation of Registrant (previously filed as
Exhibit 1 to the Registration Statement, September 29, 1995, and
incorporated herein by reference).
(b) Articles Supplementary to Articles of Incorporation of Registrant
dated December 12, 1996 with respect to RCM Global Health Care
Fund, RCM Global Small Cap Fund and RCM Large Cap Growth Fund
(previously filed with Post-Effective Amendment No. 2, March 12,
1997, and incorporated herein by reference).
(c) Form of Articles Supplementary to Articles of Incorporation of
Registrant with respect to RCM Kleinwort Benson Emerging Markets
Fund (previously filed with Post-Effective Amendment No. 2,
March 12, 1997, and incorporated herein by reference).
2. (a) Bylaws of Registrant (previously filed with Pre-Effective
Amendment No. 2, December 26, 1995, and incorporated herein by
reference).
(b) Form of Amendments to Bylaws of Registrant (previously filed with
Post-Effective Amendment No. 3, May 1, 1997, and incorporated
herein by reference).
C-1
<PAGE>
3. None.
4. (a) Proof of specimen of certificate for capital stock ($0.0001 par
value) of Registrant, on behalf of RCM Global Technology Fund,
and excerpts from Articles of Incorporation and Bylaws
(previously filed with Pre-Effective Amendment No. 2,
December 26, 1995, and incorporated herein by reference).
(b) Proof of specimen of certificate for capital stock ($0.0001 par
value) of Registrant, on behalf of RCM Global Health Care Fund
(previously filed with Post-Effective Amendment No. 1,
October 17, 1996, and incorporated herein by reference).
(c) Proof of specimen of certificate for capital stock ($0.0001 par
value) of Registrant, on behalf of RCM Global Small Cap Fund
(previously filed with Post-Effective Amendment No. 1,
October 17, 1996, and incorporated herein by reference).
(d) Proof of specimen of certificate for capital stock ($0.0001 par
value) of Registrant, on behalf of RCM Large Cap Growth Fund
(previously filed with Post-Effective Amendment No. 1,
October 17, 1996, and incorporated herein by reference).
(e) Proof of specimen of certificate for capital stock ($0.0001 par
value) of Registrant, on behalf of RCM Kleinwort Benson Emerging
Markets Fund (previously filed with Post-Effective Amendment
No. 2, March 12, 1997, and incorporated herein by reference).
5. (a) Investment Management Agreement, Power of Attorney and Services
Agreement between Registrant, on behalf of RCM Global Technology
Fund, and RCM Capital Management, L.L.C., dated as of June 14,
1996 (previously filed with Post-Effective Amendment No. 1,
October 17, 1996, and incorporated herein by reference).
(b) Form of Investment Management Agreement, Power of Attorney and
Service Agreement between Registrant, on behalf of RCM Global
Health Care Fund, and RCM Capital Management, L.L.C. (previously
filed with Post-Effective Amendment No. 1, October 17, 1996, and
incorporated herein by reference).
(c) Form of Investment Management Agreement, Power of Attorney and
Service Agreement between Registrant, on behalf of RCM Global
Small Cap Growth Fund, and RCM Capital Management, L.L.C.
(previously filed with Post-Effective Amendment No. 1,
October 17, 1996, and incorporated herein by reference).
C-2
<PAGE>
(d) Form of Investment Management Agreement, Power of Attorney and
Service Agreement between Registrant, on behalf of RCM Large Cap
Growth Fund, and RCM Capital Management, L.L.C. (previously filed
with Post-Effective Amendment No. 1, October 17, 1996, and
incorporated herein by reference).
(e) Form of Investment Management Agreement, Power of Attorney and
Service Agreement between Registrant, on behalf of RCM Kleinwort
Benson Emerging Markets Fund, and RCM Capital Management, L.L.C.
(previously filed with Post-Effective Amendment No. 2, March 12,
1997, and incorporated herein by reference).
(f) Form of Sub-Advisory Agreement between RCM Capital Management,
L.L.C. and Kleinwort Benson Investment Management America, Inc.
with respect to the RCM Kleinwort Benson Emerging Markets Fund
(previously filed with Post-Effective Amendment No. 2, March 12,
1997, and incorporated herein by reference).
(g) Form of Administration Agreement between Registrant, on behalf of
RCM Kleinwort Benson Emerging Markets Fund, and RCM Capital
Management, L.L.C. (previously filed with Post-Effective
Amendment No. 2, March 12, 1997, and incorporated herein by
reference).
6. (a) Agreement between RCM Capital Management, a California Limited
Partnership, Registrant, RCM Capital Funds, Inc. and Funds
Distributor, Inc. ("FDI"), dated June 13, 1996 (previously filed
with Post-Effective Amendment No. 1, October 17, 1996, and
incorporated herein by reference).
(b) Distribution Agreement between Registrant and FDI, dated June 13,
1996 (previously filed with Post-Effective Amendment No. 1,
October 17, 1996, and incorporated herein by reference).
(c) Fee Letter Agreement between RCM Capital Funds, Inc., Registrant,
RCM Capital Management, a California Limited Partnership, and
FDI, dated June 13, 1996 (previously filed with Post-Effective
Amendment No. 1, October 17, 1996, and incorporated herein by
reference).
(d) Form of Selling Agreement (previously filed with Post-Effective
Amendment No. 1, October 17, 1996, and incorporated herein by
reference).
7. None.
8. (a) Custodian Contract and remuneration schedule between Registrant
and State Street Bank and Trust Company (previously filed with
Pre-Effective
C-3
<PAGE>
Amendment No. 2, December 26, 1995, and incorporated herein by
reference).
(b) Form of Amendment to Custodian Contract between Registrant, with
regard to RCM Global Health Care Fund, and State Street Bank and
Trust Company (previously filed with Post-Effective Amendment
No. 1, October 17, 1996, and incorporated herein by reference).
(c) Form of Amendment to Custodian Contract between Registrant, with
regard to RCM Global Small Cap Fund, and State Street Bank and
Trust Company (previously filed with Post-Effective Amendment
No. 1, October 17, 1996, and incorporated herein by reference).
(d) Form of Amendment to Custodian Contract between Registrant, with
regard to RCM Large Cap Growth Fund, and State Street Bank and
Trust Company (previously filed with Post-Effective Amendment
No. 1, October 17, 1996, and incorporated herein by reference).
(e) Form of Custodian Agreement between Registrant, on behalf of RCM
Kleinwort Benson Emerging Markets Fund, and the Registrant's
Custodian (previously filed with Post-Effective Amendment No. 2,
March 12, 1997).
9. Agreement, dated as of June 14, 1996, between RCM Capital Management,
L.L.C. and Registrant related to the use by Registrant of the name
"RCM" (previously filed with Post-Effective Amendment No. 1,
October 17, 1996, and incorporated herein by reference).
10. (a) Opinion and consent of Baetjer, Venable and Howard, LLP as to
legality of securities being registered (previously filed with
Pre-Effective Amendment No. 2, December 26, 1995, and
incorporated herein by reference).
(b) Letter of Paul, Hastings, Janofsky & Walker LLP.
11. Consent of Coopers & Lybrand L.L.P.
12. None.
13. None.
14. None.
15. Rule 12b-1 Plan (previously filed with Post-Effective Amendment No. 1,
October 17, 1996, and incorporated herein by reference).
16. None.
C-4
<PAGE>
17. Financial Data Schedule.
18. None.
19. Power of Attorney for DeWitt F. Bowman, Pamela A. Farr, Thomas S.
Foley, Frank P. Greene and George G.C. Parker (previously filed with
Post-Effective Amendment No. 1, October 17, 1996, and incorporated
herein by reference).
20. (a) Financial Statements referred to in Item 24 (a)1, filed pursuant
to Rule 303 of Regulation S-T (previously filed with
Post-Effective Amendment No. 3 and incorporated herein by
reference).
(b) Financial Statements referred to in Item 24 (a)2.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
RCM Growth Equity Fund, RCM Small Cap Fund and RCM International
Growth Equity Fund A are each series of RCM Capital Funds, Inc., an open-end
management investment company ("Capital Funds"), for which RCM Capital
Management, L.L.C. acts as investment manager. RCM Strategic Global Government
Fund, Inc. is a closed-end management investment company ("RCS"), for which RCM
Capital Management, L.L.C. acts as investment manager. Certain officers and/or
directors of Capital Funds and RCS are also officers and/or directors of
Registrant. Accordingly, Capital Funds and RCS may be deemed to be under common
control with Registrant.
Funds Distributor, Inc. ("FDI") acts as distributor of shares of the
funds of Registrant. Certain officers or employees of FDI also serve as officers
of Registrant, Capital Funds and RCS. Accordingly, FDI may be deemed to be under
common control with Registrant.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
As of April 30, 1997
TITLE OF CLASS NUMBER OF RECORD-HOLDERS
RCM Global Technology Fund 37
Capital Stock
($0.0001 par value)
RCM Global Health Care Fund 2
Capital Stock
($0.0001 par value)
RCM Large Cap Growth Fund 2
Capital Stock
($0.0001 par value)
C-5
<PAGE>
RCM Global Small Cap Fund 2
Capital Stock
($0.0001 par value)
ITEM 27. INDEMNIFICATION.
Section 2-418 of the General Corporation Law of Maryland empowers a
corporation to indemnify directors and officers of the corporation under various
circumstances as provided in such statute. A director or officer who has been
successful on the merits or otherwise, in the defense of any proceeding, must be
indemnified against reasonable expenses incurred by such person in connection
with the proceeding. Reasonable expenses may be paid or reimbursed by the
corporation in advance of the final disposition of the proceeding, after a
determination that the facts then known to those making the determination would
not preclude indemnification under the statute, and following receipt by the
corporation of a written affirmation by the person that his or her standard of
conduct necessary for indemnification has been met and upon delivery of a
written undertaking by or on behalf of the person to repay the amount advanced
if it is ultimately determined that the standard of conduct has not been met.
Article VI of the Bylaws of Registrant contains indemnification
provisions conforming to the above statute and to the provisions of Section 17
of the Investment Company Act of 1940, as amended.
