SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For use of the Commission
Only (as permitted by Rule 14a-6(e)(2)
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
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RNC Mutual Fund Group, Inc.
(Name of Registrant as Specified in Charter)
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Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule -11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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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.
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(1) Amount previously paid:
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(2) Form, Schedule or Registration no.:
Schedule 14A; 002-99009; 811-04354
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(3) Filing Party: RNC Mutual Fund Group, Inc.
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(4) Date Filed: February 24, 1998
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RNC MUTUAL FUND GROUP, INC. 11601 Wilshire Blvd., 25th Flr
Los Angeles, California 90025
Notice of Special Meeting of Shareholders
March 27, 1998
RNC Money Market Fund
RNC Equity Fund
A Special Meeting of Shareholders of each of the above referenced funds
(each a "Fund" and together the "Funds" or "RNC Funds") will be held at the
offices of RNC Mutual Fund Group, Inc., 11601 Wilshire Boulevard., 25th Floor,
Los Angeles, California 90025 on March 27, 1998, at 8:00 A.M. (local time) for
the following purposes:
1. For shareholders of each Fund: To approve a new investment advisory
agreement between each Fund and RNC Capital Management LLC ("RNC
Management LLC") pursuant to which RNC Management LLC will act as
adviser with respect to the assets of each Fund, to become effective
upon the closing of a merger of RNC Capital Management Co., the current
adviser to the Funds, with RNC Management LLC.
2. For shareholders of RNC Money Market Fund only: To change a fundamental
investment policy of RNC Money Market Fund to permit RNC Money Market
Fund to invest in short-term money market securities with a maturity of
up to 13 months.
3. To transact such other business as may properly come before the
Meeting, or any adjournments thereto.
Shareholders of record at the close of business on February 17, 1998,
are entitled to notice of and to vote at the Meeting. Each Fund is a series of
RNC Mutual Fund Group, Inc., a Maryland corporation organized on April 9, 1985.
/s/ Eric Banhazl
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Secretary
February 24, 1998
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RNC MUTUAL FUND GROUP, INC.
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Proxy Statement
For a Special Meeting of Shareholders
To Be Held on March 27, 1998
RNC Money Market Fund
RNC Equity Fund
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Introduction
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This proxy statement is solicited by the Board of Directors (the
"Board") of RNC Mutual Fund Group, Inc., ("RNC Fund Group") for voting at the
special meeting of shareholders of each Fund named above to be held at 8:00 A.M.
(local time) on March 27, 1998, at 11601 Wilshire Boulevard, 25th floor, Los
Angeles, California, and at any and all adjournments thereof (the "Meeting"),
for the purposes set forth in the accompanying Notice of Special Meeting of
Shareholders. This proxy statement was first mailed to shareholders on or about
February 23, 1998.
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Prop. Funds Affected Summary
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1 RNC Money Market Fund Approve new investment agreement with
RNC Equity Fund new adviser
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2 RNC Money Market Fund Approve fundamental change in policy of
RNC Money Market Fund to permit
investments in securities with a maximum
13-month duration
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Each share of RNC Money Market Fund is entitled to one vote on each of
Proposals 1 and 2 and on each other matter it is entitled to vote upon at the
Meeting. Each share of RNC Equity Fund is entitled to one vote on each of
Proposal 1 and on each other matter it is entitled to vote upon at the Meeting.
Each valid proxy will be voted in accordance with your instructions and
as the persons named in the proxy determine on such other business as may come
before the Meeting. If no instructions are given, the proxy will be voted FOR
Proposal 1 and FOR Proposal 2 for Shareholders of RNC Money Market Fund and will
be voted FOR Proposal 1 for Shareholders of RNC Equity Fund. Proposal 2, which
affects only Shareholders of RNC Money Market Fund, does not require the
approval of the Shareholders of RNC Equity Fund. Shareholders who execute
proxies may revoke them at any time before they are voted, either by writing to
RNC Fund Group or in person at the time of the Meeting.
Shareholders of RNC Money Market Fund are being asked to vote upon two Proposals
and shareholders of RNC Equity Fund are being asked to vote upon one Proposal
Proposal 1 requires the affirmative vote of a "majority of the
outstanding voting securities" of each Fund. The term "majority of the
outstanding voting securities" for each Fund as defined in the 1940 Act means:
the affirmative vote of the lesser of (i) 67% of the voting securities of the
Fund present at the
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meeting if more than 50% of the outstanding shares of the Fund are present in
person or by proxy or (ii) more than 50% of the outstanding shares of the Fund.
Proposal 2 requires the affirmative vote of a majority of the outstanding voting
securities of RNC Money Market Fund. Shareholders of RNC Equity Fund do not vote
on Proposal 2. On Proposal 1 each Fund will vote separately. On Proposal 2 only
shareholders of RNC Money Market Fund will vote.
The Meeting is scheduled as a joint meeting of the respective
shareholders of both RNC Funds because the shareholders of both RNC Funds will
consider and vote on essentially the same matters. The Board has determined that
the use of a joint proxy statement for the Meeting is in the best interest of
each Fund's shareholders.
The Board of Directors of RNC Funds recommends that you vote in favor of all
Proposals.
The Board of RNC Funds has fixed the close of business on February 17,
1998, as the record date (the "Record Date") for determining holders of the
Funds' shares entitled to notice of and to vote at the Meeting. Each shareholder
will be entitled to one vote for each share held. At the close of business on
the Record Date, the following shares were outstanding:
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Fund Total Fund Shares
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RNC Money Market Fund 40,303,130
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RNC Equity Fund 298,356
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Proposal 1 Approval of New Investment Advisory Agreements
(To be voted on separately by shareholders of each Fund)
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Background
Currently, RNC Capital Management Co. (the "Adviser" or "RNC
Management") serves as investment adviser to the each Fund pursuant to an
existing investment advisory agreement (each, an "Existing Advisory Agreement"
and collectively, the "Existing Advisory Agreements"). Under the Existing
Advisory Agreements, the Adviser furnishes investment advice and investment
management services with respect to each Fund's portfolio of securities and
investments.
RNC Management is a wholly owned subsidiary of RNC Capital Group, Inc.
