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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
---
Pre-Effective Amendment No. ______ /___/
Post-Effective Amendment No. 27 / X /
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X /
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Amendment No. 30
GAM FUNDS, INC.
---------------
(Exact Name of Registrant as Specified in Charter)
135 East 57th Street, New York, New York 10022
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(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (212) 407-4600
GAM FUNDS, INC. Copy to:
135 East 57Th Street, James B. Sitrick, Esq.
New York, New York 10022 Coudert Brothers
(Name and Address of Agent for Service) 1114 Avenue of the Americas
New York, New York 10036
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: Effective date of this
Post-Effective Amendment.
It is proposed that this filing will become effective (check appropriate box)
|X| immediately upon filing pursuant to paragraph (b)
|_| on (date) pursuant to paragraph (b)
|_| 60 days after filing pursuant to paragraph (a)(i)
|_| on (date) pursuant to paragraph (a)(i)
|_| 75 days after filing pursuant to paragraph (a)(ii)
|_| on (date) pursuant to paragraph (a)(ii) of rule 485.
If appropriate, check the following box:
|_| this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
DECLARATION PURSUANT TO RULE 24f-2
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, as amended, the
Registrant has registered an indefinite number or amount of securities under the
Securities Act of 1933. The Rule 24f-2 Notice for the Registrant's fiscal year
ended December 31, 1995 was filed on February 26, 1996.
Page 1 of ___ pages
INDEX TO EXHIBITS APPEARS ON PAGE ____
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<PAGE>
GAM FUNDS, INC.
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Contents
--------
This Registration Statement on Form N-1A consists of the following:
1. Facing Sheet
2. Cross-Reference Sheet
3. Part A - Prospectus
4. Part B - Statement of Additional Information
5. Part C - Other Information
6. Signature Sheet
<PAGE>
GAM FUNDS, INC.
---------------
Cross-Reference Sheet pursuant to Rule 495(a)
---------------------------------------------
Form N-1A
Item No.
- ---------
Part A Heading in Prospectus
- ------ ---------------------
1. Cover Page Cover Page
2. Synopsis Expenses; Summary
3. Condensed Financial Information Financial Highlights
4. General Description of Investment Objective and
Registrant Policies and Risk Considerations
5. Management of the Fund Management of the Company; Net Asset
Value, Dividends and
Taxes
6. Capital Stock and Other Description of Shares;
Securities Net Asset Value,
Dividends and Taxes;
Additional Information
7. Purchase of Securities Purchase of Shares; Net
Being Offered Asset Value, Dividends
and Taxes; Management
of the Company
8. Redemption or Repurchase Redemption of Shares
9. Pending Legal Proceedings N.A.
Part B Heading in Statement of
- ------ Additional Information
----------------------
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and Change of Name
History
13. Investment Objectives and Investment Objective and
Policies Policies and Risk Considerations
<PAGE>
Form N-1A Heading in Statement
Item No. of Additional Information
- --------- -------------------------
14. Management of the Fund Management of the Company
15. Control Persons and Principal Management of the
Holders of Securities Company; Investment
Advisory and Other
Services
16. Investment Advisory and Investment Advisory and
Other Services Other Services
17. Brokerage Allocation Brokerage Allocation
18. Capital Stock and Other Investment Objective and
Securities Policies and Risk Considerations
19. Purchase, Redemption and Net Asset Value,
Pricing of Securities Dividends and Taxes;
Being Offered Investment Advisor and
Other Services
20. Tax Status Net Asset Value,
Dividends and Taxes
21. Underwriters Investment Advisory
and Other Services
22. Calculation of Performance Performance Information
Data
23. Financial Statements Financial Statements
Part C
- ------
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Registration Statement
on Form N-1A.
<PAGE>
GLOBAL ASSET MANAGEMENT(R)
GAM FUNDS, INC.
GAM Funds, Inc. (the "Company") is a diversified open-end management investment
company which offers investors the opportunity to invest in several different
portfolios investing primarily in equity securities - GAM Global Fund, GAM
International Fund, GAM Pacific Basin Fund, GAM Japan Capital Fund, GAM Asian
Capital Fund, GAM Europe Fund, GAM North America Fund, GAM Mid-Cap U.S. Fund and
GAMerica Capital Fund (the "Funds").
PROSPECTUS
DATED APRIL 30, 1996
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED COMMENT UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
This Prospectus sets forth concisely information a prospective investor should
know about each GAM Fund before investing. Investors are advised to read and
retain this Prospectus for future reference. The Company has filed a Statement
of Additional Information, dated April 30, 1996, with the Securities and
Exchange Commission. Such Statement is incorporated by reference in this
Prospectus, and is available without charge upon request at the address and
telephone numbers indicated below.
GAM FUNDS, INC.
135 East 57th Street, New York, NY 10022
Tel: (212) 407-4600 Fax: (212) 407-4684
Internet: [email protected]
GAM(R)
<PAGE>
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TABLE OF CONTENTS
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Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Investment Objectives and Policies and Risk Considerations . . . . . . . . 19
Purchase of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Redemption of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Exchanges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Net Asset Value, Dividends and Taxes . . . . . . . . . . . . . . . . . . . 35
Management of the Funds . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Description of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Purchase Application . . . . . . . . . . . . . . . . . . . . . . . Back Cover
- ----------------------------------------1---------------------------------------
<PAGE>
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SUMMARY
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INVESTMENT OBJECTIVE AND POLICIES
Each Fund seeks long-term capital appreciation by investing primarily in
equity securities. There is no assurance that each of the Funds will
achieve its investment objective.
GAM GLOBAL FUND - Investing primarily in securities of companies in the
United States, Europe, the Pacific Basin and Canada.
GAM INTERNATIONAL FUND - Investing primarily in securities of companies in
Europe, the Pacific Basin and Canada.
GAM PACIFIC BASIN FUND - Investing primarily in securities of companies in
the Pacific Basin, including Japan, Hong Kong, Korea, Taiwan, Singapore,
Thailand, Indonesia, Malaysia and Australia.
GAM JAPAN CAPITAL FUND - Investing primarily in securities of companies in
Japan.
GAM ASIAN CAPITAL FUND - Investing primarily in securities of companies in
Asia excluding Japan.
GAM EUROPE FUND - Investing primarily in securities of companies in Europe.
GAM NORTH AMERICA FUND - Investing primarily in securities of companies in
the United States and Canada.
GAMERICA CAPITAL FUND - Investing primarily in securities of companies in
the United States.
GAM MID-CAP U.S. FUND - Investing primarily in securities of companies in
the United States with medium market capitalizations.
Each Fund may invest in debt securities if it is determined that long-term
capital appreciation of debt securities may equal or exceed the return on
equity securities. Each Fund may also enter into forward foreign exchange
contracts, trade in options and futures contracts and engage in other
investment practices as described in greater detail below under "Investment
Objective and Policies".
PRINCIPAL RISKS
GAM International, Europe, Pacific Basin, Asian Capital and Japan Capital
Funds will invest primarily in securities of foreign issuers, and GAM
Global, North America and Mid-Cap U.S. Funds will invest in securities of
foreign issuers as well as in securities of United States issuers.
Generally, investments in securities of foreign issuers involve greater
risks than investments in United States issuers. Securities of some foreign
issuers are less liquid, and their prices more volatile, than securities of
United States issuers. In some foreign countries there is a risk of
political instability, expropriation, or other developments which may
adversely affect a Fund's investments. Investments in securities
denominated in foreign currencies may be affected favorably or unfavorably
by changes in currency exchange rates. GAM Mid-Cap U.S. Fund will invest
primarily in small to medium sized companies which are more vulnerable to
financial risks than larger companies. Borrowing by the Funds, also known
as leverage, will tend to exaggerate the effect on the net asset value of
the Fund's shares of any increase or decrease in the market value of the
Fund's assets. Trading in options and futures
- ----------------------------------------2---------------------------------------
<PAGE>
contracts and the purchase of higher yielding debt instruments also
involves risks described below under "Risk Considerations".
INVESTMENT ADVISERS
GAM International Management Limited is part of the Global Asset Management
(GAM) Group of companies, an international investment advisory organization
with approximately $8.5 billion under management and offices or affiliates
in Bermuda, New York, London, Zurich, Hong Kong, Singapore, Edinburgh,
Dublin and the Isle of Man.
GAM International Management Limited Tel: 011-44-(171) 493-9990
12 St James's Place Fax: 011-44-(171) 493-0715
London SW1A 1NX
Fayez Sarofim & Co., which acts as co-investment adviser for GAM North
America Fund, is based in Houston, Texas and manages aggregate assets of
approximately $30 billion.
Fayez Sarofim & Co. Tel: (713) 654-4484
Suite 2907, Two Houston Center Fax: (713) 654-8184
Houston, TX 77010
Forstmann-Leff Associates Inc., which acts as co-investment adviser for GAM
Mid-Cap U.S. Fund, is based in New York, New York and manages aggregate
assets of approximately $2.7 billion.
Forstmann-Leff Associates Inc. Tel: (212) 644-9888
55 East 52nd Street Fax: (212) 407-9651
New York, NY 10055
TRANSFER AGENT
Chase Global Funds Services Company Tel: (617) 557-8000 x6610
73 Tremont Street (800) 356-5740 (toll free)
Boston, Massachusetts 02108 Fax: (617) 557-8698
CUSTODIAN AND ADMINISTRATOR
Brown Brothers Harriman & Co.
40 Water Street
Boston, Massachusetts 02109
AUDITORS
Coopers & Lybrand L.L.P.
1301 Avenue of the Americas
New York, New York 10019
ATTORNEYS
Coudert Brothers
1114 Avenue of the Americas
New York, New York 10036
- ----------------------------------------3---------------------------------------
<PAGE>
DIVIDENDS AND DISTRIBUTIONS
Each Fund distributes annually all of its net investment income and net
realized capital gains. Dividends and distributions may be reinvested
automatically without a sales load.
EXCHANGE PRIVILEGE
Shares of each Fund may be exchanged without a sales load for shares of any
other Fund.
MINIMUM INVESTMENT
$10,000 ($2,000 for IRA accounts)
SUBSEQUENT INVESTMENTS
$1,000 ($500 for IRA accounts)
OTHER FEATURES
Statement of Intention
Right of Accumulation
Redemptions or exchanges by telephone or facsimile
Automatic investment and systematic withdrawal plans
Information about how to purchase and redeem shares appears under "Purchase
of Shares" and "Redemption of Shares." Purchases of shares may be subject
to a sales load of up to 5% of the purchase price.
- ----------------------------------------4---------------------------------------
<PAGE>
<TABLE>
<CAPTION>
EXPENSES
- --------------------------------------------------------------------------------
PACIFIC NORTH
INTERNATIONAL GLOBAL BASIN EUROPE AMERICA
C1.A C1.D C1.A C1.D C1.A C1.D C1.A C1.D C1.A C1.D
SHAREHOLDER TRANSACTION
EXPENSES
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Maximum Sales Load Imposed on
Purchases (as a percentage of
offering price)1 5% 3.5% 5% 3.5% 5% 3.5% 5% 3.5% 5% 3.5%
ANNUAL FUND OPERATING
EXPENSES
(as a percentage of average net
assets)
Management Fees (after expense
reimbursement)2 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 0.71% 0.71%
Rule 12b-1 Fees 3 0% 0.40% 0% 0.40% 0% 0.40% 0% 0.40% 0% 0.40%
Other Expenses 4 0.57% 0.82% 1.16% 1.41% 0.98% 1.23% 1.12% 1.37% 2.27% 2.52%
Total Fund Operating Expenses 1.57% 2.22% 2.16% 2.81% 1.98% 2.63% 2.12% 2.77% 2.98% 3.63%
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
JAPAN GAMERICA ASIAN MID-CAP
CAPITAL CAPITAL CAPITAL U.S.
Cl.A Cl.D Cl.A Cl.D Cl.A Cl.D Cl.A Cl.D
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Maximum Sales Load Imposed on
Purchases (as a percentage of
offering price)1 5% 3.5% 5% 3.5% 5% 3.5% 5% 3.5%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net
assets)
Management Fees (after
expense reimbursement)2 0% 0% 0% 0% 0.16% 0.16% 1.00% 1.00%
Rule 12b-1 Feess 3 0% 0.40% 0% 0.40% 0% 0.40% 0% 0.40%
Other Expenses 4 3.61% 3.86% 3.73% 3.98% 2.95% 3.20% 0.99% 1.34%
Total Fund Operating Expenses 3.61% 4.26% 3.73% 4.38% 3.11% 3.76% 1.99% 2.74%
===== ===== ===== ===== ===== ===== ===== =====
- --------------------------------------------------------------------------------
</TABLE>
Class D shares are currently available only for GAM International Fund, GAM
Global Fund and GAM Pacific Basin Fund. Class D shares may become available for
other Funds in the future. Expenses for the Class D shares not yet offered are
estimated.
- ----------------------------------------5---------------------------------------
<PAGE>
<TABLE>
<CAPTION>
EXAMPLE
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PACIFIC NORTH
INTERNATIONAL GLOBAL BASIN EUROPE AMERICA
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cl.A Cl.D Cl.A Cl.D Cl.A Cl.D Cl.A Cl.D Cl.A Cl.D
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:
1 Year $ 65 $ 57 $ 71 $ 62 $ 69 $ 61 $ 70 $ 62 $ 79 $ 70
3 Year $ 97 $102 $114 $119 $109 $114 $113 $118 $138 $142
5 Year $131 $150 $160 $178 $151 $170 $158 $176 $199 $216
10 year $227 $281 $287 $338 $269 $321 $283 $334 $363 $410
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
JAPAN GAMERICA ASIAN MID-CAP
CAPITAL CAPITAL CAPITAL U.S.
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cl.A Cl.D Cl.A Cl.D Cl.A Cl.D Cl.A Cl.D
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:
1 Year $ 85 $ 76 $ 86 $ 77 $ 80 $ 72 $ 69 $ 62
3 Year $155 $160 $158 $163 $ 41 $146 $109 $117
5 Year $226 $243 $232 $249 $204 $222 $152 $175
10 year $411 $455 $416 $460 $368 $414 $270 $331
- --------------------------------------------------------------------------------
</TABLE>
The preceding table is included to help investors understand the various costs
and expenses that will be incurred either directly by investors or indirectly by
each Fund. The information provided is based on estimated future expenses. The
table and the example 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
1 The sales load will be reduced for investments of $100,000 or more and may be
waived for certain investors, as described below under "Purchase of Shares -
Offering Price".
2 In the absence of the expense reimbursement, the management fee for GAM North
America Fund, GAM Japan Capital Fund, GAMerica Capital Fund, and GAM Asian
Capital Fund would be 1.0%, resulting in total expenses of 3.27% and 3.92% for
GAM North America Class A and D shares, respectively; 4.61% and 4.26% for GAM
Japan Capital Class A and D shares, respectively; 4.73% and 5.38% for GAMerica
Capital Class A and D shares, respectively; and 3.95% and 4.60% for GAM Asian
Capital Fund Class A and D shares, respectively.
3 12b-1 fees for Class D shares were introduced in 1995.
- ----------------------------------------6---------------------------------------
<PAGE>
4. Other expenses include custodian, transfer agent, administrative, legal and
accounting fees and expenses. Certain administrative expenses were introduced in
1995. The Funds' expense ratios may be higher than those of most registered
investment companies since the cost of maintaining custody of foreign securities
is higher than those for most domestic funds and the rate of the advisory fee
paid by each Fund exceeds that of most registered investment companies. These
expenses are estimated for GAM Mid-Cap U.S. Fund and for the Class D shares of
all funds other than GAM International, GAM Global and GAM Pacific Basin Funds
which have not yet commenced operations.
- ----------------------------------------7---------------------------------------
<PAGE>
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FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following tables containing selected financial information for the Funds
have been audited by McGladrey & Pullen, LLP, certified public accountants, for
the periods indicated in their report, which is incorporated by reference, and
which appears in the 1995 Annual Report to Shareholders of the Funds. Class D
shares were offered commencing September 5, 1995. Copies of the Annual Report
will be provided at no charge upon request.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
GAM INTERNATIONAL FUND
For the Periods
<S> <C> <C> <C> <C> <C> <C>
01-Jan-95 05-Sep-95+ 01-Jan-94 01-Jan-93 01-Jan-92 01-Jan-91
to to to to to to
31-Dec-95 31-Dec-95 31-Dec-94 31-Dec-93 31-Dec-92 31-Dec-91
Class A Class D Class A Class A Class A Class A
PER SHARE OPERATING PERFORMANCE
(for a share outstanding
throughout the period)***
Net asset value
Beginning of period $17.21 $20.46 $23.90 $14.56 $14.86 $12.87
------ ------ ------ ------ ------ ------
Income from investment operations
Net investment income 0.52 0.10 0.34 0.25 0.71 0.36
Net realized and unrealized
gain/(loss) on investments 4.64 1.78 (2.58) 10.38 (0.28) 1.64
---- ---- ----- ----- ----- ----
Total from investment operations 5.16 1.88 (2.24) 10.63 0.43 2.00
---- ---- ----- ----- ---- ----
Less distributions
Dividends from net
investment income (0.47) (0.46) (0.66) (0.34) (0.43) (0.01)
Distributions from net realized gains (0.53) (0.53) (3.79) (0.95) (0.30) --
----- ----- ----- ----- ----- -----
Total distributions (1.00) (0.99) (4.45) (1.29) (0.73) (0.01)
----- ----- ----- ----- ----- -----
Net asset value
End of period $21.37 $21.35 $17.21 $23.90 $14.56 $14.86
====== ====== ====== ====== ====== ======
TOTAL RETURN
(without deduction of sales load) 30.09% **9.26% (10.23%) 79.96% 3.08% 15.56%
RATIOS/SUPPLEMENTAL DATA:
Net assets,, end of period (000
omitted) $560,234 $8,714 $158,336 $80,776 $41,032 $40,355
Ratios to average net assets:
Expenses 1.57% *2.22% 1.60% 1.99% 2.03% 2.11%
Net investment income 3.89% *1.90% 2.74% 2.28% 4.85% 3.25%
Portfolio turnover rate 34.97% 34.97% 110.48% 98.45% 109.16% 160.67%
BANK LOANS
Amount outstanding at end of period
(000 omitted) -- -- -- $9,557 $2,743 --
Average amount of bank loans
outstanding during the period
(000 omitted) -- -- -- $2,042 $901 --
Average number of shares
outstanding during the period
(monthly average) (000 omitted) -- -- -- 270 279 --
Average amount of debt per share
during the period -- -- -- $7.56 $3.23 --
</TABLE>
* Annualized
** Not annualized
- ----------------------------------------8---------------------------------------
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
For the Periods
<S> <C> <C> <C> <C> <C>
01-Jan-90 01-Jan-89 01-Jan-88 01-Jan-87 01-Jan-86
to to to to to
31-Dec-90 31-Dec-89 31-Dec-88 31-Dec-87 31-Dec-86
Class A Class A Class A Class A Class A
PER SHARE OPERATING PERFORMANCE
(for a share outstanding
throughout the period)***
Net asset value
Beginning of period $17.02 $14.81 $13.29 $21.91 $15.92
------ ------ ------ ------ ------
Income from investment operations
Net investment income 0.17 0.03 0.04 0.11 0.13
Net realized and unrealized
gain/(loss) on investments (1.41) 3.21 2.72 2.38 7.10
----- ---- ---- ---- ----
Total from investment operations (1.24) 3.24 2.76 2.49 7.23
---- ---- ----- ----- ----
Less distributions
Dividends from net
investment income -- -- (0.06) (0.23) --
Distributions from net realized gains (2.91) (1.03) (1.18) (10.88) (1.24)
----- ----- ----- ----- -----
Total distributions (2.91) (1.03) (1.24) (11.11) (1.24)
----- ----- ----- ----- -----
Net asset value
End of period $12.87 $17.02 $14.81 $13.29 $21.91
====== ====== ====== ====== ======
TOTAL RETURN
(without deduction of sales load) (7.30%) 22.46% 21.51% 12.05% 47.51%
RATIOS/SUPPLEMENTAL DATA:
Net assets,, end of period (000
omitted) $23,450 $20,573 $19,638 $21,167 $24,987
Ratios to average net assets:
Expenses 2.30% 2.74% 2.76% 2.23% 1.81%
Net investment income 1.32% 0.19% 0.27% 0.38% 0.66%
Portfolio turnover rate 253.89% 32.52% 22.86% 79.58% 81.50%
BANK LOANS
Amount outstanding at end of period
(000 omitted) -- -- -- -- --
Average amount of bank loans
outstanding during the period
(000 omitted) -- -- -- -- --
Average number of shares
outstanding during the period
(monthly average) (000 omitted) -- -- -- -- --
Average amount of debt per share
during the period -- -- -- -- --
</TABLE>
*** Per share amounts for years ended prior to December 31, 1995 have been
restated to reflect a 10-for-1 stock split effective December 19, 1995
+ Commencement of offering
- ----------------------------------------9---------------------------------------
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
GAM GLOBAL FUND
For the Periods
<S> <C> <C> <C> <C> <C> <C>
01-Jan-95 05-Sep-95 01-Jan-94 01-Jan-93 01-Jan-92 01-Jan-91
to to to to to to
31-Dec-95 31-Dec-95 31-Dec-94 31-Dec-93 31-Dec-92 31-Dec-91
Class A Class D Class A Class A Class A Class A
PER SHARE OPERATING PERFORMANCE
(for a share outstanding
throughout the period)***
Net asset value
Beginning of period $10.60 $13.46 $17.92 $10.33 $11.37 10.28
------ ------ ------ ------ ------ -----
Income from investment operations
Net investment income 0.35 -- 0.19 0.24 0.64 0.28
Net realized and unrealized
gain/(loss) on investments 3.48 0.92 (2.94) 7.46 (1.15) 0.81
----- ---- ---- ---- ---- ----
Total from investment operations 3.83 0.92 (2.75) 7.70 (0.51) 1.09
---- ---- ----- ----- ---- ----
Dividends from net
investment income (0.30) (0.28) (0.49) (0.11) (0.28) --
Distributions from net realized gains (0.62) (0.62) (4.08) -- (0.25) --
----- ----- ----- ----- ----- ----
Total distributions (0.92) (0.90) (4.57) (0.11) (0.53) --
----- ----- ----- ----- ----- ----
Net asset value
End of period $13.51 $13.48 $10.60 $17.92 $10.33 $11.37
====== ====== ====== ====== ====== ======
TOTAL RETURN
(without deduction of sales load) 36.25% **6.97% (16.15%) 75.30% (4.65%) 10.61%
RATIOS/SUPPLEMENTAL DATA:
Net assets
end of period
(000 omitted) $26,161 $295 $19,940 $33,416 $19,763 $23,990
Ratios to average net assets:
Expenses 2.16% *2.81% 2.29% 2.68% 2.37% 2.33%
Net investment
income/(loss) 2.96% *(0.09%) 0.91% 1.88% 5.25% 2.20%
Portfolio turnover rate 60.18% 60.18% 123.33% 106.73% 118.41% 180.52%
BANK LOANS
Amount outstanding at end of period
(000 omitted) -- -- -- $2,165 $9,010 --
Average amount of bank loans
outstanding during the period
(000 omitted) -- -- -- $2,600 $1,401 --
Average number of shares
outstanding during the period
(monthly average) (000 omitted) -- -- -- 178 213 --
Average amount of debt per share
during the period -- -- -- $14.77 $6.59 --
</TABLE>
- ---------------------------------------10---------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
For the Periods
<S> <C> <C> <C> <C> <C>
01-Jan-90 01-Jan-89 01-Jan-87 01-Jan-87 ++28-May-86
to to to to to
31-Dec-90 31-Dec-89 31-Dec-88 31-Dec-87 31-Dec-86
Class A Class A Class A Class A Class A
PER SHARE OPERATING PERFORMANCE
(for a share outstanding
throughout the period)***
Net asset value
Beginning of period $13.14 $11.08 $ 9.26 $10.47 $10.00
------ ------ ------ ------ ------
Income from investment operations
Net investment income 0.06 0.04 (0.01) 0.12 (0.01)
Net realized and unrealized
gain/(loss) on investments (1.54) 2.56 2.25 (0.38) 0.48
----- ---- ---- ---- ----
Total from investment operations (1.48) 2.60 2.24 (0.26) 0.47
---- ---- ----- ----- ----
Dividends from net
investment income -- (0.03) -- (0.12) --
Distributions from net realized gains (1.38) (0.51) (0.42) (0.83) --
----- ----- ----- ----- -----
Total distributions (1.38) (0.54) (0.42) (0.95) --
----- ----- ----- ----- -----
Net asset value
End of period $10.28 $13.14 $11.08 $ 9.26 $10.47
====== ====== ====== ====== ======
TOTAL RETURN
(without deduction of sales load) (11.26%) 24.20% 25.04% (2.47%) **4.69%
RATIOS/SUPPLEMENTAL DATA:
Net assets
end of period
(000 omitted) $23,577 $22,794 $17,805 $18,229 $15,727
Ratios to average net assets:
Expenses 2.45% 2.68% 2.94% 2.09% *2.72%
Net investment
income/(loss) 0.58% 0.36% (0.05%) 0.90% *(0.19%)
Portfolio turnover rate 250.46% 31.28% 34.09% 67.35% 0.00%
BANK LOANS
Amount outstanding at end of period
(000 omitted) -- -- -- $1,900 --
Average amount of bank loans
outstanding during the period
(000 omitted) -- -- -- $158 --
Average number of shares
outstanding during the period
(monthly average) (000 omitted) -- -- -- 220 --
Average amount of debt per share
during the period -- -- -- $0.72 --
</TABLE>
* Annualized
** Not annualized
*** Per share amounts for periods ended prior to December 31, 1995 have been
restated to reflect a 10-for-1 stock split effective December 19, 1995
+ Commencement of offering
++ Commencement of operations
- ---------------------------------------11---------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
GAM PACIFIC BASIN FUND
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
For the Periods
<S> <C> <C> <C> <C> <C>
01-Jan-95 05-Sep-95+ 01-Jan-94 01-Jan-93 01-Jan-92
to to to to to
31-Dec-95 31-Dec-95 31-Dec-94 31-Dec-93 31-Dec-92
Class A Class D Class A Class A Class A
PER SHARE OPERATING PERFORMANCE
(for a share outstanding
throughout the period)***
Net asset value
Beginning of period $17.62 $17.36 $19.20 $13.14 $13.77
------ ------ ------ ------ ------
Income from investment operations
Net investment income
income/(loss) - (0.02) (0.05) (0.03) 0.01
Net realized and unrealized gain/(loss)
on investments 0.61 0.26 1.36 6.57 (0.06)
----- ---- ---- ---- ------
Total from investment operations 0.61 0.24 1.31 6.54 (0.05)
----- ---- ---- ---- ------
Less distributions
Dividends from net
investment income - - - (0.04) (0.09)
Distributions from net realized gains (1.26) (0.64) (2.89) (0.44) (0.49)
------ ----- ------ ----- ------
Total distributions (1.26) (0.64) (2.89) (0.48) (0.58)
------ ----- ------ ----- ------
Net asset value
End of period $16.97 $16.96 $17.62 $19.20 $13.14
====== ====== ====== ====== ======
TOTAL RETURN
(without deduction of sales load) 4.50% **2.35% 7.41% 51.52% (0.37%)
RATIOS/SUPPLEMENTAL DATA:
Net assets
end of period
(000 omitted) $53,944 $1,547 $48,527 $40,719 $28,206
Ratios to average net assets:
Expenses 1.98% *2.63% 1.78% 1.93% 2.03%
Net investment
income/(loss) (0.07%) *(1.49%) (0.35%) (0.29%) 0.09%
Portfolio turnover rate 64.01% 64.01% 29.11% 91.07% 74.78%
- --------------------------------------------------------------------------------
</TABLE>
- ---------------------------------------12---------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Periods
<S> <C> <C> <C> <C> <C>
01-Jan 91 01-Jan-90 01-Jan-89 01-Jan-88 ++06May-87
to to to to to
31-Dec-91 31-Dec-90 31-Dec-89 31-Dec-88 31-Dec-87
Class A Class A Class A Class A Class A
PER SHARE OPERATING PERFORMANCE
(for a share outstanding
throughout the period)***
Net asset value
Beginning of period $11.93 $14.21 $10.16 $8.25 $10.00
------ ------ ------ ----- ------
Income from investment operations
Net investment
income/(loss) 0.17 (0.04) (0.22) (0.41) (0.19)
Net realized and unrealized gain/(loss)
on investments 1.8 (1.11) 4.61 2.32 (1.56)
--- ------ ---- ---- ------
Total from investment operations 1.98 (1.15) 4.39 1.91 (1.75)
---- ------ ---- ---- ------
Less distributions
Dividends from net
investment income - - - - -
Distributions from net realized gains (0.14) (1.13) (0.34) - -
------ ------ ------ ---- ----
Total distributions (0.14) (1.13) (0.34) - -
------ ------ ------ ---- ----
Net asset value
End of period $13.77 $11.93 $14.21 $10.16 $8.25
====== ====== ====== ====== =====
TOTAL RETURN
(without deduction of sales load) 16.71% (8.21%) 43.34% 23.21% **(17.55%)
RATIOS/SUPPLEMENTAL DATA:
Net assets,
end of period
(000 omitted) $35,849 $20,811 $7,490 $4,341 $3,689
Ratios to average net assets:
Expenses 2.29% 3.74% 5.93% 5.92% *6.80%
Net investment
income/(loss) 0.78% (0.31%) (3.39%) (3.29%) *(4.47%)
Portfolio turnover rate 78.80% 103.05% 152.89% 147.87% 83.53%
</TABLE>
- --------------------------------------------------------------------------------
* Annualized
** Not annualized
*** Per share amounts for periods ended prior to December 31, 1995 have been
restated to reflect a 10-for-1 stock split effective December 19, 1995
+ Commencement of offering
++ Commencement of operations
- ---------------------------------------13---------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
GAM EUROPE FUND
For the Periods
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
01-Jan 95 01-Jan-94 01-Jan-93 01-Jan-92 01-Jan-91 +01-Jan-90
to to to to to to
31-Dec-95 31-Dec-94 31-Dec-93 31-Dec-92 31-Dec-91 31-Dec-90
Class A Class A Class A Class A Class A Class A
PER SHARE OPERATING PERFORMANCE
(for a share outstanding
throughout the period)**
Net asset value
Beginning of period $8.66 $8.93 $7.34 $8.33 $8.39 $10.00
----- ----- ----- ----- ----- ------
Income from investment operations
Net investment
income/(loss) 0.07 - 0.24 0.40 0.22 (0.02)
Net realized and unrealized
gain/(loss) on investments 1.38 (0.27) 1.41 (0.78) (0.28) (1.59)
---- ------ ---- ------ ------ ------
Total from investment operations 1.45 (0.27) 1.65 (0.38) (0.06) (1.61)
---- ------ ---- ------ ------ ------
Less distributions
Dividends from net
investment income (0.06) - (0.06) (0.22) - -
Distributions from net realized gains (0.01) - - (0.39) - -
------ ------ ------ ------ ---- ----
Total distributions (0.07) - (0.06) (0.61) - -
------ ------ ------ ------ ---- ----
Net asset value
End of period $10.04 $8.66 $8.93 $7.34 $8.33 $8.39
====== ===== ===== ===== ===== =====
TOTAL RETURN
(without deduction of sales load) 16.77% (3.11%) 22.68% (4.91%) (0.70%) (16.07%)
RATIOS/SUPPLEMENTAL DATA:
Net assets,
end of period (000
omitted) $22,961 $32,233 $14,398 $17,264 $13,558 $9,186
Ratios to average net assets:
Expenses 2.12% 2.35% 2.64% 2.47% 2.76% 3.57%
Net investment income 0.75% 0.06% 1.05% 5.06% 2.17% (0.22%)
Portfolio turnover rate 145.16% 74.96% 181.51% 72.20% 232.55% 325.62%
BANK LOANS
Amount outstanding at end of period
(000 omitted) - - $1,860 $1,177 - -
Average amount of bank loans
outstanding during the period
(000 omitted) $123 - 521 347 - -
Average number of shares
outstanding during the period
(monthly average)(000 omitted) 390 - 168 240 - -
Average amount of debt per share
during the period $0.32 - $3.10 $1.44 - -
- --------------------------------------------------------------------------------
</TABLE>
* Annualized
** Per share amounts for periods ended prior to December 31, 1995 have been
restated to reflect a 10-for-1 stock split effective December 19, 1995
+ Commencement of operations
- ---------------------------------------14---------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
GAM NORTH AMERICA FUND
<TABLE>
<CAPTION>
For the Periods
<S> <C> <C> <C> <C> <C> <C>
01-Jan 95 01-Jan-94 01-Jan-93 01-Jan-92 01-Jan-91 +01-Jan-90
to to to to to to
31-Dec-95 31-Dec-94 31-Dec-93 31-Dec-92 31-Dec-91 31-Dec-90
Class A Class A Class A Class A Class A Class A
PER SHARE OPERATING PERFORMANCE
(for a share outstanding
throughout the period)**
Net asset value
Beginning of period $9.14 $12.80 $13.63 $13.35 $10.21 $10.00
----- ----- ------ ------ ------ ------
Income from investment operations
Net investment
income/(loss) - 0.04 0.19 0.07 0.06 (0.22)
Net realized and unrealized
gain/(loss) on investments 2.83 0.23 (0.46) 0.25 0.25 0.43
---- ------ ------ ------ ------ ------
Total from investment operations 2.83 0.27 (0.27) 0.32 0.32 0.21
---- ------ ------ ------ ------ ------
Less distributions
Dividends from net
investment income - (0.23) (0.07) (0.03) - -
Distributions from net realized gains (0.04) (3.70) (0.49) (0.01) - -
------ ------ ------ ------ ------ ----
Total distributions (0.04) (3.93) (0.56) (0.04) - -
------ ------ ------ ------ ------ ----
Net asset value
End of period $11.93 $9.14 $12.80 $13.63 $13.35 $10.21
====== ===== ====== ====== ====== ======
TOTAL RETURN
(without deduction of sales load) 30.90% 2.97% (2.09)% 2.42% 30.69% 2.14%
RATIOS/SUPPLEMENTAL DATA:
Net assets,
end of period (000
omitted) $5,981 $1,887 $3,289 $11,781 $12,290 $1,862
Ratios to average net assets:
Expenses, net of reimbursement ***2.98% ***2.54% 2.10% 2.43% 2.96% ***11.52%
Net investment income/loss 0.01% 0.37% 0.69% 0.47% 0.45% (5.49%)
Portfolio turnover rate 8.57% 3.00% 3.42% 20.38% 3.44% 0.00%
</TABLE>
- --------------------------------------------------------------------------------
* Annualized
** Per share amounts for years ended prior to December 31, 1995 have been
restated to reflect a 10-for-1 stock split effective December 19, 1995
*** In the absence of the expense reimbursement, expenses on an annualized
basis would have represented 3.27%, 5.81% and 14.31% of the average net
assets, respectively, for the years ended December 31, 1995, 1994 and 1990.
Fayez Sarofim & Co. was appointed co-investment adviser of GAM North
America Fund effective June 20, 1990.
+ Commencement of operations
- ---------------------------------------15---------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
GAM JAPAN CAPITAL FUND
- --------------------------------------------------------------------------------
01-Jan-95 +01-Jul-94
to to
31-Dec-95 31-Dec-94
Class A Class A
PER SHARE OPERATING PERFORMANCE
(for a share outstanding
throughout the period)***
Net asset value
Beginning of period $9.62 $10.00
----- ------
Income from investment operations
Net investment income/(loss) (0.07) 0.02
Net realized and unrealized
gain/(loss) on investments 0.69 (0.40)
---- ------
Total from investment operations 0.62 (0.38)
---- ------
Less distributions
Dividends from net investment
income (0.05) -
Distributions from net realized gains (0.03) -
------ ------
Total distributions (0.08) -
------ ------
Net asset value
End of period $10.16 $9.62
====== =====
TOTAL RETURN
(without deduction of sales load) 6.45% **(3.77%)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000
omitted $13,600 $9,406
Ratios to average net assets:
Expenses, net of reimbursement ++3.61% *2.19%
Net investment income/(loss) (2.35%) *0.70%
Portfolio turnover rate 122.38% 7.02%
- --------------------------------------------------------------------------------
* Annualized
** Not annualized
*** Per share amounts for periods ended prior to December 31, 1995 have been
restated to reflect a 10-for-1 stock split effective December 19, 1995
+ Commencement of operations
++ In the absence of the expense reimbursement, for the period ended December
31, 1995, expenses on an annualized basis would have represented 4.61% of
the average net assets.
- ---------------------------------------16---------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
GAMERICA CAPITAL FUND
+12-May-95
to
31-Dec-95
Class A
PER SHARE OPERATING PERFORMANCE
(for a share outstanding
throughout the period)
Net asset value
Beginning of period $10.00
------
Income from investment operations
Net investment income/(loss) 0.07
Net realized and unrealized
gain/(loss) on investments 0.07
----
Total from investment operations 0.14
----
Less distributions
Dividends from net investment
income (0.07)
Distributions from net realized gains (0.04)
------
Total distributions (0.11)
------
Net asset value
End of period $10.03
======
TOTAL RETURN
(without deduction of sales load) **1.38%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000
omitted) $3,029
Ratios to average net assets:
Expenses, net of reimbursement ++*3.73%
Net investment income/(loss) *1.36%
Portfolio turnover rate 10.90%
- --------------------------------------------------------------------------------
* Annualized
** Not annualized
+ Commencement of operations
++ In the absence of the expense reimbursement, for the period ended December
31, 1995, expenses on an annualized basis would have represented 4.73% of
the average net assets.
