VONTOBEL FUNDS, INC.
1500 Forest Avenue, Suite 223, Richmond, Virginia 23229
804-285-8211 * 800-527-9500 * Fax 804-285-8251
FILED VIA EDGAR
June 3, 1997
Filing Desk
U.S. Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: Vontobel Funds, Inc.
Vontobel U.S. Value Fund (the "Fund")
File Nos 002-78931 & 811-03551
Definitive Proxy Material
Gentlemen:
Pursuant to the requirements of Rule 14a-6(b) under the
Securities Exchange Act of 1934, submitted electronically via the
EDGAR system, is a definitive copy of the proxy statement, notice
of meeting and form of proxy to be furnished to shareholders of the
above-referenced Fund in connection with a special meeting of
shareholders on June 30, 1997. It is expected that the definitive
proxy materials will be mailed to shareholders on or about June 4,
1997.
At the special meeting, shareholders will vote to approve or
disapprove a change in the classification of the Fund from a
diversified to a non-diversified investment company. Shareholders
will also consider a change in the Fund's investment limitations to
permit it to borrow up to 33-1/3% of its assets from banks to meet
redemptions.
Please direct questions and comments relating to this filing
to Michael V. Farrell, Esquire at (215) 564-8095 or, in his
absence, to Steven M. Felsenstein, Esquire at (215) 564-8074.
Very truly yours,
/s/ John Pasco, III
John Pasco, III
Enclosures
cc: Steven M. Felsenstein, Esquire
Michael V. Farrell, Esquire
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the RegistrantX
Filed by a Party other than the Registrant
Check the appropriate box:
X Preliminary Proxy Statement
Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
Vontobel Funds, 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)(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 (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:
<PAGE>
VONTOBEL FUNDS, INC.
1500 Forest Avenue
Suite 223
Richmond, Virginia 23229
NOTICE OF A SPECIAL MEETING OF SHAREHOLDERS OF
VONTOBEL U.S. VALUE FUND
June 2, 1997
To Shareholders:
A Special Meeting of Shareholders of Vontobel U.S. Value Fund (the "U.S.
Value Fund") of
Vontobel Funds, Inc. (the "Vontobel Funds") will be held at the offices of the
Vontobel Funds at 1500
Forest Avenue, Suite 223, Richmond, Virginia 23229 at 10:00 a.m. local time,
on June 30, 1997 for
the following purposes:
1. To approve or disapprove a change in the classification of the U.S.
Value Fund from a
diversified to a non-diversified investment company.
2. To approve or disapprove a change in the U.S. Value Fund's
fundamental investment
policies to permit the U.S. Value Fund to borrow up to 33 1/3% of
its assets from banks
to meet redemptions.
3. To transact such other business as may properly come before the
Meeting.
Shareholders of record at the close of business on May 15, 1997 are
entitled to vote at the
meeting or any adjournment thereof.
By Order of the Board of Directors
JOHN PASCO III
Chairman
June 2, 1997
Richmond, Virginia
IMPORTANT
Whether or not you plan to attend the meeting, please mark your voting
instructions on the enclosed proxy and promptly date, sign and return
it in the enclosed envelope. No postage is required if mailed in the
United States. We ask your cooperation in helping the Fund by mailing
your proxy promptly.<PAGE>
VONTOBEL FUNDS, INC.
1500 Forest Avenue
Suite 223
Richmond, Virginia 23229
PROXY STATEMENT - SPECIAL MEETING OF SHAREHOLDERS OF
VONTOBEL U.S. VALUE FUND
June 2, 1997
The enclosed proxy is solicited on behalf of the Board of Directors of
Vontobel Funds, Inc. (the "Vontobel Funds") in connection with a Special
Meeting of Shareholders ("Meeting") of Vontobel U.S. Value Fund (the "U.S.
Value Fund" or "Fund") and any adjournment thereof.
Vontobel Funds is an open-end investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"). Vontobel USA
Inc. (the "Advisor"), located at 450 Park Avenue, New York, New York 10022,
serves as the U.S. Value Fund's investment adviser.
