<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Amendment No. __
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as
permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
RCM CAPITAL FUNDS, INC.
-----------------------
[Name of Registrant as Specified in Charter]
--------------------------------------------------
[Name of Person(s) Filing Proxy Statement if other
than Registrant]
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction
applies:_______________________
(2) Aggregate number of securities to which transaction
applies:_______________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act
Rule 0-11:
____________________________________________
(4) Proposed maximum aggregate value of transaction:
____________________________________________
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[] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount previously paid:_______________________
(2) Form, Schedule or Registration Statement
No.___________________________________________
(3) Filing Party:________________________________
(4) Date Filed:___________________________________
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RCM CAPITAL FUNDS, INC.
RCM GROWTH EQUITY FUND
RCM SMALL CAP FUND
RCM INTERNATIONAL GROWTH EQUITY FUND A
May __, 1996
Dear Stockholders:
The enclosed proxy materials describe the proposed transaction (the
"Transaction") involving RCM Capital Management, a California Limited
Partnership ("Old RCM"), the investment manager to the RCM Growth Equity Fund,
RCM Small Cap Fund and RCM International Growth Equity Fund A (collectively, the
"Funds"), each of which is a series of RCM Capital Funds, Inc. (the "Company"),
and Dresdner Bank AG, an international banking organization headquartered in
Frankfurt, Germany ("Dresdner"). Upon the closing of the Transaction, the
business of Old RCM will be carried on by RCM Capital Management, L.L.C., a
Delaware limited liability company and a wholly owned subsidiary of Dresdner
("New RCM").
Old RCM has informed the Company that the Transaction is not expected
to have a material effect on the operation of the Funds or on the Funds'
stockholders. No material changes in investment philosophy, policies, or
strategies are contemplated, except as described below. While the Transaction
will provide New RCM with access to the expertise and experience of Dresdner and
its affiliates, New RCM will use the name "RCM Capital Management," and will
still operate from offices in San Francisco, with the same personnel
functioning in the same capacities. Those currently responsible for the
investment strategies of Old RCM are expected to continue to direct the
investment decisions of the Funds. To assure this continuity, certain key
personnel of Old RCM, including the principal portfolio managers of the Funds,
will enter into employment contracts with New RCM.
The change in ownership of Old RCM may be a transfer of control under
the provisions of the Investment Company Act of 1940 and, as such, will have the
effect of terminating the Company's existing investment management agreement
with respect to the Funds. The stockholders of each Fund are therefore being
asked to approve a new contract with New RCM in order for it to act as
investment manager to the Fund. The terms of these new agreements are
substantially identical to those of the existing agreements, except for certain
minor revisions in the method of paying and calculating management fees.
We also ask you to consider and vote on three other proposals. The
first is the election of six directors. The second is an Amendment to the
Articles of Incorporation of the Company to reduce the par value of the
Company's stock and
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to effect a split of the outstanding stock of each Fund. The third is the
ratification of the selection by the Board of Directors of Coopers & Lybrand
L.L.P. as independent public accountants to the Company for the fiscal year
ending December 31, 1996.
Finally, we ask the stockholders of the Funds to consider and vote on
certain additional matters related to their respective Funds. We ask the
stockholders of the RCM Growth Equity Fund to approve a slight revision of its
investment objective and limited revisions of its fundamental investment
policies with respect to the purchase of securities of unseasoned companies and
the purchase of warrants. We ask the stockholders of the RCM Small Cap Fund to
approve a slight revision of its investment objective and a limited revision of
its fundamental investment policies with respect to the purchase of warrants.
The Board of Directors recommends that you vote to approve the new
investment management agreements and each of the other proposals. Enclosed you
will find a proxy statement which more fully describes the Transaction, the new
investment management agreements and the other matters that you are being asked
to approve. We urge you to review the proxy statement and fill out your proxy
card. Please return your proxy card in the postage-paid envelope provided. We
want to know how you would like to vote and welcome your comments.
Should you have any questions, please call 415-954-5400. We look
forward to continuing to meet your investment needs.
Sincerely,
William L. Price
PRESIDENT
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RCM CAPITAL FUNDS, INC.
RCM Growth Equity Fund
RCM Small Cap Fund,
RCM International Growth Equity Fund A
Four Embarcadero Center
Suite 3000
San Francisco, California 94111
(415) 954-5400
NOTICE OF SPECIAL MEETING
To the Stockholders:
Notice is hereby given that a special meeting (the "Meeting") of
stockholders of the RCM Growth Equity Fund, RCM Small Cap Fund, and RCM
International Growth Equity Fund A (each a "Fund"), each of which is a series of
RCM Capital Funds, Inc., a Maryland corporation (the "Company"), will be held on
May 28, 1996, at 8:00 a.m. (Pacific Time) at the Park Hyatt Hotel, located at
333 Battery Street, San Francisco, California 94111. At the Meeting, you and
the other stockholders of the Funds will be asked to consider and vote on the
following matters:
1. The stockholders of each Fund will be asked to approve or disapprove a new
investment management agreement between the Company, with respect to the
Fund, and RCM Capital Management, L.L.C., effective upon the closing of the
transaction involving RCM Capital Management, a California Limited
Partnership, the current investment manager to the Fund, and Dresdner Bank
AG, an international banking organization headquartered in Frankfurt,
Germany. The terms of the new investment management agreement with respect
to each Fund are substantially identical to those of such Fund's existing
investment management agreement, except for certain minor revisions in the
method of paying and calculating management fees.
2. The stockholders of the Company will be asked to elect six directors to the
Board of Directors.
3. The stockholders of the RCM Growth Equity Fund will be asked to approve or
disapprove (i) a revision of its investment objective to exclude cash and
cash equivalents, and receivables and related items, in determining the
percentage of its assets which must be invested in equity and
equity-related securities, and (ii) revisions of its fundamental investment
policies to permit limited purchases of warrants and securities of
unseasoned companies.
4. The stockholders of the RCM Small Cap Fund will be asked to approve or
disapprove (i) a revision of its investment objective to exclude cash and
cash equivalents, and receivables and related items, in determining the
percentage
<PAGE>
of its assets which must be invested in equity and equity-related
securities, and (ii) revision of its fundamental investment policies to
permit limited purchases of warrants.
5. The stockholders of each Fund will be asked to approve or disapprove an
Amendment to the Articles of Incorporation of the Company to reduce the par
value of each share.
6. The stockholders of the Company will be asked to ratify or reject the
selection by the Board of Directors of Coopers & Lybrand L.L.P. as
independent public accountants for the fiscal year ending December 31,
1996.
7. To transact such other business as may properly come before the Meeting or
any adjournment(s) thereof.
Stockholders of record at the close of business on April 18, 1996, are
entitled to notice of, and to vote at, the Meeting. Regardless of whether you
plan to attend the Meeting, PLEASE COMPLETE, SIGN AND RETURN PROMPTLY THE
ENCLOSED PROXY CARD so that a quorum will be present and the maximum number of
shares may be voted. You may change your vote by written notice to the Company,
by submission of a subsequent proxy, or by voting in person at the meeting.
By Order of the Board of Directors
Timothy B. Parker
SECRETARY
San Francisco, California
May ___, 1996
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RCM CAPITAL FUNDS, INC.
RCM Growth Equity Fund
RCM Small Cap Fund
RCM International Growth Equity Fund A
Four Embarcadero Center
Suite 3000
San Francisco, California 94111
(415) 954-5400
PROXY STATEMENT
This Proxy Statement is being provided to the stockholders of RCM Growth
Equity Fund, RCM Small Cap Fund and RCM International Growth Equity Fund A (each
a "Fund" and collectively the "Funds"), each of which is a series of RCM Capital
Funds, Inc., a Maryland corporation (the "Company"), in connection with the
solicitation of proxies by the Board of Directors of the Company (the "Board of
Directors," or the "Board"). The proxies are to be used at the special meeting
of stockholders (the "Meeting") to be held at the Park Hyatt Hotel, located at
333 Battery Street, San Francisco, California 94111, on May 28, 1996 at 8:00
a.m. (Pacific Time), and any adjournment(s) thereof, for action upon the matters
set forth in the Notice of the Meeting.
The Board of Directors of the Company is soliciting stockholder votes on
proposals affecting more than one Fund. The following table summarizes the
proposals and indicates which stockholders are being requested to vote on each
of them.
RCM Growth RCM Small RCM International
Equity Fund Cap Fund Growth Equity Fund A
----------- -------- --------------------
Proposal 1 - Approval of X X X
new investment management
agreements
Proposal 2 - Election of X X X
directors
Proposal 3 - Approval of X
revisions of investment
objective and fundamental
investment policies of RCM
Growth Equity Fund
<PAGE>
RCM Growth RCM Small RCM International
Equity Fund Cap Fund Growth Equity Fund A
----------- -------- --------------------
Proposal 4 - Approval of X
revisions of investment
objective and fundamental
investment policies of RCM
Small Cap Fund
Proposal 5 - Approval of X X X
reduction of par value of
each share
Proposal 6 - Approval of X X X
independent public
accountants
All shares represented by each properly signed proxy ("Proxy") received
prior to the Meeting will be voted at the Meeting. If a stockholder specifies
how the Proxy is to be voted on any of the business matters to come before the
Meeting, it will be voted in accordance with the specification. If no
specification is made, the Proxy will be voted FOR the approval of a new
investment management agreement for each Fund (each a "New Investment Management
Agreement") (Proposal 1), FOR the election of the directors nominated by the
Board of Directors (Proposal 2), FOR the changes in the investment objective and
fundamental investment policies of the RCM Growth Equity Fund (Proposal 3), FOR
the changes in the investment objective and fundamental investment policies of
the RCM Small Cap Fund (Proposal 4), FOR the approval of an Amendment to the
Articles of Incorporation of the Company (Proposal 5), and FOR the ratification
of the selection by the Board of Directors of Coopers & Lybrand L.L.P. as the
independent public accountants for the Company for the fiscal year ending
December 31, 1996 (Proposal 6). The Proxy may be revoked by a stockholder at
any time prior to its use by written notice to the Company, by submission of a
subsequent Proxy, or by voting in person at the Meeting.
The representation in person or by proxy of at least a majority of the
shares of capital stock (the "Capital Shares") of the Company entitled to vote
is necessary to constitute a quorum for transacting business at the meeting.
For purposes of determining the presence of a quorum, abstentions, withheld
votes or broker "non-votes" will be counted as present. Broker "non-votes"
occur when the Company receives a proxy from a broker or nominee who does not
have discretionary power to vote on a particular matter and the broker or
nominee has not received instructions from the beneficial owner or other person
entitled to vote the shares represented by the Proxy. With respect to each Fund
which is the subject of Proposals 1, 3 and 4, approval of a Proposal requires
the approval of a "majority of the outstanding voting securities" of the Fund,
as defined in the Investment Company Act of 1940, as amended (the "1940 Act").
Proposal 2 requires a plurality of the Capital Shares voting at the Meeting
without regard to Fund, and Proposal 6
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requires the approval of a majority of the Capital Shares of the Company present
at the Meeting without regard to Fund. With respect to each Fund which is the
subject of Proposal 5, approval of the Proposal requires the approval of a
majority of Capital Shares of the Fund. Abstentions, withheld votes and broker
non-votes will not be counted in favor or against, and will have no other effect
on the voting on, Proposal 2. Abstentions, withheld votes and broker non-votes
with respect to any other Proposal will have the effect of votes against such
Proposal.
If a quorum is not present at the Meeting, sufficient votes in favor of the
Proposals set forth in the Notice of Special Meeting are not received by the
time scheduled for the Meeting, or the holders of Capital Shares of the Company
present, in person or by proxy, determine to adjourn the Meeting for any other
reason, the stockholders present, in person or by proxy, may adjourn the Meeting
from time to time, without notice other than announcement at the Meeting. The
persons named in the Proxy may vote in favor of such adjournment those Capital
Shares of the Company which they are entitled to vote if such adjournment is
necessary to obtain a quorum or if they determine such an adjournment is
desirable for any other reason. Business may be conducted once a quorum is
present and may continue until adjournment of the Meeting notwithstanding the
withdrawal or temporary absence of sufficient Capital Shares to reduce the
number present to less than a quorum.
None of the costs of solicitation, including postage, printing and
handling, will be borne by the Fund. The solicitation will be made primarily by
mail, but may be supplemented by telephone calls, telegrams and personal
interviews by officers, employees and agents of the Company. This Proxy
Statement and the enclosed form of Proxy were first mailed to stockholders on or
about May __, 1996.
At 5:00 p.m. (Pacific Time) on April 18, 1996, the record date for the
determination of stockholders entitled to vote at the meeting, there were
outstanding 7,110,216 Capital Shares of the Company of which 3,852,312 were
shares of RCM Growth Equity Fund (the "Growth Fund"), 2,950,841 were shares of
RCM Small Cap Fund (the "Small Cap Fund"), and 307,063 were shares of RCM
International Growth Equity Fund A (the "International Fund"). Each Capital
Share is entitled to one vote, and each fractional shares is entitled to a
proportionate vote on matters on which it is entitled to be voted.
As of April 18, 1996, there was no person or group known to the Company to
be the beneficial owner of more than 5% of the outstanding Capital Shares of any
Fund, except as follows:
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Name and % of Shares
Address of Shares Outstanding as of
Beneficial Owner Held April 18, 1996
- ---------------------- ---- --------------
RCM GROWTH EQUITY FUND
U.S. Trust Company N.Y. 419,190 10.88%
Ernst & Young U.S. Master Trust
770 Broadway, 10th Floor
New York, New York 10003
Fidelity Management Trust Co. 380,807 9.89%
American Stores Retirement Portfolio
82 Devonshire Street
Boston, Massachusetts 02109
Bankers Trust Company 343,060 8.91%
Chevron Corporation Annuity Trust
M/S 3021
34 Exchange Place, 2nd Floor
Jersey City, New Jersey 07302
Chase Manhattan Bank NA 262,396 6.81%
Boeing Company Employee Retirement Plan
3 Metrotech Center
Brooklyn, New York 11245
RCM SMALL CAP FUND
Fidelity Management Trust Co. 624,135 21.15%
American Stores Retirement Portfolio
82 Devonshire Street
Boston, Massachusetts 02109
The Northern Trust Company 201,082 6.81%
The J. Paul Getty Trust
P.O. Box 3577
Terminal Annex
Los Angeles, California 90051
Bankers Trust Company 174,652 5.92%
Chevron Corporation Annuity Trust
648 Grassmere Park Road
Nashville, Tennessee 37211
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Name and % of Shares
Address of Shares Outstanding as of
Beneficial Owner Held April 18, 1996
- ---------------------- ---- --------------
Chase Manhattan Bank, N.A. 170,972 5.79%
Employees Retirement Plan
Florida Progress Corporation
3 Metro Tech Center
Brooklyn, New York 11245
State Street Bank & Trust Company 165,292 5.60%
General Mills, Inc.
