SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
[X] Filed by the Registrant [ ] 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
Renaissance Capital Growth & Income Fund III, Inc.
------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
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 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
-----------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
5) Total fee paid:
-----------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] 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:
_____________________________________________
RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC.
8080 North Central Expressway, Suite 210, LB-59
Dallas, Texas 75206-1857
NOTICE OF 2003 ANNUAL MEETING OF SHAREHOLDERS
To Be Held On Friday, May 16, 2003
To the Shareholders of
Renaissance Capital Growth & Income Fund III, Inc.:
NOTICE IS HEREBY GIVEN that the 2003 Annual Meeting of Shareholders (the
"Annual Meeting") of Renaissance Capital Growth & Income Fund III, Inc. (the
"Fund"), a Texas corporation which has elected to be treated as a business
development company under the Investment Company Act of 1940, will be held at
the Renaissance Dallas Hotel, Dallas, Texas, on Friday, May 16, 2003, at 8:00
a.m., Dallas time, for the following purposes:
1. To elect two Class Three directors of the Fund, to hold office for terms
of three years or until their successors are elected and qualified;
2. To amend the Fund's Articles of Incorporation to change the name of the
Fund to RENN Capital Fund III, Inc.; and
3. To transact any and all other business that may properly be presented at
the Annual Meeting or any adjournments(s).
A copy of the Fund's 2002 Annual Report to shareholders is enclosed for
your review. Shareholders will have the opportunity at the Annual Meeting to
meet the principal officers of selected Portfolio Companies and to hear their
business reviews.
The close of business on March 28, 2003, has been fixed as the record date
for determining shareholders entitled to notice of and to vote at the Annual
Meeting or any adjournment. The enclosed proxy card is being solicited on behalf
of the Board of Directors of the Fund.
You are cordially invited to attend the Annual Meeting. You may vote your
shares (1) in person at the Annual Meeting, (2) by telephone, (3) via the
Internet, or (4) by completing, signing, dating, and returning the accompanying
proxy card in the enclosed, self-addressed, postage-paid envelope. Specific
instructions for voting by telephone or via the Internet are on the accompanying
proxy card. You may revoke your proxy at any time prior to the Annual Meeting.
If you decide to attend the Annual Meeting and wish to change your vote, you may
do so by voting in person at the Annual Meeting. Prompt response by our
shareholders will reduce the time and expense of solicitation.
By Order of the Board of Directors
/S/ Barbe Butschek
Barbe Butschek, Secretary
Dallas, Texas
April 14, 2003
RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC.
PROXY STATEMENT
FOR
2003 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON FRIDAY, MAY 16, 2003
SOLICITATION OF PROXIES
This Proxy Statement is being furnished to the shareholders of Renaissance
Capital Growth & Income Fund III, Inc. (the "Fund"), a Texas corporation which
has elected to be treated as a business development company under the Investment
Company Act of 1940 (the "1940 Act"). The Fund's Board of Directors is
soliciting proxies to be voted at the 2003 Annual Meeting of Shareholders (the
"Annual Meeting") to be held on Friday, May 16, 2003, at the Renaissance Dallas
Hotel, Dallas, Texas, at 8:00 a.m., Dallas time and at any adjournment(s). This
Proxy Statement is first being sent to shareholders on or about April 14, 2003.
The accompanying proxy card is designed to permit each Fund shareholder to
vote for or against or to abstain from voting on the proposals described in this
Proxy Statement, and to authorize the persons serving as proxies to vote in
their discretion with respect to any other proposal properly presented at the
Annual Meeting. When a shareholder's executed proxy card specifies a choice with
respect to a voting matter, the shares will be voted accordingly. If no
specifications are made, then the proxy will be voted by the persons serving as
proxies at the Annual Meeting FOR the election of the two Class Three directors.
The Board of Directors encourages the shareholders to attend the Annual
Meeting personally. Executing and returning the accompanying proxy card will not
affect a shareholder's right to attend the Annual Meeting and to vote in person.