("RNC Group"). Bank Austria America, Inc., (the "Bank") an indirect subsidiary
of Bank Austria Aktiengesellschaft, a banking organization which is organized
under the laws of and domiciled in the Republic of Austria, owns all of the
outstanding shares of RNC Group. On January 9, 1998, the Bank entered into a
merger agreement ("Merger Agreement") to allow RNC Group to be acquired by a new
holding company (referred to herein as "New Group LLC" or the "Acquirer"). The
new holding company will become the new parent company of both RNC Management
and its affiliated broker, Midvale Securities Corp. ("Midvale"), and both RNC
Management and Midvale will be reorganized as limited liability companies,
respectively RNC Capital Management LLC (the "New Adviser" or "RNC Management
LLC") and Midvale Securities LLC ("Midvale
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LLC"). More detailed information on the transaction (referred to herein as the
"Acquisition") is set forth at the end of the proxy statement. The Acquisition
has a direct impact on RNC Funds because it will cause a change in the ultimate
ownership of the Adviser. As explained below, such ownership changes require the
Directors of RNC Fund Group and Shareholders of each Fund to approve a New
Advisory Agreement with the New Adviser under its new ownership.
The Acquisition is expected to close on or about March 31, 1998, or
such later date as to which the parties may agree in writing (the "Closing"),
and is subject to various conditions, including approval by the Shareholders of
each Fund of the New Advisory Agreement between the New Adviser and each Fund.
After the Closing, the New Adviser will continue to operate out of RNC Group's
current offices in Los Angeles, California. Key members of the Adviser's
management team, including John G. Marshall and A. Robert Blais will have roles
with the New Adviser similar to those they had at RNC Management and they will
continue to be responsible for managing the day-to-day affairs of the Funds.
More information about the Acquisition appears at the end of this proxy
statement.
The Legal Framework
Pursuant to Section 15 of the Investment Company Act of 1940, as
amended (the "1940 Act"), each investment advisory agreement between a Fund and
an adviser terminates automatically upon its assignment, which is deemed to
include any change of control of the investment adviser. Section 15(a) of the
1940 Act prohibits any person from serving as an investment adviser to a
registered investment company except pursuant to a written contract that has
been approved by the Shareholders. Therefore, in order for the New Adviser to
provide investment advisory services to the Funds after the Closing, the
Shareholders of each Fund must approve the New Advisory Agreement between each
Fund and the New Adviser.
The Directors believe that the proposed future operations of the Funds
will provide benefits to shareholders and will comply with the 1940 Act
requirement that shareholders not bear any "unfair burden" as a result of the
Acquisition. Specifically, the Bank and the New Adviser have committed to comply
with the requirements of Section 15(f) of the 1940 Act which provides, in
pertinent part, that Bank may receive any amount of benefit in connection with a
sale of securities of, or a sale of any other interest in, the Adviser which
results in an assignment of an investment advisory contract if (i) for a period
of three years after such event, at least 75% of the members of the board of
directors of the investment company which it advises are independent--i.e., not
"interested persons"(as defined in the 1940 Act)--of the new or old investment
adviser; and (ii) for a two-year period there is no "unfair burden" imposed on
the investment company as a result of the Acquisition. The term "unfair burden"
is defined in Section 15(f) to include any arrangement during the two-year
period after the Acquisition whereby the investment 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 shareholders (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 for such investment company). The Board
has received assurances that no unfair burden will be imposed on the Funds as a
result of the Acquisition.
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After the Closing, the Funds will continue to operate under the name
RNC Mutual Fund Group or RNC Falcon Funds.
Comparison of the New Advisory Agreements and the Existing Advisory Agreements
The shareholders of RNC Money Market Fund last approved the Existing
Advisory Agreement for RNC Money Market Fund dated on or about November 26, 1990
on November 26, 1990. The initial shareholder[s] of RNC Equity Fund initially
approved the Existing Advisory Agreement for RNC Equity Fund dated October 31,
1996 on October 31, 1996. The Board of Directors of RNC Funds, including a
majority of the "disinterested" Directors, most recently approved continuation
of the Existing Advisory Agreements on December 11, 1997. Under the Existing
Advisory Agreements, the Adviser is entitled to receive investment advisory fees
from RNC Money Market Fund at a rate of 0.41% of RNC Money Market Fund's average
daily net assets and from RNC Equity Fund at a rate of 1.00% of RNC Equity
Fund's average daily net assets. For the fiscal period ending September 30,
1997, RNC Equity Fund paid the Adviser $17,621 in advisory fees. For the fiscal
period ended September 30, 1997, RNC Money Market Fund paid the Adviser $121,035
in advisory fees, after voluntary waivers of fees and reimbursement of expenses
by the Adviser. Absent such waiver and/or reimbursement, the total operating
expenses of RNC Money Market Fund is estimated to be 1.08%. Any reductions made
by the Adviser in its fees and any payments or reimbursements of expenses made
by the Adviser which are a Fund's obligation are subject to reimbursement within
the following three years by that Fund provided the Fund is able to effect such
reimbursement and remain in compliance with applicable expense limitations.
After the Closing and the merger of the Adviser into the New Adviser, the New
Adviser will continue to waive and reduce fees so that, for a period of two
years from the Closing, the total fund operating expenses for RNC Money Market
Fund will not exceed its current level of 0.70% and the total fund operating
expenses for RNC Equity Fund will not exceed its current level of 1.65%. During
the fiscal year ended September 30, 1997, no brokerage commission was paid to
any affiliated broker.
The New Advisory Agreements will be substantially identical in all
material respects to the Existing Advisory Agreements. The present total
operating expenses for RNC Money Market Fund and RNC Equity Fund shall remain
the same for a minimum two-year period. A form of the New Advisory Agreement is
attached to this Proxy Statement as Exhibit B. The following description of the
New Advisory Agreement is only a summary. You should refer to Exhibit B for the
complete New Advisory Agreement.