- ---------------------------------------17---------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
GAM ASIAN CAPITAL FUND
+12-May-95
to
31-Dec-95
Class A
PER SHARE OPERATING PERFORMANCE
(for a share outstanding
throughout the period)
Net asset value
Beginning of period $10.00
------
Income from investment operations
Net investment income/(loss) (0.01)
Net realized and unrealized
gain/(loss) on investments (0.42)
------
Total from investment operations (0.43)
------
Less distributions
Dividends from net investment
income -
Distributions from net realized gains (0.04)
------
Total distributions (0.04)
------
Net asset value
End of period $9.53
=====
TOTAL RETURN
(without deduction of sales load) **(4.25%)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000
omitted) $5,560
Ratios to average net assets:
Expenses, net of reimbursement ++*3.11%
Net investment income/(loss) *(0.17%)
Portfolio turnover rate 17.01%
- --------------------------------------------------------------------------------
* Annualized
** Not annualized
+ Commencement of operations
++ In the absence of the expense reimbursement, for the period ended December
31, 1995, expenses on an annualized basis would have represented 3.95% of
the average net assets.
No financial information is available for GAM Mid-Cap U.S. Fund, which has not
yet commenced operations.
PERFORMANCE INFORMATION
The Funds may advertise performance information representing each Fund's
total return for the periods indicated. Total return includes changes in the net
asset value of each Fund's shares and assumes reinvestment of all dividends and
capital gains distributions. Total return therefore reflects the expenses of
each Fund, but does not reflect any taxes due on dividends or distributions paid
to shareholders. The Funds may advertise total return both before and after
deduction of the sales load.
Past results may not be indicative of future performance. The investment
return and principal value of shares of each Fund will fluctuate so that your
shares, when redeemed, may be worth more or less than their original cost.
<PAGE>
Comparative performance information may be used from time to time in
advertising each Fund's shares. The performance of GAM Global Fund may be
compared to the Morgan Stanley Capital International (MSCI) World Index. The
performance of GAM International Fund may be compared to the MSCI Europe,
Australia, Far East (EAFE) Index. The performance of GAM Pacific Basin Fund may
be compared to the MSCI Pacific Index. The performance of GAM Asian Capital Fund
may be compared to the MSCI Combined Far East Index ex Japan. The performance of
GAM Japan Capital Fund may be compared to the Tokyo Stock Exchange Index. The
performance of GAM North America Fund and GAMerica Capital Fund may be compared
to the Standard & Poor's 500 Composite Stock Price Index and the Dow Jones
Industrial Average. The performance of GAM Mid-Cap U.S. Fund may be compared to
the Standard & Poor's 400 Mid-Cap Index. The performance of GAM Europe Fund may
be compared to the MSCI Europe and Financial Times Actuaries World Indices
Europe. Each stock index is an unmanaged index of common stock prices, converted
into U.S. dollars where appropriate. Any index selected by a Fund may not
compute total return in the same manner as the Funds and may exclude, for
example, dividends paid on stocks included in the index and brokerage or other
fees. Additional information about the performance of each Fund is contained in
its annual report to shareholders, which may be obtained without charge.
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES AND RISK CONSIDERATIONS
- --------------------------------------------------------------------------------
Each Fund's investment objective is to seek long-term capital appreciation,
although the Funds may also engage in short-term trading based upon changes
affecting a particular company, industry, country or region or changes in
general market, economic or political conditions. Generally, each Fund expects
to achieve its objective by investing in equity securities (common and preferred
stocks and warrants). However, if it is determined that the long-term capital
appreciation of debt securities may equal or exceed the return on equity
securities, then a Fund may be substantially invested in debt securities of
companies or governments and their agencies and instrumentalities. Such
determination may be based on various circumstances, including, among others,
anticipated changes in interest rates and bond ratings and the availability of
discount bonds. In view of their investment objective, each Fund is not required
to maintain any particular proportion of equity or debt securities in its
portfolio. Any dividend or interest income realized by a Fund on its investments
will be incidental to its goal of long-term capital appreciation.
Each Fund has adopted a different investment policy relating to the
geographic areas in which it will invest:
GAM GLOBAL FUND may invest in securities issued by issuers in any country
of the world, including the United States, and will normally invest in
securities issued by companies in the United States, Canada, the United Kingdom,
Continental Europe and the Pacific Basin, including Japan, Singapore, Malaysia,
Hong Kong and Australia. Under normal market conditions, GAM Global Fund will
invest in securities of companies in at least three different countries.
GAM INTERNATIONAL FUND may invest in securities issued by companies in any
country other than the United States, and will normally invest in securities
issued by companies in Canada, the United Kingdom, Continental Europe and the
Pacific Basin, including Japan, Singapore, Malaysia, Hong Kong and Australia.
Under normal market conditions, GAM International Fund will invest in securities
of companies in at least three foreign countries and at least 65% of the Fund's
total assets will be invested in securities of foreign issuers.
- ---------------------------------------19---------------------------------------
<PAGE>
GAM PACIFIC BASIN FUND may invest primarily in securities of companies in
the Pacific Basin, including Japan, Hong Kong, Singapore, Malaysia, Thailand,
Vietnam, Indonesia, the Philippines, Korea, China, Taiwan, India, Australia and
New Zealand. Under normal market conditions, at least 65% of the total assets of
GAM Pacific Basin Fund will be invested in securities issued by companies in the
Pacific Basin or by governments in the Pacific Basin and their agencies and
instrumentalities. The remainder, up to 35% of the Fund's total assets, may be
invested in securities of United States and other issuers located outside the
Pacific Basin.
GAM JAPAN CAPITAL FUND may invest primarily in securities of companies in
Japan. Under normal market conditions, at least 65% of the total assets of GAM
Japan Capital Fund will be invested in securities issued by companies in Japan
or by the Japanese government and its agencies and instrumentalities. The
remainder, up to 35% of the Fund's total assets, may be invested in securities
of United States and other issuers located outside Japan.
GAM ASIAN CAPITAL FUND may invest primarily in securities issued by
companies in Asia other than Japan. Countries in Asia include Hong Kong,
Singapore, Malaysia, Thailand, Vietnam, Indonesia, the Philippines, Korea,
China, Taiwan, India, Myanmar, Pakistan, Bangladesh and Sri Lanka. Under normal
market conditions, at least 65% of the total assets of GAM Asian Capital Fund
will be invested in securities issued by companies in Asia other than Japan or
by governments in Asia or their agencies or instrumentalities other than Japan.
The remainder, up to 35% of the Fund's total assets, may be invested in
securities of United States and other issuers outside Asia.
GAM EUROPE FUND may invest primarily in securities issued by companies in
Europe, including the United Kingdom, Ireland, France, Germany, Denmark, Norway,
Sweden, Finland, Iceland, Switzerland, Austria, Belgium, Spain, Portugal, Italy,
Greece, Hungary, Poland, the Czech Republic and Slovakia. Under normal market
conditions, at least 65% of the total assets of GAM Europe Fund will be invested
in securities issued by companies in Europe or by European governments and their
agencies and instrumentalities. The remainder, up to 35% of the Fund's total
assets, may be invested in securities of United States and other issuers located
outside Europe.
GAM NORTH AMERICA FUND may invest primarily in securities issued by
companies in the United States and Canada. Under normal market conditions, at
least 65% of the total assets of GAM North America Fund will be invested in
securities issued by companies in the United States and Canada or by the United
States and Canadian governments and their agencies and instrumentalities.
GAMERICA CAPITAL FUND may invest primarily in securities of companies in
the United States. Under normal market conditions, at least 65% of the total
assets of GAMerica Capital Fund will be invested in securities issued by
companies in the United States or by the United States government and its
agencies and instrumentalities.
GAM MID-CAP U.S. FUND may invest primarily in securities issued by
companies in the United States with medium market capitalizations. For this
purpose, medium market capitalization means capitalization which falls in the
range of $200 million to $5 billion. Under normal market conditions, at least
65% of the total assets of GAM Mid-Cap U.S. Fund will be invested in securities
issued by companies in the United States with medium market capitalizations or
by the United States government and its agencies and instrumentalities.
A company will be considered to be in or from a particular country for
purposes of the preceding paragraphs if (a) at least 50% of the company's assets
are located in the country or at least 50% of its total revenues are derived
from goods or services produced in the country or sales made in the country; (b)
the principal trading market for the company's securities is in the country; or
(c) the company is incorporated under the laws of the country.
- ---------------------------------------20---------------------------------------
<PAGE>
Each Fund will seek investment opportunities in all types of companies,
including smaller companies in the earlier stages of development. In making
investment decisions, each Fund will rely on the advice of its Investment
Advisers and its own judgment rather than on any specific objective criteria.
The debt securities in which the Fund may invest will be rated C or better
by Moody's Investors Service, Inc. ("Moody's") or D or better by Standard &
Poor's Corporation ("S&P"), or, if unrated, be comparable in quality as
determined pursuant to guidelines established by the Funds' Board of Directors.
Debt securities with such ratings include securities of companies in default of
interest or principal payment obligations. Debt securities of non-United States
companies or foreign governments are not generally rated by Moody's or S&P. None
of the Funds may invest more than 5% of its assets in debt securities which are
rated lower than "investment grade" by a rating service. Debt securities rated
in the lowest "investment grade" by a rating service (e.g., bonds rated BBB by
S&P) or lower have speculative characteristics, and changes in economic or other
circumstances are more likely to lead to a weakened capacity of the issuers of
such securities to make principal or interest payments than issuers of higher
grade securities. A decrease in the rating of debt securities held by a Fund may
cause the Fund to have more than 5% of its assets invested in debt securities
which are not "investment grade". In such a case, the Fund will not be required
to sell debt securities.
Each Fund may, for temporary defensive purposes, invest in debt securities
of foreign and United States companies, foreign governments and the United
States government, its agencies and instrumentalities, as well as in money
market instruments denominated in United States dollars or a foreign currency.
These money market instruments include, but are not limited to, negotiable or
short-term deposits with domestic or foreign banks with total assets of at least
$50 million; high quality commercial paper; and repurchase agreements maturing
within seven days with domestic or foreign dealers, banks and other financial
institutions deemed to be creditworthy under guidelines approved by the Board of
Directors. The commercial paper in which the Funds may invest will be rated
Prime1 or better by Moody's or A1 or better by S&P, when purchased, or if not
rated, will be of comparable high quality as determined pursuant to guidelines
established by the Board of Directors.
In order to have funds available for redemption and investment
opportunities, each Fund may hold a portion of its portfolio in cash or United
States and foreign money market instruments. At no point in time will more than
35% of each Fund's portfolio be so invested (except when the Fund is in a
temporary defensive posture) and/or held in cash.
It is contemplated that the Funds' portfolio securities will generally be
purchased on stock exchanges and in over-the-counter markets in the countries in
which the principal offices of the issuers of such securities are located. The
Funds may also invest in American Depositary Receipts ("ADRs") or European
Depositary Receipts ("EDRs") representing securities of foreign companies,
including both sponsored and unsponsored ADRs. Generally, ADRs (in registered
form) are designed for use in the United States securities markets and EDRs (in
bearer form) are designed for use in European securities markets. These
securities may not necessarily be denominated in the same currency as the
securities which they represent. Debt securities of non-United States issuers in
which the Funds invest may also be denominated in United States dollars.
Unsponsored ADRs may be created without the participation of the foreign issuer.
Holders of these ADRs generally bear all the cost of the ADR facility, whereas
foreign issuers typically bear certain costs in a sponsored ADR. The bank or
trust company depository of an unsponsored ADR may be under no obligation to
distribute shareholder communications received from the foreign issuer or to
pass through voting rights. The markets for ADRs and EDRs, especially
unsponsored ADRs, may be substantially more limited and less liquid than the
markets for the underlying securities.
- ---------------------------------------21---------------------------------------
<PAGE>
FUNDAMENTAL INVESTMENT RESTRICTIONS
Each Fund's investments will be diversified to the extent that, with
respect to 75% of its total assets, no more than 5% of its total assets will be
invested in any one issuer, and a Fund will not acquire more than 10% of the
outstanding voting securities of any one issuer. Each Fund's investments will be
selected among different industries, and a Fund will not concentrate more than
25% of its total assets in any one industry. The preceding limitations will not
apply to securities of the United States government, its agencies or
instrumentalities. A Fund will not invest more than 15% of its net assets in
securities for which market quotations are not readily available or in other
"illiquid" securities (including non-negotiable deposits with banks, repurchase
agreements of a duration of more than seven days, options traded in
over-the-counter markets and securities underlying such options), nor will it
invest more than 10% of its total assets in securities of companies which, with
their predecessors, have a record of less than three years continuous operation.
A Fund will not acquire more than 3% of the outstanding voting stock of any
closed-end investment company, or invest more than 5% of the total assets of a
Fund in any closed-end investment company, or invest more than 10% of its total
assets in the aggregate in closed-end investment companies. (Assets of a Fund
invested in closed-end investment companies will be subject to the management,
advisory and distribution fees and expenses of such investment companies in
addition to those of the Fund. Shares of closed-end investment companies
typically trade at a discount from their net asset value.) Each Fund may borrow
money from banks for temporary emergency purposes in an amount not to exceed
one-third of its total assets. Borrowing by a Fund will cause it to incur
interest and other expenses. Borrowing by a Fund, also known as leverage, will
also tend to exaggerate the effect on the net asset value of the Fund's shares
of any increase or decrease in the market value of the Fund's assets.
The percentage restrictions stated in the preceding paragraph are
fundamental policies which may not be changed by a Fund without the approval of
a majority of the Fund's shareholders, as defined in the Investment Company Act
of 1940, as amended (the "Act"). The investment objectives and policies
discussed elsewhere in this Prospectus may be changed by the Board of Directors
upon written notice to the shareholders of the Fund and supplementing its then
current Prospectus and Statement of Additional Information. Each Fund is subject
to other investment restrictions and limitations which are set forth in the
Statement of Additional Information. All restrictions except restrictions on
borrowing shall apply at the time an investment is made, and a subsequent change
in the value of an investment or of a Fund's assets shall not result in a
violation.
In light of each Fund's investment objective and anticipated portfolio,
each Fund should be considered as a vehicle for diversification and not as a
balanced investment program. Of course, there is no assurance that each Fund
will achieve its investment objective.
The Funds will also utilize certain sophisticated investment techniques
described below, some of which involve substantial risks. Additional information
about some of the investment techniques described below and the related risks is
contained in the Statement of Additional Information.
OPTIONS AND WARRANTS
Each Fund may invest up to 5% of its net assets in options on equity or
debt securities or securities indices and up to 10% of its net assets in
warrants, including options and warrants traded in over-the-counter markets. In
general, an option on a security gives the owner the right to acquire ("call
option") or dispose of ("put option") the underlying security at a fixed price
(the "strike price") on or before a specified date in the future. A warrant is
equivalent to a call option written by the issuer of the underlying security. An
option on a securities index gives the holder the right to receive, upon
exercise of the option, an amount of cash if the closing level of the securities
- ---------------------------------------22---------------------------------------
<PAGE>
index upon which the option is based is greater than, in the case of a call
option, or less than, in the case of a put option, the strike price of the
option.
Trading in options and warrants is highly leveraged, since the purchaser of
an option or warrant must put up only a small amount relative to the value of
the underlying security in order to buy an option or warrant.
Each Fund may write covered call options on securities in an amount equal
to not more than 100% of its net assets and secured put options in an amount
equal to not more than 50% of its net assets. A call option written by a Fund is
"covered" if the Fund owns the underlying securities subject to the option or if
the Fund holds a call at the same exercise price, for the same period and on the
same securities as the call written. A put option will be considered "secured"
if a Fund deposits and maintains with its custodian cash or United States
government securities having a value equal to or greater than the exercise price
of the option, or if the Fund holds a put at the same exercise price, for the
same period and on the same securities as the put written.
FUTURES CONTRACTS
Each Fund may invest up to 5% of its net assets in initial margin or
premiums for futures contracts and options on futures contracts, including stock
index futures and financial futures. In general, a commodity futures contract
obligates one party to deliver and the other party to purchase a specific
quantity of a commodity at a fixed price at a specified future date, time and
place. In the case of a financial future, the underlying commodity is a
financial instrument, such as a U.S. Treasury Bond, Treasury Note or Treasury
Bill. In the case of a stock index future, the seller of the futures contract is
obligated to deliver, and the purchaser obligated to take, an amount of cash
equal to a specific dollar amount multiplied by the difference between the value
of a specific stock index at the close of the last trading day of the contract
and the price at which the agreement is made. No physical delivery of the
underlying stocks in the index is made.
No consideration will be paid or received by a Fund upon the purchase or
sale of a futures contract. Initially, a Fund will be required to deposit with
the broker an amount of cash or cash equivalents equal to approximately 5% of
the contract amount. Subsequent payments to and from the broker, known as
"variation margin", will be made daily as the price of the index or securities
underlying the futures contract fluctuates, a process known as
"marking-to-market".
An option on a commodity futures contract, as contrasted with a direct
investment in the futures contract, gives the purchaser the right, in exchange
for the payment of a premium, to assume a position as a purchaser or a seller in
a futures contract at a specified exercise price at any time prior to the
expiration date of the option.
The Funds will trade in commodity futures and options thereon for bona fide
hedging purposes and otherwise in accordance with rules of the Commodity Futures
Trading Commission. Each Fund will segregate liquid assets in a separate account
with its custodian when required to do so by Securities and Exchange Commission
("SEC") guidelines in order to cover its obligations in connection with futures
and options transactions.
FORWARD FOREIGN EXCHANGE CONTRACTS
Since the Funds may invest in securities denominated in currencies other
than the United States dollar, changes in foreign currency exchange rates may
affect the values of portfolio securities. The rate of exchange between the
United States dollar and other currencies is determined by forces of supply and
demand in the foreign exchange markets. These forces are affected by the
international balance of payments and other economic and financial conditions,
government intervention, speculation and other factors. The Funds may enter into
forward foreign exchange contracts for the purchase or sale of foreign currency
to "lock in" the United States dollar price
- ---------------------------------------23---------------------------------------
<PAGE>
of the securities denominated in a foreign currency or the United States dollar
equivalent of interest and dividends to be paid on such securities, or to hedge
against the possibility that the currency of a foreign country in which a Fund
has investments may suffer a decline against the United States dollar. The Funds
may also enter into forward foreign exchange contracts for speculative purposes,
subject to the limitations on issuing senior securities as described in the
Statement of Additional Information. A forward foreign currency exchange
contract obligates one party to purchase and the other party to sell an agreed
amount of a foreign currency on an agreed date and at an agreed price.
If a Fund's obligations under forward foreign exchange contracts to deliver
any specific foreign currency exceed the value of the Fund's portfolio
securities or other assets denominated in such currency, the Fund will ensure
that such excess, together with any other obligations of the Fund which may be
deemed senior securities of the Fund (such as borrowing by the Fund or lending
of portfolio securities, described below), shall not exceed 33 % of the value of
the Fund's total assets. Each Fund will maintain cash, high-grade debt
securities or U.S. government securities in a separate custody account with its
custodian when required to do so by SEC guidelines in connection with such
forward contracts.
The Funds may purchase put and call options on foreign currencies for the
same purposes as they may enter into forward foreign exchange contracts. Put
options convey the right to sell the underlying currency at a price which is
anticipated to be higher than the spot prices of the currency at the time the
option expires. Call options convey the right to buy the underlying currency at
the time the option expires. Each Fund may also write covered call options in an
amount not to exceed the value of the Fund's portfolio securities or other
assets denominated in the relevant currency and secured put options in an amount
equal to 50% of its net assets.
RESTRICTED SECURITIES
The Fund may purchase securities that are not registered for sale to the
general public in the United States. The Investment Advisers will determine
whether restricted securities constitute illiquid securities under guidelines
established by the Board of Directors. Provided that a dealer or institutional
trading market in such securities exists, either within or outside the United
States, these restricted securities will not be treated as illiquid securities
for purposes of the Funds' investment restrictions. The Funds may also purchase
privately placed restricted securities for which no institutional market exists.
The absence of a trading market may adversely affect the ability of the Funds to
sell such illiquid securities promptly and at an acceptable price, and may also
make it more difficult to ascertain a market value for illiquid securities held
by the Funds.
LENDING PORTFOLIO SECURITIES
Each Fund may lend its portfolio securities to domestic and foreign
brokers, dealers and financial institutions when secured by collateral
maintained in an amount equal to at least 100% of the market value, determined
daily, of the loaned securities. A Fund may at any time call the loan and obtain
the return of the securities loaned. No such loan will be made which would cause
the aggregate market value of all securities lent by a Fund to exceed 15% of the
value of the Fund's total assets. Lending portfolio securities will result in
income to a Fund, but could also involve certain risks in the event of the
delay, default or insolvency of the borrower.
ADJUSTABLE RATE INDEX NOTES
Each Fund may invest in adjustable rate index notes (ARINs) or similar
instruments. An ARIN is a form of promissory note issued by a brokerage firm or
other counterparty which provides that the amount of principal or interest paid
will vary inversely in proportion to changes in the value of a specified
security. Under such an instrument, the Fund will make a profit if the value of
the specified security decreases and will suffer a loss if the
- ---------------------------------------24---------------------------------------
<PAGE>
value of the specified security increases. The effect of such an instrument is
equivalent to a short sale of the specified security, except that the potential
loss to the Fund is limited to the amount invested in the ARIN, whereas in the
case of a short sale the short seller is potentially subject to unlimited risk
of loss. The Funds could suffer losses in the event of a default or insolvency
of the brokerage firm or other counterparty issuing the ARIN.
OTHER INVESTMENT ACTIVITIES
It is likely that new investment products will continue to develop which
will combine elements of options, futures contracts or debt securities with
other types of derivative financial products, such as swaps, caps and floors, or
which will otherwise tie payments to be made or received to the value of
specific securities or to existing or new indices. Swaps involve the exchange by
two parties of their respective obligations to pay or receive a stream of
payments. For example, a Fund might exchange floating interest payments for
fixed interest payments, or a series of payments in one currency for a series of
payments in another currency. The purchase of a cap or floor entitles the
purchaser to receive payment on an agreed principal amount from the seller if a
specified index exceeds (in the case of a cap) or falls below (in the case of a
floor) a predetermined interest or exchange rate.
The Funds may invest and trade in derivative financial products to the
extent permitted by applicable regulations. Derivative products are traded on
over-the-counter markets and will therefore be subject to the restriction that
not more than 15% of the net assets of each Fund may be invested in illiquid
securities. Each Fund will segregate liquid assets in a separate account with
its custodian to the extent required under SEC guidelines to cover its
obligations relating to derivative products. The Funds will purchase or sell
derivative products for hedging purposes only, unless otherwise permitted by
applicable regulations. A Fund will not enter into swaps, caps or floors if on a
net basis the aggregate notional principal amount of such agreements exceeds the
net assets of the Fund.
RISK CONSIDERATIONS
INVESTING IN FOREIGN SECURITIES
GAM International, Europe, Pacific Basin, Asian Capital and Japan Capital
Funds will invest primarily in securities of foreign issuers, and GAM Global,
North America and Mid-Cap U.S. Funds will invest in securities of foreign
issuers as well as in securities of United States issuers. Investors should
carefully consider the risks involved in investments in securities of foreign
companies and governments, which add to the usual risks inherent in domestic
investments. Such special risks include fluctuations in foreign exchange rates,
political or economic instability in the country of issue, and the possible
imposition of exchange controls or other laws or restrictions. In addition,
securities prices in foreign markets are generally subject to different
economic, financial, political and social factors than are the prices of
securities in United States markets. These factors may result in either a larger
gain or a larger loss than an investment in comparable United States securities.
Securities of foreign issuers generally will not be registered with the SEC
nor will the issuers thereof generally be subject to the reporting requirements
of such agency. Accordingly, there is likely to be less publicly available
information concerning certain of the issuers of securities held by the Funds
than is available concerning United States companies. In addition, foreign
companies are not generally subject to uniform accounting, auditing and
financial reporting standards or to practices and requirements comparable to
those applicable to United States companies. There may also be less government
supervision and regulation of foreign broker-dealers, financial institutions and
listed companies than exists in the United States.
Although the value of all equity securities traded outside the United
States is greater than the value of all equity securities traded in the United
States, foreign securities exchanges generally have substantially less volume
than the New York Stock Exchange and may be subject to less government
supervision and regulation than those
- ---------------------------------------25---------------------------------------
<PAGE>
in the United States. Accordingly, securities of foreign companies may be less
liquid and more volatile than securities of comparable United States companies.
Similarly, volume and liquidity in most foreign bond markets is less than in the
United States and, at times, price volatility can be greater than in the United
States.
Foreign brokerage commissions and custodial fees are generally higher than
those in the United States, and the settlement period for securities
transactions may be longer, in some countries up to 30 days. Dividend and
interest income from foreign securities may also be subject to withholding
taxes.
GAM Europe, Pacific Basin, Japan Capital, Asian Capital, North America,
Mid-Cap U.S. and GAMerica Capital Funds will invest primarily in specific
geographic areas. An investment in one of these Funds will tend to be affected
by developments in the relevant geographic area to a greater extent than
investments in the other Funds. GAM Pacific Basin and Asian Capital Funds and,
to a lesser extent, GAM Europe, International and Global Funds may invest a
portion of their assets in securities of issuers in developing countries, which
generally involve greater potential for gain or loss. In comparison to the
United States and other developed countries, developing countries may have
relatively unstable governments, economies based on only a few industries and
securities markets that trade a smaller number of securities.
GAM Europe Fund will invest primarily in securities issued by companies in
Europe, and under normal market conditions, at least 65% of the total assets of
the Fund will be invested in securities issued by such companies or in the
securities of European governments and their agencies and instrumentalities. The
value and liquidity of securities of European issuers may be affected favorably
or unfavorably by political, economic, fiscal, regulatory or other developments
in Europe or neighboring regions. Such developments may include changes caused
by the efforts to unify or integrate certain European countries as a market and
trading block under the rubric of the European Community. Also, political and
economic changes in Eastern Europe may favorably or unfavorably affect the value
and liquidity of securities of Western European issuers, and may ultimately
result in the development of new markets for securities. Investments in the
securities of issuers in Eastern Europe typically would involve greater
potential for gain or loss than investments in securities of issuers in Western
European countries.
GAM Pacific Basin Fund and GAM Asian Capital Fund will invest primarily in
securities of companies in the Pacific Basin, and under normal market
conditions, at least 65% of the total assets of each Fund will be invested in
securities issued by such companies or in securities issued by governments in
the Pacific Basin and their agencies and instrumentalities. The value and
liquidity of securities of Pacific Basin issuers may be affected favorably or
unfavorably by political, economic, fiscal, regulatory or other developments in
the Pacific Basin or neighboring regions. The extent of economic development,
political stability and market depth of different countries in the Pacific Basin
varies widely. Certain countries in the Pacific Basin are either comparatively
underdeveloped or are in the process of becoming developed, and investments in
the securities of issuers in such countries typically would involve greater
potential for gain or loss than investments in securities of issuers in
developed countries.
GAM Japan Capital Fund will invest primarily in securities of companies in
Japan. Under normal market conditions, at least 65% of the total assets of each
Fund will be invested in securities issued by Japanese companies or the Japanese
government and its agencies and instrumentalities. The value of its investment
portfolio will, therefore, be highly dependent upon developments in Japan.
Ongoing changes in the Japanese economic and political systems may increase the
risks involved in investing in the Fund. A large part of the Japanese economy is
dependent on international trade, so that modifications in international trade
barriers and fluctuations in trade flows may indirectly affect the value of the
Fund's shares. Japan is currently in a recession and its stock market has
declined in the past several years. In recent years, Japanese securities markets
have also experienced relatively high levels of volatility.
- ---------------------------------------26---------------------------------------
<PAGE>
GAM North America, International and Global Funds may invest a portion of
their assets in securities of Canadian issuers. The value of securities of
Canadian issuers may be affected by political or economic events affecting
Canada but not the United States. Although Canada is generally considered to be
a developed country, the Canadian economy is generally more dependent on the
production and processing of raw materials, such as metals, timber, paper,
agricultural products and energy, than the United States economy.
As discussed above, a portfolio containing foreign securities may be
favorably or unfavorably affected by fluctuations in the relative rates of
exchange between the currencies of different nations and by exchange control
regulations. The Funds may enter into forward foreign exchange contracts in an
attempt to hedge against such adverse circumstances. However, this method of
attempting to hedge the value of a Fund's portfolio securities against a decline
in the value of a currency does not eliminate fluctuations in the underlying
prices of the securities. Moreover, there can be no assurance that such hedging
attempts will be successful.
INVESTING IN SMALLER COMPANIES
The Funds may invest in all types of companies, including companies in the
earlier stages of their development. Investing in smaller, newer issuers
generally involves greater risk and potentially greater reward than investing in
larger, more established issuers. Smaller, newer companies often have limited
product lines, markets or financial resources, and they may be dependent upon
one or a few key persons for management. The securities of such companies may be
subject to more abrupt or erratic market movements than securities of larger,
more established companies or the market averages in general.
The Funds may also purchase debt securities issued by smaller or
financially distressed companies, including securities of companies which may
have defaulted on interest or principal payment obligations. Such debt
securities may have very low ratings or no ratings, may be considered
speculative investments, and involve greater risk of loss of interest and
principal.
OPTIONS, FUTURES AND OTHER DERIVATIVES
Trading in options, futures and other forms of derivatives involves
substantial risks. The low margin and premiums normally required in such trading
provide a large amount of leverage. A relatively small change in the price of a
security or index underlying a derivative can produce a disproportionately
larger profit or loss, and a Fund may gain or lose more than its initial
investment. Also, there is no assurance that a liquid secondary market will
exist for options, futures or derivatives purchased or sold, and a Fund may be
required to maintain a position until exercise or expiration, which could result
in losses.
There can be no assurance that the Funds' hedging transactions will be
successful, since their success depends upon the ability of the Investment
Advisers to predict future changes in market conditions, interest rates and
prices of specific securities. There may also be a lack of correlation between
the index or instrument underlying an option or futures contract and the
securities or other assets being hedged. If the Investment Advisers predict
incorrectly, the effect on the value of a Fund's investments may be less
favorable than if the Fund had not engaged in such options and futures trading.
Certain investment activities of the Funds, such as foreign currency
forward contracts, repurchase agreements, ARINS, and certain other types of
futures, options and derivatives, will be entered into directly between the
Funds and banks, brokerage firms and other investors in over-the-counter markets
rather than through the facilities of any exchange. Although the Funds will only
enter into such transactions with parties believed to be creditworthy, a Fund
may experience losses or delays in the event of a default or bankruptcy of a
bank, broker-dealer
- ---------------------------------------27---------------------------------------
<PAGE>
or other investor with which the Fund entered into such an agreement. Some
derivatives may constitute illiquid securities which cannot readily be resold.
The Funds will invest in fixed income securities which will involve some
degree of interest rate risk. The value of bonds generally fluctuates inversely
with changes in interest rates. As interest rates rise, bond values generally
fall, and as interest rates fall, bond values generally rise.
For more complete information regarding risks which investors should
consider before making an investment in a Fund, see "Investment Objective and
Policies Risk Considerations" in the Statement of Additional Information.
PORTFOLIO TURNOVER
While it is the policy of each Fund to seek long-term appreciation of
capital, and to engage to a lesser extent in trading for short-term gains, each
Fund will effect portfolio transactions without regard to its holding period if,
in the Fund's judgment, such transactions are advisable in light of a change in
circumstances of a particular company or within a particular industry, or in
general market, economic or political conditions. For the fiscal years ended
December 31, 1995 and 1994, the portfolio turnover rate was 34.97% and 110.48%,
respectively, for GAM International Fund, 60.18% and 123.33% for GAM Global
Fund, 64.01% and 29.11% for GAM Pacific Basin Fund, 145.16% and 74.96% for GAM
Europe Fund, 8.57% and 3.00% for GAM North America Fund and 122.38% and 7.02%
for GAM Japan Capital Fund. For the fiscal year ended December 31, 1995, the
annual portfolio turnover rate for GAM Asian Capital Fund was 17.01% and for
GAMerica Capital Fund, it was 10.90%. The annual portfolio turnover rate for GAM
Mid-Cap U.S. Fund is expected to be approximately 100%. Portfolio turnover rate
is calculated by dividing the lesser of a Fund's sales or purchases of portfolio
securities for the fiscal year (exclusive of purchases or sales of all
securities whose maturities or expiration dates at the time of acquisition were
one year or less) by the monthly average value of the securities in a Fund's
portfolio during the fiscal year. A portfolio turnover rate in excess of 100% is
considered to be high. A high portfolio turnover rate may result in higher
short-term capital gains to shareholders for tax purposes and increased
brokerage commissions and other transaction costs borne by the Fund.
- --------------------------------------------------------------------------------
PURCHASE OF SHARES
- --------------------------------------------------------------------------------
The minimum initial investment in each Fund is $10,000 and subsequent
investments must be at least $1,000, except that for IRAs, the minimum initial
investment is $2,000 and the minimum subsequent investment is $500. Shares of
the Funds may be purchased by mail or wire transfer directly from the Funds'
transfer agent, Chase Global Funds Services Company ("CGFSC"), or through
authorized brokers which have entered into agreements with the Fund's
distributor, GAM Services Inc. ("GAM Services").
This Prospectus offers investors two classes of shares, Class A shares and
Class D shares, for certain Funds (currently GAM International Fund, GAM Global
Fund and GAM Pacific Basin Fund) which bear sales charges in different forms and
amounts and which bear different levels of expenses. As described below under
"Offering Price" and "Distribution Plans", Class D shares bear a lower sales
load than Class A shares, but bear additional expenses over those paid by Class
A shares, including fees imposed under a 12b-1 plan.
The decision as to which class of shares provides the most suitable
investment for you depends upon a number of factors, including the amount and
intended length of your investment. For more information about these sales
arrangements, please consult your investment dealer or GAM Services. Sales
personnel may receive different
- ---------------------------------------28---------------------------------------
<PAGE>
compensation depending on which class of shares they sell. Shares may only be
exchanged for shares of the same class of another Fund.
PURCHASES BY MAIL
Please complete the application form at the back of this Prospectus and
send it together with your check payable to "GAM Funds Inc." to:
Chase Global Funds Services Company
P.O. Box 2798
Boston, Massachusetts 02208
For overnight mail, please use the following address:
Chase Global Funds Services Company
73 Tremont Street
Boston, Massachusetts 02108
Checks must be in United States currency and drawn on a United States bank.
Checks over $1,000,000 must be certified or issued by a United States bank.
PURCHASES BY WIRE
In order to purchase shares of the Funds, by bank wire transfer, you must
call CGFSC at (800) 3565740 or (617) 5578000 x6610 to receive a wire number and
to notify CGFSC of your incoming bank wire transfer. A properly completed
application form must also be sent to CGFSC. Instruct your bank (which may
impose a charge for their service) to wire the desired amount (via the Federal
Reserve Bank) to:
Chase Manhattan Bank, N.A.
ABA # 021000021
For account of:
GAM [ ] Fund (e.g.International)
Subscription DDA # 9102733186
For credit to:
(Shareholder's Name)
Account No. (Shareholder Account No.)
Wire No. (from CGFSC)
In the case of subscriptions to more than one Fund, or more than one class
of shares of one or more Funds, you should ensure that separate wire references
are provided showing the amount invested in each Fund and/or each class of
shares. A bank wired investment is considered received when CGFSC has been
notified that the bank wire transfer has been credited to the Funds' account.
PURCHASES THROUGH BROKERS
Brokers who do not have dealer agreements with GAM Services may charge
investors a service fee as determined by the broker. That fee will be in
addition to the sales load payable by the investor and may be avoided if shares
are purchased through a broker which has a dealer agreement with GAM Services or
through CGFSC.
- ---------------------------------------29---------------------------------------
<PAGE>
ADDITIONAL INVESTMENTS
You may purchase additional shares at any time by mailing or wiring funds
in the manner described above. Please include your account number on your check
or as part of your wire transfer instructions and indicate the amount to be
invested in each Fund and/or each class of shares.
AUTOMATIC INVESTMENT PROGRAM
You may also purchase additional shares of a Fund in incremental amounts of
$500 or more through an automatic investment program. Under this program,
monthly or quarterly investments are debited automatically from your account at
a bank, savings and loan association or credit union into your Fund account. By
enrolling in this program, you authorize the relevant Fund and its agents either
to draw checks or initiate Automated Clearing House debits against your
designated account at a bank or other financial institution. This privilege may
be selected by completing the appropriate section on the application form or by
contacting CGFSC for appropriate forms. You may terminate your participation in
this program by sending written notice to CGFSC. Termination will become
effective within 30 days after CGFSC has received your request. A Fund may
immediately terminate your participation in this program in the event that any
item is unpaid by your financial institution. The Funds may terminate or modify
this privilege at any time.