Any shareholder given a proxy has the right to revoke it at any time before it
is voted by giving written notice of revocation to Ms. Barbe Butschek,
Secretary, Renaissance Capital Growth & Income Fund III, Inc., 8080 North
Central Expressway, Suite 210, LB-59, Dallas, Texas 75206-1857, by executing and
delivering a later-dated proxy, or by attending the Annual Meeting and voting in
person. No revocation notice or later-dated proxy, however, will be effective
until received by the Fund at or prior to the Annual Meeting. Revocation will
not affect a vote on any matters taken prior to the receipt of the revocation.
Mere attendance at the Annual Meeting will not by itself revoke the proxy.
In addition to soliciting proxies by mail, officers and directors of the
Fund, and officers, directors, and regular employees of Renaissance Capital
Group, Inc. ("Renaissance Group"), the investment adviser to the Fund, may
solicit the return of proxies by personal interview, mail, telephone, and
facsimile. These persons will not receive additional compensation for their
services, but will be reimbursed for out-of-pocket expenses. Brokerage houses
and other custodians, nominees, and fiduciaries will be requested by the Fund to
forward solicitation material to the beneficial owners of shares. The Fund will
pay all costs of solicitation.
The Fund's 2002 Annual Report to Shareholders is enclosed for the review of
all shareholders entitled to notice of and to vote at the Annual Meeting. The
Annual Report is not incorporated into this Proxy Statement and is not
considered proxy soliciting material.
The Fund's principal offices are located at 8080 N. Central Expressway,
Suite 210, LB-59, Dallas, Texas 75206-1857, and its telephone number is (214)
891-8294.
PURPOSES OF THE MEETING
At the Annual Meeting, Fund shareholders will have the opportunity to meet
principal officers of selected Portfolio Companies and to hear their business
reviews. In addition, the shareholders will consider and vote upon the following
matters:
1. The election of two Class Three directors of the Fund, to hold office
for terms of three years or until their successors are elected and qualified;
2. To amend the Fund's Articles of Incorporation to change the name of the
Fund to RENN Capital Fund III, Inc.; and
3. Such other and further business as may properly be presented at the
Annual Meeting or any adjournment(s).
RECORD DATE AND SHARE OWNERSHIP
The close of business on March 28, 2003, has been fixed as the record date
(the "Record Date") for determining shareholders entitled to notice of and to
vote at the Annual Meeting and any adjournment(s). At the close of business on
the Record Date, the Fund had outstanding 4,351,718 shares of Common Stock and
approximately 614 record holders.
VOTING
Each share of Common Stock is entitled to one vote. The Common Stock is the
only class of securities of the Fund entitled to vote at the Annual Meeting. A
Shareholder is entitled to vote all shares of Common Stock held of record at the
close of business on the Record Date, in person or by proxy, at the Annual
Meeting. There are no cumulative voting rights. All votes will be tabulated by
the inspector of election appointed for the meeting, who will separately
tabulate affirmative and negative votes, abstentions, and broker non-votes.
A quorum for the Annual Meeting will consist of the presence, in person or
by proxy, of the holders of a majority of the shares outstanding and entitled to
vote as of the Record Date. Shares that are voted "FOR," "AGAINST," or "WITHHELD
FROM" a matter are treated as being present at the meeting for purposes of
determining the presence of a quorum and are also treated as shares "represented
and voting" at the Annual Meeting (the "Votes Cast") with respect to such
matter.
Broker non-votes and abstentions will be counted for purposes of
determining the presence of a quorum but will not be voted for or against a
proposal. Accordingly, abstentions and broker non-votes effectively will be a
vote against any proposal where the required vote is a percentage of the shares
present or outstanding. Broker non-votes and abstentions will not be counted as
votes cast for purposes of determining whether sufficient votes have been
received to approve a proposal.
1
If a quorum is not present at the Annual Meeting or, although a quorum is
present an insufficient number of votes in favor of any of the proposals set
forth in the Notice of Meeting are received by the date of the Annual Meeting,
the persons named as proxies may vote for one or more adjournment(s) of the
Annual Meeting with no notice other than announcement at the Annual Meeting.
Further solicitations of proxies with respect to these proposals may be made.
Broker non- votes and abstentions will not be voted for any adjournment(s).