The Registrant and the directors and officers of Registrant obtained
coverage under an Errors and Omissions insurance policy. The terms and
conditions of policy coverage conform generally to the standard coverage
available throughout the investment company industry. The coverage also applies
to Registrant's investment manager and its members and employees.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of Registrant pursuant to the provisions of Maryland law and
Registrant's Articles of Incorporation and Bylaws, or otherwise, Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in said Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by Registrant of expenses incurred or
paid by a director, officer or controlling person of Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Registrant's investment manager, RCM Capital Management, L.L.C., is a
Delaware limited liability company, whose two members are Dresdner Bank AG
("Dresdner")
C-6
<PAGE>
and Dresdner Kleinwort Benson North America, Inc. ("Dresdner Kleinwort Benson").
Dresdner is an international banking organization whose principal executive
offices are located at Gallunsanlage 7, 60041 Frankfurt am Main, Frankfurt,
Germany. Dresdner Kleinwort Benson is a wholly owned subsidiary of Dresdner
whose principal executive offices are located at 75 Wall Street, New York, New
York 10005.
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) Funds Distributor, Inc. ("FDI"), whose principal offices are
located at 60 State Street, Suite 1300, Boston Massachusetts
02109, is the principal underwriter of Registrant. FDI is an
indirect, wholly owned subsidiary of Boston Institutional Group,
Inc., a holding company, all of whose outstanding shares are
owned by key employees. FDI is a broker-dealer registered under
the Securities Exchange Act of 1934, as amended, and is a member
of the National Association of Securities Dealers. FDI also
serves as principal underwriter of the following investment
companies:
BJB Investment Funds
The Brinson Funds
Burridge Funds
Fremont Mutual Funds, Inc.
HT Insight Funds, Inc. d/b/a Harris Insight Funds
Harris Insight Funds Trust
The JPM Institutional Funds
The JPM Pierpont Funds
The JPM Series Trust
The JPM Series Trust II
LKCM Fund
Monetta Fund, Inc.
Monetta Fund Trust
The Munder Framlington Funds Trust
The Munder Funds, Inc.
The Munder Funds Trust
The PanAgora Institutional Funds
RCM Equity Funds, Inc.
St. Clair Money Market Fund, Inc.
The Skyline Funds
Waterhouse Investors Cash Management Fund, Inc.
WEBS Index Fund, Inc.
FDI does not act as a depositor or investment adviser of any
investment company.
C-7
<PAGE>
(b) The directors and executive officers of FDI are set forth below:
<TABLE>
<CAPTION>
<S> <C> <C>
NAME AND PRINCIPAL POSITIONS AND OFFICES WITH POSITIONS AND OFFICES WITH
BUSINESS ADDRESS FUNDS DISTRIBUTOR, INC. REGISTRANT
- --------------------------------------------------------------------------------------------------------------------------
Marie E. Connolly Director, President and Chief None
Executive Officer
- --------------------------------------------------------------------------------------------------------------------------
Richard W. Ingram Executive Vice President President, Treasurer and Chief
Financial Officer
- --------------------------------------------------------------------------------------------------------------------------
Donald R. Roberson Executive Vice President None
- --------------------------------------------------------------------------------------------------------------------------
John E. Pelletier Senior Vice President, General Vice President and Secretary
Counsel, Secretary and Clerk
- --------------------------------------------------------------------------------------------------------------------------
Michael S. Petrucelli Senior Vice President None
- --------------------------------------------------------------------------------------------------------------------------
Joseph F. Tower III Director, Senior Vice None
President, Treasurer and Chief
Financial Officer
- --------------------------------------------------------------------------------------------------------------------------
Paula R. David Senior Vice President None
- --------------------------------------------------------------------------------------------------------------------------
Bernard A. Whalen Senior Vice President None
- --------------------------------------------------------------------------------------------------------------------------
David A. Wrubel Senior Vice President None
- --------------------------------------------------------------------------------------------------------------------------
William J. Nutt Director None
</TABLE>
(c) Not Applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
Accounts, books and other records required by Rules 31a-1 and 31a-2
under the Investment Company Act of 1940, as amended, are maintained and held in
the offices of Registrant's investment manager, RCM Capital Management, L.L.C.,
Four Embarcadero Center, San Francisco, California 94111; and/or Registrant's
distributor, Funds Distributor, Inc., 60 State Street, Suite 1300, Boston,
Massachusetts 02109.
Records covering portfolio transactions are also maintained and kept
by Registrant's custodian and transfer agent, State Street Bank and Trust
Company, U.S. Mutual Funds Services Division, P.O. Box 1713, Boston,
Massachusetts 02105, and the Registrant's custodian with respect to RCM
Kleinwort Benson Emerging Markets Fund.
C-8
<PAGE>
ITEM 31. MANAGEMENT SERVICES.
None.
ITEM 32. UNDERTAKINGS.
Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of Registrant's latest annual report to shareholders, upon
request and without charge.
C-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, RCM Equity Funds, Inc. certifies that it meets
all of the requirements for effectiveness of this Post-Effective Amendment No. 4
to the Registration Statement pursuant to Rule 485(b) under the Securities Act
of 1933 and has duly caused this Post-Effective Amendment No. 4 to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Boston, Commonwealth of Massachusetts, on June
30, 1997.
RCM EQUITY FUNDS, INC.
By:
---------------------------------
President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 4 to the Registration Statement has been signed
below by the following persons in the capacities and on the date indicated.
SIGNATURE TITLE DATE
(1) Principal Executive Officer President June 30, 1997
--------------------------
Richard W. Ingram
(2) Chief Financial and Accounting Officer Treasurer June 30, 1997
---------------------------
Richard W. Ingram
<PAGE>
SIGNATURE TITLE DATE
(3) Directors
/s/ Dewitt F. Bowman* June 30, 1997
---------------------
DeWitt F. Bowman
/s/ Pamela A. Farr* June 30, 1997
-------------------
Pamela A. Farr
/s/ Thomas S. Foley * June 30, 1997
---------------------
Thomas S. Foley
/s/ Frank P. Greene * June 30, 1997
---------------------
Frank P. Greene
/s/ George G.C. Parker * June 30, 1997
----------------------
George G.C. Parker
By: June 30, 1997
----------------------
Richard W. Ingram
as Attorney-in-Fact
- ----------------------
* By Richard W. Ingram, pursuant to Power of Attorney filed with Post-Effective
Amendment No.1, October 17, 1996, and incorporated herein by reference.
<PAGE>
EXHIBIT INDEX
Number Description
- ------ -----------
27 Financial Data Schedule
99.10 (b) Letter of Paul, Hastings, Janofsky & Walker LLP
99.11 Consent of Coopers & Lybrand L.L.P.
99.20 Financial Statements referred to in Item 24 (a)2, filed pursuant
to Rule 303 of Regulation S-T
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0001001640
<NAME> RCM EQUITY FUNDS, INC.
<SERIES>
<NUMBER> 4
<NAME> RCM GLOBAL HEALTH CARE FUND
<MULTIPLIER> 1
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> APR-30-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 3974275
<INVESTMENTS-AT-VALUE> 3979852
<RECEIVABLES> 61927
<ASSETS-OTHER> 9342
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4051121
<PAYABLE-FOR-SECURITIES> 1313
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 27978
<TOTAL-LIABILITIES> 29291
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4000100
<SHARES-COMMON-STOCK> 400010
<SHARES-COMMON-PRIOR> 400000
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 7352
<ACCUMULATED-NET-GAINS> 23505
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5577
<NET-ASSETS> 4021830
<DIVIDEND-INCOME> 11496
<INTEREST-INCOME> 9762
<OTHER-INCOME> 0
<EXPENSES-NET> (28610)
<NET-INVESTMENT-INCOME> (7352)
<REALIZED-GAINS-CURRENT> 23505
<APPREC-INCREASE-CURRENT> 5577
<NET-CHANGE-FROM-OPS> 21730
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 21830
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (13623)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (48581)
<AVERAGE-NET-ASSETS> 4105362
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> (0.02)
<PER-SHARE-GAIN-APPREC> 0.07
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.05
<EXPENSE-RATIO> 2.10
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0001001640
<NAME> RCM EQUITY FUNDS, INC.
<SERIES>
<NUMBER> 2
<NAME> RCM GLOBAL SMALL CAP FUND
<MULTIPLIER> 1
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> APR-30-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 3884155
<INVESTMENTS-AT-VALUE> 3700932
<RECEIVABLES> 266636
<ASSETS-OTHER> 9916
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3990727
<PAYABLE-FOR-SECURITIES> 220252
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 30483
<TOTAL-LIABILITIES> 250735
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4000100
<SHARES-COMMON-STOCK> 400010
<SHARES-COMMON-PRIOR> 400000
<ACCUMULATED-NII-CURRENT> (23418)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (53473)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (183217)
<NET-ASSETS> 3739992
<DIVIDEND-INCOME> 5529
<INTEREST-INCOME> 3854
<OTHER-INCOME> 0
<EXPENSES-NET> (32801)
<NET-INVESTMENT-INCOME> (23418)
<REALIZED-GAINS-CURRENT> (53473)
<APPREC-INCREASE-CURRENT> (183217)
<NET-CHANGE-FROM-OPS> (260108)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (260008)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (16196)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (52610)
<AVERAGE-NET-ASSETS> 3924403
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> (0.06)
<PER-SHARE-GAIN-APPREC> (0.59)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.35
<EXPENSE-RATIO> 2.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0001001640
<NAME> RCM EQUITY FUNDS, INC.