P.O. Box 1992
Boston, Massachusetts 02105-1992
RCM INTERNATIONAL GROWTH EQUITY FUND A
RCM Capital Management Profit-Sharing Plan 25,179 8.2%
4 Embarcadero Center
Suite 3000
San Francisco, California 94111
The Pension Plan for Salaried Employees of 225,220 83.1%
Travelers insurance Company and Its Affiliates
388 Greenwich Street
New York, New York 10013
As of April 18, 1996, all Company directors and officers as a group owned,
beneficially, the following percentages of the Capital Shares of the Funds:
Growth Equity Fund - __%, Small Cap Fund - __%, and International Fund -__%
(including __%, __%, and __%, respectively, owned by RCM Capital Management
Profit-Sharing Plan, of which certain officers and directors of the Company
serve on the Investment Committee).
DESCRIPTION OF THE TRANSACTION
INTRODUCTION. In connection with the transaction contemplated by the
Agreement of Purchase and Sale dated as of December 13, 1995 (the "Purchase
Agreement"), RCM Capital Management, L.L.C., a Delaware limited liability
company ("New RCM"), to be formed as a wholly owned subsidiary of Dresdner Bank
AG, an international banking organization headquartered in Frankfurt, Germany
("Dresdner"), is expected to acquire all the outstanding partnership interests
in RCM Capital Management, a California Limited Partnership ("Old RCM"), from
RCM Acquisition, Inc. and RCM Limited L.P. (the "Transaction"). Upon the
closing of the Transaction (the "Closing"), New RCM will own all of the
partnership interests in Old RCM, all of the assets and liabilities of Old RCM
will
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become the assets and liabilities of New RCM, and New RCM will succeed to the
business and affairs of Old RCM.
The Transaction is being treated for purposes of the 1940 Act as a change
in control of Old RCM. The 1940 Act provides that such a change in control
constitutes an "assignment" of the current investment management agreement
between the Company and Old RCM with respect to each Fund (each an "Existing
Investment Management Agreement") under which Old RCM provides advisory services
to the Fund. Such an "assignment" will result in the automatic termination of
each Existing Investment Management Agreement upon the Closing.
The Proxy Statement seeks stockholder approval of a New Investment
Management Agreement between the Company and New RCM with respect to each Fund,
to be effective as of the date of the Closing. The New Investment Management
Agreement with respect to each Fund will be substantially identical to the
Existing Investment Management Agreement with respect to such Fund, except for
certain minor revisions in the method of paying and calculating management fees.
The effect of Proposal 1 is to permit each Fund to continue to operate,
following the Transaction, under an investment management arrangement
substantially similar to that in effect immediately before the Transaction.
THE TRANSACTION. The sole general partner and controlling person of Old
RCM is RCM Limited L.P., a California limited partnership ("RCM Limited"). The
sole general partner of RCM Limited is RCM General Corporation, a California
corporation ("RCM General"). As of the date of this Proxy Statement, RCM
General has 19 stockholders and RCM Limited has 19 limited partners, all of whom
are principals of Old RCM, including certain directors and officers of the
Company. The business and affairs of RCM General are managed by RCM General's
Board of Directors. As of the date of this Proxy Statement, the directors of
RCM General are William L. Price, Michael J. Apatoff, Jeffrey S. Rudsten, Gary
W. Schreyer and William S. Stack. As of March 31, 1996, the only persons who
own 10% or more of the outstanding voting securities of RCM General are Mr.
Price, who owns 12.4% of the Common Stock of RCM General, and Mr. Schreyer, who
owns 11.1% of such stock.
The sole limited partner of Old RCM is RCM Acquisition, Inc., a wholly
owned subsidiary of Travelers Group Inc. ("Travelers"). Travelers, whose
principal executive offices are located at 388 Greenwich Street, New York, New
York 10013, is a financial services holding company which, through its
subsidiaries, is principally engaged in the business of life and property and
casualty insurance services, consumer finance services, and investment services.
Neither Travelers nor its affiliates has the power to control the management or
operation of Old RCM.
As stated above, in connection with the Purchase Agreement, RCM
Acquisition, Inc. and RCM Limited will sell all partnership interests in Old RCM
to New RCM. In addition, New RCM will acquire from Travelers or its affiliates
all of the issued and outstanding shares of RCM Capital Trust Company, a
California limited purpose trust company (the "Trust Company"). Subject to the
terms and conditions of the Purchase Agreement, Travelers will be paid an
aggregate purchase
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price of $297 million for its interests in Old RCM and the Trust Company, and
RCM Limited will be paid $3 million for its interest in Old RCM. The total
purchase price, $300 million, is subject to certain reductions upon the Closing
as provided in the Purchase Agreement.
In addition, New RCM will make aggregate payments of an estimated $100
million over approximately the next five years (collectively, the "Additional
Payments") to the partners of RCM Limited. RCM General, acting in its capacity
as general partner RCM Limited, will be entitled (in its sole discretion, but
subject to consultation with the members of the governing board of New RCM
designated and elected by Dresdner) to determine the portion of the Additional
Payments, if any, to be distributed to each of the limited partners of RCM
Limited who are party to employment agreements with New RCM and to certain other
employees of New RCM. At the Closing, New RCM will make the first Additional
Payment of $33.3 million. In addition, on each of the first five anniversaries
of the first day of the calendar quarter next succeeding the Closing Date, New
RCM will make an Additional Payment of $13.34 million, as adjusted by certain
income measurements.
Pursuant to that certain Agreement Regarding RCM Capital Management, dated
April 1, 1990, Travelers has agreed, subject to certain conditions, to pay to
RCM Limited a fee equal to 30% of the net proceeds received by Travelers (the
"Transition Fee") upon the transfer by Travelers of its interest in Old RCM or
the Trust Company. RCM General, acting as general partner of RCM Limited, is
entitled to determine the portion of the Transition Fee, if any, to be
distributed to each of its limited partners.
While New RCM will succeed to the business and affairs of Old RCM upon the
Closing, the Purchase Agreement provides that RCM Limited shall manage, operate
and make all decisions regarding the day-to-day business and affairs of New RCM,
subject to the oversight of New RCM's governing board. A management agreement
(the "Dresdner-New RCM Management Agreement") among RCM Limited, Dresdner, and
New RCM will be entered into upon the Closing, granting RCM Limited the
authority to take all actions on behalf of New RCM that may be necessary,
appropriate, proper, advisable, incidental to or convenient in the judgement of
RCM Limited. In consideration for the services to be rendered by RCM Limited,
New RCM will pay RCM Limited an amount equal to 35% of the gross operating
income of New RCM, less the aggregate salary payments (the "RCM Contract
Payments") made by New RCM to its employees who are also limited partners of RCM
Limited (the "Management Fee"). The Management Fee will be no less than $25
million, less the RCM Contract Payments, for each of the first two years that
the Dresdner-New RCM Management Agreement is in place. RCM General as general
partner of RCM Limited is entitled to determine the portion of the Management
Fee, if any, to be distributed to each of its limited partners.
RCM Limited has informed the Company that it contemplates no material
changes in the investment philosophies, policies, or strategies of the Funds,
except as described in Proposals 3 and 4. New RCM will continue to operate from
offices in San Francisco, California, with the same personnel functioning in the
same capacities as before the Closing. The same persons who are presently
responsible
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for the investment strategies of Old RCM are expected to direct New RCM's
investment strategies following the Closing. All personnel providing
services on behalf of New RCM will be employees of New RCM, and with a few
exceptions none of them will also be employees of RCM Limited. The Purchase
Agreement requires that certain key personnel of Old RCM, including the
principal portfolio managers of the Funds, will enter into employment
agreements (which will include non-competition and/or non-solicitation and
other customary provisions) with New RCM, providing assurance that investment
continuity will be maintained.
Pursuant to a governance agreement to be entered into upon the Closing
(the "Governance Agreement"), the governing board of New RCM will consist of
nine members, six of whom are to be designated by RCM Limited and three of
whom are to be designated by Dresdner. The Governance Agreement provides
that New RCM may not reorganize, change its line of business, sell or lease
substantial assets, incur substantial indebtedness, encumber substantial
assets, issue or sell debt or equity securities, or exceed certain budget and
expense limits approved by the governing board of New RCM, among other
actions, absent the consent of a supermajority of the governing board,
including a member designated by Dresdner. Certain extraordinary events,
including marked declines in New RCM's assets under management, New RCM's
poor asset management performance, and the departure of certain limited
partners of RCM Limited, will entitle Dresdner to take any actions necessary
so that persons designated by Dresdner will constitute a majority of the
governing board of New RCM. As of the date of this Proxy Statement, it is
expected that William L. Price, Michael J. Apatoff, Claude N. Rosenberg, Jr.,
Jeffrey S. Rudsten, Gary W. Schreyer and William S. Stack will be designated
by RCM Limited as members of the governing board of New RCM and that Gerhard
Eberstadt, George N. Fugelsang and Hans-Dieter Bauernfeind will be designated
by Dresdner. Mr. Price is expected to serve as the principal executive
officer of New RCM. The table below provides certain information concerning
Mr. Price and each other person who is expected to serve on the governing
board of New RCM.
Name/Address Principal Occupation
- ------------ --------------------
William L. Price (1) Principal of Old RCM (since 1979)
Michael J. Apatoff (1) Chief Operating Officer of Old RCM
(since 1991); Principal (since 1992)
Claude N. Rosenberg, Jr. Principal of Old RCM (since
(1) 1971)
Gary W. Schreyer (1) Principal of Old RCM (since
1977)
Jeffrey S . Rudsten (1) Principal of Old RCM (since
1981)
William S. Stack (1) Senior Vice President of Old RCM
(since 1994); Managing Director
of Lexington Management
Corporation (1985- 1994)
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Name/Address Principal Occupation
- ------------ --------------------
Gerhard Eberstadt (2) Director of Dresdner Bank AG
Dresdner Bank AG (since 1988)
Gallusanlage 7
60041 Frankfurt am Main
Frankfurt, Germany
George N. Fugelsang (2) President of Dresdner Securities
Dresdner Bank AG (USA) Inc. and Senior General
75 Wall Street Manager and Chief Executive
New York New York North America of Dresdner Bank
10005-2889 AG (since 1994); Managing
Director of Morgan Stanley & Co.
Incorporated (1986-1994)
Hans-Dieter Bauernfeind General Manager and Head of the
(2) Institutional Investment
Dresdner Bank AG Advisory and Asset Management
Jurgen-Ponto-Platz I Division of Dresdner AG (since
60301 Frankfurt am Main 1989)
Frankfurt, Germany
_______________
(1) Expected to be designated by RCM Limited. The principal business of
each is expected to be RCM Capital Management, L.L.C., Four Embarcadero
Center, Suite 3000, San Francisco, California 94111.
(2) Expected to be designated by Dresdner.
The Company has been advised that RCM Limited and RCM General are not
registered as investment advisers under the Investment Advisers Act of 1940
and will not be so registered upon the consummation of the Transaction. Old
RCM has taken the position that such registration is not required because
neither RCM Limited nor RCM General engage or will engage in any investment
advisory activities separate from the activities of Old RCM or New RCM. As a
result, neither the Management Agreement nor the Governance Agreement have
been submitted for approval by the Board of Directors or stockholders of the
Company.
Each of Old RCM and Dresdner has informed the Company that they will use
all commercially reasonable efforts to assure compliance with the conditions
of Section 15(f) of the 1940 Act. Section 15(f) provides a non-exclusive
safe harbor for an investment adviser or any affiliated persons to receive
any amount or benefit in connection with a change in control of the
investment adviser to an investment company. Among the conditions to the
applicability of Section 15(f) is the requirement that no "unfair burden" may
be imposed on the investment company as a result of the transaction relating
to the change of control, or any express or implied terms, conditions or
understandings applicable thereto. As defined in the 1940 Act, the term
"unfair burden" includes any arrangement during the two-year period after
-9-
<PAGE>
the change in control whereby the investment adviser (or predecessor or
successor adviser), or any interested person of any such adviser, receives or
is entitled to receive any compensation, directly or indirectly, from the
investment company or its security holders (other than fees for bona fide
investment advisory or other services), or from any person in connection with
the purchase or sale of securities or other property to, from, or on behalf
of the investment company (other than bona fide ordinary compensation as
principal underwriter of the investment company).
Other conditions precedent to the closing of the Transaction include,
among other things, that all regulatory filings, applications and
notifications, including those required by the Glass-Steagall Act for bank
holding companies registered under the Federal Bank Holding Company Act of
1956, have been duly and properly made or obtained. If the conditions to the
Transaction are not met and the Transaction is therefore not consummated, the
Existing Investment Management Agreements will remain in effect. In the
event the New Investment Management Agreement is not approved by a Fund's
stockholders and the Transaction is completed, the Board will consider
appropriate action.
APPROVAL OF NEW INVESTMENT
MANAGEMENT AGREEMENTS
(PROPOSAL 1)
DESCRIPTION OF THE EXISTING INVESTMENT MANAGEMENT AGREEMENTS AND THE NEW
INVESTMENT MANAGEMENT AGREEMENTS. If the New Investment Management Agreement
is approved by the stockholders of a Fund, New RCM will act as investment
manager to the Fund. With the exception of the effective dates and
termination dates, the terms and conditions of the New Investment Management
Agreements are identical in all material respects to those of the Existing
Investment Management Agreements with Old RCM, except for certain changes in
the method of calculating and paying management fees as described below.
Stockholders should refer to Exhibit A attached hereto for the complete terms
of the New Investment Management Agreements. The description of the New
Investment Management Agreements set forth herein is qualified in its
entirety by the provisions of the New Investment Management Agreements.
The New Investment Management Agreement will become effective with
respect to each Fund upon the later of its approval by a "majority of the
outstanding voting securities" (as such term is defined in the 1940 Act) of
the Fund or the Closing. Each New Investment Management Agreement will
continue in effect for a two-year period, and thereafter from year to year if
its continuance is approved by at least annually (i) by the Board of
Directors of the Company or by the vote of a majority of outstanding voting
securities of the Fund and (ii) by vote of a majority of the directors who
are not "interested persons" of the Company (as defined in the 1940 Act),
cast in person at a meeting called for the purpose of voting on such
approval. Each New Investment Management Agreement may be terminated at any
time without the payment of any penalty, either by the Board of Directors, or
by the vote of a "majority of the outstanding voting securities" of the Fund
on not less than
-10-
<PAGE>
60 days written notice to New RCM. Each New Investment Management Agreement
may also be terminated by New RCM on 60 days advance written notice to the
Company, and will also terminate automatically in the event of its
"assignment" (as defined in the 1940 Act). Under the New Investment
Management Agreements as under the Existing Investment Management Agreements,
New RCM will furnish investment management services to the Funds, subject to
the provisions of the 1940 Act and the Funds' investment objectives,
policies, procedures and investment restrictions.