VOTING ELECTRONICALLY VIA THE INTERNET OR BY TELEPHONE
Shareholders whose shares are registered in their own names may vote either
via the Internet or by telephone. Specific instructions to be followed by any
registered shareholder interested in voting via the Internet or by telephone are
set forth on the enclosed proxy card. The Internet and telephone voting
procedures are designed to authenticate the shareholder's identity and to allow
shareholders to vote their shares and confirm that their voting instructions
have been properly recorded.
If your shares are registered in the name of a bank or brokerage firm, you
may be eligible to vote your shares electronically over the Internet or by
telephone. A large number of banks and brokerage firms are participating in the
ADP Investor Communications Services online program. This program provides
eligible shareholders who receive a copy of this proxy statement the opportunity
to vote via the Internet or by telephone. If your bank or brokerage firm is
participating in ADP's program, your proxy card will provide instructions. If
your proxy card does not reference Internet or telephone information, please
complete and return the proxy card in the self-addressed, postage-paid envelope
provided.
PROPOSAL ONE
ELECTION OF DIRECTORS
Russell Cleveland and Ernest C. Hill have been nominated as the Class Three
directors to serve for a term of three years or until respective successors are
elected and qualified. For information concerning Mr. Cleveland and Mr. Hill,
see "Information Concerning Directors" below.
Pursuant to the Fund's Articles of Incorporation and Bylaws, the Board of
Directors consists of five directors and is divided into three classes. Each
class serves for a three-year term. The term of office of the Class Three
directors expires at the Annual Meeting to be held this year, the term of office
of the Class One director expires at the Annual Meeting of shareholders to be
held in 2004, and the term of office of the Class Two directors expires at the
Annual Meeting of shareholders to be held in 2005.
2
Because the Board of Directors is divided into classes, only those
directors in a single class may be changed in any one year. Consequently,
changing a majority of the Board of Directors would require two years (although
under Texas law, procedures exist to remove directors even if they are not then
standing for reelection and, under Securities and Exchange Commission ("SEC")
regulations, procedures exist for including appropriate shareholder proposals in
the annual proxy statement). Having a classified Board of Directors, which may
be regarded as an "anti-takeover" provision, may make it more difficult for
shareholders of the Fund to change the majority of directors, thus having the
effect of maintaining the continuity of management.
Each of the nominees for a Class Three directorship receiving the vote of a
plurality of the shares present in person or by proxy and entitled to vote at
the Annual Meeting will be elected as a director.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE
NOMINEES FOR A CLASS THREE DIRECTORSHIP.
PROPOSAL TWO
AMEND ARTICLES OF INCORPORATION
TO CHANGE THE NAME OF THE FUND TO
RENN CAPITAL FUND III, INC.
The Board of Directors has adopted a resolution to amend the Fund's
Articles of Incorporation to change the name of the Fund to RENN Capital Fund
III, Inc., and has directed that the amendment be submitted to a vote of the
Fund's shareholders. The Common Stock of the Fund is traded under the ticker
symbol RENN on the Nasdaq National Market System ("NMS"). Consequently, there is
already both name recognition and growing acceptance of RENN as the branded name
of the Fund. Further, this more distinctive and identifiable name differentiates
the Fund from other financial services concerns which use the name Renaissance.
An amendment to the Articles of Incorporation requires the affirmative vote
of the holders of at least two-thirds (2/3) of the outstanding shares of Common
Stock entitled to vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT OF THE
ARTICLES OF INCORPORATION TO CHANGE THE NAME OF THE FUND TO RENN
CAPITAL FUND III, INC.
3
Information Concerning Directors
Class Three Directors - Term Expires at 2003 Annual Meeting
Russell Cleveland, age 64, is the President, Chief Executive Officer, and
Director of the Fund since 1994. He is a Chartered Financial Analyst with more
than 35 years experience as a specialist in investments in smaller
capitalization companies. A graduate of the Wharton School of Business, Mr.
Cleveland has served as President of the Dallas Association of Investment
Analysts. Mr. Cleveland is also the President, Chief Executive Officer, sole
Director, and the majority shareholder of Renaissance Group, the investment
adviser to the Fund. Renaissance Group is also the investment manager of
Renaissance US Growth Investment Trust PLC ("RUSGIT") and the investment adviser
to BFS US Special Opportunities Trust PLC ("BFS US"), investment trusts listed
on the London Stock Exchange. Mr. Cleveland also serves on the Boards of
Directors of RUSGIT, BFS US, Tutogen Medical, Inc., Cover-All Technologies,
Inc., Integrated Security Systems, Inc., and Digital Recorders, Inc.
