GLOBAL ASSET MANAGEMENT(R)
GAM FUNDS, INC.
PROSPECTUS
APRIL 30, 1997
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
GAMERICA CAPITAL FUND
GAM Funds, Inc. (the "Company") is a diversified open-end
management investment company which offers investors the
opportunity to invest in eight different portfolios (the
"Funds") investing primarily in equity securities.
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, 1997
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 number indicated below.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION ("SEC") OR ANY STATE
SECURITIES COMMISSION, NOR HAS THE SEC OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
GAM FUNDS, INC.
135 East 57th Street, New York, NY 10022
Tel: (800) 426-4685 Fax: (212) 407-4684
Internet: http://www.usinfo.gam.com
GAM(R)
<PAGE>
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Table of Contents
- --------------------------------------------------------------------------------
Summary ............................................................... 1
Investor Expenses....................................................... 2
Financial Highlights.................................................... 4
Investment Objectives and Policies and Risk Considerations.............. 15
Shareholder Transactions and Services................................... 21
Purchasing Shares..................................................... 21
Selling Shares........................................................ 24
Exchanges............................................................. 24
Other Account Services................................................ 25
Dividends and Tax Matters............................................. 26
Management of the Funds................................................. 26
Description of Shares................................................... 29
Additional Information.................................................. 29
Purchase Application............................................. Back Cover
<PAGE>
- --------------------------------------------------------------------------------
SUMMARY
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES. The investment objective of each Fund
is to seek long-term capital appreciation. Each Fund seeks to achieve this
objective by investing in the particular geographic region established pursuant
to its own investment policy. Each Fund employs its own strategy and has its own
risk/reward profile. The Funds are not guaranteed to achieve their objective.
PRINCIPAL RISKS. GAM International, Europe, Pacific Basin, Asian Capital
and Japan Capital Funds will invest primarily in securities of foreign issuers,
and GAM Global and North America Funds and, to a lesser extent, GAMerica Capital
Fund, may invest in securities of foreign issuers. Generally, investments in
securities of foreign issuers involve greater risks than investments in United
States issuers. Certain investment techniques that may be utilized by the Funds,
such as hedging and leveraging techniques, also involve risk. Because investors
could lose money by investing in the Funds, investors should be sure to read and
understand these and all risk factors associated with an investment in the
Funds.
INVESTMENT ADVISERS AND UNDERWRITER. The Funds are managed by GAM
International Management Limited, a London-based affiliate of the Global Asset
Management (GAM) Group of companies, an international investment advisory
organization with approximately $9.3 billion under management and offices or
affiliates in Bermuda, New York, London, Zurich, Hong Kong, Singapore,
Edinburgh, Dublin and the Isle of Man. Fayez Sarofim & Co., which serves as
co-investment adviser for GAM North America Fund, is based in Houston, Texas and
manages aggregate assets of approximately $38 billion. GAM Services, Inc., an
affiliate of GAM, serves as principal underwriter for the Funds' shares. Shares
are continuously offered to the public through securities dealers and other
financial services firms that have entered into an agreement with GAM Services
to sell shares of the Funds.
MINIMUM INVESTMENT/SALES CHARGES. The minimum initial investment is
$5,000 ($2,000 for IRA accounts); shareholders may make subsequent purchases for
as little as $500. Purchases of shares may be subject to a maximum sales charge
of 5% of the purchase price in the case of Class A shares, and 3.5% in the case
of Class D shares.
DIVIDENDS AND DISTRIBUTIONS. Each Fund intends to distribute annually
all of its net investment income and net realized capital gains. Dividends and
distributions may be reinvested automatically without a sales load.
ADDITIONAL FUND FEATURES. The Funds offer Exchanges at Net Asset Value,
Reduced Sales Charges through a Statement of Intention and Rights of
Accumulation; Telephone Exchanges and Redemptions; Automatic Investment and
Systematic Withdrawal Plans; and money market investment privileges through the
GAM Money Market Account.
1
<PAGE>
INVESTOR EXPENSES
Fund investors pay various expenses either directly or indirectly. The figures
below show the expenses for the past year, adjusted to reflect any changes.
Future expenses may be greater or less.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
INTERNATIONAL GLOBAL PACIFIC BASIN
CLASS A CLASS D* CLASS A CLASS D* CLASS A CLASS D*
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> <C> <C> <C> <C> <C>
Maximum Sales Charge Imposed On
Purchases (as a percentage of offering
price) (1) 5% 3.5% 5% 3.5% 5% 3.5%
Maximum Deferred Sales Charge None (2) None None (2) None None (2) None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of Average Net Assets)
Management Fees (after expense
reimbursement) 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
12b-1 Fees (4) 0.30% 0.50% 0.30% 0.50% 0.30% 0.50%
Other Expenses (5) 0.49 0.41 1.19 1.23 0.69 0.63
Total Fund Operating Expenses (4) 1.79% 1.91% 2.49% 2.73% 1.99% 2.13%
==== ==== ==== ==== ==== ====
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
* Class D shares are currently offered only by GAM International Fund, GAM
Global Fund and GAM Pacific Basin Fund.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
NORTH JAPAN GAMERICA ASIAN
EUROPE AMERICA CAPITAL CAPITAL CAPITAL
CLASS A CLASS A CLASS A CLASS A CLASS A
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge Imposed On
Purchases (as a percentage of offering
price) (1) 5% 5% 5% 5% 5%
Maximum Deferred Sales Charge None (2) None (2) None (2) None (2) None( 2)
ANNUAL FUND OPERATING EXPENSES
(as a percentage of Average Net Assets)
Management Fees (after expense
reimbursement) 1.00% 1.00% 1.00% 0%(3) 0.40%(3)
12b-1 Fees (4) 0.30% 0.30% 0.30% 0.30% 0.30%
Other Expenses (5) 0.82% 1.54% 0.77% 5.09% 2.51%
Total Fund Operating Expenses (4) 2.12% 2.84% 2.07% 5.39% 3.21%
==== ==== ==== ==== ====
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
EXAMPLE
The table below shows what an investor would pay if he or she invested $1,000
over the various time frames indicated. The example assumes reinvestment of all
dividends, an average annual return of 5%, and that "Total Fund Operating
Expenses" remain the same each year.
- --------------------------------------------------------------------------------
INTERNATIONAL GLOBAL PACIFIC BASIN
CLASS A CLASS D CLASS A CLASS D CLASS A CLASS D
1 Year $67 $54 $74 $62 $69 $56
3 Year 104 93 124 117 109 99
5 Year 142 135 176 174 152 145
10 Year 250 250 318 330 270 273
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NORTH JAPAN GAMERICA ASIAN
EUROPE AMERICA CAPITAL CAPITAL CAPITAL
CLASS A CLASS A CLASS A CLASS A CLASS A
1 Year $70 $77 $70 $ 101 $ 81
3 Year 113 134 112 203 144
5 Year 158 192 156 304 209
10 Year 283 351 278 552 384
- --------------------------------------------------------------------------------
This example is for comparison purposes only and is not a representation of
actual expenses and returns, either past or future.
NOTES TO TABLES
(1) The sales charge is reduced for investments of $100,000 or more, declining
to zero for large order purchases of $1 million or more. The sales charge may be
waived for certain investors. See "Shareholder Transactions and Services -
Purchasing Shares."
(2) Except for investments of $1 million or more. See "Shareholder Transactions
and Services -- Purchasing Shares".
(3) In the absence of an expense reimbursement, the management fee for each of
GAMerica Capital Fund and GAM Asian Capital Fund would have been 1.0%, resulting
in total expenses of 6.39% and 3.81%, respectively.
(4) 12b-1 Fees, Total Fund Operating Expenses and the Example for Class A shares
have been restated to reflect adoption by the Funds, effective October 9, 1996,
of a 12b-1 Plan of Distribution for Class A shares providing for payments of
0.30% annually of the average daily net assets represented by Class A shares of
each Fund. 12b-1 fees for Class D shares were introduced in 1995. Class D shares
may pay up to 0.50% of average daily net assets annually pursuant to the 12b-1
Plan. Because of the 12b-1 fee, long term shareholders of Class D shares may
indirectly pay more than the equivalent of the maximum permitted front-end sales
charge.
(5) Other expenses include custodian, transfer agent, administrative, legal and
accounting fees and expenses. 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.
3
<PAGE>
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FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Unless otherwise noted, the selected financial information below is for the
fiscal periods ending December 31 of each year. The accounting firm of Coopers &
Lybrand L.L.P. audited the Funds' financial statements for the year ended
December 31, 1996. Their report is included in the Funds' Annual Report, which
contains further information about the performance of the Funds. A copy of the
Annual Report is incorporated by reference into the Statement of Additional
Information and available at no charge upon request to the Funds. The Funds'
financial statements for periods prior to 1996 were audited by other independent
accountants. Expense and income ratios and portfolio turnover rates have been
annualized for periods less than one year. Total returns for periods of less
than one year are not annualized.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
GAM INTERNATIONAL FUND For the Periods
05-Sept-95+
to
1996 1996 1995 31-Dec-95 1994 1993
Class A Class D Class A Class D Class A Class A
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding
throughout the period)*
Net asset value
Beginning of period $21.37 $21.35 $17.21 $20.46 $23.90 $14.56
----------- ----------- ----------- ----------- ----------- -----------
Income from investment operations
Net investment income 0.57 0.45 0.52 0.10 0.34 0.25
Net realized and unrealized
gain/(loss) on investments 1.34 1.32 4.64 1.78 (2.58) 10.38
----------- ----------- ----------- ----------- ----------- -----------
Total from investment operations 1.91 1.77 5.16 1.88 (2.24) 10.63
----------- ----------- ----------- ----------- ----------- -----------
Less distributions
Dividends from net
investment income (0.09) (0.01) (0.47) (0.46) (0.66) (0.34)
Distributions from net realized gains (0.04) (0.04) (0.53) (0.53) (3.79) (0.95)
----------- ----------- ----------- ----------- ----------- -----------
Total distributions (0.13) (0.05) (1.00) (0.99) (4.45) (1.29)
----------- ----------- ----------- ----------- ----------- -----------
Net asset value
End of period $23.15 $23.07 $21.37 $21.35 $17.21 $23.90
=========== =========== =========== =========== =========== ===========
TOTAL RETURN
(without deduction of sales load) 8.98% 8.33% 30.09% 9.26% (10.23%) 79.96%
Net assets, end of period
(000 omitted) $1,009,819 $38,716 $560,234 $8,714 $158,336 $80,776
RATIOS TO AVERAGE NET ASSETS:
Expenses 1.56% 2.06% 1.57% 2.22% 1.60% 1.99%
Net investment income 2.70% 2.13% 3.89% 1.90% 2.74% 2.28%
Portfolio turnover rate 82% 82% 34.97% 34.97% 110.48% 98.45%
Average Commission Rate Paid 0.0202 0.0202 -- -- -- --
BANK LOANS
Amount outstanding at end of period
(000 omitted) -- -- -- -- -- $9,557
Average amount of bank loans
outstanding during the period
(000 omitted) -- -- -- -- -- $2,042
Average number of shares outstanding
during the period (monthly average)
(000 omitted) -- -- -- -- -- 2,700
Average amount of debt per share
during the period -- -- -- -- -- $0.76
- ----------------------------------------------------------------------------------------------------------------
+ Commencement of offering of Class D shares.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
For the Periods
1992 1991 1990 1989 1988 1987
Class A Class A Class A Class A Class A Class A
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding
throughout the period)*
Net asset value
Beginning of period $14.86 $12.87 $17.02 $14.81 $13.29 $21.91
----------- ----------- ----------- ----------- ----------- -----------
Income from investment operations
Net investment income 0.71 0.36 0.17 0.03 0.04 0.11
Net realized and unrealized
gain/(loss) on investments 0.28 1.64 (1.41) 3.21 2.72 2.38
----------- ----------- ----------- ----------- ----------- -----------
Total from investment operations 0.43 2.00 (1.24) 3.24 2.76 2.49
----------- ----------- ----------- ----------- ----------- -----------
Less distributions
Dividends from net
investment income (0.43) (0.01) -- -- (0.06) (0.23)
Distributions from net realized gains (0.30) -- (2.91) (1.03) (1.18) (10.88)
----------- ----------- ----------- ----------- ----------- -----------
Total distributions (0.73) (0.01) (2.91) (1.03) (1.24) (11.11)
----------- ----------- ----------- ----------- ----------- -----------
Net asset value
End of period $14.56 $14.86 $12.89 $17.02 $14.81 $13.29
=========== =========== =========== =========== =========== ===========
TOTAL RETURN
(without deduction of sales load) 3.08% 15.56% (7.30%) 22.46% 21.51% 12.05%
Net assets, end of period
(000 omitted) $41,032 $40,355 $23,450 $20,537 $19,638 $21,167
RATIOS TO AVERAGE NET ASSETS
Expenses 2.03% 2.11% 2.30% 2.74% 2.76% 2.23%
Net investment income 4.85% 3.25% 1.32% 0.19% 0.27% 0.38%
Portfolio turnover rate 109.16% 160.67% 253.89% 32.52% 22.86% 79.58%
Average Commission Rate Paid -- -- -- -- -- --
BANK LOANS
Amount outstanding at end of period
(000 omitted) $2,743 -- -- -- -- --
Average amount of bank loans
outstanding during the period
(000 omitted) $901 -- -- -- -- --
Average number of shares outstanding
during the period (monthly average)
(000 omitted) 2,790 -- -- -- -- --
Average amount of debt per share
during the period $0.32 -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------
</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.
