SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X] File Nos.: 811-4062/2-92136
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for use of the
Commission
[ ] Definitive Proxy Statement the Commission only (as permit-
[ ] Definitive Additional Materials ted) by Rule 14a-6(e)
[ ] Soliciting Material Pursuant to $240.14a-11(c) or $240-14a-12
GAM Funds, Inc.
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(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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.)
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary material
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rules 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
GAM FUNDS, INC.
NOTICE OF SPECIAL MEETING OF CLASS A SHAREHOLDERS
TO BE HELD ON OCTOBER 1, 1996
-----------------------------
TO THE SHAREHOLDERS OF GAM FUNDS, INC.:
A Special Meeting of the Class A Shareholders (the "Meeting") of GAM Funds, Inc.
(the "Fund"), a Maryland corporation, will be held at 135 East 57th Street, 25th
Floor, New York, NY 10022 on October 1, 1996 at 10:00 a.m., for the following
purposes:
1. To consider approval of a plan of distribution for the Class A shares of
the Fund (the "Distribution Plan" or "Plan"), providing for payments by
each Series of the Fund at a maximum annual rate of 0.30% of the average
daily net assets of Class A shares of such Series; and
2. To transact such other business as may properly come before the Meeting or
any adjournments thereof.
The Board of Directors of the Fund has fixed the close of business on July 31,
1996 as the record date for the determination of shareholders entitled to notice
of, and to vote at, the Meeting or any adjournment thereof. The enclosed proxy
is being solicited on behalf of the Board of Directors. Each shareholder who
does not expect to attend in person is requested to complete, date, sign and
promptly return the enclosed form of proxy.
By Order of the Directors,
Lisa M. Hurley
SECRETARY
New York, New York
August , 1996
THE BOARD OF DIRECTORS OF GAM FUNDS, INC.
RECOMMENDS APPROVAL OF THE DISTRIBUTION PLAN.
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PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD, SIGN AND
DATE IT, AND RETURN IT IN THE ENVELOPE PROVIDED, WHICH NEEDS NO POSTAGE IF
MAILED IN THE UNITED STATES. IN ORDER TO SAVE GAM FUNDS, INC. ANY ADDITIONAL
EXPENSE OF FURTHER SOLICITATION, PLEASE MAIL YOUR PROXY PROMPTLY. INSTRUCTIONS
FOR THE PROPER EXECUTION OF PROXY CARDS ARE SET FORTH ON THE FOLLOWING PAGE.
PROXIES MAY BE REVOKED AT ANY TIME BEFORE THEY ARE EXERCISED BY THE SUBSEQUENT
EXECUTION AND SUBMISSION OF A REVISED PROXY, BY GIVING WRITTEN NOTICE OF
REVOCATION TO THE FUND AT ANY TIME BEFORE THE PROXY IS EXERCISED, OR BY VOTING
IN PERSON AT THE SPECIAL MEETING.
<PAGE>
INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing proxy cards may be of assistance to you
and avoid the time and expense to the Fund involved in validating your vote if
you fail to sign your proxy card properly. IN ALL INSTANCES, PLEASE REMEMBER TO
DATE THE PROXY CARD BEFORE MAILING IT BACK TO THE FUND.
1. Individual Accounts: Sign your name exactly as it appears in the
registration on the proxy card.
2. Joint Accounts: Either party may sign, but the name of the party signing
should conform exactly to the name shown in the registration on the proxy
card.
3. All Other Accounts: When signing in a representative capacity, indicate
the capacity of the individual signing the proxy card, unless it is
reflected in the form of registration. For example:
REGISTRATION VALID SIGNATURE
------------ ---------------
CORPORATE ACCOUNTS
(1) ABC Corp. John Doe, Treasurer
(2) ABC Corp.
c/o John Doe, Treasurer John Doe
(3) ABC Corp. Profit Sharing Plan John Doe, Trustee
TRUST ACCOUNTS
(1) ABC Trust Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee
u/t/d 12/28/78 Jane B. Doe
CUSTODIAL OR ESTATE ACCOUNTS
(1) John B. Smith, Cust.
f/b/o John B. Smith, Jr. UGMA John B. Smith
(2) Estate of John B. Smith John B. Smith, Jr.,
Executor
2
<PAGE>
PRELIMINARY COPY
GAM FUNDS, INC.
135 EAST 57th STREET
NEW YORK, NEW YORK 10022
PROXY STATEMENT
INTRODUCTION
This proxy statement is being furnished to the Class A shareholders of each
Series of GAM Funds, Inc. (the "Fund") in connection with the solicitation of
proxies by the Board of Directors of the Fund for the Special Meeting to be held
on October 1, 1996 at 10:00 a.m., or any adjournment or adjournments thereof
(the "Meeting"), for the purposes set forth in the accompanying Notice of
Special Meeting of Shareholders. The Meeting will be held at the offices of the
Fund located at 135 East 57th Street, 25th Floor, New York, NY 10022. It is
anticipated that the first mailing to Class A shareholders of proxies and proxy
statements will be on or about August 23, 1996.