Under the terms of the Existing Investment Management Agreements and the
New Investment Management Agreements, respectively, Old RCM has performed and
New RCM will perform the following services for each Fund: (a) managing the
investment and reinvestment of the Funds' assets, (b) providing investment
research advice, and supervision of each Fund in accordance with the Fund's
investment objective, policies and restrictions, (c) furnishing suitable
office space for the Funds, and (d) maintaining books and records with
respect to the Funds' portfolio transactions.
Under the Existing Investment Management Agreements, the Funds pay New
RCM for its services as follows: Growth Fund - a fee which is calculated and
paid quarterly, at an annual rate of 0.75% of the average month-end net
assets of the Fund during the preceding quarter; Small Cap Fund - a fee which
is calculated and paid quarterly, at an annual rate of 1% of the average
month-end net assets of the Fund during the preceding quarter; International
Fund - a fee which is calculated and paid quarterly, at an annual rate of
0.75% of the average month-end net assets of the Fund.
The fees under each of the New Investment Management Agreements will be
the same as the fees under the corresponding Existing Investment Management
Agreements, with two exceptions. First, under the New Investment Management
Agreements, the fees for each Fund will be calculated based on the Fund's
average daily net assets. Under the Existing Management Agreements, the
management fees for the Growth Fund and the Small Cap Fund are calculated
quarterly and are based on the average net assets at the end of each month
during the preceding calendar quarter, and the management fees for the
International Fund are calculated quarterly and are based on the average net
assets at the end of each month. The effect of this practice is that the
average net assets of each Fund for the preceding calendar quarter or at
month end, rather than the Fund's current average net assets, are used to
calculate the Fund's management fees, and that such fees are based on
month-end average net assets without regard to variations in net assets
during each month. Management of the Company believes that this method of fee
calculation is not consistent with common industry practice, which uses
current daily net assets to calculate current fees. Management of the Company
believes that changing the method of fee calculation to reflect industry
practice will more closely match the fees paid by the Funds for each quarter
to the assets that are actually under management during the quarter, and will
therefore result in a more accurate calculation of fees.
-11-
<PAGE>
Second, under the Existing Management Agreements, the management fees
are paid on a quarterly basis. New RCM has requested stockholder approval
for management fees to be paid on a monthly basis, in accordance with
industry practice for open-end mutual funds. Approval of this proposal will
mean that management fees for each Fund will be paid twelve times a year,
after the end of each month, resulting in less of a time lag between the time
when management fees are earned and when they are paid. While payment of
fees on a monthly basis will mean more frequent deductions from stockholders'
accounts, the change will not affect the method of fee calculation, nor is it
expected to affect the amount of fees paid by stockholders. It will,
however, slightly decrease the funds available for investment by each of the
Funds during the year, as the fees will be paid out of the assets of the
Funds earlier than would otherwise be the case.
The expense limitations to which New RCM has agreed with respect to each
Fund will continue after execution of the Funds' New Investment Management
Agreements. Under the New Investment Management Agreements with respect to
the Growth Fund and Small Cap Fund, (i) New RCM will be responsible for
payment of all ordinary operating expenses of the Funds other than brokerage
and commission expenses, taxes levied on the Funds, interest charges on
borrowings (if any), charges and expenses of the Funds' custodian, and New
RCM's investment management fees, and (ii) New RCM will reduce the amount of
its investment management fee with respect to a Fund by the amount, if any,
by which the Fund's ordinary operating expenses (except interest, taxes and
extraordinary expenses) exceed the annual rate of 1% of the Growth Fund's
average daily net assets, and 1.25% of the Small Cap Fund's average daily
assets, determined monthly. Under the New Investment Management Agreement
with respect to the International Fund, (i) the Fund is responsible for
payment of all its ordinary operating expenses, and (ii) New RCM will
voluntarily agree to reduce the amount of its investment management fee with
respect to the Fund for the first year of public operation of the Fund, by
the amount, if any, by which the Fund's ordinary operating expenses (except
interest, taxes and extraordinary expenses) exceed the annual rate of 1% of
the Fund's average daily net assets, determined monthly. Expenses
attributable to a particular Fund are charged against the assets of the Fund;
general expenses of the Company are allocated among the Funds in a manner
proportionate to the net assets of each Fund, on a transactional basis, or on
such other basis as the Board of Directors deems equitable.
With respect to the Growth Fund and Small Cap Fund, net fees recorded for
services provided by Old RCM under the Existing Investment Management Agreements
for the fiscal year ended December 31, 1995 were $11,038,366 and $4,385,825,
respectively. Net fees recorded for services provided by Old RCM under the
Existing Investment Management Agreement with respect to the International Fund
for the period from commencement of operation on May 22, 1995 through
December 31, 1995 were $41,875. Old RCM waived investment management fees for
the International Fund for the period from December 28, 1994 (commencement of
operations) to May 22, 1995 (the date the Fund's shares were first offered to
the public); without such waiver the International Fund would have paid
additional investment management fees aggregated $114,952. In addition, Old RCM
reimbursed the International Fund for operating expenses totaling $103,102.
-12-
<PAGE>
Neither Old RCM nor any person affiliated with Old RCM received any other
fees from the Funds for services provided to the Funds during the period
ended December 31, 1995.
The Existing Investment Management Agreements with Old RCM with respect
to the Growth Fund and the Small Cap Fund were last approved by the Board of
Directors of the Company on June 12, 1995. The Existing Investment
Management Agreement with Old RCM with respect to the International Fund was
last approved by the Board of Directors of the Company on December 20, 1994.
The Existing Management Agreement with respect to the Growth Fund was last
approved by its stockholders on June 17, 1987. The Existing Management
Agreements with respect to the Small Cap Fund and the International Fund were
last approved by their stockholders in connection with the initial
organization of the Funds on April 28, 1993 and May 19, 1995 respectively.
INFORMATION REGARDING DRESDNER. Dresdner is an international banking
organization headquartered in Frankfurt, Germany, whose principal executive
offices are located at Gallusanlage 7, 60041 Frankfurt am Main. With total
consolidated assets as of December 31, 1995 of DM ________ billion ($___
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. It is one of a
small number of global private banking organizations which has an "AAA"
credit rating from Moody's Investors Service.
In the United States, Dresdner maintains branches in New York and
Chicago and an agency in Los Angeles. Its wholly owned subsidiary,
Deutsch-Sudamerikanische Bank AG, has an agency in Miami. Dresdner
affiliates that are expected to maintain a relationship with New RCM include
Dresdner Securities (USA) Inc. ("Dresdner Securities"), a registered
broker-dealer, and Kleinwort, Benson Group plc ("Kleinwort"), a merchant
banking group based in the United Kingdom, subject to Dresdner obtaining
Federal Reserve Board approval to acquire Kleinwort's U.S. based operations.
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. New RCM believes that it may perform the services contemplated by
the New Investment Management Agreements 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 New RCM from
continuing to perform investment management services for the Company. If New
RCM were prohibited from performing investment management services for the
-13-
<PAGE>
Company, it is expected that the Company would select another qualified
adviser. Any new advisory agreement would be subject to approval in
accordance with the 1940 Act.
DIRECTORS' CONSIDERATION. The Board of Directors met on March 20, 1996
to consider the effect of the Transaction on the management of the Funds, and
the possible recommendation of the New Investment Management Agreements
between the Company and New RCM. In connection with their decision to
approve the New Investment Management Agreements and to recommend them to the
stockholders of the Funds for approval, the directors' consideration included
the same factors as those considered by them when the directors, including
the director who is not an "interested person" of the Company as defined in
the 1940 Act, last approved the Existing Investment Management Agreements
with Old RCM. Old RCM has advised the Board of Directors that it expects
there will be no diminution in the scope or quality of advisory services
provided to the Funds as a result of the Transaction.
In their consideration of the New Investment Management Agreements, the
directors requested and reviewed such information as they deemed necessary to
evaluate the terms of the agreements. RCM Limited, Old RCM and Dresdner
provided information to the directors concerning the anticipated relationship
of New RCM and Dresdner following the Closing Date, and its relevance to the
management, policies, investment management, philosophy, and strategies of
New RCM. The directors were informed that the investment management
philosophy, policies, and strategies currently pursued for the Funds would
not be affected by the Transaction. The directors received assurances that,
following the Closing Date, New RCM would operate as a business unit separate
from Dresdner, with Old RCM's personnel functioning in the same capacities;
that principals and employees of Old RCM who manage the Funds' assets would
perform the same functions on behalf of New RCM following the Closing; and
that such principals (other than certain principals of Old RCM who had
previously planned retirements) would enter into employment agreements with
New RCM that include noncompetition and nonsolicitation provisions. The
directors were informed that RCM Limited will be engaged to manage, operate
and make all decisions regarding the day-to-day business and affairs of New
RCM (subject to the oversight of New RCM's governing board) pursuant to the
Dresdner-New RCM Management Agreement. The directors considered New RCM's
financial resources after the Transaction, and Dresdner's commitment to
services of the quality and type currently provided by Old RCM to the Funds.
The directors also considered expected benefits to the Funds, including the
expertise of Dresdner and its affiliates in global markets and the reputation
and experience of Dresdner and its affiliates as investment advisers and/or
administrators to other mutual funds. Finally, the directors were informed
that the Funds will not bear any of the expenses which relate to the
Transaction or the Meeting. The costs associated with the Meeting will be
paid from the proceeds of the Transaction. In the event the transaction is
not consummated, such costs will be paid by Old RCM.
As stated above, the directors' consideration included the same factors
considered by them on June 12, 1995 with respect to the Growth Fund and the
-14-
<PAGE>
Small Cap Fund, and on December 20, 1994 with respect to the International
Fund. Those factors included, but were not limited to, the historic
performance of the Funds as compared to relevant industry indices and
comparable investment companies, the nature and quality of the services
expected to be rendered to the Funds by the investment manager, the terms of
the Existing Investment Management Agreements and the fees payable thereunder
as compared to fees paid to investment advisers of similar investment
companies, the benefits accruing to Old RCM as a result of its affiliation
with the Funds, the profitability of Old RCM, and the history, reputation,
qualifications, and background of Old RCM and its personnel. The directors
also considered the interests of certain directors and officers of the
Company in the Transaction. See "Proposal 2 - RCM Affiliations."
As a condition to the Transaction, relevant banking authorities may
impose on Dresdner and its affiliates, Dresdner Securities and Kleinwort,
certain restrictions on their ability to effect certain portfolio
transactions for the Funds. The directors of the Company do not believe that
these limitations will have a material effect on the management or
performance of the Funds.
As a result of its investigation and deliberations concerning the
Transaction and the New Investment Management Agreements, the directors,
including the director who is not an "interested person" of the Company,
concluded that the terms of the New Investment Management Agreements are in
the best interests of the Funds and the Funds' stockholders. Accordingly,
the Board of Directors, including the director who is not an "interested
person" of the Company, voted at its meeting on March 20, 1996 to approve the
New Investment Management Agreements with New RCM and to recommend them to
the stockholders of the Funds for their approval. If for any reason the
Transaction is not consummated, the Existing Investment Management Agreements
will continue in effect.
REQUIRED VOTE. The stockholders of each Fund will vote separately on
the proposed approval of the New Investment Management Agreement with respect
to the Fund. The affirmative vote of the holders of a "majority of the
outstanding voting securities" of a Fund, as defined in the 1940 Act, is
required to approve the New Investment Management Agreement with respect to
the Fund. "Majority of the outstanding voting securities" for this purpose
under the 1940 Act means the lesser of (i) 67% of the Capital Shares of the
Fund represented at the meeting if more than 50% of the outstanding Capital
Shares of the Fund are represented, or (ii) more than 50% of the outstanding
Capital Shares of the Fund.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS APPROVAL OF THE NEW
INVESTMENT MANAGEMENT AGREEMENTS.
ELECTION OF DIRECTORS
(PROPOSAL 2)
Under the Company's bylaws, the Board of Directors may consist of not
less than three nor more than eleven directors. Since November 5, 1993, the
Board of
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<PAGE>
Directors has consisted of nine directors. However, as a condition
to its approval of the Transaction, the Federal Reserve Board has required
that no officer, director or employee of New RCM or its affiliates, including
RCM Limited, may serve as an officer, director, or employee of the Company.
Accordingly, at its April 16, 1996 meeting, the Board of Directors of
the Company reduced the number of directors to six, effective as of the
Closing. To effect this reduction, upon the Closing, William L. Price,
Claude N. Rosenberg, Jr., John D. Leland, Jr., G. Nicholas Farwell, Michael
J. Apatoff, Kenneth B. Weeman, Jr., and John A. Kriewall, each of whom is an
officer of Old RCM and will be an officer of New RCM, are expected to resign
from the Board of Directors of the Company. The Board recommended that
Kenneth E. Scott, a current director of the Company, continue in office, and
that DeWitt F. Bowman, Pamela A. Farr, Thomas S. Foley, Frank P. Greene, and
George G.C. Parker be elected to the Board effective as of the Closing. In
the unanticipated event that any of such nominees is not a candidate for
election or reelection, as the case may be, then the Proxy holders may vote
in favor of such substitute nominee as the Board of Directors may designate,
or the Board of Directors may leave a vacancy in the Board. The Company has
no reason to believe that the nominees will be unable or unwilling to serve
as directors. If for any reason the Transaction is not consummated, the
current members of the Board of Directors will continue to hold their offices.
Under Maryland law (where the Company is incorporated), a registered
investment company is not required to hold an annual meeting unless such a
meeting is otherwise required under the 1940 Act. As a result, each director
elected at the Meeting will serve for an indefinite term, until a later
meeting of stockholders is held or he or she either resigns or is removed
from office by the stockholders. If any vacancy occurs on the Board of
Directors through resignation, removal or otherwise, it may be filled by a
majority of the directors then in office, even if less than a quorum.
However, under the 1940 Act the directors then in office may not fill a
vacancy if, as a result, less than two-thirds of the directors holding office
have been elected by the stockholders. In addition, if at any time less than
a majority of the directors of the Company then in office were elected by the
stockholders, the 1940 Act requires the Company to promptly hold a
stockholder meeting for the purpose of electing directors.