Ernest C. Hill, age 63, has a broad background in convertible securities
analysis with major NYSE brokerage firms and institutional investors. He
specializes in computer-aided investment analysis and administrative procedures.
Mr. Hill was awarded a Ford Fellowship to the Stanford School of Business, where
he received an MBA, with honors, in Investment and Finance. Mr. Hill's prior
experience included service as Assistant Professor of Finance, Southern
Methodist University and Associate Director of the Southwestern Graduate School
of Banking.
Continuing Directors
Class One Director - Term Expires at 2004 Annual Meeting
Peter Collins, age 57, has been a financial and management consultant to
closely-held businesses for the past ten years in the USA, the UK, and Europe,
in areas of finance, start-ups, joint ventures, and mergers and acquisitions. He
has advised companies in every segment of industry (including manufacturing,
distribution, service, agriculture, construction, and multimedia) and in all
stages of development (from start-up to bankruptcy). Mr. Collins was educated in
England, where he received a B.Sc. in Civil Engineering from Liverpool
University and an M.Sc. in Business Administration from The City University,
London.
Class Two Directors - Term Expires at 2005 Annual Meeting
Edward O. Boshell, Jr., age 67, is the retired Chairman of the Board and
CEO of Columbia General Corporation and is a private investor.
Charles C. Pierce, Jr., age 68, is the retired Vice-Chairman of Dain
Rauscher, Inc., and is a private investor.
4
Certain information concerning the Fund's directors is set forth below:
Number of
Portfolios
Director's Principal in Fund
Term of Occupation(s) Complex Other
Position(s) Office and During Overseen Directorships
Name, Address* Held Length of Past 5 by Held by
and Age with Fund Time Served Years Director Director
Independent
Directors:
Edward O. Boshell, Jr. Director Class Two Retired Chairman 1 None
Age 67 Director since of the Board and
1998. CEO of Columbia
Term expires General and private
2005. investor
Charles C. Pierce, Jr. Director Class Two Retired Vice- 1 None
Age 68 Director since Chairman of Dain
2002. Rauscher and
Term expires private investor
2005.
Ernest C. Hill Director Class Three Consultant 1 None
Age 63 Director since
1994.
Term expires
2003.
Peter Collins Director Class One Consultant 1 None
Age 57 Director since
1994.
Term expires
2004.
5
Number of
Portfolios
Director's Principal in Fund
Term of Occupation(s) Complex Other
Position(s) Office and During Overseen Directorships
Name, Address* Held Length of Past 5 by Held by
and Age with Fund Time Served Years Director Director
Interested Director:
Russell Cleveland President, Class Three President & Chief 3 RUSGIT, BFS
Age 64 Chief Director since Executive Officer US, Tutogen
Executive 1994. of Renaissance Medical, Inc.,
Officer, Term expires Group Cover-All
and 2003. Technologies,
Director Inc., Integrated
Security
Systems, Inc.,
and Digital
Recorders, Inc.
------------------------
*The address of all such persons is c/o Renaissance Capital Group, Inc., 8080
North Central Expressway, Suite 210, LB-59, Dallas, Texas 75206.
Aggregate Dollar Range*
Dollar Range* of Equity Securities in
Name of of Equity Securities All Funds in
Director in the Fund Renaissance Fund Complex
Edward O. Boshell, Jr. over $100,000 over $100,000
Charles C. Pierce, Jr. $10,001 to $50,000 $10,001 to $50,000
Ernest C. Hill $0 $0
Peter Collins $10,001 to $50,000 $10,001 to $50,000
Russell Cleveland over $100,000 over $100,000
------------------------
* As of March 14, 2003
6
OWNERSHIP OF SHARES
The following table sets forth certain information known to the Fund with
respect to beneficial ownership of the Fund's Common Stock as of March 14, 2003
(i) for all persons who are beneficial owners of 5% or more of the outstanding
shares of the Fund's Common Stock (ii) each director and nominee for director of
the Fund, and (iii) all executive officers and directors of the Fund as a group:
Number of Shares
Beneficially Owned Percent
Name of Beneficial Owner Directly or Indirectly of Class
------------------------ ---------------------- --------
Edward O. Boshell, Jr., Director 43,272 (1) 0.99%
Ernest C. Hill, Director 0 0.00%
Peter Collins, Director 1,900 0.04%
Charles C. Pierce, Jr., Director 1,978 0.05%
Russell Cleveland, President, Chief 245,531 (3) 5.64%
Executive Officer, and Director (2)
All directors and officers of the 307,185 7.06%
Fund as a group (8 persons)
------------------------
(1) Shares owned indirectly through Columbia General Investments, L.P.
