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RCM GLOBAL SMALL CAP FUND
OFFERED BY:
RCM EQUITY FUNDS, INC.
FOUR EMBARCADERO CENTER, SUITE 3000
SAN FRANCISCO, CALIFORNIA 94111
(800) 726-7240
THIS PROSPECTUS RELATES TO RCM GLOBAL 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 December 31, 1996 has been filed with the Securities and
Exchange Commission and is incorporated by reference into this Prospectus. The
Statement may be obtained, without charge, by writing or calling the Company at
the address or telephone number set forth above.
_______________
The date of this Prospectus is December 31, 1996
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TABLE OF CONTENTS
PAGE
Prospectus Summary . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Summary of Fees and Expenses . . . . . . . . . . . . . . . . . . . . . 5
Investment Objective and Policies. . . . . . . . . . . . . . . . . . . 6
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.
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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.
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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 $25 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 the Fund is subject to a variety of risks in addition to those
normally associated with investments in a portfolio of equity securities. (See
INVESTMENT AND RISK CONSIDERATIONS.)
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.
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 the 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.)
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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
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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 for purchases of $1,000,000 or more, 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 certain
ordinary operating expenses of the Fund exceed the annual rate of 2.50% 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 3.34% and 4.89%, respectively, of the Fund's average daily net
assets.
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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.
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. Generally speaking, disposal of a portfolio
security will be based upon such factors as (i) actual or potential
deterioration of the issuer's earning power which the Investment Manager
believes may adversely affect the price of its securities, (ii) increases in the
price level of the security or securities generally which the Investment Manager
believes reflect expected earnings growth too far in advance of realization, and
(iii) changes in the relative investment opportunities offered by other
securities.
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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.
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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 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 Community). 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 (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 an American bank or trust company, and represent the right to
receive securities of foreign companies deposited in the domestic bank or a
correspondent bank. EDRs and GDRs are receipts issued by a non-U.S. financial
institution evidencing a similar arrangement. 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 involves less currency risk than investment in the
underlying securities, depository receipts may have risks that are similar to
those of foreign equity securities. Therefore, for purposes of the Fund's
investment policies and restrictions, depository receipts will be treated as
foreign equity securities, based on the country in which the underlying issuer
is organized or headquartered. (See WHAT KINDS OF FOREIGN SECURITIES WILL THE
FUND INVEST IN?)
OTHER INVESTMENT COMPANIES. The laws of some foreign countries may make it
difficult or impossible for the Fund to invest directly in issuers organized or
headquartered in those countries, or may place limitations on such investments.
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 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), and debt obligations of international
or supranational entities and 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 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.
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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.)
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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 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.
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.
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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 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 than those
that arise in connection with investments in dollar-denominated securities. To
the extent that the Fund is invested in foreign securities while also
maintaining currency positions, it may be exposed to greater combined risk than
would otherwise be the case. Transactions in futures contracts and options on
futures contracts involve risks similar to those of options on securities. In
addition, the potential loss incurred by the Fund in such transactions is
unlimited.
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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.
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.
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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, Suite 3000, 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 39 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.
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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.
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.
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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.
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.
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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.)
IS THERE A SALES CHARGE?
The sales charges you pay when purchasing shares of the Fund are set forth
below:
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
- ------------------------- -------- ---------- ------------------
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;
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(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 NFDS);
(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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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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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.
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.
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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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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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 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), indexes prepared by consultants, mutual fund ranking entities, and
financial publications, or results of other mutual funds or groups of mutual
funds, in advertisements or in reports furnished to present or prospective
investors. Investment results will include information calculated on a total
return basis (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 indexes 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.
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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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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, and 50,000,000 shares have
been designated as shares of RCM Large Cap Growth Fund. 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 December 31, 1996, there were
400,000 shares of the Fund outstanding, which 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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