As is the case in under the Existing Advisory Agreements, the New
Advisory Agreements provide that the Adviser will provide investment advisory
services to the Funds, including deciding what securities will be purchased and
sold by the Funds, when such purchases and sales are to be made, and arranging
for those purchases and sales, all in accordance with the provisions of the 1940
Act and the rules thereunder, the governing documents of RNC Funds, the
fundamental policies of the Funds, as reflected in its registration statement,
and any policies and determinations of the Board of Directors.
Section 15 of the 1940 Act prohibits any person from serving as an
investment adviser to a registered investment company except pursuant to a
written contract that has been approved by the shareholders. Therefore, in order
for the Adviser to continue advising the Funds under the New Advisory
Agreements, the shareholders of the Funds each must approve the New Advisory
Agreement.
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If approved by shareholders, each New Advisory Agreement will continue
in effect for two years from its effective date for each Fund, and will continue
in effect thereafter for successive annual periods, provided its continuance is
specifically approved at least annually by (1) a majority vote, cast in person
at a meeting called for that purpose, of RNC Funds' Board of Directors or (2) a
vote of the holders of a majority of the outstanding voting securities (as
defined in the 1940 Act and the rules thereunder) of each Fund, and (3) in
either event by a majority of the Directors who are not parties to the New
Advisory Agreement or interested persons of RNC Funds or of any such party. The
New Advisory Agreement provides that it may be terminated at any time, without
penalty, by either party upon 60-days' written notice, provided that such
termination by a Fund shall be directed or approved by a vote of the Directors
of RNC Fund Group, or by a vote of holders of a majority of the shares of the
RNC Funds.
Both the Existing Advisory Agreements and the New Advisory Agreements
provide that the Investment Manager would have no liability to the Funds or any
shareholder of the Funds for any act or omission in connection with rendering
services under the respective agreements, including any error of judgment,
mistake of law or any loss arising out of any investment, except for liability
resulting from willful misfeasance, bad faith, negligence or reckless disregard
on the part of the Investment Manager of its duties under the agreements
("Disabling Conduct"), and except to the extent specified in Section 36(b) of
the 1940 Act with respect to a loss resulting from the breach of fiduciary duty
with respect to receipt of compensation for services. The New Advisory
Agreements, like the Existing Advisory Agreements, provide that the Funds shall
indemnify the New Adviser and its employees, officers and directors from any
liability arising from the New Adviser's conduct under the New Advisory
Agreement, except for Disabling Conduct, to the extent permitted by the Funds'
governing documents and applicable law.
The Directors have unanimously recommended that shareholders approve and vote
"FOR" the New Advisory Agreements
The Board of Directors of RNC Fund Group has determined that the New
Advisory Agreements are fair and in the best interests of each Fund's
shareholders. In making this recommendation, the Board exercised its independent
judgment based on a careful review of the proposed arrangements and potential
benefits.
The Directors' Considerations
The transactions contemplated by the Acquisition were presented to the
Board of Directors of RNC Fund Group for consideration at the February 19, 1998,
Board of Directors meeting. The Board, which is comprised entirely of
individuals who are not interested persons, voted to approve the transactions
contemplated by the Acquisition. The Directors carefully evaluated the
experience of the Adviser's key personnel in portfolio management, the
arrangements made to secure the continued service of the key personnel in
portfolio management, the high quality of services the New Adviser is expected
to continue to provide to the Funds, and the fair and reasonable compensation
proposed to be paid to the New Adviser, and found particularly significant:
o That no change in the portfolio management of the Funds is expected to
result from the Acquisition. Daniel J. Genter, Jr., and each of the
portfolio advisers, John G. Marshall and A. Robert Blais will continue
managing and advising the Funds. Mr. Genter will become President and
Chief Executive Officer of the Funds;
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o That the terms of the Existing Advisory Agreements will be unchanged
under the New Advisory Agreements except for different effective and
termination dates and other minor differences discussed elsewhere in
this Proxy Statement;
o That the compensation payable to the New Adviser by each Fund under the
New Advisory Agreements will be at the same rate as the compensation
now payable by each Fund to the Adviser under the Existing Advisory
Agreements and that the fee and expense ratios of the Funds are
reasonable given the quality of services expected to be provided and
the fee and expense ratios of comparable mutual funds;
The Directors also have given careful consideration to other factors
deemed to be relevant to the Funds, including, but not limited to:
o The favorable relative performance of the Funds since commencement of
operations;
o The research-intensive nature and quality of the services expected to
be rendered to the Funds by the New Adviser and the importance of such
research and services to the fulfillment of the particular investment
objective and policies of each Fund
o The favorable history, reputation, qualification and background of the
Daniel J. Genter, Jr., as well as the qualifications of his employees;
o The commitment of the New Adviser to pay or reimburse each Fund for the
expenses incurred in connection with the Acquisition so that
shareholders of the Funds would not bear those expenses;
o The benefits expected to be realized as a result of the New Adviser not
being affiliated with a bank and so will not be subject to banking law
restrictions contained in the Glass-Steagall Act that prohibit banks
and their affiliates from engaging in certain securities-related
activities, including the offering, sale or distribution of securities,
restrict the composition of the Board of Directors, etc.; and
o Other factors they deemed relevant.
The Adviser has advised the Boards of Directors that it expects that
there will be no diminution in the scope and quality of advisory services
provided to the Funds as a result of the Acquisition. Accordingly, the Board of
Directors believes that each Fund should receive investment advisory services
under the New Advisory Agreements equal or superior to those it currently
receives under the Existing Advisory Agreements, at the same fee levels.
The Board received information from the Acquirer regarding its
management, history, qualifications and other relevant information, including
portfolio transaction practices.
In addition, the Board also deemed it beneficial to Fund shareholders
for the Funds to be affiliated with the Acquirer for several reasons, including
the freedom from the Glass-Steagall Act and other banking restrictions. Because
the Adviser currently is an affiliate of the Bank, the Adviser is subject to
restrictions of the Glass-Steagall Act which imposes certain limitations on bank
affiliates. However, the New Adviser is not affiliated with the Bank or any bank
and would, therefore, not fall under the purview of the Glass-Steagall Act.
Furthermore, the Board also considered the fact that potential benefits from the
Acquirer organization were being obtained with the expected retention of the
current portfolio managers for the
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Funds as employees of the New Adviser, thereby causing no significant changes in
the portfolio management and operations of the Funds.