OFFERING PRICE
All purchase orders will be filled at the net asset value of each Fund's
shares next computed after the order has been received in proper form by CGFSC
or an authorized dealer, less a variable sales load as follows:
CLASS A SHARES
SALES LOAD SALES LOAD USUAL BROKER
AS PERCENTAGE AS PERCENTAGE REALLOWANCE AS
AMOUNT OF OF OFFERING OF NET AMOUNT PERCENTAGE OF
PURCHASE PRICE INVESTED OFFERING PRICE
Less than
$100,000 5.0% 5.26% 4.0%
$100,000 but
less than
$300,000 4.0% 4.17% 3.0%
$300,000 but
less than
$600,000 3.0% 3.09% 2.0%
$600,000 but
less than
$1,000,000 2.0% 2.04% 1.0%
$1,000,000 but
less than $4,000,000 1.0% 1.01% 0.5%
$4,000,000
or more 0% 0% 0%
- ---------------------------------------30---------------------------------------
<PAGE>
CLASS D SHARES
SALES LOAD SALES LOAD USUAL BROKER
AS PERCENTAGE AS PERCENTAGE REALLOWANCE AS
AMOUNT OF OF OFFERING OF NET AMOUNT PERCENTAGE OF
PURCHASE PRICE INVESTED OFFERING PRICE
Less than
$100,000 3.5% 3.63% 2.5%
$100,000 but
less than
$300,000 2.5% 2.56% 1.5%
$300,000 but
less than
$600,000 2.0% 2.04% 1.0%
$600,000 but
less than
$1,000,000 1.5% 1.52% 1.0%
$1,000,000
or more 0% 0% 0%
The following purchases may be aggregated for the purpose of determining
the "Amount of Purchase" in the preceding table and will be deemed owned by the
same person for purposes of the following paragraphs: purchases by you, your
spouse or children under the age of 21 years, and any trust or employee benefit
plan for the benefit of you or any such individuals or of which you are a
trustee.
You may purchase shares at a reduced sales load through a right of
accumulation. The applicable sales load will be based on the total of (i) the
total dollar amount of your current purchase, plus (ii) the current net asset
value of all shares of the Funds held by you. To obtain the reduced sales load,
you must provide CGFSC or your broker with sufficient information to verify that
you have such a right.
You may also purchase shares at reduced sales loads by signing a Statement
of Intention expressing your intention to invest at least $100,000 in shares of
the Funds over a 13-month period. Each purchase of shares under a Statement of
Intention will be subject to a sales load based on a single transaction in the
total dollar amount indicated in the Statement of Intention.
If you sign a Statement of Intention, you will not be bound to purchase the
full amount indicated. However, the minimum initial investment under a Statement
of Intention is 5% of the total amount indicated in the Statement of Intention,
and the shares purchased with the first 5% of such amount will be held in escrow
(while remaining registered in your name) to ensure payment of the higher sales
load applicable to the shares actually purchased if the full amount indicated is
not purchased. Such escrowed shares will be involuntarily redeemed to pay the
additional sales load, if necessary. When the full amount indicated has been
purchased, the escrowed shares will be released. If you purchase more than the
dollar amount indicated in the Statement of Intention and qualify for a further
reduced sales load, the sales load will be adjusted for the entire amount
purchased at the end of the 13-month period. Any resulting credit will be used
to purchase additional shares at the then current net asset value, or refunded
to you in cash if you so specify.
The Funds may waive the minimum required investment or sell shares at net
asset value without imposition of a sales load to the following categories of
investors, subject in each case to such further conditions as may be
- ---------------------------------------31---------------------------------------
<PAGE>
established by GAM Services from time to time: directors, officers and employees
(including retired directors, officers or employees) of the Funds, GAM Services
or any of its affiliates, or any broker-dealers with currently effective
distribution agreements with GAM Services, and spouses, children, siblings or
parents of such persons or trusts or employee benefit plans for the benefit of
such persons; companies exchanging shares with or selling assets to a Fund
pursuant to a merger, acquisition or exchange offer; persons investing the
proceeds of a redemption of shares of any other investment company managed or
sponsored by an affiliate of GAM Services; accounts managed by an affiliate of
GAM Services; registered investment advisors and accounts over which they have
discretionary authority; organizations providing administrative services with
respect to persons in the preceding category; registered investment advisers and
other financial services firms that purchase shares for the benefit of their
clients participating in a "wrap account" or similar program under which clients
pay a fee to the investment adviser or other firm; organizations described in
Section 501(c)(3) of the Internal Revenue Code of 1986; and trust companies,
bank trust departments, and trustees of employee benefit plans for funds over
which they exercise investment authority and which are held in a fiduciary,
agency, advisory, custodial or similar capacity. You must indicate that you are
entitled to the waiver of the sales load at the time the investment is made.
OTHER INFORMATION ABOUT PURCHASES
If you do not send a completed application form to CGFSC at the time of
your initial investment in a Fund, you will not be able to redeem shares, and
dividends and distributions to you will be subject to backup withholding tax.
All purchase orders are subject to acceptance by the Funds and are not
binding until so accepted, and all purchase orders are accepted subject to
collection of payment at full face value in United States dollars. Each Fund
reserves the right to reject any purchase order in whole or in part, in its
discretion.
The Funds do not generally issue certificates for shares purchased. CGFSC
will instead credit your account with the number of shares purchased. You should
promptly check the confirmation advice that is mailed after each purchase (or
redemption) in order to ensure that the purchase (or redemption) of shares
reported has been accurately recorded in your account. Statements of your
account will be mailed to you annually, showing transactions during the year.
CLASS D DISTRIBUTION PLAN
The Funds have adopted a Class D Distribution Plan pursuant to Rule 12b-1
under the Act which provides for payments by the Funds to GAM Services at the
annual rate of up to 0.50% of each applicable Fund's average net assets
attributable to Class D shares. There is currently no Rule 12b-1 plan in effect
with respect to Class A shares.
Payments under the Class D Distribution Plan are intended to compensate GAM
Services for services provided and expenses incurred by it as principal
underwriter of the Funds' shares. GAM Services expects to reallocate most of its
fee to investment dealers, banks or financial services firms that provide
distribution, administrative or shareholder services. GAM Services may
voluntarily waive from time to time all or any portion of its distribution fee
and GAM Services is free to make additional payments out of its own assets to
promote the sale of Fund shares. The Funds also expect to pay shareholder
service fees to dealers and other financial institutions with respect to Class D
shares in an amount equal to 0.25% of each Fund's average net assets
attributable to Class D shares and may pay such fees with respect to Class A
shares, in each case as described below under "Shareholder Servicing Agents".
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<PAGE>
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REDEMPTION OF SHARES
- --------------------------------------------------------------------------------
You may redeem shares of each Fund, without charge, either directly through
CGFSC or through brokers who have dealer agreements with GAM Services. If shares
are held in the broker's "street name", the redemption must be made through the
broker.
REDEMPTION BY MAIL
You may redeem shares by mail by submitting a written request for
redemption, which complies with the requirements listed below, to Chase Global
Funds Services Company, P.O. Box 2798, Boston, Massachusetts 02208.
1. The request must be signed by the redeeming shareholder(s) exactly in
the same manner as the shares are registered, and must specify from which Fund
and which class of shares the shares are to be redeemed and either the number of
shares, or the dollar amount, to be redeemed.
2. The signature of the redeeming shareholder(s) must be guaranteed. A
signature guarantee is a widely accepted way to protect you and the Funds by
verifying the signature on your request; it may not be provided by a notary
public. Signature guarantees will be accepted from banks, brokers, dealers,
municipal securities brokers, government securities dealers and brokers, credit
unions (if authorized under state law), national securities exchanges,
registered securities associations, clearing agencies and savings associations.
The signature guarantee must not be dated and must be in a form acceptable to
CGFSC. Where the shares are registered in more than one name, the signature of
each of the redeeming shareholders must be guaranteed separately in the same
manner.
3. If certificates have been issued for the shares being redeemed, the
request must be accompanied by such certificates endorsed for transfer (or
accompanied by an endorsed stock power).
4. If the shares being redeemed are registered in the name of an estate,
trust, custodian, guardian, employee benefit plan or the like, or in the name of
a corporation or partnership, documents must also be included which, in the
judgment of CGFSC, are sufficient to establish the authority of the person(s)
signing the request, and/or as may be required by applicable laws or
regulations.
REDEMPTION BY TELEPHONE OR FACSIMILE
You may redeem shares by telephone or facsimile if you have previously
elected this option, either by checking the appropriate box on the application
form or by completing a form which may be requested from CGFSC. The form must be
returned to CGFSC, signed by the shareholder(s), with signatures guaranteed as
described above, before telephone or facsimile redemption instructions will be
honored by CGFSC. Redemption instructions must specify from which Fund the
shares are to be redeemed, the class of shares to be redeemed and either the
number of shares, or the dollar amount, to be redeemed. Proceeds of redemptions
by telephone or facsimile will only be sent by mail to your registered address
or by wire transfer to an account designated in advance as described below.
REDEMPTION THROUGH BROKER
Shareholders with accounts at brokers who have dealer agreements with GAM
Services may submit redemption requests to their brokers. The broker may honor a
redemption request either by repurchasing the shares at their net asset value
next computed after the broker receives the request or by forwarding the request
to CGFSC. Brokers may impose a service charge for handling redemptions and may
impose other requirements. You should contact your broker for more details.
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<PAGE>
SYSTEMATIC WITHDRAWAL PLAN
If you own $25,000 or more of a Fund's shares at the current offering price
(net asset value plus sales charge), you can arrange for any requested dollar
amount to be paid from your account to you or a designated payee monthly,
quarterly, semiannually or annually. The $25,000 minimum account size is not
applicable to IRAs. The minimum periodic payment is $500. Shares are redeemed so
that you will receive payment approximately the first of the month. Any income
and capital gain dividends will be automatically reinvested at net asset value.
A sufficient number of full and fractional shares will be redeemed to make the
designated payment. Depending upon the size of the payments requested and
fluctuations in the net asset value of the shares redeemed, redemptions for the
purpose of making such payment may reduce or even exhaust your account.
The purchase of shares while participating in a systematic withdrawal plan
will ordinarily be disadvantageous to you, because you will be paying a sales
charge on the purchase of shares at the same time that you are redeeming shares
upon which a sales charge may have already been paid. Therefore, a Fund will not
knowingly permit additional investments of less than $5,000 if you are at the
same time making systematic withdrawals. The right is reserved to amend the
systematic withdrawal plan on 30 days' notice. The plan may be terminated at any
time by you or the Funds.
OTHER INFORMATION ABOUT REDEMPTIONS
The Funds reserve the right to refuse any requests for redemption by
telephone or facsimile if it is believed advisable to do so. The Funds will not
honor redemption requests which are not in proper form as determined by CGFSC,
which are subject to any special conditions, or which specify an effective date
other than as provided herein.
The redemption price will be the net asset value of the shares next
computed after the redemption request in proper order is received by CGFSC or an
authorized dealer. Payment of the redemption price will be made within seven
days after receipt of the redemption request in proper order as described above;
however, payment of the redemption price for shares purchased by checks which
were not certified or bank checks may be delayed until the check used to make
such purchase has cleared, which may take up to 15 days. Remittance will be made
by check, mailed to the shareholder's registered address (or as otherwise
directed), or by wire, except that wire transfers will only be made to
shareholders who have elected this option, either by checking the appropriate
box on the application form and designating the account to which the proceeds
should be sent or by completing a form which may be requested from CGFSC. The
form must be returned to CGFSC, signed by the shareholder(s) and with signatures
guaranteed as described above, before requests for wire transfers will be
honored by CGFSC. The same form must be completed and returned in the same
manner in order to change the account to which proceeds will be sent.
The Funds may suspend the right of redemption or postpone the date of
payment for more than seven days when the Board of Directors declares a
suspension of the determination of net asset value in the circumstances
described under the heading "Net Asset Value, Dividends and Taxes" in the
Statement of Additional Information.
Each Fund reserves the right to liquidate involuntarily any shareholder's
account (other than IRA accounts) if the net asset value of the shares held in
the account is reduced to less than $10,000 due to redemptions by the
shareholder. With respect to IRA accounts, each Fund reserves the right to
liquidate involuntarily any investment on behalf of an IRA account if the net
asset value of the shares held in the account is reduced to less than $1,000 due
to redemptions by the shareholder. Should a Fund elect to exercise such right,
you would receive prior written notice and would be permitted at least 30 days
to bring the account up to the minimum to avoid automatic
- ---------------------------------------34---------------------------------------
<PAGE>
redemption at the net asset value as of the close of business on the proposed
redemption date. A check for the proceeds will be mailed to your registered
address.
The value of a Fund's shares realized on redemption may be more or less
than your cost, depending on the net asset value of the Fund's shares at the
time of redemption. The redemption of shares may be a taxable event to you.
- --------------------------------------------------------------------------------
EXCHANGES
- --------------------------------------------------------------------------------
You may exchange shares of any Fund without charge for shares of the same
class of any other Fund. Not all Funds currently offer both classes of shares.
The exchange privilege is only available in those states where the shares being
acquired are properly registered. Shares of all Funds may not be available for
sale in all states.
EXCHANGES BY MAIL
In order to make an exchange, you must send a written request to CGFSC,
signed by the shareholders together with a completed application form indicating
the Fund in which you wish to invest.
EXCHANGES BY TELEPHONE OR FACSIMILE
Exchanges may also be made by telephone or facsimile if you have previously
elected this option, either by checking the appropriate box in the application
form or by completing a form which may be requested from CGFSC. The form must be
returned to CGFSC, signed by the shareholder(s), with signatures guaranteed as
described above, before telephone or facsimile exchange instructions will be
honored by CGFSC.
Other Information about Exchanges
Exchange requests should specify clearly the amount or number of shares of
each Fund to be redeemed, the class of such shares and the Fund in which the
proceeds should be invested. Exchange orders received in proper form will be
treated as a sale of shares of the Fund in which you were previously invested
and a purchase of shares of the Fund in which the proceeds are invested as of
the date the exchange order is received in proper form by CGFSC. The exchange
may result in a gain or loss for tax purposes.
Each Fund may terminate or amend the right to exchange shares of the Fund
for shares of any other Fund. Each Fund will give shareholders 60 days' prior
notice of any material change. You should contact CGFSC if you have any
questions regarding the procedure for making exchanges or if you encounter
problems in making exchanges.
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NET ASSET VALUE, DIVIDENDS AND TAXES
- --------------------------------------------------------------------------------
NET ASSET VALUE
The net asset value of the shares of each Fund (other than
GAM Japan Capital Fund) is calculated as of the close of trading on the New York
Stock Exchange (currently 4:00 p.m. New York City time), Monday through Friday
(excluding holidays on which the New York Stock Exchange is closed). The net
asset value of shares of GAM Japan Capital Fund is calculated as of the close of
trading on the Tokyo Stock Exchange, which is at 3:00 p.m. Tokyo time (2:00 a.m.
New York time during Daylight Savings Time; 1:00 a.m. New York time at all other
- ---------------------------------------35---------------------------------------
<PAGE>
times) Monday through Friday and 11:00 a.m. Tokyo time (10:00 p.m. New York time
during Daylight Savings Time; 9:00 p.m. New York time at all other times) on
Saturday.
Net asset value per share of each Fund is determined by dividing the value
of the Fund's securities, cash and other assets (including accrued interest),
less all liabilities (including accrued expenses), by the number of the Fund's
shares outstanding. Securities traded on foreign exchanges will ordinarily be
valued at the last quoted sale price available before the close of the New York
Stock Exchange (except as described above with respect to securities held by GAM
Japan Capital Fund). If a security is traded on more than one United States or
foreign exchange, the last quoted sales price on the exchange which represents
the primary market for the security will be used. Because some of the Funds'
portfolio securities may be traded on certain weekend days and on days that are
holidays in the United States but not in other countries where trading occurs,
the net asset value of a Fund's portfolio may be significantly affected at times
when a shareholder has no ability to purchase or redeem shares of the Fund.
DIVIDENDS AND DISTRIBUTIONS
Each Fund intends annually to pay a dividend representing its entire net
investment income and to distribute all its realized net capital gains.
Dividends and/or any capital gain distributions paid by a Fund on its shares
will be reinvested automatically in whole or fractional shares of the same class
of the Fund at net asset value as of the ex-dividend date without imposition of
a sales load unless you make a written request to CGFSC for payment in cash
prior to the payment date. The payment date shall be not more than five business
days after the ex-dividend date. No certificates for shares issued on payment of
such dividends and distributions will generally be delivered, but your ownership
of such shares will be registered in your account.
Checks issued pursuant to a shareholder's request for payment of dividends
and capital gain distributions in cash will be forwarded by first class mail to
the shareholder's registered address. The proceeds of any such checks which are
not accepted by the addressee and are returned to a Fund will not be reinvested
in the Fund.
TAX CONSEQUENCES
Each Fund expects to qualify for the special tax treatment afforded to
regulated investment companies under the Internal Revenue Code of 1986, as
amended (the "Code"). If it qualifies, each Fund will pay no United States
Federal income tax on net income and net capital gains timely distributed to
shareholders of the Fund. Each Fund also intends to take all actions necessary
to avoid the imposition of any excise taxes on the Fund.
One of the requirements of the Code applicable to regulated investment
companies is that each Fund derive less than 30% of its gross income from the
sale or other disposition of securities (including certain options and futures
contracts) held for less than three months. This requirement may limit the
extent to which each Fund may engage in options and futures transactions.
For Federal income tax purposes, distributions from net ordinary income or
net short-term capital gains will be treated as ordinary income to shareholders
and distributions from net long-term capital gains will be treated as long-term
capital gains to shareholders, regardless of whether such distributions are paid
in cash or reinvested in additional shares of a Fund. Each Fund will inform you
each year of the amount and nature of any income or gain distributed to you.
Your tax liabilities with respect to such distributions will depend on your
particular tax situation.
Distributions of net ordinary income or net short-term capital gains
received by a non-resident alien individual or foreign corporation which is not
engaged in a trade or business in the United States generally will be subject to
Federal withholding tax at the rate of 30%, unless such rate is reduced by an
applicable income tax treaty to which the United States is a party. However,
gains from the sale by such shareholders of shares of the Funds and
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<PAGE>
distributions to such shareholders from long-term capital gains generally will
not be subject to the Federal withholding tax.
For a description of certain other tax consequences to shareholders, see
"Net Asset Value, Dividends and Taxes -- Tax Status" in the Statement of
Additional Information.
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MANAGEMENT OF THE FUNDS
- --------------------------------------------------------------------------------
DIRECTORS AND OFFICERS
The business of the Funds is managed by the Board of Directors, which may
exercise all powers as are not required by statute, the Articles of
Incorporation or the By-Laws to be exercised by the shareholders. When
appropriate, the Board of Directors will consider separately matters relating to
each Fund.
INVESTMENT ADVISERS
GAM International Management Limited ("GAM"), a corporation organized in
1984 under the laws of the United Kingdom, is the investment adviser of GAM
Global, International, Pacific Basin, Japan Capital, Asian Capital, GAMerica
Capital and Europe Funds and co-investment adviser of GAM North America Fund and
GAM Mid-Cap U.S. Fund. Fayez Sarofim & Co. ("Sarofim"), a Texas corporation
organized in 1958, also serves as co-investment adviser to GAM North America
Fund. Forstmann-Leff Associates Inc. ("Forstmann-Leff"), a New York corporation
incorporated in 1982, serves as co-investment adviser to GAM Mid-Cap U.S. Fund.
The individuals primarily responsible for the day-to-day management of each
Fund's portfolio are as follows:
GAM GLOBAL AND GAM INTERNATIONAL FUNDS
John R. Horseman joined GAM in 1987, initially as a member of the firm's
Asian team based in Hong Kong. In 1990, he moved to GAM's London office to
assume responsibility for a number of GAM's global and international funds.
He commenced management of GAM Global and GAM International Funds on April
1, 1990. Prior to joining GAM, he worked for BA Investment Management
International Ltd and was responsible for certain of the Bank of America's
global equity funds. Mr. Horseman was educated at the University of
Birmingham.
GAM PACIFIC BASIN FUND
Michael S. Bunker has overall responsibility for Asian investment policy.
He has over 20 years' investment experience, primarily in Asian markets. He
joined GAM in 1985 to create its Asian investment team. He commenced
management of GAM Pacific Basin Fund on May 6, 1987. From 1984 to 1987, Mr.
Bunker lived in Hong Kong and he is now based in London.
GAM JAPAN CAPITAL FUND
Paul S. Kirkby is responsible for investment in the Japanese market. He
joined GAM in 1985 as a Senior Fund Manager in Hong Kong, and previously
was an investment analyst with New Japan Securities Co. Ltd in Tokyo. He
commenced management of GAM Japan Capital Fund on July 1, 1994. Mr. Kirkby
is now based in London having lived in Hong Kong for seven years.
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<PAGE>
GAM ASIAN CAPITAL FUND
Adrian L. Cantwell is responsible for Asia ex Japan portfolios including
GAM Asian Capital Fund. He became portfolio manager of GAM Asian Capital
Fund at its inception on May 12, 1995. He also manages GAM ASEAN Fund Inc.,
an offshore investment fund with similar objectives. Prior to joining GAM
in 1990 he was a Director of Gartmore Limited, Hong Kong, responsible for
South East Asian investment. He was educated at the University of Cardiff.
Mr. Cantwell has lived in Hong Kong since 1985.
GAM EUROPE FUND
John Bennett is an Investment Director responsible for European markets. He
commenced management of GAM Europe Fund on January 1, 1993. Prior to
joining GAM in 1993, he was a Senior Fund Manager at Ivory & Sime
responsible for Continental European equity portfolios. He qualified as an
Associate of the Institute of Bankers (Scotland) in 1986. Mr. Bennett is
based in GAM's Edinburgh office.
David Houston is an Investment Director with responsibility for European
markets. He commenced management of GAM Europe Fund on March 29, 1993.
Prior to joining GAM in 1993, he was a Fund Manager in Ivory & Sime's
European equity team. From 1987 to 1989, he worked as an investment analyst
at Scottish Life Assurance. Mr. Houston was educated at the University of
Aberdeen and is qualified as a solicitor. He is based in GAM's Edinburgh
office.
GAM NORTH AMERICA FUND
Fayez Sarofim commenced management of GAM North America Fund on June 29,
1990. From 1951 to 1958, Mr. Sarofim worked for Anderson, Clayton & Co. and
his last assignment with the company was as assistant to the President. Mr.
Sarofim founded Fayez Sarofim & Co. in 1958 and is the President and
Chairman of the Board. He is also a director of Teledyne Inc., Argonaut
Group, Unitrin, Inc., MESA Inc., Imperial Holly Corp. and EXOR Group.
GAMERICA CAPITAL FUND
Gordon Grender has been associated with the GAM group since 1983 and became
portfolio manager of GAMerica Capital Fund at its inception on May 12,
1995. He also manages GAMerica Inc., an offshore investment fund with
similar objectives, and has been actively involved in fund management in
North American stock markets since 1974. Mr. Grender is a director of GAM.
GAM Mid-Cap U.S. Fund
William F. Harnisch, CFA will manage GAM Mid-Cap U.S. Fund. Mr. Harnisch is
President and Chief Investment Officer of Forstmann-Leff, having joined the
firm in 1978 as a portfolio manager and research analyst. From 1970 to
1978, he served as portfolio manager and research analyst at Chase
Investors Management Corporation New York, where he was responsible for
special equity investments. From 1968 to 1970, Mr. Harnisch was a security
analyst for the Chase Manhattan Bank, N.A.
GAM, Forstmann-Leff and Sarofim (the "Investment Advisers") are each
registered as an investment adviser under the Investment Advisers Act of 1940,
as amended. The principal executive office of GAM is located at 12 St. James's
Place, London SW1A INX, England. The principal executive office of
Forstmann-Leff is located at 55
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<PAGE>
East 52nd Street, New York, New York 10055. The principal executive office of
Sarofim is located at Suite 2907, Two Houston Center, Houston, Texas 77010.
GAM is an indirect subsidiary of Global Asset Management Ltd., which itself
is ultimately controlled, as to approximately 70%, by Lorelock, S.A., which
itself is controlled by a discretionary trust of which Mr. de Botton, President
and Director of the Company, may be a potential beneficiary and, as to
approximately 30%, by St. James's Place Capital plc (a financial services
company organized under the laws of and based in the United Kingdom). Global
Asset Management Ltd., directly or indirectly through its subsidiaries, manages
foreign mutual funds with aggregate assets of approximately $8.5 billion.
As of December 31, 1995, Sarofim managed on a discretionary basis accounts
with aggregate assets of approximately $30 billion. The majority shareholder of
Sarofim is Mr. Fayez Sarofim.
As of February 29, 1996, Forstmann-Leff managed on a discretionary basis
accounts with aggregate assets of approximately $2.7 billion. Joel Leff, William
Harnisch, Peter Lusk and Richard Adelaar, each a director of Forstmann-Leff,
each owns more than 10% of the outstanding stock of Forstmann-Leff.
Subject to the direction and supervision of the Board of Directors, GAM
furnishes the Funds with investment research and advice and makes
recommendations with respect to the Funds' purchases and sales of portfolio
securities and brokerage allocation, and both GAM and Sarofim provide such
services with respect to GAM North America Fund, and both GAM and Forstmann-Leff
provide such services with respect to GAM Mid-Cap U.S. Fund. GAM makes all
decisions regarding purchases and sales of investments and brokerage allocation
for GAM Global, International, Pacific Basin, Japan Capital, Asian Capital,
GAMerica Capital and Europe Funds. Sarofim makes all decisions regarding
purchases and sales of investments and brokerage allocation for GAM North
America Fund. Forstmann-Leff makes all decisions regarding purchases and sales
of investments and brokerage allocation for GAM Mid-Cap U.S. Fund. As
compensation for such services, GAM Global, International, Pacific Basin, Japan
Capital, Asian Capital, GAMerica Capital and Europe Funds each pays GAM a fee
equivalent to 1.0% per annum of the Fund's average daily net assets. GAM North
America Fund pays a fee equal to 0.50% of its average daily net assets to each
of GAM and Sarofim, representing an aggregate fee equal to 1.0% of its average
daily net assets. GAM Mid-Cap U.S. Fund pays a fee equal to 0.50% of its average
daily net assets to each of GAM and Forstmann-Leff, representing an aggregate
fee equal to 1.0% of its average daily net assets.
The Funds' expense ratios may be higher than those of most registered
investment companies since the cost of maintaining custody of foreign securities
is higher than those for most domestic funds and the rate of the advisory fee
paid by each Fund exceeds that of most registered investment companies. Also,
unlike arrangements between most other investment companies and their advisers,
the Investment Advisers are not required to furnish any overhead facilities for
the Funds. Each Fund pays for all expenses of its operation, including office
space and equipment, trading desk facilities, employee compensation, fees and
expenses of directors, interest, taxes, fees and commissions of every kind,
expenses of issue, repurchase or redemption of shares, registering or qualifying
shares for sale, insurance, association membership dues, all charges of
custodians (including fees as custodian and for maintaining books, performing
portfolio valuations and rendering other services to the Funds), transfer
agents, registrars, auditors and legal counsel, expenses of preparing, printing
and distributing prospectuses and all proxy materials, reports and notices to
shareholders and all other costs incident to the Company's existence as a
corporation. Included in the expenses of registering or qualifying shares for
sale, which each Fund bears, are the printing costs, legal fees and other
expenses relating to the preparation and filing with the SEC and other relevant
authorities of the Company's registration statement, and the production and
filing of the definitive Prospectus and Statement of Additional Information.
Each Fund will bear its attributable share of such expenses.
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<PAGE>
Each Investment Adviser has undertaken that its fee will be reduced, or
that the Investment Adviser will reimburse each Fund (up to the amount of its
fee), by an amount necessary to prevent the total expenses of each Fund
(including the Investment Advisers' fees and excluding taxes, interest,
brokerage commissions, distribution expenses and, under certain circumstances,
extraordinary expenses) from exceeding limits applicable to the Fund in any
state in which its shares are then qualified for sale. GAM has undertaken to
reimburse Sarofim for any portion of the advisory fee otherwise payable to
Sarofim which is reduced pursuant to the preceding sentence. For the year ended
December 31, 1995, the fee actually paid to the Investment Advisers by GAM
International Fund, GAM Global Fund, GAM Pacific Basin Fund, and GAM Europe Fund
was 1.0% of each Fund's average daily net assets and the fee actually paid by
GAM North America Fund was 0.71% of average daily net assets and by GAM Asian
Capital Fund was 0.16% of average daily net assets. No fee was paid by GAMerica
Capital Fund or GAM Japan Capital Fund. The ratio of total expenses to average
net assets of each Fund was 1.57% for GAM International Fund Class A Shares and
2.22% for Class D Shares, 2.16% for GAM Global Fund Class A Shares and 2.81% for
Class D Shares, 1.98% for GAM Pacific Basin Fund Class A Shares and 2.63% for
Class D Shares, 2.12% for GAM Europe Fund Class A Shares, 2.98% for GAM North
America Fund Class A Shares, 3.61% for GAM Japan Capital Fund Class A Shares,
3.11% for GAM Asian Capital Fund Class A Shares and 3.73% for GAMerica Capital
Fund Class A Shares.
SHAREHOLDER SERVICING AGENTS
The Funds may also contract with banks, trust companies, broker-dealers or
other financial organizations to act as shareholder servicing agents to provide
administrative services for the Funds, such as processing purchase and
redemption transactions, transmitting and receiving funds for the purchase and
sale of shares in the Funds, answering routine inquiries regarding the Funds,
furnishing monthly and year-end statements and confirmations of purchases and
sales of shares, transmitting periodic reports, updated prospectuses, proxy
statements and other communications to shareholders, and providing other
services as agreed from time to time. For these services, each Fund pays fees to
shareholder servicing agents which may vary depending upon the services
provided, but do not exceed an annual rate of 0.25% of the daily net asset value
of the shares of a Fund owned by shareholders with whom the shareholder
servicing agent has a servicing relationship.
Some shareholder servicing agents may impose additional or different
conditions on their clients, such as requiring their clients to invest more than
the minimum initial or subsequent investments specified by the Funds or charging
a fee to the client for servicing. Shareholders using shareholder servicing
agents should consult them regarding any such fees or conditions.
The Glass-Steagall Act and other applicable laws prohibit banks from
engaging in the business of underwriting, selling or distributing securities.
Although banks are currently permitted to perform administrative and shareholder
servicing functions, changes in the law or its interpretation could prevent a
bank from continuing to perform such services. It is not expected that
shareholders would suffer any adverse financial consequences as a result of any
such change.
DISTRIBUTOR
GAM Services Inc., 135 East 57th Street, New York, New York 10022, acts as
the distributor, or principal underwriter, of the Funds' shares. Like GAM, GAM
Services is indirectly controlled by Global Asset Management Ltd. and Lorelock
S.A. and may be deemed to be controlled by St. James's Place Capital plc and a
trust of which Gilbert de Botton may be a potential beneficiary. As distributor,
GAM Services collects the sales load imposed on purchases of shares of the Funds
and reallows part of the sales load to brokers who have sold shares as set forth
in
- ---------------------------------------40---------------------------------------
<PAGE>
the table under "Purchase of Shares - Offering Price". Kevin J. Blanchfield,
Vice-President, Treasurer and Secretary of the Company, is Chief Operating
Officer, Treasurer and a director of GAM Services.
CUSTODIAN AND ADMINISTRATOR
Brown Brothers Harriman & Co., 40 Water Street, Boston, Massachusetts
02109, serves as custodian of the Funds' securities and cash and as their
administrator. Brown Brothers also maintains certain records for the Funds
required by the Act and applicable Federal and state tax laws, keeps books of
account, renders reports and statements, including financial statements, and
disburses funds in payment of the Funds' bills and obligations. Brown Brothers
employs subcustodians for the purpose of providing custodial services for the
Funds' foreign assets held outside the United States.
SHAREHOLDER SERVICE AND TRANSFER AGENT
Chase Global Fund Services Company, P.O. Box 2798, Boston, Massachusetts
02208, serves as shareholder service agent, dividend-disbursing agent, transfer
agent and registrar for the Funds.
BROKERS
The Funds may use the services of brokers which are affiliated with the
Investment Advisers, provided that the commission paid to any such broker shall
be reasonable and fair compared to the commission or other remuneration received
by other brokers in comparable transactions involving similar securities.
- --------------------------------------------------------------------------------
DESCRIPTION OF SHARES
- --------------------------------------------------------------------------------
The Company, a Maryland corporation, was organized on May 7, 1984. On
February 18, 1986, the Company changed its name from GAM International, Inc. to
GAM Funds, Inc.
The Company has nine series of common stock outstanding, each of which may
be divided into two classes of shares, Class A shares and Class D shares. The
two classes of shares of a series represent interests in the same portfolio of
investments, have the same rights, and are generally identical in all respects,
except that each class bears its separate distribution and certain class
expenses and has exclusive voting rights with respect to any matter on which a
separate vote of any class is required by the Act or Maryland law. The net
income attributable to each class and dividends payable on the shares of each
class will be reduced by the amount of distribution fees and other expenses of
each class. Class D shares bear higher distribution fees, which will cause the
Class D shares to pay lower dividends than the Class A shares. The two classes
also have separate exchange privileges. Class D shares are currently available
only for GAM International Fund, GAM Global Fund and GAM Pacific Basin Fund. The
Company may issue other series or classes of common stock in the future.
Each share outstanding is entitled to share equally in dividends and other
distributions and in the net assets of the respective series Fund on
liquidation. Shares are fully paid and nonassessable when issued, freely
transferable, have no preemptive, subscription or conversion rights and are
redeemable and subject to redemption under certain conditions described above.
Each share outstanding entitles the holder to one vote. Regulations of the
SEC provide that if a Fund is separately affected by a matter requiring a vote,
the shareholders of each such Fund shall vote separately. The approval of an
investment advisory agreement or a distribution plan pursuant to Rule 12b-1 of
the Act is considered to have a separate effect on each Fund and shall be voted
upon separately by the shareholders of each Fund. Election
- ---------------------------------------41---------------------------------------
<PAGE>
of directors, ratification of accountants, and selection and approval of a
principal underwriting agreement are not considered to have such separate effect
and may be voted upon by the Company as a whole. The shares do not have
cumulative voting rights. The Company is not required to hold annual meetings of
shareholders, although special meetings will be held for purposes such as
electing or removing directors, changing fundamental policies, or approving an
investment advisory agreement. Shareholders will be assisted in communicating
with other shareholders in connection with removing a director as if Section 16
(c) of the Act were applicable.
The Directors believe that no conflict of interest currently exists between
the Class A and Class D shares. On an ongoing basis, the Directors, in the
exercise of their fiduciary duties under the Act and Maryland law, will seek to
ensure that no such conflict arises. For this purpose, the Directors will
monitor the Funds for the existence of any material conflict among the classes
and will take such action as is reasonably necessary to eliminate any such
conflicts that may develop.
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
This Prospectus does not contain all the information included in the
Registration Statement filed with the SEC with respect to the securities offered
hereby, certain portions of which have been omitted pursuant to the rules and
regulations of the SEC. The Registration Statement, including the exhibits filed
therewith, may be examined at the office of the SEC in Washington, D.C.
Statements contained in this Prospectus as to the contents of any contract
or other document referred to are not necessarily complete and, in each
instance, reference should be made to the copy of such contract or other
document filed as an exhibit to the Registration Statement of which this
Prospectus forms a part, each such statement being qualified in all respects by
such reference.
Shareholder inquiries should be directed to the Company at the telephone
number or address set forth on the cover of this Prospectus.
- ---------------------------------------42---------------------------------------
<PAGE>
GAM FUNDS, INC.
GAM FUNDS, INC. (the "Company") is a diversified open-end management
investment company which offers investors the opportunity to invest in nine
different portfolios (the "Funds"):
GAM GLOBAL FUND - investing primarily in the United States,
Europe, the Pacific Basin, and Canada.
GAM INTERNATIONAL FUND - investing primarily in Europe, the
Pacific Basin and Canada.
GAM PACIFIC BASIN FUND - investing primarily in the Pacific
Basin, including Japan, Hong Kong, Korea, Taiwan, Singapore,
Malaysia, Thailand, Indonesia and Australia.
GAM JAPAN CAPITAL FUND - investing primarily in Japan.
GAM ASIAN CAPITAL FUND - investing primarily in Asia excluding
Japan.
GAM EUROPE FUND - investing primarily in Europe.
GAM NORTH AMERICA FUND - investing primarily in the United States
and Canada.
GAMERICA CAPITAL FUND - investing primarily in the United States.
GAM MID-CAP U.S. FUND - investing primarily in the United States.
GAM INTERNATIONAL MANAGEMENT LIMITED ("GAM") provides investment
analysis and advice regarding each Fund's portfolio. FAYEZ SAROFIM & CO.
("Sarofim") acts as co- investment adviser to GAM North America Fund.
FORSTMANN-LEFF ASSOCIATES INC. ("Forstmann- Leff") acts as co-investment adviser
to GAM Mid-Cap U.S. Fund. (GAM, Forstmann-Leff and Sarofim are referred to
jointly as the "Investment Advisers".)
----------------------
This Statement of Additional Information, which should be kept for
future reference, is not a prospectus. It should be read in conjunction with the
Prospectus of the Funds, dated April 30, 1996, which can be obtained without
cost upon request at the address or telephone numbers indicated below.
----------------------
The date of this Statement of Additional Information is April 30, 1996
1996.
GAM FUNDS, INC.