The following table provides certain information concerning the nominees
for election or reelection, as well as for the current directors. The
Company pays each of the directors who is not a principal, director, officer
or employee of Old RCM (or, after the Closing, New RCM) or any of its
affiliates $6,000 per year and $1,000 per meeting, and reimburses each such
director for reasonable expenses incurred in connection with such meetings.
Under the Existing Investment Management Agreement with respect to the Growth
Fund and the Small Cap Fund, Old RCM pays all directors' fees and expenses
allocable to such Funds, whereas, under the Existing Investment Management
Agreement with respect to the International Fund, the International Fund pays
its allocable share of such costs. Under the New Investment Management
Agreement with respect to the Growth Fund and the Small Cap Fund, New RCM
will continue to pay the directors' fees and expenses allocable to such
Funds. Directors who are principals, officers or
-16-
<PAGE>
employees of Old RCM (or, after the Closing, New RCM) are not compensated by
the Company for such service. The Company's Articles of Incorporation
provide that the Company shall, to the extent permitted by law, indemnify
each of its currently acting and its former directors against any and all
liabilities and expenses incurred in connection with their services in such
capacities.
<TABLE>
<CAPTION>
Capital
Shares of
the
Company
Name Position, if any, with the Company and Beneficially Percent
and Old RCM, Principal Occupation and Director Owned at of
Age Business Experience Since 4/18/96 Class
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Kenneth E. Scott Ralph M. Parsons Professor of Law and 1974
(67)+ Business at Stanford Law School, where
he has been since 1967. He is also a
director of certain registered investment
companies managed by Benham Capital
Management.
DeWitt F. Bowman Principal of Pension Investment --
(65) Consulting since February 1994; Chief
Investment Officer of California Public
Employees Retirement System from
February 1989 to January 1994. Director
of RREEF America REIT, Inc., Trustee
of Brandes International Fund, Trustee of
Pacific Gas and Electric Nuclear
Decommissioning Trust, and Director of
RCM Equity Funds, Inc. since December
1995.
Frank P. Greene Partner and Portfolio Manager of Wood --
(57) Island Associates, Inc., a registered
investment adviser, with which he has
been associated since August 1991;
Senior Vice President and Portfolio
Manager of Siebel Capital Management,
Inc., a registered investment adviser,
from November 1987 to August 1991;
and Director of RCM Equity Funds, Inc.
since December 1995.
</TABLE>
-17-
<PAGE>
<TABLE>
<CAPTION>
Capital
Shares of
the
Company
Name Position, if any, with the Company and Beneficially Percent
and Old RCM, Principal Occupation and Director Owned at of
Age Business Experience Since 4/18/96 Class
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pamela A. Farr Independent management consultant --
(50) since ____ 1994; President of Banyan
Homes, Inc., a real estate development
and construction firm, from ___ 1991 to
___ 1994; Management Consultant with
McKinsey & Company from ____ to ____.
Thomas S. Foley Partner of Akin, Gump, Strauss, Hauer &
(67) Feld, L.L.P. law firm since January 1995;
Speaker (from ____ to ____) and
Representative (from ____ to ____ 1994)
of the U.S. House of Representatives;
Director of H.J. Heinz Company (since
______); Member of Global Advisory
Board of Coopers & Lybrand L.L.P.
(since _____); Member of Board of
Overseers of Whitman College (since
______).
George G.C. Parker Associate Dean for Academic Affairs
(57) (since _____) and Director of the MBA
Program (since ___) of the Graduate
School of Business of Stanford
University, with which he has been
associated since 1973; Director of
California Casualty Group of Insurance
Companies since 1977; Director of H.
Warshow & Sons, Inc., a manufacturer of
specialty textiles, since 1982; Director
of Zurich Reinsurance Centre, Inc., a
reinsurance underwriter, since 1994.
</TABLE>
____________________
+ Member of the Audit Committee
* Less than 1.00% of Class
During the Company's last fiscal year, Mr. Scott received aggregate
compensation of $33,000 for his services as a director of the Company. He
received no pension or retirement benefits from the Company and is not a
director of any other registered investment company that is advised by Old
RCM or any of its
-18-
<PAGE>
affiliates or any other fund that holds itself out to investors as related to
the Company.
BOARD MEETINGS AND COMMITTEES. During the fiscal year ended December
31, 1995, the Board held four meetings. All directors except Claude N.
Rosenberg, Jr. and John A. Kriewall attended at least 75% of the meetings.
There is no compensation committee, nor any committee performing the function
of a compensation committee.
The Board has a standing Audit Committee, currently comprised of Mr.
Scott. The responsibilities of the Audit Committee include reviewing and
making recommendations to the Board concerning the Company's financial and
accounting reporting procedures. The Audit Committee meets with the
Company's independent public accountants and reviews the Funds' financial
statements, and generally assists the Board in fulfilling its
responsibilities relating to corporate accounting and reporting practices.
The Audit Committee met once in fiscal 1995.
REQUIRED VOTE. The stockholders of the Company will vote together,
without regard to Fund, with respect to the election of directors. The
election of directors requires the affirmative vote of a plurality of the
Capital Shares voting at the meeting, in person or by proxy.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF
EACH NOMINEE NAMED ABOVE.
AMENDMENT OF THE INVESTMENT OBJECTIVE
AND FUNDAMENTAL POLICIES OF RCM GROWTH EQUITY FUND
(PROPOSAL 3)
Under the 1940 Act, the investment objective and certain investment
policies of the Growth Fund have been designated by the Growth Fund as
"fundamental" policies that can be changed only with stockholder approval.
Management of the Company proposes that the stockholders approve certain
revisions to the investment objective and fundamental investment policies of
the Growth Fund, as described below. These changes will allow the Fund
greater investment flexibility to respond to future investment opportunities.
However, management of the Company does not anticipate that the proposed
changes, individually or in the aggregate, will result in an appreciable
change in the level of risk associated with an investment in the Fund.
If these proposed changes are approved, the Combined Prospectus and
Statement of Additional Information of the Growth Fund will be revised to
reflect them. These revisions must be filed with the Securities and Exchange
Commission and are subject to review and comment by the staff of the
Commission. To the extent necessary to comply with such comments, the
language of these provisions may be subject to further modification.
However, any material change would require approval of the Fund's
stockholders.
-19-
<PAGE>
REVISION OF INVESTMENT OBJECTIVE. The Growth Fund's current investment
objective is "to seek appreciation of capital by investing, during normal
conditions, at least 80% of its ASSETS in equity and equity-related
securities of small-to-medium-sized concerns." Management of the Company
proposes that the Growth Fund's investment objective be changed to the
following: "to seek appreciation of capital by investing at least 80% of its
INVESTMENTS in equity and equity-related securities, during normal market
conditions, in securities of small- to medium-sized concerns." For purposes
of the investment objective, cash and cash equivalents, and receivables and
related items, will not be considered to be "investments in equity and
equity-related securities."
The purpose of this change is to increase the Growth Fund's investment
flexibility. Although the Growth Fund's investments are concentrated in
securities of medium and smaller capitalization companies, the Growth Fund is
authorized to invest a portion of its assets in other types of securities,
including securities of larger capitalization companies. Old RCM and, if
Proposal No. 1 is approved and the Transaction is consummated, New RCM
(collectively, the "Investment Manager"), may use this authority when it
believes that investment opportunities in certain larger capitalization
companies are more attractive than the investment opportunities that are
available at that time in securities of certain medium and smaller
capitalization companies. The Investment Manager also may use this authority
when it believes it may be appropriate for the Growth Fund to take a more
defensive investment posture by increasing the capitalization of its
investments. In addition, from time-to-time, the Investment Manager may
believe that it is appropriate for the Growth Fund to increase its cash
position, when market conditions warrant a more defensive investment posture
or when necessary to accommodate anticipated withdrawals. Under the current
fundamental investment policy, however, the Investment Manager may be
hampered in its ability to engage in these investment strategies
simultaneously. As a result, management believes that it would be in the
best interests of the stockholders of the Growth Fund to amend the Growth
Fund's fundamental investment objective as described above.
INVESTMENT IN COMPANIES THAT DO NOT HAVE A THREE-YEAR OPERATING HISTORY.
The Growth Fund has a fundamental investment restriction that prohibits
investments in companies that do not have a three-year operating history.
Management of the Company proposes that this restriction be amended to permit
investments in such companies, in amounts up to 5% of the Growth Fund's total
assets, measured at the time of purchase.
The proposed change will provide the Growth Fund with greater investment
flexibility. From time-to-time, the Investment Manager may identify
securities issued by companies, with limited operating histories that it
believes are suitable investments for portfolios with investment objectives
similar to that of the Growth Fund. For example, certain initial public
offerings involve securities of companies that do not have a three-year
operating history, but may nonetheless present attractive investment
opportunities. However, under the Growth Fund's current fundamental
investment restriction, the Growth Fund is not permitted to invest in such
securities. As a result, the Growth Fund is unable to participate in certain
investment opportunities that the Investment Manager believes are attractive.
The
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<PAGE>
Small Cap Fund, in contrast, permits investments in companies that do not
have a three-year operating history, but limits such investments to 5% of the
Small Cap Fund's total assets.
The prohibition on investments in companies that do not have a
three-year operating history was originally intended to enable the Growth
Fund to avoid the risks associated with investments in companies that have
limited operating histories. Management of the Company believes, however,
that the potential risks of investments in companies with limited operating
histories can be better controlled through careful research and analysis of
companies whose securities are candidates for investment, rather than through
an outright prohibition on such investments. Because the Small Cap Fund
already permits investments in companies with limited operating histories,
the Investment Manager has extensive experience in evaluating securities
issued by companies with limited operating histories. Furthermore, by
restricting investments in companies with limited operating histories to 5%
of the Growth Fund's total assets, Management believes that the risks
associated with such investments can be limited to appropriate levels.
Management does not believe that this change would materially affect the
types of companies in which the Growth Fund will invest or would increase the
risks of an investment in the Growth Fund.
INVESTMENT IN WARRANTS. The Growth Fund has a fundamental investment
restriction that prohibits investments in warrants. Management of the
Company proposes that this restriction be amended to permit investments in
warrants.
Warrants are securities that entitle the holder to buy a specific amount
of common stock of an issuer at a specified price. Warrants may be
perpetual, or they may be for a limited duration. The Growth Fund is
currently authorized to hold warrants that it receives if the issuer of the
warrants is the issuer of underlying securities held by the Growth Fund.
Thus, if warrants are distributed to existing stockholders or are attached to
shares that are available for purchase in the market, the Growth Fund has
authority to receive and to hold such warrants. However, the Growth Fund
currently lacks the authority to purchase warrants that trade separately from
the underlying securities.
The proposed change will provide the Investment Manager with greater
investment flexibility. The Investment Manager believes that, in appropriate
circumstances, warrants may be suitable investments for portfolios with
investment objectives similar to that of the Growth Fund. For example, from
time-to-time, as a result of market conditions or other factors, investments
in warrants, or some combination of warrants and common stock, of a
particular company may offer a more attractive investment opportunity than
investments in that company's common stock. The Growth Fund currently is
precluded from engaging in such investment strategies.
Investments in warrants can entail certain investment risks that are
different from the risks of investments in common stock. For example,
warrants, unless they are perpetual in nature, typically expire on a certain
date, and if the exercise price for a particular warrant is greater than the
price of the underlying common stock, the warrant could expire without value.
The market value of the price of a warrant is
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<PAGE>
related to the price of the underlying security for which the warrant may be
exercised, but warrants may experience greater price volatility than may be
the case with respect to the securities underlying warrants. However, the
Investment Manager has experience in analyzing these risks, and believes that
the potential risks of investments in warrants can be limited appropriately
through careful research, analysis, and monitoring of such investments. In
addition, as a nonfundamental policy, the Growth Fund will limit its
investments in warrants to 10% of its total assets, measured at the time of
purchase.
The Investment Manager currently anticipates that it will invest in
warrants only when such warrants may be sold publicly in the secondary
market, although the Investment Manager will not be precluded from acquiring
warrants in a private placement if it believes, in light of all of the
circumstances, that such acquisition presents an attractive investment
opportunity for the Growth Fund. Management of the Company does not believe
that this change would materially affect the types of companies in which the
Growth Fund will invest or would increase the risks of an investment in the
Growth Fund.
REQUIRED VOTE. The stockholders of the Growth Fund will vote separately
on the proposed revisions to the investment objective and fundamental
policies of the Fund. The affirmative vote of the holders of a "majority of
the outstanding voting securities" of the Fund, as defined in the 1940 Act,
is required to approve these revisions. "Majority of the outstanding voting
securities" for this purpose under the 1940 Act means the lesser of (i) 67%
of the Capital Shares of the Fund represented at the Meeting if more than 50%
of the outstanding Capital Shares of the Fund are represented, or (ii) more
than 50% of the outstanding Capital Shares of the Fund.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS APPROVAL OF THE
PROPOSED REVISIONS TO THE INVESTMENT OBJECTIVE AND FUNDAMENTAL POLICIES OF
THE GROWTH FUND.
AMENDMENT OF THE INVESTMENT OBJECTIVE
AND FUNDAMENTAL POLICIES OF RCM SMALL CAP FUND
(PROPOSAL 4)
Under the 1940 Act, the investment objective and certain investment
policies of the Small Cap Fund have been designated by the Small Cap Fund as
"fundamental" policies that can be changed only with stockholder approval.
Management of the Company proposes that the stockholders approve certain
revisions to the fundamental investment objective and investment policies of
the Small Cap Fund, as described below. These changes will allow the Fund
greater investment flexibility to respond to future investment opportunities.
However, management of the Company does not anticipate that the proposed
changes, individually or in the aggregate, will result in an appreciable
change in the level of risk associated with an investment in the Fund.
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<PAGE>
If these proposed changes are approved, the Combined Prospectus and
Statement of Additional Information of the Small Cap Fund will be revised to
reflect them. These revisions must be filed with the Securities and Exchange
Commission and are subject to review and comment by the staff of the
Commission. To the extent necessary to comply with such comments, the
language of these provisions may be subject to further modification.
However, any material change would require approval of the Fund's
stockholders.
The Board of Directors has also approved certain other changes to the
non-fundamental restrictions of the Small Cap Fund, which do not require
stockholder approval. These changes are described below.
REVISION OF INVESTMENT OBJECTIVE. The Small Cap Fund's current
investment objective is "to seek appreciation of capital by investing, during
normal conditions, at least 80% of its ASSETS in equity and equity-related
securities of small-sized concerns (common stocks or securities convertible
into common stocks)." Management of the Company proposes that the Small Cap
Fund's investment objective be changed to the following: "to seek
appreciation of capital by investing at least 80% of its INVESTMENTS in
equity and equity-related securities, during normal market conditions, in
securities of small-sized concerns (common stocks or securities convertible
into common stocks)." For purposes of the investment objective, cash and
cash equivalents, and receivables and related items, will not be considered
to be "investments in equity and equity-related securities."
