- --------------------------------------------------------------------------------
The GAM Group
- --------------------------------------------------------------------------------
The GAM group was founded in April 1983 by Gilbert de Botton. GAM's
corporate policy is to attempt to harness the top investment talent in the
world, not only in-house but also outside the GAM organization, in order to
provide above average, long term growth. The GAM group currently has
approximately US$11.0 billion under management and employs a worldwide staff of
about 430 people.
For US investors, GAM offers GAM Funds, Inc. an open-end diversified
management investment company registered under the Investment Company Act of
1940, as amended. The Fund consists of eight open-end mutual funds - GAM
International, GAM Global, GAM Europe, GAM Pacific Basin, GAM Japan Capital, GAM
North America, GAM Asian Capital and GAMerica Capital Funds.
For additional information about any of the GAM Funds, please contact your
financial consultant or call GAM at 1-800-426-4685 (toll free).
- --------------------------------------------------------------------------------
Contents
- --------------------------------------------------------------------------------
GAM International ............................................. 2
GAM Global .................................................... 8
GAM Europe .................................................... 14
GAM Pacific Basin ............................................. 19
GAM Japan Capital ............................................. 24
GAM North America ............................................. 29
GAM Asian Capital ............................................. 34
GAMerica Capital .............................................. 38
Financial Statements .......................................... 41
Notes to Financial Statements ................................. 48
Report of Independent Accountants ............................. 66
<PAGE>
- --------------------------------------------------------------------------------
GAM International Fund
- --------------------------------------------------------------------------------
Fund Management
- --------------------------------------------------------------------------------
[PHOTO OMITTED]
John R. Horseman joined GAM in 1987, initially as a member of the Asian team
based in Hong Kong. After moving to the London office in 1990 he is now
responsible for a number of GAM's global and international funds. Prior to
joining GAM in 1987 he worked for BA Investment Management International Ltd and
was responsible for certain of the Bank of America's global equity funds. He
commenced management of GAM Global and GAM International Funds on 1st April,
1990. Mr. Horseman also manages the offshore fund GAM Universal US$ Inc. He was
educated at the University of Birmingham.
The Fund's investment objective is to seek long-term capital appreciation,
generally through investment in equity securities issued by companies in
countries other than the United States, including Canada, the United Kingdom,
Continental Europe and the Pacific Basin. However, if the Fund determines that
the long-term capital appreciation of debt securities may equal or exceed the
return on equity securities, it may be substantially invested in debt securities
of companies and governments, their agencies and instrumentalities. Any income
realized by the Fund on its investments will be incidental to its goal of
long-term capital appreciation.
Investments in securities of foreign issuers involve additional risks and
expenses including currency rate fluctuations, political and economic
instability, foreign taxes and different accounting and reporting standards.
Report to Shareholders
- --------------------------------------------------------------------------------
The Facts - Class A Shares
GAM
International
Class A
(after
maximum Average
GAM sales MSCI 1 Month
International load EAFE Deposit
Class A of 5%) Index Rate
31st Dec, 97 US$28.46 29.96 1,188.39
- --------------------------------------------------------------------------------
% % % %
- --------------------------------------------------------------------------------
Quarter to Dec, 97 + 0.01 - 4.99 - 7.77 + 1.43
- --------------------------------------------------------------------------------
Jan - Dec, 1997 +28.93 +22.48 + 2.06 + 5.65
- --------------------------------------------------------------------------------
Average annual total return:-
- --------------------------------------------------------------------------------
5 years to Dec, 1997 +24.18 +22.92 +11.71 + 4.89
- --------------------------------------------------------------------------------
10 years to Dec, 1997 +17.11 +16.51 + 6.63 + 6.03
- --------------------------------------------------------------------------------
Since inception +21.66 +21.18 +15.37 + 6.38
- --------------------------------------------------------------------------------
Performances are calculated on a total return basis. During the year Class
A and Class D shares paid dividends of US$1.35 and US$1.33 respectively. Class A
inception was on 2nd January, 1985 and Class D on 18th September, 1995. Past
performance is not indicative of future performance. The investment return and
principal value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost.
2
<PAGE>
- --------------------------------------------------------------------------------
GAM International Fund -- Report to Shareholders (continued)
- --------------------------------------------------------------------------------
[Line graph omitted]
NOTE: The graphs compare the performance results of a hypothetical $10,000
investment in either Class and a comparable index. The performances of Class A
and Class D are also shown after adjustment to reflect the maximum sales load,
which are waived for certain investors. The performance of the index does not
reflect brokerage commissions and other expenses that would be incurred to
acquire a comparable portfolio of securities.
- ----------
Sources used are the net asset value of the Fund computed daily and Morgan
Stanley Capital International.
The MSCI Europe, Australian and Far East Index is a market value weighted,
unmanaged index on the weighted share prices of some 1,000 companies listed on
the stock exchanges of Australia, Austria, Belgium, Denmark, France, Germany,
Hong Kong, Italy, Japan, the Netherlands, Norway, Singapore/Malaysia, Spain,
Sweden, Switzerland and the United Kingdom. The combined market capitalisation
of these companies represents approximately 60% of the aggregate market value
of the stock exchanges of the above 16 countries. The percentage change in the
value of the index includes dividends reinvested.
The Facts - Class D Shares
GAM
International
Class D
(after
maximum Average
GAM sales MSCI 1 Month
International load EAFE Deposit
Class D of 3.5%) Index Rate
31st Dec, 97 US$28.34 US$29.37 1,188.39
- --------------------------------------------------------------------------------
% % % %
- --------------------------------------------------------------------------------
Quarter to Dec, 97 + 0.01 - 4.99 - 7.77 + 1.43
- --------------------------------------------------------------------------------
Jan - Dec, 1997 +28.78 +24.27 + 2.06 + 5.65
- --------------------------------------------------------------------------------
Average annual total return:-
- --------------------------------------------------------------------------------
Since inception +20.29 +18.43 + 6.67 + 5.55
- --------------------------------------------------------------------------------
[Line graph omitted]
3
<PAGE>
- --------------------------------------------------------------------------------
GAM International Fund -- Report to Shareholders (continued)
- --------------------------------------------------------------------------------
Average Annual Total Return - Class A
[GRAPHIC OMITTED]
[The following table was depicted as a bar chart in the printed material]
GAM International
(after maximum
GAM International sales load of 5%) MSCI EAFE Index
----------------- ----------------- ---------------
One Year 28.93 22.48 2.06
Five Years 24.18 22.92 11.71
Ten Years 17.11 16.51 6.63
Since Inception 21.66 21.18 15.37
Annual Performance - Class A
[The following table was depicted as a bar chart in the printed material]
GAM
International
GAM Class A
International (after maximum MSCI
Class A sales load of 5%) EAFE Index
Year % % %
- --------------------------------------------------------------------------------
1993 79.96 70.97 32.94
1994 (10.23) (14.71) 8.06
1995 30.09 23.59 11.55
1996 8.98 3.53 6.36
1997 28.93 22.48 2.06
The Comment
Lingering worries about the Asian crisis continued to overhang the markets
during the final quarter of the year, as analysts sought to downgrade the
earnings of these companies with a heavy exposure to the region. Many companies
in Europe with little or no exposure to Asia also fell in sympathy with a more
cautious mood.
In a year in which at least five Asian markets have fallen as much as 60%
in US dollar terms, GAM International has remained largely unscathed, primarily
due to a modest position in Hong Kong weighing only slightly on the Fund. In
mainland Europe and the United Kingdom, we continue to see good progress. Low
inflation, and stable interest rates are providing a good background for
investment, with improving earnings in many sectors offering an encouraging
outlook.
GAM International's industry exposure has not changed much from our
previous review, with favored investments in banks and financials, the
pharmaceutical sector and those privatised utilities in the United Kingdom,
which we believe offer attractive earnings potential, namely the water utilities
and rail transport. Currency positions in Europe and Japan are currently hedged
back into the US dollar, with the exception of the British Pound where GAM
International has some exposure. As 1998 approaches, I believe we can face the
year with confidence.
4
<PAGE>
- --------------------------------------------------------------------------------
GAM International Fund - Statement of Investments
- --------------------------------------------------------------------------------
as at 31st December, 1997
Market
value
Holdings Description US$
- ----------------------------------------------------------------------------
Adjustable Rate Index Notes 4.9%
France - 0.7%
+ DLJ ARIN, Indexed to 311,824 shares
Peugeot 1998-11-18 12,486,431
--------------
12,486,431
--------------
Hong Kong - 0.3%
+ DLJ ARIN, Indexed to 100,000 shares
China Telecom ADR 1998-11-10 1,644,557
+ DLJ ARIN, Indexed to 6,000,000 shares
China Telecom 1998-11-12 4,287,972
--------------
5,932,529
--------------
United Kingdom - 3.9%
+ DLJ ARIN, Indexed to 3,200,000 shares
British Biotech 1998-04-03 5,655,569
+ DLJ ARIN, Indexed to 13,000,000 shares
British Steel 1998-11-09 20,427,566
+ DLJ ARIN, Indexed to 1,000,000 shares
Flextech 1998-05-28 7,975,399
+ DLJ ARIN, Indexed to 1,000,000 shares
Flextech 1998-06-12 6,111,726
+ DLJ ARIN, Indexed to 1,000,000 shares
Flextech 1998-10-08 4,385,308
+ DLJ ARIN, Indexed to 4,407,192 shares
General Cable 1998-12-07 9,306,620
+ DLJ ARIN, Indexed to 1,944,000 shares
Siebe 1998-12-07 13,829,064
+ DLJ ARIN, Indexed to 7,650,000 shares
TeleWest Communications 1998-12-07 7,122,730
--------------
74,813,982
--------------
Total Adjustable Rate Index Notes (Cost $75,513,308) 93,232,942
--------------
Bonds 0.3%
Germany - 0.3%
9,750,000 Bundes Deutschland 6.25% 2024-01-04 5,694,455
--------------
Total Bonds (Cost $5,946,465) 5,694,455
--------------
Bond Warrants 1.8%
France - 0.7%
*9,066,000 OAT 6% Wts 13,195,673
April 1998
Germany - 1.1%
*5,674,000 Bundes Deutschland 6.25% Wts
February 1998 19,838,499
--------------
Total Bond Warrants (Cost $15,180,656) 33,034,172
--------------
Currency Warrants 1.7%
Germany - 1.7%
*5,900,800 US Salomon USD/DEM Call Wts
1998-03-13 31,980,434
--------------
Total Currency Warrants (Cost $18,872,132) 31,980,434
--------------
Equities 85.4%
Belgium - 1.7%
73,950 Kredietbank 30,989,306
1,440 Kredietbank New 603,443
--------------
31,592,749
--------------
Denmark - 2.2%
311,100 Den Danske Bank 41,453,113
--------------
41,453,113
--------------
France - 9.2%
475,000 AXA - UAP 36,754,590
1,140,818 Credit Lyonnais 59,329,739
69,285 L'Oreal 27,110,771
877,028 Lagardere Groupe Registered 28,998,683
166,260 Union des Assurances Federales 21,823,611
--------------
174,017,394
--------------
Hong Kong - 4.2%
17,701,800 Hong Kong & China Gas 34,380,190
1,715,892 HSBC Holdings (HKD) 42,293,892
6,889,000 JCG Holdings 2,955,985
--------------
79,630,067
--------------
Hungary - 1.1%
171,260 Gedeon Richter GDR 19,908,975
--------------
19,908,975
--------------
Italy - 1.5%
6,300,000 Telecom Italia Mobile Spa 29,073,090
--------------
29,073,090
--------------
5
<PAGE>
- --------------------------------------------------------------------------------
GAM International Fund -- Statement of Investments (continued)
- --------------------------------------------------------------------------------
as at 31st December, 1997
Market
value
Holdings Description US$
- ----------------------------------------------------------------------------
Japan - 15.9%
1,939,000 Canon 45,134,456
1,373,000 Credit Saison 33,851,914
5,200 East Japan Railway 23,451,761
1,040,000 Honda Motor 38,143,951
1,938,000 Ricoh 24,039,510
280,000 Rohm 28,514,548
393,200 Sony 34,924,349
1,322,000 Takeda Chemical 37,655,743
465,000 TDK 35,035,222
--------------
300,751,454
--------------
Netherlands - 6.5%
2,075,214 ABN AMRO Holding 40,424,727
1,276,614 Fortis AMEV 55,654,333
644,110 ING 27,127,204
--------------
123,206,264
--------------
Singapore - 0.4%
5,104,000 Want Want Holdings 7,043,520
*672,600 Want Want Holdings New 887,832
--------------
7,931,352
--------------
Sweden - 1.2%
637,770 OM Gruppen 23,234,929
--------------
23,234,929
--------------
Switzerland - 10.1%
35,650 Nestle Registered 53,406,686
47,650 Novartis Registered 77,286,135
5,999 Roche Holding Genussscheine 59,550,708
--------------
190,243,529
--------------
United Kingdom - 31.4%
10,273,703 Bank of Scotland 93,307,779
3,172,057 Barclays 84,437,127
1,060,627 British Aerospace 30,222,325
5,525,300 Corporate Services Group 19,328,635
3,601,000 Dairy Crest Group 14,903,538
1,403,000 Dixons Group 14,078,766
2,363,300 Emap Publishing 35,165,174
2,359,208 Hyder 37,506,566
4,345,200 National Express Group 48,883,924
*4,296,930 Newsquest 18,736,502
3,852,301 Prudential 46,906,396
2,856,382 Severn Trent 45,879,730
2,368,824 Severn Trent Class B 1,206,036
2,614,000 Stagecoach Holdings 35,847,409
2,584,116 Thames Water 38,472,068
844,000 Zeneca 29,892,876
--------------
594,774,851
--------------
Total Equities (Cost $1,286,114,689) 1,615,817,767
--------------
Equity Warrants 1.6%
Hong Kong - 0.6%
*1,858,800 HSBC Wts 1998-12-31 11,277,775
--------------
11,277,775
--------------
Japan - 1.0%
*13,591,000 Sony Wts 1998-12-04 18,811,334
--------------
18,811,334
--------------
Switzerland - 0.0%
*3,000 Roche Holding Wts 1998-05-05 314,125
*7,800 Swiss Bank Corp Bearer Wts 2000 109,431
--------------
423,556
--------------
Total Equity Warrants (Cost $29,109,657) 30,512,665
--------------
Options 1.3%
France - 1.0%
*10,102 CAC 40 Index 1998-09-30
3,100 FRF Calls 19,764,235
--------------
19,764,235
--------------
Japan - 0.3%
*1,692 Nikkei Index 1998-02-28
15,500 JPY Puts 5,247,014
--------------
Total Options (Cost $20,244,029) 25,011,249
--------------
6
<PAGE>
- --------------------------------------------------------------------------------
GAM International Fund -- Statement of Investments (continued)
- --------------------------------------------------------------------------------
Market
value
Holdings Description US$
- ----------------------------------------------------------------------------
Time Deposits - 1.1%
United States - 1.1%
20,892,793 First National Bank of Chicago
5.0% 1998-01-02 20,892,793
714,499 Republic National Bank
5.0% 1998-01-02 714,499
--------------
Total Time Deposits (Cost $21,607,292) 21,607,292
--------------
Total Investments (Cost $1,472,588,228**) - 98.1% 1,856,890,976
Net current assets - 1.9% 36,057,036
--------------
Total net assets - 100% 1,892,948,012
==============
* Non-income producing security.
** Cost for federal income tax purposes is $1,489,420,421 (Note 5).
+ Adjustable rate index notes are inversely indexed to the value of the
underlying security.
Glossary of terms:
ADR - American Depositary Receipt
FRF - French Franc
GDR - Global Depository Receipt
HKD - Hong Kong Dollar
JPY - Japanese Yen
See notes to financial statements.
[The following table was depicted as a pie chart in the printed material]
Geographic Analysis as at
31st December, 1997
UNITED KINGDOM 35.37%
JAPAN 17.16%
FRANCE 11.59%
HONG KONG 5.12%
NETHERLANDS 6.51%
SWITZERLAND 10.07%
GERMANY 3.05%
DENMARK 2.19%
OTHER AREAS 7.04%
NET CURRENT ASSETS 1.90%
[The following table was depicted as a pie chart in the printed material]
Investment Analysis as at
31st December, 1997 (unaudited)
BANKING 20.2%
HEALTH & PERSONAL CARE 14.2%
INSURANCE 9.0%
BUSINESS & PUBLIC SERVICES 7.1%
TRANSPORT - ROAD & RAIL 5.6%
FOOD & HOUSEHOLD PRODUCTS 4.5%
FINANCIAL SERVICES 4.0%
OTHER 35.4%
7
<PAGE>
- --------------------------------------------------------------------------------
GAM Global Fund
- --------------------------------------------------------------------------------
Fund Management
- --------------------------------------------------------------------------------
[PHOTO OMITTED]
John R. Horseman joined GAM in 1987, initially as a member of the Asian team
based in Hong Kong. After moving to the London office in 1990 he is now
responsible for a number of GAM's global and international funds. Prior to
joining GAM in 1987 he worked for BA Investment Management International Ltd and
was responsible for certain of the Bank of America's global equity funds. He
commenced management of GAM Global and GAM International Funds on 1st April,
1990. Mr. Horseman also manages the offshore fund GAM Universal US$ Inc. He was
educated at the University of Birmingham.
The Fund's investment objective is to seek long-term capital appreciation,
generally through investment in equity securities issued by companies with
principal offices in countries including the United States, Canada, the United
Kingdom, Continental Europe, and the Pacific Basin. However, if the Fund
determines that the long-term capital appreciation of debt securities may equal
or exceed the return on equity securities, it may be substantially invested in
debt securities of companies and governments, their agencies and
instrumentalities. Any income realized by the Fund on its investments will be
incidental to its goal of long-term capital appreciation.
Investments in securities of foreign issuers involve additional risks and
expenses including currency rate fluctuations, political and economic
instability, foreign taxes and different accounting and reporting standards.
Report to Shareholders
- --------------------------------------------------------------------------------
The Facts - Class A Shares
GAM Global
Class A (after Average
GAM maximum MSCI 1 Month
Global sales load World Deposit
Class A of 5%) Index Rate
31st Dec, 97 US$18.71 US$19.69 936.59
- --------------------------------------------------------------------------------
% % % %
- --------------------------------------------------------------------------------
Quarter to Dec, 97 + 1.45 - 3.62 - 2.37 + 1.43
- --------------------------------------------------------------------------------
Jan - Dec, 1997 +34.95 +28.20 +16.23 + 5.65
- --------------------------------------------------------------------------------
Average annual total return:-
- --------------------------------------------------------------------------------
5 years to Dec, 1997 +24.96 +23.68 +15.88 + 4.89
- --------------------------------------------------------------------------------
10 years to Dec, 1997 +16.04 +15.45 +11.19 + 6.03
- --------------------------------------------------------------------------------
Since inception +13.90 +13.40 +12.30 + 6.15
- --------------------------------------------------------------------------------
Performances are calculated on a total return basis. During the year Class
A and Class D shares paid dividends of US$0.64 and US$0.65 respectively. Class A
inception was on 28th May, 1986 and Class D inception was on 6th October, 1995.