<SERIES>
<NUMBER> 3
<NAME> RCM LARGE CAP GROWTH FUND
<MULTIPLIER> 1
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> APR-30-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 3870709
<INVESTMENTS-AT-VALUE> 4102720
<RECEIVABLES> 129196
<ASSETS-OTHER> 13036
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4244952
<PAYABLE-FOR-SECURITIES> 18440
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 28147
<TOTAL-LIABILITIES> 46587
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4000100
<SHARES-COMMON-STOCK> 400009
<SHARES-COMMON-PRIOR> 400000
<ACCUMULATED-NII-CURRENT> (4725)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (29024)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 232014
<NET-ASSETS> 4198365
<DIVIDEND-INCOME> 20555
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 25280
<NET-INVESTMENT-INCOME> (4725)
<REALIZED-GAINS-CURRENT> (29024)
<APPREC-INCREASE-CURRENT> 232014
<NET-CHANGE-FROM-OPS> 198265
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 198365
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (10250)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (46947)
<AVERAGE-NET-ASSETS> 4130100
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> (0.01)
<PER-SHARE-GAIN-APPREC> 0.51
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.50
<EXPENSE-RATIO> 1.85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
Exhibit 99.10(b)
PAUL, HASTINGS, JANOFSKY & WALKER LLP
555 South Flower Street
Los Angeles, California 90071
Telephone (213) 683-6000
June 30, 1997
RCM Equity Funds, Inc.
Four Embarcadero Center
Suite 3000
San Francisco, California 94111
Ladies and Gentlemen:
We have acted as counsel to RCM Equity Funds, Inc., a
Maryland corporation (the "Company"), with respect to certain legal matters
in connection with the capital shares of the Company offered pursuant to a
Registration Statement on Form N-1A (Registration Statement No. 33-97572), as
amended, filed with the Securities and Exchange Commission under the Securities
Act of 1933, as amended (the "Registration Statement").
We hereby consent to the reference to Paul, Hastings, Janofsky &
Walker LLP under the caption "Additional Information -- Counsel" in the
Statement of Additional Information which forms part of the Registration
Statement.
Very truly yours,
PAUL, HASTINGS, JANOFSKY & WALKER LLP
<PAGE>
Exhibit 99.11
[LETTERHEAD]
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Trustees of
RCM Equity Funds Inc.:
Re: RCM Global Small Cap Fund,
RCM Large Cap Growth Fund,
RCM Global Health Care Fund,:
We consent to the incorporation by reference in the Prospectuses and Statement
of Additional Information constituting parts of Post-Effective Amendment to the
Registration Statement of RCM Equity Funds, Inc. Fund on Form N-1A of our
report dated February 28, 1997, on our audits, of the financial statements and
financial highlights of the Funds, which reports are included in the Annual
Report to Shareholders which is incorporated by reference in the Registration
Statement.
We also consent to the references to our firm under the caption "Independent
Accountants" in the Statement of Additional Information and under the heading
"financial highlights" in such Prospectuses.
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
June 30, 1997
<PAGE>
RCM GLOBAL HEALTH CARE FUND
FINANCIAL REPORT
APRIL 30, 1997
<PAGE>
RCM GLOBAL HEALTH CARE FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
APRIL 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
% OF
SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- --------- ------- ------------------------------------- ---------- ------------
<S> <C> <C> <C> <C>
DRUGS AND HOSPITAL SERVICES 64.2%
3,400 US Algos Pharmaceutical Corp. * $ 52,275
2,800 US Amgen Inc. 164,850
2,600 US Anesta Corp. * 36,400
3,900 US Biomet, Inc. * 59,231
4,200 US Centocor Inc. * 118,125
13,300 US CIMA Labs Inc. * 66,500
2,800 US Creative BioMolecules Inc. * 21,175
2,500 US Genzyme Corp. * 57,813
3,900 UK Glaxo Wellcome PLC Sponsored ADR 153,563
2,600 US Guidant Corp. 177,450
1,200 US Invacare Corp. 23,850
2,100 US Eli Lilly & Co 184,538
3,000 US Medimmune Inc. * 39,000
2,600 US Medtronic, Inc. 180,050
3,100 US Mentor Corp. 71,688
3,000 US NaPro BioTherapeutics Inc. * 23,250
2,200 US NeXstar Pharmaceuticals Inc. * 20,625
1,700 US PathoGenesis Corp. * 44,625
6,700 US Penederm Inc. * 72,025
1,900 US Pfizer Inc. 182,400
1,600 US Pharmacia & Upjohn Inc. 47,400
7,300 US Physio-Control International Corp. * 91,250
1,400 US SangStat Medical Corp. * 23,975
4,100 US Sepracor Inc. * 79,950
2,400 UK SmithKline Beecham PLC ADR 193,500
4,100 US Sofamor/Danek Group Inc. * 159,900
1,800 US VISX Inc. * 40,500
2,000 US Warner Lambert Co. 196,000
----------
2,581,908
----------
HEALTH CARE SERVICES 29.1%
2,800 US AmeriSource Health Corp. * 124,950
3,500 US Bergen Brunswig Corp. 119,438
1,200 US Columbia / HCA Healthcare Corp. 42,000
1,200 US CRA Managed Care, Inc. * 42,300
1,500 US Genesis Health Ventures Inc. * 44,813
1,500 US HBO & Co. 80,250
1,500 US McKesson Corp. 108,563
1,600 US PacifiCare Health Systems, Inc. * 128,400
4,500 US PhyCor Inc. * 119,808
500 US Quintiles Transnational Corp. * 25,438
4,800 US Renal Treatment Centers Inc. * 103,800
3,500 US Transition Systems Inc. * 42,000
7,300 US Vivra Inc. * 188,888
----------
1,170,648
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 1
<PAGE>
RCM GLOBAL HEALTH CARE FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
APRIL 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
% OF
SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- --------- ------- ------------------------------------- ---------- ------------
<S> <C> <C> <C> <C>
TOTAL EQUITY INVESTMENTS
(COST $3,746,979) 93.3% $ 3,752,556
-----------
SHORT-TERM INVESTMENTS
MONEY MARKET FUNDS
91,873 US SSgA Money Market Fund 91,873
135,423 US SSgA U.S. Government Money Market Fund 135,423
-----------
TOTAL SHORT-TERM INVESTMENTS 5.7%
(COST $227,296) 227,296
-----------
TOTAL INVESTMENTS (COST $3,974,275) 99.0% 3,979,852
OTHER ASSETS LESS LIABILITIES 1.0% 41,978
-----------
NET ASSETS 100.0% $ 4,021,830
-----------
-----------
</TABLE>
* Non-income producing security.
- --------------------------------------------------------------------------------
The Fund's investments in securities at April 30, 1997 categorized by country:
% of Net Assets
--------------------------------------
Short-Term
Country Equities and Other Total
------- -------- ---------- -----
United Kingdom 8.6% 8.6%
United States 84.7% 6.7% 91.4%
------- ------- -------
Total 93.3% 6.7% 100.0%
------- ------- -------
------- ------- -------
The accompanying notes are an integral part of the financial statements.
Page 2
<PAGE>
RCM GLOBAL HEALTH CARE FUND
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value (cost $3,974,275) (Note 1) $ 3,979,852
Receivable for investments sold 55,998
Deferred organizational costs (Note 5) 9,342
Dividends receivable 5,360
Interest receivable 569
------------
Total Assets 4,051,121
------------
LIABILITIES:
Payable for organizational costs (Note 5) 8,032
Payable for legal fees 4,932
Payable for Directors' fees (Note 6) 4,932
Payable for audit fees 4,932
Payable for transfer agent fees 3,031
Payable for investments purchased 1,313
Payable for investment management fees (Note 6) 1,144
Payable for custodian fees 533
Payable for insurance expenses 442
------------
Total Liabilities 29,291
------------
NET ASSETS $ 4,021,830
------------
------------
NET ASSETS CONSIST OF:
Paid-in capital $ 4,000,100
Net investment loss (7,352)
Accumulated net realized gain on investments 23,505
Net unrealized appreciation on investments 5,577
------------
NET ASSETS $ 4,021,830
------------
------------
NET ASSET VALUE PER SHARE
($4,021,830 divided by 400,010 shares outstanding) $ 10.05
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 3
<PAGE>
RCM GLOBAL HEALTH CARE FUND
STATEMENT OF OPERATIONS
FOR THE FOUR MONTHS ENDED APRIL 30, 1997
(UNAUDITED)
INVESTMENT INCOME:
Income:
Dividends (net of foreign withholding tax of $663) $ 11,496
Interest 9,762
-----------
Total income 21,258
-----------
Expenses:
Investment management fees (Note 6) 13,623
Directors' fees (Note 6) 9,932
Transfer agent fees 7,131
Legal fees 4,932
Audit fees 4,932
Registration and filing fees 2,829
Custodian fees 1,700
Amortization of organizational costs (Note 5) 658
Miscellaneous expenses 2,844
-----------
Total expenses before reimbursements 48,581
Expenses reimbursed by investment manager (Note 6) (19,971)
-----------
Total net expenses 28,610
-----------
Net investment loss (7,352)
-----------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain from investments 23,505
Net change in unrealized appreciation on investments 5,577
-----------
Net realized and unrealized gain during the period 29,082
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 21,730
-----------
-----------
The accompanying notes are an integral part of the financial statements.
Page 4
<PAGE>
RCM GLOBAL HEALTH CARE FUND
STATEMENTS OF CHANGES IN NET ASSETS
December 31, 1996
Four Months Ended (commencement
April 30, 1997 of operations) to
(Unaudited) December 31, 1996
----------------- -----------------
OPERATIONS:
Net investment loss $ (7,352) $ -
Net realized gain on investments 23,505 -
Net change in unrealized appreciation on
investments 5,577 -
------------ ------------
Net increase in net assets resulting from
operations 21,730 -
NET INCREASE FROM CAPITAL SHARES TRANSACTIONS
(Note 3) 100 4,000,000
------------ ------------
TOTAL INCREASE IN NET ASSETS 21,830 4,000,000
NET ASSETS:
Beginning of period 4,000,000 -
------------ ------------
End of period * $ 4,021,830 $ 4,000,000
------------ ------------
------------ ------------
______________________
* Includes accumulated net investment
loss of $ (7,352) $ -
------------ ------------
------------ ------------
The accompanying notes are an integral part of the financial statements.