The Adviser and the Acquirer have assured the Board that they intend to
comply with Section 15(f) of the 1940 Act. As discussed above, Section 15(f)
provides a non-exclusive safe harbor for an investment adviser to an investment
company or any of its affiliated persons to receive any amount or benefit in
connection with a change in control of the investment adviser so long as certain
conditions are met, including the condition that no "unfair burden" be imposed
on the Funds for a two-year period. The Adviser is not aware of any express or
implied term, condition, arrangement or understanding that would impose an
unfair burden on the Funds as a result of the Acquisition. The Acquirer has
agreed that it and its affiliates will take no action that would have the effect
of imposing an "unfair burden" on the Funds as a result of the Acquisition, and
will indemnify the shareholders and the independent Directors of RNC Funds for
any losses from imposition of an unfair burden.
Based upon its evaluation of the relevant information presented to
them, and in light of their fiduciary duties under federal and state law, the
Board, including all the disinterested Directors of RNC Funds, unanimously
determined that the transactions contemplated by the Acquisition, including the
New Advisory Agreements for the Funds, are advisable and in the best interests
of each Fund and their shareholders, and recommended the approval of each
Proposal by the shareholders at the Meeting.
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Proposal 2 To change a fundamental restriction of RNC Money Market Fund
to permit RNC Money Market Fund to invest in short-term money
market securities with a maturity of up to 13 months. (To be
voted on only by shareholders of RNC Money Market Fund)
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The RNC Money Market Fund primarily invests in short-term money market
securities. Under current Rule 2a-7 of the 1940 Act, a money market mutual fund
may purchase any security with a remaining maturity of no more than 397 calendar
days (i.e., 13 months). A current fundamental investment policy of RNC Money
Market Fund, however, defines short-term money market securities as securities
having a maturity of up to one year. This policy restricts RNC Money Market
Fund's investments to securities with a maximum remaining maturity of one year
and because other similar funds may invest in securities with a 13-month maximum
duration and puts RNC Money Market Fund at a competitive disadvantage with
similar funds. The Adviser has recommended to the Board that such a fundamental
policy should be relaxed to conform to the maximum maturity currently allowed by
the Securities Exchange Commission. the Adviser believes extending the maximum
duration of securities that RNC Money Market Fund may invest in will open up
additional income opportunities and increase yields while maintaining the
desired margin of safety.
The Board of Directors of RNC Funds has reasonably determined that
extending the duration of permissible securities is in the best interests of RNC
Funds' shareholders. In making this recommendation, the Board exercised its
independent judgment based on a careful review of the proposed changes and
potential benefits.
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Based upon its evaluation of the relevant information presented to
them, and in light of their fiduciary duties under federal and state law, the
Board unanimously determined that the proposed change to the fundamental
investment policy of RNC Money Market Fund is advisable and in the best
interests of RNC Money Market Fund and its shareholders, and recommended the
approval of the Proposal by the shareholders at the Meeting.
Other Information
The Merger Agreement
The Merger Agreement entered into on January 9, 1998, by and between
the Bank, RNC Group, New Group LLC, RNC Management, RNC Management LLC, Midvale,
Midvale LLC and Daniel J. Genter, Jr., provides that (i) RNC Group will be
merged into the Acquirer, New Group LLC ,(ii) the Adviser will be merged into
RNC Management LLC, and (iii) Midvale will be merged into Midvale LLC. Both RNC
Management LLC and Midvale LLC are wholly owned by the Acquirer and the Acquirer
is wholly owned by Mr. Genter.
RNC Funds, the Current Adviser and Current RNC Group
The Adviser currently is a wholly owned subsidiary of RNC Group, which
is in the business of providing financial services to institutional and
individual investors through its subsidiaries. RNC Group, in turn, is a wholly
owned subsidiary of the Bank which is an indirect subsidiary of Bank Austria
Aktiengesellschaft, a banking organization organized under the laws of and
domiciled in the Republic of Austria. Anteilsverwaltung-Zentralsparkasse holds
49% of the voting securities of Bank, Post-und Telekombeteiligungsgesellschaft
holds 19% of the voting securities of Bank and Westdeutsche Landesbank
Girozentrale holds 9% of the voting securities of Bank. No other single entity
owns more than 5% of the issued and outstanding stock of Bank.
The address of RNC Fund Group, the Adviser and RNC Group, is 11601
Wilshire Boulevard, 25th floor, Los Angeles, California 90025. The names,
addresses and principal occupations of the principal executive officers and
shareholders of the Adviser, and the executive officers and Directors of RNC
Fund Group, are set forth below. The address of each, as it relates to his
duties of the Adviser or RNC Funds, is the same as that of the Adviser or RNC
Fund Group unless otherwise noted.
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Name Position with Other Substantial Business, Profession,
RNC Fund Group* Vocation or Employment
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Eric M. Banhazl President, Mr. Banhazl is Executive Vice President
Treasurer and of The Wadsworth Group and Investment
Secretary Company Administration Corporation,
the Funds' administrator and Vice
President of First Fund Distributors,
Inc., the Funds' principal underwriter.
Mr. Banhazl is also the President of
Advisors Series Trust and E.M. Banhazl
& Associates, Inc., a mutual fund
consulting firm and the Treasurer of
Professionally Managed Portfolios,
Guinness Flight Investment Funds, Inc.,
Masters' Select Funds Trust, Kayne
Anderson Mutual Funds, Brandes
Investment Trust, Purisima Funds,
Fleming Funds, Inc., Jurika & Voyles
Fund Group, Nicholas Applegate??, PIC
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Name Position with Other Substantial Business, Profession,
RNC Fund Group* Vocation or Employment
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Investment Trust, Ranier Investment
Management Mutual Funds and Matterhorn
Growth Fund, Inc., all of which are
investment companies unaffiliated with
the Group.
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Bruce B. Stuart Director President of Nu-Ceramic Technology,
Inc.
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DeVere W. McGuffin Director Owner and principal executive officer
of the Meadow Grove Group, a finance
and investment firm; Chief Executive
Officer of California Adventist Federal
Credit Union; Mr. McGuffin also directs
First Interurban Development
Corporation, a non-profit financial
corporation which he founded in 1981.