The Fund currently offers shares of eight series (each, a "Series"): GAM
International Fund, GAM Global Fund, GAM Pacific Basin Fund, GAM Europe Fund,
GAM North America Fund, GAM Japan Capital Fund, GAM Asian Capital Fund, and
GAMerica Capital Fund. Each of the GAM International Fund, GAM Global Fund and
GAM Pacific Basin Fund Series also offers Class D shares. No matters relating to
the Class D shares will be presented at the Meeting. The within Proposal
submitted for approval by the Class A shareholders of the Fund is the same for
each Series; however, each Series must separately approve the proposal. Approval
of the Distribution Plan requires the affirmative vote of the holders of a
majority of the outstanding Class A shares of each Series as defined in the
Investment Company Act of 1940, as amended (the "1940 Act"). A majority of the
outstanding Class A shares of each Series for this purpose (a "1940 Act
Majority") shall be the affirmative vote of the holders of (i) 67% or more of
the Class A shares of each Series present and entitled to vote at the Meeting,
provided the holders of more than 50% of the outstanding Class A shares of the
Series are present or represented by proxy; or (ii) more than 50% of the
outstanding Class A shares of each Series, whichever is less. Implementation of
the Plan by any one Series would not be conditioned on receipt of shareholder
approval by any other Series. Each share is entitled to one vote and any
fractional share is entitled to a fractional vote. If the enclosed proxy is
properly executed and returned in time to be voted at the Meeting, the shares
represented thereby will be voted in accordance with the instructions marked
thereon. UNLESS INSTRUCTIONS TO THE CONTRARY ARE MARKED THEREON, A PROXY WILL BE
VOTED FOR THE MATTERS LISTED ON THE NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
AND FOR ANY OTHER MATTERS DEEMED APPROPRIATE.
The holders of a majority of the Class A shares outstanding at the close of
business on the Record Date present in person or represented by proxy will
constitute a quorum for the Meeting of each Series. For purposes of determining
the presence of a quorum for transacting business at the meeting, abstentions
and broker non-votes (i.e., proxies from brokers or nominees indicating that
such persons have not received instructions from the beneficial owner or other
persons entitled to vote shares on a particular matter with respect to which the
brokers or nominees do not have discretionary power) will be treated as shares
that are present but which have not been voted. For this reason, abstention and
broker "non-votes" will have the effect of a "no" vote for the purposes of
obtaining the requisite approval of each proposal.
Any shareholder who has returned a signed proxy has the right to revoke it at
any time prior to its exercise either by attending the Meeting and voting his or
her shares in person or by submitting
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a letter of revocation to the Secretary of the Fund or a later-dated proxy to
the Fund at the above address prior to the date of the Meeting.
In the event that a quorum is not present at the Meeting, or in the event that a
quorum is present but sufficient votes to approve any of the proposals are not
received, the persons named as proxies may propose one or more adjournments of
the Meeting to permit further solicitation of proxies. In determining whether to
adjourn the Meeting, the following factors may be considered: the nature and
purposes of the proposals that are the subject of the Meeting, the percentage of
votes actually cast and what percentage were negative votes, the nature of any
further solicitation, and whether adjournment is in the best interest of the
shareholders. Any adjournment will require the affirmative vote of a majority of
those Class A shares represented at the Meeting in person or by proxy.
The Board of Directors of the Fund (the "Board") has fixed the close of business
on July 31, 1996 as the record date (the "Record Date") for the determination of
Class A shareholders of the Fund entitled to notice of and to vote at the
Meeting. At the close of business on the Record Date, the following shares of
common stock were issued and outstanding:
Name of Fund Class A Shares
------------ Outstanding on 7/31/96
----------------------
GAM International Fund 42,909,439.091
GAM Global Fund 1,350,068.095
GAM Pacific Basin Fund 4,189,362.056
GAM Europe Fund 2,575,204.822
GAM North America Fund 396,877.301
GAM Japan Capital Fund 3,758,150.367
GAMerica Capital Fund 188,627.789
GAM Asian Capital Fund 733,226.400
--------------
TOTAL SHARES 56,100,955.921
Proxy cards will be sent to each shareholder who is a record owner of Fund
shares. It is essential that shareholders complete, date and sign the enclosed
proxy card. In order that a shareholder's shares may be represented at the
Meeting, shareholders must allow sufficient time for their proxy to be received
on or before the close of business September 30, 1996.
The cost of the Meeting, including the cost of preparing and distributing the
proxy statement to shareholders and the cost of soliciting proxies, including
printing, postage and telephone, will be paid by the Fund. Proxy material will
also be distributed through brokers, custodians, agents and nominees to
beneficial owners, and the Fund will reimburse such parties for reasonable
charges and expenses. Proxy solicitations will be made primarily by mail and
expedited service, but also may be made in person or by telephone or other
electronic means of communication by officers or Directors of the Fund, or their
agents, on behalf of the Board of Directors of the Fund, expenses of which may
be charged to the Fund. The Fund may also engage the service of Shareholder
Communications Corporation ("SCC"), an independent proxy solicitation firm,
which, for its services, will receive a fee of $10,000 from the Fund, plus
expenses. SCC, if retained, may call shareholders to ask if they would be
willing to authorize SCC to execute a proxy on their behalf, authorizing the
voting of their shares in accordance with the instructions given over the
telephone by the shareholders. SCC has implemented procedures designed to
authenticate the shareholder's
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identity by, among other things, asking the shareholder to provide his or her
social security number (in the case of an individual) or taxpayer identification
number (in the case of an entity). The shareholder's instructions will be
implemented in a proxy executed by SCC or its agent and a confirmation will be
sent to the shareholder to ensure that the vote has been authorized in
accordance with the shareholder's instructions. Although a shareholder's vote
may be solicited and cast in this manner, each shareholder will receive a copy
of this Proxy Statement and may vote by mail or by fax using the enclosed proxy
card. The aggregate cost of solicitation of all Class A shareholders for
purposes of the Special Meeting, including costs associated with SCC, is
estimated to be $90,000. These expenses will be allocated among the Series in
the same proportion which the net assets of the Series bears to the net assets
of the Fund.
The Annual Report of the Fund, containing audited financial statements for the
Fund's fiscal year ended December 31, 1995, has previously been furnished to
shareholders. Shareholders will be mailed a copy of the Fund's Annual Report and
most recent succeeding Semi-Annual Report, free of charge, within three days of
receipt of a request in writing to the Fund, 135 East 57th Street, 25th Floor,
New York, NY l0022, attention Mutual Funds, or by calling (800) 356-5740, ext.