Past performance is not indicative of future performance. The investment return
and principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
8
<PAGE>
- --------------------------------------------------------------------------------
GAM Global Fund - Report to Shareholders (continued)
- --------------------------------------------------------------------------------
[Line graph omitted]
NOTE: The graphs compare the performance results of a hypothetical $10,000
investment in either Class and a comparable index. The performances of Class A
and Class D are also shown after adjustment to reflect the maximum sales load,
which is waived for certain investors. The performance of the index does not
reflect brokerage commissions and other expenses that would be incurred to
acquire a comparable portfolio of securities.
- ----------
Sources used are the net asset value of the Fund computed daily and Morgan
Stanley Capital International.
The MSCI World Index is an arithmetical average weighted by market value of the
performance of some 1,400 securities listed on the stock exchanges of Australia,
Austria, Belgium, Canada, Denmark, France, Finland, Germany, Hong Kong, Italy,
Japan, the Netherlands, New Zealand, Norway, Singapore, Malaysia, Spain, Sweden,
Switzerland, the United Kingdom and the United States of America. The combined
market capitalisation of these companies represents approximately 60% of the
aggregate market value of the stock exchanges of the above 20 countries. The
percentage change in the value of the index includes dividends reinvested.
The Facts - Class D Shares
GAM Global
Class D (after Average
GAM maximum MSCI 1 Month
Global sales load World Deposit
Class D of 3.5%) Index Rate
31st Dec, 97 US$18.50 US$19.17 936.59
- --------------------------------------------------------------------------------
% % % %
- --------------------------------------------------------------------------------
Quarter to Dec, 97 + 1.41 - 3.66 - 2.37 + 1.43
- --------------------------------------------------------------------------------
Jan - Dec, 1997 +34.80 +30.08 +16.23 + 5.65
- --------------------------------------------------------------------------------
Average annual total return:-
- --------------------------------------------------------------------------------
Since inception +23.52 +21.57 +16.02 + 5.54
- --------------------------------------------------------------------------------
[Line graph omitted]
9
<PAGE>
- --------------------------------------------------------------------------------
GAM Global Fund - Report to Shareholders (continued)
- --------------------------------------------------------------------------------
[Graphic Omitted]
Average Annual Total Return - Class A
[The following table was depicted as a bar chart in the printed material]
GAM Global
(after maximum
GAM Global sales load of 5%) MSCI World Index
---------- ----------------- ----------------
One Year 34.95 28.20 16.23
Five Years 24.96 23.68 15.88
Ten Years 16.04 15.45 11.19
Since Inception 13.90 13.40 12.30
Annual Performance - Class A
[The following table was depicted as a bar chart in the printed material]
GAM Global
GAM Class A MSCI
Global (after maximum World
Class A sales load of 5%) Index
Year % % %
- --------------------------------------------------------------------------------
1993 75.30 66.53 23.13
1994 (16.15) (20.35) 5.58
1995 36.25 29.44 21.32
1996 12.74 7.11 14.00
1997 34.95 28.20 16.23
The Comment
Lingering worries about the Asian crisis continued to overhang the markets
during the final quarter of the year, as analysts sought to downgrade the
earnings of these companies with a heavy exposure to the region. Many companies
in Europe with little or no exposure to Asia also fell in sympathy with a more
cautious mood.
In a year in which at least five Asian markets have fallen as much as 60%
in US dollar terms, GAM Global has remained largely unscathed, primarily due to
a modest position in Hong Kong weighing only slightly on the Fund. In mainland
Europe and the United Kingdom, we continue to see good progress. Low inflation,
and stable interest rates are providing a good background for investment, with
improving earnings in many sectors offering an encouraging outlook.
Similarly, in the United States, GAM Global has maintained large positions
and new investments have been made, notably in airlines. Some losses were
experienced amongst the Fund's technology holdings but current prices appear to
discount the prevailing risks of a slowdown in Asian demand.
GAM Global's industry exposure has not changed much from our previous
review, with favored investments in banks, financials and the pharmaceutical
sector in the United States and Europe. Currency positions in Europe and Japan
are currently hedged back into the US dollar, with the exception of sterling
where GAM Global has some exposure. As 1998 approaches, I believe we can face
the year with confidence.
10
<PAGE>
- --------------------------------------------------------------------------------
GAM Global Fund - Statement of Investments
- --------------------------------------------------------------------------------
as at December 31, 1997
Market
value
Holdings Description US$
- ----------------------------------------------------------------------------
Adjustable Rate Index Notes - 3.9%
United Kingdom - 1.6%
+ DLJ ARIN Indexed to 115,000 shares
British Biotech 1998-05-08 203,604
+ DLJ ARIN Indexed to 85,000 shares
Flextech 1998-10-13 400,686
+ DLJ ARIN Indexed to 120,360 shares
General Cable 1998-06-10 221,251
+ DLJ ARIN Indexed to 75,000 shares
TeleWest Communications 1998-03-24 124,603
+ DLJ ARIN Indexed to 100,000 shares
TeleWest Communications 1998-04-02 156,218
--------------
1,106,362
--------------
United States - 2.3%
+ DLJ ARIN Indexed to 25,000 shares
Global Star Tele 1998-11-12 346,015
+ DLJ ARIN Indexed to 8,000 shares
Global Star Tele 1998-12-31 81,288
+ DLJ ARIN Indexed to 12,500 shares
Worldcom 1998-10-28 165,496
+ DLJ ARIN Indexed to 25,000 shares
Worldcom 1998-10-19 511,003
+ DLJ ARIN Indexed to 18,000 shares
Worldcom 1998-11-12 246,333
+ DLJ ARIN Indexed to 14,000 shares
Worldcom 1998-12-29 220,251
--------------
1,570,386
--------------
Total Adjustable Rate Index Notes (Cost $2,326,698) 2,676,748
--------------
Bond Warrants - 0.3%
Germany
*34,600 Salomon Bundes 6.25% Wts February 1998 120,975
--------------
France - 0.1%
*42,000 OAT 6% Wts April 1998 61,131
--------------
Total Bond Warrants (Cost $74,775) 182,106
--------------
Currency Warrants - 1.9%
Germany - 1.9%
*554,600 Goldman Sachs Sony Wts /DEM/ 767,623
*104,100 Salomon Bros C/Wt USD Lnkd 1.698 564,188
--------------
1,331,811
--------------
Total Currency Warrants (Cost $1,047,602) 1,331,811
--------------
Equities - 82.6%
France - 3.2%
*16,806 Credit Lyonnais 874,018
1,734 L'Oreal 678,503
4,922 Union des Assurances Federales 646,071
--------------
2,198,592
--------------
Hong Kong - 4.2%
512,920 Hong Kong & China Gas 996,186
77,781 HSBC Holdings (HKD) 1,917,173
--------------
2,913,359
--------------
Japan - 9.1%
59,000 Canon 1,373,354
46,000 Honda Motor 1,687,136
9,000 Rohm 916,539
12,000 Sony 1,065,850
17,000 TDK 1,280,857
--------------
6,323,736
--------------
Netherlands - 3.0%
59,736 ABM-AMRO Holding 1,163,644
21,439 Fortis AMEV 934,639
--------------
2,098,283
--------------
Sweden - 1.2%
22,641 OM Gruppen 824,846
--------------
824,846
--------------
Switzerland - 3.2%
1,307 Novartis Registered 2,119,895
9 Roche Holding Genusscheine 89,341
--------------
2,209,236
--------------
United Kingdom - 5.5%
74,558 Barclays 1,984,663
59,457 Hyder 945,244
58,541 Thames Water 871,553
--------------
3,801,460
--------------
11
<PAGE>
- --------------------------------------------------------------------------------
GAM Global Fund - Statement of Investments (continued)
- --------------------------------------------------------------------------------
Market
value
Holdings Description US$
- ----------------------------------------------------------------------------
United States 53.2%
10,495 American International Group 1,141,331
11,830 Burlington Northern/Santa Fe 1,099,451
15,103 Chase Manhattan 1,653,778
23,630 Compaq Computer 1,333,618
30,175 Computer Associates International 1,595,503
*11,680 Computer Sciences 975,280
18,805 Delta Air Lines 2,237,795
36,710 Depuy 1,055,413
27,812 Federal Home Loan Mortgage 1,166,366
24,846 First Union 1,273,358
47,265 Galileo Intl 1,305,696
30,536 Intel 2,145,154
21,596 Johnson & Johnson 1,422,637
38,380 Kroger 1,417,661
46,235 MBNA 1,262,793
23,620 Medtronic 1,235,621
41,720 Merrill Lynch 3,042,953
*17,350 Microsoft 2,242,488
17,740 Morgan Stan. /Dean Witter Disc 1,048,878
38,048 NationsBank 2,313,794
*11,823 Rambus 540,902
30,680 Republic Group 502,385
20,086 Schering-Plough 1,247,843
*24,090 Sungard Data 746,790
*48,070 Usair Group 3,004,375
--------------
37,011,863
--------------
Total Equities (Cost $48,516,185) 57,381,375
--------------
Equity Warrants - 0.0%
Switzerland - 0.0%
*54 Roche Holdings Genusscheine
Wts 1998 5,654
*195 Swiss Bank Corp Bearer Wts. 2000 2,736
--------------
Total Equity Warrants (Cost $1,545) 8,390
--------------
Options - 1.1%
France - 0.9%
*334 CAC 40 Index
3,100 FRF Calls 1998-09-30 653,460
--------------
653,460
--------------
Japan - 0.2%
*54 Nikkei Index
15,500 JPY Puts 1998-02-12 167,458
--------------
167,458
--------------
Total Options (Cost $772,621) 820,918
--------------
Time Deposits - 8.4%
United States - 8.4%
5,868,444 First National Bank of Chicago
5.0% 1998-01-02 5,868,444
--------------
Total Time Deposits (Cost $5,868,444) 5,868,444
--------------
Total Investments (Cost $58,607,870**) - 98.2% 68,269,792
--------------
Net current assets - 1.8% 1,237,706
--------------
Total net assets - 100% 69,507,498
==============
* Non-income producing security.
** Cost for federal income tax purposes is $58,673,744 (Note 5).
+ Adjustable rate index notes are inversely indexed to the value of the
underlying security.
Glossary of terms:
FRF - French Franc
HKD - Hong Kong Dollar
JPY - Japanese Yen
See notes to financial statements.
12
<PAGE>
- --------------------------------------------------------------------------------
GAM Global Fund - Statement of Investments (continued)
- --------------------------------------------------------------------------------
Geographic Analysis as at
31st December, 1997
[The following table was depicted as a pie chart in the printed material]
UNITED STATES 63.90%
UNITED KINGDOM 7.10%
GERMANY 2.10%
HONG KONG 4.20%
NETHERLANDS 3.00%
SWITZERLAND 3.20%
JAPAN 9.30%
FRANCE 4.20%
SWEDEN 1.20%
NET CURRENT ASSETS 1.80%
Investment Analysis as at
31st December, 1997 (unaudited)
[The following table was depicted as a pie chart in the printed material]
BUSINESS & PUBLIC SERVICES 12.3%
BANKING 11.9%
ELECTRONIC COMP. & INSTRUMENTS 7.6%
TRANSPORTATION - AIRLINES 7.1%
OTHER 27.8%
CASH 7.2%
HEALTH & PERSONAL CARE 13.3%
FINANCIAL SERVICES 12.8%
13
<PAGE>
- --------------------------------------------------------------------------------
GAM Europe Fund
- --------------------------------------------------------------------------------
Fund Management
- --------------------------------------------------------------------------------
[PHOTO OMITTED]
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 1st January, 1993. Mr. Bennett also manages the offshore fund GAM
Pan European Inc. He is based in London.
The Fund's investment objective is to seek long-term capital appreciation,
generally through investment in equity securities issued by companies in Europe.
However, if the Fund determines that the long-term capital appreciation of debt
securities may equal or exceed the return on equity securities, it may be
substantially invested in debt securities of companies and governments, their
agencies and instrumentalities. Any income realized by the Fund on its
investments will be incidental to its goal of long-term capital appreciation.
Investments in securities of foreign issuers involve additional risks and
expenses including currency rate fluctuations, political and economic
instability, foreign taxes and different accounting and reporting standards.
Report to Shareholders
- --------------------------------------------------------------------------------
The Facts
GAM
Europe
(after Average
maximum MSCI 1 Month
GAM sales load Europe Deposit
Europe of 5%) Index Rate
- --------------------------------------------------------------------------------
31st Dec, 97 US$12.57 US$13.23 1,056.66
- --------------------------------------------------------------------------------
% % % %
- --------------------------------------------------------------------------------
Quarter to Dec, 97 + 0.41 - 4.61 + 0.15 + 1.43
- --------------------------------------------------------------------------------
Jan - Dec, 1997 +27.55 +21.17 +24.20 + 5.65
- --------------------------------------------------------------------------------
Average annual total return:-
- --------------------------------------------------------------------------------
5 years to Dec, 1997 +16.52 +15.33 +19.70 + 4.89
- --------------------------------------------------------------------------------
Since inception + 6.88 + 6.19 +12.69 + 5.36
- --------------------------------------------------------------------------------
Performances are calculated on a total return basis. During the year, a
dividend was paid of US$2.45. The Fund's inception was on 1st January, 1990.
Past performance is not indicative of future performance. The investment return
and principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
14
<PAGE>
- --------------------------------------------------------------------------------
GAM Europe Fund - Report to Shareholders (continued)
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
NOTE: The graph compares the performance results of a hypothetical $10,000
investment in the Fund and a comparable index. The performance of the Fund is
also shown after adjustment to reflect the maximum sales load, which is waived
for certain investors. The performance of the index does not reflect brokerage
commissions and other expenses that would be incurred to acquire a comparable
portfolio of securities.
- ----------
Sources used are the net asset value of the Fund computed daily and Morgan
Stanley Capital International.
The MSCI Europe Index is an arithmetical average weighted by market value of the
performance of some 600 securities listed on the stock exchanges of Austria,
Belgium, Denmark, Finland, France, Germany, Italy, Netherlands, Norway, Spain,
Sweden, Switzerland and the United Kingdom. The combined market capitalisation
of these companies represents approximately 60% of the aggregate market value of
the stock exchanges of the above 13 countries. The percentage change in the
value of the index includes dividends reinvested.
Average Annual Total Return
[GRAPHIC OMITTED]
[The following table was depicted as a bar chart in the printed material.]
GAM Europe
(after maximum
GAM Europe sales load of 5%) MSCI Europe Index
---------- ----------------- -----------------
One Year 27.55 21.17 24.20
Three Years 21.80 19.73 22.63
Five Years 16.52 15.33 19.70
Since Inception 6.88 6.19 12.69
Annual Performance
[GRAPHIC OMITTED]
GAM
Europe
(after maximum MSCI
GAM sales load Europe
Europe of 5%) Index
Year % % %
- --------------------------------------------------------------------------------
1993 22.68 16.55 29.79
1994 (3.11) (7.95) 2.66
1995 16.77 10.93 22.13
1996 21.32 15.25 21.57
1997 27.55 21.17 24.20
15
<PAGE>
- --------------------------------------------------------------------------------
GAM Europe Fund - Statement of Investments
- --------------------------------------------------------------------------------
The Comment
1997 has been a banner year for investors in European equities. Strong
liquidity flows, a firm US dollar and a benign inflationary environment have set
the tone for a substantial re-rating of financial assets.
Throughout the year two main themes have prevailed: deflation and
corporate restructuring. The former hardens our aversion to deeply cyclical and
commodity businesses while the latter has produced excellent returns for the
Fund.
One sector worthy of mention is financial services, the Fund's largest
single industry exposure. The economic conditions noted above highlight the
pressing need for an over-banked continent to address excess capacity and
insufficient returns. Since early in the year we have identified a number of
European banks and insurers poised for radical action to improve profitability.
In recent months this has proven fruitful as the managers of these businesses
begin to respond to pressures from competitors and shareholders alike. The
merger wave now gripping the sector in Europe should be seen in this context and
is a theme we expect to produce further gains for the Fund.
as at 31st December, 1997
Market
value
Holdings Description US$
- --------------------------------------------------------------------------------
Adjustable Rate Index Notes 0.2%
Germany - 0.2%
+9,200 DLJ ARIN, Indexed to 9,200 shares
Siemens 1998-11-16 90,175
----------
Total Adjustable Rate Index Notes (Cost $132,972) 90,175
----------
Equities 97.1%
Belgium - 2.2%
1,939 Generale de Banque 842,599
----------
842,599
----------
Denmark - 7.0%
10,300 Bang & Olufsen Holding Class B 613,315
7,880 Den Danske Bank 1,049,986
18,000 Spar Nord Holding 1,050,140
----------
2,713,441
----------
Finland - 2.8%
43,950 Kesko 681,530
30,635 Valmet Class A (Fria) 422,209
----------
1,103,739
----------
France - 24.4%
3,515 Accor 653,532
5,985 Alcatel Alsthom 760,742
12,830 AXA - UAP 992,761
13,480 Banque Nationale de Paris 716,499
10,634 Bertrand Faure 756,050
1,175 CGIP 421,700
5,310 IMETAL 659,945
5,175 Plastic Omnium 682,720
7,540 Societe National Elf Aquitaine 876,963
4,905 Technip 517,517
14,590 Total B 1,587,846
13,625 Valeo 924,105
----------
9,550,380
----------
Germany - 8.1%
*2,705 Alliance 697,677
18,370 BASF 655,561
*35,300 BHW Holding 578,849
18,175 Veba 1,237,597
----------
3,169,684
----------
16
<PAGE>
- --------------------------------------------------------------------------------
GAM Europe Fund - Statement of Investments (continued)
- --------------------------------------------------------------------------------
Market
value
Holdings Description US$
- --------------------------------------------------------------------------------
Italy - 5.7%
133,795 ENI Spa 758,465
230,910 Telecom Italia Spa 1,474,741
----------
2,233,206
----------
Netherlands - 9.3%
29,985 ABN-AMRO Holding 584,101
25,535 Heijmans Group 591,863
*14,945 ING 629,421
26,450 Royal Dutch Petroleum 1,451,804
20,710 Telegraaf Holding 390,149
----------
3,647,338
----------
Norway - 4.6%
24,550 Kverneland Gruppen 399,458
8,740 Orkla Class A 754,899
17,560 Sparbanken 623,826
----------
1,778,183
----------
Portugal - 1.3%
*13,975 Brisa Auto Estradas 500,618
*++8,297 Sotancro --
----------
500,618
----------
Spain - 2.6%
14,660 Banco Popular Registered 1,024,393
----------
1,024,393
----------
Sweden - 7.9%
23,495 Atlas Copco Class A 701,945
20,100 Cardo 524,500
23,470 Kalmar Industries 378,706
23,570 Sandvik Class A 671,502
23,236 Svenska Handlesbank Class A 804,050
----------
3,080,703
----------
Switzerland - 7.6%
720 Novartis Registered 1,167,807
79 Roche Holding Genussscheine 784,215
*715 Union Bank Of Switzerland 1,033,452
----------
2,985,474
----------
United Kingdom - 13.6%
109,410 Bank Of Scotland 993,683
244,101 Burford Holdings 400,899
31,170 Daily Mail & General Trust Class A 1,013,603
31,485 Glaxo Wellcome 750,551
186,010 Lasmo 827,887
328,425 Metalrax Group 488,147
25,460 Prudential 310,006
159,250 Somerfield 549,243
----------
5,334,019
----------
Total Equities (Cost $32,686,260) 37,963,777
----------
Equity Rights 0.0%
Belgium - 0.0%
90 Generale de Banque Rts 24
----------
Total Equity Rights (Cost $113) 24
----------
Total Investments (Cost $32,819,345**) - 97.3% 38,053,976
----------
Net current assets - 2.7% 1,046,612
----------
Total net assets - 100% 39,100,588
==========
* Non-income producing security.