Mr. McGuffin is also currently licensed
as a securities representative and as a
commodities futures principal.
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Daniel J. Genter N/A President, CEO and Director of the
Adviser
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Thomas Pastore N/A Vice President/Assistant Secretary and
Director of the Adviser
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James O'Neill N/A Vice President/Assistant Treasurer and
Director of the Adviser
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Nicanor M. Mamaril N/A Senior Vice President, Treasurer and
Secretary of the Adviser
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Jan Kallik N/A Senior Vice President and Director of
Equity Research of the Adviser
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A. Robert Blais N/A Senior Vice President and Director of
Fixed Income of the Adviser
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Bruce A. Mandel N/A Senior Vice President and Director of
Marketing of the Adviser
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John G. Marshall N/A Senior Vice President and Director of
Equity of the Adviser
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RNC Capital Management Co., (as defined above, "the Adviser") currently
serves as each Fund's investment adviser pursuant to Existing Advisory
Agreements. The Adviser manages each Fund's investments, provides various other
services and supervises each Fund's daily business affairs, subject to
supervision by the Fund's Board of Directors. John G. Marshall and A. Robert
Blais, the Funds' portfolio advisers, have been responsible for the day-to-day
management of the Funds since their inception. The Adviser's successor
organization, the New Adviser, will serve as investment adviser to the Funds
pursuant to the New Advisory Agreements and Mr. Marshall and Mr. Blais will
continue to be responsible for the day-to-day management of the Funds. It is
expected that all senior officers off the Adviser would execute employment
agreement with the New Adviser and will work for the New Adviser in the same
capacity that they worked for the Adviser after the Closing.
The Acquirer
The names, addresses and principal occupations of the principal
executive officers of the Acquirer are as follows. The address of each, as it
relates to his duties at the Adviser, is the same as that at the Adviser.
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Name and Address Principal Occupation
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Daniel J. Genter _________________ of New Group LLC, President, Chief
Executive Officer and Director of RNC Capital
Management Co.; Chairman of Midvale Securities
Corporation, _________________ of RNC Capital
Management LLC, _________________ of Midvale
Securities LLC
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General
RNC Funds' principal underwriter is First Fund Distributors, Inc., 4455
East Camelback Road, Suite 261-E, Phoenix, Arizona 85018. The Administrator for
RNC Funds is Investment Company Administration Corporation, 4455 East Camelback
Road, Suite 261-E, Phoenix, Arizona 85018.
Shareholder Meeting Costs and Voting Procedures
The By-Laws of RNC Funds provide that the presence at a shareholder
meeting in person or by proxy of a majority of the shares of RNC Funds (or
series) entitled to vote at the Meeting constitutes a quorum. Thus, the meeting
for RNC Funds (or series) will take place on its scheduled date if a majority of
the shares of RNC Funds (or series) are represented. If a quorum of shareholders
of RNC Funds (or series) is not present or if a quorum is present but sufficient
votes in favor of any of the Proposals are not received, the meeting may be held
for the purposes of voting on those proposals for which sufficient votes have
been received and the persons named as proxies may propose one or more
adjournments of the meeting to permit further solicitation of proxies with
respect to any proposal for either Fund for which sufficient votes have not been
received. Any such adjournment will require the affirmative vote of a majority
of the votes cast on the question of adjournment in person or by proxy. The
persons named as proxies will vote in favor of any such adjournment.
In tallying shareholder votes, abstentions (i.e., shares for which a
proxy is presented, but which abstains from voting on one or more matters) and
"nominee non-votes"(i.e., shares held by nominees for which proxies are
presented but as to which (i) instructions have not been received from the
beneficial owners or persons entitled to vote and (ii) the nominee does not have
discretionary voting power on a particular matter) will be counted for purposes
of determining whether a quorum, or majority of voting shares, is present for
the conduct of business at the Meeting and will be voted in favor of any
adjournment proposed. However, nominee non-votes will not constitute votes for
or against any proposal, will not constitute an abstention, and will be
disregarded in determining votes cast for purposes of determining whether a
proposal has received a majority of the outstanding voting shares. For purposes
of qualifying shares as present, and for purposes of voting on Proposal 2 in
which RNC Management has no interest, RNC Management may use its discretionary
authority to present shares and to vote shares as to which no client
instructions have been received.
<TABLE>
Shareholders of each Fund at the close of business on February 17,
1998, will be entitled to be present and vote at the Meeting. As of that date,
the number of shares outstanding for each Fund and their respective total net
assets are set forth in table format below:
<CAPTION>
- -----------------------------------------------------------------------------------------------
Fund Name Shares Outstanding (in thousands) Total Net Assets (in millions)
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
RNC Money Market Fund 40,303 40.303
- -----------------------------------------------------------------------------------------------
RNC Equity Fund 298 4.78
- -----------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
To the knowledge of management, at the close of business on February
17, 1998, the officers and Directors of the Group owned, collectively, less than
1% of the shares of each Fund. To the knowledge of the Group's management at the
close of business of February 17, 1998, the only persons owning beneficially
more than 5% of the outstanding shares of each Fund were those listed in Exhibit
A.
The cost of preparing, printing and mailing the enclosed proxy,
accompanying notice and proxy statement and all other costs in connection with
solicitation of proxies related to the required approvals will be paid by RNC
Capital and the Acquirer, including any additional solicitation made by letter,
telephone or telegraph. In addition to solicitation by mail, certain officers
and representatives of RNC Funds, officers and employees of RNC Capital and the
Acquirer and certain financial services firms and their representatives, who
will receive no extra compensation for their services, may solicit proxies by
telephone, telegram or personally. In addition, RNC Capital and the Acquirer may
retain a firm to solicit proxies on behalf of the Board; the fee for which will
be borne by the Adviser and the Acquirer.
Annual Reports
A copy of your Fund's annual report for the fiscal year ended September
30, 1997, is available without charge upon request by writing to RNC Mutual Fund
Group, Inc., 11601 Wilshire Boulevard, 25th Floor, Los Angeles, California 90025
or by calling 1-800-385-7003.