1.
PROPOSAL ONE
------------
CONSIDERATION OF APPROVAL OF A PLAN OF DISTRIBUTION FOR THE CLASS A SHARES OF
EACH SERIES OF THE FUND PURSUANT TO RULE 12b-1 UNDER THE INVESTMENT COMPANY ACT
OF 1940
BACKGROUND
At a Board meeting held on July 24, 1996, the Board of Directors of the Fund and
representatives of GAM Services, Inc., the Fund's distributor (the
"Distributor"), discussed sales and redemption trends of each Series of the
Fund, distribution methods used by the Fund, and particular issues related to
the distribution of the shares of each Series in light of the long-term
objectives for the Fund and its shareholders. In this context, the Distributor
proposed that the Fund and each Series adopt a plan of distribution for the
Class A shares (the "Plan"). Based upon a number of considerations discussed in
greater detail below, the Board, including all members who are not "interested
persons" of the Fund, as defined in the 1940 Act, and who have no direct or
indirect financial interest in the operation of the Plan or any related
agreements ("Independent Directors"), voting separately, unanimously approved
the Plan for the Fund's Class A shares and determined to recommend it for
approval by the Class A shareholders. The form of the Plan is attached as
Exhibit A and described in detail below.
NATURE AND PURPOSE OF ACTION REQUESTED TO BE TAKEN BY SHAREHOLDERS
Rule 12b-1 (the "Rule") under the 1940 Act, which governs the adoption of
distribution plans, provides in substance that a registered open-end investment
company such as the Fund may not engage directly or indirectly in financing any
activity which is primarily intended to result in the sale of its shares except
pursuant to a written plan containing certain provisions that has been approved
by the Board of Directors and shareholders. As set forth below, the Directors
determined that there was a reasonable likelihood that the Plan would benefit
Class A shareholders. Accordingly, the Class A shareholders are being asked to
approve the Plan based upon the Board's determination, the basis for which is
described under "Factors Considered by the Board of Directors and its
Conclusions."
5
<PAGE>
In support of its request that the Board of Directors consider adoption of the
Plan, the Distributor made the following observations in support of the
proposal:
-Asset growth of the Fund is critical to its long term viability and
successful management of its investment portfolios.
-Recent trends in sales and redemptions and the effects of difficult market
cycles that impacted performance evidenced the need to more effectively
market the Fund and provide incentives to retain assets in the Fund.
-That while the industry had evolved over the years toward a fee-based
means of compensating brokers and other intermediaries, the Fund's pricing
structure had remained static, leaving it at a competitive disadvantage to
virtually its entire competitive universe.
-Although the Fund had successfully established itself in several
distribution channels, it had failed to penetrate the retail
sales-assisted market, which represents by far the greatest market share.
Because the Fund had not aggressively pursued this channel, the
Distributor stressed the need to make the necessary modifications to its
pricing structure in order to ensure that it can compete in that
particular market.
The Board, after consideration of numerous factors, concluded that the
establishment of the Plan could address some of the issues facing the Fund. The
Board noted that the expense ratios of the Fund would be impacted by the Plan,
but concluded that the additional expense of the Plan to the Fund was reasonable
in light of the anticipated benefits to the Fund and its Class A shareholders.
THE PLAN
Under the Plan, the Fund will pay each month to the Distributor 0.30% on an
annual basis of the average daily net assets of the Class A shares of each
Series of the Fund. The Distributor intends to pay up to 0.25% of the average
net assets of the Class A shares of each Series as fees to broker-dealers and
other intermediaries who provide certain services of value to the Fund's Class A
shareholders, as more fully described below ("Service Fees"). In addition to the
Service Fees, the Distributor is permitted to utilize the fees it will receive
under the Plan for any other activity intended to result in the sale of Fund
shares. Other expenses might include: (i) commissions to sales personnel for
selling Class A shares of the Fund; (ii) compensation, sales incentives and
payments to sales, marketing and service personnel; (iii) reimbursement of
expenses of broker-dealers and other financial institutions which have entered
into selling agreements with the Distributor relating to selling and servicing
efforts or organizing and conducting sales seminars; (iv) payment of expenses
incurred in sales and promotional activities, including advertising expenditures
related to the Class A shares of the Fund; (v) the costs of preparing and
distributing promotional materials relating to Class A shares; (vi) the cost of
printing the Funds' prospectus and statement of additional information for
distribution to potential Class A shareholders; (vii) the Distributor's costs of
providing services to Class A shareholders, including assistance in connection
with inquiries related to shareholder accounts; and (viii) such other similar
services or activities that the Board of Directors of the Fund determines are
reasonably calculated to result in the sale of Class A shares of the Fund.
The Service Fees intended to be paid to broker-dealers and other intermediaries
are designed to compensate those parties who may be called upon to provide
certain shareholder related services. These services include, among others,
answering inquiries or providing information about the
6
<PAGE>
Fund, including review of current performance and other developments, offering
assistance with enrollment in special investment plans of the Fund, and
assisting shareholders with account matters such as account registration, and
questions relating to shareholder statements, records, purchase and redemption
order processing, and distribution elections.
The Distributor intends to pay Service Fees to all broker-dealers and other
intermediaries maintaining investor accounts in the Fund who provide such
services. The Distributor will collect Service Fees on its own behalf where it
has been designated the broker of record. In return for this compensation, the
Distributor shall provide a comparable level and quality of services as those
provided by other broker-dealers and intermediaries receiving Service Fees.
These amounts will be in addition to any portion of the fee that the Distributor
may otherwise retain to cover other distribution-related expenses. The
Distributor does not contemplate retaining any more than 0.05% of Plan assets
annually to cover these other expenses.