Page 5
<PAGE>
RCM GLOBAL HEALTH CARE FUND
FINANCIAL HIGHLIGHTS
Selected data for each share of capital stock outstanding are as follows:
<TABLE>
<CAPTION>
December 31, 1996
Four Months Ended (commencement
April 30, 1997 of operations) to
(Unaudited) December 31, 1996
----------------- -----------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.00 $ 10.00
---------- ----------
Net investment loss (a) (0.02)(b) -
Net realized and unrealized gain
on investments (a) 0.07 -
---------- ----------
Net increase in net asset value
resulting from investment operations (a) 0.05 -
---------- ----------
NET ASSET VALUE, END OF PERIOD $ 10.05 $ 10.00
---------- ----------
---------- ----------
TOTAL RETURN (c) 0.50% 0.00%
---------- ----------
---------- ----------
RATIOS AND SUPPLEMENTAL DATA:
Average commission rate paid per share (d) $ 0.0478 $ 0.0324
---------- ----------
---------- ----------
Net assets, end of period (in 000's) $ 4,022 $ 4,000
---------- ----------
---------- ----------
Ratio of expenses to average net assets 2.10% (b) 0.00% (f)
---------- ----------
---------- ----------
Ratio of net investment loss to average
net assets (0.54%)(b) 0.00% (f)
---------- ----------
---------- ----------
Portfolio turnover 40.13% (e) 0.00% (f)
---------- ----------
---------- ----------
</TABLE>
__________________________
(a) Calculated using the average share method.
(b) Includes reimbursement by the Fund's investment manager of certain ordinary
operating expenses equal to $0.05 per share (calculated using the average
share method). Without such reimbursement, the ratio of expenses to average
net assets would have been 3.57% and the ratio of net investment loss to
average net assets would have been (2.01%) (see Note 6).
(c) Total return measures the change in value of an investment in the Fund over
the period indicated.
(d) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for security
trades on which commissions are charged. This amount may vary from period
to period and fund to fund depending on the mix of trades executed in
various markets where trading practices and commission structures may
differ.
(e) Not annualized.
(f) Not annualized. Fund was in operation for one day.
Page 6
<PAGE>
RCM GLOBAL HEALTH CARE FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1997
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
RCM Global Health Care Fund (the "Fund") is a non-diversified series of RCM
Equity Funds, Inc. (the "Company"). The Company is organized as a Maryland
corporation and is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company. The Fund commenced
operations on December 31, 1996.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles
which require management to make estimates and assumptions that affect the
reported amount of assets and liabilities. Actual results may differ from
these estimates.
a. SECURITIES VALUATIONS:
Investment securities are stated at fair market value. 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. If there has been no sale on such day, then the security will be
valued at the closing bid price on such day. If no bid price is quoted on
such day, then the security will be valued by such method as the Board of
Directors of the Company in good faith deems appropriate to reflect its
fair market value. Readily marketable securities traded only in the
over-the-counter market that are not listed on the National Association of
Securities Dealers, Inc. Automated Quotation System or similar foreign
reporting service will be valued at the mean bid price, or such other
comparable sources as the Board of Directors of the Company 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 the Board of Directors of the Company in good faith deems
appropriate to reflect their fair market value. Short-term investments
with a maturity of 60 days or less are valued at amortized cost, which
approximates market value.
b. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME:
Security transactions are recorded as of the date of purchase or sale.
Realized gains and losses on security transactions are determined on the
identified cost basis for both financial statement and federal income tax
purposes. Interest income, foreign taxes and expenses are accrued daily.
Dividends are recorded on the ex-dividend date.
c. FOREIGN CURRENCY TRANSACTIONS:
The records of the Fund are maintained in U.S. dollars. Foreign
currencies, investments and other assets and liabilities are translated
into U.S. dollars at current exchange rates. Purchases and sales of
foreign securities and income and withholding taxes are translated on the
respective dates of such transactions. Net realized currency gains and
losses include foreign currency gains and losses between trade date and
settlement date and foreign currency transactions. The Fund does not
isolate that portion of foreign currency exchange fluctuation on
investments from unrealized appreciation and depreciation which arises from
changes in market prices. Such fluctuations are included with the net
unrealized appreciation or depreciation on investments.
Page 7
<PAGE>
RCM GLOBAL HEALTH CARE FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1997
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
d. FEDERAL INCOME TAXES:
It is the policy of the Fund to comply with the requirements for
qualification as a "regulated investment company" under the Internal
Revenue Code of 1986, as amended (the "Code"). It is also the intention of
the Fund to make distributions sufficient to avoid imposition of any excise
tax under Section 4982 of the Code. Therefore, no provision has been made
for Federal or excise taxes on income and capital gains.
e. DISTRIBUTIONS:
Distributions to shareholders are recorded by the Fund on the ex-dividend
date. Income and capital gain distributions are determined in accordance
with Federal income tax regulations, which may differ from generally
accepted accounting principles. These differences are primarily due to
differing treatments of income and gains on various investment securities
held by the Fund and timing differences.
2. INVESTMENT IN FOREIGN SECURITIES
Investing in foreign equity securities and currency transactions involves
significant risks, some of which are not typically associated with
investments of domestic origin. The Fund's investments in foreign markets
will subject the Fund to the risk of foreign currency exchange rate
fluctuations, perceived credit risk and adverse economic and political
developments.
3. CAPITAL SHARES
At April 30, 1997, there were 1,000,000,000 shares of the Company's capital
stock authorized, at $0.0001 par value. Of this amount, 50,000,000 were
classified as shares of the Fund; 50,000,000 were classified as shares of
RCM Global Technology Fund; 50,000,000 were classified as shares of RCM
Global Small Cap Fund; 50,000,000 were classified as shares of RCM Large
Cap Growth Fund; 50,000,000 were classified as shares of Dresdner RCM
Emerging Markets Fund; and 750,000,000 shares remain unclassified. There
were 400,000 shares sold for a total of $4,000,000 on December 31, 1996
(commencement of operations) and 10 shares sold for a total of $100 during
the four-month period ended April 30, 1997. At April 30, 1997, 400,000
shares of the total 400,010 outstanding shares of the Fund were
beneficially owned by clients of Dresdner Bank AG/Investment
Management/Institutional Asset Management Division.
4. PURCHASES AND SALES OF SECURITIES
For the four-month period ended April 30, 1997, purchases and sales of
investment securities by the Fund, other than U.S. government obligations
and short-term securities, aggregated $4,237,663 and $1,273,371,
respectively. During the same period, short-term sales/maturities of U.S.
government obligations aggregated $5,999,530, and there were no purchases
of U.S. government obligations by the Fund. At April 30, 1997, the
aggregate cost of investments was the same for book and federal income tax
purposes.
Page 8
<PAGE>
RCM GLOBAL HEALTH CARE FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1997
(UNAUDITED)
5. DEFERRED ORGANIZATIONAL COSTS
Costs incurred by the Fund in connection with its organization aggregated
$10,000. These costs are being amortized on a straight-line basis over a
five-year period beginning at the commencement of the Fund's operations.
6. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
RCM Capital Management, L.L.C. ("RCM") manages the Fund's investments and
provides various administrative services, subject to the authority of the
Board of Directors. The Fund pays investment management fees monthly to
RCM at an annualized rate of 1.00% of the Fund's average daily net assets.
For the four-month period ended April 30, 1997, the Fund recorded
investment management fees of $13,623.
RCM has voluntarily agreed, until at least December 31, 1997, 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 annualized
rate of 2.10% of the value of the average daily net assets of the Fund. In
subsequent years, the Fund will reimburse RCM for any such payments to the
extent that the Fund's operating expenses are otherwise below this expense
cap. RCM recorded reimbursement of Fund operating expenses totaling
$19,971 for the four-month period ended April 30, 1997.
Funds Distributor, Inc. (the "Distributor"), acts as distributor of shares
of the Fund. The Distributor retains a portion of any initial sales charge
upon the purchase of shares of the Fund. The Company has adopted a
distribution plan pursuant to Rule 12b-1 under the 1940 Act with respect to
the Fund. Under the distribution plan, which is a "reimbursement plan,"
the Fund pays the Distributor an annual fee of up to 0.30% of the Fund's
average daily net assets as reimbursement for certain expenses actually
incurred by the Distributor in connection with distribution of shares of
the Fund. For the four-month period ended April 30, 1997, the Fund did
not record any 12b-1 fees.
Each Director who is not an interested person of the Company receives from
the Company an annual retainer of $1,000 (the retainer is evenly prorated
among each series of the Company), plus $500 for each meeting of the Board
attended and $250 for each committee meeting attended.
Page 9
<PAGE>
INVESTMENT MANAGER
RCM Capital Management, L.L.C.
Four Embarcadero Center
San Francisco, California 94111
TRANSFER AND REDEMPTION AGENT
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
DISTRIBUTOR
Funds Distributor, Inc.