Proposals of Shareholders
Under Maryland law, RNC Funds is not required to hold annual
shareholder meetings, but it will hold special meetings as required or deemed
desirable, or upon request by holders of 10% of the shares. Since RNC Funds does
not hold regular meetings of shareholders, the anticipated date of the next
special shareholder meeting cannot be provided. If an annual meeting is called,
any shareholder who wishes to submit a proposal for consideration at the meeting
should submit the proposal promptly to the Funds. Any proposal to be considered
for submission to shareholders must comply with Rule 14a-8 under the Securities
Exchange Act of 1934, as amended.
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<PAGE>
Other Matters to Come Before the Meeting
The Board is not aware of any matters that will be presented for action
at the Meeting other than the matters set forth herein. Should any other matters
requiring a vote of shareholders arise, the proxy in the accompanying form will
confer upon the person or persons entitled to vote the shares represented by
such proxy the discretionary authority to vote matters in accordance with their
best judgment.
PLEASE COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY. NO POSTAGE IS
REQUIRED IF MAILED IN THE UNITED STATES.
By order of the Board of Directors,
________________________________________
Eric M. Banhazl
President, Treasurer and Secretary
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<PAGE>
EXHIBIT A
LIST OF FIVE PERCENT SHAREHOLDERS
As of February 17, 1998, the following persons held of record 5% or
more of the outstanding shares of the RNC Money Market Fund:
- --------------------------------------------------------------------------------
Shareholder Percentage of RNC Money Market Fund held
- --------------------------------------------------------------------------------
Repub & Co.
c/o Imperial Trust Co.
201 N. Figueroa Street, Suite 610 62.75%
Los Angeles, California 90071;
- --------------------------------------------------------------------------------
RNC Capital Management Co.
11601 Wilshire Boulevard, 25th Floor 22.24%
Los Angeles, California 90025
- --------------------------------------------------------------------------------
Repub & Co. ERISA Account
c/o Imperial Trust Co. 9.97%
201 N. Figueroa Street, Suite 610
Los Angeles, California 90071
- --------------------------------------------------------------------------------
As of February 17, 1998, there were no shareholders who held 5% or more
of the outstanding shares of RNC Equity Fund.
14
<PAGE>
EXHIBIT B
FORM OF NEW INVESTMENT ADVISORY AGREEMENT
RNC MUTUAL FUND GROUP, INC.
INVESTMENT ADVISORY AGREEMENT
THIS INVESTMENT ADVISORY AGREEMENT made as of the ___th day of
___________________, 1998, by and between RNC MUTUAL FUND GROUP, INC., a
Maryland corporation (the "Group"), on behalf of each series of the Group listed
in Appendix A hereto, as such may be amended from time to time (hereinafter
referred to individually as a "Fund"and collectively as the "Funds") and RNC
CAPITAL MANAGEMENT LLC, a California limited liability company (the "Adviser").
W I T N E S S E T H
WHEREAS, the Group is engaged in business as a diversified open-end
management investment company and is registered as such under the Investment
Company Act of 1940, as amended, (the "1940 Act");
WHEREAS, each Fund is a Series of the Group;
WHEREAS, the Adviser is engaged principally in rendering advisory
services and is registered as an investment adviser under the Investment
Advisers Act of 1940, as amended (the "Investment Advisers Act"); and
WHEREAS, the Group desires to retain the Adviser to render investment
supervisory services to the Group on behalf of the Funds in the manner and on
the terms hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Group and the Adviser hereby agree as follows:
1. Duties of the Adviser.
The Group hereby engages the Adviser to act as the investment
adviser to the Funds and to supervise the investment and reinvestment of the
assets of the Funds, subject to the supervision of the Board of Directors of the
Group, for the period and on the terms and conditions set forth in this
Agreement. The Adviser hereby accepts such engagement and agrees during such
period, at its own expense, to render the services and to assume the obligations
herein set forth for the compensation provided for herein. The Adviser shall for
all purposes herein be deemed to be an independent contractor and shall, unless
otherwise expressly provided or authorized, have no authority to act for or
represent the Group in any way or otherwise be deemed an agent of the Group.
(a) Investment Advisory Services. In acting as investment
adviser to the Funds, the Adviser shall regularly provide the Funds with such
investment research, advice and related services as the Adviser may from time to
time consider necessary for the Funds; shall furnish, continuously, portfolio
managers and an investment program and shall determine from time to time what
securities shall be purchased, sold or exchanged and what portion of the assets
of the Funds shall be held in the
15
<PAGE>
various securities in which it may invest, subject always to the restrictions of
the Group's Articles of Incorporation and By-Laws, as amended from time to time,
the provisions of the 1940 Act, the Investment Advisers Act and the statements
relating to the Funds' investment objectives, investment policies and investment
restrictions as the same are set forth in the currently effective prospectus
and/or statement of additional information of the Group under the 1940 Act and
Securities Act of 1933, as amended (the "Prospectus"). Should the Board of
Directors of the Group at any time, however, make any definite determination as
to investment policy and notify the Adviser thereof, the Adviser shall be bound
by such determination for the period, if any, specified in such notice or until
similarly notified that such determination has been revoked. The Adviser shall
take, on behalf of the Funds, all actions which it deems necessary to implement
the investment policies determined as provided above.
(b) Brokerage. The Adviser shall place orders for the purchase
and sale of securities either directly with the issuer or with a broker or
dealer selected by the Adviser. In placing the Funds' securities trades, it is
recognized that the Adviser will give primary consideration to securing the most
favorable price and efficient execution, so that the Funds' total cost or
proceeds in each transaction will be the most favorable taking into account all
circumstances. Within the framework of this policy, the Adviser may consider the
financial responsibility, research and investment information, and other
services provided by brokers or dealers who may effect or be a party to any such
transaction or other transactions to which other clients of the Adviser may be a
party.