5
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
GAM GLOBAL FUND
For the Periods
05-Sep-95+
to
1996 1996 1995 31-Dec-95 1994 1993
Class A Class D Class A Class D Class A Class A
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding
throughout the period)*
Net asset value
Beginning of period $13.51 $13.48 $10.60 $13.46 $17.92 $10.33
----------- ----------- ----------- ----------- ----------- -----------
Income from investment operations
Net investment income 0.16 0.07 0.35 -- 0.19 0.24
Net realized and unrealized
gain/(loss) on investments 1.55 1.47 3.48 0.92 (2.94) 7.46
----------- ----------- ----------- ----------- ----------- -----------
Total from investment operations 1.71 1.54 3.83 0.92 (2.75) 7.70
----------- ----------- ----------- ----------- ----------- -----------
Dividends from net
investment income (0.08) (0.01) (0.30) (0.28) (0.49) (0.11)
Distributions from net realized gains (0.79) (0.79) (0.62) (0.62) (4.08) --
----------- ----------- ----------- ----------- ----------- -----------
Total distributions (0.87) (0.80) 0.92 (0.90) (4.57) (0.11)
----------- ----------- ----------- ----------- ----------- -----------
Net asset value
End of period $14.35 $14.22 $13.51 $13.48 $10.60 $17.92
=========== =========== =========== =========== =========== ===========
TOTAL RETURN
(without deduction of sales load) 12.74% 11.54% 36.25% 6.97% (16.15%) 75.30%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $19,583 $815 $26,161 $295 $19,940 $33,416
Ratios to average net assets
Expenses 2.26% 2.88% 2.16% 2.81% 2.29% 2.68%
Net investment income/(loss) 1.17% 0.52% 2.96% (0.09%) 0.91% 1.88%
Portfolio turnover rate 107% 107% 60.18% 60.18% 123.33% 106.73%
Average Commission Rate Paid 0.0255 0.0255 -- -- -- --
BANK LOANS
Amount outstanding at end of period -- -- -- -- -- $2,165
(000 omitted)
Average amount of bank loans
outstanding during the period
(000 omitted) -- -- -- -- -- $2,600
Average number of shares outstanding
during the period (monthly average)
(000 omitted) -- -- -- -- -- 1,780
Average amount of debt per share
during the period -- -- -- -- -- $ 1.48
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Commencement of offering of Class D shares.
6
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
For the Periods
1992 1991 1990 1989 1988 1987
Class A Class A Class A Class A Class A Class A
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding
throughout the period)*
Net asset value
Beginning of period $11.37 $10.28 $13.14 $11.08 $9.26 $10.47
----------- ----------- ----------- ----------- ----------- -----------
Income from investment operations
Net investment income 0.64 0.28 0.06 0.04 (0.01) 0.12
Net realized and unrealized
gain/(loss) on investments ($ 1.15) $ 0.81 (1.54) 2.56 2.25 (0.38)
----------- ----------- ----------- ----------- ----------- -----------
Total from investment operations (0.51) 1.09 (1.48) 2.60 2.24 (0.26)
----------- ----------- ----------- ----------- ----------- -----------
Dividends from net
investment income (0.28) -- -- (0.03) -- (0.12)
Distributions from net realized gains (0.25) -- (1.38) (0.51) (0.42) (0.83)
----------- ----------- ----------- ----------- ----------- -----------
Total distributions (0.53) -- (1.38) (0.54) (0.42) (0.95)
----------- ----------- ----------- ----------- ----------- -----------
Net asset value
End of period $10.33 $11.37 $10.28 $13.14 $11.08 $9.26
=========== =========== =========== =========== =========== ===========
TOTAL RETURN
(without deduction of sales load) (4.65%) 10.61% (11.26%) 24.20% 25.04% (2.47%)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $19,763 $23,990 $23,577 $22,794 $17,805 $18,229
Ratios to average net assets
Expenses 2.37% 2.33% 2.45% 2.68% 2.94% 2.09%
Net investment income/(loss) 5.25% 2.20% 0.58% 0.36% (0.05%) 0.90%
Portfolio turnover rate 118.41% 180.52% 250.46% 31.28% 34.09% 67.35%
Average Commission Rate Paid -- -- -- -- -- --
BANK LOANS
Amount outstanding at end of period
(000 omitted) $9,010 -- -- -- -- $1,900
Average amount of bank loans
outstanding during the period
(000 omitted) $1,401 -- -- -- -- $158
Average number of shares outstanding
during the period (monthly average)
(000 omitted) 2,130 -- -- -- -- 2,200
Average amount of debt per share
during the period $0.66 -- -- -- -- $0.72
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
* 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.
7
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
GAM PACIFIC BASIN FUND
For the Periods
05-Sep-95+
to
1996 1996 1995 31-Dec-95 1994 1993
Class A Class D Class A Class D Class A Class A
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding
throughout the period)*
Net asset value
Beginning of period $16.97 $16.96 $17.62 $17.36 $19.20 $13.14
----------- ----------- ----------- ----------- ----------- -----------
Income from investment operations
Net investment income/(loss) 0.04 (0.10) -- (0.02) (0.05) (0.03)
Net realized and unrealized
gain/(loss) on investments (0.11) (0.11) 0.61 0.26 1.36 6.57
----------- ----------- ----------- ----------- ----------- -----------
Total from investment operations (0.07) (0.21) 0.61 0.24 1.31 6.54
----------- ----------- ----------- ----------- ----------- -----------
Less distributions
Dividends from net
investment income (0.74) (0.65) -- -- -- (0.04)
Distributions from net realized gains (0.90) (0.90) (1.26) (0.64) (2.89) (0.44)
----------- ----------- ----------- ----------- ----------- -----------
Total distributions (1.64) (1.55) (1.26) (0.64) (2.89) (0.48)
----------- ----------- ----------- ----------- ----------- -----------
Net asset value
End of period $15.26 $15.20 $16.97 $16.96 $17.62 $19.20
=========== =========== =========== =========== =========== ===========
TOTAL RETURN
(without deduction of sales load) (0.39%) (1.19%) 4.50% 2.35% 7.41% 51.52%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $49,808 $1,878 $53,944 $1,547 $48,527 $40,719
Ratios to average net assets
Expenses 1.76% 2.28% 1.98% 2.63% 1.78% 1.93%
Net investment income 0.22% (0.57%) (0.07%) (1.49%) (0.35%) (0.29%)
Portfolio turnover rate 46% 46% 64.01% 64.01% 29.11% 91.07%
Average Commission Rate Paid 0.0251 0.0251
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Commencement of offering of Class D shares.
8
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
For the Periods
++06-May-87
to
1992 1991 1990 1989 1988 31-Dec-87
Class A Class A Class A Class A Class A Class A
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding
throughout the period)*
Net asset value
Beginning of period $13.77 $11.93 $14.21 $10.16 $8.25 $10.00
----------- ----------- ----------- ----------- ----------- -----------
Income from investment operations
Net investment income 0.01 0.17 (0.04) (0.22) (0.41) (0.19)
Net realized and unrealized
gain/(loss) on investments (0.06) 1.81 (1.11) 4.61 (2.32) (1.56)
----------- ----------- ----------- ----------- ----------- -----------
Total from investment operations (0.05) (1.98) (1.15) 4.39 1.91 (1.75)
----------- ----------- ----------- ----------- ----------- -----------
Less distributions
Dividends from net
investment income (0.09) -- -- -- -- --
Distributions from net realized gains (0.49) (0.14) (1.13) (0.34) -- --
----------- ----------- ----------- ----------- ----------- -----------
Total distributions (0.58) (0.14) (1.13) (0.34) -- --
----------- ----------- ----------- ----------- ----------- -----------
Net asset value
End of period $13.14 $13.77 $11.93 $14.21 $10.16 $8.25
=========== =========== =========== =========== =========== ===========
TOTAL RETURN
(without deduction of sales load) (0.37%) 16.71% (8.21%) 43.34% 23.21% (17.55%)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $28,206 $35,849 $20,811 $7,490 $4,341 $3,689
Ratios to average net assets
Expenses 2.03% 2.29% 3.74% 5.93% 5.92% 6.80%
Net investment income/(loss) 0.09% 0.78% (0.31%) (3.39%) (3.29%) (4.47%)
Portfolio turnover rate 74.78% 78.80% 103.05% 152.89% 147.87% 85.53%
Average Commission Rate Paid
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
* 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
9
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
GAM EUROPE FUND
For the Periods
+01-Jan-90
to
1996 1995 1994 1993 1992 1991 31-Dec-90
Class A Class A Class A Class A Class A Class A Class A
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding
throughout the period)*
Net asset value
Beginning of period $10.04 $8.66 $8.93 $7.34 $8.33 $8.39 $10.00
------ ----- ----- ----- ----- ----- ------
Income from investment operations
Net investment income 0.07 0.07 -- 0.24 0.40 0.22 (0.02)
Net realized and unrealized
gain/(loss) on investments 2.06 1.38 (0.27) 1.41 (0.78) (0.28) (1.59)
------ ----- ----- ----- ----- ----- ------
Total from investment operations 2.13 1.45 (0.27) 1.65 (0.38) (0.06) (1.61)
------ ----- ----- ----- ----- ----- ------
Less distributions
Dividends from net
investment income (0.01) (0.06) -- (0.06) (0.22) -- --
Distributions from net realized gains (0.31) (0.01) -- -- (0.39) -- --
------ ----- ----- ----- ----- ----- ------
Total distributions (0.32) (0.07) -- (0.06) (0.61) -- --
------ ----- ----- ----- ----- ----- ------
Net asset value
End of period $11.85 $10.04 $8.66 $8.93 $7.34 $8.33 $8.39
====== ====== ===== ===== ===== ===== =====
TOTAL RETURN
(without deduction of sales load) 21.32% 16.77% (3.11%) 22.68% (4.91%) (0.70%) (16.07%)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $25,127 $22,961 $32,233 $14,398 $17,264 $13,558 $9,186
Ratios to average net assets
Expenses 1.89% 2.12% 2.35% 2.64% 2.47% 2.76% 3.57%
Net investment income/(loss) 0.59% 0.75% 0.06% 1.05% 5.06% 2.17% (0.22%)
Portfolio turnover rate 76% 145.16% 74.96% 181.51% 72.20% 232.55% 325.62%
Average Commission Rate Paid 0.0168 -- -- -- -- -- --
BANK LOANS
Amount outstanding at end of period -- -- -- $1,860 $1,177 -- --
(000 omitted)
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) -- 3,900 -- 1,680 2,400 -- --
Average amount of debt per share
during the period -- $0.32 -- $0.31 $0.14 -- --
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
* 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
10
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
GAM NORTH AMERICA FUND
For the Periods
1996 1995 1994 1993 1992 1991 +1990
Class A Class A Class A Class A Class A Class A Class A
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding
throughout the period)*
Net asset value
Beginning of period $11.93 $ 9.14 $12.80 $13.63 $13.35 $10.21 $10.00
------ ------ ------ ------ ------ ------ ------
Income from investment operations
Net investment income (loss) (0.05) -- 0.04 0.19 0.07 0.06 (0.22)
Net realized and unrealized
gain/(loss) on investments 2.93 2.83 0.23 (0.46) 0.25 3.08 0.43
------ ------ ------ ------ ------ ------ ------
Total from investment operations 2.88 2.83 0.27 (0.27) 0.32 3.14 0.21
------ ------ ------ ------ ------ ------ ------
Less distributions
Dividends from net
investment income -- -- (0.23) (0.07) (0.03) -- --
Distributions from net realized gains (1.25) (0.04) (3.70) (0.49) (0.01) -- --
------ ------ ------ ------ ------ ------ ------
Total distributions (1.25) (0.04) (3.93) (0.56) (0.04) -- --
------ ------ ------ ------ ------ ------ ------
Net asset value
End of period $13.56 $11.93 $ 9.14 $12.80 $13.63 $13.35 $10.21
====== ====== ====== ====== ====== ====== ======
TOTAL RETURN
(without deduction of sales load) 24.10% 30.90% 2.97% (2.09%) 2.42% 30.69% 2.14%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $5,853 $5,981 $1,887 $3,289 $11,781 $12,290 $1,862
Ratios to average net assets
Expenses, net of reimbursement 2.61%** 2.98%** 2.54% 2.10% 2.43% 2.96%** 11.52%
Net investment income (0.39%) 0.01% 0.37% 0.69% 0.47% 0.45% (5.49%)
Portfolio turnover rate 9% 8.57% 3.00% 3.42% 20.38% 3.44% 0.00%
Average Commission Rate Paid 0.06
- --------------------------------------------------------------------------------------------------------------------
</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.