While the Plan is in effect, the Treasurer of the Fund shall provide a written
report to the Fund's Board of Directors at least quarterly for its review as to
the amount of all payments made pursuant to the Plan and the purposes for which
the payments were made. The Plan further provides that while it is in effect,
the selection and nomination of new Independent Directors of the Fund will be
committed to the discretion of the Independent Directors.
If approved, the Plan (unless terminated as provided therein) shall continue in
effect for one year from its effective date and from year to year thereafter,
but only if the continuance is specifically approved at least annually by the
Fund's Board of Directors (including a majority of its Independent Directors) by
a vote cast in person at a meeting called for the purpose of voting on such
continuance. The Plan may be terminated at any time with respect to a Series by
vote of a majority of the Independent Directors or by a 1940 Act Majority of the
Class A shares of the Series, and will terminate automatically in the event of
its assignment, as that term is defined in the 1940 Act. The Plan may not be
amended to increase materially the amount of payments to be made thereunder,
unless the amendment is approved by a 1940 Act Majority of the Class A
shareholders of each Series, and all material amendments to the Plan must be
approved by the Board of Directors, including a majority of the Independent
Directors, cast at a meeting called for that purpose.
IMPACT ON FUND EXPENSE RATIOS
If approved by shareholders, the Plan would have the effect of increasing the
Fund's Class A share expenses from what they otherwise would be, but by no more
that 0.30% per annum of average daily net assets. However, should the Plan
result in increased Fund assets, the expense ratios of all the Series are
expected to decline over time as the fixed costs of these Series are absorbed by
an increasing asset base. Those Series with the least assets are expected to
benefit the most in this regard, such that with significant asset growth their
expense ratios could drop to a level below the current ratios, which do not
include the expense of the Plan. The table below sets forth the current fees for
each Series of the Fund (Column A) and the pro-forma fees after giving effect to
the Plan (Column B), followed by examples of what an investor would pay in each
case.
7
<PAGE>
COMPARATIVE FEE TABLE
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
PACIFIC
INTERNATIONAL GLOBAL BASIN EUROPE
A B A B A B A B
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees (after expense 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
reimbursements)1
Rule 12b-1 Fees 0% 0.30% 0% 0.30% 0% 0.30% 0% 0.30%
Other Expenses 0.46% 0.46% 1.25% 1.25% 0.53% 0.53% 0.76% 0.76%
Total Fund Operating Expenses 1.46% 1.76% 2.25% 2.55% 1.53% 1.83% 1.76% 2.06%
==== ==== ==== ==== ==== ==== ==== ====
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
NORTH JAPAN GAMERICA ASIAN
AMERICA CAPITAL CAPITAL CAPITAL
A B A B A B A B
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees (after expense 1.00% 1.00% 1.00% 1.00% 0% 0% 1.00% 1.00%
reimbursement)1
Rule 12b-1 Fees 0% 0.30% 0% 0.30% 0% 0.30% 0% 0.30%
Other Expenses 1.61% 1.61% 0.70% 0.70% 5.80% 5.80% 2.67% 2.67%
Total Fund Operating Expenses 2.61% 2.91% 1.70% 2.00% 5.80% 6.10% 3.67% 3.97%
==== ==== ==== ==== ==== ==== ==== =====
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</TABLE>
EXAMPLES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
PACIFIC
INTERNATIONAL GLOBAL BASIN EUROPE
A B A B A B A B
You would pay the following
expenses on a $1,000
investment, assuming (1) 5%
annual return and (2)
redemption at the end of the
period:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 64 $ 67 $ 72 $ 75 $ 65 $ 68 $ 67 $ 70
3 Year $ 94 $103 $117 $125 $ 96 $105 $103 $111
5 Year $126 $141 $164 $179 $129 $144 $141 $155
10 Year $216 $247 $296 $324 $223 $254 $247 $277
- -----------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
NORTH JAPAN GAMERICA ASIAN
AMERICA CAPITAL CAPITAL CAPITAL
A B A B A B A B
You would pay the following
expenses on a $1,000
investment, assuming (1) 5%
annual return and (2)
redemption at the end of the
period:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 75 $ 78 $ 66 $ 69 $105 $108 $ 85 $ 88
3 Year $127 $136 $101 $110 $213 $221 $157 $165
5 Year $182 $196 $138 $152 $320 $332 $230 $243
10 Year $330 $357 $241 $271 $579 $599 $423 $447
- -----------------------------------------------------------------------------------------------------------
</TABLE>
The purpose of the examples is to help investors understand the various costs
and expenses of investing in shares of the Fund. The table and the examples
should not be considered a representation of past or future expenses since
actual expenses may be more or less than those shown and the size of each Fund
may vary.
NOTES TO TABLE
Column A reflects expenses of each Series at June 30, 1996; Column B reflects
pro-forma expenses of each Series on that date giving effect to the Plan.
1 The Adviser has agreed to waive up to the entire amount of its advisory fee
with respect to each of the Series in order to comply with state imposed
expense limitations. Currently, GAMerica Capital Fund is the only Series in
which the Adviser is waiving its fee. In the absence of this fee waiver,
management fees for GAMerica Capital Fund would be 1.0%, resulting in total
actual expenses of 6.80% at June 30, 1996, and pro-forma expenses on that
date, with the Plan, of 7.10%.
FACTORS CONSIDERED BY THE BOARD OF DIRECTORS AND ITS CONCLUSIONS
In considering the Distributor's recommendation that the Plan be adopted on
behalf of the Fund and each Series, the Board focused primarily on the
competitive factors justifying the need for the Plan, weighed against the
expense of the Plan to
each Series of the Fund. The overriding consideration was
the long term viability of the Fund in light of current industry pricing trends
and the perceived need to reposition the Fund to provide for new and sustained
growth while mitigating the effects of redemptions.