It is also understood that it is desirable for the Funds that
the Adviser have access to investment and market research and securities and
economic analyses provided by brokers and others. It is also understood that
brokers providing such services may execute brokerage transactions at a higher
cost to the Funds than might result from the allocation of brokerage to other
brokers on the basis of seeking the most favorable price and efficient
execution. Therefore, the purchase and sale of securities for the Funds may be
made with brokers who provide such research and analysis, subject to review by
the Group's Board of Directors from time to time with respect to the extent and
continuation of this practice to determine whether the Funds benefit, directly
or indirectly, from such practice. It is understood by both parties that the
Adviser may select broker-dealers for the execution of the Funds' portfolio
transactions who provide research and analysis as the Adviser may lawfully and
appropriately use in its investment management and advisory capacities, whether
or not such research and analysis may also be useful to the Adviser in
connection with its services to other clients.
On occasions when the Adviser deems the purchase or sale of a
security to be in the best interest of one or more of the Funds as well as of
other clients, the Adviser, to the extent permitted by applicable laws and
regulations, may aggregate the securities to be so purchased or sold in order to
obtain the most favorable price or lower brokerage commissions and the most
efficient execution. In such event, allocation of the securities so purchased or
sold, as well as the expenses incurred in the transaction, will be made by the
Adviser in the manner it considers to be the most equitable and consistent with
its fiduciary obligations to each of the Funds and to such other clients.
The Adviser shall also provide the Funds, at the Adviser's
expense, with office space and related services as necessary in furtherance of
the provision of investment advisory services pursuant to this Agreement.
2. Allocation of Charges and Expenses.
(a) the Adviser. The Adviser assumes and shall pay for
maintaining the staff and personnel, and shall at its own expense provide the
equipment, office space and facilities necessary to
16
<PAGE>
perform its obligations under this Agreement. If employees of the Adviser also
serve as directors, officers or employees of the Group, the Adviser shall pay
all of their compensation for actions in such capacity with the Group.
(b) The Group/Funds. The Group assumes and shall pay all
expenses of the Group and the Funds not expressly assumed by the Adviser in
paragraph (a) above, including, without limitation: expenses of redemption of
shares; expenses of portfolio transactions; organization costs, including costs
of incorporation; insurance costs; expenses for legal and auditing services;
costs of printing proxies, stock certificates, shareholder reports, shareholder
prospectuses and statements of additional information; charges of the custodian
and transfer agent; expenses for management and administrative services;
Securities and Exchange Commission fees; expenses of registering the shares of
the Funds under federal and state securities laws; fees and expenses of
directors (other than those related to interested persons); pricing costs
(including the daily calculation of net asset value); interest; certain taxes;
brokerage costs; litigation and other extraordinary or non-recurring expenses;
and other expenses properly payable by the Group on behalf of the Funds.
3. Compensation of the Adviser.
(a) Investment Advisory Fee. As compensation for the services
rendered to the Funds, the facilities furnished and the expenses assumed by the
Adviser, each Fund shall pay to the Adviser at periodic intervals not to exceed
one month as determined by the Board of Directors of the Group, a fee as set
forth in the Fee Schedule attached hereto as Appendix B, as may be amended in
writing from time to time by the Group and the Manager. The net asset values
referenced in the Fee Schedule will be determined and computed in accordance
with the description of the method of determination of net asset value contained
in the Group's current Prospectus. During any period when the determination of
net asset value is suspended by the Board of Directors of the Group, the net
asset value of a share as of the last business day prior to such suspension
shall for this purpose be deemed to be the net asset value at the close of each
succeeding business day until it is again determined. The Adviser may reduce its
fee from time to time consistent with its fiduciary obligations and/or reduce
the Funds' expenses.
(b) Expense Limitations. In the event the operating expenses
of a Fund, including the investment advisory fee applicable to that Fund payable
to the Adviser pursuant to subparagraph (a) hereof, exceed for any fiscal year
ending on a date on which this Agreement is in effect either (i) the expense
limitations applicable to that Fund imposed by state securities laws or
published regulations thereunder as such limitations may be raised or lowered
from time to time, or (ii) any voluntary expense limitations agreed to by the
Adviser and the Board of Directors of the Group, the Adviser shall reduce its
investment advisory fee by the extent of such excess and, if required pursuant
to any such laws, regulations or voluntary agreement, will reimburse that Fund
in the amount of such excess; provided however, to the extent permitted by law,
there shall be excluded from such expenses the amount of interest, taxes,
brokerage commissions and extraordinary expenses (including but not limited to
legal claims and liabilities, litigation costs and any indemnification related
thereto) paid or payable by the Group on behalf of that Fund.
(c) Expense Reductions, Waivers and Recapture Thereof. The
Adviser may reduce any portion of the compensation or reimbursement of expenses
due to it pursuant to this Agreement and may agree to make payments to limit the
expenses which are the responsibility of the Funds under this Agreement. Any
such reduction or payment shall be applicable only to such specific reduction or
payment and shall not constitute an agreement to reduce any future compensation
or reimbursement due
17
<PAGE>
to the Adviser hereunder or to continue future payments. Any such reduction will
be agreed to prior to accrual of the related expense or fee and will be
estimated daily and reconciled and paid on a monthly basis. To the extent such
an expense limitation has been agreed to by the Adviser and such limit has been
disclosed to shareholders of a Fund in a prospectus, the Adviser may not change
the limitation without first disclosing the change in an updated prospectus. Any
fee withheld pursuant to subparagraph (b) shall be reimbursed by the appropriate
Fund to the Adviser in the first, second or third (or any combination thereof)
fiscal year next succeeding the fiscal year of the withholding if the aggregate
expenses for the next succeeding fiscal year or second succeeding fiscal year or
third succeeding fiscal year do not exceed any more restrictive limitation to
which the Adviser has agreed and the Board of Directors finds the reimbursement
to be not inconsistent with the best interests of shareholders. The Adviser
generally may request and receive reimbursement for the oldest reductions and
waivers before payment for fees and expenses for the current year.
4. Limitation of Liability of the Adviser.
The Adviser shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Funds in connection with any
investment policy or the purchase, sale or redemption of any securities on the
recommendation of the Adviser. Nothing herein contained shall be construed to
protect the Adviser against any liability to the Funds or its security holders
to which the Adviser shall otherwise be subject by reason of willful
misfeasance, bad faith, negligence in the performance of its duties on behalf of
the Funds, reckless disregard of the Adviser's obligations and duties under this
Agreement or the violation of any applicable law.