60 State Street, Suite 1300
Boston, Massachusetts 02109
CUSTODIAN
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
LEGAL COUNSEL
Paul, Hastings, Janofsky & Walker LLP
555 South Flower Street
Los Angeles, California 90071
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
Page 10
<PAGE>
RCM GLOBAL SMALL CAP FUND
FINANCIAL REPORT
APRIL 30, 1997
<PAGE>
RCM GLOBAL SMALL CAP FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
APRIL 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
% OF
SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- --------------- ---------- --------------------------------- ---------- ------------
<C> <C> <S> <C> <C>
CONSUMER DURABLES SECTOR 5.1%
AUTOMOTIVE RELATED 0.7%
700 US Tower Automotive Inc. * $ 25,900
OTHER CONSUMER DURABLES 4.4%
1,500 NETH Koninklijke Ahrend Groep N.V. 90,848
3,000 US Sola International Inc. * 75,000
----------
165,848
----------
CONSUMER NON-DURABLES SECTOR 19.7%
FOOD AND FOOD PROCESSING 6.5%
2,340 JPN Hokuto Corp. 81,112
440 FR Lambert Dodard Chancereul S.A. 77,649
1,000 FIN Raision Tehtaat Oy 82,878
----------
241,639
----------
GENERAL RETAIL 2.7%
2,400 US Samsonite Corp. * 99,600
HOUSEHOLD/RELATED NON-DURABLES 3.9%
10,000 US Carson Inc. * 75,000
5,000 SWTZ Tag Heuer International S.A. Sponsored ADR * 70,000
----------
145,000
----------
LEISURE TIME PRODUCTS/SERVICES 6.6%
2,500 US CapStar Hotel Co. * 70,938
3,300 CAN Four Seasons Hotels Inc. * 73,425
265 FR Grand Optical-Photoservice 39,456
1,800 SPN Sol Melia S.A. * 61,681
----------
245,500
----------
CYCLICAL/CAPITAL GOODS SECTOR 15.0%
AEROSPACE AND DEFENSE 1.2%
2,000 UK Doncasters PLC * 45,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 1
<PAGE>
RCM GLOBAL SMALL CAP FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
APRIL 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
% OF
SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- ---------------- ----------- ----------------------------------- ------------ ------------
<C> <C> <S> <C> <C>
BUILDING AND CONSTRUCTION 2.8%
17,000 MEX Consorcio ARA S.A. * $ 57,761
10,000 IRE Green Property PLC 46,191
----------
103,952
----------
CHEMICALS AND TEXTILES 0.9%
320 AUS Wolford AG 32,992
INDUSTRIAL EQUIPMENT 4.6%
2,400 GER Pfeiffer Vacuum Technology AG - G * 55,434
600 GER Pfeiffer Vacuum Technology AG * 13,950
4,200 UK Powerscreen International PLC 41,387
3,100 NOR Tomra Systems A/S 60,074
----------
170,845
----------
TRANSPORTATION SERVICES 5.5%
5,000 US Kitty Hawk Inc. * 68,750
200 GER Sixt AG 138,584
----------
207,334
----------
ENERGY SECTOR 5.5%
ENERGY 5.5%
2,000 CAN Ballard Power Systems, Inc. * 54,402
2,000 UK British-Borneo Petroleum Syndicate PLC 41,653
3,000 US Houston Exploration Co. * 37,500
3,000 NOR Semdvig ASA 71,617
----------
205,172
----------
HEALTH CARE SECTOR 12.7%
DRUGS & HOSPITAL SERVICES 4.5%
15,000 INDO Darya Varya Laboratoria 18,210
3,200 CHLE Laboratorio Chile S.A. 70,400
2,000 US Sofamor/Danek Group Inc. * 78,000
----------
166,610
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 2
<PAGE>
RCM GLOBAL SMALL CAP FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
APRIL 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
% OF
SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- -------------- ---------- --------------------------------- ---------- ------------
<C> <C> <S> <C> <C>
HEALTH CARE SERVICES 8.2%
5,000 US Advanced Health Corp. * $ 86,250
2,000 US Curative Health Services, Inc. * 47,250
7,000 US Harborside Healthcare Corp. * 80,500
2,000 US Total Renal Care Holdings Inc. * 64,250
2,000 US Transition Systems Inc. * 30,000
----------
308,250
----------
INTEREST-SENSITIVE SECTOR 4.6%
BANKING 3.7%
1,800 US Community First Bankshares Inc. 57,825
19,600 HK Dah Sing Financial Holdings, Ltd. 81,472
----------
139,297
----------
GENERAL FINANCE 0.9%
1,900 CAN Newcourt Credit Group Inc. 35,089
TECHNOLOGY SECTOR 21.0%
ELECTRONICS AND NEW TECHNOLOGY 6.2%
5,000 US Computer Products, Inc. * 85,625
2,200 CAN Leitch Technology Corp. * 46,063
2,500 US Uniphase Corp. * 99,375
----------
231,063
----------
TECHNOLOGY SERVICES 14.8%
5,800 FR Business Objects SA Sponsored ADR * 52,200
150 FR Group Axime * 18,042
4,600 UK Dr. Solomons Group PLC Sponsored ADR * 106,375
1,500 SWDN Enator AB * 30,211
9,000 US International Telecommunication Systems Inc. * 108,000
11,000 CAN Open Text Corp. * 82,500
2,500 US Renaissance Solutions Inc. * 54,375
3,500 US The Indus Group Inc. * 52,938
1,500 US VERITAS Software Co. * 50,438
----------
555,079
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 3
<PAGE>
RCM GLOBAL SMALL CAP FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
APRIL 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
% OF
SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- ----------- --------- --------------------------------- ---------- ------------
<C> <C> <S> <C> <C>
TELEMEDIA/SERVICES SECTOR 14.4%
BUSINESS SERVICES 10.0%
1,500 US Caribiner International Inc. * $ 79,500
3,000 US F. Y. I. Inc. * 54,000
4,600 CAN Philip Environmental Inc. * 72,450
3,000 US Precision Response Corp. * 49,125
2,000 US The Registry Inc. * 84,750
2,000 US Wilmar Industries Inc. * 33,000
----------
372,825
----------
COMMUNICATION SERVICES 1.4%
5,000 US Smartalk Teleservices Inc. * 53,750
MEDIA SERVICES 3.0%
4,000 BMD Central European Media Entertainment Ltd. Class A * 113,501
----------
TOTAL EQUITY INVESTMENTS
(COST $3,847,469) 98.0% 3,664,246
----------
SHORT-TERM INVESTMENTS
MONEY MARKET FUNDS 1.0%
36,686 US SSgA U.S. Government Money Market Fund 36,686
----------
TOTAL SHORT-TERM INVESTMENTS 1.0%
(COST $36,686) 36,686
TOTAL INVESTMENTS (COST $3,884,155) 99.0% 3,700,932
OTHER ASSETS LESS LIABILITIES 1.0% 39,060
----------
NET ASSETS 100.0% $3,739,992
----------
----------
</TABLE>
* Non-income producing security.
The accompanying notes are an integral part of the financial statements.
Page 4
<PAGE>
RCM GLOBAL SMALL CAP FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
APRIL 30, 1997
(UNAUDITED)
The Fund's investments in securities at April 30, 1997 categorized by
country:
% of Net Assets
-------------------------------------------
Short-Term
Country Equities and Other Total
- ------- -------- --------- --------
Austria 0.9% 0.9%
Bermuda 3.0% 3.0%
Canada 9.7% 0.3% 10.0%
Chile 1.9% 1.9%
Finland 2.2% 2.2%
France 5.0% 5.0%
Germany 5.6% 5.6%
Hong Kong 2.2% 2.2%
Indonesia 0.5% 0.5%
Ireland 1.2% 1.2%
Japan 2.2% 2.2%
Mexico 1.5% 1.5%
Netherlands 2.4% 2.4%
Norway 3.5% 3.5%
Spain 1.6% 1.6%
Sweden 0.8% 0.8%
Switzerland 1.9% 1.9%
United Kingdom 6.3% 6.3%
United States 45.5% 1.8% 47.3%
---------- --------- --------
Total 97.9% 2.1% 100.0%
---------- --------- --------
---------- --------- --------
The accompanying notes are an integral part of the financial statements.
Page 5
<PAGE>
RCM GLOBAL SMALL CAP FUND
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1997
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value (cost $3,884,155) (Note 1) $ 3,700,932
Foreign currency, at value (cost $13,244) (Note 1) 13,243
Receivable for investments sold 265,148
Deferred organizational costs (Note 5) 9,342
Dividends receivable 1,488
Other assets 574
-------------
Total Assets 3,990,727
-------------
LIABILITIES:
Payable for investments purchased 220,252
Payable for organizational costs (Note 5) 8,032
Payable for Directors' fees (Note 6) 4,933
Payable for legal fees 4,932
Payable for audit fees 4,932
Payable for transfer agent fees 3,006
Payable for investment management fees (Note 6) 2,618
Payable for custodian fees 1,587
Payable for insurance expenses 443
-------------
Total Liabilities 250,735
-------------
NET ASSETS $ 3,739,992
-------------
-------------
NET ASSETS CONSIST OF:
Paid-in capital 4,000,100
Net investment loss (23,418)
Accumulated net realized loss on investments and foreign
currency transactions (53,473)
Net unrealized depreciation on investments and translation of
other assets and liabilities on foreign currencies (183,217)
-------------
NET ASSETS $ 3,739,992
-------------
-------------
Net asset value per share
($3,739,992 + 400,010 shares outstanding) $ 9.35
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 6
<PAGE>
RCM GLOBAL SMALL CAP FUND
STATEMENT OF OPERATIONS
FOR THE FOUR MONTHS ENDED APRIL 30, 1997
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Dividends (net of foreign withholding tax of $248) 5,529
Interest 3,854
--------------
Total income 9,383
--------------
Expenses:
Investment management fees (Note 6) 16,196
Directors' fees (Note 6) 9,932
Transfer agent fees 7,052
Legal fees 4,932
Audit fees 4,932
Registration and filing fees 2,829
Custodian fees 2,781
Amortization of organizational costs (Note 5) 658
Miscellaneous expenses 3,298
--------------
Total expenses before reimbursements 52,610
Expenses reimbursed by investment manager (Note 6) (19,809)
--------------
Total net expenses 32,801
--------------
Net investment loss (23,418)
--------------
NET REALIZED AND UNREALIZED LOSS:
Net realized loss from investments (50,951)
Net realized loss from foreign currency transactions (2,522)
--------------
Net realized loss (53,473)
--------------
Net change in unrealized depreciation on investments and
translation of other assets and liabilities on foreign currencies (183,217)
--------------
Net realized and unrealized loss during the period (236,690)
--------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (260,108)
--------------
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 7
<PAGE>
RCM GLOBAL SMALL CAP FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
December 31, 1996
Four Months Ended (commencement
April 30, 1997 of operations) to
(Unaudited) December 31, 1996
--------------------- -------------------
<S> <C> <C>
OPERATIONS:
Net investment loss $ (23,418) $ -
Net realized loss on investments and foreign
currency transactions (53,473) -
Net change in unrealized depreciation on
investments and translation of other assets
and liabilities on foreign currencies (183,217) -
--------------------- -------------------
Net decrease in net assets resulting from
operations (260,108) -
NET INCREASE FROM CAPITAL SHARES TRANSACTIONS
(Note 3) 100 4,000,000
--------------------- -------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (260,008) 4,000,000
NET ASSETS:
Beginning of period 4,000,000 -
--------------------- -------------------
End of period * $ 3,739,992 $ 4,000,000
--------------------- -------------------
--------------------- -------------------
* Includes accumulated net investment loss of $(23,418) $ -
--------------------- -------------------
--------------------- -------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 8
<PAGE>
RCM GLOBAL SMALL CAP FUND
FINANCIAL HIGHLIGHTS
Selected data for each share of capital stock outstanding are as follows:
<TABLE>
<CAPTION>
December 31, 1996
Four Months Ended (commencement
April 30, 1997 of operations) to
(Unaudited) December 31, 1996
------------------ ---------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.00 $ 10.00
----------- -----------
Net investment loss (a) (0.06) (b) -
Net realized and unrealized loss
on investments (a) (0.59) -
----------- ----------
Net decrease in net asset value
resulting from investment operations (a) (0.65) -
----------- ----------
NET ASSET VALUE, END OF PERIOD $ 9.35 $ 10.00
----------- ----------
----------- ----------
TOTAL RETURN (c) (6.60%) 0.00%
----------- ----------
----------- ----------
RATIOS AND SUPPLEMENTAL DATA:
Average commission rate paid per share (d) $ 0.0390 $ 0.0465
----------- ----------
----------- ----------
Net assets, end of period (in 000's) $ 3,740 $ 4,000
----------- ----------
----------- ----------
Ratio of expenses to average net assets 2.50% (b) 0.00% (f)
----------- ----------
----------- ----------
Ratio of net investment loss to average
net assets (1.78%) (b) 0.00% (f)
----------- ----------
----------- ----------
Portfolio turnover 44.80% (e) 0.00% (f)
------------ ----------
------------ ----------
</TABLE>
- -------------------------------------
(a) Calculated using the average share method.
