-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VWJ789pnyE+5f6XGjOpAyBX83Af++EpDMH9/mgQxmN+x5wRXCK1Nv0QlvaadV1Bp iExoMRsQezNRphOIXKUzWg== 0000912057-96-008764.txt : 19960510 0000912057-96-008764.hdr.sgml : 19960510 ACCESSION NUMBER: 0000912057-96-008764 CONFORMED SUBMISSION TYPE: DEFS14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960528 FILED AS OF DATE: 19960509 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: RCM CAPITAL FUNDS INC CENTRAL INDEX KEY: 0000310619 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 942564439 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEFS14A SEC ACT: 1934 Act SEC FILE NUMBER: 811-02913 FILM NUMBER: 96558754 BUSINESS ADDRESS: STREET 1: FOUR EMBARCADERO CTR STREET 2: STE 2900 CITY: SAN FRANCISCO STATE: CA ZIP: 94111 BUSINESS PHONE: 4159545474 FORMER COMPANY: FORMER CONFORMED NAME: RCM GROWTH EQUITY FUND INC DATE OF NAME CHANGE: 19920126 DEFS14A 1 DEFS14A 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: [ ] 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 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): [ ] $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: ____________________________________________ -2- [] 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:___________________________________ -3- May 8, 1996 Dear Stockholder: As a client of RCM, you are already aware of our pending agreement to become the major institutional money management subsidiary of the Dresdner Group. We have already sent to each client a consent form that would permit the assignment of each client's existing investment management agreement to RCM Capital Management, L.L.C. We hope that you have already had an opportunity to complete that consent form and return it to us. In addition to that consent form, we will need to receive approval of the Dresdner transaction by the shareholders of the investment companies for which we serve as investment manager. A meeting of the shareholders of RCM Capital Funds, Inc. (the "Fund") has been scheduled for May 28, 1996 for the purpose of approving a new investment management agreement with RCM Capital Management, L.L.C. to be effective upon the closing of the Dresdner transaction. The attached proxy permits you to cast your vote as shareholder for or against the new agreement with RCM Capital Management, L.L.C. The enclosed proxy statement contains more information about RCM and the Dresdner transaction. As mentioned above, the shareholder meeting will be held on May 28. Therefore, we would appreciate your prompt execution and return of the proxy. If possible, faxing a copy to Judith A. Wilkinson at (415) 954-1782 would facilitate our early compilation of results. If there is further information you require, please call Timothy B. Parker, the Fund's Secretary, at (415) 954-5459. Again, we look forward to a long and mutually advantageous relationship. Best regards, William L. Price RCM CAPITAL FUNDS, INC. RCM GROWTH EQUITY FUND RCM SMALL CAP FUND RCM INTERNATIONAL GROWTH EQUITY FUND A May 8, 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, are expected to 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 agreements 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. 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 -2- 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 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 8, 1996 -ii- 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 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 -2- 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 9, 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: -3- 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 -4- 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, of record or beneficially, the following percentages of the Capital Shares of the Funds: Growth Equity Fund - 0.09%, Small Cap Fund - 0.31%, and International Fund -1.75%. More to come. 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 -5- become the assets and liabilities of New RCM, and New RCM will succeed to the business and affairs of Old RCM. Please see the organizational chart, below. ----------------- |Dresdner Bank AG| ----------------- ------------ | Shareholder | RCM General| | ----------- | Corproation| | | ------------ | Wholly owned | | | Subsidiary - --------------- | | |19 Individuals| |General | - --------------- |Partner | | | | | ------------------ ------------------------------ -----------|RCM Limited L.P.|------------|RCM Capital Management L.L.C.| Limited ------------------ Managing ------------------------------- Partner Agent 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 Claude N. Rosenberg, Jr., Michael J. Apatoff, John D. Leland, Jr., William L. Price, Jeffrey S. Rudsten, Gary W. Schreyer, and William S. Stack and Kenneth B. Weeman, Jr. 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 -6- 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 -7- 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) -8- 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 (2) General Manager and Head of the Dresdner Bank AG Institutional Investment Jurgen-Ponto-Platz I Advisory and Asset Management 60301 Frankfurt am Main Division of Dresdner AG (since Frankfurt, Germany 1989) _______________ (1) Expected to be designated by RCM Limited. The principal business address 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- 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 Exhibits A-1, A-2 and A-3, 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- 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- 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- 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 DM484 billion ($696 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- 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- 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 -15- 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 any of its affiliates $6,000 per year and $1,000 per meeting for each series, 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- 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.
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 - ---------------------------------------------------------------------------------------------------- Kenneth E. Scott Ralph M. Parsons Professor of Law and 1994 * (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.
-17-
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 - ---------------------------------------------------------------------------------------------------- Pamela A. Farr Independent management consultant -- * (50) since January 1987; President of Banyan Homes, Inc., a real estate development and construction firm, from June 1991 to February 1994. Thomas S. Foley Partner of Akin, Gump, Strauss, Hauer & -- * (67) Feld, L.L.P. law firm since January 1995; Speaker of the House of Representatives (from 1989 to 1994); served in the U.S. House of Representatives from the State of Washington (from 1965 - 1994); Director of H.J. Heinz Company (since 1995); Member of Global Advisory Board of Coopers & Lybrand L.L.P. (since 1995). George G.C. Parker Associate Dean for Academic Affairs -- * (57) (since September 1993) and Director of the MBA Program (since September 1993) 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.