The Distributor, in assisting the Board in its analysis of the Plan, provided an
overview of the four main distribution channels through which the Fund sells
shares: (i) the managed client base of advisers affiliated with the Fund's
adviser; (ii) the institutional market, including defined benefit and
contribution plans, and 401(k) plans; (iii) clients of broker-dealers and
fee-based advisers through wrap fee and other similar programs; and, (iv)
sales-assisted retail distribution through broker-dealers and financial planners
and consultants. The Distributor explained that the Fund had successfully
developed each of these channels other than the retail distribution channel,
which represented the broadest part of the industry. The Distributor noted that
retail sales-assisted purchases, including those from fee based financial
planners, total approximately 45% of industry sales, with institutional
representing approximately 28% and retail sales without sales assistance another
27%. Broker-assisted sales of all equity funds on a net basis through May of
1996 were $25 billion; of this amount, sales of shares of the Fund represented
only 0.06%. Although the Fund was established as a load product for distribution
through and payment to financial intermediaries, a large portion of its sales
were occurring outside this channel, representing a significant lost opportunity
within the largest market segment of the industry.
9
<PAGE>
The Distributor explained that the Fund's sales trends had developed over the
years as a result of the gradual shift in the industry from transaction-based
fees (i.e., one-time fees paid at the point of sale or redemption) to fee-based
pricing (i.e., asset-based fees or commissions paid over the life of an
account). Throughout this evolution, sales loads had been gradually declining,
as asset based fees, such as 12b-1 fees, were instituted. Although the Fund had
instituted the D share class to address these trends, the Distributor indicated
that the Fund had not changed its original Class A pricing structure over ten
years of operations. And, despite not having changed its pricing, the Fund
nevertheless carried a front-end sales load that was lower than most funds in
its peer group. This lower commission payment to financial intermediaries
selling shares of the Fund, combined with the lack of an ongoing asset-based
commission or Service Fee to these distributors, has left the Fund severely
disadvantaged against its competitive universe in the view of the Distributor.
The Distributor noted that the financial intermediaries on whom the Fund depends
for distribution and servicing appear to be turning to competing products that
carry more attractive compensation for their services, even when performance may
not be comparable. The Distributor also informed the Board that 70% of sales of
non-proprietary funds (e.g. those funds which are not sponsored by the selling
brokerage or financial service firm) continue to be of funds with traditional
"Class A" or front-end load pricing. Moreover, most of those sales are made
through the retail distribution network of broker-dealers and financial planners
and consultants. The Distributor stressed its belief that bringing the Fund's
Class A pricing structure in line with the industry was central to its ability
to successfully market shares of the Fund.
It was noted and discussed in this context that the Fund's excellent performance
record associated with its larger, long-standing portfolios had served for a
period of time to overcome this disadvantage. However, given recent short-term
performance results in some of the products, the Funds were not only
experiencing a decline in sales, but also increased redemptions. The Board
discussed with the Distributor the extent to which the Distributor believed
that, through difficult market cycles or in overcoming periods of short-term
negative performance, the Plan, and ongoing payments to financial intermediaries
thereunder, could serve to stem redemptions. The Distributor pointed to the
Fund's Class D shares, which through the same recent performance trends had
experienced far fewer redemptions on a relative basis.
The Board then discussed the use of Plan assets in light of these developments
to address the Fund's competitive disadvantage. In particular, the Distributor
explained that the majority of Plan assets would be paid out to retail brokers
and other intermediaries for providing ongoing servicing of shareholder accounts
and for rendering personal services to shareholders in connection with their
investment in the Fund. In this connection, the Distributor provided statistics
prepared by an independent industry consultant showing that within the Fund's
competitive universe of 734 non-proprietary equity funds, 75% of all sales went
to funds with a 0.25% asset-based trail commission or Service Fee; only 2% of
this market went to funds, such as the Fund, which had no trail commission or
Service Fee. In addition, statistics were provided showing that 64% of equity
sales went to funds with a front-end load of 5.75%, while only 2% went to funds
with a load of 5%, the amount paid to invest in the Fund. The Distributor and
the Board discussed adjustment of the front-end sales load and concluded that
this would not be advisable given the trend away from transaction-based fees,
and the possibility that commissions at the point of sale may continue to
decline.
The Distributor explained in detail how it would utilize any fees under the Plan
retained by it to improve its services to the brokerage community as well as to
the Fund's shareholder base. These
10
<PAGE>
included ongoing improvements to shareholder account statements, continued
enhancements and hours of service for the Fund's 800 number, and providing
ongoing sales support to retail dealers.
The Board discussed at length the potential benefits that could flow from the
anticipated higher level of sales and moderated redemption rates, and whether
the anticipated benefits justified the increased costs to the Fund. In doing so,
the Directors reviewed statistics on the Fund's expense ratios, the level to
which the ratios would increase as a result of the Plan, the level to which they
could possibly decline as assets increased over the base of fixed expenses, the
relationship of the expense to the overall expense ratio of each Series, and,
finally, how the overall expense ratio of each Series, after giving effect to
the Plan, would compare to expense ratios of funds within the competitive
universe of such Series. With respect to the portfolios that were currently
operating with very high ratios due to their small asset base, increased growth
was expected to measurably reduce these expenses. With respect to the remaining
portfolios, the expenses were also expected to decline, however, less
substantially. In terms of industry comparisons, the Fund's expense ratios,
particularly of its established portfolios, were expected to remain remain
competitive after installing the Plan, even prior to any impact from asset
growth.
THE BOARD, AFTER CONSIDERING THE ABOVE FACTORS, AGREED THAT THERE WAS A
LIKELIHOOD THAT THE PLAN WOULD BENEFIT THE FUND AND ITS SHAREHOLDERS AND AGREED
TO RECOMMEND APPROVAL OF THE PLAN TO THE CLASS A SHAREHOLDERS OF THE FUND.