135 East 57th Street
New York, NY 10022
Tel: (212) 407-4600
Fax: (212) 407-4684
<PAGE>
TABLE OF CONTENTS
Page
INVESTMENT OBJECTIVE AND POLICIES.......................................... 2
Rating of Securities..................................................... 2
United States Government Obligations..................................... 2
Repurchase Agreements.................................................... 3
Options ................................................................ 3
Stock Index Futures and Options.......................................... 4
Interest Rate Futures and Options........................................ 6
Foreign Currency Transactions............................................ 6
Lending Portfolio Securities............................................. 8
Warrants ................................................................ 9
Borrowing................................................................ 9
Restricted Securities.................................................... 9
Future Developments...................................................... 9
Investment Restrictions.................................................. 10
Risk Considerations...................................................... 11
PERFORMANCE INFORMATION.................................................... 13
NET ASSET VALUE, DIVIDENDS AND TAXES....................................... 14
Net Asset Value.......................................................... 14
Suspension of the Determination of Net Asset Value....................... 14
Tax Status............................................................... 15
MANAGEMENT OF THE COMPANY.................................................. 16
Compensation of Directors and Executive Officers......................... 17
Principal Holders of Securities.......................................... 18
Change of Name........................................................... 21
INVESTMENT ADVISORY AND OTHER SERVICES..................................... 21
Investment Advisory Contracts............................................ 21
Advisory Fees............................................................ 22
Investment Advisers...................................................... 23
Distribution of Shares................................................... 25
Custodian and Administrator.............................................. 26
Shareholder Service and Transfer Agent................................... 26
Legal Counsel............................................................ 26
Independent Accountants.................................................. 26
Reports to Shareholders.................................................. 27
BROKERAGE ALLOCATION....................................................... 27
FINANCIAL STATEMENTS....................................................... 29
<PAGE>
-2-
INVESTMENT OBJECTIVE AND POLICIES
The investment objective and policies of each Fund are
described in the Prospectus under the heading "Investment Objective and Policies
and Risk Considerations." Set forth below is additional information with respect
to the investment objective and policies of each Fund.
RATING OF SECURITIES
Each Fund may invest a substantial portion of its assets in
debt securities issued by companies or governments and their agencies and
instrumentalities if it determines that the long-term capital appreciation of
such debt securities may equal or exceed the return on equity securities. The
debt securities (bonds and notes) in which the Funds may invest will be rated C
or better by Moody's Investors Services, Inc. ("Moody's") or D or better by
Standard & Poor's Corporation ("S&P"), which are the lowest ratings, or, if
unrated, be comparable in quality as determined pursuant to guidelines
established by the Company's Board of Directors, since debt securities of
foreign companies and foreign governments are not generally rated by Moody's or
S&P. Each Fund may, for temporary defensive purposes, invest in debt securities
(with remaining maturities of five years or less) issued by companies and
governments and their agencies and instrumentalities and in money market
instruments denominated in currency of the United States or foreign nations. The
money market instruments include commercial paper which, when purchased, is
rated Prime-1 or better by Moody's or A-1 or better by S&P or, if not rated, is
issued by a company which at the date of investment has an outstanding debt
issue rated Aa or better by Moody's or AA or better by S&P or is of equivalent
investment quality as determined by the Company pursuant to guidelines
established and maintained in good faith by the Board of Directors. A
description of the Moody's and S&P rating systems is contained in the Appendix
to this Statement of Additional Information.
None of the Funds will invest more than 5% of its assets in
debt securities which are rated lower than "investment grade" by a rating
service. Debt securities rated lower than "investment grade," also known as
"junk bonds," are those debt securities not rated in one of the four highest
categories by a rating service (e.g., bonds rated lower than BBB by S&P or lower
than Baa by Moody's). Junk bonds, and debt securities rated in the lowest
"investment grade," have speculative characteristics, and changes in economic
circumstances or other circumstances are more likely to lead to a weakened
capacity on the part of issuers of such lower rated debt securities to make
principal and interest payments than issuers of higher rated investment grade
bonds. Developments such as higher interest rates may lead to a higher incidence
of junk bond defaults, and the market in junk bonds may be more volatile and
illiquid than that in investment grade bonds.
A Fund will not invest more than 3% of its total assets in
securities (including money market instruments and repurchase agreements) issued
by any single non-United States bank, nor will a Fund acquire more than 3% of
the outstanding voting stock of any non-United States bank.
UNITED STATES GOVERNMENT OBLIGATIONS
Under the circumstances indicated under the heading
"Investment Objective and Policies" in the Prospectus, the Funds may invest in
securities of the United States government, its agencies and instrumentalities.
United States government securities include (1) United States Treasury
obligations, which differ only in their interest rates, maturities and times of
issuance, and which include United States Treasury bills (maturing in one year
or less), United States Treasury notes (maturing in one to ten years) and United
States Treasury bonds (generally maturing in more than ten years); and (2)
obligations issued or guaranteed
<PAGE>
-3-
by United States government agencies and instrumentalities which are supported
by any of the following: (a) the full faith and credit of the United States
Treasury, (b) the right of the issuer to borrow an amount limited to a specific
line of credit from the United States Treasury, (c) discretionary authority of
the United States government to purchase certain obligations of the United
States government agency or instrumentality, or (d) the credit of the agency or
instrumentality. Agencies and instrumentalities include, but are not limited to:
Federal Land Banks, Farmers Home Administration, Central Bank for Cooperatives,
Federal Intermediate Credit Banks, Federal Home Loan Bank, Student Loan
Marketing Association, Federal National Mortgage Association and Government
National Mortgage Association.
REPURCHASE AGREEMENTS
Each Fund may, for temporary defensive purposes, invest in
repurchase agreements. In such a transaction, at the same time a Fund purchases
a security, it agrees to resell it to the seller and is obligated to redeliver
the security to the seller at a fixed price and time. This establishes a yield
during the Fund's holding period, since the resale price is in excess of the
purchase price and reflects an agreed-upon market rate. Such transactions afford
an opportunity for a Fund to invest temporarily available cash. Repurchase
agreements may be considered loans to the seller collateralized by the
underlying securities. The risk to a Fund is limited to the ability of the
seller to pay the agreed-upon sum on the delivery date; in the event of a
default the repurchase agreement provides that the Fund is entitled to sell the
underlying collateral. If the value of the collateral declines after the
agreement is entered into, however, and if the seller defaults when the value of
the underlying collateral is less than the repurchase price, a Fund could incur
a loss of both principal and interest. The collateral is marked-to-market daily
and the Investment Advisers monitor the value of the collateral in an effort to
determine that the value of the collateral always equals or exceeds the
agreed-upon sum to be paid to a Fund. If the seller were to be subject to a
United States bankruptcy proceeding, the ability of a Fund to liquidate the
collateral could be delayed or impaired because of certain provisions in the
bankruptcy law. Each Fund may only enter into repurchase agreements with
domestic or foreign securities dealers, banks and other financial institutions
deemed to be creditworthy under guidelines approved by the Board of Directors.
OPTIONS
The principal reason for writing covered call options is to
realize, through the receipt of premiums, a greater return than would be
realized on a Fund's portfolio securities alone. In return for a premium, the
writer of a covered call option forfeits the right to any appreciation in the
value of the underlying security above the strike price for the life of the
option (or until a closing purchase transaction can be effected). Nevertheless,
the call writer retains the risk of a decline in the price of the underlying
security. Similarly, the principal reason for writing secured put options is to
realize income in the form of premiums. The writer of a secured put option
accepts the risk of a decline in the price of the underlying security. The size
of the premiums that a Fund may receive may be adversely affected as new or
existing institutions, including other investment companies, engage in or
increase their option-writing activities.
Options written ordinarily will have expiration dates between
one and nine months from the date written. The exercise price of the options may
be below, equal to or above the market values of the underlying securities at
the times the options are written. In the case of call options, these exercise
prices are referred to as "in-the-money," "at-the-money" and "out-of-the-money,"
respectively. Each Fund may write (a) in-the-money call options when the Fund
expects that the price of the underlying security will remain stable or decline
moderately during the option period, (b) at-the-money call options when the Fund
expects that the price of the underlying security will remain stable or advance
moderately during the option period and (c) out-
<PAGE>
-4-
of-the-money call options when the Fund expects that the premiums received from
writing the call option plus the appreciation in market price of the underlying
security up to the exercise price will be greater than the appreciation in the
price of the underlying security alone. In these circumstances, if the market
price of the underlying security declines and the security is sold at this lower
price, the amount of any realized loss will be offset wholly or in part by the
premium received. Out-of-the-money, at-the-money and in-the-money put options
(the reverse of call options as to the relation of exercise price to market
price) may be utilized in the same market environments that such call options
are used in equivalent transactions.
To close out a position when writing covered options, a Fund
may make a "closing purchase transaction," which involves purchasing an option
on the same security with the same exercise price and expiration date as the
option which it has previously written on a security. A Fund will realize a
profit or loss from a closing purchase transaction if the amount paid to
purchase an option is less or more, as the case may be, than the amount received
from the sale of the option.
Although each Fund generally will purchase or write only those
options for which it believes there is an active secondary market so as to
facilitate closing transactions, there is no assurance that sufficient trading
interest to create a liquid secondary market on a securities exchange will exist
for any particular option or at any particular time, and for some options no
such secondary market may exist. A liquid secondary market in an option may
cease to exist for a variety of reasons. In such event, it might not be possible
to effect closing transactions in particular options. If, as a covered call
option writer, a Fund is unable to effect a closing purchase transaction in a
secondary market, it will not be able to sell the underlying security until the
option expires or it delivers the underlying security upon exercise.
The success of each Fund's options trading activities will
depend on the ability of the Investment Advisers to predict correctly future
changes in the prices of securities. Purchase or sale of options to hedge each
Fund's existing securities positions is also subject to the risk that the value
of the option purchased or sold may not move in perfect correlation with the
price of the underlying security.
It is a condition to the favorable tax treatment afforded to a
regulated investment company, such as the Funds, that each Fund derive less than
30% of its gross income from the sale or disposition of securities (including
certain options and futures contracts) held for less than three months. This
requirement may limit the extent to which each Fund may engage in trading in
options and futures (discussed below), and options and futures trading may
increase the risk that a Fund may not satisfy this requirement and that it may
therefore become liable for taxes on its income and gains. The greater leverage
in options and futures trading may also tend to increase the daily fluctuations
in the value of a Fund's shares.
STOCK INDEX FUTURES AND OPTIONS
Each Fund may purchase and sell stock index futures contracts,
and purchase, sell and write put and call options on stock index futures
contracts, for the purpose of hedging its portfolio. A stock index fluctuates
with changes in the market value of the stocks included in the index. Some stock
index options are based on a broad market index, such as the NYSE Composite
Index, or a narrower market index, such as the Standard & Poor's 100. If the
assets of a Fund are substantially invested in equity securities, the Fund might
sell a futures contract based on a stock index which is expected to reflect
changes in prices of stocks in the Fund's portfolio in order to hedge against a
possible general decline in market prices. A Fund may similarly purchase a stock
index futures contract to hedge against a possible increase in the price of
stocks before the Fund is able to invest cash or cash equivalents in stock in an
orderly fashion.
<PAGE>
-5-
The effectiveness of trading in stock index futures and
options as a hedging technique will depend upon the extent to which price
movements in a Fund's portfolio correlate with price movements of the stock
index selected. Because the value of an index future or option depends upon
movements in the level of the index rather than the price of a particular stock,
whether a Fund will realize a gain or loss from the purchase, sale or writing of
a stock index future or option depends upon movements in the level of stock
prices in the stock market generally, or in the case of certain indexes, in an
industry or market segment, rather than movements in the price of a particular
stock.
In addition to the possibility that there may be an imperfect
correlation, or no correlation at all, between movements in a stock index and
the portion of the portfolio being hedged, the price of stock index futures may
not correlate perfectly with the movement in the stock index due to certain
market distortions. First, all participants in the futures market are subject to
margin deposit and maintenance requirements. Rather than meeting additional
margin deposit requirements, investors may close futures contracts through
offsetting transactions which would distort the normal relationship between the
index and futures markets. Secondly, from the point of view of speculators, the
deposit requirements in the futures market are less onerous than margin
requirements in the securities market. Therefore, increased participation by
speculators in the futures market also may cause temporary price distortions.
Due to the possibility of price distortions in the futures market and because of
the imperfect correlation between movements in the stock index and movements in
the price of stock index futures, a correct forecast of general market trends by
the Investment Advisers still may not result in a successful hedging
transaction.
Successful use of stock index futures by the Funds also is
subject to the ability of the Investment Adviser to predict correctly movements
in the direction of the market. For example, if a Fund has hedged against the
possibility of a decline in the market adversely affecting stocks held in its
portfolio and stock prices increase instead, the Fund will lose part or all of
the benefit of the increased value of its stocks which it has hedged because it
will have offsetting losses in its futures positions. In addition, in such
situations, if a Fund has insufficient cash, it may have to sell securities to
meet daily variation margin requirements. Such sales of securities may be, but
will not necessarily be, at increased prices which reflect the rising market.
The Fund may have to sell securities at a time when it may be disadvantageous to
do so.
Each Fund may purchase and sell commodity futures contracts,
and purchase, sell or write options on futures contracts, for bona fide hedging
purposes or otherwise in accordance with applicable rules of the Commodity
Futures Trading Commission (the "CFTC"). CFTC rules permit an entity such as a
Fund to acquire commodity futures and options as part of its portfolio
management strategy, provided that the sum of the amount of initial margin
deposits and premiums paid for unexpired commodity futures contracts and options
would not exceed 5% of the fair market value of the assets of the Fund, after
taking into account unrealized profits and unrealized losses on such contracts
it has entered into. In the case of an option that is in-the-money at the time
of purchase, the in-the-money amount may be excluded in calculating the 5%.
When a Fund enters into a futures contract or writes an option
on a futures contract, it will deposit in a segregated account with its
custodian cash or United States government securities having a market value
which, when added to the margin deposited with the broker or futures commission
merchant, will at all times equal the purchase price of a long position in a
futures contract, the strike price of a put option written by the Fund, or the
market value (marked-to-market daily) of the commodity underlying a short
position in a futures contract or a call option written by the Fund, or the Fund
will otherwise cover the transaction.
<PAGE>
-6-
INTEREST RATE FUTURES AND OPTIONS
Each Fund may hedge against the possibility of an increase or
decrease in interest rates adversely affecting the value of securities held in
its portfolio by purchasing or selling a futures contract on a specific debt
security whose price is expected to reflect changes in interest rates. However,
if a Fund anticipates an increase in interest rates and rates decrease instead,
the Fund will lose part or all of the benefit of the increased value of the
securities which it has hedged because it will have offsetting losses in its
futures position. In addition, in such situations, if the Fund has insufficient
cash, it may have to sell securities to meet daily variation margin requirements
at a time when it may be disadvantageous to do so. These sales of securities
may, but will not necessarily, be at increased prices which reflect the decline
in interest rates.
A Fund may purchase call options on interest rate futures
contracts to hedge against a decline in interest rates and may purchase put
options on interest rate futures contracts to hedge its portfolio securities
against the risk of rising interest rates. A Fund will sell options on interest
rate futures contracts as part of closing purchase transactions to terminate its
options positions. No assurance can be given that such closing transactions can
be effected or that there will be a correlation between price movements in the
options on interest rate futures and price movements in the portfolio securities
of the Fund which are the subject of the hedge. In addition, a Fund's purchase
of such options will be based upon predictions as to anticipated interest rate
trends, which could prove to be inaccurate. The potential loss related to the
purchase of an option on interest rate future contracts is limited to the
premium paid for the option.
Although each Fund intends to purchase or sell commodity
futures contracts only if there is an active market for each such contract, no
assurance can be given that a liquid market will exist for the contracts at any
particular time. Most futures exchanges and boards of trade limit the amount of
fluctuation permitted in futures contract prices during a single trading day.
Once the daily limit has been reached in a particular contract, no trades may be
made that day at a price beyond that limit. Futures contract prices could move
to the daily limit for several consecutive trading days with little or no
trading, thereby preventing prompt liquidation of futures positions and
subjecting some futures traders to substantial losses. In such event and in the
event of adverse price movements, a Fund would be required to make daily cash
payments of variation margin. In such circumstances, an increase in the value of
the portion of the portfolio being hedged, if any, may offset partially or
completely losses on the futures contract. However, no assurance can be given
that the price of the securities being hedged will correlate with the price
movements in a futures contract and thus provide an offset to losses on the
futures contract.
FOREIGN CURRENCY TRANSACTIONS
Since investments in foreign securities will usually involve
currencies of foreign countries, and since each Fund may temporarily hold funds
in foreign or domestic bank deposits in foreign currencies during the completion
of investment programs, the value of the assets of each Fund as measured in
United States dollars may be affected favorably or unfavorably by changes in
foreign currency exchange rates and exchange control regulations, and the Funds
may incur costs in connection with conversions between various currencies. The
Funds will conduct their foreign currency exchange transactions either on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign currency exchange
market, or through entering into forward contracts to purchase or sell foreign
currencies. A forward foreign exchange contract involves an obligation to
purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract agreed upon by the parties, at a
price set at the time of the contract. These contracts are traded in the
interbank market conducted directly between currency traders (usually large
commercial banks) and
<PAGE>
-7-
their customers. A forward contract generally has no deposit requirement and is
consummated without payment of any commission.
Each Fund may enter into forward foreign exchange contracts
for speculative purposes and under the following circumstances: First, when a
Fund enters into a contract for the purchase or sale of a security denominated
in a foreign currency, or when a Fund anticipates the receipt in a foreign
currency of dividends or interest payments on such a security which it purchases
or already holds, it may desire to "lock-in" the United States dollar price of
the security or the United States dollar equivalent of such dividend or interest
payment, as the case may be. By entering into a forward contract for the
purchase or sale, for a fixed amount of dollars, of the amount of foreign
currency involved in the underlying security transactions, the Fund will be able
to protect itself against a possible loss resulting from an adverse change in
the relationship between the United States dollar and the subject foreign
currency during the period between the date the security is purchased or sold,
or on which the dividend or interest payment is declared, and the date on which
payment is made or received.
Second, if it is believed that the currency of a particular
foreign country may suffer a substantial decline against the United States
dollar or another currency, a Fund may enter into a forward contract to sell,
for a fixed amount of dollars, the amount of foreign currency approximating the
value of some or all of the Fund's portfolio securities denominated in such
foreign currency. The precise matching of the forward contract amounts and the
value of the securities involved will not generally be possible since the future
value of such securities in foreign currencies will change as a consequence of
market movements in the value of those securities between the date the forward
contract is entered into and the date it matures.
The projection of short-term currency market movements is
extremely difficult, and the successful execution of a short-term hedging
strategy is highly uncertain. Each Fund will place cash or liquid debt
securities in a separate custody account of the Fund with the Company's
custodian in an amount equal to the value of the Fund's total assets committed
to the consummation of the hedge contracts or otherwise cover such transactions.
The securities placed in the separate account will be marked-to-market daily. If
the value of the securities placed in the separate account declines, additional
cash or liquid securities will be placed in the account on a daily basis so that
the value of the account will equal the amount of the Fund's uncovered
commitments with respect to such contracts.
The Funds generally will not enter into a forward contract
with a term of greater than one year. At the maturity of a forward contract, a
Fund may either sell the portfolio security and make delivery of the foreign
currency, or it may retain the security and terminate its contractual obligation
to deliver the foreign currency by purchasing an "offsetting" contract with the
same currency trader obligating it to purchase, on the same maturity date, the
same amount of the foreign currency. A Fund may also purchase an "offsetting"
contract prior to the maturity of the underlying contract. There is no assurance
that such an "offsetting" contract will always be available to a Fund.
It is impossible to forecast with absolute precision what the
market value of portfolio securities will be at the expiration of a related
forward contract. Accordingly, it may be necessary for a Fund to purchase
additional foreign currency on the spot market (and bear the expense of such
purchase) if the market value of a security being sold is less than the amount
of foreign currency the Fund is obligated to deliver. Conversely, a Fund may
sell on the spot market some of the foreign currency received upon the sale of
the portfolio security if its market value exceeds the amount of foreign
currency the Fund is obligated to deliver.
<PAGE>
-8-
If a Fund retains the portfolio security and engages in an
offsetting transaction, the Fund will incur a gain or a loss to the extent that
there has been movement in forward contract prices. If a Fund engages in an
offsetting transaction, it may subsequently enter into a new forward contract to
sell the foreign currency. Should forward prices decline during the period
between a Fund's entering into a forward contract for the sale of a foreign
currency and the date it enters into an offsetting contract for the purchase of
the foreign currency, the Fund will realize a gain to the extent the price of
the currency it has agreed to purchase is less than the price of the currency it
has agreed to sell. Should forward prices increase, the Fund will suffer a loss
to the extent the price of the currency it has agreed to purchase exceeds the
price of the currency it has agreed to sell.
Each Fund's dealing in forward foreign exchange contracts will
be limited to the transactions described above. A Fund is not required to enter
into such transactions with regard to its foreign currency-denominated
securities and will not do so unless deemed appropriate by the Company. It also
should be realized that this method of hedging the value of a Fund's portfolio
securities against a decline in the value of a currency does not eliminate
fluctuations in the underlying prices of the securities. Additionally, although
such contracts tend to minimize the risk of loss due to a decline in the value
of the hedged currency, at the same time, they tend to limit any potential gain
which might result should the value of such currency increase.
The Funds may purchase or sell options to buy or sell foreign
currencies and options on foreign currency futures, or write such options, as a
substitute for entering into forward foreign exchange contracts in the
circumstances described above. For example, in order to hedge against the
decline in value of portfolio securities denominated in a specific foreign
currency, a Fund may purchase an option to sell, for a specified amount of
dollars, the amount of foreign currency represented by such portfolio
securities. In such case, the Fund will pay a "premium" to acquire the option,
as well as the agreed exercise price if it exercises the option.
Although each Fund values its assets daily in terms of United
States dollars, the Funds do not intend to convert their foreign currency
holdings into United States dollars on any regular basis. A Fund may so convert
from time to time, and thereby incur certain currency conversion charges.
Although foreign exchange dealers do not generally charge a fee for conversion,
they do realize a profit based on the difference (the "spread") between the
prices at which they are buying and selling various currencies. Thus, a dealer
may offer to sell a foreign currency to a Fund at one rate, while offering a
lesser rate of exchange should the Fund desire to resell that currency to the
dealer.
LENDING PORTFOLIO SECURITIES
Each Fund may lend its portfolio securities to brokers,
dealers and financial institutions when secured by collateral maintained on a
daily marked-to-market basis in an amount equal to at least 100% of the market
value, determined daily, of the loaned securities. A Fund may at any time call
the loan and obtain the return of the securities loaned. No such loan will be
made which would cause the aggregate market value of all securities lent by a
Fund to exceed 15% of the value of the Fund's total assets. The Fund will
continue to receive the income on loaned securities and will, at the same time,
earn interest on the loan collateral. Any cash collateral received under these
loans will be invested in short-term money market instruments. Where voting or
consent rights with respect to loaned securities pass to the borrower, each Fund
will follow the policy of calling the loan, in whole or in part as may be
appropriate, to permit the exercise of such voting or consent rights if the
matters involved will have a material effect on the Fund's investment in the
securities loaned.
<PAGE>
-9-
WARRANTS
Each Fund may purchase warrants. The holder of a warrant has
the right to purchase a given number of shares of a particular issuer at a
specified price until expiration of the warrant. Such investments can provide a
greater potential for profit or loss than an equivalent investment in the
underlying security. Each Fund may invest up to 10% of its net assets, valued at
the lower of cost or market value, in warrants (other than those that have been
acquired in units or attached to other securities), including warrants not
listed on American or foreign stock exchanges. Prices of warrants do not move in
tandem with the prices of the underlying securities, and are speculative
investments. They pay no dividends and confer no rights other than a purchase
option. If a warrant is not exercised by the date of its expiration, a Fund will
lose its entire investment in such warrant.
BORROWING
Each Fund may borrow from banks for temporary emergency
purposes. Each Fund will maintain continuous asset coverage (that is, total
assets including borrowings, less liabilities exclusive of borrowings) of 300%
of the amount borrowed. (For this purpose, the proceeds received from a reverse
repurchase agreement will be deemed a borrowing by a Fund.) If the 300% asset
coverage should decline as a result of market fluctuations or other reasons, a
Fund may be required to sell some of its portfolio holdings within three days to
reduce the debt and restore the 300% asset coverage, even though it may be
disadvantageous from an investment standpoint to sell portfolio holdings at the
time.
Borrowing money, also known as leveraging, will cause a Fund
to incur interest charges, and may increase the effect of fluctuations in the
value of the investments of the Fund on the net asset value of its shares. A
Fund will not purchase additional securities for investment while there are
borrowings outstanding representing more than 5% of the total assets of the
Fund.
RESTRICTED SECURITIES
The Funds may purchase securities that are not registered for
sale to the general public in the United States, but which can be resold to
institutional investors in the United States, including securities offered
pursuant to Rule 144A adopted by the United States Securities and Exchange
Commission ("SEC"). Provided that a dealer or institutional trading market in
such securities exists, either within or outside the United States, these
restricted securities will not be treated as illiquid securities for purposes of
the Funds' investment restrictions. The Board of Directors will establish
standards for determining whether or not such securities are liquid based on the
level of trading activity, availability of reliable price information and other
relevant considerations. The Funds may also purchase privately placed restricted
securities for which no institutional market exists. The absence of a trading
market may adversely affect the ability of the Funds to sell such illiquid
securities promptly and at an acceptable price, and may also make it more
difficult to ascertain a market value for illiquid securities held by the Funds.
The purchase by the Funds of securities offered pursuant to Rule 144A may also
increase the level of illiquidity of a Fund if qualified institutional investors
cease to be interested in purchasing such restricted securities and no other
market exists.
FUTURE DEVELOPMENTS
The Funds may take advantage of opportunities in the area of
options and futures contracts and other derivative financial instruments which
are developed in the future, to the extent such opportunities are both
consistent with each Fund's investment objective and permitted by applicable
regulations. The Funds'
<PAGE>
-10-
Prospectus and Statement of Additional Information will be amended or
supplemented, if appropriate in connection with any such practices.
INVESTMENT RESTRICTIONS
Each Fund has adopted certain investment restrictions which
cannot be changed without approval by holders of a majority of its outstanding
voting shares. As defined in the Investment Company Act of 1940, as amended (the
"Act"), this means the lesser of (a) 67% or more of the shares of the Fund at a
meeting where more than 50% of the outstanding shares are present in person or
by proxy or (b) more than 50% of the outstanding shares of the Fund.
In accordance with these restrictions, each Fund may not:
1. With respect to 75% of its total assets, invest more than
5% of its total assets in any one issuer (other than the United States
government, its agencies and instrumentalities) or purchase more than 10% of the
voting securities, or more than 10% of any class of securities, of any one
issuer. (For this purpose all outstanding debt securities of an issuer are
considered as one class, and all preferred stocks of an issuer are considered as
one class.)
2. Invest for the purpose of exercising control or
management of another company.
3. Make short sales of securities or purchase any securities
on margin, except for such short-term credits as are necessary for the clearance
of transactions.
4. Invest in real estate (including real estate limited
partnerships), although a Fund may invest in marketable securities which are
secured by real estate and securities of companies which invest or deal in real
estate.
5. Invest more than 10% of the value of its total assets in
securities of companies which, with their predecessors, have a record of less
than three years' continuous operation.
6. Purchase or retain the securities of any issuer if any of
the officers or directors of the Company or its investment adviser owns
individually more than 1/2 of 1% of the securities of such issuer and together
such officers and directors owning more than 1/2 of 1% own more than 5% of the
securities of such issuer.
7. Concentrate more than 25% of the value of its total
assets in any one industry (including securities of non-United States
governments).
8. Make loans, except that this restriction shall not
prohibit (1) the purchase of publicly distributed debt securities in accordance
with a Fund's investment objectives and policies, (2) the lending of portfolio
securities, and (3) entering into repurchase agreements.
9. Borrow money, except from banks for temporary emergency
purposes and, in no event, in excess of 33 1/3% of its total assets at value or
cost, whichever is less; or pledge or mortgage its assets or transfer or assign
or otherwise encumber them in an amount exceeding the amount of the borrowing
secured thereby.
<PAGE>
-11-
10. Underwrite securities issued by others except to the
extent the Company may be deemed to be an underwriter, under the Federal
securities laws, in connection with the disposition of its portfolio securities.
11. Purchase securities of other investment companies, except
(a) in connection with a merger, consolidation, reorganization or acquisition of
assets or (b) a Fund may purchase securities of closed-end investment companies
up to (i) 3% of the outstanding voting stock of any one investment company
(including for this purpose investments by any other series of the Company),
(ii) 5% of the total assets of the Fund with respect to any one investment
company and (iii) 10% of the total assets of the Fund in the aggregate.
12. Invest in interests in oil, gas or other mineral
exploration or development programs (including leases), although it may invest
in the securities of companies which invest in or sponsor such programs.
13. Invest more than 15% of the Fund's net assets in
securities which cannot be readily resold to the public because of legal or
contractual restrictions or because there are no market quotations readily
available or in other "illiquid" securities (including non-negotiable deposits
with banks and repurchase agreements of a duration of more than seven days).
14. Participate on a joint or a joint and several basis in any
trading account in securities.
15. Issue senior securities (as defined in the Act), other
than as set forth in paragraph 9 above and except to the extent that foreign
currency forward contracts may be deemed to constitute a senior security.
16. Invest in commodities or commodity futures contracts,
except that each Fund may enter into forward foreign exchange contracts and may
invest up to 5% of its net assets in initial margin or premiums for futures
contracts or options on futures contracts.
If a percentage restriction (other than the restriction on
borrowing in paragraph 9) is adhered to at the time of investment, a subsequent
increase or decrease in the percentage beyond the specified limit resulting from
a change in value or net assets will not be considered a violation. Whenever any
investment policy or investment restriction states a maximum percentage of a
Fund's assets which may be invested in any security or other property, it is
intended that such maximum percentage limitation be determined immediately after
and as a result of the acquisition of such security or property.
RISK CONSIDERATIONS
Investors should carefully consider the risks involved in
investments in securities of companies and governments of foreign nations, which
add to the usual risks inherent in domestic investments. Such special risks
include the lower level of government supervision and regulation of stock
exchanges, broker-dealers and listed companies, fluctuations in foreign exchange
rates, future political and economic developments, and the possible imposition
of exchange controls or other foreign governmental laws or restrictions. In
addition, securities prices in foreign countries are generally subject to
different economic, financial, political and social factors than prices of
securities of United States issuers.
<PAGE>
-12-
The Company anticipates that the portfolio securities of
foreign issuers held by each Fund generally will not be registered with the SEC
nor will the issuers thereof be subject to the reporting requirements of such
agency. In addition, the governments under which these companies are organized
may impose less government supervision than is required in the United States.
Accordingly, there may be less publicly available information concerning certain
of the issuers of securities held by the Funds than is available concerning
United States companies. In addition, foreign companies are not generally
subject to uniform accounting, auditing and financial reporting standards or to
practices and requirements comparable to those applicable to United States
companies.
It is contemplated that the Funds' foreign portfolio
securities generally will be purchased on stock exchanges or in over-the-counter
markets located in the countries in which the principal offices of the issuers
of the various securities are located, if that is the best available market.
Foreign stock exchanges generally have substantially less volume than the New
York Stock Exchange and may be subject to less government supervision and
regulation than those in the United States. Accordingly, securities of foreign
companies may be less liquid and more volatile than securities of comparable
United States companies. Similarly, volume and liquidity in most foreign bond
markets is less than in the United States and, at times, price volatility can be
greater than in the United States.
Foreign broker-dealers also may be subject to less government
supervision than those in the United States. Although the Funds endeavor to
achieve the most favorable net results on their portfolio transactions, fixed
commissions for transactions on certain foreign stock exchanges may be higher
than negotiated commissions available on United States exchanges.
With respect to certain foreign countries, there is the
possibility of adverse changes in investment or exchange control regulations,
expropriation or confiscatory taxation, and limitations on the transfer or
exchange of funds or other assets of the Funds. The Funds' ability and decisions
to purchase or sell portfolio securities may be affected by laws or regulations
relating to the convertibility and repatriation of assets. There is also the
risk in certain foreign countries of political or social instability, or
diplomatic developments which could affect United States investments as well as
the prices of securities in those countries. Moreover, individual foreign
economies may differ favorably or unfavorably from the United States economy in
such respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments position.
The Company will keep abreast of, and its Board of Directors
will consider at least annually the likelihood of, the imposition by any foreign
government of exchange control restrictions which would likely affect the
liquidity of a Fund's assets maintained with custodians in such countries, as
well as the degree of risk from political, social and economic events and
developments to which such assets may be exposed. Even such close consideration,
however, might not be sufficient to detect an unexpected event leading to the
imposition of exchange control restrictions. The Board of Directors will also
consider the degree of risk involved in the holding of portfolio securities in
domestic and foreign securities depositories. The Board of Directors will take
such measures, which may from time to time include the maintenance of
expropriation insurance and/or depository account insurance, to the extent that,
in their good faith judgment, they deem advisable under prevailing conditions.
The Company does not presently maintain any expropriation insurance or
depository account insurance. No assurance can be given that the appraisal of
perceived risks by the Board of Directors will always be correct or that
exchange control restrictions or activities of foreign governments which might
materially adversely affect the value of a Fund's portfolio might not occur.
<PAGE>
-13-
Because the shares of the Funds are redeemable on a daily
basis in United States dollars, each Fund intends to manage its portfolio so as
to give reasonable assurance that it will be able to obtain United States
dollars to the extent necessary to meet anticipated redemptions. The Funds do
not believe that this consideration will have any significant effects on their
portfolio strategies under present conditions.
PERFORMANCE INFORMATION
The average annual total return of each Fund for the periods
ended December 31, 1995 is set forth in the table below. Average annual total
return is computed by finding the average annual compounded rates of return over
the periods indicated that would equate the initial amount invested in a Fund to
the redemption value at the end of the period. All dividends and distributions
are assumed to be reinvested. The results are shown both with and without
deduction of the sales load, since the sales load can be waived for certain
investors.
Average Annual Return
---------------------
After Deduction of Without Deduction
Maximum Sales Load of Sales Load
------------------ -----------------
GAM International Fund (Class A)
1 year 23.58% 30.09%
5 years 18.91% 20.14%
10 years 18.41% 19.02%
From inception (1/2/85) 21.65% 22.22%
GAM International Fund (Class D)
From inception (9/5/95) 5.44% 9.26%
GAM Global Fund (Class A)
1 year 29.44% 36.25%
5 years 14.95% 16.13%
From inception (5/28/86) 11.43% 12.03%
GAM Global Fund (Class D)
From inception (9/5/95) 3.23% 6.97%
GAM Pacific Basin Fund (Class A)
1 year (0.72)% 4.50%
5 years 13.44% 14.60%
From inception (5/6/87) 11.22% 11.88%
GAM Pacific Basin Fund (Class D)
From inception (9/5/95) (1.23)% 2.35%
GAM Europe Fund
1 year 10.93% 16.77%
5 years 4.48% 5.56%
From inception (1/1/90) 0.74% 1.60%
<PAGE>
-14-
GAM North America Fund
1 year 24.35% 30.90%
5 years 10.90% 12.05%
From inception (1/1/90) 9.40% 10.34%
GAM Japan Capital Fund
1 year 1.12% 6.45%
From inception (7/1/94) (1.80)% 1.61%
GAM Asian Capital Fund
From inception (5/12/95) (9.04)% (4.25)%
GAMerica Capital Fund
From inception (5/12/95) (3.69)% 1.38%
Prospective investors should note that past results may not be
indicative of future performance. The investment return and principal value of
shares of a Fund will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than their original cost.
NET ASSET VALUE, DIVIDENDS AND TAXES
Reference is made to the material in the Prospectus under the
heading "Net Asset Value, Dividends and Taxes."
NET ASSET VALUE
As stated in the Prospectus, each Fund determines its net
asset value each day the New York Stock Exchange is open for trading. The New
York Stock Exchange is closed on the following holidays, in addition to
Saturdays and Sundays: New Year's Day, President's Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Portfolio securities, including ADR's, EDR's and options,
which are traded on stock exchanges or a national securities market will be
valued at the last sale price as described in the Prospectus as of the close of
business on the day the securities are being valued or, lacking any sales, at
the last available bid price. Securities traded in the over-the-counter market
will be valued at the last available bid price in the over-the-counter market
prior to the time of valuation. Money market securities will be valued at market
value, except that instruments maturing within 60 days of the valuation are
valued at amortized cost. The other securities and assets of each Fund for which
market quotations may not be readily available (including restricted securities
which are subject to limitations as to their sale) will be valued at fair value
as determined in good faith by or under the direction of the Board of Directors.
Securities quoted in foreign currencies will be converted to United States
dollar equivalents using prevailing market exchange rates.
SUSPENSION OF THE DETERMINATION OF NET ASSET VALUE
The Board of Directors may suspend the determination of net
asset value for a Fund for the whole or any part of any period during which (1)
the New York Stock Exchange is closed (other than for customary weekend and
holiday closings), (2) trading on the New York Stock Exchange is restricted, (3)
an emergency exists as a result of which disposal of securities owned by the
Fund is not reasonably practicable
<PAGE>
-15-
or it is not reasonably practicable for the Fund fairly to determine the value
of its net assets, or (4) the Securities and Exchange Commission may by order
permit for the protection of the holders of the Fund's shares.
TAX STATUS
Although each Fund is a series of the Company, it is treated
as a separate corporation for purposes of the Internal Revenue Code of 1986, as
amended (the "Code"). Each Fund expects to meet certain
diversification-of-assets and other requirements in order to qualify under the
Code as a regulated investment company. If it qualifies, a Fund will not be
subject to United States Federal income tax on net ordinary income and net
capital gains which are distributed to its shareholders within certain time
periods specified in the Code. Each Fund intends to distribute annually all of
its net ordinary income and net capital gains. If a Fund were to fail to
distribute timely all such income and gains, it would be subject to Federal
corporate income tax and, in certain circumstances, a 4% excise tax on its
undistributed income and gains.