** 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.
+ Commenced operations January 1, 1990. Fayez Sarofim & Co. was appointed
co-investment adviser of the Fund effective June 20, 1990.
11
<PAGE>
- --------------------------------------------------------------------------------
GAM JAPAN CAPITAL FUND
For the Periods
+01-Jul-94
to
1996 1995 31-Dec-94
Class A Class A Class A
PER SHARE OPERATING PERFORMANCE
(for a share outstanding
throughout the period)*
Net asset value
Beginning of period $10.16 $ 9.62 $10.00
--------- ----------- -----------
Income from investment operations
Net investment income (0.05) (0.07) 0.02
Net realized and unrealized
gain/(loss) on investments 0.07 0.69 (0.40)
--------- ----------- -----------
Total from investment operations 0.02 0.62 (0.38)
--------- ----------- -----------
Less distributions
Dividends from net investment
income (0.70) (0.05) --
Distributions from net realized gains (0.09) (0.03) --
--------- ----------- -----------
Total distributions (0.79) (0.08) --
--------- ----------- -----------
Net asset value
End of period $9.39 $10.16 $9.62
========= =========== ===========
TOTAL RETURN
(without deduction of sales load) 0.15% 6.45% (3.77%)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $36,504 $13,600 $9,406
Ratios to average net assets
Expenses, net of reimbursement 1.84 **3.61% 2.19%
Net investment income/(loss) (0.50%) (2.35%) 0.70%
Portfolio turnover rate 23% 122.38% 7.02%
Average Commission Rate Paid 0.0697 -- --
- --------------------------------------------------------------------------------
* 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.
** 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.
+ Commencement of operations
12
<PAGE>
- --------------------------------------------------------------------------------
GAMERICA CAPITAL FUND
For the Periods
+12-May-95
to
1996 31-Dec-95
Class A Class A
PER SHARE OPERATING PERFORMANCE
(for a share outstanding
throughout the period)
Net asset value
Beginning of period $10.03 $10.00
----------- -----------
Income from investment operations
Net investment income (loss) (0.42) 0.07
Net realized and unrealized
gain/(loss) on investments 2.22 0.07
----------- -----------
Total from investment operations 1.80 0.14
----------- -----------
Less distributions
Dividends from net investment
income -- (0.07)
Distributions from net realized gains (1.01) (0.04)
----------- -----------
Total distributions (1.01) (0.11)
----------- -----------
Net asset value
End of period $10.82 $10.03
=========== ===========
TOTAL RETURN
(without deduction of sales load) 18.31% 1.38%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $ 1,924 $ 3,029
Ratios to average net assets
Expenses, net of reimbursement* 5.16% 3.73%
Net investment income/(loss) (3.79%) 1.36%
Portfolio turnover rate 27% 10.90%
Average Commission Rate Paid 0.0533 --
- --------------------------------------------------------------------------------
+ Commencement of operations
* In the absence of the expense reimbursement, for the period ended December
31, 1995 and the year ended December 31, 1996, expenses on an annualized
basis would have represented 4.73% and 6.16%, respectively, of the average
net assets.
13
<PAGE>
- --------------------------------------------------------------------------------
GAM ASIAN CAPITAL FUND
For the Periods
+12-May-95
to
1996 31-Dec-95
Class A Class A
PER SHARE OPERATING PERFORMANCE
(for a share outstanding
throughout the period)
Net asset value
Beginning of period $9.53 $10.00
----------- -----------
Income from investment operations
Net investment income (loss) (0.07) (0.01)
Net realized and unrealized
gain/(loss) on investments 0.38 (0.42)
----------- -----------
Total from investment operations 0.31 (0.43)
----------- -----------
Less distributions
Dividends from net
investment income -- --
Distributions from net realized gains (0.01) (0.04)
----------- -----------
Total distributions (0.01) (0.04)
----------- -----------
Net asset value
End of period $9.83 $9.53
=========== ===========
TOTAL RETURN
(without deduction of sales load) 3.28% (4.25%)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $5,629 $5,560
Ratios to average net assets
Expenses, net of reimbursement* 2.98% 3.11%
Net investment income/(loss) (0.75%) (0.17%)
Portfolio turnover rate 86% 17.01%
Average Commission Rate Paid 0.0124 --
- --------------------------------------------------------------------------------
+ Commencement of operations
* In the absence of the expense reimbursement, for the period ended December
31, 1995 and the year ended December 31, 1996, expenses on an annualized
basis would have represented 3.95% and 3.58%, respectively, of the average
net assets.
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.
14
<PAGE>
- --------------------------------------------------------------------------------
Investment Objectives and Policies and Risk Considerations
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES
Each Fund's investment objective is to seek long-term capital
appreciation. To pursue this goal, each Fund has adopted an investment policy
relating to a particular geographic region in which it intends to invest a
substantial portion of its assets. The policy of each Fund is described below.
Although the Funds generally intend to purchase securities for long-term
investment, each Fund 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 (which include but
are not limited to 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. 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.
The investment objective of each Fund and the investment policies set
forth below may be changed by the Board of Directors upon written notice to the
shareholders of the affected Fund(s). If there is a change in objective,
shareholders should consider whether the Fund remains an appropriate investment.
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. There is no assurance that each Fund will achieve its
investment objective.
Each Fund has adopted the following investment policy relating to the
geographic areas in which it may invest. In the case of the GAM Pacific Basin,
Japan Capital, Asian Capital, Europe, North America and GAMerica Capital Funds,
each Fund intends to invest substantially all of its assets in the region
dictated by its investment policy and, under normal market circumstances, will
invest at least 65% of its total assets in securities of companies or
governments in the relevant geographic area.
GAM GLOBAL FUND may invest in securities issued by companies 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. 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. Under normal market conditions, GAM International Fund will
invest in securities of companies in at least three foreign countries. For
temporary defensive purposes, GAM International Fund may invest in debt
securities of United States companies and the United States government and its
agencies and instrumentalities.
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.
GAM JAPAN CAPITAL FUND may invest primarily in securities of companies
in 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.
15
<PAGE>
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.
GAM NORTH AMERICA FUND may invest primarily in securities issued by
companies in the United States and Canada.
GAMERICA CAPITAL FUND may invest primarily in securities of companies in
the United States.
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.
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
Adviser(s) and its own judgment rather than on any specific objective criteria.
The debt securities in which each Fund may invest are not required to
have any rating and may include securities of companies in default of interest
or principal payment obligations. 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 such
debt securities.
Each Fund may, for temporary defensive purposes, invest in short-term
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 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.
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 and/or held in cash except when the
Fund is in a temporary defensive posture.
The Funds' portfolio securities are generally 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 both sponsored and unsponsored American Depositary Receipts
("ADRs") or European Depositary Receipts ("EDRs") representing securities of
foreign companies. These securities may not necessarily be denominated in the
same currency as the securities which they represent.
OTHER INVESTMENT POLICIES AND TECHNIQUES
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.
16
<PAGE>
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. 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.
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 segregates liquid assets 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. 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.
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 a
broker an amount of cash or cash equivalents equal to approximately 5% of the
contract amount. Subsequent payments to and from the broker will be made daily
as the price of the index or securities underlying the futures contract
fluctuates.
An option on a commodity 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.
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
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, or for
speculative purposes. 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.
The Funds may purchase put and call options on foreign currencies. 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.
17
<PAGE>
ILLIQUID SECURITIES. Each Fund may invest up to 15% of its net assets in
illiquid securities, including restricted securities or private placements. An
illiquid security is a security that cannot be sold quickly in the ordinary
course of business. 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 such securities. Certain securities cannot be sold to the U.S. public
because of their terms or because of SEC regulation. The Investment Advisers may
determine that securities that cannot be sold to the U.S. public but that can be
sold to institutional investors (Rule 144A Securities) or on foreign markets are
liquid. The Investment Adviser will follow guidelines established by the Board
of Directors of the Company in making liquidity determinations for Rule 144A and
other securities.
BORROWING AND LENDING. 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.
Each Fund may lend its portfolio securities to institutions deemed
creditworthy pursuant to procedures established by the Board of Directors. 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.
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 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. 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.
The Funds may invest and trade in derivative financial products to the
extent permitted by applicable regulations. Derivative products are frequently
traded on over-the-counter markets and will usually be subject to the
restriction that not more than 15% of the net assets of each Fund may be
invested in illiquid securities. The Funds will purchase or sell derivative
products for hedging purposes only, unless otherwise permitted by applicable
regulations.
DIVERSIFICATION; INVESTMENT RESTRICTIONS
The Investment Company Act of 1940 (the "Act") classifies investment
companies as either diversified or non-diversified. The Company qualifies as a
diversified company. Accordingly, each Fund's investments will be diversified to
18
<PAGE>
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, such that not
more than 25% of its total assets will be invested in any one industry. The
preceding limitations will not apply to securities of the United States
government, its agencies or instrumentalities.
Each Fund is subject to certain fundamental investment restrictions and
limitations which are set forth in full in the Statement of Additional
Information. These fundamental policies cannot be changed without approval of a
majority of each Fund's outstanding voting securities. All restrictions, except
the restriction relating to borrowing, shall apply only 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.
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 GAMerica Capital Funds
may invest a portion of their assets in securities of foreign issuers. Investors
should carefully consider the risks involved in investments in securities of
non-U.S. companies and governments. Such 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.
Securities prices in non-U.S. markets are generally subject to different
economic, financial, political and social factors than are the prices of
securities in U.S. markets. These factors may result in either a larger gain or
a larger loss than an investment in comparable U.S. securities.
The Funds may enter into forward foreign exchange contracts in an
attempt to hedge against adverse fluctuations in the relative rates of exchange
between different currencies. However, attempting to hedge the value of a Fund's
portfolio securities against a decline in the value of a currency will not
eliminate fluctuations in the underlying prices of the securities. There can be
no assurance that such hedging attempts will be successful.
There is likely to be less publicly available information concerning
non-U.S. issuers of securities held by the Funds than is available concerning
U.S. companies. Foreign companies are not subject to the same accounting,
auditing and financial reporting standards as are applicable to U.S. companies.
There may be less government supervision and regulation of foreign
broker-dealers, financial institutions and listed companies than exists in the
United States.
Non-U.S. securities exchanges generally have less volume than the New
York Stock Exchange and may be subject to less government supervision and
regulation than those in the United States. Securities of non-U.S. companies may
be less liquid and more volatile than securities of comparable U.S. companies.
Non-U.S. 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 non-U.S. securities may be subject to withholding taxes.
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 or emerging markets, 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, Pacific Basin, Japan Capital, Asian Capital, North America
and GAMerica Capital Funds will invest primarily in specific geographic areas.
An investment in one of these Funds will tend to be affected by political,
19
<PAGE>
economic, fiscal, regulatory or other developments in the relevant geographic
area to a greater extent than investments in the other Funds. For example,
securities markets in Europe may be affected by the efforts of certain European
countries to adopt a single currency, coordinate monetary and fiscal policies
and form a single market and trading block. 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.
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.
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.
INVESTING IN SMALLER COMPANIES. Each Fund may invest in all types of
companies, including companies in the earlier stages of development. Investing
in smaller, newer companies generally involves greater risk and potentially
greater reward than investing in larger, more established companies. 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.
FIXED INCOME SECURITIES. The Funds will invest in fixed income
securities which involve interest rate risk. As interest rates rise, bond values
generally fall, and as interest rates fall, bond values generally rise. 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. 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. 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.