** Cost for federal income tax purposes is $32,824,543 (Note 5).
+ Adjustable rate index notes are inversely indexed to the value of the
underlying security.
++ Fair value determined by the board of directors.
See notes to financial statements.
17
<PAGE>
- --------------------------------------------------------------------------------
GAM Europe Fund - Statement of Investments (continued)
- --------------------------------------------------------------------------------
Geographic Analysis as at
31st December, 1997
[GRAPHIC OMITTED]
[The following information was depicted as a pie graph in the printed material.]
UNITED KINGDOM 13.64%
NETHERLANDS 9.32%
GERMANY 8.34%
SWEDEN 7.89%
SWITZERLAND 7.64%
DENMARK 6.95%
FRANCE 24.42%
ITALY 5.71%
NORWAY 4.55%
FINLAND 2.82%
SPAIN 2.62%
NET CURRENT ASSETS 2.68%
OTHER AREAS 3.42%
Investment Analysis as at
31st December, 1997 (unaudited)
[GRAPHIC OMITTED]
[The following information was depicted as a pie graph in the printed material.]
BANKING 21.90%
ENERGY SOURCE 12.60%
HEALTH & PERSONAL CARE 7.70%
MACHINERY & ENGINEERING 7.50%
INSURANCE 6.90%
FINANCIAL SERVICES 5.80%
TELECOMMUNICATIONS 5.60%
OTHER 32.00%
18
<PAGE>
- --------------------------------------------------------------------------------
GAM Pacific Basin Fund
- --------------------------------------------------------------------------------
Fund Management
- --------------------------------------------------------------------------------
[PHOTO OMITTED]
Michael S. Bunker, Investment Director, has overall responsibility for Asian
investment policy. Prior to joining GAM in 1985, he worked for J. Rothschild
Charterhouse Management Ltd. in Hong Kong. He has over 20 years investment
experience, primarily in Asian markets. He commenced management of GAM Pacific
Basin Fund on 6th May, 1997. Mr. Bunker also manages the offshore fund GAM
Pacific Inc. Mr. Bunker is now based in London, having lived in Hong Kong for 3
years.
The Fund's investment objective is to seek long-term capital appreciation,
generally through investment in equity securities issued by companies with
principal offices in the Pacific Basin, including Japan, Hong Kong, Singapore,
Malaysia, Indonesia, the Philippines, Korea, Taiwan, India, Australia and New
Zealand. However, if the Fund determines that the long-term capital appreciation
of debt securities may equal or exceed the return on equity securities, it may
be invested substantially in debt securities of Pacific Basin companies and the
governments of the Pacific Basin, their agencies and instrumentalities. Any
income realized by the Fund on its investments will be incidental to its goal of
long-term capital appreciation.
Investments in securities of foreign issuers involve additional risks and
expenses including currency rate fluctuations, political and economic
instability, foreign taxes and different accounting and reporting standards.
Report to Shareholders
- --------------------------------------------------------------------------------
The Facts - Class A Shares
GAM
Pacific Basin
Class A (after Average
GAM maximum MSCI 1 Month
Pacific Basin sales load Pacific Depsosit
Class A of 5%) Index Rate
31st Dec, 97 US$9.69 US$10.20 1,576.30
- --------------------------------------------------------------------------------
% % % %
- --------------------------------------------------------------------------------
Quarter to Dec, 97 -26.11 -29.80 -20.59 + 1.43
- --------------------------------------------------------------------------------
Jan - Dec, 1997 -30.00 -33.50 -25.34 + 5.65
- --------------------------------------------------------------------------------
Average annual total return:-
- --------------------------------------------------------------------------------
5 years to Dec, 1997 + 3.47 + 2.41 + 1.60 + 4.89
- --------------------------------------------------------------------------------
10 years to Dec, 1997 + 8.39 + 7.83 - 1.04 + 6.03
- --------------------------------------------------------------------------------
Since inception + 5.91 + 5.41 - 1.95 + 6.12
- --------------------------------------------------------------------------------
Performances are calculated on a total return basis. During the year Class
A and Class D shares paid dividends of US$1.12 and US$1.12 respectively. Class A
inception was on 6th May, 1987 and Class D on the 18th October, 1995. Past
performance is not indicative of future performance. The investment return and
principal value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost.
19
<PAGE>
- --------------------------------------------------------------------------------
GAM Pacific Basin Fund - Report to Shareholders (continued)
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
NOTE: The graphs compare the performance results of a hypothetical $10,000
investment in either Class and a comparable index. The performances of Class A
and Class D are also shown after adjustment to reflect the maximum sales load,
which is waived for certain investors. The performance of the index does not
reflect brokerage commissions and other expenses that would be incurred to
acquire a comparable portfolio of securities.
- ----------
Sources used are the net asset value of the Fund computed daily, Morgan Stanley
Capital International.
The MSCI Pacific Index is an arithmetical average weighted by market value of
the performance of some 410 securities listed on the stock exchanges of
Australia, Hong Kong, New Zealand, Singapore/Malaysia and Japan. The combined
market capitalisation of these companies represents approximately 60% of the
aggregate market value of the stock exchanges of the above 5 countries. The
percentage change in the value of the index includes dividends reinvested.
The Facts - Class D Shares
GAM
Pacific Basin
Class D (after Average
GAM maximum MSCI 1 Month
Pacific Basin sales load Pacific Deposit
Class D of 3.5%) Index Rate
31st Dec, 97 US$9.62 US$9.97 1,576.30
- --------------------------------------------------------------------------------
% % % %
- --------------------------------------------------------------------------------
Quarter to Dec, 97 -26.13 -29.83 -20.59 + 1.43
- --------------------------------------------------------------------------------
Jan - Dec, 1997 -30.18 -32.63 -25.34 + 5.65
- --------------------------------------------------------------------------------
Average annual total return:-
- --------------------------------------------------------------------------------
Since inception -14.66 -16.03 -12.86 + 5.54
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
20
<PAGE>
- --------------------------------------------------------------------------------
GAM Pacific Basin Fund - Report to Shareholders (continued)
- --------------------------------------------------------------------------------
Average Annual Total Return - Class A
[GRAPHIC OMITTED]
[The following information was depicted as a bar graph in the printed material.]
GAM Pacific Basin
(after maximum
GAM Pacific Basin sales load of 5%) MSCI Pacific Index
----------------- ----------------- ------------------
One Year -30.00 -33.50 -25.34
Three Years -10.04 -11.57 -11.03
Five Years 3.47 2.41 1.60
Since Inception 5.91 5.41 -1.95
Annual Performance - Class A
[GRAPHIC OMITTED]
GAM
Pacific Basin MSCI
GAM (after maximum Pacific
Pacific Basin sales load of 5%) Index
Year % % %
- --------------------------------------------------------------------------------
1993 51.51 43.93 35.97
1994 7.41 2.04 13.03
1995 4.56 (0.72) 2.99
1996 (0.39) (5.37) (8.40)
1997 (30.00) (33.50) (25.34)
The Comment
In 1997 Pacific stock markets experienced one of the steepest declines
ever seen by the financial system of any region, with most of the collapse being
centred on the final quarter of the year. In most countries the catalyst for the
flight of investors, both local and foreign, was a steep fall in the currency
which over a period of several years became overvalued leaving exports
increasingly uncompetitive. The problems have been compounded by the sharp
growth of bank lending to the property sector and widespread use of US dollar
borrowings to finance projects at interest rate levels considerably lower than
those available locally.
It will take several years for most of the Asian economies to stabilise
and they will be dependent on substantial inflows of foreign capital,
particularly to refinance the banking sectors. However, declines in US dollar
values of typically between 50% and 80% are reflecting the severity of the
situation and with IMF support growth can be rebuilt through exports. Hong Kong
and Singapore continue to outperform on a relative basis due to the strength of
their banking systems.
The Japanese economy remains weak and without decisive action being taken
by the government to support the banking sector and rebuild consumption, there
is little prospect of an improvement in investor confidence. With domestic
interest rates remaining low it is unlikely that the downward trend in the yen
against its US counterpart will be reversed.
21
<PAGE>
- --------------------------------------------------------------------------------
GAM Pacific Basin Fund - Statement of Investments
- --------------------------------------------------------------------------------
as at 31st December, 1997
Market
value
Holdings Description US$
- --------------------------------------------------------------------------------
Equities - 100.3%
Australia - 13.0%
58,500 Broken Hill Proprietary 543,315
370,000 Colonial 1,056,226
305,000 Novus Petroleum 795,135
43,475 Rio Tinto 507,279
*146,000 Telstra Corp Installment Receipts 308,304
----------
3,210,259
----------
Hong Kong - 31.4%
417,000 Amoy Properties 365,931
203,000 Cheung Kong (Holdings) 1,329,494
517,800 Hong Kong & China Gas 1,005,664
*273,000 Hong Kong Land Holdings 524,160
179,000 Hong Kong Telecommunications 369,596
42,400 HSBC Holdings (HKD) 1,045,090
381,000 Kerry Properties 629,346
130,000 Sun Hung Kai Properties 910,118
138,000 Swire Pacific Class A 760,434
372,352 Wharf (Holdings) 804,865
----------
7,744,698
----------
Indonesia - 2.6%
1,438,800 Bank Bali 176,580
760,000 Hero Supermarket 186,546
1,018,000 Mayorah Indah 87,918
462,000 Modern Photo Film 134,400
309,000 Mustika Ratu 54,777
----------
640,221
----------
Japan - 32.0%
42,000 Canon 977,642
16,000 Canon Sales 182,542
74 DDI 195,482
14,000 Japan Associated Finance 498,469
61,000 JGC 128,446
29,000 Joshin Denki 67,726
51,000 Keisei Electric Railway 133,162
163,000 Long Term Credit Bank Of Japan 260,850
63,000 Mitsubishi Estate 684,992
12,000 Murata Manufacturing 301,378
70,000 Nagoya Railroad 240,123
76,000 Nissan Fire & Marine Insurance 231,026
22,400 ORIX 1,560,796
34,000 Sekisui Chemical 172,603
14,400 Sony 1,279,020
58,000 Sumitomo Marine & Fire Insurance 306,432
10,000 Tachihi Enterprise 211,332
41,000 Taiyo Yuden 284,112
19,500 Xebio 155,283
----------
7,871,416
----------
Korea - 1.1%
48,000 Hyundai Motor GDR 74,880
41,508 Shinhan Bank 184,888
----------
259,768
----------
Philippines - 4.2%
811,500 Ayala Land B 320,593
280,400 Bank of The Phillipine Islands 616,188
*3,766,000 Cebu Holdings Inc (PHP) 92,988
----------
1,029,769
----------
Singapore - 12.7%
104,000 DBS Land 159,193
104,750 Development Bank Of Singapore (FR) 894,927
78,000 Keppel 223,981
699,000 Kim Eng Holdings 228,093
280,718 Overseas Chinese Banking (FR) 1,632,178
----------
3,138,372
----------
Thailand - 3.3%
63,000 Bangkok Bank (FR) 157,009
116,000 Krung Thai Bank (FR) 24,091
181,750 Post Publishing (FR) 103,803
118,000 Siam Commercial Bank (FR) 134,787
88,610 Thai Farmers Bank (FR) 161,025
249,700 Thai Glass Industries (FR) 191,877
180,900 Thai Military Bank (FR) 37,570
----------
810,162
----------
Total Equities (Cost $39,917,202) 24,704,665
----------
Equity Warrants - 0.2%
Australia - 0.1%
*432,000 Colonial Ltd Wts 1998-02-02 20,835
----------
20,835
----------
Indonesia - 0.0%
*5,600 Bank Bali (FR) Wts 2000-08-29 51
----------
51
----------
Japan - 0.1%
*170 Kyocera Wts 1998-01-23 4,250
*490 Tobu Railway Wts 1998-03-17 12,250
----------
16,500
----------
22
<PAGE>
- --------------------------------------------------------------------------------
GAM Pacific Basin Fund - Statement of Investments (continued)
- --------------------------------------------------------------------------------
Market
value
Holdings Description US$
- --------------------------------------------------------------------------------
Thailand - 0.0%
*17,763 Thai Farmers Bank Wts 2002-09-15 (FR) 1,881
----------
1,881
----------
Total Equity Warrants (Cost $522,627) 39,267
----------
Total Investments (Cost $40,439,829**) - 100.5% 24,743,932
Net current liabilities - (0.5)% (115,592)
----------
Total net assets - 100.0% 24,628,340
==========
* Non-income producing security.
** Cost for federal income tax purposes is $41,524,738 (Note 5).
Glossary of terms:
GDR - Global Depository Receipt
FR - Foreign Registered
HKD - Hong Kong Dollar
PHP - Phillipine Peso
See notes to financial statements.
Geographic Analysis
as at 31st December, 1997
[GRAPHIC OMITTED]
[The following information was depicted as a pie graph in the printed material.]
JAPAN 32.03%
HONG KONG 31.45%
AUSTRALIA 13.12%
SINGAPORE 12.74%
INDONESIA 2.60%
THAILAND 3.30%
PHILLIPINES 4.18%
KOREA 1.05%
NET CURRENT LIABILITES (0.47)%
Investment Analysis
as at 31st December, 1997 (unaudited)
[GRAPHIC OMITTED]
[The following information was depicted as a pie graph in the printed material.]
REAL ESTATE 18.70%
BANKING 17.50%
FINANCIAL SERVICES 13.30%
ENERGY SOURCES 4.90%
TELECOMMUNICATION 4.40%
APPLIANCES & HOUSEHOLD DURABLES 4.00%
OTHER 26.70%
CASH 10.50%
23
<PAGE>
- --------------------------------------------------------------------------------
GAM Japan Capital Fund
- --------------------------------------------------------------------------------
Fund Management
- --------------------------------------------------------------------------------
[PHOTO OMITTED]
Paul S. Kirkby, Investment Director, is responsible for investments 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 1st July, 1994. Mr. Kirkby
also manages the offshore fund GAM Japan Inc. He is now based in London having
lived in Hong Kong for seven years.
The Fund's investment objective is to seek long-term capital appreciation,
generally through investment in equity securities issued by companies in Japan.
However, if the Fund determines that the long-term capital appreciation of debt
securities may equal or exceed the return on equity securities, it may be
substantially invested in debt securities of companies and governments, their
agencies and instrumentalities. Any income realized by the Fund on its
investments will be incidental to its goal of long-term capital appreciation.
Investments in securities of foreign issuers involve additional risks and
expenses including currency rate fluctuations, political and economic
instability, foreign taxes and different accounting and reporting standards.
Report to Shareholders
- --------------------------------------------------------------------------------
The Facts
GAM Japan
Capital
(after Average
maximum Tokyo 1 Month
GAM Japan sales load S.E. Deposit
Capital of 5%) Index Rate
31st Dec, 97 US$8.44 US$8.88 1,175.03
- --------------------------------------------------------------------------------
% % % %
- --------------------------------------------------------------------------------
Quarter to Dec, 97 - 9.48 -14.01 -21.23 + 1.43
- --------------------------------------------------------------------------------
Jan - Dec, 1997 - 2.57 - 7.44 -28.09 + 5.65
- --------------------------------------------------------------------------------
Average annual total return:-
- --------------------------------------------------------------------------------
Since inception - 0.02 - 1.47 -15.63 + 5.58
- --------------------------------------------------------------------------------
Performances are calculated on a total return basis. During the year, a
dividend was paid of US$0.74. The Fund's inception was on 1st July, 1994. Past
performance is not indicative of future performance. The investment return and
principal value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost.
24
<PAGE>
- --------------------------------------------------------------------------------
GAM Japan Capital Fund - Report to Shareholders (continued)
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
NOTE: The graph compares the performance results of a hypothetical $10,000
investment in the Fund and a comparable index. The performance of the Fund is
also shown after adjustment to reflect the maximum sales load, which is waived
for certain investors. The performance of the index does not reflect brokerage
commissions and other expenses that would be incurred to acquire a comparable
portfolio of securities.
- ----------
Sources used are net asset value of the Fund computed daily and Datastream.
The Tokyo Stock Exchange Index (TOPIX) is a capitalisation-weighted composite
index of approximately 1,200 companies listed on the First section of the Tokyo
Stock Exchange. The combined market capitalisation of these companies represents
approximately 95 % of the aggregate market value of the First and Second
Section. The percentage change in the value of the index is calculated on a
total return basis with dividends reinvested.
The Comment
The final quarter witnessed extremely difficult conditions for both the
economy and the stockmarket. Your Fund, despite its high cash position, suffered
as a result. Conditions in Asia deteriorated substantially as the confidence
crisis spread to Korea, an important trading partner and competitor of Japan.
Within Japan a string of high profile bankruptcies, most notably of the fourth
largest stockbroker and the tenth largest bank, further depressed expectations.