Proxies will be voted in accordance with the instructions contained
thereon. If no instructions are given, proxies that are signed and returned
will be voted in favor of the proposals. A shareholder may revoke his or
her proxy at any time before it is exercised by delivering a written notice
to the Fund expressly revoking such proxy, by executing and forwarding to
the Fund a subsequently dated proxy, or by attending the Meeting and voting
in person. This proxy statement and the accompanying form of proxy are
being first sent to shareholders on approximately June 3, 1997. In the
event that at the time the Meeting is called to order a quorum is not
present in person or by proxy, those proxies that have been received will
be voted to adjourn the Meeting to a later date. In the event a quorum is
present but sufficient votes in favor of the proposals have not been received
, the Meeting may be adjourned to solicit additional votes. In that event,
only those proxies that have been received which would be voted to approve
the proposals will be voted in favor of an adjournment, and those proxies
that have been received which would be voted against the proposals will be
voted against the adjournment.
As of the close of business on May 15, 1997, the record date fixed by
the Board of Directors for the determination of shareholders of the U.S.
Value Fund entitled to notice of and to vote at the Meeting ("Record Date"),
6,491,628.958 shares of the U.S. Value Fund were outstanding. Each
share is entitled to one vote.
The vote of the holders of a "majority of the outstanding voting
securities" of the U.S. Value Fund, as defined in the 1940 Act, represented
at the meeting in person or by proxy, is required for the approval of each
proposal ("1940 Act Majority Vote"). A 1940 Act Majority Vote means the
vote of (a) at least 67% of the shares of the U.S. Value Fund present in
person or by proxy, if more than 50% of the shares of the U.S. Value Fund
are represented at the meeting, or (b) more than 50% of the outstanding
shares of the U.S. Value Fund, whichever is less. Under Maryland law,
abstentions and broker non-votes will be included for purposes of determining
whether a quorum is present at the Meeting, but will be treated as votes
not cast and, therefore, would not be counted for purposes of determining
whether the proposals have been approved. No other business may properly
come before the Meeting.
The cost of solicitation, including preparing and mailing the proxy
materials, will be borne by the U.S. Value Fund. In addition to
solicitations through the mails, the employees of the Advisor may solicit
proxies by telephone, telegraph and personal interviews. It is not
anticipated that any of the foregoing persons will be specially engaged for
that purpose.
PRINCIPAL SHAREHOLDERS
As of May 15, 1997, the following persons are known by the Vontobel Funds
to be beneficial owners of more than five percent of the U.S. Value Fund's
outstanding shares:
Number of Shares Percentage
Name & Address Beneficially Owned of Fund
Charles Schwab Reinvestment1,624,411.500 25.023%
Attn.: Mutual Fund Dept.
101 Montgomery Street
San Francisco, CA 94105
Vontobel USA Inc. 1,843,944.795* 28.405%
450 Park Avenue
New York, NY 10022
Bank J. Vontobel 1,270,790.875 19.576%
Bahnhofstrasse #3
CH-8022 Zurich
Switzerland
National Financial Services 535,092.917 8.243%
Attn.: Mutual Fund Dept.
One World Financial Center
200 Liberty Street
4th Floor
New York, N.Y. 10281-1003
TOTAL 5,274,240.087 81.247%
As of May 15, 1997, the Directors and executive officers of the Vontobel
Funds beneficially owned the following amounts of the U.S. Value Fund's
outstanding shares:
Number of Shares Percentage
Name & Address Beneficially Owned of Fund
John Pasco, III 2,000.000 0.031%
Chairman, Director and
Treasurer
1500 Forest Ave.
Suite 223
Richmond, VA 23229
Henry Schlegel 158.155 0.002%
Director
450 Park Avenue
New York, NY 10022
Samuel Boyd, Jr. 158.155 0.002%
Director
10808 Hob Nail Court
Potomac, MD 20854
William E. Poist 106.680** 0.002%
Director
5272 River Road
Bethesda, MD 20816
Paul M. Dickinson 493.017 0.008%
Director
8704 Berwickshire Drive
Richmond, VA 23229
F. Byron Parker, Jr. 15.847 0%
Secretary
810 Lindsay Court
Richmond, VA 23229
*Henry Schlegel, through his positions as Director, President and Chief
Executive Officer of the Advisor may be deemed a beneficial owner of the
1,843,944.795 shares of the Fund that are owned by clients of the Advisor
who have granted the Advisor discretionary investment authority with
respect to such shares.