(2) "Interested person," as defined by the 1940 Act.
(3) Includes 21,635 shares owned by the Cleveland Family Limited Partnership
and 223,896 shares owned by Renaissance Investment Limited Partnership.
Committees and Meetings
The Board of Directors held eighteen (18) meetings or executed consent
actions in lieu of meetings during 2002, and each director attended or executed
at least seventy-five per cent (75%) of these meetings and consent actions. The
Audit Committee consists of Ernest C. Hill, Peter Collins, and Edward O.
Boshell, Jr., and held three (3) meetings in 2002.
7
Director Compensation
Directors who are not employees of either the Fund or Renaissance Group
receive a monthly fee of $1,500, plus $750 and out-of-pocket expenses for each
meeting attended. The Fund does not pay any fees to, or reimburse expenses of,
its directors who are considered "interested persons" of the Fund. The aggregate
compensation for the period from January 1 to December 31, 2002, that the Fund
paid each director, and the aggregate compensation paid to each director for the
most recently completed fiscal year by other funds to which Renaissance Group
provided investment advisory services (collectively, the "Renaissance Fund
Complex") is set forth below:
Pension or
Retirement Estimated Total 2002
Aggregate Benefits Annual Compensation
2002 Accrued as Benefits from Fund and
Compensation Part of Fund upon Renaissance
Name of Director from Fund Expenses Retirement Fund Complex
Russell Cleveland (1) $0 $0 $0 $8,993
Peter Collins $21,000 $0 $0 $21,000
Ernest C. Hill $21,000 $0 $0 $21,000
Edward O. Boshell, Jr. $21,000 $0 $0 $21,000
Charles C. Pierce, Jr. $17,250 $0 $0 $17,250
------------------------
(1) Mr. Cleveland is President and Chief Executive Officer of Renaissance
Group. See "Information about the Fund's Principal Officers and Investment
Adviser - Renaissance Group."
Executive Compensation and Options
Officers of the Fund receive no compensation from the Fund. The Fund has
never issued options or warrants to officers or directors of the Fund.
8
Auditor
The Audit Committee has selected Ernst & Young LLP ("EY"), independent
public accountants, to audit the Fund for the fiscal year ending December 31,
2003. EY has performed audit services for the Fund since 1999. A representative
of EY is expected to attend the Annual Meeting. The EY representative will
respond to appropriate questions from the shareholders and will be given the
opportunity to make a statement, should the representative desire to do so. The
aggregate fees billed by EY for audit services for the audit of the Fund's
financial statements included in the Fund's Form 10-K and the review of the
Fund's financial statements included in the Fund's Forms 10-Q for 2002 and 2001
were $86,206 and $58,000, respectively.
INFORMATION ABOUT THE FUND'S OFFICERS
AND THE INVESTMENT ADVISER
Officers
Set forth below is certain information regarding the officers of
Renaissance Group, the Fund's investment adviser:
Russell Cleveland, age 64, is the President, Chief Executive Officer, sole
Director, and the majority shareholder of Renaissance Group. He is also
President, Chief Executive Officer, and a Class Three director of the Fund. He
is a Chartered Financial Analyst with more than 35 years experience as a
specialist in investments for smaller capitalization companies. A graduate of
the Wharton School of Business, Mr. Cleveland has served as President of the
Dallas Association of Investment Analysts. Mr. Cleveland serves on the Boards of
Directors of Renaissance US Growth Investment Trust PLC, BFS US Special
Opportunities Trust PLC, Integrated Security Systems, Inc., Tutogen Medical,
Inc., Digital Recorders, Inc., and Cover-All Technologies, Inc. He has served as
an officer and director of the Fund since 1994.