In all probability the recovery of consumption expected next year, after the
rise in the sales tax this year, will now be postponed. This is despite the
Hashimoto government's recent U turn on fiscal policy in giving a Yen 2 trillion
income tax cut, much of which will be saved. The significance of the recent
rescue package is that more public funds can be added if necessary to ensure the
proper functioning of the financial system. This does not mean however that all
banks are safe nor does it mean that the prospects for weak or overvalued
companies have been transformed.
The prospect of a market solution to Japan's problems, and with it higher
unemployment, though it is part of the cure, is likely to create further
difficult conditions in the coming months. However it will be important to
remember that good stocks are likely to prove the most resilient and to recover
the most when conditions improve. Until that time cash is being kept at high
levels and exposure to the yen limited. Currently the funds exposure to the yen
stands at less than 20%.
25
<PAGE>
- --------------------------------------------------------------------------------
GAM Japan Capital Fund - Report to Shareholders (continued)
- --------------------------------------------------------------------------------
[The following information was depicted as a bar chart in the printed material.]
Average Annual Total Return
GAM
Japan Capital Tokyo Stock
GAM (after maximum Exchange
Japan Capital sales load of 5%) Index
% % %
- ---------------------------------------------------------------------
One Year - 2.57 - 7.44 - 28.09
Two Years - 1.22 - 3.72 - 22.54
Three Years 1.27 - 0.45 - 16.02
Since Inception - 0.02 - 1.47 - 15.63
[The following information was depicted as a bar chart in the printed material.]
Annual Performance
GAM
Japan Capital Tokyo Stock
GAM (after maximum Exchange
Japan Capital sales load of 5%) Index
Year % % %
- ---------------------------------------------------------------------
1994 (3.77) (8.58) (6.86)
1995 6.45 1.12 (1.32)
1996 0.16 (4.85) (16.55)
1997 (2.57) (7.44) (28.09)
Statement of Investments
as at 31st December, 1997
Market
Value
Holdings Description US$
- ----------------------------------------------------------------------------
Convertibles - 0.2%
Financial Services - 0.2%
8,000,000 Ab Intl Cayman Tr Pfd 46,248
----------
Total Convertibles (Cost $68,912) 46,248
----------
Equities - 70.9%
Appliances & Household Durables - 4.8%
16,600 Sony 1,474,426
----------
1,474,426
----------
Automobiles - 1.4%
63,000 Mazda Motor 149,541
32,000 Suzuki Motor 289,127
----------
438,668
----------
Banking - 2.7%
36,000 Bank of Kyoto 135,069
14,000 Keiyo Bank 28,943
143,000 Long Term Credit Bank of Japan 228,844
118,000 Sakura Bank 337,014
20,000 Tochigi Bank 99,694
----------
829,564
----------
Broadcasting & Publishing - 0.7%
6,000 Broadcasting System Niigata 43,645
4,000 Nippon Broadcasting System 158,040
----------
201,685
----------
Building Materials & Components - 0.2%
5,000 Almetax Manufacturing 15,544
11,000 Daikin Kogyo 41,440
2,000 Okabe 5,896
----------
62,880
----------
Business & Public Services - 2.0%
9,200 Sanix 147,933
7,000 Secom 447,014
14,600 Wesco 35,773
----------
630,720
----------
Chemicals - 2.0%
32,000 Shin-Etsu Chemical 610,107
----------
610,107
----------
26
<PAGE>
- --------------------------------------------------------------------------------
GAM Japan Capital Fund - Statement of Investments (continued)
- --------------------------------------------------------------------------------
Market
Value
Holdings Description US$
- ----------------------------------------------------------------------------
Construction & Housing - 0.3%
19,000 Ataka Construction & Engineering 59,793
13,000 JGC 27,374
----------
87,167
----------
Data Processing & Reproduction - 6.0%
42,000 Canon 977,642
5,500 I-O Data Device 41,060
3,300 Nidec 138,974
56,000 Ricoh 694,640
----------
1,852,316
----------
Electrical & Electronics - 1.8%
700 Fuji Soft ABC 23,959
28,000 Nippon Denwa Shisetsu 107,198
27,000 Omron 421,746
----------
552,903
----------
Electronic Comp. & Instruments - 7.4%
2,100 Keyence 310,337
10,000 Mimasu Semiconductor Industry 139,357
22,000 Mitsumi Electric 313,323
10,000 Rohm 1,018,377
17,000 Taiyo Yuden 117,802
36,000 Yamatake-Honeywell 383,155
----------
2,282,351
----------
Financial Services - 16.4%
*9,400 Aiful 636,983
23,900 Credit Saison 589,265
12,000 Japan Associated Finance 427,259
8,400 Nichiei (8577) 894,028
22,500 ORIX 1,567,764
3,100 Shohkoh Fund 944,717
----------
5,060,016
----------
Health & Personal Care - 2.7%
23,000 Eisai 350,459
8,000 Santen Pharmaceutical 91,884
11,000 Sawai Pharmaceutical 63,254
16,000 Terumo 235,222
14,000 Towa Pharmaceutical 91,654
----------
832,473
----------
Industrial Components - 3.3%
94,000 Minebea 1,007,657
----------
1,007,657
----------
Insurance - 3.0%
33,000 Dai Tokyo Fire & Marine Insurance 113,201
34,000 Dowa Fire & Marine Insurance 101,271
104,000 Nissan Fire & Marine Insurance 316,141
76,000 Sumitomo Marine & Fire Insurance 401,531
----------
932,144
----------
Leisure & Tourism - 0.1%
4,700 Yellow Hat 33,650
----------
33,650
----------
Machinery & Engineering - 0.1%
7,000 Higashi Nihon House 31,892
1,000 Sansei Yusoki 2,191
----------
34,083
----------
Merchandising 10.1%
12,800 Amway Japan 245,023
7,800 Aoyama Trading 139,158
17,800 Circle K Japan 851,838
1,900 Daimon 3,783
35,900 DeoDeo Corp 310,620
12,000 Joshin Denki 28,025
32,000 Juel Verite Ohkubo 65,421
19,000 Jusco 267,688
21,100 Matsumotokiyoshi 807,810
7,800 Paris Miki 83,614
14,300 Shimachu 224,464
12,600 Xebio 100,337
----------
3,127,781
----------
Metals - Steel - 0.6%
88,000 Nisshin Steel 96,355
30,500 Tokyo Steel 102,990
----------
199,345
----------
Real Estate - 3.2%
16,000 Mitsubishi Estate 173,966
61,000 Mitsui Real Estate 588,515
8,000 Sankei Building 18,989
2,000 Tachihi Enterprise 42,266
22,000 TOC 166,769
----------
990,505
----------
Telecommunications - 0.1%
7 DDI 18,492
----------
18,492
----------
27
<PAGE>
- --------------------------------------------------------------------------------
GAM Japan Capital Fund - Statement of Investments (continued)
- --------------------------------------------------------------------------------
Market
Value
Holdings Description US$
- ----------------------------------------------------------------------------
Transportation - Road & Rail - 1.7%
79,000 Keisei Electric Railway 206,261
100 West Japan Railway 318,530
----------
524,791
----------
Utilities - Electric & Gas - 0.1%
2,900 Okinawa Electric Power 44,411
----------
44,411
----------
Wholesale & International Trade - 0.2%
21,000 Nakayamafuku 64,802
----------
64,802
----------
Total Equities (Cost $27,718,045) 21,892,937
----------
Options 0.4%
Index - 0.4%
*14 P/O Nikkei 225 Index 14,500 (JPY)
1998-02-13 45,023
*15 P/O Nikkei 225 Index 15,000 (JPY)
1998-02-13 67,764
*2 P/O Nikkei 225 Index 16,500 (JPY)
1998-02-21 22,971
----------
135,758
----------
Total Options (Cost $178,449) 135,758
----------
Equity Warrants - 0.0%
Transportation - Road & Rail - 0.0%
*170 Tobu Railway Wts 1998 4,250
----------
Total Equity Warrants (Cost $85,000) 4,250
----------
Preferred Shares - 0.5%
Financial Services - 0.5%
30,000,000 Sakura Finance Bermuda
75% CV Pfd 2001 167,400
----------
Total Preferred Shares (Cost $272,047) 167,400
----------
Time Deposits - 21.0 %
United States - 21.0 %
6,478,474 Chase Manhattan Bank 5.0% 1998-01-02 6,478,474
----------
Total Time Deposits (Cost $6,478,474) 6,478,474
----------
Total Investments (Cost $34,800,927**) - 93.0% 28,725,067
Net current assets - 7.0% 2,146,707
----------
Total net assets - 100% 30,871,774
==========
* Non-income producing security.
** Cost for federal income tax purposes is $36,090,938 (Note 5).
Glossary of terms:
JPY - Japanese Yen
See notes to financial statements.
28
<PAGE>
- --------------------------------------------------------------------------------
GAM North America Fund
- --------------------------------------------------------------------------------
Fund Management
- --------------------------------------------------------------------------------
[PHOTO OMITTED]
Fayez Sarofim founded Fayez Sarofim & Co in 1958 and is the President and
Chairman of the Board. He is also a director of Teledyne Inc., Argonaut Group,
Unitrin, Inc., MESA Ins., Imperial Holly Corp. and EXOR Group. From 1951 to 1958
Mr. Sarofim worked for Anderson, Clayton & Co. where his last assignment was as
assistant to the President. He commenced management of GAM North America Fund on
29th June, 1990. Mr. Sarofim also manages the offshore fund GAM U.S. Inc.
The Fund's investment objective is to seek long-term capital appreciation,
generally through investment in equity securities issued by companies in the
United States and Canada. However, if the Fund determines that the long-term
capital appreciation of debt securities may equal or exceed the return on equity
securities, it may be substantially invested in debt securities of companies and
governments, their agencies and instrumentalities. Any income realized by the
Fund on its investments will be incidental to its goal of long-term capital
appreciation.
Report to Shareholders
- --------------------------------------------------------------------------------
The Facts
GAM North
America
(after Average
maximum S & P 1 Month
GAM sales load Comp Deposit
North America of 5%) Index Rate
31st Dec, 97 US$17.32 US$18.23 970.43
- --------------------------------------------------------------------------------
% % % %
- --------------------------------------------------------------------------------
Quarter to Dec, 97 +2.25 -2.86 +2.87 +1.43
- --------------------------------------------------------------------------------
Jan - Dec, 1997 +29.41 +22.94 +33.35 +5.65
- --------------------------------------------------------------------------------
Average annual total return:-
- --------------------------------------------------------------------------------
5 years to Dec, 1997 +16.21 +15.02 +20.26 +4.89
- --------------------------------------------------------------------------------
Since inception +14.23 +13.50 +16.63 +5.36
- --------------------------------------------------------------------------------
Performances are calculated on a total return basis. During the year, a
dividend was paid of US$0.23. The Fund's inception was on 1st January, 1990.
Past performance is not indicative of future performance. The investment return
and principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
29
<PAGE>
- --------------------------------------------------------------------------------
GAM North America Fund - Report to Shareholders (continued)
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
NOTE: The graph compares the performance results of a hypothetical $10,000
investment in the Fund and a comparable index. The performance of the Fund is
also shown after adjustment to reflect the maximum sales load, which is waived
for certain investors. The performance of the index does not reflect brokerage
commissions and other expenses that would be incurred to acquire a comparable
portfolio of securities.
- ----------
Sources used are the net asset value of the Fund which is computed daily and
Datastream.
The Standard & Poor's Composite Index is an unmanaged weighted index of the
stock performance of 500 industrial, transportation, utility and financial
companies. The percentage change in the value of the index includes dividends
reinvested.
[The following information was depicted as a bar chart in the printed material.]
Average Annual Total Return
GAM Standard
North America & Poor's
GAM (after maximum Composite
North America sales load of 5%) Index
% % %
- ---------------------------------------------------------------------
One Year 29.41 22.94 33.35
Three Years 28.10 25.93 31.15
Five Years 16.21 15.02 20.26
Since Inception 14.23 13.50 16.63
[The following information was depicted as a bar chart in the printed material.]
Annual Performance
GAM Standard
North America & Poor's
GAM (after maximum Composite
North America sales load of 5%) Index
Year % % %
- ---------------------------------------------------------------------
1993 (2.09) (6.98) 10.08
1994 2.97 (2.18) 1.27
1995 30.90 24.35 37.60
1996 24.10 17.89 22.95
1997 29.41 22.94 33.35
30
<PAGE>
- --------------------------------------------------------------------------------
GAM North America Fund - Report to Shareholders (continued)
- --------------------------------------------------------------------------------
The Comment
The US economy is positioned to extend the current business cycle, building on a
foundation of positive fundamentals, and prudent monetary policy. If the economy
continues to expand throughout the year, as we expect, the current cycle will
become the second longest expansion since World War Two. The prospect of
continued low inflation, declining interest rates and a balanced budget for the
first time since the mid-seventies, presents a positive backdrop for financial
assets, in our view. However, pessimism is pervasive, reflecting uncertainty
about the length and depth of the Asian crisis, weakening corporate profits,
squeezed by rising wages and moderating demand. Negative sentiment is a positive
factor in our view, as it counteracts speculative excesses that have developed
during various periods in this long market advance and maintains the self
correcting dynamic which has rationalized the equities' historically high total
return over the past three years. The sharp decline in interest rates is the
most positive factor supporting an improved backdrop for corporate, public and
consumer balance sheets. Our outlook calls for average annual GDP to moderate to
2.5%, with inflation declining to 1.5%. In this environment, the yield on the
30-year bond should decline toward 5.0%. We expect the Federal Funds rate to be
lowered by as much as 100 basis points. Having said this, we expect wage
inflation to remain contained. Job creation should fall off in this environment,
coupled with the increased price competitiveness of Asian labor and imports, we
believe employees will value job security over wage gain. Relatedly, it is
important to recognize that declining inflation is resulting in higher real
wages and the sharp drop in interest rates continue to enhance consumer
liquidity, as mortgages are refinanced. The high correlation between corporate
profit growth and GDP supports our outlook for corporate growth of 8.0%. The
highest quality, industry leaders which we believe we have identified, should
benefit in this uncertain environment even with the short term negative
implications of a stronger dollar. During December, the sharp decline in long
term interest rates, resulted in a premium being placed on higher yielding
stocks, such as utilities. Sectors which could be negatively impacted by
weakness in Asia, such as technology, capital goods and basic industries,
considerably underperformed the market during the fourth quarter, weakening
portfolio returns for the year. These combined factors, which we view as
relatively short term, were counteracted by strength in Merck, Coca-Cola and
Philip Morris in December, which led to the portfolio's outperformance for the
month.
31
<PAGE>
- --------------------------------------------------------------------------------
GAM North America Fund - Statement of Investments
- --------------------------------------------------------------------------------
as at 31st December, 1997
Market
Value
Holdings Description US$
- ----------------------------------------------------------------------------
Equities - 94.1 %
Aerospace/Military Technology - 1.1 %
2,208 Boeing 108,054
184 Raytheon 9,074
----------
117,128
----------
Automobile Parts & Equipment - 0.1%
599 Meritor Automotive Inc 12,616
----------
12,616
----------
Automobiles - 6.1%
4,800 Chrysler 168,900
6,718 Ford Motor 327,083
2,900 General Motors 175,812
----------
671,795
----------
Banking - 6.8%
2,500 Bankamerica 182,500
2,400 Chase Manhattan 262,800
2,400 Citicorp 303,450
----------
748,750
----------
Beverages & Tobacco - 11.6%
8,600 Coca-Cola 572,975
7,200 PepsiCo 262,350
9,600 Philip Morris 435,000
----------
1,270,325
----------
Broadcasting & Publishing - 0.7%
1,000 McGraw-Hill 74,000
----------
74,000
----------
Chemicals - 1.9%
3,400 DuPont de Nemours 204,212
----------
204,212
----------
Computer Software - 1.2%
*1,000 Microsoft 129,250
----------
129,250
----------
Data Processing & Reproduction - 3.7%
2,900 Compaq Computer 163,669
2,400 First Data 70,200
2,800 Hewlett Packard 175,000
----------
408,869
----------
Electrical & Electronics - 4.0%
800 Emerson Electric 45,150
5,400 General Electric 396,225
----------
441,375
----------
Electronic Comp. & Instruments - 3.1%
4,900 Intel 344,225
----------
344,225
----------
Energy Sources - 7.5%
2,700 British Petroleum ADR 215,156
2,500 Chevron 192,500
3,800 Exxon 232,512
2,500 Mobil 180,469
----------
820,637
----------
Financial Services - 2.0%
3,800 Federal National Mortgage Association 216,837
----------
216,837
----------
Food & Household Products - 4.4%
2,100 Kellogg 104,213
4,800 Proctor & Gamble 383,100
----------
487,313
----------
Health & Personal Care - 20.4%
2,900 Abbott Laboratories 190,131
2,700 American Home Products 206,550
900 Estee Lauder Class A 46,294
3,400 Gillette 341,487
5,300 Johnson & Johnson 349,137
4,300 Merck 456,875
8,600 Pfizer 641,238
----------
2,231,712
----------
IndustrialComponents - 0.9%
1,900 Rockwell International 99,275
----------
99,275
----------
Insurance - 0.9%
1,900 American General 102,719
----------
102,719
----------
Leisure & Tourism - 1.7%
2,900 McDonald's 138,475
*1,650 Tricon Global Restaurants 47,953
----------
186,428
----------
32
<PAGE>
- --------------------------------------------------------------------------------
GAM North America Fund - Statement of Investments (continued)
- --------------------------------------------------------------------------------
Market
Value
Holdings Description US$
- ----------------------------------------------------------------------------
Machinery & Engineering - 1.0%
2,200 Caterpillar 106,837
----------
106,837
----------
Merchandising - 2.1%
1,900 Wal-Mart Stores 74,931
4,800 Walgreen 150,600
----------
225,531
----------
Multi-Industry - 4.8%
3,500 Allied Signal 136,281
*6 Berkshire Hathaway 276,000
1,400 Minnesota Mining & Manufacturing 114,888
----------
527,169
----------
Networking Products - 1.1%
2,100 Cisco Systems 117,075
----------
117,075
----------
Recreation, Other Consumer Goods - 1.5%
1,200 Eastman Kodak 72,975
2,400 Nike Class B 94,200
----------
167,175
----------
Telecommunications - 3.3%
2,700 Bellsouth 152,044
2,782 SBC Communications 203,782
----------
355,826
----------
Textiles & Apparel - 0.8%
*3,800 Polo Ralph Lauren Class A 92,388
----------
92,388
----------
Transportation - Road & Rail - 1.4%
5,100 Norfolk Southern 157,144
----------
157,144
----------
Total Equities (Cost $6,882,866) 10,316,611
----------
Preferred Shares - 0.5%
Broadcasting & Publishing - 0.5%
2,900 News Corp ADR (Pfd) 57,638
----------
Total Preferred Shares (Cost $58,537) 57,638
----------
Time Deposits - 7.1%
776,873 Morgan Guaranty London
5.0% 1998-01-02 776,873
----------
Total Time Deposits (Cost$776,873) 776,873
----------
Total Investments (Cost $7,718,276**) - 101.7% 11,151,122
Net current liabilities - (1.7)% (184,949)
----------
Total net assets - 100% 10,966,173
==========
* Non-income producing security
** Cost for federal income tax purposes is identical.
Glossary of terms
ADR - American Depository Receipt
See notes to financial statements.
