SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
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Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
Vontobel Funds, Inc.
(Name of Registrant as Specified In Its Charter)
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<PAGE>
Preliminary Proxy Material
VONTOBEL FUNDS, INC.
1500 Forest Avenue
Suite 223
Richmond, Virginia 23229
NOTICE OF A SPECIAL MEETING OF SHAREHOLDERS OF
VONTOBEL U.S. VALUE FUND
May __, 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 May ____, 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
May __, 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.
VONTOBEL FUNDS, INC.
1500 Forest Avenue
Suite 223
Richmond, Virginia 23229
PROXY STATEMENT - SPECIAL MEETING OF SHAREHOLDERS OF
VONTOBEL U.S. VALUE FUND
May __, 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 May _____,
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 nonvotes 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 Reinvestment 1,624,411.500 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 2,678.592 0.041%
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 , 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 , 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 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
May __, 1997<PAGE>
BY SIGNING AND DATING THE BACK OF THIS CARD, 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 - MAY____, 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 _____ day of May 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.