The purpose of this change is to increase the Small Cap Fund's
investment flexibility. Although the Small Cap Fund's investments are
concentrated in securities of smaller capitalization companies, the Small Cap
Fund is authorized to invest a portion of its assets in other types of
securities, including securities of medium and larger capitalization
companies. The Investment Manager may use this authority when it believes
that investment opportunities in certain medium and larger capitalization
companies are more attractive than the investment opportunities that are
available at that time in securities of certain smaller capitalization
companies. The Investment Manager also may use this authority when believes
it may be appropriate for the Small Cap Fund to take a more defensive
investment posture by increasing the capitalization of its investments. In
addition, from time-to-time, the Investment Manager may believe that it is
appropriate for the Small Cap Fund to increase its cash position, when market
conditions warrant a more defensive investment posture or when necessary to
accommodate anticipated withdrawals. Under the current fundamental investment
policy, however, the Investment Manager may be hampered in its ability to
engage in these investment strategies simultaneously. As a result,
management believes that it would be in the best interests of the
stockholders of the Small Cap Fund to amend the Small Cap Fund's investment
objective as described above.
INVESTMENTS IN WARRANTS. The Small Cap has a fundamental investment
restriction that prohibits investments in warrants. Management of the
Company proposes that this restriction be amended to permit investments in
warrants.
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<PAGE>
Warrants are securities that entitle the holder to buy a specified
amount of common stock at a specified price. Warrants may be perpetual, or
they may be for a limited duration. The Small Cap Fund is currently
authorized to hold warrants that it receives if the issuer of the warrants is
the issuer of underlying securities held by the Small Cap Fund. Thus, if
warrants are distributed to existing stockholders or are attached to shares
that are available for purchase in the market, the Small Cap Fund has
authority to receive and to hold such warrants. However, the Small Cap Fund
currently lacks the authority to purchase warrants that trade separately from
the underlying securities.
The proposed change will provide the Investment Manager with greater
investment flexibility. The Investment Manager believes that, in appropriate
circumstances, warrants may be suitable investments for portfolios with
investment objectives similar to that of the Small Cap Fund. For example,
from time-to-time, as a result of market conditions or other factors,
investments in warrants, or some combination of warrants and common stock, of
a particular company may offer a more attractive investment opportunity than
investments in that company's common stock. The Small Cap Fund currently is
precluded from engaging in such investment strategies.
Investments in warrants can entail certain investment risks that are
different from investments in common stock. For example, warrants typically
expire on a certain date, and if the exercise price for a particular warrant
is greater than the price of the underlying common stock, the warrant could
expire without value. The market value of the price of a warrant is related
to the price of the underlying security for which the warrant may be
exercised, but warrants may experience greater price volatility than may be
the case with respect to the securities underlying warrants. However, the
Investment Manager has experience in analyzing these risks, and believes that
the potential risks of investments in warrants can be limited appropriately
through careful research, analysis, and monitoring of such investments. In
addition, as a non-fundamental policy, the Small Cap Fund will limit its
investments in warrants to 10% of its total assets, measured at the time of
purchase.
The Investment Manager currently anticipates that it will invest in
warrants only when such warrants may be sold publicly in the secondary
market, although the Investment Manager will not be precluded from acquiring
warrants in a private placement if it believes, in light of all of the
circumstances, that such an acquisition presents an attractive investment
opportunity for the Small Cap Fund. Management of the Company does not
believe that this change would materially affect the types of companies in
which the Small Cap Fund will invest or would increase the risks of an
investment in the Small Cap Fund.
OTHER CHARGES APPROVED BY THE BOARD OF DIRECTORS. The Board of
Directors has approved the following changes to the non-fundamental
restrictions and objectives of the Small Cap Fund in order to provide greater
investment flexibility and to keep pace with an increase in the general value
of stock prices. These changes do not require stockholder approval, and will
become effective on or about July 1, 1996.
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<PAGE>
The Board of Directors has increased the maximum size of companies in
which the Small Cap Fund can invest, from $750 million to $1 billion in total
market capitalization. In addition, the Fund is now not required to sell
securities unless their total market capitalization exceeds $1.5 billion, up
from $1 billion. The Board has also increased the average market
capitalization of companies whose securities are held by the Fund from $450
million to $500 million, and has approved the elimination of several other
requirements.
The following table is a summary of all of the changes approved by the
Board to the Small Cap Fund.
CURRENT RESTRICTION CHANGE
At least 80% of the Fund's assets At least 80% of the Fund's investments
will be invested in equity and equity- in equity and equity-related securities
related securities of small sized will be in securities of small sized
concerns, defined as companies with concerns, defined as companies with
total market capitalizations of up total market capitalizations of up to
to $750 million at the time of $750 million at the time of
acquisition. acquisition.
At least 65% of the Fund's assets will This restriction will be eliminated.
be invested in equity and equity-
related securities of companies with
total market capitalizations of up
to $500 million at the time of
acquisition.
No more than 35% of the Fund's assets This restriction will be eliminated.
will be invested in equity and equity-
related securities of companies with
total market capitalizations between
$500 million and $750 million at the
time of acquisition.
The Fund will not purchase any The Fund will not purchase any security
security with a market capitalization with a market capitalization over
over $750 million. $1 billion.
The Fund will sell or transfer The Fund will sell or transfer
securities whenever, at the end of a securities whenever, at the end of a
calendar quarter, the issuer's market calendar quarter, the issuer's market
capitalization exceeds $1 billion. capitalization exceeds $1.5 billion.
The average market capitalization of The average market capitalization of
companies whose securities are companies whose securities are acquired
acquired by the Fund will not exceed by the Fund is not expected to exceed
$450 million. $500 million.
-25-
<PAGE>
REQUIRED VOTE. The stockholders of the Small Cap Fund will vote
separately on the proposed revisions to the investment objective and policies
of the Fund. The affirmative vote of the holders of a "majority of the
outstanding voting securities" of the Fund, as defined in the 1940 Act, is
required to approve these revisions. "Majority of the outstanding voting
securities" for this purpose under the 1940 Act means the lesser of (i) 67%
of the Capital Shares of the Fund represented at the Meeting if more than 50%
of the outstanding Capital Shares of the Fund are represented, or (ii) more
than 50% of the outstanding Capital Shares of the Fund.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS APPROVAL OF THE PROPOSED
REVISIONS TO THE INVESTMENT OBJECTIVE AND FUNDAMENTAL POLICIES OF THE SMALL
CAP FUND.
AMENDMENT OF ARTICLES OF INCORPORATION
(PROPOSAL 5)
Management of the Company proposes that the Company amend its Articles of
Incorporation to reduce the par value of its outstanding Capital Shares.
Stockholders should refer to Exhibit B attached hereto for the form of the
proposed Amendment to the Articles of Incorporation.
STOCK SPLIT. At its March 20, 1996 meeting, the Board of Directors of the
Company approved a split of the Capital Shares of each Fund, conditioned upon
approval by the stockholders of the Company of a reduction in the par value of
the Capital Shares of the Company as described below. Such a stock split would
reduce the net asset value per Share of each Fund to approximately $10. The
proposed stock split does not change the rights or in any way dilute the
interests of any existing stockholder. The current net asset value per Capital
Share of each of the Funds is unusually high by industry standards, and the
purpose of the stock split is to bring the net asset value per Capital Share in
line with that of most other open-end funds.
The table below lists the net asset value per Capital Share of each Fund as
of the record date for the Meeting and the proposed ratios for each Fund's stock
split:
PRO FORMA NET
NET ASSET VALUE PROPOSED STOCK ASSET VALUE PER
FUND PER SHARE SPLIT RATIO SHARE AFTER SPLIT
Growth Fund 25 for 1
Small Cap Fund 12 for 1
International Fund 10 for 1
RECLASSIFICATION OF CAPITAL SHARES. Under its Articles of
Incorporation, the Company is currently authorized to issue a total of
25,000,000 Capital Shares. These Capital Shares are currently classified as
12,000,000 Shares of the Growth
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<PAGE>
Fund, 8,000,000 Shares of the Small Cap Fund, and 4,500,000 Shares of the
International Fund. At its March 20, 1996 meeting, the Board of Directors of
the Company approved an increase in the authorized Capital Shares to
1,000,000,000, conditioned upon approval by the stockholders of the Company
of a reduction in the par value of the Capital Shares of the Company as
described below, and classified additional Capital Shares as follows:
<TABLE>
<CAPTION>
PREVIOUS INCREASE IN NEW TOTAL
FUND CLASSIFIED SHARES CLASSIFIED SHARES CLASSIFIED SHARES
<S> <S> <S> <S>
Growth Fund 12,000,000 288,000,000 300,000,000
Small Cap Funds 8,000,000 92,000,000 100,000,000
International Fund 4,500,000 95,500,000 100,000,000
</TABLE>
Under Maryland law, these increases do not require the approval of the
stockholders of the Company. The purpose of the authorization of new Capital
Shares and the classification of additional Capital Shares of each Fund is to
facilitate the issuance of new Shares and the creation of new series of
Shares in the future. In addition, the authorization of new Capital Shares
is necessary to accomplish the proposed stock split discussed above. The
issuance of these additional Capital Shares does not change the rights or in
any way dilute the interests of any existing stockholder.
PROPOSED REDUCTION IN PAR VALUE. Management also proposes that the
Company amend its Articles of Incorporation to reduce the par value per
Capital Share of the Company from $.10 to $.0001. The purpose of this change
is to minimize the fees that will be incurred in connection with the issuance
of additional Capital Shares of the Company. The State of Maryland, in which
the Company is incorporated, imposes a fee on newly authorized Capital Shares
which is based on a formula involving the aggregate number of authorized
Shares and the par value per Share. The reduction in par value does not
change the rights or in any way dilute the interests of any existing
stockholder.
REQUIRED VOTE. The stockholders of each Fund will vote separately on
the proposed Amendment of the Articles of Incorporation to effect a stock
split, and will vote together, without regard to Fund, on the proposed
Amendment of the Articles of Incorporation to reduce the par value per Share
of the Company. The stock split with respect to each Fund requires the
affirmative vote of the holders of a majority of the outstanding Capital
Shares of the Fund. The reduction in par value requires the affirmative vote
of the holders of a majority of the outstanding Capital Shares of the Company.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS APPROVAL OF THE PROPOSED
AMENDMENTS TO THE ARTICLES OF INCORPORATION.
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<PAGE>
RATIFICATION OF ACCOUNTANTS
(PROPOSAL 6)
Coopers & Lybrand L.L.P. acted as independent public accountants for the
Company for the fiscal year ended December 31, 1995. The Board of Directors,
including the independent director, have selected Coopers & Lybrand L.L.P. as
the independent accountants for the Company for the current fiscal year
ending December 31, 1996. Upon request of any stockholder, representatives
of Coopers & Lybrand L.L.P. will attend the meeting, will (if they so desire)
make a statement, and will respond to appropriate questions.
REQUIRED VOTE. The stockholders of the Company will vote together,
without regard to Fund, with respect to the independent public accountants.
The ratification of the selection of Coopers & Lybrand L.L.P. requires the
affirmative vote of a majority of the Capital Shares of the Company present
at the Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
RATIFICATION OF THE SELECTION OF COOPERS & LYBRAND L.L.P. AS INDEPENDENT
PUBLIC ACCOUNTANTS FOR THE COMPANY.
ADDITIONAL INFORMATION
EXECUTIVE OFFICERS OF THE COMPANY. The table below provides certain
information concerning certain of the current executive officers of the
Company and certain other officers who perform similar duties. Similar
information regarding Messrs. Price, Rosenberg, Leland, Farwell, Apatoff and
Weeman is set forth above. The address of each officer is Four Embarcadero
Center, Suite 3000, San Francisco, California 94111. Officers hold office at
the pleasure of the Board and until their successors are appointed and
qualified or until their earlier resignation or removal. Officers and
employees of the Company who are principals, officers or employees of Old RCM
or New RCM are not compensated by the Fund.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND BUSINESS
NAME AND AGE POSITION WITH COMPANY EXPERIENCE
------------ --------------------- ---------------------------------
<S> <C> <C>
William L. Price Director, Chairman of Principal of Old RCM since 1979.
(55) the Board and President. Director of RCM Equity Funds, Inc.
since 1995.
Claude N. Rosenberg, Jr. Director and Vice Chairman Senior Principal of Old RCM, with which
(68) of the Board. he has been associated since 1970.
John D. Leland, Jr. Director and Vice President Principal of Old RCM, with
(65) which he has been associated
since 1972.
G. Nicholas Farwell Director and Vice President Principal of Old RCM, with which
(49) he has been associated since 1980.
</TABLE>
-28-
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND BUSINESS
NAME AND AGE POSITION WITH COMPANY EXPERIENCE
------------ --------------------- ---------------------------------
<S> <C> <C>
Michael J. Apatoff Director and Vice President Chief Operating Officer (since 1991)
(41) and Chief Operating Officer. and Principal (since 1992) of Old RCM;
Chief Operating Officer of Chicago
Mercantile Exchange from 1986 to 1991.
Director of RCM Equity Funds, Inc.
since 1995.
Kenneth B. Weeman, Jr. Director and Vice President. Principal of Old RCM, with which he has
(55) been associated since 1979.
John A. Kriewall Director Principal of Old RCM, with which he has
(55) been associated with 1973.
Susan C. Gause Treasurer and Chief Financial Director of Finance, Old RCM (since 1994);
(43) Officer CFO and Controller, Citicorp Bankers
Leasing (1990-1994); Assistant Controller,
Sierra Capital Realty Advisers (1988-1990)
Caroline M. Hirst Vice President and Principal Director of Investment Operations, Old
(35) Accounting Officer RCM (since December 1994); head of
International Administration, Morgan
Grenfell Asset management (1980-1994)
Anthony Ain Vice President and General General Counsel, Old RCM (since 1992),
(36) Counsel Senior Vice President (since 1993);
Counsel to a Commissioner, Senior Special
Counsel, Securities and Exchange Commission
(1988-1992)
Timothy B. Parker Secretary and Associate Deputy General Counsel, Old RCM (since 1993);
(38) General Counsel Associate with Orrick, Herrington & Sutcliffe
(1989-1993)
</TABLE>
In addition, each of Huachen Chen, Walter C. Price, Jr., William S.
Stack and Judith A. Wilkinson serves as a Vice President to the Company.
William L. Price, Claude N. Rosenberg, Jr., John D. Leland, Jr., G.
Nicholas Farwell, Michael J. Apatoff, Kenneth A. Weeman, Jr. and John A.