Distributions from net ordinary income and net short-term
capital gains are taxable to shareholders as ordinary income. The 70% deduction
available to corporations for dividends received from a Fund will apply to
ordinary income distributions only to the extent that they are attributable to a
Fund's dividend income from United States corporations. Distributions from net
long-term capital gains are taxable to a shareholder as long-term capital gains
regardless of the length of time the shares in respect of which such
distributions are received have been held by the shareholder. Dividends declared
in December will be treated as received in December as long as they are actually
paid before February 1 of the following year.
After a Fund makes a distribution to shareholders, the value
of each outstanding share of the Fund will decrease by the amount of the
distribution. If a shareholder purchases shares immediately before the record
date of the distribution, the shareholder will pay the full price for the shares
and then receive some portion of the price back as a taxable dividend or capital
gain distribution (also known as "buying a dividend").
Income from foreign securities purchased by a Fund may be
reduced by a withholding tax at the source. If as of the fiscal year-end of a
Fund more than 50% of the Fund's assets are invested in securities of foreign
corporations, then the Fund may make an election which will result in the
shareholders having the option to elect either to deduct their pro rata share of
the foreign taxes paid by the Fund or to use their pro rata share of the foreign
taxes paid by the Fund in calculating the foreign tax credit to which they are
entitled. Distributions by a Fund will be treated as United States source income
for purposes other than computing the foreign tax credit limitation. As a
result, a Fund may be required to withhold Federal tax on certain distributions
to foreign shareholders.
Ordinarily, distributions and redemption proceeds earned by a
United States shareholder of a Fund are not subject to withholding of Federal
income tax. However, distributions or redemption proceeds paid by a Fund to a
shareholder may be subject to 20% backup withholding if the shareholder fails to
supply the Fund or its agent with such shareholder's taxpayer identification
number or an applicable exemption certificate.
In addition to the Federal income tax consequences described
above relating to an investment in a Fund, there may be other Federal, state or
local tax considerations that depend upon the circumstances of each particular
investor. Prospective shareholders are therefore urged to consult their tax
advisors with respect to the effect of this investment on their own specific
situations.
<PAGE>
-16-
MANAGEMENT OF THE COMPANY
The name, address, principal occupation during the past five
years and other information with respect to each of the Directors and Executive
Officers of the Company are as follows:
Name and Address:
Position(s) Held Principal Occupation(s)
With the Company During Past Five Years
Gilbert de Botton*............. Chairman, Global Asset Management Limited,
12 St. James's Place investment adviser, 1983 to present; Chairman,
London SW1A 1NX Global Asset Management (U.K.) Ltd., holding
England company, 1983 to present; Vice President,
Director and President Global Asset Management Limited (Bermuda),
investment adviser, 1989 to present.
George W. Landau............... President, Americas Society and the Council of
2601 South Bayshore Drive the Americas, 1985-1993; Chairman, Latin
Suite 1109 American Advisory Board of Coca-Cola
Coconut Grove, FL 33133 International, 1988 to present.
Director
Therese Meier*................. Managing Director, Global Asset Management GAM
Muhlebachstrasse 173 (Schweiz) A.G., Zurich, 1983 to present.
8008 Zurich
Switzerland
Director
Madelon DeVoe Talley........... Author and consultant; COMMISSIONER, PORT
876 Park Avenue AUTHORITY of New York AND NEW JERSEY; Governor
New York, NY 10021 of National Association of Securities Dealers,
Director Inc.; TRUSTEE, NEW YORK STATE TEACHERS
RETIREMENT SYSTEM, 1988 TO 1993.
Roland Weiser.................. President, Intervista, business consulting,
86 Beekman Road 1984 to present.
Summit, New Jersey 07901
Director
- --------
* Mr. de Botton and Mrs. Meier are Directors who are "interested persons" of
the Company within the definitions set forth in the Act.
<PAGE>
Name and Address:
Position(s) Principal Occupation(s)
With the Company Held During Past Five Years
---------------- ---------------------------
Kevin Blanchfield............... Chief Operating Officer, Treasurer and
135 East 57th Street Secretary, Global Asset Management (USA) Inc.,
New York, NY 10022 GAM Investments, Inc. and GAM Services Inc.,
Vice President, 1995 to present; Vice President, Secretary and
Treasurer and Treasurer, Global Asset Management (USA) Inc.,
Secretary GAM Investments, Inc. and GAM Services Inc.,
1993 to 1995; Senior Vice President - Finance
and Administration, Lazard Freres & Co., 1991
to 1993; Senior Vice President-Finance, J&W
Seligman & Co. Inc., prior to 1991.
- -----------------------------------
Each independent Director of the Company receives annual
compensation from the Company of $5,000 per year plus $500 for each regularly
scheduled Board of Directors meeting attended and is reimbursed by the Company
for travel expenses incurred in connection with attendance at Board of Directors
meetings. The officers and interested Directors of the Company do not receive
any compensation from the Company.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
The name, position(s) and information related to the
compensation of each of the Directors and the three highest paid Executive
Officers of the Company are as follows:
<TABLE>
<CAPTION>
Aggregate Pension or Retirement Estimated Total Compensation
Compensation Benefits Accrued as Annual Benefits From the Company
Name and Position(s) Held From the Part of Company Upon and Fund Complex
With the Company Company Expenses Retirement Paid to Directors
- ------------------------- ------------ --------------------- --------------- ------------------
<S> <C> <C>
Gilbert de Botton $0 $0
Director and President
George W. Landau $6,500 $6,500
Director
Therese Meier $0 $0
Director
Madelon DeVoe Talley $7,000 $7,000
Director
Roland Weiser $7,000 $7,000
Director
</TABLE>
<PAGE>
-19-
PRINCIPAL HOLDERS OF SECURITIES
As of March 25, 1996, the following persons may be deemed to own
beneficially more than 5% of the outstanding shares of any Fund.
<TABLE>
<CAPTION>
International International Global Global Pac Basin Pac Basin
Class A Class D Class A Class D Class A Class D
------------- ------------- ------- ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Alex Brown & Sons - 260,674 - - 10,167 -
P.O. Box 1346 - 23.01% - - 0.26% -
Baltimore, MD 21203
Bear Stearns Securities Corp. - 12,315 - 4,560 - -
1 Metrotech Center North - 1.09% - 9.82% - -
Brooklyn, NY 11201
Gilbert de Botton* 4,108,268 - 524,534 - 1,430,949 -
12 St. Jame's Place 10.26% - 31.24% - 36.27% -
London SW1A INX
England
Dekko Foundation Inc. - 72,310 - - - -
P.O. Box 548 - 6.38% - - - -
Kendallville, IN 46755
Donaldson, Lufkin & - - 26,694 3,260 93,754 19,068
Jenerette Securities - - 1.59% 7.02% 2.38% 15.89%
Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303
Fayez Sarofim & Co. 8,528 - 45,351 - - -
Two Houston Center 0.02% - 2.70% - - -
Suite 2907
Houston, TX 77010
</TABLE>
- ------------------------------
* All shares indicated as owned beneficially by Mr. Gilbert de Botton,
President and Director of the Company, are owned of record by clients, or
custodians or nominees for clients, of GAM and its affiliates, or by employee
benefit plans for the benefit of employees of GAM and its affiliates. Entities
controlled by Global Asset Management Ltd. may be deemed to have investment or
voting power over such shares. Mr. de Botton is the Chairman of Global Asset
Management Ltd. and may be a potential beneficiary of a discretionary trust
which indirectly owns approximately 70% of the voting securities of Global Asset
Management Ltd. As a result, Mr. de Botton may be deemed to have shared voting
or investment power over such shares. Mr. de Botton disclaims beneficial
ownership of such shares.
<PAGE>
-19-
PRINCIPAL HOLDERS OF SECURITIES
As of March 25, 1996, the following persons may be deemed to own
beneficially more than 5% of the outstanding shares of any Fund.
<TABLE>
<CAPTION>
Europe North America Japan Capital Asian Cap. GAMerica
Class A Class A Class A Class A Class A Total
------- ------------- ------------- ---------- --------- -----
<S> <C> <C> <C> <C> <C> <C>
Alex Brown & Sons - - 15,313 - - 286,154
P.O. Box 1346 - - 0.68% - - 0.54%
Baltimore, MD 21203
Bear Stearns Securities Corp. - - - - - 16,875
1 Metrotech Center North - - - - - 0.03%
Brooklyn, NY 11201
Gilbert de Botton* 2,022,462 337,537 1,135,418 472,563 220,046 10,251,778
12 St. Jame's Place 92.51% 74.40% 50.32% 67.80% 67.80% 19.42%
London SW1A INX
England
Dekko Foundation Inc. - - - - - 72,310
P.O. Box 548 - - - - - 0.14%
Kendallville, IN 46755
Donaldson, Lufkin & 1,483 - 5,093 1,933 - 151,285
Jenerette Securities 0.07% - 0.23% 0.28% - 0.29%
Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303
Fayez Sarofim & Co. - 146,129 - - - 200,008
Two Houston Center 32.21% - - - 0.38%
Suite 2907
Houston, TX 77010
</TABLE>
- ------------------------------
* All shares indicated as owned beneficially by Mr. Gilbert de Botton,
President and Director of the Company, are owned of record by clients, or
custodians or nominees for clients, of GAM and its affiliates, or by employee
benefit plans for the benefit of employees of GAM and its affiliates. Entities
controlled by Global Asset Management Ltd. may be deemed to have investment or
voting power over such shares. Mr. de Botton is the Chairman of Global Asset
Management Ltd. and may be a potential beneficiary of a discretionary trust
which indirectly owns approximately 70% of the voting securities of Global Asset
Management Ltd. As a result, Mr. de Botton may be deemed to have shared voting
or investment power over such shares. Mr. de Botton disclaims beneficial
ownership of such shares.
<PAGE>
-20-
<TABLE>
<CAPTION>
International International Global Global Pac Basin Pac Basin
Class A Class D Class A Class D Class A Class D
------- ------- ------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Gordon P. Getty 74,668 - 133 - 120,473 -
Family Trust 0.19% - 0.01% - 3.05% -
600 New Hampshire
Suite 953
Washington, D.C. 20037
Esmond Harnsworth 51,702 - - - 69,237 -
359 Beacon Street 0.13% - - - 1.76% -
Boston, MA 02110
Long Island University - - - - 87,695 -
University Center - - - - 2.22% -
Brookville, NY 11548
Resources Trust Co. - - - 2,852 - -
FBO HIRA L. Kenna IRA - - - 6.14% - -
P. O. Box 5900
Denver, CO 80217
S. Klein Decl. Trust 18,271 - 16,173 - 29,810 -
c/o Rothschild Bank AG 0.05% - 0.96% - 0.76% -
Zollikerstrasse 181
8034 Zurich
Switzerland
Neil McConnell Foundation 17.239 - 31,144 - 22,403 -
c/o Bankers Trust Company 0.76% - 1.38% - 0.99% -
130 Liberty Street - 17th Floor
New York, NY 10006
Steven Read 48,490 - - - 61,083 -
2000 Fifth Street 0.12% - - - 1.55% -
Berkeley, CA 94710
Prudential Securities - - - 3,658 - -
FBO Harvey B. Rosenberg - - - 7.87% - -
IRA
516 Hupp Cross
Bloomfield, MI 48301
</TABLE>
<PAGE>
-20-
<TABLE>
<CAPTION>
Europe North America Japan Capital Asian Cap. GAMerica
Class A Class A Class A Class A Class A Total
------- ------- ------- ------- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Gordon P. Getty 208,370 - 130,818 - - 534,462
Family Trust 9.53% - 5.80% - - 1.01%
600 New Hampshire
Suite 953
Washington, D.C. 20037
Esmond Harnsworth 170,798 41,185 25,073 - 17,172 375,167
359 Beacon Street 7.81% 9.08% 1.11% - 7.47% 0.71%
Boston, MA 02110
Long Island University 147,344 - - - - 235,039
University Center 6.74% - - - - 0.45%
Brookville, NY 11548
Resources Trust Co. - - - - - 2,852
FBO HIRA L. Kenna IRA - - - - - 0.01%
P. O. Box 5900
Denver, CO 80217
S. Klein Decl. Trust 55,540 24,048 10,328 - 17,818 171,988
c/o Rothschild Bank AG 2.54% 5.30% 0.46% - 7.,75% 0.33%
Zollikerstrasse 181
8034 Zurich
Switzerland
Neil McConnell Foundation 46,947 15,094 10,167 - 18,236 161,230
c/o Bankers Trust Company 2.08% 0.67% 0.45% - 7.93% 0.31%
130 Liberty Street - 17th Floor
New York, NY 10006
Steven Read 128,745 - 28,335 - - 266,653
2000 Fifth Street 5.89% - 1.26% - - 0.51%
Berkeley, CA 94710
Prudential Securities - - - - - 3,658
FBO Harvey B. Rosenberg - - - - - 0.01%
IRA
516 Hupp Cross
Bloomfield, MI 48301
</TABLE>
-----------------------
* Includes shares which may be deemed to be owned beneficially by
Mr. de Botton as described in footnote 1 above.
<PAGE>
-21-
<TABLE>
<CAPTION>
International International Global Global Pac Basin Pac Basin
Class A Class D Class A Class D Class A Class D
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Royal Life Insurance 2,700 538 - 17,672 - -
International LTD 0.12% 0.05% - 38.04% - -
Royal Court, Castletown
Isle of Man, British Isles
Richard C. and Pauline Z. - - - 3,726 - -
Schultz - - - 8.02% - -
21150 N. Middleton Drive
Kildeer, IL 60047
Charles Schwab & Co. 10,425,004 - 120,329 - 1,451,086 -
101 Montgomery Street 26.03% - 7.17% - 36.78% -
San Francisco, CA 94104
Jan I. Shrem 18,452 - 24,872 - 37,217 -
1060 Dunaweal Lane 0.05% - 1.48% - 0.94% -
Calistoga, CA 94515
Tword C. Family - 60,037 - - - -
Partnership LP - 5.30% - - - -
210 E. Capital, Suite 1525
Jackson, MS 39201
Key Trust Co. of Ohio, Custodian - - - - - 89,737
University Orthopedic Assoc - - - - - 74.80%
Pension Plan
127 Public Square - 14th Floor
Cleveland, OH 44114
All officers and 4,108,268 - 524,534 - 1,430,949 -
directors* 10.26% - 31.24% - 36.27% -
</TABLE>
-----------------------
* Includes shares which may be deemed to be owned beneficially by
Mr. de Botton as described in footnote 1 above.
<PAGE>
-21-
<TABLE>
<CAPTION>
Europe North America Japan Capital Asian Cap. GAMerica
Class A Class A Class A Class A Class A Total
------- ------- ------- ------- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Royal Life Insurance - - - - - 20,910
International LTD - - - - - 0.04%
Royal Court, Castletown
Isle of Man, British Isles
Richard C. and Pauline Z. - - - - - 3,726
Schultz - - - - - 0.01%
21150 N. Middleton Drive
Kildeer, IL 60047
Charles Schwab & Co. 633,495 3,600 72,450 5,698 3,457 12,145,119
101 Montgomery Street 2.90% 0.79% 3.21% 0.82% 1.50% 23.01%
San Francisco, CA 94104
Jan I. Shrem 87,913 23,062 19,934 - 24,321 235,771
1060 Dunaweal Lane 4.02% 5.08% 0.88% - 10.58% 0.45%
Calistoga, CA 94515
Tword C. Family - - - - - 60,037
Partnership LP - - - - - 0.11%
210 E. Capital, Suite 1525
Jackson, MS 39201
Key Trust Co. of Ohio, Custodian - - - - - 89,737
University Orthopedic Assoc - - - - - 0.17%
Pension Plan
127 Public Square - 14th Floor
Cleveland, OH 44114
All officers and 2,022,462 337,537 1,135,418 472,563 220,046 10,251,778
directors* 92.51% 74.40% 50.32% 67.80% 95.72% 19.42%
</TABLE>
------------------------
* Includes shares which may be deemed to be owned beneficially by
Mr. de Botton as described in footnote 1 above.
<PAGE>
-22-
CHANGE OF NAME
On February 18, 1986, the Company changed its name from GAM
International, Inc. to GAM Funds, Inc.
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISORY CONTRACTS
The Amended and Restated Investment Advisory Contract dated
April 14, 1994 (the "GAM Contract") between the Company and GAM, as amended, was
last approved by the Board of Directors (including a majority of the Directors
who were not parties to the GAM Contract or interested persons of any such
party) on behalf of each Fund on October 25, 1995 and by the shareholders of
each Fund (other than GAM Japan Capital Fund, GAMerica Capital Fund, GAM Mid-Cap
U.S. Fund and GAM Asian Capital Fund) on April 14, 1994. The investment advisory
agreement dated June 29, 1990 between the Company and Sarofim (the "Sarofim
Contract") was last approved by the Board of Directors, including a majority of
the Directors who are not parties to the Sarofim Contract or interested persons
of any such party, on October 25, 1995 and by the shareholders of GAM North
America Fund on April 14, 1994. The investment advisory agreement dated August
17, 1995 between the Company and Forstmann-Leff (the "Forstmann-Leff Contract")
was approved by the Board of Directors, including a majority of the Directors
who are not parties to the Forstmann-Leff Contract or interested persons of any
such party, on August 17, 1995 and by the sole shareholder of GAM Mid-Cap U.S.
Fund on August 17, 1995. The GAM Contract and the Sarofim Contract will each
continue in effect until December 31, 1996, and the Forstmann-Leff Contract will
continue in effect until September 5, 1996, and from year to year thereafter if
approved annually by the Board of Directors or by the vote of a majority of the
outstanding shares of each Fund (as defined in the Act) and, in either event, by
the approval of a majority of those Directors who are not parties to the GAM
Contract, the Forstmann-Leff Contract or the Sarofim Contract or interested
persons of any such party.
The GAM Contract requires GAM to conduct and maintain a
continuous review of each Fund's portfolio and to make all investment decisions
regarding purchases and sales of portfolio securities and brokerage allocation
for each Fund other than GAM North America Fund and GAM Mid-Cap U.S. Fund. The
Sarofim Contract requires Sarofim to provide the same services to GAM North
America Fund, and the Forstmann-Leff Contract requires Forstmann-Leff to provide
the same services to GAM Mid-Cap U.S. Fund. Sarofim commenced providing
investment advisory services to GAM North America Fund on June 29, 1990 and
Forstmann-Leff will commence providing investment advisory services to GAM
Mid-Cap U.S. Fund when GAM Mid-Cap U.S. Fund commences operations.
No Investment Adviser will be required to furnish any overhead
facilities for the Funds, including daily pricing facilities. Although such
expenses are paid by most investment advisers of other investment companies,
these expenses and all other operating expenses will be borne directly by the
Funds. GAM will render its services to each Fund from outside the United States.
The GAM Contract, the Forstmann-Leff Contract and the Sarofim
Contract (the "Contracts") each provides that the Investment Advisers will
select brokers and dealers for execution of each Fund's portfolio transactions
consistent with the Company's brokerage policy (see "Brokerage Allocation").
Although the services provided by broker-dealers in accordance with the
brokerage policy incidentally may help reduce the expenses of or otherwise
benefit the other investment advisory clients of the Investment Advisers or
their
<PAGE>
-23-
affiliates, as well as the Funds, the value of such services is indeterminable
and the Investment Advisers' fees are not reduced by any offset arrangement by
reason thereof.
Each of the Contracts provides that the Investment Advisers
shall have no liability to the Company or to any shareholder of a Fund for any
error of judgment, mistake of law, or any loss arising out of any investment or
other act or omission in the performance by an Investment Adviser of its duties
under such Contracts or for any loss or damage resulting from the imposition by
any government of exchange control restrictions which might affect the liquidity
of a Fund's assets maintained with custodians or securities depositories in
foreign countries or from any political acts of any foreign governments to which
such assets might be exposed, except for liability resulting from willful
misfeasance, bad faith or gross negligence on the Investment Adviser's part or
reckless disregard of its duties under the Contract.
Each Contract will terminate automatically in the event of its
assignment, as such term is defined under the Act, and may be terminated by each
Fund at any time without payment of any penalty on 60 days' written notice, with
the approval of a majority of the Directors of the Company or by vote of a
majority of the outstanding shares of a Fund (as defined in the Act).
The Company acknowledges that it has obtained its corporate
name by consent of GAM and agrees that if (i) GAM should cease to be the
Company's investment adviser or (ii) Global Asset Management Ltd. should cease
to own a majority equity interest in GAM, the Company, upon request of GAM,
shall submit to its shareholders for their vote a proposal to delete the
initials "GAM" from its name and cease to use the name "GAM Funds, Inc." or any
other name using or derived from "GAM" or "Global Asset Management," any
component thereof or any name deceptively similar thereto, and indicate on all
letterheads and other promotional material that GAM is no longer the Company's
investment adviser. If GAM makes such request because Global Asset Management
Ltd. no longer owns a majority equity interest in GAM, the question of
continuing the GAM Contract must be submitted to a vote of the Company's
shareholders. The Company has agreed that GAM or any of its successors or
assigns may use or permit the use of the names "Global Asset Management" and
"GAM" or any component or combination thereof in connection with any entity or
business, whether or not the same directly or indirectly competes or conflicts
with the Company and its business in any manner.
ADVISORY FEES
For its services to the Funds, GAM receives a quarterly fee of
0.25% of the average daily net assets of each of GAM International Fund, GAM
Global Fund, GAM Pacific Basin Fund, GAM Japan Capital Fund, GAM Asian Capital
Fund, GAMerica Capital Fund and GAM Europe Fund during the quarter preceding
each payment; GAM and Sarofim each receives a quarterly fee equal to 0.125% of
the average daily net assets of GAM North America Fund; and GAM and
Forstmann-Leff will each receive a quarterly fee equal to 0.125% of the average
daily net assets of GAM Mid-Cap U.S. Fund. In each case the aggregate advisory
fees are equivalent to an annual fee of 1.0% of the average daily net assets of
each Fund during the year. The level of advisory fees paid by each Fund is
higher than the rate of advisory fee paid by most registered investment
companies. The actual advisory fee paid by each Fund during the fiscal years
ended December 31, 1995, 1994 and 1993 are set forth below:
<PAGE>
-24-
<TABLE>
<CAPTION>
Inter- Pacific North Japan GAMerica Asian Mid-Cap
national Global Basin Europe America Capital Capital Capital U.S.
-------- ------ ----- ------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995 $3,085,111 $208,022 $414,221 $203,030 $38,934 $57,489 $16,082 $28,041 NA
1994 $1,239,629 $241,333 $461,985 $237,793 $20,883 $31,606 NA NA NA
1993 $456,683 $223,863 $291,724 $130,608 $69,370 NA NA NA NA
</TABLE>
In the event that a Fund's annual expenses for all purposes
(including the investment advisory fee), except taxes, brokerage fees and
commissions, distribution expenses and (with the consent of the state securities
administrators where necessary) extraordinary expenses such as litigation,
exceed the limits prescribed by any state in which the Fund's shares are
qualified for sale, the amount of the fee payable by the Fund to the Investment
Advisers will be reduced by the amount of any such excess. Currently, the most
restrictive limitation applicable to the Funds limit each Fund's expenses (other
than those referred to above, subcustodian costs, certain legal expenses and
one-half of the investment advisory fees) to 2.5% of the first $30,000,000 of
each Fund's average month-end net asset value, 2.0% of the next $70,000,000 of
each Fund's average month-end net asset value, and 1.5% of the remainder.
Expenses incurred in connection with each Fund's organization,
initial registration and initial offering under Federal and state securities
laws, including printing, legal and registration fees, and the period over which
such expenses are amortized, are set forth below (except for the expenses of GAM
International Fund, GAM Global Fund, GAM Pacific Basin Fund, GAM Europe Fund and
GAM North American Fund, which have been fully amortized):
<TABLE>
<CAPTION>
Japan GAMerica Asian Mid-Cap
Capital Capital Capital U.S.
------- ------- ------- -------
<S> <C> <C> <C> <C>
Organizational Expenses $34,166 $30,036 $30,036 $35,000
Amortized over 5 years beginning 7/1/94 5/12/95 5/12/95 9/5/95
</TABLE>
The expense ratio of each Fund may be higher than that of most
registered investment companies since the cost of maintaining the custody of
foreign securities is higher than that for most domestic funds and the rate of
advisory fees paid by the Funds exceeds that of most registered investment
companies.
INVESTMENT ADVISERS
All of the Investment Advisers are registered under the United
States Investment Advisers Act of 1940, as amended. GAM is controlled by and
under common control with other investment advisers (as described below) which
have substantial experience managing foreign mutual funds and which have
aggregate assets under management of approximately $8.5 billion. Sarofim has
aggregate assets under management of approximately $30 billion. Forstmann-Leff
has aggregate assets under management of approximately $2.7 billion.
The Directors of GAM and their principal occupations are as
follows:
<PAGE>
-25-
Name and
Position Held with
Investment Adviser Principal Occupation(s)
- ------------------ -----------------------
Gilbert de Botton........See "Management of the Company" above.
Director
Nicholas J. Eeley........Director, Global Asset Management Limited.
Director
Count Ulric von Rosen....President, Bonnier Medical Division of Bonnier Medical
Director Group, Sweden.
Paul S. Kirkby...........Investment Director, Global Asset Management (H.K.)
Director Ltd.
David J. Miller..........Finance Director, Global Asset Management (U.K.) Ltd.
Director
Alan McFarlane...........Managing Director (Institutional), Global Asset
Director Management Ltd., investment adviser.
Denis G. Raeburn.........Managing Director, Global Asset Management Ltd. and
Director Global Asset Management (U.K.) Ltd., holding company.
Gordon Grender ..........Self-employed investment manager.
Director
GAM is a wholly-owned subsidiary of Global Asset Management
(U.K.) Limited,* a holding company. Global Asset Management Ltd.,** an
investment adviser organized under the laws of Bermuda, controls the Investment
Adviser through its wholly-owned subsidiaries, Greenpark Management N.V. and
GAMAdmin B.V. (the latter of which is the direct parent of Global Asset
Management (U.K.) Limited). Lorelock, S.A.,*** which is controlled by a
discretionary trust of which Mr. de Botton, a Director and President of the
Fund, may be deemed to be a beneficiary, owns approximately 70% of the voting
securities of Global Asset Management Ltd. St. James's Place Capital plc, an
international, diversified financial services company, owns approximately 30%
through its wholly-owned subsidiary J. Rothschild Investment Management Ltd. St.
James's Place Capital plc controls, individually and collectively and directly
and indirectly, a number of subsidiaries, which provide financial services and
investment management services for various investment companies, among others,
and which are involved internationally in various financial service businesses.
- ------------------------------
* Mr. de Botton, President and Director of the Company, is Chairman of
Global Asset Management (U.K.) Limited.
** Mr. de Botton, President and Director of the Company, is Vice President
and Director, and Ms. Meier, a Director of the Company, is President
and Director of Global Asset Management Ltd.
*** Ms. Meier, a Director of the Company, is a Director of Lorelock, S.A.
<PAGE>
-26-
The Directors and principal executive officers of Sarofim and
their principal occupations are as follows:
Fayez S. Sarofim Chairman, Director and President, Sarofim
Raye G. White Executive Vice President, Secretary-Treasurer and
Director, Sarofim
Ralph B. Thomas Senior Vice President, Sarofim
William K. McGee, Jr. Senior Vice President, Sarofim
Russell M. Frankel Senior Vice President, Sarofim
Charles E. Sheedy Senior Vice President, Sarofim
Russell B. Hawkins Senior Vice President, Sarofim
A majority of the outstanding stock of Sarofim is owned by
Fayez S. Sarofim. In addition, Mr. Sarofim is a director of Teledyne, Inc.,
Unitrin, Inc., Argonaut Group, Imperial Holly Corp., EXOR Group and MESA Inc.,
each of which is a publicly traded corporation with principal offices in the
United States.
The Directors and principal executive officers of Forstmann-Leff and
their principal occupations are as follows:
Joel B. Leff Chairman and Director Forstmann-Leff
William F. Harnisch Chief Executive Officer, President and Director,
Forstmann-Leff
Peter A. Lusk Executive Vice President, Chief Operating Officer
and Director
Richard H. Adelaar Executive Vice President and Director,
Forstmann-Leff
William F. Harnisch owns between 25% and 50% of the outstanding stock
of Forstmann-Leff. Joel B. Leff, Peter A. Lusk and Richard H. Adelaar each owns
more than 10% of the outstanding stock of Forstmann-Leff.
DISTRIBUTION OF SHARES
The Company has entered into a distribution agreement (the
"Distribution Agreement") with GAM Services Inc. ("GAM Services"), under which
GAM Services has agreed to act as principal underwriter and to use reasonable
efforts to distribute the Fund's shares. Pursuant to the Distribution Agreement,
GAM Services receives the sales load on sales of the Funds' shares and reallows
a portion of the sales load to brokers.
<PAGE>
-27-
GAM Services is controlled by Global Asset Management Ltd.,
which also controls GAM, and may be deemed to be controlled by St. James's Place
Capital plc and a discretionary trust of which Gilbert de Botton, President and
Director of the Company, may be a beneficiary. Kevin Blanchfield, Vice
President, Secretary and Treasurer of the Company, is also Chief Operating
Officer, Treasurer and a Director of GAM Services.
The sales load will be waived in connection with sales of
shares of the Funds to the classes of investors specified in the Prospectus
under "Purchase of Shares -- Offering Price." GAM Services has waived the sales
charge to such investors because of the efficiencies involved in sales of shares
to those investors.
CUSTODIAN AND ADMINISTRATOR
Brown Brothers Harriman & Co., 40 Water Street, Boston,
Massachusetts 02109 ("Brown Brothers") serves as custodian of the Company's
securities and cash and as its administrator. Brown Brothers also maintains
certain records for the Company required by the Act and applicable Federal and
state tax laws, keeps books of account, renders reports and statements,
including financial statements, and disburses funds in payment of the Company's
bills and obligations.
Brown Brothers is reimbursed by the Company for its
disbursements, expenses and charges (including counsel fees but excluding
salaries and usual overhead expenses) incurred in connection with the foregoing
services and receives a fee from the Company based on a fee schedule in effect
from time to time (which is based on the net asset value of the Fund). The
agreement provides for termination by either party on 60 days' written notice.
Brown Brothers may from time to time enter into Subcustodian
Agreements with foreign branches of United States banks or eligible foreign
custodians pursuant to which portfolio securities and cash owned by the Company
are held outside the United States in the custody of such foreign branches or
eligible foreign custodians.
SHAREHOLDER SERVICE AND TRANSFER AGENT
Chase Global Funds Service Company, P.O. Box 2798, Boston,
Massachusetts 02208, serves as shareholder service agent, dividend-disbursing
agent, transfer agent and registrar for the Funds. The Funds may also engage
other entities to act as shareholder servicing agents and to perform
subaccounting services as described under "Shareholder Servicing Agents" in the
Prospectus.
LEGAL COUNSEL
The law firm of Coudert Brothers, 1114 Avenue of the Americas,
New York, New York 10036, is legal counsel for the Funds.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., 1301 Avenue of the Americas, New
York, New York 10019- 6013, are the independent accountants for the Company for
the fiscal year ending December 31, 1996. In addition to reporting annually on
the financial statements of each Fund, the Company's accountants will review
certain filings of the Company with the Securities and Exchange Commission and
will prepare the Company's Federal and state corporation tax returns.
<PAGE>
-287-
REPORTS TO SHAREHOLDERS
The fiscal year of the Company ends on December 31.
Shareholders of each Fund will be provided at least semi-annually with reports
showing the portfolio of the Fund and other information, including an annual
report with financial statements audited by independent accountants.
BROKERAGE ALLOCATION
The Contracts provide that the Investment Advisers shall be
responsible for the selection of members of securities exchanges, brokers and
dealers (such members, brokers and dealers being hereinafter collectively
referred to as "brokers") for the execution of the portfolio transactions of
each Fund and, when applicable, the negotiation of commissions in connection
therewith. It should be noted that in transactions on stock exchanges in the
United States, brokerage commissions are negotiated, whereas on certain foreign
stock exchanges these commissions are fixed. In the case of securities traded on
the over-the-counter markets, there is generally no stated commission, but the
price usually includes an undisclosed commission or markup.
All recommendations, decisions and placements of each Fund's
brokerage transactions shall be made in accordance with the following
principles:
Purchase and sale orders will usually be placed with brokers
who are selected based on their ability to achieve "best execution" of such
orders. "Best execution" shall mean prompt and reliable execution at the most
favorable security price, taking into account the other provisions hereinafter
set forth. The determination of what may constitute best execution and price in
the execution of a securities transaction by a broker involves a number of
considerations, including, without limitation, the overall direct net economic
result to the Fund (involving both price paid or received and any commissions
and other costs paid), the efficiency with which the transaction is effected,
the ability to effect the transaction at all where a large block is involved,
the availability of the broker to stand ready to execute possibly difficult
transactions in the future, and the financial strength and stability of the
broker. Such considerations are judgmental and are to be weighed by the
Investment Advisers in determining the overall reasonableness of brokerage
commissions.
In selecting brokers for portfolio transactions, the
Investment Advisers shall take into account their past experience as to brokers
qualified to achieve "best execution," including brokers who specialize in any
foreign securities held by a Fund.
Each Investment Adviser is authorized to allocate brokerage
and principal business to brokers who have provided brokerage and research
services, as such services are defined in Section 28(e) of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), for the Company and/or other
accounts for which the Investment Adviser exercises investment discretion (as
defined in Section 3(a)(35) of the 1934 Act) and, as to transactions for which
fixed minimum commission rates are not applicable, to cause a Fund to pay a
commission for effecting a securities transaction in excess of the amount
another broker would have charged for effecting that transaction, if the
Investment Adviser determines in good faith that such amount of commission is
reasonable in relation to the value of the brokerage and research services
provided by such broker, viewed in terms of either that particular transaction
or the Investment Adviser's overall responsibilities with respect to the Fund
and the other accounts as to which it exercises investment discretion. In
reaching such determination, the Investment Advisers will not be required to
place or to attempt to place a specific dollar value on the research or
execution services of a broker or on the portion of any commission reflecting
either of said services.
<PAGE>
-29-
In demonstrating that such determinations were made in good
faith, the Investment Advisers shall be prepared to show that all commissions
were allocated and paid for purposes contemplated by the Company's brokerage
policy; that commissions were not allocated or paid for products or services
which were readily and customarily available and offered to the public on a
commercial basis; and that the commissions paid were within a reasonable range.
The determination that commissions were within a reasonable range shall be based
on any available information as to the level of commissions known to be charged
by other brokers on comparable transactions, but there shall be taken into
account the Company's policies: (i) that obtaining a low commission is deemed
secondary to obtaining a favorable securities price, since it is recognized that
usually it is more beneficial to a Fund to obtain a favorable price than to pay
the lowest commission; and (ii) that the quality, comprehensiveness and
frequency of research studies which are provided for the Funds and the
Investment Advisers are useful to each Investment Adviser in performing its
advisory services under its Contract with the Company.
Research services provided by brokers to the Funds or the
Investment Advisers are considered by the Investment Advisers to be in addition
to, and not in lieu of, services required to be performed by each Investment
Adviser under its Contract with the Funds. Such research consists of that which
brokerage houses customarily provide to institutional investors and includes
statistical and economic data and research reports on particular companies and
industries. Research furnished by brokers through whom the Funds effect
securities transactions may be used by each Investment Adviser for any of its
accounts, and not all such research may be used by the Investment Advisers for
the Funds. When execution of portfolio transactions is allocated to brokers
outside the United States and fixed brokerage commission rates are applicable,
account may be taken of various services provided by the broker, including
quotations for daily pricing of foreign securities held in the Funds' portfolios
and trading desk services for the Funds.
Purchases and sales of portfolio securities within the United
States other than on a securities exchange shall be executed with primary market
makers acting as principal except where, in the judgment of the Investment
Advisers, better prices and execution may be obtained on a commission basis or
from other sources.
Portfolio transactions executed by brokers which may be deemed
to be affiliated with the Company, such as Bowling Green Capital Corporation,
which is an affiliate of Forstmann-Leff, will be in accordance with procedures
adopted by the Company to ascertain that the brokerage commissions paid to such
brokers are fair, reasonable, usual and customary compared to the commission,
fee or other remuneration received by other brokers in connection with
comparable transactions involving similar securities being purchased or sold
during a comparable period of time. The Board of Directors of the Company will
review these procedures at least annually and will determine at least quarterly
that all brokerage commissions paid to such brokers during the preceding quarter
were paid in compliance with such procedures.
The amount of brokerage commissions paid by each Fund during
the three fiscal years ended December 31, 1995 are set forth below:
<TABLE>
<CAPTION>
Inter- Pacific North Japan GAMerica Asian Mid-Cap
national Global Basin Europe America Capital Capital Capital U.S.
-------- ------ ------- ------ ------- ------- ------- ------- -------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995 $706,834 $ 51,949 $268,565 $149,546 $ 3,906 $96,322 $6,336 $30,158 NA
1994 614,271 209,240 165,154 120,013 2,304 41,233 NA NA NA
1993 399,236 182,755 266,125 96,567 10,062 NA NA NA NA
</TABLE>
<PAGE>
-30-
FINANCIAL STATEMENTS
The audited financial statements of each Fund (other than GAM
Mid-Cap U.S. Fund) for the fiscal year ended December 31, 1995 and the report of
the Funds' independent auditors in connection therewith are included in the 1995
Annual Report to Shareholders and are incorporated by reference in this
Statement of Additional Information.