Barbe Butschek, age 48, has been associated with Renaissance Group and its
predecessor companies since 1977, and is a shareholder of Renaissance Group. As
Senior Vice-President and Secretary/Treasurer of Renaissance Group, she has been
responsible for office management, accounting management, and records management
of several investment funds. Ms. Butschek has served as Secretary and Treasurer
of the Fund since 1994.
Robert C. Pearson, age 67, joined Renaissance Group in April 1997 and is
Senior Vice- President - Investments. He is also Vice-President of the Fund. Mr.
Pearson brings more than thirty years of experience to Renaissance Group's
corporate finance function. From May 1994 to May 1997, Mr. Pearson was an
independent financial management consultant. From May 1990 to May 1994, he
served as Chief Financial Officer and Executive Vice-President of Thomas Group,
Inc., a management consulting firm, where he was instrumental in moving a small
privately held company from a start-up to a public company with more than $40
million in revenues. Prior to 1990, Mr. Pearson was responsible for all
administrative activities for the Superconducting Super Collider Laboratory.
9
In addition, from 1960 to 1985, Mr. Pearson served in a variety of positions at
Texas Instruments in financial planning and analysis, holding such positions as
Vice-President - Controller and Vice-President - Finance. Mr. Pearson holds a BS
in Business from the University of Maryland and was a W.A. Paton Scholar with an
MBA from the University of Michigan. He is a director of eOriginal, Inc., Poore
Brothers, Inc., CaminoSoft Corp., Laserscope, Simtek Corporation, and Advanced
Power Technologies, Inc.
John A. Schmit, age 35, joined Renaissance Group in 1997, and is
Vice-President - Investments. He is also Vice-President of the Fund. Mr. Schmit
is responsible for portfolio analysis and monitoring. From September 1992 to
September 1994, he practiced law with the law firm of Gibson, Ochsner & Adkins,
Amarillo, Texas. He holds a BBA in Finance from Texas Christian University, a JD
from the University of Oklahoma College of Law and an LLM in International and
Comparative Law from The Georgetown University Law Center. He is a director of
Obsidian Enterprises, Inc.
Renaissance Group
Renaissance Group provides investment advisory services to the Fund
pursuant to the Investment Advisory Agreement, as amended, between the Fund and
Renaissance Group (the "Agreement"). The Agreement is subject to annual review
and approval by the Fund's Board of Directors. Renaissance Group is also the
Investment Manager of BFS US and RUSGIT, closed-end investment trusts listed on
the London Stock Exchange. Renaissance Group is a registered investment adviser
under the Investment Advisers Act of 1940, as amended (the "1940 Act"), and is
subject to the reporting and other requirements of the 1940 Act. Renaissance
Group and its officers and employees devote such time to the Fund's business as
is necessary for the conduct of its operations. Pursuant to the Agreement,
Renaissance Group is entitled to receive a management fee equal to a quarterly
rate of 0.4375% (1.75% annually) of the Fund's net assets, as determined at the
end of such quarter with each such payment to be due on the last day of the
calendar quarter. In addition to the quarterly fee of 0.4375% of the Fund's net
assets, Renaissance Group is entitled to receive an incentive fee in an amount
equal to 20% of the Fund's realized capital gains in excess of realized capital
losses of the Fund after allowance for any unrealized capital losses in excess
of unrealized capital gains on the portfolio investments of the Fund. The
incentive fee is calculated, accrued, and paid on a quarterly basis. In 2002,
the Fund paid Renaissance Group $860,834 as its management fee and $0 as its
incentive fee. The Fund also received director's fees from portfolio companies
with respect to Mr. Cleveland's and Mr. Pearson's services as a director.
Neither Renaissance Group nor its affiliates are prohibited from engaging in
activities outside the Fund's business. Officers and employees of Renaissance
Group are compensated solely by Renaissance Group. Russell Cleveland and Barbe
Butschek own 80% and 20%, respectively, of the Common Stock of Renaissance
Group. The sole director of Renaissance Group is Russell Cleveland.