Kriewall, directors of the Company, are stockholders of RCM General, limited
partners of RCM Limited and principals of Old RCM. In connection with the
Transaction, each of them will enter into employment agreements with New RCM,
and will therefore receive employment compensation from New RCM. At the
discretion of RCM General as general partner of RCM Limited, each of them may
receive some portion
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<PAGE>
of the Management Fee, some portion of the Transaction Fee, and/or some
portion of the Additional Payments. Through their stock ownership of RCM
General, each of them will also receive a portion of the $3 million paid by
Dresdner to RCM Limited. By virtue of these interests, each of them may be
deemed to have a substantial interest in stockholder approval of Proposal 1.
Each of Susan C. Gause, Caroline M. Hirst, Anthony Ain, Huachen Chen,
Walter C. Price, Jr., William S. Stack, Judith A. Wilkinson and Timothy B.
Parker is an officer of the Company who is either a principal of or is
currently employed by Old RCM, and, in connection with the Transaction, each
would either be a principal of or would enter into an employment agreement
with New RCM. Messrs. Chen and Price are stockholders of RCM General, limited
partners of RCM Limited, and principals of Old RCM. Each may, at the
discretion of RCM Limited, receive some portion of the Management Fee, some
portion of the Transition Fee, and/or some portion of the Additional
Payments. Through their stock ownership of RCM General, they will also
receive a portion of the $3 million paid by Dresdner to RCM Limited. By
virtue of these interests, each of these officers may be deemed to have a
substantial interest in stockholder approval of Proposal 1.
As discussed above, as a condition to its approval of the Transaction,
the Federal Reserve Board has required that no officer, director or employee
of New RCM or its affiliates, including RCM Limited, may serve as an officer,
director or employee of the Company. Accordingly, after the Closing Date,
new officers of the Company will be elected by the Board of Directors. As of
the date of this Proxy Statement, no such officers had yet been selected.
INFORMATION REGARDING OLD RCM. Old RCM was established in July, 1986,
as the successor to the business and operations of Rosenberg Capital
Management (established in 1970). As of March 31, 1996, Old RCM had
approximately $25 billion in assets under management. Old RCM is registered
under the Investment Advisers Act of 1940 (the "Advisers Act"). Upon
consummation of the Transaction, New RCM will be registered under the
Advisers Act and will employ the same key personnel as previously employed by
Old RCM.
Old RCM also acts as investment manager for the portfolios of registered
investment companies other than the Company, which portfolios have investment
objectives that may be similar to those of the Company. Set forth below are
the names of each such portfolio, its net assets and information concerning
the fees paid to Old RCM for its services.
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<PAGE>
Fee Waivers
Net Assets as of Annual Rate of of
Fund Name March 31, 1996 Compensation Reductions
--------- ---------------- -------------- -----------
RCM Global
Technology Fund $1,597,724 1.00% of (1)
average daily
net assets
Bergstrom
Capital
Corporation $62,233,338 0.70% on first None
$10 million of
average annual
net assets,
declining in
increments
to 0.25% on
average net
assets in excess
of $100 million
(1) Old RCM has voluntarily agreed, until at least December 31, 1996, to
pay RCM Global Technology Fund the amount, if any, by which certain
ordinary operating expenses of the Fund exceed 1.75% of the average daily
net assets of the Fund on an annual basis.
BROKERAGE PORTFOLIO TRANSACTIONS. The Funds pay brokerage commissions
for purchases and sales of portfolio securities. During the fiscal year
ended December 31, 1995, the Funds paid no brokerage commission to any broker
that is an affiliated person of the Company, an affiliated person of such
person, or an affiliated person of which is an affiliated person of the
Company or Old RCM.
COSTS OF SOLICITATION. The costs associated with the Meeting will be
paid from the proceeds of the Transaction. In the event the Transaction is
not consummated, such costs will be paid by Old RCM.
OTHER BUSINESS. As of the date of this Proxy Statement, the Company's
management and Old RCM know of no business other than as set forth in the
Notice of the Special Meeting of Stockholders to come before the Meeting. If
any other business is properly brought before the Meeting, or any adjournment
thereof, the persons named as proxies will vote in their sole discretion.
ADJOURNMENT. In the event that sufficient votes in favor of any of the
proposals set forth in the Notice of the Meeting are not received by the time
scheduled for the meeting, the persons named as Proxies may propose one or
more adjournments of the Meeting after the date set for the original Meeting
to permit further solicitation of proxies with respect to any such proposals.
In addition, if, in the judgment of the persons named as Proxies, it is
advisable to defer action on one or more proposals, the persons named as
Proxies may propose one or more adjournments of the Meeting for a reasonable
time. Any such adjournments will
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<PAGE>
require the affirmative vote of a majority of the votes cast on the question
in person or by proxy at the session of the Meeting to be adjourned, as
required by the Company's Articles and By-Laws. The persons named as Proxies
will vote in favor of such adjournment those Proxies which they are entitled
to vote in favor of such proposals. They will vote against any such
adjournment those Proxies required to be voted against any of such proposals.
None of the costs of any additional solicitation and of any adjourned session
will be borne by the Funds. Any proposals for which sufficient favorable
votes have been received by the time of the Meeting will be acted upon and
such action will be final regardless of whether the Meeting is adjourned to
permit additional solicitation with respect to any other proposal.
ANNUAL REPORT. The Funds' 1995 Annual Reports to Stockholders were
mailed to stockholders on or about February 29, 1996. IF YOU SHOULD DESIRE
AN ADDITIONAL COPY OF ANY ANNUAL REPORT, IT CAN BE OBTAINED, WITHOUT CHARGE,
FROM RCM CAPITAL MANAGEMENT BY CALLING (800) 227-5183.
STOCKHOLDER PROPOSALS. The Meeting is a special meeting of
stockholders. Neither the Company nor the Funds are required, nor does any of
them intend, to hold regular annual meetings of stockholders. If such a
meeting is called, any stockholder who wishes to submit a proposal for
consideration at the meeting should submit the proposal promptly to the
Company. Any such proposal must comply with all applicable legal
requirements.
PLEASE EXECUTE AND RETURN THE ENCLOSED PROXY PROMPTLY TO ENSURE THAT A
QUORUM IS PRESENT AT THE ANNUAL MEETING. A SELF-ADDRESSED, POSTAGE-PAID
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
William L. Price
President
May ___, 1996
San Francisco, California
-32-
<PAGE>
EXHIBIT LIST
Exhibit A -- Forms of the New Investment Management Agreements
Exhibit B -- Form of Amendment to Articles of Incorporation
<PAGE>
RCM CAPITAL FUNDS, INC.
RCM Growth Equity Fund
RCM Small Cap Fund
RCM International Growth Equity Fund A
Four Embarcadero Center
Suite 3000
San Francisco, California 94111
(415) 954-5400
The undersigned hereby appoints Laura Shaw, Dede Dunegan, and Jennie
Wong, and each of them, as proxies of the undersigned (the "Proxies"), each
with full power to appoint her substitute, and hereby authorizes each of them
to represent and vote all the shares of common stock of RCM Growth Equity
Fund, RCM Small Cap Fund and RCM International Growth Equity Fund A (each a
"Fund"), each of which is a series of RCM Capital Funds, Inc. (the
"Company"), held of record as of April 18, 1996 at the Special Meeting of
Stockholders of the Company, to be held at the Park Hyatt Hotel, located at
333 Battery Street, San Francisco, California 94111 on May 28, 1996, at 8:00
a.m. (Pacific Time), and at any and all of the adjournments or postponements
thereof.
When properly executed, this proxy will be voted in the manner directed
herein by the undersigned stockholder(s). IF NO DIRECTION IS GIVEN THIS
PROXY WILL BE VOTED FOR EACH OF THE PROPOSALS AND FOR ELECTION OF THE
NOMINATED DIRECTORS. In their discretion, the Proxies are each authorized to
vote upon such other business as may properly come before the meeting and any
adjournments or postponements of the meeting. A stockholder wishing to vote
in accordance with the Board of Directors' recommendation need only sign and
date this proxy and return it in the envelope provided.
The undersigned hereby acknowledge(s) receipt of a copy of the
accompanying Notice of Special Meeting of Stockholders and the Proxy
Statement with respect thereto and hereby revoke(s) any proxy or proxies
heretofore given. This proxy may be revoked at any time before it is
exercised.
- -------------------------------------------------------------------------------
PLEASE VOTE AND SIGN ON THE OTHER SIDE, AND RETURN PROMPTLY IN
ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING
- -------------------------------------------------------------------------------
NOTE: Please sign exactly as the name appears on this proxy card. When
signing as executor, administrator, trustee or guardian, please give the
appropriate and complete title. If a corporation, please sign the
corporation name by the appropriate authorized officer. If a partnership,
please sign the partnership name by the appropriate authorized person.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
_______________________________ __________________________________
_______________________________ __________________________________
<PAGE>
/X/ PLEASE MARK VOTES AS IN THIS EXAMPLE
1) To approve the new investment management agreements between the Funds
and RCM Capital Management, L.L.C.
For Against Abstain
/ / / / / /
2) To elect as directors the nominees listed below:
Kenneth E. Scott For / / Withhold / /
Frank P. Greene For / / Withhold / /
DeWitt F. Bowman For / / Withhold / /
Pamela A. Farr For / / Withhold / /
Thomas S. Foley For / / Withhold / /
George G.C. Parker For / / Withhold / /
3) To approve the proposed revisions of the investment objective and
fundamental investment policies of RCM Growth Fund
For Against Abstain
/ / / / / /
4) To approve the proposed revisions of the investment objective and
fundamental investment policies of RCM Small Cap Fund.
For Against Abstain
/ / / / / /
5) To approve an Amendment to the Articles of Incorporation of the
Company to reduce the par value of the shares of the Company.
For Against Abstain
/ / / / / /
6) To ratify the selection by the Board of Directors of Coopers & Lybrand
L.L.P. as independent public accountants for the fiscal year ending
December 31, 1996.
For Against Abstain
/ / / / / /
I plan to attend the meeting in San Francisco at 8:00 a.m. on May 28, 1996. / /
Mark box at right if comments or address change have been noted on the
reverse side of this card. / /
RECORD DATE SHARES:
Please be sure to sign and date this Proxy.
- -------------------------------------------------------------------------------
----------
Date
Stockholder sign here Co-owner sign here ----------
- -------------------------------------------------------------------------------
<PAGE>
THIS PAGE MUST BE KEPT AS THE LAST PAGE OF THE DOCUMENT.
SoftSolution Network ID: LA-BLD:B44588.2 Type: SMT
<PAGE>
INVESTMENT MANAGEMENT AGREEMENT, POWER OF ATTORNEY
AND SERVICE AGREEMENT
THIS AGREEMENT is entered into this day of __________, 1996 by and between
RCM Capital Management, _______________________ (the "Investment Manager") and
RCM Capital Funds Inc. (the "Company"), on behalf of RCM Growth Equity Fund, a
series of the Company ("Fund").
1. APPOINTMENT AND ACCEPTANCE OF APPOINTMENT OF THE INVESTMENT MANAGER
(a) Subject to express provisions and limitations set forth in the
Company's Articles of Incorporation, By-Laws, Form N-1A Registration
Statement under the Investment Company Act of 1940, as amended (the "1940
Act") and under the Securities Act of 1933, as amended (the "1933 Act"),
and the Fund's prospectus as in use from time to time, as well as to the
factors affecting the Company's status as a regulated investment company
under the Internal Revenue Code of 1954, as amended, the Company hereby
grants to the Investment Manager and the Investment Manager hereby accepts
full discretionary authority to manage the investment and reinvestment of
the cash and securities in the account of the Fund (the Portfolio.)
presently held by Chase Manhattan Bank, NA (the "Custodian"), the proceeds
thereof, and any additions thereto, in the Investment Manager's discretion.
In its duties hereunder, the Investment Manager shall further be bound by
any and all determinations by the Board of Directors of the Company
relating to the investment policies of the Fund, which determinations shall
be communicated in writing to the Investment Manager. For all purposes
herein, the Investment Manager shall be deemed an independent contractor of
the Company.
2. POWERS OF THE INVESTMENT MANAGER
The Investment Manager is empowered, through any of its partners or
employees:
(a) to invest and reinvest in shares, stocks, bonds, notes and other
obligations of every description issued or incurred by governmental bodies,
corporations, mutual funds, trusts, associations or firms, in trade
acceptances and other commercial paper, and in loans and deposits at
interest on call or on time, whether or not secured by collateral;
(b) to purchase and sell commodities or commodities contracts and
investments in put, call, straddle, or spread options, and
(c) to lend its portfolio securities to brokers, dealers and other
financial institutions;
(b) to buy, sell, or exercise rights and warrants to subscribe for stock
or securities; and
(c) to take such other action, or direct the Custodian to take such other
action, as may be necessary or desirable to carry out the purpose and
intent of the foregoing.
<PAGE>
3. EXECUTION OF PORTFOLIO TRANSACTIONS
(a) The Investment Manager shall provide adequate facilities and qualified
personnel for the placement of, and shall place, orders for the purchase,
or other acquisition, and sale, or other disposition, of portfolio
securities for the Company;
(b) unless otherwise specified in writing to the Investment Manager by the
Company,' all orders for the purchase and sale of securities for the
Portfolio shall be placed in such markets and through such brokers as in
the Investment Manager's best judgment shall offer the most favorable price
and market for the execution of each transaction; provided, however, that,
subject to the above, the Investment Manager may place orders with
brokerage firms which have sold shares of the Company or which furnish
statistical and other information to the Investment Manager, taking into
account the value and quality of the brokerage services of such firms,
including the availability and quality of such statistical and other
information. Receipt by the Investment Manager of any such statistical and
other information and services shall not be deemed to give rise to any
requirement for abatement of the advisory fee payable to the Investment
Manager pursuant to Section 5 hereof and Appendix A hereto;
(c) the Company understands and agrees that the Investment Manager may
effect securities transactions which cause the Company to pay an amount of
commission in excess of the amount of commission another broker or dealer
would have charged. Provided, however, that the Investment Manager
determines in good faith that such amount of commission is reasonable in
relation to the value of Company share sales, statistical, brokerage and
other services provided by such broker or dealer, viewed in terms of either
the specific transaction or the Investment Manager's overall
responsibilities to the Company and other non-investment company clients
for which the Investment Manager exercises investment discretion. The
Company also understands that the receipt and use of such services will not
reduce the Investment Manager's customary and normal research activities:
(d) the Company understands and agrees:
(i) that the Investment Manager performs investment management
services for various clients and that the Investment Manager may take
action with respect to any of its other clients which may differ from
action taken or from the timing or nature of action taken with respect
to the Portfolio, so long as it is the Investment Manager's policy, to
the extent practical, to allocate investment opportunities to the
Portfolio over a period of time on a fair and equitable basis relative
to other clients;
(ii) that the Investment Manager shall have no obligation to
purchase or sell for the Portfolio any security which the Investment
Manager or its partners or employees, may purchase or sell for its or
their own accounts or the account of any other client, if in the
opinion of the Investment Manager such transaction or investment
appears unsuitable, impractical or undesirable for the Portfolio; and
(iii) that on occasions when the Investment Manager deems the
purchase or sale of a security to be in the best interests of the
Company as well as other clients of the Investment Manager, the
Investment Manager, to the extent permitted by applicable
-2-
<PAGE>
laws and regulations, may aggregate the securities to be so sold or
purchased when the Investment Manager believes that to do so will be
in the best interests of the Company. In such event, allocation of the
securities so purchased or sold, as well as the expenses incurred in
the transaction, shall be made by the Investment Manager in the manner
the Investment Manager considers to be the most equitable and
consistent with its fiduciary obligations to the Company and to such
other clients.