33
<PAGE>
- --------------------------------------------------------------------------------
GAM Asian Capital Fund
- --------------------------------------------------------------------------------
Fund Management
- --------------------------------------------------------------------------------
[PHOTO OMITTED]
Adrian L. Cantwell, Investment Director, is responsible for Asia excluding 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 12th May, 1995. Mr. Cantwell also manages the
offshore funds GAM Asian Inc. and GAM Singapore/ Malaysia Inc. Mr. Cantwell has
lived in Hong Kong since 1985.
The Fund's investment objective is to seek long-term capital appreciation,
generally through investment in equity 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. However, if the Fund determines
that the long-term capital appreciation of debt securities may equal or exceed
the return on equity securities, it may be substantially invested in debt
securities of companies and governments, their agencies and instrumentalities.
Any income realized by the Fund on its investments will be incidental to its
goal of long-term capital appreciation.
Investments in securities of foreign issuers involve additional risks and
expenses including currency rate fluctuations, political and economic
instability, foreign taxes and different accounting and reporting standards.
Report to Shareholders
- --------------------------------------------------------------------------------
The Facts
GAM Asian
Capital
(after Average
GAM maximum MSCI AC 1 Month
Asian sales load Far East Deposit
Capital of 5%) ex Japan Rate
31st Dec, 97 US$6.02 US$6.34 189.38
- --------------------------------------------------------------------------------
% % % %
- --------------------------------------------------------------------------------
Quarter to Dec, 97 -25.01 -28.76 -32.05 +1.43
- --------------------------------------------------------------------------------
Jan - Dec, 1997 -35.34 -38.57 -40.92 +5.65
- --------------------------------------------------------------------------------
Average annual total return:-
- --------------------------------------------------------------------------------
Since inception -15.58 -17.21 -15.56 +5.62
- --------------------------------------------------------------------------------
Performances are calculated on a total return basis. During the year, a
dividend was paid of US$0.42. The Fund's inception was on 12th May, 1995. Past
performance is not indicative of future performance. The investment return and
principal value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost.
34
<PAGE>
- --------------------------------------------------------------------------------
GAM Asian Capital Fund - Report to Shareholders (continued)
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
NOTE: The graph compares the performance results of a hypothetical $10,000
investment in the Fund and a comparable index. The performance of the Fund is
also shown after adjustment to reflect the maximum sales load, which is waived
for certain investors. The performance of the index dose not reflect brokerage
commissions and other expenses that would be incurred to acquire a comparable
portfolio of securities.
- ----------
Sources used are net asset value of the Fund which is computed daily and
Datastream.
The MSCI AC Far East (ex Japan) Index is an arithmetical average weighted by
market value of the performance of some 400 securities listed on the stock
exchanges of Hong Kong, Indonesia, Korea, Malaysia, Phillipines, Singapore,
Tawian and Thailand. The combined market capitalisation of these companies
represents approximately 60% of the aggregated market value of the stock
exchanges of the above 8 countries. The percentage change in the value of the
index includes dividends reinvested.
The Comment
The plight of Asia's economies has now captured the world stage.
Multinational companies from America and Europe are already beginning to feel
the secondary impact of the currency dislocations suffered in Asia over the last
few months. The severity of the crisis is reflected in the fact that four
countries in Asia are now subject to IMF assistance. It is now quite apparent
that an absence of suitable and swift policy decisions has increased the
probability of a very slow recovery rather than a quick one and a possibility of
even worse conditions before they improve. Economic growth forecasts across the
region for 1998 are continually being revised down. In equity markets, there has
not even been a discernible flight to quality but more a flight to cash. In due
course, however, the financially sound companies will be the ones which will
survive and into which investors will want to concentrate their portfolios in
order to achieve out-performance. This change in risk exposure is already being
well reflected in your Fund.
The Fund's cash position provides the flexibility to increase exposure for
the longer term to sound companies whose share prices in the short term are
unable to de-couple from periods of general market weakness. Nevertheless, even
these companies' earnings abilities will be dented next year as slowing sales
growth and higher interest rates eat into margins faster than cost cutting
exercises can be implemented.
Looking ahead, the first signs of relief should be seen in a pick-up in
exports, which will then feed through into improving balances of trade, thus
allowing currencies to stabilise and, eventually, domestic interest rates to
fall. Such a process will take many quarters, however.
35
<PAGE>
- --------------------------------------------------------------------------------
GAM Asian Capital Fund - Statement of Investments
- --------------------------------------------------------------------------------
as at 31st December, 1997
Market
Value
Holdings Description US$
- ----------------------------------------------------------------------------
Equities - 102.5%
Hong Kong - 80.0%
*8000 Asia Satellite Telecom 13,679
2,800 Bank Of East Asia 6,558
7,000 Cheung Kong Holdings 40,073
2,000 Cheung Kong Holdings 11,450
11,600 Dah Sing Financial 27,918
10,500 Dickson Concepts International 15,312
*12,000 First Tractor (HKD) 7,240
47,330 HKR International 34,815
27,600 Hong Kong & China Gas 53,604
12,500 Hong Kong Electric 47,667
3,200 HSBC Holdings (HKD) 78,875
8,000 Hutchison Whampoa 50,071
28,000 JCG Holdings 12,014
19,000 Kerry Properties 31,385
9,000 Li & Fung 12,602
9,000 New World Development 31,127
*9,000 New World Infrastructure 20,383
4,000 Sun Hung Kai Properties 28,004
8,000 Swire Pacific Class A 44,083
28,000 Tai Cheung Holdings 11,111
4,000 Television Broadcasting 11,408
15,000 Wharf Holdings 32,424
32,000 Wheelock 37,373
----------
659,176
----------
New Zealand - 1.6%
5,000 Fernz 12,919
----------
12,919
----------
Philippines - 3.0%
32,000 Ayala Land 12,444
31,000 Ayala Land Class B 12,247
----------
24,691
----------
Republic Of China - 1.0%
19,000 Beijing Datang Power (HKD) 8,704
----------
8,704
----------
Singapore - 16.9%
11,000 DBS Land 16,838
2,600 Development Bank Of Singapore (FR) 22,213
6,000 Osprey Maritime 4,806
*5,000 Overseas Chinese Banking (FR) 29,071
4,000 Overseas Union Bank (FR) 15,307
1,000 Singapore Airlines (FR) 6,526
1,000 Singapore Press Holdings (FR) 12,519
3,000 United Overseas Bank (FR) 16,642
13,000 Wing Tai Holdings 15,194
----------
139,116
----------
Total Equities (Cost $1,129,066) 844,606
----------
Time Deposits - 19.8%
United States - 19.8%
163,097 Morgan Guaranty London 5.0% 1998-01-02 163,097
----------
Total Time Deposits (Cost $163,097) 163,097
----------
Total Investments (Cost $1,292,163**) - 122.3% 1,007,703
Net current liabilities - (22.3%) (183,490)
----------
Total net assets - 100% 824,213
==========
* Non-income producing security.
** Cost for federal income tax purposes is $1,301,706 (Note 5).
Glossary of terms:
FR - Foreign Registered
HKD - Hong Kong Dollar
See notes to financial statements.
36
<PAGE>
- --------------------------------------------------------------------------------
GAM Asian Capital Fund - Statement of Investments
- --------------------------------------------------------------------------------
[The following table was depicted as a pie chart in the printed material]
Geographic Analysis as at
31st December, 1997
NET CURRENT LIABILITIES (22.26)%
HONG KONG 79.98%
UNITED STATES 19.79%
CHINA 1.05%
PHILIPPINES 3.00%
NEW ZEALAND 1.57%
SINGAPORE 16.87%
[The following table was depicted as a pie chart in the printed material]
Investment Analysis as at
31st December, 1997 (unaudited)
BANKING 17.80%
REAL ESTATE 17.70%
MULTI-INDUSTRY 14.30%
UTILITIES - ELECTRICAL & GAS 10.00%
BROADCASTING & PUBLISHING 3.00%
TRANSPORTATION - AIRLINES 1.80%
OTHER 6.60%
CASH 28.80%
37
<PAGE>
- --------------------------------------------------------------------------------
GAMerica Capital Fund
- --------------------------------------------------------------------------------
Fund Management
- --------------------------------------------------------------------------------
[PHOTO OMITTED]
Gordon Grender, Director, has been associated with GAM since 1983 and is also
adviser to GAMerica. He has been actively involved in fund management in North
American stock markets since 1974. He commenced management of GAMerica Capital
Fund on 12th May, 1995. Mr. Grender also manages GAMerica Inc., an offshore fund
with similar investment objectives.
The Fund's investment objective is to seek long-term capital appreciation,
generally through investment in equity securities issued by companies in the
United States. However, if the Fund determines that the long-term capital
appreciation of debt securities may equal or exceed the return on equity
securities, it may be substantially invested in debt securities of companies and
governments, their agencies and instrumentalities. Any income realized by the
Fund on its investments will be incidental to its goal of long-term capital
appreciation.
Report to Shareholders
- --------------------------------------------------------------------------------
The Facts
GAMerica
Capital
(after Average
maximum S & P 1 Month
GAMerica sales load Comp Deposit
Capital of 5%) Index Rate
31st Dec, 97 US$13.43 US$14.14 970.43
- --------------------------------------------------------------------------------
% % % %
- --------------------------------------------------------------------------------
Quarter to Dec, 97 - 2.55 - 7.42 + 2.87 + 1.43
- --------------------------------------------------------------------------------
Jan - Dec, 1997 +37.28 +30.41 +33.35 + 5.65
- --------------------------------------------------------------------------------
Average annual total return:-
- --------------------------------------------------------------------------------
Since inception +20.80 +18.47 +28.83 + 5.62
- --------------------------------------------------------------------------------
Performances are calculated on a total return basis. During the year, a
dividend was paid of US$1.38. The Fund's inception was on 12th May, 1995. Past
performance is not indicative of future performance. The investment return and
principal value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost.
38
<PAGE>
- --------------------------------------------------------------------------------
GAMerica Capital Fund - Report to Shareholders
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
NOTE: The graph is intended to compare the performance results of a hypothetical
$10,000 investment in the Fund and a comparable index. The performance of the
Fund is also shown after adjustment to reflect the maximum sales load, which is
waived for certain investors. The performance of the index does not reflect
brokerage commissions and other expenses that would be incurred to acquire a
comparable portfolio of securities.
The Comment
1997 was another exceptional year for the US stock market with a rise of
over 25%.
This is the second year of very high returns. While earnings growth for
the year was around 12%, long-term interest rates continued to decline. In this
environment investors were prepared to pay a higher price for a given level of
earnings.
The outlook for equity markets however, seems less positive to us this
year than at the same time last year. While the prospects of low inflation or
deflation worldwide continue and there is little prospect of significant real
interest rate increases the Standard & Poor's Industrial Index is selling at
over 25 times historical earnings. Though analysts have been predicting another
year of 13% earnings growth for 1998, we are not convinced this will be
achieved.
The problems in Asia introduce further risks into the equation. As the US
exports only about 10% of output of which about 30% goes to Asia, the Asian
slowdown might reduce US growth by 0.25% to 0.5%. This, together with the
absence of demand for raw materials from Asia would, taken in isolation, be
positive for the US. Unfortunately there is always a risk of financial failures
in these circumstances, which could have negative implications for American and
European banks' ability to conduct normal business.
Despite our general unease about valuation levels, we will continue to do
our best to identify undervalued stocks.
- ----------
Sources used are the net asset value of the Fund which is computed daily and
Datastream.
The Standard & Poor's Composite Index is an unmanaged weighted index of the
stock performance of 500 industrial, transportation, utility and financial
companies. The percentage change in the value of the index includes dividends
reinvested.
39
<PAGE>
- --------------------------------------------------------------------------------
GAMerica Capital Fund - Statement of Investments
- --------------------------------------------------------------------------------
as at 31st December, 1997
Market
Value
Holdings Description US$
- ---------------------------------------------------------------------------
Equities - 59.4%
Beverages & Tobacco - 3.1%
2,000 Fortune Brands 74,125
2,000 Gallaher Group ADR 42,750
---------
116,875
---------
Business & Public Services - 4.3%
*26,400 Titan 165,000
---------
165,000
---------
Construction & Housing - 5.8%
*7,812 Palm Harbor Homes 220,689
---------
220,689
---------
Electrical & Electronics - 1.2%
2,500 AVX 46,094
---------
46,094
---------
Energy Sources - 3.1%
3,000 Unocal 116,437
---------
116,437
---------
Financial Services - 1.4%
*3,000 Friedman, Billings, Ramsey Group 53,813
---------
53,813
---------
Food & Household Products - 1.9%
3,307 Archer-Daniels-Midland 71,721
---------
71,721
---------
Health & Personal Care - 7.5%
*4,500 ClinTrials Research 35,437
8,000 Intimate Brands Class A 192,500
*30,000 Unilab 56,250
---------
284,187
---------
Industrial Components - 3.4%
*12,000 Foamex International 130,500
---------
130,500
---------
Merchandising - 17.1%
*6,000 Best Buy 221,250
6,250 Fred's Class A 128,125
*12,500 Jumbosports 18,750
2,000 Mercantile Stores 121,750
*5,000 Party City 161,250
---------
651,125
---------
Recreation, Other Consumer Goods - 1.9%
*5,000 N2K 73,125
---------
73,125
---------
Real Estate - 3.9%
7,000 Bradley Real Estate 147,000
---------
147,000
---------
Telecommunications - 4.8%
*6,000 World Com 181,500
---------
181,500
---------
Total Equities (Cost $1,730,847) - 59.4% 2,258,066
---------
Time Deposits - 37.0%
1,404,078 First National Bank of Chicago
5.0% 1998-01-02 1,404,078
---------
Total Time Deposits (Cost $1,404,078) 1,404,078
---------
Total Investments (Cost $3,134,925**) - 96.4% 3,662,144
Net current assets - 3.6% 136,913
---------
Total net assets - 100% 3,799,057
=========
* Non-income producing security.
** Cost for federal income tax purposes is identical.
Glossary of terms:
ADR - American Depository Receipt
See notes to financial statements.
40
<PAGE>
- --------------------------------------------------------------------------------
GAM Funds, Inc. - Statements of Assets and Liabilities
- --------------------------------------------------------------------------------
at 31st December, 1997
<TABLE>
<CAPTION>
GAM
GAM GAM GAM Pacific
International Global Europe Basin
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets (in US$)
Investments in securities at value $1,856,890,976 $68,269,792 $38,053,976 $24,743,932
Cash - - 709 596
Cash - Foreign currencies 1,655,233 - 1,224,539 344,221
Receivables:
Securities sold 6,023,319 - 1,225,238 2,059,299
Capital shares sold 9,285,594 1,109,006 31,726 164,553
Dividends, interest and other 2,648,277 36,677 53,896 43,943
Net equity in foreign currency exchange contracts (Note 6) 39,450,165 724,888 800,316 1,041,068
Deferred organizational expenses and other assets - - - -
--------------- ------------ ----------- ------------
Total assets 1,915,953,564 70,140,363 41,390,400 28,397,612
--------------- ------------ ----------- ------------
Liabilities
Payables:
Securities purchased 14,606,721 336,655 1,228,328 1,067,398
Capital shares redeemed 1,951,817 58,698 - 229,374
Loans - - 884,000 2,246,000
Accrued management fee 4,465,800 147,318 105,784 94,897
Accrued distribution fee 1,398,663 44,307 38,345 24,603
Accrued expenses and other 582,551 45,887 33,355 107,000
--------------- ------------ ----------- ------------
Total liabilities 23,005,552 632,865 2,289,812 3,769,272
--------------- ------------ ----------- ------------
Net assets $1,892,948,012 $69,507,498 $39,100,588 $24,628,340
=============== ============ =========== ============
Source of net assets
Net capital paid in on shares of capital stock (Note 4) $1,504,197,109 $58,668,062 $32,521,009 $45,301,039
Accumulated net investment income/(loss) (8,350,974) (155,350) 89,676 (310,853)
Accumulated net realized gains/(losses) (26,603,436) 608,107 461,339 (5,705,626)
Net unrealized appreciation/(depreciation) 423,705,313 10,386,679 6,028,564 (14,656,220)
--------------- ------------ ----------- ------------
Net assets $1,892,948,012 $69,507,498 $39,100,588 $24,628,340
=============== ============ =========== ============
Class A shares outstanding 63,022,600 3,513,547 3,110,245 2,379,009
Class A net assets $1,793,665,482 $65,739,091 $39,100,588 $23,045,699
Net asset value and redemption value per share (Note 4) $28.46 $18.71 $12.57 $9.69
Offering price per share (100/95 x net asset value
per share reduced on sales of $100,000 or more) $29.96 $19.69 $13.23 $10.20
Class D shares outstanding 3,502,721 203,699 164,585
Class D net assets $99,282,530 $3,768,407 $1,582,641
Net asset value and redemption value per share (Note 4) $28.34 $18.50 $9.62
Offering price per share (100/96.5 x net asset value
per share reduced on sales of $100,000 or more) $29.37 $19.17 $9.97
Identified cost of investments $1,472,588,228 $58,607,870 $32,819,345 $40,439,829
</TABLE>
See notes to financial statements.