____________________ + 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- 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 five meetings. All directors except Claude N. Rosenberg, Jr. and John A. Kriewall attended at least 75% of the meetings. 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. The Board has no compensation or nominating committee, nor any committee performing the function of a compensation or nominating committee. 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- 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." In addition, upon stockholder approval of this change, the Company will adopt an investment policy requiring the Fund to invest at least 65% of its total assets, during normal market conditions, 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 -20- 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 -21- 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 each of the proposed revisions to the 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 each of 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. -22- 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." In addition, upon shareholder approval of this change, the Company will adopt an investment policy requiring the Fund to invest at least 65% of its total assets, during normal market conditions, in equity and equity-related securities of such concerns. 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. -23- 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 CHANGES 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. -24- 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. In addition, at least 65% of the Fund's total assets will be invested in equity and equity-related securities of such concerns. 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- REQUIRED VOTE. The stockholders of the Small Cap Fund will vote separately on the proposed revisions to the investment objective and the proposed revision to the 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 each of 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-$15. 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 248.73 25 for 1 9.95 Small Cap Fund 155.71 12 for 1 12.98 International Fund 126.02 10 for 1 12.60 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 -26- 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:
PREVIOUS INCREASE IN NEW TOTAL FUND CLASSIFIED SHARES CLASSIFIED SHARES CLASSIFIED SHARES 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
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. -27- 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 at the meeting, representatives of Coopers & Lybrand L.L.P. will participate in the meeting by telephone, 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 are not compensated by the Fund. -28-
PRINCIPAL OCCUPATION AND BUSINESS NAME AND AGE POSITION WITH COMPANY EXPERIENCE ------------ --------------------- --------------------------------- 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)
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 -29- 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. DISTRIBUTOR. The Company expects that, upon the Closing, Funds Distributor, Inc. ("FDI") will act as the distributor for each series of the Company. All expenses related to the Company's agreement with FDI will be borne by New RCM. 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. -30- 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 -31- 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 (415) 954-5400. 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 8, 1996 San Francisco, California -32- EXHIBIT A-1 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. 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- 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- 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- 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- 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: __________________________ EXHIBIT A-2 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 (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- 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- (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- 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- 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: __________________________ EXHIBIT A-3 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 (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; 2 of 6 (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 3 of 6 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. 4 of 6 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). 5 of 6 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: ________________________________ 6 of 6 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: __________________________ EXHIBIT B RCM CAPITAL FUNDS, INC. AMENDED SECTIONS OF RESTATED ARTICLES OF INCORPORATION FIFTH: Capital Stock. 1.(a) The total number of shares of all classes of stock heretofore authorized is twenty-five million (25,000,000) shares of common stock, par value $0.10 per share. (b) As increased, the total number of shares of all classes of capital stock which the Corporation shall have the authority to issue is one billion (1,000,000,000) shares, par value $0.0001 per share. There shall currently be three series of shares, designated as "RCM Growth Equity Fund," consisting of 300,000,000 shares; "RCM Small Cap Fund" consisting of 100,000,000 shares; "RCM International Growth Equity Fund A" consisting of 100,000,000 shares (such series and any further series of shares from time to time created by the Board of Directors being referred to individually herein as a "series"). The Board of Directors of the Corporation is hereby empowered to increase or decrease, from time to time, the total number of shares of capital stock or the number of shares of capital stock of any series that the Corporation shall have authority to issue without any action by the shareholders. (c) The aggregate par value of all shares having a par value is $2,500,000 before the increase and $100,000 as increased. 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? _______________________________ __________________________________ _______________________________ __________________________________ /X/ PLEASE MARK VOTES AS IN THIS EXAMPLE 1A) To approve the new investment management agreement between the Company, on behalf of RCM Growth Equity Fund, and RCM Capital Management, L.L.C. For Against Abstain / / / / / / 1B) To approve the new investment management agreement between the Company, on behalf of RCM Small Cap Fund, and RCM Capital Management, L.L.C. For Against Abstain / / / / / / 1C) To approve the new investment management agreement between the Company, on behalf of RCM International Growth Equity Fund A, 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 / / 3A) To approve the proposed revisions of the investment objective of RCM Growth Fund For Against Abstain / / / / / / 3B) To approve proposed revision of the fundamental investment policy of RCM Growth fund regarding investment in companies without a three-year voting history. For Against Abstain / / / / / / 3C) To approve the proposed revision of the fundamental investment policy of RCM Growth Fund regarding investment in warrants For Against Abstain / / / / / / 4A) To approve the proposed revisions of the investment objective of RCM Small Cap Fund. For Against Abstain / / / / / / 4B) To approve the proposed revision of the fundamental investment policy of RCM Small Cap Fund regarding investment in warrents. 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. / / RECORD DATE SHARES: Please be sure to sign and date this Proxy. - ------------------------------------------------------------------------------- ---------- Date Stockholder sign here Co-owner sign here ---------- - ------------------------------------------------------------------------------- THIS PAGE MUST BE KEPT AS THE LAST PAGE OF THE DOCUMENT. SoftSolution Network ID: LA-BLD:B44588.2 Type: SMT -----END PRIVACY-ENHANCED MESSAGE-----