**15.581 of Mr. Poist's shares are owned by his son.
ITEM 1: CHANGE IN THE CLASSIFICATION OF THE FUND FROM
"DIVERSIFIED" TO "NON-DIVERSIFIED"
The Board of Directors of the U.S. Value Fund has approved a proposal to
reclassify the Fund from a "diversified" to a "non-diversified" investment
company, as defined in the 1940 Act.
Background
The Fund is currently classified as a "diversified" investment
company under the 1940 Act. This classification requires the Fund to
invest so that a total of at least 75% of the value of the Fund's assets
consist of a combination of cash, securities of the U.S. government or its
agencies or instrumentalities, securities of other investment companies, and
securities of other issuers in each of which the Fund has not invested more
than 5% of its total assets. Under this provision, a diversified
investment company may invest any or all of the remaining 25% of its total
assets, in any one or more issuers without regard to the 5% limitation. The
Fund has adopted a fundamental investment
restriction consistent with this policy.
Discussion
The Fund invests primarily in equity securities that have been
selected by the Advisor using a disciplined value approach. The Advisor
seeks to invest the Fund's assets in companies with a high level of earnings
predictability with equity securities being offered at a discount to their
intrinsic value, as measured by calculating the present value of future free
cash flows. Generally, there are a limited number of securities that meet
the Advisor's strict standards for selection of the Fund's portfolio
investments, and the Fund may then be unable to invest additional amounts
in investments of its choosing. When this occurs, the Fund maintains a large
cash position, because it is unable to place additional assets in the limited
number of stocks that the Advisor deems to be suitable value investments.
Therefore, while the Fund is classified as a diversified portfolio under
Section 5(b)(1) of the 1940 Act, it is subject to diversification requirements
that significantly restrict its ability to focus its investments in a small
number of issuers. For this reason, the Fund may have to forgo
opportunities to increase certain positions which are considered to be
attractive by the Advisor. The Advisor believes that it would be beneficial
for the Fund to have the flexibility to invest a larger
percentage of its assets in stocks identified as suitable value investments
in order to take advantage of the potential offered by such stocks.
Consequently, the Advisor recommends that the Fund operate
under the less restrictive diversification requirements applicable to non-
diversified investment companies under the 1940 Act.
As a diversified investment company, the U.S. Value Fund is currently
subject to the 75% diversification standard set in the 1940 Act, which
provides that:
"Diversified company" means a management company which meets the following
requirements: At least 75 per centum of the value of its total assets is
represented by cash and cash items (including receivables), Government
securities, securities of other investment companies, and other
securities for the purposes of this calculation limited in respect of
any one issuer to an amount not greater in value than 5 per
centum of the value of the total assets of such management company and to
not more than 10 per centum of the outstanding voting securities of such
issuer.
The Fund is also subject to a similar, but less restrictive diversification
requirement under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). Though similar to the 1940 Act standard, the Code
provision applies to only 50% of the assets of the Fund, and not to 75%.
As a "regulated investment company," the Fund is relieved from any liability
for federal income tax and excise tax to the extent that it distributes its
taxable income and capital gains to its shareholders and meets the
diversification requirements under the Code. The Fund intends to continue to
operate so that it qualifies as a "regulated investment company" for purposes
of the Code. The Fund's amended investment limitation, which would apply to
50% of its assets, conforms to the Code's diversification requirements.
The revised investment restriction, which would govern the
diversification of the Fund's assets, would provide that the Fund will not:
"(i) as to 50% of its total assets, purchase the securities of any one
issuer, (other than obligations issued or guaranteed as to principal
and interest by the U.S. government or any agency or instrumentality
thereof or the securities of other regulated investment companies) if,
as a result of such purchase, more than 5% of the value of Fund's total
assets would be invested in the securities of such issuer, or if such
purchase would cause the Fund to own more than 10% of any class of the
outstanding voting securities of such issuer; and (ii) invest more than
25% of the value of its total assets in securities (other than U.S.
government securities or the securities of other regulated
investment companies) of any one issuer."