10
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to the Agreement, Renaissance Group serves as investment adviser
to the Fund, subject to the supervision of the Fund's Board of Directors.
Services provided to the Fund include but are not necessarily limited to
assisting the Fund in the determination of the net assets and recommending the
valuation of assets of the Fund to the Board of Directors. The valuation of
assets is subject to the Board of Directors' determination and is used in the
computation of the management fee and incentive fee paid to Renaissance Group.
The valuations of portfolio securities are performed in accordance with
valuation procedures and policies formulated by Renaissance Group and approved
by the Board of Directors. These valuation policies are described in detail in
the Fund's public filings. In addition, on a quarterly basis, the Board of
Directors reviews the valuation policies to determine their appropriateness.
Renaissance Group has formed, and may form in the future, other investment
funds to make investments in companies similar to those in which the Fund
invests. The determination regarding the existence of a conflict of interest
between these affiliated investment funds and the Fund, and the resolution of
any such conflict, vests in the Board of Directors, subject to the provisions of
the 1940 Act.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors (the "Audit Committee") is
comprised of three directors, all of whom meet the independence and experience
requirements of NASD Rule 4200(1)(15). The Audit Committee responsibilities are
described in a written charter adopted by the Board of Directors. The Audit
Committee has reviewed and discussed the Fund's audited financial statements for
the fiscal year ended December 31, 2002, with the Fund's management. The Audit
Committee has discussed with Ernst & Young LLP, the Fund's independent auditors,
the matters required to be discussed by Statement on Auditing Standards No. 61.
The Audit Committee has received the written disclosures and the letter from
Ernst & Young LLP required by Independence Standards Board Standard No. 1 and
has discussed with Ernst & Young LLP its independence. Based on the review and
discussions described above, among other things, the Audit Committee recommended
to the Board of Directors that the audited financial statements of the Fund be
included in the Fund's Annual Report on Form 10-K for the fiscal year ended
December 31, 2002.
Ernest C. Hill, Chairman
Edward O. Boshell, Jr.
Peter Collins
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Fund's officers and directors and persons who own more than 10% of a
registered class of the Fund's equity securities to file reports of ownership
11
and changes in ownership with the SEC. Officers, directors, and greater than 10%
beneficial owners are required by SEC regulations to furnish the Fund with
copies of all Section 16(a) forms they file. The Fund believes that during the
fiscal year ended December 31, 2002, all Section 16(a) filings relating to the
Fund's Common Stock applicable to its officers, directors, and greater than 10%
beneficial owners were timely filed.
SHAREHOLDER PROPOSALS
Pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as
amended, shareholders may present proper proposals for inclusion in the Fund's
proxy statement for consideration at its 2004 Annual Meeting of Shareholders by
submitting proposals to the Fund in a timely manner. To be included in the proxy
statement for the 2004 Annual Meeting of Shareholders, shareholder proposals
must be received by the Fund by December 15, 2003, and must otherwise comply
with the requirements of Rule 14a-8.
OTHER BUSINESS
Management knows of no other business to be presented at the Annual Meeting
that will be voted on by the shareholders. If other matters properly come before
the Annual Meeting or any adjournment(s), then the persons serving as proxies
will vote the proxies as in their discretion they may deem appropriate.
THE ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2002, HAS
BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. IF YOU WOULD LIKE A COPY
OF THE REPORT, PLEASE CHECK THE APPROPRIATE BOX ON THE PROXY CARD AND ENCLOSE
THE CARD IN THE SELF-ADDRESSED, POSTAGE-PAID ENVELOPE. A COPY OF THE REPORT WILL
BE FORWARDED TO YOU FREE OF CHARGE BY FIRST CLASS MAIL.
By Order of the Board of Directors,
/S/ Barbe Butschek
Barbe Butschek, Secretary
Dallas, Texas
April 14, 2003
IMPORTANT: PLEASE RETURN PROXY PROMPTLY. SHAREHOLDERS WHO DO NOT EXPECT TO
ATTEND THE ANNUAL MEETING AND WISH THEIR SHARES OF COMMON STOCK TO BE VOTED
SHOULD DATE, SIGN, AND RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED,
POSTAGE-PAID ENVELOPE.
12