INVESTMENT MANAGEMENT AGREEMENT, POWER OF ATTORNEY
AND SERVICE AGREEMENT
THIS AGREEMENT is entered into this ____ day of _____________, 1996 by and
between RCM Equity Funds, Inc. (the "Company"), on behalf of RCM Global Small
Cap Fund, a series of the Company (the "Fund") and RCM Capital Management,
L.L.C. (the "Investment Manager").
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, Bylaws, 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;
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(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;
(e) to buy, sell, or exercise options, rights and warrants to subscribe
for stock or securities;
(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:
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(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) 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, subject to
the provisions of the Investment Manager's Code of Ethics and that of the
Company.
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 0000 Xxx) 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
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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 membership in investment company associations;
premiums and other costs associated with the acquisition of a mutual fund
directors and officers errors and 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 Bylaws of the Company and the Fund's prospectus as of the close of regular
trading on the New York Stock Exchange on each business day 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.
(d) The Investment Manager may from time to time voluntarily agree to
limit the aggregate operating expenses of the Fund for one or more fiscal
years of the Company, as set forth in Appendix A hereto or in any other
written agreement with the Company. If in any such fiscal year the aggregate
operating expenses of the Fund (as defined in Appendix A or such other written
agreement) exceed the applicable percentage of the average daily net assets of
the Fund for such fiscal year, the Investment Manager shall reimburse the Fund
for such excess operating expenses. Such operating expense reimbursement, if
any, shall be estimated, reconciled and paid on a quarterly basis, or such
more frequent basis as the Investment Manager may agree in writing. Any such
reimbursement of the Fund shall be
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repaid to the Investment Manager by the Fund, without interest, at such later
time or times as it may be repaid without causing the aggregating operating
expenses of the Fund to exceed the applicable percentage of the average daily
net assets of the Fund for the period in which it is repaid; provided,
however, that upon termination of this Agreement, the Fund shall have no
further obligation to repay any such reimbursements.
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, loss arising out of
any investment, or 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.
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 0000 Xxx) 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 0000 Xxx)
of any such party cast in person at a meeting called for the purpose of voting
on such approval.
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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 0000 Xxx) 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).
10. REPORTS, BOOKS AND RECORDS
The Investment Manager shall render to the Board of Directors of the
Company such periodic and other reports as the Board may from time to time
reasonably request. In compliance with the requirements of Rule 31a-3 under
the 1940 Act, the Investment Manager hereby agrees that all records which it
maintains for the Company are property of the Company. The Investment Manager
shall surrender promptly to the Company any of such records upon the Company's
request, and shall preserve for the periods prescribed by Rule 31a-2 under the
1940 Act the records required to be maintained by Rule 31a-1 under the 1940
Act.
11. REPRESENTATIONS AND WARRANTIES
The Investment Manager represents and warrants to the Company that the
Investment Manager is registered as an investment adviser under the Investment
Advisers Act of 1940. During the term of this Agreement, the Investment
Manager shall notify the Company of any change in the membership of the
Investment Manager's partnership within a reasonable time after such change.
The Company represents and warrants to the Investment Manager that the company
is registered as an open-end management investment company under the 1940 Act.
Each party further represents and warrants to the other that this Agreement
has been duly authorized by such party and constitutes the legal, valid and
binding obligation of such party in accordance with its terms.
12. AMENDMENT OF THIS AGREEMENT
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate originals by their officers thereunto duly authorized as
of the date first above written.
RCM CAPITAL MANAGEMENT, L.L.C. RCM EQUITY FUNDS, INC.
ON BEHALF OF
RCM GLOBAL SMALL CAP FUND
By:__________________________ By: __________________________
ATTEST: ATTEST:
By:__________________________ By: __________________________
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APPENDIX A
INVESTMENT MANAGEMENT AGREEMENT, POWER OF ATTORNEY,
AND SERVICE AGREEMENT
BETWEEN RCM CAPITAL MANAGEMENT, L.L.C.
AND RCM EQUITY FUNDS, INC.
SCHEDULE OF FEES
FOR RCM GLOBAL 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 ____% of the value of
the Fund's average daily net assets.
Value of Securities and Cash of Fund Fee
------------------------------------ ---
On all sums ____% annually
For the fiscal year ended December 31, 1997, the Investment Manager shall
reimburse the Fund to the extent that the operating expenses of the Fund (as
hereinafter defined) exceed ____% of the average daily net assets of the Fund.
For this purpose, the "operating expenses" of the Fund shall be deemed to
include all ordinary operating expenses other than interest, taxes and
extraordinary expenses.
Dated: ____________, 1996
RCM CAPITAL MANAGEMENT, L.L.C. RCM EQUITY FUNDS, INC.
ON BEHALF OF
RCM GLOBAL SMALL CAP FUND
By:___________________________ By: __________________________
ATTEST: ATTEST:
By:___________________________ By: __________________________
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