41
<PAGE>
- --------------------------------------------------------------------------------
GAM Funds, Inc. - Statements of Assets and Liabilities (continued)
- --------------------------------------------------------------------------------
at 31st December, 1997
<TABLE>
<CAPTION>
GAM GAM GAM
Japan North Asian GAMerica
Capital America Capital Capital
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets (in US$)
Investments in securities at value $28,725,067 $11,151,122 $1,007,703 $3,662,144
Cash - - - -
Cash - Foreign currencies 965,396 - 36,070 -
Receivables:
Securities sold - - 229,956 -
Capital shares sold 143,930 27,730 17,298 155,114
Dividends, interest and other 3,211 13,714 1,299 -
Net equity in foreign currency exchange contracts (Note 6) 1,324,546 - - -
Deferred organizational expenses and other assets 10,644 - 13,480 13,562
--------------- ------------ ----------- ------------
Total assets 31,172,794 11,192,566 1,305,806 3,830,820
--------------- ------------ ----------- ------------
Liabilities
Payables:
Securities purchased - 160,348 7,438 -
Capital shares redeemed 150,091 10,000 437,716 -
Accrued management fee 80,779 26,423 3,937 7,250
Accrued distribution fee 24,390 9,206 1,368 2,193
Accrued expenses and other 45,760 20,416 31,134 22,320
--------------- ------------ ----------- ------------
Total liabilities 301,020 226,393 481,593 31,763
--------------- ------------ ----------- ------------
Net assets $30,871,774 $10,966,173 $824,213 $3,799,057
=============== ============ =========== ============
Source of net assets
Net capital paid in on shares of capital stock (Note 4) $39,943,356 $7,238,788 $1,952,697 $3,109,977
Accumulated net investment income/(loss) (410,969) - (5,597) -
Accumulated net realized gains/(losses) (3,900,870) 294,541 (837,951) 161,861
Net unrealized appreciation/(depreciation) (4,759,743) 3,432,844 (284,936) 527,219
--------------- ------------ ----------- ------------
Net assets $30,871,774 $10,966,173 $824,213 $3,799,057
=============== ============ =========== ============
Class A shares outstanding 3,656,282 633,097 137,015 282,816
Class A net assets $30,871,774 $10,966,173 $824,213 $3,799,057
Net asset value and redemption value per share (Note 4) $8.44 $17.32 $6.02 $13.43
Offering price per share (100/95 x net asset value
per share reduced on sales of $100,000 or more) $8.88 $18.23 $6.34 $14.14
Identified cost of investments $34,800,927 $7,718,276 $1,292,163 $3,134,925
</TABLE>
See notes to financial statements.
42
<PAGE>
- --------------------------------------------------------------------------------
GAM Funds, Inc. - Statements of Operations
- --------------------------------------------------------------------------------
for the year ended 31st December, 1997
<TABLE>
<CAPTION>
GAM
GAM GAM GAM Pacific
International Global Europe Basin
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment income (in US$)
Dividends (Note 5) $24,332,055 $459,140 $630,428 $893,756
Interest (Note 5) 4,448,310 140,838 91,130 111,566
--------------- ------------ ----------- ------------
28,780,365 599,978 721,558 1,005,322
--------------- ------------ ----------- ------------
Expenses
Investment advisory fee (Note 2) 14,631,974 379,486 366,938 502,073
Custodian fees and expenses 1,779,162 55,116 92,056 128,265
Transfer agent fees and expenses 761,329 24,662 19,532 30,772
Shareholder servicing fees 920,356 10,973 14,180 42,349
Distribution fee - Class A (Note 2) 4,210,893 109,036 111,466 144,537
Distribution fee - Class D (Note 2) 330,875 8,594 - 10,036
Professional fees 65,539 32,956 32,359 33,835
Administrative expense 1,463,486 54,473 13,749 69,776
Printing 197,246 7,809 4,210 11,133
Amortization of organization costs - - - -
Filing fees 299,434 1,744 1,280 4,894
Other 108,672 7,307 6,273 12,075
--------------- ------------ ----------- ------------
Total operating expenses 24,768,966 692,156 662,043 989,745
Expenses reimbursed (Note 2) - - - -
Interest expense 18,611 7,068 3,378 7,518
--------------- ------------ ----------- ------------
Total expense 24,787,577 699,224 665,421 997,263
--------------- ------------ ----------- ------------
Net investment income/(loss) 3,992,788 (99,246) 56,137 8,059
--------------- ------------ ----------- ------------
Realized and unrealized
gain/(loss) from investments
and foreign currency
Net realized gain/(loss) from:
Securities and futures 5,496,347 2,265,518 4,224,970 (5,029,765)
Foreign currency transaction 36,414,005 479,874 2,495,699 2,029,961
--------------- ------------ ----------- ------------
41,910,352 2,745,392 6,720,669 (2,999,804)
--------------- ------------ ----------- ------------
Unrealized appreciation/(depreciation) for the period:
Securities and futures 259,590,424 5,933,500 1,121,157 (12,184,320)
Foreign currency translation of
assets and liabilities other than investments 37,422,289 593,305 833,847 268,360
--------------- ------------ ----------- ------------
297,012,713 6,526,805 1,955,004 (11,915,960)
--------------- ------------ ----------- ------------
Net gain/(loss) on investments and foreign currencies 338,923,065 9,272,197 8,675,673 (14,915,764)
--------------- ------------ ----------- ------------
Net increase/(decrease) in net assets from operations $342,915,853 $9,172,951 $8,731,810 ($14,907,705)
=============== ============ =========== ============
</TABLE>
See notes to financial statements.
43
<PAGE>
- --------------------------------------------------------------------------------
GAM Funds, Inc. - Statements of Operations (continued)
- --------------------------------------------------------------------------------
for the year ended 31st December, 1997
<TABLE>
<CAPTION>
GAM GAM GAM
Japan North Asian GAMerica
Capital America Capital Capital
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment income (in US$)
Dividends (Note 5) $146,961 $141,453 $73,906 $22,826
Interest (Note 5) 173,488 23,880 4,200 8,946
--------------- ------------ ----------- ------------
320,449 165,333 78,106 31,772
--------------- ------------ ----------- ------------
Expenses
Investment advisory fee (Note 2) 293,314 85,196 27,653 22,409
Custodian fees and expenses 109,391 7,605 46,273 8,152
Transfer agent fees and expenses 17,563 6,049 3,940 2,174
Shareholder servicing fees 9,083 3,486 1,172 700
Distribution fee - Class A (Note 2) 88,004 25,911 8,195 6,745
Distribution fee - Class D (Note 2) - - - -
Professional fees 24,474 19,541 24,295 17,035
Administrative expenses 36,937 9,841 7,573 3,000
Printing 4,537 2,646 8,068 2,876
Amortization of organization costs 6,650 - 5,267 5,201
Filing fees 15,657 52 - -
Other 11,770 4,902 7,959 4,193
--------------- ------------ ----------- ------------
Total operating expenses 617,380 165,229 140,395 72,485
Expenses reimbursed (Note 2) - - (100,000) -
Interest expense 12,758 50 9,174 5,136
--------------- ------------ ----------- ------------
Total expenses 630,138 165,279 49,569 77,621
--------------- ------------ ----------- ------------
Net investment income/(loss) (309,689) 54 28,537 (45,849)
--------------- ------------ ----------- ------------
Realized and unrealized
gain/(loss) from investments
and foreign currency
Net realized gain/(loss) from:
Securities and futures (2,863,500) 390,977 (623,152) 400,765
Foreign currency transactions 2,336,871 - (17,639) -
--------------- ------------ ----------- ------------
(526,629) 390,977 (640,791) 400,765
--------------- ------------ ----------- ------------
Unrealized appreciation/(depreciation) for the period:
Securities and futures (2,288,040) 1,513,490 (318,739) 351,466
Foreign currency translation of
assets and liabilities other than investments 570,218 - (424) -
--------------- ------------ ----------- ------------
(1,717,822) 1,513,490 (319,163) 351,466
--------------- ------------ ----------- ------------
Net gain/(loss) on investments and foreign currencies (2,244,451) 1,904,467 (959,954) 752,231
--------------- ------------ ----------- ------------
Net increase/(decrease) in net assets from operations ($2,554,140) $1,904,521 ($931,417) $706,382
=============== ============ =========== ============
</TABLE>
See notes to financial statements.
44
<PAGE>
- --------------------------------------------------------------------------------
GAM Funds, Inc. - Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GAM International GAM Global GAM Europe
------------------------------- --------------------------- ---------------------------
For the year For the year For the year For the year For the year For the year
ended ended ended ended ended ended
31st Dec., 31st Dec., 31st Dec., 31st Dec., 31st Dec., 31st Dec.,
1997 1996 1997 1996 1997 1996
<S> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------
Increase/(Decrease) in net
assets from:
Operations
Net investment income/(loss) $3,992,788 $23,352,061 ($99,246) $236,346 $56,137 $157,888
Net realized gain/(loss) 41,910,352 (3,924,932) 2,745,392 1,542,721 6,720,669 1,945,168
Unrealized appreciation/(depreciation)
for the year 297,012,713 75,798,692 6,526,805 292,207 1,955,004 2,542,288
-------------- -------------- ------------ ------------ ------------ ------------
Net increase in
net assets from operations 342,915,853 95,225,821 9,172,951 2,071,274 8,731,810 4,645,344
Dividends paid to shareholders from:
Net investment income
Class A (9,853,914) (3,931,303) (41,404) (104,667) (157,450) (12,643)
Class D (446,919) (20,209) (3,430) (765) - -
Net realized gain on investments
Class A (69,883,955) (1,784,396) (1,964,612) (1,034,220) (6,689,436) (709,600)
Class D (3,900,288) (63,253) (113,298) (43,139) - -
Capital share transactions (Note 4) 585,581,903 390,160,627 42,059,028 (6,945,972) 12,088,259 (1,757,129)
-------------- -------------- ------------ ------------ ------------ ------------
Total increase/(decrease)
in net assets 844,412,680 479,587,287 49,109,235 (6,057,489) 13,973,183 2,165,972
Net assets
Beginning of year 1,048,535,332 568,948,045 20,398,263 26,455,752 25,127,405 22,961,433
-------------- -------------- ------------ ------------ ------------ ------------
End of year $1,892,948,012 $1,048,535,332 $69,507,498 $20,398,263 $39,100,588 $25,127,405
============== ============== ============ ============ ============ ============
</TABLE>
See notes to financial statements.
45
<PAGE>
- --------------------------------------------------------------------------------
GAM Funds, Inc. - Statements of Changes in Net Assets (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GAM Pacific Basin GAM Japan Capital GAM North America
---------------------------- --------------------------- ---------------------------
For the year For the year For the year For the year For the year For the year
ended ended ended ended ended ended
31st Dec., 31st Dec., 31st Dec., 31st Dec., 31st Dec., 31st Dec.,
1997 1996 1997 1996 1997 1996
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Increase/(Decrease) in net
assets from:
Operations
Net investment income/(loss) $ 8,059 $ 136,753 $ (309,689) $ (173,050) $ 54 $ (21,847)
Net realized gain/(loss) (2,999,804) 7,490,904 (526,629) 3,411,826 390,977 562,745
Unrealized appreciation/(depreciation)
for the year (11,915,960) (9,000,460) (1,717,822) (4,080,940) 1,513,490 710,420
------------ ----------- ----------- ----------- ----------- ----------
Net increase/(decrease) in
net assets from operations (14,907,705) (1,372,803) (2,554,140) (842,164) 1,904,521 1,251,318
Dividends paid to shareholders from:
Net investment income
Class A -- (2,363,071) -- (2,786,341) (576) --
Class D -- (73,778) -- -- -- --
Net realized gain on investments
Class A (3,364,522) (3,041,344) (2,411,374) (326,642) (130,244) (506,891)
Class D (168,365) (101,996) -- -- -- --
Capital share transactions (Note 4) (8,616,881) 3,147,400 (679,565) 26,871,997 3,339,649 (872,358)
------------ ----------- ----------- ----------- ----------- ----------
Total increase/(decrease)
in net assets (27,057,473) (3,805,592) (5,645,079) 22,916,850 5,113,350 (127,931)
Net assets
Beginning of year 51,685,813 55,491,405 36,516,853 13,600,003 5,852,823 5,980,754
------------ ----------- ----------- ----------- ----------- ----------
End of year $ 24,628,340 $51,685,813 $30,871,774 $36,516,853 $10,966,173 $5,852,823
============ =========== =========== =========== =========== ==========
</TABLE>
See notes to financial statements.
46
<PAGE>
- --------------------------------------------------------------------------------
GAM Funds, Inc. - Statements of Changes in Net Assets (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GAM Asian Capital GAMerica Capital
--------------------------- --------------------------
For the year For the year For the year For the year
ended ended ended ended
31st Dec., 31st Dec., 31st Dec., 31st Dec.,
1997 1996 1997 1996
-------------------------------------------------------
<S> <C> <C> <C> <C>
Increase/(Decrease) in net
assets from:
Operations
Net investment income/(loss) $ 28,537 $ (50,095) $ (45,849) $ (87,946)
Net realized gain/(loss) (640,791) (84,553) 400,765 292,631
Unrealized appreciation/(depreciation)
for the year (319,163) 235,381 351,466 175,800
----------- ---------- ---------- -----------
Net increase/(decrease) in
net assets from operations (931,417) 100,733 706,382 380,485
Dividends paid to shareholders from:
Net investment income
Class A (3,857) -- -- --
Class D -- -- -- --
Net realized gain on investments
Class A (74,195) (8,786) (228,865) (169,707)
Class D -- -- -- --
Capital share transactions (Note 4) (3,795,577) (23,103) 1,397,530 (1,316,024)
----------- ---------- ---------- -----------
Total increase/(decrease)
in net assets (4,805,046) 68,844 1,875,047 (1,105,246)
Net assets
Beginning of year 5,629,259 5,560,415 1,924,010 3,029,256
----------- ---------- ---------- -----------
End of year $ 824,213 $5,629,259 $3,799,057 $ 1,924,010
=========== ========== ========== ===========
</TABLE>
See notes to financial statements.
47
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
Note 1. Significant accounting policies
GAM Funds, Inc. (the "Company"), is an open-end diversified investment company
registered under the Investment Company Act of 1940 comprised of eight
portfolios: GAM International Fund, GAM Global Fund, GAM Europe Fund, GAM
Pacific Basin Fund, GAM Japan Capital Fund, GAM North America Fund, GAM Asian
Capital Fund, and GAMerica Capital Fund (the Funds).
Each Fund seeks long-term capital appreciation by investing primarily in equity
securities. GAM International Fund invests primarily in securities of companies
in Europe, the Pacific Basin and Canada. GAM Global Fund invests primarily in
securities of companies in the United States, Europe, the Pacific Basin and
Canada. GAM Europe Fund invests primarily in securities of companies in Europe.
GAM Pacific Basin Fund invests primarily in securities of companies in the
Pacific Basin. GAM Japan Capital Fund invests primarily in securities of
companies in Japan. GAM North America Fund invests primarily in securities of
companies in the United States and Canada. GAM Asian Capital Fund invests
primarily in securities of companies in Asia excluding Japan. GAMerica Capital
Fund invests primarily in securities of companies in the United States.
The Funds offer Class A and Class D shares however, Class D shares currently are
available only for GAM International Fund, GAM Global Fund and GAM Pacific Basin
Fund. Class A shares are sold with a front-end sales charge of up to 5.0% and
Class D shares are sold with a front-end sales charge of up to 3.5%. The two
classes of shares have identical voting, dividend, liquidation and other rights,
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 federal or state law. The following is
a summary of significant accounting policies followed in the preparation of the
Company's financial statements.
Valuation of securities
Investment securities are stated at value based on the last sale price on the
principal exchange on which the securities are traded, or, lacking any sales, at
the last available bid price. Securities traded in the over-the-counter market
are valued at the last available bid price. Short-term securities maturing in 60
days or less are valued on an amortized cost basis which approximates market
value. Forward foreign currency contracts are valued at the forward rate and are
marked to market daily. Other securities for which market quotations are not
readily available are valued at fair value as determined by or under the
direction of the Board of Directors.
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. The Funds could suffer losses in the event of a default or insolvency
of the brokerage firm or other counterparty issuing the ARIN.
Foreign currency
Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into US dollar amounts at date of valuation. Purchases
and sales of portfolio securities and income items denominated in foreign
currencies are translated into US dollar amounts on the respective dates of such
transactions.
The Funds do not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
48
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
Reported net realized foreign exchange gains or losses arise from sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, the difference between the amounts
of dividends, interest and foreign withholding taxes recorded on the Funds'
books, and the US dollar equivalent of the amounts actually received or paid.
Net unrealized foreign exchange gains and losses arise from changes in the value
of assets and liabilities other than investments in securities at fiscal period
end, resulting from changes in the exchange rate.
Foreign currency contracts
Each Fund may enter into forward foreign currency exchange contracts primarily
in order to hedge against foreign currency exchange rate risks on the non-US
dollar denominated investment securities. These contracts are valued daily and
the Funds' equity therein, representing unrealized gain or loss on the
contracts, is included in the Statement of Assets and Liabilities. Realized and
unrealized gains and losses on these contracts are included in the Statement of
Operations.
Futures contracts
Initial margin deposits made with respect to futures contracts traded on
domestic exchanges are maintained by the Funds' custodian in segregated asset
accounts. Initial margin deposits made upon entering into futures contracts
traded on foreign exchanges are recognized as assets due from the broker (the
Funds' agent in acquiring the futures positions). Subsequent changes in the
daily valuation of open contracts are recognized as unrealized gains or losses.
Variation margin payments are made or received on domestically traded futures as
appreciation or depreciation in the value of these contracts occurs. Realized
gains or losses are recorded when a contract is closed.
Federal income taxes
It is each Fund's policy to satisfy the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
taxable income to shareholders. Therefore, no provision for Federal income taxes
is required.
Option contracts
The Funds may invest, for hedging and other purposes, in call and put options on
securities, currencies and futures contracts. Call and put options give the
Funds the right but not the obligation to buy (calls) or sell (puts) the
instrument underlying the option at a specified price. The premium paid on the
option, should it be excercised, will, on a call, increase the cost of the
instrument acquired and, on a put, reduce the proceeds received from the sale of
the instrument underlying the option. If the options are not exercised, the
premium paid will be recorded as a capital loss upon expiration. The Funds may
incur additional risk to the extent that the value of the underlying instrument
does not correlate with the movement of the option value.
Distributions to shareholders
Distributions are recorded on the ex-dividend date. Income and capital gain
distributions are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles. These differences, which
may result in distribution reclassifications, are primarily due to differing
treatments for futures transactions, foreign currency transactions, passive
foreign investment companies (PFIC), capital loss carryforwards and losses
deferred due to wash sales and excise tax regulations. Permanent book and tax
basis differences relating to shareholder distributions will result in
reclassifications to paid-in capital and may affect the per share distribution
between net investment income and realized and unrealized gain/(loss). The
calculation of Net Investment Income per share in the Selected Financial
Information excludes these adjustments. Undistributed net investment
income/(loss) and accumulated undistributed net realized gain/(loss) on
investments and foreign currency transactions may include temporary book and tax
basis differences which will reverse in a subsequent period. Any taxable income
or gain remaining at fiscal year end is distributed in the following year.
49
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
Deferred organization expenses
Organization costs for GAM Japan Capital Fund, GAM Asian Capital Fund and
GAMerica Capital Fund have been deferred and are being amortized on a
straight-line basis over a five-year period from each Fund's commencement of
operations.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expense during the reporting period. Actual
results could differ from those estimates.