As a "non-diversified" investment company, the U.S. Value Fund will
be permitted to invest a larger percentage of its assets in the
securities of a single issuer. As a result, changes in the
value of a security held by the Fund could have a greater impact on
the overall value of the Fund's net assets, thereby exposing the Fund's
shareholders to the potential for greater fluctuation in the
value of their investments. However, in the opinion of the Advisor, such
potential for increased fluctuation in values will be offset by the strict
screening procedures employed to select and monitor the Fund's portfolio
investments. Specifically, the Advisor seeks portfolio securities with the
following attributes: predictable earnings, safety of principal and a
discounted purchase price relative to the security's intrinsic value.
Conclusion
The Board of Directors recommends that the Fund's investment
limitation regarding diversification be amended to conform to the less
restrictive standard proposed above which will result in the Fund's
reclassification as a non-diversified investment company. The Board of
Directors has considered the factors discussed above and has determined that
the proposed reclassification of the Fund as a non-diversified investment
company will enhance the Fund's ability to achieve its investment objective
by allowing the Fund to concentrate its assets in securities that meet the
Advisor's stringent selection criteria for value investments. Accordingly,
the Board of Directors recommends that shareholders vote to approve the
reclassification of the Fund from a diversified to a non-diversified
investment company. Approval by shareholders of the amended investment
limitations will become effective at the time that the Fund's prospectus
is amended to reflect the new limitations. It is presently expected that
such revision will be made on or about August 20, 1997. If the proposal
is not approved, the current limitation will remain unchanged.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS APPROVAL
OF THE PROPOSAL TO RECLASSIFY THE U.S. VALUE FUND AS A
"NON-DIVERSIFIED" INVESTMENT COMPANY
ITEM 2: CHANGE IN THE FUNDAMENTAL INVESTMENT POLICY WITH RESPECT
TO BORROWING
Currently, the Fund is subject to the following borrowing limitation,
which is a fundamental investment policy:
"The Fund may not borrow money, except as a temporary measure for
extraordinary or emergency purposes, or except in connection with
reverse repurchase agreements, provided that the Fund maintains asset
coverage of 300% in connection with the issuance of senior securities.
Notwithstanding the foregoing, to avoid the untimely disposition of
assets to meet redemptions, the Fund may borrow up to 20% of the
value of the Fund's assets to meet redemptions, provided that the Fund
may not make other investments while such borrowings are outstanding;"
The Board of Directors has considered whether it would be in the
best interest of the Fund to permit the Fund to borrow money for the limited
purpose of making prompt payment to shareholders redeeming shares without
the need to liquidate portfolio securities at a time when such a
sale may not be in the interest of the Fund. The Board considered that under
the 1940 Act, a fund may borrow for this purpose in an amount up to 33 1/3%
of the value of its assets. After discussion, the Board determined that such
a change could benefit the Fund in the event that the Fund would avoid the
untimely disposition of portfolio securities, and the Board approved a proposal
to amend the restriction to raise the amount that the Fund may borrow from 20%
to 33 1/3% of the value of the Fund's assets.
The Board of Directors concluded that the proposed investment policy,
which provides greater flexibility to borrow when necessary to meet shareholder
redemptions, would not significantly increase risk for shareholders, as the
Fund will not engage in borrowing for purposes of leveraging the investments of
the Fund.
Under the 1940 Act, a fundamental policy may only be amended if the
change is approved by a 1940 Act Majority Vote. The Board has therefore
submitted to the shareholders this proposal to change the fundamental
investment restriction. Approval by shareholders of the change in
this fundamental investment restriction will become effective at the time
that the Fund's prospectus is amended to reflect the new investment
restriction. It is presently expected that such revision will be
made on or about August 20, 1997.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS APPROVAL
OF THE PROPOSAL TO INCREASE THE EXTENT TO WHICH THE
FUND MAY BORROW FROM BANKS UNDER THE 1940 ACT
ITEM 3: OTHER MATTERS THAT MAY COME BEFORE THE MEETING
This Meeting of the shareholders of the Fund is a special meeting,
and will generally address only those matters set forth in the Notice of the
Meeting. The Board of Directors of the Vontobel Funds knows of no other
business to be brought before the Meeting. However, if any other matters
properly come before the Meeting, it is the intention of the Board that proxies
that do not contain specific instructions to the contrary will be voted on such
matters in accordance with the judgement of the persons designated therein as
proxies.