<PAGE>
APPENDIX A
Description of Moody's Investors Service, Inc. ("Moody's") and
Standard & Poor's Corporation ("S&P") highest commercial paper and bond ratings:
PRIME-1 AND A-1 COMMERCIAL PAPER RATING
The rating Prime-1 is the highest commercial paper rating
assigned by Moody's. Among the factors considered by Moody's in assigning
ratings are the following: (1) evaluation of the management of the issuer; (2)
economic evaluation of the issuer's industry or industries and an appraisal of
speculative type risks which may be inherent in certain areas; (3) evaluation of
the issuer's products in relation to competition and customer acceptance; (4)
liquidity; (5) amount and quality of long-term debt; (6) trend of earnings over
a period of ten years; (7) financial strength of a parent company and the
relationships which exist with the issuer; and (8) recognition by the management
of obligations which may be present or may arise as a result of public interest
questions and preparations to meet obligations.
Commercial paper rated A-1 by S&P has the following
characteristics: Liquidity ratios are adequate to meet cash requirements.
Long-term senior debt is rated "A" or better. The issuer has access to at least
two additional channels of borrowing. Basic earnings and cash flow have an
upward trend with allowance made for unusual circumstances. Typically, the
issuer's industry is well established and the issuer has a strong position in
the industry. The reliability and quality of management are unquestioned.
Relative strength or weakness of the above factors determine whether the
issuer's commercial paper is rated A-1, A-2 or A-3.
C AND D BOND RATINGS
Bonds rated C by Moody's are the lowest rated class of bonds
and are judged by Moody's as having extremely poor prospects of ever attaining
any real investment standing. Such issues are often in default and are
considered highly speculative. Bonds rated D by S&P are issues as to which
interest or principal payments are in default or in arrears.
<PAGE>
GAM Funds, Inc.
Post-Effective Amendment No. 27
PART C
------
OTHER INFORMATION
-----------------
Item 24. Financial Statements and Exhibits.
- ------- ----------------------------------
(a) Financial Statements:
---------------------
The following financial statements for the year ended December
31, 1995 are incorporated by reference to the Annual Report to
shareholders of the following funds: GAM International,
Global, Pacific Basin, Europe, Japan Capital, North America,
Asian Capital and GAMerica Capital Funds:
Statements of Investments
Statements of Assets and Liabilities
Statements of Operations
Statements of Changes in Net Assets
Notes to Financial Statements
(b) Exhibits:
---------
(1)(a) Articles of Incorporation of Registrant, as amended
or supplemented from time to time, are incorporated
by reference to the Registrant's Registration
Statement on Form N-1A which has been previously
filed with the Commission ("Form N- 1A").
(1)(b) Certificate of Correction to the Registrant's
Articles of Incorporation is incorporated to
reference to the Registrant's Form N-SAR filed for
the period ended December 31, 1995.
(1)(c) Articles Supplementary to the Registrant's Articles
of Incorporation increasing number of authorized
shares and classifying shares of each of the Funds as
Class A Shares or Class D Shares are incorporated by
reference to the Registrant's Form N-SAR filed for
the period ended December 31, 1995.
(1)(d) Articles of Amendment to the Registrant's Articles of
Incorporation redesignating the shares of each of the
Funds as Class A Shares are filed herewith.
(1)(e) Articles Supplementary adding GAM Mid-Cap U.S. Fund
are filed herewith.
<PAGE>
-2-
(2) Bylaws of Registrant are incorporated herein by
reference to the Registrant's Post-Effective
Amendment No. 4 to the Registration Statement on Form
N-1A, filed on December 31, 1985 ("PEA No. 4").
(3) Not applicable.
(4) Specimen stock certificates of the Registrant are
incorporated herein by reference to PEA No. 4.
(5)(a) Amended and Restated Investment Advisory Agreement
with GAM International Management Limited, dated
April 14, 1994, is filed herewith.
(5)(b) Amendment No. 1 to Amended and Restated Investment
Advisory Agreement with GAM International Management
Limited, dated March 10, 1995, is filed herewith.
(5)(c) Amendment No. 2 to Amended and Restated Investment
Advisory Agreement with GAM International Management
Limited, dated August 17, 1995, is filed herewith.
(5)(d) Investment Advisory Agreement with Fayez Sarofim &
Co., dated June 29, 1990, is incorporated herein by
reference to the Registrant's Post-Effective
Amendment No. 15 to the Registration Statement on
Form N-1A, filed on August 29, 1990.
(5)(e) Investment Advisory Agreement with Forstmann-Leff
Associates Inc., dated August 17, 1995, is filed
herewith.
(6)(a) First Amended and Restated Distribution Agreement For
Class A Shares with GAM Services, Inc., dated August
17, 1995, is filed herewith.
(6)(b) Distribution Agreement For Class D Shares with GAM
Services, Inc., dated August 17, 1995, is filed
herewith.
(6)(c) Form of Dealer Agreement between GAM Services, Inc.
and designated dealers is incorporated by reference
to the Registrant's Post-Effective Amendment No. 26
to the Registration Statement on Form N-1A filed on
September 5, 1995. ("PEA No. 26").
(7) Not Applicable.
(8) Custodian Agreement with Brown Brothers Harriman &
Co., dated April 26, 1995, incorporated by reference
to PEA No. 26.
(9) Transfer Agency Agreement with Chase Global Funds
Service Company (as successor to AIM Financial
Services, Inc.), as amended, is incorporated herein
by reference to the Registrant's Post-Effective
Amendment No. 2 to the Registration Statement on Form
N-1A, filed on June 26, 1985, the Registrant's
<PAGE>
-3-
Post-Effective Amendment No. 6 to the Registration
Statement on Form N-1A, filed on October 31, 1986,
and the Registrant's Post-Effective Amendment No. 11
to the Registration Statement on Form N-1A, filed on
April 27, 1989.
(10) Opinion of Counsel is incorporated herein by
reference to the Registrant's Rule 24f-2 Notice for
the Registrant's fiscal year ended December 31, 1995,
filed on February 26, 1996.
(11) Consent of McGladrey & Pullen, LLP is filed herewith.
(12) Not Applicable.
(13)(a) Subscription Agreement with Global Asset Management
(USA) Inc. for shares of GAM Mid-Cap U.S. Fund, dated
September 5, 1995, is filed herewith.
(14) Not Applicable.
(15) Class D Distribution Plan adopted by the Registrant
pursuant to Rule 12b-1 under the Investment Company
Act of 1940, as amended, (the "1940 Act") is filed
herewith.
(17) Not Applicable.
(16) Not Applicable.
(18) Multiple Class Plan For Class A and D Shares adopted
by the Registrant pursuant to Rule 18f-3 under the
1940 Act is filed herewith.
(19) Powers of Attorney for Mr. Weiser, Mrs. Meier and
Mrs. Talley are incorporated herein by reference to
PEA No. 22 filed October 28, 1994. Power of Attorney
for Mr. Landau is incorporated herein by reference to
PEA No. 24 filed March 31, 1995.
Item 25. Persons Controlled by or Under Common Control with Registrant.
- -------- --------------------------------------------------------------
N/A
Item 26. Number of Holders of Securities.
- -------- --------------------------------
Number of Record Holders
Title of Series as of March 26, 1996
--------------- ------------------------
GAM International Fund
Class A Common Stock 12,886
Class D Common Stock 632
<PAGE>
-4-
GAM Global Fund
Class A Common Stock 501
Class D Common Stock 19
GAM Pacific Basin Fund
Class A Common Stock 687
Class D Common Stock 22
GAM Europe Fund
Class A Common Stock 98
GAM North America Fund
Class A Common Stock 43
GAM Japan Capital Fund
Class A Common Stock 135
GAMerica Capital Fund
Class A Common Stock 24
GAM Asian Capital Fund
Class A Common Stock 85
Item 27. Indemnification.
- -------- ----------------
All officers, directors, employees and agents of the
Registrant are to be indemnified to the fullest extent
permitted by law for any liabilities of any nature whatsoever
incurred in connection with the affairs of the Registrant,
except in cases where willful misfeasance, bad faith, gross
negligence or reckless disregard of duties to the Registrant
are established. See Article NINTH of the Articles of
Incorporation of the Registrant, as amended, for a more
complete description of matters related to indemnification.
GAM Services Inc. ("GAM Services"), the Registrant's principal
underwriter, will be indemnified against all claims, demands,
liabilities and expenses which may be incurred by it arising
out of any untrue statement, or alleged untrue statement, of a
material fact contained in the Registrant's registration
statement or material omission, or alleged material omission,
therein.
Item 28. Business and Other Connections of Investment Advisers.
- -------- ------------------------------------------------------
Paul S. Kirkby
--------------
Global Asset Management (H.K.) Ltd., 1801 Two Exchange Square,
Central, Hong Kong, investment adviser, director, 1985 to
present.
GAM (Asia) Retirement Scheme, 1801 Two Exchange Square,
Central, Hong Kong, trustee, 1986 to present.
<PAGE>
-5-
Hanningfield Investments Ltd., 1801 Two Exchange Square,
Central, Hong Kong, investment adviser, director, 1987 to
present.
GAM Japan Inc. and GAM Pacific Inc., Craigmuir Chambers, P.O.
Box 71, Road Town, Tortola, British Virgin Islands, director.
Exeter Investments Ltd., 11/F Alexandra House, Central, Hong
Kong, investment company, director, 1987 to present.
Nicholas J. Eeley
-----------------
Global Asset Management Limited, 12 St. James's Place, London
SWlA 1NX, England, investment adviser, director, 1984 to
present.
GAM Pacific Inc. and GAM Arbitrage Inc., Craigmuir Chambers,
P.O. Box 71, Road Town, Tortola, British Virgin Islands,
director.
David J. Miller
---------------
Global Asset Management (U.K.) Ltd., 12 St. James's Place,
London SW1A 1NX, England, investment adviser, chief financial
officer, 1987 to present.
GAM Funds, Inc., vice president, treasurer and assistant
secretary from 1988 until October 1994.
GAM Administration Limited, 11 Athol Street, Douglas, Isle of
Man, director.
Alan McFarlane
--------------
Global Asset Management Ltd., 12 St. James's Place, London
SW1A 1NX, England, managing director (institutional), 1993 to
present.
Ivory & Sime plc., 1 Charlotte Square, Edinburgh EH2 4D2,
Scotland, investment adviser, director, 1990 to 1993.
Denis G. Raeburn
----------------
Global Asset Management Ltd. and Global Asset Management
(U.K.) Ltd., 12 St. James's Place, London SW1A 1NX, England,
managing director, 1987 to present.
Cellcom Limited, Denmark House, Staples Corner, London NW9
7BW, England, director, 1983 to present.
Global Asset Management (USA) Inc., 135 East 57th Street, New
York, NY 10022, director, 1990 to present.
<PAGE>
-6-
Mr. Raeburn is also a director of various other companies
controlled by GAM and of various investment funds organized
outside the United States in the GAM group of funds.
Gordon Grender
--------------
Global Asset Management (U.K.) Ltd., 12 St. James's Place,
London SW1A 1NX, England, independent contractor and fund
manager, 1994 to present.
Stephens Inc., 111 Center Street, Little Rock, consultant,
1995 to present.
Foreign & Colonial US Smaller Companies plc, Exchange House,
Primrose Street, London EC2A 2NY, England, director, 1993 to
present.
Investco Overseas Holdings Limited, 81 Carter Lane, London EC4
5EP, England, director, 1987 to present.
Flexbale Limited, 2 Chapel Court, London SE1 1HR, England,
director, 1983 to present.
Adrian Berkeley & Associates Limited, The Estate Office,
Normanby, Scunthorpe, South Humberside DN15 9HS, England,
director, 1969 to present.
Carr, Kitcat & Aitken, No. 1 London Bridge, London EC1,
England, analyst, salesman and fund manager, 1990 to 1994.
Lehman Brothers, No. 1 Broadgate, London EC1, England,
investment manager and broker, 1994.
Mr. Grender also acts as portfolio manager for GAM North
American Unit Trust and GAMerica, Inc.
The directors and officers of Sarofim and their only
activities of a substantial nature during the past two years
are set forth in the Statement of Additional Information under
"Investment Advisers."
The directors and officers of Forstmann-Leff are set forth in
the Statement of Additional Information under "Investment
Advisers." The following is a list of the only other business,
profession, vocation or employment of a substantial nature
which such directors and officers have engaged in during the
past two years:
Joel B. Leff
------------
Langham Leff, an antiques and artwork importer and dealer, 19
East 71st Street, New York, New York 10021, president, 1995 to
present.
<PAGE>
-7-
William F. Harnisch
-------------------
East Quogue Oil Co., a real estate investment company, Suite
478, 405 Tarrytown Road, White Plains, New York 10607,
president, 1988 to present.
Mistinquette Too Ltd., an antique poster importer and dealer,
19 East 71st Street, New York, New York 10021, chairman, 1995
to present.
Master Art Sales, a design firm, 55 East 52nd Street, New
York, New York 10055, vice president, 1995 to present.
Peter A. Lusk
-------------
Investors Fiduciary Services Inc., a proxy research company,
3300 Northeast Expressway, Suite 8B, Atlanta, Georgia 30341,
chairman, 1991 to present.
Start, a consumer rebate card company, P.O. Box 468, Herndon,
Virginia 22070, director, 1992 to present.
MVS, a cellular technology company, 18 Linderman Drive,
Trumbull, Connecticut 06611, director, 1989 to present.
Richard H. Adelaar
------------------
Crucible Partners, L.P., a real estate investment company, 405
Tarrytown Road, White Plains, New York 10607, partner, 1988 to
present.
Item 29. Principal Underwriters.
- -------- -----------------------
(a) None.
(b) Name and Positions and Positions and
Principal Offices with Offices with
Business Address Underwriter Registrant
---------------- ----------- ----------
Kevin Blanchfield Chief Operating Officer, Vice President
135 East 57th Street Treasurer and Treasurer
New York, NY 10022 and Director
(c) N/A
Item 30. Location of Accounts and Records.
- -------- ---------------------------------
The accounts, books and other documents required to be maintained
by Registrant pursuant to Rule 31a-1(a) of the Act are maintained
as follows:
Accounts and Records
<PAGE>
-8-
Pursuant to Rule Location
---------------- --------
31a - 1(b)(1) Brown Brothers Harriman & Co.
31a - 1(b)(2)(i) 40 Water Street
31a - 1(b)(2)(ii) Boston, Massachusetts 02109
31a - 1(b)(2)(iii)
31a - 1(b)(3)
31a - 1(b)(5)-(8)
31a - 1(b)(10)
31a - 1(b)(1) Chas Global Funds Service Company
31a - 1(b)(2)(iv) P.O. Box 2798
Boston, Massachusetts 02208
31a - 1(b)(9)-(11) GAM International Management
Limited
12 St. James's Place
London SWIA 1NX, England
Fayez Sarofim & Co.
Suite 2907
Two Houston Center
Houston, Texas 77010
and
Forstmann-Leff Associates Inc.
55 East 52nd Street
New York, New York 10055
31a - 1(b)(4) Coudert Brothers
1114 Avenue of the Americas
New York, New York 10036
Item 31. N/A
- -------- ---
Item 32. Undertakings
- -------- ------------
(a) N/A
(b) N/A
(c) Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual report to
shareholders for each series upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Amendment to the Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused
this Amendment to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorised, in the City of New York and State of New
York, on the 29th day of April , 1996.
GAM FUNDS, INC.
Registrant
By: /s/ Gilbert de Botton
---------------------
Gilbert de Botton, President
- --------------------------------------------------------------------------------
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, this Amendment to the Registration Statement has been
signed below by the following persons in the capacities and on the dates
indicated.
Signature: Title: Date:
- --------- ----- ----
/s/ Gilbert de Botton President and Director April 29, 1996
- ------------------------ (Principal Executive Officer)
Gilbert de Botton
/s/ Kevin J. Blanchfield Treasurer (Principal Financial April 29, 1996
- ------------------------ and Accounting Officer) and
Kevin J. Blanchfield Secretary
/s/ Therese Meier* Director April 29, 1996
- ------------------------
Therese Meier
/s/ Madelon DeVoe Talley* Director April 29, 1996
- ------------------------
Madelon DeVoe Talley
/s/ Roland Weiser* Director April 29, 1996
- ------------------------
Roland Weiser
/s/ George W. Landau* Director April 29, 1996
- ---------------------
Roland Weiser
* By: /s/ Kevin J. Blanchfield
------------------------
Name: Kevin J. Blanchfield
Title: Attorney-in-Fact
Exhibit 1(d)
GAM FUNDS, INC.
ARTICLES OF AMENDMENT
GAM Funds, Inc., a Maryland corporation having its principal
office in Maryland in Baltimore City, Maryland (hereinafter called
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The Charter of the Corporation, as heretofore amended, is
further amended by redesignating all of the issued and unissued shares of each
class of Common Stock of the Corporation as Class A Common Stock of the
respective series. Subsequent to such redesignation, the Common Stock of the
Corporation is designated as follows:
GAM International Fund Class A Common Stock
GAM Global Fund Class A Common Stock
GAM Pacific Basin Fund Class A Common Stock
GAM Europe Fund Class A Common Stock
GAM North America Fund Class A Common Stock
GAM Japan Capital Fund Class A Common Stock
GAMerica Capital Fund Class A Common Stock
GAM Asian Capital Fund Class A Common Stock
SECOND: The foregoing amendment to the Charter of the
Corporation was approved by a majority of the entire board of directors at a
meeting duly convened and held on August 17, 1995.
THIRD: The foregoing amendment to the Charter of the Corporation
is limited to a change expressly permitted by Section 2-605 of Subtitle 6 of
Title 2 of the Maryland General Corporation Law to be made without action by
stockholders.
FOURTH: The Corporation is registered as an open-end company
under the Investment Company Act of 1940 as amended.
IN WITNESS WHEREOF, GAM Funds, Inc. has caused these presents to be
signed in its name and on its behalf by its duly authorized officers who
acknowledge that these Articles of Amendment are the act of the Corporation
that, to the best of their knowledge, information and belief, all matters and
facts set forth herein relating to the authorization and approval of the
Articles are true in all material respects and that this statement is made under
the penalties of perjury.
ATTEST: GAM FUNDS, INC.
/s/ Mary Moran Zeven By: /s/ Kevin Blanchfield
- ---------------------------- --------------------------
Name: Mary Moran Zeven Name: Kevin Blanchfield
Title: Secretary Title: Vice President
Exhibit 1(e)
GAM FUNDS, INC.
ARTICLES SUPPLEMENTARY
GAM Funds, Inc., a Maryland corporation having its principal office in
Maryland in Baltimore City, Maryland (hereinafter called the "Corporation"),
hereby certifies to the State Department of Assessments and Taxation of Maryland
that:
FIRST: The Corporation presently has authorized 200,000,000 shares of
Common Stock, par value $.001 per share, previously classified and allocated in
the Charter of the Corporation as follows:
Number of Shares of
Common Stock Previously
Name of Series Classified and Allocated
-------------- ------------------------
GAM International Fund Class A Common Stock 25,000,000 shares
GAM Global Fund Class A Common Stock 25,000,000 shares
GAM Pacific Basin Bond Fund Class A Common Stock 25,000,000 shares
GAM Europe Fund Class A Common Stock 25,000,000 shares
GAM North America Fund Class A Common Stock 25,000,000 shares
GAM Japan Capital Fund Class A Common Stock 25,000,000 shares
GAMerica Capital Fund Class A Common Stock 25,000,000 shares
GAM Asian Capital Fund Class A Common Stock 25,000,000 shares
SECOND: These Articles Supplementary do not increase the total number
of authorized shares of the Corporation or the aggregate par value thereof. The
Board of Directors of the Corporation hereby classifies and reclassifies
12,500,000 authorized but unissued shares of GAM Asian Capital Fund Class A
Common Stock and 12,500,000 authorized but unissued shares of GAM Japan Capital
Fund Class A Common Stock as 12,500,000 shares of authorized but unissued GAM
Mid-Cap U.S. Fund Class A Common Stock and 12,500,000 shares of authorized but
unissued GAM Mid-Cap U.S. Fund Class D Common Stock.
THIRD: The Board of Directors of the Corporation hereby further
classifies and reclassifies all of the other unissued shares of Class A Common
Stock of each Series in such manner that the Corporation's Common Stock will be
classified into nine (9) series, (each, a "Series"), each of which will have two
(2) classes of Common Stock, Class A Common Stock and Class D Common Stock, for
an aggregate of eighteen (18) classes of Common Stock, each with a par value of
$.001 per share and with an aggregate par value of two hundred thousand dollars
($200,000). Subsequent to the hereinabove classifications and reclassifications,
the Common
<PAGE>
Stock of the Corporation is classified as follows:
Number of Shares of
Common Stock
Name of Series Classified and Allocated
-------------- ------------------------
GAM International Fund Class A Common Stock 12,500,000 shares
GAM International Fund Class D Common Stock 12,500,000 shares
GAM Global Fund Class A Common Stock 12,500,000 shares
GAM Global Fund Class D Common Stock 12,500,000 shares
GAM Pacific Basin Fund Class A Common Stock 12,500,000 shares
GAM Pacific Basin Fund Class D Common Stock 12,500,000 shares
GAM Europe Fund Class A Common Stock 12,500,000 shares
GAM Europe Fund Class D Common Stock 12,500,000 shares
GAM North America Fund Class A Common Stock 12,500,000 shares
GAM North America Fund Class D Common Stock 12,500,000 shares
GAM Japan Capital Fund Class A Common Stock 6,250,000 shares
GAM Japan Capital Fund Class D Common Stock 6,250,000 shares
GAMerica Capital Fund Class A Common Stock 12,500,000 shares
GAMerica Capital Fund Class D Common Stock 12,500,000 shares
GAM Asian Capital Fund Class A Common Stock 6,250,000 shares
GAM Asian Capital Fund Class D Common Stock 6,250,000 shares
GAM Mid-Cap U.S. Fund Class A Common Stock 12,500,000 shares
GAM Mid-Cap U.S. Fund Class D Common Stock 12,500,000 shares
FOURTH: The shares of Class A and Class D Common Stock of the GAM
Mid-Cap U.S. Fund Series classified and reclassified hereby shall be subject to
all provisions of its Charter relating to stock of the Corporation generally,
and those set forth as follows:
(a) The Class A and Class D shares of GAM Mid-Cap U.S. Fund
Series shall have the following preferences, conversion and other rights,
restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption:
(1) All consideration received by the Corporation for
the issue or sale of Class A and Class D shares of GAM Mid-Cap
U.S. Fund Series, together with all income, earnings, profits
and proceeds thereof, including any proceeds derived from the
sale, exchange or liquidation thereof, and any funds or
payments derived from any reinvestment of such proceeds in
whatever form the same may be, shall irrevocably belong to
such Series for all purposes, subject only to the rights of
creditors, and shall be so recorded upon the books of account
of the Corporation. Such consideration, income, earnings,
profits and proceeds thereof, including any proceeds
2
<PAGE>
derived from the sale, exchange or liquidation thereof, and
any funds or payments derived from any reinvestment of such
proceeds, in whatever form the same may be, are herein
referred to as "assets belonging to" such Series.
(2) Dividends or distributions on shares of GAM
Mid-Cap U.S. Fund Series, whether payable in stock or cash,
shall be paid only out of earnings, surplus or other assets
belonging to such Series.
(3) In the event of the liquidation or dissolution of
the Corporation, stockholders of the GAM Mid-Cap U.S. Fund
Series shall be entitled to receive, as a class, out of the
assets of the Corporation available for distribution to
stockholders, the assets belonging to that Series. The assets
so distributable to the stockholders of such Series shall be
distributed among such stockholders in proportion to the
relative net asset values of the classes within the Series and
the number of shares of the particular class of the Series
held by them and recorded on the books of the Corporation or
in such other manner as may be determined by the Board of
Directors in accordance with law.
(4) The assets belonging to the GAM Mid-Cap U.S. Fund
Series shall be charged with the liabilities of the
Corporation in respect of such Series and with such Series'
share of the general liabilities of the Corporation, in the
latter case in the proportion that the respective net asset
values of the classes of such Series bear to the net asset
values of the classes of all Series as determined by Article
SIXTH of the Articles of Incorporation or in such other manner
as may be determined by the Board of Directors in accordance
with law. The determination of the Board of Directors shall be
conclusive as to the allocation of assets and liabilities,
including accrued expenses and reserves, to a given Series and
the classes therein.
(b) The Class A and Class B shares of Common Stock of GAM
Mid-Cap U.S. Fund Series classified hereby will be invested in a common
investment Series and, if hereafter authorized, with one or more other classes
in a common investment Series and in that regard shall be subject to the
following additional
3
<PAGE>
preferences, conversion and other rights, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption:
(1) Except as otherwise noted herein, Class A shares
and Class D shares of GAM Mid-Cap U.S. Fund Series shall
represent the same interest in the Corporation and in GAM Mid-
Cap U.S. Fund Series and have identical voting, dividend,
liquidation and other rights.
(2) Class A shares and Class D shares of GAM Mid-Cap
U.S. Fund Series may be subject to such front-end sales loads,
which may differ between and within the classes, as may be
established by the Board of Directors from time to time in
accordance with the Investment Company Act of 1940 (the "1940
Act") and applicable rules and regulations of the National
Association of Securities Dealers, Inc. (the "NASD").
(3) Expenses related solely to a particular class of
GAM Mid-Cap U.S. Fund Series (including, without limitation,
distribution expenses under a Rule 12b-1 plan and
administrative expenses under an administration or service
agreement, plan or other arrangement, however designated,
which may differ between the classes) shall be borne by that
class and shall be appropriately reflected (in the manner
determined by the Board of Directors) in the net asset value,
dividends, distributions and liquidation rights of the shares
of that class. The determination of the Board of Directors
shall be conclusive as to the allocation of assets and
liabilities, including accrued expenses and reserves, to a
given class.
(4) At such times as shall be permitted under the
1940 Act or any applicable rules and regulations thereunder
and as may be determined by the Board of Directors and
disclosed in the then current prospectus of the Corporation
pertaining to the GAM Mid-Cap U.S. Fund Series, shares of each
class of the Series may be exchanged for shares of the same
class of another Series of the Corporation.
(c) On each matter submitted to a vote of the stockholders,
each holder of a share of Class A and Class D stock of the GAM Mid-Cap U.S. Fund
Series shall be entitled to one vote for each such share
4
<PAGE>
standing in such stockholder's name on the books of the Corporation irrespective
of the Series or class thereof. All holders of such shares shall vote as a
single class with the holders of other shares of the Corporation, provided,
however, that to the extent class or Series voting is required by the 1940 Act
or Maryland Law as to any such matters those requirements shall apply and that
except as otherwise required by law, only the holders of shares of the class or
classes affected shall be entitled to vote. Any fractional share, if any such
fractional share is outstanding, shall carry proportionately all the rights of a
whole share, including the right to vote and the right to receive dividends.
FIFTH: The Shares of Class A Common Stock of each Series of the
Corporation listed in Article Third hereof, other than the GAM Mid-Cap U.S. Fund
Series, shall have the preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption of such classes as currently set forth in the Charter
of the Corporation. The shares of Class D Common Stock of each such Series of
the Corporation, other than GAM Mid-Cap U.S. Fund Series, classified and
reclassified hereby shall have the preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends, qualifications and
terms and conditions of redemption as currently set forth in the Charter of the
Corporation and shall be subject to all provisions of its Charter relating to
stock of the Corporation generally, and those set forth as follows:
(a) The Class D shares of each such Series of Common Stock
shall have the following preferences, conversion and other rights, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption:
(1) All consideration received by the Corporation for the
issue or sale of shares of Class D Common Stock of a Series,
together with all income, earnings, profits and proceeds
thereof, including any proceeds derived from the sale,
exchange or liquidation thereof, and any funds or payments
derived from any reinvestment of such proceeds in whatever
form the same may be, shall irrevocably belong to such Series
for all purposes, subject only to the rights of creditors, and
shall be so recorded upon the books of account of the
Corporation. Such consideration,
5
<PAGE>
income, earnings, profits and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation
thereof, and any funds or payments derived from any
reinvestment of such proceeds, in whatever form the same may
be, are included in the term "assets belonging to" such Series
as used herein and in the other provisions of the Charter of
the Corporation pertaining to such Series.
(2) Dividends or distributions on shares of Class D
Common Stock of a Series, whether payable in stock or cash,
shall be paid only out of earnings, surplus or other assets
belonging to such Series.
(3) In the event of the liquidation or dissolution of
the Corporation, stockholders of Class D Common Stock of each
Series shall, together with the stockholders of Class A Common
Stock of the respective Series and any other class of the
respective Series hereafter established, be entitled to
receive, as a class, out of the assets of the Corporation
available for distribution to stockholders, the assets
belonging to the Series of which they are stockholders. The
assets so distributable to the stockholders of such Series
shall be distributed among such stockholders in proportion to
the relative net asset values of the classes within the Series
and the number of shares of the particular class of the Series
held by them and recorded on the books of the Corporation or
in such other manner as may be determined by the Board of
Directors in accordance with law.
(4) The assets belonging to each Series shall be
charged with the liabilities of the Corporation in respect of
such Series and with such Series' share of the general
liabilities of the Corporation, in the latter case in the
proportion that the respective net asset values of the classes
of such Series bear to the net asset values of the classes of
all Series as determined by Article SIXTH of the Articles of
Incorporation or in such other manner as may be determined by
the Board of Directors in accordance with law. The
determination of the Board of Directors shall be conclusive as
to the allocation of assets and liabilities, including accrued
expenses and
6
<PAGE>
reserves, to a given Series and the classes therein.
(b) Class D shares of Common Stock of each Series will be
invested with Class A shares of Common Stock of the respective Series and, if
hereafter authorized, with one or more other classes in a common investment
Series and in that regard shall be subject to the following preferences,
conversion and other rights, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption:
(1) Except as otherwise noted herein, Class D Shares
of each Series shall represent the same interest in the
Corporation and in each Series and have identical voting,
dividend, liquidation and other rights as Class A shares of
each respective Series.
(2) Class D shares of each Series may be subject to
such front-end sales loads, which may differ among the holders
of Class D shares and from those to which other classes of the
Series may be subject, as may be established by the Board of
Directors from time to time in accordance with the 1940 Act
and applicable rules and regulations of the NASD.
(3) Expenses related solely to Class D shares of a
Series (including, without limitation, distribution expenses
under a Rule 12b-1 plan and administrative expenses under an
administration or service agreement, plan or other
arrangement, however designated, which may differ between the
classes) shall be borne by Class D and shall be appropriately
reflected (in the manner determined by the Board of Directors)
in the net asset value, dividends, distributions and
liquidation rights of the Class D shares of the Series. The
determination of the Board of Directors shall be conclusive as
to the allocation of assets and liabilities, including accrued
expenses and reserves, to a given class.
(4) At such times as shall be permitted under the
1940 Act or any applicable rules and regulations thereunder
and as may be determined by the Board of Directors and
disclosed in the then current prospectus of the Corporation
pertaining to such Series, Class D shares of a Series may be
exchanged for shares of the same class of another Series.
(c) On each matter submitted to a vote of the stockholders,
each holder of a share of Class
7
<PAGE>
D stock of each such Series of the Corporation shall be entitled to one vote for
each such share standing in such stockholder's name on the books of the
Corporation irrespective of the Series or class thereof. All holders of such
shares shall vote as a single class with the holders of other shares of the
Corporation provided, however, that to the extent class or Series voting is
required by the 1940 Act or Maryland law as to any such matters, these
requirements shall apply and that except as otherwise required by law, only the
holders of shares of the class or classes affected shall be entitled to vote.
Any fractional share, if any such fractional share is outstanding, shall carry
proportionately all the rights of a whole share, including the right to vote and
the right to receive dividends.
FOURTH: The shares aforesaid have been duly reclassified by the Board
of Directors pursuant to the authority and power contained in the Charter of the
Corporation.
IN WITNESS WHEREOF, GAM Funds, Inc. has caused these presents to be
signed in its name and on its behalf by its duly authorized officers who
acknowledge that these Articles Supplementary are the act of the Corporation,
that, to the best of their knowledge, information and belief, all matters and
facts set forth herein relating to the authorization and approval of the
Articles are true in all material respects and that this statement is made under
the penalties of perjury.
GAM FUNDS, INC.
By: /s/ Kevin Blanchfield
------------------------------
Kevin Blanchfield
Vice President
ATTEST:
/s/ Mary Moran Zeven
- -------------------------------------
Mary Moran Zeven
Secretary
8
Exhibit 5(a)
GAM FUNDS, INC.
March 10, 1995
GAM International Management Limited
12 St. James's Place
London SWIA 1NX
ENGLAND
AMENDED AND RESTATED INVESTMENT ADVISORY CONTRACT
Dear Sirs:
The undersigned, GAM Funds, Inc., a Maryland corporation (the "Fund"),
is an open-end diversified series investment company, registered under the
Investment Company Act of 1940, as amended (the "1940 Act"). This letter (the
"Contract") confirms your engagement as investment adviser to each series of the
Fund's shares presently authorized -- GAM International Fund, GAM Global Fund,
GAM Pacific Basin Fund, GAM Europe Fund, GAM North America Fund, GAM Japan
Capital Fund, GAMerica Capital Fund and GAM Asian Capital Fund -- on the terms
and subject to the conditions set forth below:
SECTION 1. INVESTMENT MANAGEMENT SERVICES
A. GENERAL
You shall conduct and maintain a continuous review of each
series' portfolio of securities and investments, and, except with respect to GAM
North America Fund, you shall make all decisions regarding purchases and sales
of securities and other investments on behalf of each series. On behalf of each
series other than GAM North America Fund, such services shall include, among
others, determining the portion of the assets of each series to be held in
United States and foreign issuers and entering into foreign exchange contracts
in connection therewith on behalf of each series, as you deem advisable.
With respect to GAM North America Fund, you shall provide to
Fayez Sarofim & Co. ("Sarofim") recommendations as to the purchase and sale of
securities, portfolio reviews, and investment research and advice with respect
to the securities and investments of GAM North America Fund.
In all instances, you shall be guided by the investment
objectives, policies and restrictions of each series as set forth in the
Prospectus and the Statement of Additional
<PAGE>
-2-
Information filed by the Fund with the Securities and Exchange Commission, as
amended from time to time (the "Disclosure Documents"), in accordance with such
other policies or limitations adopted by the Board of Directors and the
provisions of the 1940 Act and the rules promulgated thereunder. We agree to
supply you with all such relevant documents and to notify you of any relevant
changes in the Fund's investment objectives, policies and restrictions.
In acting under this Agreement, you shall be an independent
contractor and shall not be an agent of the Fund.
B. SELECTION AND RECOMMENDATIONS OF BROKERS
With respect to each series of the Fund other than GAM North
America Fund, you shall be solely responsible for the selection of members of
securities exchanges, brokers and dealers for the execution of the portfolio
transactions of the Fund, and, when applicable, negotiating commissions in
connection therewith. With respect to GAM North America Fund, you shall make
recommendations to Sarofim as requested by Sarofim as to the selection of
members of securities exchanges, brokers and dealers for the execution of the
portfolio transactions of GAM North America Fund. All such selections and
recommendations shall be made in accordance with the Fund's policies and
restrictions regarding brokerage allocation set forth in the Disclosure
Documents.
You may, in making such brokerage selections and
recommendations and in negotiating commissions, take into account any services
or facilities provided by a broker. You are authorized to select or recommend a
member of a securities exchange or any other securities broker or dealer which
charges an amount of commission for effecting a securities transaction in excess
of the amount of commission another member of an exchange, broker or dealer
would have charged for effecting that transaction if you determine in good faith
that such amount of commission is reasonable in relation to the value of the
brokerage and research services (as such services are defined in Section 28(e)
of the Securities Exchange Act of 1934, as amended (the "1934 Act")) provided by
such member, broker or dealer, viewed in terms of either that particular
transaction or your overall responsibility with respect to the accounts as to
which you exercise investment discretion (as that term is defined in Section
3(a)(35) of the 1934 Act).
C. REPORTS AND SUMMARIES
You shall maintain a continuous record of all the investments
and securities which comprise the portfolio of each series of the Fund, other
than GAM North America Fund, and shall furnish to the Fund or its designee such
summaries of each series' portfolio and such other reports, evaluations,
analyses and opinions, including statistical reports, relating to your services
as investment adviser hereunder as the Fund may reasonably request at any time
or from time to time or as you may deem helpful to the Fund. All such records
shall be the property of the Fund.
<PAGE>
-3-
SECTION 2. EXPENSES
You shall assume and pay all of your own costs and expenses,
including those for furnishing such office space, office equipment, office
personnel and office services as you may require in the performance of your
duties under this Contract.
The Fund shall bear all expenses of its organization,
operations and business not expressly assumed or agreed to be paid by you under
this Contract. In particular, but without limiting the generality of the
foregoing, the Fund shall pay all interest, taxes, governmental charges or
duties, fees, brokerage and commissions of every kind arising hereunder or in
connection herewith, expenses of issue, repurchase or redemption of the Fund's
shares, expenses of registering, qualifying and pricing the Fund's shares for
sale, insurance, association membership dues, all charges of custodians
(including fees as custodian and for keeping books, performing portfolio
valuations and rendering other services to the Fund), transfer agents,
registrars, dividend disbursing agents, independent auditors and legal counsel,
expenses of preparing, printing and distributing all prospectuses, proxy
material, reports and notices to shareholders, all distribution expenses under
its Plan adopted in accordance with Rule 12b-1 under the 1940 Act, fees and
out-of-pocket expenses of directors, all overhead expenses of the Fund's
operations, including office space, office equipment, office personnel and
office services and all other costs incident to the Fund's corporate existence.
SECTION 3. USE OF SERVICES OF OTHERS
You may (at your expense except as set forth in Section 2
hereof) employ, retain or otherwise avail yourself of the services or facilities
of other persons or organizations for the purpose of providing you or the Fund
with such statistical or factual information, such advice regarding economic
factors and trends or such other information, advice or assistance as you may
deem necessary, appropriate or convenient for the discharge of your obligations
hereunder or otherwise helpful to the Fund.