Other
Securities transactions are recorded on the trade date basis. Interest is
accrued on a daily basis and market discount is accreted on a straight-line
basis. Dividend income is recorded on the ex-dividend date, except that certain
dividends on foreign securities are recorded as soon as information is available
to the Fund.
Note 2. Investment advisory fee and other transactions with affiliates
The Investment Adviser, GAM International Management Limited, receives a fee
under its agreement with the Company equivalent to 1% per annum of each Fund's
average daily net assets, except for GAM North America Fund. With respect to GAM
North America Fund, GAM International Management Limited and Fayez Sarofim & Co.
serve as co-investment advisers to the Fund. Each co-adviser receives a fee
under its agreement equivalent to 0.50% per annum of the Fund's average daily
net assets. For the year ended 31st December, 1997 GAM International Management
Limited waived its entire advisory fee due from the GAM Asian Capital Fund and
assumed additional fund expenses totalling $72,347.
GAM Services, Inc. acts as principal underwriter of the Fund. For the year ended
31st December, 1997, GAM Services, Inc. received front-end sales load charges of
$3,156,062 from the sale of the Funds' shares.
Effective 5th September, 1995, the Funds adopted a Class D Distribution Plan
pursuant to Rule 12b-1 under the Investment Company Act of 1940 which provides
for payments by the Funds to GAM Services at the annual rate of up to 0.50% of
each applicable Fund's average net assets attributable to Class D shares.
Effective 9th October, 1996, the Funds adopted a Class A Distribution Plan
pursuant to this rule which provides for payments by the Funds to GAM Services
at the annual rate of up to 0.30% of each applicable Fund's average net assets
attributable to Class A shares.
Note 3. Directors fees
The Funds do not pay any compensation to their officers or to any directors,
officers or employees of GAM International Management Limited, GAM Services Inc.
or their affiliates. Each disinterested director is compensated by each Fund as
follows:
<TABLE>
<CAPTION>
GAM GAM GAM GAM GAM GAM GAM GAMerica
International Global Europe Pacific Basin Japan Capital North America Asian Capital Capital
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Annual Retainer $625 $625 $625 $625 $625 $625 $625 $625
Meeting Fee 63 63 63 63 63 63 63 63
</TABLE>
50
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
Note 4. Capital stock
The Company declared a 10-for-1 stock split to shareholders of record as of 19th
December, 1995. All per share data have been restated to reflect the stock
split.
At 31st December, 1997, GAM Funds, Inc. had 700,000,000 shares of common stock,
$0.001 par value authorized. For each of the eight active funds shares were
allocated as follows: 150,000,000 and 50,000,000 shares, respectively, were
allocated to each of Class A and Class D of GAM International, 50,000,000 and
25,000,000 shares, respectively, were allocated to Class A and Class D of GAM
Global, GAM Europe, GAM Pacific Basin and GAM North America, 25,000,000 shares,
were allocated to each of Class A and Class D of GAMerica Capital, while
45,000,000 and 12,500,000 shares, respectively, were allocated to each of Class
A and Class D of GAM Japan Capital and GAM Asian Capital. Changes in each Fund's
capital stock are summarized as follows:
<TABLE>
<CAPTION>
GAM International Fund
For the Periods
------------------------------------------------------------
01-Jan-97 to 31-Dec-97 01-Jan-96 to 31-Dec-96
Shares US$ Shares US$
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Class A
Shares sold 29,334,376 797,964,527 33,365,859 692,156,317
Shares issued on reinvestment of dividends 2,500,837 69,462,995 219,386 4,843,204
Shares redeemed (12,437,416) (332,541,512) (16,170,479) (333,081,923)
----------- ------------ ----------- ------------
Net increase 19,397,797 534,886,010 17,414,766 363,917,598
=========== ============ =========== ============
Class D
Shares sold 2,142,282 59,042,169 1,461,453 30,255,446
Shares issued on reinvestment of dividends 134,583 3,717,035 3,688 78,975
Shares redeemed (452,108) (12,063,311) (195,341) (4,091,392)
----------- ------------ ----------- ------------
Net increase/(decrease) 1,824,757 50,695,893 1,269,800 26,243,029
=========== ============ =========== ============
<CAPTION>
GAM Global Fund
For the Periods
------------------------------------------------------------
01-Jan-97 to 31-Dec-97 01-Jan-96 to 31-Dec-96
Shares US$ Shares US$
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Class A
Shares sold 3,043,487 53,815,753 899,878 11,907,144
Shares issued on reinvestment of dividends 95,084 1,743,330 64,567 915,513
Shares redeemed (989,599) (16,207,961) (1,535,935) (20,228,744)
----------- ------------ ----------- ------------
Net increase/(decrease) 2,148,972 39,351,122 (571,490) (7,406,087)
=========== ============ =========== ============
Class D
Shares sold 164,316 3,018,076 54,061 697,624
Shares issued on reinvestment of dividends 5,659 102,511 2,735 38,450
Shares redeemed (23,624) (412,681) (21,328) (275,959)
----------- ------------ ----------- ------------
Net increase/(decrease) 146,351 2,707,906 35,468 460,115
=========== ============ =========== ============
</TABLE>
51
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GAM Europe Fund
For the Periods
------------------------------------------------------------
01-Jan-97 to 31-Dec-97 01-Jan-96 to 31-Dec-96
Shares US$ Shares US$
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Class A
Shares sold 2,155,335 28,650,194 1,072,701 12,022,756
Shares issued on reinvestment of dividends 382,881 4,693,020 47,646 542,923
Shares redeemed (1,547,698) (21,254,955) (1,287,490) (14,322,808)
---------- ------------ ----------- ------------
Net increase/(decrease) 990,518 12,088,259 (167,143) (1,757,129)
========== ============ =========== ============
<CAPTION>
GAM Pacific Basin Fund
For the Periods
------------------------------------------------------------
01-Jan-97 to 31-Dec-97 01-Jan-96 to 31-Dec-96
Shares US$ Shares US$
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Class A
Shares sold 1,941,999 28,048,990 2,466,475 43,289,379
Shares issued on reinvestment of dividends 236,407 2,658,787 265,013 4,074,012
Shares redeemed (3,062,559) (39,899,633) (2,646,254) (44,771,351)
---------- ------------ ----------- ------------
Net increase/(decrease) (884,153) (9,191,856) 85,234 2,592,040
========== ============ =========== ============
Class D
Shares sold 51,066 746,179 53,648 907,532
Shares issued on reinvestment of dividends 14,840 163,481 1,072 17,934
Shares redeemed (24,922) (334,685) (22,302) (370,106)
---------- ------------ ----------- ------------
Net increase/(decrease) 40,984 574,975 32,418 555,360
========== ============ =========== ============
</TABLE>
52
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GAM Japan Capital Fund
For the Periods
-----------------------------------------------------------
01-Jan-97 to 31-Dec-97 01-Jan-96 to 31-Dec-96
Shares US$ Shares US$
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Class A
Shares sold 3,911,543 38,716,276 4,134,008 43,069,239
Shares issued on reinvestment of dividends 219,840 1,969,882 232,747 2,201,623
Shares redeemed (4,362,649) (41,365,723) (1,817,450) (18,398,865)
---------- ----------- ---------- -----------
Net increase/(decrease) (231,266) (679,565) 2,549,305 26,871,997
========== =========== ========== ===========
<CAPTION>
GAM North America Fund
For the Periods
-----------------------------------------------------------
01-Jan-97 to 31-Dec-97 01-Jan-96 to 31-Dec-96
Shares US$ Shares US$
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Class A
Shares sold 392,721 6,494,878 69,484 911,748
Shares issued on reinvestment of dividends 5,909 101,515 26,418 360,609
Shares redeemed (197,145) (3,256,744) (165,717) (2,144,715)
---------- ----------- ---------- -----------
Net increase/(decrease) 201,485 3,339,649 (69,815) (872,358)
========== =========== ========== ===========
</TABLE>
53
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GAM Asian Capital Fund
For the Periods
---------------------------------------------------------
01-Jan-97 to 31-Dec-97 01-Jan-96 to 31-Dec-96
Shares US$ Shares US$
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Class A
Shares sold 180,437 1,471,448 414,332 4,143,499
Shares issued on reinvestment of dividends 10,133 75,019 146 1,512
Shares redeemed (626,223) (5,342,044) (425,435) (4,168,114)
-------- ---------- -------- ----------
Net increase/(decrease) (435,653) (3,795,577) (10,957) (23,103)
======== ========== ======== ==========
<CAPTION>
GAMerica Capital Fund
For the Periods
---------------------------------------------------------
01-Jan-97 to 31-Dec-97 01-Jan-96 to 31-Dec-96
Shares US$ Shares US$
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Class A
Shares sold 168,956 2,197,313 21,800 269,201
Shares issued on reinvestment of dividends 9,395 124,173 9,804 102,358
Shares redeemed (73,313) (923,956) (155,887) (1,687,583)
-------- ---------- -------- ----------
Net increase/(decrease) 105,038 1,397,530 (124,283) (1,316,024)
======== ========== ======== ==========
</TABLE>
54
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
Note 5. Investment Transactions
The cost of purchases and proceeds of sales of investment securities for the
year ended 31st December, 1997 excluding short-term securities, were as follows:
<TABLE>
<CAPTION>
GAM GAM GAM GAM GAM GAM GAM GAMerica
International Global Europe Pacific Basin Japan Capital North America Asian Capital Capital
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
In US$
Purchases 1,116,659,837 49,848,083 34,319,310 19,611,861 19,366,786 3,801,870 1,852,186 478,500
Sales 665,661,509 17,131,044 27,028,226 30,418,744 25,744,372 1,243,057 5,767,264 879,012
</TABLE>
Realized gains and losses are reported on an identified cost basis. At 31st
December, 1997, the aggregate gross unrealized appreciation and depreciation of
securities, based on cost for federal income taxes purposes, were as follows:
<TABLE>
<CAPTION>
GAM GAM GAM GAM GAM GAM GAM GAMerica
International Global Europe Pacific Basin Japan Capital North America Asian Capital Capital
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
In US$
Appreciation 395,669,646 10,437,765 6,133,636 2,083,055 1,792,003 3,538,945 18,807 743,007
Depreciation (28,199,091) (841,717) (904,203) (18,863,861) (9,157,874) (106,099) (312,810) (215,788)
----------- ---------- --------- ---------- --------- --------- ------- -------
Net 367,470,555 9,596,048 5,229,433 (16,780,806) (7,365,871) 3,432,846 (294,003) 527,219
=========== ========== ========= ========== ========= ========= ======= =======
</TABLE>
At 31st December, 1997, the Funds had tax basis net capital losses as follows.
These losses may be carried over to offset future capital gains through the
expiration dates shown:
<TABLE>
<CAPTION>
GAM GAM GAM GAM GAM GAM GAM GAMerica
International Global Europe Pacific Basin Japan Capital North America Asian Capital Capital
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
In US$ -- -- -- 770,561 507,841 -- 291,731 --
2,414,939
Carryforward -- -- -- 31st Dec, 31st Dec, -- 31st Dec, --
Expiration
dates -- -- -- 2005 2003 & 2005 -- 2005 --
</TABLE>
Foreign taxes withheld from dividends and interest for the year ended 31st
December, 1997, were as follows:
<TABLE>
<CAPTION>
GAM GAM GAM GAM GAM GAM GAM GAMerica
International Global Europe Pacific Basin Japan Capital North America Asian Capital Capital
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
In US$
Dividends 3,312,224 24,965 78,203 75,952 30,251 401 1,606 241
Interest -- -- -- -- 13 -- -- --
</TABLE>
55
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
Note 6. Financial Instruments
During the period, several of the Funds have been party to financial instruments
with off-balance sheet risks, including forward foreign currency contracts and
futures contracts, primarily in an attempt to minimize the risk to the Fund, in
respect of its portfolio transactions. These instruments involve market and/or
credit risk in excess of the amount recognized in the Statement of Assets and
Liabilities. Risks arise from the possible inability of counterparties to meet
the terms of their contracts and from unexpected movement in currencies,
securities values and interest rates. The contract amounts indicate the extent
of the Funds' involvement in such contracts.
Forwards: When entering a forward currency contract, the Fund agrees to receive
or deliver a fixed quantity of foreign currency for an agreed upon price on an
agreed upon future date.
At 31st December, 1997 the Fund had outstanding forward contracts for the
purchase and sale of currencies as set out below. The contracts are reported in
the financial statements at the Fund's net equity, as measured by the difference
between the forward foreign exchange rates at the dates of entry into the
contracts and the forward rates at the reporting date, or the date an offsetting
position, if any, has been entered into.
GAM INTERNATIONAL FUND
Unrealized
appreciation/
(depreciation)
--------------
US$
550,125,000 Belgian francs sold vs. 15,000,000 US$
23rd January, 1998 150,595
323,820,000 Belgian francs sold vs. 9,000,000 US$
29th April, 1998 210,336
245,905,200 Swiss francs sold vs. 172,000,000 US$
17th April, 1998 1,604,583
220,468,600 German marks sold vs. 125,999,999 US$,
14th January, 1998 (115,398)
201,699,000 Dutch guilders sold vs. 30,000,000 US$
29th June, 1998 294,015
7,093,005,000 Spanish pesetas sold vs. 47,000,000 US$,
14th January, 1998 (116,769)
348,360,000 French francs sold vs. 60,000,000 US$,
5th January, 1998 (145,505)
984,059,700 French francs sold vs. 166,000,000 US$
14th January, 1998 987,968
53,406,000 French francs sold vs 9,000,000 US$
6th July, 1998 32,314
177,260,721 UK Pound sterling sold vs. 280,000,000 US$
9th February, 1998 (10,641,937)
43,465,000,000 Italian lire sold vs. 25,000,000 US$
9th June, 1998 407,232
4,047,200,000 Japanese yen sold vs. 36,000,000 US$,
5th January, 1998 4,384,408
38,723,609,000 Japanese yen sold vs. 336,700,000 US$,
22nd January, 1998 39,232,491
56
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
Unrealized
appreciation/
(depreciation)
--------------
US$
3,798,000,000 Japanese yen sold vs. 30,000,000 US$,
6th July, 1998 91,348
321,885,700 Dutch guilders sold vs. 164,000,000 US$,
14th January, 1998 3,055,401
142,254,000 Swedish krona sold vs. 18,000,000 US$
30th January, 1998 37,306
570,280,000 Japanese yen bought vs. 4,384,408 US$,
5th January, 1998 (18,223)
----------
Net equity in foreign currency exchange contracts 39,450,165
==========
GAM GLOBAL FUND
US$
2,468,380 Swiss francs sold vs. 1,728,000 US$
17th April, 1998 17,582
8,063,515 French francs sold vs. 1,350,000 US$
14th January, 1998 8,991
7,056,000 French francs sold vs. 1,200,000 US$
16th June, 1998 16,470
3,617,305 German Marks sold vs. 1,850,000 US$
12th January, 1998 64,488
1,141,087 UK Pound sterling sold vs. 1,800,000 US$
9th February, 1998 (70,959)
78,071,000 Japanese yen sold vs. 700,000 US$
5th January, 1998 99,777
812,071,900 Japanese yen sold vs. 6,830,000 US$
22nd January, 1998 591,815
88,620,000 Japanese yen sold vs. 700,000 US$
6th July, 1998 2,131
653,835 Dutch guilders sold vs. 350,000 US$
14th January, 1998 (13,791)
3,530,124 Swedish krona sold vs. 456,000 US$
15th June, 1998 8,799
12,978,000 Japanese yen bought vs. 99,777 US$
5th January, 1998 (415)
----------
Net equity in foreign currency exchange contracts 724,888
==========
57
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
GAM EUROPE FUND
Unrealized
appreciation/
(depreciation)
--------------
US$
29,000,000 Belgian francs sold vs. 802,768 US$
26th January, 1998 19,837
3,750,000 Swiss francs sold vs. 2,656,654 US$
26th January, 1998 81,894
7,500,000 German marks sold vs 4,282,778 US$
26th January, 1998 77,175
15,500,000 Danish krone sold vs. 2,323,490 US$
26th January, 1998 57,708
132,000,000 Spanish pesetas sold vs. 889,428 US$
26th January, 1998 22,489
5,350,000 Finnish markka sold vs. 1,011,591 US$
26th January, 1998 27,516
52,000,000 French francs sold vs. 8,872,812 US$
26th January, 1998 218,528
4,250,000,000 Italian lire sold vs. 2,465,583 US$
26th January, 1998 62,971
5,700,000 Dutch guilders sold vs. 2,888,782 US$
26th January, 1998 72,622
14,000,000 Norwegian kroner sold vs. 1,957,221 US$
26th January, 1998 54,894
95,000,000 Portuguese escudos sold vs. 526,987 US$
26th January, 1998 10,385
25,500,000 Swedish krona sold vs. 3,313,840 US$
26th January, 1998 94,297
----------
Net equity in foreign currency exchange contracts 800,316
==========
GAM PACIFIC BASIN FUND
US$
1,556,100,000 Japanese yen sold vs. 13,000,000 US$
22nd January, 1998 956,308
5,688,623 Australian dollar sold vs. 3,800,000 US$
16th March, 1998 84,760
----------
Net equity in foreign currency exchange contracts 1,041,068
==========
58
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
GAM JAPAN CAPITAL FUND
Unrealized
appreciation/
(depreciation)
--------------
US$
119,620,000 Japanese yen sold vs. 1,000,000 US$
14th January, 1998 82,217
837,550,000 Japanese yen sold vs. 7,000,000 US$
20th January, 1998 568,053
1,020,680,000 Japanese yen sold vs. 8,500,000 US$
6th February, 1998 641,805
384,210,000 Japanese yen sold vs. 3,000,000 US$
9th March, 1998 28,845
128,500,000 Japanese yen sold vs. 1,000,000 US$
26th March, 1998 3,626
Net equity in foreign currency exchange contracts 1,324,546
At 31st December, 1997 the Funds had sufficient cash and/or securities to cover
any commitments under these contracts.