(b) Includes reimbursement by the Fund's investment manager of certain ordinary
operating expenses equal to $0.05 per share (calculated using the average
share method). Without such reimbursement, the ratio of expenses to
average net assets would have been 4.01% and the ratio of net investment
loss to average net assets would have been (3.29%) (see Note 6).
(c) Total return measures the change in value of an investment in the Fund over
the period indicated.
(d) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for security
trades on which commissions are charged. This amount may
vary from period to period and fund to fund depending on the mix of trades
executed in various markets where trading practices and commission
structures may differ.
(e) Not annualized.
(f) Not annualized. Fund was in operation for one day.
Page 9
<PAGE>
RCM GLOBAL SMALL CAP FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1997
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
RCM Global Small Cap Fund (the "Fund") is a diversified series of RCM
Equity Funds, Inc. (the "Company"). The Company is organized as a Maryland
corporation and is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company. The Fund commenced
operations on December 31, 1996.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles
which require management to make estimates and assumptions that affect the
reported amount of assets and liabilities. Actual results may differ from
these estimates.
a. SECURITIES VALUATIONS:
Investment securities are stated at fair market value. 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. If there has been no sale on such day, then the security will be
valued at the closing bid price on such day. If no bid price is quoted on
such day, then the security will be valued by such method as the Board of
Directors of the Company in good faith deems appropriate to reflect its
fair market value. Readily marketable securities traded only in the
over-the-counter market that are not listed on the National Association of
Securities Dealers, Inc. Automated Quotation System or similar foreign
reporting service will be valued at the mean bid price, or such other
comparable sources as the Board of Directors of the Company 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 the Board of Directors of the Company in good faith deems
appropriate to reflect their fair market value. Short-term investments
with a maturity of 60 days or less are valued at amortized cost, which
approximates market value.
b. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME:
Security transactions are recorded as of the date of purchase or sale.
Realized gains and losses on security transactions are determined on the
identified cost basis for both financial statement and federal income tax
purposes. Interest income, foreign taxes and expenses are accrued daily.
Dividends are recorded on the ex-dividend date.
c. FOREIGN CURRENCY TRANSACTIONS:
The records of the Fund are maintained in U.S. dollars. Foreign
currencies, investments and other assets and liabilities are translated
into U.S. dollars at current exchange rates. Purchases and sales of
foreign securities and income and withholding taxes are translated on the
respective dates of such transactions. Net realized currency gains and
losses include foreign currency gains and losses between trade date and
settlement date and foreign currency transactions. The Fund does not
isolate that portion of foreign currency exchange fluctuation on
investments from unrealized appreciation and depreciation which arises from
changes in market prices. Such fluctuations are included with the net
unrealized appreciation or depreciation on investments.
Page 10
<PAGE>
RCM GLOBAL SMALL CAP FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1997
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
d. FEDERAL INCOME TAXES:
It is the policy of the Fund to comply with the requirements for
qualification as a "regulated investment company" under the Internal
Revenue Code of 1986, as amended (the "Code"). It is also the intention of
the Fund to make distributions sufficient to avoid imposition of any excise
tax under Section 4982 of the Code. Therefore, no provision has been made
for Federal or excise taxes on income and capital gains.
e. DISTRIBUTIONS:
Distributions to shareholders are recorded by the Fund on the ex-dividend
date. Income and capital gain distributions are determined in accordance
with Federal income tax regulations, which may differ from generally
accepted accounting principles. These differences are primarily due to
differing treatments of income and gains on various investment securities
held by the Fund and timing differences.
2. INVESTMENT IN FOREIGN SECURITIES
Investing in foreign equity securities and currency transactions involves
significant risks, some of which are not typically associated with
investments of domestic origin. The Fund's investments in foreign markets
will subject the Fund to the risk of foreign currency exchange rate
fluctuations, perceived credit risk and adverse economic and political
developments.
3. CAPITAL SHARES
At April 30, 1997, there were 1,000,000,000 shares of the Company's capital
stock authorized, at $0.0001 par value. Of this amount, 50,000,000 were
classified as shares of the Fund; 50,000,000 were classified as shares of
RCM Global Technology Fund; 50,000,000 were classified as shares of RCM
Global Health Care Fund; 50,000,000 were classified as shares of RCM Large
Cap Growth Fund; 50,000,000 were classified as shares of Dresdner RCM
Emerging Markets Fund; and 750,000,000 shares remain unclassified. There
were 400,000 shares sold for a total of $4,000,000 on December 31, 1996
(commencement of operations) and 10 shares sold for a total of $100 during
the four-month period ended April 30, 1997. At April 30, 1997, 400,000
shares of the total 400,010 outstanding shares of the Fund were
beneficially owned by clients of Dresdner Bank AG/Investment
Management/Institutional Asset Management Division.
4. PURCHASES AND SALES OF SECURITIES
For the four-month period ended April 30, 1997, purchases and sales of
investment securities by the Fund, other than U.S. government obligations
and short-term securities, aggregated $3,015,657 and $1,565,894,
respectively. During the same period, short-term sales/maturities of U.S.
government obligations aggregated $3,998,761, and there were no purchases
of U.S. government obligations by the Fund. At April 30, 1997, the
aggregate cost of investments was the same for book and federal income tax
purposes.
Page 11
<PAGE>
RCM GLOBAL SMALL CAP FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1997
(UNAUDITED)
5. DEFERRED ORGANIZATIONAL COSTS
Costs incurred by the Fund in connection with its organization aggregated
$10,000. These costs are being amortized on a straight-line basis over a
five-year period beginning at the commencement of the Fund's operations.
6. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
RCM Capital Management, L.L.C. ("RCM") manages the Fund's investments and
provides various administrative services, subject to the authority of the
Board of Directors. The Fund pays investment management fees monthly to
RCM at an annualized rate of 1.25% of the Fund's average daily net assets.
For the four-month period ended April 30, 1997, the Fund recorded
investment management fees of $16,196.
RCM has voluntarily agreed, until at least December 31, 1997, 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 annualized
rate of 2.50% of the value of the average daily net assets of the Fund. In
subsequent years, the Fund will reimburse RCM for any such payments to the
extent that the Fund's operating expenses are otherwise below this expense
cap. RCM recorded reimbursement of Fund operating expenses totaling
$19,809 for the four-month period ended April 30, 1997.
Funds Distributor, Inc. (the "Distributor"), acts as distributor of shares
of the Fund. The Distributor retains a portion of any initial sales charge
upon the purchase of shares of the Fund. The Company has adopted a
distribution plan pursuant to Rule 12b-1 under the 1940 Act with respect to
the Fund. Under the distribution plan, which is a "reimbursement plan,"
the Fund pays the Distributor an annual fee of up to 0.30% of the Fund's
average daily net assets as reimbursement for certain expenses actually
incurred by the Distributor in connection with distribution of shares of
the Fund. For the four-month period ended April 30, 1997, the Fund did not
record any 12b-1 fees.
Each Director who is not an interested person of the Company receives from
the Company an annual retainer of $1,000 (the retainer is evenly prorated
among each series of the Company), plus $500 for each meeting of the Board
attended and $250 for each committee meeting attended.
Page 12
<PAGE>
INVESTMENT MANAGER
RCM Capital Management, L.L.C.
Four Embarcadero Center
San Francisco, California 94111
TRANSFER AND REDEMPTION AGENT
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
DISTRIBUTOR
Funds Distributor, Inc.
60 State Street, Suite 1300
Boston, Massachusetts 02109
CUSTODIAN
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
LEGAL COUNSEL
Paul, Hastings, Janofsky & Walker LLP
555 South Flower Street
Los Angeles, California 90071
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
Page 13
<PAGE>
RCM LARGE CAP GROWTH FUND
FINANCIAL REPORT
APRIL 30, 1997
<PAGE>
RCM LARGE CAP GROWTH FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
APRIL 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
% OF
SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- ------ ------- ----------------- ---------- ------------
<S> <C> <C> <C> <C>
CONSUMER DURABLES SECTOR 0.5%
OTHER CONSUMER DURABLES 0.5%
500 US Harman International Industries Inc. $ 19,125
CONSUMER NON-DURABLES SECTOR 20.8%
BEVERAGE AND TOBACCO 3.6%
1,100 US The Coca-Cola Company 69,988
800 MEX Pan American Beverages Inc. Class A 23,200
1,500 US Philip Morris Companies Inc. 59,063
------------
152,251
------------
FOOD AND FOOD PROCESSING 0.5%
300 US Pioneer Hi Bred International Inc. 21,188
GENERAL RETAIL 3.2%
400 US CVS Corp. 19,850
350 US Home Depot, Inc. 20,300
1,300 US Liz Claiborne, Inc. 58,825
1,200 US PETsMART, Inc. * 20,175
700 US Saks Holdings Inc. 13,388
------------
132,538
------------
HOUSEHOLD/RELATED NON-DURABLES 8.3%
1,300 US Colgate-Palmolive Company 144,300
900 US Gillette Company 76,500
1,100 US Kimberly-Clark Corporation 56,375
400 US The Procter & Gamble Company 50,300
600 US Revlon Inc. Class A * 22,050
------------
349,525
------------
LEISURE TIME PRODUCTS/SERVICES 5.2%
1,000 US Doubletree Corp. * 42,000
2,100 US Hasbro Inc. 52,500
7,000 US Host Marriott Corp. * 121,625
------------
216,125
------------
The accompanying notes are an intergral part of the financial statements.