SECTION 4. MANAGEMENT FEES
A. FEE RATE
In consideration of your services hereunder to each series of
the Fund other than GAM North America Fund, you shall be entitled to a
management fee, payable quarterly, equal to 0.25% of the average daily net
assets of each series of the Fund during the quarter preceding each payment
(equivalent to an annual fee of 1% of the average daily net assets of the Fund
during the year). The fee shall be accrued for each calendar day and the sum of
the daily fee accruals shall be paid quarterly to you on the first business day
of the next succeeding quarter. The daily fee accruals will be computed by
multiplying the fraction of one over the number of calendar days in the quarter
by 0.25% and multiplying this product by the net assets of each series of the
Fund as determined in accordance with the Fund's Prospectus as of the close of
business on the previous business day on which the Fund was open for business.
<PAGE>
-4-
In consideration of your services hereunder to GAM North
America Fund, you shall be entitled to a management fee, payable quarterly,
equal to 0.125% of the average daily net assets of GAM North America Fund during
the quarter preceding each payment (equivalent to an annual fee of 0.5% of the
average daily net assets of GAM North America Fund during the year). The fee
shall be accrued for each calendar day and the sum of the daily fee accruals
shall be paid quarterly to you on the first business day of the next succeeding
quarter. The daily fee accruals will be computed by multiplying the fraction of
one over the number of calendar days in the quarter by 0.125% and multiplying
this product by the net assets of GAM North America Fund as determined in
accordance with the Fund's Prospectus as of the close of business on the
previous business day on which the Fund was open for business.
B. EXPENSE LIMITATION
In the event that the annual expenses of any series of the
Fund for all purposes (including the investment management fee), except taxes,
brokerage fees and commissions, distribution expenses and (with the consent of
the state securities administrators where necessary) extraordinary expenses such
as litigation, exceed the limits prescribed by any state in which the shares of
such series are qualified for sale, the amount of the fee payable by such series
to you will be reduced by the amount of any such excess. When the accrued amount
of such expenses exceeds the limits at month-end, the accrued amount of your fee
at month-end will be reduced by the amount of such excess, subject to adjustment
monthly during the balance of the Fund's fiscal year if accrued expenses
thereafter fall below the limit.
SECTION 5. LIMITATION OF LIABILITY OF INVESTMENT ADVISER
You shall be liable for losses resulting from your own acts or
omissions caused by your willful misfeasance, bad faith or gross negligence in
the performance of your duties hereunder or your reckless disregard of your
duties under this Contract, and nothing herein shall protect you against any
such liability to the Fund or its shareholders. You shall not be liable to the
Fund or to any shareholder of the Fund for any claim or loss arising out of any
investment or other act or omission, in the performance of your duties under
this Contract or for any loss or damage resulting from the imposition by any
government of exchange control restrictions which might affect the liquidity of
the Fund's assets maintained with custodians or securities depositories in
foreign countries or from any political acts of any foreign governments to which
such assets might be exposed.
SECTION 6. SERVICES TO OTHER CLIENTS AND THE FUND
Nothing contained in this Contract shall be deemed to prohibit
you or any of your affiliated persons from acting, and being separately
compensated for acting, in one or more capacities on behalf of the Fund. We
understand that you may act as investment manager or in other capacities on
behalf of other investment companies and customers. While information and
recommendations you supply to the Fund and investments you make on behalf of the
Fund shall
<PAGE>
-5-
in your judgment be appropriate under the circumstances in light of the
investment objectives and policies of the Fund, it is understood and agreed that
they may be different from the information and recommendations you or your
affiliated persons supply to other clients. You and your affiliated persons
shall supply information, recommendations and any other services, and shall
allocate investment opportunities among each series of the Fund and any other
client, in an impartial and fair manner in order to seek good results for all
clients involved, but you shall not be required to give preferential treatment
to any one series of the Fund as compared with the treatment given to any other
series or to any other client. Whenever you shall act in multiple capacities on
behalf of the Fund, you shall maintain the appropriate separate accounts and
records for each such capacity. As used herein, the term "affiliated person"
shall have the meaning assigned to it in the 1940 Act.
On occasions when you deem the purchase or sale of a security
to be in the best interest of one or more of the Fund's series as well as other
customers, you may, to the extent permitted by applicable law, aggregate the
securities to be so sold or purchased in order to obtain the best execution or
lower brokerage commissions, if any. You may also on occasion purchase or sell a
particular security for one or more customers in different amounts. On either
occasion, and to the extent permitted by applicable law and regulations,
allocation of the securities so purchased or sold, as well as the expenses
incurred in the transaction, will be made by you in the manner you consider to
be the most equitable and consistent with your fiduciary obligations to each
series of the Fund and to such other customers.
SECTION 7. REPORTS TO INVESTMENT ADVISER
The Fund shall furnish to you solely for your use such
prospectuses, proxy statements, reports and other information relating to the
business and affairs of the Fund as you may, at any time or from time to time,
reasonably require in order to discharge your duties under this Contract.
SECTION 8. USE OF INVESTMENT ADVISER'S NAME
The Fund may use the names "GAM Funds, Inc.", "GAM
International Fund", "GAM Global Fund", "GAM Pacific Basin Fund", "GAM Europe
Fund", "GAM North America Fund", "GAM Japan Capital Fund", "GAMerica Capital
Fund", "GAM Asian Capital Fund" or any other name derived from the name "GAM" or
"Global Asset Management" only for so long as (i) this Contract or any
extension, renewal or amendment hereof remains in effect, (ii) a majority of
your equity interest shall continue to be owned by your corporate parent, Global
Asset Management Ltd., or (iii) you shall specifically consent in writing to
such continued use. Any such use by the Fund shall in no way prevent you or any
of your successors or assigns from using or permitting the use of the names GAM
Funds, Inc., GAM International Fund, GAM Global Fund, GAM Pacific Basin Fund,
GAM Europe Fund, GAM North America Fund, GAM Japan Capital Fund, GAMerica
Capital Fund, GAM Asian Capital Fund or any component or components thereof,
singly or in any combination, alone or with any other word or words, for, by or
in connection with any other entity or business, other than the Fund or its
<PAGE>
-6-
businesses, whether or not the same directly or indirectly competes or conflicts
with the Fund or its business in any manner. To the extent permitted by the 1940
Act and rules and regulations thereunder, and more particularly, Investment
Company Act Release No. 5510, dated October 8, 1968, in the event that you shall
cease to be the investment manager of the Fund or your corporate parent shall no
longer own a majority of your equity interest, the Fund, upon your written
request, shall submit to its shareholders for their vote a proposal to amend its
Charter to delete from its name the initials "GAM" and thereafter (1) cease to
use the names "GAM Funds, Inc.", "GAM International Fund", "GAM Pacific Basin
Fund", "GAM Europe Fund", "GAM North America Fund", "GAM Japan Capital Fund",
"GAMerica Capital Fund", "GAM Asian Capital Fund" or any component or components
thereof, singly or in any combination, or any name deceptively similar to
"Global Asset Management" or "GAM Funds", "GAM International", "GAM Global",
"GAM Pacific Basin", "GAM Europe", "GAM North America", "GAM Japan Capital",
"GAMerica Capital Fund", or "GAM Asian Capital Fund" in any way whatsoever, and
(2) for such period and in such manner as may reasonably be required by you, on
all letterheads and other material designed to be read or used by salesmen,
distributors or investors, state in a prominent position and prominent type that
GAM International Management Limited has ceased to be the investment manager of
the Fund, provided, however, that if you make such request because your parent
corporation no longer owns a majority of your equity interest, the question of
continuing the investment management agreement between you and the Fund must be
submitted to a vote of the shareholders of each series of the Fund at the time
of submission of the proposal to amend the Fund's name.
SECTION 9. TERM OF CONTRACT
This Contract shall be effective (i) with respect to each of
GAM International Fund, GAM Global Fund, GAM Pacific Basin Fund and GAM Europe
Fund, on the date on which this Contract is approved by vote of a majority of
the outstanding shares of each such series (as defined in the 1940 Act), (ii)
with respect to GAM North America Fund, on the date hereof, and (iii) with
respect to GAM Japan Capital Fund, GAMerica Capital Fund and GAM Asian Capital
Fund, on the date such series commence operations. This Contract shall continue
in effect from year to year with respect to each series, subject to approval
annually by the Board of Directors of the Fund or by vote of a majority of the
outstanding shares of such series of the Fund (as defined in the 1940 Act) and
also, in either event, by the vote, cast in person at a meeting called for the
purpose of voting on such approval, of a majority of the directors of the Fund
who are not parties to this Contract or interested persons (as defined in the
1940 Act) of any such person.
SECTION 10. TERMINATION OF CONTRACT; ASSIGNMENT
This Contract may be terminated with respect to each series by
either party hereto, without the payment of any penalty, upon 60 days' prior
notice in writing to the other party; provided, that in the case of termination
by the Fund, such action shall have been authorized by resolution of a majority
of the directors of the Fund in office at the time or by vote of a majority of
the outstanding shares of such series of the Fund (as defined by the 1940
<PAGE>
-7-
Act).
This Contract shall automatically terminate in the event of
its assignment (as defined in the 1940 Act). Termination of this Contract for
any reason shall not affect rights of the parties that have accrued prior
thereto.
SECTION 11. APPLICABLE PROVISIONS OF LAW
This Contract shall be subject to all applicable provisions of
law, including, without limitation, the applicable provisions of the 1940 Act,
and to the extent that any provisions herein contained conflict with any such
applicable provisions of law, the latter shall control.
If the above terms and conditions are acceptable to you,
please so indicate by signing and returning to us the enclosed copy of this
letter, whereupon this letter shall constitute a binding contract between us.
Very truly yours,
GAM FUNDS, INC.
By: /s/ Kevin J. Blanchfield
-------------------------------
Authorized Signature
Accepted and Agreed:
GAM INTERNATIONAL MANAGEMENT LIMITED
By: /s/ Denis Raeburn/Nicholas Eeley
------------------------------------------
Authorized Signature
Exhibit 5(b)
GAM FUNDS, INC.
March 10, 1995
GAM International Management Limited
12 St. James's Place
London SWIA 1NX
ENGLAND
AMENDMENT NUMBER 1 TO AMENDED AND RESTATED INVESTMENT ADVISORY CONTRACT
Dear Sirs:
The undersigned, GAM Funds, Inc., a Maryland corporation (the "Fund"),
is an open-end diversified, series investment company, registered under the
Investment Company Act of 1940, as amended. This letter confirms your engagement
as investment adviser to two newly proposed series of the Fund's shares -
GAMerica Capital Fund and GAM Asian Capital Fund on the terms and subject to the
conditions set forth in the Amended and Restated Investment Advisory Contract,
dated April 14, 1994, now in effect between you and the Fund, including without
limitation the Fund's right to use the names "GAMerica Capital Fund" and "GAM
Asian Capital Fund" subject to the limitations (including your right to
terminate such use) set forth in Section 8 of the Amended and Restated
Investment Advisory Contract.
This Amendment Number 1 shall become effective upon issuance of shares
of GAMerica Capital Fund and GAM Asian Capital Fund and shall thereafter
continue in effect as provided in the Amended and Restated Investment Advisory
Contract. Except as set forth in this Amendment Number 1, the Amended and
Restated Investment Advisory Contract shall remain in full force and effect in
accordance with its terms.
If the above terms and conditions are acceptable to you, please so
indicate by signing and returning to us the enclosed copy of this letter,
whereupon this letter shall constitute a binding contract between us.
Very truly yours,
GAM FUNDS, INC.
By: /s/ Kevin Blanchfield
---------------------
Kevin Blanchfield, Vice President
Accepted and Agreed:
GAM INTERNATIONAL MANAGEMENT LIMITED
By: /s/ Denis Raeburn
-----------------
Denis Raeburn, Director
Exhibit 5(c)
GAM FUNDS, INC.
August 17, 1995
GAM International Management Limited
12 St. James's Place
London SWIA 1NX
ENGLAND
AMENDMENT NUMBER 2 TO AMENDED AND RESTATED INVESTMENT ADVISORY CONTRACT
Dear Sirs:
The undersigned, GAM Funds, Inc., a Maryland corporation (the "Fund"),
is an open-end diversified series investment company, registered under the
Investment Company Act of 1940, as amended (the "1940 Act"). This letter
confirms your engagement as co-adviser with Forstmann-Leff Associates, Inc.
("Forstmann-Leff") to a newly proposed series of the Fund's shares --GAM Mid-Cap
U.S. Fund -- on the terms and subject to the conditions set forth in the Amended
and Restated Investment Advisory Contract, dated April 14, 1994 (the "Contract")
now in effect between you and the Fund, including without limitation the Fund's
right to use the name "GAM Mid-Cap U.S. Fund", subject to the limitations
(including your right to terminate such use) set forth in Section 8 of the
Contract. In such capacity, you shall provide to Forstmann-Leff recommendations
as to the purchase and sale of securities, portfolio reviews, and investment
research and advice with respect to the securities and investments of GAM Mid-
Cap U.S. Fund, but you shall not have any authority to purchase or sell
securities or other investments on behalf of GAM Mid-Cap U.S. Fund without the
consent of Forstmann-Leff.
In consideration of your services hereunder to GAM Mid-Cap U.S. Fund,
you shall be entitled to an advisory fee, payable quarterly, equal to 0.125% of
the average daily net assets of the Fund during the quarter preceding each
payment (equivalent to an annual fee of 0.5% of the average daily net assets of
the GAM Mid-Cap U.S. Fund during the year), calculated and payable, and subject
to the expense limitation, as provided in Section 4 of the Contract.
This Amendment Number 2 shall become effective upon issuance of shares
of GAM Mid- Cap U.S. Fund and shall thereafter continue as provided in the
Contract. Except as set forth in this Amendment Number 2, the Contract shall
remain in full force and effect in accordance with its terms.
<PAGE>
August 17, 1995
Page 2
If the above terms and conditions are acceptable to you, please
indicate by signing and returning to us the enclosed copy of this letter,
whereupon this letter shall constitute a binding contract between us.
Very truly yours,
GAM FUNDS, INC.
By: /s/ Kevin J. Blanchfield
------------------------
Name: Kevin J. Blanchfield
Title: Vice President
Accepted and Agreed:
GAM INTERNATIONAL MANAGEMENT LIMITED
By: /s/ Denis G. Raeburn
---------------------
Name: Denis G. Raeburn
Title: Director
Exhibit 5(e)
GAM FUNDS, INC.
August 17, 1995
Forstmann-Leff Associates Inc.
55 East 52nd Street
New York, New York 10035
INVESTMENT ADVISORY CONTRACT
Dear Sirs:
The undersigned, GAM Funds, Inc., a Maryland corporation (the "Fund"),
is an open-end diversified series investment company, registered under the
Investment Company Act of 1940, as amended (the "1940 Act"). This letter (the
"Contract") confirms your engagement as investment adviser to GAM Mid-Cap U.S.
Fund on the terms and subject to the conditions set forth below:
SECTION 1. INVESTMENT MANAGEMENT SERVICES
A. GENERAL
You are hereby appointed to act as co-investment manager with
GAM International Management Limited ("GIML") with respect to GAM Mid-Cap U.S.
Fund, a series of the Fund. In such capacity, you shall conduct and maintain a
continuous review of the securities and investments of GAM Mid-Cap U.S. Fund and
you shall have full discretionary authority to make all decisions regarding the
purchase and sale of securities, and other investments on behalf of GAM Mid-Cap
U.S. Fund.
In all instances, you shall be guided by and shall comply with
the investment objectives, policies and restrictions of each series as set forth
in the Prospectus and the Statement of Additional Information filed by the Fund
with the Securities and Exchange Commission, as amended from time to time (the
"Disclosure Documents"), and with such other policies or limitations as may be
adopted by the Board of Directors and the provisions of the 1940 Act and
<PAGE>
August 17, 1995
Page 2
the rules promulgated thereunder, as applicable to the Fund. We agree to supply
you with all such relevant documents and to notify you of any relevant changes
in the Fund's investment objectives, policies and restrictions. You may also,
but are not required to, take into account the advice and recommendations
provided by GIML.
In acting under this Agreement, you shall be an independent
contractor and shall not be an agent of the Fund.
B. SELECTION AND RECOMMENDATIONS OF BROKERS
You shall have full discretionary authority to select members
of securities exchanges, brokers and dealers for the execution of the portfolio
transactions of GAM Mid-Cap U.S. Fund. All such selections shall be made in
accordance with the Fund's policies and restrictions regarding brokerage
allocation set forth in the Disclosure Documents.
You may, in making such brokerage selections and in
negotiating commissions, take into account any services or facilities provided
by a broker. You are authorized to select a member of a securities exchange or
any other securities broker or dealer which charges an amount of commission for
effecting a securities transaction in excess of the amount of commission another
member of an exchange, broker or dealer would have charged for effecting that
transaction if you determine in good faith that such amount of commission is
reasonable in relation to the value of the brokerage and research services (as
such services are defined in Section 28(e) of the Securities Exchange Act of
1934, as amended (the "1934 Act")) provided by such member, broker or dealer,
viewed in terms of either that particular transaction or your overall
responsibility with respect to the accounts as to which you exercise investment
discretion (as that term is defined in Section 3(a)(35) of the 1934 Act).
C. REPORTS AND SUMMARIES
You shall maintain a continuous record of all the investments
and securities which comprise the portfolio of GAM Mid-Cap U.S. Fund, and shall
furnish to the Fund or its designee such summaries of such portfolio and such
other reports, evaluations, analyses and opinions, including statistical
reports, relating to your services as investment adviser hereunder as the Fund
may reasonably request at any time or from time to time or as you may deem
helpful to the Fund. All such records shall be the property of the Fund.
However, you may retain copies of such records.
<PAGE>
August 17, 1995
Page 3
SECTION 2. EXPENSES
You shall assume and pay all of your own costs and expenses,
including those for furnishing such office space, office equipment, office
personnel and office services as you may require in the performance of your
duties under this Contract.
The Fund shall bear all expenses of its organization,
operations and business not expressly assumed or agreed to be paid by you under
this Contract. In particular, but without limiting the generality of the
foregoing, the Fund shall pay all interest, taxes, governmental charges or
duties, fees, brokerage and commissions of every kind arising hereunder or in
connection herewith, expenses of issue, repurchase or redemption of the Fund's
shares, expenses of registering, qualifying and pricing the Fund's shares for
sale, insurance, association membership dues, all charges of custodians
(including fees as custodian and for keeping books, performing portfolio
valuations and rendering other services to the Fund), transfer agents,
registrars, dividend disbursing agents, independent auditors and legal counsel,
expenses of preparing, printing and distributing all prospectuses, proxy
material, reports and notices to shareholders, all distribution expenses under
its Plan adopted in accordance with Rule 12b-1 under the 1940 Act, fees and
out-of-pocket expenses of directors, all overhead expenses of the Fund's
operations, including office space, office equipment, office personnel and
office services and all other costs incident to the Fund's corporate existence.
SECTION 3. USE OF SERVICES OF OTHERS
You may (at your expense except as set forth in Section 2
hereof) employ, retain or otherwise avail yourself of the services or facilities
of other persons or organizations for the purpose of providing you or the Fund
with such statistical or factual information, such advice regarding economic
factors and trends or such other information, advice or assistance as you may
deem necessary, appropriate or convenient for the discharge of your obligations
hereunder or otherwise helpful to the Fund.
SECTION 4. MANAGEMENT FEES
A. FEE RATE
In consideration of your services hereunder to GAM Mid-Cap
U.S. Fund, you shall be entitled to an advisory fee, payable quarterly, equal to
0.125% of the average daily net assets of the Fund during the quarter preceding
each payment (equivalent to an annual fee of 0.5% of the average daily net
assets of GAM Mid-Cap U.S. Fund during the year). The fee shall be accrued for
each calendar day and the sum of the daily fee accruals shall be paid
<PAGE>
August 17, 1995
Page 4
quarterly to you on the first business day of the next succeeding quarter. The
daily fee accruals will be computed by multiplying the fraction of one over the
number of calendar days in the quarter by 0.125% and multiplying this product by
the net assets of the Fund as determined in accordance with the Fund's
Disclosure Documents as of the close of business on the previous business day on
which the Fund was open for business.
B. EXPENSE LIMITATION
In the event that the annual expenses of GAM Mid-Cap U.S. Fund
for all purposes (including the investment advisory fee), except taxes,
brokerage fees and commissions, distribution expenses and (with the consent of
the state securities administrators where necessary) extraordinary expenses such
as litigation, exceed the limits prescribed by any state in which the shares of
the Fund are qualified for sale, the amount of the fee payable by the Fund to
you will be reduced by the amount of any such excess. Any other investment
adviser of GAM Mid-Cap U.S. Fund will share equally in such fee reduction. When
the accrued amount of such expenses exceeds the limits at month-end, the accrued
amount of your fee at month-end will be reduced by the amount of such excess,
subject to adjustment monthly during the balance of the Fund's fiscal year if
accrued expenses thereafter fall below the limit.
SECTION 5. LIMITATION OF LIABILITY OF INVESTMENT ADVISER
You shall be liable for losses resulting from your own acts or
omissions caused by your willful misfeasance, bad faith or gross negligence in
the performance of your duties hereunder or your reckless disregard of your
duties under this Contract, and nothing herein shall protect you against any
such liability to the Fund or its shareholders. You shall not be liable to the
Fund or to any shareholder of the Fund for any claim or loss arising out of any
investment or other act or omission, in the performance of your duties under
this Contract or for any loss or damage resulting from the imposition by any
government of exchange control restrictions which might affect the liquidity of
the Fund's assets maintained with custodians or securities depositories in
foreign countries or from any political acts of any foreign governments to which
such assets might be exposed.
SECTION 6. SERVICES TO OTHER CLIENTS AND THE FUND
Nothing contained in this Contract shall be deemed to prohibit
you or any of your affiliated persons from acting as investment manager or in
other capacities on behalf of other investment companies and customers. While
information and recommendations you supply to the Fund and investments you make
on behalf of the Fund shall in your judgment be appropriate under the
circumstances in light of the investment objectives and policies of the Fund, it
is
<PAGE>
August 17, 1995
Page 5
understood and agreed that they may be different from the information and
recommendations you or your affiliated persons supply to other clients. You and
your affiliated persons shall supply information, recommendations and any other
services, and shall allocate investment opportunities among the Fund and any
other client, in an impartial and fair manner in order to seek good results for
all clients involved, but you shall not be required to give preferential
treatment to the Fund as compared with the treatment given to any other client.
Whenever you shall act in multiple capacities on behalf of the Fund, you shall
maintain the appropriate separate accounts and records for each such capacity.
As used herein, the term "affiliated person" shall have the meaning assigned to
it in the 1940 Act.
On occasions when you deem the purchase or sale of a security
to be in the best interest of the Fund as well as other customers, you may, to
the extent permitted by applicable law, aggregate the securities to be so sold
or purchased in order to obtain the best execution or lower brokerage
commissions, if any. You may also on occasion purchase or sell a particular
security for one or more customers in different amounts. On either occasion, and
to the extent permitted by applicable law and regulations, allocation of the
securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by you in the manner you consider to be the most
equitable and consistent with your fiduciary obligations to each series of the
Fund and to such other customers.
SECTION 7. REPORTS TO INVESTMENT ADVISER
The Fund shall furnish to you solely for your use such
prospectuses, proxy statements, reports and other information relating to the
business and affairs of the Fund as you may, at any time or from time to time,
reasonably require in order to discharge your duties under this Contract.
SECTION 8. TERM OF CONTRACT
This Contract shall be effective upon the first issuance of
shares of GAM Mid-Cap U.S. Fund. This Contract shall continue in effect from
year to year with respect to GAM Mid- Cap U.S. Fund, subject to approval
annually by the Board of Directors of the Fund or by vote of a majority of the
outstanding shares (as defined in the 1940 Act) of GAM Mid-Cap U.S. Fund and
also, in either event, by the vote, cast in person at a meeting called for the
purpose of voting on such approval, of a majority of the directors of the Fund
who are not parties to this Contract or interested persons (as defined in the
1940 Act) of any such person.
<PAGE>
August 17, 1995
Page 6
SECTION 9. TERMINATION OF CONTRACT; ASSIGNMENT
This Contract may be terminated by either party hereto,
without the payment of any penalty, upon 60 days' prior notice in writing to the
other party; provided, that in the case of termination by the Fund, such action
shall have been authorized by resolution of a majority of the directors of the
Fund in office at the time or by vote of a majority of the outstanding shares
(as defined by the 1940 Act) of GAM Mid-Cap U.S. Fund.
This Contract shall automatically terminate in the event of
its assignment (as defined in the 1940 Act). Termination of this Contract for
any reason shall not affect rights of the parties that have accrued prior
thereto.
SECTION 10. APPLICABLE PROVISIONS OF LAW
This Contract shall be subject to all applicable provisions of
law, including, without limitation, the applicable provisions of the 1940 Act,
and to the extent that any provisions herein contained conflict with any such
applicable provisions of law, the latter shall control.
If the above terms and conditions are acceptable to you,
please so indicate by signing and returning to us the enclosed copy of this
letter, whereupon this letter shall constitute a binding contract between us.
Very truly yours,
GAM FUNDS, INC.
By: /s/ Kevin T. Blanchfield
------------------------
Name: Kevin J. Blanchfield
Title: Treasurer
Accepted and Agreed:
FORSTMANN-LEFF ASSOCIATES INC.
By: /s/ William F. Harnisch
-----------------------
Name: William F. Harnisch
Title:
Exhibit 6(a)
FIRST AMENDED AND RESTATED
DISTRIBUTION AGREEMENT
FOR CLASS A SHARES
THIS AGREEMENT is made as of the 17th day of August, 1995 by and
between GAM FUNDS, INC. a Maryland corporation (the "Fund"), and GAM SERVICES
INC., a Delaware corporation ("GAM Services").
WHEREAS, the Fund is registered as an open-end, diversified, management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act");
WHEREAS, on December 11, 1989, the Fund and GAM Services entered into
an agreement to provide distribution services for the Fund (the "Original
Distribution Agreement"); and
WHEREAS, the Fund and GAM Services now desire to amend the Original
Distribution Agreement to provide that GAM Services shall provide distribution
services for the Fund's Class A Shares on the terms and conditions hereinafter
set forth, and simultaneously to enter into a separate Distribution Agreement
with GAM Services regarding the Fund's Class D shares;
NOW THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt whereof is
hereby acknowledged, the parties hereto agree as follows:
1. APPOINTMENT. The Fund hereby appoints GAM Services as distributor
of the Class A Shares of the Fund for the period and on the terms set forth in
this Agreement. GAM Services accepts such appointment and agrees to render the
services herein set forth, for the compensation herein provided.
2. DELIVERY OF DOCUMENTS. The Fund has furnished GAM Services with
true and correct copies of each of the following:
(a) the Fund's Certificate of Incorporation and all amendments
thereto (such Certificate of Incorporation, as presently in effect and
as it shall from time to time be amended, is herein called the
"Certificate");
(b) the Fund's By-Laws and all amendments thereto (such
By-Laws, as presently in effect and as they shall from time to time be
amended, are herein called the "By-Laws");
(c) the Fund's Registration Statement on Form N-1A under the
Securities Act of 1933, as amended (the "1933 Act"), and under the 1940
Act as filed with the
<PAGE>
-2-
Securities and Exchange Commission (the "SEC") relating to the shares
of the Fund and all amendments thereto; and
(d) the Fund's most recent prospectus and statement of
additional information (such prospectus and statement of additional
information, as presently in effect and all amendments and supplements
thereto, are herein called the "Prospectus" and "SAI", respectively).
The Fund will furnish GAM Services from time to time with copies of all
amendments or supplements to the foregoing, if any.
3. DUTIES AS DISTRIBUTOR. GAM Services shall give the Fund the
benefit of its best judgment, efforts and facilities in rendering its services
as distributor of the Fund's Class A shares. In carrying out its obligations
hereunder, GAM Services shall:
(a) receive orders for the purchase of the Fund's
Class A Shares, accept or reject such orders on behalf of the
Fund in accordance with the Fund's currently effective
Prospectus and SAI and transmit such orders as are so accepted
to the Fund's transfer agent as promptly as possible;
(b) receive requests for redemption from holders of
the Fund's Class A Shares and transmit such redemption
requests to the Fund's transfer agent as promptly as possible;
and
(c) respond to inquiries from the Fund's Class A
shareholders concerning the status of their accounts with the
Fund.
4. DISTRIBUTION OF CLASS A SHARES. GAM Services shall be exclusive
distributor of the Fund's Class A Shares. It is mutually understood and agreed
that GAM Services does not undertake to sell all or any specific portion of the
Class A Shares of the Fund. The Fund shall not sell any of its Class A Shares
through any securities dealer other than GAM Services.
Notwithstanding the provisions of the foregoing sentence:
(a) the Fund may issue its Class A Shares to any other
investment company or personal holding company, or to the shareholders
thereof, in exchange for all or a majority of the shares or assets of
any such company;
(b) the Fund may issue its Class A Shares at their net asset
value to any shareholder of the Fund purchasing such shares with
dividends or other cash distributions received from the Fund pursuant
to an offer made to all shareholders;
(c) GAM Services may enter into shareholder processing and
servicing agreements in accordance with Section 7 hereof;
<PAGE>
-3-
(d) GAM Services may, and when requested by the Fund shall,
suspend its efforts to effectuate sales of the Class A Shares of the
Fund at any time when in the opinion of GAM Services or of the Fund no
sales should be made because of market or other economic considerations
or abnormal circumstances of any kind;
(e) the Fund may withdraw the offering of its Class A Shares
(i) at any time with the consent of GAM Services, or (ii) without such
consent when so required by the provisions of any statute or of any
order, rule or regulation of any governmental body having jurisdiction;
and
(f) the price at which the Class A Shares may be sold (the
"offering price") shall be the net asset value per Class A Share plus
any applicable sales load as determined in the manner established from
time to time by the Fund's Board of Directors and as set forth in the
Fund's then current Prospectus and SAI.
5. CONTROL BY BOARD OF DIRECTORS. Any distribution activities
undertaken by GAM Services pursuant to this Agreement, as well as any other
activities undertaken by GAM Services on behalf of the Fund pursuant thereto,
shall at all times be subject to any applicable directives of the Board of
Directors of the Fund.
6. COMPLIANCE WITH APPLICABLE REQUIREMENTS. In carrying out its
obligations under this Agreement, GAM Services shall at all times conform to:
(a) all applicable provisions of the 1940 Act and any rules
and regulations adopted thereunder;
(b) the provisions of the Registration Statement of the Fund
under the 1933 Act and the 1940 Act;
(c) the provisions of the Certificate of the Fund;
(d) the provisions of the By-Laws of the Fund;
(e) the rules and regulations of the National Association of
Securities Dealers, Inc. ("NASD") and all other self-regulatory
organizations applicable to the sale of investment company shares; and
(f) any other applicable provision of state and Federal law.
7. DEALER AND SHAREHOLDER SERVICE AGREEMENTS. GAM Services may enter
into dealer and shareholder service agreements (the "Dealer Agreements") with
any securities dealer ("Securities Dealer") who is registered under the
Securities Exchange Act of 1934 (the "1934 Act") and a member in good standing
of the NASD, who may wish to establish accounts or sub-
<PAGE>
-4-
accounts on behalf of such Securities Dealer's customers. GAM Services may enter
into shareholder processing and service agreements ("Shareholder Service
Agreements") with persons other than Securities Dealers ("Shareholder Service
Agents") who are not required to be registered under the 1934 Act or members in
good standing of the NASD, who are exempt from registration as a broker or a
dealer under the 1934 Act or who may otherwise lawfully furnish services to Fund
shareholders without registration under the 1934 Act. GAM Services will
supervise the Fund's relations with Securities Dealers and Shareholder Service
Agents. GAM Services will make payments to Securities Dealers and Shareholder
Service Agents in such amounts as GAM Services may determine from time to time
in its discretion.
8. EXPENSES. The expenses connected with the Fund shall be
allocable between the Fund and GAM Services as follows:
(a) GAM Services shall furnish, at its expense and without
cost to the Fund, the services of personnel to the extent that such
services are required to carry out its obligations under this
Agreement.
(b) GAM Services shall bear the fees payable to Securities
Dealers and Shareholder Service Agents as set forth in Section 7 above,
except that the Fund may pay fees to Securities Dealers and
Shareholders Service Agents in an amount not to exceed an annual rate
of 0.25% of the daily net asset value of the Class A Shares of the Fund
owned by shareholders with whom such Securities Dealer or Shareholder
Service Agent has a servicing relationship in exchange for
administrative services provided to such shareholders as described in
the Prospectus and SAI.
(c) The expenses of printing and distributing Prospectuses and
SAI (other than those Prospectuses and SAI distributed to shareholders
of the Fund) and any other promotional or sales literature used by GAM
Services or furnished by GAM Services to investors, Securities Dealers
or Shareholder Service Agents in connection with the public offering of
the Fund's Class A Shares, and other advertising or promotional
expenses incurred in connection with such public offering, shall be
paid by GAM Services.
(d) The Fund assumes and shall pay or cause to be paid all
other expenses of the Fund (other than those expressly assumed by the
Fund's investment advisors), including, without limitation: the fees of
the Fund's investment advisors; the charges and expenses of any
registrar, any custodian or depository appointed by the Fund for the
safekeeping of its cash, portfolio securities and other property, and
any transfer, dividend or accounting agent or agents appointed by the
Fund; brokers' commissions chargeable to the Fund in connection with
portfolio securities transactions to which the Fund is a party; all
taxes, including securities issuance and transfer taxes, and fees
payable by the Fund to Federal, state or other governmental agencies;
the costs and expenses of engraving or printing of certificates
representing shares of the Fund; all costs and expenses in connection
with the registration and maintenance of registration of the Fund
<PAGE>
-5-
and its shares with the SEC and various states and other jurisdictions
(including filing fees, legal fees and disbursements of counsel); the
costs and expenses of printing, including typesetting, and distributing
the Prospectuses and SAI of the Fund and supplements thereto to the
Fund's shareholders; all expenses of shareholders' and directors'
meetings and of preparing, printing and mailing of proxy statements and
reports to shareholders; fees and travel expenses of directors or
members of any advisory board or committee; all expenses incident to
the payment of any dividend, distribution, withdrawal or redemption,
whether in shares or in cash; charges and expenses of any outside
service used for pricing of the Fund's shares; fees and expenses of
legal counsel and of independent accountants, in connection with any
matter relating to the Fund; membership dues of industry associations;
interest payable on Fund borrowings; postage; insurance premiums on
property or personnel (including officers and directors) of the Fund;
extraordinary expenses (including, but not limited to, legal claims and
liabilities and litigation costs and any indemnification related
thereto); and all other charges and costs of the Fund's operation
unless otherwise explicitly provided herein.
9. COMPENSATION. The Fund shall pay or cause to be paid to GAM
Services any sales load received by the Fund with respect to the sale of its
Class A Shares in accordance with the Prospectus and SAI.
10. NON-EXCLUSIVITY. The services of GAM Services to the Fund are
not to be deemed to be exclusive, and GAM Services and its officers and
directors shall be free to render distribution or other services to others
(including other investment companies) and to engage in other activities.
11. TERM. This Agreement shall become effective on the date hereof
and shall continue in force and effect, subject to Section 13 hereof, until the
first anniversary of the date hereof.
12. RENEWAL. Following the expiration of its initial one-year
term, this Agreement shall continue in force and effect from year to year,
subject to Section 13 hereof, provided that such continuance is specifically
approved at least annually:
(a) by the Fund's Board of Directors; and
(b) by the affirmative vote of a majority of the Directors who
are not parties to this Agreement or "interested persons" (as defined
by the 1940 Act) of any such party and have no direct or indirect
financial interest in the operation of this Agreement or any agreement
related to this Agreement, by votes cast in person at a meeting
specifically called for the purpose of voting on such approval.
13. TERMINATION. This Agreement may be terminated at any time,
without the payment of any penalty, (i) by vote of the Fund's Board of
Directors, (ii) by vote of a majority
<PAGE>
-6-
of the members of the Board of Directors of the Fund who are not "interested
persons" of the Fund and have no direct or indirect financial interest in the
operation of this Agreement or in any agreement related to this Agreement, (iii)
with respect to any Series of the Fund, by vote of a majority of the outstanding
Class A Shares of such Series (as defined in Section 2(a)(42) of the 1940 Act),
or (iv) by GAM Services, on sixty (60) days' written notice to the other party.
The notice provided for herein may be waived by either party. This Agreement
shall automatically terminate in the event of its "assignment" as defined in
Section 2(a)(4) of the 1940 Act.
14. AMENDMENTS.
(a) This Agreement may be amended by the parties hereto only if such
amendment is specifically approved (i) by the Board of Directors of the Fund and
(ii) by a majority of those Directors who are not parties to this Agreement or
"interested persons" of any such party, which vote must be cast in person at a
meeting called for the purpose of voting on such approval.
(b) In the event that this Agreement is proposed to be amended to
increase materially the amount to be spent by the Fund for distribution, such
amendment will not be effected with respect to any Series without the approval
of the holders of the Class A shares of such Series.
15. LIABILITY OF THE DISTRIBUTOR. In the performance of its duties
hereunder, GAM Services shall be obligated to exercise care and diligence and to
act in good faith and to use its best efforts within reasonable limits to ensure
the accuracy of all services performed under this Agreement, but GAM Services
shall not be liable for any act or omission which does not constitute willful
misfeasance, bad faith or gross negligence on the part of GAM Services or
reckless disregard by GAM Services of its duties under this Agreement.