The Board concluded that it is likely that the Plan will benefit the Fund by
enabling the Fund to maintain or increase its present asset base in the face of
current industry competition. In reaching its conclusion, the Board acknowledged
that brokers and financial intermediaries that sell the Fund's shares
increasingly have been called upon to provide services of value to the Fund's
shareholders, and that virtually all of the Fund's competitors had already
implemented a plan of distribution for payment for such services. The Board
noted that the Distributor was seeking implementation of the Plan primarily for
the purpose of compensating the Fund's distributors for ongoing distribution and
shareholder servicing efforts. It agreed that these services were valuable and
necessary for Fund shareholders, and determined that unless the Fund began
compensating its actual and targeted network of distributors for such efforts,
the Fund would lose market share to those funds which do compensate their
selling agents. The Plan also may stem redemptions and maintain an acceptable
level of redemptions going forward by countering the incentives dealers may
otherwise have to promote the transfer of assets from the Fund to competing
funds or alternative investment vehicles that do provide them with continuing
compensation. The Board concluded further that the expense of the Plan was
reasonable in light of the level and quality of the services to be received by
shareholders and the benefits anticipated to flow from the arrangement, such as
retaining assets and increasing new sales and net assets. In particular, the
Board considered that providing a more stable flow of new investment money is
desirable in part to prevent the potentially adverse effects of net redemptions,
as a result of which the Fund's portfolio managers may have to dispose of
securities for other than investment considerations. The Board also believes
that payments made pursuant to the Plan will be offset in part by economies of
scale associated with the potential growth of the Fund's assets.
In performing its analysis, the Directors recognized that there could be no
assurance that any of the potential benefits will be achieved if the Plan is
implemented, and that dealer compensation is constantly evolving. The Board will
review the Plan for continuing appropriateness in light of future changes in the
industry and the needs of the Fund and its shareholders.
11
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR APPROVAL OF THE
PLAN.
RELATED MATTERS
On July 7, 1992, the Securities and Exchange Commission approved amendments to
the National Association of Securities Dealers, Inc. ("NASD") Rules of Fair
Practice, Maximum Sales Charge Rule (the "Rule"), governing sales charges that
may be imposed on purchases of fund shares. The Rule subjects the payment of
12b-1 fees by mutual funds to certain limits which may vary depending on the
existence of other types of sales charges. At its current sales load level, the
maximum 12b-1 distribution fee that may be imposed by the Fund is 0.75% and the
maximum Service Fee is 0.25%. The Rule also imposes an overall sales charge
limit that takes into consideration the 12b-1 distribution fee (but excludes the
Service Fee) and the Fund's front end sales charge. The distribution fee under
the Plan, in combination with the sales load currently charged by the Fund, will
not exceed the limits of the Rule.
VOTE REQUIRED FOR APPROVAL
Approval of the Plan requires the affirmative vote of the holders of (i) 67% or
more of the Class A shares of each Series present and entitled to vote at the
Meeting, provided the holders of more than 50% of the outstanding Class A shares
of the Series are present or represented by proxy; or (ii) more that 50% of the
outstanding Class A shares of each Series, whichever is less.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR"
PROPOSAL ONE, AND ANY SIGNED BUT UNMARKED PROXIES
WILL BE VOTED IN FAVOR OF THE PROPOSAL
SUPPLEMENTAL INFORMATION
------------------------
INVESTMENT ADVISER; DISTRIBUTOR AND ADMINISTRATOR
The investment adviser of each Series of the Fund is GAM International
Management Limited, whose address is 12 St. James's Place, London SW1A 1NX,
England. Fayez Sarofim & Co. serves as co-investment adviser to GAM North
America Fund and is located at Two Houston Center, Suite 2907, Houston, Texas
77010. GAM Services, Inc. serves as the Fund's Distributor and is located at 135
East 57th Street, 25th Floor, New York, New York 10022. Brown Brothers Harriman
& Co. serves as the Fund's Administrator and is located at 40 Water Street,
Boston, Massachusetts 02109.
12
<PAGE>
SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of the Record Date, the officers and Directors of the Fund as a group
beneficially owned less than 1% of the outstanding Class A common stock of each
Series of the Fund.(1) To the knowledge of the Fund, the following persons owned
beneficially, 5% or more of the outstanding shares of the following Series:
<TABLE>
<CAPTION>
<S> <C>
GAM NORTH AMERICA FUND GAM ASIAN CAPITAL
1. Fayez Sarofim & Co. (36.8%) 1. S. M. Read (9%)
Two Houston Center, Ste. 2907 2000 5th Street
Houston, TX 77010 Berkeley, CA 94710-1918
2. S.W. Klein, Trustee (6%) 2. J.I. and M. Shrem (6.2%)
c/o Rothschild Bank AG c/o Rothschild Bank
Zollikerstrasse 181 Zollikerstrasse 181
CH-8034 Zurich Switzerland CH-8034 Zurich Switzerland
3. J.I. and M. Shrem (5.8%) 3. Wendel & Co. (6.7%)
c/o Rothschild Bank c/o Bank of New York
Zollikerstrasse 181 P.O. Box 1066, Wall St. Stat.
CH-8034 Zurich Switzerland New York, NY 10268
4.Infid & Co. (5.3%) 4. Gordon P. Getty Family Trust (5.9%)
c/o Bankers Trust c/o Global Asset Management (USA) Inc.