Foreign currency forward contracts, repurchase agreements, ARINS, and
certain other types of futures, options and derivatives are 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. A
Fund may experience losses or delays in the event of a default or bankruptcy of
a bank, broker-dealer or other investor with which the Fund entered into such an
agreement. Some derivatives may constitute illiquid securities which cannot
readily be resold.
---------------------
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.
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Shareholder Transactions and Services
- --------------------------------------------------------------------------------
Following is information relevant to purchasing, selling and exchanging
shares of the Funds, as well as a description of the shareholder services and
programs available. All transactions will be processed through the Funds'
transfer agent, Chase Global Funds Services Company (the "Transfer Agent") at
the address and telephone number set forth below under "Shareholder Inquiries".
The price or net asset value ("NAV") per share for each Fund and class,
other than GAM Japan Capital Fund, is determined at the close of regular trading
(normally 4 p.m. New York time) on each day the New York Stock Exchange is open
for business (normally Monday through Friday). GAM Japan Capital Fund's NAV is
calculated at the close of trading on the Tokyo Stock Exchange. NAV per share is
determined by dividing the value of a 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. Purchase, sale and exchange
transactions in shares of the Funds will be processed based on the NAV per share
on the date the transaction request is received and accepted.
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.
PURCHASING SHARES
Shares of each Fund are offered on a continuous basis. Orders received
in good form prior to 4:00 p.m. New York time (or placed with a financial
service firm before such time and transmitted by the financial service firm
before the Fund processes that day's share transactions) will be processed based
on that day's closing price or NAV, plus any applicable initial sales charge.
Purchase orders must be accompanied by a completed and signed application, and
are subject to acceptance and collection of full payment. Each Fund and GAM
Services, Inc., the Funds' distributor ("GAM Services"), reserve the right to
reject any purchase order.
The minimum initial investment in each Fund is $5,000 and subsequent
investments must be at least $500, except that the minimum initial investment
for IRA accounts is $2,000 and the minimum subsequent investment is $500. You
can initiate any purchase, exchange or sale of shares through your financial
services firm or shares may be purchased by mail directly from the Transfer
Agent by forwarding the Purchase Application form attached to this Prospectus.
Complete the appropriate parts of the Purchase Application following the
instructions set forth on the form and mail it with your check payable to "GAM
Funds, Inc." Payment for shares may also be made by wire transfer after you have
mailed in your Purchase Application. Wire instructions are included in the
Purchase Application. In addition to the Funds, investors may also purchase
directly or by exchange, without charge, shares of The Reserve Funds - Primary
Fund, an open-end management investment company commonly known as a money market
fund (the "GAM Money Market Account"). The GAM Money Market Account is offered
through GAM Services, but is not a series of the Company.
Each Fund offers Class A shares, and GAM International, GAM Global and
GAM Pacific Basin Funds offer Class D shares. Each class has its own cost
structure, allowing investors to choose the one that best meets their
requirements. Investors should consult their financial services firm to assist
them with this decision. Share purchases and other transactions are
21
<PAGE>
electronically recorded (book-entry shares). The Funds do not generally issue
certificates for shares purchased.
CLASS A SHARES
Class A shares are offered at net asset value plus an initial sales
charge as set forth below, unless the purchase qualifies for a complete waiver
of the charge. Large order purchases and purchases by eligible employee
retirement plans may be made without a sales charge; however, such purchases may
be subject to a contingent deferred sales charge. Class A shares are also
subject to an ongoing fee of 0.30% annually of the average daily net assets of
each Fund represented by Class A shares pursuant to the Class A Share Plan of
Distribution adopted by the Funds. (See "Management of the Funds - The
Distributor").
AMOUNT
REALLOWED
SALES LOAD SALES LOAD TO DEALERS
(AS % OF (AS % OF NET (AS % OF
PURCHASE AMOUNT OFFERING PRICE) AMOUNT INVESTED) OFFERING PRICE)
Up to $100,000 5.00% 5.26% 4.0%
$100,000- $299,999 4.0% 4.17% 3.0%
$300,000-$599,999 3.0% 3.09% 2.0%
$600,000-$999,999 2.0% 2.04% 1.0%
$1,000,000 and over 0% See Large Order
Purchases Below
CLASS D SHARES
Class D shares are offered at net asset value plus an initial sales
charge which is lower than the sales charge imposed on Class A shares. Class D
shares are also subject to an ongoing fee of 0.50% annually of the average daily
net assets of each Fund represented by Class D shares pursuant to the Class D
Share Plan of Distribution adopted by the Funds. (See "Management of the Funds -
The Distributor").
AMOUNT
REALLOWED
SALES LOAD SALES LOAD TO DEALERS
(AS % OF (AS % OF NET (AS % OF
PURCHASE AMOUNT OFFERING PRICE) AMOUNT INVESTED) OFFERING PRICE)
Up to $100,000 3.50% 3.63% 2.5%
$100,000- $299,999 2.5% 2.56% 1.5%
$300,000-$599,999 2.0% 2.04% 1.0%
$600,000-$999,999 1.5% 1.52% 1.0%
$1,000,000 and over* 0%
*Purchases of $1 million or more should be for Class A shares. Please consult
your financial services firm.
SALES CHARGE REDUCTIONS AND WAIVERS
REDUCTIONS. Certain purchases of Class A and Class D shares may qualify
for reduced or eliminated sales charges. Investors qualifying for a complete
waiver of the sales charge should purchase Class A shares. Please refer to the
Purchase Application or consult your financial services firm to take advantage
of these purchase options.
RIGHTS OF ACCUMULATION. You may add the value of any shares of the same
class already owned to the amount of your next investment in that class for
purposes of calculating the sales charge.
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STATEMENT OF INTENTION. You may purchase shares of the same Class
subject to a sales load over a 13-month period and receive the same sales charge
as if all shares had been purchased at once.
COMBINATION PRIVILEGE. You may combine shares of the same class of more
than one Fund, and individuals may include shares purchased for themselves,
their spouse and children under the age of 21 for purposes of calculating the
sales charge.
WAIVERS OF FRONT-END SALES CHARGES. Shares may be offered without the
front-end sales charge to active and retired Fund directors and other persons
affiliated with the Fund or GAM Services or its affiliates, broker-dealers
having sales agreements with GAM Services, and spouses and minor children of the
foregoing persons or trusts or employee benefit plans for the benefit of such
persons; 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; financial representatives
utilizing Fund shares in fee-based investment products under agreements with GAM
Services or the Funds; organizations described in Section 501(c)(3) of the
Internal Revenue Code of 1986; financial institution trust departments investing
an aggregate of $1 million or more in the Funds; and certain tax qualified plans
of administrators who have entered into a services agreement with GAM Services
or the Funds. The sales load will also be waived on the purchase of Class A
shares through a dealer where the investment represents the entire proceeds from
another mutual fund with the same or similar objective, PROVIDED that the
following conditions are met: the redemption occurred no more than 60 days prior
to the purchase of shares of a GAM Fund, the redeemed shares were held for at
least six months prior to redemption, and the proceeds of the redemption are
sent directly to the Fund or its agent, or maintained temporarily in cash or a
money market fund. No commissions will be paid to dealers in connection with
such purchases.
LARGE ORDERS PURCHASES AND PURCHASES BY ELIGIBLE PLANS. Purchase orders
of $1 million or more and all purchase orders by employee retirement plans with
more than 100 participants will not be subject to the front-end sales charge.
GAM Services may advance to dealers a commission from its own resources in
connection with these purchases based upon cumulative sales in each year or
portion thereof. GAM Services will pay 1% of sales up to $2 million; 0.80% on
sales of $2 million up to $3 million, 0.50% on sales of $3 million up to $5
million, and 0.25% on sales of $5 million and above. Those purchases for which
GAM Services pays a commission (and the payment of which has not been waived by
the dealer) are subject to a 1% contingent deferred sales charge ("CDSC") on any
shares sold within 18 months of purchase. In the case of eligible retirement
plans, the CDSC will apply to redemptions at the plan level only. 12b-1 fees
earned on assets representing large order purchases or purchases by eligible
plans will be retained by GAM Services for one year after the purchase is
effected in order to reimburse it for a portion of the dealer payment.
The CDSC is based on the lesser of the original purchase cost or the
current market value of the shares being sold, and is not charged on shares
acquired by reinvesting your dividends. To keep the CDSC as low as possible,
each time an investor places a request to sell shares, the Fund will first sell
any shares in your account that are not subject to a CDSC.
The CDSC will be waived on shares sold to make payments through a
systematic withdrawal plan; due to the death or disability of a shareholder; in
connection with exchanges for Class A shares of another Fund; by retirement
plans due to any benefit payment such as loans, hardship withdrawals, death,
retirement or separation from service with respect to plan participants or the
distribution of excess contributions; and in connection with mandatory
distributions under 403(b) plans and individual retirement accounts.
23
<PAGE>
SELLING SHARES
Shares may be sold on any day the New York Stock Exchange is open,
either through your financial services firm or directly to the Funds' Transfer
Agent. Financial services firms must receive requests before 4:00 p.m., New York
time, and are responsible for furnishing all necessary documentation to the
Transfer Agent. You will receive the NAV (price) per share on the date your
request is received in proper order for processing, less any applicable CDSC on
Class A shares.
Requests made directly to the Transfer Agent must be made in writing
unless you have elected telephone redemption privileges. (See "Telephone
Transactions" below.) The written request, signed by the registered account
holder(s), must be addressed and mailed to the Transfer Agent, indicating the
number of shares or dollar amount to be sold. Your signature(s) must be
guaranteed by a bank, member firm of a national stock exchange or another
eligible guarantor institution. A notary public is not acceptable. If you hold
certificates representing your shares, the certificate, endorsed for transfer,
must accompany your request. Additional documentation is required for sales by
corporations, agents, fiduciaries, surviving joint owners and individual
retirement account holders. Please contact the Transfer Agent.
When you place a request to sell shares for which the purchase money has
not yet been collected, the request will be executed in a timely fashion, but
the Fund will not release the proceeds to you until your purchase payment
clears, which may take up to ten days after the purchase. In unusual
circumstances, a Fund may temporarily suspend the processing of sell requests,
or may postpone payment of proceeds for up to three business days or longer, as
permitted by law. The value of your shares at the time of sale may be more or
less than you paid for them. The sale of shares may be a taxable event to you.
(See "Tax Matters".)
INVOLUNTARY REDEMPTIONS. Except in the case of retirement accounts and
accounts maintained by administrators for retirement plans, if your account
value falls below $1,000 due to withdrawals other than by use of the systematic
withdrawal program described below, you may be asked to purchase more shares
within 30 days. If your account is not brought back to the minimum account size,
the Fund may close the account and mail the proceeds to the registered address
for the account. Your account will not be closed if the value has decreased due
to Fund performance or the payment of sales charges. No CDSC will be imposed on
accounts closed involuntarily.
REINSTATEMENT PRIVILEGE. If you sell shares of a Fund, you may reinvest
in your existing account (or a new account reopened under the same registration)
some or all of the proceeds in the same class of shares of any Fund within 60
days without a sales charge. If you paid a CDSC at the time of sale, you will be
credited with the portion of the CDSC paid in respect of the reinvested
proceeds.
EXCHANGES
Shares of one Fund may be exchanged for shares of the same class of
another Fund, or for shares of the GAM Money Market Account, generally without
paying any sales charge. Upon an exchange from the GAM Money Market Account into
a Fund, investors who purchased the GAM Money Market Account directly must pay
the initial sales charge imposed by the Fund into which they exchange. Shares
subject to a CDSC will be subject to the same CDSC after the exchange, which
will continue to age from the original purchase date. A Fund may refuse any
exchange order, and may change or cancel the exchange privilege at any time upon
60 days' notice to shareholders.
Unless an investor has elected the telephone or facsimile exchange
privilege, investors must request in writing a sale of all or a portion of their
current investment and a simultaneous purchase into a separate Fund(s), which
the investor must indicate on a new application form. An executed request to
sell and a Purchase Application must be mailed to the Transfer Agent for
24
<PAGE>
processing. An exchange out of a Fund is treated as a sale and may result in a
gain or loss for tax purposes. (See "Tax Matters".)
OTHER ACCOUNT SERVICES
DIVIDEND REINVESTMENT. Investors may opt to have their dividends
reinvested in additional shares of the same Fund and class. Unless you direct
otherwise, your distributions will be automatically reinvested. You can choose
on the Purchase Application to have a check for your dividends mailed to your
registered address. However, if your dividend checks are returned to the Fund
because they are not deliverable after two attempts, your dividends will
automatically be reinvested thereafter in additional shares of the same Fund and
class.