4. ALLOCATION OF EXPENSES OF THE COMPANY
(a) The Company is responsible for payment of the following ordinary
operating expenses: (i) brokerage and commission expenses, (ii) Federal,
state or local taxes, incurred by, or levied on, the Company, (iii)
interest charges on borrowings, (iv) charges and expenses of the Company's
custodian, and (v) payment of all Investment Management or advisory fees
including fees payable under Section 5 hereof and Appendix A hereto:
(b) the Investment Manager shall provide persons to perform all executive,
administrative, clerical and bookkeeping functions of the Company and shall
assume all ordinary operating expenses not assumed by the Company under
4(a) hereof; and
(c) the Company is responsible for payment of any extraordinary expenses
incurred. A good faith determination of what constitutes an extraordinary
expense shall be made by the Board of Directors of the Company, which good
faith determination shall include the affirmative vote of all non-
interested directors of the Company.
5. COMPENSATION OF THE INVESTMENT MANAGER
(a) In consideration of the services performed by the Investment Manager
hereunder, the Fund will pay or cause to be paid to the Investment Manager,
as they become due and payable, management fees determined in accordance
with the attached Schedule of Fees (Appendix A). In the event of
termination, any management fees paid in advance pursuant to such fee
schedule will be prorated as of the date of termination and the unearned
portion thereof will be returned to the Company.
(b) the net asset value of the Company used in fee calculations shall be
determined in the manner set forth in the Articles of Incorporation and By-
Laws and Prospectus of the Company after the close of the New York Stock
Exchange composite tape on the last business day of each month the New York
Stock Exchange is open.
(c) the Company hereby authorizes the Investment Manager to charge the
Portfolio, subject to the provisions in Section 6 hereof, for the full
amount of fees as they become due and payable pursuant to the attached
schedule of fees; provided, however, that a copy of a fee statement
covering said payment shall be sent to the Custodian and to the Company.
6. EXPENSE LIMITATION
(a) On the first business day of the second month of each fiscal year, the
Investment Manager agrees to pay the Company the amount, if any, by which
ordinary operating expenses of the Company for the preceding fiscal year
(except interest and taxes and
-3-
<PAGE>
extraordinary expenses) exceed 1% of the average net assets of the Company
for that year, determined monthly. Costs incurred in connection with
brokerage fees and commissions, which are capitalized in accordance with
generally accepted accounting principles applicable to investment
companies, shall be accounted for as capital items and not as expenses.
(b) In paying the quarterly Investment Management fee to the Investment
Manager, the Company shall reduce the amount of such fee by the amount, if
any, by which the Company's ordinary operating expenses for the previous
quarter (except interest and taxes and extraordinary expenses) exceeded on
an annualized basis 1% of the Company's average net asset value of the
Fund's shares, determined monthly; provided, however, that the Company
shall pay to the Investment Manager on the first day of June the amount if
any, by which any such reductions exceeded the amount to which the Company
would be entitled under Section 6(a) hereof.
7. SERVICE TO OTHER CLIENTS
Nothing contained in this Agreement shall be construed to prohibit the
Investment Manager from performing investment advisory, management,
distribution or other services for other investment companies and other
persons, trusts or companies, or to prohibit affiliates of the Investment
Manager from engaging in such businesses or in other related or unrelated
businesses.
8. INDEMNIFICATION
The Investment Manager shall have no liability to the Company, or its
stockholders, for any error of judgment, mistake of law, or for any loss
arising out of any investment, or for any other act or omission in the
performance of its obligations to the Company not involving willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations and duties hereunder.
9. DURATION OF AGREEMENT
This Agreement shall continue in effect until the close of business on
____________, 1998. This Agreement may thereafter be renewed from year to
year by mutual consent, provided that such renewal shall be specifically
approved at least annually by (i) the Board of Directors of the Company, or
by the vote of a majority (as defined in the 1940 Act) of the outstanding
voting securities of the Company, and (ii) a majority of those directors
who arc not parties to this Agreement or interested persons (as defined in
the 1940 Act) of any such party cast in person at a meeting called for the
purpose of voting on such approval. Such mutual consent to renewal shall
not be deemed to have been given unless evidenced by a writing signed by
both parties hereto.
10. TERMINATION
This Agreement may be terminated at any time, without payment of any
penalty, by the Board of Directors of the Company or by the vote of a
majority (as defined in the 1940 Act) of the outstanding voting securities
of the Company on sixty (60) days' written notice to the
-4-
<PAGE>
Investment Manager, or by the Investment Manager on like notice to the
Company. This Agreement shall automatically terminate in the event of its
assignment (as defined in the 1940 Act).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in duplicate originals by their officers hereunto duly authorized as
of the date first above written.
RCM CAPITAL MANAGEMENT, RCM CAPITAL FUNDS, INC.
_________________________ ON BEHALF OF
RCM GROWTH EQUITY FUND
By: ____________________ By: ________________________
ATTEST: ATTEST:
_________________________ _____________________________
-5-
<PAGE>
APPENDIX A
INVESTMENT MANAGEMENT AGREEMENT, POWER OF ATTORNEY,
AND SERVICE AGREEMENT
BETWEEN RCM CAPITAL MANAGEMENT, _____________________
AND RCM CAPITAL FUNDS, INC.
SCHEDULE OF FEES
FOR RCM GROWTH EQUITY FUND
Effective Date: _________________, 1996
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.
Average Daily Net Assets Fee
________________________ ___
On all sums 0.75% annually
Dated: __________________, 1996
RCM CAPITAL MANAGEMENT, RCM CAPITAL FUNDS, INC.
_______________________ ON BEHALF OF
RCM GROWTH EQUITY FUND
By: ____________________________ By: __________________________
ATTEST: ATTEST:
By: ___________________________ By: __________________________
<PAGE>
INVESTMENT MANAGEMENT AGREEMENT, POWER OF ATTORNEY
AND SERVICE AGREEMENT
THIS AGREEMENT is entered into this day of _____________, 1996 by and
between RCM Capital Management, _______________________ (the "Investment
Manager") and RCM Capital Funds Inc. (the Company), on behalf of RCM Small Cap
Fund, a series of the Company ("Fund").
1. APPOINTMENT AND ACCEPTANCE OF APPOINTMENT OF THE INVESTMENT MANAGER
(a) Subject to express provisions and limitations set forth in the
Company's Articles of Incorporation, By-Laws, Form N-1A Registration
Statement under the Investment Company Act of 1940, as amended (the "1940
Act") and under the Securities Act of 1933, as amended (the "1933 Act"),
and the Fund's prospectus as in use from time to time, as well as to the
factors affecting the Company's status as a regulated investment company
under the Internal Revenue Code of 1986, as amended, the Company hereby
grants to the Investment Manager and the Investment Manager hereby accepts
full discretionary authority to manage the investment and reinvestment of
the cash and securities in the account of the Fund (the "Portfolio")
presently held by Chase Manhattan Bank, NA (the "Custodian"), the proceeds
thereof, and any additions thereto, in the Investment Manager's discretion.
In its duties hereunder, the Investment Manager shall further be bound by
any and all determinations by the Board of Directors of the Company
relating to the investment policies of the Fund, which determinations shall
be communicated in writing to the Investment Manager. For all purposes
herein, the Investment Manager shall be deemed an independent contractor of
the Company.
2. POWERS OF THE INVESTMENT MANAGER
Subject to the limitations provided in Section 1 hereof, the Investment
Manager is empowered hereby, through any of its partners or appropriate
employees, for the benefit of the Fund:
(a) to invest and reinvest in shares, stocks, bonds, notes and other
obligations of every description issued or incurred by governmental bodies,
corporations, mutual funds, trusts, associations or firms, in trade
acceptances and other commercial paper, and in loans and deposits at
interest on call or on time, whether or not secured by collateral;
(b) to purchase and sell commodities or commodities contracts and
investments in put, call, straddle, or spread options;
(c) to lend its portfolio securities to brokers, dealers and other
financial institutions;
(d) to buy, sell, or exercise rights and warrants to subscribe for stock
or securities, and
<PAGE>
(e) to take such other action, or direct the Custodian to take such other
action, as may be necessary or desirable to carry out the purpose and
intent of the foregoing.
3. EXECUTION OF PORTFOLIO TRANSACTIONS
(a) The Investment Manager shall provide adequate facilities and qualified
personnel for the placement of, and shall place, orders for the purchase,
or other acquisition, and sale, or other disposition, of portfolio
securities for the Fund;
(b) unless otherwise specified in writing to the Investment Manager by the
Fund, all orders for the purchase and sale of securities for the Portfolio
shall be placed in such markets and through such brokers as in the
Investment Manager's best judgment shall offer the most favorable price and
market for the execution of each transaction; provided, however, that,
subject to the above, the Investment Manager may place orders with
brokerage firms which have sold shares of the Fund or which furnish
statistical and other information to the Investment Manager, taking into
account the value and quality of the brokerage services of such firms,
including the availability and quality of such statistical and other
information. Receipt by the Investment Manager of any such statistical and
other information and services shall not be deemed to give rise to any
requirement for abatement of the advisory fee payable to the Investment
Manager pursuant to Section 5 hereof and Appendix A hereto;
(c) the Fund understands and agrees that the Investment Manager may effect
securities transactions which cause the Fund to pay an amount of commission
in excess of the amount of commission another broker or dealer would have
charged, provided, however, that the Investment Manager determines in good
faith that such amount of commission is reasonable in relation to the value
of Fund share sales, statistical, brokerage and other services provided by
such broker or dealer, viewed in terms of either the specific transaction
or the Investment Manager's overall responsibilities to the Fund and other
clients for which the Investment Manager exercises investment discretion.
The Fund also understands that the receipt and use of such services will
not reduce the Investment Manager's customary and normal research
activities:
(d) the Fund understands and agrees:
(i) The Investment Manager performs investment management services
for various clients and that the Investment Manager may take action
with respect to any of its other clients which may differ from action
taken or from the timing or nature of action taken with respect to the
Portfolio, so long as it is the Investment Manager's policy, to the
extent practical to allocate investment opportunities to the Portfolio
over a period of time on a fair and equitable basis relative to other
clients;
(ii) that the Investment Manager shall have no obligation to
purchase or sell for the Portfolio any security which the Investment
Manager or its partners or employees, may purchase or sell for its or
their own accounts or the account of
-2-
<PAGE>
any other client, if in the opinion of the Investment Manager such
transaction or investment appears unsuitable, impractical or
undesirable for the Portfolio; and
(iii) that on occasions when the Investment Manager deems the
purchase or sale of a security to be in the best interests of the Fund
as well as other clients of the Investment Manager, the Investment
Manager, to the extent permitted by applicable laws and regulations,
may aggregate the securities to be so sold or purchased when the
Investment Manager believes that to do so will be in the best
interests of the Company. In such event, allocation of the securities
so purchased or sold, as well as the expenses incurred in the
transaction, shall be made by the Investment Manager in the manner the
Investment Manager considers to be the most equitable and consistent
with its fiduciary obligations to the Fund and to such other clients.
4. ALLOCATION OF EXPENSES OF THE COMPANY
(a) The Company is responsible for payment of the following ordinary
operating expenses: (I) brokerage and commission expenses, (ii) Federal,
state or local taxes, incurred by, or levied on, the Company, (iii)
interest charges on borrowings, (iv) charges and expenses of the Company's
custodian, and (v) payment of all Investment Management or advisory fees
payable under Section 5 hereof and Appendix A hereto:
(b) the Investment Manager shall provide persons to perform all executive,
administrative, clerical and bookkeeping functions of the company and shall
assume all ordinary operating expenses not assumed by the Company under
4(a) hereof; and
(c) the Company is responsible for payment of any extraordinary expenses
incurred. A good faith determination of what constitutes an extraordinary
expense shall be made by the Board of Directors of the Company, which good
faith determination shall include the affirmative vote of all non-
interested directors of the Company.
5. COMPENSATION OF THE INVESTMENT MANAGER
(a) In consideration of the services performed by the Investment Manager
hereunder, the Fund will pay or cause to be paid to the Investment Manager,
as they become due and payable, management fees determined in accordance
with the attached Schedule of Fees (Appendix A). In the event of
termination, any management fees paid in advance pursuant to such fee
schedule will be prorated as of the date of termination and the unearned
portion thereof will be returned to the Fund;
(b) the net asset value of the Fund's portfolio used in fee calculations
shall be determined in the manner set forth in the Articles of
Incorporation and By-Laws of the Company and the Fund's prospectus as of
the close of regular trading on the New York Stock Exchange on the last
business day of each month the New York Stock Exchange is open; and
-3-
<PAGE>
(c) the Fund hereby authorizes the Investment Manager to charge the
Portfolio, subject to the provisions in Section 6 hereof, for the full
amount of fees as they become due and payable pursuant to the attached
schedule of fees; provided, however, that a copy of a fee statement
covering said payment shall be sent to the Custodian and to the Company.
6. EXPENSE LIMITATION
(a) On the first business day of the second month of each fiscal year, the
Investment Manager agrees to pay the Fund the amount, if any, by which
ordinary operating expenses of the Company for the preceding fiscal year
(except interest and taxes and extraordinary expenses) exceed 15% of the
average net assets of the Fund for that year, determined monthly. Costs
incurred in connection with brokerage fees and commissions, which are
capitalized in accordance with generally accepted accounting principles
applicable to investment companies, shall be accounted for as capital items
and not as expenses; and
(b) in paying the quarterly Investment Management fee to the Investment
Manager, the Fund shall reduce the amount of such fee by the amount, if
any, by which the Company's ordinary operating expenses for the previous
quarter (except interest and taxes and extraordinary expenses) exceeded on
an annualized basis 1.25% of the average net asset value of the Fund's
shares, determined monthly; provided, however, that the Fund shall pay to
the Investment Manager on the first day of June the amount if any, by which
any such reductions in the preceding fiscal year exceeded the amount to
which the Fund would have been entitled in the second month of the current
fiscal year under Section 6(a) hereof if such reductions had not occurred.