PO Box 9005 135 E. 57th Street
Church Street St. New York, NY 10022
New York, NY 10008
GAM EUROPE FUND
GAMERICA CAPITAL FUND
1. Gordon P. Getty Family Trust (10.7%)
c/o Global Asset Management (USA) Inc. 1. J.I. and M. Shrem (12.8%)
135 E. 57th Street c/o Rothschild Bank
New York, NY 10022 Zollikerstrasse 181
CH-8034 Zurich Switzerland
2. S. M. Read (7.2%)
2000 5th Street 2. Infid & Co. (11.8%)
Berkeley, CA 94710-1918 c/o Bankers Trust Co.
PO Box 9005, Church St. Stat.
3. Wendel & Co. (6.7%) New York, NY 10008
c/o The Bank of New York
P.O. Box 1066, Wall St. Stat. 3. S.W. Klein, Trustee (5.6%)
New York, NY 10268 c/o Rothschild Bank AG
Zollikerstrasse 181
GAM JAPAN FUND CH-8034 Zurich Switzerland
1. NAV LLC (13.7%) 4. P. Blum (5.4%)
650 Madison Avenue c/o United Overseas Bank
New York, NY 10022 AUAI Des Bergues 11
Case Postal 2280
2. Commerce Bank NA (5%) 1211 Geneve Switzerland
Cust. Foundation Partners
P.O. Box 13366
Kansas City, MO 64199-3366
</TABLE>
- ----------------
1 Mr. Gilbert de Botton, President and Director of the Company, may be deemed to
have shared voting or investment power over Shares owned by clients or
custodians or nominees for clients of Global Asset Management (USA) Inc., an
affiliate of the Fund's Adviser, or by employee benefit plans for the benefit of
employees of GAM or its affiliates, as a result of ownership interests in the
Fund's Adviser and its affiliates of which Mr. de Botton is a potential
beneficiary. Mr. de Botton disclaims beneficial ownership of such shares.
13
<PAGE>
SHAREHOLDER PROPOSALS
The Fund does not ordinarily hold annual meetings of shareholders. Any
shareholder desiring to submit proposals for inclusion in a proxy statement for
a subsequent shareholder meeting should send written proposals to the Fund at
GAM Funds, Inc., 135 East 57th Street, New York, NY 10022, attention, Corporate
Secretary.
OTHER MATTERS
Management does not know of any matters to be presented at the Special Meeting
other than those stated and described in this Proxy Statement. If any other
business should come before the meeting, the proxies will vote thereon in
accordance with their best judgment.
If you cannot attend the Special Meeting in person, please complete and sign the
enclosed proxy and return it in the envelope provided so that the meeting may be
held and action taken on the matters described herein with the greatest possible
number of shares participating.
By Order of the Board of Directors
Lisa M. Hurley
Secretary
New York, New York
Dated: August , 1996
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, SHAREHOLDERS WHO
DO NOT EXPECT TO ATTEND THE SPECIAL MEETING IN PERSON ARE URGED TO COMPLETE,
SIGN, DATE AND RETURN THE PROXY CARD IN THE ENCLOSED STAMPED ENVELOPE.
14
<PAGE>
EXHIBIT A
GAM FUNDS, INC.
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
CLASS A SHARES
WHEREAS, GAM Funds, Inc. (the "Fund") is an open-end management investment
company and is registered as such under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Fund desires to adopt a Plan of Distribution pursuant to Rule 12b-1
under the 1940 Act with respect to shares of its Class A common stock, par value
$0.001 per share (the "Class A Shares"), of each series of the Fund (the
"Series"), and the Board of Directors has determined that there is a reasonable
likelihood that adoption of the Plan will benefit each Series and its
stockholders; and
WHEREAS, pursuant to a Distribution Agreement, the Fund employs GAM Services
Inc. (the "Distributor") as distributor for the continuous offering of Class A
Shares.
NOW, THEREFORE, the Fund hereby adopts a Plan of Distribution on the terms set
forth below (the "Plan").
1. The Fund and each Series shall pay to the Distributor, as distributor of the
Class A Shares, or any successor of the Distributor authorised to act as
distributor for the Fund, compensation for distribution of the Class A Shares at
the annual rate of .30% of the average daily value of the net assets of each
Series attributable to the Class A Shares. The amount of such compensation shall
be calculated and accrued daily and paid monthly or at such other intervals as
the Board of Directors and the Distributor shall mutually agree.
2. The amount set forth in Paragraph 1 of this Plan shall be paid for the
Distributor's services as distributor of the Class A Shares. Such amount may be
spent by the Distributor on any activities or to pay any expenses primarily
intended to result in the sale of Class A Shares, including, but not limited to,
compensation to and expenses of employees of the Distributor who engage in or
support distribution of the Class A Shares, including overhead and telephone
expenses of such employees; printing of prospectuses and reports for other than
existing shareholders; preparation, printing and distribution of sales
literature and advertising materials; compensation to broker/dealers who sell
Class A Shares; and such other similar services that the Directors determine are
reasonably calculated to result in sales of Class A Shares of the Fund; provided
however, that any portion of such amount paid to the Distributor, which portion
shall be equal to or less than 0.25% annually of the average daily net assets of
the Fund's Class A Shares, may represent compensation for personal service to
shareholders and/or maintenance of shareholder accounts (the "Service Fee"). The
Distributor may negotiate with selling broker/dealers for distribution and
personal services to be provided by the broker/dealer to investors and
shareholders in connection with the sale and holding of Class A Shares, and all
or any portion of the compensation paid to the Distributor under Paragraph 1 of
this Plan may be reallocated by the Distributor to broker/dealers who sell Class
A Shares in the form of distribution fees or a combination of Service Fees and
distribution fees.
3. This Plan shall not take effect with respect to any Series until it has been
approved by a vote of at least a majority (as defined in the 1940 Act) of the
outstanding Class A Shares of such Series.