SYSTEMATIC WITHDRAWAL PLAN. This program allows investors to sell their
shares at regular periodic intervals and direct payment of the proceeds to
themselves or to a third party. To initiate this option, you must have at least
$10,000 worth of shares in your account. You may elect this option by providing
the information required in the appropriate section of the Purchase Application.
Withdrawals concurrent with the purchase of shares of the Funds will be
disadvantageous because of the payment of duplicative sales loads, if
applicable. For this reason, additional purchases of Fund shares are discouraged
when participating in this program.
AUTOMATIC INVESTMENT PLAN. You may make additional purchases in
incremental amounts of $500 or more through an automatic investment program.
Monthly or quarterly investments will be debited automatically at your
instruction from your account at a financial institution. To enroll in this
program, please complete the appropriate sections of the Purchase Application or
contact the Transfer Agent. You may terminate the program at any time by written
notice to the Transfer Agent. Termination will become effective within 30 days
after receipt of your request. The Fund may immediately terminate your
participation in the event that any item is unpaid by your financial
institution.
TELEPHONE AND FACSIMILE PRIVILEGES. Telephone and facsimile redemption
and exchange privileges are available and can be initiated by properly
completing the appropriate sections of the Purchase Application or contacting
the Transfer Agent. For your protection, telephone requests may be recorded in
order to verify their accuracy. In addition, the Transfer Agent has procedures
in place to verify the identity of the caller. If these procedures are not
followed, the Transfer Agent is responsible for any losses that may occur to any
account due to an unauthorized telephone call. Proceeds of telephone and
facsimile redemptions will only be mailed to your registered address or sent by
wire transfer to an account designated in advance.
SHAREHOLDER INQUIRIES. Please contact your financial representative for
further instructions and assistance with your investment, or contact the
Transfer Agent at the following address or telephone numbers:
Chase Global Funds Services Company
73 Tremont Street
Boston, MA 02108
(800) 426-4685
(617) 557-8000 ext. 6610
Facsimile: (617) 557-8635
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<PAGE>
DIVIDENDS AND TAX MATTERS
So long as each Fund meets the requirements for being a tax-qualified
regulated investment company it pays no federal income tax on the earnings it
distributes to shareholders. Each Fund intends annually to pay a dividend
representing its entire net investment income and to distribute all its realized
net capital gains. In so doing, the Fund will avoid the imposition of any excise
taxes. Dividends, whether reinvested or taken as cash, are generally taxable.
Dividends from long-term capital gains are taxable as capital gains; dividends
from other sources are generally taxable as ordinary income.
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.
Normally, any sale or exchange of shares of a Fund will be a taxable
event. Depending on the purchase price and the sale price of the shares you sell
or exchange, you may have a gain or a loss on the transaction. The Form 1099 and
Tax Notice that is mailed to you every January details your distributions and
their federal tax category. You should verify your tax liability with your tax
professional. Please consult the Statement of Additional Information for a
description of certain other tax consequences to shareholders.
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Management of the Funds
- --------------------------------------------------------------------------------
DIRECTORS AND OFFICERS
The business of the Funds is supervised by the Board of Directors, who
may exercise all powers 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 or to any
class of shares of a Fund. The Board elects the officers of the Company and
retains various companies to carry out the Fund's operations, including the
investment advisers, custodian, administrator and transfer agent.
INVESTMENT ADVISERS
Each Fund is advised by GAM International Management Limited ("GAM"), a
corporation organized in 1984 under the laws of the United Kingdom, with its
principal offices located at 12 St. James Place, London SW1A 1NX England. Fayez
Sarofim & Co. ("Sarofim"), a Texas corporation organized in 1958 with offices at
Two Houston Center, Houston, TX 77010, serves as co-investment adviser to GAM
North America Fund. The individuals primarily responsible for the day-to-day
management of each Fund's portfolio are set forth below.
GAM GLOBAL AND GAM INTERNATIONAL FUNDS. John R. Horseman, Investment
Director, joined GAM initially as a member of the Asian team based in Hong Kong.
He commenced management of GAM International and GAM Global Funds on April 20,
1990 after moving to the London office. He is now responsible for a number of
GAM's other global and international funds, including the offshore fund, GAM
Universal US$ Inc.
GAM PACIFIC BASIN FUND. Michael S. Bunker, Investment Director, has
overall responsibility for Asian investment policy. He has over 20 years'
investment experience, primarily in Asian markets. He commenced management of
GAM Pacific Basin Fund on May 6, 1987. Mr. Bunker also manages the offshore fund
GAM Pacific Inc. He is now based in London after having lived in Hong Kong for
three years.
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<PAGE>
GAM JAPAN CAPITAL FUND. Paul S. Kirkby, Investment Director, is
responsible for investment in the Japanese market. Prior to joining GAM in 1985
as a Senior Fund Manager in Hong Kong, he 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 also manages the offshore fund GAM Japan Inc.
Mr. Kirkby is now based in London having lived in Hong Kong for seven years.
GAM ASIAN CAPITAL FUND. Adrian L. Cantwell, Investment Director, is
responsible for Asia ex Japan portfolios. Prior to joining GAM in 1990, he was a
Director of Gartmore Limited, Hong Kong, responsible for South East Asian
investment. He commenced management of GAM Asian Capital Fund on May 12, 1995.
Mr. Cantwell also manages the offshore funds GAM Asian Inc. and GAM
Singapore/Malaysia Inc. He has lived in Hong Kong since 1985.
GAM EUROPE FUND. John Bennett, Investment Director, is responsible for
European markets. Prior to joining GAM in 1993, he was a Senior Fund Manager at
Ivory & Sime, responsible for Continental European equity portfolios. He
commenced management of GAM Europe Fund on January 1, 1993. Mr. Bennett also
manages the offshore fund GAM Pan European Inc. He is based in Edinburgh.
GAM NORTH AMERICA FUND. Fayez Sarofim founded Fayez Sarofim & Co in 1958
and is the majority shareholder, President and Chairman of the Board. The firm,
which serves as co-investment adviser of GAM North America, currently manages
aggregate assets of approximately $38 billion under the supervision of Mr.
Sarofim. Mr. Sarofim is also a director of Allegheny Teledyne, Inc., Argonaut
Group, Unitrin, Inc., Imperial Holly Corp. and EXOR Group. He commenced
management of GAM North America Fund on June 29, 1990. Mr. Sarofim also manages
the offshore fund GAM US Inc.
GAMERICA CAPITAL FUND. Gordon Grender, Director, has been associated
with the GAM group since 1983. He has been actively involved in fund management
in North American stock markets since 1974. He commenced management of GAMerica
Capital Fund on May 12, 1995. Mr. Grender also manages GAMerica Inc., an
offshore fund with similar investment objectives.
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
domestic and foreign mutual funds and managed accounts with aggregate assets of
approximately $9.3 billion.
Subject to the direction and general 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. As compensation for such
services, each Fund except GAM North America Fund pays GAM the 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.
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. The
Funds pay for all expenses of their operations.
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<PAGE>
DISTRIBUTOR AND SALES AND SERVICE COMPENSATION
GAM Services Inc., an affiliate of GAM with its principal offices
located at 135 East 57th Street, New York, New York 10022, serves as distributor
and principal underwriter of the Funds' shares. As such, GAM Services
compensates financial services firms which sell shares of the Funds pursuant to
agreements with GAM Services. Compensation payments originate from sales charges
paid by shareholders at the time of purchase and from 12b-1 fees paid out of
Fund assets.
Sales charges are deducted from payment for shares at the time of
investment and reallowed to financial services firms as set forth in the table
under "Purchase of Shares." These firms typically pass on a portion of this
selling compensation to their financial representatives who sell shares of the
Funds and provide personal account services to Fund shareholders.
12b-1 fees vary according to the 12b-1 Plan adopted by each Fund for
each class of shares. The Funds pay 12b-1 fees equal to 0.30% annually of the
average daily net assets represented by Class A shares. Of this amount, GAM
Services retains 0.05% annually and a service fee of 0.25% is reallowed to
financial services firms. Funds offering Class D shares pay 12b-1 fees equal to
0.50% annually of those Funds' net assets represented by Class D shares. GAM
Services reallows the entire Class D share 12b-1 fee to financial services
firms. In the case of Class A and Class D share accounts which are not assigned
to a financial services firm, GAM Services retains the entire fee. Distribution
fees may be used to pay sales and service compensation to financial services
firms and to defray other distribution related expenses enumerated in the 12b-1
Plans. Should the fees collected under the Plans exceed the expenses of GAM
Services in any year, GAM Services would realize a profit.
GAM Services, as distributor for the GAM Money Market Account, collects
a fee paid in part by the GAM Money Market Account pursuant to distribution and
shareholder service arrangements offered by The Reserve Funds and their
principal underwriter.
GAM Services or 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.
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 employs subcustodians for the purpose of providing
custodial services for the Funds' foreign assets held outside the United States.
TRANSFER AGENT; SHAREHOLDER SERVICING AGENTS
Chase Global Fund Services Company, P.O. Box 2798, Boston, Massachusetts
02208 (the "Transfer Agent") serves as shareholder service agent,
dividend-disbursing agent, transfer agent and registrar for the Funds. Pursuant
to an agreement with GAM Services, the Transfer Agent also provides information
to representatives of financial services companies. As referenced above, the
Funds and GAM Services also engage and compensate other entities for serving as
shareholder servicing and subaccounting agents for the benefit of discrete
groups of Fund shareholders.
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Description of Shares
- --------------------------------------------------------------------------------
GAM Funds, Inc., a Maryland corporation, was organized on May 7, 1984.
The Company has eight 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 Directors, in
the exercise of their fiduciary duties under the Act and Maryland law, will seek
to ensure that no conflicts arise between the Class A and Class D shares of a
Fund.
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 pre-emptive, 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. If a Fund is
separately affected by a matter requiring a vote, the shareholders of each such
Fund shall vote separately. 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.
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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. 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.
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GLOBAL ASSET MANAGEMENT(R)
GAM FUNDS, INC.
PROSPECTUS
AND
APPLICATION
APRIL 30, 1997
No dealer, salesman, or any other person has been authorized to give any
information or to make any representations, other than those contained in this
Prospectus, in connection with the offer contained in this Prospectus, and, if
given or made, such other information or representations must not be relied upon
as having been authorized by the Company. This Prospectus does not constitute an
offer by the Company to sell or a solicitation of any offer to buy any of the
securities offered hereby in any jurisdiction to any person to whom it is
unlawful to make such offer or solicitation in such jurisdiction.
<PAGE>
GAM FUNDS, INC. - NEW ACCOUNT APPLICATION
Mail to: Chase Global Funds Services Company, P.O. Box 2798, Boston, MA 02208
(73 Tremont Street, Boston MA 02108 for express mail services) with your check
or money order payable to "GAM Funds, Inc." To make payment by wire, please
notify Chase Global at (800) 356-5740 or (617) 557-8000, ext. 6610 of the
incoming wire and to receive a wire reference number. Instruct your bank to wire
the funds with the assigned reference number to: Chase Manhattan Bank, N.A. ABA#
021000021 for account of GAM [ ] Fund Subscription DDA #910-2-733186
================================================================================
ACCOUNT REGISTRATION
================================================================================
o JOINT TENANT REGISTRATION will be as "joint tenants with the right of
survivorship" and not as "tenants in common" unless specified, and both
registrants should sign this application.
o TRUST REGISTRATIONS should specify the name of the trust, trustee(s),
beneficiary(ies), date of trust instrument, and the trustee, or other
fiduciary, should sign this application.
o UNIFORM GIFTS/TRANSFERS TO MINORS REGISTRATION should be in the name of one
custodian and one minor and include the state under which the custodianship
is created (using the minor's Social Security Number and the custodian
should sign this application.)
o INSTITUTIONAL REGISTRATIONS should be in the name of the institution, and an
officer should sign, indicating corporate or partnership office or title,
this application.
o For an INDIVIDUAL RETIREMENT ACCOUNT (IRA), a different application is
required. Please call (800) 426-4685 ext. 1 or your investment
representative to obtain an IRA application.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Registration Type: (Choose One) o Individual o Gift/Transfer to Minor o Other--------------
o Joint Tenants o Trust
Investor(s) Information Owner Joint Owner
Name ---------------------------------------------- ----------------------------------------
Address ---------------------------------------------- ----------------------------------------
---------------------------------------------- ----------------------------------------
City/State/Zip ---------------------------------------------- ----------------------------------------
Taxpayer ID/Social ---------------------------------------------- ----------------------------------------
Security Number ---------------------------------------------- ----------------------------------------
Date of Birth ---------------------------------------------- ----------------------------------------
Daytime Phone ( )----------------------------------------- ----------------------------------------
</TABLE>
================================================================================
INVESTMENT SELECTION
================================================================================
The minimum initial investment is $5,000 per fund and subsequent investments are
$500 per fund.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Investment Amount Class A Class D
GAM International Fund: $------------------------ o o GAM Asian Capital Fund: $-----------------------
GAM Global Fund: $------------------------ o o GAM North America Fund: $-----------------------
GAM Pacific Basin Fund: $------------------------ o o GAMerica Capital Fund: $-----------------------
GAM Europe Fund: $------------------------ GAM Money Market Account: $-----------------------
GAM Japan Capital Fund: $------------------------
</TABLE>
CAPITAL GAIN AND DIVIDEND DISTRIBUTIONS
All dividends and capital gains distributions will be reinvested in additional
shares of the same class of the same Fund unless the appropriate boxes below are
checked:
o Pay dividends in cash o Pay capital gains distributions in cash
================================================================================
INVESTMENT ADVISOR/BROKER (IF APPLICABLE)
================================================================================
Representative's Name ---------------------- Branch Address-------------
Representative's Number ---------------------- ---------------------------
Representative's Phone Number ( )------------- ---------------------------
Firm Name ---------------------- Branch Number----------------
================================================================================
ADDITIONAL FEATURES AVAILABLE
================================================================================
TELEPHONE PRIVILEGES By checking any
box, you authorize the Funds or their agents to honor telephone or facsimile
requests from you after you have reasonably identified yourself.
o Telephone Exchange -- Exchange shares of any Fund for shares of any other
Fund.
o Telephone Redemption -- Redemption of shares by telephone.