5. Activities of the Adviser.
The services of the Adviser under this Agreement are not to be
deemed exclusive, and the Adviser shall be free to render similar services to
others so long as its services hereunder are not impaired thereby.
6. Duration and Termination of this Agreement.
This Agreement shall become effective for each fund on the
date that is the latest of (1) the execution of this Agreement, (2) the approval
of this Agreement by the Board of Directors of the Group and (3) the approval of
this Agreement by the shareholders of each Fund in a special meeting of
shareholders of that Fund. This Agreement remain in force for an initial term of
two (2) years from such date or such shorter term as shall be established by the
Board of Directors of the Group. Thereafter, this Agreement may be continued
from year to year for successive one-year terms, but only so long as such
continuance is specifically approved at least annually by (i) the Board of
Directors of the Group, or by the vote of a majority of the outstanding voting
securities of each Fund as defined in the 1940 Act and (ii) a majority of those
Directors, who are not parties to this Agreement or interested persons of any
such party, cast in person at a meeting called for the purpose of voting on such
approval.
This Agreement may be terminated by the Group on behalf of one
or more of the Funds at any time, without the payment of any penalty, by the
Board of Directors of the Group or by vote of a majority of the outstanding
voting securities of a Fund, or by the Adviser, on sixty (60) days written
notice to the other party. This Agreement shall automatically terminate in the
event of its assignment.
7. Definitions.
18
<PAGE>
The terms "assignment,""affiliated person" and "interested
person," when used in this Agreement, shall have the respective meanings
specified in the 1940 Act. The term "majority of the outstanding shares,"when
used in this Agreement, shall mean the lesser of (i) 67% of the shares of a Fund
represented at a meeting at which more than 50% of the outstanding shares of the
that Fund are represented or (ii) more than 50% of a Fund's outstanding shares.
8. Governing Law.
The provisions of this Agreement shall be construed and
interpreted in accordance with the applicable laws of the State of California
and the applicable provisions of the 1940 Act. To the extent that the applicable
law of the State of California, or any of the provisions herein, conflict with
the applicable provisions of the 1940 Act, the latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, as
of the day and year first above written.
RNC MUTUAL FUND GROUP, INC.
By___________________________
Eric M. Banhazl, President
RNC CAPITAL MANAGEMENT LLC
By___________________________
Daniel J. Genter, Jr., ______
Appendix A Fund Schedule
RNC Money Market Fund and RNC Equity Fund
Appendix B Fee Schedule
1. RNC Money Market Fund 0.41% of net assets.
2. RNC Equity Fund 1.00% of net assets.
19
<PAGE>
EXHIBIT C
FORM OF PROXY
[Shareholder Name]
[Title (if applicable)]
[Address]
[Address]
[Fund Name]
[Shares Held]
RNC MUTUAL FUND GROUP, INC.
SPECIAL MEETING OF SHAREHOLDERS
February 24, 1998
SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF
RNC MUTUAL FUND GROUP, INC.
The undersigned hereby appoints DeVere W. McGuffin II and Bruce B. Stuart, and
each of them, as proxies of the undersigned, each with the power to appoint his
substitute, for the Special Meeting of Shareholders of the Funds noted below
(the "Fund"), a separate series of RNC Mutual Fund Group, Inc., to be held on
March 27, 1998 at the offices of RNC Mutual Fund Group, Inc., 11601 Wilshire
Boulevard, 25th floor, Los Angeles, California, and at any and all adjournments
thereof (the "Meeting"), to vote, as designated below, all shares of the Fund,
held by the undersigned at the close of business on February 17, 1998.
Capitalized terms used without definition have the meanings given to them in the
accompanying Proxy Statement.
A signed proxy will be voted in favor of the Proposals listed below unless you
have specified otherwise. Please sign, date and return this proxy promptly. You
may vote only if you held shares in the Fund at the close of business on
February 17, 1998. Your signature authorizes the proxies to vote in their
discretion on such other business as may properly come before the Meeting
including, without limitation, all matters incident to the conduct of the
Meeting.
20
<PAGE>
Owners of shares of RNC MONEY MARKET FUND
Please vote by filling in the boxes below.
Proposal 1 To approve a new investment advisory agreement between
each Fund and RNC Capital Management LLC ("RNC Management LLC")
pursuant to which RNC Management LLC will act as adviser with
respect to the assets of each Fund, to become effective upon the
closing of a merger of RNC Capital Management Co., a California
corporation and the current the Adviser to the Funds, with RNC
Management LLC, a California limited liability company.
FOR |_| AGAINST |_| ABSTAIN |_|
Proposal 2 To change a fundamental investment policy of RNC Money
Market Fund to permit RNC Money Market Fund to invest in short-term
money market securities with a maturity of up to 13 months.
FOR |_| AGAINST |_| ABSTAIN |_|
Owners of shares of RNC EQUITY FUND
Please vote by filling in the boxes below.
Proposal 1 To approve a new investment advisory agreement between
each Fund and RNC Capital Management LLC ("RNC Management LLC")
pursuant to which RNC Management LLC will act as adviser with
respect to the assets of each Fund, to become effective upon the
closing of a merger of RNC Capital Management Co., a California
corporation and the current the Adviser to the Funds, with RNC
Management LLC, a California limited liability company.
FOR |_| AGAINST |_| ABSTAIN |_|
Dated:_________________________________________________________________, 1998
[Shareholder Name]
Dated:_________________________________________________________________, 1998
[Signature(s) (if held jointly)]
Please sign exactly as name or names appear on your shareholder account
statement. When signing as attorney, trustee, executor, administrator,
custodian, guardian or corporate officer, please give full title. If shares are
held jointly, each shareholder should sign.
21
<PAGE>
You may use this Proxy to vote shares of either Fund in RNC Mutual Fund Group.
However, you must fill out only the sections that pertain to the Fund you own
shares of. If you own shares of both Funds in RNC Mutual Fund Group, you may
fill out both sections that pertain to the Funds you own shares of.
22