59
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
Note 7. Selected financial information
<TABLE>
<CAPTION>
Per share operating performance (for a share outstanding throughout the period)
-----------------------------------------------------------------------------------------------------------------
Income from investment operations Less distributions
----------------------------------------- ----------------------------------------
Net realized Dividends Distributions
Net asset value, Net and unrealized Total from from net from net Net asset
beginning investment gain/(loss) on investment investment realized Total value, end
of period income/(loss) investments operations income gains Distributions of period
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
01-Jan-97 to
31-Dec-97
US$
GAM International
Class A US$ 23.15 0.08+ 6.58 6.66 (0.18) (1.17) (1.35) US$ 28.46
Class D US$ 23.07 0.01+ 6.59 6.60 (0.16) (1.17) (1.33) US$ 28.34
GAM Global
Class A US$ 14.35 (0.04)+ 5.04 5.00 (0.02) (0.62) (0.64) US$ 18.71
Class D US$ 14.22 (0.09)+ 5.02 4.93 (0.03) (0.62) (0.65) US$ 18.50
GAM Europe
Class A US$ 11.85 0.02+ 3.15 3.17 (0.06) (2.39) (2.45) US$ 12.57
GAM Pacific Basin
Class A US$ 15.26 0.00+ (4.45) (4.45) -- (1.12) (1.12) US$ 9.69
Class D US$ 15.20 0.01+ (4.47) (4.46 ) -- (1.12) (1.12) US$ 9.62
GAM Japan Capital
Class A US$ 9.39 (0.10)+ (0.11) (0.21) -- (0.74) (0.74) US$ 8.44
GAM North America
Class A US$ 13.56 0.00+ 3.99 3.99 -- (0.23) (0.23) US$ 17.32
GAM Asian Capital
Class A US$ 9.83 0.09+ (3.48) (3.39) (0.02) (0.40) (0.42) US$ 6.02
GAMerica Capital
Class A US$ 10.82 (0.24)+ 4.23 3.99 0.00 (1.38) (1.38) US$ 13.43
01-Jan-96 to
31-Dec-96
US$
GAM International
Class A US$ 21.37 0.57+ 1.34 1.91 (0.09) (0.04) (0.13) US$ 23.15
Class D US$ 21.35 0.45+ 1.32 1.77 (0.01) (0.04) (0.05) US$ 23.07
GAM Global
Class A US$ 13.51 0.16+ 1.55 1.71 (0.08) (0.79) (0.87) US$ 14.35
Class D US$ 13.48 0.07+ 1.47 1.54 (0.01) (0.79) (0.80) US$ 14.22
GAM Europe
Class A US$ 10.04 0.07+ 2.06 2.13 (0.01) (0.31) (0.32) US$ 11.85
GAM Pacific Basin
Class A US$ 16.97 0.04+ (0.11) (0.07) (0.74) (0.90) (1.64) US$ 15.26
Class D US$ 16.96 (0.10)+ (0.11) (0.21) (0.65) (0.90) (1.55) US$ 15.20
GAM Japan Capital
Class A US$ 10.16 (0.05)+ 0.07 0.02 (0.70) (0.09) (0.79) US$ 9.39
GAM North America
Class A US$ 11.93 (0.05)+ 2.93 2.88 -- (1.25) (1.25) US$ 13.56
GAM Asian Capital
Class A US$ 9.53 (0.07)+ 0.38 0.31 -- (0.01) (0.01) US$ 9.83
GAMerica Capital
Class A US$ 10.03 (0.42)+ 2.22 1.80 -- (1.01) (1.01) US$ 10.82
</TABLE>
60
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Per share operating performance (for a share outstanding throughout the period)
-----------------------------------------------------------------------------------------------------------------
Income from investment operations Less distributions
----------------------------------------- ----------------------------------------
Net realized Dividends Distributions
Net asset value, Net and unrealized Total from from net from net Net asset
beginning investment gain/(loss) on investment investment realized Total value, end
of period income/(loss) investments operations income gains Distributions of period
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
01-Jan-95 to
31-Dec-95
US$
GAM International
Class A US$ 17.21 0.52 4.64 5.16 (0.47) (0.53) (1.00) US$ 21.37
Class D US$ 20.46 0.10 1.78 1.88 (0.46) (0.53) (0.99) US$ 21.35
GAM Global
Class A US$ 10.60 0.35 3.48 3.83 (0.30) (0.62) (0.92) US$ 13.51
Class D US$ 13.46 -- 0.92 0.92 (0.28) (0.62) (0.90) US$ 13.48
GAM Europe
Class A US$ 8.66 0.07 1.38 1.45 (0.06) (0.01) (0.07) US$ 10.04
GAM Pacific Basin
Class A US$ 17.62 -- 0.61 0.61 -- (1.26) (1.26) US$ 16.97
Class D US$ 17.36 (0.02) 0.26 0.24 -- (0.64) (0.64) US$ 16.96
GAM Japan Capital
Class A US$ 9.62 (0.07) 0.69 0.62 (0.05) (0.03) (0.08) US$ 10.16
GAM North America
Class A US$ 9.14 -- 2.83 2.83 -- (0.04) (0.04) US$ 11.93
GAM Asian
Capital **
Class A US$ 10.00 (0.01) (0.42) (0.43) -- (0.04) (0.04) US$ 9.53
GAMerica
Capital **
Class A US$ 10.00 0.07 0.07 0.14 (0.07) (0.04) (0.11) US$ 10.03
01-Jan-94 to
31-Dec-94
US$
GAM International US$ 23.90 0.34 (2.58) (2.24) (0.66) (3.79) (4.45) US$ 17.21
GAM Global US$ 17.92 0.19 (2.94) (2.75) (0.49) (4.08) (4.57) US$ 10.60
GAM Europe US$ 8.93 -- (0.27) (0.27) -- -- -- US$ 8.66
GAM Pacific Basin US$ 19.20 (0.05) 1.36 1.31 -- (2.89) (2.89) US$ 17.62
GAM Japan
Capital* US$ 10.00 0.02 (0.40) (0.38) -- -- -- US$ 9.62
GAM North America US$ 12.80 0.04 0.23 0.27 (0.23) (3.70) (3.93) US$ 9.14
01-Jan-93 to
31-Dec-93
US$
GAM International US$ 14.56 0.25 10.38 10.63 (0.34) (0.95) (1.29) US$ 23.90
GAM Global US$ 10.33 0.24 7.46 7.70 (0.11) -- (0.11) US$ 17.92
GAM Europe US$ 7.34 0.24 1.41 1.65 (0.06) -- (0.06) US$ 8.93
GAM Pacific Basin US$ 13.14 (0.03) 6.57 6.54 (0.04) (0.44) (0.48) US$ 19.20
GAM North America US$ 13.63 0.19 (0.46) (0.27) (0.07) (0.49) (0.56) US$ 12.80
</TABLE>
+ For the years ended 31st December 1996 and 1997, net investment income per
share has been determined based on the weighted average shares outstanding
method.
* Period from 1st July, 1994 (Inception) to 31st December, 1994.
** Period from 12th May, 1995 (Inception) to 31st December, 1995.
61
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratios/supplemental data
------------------------------------------------------------------------------------------
Ratios to average net assets
----------------------------
Total return
(without Net assets Net Portfolio Average
deduction of end of period investment turnover commission
sales load)++++ (000 omitted) Expenses income/(loss) rate rate paid ss.
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
01-Jan-97 to
31-Dec-97
US$
GAM International
Class A 28.93% US$ 1,793,665 1.68% 0.28% 48% 0.0444
Class D 28.78% US$ 99,283 1.82% 0.05% 48% 0.0444
GAM Global
Class A 34.95% US$ 65,739 1.83% (0.25)% 48% 0.0733
Class D 34.80% US$ 3,768 2.01% (0.53)% 48% 0.0733
GAM Europe
Class A 27.55% US$ 39,101 1.81% 0.15% 80% 0.0352
GAM Pacific Basin
Class A (30.00)% US$ 23,046 1.98% 0.02% 42% 0.0168
Class D (30.18)% US$ 1,583 2.08% (0.09)% 42% 0.0168
GAM Japan Capital
Class A (2.58)% US$ 30,872 2.15% (1.06)% 76% 0.0554
GAM North America
Class A 29.41% US$ 10,966 1.94% 0% 15% 0.0600
GAM Asian Capital **
Class A (35.34)% US$ 824 1.81% 1.04% 68% 0.0078
GAMerica Capital
Class A 37.28% US$ 3,799 3.45% (2.04)% 22% 0.0152
01-Jan-96 to
31-Dec-96
US$
GAM International+++
Class A 8.98% US$ 1,009,819 1.56% 2.70% 82% 0.0202
Class D 8.33% US$ 38,716 2.06% 2.13% 82% 0.0202
GAM Global+++
Class A 12.74% US$ 19,583 2.26% 1.17% 107% 0.0255
Class D 11.54% US$ 815 2.88% 0.52% 107% 0.0255
GAM Europe+++
Class A 21.32% US$ 25,127 1.89% 0.59% 76% 0.0168
GAM Pacific Basin+++
Class A (0.39)% US$ 49,808 1.76% 0.22% 46% 0.0251
Class D (1.19)% US$ 1,878 2.28% (0.57)% 46% 0.0251
GAM Japan Capital+++
Class A 0.15% US$ 36,504 1.84% (0.50)% 23% 0.0697
GAM North America+++
Class A 24.10% US$ 5,853 2.61% (0.39)% 9% 0.0600
GAM Asian Capital**+++
Class A 3.28% US$ 5,629 2.98% (0.75)% 86% 0.0124
GAMerica Capital**+++
Class A 18.31% US$ 1,927 5.16% (3.79)% 27% 0.0533
</TABLE>
62
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratios/supplemental data
------------------------------------------------------------------------------------------
Ratios to average net assets
----------------------------
Total return
(without Net assets Net Portfolio Average
deduction of end of period investment turnover commission
sales load)++++ (000 omitted) Expenses income/(loss) rate rate paid ss.
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
01-Jan-95 to
31-Dec-95
US$
GAM International
Class A 30.09% US$ 560,234 1.57% 3.89% 35% -
Class D 9.26% US$ 8,714 2.22%* 1.90%* 35% -
GAM Global
Class A 36.25% US$ 26,161 2.16% 2.96% 60% -
Class D 6.97% US$ 295 2.81%* (0.09)%* 60% -
GAM Europe
Class A 16.77% US$ 22,961 2.12% 0.75% 145% -
GAM Pacific Basin
Class A 4.50% US$ 53,944 1.98% (0.07)% 64% -
Class D 2.35% US$ 1,547 2.63%* (1.49)% 64% -
GAM Japan Capital**
Class A 6.45% US$ 13,600 3.61% (2.35)% 122% -
GAM North America**
Class A 30.90% US$ 5,981 2.98% 0.01% 9% -
GAM Asian Capital++**
Class A (4.25)% US$ 5,560 3.11%* (0.17)%* 17% -
GAMerica Capital++**
Class A 1.38% US$ 3,029 3.73%* 1.36%* 11% -
01-Jan-94 to
31-Dec-94
US$
GAM International (10.23)% US$ 158,336 1.60% 2.74% 110% -
GAM Global (16.15)% US$ 19,940 2.29% 0.91% 123% -
GAM Europe (3.11)% US$ 32,233 2.35% 0.06% 75% -
GAM Pacific Basin 7.41% US$ 48,527 1.78% (0.35)% 29% -
GAM Japan Capital+ (3.77)% US$ 9,406 2.19%* 0.70%* 7% -
GAM North America** 2.97% US$ 1,887 2.54% 0.37% 3% -
1-Jan-93 to
31-Dec-93
US$
GAM International 79.96% US$ 80,776 1.99% 2.28% 98% -
GAM Global 75.30% US$ 33,416 2.68% 1.88% 107% -
GAM Europe 22.68% US$ 14,398 2.64% 1.05% 182% -
GAM Pacific Basin 51.52% US$ 40,719 1.93% (0.29)% 91% -
GAM North America (2.09)% US$ 3,289 2.10% 0.69% 3% -
</TABLE>
+ Period from 1st July, 1994 (Inception) to 31st December, 1994.
++ Period from 12th May, 1995 (Inception) to 31st December, 1995.
* Annualized.
** In the absence of expense reimbursement, expenses on an annualized basis
would have represented 5.44 % for GAM Asian Capital for the year ended 31st
December, 1997. Expenses on an annualized basis would have represented 3.59 %
for GAM Asian Capital and 6.16 % for GAMerica Capital of average net assets
respectively, for the year ended 31st December, 1996. Expenses on an annualized
basis would have represented 4.61 % for GAM Japan Capital, 3.27 % for GAM North
America, 3.95 % for GAM Asian Capital and 4.73 % for GAMerica Capital of average
net assets, respectively, for the period ended 31st December, 1995 and 5.81 % of
average net assets for GAM North America Fund for the year ended 31st December
1994.
+++ The ratios of expenses to average net assets for the year ended 31st
December, 1996 include amounts paid through expense offset arrangements. Prior
and subsequent period ratios exclude these amounts.
++++ Total return calculated for a period of less than one year is not
annualized.
ss. For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate per share for trades on which a
commission is charged. This amount includes commissions paid to foreign brokers
which may materially affect the rate shown. Amounts paid in foreign currencies
have been converted into US dollars using the prevailing exchange rate on the
date of the transaction.
63
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Bank loans
---------------------------------------------------------------------------------------
Average
Average amount number of shares Average
Amounts of bank loans oustanding amount of
outstanding outstanding during the period debt per share
end of period during the period (monthly average) during
(000 omitted) (000 omitted) (000 omitted) the period
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
01-Jan-97 to
31-Dec-97
US$
GAM International
Class A
Class D
GAM Global
Class A
Class D
GAM Europe+++ US$ 884 US$ 2.4 2,688 0.001
Class A
GAM Pacific Basin+++ US$ 2,102 US$ 5.8 3,265 0.002
Class A US$ 144 US$ 0.4 140 0.003
Class D
GAM Japan Capital+++
Class A - US$ 145.5 3,074 0.047
GAM North America
Class A
GAM Asian Capital
Class A
GAMerica Capital
Class A
01-Jan-96 to
31-Dec-96
US$
GAM International
Class A
Class D
GAM Global
Class A
Class D
GAM Europe
Class A
GAM Pacific Basin
Class A
Class D
GAM Japan Capital
Class A
GAM North America
Class A
GAM Asian Capital
Class A
GAMerica Capital
Class A
</TABLE>
64
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Bank loans
---------------------------------------------------------------------------------------
Average
Average amount number of shares Average
Amounts of bank loans oustanding amount of
outstanding outstanding during the period debt per share
end of period during the period (monthly average) during
(000 omitted) (000 omitted) (000 omitted) the period
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
01-Jan-95 to
31-Dec-95
US$
GAM International
Class A
Class D
GAM Global
Class A
Class D
GAM Europe
Class A - US$ 123 390 US$ 0.32
GAM Pacific Basin
Class A
Class D
GAM Japan Capital
Class A
GAM North America
Class A
GAM Asian Capital++
Class A
GAMerica Capital++
Class A
01-Jan-94 to
31-Dec-94
US$
GAM International
GAM Global
GAM Europe
GAM Pacific Basin
GAM Japan Capital+
GAM North America
01-Jan-93 to
31-Dec-93
US$
GAM International US$ 9,557 US$ 2,042 2,700 US$ 0.76
GAM Global US$ 2,165 US$ 2,600 1,780 US$ 1.48
GAM Europe US$ 1,860 US$ 521 1,680 US$ 0.31
GAM Pacific Basin US$ - US$ - - US$ -
GAM North America US$ - US$ - - US$ -
</TABLE>
+ Period from 1st July, 1994 (Inception) to 31st December, 1994.
++ Period from 12th May, 1995 (Inception) to 31st December, 1995.
+++ The average daily interest rate during the period was 8.69 % for GAM Europe,
8.69 % for GAM Pacific Basin and 8.41 % for GAM Japan Capital, respectively. The
interest rate at 31st December, 1997 was 8.69 % for GAM Europe and GAM Pacific
Basin.
65
<PAGE>
- --------------------------------------------------------------------------------
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders of
GAM Funds, Inc.
We have audited the accompanying statements of assets and liabilities, including
the statements of investments, of GAM Funds, Inc. (comprising, respectively, GAM
International Fund, GAM Global Fund, GAM Europe Fund, GAM Pacific Basin Fund,
GAM Japan Capital Fund, GAM North America Fund, GAM Asian Capital Fund, and
GAMerica Capital Fund) as of December 31, 1997, and the related statements of
operations for the year then ended, the statements of changes in net assets and
the selected financial information for the two years in the period then ended.
These financial statements and selected financial information are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and selected financial information based
on our audits. The selected financial information for each of the three years in
the period ended December 31, 1995, were audited by other auditors whose report,
dated February 2, 1996, expressed an unqualified opinion thereon.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and selected
financial information are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1997, by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and selected financial information
referred to above present fairly, in all material respects, the financial
position of each of the respective portfolios constituting GAM Funds, Inc. as of
December 31, 1997 and the results of their operations for the year ended, the
changes in their net assets and the selected financial information for each of
the two years in the period then ended, in conformity with generally accepted
accounting principles.
Boston, Massachusetts
February 19, 1998 Coopers & Lybrand L.L.P.
66
<PAGE>
- --------------------------------------------------------------------------------
Board of Directors
- --------------------------------------------------------------------------------
Gilbert de Botton - President
Chairman, Global Asset Management Limited,
London.
George W. Landau
Senior Adviser and Chairman, Latin America Advisory
Board, Coca-Cola International, New York.
Roland Weiser
President, Intervista, Summit, New Jersey.
Address of the Company:
135 East 57th Street
New York, New York 10022.
Tel: (212) 407 4600
1-800-426-4685 (toll free)
Fax: (212) 407 4684
Registrar and Transfer Agent:
Chase Global Funds Services Company
P.O. Box 2798
Boston, Massachusetts 02208.
Tel: (617) 557 8000 ext 6610
1-800-356-5740 (toll free)
Fax: (617) 557 8698
- --------------------------------------------------------------------------------
Copies of this report may be obtained from the Fund, from the Transfer Agent or
from:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In the Isle of Man;
GAM Administration Limited,
11 Athol Street, Douglas, Isle of Man IM99 1HH, British Isles
Tel: 44-1624 632632 Fax: 44-1624 625956
In the United Kingdom (for authorized persons only);
Global Asset Management Limited, a member of IMRO,
12 St. James's Place, London, SW1A 1NX, UK
Tel: 44-71-493 9990 Fax: 44-71-493 0715 Tlx: 296099 GAMUK G
On Internet;
Information on GAM's SEC-registered funds -
www.usinfo.gam.com
Email enquiries on GAM - [email protected]
- --------------------------------------------------------------------------------
GLOBAL ASSET MANAGEMENT(R)
GAM Funds, Inc.
Financial Statements
For the Period Ended
31st December, 1997
This report has been prepared for the information of shareholders of GAM Funds,
Inc., and is not authorized for distribution to prospective investors unless
preceded or accompanied by an effective prospectus that includes information
regarding the Funds objectives, policies, management, records and other
information.
GAM Funds, Inc.
Investment Adviser:
GAM International Management Limited
GAM(R)