WIRE TRANSFER
Please complete wiring instructions below if you wish to be able to instruct the
Funds to wire redemption proceeds. A nominal fee will be deducted from the
redemption proceeds.
Bank Name -------------------------- ABA #*--------------------------
Name on Account---------------------- Account #-----------------------
Bank Address------------------------- --------------------------------
* The ABA # is the nine-digit number that proceeds your account number along
the bottom of your check.
** Savings and loan associations or credit unions may not be able to receive
wire redemptions.
AUTOMATIC INVESTMENT PLAN (OPTIONAL)
By completing the section below you authorize the Fund's Agent to initiate
Automated Clearing House ("ACH") debits on the 25th day of each month or the
next business day. Please attach a voided check.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Fund Investment Amount Monthly or Quarterly
- ------------------------------------- $----------------------------------- o o
- ------------------------------------- $----------------------------------- o o
Bank Name ------------------------------------------------------- ABA # --------------------------------
Name on Account ------------------------------------------------------- Account # ----------------------------
Bank Address (City, State Only) -------------------------------------------------------------------------------------------
</TABLE>
* The ABA # is the nine-digit number that proceeds your account number along
the bottom of your check.
OVER, PLEASE
<PAGE>
CONTINUED
SYSTEMATIC WITHDRAWAL PLAN (OPTIONAL)
By completing the section below you authorize the Fund's Agent to redeem the
necessary number of shares from your account in order to make periodic payments.
The minimum is $500 per Fund.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Choose One
Fund Withdrawal Amount Monthly Quarterly Semi-annually Annually
- ----------------------------- $------------------------------ o o o o
- ----------------------------- $------------------------------ o o o o
</TABLE>
o Credit to bank account as designated under Wire Transfer or
o Send check to name and address of account registration
* This request for Systematic Withdrawal Plan must be received by the 18th day
of the month in which you wish withdrawals to begin. Redemption of shares
will occur on the 25th day of the month prior to payment or the next
business day.
STATEMENT OF INTENTION (OPTIONAL)
o I/we agree to the Statement of Intention and Escrow Agreement set forth
below. Although I/we am/are not obligated to do so, I/we intend to invest in
the Funds over a 13-month period at least:
o $100,000 o $300,000 o $600,000 o $1,000,000
RIGHT OF ACCUMULATION (OPTIONAL)
o I/we qualify for the Right of Accumulation described in the Prospectus.
(Please identify in whose name shares are registered, in which Fund(s), the
shareholder's account number, and the shareholder's relationship to you):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NET ASSET VALUE ELIGIBILITY
o Check here if eligible for waiver of sales load. (Reason must be stated or
sales load will be incurred. See page 22)
Specify Reason -----------------------------------------------------------------
AGREEMENT AND SIGNATURE(S)
1. I/we have received, read and carefully reviewed a copy of the Funds'
prospectus.
2. All share purchases are subject to acceptance and are governed by New York
law.
3. I/we authorize you to honor redemption requests by telephone or facsimile, if
so elected above.
4. I/we authorize you to accept telephone or facsimile exchange instructions, if
so elected above.
5. I/we authorize you to wire proceeds of redemptions, if so elected above.
6. I/we hereby agree that neither the Company nor Chase Global Funds Services
Company will be liable for any loss, liability or expense as a result of any
action taken upon instructions believed by it to be genuine and which were in
accordance with the procedures set forth in the prospectus.
- --------------------------------------------------------------------------------
______ U.S. CITIZEN/TAXPAYER: UNDER PENALTY OF PERJURY, I/WE CERTIFY THAT (1)
THE NUMBER SHOWN ON THIS FORM IS MY/OUR CORRECT TAXPAYER IDENTIFICATION NUMBER
AND (2) I/WE AM/ARE NOT SUBJECT TO BACKUP WITHHOLDING EITHER BECAUSE I/WE HAVE
NOT BEEN NOTIFIED BY THE INTERNAL REVENUE SERVICE THAT I/WE AM/ARE SUBJECT TO
BACKUP WITHHOLDING AS A RESULT OF FAILURE TO REPORT ALL INTEREST AND
DIVIDENDS, OR THE INTERNAL REVENUE SERVICE HAS NOTIFIED ME/US THAT I/WE AM/ARE
NO LONGER SUBJECT TO BACKUP WITHHOLDING. (IF YOU HAVE BEEN NOTIFIED BY THE
INTERNAL REVENUE SERVICE THAT YOU ARE CURRENTLY SUBJECT TO BACKUP WITHHOLDING,
STRIKE OUT PHRASE (2) ABOVE.) THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE
YOUR CONSENT TO ANY PROVISION OF THIS DOCUMENT OTHER THAN THE PRECEDING
CERTIFICATIONS REQUIRED TO AVOID BACKUP WITHHOLDING.
______ NON-U.S. CITIZENS/TAXPAYER: INDICATED COUNTRY OF RESIDENCE FOR TAX
PURPOSES______________________________________________________ UNDER PENALTIES
OF PERJURY, I/WE CERTIFY THAT WE ARE NOT U.S. CITIZENS OR RESIDENTS AND I/WE
ARE EXEMPT FOREIGN PERSONS AS DEFINED BY INTERNAL REVENUE SERVICE.
- --------------------------------------------------------------------------------
X----------------------------------- X---------------------------------
X----------------------------------- X---------------------------------
SIGNATURE(S) OF ALL APPLICANTS REGISTERED ABOVE - Sign exactly as name(s) of
registered owner(s) appear(s) above (including legal title if signing for
corporation, trust, custodial account, etc.).
Date -------------- 199--
STATEMENT OF INTENTION
If you anticipate investing $100,000 or more in shares of the Funds within a
13-month period, you may obtain a reduced sales load as though the total
quantity were invested in one lump sum by filing a Statement of Intention within
90 days of the start of the purchases. To ensure that the reduced price will be
received on future purchases, you must inform Chase Global Funds Services
Company that this Statement is in effect each time shares are purchased.
Subject to the conditions mentioned below, each purchase will be made at the
public offering price applicable to a single transaction of the dollar amount
specified on the application, as described in the prospectus. You are not
committed to purchase additional shares, but if your purchases within 13 months
plus the value of shares credited toward completion do not total the sum
specified, you will pay the increased amount of the sales load prescribed in the
Escrow Agreement. Neither dividends nor capital gain distributions invested in
additional shares will apply toward the competition of this Statement. If the
total purchases under this Statement are large enough to qualify for an even
lower sales load than that applicable to the amount specified in the Statement,
then you must notify the Transfer Agent and all transactions will then be
recomputed at the expiration date of this Statement to give effect to the lower
load. Any difference in sales load as a result of these additional purchases
will be applied to the purchase of additional shares at the lower load if
specified by you or refunded to you in cash if you so specify.
This Statement is not effective until accepted by the Company.
ESCROW AGREEMENT
Out of the initial purchase (or subsequent purchases if necessary) 5% of the
dollar amount specified on the application shall be held in escrow by Chase
Global Funds Services Company in the form of shares registered in your name. All
dividends and capital gain distributions on escrowed shares will be paid to you
or to your order. When the minimum investment so specified is completed, the
escrowed shares will be released. If the investment is not completed, the
Company will redeem an appropriate number of the escrowed shares in order to
realize any difference between the sales load on the amount specified and on the
amount actually attained. Shares remaining after any such redemption will be
released from escrow.
In signing the application, you irrevocably constitute and appoint Chase Global
Funds Services Company your attorney to surrender for redemption any or all
escrowed shares with full power of substitution in the premises.
GLOBAL ASSET MANAGEMENT(R)
GAM FUNDS, INC.
PROSPECTUS
AND
APPLICATION
APRIL 30, 1997
No dealer, salesman, or any other person has been authorized to give any
information or to make any representations, other than those contained in
this Prospectus, in connection with the offer contained in this
Prospectus, and, if given or made, such other information or
representations must not be relied upon as having been authorized by the
Company. This Prospectus does not constitute an offer by the Company to
sell or a solicitation of any offer to buy any of the securities offered
hereby in any jurisdiction to any person to whom it is unlawful to make
such offer or solicitation in such jurisdiction.
GAM(R)
<PAGE>
GAM FUNDS, INC.
135 East 57th Street
New York, NY 10022
Tel: (212) 407-4600/Fax: (212) 407-4684
STATEMENT OF ADDITIONAL INFORMATION
April 30, 1997
This Statement of Additional Information pertains to the funds listed below,
each of which is a separate series of common stock GAM Funds, Inc. (the
"Company"), a diversified open-end management investment company. Each series of
the Company represents a separate portfolio of securities (each a "Fund" and
collectively the "Funds"). The investment objective of each Fund is to seek long
term capital appreciation through investment primarily in equity securities.
Each Fund seeks to achieve its objective by investing primarily within a
particular geographic region in accordance with its own investment policy. There
is no assurance that the Funds will achieve their objective.
The Funds are managed by GAM International Management Limited ("GAM"). Fayez
Sarofim & Co. ("Sarofim") serves as co-investment adviser to the GAM North
America Fund. (GAM and Sarofim are collectively referred to as the "Investment
Advisers".) GAM Services, Inc., an affiliate of GAM ("GAM Services") serves as
the principal underwriter for the Funds' securities.
GAM GLOBAL FUND invests primarily in the United States, Europe,
the Pacific Basin, and Canada.
GAM INTERNATIONAL FUND invests primarily in Europe, the Pacific
Basin and Canada.
GAM PACIFIC BASIN FUND invests primarily in the Pacific Basin,
including Japan, Hong Kong, Korea, Taiwan, Singapore, Malaysia,
Thailand, Indonesia and Australia.
GAM JAPAN CAPITAL FUND invests primarily in Japan.
GAM ASIAN CAPITAL FUND invests primarily in Asia excluding Japan.
GAM EUROPE FUND invests primarily in Europe.
GAM NORTH AMERICA FUND invests primarily in the United States and
Canada.
GAMERICA CAPITAL FUND investing primarily in the United States.
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, 1997, which can be obtained without
cost upon request at the address indicated above.
<PAGE>
TABLE OF CONTENTS
Page
INVESTMENT OBJECTIVE AND POLICIES
Rating of Securities
United States Government Obligations
Repurchase Agreements
Options
Stock Index Futures and Options
Interest Rate Futures and Options
Foreign Currency Transactions
Lending Portfolio Securities
Warrants
Borrowing
Restricted Securities
Future Developments
Investment Restrictions
Risk Considerations
Portfolio Turnover
PERFORMANCE INFORMATION
NET ASSET VALUE, DIVIDENDS AND TAXES
Net Asset Value
Suspension of the Determination of Net Asset Value
Tax Status
MANAGEMENT OF THE COMPANY
Compensation of Directors and Executive Officers
Principal Holders of Securities
INVESTMENT ADVISORY AND OTHER SERVICES
Investment Advisory Contracts
Advisory Fees
Investment Advisers
Distributor and Plans of Distribution
Custodian and Administrator
Transfer Agent
Legal Counsel
Independent Accountants
Reports to Shareholders
BROKERAGE ALLOCATION
FINANCIAL STATEMENTS
-i-
<PAGE>
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.