7. SERVICE TO OTHER CLIENTS
Nothing contained in this Agreement shall be construed to prohibit the
Investment Manager from performing investment advisory, management,
distribution or other services for other investment companies and other
persons, trusts or companies, or to prohibit affiliates of the Investment
Manager from engaging in such businesses or in other related or unrelated
businesses.
8. STANDARD OF CARE
The Investment Manager shall have no liability to the Fund, or its
stockholders, for any error of judgment, mistake of law, or for any loss
arising out of any investment, or for any other act or omission in the
performance of its obligations to the Fund not involving willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations and duties hereunder.
9. DURATION OF AGREEMENT
This Agreement shall continue in effect until the close of business on
____________, 1998. This Agreement may thereafter be renewed from year to
year by mutual consent,
-4-
<PAGE>
provided that such renewal shall be specifically approved at least annually
by (i) the Board of Directors of the Company, or by the vote of a majority
(as defined in the 1940 Act) of the outstanding voting securities of the
Company, and (ii) a majority of those directors who are not parties to this
Agreement or interested persons (as defined in the 1940 Act) of any such
party cast in person at a meeting called for the purpose of voting on such
approval. Such mutual consent to renewal shall not be deemed to have been
given unless evidenced by a writing signed by both parties hereto.
10. TERMINATION
This Agreement may be terminated at any time, without payment of any
penalty, by the Board of Directors of the Company or by the vote of a
majority (as defined in the 1940 Act) of the outstanding voting securities
of the Company on sixty (60) days' written notice to the Investment
Manager, or by the Investment Manager on like notice to the Company. This
Agreement shall automatically terminate in the event of its assignment (as
defined in the 1940 Act).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate originals by their officers thereunto duly authorized as
of the date first above written.
RCM CAPITAL MANAGEMENT, RCM CAPITAL FUNDS, INC.
_____________________________ ON BEHALF OF
RCM SMALL CAP FUND
By: _________________________ By: _________________________
ATTEST: ATTEST:
_____________________________ _____________________________
-5-
<PAGE>
APPENDIX A
INVESTMENT MANAGEMENT AGREEMENT, POWER OF ATTORNEY,
AND SERVICE AGREEMENT
BETWEEN RCM CAPITAL MANAGEMENT, _______________________
AND RCM CAPITAL FUNDS, INC.
SCHEDULE OF FEES
FOR RCM SMALL CAP FUND
Effective Date: _________________, 1996
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.
Average Daily Net Assets Fee
________________________ ___
On all sums 1.00% annually
Dated: __________________, 1996
RCM CAPITAL MANAGEMENT, RCM CAPITAL FUNDS, INC.
________________________ ON BEHALF OF
RCM SMALL CAP FUND
By: ____________________________ By: __________________________
ATTEST: ATTEST:
By:________________________________ By: __________________________
<PAGE>
INVESTMENT MANAGEMENT AGREEMENT, POWER OF ATTORNEY
AND SERVICE AGREEMENT
THIS AGREEMENT is entered into this ____day of ____________, 1996 by and
between RCM Capital Management, _______________, (the "Investment Manager"), and
RCM Capital Funds, Inc. (the "Company"), on behalf of RCM International Growth
Equity Fund A, a series of the Company (the "Fund").
1. APPOINTMENT AND ACCEPTANCE OF APPOINTMENT OF THE INVESTMENT MANAGER
(a) Subject to express provisions and limitations set forth in the
Company's Articles of Incorporation, By-Laws, Form N-lA Registration
Statement under the Investment Company Act of 1940, as amended (the "1940
Act") and under the Securities Act of 1933, as amended (the "1933 Act"),
and the Fund's prospectus as in use from time to time, as well as to the
factors affecting the Company's status as a regulated investment company
under the Internal Revenue Code of 1986, as amended, the Company hereby
grants to the Investment Manager and the Investment Manager hereby accepts
full discretionary authority to manage the investment and reinvestment of
the cash, securities, and other assets of the Fund (the "Portfolio")
presently held by State Street Bank & Trust Company (the "Custodian"), any
proceeds thereof, and any additions thereto, in the Investment Manager's
discretion. In the performance of its duties hereunder, the Investment
Manager shall further be bound by any and all determinations by the Board
of Directors of the Company relating to the investment objectives policies
or restrictions of the Fund, which determinations shall be communicated in
writing to the Investment Manager. For all purposes herein, the Investment
Manager shall be deemed an independent contractor of the Company.
2. POWERS OF THE INVESTMENT MANAGER
Subject to the limitations provided in Section 1 hereof, the
Investment Manager is empowered hereby, through any of its partners,
principals, or appropriate employees, for the benefit of the Fund:
(a) to invest and reinvest in shares, stocks, bonds, notes and
other obligations of every description issued or incurred by governmental
bodies, corporations, mutual funds, trusts, associations or firms, in trade
acceptances and other commercial paper, and in loans and deposits at
interest on call or on time, whether or not secured by collateral;
(b) to purchase and sell commodities or commodities contracts and
investments in put, call, straddle, or spread options;
(c) to enter into forward, future, or swap contracts with respect
to the purchase and sale of securities, currencies, commodities, and
commodities contracts;
(d) to lend its portfolio securities to brokers, dealers and other
financial institutions;
1 of 6
<PAGE>
(e) to buy, sell, or exercise options, rights and warrants to
subscribe for stock or securities; and
(f) to engage in any other types of investment transactions
described in the Fund's Prospectus and Statement of Additional Information;
and
(g) to take such other action, or to direct the Custodian to take
such other action, as may be necessary or desirable to carry out the
purpose and intent of the foregoing.
3. EXECUTION OF PORTFOLIO TRANSACTIONS
(a) The Investment Manager shall provide adequate facilities and
qualified personnel for the placement of, and shall place, orders for the
purchase, or other acquisition, and sale, or other disposition, of
portfolio securities or other portfolio assets for the Fund.
(b) Unless otherwise specified in writing to the Investment Manager
by the Fund, all orders for the purchase and sale of securities for the
Portfolio shall be placed in such markets and through such brokers as in
the Investment Manager's best judgment shall offer the most favorable price
and market for the execution of each transaction; provided, however, that,
subject to the above, the Investment Manager may place orders with
brokerage firms that have sold shares of the Fund or that furnish
statistical and other information to the Investment Manager, taking into
account the value and quality of the brokerage services of such firms,
including the availability and quality of such statistical and other
information. Receipt by the Investment Manager of any such statistical and
other information and services shall not be deemed to give rise to any
requirement for abatement of the advisory fee payable to the Investment
Manager pursuant to Section 5 hereof and Appendix A hereto.
(c) the Fund understands and agrees that the Investment Manager may
effect securities transactions which cause the Fund to pay an amount of
commission in excess of the amount of commission another broker would have
charged, provided, however, that the Investment Manager determines in good
faith that such amount of commission is reasonable in relation to the value
of Fund share sales, statistical, brokerage and other services provided by
such broker, viewed in terms of either the specific transaction or the
Investment Manager's overall responsibilities to the Fund and other clients
for which the Investment Manager exercises investment discretion. The Fund
also understands that the receipt and use of such services will not reduce
the Investment Manager's customary and normal research activities.
(d) The Fund understands and agrees that:
(i) the Investment Manager performs investment management
services for various clients and that the Investment Manager may take
action with respect to any of its other clients which may differ from
action taken or from the timing or nature of action taken with respect to
the Portfolio, so long as it is the Investment Manager's policy, to the
extent practical, to allocate investment opportunities to the Portfolio
over a period of time on a fair and equitable basis relative to other
clients;
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(ii) the Investment Manager shall have no obligation to
purchase or sell for the Portfolio any security which the Investment
Manager or its principals or employees, may purchase or sell for its or
their own accounts or the account of any other client, if in the opinion of
the Investment Manager such transaction or investment appears unsuitable,
impractical or undesirable for the Portfolio;
(iii) on occasions when the Investment Manager deems the
purchase or sale of a security to be in the best interests of the Fund as
well as other clients of the Investment Manager, the Investment Manager, to
the extent permitted by applicable laws and regulations, may aggregate the
securities to be so sold or purchased when the Investment Manager believes
that to do so will be in the best interests of the Fund. In such event,
allocation of the securities so purchased or sold, as well as the expenses
incurred in the transaction, shall be made by the Investment Manager in the
manner the Investment Manager considers to be the most equitable and
consistent with its fiduciary obligations to the Fund and to such other
clients; and
(iv) the Investment Manager does not prohibit any of its
principals or employees from purchasing or selling for their own accounts
securities that may be recommended to or held by the Investment Manager's
clients.
4. ALLOCATION OF EXPENSES OF THE COMPANY AND THE FUND
(a) The Investment Manager will bear all expenses related to
salaries of its employees and to the Investment Manager's overhead in
connection with its duties under this Agreement. The Investment Manager
also will pay all fees and salaries of the Company's directors and officers
who are affiliated persons (as such term is defined in the 1940 Act) of the
Investment Manager.
(b) Except for the expenses specifically assumed by the Investment
Manager, the Fund will pay all of its expenses, including, without
limitation, fees and expenses of the directors not affiliated with the
Investment Manager attributable to the Fund; fees of the Investment
Manager; fees of the Fund's administrator, custodian and subcustodians for
all services to the Fund (including safekeeping of funds and securities and
maintaining required books and accounts); transfer agent, registrar and
dividend reinvestment and disbursing agent interest charges; taxes;
charges and expenses of the Fund's legal counsel and independent
accountants; charges and expenses of legal counsel provided to the non-
interested directors of the Company; expenses of repurchasing shares of the
Fund; expenses of printing and mailing share certificates, stockholder
reports, notices, proxy statements and reports to governmental agencies;
brokerage and other expenses connected with the execution, recording and
settlement of portfolio security transactions; expenses connected with
negotiating, or effecting purchases or sales of portfolio securities or
registering privately issued portfolio securities; expenses of calculating
and publishing the net asset value of the Fund's shares; expenses of member
ship in investment company associations; premiums and other costs associated
with the acquisition of a mutual fund directors and officers errors and
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omissions liability insurance policy; expenses of fidelity bonding and
other insurance premiums; expenses of stockholders' meetings; and SEC and
state blue sky registration fees.
(c) The expenses borne by the Fund pursuant to Section 4(b) shall
include the Fund's proportionate share of any such expenses of the Company,
which shall be allocated among the Fund and the other series of the Company
on such basis as the Company shall deem appropriate.
5. COMPENSATION OF THE INVESTMENT MANAGER
(a) In consideration of the services performed by the Investment
Manager hereunder, the Fund will pay or cause to be paid to the Investment
Manager, as they become due and payable, management fees determined in
accordance with the attached Schedule of Fees (Appendix A). In the event of
termination, any management fees paid in advance pursuant to such fee
schedule will be prorated as of the date of termination and the unearned
portion thereof will be returned to the Fund.
(b) The net asset value of the Fund's portfolio used in fee
calculations shall be determined in the manner set forth in the Articles of
Incorporation and By-Laws of the Company and the Fund's prospectus as of
the close of regular trading on the New York Stock Exchange on the last
business day of each month the New York Stock Exchange is open.
(c) The Fund hereby authorizes the Investment Manager to charge the
Portfolio, subject to the provisions in Section 6 hereof, for the full
amount of fees as they become due and payable pursuant to the attached
schedule of fees; provided, however, that a copy of a fee statement
covering said payment shall be sent to the Custodian and to the Company.
6. SERVICE TO OTHER CLIENTS
Nothing contained in this Agreement shall be construed to prohibit the
Investment Manager from performing investment advisory, management,
distribution or other services for other investment companies and other
persons, trusts or companies, or to prohibit affiliates of the Investment
Manager from engaging in such businesses or in other related or unrelated
businesses.
7. STANDARD OF CARE
The Investment Manager shall have no liability to the Fund, or its
stockholders, for any error of judgment, mistake of law, or for any loss
arising out of any investment, or for any other act or omission in the
performance of its obligations to the Fund not involving willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations and duties hereunder. The federal securities laws impose
liabilities under certain circumstances on persons who act in good faith,
and therefore nothing herein shall in any way constitute a waiver or
limitation of any rights which the undersigned may have under any federal
securities laws.
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8. DURATION OF AGREEMENT
This Agreement shall continue in effect until the close of business on
____________, 1998. This Agreement may thereafter be renewed from year to
year by mutual consent, provided that such renewal shall be specifically
approved at least annually by (i) the Board of Directors of the Company, or
by the vote of a majority (as defined in the 1940 Act) of the outstanding
voting securities of the Company, and (ii) a majority of those directors
who are not parties to this Agreement or interested persons (as defined in
the 1940 Act) of any such party cast in person at a meeting called for the
purpose of voting on such approval. Such mutual consent to renewal shall
not be deemed to have been given unless evidenced by a writing signed by
both parties hereto.
9. TERMINATION
This Agreement may be terminated at any time, without payment of any
penalty, by the Board of Directors of the Company or by the vote of a
majority (as defined in the 1940 Act) of the outstanding voting securities
of the Company on sixty (60) days' written notice to the Investment
Manager, or by the Investment Manager on like notice to the Company. This
Agreement shall automatically terminate in the event of its assignment (as
defined in the 1940 Act).
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate originals by their officers thereunto duly authorized as
of the date first above written.
RCM CAPITAL MANAGEMENT, RCM CAPITAL FUNDS, INC.
_______________________ ON BEHALF OF
RCM INTERNATIONAL GROWTH
EQUITY FUND A
By: ____________________________ By: _____________________________
ATTEST: ATTEST:
By: ________________________________ By: ________________________________
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APPENDIX A
INVESTMENT MANAGEMENT AGREEMENT, POWER OF ATTORNEY,
AND SERVICE AGREEMENT
BETWEEN RCM CAPITAL MANAGEMENT, ________________________
AND RCM CAPITAL FUNDS, INC.
SCHEDULE OF FEES
FOR RCM INTERNATIONAL GROWTH EQUITY FUND A
Effective Date: _________________, 1996
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.
Average Daily Net Assets Fee
________________________ ___
On all sums 0.75% annually
Dated: __________________, 1996
RCM CAPITAL MANAGEMENT, RCM CAPITAL FUNDS, INC.
________________________ ON BEHALF OF
RCM INTERNATIONAL
GROWTH EQUITY FUND A
By: ____________________________ By: __________________________
ATTEST: ATTEST:
By: ________________________________ By: __________________________