Page 1
<PAGE>
RCM LARGE CAP GROWTH FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
APRIL 30, 1997
(UNAUDITED)
<CAPTION>
% OF
SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- ------ ------- ----------------- ---------- ------------
<S> <C> <C> <C> <C>
CYCLICAL/CAPITAL GOODS SECTOR 9.8%
AEROSPACE AND DEFENSE 3.8%
200 US The Boeing Company $ 19,725
700 US Rockwell International Corp. 46,550
1,900 US Sundstrand Corp. 92,625
------------
158,900
------------
ELECTRICAL EQUIPMENT 4.4%
900 US General Electric Company 99,788
1,200 US Honeywell Inc. 84,750
------------
184,538
------------
INDUSTRIAL EQUIPMENT 1.6%
1,100 US Tyco International Ltd. 67,100
ENERGY SECTOR 4.2%
ENERGY 4.2%
1,100 US Baker Hughes, Inc. 37,950
150 UK British Petroleum Co., PLC ADR 20,644
600 US Camco International Inc. 26,625
700 US Chevron Corporation 47,950
400 NETH Schlumberger Ltd. 44,300
------------
177,469
------------
HEALTH CARE SECTOR 26.0%
DRUGS & HOSPITAL SERVICES 24.8%
1,600 US Amgen Inc. 94,200
2,200 US Centocor Inc. * 61,875
1,600 US Guidant Corp. 109,200
1,900 US Eli Lilly & Co 166,963
1,200 US Medtronic Inc. 83,100
600 US Merck & Co., Inc. 54,300
1,400 US Pfizer Inc. 134,400
500 US Pharmacia & Upjohn Inc. 14,813
1,000 US SangStat Medical Corp. * 17,125
2,300 UK SmithKline Beecham PLC ADR 185,438
1,200 US Warner-Lambert Company 117,600
------------
1,039,014
------------
The accompanying notes are an integral part of the financial statements.
Page 2
<PAGE>
RCM LARGE CAP GROWTH FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
APRIL 30, 1997
(UNAUDITED)
<CAPTION>
% OF
SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- ------ ------- ----------------- ---------- ------------
<S> <C> <C> <C> <C>
HEALTH CARE SERVICES 1.2%
400 US HBO & Co. $ 21,400
1,100 US PhyCor Inc. * 29,288
------------
50,688
------------
INTEREST-SENSITIVE SECTOR 8.9%
BANKING 2.7%
1,000 US Citicorp 112,625
GENERAL FINANCE 3.3%
1,500 US AMRESCO Inc. * 21,844
1,300 US Federal National Mortgage Association 53,463
2,200 US Glendale Federal Bank FSB (California) * 54,725
500 CAN Newcourt Credit Group Inc. 9,234
------------
139,266
------------
INSURANCE 2.9%
800 US American International Group Inc. 102,800
400 US PMI Group Inc. 20,450
------------
123,250
------------
TECHNOLOGY SECTOR 17.1%
COMPUTERS AND OFFICE EQUIPMENT 2.4%
1,000 US E M C Corp. * 36,375
300 US International Business Machines Corp. 48,225
600 US Sun Microsystems Inc. * 17,288
------------
101,888
------------
ELECTRONICS AND NEW TECHNOLOGY 6.8%
1,000 US Ascend Communications Inc. * 45,750
1,200 SWDN Ericsson LM Telephone Co. Sponsored ADR 40,350
600 US Intel Corp. 91,875
700 CAN Newbridge Networks Corp. * 22,225
1,300 FIN Nokia Corp. Sponsored ADR A 84,013
------------
284,213
------------
The accompanying notes are an integral part of the financial statements.
Page 3
<PAGE>
RCM LARGE CAP GROWTH FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
APRIL 30, 1997
(UNAUDITED)
<CAPTION>
% OF
SHARES COUNTRY EQUITY INVESTMENTS NET ASSETS MARKET VALUE
- ------ ------- ----------------- ---------- ------------
<S> <C> <C> <C> <C>
TECHNOLOGY SERVICES 7.9%
500 US America Online Inc. * $ 22,563
300 US Computer Sciences Corp. * 18,750
900 US Electronics Arts Inc. * 21,713
600 US First Data Corp. 20,700
500 US McAfee Associates Inc. * 27,875
1,500 US Microsoft Corp. * 182,250
1,400 US Sterling Commerce Inc. * 36,225
------------
330,076
------------
TELEMEDIA/SERVICES SECTOR 7.4%
BUSINESS SERVICES 3.7%
1,400 UK Danka Business Systems PLC Sponsored ADR 42,788
1,100 US Manpower Inc. * 44,138
1,200 US Olsten Corp. 21,150
1,400 US Reynolds & Reynolds Co. Class A 29,050
600 US USA Waste Services, Inc. * 19,650
------------
156,776
------------
COMMUNICATION SERVICES 3.7%
450 US GTE Corporation 20,644
2,200 US Nextel Communications Inc. * 29,003
4,400 US WorldCom Inc. * 105,600
------------
155,247
------------
TOTAL EQUITY INVESTMENTS
(COST $3,739,791) 94.7% 3,971,802
------------
SHORT-TERM INVESTMENTS
MONEY MARKET FUNDS 3.1%
130,918 US SSgA U.S. Government Money Market Fund 130,918
------------
TOTAL SHORT-TERM INVESTMENTS 3.1%
(COST $130,918) 130,918
------------
TOTAL INVESTMENTS (COST $3,870,709) 97.8% 4,102,720
OTHER ASSETS LESS LIABILITIES 2.2% 95,645
------------
NET ASSETS 100.0% $ 4,198,365
------------
------------
</TABLE>
* Non-income producing security.
The accompanying notes are an integral part of the financial statements.
Page 4
<PAGE>
RCM LARGE CAP GROWTH FUND
INVESTMENTS IN SECURITIES AND NET ASSETS
APRIL 30, 1997
(UNAUDITED)
The Fund's investments in securities at April 30, 1997 categorized by country:
% of Net Assets
----------------------------------------------
Short-Term
Country Equities and Other Total
------- -------- ---------- -----
Canada 0.7% 0.1% 0.8%
Finland 2.0% 2.0%
Netherlands 1.1% 1.1%
Panama/Mexico 0.6% 0.6%
Sweden 1.0% 1.0%
United Kingdom 5.9% 5.9%
United States 83.4% 5.2% 88.6%
-------- ---------- ------
Total 94.7% 5.3% 100.0%
-------- ---------- ------
-------- ---------- ------
Page 5
<PAGE>
RCM LARGE CAP GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1997
(UNAUDITED)
ASSETS:
Investments in securities, at value (cost $3,870,709) (Note 1) $ 4,102,720
Foreign currency, at value (cost $3,694) (Note 1) 3,694
Receivable for investments sold 123,498
Deferred organizational costs (Note 5) 9,342
Dividends receivable 4,692
Receivable from investment manager (Note 6) 1,006
-----------
Total Assets 4,244,952
-----------
LIABILITIES:
Payable for investments purchased 18,440
Payable for organizational costs (Note 5) 8,032
Payable for legal fees 4,932
Payable for Directors' fees (Note 6) 4,932
Payable for audit fees 4,932
Payable for transfer agent fees 3,032
Payable for custodian fees 1,393
Payable for insurance expenses 443
Payable for miscellaneous expenses 451
-----------
Total Liabilities 46,587
-----------
NET ASSETS $ 4,198,365
-----------
-----------
NET ASSETS CONSIST OF:
Paid-in capital $ 4,000,100
Net investment loss (4,725)
Accumulated net realized loss on investments and foreign
currency transactions (29,024)
Net unrealized appreciation on investments and translation of
other assets and liabilities on foreign currencies 232,014
-----------
NET ASSETS $ 4,198,365
-----------
-----------
NET ASSET VALUE PER SHARE
($4,198,365 DIVIDED BY 400,009 shares outstanding) $ 10.50
-----------
-----------
The accompanying notes oare an integral part of the financal statements.
Page 6
<PAGE>
RCM LARGE CAP GROWTH FUND
STATEMENT OF OPERATIONS
FOR THE FOUR MONTHS ENDED APRIL 30, 1997
(UNAUDITED)
INVESTMENT INCOME:
Income:
Dividends (net of foreign withholding tax of $432) $ 20,555
Expenses:
Investment management fees (Note 6) 10,250
Directors' fees (Note 6) 9,932
Transfer agent fees 7,132
Legal fees 4,932
Audit fees 4,932
Custodian fees 3,438
Registration and filing fees 2,829
Amortization of organizational costs (Note 5) 658
Insurance expenses 444
Miscellaneous expenses 2,400
----------
Total expenses before reimbursements 46,947
Expenses reimbursed by investment manager (Note 6) (21,667)
----------
Total net expenses 25,280
----------
Net investment loss (4,725)
----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss from investments (27,285)
Net realized loss from foreign currency transactions (1,739)
----------
Net realized loss (29,024)
----------
Net change in unrealized appreciation on investments
and translation of other assets and liabilities on
foreign currencies 232,014
----------
Net realized and unrealized gain during the period 202,990
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 198,265
----------
----------
The accompanying notes are an integral part of the financial statements.