Other Information
First Dominion Capital Corp. is the Distributor of the U.S. Value
Fund's shares, and Commonwealth Shareholder Services, Inc. serves as
Administrator to the Fund. The address of both the Distributor and
Administrator is 1500 Forest Avenue, Suite 223, Richmond, Virginia 23229
Shareholder Reports
The most recent Annual Report for the U.S. Value Fund is available at
no cost to shareholders of the Fund upon request by contacting the Vontobel
Funds at 1500 Forest Avenue, Suite 223, Richmond, Virginia 23229 or calling
800-527-9500 (toll free).
Shareholder Proposals
Any shareholder who desires to submit a shareholder proposal may do s
so by submitting such proposal in writing, addressed to the Secretary of the
U.S. Value Fund, at 1500 Forest Avenue, Suite 223, Richmond, Virginia 23229.
Ordinarily, the Fund does not hold shareholders meetings.
By Order of the Board of Directors
JOHN PASCO, III
Chairman
June 2, 1997<PAGE>
BY SIGNING AND DATING THIS PROXY, YOU AUTHORIZE THE PROXIES TO VOTE EACH
PROPOSAL AS MARKED. IF NOT MARKED, THE PROXIES WILL VOTE "FOR" EACH PROPOSAL,
AND AS THEY SEE FIT ON ANY OTHER MATTER AS MAY PROPERLY COME BEFORE THE
MEETING. IF YOU DO NOT INTEND TO PERSONALLY ATTEND THE MEETING, PLEASE
COMPLETE AND MAIL THIS CARD AT ONCE IN THE ENCLOSED ENVELOPE.
VONTOBEL FUNDS, INC.
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS - JUNE 30, 1996
The undersigned hereby constitutes and appoints John Pasco III and F.
Byron Parker, Jr. or any of them, with power of substitution, as proxies to
appear and vote all of the shares of stock standing in the name of the
undersigned on the record date at the special meeting of shareholders of
Vontobel U.S. Value Fund to be held at 1500 Forest Avenue, Suite 223,
Richmond Virginia 23229 on the 30th day of June 1997 at 10:00 a.m. local time,
or at any postponement or adjournment thereof; and the undersigned hereby
instructs said proxies to vote as indicated on this proxy card.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED IN THE
FOLLOWING ITEMS 1 and 2. IF NO CHOICE IS SPECIFIED, THEY WILL BE VOTED TO
APPROVE EACH PROPOSAL. PLEASE REFER TO THE PROXY STATEMENT DISCUSSION OF
THESE MATTERS. THIS PROXY IS SOLICITED ON BEHALF OF THE FUND'S BOARD OF
DIRECTORS.
1. To approve a change in the classification of the Vontobel U.S. Value
Fund from a diversified to a non-diversified investment company.
FOR AGAINST ABSTAIN
2. To approve a change in the U.S. Value Fund's fundamental investment
policies with respect to borrowing which will permit the Fund to
borrow up to 33 1/3% of its net assets from banks to meet
redemptions.
FOR AGAINST ABSTAIN
3. To transact such other business as may properly come before the
Meeting.
_______________________________________________________________________ 1997
SIGNATURE SIGNATURE (JOINT OWNER) DATE
PLEASE DATE AND SIGN NAME OR NAMES TO AUTHORIZE THE VOTING OF YOUR SHARES AS
INDICATED ABOVE. WHERE SHARES ARE REGISTERED WITH JOINT OWNERS, ALL JOINT
OWNERS SHOULD SIGN. PERSONS SIGNING AS AN EXECUTOR, ADMINISTRATOR, TRUSTEE
OR OTHER REPRESENTATIVE SHOULD GIVE FULL TITLE AS SUCH.