4. In addition to the approval required by paragraph 3 above, the Plan shall not
take effect with respect to each Series until it has been approved, together
with any related agreements, by votes of a majority of both (a) the Board of
Directors of the Fund and (b) those Directors of the Fund who are not
"interested persons" of the Fund (as defined in the 1940 Act) and have no direct
or indirect financial interest in the operation of this Plan or any agreements
related to it (the "Rule 12b-1 Directors") cast in person at a meeting (or
meetings) called for the purpose of voting on this Plan and such related
agreements.
15
<PAGE>
5. This Plan shall continue in effect for one year from the date of its
adoption, and thereafter the Plan shall continue in effect for so long as such
continuance is specifically approved at least annually in the manner provided
for approval of this Plan in Paragraph 4.
6. At least quarterly in each year that this Plan remains in effect, the Fund's
Principal Accounting Officer or Treasurer, or such other person authorised to
direct the disposition of monies paid or payable by each Fund, shall, with the
assistance of the Distributor, prepare and furnish to the Board of Directors of
the Fund, for their review, a written report of the amounts expended pursuant to
this Plan and the purposes for which such expenditures were made, including
payment of commissions, advertising, printing, and interest expense, carrying
charges and allocated overhead expenses.
7. All amounts expended under this Plan for the benefit of the Class A Shares of
a specific Series as to which this Plan is effective will be charged to the
Class A Shares of the Series, and any expenses pursuant to this Plan which are
deemed by the Board of Directors of the Fund to benefit all such Series equally
will be charged to the Class A Shares of each such Series on the basis of the
net asset value of the Class A Shares of such Series in relation to the net
asset value of all of the outstanding Class A Shares of the Fund.
8. This Plan may be terminated with respect to the Class A Shares of any Series
at any time by vote of a majority of the Rule 12b-1 Directors, or by a vote of a
majority of the outstanding Class A shareholders of such Series.
9. This Plan may be amended at any time by the Board of Directors of the Fund,
provided that any amendment to increase materially the amount to be expended by
any Series of the Fund for distribution shall be effective only upon approval by
shareholders of such Series of such amendment in the manner provided for initial
approval in Paragraph 3 hereof, and any material amendments to the Plan shall be
effective only upon approval by the Directors in the manner provided for
approval on annual renewal in Paragraphs 4 and 5 hereof.
10. While this Plan is in effect, the selection and nomination of Directors who
are not interested persons (as defined in the 1940 Act) of the Fund shall be
committed to the discretion of the then current Directors who are not interested
persons (as defined in the 1940 Act) of the Fund.
11. Any agreement related to this Plan shall provide (i) that such agreement may
be terminated with respect to the Class A Shares of any Series at any time,
without payment of any penalty, by vote of a majority of the outstanding voting
securities of such Series, on not more than sixty (60) days' written notice to
any other party to the agreement; and (ii) that such agreement shall terminate
automatically in the event of its assignment.
12. In the event of an exchange between Series of the Fund, the Series into
which the assets are transferred may adjust its remaining account balance of
12b-1 carryforwards in a manner consistent with adjustments for new sales;
provided however, that the Series from which such balance is "transferred" has a
sufficient remaining balance and such arrangement is otherwise conducted in
accordance with Section 26(d)(2)(D) of the NASD's Rules of Fair Practice and the
carryforward arrangement is implemented in accordance with this Plan.
13. The Fund shall preserve copies of this Plan and any related agreements and
all reports made pursuant to Paragraph 6 hereof for a period of not less than
six (6) years from the date of the Plan, such agreements or such reports, as the
case may be, the first two (2) years in an easily accessible place.
GAM FUNDS, INC.
Dated:__________________________ By:_______________________________
Title:_______________________________
16
<PAGE>
GAM FUNDS, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of GAM Funds, Inc., a Maryland corporation
(the "Company"), hereby appoints Kevin J. Blanchfield and Lisa M. Hurley and
each of them, with full power of substitution and revocation, the true and
lawful proxies to represent the undersigned, to vote on behalf of the
undersigned all shares of the Company which the undersigned is entitled to vote
at the Special Meeting of Shareholders of the Company to be held on October 1,
1996 at 10:00 A.M. and at any adjournments thereof, hereby revoking any proxy
heretofore given with respect to such shares, and the undersigned authorizes and
instructs said proxies to vote as indicated on the reverse side hereof.
PLEASE SIGN, DATE AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED POSTAGE PAID
ENVELOPE.
If you expect to attend the meeting, please check box. / /
Signature(s) should be exactly as name or names appearing on this proxy. If
stock is held jointly, each holder should sign. If signing is by an officer,
attorney, executor, administrator, trustee or guardian, please give full title
or indicate representative capacity in which you are signing.
Dated____________________________, 1996
_______________________________________
Signature(s)
_______________________________________
Signature(s)
<PAGE>
THE SHARES REPRESENTED HEREBY WILL BE VOTED IN ACCORDANCE WITH THE
SPECIFICATIONS HEREIN, BUT WHERE SPECIFICATIONS ARE NOT INDICATED, THIS PROXY
WILL BE VOTED FOR PROPOSAL ONE AND IN THE DISCRETION OF THE PROXIES NAMED HEREIN
WITH RESPECT TO ALL OTHER MATTERS (INCLUDING WITHOUT LIMITATION, ADJOURNMENTS)
PROPERLY COMING BEFORE THE MEETING, ALL IN ACCORDANCE WITH THE PROXY STATEMENT
OF THE FUND, RECEIPT OF WHICH IS HEREBY ACKNOWLEDGED. (This proxy may be revoked
at any time before the Meeting).
PLEASE MARK BOXES IN BLUE OR BLACK INK. [ID OF SERIES]
1. Proposal to approve a Plan of Distribution FOR AGAINST ABSTAIN
for the Class A Shares of the Series; / / / / / /
And, in their discretion, the proxies are authorized to vote upon such
other business as may properly come before the Meeting.