Page 7
<PAGE>
RCM LARGE CAP GROWTH FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
December 31, 1996
Four Months Ended (commencement
April 30, 1997 of operations) to
(Unaudited) December 31, 1996
----------------- -----------------
<S> <C> <C>
OPERATIONS:
Net investment loss $ (4,725) $ -
Net realized loss on investments and foreign
currency transactions (29,024) -
Net change in unrealized appreciation on
investments and translation of other assets
and liabilities on foreign currencies 232,014 -
------------- ---------------
Net increase in net assets resulting from
operations 198,265 -
NET INCREASE FROM CAPITAL SHARES TRANSACTIONS
(Note 3) 100 4,000,000
------------- ---------------
TOTAL INCREASE IN NET ASSETS 198,365 4,000,000
NET ASSETS:
Beginning of period 4,000,000 -
------------- ---------------
End of period * $ 4,198,365 $ 4,000,000
------------- ---------------
------------- ---------------
- ----------------------
* Includes accumulated net investment loss of $ (4,725) $ -
------------- ---------------
------------- ---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 8
<PAGE>
RCM LARGE CAP GROWTH FUND
FINANCIAL HIGHLIGHTS
Selected data for each share of capital stock outstanding are as follows:
<TABLE>
<CAPTION>
December 31, 1996
Four Months Ended (commencement
April 30, 1997 of operations) to
(Unaudited) December 31, 1996
----------------- -----------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.00 $ 10.00
---------- ----------
Net investment loss (a) (0.01)(b) -
Net realized and unrealized gain
on investments (a) 0.51 -
---------- ----------
Net increase in net asset value
resulting from investment operations (a) 0.50 -
---------- ----------
NET ASSET VALUE, END OF PERIOD $ 10.50 $ 10.00
---------- ----------
---------- ----------
TOTAL RETURN (c) 4.90% 0.00%
---------- ----------
---------- ----------
RATIOS AND SUPPLEMENTAL DATA:
Average commission rate paid per share (d) $ 0.0727 $ 0.0326
---------- ----------
---------- ----------
Net assets, end of period (in 000's) $ 4,198 $ 4,000
---------- ----------
---------- ----------
Ratio of expenses to average net assets 1.85%(b) 0.00%(f)
---------- ----------
---------- ----------
Ratio of net investment loss to average
net assets (0.35%)(b) 0.00%(f)
---------- ----------
---------- ----------
Portfolio turnover 49.59%(e) 0.00%(f)
---------- ----------
---------- ----------
</TABLE>
- -------------------------
(a) Calculated using the average share method.
(b) Includes reimbursement by the Fund's investment manager of certain ordinary
operating expenses equal to $0.05 per share (calculated using the average
share method). Without such reimbursement, the ratio of expenses to
average net assets would have been 3.44% and the ratio of net investment
loss to average net assets would have been (1.93%) (see Note 6).
(c) Total return measures the change in value of an investment in the Fund over
the period indicated.
(d) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for security
trades on which commissions are charged. This amount may vary from period
to period and fund to fund depending on the mix of trades executed in
various markets where trading practices and commission structures may
differ.
(e) Not annualized.
(f) Not annualized. Fund was in operation for one day.
Page 9
<PAGE>
RCM LARGE CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1997
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
RCM Large Cap Growth Fund (the "Fund") is a diversified series of RCM
Equity Funds, Inc. (the "Company"). The Company is organized as a Maryland
corporation and is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company. The Fund commenced
operations on December 31, 1996.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles
which require management to make estimates and assumptions that affect the
reported amount of assets and liabilities. Actual results may differ from
these estimates.
a. SECURITIES VALUATIONS:
Investment securities are stated at fair market value. 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. If there has been no sale on such day, then the security will be
valued at the closing bid price on such day. If no bid price is quoted on
such day, then the security will be valued by such method as the Board of
Directors of the Company in good faith deems appropriate to reflect its
fair market value. Readily marketable securities traded only in the over-
the-counter market that are not listed on the National Association of
Securities Dealers, Inc. Automated Quotation System or similar foreign
reporting service will be valued at the mean bid price, or such other
comparable sources as the Board of Directors of the Company 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 the Board of Directors of the Company in good faith deems
appropriate to reflect their fair market value. Short-term investments
with a maturity of 60 days or less are valued at amortized cost, which
approximates market value.
b. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME:
Security transactions are recorded as of the date of purchase or sale.
Realized gains and losses on security transactions are determined on the
identified cost basis for both financial statement and federal income tax
purposes. Interest income, foreign taxes and expenses are accrued daily.
Dividends are recorded on the ex-dividend date.
c. FOREIGN CURRENCY TRANSACTIONS:
The records of the Fund are maintained in U.S. dollars. Foreign
currencies, investments and other assets and liabilities are translated
into U.S. dollars at current exchange rates. Purchases and sales of
foreign securities and income and withholding taxes are translated on the
respective dates of such transactions. Net realized currency gains and
losses include foreign currency gains and losses between trade date and
settlement date and foreign currency transactions. The Fund does not
isolate that portion of foreign currency exchange fluctuation on
investments from unrealized appreciation and depreciation which arises from
changes in market prices. Such fluctuations are included with the net
unrealized appreciation or depreciation on investments.
Page 10
<PAGE>
RCM LARGE CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1997
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
d. FEDERAL INCOME TAXES:
It is the policy of the Fund to comply with the requirements for
qualification as a "regulated investment company" under the Internal
Revenue Code of 1986, as amended (the "Code"). It is also the intention of
the Fund to make distributions sufficient to avoid imposition of any excise
tax under Section 4982 of the Code. Therefore, no provision has been made
for Federal or excise taxes on income and capital gains.
e. DISTRIBUTIONS:
Distributions to shareholders are recorded by the Fund on the ex-dividend
date. Income and capital gain distributions are determined in accordance
with Federal income tax regulations, which may differ from generally
accepted accounting principles. These differences are primarily due to
differing treatments of income and gains on various investment securities
held by the Fund and timing differences.
2. INVESTMENT IN FOREIGN SECURITIES
Investing in foreign equity securities and currency transactions involves
significant risks, some of which are not typically associated with
investments of domestic origin. The Fund's investments in foreign markets
will subject the Fund to the risk of foreign currency exchange rate
fluctuations, perceived credit risk and adverse economic and political
developments.
3. CAPITAL SHARES
At April 30, 1997, there were 1,000,000,000 shares of the Company's capital
stock authorized, at $0.0001 par value. Of this amount, 50,000,000 were
classified as shares of the Fund; 50,000,000 were classified as shares of
RCM Global Health Care Fund; 50,000,000 were classified as shares of RCM
Global Small Cap Fund; 50,000,000 were classified as shares of RCM Global
Technology Fund; 50,000,000 were classified as shares of Dresdner RCM
Emerging Markets Fund; and 750,000,000 shares remain unclassified. There
were 400,000 shares sold for a total of $4,000,000 on December 31, 1996
(commencement of operations) and 9 shares sold for a total of $100 during
the four-month period ended April 30, 1997. At April 30, 1997, 400,000
shares of the total 400,009 outstanding shares of the Fund were
beneficially owned by clients of Dresdner Bank AG/Investment
Management/Institutional Asset Management Division.
4. PURCHASES AND SALES OF SECURITIES
For the four-months ended April 30, 1997, purchases and sales of investment
securities by the Fund, other than U.S. government obligations and short-
term securities, aggregated $4,412,671 and $1,709,344, respectively. During
the same period, short-term sales/maturities of U.S. government obligations
aggregated $3,999,077, and there were no purchases of U.S. government
obligations by the Fund. At April 30, 1997, the aggregate cost of
investments was the same for book and federal income tax purposes.
Page 11
<PAGE>
RCM LARGE CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1997
(UNAUDITED)
5. DEFERRED ORGANIZATIONAL COSTS
Costs incurred by the Fund in connection with its organization aggregated
$10,000. These costs are being amortized on a straight-line basis over a
five-year period beginning at the commencement of the Fund's operations.
6. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
RCM Capital Management, L.L.C. ("RCM") manages the Fund's investments and
provides various administrative services, subject to the authority of the
Board of Directors. The Fund pays investment management fees monthly to
RCM at an annualized rate of 0.75% of the Fund's average daily net assets.
For the four-month period ended April 30, 1997, the Fund recorded
investment management fees of $10,250.
RCM has voluntarily agreed, until at least December 31, 1997, 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 annualized
rate of 1.85% of the value of the average daily net assets of the Fund. In
subsequent years, the Fund will reimburse RCM for any such payments to the
extent that the Fund's operating expenses are otherwise below this expense
cap. RCM recorded reimbursement of Fund operating expenses totaling
$21,667 for the four-month period ended April 30, 1997.
Funds Distributor, Inc. (the "Distributor"), acts as distributor of shares
of the Fund. The Distributor retains a portion of any initial sales charge
upon the purchase of shares of the Fund. The Company has adopted a
distribution plan pursuant to Rule 12b-1 under the 1940 Act with respect to
the Fund. Under the distribution plan, which is a "reimbursement plan,"
the Fund pays the Distributor an annual fee of up to 0.30% of the Fund's
average daily net assets as reimbursement for certain expenses actually
incurred by the Distributor in connection with distribution of shares of
the Fund. For the four- month period ended April 30, 1997, the Fund did not
record any 12b-1 fees.
Each Director who is not an interested person of the Company receives from
the Company an annual retainer of $1,000 (the retainer is evenly prorated
among each series of the Company), plus $500 for each meeting of the Board
attended and $250 for each committee meeting attended.
Page 12
<PAGE>
INVESTMENT MANAGER
RCM Capital Management, L.L.C.
Four Embarcadero Center
San Francisco, California 94111
TRANSFER AND REDEMPTION AGENT
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
DISTRIBUTOR
Funds Distributor, Inc.
60 State Street, Suite 1300
Boston, Massachusetts 02109
CUSTODIAN
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
LEGAL COUNSEL
Paul, Hastings, Janofsky & Walker LLP
555 South Flower Street
Los Angeles, California 90071
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
Page 13