None of the Funds will commit more than 5% of its assets, determined at the time
of investment, to investments 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.
UNITED STATES GOVERNMENT OBLIGATIONS. The Funds may invest in securities of the
United States government, its agencies and instrumentalities. United States
government securities include United States Treasury obligations, which include
United States Treasury bills, United States Treasury notes and United States
Treasury bonds; and obligations issued or guaranteed by United States government
agencies and instrumentalities. Agencies and instrumentalities include the
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
<PAGE>
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.
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
<PAGE>
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.
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
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. 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. 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. 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.
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.
<PAGE>
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.
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 instruct its custodian to segregate cash or liquid 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.
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.
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 an interest rate futures 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. Many
<PAGE>
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 may enter into 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 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: 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.
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.
<PAGE>
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 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.
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.
A Fund is not required to enter into hedging transactions with regard to its
foreign currency-denominated securities and will not do so unless deemed
appropriate by the Investment Advisers. 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. 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
<PAGE>
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 considered creditworthy 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.
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. 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 bank borrowings
outstanding representing more than 5% of the total assets of the Fund.
<PAGE>
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 144A 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.
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' 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.
<PAGE>
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.
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
<PAGE>
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.
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.
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. 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.
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
<PAGE>
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.
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.
PORTFOLIO TURNOVER. 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.
PERFORMANCE INFORMATION
The average annual total return of each Fund for the periods ended December 31,
1996 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 3.53% 8.98%
5 years 17.54% 18.75%
10 years 14.89% 15.48%
From inception (1/2/85) 20.55% 21.07%
<PAGE>
GAM International Fund (Class D)
1 year 4.54% 8.33%
From inception (9/5/95) 10.94% 14.06%
GAM Global Fund (Class A)
1 year 7.11% 12.74%
5 years 15.38% 16.57%
10 years 11.76% 12.34%
From inception (5/28/86) 11.55% 12.09%
GAM Global Fund (Class D)
1 year 7.63% 11.53%
From inception (9/5/95) 11.82% 15.09%
GAM Pacific Basin Fund (Class A)
1 year (5.37)% (0.39)%
5 years 9.91% 11.04%
From inception (5/6/87) 9.97% 10.55%
GAM Pacific Basin Fund (Class D)
1 year (4.65)% (1.19)%
From inception (9/5/95) (2.11)% 0.83%
GAM Europe Fund
1 year 15.25% 21.32%
5 years 8.75% 9.87%
From inception (1/1/90) 3.45% 4.21%
GAM North America Fund
1 year 17.89% 24.10%
5 years 9.77% 10.90%
From inception (1/1/90) 11.39% 12.21%
GAM Japan Capital Fund
1 year (4.86)% 0.15%
From inception (7/1/94) (1.02)% 1.03%
GAM Asian Capital Fund
1 year (1.89)% 3.28%
From inception (5/12/95) (3.74)% (0.68)%
GAMerica Capital Fund
1 year 12.40% 18.31%
From inception (5/12/95) 8.28% 11.73%
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.
<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 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.
NET ASSET VALUE, DIVIDENDS AND TAXES
NET ASSET VALUE. 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 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 and, accordingly, redemptions 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 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
<PAGE>
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
substantially 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.
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.
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 distributions to such
shareholders from long-term capital gains generally will not be subject to the
Federal withholding tax.
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 31% 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.
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:
<PAGE>
<TABLE>
<CAPTION>
Name and Address:
Position(s) Held Principal Occupation(s)
With the Company During Past Five Years
----------------- -----------------------
<S> <C> <C>
Gilbert de Botton* Chairman, Global Asset Management Limited, investment adviser,
Director/President and Global Asset Management (U.K.) Ltd., holding company, 1983
12 St. James's Place to present; Vice President, Global Asset Management Limited
London SW1A 1NX (Bermuda), investment adviser, 1989 to present.
England
George W. Landau Chairman, Latin American Advisory Board of Coca-Cola
Director International, 1988 to present. Director, Emigrant Savings
2601 South Bayshore Drive Bank, Brazil Equity Fund, Chile Fund, Latin American
Suite 1109 Investment Fund, South America Fund, Latin American Equity
Coconut Grove, FL 33133 Fund, Emerging Markets Telecommunications Fund, Emerging
Markets Infrastructure Fund, Global Asset Management Funds,
and Fundacion Chile. Former President, Americas Society and
the Council of the Americas, 1985-1993.
Therese Meier* Managing Director, Global Asset Management GAM (Schweiz) A.G.,
Director Zurich, 1983 to present.
Muhlebachstrasse 173
8008 Zurich
Switzerland
Madelon DeVoe Talley Author and Investment Consultant; Commissioner, Port Authority
Director of New York and New Jersey; Governor of National Association
876 Park Avenue of Securities Dealers, Inc. (1993-1995), currently a member of
New York, NY 10021 the NASD Selection Committee; Director or Trustee: Alliance
Capital Management, L.P.; Corporate Property Association
Series 1-10, Smith Barney Special Equity and Fixed Income
Series and Trak Series; New York State Industrial Development
Board, Schroders Asian Growth Fund. Member of Investment
Committee - New York State Retirement Fund. Former Trustee,
New York State Teachers Retirement System, 1988 to 1993.
Roland Weiser President, Intervista, business consulting, 1984 to present.
Director Director, GAM Diversity Fund and Unimed Pharmaceuticals, Inc.
86 Beekman Road Former Senior Vice President, Schering Plough Corporation
Summit, New Jersey 07901 (International).
- ----------
*Mr. de Botton and Ms. Meier are directors who are "interested persons" of the
Company within the definitions set forth in the Act.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Kevin Blanchfield Chief Operating Officer, Treasurer and Assistant Secretary,
Vice President/Treasurer Global Asset Management (USA) Inc., GAM Investments, Inc. and
135 East 57th Street GAM Services Inc., 1995 to present; Vice President and
New York, NY 10022 Treasurer, Global Asset Management (USA) Inc., GAM
Investments, Inc. and GAM Services Inc., 1993 to 1995; Senior
Vice President - Finance and Administration, Lazard Freres &
Co., 1991 to 1993.
Lisa M. Hurley General Counsel and Secretary, Global Asset Management (USA)
Secretary Inc. and Secretary of GAM Investments, Inc. and GAM Services,
135 East 57th Street Inc., 1996 to present. From October 1993 to May 1996, Senior
New York, NY 10022 Vice President and Secretary of Northstar Investment
Management Corporation and Vice President and Secretary,
Northstar Advantage Funds. Prior to October 1993, Vice
President and General Counsel of National Securities and
Research Corporation and Secretary of the National Funds.
</TABLE>
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS. Each independent Director of
the Company receives annual compensation from the Company of $5,000 per year
plus $500 for each meeting of the Board of Directors attended. Each Director 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.
The name, position(s) and information related to the compensation of each of the
Directors in the most recent fiscal year are as follows.
<TABLE>
<CAPTION>
Aggregate Pension or Estimated Total Compensation
Compensation Retirement Benefits Annual Benefits From the Company and
Name and Position(s) Held From the Accrued as Part of Upon Fund Complex
With the Company Company Company Expenses Retirement Paid to Directors
------------------------- ------------ ------------------- --------------- --------------------
<S> <C> <C>
Gilbert de Botton $0 $0
Director and President
George W. Landau $7,000 $7,000
Director
Therese Meier $0 $0
Director
Madelon DeVoe Talley $7,000 $7,000
Director
Roland Weiser $7,000 $7,000
Director
</TABLE>
<PAGE>
PRINCIPAL HOLDERS OF SECURITIES. As of January 31, 1997, all Directors and
Officers of the Funds as a group owned beneficially or of record less than 1% of
the outstanding securities of any Fund except GAMerica Capital Fund, of which
the group held 2.5%. To the knowledge of the Funds, as of December 31, 1996, no
Shareholders owned beneficially or of record more than 5% of a Fund's
outstanding shares, except as set forth below. Mr. Gilbert de Botton, President
and Director of the Company, may be deemed to have shared voting or investment
power over shares owned by clients or held by custodians or nominees for clients
of Global Asset Management (USA) Inc. or other affiliates of GAM, or by employee
benefit plans for the benefit of employees of GAM its affiliates, as a result of
the indirect ownership of interests in GAM and its affiliates by a trust of
which Mr. de Botton is a potential beneficiary. Mr. de Botton disclaims
beneficial ownership of such shares.
<TABLE>
<CAPTION>
INTERNATIONAL GLOBAL PACIFIC BASIN
Class A Class D Class A Class D Class A Class D
<S> <C> <C> <C> <C> <C> <C>
Enele Co 6.54%
1211 Southwest Ave
Portland, OR 97204
Charles Schwab 22.05% 13.28% 32.29
101 Montgomery St.
San Francisco, CA 94104
Julius Baer Securities 6.08%
330 Madison Ave
New York, NY 10017
Resources Trust Co., Trustee 12.04%
fbo R.C. Erfft, IRA
P.O. Box 5900
Denver, CO 80217
Fox & Co. 8.90%
P.O. Box 976
New York, NY 10268
S. & T. Hardilek 7.4%
P.O. Box 536
Lake City, CO 81235
Resources Trust 5.62%
FBO H.L. Kenna IRA
Denver, CO 80217
Royal Life Insurance Int'l Ltd. 27.91%
Royal Court, Castletown
Isle of Man, BI
Key Trust Co. of Ohio 81.44%
UOA Pension Plan
Cleveland, OH 44114
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EUROPE NORTH AMERICA JAPAN CAPITAL ASIAN CAPITAL GAMERICA
<S> <C> <C> <C> <C> <C>
Blush & Co 5.23% 5.13%
P.O. Box 976
New York, NY 10268
Peter Blum 6.17%
Case Postal
1211 Geneve Switz 999
Fayez Serofim 37.1%
2 Houston Center
Houston, TX 77010
Fox & Co. 17.l3% 12.03% 12.6% 11.5% 23.34%
P.O. Box 976
New York, NY 10268
Northern Trust fbo
Gordon Trust 5.64% 5.94%
P.O. Box 92956
Chicago, IL 60675
Edmond Harmsworth 7.82% 6.78% 10.42%
359 Beacon Street
Boston, MA 02110
Infid & Co. 12.11%
P.O. Box 9005
Church Street Station
New York, NY 10008
Long Island University 6.1%
Brookville, NY 11548
S. Klein Trust 5.59% 5.87%
c/o Rothschild Bank
8034 Zurich, Switzerland
NAV LLC 18.28%
650 Madison Ave.
New York, NY 10022
Post & Co. 5.87% 5.39%
Wall Street Station
New York, NY 10268
Rozenkranz Fndn 19.67%
650 Madison Ave.
New York, NY 10022
Charles Schwab 17.97% 9.92% 30.35% 19.43% 12.57%
101 Montgomery Street
San Francisco, CA 94104
J. & M. Schrem 6.52% 5.36% 7.09% 13.4%
c/o Rothschild Bank
Zolikerstr. 181
CH-8034 Zurich Switz.
</TABLE>
<PAGE>
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 24, 1996 and by the
shareholders of each Fund (other than GAM Japan Capital Fund, GAMerica Capital
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 24, 1996 and by the shareholders of GAM North
America Fund on April 14, 1994. The GAM Contract and the Sarofim Contract will
each continue in effect 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 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. GAM will render its services to each fund from
outside the United States. The Sarofim Contract requires Sarofim to provide the
same services to GAM North America Fund subject to the supervision and oversight
of GAM. Sarofim commenced providing investment advisory services to GAM North
America Fund on June 29, 1990.
The GAM 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 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.
<PAGE>
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; and GAM and Sarofim each receives a quarterly fee equal to 0.125%
of the average daily net assets of GAM North America 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, 1996, 1995 and 1994 are set forth below:
<TABLE>
<CAPTION>
Inter- Pacific North Japan GAMerica Asian
national Global Basin Europe America Capital Capital Capital
-------- ------ ------- ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 $8,746,443 $206,365 $710,064 $270,703 $57,701 $350,646 $23,247 $66,992
1995 $3,085,111 $208,022 $414,221 $203,030 $38,934 $57,489 $16,082 $28,041
1994 $1,239,629 $241,333 $461,985 $237,793 $20,883 $31,606 NA NA
</TABLE>
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):
Japan GAMerica Asian
Capital Capital Capital
------- -------- -------
Organizational Expenses $34,166 $30,036 $30,036
Amortized over 5 years beginning 7/1/94 5/12/95 5/12/95
<PAGE>
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. In
addition, each Fund bears its own operating expenses.