16. INDEMNIFICATION.
(a) The Fund agrees to indemnify, defend and hold GAM Services, its
officers and directors and any person who controls GAM Services within the
meaning of Section 15 of the 1933 Act, free and harmless from and against any
and all claims, demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which GAM Services, its officers,
directors or any such controlling person may incur arising out of or based upon
any untrue statement of a material fact contained in the Registration Statement,
Prospectus or SAI or arising out of or based upon any alleged omission to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such claims, demands,
liabilities or expenses arise out of or are based upon any such untrue statement
or omission or alleged untrue statement or omission made in reliance upon and in
conformity with information furnished in writing by GAM Services to the Fund for
use in the Registration Statement, Prospectus or SAI; provided, however, that
this indemnity agreement, to the extent that it might require indemnity of any
person who is also an officer or director of the Fund or who controls
<PAGE>
-7-
the Fund within the meaning of Section 15 of the 1933 Act, shall not inure to
the benefit of such officer, director or controlling person unless a court of
competent jurisdiction shall determine, or it shall have been determined by
controlling precedent, that such result would not be against public policy as
expressed in the 1933 Act; and further provided, that in no event shall anything
contained herein be so construed as to protect GAM Services against any
liability to the Fund or to its security holders to which GAM Services would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties, or by reason of its reckless
disregard of its obligations under this Agreement. In the event that GAM
Services becomes a party to any action or proceeding in respect of which
indemnification may be sought hereunder, GAM Services shall promptly notify the
Fund thereof. Following such notice, the Fund shall be entitled to participate
therein, and to the extent that it may wish, to assume the defense thereof with
counsel reasonably satisfactory to GAM Services. After notice from the Fund to
GAM Services of an election so to assume the defense thereof, the Fund shall not
be liable to GAM Services hereunder for any legal or other expenses subsequently
incurred by GAM Services in connection with the defense thereof other than
reasonable costs of investigation.
(b) GAM Services agrees to indemnify, defend and hold the Fund, its
officers and directors and any person who controls the Fund, if any, within the
meaning of Section 15 of the 1933 Act, free and harmless from and against any
and all claims, demands, liabilities and expenses (including the costs of
investigating or defending against such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which the Fund, its directors or
officers or any such controlling person may incur, but only to the extent that
such liability or expense incurred by the Fund, its directors or officers or
such controlling person resulting from such claims or demands shall arise out of
or be based upon any alleged untrue statement of a material fact contained in
information furnished in writing by GAM Services to the Fund for use in the
Registration Statement, Prospectus or SAI or shall arise out of or be based upon
any alleged omission to state a material fact in connection with such
information required to be stated in the Registration Statement, Prospectus or
SAI or necessary to make such information not misleading.
(c) Neither party to this Agreement shall be liable under this Section
16 for any settlement of any action or claim effected without its prior written
consent.
17. REPORTS. GAM Services shall provide to the Board of Directors of
the Fund, and the Board of Directors shall review, at least quarterly, a written
report of the amounts expended pursuant to this Agreement and the purposes for
which such expenditures were made, including, without limitation, commissions,
advertising, printing, interest, carrying charges and allocated overhead
expenses. GAM Services shall also provide the Board of Directors of the Fund
with such other information regarding the implementation of this Agreement as
the Board of Directors may reasonably request from time to time.
<PAGE>
-8-
18. NOTICES. Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party at such
address as such other party may designate for the receipt of such notice. Until
further notice to the other party, it is agreed that the address of each party
for this purpose shall be 135 East 57th Street, New York, New York 10022.
19. INTERPRETATION. This Agreement shall be implemented and construed
in a manner consistent with the provisions of the 1940 Act. Any question of
interpretation of any term or provision of this Agreement having a counterpart
in or otherwise derived from a term or provision of the 1940 Act shall be
resolved by reference to such term or provision of the 1940 Act and to
interpretations thereof, if any, by the United States courts or, in the absence
of any controlling decision of any such court, by rules, regulations or orders
of the SEC issued pursuant to the 1940 Act. In addition, where the effect of a
requirement of the 1940 Act reflected in any
<PAGE>
-9-
provision of this Agreement is revised by rule, regulation or order of the SEC,
such provision shall be deemed to incorporate the effect of such rule,
regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers on the day and year first above written.
GAM FUNDS, INC.
By: /s/ Kevin J. Blanchfield
-------------------------------
Name: Kevin J. Blanchfield
Title: Treasurer
GAM SERVICES, INC.
By: /s/ Mary Moran Zeven
-------------------------------
Name: Mary Moran Zeven
Title: Secretary
Exhibit 6(b)
DISTRIBUTION AGREEMENT
FOR CLASS D SHARES
THIS AGREEMENT is made as of the 17th day of August, 1995 by and
between GAM FUNDS, INC. a Maryland corporation (the "Fund"), and GAM SERVICES
INC., a Delaware corporation ("GAM Services").
WHEREAS, the Fund is registered as an open-end, diversified, management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, in accordance with the Fund's plan pursuant to Rule 12b-1
under the 1940 Act, the Fund and GAM Services desire to enter into an agreement
to provide distribution services for the Fund's Class D Shares on the terms and
conditions hereinafter set forth;
NOW THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt whereof is
hereby acknowledged, the parties hereto agree as follows:
1. APPOINTMENT. The Fund hereby appoints GAM Services as
distributor of the Class D Shares of the Fund for the period and on the terms
set forth in this Agreement. GAM Services accepts such appointment and agrees to
render the services herein set forth, for the compensation herein provided.
2. DELIVERY OF DOCUMENTS. The Fund has furnished GAM Services
with true and correct copies of each of the following:
(a) the Fund's Certificate of Incorporation and all amendments
thereto (such Certificate of Incorporation, as presently in effect and
as it shall from time to time be amended, is herein called the
"Certificate");
(b) the Fund's By-Laws and all amendments thereto (such
By-Laws, as presently in effect and as they shall from time to time be
amended, are herein called the "By-Laws");
(c) the Fund's Registration Statement on Form N-1A under the
Securities Act of 1933, as amended (the "1933 Act"), and under the 1940
Act as filed with the Securities and Exchange Commission (the "SEC")
relating to the shares of the Fund and all amendments thereto; and
(d) the Fund's most recent prospectus and statement of
additional information (such prospectus and statement of additional
information, as presently in effect and all amendments and supplements
thereto, are herein called the "Prospectus" and "SAI", respectively).
<PAGE>
-2-
The Fund will furnish GAM Services from time to time with copies of all
amendments or supplements to the foregoing, if any.
3. DUTIES AS DISTRIBUTOR. GAM Services shall give the Fund the
benefit of its best judgment, efforts and facilities in rendering its services
as distributor of the Fund's Class D Shares. In carrying out its obligations
hereunder, GAM Services shall:
(a) receive orders for the purchase of the Fund's Class D
Shares, accept or reject such orders on behalf of the Fund in
accordance with the Fund's currently effective Prospectus and SAI and
transmit such orders as are so accepted to the Fund's transfer agent as
promptly as possible;
(b) receive requests for redemption from holders of the Fund's
Class D Shares and transmit such redemption requests to the Fund's
transfer agent as promptly as possible; and
(c) respond to inquiries from the Fund's Class D shareholders
concerning the status of their accounts with the Fund.
4. DISTRIBUTION OF CLASS D SHARES. GAM Services shall be
exclusive distributor of the Fund's Class D Shares. It is mutually understood
and agreed that GAM Services does not undertake to sell all or any specific
portion of the Class D Shares of the Fund. The Fund shall not sell any of its
Class D Shares through any securities dealer other than GAM Services.
Notwithstanding the provisions of the foregoing sentence:
(a) the Fund may issue its Class D Shares to any other
investment company or personal holding company, or to the shareholders
thereof, in exchange for all or a majority of the shares or assets of
any such company;
(b) the Fund may issue its Class D Shares at their net asset
value to any shareholder of the Fund purchasing such shares with
dividends or other cash distributions received from the Fund pursuant
to an offer made to all shareholders;
(c) GAM Services may enter into shareholder processing and
servicing agreements in accordance with Section 7 hereof;
(d) GAM Services may, and when requested by the Fund shall,
suspend its efforts to effectuate sales of the Class D Shares of the
Fund at any time when in the opinion of GAM Services or of the Fund no
sales should be made because of market or other economic considerations
or abnormal circumstances of any kind;
(e) the Fund may withdraw the offering of its Class D Shares
(i) at any time with the consent of GAM Services, or (ii) without such
consent when so required by the
<PAGE>
-3-
provisions of any statute or of any order, rule or regulation of any
governmental body having jurisdiction; and
(f) the price at which the Class D Shares may be sold (the
"offering price") shall be the net asset value per Class D Share plus
any applicable sales load as determined in the manner established from
time to time by the Fund's Board of Directors and as set forth in the
Fund's then current Prospectus and SAI.
5. CONTROL BY BOARD OF DIRECTORS. Any distribution activities
undertaken by GAM Services pursuant to this Agreement, as well as any other
activities undertaken by GAM Services on behalf of the Fund pursuant thereto,
shall at all times be subject to any applicable directives of the Board of
Directors of the Fund.
6. COMPLIANCE WITH APPLICABLE REQUIREMENTS. In carrying out its
obligations under this Agreement, GAM Services shall at all times conform to:
(a) all applicable provisions of the 1940 Act and any rules
and regulations adopted thereunder;
(b) the provisions of the Registration Statement of the Fund
under the 1933 Act and the 1940 Act;
(c) the provisions of the Certificate of the Fund;
(d) the provisions of the By-Laws of the Fund;
(e) the rules and regulations of the National Association of
Securities Dealers, Inc. ("NASD") and all other self-regulatory
organizations applicable to the sale of investment company shares; and
(f) any other applicable provision of state and Federal law.
7. DEALER AND SHAREHOLDER SERVICE AGREEMENTS. GAM Services may
enter into dealer and shareholder service agreements (the "Dealer Agreements")
with any securities dealer ("Securities Dealer") who is registered under the
Securities Exchange Act of 1934 (the "1934 Act") and a member in good standing
of the NASD, who may wish to establish accounts or sub- accounts on behalf of
such Securities Dealer's customers. GAM Services may enter into shareholder
processing and service agreements ("Shareholder Service Agreements") with
persons other than Securities Dealers ("Shareholder Service Agents") who are not
required to be registered under the 1934 Act or members in good standing of the
NASD, who are exempt from registration as a broker or a dealer under the 1934
Act or who may otherwise lawfully furnish services to Fund shareholders without
registration under the 1934 Act. GAM Services will supervise the Fund's
relations with Securities Dealers and Shareholder Service Agents. GAM
<PAGE>
-4-
Services will make payments to Securities Dealers and Shareholder Service Agents
in such amounts as GAM Services may determine from time to time in its
discretion.
8. EXPENSES. The expenses connected with the Fund shall be
allocable between the Fund and GAM Services as follows:
(a) GAM Services shall furnish, at its expense and without
cost to the Fund, the services of personnel to the extent that such
services are required to carry out its obligations under this
Agreement.
(b) GAM Services shall bear the fees payable to Securities
Dealers and Shareholder Service Agents as set forth in Section 7 above,
except that the Fund may pay fees to Securities Dealers and
Shareholders Service Agents in an amount not to exceed an annual rate
of 0.25% of the daily net asset value of the Class D Shares of the Fund
owned by shareholders with whom such Securities Dealer or Shareholder
Service Agent has a servicing relationship in exchange for
administrative services provided to such shareholders as described in
the Prospectus and SAI.
(c) The expenses of printing and distributing Prospectuses and
SAI (other than those Prospectuses and SAI distributed to shareholders
of the Fund) and any other promotional or sales literature used by GAM
Services or furnished by GAM Services to investors, Securities Dealers
or Shareholder Service Agents in connection with the public offering of
the Fund's Class D Shares, and other advertising or promotional
expenses incurred in connection with such public offering, shall be
paid by GAM Services.
(d) The Fund assumes and shall pay or cause to be paid all
other expenses of the Fund (other than those expressly assumed by the
Fund's investment advisors), including, without limitation: the fees of
the Fund's investment advisors; the charges and expenses of any
registrar, any custodian or depository appointed by the Fund for the
safekeeping of its cash, portfolio securities and other property, and
any transfer, dividend or accounting agent or agents appointed by the
Fund; brokers' commissions chargeable to the Fund in connection with
portfolio securities transactions to which the Fund is a party; all
taxes, including securities issuance and transfer taxes, and fees
payable by the Fund to Federal, state or other governmental agencies;
the costs and expenses of engraving or printing of certificates
representing shares of the Fund; all costs and expenses in connection
with the registration and maintenance of registration of the Fund and
its shares with the SEC and various states and other jurisdictions
(including filing fees, legal fees and disbursements of counsel); the
costs and expenses of printing, including typesetting, and distributing
the Prospectuses and SAI of the Fund and supplements thereto to the
Fund's shareholders; all expenses of shareholders' and directors'
meetings and of preparing, printing and mailing of proxy statements and
reports to shareholders; fees and travel expenses of directors or
members of any advisory board or committee; all expenses incident to
the payment of any dividend, distribution,
<PAGE>
-5-
withdrawal or redemption, whether in shares or in cash; charges and
expenses of any outside service used for pricing of the Fund's shares;
fees and expenses of legal counsel and of independent accountants, in
connection with any matter relating to the Fund; membership dues of
industry associations; interest payable on Fund borrowings; postage;
insurance premiums on property or personnel (including officers and
directors) of the Fund; extraordinary expenses (including, but not
limited to, legal claims and liabilities and litigation costs and any
indemnification related thereto); and all other charges and costs of
the Fund's operation unless otherwise explicitly provided herein.
9. COMPENSATION. The Fund shall pay or cause to be paid to GAM
Services: (i) any sales load received by the Fund with respect to the sale of
its Class D Shares in accordance with the Prospectus and SAI, and (ii)
compensation at the annual rate of 0.50% of the average daily net assets of each
series of the Fund attributable to the Class D Shares, which shall be calculated
and accrued daily and paid monthly or at such other intervals as the Board of
Directors and GAM Services shall mutually agree.
10. NON-EXCLUSIVITY. The services of GAM Services to the Fund are
not to be deemed to be exclusive, and GAM Services and its officers and
directors shall be free to render distribution or other services to others
(including other investment companies) and to engage in other activities.
11. TERM. This Agreement shall become effective on the date hereof
and shall continue in force and effect, subject to Section 13 hereof, until the
first anniversary of the date hereof.
12. RENEWAL. Following the expiration of its initial one-year
term, this Agreement shall continue in force and effect, subject to Section 13
hereof, provided that such continuance is specifically approved at least
annually:
(a) by the Fund's Board of Directors; and
(b) by the affirmative vote of a majority of the Directors who
are not parties to this Agreement or "interested persons" (as defined
by the 1940 Act) of any such party and have no direct or indirect
financial interest in the operation of this Agreement or any agreement
related to this Agreement, by votes cast in person at a meeting
specifically called for the purpose of voting on such approval.
13. TERMINATION. This Agreement may be terminated at any time,
without the payment of any penalty, (i) by vote of the Fund's Board of
Directors, (ii) by vote of a majority of the members of the Board of Directors
of the Fund who are not "interested persons" of the Fund and have no direct or
indirect financial interest in the operation of this Agreement or in any
agreement related to this Agreement, (iii) with respect to any Series of the
Fund, by vote of a majority of the outstanding Class D Shares of such Series (as
defined in Section 2(a)(42)
<PAGE>
-6-
of the 1940 Act), or (iv) by GAM Services, on sixty (60) days' written notice to
the other party. The notice provided for herein may be waived by either party.
This Agreement shall automatically terminate in the event of its "assignment" as
defined in Section 2(a)(4) of the 1940 Act.
14. AMENDMENTS.
(a) This Agreement may be amended by the parties hereto only if
such amendment is specifically approved (i) by the Board of Directors of the
Fund and (ii) by a majority of those Directors who are not parties to this
Agreement or "interested persons" of any such party, which vote must be cast in
person at a meeting called for the purpose of voting on such approval.
(b) In the event that this Agreement is proposed to be amended to
increase materially the amount to be spent by the Fund for distribution, such
amendment will not be effected with respect to any Series without the approval
of the holders of Class D Shares of such Series.
15. LIABILITY OF THE DISTRIBUTOR. In the performance of its duties
hereunder, GAM Services shall be obligated to exercise care and diligence and to
act in good faith and to use its best efforts within reasonable limits to ensure
the accuracy of all services performed under this Agreement, but GAM Services
shall not be liable for any act or omission which does not constitute willful
misfeasance, bad faith or gross negligence on the part of GAM Services or
reckless disregard by GAM Services of its duties under this Agreement.
16. INDEMNIFICATION.
(a) The Fund agrees to indemnify, defend and hold GAM Services,
its officers and directors and any person who controls GAM Services within the
meaning of Section 15 of the 1933 Act, free and harmless from and against any
and all claims, demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which GAM Services, its officers,
directors or any such controlling person may incur arising out of or based upon
any untrue statement of a material fact contained in the Registration Statement,
Prospectus or SAI or arising out of or based upon any alleged omission to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such claims, demands,
liabilities or expenses arise out of or are based upon any such untrue statement
or omission or alleged untrue statement or omission made in reliance upon and in
conformity with information furnished in writing by GAM Services to the Fund for
use in the Registration Statement, Prospectus or SAI; provided, however, that
this indemnity agreement, to the extent that it might require indemnity of any
person who is also an officer or director of the Fund or who controls the Fund
within the meaning of Section 15 of the 1933 Act, shall not inure to the benefit
of such officer, director or controlling person unless a court of competent
jurisdiction shall determine, or it shall have been determined by controlling
precedent, that such result would not be against public policy as expressed in
the 1933 Act; and further provided, that in no event shall anything
<PAGE>
-7-
contained herein be so construed as to protect GAM Services against any
liability to the Fund or to its security holders to which GAM Services would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties, or by reason of its reckless
disregard of its obligations under this Agreement. In the event that GAM
Services becomes a party to any action or proceeding in respect of which
indemnification may be sought hereunder, GAM Services shall promptly notify the
Fund thereof. Following such notice, the Fund shall be entitled to participate
therein, and to the extent that it may wish, to assume the defense thereof with
counsel reasonably satisfactory to GAM Services. After notice from the Fund to
GAM Services of an election so to assume the defense thereof, the Fund shall not
be liable to GAM Services hereunder for any legal or other expenses subsequently
incurred by GAM Services in connection with the defense thereof other than
reasonable costs of investigation.
(b) GAM Services agrees to indemnify, defend and hold the Fund,
its officers and directors and any person who controls the Fund, if any, within
the meaning of Section 15 of the 1933 Act, free and harmless from and against
any and all claims, demands, liabilities and expenses (including the costs of
investigating or defending against such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which the Fund, its directors or
officers or any such controlling person may incur, but only to the extent that
such liability or expense incurred by the Fund, its directors or officers or
such controlling person resulting from such claims or demands shall arise out of
or be based upon any alleged untrue statement of a material fact contained in
information furnished in writing by GAM Services to the Fund for use in the
Registration Statement, Prospectus or SAI or shall arise out of or be based upon
any alleged omission to state a material fact in connection with such
information required to be stated in the Registration Statement, Prospectus or
SAI or necessary to make such information not misleading.
(c) Neither party to this Agreement shall be liable under this
Section 16 for any settlement of any action or claim effected without its prior
written consent.
17. REPORTS. GAM Services shall provide to the Board of Directors
of the Fund, and the Board of Directors shall review, at least quarterly, a
written report of the amounts expended pursuant to this Agreement and the
purposes for which such expenditures were made, including, without limitation,
commissions, advertising, printing, interest, carrying charges and allocated
overhead expenses. GAM Services shall also provide the Board of Directors of the
Fund with such other information regarding the implementation of this Agreement
as the Board of Directors may reasonably request from time to time.
18. NOTICES. Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party at such
address as such other party may designate for the receipt of such notice. Until
further notice to the other party, it is agreed that the address of each party
for this purpose shall be 135 East 57th Street, New York, New York 10022.
<PAGE>
-8-
19. INTERPRETATION. This Agreement shall be implemented and
construed in a manner consistent with the provisions of the 1940 Act. Any
question of interpretation of any term or provision of this Agreement having a
counterpart in or otherwise derived from a term or provision of the 1940 Act
shall be resolved by reference to such term or provision of the 1940 Act and to
interpretations thereof, if any, by the United States courts or, in the absence
of any controlling decision of any such court, by rules, regulations or orders
of the SEC issued pursuant to the 1940 Act. In addition, where the effect of a
requirement of the 1940 Act reflected in any provision of this Agreement is
revised by rule, regulation or order of the SEC, such provision shall be deemed
to incorporate the effect of such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers on the day and year first above written.
GAM FUNDS, INC.
By: /s/ Kevin J. Blanchfield
----------------------------
Name: Kevin J. Blanchfield
Title: Treasurer
GAM SERVICES, INC.
By: /s/ Mary Moran Zeven
----------------------------
Name: Mary Moran Zeven
Title: Secretary
MCGLADREY & PULLEN, LLP
Certified Public Accountants and Consultants
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use of our report dated 2nd February, 12996 on the
financial statements of GAM International Fund, GAM Global Fund, GAM Europe
Fund, GAM Pacific Basin Fund, GAM Japan Capital Fund, GAM North America Fund,
GAm Asian Capital Fund, and GAMerica Capital Fund, series of GAM Funds, Inc.
incorporated by reference therein, in Post-Effective Amendement No. 27 to the
Registration Statement on Form N-1A, File No. 811-4062, as filed with the
Securities and Exchange Commission.
We also consent to the reference to our firm in the Prospectus under the
caption "Finiancial Highlights."
/s/ McGladrey & Pullen, LLP
McGladrey & Pullen, LLP
New York, New York
22nd April, 1996
Exhibit 13(a)
GAM FUNDS, INC.
SUBSCRIPTION AGREEMENT
The undersigned, GLOBAL ASSET MANAGEMENT (USA) INC., a Delaware
corporation (the "Subscriber"), hereby subscribes for one (1) share of GAM
Mid-Cap U.S. Fund Common Stock, par value One One-Thousandth of a Dollar ($.001)
per share, of GAM FUNDS, INC., a Maryland corporation (the "Fund"), and agrees
to pay therefor Ten Dollars ($10.00) per share, for an aggregate purchase price
of Ten Dollars ($10.00).
The Subscriber understands that the Fund reserves the right to reject
the Subscriber's subscription for any reason which the Fund, in its sole
discretion, deems sufficient, by failing to cause this Subscription Agreement to
be signed on its behalf and refunding all funds, if any, paid hereon, in which
event the Fund shall have no further obligations hereunder.
The Subscriber hereby represents that it is acquiring the share of the
Fund for its own account for investment and with no present intention of
reselling or otherwise distributing the same.
The Subscription Agreement contains the entire agreement between the
Fund and the Subscriber relating to the subject matter hereof; it may not be
changed or altered except in writing.
GLOBAL ASSET MANAGEMENT (USA) INC.
By: /s/ Mary Moran Zeven
---------------------------
Name: Mary Moran Zeven
Title: Secretary
ACCEPTED this 5th day of September, 1995.
GAM FUNDS, INC.
By: /s/ Kevin Blanchfield
-------------------------------
Name: Kevin Blanchfield
Title: Treasurer
Exhibit 15
GAM FUNDS, INC.
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
FOR CLASS D 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 (the "Plan") with respect to shares of its Class D
common stock, par value $.001 per share, (the "Class D 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, the Fund employs GAM Services Inc. (the "Distributor") as
distributor of the Class D Shares; and
WHEREAS, the Fund and the Distributor intend to enter into a separate
Distribution Agreement with the Fund for the Class D Shares, pursuant to which
the Fund will employ the Distributor as distributor for the continuous offering
of Class D Shares;
NOW, THEREFORE, the Fund hereby adopts, and the Distributor hereby
agrees to the terms of, the Plan with respect to the Class D Shares of each
Series in accordance with Rule 12b-1 under the 1940 Act on the following terms
and conditions:
1. The Fund shall pay to the Distributor, as the distributor of
the Class D Shares, compensation for distribution of the Class D Shares at the
annual rate of 0.50% of the average daily net assets of each Series attributable
to the Class D 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 D Shares. Such amount
may be spent by the Distributor on any activities or expenses primarily intended
to result in the sale of Class D Shares, including, but not limited to:
compensation to and expenses, including overhead and telephone expenses, of
employees of the Distributor who engage in or support distribution of the Class
D Shares; printing of prospectuses and reports for other than existing
stockholders; preparation, printing and distribution of sales literature and
advertising materials; and compensation to broker/dealers who sell Class D
Shares. The Distributor may negotiate with any such broker/dealer the services
to be provided by the broker/dealer to stockholders in connection with the sale
of Class D Shares, and all or any portion of the compensation paid to the
Distributor under
<PAGE>
2
Paragraph 1 of this Plan may be reallocated by the Distributor to broker/dealers
who sell Class D Shares.
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 D Shares of such Series.
4. In addition to the approval required by paragraph 3 above,
this 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.
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. The Distributor shall provide to the Board of Directors of the
Fund, and the Board of Directors shall review, at least quarterly, a written
report of the amounts expended pursuant to this Plan and any related agreements
and the purposes for which such expenditures were made, including commissions,
advertising, printing, interest, carrying charges and allocated overhead
expenses.
7. Any agreement related to this Plan shall provide:
a. that such agreement may be terminated with respect to
the Class D Shares of any Series at any time, without
payment of any penalty, by vote of a majority of the
Rule 12b-1 Directors or by vote of a majority of the
outstanding voting securities of such Shares, on not
more than sixty (60) days' written notice to any
other party to the agreement; and
b. that such agreement shall terminate automatically in
the event of its assignment.
8. All amounts expended under this Plan for the benefit of the
Class D Shares of a specific Series as to which this Plan is effective will be
charged to the Class D Shares of that 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 D Shares of each such Series on the
basis of the net asset value of the Class D Shares of such Series in relation to
the net asset value of all of the outstanding Class D Shares of the Fund.
<PAGE>
3
9. This Plan may be terminated with respect to the Class D 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 D Shares of such Series.
10. This Plan may not be amended with respect to the Class D
Shares of any Series to increase materially the amount of compensation provided
for in Paragraph 1 hereof unless such amendment is approved in the manner
provided for initial approval in Paragraph 3 hereof, and no material amendment
to the Plan of any kind, including an amendment which would increase materially
the amount of such compensation, shall be made unless approved in the manner
provided for approval and annual renewal in Paragraphs 4 and 5 hereof.
11. 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.
12. 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 this Plan, such agreements or such
reports, as the case may be, the first two (2) years in an easily accessible
place.
Exhibit 18
GAM FUNDS, INC.
RULE 18F-3 MULTIPLE CLASS PLAN
FOR CLASS A AND D SHARES
I. INTRODUCTION.
A. AUTHORITY. This Rule 18f-3 Multiple Class Plan (the "Plan") is
adopted by the Board of Directors (the "Board") of GAM Funds, Inc. (the "Fund"),
including a majority of the directors of the Fund who are not "interested
persons" of the Fund as defined in the Investment Company Act of 1940, as
amended (the "1940 Act") (the "Independent Directors"), pursuant to Rule 18f-3
under the 1940 Act.
B. PLAN REQUIREMENTS. The Fund presently has two classes of
shares, Class A Shares and Class D Shares, authorized for each of nine series of
Common Stock (the "Series"). Pursuant to Rule 18f-3, the Fund is required to
adopt a written plan specifying all of the differences between the Fund's Class
A and Class D Shares, including shareholder services, distribution arrangements,
expense allocations, and any related conversion features or exchange options.
Before the first issuance of Class D Shares of any Series of the Fund, and
before any material amendment of the Plan, a majority of the Board, and a
majority of the Independent Directors, must find that the Plan, as proposed to
be adopted or amended, including the expense allocations, is in the best
interests of each class individually and the Fund as a whole. In making its
findings, the Board should consider the relationship between the classes and
examine potential conflicts of interest between the classes regarding the
allocation of fees, services, waivers and reimbursements of expenses, and voting
rights. The Board should evaluate the level of services provided to each class
and the cost of those services to ensure that the services are appropriate and
that the allocation of expenses is reasonable.
II. ATTRIBUTES OF SHARE CLASSES.
The shares of each class of a particular Series represent an equal pro
rata interest in the Series and have identical voting, dividend, liquidation and
other rights, preferences, powers, restrictions, limitations, qualifications,
designations and terms and conditions, except that: (i) each class of shares has
a different class designation (i.e., Class A or Class D Shares); (ii) each class
of shares separately bears any distribution expenses in connection with any plan
adopted pursuant to Rule 12b-1 under the 1940 Act (a "Rule 12b-1 Plan") for such
class (and any other costs relating to obtaining shareholder approval of the
Rule 12b-1 Plan for such class, or an amendment of such plan); (iii) only the
holders of the shares of the class involved are entitled to vote on matters
pertaining to the Rule 12b-1 Plan relating to such class (e.g., the adoption,
amendment or termination of a Rule 12b-1 Plan); (iv) each class of shares
separately bears shareholder servicing expenses for such class; (v) each class
of shares bears all other
<PAGE>
-2-
expenses of the operations of a particular Series that are directly attributable
to such class ("Class Expenses")1; (vi) each class of shares has exchange
privileges unique to such class; and (vii) the expenses of a specific class of
shares may be waived or reimbursed by GAM Services Inc., the Fund's distributor
(the "Distributor"), or by the Fund's investment advisers or other providers of
services.
A. CLASS A SHARES
Each Series has a class of shares designated as its "Class A Shares"
which are offered subject to the following terms and conditions:
(1) SALES LOADS. Class A Shares are offered with a maximum
front-end sales charge of 5.0% of the offering price of the shares. The
sales charge is reduced at four break points, and purchases of
$1,000,000 or more are subject to a front-end sales charge of 1.0%.
The Distributor receives the sales charges and either retains
such amounts or reallows all or a substantial part of such charges to
authorized dealers that have effected sales of Class A Shares. The
Distributor may make payments to authorized dealers in amounts up to
4.0% of the offering price.
Shares purchased through the reinvestment of dividends and
other distributions paid in respect of Class A Shares will also be
Class A Shares, although such shares will not be subject to the
front-end sales charge. However, such shares may be subject to the
0.25% annual shareholder servicing fee described immediately below.
(2) ASSET-BASED DISTRIBUTION AND SHAREHOLDER SERVICING FEES.
There is currently no Rule 12b-1 Plan in effect with respect to the
Class A Shares, and no distribution fees are currently payable with
respect to such shares. Class A Shares owned by shareholders that have
a servicing relationship with banks, trust companies,
- --------------------------------
(1) Class Expenses may include: (i) transfer agent fees identified as being
attributable to a specific class of shares; (ii) stationery, printing, postage,
and delivery expenses related to preparing and distributing materials such as
shareholder reports, prospectuses, and proxy statements to current shareholders
of a specific class; (iii) Blue Sky registration fees incurred by a class of
shares; (iv) SEC registration fees incurred by a class of shares; (v) expenses
of administrative personnel and services as required to support the shareholders
of a specific class; (vi) directors' fees or expenses incurred as a result of
issues relating solely to a class of shares; (vii) accounting expenses relating
solely to a class of shares; (viii) auditors' fees, litigation expenses, and
legal fees and expenses relating solely to a class of shares; and (ix) expenses
incurred in connection with shareholders meetings as a result of issues relating
solely to a class of shares.
<PAGE>
-3-
broker-dealers or other financial organizations ("shareholder servicing
agents") that have contracted with the Fund to provide administrative
services for the Fund may be subject to an annual servicing fee of up
to 0.25% of the average daily net assets attributable to such Class A
Shares. The shareholder servicing fee is used to compensate such
shareholder servicing agents for providing administrative services with
respect to the holders of Class A Shares, such as processing purchase
and redemption transactions, transmitting and receiving funds for the
purchase and sale of Class A Shares, answering routine inquiries
regarding the Fund, furnishing monthly and year-end statements and
confirmations of purchases and sales of shares, transmitting periodic
reports, updated prospectuses, proxy statements and other
communications to shareholders, and providing other services as agreed
from time to time.
(3) EXCHANGE PRIVILEGES AND CONVERSION FEATURES. Class A
Shares of each Series are exchangeable only for Class A Shares of any
other Series. Class A Shares have no conversion feature.
B. CLASS D SHARES
Each Series has a class of shares designated as its "Class D Shares"
which are offered subject to the following terms and conditions:
(1) SALES LOADS. Class D Shares are offered with a maximum
front-end sales charge of 3.5% of the offering price of the shares. The
sales charge is reduced at four break points, and purchases of
$1,000,000 or more are not subject to the front-end sales charge.
The Distributor receives the sales charges and either retains
such amounts or reallows all or a substantial part of such charges to
authorized dealers that have effected sales of Class D Shares. The
Distributor may make payments to authorized dealers in amounts up to
2.5% of the offering price.
Shares purchased through the reinvestment of dividends and
other distributions paid in respect of Class D Shares will also be
Class D Shares, although such shares will not be subject to the
front-end sales charge. However, such shares will be subject to the
0.50% annual distribution fee and the 0.25% annual shareholder
servicing fee described immediately below.
(2) ASSET-BASED DISTRIBUTION FEES AND SHAREHOLDER SERVICING
FEES. Class D Shares are subject to an annual distribution fee of 0.50%
of the average daily net assets attributable to the Class D Shares of
the relevant Series pursuant to the Rule 12b-1 Plan currently in effect
for Class D Shares for such Series, and an annual shareholder servicing
fee of up to 0.25% of the average daily net assets attributable to the
Class D Shares of the relevant Series. Distribution fees are used to
compensate the Distributor
<PAGE>
-4-
for services provided and expenses incurred by it as principal
underwriter of the Fund's Class D Shares and such distribution fees may
be reallowed to authorized dealers that have effected sales of Class D
Shares. The shareholder servicing fee is used to compensate shareholder
servicing agents which provide administrative services with respect to
the holders of Class D Shares, such as processing purchase and
redemption transactions, transmitting and receiving funds for the
purchase and sale of Class D Shares, answering routine inquiries
regarding the Fund, furnishing monthly and year-end statements and
confirmations of purchases and sales of shares, transmitting periodic
reports, updated prospectuses, proxy statements and other
communications to shareholders, and providing other services as agreed
from time to time.
(3) EXCHANGE PRIVILEGES AND CONVERSION FEATURES. Class D
Shares of each Series are exchangeable only for Class D Shares of any
other Series. Class D Shares have no conversion feature.
III. CALCULATION OF DIVIDENDS.
Dividends paid by a Series with respect to each class of its shares, to
the extent any dividends are paid, must be calculated in the same manner, at the
same time, on the same day and in the same amount, except that: (i) distribution
and shareholder servicing payments associated with any Rule 12b-1 Plan or
shareholder servicing agreement relating to each respective class of shares
(including any costs relating to implementing such plans or any amendment
thereto) will be borne exclusively by that particular class; (ii) any
incremental transfer agency fee relating to a particular class will be borne
exclusively by that class; and (iii) Class Expenses relating to a particular
class will be borne exclusively by that class.
IV. EXPENSE ALLOCATIONS.
All amounts expended for the benefit of a particular class of shares
will be charged to that class of shares and any expenses which are deemed by the
Board of Directors of the Fund to benefit both classes of shares equally will be
charged to each class of shares on the basis of the net asset value of such
class of shares in relation to the net asset value of all of the outstanding
shares of the Fund.
The methodology and procedures for calculating the net asset value and
dividends and distributions with respect to each class of shares of the Fund and
the proper allocation of income and expenses between the classes of shares of
the Fund are required to be reviewed pursuant to the American Institute of
Certified Public Accountants' Statement on Auditing Standards No. 55, which
requires a review of the Fund's internal control structure.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000749155
<NAME> "GAM FUNDS, Inc."
<SERIES>
<NUMBER> 001
<NAME> GAM International Fund Class A
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<TABLE> <S> <C>
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<CIK> 0000749155
<NAME> "GAM FUNDS, Inc."
<SERIES>
<NUMBER> 001
<NAME> GAM International Fund Class D
<MULTIPLIER> 1
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<EXPENSE-RATIO> 2.22
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000749155
<NAME> "GAM FUNDS, Inc."
<SERIES>
<NUMBER> 002
<NAME> GAM Global Fund Class A
<MULTIPLIER> 1
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<FISCAL-YEAR-END> Dec-31-1995
<PERIOD-START> Jan-01-1995
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<INVESTMENTS-AT-VALUE> 25434320
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<ACCUM-APPREC-OR-DEPREC> 3567667
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<DIVIDEND-INCOME> 174920
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<DISTRIBUTIONS-OF-GAINS> 1107972
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<GROSS-EXPENSE> 450432
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<EXPENSE-RATIO> 2.16
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000749155
<NAME> "GAM FUNDS, Inc."
<SERIES>
<NUMBER> 002
<NAME> GAM Global Fund Class D
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<S> <C>
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000749155
<NAME> "GAM FUNDS, Inc."
<SERIES>
<NUMBER> 003
<NAME> GAM Pacific Basin Fund Class A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> Dec-31-1995
<PERIOD-START> Jan-01-1995
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000749155
<NAME> "GAM FUNDS, Inc."
<SERIES>
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<NAME> GAM Pacific Basin Fund Class A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> Year
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000749155
<NAME> GAM Europe Fund
<MULTIPLIER> 1
<S> <C>
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<PERIOD-START> Jan-01-1995
<PERIOD-END> Dec-31-1995
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000749155
<NAME> GAM Japan Capital Fund
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<S> <C>
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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