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 $9.3 billion. Sarofim has
aggregate assets under management of approximately $38 billion.
The Directors of GAM and their principal occupations are as follows:
Name and Position Held
with Investment Adviser Principal Occupation
- --------------------------------------------------------------------------------
Gilbert de Botton, Director. See "Management of the Company" above.
Count Ulric von Rosen, Director. President, Bonnier Medical Division of Bonnier
Medical Group, Sweden.
Paul S. Kirkby, Director. Investment Director, Global Asset Management (H.K.)
Ltd.
David J. Miller, Director. Finance Director, Global Asset Management (U.K.) Ltd.
Alan McFarlane, Director. Managing Director (Institutional), Global Asset
Management Ltd., investment adviser.
Denis G. Raeburn, Director. Managing Director, Global Asset Management Ltd. and
Global Asset Management (U.K.) Ltd., holding company.
Gordon Grender, Director. Investment manager.
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 directly by Metrolis Anstalt, a Lichtenstein
company, and indirectly by a discretionary trust of which Protec Trust
Management Establishment is trustee and 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
<PAGE>
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.
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 Allegheny Teledyne, Inc., Unitrin, Inc.,
Argonaut Group, Imperial Holly Corp. and EXOR Group, each of which is a publicly
traded corporation with principal offices in the United States. Mr. Sarofim is a
past director of Teledyne, Inc., MESA, Inc., Alley Theatre, Houston Ballet
Foundation and the Museum of Fine Arts Houston.
PRINCIPAL UNDERWRITER AND PLANS OF DISTRIBUTION. The Company has entered into
distribution agreements (the "Distribution Agreements") with GAM Services under
which GAM Services has agreed to act as principal underwriter and to use
reasonable efforts to distribute each Fund's Class A and Class D shares. GAM
Services is an indirect wholly-owned subsidiary of Global Asset Management Ltd.,
which also controls GAM.
Pursuant to the Distribution Agreements, GAM Services receives the sales load on
sales of each Class of the Funds' shares and reallows a portion of the sales
load to dealers/brokers. GAM Services also receives the distribution fees
payable pursuant to the Funds' Plans of Distribution for Class A and Class D
Shares described below (the "Plans"). The Distribution Agreements may be
terminated at any time upon 60 days' written notice, without payment of a
penalty, by GAM Services, by vote of a majority of the outstanding class of
voting securities of the affected Fund, or by vote of a majority of the
Directors of the Fund who are not "interested Persons" of the Fund and who have
no direct or indirect financial interest in the operation of the Distribution
Agreements. The Distribution Agreements will terminate automatically in the
event of their assignment.
<PAGE>
In addition to the amount paid to dealers pursuant to the sales charge table in
the Prospectus, GAM Services from time to time may offer assistance to dealers
and their registered representatives in the form of business and educational or
training seminars. Dealers may not use sales of any of the Funds' shares to
qualify for or participate in such programs to the extent such may be prohibited
by a dealer's internal procedures or by the laws of any state or any
self-regulatory agency, such as the National Association of Securities Dealers,
Inc. Costs associated with incentive or training programs are borne by GAM
Services and paid from its own resources or from fees collected under the Plans.
GAM Services from time to time may reallow all or a portion of the sales charge
on Class A and Class D shares to individual selling dealers. Such additional
reallowance generally will be made only when the selling dealer commits to
substantial marketing support such as internal wholesaling through dedicated
personnel, internal communications and mass mailings.
Each Fund has adopted separate distribution plans under Rule 12b-1 of the 1940
Act for each class of its shares. The Plans permit each Fund to compensate GAM
Services in connection with activities intended to promote the sale of each
class of shares of each Fund. Pursuant to the Plan for Class A shares, each Fund
may pay GAM Services up to 0.30% of average daily net assets of the Fund's Class
A shares. Under the Plan for Class D shares, each Fund may pay GAM Services up
to 0.50% of the average daily net assets attributable to Class D shares of the
Fund. Expenditures by GAM Services under the Plans may consist of: (i)
commissions to sales personnel for selling shares of the Funds; (ii)
compensation, sales incentives and payments to sales, marketing and service
personnel; (iii) payments to broker-dealers and other financial institutions
that have entered into agreements with GAM Services in the form of a Dealer
Agreement for GAM Funds, Inc. for services rendered in connection with the sale
and distribution of shares of the Funds; (iv) payment of expenses incurred in
sales and promotional activities, including advertising expenditures related to
the Funds; (v) the costs of preparing and distributing promotional materials;
(vi) the cost of printing the Funds' Prospectus and SAI for distribution to
potential investors; and (vii) other activities that are reasonably calculated
to result in the sale of shares of the Funds.
A portion of the fees paid to GAM Services pursuant to the Plans not exceeding
0.25% annually of the average daily net assets of each Fund's shares may be paid
as compensation for providing services to each Fund's shareholders, including
assistance in connection with inquiries related to shareholder accounts (the
"Service Fees"). In order to receive Service Fees under the Plans, participants
must meet such qualifications as are established in the sole discretion of GAM
Services, such as services to each Fund's shareholders; services providing each
Fund with more efficient methods of offering shares to coherent groups of
clients, members or prospects of a participant; services permitting more
efficient methods of purchasing and selling shares, or transmission of orders
for the purchase or sale if shares by computerized tape or other electronic
equipment; or other processing.
The Directors have concluded that there is a reasonable likelihood that the
Plans will benefit each Fund and its shareholders and that the Plans should
result in greater sales and/or fewer redemptions of Fund shares. On a quarterly
basis, the Directors will review a report on expenditures under the Plans and
the purposes for which expenditures were made. The Directors will conduct an
additional, more extensive review annually in determining whether the Plans
shall be continued. Continuation of the Plans from year to year is contingent on
annual approval by a majority of the Directors acting separately on behalf of
each Fund and class and by a majority of the Directors who are not "interested
persons" (as defined in the 1940 Act) and who have no direct or indirect
financial interest in the operation of the Plans or any related agreements (the
"Plan Directors"). The Plans provide that they may not be amended to increase
materially the costs that a Fund may bear pursuant to the applicable Plan
without approval of the shareholders of the affected class of shares of each
<PAGE>
Fund and that other material amendments to the Plans must be approved by a
majority of the Plan Directors acting separately on behalf of each Fund, by vote
cast in person at a meeting called for the purpose of considering such
amendments. The Plans further provide that while each Plan is in effect, the
selection and nomination of Directors who are not "interested persons" shall be
committed to the discretion of the Directors who are not "interested persons." A
Plan may be terminated at any time by vote of a majority of the Plan Directors
or a majority of the outstanding Class of shares of the affected Fund to which
the Plan relates.
The total dollar amount (000's omitted) and manner in which amounts paid by each
class of shares of the Funds under the Plans during the last fiscal year were
spent is set forth below:
International Fund
Class A Class D
------- -------
Advertising $ 10.8 $ 0.3
Printing/Mailing Prospectus/
SAI to Potential Investors 111.5 1.8
Compensation to Dealers 215.3 100.8
Compensation to Sales Personnel 130.6 4.1
Other* 187.1 33.0
----- ----
Total Disbursements $655.3 $111
Global Fund
Class A Class D
------- -------
Advertising $0.2 $ -
Printing/Mailing Prospectus/
SAI to Potential Investors 2.4 0.2
Compensation to Dealers 3.8 1.7
Compensation to Sales Personnel 2.8 0.4
Other* 3.9 0.4
----- ----
Total Disbursements $13.1 $2.7
Pacific Basin Fund
Class A Class D
------- -------
Advertising $0.8 $ -
Printing/Mailing Prospectus/
SAI to Potential Investors 8.4 -
Compensation to Dealers 7.2 7.8
Compensation to Sales Personnel 9.9 0.1
Other* 14.1 0.1
----- ----
Total Disbursements $40.4 8.0
<PAGE>
Japan Capital Fund
Class A
- -------
Advertising $0.6
Printing/Mailing Prospectus/
SAI to Potential Investors 6.3
Compensation to Dealers 2.8
Compensation to Sales Personnel 7.4
Other* 10.6
-----
Total Disbursements $27.8
Asian Capital Fund
Class A
- -------
Advertising $0.1
Printing/Mailing Prospectus/
SAI to Potential Investors 0.8
Compensation to Dealers 0.9
Compensation to Sales Personnel 0.9
Other* 1.4
-----
Total Disbursements $4.1
Europe Fund
Class A
- -------
Advertising $0.4
Printing/Mailing Prospectus/ 3.9
SAI to Potential Investors
Compensation to Dealers 2.7
Compensation to Sales Personnel 4.5
Other* 6.5
-----
Total Disbursements $18.0
<PAGE>
North America Fund
Class A
- -------
Advertising $0.1
Printing/Mailing Prospectus/
SAI to Potential Investors 1.0
Compensation to Dealers 0.3
Compensation to Sales Personnel 1.1
Other* 1.6
-----
Total Disbursements $4.1
GAMerica Capital Fund
Class A
- -------
Advertising $ -
Printing/Mailing Prospectus/ 0.3
SAI to Potential Investors
Compensation to Dealers 0.1
Compensation to Sales Personnel 0.4
Other* 0.6
-----
Total Disbursements $1.4
- -----------------------
* Includes travel and entertainment costs of internal sales personnel,
communications costs, establishment costs for regional sales personnel and
fulfillment expenses.
------------------------
The aggregate dollar amount of underwriting commissions and the amount retained
by the Distributor for each of the last 2 fiscal years is a follows:
<TABLE>
<CAPTION>
1996
(000's omitted)
Class A Class D
------- -------
Aggregate After Reallowance Aggregate After Reallowance
<S> <C> <C> <C> <C>
International Fund $9,386 $3,591 $584 $199
Global Fund 217 65 23 7
Pacific Basin Fund 215 91 15 6
Japan Capital Fund 122 59 NA
Asian Capital Fund 6 3 N/A
Europe Fund 17 11 N/A
North America Fund 9 2 N/A
GAMerica Fund -- -- N/A
1995
(000's omitted)
Class A Class D*
Aggregate After Reallowance Aggregate After Reallowance
International Fund $2,523 $1,656 $ -- $ --
Global Fund 101 64 -- --
Pacific Basin Fund 110 80 -- --
Japan Capital Fund 8 7
Asian Capital Fund 9 8
Europe Fund 16 15
North America Fund 25 22
GAMerica Fund 2 2
*Class D Shares were first offered on September 5, 1995.
</TABLE>
<PAGE>
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 fund accounting agent and
administrator. As such, Brown Brothers 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 each Fund). The agreement provides for
termination by either party on 60 days' written notice.
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 also engage other
entities to act as shareholder servicing agents and to perform subaccounting
services for the benefit of discrete groups of Fund shareholders.
LEGAL COUNSEL. Coudert Brothers, 1114 Avenue of the Americas, New York, New York
10036, acts as legal counsel for the Funds and GAM.
INDEPENDENT ACCOUNTANTS. Coopers & Lybrand L.L.P., One Post Office Square,
Boston, MA 02109, are the independent accountants for the Company for the fiscal
year ending December 31, 1997. 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 SEC and will prepare the Company's Federal and
state corporation tax returns.
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 brokers and dealers for the execution of the portfolio transactions
of each Fund and, when applicable, the negotiation of commissions in connection
therewith.
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" means prompt and reliable execution at the most favorable security
price, taking into account the other provisions hereinafter set forth. The
<PAGE>
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 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 weighed
by the Investment Advisers in determining the overall reasonableness of
brokerage commissions.
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.
Research services provided by brokers to the Investment Advisers includes that
which brokerage houses customarily provide to institutional investors and
statistical and economic data and research reports on particular companies and
industries. Research furnished by brokers 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.
The amount of brokerage commissions paid by each Fund during the three fiscal
years ended December 31, 1996 are set forth below:
<TABLE>
<CAPTION>
Inter- Pacific North Japan GAMerica Asian
national Global Basin Europe America Capital Capital Capital
-------- ------ ------- ------ ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 $3,778,350 $109,863 $362,709 $ 93,545 $2,512 $139,479 $3,385 $47,627
1995 706,834 51,949 268,565 149,546 3,906 96,322 6,336 30,158
1994 614,271 209,240 165,154 120,013 2,304 41,233 NA NA
</TABLE>
FINANCIAL STATEMENTS
The audited financial statements of each Fund for the fiscal year ended December
31, 1996 and the report of the Funds' independent auditors in connection
therewith are included in the 1996 Annual Report to Shareholders and are
incorporated by reference in this Statement of Additional Information.
